full obligations and contracts digested cases

8/15/2019 Full Obligations and Contracts Digested Cases

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Saint Louis University

School of Law

Department of Civil and Labor Laws

In partial fulfillment of the requirements in the subject Obligations and

Contracts

Submitted to:

Atty. Ma. Lulu G. Reyes

Submitted by:

Dexter Cayadan

Frederick Diong-an

Jonardo Jonel Dalimag

Andrew Gondayao

Sidney Kotoken Novelyn Balgonia

Jenny A. Sagpa-ey

Marjoree Anne S. Sagsago



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No. Cases Page

GENERAL PRINCIPLES1 Ocampo III v. People 11

2 Leung Ben v. O‘Brien 12

3 Pelayo v. Lauron 13

4 ASI Corporation v. Evangelista 14

5 Ramas v. Quiamco 15

6 Hotel Nikko v. Reyes 16

7 St. Mary‘s Academy v. Carpitanos 17

8 Spouses Guanio v. Makati Shangri-la Hotel 18

9 TSPI, Inc. v. TSPOC Employees Union 19

10 Regino v. Pangasinan College 2011 PSBA v. Court of Appeals 21

12 Cosmo Entertainment v. La Ville 22

13 Ayala Corporation v. Rosa Diana Realty 23

14 Bricktown Development v. Amor Tierra Development 24

15 Pilipinas Hino v. Court of Appeals 25

16 Philippine Realty and Holding Corporation v. Ley Construction and Development 26

17 Titan-Ikeda Construction v. Primetown Property 27

18 PADCOM v. Ortigas 28

19 MC Engineering v. Court of Appeals 29

20 Bank of the Philippine Islands v. Pineda 30

21 State Investment v. Court of Appeals 3122 Abellana v. People 32

23 People v. Malicsi 33

24 People v. Sia 34

25 People v. Doctolero 35

26 People v. Abulencia 36

27 Bermudez v. Melecio-Herrera 37

28 People v. Relova 38

29 Manantan v. Court of Appeals 39

30 People v. Bayotas 40

31 Barredo v. Garcia 41

32 Philippine Hawk Corporation v. Lee 42

33 Dy Teban v. Ching 4334 Safeguard Security v. Tiangco 44

35 Villanueva v. Domingo 45

36 Calalas v. Court of Appeals 46

37 Ludo & Luym Corporation v. Court of Appeals 47

38 Thermochem v. Naval 48

39 Picart v. Smith 49

NATURE AND EFFECTS OF OBLIGATIONS40 Lagon v. Hooven Comalco 50

41 Francisco v. Court of Appeals 51

42 Tanguiling v. Court of Appeals 52

43 Periquet v. Court of Appeals 5344 Legaspi oil v. Court of Appeals 54

45 Titan-Ikeda Construction v. Primetown Property 55

46 Philippine National Bank Madecor v. Uy 56

47 Barzaga v. Court of Appeals 57

48 Tanguiling v. Court of Appeals 58

49 Tayag v. Court of Appeals 59



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50 Periquet v. Court of Appeals 60

51 Raquel-Santos v. Court of Appeals 61

52 Rizal Commercial Banking Corporation v. Court of Appeals 62

53 Bank of the Philippine Islands v. Court of Appeals 63

54 Leano v. Court of Appeals 64

55 Heirs of Bacus v. Court of Appeals 65

56 Integrated Packing v. Court of Appeals 66

57 Laforteza v. Machuca 67

58 Regala v. Carin 68

59 International Corporate Bank v. Gucco 69

60 Republic v. Court of Appeals 70

61 Yambao v. Zuniga 71

62 Smith, Bell Dodwell v. Borja 72

63 Ilusorio v. Court of Appeals 73

64 National Power Corporation v. Court of Appeals 74

65 Muaje-Tuazon v. Wenphil 75

66 RCPI v. Verchez 76

67 Victory Liner v. Gammad 7768 FGU v. Sarmiento 78

69 LRTA v. Natividad 79

70 Rodzssen v. Far East Bank 80

71 University of the East v. Jader 81

72 Bayne Adjusters v. Court of Appeals 82

73 Delsan Transport v. C & A Consortium 83

74 PCIB v. Court of Appeals 84

75 SMC and heirs of Ouana v. Court of Appeals 85

76 Pacis v. Morales 86

77 Philippine Hawk Corporation v. Tan Lee 87

78 Mercury Drug v. Spouses Huang 88

79 Mendoza v. Soriano 8980 Cerezo v. Tuazon 90

81 Filipinas Synthetic v. De Los Santos 91

82 Viron v. De los Santos 92

83 Mercury Drug v. Baking 93

84 Safeguard Security v. Tangco 94

85 Pleyto v. Lomboy 95

86 Viron v. De los Santos 96

87 Sykl v. Begana 97

88 Yambao v. Zuniga 98

89 Regino v. Pangasinan College 99

90 YHT Realty v. Court of Appeals 100

91 Ramos v. Court of Appeals 101

92 Reyes v. Sisters of Mercy 102

93 Nogales v. Capitol Medical Center 103

94 Proffesional Services v. Agana 104

95 Professional Services v. Court of Appeals 105

96 Rubi Li v. Spouses Soliman 106

97 Diaz v. Davao Light 107

98 Yasonna v. De Ramos 108

99 People v. De los Santos 109

100 Magat v. Medialdea 110

101 Vda. De Mistica v. Naguiat 111

102 Co v. Court of Appeals 112103 Reyes v. Tuparan 113

104 G.G. Sportswear Manufacturing v. World Class Properties, Inc. 114

105 UFC v. Court of Appeals 115

106 University of the Philippines v. Delos Angeles 116

107 Raquel-Santos v. Court of Appeals 117

108 Francisco v. DEAC Construction, Inc. 118

109 Cannu v. Galang 119



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110 Villanueva v. Estate of Gonzaga 120

111 Paguyo v. Astorga 121

112 Casino v. Court of Appeals 122

113 Carrascoso v. Court of Appeals 123

114 Goldenrod v. Court of Appeals 124

115 Serrano v. Court of Appeals 125

116 Gil v. Court of Appeals 126

117 Reyes v. Lim 127

118 Ong v. Tiu 128

119 Equatorial Realty v. Mayfair Theater 129

120 Velarde v. Court of Appeals 130

121 Asuncion v. Evangelista 131

122 Uy v. Court of Appeals 132

123 Tamayo, et. al. v. Abad Senora 133

124 Victory Liner v. Heirs 134

125 GSIS v. Labung Deang 135

126 BPI Investment v. D.G. Carreon 136

127 Khe Kong v. Court of Appeals 137128 Philippine Realty and Holding Corp. v. Ley Construction and Dev‘t. 138

129 Megaworld Globus Asia, Inc. v. Tanseco 139

130 Sicam v. Jorge 140

131 Huibonhoa v. Court of Appeals 141

132 Ace Agro v. Court of Appeals 142

133 Dioquino v. Laureano 143

134 Bachelor Express v. Court of Appeals 144

135 Vasquez v. Court of Appeals 145

136 Yobido v. Court of Appeals 146

137 Juntilla v. Fontanar 147

138 Philamgen Insurance v. MGG Marine 148

139 Mindez v. Morillo 149140 NAPOCOR v. Phillip Bros. 150

141 Ong Genato v. Bayhon, et. al. 151

142 Union Bank v. Santibanez 152

143 San Agustin v. Court of Appeals 153

144 Project Builders, Inc. v. Court of Appeals 154

KINDS OF OBLIGATIONS145 Development Bank of the Philippines v. Court of Appeals 155

146 Tomimbang v. Tomimbang 156

147 Gonzales v. Heirs 157

148 Insular Life v. Young 158

149 Direct Funders v. Lavina 159

150 Vda. De Mistica v. Naguiat 160

151 Hermosa v. Longara 161

152 Trillana v. Quezon Colleges 162

153 Visayan Sawmill v. Court of Appeals 163

154 Leano v. Court of Appeals 164

155 Heirs of Sandejas v. Lim 165

156 Commissioner of Internal Revenue v. Primetown 166

157 NAMARCO v. Tecson 167

158 Berg v. Magdalena Estates 168

159 Lirag v. Court of Appeals 169

160 Daguhoy v. Ponce 170161 Victoria Planters v. Victoria Milling 171

162 Jespajo v. Court of Appeals 172

163 Morromeo v. Court of Appeals 173

164 Gonzales v. Jose 174

165 Baluyut v. Poblete 175

166 Malayan Realty v. Uy 176

167 Kasapian ng Manggagawa ng Coca-Cola v. Court of Appeals 177



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168 Santos v. Santos 178

169 Melotindos v. Tobias 179

170 LL and Company v. Huang 180

171 Brent School v. Zamora 181

172 Lim v. People 182

173 Pacific Banking v. Court of Appeals 183

174 Agoncillo v. Javier 184

175 Ong Guan v. Century 185

176 Legarda v. Miailhe 186

177 Reyes v. Martinez 187

178 Quizana v. Redugerio 188

179 Alipio v. Court of Appeals 189

180 PH Credit Corporation v. Court of Appeals 190

181 CDCP v. Estrella 191

182 Republic Glass Corporation v. Qua 192

183 Industrial Management v. NLRC 193

184 Metro Manila Transit v. Court of Appeals 194

185 Inciong v. Court of Appeals 195186 Philippine Blooming Mills v. Court of Appeals 196

187 Asset Builders v. Stronghold 197

188 Esparwa Security v. Liceo de Cagayan 198

189 Dimayuga v. PCIB 199

190 Cerna v. Court of Appeals 200

191 Nazareno v. Court of Appeals 201

192 Alonzo v. San Juan 202

193 David v. Court of Appeals 203

194 Republic v. Thi Thu Thuy de Guzman 204

195 Marques v. far East Bank 205

196 Prisma Construction v. Menchavez 206

197 Macalalag v. People 207198 Tan v. Court of Appeals 208

199 Eastern Shipping v. Court of Appeals 209

200 PCI v. Ng Sheung Ngor 210

201 NSBC v. Philippine National Bank 211

202 Polotan v. Court of Appeals 212

203 New Sampaguita v. Philippine National Bank 213

204 Prisma Construction v. Menchavez 215

205 Maceda, Jr. v. DBO/DBP 216

206 Philippine National Bank v. Encina 217

207 Imperial v. Jaucian 218

208 Pabugais v. Sahijwani 219

209 Lo v. Court of Appeals 221

210 Ligutan v. Court of Appeals 222

211 Pascual v. Ramos 223

212 First Metro Investment v. Este del Sol 224

213 Domel Trading v. Court of Appeals 225

214 Medel v. Court of Appeals 227

215 Reformina v. Tomol 228

EXTINGUISHMENT OF OBLIGATIONS216 Lo v. KJH 229

217 Philippine National Bank v. Court of Appeals 230

218 Cathay Pacific v. Vasquez 231219 Citibank v. Sabentiano 232

220 Telengton Bros. v. US Lines 233

221 CF Sharp v. Northwest Airlines 234

222 Padilla v. Paredes 235

223 Tibajia v. Court of Appeals 236

224 Development Bank of the Philippines v. Court of Appeals 237

225 Vitarich v. Locsin 238



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226 Metrobank v. Cabilzo 239

227 Almeda v. Bathala Marketing 240

228 PCI v. Ng Sheung Ngor 241

229 Palanca v. Guides 242

230 PCIB v. Court of Appeals 243

231 Lagon v. Hooven Comalco 244

232 Bank of the Philippine Islands v. Court of Appeals 245

233 Republic v. Thi Thu Thuy De Guzman 246

234 Audio Electric v. NLRC 247

235 Land Bank of the Philippines v. Ong 248

236 Binalbagan v. Court of Appeals 249

237 Lorenzo Shipping v. BJ Marthel 251

238 Luzon Development Bank v. Enriquez 252

239 Estanislao v. East-West Banking Corporation 253

240 Aquintey v. Tibong 254

241 Vda. De Jayme v. Court of Appeals 255

242 Caltex v. IAC 256

243 Lo v. Court of Appeals 257244 ASI Corporation v. Evangelista 258

245 Paculdo v. Regalado 259

246 CBC v. Court of Appeals 260

247 Mobil v. Court of Appeals 261

248 Dalton v. FGR Realty and Development Corporation 262

249 Benos v. Lawilao 263

250 People‘s Industrial v. Court of Appeals 264

251 Eternal Gardens v. Court of Appeals 265

252 Rayos v. Reyes 266

253 Cebu International v. Court of Appeals 267

254 De Mesa v. Court of Appeals 268

255 Occena v. Court of Appeals 269256 Ortigas v. Feati Bank 270

257 So v. Food Fest Land, Inc. 271

258 Magat v. Court of Appeals 272

259 PNCC v. Court of Appeals 273

260 NATELCO v. Court of Appeals 274

261 Reyna v. Commission on Audit 275

262 Trans Pacific v. Court of Appeals 276

263 Dalupan v. Harden 277

264 Lopez Vito v. Tambunting 278

265 Estate of Mota v. Serra 279

266 Yek Ton Lin v. Yusingco 280

267 EGV Realty v. Court of Appeals 281

268 Aerospace Chemical v. Court of Appeals 282

269 Apodaca v. NLRC 283

270 Spouses Chung v. Ulanday Construction 284

271 Lao, et. al. v. Special Plans, Inc. 285

272 United Planters Sugar v. Court of Appeals 286

273 PNB Management v. R&R Metal 287

274 Silahis v. IAC 288

275 Francia v. Court of Appeals 289

276 Trinidad v. Acapulco 290

277 Hernandez Nievera v. Hernandez 291

278 St. James College v. Equitable PCI Bank 292279 Tomimbang v. Tomimbang 293

280 Mindanao Savings v. Willkom 294


282 Swagman v. Court of Appeals 296

283 Azolla Farms v. Court of Appeals 297

284 California Bus Lines v. State Investment 298

285 Ocampo-Paule v. Court of Appeals 299



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286 Reyes v. Court of Appeals 300

287 Bautista v. Pilar Development 301

288 Evadel Realty v. Soriano 302

289 B&I Realty v. Caspe 303

290 Mersina v. Garcia 304

291 Heirs of Gaudiane v. Court of Appeals 305

292 Laureano v. Court of Appeals 306

293 Banco Filipino v. Court of Appeals 307

294 Vda. De Delgado v. Court of Appeals 308

295 Maestrado v. Court of Appeals 309

296 Tanay Recreation v. Fausto 310

297 Mendoza v. Court of Appeals 311

298 Lim v. Queensland 312

299 Placewell v. Camote 313

300 Heirs of Ragua v. Court of Appeals 314

301 Metrobank v. Court of Appeals 315

302 Spouses Manuel v. Court of Appeals 316

303 Cuenco v. Cuenco 317304 Laurel v. Desierto 318

305 Hanopol v. SM 319

306 Terminal Facilities v. PPA 320

307 Mendoza v. Court of Appeals 322

308 Roblett Construction v. Court of Appeals 325

309 Simedarby v. Goodyear 327

310 Kings Properties Corporation, Inc. v. Galido 328

311 Metrobank v. Cabilzo 330

312 Mesina v. Garcia 331

313 Pahamatong v. Philippine National Bank 322

314 Shopper‘s Paradise v. Roque 333

315 Meatmasters v. Lelis Integrated 335316 Manipor v. Ricafort 337

317 Larena v. Mapili 338

318 Santos v. Santos 339

319 Villanueva Mijares v. Court of Appeals 341

CONTRACTS320 Spouses Edralin v. Philippine Veterans Bank 342

321 Martin, et. al. v. DBS Bank Philippines 344

322 Heirs of Zabala, et. al. v. Court of Appeals 346

323 Star Paper v. Simbol 347

324 Tiu v. Platinum Plans 348

325 Avon Cosmetics v. Luna 349

326 Del Castillo v. Richmond 351

327 Arwood v. DM Consunji 352

328 Pascual v. Ramos 353

329 PUP v. Golden Horizon 355

330 Villegas v. Court of Appeals 357

331 Equatorial Realty v. Carmelo 358

332 PUP v. Court of Appeals 360

333 Litonjua v. L&R 362

334 Josefa v. Zhandong 363

335 Saludo v. Security Bank 364

336 PCI v. Ng Sheung Ngor 366337 Dio v. St. Ferdinand Memorial 367

338 PILTEL v. Tecson 369

339 PAL v. Court of Appeals 370

340 Ermitano v. Court of Appeals 371

341 Uniwide v. Titan-Ikeda 372

342 Heirs of Salas v. Laperal 373

343 Medrano v. Court of Appeals 375



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344 Tan v. Gullas 376

345 Gozan v. Mercado 378

346 Sta. Lucia Realty v. Spouses Buenaventura 379

347 Chan v. Maceda 381

348 Baluyot v. Court of Appeals 383

349 Cuyco v. Cuyco 386

350 Go v. Cordero 388

351 Tayag v. Court of Appeals 390

352 So v. Court of Appeals 391

353 International Freeport v. Danzas 393

354 Rockland v. Mid Pasig Development 395

355 MMDA v. JANCOM 397

ESSENTIAL REQUISITES OF CONTRACTS356 Rockland v. Mid Pasig Land Development 399

357 Manila Metal v. PNB 401

358 Montecillo v. Reynes 403

359 Soler v. Court of Appeals 405360 Palattao v. Court of Appeals 407

361 ABS-CBN v. Court of Appeals 409

362 Limson v. Court of Appeals 411

363 Villanueva v. Philippine National Bank 412

364 Catalan v. Basa 114

365 Domingo v. Court of Appeals 416

366 Mendezona v. Ozamiz 417

367 Lim v. Court of Appeals 418

368 Ruiz v. Court of Appeals 419

369 Dela Cruz v. Sison 420

370 Rural Bank of Sta. Maria v. Court of Appeals 421

371 Carabeo v. Spouses Dingco 422372 Chavez v. PEA 423

373 Melliza v. City of Ilo-Ilo 424

374 Catindig v. Vda. De Meneses 425

375 Orduna, et. al. v. Fuentebella 426

376 Askay v. Cosalan 428

377 Heirs of Balite v. Lim 429

378 Suntay v. Court of Appeals 431

379 Uy v. Court of Appeals 433

380 Catly v. Navarro, et. al. 434

381 Liguez v. Court of Appeals 436

382 Philbank v. Lui She 437

FORM OF CONTRACTS383 Londres v. Court of Appeals 438

384 Spouses Vega v. SSS 440

385 Balatbat v. Court of Appeals 441

386 Universal Robina v. Heirs of Teves 442

REFORMATION OF INSTRUMENTS

387 Sarming v. Dy 444

388 Cebu v. Court of Appeals 445

INTERPRETATION OF CONTRACTS389 ADR Shipping v. Gallardo 446

390 Movido v. Pastor 447

391 TSPIC Corp. v. TSPIC Employees Union 448

392 Estanislao v. East-West Banking Corporation 449


394 Cruz v. Court of Appeals 451

395 Gonzales v. Court of Appeals 453



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396 Almira v. Court of Appeals 454

397 Philbank v. Lim 455

398 Rigor v. Consolidated Leasing 456

399 Velasquez v. Court of Appeals 457

DEFECTIVE CONTRACTS 400 Heirs of Qurong v. Development Bank of the Philippines 458

401 Lee v. Bangkok Bank 460

402 Equatorial Realty v. Mayfair Theater 462

403 Siguan v. Lim 463

404 Khe Kong v. Court of Appeals 465

405 Suntay v. Court of Appeals 466

406 Brobio Mangahas v. Brobio 467

407 Hernandez v. Hernandez 469

408 Fuentes, et. al. v. Roca 471

409 Associated Bank v. Spouses Montano 472

410 Miailhe v. Court of Appeals 473

411 First Philippine Holdings v. Trans Middle East Equities, Inc. 474412 Sanchez v. Malapad Realty 475

413 Oesmer v. PDC 476

414 Vda. De Ape v. Court of Appeals 477

415 Francisco v. Herrera 478

416 Braganza v. Villa Abrille 479

417 Katipunan v. Katipunan 480

418 Jumalon v. Court of Appeals 481

419 Cabales, et. al. v. Court of Appeals 482

420 Vda. De Ouano, et. al. v. Republic 483

421 Shoemaker v. La Tondena 484

422 PNB v. Philippine Vegetable Oil Company 485

423 Vda. De Ouano, et. al. v. Republic 486424 Municipality of Hagonoy v. Dumdum 487

425 Tan v. Villapaz 488

426 Spouses David v. Tiongson 489

427 Cordial v. Miranda 490

428 Villanueva-Mijares v. Court of Appeals 491

429 Rosencor v. Inquing 492

430 Firme v. Buka 493

431 Heirs of M. Doronio v. Heirs of F. Doronio 494

432 Gurrea v. Suplico 495

433 Frenzel v. Catito 496

434 La Bugal B‘laan v. Ramos 497

435 Agan v. PIATCO 498

436 COMELEC v. Quijano-Padilla 499

437 Jaworski v. PAGCOR 500

438 Oesmer v. PDC 501

439 Heirs of Balite v. Lim 502

440 Pineda v. Court of Appeals 503

441 Cruz v. Bancom 504

442 Cauton v. Salud 505

443 Infotech v. COMELEC 506

444 Pabugais v. Sahijwani 507

445 Liguez v. Court of Appeals 509

446 Philbank v. Lui She 510447 Vigilar v. Aquino 511

448 EPG Construction v. Vigilar 512

449 Go Chan v. Young 513

450 Francisco v. Herrera 514

451 Mendezona v. Ozamiz 515

NATURAL OBLIGATIONS



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OCAMPO III. VS. PEOPLEG.R Nos. 156547-51. February 4, 2008

FACTS:

The Department of Budget and Management released the amount of Php 100 Million forthe support of the local government unit of the province of Tarlac. However, petitioner Ocampo,governor of Tarlac, loaned out more than P 56.6 million in which he contracted with LingkodTarlac Foundation, Inc.. thus, it was the subject of 25 criminal charges against the petitioner.

The Sandiganbayan convicted the petitioner of the crime of malversation of public funds.However, the petitioner contended that the loan was private in character since it was a loancontracted with the Taralc Foundation.

ISSUE:

Whether the amount loaned out was private in nature.

RULING:

Yes, the loan was private in nature because Art. 1953 of the New Civil Code providesthat ―a person who receives a loan of money or any other fungible thing acquires the ownershipthereof, and is bound to pay the creditor an equal amount of the same kind and quality.‖

The fact that the petitioner-Governor contracted the loan, the public fund changed itsnature to private character, thus it is not malversation which is the subject of this case, instead itmust be a simple collection of money suit against the petitioner in case of non payment .therefore, the petitioner is acquitted for the crime of malversation.



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Leung Ben vs. O’Brien G.R. No. L-13602, April 6, 1918

38 Phil. 182

FACTS:

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

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

ISSUE:

The issue is whether or not the statutory obligation to restore money won at gaming is anobligation from ―contract, express or implied.‖

HELD:

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



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Arturo Pelayo vs. Marcelo LauronG.R. No. L-4089, January 12, 1909

12 Phil. 453

FACTS:

On or about October 13, 1906, the plaintiff Arturo Pelayo was called to the house of thedefendants, Marcelo Lauron and Juana Abella situated in San Nicolas, and that upon arrival hewas requested by them to render medical assistance to their daughter-in-law who was about togive birth to a child. After consultation with the attending physician, Dr. Escaño, the plaintifffound it necessary to remove the fetus by means of an operation, in which service he wasoccupied until the following morning, and had visited the patient several times. The equitablevalue of the services rendered by the plaintiff was P500.00, which the defendants refused to pay.On November 23, 1906, the plaintiff filed a complaint against the defendants and prayed that the judgment be rendered in his favor as against the defendants, or any of them, for the sum of P500

and costs, together with any other relief that may be deemed proper. In answer, the defendantsdenied all allegations and alleged as a special defense, that their daughter-in-law died as aconsequence of the said childbirth, and when she was still alive she lived with her husbandindependently and in a separate house and without any relation whatsoever with them, and on theday she gave birth she was in the house of the defendants and her stay there was accidental anddue to fortuitous circumstances. Thus, the defendants prayed that they be absolved from thecomplaint with costs against the plaintiff.

The plaintiff demurred the answer and that the lower court sustained the demurrerdirecting the defendants to amend their answer. In compliance, the defendants amended theiranswer denying each and every allegation contained in the complaint. The lower court rendered judgment in favor of the defendants absolving them from the complaint.

ISSUE:The issue is whether or not the parents-in-law are under any obligation to pay the fees claimed by the plaintiff.

HELD:The defendants were not, nor are they now, under any obligation by virtue of any legal

provision, to pay the fees claimed, nor in consequence of any contract entered into between themand the plaintiff from which such obligation might have arisen.

The rendering of medical assistance in case of illness is comprised among the mutualobligations to which spouses are bound by way of mutual support. When either of them byreason of illness should be in need of medical assistance, the other is under the unavoidableobligation to furnish the necessary services of a physician in order that the health may berestored; the party bound to furnish such support is therefore, liable for all the expenses,including the fees of the medical expert for his professional services. The liability arises from theobligation, which the law has expressly established, between married couples. It is therefore thehusband of the patient who is bound to pay for the services of the plaintiff. The fact that it wasnot the husband who called the plaintiff and requested the medical assistance for his wife is no bar to his fulfillment of such obligation, as the defendants, in view of the imminent danger towhich the life of the patient was at that moment exposed, considered that the medical assistancewas urgently needed. Therefore, plaintiff should direct his action against the husband of the patient, and not against her parents-in-law.



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ASI CORPORATION VS. EVANGELISTAG.R No. 158086.

February 14, 2008

FACTS:

Private respondent Evangelista contracted Petitioner ASJ Corporation for the incubationand hatching of eggs and by products owned by Evangelista Spouses. The contract includes thescheduled payments of the service of ASJ Corporation that the amount of installment shall be paid after the delivery of the chicks. However, the ASJ Corporation detained the chicks becauseEvangelista Spouses failed to pay the installment on time.

ISSUE:

Was the detention of the alleged chicks valid and recognized under the law?

RULING:

No, because ASJ Corporation must give due to the Evangelista Spouses in paying theinstallment, thus, it must not delay the delivery of the chicks. Thus, under the law, they areobliged to pay damages with each other for the breach of the obligation.

Therefore, in a contract of service, each party must be in good faith in the performance oftheir obligation, thus when the petitioner had detained the hatched eggs of the respondentsspouses, it is an implication of putting prejudice to the business of the spouses due to the delay of paying installment to the petitioner.



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RAMAS VS. QUIAMCOG.R No. 146322. December 6, 2006

FACTS:

Quiamco has amicably settled with Davalan, Gabutero and Generoso for the crime ofrobbery and that in return, the three had surrendered to Quiamco a motorcycle with itsregistration. However, Atty. Ramas has sold to Gabutero the motorcycle in installment but whenthe latter did not able to pay the installment, Davalon continued the payment but when he became insolvent, he said that the motorcycle was taken by Quiamco‘s men. However, afterseveral years, the petitioner Ramas together with policemen took the motorcycle without therespondent‘s permit and shouted that the respondent Quiamco is a thief of motorcycle.Respondent then filed an action for damages against petitioner alleging that petitioner is liablefor unlawful taking of the motorcycle and utterance of a defamatory remark and filing a baselesscomplaint. Also, petitioners claim that they should not be held liable for petitioner‘s exercise of

its right as seller-mortgagee to recover the mortgaged motorcycle preliminary to the enforcementof its right to foreclose on the mortgage in case of default.

ISSUE:

Whether the act of the petitioner is correct.

RULING:

No. The petitioner being a lawyer must know the legal procedure for the recovery of possession of the alleged mortgaged property in which said procedure must be conductedthrough judicial action. Furthermore, the petitioner acted in malice and intent to cause damage tothe respondent when even without probable cause, he still instituted an act against the law onmortgage.



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Nikko Hotel Manila Garden vs. Roberto ReyesG.R. No. 154259, February 28, 2005

452 SCRA 532

FACTS:

Respondent herein Roberto Reyes, more popularly known by the screen name ―AmayBisaya,‖ alleged that while he was having coffee at the lobby of Hotel Nikko, he was spotted byDr. Violeta Filart, his friend of several years, invited him to join her in a party at the hotel‘s penthouse in celebration of the natal day of the hotel‘s manager, Mr. Masakazu Tsuruoka. Mr.Reyes asked if she could vouch for him for whom she replied: ―of course.‖ Reyes then went upwith the party of Dr. Filart carrying the basket of fruits which was the latter‘s present for thecelebrant. At the penthouse, they first had their picture taken with the celebrant after whichReyes sat with the party of Dr. Filart. After a couple of hours, when the buffet dinner was ready,Mr. Reyes lined-up at the buffet table but, to his great shock, shame and embarrassment, he wasstopped by Ruby Lim, the Executive Secretary of Hotel Nikko. Reyes alleged that Ruby Lim, in

a loud voice and within the presence and hearing of the other guests who were making a queue atthe buffet table, told him to leave the party because he was not invited. Mr. Reyes tried toexplain that he was invited by Dr. Filart but the latter, who was within hearing distance,completely ignored him thus adding to his shame and humiliation. Afterwards, while he was stillrecovering from the traumatic experience, a Makati policeman approached and asked him to stepout of the hotel. Like a common criminal, he was escorted out of the party by the policeman.Claiming damages, Mr. Reyes asked for One Million Pesos actual damages, One Million Pesosmoral and/or exemplary damages and Two Hundred Thousand Pesos attorney‘s fees.

Petitioners Lim and Hotel Nikko contend that pursuant to the doctrine of volenti non fitinjuria, they cannot be made liable for damages as respondent Reyes assumed the risk of beingasked to leave (and being embarrassed and humiliated in the process) as he was a ―gate-crasher.‖

ISSUE:Whether or not Hotel Nikko and Ruby Lim are jointly and severally liable with Dr. Filart

for damages under Articles 19 and 21 of the Civil Code.

HELD:The doctrine of volenti non fit injuria (―to which a person assents is not esteemed in law

as injury‖) refers to self -inflicted injury or to the consent to injury which precludes the recoveryof damages by one who has knowingly and voluntarily exposed himself to danger, even if he isnot negligent in doing so.

The Supreme Court agreed with the lower court‘s ruling that Ms. Lim did not abuse herright to ask Mr. Reyes to leave the party as she talked to him politely and discreetly. Consideringthe closeness of defendant Lim to plaintiff when the request for the latter to leave the party wasmade such that they nearly kissed each other, the request was meant to be heard by him only andthere could have been no intention on her part to cause embarrassment to him. In the absence ofany proof of motive on the part of Ms. Lim to humiliate Mr. Reyes and expose him to ridiculeand shame, it is highly unlikely that she would shout at him from a very close distance. Ms. Limhaving been in the hotel business for twenty years wherein being polite and discreet are virtues to be emulated, the testimony of Mr. Reyes that she acted to the contrary does not inspire belief andis indeed incredible. Ms. Lim, not having abused her right to ask Mr. Reyes to leave the party towhich he was not invited, cannot be made liable to pay for damages under Articles 19 and 21 ofthe Civil Code. Necessarily, neither can her employer, Hotel Nikko, be held liable as its liabilitysprings from that of its employee. Had respondent simply left the party as requested, there wasno need for the police to take him out.



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St. Mary’s Academy vs. William Carpitanos and Lucia S. Carpitanos G.R. No. 143363, February 6, 2002

426 Phil 878

FACTS:

From 13 to 20 February 1995, St. Mary‘s Academy of Dipolog City conducted anenrollment drive for the school year 1995-1996. A facet of the enrollment campaign was thevisitation of schools from where prospective enrollees were studying. As a student of St. Mary‘sAcademy, Sherwin Carpitanos was part of the campaigning group. Accordingly, on the fatefulday, Sherwin, along with other high school students were riding in a Mitsubishi jeep owned bydefendant Vivencio Villanueva on their way to Larayan Elementary School, Larayan, DapitanCity. The jeep was driven by James Daniel II then 15 years old and a student of the same school.Allegedly, the latter drove the jeep in a reckless manner and as a result the jeep turnedturtle.Sherwin Carpitanos died as a result of the injuries he sustained from the accident.

ISSUE:

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

HELD:For petitioner to be liable, there must be a finding that the act or omission considered as

negligent was the proximate cause of the injury caused because the negligence must have acausal connection to the accident. In this case, the respondents failed to show that the negligenceof petitioner was the proximate cause of the death of the victim.

Respondents Daniel spouses and Villanueva admitted that the immediate cause of theaccident was not the negligence of petitioner or the reckless driving of James Daniel II, but thedetachment of the steering wheel guide of the jeep. Hence, liability for the accident, whethercaused by the negligence of the minor driver or mechanical detachment of the steering wheelguide of the jeep, must be pinned on the minor‘s parents primarily. The negligence of petitionerSt. Mary‘s Academy was only a remote cause of the accident. Between the remote cause and theinjury, there intervened the negligence of the minor‘s parents or the detachment of the steeringwheel guide of the jeep. Hence, with the overwhelming evidence presented by petitioner and therespondent Daniel spouses that the accident occurred because of the detachment of the steeringwheel guide of the jeep, it is not the school, but the registered owner of the vehicle who shall beheld responsible for damages for the death of Sherwin Carpitanos.



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SPS. GUANIO v. MAKATI SHANGRI-LA HOTELGR No. 190601, February 7 2011

FACTS:

For their wedding reception on July 28, 2001, spouses Luigi M. Guanio and AnnaHernandez-Guanio (petitioners) booked at the Shangri-la Hotel Makati.Prior to the event, MakatiShangri-La Hotel & Resort, Inc. (respondent) scheduled an initial and final food tasting. The parties eventually agreed on a final price ─ P1,150 per person.On July 27, 2001, the partiesfinalized and signed their contract.

Petitioners claim that during the reception, respondent‘s representatives, CateringDirector Bea Marquez and Sales Manager Tessa Alvarez, did not show up despite their assurancethat they would; their guests complained of the delay in the service of the dinner; certain itemslisted in the published menu were unavailable; the hotel‘s waiters were rude and unapologeticwhen confronted about the delay; and despite Alvarez‘s promise that there would be no charge

for the extension of the reception beyond 12:00 midnight, they were billed and paid P8,000 perhour for the three-hour extension of the event up to 4:00 A.M. the next day. They further claimthat they brought wine and liquor in accordance with their open bar arrangement, but these werenot served to the guests who were forced to pay for their drinks.

Petitioners thus sent a letter-complaint to the Makati Shangri-la Hotel and Resort, Inc.andreceived an apologetic reply from Krister Svensson, the hotel‘s Executive Assistant Manager incharge of Food and Beverage. They nevertheless filed a complaint for breach of contract anddamages before the RTC of Makati City. Respondents averred that it was the increase in numberof the unexpected guests that led to the shortage claimed by the petitioners.

The RTC rendered a decision in favor of the plaintiffs and was reversed by the CA, uponappeal, the latter holding that the proximate cause of petitioners‘ injury was an unexpectedincrease in their guests.

ISSUE:

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

HELD:

The Court finds that since petitioners‘ complaint arose from a contract, the doctrine of proximate cause finds no application to it, the latter applicable only to actions for quasi-delicts,not in actions involving breach of contract.

Breach of contract is defined as the failure without legal reason to comply with the termsof a contract. It is also defined as the failure, without legal excuse, to perform any promise whichforms the whole or part of the contract. The appellate court, and even the trial court, observedthat petitioners were remiss in their obligation to inform respondent of the change in theexpected number of guests. The observation is reflected in the records of the case. Petitioners‘failure to discharge such obligation thus excused respondent from liability for ―any damage orinconvenience‖ occasioned thereby.



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TSPIC CORPORATION VS. TSPIC EMPLOYEES UNIONG.R No. 163419. February 13, 2008

FACTS:

TSPI Corporation entered into a Collective Bargaining Agreement with the corporationUnion for the increase of salary for the latter‘s members for the year 2000 to 2002 starting fromJanuary 2000. thus, the increased in salary was materialized on January 1, 2000. However, onOctober 6, 2000, the Regional Tripartite Wage and production Board raised daily minimumwage from P 223.50 to P 250.00 starting November 1, 2000. Conformably, the wages of the 17 probationary employees were increased to P250.00 and became regular employees thereforereceiving another 10% increase in salary. In January 2001, TSPIC implemented the new wagerates as mandated by the CBA. As a result, the nine employees who were senior to the 17recently regularized employees, received less wages. On January 19, 2001, TSPIC‘s HRDnotified the 24 employees who are private respondents, that due to an error in the automated

payroll system, they were overpaid and the overpayment would be deducted from their salariesstarting February 2001. The Union on the other hand, asserted that there was no error and thededuction of the alleged overpayment constituted diminution of pay.

ISSUE:

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

RULING:

Yes, because it is considered that Collective Bargaining Agreement entered into byunions and their employers are binding upon the parties and be acted in strict compliancetherewith. Thus, the CBA in this case is the law between the employers and their employees.

Therefore, there was no overpayment when there was an increase of salary for themembers of the union simultaneous with the increasing of minimum wage for workers in the National Capital Region. The CBA should be followed thus, the senior employees who were first promoted as regular employees shall be entitled for the increase in their salaries and the samewith lower rank workers.



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Regino vs. Pangasinan Colleges of Science and TechnologyG.R. No. 156109November 8, 2004

FACTS:

Petitioner Khristine Rea M. Regino was a first year computer science student ofPangasinan Colleges of Science and Technology (PCST). Reared in a poor family, Regino wentto college mainly through the financial support of her relatives. She enrolled Logic and Statisticssubjects under Rachelle Gamurot and Elissa Baladad, respectively as teachers.

In February 2002, PCST held a fund raising campaign dubbed ―The Rave Party andDance Revolution‖ the proceeds which were to go to the construction of the school‘s tennis andvolleyball courts. Each student was required to pay for two tickets at the price of P100.00 each.The project was allegedly implemented by recompensing students who purchased tickets with

additional points in their test scores; those who refused to pay were denied the opportunity totake the final examinations.

Financially strapped and prohibited by her religion from attending dance parties andcelebration, Regino refused to pay tickets. On March 14 and 15, 2002, the scheduled dates ofexaminations in Logics and Statistics, the teachers allegedly disallowed her from taking the tests.Petitioner then filed as pauper litigant, a complaint for damages against PCST. She prayed forP500,000.00 as nominal; P500,000.00 as moral and at least P1,000,000.00 as exemplarydamages, P250,000.00 as actual damages & cost of litigation and attorney‘s fees. The Regional Trial Court dismissed the complaint for lack of merit. It ruled that Commission onHigher Education, not the court, has jurisdiction over the controversy.

ISSUES:

Whether or not court has jurisdiction over the controversy.Whether or not there was a breach of contract and liability of tort.

HELD:

The doctrine of exhaustion of administrative remedies is basic. Court for reasons of law,comity and convenience should not entertain suits unless the available administrative remedieshave first been resorted to and the proper authorities have been given the appropriate opportunityto act and correct their alleged errors. Exhaustion of administrative remedies is applicable whenthere is a competence on the part of the administrative bodies to act upon the matter complainedof.

The terms of the school-student contract are defined at the moment of its inception-uponenrolment of the student.

PCST imposed the assailed revenue-raising measure belatedly in the middle of thesemester, It exacted the dance party fee as a condition for students in taking the finalexaminations and ultimately for recognition of their ability to finish a course. The fee, however,was not part of the school-student contract entered into at the start of the school year.

Wherefore, the petition is hereby granted, and the assailed orders reversed. The trialcourt is directed to reinstate the complaint and with all deliberate speed, to continue the proceedings in Civil Case No. U-7541. No costs.



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Cosmo Entertainment Management, Inc. vs. La Ville Commercial CorporationG.R. No. 152801, August 20, 2004

437 SCRA 145

FACTS:

The respondent, La Ville Commercial Corporation, is the registered owner of a parcel ofland covered by TCT No. 174250 of the Registry of Deeds of Makati City together with thecommercial building thereon situated at the corner of Kalayaan and Neptune Streets in MakatiCity.

On March 17, 1993, it entered into a Contract of Lease with petitioner CosmoEntertainment Management, Inc. over the subject property for a period of seven years with amonthly rental of P250 per square meter of the floor area of the building and a security depositequivalent to three monthly rentals in the amount of P447, 000.00 to guarantee the faithful

compliance of the terms and conditions of the lease agreement. Upon execution of the contract,the petitioner took possession of the subject property.

The petitioner, however, suffered business reverses and was constrained to stopoperations in September 1996. Thereafter, the petitioner defaulted in its rental payments.Consequently, the respondent made a demand on the petitioner to vacate the premises as well asto pay the accrued rentals plus interests which, as of January 31, 1997, amounted to P740,478.91. In reply to the demand, the petitioner averred that its unpaid rentals amounted to P698,500 only and since it made a security deposit of P419, 100 with the respondent, the said amountshould be applied to the unpaid rentals; hence, the outstanding accounts payable would only beP279, 400. The respondent requested that the interest charges be waived and it be given time tofind a solution to its financial problems.

After negotiations between the parties failed, the respondent, on May 27, 1997, reiteratedits demand on the petitioner to pay the unpaid rentals as well as to vacate and surrender the premises to the respondent. When the petitioner refused to comply with its demand, therespondent filed with the Metropolitan Trial Court of Makati City a complaint for illegaldetainer. The petitioner, in its answer to the complaint, raised the defense that, under thecontract, it had the right to sublease the premises upon prior written consent by the respondentand payment of transfer fees. However, the respondent, without any justifiable reason, refused toallow the petitioner to sublease the premises.

ISSUE:

Whether or not the petitioner has the right to sublease the premises.

HELD:

The Court is convinced that the findings and conclusions of the court a quo and the RTCare in order. These courts uniformly found that, under the terms of the contract of lease, therespondent, as the owner-lessor of the premises, had reserved its right to approve the sublease ofthe same. The petitioner, having voluntarily given its consent thereto, was bound by thisstipulation. And, having failed to pay the monthly rentals, the petitioner is deemed to haveviolated the terms of the contract, warranting its ejectment from the leased premises. The Courtfinds no cogent reason to depart from this factual disquisition of the courts below in view of therule that findings of facts of the trial courts are, as a general rule, binding on this Court.



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Bricktown Development vs. Amor Tierra DevelopmentG.R. No. 112182, December 12, 1994

239 SCRA 126

FACTS:

On 31 March 1981, petitioner Bricktown Development Corporation executed two contractsto sell in favor of petitioner Tierra Corp. covering a total of 96 residential lots situated at theMultinational Village Subdivision, La Huerta, Parañaque, Metro Manila. The total price ofP21,639,875.00 was stipulated to be paid by private respondent in such amount and maturity dates,as follows; P2,200,000.00 on March 31, 1981, P3, 209, 965.75 on 30 June 1981, P4, 729, 906.25 on31 December 1981, and the balance of P11, 500,000.00 to be paid by means of an assumption byprivate respondent of petitioner’s corporation’s mortgage liability to the Philippine Saving Bank or,alternatively, to be made payable in cash. On even date 31 March 1981, the parties executed asupplemental agreement providing that private respondent would additionally pay to petitioner theamount of P55, 364.68 or 21% interest on the balance of downpayment for the period from 31

March to 30 June 1981 and of P390, 367.37 representing interest paid by petitioner corporation tothe Philippine Savings Bank in updating the bank loan for the period from 1 February to 31 March1981.

On 12 October 1981, Petitioner Corporation sent notice of cancellation of contract toprivate respondent on account of the latter’s continued failure to pay the installment due 30 June1981 and interest on the unpaid balance of the stipulated initial payment.

On 26 September 1983, private respondent demanded the refund of its various payment topetitioner amounting to P2, 445, 497.71. However, petitioner did not heed the demand, so privaterespondent filed an action with the court a quo.

The lower court ruled in favor of private respondent and it was affirmed in toto by theappellate court.

ISSUE:

The issue is whether or not the contracts to sell were validly rescinded or cancelled byPetitioner Corporation.

HELD:

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

own breach.



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PHILIPPINE REALTY and HOLDING CORP. v. LEY CONST. and DEV. CORP.G. R. No. 165548, June 13, 2011

FACTS:Ley Construction and Development Corporation (LCDC) was the project contractor for

the construction of several buildings for Philippine Realty & Holdings Corporation (PRHC), the project owner. Engineer Dennis Abcede (Abcede) was the project construction manager ofPRHC, while Joselito Santos (Santos) was its general manager and vice-president for operations.

Sometime between April 1988 and October 1989, the two corporations entered into fourmajor construction projects, as evidenced by four duly notarized "construction agreements."These were the four construction projects the parties entered into involving a Project 1, Project 2,Project 3 (all of which involve the Alexandra buildings) and a Tektite Building. LCDCcommitted itself to the construction of the buildings needed by PRHC, which in turn committeditself to pay the contract price agreed upon. In the course of the construction of the TektiteBuilding, it became evident to both parties that LCDC would not be able to finish the projectwithin the agreed period. LCDC explained that the unanticipated delay in construction was due

mainly to the sudden, unexpected hike in the prices of cement and other construction materials.Both parties agreed to enter into another agreement. Abcede asked LCDC to advance the amountnecessary to complete construction. Its president acceded, on the absolute condition that it beallowed to escalate the contract price. Abcede replied that he would take this matter up with the board of directors of PRHC.The board of directors turned down the request for an escalationagreement. However, On 9 August 1991 Abcede sent a formal letter to LCDC, asking for itsconformity, to the effect that should it infuse P36 million into the project, a contract priceescalation for the same amount would be granted in its favor by PRHC.

LCDC then proceeded with the construction of the Tektite Building, expending the entireamount necessary to complete the project. From August to December 1991, it infused amountstotaling P 38,248,463.92. These amounts were not deposited into the joint account of LCDC andPRHC, but paid directly to the suppliers upon the instruction of Santos.LCDC religiouslysubmitted to PRHC monthly reports that contained the amounts of infusion it made from the period August 1991 to December 1991. PRHC never replied to any of these monthly reports.On20 January 1992, LCDC wrote a letter addressed to Santos stating that it had already compliedwith its commitment as of 31 December 1991 and was requesting the release of P 2,248,463.92.

In a letter dated 18 January 1993, LCDC, through counsel, demanded payment of theagreed escalation price of P 36 million. In its reply on 16 February 1993, PRHC suddenly deniedany liability for the escalation price. In the same letter, it claimed that LCDC had incurred 111days of delay in the construction of the Tektite Building and demanded that the latter pay P39,326,817.15 as liquidated damages.

ISSUE:Whether or not LCDC was delayed in the performance of its obligation to construct the

buildings for PRHC .

HELD:The Court held that A subsequent escalation agreement was validly entered into by the

parties, but only to the extent of P 36 million. LCDC was able to establish that Abcede andSantos, on behalf of PRHC, had signed the letter-agreement containing the stipulation on theescalation. PRHC does not question the validity of these agreements; it thereby effectivelyadmits that these two individuals had actual authority to sign on its behalf with respect to theseconstruction projects. Thus, the lack of authority on their part should not be used to prejudice it,considering that the two were clothed with apparent authority to execute such agreements. Inaddition, PRHC is allegedly barred by promissory estoppel from denying the claims of the othercorporation.

The Court further held that LCDC is not liable for liquidated damages for delay in theconstruction of the buildings for PRHC. There is no question that LCDC was not able to fullyconstruct the Tektite Building and Projects 1, 2, and 3 on time. The shortage in supplies andcement may be characterized as force majeure. In the present case, hardware stores did not haveenough cement available in their supplies or stocks at the time of the construction in the 1990s.



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TITAN-IKEDA VS. PRIMETOWNG.R No. 158768

February 12, 2008

FACTS:

The respondent Primetown Property Corporation entered into contract weith the petitioner Titan-Ikeda Construction Corporation for the structural works of a 32-storey primetower. After the construction of the tower, respondent again awarded to the petitioner the amountof P 130,000,000.00 for the tower‘s architectural design and structure. Howevere, in 1994, therespondent entered inot a contract of sale of the tower in favor of the petitioner in a mannercalled full-swapping. Since the respondent had allegedly constructed almost one third of the project as weel as selling some units to third persons unknown to the petitioner. Integrated Inc.took over the project, thus the petitioner is demanding for the return of its advanced payment in

the amount of P2, 000,000.00 as weel as the keys of the unit.

ISSUE:

Whether the petitioner is entitled to damages.

RULING:

No, because in a contract necessarily that there is a meeting of the minds of the parties inwhich this will be the binding law upon them. Thus, in a reciprocal obligation. Both parties areobliged to perform their obligation simultaneously and in good faith. In this case, petitioner,Titan-Ikeda can not recover damages because it was found out there was no solutio indebiti ormistake in payment in this case since the latter is just entitled to the actual services it rendered tothe respondent and thus it is ordered to return the condominium units to the respondent.



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PADCOM Condominium Corporation vs. Ortigas Center Association, Inc.,G.R. No. 146807, May 9, 2002

FACTS:

Petitioner Padcom Condominium Corporation (hereafter PADCOM) owns and managesthe Padilla Office Condominium Building (PADCOM Building) located at Emerald Avenue,Ortigas Center, Pasig City. The land on which the building stands was originally acquired fromthe Ortigas & Company, Limited Partnership (OCLP), by Tierra Development Corporation(TDC) under a Deed of Sale dated 4 September 1974. Among the terms and conditions in thedeed of sale was the requirement that the transferee and its successor-in-interest must becomemembers of an association for realty owners and long-term lessees in the area later known as theOrtigas Center. Subsequently, the said lot, together with improvements thereon, was conveyed by TDC in favor of PADCOM in a Deed of Transfer dated 25 February 1975.In 1982, respondent Ortigas Center Association, Inc. (hereafter the Association) was organizedto advance the interests and promote the general welfare of the real estate owners and long-term

lessees of lots in the Ortigas Center. It sought the collection of membership dues in the amountof two thousand seven hundred twenty-four pesos and forty centavos (P2, 724.40) per monthfrom PADCOM. The corporate books showed that PADCOM owed the Association P639,961.47, representing membership dues, interests and penalty charges from April 1983 to June1993. The letters exchanged between the parties through the years showed repeated demands for payment, requests for extensions of payment, and even a settlement scheme proposed byPADCOM in September 1990.In view of PADCOM's failure and refusal to pay its arrears in monthly dues, including interestsand penalties thereon, the Association filed a complaint for collection of sum of money beforethe trial court. The Association averred that purchasers of lands within the Ortigas Centercomplex from OCLP are obligated under their contracts of sale to become members of theAssociation. This obligation was allegedly passed on to PADCOM when it bought the lot fromTDC, its predecessor-in-interest.The trial court dismissed the case. However, the Court of Appeals reversed the same in favor ofthe Association.

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

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

membership is necessary. If at all, acceptance by the Board of Directors is a ministerial functionconsidering that PADCOM is deemed to be a regular member upon the acquisition of the lot pursuant to the automatic membership clause annotated in the Certificate of Title of the propertyand the Deed of Transfer. PADCOM‘s contention that the automatic membership clause is aviolation of its freedom of association because it was never forced to join the association islikewise untenable. Nobody forced it to buy the land when it bought the building with theannotation of the condition or lien on the Certificate of Title thereof and accepted the Deed.PADCOM voluntarily agreed to be bound by and respect the condition, and thus to join theAssociation.Having ruled that PADCOM is a member of the Association, it is obligated to pay its duesincidental thereto as mandated by Article 1159 of the Civil Code which states that ―obligationsarising from contracts have the force of law between the contracting parties and should becomplied with in good faith‖.Assuming in gratis argumenti that PADCOM is not a member of the Association, it cannot

evade payment without violating the equitable principles underlying quasi-contracts. Article2142 of the Civil Code provides that ―certain lawful, voluntary and unilateral acts give rise to the juridical relation of quasi-contract to the end that no one shall be unjustly enriched or benefitedat the expense of another‖.



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MC Engineering, Inc., vs. Court of AppealsG.R. No. 104047, April 3, 2002

380 SCRA 116

FACTS:Mc Engineering, Inc. and Surigao Coconut Development Corporation signed a contract,for the restoration of the latter‘s building, land improvement, electrical, and mechanicalequipment located at Lipata, Surigao City, which was damaged by typhoon Nitang. DefendantMc Engineering and plaintiff Gerent Builders, Inc. entered into an agreement wherein defendantsubcontracted to plaintiff the restoration of the buildings and land improvement phase of itscontract with Sucodeco.On January 2, 1985, plaintiff received from defendant the amount of P1, 339,720.00 as full payment of the sub-contract price, after deducting earlier payments made by defendant to plaintiff, as evidenced by the affidavit executed by plaintiff‘s president, Mr. Narciso C. Roque,wherein the latter acknowledged complete satisfaction for such payment on the basis of the

Statement of Account which plaintiff had earlier forwarded to defendant. Nevertheless, plaintiff is still claiming from defendant the sum of P632, 590.13 as its share in theadjusted contract cost in the amount of P854, 851.51, alleging that the sub-contract is subject tothe readjustment provided for in Section VII of the agreement, and also the sum of P166, 252.00in payment for additional electrical and civil works outside the scope of the sub-contract.Petitioner refused to pay respondent Gerent. Thus, on March 21, 1985, respondent Gerent filedthe complaint against petitioner. On March 28, 1985, the trial court issued the correspondingwrit of preliminary attachment upon the filing by respondent Gerent of a P632, 590.13 bondissued by respondent Surety. On April 24, 1985, petitioner moved to quash the writ on theground that it was improperly issued. The trial court denied the motion.On July 13, 1987, the trial court ordered the return of petitioner‘s properties that deputy sheriffCristobal C. Florendo attached and seized. The sheriff reported to the court that he never seized asingle property of petitioner but merely conducted a ―paper levy‖. On January 5, 1988, petitioner filed an application against the attachment bond to recoverdamages it suffered due to the wrongful issuance of the writ of attachment. Respondent Suretyopposed the application.In its Answer, petitioner vigorously denied respondent Gerent‘s causes of action. Petitionercounterclaimed for damages and attorney‘s fees due to the improper issuance of the writ ofattachment.

ISSUE:Whether or not petitioner is entitled to actual moral and exemplary damages due to the

wrongful issuance of the writ of preliminary attachment.

HELD:Since no moral damages is due to appellee and it appearing that no actual damages was

awarded by the lower court, the grant of exemplary damages has no leg on which to stand (Art.2234, Civil Code).If at all, the wrongful issuance of the writ of attachment, as ruled out by this Court, merelyresulted in actual damages to appellee. But such is not automatically awarded for it is subject to proof. Appellee‘s claim that it lost major contracts after a credit investigation revealed that itsaccounts were garnished is a bare allegation not merely unsupported by solid evidence but is alsospeculative. The alleged $35,000.00 remittance refused by the Hongkong and Shanghai Bankdoes not inspire belief for failure of appellee to produce documentary proof to buttress its claim.‖We agree with the Court of Appeals that the trial court erred in awarding moral and exemplarydamages to petitioner. The mere fact that a complaint is dismissed for lack of legal basis will not justify an award of moral damages to the prevailing party. Even the dismissal of a ―clearlyunfounded civil action or proceeding‖ will not entitle the winning party to moral damages. Formoral damages to be awarded, the case must fall within the instances enumerated in Article2219, or under Article 2220, of the Civil Code. Moreover, in the absence of fraud, malice,wanton recklessness or oppressiveness, exemplary damages cannot be awarded.



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Bank of the Philippine Islands vs. Benjamin PinedaG.R.No. L-62441, December 14, 1987

156 SCRA 404

FACTS:

Through financing of Peoples Bank and Trust Company, now BPI, three vessels were bought by Southern Industrial Project (SIP) and/or Bacong Shipping Company. SIP is acorporation whose majority stockholder belongs to Concon Family. Bacong Shipping Companyis a Panamanian corporation. The said vessels were mortgaged to the bank as a security of their payment of their bank loans.

Interocean Shipping Corporation, a booking agency, handled the operation of saidvessels. It undertook the freight revenues from their charter and operation which shall bedeposited with Trust Department of PBTC and disbursements made therefrom shall be covered by vouchers bearing the approval of SIP.

SIP and PBTC became doubtful of the amount of revenues being deposited with the bankas diversions of payments were being made. Gregorio Concon of SIP and/or Bacong and Ramon

Azanza of PBTC organized SA Gacet Inc. to manage and supervise the vessels‘ operation withEzekiel Toeg as its manager. A management contract was entered into between SIP and GacetInc. placing the supervision and management of said vessels in the hands of Gacet for a specified period, renewable at the will of the parties without however terminating the booking agency ofInterocean Shipping Corp. Gacet and Interocean, in accordance with the management contract,contracted services of Benjamin Pineda doing business in the name and style Pioneer Iron Worksto carry out repairs, fabrication and installation of necessary parts in said vessels in order tomake them seaworthy and in good working condition.

Unable to pay their mortgage indebtedness to PBTC hich became past due, SIP and/orBacong sold said vessels to PBTC by way of dacion en pago.Pineda filed an action against SIP,Gacet, Interocean and PBTC for payment and interest of the cost of repairs, fabrication andinstallation of necessary parts of the vessels.

ISSUE:Who should be liable for the payment of the cost of repairs undertaken in the subject

vessels?

HELD:The Deed of Confirmation of Obligation is but a part or corollary to the Deeds of Sale of

the vessels. In fact, specific reference thereto was made by said Deeds of Sale as to thesettlement of obligations, among which are repairs in question. The stipulation with the Deed ofConfirmation leaves no room for doubt while the bank may indeed pay certain obligations. The primary purpose of the contracts is the protection of the vessels. Among them are liens on thesame under which the obligation to private respondent properly belongs.

Private respondent was paid certain sum of money and its balance through the issuance ofthree checks by Interocean. Under the circumstances, private respondent has no basis ornecessity at that time to exercise his right of retention under 1731 of the Civil Code. The checkswere dishonored thus the private respondent could not give validity to petitioner‘s argument thatthe former has waived or abandoned his liens on the vessels. To pursue such view would put a premium on an act of deception which led private respondent to believe that he will be fully paid.Furthermore, when the checks were dishonored, it was impossible for private respondent toenforce his liens because the vessels were already in Japan, outside the territorial jurisdiction ofPhilippine waters. If there was no intention on the part of PBTC (BPI) to assume responsibilityfor these obligations at the time of the sale of the vessels, there is no sense in executing saidDeed of Confirmation together with the Deeds of Sale and the stipulations thereunder would be pointless.

The repairs made on the vessels ultimately redounded to the benefit of the new owner(BPI) for without said repairs, those vessels would not be seaworthy. Under Article 2124 of theCivil Code, such acts give rise to the juridical relation of quasi-contract to the end that no oneshall be unjustly enriched or benefited at the expense of another.The petitioner bank isanswerable to Pineda for the services contracted on the vessels.



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State Investment vs. Court of AppealsG.R. No. 90676, June 19, 1991

198 SCRA 392

FACTS:

Respondent spouses Rafael and Refugio Aquino pledged certain shares of stock to petitioner State Investment House Inc. in order to secure a loan of P120, 000.00. Prior to theexecution of the pledge, respondent spouses Jose and Marcelina Aquino signed an agreementwith Petitioner f or the latter‘s purchase of receivables amounting to P375, 000.00. When the 1stAccount fell due, respondent spouses paid the same partly with their own funds and partly fromthe proceeds of another loan which they obtained also from Petitioner designated as the 2ndAccount. This new loan was secured by the same pledge agreement executed in relation to the1st Account. When the new loan matured, State demanded payment. Respondents expressedwillingness to pay, requesting that upon payment, the shares of stock pledged be released. State

denied the request on the ground that the loan which it had extended to the spouses Jose andMarcelina Aquino has remained unpaid.

On 29, June 1984, Atty. Rolando Salonga sent to respondent spouses a Notice of NotarialSale stating that upon request of State and by virtue of the pledge agreement, he would sell at public auction the shares of stock pledged to State. This prompted respondents to file a case before the Regional Trial Court of Quezon City alleging that the intended foreclosure sale wasillegal because from the time the obligation under the 2nd Account became due, they had beenable and willing to pay the same, but petitioner had insisted that respondents pay even the loanaccount of Jose and Marcelino Aquino, which had not been secured by the pledge. It was furtheralleged that their failure to pay their loan was excused because State itself had prevented thesatisfaction of the obligation.

On January 29, 1985, the trial court rendered a decision in favor of the plaintiff orderingState to immediately release the pledge and to deliver to respondents the share of stock upon payment of the loan. The Court of Appeals affirmed in toto the decision of the trial court.

ISSUES:

Whether or not the conditions to be complied with by the debtor desirous of beingreleased from his obligation in cases where the creditor unjustly refuses to accept payment have been met by the spouses Aquino.

HELD:

The conditions had not been complied with. Article 1256 of the civil code states that: ―Ifthe creditor to whom tender of payment has been made refuses without just cause to accept it, thedebtor shall be released from responsibility by consignation of the thing or sum due.‖ Where thecreditor unjustly refuses to accept payment, the debtor desirous of being released from hisobligation must comply with two (2) conditions: (a) tender of payment; and (b) consignation ofthe sum due. Tender of payment must be accompanied or followed by consignation in order thatthe effects of payment may be produced. In the instant case, respondent spouses Aquino, whilethey are properly regarded as having made a written tender of payment to petitioner state, failedto consign in court the amount due at the time of the maturity of the 2nd Account No. It followsthat their obligation to pay principal-cum-regular or monetary interest under the terms andconditions of the said Account was not extinguished by such tender of payment alone.



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ABELLANA V. PEOPLEG.R. No. 174654, August 17, 2011

FACTS:

In 1985, petitioner Felixberto A. Abellana extended a loan to private respondents spousesDiaga and Saapia Alonto (spouses Alonto), secured by a Deed of Real Estate Mortgage over Lot Nos. 6471 and 6472 located in Cebu City.Subsequently, or in 1987, petitioner prepared a Deedof Absolute Sale conveying said lots to him. The Deed of Absolute Sale was signed by spousesAlonto in Manila. However, it was notarized in Cebu City allegedly without the spouses Alontoappearing before the notary public. Thereafter, petitioner caused the transfer of the titles to hisname and sold the lots to third persons.On August 12, 1999, respondent spouses filed acomplaint charging petitioner with Estafa through Falsification of Public Document.

The RTC found that petitioner did not intend to defraud the spouses Alonto andthat petitioner can only be held guilty of Falsification of a Public Document by a private

individual under Article 172(1)in relation to Article 171(2) of the Revised Penal Code and notEstafa through falsification of public document as charged in the Information.

Petitioner, upon appeal, raised the issue of whether an accused who was acquittedof the crime charged may nevertheless be convicted of another crime or offense not specificallycharged and alleged and which is not necessarily included in the crime or offense charged. TheCA held that petitioner who was charged with and arraigned for estafa through falsification of public document under Article 171(1) of the RPC could not be convicted of Falsification ofPublic Document by a Private Individual under Article 172(1) in relation to Article 171(2). Thus,the CA opined that the conviction of the petitioner for an offense not alleged in the Informationor one not necessarily included in the offense charged violated his constitutional right to beinformed of the nature and cause of the accusation against him. Nonetheless, the CA affirmed thetrial court's finding with respect to petitioner's civil liability.

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

acquittal.

HELD: NO. It is an established rule in criminal procedure that a judgment of acquittal

shall state whether the evidence of the prosecution absolutely failed to prove the guilt of theaccused or merely failed to prove his guilt beyond reasonable doubt. The "extinction of the penalaction does not carry with it the extinction of civil liability unless the extinction proceeds from adeclaration in a final judgment that the fact from which the civil liability might arise did notexist."

Civil liability arises when one, by reason of his own act or omission, doneintentionally or negligently, causes damage to another. Hence, for petitioner to be civilly liable tospouses Alonto, it must be proven that the acts he committed had caused damage to thespouses.Based on the records of the case, we find that the acts allegedly committed by the petitioner did not cause any damage to spouses Alonto.

Even assuming that the spouses Alonto did not personally appear before thenotary public for the notarization of the Deed of Absolute Sale, the same does not necessarilynullify or render void ab initio the parties' transaction. Such non-appearance is not sufficient toovercome the presumption of the truthfulness of the statements contained in the deed. And sincethe defective notarization does not ipso facto invalidate the Deed of Absolute Sale, the transfer ofsaid properties from spouses Alonto to petitioner remains valid. Hence, when on the basis ofsaid Deed of Absolute Sale, petitioner caused the cancellation of spouses Alonto's title and theissuance of new ones under his name, and thereafter sold the same to third persons, no damageresulted to the spouses Alonto.



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PEOPLE VS. MALICSIG.R No. 175833January 29, 2008

FACTS:

The accused-appellant was accused for the crime of rape against his niece. The incidentwas repeated trice by the appellant. The appellant contended that he and the victim weresweethearts but the trial court did not give weight to that theory.

The trial court found appellant guilty of the crime of four counts of qualified rape andwas sentenced to suffer the penalty of death for each count of rape, to pay P300,000.00 as civilindemnity (P75,000.00 for each count), and P200,000.00 as moral damages (P50,000.00 for each

count). The CA however modified the findings of the RTC declaring that appellant is guilty offour counts of simple rape and to suffer the penalty of reclusion perpetua.

ISSUE:

Whether the award of damages was properly made.

RULING:

No, because the Supreme Court declared that the crime committed was four count ofsimple rape only and not qualified rape because the special aggravating circumstances ofminority and relationship must be alleged in the information but the prosecution failed to do so.Since it is not included, four counts of simple rape should be undertaken. The penalty imposedthen should be reclusion perpetua. The appellate court also correctly affirmed the award by thetrial court of P200,000.00 for moral damages. Moral damages are automatically granted to rapevictim. However, the award of civil indemnity is reduced to P200,000.00 in the amount ofP50,000.00 for each count of simple rape is automatically granted.



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People of the Philippines vs. Rosauro SiaG.R. No. 137457, November 21, 2001

370 SCRA 123

FACTS:

This is an automatic review of a decision of the Regional Trial Court finding the accusedJohnny Balalio y Deza and Jimmy Ponce y Tol guilty beyond reasonable doubt as principals byconspiracy for violation of RA 6539 (Anti- Carnapping law) as amended, and sentenced them tosuffer the penalty of death.

Accused are likewise adjudged jointly and severally liable to pay Agripina Bermudez, themother of the deceased Christian Bermudez the sums of: (a) P50, 000.00 as compensatorydamages for the death of Christian Bermudez; (b) P200, 000.00 as burial and other expensesincurred in connection with the death of Christian; and (c) P3, 307,199.60 (2/3 x [80-27] x 300

per day x 26 days (excluding Sundays) x 12 months) representing the loss of earning capacity ofChristian Bermudez as taxi driver.

ISSUE:The issue is whether or not the trial courts‘ award for damages is proper.

HELD:

The decision is partly correct. The Court finds the amount of P50, 000.00 as deathindemnity proper, following prevailing jurisprudence, and in line with controlling policy. Theaward of civil indemnity may be granted without any need of proof other than the death of thevictim. Though not awarded by the trial court, the victim‘s heirs are likewise entitled to moraldamages, pegged at P50, 000.00 by controlling case law, taking into consideration the pain andanguish of the victim‘s family brought about by his death.

However, the award of P200, 000.00 as burial and other expenses incurred in connectionwith the death of the victim must be deleted. The records are bereft of any receipt or voucher to justify the trial court‘s award of burial and other expenses incurred in connection with thevictim‘s death. The rule is that every pecuniary loss must be established by credible evidence before it may be awarded. Credence can be given only to claims, which are duly supported, byreceipts or other credible evidence.

The trial court was correct in awarding damages for loss of earning capacity despite thenon-availability of documentary evidence. The court based on testimony in several cases hasawarded damages representing net earning capacity. However the amount of the trial court‘saward needs to be re computed and modified accordingly.

In determining the amount of lost income, the following must be taken into account: (1)the number of years for which the victim would otherwise have lived; and (2) the rate of the losssustained by the heirs of the deceased. The second variable is computed by multiplying the lifeexpectancy by the net earnings of the deceased meaning total earnings less expenses necessary inthe creation of such earnings or income less living and other incidental expenses considering thatthere is no proof of living expenses of the deceased, net earnings are computed at fifty percent ofthe gross earnings.

In this case, the court notes that the victim was 27 years old at the time of his death andhis mother testified that as a driver of the Tamaraw FX taxi, he was earning P650.00 a day.Based on the foregoing computation, the award of the trial court with regard to lost income isthus modified accordingly.The court ordered the accused to pay the heirs of the victim Christian Bermudez the sum of P50,000.000 as civil indemnity, the sum of P50, 000.00 as moral damages, and the sum of P2,996,867.20 representing lost earnings. The award of P200, 000.00 as burial and other expenses isdeleted for lack of substantial proof.



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People of the Philippines vs. Carlos Doctolero, SrG.R. No. 131866, August 20, 2001

363 SCRA 404

FACTS:

This is an appeal of the accused from the decision of the Regional Trial Court of BaguioCity finding him guilty beyond reasonable doubt of the crime of murder and ordering him toindemnify the heirs of the victim the sum of P50, 000.00 as indemnity for his death; the sum ofP227, 808.80 as actual damages for expenses incurred for hospitalization, doctor‘s fees, funeralexpenses, vigil and burial as a result of his death, and P300, 000.00 as moral damages for the pain and mental anguish suffered by the heirs by reason of his death, all indemnifications beingwithout subsidiary imprisonment in case of insolvency, and to pay the costs.

ISSUE:

Whether or not the trial court‘s award of damages is proper.

HELD:

The Supreme Court modified the award for damages by the trial court. It reduced theaward to P112, 413.40 representing funeral expenses, which were duly proven and covered byreceipts Expenses relating to the 9th day, 40th day and 1st year anniversaries cannot beconsidered in the award of actual damages as these were incurred after a considerable lapse oftime from the burial of the victim. With respect to the award of moral damages, the same isreduced to P50, 000.00 in accordance with existing jurisprudence.

Based on the above modifications the court ordered the accused to pay the heirs of thevictim P112, 413.40 as actual damages P50, 000.00 as civil indemnity, and P50, 000.00 as moraldamages plus costs.



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People of the Philippines vs. Rolly AbulenciaG.R. No. 138403, August 22, 2001

363 SCRA 496

FACTS:

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

ISSUE:

Whether or not the trial court‘s award for damages is proper.

HELD:

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

The trial court did not award moral damages to the victim‘s family. Based on prevailing jurisprudence, moral damages may be awarded to the heirs of the victim without need for pleading or proof of its basis for their mental, physical and psychological sufferings are tooobvious to still require their recital at the trial. Hence, moral damages in the amount of P50,000.00 must be awarded.

In People v. Lagarto, the court held that attendant circumstances may be considered todetermine civil liability. Thus, in view of the evident cruelty inflicted upon the victim, as shown by the multiple burns and contusions on her body, the court granted the award of exemplarydamages in the amount of P25, 000.00.

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



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People of the Philippines vs. RelovaG.R. No. L-45129, March 6, 1987

148 SCRA 293

FACTS:

On February 1, 1975, members of the Batangas City Police together with personnel of theBatangas Electric Light System, equipped with a search warrant, searched the premises of theOpulencia Carpena Ice Plant and Cold Storage owned and operated by private respondentManuel Opulencia. The police discovered that electric wiring devices and contraptions had beeninstalled without the necessary authority from the city government. These electric devices weredesigned purposely to lower or decrease the readings of electric consumption in the electricmeter of the said electric and cold storage ice plant.

Consequently, an Assistant City Fiscal of Batangas filed an information against

Opulencia for violation of Ordinance No. 1 Series of 1974, Batangas City. However,subsequently, the accused filed a motion to dismiss the information upon the grounds that thecrime there charged had already prescribed.

Fourteen (14) days later, the Acting City Fiscal of Batangas filed before the Court of FirstInstance of Batangas another information against Opulencia this time for theft of electric powerunder Article 308 in relation to Article 309 of the Revised Penal Code. However, the case waslikewise dismissed on the ground of the constitutional right against double jeopardy. As regardsthe civil aspect of the case, no right to file a separate civil action was filed by the Batangas CityElectric Light System.

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

HELD:

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



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Manantan vs. Court of AppealsG.R. No. 107125, January 29, 2001

350 SCRA 387

FACTS:

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

The trial court decided in favor of the accused. However, the Court of Appeals modified

the decision of the lower court, in that defendant-appellee is held civilly liable for his negligentand reckless act of driving his car which was the proximate cause of the vehicular accident andsentenced to indemnify plaintiff-appellants in the amount of P174, 400.00 for the death of Ruben Nicolas

ISSUES:(1) Whether or not the trial court erred in finding that petitioner‘s acquittal did not extinguishhis civil liability.(2) Whether or not the Court a quo erred in finding that petitioner‘s acquittal did notextinguish his civil liability.(3) Whether or not the appellate court committed reversible error in finding to apply theManchester doctrine.

HELD:

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

The decision in Criminal Case No 066 supports the conclusions of the appellate court thatthe acquittal was based on reasonable doubt; hence, the civil liability was not extinguished by hisdischarge. It clearly shows that petitioner‘s acquittal was predicated on the conclusion that hisguilt had not been established with moral centainty.At the time of the filing of the information in 1983, the implied institution of civil actions withcriminal actions was governed by Rule III, Section 1 of the 1964 Rules of Court. Where the civilaction is impliedly instituted together with the criminal action, the actual damages claimed by theoffended parties, as in this case, are not included in the computation of the filing fees. Filingfees are to be paid only if other items of damages such as moral, nominal, temperate orexemplary damages are alleged in the complaint or information, or if they are not so alleged,shall constitute a first lien on the judgment. The filing fees are deemed paid from the filing ofthe criminal complaint or information.WHEREFORE, the instant petition is DISMISSED for lack of merit. The assailed decision of theCourt of Appeals in CA-G.R. CV No. 19240 promulgated on January 31, 1992, as well as itsresolution dated August 24, 1992, denying herein petitioner's motion for reconsideration, areAFFIRMED. Costs against petitioner.



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People of the Philippines vs. Rogelio BayotasG.R. No. 102007, September 2, 1994

236 SCRA 239

FACTS:

Rogelio Bayotas was charged with rape and eventually convicted thereof on June 19,1991 in a decision penned by Judge Manuel Autajay. Pending appeal of his conviction, Bayotasdied on February 4, 1992 at the National Bilibid Hospital due to cardio respiratory arrest.Consequently, the Supreme Court in its resolution of May 20, 1992, dismissed the criminalaspect of the appeal. However, it required the Solicitor General to file its comment with regard toBayotas civil liability arising from his commission of the offense charged.

In his comment, the Solicitor General expressed his view that the death of the accused didnot extinguish his civil liability as a result of his commission of the offense charged. The

Solicitor General insists that the appeal should still be resolved for the purpose of reviewing hisconviction by the lower court on which the civil liability is based.

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

ISSUE:Whether or not the death of the accused pending appeal of his conviction extinguishes his

civil liability.

HELD:

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

The legal import of the term ‗final judgment‘ is similarly reflected in the Revised PenalCode. Articles 72 and 78 of the legal body mention the term ‗final judgment‘ in the sense that itis already enforceable. This also brings to mind Section 7, Rule 116 of the Rules of Court whichstates that the judgment in a criminal case becomes final after the lapse of the period for perfecting an appeal or when the sentence has been partially or totally satisfied or served, or thedefendant has expressly waived in writing his right to appeal.

Since the death of the accused occurred while his appeal is pending, the decision has notyet become final and executory; thus, his civil liability together with his criminal liability isextinguished. However, if the civil obligation arises from other sources of obligation other thanthe crime complained of, the civil liability of the accused survived in spite of his death pendinghis appeal. A preponderance of evidence is sufficient to prove his civil liability.



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Fausto Barredo vs. Severino GarciaG.R. No. L-48006, July 8, 1942

73 PHIL 607

FACTS:

At about half past one in the morning of May 3, 1936, on the road between Malabon and Navotas, Province of Rizal, there was a head-on collision between a taxi of the Malate Taxicabdriven by Pedro Fontanilla and a carretela guided by Pedro Dimapilis. The carretela wasoverturned, and one of its passengers, 16-year-old boy Faustino Garcia, suffered injuries fromwhich he died two days later. A criminal action was filed against Fontanilla in the Court of FirstInstance of Rizal and he was convicted and sentenced to an indeterminate sentence of one yearand one day to two years of prision correctional. The court in the criminal case granted the petition that the right to bring a separate civil action be reserved. The Court of Appeals affirmedthe sentence of the lower court in the criminal case. Severino Garcia and Timotea Almario,

parents of the deceased, brought an action in the Court of First Instance of Manila against FaustoBarredo as the sole proprietor of the Malate Taxicab and employer of Pedro Fontanilla. On July8, 1939, the Court of First Instance of Manila awarded damages in favor of the plaintiffs for P2,000.00 plus legal interest from the time the action was instituted.

The main theory of the defense is that the liability of Fausto Barredo is governed by theRevised Penal Code; hence, his liability is only subsidiary, as there has been no civil actionagainst Pedro Fontanilla, the person criminally liable, Barredo cannot be held responsible inthis case.

However, the decision of the Court of Appeals expressed that the liability sought to beimposed against Fausto Barredo is not a civil obligation arising from a felony or a misdemeanor, but an obligation imposed in Article 1903 of the Civil Code by reason of his negligence in theselection or supervision of his servant or employee.

ISSUE:Whether or not the plaintiffs may bring this separate civil action against Fausto Barredo, thusmaking him primary and directly responsible under Article 1903 of the Civil Code as theemployer of Pedro Fontanilla.

HELD:

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

To hold that there is only one way to make the employer‘s liability effective, and that is,to sue the driver and exhaust his properties is tantamount to compelling the plaintiff to follow adevious and cumbersome method of obtaining relief. True, there is such a remedy under ourlaws, but there is also an expeditious way, which is based on the primary and directresponsibility of the employer under Article 1903 of the Civil Code.

At this juncture, it should be said that the primary and direct responsibility of employersand presumed negligence are principles calculated to protect society. Workmen and employeesshould be carefully chosen and supervised in order to avoid injury to the public. It is the mastersor employers who principally reap the profits resulting from the services of their servants. It is but right that they should guarantee the latter‘s careful conduct for the personnel and patrimonialsafety of the others.



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PHILIPPINE HAWK CORP. v. TAN LEEG.R. No. 166869

February 16, 2010

FACTS:

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

On June 18, 1992, respondent filed an Amended Complaint, in her own behalf and in

behalf of her children, in the civil case for damages against petitioner. Respondent sought the payment of indemnity for the death of Silvino Tan, moral and exemplary damages, funeral andinterment expenses, medical and hospitalization expenses, the cost of the motorcycle's repair,attorney's fees, and other just and equitable reliefs.

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

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

ISSUE:

Whether or not petitioner is liable to respondent for damages.

HELD:

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



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DY TEBAN VS. LIBERTY FORESTG.R No. 161803February 4, 2008

FACTS:

A Prime Mover Trailer suffered a tire blow out during the night of its travel at a nationalhighway. The trailer was owned by the respondent Liberty Forest. The driver allegedly put earlwarning devices but the only evidence being witnessed was a banana trunks and candles. Sincethe car was placed at the right wing of the road, thus it cause the swerving of a Nissan van owned by the petitioner when a passenger bus was coming in between the trailer. The Nissan van ownerclaimed for damages against the respondent. The trial court found that the proximate cause of thethree – way accident is the negligence and carelessness of driver of the respondent . Howeverreversed the decision of the trial court.

ISSUE:Whether there was negligence on the part of the respondent.

RULING:

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



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SAFEGUARD SECURITY VS. TANGCOG.R No. 165732

December 14, 2006

FACTS:

The victim Evangeline Tangco was depositor of Ecology Bank. She was also a licensed-fire arm holder, thus during the incident, she was entering the bank to renew her time deposit andalong with her was her firearm. Suddenly, the security guard of the bank, upon knowing that thevictim carries a firearm, the security guard shot the victim causing the latter‘s instant death. Theheirs of the victim filed a criminal case against security guard and an action against SafeguardSecurity for failure to observe diligence of a goof father implied upon the act of its agent.

ISSUE:

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

RULING:

Yes. The law presumes that any injury committed either by fault or omission of anemployee reflects the negligence of the employer. In quasi-delicts cases, in order to overcomethis presumption, the employer must prove that there was no negligence on his part in thesupervision of his employees.

It was declared that in the selection of employees and agents, employers are required toexamine them as to their qualifications, experience and service records. Thus, due diligence onthe supervision and operation of employees includes the formulation of suitable rules andregulations for the guidance of employees and the issuance of proper instructions intended forthe protection of the public and persons with whom the employer has relations through hisemployees. Thus, in this case, Safeguard Security committed negligence in identifying thequalifications and ability of its agents.



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VILLANUEVA VS. DOMINGOG.R No. 144274

September 20, 2004

FACTS:

In 1991, a collision was made by a green Mitsubishi lancer owned by Ocfemia against asilver Mitsubishi lancer driven by Leandro Domingo and owned by petitioner Priscilla Domingo.The incident caused the car of Domingo bumped another two parked vehicles. A charged wasfiled against Ocfemia and the owner Villanueva. Villanueva claimed that he must not be heldliable for the incident because he is no longer the owner of the car, that it was already swapped toanother car . however, the trial court ordered the petitioner to pay the damages incurred by thesilver Mitsubishi lancer car.

ISSUE:Whether the owner Villanueva be held liable for the mishap.

RULING:

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



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CALALAS VS. COURT OF APPEALSG.R No. 122039

May 31, 2000

FACTS:

Eliza Sunga was a passenger of a jeepney owned and operated by the petitioner Calalas.Private respondent Sunga sat in the rear protion of the jeepney where the conductor gave Sungaan extension seat. When the jeep stopped, Sunga gave way to a passenger going outside the jeep.However, an Isuzu Truck driven by Verene and owned by Salva, accidentally hit Sunga causingthe latter to suffer physical injuries where the attending physician ordered a three months of rest.Sunga filed an action for damages against the petitioner for breach of contract of commoncarriage by the petitioner.

On the other hand, the petitioner Calalas filed an action against Salva, being the owner ofthe truck. The lower court ruled in favor of ther petitioner, thus the truck owner is liable for thedamage to the jeep of the petitioner.

ISSUE:Whether the petitionerr is liable.

RULING:

Yes. The petitioner is liable for the injury suffered by Sunga. Under Article 1756of the New Civil Code, it provides that common carriers are presumed to have been at fault or tohave acted negligently unless they prove that they observed extraordinary diligence as defined inArts. 1733 and 1755 of the Code. This provision necessarily shifts to the common carrier the burden of proof.

In this case, the law presumes that any injury suffered by a passenger of the jeepis deemed to be due to the negligence of the driver. This is a case on Culpa Contractual wherethere was pre-existing obligations and that the fault is incidental to the performance of theobligation. Thus, it was clearly observed that the petitioner has negligence in the conduct of hisduty when he allowed Sunga to seat in the rear portion of the jeep which is prone to accident.



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THERMOCHEM INCORPORATED vs. LEONORA NAVALG.R. No. 131541

OCTOBER 20, 2000

FACTS:

"On May 10, 1992, at around 12:00 o'clock midnight, Eduardo Edem was driving a"Luring Taxi" along Ortigas Avenue, near Rosario, Pasig, going towards Cainta. Thereafter, thedriver executed a U-turn to traverse the same road, going to the direction of EDSA. At this point,the Nissan Pathfinder traveling along the same road going to the direction of Cainta collided withthe taxicab. The point of impact was so great that the taxicab was hit in the middle portion andwas pushed sideward, causing the driver to lose control of the vehicle. The taxicab was thendragged into the nearby Question Tailoring Shop, thus, causing damage to the said tailoringshop, and its driver, Eduardo Eden, sustained injuries as a result of the incident."

Private respondent, as owner of the taxi, filed a damage suit against petitioner,Thermochem Incorporated, as the owner of the Nissan Pathfinder, and its driver, petitionerJerome Castro. After trial, the lower court adjudged petitioner Castro negligent and ordered petitioners, jointly and severally, to pay private respondent actual, compensatory and exemplarydamages plus attorney's fees and costs of suit.

ISSUE:What are the liabilities of both parties?

RULING:

The driver of the oncoming Nissan Pathfinder vehicle was liable and the driver of the U-turning taxicab was contributorily liable. It is established that Castro was driving at a speedfaster than 50 kilometers per hour because it was a downhill slope. But as he allegedly steppedon the brake, it locked causing his Nissan Pathfinder to skid to the left and consequently hit thetaxicab. Malfunction or loss of brake is not a fortuitous event. Between the owner and his driver,on the one hand, and third parties such as commuters, drivers and pedestrians, on the other, theformer is presumed to know about the conditions of his vehicle and is duty bound to take carethereof with the diligence of a good father of the family. A mechanically defective vehicleshould avoid the streets. As petitioner's vehicle was moving downhill, the driver should haveslowed down since a downhill drive would naturally cause the vehicle to accelerate. Moreover,the record shows that the Nissan Pathfinder was on the wrong lane when the collision occurred.

The taxi driver is contributorily liable since he took a U-turn where it is not generallyadvisable. The taxi was hit on its side which means that it had not yet fully made a turn to theother lane. The driver of the taxi ought to have known that vehicles coming from the Rosario bridge are on a downhill slope. Obviously, there was lack of foresight on his part, making himcontributorily liable. Considering the contributory negligence of the driver of privaterespondent's taxi, the award of P47,850.00, for the repair of the taxi, should be reduced in half.All other awards for damages are deleted for lack of merit.



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AMADO PICART vs. FRANK SMITH, JR.G.R. No. L-12219MARCH 15, 1918

FACTS:

The plaintiff, riding on his pony was half way across the Carlatan bridge when thedefendant approached from the opposite direction in an automobile, going at the rate of about tenor twelve miles per hour. As the defendant neared the bridge he saw a horseman on it and blewhis horn to give warning of his approach. He continued his course and after he had taken the bridge he gave two more successive blasts, as it appeared to him that the man on horseback before him was not observing the rule of the road. The plaintiff saw the automobile coming andheard the warning signals. However, thinking that he has no sufficient time to go to the otherside of the road, he pulled the pony closely up against the railing on the right side of the bridgeinstead of going to the left. The defendant, instead of veering to the right while yet some distance

away or slowing down, continued to approach directly toward the horse. When he had gottenquite near, there being then no possibility of the horse getting across to the other side, thedefendant quickly turned his car sufficiently to the right to escape hitting the horse alongside ofthe railing where it as then standing; but in so doing the automobile passed in such close proximity to the animal that it became frightened and turned its body across the bridge with itshead toward the railing. In so doing, it as struck on the hock of the left hind leg by the flange ofthe car and the limb was broken. The horse fell and its rider was thrown off with some violence.As a result of its injuries the horse died. The plaintiff received contusions which causedtemporary unconsciousness and required medical attention for several days.

ISSUE:Whether or not the defendant is guilty of negligence.

RULING:

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

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



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JOSE V. LAGON vs. HOOVEN COMALCO INDUSTRIES, INCG.R. No. 135657

JANUARY 17, 2001

FACTS:

Sometime in April 1981 Lagon, a businessman and HOOVEN entered into two (2)contracts, denominated Proposal, whereby for a total consideration of P104,870.00 HOOVENagreed to sell and install various aluminum materials in Lagon‘s commercial building inTacurong, Sultan Kudarat. HOOVEN filed an action against Lagon claiming that the latter failedto pay his due despite HOOVEN‘s performance of its obligation. Lagon, in his answer, deniedliability and averred that HOOVEN was the party guilty of breach of contract by failing todeliver and install some of the materials specified in the proposals; that as a consequence he wascompelled to procure the undelivered materials from other sources; that as regards the materialsduly delivered and installed by HOOVEN, they were fully paid.

ISSUE:Who among the parties is entitled to damages?

RULING:

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



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SPOUSES FRANCISCO vs. HONORABLE COURT OF APPEALSG.R. No. 118749APRIL 25, 2003

FACTS:

On 3 February 1984, the spouses Lorenzo and Lorenza Francisco and EngineerBienvenido C. Mercado entered into a Contract of Development for the development into asubdivision of several parcels of land in Pampanga. Under the Contract, respondent agreed toundertake at his expense the development work for the Franda Village Subdivision. Respondentcommitted to complete the construction within 27 months. Respondent also advancedP200,000.00 for the initial expenses of the development work. In return, respondent wouldreceive 50% of the total gross sales of the subdivision lots and other income of the subdivision.Respondent also enjoyed the exclusive and irrevocable authority to manage, control andsupervise the sales of the lots within the subdivision. The Contract required respondent to submit

to petitioners, within the first 15 days of every month, a report on payments collected from lot buyers with copies of all the contracts to sell. However, respondent failed to submit the monthlyreport.

On 27 February 1987, respondent filed with the trial court an action to rescind theContract with a prayer for damages. Petitioners countered that respondent breached the Contract by failing to finish the subdivision within the 27 months agreed upon, and therefore respondentwas in delay.

ISSUE:Did Engr. Mercado incur delay in the case at bench?

RULING:

The petitioners breached the Contract by: (1) hiring Rosales to do development work onthe subdivision within the 27-month period exclusively granted to respondent; (2) interferingwith the latter's development work; and (3) stopping respondent from managing the sale of lotsand collection of payments. Because petitioners were the first to breach the Contract and eveninterfered with the development work, respondent did not incur delay even if he completed only28% of the development work. Further, the HSRC extended the Contract up to July 1987. Sincethe Contract had not expired at the time respondent filed the action for rescission, petitioners'defense that respondent did not finish the development work on time was without basis. The law provides that delay may exist when the obligor fails to fulfill his obligation within the timeexpressly stipulated. In this case, the HSRC extended the period for respondent to finish thedevelopment work until 30 July 1987. Respondent did not incur delay since the period grantedhim to fulfill his obligation had not expired at the time respondent filed the action for rescissionon 27 February 1987.

Moreover, since petitioners stopped respondent from selling lots and collecting paymentsfrom lot buyers, which was the primary source of development funds, they in effect, renderedrespondent incapable, or at least made it difficult for him, to develop the subdivision within theallotted period. In reciprocal obligations, neither party incurs in delay if the other does notcomply or is not ready to comply with what is incumbent upon him. It is only when one of the parties fulfills his obligation that delay by the other begins.



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JACINTO TANGUILIG vs. COURT OF APPEALS and VICENTE HERCE JR.G.R. No. 117190

JANUARY 2, 1997

FACTS:

Petitioner Jacinto M. Tanguilig proposed to respondent Vicente Herce Jr. to construct awindmill system for him. After some negotiations they agreed on the construction of thewindmill for a consideration of P60,000.00. On 14 March 1988, due to the refusal and failure ofrespondent to pay the balance, petitioner filed a complaint to collect the amount. Respondentdenied the claim saying that he had already paid this amount to the San Pedro GeneralMerchandising Inc. (SPGMI) which constructed the deep well to which the windmill system wasto be connected. According to respondent, since the deep well formed part of the system the payment he tendered to SPGMI should be credited to his account by petitioner. Moreover,assuming that he owed petitioner a balance of P15,000.00, this should be offset by the defects in

the windmill system which caused the structure to collapse after a strong wind hit their place.

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

ISSUE:Whether or not the payment for the deep well is part of the contract price.

Whether or not Tanguilig is liable to reconstruct the damaged windmill considering that itscollapse is due to a typhoon.

RULING:

There is absolutely no mention in the two (2) documents that a deep well pump is acomponent of the proposed windmill system. The contract prices fixed in both proposals coveronly the features specifically described therein and no other. Respondent is directed to pay petitioner Tanguilig the balance of P15,000.00 plus legal interest.

Regarding the second issue, the Supreme Court has consistently held that in order for a party to claim exemption from liability by reason of fortuitous event under Art. 1174 of the CivilCode four (4) requisites must concur: (a) the cause of the breach of the obligation must beindependent of the will of the debtor; (b) the event must be either unforeseeable or unavoidable;(c) the event must be such as to render it impossible for the debtor to fulfill his obligation in anormal manner; and, (d) the debtor must be free from any participation in or aggravation of theinjury to the creditor. Petitioner failed to show that the collapse of the windmill was due solely toa fortuitous event. Petitioner merely stated that there was a "strong wind." But a strong wind inthis case cannot be fortuitous. On the contrary, a strong wind should be present in places wherewindmills are constructed. Petitioner is ordered to "reconstruct subject defective windmillsystem, in accordance with the one-year guaranty".



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DR. FERNANDO PERIQUET, JR. vs. THE COURT OF APPEALSG.R. No. L-69996

DECEMBER 5, 1994

FACTS:

Spouses Fernando Periquet and Petra Francisco were left childless after the death of theironly child, Elvira, so they took in a son out of wedlock of Marta Francisco-Reyes, sister of Petra.Though he was not legally adopted, the boy was given the name Fernando Periquet, Jr. and wasreared to manhood by the spouses Periquet. On March 20, 1966, Fernando Periquet died. WhenPetra died, she was survived by her siblings, nieces and nephews and by the petitioner. But a fewdays before her death, Petra asked her lawyer to prepare her last will and testament. However,she died before she could sign it. In the said will, Petra left her estate to petitioner, FernandoPeriquet, Jr. and provided for certain legacies to her other heirs. Felix Franciso, brother of Petra,assigned his hereditary rights to the petitioner. However, later on, he filed an action for

annulment of the Assignment of Hereditary Rights claiming "gross misrepresentation and fraud,""grave abuse of confidence," "mistake and undue influence," and "lack of cause and/orconsideration" in the execution of the challenged deed of assignment.

ISSUE:

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

RULING:

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

Felix Francisco could not be considered to have been deceived into signing the subjectdeed of assignment for the following reasons: The assignment was executed and signed freelyand voluntarily by Felix Francisco in order to honor, respect and give full effect to the lastwishes of his deceased sister, Petra. The same was read by him and was further explained byAtty. Diosdado Guytingco. Furthermore, witnesses for petitioner, who also served as witnessesin the execution and signing of the deed of assignment, declared that Felix Francisco was neitherforced nor intimidated to sign the assignment of hereditary rights.



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LEGASPI OIL CO., INC. vs. THE COURT OF APPEALSG.R. No. 96505JULY 1, 1993

FACTS:

Bernard Oseraos had several transactions with Legaspi Oil Co. for the sale of copra to thelatter. The price at which appellant sells the copra varies from time to time, depending on the prevailing market price when the contract is entered into. On February 16, 1976, appellant'sagent Jose Llover signed contract No. 3804 for the sale of 100 tons of copra at P82.00 per 100kilos with delivery terms of 20 days effective March 8, 1976. After the period to deliver hadlapsed, appellant sold only 46,334 kilos of copra thus leaving a balance of 53,666 kilos.Accordingly, demands were made upon appellant to deliver the balance with a final warning thatfailure to deliver will mean cancellation of the contract, the balance to be purchased at openmarket and the price differential to be charged against appellant. On October 22, 1976, since

there was still no compliance, appellee exercised its option under the contract and purchased theundelivered balance from the open market at the prevailing price of P168.00 per 100 kilos, or a price differential of P86.00 per 100 kilos, a net loss of P46,152.76 chargeable against appellant.

ISSUE:Whether or not private respondent is guilty of breach of contact.

RULING:

Private respondent is guilty of fraud in the performance of his obligation under the salescontract whereunder he bound himself to deliver to petitioner 100 metric tons of copra. Howeverwithin the delivery period, Oseraos delivered only 46,334 kilograms of copra to petitioner.Petitioner made repeated demands upon private respondent to deliver the balance of 53,666kilograms but private respondent ignored the same. Petitioner made a final demand with awarning that, should private respondent fail to complete delivery of the balance of 53,666kilograms of copra, petitioner would purchase the balance at the open market and charge the price differential to private respondent. Still private respondent failed to fulfill his contractualobligation to deliver the remaining 53,666 kilograms of copra and since there was still nocompliance by private respondent, petitioner exercised its right under the contract and purchased53,666 kilograms of copra, the undelivered balance, at the open market at the then prevailing price of P168.00 per 100 kilograms, a price differential of P46,152.76.

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



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TITAN-IKEDA CONSTRUCTION vs. PRIMETOWNG.R. No. 158768

FEBRUARY 12, 2008

FACTS:

In 1992, respondent Primetown Property Group, Inc. awarded the contract for thestructural works of its 32-storey Makati Prime Tower (MPT) to petitioner Titan-IkedaConstruction and Development Corporation. In September 1995, respondent engaged theservices of Integratech, Inc. (ITI), an engineering consultancy firm, to evaluate the progress ofthe project. In its report, ITI informed respondent that petitioner, at that point, had onlyaccomplished 31.89% of the project (or was 11 months and six days behind schedule).Meanwhile, petitioner and respondent were discussing the possibility of the latter‘s take over ofthe project‘s supervision. Despite ongoing negotiations, respondent did not obtain petitioner‘sconsent in hiring ITI as the project‘s construction manager. Neither did it inform petitioner of

ITI‘s September 7, 1995 report.

Subsequently, both parties agreed that Primetown will take over the project.Petitioner then demanded for the payment due him in relation to its partial performance of itsobligation. For failure of Primetown to pay despite repeated demands, petitioner filed a case forspecific performance against Primetown. Meanwhile, Primetown demanded reimbursement forthe amount it spent in having the project completed.

ISSUE:

Whether or not Titzn-Ikeda is responsible for the project‘s delay.

RULING:

It was found that because respondent modified the MPT's architectural design, petitioner had to adjust the scope of work. Moreover, respondent belatedly informed petitioner ofthose modifications. It also failed to deliver the concrete mix and rebars according to schedule.For this reason, petitioner was not responsible for the project's delay. Mora or delay is the failureto perform the obligation in due time because of dolo (malice) or culpa (negligence). A debtor isdeemed to have violated his obligation to the creditor from the time the latter makes a demand.Once the creditor makes a demand, the debtor incurs mora or delay. Respondent never sent petitioner a written demand asking it to accelerate work on the project and reduce, if noteliminate, slippage. In view of the foregoing, we hold that petitioner did not incur delay in the performance of its obligation.



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PNB MADECOR vs. GERARDO C. UYG.R. No. 129598AUGUST 15, 2001

FACTS:

Guillermo Uy assigned to respondent Gerardo Uy his receivables due from Pantranco North Express Inc. (PNEI). The deed of assignment included sales invoices containingstipulations regarding payment of interest and attorney‘s fees. On January 23, 1995, Gerardo Uyfiled with the RTC a collection suit against PNEI. He alleged that PNEI was guilty of fraud incontracting the obligation sued upon, hence his prayer for a writ of preliminary attachment. Thesheriff issued a notice of garnishment addressed to the Philippine National Bank (PNB) and PNBMADECOR attaching the ―goods, effects, credits, monies and all other personal properties‖ ofPNEI in the possession of the bank. PNB MADECOR however claimed that the receivables ofGuillermo Uy have been applied to PNEI‘s unpaid rentals to the bank thru compensation, thus

private respondent is no longer entitled to such. Respondent pointed out that the demand lettersent by PNEI to petitioner was made before petitioner‘s obligation to PNEI became due. This being so, respondent argues that there can be no compensation since there was as yet nocompensable debt in 1984 when PNEI demanded payment from petitioner.

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

applicable to its receivables from and its payables to PNEI.

RULING:

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

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



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IGNACIO BARZAGA vs. COURT OF APPEALS and ANGELITO ALVIARG.R. No. 115129

FEBRUARY 12, 1997

FACTS:

Barzaga went to the hardware store of respondent Alviar to inquire about the availabilityof certain materials to be used in the construction of a niche for his wife. The followingmorning, Barzaga went back to the store and told the employees that the materials he was buyingwould have to be delivered at the Memorial Cemetery by eight o'clock that morning since hishired workers were already at the burial site and time was of the essence. A store employeeagreed to deliver the items at the designated time, date and place. With this assurance, Barzaga purchased the materials and paid in full. The construction materials did not arrive at eighto'clock as promised. After follow-ups and several hours later, when there was yet no deliverymade, Barzaga went back to the store. He saw the delivery truck but the things he purchased

were not yet ready for loading. Distressed by the seeming lack of concern on the store‘s part,Barzaga decided to cancel his transaction with the store and buy from another store.

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

ISSUE:Whether or not the respondent incurred delay in the performance of his

obligation.

RULING:

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

This case is clearly one of non-performance of a reciprocal obligation. In their contract of purchase and sale, petitioner had already complied fully with what was required of him as purchaser, i.e., the payment of the purchase price of P2,110.00. It was incumbent uponrespondent to immediately fulfill his obligation to deliver the goods otherwise delay wouldattach.



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JACINTO TANGUILIG vs. COURT OF APPEALS and VICENTE HERCE JR.G.R. No. 117190

JANUARY 2, 1997

FACTS:

Petitioner Jacinto M. Tanguilig proposed to respondent Vicente Herce Jr. to construct awindmill system for him. After some negotiations they agreed on the construction of thewindmill for a consideration of P60,000.00. On 14 March 1988, due to the refusal and failure ofrespondent to pay the balance, petitioner filed a complaint to collect the amount. Respondentdenied the claim saying that he had already paid this amount to the San Pedro GeneralMerchandising Inc. (SPGMI) which constructed the deep well to which the windmill system wasto be connected. According to respondent, since the deep well formed part of the system the payment he tendered to SPGMI should be credited to his account by petitioner. Moreover,assuming that he owed petitioner a balance of P15,000.00, this should be offset by the defects in

the windmill system which caused the structure to collapse after a strong wind hit their place.

Petitioner refused to pay and argued that private respondent was already in default in the payment of his outstanding balance of P15,000.00 and hence should bear his own loss.

ISSUE:Whether or not petitioner is correct in his contention that respondent is already in

default thus he should bear the loss of the windmill.

RULING:

Petitioner's argument that private respondent was already in default in the payment of hisoutstanding balance of P15,000.00 and hence should bear his own loss, is untenable. Inreciprocal obligations, neither party incurs in delay if the other does not comply or is not ready tocomply in a proper manner with what is incumbent upon him. When the windmill failed tofunction properly it became incumbent upon petitioner to institute the proper repairs inaccordance with the guaranty stated in the contract. Thus, respondent cannot be said to haveincurred in delay; instead, it is petitioner who should bear the expenses for the reconstruction ofthe windmill. Article 1167 of the Civil Code is explicit on this point that if a person obliged todo something fails to do it, the same shall be executed at his cost.



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TAYAG vs. COURT OF APPEALSG.R. No. 96053MARCH 3, 1993

FACTS:

Juan Galicia, Sr. executed a deed of conveyance, prior to his demise in 1979 in favor ofAlbrigido Leyva involving the undivided one-half portion of a piece of land situated atPoblacion, Guimba, Nueva Ecija for the sum of P50,000.00. There is no dispute that the firstinstallment was received by Juan Galicia, Sr. And according to petitioners, of the P10,000.00 to be paid within ten days from execution of the instrument, only P9,707.00 was tendered to, andreceived by, them on numerous occasions from May 29, 1975, up to November 3, 1979. It wasalso agreed upon that private respondent will assume the vendors' obligation to the PhilippineVeterans Bank, however, he paid only the sum of P6,926.41 while the difference of theindebtedness was paid by Juan Galicia, Sr.‘s sister. Moreover, petitioners claimed that not a

single centavo of the P27,000.00 representing the remaining balance was paid to them.Petitioners averred that private respondent‘s failure to pay full consideration of the agreement tosell gave them the right to have the contract rescinded.

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

RULING:

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

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



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RACQUEL-SANTOS v. CAG.R. No. 174986

July 7, 2009

FACTS:

Finvest is a stock brokerage corporation duly organized under Philippine laws andis a member of the PSE with one membership seat pledged to the latter. Armand O. Raquel-Santos (Raquel-Santos) was Finvest‘s President and nominee to the PSE from February 20, 1990to July 16, 1998. Annalissa Mallari (Mallari) was Finvest‘s Administrative Officer untilDecember 31, 1998. In the course of its trading operations, Finvest incurred liabilities to PSErepresenting fines and penalties for non-payment of its clearing house obligations. PSE alsoreceived reports that Finvest was not meeting its obligations to its clients. Consequently, PSEindefinitely suspended Finvest from trading. The Securities and Exchange Commission (SEC)also suspended its license as broker. On June 17, 1998, PSE demanded from Finvest the paymentof its obligations to the PSE in the amount ofP4,267,339.99 and to its (Finvest‘s) clients within

15 days. PSE also ordered Finvest to replace its nominee, Raquel-Santos. As of August 11,1998, Finvest‘s total obligation to PSE, representing penalties, charges and fines for violations of pertinent rules, was pegged at P5,990,839.99. Finvest promised to settle all obligations to itsclients and to PSE subject to verification of the amount due, but Finvest requested a deadline ofJuly 31, 1999. PSE granted Finvest‘s request, with the warning that, should Finvest fail to meetthe deadline, PSE might exercise its right to sell Finvest‘s membership seat and use the proceedsthereof to settle its obligations to the PSE, its member-brokers and its clients. On February 3,1999, PSE inquired from Finvest if it had already settled all duly acknowledged claims of itsclients and its liabilities to PSE. PSE also demanded that Finvest settle its liabilities to it not laterthan March 31, 1999.

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

ISSUE:Whether or not Finvest incurred delay in its obligations.

HELD: NO. Under the law on contracts, mora solvendi or debtor‘s default is defined as a

delay in the fulfillment of an obligation, by reason of a cause imputable to the debtor. There arethree requisites necessary for a finding of default. First, the obligation is demandable andliquidated; second, the debtor delays performance; and third, the creditor judicially orextrajudicially requires the debtor‘s performance. In the present petition, PSE insists thatFinvest‘s liability for fines, penalties and charges has been established, determined andsubstantiated, hence, liquidated. However, both trial court and CA have ruled otherwise. Thefindings of fact of both the trial court and the CA are fully supported by the records and that they plainly show that the parties were negotiating to determine the exact amount of Finvest‘sobligations to PSE, during which period PSE repeatedly moved the deadlines it imposed forFinvest to pay the fines, penalties and charges, apparently to allow for more time to thresh outthe details of the computation of said penalties.

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



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BPI INVESTMENT CORPORATION vs. HON. COURT OF APPEALSG.R. No. 133632

FEBRUARY 15, 2002

FACTS:

Frank Roa obtained a loan at an interest rate of 16 1/4% per annum from AyalaInvestment and Development Corporation (AIDC), predecessor of petitioner BPIIC for theconstruction of a house on his lot. Said house and lot were mortgaged to AIDC to secure theloan. Sometime in 1980, Roa sold the house and lot to private respondents ALS and AntonioLitonjua. They paid P350,000 in cash and assumed the P500,000 balance of Roa‘s indebtednesswith AIDC. The latter, however, was not willing to extend the old interest rate to privaterespondents and proposed to grant them a new loan of P500,000 to be applied to Roa‘s debt andsecured by the same property, at an interest rate of 20% per annum. In June 1984, BPIICinstituted foreclosure proceedings against private respondents on the ground that they failed to

pay the mortgage indebtedness. Private respondents on the other hand alleged that they were notin arrears in their payment, but in fact made an overpayment as of June 30, 1984.

ISSUE:Whether or not petitioner may be held liable for moral and exemplary damages.

RULING:

Petitioner claims that it should not be held liable for moral and exemplary damages for itdid not act maliciously when it initiated the foreclosure proceedings. It merely exercised its rightunder the mortgage contract because private respondents were irregular in their monthlyamortization. Private respondents counter that BPIIC was guilty of bad faith and should be liablefor said damages because it insisted on the payment of amortization on the loan even before itwas released. Further, it did not make the corresponding deduction in the monthly amortizationto conform to the actual amount of loan released, and it immediately initiated foreclosure proceedings when private respondents failed to make timely payment. But as admitted by privaterespondents themselves, they were irregular in their payment of monthly amortization. Thus, wecan not properly declare BPIIC in bad faith. Consequently, we should rule out the award ofmoral and exemplary damages. However, in our view, BPIIC was negligent in relying merely onthe entries found in the deed of mortgage, without checking and correspondingly adjusting itsrecords on the amount actually released to private respondents and the date when it was released.Such negligence resulted in damage to private respondents, for which an award of nominaldamages should be given in recognition of their rights which were violated by BPIIC. For this purpose, the amount of P25,000 is sufficient. Lastly, we sustain the award of P50,000 in favor of private respondents as attorney‘s fees since they were compelled to litigate.



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CARMELITA LEAÑO vs. COURT OF APPEALSG.R. No. 129018

NOVEMBER 15, 2001

FACTS:

Hermogenes Fernando, as vendor and Carmelita Leaño, as vendee executed a contract tosell involving a piece of land. In the contract, Leaño bound herself to pay Fernando P10,775.00at the signing of the contract with the balance of P96,975.00 to be paid within a period of TEN(10) years at a monthly amortization of P1,747.30. The contract also provided for a grace periodof one month within which to make payments, together with the one corresponding to the monthof grace. Should the month of grace expire without the installments for both months having beensatisfied, an interest of 18% per annum will be charged on the unpaid installments.

ISSUE:Whether petitioner was in delay in the payment of the monthly amortizations.

RULING:

On the issue of whether petitioner Leaño was in delay in paying the amortizations, werule that while the contract provided that the total purchase price was payable within a ten-year period, the same contract specified that the purchase price shall be paid in monthly installmentsfor which the corresponding penalty shall be imposed in case of default. Petitioner Leaño cannotignore the provision on the payment of monthly installments by claiming that the ten-year periodwithin which to pay has not elapsed.

Article 1169 of the Civil Code provides that in reciprocal obligations, neither party incursin delay if the other does not comply or is not ready to comply in a proper manner with what isincumbent upon him. From the moment one of the parties fulfills his obligation, delay by theother begins. In the case at bar, respondent Fernando performed his part of the obligation byallowing petitioner Leaño to continue in possession and use of the property. Clearly, when petitioner Leaño did not pay the monthly amortizations in accordance with the terms of thecontract, she was in delay and liable for damages. However, we agree with the trial court that thedefault committed by petitioner Leaño in respect of the obligation could be compensated by theinterest and surcharges imposed upon her under the contract in question.



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HEIRS OF LUIS BACUS vs. HON. COURT OF APPEALSG.R. No. 127695

DECEMBER 3, 2001

FACTS:

Luis Bacus leased to private respondent Faustino Duray a parcel of agricultural land. Thecontract contained an option to buy clause. Under said option, the lessee had the exclusive andirrevocable right to buy 2,000 square meters of the property within five years from a year afterthe effectivity of the contract. Close to the expiration of the contract, Luis Bacus died.Thereafter, the Duray spouses informed one of the heirs of Luis Bacus, that they were willingand ready to purchase the property under the option to buy clause. Due to the refusal of petitioners to sell the property, Duray filed a complaint for specific performance against the heirsof Luis Bacus asking that he be allowed to purchase the lot specifically referred to in the leasecontract with option to buy. On the other hand, petitioners alleged that before Luis Bacus‘ death,

private respondents conveyed to them the former‘s lack of interest to exercise their option because of insufficiency of funds. They further alleged that private respondents did not depositthe money as required by the Lupon and instead presented a bank certification which cannot bedeemed legal tender.

ISSUE:Did private respondents incur in delay when they did not deliver the purchase price or

consign it in court on or before the expiration of the contract?

RULING:

Obligations under an option to buy are reciprocal obligations. The performance of oneobligation is conditioned on the simultaneous fulfillment of the other obligation. In other words,in an option to buy, the payment of the purchase price by the creditor is contingent upon theexecution and delivery of a deed of sale by the debtor. In this case, when private respondentsopted to buy the property, their obligation was to advise petitioners of their decision and theirreadiness to pay the price. They were not yet obliged to make actual payment. Only upon petitioners‘ actual execution and delivery of the deed of sale were they required to pay. Noticeof the creditor‘s decision to exercise his option to buy need not be coupled with actual paymentof the price, so long as this is delivered to the owner of the property upon performance of his partof the agreement. Consequently, since the obligation was not yet due, consignation in court ofthe purchase price was not yet required.

Private respondents did not incur in delay when they did not yet deliver payment normake a consignation before the expiration of the contract. In reciprocal obligations, neither partyincurs in delay if the other does not comply or is not ready to comply in a proper manner withwhat is incumbent upon him. Only from the moment one of the parties fulfills his obligation,does delay by the other begin. In this case, as there was no compliance yet with what wasincumbent upon petitioners under the option to buy, private respondents had not incurred indelay when the cashier‘s check was issued even after the contract expired.



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INTEGRATED PACKAGING CORP. vs. COURT OF APPEALSG.R. No. 115117

JUNE 8, 2000

FACTS:

Petitioner and private respondent executed an order agreement whereby privaterespondent bound itself to deliver to petitioner 3,450 reams of printing papers under specifiedschedule of delivery. As of July 30, 1979, private respondent had delivered to petitioner 1,097reams of printing paper out of the total 3,450 reams stated in the agreement. Petitioner alleged itwrote private respondent to immediately deliver the balance because further delay would greatly prejudice petitioner. From June 5, 1980 and until July 23, 1981, private respondent deliveredagain to petitioner various quantities of printing paper amounting to P766,101.70. However, petitioner encountered difficulties paying private respondent said amount. Accordingly, privaterespondent made a formal demand upon petitioner to settle the outstanding account. Private

respondent filed a collection suit against petitioner for the sum of P766,101.70, representing theunpaid purchase price of printing paper bought by petitioner on credit. In its answer, petitionerdenied the material allegations of the complaint. It alleged that private respondent was able todeliver only 1,097 reams of printing paper which was short of 2,875 reams, in total disregard oftheir agreement; that private respondent failed to deliver the balance of the printing paper despitedemand therefor, hence, petitioner suffered actual damages and failed to realize expected profits.

ISSUE:Whether or not private respondent violated the order agreement.

RULING:

The transaction between the parties is a contract of sale whereby private respondent(seller) obligates itself to deliver printing paper to petitioner (buyer) which, in turn, binds itself to pay its equivalent (price). Both parties concede that the order agreement gives rise to a reciprocalobligation such that the obligation of one is dependent upon the obligation of the other.Reciprocal obligations are to be performed simultaneously, so that the performance of one isconditioned upon the simultaneous fulfillment of the other. Thus, private respondent undertakesto deliver printing paper of various quantities subject to petitioner‘s corresponding obligation to pay, on a maximum 90-day credit, for these materials. Clearly, petitioner did not fulfill its side ofthe contract as its last payment in August 1981 could cover only materials covered by deliveryinvoices dated September and October 1980. Thus, private respondent did not violate the orderagreement.



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LAFORTEZA vs. MACHUCAG.R. No. 137552JUNE 16, 2000

FACTS:

In the exercise of the Special Power of Attorney executed by their co-heirs, by Roberto Z.Laforteza and Gonzalo Z. Laforteza, Jr. entered into a Memorandum of Agreement (Contract toSell) with the plaintiff over the subject house and lot for the sum of P630,000.00. On September18, 1998, defendant heirs, through their counsel wrote a letter to the plaintiff furnishing the lattera copy of the reconstituted title to the subject property, advising him that he had thirty (3) days to produce the balance of P600,000.00 under the Memorandum of Agreement which plaintiffreceived on the same date. The plaintiff requested a 30-day extension within which he would paythe balance of the purchase price. This was granted by Roberto Laforteza but not by GonzaloLaforteza, the second attorney-in-fact.

On November 15, 1989, plaintiff informed the defendant heirs, through defendantRoberto Z. Laforteza, that he already has the money. However, the defendants, refused to acceptthe told him that the subject property was no longer for sale. Thereafter, plaintiff reiterated hisrequest to tender payment of the balance but the defendants insisted on the rescission of theMemorandum of Agreement. Thereafter, plaintiff filed the instant action for specific performance.

ISSUE:Whether or not defendants may rescind the contract of sale entered with Machuca.

RULING:

Admittedly, the failure of the respondent to pay the balance of the purchase price was a breach of the contract and was a ground for rescission thereof. The extension of thirty (30) daysallegedly granted to the respondent by Roberto Z. Laforteza was correctly found by the Court ofAppeals to be ineffective inasmuch as the signature of Gonzalo Z. Laforteza did not appearthereon as required by the Special Powers of Attorney. However, the evidence reveals that afterthe expiration of the six-month period provided for in the contract, the petitioners were not readyto comply with what was incumbent upon them, i.e. the delivery of the reconstituted title of thehouse and lot. It was only on September 18, 1989 or nearly eight months after the execution ofthe Memorandum of Agreement when the petitioners informed the respondent that they alreadyhad a copy of the reconstituted title and demanded the payment of the balance of the purchase price. The respondent could not therefore be considered in delay for in reciprocal obligations,neither party incurs in delay if the other party does not comply or is not ready to comply in a proper manner with what was incumbent upon him.

Even assuming for the sake of argument that the petitioners were ready to comply withtheir obligation, we find that rescission of the contract will still not prosper. Delay in paymentwas only thirty days which was caused by the respondent‘s justified but mistaken belief that anextension to pay was granted to him. We agree with the Court of Appeals that the delay of onemonth in payment was a mere casual breach that would not entitle the respondents to rescind thecontract. Rescission of a contract will not be permitted for a slight or casual breach, but onlysuch substantial and fundamental breach as would defeat the very object of the parties in makingthe agreement.



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REGALA v. CARING.R. No. 188715

April 6, 2011

FACTS:

Petitioner and respondent are adjacent neighbors at Spirig Street, BF Resort Village, LasPiñas City. When petitioner decided to renovate his one storey residence by constructing asecond floor, he under the guise of merely building an extension to his residence, approachedrespondent sometime in May 1998 for permission to bore a hole through a perimeter wall shared by both their respective properties, to which respondent verbally consented on condition that petitioner would clean the area affected by the work.

As ear lier indicated, petitioner‘s real intention was to build a second floor, in fact with a

terrace atop the dividing wall. In the course of the construction of the second floor, respondentand his wife Marietta suffered from the dust and dirt which fell on their property. As petitionerfailed to address the problem to respondent‘s satisfaction, respondent filed a letter -complaint[3]with the Office of the City Engineer and Building Official of Las Piñas City on June 9, 1998.

ISSUE:

Whether or not the injuries sustained by respondent was done maliciously.

RULING:

Malice or bad faith implies a conscious and intentional design to do a wrongful act for adishonest purpose or moral obliquity; it is different from the negative idea of negligence in thatmalice or bad faith contemplates a state of mind affirmatively operating with furtive design or illwill. While the Court harbors no doubt that the incidents which gave rise to this dispute have brought anxiety and anguish to respondent, it is unconvinced that the damage inflicted uponrespondent‘s property was malicious or willful, an element crucial to merit an award of moraldamages under Article 2220 of the Civil Code.

Necessarily, the Court is not inclined to award exemplary damages.Petitioner, however, cannotsteer clear from any liability whatsoever. Respondent and his family‘s rights to the peacefulenjoyment of their property have, at the very least, been inconvenienced from the incident borneof petitioner‘s construction work. Any pecuniary loss or damage suffered by respondent cannot be established as the records are bereft of any factual evidence to establish the same. Nominaldamages may thus be adjudicated in order that a right of the plaintiff, respondent herein, whichhas been violated or invaded by the defendant, petitioner herein, may be vindicated orrecognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him.



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THE INTERNATIONAL CORPORATE vs. SPS. GUECOG.R. No. 141968

FEBRUARY 12, 2001

FACTS:

The Gueco Spouses obtained a loan from petitioner International Corporate Bank (nowUnion Bank of the Philippines) to purchase a car. In consideration thereof, the Spouses executed promissory notes which were payable in monthly installments and chattel mortgage over the carto serve as security for the notes. The Spouses defaulted in payment of installments. After somenegotiations and computation, the amount of car loan was lowered. Finally, Dr. Guecodelivered a manager‘s check in the amount of reduced car loan but the car was not released because of his refusal to sign the Joint Motion to Dismiss. Petitioner, however, insisted that the joint motion to dismiss is standard operating procedure in their bank to effect a compromise andto preclude future filing of claims, counterclaims or suits for damages.

ISSUE:

Whether or not there was fraud in the part of herein petitioner.

RULING:

Fraud has been defined as the deliberate intention to cause damage or prejudice. It is thevoluntary execution of a wrongful act, or a willful omission, knowing and intending the effectswhich naturally and necessarily arise from such act or omission. We fail to see how the act of the petitioner bank in requiring the respondent to sign the joint motion to dismiss could constitute asfraud. True, petitioner may have been remiss in informing Dr. Gueco that the signing of a jointmotion to dismiss is a standard operating procedure of petitioner bank. However, this can not inanyway have prejudiced Dr. Gueco. The motion to dismiss was in fact also for the benefit of Dr.Gueco, as the case filed by petitioner against it before the lower court would be dismissed with prejudice. The whole point of the parties entering into the compromise agreement was in orderthat Dr. Gueco would pay his outstanding account and in return petitioner would return the carand drop the case for money and replevin before the Metropolitan Trial Court. Petitioner's act ofrequiring Dr. Gueco to sign the joint motion to dismiss can not be said to be a deliberate attempton the part of petitioner to renege on the compromise agreement of the parties. It should,likewise, be noted that in cases of breach of contract, moral damages may only be awarded whenthe breach was attended by fraud or bad faith. The law presumes good faith. Dr. Gueco failed to present an iota of evidence to overcome this presumption. Necessarily, the claim for exemplarydamages must fail. In no way, may the conduct of petitioner be characterized as ―wanton,fraudulent, reckless, oppressive or malevolent.‖



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REPUBLIC OF THE PHILIPPINES vs. THE COURT OF TAX APPEALSG.R. No. 139050

OCTOBER 2, 2001

FACTS:

On 12 December 1992, a shipment of bales of textile gray cloth arrived at the ManilaInternational Container Port (MICP). There has been a mistake in the name of the consignee provided in the shipment's Inward Foreign Manifest. Forthwith, the shipping agent, FIL-JAPAN,requested for an amendment of the Inward Foreign Manifest so as to correct the name of theconsignee from that of GQ GARMENTS, Inc., to that of AGFHA, Inc. Subsequently, FIL-JAPAN forwarded to AGFHA, Inc., the amended Inward Foreign Manifest which the latter, inturn, submitted to the MICP Law Division. The MICP indorsed the document to the CustomsIntelligence Investigation Services (CIIS). The CIIS placed the subject shipment under HoldOrder on the ground that GQ GARMENTS, Inc., could not be located in its given address and

was thus suspected to be a fictitious firm. Forfeiture proceedings under Section 2530(f) and (l)(3-5) of the Tariff and Customs Code were initiated.

ISSUE:Whether or not the private respondent is guilty of fraud in relation to the shipment subject

of the case at bench.

RULING:

Petitioner asserts that all of the requisites for forfeiture proceedings under the Tariff andCustoms Code are present in this case. Private respondent AGFHA, Inc., on the other hand,maintains that there has only been an inadvertent error and not an intentional wrongfuldeclaration by the shipper to evade payment of any tax due.Fraud must be proved to justify forfeiture. It must be actual, amounting to intentional wrong-doing with the clear purpose of avoiding the tax. Forfeiture is not favored in law nor in equity.Mere negligence is not equivalent to the fraud contemplated by law. What is here involved is anhonest mistake, not even directly attributable to private respondent, which will not deprive thegovernment of its right to collect the proper tax. The conclusion of the appellate court, beingconsistent with the evidence on record and not contrary to law and jurisprudence, hardly can beoverturned by this Court.



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YAMBAO vs. ZUÑIGAG.R. No. 146173 DECEMBER 11, 2003

FACTS:

At around 3:30 p.m. of May 6, 1992, the bus owned by the petitioner was being driven byher driver, Ceferino G. Venturina along the northbound lane of Epifanio delos Santos Avenue(EDSA). Suddenly, the bus bumped Herminigildo Zuñiga, a pedestrian. Such was the force ofthe impact that the left side of the front windshield of the bus was cracked. Zuñiga was rushed tothe Quezon City General Hospital where he was given medical attention, but due to the massiveinjuries sustained, he succumbed shortly thereafter.

Private respondents, heirs of the victim, filed a Complaint against petitioner and herdriver, Venturina, for damages. The complaint alleged that Venturina drove the bus in a reckless,careless and imprudent manner, in violation of traffic rules and regulations, without due regard to

public safety, thus resulting in the victim‘s premature death. In her Answer, the petitioner deniedthe allegations of the complaint, trying to shift the blame to the victim, theorizing thatHerminigildo bumped into her bus, while avoiding an unidentified woman who was chasing him.She further alleged that she was not liable for any damages because as an employer, sheexercised the proper diligence of a good father of a family, both in the selection and supervisionof her bus driver.

ISSUE:Whether petitioner exercised the diligence of a good father of a family in the selection

and supervision of her employees, thus absolving her from any liability.

RULING:

Petitioner claimed that she exercised due diligence in the selection and supervision of herdriver, Venturina. Her allegation that before she hired Venturina she required him to submit hisdriver‘s license and clearances is worthless, in view of her failure to offer in evidence certifiedtrue copies of said license and clearances. Moreover, petitioner contradicted herself. Shedeclared that Venturina applied with her sometime in January 1992 and she then required him tosubmit his license and clearances. However, the record likewise shows that Venturina submittedthe said requirements only on May 6, 1992, or on the very day of the fatal accident itself. In otherwords, petitioner‘s own admissions clearly and categorically show that she did not exercise duediligence in the selection of her bus driver.

In any case, assuming arguendo that Venturina did submit his license and clearanceswhen he applied with petitioner in January 1992, the latter still fails the test of due diligence inthe selection of her bus driver. Petitioner failed to present convincing proof that she went to thisextent of verifying Venturina‘s qualifications, safety record, and driving history. Nor did petitioner show that she exercised due supervision over Venturina after his selection. For as pointed out by the Court of Appeals, petitioner did not present any proof that she drafted andimplemented training programs and guidelines on road safety for her employees. In fact, therecord is bare of any showing that petitioner required Venturina to attend periodic seminars onroad safety and traffic efficiency. Hence, petitioner cannot claim exemption from any liabilityarising from the recklessness or negligence of Venturina.



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SMITH BELL DODWELL vs. CATALINO BORJAG.R. No. 143008. JUNE 10, 2002

FACTS:

Smith Bell filed a written request with the Bureau of Customs for the attendance of thelatter‘s inspection team on vessel M/T King Family which was due to arrive at the port of Manilaon September 24, 1987. In response, Catalino Borja was instructed to board the said vessel andinspect the vessel. At about 11 o‘clock in the morning on September 24, 1987, while M/T KingFamily was unloading chemicals unto two (2) barges owned by respondent ITTC, a suddenexplosion occurred setting the vessels afire. Upon hearing the explosion, Borja, who was at thattime inside the cabin preparing reports, ran outside to check what happened. Again, anotherexplosion was heard. Seeing the fire Borja hurriedly jumped over board to save himself.However, the water was likewise on fire due mainly to the spilled chemicals. Despite thetremendous heat, Borja swam his way until he was rescued by the people living in the squatters‘

area and sent to San Juan De Dios Hospital.

After weeks of intensive care at the hospital, Borja was diagnosed to be permanentlydisabled due to the incident. Thus, he made demands against Smith Bell and ITTC for thedamages caused by the explosion. However, both denied liabilities and attributed to each othernegligence.‖

ISSUES:Who, if any, is liable for Borja‘s injuries?

RULING:

Both the RTC and the CA ruled that the fire and the explosion had originated from petitioner‘s vessel. The attempts of Smith Bell to shift the blame on ITTC were all for naught.First, the testimony of its alleged eyewitness was stricken off the record for his failure to appearfor cross-examination. Second, the documents offered to prove that the fire originated from barge ITTC-101 were all denied admission by the court for being, hearsay. Thus, there isnothing in the r ecord to support petitioner‘s contention that the fire and explosion originatedfrom barge ITTC-101.

The three elements of quasi delict are: (a) damages suffered by the plaintiff, (b) fault ornegligence of the defendant, and (c) the connection of cause and effect between the fault ornegligence of the defendant and the damages inflicted on the plaintiff. All these elements wereestablished in this case. Knowing fully well that it was carrying dangerous chemicals, petitionerwas negligent in not taking all the necessary precautions in transporting the cargo. As a result ofthe fire and the explosion during the unloading of the chemicals from petitioner‘s vessel,Respondent Borja suffered severe injuries. Hence, the owner or the person in possession andcontrol of a vessel and the vessel are liable for all natural and proximate damage caused to persons and property by reason of negligent management or navigation.



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RAMON K. ILUSORIO vs. HON. COURT OF APPEALSG.R. No. 139130. NOVEMBER 27, 2002

FACTS:

Petitioner is a prominent businessman and was a depositor in good standing ofrespondent bank, the Manila Banking Corporation. As he was then running about 20corporations, and was going out of the country a number of times, petitioner entrusted to hissecretary, Katherine E. Eugenio, his credit cards and his checkbook with blank checks. Eugeniowas able to encash and deposit to her personal account about seventeen (17) checks drawnagainst the account of the petitioner at the respondent bank, with an aggregate amount ofP119,634.34. Petitioner did not bother to check his statement of account until a business partnerapprised him that he saw Eugenio use his credit cards. Petitioner fired Eugenio immediately, andinstituted a criminal action against her for estafa thru falsification.

Petitioner then requested the respondent bank to credit back and restore to its account thevalue of the checks which were wrongfully encashed but respondent bank refused. Hence, petitioner filed the instant case.

ISSUE:Is Manila Bank liable for damages for its negligence in failing to detect the discrepant

checks?

RULING:

Petitioner‘s contention that Manila Bank was remiss in the exercise of its duty as draweelacks factual basis. Manila Bank employees exercised due diligence in cashing the checks. Itsverifiers first verified the drawer‘s signatures thereon as against his specimen signature cards,and when in doubt, the verifier went further, such as by referring to a more experienced verifierfor further verification. In some instances the verifier made a confirmation by calling thedepositor by phone. It is only after taking such precautionary measures that the subject checkswere given to the teller for payment.

Of course it is possible that the verifiers of TMBC might have made a mistake in failingto detect any forgery -- if indeed there was. However, a mistake is not equivalent to negligenceif they were honest mistakes. In the instant case, we believe and so hold that if there weremistakes, the same were not deliberate, since the bank took all the precautions. As borne by therecords, it was petitioner, not the bank, who was negligent. Negligence is the omission to dosomething which a reasonable man, guided by those considerations which ordinarily regulate theconduct of human affairs, would do, or the doing of something which a prudent and reasonableman would do. In the present case, it appears that petitioner accorded his secretary unusualdegree of trust and unrestricted access to his credit cards, passbooks, check books, bankstatements, including custody and possession of cancelled checks and reconciliation of accounts.



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NATIONAL POWER CORPORATION vs. THE COURT OF APPEALSG.R. No. 124378. MARCH 8, 2005

FACTS:

On 15 November 1973, the Office of the President of the Philippines issuedMemorandum Order No. 398 instructing the NPC to build the Agus Regulation Dam at themouth of Agus River in Lanao del Sur, at a normal maximum water level of Lake Lanao at 702meters elevation. Pursuant thereto, petitioner built and operated the said dam in 1978. Privaterespondents Hadji Abdul Carim Abdullah, Caris Abdullah, Hadji Ali Langco and DiamaelPangcatan own fishponds along the Lake Lanao shore. In October and November of 1986, all theimprovements were washed away when the water level of the lake escalated and the subjectlakeshore area was flooded. Private respondents blamed the inundation on the Agus RegulationDam built and operated by the NPC in 1978. They theorized that NPC failed to increase theoutflow of water even as the water level of the lake rose due to the heavy rains.

ISSUE:Whether or not the Court of Appeals erred in affirming the trial court‘s verdict that

petitioner was legally answerable for the damages endured by the private respondents.

RULING:

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

With respect to its job to maintain the normal maximum level of the lake at 702 meters,the Court of Appeals, echoing the trial court, observed with alacrity that when the water levelrises due to the rainy season, the NPC ought to release more water to the Agus River to avoidflooding and prevent the water from going over the maximum level. And yet, petitioner failed todo so, resulting in the inundation of the nearby estates. Consequently, even assuming that thefishponds were erected below the 702-meter level, NPC must, nonetheless, bear the brunt forsuch damages inasmuch as it has the duty to erect and maintain the benchmarks precisely to warnthe owners of the neighboring properties not to build fishponds below these marks. Withoutsuch points of reference, the inhabitants in said areas are clueless whether or not theirimprovements are within the prohibited area. Conversely, without such benchmarks, NPC hasno way of telling if the fishponds, subject matter of the present controversy, are indeed below the prescribed maximum level of elevation. Due to NPC‘s negligence in the performance of itsduties, it shall be held liable for the resulting damages suffered by private respondents.



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MUAJE-TUAZON vs. WENPHILG.R. No. 162447. DECEMBER 27, 2006

FACTS:

Petitioners Annabelle M. Tuazon and Almer R. Abing worked as branch managers of theWendy's food chains. In Wendy‘s ―Biggie Size It! Crew Challenge" promotion contest, branchesmanaged by petitioners won first and second places, respectively. Because of its success,respondent had a second run of the contest from April 26 to July 4, 1999. The Meycauayan branch won again. The MCU Caloocan branch failed to make it among the winners. Before theannouncement of the third round winners, management received reports that as early as the firstround of the contest, the Meycauayan, MCU Caloocan, Tandang Sora and Fairview branchescheated. An internal investigation ensued. Petitioners were summoned to the main officeregarding the reported anomaly. Petitioners denied there was cheating. Immediately thereafter, petitioners were notified, in writing, of hearings and of their immediate suspension. Thereafter,

petitioners were dismissed.

ISSUE:Is the respondent guilty of illegal suspension and dismissal in the case at bench?

RULING:

There is no denying that petitioners were managerial employees. They executedmanagement policies, they had the power to hire personnel and assign them tasks; and disciplinethe employees in their branch. They recommended actions on employees to the headoffice.Article 212 (m) of the Labor Code defines a managerial employee as one who is vestedwith powers or prerogatives to lay down and execute management policies and/or hire, transfer,suspend, lay-off, recall, discharge, assign or discipline employees. Consequently, as managerialemployees, in the case of petitioners, the mere existence of grounds for the loss of trust andconfidence justify their dismissal. Pursuant to our ruling in Caoile v. National Labor RelationsCommission, as long as the employer has a reasonable ground to believe that the managerialemployee concerned is responsible for the purported misconduct, or the nature of his participation renders him unworthy of the trust and confidence demanded by his position, themanagerial employee can be dismissed.

In the present case, the tape receipts presented by respondents showed that there wereanomalies committed in the branches managed by the petitioners. On the principle of respondeatsuperior or command responsibility alone, petitioners may be held liable for negligence in the performance of their managerial duties, unless petitioners can positively show that they were notinvolved. Their position requires a high degree of responsibility that necessarily includesunearthing of fraudulent and irregular activities. Their bare, unsubstantiated and uncorroborateddenial of any participation in the cheating does not prove their innocence nor disprove theiralleged guilt. Additionally, some employees declared in their affidavits that the cheating wasactually the idea of the petitioners.



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RCPI vs. VERCHEZG.R. No. 164349. JANUARY 31, 2006

FACTS:

Editha Hebron Verchez (Editha) was confined in the hospital due to an ailment. Herdaughter Grace immediately went to the Sorsogon Branch of RCPI whose services she engagedto send a telegram to her sister Zenaida. As three days after RCPI was engaged to send thetelegram to Zenaida no response was received from her, Grace sent a letter to Zenaida, this timethru JRS Delivery Service, reprimanding her for not sending any financial aid. Immediately aftershe received Grace‘s letter, Zenaida, along with her husband left for Sorsogon. On her arrival atSorsogon, she disclaimed having received any telegram.

The telegram was finally delivered to Zenaida 25 days later. On inquiry from RCPI whyit took that long to deliver it, RCPI claimed that delivery was not immediately effected due to the

occurrence of circumstances which were beyond the control and foresight of RCPI.

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

RULING:

Article 1170 of the Civil Code provides: Those who in the performance of theirobligations are guilty of fraud, negligence, or delay, and those who in any manner contravene thetenor thereof, are liable for damages. In culpa contractual, the mere proof of the existence of thecontract and the failure of its compliance justify, prima facie, a corresponding right of relief. Thelaw, recognizing the obligatory force of contracts, will not permit a party to be set free fromliability for any kind of misperformance of the contractual undertaking or a contravention of thetenor thereof.

Considering the public utility of RCPI‘s business and its contractual obligation totransmit messages, it should exercise due diligence to ascertain that messages are delivered to the persons at the given address and should provide a system whereby in cases of undeliveredmessages the sender is given notice of non-delivery. Messages sent by cable or wireless meansare usually more important and urgent than those which can wait for the mail. RCPI argues,however, against the presence of urgency in the delivery of the telegram, as well as the basis forthe award of moral damages. RCPI‘s arguments fail. For it is its breach of contract upon whichits liability is, it bears repeating, anchored. Since RCPI breached its contract, the presumption isthat it was at fault or negligent. It, however, failed to rebut this presumption. For breach ofcontract then, RCPI is liable to Grace for damages. RCPI‘s liability as an employer could ofcourse be avoided if it could prove that it observed the diligence of a good father of a family to prevent damage.



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VICTORY LINER, INC. vs. GAMMADG.R. No. 159636. NOVEMBER 25, 2004

FACTS:

Marie Grace Pagulayan-Gammad was on board an air-conditioned Victory Liner bus bound for Tuguegarao, Cagayan from Manila. At about 3:00 a.m., the bus while running at ahigh speed fell on a ravine which resulted in the death of Marie Grace and physical injuries toother passengers. On May 14, 1996, respondent heirs of the deceased filed a complaint fordamages arising from culpa contractual against petitioner. In its answer, the petitioner claimedthat the incident was purely accidental and that it has always exercised extraordinary diligence inits 50 years of operation.

ISSUE:

Whether petitioner should be held liable for breach of contract of carriage.

RULING:

Petitioner was correctly found liable for breach of contract of carriage. A commoncarrier is bound to carry its passengers safely as far as human care and foresight can provide,using the utmost diligence of very cautious persons, with due regard to all the circumstances. Ina contract of carriage, it is presumed that the common carrier was at fault or was negligent whena passenger dies or is injured. Unless the presumption is rebutted, the court need not even makean express finding of fault or negligence on the part of the common carrier. This statutory presumption may only be overcome by evidence that the carrier exercised extraordinarydiligence.

In the instant case, there is no evidence to rebut the statutory presumption that the proximate cause of Marie Grace‘s death was the negligence of petitioner. Hence, the courts below correctly ruled that petitioner was guilty of breach of contract of carriage.



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FGU INSURANCE CORP. vs. G.P. SARMIENTO TRUCKING CORPORATIONG.R. No. 141910. AUGUST 6, 2002

FACTS:

G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver refrigerators aboardone of its Isuzu truck, driven by Lambert Eroles, from the plant site of Concepcion Industries,Inc. to the Central Luzon Appliances in Dagupan City. While the truck was traversing the northdiversion road along McArthur highway in Barangay Anupol, Bamban, Tarlac, it collided withan unidentified truck, causing it to fall into a deep canal, resulting in damage to the cargoes. FGUInsurance Corporation (FGU), an insurer of the shipment, paid to Concepcion Industries, Inc.,the value of the covered cargoes. FGU, in turn, being the subrogee of the rights and interests ofConcepcion Industries, Inc., sought reimbursement of the amount it had paid to the latter fromGPS. Since the trucking company failed to heed the claim, FGU filed a complaint for damagesand breach of contract of carriage against GPS and its driver Lambert Eroles. Respondents

asserted that that the cause of damage was purely accidental.

ISSUE:Whether or not GPS is liable for damages arising from negligence.

RULING:

In culpa contractual, upon which the action of petitioner rests as being the subrogee ofConcepcion Industries, Inc., the mere proof of the existence of the contract and the failure of itscompliance justify, prima facie, a corresponding right of relief. Respondent trucking corporationrecognizes the existence of a contract of carriage between it and petitioner and admits that thecargoes it has assumed to deliver have been lost or damaged while in its custody. In such asituation, a default on, or failure of compliance with, the obligation – in this case, the delivery ofthe goods in its custody to the place of destination - gives rise to a presumption of lack of careand corresponding liability on the part of the contractual obligor the burden being on him toestablish otherwise. GPS has failed to do so.

Respondent driver, without concrete proof of his negligence or fault, may not himself beordered to pay petitioner. The driver, not being a party to the contract of carriage between petitioner and defendant, may not be held liable under the agreement. A contract can only bindthe parties who have entered into it or their successors who have assumed their personality ortheir juridical position. Petitioner‘s civil action against the driver can only be based on culpaaquiliana, which, unlike culpa contractual, would require the claimant for damages to provenegligence or fault on the part of the defendant.



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LRTA vs. NAVIDADG.R. No. 145804. FEBRUARY 6, 2003

FACTS:

On 14 October 1993, in the evening, Nicanor Navidad, then drunk, entered the EDSALRT station. While Navidad was standing on the platform near the LRT tracks, Junelito Escartin,the security guard assigned to the area approached Navidad. A misunderstanding or analtercation between the two apparently ensued that led to a fist fight. No evidence, however, wasadduced to indicate how the fight started or who, between the two, delivered the first blow orhow Navidad later fell on the LRT tracks. At the exact moment that Navidad fell, an LRT train,operated by petitioner Rodolfo Roman, was coming in. Navidad was struck by the moving train,and he was killed instantaneously. The widow of Nicanor, along with her children, filed acomplaint for damages against Junelito Escartin, Rodolfo Roman, the LRTA, the Metro Transit

Organization, Inc. (Metro Transit), and Prudent for the death of her husband. LRTA and Romanfiled a counterclaim against Navidad and a cross-claim against Escartin and Prudent. Prudent, inits answer, denied liability and averred that it had exercised due diligence in the selection andsupervision of its security guards.

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

RULING:

The foundation of LRTA‘s liability is the contract of carriage and its obligation toindemnify the victim arises from the breach of that contract by reason of its failure to exercisethe high diligence required of the common carrier. In the discharge of its commitment to ensurethe safety of passengers, a carrier may choose to hire its own employees or avail itself of theservices of an outsider or an independent firm to undertake the task. In either case, the commoncarrier is not relieved of its responsibilities under the contract of carriage.

Regrettably for LRTA, as well as perhaps the surviving spouse and heirs of the late Nicanor Navidad, this Court is concluded by the factual finding of the Court of Appeals that―there is nothing to link Prudent to the death of Navidad, for the reason that the negligence of itsemployee, Escartin, has not been duly proven. There being, similarly, no showing that petitionerRodolfo Roman himself is guilty of any culpable act or omission, he must also be absolved fromliability.



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RODZSSEN SUPPLY CO, INC. VS. FAR EAST BANK & TRUST CO.GR No. 109087 May 9, 2001

FACTS:

Defendant Rodzssen Supply, Inc. opened with plaintiff Far East Bank and Trust Co. a 30-day domestic letter of credit in the amount of P190,000.00 in favor of Ekman and Company, Inc.(Ekman) for the purchase from the latter of five units of hydraulic loaders, to expire on February15, 1979. Defendant refused to pay without any valid reason. Plaintiff prays for judgmentordering defendant to pay the abovementioned P76,000.00 plus due interest thereon, plus 25% ofthe amount of the award as attorney‘s fees. Knowing that the two units of hydraulic loaders had been delivered to defendant after the expiry date of subject LC; and that in view of the breach ofcontract, defendant offered to return to plaintiff the two units of hydraulic loaders, ‗presently stillwith the defendant‘ but plaintiff refused to take possession thereof.

Under the contract of sale of the five loaders between Ekman and defendant, uponEkman‘s delivery to, and acceptance by, defendant of the two remaining units of the five loaders,defendant became liable to Ekman for the payment of said two units. However, as defendant didnot pay Ekman, the latter pressed plaintiff for the payment of said two loaders in the amount ofP76,000.00. In the honest belief that it was still under obligation to Ekman for said amount,considering that Ekman had presented all the necessary documents, plaintiff voluntarily paid thesaid amount to Ekman.

The CA rejected petitioner‘s imputation of bad faith and negligence to respondent bankfor paying for the two hydraulic loaders, which had been delivered after the expiration of thesubject letter of credit. To absolve defendant from liability for the price of the same," the CAexplained, "is to allow it to get away with its unjust enrichment at the expense of the plaintiff."

ISSUE:Whether petitioner is liable to respondent.

RULING:

Petitioner claims that it accepted the late delivery of the equipment, only because it was bound to accept it under the company‘s trust receipt arrangement with respondent bank.

Granting that petitioner was bound under such arrangement to accept the late delivery ofthe equipment, we note its unexplained inaction for almost four years with regard to the status ofthe ownership or possession of the loaders. Bewildering was its lack of action to validate theownership and possession of the loaders, as well as its stolidity over the purported failed salestransaction. Significant too is the fact that it formalized its offer to return the two pieces ofequipment only after respondent‘s demand for payment, which came more than three years afterit accepted delivery.

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

Petitioner Rodzssen Supply Co., Inc. is orderd to reimburse Respondent Far East Bankand Trust Co., Inc. P76,000 plus interest thereon at the rate of 6 percent per annum computedfrom April 7, 1983. After this judgment becomes final, the interest shall be 12 percent perannum.



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DELSAN TRANSPORT VS. C & A CONSORTIUMGR No. 156034 October 1, 2003

FACTS:

On October 9, 1994, M/V Delsan Express, a ship owned and operated by petitionerDelsan Transport Lines, Inc., anchored at the Navotas Fish Port for the purpose of installing acargo pump and clearing the cargo oil tank. At around 12:00 midnight of October 20, 1994,Captain Demetrio T. Jusep of M/V Delsan Express received a report from his radio head operatorin Japan that a typhoon was going to hit Manila in about eight (8) hours. At approximately 8:35in the morning of October 21, 1994, Capt. Jusep tried to seek shelter at the North Harbor butcould not enter the area because it was already congested. At 10:00 a.m., Capt. Jusep decided todrop anchor at the vicinity of Vitas mouth, 4 miles away from a Napocor power barge. At thattime, the waves were already reaching 8 to 10 feet high. Capt. Jusep ordered his crew to go fullahead to counter the wind which was dragging the ship towards the Napocor power barge. Toavoid collision, Capt. Jusep ordered a full stop of the vessel.[9] He succeeded in avoiding the

power barge, but when the engine was re-started and the ship was maneuvered full astern, it hitthe deflector wall constructed by respondent.Respondent demanded payment of the damage from petitioner but the latter refused to

pay.

ISSUES:1. Whether or not Capt. Jusep was negligent;2. If yes, whether or not petitioner is solidarily liable under for the quasi-delict committed

by Capt. Jusep?

RULING:

In the case at bar, the Court of Appeals was correct in holding that Capt. Jusep wasnegligent in deciding to transfer the vessel only at 8:35 in the morning of October 21, 1994. Asearly as 12:00 midnight of October 20, 1994, he received a report from his radio head operator inJapan that a typhoon was going to hit Manila after 8 hours. This, notwithstanding, he didnothing, until 8:35 in the morning of October 21, 1994, when he decided to seek shelter at the North Harbor, which unfortunately was already congested.

The finding of negligence cannot be rebutted upon proof that the ship could not havesought refuge at the North Harbor even if the transfer was done earlier. It is not the speculativesuccess or failure of a decision that determines the existence of negligence in the present case, but the failure to take immediate and appropriate action under the circumstances. Capt. Jusep,despite knowledge that the typhoon was to hit Manila in 8 hours, complacently waited for thelapse of more than 8 hours thinking that the typhoon might change direction. Furthermore, he didnot transfer as soon as the sun rose because, according to him, it was not very cloudy and therewas no weather disturbance yet.

Anent the second issue, we find petitioner vicariously liable for the negligent act of Capt.Jusep. Under Article 2180 of the Civil Code an employer may be held solidarily liable for thenegligent act of his employee. Whenever an employee‘s negligence causes damage or injury toanother, there instantly arises a presumption juris tantum that the employer failed to exercisediligentissimi patris families in the selection (culpa in eligiendo) or supervision (culpa invigilando) of its employees. To avoid liability for a quasi-delict committed by his employee, anemployer must overcome the presumption by presenting convincing proof that he exercised thecare and diligence of a good father of a family in the selection and supervision of his employee.

There is no question that petitioner, who is the owner/operator of M/V Delsan Express, isalso the employer of Capt. Jusep who at the time of the incident acted within the scope of hisduty. The defense raised by petitioner was that it exercised due diligence in the selection of Capt.Jusep because the latter is a licensed and competent Master. It is not enough that the employeeschosen be competent and qualified, inasmuch as the employer is still required to exercise duediligence in supervising its employees.



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SAN MIGUEL CORPORATION AND HEIRS OF OUANA VS. CAGR No. 141716 July 4, 2002

FACTS:

San Miguel Corporation entered into a Time Charter Party Agreement with Julius Ouano,doing business under the name and style J. Ouano Marine Services. Under the terms of theagreement, SMC chartered the M/V Doña Roberta owned by Julius Ouano for a period of twoyears, from June 1, 1989 to May 31, 1991, for the purpose of transporting SMC‘s beverage products from its Mandaue City plant to various points in Visayas and Mindanao. On November11, 1990, during the term of the charter, SMC issued sailing orders to the Master of the MNDoña Roberta, Captain Sabiniano Inguito, to sail for Opol, Cagayan Nov. 12, 1990. Meanwhile,at 4:00 a.m. of November 12, 1990, typhoon Ruping was spotted 570 kilometers east-southeastof Borongan, Samar, moving west-northwest at 22 kilometers per hour in the general direction ofEastern Visayas. The typhoon had maximum sustained winds of 240 kilometers per hour near thecenter with gustiness of up to 280 kilometers per hour.At 7:00 a.m., November 12, 1990, one

hour after the M/V Doña Roberta departed from Mandaue City SMC Radio Operator Rogelio P.Moreno contacted Captain Inguito through the radio and advised him to take shelter. CaptainInguito replied that they will proceed since the typhoon was far away from them, and that thewinds were in their favor.At 1:15 a.m., November 13, 1990, Captain Inguito called Moreno overthe radio and requested him to contact Rico Ouano, son of Julius Ouano, because they needed ahelicopter to rescue them. The vessel was about 20 miles west of Sulauan Point.Upon being told by SMC‘s radio operator, Rico Ouano turned on his radio and read the distress signal fromCaptain Ingiuto. When he talked to the captain, the latter requested for a helicopter to rescuethem. Rico Ouano talked to the Chief Engineer who informed him that they can no longer stopthe water from coming into the vessel because the crew members were feeling dizzy from the petroleum fumes.At 2:30 a.m. of November 13, 1990, the M/V Doña Roberta sank. Out of the 25officers and crew on board the vessel, only five survived.

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

RULING:A charter party is a contract by virtue of which the owner or the agent of a vessel binds

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

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

The evidence does not show that SMC or its employees were amiss in their duties. In theassailed decision, the Court of Appeals found that the proximate cause of the sinking of thevessel was the negligence of Captain Sabiniano Inguito. SC likewise agrees with the CA thatOuano is vicariously liable for the negligent acts of his employee, Captain Inguito. UnderArticles 2176 and 2180 of the Civil Code, owners and managers are responsible for damagescaused by the negligence of a servant or an employee, the master or employer is presumed to benegligent either in the selection or in the supervision of that employee.



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PACIS v. MORALESG.R. No. 169467 : February 25, 2010

FACTS:

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

Defendant Morales was in Manila at the time.Sales agents Matibag and Herbolario were

the ones left to look after the gun store. It appears that Matibag and Herbolario later brought outthe gun from the drawer and placed it on top of the table. Attracted by the sight of the gun, theyoung Alfred Dennis Pacis got hold of the same. Matibag asked Alfred Dennis Pacis to returnthe gun. The latter followed and handed the gun to Matibag. It went off, the bullet hitting theyoung Alfred in the head.

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

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

ISSUE:

Whether or not respondent Morales, as the employer is subsidiary liable.

HELD:

YES. The Court held that respondent did not exercise the degree of care and diligencerequired of a good father of a family, much less the degree of care required of someone dealingwith dangerous weapons. For the subsidiary liability of the employer under Article 103 of theRevised Penal Code, the liability of the employer, or any person for that matter, under Article2176 of the Civil Code is primary and direct, based on a persons own negligence.

As a gun store owner, respondent is presumed to be knowledgeable about firearms safetyand should have known never to keep a loaded weapon in his store to avoid unreasonable risk ofharm or injury to others. For failing to insure that the gun was not loaded, respondent himselfwas negligent. Furthermore, it was not shown in this case whether respondent had a License toRepair which authorizes him to repair defective firearms to restore its original composition orenhance or upgrade firearms.



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MERCURY DRUG CORPORATION VS. HUANGGR No. 172122 June 22, 2007

FACTS:

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

selection and supervision of its driver.

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

ISSUE:

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

RULING:

Article 2176 and 2180 of the Civil Code provide:―Whoever by act or omission causes damage to another, there being fault or

negligence, is obliged to pay for the damages done. Such fault or negligence, if there is no pre-existing contractual relationship between the parties, is called a quasi-delict and is governed bythe provisions of this Chapter.‖

―The obligation imposed by article 2176 is demandable not only for one‘s ownacts or omissions, but also for those of persons for whom one is responsible.‖

The liability of the employer under Article 2180 is direct and immediate. It is notconditioned on a prior recourse against the negligent employee, or a prior showing of insolvencyof such employee. It is also joint and solidary with the employee. To be relieved f the liability, petitioner should show that it exercised the diligence of a good father of a family, both in theselection of the employee and in the supervision of the performance of his duties.

In this case, the petitioner Mercury Drug does not provide for back-up driver for longtrips. As the time of the accident, Del Rosario has been driving for more than thirteen hours,without any alternate. Moreover, Del Rosario took the driving test and psychological exam forthe position of Delivery Man and not as Truck Man.

With this, petitioner Mercury Drug is liable jointly and severally liable to pay therespondents.



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MENDOZA VS. SORIANOGR No. 164012 June 8, 2007

FACTS:

Sonny Soriano, while crossing Commonwealth Avenue near Luzon Avenue, was hit by aspeeding Tamaraw FX driven by Lomer Macasasa. Soriano was thrown five meters away, whilethe vehicle stopped some 25 meters from the point of impact. Gerard Villaspin, one of Soriano‘scompanions, asked Macasasa to bring Soriano to the hospital, but the first flee. Respondent‘swife and daughter filed a complaint for damages against Macasasa and petitioner FlordelizaMendoza, the registered owner of the vehicle.

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

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

ISSUE:

Whether or not petitioner is liable for damages.

RULING:

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

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

Further, under Article 2180, employers are liable for the damages caused by theiremployees acting within the scope of their assigned tasks. The liability arises due to the presumed negligence of the employers in supervising their employees unless they prove that theyobserved all the diligence of a good father of a family to prevent the damage. In this case petitioner is held primarily and solidarily liable for the damages caused by Macasasa.

However, Article 2179 states that ―when the plaintiff‘s own negligence was theimmediate and proximate cause of his injury, he cannot recover damages. But if his negligencewas only contributory, the immediate and proximate cause of the injury being the defendant‘slack of due care, the plaintiff may recover damages, but the court shall mitigate the damagesawarded.

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



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CEREZO VS. TUAZONGR No. 141538 March 23, 2004

FACTS:

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

After considering Tuazon‘s testimonial and documentary evidence, the trial court ruledin Tuazon‘s favor. The trial court made no pronouncement on Foronda‘s liability because therewas no service of summons on him. The trial court did not hold Atty. Cerezo liable as Tuazonfailed to show that Mrs. Cerezo‘s business benefited the family, pursuant to Article 121(3) of theFamily Code. The trial court held Mrs. Cerezo solely liable for the damages sustained byTuazon arising from the negligence of Mrs. Cerezo‘s employee, pursuant to Article 2180 of theCivil Code.

ISSUE:Whether petitioner is solidarily liable.

RULING:

Contrary to Mrs. Cerezo‘s assertion, Foronda is not an indispensable party to the case.An indispensable party is one whose interest is affected by the court‘s action in the litigation, andwithout whom no final resolution of the case is possible. However, Mrs. Cerezo‘s liability as anemployer in an action for a quasi-delict is not only solidary, it is also primary and direct. Forondais not an indispensable party to the final resolution of Tuazon‘s action for damages against Mrs.Cerezo.

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

Moreover, an employer‘s liability based on a quasi-delict is primary and direct, while theemployer‘s liability based on a delict is merely subsidiary. The words ―primary and direct,‖ ascontrasted with ―subsidiary,‖ refer to the remedy provided by law for enforcing the obligationrather than to the character and limits of the obligation. Although liability under Article 2180originates from the negligent act of the employee, the aggrieved party may sue the employerdirectly.

When an employee causes damage, the law presumes that the employer has himselfcommitted an act of negligence in not preventing or avoiding the damage. This is the fault thatthe law condemns. While the employer is civilly liable in a subsidiary capacity for theemployee‘s criminal negligence, the employer is also civilly liable directly and separately for hisown civil negligence in failing to exercise due diligence in selecting and supervising hisemployee. The idea that the employer‘s liability is solely subsidiary is wrong.

To hold the employer liable in a subsidiary capacity under a delict, the aggrieved partymust initiate a criminal action where the employee‘s delict and corresponding primary liabilityare established. If the present action proceeds from a delict, then the trial court‘s jurisdiction overForonda is necessary.

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

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



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FILIPINAS SYNTHETIC v. DE LOS SANTOSG.R. No. 152033, March 16, 2011

FACTS:

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

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

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

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

ISSUE:

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

HELD:

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

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

In the present case, Filsyn, the employer of Mejia merely presented evidence on thealleged care it took in the selection or hiring of Mejia way back in 1974 or ten years before thefatal accident. Neither did Filsyn present any proof of the existence of the rules and regulationsgoverning the conduct of its employees. It is significant to note that in employing Mejia, who isnot a high school graduate, Filsyn waived its long-standing policy requirement of hiring onlyhigh school graduates. It insufficiently failed to explain the reason for such waiver other thantheir allegation of Mejia's maturity and skill for the job.



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VIRON TRANSPORTATION CO., INC. VS. DELOS SANTOSGR No. 54080 November 22, 2000

FACTS:

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

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

ISSUE:

Whether the employer is liable to the negligence of his employee.

RULING:

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

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

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



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MERCURY DRUG CORPORATION VS. BAKINGGR No. 57435 May 25, 2007

FACTS:

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

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

Suspecting that the tablet he took may have bearing on his physical and mental state atthe time of the collision, respondent returned to Dr. Sy. Upon being shown the medicine, Dr. Sywas shocked to find that what was sold to him was Dormicum, instead of the prescribedDiamicron

The RTC and CA rendered their decision in favor of respondent.

ISSUE:

Whether petitioner was negligent, and if so, whether such negligence was the proximatecause of respondent‘s accident.

RULING:

Article 2176 states that ―whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damages done. Such fault or negligence, ifthere is no pre-existing contractual relationship between the parties, is called a quasi-delict…‖

Obviously, petitioner‘s employee was grossly negligent in selling respondent domicrum,instead of the prescribed diamicron. Considering that a fatal mistake could be a matter of life anddeath for a buying patient, the employee should have been very cautious in dispensingmedicines. Petitioner contends that the proximate cause of the accident was respondent‘snegligence in driving. The court disagrees. The accident could have not occurred had petitioner‘semployee been careful in reading the prescription.

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

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



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SAFEGUARD SECURITY V. TANGCOGR No. 165732 December 14, 2006

FACTS:

Evangeline Tangco (Evangeline) went to Ecology Bank, Katipunan Branch, Quezon City,to renew her time deposit per advise of the bank's cashier as she would sign a specimen card.Evangeline, a duly licensed firearm holder with corresponding permit to carry the same outsideher residence, approached security guard Pajarillo, who was stationed outside the bank, and pulled out her firearm from her bag to deposit the same for safekeeping. Suddenly, Pajarillo shotEvangeline with his service shotgun hitting her in the abdomen instantly causing her death.Respondent filed a complaint for damages against Pajarillo for negligently shooting Evangelineand against Safeguard for failing to observe the diligence of a good father of a family to preventthe damage committed by its security guard.

Petitioners denied the material allegations in the complaint and alleged that Safeguardexercised the diligence of a good father of a family in the selection and supervision of Pajarillo;

that Evangeline's death was not due to Pajarillo's negligence as the latter acted only in self-defense.

ISSUES:1. Whether Pajarillo is guilty of negligence in shooting Evangeline; and2. Whether Safeguard should be held solidarily liable for the damages awarded to

respondents.

RULING:

Safeguard contends that it cannot be jointly held liable since it had adequately shown thatit had exercised the diligence required in the selection and supervision of its employees. It claimsthat it had required the guards to undergo the necessary training and to submit the requisitequalifications and credentials which even the RTC found to have been complied with; that theRTC erroneously found that it did not exercise the diligence required in the supervision of itsemployee. Safeguard further claims that it conducts monitoring of the activities of its personnel,wherein supervisors are assigned to routinely check the activities of the security guards whichinclude among others, whether or not they are in their proper post and with proper equipment, aswell as regular evaluations of the employees' performances; that the fact that Pajarillo loaded hisfirearm contrary to Safeguard's operating procedure is not sufficient basis to say that Safeguardhad failed its duty of proper supervision; that it was likewise error to say that Safeguard wasnegligent in seeing to it that the procedures and policies were not properly implemented byreason of one unfortunate event. The Supreme Court was not convinced. Article 2180 of theCivil Code provides: The obligation imposed by Article 2176 is demandable not only for one'sown acts or omissions, but also for those of persons for whom one is responsible.

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



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PLEYTO VS. LOMBOYGR No. 148737 December 16, 2004

FACTS:

Respondent Maria D. Lomboy of Calasiao, Pangasinan, is the surviving spouse of the lateRicardo Lomboy, who died in Pasolingan, Gerona, Tarlac, in a vehicular accident. The accidentwas a head-on collision between the PRBL bus driven by petitioner Pleyto and the car whereRicardo was a passenger. Carmela suffered injuries requiring hospitalization in the same accidentwhich resulted in her father‘s death.

According to Rolly Orpilla, a witness and one of the bus passengers, Pleyto tried toovertake Esguerra‘s tricycle but hit it instead. Pleyto then swerved into the left opposite lane.Coming down the lane, some fifty meters away, was a southbound Mitsubishi Lancer car, driven by Arnulfo Asuncion. The car was headed for Manila with some passengers. Seated besideArnulfo was his brother-in-law, Ricardo Lomboy, while in the back seat were Ricardo‘s 18-yearold daughter Carmela and her friend, one Rhino Daba. PRBL Bus No. 1539 smashed head-on

the car, killing Arnulfo and Ricardo instantly. Carmela and Rhino suffered injuries, but onlyCarmela required hospitalization.The Court of Appeals found PRBL liable for Pleyto‘s negligence pursuant to Article

2180 in relation to Article 2176 of the Civil Code. Under Article 2180, when an injury is caused by the negligence of a servant or an employee, the master or employer is presumed to benegligent either in the selection or in the supervision of that employee. This presumption may beovercome only by satisfactorily showing that the employer exercised the care and the diligenceof a good father of a family in the selection and the supervision of its employee.

ISSUE:

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

RULING:

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

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

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



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VIRON TRANSPORTATION CO., INC. VS. DELOS SANTOSGR No. 54080 November 22, 2000

FACTS:

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

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

ISSUE:

Whether the employer is liable to the negligence of his employee.

RULING:

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

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

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



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SYKI VS. BEGASAGR No. 149149 October 23, 2003

FACTS:

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

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

ISSUE:

1. Whether or not petitioner is liable for the act of his employee.2. Whether he exercised the diligence of a good father of a family.

RULING:

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

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

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

In the selection of prospective employees, employers are required to examine them as totheir qualifications, experience, and service records. On the other hand, with respect to thesupervision of employees, employers should formulate standard operating procedures, monitortheir implementation, and impose disciplinary measures for breaches thereof. To establish thesefactors in a trial involving the issue of vicarious liability, employers must submit concrete proof,including documentary evidence.The employer must not merely present testimonial evidence to prove that he had observed the diligence of a good father of a family in the selection andsupervision of his employee, but he must also support such testimonial evidence with concrete ordocumentary evidence. The reason for this is to obviate the biased nature of the employer‘stestimony or that of his witnesses.

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



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YAMBAO VS. ZUNIGAGR No. 146173 December 11, 2003

FACTS:

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

Private respondents, as heirs of the victim, filed a Complaint against petitioner and herdriver, Venturina, for damages. The complaint essentially alleged that Venturina drove the bus ina reckless, careless and imprudent manner, in violation of traffic rules and regulations, withoutdue regard to public safety, thus resulting in the victim‘s premature death.

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

ISSUE:

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

RULING:

It held that this was a case of quasi-delict, there being no pre-existing contractualrelationship between the parties. The court a quo then found the petitioner directly and primarilyliable as Venturina‘s employer pursuant to Article 2180 of the Civil Code as she failed to presentevidence to prove that she has observed the diligence of a good father of a family in the selectionand supervision of her employees.

Art. 2180 states that ―the obligation imposed by Article 2176 is demandable not only forone‘s own acts or omissions, but also for those of persons for whom one is responsible‖

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

Petitioner contends that as an employer, she observed the proper diligence of a goodfather of a family, both in the selection and supervision of her driver and therefore, is relievedfrom any liability for the latter‘s misdeed. To support her claim, she points out that whenVenturina applied with her as a driver in January 1992, she required him to produce not just hisdriver‘s license, but also clearances from the National Bureau of Investigation (NBI), thePhilippine National Police, and the barangay where he resides. She also required him to presenthis Social Security System (SSS) Number prior to accepting him for employment. She likewisestresses that she inquired from Venturina‘s previous employer about his employment record, andonly hired him after it was shown to her satisfaction that he had no blot upon his record.

In sum, petitioner‘s liability to private respondents for the negligent and imprudent actsof her driver, Venturina, under Article 2180 of the Civil Code is both manifest and clear.Petitioner, having failed to rebut the legal presumption of negligence in the selection andsupervision of her driver, is responsible for damages, the basis of the liability being therelationship of pater familias or on the employer‘s own negligence.



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REGINO VS. PANGASINAN COLLEGESGR No. 156109 November 18, 2004

FACTS:

Petitioner Khristine Rea M. Regino was a first year computer science student atRespondent Pangasinan Colleges of Science and Technology (PCST). In February 2002, PCSTheld a fund raising campaign dubbed the ―Rave Party and Dance Revolution,‖ the proceeds ofwhich were to go to the construction of the school‘s tennis and volleyball courts. Each studentwas required to pay for two tickets at the price of P100 each. The project was allegedlyimplemented by recompensing students who purchased tickets with additional points in their testscores; those who refused to pay were denied the opportunity to take the final examinations.Financially strapped and prohibited by her religion from attending dance parties andcelebrations, Regino refused to pay for the tickets. On March 14 and March 15, 2002, thescheduled dates of the final examinations in logic and statistics, her teachers -- RespondentsRachelle A. Gamurot and Elissa Baladad -- allegedly disallowed her from taking the tests.

ISSUE:

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

RULING:

Reciprocity of the School-Student ContractThe school-student relationship is also reciprocal. Thus, it has consequences appurtenant

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

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

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

The foregoing practice does not merely ensure compliance with financial obligations; italso underlines the importance of major examinations. Failure to take a major examination isusually fatal to the students‘ promotion to the next grade or to graduation. Examination resultsform a significant basis for their final grades. These tests are usually a primary and anindispensable requisite to their elevation to the next educational level and, ultimately, to theircompletion of a course.

Thus, students expect that upon their payment of tuition fees, satisfaction of the setacademic standards, completion of academic requirements and observance of school rules andregulations, the school would reward them by recognizing their ―completion‖ of the courseenrolled in.PCST imposed the assailed revenue-raising measure belatedly, in the middle of the semester. Itexacted the dance party fee as a condition for the students‘ taking the final examinations, andultimately for its recognition of their ability to finish a course. The fee, however, was not part ofthe school-student contract entered into at the start of the school year. Hence, it could not beunilaterally imposed to the prejudice of the enrollees.



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YHT REALTY VS. CAGR. No. 126780 February 17, 2005

FACTS:

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

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

ISSUE:

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

RULING:

Under Article 1170 of the New Civil Code, those who, in the performance of theirobligations, are guilty of negligence, are liable for damages. Article 2180 provides that theowners and managers of an establishment or enterprise are likewise responsible for damagescaused by their employees in the service of the branches in which the latter are employed or onthe occasion of their functions. Also, this Court has ruled that if an employee is found negligent,it is presumed that the employer was negligent in selecting and/or supervising him for it is hardfor the victim to prove the negligence of such employer. Thus, given the fact that the loss ofMcLoughlin‘s money was consummated through the negligence of Tropicana‘s employees inallowing Tan to open the safety deposit box without the guest‘s consent, both the assistingemployees and YHT Realty Corporation itself, as owner and operator of Tropicana, should beheld solidarily liable.

Art. 2003. The hotel-keeper cannot free himself from responsibility by posting notices tothe effect that he is not liable for the articles brought by the guest. Any stipulation between thehotel-keeper and the guest whereby the responsibility of the former as set forth in Articles1998 to 2001 is suppressed or diminished shall be void.

The hotel business like the common carrier‘s business is imbued with public interest. Thetwin duty constitutes the essence of the business. The law in turn does not allow such duty to the public to be negated or diluted by any contrary stipulation in so-called ―undertakings‖ thatordinarily appear in prepared forms imposed by hotel keepers on guests for their signature.

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

Thus, Tropicana was guilty of concurrent negligence in allowing Tan, who was not theregistered guest, to open the safety deposit box of McLoughlin, even assuming that the latter wasalso guilty of negligence in allowing another person to use his key. To rule otherwise wouldresult in undermining the safety of the safety deposit boxes in hotels for the management will begiven imprimatur to allow any person, under the pretense of being a family member or a visitorof the guest, to have access to the safety deposit box without fear of any liability that will attachthereafter in case such person turns out to be a complete stranger. This will allow the hotel toevade responsibility for any liability incurred by its employees in conspiracy with the guest‘srelatives and visitors.



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RAMOS VS. CAGR No. 124354 December 29, 1999

FACTS:

Plaintiff Erlinda Ramos was a robust woman Except for occasional complaints ofdiscomfort due to pains allegedly caused by the presence of a stone in her gall bladder. Becausethe discomforts somehow interfered with her normal ways, she sought professional advice. Shewas advised to undergo an operation for the removal of a stone in her gall bladder. At around7:30 A.M. of June 17, 1985 and while still in her room, she was prepared for the operation by thehospital staff. Her sister-in-law, Herminda Cruz, who was the Dean of the College of Nursing atthe Capitol Medical Center, was also there for moral support. Herminda was allowed to stayinside the operating room.

At around 9:30 A.M., Dr. Gutierrez reached a nearby phone to look for Dr. Hosaka whowas not yet in Dr. Gutierrez thereafter informed Herminda Cruz about the prospect of a delay inthe arrival of Dr. Hosaka. Herminda then went back to the patient who asked, "Mindy, wala pa

ba ang Doctor"? The former replied, "Huwag kang mag-alaala, darating na iyon. Thereafter,Herminda went out of the operating room and informed the patient's husband, Rogelio, that thedoctor was not yet around.

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

ISSUE:

Whether the respondent doctors are negligent.

RULING:

Res ipsa loquitur is a Latin phrase which literally means "the thing or the transactionspeaks for itself." The phrase "res ipsa loquitur" is a maxim for the rule that the fact of theoccurrence of an injury, taken with the surrounding circumstances, may permit an inference orraise a presumption of negligence, or make out a plaintiff's prima facie case, and present aquestion of fact for defendant to meet with an explanation

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



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

FACTS:

Jorge Reyes was taken to the Mercy Community Clinic. He was attended to byrespondent Dr. Marlyn Rico, a resident physician and admitting physician on duty, who gaveJorge a physical examination and took his medical records. Typhoid fever was then prevalent inthe locality. Suspecting that Jorge could be suffering from this disease, Dr. Rico ordered a WidalTest, a standard test for typhoid fever, to be performed on Jorge. The results of the test fromwhich Dr. Rico concluded that Jorge was positive for typhoid fever. As her shift was only up to5:00 p.m., Dr. Rico indorsed Jorge to respondent Dr. Marivie Blanes. Dr. Blanes also took the physical examination of Jorge. Antibiotics being the accepted treatment for typhoid fever, sheordered that a compatibility test with the antibiotic chloromycetin be done on Jorge. As she didnot observe any adverse reaction, she ordered the first 500 mg. of said antibiotic. At around 1:00in the morning, Dr. Blanes was called as Jorge‘s temperature rose to 41 degrees and then valium

was administered. However, the patient did not respond to the treatment and slipped intocyanosis, a bluish or purplish discoloration of the skin or mucous membrane due to deficientoxygenation of the blood. At around 2:00 a.m. Jorge died.

ISSUES:

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

RULING:Petitioner‘s action is for medical malpractice. It is a form of negligence which consists in

the failure of the physician or surgeon to apply to his practice of medicine that degree of care andskill which is ordinarily employed by the profession. Four elements involve in medicalnegligence cases, namely: duty, breach, injury, and proximate causation. In this case, there is nodoubt that physician-patient relationship existed between respondent doctors and Jorge Reyes. Itis breach of this duty which constitutes actionable malpractice. As to this aspect of medicalmalpractice, the determination of reasonable level of care and breach thereof, expert testimony isessential.

The petitioner presented Dr. Vacalares, Chief Pathologist of the Northern MindanaoTraining Hospital, Cagayan de Oro, who performed the autopsy of Jorge. He testified that Jorgedid not die of typhoid fever but of shock undetermined, which could be due to allergic reactionor chloromycetin overdose. The court was not persuaded. Although Dr. Vacalares may have hadextensive experience in performing autopsies, he admitted that he had yet to do one on the bodyof a typhoid victim at the time he conducted the post mortem of Jorge. It is also plain from histestimony that he treated only about three cases of typhoid fever. On the other hand, the twodoctors presented by respondents clearly were experts on the subject. They vouched for thecorrectness of Dr. Rico‘s diagnosis. Dr. Gotiong, a diplomate whose specialization is infectiousdiseases and microbiology and an associate professor at the Southern University College ofMedicine and the Gullas College of Medicine, testified that he has already treated over athousand cases of typhoid fever. According to him a case of typhoid fever is suspected using thewidal test, if the 1:320 results of the said test has been presented to him. As to the treatment ofthe disease, he stated that chloromycetin was the drug of choice. He also explained that despitethe measures taken by respondents and the intravenous administration of the two doses ofchloromycetin, complications of the disease could not be discounted.

Dr. Marilyn did not depart from the reasonable standard recommended by the experts asshe in fact observed the due care required under the circumstances. Though the widal test is notconclusive, it remains a standard diagnostic test for typhoid fever and, in the present case, agreater accuracy through repeated testing was rendered unobtainable by the early death of the patient. The results of the widal test and the patient‘s history of fever with chills for five days,taken with the fact that typhoid fever was then prevalent, were sufficient to give upon any doctorof reasonable skill the impression that the patient had typhoid fever.



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PROFESSIONAL SERVICES VS. AGANAGR No. 126467 February 11, 2008

FACTS:

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

After a couple of days, Natividad complained excruciating pain in her anal region. Sheconsulted both Dr. Ampil and Dr. Fuentes. They told her that the pain was the naturalconsequence of the surgical operation performed upon her. Dr. Ampil recommended that sheconsult an oncologist to treat the cancerous nodes which were not removed. Natividad and herhusband went to the US to seek further treatment. After 4 months she was told that she was freeof cancer. They then flew back to the Philippines. Two weeks thereafter , Natividad‘s daughterfound a piece of gauze protruding from her vagina. Dr. Ampil saw immediately informed. He proceeded to Natividad‘s house where he extracted by hand a piece of gauze. Natividad soughtthe treatment of Polymedic General Hospital thereat Dr. Gutierrez detected a foreign object inher vagina - a foul-smelling gauze which infected her vaginal vault. A recto-vaginal fistula hadformed in her reproductive organ which forced stool to excrete in her vagina. Another surgicaloperation was performed upon her.

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

ISSUE:

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

RULING:

It was duly established that Dr. Ampil was the lead surgeon during the operation of Natividad. He requested the assistance of Dr. Fuentes only to perform hysterectomy when he(Dr. Ampil) found that the malignancy in her sigmoid area had spread to her left ovary. Dr.Fuentes performed the surgery and thereafter reported and showed his work to Dr. Ampil. Thelatter examined it and finding everything to be in order, allowed Dr. Fuentes to leave theoperating room. Dr. Ampil then resumed operating on Natividad. He was about to finish the procedure when the attending nurses informed him that two pieces of gauze were missing. A"diligent search" was conducted, but the misplaced gauzes were not found. Dr. Ampil thendirected that the incision be closed. During this entire period, Dr. Fuentes was no longer in theoperating room and had, in fact, left the hospital.

Under the "Captain of the Ship" rule, the operating surgeon is the person in completecharge of the surgery room and all personnel connected with the operation. Their duty is to obeyhis orders. As stated before, Dr. Ampil was the lead surgeon. In other words, he was the"Captain of the Ship." That he discharged such role is evident from his following conduct.Clearly, the control and management of the thing which caused the injury was in the hands of Dr.Ampil, not Dr. Fuentes.

Here, the negligence was proven to have been committed by Dr. Ampil and not by Dr.Fuentes.



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

FACTS:

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

After a couple of days, Natividad complained excruciating pain in her anal region. Sheconsulted both Dr. Ampil and Dr. Fuentes. They told her that the pain was the naturalconsequence of the surgical operation performed upon her. Dr. Ampil recommended that sheconsult an oncologist to treat the cancerous nodes which were not removed. Natividad and herhusband went to the US to seek further treatment. After 4 months she was told that she was freeof cancer. They then flew back to the Philippines. Two weeks thereafter , Natividad‘s daughterfound a piece of gauze protruding from her vagina. Dr. Ampil saw immediately informed. He proceeded to Natividad‘s house where he extracted by hand a piece of gauze. Natividad soughtthe treatment of Polymedic General Hospital thereat Dr. Gutierrez detected a foreign object inher vagina - a foul-smelling gauze which infected her vaginal vault. A recto-vaginal fistula hadformed in her reproductive organ which forced stool to excrete in her vagina. Another surgicaloperation was performed upon her.

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

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

RULING:

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

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



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DR. RUBI LI v. SPS. SOLIMANG.R. No. 165279, June 07, 2011

FACTS:

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

On August 18, 1993, Angelica was admitted to SLMC. However, she died on September

1, 1993, just eleven (11) days after the administration of the first cycle of the chemotherapyregimen.

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

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

HELD: NO. There are four essential elements a plaintiff must prove in a malpractice action based

upon the doctrine of informed consent: "(1) the physician had a duty to disclose material risks;

(2) he failed to disclose or inadequately disclosed those risks; (3) as a direct and proximate resultof the failure to disclose, the patient consented to treatment she otherwise would not haveconsented to; and (4) plaintiff was injured by the proposed treatment." The gravamen in aninformed consent case requires the plaintiff to "point to significant undisclosed informationrelating to the treatment which would have altered her decision to undergo it.

Examining the evidence on record, the Court held that there was adequate disclosure ofmaterial risks inherent in the chemotherapy procedure performed with the consent of Angelica's parents. Respondents could not have been unaware in the course of initial treatment andamputation of Angelica's lower extremity, that her immune system was already weak on accountof the malignant tumor in her knee.On the other hand, it is difficult to give credence to

respondents' claim that petitioner told them of 95% chance of recovery for their daughter, as itwas unlikely for doctors like petitioner who were dealing with grave conditions such as cancer tohave falsely assured patients of chemotherapy's success rate. Besides, informed consent laws inother countries generally require only a reasonable explanation of potential harms, so specificdisclosures such as statistical data, may not be legally necessary.



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YASOÑA VS. DE RAMOSGR No. 156339 October 6, 2004

FACTS:

Aurea Yasoña and her son, Saturnino, went to the house of Jovencio de Ramos to ask forfinancial assistance in paying their loans to Philippine National Bank (PNB), otherwise theirresidential house and lot would be foreclosed. Inasmuch as Aurea was his aunt, Jovencio accededto the request. They agreed that, upon payment by Jovencio of the loan to PNB, half of Yasoñas‘subject property would be sold to him. Jovencio paid Aurea‘s bank loan. As agreed upon, Aureaexecuted a deed of absolute sale in favor of Jovencio over half of the lot consisting of 123 squaremeters. Thereafter, the lot was surveyed and separate titles were issued by the Register of Deedsof Sta. Cruz, Laguna in the names of Aurea and Jovencio

Twenty-two years later, in August 1993, Aurea filed an estafa complaint against brothersJovencio and Rodencio de Ramos on the ground that she was deceived by them when she askedfor their assistance in 1971 concerning her mortgaged property. In her complaint, Aurea alleged

that Rodencio asked her to sign a blank paper on the pretext that it would be used in theredemption of the mortgaged propertyOn February 21, 1994, Assistant Provincial Prosecutor Rodrigo B. Zayenis dismissed the

criminal complaint for estafa for lack of evidence. On account of this dismissal, Jovencio andRodencio filed a complaint for damages on the ground of malicious prosecution. They allegedthat the filing of the estafa complaint against them was done with malice and it causedirreparable injury to their reputation, as Aurea knew full well that she had already sold half of the property to Jovencio.

ISSUE:

Whether or not the filing of the criminal complaint for estafa by petitioners againstrespondents constituted malicious prosecution?

RULING:

To constitute ―malicious prosecution,‖ there must be proof that the prosecution was prompted by a sinister design to vex or humiliate a person, and that it was initiated deliberately by the defendant knowing that his charges were false and groundless. Concededly, the mere actof submitting a case to the authorities for prosecution does not make one liable for malicious prosecution.

In this case, the records show that the sale of the property was evidenced by a deed ofsale duly notarized and registered with the local Register of Deeds. After the execution of thedeed of sale, the property was surveyed and divided into two portions. Separate titles were thenissued in the names of Yasoña and Jovencio. Since 1973, Jovencio had been paying the realtytaxes of the portion registered in his name. In 1974, Aurea even requested Jovencio to use his portion as bond for the temporary release of her son who was charged with malicious mischief.Also, when Aurea borrowed money from the Rural Bank of Lumban in 1973 and the PNB in1979, only her portion was mortgaged.All these pieces of evidence indicate that Aurea had long acknowledged Jovencio‘s ownership ofhalf of the property. Furthermore, it was only in 1993 when petitioners decided to file the estafacomplaint against respondents. If petitioners had honestly believed that they still owned theentir e property, it would not have taken them 22 years to question Jovencio‘s ownership of halfof the property.Malicious prosecution, both in criminal and civil cases, requires the elements of (1) malice and(2) absence of probable cause. These two elements are present in the present controversy. Thecomplaint for estafa was dismissed outright as the prosecutor did not find any probable causeagainst respondents. A suit for malicious prosecution will prosper where legal prosecution iscarried out without probable cause.



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MAGAT VS. MEDIALDEAL-37120 April 20, 1983

FACTS:

That sometime in September 1972, the defendant entered into a contract with the U.S. Navy Exchange, Subic Bay, Philippines, for the operation of a fleet of taxicabs, each taxicab to be provided with the necessary taximeter and a radio transceiver for receiving and sending ofmessages from mobile taxicab to fixed base stations within the Naval Base at Subic Bay,Philippines.

ISSUE:

Whether or not there is contravention of the terms.

RULING:

After a thorough examination of the complaint at bar, We find the test of legal sufficiencyof the cause of action adequately satisfied. In a methodical and logical sequence, the complaintrecites the circumstances that led to the perfection of the contract entered into by the parties. Itfurther avers that while petitioner had fulfilled his part of the bargain, private respondent failedto comply with his correlative obligation by refusing to open a letter of credit to cover paymentof the goods ordered by him and that consequently, petitioner suffered not only loss of hisexpected profits, but moral and exemplary damages as well. From these allegations, the essentialelements of a cause of action are present, to wit: the existence of a legal right to the plaintiff; acorrelative duty of the defendant and an act or omission of the defendant in violation of the plaintiff's right, with consequent injury or damage to the latter for which he may maintain anaction for recovery of damages or other appropriate relief.

Indisputably, the parties, both businessmen, entered into the aforesaid contract with theevident intention of deriving some profits therefrom. Upon breach of the contract by either ofthem, the other would necessarily suffer loss of his expected profits. Since the loss comes into being at the very moment of breach, such loss is real, "fixed and vested" and, therefore,recoverable under the law.

Article 1170 of the Civil Code provides:"Those who in the performance of their obligation are guilty of fraud, negligence, or

delay, and those who in any manner contravene the tenor thereof are liable for damages."

The phrase "in any manner contravene the tenor" of the obligation includes any illicit actor omission which impairs the strict and faithful fulfillment of the obligation and every kind ofdefective performance.

The damages which the obligor is liable for includes not only the value of the losssuffered by the obligee [daño emergente] but also the profits which the latter failed to obtain[lucro cesante]. If the obligor acted in good faith, he shall be liable for those damages that are thenatural and probable consequences of the breach of the obligation and which the parties haveforeseen or could have reasonably foreseen at the time the obligation was constituted; and in caseof fraud, bad faith, malice or wanton attitude, he shall be liable for all damages which may bereasonably attributed to the nonperformance of the obligation



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VDA. DE MISTICA VS. NAGUIATGR. No 137909 December 11, 2003

FACTS:

Eulalio Mistica, predecessor-in-interest of herein petitioner, is the owner of a parcel ofland. A portion thereof was leased to [Respondent Bernardino Naguiat] sometime in 1970. On 5April 1979, Eulalio Mistica entered into a contract to sell with Respondent Naguiat over a portion of the aforementioned lot containing an area of 200 square meters.

Pursuant to said agreement, Respondent Bernardino Naguiat gave a downpayment ofP2,000.00. He made another partial payment of P1,000.00 on 7 February 1980. He failed tomake any payments thereafter. Eulalio Mistica died sometime in October 1986.

On 4 December 1991, petitioner filed a complaint for rescission alleging inter alia: thatthe failure and refusal of respondents to pay the balance of the purchase price constitutes a

violation of the contract which entitles her to rescind the same; that [respondents] have been in possession of the subject portion and they should be ordered to vacate and surrender possessionof the same to petitioner. Respondents contended that the contract cannot be rescinded onthe ground that it clearly stipulates that in case of failure to pay the balance as stipulated, a yearlyinterest of 12% is to be paid. Likewise alleged that sometime in October 1986, during the wakeof the late Eulalio Mistica, he offered to pay the remaining balance to petitioner but the latterrefused and hence, there is no breach or violation committed by them and no damages could yet be incurred by the late Eulalio Mistica, his heirs or assigns pursuant to the said document.

ISSUE:

Whether petitioner may rescind the contract.

RULING:

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

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

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

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



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CO VS. CAGR No. 112330 August 17, 1999

FACTS:

Plaintiff entered into a verbal contract with defendant for her purchase of the latter‘shouse and lot located at 316 Beata St., New Alabang Village, Muntinlupa, Metro Manila, for andin consideration of the sum of $100,000.00. One week thereafter, and shortly before she left forthe United States, plaintiff paid to the defendants the amounts of $1,000.00 and P40,000.00 asearnest money, in order that the same may be reserved for her purchase, said earnest money to bededucted from the total purchase price. The purchase price of $100,000.00 is payable in two payments $40,000.00 on December 4, 1984 and the balance of $60,000.00 on January 5, 1985.On January 25, 1985, although the period of payment had already expired, plaintiff paid to thedefendant Melody Co in the United States, the sum of $30,000.00, as partial payment of the purchase price. Defendant‘s counsel, Atty. Leopoldo Cotaco, wrote a letter to the plaintiff dated

March 15, 1985, demanding that she pay the balance of $70,000.00 and not receiving anyresponse thereto, said lawyer wrote another letter to plaintiff dated August 8, 1986, informingher that she has lost her ‗option to purchase‘ the property subject of this case and offered to sellher another property.

ISSUE:

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

RULING:

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

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

Article 1479.An accepted unilateral promise to buy or to sell a determinate thing for a price certain is

binding upon the promissor if the promise is supported by a consideration distinct from the price.‖

However, the March 15, 1985 letter sent by the COS through their lawyer to the Custodioreveals that the parties entered into a perfected contract of sale and not an option contract.

In the case at bar, the property involved has not been delivered to the appellee. She hastherefore nothing to return to the appellants. The price received by the appellants has to bereturned to the appellee as aptly ruled by the lower court, for such is a consequence of rescission,which is to restore the parties in their former situations.



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REYES v. TUPARANG.R. No. 188064; June 1, 2011

FACTS:

In December 1989, respondent leased from petitioner a space on the ground floor ofthe RBJ Building for her pawnshop business for a monthly rental of ₱4,000.00. A closefriendship developed between the two which led to the respondent investing thousands of pesosin petitioner‘s financing/lending business from February 7, 1990 to May 27, 1990, with interestat the rate of 6% a month.

On June 20, 1988, petitioner mortgaged the subject real properties to the Farmers SavingsBank and Loan Bank, Inc. to secure a loan of ₱2,000,000.00 payable in installments.On November 15, 1990, petitioner‘s outstanding account on the mortgage reached₱2,278,078.13. Petitioner then decided to sell her real properties for at least ₱6,500,000.00 so shecould liquidate her bank loan and finance her businesses. As a gesture of friendship, respondentverbally offered to conditionally buy petitioner‘s real properties for ₱4,200,000.00 payable on

installment basis without interest and to assume the bank loan.On November 26, 1990, the parties and FSL Bank executed the corresponding Deed ofConditional Sale of Real Properties with Assumption of Mortgage.

Respondent, however, defaulted in the payment of her obligations on their due dates.Instead of paying the amounts due in lump sum on their respective maturity dates, respondent paid petitioner in small amounts from time to time. To compensate for her delayed payments,respondent agreed to pay petitioner an interest of 6% a month. As of August 31, 1992,respondent had only paid ₱395,000.00, leaving a balance of ₱805,000.00 as principal on theunpaid installments and ₱466,893.25 as unpaid accumulated interest.

Since December 1990, respondent had taken possession of the subject real properties andhad been continuously collecting and receiving monthly rental income from the tenants of the buildings and vendors of the sidewalk fronting the RBJ building without sharing it with petitioner. On September 2, 1992, respondent offered the amount of ₱751,000.00 only payableon September 7, 1992, as full payment of the purchase price of the subject real properties anddemanded the simultaneous execution of the corresponding deed of absolute sale.

On September 10, 1992, Mila A. Reyes filed a complaint for Rescission of Contract withDamages against Victoria T. Tuparan before the RTC.

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

Assumption of Mortgage.

HELD:

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

Accordingly, the petitioner‘s obligation to sell the subject properties becomesdemandable only upon the happening of the positive suspensive condition, which is therespondent‘s full payment of the purchase price. Without respondent‘s full payment, there can beno breach of contract to speak of because petitioner has no obligation yet to turn over the title.Respondent‘s failure to pay in full the purchase price is not the breach of contract contemplatedunder Article 1191 of the New Civil Code but rather just an event that prevents the petitionerfrom being bound to convey title to the respondent.



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G.G. SPORTSWEAR MFG. CORP. v.WORLD CLASS PROPERTIES, INC.G.R. No. 182720 March 2, 2010

FACTS:

GG Sportswear offered to purchase the 38th floor penthouse unit and 16 parking slots for 32 carsin World Class's condominium project for the discounted, pre-selling price. After GG Sportswear paid the reservation fee, the parties, signed a Reservation Agreement that provides for theschedule of payments, including the stipulated monthly installments on the down payment andthe balance on the purchase price. From May to December 1996, GG Sportswear timely paid theinstallments due.In a letter dated January 30, 1997, GG Sportswear requested the return of theoutstanding postdated checks it previously delivered to World Class because it (GG Sportswear)intended to replace these old checks with new ones f rom the corporation‘s new bank. WorldClass acceded, but suggested the execution of a new Reservation Agreement to reflect thearrangement involving the replacement checks, with the retention of the other terms andconditions of the old Agreement.8 GG Sportswear did not object to the execution of a new

Reservation Agreement, but requested that World Class defer the deposit of the replacementchecks for 90 days. World Class denied this request, contending that a deferment would delaythe subsequent monthly installment payments. It likewise demanded that GG Sportswearimmediately pay its overdue January 1997 installment to avoid the penalties provided in theAgreement. GG Sportswear did not sign the second Reservation Agreement. Instead, it sent aletter to World Class, requesting that its check dated April 24, 1997 be deposited on May 15,1997 because it was experiencing financial difficulties. When World Class rejected GGSportswear‘s request, GG Sportswear sent another letter informing World Class that the secondReservation Agreement was incomplete because it did not expressly provide the time ofcompletion of the condominium unit. World Class countered that the provisional Contract to Sellit previously submitted to GG Sportswear expressly provided for the completion date (December15, 1998) and insisted that GG Sportswear pay its overdue account.

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

refund.

RULING:

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



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UNIVERSAL FOOD CORPORATION VS. CAL-29155 February 22, 1971

FACTS:

The petitioner contends that (a) under the terms of the Bill of Assignment, exh. A, therespondent Magdalo V. Francisco ceded and transferred to the petitioner not only the right to theuse of the formula for Mafran sauce but also the formula itself, because this, allegedly, was theintention of the parties; (b) that on the basis of the entire evidence on record and as found by thetrial court, the petitioner did not dismiss the respondent Francisco because he was, and still is, amember of the board of directors, a stockholder, and an officer of the petitioner corporation, andthat as such, had actual knowledge of the resumption of production by the petitioner, but thatdespite such knowledge, he refused to report back for work notwithstanding the petitioner's callfor him to do so; (c) that the private respondents are not entitled to rescind the Bill of

Assignment; and (d) that the evidence on record shows that the respondent Francisco was the onenot ready, willing and able to comply with his obligations under the Bill of Assignment, in thesense that he not only irregularly reported for work but also failed to assign, transfer and conveyto the petitioner of the said deed of conveyance.

ISSUE:

Whether respondent Francisco ceded to the petitioner merely the use of the formula forMafran sauce and not the formula itself.

RULING:

The Court concluded that what was actually ceded and transferred was only the use of theMafran sauce formula. The fact that the trademark "Mafran" was duly registered in the name ofthe petitioner pursuant to the Bill of Assignment, standing by itself alone, to borrow the petitioner's language, is not sufficient proof that the respondent Francisco was supposedlyobligated to transfer and cede to the petitioner the formula for Mafran sauce and not merely itsuse. For the said respondent allowed the petitioner to register the trademark for purposes merelyof the "marketing of said project."



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UNIVERSITY OF THE PHILIPPINES VS. DELOS ANGELESL-28602 September 29, 1970

FACTS:

UP and ALUMCO entered into a logging agreement under which the latter was grantedexclusive authority, for a period starting from the date of the agreement to 31 December 1965,extendible for a further period of five (5) years by mutual agreement, to cut, collect and removetimber from the Land Grant, in consideration of payment to UP of royalties, forest fees, etc.; thatALUMCO cut and removed timber therefrom but, as of 8 December 1964, it had incurred anunpaid account of P219,362.94, which, despite repeated demands, it had failed to pay; that afterit had received notice that UP would rescind or terminate the logging agreement, ALUMCOexecuted an instrument, entitled "Acknowledgment of Debt and Proposed Manner of Payments,"dated 9 December 1964, which was approved by the president of UP. ALUMCO continued itslogging operations, but again incurred an unpaid account, for the period from 9 December 1964

to 15 July 1965, in the amount of P61,133.74, in addition to the indebtedness that it had previously acknowledged.That on 19 July 1965, petitioner UP informed respondent ALUMCO that it had, as of that

date, considered as rescinded and of no further legal effect the logging agreement that they hadentered in 1960.

That before the issuance of the aforesaid preliminary injunction UP had taken steps tohave another concessionaire take over the logging operation, and the concession was awarded toSta. Clara Lumber Company, Inc.

ISSUE:

Whether petitioner U.P. can treat its contract with ALUMCO rescinded, and maydisregard the same before any judicial pronouncement to that effect.

RULING:

Respondent ALUMCO contended, and the lower court, in issuing the injunction order of25 February 1966. apparently sustained it (although the order expresses no specific findings inthis regard), that it is only after a final court decree declaring the contract rescinded for violationof its terms that U.P. could disregard ALUMCO's rights under the contract and treat theagreement as breached and of no force or effect.

UP and ALUMCO had expressly stipulated in the "Acknowledgment of Debt andProposed Manner of Payments" that, upon default by the debtor ALUMCO, the creditor (UP) has"the right and the power to consider the Logging Agreement dated 2 December 1960 asrescinded without the necessity of any judicial suit." "There is nothing in the law that prohibitsthe parties from entering into agreement that violation of the terms of the contract would causecancellation thereof, even without court intervention. In other words, it is not always necessaryfor the injured party to resort to court for rescission of the contract."

In other words, the party who deems the contract violated may consider it resolved orrescinded, and act accordingly, without previous court action, but it proceeds at its own risk. Forit is only the final judgment of the corresponding court that will conclusively and finally settlewhether the action taken was or was not correct in law. But the law definitely does not requirethat the contracting party who believes itself injured must first file suit and wait for a judgment before taking extrajudicial steps to protect its interest. Otherwise, the party injured by the other's breach will have to passively sit and watch its damages accumulate during the pendency of thesuit until the final judgment of rescission is rendered when the law itself requires that he shouldexercise due diligence to minimize its own damages.



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ARMAND O. RAQUEL-SANTOS v. COURT OF APPEALSG.R. No. 174986 July 7, 2009

FACTS:

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

ordered Finvest to replace its nominee, Raquel-Santos.

ISSUE:Whether or not rescission is the proper remedy.

RULING:

Clearly, Finvest‘s failure to deliver the stock cer tificates representing the shares of stock purchased by TMEI and Garcia amounted to a substantial breach of their contract which gaverise to a right to rescind the sale.

Rescission creates the obligation to return the object of the contract. This is evident from Article1385 of the Civil Code which provides:

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

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

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

To rescind is to declare a contract void at its inception and to put an end to it as though it neverwas. Rescission does not merely terminate the contract and release the parties from furtherobligations to each other, but abrogates it from the beginning and restores the parties to theirrelative positions as if no contract has been made.79

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



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FRANCISCO VS. DEAC CONSTRUCTION, INC.GR No. 171312 February 4, 2008

FACTS:

Spouses Francisco obtained the services of DEAC Construction, Inc. to construct a 3-storey residential building with mezzanine and roof deck on their lot for a contract price of 3.5M.as agreed upon, a downpayment of 2M should be paid upon signing of the construct ofconstruction, and the remaining balance of 1.5M was to be paid in two equal installments. Toundertake the said project, DEAC engaged the services of a sub-contractor, Vigor Constructionand Development Corporation, but allegedly without the spouses‘ knowledge and consent.

Even prior to the execution of the contract, spouses Francisco had paid the downpayment.However, the said construction commenced although DEAC had not yet obtained the necessary building permit for the proposed construction and that the contractor deviated from the approved

plans. Spouses Francisco demanded DEAC to comply with the approved plan, otherwise, theywould be compelled to invoke legal remedies. Work stoppage was issued against Lino Francisco pursuant to the previous Notice of Violations. The plaintiffs then file civil case for Rescission ofContract and Damages against DEAC.

ISSUE:Whether or not spouses Francisco may rescind the contract.

RULING:

Article 1191 of the Civil Code provides that the power to rescind obligations is implied inreciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.The rescission referred to in this article, more appropriately referred to a resolution, is not predicated on injury to economic interests on the part of the party plaintiff, but of breach of faith by the defendant which is violative of the reciprocity between the parties.

Given the fact that the construction in this case is already 75% complete, that trial courtwas correct in ordering partial rescission of the portion of the construction. Equitableconsiderations justify rescission of the portion of the obligation which has not been delivered.



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GENEROSO VILLANUEVA and RAUL VILLANUEVA JR.. versus ESTATE OFGERARDO GONZAGA/ MA. VILLA GONZAGA in her capacity as Administratrix

G.R. No. 15731 2006 August 09

FACTS:

On January 15, 1990, petitioners Generoso Villanueva and Raul Villanueva, Jr., businessentrepreneurs engaged in the operation of transloading stations and sugar trading, and respondentEstate of Gerardo L. Gonzaga, represented by its Judicial Administratrix, respondent Ma. Villa J.Gonzaga, executed a MOA. As stipulated in the agreement, petitioners introduced improvementsafter paying P291,600.00 constituting sixty (60%) percent of the total purchase price of the lots.Petitioners then requested permission from respondent Administratrix to use the premises for thenext milling season. Respondent refused on the ground that petitioners cannot use the premisesuntil full payment of the purchase price. Petitioners informed respondent that their immediate useof the premises was absolutely necessary and that any delay will cause them substantialdamages. Respondent remained firm in her refusal, and demanded that petitioners stop using thelots as a transloading station to service the Victorias Milling Company unless they pay the full

purchase price. In a letter-reply dated April 5, 1991, petitioners assured respondent of theirreadiness to pay the balance but reminded respondent of her obligation to redeem the lots frommortgage with the Philippine National Bank (PNB). Petitioners gave respondent ten (10) dayswithin which to do so.

On April 10, 1991, respondent Administratrix wrote petitioners informing themthat the PNB had agreed to release the lots from mortgage. She demanded payment of the balance of the purchase price. Enclosed with the demand letter was the PNB‘s letter of approvaldated April 8, 1991. Petitioners demanded that respondent show the clean titles to the lots first before they pay the balance of the purchase price. Respondent merely reiterated the demand for payment. Petitioners stood pat on their demand. On May 28, 1991, respondent Administratrixexecuted a Deed of Rescission rescinding the MOA. In their Letter dated June 13, 1991, petitioners, through counsel, formally demanded the production of the titles to the lots beforethey pay the balance of the purchase price. The demand was ignored. Consequently, on June 19,1991, petitioners filed a complaint against respondents for breach of contract, specific performance and damages before the RTC-Bacolod City. The trial court decided the case infavor of respondents. Petitioners filed a petition for review before the Court of Appeals. TheCourt of Appeals affirmed the trial court‘s decision but deleted the award for moral damages onthe ground that petitioners were not guilty of bad faith in refusing to pay the balance of the purchase price.

ISSUE:Whether there is legal, or even a factual, ground for the rescission of the

Memorandum of Agreement.

RULING:There is no legal basis for the rescission. The remedy of rescission under Art. 1191 of the

Civil Code is predicated on a breach of faith by the other party that violates the reciprocity between them. The MOA between petitioners and respondents is a conditional contract to sell.Ownership over the lots is not to pass to the petitioners until full payment of the purchase price.Petitioners‘ obligation to pay, in turn, is conditioned upon the release of the lots from mortgagewith the PNB to be secured by the respondents. Although there was no express provisionregarding reserved ownership until full payment of the purchase price, the intent of the parties inthis regard is evident from the provision that a deed of absolute sale shall be executed only whenthe lots have been released from mortgage and the balance paid by petitioners. Since ownershiphas not been transferred, no further legal action need have been taken by the respondents, exceptan action to recover possession in case petitioners refuse to voluntarily surrender the lots.

The records show that the lots were finally released from mortgage in July 1991.Petitioners have always expressed readiness to pay the balance of the purchase price once that isachieved. Hence, petitioners should be allowed to pay the balance now, if they so desire, since itis established that respondents‘ demand for them to pay in April 1991 was premature.



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SPOUSES DOMINGO and LOURDES PAGUYO versus Pierre Astorga and St.Andrew Realty, Inc.

G.R. No. 130982 2005 September 16

FACTS:

On 29 November 1988, in order to raise the much needed amount, petitioner LourdesPaguyo entered into an agreement captioned as Receipt of Earnest Money with respondent PierreAstorga, for the sale of the former‘s property consisting of the lot which was to be purchasedfrom the Armases, together with the improvements thereon, particularly, the existing buildingknown as the Paguyo Building. However, contrary to their express representation with respect tothe subject lot, petitioners failed to comply with their obligation to acquire the lot from theArmas family despite the full financial support of respondents. Nevertheless, the partiesmaintained their business relationship under the terms and conditions of the above-mentionedReceipt of Earnest Money. On 12 December 1988, petitioners asked for and were given byrespondents an additional P50,000.00 to meet the former‘s urgent need for money in connection

with their construction business. Thus, on 5 January 1989, the parties executed the fourdocuments in question namely, the Deed of Absolute Sale of the Paguyo Building, the MutualUndertaking, the Deed of Real Estate Mortgage, and the Deed of Assignment of Rights andInterest. Simultaneously with the signing of the four documents, respondents paid petitioners theadditional amount of P500,000.00. Thereafter, the respondents renamed the Paguyo Buildinginto GINZA Bldg. and registered the same in the name of respondent St. Andrew Realty, Inc. atthe Makati Assessor‘s Office after paying accrued real estate taxes in the total amount ofP169,174.95.

ISSUE:Did the Court of Appeals err in upholding the trial court‘s decision denying petitioners‘

complaint for rescission?

RULING: No. The right to rescind a contract involving reciprocal obligations is provided for

in Article 1191 of the Civil Code. Article 1191 states: The power to rescind obligations isimplied in reciprocal ones, in case one of the obligors should not comply with what is incumbentupon him. The injured party may choose between the fulfillment and the rescission of theobligation, with the payment of damages in either case. He may also seek rescission, even afterhe has chosen fulfillment, if the latter should become impossible. The court shall decree therescission claimed, unless there be just cause authorizing the fixing of a period.

Moreover, Articles 1355 and 1470 of the Civil Code state: Art. 1355. Except incases specified by law, lesion or inadequacy of cause shall not invalidate a contract, unless therehas been fraud, mistake or undue influence. Art. 1470. Gross inadequacy of price does not affecta contract of sale, except as may indicate a defect in the consent, or that the parties reallyintended a donation or some other act or contract.

Petitioners failed to prove any of the instances mentioned in Articles 1355 and1470 of the Civil Code, which would invalidate, or even affect, the Deed of Sale of the Buildingand the related documents. Indeed, there is no requirement that the price be equal to the exactvalue of the subject matter of sale. In sum, petitioners pray for rescission of the Deed of Sale ofthe building and offer to repay the purchase price after their liquidity position would haveimproved and after respondents would have refurbished the building, updated the real propertytaxes, and turned the building into a profitable business venture. The court stated however that,it will not allow itself to be an instrument to the dissolution of contract validly entered into, for a party should not, after its opportunity to enjoy the benefits of an agreement, be allowed to laterdisown the arrangement when the terms thereof ultimately would prove to operate against itshopeful expectations.



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BIENVENIDO M. CASIÑO, JR. versus THE COURT OF APPEALS andOCTAGON REALTY DEVELOPMENT CORPORATION

G.R. No. 133803 2005 September 16

FACTS:

In its complaint, respondent alleges that on December 22, 1989, it entered into acontract with petitioner for the supply and installation by the latter of narra wood parquet (kilndried) to the Manila Luxury Condominium Project, of which respondent is the developer, for atotal price of P1,158,487.00; that the contract stipulated that full delivery by petitioner of laborand materials was in May 1990; that in accordance with the terms of payment in the contract,respondent paid to petitioner the amount P463,394.50, representing 40% of the total contract price; that after delivering only 26,727.02 sq. ft. of wood parquet materials, petitionerincurred in delay in the delivery of the remainder of 34,245.98 sq. ft.; that petitionermisrepresented to respondent that he is qualified to do the work contracted when in truth and infact he was not and, furthermore, he lacked the necessary funds to execute the work as

he was totally dependent on the funds advanced to him by respondent; that due to petitioner‘sunlawful and malicious refusal to comply with its obligations, respondent incurred actualdamages in the amount of P912,452.39 representing estimated loss on the new price,unliquidated damages and cost of money; that in order to minimize losses, the respondentcontracted the services of Hilvano Quality Parquet and Sanding Services to complete the petitioner‘s unfinished work, respondent thereby agreeing to pay the latter P1,198,609.30.

ISSUE:Whether or not the rescission of the contract by the private respondent is valid.

RULING:

Under the contract, petitioner and respondent had respective obligations, i.e., theformer to supply and deliver the contracted volume of narra wood parquet materials and installthe same at respondent‘s condominium project by May, 1990, and the latter, to pay for saidmaterials in accordance with the terms of payment set out under the parties‘ agreement. Butwhile respondent was able to fulfill that which is incumbent upon it by making a downpaymentrepresenting 40% of the agreed price upon the signing of the contract and even paid the first billing of petitioner, the latter failed to comply with his contractual commitment. For, afterdelivering only less than one-half of the contracted materials, petitioner failed, by the end of theagreed period, to deliver and install the remainder despite demands for him to do so. Thus, it is petitioner who breached the contract. The petitioner therefore, has failed to comply with his prestations under his contract with respondent, the latter is vested by law with the right to rescindthe parties‘ agreement, conformably with Article 1191 of the Civil Code.

However, the right to rescind a contract for non-performance of its stipulations isnot absolute. The general rule is that rescission of a contract will not be permitted for a slight orcasual breach, but only for such substantial and fundamental violations as would defeat the veryobject of the par ties in making the agreement. Contrary to petitioner‘s asseveration, the breach hecommitted cannot, by any measure, be considered as ―slight or casual‖. For petitioner‘s failure tomake complete delivery and installation way beyond the time stipulated des pite respondent‘sdemands, is doubtless a substantial and fundamental breach, more so when viewed in the light ofthe large amount of money respondent had to pay another contractor to complete petitioner‘sunfinished work.

Likewise, contrary to petitioner‘s claim, it cannot be said that he had no inklingwhatsoever of respondent‘s recourse to rescission. Petitioner cannot feign ignorance ofrespondent‘s intention to rescind, fully aware, as he was, of his non-compliance with what wasincumbent upon him, and not to mention the several letters respondent sent to him demandingcompliance with his obligation.



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FERNANDO CARRASCOSO JR. v. COURT OF APPEALSG.R. No. 123672 & G. R. No. 164489 December 14, 2005

FACTS:

On February 15, 1972, at a special meeting of El Dorado‘s Board of Directors, aResolution was passed authorizing Feliciano Leviste, then President of El Dorado, to negotiatethe sale of the property and sign all documents and contracts bearing thereon. El Dorado, throughFeliciano Leviste, sold the property to Fernando O. Carrascoso, Jr. Under the Deed of Sale,Carrascoso was to pay the full amount of the purchase price on March 23, 1975. On March 24,1972, Carrascoso and his wife Marlene executed a Real Estate Mortgage] over the property infavor of Home Savings Bank (HSB) to secure a loan in the amount of P1,000,000.00. Of thisamount, P290,000.00 was paid to Philippine National Bank to release the mortgage priorlyconstituted on the property and P210,000.00 was paid to El Dorado pursuant to the terms andconditions of the Deed of Sale.

On May 18, 1972, the real estate mortgage in favor of HSB was amended toinclude an additional three year loan of P70,000.00 as requested by the spouses Carrascoso.However, the 3-year period for Carrascoso to fully pay for the property on March 23, 1975 passed without him having complied therewith. In the meantime, on July 11, 1975, Carrascosoand the Philippine Long Distance Telephone Company (PLDT), through its President RamonCojuangco, executed an Agreement to Buy and Sell whereby the former agreed to sell 1,000hectares of the property to the latter at a consideration of P3,000.00 per hectare or a total ofP3,000,000.00.

Lauro Leviste, a stockholder and member of the Board of Directors of El Dorado,called the attention of the Board to Carrascoso‘s failure to pay the balance of the purchase priceof the property amounting to P1,300,000.00. Lauro‘s desire to rescind the sale was reiterated intwo other letters addressed to the Board. Jose P. Leviste, as President of El Dorado, later sent aletter of February 21, 1977 to Carrascoso informing him that in view of his failure to pay the balance of the purchase price of the property, El Dorado was seeking the rescission of the March23, 1972 Deed of Sale of Real Property. For the failure of Carrascoso to give his reply, Lauroand El Dorado finally filed a complaint for rescission of the Deed of Sale. They also sought thecancellation of TCT No. T-6055 in the name of Carrascoso and the revival of TCT No. T-93 inthe name of El Dorado, free from any liens and encumbrances.

ISSUE:Whether or not the rescission is valid.

RULING:The right of rescission of a party to an obligation under Article 1191 is predicated on a

breach of faith by the other party who violates the reciprocity between them. A contract of sale isa reciprocal obligation. The seller obligates itself to transfer the ownership of and deliver adeterminate thing, and the buyer obligates itself to pay therefor a price certain in money or itsequivalent. The non-payment of the price by the buyer is a resolutory condition whichextinguishes the transaction that for a time existed, and discharges the obligations createdthereunder. Such failure to pay the price in the manner prescribed by the contract of sale entitlesthe unpaid seller to sue for collection or to rescind the contract.

In the case at bar, El Dorado already performed its obligation through the execution ofthe March 23, 1972 Deed of Sale of Real Property which effectively transferred ownership of the property to Carrascoso. The latter, on the other hand, failed to perform his correlative obligationof paying in full the contract price in the manner and within the period agreed upon. The terms ofthe Deed are clear and unequivocal: Carrascoso was to pay the balance of the purchase price ofthe property amounting to P1,300,000.00 plus interest thereon at the rate of 10% per annumwithin a period of three (3) years from the signing of the contract on March 23, 1972. When JoseLeviste informed him that El Dorado was seeking rescission of the contract by letter of February21, 1977, the period given to him within which to fully satisfy his obligation had long lapsed.



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GOLDENROD, INC. vs. COURT OF APPEALS BARRETTO & SONS, INC., PIOBARRETTO REALTY DEVELOPMENT, INC., and ANTHONY QUE

G.R. No. 126812 1998 Nov 24

FACTS:

When the term of existence of BARRETTO & SONS expired, all its assets andliabilities including the property located in Quiapo were transferred to respondent Pio BarrettoRealty Development, Inc. Petitioner's offer to buy the property resulted in its agreement withrespondent BARRETTO REALTY that petitioner would pay P24.5 million representing theoutstanding obligations of BARRETTO REALTY with UCPB on 30 June 1988, the deadline set by the bank for payment; and P20 million which was the balance of the purchase price of the property to be paid in installments within a 3-year period with interest at 18% per annum.However, petitioner did not pay UCPB the P24.5 million loan obligation of BARRETTOREALTY on the deadline set for payment. It asked for an extension of one month or up to 31July 1988 to settle the obligation, which the bank granted. Moreover, petitioner again requestedanother extension of sixty days to pay the loan, but the bank demurred. In the meantime

BARRETTO REALTY was able to cause the reconsolidation of the forty-three titles coveringthe property subject of the purchase into two titles covering Lots 1 and 2. The reconsolidation ofthe titles was made pursuant to the request of petitioner in its letter to private respondents on 25May 1988. Respondent BARRETTO REALTY allegedly incurred expenses for thereconsolidation amounting to P250,000.00.

ISSUE:Whether or not the petitioner's extrajudicial rescission of its agreement with private

respondents was valid.

RULING:Under Art. 1482 of the Civil Code, whenever earnest money is given in a contract of

sale, it shall be considered as part of the purchase price and as proof of the perfection of thecontract. Petitioner clearly stated without any objection from private respondents that the earnestmoney was intended to form part of the purchase price. It was an advance payment which must be deducted from the total price. Hence, the parties could not have intended that the earnestmoney or advance payment would be forfeited when the buyer should fail to pay the balance ofthe price, especially in the absence of a clear and express agreement thereon. By reason of itsfailure to make payment petitioner, through its agent, informed private respondents that it wouldno longer push through with the sale. In other words, petitioner resorted to extrajudicialrescission of its agreement with private respondents.

It was held in the case of University of the Philippines v. de los Angeles that the right torescind contracts is not absolute and is subject to scrutiny and review by the proper court. It washeld further that rescission of reciprocal contracts may be extrajudicially rescinded unlesssuccessfully impugned in court. If the party does not oppose the declaration of rescission of theother party, specifying the grounds therefor, and it fails to reply or protest against it, its silencethereon suggests an admission of the veracity and validity of the rescinding party's claim. Asuch, private respondents did not interpose any objection to the rescission by petitioner of theagreement. As found by the Court of Appeals, private respondent BARRETTO REALTY evensold Lot 2 of the subject consolidated lots to another buyer, ASIAWORLD, one day after itsPresident Anthony Que received the broker's letter rescinding the sale. Subsequently, on 13October 1988 respondent BARRETTO REALTY also conveyed ownership over Lot 1 to UCPBwhich, in turn, sold the same to ASIAWORLD.

Article 1385 of the Civil Code provides that rescission creates the obligation to return thethings which were the object of the contract together with their fruits and interest. Therefore, byvirtue of the extrajudicial rescission of the contract to sell by petitioner without opposition from private respondents who, in turn, sold the property to other persons, private respondentBARRETTO REALTY, as the vendor, had the obligation to return the earnest money ofP1,000,000.00 plus legal interest from the date it received notice of rescission from petitioner,i.e., 30 August 1988, up to the date of the return or payment.



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PERLA PALMA GIL v. HON. COURT OF APPEALSG.R. No. 127206 September 12, 2003

FACTS:Concepcion Palma Gil, and her sister, Nieves Palma Gil, married to Angel Villarica, were

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

Nieves appealed to the Court of Appeals which affirmed the assailed decision. In duecourse, the decision became final and executory. On motion of the plaintiff (Concepcion), thecourt issued a writ of execution. Nieves, however, refused to execute the requisite deed in favor

of her sister. In the interim, the spouses Angel and Nieves Villarica executed a real estatemortgage over Lot 59-C-4 in favor of Prudential Bank as security for a loan. On August 4, 1959,Concepcion died intestate and was survived by Nieves Villarica and her nephews and nieces.Iluminada filed a motion for her substitution as party-plaintiff in lieu of the deceasedConcepcion. On August 2, 1961, the court issued an order granting the motion.

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

RULING:Under the last paragraph of Article 1169 of the New Civil Code, in reciprocal obligations,

neither party incurs in delay if the other does not comply or is not ready to comply in a propermanner with what is incumbent upon him. From the moment one of the parties fulfills hisobligation, delay in the other begins. Thus, reciprocal obligations are to be performedsimultaneously so that the performance of one is conditioned upon the simultaneous fulfillmentof the other. The right of rescission of a party to an obligation under Article 1191 of the NewCivil Code is predicated on a breach of faith by the other party that violates the reciprocity between them. The deed of absolute sale executed by Concepcion Gil in favor of IluminadaPacetes is an executory contract and not an executed contract is a settled matter. In a perfectedcontract of sale of realty, the right to rescind the said contract depends upon the fulfillment ornon-fulfillment of the prescribed condition. The court ruled that the condition pertains in realityto the compliance by one party of an undertaking the fulfillment of which would give rise to thedemandability of the reciprocal obligation pertaining to the other party. The reciprocal obligationenvisaged would normally be, in the case of the vendee, the payment by the vendee of the agreed purchase price and in the case of the vendor, the fulfillment of certain express warranties.

The vendee paid the downpayment of P7,500.00. By the terms of the contract, theobligation of the vendee to pay the balance of the purchase price ensued only upon the issuanceof the certificate of title by the Register of Deeds over the property sold to and under the name ofthe vendee, and the delivery thereof by the vendor Concepcion Gil to the latter. Concepcionfailed to secure a certificate of title over the property. When she died intestate on August 4, 1959,her obligation to deliver the said title to the vendee devolved upon her heirs, including the petitioners. The said heirs, including the petitioners failed to do so, despite the lapse of eighteenyears since Concepcion‘s death.The petitioners, as successors-in-interest of the vendor, are notthe injured parties entitled to a rescission of the deed of absolute sale. It was Concepcion‘s heirs,including the petitioners, who were obliged to deliver to the vendee a certificate of title over the property under the latter‘s name, free from all liens and encumbrances within 120 days from theexecution of the deed of absolute sale on October 24, 1956, but had failed to comply with theobligation.The consignation by the vendee of the purchase price of the property is sufficient todefeat the right of the petitioners to demand for a rescission of the said deed of absolute sale.



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

FACTS:

On 7 November 1994, Reyes as seller and Lim as buyer entered into a contract to sell a parcel of land located along F.B. Harrison Street, Pasay City. Harrison Lumber occupied theProperty as lessee with a monthly rental of P35,000. The total consideration for the purchase ofthe aforedescribed parcel of land together with the perimeter walls found therein P28,000,000.00 pesos.

The complaint claimed that Reyes had informed Harrison Lumber to vacate the Property before the end of January 1995. Reyes also informed Keng and Harrison Lumber that if theyfailed to vacate by 8 March 1995, he would hold them liable for the penalty of P400,000 a monthas provided in the Contract to Sell. The complaint further alleged that Lim connived withHarrison Lumber not to vacate the Property until the P400,000 monthly penalty would haveaccumulated and equaled the unpaid purchase price of P18,000,000.

On the other hand, Keng and Harrison Lumber denies that they connived with Lim to defraudReyes. Keng and Harrison Lumber alleged that Reyes approved their request for an extension oftime to vacate the Property due to their difficulty in finding a new location for their business.Harrison Lumber claimed that as of March 1995, it had already started transferring some of itsmerchandise to its new business location in Malabon.Lim alleged that he was ready and willing to pay the balance of the purchase price on or before 8March 1995, but Reyes kept postponing their meeting. On 9 March 1995, Reyes offered to returnthe P10 million down payment to Lim because Reyes was having problems in removing thelessee from the Property. Lim rejected Reyes‘ offer and proceeded to verify the status of Reyes‘title to the Property. Lim learned that Reyes had already sold the Property to Line One FoodsCorporation on 1 March 1995 for P16,782,840.

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

downpayment in court.

RULING:

There is also no plausible or justifiable reason for Reyes to object to the deposit of theP10 million down payment in court. The Contract to Sell can no longer be enforced becauseReyes himself subsequently sold the Property to Line One. Both Reyes and Lim are seekingrescission of the Contract to Sell. Under Article 1385 of the Civil Code, rescission creates theobligation to return the things that are the object of the contract. Rescission is possible only whenthe person demanding rescission can return whatever he may be obliged to restore. A court ofequity will not rescind a contract unless there is restitution, that is, the parties are restored to thestatus quo ante.Thus, since Reyes is demanding to rescind the Contract to Sell, he cannot refuse to deposit theP10 million down payment in court. Such deposit will ensure restitution of the P10 million to itsrightful owner. Lim, on the other hand, has nothing to refund, as he has not received anythingunder the Contract to Sell.

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



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EQUATORIAL REALTY DEVELOPMENT, Inc. vs. MAYFAIR THEATER, Inc.,G.R. No. 133879 2001 Nov 21

FACTS:

Carmelo & Bauermann, Inc. (Carmelo) used to own a parcel of land, together with two 2-storey buildings constructed thereon, located at Claro M. Recto Avenue, Manila, and covered byTCT No. 18529 issued in its name by the Register of Deeds of Manila. On June 1, 1967,Carmelo entered into a Contract of Lease with Mayfair Theater Inc. (Mayfair) for a period of 20years. Two years later, on March 31, 1969, Mayfair entered into a second Contract of Leasewith Carmelo for the lease of another portion of the latter‘s property -- namely, a part of thesecond floor of the two-storey building, and two store spaces on the ground floor and themezzanine. In that space, Mayfair put up another movie house known as Miramar Theater. TheContract of Lease was likewise for a period of 20 years. Both leases contained a provisiongranting Mayfair a right of first refusal to purchase the subject properties. However, on July 30,1978 - within the 20-year-lease term -- the subject properties were sold by Carmelo to Equatorial

Realty Development, Inc. (―Equatorial‖) for the total sum of P11,300,000, without their first being offered to Mayfair.

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

ISSUES:

1. Whether or not the contract of sale is validly rescinded though there was no actualdelivery made.

2. Whether or not the rentals paid concede actual delivery.

RULING:

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

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



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Spouses MARIANO Z. VELARDE and AVELINA D. VELARDE vs. COURT OFAPPEALS, DAVID A. RAYMUNDO and GEORGE RAYMUNDO

G.R. No. 108346 2001 Jul 11

FACTS:

David Raymundo is the absolute and registered owner of a parcel of land, together withthe house and other improvements thereon. Private Respondent George Raymundo is David‘sfather who negotiated with plaintiffs Avelina and Mariano Velarde, the petitioners, for the sale ofsaid property, which was, however, under lease. On August 8, 1986, a Deed of Sale withAssumption of Mortgage was executed by defendant David Raymundo, as vendor, in favor of plaintiff Avelina Velarde, as vendee. It is further agreed and understood by the parties that thecapital gains tax and documentary stamps on the sale shall be for the account of the vendor;whereas, the registration fees and transfer tax thereon shall be for the account of the vendee. Onthe same date, and as part of the above-document, plaintiff Avelina Velarde, with the consent ofher husband, Mariano, executed an Undertaking.

It appears that the negotiated terms for the payment of the balance of P1.8 million wasfrom the proceeds of a loan that plaintiffs were to secure from a bank with defendant‘s help.Defendants had a standing approved credit line with the Bank of the Philippine Islands (BPI).The parties agreed to avail of this, subject to BPI‘s approval of an application for assumption ofmortgage by plaintiffs. Pending BPI‘s approval of the application, plaintiffs were to continue paying the monthly interests of the loan secured by a real estate mortgage. Pursuant to saidagreements, plaintiffs paid BPI the monthly interest on the loan secured by the aforementionedmortgage for three (3) months, however, plaintiffs were advised that the Application forAssumption of Mortgage with BPI was not approved, which prompted plaintiffs not to make anyfurther payment. On January 5, 1987, defendants, thru counsel, wrote plaintiffs informing thelatter that their non-payment to the mortgage bank constituted non-performance of theirobligation. Thereafter, defendants sent plaintiffs a notarial notice of cancellation/rescission of theintended sale of the subject property allegedly due to the latter‘s failure to comply with the termsand conditions of the Deed of Sale with Assumption of Mortgage and the Undertaking.

ISSUE:Whether or not the Court of Appeals erred in holding that the rescission (resolution) of

the contract by private respondents was justified.

RULING:A substantial breach of a reciprocal obligation entitles the injured party to rescind the

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

The right of rescission of a party to an obligation under Article 1191 of the Civil Code is predicated on a breach of faith by the other party who violates the reciprocity between them. The breach contemplated in the said provision is the obligor‘s failure to comply with an existingobligation. When the obligor cannot comply with what is incumbent upon it, the obligee mayseek rescission and, in the absence of any just cause for the court to determine the period ofcompliance, the court shall decree the rescission. The private respondents therefore validlyexercised their right to rescind the contract, because of the failure of petitioners to comply withtheir obligation to pay the balance of the purchase price.

The breach committed by petitioners was the nonperformance of a reciprocal obligation,not a violation of the terms and conditions of the mortgage contract. Therefore, the automaticrescission and forfeiture of payment clauses stipulated in the contract does not apply. Instead,Civil Code provisions shall govern and regulate the resolution of this controversy. Consideringthat the rescission of the contract is based on Article 1191 of the Civil Code, mutual restitution isrequired to bring back the parties to their original situation prior to the inception of the contract.



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ALEXANDER G. ASUNCION vs. EDUARDO B. EVANGELISTA and COURT OFAPPEALS

G.R. No. 133491 1999 Oct 13

FACTS:

On September 9, 1980, private respondent borrowed P500,000 from Paluwagan ng BayanSavings and Loan Association to use as working capital for Embassy Farms. He executed a realestate mortgage on three of his properties as security for the loan. On November 4, 1981, privaterespondent mortgaged 10 titles more in favor of PAIC Savings and Mortgage Bank. Privaterespondent obtained another loan in the amount of P844,625.78 from Mercator FinanceCorporation. The loan was secured by a real estate mortgage on five 5 other landholdings of private respondent. Private respondents aggregate debt exposure totaled P3,056,625.78.However, he defaulted in his loan payments. By June 1984, his aggregate debt had ballooned toalmost six million pesos.On August 2, 1984, petitioner and private respondent executed aMemorandum of Agreement. Upon the execution of the Memorandum, petitioner paid private

respondent one million pesos, P500,000.00 within a ninety-day period in four disbursements.The second installment, in the like amount of three hundred thousand pesos, was supposed to beremitted by petitioner to private respondent for the purpose of financing the operations of the piggery pursuant to the Memorandum. Instead, petitioner agreed to pay to PAIC Savings &Mortgage Bank.

However, more than a year after the signing of the Memorandum of Agreement, thelandholdings of private respondent which were mortgaged to Paluwagan ng Bayan Savings andLoan Association, PAIC Savings and Mortgage Bank and Mercator Finance Corporation stillremained titled in his name. Neither did he inform said mortgagees of the transfer of his lands.As to the shares of stock, it was incumbent upon private respondent to endorse and deliver themto petitioner so he could also have them transferred in his name, but private respondent neverdid. He refused to honor his obligations under the Memorandum of Agreement and evencountered with a demand letter of his own.

ISSUES:Whether the non-compliance of one party in a reciprocal obligation amounts to

rescission of the obligation.

RULING:

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

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

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



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William Uy vs. Court of AppealsG.R. No. 120465, September 9, 1999

314 SCRA 69

FACTS:

Petitioners William Uy and Rodel Roxas are agents authorized to sell eight parcels ofland by owners thereof. By virtue of such authority, they entered the contract of sale torespondent National Housing Authority to be utilized in developing as a housing project.However, due to the report of the DENR the three (3) parcels are located at an active landslidearea and not suitable for housing project, NHA issued a resolution canceling the sale of the three(3) parcels of land but it offered the amount of P1.225 million to the land owners as danos perjuicious.

Petitioners filed before the RTC a complaint for damages against NHA. The RTC

rendered a decision declaring the cancellation of contract to be justified. Nevertheless, itawarded damages to plaintiff. Upon appeal by the petitioners, the Court of Appeals dismissedthe complaint and cancelled the award for damages.

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

HELD:

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



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

FACTS:

On September 28, 1995, at about 11:00 a.m., Antonieto M. Señora (Señora), was riding amotorcycle, when a tricycle allegedly bumped his motorcycle from behind. As a result, themotorcycle was pushed into the path of an Isuzu Elf Van (delivery van). The delivery van ranover Señora, while his motorcycle was thrown a few meters away. He was recovered underneaththe delivery van and rushed to the Medical Center of Parañaque, where he was pronounced deadon arrival.The tricycle was driven by Leovino F. Amparo (Amparo), who testified that it was thedelivery van that bumped Señora‘s motorcycle.

The delivery van, on the other hand, was driven by Elmer O. Polloso (Polloso) and

registered in the name of Cirilo Tamayo (Cirilo). While trial was ongoing, Cirilo was sufferingfrom lung cancer and was bedridden. His wife, petitioner Constancia, testified on his behalf.Constancia narrated that she and her husband were managing a single proprietorship known asTamayo and Sons Ice Dealer. She testified that it was Cirilo who hired their drivers. She claimedthat, as employer, her husband exercised the due diligence of a good father of a family in theselection, hiring, and supervision of his employees, including driver Polloso. Cirilo would telltheir drivers not to drive fast and not to be too strict with customers.

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

RULING:The award of damages for loss of earning capacity is concerned with the determination of

losses or damages sustained by respondents, as dependents and intestate heirs of the deceased.This consists not of the full amount of his earnings, but of the support which they received orwould have received from him had he not died as a consequence of the negligent act. Thus, theamount recoverable is not the loss of the victim‘s entire earnings, but rather the loss of that portion of the earnings which the beneficiary would have received.

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

The CA correctly modified the RTC‘s computation. The RTC had misapplied the formulagenerally used by the courts to determine net earning capacity, which is, to wit:

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

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

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



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BPI Investment Corporation vs. D. G. Carreon Commercial Corp.G.R. No. 126524, November 29, 2001

371 SCRA 58

FACTS:

Petitioner BPI Investment Corp. (BPI), formerly known as Ayala Investment andDevelopment Corp, was engaged in money market operations. Respondent D. G. CommercialCorp. was a client of petitioner. The individual respondents, spouses Daniel and Aurora Carreonand Josefa Jaceil also placed with BPI their personal money in money market placements.

On April 21, 1982, petitioner wrote respondents Daniel Carreon, demanding the return ofan alleged overpayment amounting to P410, 937.09. The respondents, however, asserted thatthere was no overpayment and asked for time to go over the documents and papers. Upon therequest of petitioners, the spouses Daniel and Aurora Carreon sent to BPI a proposedmemorandum of agreement dated May 7, 1982. The agreement provided that respondent

company, in the spirit of goodwill, agreed to temporarily reimburse BPI the amount of P410,937.09 while the said controversy (transactions of the placement) would be checked within the period of five years.

On May 10, 1982, petitioners without responding to the memorandum and proposal ofthe respondent company filed with the Court of First Instance of Rizal, a complaint for recoveryof a sum of money against respondent D. G. Carreon with preliminary attachment. On May 14,1982, the trial court issued an order of attachment and posting a bond in the amount of P200,000. However, on October 8, 1982, the trial court lifted the writ of attachment. Petitioner movedfor reconsideration but was denied.

On July 30, 1982, respondents D. G. Carreon filed with the trial court an answer to thecomplaint with counterclaim. D. G. Carreon asked for compensatory damages, spouses Danieland Aurora Carreon and Josefa Jeceil asked for moral damages because of the filing of complaintand indiscriminate and wrongful attachment of their property. All respondents asked forexemplary damages.

On May 25, 1993, the trial court dismissed both the complaint the counterclaim.Both parties appealed. On July, 19, 1996, the Court of Appeals affirmed the dismissal of

the complaint but reversed and set aside the dismissal of the counterclaim thereby awardingrespondents damages amounting to more than five million in sum.

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

HELD:The Court finds petitioners not guilty of gross negligence. Exemplary damages, therefore,

cannot be awarded to respondents. Petitioner BPI did not act in wanton, fraudulent, reckless,oppressive, or malevolent manner when it asked for preliminary attachment. It was justexercising a legal option. The sheriff of the issuing court did the execution and the attachment.Hence, BPI is not to be blamed for the excessive and wrongful attachment.

As to the filing of the appellate court that the filing of the case was aggravated andeventually caused the death of two of the respondents, the Court agrees with the petitioner thatsuch correlation is bereft of basis and is far fetched.

The award of moral damages and attorney‘s fees is also not in keeping with existing jurisprudence. Moral damages may be awarded in a breach of contract when the defendant actedin bad faith, or was guilty of gross negligence amounting to bad faith, or in wanton disregard ofhis contractual obligation. Finally, with the elimination of award of moral damages, so must theaward of attorney‘s fees be deleted.

There is no doubt, however, that the damages sustained by respondents were due to petitioner‘s fault or negligence, short of gross negligence. Temperate or moderate damages may be recovered when the court finds that some pecuniary loss has been suffered but its amountcannot, from the nature of the case, be proved with certainty. The Court deems it prudent toaward reasonable temperate damage to respondents under the circumstances.



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MEGAWORLD GLOBUS ASIA, INC. v .MILA S. TANSECOG.R. No. 181206 October 9, 2009

FACTS:

On July 7, 1995, petitioner Megaworld Globus Asia, Inc. (Megaworld) and respondent Mila S.Tanseco (Tanseco) entered into a Contract to Buy and Sell1 a 224 square-meter (more or less)condominium unit at a pre-selling project. The purchase price was P16,802,037.32, to be paid asfollows: (1) 30% less the reservation fee of P100,000, or P4,940,611.19, by postdated check payable on July 14, 1995; (2) P9,241,120.50 through 30 equal monthly installments ofP308,037.35 from August 14, 1995 to January 14, 1998; and (3) the balance of P2,520,305.63 onOctober 31, 1998, the stipulated delivery date of the unit; provided that if the construction iscompleted earlier, Tanseco would pay the balance within seven days from receipt of a notice ofturnover. Tanseco paid all installments due up to January, 1998, leaving unpaid the balance ofP2,520,305.63 pending delivery of the unit. Megaworld, however, failed to deliver the unit

within the stipulated period on October 31, 1998 or April 30, 1999, the last day of the six-monthgrace period.

A few days shy of three years later, Megaworld, by notice dated April 23, 2002 (notice ofturnover), informed Tanseco that the unit was ready for inspection preparatory to delivery.Tanseco replied through counsel, by letter of May 6, 2002, that in view of Megaworld‘s failureto deliver the unit on time, she was demanding the return of P14,281,731.70 representing thetotal installment payment she had made, with interest at 12% per annum from April 30, 1999, theexpiration of the six-month grace period. Tanseco pointed out that none of the excepted causes ofdelay existed.

ISSUE:

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

RULING:

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

That Megaworld‘s sending of a notice of turnover preceded Tanseco‘s demand for refund doesnot abate her cause. For demand would have been useless, Megaworld admittedly having failedin its obligation to deliver the unit on the agreed date.

Article 1174 of the Civil Code provides:

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

The Court cannot generalize the 1997 Asian financial crisis to be unforeseeable and beyond thecontrol of a business corporation. A real estate enterprise engaged in the pre-selling ofcondominium units is concededly a master in projections on commodities and currencymovements, as well as business risks. The fluctuating movement of the Philippine peso in theforeign exchange market is an everyday occurrence, hence, not an instance of caso fortuito.Megaworld‘s excuse for its delay does not thus lie.



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ROBERTO C. SICAM and AGENCIA de R.C. SICAM, INC. versus LULU V. JORGEand CESAR JORGE

G.R. NO. 159617 August 8, 2007

FACTS:

On different dates from September to October 1987, Lulu V. Jorge pawned several pieces of jewelry with Agencia de R. C. Sicam located at No. 17 Aguirre Ave., BF Homes Parañaque,Metro Manila, to secure a loan in the total amount of P59, 500.00. On October 19, 1987, twoarmed men entered the pawnshop and took away whatever cash and jewelry were found insidethe pawnshop vault. Petitioner Sicam sent respondent Lulu a letter dated October 19, 1987informing her of the loss of her jewelry due to the robbery incident in the pawnshop. On November 2, 1987, respondent Lulu then wrote a letter to petitioner Sicam expressing disbeliefstating that when the robbery happened, all jewelry pawned were deposited with Far East Banknear the pawnshop since it had been the practice that before they could withdraw, advance noticemust be given to the pawnshop so it could withdraw the jewelry from the bank. Respondent Lulu

then requested petitioner Sicam to prepare the pawned jewelry for withdrawal on November 6,1987 but petitioner Sicam failed to return the jewelry.

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

ISSUE:Whether petitioners are liable for the loss of the pawned articles in their possession.

RULING:Fortuitous events by definition are extraordinary events not foreseeable or avoidable. It is

therefore, not enough that the event should not have been foreseen or anticipated, as iscommonly believed but it must be one impossible to foresee or to avoid. The mere difficulty toforesee the happening is not impossibility to foresee the same. To constitute a fortuitous event,the following elements must concur: (a) the cause of the unforeseen and unexpected occurrenceor of the failure of the debtor to comply with obligations must be independent of human will; (b)it must be impossible to foresee the event that constitutes the caso fortuito or, if it can beforeseen, it must be impossible to avoid; (c) the occurrence must be such as to render itimpossible for the debtor to fulfill obligations in a normal manner; and, (d) the obligor must befree from any participation in the aggravation of the injury or loss.

Robbery per se, just like carnapping, is not a fortuitous event. It does not foreclose the possibility of negligence on the part of herein petitioners. The presentation of the police report ofthe Parañaque Police Station on the robbery committed based on the report of petitioners'employees is not sufficient to establish robbery. Such report also does not prove that petitionerswere not at fault. Also, the robbery in this case took place in 1987 when robbery was already prevalent and petitioners in fact had already foreseen it as they wanted to deposit the pawn with anearby bank for safekeeping. Thus, petitioners are negligent in securing their pawnshop.



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Florencia Huibonhoa vs. Court of AppealsG.R. No. 95897, December 14, 1999

320 SCRA 625

FACTS:

On June 8, 1983, Florencia Huibonhoa entered into a memorandum of agreement with thesiblings Lim, Gojocco and Chua, stating that she will lease from them three (3) adjacentcommercial lots in Binondo, Manila. A contract of lease was thereafter executed between the parties, where such lease over the lots shall last for fifteen (15) years commencing on July 1,1983 and renewable upon agreement of the parties. Further, it was agreed in the terms andconditions of the contract, among others that: (1) Huibonhoa was allowed to construct a four-storey building; (2) that the said building shall be completed within eight (8) months from thedate of the execution of the contract of lease; (3) that Huibonhoa shall pay to each lessor the sumof P 300, 000; (4) that Huibonhoa shall pay to each lessor P 15, 000.00 as monthly rentals; (6)that the obligation to start paying the rental shall commence only upon completion of the building within the eight-month period.

However, Huibonhoa brought an action for reformation of the contract alleging that theirtrue intention as to when the monthly rental would accrue was not expressed due to mistake oraccident, averring that by reason of such, the lease contract failed to provide that should anunforeseen event dramatically increase the cost of construction, the monthly rental would bereduced and the term of the lease would be extended for such duration as may be fair andequitable to both the lessor and the lessee.

ISSUE:Whether or not the assassination of former senator Benigno Aquino was a fortuitous event

that can thereby lead the parties to reform the contract.

HELD:A fortuitous event is that which could not be foreseen, or even if foreseen, was inevitable.

To exempt the obligor from liability for breach of an obligation due to an ―act of God,‖ thefollowing must concur: first, the cause of breach must be independent of the will of the obligor.Second, the event must be unforeseeable or inevitable. Third, the event must be such as to renderit impossible for the debtor to fulfill his obligation in a normal manner. And fourth, the debtormust be free from any participation in, or aggravation of, the injury to the creditor. Further,inflation per se, does not account that a fortuitous event transpired. Inflation is the sharp increaseof money or credit or both without a corresponding increase in business transaction. There isinflation when there is an increase in the volume of money and credit relative to available partiesto the lease contract. Ordinary diligence on the part of the parties demanded that they execute awritten agreement if indeed they wanted to enter into a new one because of the 15-year life spanof the lease affecting real property and the fact that third persons would be affected thereby onaccount of the express agreement allowing the lessee to lease the building to third parties.However, only when an extraordinary inflation supervenes that the law affords the parties a reliefin contractual obligations. Extraordinary inflation exists when there is a decrease or increase inthe purchasing power of the Philippine currency which is unusual or beyond the commonfluctuation in the value of said currency, and such decrease or increase could not have beenreasonably foreseen or was manifestly beyond the contemplation of the parties at the time of theestablishment of the obligation. Further, no decrease in the peso value of such magnitude havingoccurred, Huibonhoa has no valid ground to ask the Court to intervene and modify the leaseagreement to suit her purpose. Huibonhoa failed to prove by evidence, both documentary andtestimonial, that there was an extraordinary inflation from July 1983 to February 1984. Althoughshe repeatedly alleged that the cost of constructing the building doubled from P 6M to P 12 M,she failed to show by how much, for instance, the price index of goods and services had risenduring that intervening period. An extraordinary inflation cannot be assumed. Hence, forHuibonhoa to claim exemption from liability by reason of fortuitous event under Article 1174 ofthe Civil Code, she must prove that inflation was the sole and proximate cause of the loss ordestruction of the contract or in this case, of the delay in the construction of the building. Havingfailed to do so, Huibonhoa‘s contention is untenable.



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Ace Agro Development Corporation vs. Court of AppealsG.R. No. 119729, January 21, 1997

266 SCRA 429

FACTS:

Petitioner Ace-Agro Development Corporation and private respondent Cosmos BottlingCorporation entered into service contracts, which they renewed every year. On April 25, 1990,fire broke out in private respondent‘s plant, destroying, among other places, the area where petitioner did its work. As a result, petitioner‘s work was stopped. Petitioner expressed surprise at the termination of the contract and requested private respondent.Petitioner brought this case against private respondent for breach of contract and damages itcomplained that the termination of its service contract was illegal and arbitrary and that, as aresult, it stood to lose profits and to be held liable to its employees for back wages, damages

and/or separation pay.

ISSUE:Whether the contract terminated on account of a force majeure was justified.

HELD:

Obligations may be extinguished by the happening of unforeseen events, under whoseinfluence the obligation would never have been contracted, because in such cases, the very basisupon which the existence of the obligation is founded would be wanting.Both parties admitted that the April 25, 1990 fire was a force majeure or unforeseen event andthat the same even burned practically all the soft drink bottles and wooden shells -- which are theobjects of the agreement. But the story did not end there.It is true that defendant-appellant still had other bottles that needed cleaning and wooden shellsthat needed repairing; therefore, the suspension of the work of the plaintiff-appellee broughtabout by the fire is, at best, temporary as found by the trial court. Hence, plaintiff-appellee‘sletters of reconsideration of the termination of the agreement addressed to defendant-appellantdated June 13, 1990 and July 17, 1990



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Pedro Dioquino vs. Federico LaureanoG.R. No. L-25906, May 28, 1970

33 SCRA 65

FACTS:

Atty. Dioquino met patrol officer Federico Laureano in the MVO office in Masbate toregister his car. Laureano helped Dioquino in the facilitation of the registration of his car.Thereby, Atty. Dioquino lent Laureano his car on a commodatum basis but the car‘s windshieldwas broken due to a stone thrown by some mischievous boys. No satisfactory arrangements weremade about the damage caused on the windshield. Laureano believed that the stone-throwingwas merely accidental so he refused to file any charges against the stone-thrower or the parents;and he also believed that he is not liable for any damages because the incident was a forcemajeure.

ISSUE:

The issue is whether or not the breaking of the car‘s windshield due to the stone -throwingis a force majeure and thereby exculpating defendant from civil liability in favor of Atty.Dioquino.

HELD:

YES, because Article 1174 of the Civil Code states that ―Except in cases expresslyspecified by the law, or when it is otherwise declared by stipulation, or when the nature of theobligation requires the assumption of risk, no person shall be responsible for those events whichcould not be foreseen, or which, though foreseen, were inevitable.‖ The stone-throwing thatyielded to the breaking of the windshield was clearly unforeseeable and inevitable. Hence,Laureano cannot be compelled to pay the damages caused on Atty. Dioquino‘s car windshield.



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Bachelor Express, Incorporated vs. Court of AppealsG.R. No. 85691, July 31, 1990

193 SCRA 216

FACTS:

On August 1, 1980, Bus No. 800 owned by Bachelor Express, Inc. and driven byCresencio Rivera was the situs of a stampede which resulted in the death of passengersOrnominio Beter and Narcisa Rautraut. The evidence shows that the bus came from Davao Cityon its way to Cagayan de Oro City passing Butuan City; that while at Tabon-Tabon, Butuan City,the bus picked up a passenger; that about fifteen (15) minutes later, a passenger at the rear portion suddenly stabbed a PC soldier which caused commotion and panic among the passengers; that when the bus stopped, passengers Ornominio Beter and Narcisa Rautraut werefound lying down the road, the former already dead as a result of head injuries and the latter alsosuffering from severe injuries which caused her death later. The passenger assailant alighted

from the bus and ran toward the bushes but was killed by the police. Thereafter, the heirs ofOrnominio Beter and Narcisa Rautraut, private respondents herein (Ricardo Beter and SergiaBeter are the parents of Ornominio while Teofilo Rautraut and Zoetera [should be Zotera]Rautraut are the parents of Narcisa) filed a complaint for "sum of money" against BachelorExpress, Inc. its alleged owner Samson Yasay and the driver Rivera.

ISSUE:Whether or not Bachelor Express, Inc. can be held liable for the death of Beter and

Rautraut.

HELD:

The running amuck of the passenger was the proximate cause of the incident as it triggeredoff a commotion and panic among the passengers such that the passengers started running to thesole exit shoving each other resulting in the falling off the bus by passengers Beter and Rautrautcausing them fatal injuries. The sudden act of the passenger who stabbed another passenger inthe bus is within the context of force majeure.

However, in order that a common carrier may be absolved from liability in case of forcemajeure, it is not enough that the accident was caused by force majeure. The common carriermust still prove that it was not negligent in causing the injuries resulting from such accident.Considering the factual findings of the Court of Appeals-the bus driver did not immediately stopthe bus at the height of the commotion; the bus was speeding from a full stop; the victims fellfrom the bus door when it was opened or gave way while the bus was still running; the conductor panicked and blew his whistle after people had already fallen off the bus; and the bus was not properly equipped with doors in accordance with law-it is clear that the petitioners have failed toovercome the presumption of fault and negligence found in the law governing common carriers.The petitioners' argument that the petitioners "are not insurers of their passengers" deserves nomerit in view of the failure of the petitioners to prove that the deaths of the two passengers wereexclusively due to force majeure and not to the failure of the petitioners to observe extraordinarydiligence in transporting safely the passengers to their destinations as warranted by law.The liability, if any, of the petitioners is anchored on culpa contractual or breach of contract ofcarriage.



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PEDRO VASQUEZ v. THE COURT OF APPEALSG.R. No. L-42926 1985 Sep 13

FACTS:

MV 'Pioneer Cebu' was owned and operated by the defendant and used in the transportationof goods and passengers in the interisland shipping. It had a passenger capacity of three hundredtwenty-two including the crew. It undertook the said voyage on a special permit issued by theCollector of Customs inasmuch as, upon inspection, it was found to be without an emergencyelectrical power system. The special permit authorized the vessel to carry only two hundred sixty passengers due to the said deficiency and for lack of safety devices for 322 passengers. Aheadcount was made of the passengers on board, resulting on the tallying of 168 adults and 20minors, although the passengers manifest only listed 106 passengers. It has been admitted,however, that the headcount is not reliable. When the vessel left Manila, its officers were alreadyaware of the typhoon Klaring building up somewhere in Mindanao. Plaintiffs seek the recoveryof damages due to the loss of Alfonso Vasquez, Filipinas Bagaipo and Mario Marlon Vasquez

during said voyage.

ISSUE:Whether or not the respondent would be exempt from responsibility due to its defense of

fortuitous event.

RULING:

To constitute a caso fortuito that would exempt a person from responsibility, it isnecessary that (1) the event must be independent of the human will; (2) the occurrence mustrender it impossible for the debtor to fulfill the obligation in a normal manner; and that (3) theobligor must be free of participation in, or aggravation of, the injury to the creditor. The eventmust have been impossible to foresee, or if it could be foreseen, must have been impossible toavoid. There must be an entire exclusion of human agency from the cause of injury or loss.

Under the circumstances, while, indeed, the typhoon was an inevitable occurrence, yet,having been kept posted on the course of the typhoon by weather bulletins at intervals of sixhours, the captain and crew were well aware of the risk they were taking as they hopped fromisland to island from Romblon up to Tanguingui. They held frequent conferences, and obliviousof the utmost diligence required of very cautious persons, they decided to take a calculated risk.In so doing, they failed to observe that extraordinary diligence required of them explicitly by lawfor the safety of the passengers transported by them with due regard for all circumstances andunnecessarily exposed the vessel and passengers to the tragic mishap. They failed to overcomethat presumption of fault or negligence that arises in cases of death or injuries to passengers.

With regard to the contention that the total loss of the vessel extinguished its liability pursuant to Article 587 of the Code of Commerce, it was held that the liability of a shipowner islimited to the value of the vessel or to the insurance thereon. Despite the total loss of the vesseltherefore, its insurance answers for the damages that a shipowner or agent may be held liable for by reason of the death of its passengers.



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ALBERTA YOBIDO vs. COURT OF APPEALSG.R. No. 113003 1997 Oct 17

FACTS:On April 26, 1988, spouses Tito and Leny Tumboy and their minor children named Ardee and

Jasmin, boarded at Mangagoy, Surigao del Sur, a Yobido Liner bus bound for Davao City. AlongPicop Road in Km. 17, Sta. Maria, Agusan del Sur, the left front tire of the bus exploded. The bus fell into a ravine around three (3) feet from the road and struck a tree. The incident resultedin the death of 28-year-old Tito Tumboy, and physical injuries to other passengers. On November 21, 1988, a complaint for breach of contract of carriage, damages and attorney's feeswas filed by Leny and her children against Alberta Yobido, the owner of the bus, and CresencioYobido, its driver, before the Regional Trial Court of Davao City. The plaintiffs asserted thatviolation of the contract of carriage between them and the defendants was brought about by thedriver's failure to exercise the diligence required of the carrier in transporting passengers safelyto their place of destination. On the other hand, the defendants raised the affirmative defense ofcaso fortuito.

ISSUE:

Whether or not petitioners should be exempt from liability because the tire blowout was afortuitous event.

RULING:

As a rule, when a passenger boards a common carrier, he takes the risks incidental to themode of travel he has taken. After all, a carrier is not an insurer of the safety of its passengersand is not bound absolutely and at all events to carry them safely and without injury. However,when a passenger is injured or dies, while traveling, the law presumes that the common carrier isnegligent. Thus, the Civil Code provides under Article 1755 that a common carrier is bound tocarry the passengers safely as far as human care and foresight can provide, using the utmostdiligence of very cautious persons, with a due regard for all the circumstances. Accordingly, inculpa contractual, once a passenger dies or is injured, the carrier is presumed to have been atfault or to have acted negligently. This disputable presumption may only be overcome byevidence that the carrier had observed extraordinary diligence as prescribed by Articles 1733, 101755 and 1756 of the Civil Code or that the death or injury of the passenger was due to afortuitous event. Consequently, the court need not make an express finding of fault or negligenceon the part of the carrier to hold it responsible for damages sought by the passenger.

The petitioners' contention that they should be exempt from liability because the tire blowout was no more than a fortuitous event that could not have been foreseen, must fail. Underthe circumstances of this case, the explosion of the new tire may not be considered a fortuitousevent. There are human factors involved in the situation. The fact that the tire was new did notimply that it was entirely free from manufacturing defects or that it was properly mounted on thevehicle. Neither may the fact that the tire bought and used in the vehicle is of a brand name notedfor quality, resulting in the conclusion that it could not explode within five days' use. It is settledthat an accident caused either by defects in the automobile or through the negligence of its driveris not a caso fortuito that would exempt the carrier from liability for damages.

Moral damages are generally not recoverable in culpa contractual except when bad faithhad been proven. However, the same damages may be recovered when breach of contract ofcarriage results in the death of a passenger, as in this case. Exemplary damages, awarded by wayof example or correction for the public good when moral damages are awarded, may likewise berecovered in contractual obligations if the defendant acted in wanton, fraudulent, reckless,oppressive, or malevolent manner. Because petitioners failed to exercise the extraordinarydiligence required of a common carrier, which resulted in the death of Tito Tumboy, it is deemedto have acted recklessly. As such, private respondents shall be entitled to exemplary damages.



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THE PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC. vs. MGG MARINESERVICES, INC. and DOROTEO GAERLAN

G.R. No. 135645 2002 Mar 8

FACTS:

On March 1, 1987, San Miguel Corporation insured several beer bottle cases with petitioner Philippine American General Insurance Company. The cargo were loaded on board theM/V Peatheray Patrick-G to be transported from Mandaue City to Bislig, Surigao del Sur. Afterhaving been cleared by the Coast Guard Station in Cebu the previous day, the vessel left the portof Mandaue City for Bislig, Surigao del Sur on March 2, 1987. The following day, March 3,1987, M/V Peatheray Patrick-G listed and subsequently sunk off Cawit Point, Cortes, Surigaodel Sur. As a consequence thereof, the cargo belonging to San Miguel Corporation was lost.Subsequently, San Miguel Corporation claimed the amount of its loss from petitioner.

The Board of Marine Inquiry conducted its own investigation of the sinking of the M/V

Peatheray Patrick-G to determine whether or not the captain and crew of the vessel should beheld responsible for the incident. On May 11, 1989, the Board rendered its decision exoneratingthe captain and crew of the ill-fated vessel for any administrative liability. It found that the causeof the sinking of the vessel was the existence of strong winds and enormous waves in Surigao delSur, a fortuitous event that could not have been forseen at the time the M/V Peatheray Patrick-Gleft the port of Mandaue City. It was further held by the Board that said fortuitous event was the proximate and only cause of the vessel‘s sinking.

ISSUE:

Whether the cargo was lost due to a fortuitous event and whether respondents exerciseddue diligence to prevent the loss of the cargo.

RULING:

Common carriers, from the nature of their business and for reasons of public policy, aremandated to observe extraordinary diligence in the vigilance over the goods and for the safety ofthe passengers transported by them. Owing to this high degree of diligence required of them,common carriers, as a general rule, are presumed to have been at fault or negligent if the goodstransported by them are lost, destroyed or if the same deteriorated.

However, this presumption of fault or negligence does not arise in the cases enumeratedunder Article 1734 of the Civil Code:

Common carriers are responsible for the loss, destruction, or deterioration of the goods,unless the same is due to any of the following causes only:(1) Flood, storm, earthquake, lightningor other natural disaster or calamity;(2) Act of the public enemy in war, whether international orcivil;(3) Act or omission of the shipper or owner of the goods;(4) The character of the goods ordefects in the packing or in the containers;(5) Order or act of competent public authority.

The findings of the Board of Marine Inquiry indicate that the attendance of strong windsand huge waves while the M/V Peatheray Patrick-G was sailing through Cortes, Surigao del Norte on March 3, 1987 was indeed fortuitous. Thus, the Caprain could not be expected to haveforeseen the unfavorable weather condition that awaited the vessel in Cortes, Surigao del Sur. Itwas the presence of the strong winds and enormous waves which caused the vessel to list, keelover, and consequently lose the cargo contained therein. The appellate court likewise found thatthere was no negligence on the part of the crew of the M/V Peatheray Patrick-G. Hence, privaterespondents cannot be held liable for the said loss.



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MINDEX RESOURCES DEVELOPMENT vs. EPHRAIM MORILLOG.R. No. 138123 2002 Mar 12

FACTS:

On February 1991, a verbal agreement was entered into between Ephraim Morillo andMindex Resources Corporation for the lease of the former‘s 6 x 6 ten-wheeler cargo truck for usein MINDEX‘s mining operations in Binaybay, Bigaan, San Teodoro, Oriental Mindoro, at thestipulated rental of ‗P300.00 per hour for a minimum of eight hours a day or a total of P2,400.00daily.‘ MINDEX had been paying the rentals until April 10, 1991. Unknown to Morillo, onApril 11, 1991, the truck was burned by unidentified persons while it was parked unattended atSitio Aras, Bigaan, San Teodoro, Oriental Mindoro, due to mechanical trouble. Upon learning ofthe burning incident, Morillo offered to sell the truck to MINDEX but the latter refused. Instead,it replaced the vehicle‘s burned tires and had it towed to a shop for repair and overhauling.

On April 15, 1991, Morillo sent a letter to Mr. Arni Isberg, the Finance Manager of

MINDEX, thru Mr. Ramoncito Gozar, Project Manager, proposing that he is entrusting toMINDEX the said vehicle in the amount of P275,000.00 which is its cost price, in four monthlyinstallments. Morillo then promised to relinquish all the necessary documents upon full paymentof said account. On the other hand, MINDEX expressed thier reservations and made counteroffers that it will pay the truck in the amount of P76,000, that the repair and overhaul will be ontheir expense, and that they wll return it in a good running condition after repair. Morillo replied1 that he will relinquish to MINDEX the damaged truck, that he is amenable to receive the rentalin the amount of P76,000.00, and that MINDEX will pay fifty thousand pesos monthly until the balance of P275,000.00 is fully paid. On August 1991, Morillo pulled out the truck from therepair shop of MINDEX and had it repaired elsewhere for which he spent the total amount ofP132,750.00.

ISSUE:Whether or not the Court of Appeals gravely erred in finding that petitioner failed to

overcome the presumption of negligence against it considering that the facts show that the burning of the truck was a fortuitous event.

RULING:

Both the RTC and the CA found petitioner negligent and thus liable for the loss ordestruction of the leased truck. Both parties may have suffered from the burning of the truck;however, as found by both lower courts, the negligence of petitioner makes it responsible for theloss. In order for a fortuitous event to exempt one from liability, it is necessary that one hascommitted no negligence or misconduct that may have occasioned the loss. An act of God cannot be invoked to protect a person who has failed to take steps to forestall the possible adverseconsequences of such a loss. One‘s negligence may have concurred with an act of God in producing damage and injury to another; nonetheless, showing that the immediate or proximatecause of the damage or injury was a fortuitous event would not exempt one from liability. Whenthe effect is found to be partly the result of a person‘s participation -- whether by activeintervention, neglect or failure to act -- the whole occurrence is humanized and removed from therules applicable to acts of God.

The records clearly shows that petitioner failed to exercise reasonable care and caution thatan ordinarily prudent person would have used in the same situation. Petitioner fell short ofordinary diligence in safeguarding the leased truck against the accident.n Petitioner failed toemploy reasonable foresight, diligence and care that would have exempted it from liabilityresulting from the burning of the truck. Negligence, as commonly understood, is that conductthat naturally or reasonably creates undue risk or harm to others. It may be a failure to observethat degree of care, precaution or vigilance that the circumstances justly demand; or to do anyother act that would be done by a prudent and reasonable person, who is guided byconsiderations that ordinarily regulate the conduct of human affairs.



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NATIONAL POWER CORPORATION vs. PHILIPP BROTHERS OCEANIC, INC.G.R. No. 126204 2001 Nov 20

FACTS:

On May 14, 1987, the National Power Corporation (NAPOCOR) issued invitations to bidfor the supply and delivery of 120,000 metric tons of imported coal for its Batangas Coal-FiredThermal Power Plant in Calaca, Batangas. The Philipp Brothers Oceanic, Inc. (PHIBRO) prequalified and was allowed to participate as one of the bidders. After the public bidding wasconducted, PHIBRO‘s bid was accepted. NAPOCOR‘s acceptance was conveyed in a letterdated July 8, 1987, which was received by PHIBRO on July 15, 1987. On July 10, 1987,PHIBRO sent word to NAPOCOR that industrial disputes might soon plague Australia, theshipment‘s point of origin, which could seriously hamper PHIBRO‘s ability to supply the neededcoal. From July 23 to July 31, 1987, PHIBRO again apprised NAPOCOR of the situation inAustralia, particularly informing the latter that the ship owners therein are not willing to load

cargo unless a ―strike-free‖ clause is incorporated in the charter party or the contract of carriage.In order to hasten the transfer of coal, PHIBRO proposed to NAPOCOR that they equally sharethe burden of a ―strike-free‖ clause. NAPOCOR refused.

On August 6, 1987, PHIBRO received from NAPOCOR a confirmed and workable letterof credit. Instead of delivering the coal on or before the thirtieth day after receipt of the Letter ofCredit, as agreed upon by the parties in the July contract, PHIBRO effected its first shipmentonly on November 17, 1987. Consequently, in October 1987, NAPOCOR once more advertisedfor the delivery of coal to its Calaca thermal plant. PHIBRO participated anew in thissubsequent bidding. On November 24, 1987, NAPOCOR disap proved PHIBRO‘s applicationfor pre-qualification to bid for not meeting the minimum requirements. Upon further inquiry,PHIBRO found that the real reason for the disapproval was its purported failure to satisfy NAPOCOR‘s demand for damages due to the delay in the delivery of the first coal shipment.

ISSUE:

Whether or not the Court of Appeals gravely and seriously erred in concluding and soholding that PHIBRO‘s delay in the delivery of imported coal was due to NAPOCOR‘s allegeddelay in opening a letter of credit and to force majeure, and not to PHIBRO‘s own deliberate actsand faults

RULING:

Fortuitous events may be produced by two general causes: (1) by Nature, such asearthquakes, storms, floods, epidemics, fires, etc., and (2) by the act of man, such as an armedinvasion, attack by bandits, governmental prohibitions, robbery, etc. The term generally applies, broadly speaking, to natural accidents. In order that acts of man such as a strike, may constitutefortuitous event, it is necessary that they have the force of an imposition which the debtor couldnot have resisted. Hence, by law and by stipulation of the parties, the strikes which took place inAustralia from the first week of July to the third week of September, 1987, exempted Phibrofrom the effects of delay of the delivery of the shipment of coal.

In addition, PHIBRO and NAPOCOR explicitly agreed in Section XVII of the ―BiddingTerms and Specifications‖ that ―neither seller (PHIBRO) nor buyer (NAPOCOR) shall be liablefor any delay in or failure of the performance of its obligations, other than the payment of moneydue, if any such delay or failure is due to Force Majeure.‖ Specifically, they defined forcemajeure as ―any disabling cause beyond the control of and without fault or negligence of the party, which causes may include but are not restricted to Acts of God or of the public enemy;acts of the Government in either its sovereign or contractual capacity; governmental restrictions;strikes, fires, floods, wars, typhoons, storms, epidemics and quarantine restrictions.‖



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WILLIAM ONG GENATO vs. BENJAMIN BAYHONG.R. No. 171035 August 24, 2009

FACTS:

Respondent Benjamin Bayhon alleged that on July 3, 1989, he obtained from the petitioner a loan amounting to PhP 1,000,000.00;3 that to cover the loan, he executed a Deed ofReal Estate Mortgage over the property covered by Transfer Certificate of Title (TCT) No.38052; that, however, the execution of the Deed of Real Estate Mortgage was conditioned uponthe personal assurance of the petitioner that the said instrument is only a private memorandum ofindebtedness and that it would neither be notarized nor enforced according to its tenor. In hisAnswer, petitioner Genato denied the claim of the respondent regarding the death of the latter‘swife.8 He alleged that on the date that the real estate mortgage was to be signed, respondentintroduced to him a woman as his wife.9 He alleged that the respondent signed the dacion en pago and that the execution of the instrument was above-board.

Petitioner further averred that despite demands, respondent refused to execute the requisitedocuments to transfer to him the ownership of the lot subject of the dacion en pago. Petitioner prayed, inter alia, for the court to order the respondent to execute the final deed of sale andtransfer of possession of the said lot.

ISSUE:

Whether or not the dacion en pago is void.

RULING:

Under our law, therefore, the general rule is that a party's contractual rights and obligationsare transmissible to the successors. The rule is a consequence of the progressive"depersonalization" of patrimonial rights and duties that, as observed by Victorio Polacco, hascharacterized the history of these institutions. From the Roman concept of a relation from personto person, the obligation has evolved into a relation from patrimony to patrimony, with the persons occupying only a representative position, barring those rare cases where the obligation isstrictly personal, i.e., is contracted intuitu personae, in consideration of its performance by aspecific person and by no other. The transition is marked by the disappearance of theimprisonment for debt.28 (Emphasis supplied)

The loan in this case was contracted by respondent. He died while the case was pending beforethe Court of Appeals. While he may no longer be compelled to pay the loan, the debt subsistsagainst his estate. No property or portion of the inheritance may be transmitted to his heirs unlessthe debt has first been satisfied. Notably, throughout the appellate stage of this case, the estatehas been amply represented by the heirs of the deceased, who are also his co-parties in CivilCase No. Q-90-7012.

The procedure in vindicating monetary claims involving a defendant who dies before final judgment is governed by Rule 3, Section 20 of the Rules of Civil Procedure.



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GONZALES VS THE HEIRS OF THOMAS AND PAULA CRUZGR No. 131784 September 16, 1999

FACTS:

On December 1, 1983, Paula Año Cruz together with the plaintiffs heirs of Thomas andPaula Cruz entered into a contract of lease with the defendant, Felix L. Gonzales of a half portionof a land containing an area of 12 hectares, more or less, and an accretion of 2 hectares, more orless, situated in Rodriguez Town, Province of Rizal‘ and covered by Transfer Certificate of Title No. 12111. As stipulated therein:

Paragraph 9 - The LESSORS hereby commit themselves and shall undertake toobtain a separate and distinct T.C.T. over the herein leased portion to the LESSEE within areasonable period of time which shall not in any case exceed four (4) years, after which a newContract shall be executed by the herein parties which shall be the same in all respects with this

Contract of Lease/Purchase insofar as the terms and conditions are concerned.

Under the contract, Gonzales paid the rental fees but did not choose to exercise the optionof paying the one million purchase price. A letter was issued by one of the heirs to rescind thesaid contract following breach and ordered Gonzales to vacate the premises within ten days.Gonzales did no vacate. A few days later Paula Cruz died. A case was launched in Court by theheirs of Paula Cruz.

ISSUE:

How must paragraph nine of the contract be interpreted in enforcing the contract of lease?

RULING:

If a stipulation in a contract admits of several meanings, it shall be understood as bearingthat import most adequate to render it effectual. An obligation cannot be enforced unless the plaintiff has fulfilled the condition upon which it is premised. The ninth provision was intendedto ensure that respondents would have a valid title over the specific portion they were selling to petitioner. Only after the title is assured may the obligation to buy the land and to pay the sumsstated in the Contract be enforced within the period stipulated. Verily, the petitioner‘s obligationto purchase has not yet ripened and cannot be enforced until and unless respondents can provetheir title to the property subject of the Contract. The ninth clause was the condition precedent ofthe contract.

Respondents cannot rescind the contract, because they have not caused the transfer of theTCT to their names, which is a condition precedent to petitioner‘s obligation. This Court hasheld that ―there can be no rescission (or more properly, resolution) of an obligation as yet non-existent, because the suspensive condition has not happened.‖



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INSULAR LIFE VS YOUNGGR No. 140964 January 16, 2002

FACTS:

Respondent Robert Young obtained a short term loan of P170,000,000.00 from interbankto finance the purchase 45% equity in Insular Savings Bank. He did this under the assumptionthat Araneta would purchase 99.82% of the banks outsanding capital stock and consolidate allshares in Young‘s name. However, Araneta backed and Young was left with a massive debt.Young entered into a Memorandum of Agreement where Insular Life and its Pension Fundwhereby Insular Life would purchase shares of stock if Young would abide by certainconditions: one of them being to infuse additional capital of P50,000,000.00 into the Bank.

It was discovered that Young was pilfering funds from the bank through check kitingoperations and he tendered his resignation. He also defaulted on his obligations. His shares of

stock were purchased by Insular Life in a public auction. The shares were then consolidated in itsname. On January 7, 1992, Young filed a case for annulment of notarial sale, specific performance and damages.

ISSUE:

Is Insular Life entitled to ownership of majority of the Bank‘s shares of stock?

RULING:

The provisions of the MOA negate the existence of a perfected contract of sale. The MOAis merely a contract to sell since the parties therein specifically undertook to enter into a contractof sale if the stipulated conditions are met and the representation and warranties given by Young prove to be true. Here, the MOA provides that Young shall infuse additional capital ofP50,000,000.00 into the Bank. Young failed to infuse the required additional capital. Moreover,the due diligence audit shows that Young was involved in fraudulent schemes like check kiting.Since no sale transpired between the parties, the CA erred in concluding that Insular Life purchased 55% of the total shares of the Bank under the MOA.

It would be unfair on the part of Young to demand compliance by Insular Life of itsobligations when he himself was remiss in his own.



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HERMOSA VS LONGARAGR No. L-5267, October 27, 1953

FACTS:

This is an appeal by way of certiorari against a decision of the Court of Appeals, fourthdivision, approving certain claims presented by Epifanio M. Longara against the testate estate ofFernando Hermosa, Sr. The claims are of three kinds, namely, P2,341.41 representing creditadvances made to the intestate from 1932 to 1944, P12,924.12 made to his son FranciscoHermosa, and P3,772 made to his grandson, Fernando Hermosa, Jr. from 1945 to 1947, after thedeath of the intestate, which occurred in December, 1944. The claimant presented evidence andthe Court of Appeals found, in accordance therewith, that the intestate had asked for the saidcredit advances for himself and for the members of his family "on condition that their paymentshould be made by Fernando Hermosa, Sr. as soon as he receive funds derived from the sale ofhis property in Spain." Claimant had testified without opposition that the credit advances were to

be "payable as soon as Fernando Hermosa, Sr.'s property in Spain was sold and he receivemoney derived from the sale." The Court of Appeals held that payment of the advances did not become due until the administratrix received the sum of P20,000 from the buyer of the property.Upon authorization of the probate court in October, 1947, and the same was paid forsubsequently. The Claim was filed on October 2, 1948.

ISSUE:

Does said condition a potestative condition and thusly void and unenforceable?

RULING:

A careful consideration of the condition upon which payment of the sums advanced wasmade to depend, "as soon as he (intestate) receive funds derived from the sale of his property inSpain," discloses the fact that the condition in question does not depend exclusively upon thewill of the debtor, but also upon other circumstances beyond his power or control. Cirumstancesshow that the intestate had already decided to sell his house lest he meant to fool his creditors.But in addition of the sale to him (the intestate-vendor), there were still other conditions that hadno concur to effect the sale, mainly that of the presence of a buyer, ready, able and willing to purchase the property under the conditions demanded by the intestate. It is evident, therefore,that the condition of the obligation was not a purely protestative one, depending exclusivelyupon the will of the intestate, but a mixed one, depending partly upon the will of intestate and partly upon chance. The Supreme Court upheld the ruling of the lower courts.



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TRILLANA VS QUEZON COLLEGESGR No. L-5003, June 27, 1953

FACTS:

On June 1, 1948, Damasa Crisostomo applied for 200 shares of stock worth PhP100.00each at Quezon Colleges, Inc. Within her letter of application, she stipulated, ―You will find(Babayaran kong lahat pagkatapos na ako ay makapag-pahuli ng isda) pesos as my initial payment and the balance payable in accordance with law and the rules and regulations of theQuezon College.‖ Damasa died on October 26, 1948. Since no payment was rendered on thesubscription made in the foregoing letter, Quezon College presented a claim of PhP20,000.00 onher intestate proceedings. The petitioner – administrator of the estate then contests the validity ofsaid proceedings?

ISSUE:

Is the condition laid down by Damasa Crisostomo valid?

RULING:

There is nothing in the record to show that the Quezon College, Inc. accepted the term of payment suggested by Damasa Crisostomo, or that if there was any acceptance the same came toher knowledge during her lifetime. As the application of Damasa Crisostomo is obviously atvariance with the terms evidenced in the form letter issued by the Quezon College, Inc., therewas absolute necessity on the part of the College to express its agreement to Damasa's offer inorder to bind the latter. Conversely, said acceptance was essential, because it would be unfair toimmediately obligate the Quezon College, Inc. under Damasa's promise to pay the price of thesubscription after she had caused fish to be caught. Thus, it cannot be said that the letter ripenedinto a contract.

Indeed, the need for express acceptance on the part of the Quezon College, Inc. becomesthe more imperative, in view of the proposal of Damasa Crisostomo to pay the value of thesubscription after she has harvested fish, a condition obviously dependent upon her sole will and,therefore, facultative in nature, rendering the obligation void. Under the Civil Code it is providedthat if the fulfillment of the condition should depend upon the exclusive will of the debtor, theconditional obligation shall be void.



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VISAYAN SAWMILL VS CA219 SCRA 378 March 3, 1993

FACTS:

On May 1, 1983, herein plaintiff-appellee and defendants appellants entered into a saleinvolving scrap iron, subject to the condition that plaintiff appellee will open a letter of credit inthe amount of P250,00.00 in favor of defendant-appellant corporation on or before May 15,1983. On May 24, 1983, plaintiff-appellee informed defendans-appellants by telegram that theletter of credit was opened May 12, 1983 at the BPI main office in Ayala, but that transmittalwas delayed. On May 26, 1983, defendants-appellants received a letter advice from theDumaguete City Branch of BPI dated May 26, 1983, that a domestic letter of credit had beenopened in favor of Visayan Sawmill Company.

On July 19, 1983 plaintiffs then demanded that defendants comply with the deed of sale.

On July 20, 1983 defendant corporation informed plaintiff‘s lawyer that it is unwilling tocontinue with the sale due to plaintiff‘s failure to comply with the essential preconditions of thecontract.

Private respondent prayed for judgment ordering the petitioner corporation to comply withthe contract by delivering to him the scrap iron subject thereof.

ISSUE:

Did petitioner corporation violate the terms and conditions of the contract?

RULING:

The petitioner corporation‘s obligation to sell is unequivocally subject to a positivesuspensive condition. The failure of the private respondent to comply with the positivesuspensive condition cannot even be considered a breach – casual or serious – but simply anevent that prevented the obligation of petitioner corporation to convey title from acquiring binding force.

The letter of credit in favor of petitioner was indisputably not in accordance with thestipulation in the contract signed by the parties on at three counts: (1) it was not opened, made orindorsed by the private respondent, but by a corporation which is not a party to the contract; (2)it was not opened with the bank agreed upon and; (3) it is not irrevocable and unconditional, forit is without recourse, it is set to expire on a specific date and it stipulates certain conditions withrespect to shipment.

Consequently, the obligation of petitioner to sell did not arise; it therefore cannot becompelled by specific performance to comply with its prestation.



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LEAÑO VS COURT OF APPEALSGR No. 129018 November 15, 2001

FACTS:

On November 13, 1985, Hermogenes Fernando, as vendor and Carmelita Leaño, as vendeeexecuted a contract to sell involving a piece of land. In the contract, Carmelita Leaño boundherself to pay Hermogenes Fernando the sum of PhP107,750.00 as the total purchase price of thelot.

The contract also provided for a grace period of one month within which to make payments, together with the one corresponding to the month of grace. Should the month of graceexpire without the installments for both months having been satisfied, an interest of 18% perannum will be charged on the unpaid installments. Should a period of ninety days elapse fromthe expiration of the grace period without the overdue and unpaid installment paid with proper

interests, Fernando, as vendor, was authorized to declare the contract cancelled. The defendantlater filed an ejectment case for failure of petitioner to pay within the terms of contract.

ISSUE:

Is petitioner entitled to rights over the lot?

RULING:

The transaction between the parties was a conditional sale not an absolute sale. Theintention of the parties was to reserve the ownership of the land in the seller until the buyer has paid the total purchase price. The ownership of the lot was not transferred to Carmelita Leaño. Ina contract to sell real property on installments, the full payment of the purchase price is a positivesuspensive condition, the failure of which is not considered a breach, casual or serious, butsimply an event that prevented the obligation of the vendor to convey title from acquiring anyobligatory force. In the case at bar, petitioner‘s non-payment of the installments after April 1,1989, prevented the obligation of respondent to convey the property from arising. In fact, it brought into effect the provision on cancellation.

However, in view of RA No. 6552, that the default committed by petitioner in respect ofthe obligation could be compensated by the interest and surcharges imposed upon her under thecontract in question.



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HEIRS OF SANDEJAS VS LINAGR No. 141634 February 5, 2001

FACTS:

Eliodoro Sendejas, Sr., served as administrator of the estate of Remedios R. Sandejas.Eliodoro, in his capacity as seller, bound and obligated himself, administrators, and assigns, tosell forever and absolutely and in their entirety parcels of lands which formed part of the estateof the late Remedios to one Mr. Alex A. Lina for the consideration of P1 Million. Eliodoro diedand Mr. Alex Lina served as temporary administrator of the estate until he was replaced by theheir of Eliodoro, Sixto Sandejas. Mr. Lina filed an Omnibus motion to approve the deed ofconditional sale executed between Plaintiff-in-Intervention Alex A. Lina and Eliodoro Sandejas,Sr. on June 7, 1982. The administrator Sixto filed a motion to dismiss.

ISSUE:

Is Mr. Lina entitled to purchase parcels of lands forming the estate of Remedios?

RULING:

In a contract to sell, the payment of the purchase price is a positive suspensive condition.The vendor‘s obligation to convey the title does not become effective in case of failure to pay.On the other hand, the agreement between Eliodoro, Sr. and respondent is subject to a suspensivecondition – the procurement of a court approval, not full payment. There was no reservation ofownership in the agreement. In accordance with paragraph 1 of the Receipt, petitioners weresupposed to deed the disputed lots over to respondent. This they could do upon the court‘sapproval, even before full payment. Hence, their contract was a conditional sale, rather than acontract to sell as determined by the CA.

Because petitioners did not consent to he sale of their ideal shares in the disputed lots,the CA correctly limited the scope of the Receipt to the pro-indiviso share of Eliodoro, Sr. Thus,it correctly modified the intestate court‘s ruling by excluding their shares from the ambit of thetransaction.

The petition was partially granted. The appealed decision and resolution are affirmedwith he modification that respondent is entitled to only a pro-indiviso share equivalent to 11/20of the disputed lots.



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CIR VS PRIMETOWNGR No. 162155 August 28, 2007

FACTS:

On March 11, 1999, Gilbert Yap, vice chair of respondent Primetown Property Group,Inc., applied for the refund or credit of income tax respondent paid in 1997. According to Yap, because respondent suffered losses, it was not liable for income taxes. Nevertheless, respondent paid its quarterly corporate income tax and remitted creditable withholding tax from real estatesales to the BIR in the total amount of P26,318,398.32. Therefore, respondent was entitled to taxrefund or tax credit.

On May 13, 1999, revenue officer Elizabeth Y. Santos required respondent to submitadditional documents to support its claim. Respondent complied but its claim was not acted

upon. Thus, on April 14, 2000, it filed a petition for review in the Court of Tax Appeals (CTA).On December 15, 2000, the CTA dismissed the petition as it was filed beyond the two-year prescriptive period for filing a judicial claim for tax refund or tax credit. Respondents now assailthat decision for dismissal of the CTA.

ISSUE:

What is the expiration period for the filing of the action?

RULING:

Both Article 13 of the Civil Code and Section 31, Chapter VIII, Book I of theAdministrative Code of 1987 deal with the same subject matter — the computation of legal periods. Under the Civil Code, a year is equivalent to 365 days whether it be a regular year or aleap year. Under the Administrative Code of 1987, however, a year is composed of 12 calendarmonths. Needless to state, under the Administrative Code of 1987, the number of days isirrelevant.

There obviously exists a manifest incompatibility in the manner of computing legal periods under the Civil Code and the Administrative Code of 1987. For this reason, we hold thatSection 31, Chapter VIII, Book I of the Administrative Code of 1987, being the more recent law,governs the computation of legal periods. Lex posteriori derogat priori.

Following this formula, respondent‘s petition (filed on April 14, 2000) was filed on thelast day of the 24th calendar month from the day respondent filed its final adjusted return. Hence,it was filed within the reglementary period.



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NAMARCO vs TecsonGR No. L-29131 August 27, 1969

FACTS:

On a previous court case, the CFI rendered judgment:

(a) Ordering the defendants Miguel D. Tecson and Alto Surety Insurance Co.,Inc. to pay jointly and severally plaintiff PRATRA the sum of P7,200.00 plus 7% interest fromMay 25, 1960 until the amount is fully paid, plus P500.00 for attorney's fees, and plus costs;(b) ordering defendant Miguel D. Tecson to indemnify his co-defendant Alto Surety & InsuranceCo., Inc. on the cross-claim for all the amounts it would be made to pay in this decision, in casedefendant Alto Surety & Insurance Co., Inc. pay the amount adjudged to plaintiff in thisdecision. From the date of such payment defendant Miguel D. Tecson would pay the Alto Surety

& Insurance Co., Inc., interest at 12% per annum until Miguel D. Tecson has fully reimbursed plaintiff of the said amount.

Defendant Miguel Tecson seeks the dismissal of the complaint on the ground of lack of jurisdiction and prescription. This case was filed exactly on December 21, 1965 but more thanten years have passed a year is a period of 365 days (Art. 13, CCP). Plaintiff forgot that 1960,1964 were both leap years so that when this present case was filed it was filed two days too late.

ISSUE:

Should the complaint be dismissed on the grounds of prescription?

RULING:

In the language of this Court, in People vs. Del Rosario, with the approval of the CivilCode of the Philippines (Republic Act 386) ... we have reverted to the provisions of the SpanishCivil Code in accordance with which a month is to be considered as the regular 30-day month ...and not the solar or civil month," with the particularity that, whereas the Spanish Code merelymentioned "months, days or nights," ours has added thereto the term "years" and explicitlyordains that "it shall be understood that years are of three hundred sixty-five days."

The decision was affirmed.



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Ernest Berg vs. Magdalena Estate, Inc.G.R. No. L-3784, October 17, 1952

92 Phil 111

FACTS:

The complaint avers that plaintiff and defendant are co-owners of said property, theformer being the owner of one-third interest and the latter of the remaining two-thirds. Thedivision is asked because plaintiff and defendant are unable to agree upon the management of the property and upon the partition thereof.

Defendant answered setting up a special defense and counterclaim. As a special defense,defendant claims that on September 22, 1943, it sold to plaintiff one-third of the property inlitigation subject to the express condition that should either vendor or vendee decide to sell hisundivided share, the party selling would grant to the other party first an irrevocable option to

purchase the same at the seller‘s price. It avers that in January 1946, plaintiff fixed the sum ofP200, 000 as the price of said share and offered to sell it to defendant, which offer was acceptedand for the payment of said price plaintiff gave defendant a period of time which, including theextensions granted would expire on May 31, 1947. Defendant claims that in spite of itsacceptance of the offer, plaintiff refused to accept the payment of the price, and for this refusaldefendant suffered damages in the amount of P100, 000. For these reasons, defendant asks forspecific performance.

ISSUE:Whether or not the obligation is one subject to a term.

HELD:

The obligation is rather subject to a condition. Under Article 1125 of the old Civil Code,obligations with a term, for the fulfillment of which a day certain has been fixed, shall bedemandable only when the day arrives. A day certain is understood to be that which mustnecessarily arrive, even though it is not known when. In order that an obligation may be with aterm, it is, therefore, necessary that it should arrive, sooner or later; otherwise, if its arrival isuncertain, the obligation is conditional.

Viewing in this light the clause on which defendant relies for the enforcement of itsright to buy the property, it would seem that it is not a term, but a condition. Considering thefirst alternative, that is, until defendant shall have obtained a loan from the National City Bank of New York, it is clear that the granting of such loan is not definite and cannot be held to comewithin the terms ―day certain.‖ And if it is considered that the period given was until such timeas defendant could raise money from other sources, then it is also to be indefinite and contingent,and so it is also a condition and not a term within the meaning of the law. In any event, it isapparent that the fulfillment of the condition contained in this second alternative is made todepend upon defendant‘s exclusive will, and viewed in this light, the plaintiff‘s obligation to selldid not arise, for, under article 1115 of the old Civil Code, ―when the fulfillment of the conditiondepends upon the exclusive will of the debtor the conditional obligation shall be void.‖



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Victorias Planters vs. Victorias Milling Co. Inc.G.R. No. L-6648, July 25, 1955

97 PHIL 318

FACTS:

From 1917 to 1934, the sugar cane planters Manapla and Cadiz, Negros Occidental, executedidentical milling contracts, under which the sugar central "North Negros Sugar Co. Inc." wouldmill the sugar produced by the sugar cane planters of the Manapla and Cadiz districts.The sugar cane planters of Manapla and Cadiz, Negros Occidental had executed a contractwhereby Ossorio was given a period up to December 31, 1916 within which to make a study ofand decide whether he would construct a sugar central or mill with a capacity of milling 300 tonsof sugar cane every 24 hours and setting forth the mutual obligations and undertakings of suchcentral and the planters and the terms and conditions under which the sugar cane produced bysaid planters would be milled in the event of the construction of such sugar central by Ossorio.Such central was in fact constructed by said Ossorio in Manapla, Negros Occidental, through the North Negros Sugar Co., Inc., where after the standard form of milling contracts were

executed.The parties cannot stipulate as to the milling contracts executed by the planters byVictorias, Negros Occidental, other than as follows: 1) a number of them executed such millingcontracts with the North Negros Sugar Co., Inc.; 2) while a number of them executed millingcontracts with the Victorias Milling Co., Inc., which was likewise organized by Miguel J.Ossorio and which had constructed another Central at Victorias, Negros Occidental. Thus, afterthe war, all the sugar cane produced by the planters of petitioner associations, in Manapla, Cadiz,as well as in Victorias, who held milling contracts, were milled in only one central, that of therespondent corporation at Victorias. Beginning with the year 1948, and in the following years,when the planters-members of the North Negros Planters Association, Inc. considered that thestipulated 30-year period of their milling contracts executed in the year 1918 had already expiredand terminated in the crop year 1947-1948, and the planters-members of the Victorias PlantersAssociation, Inc. likewise considered the stipulated 30-year period of their milling contracts, ashaving likewise expired and terminated in the crop year 1948-1949, under the pertinent provisions of the standard milling contract. Notwithstanding the repeated representations made by the herein petitioners with the respondent corporation, the herein respondent has refused andstill refuses to accede to the same, contending that under the provisions of the milling contract.

ISSUE:Whether or not the trial court erred in rendering its disputed decision, favoring the

petitioner.

HELD :The fact that the contracts make reference to "first milling" does not make the period of

thirty (30) years one of thirty (30) milling years. The term "first milling" used in the contractsunder consideration was for the purpose of reckoning the thirty-year period stipulated therein.Even if the thirty-year period provided for in the contracts be construed as milling years, thededuction or extension of six (6) years would not be justified. At most on the last year of thethirty-year period stipulated in the contracts the delivery of sugar cane could be extended up to atime when all the amount of sugar cane raised and harvested should have been delivered to theappellant's mill as agreed upon. Further, the parties stipulated that in the event of flood, typhoon,earthquake, or other force majeure, war, insurrection, civil commotion, organized strike, etc., thecontract shall be deemed suspended during said period, does not mean that the happening of anyof those events stops the running of the period agreed upon. It only relieves the parties from thefulfillment of their respective obligations during that time — the planters from delivering sugarcane and the central from milling it. In order that the central, the herein appellant, may beentitled to demand from the other parties the fulfillment of their part in the contracts, the lattermust have been able to perform it but failed or refused to do so and not when they were prevented by force majeure such as war. To require the planters to deliver the sugar cane whichthey failed to deliver during the four (4) years of the Japanese occupation and the two (2) yearsafter liberation when the mill was being rebuilt is to demand from the obligors the fulfillment ofan obligation which was impossible of performance at the time it became due.



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JESPAJO VS CAGR No. 113626 September 27, 2002

FACTS:

On February 1, 1985, said corporation, represented by its President, Jesus L. Uy, enteredinto separate contracts of lease with Tan Te Gutierrez and Co Tong. Pursuant to the contract, TanTe occupied room No. 217 of the subject building at a monthly rent of P847.00 while Co Tengoccupied the Penthouse at a monthly rent of P910.00. The terms of the contract among others arethe following:

―PERIOD OF LEASE- The lease period shall be effective as of February 1, 1985and shall continue for an indefinite period provided the lessee is up-to-date in the payment of hismonthly rentals. The LESSEE may, at his option, terminate this contract any time by givingsixty (60) days prior written notice of termination to the LESSOR.

However, violation of any of the terms and conditions of this contract shall be asufficient ground for termination thereof by the LESSOR.‖

The private respondents religiously paid the monthly rental fees. On January 2, 1990, thelessor corporation sent a written notice to the lessees informing them of the formers‘ intention toincrease the monthly rentals on the occupied premises to P3,500.00 monthly effective February1, 1990. The private respondents refused payment. An ejectment case was filed against them incourt.

ISSUE:

Is the stipulation a potestative period and hence void?

RULING:

The lease contract between petitioner and respondents is with a period subject to aresolutory condition. The wording of the agreement is unequivocal. The condition imposed inorder that the contract shall remain effective is that the lessee is up-to-date in his monthly payments. It is undisputed that the lessees Gutierrez and Co Tong religiously paid their rent atthe increasing rate of 20% annually. The agreement between the lessor and the lessees aretherefore still subsisting, with the original terms and conditions agreed upon, when the petitionerunilaterally increased the rental payment to more than 20% or P3,500.00 a month.

The petitioner is estopped from backing out of their representations in the contract withrespondent, that is, they may not renege on their own acts and representations, to the prejudice ofthe respondents who relied on them.



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GONZALES VS JOSEGR No. 43429 October 24, 1938

FACTS:

The plaintiff Benito Gonzales filed an action to recover from the defendant the totalamount of Php547.95 from two promissory notes dated June 22, 1922 and September 13, 1922.The CFI granted his petition. The defendant now assails that decision claiming that the complaintwas uncertain inasmuch as the notes did not specify when the indebtedness was incurred or whenit was demandable, and that, granting that plaintiff has any cause of action, the same has prescribed in accordance with law.

ISSUE:

Does plaintiff have a cause of action?

RULING:

Article 1128 of the Civil Code stipulates that if the obligation does not specify a term, but itis inferred from its nature and circumstances that it was intended to grant the debtor time for its performance, the period of the term shall be fixed by the Court.

The two promissory notes are governed by Article 1128 because under the terms thereof,the plaintiff intended to grant the defendant a period within which to pay his debts. However, theaction to ask the court to fix a period has already prescribed. The period of prescription is tenyears, which has already elapsed from the execution of the promissory notes until the filing ofthe action on June 1, 1934.



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BALUYUT VS POBLETEGR No. 144435 February 6, 2007

FACTS:

On July 20, 1981, Guillermina Baluyut, mortgaged her house to secure a loan in theamount of PhP850,000.00 from the spouses Eulogio and Salud Poblete. The load was set tomature in one month. After a month had passed, she was unable to pay her indebtedness whichled the spouses to extrajudicially foreclose the mortgage. The property was then sold on Auctionto the Poblete spouses who asked Baluyut to vacate the premises. Baluyut instead filed an actionfor annulment of mortgage. His claim was rejected by the RTC and the CA. Petitioner claimsthat based on the testimony of Atty. Edwina Mendoza that the maturity of the loan which sheincurred is only for one year.

ISSUE:

Is petitioner‘s contention tenable?

RULING:

Evidence of a prior or contemporaneous verbal agreement is generally not admissible tovary, contradict or defeat the operation of a valid contract. In the instant case, aside from thetestimony of Atty. Mendoza, no other evidence was presented to prove that the real date ofmaturity is one year.

The terms that were thusly reduced to writing is deemed to contain all the terms agreedupon and no evidence of such terms can be admitted other than the contents of the agreementitself. The promissory note is the law between petitioner and private respondents and it clearlystates that the loan shall mature in one month from date of the said Promissory Note.



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Manuel Melotindos vs. Melecio TobiasG.R. No. 146658, October 28, 2002

391 SCRA 299

FACTS:

Eighty-seven-year old petitioner, Atty. Manuel D. Melontindos, was the lessee of theground floor of a house in Malate, Manila. He had been renting the place since 1983 on amonth-to-month basis from its owner, respondent Melecio Tobias, who was then residing inCanada.

Sometime in the last quarter of 1995, owing to his sickly mother who needed constantmedical attention and filial care, respondent demanded from petitioner either to pay an increasedrate of monthly rentals or else to vacate the place so he and his mother could use the house

during her regular medical check-up in Manila. For two (2) years nothing came out of thedemand to vacate, hence, in 1997 respondent insisted upon raising the rental fee once again.

On 1 June 1998, respondent asked petitioner to restore the premises to him for someessential repairs of its dilapidated structure. This time he did not offer petitioner anymore theoption to pay higher rentals. The renovation of the house was commenced but had to stopmidway because petitioner refused to vacate the portion he was occupying and worse heneglected to pay for the lease for four (4) months from May to August 1998. Hence for thesecond time, or on 19 October 1998, respondent demanded the payment of the rental arrears aswell as the restoration of the house to him. On 3 February 1999, since petitioner was insisting onkeeping possession of the house but did not pay the rental for January 1999, although he hadsettled the arrears of four (4) months, respondent was compelled to file a complaint forejectment.

The MeTC of Manila decided the ejectment complaint in favor of respondent and ordered petitioner to vacate the leased premises and to pay rental arrears in the amount of P60,000.00 asof December 1998 and P6,000.00 for every month thereafter until he finally restored possessionthereof to respondent plus attorney‘s fees of P15,000.00 and the costs of suit. The RTC ofManila upheld in toto the MeTC Decision and denied the subsequent motion for reconsiderationfor failure to set the date of hearing thereof not later than ten (10) days from its filing.Petitioner‘s recourse to the Court of Appeals by petition for review was also unsuccessful sincethe assailed Decision was affirmed in its entirety as the ensuing motion for reconsiderationthereof was denied for late filling, i.e., the motion was filed only on 30 October 2000 beyond thefifteen (15) – day period from his receipt of the CA Decision on 9 October 2000 as shown by theregistry return receipt.

ISSUE:

Whether or not the lower courts erred in their rulings.

HELD:

It is not only the evidence on record but petitioner‘s pleadings themselves that confirmhis default in paying the rental fees for more than three (3) months in 1999 and 1998 prior to thefiling of the ejectment complaint. There is also sufficient basis for the courts a quo to concludethat respondent desperately needed the property in good faith for his own family and for therepair and renovation of the house standing thereon. These facts represent legal grounds to ejecta tenant.

The Petition for Review is DENIED for lack of merit.



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LL and Company Development vs. Huang Chao ChunG.R. No. 142378, March 7, 2000

378 SCRA 612

FACTS:

The case originated from an unlawful detainer case filed by petitioner before the trialcourt alleging that respondents Huang Chao Chun and Yang Tung Fa violated their amendedlease contract over a 1,112 square meter lot it owns, when they did not pay the monthly rentalsthereon in the total amount of P4,322,900.00. It also alleged that the amended lease contractalready expired on September 16, 1996 but respondents refused to surrender possession thereof plus the improvements made thereon, and pay the rental arrearages despite repeated demands.The parties entered into the amended lease contract sometime in August 1991. The sameamended the lease contract previously entered into by the parties on August 8, 1991.

Respondent were joined by the Tsai Chun International Resources Inc. in their answer to theComplaint, wherein they alleged that the actual lessee is the corporation. Respondents and thecorporation denied petitioner‘s allegations.

The MTC dismissed the case. The MTC ruled that the lessees could extend the contractentered into by the parties unilaterally for another five years for reasons of justice and equity. Italso ruled that the corporation‘s failure to pay the monthly rentals as they fell due was justified by the fact that petitioner refused to honor the basis of the rental increase as stated in their LeaseAgreement. This was affirmed by the RTC. It also held that the parties had a reciprocalobligation: unless and until petitioner presented ―the increased realty tax,‖ private respondentswere not under any obligation to pay the increased monthly rental. The decision was likewiseaffirmed by the Court of Appeals.

ISSUE:

Whether or not the court could still extend the term of the lease, after its expiration.

HELD:In general, the power of the courts to fix a longer term for a lease is discretionary. Such

power is to be exercised only in accordance with the particular circumstances of a case: a longerterm to be granted where equities demanding extension come into play; to be denied where noneappear -- always with due deference to the parties‘ freedom to contract. Thus, courts are not bound to extend the lease.Article 1675 of the Civil Code excludes cases falling under Article 1673 from those underArticle 1687. Article 1673 provides among others, that the lessor may judicially eject the lesseeupon the expiration of ―the period agreed upon or that, which is fixed for the duration of theleases.‖ Where no period has been fixed by the parties, the courts, pursuant to Article 1687,have the potestative authority to set a longer period of lease.In the case, the Contract of Lease provided for a fixed period of five (5) years -- ―specifically‖from September 16, 1991 to September 15, 1996. Because the lease period was for adeterminate time, it ceased, by express provision of Article 1669 of the Civil Code, ―on the dayfixed, without need of a demand.‖ Here, the five-year period expired on September 15, 1996,whereas the Complaint for ejectment was filed on October 6, 1996. Because there was no longerany lease that could be extended, the MeTC, in effect, made a new contract for the parties, a power it did not have.Furthermore, the extension of a lease contract must be made before the term of the agreementexpires, not after. Upon the lapse of the stipulated period, courts cannot belatedly extend ormake a new lease for the parties, even on the basis of equity. Because the Lease Contract endedon September 15, 1996, without the parties reaching any agreement for renewal, respondents can be ejected from the premises.



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Brent School vs. ZamoraG.R. No. L-48494, February 5, 1990

181 SCRA 702

FACTS:

The root of the controversy at bar is an employment contract in virtue of which DoroteoR. Alegre as engaged as athletic director by Brent School, Inc. at a yearly compensation ofP20,000. The contract fixed a specific term for its existence, five (5) years, i.e., from July 18,1971, the date of execution of the agreement, to July 17, 1976. Subsequent subsidiaryagreements dated March 15, 1973, August 28, 1973, and September 14, 1974 reiterated the sameterms and conditions, including the expiry date, as those contained in the original contract.

Some three (3) months before the expiration of the stipulated period, or more precisely onApril 20, 1976, Alegre was given a copy of the report filed by Brent School with the Department

of Labor advising of the termination of his services effective on July 16, 1976.

Alegre objected to this termination of his employment contending that since his serviceswere necessary and desirable in the usual business of his employer, and his employment hadlasted for five (5) years, he had acquired the status of a regular employee and could not beremoved except for valid cause.

ISSUE:

The issue is whether or not Alegre‘s contention is tenable.

HELD:

The provisions of the Labor Code recognize the existence and legality of termemployments. The case at bar is one which involves term employment. Therefore, Alegre‘semployment was terminated upon the expiration of his last contract with Brent School on July16, 1976 without the necessity of any notice. The advance written advice given the Departmentof Labor with copy to said petitioner was a mere reminder of the impending expiration of hiscontract, not a letter of termination, nor an application for clearance to terminate which neededthe approval of the Department of Labor to make the termination of his services effective. In anycase, such clearance should properly have been given, not denied.



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Lourdes Valerio Lim vs.People of the PhilippinesG.R. No. L-34338, November 21, 1984

133 SCRA 333

FACTS:

On January 10, 1966, the appellant, a businesswoman, went to the house of Maria Ayrosoand proposed to sell Ayroso‘s tobacco. Ayroso agreed to the proposition of the appellant to sellher tobacco consisting of 615 kilos at P1.30 a kilo. The appellant was to receive the overpricefor which she could sell the tobacco. This agreement was made in the presence of plaintiff‘ssister, Salud G. Bantug. Salvador Bantug drew the document dated January 10, 1966 in whichappellant acknowledged the receipt of the tobacco. In the document, the parties agreed that the proceeds of the sale will be given to Ayroso as soon as the tobaccos were sold.

Appellant subsequently failed to pay the entire obligation prompting Ayroso to file an

estafa case against her. Both the Court of First Instance and the Court of Appeals convicted herof the crime charged.

ISSUE:

Whether or not the provisions of Article 1197 of the Civil Code is applicable.

HELD:

It is clear in the agreement that the proceeds of the sale of the tobacco should be turnedover to the complainant as soon as the same was sold, or, that the obligation was immediatelydemandable as soon as the tobacco was disposed of. Hence, Article 1197 of the New Civil Code,which provides that the courts may fix the duration of the obligation if it does not fix a period,does not apply.

Anent the argument that petitioner was not an agent because the agreement does not saythat she would be paid the commission if the goods were sold, the fact that appellant received thetobacco to be sold at P1.30 per kilo and the proceeds to be given to complainant as soon as it wassold, strongly negates transfer of ownership of the goods to the petitioner. The agreementconstituted her as an agent with the obligation to return the tobacco if the same was not sold.



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Pacific Banking Corp. vs. Court of AppealsG.R. No. L-45656, May 5, 1989

173 SCRA 103

FACTS:

On April 15, 1955, private respondents Joseph and Eleanor Hart organized Insular FarmsInc. (Insular), applied for and after eleven (11) months, obtained a lease from the Department ofAgriculture for a period of twenty five (25) years and renewable for another twenty five (25)years. Subsequently, Joseph approached John Clarkin for financial assistance and the two signeda memorandum of agreement and that of 1,000 shares outstanding, so that Clarkin had 510shares against the Hart‘s. Hart was ap pointed President and General Manager of the First City National Bank.

Due to financial difficulty, Insular Farms Inc. borrowed P250, 000 from Pacific BankingCorp. (Pacific) in July of 1956. On July 31, 1956, Insular executed a promissory note of P250,000 to the bank payable in five (5) installments. Said note provided that in case there is default inthe payment of any installment due; all other installments shall become due and payable.

As the business further deteriorated, Har t agreed to Clarkin‘s proposal that all Insular‘sshares of stocks be pledged to petitioner bank in lieu of additional collateral and to insure anextension of the period to pay the July 1957 installment.On March 3, 1958, Pacific Farms Inc.was organized to engage in the same business as Insular‘s. The next day, Pacific wrote Insularhaving later forty-eight (48) hours to pay the entire obligation. On March 7, 1958, Hart receiveda notice that the pledged shares of stocks of Insular would be sold to public auction to satisfyInsular‘s obligation. Private respondents filed complaint for reconveyance and damages with theCFI of Manila, which was granted. The same was lifted on the motion of Pacific.

On March 21, 1958, Pacific sold Insular‘s shares of stocks to its own stockholders and thenresold them back to Pacific all of Insular‘s assets. On September 28, 1959, Joseph filed anothercomplaint for recovery of sum of money comprising his investments and earning against Insular.The Claims are dismissed so that the private respondents appealed to the Cain which the courtgranted the claims and ordered the petitioners to pay the private respondents the claims soughtfor.

ISSUE:

Whether or not the Court may fix a period in the parties‘ agreement to extend the paymentof the loan, including the installment which was due on or before July 1957 it being imprecise.

HELD:

In case the period of extension is not precise, the provisions of Article 1197 of the CivilCode should apply. The pledge executed as collateral security no longer contained a provision oninstallment due on or before July 1957. The pledge constituted on February 19, 1958 on theshares of stocks of Insular was sufficient consideration for the extension, considering that pledgewas additional collateral required by the Pacific in addition to the continuing guaranty of Carkin.Even the ledge did not provide for dates of payment of installments; or any fixed date formaturity of the whole indebtedness. Accordingly, the date of maturity of the indebtedness should be as may be determined by the court under Article 1197 of the Civil Code. Hence, the disputedforeclosure and subsequent sale were premature.



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ESTANISLAO REYES vs. SEBASTIANA MARTINEZ ET AL.,G.R. No. 32226 . DECEMBER 29, 1930.

FACTS:

Estanislao Reyes filed an action against the Martinez heirs in which the plaintiff seeks,among others, to recover five parcels of land, containing approximately one thousand coconuttrees, and to obtain a declaration of ownership in his own favor as against the defendants withrespect to said parcels. This cause of action is founded upon the contract, and the claim by the plaintiff is to have the five parcels adjudged to him in lieu of another parcel formerly supposed tocontain one thousand trees and described in paragraph 8 of the contract between him and certainof the Martinez heirs. By this contract Reyes was to be given the parcel described in clause 8, butin a proviso to said clause, the parties contracting with Reyes agreed to assure to him certainother land containing an equivalent number of trees in case he should so elect.

ISSUE:

Whether or not Reyes is entitled to the recovery of ownership of the five parcels of landsubject of this case.

RULING:

The prior history of the litigation shows that Reyes elected to take and hold the parceldescribed in clause 8, and his right thereto has all along been recognized in the dispositions made by the court with respect to said land. In our decision in Martinez vs. Graño (51 Phil., 287, 301),it was a basal assumption that Reyes would obtain the thousand trees referred to; and we are ofthe opinion that, from various steps taken in the prior litigation, Reyes must be taken to haveelected to take that particular parcel and he is now estopped from asserting a contrary election totake the five parcels of land described in paragraph IX of his complaint.

However, the title to the parcel of land elected by Reyes is in the heirs of InocenteMartinez and it does not appear that they have transferred said title to Reyes. It results thereforethat Reyes now has a claim for damages against the parties signatory to the contract of March 5,1921, for the value of the aforesaid property. We therefore reach the conclusion that Reyesshould either have the land originally set apart for him under clauses 4 and 8 of the contract, or,in case his right thereto should fail, he should not be required to pay the judgment for P8,000which was awarded to the Martinez heirs in Martinez vs. Graño (51 Phil., 287, 302).



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QUIZANA VS REDUGORIOGR No. L-6620 May 7, 1954

FACTS:

This is an appeal to this Court from a decision rendered by the Court of First Instance ofMarinduque, wherein the defendants-appellants are ordered to pay the plaintiff-appellee the sumof P550, with interest from the time of the filing of the complaint, and from an order of the samecourt denying a motion of the defendants-appellants for the reconsideration of the judgment onthe ground that they were deprived of their day in court.

ISSUE:

What is the nature and effect of the actionable document mentioned above?

RULING:

The decisive question at issue, therefore, is whether the second part of the writtenobligation, in which the obligors agreed and promised to deliver a mortgage over the parcel ofland described therein, upon their failure to pay the debt on a date specified in the proceeding paragraph, is valid and binding and effective upon the plaintiff-appellee, the creditor. Thissecond part of the obligation in question is what is known in law as a facultative obligation,defined in article 1206 of Civil Code of the Philippines, which provides:

ART. 1206. When only one prestation has been agreed upon, but the obligor mayrender another in substitution, the obligation is called facultative.

There is nothing in the agreement which would argue against its enforcement. it is notcontrary to law or public morals or public policy, and notwithstanding the absence of any legal provision at the time it was entered into government it, as the parties had freely and voluntarilyentered into it, there is no ground or reason why it should not be given effect. It is a new rightwhich should be declared effective at once.



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PH CREDIT CORP VS CAGR No. 109648 November 22, 2001

FACTS:

PH Credit Corp., filed a case against Pacific Lloyd Corp., Carlos Farrales, Thomas H. VanSebille and Federico C. Lim, for [a] sum of money. The case was docketed as Civil Case No.83-17751 before the Regional Trial Court, Branch 51, Manila. After service of summons uponthe defendants, they failed to file their answer within the reglementary period, hence they weredeclared in default. PH Credit Corp., was then allowed to present its evidence ex-parte. TheRTC judged in favor of PH Credit Corp.

On July 27, 1990, a motion for the issuance of a writ of possession was filed and onOctober 12, 1990, the same was granted. The writ of possession itself was issued on October 26,1990. Said order and writ of possession are now the subject of this petition. Petitioner claims

that Respondent Judge erred in applying the presumption of a joint obligation in the face of theconclusion of fact and law contained in the decision showing that the obligation is solidary.

ISSUE:

Is the petitioner‘s contention tenable?

RULING:

The Rules of Court requires that all available objections to a judgment or proceeding must be set up in an Omnibus Motion assailing it; otherwise, they are deemed waived. In the case at bar, the objection of private respondent to his solidary liability became available to him, onlyafter his real property was sold at public auction. At the time his personal properties were leviedand sold, it was not evident to him that he was being held solely liable for the monetary judgment rendered against him and his co-respondents. That was why his objections then did notinclude those he asserted when his solidary liability became evident.

In the dispositive portion of the January 31, 1984 Decision of the trial court, the wordsolidary neither appears nor can it be inferred therefrom. The fallo merely stated that thefollowing respondents were liable: Pacific Lloyd Corporation, Thomas H. Van Sebille, Carlos M.Farrales and Federico C. Lim. Under the circumstances, the liability is joint, as provided by theCivil Code.

We should stress that respondent‘s obligation is based on the judgment rendered by thetrial court. The dispositive portion or the fallo is its decisive resolution and is thus the subject ofexecution. The other parts of the decision may be resorted to in order to determine the ratiodecidendi for the disposition. Where there is a conflict between the dispositive part and theopinion of the court contained in the text or body of the decision, the former must prevail overthe latter on the theory that the dispositive portion is the final order, while the opinion is merely astatement ordering nothing. Hence the execution must conform with that which is ordained ordecreed in the dispositive portion of the decision.



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INDUSTRIAL MANAGEMENT VS NLRCGR No. 101723 May 11, 2000

FACTS:

This is a petition for certiorari assailing the Resolution dated September 4, 1991 issued bythe National Labor Relations Commission in RAB-VII-0711-84 on the alleged ground that itcommitted a grave abuse of discretion amounting to lack of jurisdiction in upholding the AliasWrit of Execution issued by the Labor Arbiter which deviated from the dispositive portion of theDecision dated March 10, 1987, thereby holding that the liability of the six respondents in a caseadjudicated by the NLRC is solidary despite the absence of the word "solidary" in the dispositive portion of the Decision, when their liability should merely be joint.

ISSUE:

Is the petitioner‘s liability pursuant to the Decision of the Labor Arbiter dated March 10,1987, solidary or not?

RULING:

In the dispositive portion of the Labor Arbiter, the word "solidary" does not appear. Thesaid fallo expressly states the following respondents therein as liable, namely: Filipinas Carbonand Mining Corporation, Gerardo Sicat, Antonio Gonzales, Industrial Management DevelopmentCorporation (petitioner INIMACO), Chiu Chin Gin, and Lo Kuan Chin. Nor can it be inferredtherefrom that the liability of the six (6) respondents in the case below is solidary, thus theirliability should merely be joint.

Moreover, it is already a well-settled doctrine in this jurisdiction that, when it is not provided in a judgment that the defendants are liable to pay jointly and severally a certain sum ofmoney, none of them may be compelled to satisfy in full said judgment. Granting that the LaborArbiter has committed a mistake in failing to indicate in the dispositive portion that the liabilityof respondents therein is solidary, the correction -- which is substantial -- can no longer beallowed in this case because the judgment has already become final and executory.



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INCIONG VS. COURT OF APPEALSG.R. No. 96405, June 26, 1996

FACTS:

On February 3, 1983, petitioner Baldomero L. Inciong, Jr. together with Rene C. Naybeand Gregorio D. Pantanosas signed a promissory note in the amount of P50, 000.00 holdingthemselves jointly and severally liable to private respondent Philippine Bank ofCommunications. The promissory note was due on May 5, 1983. Said due date expired withoutthe promissors having paid their obligation.

On November 14, 1983 and on June 8, 1984, private respondent sent petitioner telegramsdemanding payment thereof. On December 11, 1983, private respondent also sent registered maila final letter of demand to Rene C. Naybe. Since both obligors did not respond to the demand

made, private respondent filed on January 24, 1986 a complaint for collection of the sum of P50,000.00 against the three (3) obligors. On January 27, 1987, the lower court dismissed the caseagainst defendant Pantanosas as prayed by herein private respondent. Meanwhile, only thesummons addressed to petitioner was served for the reason that defendant Naybe had gone toSaudi Arabia.

The lower court rendered its decision holding petitioner solidarily liable and to payherein respondent bank the amount of P50, 000.00 plus interest thereon. Petitioner appealed thesaid decision to the Court of Appeals. The respondent court, however, affirmed the decision ofthe lower court. The petitioner moved for reconsideration, which was later on denied by therespondent Court of Appeals.

ISSUE:

Whether or not the dismissal of the complaint against Naybe, the principal debtor, andagainst Pantanosas, his co-maker, constituted a release of his obligation.

HELD:

The dismissal of the complaint against Naybe and Pantanosas did not constitute arelease of petitioner‘s obligation, especially because the dismissal of the case against Pantanosaswas upon the motion of private respondent itself. Petitioner signed the promissory note as asolidary co-maker and not as a guarantor. A solidary or joint and several obligation is one inwhich each debtor is liable for the entire obligation, and each creditor is entitled to demand thewhole obligation. The promissory note involved in this case expressly states that the threesignatories therein are jointly and severally liable, any one, some or all of them may be proceeded against for the entire obligation. The choice is left to the solidary creditor to determineagainst whom he will enforce collection

Under Article 1207 of the Civil Code, when there are two or more debtors in one andthe same obligation, the presumption is that the obligation is joint so that each of the debtors isliable only for a proportionate part of the debt. There is solidary liability only when theobligation expressly so states, when the law so provides or when the nature of the obligation sorequires.



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CERNA VS CAGR No. L-48359 March 30, 1993

FACTS:

On or about October 16, 1972, Celerino Delgado (Delgado) and Conrad Leviste (Leviste)entered into a loan agreement which was evidenced by a promissory note worded as follows:FOR VALUE RECEIVED, I, CELERINO DELGADO, with postal address at 98 K-11 St.,Kamias Rd., Quezon City, promise to pay to the order of CONRAD C. LEVISTE, NINETY (90)DAYS after date, at his office at 215 Buendia Ave., Makati, Rizal, the total sum ofSEVENTEEN THOUSAND FIVE HUNDRED (P17,500.00) PESOS, Philippine Currency,without necessity of demand, with interest at the rate of TWELVE (12%) PERCENT per annumOn the same date, Delgado executed a chattel mortgage over a Willy's jeep owned by him. Andacting as the attorney-in-fact of herein petitioner, Manolo P. Cerna (petitioner), he also

mortgaged a "Taunus" car owned by the latter. The period lapsed without Delgado paying theloan. This prompted Leviste to file a collection suit docketed as Civil Case No. 17507 with theCourt of First Instance of Rizal, Branch XXII against Delgado and petitioner as solidary debtors.The Court of Appeals held that petitioner and Delgado were solidary debtors.

ISSUE:

Are petitioner and Delgado solidary debtors?

RULING:

Only Delgado signed the promissory note and accordingly, he was the only one bound bythe contract of loan. Nowhere did it appear in the promissory note that petitioner was a co-debtor. The law is clear that "(c)ontracts take effect only between the parties. But by somestretch of the imagination, petitioner was held solidarily liable for the debt allegedly because hewas a co-mortgagor of the principal debtor, Delgado. This ignores the basic precept that "(t)hereis a solidary liability only when the obligation expressly so states, or when the law or the natureof the obligation requires solidarity." We have already stated that the contract of loan, asevidenced by the promissory note, was signed by Delgado only. Petitioner had no part in the saidcontract. Thus, nowhere could it be seen from the agreement that petitioner was solidarily boundwith Delgado for the payment of the loan.



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REPUBLIC OF THE PHILIPPINES vs.THI THU THUY T. DE GUZMANG.R. No. 175021 June 15, 2011

FACTS:

Respondent is a contractor accredited by the PNP for the supply of office and constructionmaterials and equipment, and for the delivery of various services such as printing and rental,repair of various equipment, and renovation of buildings, facilities, vehicles, tires, and spare parts. On December 8, 1995, the PNP Engineering Services (PNPES), released a Requisition andIssue Voucher for the acquisition of various building materials amounting to (P2,288,562.60) forthe construction of a four-storey condominium building with roof deck at Camp Crame, QuezonCity. Respondent averred that on December 11, 1995, MGM and petitioner, represented by thePNP, through its chief, executed a Contract of Agreement8 (the Contract) wherein MGM, for the price of P2,288,562.60, undertook to procure and deliver to the PNP the construction materialsitemized in the purchase order attached to the Contract. Respondent claimed that after the PNPChief approved the Contract and purchase order, MGM, on March 1, 1996, proceeded with the

delivery of the construction materials, as evidenced by Delivery Receipts and Sales Invoices andthe "Report of Public Property Purchase" issued by the PNP‘s Receiving and AccountingOfficers to their Internal Auditor Chief. Respondent asseverated that following the PNP‘sinspection of the delivered materials on March 4, 1996, the PNP issued two DisbursementVouchers; one in the amount of P2,226,147.26 in favor of MGM, and the other, in the amount ofP62,415.34, representing the three percent (3%) withholding tax, in favor of the BIR.

ISSUE:What is the proper interest to be awarded?

RULING:

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loanor forbearance of money, the interest due should be that which may have been stipulated inwriting. Furthermore, the interest due shall itself earn legal interest from the time it is judiciallydemanded. In the absence of stipulation, the rate of interest shall be 12% per annum to becomputed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an intereston the amount of damages awarded may be imposed at the discretion of the court at the rate of6% per annum. No interest, however, shall be adjudged on unliquidated claims or damagesexcept when or until the demand can be established with reasonable certainty. Accordingly,where the demand is established with reasonable certainty, the interest shall begin to run fromthe time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when suchcertainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time thequantification of damages may be deemed to have been reasonably ascertained). The actual basefor the computation of legal interest shall, in any case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, therate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.84

Since the obligation herein is for the payment of a sum of money, the legal interest rate to beimposed, under Article 2209 of the Civil Code is six percent (6%) per annum.



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Marques vs. Far East BankG.R. No. 171379, January 10, 2011

Facts:

Maxilite Technologies, Inc. (Maxilite) is a domestic corporation engaged in theimportation and trading of equipment for energy-efficiency systems. Jose N. Marques (Marques)is the President and controlling stockholder of Maxilite. Far East Bank and Trust Co. (FEBTC) isa local bank which handled the financing and related requirements of Marques and Maxilite.Marques and Maxilite maintained accounts with FEBTC. Accordingly, FEBTC financedMaxilite‘s capital and operational requirements through loans secured with properties ofMarques under the latter‘s name. Far East Bank Insurance Brokers, Inc. (FEBIBI) is a localinsurance brokerage corporation while Makati Insurance Company is a local insurance company.Both companies are subsidiaries of FEBTC. On 17 June 1993, Maxilite and Marques entered intoa trust receipt transaction with FEBTC, in the sum of US$80,765.00, for the shipment of various

high-technology equipments from the United States, with the merchandise serving as collateral.The foregoing importation was covered by a trust receipt document signed by Marques on behalfof Maxilite. Sometime in August 1993, FEBIBI, upon the advice of FEBTC, facilitated the procurement and processing from Makati Insurance Company of four separate and independentfire insurance policies over the trust receipted merchandise. Finding that Maxilite failed to paythe insurance premium in the sum of P8,265.60 for Insurance Policy No. 1024439 covering the period 24 June 1994 to 24 June 1995, FEBIBI sent written reminders to FEBTC, dated 19October 1994, 24 January 1995, and 6 March 1995, to debit Maxilite‘s account. On 24 and 26October 1994, Maxilite fully settled its trust receipt account. On 9 March 1995, a fire gutted theAboitiz Sea Transport Building along M.J. Cuenco Avenue, Cebu City, where Maxilite‘s officeand warehouse were located. As a result, Maxilite suffered losses amounting to at least P2.1million, which Maxilite claimed against the fire insurance policy with Makati InsuranceCompany. Makati Insurance Company denied the fire loss claim on the ground of non-paymentof premium. FEBTC and FEBIBI disclaimed any responsibility for the denial of the claim.

Issue:

Whether FEBTC, FEBIBI and Makati Insurance Company are jointly and severally liableto pay respondents the full coverage of the subject insurance policy?

Held:

Contrary to Maxilite‘s and Marques‘ view, FEBTC is solely liable for the payment of theface value of the insurance policy and the monetary awards stated in the Court of Appeals‘decision. Suffice it to state that FEBTC, FEBIBI, and Makati Insurance Company areindependent and separate juridical entities, even if FEBIBI and Makati Insurance Company aresubsidiaries of FEBTC. Absent any showing of its illegitimate or illegal functions, a subsidiary‘sseparate existence shall be respected, and the liability of the parent corporation as well as thesubsidiary shall be confined to those arising in their respective business. Besides, the records are bereft of any evidence warranting the piercing of corporate veil in order to treat FEBTC,FEBIBI, and Makati Insurance Company as a single entity. Likewise, there is no evidenceshowing FEBIBI‘s and Makati Insurance Company‘s negligence as regards the non-payment ofthe insurance premium.



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PRISMA CONSTRUCTION & DEVELOPMENT CORPORATION vs.MENCHAVEZG.R. No. 160545 March 9, 2010

FACTS:

On December 8, 1993, Pantaleon, the President and Chairman of the Board of PRISMA,obtained a P1,000,000.00 loan from the respondent, with a monthly interest of P40,000.00 payable for six months, or a total obligation of P1,240,000.00 to be paid within six (6) months.To secure the payment of the loan, Pantaleon issued a promissory note. As of January 4, 1997,the petitioners had already paid a total of P1,108,772.00. However, the respondent found that the petitioners still had an outstanding balance of P1,364,151.00 as of January 4, 1997, to which itapplied a 4% monthly interest. Thus, on August 28, 1997, the respondent filed a complaint forsum of money with the RTC to enforce the unpaid balance, plus 4% monthly interest,P30,000.00 in attorney‘s fees, P1,000.00 per court appearance and costs of suit.

ISSUE:

What is the proper interest rate to be awarded?

RULING:

In the present case, the respondent issued a check for P1,000,000.00. In turn, Pantaleon, in his personal capacity and as authorized by the Board, executed the promissory note quoted above.Thus, the P1,000,000.00 loan shall be payable within six (6) months, or from January 8, 1994 upto June 8, 1994. During this period, the loan shall earn an interest of P40,000.00 per month, for atotal obligation of P1,240,000.00 for the six-month period. We note that this agreed sum can becomputed at 4% interest per month, but no such rate of interest was stipulated in the promissorynote; rather a fixed sum equivalent to this rate was agreed upon.

Article 1956 of the Civil Code specifically mandates that "no interest shall be due unless it has been expressly stipulated in writing." Under this provision, the payment of interest in loans orforbearance of money is allowed only if: (1) there was an express stipulation for the payment ofinterest; and (2) the agreement for the payment of interest was reduced in writing. Theconcurrence of the two conditions is required for the payment of interest at a stipulated rate.Thus, we held in Tan v. Valdehueza and Ching v. Nicdao that collection of interest without anystipulation in writing is prohibited by law.

Applying this provision, we find that the interest of P40,000.00 per month corresponds only tothe six (6)-month period of the loan, or from January 8, 1994 to June 8, 1994, as agreed upon bythe parties in the promissory note. Thereafter, the interest on the loan should be at the legalinterest rate of 12% per annum, consistent with our ruling in Eastern Shipping Lines, Inc. v.Court of Appeals:

When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan orforbearance of money, the interest due should be that which may have been stipulated in writing.Furthermore, the interest due shall itself earn legal interest from the time it is judiciallydemanded. In the absence of stipulation, the rate of interest shall be 12% per annum to becomputed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code."



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THERESA MACALALAG vs. PEOPLE OF THE PHILIPPINESG.R. No. 164358 December 20, 2006

FACTS:

On two separate occasions, particularly on 30 July 1995 and 16 October 1995, petitionerTheresa Macalalag obtained loans from Grace Estrella (Estrella), each in the amount ofP100,000.00, each bearing an interest of 10% per month. Macalalag consistently paid theinterests. Finding the interest rates so burdensome, Macalalag requested Estrella for a reductionof the same to which the latter agreed. On 16 April 1996 and 1 May 1996, Macalalag executedAcknowledgment/Affirmation Receipts promising to pay Estrella the face value of the loans inthe total amount of P200,000.00 within two months from the date of its execution plus 6%interest per month for each loan. Under the two Acknowledgment/Affirmation Receipts, shefurther obligated herself to pay for the two (2) loans the total sum of P100,000.00 as liquidateddamages and attorney's fees in the total sum of P40,000.00 as stipulated by the parties the

moment she breaches the terms and conditions thereof.

As security for the payment of the aforesaid loans, Macalalag issued two Philippine National Bank (PNB) Checks on 30 June 1996, each in the amount of P100,000.00, in favor ofEstrella. However, the said checks were dishonored for the reason that the account against whichthe same was drawn was already closed. Estrella sent a notice of dishonor and demand to makegood the said checks to Macalalag, but the latter failed to do so. Hence, Estrella filed twocriminal complaints for Violation of Batas Pambansa Blg. 22 before the Municipal Trial Court inCities (MTCC) of Bacolod City.The MTCC found the accused Theresa Macalalag guilty beyondreasonable doubt of the crime charged and is likewise ordered to pay as civil indemnity the totalamount of P200,000.00 with interest at the legal rate from the time of the filing of theinformations until the amount is fully paid; less whatever amount was thus far paid and validlydeducted from the principal sum originally claimed. On appealed, the Court of Appeals, affirmedthe RTC and the MTCC decisions with modification to the effect that accused was convictedonly of one (1) count of Violation of Batas Pambansa Blg. 22.

ISSUE:

Whether petitioner`s payments over and above the value of the said checks would freeher from criminal liability.

RULING:

The Court argued that, ―Even if we agree with petitioner Macalalag that the interests onher loans should not be imputed to the face value of the checks she issued, petitioner Macalalagis still liable for Violation of Batas Pambansa Blg. 22. Petitioner Macalalag herself declares that before the institution of the two cases against her, she has made a total payment of P156,000.00.Applying this amount to the first check (No. C-889835), what will be left is P56,000.00, anamount insufficient to cover her obligation with respect to the second check. As stated above,when Estrella presented the checks for payment, the same were dishonored on the ground thatthey were drawn against a closed account. Despite notice of dishonor, petitioner Macalalag failedto pay the full face value of the second check issued.

Only a full payment of the face value of the second check at the time of its presentmentor during the five-day grace period15 could have exonerated her from criminal liability. Acontrary interpretation would defeat the purpose of Batas Pambansa Blg. 22, that of safeguardingthe interest of the banking system and the legitimate public checking account user,16 as thedrawer could very well have himself exonerated by the mere expediency of paying a minimalfraction of the face value of the check. Hence, the Petition is denied.



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Tan vs. Court f AppealsG.R. No. 116285, October 19, 2001

367 SCRA 571

FACTS:

On May 14, 1978, petitioner Antonio Tan obtained two (2) loans in the total principalamount of four (4) million pesos from respondent Cultural Center of the Philippines (CCP),evidenced by 2 promissory notes with maturity dates on May 14, 1979 and July 6, 1979,respectively. Petitioner defaulted but after a few partial payments he had the loans restructured by respondent CCP, and petitioner accordingly executed a promissory note on August 31, 1979in the amount of P3,411,421.32 payable in five (5) installments. Petitioner Tan, however, failedto pay any of the supposed installments and again offered another mode of paying restructuredloan which respondent CCP refused to consent.

On May 30, 1984, respondent, thru counsel, wrote petitioner demanding the full payment, within ten (10) days, from receipt of the letter, of the latter‘s restructured loan which asof April 30, 1984 amounted to P6, 088,735.03.

On August 29, 1984, respondent CCP filed with the RTC of Manila a complaint for acollection of a sum of money. Eventually, petitioner was ordered to pay said amount, with 25%thereof as attorney‘s fees and P500, 000.00 as exemplary damages. The Court of Appeals, onappeal, reduced the attorney‘s fees to 5% of the principal amount to be collected from petitionerand deleted the exemplary damages.

Still unsatisfied with the decision, petitioner comes to this Court seeking for the deletionof the attorney‘s fees and the reduction of the penalties.

ISSUE:

The issue is whether or not interests and penalties may be both awarded in the case at bar.

HELD:

YES. Article 1226 of the New Civil Code provides that in obligations with a penalclause, the penalty shall substitute the indemnity for damages and the payment of interests incase of non-compliance, if there is no stipulation to the contrary. Nevertheless, damages shall be paid if the obligor refuses to pay the penalty or is guilty of fraud in the fulfillment of theobligation. The penalty may be enforced only when it is demandable in accordance with the provisions of this Code. In the case at bar, the promissory note expressly provides for theimposition of both interest and penalties in case of default on the part of the petitioner in the payment of the subject restructured loan, and since the said stipulation has the force of law between the parties and does not appear to be inequitable or unjust, the said stipulation must berespected.



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EASTERN SHIPPING INES, INC vs. HON. COURT OF APPEALSG.R. No. 97412 Jul 12, 1994

FACTS:

On December 4, 1981, two fiber drums of riboflavin were shipped from Yokohama,Japan for delivery vessel `SS EASTERN COMET' owned by defendant Eastern Shipping Linesunder Bill of Lading No. YMA-8 (The shipment was insured under plaintiff's Marine InsurancePolicy No. 81/01177 for P36,382,466.38.

Upon arrival of the shipment in Manila on December 12, 1981, it was discharged unto thecustody of defendant Metro Port Services, Inc. The latter excepted to one drum, said to be in badorder, which damage was unknown to plaintiff. On January 7, 1982 defendant Allied BrokerageCorporation received the shipment from defendant Metro Port Service, Inc., one drum openedand without. On January 8 and 14, 1982, defendant Allied Brokerage Corporation made

deliveries of the shipment to the consignees' warehouse. The latter excepted to one drum whichcontained spillages, while the rest of the contents was adulterated/fake Plaintiff contended thatdue to the losses/damage sustained by said drum, the consignee suffered losses totalingP19,032.95, due to the fault and negligence of defendants. Claims were presented againstdefendants who failed and refused to pay the same "As a consequence of the losses sustained, plaintiff was compelled to pay the consignee P19,032.95 under the aforestated marine insurance policy, so that it became subrogated to all the rights of action of said consignee againstdefendants.

ISSUE:

a.)Whether the payment of legal interest on an award for loss or damage is to be computed fromthe time the complaint is filed or form the date the decision appealed from is rendered; and b)Whether the applicable rate of interest is twelve percent or six percent.

HELD:

When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts orquasi-delicts is breached, the contravenor can be held liable for damages. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rateof interest, as well as the accrual thereof, is imposed, as follows:1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loanor forbearance of money, the interest due should be that which may have been stipulated inwriting. Furthermore, the interest due shall itself earn legal interest from the time it is judiciallydemanded. In the absence of stipulation, the rate of interest shall be 12% per annum to becomputed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 23 of the Civil Code.2. When a obligation, not constituting a loan or forbearance of money, is breached, an interest onthe amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages exceptwhen or until the demand can be established with reasonable certainty. Accordingly, where thedemand is established with reasonable certainty, the interest shall begin to run from the time theclaim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run onlyfrom the date of the judgment of the court is made (at which time the quantification of damagesmay be deemed to have been reasonably ascertained).3. When the judgment of the court awarding a sum of money becomes final and executory, therate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.



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PCI vs Ng Shueng NgorA.M. No. P-05-1973. March 18, 2005

FACTS:

Complainant EPCIB is the defendant in Civil Case No. CEB-26983 before the RegionalTrial Court (RTC), Branch 16, Cebu City, entitled, ―Ng Sheung Ngor, doing business under thename and style ‗Ken Marketing,‘ Ken Appliance Division, Inc. and Benjamin Go, Plaintiffs, vs.Equitable PCI Bank, Aimee Yu and Ben Apas, Defendants‖ for Annulment and/or Reformationof Documents and Contracts.Respondents Antonio A. Bellones and Generoso B. Regalado are the sheriffs in Branches 9 and16, respectively, of the RTC of Cebu City.

For garnishing accounts maintained by Equitable PCI Bank, Inc. (EPCIB) at Citibank, N.A., and Hongkong and Shanghai Bank Corporation (HSBC), allegedly in violation of Section

9(b) of Rule 39 of the Rules of Court, a complaint for grave abuse of authority was filed by Atty.Paulino L. Yusi against Sheriffs Antonio A. Bellones and Generoso B. Regalado. There was anoffer of other real property by petitioner.

ISSUE:

Did respondents violate the Rules of Court?

RULING:

By serving notices of garnishment on Citibank, N.A., HSBC and PNB, Sheriff Regaladoviolated EPCIB‘s right to choose which property may be levied upon to be sold at auction for thesatisfaction of the judgment debt. Thus, it is clear that when EPCIB offered its real properties, itexercised its option because it cannot immediately pay the full amount stated in the writ ofexecution and all lawful fees in cash, certified bank check or any other mode of paymentacceptable to the judgment obligee.

In the case at bar, EPCIB cannot immediately pay by way of Manager‘s Check so itexercised its option to choose and offered its real properties. With the exercise of the option,Sheriff Regalado should have ceased serving notices of garnishment and discontinued theirimplementation. This is not true in the instant case. Sheriff Regalado was adamant in his posture even if real properties have been offered which were sufficient to satisfy the judgmentdebt.



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POLOTAN VS CAGR No. 119379 September 25, 1998

FACTS:

Private respondent Security Diners International Corporation (Diners Club), a creditcard company, extends credit accomodations to its cardholders for the purchase of goods andother services from member establishments. Said goods and services are reimbursed later on bycardholders upon proper billing. Petitioner Rodelo G. Polotan, Sr. applied for membership andcredit accmodations with Diners Club in October 1985. The application form contained termsand conditions governing the use and availment of the Diners Club card, among which is for thecardholder to pay all charges made through the use of said card within the period indicated in thestatement of account and any remaining unpaid balance to earn 3% interest per annum plus prime rate of Security Bank & Trust Company. Notably, in the application form submitted by petitioner, Ofricano Canlas obligated himself to pay jointly and severally with petitioner the

latter‘s obligation to private respondent.

Upon acceptance of his application, petitioner was issued Diners Club card No. 3651-212766-3005. As of May 8, 1987, petitioner incurred credit charges plus appropriate interest andservice charges in the aggregate amount of P33,819.84 which had become due and demandable.Demands for payment made against petitioner proved futile. Hence, private respondent filed aComplaint for Collection of Sum of Money against petitioner before the lower court.

ISSUE:

Is petitioner liable for payment of credit charges plus interest and service charges?

RULING:

A contract of adhesion is one in which one of the contracting parties imposes a ready-made form of contract which the other party may accept or reject, but cannot modify. One party prepares the stipulation in the contract, while the other party merely affixes his signature or his―adhesion‖ thereto, giving no room for negotiation and depriving the latter of the opportunity to bargain on equal footing. Nevertheless, these types of contracts have been declared as binding asordinary contracts, the reason being that the party who adheres to the contract is free to reject itentirely.

In this case, petitioner, in effect, claims that the subject contract is one-sided in that thecontract allows for the escalation of interests, but does not provide for a downward adjustment ofthe same in violation of Central Bank Circular 905. Admittedly, the second paragraph of thequestioned proviso which provides that ―the Cardholder hereby authorizes Security Diners tocorrespondingly increase the rate of such interest in the event of changes in prevailing marketrates x x x‖ is an escalation clause. However, it cannot be said to be dependent solely on the willof private respondent as it is also dependent on the prevailing market rates.

Escalation clauses are not basically wrong or legally objectionable as long as they arenot solely potestative but based on reasonable and valid grounds. Obviously, the fluctuation inthe market rates is beyond the control of private respondent.



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the PNB Dagupan Branch sent demand letters to Petitioner NSBCI at its office address at 1611ERDC Building, E. Rodriguez Sr. Avenue, Quezon City, asking it to settle its past due loanaccount.

Petitioners nevertheless failed to pay their loan obligations within the time framegiven them and as a result, Respondent PNB filed with the Provincial Sheriff of Pangasinan at

Lingayen a Petition for SaleThe sheriff foreclosed the real estate mortgage and sold at public auction the mortgaged properties of petitioner-spouses, with Respondent PNB being declared the highest bidder for theamount of P10,334,000.00. Copies of the Sheriff‘s Certificate of Sale were sent by registeredmail to petitioner corporation‘s address petitioner -spouses‘ address.

On April 6, 1992, the PNB Dagupan Branch Manager sent a letter to petitioners at theiraddress informing them that the properties securing their loan account had been sold at publicauction, that the Sheriff‘s Certificate of Sale had been registered with the Registry of Deeds ofPangasinan and that a period of one (1) year therefrom was granted to them within which toredeem their properties. Petitioners failed to redeem their properties within the one-yearredemption period and so Respondent PNB executed a Deed of Absolute Sale consolidating title

to the properties in its name.Respondent PNB informed Petitioner NSBCI that the proceeds of the sale conducted onFebruary 26, 1992 were not sufficient to cover its total claim amounting to P12,506,476.43 andthus demanded from the latter the deficiency of P2,172,476.43 plus interest and other chargesuntil the amount was fully paid. Petitioners refused to pay the above deficiency claim whichcompelled Respondent PNB to institute the instant Complaint for the collection of its deficiencyclaim.

ISSUE:

Whether or not the escalation clause is valid and whether or not it is violative of the principle of mutuality of contracts.

RULING:In each drawdown, the Promissory Notes specified the interest rate to be charged: 19.5

percent in the first, and 21.5 percent in the second and again in the third. However, a uniformclause therein permitted respondent to increase the rate ―within the limits allowed by law at anytime depending on whatever policy it may adopt in the future x x x,‖ without even giving priornotice to petitioners. The Court holds that petitioners‘ accessory duty to pay interest did not giverespondent unrestrained freedom to charge any rate other than that which was agreed upon. Nointerest shall be due, unless expressly stipulated in writing. It would be the zenith of farcicalityto specify and agree upon rates that could be subsequently upgraded at whim by only one partyto the agreement.

The ―unilateral determination and imposition‖ of increased rates is ―violative of the principle of mutuality of contracts ordained in Article 1308 of the Civil Code.‖ One-sidedimpositions do not have the force of law between the parties, because such impositions are not based on the parties‘ essential equality.

Although escalation clauses are valid in maintaining fiscal stability and retaining thevalue of money on long-term contracts, giving respondent an unbridled right to adjust the interestindependently and upwardly would completely take away from petitioners the ―right to assent toan important modification in their agreement‖ and would also negate the element of mutuality intheir contracts. The clause cited earlier made the fulfillment of the contracts ―dependentexclusively upon the uncontrolled will‖ of respondent and was therefore void. Besides, the proforma promissory notes have the character of a contract d‘adhésion, ―where the parties do not bargain on equal footing, the weaker party‘s the debtor‘s participation being reduced to thealternative ‗to take it or leave it.‘‖



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JOSEPH CHAN, WILSON CHAN and LILY CHAN VS. BONIFACIO S. MACEDA, JR402 SCRA

G.R. No. 142591 352 2003 Apr 30

FACTS:

On July 28, 1976, Bonifacio S. Maceda, Jr., herein respondent, obtained a P7.3 millionloan from the Development Bank of the Philippines for the construction of his New Gran HotelProject in Tacloban City. Thereafter, on September 29, 1976, respondent entered into a buildingconstruction contract with Moreman Builders Co., Inc. They agreed that the construction would be finished not later than December 22, 1977. Respondent purchased various constructionmaterials and equipment in Manila. Moreman, in turn, deposited them in the warehouse ofWilson and Lily Chan, herein petitioners. The deposit was free of charge. Unfortunately,Moreman failed to finish the construction of the hotel at the stipulated time. Hence, on February1, 1978, respondent filed with the then CFI an action for rescission and damages againstMoreman. On November 28, 1978, the CFI rendered its Decision rescinding the contract

between Moreman and respondent and awarding to the latter P445,000.00 as actual, moral andliquidated damages; P20,000.00 representing the increase in the construction materials; andP35,000.00 as attorney‘s fees. Moreman interposed an appeal to the Court of Appeals but thesame was dismissed on March 7, 1989 for being dilatory. He elevated the case to the SC via a petition for review on certiorari. In a Decision dated February 21, 1990, the Court denied the petition. On April 23, 1990 an Entry of Judgment was issued.

Meanwhile, during the pendency of the case, respondent ordered petitioners to return tohim the construction materials and equipment which Moreman deposited in their warehouse.Petitioners, however, told them that Moreman withdrew those construction materials in 1977.Hence, on December 11, 1985, respondent filed with the RTC an action for damages with anapplication for a writ of preliminary attachment against petitioners.

ISSUE:

Whether or not respondent have the right to demand the release of the said materials andequipment or claim for damages.

RULING:

At the outset, the case should have been dismissed outright by the trial court because of patent procedural infirmities. Even without such serious procedural flaw, the case should also bedismissed for utter lack of merit. Under Article 1311 of the Civil Code, contracts are bindingupon the parties (and their assigns and heirs) who execute them. When there is no privity ofcontract, there is likewise no obligation or liability to speak about and thus no cause of actionarises. Specifically, in an action against the depositary, the burden is on the plaintiff to prove the bailment or deposit and the performance of conditions precedent to the right of action. Adepositary is obliged to return the thing to the depositor, or to his heirs or successors, or to the person who may have been designated in the contract.

The only pieces of evidence respondent presented to prove the contract of deposit werethe delivery receipts. Significantly, they are unsigned and not duly received or authenticated byMoreman, petitioners or respondent or any of their authorized representatives. Hence, thosedelivery receipts have no probative value at all. While our laws grant a person the remedial rightto prosecute or institute a civil action against another for the enforcement or protection of a right,or the prevention or redress of a wrong, every cause of action ex-contractu must be founded upona contract, oral or written, express or implied. Moreover, respondent also failed to prove thatthere were construction materials and equipment in petitioners‘ warehouse at the time he made ademand for their return. Considering that respondent failed to prove (1) the existence of anycontract of deposit between him and petitioners, nor between the latter and Moreman in hisfavor, and (2) that there were construction materials in petitioners‘ warehouse at the time ofrespondent‘s demand to return the same, we hold that petitioners have no correspondingobligation or liability to respondent with respect to those construction materials.



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PNB VS ENCINA GR 174055. February 12, 2008

FACTS:

The Philippine National Bank (PNB) assails the Decision of the Court of Appeals dated15 May 2005, rendered in CA-G.R. CV No. 79094 which, among others, declared null and voidthe interest rate imposed by PNB on the loan obtained from it by respondents and the consequentextrajudicial foreclosure of the properties offered as security for the loan.

Respondents Encina spouses acquired several loans from PNB from which it failed to paywithin due time. Encina avers that there ought to be longer gestation periods on its part beingengaged in a business of agricultural character.

ISSUE:

Was there a violation of the Usury Law?

RULING:

As borne by the records, the Encina spouses never challenged the validity of their loanand the accessory contracts with PNB on the ground that they violated the principle of mutualityof contracts in view of the provision therein that the interest rate shall be set by management.Their only contention concerning the interest rate was that the charges imposed by the bankviolated the Usury Law. This was the essence of the second cause of action alleged in thecomplaint.

It should be definitively ruled in this regard that the Usury Law had been rendered legallyineffective by Resolution No. 224 dated 3 December 1982 of the Monetary Board of the CentralBank, and later by Central Bank Circular No. 905 which took effect on 1 January 1983 andremoved the ceiling on interest rates for secured and unsecured loans regardless of maturity. Theeffect of these circulars is to allow the parties to agree on any interest that may be charged on aloan. The virtual repeal of the Usury Law is within the range of judicial notice which courts are bound to take into account. After all, the fundamental tenet is that the law is deemed part of thecontract. Thus, the trial court was correct in ruling that the second cause of action was without basis.



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LO VS. COURT OF APPEALSG.R. No. 141434, September 23, 2003

411 SCRA 523

FACTS:

Antonio Lo acquired two parcels of land with an office constructed thereon in an auctionsale on November 9,1995 from the Land Bank of the Philippines. At variance, private respondent National Onion Growers Cooperative Marketing Association, Inc. was the occupant of the parcels of land under a subsisting contract of lease with Land Bank. The lease was valid untilDecember 31,1995.

Upon the expiration of the lease contract, Lo demanded that private respondent vacate theleased premises and surrender its possession to him. The agricultural cooperative refused on theground of a contest against petitioner‘s acquisition of the parcels of land in an action forannulment of sale, redemption and damages.

On February 23,1996, petitioner filed an action for ejectment and subsequently asked forimposition of the contractually stipulated penalty of P5, 000 per day of delay in surrendering the possession of the property. Thereafter, the trial court decided the case in favor of petitioner.Private respondent was ordered to vacate the leased premises. On appeal to the Regional TrialCourt, the MTC decision was affirmed in toto. The agricultural cooperative then elevated thecase to the court of Appeals that affirmed the lower court‘s decision but modified that the penaltyto be imposed must be reduced to P1, 000.

Unsatisfied with the decision of the CA, Lo filed the instant petition for review.

ISSUE:

The issue raised by the petitioner is whether or not the Court of Appeals has the authorityto reduce the penalty awarded by the trial court, the same having been stipulated by the parties intheir Contract of Lease.

RULING:

YES, the Court of Appeals has the authority to do so. While courts are not at liberty toignore the freedom of the parties to agree on such terms and conditions as they see fit as long asthey are not contrary to law, morals, good customs, public order or public policy, courts mayequitably reduce a stipulated penalty if it is iniquitous or unconscionable, or if the principalobligation has been partly or irregularly complied with. This power of the courts is explicitlysanctioned by Article 1229 of the Civil Code which provides that the judge shall equitablyreduce the penalty when the principal obligation has been partly or irregularly complied with bythe debtor. Even if there has been no performance, the penalty may also be reduced by courts if itis iniquitous or unconscionable.



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LIGUTAN VS. COURT OF APPEALSG.R. No. 138677, February 12, 2002

376 SCRA 561

FACTS:

Petitioners Tolomeo Ligutan and Leonidas dela Llana obtained on May 11, 1981 a loanin the amount of P120, 000.00 from respondent Security Bank and Trust Company. Petitionersexecuted a promissory note binding themselves, jointly and severally, to pay the sum borrowedwith an interest of 15.189% per annum upon maturity and to pay a penalty of 5% every month onthe outstanding principal and interest in case of default. In addition, petitioners agreed to pay10% of the total amount due by way of attorney‘s fees if the matter were indorsed to a lawyer forcollection or if a suit were instituted to enforce payment. The obligation matured on September8, 1981; the bank, however, granted an extension but only until December 29, 1981.

When petitioners defaulted on their obligation, the bank filed on November 3, 1982 withthe RTC of Makati, Branch 143 a complaint for recovery of the due amount.

On September 5, 1988, the trial court ruled in favor of the bank. It ordered the petitionersto pay, jointly and severally, the sum of P114, 416.00 with interest thereon at the rate of 15.189% per annum, 2% service charge and 5% per month penalty charge, commencing on May 20, 1982until fully paid.

The Court of Appeals affirmed it but deleted the 2% service charge pursuant to CentralBank Circular No. 783. Not fully satisfied with the decision, both parties moved forreconsideration. Petitioners prayed for the reduction of the 5% penalty for being unconscionable.The bank, on the other hand, asked that the payment of interest and penalty be commenced notfrom the date of filing of complaint but from the time of default as so stipulated in the contract ofthe parties.

The petitioner, before this Court, contended, among others that the 15.189% interest andthe penalty of 3% per month or 36% per annum imposed by private respondent bank on petitioner‘s loan obligation are still manifestly exorbitant, iniquitous and unconscionable.Respondent bank, which did not take an appeal, would, however, have it that the penalty soughtto be deleted by petitioners was even insufficient to fully cover and compensate for the cost ofmoney brought about by the radical devaluation and decrease in the purchasing power of the peso.

ISSUE:

Whether or not the penalty is reasonable and not iniquitous.

RULING:

NO, the penalty is not unreasonable. The Court held that the question of whether a penalty is reasonable or iniquitous can be partly subjective and partly objective. Its resolutionwould depend on such factors as, but not necessarily confide to, the type, extent and purpose ofthe penalty, the nature of the obligation, the mode of breach and its consequences, thesupervening realities, the standing and relationship of the parties, and the like, the application ofwhich, by and large, is addressed to the sound discretion of the court. In Rizal CommercialBanking Corp. v. Court of Appeals, for example, the Court has tempered the penalty chargesafter taking into account the debtor‘s pitiful situation and its offer to settle the entire obligationwith the creditor bank. The stipulated penalty might likewise be reduced when a partial orirregular payment is made by the payment. The stipulated penalty might even be deleted such aswhen there has been substantial performance in good faith by the obligor, when the penaltyclause itself suffers from fatal infirmity, and when exceptional circumstances so exist as towarrant it. In the case at bar, given the circumstances, not to mention the repeated acts of breach by petitioners of their contractual obligation, this Court sees no cogent ground to ruling of theappellate court.



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Article 2227 of the Civil Code likewise states, thus: ―Liquidated damages, whether intended asan indemnity or a penalty, shall be equitably reduced if they are iniquitous or unconscionable.‖

In determining whether a penalty clause is ―iniquitous and unconscionable,‖ a court may verywell take into account the actual damages sustained by a creditor who was compelled to sue the

defaulting debtor, which actual damages would include the interest and penalties the creditormay have had to pay on its own from its funding source. In this case, NNRMC was only able to prove that it incurred the amounts of P5,995.83 as opening charges on the two Letters of Creditand an additional P1,911.85 as amendment charges on the same Letters of Credit. Other thanthat, NNRMC failed to prove it had suffered actual damages resulting from the nondelivery ofthe specified buri midribs and rattan poles. In fact, what it allegedly suffered are what it calls―Foregone Interest Income‖ and ―Foregone Profit‖ from the two Letters of Credit. Such couldnot be considered as actual damages.



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PHILPPINE NATIONAL BANK v. CA and LORETO TANG.R. No. 108630 April 2, 1996

FACTS:

Private respondent Loreto Tan is the owner of a parcel of land abutting the nationalhighway. Expropriaton proceedings were instituted by the government. Tan filed a motionrequesting the issuance of an order for the release to him of the expropriation price ofP32,480.00. PNB was required by the trial court to release to tan the amount and deposited it bythe government. Petitioner, through its Assistant Manager Tagamolila, issued a check anddelivered the same to Sonia Gonzaga on the strength of the SPA, without tan‘s knowledge,consent and authority. RTC ordered petitioner and Tagamolila to pay private respondent jointlyand severally the amount worth legal interests, damages and attorney‘s fees. Ca affirmed thedecision.

ISSUE:

Whether the Special Power of Attorney authorized Sonia Gonzaga to receive paymentintended for private respondent

RULING:

There is no question that no payment had ever been made to private respondent as to thecheck was never delivered to him. Under Article 1233 of the Civil Code, a debt shall not beunderstood to have been paid unless the thing or service in which the obligation consists has been completely delivered or rendered, as the case may be. The burden of proof of sad paymentlies with the debtor.

The decision of the court of appeals is affirmed with the modification that the award bythe RTC of P5,000 as attorney‘s fees is reinstated.



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CATHAY PACIFIC AIRWAYS v.Spouses VazquezG.R. No. 150843 March 14, 2003

FACTS:

Cathay is a common carrier engaged in transporting passenger and goods by air. SpousesVazquez are Gold Card Members of its Marc Polo Club. The Spouses, with two friends and amaid went to HongKong for business. Spouses have the Business class boarding passes andeconomy class for the maid. When boarding, the ground stewardess declared a seat change fromBusiness class to First Class for the Vazquez. The Spouses refused but after insistence by thestewardess, the spouses gave in. When the arrived in Manila, spouses demanded to beindemnified in the amount of one million ― for the humiliation and embarrassment‖ caused bythe employee. RTC ruled for the Vazquez ordering Cathay Airways to pay the spouses, statingfurther that there was a breach of contract not because of overbooking but because the latter pushed through with the upgrading despite objections of the spouses.

ISSUE:

Is an involuntary upgrading of an airline‘s accommodation at no extra costs cause a breach of contract of carriage?

RULING:

The Vazquezes are aware of the privileges, but such privileges may be waived. Spousesshould have been consulted first. It should not have been imposed on them over their vehementobjection. By insisting of the upgrade, Pacific Airways breached its contract of carriage with theVazquezes. Nominal damages are adjudicated in order that the right of the plaintiff, which have been violated may be vindicated or recognized and not for indemnifying the plaintiff for any losssuffered by him.

Petition is partly granted. Court of Appeals‘ decision is modified. Moral damagesdeleted, nominal damages reduced to P5,000.



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TELENGTAN BROTHERS and SONS v.UNITED STATES LINES G.R.No.132284,February 28,2006

FACTS:

Petitioner is a domestic corporation while US Lines is a foreign corporation engaged inoverseas shipping. It was made applicable that consignees who fail to take delivery of theircontainerized cargo within the 10-day free period are liable to pay demurrage charges. On June22, 1981, US Lines filed a suit against petitioner seeking payment of demurrage charges plusinterest and damages. Petitioner incurred P94,000 which the latter refused to pay despiterepeated demands. Petitioner disclaims liability alleging that it has never entered into a contractnor signed an agreement to be bound by it. RTC ruled that petitioner is liable to respondent andall be computed as of the date of payment in accordance with Article 1250 of the Civil Code.CA affirmed the decision.

ISSUE:

Whether the re-computation of the judgment award in accordance with Article 1250 ofthe Civil Code proper

RULING:

The Supreme Court found as erroneous the trial court‘s decision as affirmed y the Courtof Appeals. The Court holds that there has been an extraordinary inflation within the meaning ofArticle 1250 of the Civil Code. There is no reason for ordering the payment of an obligation inan amount different from what has been agreed upon because of the purported supervention of anextraordinary inflation.

The assailed decision is affirmed with modification that the order for re-computation asof the date of payment in accordance with the provisions of Article 1250 of New Civil Code isdeleted.



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C. F. SHARP v. NORTHWEST AIRLINESG.R. No. 133498, April 18,2002

FACTS:

On May 9, 1974, respondent entered into an International Passengers Sales AgencyAgreement with petitioner, authorizing the latter to sell its air transport tickets. Petitioner failedto remit the proceeds of the ticket sales, for which reason, respondent filed a Collection suitagainst petitioner before the Tokyo District Court, which ordered petitioner to pay respondent82,158,195 Yen and damages for the delay at the rate of 6% per annum fro August 28,1980 up toand until payment is completed. Unable to execute the decision in Japan, respondent filed a casewith the RTC.

RTC issued writ of execution ordering defendant to pay plaintiff 83,158,195 Yen at theexchange rate on the date of foreign judgment plus 6% interest. On appeal, petitioner contendedthat it had already paid partial payments hence, was not liable to pay additional 6% interest

imposed in the foreign judgment.

ISSUE:Whether or not the petitioner is liable to pay additional 6% per annum for the delay

RULING:

The petition is denied. CA decision is affirmed with modification. Petitioner is directed to pay respondent 61,734 Yen plus damages for the delay at 6% per annum from August 28,1980until payment is completed, with interest at the rate of 12% per annum counted from the date offiling until fully satisfied. Petitioner‘s liability may be paid in Philippine currency computed atthe exchange rate prevailing at the time of payment.



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ALBERT PADILLA v. SPOUSES PAREDES and COURT OF APPEALSG.R. NO. 124874,March 17, 2000

FACTS:

On October 20, 1988, petitioner Padilla and private respondent entered into a contract tosell involving a parcel of land. The was untitled but private respondent was paying taxes thereon.Under the contract, petitioner undertook to secure title to the property in private respondent‘snames of the P312,840 purchase prize, petitioner was to pay downpayment of P50,000 uponsigning and the balance was to be paid within 10 days from the issuance of the court orderdirecting issuance of the decree of registration. For failure to pay some of the amount,respondent offered to sell to petitioner one-half of the property for all the payment, lestrespondent rescinds the contract. Petitioner refused and instituted action for specific performancealleging that they have substantially complied with the obligation. RTC ruled for the petitionersstating a casual or slight breach that did not warrant rescission. CA reversed the decision and

confirmed the respondent‘s rescission.

ISSUE:

Whether or not the private respondents are entitled to rescind the contract to sell the landto petitioner

RULING:

The Supreme Court sustained the ruling of CA that private respondent may validlyrescind the contract to sell, however, the reason for this is not that respondents have the power torescind but because their obligation thereunder did not arise. The CA is correct in ordering thereturn to petitioner of the amounts received from him by private respondents, on the precept thatno one shall be unjustly enriched himself at the expense of another.



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SPOUSES TIBAJIA v. COURT OF APPEALS and EDEN TANG. R. No. 100290, June 4, 1993

FACTS:

A suit of collection of sum of money was filed by Eden Tan against the spouses. A writof attachment was issued, the Deputy Sheriff filed a return stating that a deposit made by Tibajiain the amount of P442,750 in another case, had been garnished by him. RTC ruled in favor ofEden Tan and ordered the spouses to pay her an amount in excess of P3,000,000. Court ofAppeals modified the decision by reducing the amount for damages. Tibajia Spouses delivered toSheriff Bolima the total money judgment of P398483.70. Tan refused to accept the payment andinsisted that the garnished funds be withdrawn to satisfy the judgment obligation.

ISSUE:Whether or not payment by means of check is considered payment in legal tender

RULING:

The ruling applies the statutory provisions which lay down the rule that a check is notlegal tender and that a creditor may validly refuse payment by check, whether it be a manager‘scheck, cashier‘s or personal check. The decision of the court of Appeals is affirmed.



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VITARICH vs. LOSING.R. No. 181560 November 15, 2010

FACTS:

Respondent Chona Losin (Losin) was in the fastfood and catering services businessnamed Glamours Chicken House. Since 1993, Vitarich, particularly its Davao Branch, had beenher supplier of poultry meat.In the months of July to November 1996, Losin‘s orders of dressed chicken and other meat products allegedly amounted to P921,083.10. During this said period, Losin‘s poultry meat needsfor her business were serviced by Rodrigo Directo (Directo) and Allan Rosa (Rosa), bothsalesmen and authorized collectors of Vitarich, and Arnold Baybay (Baybay), a supervisor ofsaid corporation.

On August 24, 1996, Directo‘s services were terminated by Vitarich without Losin‘sknowledge. He left without turning over some supporting invoices covering the orders of Losin.Rosa and Baybay, on the other hand, resigned on November 30, 1996 and December 30, 1996,

respectively. Just like Directo, they did not also turn over pertinent invoices covering Losin‘saccount.On February 12, 1997, demand letters were sent to Losin covering her alleged unpaid

account amounting to P921,083.10. It appears that Losin had issued three (3) checks amountingto P288,463.30 which were dishonored either for reasons - Drawn Against Insufficient Funds(DAIF) or Stop Payment.

On March 2, 1998, Vitarich filed a complaint for Sum of Money against Losin, Directo,Rosa, and Baybay before the RTC.

On August 9, 2001, the RTC rendered its Decision8 in favor of Vitarich, however the CArendered the assailed decision in favor of Losin.

ISSUE:

WON there is already payment on the part of Locsin.

RULING:

No. As a general rule, one who pleads payment has the burden of proving it.The burdenrests on the debtor to prove payment, rather than on the creditor to prove non-payment. Thedebtor has the burden of showing with legal certainty that the obligation has been discharged by payment.

True, the law requires in civil cases that the party who alleges a fact has the burden of proving it. Section 1, Rule 131 of the Rules of Court24 provides that the burden of proof is theduty of a party to prove the truth of his claim or defense, or any fact in issue by the amount ofevidence required by law. In this case, however, the burden of proof is on Losin because shealleges an affirmative defense, namely, payment. Losin failed to discharge that burden.After examination of the evidence presented, this Court is of the opinion that Losin failed to present a single official receipt to prove payment.25 This is contrary to the well-settled rule thata receipt, which is a written and signed acknowledgment that money and goods have beendelivered, is the best evidence of the fact of payment although not exclusive.26 All she presentedwere copies of the list of checks allegedly issued to Vitarich through its agent Directo,27 aStatement of Payments Made to Vitarich,28 and apparently copies of the pertinent history of herchecking account with Rizal Commercial Banking Corporation (RCBC). At best, these may onlyserve as documentary records of her business dealings with Vitarich to keep track of the payments made but these are not enough to prove payment.



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METROBANK vs. CABILZO510 SCRA 259

FACTS:

On 12 November 1994, Cabilzo issued a Metrobank Check No. 985988, payable to―CASH‖ and postdated on 24 November 1994 in the amount of One Thousand Pesos (P1,000.00). The check was drawn against Cabilzo‘s Account with Metrobank Pasong Tamo Branchunder Current Account No. 618044873-3 and was paid by Cabilzo to a certain Mr. Marquez, ashis sales commission. Subsequently, the check was presented to Westmont Bank for payment.Westmont Bank, in turn, indorsed the check to Metrobank for appropriate clearing. After theentries thereon were examined, including the availability of funds and the authenticity of thesignature of the drawer, Metrobank cleared the check for encashment in accordance with thePhilippine Clearing House Corporation (PCHC) Rules.

On 16 November 1994, Cabilzo‘s representative was at Metrobank Pasong Tamo Branchto make some transaction when he was asked by bank personnel if Cabilzo had issued a check in

the amount of P91, 000.00 to which the former replied in the negative. On the afternoon of thesame date, Cabilzo himself called Metrobank to reiterate that he did not issue a check in theamount of P91, 000.00 and requested that the questioned check be returned to him forverification, to which Metrobank complied. Upon receipt of the check, Cabilzo discovered thatMetrobank Check No. 985988 which he issued on 12 November 1994 in the amount of P1,000.00 was altered to P91, 000.00 and the date 24 November 1994 was changed to 14 November1994.Hence, Cabilzo demanded that Metrobank re-credit the amount of P91, 000.00 to hisaccount. Metrobank, however, refused reasoning that it has to refer the matter first to its LegalDivision for appropriate action. Repeated verbal demands followed but Metrobank still failed tore-credit the amount of P91, 000.00 to Cabilzo‘s account

On 30 June 1995, Cabilzo, thru counsel, finally sent a letter-demand to Metrobank for the payment of P90, 000.00, after deducting the original value of the check in the amount of P1,000.00. Such written demand notwithstanding, Metrobank still failed or refused to comply withits obligation. Consequently, Cabilzo instituted a civil action for damages against Metrobank before the RTC of Manila, Branch 13. In his Complaint docketed as Civil Case No. 95-75651,Renato D. Cabilzo v. Metropolitan Bank and Trust Company, Cabilzo prayed that in addition tohis claim for reimbursement, actual and moral damages plus costs of the suit be awarded in hisfavor.

ISSUE:Whether equitable estoppel can be appreciated in favor of petitioner

HELD:The degree of diligence required of a reasonable man in the exercise of his tasks and the

performance of his duties has been faithfully complied with by Cabilzo. In fact, he was waryenough that he filled with asterisks the spaces between and after the amounts, not only thosestated in words, but also those in numerical figures, in order to prevent any fraudulent insertion, but unfortunately, the check was still successfully altered, indorsed by the collecting bank, andcleared by the drawee bank, and encashed by the perpetrator of the fraud, to the damage and prejudice of Cabilzo.

Metrobank cannot lightly impute that Cabilzo was negligent and is therefore preventedfrom asserting his rights under the doctrine of equitable estoppel when the facts on record are bare of evidence to support such conclusion. The doctrine of equitable estoppel states that whenone of the two innocent persons, each guiltless of any intentional or moral wrong, must suffer aloss, it must be borne by the one whose erroneous conduct, either by omission or commission,was the cause of injury. Metrobank‘s reliance on this dictum is misplaced. For one,Metrobank‘s representation that it is an innocent party is flimsy and evidently, misleading. Atthe same time, Metrobank cannot asseverate that Cabilzo was negligent and this negligence wasthe proximate cause of the loss in the absence of even a scintilla proof to buttress such claim. Negligence is not presumed but must be proven by the one who alleges it, which petitioner failedto.



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EUFEMIA and ROMEL ALMEDA v. BATHALA MARKETINGG.R.No. 150806, January 28, 2008

FACTS:

In May 1997, Bathala Marketng, renewed its Contract of Lease with Ponciano Almeda.Under the contract, Ponciano agreed to lease a porton of Almeda Compound for a monthlyrental of P1,107,348.69 for four years. On January 26, 1998, petitioner informed respondent thatits monthly rental be increased by 73% pursuant to the condition No. 7 of the contract andArticle 1250. Respondent refused the demand and insisted that there was no extraordinaryinflation to warrant such application. Respondent refused to pay the VAT and adjusted rentals asdemanded by the petitioners but continually paid the stipulated amount. RTC ruled in favor ofthe respondent and declared that plaintiff is not liable for the payment of VAT and theadjustment rental, there being no extraordinary inflation or devaluation. CA affirmed thedecision deleting the amounts representing 10% VAT and rental adjustment.

ISSUE:

Whether the amount of rentals due the petitioners should be adjusted by reason ofextraordinary inflation or devaluation

RULING:

Petitioners are stopped from shifting to respondent the burden of paying the VAT. 6thCondition states that respondent can only be held liable for new taxes imposed after theeffectivity of the contract of lease, after 1977, VAT cannot be considered a ―new tax‖. Neithercan petitioners legitimately demand rental adjustment because of extraordinary inflation ordevaluation. Absent an official pronouncement or declaration by competent authorities of itsexistence, its effects are not to be applied.Petition is denied. CA decision is affirmed.



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EQUITABLE PCI BANK, YU and APAS v. NG SHEUNG NGORG.R.NO. 171545, December 19, 2007

FACTS:

On October 7, 2001, respondents Ngor and Go filed an action for amendment and/orreformation of documents and contracts against Equitable and its employees. They claimed thatthey were induced by the bank to avail of its peso and dollar credit facilities by offering lowinterests so they accepted and signed Equitable‘s proposal. They alleged that they were unawarethat the documents contained escalation clauses granting Equitable authority to increase interestwithout their consent. These were rebutted by the bank. RTC ordered the use of the 1996 dollarexchange rate in computing respondent‘s dollar -denominated loans. CA granted the Bank‘sapplication for injunction but the properties were sold to public auction.

ISSUE:

Whether or not there was an extraordinary deflation

RULING:

Extraordinary inflation exists when there is an unusual decrease in the purchasing powerof currency and such decrease could not be reasonably foreseen or was beyond the contemplationof the parties at the time of the obligation. Deflation is an inverse situation.

Despite the devaluation of the peso, BSP never declared a situation of extraordinaryinflation. Respondents should pay their dollar denominated loans at the exchange rate fixed bythe BSP on the date of maturity.

Decision of lower courts are reversed and set aside.



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JOSE LAGONv. HOOVEN COMALCO INDUSTRIESG.R. No. 135657 January 17, 2001

FACTS:

Petitioner is the owner of a commercial building while respondent is a domesticcorporation known to be the biggest manufacturer and installer of aluminum materials in thecountry. Parties entered into 2 contracts whereby for a total consideration of P104,870. Hoovenagreed to sell and install various aluminum materials in Lagon‘s building. Upon execution ofcontracts, Lagon paid Hooven P48,000 in advance. On February 24, 1987, Hooven commencedan action for sum of money. It was alleged that materials were delvered and installed butP69,329 remained unpaid even after the completion of the project and despite repeated demands.RTC held partly on the basis of the ocular inspection finding that the total actual deliveries costP87,140 deducting therefrom P48,000. CA set aside the decision and held in favor of Hooven.

ISSUE:

Whether all the materials specified in the contracts had been delivered and installed byrespondent in petitioner‘s commercial building

RULING:

Essentially, respondent has the burden of establishing its affirmative allegations ofcomplete delivery and installation of the materials and petitioner‘s failure to pay therefor. Theevidence on its discharge is grossly anemic. The CA decision is modified. Lagon is ordered to pay respondent P6,377.66 representing the value unpaid. On the other hand, respondent isordered to pay petitioner P50,000 as moral damages, P30,000 attorney‘s fees and P46,554.50 asactual damages.



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BANK OF THE PHILIPPINE ISLANDS v. EASTERN PLYWOOD and BENIGNO LIMG.R. No. 104612, May 10, 1994

FACTS:

Private respondent , Eastern and Lim, an officer and stock holder of Eastern held at leastone joint bank account with the CBTC, the predecessor-in – interest of the petitioner BPI. InMarch 1975, checking account with Lim in the amount of P120,000 was opened by Velasco withfunds withdrawn fro the account of Eastern and Lim. Velasco died and at the time of his death,the outstanding balance of the account stood at P662,522.87. Thereafter, Easrtern obtained a loanof P73,000 fro CBTC in addition, Eastern and Lim and CBTC signed another document entitled― Holdout agreement‖.

In the settlement proceeding of Velasco‘s estate, the whole balance of P331,261.44 in the joint account of Velasco and Lim was claimed as part of Velasco‘s estate. The interstate courtgranted the urgent motion of heirs of Velasco to withdraw the deposit and authorize them to

divide among themselves the amount. BPI filed a complaint against Lin and Eastern demanding payment of promissory not for P73,000. RTC ruled that the promissory note is subject to theholdout agreement. CA affirmed the division.

ISSUE:

Whether BPI is still liable to the private respondent on the account subject to the holdoutagreement after it is withdrawn by the heirs of Velasco

RULING:

The account was proved to belong to Eastern even if it was in the names of Lim andVelasco. As the real creditor of the bank, Eastern has the right to withdraw it or demand paymentthereof. BPI can not be relieved of its duty to pay Eastern simply because it already allowed theheirs of Velasco to withdraw the whole balance of the account. Payment made by the debtor tothe wrong party does not extinguish the obligation as to the creditor who is without fault ornegligence.



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AUDION ELECTRIC COMPANY v. NLRCG.R. NO. 106648, June 17,1999

FACTS:

Complainant Nicolas Madolid was employed by Audion as a fabricator. He continuouslyrendered service, assigned in different offices or projects for 13 years with a clean record. Thecomplainant was surprised to received an information stating that he will be consideredterminated after the turnover of materials. Complainant claims that he was dismissed without justifiable cause. For this reason, he claims that he is entitled to reinstatement with full backwages, payment of overtime pay, project allowances, increase adjustments, 13 th month payand attorney‘s fees. LocalArbiter ruled in favor of Madolid and ordered Audion to pay the former, which was affirmed bythe NLRC.

ISSUE:

Whether the respondent NLRC committed grave abuse of discretion when it ruled that private respondent was a regular employee and not a project employee

RULING:

Private respondent‘s employment status was established by the certification ofemployment issued by the petitioner. The rule is that findings of facts of the NLRC affirmingthose of the Labor Arbiter are entitled to a great weight and will not be disturbed if they weresupported by substantial evidence. There was no grave abuse of discretion committed by NLRCin finding that respondent was not a project employee. Decision of NLRC is affirmed withmodification deleting the awards of damages and attorney‘s fees.



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BINALBAGAN VS. COURT OF APPEALSG.R. No. 100594, March 10, 1993

FACTS:

On May 11, 1967, private respondents, through Angelina P. Echaus, in her capacity asJudicial Administrator of the intestate estate of Luis B. Puentevella, executed a Contract to Selland a Deed of Sale of forty-two subdivision lots within the Phib-Khik Subdivision of thePuentevella family, conveying and transferring said lots to petitioner Binalbagan Tech., Inc.(hereinafter referred to as Binalbagan). In turn Binalbagan, through its president, petitionerHermilo J. Nava (hereinafter referred to as Nava), executed an Acknowledgment of Debt withMortgage Agreement, mortgaging said lots in favor of the estate of Puentevella.

Upon the transfer to Binalbagan of titles to the 42 subdivision lots, said petitioner took possession of the lots and the building and improvements thereon. Binalbagan started operatinga school on the property from 1967 when the titles and possession of the lots were transferred toit.

It appears that there was a pending case, Civil Case No. 7435 of Regional Trial Courtstationed at Himamaylan, Negros Occidental. In this pending case the intestate estate of the lateLuis B. Puentevella, thru Judicial Administratrix, Angelina L. Puentevella sold saidaforementioned lots to Raul Javellana with the condition that the vendee-promisee would nottransfer his rights to said lots without the express consent of Puentevella and that in case of thecancellation of the contract by reason of the violation of any of the terms thereof, all paymentstherefor made and all improvements introduced on the property shall pertain to the promissor andshall be considered as rentals for the use and occupation thereof.

Javellana having failed to pay the installments for a period of five years, Civil Case No.7435 was filed by defendant Puentevella against Raul Javellana and the Southern NegrosColleges which was impleaded as a party defendant it being in actual possession thereof, for therescission of their contract to sell and the recovery of possession of the lots and buildings withdamages.

Accordingly, after trial, judgment was rendered in favor of Puentevella. Came December29, 1965 when the plaintiffs in the instant case on appeal filed their Third-Party Claim based onan alleged Deed of Sale executed in their favor by spouses Jose and Lolita Lopez, thusPuentevella was constrained to assert physical possession of the premises to counteract thefictitious and unenforceable claim of herein plaintiffs.

Upon the filing of the instant case for injunction and damages on January 3, 1966, an ex- parte writ of preliminary injunction was issued by the Honorable Presiding Judge Carlos Abiera,which order, however, was elevated to the Honorable Court of Appeals which issued a writ of preliminary injunction ordering Judge Carlos Abiera or any other person or persons in his behalfto refrain from further enforcing the injunction issued by him in this case and from furtherissuing any other writs or prohibitions which would in any manner affect the enforcement of the judgment rendered in Civil Case 7435, pending the finality of the decision of the HonorableCourt of Appeals in the latter case. Thus, defendant Puentevella was restored to the possession ofthe lots and buildings subject of this case. However, plaintiffs filed a petition for review with theSupreme Court which issued a restraining order against the sale of the properties claimed by thespouses-plaintiffs.

When the Supreme Court dissolved the aforesaid injunction issued by the Court ofAppeals, possession of the building and other property was taken from petitioner Binalbagan andgiven to the third-party claimants, the de la Cruz spouses. Petitioner Binalbagan transferred itsschool to another location. In the meantime, the defendants in Civil Case No. 293 with the Courtof Appeals interposed an appeal. On October 30, 1978, the Court of Appeals rendered judgment,reversing the appealed decision in Civil Case No. 293. On April 29, 1981, judgment was enteredin CA-G.R. No. 42211, and the record of the case was remanded to the court of origin onDecember 22, 1981. Consequently, in 1982 the judgment in Civil Case No. 7435 was finallyexecuted and enforced, and petitioner was restored to the possession of the subdivision lots anMay 31, 1982. It will be noted that petitioner was not in possession of the lots from 1974 to May31, 1982.



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After petitioner Binalbagan was again placed in possession of the subdivision lots, private respondent Angelina Echaus demanded payment from petitioner Binalbagan for thesubdivision lots, enclosing in the letter of demand a statement of account as of September 1982showing a total amount due of P367,509.93, representing the price of the land and accruedinterest as of that date.

As petitioner Binalbagan failed to effect payment, private respondent Angelina P. Echausfiled on October 8, 1982 Civil Case No. 1354 of the Regional Trial Court of the Sixth JudicialRegion stationed in Himamaylan, Negros Occidental against petitioners for recovery of title anddamages. Private respondent Angelina P. Echaus filed an amended complaint by including hermother, brothers, and sisters as co-plaintiffs, which was admitted by the trial court on March 18,1983.

The trial court rendered a decision in favor of the petitioner because of prescription. Nonetheless, the Court of Appeals reversed said decision.

ISSUE:

Whether or not the petition is with merit.

RULING:

No. A party to a contract cannot demand performance of the other party's obligationsunless he is in a position to comply with his own obligations. Similarly, the right to rescind acontract can be demanded only if a party thereto is ready, willing and able to comply with hisown obligations there under (Art. 1191, Civil Code).

In a contract of sale, the vendor is bound to transfer the ownership of and deliver, as wellas warrant, the thing which is the object of the sale (Art. 1495, Civil Code); he warrants that the buyer shall, from the time ownership is passed, have and enjoy the legal and peaceful possessionof the thing. As afore-stated, petitioner was evicted from the subject subdivision lots in 1974 byvirtue of a court order in Civil Case No. 293 and reinstated to the possession thereof only in1982. During the period, therefore, from 1974 to 1982, seller private respondent AngelinaEchaus' warranty against eviction given to buyer petitioner was breached though, admittedly,through no fault of her own. It follows that during that period, 1974 to 1982, private respondentEchaus was not in a legal position to demand compliance of the prestation of petitioner to paythe price of said subdivision lots. In short, her right to demand payment was suspended duringthat period, 1974-1982.

The prescriptive period within which to institute an action upon a written contract is tenyears (Art. 1144, Civil Code). The cause of action of private respondent Echaus is based on thedeed of sale afore-mentioned. The deed of sale whereby private respondent Echaus transferredownership of the subdivision lots was executed on May 11, 1967. She filed Civil Case No. 1354for recovery of title and damages only on October 8, 1982. From May 11, 1967 to October 8,1982, more than fifteen (15) years elapsed. Seemingly, the 10-year prescriptive period hadexpired before she brought her action to recover title. However, the period 1974 to 1982 should be deducted in computing the prescriptive period for the reason that, as above discussed, from1974 to 1982, private respondent Echaus was not in a legal position to initiate action against petitioner since as afore-stated, through no fault of hers, her warranty against eviction was breached. In the case of it was held that a court order deferring action on the execution of judgment suspended the running of the 5-year period for execution of a judgment. Here theexecution of the judgment in Civil Case No. 7435 was stopped by the writ of preliminaryinjunction issued in Civil Case No. 293. It was only when Civil Case No. 293 was dismissedthat the writ of execution in Civil Case No. 7435 could be implemented and petitionerBinalbagan restored to the possession of the subject lots.

Deducting eight years (1974 to 1982) from the period 1967 to 1982, only seven yearselapsed. Consequently, Civil Case No. 1354 was filed within the 10-year prescriptive period.Working against petitioner's position too is the principle against unjust enrichment, which wouldcertainly be the result if petitioner were allowed to own the 42 lots without full payment thereof.

WHEREFORE, the petition is DENIED and the decision of the Court of Appeals in CA-G.R. CV No. 24635 is AFFIRMED.



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LUZON DEVELOPMENT BANK vs. ENRIQUEZG.R. No. 168646 January 12, 2011

DELTA DEVELOPMENT vs. ENRIQUEZ and LUZON DEVELOPMENT BANKG.R. No. 168666

FACTS:On July 3, 1995, De Leon (owner of Delta) and his spouse obtained a P4 million loan from theBANK for the express purpose of developing Delta Homes I.8 To secure the loan, the spousesDe Leon executed in favor of the BANK a real estate mortgage (REM) on several of their properties,9 including Lot 4. Subsequently, this REM was amended10 by increasing the amountof the secured loan from P4 million to P8 million. Both the REM and the amendment wereannotated on TCT No. T-637183.11Sometime in 1997, DELTA executed a Contract to Sell with respondent Angeles CatherineEnriquez (Enriquez)14 over the house and lot in Lot 4 with the condition that upon full paymentof the total consideration the Owner shall execute a final deed of sale in favor of the Vendee/s.

When DELTA defaulted on its loan obligation, the BANK, instead of foreclosing the REM,agreed to a dation in payment or a dacion en pago. Enriquez filed a complaint against DELTAand the BANK before Office of the HLURB19 alleging that DELTA violated the terms of itsLicense to Sell. The HLURB Arbiter Atty. Raymundo A. Foronda upheld the validity of the purchase price, but ordered DELTA to accept payment of the balance of P108,013.36 fromEnriquez, and (upon such payment) to deliver to Enriquez the title to the house and lot free fromliens and encumbrances.DELTA appealed the arbiter‘s Decision to the HLURB Board of Commissioners. TheCommission ordered [Enriquez] to pay [DELTA] the amount due from the time she suspended payment up to filing of the complaint with 12% interest thereon per annum; thereafter the provisions of the Contract to Sell shall apply until full payment is made.The OP adopted by reference the findings of fact and conclusions of law of the HLURBDecisions, which it affirmed in toto. The CA ruled against the validity of the dacion en pagoexecuted in favor of the BANK on the ground that DELTA had earlier relinquished its ownershipover Lot 4 in favor of Enriquez via the Contract to Sell.46

ISSUE:Whether the dacion en pago extinguished the loan obligation, such that DELTA has no

more obligations to the BANK.

RULING:

The violation of Section 18 renders the mortgage executed by DELTA void therefore the8 million loans are unsecured. Since the Contract to sell did not transfer ownership of Lot 4 toEnriquez, said ownership remained with DELTA. DELTA could then validly transfer suchownership (as it did) to another person (the BANK). However, the transferee BANK is bound bythe Contract to Sell and has to respect Enriquez‘s rights thereunder.BANK is also not entitled to payment of the equivalent value of the lot 4 from DELTA when thethis court ruled in favor of ENRIQUEZ over lot 4. Like in all contracts, the intention of the parties to the dation in payment is paramount and controlling. The contractual intentiondetermines whether the property subject of the dation will be considered as the full equivalent ofthe debt and will therefore serve as full satisfaction for the debt. "The dation in paymentextinguishes the obligation to the extent of the value of the thing delivered, either as agreed upon by the parties or as may be proved, unless the parties by agreement, express or implied, or bytheir silence, consider the thing as equivalent to the obligation, in which case the obligation istotally extinguished."



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ESTANISLAO REYES vs. SEBASTIANA MARTINEZ ET AL.,G.R. No. 32226 . DECEMBER 29, 1930.

FACTS:

Estanislao Reyes filed an action against the Martinez heirs in which the plaintiff seeks,among others, to recover five parcels of land, containing approximately one thousand coconuttrees, and to obtain a declaration of ownership in his own favor as against the defendants withrespect to said parcels. This cause of action is founded upon the contract, and the claim by the plaintiff is to have the five parcels adjudged to him in lieu of another parcel formerly supposed tocontain one thousand trees and described in paragraph 8 of the contract between him and certainof the Martinez heirs. By this contract Reyes was to be given the parcel described in clause 8, butin a proviso to said clause, the parties contracting with Reyes agreed to assure to him certainother land containing an equivalent number of trees in case he should so elect.

ISSUE:

Whether or not Reyes is entitled to the recovery of ownership of the five parcels of landsubject of this case.

RULING:

The prior history of the litigation shows that Reyes elected to take and hold the parceldescribed in clause 8, and his right thereto has all along been recognized in the dispositions made by the court with respect to said land. In our decision in Martinez vs. Graño (51 Phil., 287, 301),it was a basal assumption that Reyes would obtain the thousand trees referred to; and we are ofthe opinion that, from various steps taken in the prior litigation, Reyes must be taken to haveelected to take that particular parcel and he is now estopped from asserting a contrary election totake the five parcels of land described in paragraph IX of his complaint.

However, the title to the parcel of land elected by Reyes is in the heirs of InocenteMartinez and it does not appear that they have transferred said title to Reyes. It results thereforethat Reyes now has a claim for damages against the parties signatory to the contract of March 5,1921, for the value of the aforesaid property. We therefore reach the conclusion that Reyesshould either have the land originally set apart for him under clauses 4 and 8 of the contract, or,in case his right thereto should fail, he should not be required to pay the judgment for P8,000which was awarded to the Martinez heirs in Martinez vs. Graño (51 Phil., 287, 302).



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ASI CORP and ANTONIO SAN JUAN v. SPOUSES EFREN EVANGELISTA

FACTS:

Respondents are engaged in the large-scale business of buying broiler eggs, hatchingand selling them and egg by-products. For incubation and hatchings, respondents availed of thehatching services of ASJ Corp. They agreed o service fees of 80 centavos per egg. Service feeswere paid upon release. Fro consecutive times the respondents failed to pay the fee until suchtime that ASJ retained the chicks demanding full payment from the respondent. ASJ receivedP15,000 for partial payment but the chicks were still not released. RTC ruling, which wasaffirmed by the Court of Appeals holding that ASJ Corp and Antonio San Juan be solidarilyliable to the respondents.

ISSUE:

Was petitioner‘s retention of the chicks and by- products, on account of respondent‘sfailure to pay the corresponding fees unjustified?

RULING:

Respondents‘ offer to partially satisfy their accounts is not enough to extinguish theirobligation. Respondents cannot substitute or apply as their payment the value of the chicks and by-products they expect to derive because it is necessary that all the debts be paid for the samekind. The petition is partly granted. The Court of Appeals decision is modified.



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NEREO PACULDO v. BONIFACIO REGALADOG. R. No. 123855,November 20, 2000

FACTS:

On December 27, 1990, petitioner Paculdo and respondent Regalado entered into acontract of lease over a parcel of land for 25 years. For the first 5 years, Paculdo would paymonthly rental of P450,000 payable within 5 days of each month, with 2% penalty for verymonth of delay. Aside from the above lease, petitioner leased 11 other property fromrespondent. Petitioner failed to pay. Without the knowledge of petitioner, respondent ortgagedthe land subject of the lease contract including the improvements to Monte de Piedad. On August12, 1995, and on subsequent dates thereafter, respondent refused to accepr petitioner‘s dailyrental payments. Petitioner filed an action for injunction to enjoin respondent from disturbing his possession while respondent filed a complaint for ejectment attaching the demand letters. MTCheld in favor of the plaintiff which was affired by the RTC. CA found that the petitioner

impliedly consented to respondent‘s application of payment to his obligations, thus, dismissedthe petition for lack of merit.

ISSUE:

Whether petitioner was truly in arrears in the payment of rentals on the subject propertyat the time of the filing of the complaint of ejectment

RULING:

The lease over the Fairview wet market property is the most onerous among all theobligations of petitioner to respondent. It was established that the wet market is a going concernand that petitioner has invested about P35,000,000 in form of improvements, over the property.Hence, petitioner would stand to lose more if the lease would not proceed. CA decision was based on a misapprehension of the facts and the law on the application of payment. Hence, theejectment case must be dismissed. CA decision is set aside.



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CHINA BANKING CORPORATION v. COURT OF APPEALSG.R. No. 121158, December 5, 1996

FACTS:

China Banking Corporation extended several loans to Native West and so Ching, NativeWest‘s President. Native west executed a promissory note in favor of China Bank. So Ching,with the marital consent of his wife additionally executed two real estate mortgages over their properties. The promissory notes matured and despite due demands, neither private respondents paid. China Bank filed petition for the extrajudicial foreclosure of the mortgaged properties.Upon receipt of the foreclosure, private respondents filed a complaint before RTC for accountingwith damages and with temporary restraining order.

ISSUE:

Whether or not the subject additional mortgaged properties of the spouses are not

included in the notice of foreclosure

RULING:

It is well-settled that mortgages given to secure future advancements or loans are validand legal contracts, and that the amounts named as considerations in said contracts do not limitthe amount for which the mortgage may stand as security if from the four corners of theinstrument the intent to secure future and their indebtedness can be gathered. Supreme Courtfound that petitioners are entitled to foreclose the mortgages.



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MOBIL OIL PHILIPPINES and CALTEX v. COURT OF APPEALS andCONTINENTAL CEMENT

G.R.No. 103052,May 23, 1997

FACTS:

In May 1982, petitioner Mobil Oil entered into a supply agreement with privaterespondent Continental Cement, under which the former would supply the latter‘s industrial fueloil or bunker fuel oil requirements. MOP extended to CCC an unsecured credit line ofP2,000,000 against which CCC‘s purchases of oil could initially be charged. MOP made a totalof 67 deliveries of BFO, each delivery consisting of 20,000 liters to CCC‘s factory. CCCdiscovered that, the supposed BFO was in fact, pure water. A joint undertaking was initiated. OnAugust 23, 1983, Caltex informed CCC that it would be the new owner of Mop effectiveSeptember 1, 1983 and that Caltex would assume all rights and obligations of MOP under all itsexisting contracts. CA upheld the findings of the trial court that the water-contaminated BFOdelivered by MOP caused damages to CCC‘s rotary kin.

ISSUE:

Whether or not petitioners can be held liable for the contaminated BO delivered on theground that CFS, as carrier-hauler, was an agent of Mobil

RULING:

Court of Appeals correctly ruled that MOP could be held liable for the acts of CFS. Thehauling contract executed by and between MOP and CFS laid out the responsibilities of CFS.The presumption LAID DOWN IN Article 1523 of the Civil Code is not applicable. Thequestioned decision of the court of Appeals is affirmed in toto.



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DALTON, vs.FGR REALTY AND DEVELOPMENT CORPG.R. No. 172577 January 19, 2011

FACTS:

Flora R. Dayrit (Dayrit) owned a 1,811-square meter parcel of land located at the corner of RamaAvenue which Dalton leased portions of the property.In June 1985, Dayrit sold the property to respondent FGR Realty and Development Corporation(FGR). In August 1985, Dayrit and FGR stopped accepting rental payments because they wantedto terminate the lease agreements with Dalton and Sasam, et al.Soledad Dalton built a house which she initially used as a dwelling and store space. She vacatedthe premises when her children got married. She transferred her residence near F. Ramos PublicMarket, Cebu City.She constructed the 20 feet by 20 feet floor area house sometime in 1973. The last monthly rentalwas P69.00. When defendants refused to accept rent al and demanded vacation of the premises,she consignated [sic] her monthly rentals in court.

The RTC dismissed the 11 September 1985 complaint and ordered Dalton to vacate the property.The RTC held that:The requisites of consignation are as follows:1. The existence of a valid debt.2. Valid prior tender, unless tender is excuse [sic];3. Prior notice of consignation (before deposit)4. Actual consignation (deposit);5. Subsequent notice of consignation;Requisite Nos. 3 and 5 are absent or were not complied with. It is very clear that there were no prior notices of consignation (before deposit) and subsequent notices of consignation (afterdeposit) The Court of Appeals affirmed the RTC‘s 26 February 2002 Decision.

ISSUE:

WON the consignation was void.

RULING:

No. Compliance with the requisites of a valid consignation is mandatory. Failure tocomply strictly with any of the requisites will render the consignation void. Substantialcompliance is not enough. The requisites of a valid consignation: (1) a debt due; (2) the creditorto whom tender of payment was made refused without just cause to accept the payment, or thecreditor was absent, unknown or incapacitated, or several persons claimed the same right tocollect, or the title of the obligation was lost; (3) the person interested in the performance of theobligation was given notice before consignation was made; (4) the amount was placed at thedisposal of the court; and (5) the person interested in the performance of the obligation was givennotice after the consignation was made.Substantial compliance is not enough for that would render only a directory construction to thelaw. The use of the words "shall" and "must" which are imperative, operating to impose a dutywhich may be enforced, positively indicate that all the essential requisites of a valid consignationmust be complied with. The Civil Code Articles expressly and explicitly direct what must beessentially done in order that consignation shall be valid and effectual.



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SPOUSES JAIME BENOS v. SPOUSES GREGORIO LAWILAOG.R. No. 172259, December 5, 2006

FACTS:

On February 11,1999, petitioner-spouses Benos and respondent Lawilao executeda Pacto de Retro Sale where Benos sold their lot and the building erected thereon forP300,000, one-half of which to be paid in cash to the Benos and the other half to be paidto the bank to pay off the loans of the Benos which was secured by the same lot and building. Under the contract, Benos could redeem the property within 18 months fromthe date of execution by returning the contract price, otherwise, the sale would becomeirrevocable. After paying the P150,000, Lawilao took possession of the property,restructured it twicw, eventually the loan become due and demandable. On August 14,2000, a son of Benos and Lawilao paid the bankl but the bank refused. Lawilao filed forconsignation against the bank and deposited the amount of P159,000.00. RTC declared

Lawilao of the ownership of the subject property, which was affirmed by the Court ofAppeals.

ISSUE:

Whether or not the contract of Pacto de Retro Sale be rescinded by the petitioner

RULING:

In the instant case, records show that Lawilao filed the petition for consignationagainst the bank in Civil Case without notifying the Benos. Hence, Lawilao failed to prove their offer to pay the balance, even before the filing of the consignation case.Lawilao never notified the Benos. Thus, as far as the Benos are concerned, there was nofull and complete payment of the contract price which gives them the right to rescind.

Petition is granted. Court of Appeals decision is reversed and set aside, that thePacto de Retro Sale is rescinded and petitioner are ordered to return the amount ofP150,000 to respondents.



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ETERNAL GARDENS v. COURT OF APPEALS and 7TH DAY ADVENTISTG.R. No. 124554, December 9, 1997

FACTS:

Petitioner Eternal Gardens and private NPUM entered into a Land DevelopmentAgreement. Under the agreement, EG was to develop a parcel of land owned by NPUM into amemorial park. The P1.5 million initial installment mentioned in the Deed of Absolute Sale,shall be deducted out of the proceeds from the First Party‘s 40% at the end of the 5 th year.Subsequent payment should be changed against what is due to the first Party under the LandDevelopment agreement. Later, 2 claimants of the land surfaced but were dismissed. The casewas remanded to the CA for proper determination and dispositions. CA required EG to producedocuments necessary for accounting but failed to do so, hence, the right is waived. CA directedEG to pay private respondent the amounts of P167,065,195.00 as principal and P167,235,451.00interest.

ISSUE:

Whether or not the petitioner is liable for interest despite the land dispute

RULING:

Even during the pendency of the land dispute cases, EG was required to deposit theaccruing interests with a reputable commercial bank ― to avoid possible wastage of funds‖ whenthe case was given due course. Yet, EG hedged in depository the amounts due and made obviousattempts to stay payment by filing sundry motions and pleadings. CA correctly held EG liable forinterest of 12%. It is tantamount to a forbearance of money.



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CEBU INTERNATIONAL V CAG.R.No. 123031 October 12, 1999

FACTS:

On April 25, 1991, private respondent, Vicente Alegre, invested with CIFC, P500,000.00 pesos, in cash. Petitioner issued a promissory note to mature on May 27, 1991. The note forP516,238.67 covered private respondent's placement plus interest at twenty and a half percent forthirty-two days. On May 27, 1991, CIFC issued BPI Check No. 513397 P514,390.94 in favor ofthe private respondent as proceeds of his matured investment plus interest. The CHECK wasdrawn from petitioner's current account number 0011-0803-59, maintained with BPI, main branch at Makati City. On June 17, 1991, private respondent's wife deposited the CHECK withRCBC, in Puerto Princesa, Palawan. BPI dishonored the CHECK with the annotation, that the"Check (is) Subject of an Investigation." BPI took custody of the CHECK pending aninvestigation of several counterfeit checks drawn against CIFC's aforestated checking account.BPI used the check to trace the perpetrators of the forgery. Immediately, private respondent

notified CIFC of the dishonored CHECK and demanded, on several occasions, that he be paid incash. CIFC refused the request, and instead instructed private respondent to wait for its ongoing bank reconciliation with BPI.

ISSUE:

Whether or not there was valid tender of payment in the instant case?

RULING:

A check is not a legal tender, and therefore cannot constitute valid tender of payment."Since a negotiable instrument is only a substitute for money and not money, the delivery of suchan instrument does not, by itself, operate as payment. A check, whether a manager's check orordinary check, is not legal tender, and an offer of a check in payment of a debt is not a validtender of payment and may be refused receipt by the obligee or creditor. Mere delivery of checksdoes not discharge the obligation under a judgment. The obligation is not extinguished andremains suspended until the payment by commercial document is actually realized

The delivery of promissory notes payable to order, or bills of exchange or othermercantile documents shall produce the effect of payment only when they have been cashed, orwhen through the fault of the creditor they have been impaired.



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DE MESA V CAG.R.No. 106467-68 October 19,1999

FACTS:

Petitioner Dolores Ligaya de Mesa owns several parcels of land in Makati, Pasay City,Cavite, and General Santos City3 I. Two (2) parcels of land situated in Makati, Metro Manila,with TCT no. (232345) S-60337 containing an area of 188 square meters and TCT No. (232344)S-50336 containing an area of 236 square meters.Two parcels of land situated in Makan, General Santos City, with TCT No. T-11067 containingan area of 837 square meters. which were mortgaged to the Development Bank of the Philippines(DBP) as security for a loan she obtained from the bank. Failing to pay her mortgage debt, all hermortgaged properties were foreclosed and sold at public auction held on different days. On April30, 1977, the Makar property was sold and the corresponding certificate of sale inscribed onMarch 10, 1978. On August 25, 1977, the Naic, Cavite property was sold and the certificate ofsale registered on the same day. On August 30, 1977, the two (2) parcels of land in Makati were

sold at public auction and the certificate of sale was inscribed on November 25, 1977. And onJanuary 12, 1978, the three (3) parcels of land in Pasay City were also sold and the certificate ofsale was recorded on the same date. In all the said auction sales, DBP was the winning bidder.

ISSUE:

Whether or not the Court can supplant its own reading of an ambiguous contract for theactual intention of the contracting parties as testified to in open court and under oath.

RULING:

Art. 1370. If the terms of a contract are clear and leave no doubt upon the intention of thecontracting parties, the literal meaning of its stipulation shall control.

When the words of a contract are plain and readily understood, there is no room forconstruction. As the agreement of the parties are reduced to writing, such agreement isconsidered as containing all its terms and there can be, between the parties and their successors-in-interest, no evidence of the terms of the written agreement other than the contents of thewriting.In the case under consideration, the terms of the "Deed of Sale with Assumption of MortgageDebt" are clear and leave no doubt as to what were sold thereunder.

The contract under scrutiny is so explicit and unambiguous that it does not justify anyattempt to read into it any supposed intention of the parties, as the said contract is to beunderstood literally, just as they appear on its face.



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OCCENA V CAG.R.No. 44349 October 29, 1976

FACTS:

On February 25, 1975 private respondent Tropical Homes, Inc. filed a complaint formodification of the terms and conditions of its subdivision contract with petitioners (landownersof a 55,330 square meter parcel of land in Davao City), making the following allegations:

"That due to the increase in price of oil and its derivatives and the concomitantworldwide spiralling of prices, which are not within the control of plaintiff, of all commoditiesincluding basis raw materials required for such development work, the cost of development hasrisen to levels which are unanticipated, unimagined and not within the remotest contemplation ofthe parties at the time said agreement was entered into and to such a degree that the conditionsand factors which formed the original basis of said contract, Annex 'A', have been totallychanged;

"That further performance by the plaintiff under the contract, Annex 'A', will result in

situation where defendants would be unjustly enriched at the expense of the plaintiff; will causean inequitous distribution of proceeds from the sales of subdivided lots in manifest contraventionof the original essence of the agreement; and will actually result in the unjust and intolerableexposure of plaintiff to implacable losses.

ISSUE:

Whether or not provisions of art 1267 of the new civil code is applicable in the case at a bar?

RULING:

ART. 1267. When the service has become so difficult as to be manifestly beyond thecontemplation of the parties, the obligor may also be released therefrom, in whole or in part."

Respondent's complaint seeks not release from the subdivision contract but that the court"render judgment modifying the terms and conditions of the contract . . . by fixing the propershares that should pertain to the herein parties out of the gross proceeds from the sales ofsubdivided lots of subject subdivision". The cited article does not grant the courts this authorityto remake, modify or revise the contract or to fix the division of shares between the parties ascontractually stipulated with the force of law between the parties, so as to substitute its ownterms for those covenanted by the parties themselves. Respondent's complaints for modificationof contract manifestly has no basis in law and therefore states no cause of action. Under the particular allegations of respondent's complaint and the circumstances therein averred, the courtscannot even in equity grant the relief sought.



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ORTIGAS V FEATI BANKG.R.No. 24670 December 14, 1979

FACTS:

On March 4, 1952, plaintiff, as vendor, and Augusto Padilla y Angeles and NatividadAngeles, as vendees, entered into separate agreements of sale on installments over two parcels ofland, known as Lots Nos. 5 and 6, Block 31, of the Highway Hills Subdivision, situated atMandaluyong, Rizal. On July 19, 1962, the said vendees transferred their rights and interestsover the aforesaid lots in favor of one Emma Chavez. Upon completion of payment of the purchase price, the plaintiff executed the corresponding deeds of sale in favor of Emma Chavez.

On or about May 5, 1963, defendant-appellee began laying the foundation andcommenced the construction of a building on Lots Nos. 5 and 6, to be devoted to banking purposes, but which defendant-appellee claims could also be devoted to, and used exclusivelyfor, residential purposes. The following day, plaintiff-appellant demanded in writing thatdefendant-appellee stop the construction of the commercial building on the said lots. The latter

refused to comply with the demand, contending that the building was being constructed inaccordance with the zoning regulations, defendant-appellee having filed building and planning permit applications with the Municipality of Mandaluyong, and it had accordingly obtained building and planning permits to proceed with the construction.

ISSUE:

Whether the Resolution No. 27 s-1960 can nullify or supersede the contractualobligations assumed by defendant-appellee.

RULING:

It should be stressed, that while non-impairment of contracts is constitutionallyguaranteed, the rule is not absolute, since it has to be reconciled with the legitimate exercise of police power.

Resolution No. 27, s-1960 declaring the western part of Highway 54, EDSA from ShawBoulevard to the Pasig River as an industrial and commercial zone, was obviously passed by theMunicipal Council of Mandaluyong, Rizal in the exercise of police power to safeguard or promote the health, safety, peace, good order and general welfare of the people in the locality.Judicial notice may be taken of the conditions prevailing in the area, especially where Lots Nos.5 and 6 are located. The lots themselves not only front the highway; industrial and commercialcomplexes have flourished about the place. EDSA, a main traffic artery which runs throughseveral cities and municipalities in the Metro Manila area, supports an endless stream of trafficand the resulting activity, noise and pollution are hardly conducive to the health, safety orwelfare of the residents in its route. Having been expressly granted the power to adopt zoningand subdivision ordinances or regulations, the municipality of Mandaluyong, through itsMunicipal Council, was reasonably, if not perfectly, justified under the circumstances, in passingthe subject resolution.



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DANIEL T. SO vs. FOOD FEST LAND, INC.G.R. No. 183628 April 7, 2010

FOOD FEST LAND, INC. vsDANIEL T. SOG.R. No. 183670

FACTS:Food Fest Land Inc. (Food Fest) entered into a September 14, 1999 Contract of Lease1

with Daniel T. So (So) over a commercial space in San Antonio Village, Makati City for a periodof three years (1999-2002) on which Food Fest intended to operate a Kentucky Fried Chickencarry out branch.

Before forging the lease contract, the parties entered into a preliminary agreement datedJuly 1, 1999, the pertinent portion of which states that the lease shall not become binding uponus unless and until the government agencies concerned shall authorize, permit or license us toopen and maintain our business at the proposed Lease Premises.While Food Fest was able to secure the necessary licenses and permits for the year 1999, it

failed to commence business operations. For the year 2000, Food Fest‘s application for renewalof barangay business clearance was "held in abeyance until further study of [its] kitchenfacilities."

As the barangay business clearance is a prerequisite to the processing of other permits,licenses and authority by the city government, Food Fest was unable to operate. Fearing further business losses, Food Fest, by its claim, communicated its intent to terminate the lease contractto So who, however, did not accede and instead offered to help Food Fest secure authorizationfrom the barangay.

On April 26, 2001, So filed a complaint for ejectment and damages against Food Fest before the Metropolitan Trial Court (MeTC) of Makati City.The MeTC, by Decision of July 4, 2005,7 rendered judgment in favor of So.The Regional TrialCourt (RTC), by Decision of November 30, 2006,9 reversed the MeTC Decision.Court of Appeals however, declared that Food Fest‘s obligation to pay rent was not extinguishedupon its failure to secure permits to operate.

ISSUE:

WON Principle of rebus sic stantibus is applicable to the instant case.

RULING:

No. As for Food Fest‘s invocation of the principle of rebus sic stantibus as enunciated inArticle 1267 of the Civil Code to render the lease contract functus officio, and consequentlyrelease it from responsibility to pay rentals, the Court is not persuaded.

This article, which enunciates the doctrine of unforeseen events, is not, however, anabsolute application of the principle of rebus sic stantibus, which would endanger the security ofcontractual relations. The parties to the contract must be presumed to have assumed the risks ofunfavorable developments. It is, therefore, only in absolutely exceptional changes ofcircumstances that equity demands assistance for the debtor.19

Food Fest was able to secure the permits, licenses and authority to operate when the leasecontract was executed. Its failure to renew these permits, licenses and authority for thesucceeding year, does not, however, suffice to declare the lease functus officio, nor can it beconstrued as an unforeseen event to warrant the application of Article 1267.



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MAGAT V CAG.R.No. 124221 August 4, 2000

FACTS:

Private respondent Santiago A. Guerrero (hereinafter referred to as "Guerrero") wasPresident and Chairman of[4] "Guerrero Transport Services", a single proprietorship.Sometime in 1972, Guerrero Transport Services won a bid for the operation of a fleet of taxicabswithin the Subic Naval Base, in Olongapo. As highest bidder, Guerrero was to "provide radio-controlled taxi service within the U. S. Naval Base, Subic Bay, utilizing as demand requires...160 operational taxis consisting of four wheel, four-door, four passenger, radio controlled, metercontrolled, sedans, not more than one year.On September 22, 1972, with the advent of martial law, President Ferdinand E. Marcos issuedLetter of Instruction No. 1. SEIZURE AND CONTROL OF ALL PRIVATELY OWNED NEWSPAPERS, MAGAZINES, RADIO AND TELEVISION FACILITIES AND ALLOTHERMEDIA OF COMMUNICATION.

ISSUE:

Whether the contract between Victorino and Guerrero for the purchase of radiotransceivers was void.

RULING:

The contract was not void ab initio. Nowhere in the LOI and Admin. Circular is there anexpress ban on the importation of transceivers.

The LOI and Administrative Circular did not render "radios and transceivers" illegal perse. The Administrative Circular merely ordered the Radio Control Office to suspend the"acceptance and processing .... of applications... for permits to possess, own, transfer, purchaseand sell radio transmitters and transceivers..."[41] Therefore, possession and importation of theradio transmitters and transceivers was legal provided one had the necessary license for it.[42]Transceivers were not prohibited but merely regulated goods. The LOI and AdministrativeCircular did not render the transceivers outside the commerce of man. They were valid objects ofthe contract.



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NATELCO V CAG.R.No. 107112 February 24, 1994

FACTS:

Petitioner Naga Telephone Co., Inc. (NATELCO) is a telephone company rendering localas well as long distance service in Naga City while private respondent Camarines Sur II ElectricCooperative, Inc. (CASURECO II) is a private corporation established for the purpose ofoperating an electric power service in the same city. On November 1, 1977, the parties enteredinto a contract (Exh. "A") for the use by petitioners in the operation of its telephone service theelectric light posts of private respondent in Naga City. In consideration therefor, petitionersagreed to install, free of charge, ten (10) telephone connections for the use by private respondent

After the contract had been enforced for over ten (10) years, private respondent filed onJanuary 2, 1989 with the Regional Trial Court of Naga City (Br. 28) C.C. No. 89-1642 against petitioners for reformation of the contract with damages, on the ground that it is too one-sided infavor of petitioners; that it is not in conformity with the guidelines of the National Electrification

Administration (NEA) which direct that the reasonable compensation for the use of the posts isP10.00 per post, per month; that after eleven (11) years of petitioners' use of the posts, thetelephone cables strung by them thereon have become much heavier with the increase in thevolume of their subscribers, worsened by the fact that their linemen bore holes through the postsat which points those posts were broken during typhoons.

ISUUE:

Whether respondent court erred in making a contract for the parties by invoking Article1267 of the New Civil Code.

RULING:

Article 1267 speaks of "service" which has become so difficult. Taking into considerationthe rationale behind this provision, 9 the term "service" should be understood as referring to the"performance" of the obligation. In the present case, the obligation of private respondent consistsin allowing petitioners to use its posts in Naga City, which is the service contemplated in saidarticle. Furthermore, a bare reading of this article reveals that it is not a requirement thereunderthat the contract be for future service with future unusual change. According to Senator ArturoM. Tolentino, 10 Article 1267 states in our law the doctrine of unforseen events. This is said to be based on the discredited theory of rebus sic stantibus in public international law; under thistheory, the parties stipulate in the light of certain prevailing conditions, and once these conditionscease to exist the contract also ceases to exist. Considering practical needs and the demands ofequity and good faith, the disappearance of the basis of a contract gives rise to a right to relief infavor of the party prejudiced.



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REYNA V. COAFEBRUARY 8, 2011

FACTS:

The Land Bank of the Philippines (Land Bank) was engaged in a cattle-financing program wherein loans were granted to various cooperatives. Pursuant thereto, Land Bank's Ipil,Zamboanga del Sur Branch (Ipil Branch) went into a massive information campaign offering the program to cooperatives.Cooperatives who wish to avail of a loan under the program must fill upa Credit Facility Proposal (CFP) which will be reviewed by the Ipil Branch. The Ipil Branchapproved the applications of four cooperatives.One of the conditions stipulated in the CFP is that prior to the release of the loan, a Memorandum of Agreement (MOA) between the supplier of thecattle, Remad Livestock Corporation (REMAD), and the cooperative, shall have been signed. Asalleged by petitioners, the terms of the CFP allowed for pre-payments or advancement of the payments prior to the delivery of the cattle by the supplier REMAD but such was not stipulatedin the contracts.

Three checks were issued by the Ipil Branch to REMAD to serve as advanced paymentfor the cattle. REMAD, however, failed to supply the cattle on the dates agreed upon.In post audit, the Land Bank Auditor disallowed the amount of P3,115,000.00 under CSB

No. 95-005 dated December 27, 1996 and Notices of Disallowance Nos. 96-014 to 96-019 inview of the non-delivery of the cattle. Also made as the basis of the disallowance was the factthat advanced payment was made in violation of bank policies and COA rules and regulations.Petitioners were made liable for the amount

ISSUE:

Whether or not the writing off of a loan is considered as condonation

RULING:

This Court rules that writing-off a loan does not equate to a condonation or release of adebt by the creditor.As an accounting strategy, the use of write-off is a task that can help a company maintain a moreaccurate inventory of the worth of its current assets. In general banking practice, the write-offmethod is used when an account is determined to be uncollectible and an uncollectible expense isrecorded in the books of account. If in the future, the debt appears to be collectible, as when thedebtor becomes solvent, then the books will be adjusted to reflect the amount to be collected asan asset. In turn, income will be credited by the same amount of increase in the accountsreceivable.Write-off is not one of the legal grounds for extinguishing an obligation under the Civil Code. Itis not a compromise of liability. Neither is it a condonation, since in condonation gratuity on the part of the obligee and acceptance by the obligor are required. In making the write-off, only thecreditor takes action by removing the uncollectible account from its books even without theapproval or participation of the debtor.



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TRANS PACIFIC V CAG.R.No. 109172 August 19, 1994

FACTS:

Sometime in 1979, petitioner applied for and was granted several financialaccommodations amounting to P1,300,000.00 by respondent Associated Bank. The loans wereevidence and secured by four (4) promissory notes, a real estate mortgage covering three parcelsof land and a chattel mortgage over petitioner's stock and inventories.Unable to settle its obligation in full, petitioner requested for, and was granted by respondent bank, a restructuring of the remaining indebtedness which then amounted to P1,057,500.00, asall the previous payments made were applied to penalties and interests.

The mortgaged parcels of land were substituted by another mortgage covering two other parcels of land and a chattel mortgage on petitioner's stock inventory. The released parcels ofland were then sold and the proceeds amounting to P1,386,614.20, according to petitioner, were

turned over to the bank and applied to Trans-Pacific's restructured loan. Subsequently,respondent bank returned the duplicate original copies of the three promissory notes to Trans-Pacific with the word "PAID" stamped thereon. Despite the return of the notes, or on December12, 1985, Associated Bank demanded from Trans-Pacific payment of the amount of P492,100.00representing accrued interest on PN No. TL-9077-82. According to the bank, the promissorynotes were erroneously released.

ISSUE :

Whether or not petitioner has indeed paid in full its obligation to respondent bank.

RULING:

Art. 1271. The delivery of a private document evidencing a credit, made voluntarily bythe creditor to the debtor, implies the renunciation of the action which the former had against thelatter."

The surrender and return to plaintiffs of the promissory notes evidencing the consolidatedobligation as restructured, produces a legal presumption that Associated had thereby renouncedits actionable claim against plaintiffs (Art. 1271, NCC). The presumption is fortified by ashowing that said promissory notes all bear the stamp "PAID", and has not been otherwiseovercome. Upon a clear perception that Associated's record keeping has been less thanexemplary . . . , a proffer of bank copies of the promissory notes without the "PAID" stampsthereon does not impress the Court as sufficient to overcome presumed remission of theobligation vis-a-vis the return of said promissory notes. Indeed, applicable law is supportive of afinding that in interest bearing obligations-as is the case here, payment of principal (sic) shall not be deemed to have been made until the interests have been covered (Art. 1253, NCC).Conversely, competent showing that the principal has been paid, militates against posturedentitlement to unpaid interests.



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LOPEZ V TAMBUNTINGG.R.No. 9806 January 19, 1916

FACTS:

These proceedings were brought to recover from the defendant the sum of P2,000,amount of the fees, which, according to the complaint, are owing for professional medicalservices rendered by the plaintiff to a daughter of the defendant from March 10 to July 15, 1913,which fees the defendant refused to pay, notwithstanding the demands therefor made upon him by the plaintiff.

The defendant denied the allegations of the complaint, and furthermore alleged that theobligation which the plaintiff endeavored to compel him to fulfill was already extinguished.

ISSUE:

Whether or not implied condonation can be legally pressumed in the instant case?

RULING:

It is true that number 8 of section 334 of the Code of Civil Procedure provides as a legal presumption "that an obligation delivered up to the debtor has been paid." Article 1188 of theCivil Code also provides that the voluntary surrender by a creditor to his debtor, of a privateinstrument proving a credit, implies the renunciation of the right of action against the debtor; andarticle 1189 prescribes that whenever the private instrument which evidences the debt is in the possession of the debtor, it will be presumed that the creditor delivered it of his own free will,unless the contrary is proven.

But the legal presumption established by the foregoing provisions of law cannot stand ifsufficient proof is adduced against it. In the case at bar the trial court correctly held that therewas sufficient evidence to the contrary, in view of the preponderance thereof in favor of the plaintiff and of the circumstances connected with the defendant's possession of said receiptExhibit 1. Furthermore, in order that such a presumption may be taken into account, it isnecessary, as stated in the laws cited, that the evidence of the obligation be delivered up to thedebtor and that the delivery of the instrument proving the credit be made voluntarily by thecreditor to the debtor. In the present case, it cannot be said that these circumstances concurred,inasmuch as when the plaintiff sent the receipt to the defendant for the purpose of collecting hisfee, it was not his intention that that document should remain in the possession of the defendantif the latter did not forthwith pay the amount specified therein.



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ESTATE OF MOTA V SERRAG.R.No. 22825 February 14, 1925

FACTS:

On February 1, 1919, plaintiffs and defendant entered into a contract of partnership,marked Exhibit A, for the construction and exploitation of a railroad line from the "San Isidro"and "Palma" centrals to the place known as "Nandong". The original capital stipulated wasP150,000. It was covenanted that the parties should pay this amount in equal parts and the plaintiffs were entrusted with the administration of the partnership.

January 29, 1920, the defendant entered into a contract of sale with VenancioConcepcion, Phil. C. Whitaker, and Eusebio R. de Luzuriaga, whereby he sold to the latter theestate and central known as "Palma" with its running business, as well as all the improvements,machineries and buildings, real and personal properties, rights, choses in action and interests,including the sugar plantation of the harvest year of 1920 to 1921, covering all the property ofthe vendor. Before the delivery to the purchasers of the hacienda thus sold, Eusebio R. de

Luzuriaga renounced all his rights under the contract of January 29, 1920, in favor of Messrs.Venancio Concepcion and Phil. C. Whitaker.Afterwards, on January 8, 1921, Venancio Concepcion and Phil. C. Whitaker bought from the plaintiffs the one half of the railroad line pertaining to the latter executing therefor the documentExhibit 5. The price of this sale was P237,722.15, excluding any amount which the defendantmight be owing to the plaintiffs.

ISSUE:

Whether or not there was confusion of the rights of the creditor and debtor

RULING:

The purchasers, Phil. C. Whitaker and Venancio Concepcion, to secure the payment ofthe price, executed a mortgage in favor of the plaintiffs on the same rights and titles that they had bought and also upon what they had purchased from Mr. Salvador Serra. In other words, Phil C.Whitaker and Venancio Concepcion mortgaged unto the plaintiffs what they had bought from the plaintiffs and also what they had bought from Salvador Serra. If Messrs. Phil. C. Whitaker andVenancio Concepcion had purchased something from Mr. Salvador Serra, the herein defendant,regarding the railroad line, it was undoubtedly the one-half thereof pertaining to Mr. SalvadorSerra. This clearly shows that the rights and titles transferred by the plaintiffs to Phil. C.Whitatker and Venancio Concepcion were only those they had over the other half of the railroadline. Therefore, as already stated, since there was no novation of the contract between the plaintiffs and the defendant, as regards the obligation of the latter to pay the former one-half ofthe cost of the construction of the said railroad line, and since the plaintiffs did not include in thesale, evidenced by Exhibit 5, the credit that they had against the defendant, the allegation that theobligation of the defendant became extinguished by the merger of the rights of creditor anddebtor by the purchase of Messrs. Phil. C. Whitaker and Venancio Concepcion is whollyuntenable.



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YEK TON LIN V YUSINGCOG.R.No. 43608 July 20, 1937

FACTS:

Defendant Pelagio Yusingco was the owner of the steamship Yusingco and, as such, heexecuted, on November 19, 1927, a power of attorney in favor of Yu Seguioc to administer,lease, mortgage and sell his properties, including his vessels or steamship. Yu Seguiocmortgaged to the plaintiff Yek Tong Lin Fire & Marine Insurance Co., Ltd., with the approval ofthe Bureau of Customs, the steamship Yusingco belonging to the defendant. One year and somemonths later, the steamship Yusingco needed some repairs which were made by the EarnshawDocks & Honolulu Iron Works. The repairs were made upon the guaranty of the defendant andappellant Vicente Madrigal at a cost of P8,244.66. When neither A. Yusingco Hermanos norPelagio Yusingco could pay said sum to the Earnshaw Docks & Honolulu Iron Works, thedefendant and appellant Vicente Madrigal had to make payment thereof with the stipulated

interest thereon, which was at the rate of 9 per cent per annum, on March 9, 1932, because hewas bound thereto by reason of the bond filed by him, the payment then made by him havingamounted to P8,777.60. When said defendant discovered that he was not to be reimbursed for therepairs made on the steamship Yusingco, he brought an action against his codefendant PelagioYusingco and A. Yusingco Hermanos to compel them to reimburse, thereby giving rise to civilcase No. 41654 of the Court of First Instance of Manila, entitled "Vicente Madrigal, plaintiff, vs.Pelagio Yusingco and A. Yusingco Hermanos, defendants" which resulted in a judgmentfavorable to him and adverse to the Yusingcos.

ISSUE:

Whether or not obligations were extinguished by reason of the merger of the rights of thedebt or and creditor?

RULING:

After the steamship Yusingco had been sold by virtue of the judicial writ issued in civilcase No. 41654 for the execution of the judgment rendered in favor of Vicente Madrigal, theonly right left to the plaintiff was to collect its mortgage credit from the purchaser thereof at public auction, inasmuch as the rule is that a mortgage directly and immediately subjects the property on which it is imposed, whoever its possessor may be, to the fulfillment of theobligation for the security of which it was created (article 1876, Civil code); but it so happensthat it can not take such steps now because it was the purchaser of the steamship Yusingco at public auction, and it was so with full knowledge that it had a mortgage credit on said vessel.Obligations are extinguished by the merger of the rights of the creditor and debtor (articles 1156and 1192, Civil Code).



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E.G.V. REALTY V CAG.R.No. 120236 July 20, 1999

FACTS:

Petitioner E.G.V. Realty Development Corporation is the owner/developer of a seven-storey condominium building known as Cristina Condominium. Cristina CondominiumCorporation holds title to all common areas of Cristina Condominium and is in charge ofmanaging, maintaining and administering the condominium‘s common areas and providing forthe building‘s security. R espondent Unisphere International, Inc. (hereinafter referred to asUnisphere) is the owner/occupant of Unit 301 of said condominium. On November 28, 1981,respondent Unisphere‘s Unit 301 was allegedly robbed of various items valued at P6,165.00. Theincident was reported to petitioner CCC. On July 25, 1982, another robbery allegedly occurred at

Unit 301 where the items carted away were valued at P6,130.00, bringing the total value of itemslost to P12,295.00. This incident was likewise reported to petitioner CCC. On October 5, 1982,respondent Unisphere demanded compensation and reimbursement from petitioner CCC for thelosses incurred as a result of the robbery. On January 28, 1987, petitioners E.G.V. Realty andCCC jointly filed a petition with the Securities and Exchange Commission (SEC) for thecollection of the unpaid monthly dues in the amount of P13,142.67 against respondentUnisphere.

ISSUE :

Whether or not set-off or compensation has taken place in the instant case.

RULING:

Compensation or offset under the New Civil Code takes place only when two persons orentities in their own rights, are creditors and debtors of each other. (Art. 1278).

A distinction must be made between a debt and a mere claim. A debt is an amountactually ascertained. It is a claim which has been formally passed upon by the courts or quasi- judicial bodies to which it can in law be submitted and has been declared to be a debt. A claim,on the other hand, is a debt in embryo. It is mere evidence of a debt and must pass thru the process prescribed by law before it develops into what is properly called a debt. Absent,however, any such categorical admission by an obligor or final adjudication, no compensation oroff-set can take place. Unless admitted by a debtor himself, the conclusion that he is in truthindebted to another cannot be definitely and finally pronounced, no matter how convinced hemay be from the examination of the pertinent records of the validity of that conclusion theindebtedness must be one that is admitted by the alleged debtor or pronounced by final judgmentof a competent court or in this case by the Commission.

There can be no doubt that Unisphere is indebted to the Corporation for its unpaidmonthly dues in the amount of P13,142.67. This is admitted.



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AEROSPACE CHEMICAL V CAg.r.no. 108129 september 23, 1999

FACTS:

On June 27, 1986, petitioner Aerospace Industries, Inc. (Aerospace) purchased fivehundred (500) metric tons of sulfuric acid from private respondent Philippine PhosphateFertilizer Corporation (Philphos). Initially set beginning July 1986, the agreement provided thatthe buyer shall pay its purchases in equivalent Philippine currency value, five days prior to theshipment date. Petitioner as buyer committed to secure the means of transport to pick-up the purchases from private respondent's loadports. Per agreement, one hundred metric tons (100 MT)of sulfuric acid should be taken from Basay, Negros Oriental storage tank, while the remainingfour hundred metric tons (400 MT) should be retrieved from Sangi, Cebu. On December 18,

1986, M/T Sultan Kayumanggi docked at Sangi, Cebu, but withdrew only 157.51 MT of sulfuricacid. Again, the vessel tilted. Further loading was aborted. Two survey reports conducted by theSociete Generale de Surveillance (SGS) Far East Limited, dated December 17, 1986 and January2, 1987, attested to these occurrences. Later, on a date not specified in the record, M/T SultanKayumanggi sank with a total of 227.51 MT of sulfuric acid on board. Petitioner charteredanother vessel, M/T Don Victor, with a capacity of approximately 500 MT.6 [TSN, September 1,1989, pp. 28-29.] On January 26 and March 20, 1987, Melecio Hernandez, acting for the petitioner, addressed letters to private respondent, concerning additional orders of sulfuric acid toreplace its sunken purchases.

ISSUE:

Should expenses for the storage and preservation of the purchased fungible goods,namely sulfuric acid, be on seller's account pursuant to Article 1504 of the Civil Code?

RULING:

Petitioner tries to exempt itself from paying rental expenses and other damages byarguing that expenses for the preservation of fungible goods must be assumed by the seller.Rental expenses of storing sulfuric acid should be at private respondent's account until ownershipis transferred, according to petitioner. However, the general rule that before delivery, the risk ofloss is borne by the seller who is still the owner, is not applicable in this case because petitionerhad incurred delay in the performance of its obligation. Article 1504 of the Civil Code clearlystates: "Unless otherwise agreed, the goods remain at the seller's risk until the ownership thereinis transferred to the buyer, but when the ownership therein is transferred to the buyer the goodsare at the buyer's risk whether actual delivery has been made or not, except that: (2) Where actualdelivery has been delayed through the fault of either the buyer or seller the goods are at the riskof the party at fault."

On this score, we quote with approval the findings of the appellate court, thus: Thedefendant [herein private respondent] was not remiss in reminding the plaintiff that it would haveto bear the said expenses for failure to lift the commodity for an unreasonable length of time.Buteven assuming that the plaintiff did not consent to be so bound, the provisions of Civil Codecome in to make it liable for the damages sought by the defendant.



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APODACA V NLRC G.R.No. 80039 April1 8, 1989

FACTS:

Petitioner was employed in respondent corporation. On August 28, 1985, respondent JoseM. Mirasol persuaded petitioner to subscribe to P1,500 shares of respondent corporation itP100.00 per share or a total of P150,000.00. He made an initial payment of P37,500.00. OnSeptember 1, 1975, petitioner was appointed President and General Manager of the respondentcorporation. However, on January 2, 1986, he resigned.On December 19, 1986, petitioner instituted with the NLRC a complaint against privaterespondents for the payment of his unpaid wages, his cost of living allowance, the balance of hisgasoline and representation expenses and his bonus compensation for 1986. Petitioner and private respondents submitted their position papers to the labor arbiter. Private respondentsadmitted that there is due to petitioner the amount of P17,060.07 but this was applied to theunpaid balance of his subscript in the amount of P95,439.93. Petitioner questioned the set-off

alleging that there was no call or notice for the payment of unpaid subscription and that,accordingly, the alleged obligation is not enforceable.

ISSUE :

Does the National Labor Relations Commission (NLRC) have jurisdiction to resolve aclaim for non-payment of stock subscriptions to a corporation? Assuming that it has, can anobligation arising therefrom be offset against a money claim of an employee against theemployer?

RULING:

Firstly, the NLRC has no jurisdiction to determine such intra-corporate dispute betweenthe stockholder and the corporation as in the matter of unpaid subscriptions. This controversy iswithin the exclusive jurisdiction of the Securities and Exchange Commission.

Secondly, assuming arguendo that the NLRC may exercise jurisdiction over the saidsubject matter under the circumstances of this case, the unpaid subscriptions are not due and payable until a call is made by the corporation for payment. Private respondents have not presented a resolution of the board of directors of respondent corporation calling for the paymentof the unpaid subscriptions. It does not even appear that a notice of such call has been sent to petitioner by the respondent corporation.



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SPOUSES CHUNG V. ULANDAY CONSTRUCTIONOCTOBER 11, 2010

FACTS:

In February 1985, the petitioners contracted with respondent Ulanday Construction, Inc. toconstruct, within a 150-day period,the concrete structural shell of the formers two-storeyresidential house in Urdaneta Village, Makati City at the contract price of P3, 291,142.00.

The contract stipulated among others that

the petitioners shall pay a P987,342.60 downpayment,with the balance to be paid in progress payments based on actual work completed; (c) theConstruction Manager or Architect shall check the respondent‘s request for progress paymentand endorse it to the petitioners for payment within 3 days from receipt, (d) the petitioners shall pay the respondents within 7 days from receipt of the Construction Manager‘s or Architect‘scertificate; (e) the respondent cannot change or alter the plans, specifications, and works withoutthe petitioners‘ prior written approval. Respondent gave 12 progress billings but the petitioners

were only able to pay 7 of them. On their part, the respondent effected 19 change orders withoutthe consent of the petitioners amounting to P912, 885.91. Respondents demanded the remaining balance from the petitioners which the petitioners denied asserting that the respondents violatedthe contract.

ISSUE:

Whether or not the petitioners are liable for the remaining balance

RULING:

In contractual relations, the law allows the parties leeway and considers their agreement as thelaw between them.Contract stipulations that are not contrary to law, morals, good customs, public order or public policy shall be binding and should be complied with in good faith. No party is permitted to change his mind or disavow and go back upon his own acts, or to proceedcontrary thereto, to the prejudice of the other party. In the present case, we find that both partiesfailed to comply strictly with their contractual stipulations on the progress billings and changeorders that caused the delays in the completion of the project.

Under the circumstances, fairness and reason dictate that we simply order the set-off of the petitioners‘ contractual liabilities totaling P575,922.13 against the repair cost for the defectivegutter, pegged at P717,524.00, leaving the amount of P141,601.87 still due from the respondent.Support in law for this ruling for partial legal compensation proceeds from Articles1278, 1279, 1281, and 1283 of the Civil Code. In short, both parties are creditors and debtors ofeach other, although in different amounts that are already due and demandable.



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SELWIN LAO V. SPECIAL PLANS, INC.GR No. 164729; June 29, 2010

FACTS:

Petitioners Selwyn F. Lao and Edgar Manansala (Manansala), together with Benjamin Jim (Jim),entered into a Contract of Lease with respondent Special Plans, Inc. (SPI) for the period January16, 1993 to January 15, 1995 over SPI‘s building at No. 354 Quezon Avenue, QuezonCity. Petitioners intended to use the premises for their karaoke and restaurant business known as―Saporro Restaurant‖. Upon expiration of the lease contract, it was renewed for a period of eight months at a monthlyrate of P23, 000.00. On June 3, 1996, SPI sent a Demand Letter to the petitioners asking for full payment of rentals in arrears.Receiving no payment, SPI filed on July 23, 1996 a Complaint forsum of money with the MeTC of Quezon City, claiming unpaid rentals of P118, 000.00 coveringthe period March 16, 1996 to August 16, 1996.

Petitioners answered faulting SPI for making them believe that it owns the leased property andthat SPI did not deliver the leased premises in a condition fit for petitioners‘ intended use. Thus, petitioners claimed that they were constrained to incur expenses for necessary repairs as well asexpenses for the repair of structural defects, which SPI failed and refused toreimburse. Petitioners prayed that the complaint be dismissed and judgment on theircounterclaims be rendered ordering SPI to pay them the sum of P422, 920.40 as actual damages,as well as moral damages, attorney‘s fees and exemplary damages.

ISSUE:

Whether or not the cost of repairs incurred by the petitioners should be compensated against theunpaid rentals.

RULING:

Petitioners failed to properly discharge their burden to show that the debts are liquidated anddemandable. Consequently, legal compensation is inapplicable.

The petitioners attempted to prove that they spent for the repair of the roofing, ceiling andflooring, as well as for waterproofing. However, they failed to appreciate that, as per their leasecontract, only structural repairs are for the account of the lessor, herein respondent SPI. In whichcase, they overlooked the need to establish that aforesaid repairs are structural in nature, in thecontext of their earlier agreement. It would have been an altogether different matter if the lessorwas informed of the said structural repairs and he implicitly or expressly consented and agreed totake responsibility for the said expenses. Such want of evidence on this respect is fatal to thisappeal. Consequently, their claim remains unliquidated and, legal compensation isinapplicable.



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UNITED PLANTERS MILLING CO. V. CAGR No. 126890; April 2, 2009

FACTS:

In 1987, the Republic of the Philippines lost around 1.5 Billion Pesos after it had waived its rightto collect on an outstanding indebtedness from petitioner, by virtue of a so-called ―friendlyforeclosure agreement‖ that ultimately was friendly only to petitioner.

Petitioner United Planters Sugar Milling Co. (UPSUMCO) was engaged in the business ofmilling sugar. In 1974, as UPSUMCO commenced operations, it obtained a set of loans fromrespondent Philippine National Bank (PNB). The loans were securedover two parcels of land where the milling plant stood and chattel mortgages over themachineries and equipment.

On 27 February 1987, through a Deed of Transfer, PNB assigned to the Government its ―rights,

titles and interests‖ over UPSUMCO, among several other assets.

[6]

The Deed of Transferacknowledged that said assignment was being undertaken ―in compliance with PresidentialProclamation No. 50.‖ The Government subsequently transferred these ―rights, titles andinterests‖ over UPSUMCO to the respondent Asset and Privatization Trust (APT).

ISSUE:

Whether or not there was compensation in the present case.

RULING:

The right of PNB to set-off payments from UPSUMCO arose out of conventional compensationrather than legal compensation, even though all of the requisites for legal compensation were present as between those two parties. The determinative factor is the mutual agreement betweenPNB and UPSUMCO to set-off payments. Even without an express agreement stipulatingcompensation, PNB and UPSUMCO would have been entitled to set-off of payments, as thelegal requisites for compensation under Article 1279 were present.

As soon as PNB assigned its credit to APT, the mutual creditor-debtor relation between PNB andUPSUMCO ceased to exist. However, PNB and UPSUMCO had agreed to a conventionalcompensation, a relationship which does not require the presence of all the requisites underArticle 1279. And PNB too had assigned all its rights as creditor to APT, including its rightsunder conventional compensation. The absence of the mutual creditor-debtor relation betweenthe new creditor APT and UPSUMCO cannot negate the conventional compensation.Accordingly, APT, as the assignee of credit of PNB, had the right to set-off the outstandingobligations of UPSUMCO on the basis of conventional compensation before the condonationtook effect on 3 September 1987.

http://sc.judiciary.gov.ph/jurisprudence/2009/april2009/126890.htm#_ftn6






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PNB MANAGEMENT V R&R METALG.R.No. 132245 January 1, 2002

FACTS:

It appears that on November 19, 1993, respondent R&R Metal Casting and Fabricating,Inc. (R&R) obtained a judgment in its favor against Pantranco North Express, Inc. (PNEI).PNEI was ordered to pay respondent P213,050 plus interest as actual damages, P50,000 asexemplary damages, 25 percent of the total amount payable as attorney‘s fees, and the costs ofsuit. However, the writ of execution was returned unsatisfied since the sheriff did not find any property of PNEI recorded at the Registries of Deeds of the different cities of Metro Manila. Neither did the sheriff receive a reply to the notice of garnishment he sent to PNB-Escolta.OnMarch 27, 1995, respondent filed with the trial court a motion for the issuance of subpoenaeduces tecum and ad testificandum requiring petitioner PNB Management and DevelopmentCorp. (PNB MADECOR) to produce and testify on certain documents pertaining to transactions between petitioner and PNEI from 1981 to 1995.

ISSUE:

Whether or not legal compensation have occured in the instant case?

RULING:

Legal compensation could not have occurred because of the absence of one requisite inthis case: that both debts must be due and demandable.Petitioner‘s obligation to PNEI appears to be payable on demand, following the aboveobservation made by the CA and the assertion made by petitioner. Petitioner is obligated to paythe amount stated in the promissory note upon receipt of a notice to pay from PNEI. If petitioner fails to pay after such notice, the obligation will earn an interest of 18 percent perannum.

Since petitioner‘s obligation to PNEI is payable on demand, and there being no demandmade, it follows that the obligation is not yet due. Therefore, this obligation may not be subjectto compensation for lack of a requisite under the law. Without compensation having taken place, petitioner remains obligated to PNEI to the extent stated in the promissory note. This obligationmay undoubtedly be garnished in favor of respondent to satisfy PNEI‘s judgment debt.



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SILAHIS V IACG.R.No. 74027 December 7, 1989

FACTS:

Petitioner Silahis Marketing Corporation seeks in this petition for review on certiorari areversal of the decision of the then Intermediate Appellate Court (IAC) in AC-G.R. CV No.67162 entitled "De Leon, etc. v. Silahis Marketing Corporation", disallowing petitioner'scounterclaim for commission to partially offset the claim against it of private respondentGregorio de Leon for the purchase price of certain merchandise. A review of the record showsthat on various dates in October, November and December, 1975, Gregorio de Leon doing business under the name and style of Mark Industrial Sales sold and delivered to SilahisMarketing Corporation various items of merchandise covered by several invoices in theaggregate amount of P22,213.75 payable within thirty (30) days from date of the coveringinvoices.Allegedly due to Silahis' failure to pay its account upon maturity despite repeated

demands, de Leon filed before the then Court of First Instance of Manila a complaint for thecollection of the said accounts including accrued interest thereon in the amount of P661.03 andattorney's fees of P5,000.00 plus costs of litigation.

ISSUE:

Whether or not private respondent is liable to the petitioner for the commission or marginfor the direct sale which the former concluded and consummated with Dole Philippines,Incorporated without coursing the same through herein petitioner.

RULING:

It must be remembered that compensation takes place when two persons, in their ownright, are creditors and debtors to each other. Article 1279 of the Civil Code provides that: "Inorder that compensation may be proper, it is necessary: [1] that each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other; [2] that bothdebts consist in a sum of money, or if the things due are consumable, they be of the same kind,and also of the same quality if the latter has been stated; [3] that the two debts be due; [4] thatthey be liquidated and demandable; [5] that over neither of them there be any retention orcontroversy, commenced by third persons and communicated in due time to the debtor."

When all the requisites mentioned in Art. 1279 of the Civil Code are present,compensation takes effect by operation of law, even without the consent or knowledge of thecreditors and debtors. 5 Article 1279 requires, among others, that in order that legalcompensation shall take place, "the two debts be due" and "they be liquidated and demandable."Compensation is not proper where the claim of the person asserting the set-off against the otheris not clear nor liquidated; compensation cannot extend to unliquidated, disputed claim existingfrom breach of contract. Undoubtedly, petitioner admits the validity of its outstanding accountswith private respondent in the amount of P22,213.75 as contained in its answer. But whether private respondent is liable to pay the petitioner a 20% margin or commission on the subject saleto Dole Philippines, Inc. is vigorously disputed. This circumstance prevents legal compensationfrom taking place.



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FRANCIA V CAG.R.No. 67649 June 28, 1998

FACTS:

Engracio Francia is the registered owner of a residential lot and a two-story house builtupon it situated at Barrio San Isidro, now District of Sta. Clara, Pasay City, Metro Manila. OnOctober 15, 1977, a 125 square meter portion of Francia's property was expropriated by theRepublic of the Philippines for the sum of P4,116.00 representing the estimated amountequivalent to the assessed value of the aforesaid portion.Since 1963 up to 1977 inclusive, Franciafailed to pay his real estate taxes. Thus, on December 5, 1977, his property was sold at publicauction by the City Treasurer of Pasay City pursuant to Section 73 of Presidential Decree No.464 known as the Real Property Tax Code in order to satisfy a tax delinquency of P2,400.00. HoFernandez was the highest bidder for the property. Francia was not present during the auctionsale since he was in Iligan City at that time helping his uncle ship bananas. On March 3, 1979,Francia received a notice of hearing of LRC Case No. 1593-P "In re: Petition for Entry of New

Certificate of Title" filed by Ho Fernandez, seeking the cancellation of TCT No. 4739 (37795)and the issuance in his name of a new certificate of title. On March 20, 1979, Francia filed acomplaint to annul the auction sale. He later amended his complaint on January 24, 1980.

ISSUE:

Whether or not francia‘s tax delinquency of P2,400.00 has been extinguished by legalcompensation.

RULING:

There is no legal basis for the contention. By legal compensation, obligations of persons,who in their own right are reciprocally debtors and creditors of each other, are extinguished (Art.1278, Civil Code). The circumstances of the case do not satisfy the requirements provided byArticle 1279, to wit:"(1) that each one of the obligors be bound principally and that he be at the same time a principal creditor of the other;We have consistently ruled that there can be no off-setting of taxes against the claims that thetaxpayer may have against the government. A person cannot refuse to pay a tax on the groundthat the government owes him an amount equal to or greater than the tax being collected. Thecollection of a tax cannot await the results of a lawsuit against the government.

A claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set-off under the statutes of set-off, which are construed uniformly, in the light of public policy, toexclude the remedy in an action or any indebtedness of the state or municipality to one who isliable to the state or municipality for taxes. Neither are they a proper subject of recoupment sincethey do not arise out of the contract or transaction sued on. "The general rule based on groundsof public policy is well-settled that no set-off admissible against demands for taxes levied forgeneral or local governmental purposes. The reason on which the general rule is based, is thattaxes are not in the nature of contracts between the party and party but grow out of duty to, andare the positive acts of the government to the making and enforcing of which, the personalconsent of individual taxpayers is not required



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TRINIDAD V ACAPULCO G.R.No. 147477 June 27, 2006

FACTS:

On May 6, 1991, respondent Estrella Acapulco filed a Complaint before the RTC seekingthe nullification of a sale she made in favor of petitioner Hermenegildo M. Trinidad. Shealleged: Sometime in February 1991, a certain Primitivo Cañete requested her to sell a MercedesBenz for P580,000.00. Cañete also said that if respondent herself will buy the car, Cañete waswilling to sell it for P500,000.00. Petitioner borrowed the car from respondent for two days butinstead of returning the car as promised, petitioner told respondent to buy the car from Cañete forP500,000.00 and that petitioner would pay respondent after petitioner returns from Davao.Following petitioner‘s instructions, respondent requested Cañete to execute a deed of salecovering the car in respondent‘s favor for P500,000.00 for which respondent issued three checksin favor of Cañete. Respondent thereafter executed a deed of sale in favor of petitioner eventhough petitioner did not pay her any consideration for the sale. When petitioner returned from

Davao, he refused to pay respondent the amount of P500,000.00 saying that said amount would just be deducted from whatever outstanding obligation respondent had with petitioner. Due to petitioner‘s failure to pay respondent, the checks that respondent issued in favor of Cañete bounced, thus criminal charges were filed against her.[3] Respondent then prayed that the deedof sale between her and petitioner be declared null and void; that the car be returned to her; andthat petitioner be ordered to pay damages.

ISSUE:

Whether or not petitioner‘s claim for legal compensation was already too late

RULING:

The court ruled in favor of the petitioner. Compensation takes effect by operation of laweven without the consent or knowledge of the parties concerned when all the requisitesmentioned in Article 1279 of the Civil Code are present.[26] This is in consonance with Article1290 of the Civil Code which provides that: Article 1290. When all the requisites mentioned inarticle 1279 are present, compensation takes effect by operation of law, and extinguishes bothdebts to the concurrent amount, even though the creditors and debtors are not aware of thecompensation. Since it takes place ipso jure,[27] when used as a defense, it retroacts to the datewhen all its requisites are fulfilled.



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CAROLINA HERNANDEZ-NIEVERA V. WILFREDO HERNANDEZGR No. 171165; February 14, 2011

FACTS:

Project Movers Realty & Development Corporation (PMRDC) is a duly organizeddomestic corporation engaged in real estate development. It entered into a Memorandum ofAgreement (MOA) whereby it was given the option to buy pieces of land owned by petitionersCarolina Hernandez-Nievera, Margarita H. Malvar and Demetrio P. Hernandez, Jr. Demetrio,under authority of a Special Power of Attorney to Sell or Mortgage, signed the MOA also in behalf of Carolina and Margarita. In the aggregate, the realty measured 4,580,451 square metersand was segregated by agreement into Area I and Area II.

On March 23, 1998, the PMRDC entered with LBP and Demetrio - the latter purportedlyacting under authority of the same special power of attorney as in the MOA - into a Deed ofAssignment and Conveyance (DAC). PMRDC delivered to petitioners certain checksrepresenting the money, the same however allegedly bounced. Hence, on January 8, 1999,

petitioners demanded the return of the corresponding TCTs over the land but PMRDC said thatthe TCTs could no longer be delivered back to petitioners as the covered properties had already been conveyed and assigned to the Asset Pool pursuant to the March 23, 1998 DAC. Petitionercontended that Demetrio could not have entered into the said agreement as his power of attorneywas limited only to selling or mortgaging the properties and not conveying the same to the AssetPool.

ISSUE:

Whether or not the novation of the MOA is valid.

RULING:

Thus, it becomes clear that Demetrio's special power of attorney to sell is sufficient toenable him to make a binding commitment under the DAC in behalf of Carolina and Margarita.In particular, it does include the authority to extinguish PMRDC's obligation under the MOA todeliver option money and agree to a more flexible term by agreeing instead to receive shares ofstock in lieu thereof and in consideration of the assignment and conveyance of the properties tothe Asset Pool. Indeed, the terms of his special power of attorney allow much leeway toaccommodate not only the terms of the MOA but also those of the subsequent agreement in theDAC which, in this case, necessarily and consequently has resulted in a novation of PMRDC'sintegral obligations.

There are two ways which could indicate, in fine, the presence of novation and thereby produce the effect of extinguishing an obligation by another which substitutes the same. Thefirst is when novation has been explicitly stated and declared in unequivocal terms. The secondis when the old and the new obligations are incompatible on every point. The test ofincompatibility is whether the two obligations can stand together, each one having itsindependent existence. If they cannot, they are incompatible, and the latter obligation novatesthe first.



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ST. JAMES COLLEGE V. EQUITABLE PCI BANKGR No. 179441; August 9, 2010

FACTS:

Petitioners-spouses owned and operated St. James College of Paranaque. Sometime in1995, the Philippine Commercial and International Bank (PCIB), respondent, granted the Torresspouses and/or St. James College a credit line facility of up to 25,000,000 secured by a real estatemortgage over a parcel of land in Paranaque. Petitioners had defaulted in the payment of the loanobtained from the secured credit accommodation, their total unpaid loan obligation, as ofSeptember 2001, stood at 18,300,000. Respondent proposed a payment scheme to pay annuallywhich the petitioners agreed upon but failed to comply with. Respondent then demanded fullsettlement of the loan. Petitioners contended that the the full amount is still not due owing to theimplied novation of the terms of payment previously agreed upon. As petitioners assert in thisregard that the acceptance by respondent, particularly of the June 23, 2003 PhP 2,521,609.62 payment, without any objection on the new terms set forth in their June 23, 2003 complementing

covering letter, novated the terms of payment of the 18,300,000 secured loan.

ISSUE:

Whether or not there was novation of contract

RULING:

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

For novation, as a mode of extinguishing or modifying an obligation, to apply, the followingrequisites 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.



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MARIA TOMIMBANG V. ATTY. JOSE TOMIMBANGGR No. 165116; August 4, 2009

FACTS:

Petitioner and respondent are siblings. Their parents donated to petitioner an eight-doorapartment located at 149 Santolan Road, Murphy, Quezon City. Petitioner failed to obtain a loanfrom PAG-IBIG Fund, hence, respondent offered to extend a credit line to petitioner on thefollowing conditions: (1) petitioner shall keep a record of all the advances; (2) petitioner shallstart paying the loan upon the completion of the renovation; (3) upon completion of therenovation, a loan and mortgage agreement based on the amount of the advances made shall beexecuted by petitioner and respondent; and (4) the loan agreement shall contain comfortableterms and conditions which petitioner could have obtained from PAG-IBIG.

A conflict between the siblings ensued leading to a new agreement whereby petitionerwas to start making monthly payments on her loan. Upon respondent's demand, petitioner turnedover to respondent all the records of the cash advances for the renovations. Subsequently, or

from June to October of 1997, petitioner made monthly payments of P18, 700.00, or a totalofP93, 500.00. Petitioner never denied the fact that she started making such monthly payments.Thereafter, the petitioner can no longer be found and also stopped making the monthly payments.Thus, a complaint was filed against the petitioner demanding payment of the loan plus interest.Petitioner contended that the loan is not yet due and demandable as the renovation of theapartment is not yet completed.

ISSUE:

Whether or not the loan is already due and demandable.

RULING:

The loan is already due and demandable due to the subsequent agreement entered in to bythe parties.Article 1291 of the Civil Code provides, thus:

Art. 1291. Obligations may be modified by:(1) Changing their object or principal conditions;(2) Substituting the person of the debtor;(3) Subrogating a third person in the rights of the creditor.

The petitioner admitted that she started to comply with the demand of the respondent to pay on a monthly basis. Her partial performance of her obligation is unmistakable proof thatindeed the original agreement between her and respondent had been novated by the deletion ofthe condition that payments shall be made only after completion of renovations. Hence, by hervery own admission and partial performance of her obligation, there can be no other conclusion but that under the novated agreement, petitioner's obligation is already due and demandable.



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MINDANAO SAVINGS AND LOAN ASSOCIATION INC. V. EDWARD WILLKOMGR No. 178618; October 11, 2010

FACTS:

The First Iligan Savings and Loan Association, Inc. (FISLAI) and the Davao Savings andLoan Association, Inc. (DSLAI) banks that entered into a merger, with DSLAI as the survivingcorporation. The articles of merger were not registered with the SEC but when DSLAI changedits corporate name to MSLAI the amendment was approved by the SEC.Meanwhile, the Board ofDirectors of FISLAI passed a resolution, assigning its assets in favor of DSLAI which in turnassumed the former‘s liabilities.The business of MSLAI, however, failed was ordered its closureand placed under receivership.

Prior to the closure of MSLAI, Uy filed an action for collection of sum of money againstFISLAI. The RTC issued a summary decision in favor of Uy, directing defendants therein (whichincluded FISLAI) to pay the former the sum of P136, 801.70. Therafter,sheriff Bantuas levied onsix (6) parcels of land owned by FISLAI and Willkom was the highest bidder. New certificates

of title covering the subject properties were issued in favor of Willkom who sold one of thesubject parcels of land to Go.MSLAI, represented by PDIC, filed a complaint for Annulment of Sheriff’s Sale,

Cancellation of Title and Reconveyance of Properties against respondents. Therespondentsaverred that MSLAI had no cause of action against them or the right to recover the subject properties because MSLAI is a separate and distinct entity from FISLAI as the merger did nottake effect.

ISSUE:

Whether or not there was novation of the obligation by substituting the person of thedebtor

RULING:

It is a rule that novation by substitution of debtor must always be made with the consentof the creditor. Article 1293 of the Civil Code is explicit, thus:

Art. 1293. Novation which consists in substituting a new debtor in the place of theoriginal one, may be made even without the knowledge or against the will of the latter, but notwithout the consent of the creditor. Payment by the new debtor gives him the rights mentioned inArticles 1236 and 1237.

In this case, there was no showing that Uy, the creditor, gave her consent to theagreement that DSLAI (now MSLAI) would assume the liabilities of FISLAI. Such agreementcannot prejudice Uy. Thus, the assets that FISLAI transferred to DSLAI remained subject toexecution to satisfy the judgment claim of Uy against FISLAI. The subsequent sale of the properties by Uy to Willkom, and of one of the properties by Willkom to Go, cannot, therefore, be questioned by MSLAI.

The consent of the creditor to a novation by change of debtor is as indispensable as thecreditor‘s consent in conventional subrogation in order that a novation shall legally take place. Since novation implies a waiver of the right which the creditor had before the novation,such waiver must be express.



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AQUINTEY v. SPOUSES TIBONGG.R. No. 166704,December 20, 2006

FACTS:

On May 6, 1999, petitioner Aquintey filed before RTC Baguio, a complaint for sum ofmoney and damages against respondents. Agrifina alleged that Felicidad secured loans from heron several occasions at monthly interest rates of 6% to 7%. Despite demands, spouses Tibongfailed to pay their outstanding loans of P773,000,00 exclusive of interests. However, spousesTiong alleged that they had executed deeds of assignment in favor of Agrifina amounting toP546,459 and that their debtors had executed promissory notes in favor of Agrifina. Spousesinsisted that by virtue of these documents, Agrifina became the new collector of their debts.Agrifina was able to collect the total amount of P301,000 from Felicdad‘s debtors. She tried tocollect the balance of Felicidad and when the latter reneged on her promise, Agrifina filed acomplaint in the office of the barangay for the collection of P773,000.00. There was nosettlement. RTC favored Agrifina. Court of Appeals affirmed the decision with modification

ordering defendant to pay the balance of total indebtedness in the amount of P51,341,00 plus6% per month.

ISSUE:

Whether or not the deeds of assignment in favor of petitioner has the effect of payment ofthe original obligation that would partially extinguish the same

RULING:

Substitution of the person of the debtor May be affected by delegacion. Meaning, thedebtor offers, the creditor accepts a third person who consent of the substitution and assumes theobligation. It is necessary that the old debtor be released from the obligation and the third personor new debtor takes his place in the relation . Without such release, there is no novation. Courtof Appeals correctly found that the respondent‘s obligation to pay the balance of their accountwith petitioner was extinguished pro tanto by the deeds of credit. CA decision is affirmed withthe modification that the principal amount of the respondents is P33,841.



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SWAGMAN V CAG.R.No. 161135 April 8, 2005

FACTS:

Sometime in 1996 and 1997, petitioner Swagman Hotels and Travel, Inc., through Atty.Leonor L. Infante and Rodney David Hegerty, its president and vice-president, respectively,obtained from private respondent Neal B. Christian loans evidenced by three promissory notesdated 7 August 1996, 14 March 1997, and 14 July 1997. Each of the promissory notes is in theamount of US$50,000 payable after three years from its date with an interest of 15% per annum payable every three months. In a letter dated 16 December 1998, Christian informed the petitioner corporation that he was terminating the loans and demanded from the latter payment inthe total amount of US$150,000 plus unpaid interests in the total amount of US$13,500. On 2February 1999, private respondent Christian filed with the Regional Trial Court of Baguio City,Branch 59, a complaint for a sum of money and damages against the petitioner corporation,Hegerty, and Atty. Infante. The petitioner corporation, together with its president and vice-

president, filed an Answer raising as defenses lack of cause of action and novation of the principal obligations. According to them, Christian had no cause of action because the three promissory notes were not yet due and demandable.

ISSUE:

Where there is a valid novation, may the original terms of contract which has beennovated still prevail?

HELD:

The receipts, as well as private respondent‘s summary of payments, lend credence to petitioner‘s claim that the payments were for the principal loans and that the interests on thethree consolidated loans were waived by the private respondent during the undisputedrenegotiation of the loans on account of the business reverses suffered by the petitioner at thetime.

There was therefore a novation of the terms of the three promissory notes in that theinterest was waived and the principal was payable in monthly installments of US$750.Alterations of the terms and conditions of the obligation would generally result only inmodificatory novation unless such terms and conditions are considered to be the essence of theobligation itself.[25] The resulting novation in this case was, therefore, of the modificatory type,not the extinctive type, since the obligation to pay a sum of money remains in force.

Thus, since the petitioner did not renege on its obligation to pay the monthly installmentsconformably with their new agreement and even continued paying during the pendency of thecase, the private respondent had no cause of action to file the complaint. It is only upon petitioner‘s default in the payment of the monthly amortizations that a cause of action wouldarise and give the private respondent a right to maintain an action against the petitioner.



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AZOLLA FARMS V CAG.R.No. 138085 November 11, 2004

FACTS:

Petitioner Francis R. Yuseco, Jr., is the Chairman, President and Chief Operating Officerof petitioner Azolla Farms International Philippines. In 1982, Azolla Farms undertook to participate in the National Azolla Production Program wherein it will purchase all the Azolla produced by the Azolla beneficiaries in the amount not exceeding the peso value of all the inputs provided to them. The project also involves the then Ministry of Agriculture, the KilusangKabuhayan at Kaunlaran, and the Kiwanis. To finance its participation, petitioners applied for aloan with Credit Manila, Inc., which the latter endorsed to its sister company, respondent SavingsBank of Manila (Savings Bank). The Board of Directors of Azolla Farms, meanwhile, passed a board resolution on August 31, 1982, authorizing Yuseco to borrow from Savings Bank in anamount not exceeding P2,200,000.00.

The loan having been approved, Yuseco executed a promissory note on September 13,

1982, promising to pay Savings Bank the sum of P1,400,000.00 on or before September 13,1983. the Azolla Farms project collapsed. Blaming Savings Bank, petitioners Yuseco and AzollaFarms filed on October 3, 1983 with the Regional Trial Court of Manila (Branch 25), acomplaint for damages. In essence, their complaint alleges that Savings Bank unjustifiablyrefused to promptly release the remaining P300,000.00 which impaired the timetable of the project and inevitably affected the viability of the project resulting in its collapse, and resulted intheir failure to pay off the loan. Thus, petitioners pray for P1,000,000.00 as actual damages,among others.

ISSUE:

Whether the trial court erred in admitting petitioners‘ amended complaint

RULING:

SEC. 5. Amendment to conform to or authorize presentation of evidence . — When issuesnot raised by the pleadings are tried by express or implied consent of the parties, they shall betreated in all respects, as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issuesmay be made upon motion of any party at any time, even after judgment; but failure so to amenddoes not affect the result of the trial of these issues. If evidence is objected to at the trial on theground that it is not within the issues made by the pleadings, the court may allow the pleadingsto be amended and shall do so freely when the presentation of the merits of the action will besubserved thereby and the objecting party fails to satisfy the court that the admission of suchevidence would prejudice him in maintaining his action or defense upon the merits.

As can be gleaned from the records, it was petitioners‘ belief that respondent‘s evidence justified the amendment of their complaint. The trial court agreed thereto and admitted theamended complaint. On this score, it should be noted that courts are given the discretion toallow amendments of pleadings to conform to the evidence presented during the trial.



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CALIFORNIA BUS LINES V STATE INVESMENTSG.R.No. 147950 December 11, 2003

FACTS:

Sometime in 1979, Delta Motors Corporation — M.A.N. Division (Delta) applied forfinancial assistance from respondent State Investment House, Inc.SIHI agreed to extend a credit line to Delta for P25,000,000.00 in three separate creditagreements dated May 11, June 19, and August 22, 1979. Delta eventually became indebted toSIHI to the tune of P24,010,269.32

From April 1979 to May 1980, petitioner California Bus Lines, Inc. (hereafter CBLI), purchased on installment basis 35 units of M.A.N. Diesel Buses and two (2) units of M.A.N.Diesel Conversion Engines from Delta. To secure the payment of the purchase price of the 35 buses, CBLI and its president, Mr. Dionisio O. Llamas, executed sixteen (16) promissory notesin favor of Delta on January 23 and April 25, 1980.[5] In each promissory note, CBLI promisedto pay Delta or order, P2,314,000 payable in 60 monthly installments starting August 31, 1980,

with interest at 14% per annum. CBLI further promised to pay the holder of the said notes 25%of the amount due on the same as attorney‘s fees and expenses of collection, whether actuallyincurred or not, in case of judicial proceedings to enforce collection. In addition to the notes,CBLI executed chattel mor tgages over the 35 buses in Delta‘s favor. When CBLI defaulted onall payments due, it entered into a restructuring agreement with Delta on October 7, 1981, tocover its overdue obligations under the promissory notes.CBLI continued having trouble meetingits obligations to Delta. This prompted Delta to threaten CBLI with the enforcement of themanagement takeover clause.

ISSUE:

Whether the Restructuring Agreement dated October 7, 1981, between petitioner CBLIand Delta Motors, Corp. novated the five promissory notes Delta Motors, Corp. assigned torespondent SIHI.

RULING:

Novation has been defined as the extinguishment of an obligation by the substitution orchange of the obligation by a subsequent one which terminates the first, either by changing theobject or principal conditions, or by substituting the person of the debtor, or subrogating a third person in the rights of the creditor.For novation to take place, four essential requisites have to bemet, namely, (1) a previous valid obligation; (2) an agreement of all parties concerned to a newcontract; (3) the extinguishment of the old obligation; and (4) the birth of a valid new obligation.

In this case, the attendant facts do not make out a case of novation. The restructuringagreement between Delta and CBLI executed on October 7, 1981, shows that the parties did notexpressly stipulate that the restructuring agreement novated the promissory notes. Absent anunequivocal declaration of extinguishment of the pre-existing obligation, only a showing ofcomplete incompatibility between the old and the new obligation would sustain a finding ofnovation by implication.



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OCAMPO-PAULE V CAG.R.No. 145872 February 4, 2002

FACTS:

During the period August, 1991 to April, 1993, petitioner received from privatecomplainant Felicitas M. Calilung several pieces of jewelry with a total value of One hundredSixty Three Thousand One hundred Sixty Seven Pesos and Ninety Five Centavos (P163,167.95).The agreement between private complainant and petitioner was that the latter would sell thesame and thereafter turn over and account for the proceeds of the sale, or otherwise return to private complainant the unsold pieces of jewelry within two months from receipt thereof. Since private complainant and petitioner are relatives, the former no longer required petitioner to issuea receipt acknowledging her receipt of the jewelry.When petitioner failed to remit the proceedsof the sale of the jewelry or to return the unsold pieces to private complainant, the latter sent petitioner a demand letter. Notwithstanding receipt of the demand letter, petitioner failed to turnover the proceeds of the sale or to return the unsold pieces of jewelry. Private complainant was

constrained to refer the matter to the barangay captain of Sta. Monica, Lubao, Pampanga.

ISSUE:

Whether or not there was a novation of petitioner‘s criminal liability when she and private complainant executed the Kasunduan sa Bayaran.

RULING:

It is well-settled that the following requisites must be present for novation to take place:(1) a previous valid obligation; (2) agreement of all the parties to the new contract; (3)extinguishment of the old contract; and (4) validity of the new one. Novation, in its broad concept, may either be extinctive or modificatory. It is extinctive when anold 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 compatiblewith the amendatory agreement.

The execution of the Kasunduan sa Bayaran does not constitute a novation of the originalagreement between petitioner and private complainant. Said Kasunduan did not change theobject or principal conditions of the contract between them. The change in manner of payment of petitioner‘s obligation did not render the Kasunduan incompatible with the original agreement,and hence, did not extinguish petitioner‘s liability to remit the proceeds of the sale of the jewelryor to return the same to private complainant.

An obligation to pay a sum of money is not novated, in a new instrument wherein the oldis ratified, by changing only the terms of payment and adding other obligations not incompatiblewith the old one, or wherein the old contract is merely supplemented by the new one.

In any case, novation is not one of the grounds prescribed by the Revised Penal Code forthe extinguishment of criminal liability.



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REYES V CAG.R.NO. 147758 june 26, 2002

FACTS:

This petition arose from a civil case for collection of a sum of money with preliminaryattachment filed by respondent Pablo V. Reyes against his first cousin petitioner Arsenio R.Reyes and spouse Nieves S. Reyes. According to private respondent, petitioner-spouses borrowed from him P600,000.00 with interest at five percent (5%) per month, which totalledP1,726,250.00 at the time of filing of the Complaint. The loan was to be used supposedly to buya lot in Parañaque. It was evidenced by an acknowledgment receipt dated 15 July 1990 signed bythe petitioner-spouses Arsenio R. Reyes and Nieves S. Reyes and witness Romeo Rueda.In their Answer petitioners admitted their loan from respondent but averred that there was anovation so that the amount loaned was actually converted into respondent's contribution to a partnership formed between them on 23 March 1990.

ISSUE:Whether or not there was novation in the instant case?

RULING:

For novation to take place, the following requisites must concur: (a) there must be a previous valid obligation; (b) there must be an agreement of the parties concerned to a newcontract; (c) there must be the extinguishment of the old contract; and, (d) there must be thevalidity of the new contract.

In the case at bar, the third requisite is not present. The parties did agree that the amountloaned would be converted into respondent's contribution to the partnership, but this conversiondid not extinguish the loan obligation. The date when the acknowledgment receipt/promissorynote was made negates the claim that the loan agreement was extinguished through novationsince the note was made while the partnership was in existence.

Significantly, novation is never presumed. It must appear by express agreement of the parties, or by their acts that are too clear and unequivocal to be mistaken for anything else. Anobligation to pay a sum of money is not novated in a new instrument wherein the old is ratified by changing only the terms of payment and adding other obligations not incompatible with theold one, or wherein the old contract is merely supplemented by the new one.



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BAUTISTA V PILAR DEVELOPMENTG.R.NO. 135046 august 17, 1999

FACTS:

In 1978, petitioner spouses Florante and Laarni Bautista purchased a house and lot inPilar Village, Las Pinas, Metro Manila. To partially finance the purchase, they obtained from theApex Mortgage & Loan Corporation a loan in the amount of P100,180.00. They executed a promissory note on December 22, 1978 obligating themselves, jointly and severally, to pay the"principal sum of P100,180.00 with interest rate of 12% and service charge of 3%" for a periodof 240 months, or twenty years, from date, in monthly installments of P1,378.83. Late paymentswere to be charged a penalty of one and one-half per cent (1 1/2%) of the amount due. In thesame promissory note, petitioners authorized Apex to "increase the rate of interest and/or servicecharges" without notice to them in the event that a law, Presidential Decree or any Central Bankregulation should be enacted increasing the lawful rate of interest and service charges on theloan. Payment of the promissory note was secured by a second mortgage on the house and lot

purchased by petitioners.Petitioner spouses failed to pay several installments. On September 20,1982, they executed another promissory note in favor of Apex. This note was in the amount ofP142,326.43 at the increased interest rate of twenty-one per cent (21%) per annum with no provision for service charge but with penalty charge of 1 1/2% for late payments.

ISSUE:

Whether or not there was valid novation in the case at bar?

RULING:

Novation has four (4) essential requisites: (1) the existence of a previous validobligation; (2) the agreement of all parties to the new contract; (3) the extinguishment of the oldcontract; and (4) the validity of the new one. In the instant case, all four requisites have beencomplied with. The first promissory note was a valid and subsisting contract when petitionerspouses and Apex executed the second promissory note. The second promissory note absorbedthe unpaid principal and interest of P142,326.43 in the first note which amount became the principal debt therein, payable at a higher interest rate of 21% per annum. Thus, the terms of thesecond promissory note provided for a higher principal, a higher interest rate, and a highermonthly amortization, all to be paid within a shorter period of 16.33 years. These changes aresubstantial and constitute the principal conditions of the obligation. Both parties voluntarilyaccepted the terms of the second note; and also in the same note, they unequivocally stipulated toextinguish the first note. Clearly, there was animus novandi, an express intention to novate. Thefirst promissory note was cancelled and replaced by the second note. This second note becamethe new contract governing the parties' obligations.



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EVADEL REALTY V SORIANOG.R.No. 144291 April 20, 2001

FACTS:

On April 12, 1996, the spouses Antero and Virginia Soriano (respondent spouses), assellers, entered into a "Contract to Sell " with Evadel Realty and Development Corporation(petitioner), as buyer, over a parcel of land denominated as Lot 5536-C of the Subdivision Planof Lot 5536 covered by Transfer Certificate of Title No. 125062 which was part of a huge tractof land known as the Imus Estate. Upon payment of the first installment, petitioner introducedimprovements thereon and fenced off the property with concrete walls. Later, respondent spousesdiscovered that the area fenced off by petitioner exceeded the area subject of the contract to sell by 2,450 square meters. Upon verification by representatives of both parties, the area encroachedupon was denominated as Lot 5536-D-1 of the subdivision plan of Lot 5536-D of Psd-04-092419and was later on segregated from the mother title and issued a new transfer certificate of title,TCT No. 769166, in the name of respondent spouses. Respondent spouses successively sent

demand letters to petitioner on February 14, March 7, and April 24, 1997, to vacate theencroached area. Petitioner admitted receiving the demand letters but refused to vacate the saidarea.

ISSUE:

Whether or not there was novation of contract?

RULING:

Petitioner's claim that there was a novation of contract because there was a "second"agreement between the parties due to the encroachment made by the national road on the property subject of the contract by 1,647 square meters, is unavailing. Novation, one of themodes of extinguishing an obligation, requires the concurrence of the following: (1) there is avalid previous obligation; (2) the parties concerned agree to a new contract; (3) the old contractis extinguished; and (4) there is valid new contract. Novation may be express or implied. In orderthat an obligation may be extinguished by another which substitutes the same, it is imperativethat it be so declared in unequivocal terms (express novation) or that the old and the newobligations be on every point incompatible with each other (implied novation).

In the instant case, there was no express novation because the "second" agreement wasnot even put in writing. Neither was there implied novation since it was not shown that the twoagreements were materially and substantially incompatible with each other. We quote withapproval the following findings of the trial court: Since the alleged agreement between the plaintiffs [herein respondents] and defendant [herein petitioner] is not in writing and the allegedagreement pertains to the novation of the conditions of the contract to sell of the parcel of landsubject of the instant litigation, ipso facto, novation is not applicable in this case since, as statedabove, novation must be clearly proven by the proponent thereof and the defendant in this case isclearly barred by the Statute of Frauds from proving its claim.



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B & I REALTY V. CASPEG.R. No. 146972 January 29, 2008

FACTS:

Consorcia L. Venegas was the owner of a parcel of land located in Barrio Bagong-Ilog inPasig, Rizal and covered by TCT No. 247434. She delivered said title to, and executed asimulated deed of sale in favor of, Datuin for purposes of obtaining a loan with the RCBC.Datuin claimed that he had connections with the management of RCBC and offered hisassistance to Venegas in obtaining a loan from the bank. He issued a receipt to the Venegases,acknowledging that the lot was to be used as a collateral for bank financing and that the deed ofsale was executed only as a device to obtain the loan. However, Datuin prepared a deed ofabsolute sale and, through forgery, made it appear that the spouses Venegas executed thedocument in his favor. Venegas learned of Datuin's fraudulent scheme when she sold the lot toherein respondents for P160,000 in a deed of conditional sale. She, along with her husband,instituted a complaint against Datuin in the then Court of First Instance CFI of Rizal, Branch 11,

docketed as Civil Case No. 188893, for recovery of property and nullification of TCT No.377734, with damages. However, when the case was called for pre-trial, the Venegases' counselfailed to appear and the complaint was eventually dismissed without prejudice.

ISSUE:

Whether or not filing of Civil Case No. 36852 by the Venegases had the effect ofinterrupting the prescriptive period for the filing of the complaint for judicial foreclosure ofmortgage?

RULING:

We agree with the CA's ruling that Civil Case No. 36852 did not have the effect ofinterrupting the prescription of the action for foreclosure of mortgage as it was not an action forforeclosure but one for annulment of title and nullification of the deed of mortgage and the deedof sale. It was not at all the action contemplated in Article 1155 of the Civil Code whichexplicitly provides that the prescription of an action is interrupted only when the action itself isfiled in court. Petitioner could have protected its right over the property by filing a cross-claimfor judicial foreclosure of mortgage against respondents in Civil Case No. 36852. The filing of across-claim would have been proper there. All the issues pertaining to the mortgage validity ofthe mortgage and the propriety of foreclosure would have been passed upon concurrently and noton a piecemeal basis. This should be the case as the issue of foreclosure of the subject mortgagewas connected with, or dependent on, the subject of annulment of mortgage in Civil Case No.36852. The actuations clearly manifested that petitioner knew its rights under the law but choseto sleep on the same.



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MESINA V. GARCIAG.R. No. 168035 November 30, 2006

FACTS:

Atty. Honorio Valisno Garcia and Felicisima Mesina, during their lifetime, enstered intoa Contract to Sell over a lot consisting of 235 square meters, situated at Diversion Road,Sangitan, Cabanatuan City, covered and embraced by TCT No. T-31643 in the name ofFelicisima Mesina which title was eventually cancelled and TCT No. T-78881 was issued in thename of herein petitioners. The Contract to Sell provides that the cost of the lot is P70.00 persquare meter for a total amount of P16,450.00; payable within a period not to exceed 7 years atan interest rate of 12% per annum, in successive monthly installments of P260.85 per month,starting May 1977. Thereafter, the succeeding monthly installments are to be paid within thefirst week of every month, at the residence of the vendor at Quezon City, with all unpaidmonthly installments earning an interest of 1% per month. Instituting this case at bar,respondent asserts that despite the full payment made on 7 February 1984 for the

consideration of the subject lot, petitioners refused to issue the necessary Deed of Sale to effectthe transfer of the property to her.

ISSUE:

Whether or not respondent‘s cause of action had already prescribed?

RULING:

Article 1155 of the Civil Code is explicit that the prescriptive period is interrupted whenan action has been filed in court; when there is a written extrajudicial demand made by thecreditors; and when there is any written acknowledgment of the debt by the debtor.

The records reveal that starting 19 April 1986 until 2 January 1997 respondentcontinuously demanded from the petitioners the execution of the said Deed of Absolute Sale butthe latter conjured many reasons and excuses not to execute the same. Respondent even filed aComplaint before the Housing and Land Use Regulatory Board way back in June, 1986, toenforce her rights and to compel the mother of herein petitioners, who was still alive at that time,to execute the necessary Deed of Absolute Sale for the transfer of title in her name. On 2 January1997, respondent, through her counsel, sent a final demand letter to the petitioners for theexecution of the Deed of Absolute Sale, but still to no avail. Consequently, because of utterfrustration of the respondent, she finally lodged a formal Complaint for Specific Performancewith Damages before the trial court on 20 January 1997.

Hence, from the series of written extrajudicial demands made by respondent to have theexecution of the Deed of Absolute Sale in her favor, the prescriptive period of 10 years has beeninterrupted. Therefore, it cannot be said that the cause of action of the respondent has already been prescribed.



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HEIRS OF GAUDIANE V CAG.R.No. 119879 March 11, 2004

FACTS:

The lot in controversy is Lot 4389 located at Dumaguete City and covered by OriginalCertificate of Title No. 2986-A (OCT 2986-A) in the names of co-owners Felix and JuanaGaudiane. Felix died in 1943 while his sister Juana died in 1939. Herein respondents are thedescendants of Felix while petitioners are the descendants of Juana.On November 4, 1927, Felix executed a document entitled Escritura de Compra-Venta(Escritura, for brevity) whereby he sold to his sister Juana his one-half share in Lot No. 4156covered by Transfer Certificate of Title No. 3317-A.

Petitioners‘ predecessors-in-interest, Geronimo and Ines Iso (the Isos), believed that thesale by Felix to their mother Juana in 1927 included not only Lot 4156 but also Lot 4389. In1974, they filed a pleading in the trial court seeking to direct the Register of Deeds ofDumaguete City to cancel OCT 2986-A covering Lot 4389 and to issue a new title in favor of the

Isos. This was later withdrawn after respondents‘ predecessors-in-interest, Procopio Gaudianeand Segundo Gaudiane, opposed it on the ground that the Isos falsified their copy of theEscritura by erasing ―Lot 4156‖ and intercalating in its place ―Lot 4389.‖

ISSUE:

Whether the court gravely erred in not giving due course to the claim of petitioners andlegal effect of prescription and laches adverted by defendants-appellants in their answer andaffirmative defenses proven during the hearing by documentary and testimonial evidence.

RULING:

As a general rule, ownership over titled property cannot be lost through prescription.[12]Petitioners, however, invoke our ruling in Tambot vs. Court of Appeals[13] which held that titled property may be acquired through prescription by a person who possessed the same for 36 yearswithout any objection from the registered owner who was obviously guilty of laches.

Petitioners‘ claim is already rendered moot by our ruling barring petitioners from raisingthe defense of exclusive ownership due to res judicata. Even assuming arguendo that petitionersare not so barred, their contention is erroneous. As correctly observed by the appellate court.

As explained earlier, only Lot No. 4156 was sold. It was through this misrepresentationthat appellees‘ predecessor -in-interest succeeded in withholding possession of appellees‘ share inLot No. 4389. Appellees cannot, by their own fraudulent act, benefit therefrom by alleging prescription and laches.



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LAUREANO V CAG.R.No. 114776 February 2, 2000

FACTS:

Petitioner was employed in the singapore airlines limited as the pilot captain of B-707.Sometime in 1982, defendant, hit by a recession, initiated cost-cutting measures. Seventeenexpatriate captains in the Airbus fleet were found in excess of the defendant's requirement.Consequently, defendant informed its expatriate pilots including plaintiff of the situation andadvised them to take advance leaves. Realizing that the recession would not be for a short time,defendant decided to terminate its excess personnel. It did not, however, immediately terminateit's A-300 pilots. It reviewed their qualifications for possible promotion to the B-747 fleet.Among the 17 excess Airbus pilots reviewed, twelve were found qualified. Unfortunately, plaintiff was not one of the twelve. Aggrieved, plaintiff on June 29, 1983, instituted a case forillegal dismissal before the Labor Arbiter. Defendant moved to dismiss on jurisdictional grounds.Before said motion was resolved, the complaint was withdrawn.

ISSUE :

What is the prescriptive period for money claims arising from employer-employeerelationship?

RULING:

Article 291. Money claims. - All money claims arising from employee-employerrelations accruing during the effectivity of this Code shall be filed within three (3) years from thetime the cause of action accrued; otherwise they shall be forever barred.

It should be noted further that Article 291 of the Labor Code is a special law applicable tomoney claims arising from employer-employee relations; thus, it necessarily prevails overArticle 1144 of the Civil Code, a general law. Basic is the rule in statutory construction that'where two statutes are of equal theoretical application to a particular case, the one designedtherefore should prevail.'

In the instant case, the action for damages due to illegal termination was filed by plaintiff-appellee only on January 8, 1987 or more than four (4) years after the effectivity date ofhis dismissal on November 1, 1982. Clearly, plaintiff-appellee's action has already prescribed.



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BANCO FILIPINO vs. COURT OF APPEALS332 SCRA 241

FACTS:

Elsa Arcilla and her husband, Calvin Arcilla secured on three occasions, loans from theBanco Filipino Savings and Mortgage bank in the amount of Php.107,946.00 as evidenced by the―Promissory Note‖ executed by the spouses in favor of the said bank. To secure payment of saidloans, the spouses executed ―Real Estate Mortgages‖ in favor of the appellants (Banco Filipino)over their parcels of land. The appellee spouses failed to pay their monthly amortization toappellant. On September 2, 1985 the appellee‘s filed a complaint for ―Annulment of the LoanContracts, Foreclosure Sale with Prohibitory and Injunction‖ which was granted by the RTC.Petitioners appealed to the Court of Appeals, but the CA affirmed the decision of the RTC.

ISSUE:

Whether or not the CA erred when it held that the cause of action of the privaterespondents accrued on October 30, 1978 and the filing of their complaint for annulment of theircontracts in 1085 was not yet barred by the prescription/

RULING:

The court held that the petition is unmeritorious. Petitioner‘s claim that the action of the private respondents have prescribed is bereft of merit. Under Article 1150 of the Civil Code, thetime for prescription of all kinds of action where there is no special provision which ordainsotherwise shall be counted from the day they may be brought. Thus the period of prescription ofany cause of action is reckoned only from the date of the cause of action accrued. The period

should not be made to retroact to the date of the execution of the contract, but from the date theyreceived the statement of account showing the increased rate of interest, for it was only from themoment that they discovered the petitioner‘s unilateral increase thereof.



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VDA. DE DEL GADO vs. COURT OF APPEALS363 SCRA 58

FACTS:

Carlos Delgado was the absolute owner of a parcel of land with an area of 692,549 squaremeter situated in the Municipality of Catarman Samar. Carlos Delgado granted and conveyed byway of donation with quitclaim all rights, title, interest claim and demand over a portion of landwith an area of 165,000 square meter in favor of the Commonwealth of the Philippines. Theacceptance was then made to President Quezon in his capacity as Commander-in-Chief. TheDeed of Donation was executed with a condition that the said land will be used for the formationof the National Defense of the Philippines. The said parcel of land then covered by the TorrensSystem of the Philippines and was registered in the name of Commonwealth of the Philippinesfor a period of 40 years. The land was registered under TCT 0-2539-160 in favor of theCommonwealth however without any annotation.

Upon declaration of independence, the Commonwealth was replaced by Republic of thePhilippines which took over the subject land and turned over to Civil AeronauticsAdministration, later named Bureau of Air Transportation Office. The said agency utilizes thesaid land a domestic airport.

Jose Delgado filed a petition for reconveyance for a violation of the condition. The RTCruled in favor of the plaintiff Delgado. But the CA reversed the said decision because of prescription. The petitioner filed only before 24 years o discovery which the law only requires 10years of filing.

ISSUE:

Whether or not the petitioner‘s action for reconveyance is already barred by prescription.

RULING:

The Supreme Court denied the petition and affirmed the decision of the Court of Appeals because the time of filing has been prescribed. Under Article 1144 of the Civil Code onPrescription based on written contracts, the filing of action for reconveyance is within 10 yearsfrom the time the condition in the Deed of Donation was violated. The petitioner herein filedonly 24 years in the first action and 43 years in the second filing of the 2nd action.

The action for reconveyance on the alleged excess of 33, 607 square meter mistakenlyincluded in the title was also prescribed Article 1456 of the Civil Code states, if property isacquired through mistake or fraud, the person obtaining it is, by force of law, considered atrustee of an implied trust for the benefits of the person from whom the property comes, if within10 years such action for reconveyance has not been executed.



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TANAY RECREATION CENTER AND DEVELOPMENT CORP.vs. CATALINA MATIENZO FAUSTO

April 12, 2005

FACTS:

Petitioner Tanay Recreation Center and Development Corp. (TRCDC) is the lessee of a3,090-square meter property located in Sitio Gayas, Tanay, Rizal, owned by Catalina MatienzoFausto, under a Contract of Lease. On this property stands the Tanay Coliseum Cockpit operated by petitioner. The lease contract provided for a 20-year term, subject to renewal within sixtydays prior to its expiration. The contract also provided that should Fausto decide to sell the property, petitioner shall have the ―priority right‖ to purchase the same.

On June 17, 1991, petitioner wrote Fausto informing her of its intention to renew thelease. However, it was Fausto‘s daughter, respondent Anunciacion F. Pacunayen, who replied,asking that petitioner remove the improvements built thereon, as she is now the absolute owner

of the property. It appears that Fausto had earlier sold the property to Pacunayen and title hasalready been transferred in her name. Petitioner filed an Amended Complaint for Annulment ofDeed of Sale, Specific Performance with Damages, and Injunction

In her Answer, respondent claimed that petitioner is estopped from assailing the validityof the deed of sale as the latter acknowledged her ownership when it merely asked for a renewalof the lease. According to respondent, when they met to discuss the matter, petitioner did notdemand for the exercise of its option to purchase the property, and it even asked for grace periodto vacate the premises.

ISSUE:

The contention in this case refers to petitioner‘s pr iority right to purchase, also referred toas the right of first refusal.

RULING:

When a lease contract contains a right of first refusal, the lessor is under a legal duty tothe lessee not to sell to anybody at any price until after he has made an offer to sell to the latter ata certain price and the lessee has failed to accept it. The lessee has a right that the lessor's firstoffer shall be in his favor. Petitioner‘s right of first refusal is an integral and indivisible part ofthe contract of lease and is inseparable from the whole contract. The consideration for the lease

includes the consideration for the right of first refusal and is built into the reciprocal obligationsof the parties.

It was erroneous for the CA to rule that the right of first refusal does not apply when the property is sold to Fausto‘s relative. When the terms of an agreement have been reduced towriting, it is considered as containing all the terms agreed upon. As such, there can be, betweenthe parties and their successors in interest, no evidence of such terms other than the contents ofthe written agreement, except when it fails to express the true intent and agreement of the parties.In this case, the wording of the stipulation giving petitioner the right of first refusal is plain andunambiguous, and leaves no room for interpretation. It simply means that should Fausto decideto sell the leased property during the term of the lease, such sale should first be offered to petitioner. The stipulation does not provide for the qualification that such right may be exercisedonly when the sale is made to strangers or persons other than Fausto‘s kin. Thus, under the termsof petitioner‘s right of first refusal, Fausto has the legal duty to petitioner not to sell the propertyto anybody, even her relatives, at any price until after she has made an offer to sell to petitionerat a certain price and said offer was rejected by petitioner.



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ROMEO MENDOZA vs. COURT OF APPEALSFebruary 18, 2005

FACTS:

Manotok was the administrator of a parcel of land which it leased to Benjamin Mendoza;that the contract of lease expired on December 31, 1988; that even after the expiration of thelease contract, Benjamin Mendoza, and after his demise, his son, Romeo, continued to occupythe premises and thus incurred a total of P44,011.25 as unpaid rentals from January 1, 1989 toJuly 31, 1996; that on July 16, 1996, Manotok made a demand on Benjamin Mendoza to pay therental arrears and to vacate the premises within fifteen (15) days from receipt of the demandletter; that despite receipt of the letter and after the expiration of the 15-day period, theMendozas refused to vacate the property and to pay the rentals. The complaint prayed that thecourt order Mendoza and those claiming rights under him to vacate the premises and deliver possession thereof to Manotok, and to pay the unpaid rentals from January 1, 1989 to July 31,1996 plus P875.75 per month starting August 1, 1996, subject to such increase allowed by law,

until he finally vacates the premise.

ISSUE:

Whether or not the Honorable Court of Appeals committed error in giving efficacy to alease contract signed in 1988 when the alleged signatory was already dead since 1986.

RULING:

This is a case for unlawful detainer. It appears that respondent corporation leased the property subject of this case to petitioner‘s father. After expiration of the lease, petitioner

continued to occupy the property but failed to pay the rentals. On July 16, 1996, respondentcorporation made a demand on petitioner to vacate the premises and to pay their arrears.

An action for unlawful detainer may be filed when possession by a landlord, vendor,vendee or other person of any land or building is unlawfully withheld after the expiration ortermination of the right to hold possession by virtue of a contract, express or implied. The onlyissue to be resolved in an unlawful detainer case is physical or material possession of the property involved, independent of any claim of ownership by any of the parties involved. In thecase at bar, petitioner lost his right to possess the property upon demand by respondentcorporation to vacate the rented lot. Petitioner cannot now refute the existence of the leasecontract because of his prior admissions in his pleadings regarding his status as tenant on thesubject property.



of 745

JEFFERSON LIM vs. QUEENSLAND TOKYO COMMODITIES, INC.January 4, 2002

FACTS:

Sometime in 1992, Benjamin Shia, a market analyst and trader of Queensland, wasintroduced to petitioner Jefferson Lim by Marissa Bontia, one of his employees. Marissa‘s fatherwas a former employee of Lim‘s father. Shia suggested that Lim invest in the Foreign ExchangeMarket, trading U.S. dollar against the Japanese yen, British pound, Deutsche Mark and SwissFranc.Before investing, Lim requested Shia for proof that the foreign exchange was reallylucrative. They conducted mock tradings without money involved. As the mock trading showed profitability, Lim decided to invest with a marginal deposit of US$5,000 in manager‘s check.The marginal deposit represented the advance capital for his future tradings. It was made toapply to any authorized future transactions, and answered for any trading account against whichthe deposit was made, for any loss of whatever nature, and for all obligations, which the investorwould incur with the broker. Petitioner Lim was then allowed to trade with respondent company

which was coursed through Shia by virtue of blank order forms all signed by Lim. Respondentfurnished Lim with the daily market report and statements of transactions as evidenced by thereceiving forms, some of which were received by Lim.

Meanwhile, on October 22, 1992, respondent learned that it would take seventeen (17)days to clear the manager‘s check given by petitioner. Shia returned the check to petitioner whoinformed Shia that petitioner would rather replace the manager‘s check with a traveler‘s check.Shia noticed that the traveler‘s check was not indorsed but Lim told Shia that Queensland couldsign the endorsee por tion. Because Shia trusted the latter‘s good credit rating, and out ofignorance, he brought the check back to the office unsigned. Inasmuch as that was a busy Friday,the check was kept in the drawer of respondent‘s consultant. Later, the traveler‘s check was

deposited with Citibank.

On October 27, 1992, Citibank informed respondent that the traveler‘s check could not becleared unless it was duly signed by Lim, the original purchaser of the traveler‘s check. A MissArajo, from the accounting staff of Queensland, returned the check to Lim for his signature, butthe latter, aware of his P44,465 loss, demanded for a liquidation of his account and said he wouldget back what was left of his investment.

ISSUE:

Whether or not the CA erred in reversing the decision of the RTC which dismissedthe respondent‘s complaint

RULING:

The essential elements of estoppel are: (1) conduct of a party amounting to falserepresentation or concealment of material facts or at least calculated to convey the impressionthat the facts are otherwise than, and inconsistent with, those which the party subsequentlyattempts to assert; (2) intent, or at least expectation, that this conduct shall be acted upon by, orat least influence, the other party; and (3) knowledge, actual or constructive, of the real facts. ere,it is uncontested that petitioner had in fact signed the Customer‘s Agreement in the morning ofOctober 22, 1992, knowing fully well the nature of the contract he was entering into. TheCustomer‘s Agreement was duly notarized and as a public document it is evidence of the fact,which gave rise to its execution and of the date of the latter.

Next, petitioner paid his investment deposit to respondent in the form of a manager‘scheck in the amount of US$5,000 as evidenced by PCI Bank Manager‘s Check No. 69007, datedOctober 22, 1992. All these are indicia that petitioner treated the Customer‘s Agreement as avalid and binding contract.



of 745

PLACEWELL INTERNATIONAL SERVICES CORP. vs. CAMOTEG.R. No. 169973, June 26, 2006

FACTS:

Petitioner Placewell International Services Corporation (PISC) deployed respondentIreneo B. Camote to work as building carpenter for SAAD Trading and Contracting Co. (SAAD)at the Kingdom of Saudi Arabia (KSA) for a contract duration of two years, with acorresponding salary of US$370.00 per month. At the job site, respondent was allegedly foundincompetent by his foreign employer; thus the latter decided to terminate his services. However,respondent pleaded for his retention and consented to accept a lower salary of SR 800.00 permonth. Thus, SAAD retained respondent until his return to the Philippines two years after.

On November 27, 2001, respondent filed a sworn Complaint for monetary claims against petitioner alleging that when he arrived at the job site, he and his fellow Filipino workers wererequired to sign another employment contract written in Arabic under the constraints of losing

their jobs if they refused; that for the entire duration of the new contract, he received only SR590.00 per month; that he was not given his overtime pay despite rendering nine hours of workeveryday; that he and his co-workers sought assistance from the Philippine Embassy but they didnot succeed in pursuing their cause of action because of difficulties in communication.

ISSUE:

Whether there is estoppel by laches

HELD:

R.A. No. 8042 explicitly prohibits the substitution or alteration to the prejudice of theworker, of employment contracts already approved and verified by the Department of Labor andEmployment (DOLE) from the time of actual signing thereof by the parties up to and includingthe period of the expiration of the same without the approval of the DOLE. The subsequentlyexecuted side agreement of an overseas contract worker with her foreign employer whichreduced her salary below the amount approved by the POEA is void because it is against ourexisting laws, morals and public policy. The said side agreement cannot supersede her standardemployment contract approved by the POEA.

Petitioner‘s contention that respondent is guilty of laches is without basis. Laches has been defined as the failure of or neglect for an unreasonable and unexplained length of time to dothat which by exercising due diligence, could or should have been done earlier, or to assert aright within reasonable time, warranting a presumption that the party entitled thereto has eitherabandoned it or declined to assert it. Thus, the doctrine of laches presumes that the party guiltyof negligence had the opportunity to do what should have been done, but failed to do so.Conversely, if the said party did not have the occasion to assert the right, then, he can not beadjudged guilty of laches. Laches is not concerned with the mere lapse of time; rather, the partymust have been afforded an opportunity to pursue his claim in order that the delay maysufficiently constitute laches.

In the instant case, respondent filed his claim within the three-year prescriptive period forthe filing of money claims set forth in Article 291 of the Labor Code from the time the cause ofaction accrued. Thus, we find that the doctrine of laches finds no application in this case.



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HEIRS OF RAGUA vs. COURT OF APPEALSG.R. Nos. 88521-22

FACTS:

These consolidated cases involve a prime lot consisting of 4,399,322 square meters,known as the Diliman Estate, situated in Quezon City. On this 439 hectares of prime land nowstand the following: the Quezon City Hall, Philippine Science High School, Quezon MemorialCircle, Visayas Avenue, Ninoy Aquino Parks and Wildlife, portions of UP Village and EastTriangle, the entire Project 6 and Vasha Village, Veterans Memorial Hospital and golf course,Department of Agriculture, Department of Environment and Natural Resources, SugarRegulatory Administration, Philippine Tobacco Administration, Land Registration Authority,Philcoa Building, Bureau of Telecommunications, Agricultural Training Institute building,Pagasa Village, San Francisco School, Quezon City Hospital, portions of Project 7, MindanaoAvenue subdivision, part of Bago Bantay resettlement project, SM City North EDSA, part ofPhil-Am Life Homes compound and four-fifths of North Triangle. This large estate was the

subject of a petition for judicial reconstitution originally filed by Eulalio Ragua in 1964, whichgave rise to protracted legal battles between the affected parties, lasting more than thirty-five(35) years.

ISSUE:

Whether estoppel by laches exists on the part of petitioner

HELD:

Petitioners filed the petition for reconstitution of OCT 632 nineteen (19) years after thetitle was allegedly lost or destroyed. We thus consider petitioners guilty of laches. Laches isnegligence or omission to assert a right within a reasonable time, warranting the presumptionthat the party entitled to assert it either has abandoned or declined to assert it.



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METROPOLITAN BANK & TRUST COMPANY vs. COURT OF APPEALSJune 8, 2000

FACTS:

Mr. Chia offered the subject property for sale to private respondent G.T.P. DevelopmentCorporation (hereafter, GTP), with assumption of the mortgage indebtedness in favor of petitioner METROBANK secured by the subject property. Pending negotiations for the proposedsale, Atty. Bernardo Atienza, acting in behalf of respondent GTP, went to METROBANK toinquire on Mr. Chia's remaining balance on the real estate mortgage. METROBANK obligedwith a statement of account of Mr. Chia amounting to about P115,000.00 as of August ,1980.The deed of sale and the memorandum of agreement between Mr. Chia and respondent GTPwere eventually executed and signed. Atty. Atienza went to METROBANK Quiapo Branch and paid one hundred sixteen thousand four hundred sixteen pesos and seventy-one centavos(P116,416.71) for which METROBANK issued an official receipt acknowledging payment. Thisnotwithstanding, petitioner METROBANK refused to release the real estate mortgage on the

subject property despite repeated requests from Atty. Atienza, thus prompting respondent GTP tofile an action for specific performance against petitioner METROBANK and Mr. Chia.

ISSUE:

Whether or not the CA erred in reversing the decision of the lower court.

RULING:

The Court found no compelling reasons to disturb the assailed decision. All thingsstudiedly viewed in proper perspective, the Court are of the opinion, and so rule, that whatever

debts or loans mortgagor Chia contracted with Metrobank after September 4, 1980, without theconformity of plaintiff-appellee, could not be adjudged as part of the mortgage debt the latter soassumed. We are persuaded that the contrary ruling on this point in Our October 24, 1994decision would be unfair and unjust to plaintiff-appellee because, before buying subject propertyand assuming the mortgage debt thereon, the latter inquired from Metrobank about the exactamount of the mortgage debt involved.

Petitioner METROBANK is estopped from refusing the discharge of the real estatemortgage on the claim that the subject property still secures "other unliquidated past due loans."



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SPOUSES DEL CAMPO vs. COURT OF APPEALSFebruary 1, 2001

FACTS:

Salome, Consorcia, Alfredo, Maria, Rosalia, Jose, Quirico and Julita, all surnamedBornales, were the original co-owners of the lot in question.

On July 14, 1940, Salome sold part of her 4/16 share to Soledad Daynolo. Thereafter,Soledad Daynolo immediately took possession of the land described above and built a housethereon. A few years later, Soledad and her husband, Simplicio Distajo, mortgaged the subject portion of the lot as security for a debt to Jose Regalado, Sr. This transaction was evidenced by aDeed of Mortgage.

On April 14, 1948, three of the eight co-owners of Lot 162, specifically, Salome,Consorcia and Alfredo, sold 24,993 square meters of said lot to Jose Regalado, Sr. On May 4,

1951, Simplicio Distajo, heir of Soledad Daynolo who had since died, paid the mortgage debtand redeemed the mortgaged portion of Lot 162 from Jose Regalado, Sr. The latter, in turn,executed a Deed of Discharge of Mortgage in favor of Soledad‘s heirs, namely: SimplicioDistajo, Rafael Distajo and Teresita Distajo-Regalado. On same date, the said heirs sold theredeemed portion of Lot 162 for P1,500.00 to herein petitioners, the spouses Manuel Del Campoand Salvacion Quiachon.

ISSUE:

Whether or not the sale of the subject portion constitutes a sale of a concrete or definite portion of land owned in common does not absolutely deprive herein petitioners of any right or

title thereto.

RULING:

There can be no doubt that the transaction entered into by Salome and Soledad could belegally recognized in its entirety since the object of the sale did not even exceed the ideal sharesheld by the former in the co-ownership. As a matter of fact, the deed of sale executed betweenthe parties expressly stipulated that the portion of Lot 162 sold to Soledad would be taken fromSalome‘s 4/16 undivided interest in said lot, which the latter could validly transfer in whole or in part even without the consent of the other co-owners. Salome‘s right to sell part of her undividedinterest in the co-owned property is absolute in accordance with the well-settled doctrine that a

co-owner has full ownership of his pro-indiviso share and has the right to alienate, assign ormortgage it, and substitute another person in its enjoyment.



of 745

LAUREL vs. HON. ANIANO A. DESIERTOJuly 1, 2002

FACTS:

Petitioner Salvador H. Laurel moves for a reconsideration of this Court‘s decision declaringhim, as Chair of the National Centennial Commission (NCC), a public officer. Petitioner also prays that the case be referred to the Court En Banc.

ISSUE:

Whether or not Laurel is a public officer as Chair of the NCC

RULING:

The issue in this case is whether petitioner, as Chair of the NCC, is a public officer under the

jurisdiction of the Ombudsman. Assuming, as petitioner proposes, that the designation of othermembers to the NCC runs counter to the Constitution, it does not make petitioner, as NCC Chair,less a public officer. Such ―serious constitutional repercussions‖ do not reduce the force of therationale behind this Court‘s decision.

Second, petitioner invokes estoppel. He claims that the official acts of the President, theSenate President, the Speaker of the House of Representatives, and the Supreme Court, indesignating Cabinet members, Senators, Congressmen and Justices to the NCC, led him to believe that the NCC is not a public office.

The contention has no merit. In estoppel, the party representing material facts must have the

intention that the other party would act upon the representation. It is preposterous to suppose thatthe President, the Senate President, the Speaker and the Supreme Court, by the designation ofsuch officials to the NCC, intended to mislead petitioner just so he would accept the position of NCC Chair. Estoppel must be unequivocal and intentional. Moreover, petitioner himself admitsthat the principle of estoppel does not operate against the Government in the exercise of itssovereign powers.

Third, as ground for the referral of the case to the Court En Banc, petitioner submits that ourdecision in this case modified or reversed doctrines rendered by this Court, which can only bedone by the Court En Banc.It is argued that by designating three of its then incumbent membersto the NCC, the Court took the position that the NCC was not a public office. The argument is a

bit of a stretch. Section 4 (3), Article VIII of the Constitution provides that ―no doctrine or principle of law laid down by the court in a decision rendered en banc or in division may bemodified or reversed except by the court sitting en banc.‖ In designating three of its incumbentmembers to the NCC, the Court did not render a ―decision,‖ in the context of said constitutional provision, which contemplates an actual case. Much less did the Court, by such designation,articulate any ―doctrine or principle of law.‖ Invoking the same provision, petitioner asserts thatthe decision in this case reversed or modified Macalino vs. Sandiganbayan, holding that theAssistant Manager of the Treasury Division and the Head of the Loans Administration &Insurance Section of the Philippine National Construction Corporation (PNCC) is not a publicofficer under Republic Act No. 3019. This contention also has no merit. The rationale for theruling in Macalino is that ―the PNCC has no original charter as it was incorporated under thegeneral law on corporations.‖ However, as we pointed out in our decision, a conclusion thatEXPOCORP is a government-owned or controlled corporation would not alter the outcome ofthis case because petitioner‘s position and functions as Chief Executive Officer of EXPOCORPare by virtue of his being Chairman of the NCC. The other issues raised by petitioner are merereiterations of his earlier arguments. The Court, however, remains unswayed thereby.



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SPOUSES HANOPOL vs. SHOEMART INCORPORATEDOctober 4, 2002

FACTS:

Shoemart, Inc., is a corporation duly organized and existing under the laws of thePhilippines engaged in the operation of department stores. On December 4, 1985, Shoemart,through its Executive Vice-President, Senen T. Mendiola, and spouses Manuel R. Hanopol andBeatriz T. Hanopol executed a Contract of Purchase on Credit.

Under the terms of the contract, Shoemart extended credit accommodations, in theamount of Three Hundred Thousand Pesos (P300,000.00), for purchases on credit made byholders of SM Credit Card issued by spouses Hanopol for one year, renewable yearly thereafter.Spouses Hanopol were given a five percent (5%) discount on all purchases made by theircardholders, deductible from the semi-monthly payments to be made to Shoemart by spousesHanopol.

For failure of spouses Hanopol to pay the principal amount of One Hundred Twenty-FourThousand Five Hundred Seventy-One Pesos and Eighty-Nine Centavos (P124,571.89) as ofOctober 6, 1987, Shoemart instituted extrajudicial foreclosure proceedings against the mortgaged properties.

Spouses Hanopol alleged that Shoemart breached the contract when the latter failed tofurnish the former with the requisite documents by which the former‘s liability shall bedetermined, namely: charge invoices, purchase booklets and purchase journal, as provided intheir contract; that without the requisite documents, spouses Hanopol had no way of knowingthat, in fact, they had already paid, even overpaid, whatever they owed to Shoemart; that despite

said breach, Shoemart even had the audacity to apply for extrajudicial foreclosure with theSheriff.

ISSUE:

Whether or not Shoemart acted with manifest bad faith in pursuing with the foreclosureand auction sale of the property of spouses Hanopol, and, accordingly, should be held liable fordamages.

RULING:

All the three (3) elements for litis pendentia as a ground for dismissal of an action are present, namely: (a) identity of parties, or at least such parties who represent the same interest in both actions; (b) identity of rights asserted and relief prayed for, the relief being founded on thesame facts; and (c) the identity, with respect to the two (2) preceding particulars in the two (2)cases, in such that any judgment that may be rendered in the pending case, regardless of which party is successful, would amount to res judicata in the other.

In the case at bench, the parties are the same; the relief sought in the case before theCourt of Appeals and the trial court are the same, that is, to permanently enjoin the foreclosure ofthe real estate mortgage executed by spouses Hanopol in favor of Shoemart; and, both are premised on the same facts. The judgment of the Court of Appeals would constitute a bar to thesuit before the trial court.



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TERMINAL FACILITIES vs. PPA378 SCRA 82

FACTS:

Before us are two (2) consolidated petitions for review, one filed by the TerminalFacilities and Services Corporation (TEFASCO) and the other by the Philippine Ports Authority(PPA). TEFASCO is a domestic corporation organized and existing under the laws of thePhilippines with principal place of business at Barrio Ilang, Davao City. It is engaged in the business of providing port and terminal facilities as well as arrastre, stevedoring and other port-related services at its own private port at Barrio Ilang.

Sometime in 1975 TEFASCO submitted to PPA a proposal for the construction of aspecialized terminal complex with port facilities and a provision for port services in Davao City.To ease the acute congestion in the government ports at Sasa and Sta. Ana, Davao City, PPAwelcomed the proposal and organized an inter-agency committee to study the plan. The

committee recommended approval.

On April 21, 1976 the PPA Board of Directors passed Resolution No. 7 accepting andapproving TEFASCO's project proposal.

Long after TEFASCO broke round with massive infrastructure work, the PPA Boardcuriously passed on October 1, 1976 Resolution No. 50 under which TEFASCO, without askingfor one, was compelled to submit an application for construction permit. Without the consent ofTEFASCO, the application imposed additional significant conditions.

The series of PPA impositions did not stop there. Two (2) years after the completion of

the port facilities and the commencement of TEFASCO's port operations, or on June 10, 1978,PPA again issued to TEFASCO another permit, under which more onerous conditions werefoisted on TEFASCO's port operations. In the purported permit appeared for the first time thecontentious provisions for ten percent (10%) government share out of arrastre and stevedoringgross income and one hundred percent (100%) wharfage and berthing charges.

On February 10, 1984 TEFASCO and PPA executed a Memorandum of Agreement(MOA) providing among others for (a) acknowledgment of TEFASCO's arrears in governmentshare at Three Million Eight Hundred Seven Thousand Five Hundred Sixty-Three Pesos andSeventy-Five Centavos (P3,807,563.75) payable monthly, with default penalized by automaticwithdrawal of its commercial private port permit and permit to operate cargo handling services;

(b) reduction of government share from ten percent (10%) to six percent (6%) on all cargohandling and related revenue (or arrastre and stevedoring gross income); (c) opening of its pierfacilities to all commercial and third-party cargoes and vessels for a period coterminous with itsforeshore lease contract with the National Government; and, (d) tenure of five (5) yearsextendible by five (5) more years for TEFASCO's permit to operate cargo handling in its private port facilities. In return PPA promised to issue the necessary permits for TEFASCO's portactivities. TEFASCO complied with the MOA and paid the accrued and current governmentshare.

On August 30, 1988 TEFASCO sued PPA and PPA Port Manager, and Port Officer inDavao City for refund of government share it had paid and for damages as a result of alleged

illegal exaction from its clients of one hundred percent (100%) berthing and wharfage fees. Thecomplaint also sought to nullify the February 10, 1984 MOA and all other PPA issuancesmodifying the terms and conditions of the April 21, 1976 Resolution No. 7 above-mentioned.

PPA appealed the decision of the trial court to the Court of Appeals. The appellate courtin its original decision recognized the validity of the impositions and reversed in toto thedecision of the trial court. TEFASCO moved for reconsideration which the Court of Appealsfound partly meritorious. Thus the Court of Appeals in its Amended Decision partially affirmed



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the RTC decision only in the sense that PPA was directed to pay TEFASCO (1) the amounts ofFifteen Million Eight Hundred Ten Thousand Thirty-Two Pesos and Seven Centavos(P15,810,032.07) representing fifty percent (50%) wharfage fees and Three Million NineHundred Sixty-One Thousand Nine Hundred Sixty-Four Pesos and Six Centavos(P3,961,964.06) representing thirty percent (30%) berthing fees which TEFASCO could have

earned as private port usage fee from 1977 to 1991. The Court of Appeals held that the onehundred percent (100%) berthing and wharfage fees were unenforceable because they had not been approved by the President under P.D. No. 857, and discriminatory since much lower rateswere charged in other private ports as shown by PPA issuances effective 1995 to 1997. BothPPA and TEFASCO were unsatisfied with this disposition hence these petitions.

ISSUE:

Whether or not the collection by PPA of one hundred percent (100%) wharfage fees and berthing charges; (c) the propriety of the award of fifty percent (50%) wharfage fees and thirty percent (30%) berthing charges as actual damages in favor of TEFASCO for the period from

1977 to 1991 is valid.

RULING:

The imposition by PPA of ten percent (10%), later reduced to six percent (6%),government share out of arrastre and stevedoring gross income of TEFASCO is void. Thisexaction was never mentioned in the contract, much less is it a binding prestation, betweenTEFASCO and PPA. What was clearly stated in the terms and conditions appended to PPAResolution No. 7 was for TEFASCO to pay and/or secure from the proper authorities "all feesand/or permits pertinent to the construction and operation of the proposed project." Thegovernment share demanded and collected from the gross income of TEFASCO from its arrastre

and stevedoring activities in TEFASCO's wholly owned port is certainly not a fee or in any eventa proper condition in a regulatory permit. Rather it is an onerous "contractual stipulation" whichfinds no root or basis or reference even in the contract aforementioned.



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MENDOZA vs. COURT OF APPEALSJune 25, 2001

FACTS:

Petitioner Danilo D. Mendoza is engaged in the domestic and international trading of rawmaterials and chemicals. He operates under the business name Atlantic Exchange Philippines(Atlantic), a single proprietorship registered with the Department of Trade and Industry (DTI).Sometime in 1978 he was granted by respondent Philippine National Bank (PNB) a FiveHundred Thousand Pesos (P500,000.00) credit line and a One Million Pesos (P1,000,000.00)Letter of Credit/Trust Receipt (LC/TR) line.

As security for the credit accommodations and for those which may thereinafter begranted, petitioner mortgaged to respondent PNB the following: 1) three (3) parcels of land withimprovements in F. Pasco Avenue, Santolan, Pasig; 2) his house and lot in Quezon City; and 3)several pieces of machinery and equipment in his Pasig coco-chemical plant.

Petitioner executed in favor of respondent PNB three (3) promissory notes covering theFive Hundred Thousand Pesos (P500,000.00) credit line, one dated March 8, 1979 for ThreeHundred Ten Thousand Pesos (P310,000.00); another dated March 30, 1979 for Forty ThousandPesos (P40,000.00); and the last dated September 27, 1979 for One Hundred Fifty ThousandPesos (P150,000.00).

Petitioner made use of his LC/TR line to purchase raw materials from foreign importers.He signed a total of eleven (11) documents denominated as "Application and Agreement forCommercial Letter of Credit," on various dates

In a letter dated January 3, 1980 and signed by Branch Manager Fil S. Carreon Jr.,respondent PNB advised petitioner Mendoza that effective December 1, 1979, the bank raised itsinterest rates to 14% per annum, in line with Central Bank's Monetary Board Resolution No.2126 dated November 29, 1979.

On March 9, 1981, he wrote a letter to respondent PNB requesting for the restructuring ofhis past due accounts into a five-year term loan and for an additional LC/TR line of Two MillionPesos (P2,000,000.00). According to the letter, because of the shut-down of his end-usercompanies and the huge amount spent for the expansion of his business, petitioner failed to payto respondent bank his LC/TR accounts as they became due and demandable.

Ceferino D. Cura, Branch Manager of PNB Mandaluyong replied on behalf of therespondent bank and required petitioner to submit the following documents before the bankwould act on his request: 1) Audited Financial Statements for 1979 and 1980; 2) Projected cashflow (cash in - cash out) for five (5) years detailed yearly; and 3) List of additional machineryand equipment and proof of ownership thereof. Cura also suggested that petitioner reduce histotal loan obligations to Three Million Pesos (P3,000,000.00).

On September 25, 1981, petitioner sent another letter addressed to PNB Vice-PresidentJose Salvador, regarding his request for restructuring of his loans. He offered respondent PNBthe following proposals: 1) the disposal of some of the mortgaged properties, more particularly,his house and lot and a vacant lot in order to pay the overdue trust receipts; 2) capitalization andconversion of the balance into a 5-year term loan payable semi-annually or on annualinstallments; 3) a new Two Million Pesos (P2,000,000.00) LC/TR line in order to enable AtlanticExchange Philippines to operate at full capacity; 4) assignment of all his receivables to PNBfrom all domestic and export sales generated by the LC/TR line; and 5) maintenance of theexisting Five Hundred Thousand Pesos (P500,000.00) credit line.

The petitioner testified that respondent PNB Mandaluyong Branch found his proposalfavorable and recommended the implementation of the agreement. However, Fernando



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Maramag, PNB Executive Vice-President, disapproved the proposed release of the mortgaged properties and reduced the proposed new LC/TR line to One Million Pesos (P1,000,000.00).Petitioner claimed he was forced to agree to these changes and that he was required to submit anew formal proposal and to sign two (2) blank promissory notes.

In a letter dated July 2, 1982, petitioner offered the following revised proposals torespondent bank: 1) the restructuring of past due accounts including interests and penalties intoa 5-year term loan, payable semi-annually with one year grace period on the principal; 2) payment of Four Hundred Thousand Pesos (P400,000.00) upon the approval of the proposal; 3)reduction of penalty from 3% to 1%; 4) capitalization of the interest component with interest rateat 16% per annum; 5) establishment of a One Million Pesos (P1,000,000.00) LC/TR line againstthe mortgaged properties; 6) assignment of all his export proceeds to respondent bank toguarantee payment of his

Petitioner failed to pay the subject two (2) Promissory Notes Nos. 127/82 and 128/82 asthey fell due. Respondent PNB extra-judicially foreclosed the real and chattel mortgages, and

the mortgaged properties were sold at public auction to respondent PNB, as highest bidder, for atotal of Three Million Seven Hundred Ninety Eight Thousand Seven Hundred Nineteen Pesosand Fifty Centavos (P3,798,719.50).

The petitioner filed a complaint for specific performance, nullification of the extrajudicial foreclosure and damages against respondents PNB. He alleged that the ExtrajudicialForeclosure Sale of the mortgaged properties was null and void since his loans were restructuredto a five-year term loan; hence, it was not yet due and demandable. On March 16, 1992, the trialcourt rendered judgment in favor of the petitioner and ordered the nullification of theextrajudicial foreclosure of the real estate mortgage, the Sheriff‘s sale of the mortgaged real properties by virtue of consolidation thereof and the cancellation of the new titles issued to PNB;

that PNB vacate the subject premises in Pasig and turn the same over to the petitioner; and alsothe nullification of the extrajudicial foreclosure and sheriff's sale of the mortgaged chattels, andthat the chattels be returned to petitioner Mendoza if they were removed from his Pasig premisesor be paid for if they were lost or rendered unserviceable.

The trial court decided for the petitioner. Upon appeal, the Court of Appeals reversed thedecision of the trial court and dismissed the complaint.

ISSUE:

Whether or not respondent promised to be bound by the proposal of the petitioner for afive-year restructuring of his overdue loan.

RULING:

No. Respondent Court of Appeals held that there is no evidence of a promise fromrespondent PNB, admittedly a banking corporation, that it had accepted the proposals of the petitioner to have a five-year restructuring of his overdue loan obligations. It found and held, onthe basis of the evidence adduced, that "appellee's (Mendoza) communications were mere proposals while the bank's responses were not categorical that the appellee's request had beenfavorably accepted by the bank."

Nowhere in those letters presented by the petitioner is there a categorical statement thatrespondent PNB had approved the petitioner‘s proposed five-year restructuring plan. It isstretching the imagination to construe them as evidence that his proposed five-year restructuring plan has been approved by the respondent PNB which is admittedly a banking corporation. Onlyan absolute and unqualified acceptance of a definite offer manifests the consent necessary to perfect a contract. If anything, those correspondences only prove that the parties had not gone beyond the preparation stage, which is the period from the start of the negotiations until themoment just before the agreement of the parties.



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The doctrine of promissory estoppel is an exception to the general rule that a promise offuture conduct does not constitute an estoppel. In some jurisdictions, in order to make out aclaim of promissory estoppel, a party bears the burden of establishing the following elements: (1)a promise reasonably expected to induce action or forebearance; (2) such promise did in factinduce such action or forebearance, and (3) the party suffered detriment as a result.

It is clear from the forgoing that the doctrine of promissory estoppel presupposes theexistence of a promise on the part of one against whom estoppel is claimed. The promise must be plain and unambiguous and sufficiently specific so that the Judiciary can understand theobligation assumed and enforce the promise according to its terms. For petitioner to claim thatrespondent PNB is estopped to deny the five-year restructuring plan, he must first prove thatrespondent PNB had promised to approve the plan in exchange for the submission of the proposal. As discussed earlier, no such promise was proven, therefore, the doctrine does notapply to the case at bar. A cause of action for promissory estoppel does not lie where an allegedoral promise was conditional, so that reliance upon it was not reasonable. It does not operate tocreate liability where it does not otherwise exist.



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ROBLETT INDUSTRIAL CONSTRUCTION CORPORATIONvs. COURT OF APPEALS

266 SCRA 71

FACTS:

On 23 September 1986 respondent Contractors Equipment Corporation (CEC) institutedan action for a sum of money against petitioner Roblett Industrial Construction Corporation(RICC) before the Regional Trial Court of Makati alleging that in 1985 it leased to the lattervarious construction equipment which it used in its projects. As a result RICC incurred unpaidaccounts amounting to P342,909.38.

On 19 December 1985 RICC through its Assistant Vice President for Finance CandelarioS. Aller Jr. entered into an Agreement with CEC where it confirmed petitioner's account. As anoff-setting arrangement respondent received from petitioner construction materials worthP115,000.00 thus reducing petitioner's balance to P227,909.38.

A day before the execution of their Agreement, or on 18 December 1985, RICC paidCEC P10,000.00 in postdated checks which when deposited were dishonored. As a consequencethe latter debited the amount to petitioner's account of P227,909.38 thus increasing its balance toP237,909.38.

On 24 July 1986 Mariano R. Manaligod, Jr., General Manager of CEC, sent a letter ofdemand to petitioner through its Vice President for Finance regarding the latter's overdueaccount of P237,909.38 and sought settlement thereof on or before 31 July 1986. In reply, petitioner requested for thirty (30) days to have enough time to look for funds to substantiallysettle its account.

Traversing the allegations of respondent, Candelario S. Aller Jr. declared that he signedthe Agreement with the real intention of having proof of payment. In fact Baltazar Banlot, VicePresident for Finance of petitioner, claimed that after deliberation and audit it appeared that petitioner overpaid respondent by P12,000.00 on the basis of the latter's Equipment Daily TimeReports for 2 May to 14 June 1985 which reflected a total obligation of only P103,000.00. Heclaimed however that the Agreement was not approved by the Board and that he did notauthorize Aller Jr. to sign thereon.

On rebuttal, Manaligod Jr. declared that petitioner had received a statement of accountcovering the period from 28 March to 12 July 1985 in the amount of P376,350.18 which it never

questioned. From this amount P3,440.80, based on respondent's account with petitioner andP30,000.00, representing payments made by the latter, were deducted thus leaving a balance ofP342,909.38 as mentioned in the Agreement. On 19 December 1990 the trial court rendered judgment ordering petitioner to pay respondent

ISSUE:

Whether or not the agreement between the parties is binding upon them.

RULING:

Yes. It must be emphasized that the same agreement was used by plaintiff as the basis forclaiming defendant's obligation of P237,909.38 and also used by defendant as the same basis forits alleged payment in full of its obligation to plaintiff. But while plaintiff treats the entireagreement as valid, defendant wants the court to treat that portion which treats of the offsetting



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of P115,000.00 as valid, whereas it considers the other terms and conditions as "onerous, illegaland want of prior consent and Board approval." This Court cannot agree to defendant'scontention. It must be stressed that defendant's answer was not made under oath, and therefore,the genuineness and due execution of the agreement which was the basis for plaintiff's claim isdeemed admitted (Section 8, Rule 8, Rules of Court). Such admission, under the principle of

estoppel, is rendered conclusive upon defendant and cannot be denied or disproved as against plaintiff (Art. 1431, Civil Code). Either the agreement is valid or void. It must be treated as awhole and not to be divided into parts and consider only those provisions which favor one party(in this case the defendant). Contracts must bind both contracting parties, its validity orcompliance cannot be left to the will of one of them (Art. 1308, New Civil Code).



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SIME DARBY PILIPINAS, INC. V. GOODYEAR PHILIPPINES, INC.GR No. 182148; June 8, 2011

FACTS:

Macgraphics leased a billboard to Sime Darby to bare its name and logo at a monthlyrental of P120, 000.00 for four years and was set to expire on March 30, 1998. Sime Darby paidMacgraphics a total of P1.2 million representing the ten-month deposit which the latter wouldapply to the last ten months of the lease. Thereafter, Sime Darby was bought by Goodyear for atotal of P1.65 billion including the assignment of the receivables in connection with its billboardadvertising. Sime Darby then notified Macgraphics of the assignment of the Magallanes billboard in favor of Goodyear.

Macgraphics then sent a letter to Sime Darby, dated July 11, 1996, informing the latter that itcould not give its consent to the assignment of lease to Goodyear and advised Goodyear that anyadvertising service it intended to get from them would have to wait until after the expiration or

valid pre-termination of the lease then existing with Sime Darby. Goodyear demanded partialrescission of deed and the refund of P1, 239,000.00value of Sime Darby's leasehold rights overthe Magallanes billboard.Sime Darby refused and a complaint was filed by Goodyear.

ISSUE:

Whether or not the doctrine of laches can be applied in the present case

RULING:

The Court finds that the doctrine of laches cannot be applied in this case.

Laches is the failure or neglect, for an unreasonable and unexplained length of time, to do thatwhich, by exercising due diligence, could or should have been done earlier; it is negligence oromission to assert a right within a reasonable time, warranting the presumption that the partyentitled to assert it either has abandoned or declined to assert it. There is no absolute rule as towhat constitutes laches or staleness of demand; each case is to be determined according to its particular circumstances, with the question of laches addressed to the sound discretion of thecourt. Because laches is an equitable doctrine, its application is controlled by equitableconsiderations and should not be used to defeat justice or to perpetuate fraud or injustice.

From the records, it appears that Macgraphics first learned of the assignment when Sime Darbysent its letter-notice dated May 3, 1996. From the letters sent by Macgraphics to Goodyear, it isapparent that Macgraphics had to study and determine both the legal and practical implicationsof entertaining Goodyear as a client. After review, Macgraphics found that consenting to theassignment would entail the commitment of manpower and resources that it did not foresee at theinception of the lease. It thereafter communicated its non-conformity to the assignment. To themind of the Court, there was never a delay.



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KINGS PROPERTIES CORP V. GALIDOG.R. No. 170023 Nov 27, 2009

FACTS:

Kings Properties Corporation (petitioner) filed this Petition for Review on Certiorariassailing the Court of Appeals‘ Decision[2] dated 20 December 2004 in CA-G.R. CV No. 68828as well as the Resolution[3] dated 10 October 2005 denying the Motion for Reconsideration. Inthe assailed decision, the Court of Appeals reversed the Regional Trial Court‘s Decision dated 4July 2000. This case involves an action for cancellation of certificates of title, registration ofdeed of sale and issuance of certificates of title filed by Canuto A. Galido before Branch 71 ofthe Regional Trial Court of Antipolo City (trial court). On 18 April 1966, the heirs of DomingoEniceo, namely Rufina Eniceo and Maria Eniceo, were awarded with Homestead Patent No.112947 consisting of four parcels of land located in San Isidro, Antipolo, Rizal and particularlydescribed as follows; Lot No. 1 containing an area of 96,297 square meters; Lot No. 3 containingan area of 25,170 square meters; Lot No. 4 containing an area of 26,812 square meters; and Lot

No. 5 containing an area of 603 square meters. The Antipolo property with a total area of14.8882 hectares was registered under Original Certificate of Title (OCT) No. 535. Subsequentlya deed of sale covering the Antipolo property was executed between Rufina Eniceo and MariaEniceo as vendors and respondent as vendee. They sold the Antipolo property to respondent forP250,000. A certain Carmen Aldana delivered the owner‘s duplicate copy of OCT No. 535 torespondent.Petitioner alleges that when Maria Eniceo died in June 1975, Rufina Eniceo and theheirs of Maria Eniceo, who continued to occupy the Antipolo property as owners, thought thatthe owner‘s duplicate copy of OCT No. 535 was lost. On 5 April 1988, the Eniceo heirsregistered with the Registry of Deeds of Marikina City a Notice of Loss dated 2 April 1988 ofthe owner‘s copy of OCT No. 535. The Eniceo heirs also filed a petition for the issuance of anew owner‘s duplicate copy of OCT No. 535 with Branch 72 of the Regional Trial Court ofAntipolo, Rizal. The RTC rendered a decision finding that the certified true copy of OCT No.535 contained no annotation in favor of any person, corporation or entity. The RTC ordered theRegistry of Deeds to issue a second owner‘s copy of OCT No. 535 in favor of the Eniceo heirsand declared the original owner‘s copy of OCT NO. 535 cancelled and considered of no furthervalue. Thus the Registry of Deeds issued a second owner‘s copy of OCT No. 535 in favor of theEniceo heirs. Petitioner states that as early as 1991, respondent knew of the RTC decision inLRC Case No. 584-A because respondent filed a criminal case against Rufina Eniceo andLeonila Bolinas for giving false testimony upon a material fact during the trial of LRC Case No.584-A. Petitioner alleges that sometime in February 1995, Bolinas came to the office of AlbertoTronio Jr. , petitioner‘s general manager, and offered to sell the Antipolo property. Tronioascertained that OCT No. 535 was clean and had no lien and encumbrances. After the necessaryverification, petitioner decided to buy the Antipolo property. On 14 March 1995, respondentcaused the annotation of his adverse claim in OCT No. 535. On 20 March 1995, the Eniceo heirsexecuted a deed of absolute sale in favor of petitioner covering lots 3 and 4 of the Antipolo property for P500,000. On the same date, Transfer Certificate of Title (TCT) Nos. 277747 and277120 were issued. TCT No. 277747 covering lots 1 and 5 of the Antipolo property wasregistered in the names of Rufina Eniceo, Ambrosio Eniceo, Rodolfo Calove, Fernando Caloveand Leonila Calove Bolinas. TCT No. 277120 covering lots 3 and 4 of the Antipolo property wasregistered in the name of petitioner. On 5 April 1995, the Eniceo heirs executed another deed ofsale in favor of petitioner covering lots 1 and 5 of the Antipolo property for P1,000,000. TCT No. 278588 was issued in the name of petitioner and TCT No. 277120 was cancelled. On 17August 1995, the Secretary of the Department of Environment and Natural Resources (DENRSecretary) approved the deed of sale between the Eniceo heirs and respondent. On 16 January1996, respondent filed a civil complaint with the trial court against the Eniceo heirs and petitioner. Respondent prayed for the cancellation of the certificates of title issued in favor of petitioner, and the registration of the deed of sale and issuance of a new transfer certificate oftitle in favor of respondent. The trial court rendered its decision dismissing the case for lack oflegal and factual basis. Respondent appealed to the Court of Appeals. On 20 December 2004, theCA rendered a decision reversing the trial court‘s decision. Aggrieved by the CA‘s decision andresolution, petitioner elevated the case before the High Court.



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ISSUES:

Whether the adverse claim of respondent over the Antipolo property should be barred bylaches

Whether the deed of sale delivered to respondent should be presumed an equitable

mortgage pursuant to Article 1602(2) and 1604 of the Civil Code.

HELD:The contract between the Eniceo heirs and respondent executed was a perfected contract

of sale. A contract is perfected once there is consent of the contracting parties on the objectcertain and on the cause of the obligation. In the present case, the object of the sale is theAntipolo property and the price certain is P250,000. The contract of sale has also beenconsummated because the vendors and vendee have performed their respective obligations underthe contract. In a contract of sale, the seller obligates himself to transfer the ownership of thedeterminate thing sold, and to deliver the same to the buyer, who obligates himself to pay a pricecertain to the seller. The execution of the notarized deed of sale and the delivery of the owner‘s

duplicate copy of OCT No. 535 to respondent is tantamount to a constructive delivery of theobject of the sale. The Eniceo heirs also claimed in their answer that the deed of sale is fake andspurious. However, as correctly held by the CA, forgery can never be presumed. The partyalleging forgery is mandated to prove it with clear and convincing evidence. Whoever allegesforgery has the burden of proving it. In this case, petitioner and the Eniceo heirs failed todischarge this burden.

Petitioner contends that respondent is guilty of laches because he slept on his rights byfailing to register the sale of the Antipolo property at the earliest possible time. Petitioner claimsthat despite respondent‘s knowledge of the subsequent sale in 1991, respondent still failed tohave the deed of sale registered with the Registry of Deeds. The essence of laches is the failureor neglect, for an unreasonable and unexplained length of time, to do that which, through duediligence, could have been done earlier, thus giving rise to a presumption that the party entitledto assert it had either abandoned or declined to assert it. Respondent discovered in 1991 that anew owner‘s copy of OCT No. 535 was issued to the Eniceo heirs. Respondent filed a criminalcase against the Eniceo heirs for false testimony. When respondent learned that the Eniceo heirswere planning to sell the Antipolo property, respondent caused the annotation of an adverseclaim. On 16 January 1996, when respondent learned that OCT No. 535 was cancelled and newTCTs were issued, respondent filed a civil complaint with the trial court against the Eniceo heirsand petitioner. Respondent‘s actions negate petitioner‘s argument that respondent is guilty oflaches. True, unrecorded sales of land brought under Presidential Decree No. 1529 or theProperty Registration Decree (PD 1529) are effective between and binding only upon theimmediate parties. The registration required in Section 51 of PD 1529 is intended to protectinnocent third persons, that is, persons who, without knowledge of the sale and in good faith,acquire rights to the property. Petitioner, however, is not an innocent purchaser for value. Hencethe petition was denied.



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METROBANK v. CABLZOG.R. No. 154469 December 6, 2006

FACTS:

Respondent Cabilzo was one of the Metrobank‘s client who maintained a currentaccount. On November 12, 199, Cabilzo issued a Metrobank check payable to cash in theamount of P1,000 and was paid to a certain Mr. Marquez. The check was oresented to WestmontBank or payment and in turn indorsed to etrobank for appropriate clearing. It was discoveredthat the amount withdrawn wa P91,000, thus, the check was altered. Cabilzo re-credit the amountof P91,000 to his account but Metrobank refused to comply despite demands. RTC orderedMetrobank to pay the sum of P90,000 to Cabilzo. Court of Appeals affirmed the decision withmodification.

ISSUE:Whether holding Metrobank, as drawee bank, liable for the alternations on the subject

check bearing the authentic signature of the drawer thereof

RULING:

The degree of diligence in the exercise of his tasks and the performance of his duties have been faithfully complied with by Cabilzo. It is obvious that Metrobank was remiss in the dutyand violated that fiduciary relationship with its clients as it appeared that there are materialalterations on the check that are visble to the naked eye but the bank failed to detect such.

Petition is denied. Court of Appeals decision is affirmed with modification thatexemplary damages in the amount of P50,000 be awarded.



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MESINA V. GARCIAG.R. No. 168035 November 30, 2006

FACTS:

Atty. Honorio Valisno Garcia and Felicisima Mesina, during their lifetime, enstered intoa Contract to Sell over a lot consisting of 235 square meters, situated at Diversion Road,Sangitan, Cabanatuan City, covered and embraced by TCT No. T-31643 in the name ofFelicisima Mesina which title was eventually cancelled and TCT No. T-78881 was issued in thename of herein petitioners. The Contract to Sell provides that the cost of the lot is P70.00 persquare meter for a total amount of P16,450.00; payable within a period not to exceed 7 years atan interest rate of 12% per annum, in successive monthly installments of P260.85 per month,starting May 1977. Thereafter, the succeeding monthly installments are to be paid within thefirst week of every month, at the residence of the vendor at Quezon City, with all unpaidmonthly installments earning an interest of 1% per month. Instituting this case at bar,respondent asserts that despite the full payment made on 7 February 1984 for the

consideration of the subject lot, petitioners refused to issue the necessary Deed of Sale to effectthe transfer of the property to her.

ISSUE:

Whether or not respondent‘s cause of action had already prescribed?

RULING:

Article 1155 of the Civil Code is explicit that the prescriptive period is interrupted whenan action has been filed in court; when there is a written extrajudicial demand made by thecreditors; and when there is any written acknowledgment of the debt by the debtor.

The records reveal that starting 19 April 1986 until 2 January 1997 respondentcontinuously demanded from the petitioners the execution of the said Deed of Absolute Sale butthe latter conjured many reasons and excuses not to execute the same. Respondent even filed aComplaint before the Housing and Land Use Regulatory Board way back in June, 1986, toenforce her rights and to compel the mother of herein petitioners, who was still alive at that time,to execute the necessary Deed of Absolute Sale for the transfer of title in her name. On 2 January1997, respondent, through her counsel, sent a final demand letter to the petitioners for theexecution of the Deed of Absolute Sale, but still to no avail. Consequently, because of utterfrustration of the respondent, she finally lodged a formal Complaint for Specific Performancewith Damages before the trial court on 20 January 1997.

Hence, from the series of written extrajudicial demands made by respondent to have theexecution of the Deed of Absolute Sale in her favor, the prescriptive period of 10 years has beeninterrupted. Therefore, it cannot be said that the cause of action of the respondent has already been prescribed.



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PAHAMOTANG VS. PNBG.R. No. 156403, March 21, 2005

FACTS:

On July 1, 1972, Melitona Pahamotang died. She was survived by her husband AgustinPahamotang, and their eight (8) children, namely: Ana, Genoveva, Isabelita, Corazon, Susana,Concepcion and herein petitioners Josephine and Eleonor, all surnamed Pahamotang. OnSeptember 15, 1972, Agustin filed with the then Court of First Instance of Davao City a petitionfor issuance of letters administration over the estate of his deceased wife. The petition, docketedas Special Case No. 1792, was raffled to Branch VI of said court, hereinafter referred to as theintestate court. In his petition, Agustin identified petitioners Josephine and Eleonor as among theheirs of his deceased spouse. It appears that Agustin was appointed petitioners' judicial guardianin an earlier case - Special Civil Case No. 1785 – also of the CFI of Davao City, Branch VI. OnDecember 7, 1972, the intestate court issued an order granting Agustin‘s petition.

The late Agustin then executed several mortgages and later sale of the properties with thePNB and Arguna respectively. The heirs later questioned the validity of the transactions prejudicial to them. The trial court declared the real estate mortgage and the sale void but bothwere valid with respect to the other parties. The decision was reversed by the Court of Appeals;to the appellate court, petitioners committed a fatal error of mounting a collateral attack on theforegoing orders instead of initiating a direct action to annul them.

ISSUE:

Whether the Court of Appeals erred in reversing the decision of the trial court

RULING:

In the present case, the appellate court erred in appreciating laches against petitioners. Theelement of delay in questioning the subject orders of the intestate court is sorely lacking.Petitioners were totally unaware of the plan of Agustin to mortgage and sell the estate properties.There is no indication that mortgagor PNB and vendee Arguna had notified petitioners of thecontracts they had executed with Agustin. Although petitioners finally obtained knowledgeof the subject petitions filed by their father, and eventually challenged the July 18, 1973,October 19, 1974, February 25, 1980 and January 7, 1981 orders of the intestate court, it isnot clear from the challenged decision of the appellate court when they (petitioners) actuallylearned of the existence of said orders of the intestate court. Absent any indication of the pointin time when petitioners acquired knowledge of those orders, their alleged delay inimpugning the validity thereof certainly cannot be established. And the Court of Appeals cannotsimply impute laches against them.



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SHOPPER'S PARADISE REALTY & DEVELOPMENT CORPORATIONvs. EFREN ROQUE

January 13, 2004

FACTS:

On 23 December 1993, petitioner Shopper's Paradise Realty & DevelopmentCorporation, represented its president, Veredigno Atienza, entered into a twenty-five year leasewith Dr. Felipe C. Roque, now deceased, over a parcel of land, Petitioner issued to Dr. Roque acheck for P250,000.00 by way of "reservation payment." Simultaneously, petitioner and Dr.Roque likewise entered into a memorandum of agreement for the construction, development andoperation of a commercial building complex on the property. Conformably with the agreement, petitioner issued a check for another P250,000.00 "downpayment" to Dr. Roque.

The annotations, however, were never made because of the untimely demise of Dr. FelipeC. Roque. The death of Dr. Roque on 10 February 1994 constrained petitioner to deal with

respondent Efren P. Roque, one of the surviving children of the late Dr. Roque, but thenegotiations broke down due to some disagreements. In a letter, dated 3 November 1994,respondent advised petitioner "to desist from any attempt to enforce the aforementioned contractof lease and memorandum of agreement". On 15 February 1995, respondent filed a case forannulment of the contract of lease and the memorandum of agreement, with a prayer for theissuance of a preliminary injunction. Efren P. Roque alleged that he had long been the absoluteowner of the subject property by virtue of a deed of donation inter vivos executed in his favor byhis parents, Dr. Felipe Roque and Elisa Roque, on 26 December 1978, and that the late Dr.Felipe Roque had no authority to enter into the assailed agreements with petitioner. The donationwas made in a public instrument duly acknowledged by the donor-spouses before a notary publicand duly accepted on the same day by respondent before the notary public in the same instrument

of donation. The title to the property, however, remained in the name of Dr. Felipe C. Roque,and it was only transferred to and in the name of respondent sixteen years later, or on 11 May1994, while he resided in the United States of America, delegated to his father the mereadministration of the property. Respondent came to know of the assailed contracts with petitioneronly after retiring to the Philippines upon the death of his father. On 9 August 1996, the trialcourt dismissed the complaint of respondent; it explained:

Ordinarily, a deed of donation need not be registered in order to be valid between the parties. Registration, however, is important in binding third persons. Thus, when Felipe Roqueentered into a lease contract with defendant corporation, plaintiff Efren Roque (could) no longerassert the unregistered deed of donation and say that his father, Felipe, was no longer the ownerof the subject property at the time the lease on the subject property was agreed upon. "Theregistration of the Deed of Donation after the execution of the lease contract did not affect thelatter unless he had knowledge thereof at the time of the registration which plaintiff had not beenable to establish. Plaintiff knew very well of the existence of the lease. He, in fact, met with theofficers of the defendant corporation at least once before he caused the registration of the deed ofdonation in his favor and although the lease itself was not registered, it remains valid consideringthat no third person is involved. Plaintiff cannot be the third person because he is the successor-in-interest of his father, Felipe Roque, the lessor, and it is a rule that contracts take effect notonly between the parties themselves but also between their assigns and heirs (Article 1311, CivilCode) and therefore, the lease contract together with the memorandum of agreement would beconclusive on plaintiff Efren Roque. He is bound by the contract even if he did not participatetherein. Moreover, the agreements have been perfected and partially executed by the receipt ofhis father of the downpayment and deposit totaling to P500,000.00." The trial court orderedrespondent to surrender TCT No. 109754 to the Register of Deeds of Quezon City for theannotation of the questioned Contract of Lease and Memorandum of Agreement.

On appeal, the Court of Appeals reversed the decision of the trial court and held to beinvalid the Contract of Lease and Memorandum of Agreement. While it shared the viewexpressed by the trial court that a deed of donation would have to be registered in order to bind



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third persons, the appellate court, however, concluded that petitioner was not a lessee in goodfaith having had prior knowledge of the donation in favor of respondent, and that such actualknowledge had the effect of registration insofar as petitioner was concerned. The appellate court based its findings largely on the testimony of Veredigno Atienza during cross-examination.

ISSUE:Whether or not the respondent is barred by laches and estoppel from denying the

contracts.

RULING:

The Court cannot accept petitioner's argument that respondent is guilty of laches. Laches,in its real sense, is the failure or neglect, for an unreasonable and unexplained length of time, todo that which, by exercising due diligence, could or should have been done earlier; it isnegligence or omission to assert a right within a reasonable time, warranting a presumption that

the party entitled to assert it either has abandoned or declined to assert it. Respondent learned ofthe contracts only in February 1994 after the death of his father, and in the same year, during November, he assailed the validity of the agreements. Hardly, could respondent then be said tohave neglected to assert his case for an unreasonable length of time.

Neither is respondent estopped from repudiating the contracts. The essential elements ofestoppel in pais, in relation to the party sought to be estopped, are: 1) a clear conduct amountingto false representation or concealment of material facts or, at least, calculated to convey theimpression that the facts are otherwise than, and inconsistent with, those which the partysubsequently attempts to assert; 2) an intent or, at least, an expectation, that this conduct shallinfluence, or be acted upon by, the other party; and 3) the knowledge, actual or constructive, by

him of the real facts. With respect to the party claiming the estoppel, the conditions he mustsatisfy are: 1) lack of knowledge or of the means of knowledge of the truth as to the facts inquestion; 2) reliance, in good faith, upon the conduct or statements of the party to be estopped;and 3) action or inaction based thereon of such character as to change his position or statuscalculated to cause him injury or prejudice. 12 It has not been shown that respondent intended toconceal the actual facts concerning the property; more importantly, petitioner has been shownnot to be totally unaware of the real ownership of the subject property. Altogether, there is nocogent reason to reverse the Court of Appeals in its assailed decision.



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MEATMASTER vs. LELIS INTEGRATED452 SCRA 626

FACTS:

On November 11, 1993, petitioner Meatmasters International Corporation engaged theservices of respondent Lelis Integrated Development Corporation to undertake the constructionof a slaughterhouse and meat cutting and packing plant. The Construction Agreement providedthat the construction of petitioner‘s slaughterhouse should be completed by March 10, 1994. Respondent failed to finish the construction of the said facility within the stipulated period,hence, petitioner filed a complaint for rescission of contract and damages on August 9, 1996 before the Regional Trial Court.

On November 23, 1998, the trial court rendered decision RESCINDING the ConstructionAgreement between plaintiff Meatmaster Int‘l. Corp. and defendant Lelis Integrated Dev‘t. Corp.with both parties shouldering their own respective damage.

A copy of the decision was received by the respondent on December 9, 1998. A motionfor reconsideration was filed by respondent on December 22, 1998, but the same was denied. Acopy of the resolution denying the motion for reconsideration was received on March 25, 1999.Respondent filed its notice of appeal on March 29, 1999.

Initially, the trial court dismissed the appeal for failure of the respondent to pay therequisite docket fees within the reglementary period. Upon motion by the respondent however,the trial court reconsidered and gave due course to the notice of appeal because respondent paidthe docket fees.

In a motion to dismiss filed before the appellate court, the petitioner alleged thatrespondent‘s appeal suffers from jurisdictional infirmity because of late payment of docket fees.

CA set aside the decision of the trial court and directed petitioner to pay respondent theamount of P1,863,081.53. Petitioner‘s motion for reconsideration was denied Hence, the instant petition.

ISSUE:

Whether or not the Court of Appeals erred in entertaining the appeal of respondentdespite the finality of the trial court‘s decision.

RULING:

Yes. It is well-established that the payment of docket fees within the prescribed period ismandatory for the perfection of an appeal. This is so because a court acquires jurisdiction overthe subject matter of the action only upon the payment of the correct amount of docket feesregardless of the actual date of filing of the case in court. The payment of the full amount of thedocket fee is a sine qua non requirement for the perfection of an appeal. The court acquires jurisdiction over the case only upon the payment of the prescribed docket fees.

In the case at bar, the respondent seasonably filed the notice of appeal but it paid the docket fees

one (1) month after the lapse of the appeal period. As admitted by the respondent, the last dayfor filing the notice of appeal was on March 29, 1999, but it paid the docket fees only on April30, 1999 because of oversight. Obviously, at the time the said docket fees were paid, thedecision appealed from has long attained finality and no longer appealable.

Respondent‘s contention that the petitioner is now estopped from raising the issue of late payment of the docket fee because of his failure to assail promptly the trial court‘s orderapproving the notice of appeal and accepting the appeal fee, is untenable. Estoppel by laches



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LARENA vs. MAPILI408 SCRA 484

FACTS:

Hipolito Mapili during his lifetime owned a parcel of unregistered land declared fortaxation purposes in his name. The property had descended by succession from Hipolito to hisonly son Magno and on to the latter‘s own widow and children. These heirs, the hereinrespondents, took possession of the property up to the outbreak of World War II when theyevacuated to the hinterlands.

On the other hand, petitioner Aquilina Larena took possession of the property in the1970‘salleging that she had purchased it from her aunt (Filomena Larena) on February 17, 1968.Filomena Larena in turn claimed to have bought it from Hipolito on October 28, 1949, asevidence by the Affidavit of Transfer of Real Property executed on the same date. The RegionalTrial Court, however, declared the said affidavit as spurious because Hipolito was already dead

when the alleged transfer was made to Filomena Larena.

On appeal, the Court of Appeals declared that respondents had never lost their right to theland in question as they were the heirs to whom the property had descended upon the death of theoriginal claimant and possessor.

ISSUE:

Whether or not Filomena Larena acquired the subject property by means of sale, prescription, and/or laches.

RULING:

No, Filomena did not acquire said property by means of sale, prescription and/or laches.First, the tax declarations are not a conclusive evidence of ownership, but a proof that the holderhas a claim of title over the property. It is good indicia of possession in the concept of owner. Itmay strengthen Aquilina‘s bona fide claim of acquisition of ownership. However, petitionersfailed to present the evidence needed to tack the date of possession on the property in question.

Second, acquisitive prescription is a mode of acquiring ownership by a possessor throughthe requisite lapse of time. Since the claims of purchase were unsubstantiated, petitioners‘ acts of

possessory character have been merely tolerated by the owner. Hence, it did not constitute possession. Moreover, there is lack of just title on the part of Aquilina and therefore, ordinaryacquisitive prescription of ten (10) years as provided under Article 1134 of the Civil Code cannot be applied. Under Article 1137 of the Civil Code, the lapse of time required for extra-ordinaryacquisitive prescription is thirty (30) years, and records show that the lapse of time was onlytwenty-seven (27) years — a period that was short of three (3) years, when the complaint wasfiled.

Finally, laches is a failure or neglect for an unreasonable and unexplained length of timeto do that which could or should have been done earlier through the exercise of due diligence.The filing by respondents of the complaint in 1977 completely negates the decision that the latter

were negligent in asserting their claim.



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SANTOS vs. SANTOS366 SCRA 395

FACTS:

Petitioner Zenaida M. Santos is the widow of Salvador Santos, a brother of privaterespondents Calixto, Alberto, Antonio, all surnamed Santos and Rosa Santos-Carreon.

The spouses Jesus and Rosalia were the parents of the respondents and the husband of the petitioner. The spouses owned a parcel of registered land with a four-door apartmentadministered by Rosalia who rented them out. On January 19, 1959, the spouses executed a deedof sale of the properties in favor of their children Salvador and Rosa. Rosa in turn sold her shareto Salvador on November 20, 1973, which resulted in the issuance of new TCT. Despite thetransfer of the property to Salvador, Rosalia continued to lease and receive rentals from theapartment units.

On January 9, 1985, Salvador died, followed by Rosalia who died the following month.Shortly after, petitioner Zenaida, claiming to be Salvador‘s heir, demanded the rent from AntonioHombrebueno, a tenant of Rosalia. When the latter refused to pay, Zenaida filed an ejectmentsuit against him with the Metropolitan Trial Court of Manila, which eventually decided inZenaida‘s favor.

On January 5, 1989, private respondent instituted an action for reconveyance of propertywith preliminary injunction against petitioner in the Regional Trial Court of Manila, where theyalleged that the two deeds of sale were simulated for lack of consideration. The petitioner on theother hand denied the material allegations in the complaint and that she further alleged that therespondents‘ right to reconveyance was already barred by prescription and laches considering the

fact that from the date of sale from Rosa to Salvador up to his death, more or less twelve (12)years had lapsed, and from his death up to the filing of the case for reconveyance, four (4) yearshas elapsed. In other words, it took respondents about sixteen (16) years to file the case.Moreover, petitioner argues that an action to annul a contract for lack of consideration prescribesin ten (10) years and even assuming that the cause of action has not prescribed, respondents areguilty of laches for their inaction for a long period of time.

The trial court decided in favor of private respondents in as much as the deeds of salewere fictitious, the action to assail the same does not prescribe.

Upon appeal, the Court of Appeals affirmed the trial court‘s decision. It held that the

subject deeds of sale did not confer upon Salvador the ownership over the subject property, because even after the sale, the original vendors remained in dominion, control, and possessionthereof.

ISSUE:

Whether or not the cause of action of the respondents had prescribed and/or barred bylaches.

RULING:

No, the cause of action by the respondents had not prescribed nor is it barred by laches.

First, the right to file an action for the reconveyance of the subject property to the estateof Rosalia has not prescribed since deeds of sale were simulated and fictitious. The complaintamounts to a declaration of nullity of a void contract, which is imprescriptible. Hence,respondents‘ cause of action has not prescribed.



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Second, neither is their action barred by laches. The elements of laches are: 1) conduct onthe part of the defendant, or of one under whom he claims, giving rise to the situation of whichthe complainant seeks a remedy; 2) delay in asserting the complainant‘s rights, the complainanthaving knowledge or notice of the defendant‘s conduct as having been afforded an opportunity toinstitute a suit; 3) lack of knowledge or notice on the part of the defendant that the complainant

would assert the right in which he bases his suit; and 4) injury or prejudice to the defendant inthe event relief is accorded to the complainant, or the suit is not held barred. These elementsmust all be proved positively. The lapse of four (4) years is not an unreasonable delay sufficientto bar respondent‘s action. Moreover, the fourth (4 th) element is lacking in this case. The conceptof laches is not concerned with the lapse of time but only with the effect of unreasonable lapse.The alleged sixteen (16) years of respondents‘ inaction has no adverse effect on the petitioner tomake respondents guilty of laches.



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VILLANUEVA- MIJARES ET. AL. vs. COURT OF APPEALSApril 12, 2000

FACTS:

Felipe Villanueva left a 15,336-square-meter parcel of land in Kalibo, Capiz to his eightchildren: Simplicio, Benito, Leon, Eustaquio, Camila, Fausta and Pedro. In 1952, Pedro declaredunder his name 1/6 portion of the property (1,905 sq. m.). He held the remaining properties intrust for his co-heirs who demanded the subdivision of the property but to no avail. After Leon‘sdeath in 1972, private respondents discovered that the shares of Simplicio, Nicolasa, Fausta andMaria Baltazar had been purchased by Leon through a deed of sale dated August 25, 1946 butregistered only in 1971. In July 1970, Leon also sold and partitioned the property in favor of petitioners, his children, who thereafter secured separate and independent titles over theirrespective pro- indiviso shares.

Private respondents, who are also descendants of Felipe, filed an action for partition with

annulment of documents and/or reconveyance and damages against petitioners. They contendedthat Leon fraudulently obtained the sale in his favor through machinations and false pretenses.The RTC declared that private respondents‘ action had been barred by res judicata and that petitioners are the ―legal owners of the property in question in accordance with the individualtitles issued to them.

ISSUE:

Whether or not laches apply against the minor‘s property that was held in trust.

RULING:

No. At the time of the signing of the Deed of Sale of August 26,1948, private respondentsProcerfina, Prosperedad, Ramon and Rosa were minors. They could not be faulted for theirfailure to file a case to recover their inheritance from their uncle Leon, since up to the age ofmajority, they believed and considered Leon their co-heir administrator. It was only in 1975, notin 1948, that they became aware of the actionable betrayal by their uncle. Upon learning of theiruncle‘s actions, they filed for recovery. Hence, the doctrine of stale demands formulated inTijam cannot be applied here. They did not sleep on their rights, contrary to petitioner‘sassertion.

Furthermore, when Felipe Villanueva died, an implied trust was created by operation of

law between Felipe‘s children and Leon, their uncle, as far as the 1/6 share of Felipe. Leon‘sfraudulent titling of Felipe‘s 1/6 share was a betrayal of that implied trust.



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SPS. EDRALIN V. PHIL. VETERANS BANKG.R. No. 168523, March 09, 2011

FACTS:

Respondent Philippine Veterans Bank is a commercial banking institution created underRepublic Act (RA) No. 3518, as amended by RA No. 7169. On February 5, 1976, Veterans Bankgranted petitioner spouses Fernando and Angelina Edralin a loan in the amount of Two HundredSeventy Thousand Pesos (P270,000.00). As security thereof, petitioners executed a Real EstateMortgage in favor of Veterans Bank over a real property situated in the Municipality ofParañaque and registered in the name of petitioner Fernando Edralin. The mortgaged property ismore particularly described in Transfer Certificate of Title (TCT) No. 204889. The REM wasregistered with the Registry of Deeds of the Province of Rizal. The REM and its subsequentamendments were all duly annotated at the back of TCT No. 204889. The Edralins failed to paytheir obligation to Veterans Bank. Thus, on June 28, 1983, Veterans Bank filed a Petition forExtrajudicial Foreclosure of the REM with the Office of the Clerk of Court and Ex-Officio

Sheriff of Rizal. In due course it was foreclosed and a sale was held in which the Ex-OfficioSheriff of Rizal sold the mortgaged property at public auction. Veterans Bank emerged as thehighest bidder at the said foreclosure sale and was issued the corresponding Certificate of Sale.The said Certificate of Sale was registered with the Registry of Deeds of the Province of Rizaland annotated at the back of TCT No. 204889 under Entry No. 83-62953/T-No. 43153-A. Uponthe Edralins‘ failure to redeem the property during the one-year period provided under Act No.3135, Veterans Bank acquired absolute ownership of the subject property. Consequently,Veterans Bank caused the consolidation of ownership of the subject property in its name onJanuary 19, 1994. Subsequently the Register of Deeds of Parañaque, Metro Manila cancelledTCT No. 204889 under the name of Fernando Edralin and replaced it with a new transfercertificate of title, TCT No. 78332, in the name of Veterans Bank. Despite the foregoing, theEdralins failed to vacate and surrender possession of the subject property to Veterans Bank.Thus, on May 24, 1996, Veterans Bank filed an Ex-Parte Petition for the Issuance of a Writ ofPossession, docketed as Land Registration Case No. 06-060 before Branch 274 of the RegionalTrial Court (RTC) of Parañaque City. The same, however, was dismissed for Veterans Bank‘sfailure to prosecute. Veterans Bank again filed an Ex-Parte Petition for Issuance of Writ ofPossession, this time docketed as Land Registration Case No. 03-0121, before the RTC ofParañaque City. Veterans Bank divulged in its Certification against Forum-Shopping that theearlier case, LRC No. 96-060, involving the same subject matter and parties, was dismissed. TheEdralins moved to dismiss the petition on the ground that the dismissal of LRC No. 96-060constituted res judicata. The trial court denied the motion to dismiss explaining that the groundof failure to present evidence is not a determination of the merits of the case hence does notconstitute res judicata on the petition for issuance of a writ of possession. The appellate courtruled in favor of Veterans Bank hence the petition.

ISSUE:

Whether the consolidation of ownership of the extrajudicially foreclosed propertythrough a Deed of Sale is in accordance with law.

HELD:

Petitioners assail the CA's ruling that the issuance of a writ of possession does not prescribe.[48] They maintain that Articles 1139, 1149, and 1150 of the Civil Code regarding prescriptive periods cover all kinds of action, which necessarily include the issuance of a writ of possession. Petitioners posit that, for purposes of the latter, it is the five-year prescriptive period provided in Article 1149 of the Civil Code which applies because Act No. 3135 itself did not provide for its prescriptive period. Thus, Veterans Bank had only five years from September 12,1983, the date when the Certificate of Sale was issued in its favor, to move for the issuance of awrit of possession. Respondent argues that jurisprudence has consistently held that a registered



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owner of the land, such as the buyer in an auction sale, is entitled to a writ of possession at anytime after the consolidation of ownership.

The Court could not accept petitioners' contention. We have held before that the purchaser's right "to request for the issuance of the writ of possession of the land never

prescribes. "The right to possess a property merely follows the right of ownership," and it would be illogical to hold that a person having ownership of a parcel of land is barred from seeking possession thereof. Moreover, the provisions cited by petitioners refer to prescription of actions.An action is "defined as an ordinary suit in a court of justice, by which one party prosecutesanother for the enforcement or protection of a right, or the prevention or redress of a wrong." Onthe other hand "a petition for the issuance of the writ, under Section 7 of Act No. 3135, asamended, is not an ordinary action filed in court, by which one party `sues another for theenforcement or protection of a right, or prevention or redress of a wrong.' It is in the nature of anex parte motion [in] which the court hears only one side. It is taken or granted at the instanceand for the benefit of one party, and without notice to or consent by any party adversely affected.Accordingly, upon the filing of a proper motion by the purchaser in a foreclosure sale, and the

approval of the corresponding bond, the writ of possession issues as a matter of course and thetrial court has no discretion on this matter."Hence the Petition was denied for lack of merit. TheCA Decision dated June 10, 2005 in CA-G.R. SP No. 89248 was affirmed.



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MARTIN V. DBSG.R. No. 174632 June 16, 2010

FACTS:

Felicidad T. Martin, Melissa M. Isidro, Grace M. David, Caroline M. Garcia, Victoria M.

Roldan, and Benjamin T. Martin, Jr., as lessors, entered into a lease contract with the DBS BankPhilippines, Inc., covering a commercial warehouse and lots that DBS was to use for office,warehouse, and parking yard for repossessed vehicles. The lease was for five years, from March1, 1997 to March 1, 2002, at a monthly rent of P300,000.00 for the first year, P330,000.00 for thesecond year, P363,000.00 for the third year, P399,300.00 for the fourth year, and P439,230.00for the final year, all net of withholding taxes. DBS paid a deposit of P1,200,000.00 and advancerentals of P600,000.00. On May 25 and August 13, 1997 heavy rains flooded the leased propertyand submerged into water the DBS offices there along with its 326 repossessed vehicles. As aresult, on February 11, 1998 DBS wrote the Martins demanding that they take appropriate stepsto make the leased premises suitable as a parking yard for its vehicles. DBS suggested theimprovement of the drainage system or the raising of the property‘s ground level. In response,

the Martins filled the property‘s grounds with soil and rocks. But DBS lamented that the propertyremained unsuitable for its use since the Martins did not level the grounds. Worse, portions ofthe perimeter fence collapsed because of the excessive amount of soil and rock that werehaphazardly dumped on it. In June 1998, DBS vacated the property but continued paying themonthly rents. On September 11, 1998, however, it made a final demand on the Martins torestore the leased premises to tenantable condition on or before September 30, 1998, otherwise,it would rescind the lease contract. On September 24, 1998 the Martins contracted the services ofAltitude Systems & Technologies Co. for the reconstruction of the perimeter fence on the property. On October 13, 1998 DBS demanded the rescission of the lease contract and the returnof its deposit. At that point, DBS had already paid the monthly rents from March 1997 toSeptember 1998. The Martins refused, however, to comply with DBS‘ demand. On July 7, 1999DBS filed a complaint against the Martins for rescission of the contract of lease with damages before the Regional Trial Court of Makati City, Branch 141, in Civil Case 99-1266. Claimingthat the leased premises had become untenantable, DBS demanded rescission of the leasecontract as well as the return of its deposit of P1,200,000.00.

The Makati City RTC rendered a decision, dismissing the complaint against the Martins.The trial court found that, although the floods submerged DBS‘ vehicles, the leased premisesremained tenantable and undamaged. Moreover, the Martins had begun the repairs that DBSrequested but were not given sufficient time to complete the same. It held that DBS unjustifiablyabandoned the leased premises and breached the lease contract. Thus, the trial court ordered itsdeposit of P1,200,000.00 deducted from the unpaid rents due the Martins and ordered DBS to pay them the remaining P15,198,360.00 in unpaid rents.

On appeal to the Court of Appeals, the court rendered judgment reversing and settingaside the RTC decision. The CA found that floods rendered the leased premises untenantable andthat the RTC should have ordered the rescission of the lease contract especially since the contract provided for such remedy. The CA ordered the Martins to apply the deposit of P1,200,000.00 tothe rents due up to July 7, 1999 when DBS filed the complaint and exercised its option to rescindthe lease. The CA ordered the Martins to return the remaining balance of the deposit to DBS.With the denial of their separate motions for reconsideration DBS and the Martins filed theirrespective petitions for review before this Court in G.R. 174632 and 174804. The Courteventually consolidated the two cases.

ISSUE:Whether or not the CA erred in holding that DBS is entitled to the rescission of the leasecontract only from July 7, 1999 when it filed its action for rescission, entitling the

Martins to collect rents until that time.



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HELD:Unless the terms of a contract are against the law, morals, good customs, and public

policy, such contract is law between the parties and its terms bind them. In Felsan Realty &Development Corporation v. Commonwealth of Australia,13 the Court regarded as valid and binding a provision in the lease contract that allowed the lessee to pre-terminate the same when

fire damaged the leased building, rendering it uninhabitable or unsuitable for living. Here, paragraph VIII14 of the lease contract between DBS and the Martins permitted rescission byeither party should the leased property become untenantable because of natural causes. Thus Incase of damage to the leased premises or any portion thereof by reason of fault or negligenceattributable to the lessee, its agents, employees, customers, or guests, the lessee shall beresponsible for undertaking such repair or reconstruction. In case of damage due to fire,earthquake, lightning, typhoon, flood, or other natural causes, without fault or negligenceattributable to the lessee, its agents, employees, customers or guests, the lessor shall beresponsible for undertaking such repair or reconstruction. In the latter case, if the leased premises become untenantable, either party may demand for the rescission of this contract and in suchcase, the deposit referred to in paragraph III shall be returned to the lessee immediately. The

Martins claim that DBS cannot invoke the above since they undertook the repair andreconstruction of the leased premises, incurring P1.6 million in expenses. The Martins point outthat the option to rescind was available only if they failed to do the repair work andreconstruction.

But, under their agreement, the remedy of rescission would become unavailable to DBSonly if the Martins, as lessors, made the required repair and reconstruction after the damages bynatural cause occurred, which meant putting the premises after the floods in such condition aswould enable DBS to resume its use of the same for the purposes contemplated in the agreement,namely, as office, warehouse, and parking space for DBS‘ repossessed vehicles. Here, it isundisputed that the floods of May 25 and August 13, 1997 submerged the DBS offices and its326 repossessed vehicles. The floods rendered the place unsuitable for its intended uses. And,while the Martins did some repairs, they did not restore the place to meet DBS‘ needs. The photographs16 taken of the place show that the Martins filled the grounds with soil and rocks toraise the elevation but did not level and compact the same so they could accommodate therepossessed vehicles. Moreover, the heaviness of the filling materials caused portions of the perimeter walls to collapse or lean dangerously.17 Indeed, the Office of the City Engineeradvised DBS that unless those walls were immediately demolished or rehabilitated, they wouldendanger passersby

Undeniably, the DBS suffered considerable damages when flood waters deluged itsoffices and 326 repossessed vehicles. Notably, DBS vacated the leased premises in June of 1998,without rescinding the lease agreement, evidently to allow for unhindered repair of the grounds.In fact, DBS continued to pay the monthly rents until September 1998, showing how DBS leaned back to enable the Martins to finish the repair and rehabilitation of the place. 19 The Martins provided basis for rescission by DBS when they failed to do so.

Hence the Court denied the petition and affirmed with mocifications the April 26, 2006decision of the Court of Appeals in CA-G.R. CV 76210 in that Felicidad T. Martin, Melissa M.Isidro, Grace M. David, Caroline M. Garcia, Victoria M. Roldan, and Benjamin T. Martin, Jr. areORDERED to return the full deposit of P1,200,000.00 to DBS Bank Philippines, Inc. (formerlyknown as Bank of Southeast Asia, now merged with and into BPI Family Bank) with interest of12% per annum to be computed from the finality of this decision until the amount is fully paid.



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HEIRS OF ZABALA V. CAG.R. No. 189602 May 6, 2010

FACTS:

On April 1, 2002, respondent Vicente T. Manuel filed a Complaint for ejectment withdamages against Alfredo Zabala before the Municipal Trial Court in Cities of Balanga, Bataan.Respondent alleged that he was in actual and peaceful possession of a fishpond (Lot No. 1483)located in Ibayo, Balanga City. On October 15, 2001, Zabala allegedly entered the fishpondwithout authority, and dumped soil into the fishpond without an Environment ComplianceCertificate. Zabala continued such action until the time of the filing of the Complaint, killing thecrabs and the bangus that respondent was raising in the fishpond. Thus, respondent asked thatZabala be restrained from touching and destroying the fishpond; that Zabala be ejected therefrom permanently; and for actual and moral damages and attorney‘s fees. Zabala promptly moved forthe dismissal of the Complaint for non-compliance with the requirement under the LocalGovernment Code to bring the matter first to barangay conciliation before filing an action in

court.Respondent subsequently filed a Motion for Judgment on the ground of petitioner‘s failure to filea responsive pleading or answer. The MTCC, in an Order dated May 27, 2003, granted Zabala‘smotion and dismissed the Complaint, holding that respondent indeed violated the requirement of barangay conciliation. Respondent then appealed the ruling to the Balanga, Bataan RegionalTrial Court. In a decision dated March 30, 2004,[5] the RTC reversed the MTCC‘s May 27, 2003Order and rendered judgment directing Zabala, his heirs or subalterns to immediately vacate Lot No. 1483 and restore respondent to his peaceful possession thereof. The RTC also directedZabala to pay respondent actual damages, moral damages, and attorney‘s fees. The RTC foundthat Zabala did not, in fact, file an answer to the Complaint. Zabala then filed a Petition forReview before the Court of Appeal. The CA promulgated a Decision upholding the RTC‘sreversal of the MTCC‘s Order. The CA held that, based on the allegations in the Complaint, therequirement for prior conciliation proceedings under the Local Government Code wasinapplicable to the suit before the MTCC, the action being one for ejectment and damages, withapplication for a writ of preliminary injunction, even without the use of those actual terms in theComplaint. However, the CA granted Zabala‘s prayer for the deletion of the awards for actualand moral damages, and for attorney‘s fees. Zabala filed a Motion for Reconsideration, whichthe CA denied. Zabala‘s heirs filed this Verified Petition for Certiorari. They prayed for theannulment of the CA‘s December 19, 2008 Decision and August 26, 2009 Resolution, and forthe reinstatement of the MTCC‘s May 27, 2003 Order. In the alternative, they prayed that theCourt remand the records to the MTCC, so that they could file their Answer, and that due proceedings be undertaken before judgment. In a Resolution dated November 18, 2009,respondents were required to file their Comment on the Petition. Subsequently a CompromiseAgreement was entered into by the parties.

ISSUE:

Whether or not the case must prosper and continue considering the present circumstances

HELD :

No. The Court ruled that Under Article 2028 of the Civil Code, a compromise agreementis a contract whereby the parties, by making reciprocal concessions, avoid litigation or put anend to one already commenced. Compromise is a form of amicable settlement that is not onlyallowed, but also encouraged in civil cases. Contracting parties may establish such stipulations,clauses, terms, and conditions as they deem convenient, provided that these are not contrary tolaw, morals, good customs, public order, or public policy. Thus, finding the above CompromiseAgreement to have been validly executed and not contrary to law, morals, good customs, publicorder, or public policy, we approve the same. Thus the Compromise Agreement was and judgment is hereby rendered in accordance therewith. By virtue of such approval, this case wasdeemed terminated.



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STAR PAPER vs. SIMBOL 487 SCRA 228

FACTS:

Petitioner was the employer of the respondents. Under the policy of Star Paper theemployees are:

1. New applicants will not be allowed to be hired if in case he/she has a relative, up to the 3rddegree of relationship, already employed by the company.2. In case of two of our employees (singles, one male and another female) developed a friendlyrelationship during the course of their employment and then decided to get married, one of themshould resign to preserve the policy stated above.

Respondents Comia and Simbol both got married to their fellow employees. Estrella onthe other hand had a relationship with a co-employee resulting to her pregnancy on the belief that

such was separated. The respondents allege that they were forced to resign as a result of theimplementation of the said assailed company policy.

The Labor Arbiter and the NLRC ruled in favor of petitioner. The decision was appealedto the Court of Appeals which reversed the decision.

ISSUE:

Whether the prohibition to marry in the contract of employment is valid

HELD:

It is significant to note that in the case at bar, respondents were hired after they werefound fit for the job, but were asked to resign when they married a co-employee. Petitionersfailed to show how the marriage of Simbol, then a Sheeting Machine Operator, to Alma Dayrit,then an employee of the Repacking Section, could be detrimental to its business operations. Neither did petitioners explain how this detriment will happen in the case of Wilfreda Comia,then a Production Helper in the Selecting Department, who married Howard Comia, then ahelper in the cutter-machine. The policy is premised on the mere fear that employees married toeach other will be less efficient. If we uphold the questioned rule without valid justification, theemployer can create policies based on an unproven presumption of a perceived danger at theexpense of an employee‘s right to security of tenure.

Petitioners contend that their policy will apply only when one employee marries a co-employee, but they are free to marry persons other than co-employees. The questioned policymay not facially violate Article 136 of the Labor Code but it creates a disproportionate effect andunder the disparate impact theory, the only way it could pass judicial scrutiny is a showing that itis reasonable despite the discriminatory, albeit disproportionate, effect. The failure of petitionersto prove a legitimate business concern in imposing the questioned policy cannot prejudice theemployee‘s r ight to be free from arbitrary discrimination based upon stereotypes of married persons working together in one company.

Lastly, the absence of a statute expressly prohibiting marital discrimination in our jurisdiction cannot benefit the petitioners. The protection given to labor in our jurisdiction is vastand extensive that we cannot prudently draw inferences from the legislature‘s silence thatmarried persons are not protected under our Constitution and declare valid a policy based on a prejudice or stereotype. Thus, for failure of petitioners to present undisputed proof of areasonable business necessity, we rule that the questioned policy is an invalid exercise ofmanagement prerogative. Corollary, the issue as to whether respondents Simbol and Comiaresigned voluntarily has become moot and academic.

In the case of Estrella, the petitioner failed to adduce proof to justify her dismissal.Hence, the Court ruled that it was illegal.



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TIU vs. PLATINUM PLANS PHILIPPINES G.R. No. 163512, February 28, 2007

FACTS:

Respondent Platinum Plans Philippines, Inc. is a domestic corporation engaged in the pre-need industry. From 1987 to 1989, petitioner Daisy B. Tiu was its Division MarketingDirector. On January 1, 1993, respondent re-hired petitioner as Senior Assistant Vice-Presidentand Territorial Operations Head in charge of its Hong Kong and Asean operations. The partiesexecuted a contract of employment valid for five years.On September 16, 1995, petitioner stopped reporting for work. In November 1995, she becamethe Vice-President for Sales of Professional Pension Plans, Inc., a corporation engaged also inthe pre-need industry.

Consequently, respondent sued petitioner for damages before the RTC of Pasig City,Branch 261. Respondent alleged, among others, that petitioner‘s employment with Professional

Pension Plans, Inc. violated the non-involvement clause in her contract of employment. Inupholding the validity of the non-involvement clause, the trial court ruled that a contract inrestraint of trade is valid provided that there is a limitation upon either time or place. In the caseof the pre-need industry, the trial court found the two-year restriction to be valid and reasonable.On appeal, the Court of Appeals affirmed the trial court‘s ruling. It reasoned that petitionerentered into the contract on her own will and volition. Thus, she bound herself to fulfill not onlywhat was expressly stipulated in the contract, but also all its consequences that were not againstgood faith, usage, and law. The appellate court also ruled that the stipulation prohibiting non-employment for two years was valid and enforceable considering the nature of respondent‘s business.

ISSUE:

Whether the Court of Appeals erred in sustaining the validity of the non-involvementclause

HELD:

In this case, the non-involvement clause has a time limit: two years from the time petitioner‘s employment with respondent ends. It is also limited as to trade, since it only prohibits petitioner from engaging in any pre-need business akin to respondent‘s. Moresignificantly, since petitioner was the Senior Assistant Vice-President and Territorial OperationsHead in charge of respondent‘s Hongkong and Asean operations, she had been privy toconfidential and highly sensitive mar keting strategies of respondent‘s business. To allow her toengage in a rival business soon after she leaves would make respondent‘s trade secretsvulnerable especially in a highly competitive marketing environment. In sum, The Court findsthe non-involvement clause not contrary to public welfare and not greater than is necessary toafford a fair and reasonable protection to respondent. Hence the restraint is valid and suchstipulation prevails.



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AVON COSMETICS vs. LUNA511 SCRA 376

FACTS:

The present petition stemmed from a complaint[3] dated 1 December 1988, filed byherein respondent Luna alleging, inter alia¸ that she began working for Beautifont, Inc. in 1972,first as a franchise dealer and then a year later, as a Supervisor. Sometime in 1978, AvonCosmetics, Inc. (Avon), herein petitioner, acquired and took over the management andoperations of Beautifont, Inc. Nonetheless, respondent Luna continued working for saidsuccessor company. Aside from her work as a supervisor, respondent Luna also acted as a make-up artist of petitioner Avon‘s Theatrical Promotion‘s Group, for which she received a per diemfor each theatrical performance.

The contract was that:

The Company agrees:

1) To allow the Supervisor to purchase at wholesale the products of the Company.

The Supervisor agrees:

1) To purchase products from the Company exclusively for resale and to be responsible forobtaining all permits and licenses required to sell the products on retail.

The Company and the Supervisor mutually agree:

1) That this agreement in no way makes the Supervisor an employee or agent of theCompany, therefore, the Supervisor has no authority to bind the Company in any contracts withother parties.

2) That the Supervisor is an independent retailer/dealer insofar as the Company isconcerned, and shall have the sole discretion to determine where and how products purchasedfrom the Company will be sold. However, the Supervisor shall not sell such products to stores,supermarkets or to any entity or person who sells things at a fixed place of business.

3) That this agreement supersedes any agreement/s between the Company and theSupervisor.

4) That the Supervisor shall sell or offer to sell, display or promote only and exclusively products sold by the Company.

5) Either party may terminate this agreement at will, with or without cause, at any timeupon notice to the other.

Later, respondent Luna entered into the sales force of Sandre Philippines which causedher termination for the alleged violation of the terms of the contract. The trial court ruled in favorof Luna that the contract was contrary to public policy thus the dismissal was not proper. TheCourt of Appeals affirmed the decision, hence this petition.

ISSUE:

Whether the Court of Appeals erred in ruling that the Supervisor‘s Agreement wasinvalid for being contrary to public policy

Whether there was subversion of the autonomy of contracts by the lower courts



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HELD:

Agreements in violation of orden público must be considered as those which conflict withlaw, whether properly, strictly and wholly a public law (derecho) or whether a law of the person, but law which in certain respects affects the interest of society. Plainly put, public policy is that

principle of the law which holds that no subject or citizen can lawfully do that which has atendency to be injurious to the public or against the public good. As applied to contracts, in theabsence of express legislation or constitutional prohibition, a court, in order to declare a contractvoid as against public policy, must find that the contract as to the consideration or thing to bedone, has a tendency to injure the public, is against the public good, or contravenes someestablished interests of society, or is inconsistent with sound policy and good morals, or tendsclearly to undermine the security of individual rights, whether of personal liability or of private property.

From another perspective, the main objection to exclusive dealing is its tendency toforeclose existing competitors or new entrants from competition in the covered portion of the

relevant market during the term of the agreement. Only those arrangements whose probableeffect is to foreclose competition in a substantial share of the line of commerce affected can beconsidered as void for being against public policy. The foreclosure effect, if any, depends on themarket share involved. The relevant market for this purpose includes the full range of sellingopportunities reasonably open to rivals, namely, all the product and geographic sales they mayreadily compete for, using easily convertible plants and marketing organizations.

Applying the preceding principles to the case at bar, there is nothing invalid or contraryto public policy either in the objectives sought to be attained by paragraph 5, i.e., the exclusivityclause, in prohibiting respondent Luna, and all other Avon supervisors, from selling productsother than those manufactured by petitioner Avon.

Having held that the ―exclusivity clause‖ as embodied in paragraph 5 of the Supervisor‘sAgreement is valid and not against public policy, we now pass to a consideration of respondentLuna‘s objections to the validity of her termination as provided for under paragraph 6 of theSupervisor‘s Agreement giving petitioner Avon the right to terminate or cancel such contract.The paragraph 6 or the ―termination clause‖ therein expressly provides that:

The Company and the Supervisor mutually agree:

6) Either party may terminate this agreement at will, with or without cause, at any timeupon notice to the other.

In the case at bar, the termination clause of the Supervisor‘s Agreement clearly providesfor two ways of terminating and/or canceling the contract. One mode does not exclude the other.The contract provided that it can be terminated or cancelled for cause, it also stated that it can beterminated without cause, both at any time and after written notice. Thus, whether or not thetermination or cancellation of the Supervisor‘s Agreement was ―for cause,‖ is immaterial. Theonly requirement is that of notice to the other party. When petitioner Avon chose to terminate thecontract, for cause, respondent Luna was duly notified thereof.

Worth stressing is that the r ight to unilaterally terminate or cancel the Supervisor‘sAgreement with or without cause is equally available to respondent Luna, subject to the samenotice requirement. Obviously, no advantage is taken against each other by the contracting parties.

Hence, the petition was granted.



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DEL CASTILLO vs. RICHMOND45 PHIL. REPORTS 679

FACTS:

The plaintiff alleges that the provisions and conditions contained in the third paragraph oftheir contract constitute an illegal and unreasonable restriction upon his liberty to contract, arecontrary to public policy, and are unnecessary in order to constitute a just and reasonable protection to the defendant; and asked that the same be declared null and void and of no effect.The defendant interposed a general and special defense. In his special defense he alleges thatduring the time the plaintiff was in the defendant's employ he obtained knowledge of his tradeand professional secrets and came to know and became acquainted and established friendlyrelations with his customers so that to now annul the contract and permit plaintiff to establish acompeting drugstore in the town of Legaspi, as plaintiff has announced his intention to do, would be extremely prejudicial to defendant's interest." The defendant further, in an amended answer,alleges that this action not having been brought within four years from the time the contract

referred to in the complaint was executed, the same has prescribed.

ISSUE:

Whether the contract is valid and the autonomy of contracts be upheld

HELD:

Considering the nature of the business in which the defendant is engaged, in relation withthe limitation placed upon the plaintiff both as to time and place, The Court is of the opinion, andso decide, that such limitation is legal and reasonable and not contrary to public policy,otherwise, the autonomy of the contract will be subverted.



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ARWOOD INDUSTRIES, INC. vs. DM CONSUNJI, INC.394 SCRA 11

FACTS:

Petitioner and respondent, as owner and contractor, respectively, entered into a civil,structural and architectural works Agreement dated February 6, 1989 for the construction of petitioners Westwood condominium at No. 23 Eisenhower St., Greenhills, San Juan, MetroManila. The contract price for the condominium project aggregated P20, 800,000.00.

Despite the completion of the condominium project, the amount of P962, 434.78 remainunpaid by petitioner. Repeated demands by respondent for petitioner to pay went unheeded.

Thus on August 13, 1993, respondent as plaintiff in a civil case filed its complaint for therecovery of the balance of the contract price and for damages against petitioner.

Respondent specifically prayed for the payment of the: (a) amount of P962, 434.78 withinterest of 2% per month or a fraction thereof, from November 1990 up to the time of payment;(b) the amount of P250,000 as Attorneys fees and litigation expenses; (c) amount ofP150,000.00 as exemplary damages; and (d)cost of suit.

On appeal, the Court of Appeals affirmed the lower court‘s decision with modification

ISSUE:

Whether or not the imposition of two percent interest on the amount adjudged is proper.

RULING:

Yes. It must be noted that the agreement provided the contractor, respondent in this case,two (2) options in case of delay in monthly payments, to wit: a) suspend works on the projectuntil payment is remitted by the owner or continue the work but the owner shall be required to pay interest at a rate of two (2) percent per month or a fraction thereof. Evidently, respondentchose the latter option, as the condominium project was in fact already completed. Since theagreement stands as the law between the parties, the court cannot ignore the existence of such provision providing for a penalty for every months delay.



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PASCUAL vs. RAMOS384 SCRA 105

FACTS:

Ramos alleged that on 3 June 1987, for and in consideration of P150,000, the SpousesPascual executed in his favor a Deed of Absolute Sale with Right to Repurchase over two parcelsof land and the improvements thereon located in Bambang, Bulacan, Bulacan. This documentwas annotated at the back of the title. The Pascuals did not exercise their right to repurchase the property within the stipulated one-year period; hence, Ramos prayed that the title or ownershipover the subject parcels of land and improvements thereon be consolidated in his favor.

In their Answer, the Pascuals admitted having signed the Deed of Absolute Sale withRight to Repurchase for a consideration of P150, 000 but averred that what the parties hadactually agreed upon and entered into was a real estate mortgage. They further alleged that therewas no agreement limiting the period within which to exercise the right to repurchase and that

they had even overpaid Ramos. The trial court found that the transaction between the parties wasactually a loan in the amount of P150,000, the payment of which was secured by a mortgage ofthe property covered by TCT No. 305626. It also found that the Pascuals had made payments inthe total sum of P344,000, and that with interest at 7% per annum, they had overpaid the loan byP141,500. Accordingly, in its Decision of 15 March 1995 the trial court ruled in favor of thedefendants. The Pascuals interposed the following defenses: (a) the trial court had no jurisdictionover the subject or nature of the petition; (b) Ramos had no legal capacity to sue; (c) the cause ofaction, if any, was barred by the statute of limitations; (d) the petition stated no cause of action;(e) the claim or demand set forth in Ramos‘s pleading had been paid, waived, abandoned, orotherwise extinguished; and (f) Ramos has not complied with the required confrontation andconciliation before the barangay.

The Court of Appeals affirmed in toto the trial court‘s Orders of 5 June 1995 and 7September 1995.

ISSUE:

Whether or not the contract entered into is a contract of loan.

RULING:

The Pascuals are actually raising as issue the validity of the stipulated interest rate. It

must be stressed that they never raised as a defense or as basis for their counterclaim the nullityof the stipulated interest. While overpayment was alleged in the Answer, no ultimate facts whichconstituted the basis of the overpayment was alleged. In their pre-trial brief, the Pascuals made along list of issues, but not one of them touched on the validity of the stipulated interest rate.Their own evidence clearly shows that they have agreed on, and have in fact paid interest at, therate of 7% per month.

After the trial court sustained petitioners‘ claim that their agreement with RAMOS wasactually a loan with real estate mortgage, the Pascuals should not be allowed to turn their back onthe stipulation in that agreement to pay interest at the rate of 7% per month. The Pascuals shouldaccept not only the favorable aspect of the court‘s declaration that the document is actually an

equitable mortgage but also the necessary consequence of such declaration, that is, that intereston the loan as stipulated by the parties in that same document should be paid. Besides, whenRamos moved for a reconsideration of the 15 March 1995 Decision of the trial court pointing outthat the interest rate to be used should be 7% per month, the Pascuals never lifted a finger tooppose the claim. Admittedly, in their Motion for Reconsideration of the Order of 5 June 1995,the Pascuals argued that the interest rate, whether it be 5% or 7%, is exorbitant, unconscionable,unreasonable, usurious and inequitable. However, in their Appellants‘ Brief, the only argumentraised by the Pascuals was that Ramos‘s petition did not contain a prayer for general relief and,



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hence, the trial court had no basis for ordering them to pay Ramos P511,000 representing the principal and unpaid interest. It was only in their motion for the reconsideration of the decisionof the Court of Appeals that the Pascuals made an issue of the interest rate and prayed for itsreduction to 12% per annum.

It is a basic principle in civil law that parties are bound by the stipulations in the contractsvoluntarily entered into by them. Parties are free to stipulate terms and conditions which theydeem convenient provided they are not contrary to law, morals, good customs, public order, or public policy.

The interest rate of 7% per month was voluntarily agreed upon by Ramos and thePascuals. There is nothing from the records and, in fact, there is no allegation showing that petitioners were victims of fraud when they entered into the agreement with Ramos. Neither isthere a showing that in their contractual relations with Ramos, the Pascuals were at adisadvantage on account of their moral dependence, ignorance, mental weakness, tender age orother handicap, which would entitle them to the vigilant protection of the courts as mandated by

Article 24 of the Civil Code.



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PUP V. GOLDEN HORIZONG.R. No. 183612 March 15, 2010

FACTS:

Petitioner National Development Company (NDC) is a government- owned andcontrolled corporation, created under Commonwealth Act No. 182, as amended by Com. Act No.311 and Presidential Decree (P.D.) No. 668. Petitioner Polytechnic University of the Philippines(PUP) is a public, non-sectarian, non-profit educational institution created in 1978 by virtue ofP.D. No. 1341. In the early sixties, NDC had in its disposal a ten -hectare property located alongPureza St., Sta. Mesa, Manila. The estate was popularly known as the NDC Compound andcovered by Transfer Certificate of Title Nos. 92885, 110301 and 145470.On September 7, 1977, NDC entered into a Contract of Lease (C-33-77) with Golden Horizon Realty Corporation(GHRC) over a portion of the property, with an area of 2,407 square meters for a period of tenyears, renewable for another ten years with mutual consent of the parties.On May 4, 1978, asecond Contract of Lease (C-12-78) was executed between NDC and GHRC covering 3,222.80

square meters, also renewable upon mutual consent after the expiration of the ten (10)-year lease period. In addition, GHRC as lessee was granted the "option to purchase the area leased, the price to be negotiated and determined at the time the option to purchase is exercised." Under thelease agreements, GHRC was obliged to construct at its own expense buildings of strongmaterial at no less than the stipulated cost, and other improvements which shall automatically belong to the NDC as lessor upon the expiration of the lease period. Accordingly, GHRCintroduced permanent improvements and structures as required by the terms of the contract.After the completion of the industrial complex project, for which GHRC spent P5 million, it wasleased to various manufacturers, industrialists and other businessmen thereby generatinghundreds of jobs. On June 13, 1988, before the expiration of the ten (10)-year period under thesecond lease contract, GHRC wrote a letter to NDC indicating its exercise of the option to renewthe lease for another ten years. As no response was received from NDC, GHRC sent anotherletter on August 12, 1988, reiterating its desire to renew the contract and also requesting for priority to negotiate for its purchase should NDC opt to sell the leased premises. NDC still didnot reply but continued to accept rental payments from GHRC and allowed the latter to remain in possession of the property. Sometime after September 1988, GHRC discovered that NDC haddecided to secretly dispose the property to a third party. On October 21, 1988, GHRC filed in theRTC a complaint for specific performance, damages with preliminary injunction and temporaryrestraining order.

On February 20, 1989, the RTC issued a writ of preliminary injunction enjoining NDCand its attorneys, representatives, agents and any other persons assisting it from proceeding withthe sale and disposition of the leased premises. On February 23, 1989, PUP filed a motion tointervene as party defendant, claiming that as a purchaser pendente lite of a property subject oflitigation it is entitled to intervene in the proceedings. The RTC granted the said motion anddirected PUP to file its Answer-in-Intervention.PUP also demanded that GHRC vacate the premises, insisting that the latter‘s lease contract had already expired. Its demand letter unheeded by GHRC, PUP filed an ejectment case (Civil Case No. 134416) before the Metropolitan TrialCourt (MeTC) of Manila on January 14, 1991.

Due to this development, GHRC filed an Amended and/or Supplemental Complaint toinclude as additional defendants PUP, Honorable Executive Secretary Oscar Orbos and JudgeErnesto A. Reyes of the Manila MeTC, and to enjoin the afore-mentioned defendants from prosecuting Civil Case No. 134416 for ejectment. A temporary restraining order wassubsequently issued by the RTC enjoining PUP from prosecuting and Judge Francisco Brillantes,Jr. from proceeding with the ejectment case.

On November 14, 2001, this Court rendered a decision in G.R. Nos. 143513 (PolytechnicUniversity of the Philippines v. Court of Appeals) and 143590 (National DevelopmentCorporation v. Firestone Ceramics, Inc.),15 which declared that the sale to PUP by NDC of the portion leased by Firestone pursuant to Memorandum Order No. 214 violated the right of firstrefusal granted to Firestone under its third lease contract with NDC.



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ISSUE:

Whether or not our ruling in Polytechnic University of the Philippines v. Court ofAppeals applies in this case involving another lessee of NDC who claimed that the option

to purchase the portion leased to it was similarly violated by the sale of the NDCCompound in favor of PUP pursuant to Memorandum Order No. 214.

HELD:

The CA was correct in declaring that there exists no justifiable reason not to apply thesame rationale in Polytechnic University of the Philippines v. Court of Appeals in the case ofrespondent who was similarly prejudiced by petitioner NDC‘s sale of the property to PUP, as toentitle the respondent to exercise its option to purchase until October 1988 inasmuch as the May4, 1978 contract embodied the option to renew the lease for another ten (10) years upon mutualconsent and giving respondent the option to purchase the leased premises for a price to be

negotiated and determined at the time such option was exercised by respondent. It is to be notedthat Memorandum Order No. 214 itself declared that the transfer is "subject to such liens/leasesexisting on the subject property."

The option in this case was incorporated in the contracts of lease by NDC for the benefitof firestone which, in view of the total amount of its investments in the property, wanted to beassured that it would be given the first opportunity to buy the property at a price for which itwould be offered. Consistent with their agreement, it was then implicit for NDC to have firstoffered the leased premises of 2.60 hectares to FIRESTONE prior to the sale in favor of PUP.Only if FIRESTONE failed to exercise its right of first priority could NDC lawfully sell the property to petitioner PUP.

In the light of the foregoing, the Court held that respondent, which did not offer anyamount to petitioner NDC, and neither disputed the P1,500.00 per square meter actual value of NDC‘s property at that time it was sold to PUP at P554.74 per square meter, as duly considered by this Court in the Firestone case, should be bound by such determination. Accordingly, the price at which the leased premises should be sold to respondent in the exercise of its right of firstrefusal under the lease contract with petitioner NDC, which was pegged by the RTC at P554.74 per square meter, should be adjusted to P1,500.00 per square meter, which more accuratelyreflects its true value at that time of the sale in favor of petitioner PUP. Indeed, basic is the rulethat a party to a contract cannot unilaterally withdraw a right of first refusal that stands uponvaluable consideration.40 We have categorically ruled that it is not correct to say that there is noconsideration for the grant of the right of first refusal if such grant is embodied in the samecontract of lease. Since the stipulation forms part of the entire lease contract, the considerationfor the lease includes the consideration for the grant of the right of first refusal. In entering intothe contract, the lessee is in effect stating that it consents to lease the premises and to pay the price agreed upon provided the lessor also consents that, should it sell the leased property, then,the lessee shall be given the right to match the offered purchase price and to buy the property atthat price. We have further stressed that not even the avowed public welfare or the constitutional priority accorded to education, invoked by petitioner PUP in the Firestone case, would serve aslicense for us, and any party for that matter, to destroy the sanctity of binding obligations. Whileeducation may be prioritized for legislative and budgetary purposes, it is doubtful if suchimportance can be used to confiscate private property such as the right of first refusal granted toa lessee of petitioner NDC.42 Clearly, no reversible error was committed by the CA in sustainingrespondent‘s contractual right of first refusal and ordering the reconveyance of the leased portionof petitioner NDC‘s property in its favor. Hence the petition was denied.



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JOSELITO VILLEGAS and DOMINGA VILLEGAS vs. COURT OF APPEALSG.R. No. 129977. February 1, 2001

FACTS:

Before September 6, 1973, Lot B-3-A, with an area of 4 hectares was registered underTCT No. 68641 in the names of Ciriaco D. Andres and Henson Caigas. This land was alsodeclared for real estate taxation under Tax Declaration No. C2-4442. On September 6, 1973,Andres and Caigas, with the consent of their respective spouses, Anita Barrientos andConsolacion Tobias, sold the land to Fortune Tobacco Corporation for P60,000.00.Simultaneously, they executed a joint affidavit declaring that they had no tenants on said lot. Onthe same date, the sale was registered in the Office of the Register of Deeds of Isabela. TCT No.68641 was cancelled and TCT No. T-68737 was issued in Fortune‘s name. On August 6, 1976,Andres and Caigas executed a Deed of Reconveyance of the same lot in favor of FilomenaDomingo, the mother of Joselito Villegas, defendant in the case before the trial court. Althoughno title was mentioned in this deed, Domingo succeeded in registering this document in the

Office of the Register of Deeds on August 6, 1976, causing the latter to issue TCT No. T-91864in her name. It appears in this title that the same was a transfer from TCT No. T-68641. On April13, 1981, Domingo declared the lot for real estate taxation under Tax Declaration No. 10-5633.On December 4, 1976, the Office of the Register of Deeds of Isabela was burned together withall titles in the office. On December 17, 1976, the original of TCT No. T-91864 wasadministratively reconstituted by the Register of Deeds. On June 2, 1979, a Deed of AbsoluteSale of a portion of 20,000 square meters of Lot B-3-A was executed by Filomena Domingo infavor of Villegas for a consideration of P1,000.00. This document was registered on June 3, 1981and as a result TCT No. T-131807 was issued by the Register of Deeds to Villegas. On the samedate, the technical description of Lot B-3-A-2 was registered and TCT No. T-131808 was issuedin the name of Domingo. On January 22, 1991, this document was registered and TCT No.154962 was issued to the defendant, Joselito Villegas.

On April 10, 1991, the trial court upon a petition filed by Fortune ordered thereconstitution of the original of TCT No. T-68737. After trial on the merits, the trial courtrendered its assailed decision in favor of Fortune Tobacco, declaring it to be entitled to the property. Petitioners thus appealed this decision to the Court of Appeals, which affirmed the trialcourt‘s decision.

ISSUES:Whether or not the Court of Appeals was correct in affirming the trial court‘s decision.

RULING:

Even if Fortune had validly acquired the subject property, it would still be barred fromasserting title because of laches. The failure or neglect, for an unreasonable length of time to dothat which by exercising due diligence could or should have been done earlier constitutes laches.It is negligence or omission to assert a right within a reasonable time, warranting a presumptionthat the party entitled to assert it has either abandoned it or declined to assert it. While it is byexpress provision of law that no title to registered land in derogation of that of the registeredowner shall be acquired by prescription or adverse possession, it is likewise an enshrined rulethat even a registered owner may be barred from recovering possession of property by virtue oflaches.

Hence, petition was GRANTED and the Decision of the Court of Appeals wasREVERSED.



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EQUATORIAL REALTY DEVELOPMENT, INC. & CARMELO & BAUERMANN, INCvs. MAYFAIR THEATER, INC

G.R. No. 106063 1996 Nov 21 264 SCRA 483

FACTS:

Carmelo owned a parcel of land, together with two 2-storey buildings constructedthereon. On June 1, 1967 Carmelo entered into a contract of lease with Mayfair for the latter‘slease of a portion of Carmelo‘s property. Two years later, on March 31, 1969, Mayfair enteredinto a second contract of lease with Carmelo for the lease of another portion of Carmelo‘s property.

Both contracts of lease provide identically worded paragraph 8, which reads:

‗That if the LESSOR should desire to sell the leased premises, the LESSEE shall begiven 30-days exclusive option to purchase the same.

In the event, however, that the leased premises is sold to someone other than theLESSEE, the LESSOR is bound and obligated, as it hereby binds and obligates itself, to stipulatein the Deed of Sale thereof that the purchaser shall recognize this lease and be bound by all theterms and conditions thereof.

Mr. Henry Pascal of Carmelo informed Mr. Henry Yang, President of Mayfair, through atelephone conversation that Carmelo was desirous of selling the entire Claro M. Recto property.Mr. Pascal told Mr. Yang that a certain Jose Araneta was offering to buy the whole property forUS Dollars 1,200,000, and Mr. Pascal asked Mr. Yang if the latter was willing to buy the property for Six to Seven Million Pesos.

Under your company‘s two lease contracts with our client, it is uniformly provided:

‗8. That if the LESSOR should desire to sell the leased premises the LESSEE shall be given 30 -days exclusive option to purchase the same. In the event, however, that the leased premises issold to someone other than the LESSEE, the LESSOR is bound and obligated, as it here bindsand obligates itself, to stipulate in the Deed of Sale thereof that the purchaser shall recognize thislease and be bound by all the terms and conditions hereof.

Carmelo did not reply to this letter.

On September 18, 1974, Mayfair sent another letter to Carmelo purporting to expressinterest in acquiring not only the leased premises but ‗the entire building and other improvementsif the price is reasonable. However, both Carmelo and Equatorial questioned the authenticity ofthe second letter.

Four years later, on July 30, 1978, Carmelo sold its entire C.M. Recto Avenue land and building, which included the leased premises housing the ‗Maxim‘ and ‗Miramar‘ theatres, toEquatorial by virtue of a Deed of Absolute Sale, for the total sum of P11,300,000.00.

In September 1978, Mayfair instituted the action a quo for specific performance andannulment of the sale of the leased premises to Equatorial. It dismissed the complaint with costsagainst the plaintiff. The Court of Appeals reversed the decision of the trial court.

ISSUE:

Whether or not the decision of the Court of Appeals‘ decision was correct.



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RULING:The Court agrees with the Court of Appeals that the aforecited contractual stipulation

provides for a right of first refusal in favor of Mayfair. It is not an option clause or an optioncontract. It is a contract of a right of first refusal.

As early as 1916, in the case of Beaumont vs. Prieto, unequivocal was ourcharacterization of an option contract as one necessarily involving the choice granted to anotherfor a distinct and separate consideration as to whether or not to purchase a determinate thing at a predetermined fixed price.

Further, what Carmelo and Mayfair agreed to, by executing the two lease contracts, wasthat Mayfair will have the right of first refusal in the event Carmelo sells the leased premises. Itis undisputed that Carmelo did recognize this right of Mayfair, for it informed the latter of itsintention to sell the said property in 1974. There was an exchange of letters evidencing the offerand counter-offers made by both parties. Carmelo, however, did not pursue the exercise to itslogical end. While it initially recognized Mayfair‘s right of first refusal, Carmelo violated such

right when without affording its negotiations with Mayfair the full process to ripen to at least aninterface of a definite offer and a possible corresponding acceptance within the ―30 -dayexclusive option‖ time granted Mayfair, Carmelo abandoned negotiations, kept a low profile forsome time, and then sold, without prior notice to Mayfair, the entire Claro M. Recto property toEquatorial.

Since Equatorial is a buyer in bad faith, this finding renders the sale to it of the propertyin question rescissible. We agree with respondent Appellate Court that the records bear out thefact that Equatorial was aware of the lease contracts because its lawyers had, prior to the sale,studied the said contracts. As such, Equatorial cannot tenably claim to be a purchaser in goodfaith, and, therefore, rescission lies.

Hence, the petition was denied.



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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES vs . COURT OF APPEALS andFIRESTONE CERAMICS, INC.

G.R. No. 143513. November 14, 2001

NATIONAL DEVELOPMENT CORPORATION

vs. FIRESTONE CERAMICS INCG.R. No. 143590. November 14, 2001

FACTS:

In the early sixties, petitioner National Development Corporation (NDC), had in itsdisposal a ten-hectare property located along Pureza St., Sta. Mesa, Manila. The estate was popularly known as the NDC compound and covered by Transfer Certificates of Title Nos.92885, 110301 and 145470. Private respondent Firestone Ceramics Inc. manifested its desire tolease a portion of the property for its ceramic manufacturing business. NDC and FIRESTONEentered into a contract of lease denominated as Contract No. C-30-65 covering a portion of the

property measured at 2.90118 hectares for use as a manufacturing plant for a term of ten years,renewable for another ten years under the same terms and conditions. In consequence of theagreement, FIRESTONE constructed on the leased premises several warehouses and otherimprovements needed for the fabrication of ceramic products. Three and a half years later,FIRESTONE entered into a second contract of lease with NDC over the latter's four-unit pre-fabricated reparation steel warehouse stored in Daliao, Davao. FIRESTONE agreed to ship thewarehouse to Manila for eventual assembly within the NDC compound. The second contract,denominated as Contract No. C-26-68, was for similar use as a ceramic manufacturing plant andwas agreed expressly to be "co-extensive with the lease of LESSEE with LESSOR on the 2.60hectare-lot. The parties signed a similar contract concerning a six-unit pre-fabricated steelwarehouse which, as agreed upon by the parties, would expire on 2 December 1978. Prior to theexpiration of the aforementioned contract, FIRESTONE wrote NDC requesting for an extensionof their lease agreement. Consequently, the Board of Directors of NDC adopted the Resolutionextending the term of the lease, subject to several conditions among which was that in the event NDC "with the approval of higher authorities, decide to dispose and sell these propertiesincluding the lot, priority should be given to the LESSEE". In pursuance of the resolution, the parties entered into a new agreement for a ten-year lease of the property, renewable for anotherten years, expressly granting FIRESTONE the first option to purchase the leased premises in theevent that it decided "to dispose and sell these properties including the lot‖.

The parties' lessor-lessee relationship went smoothly until early 1988 when FIRESTONE,cognizant of the impending expiration of their lease agreement with NDC, informed the latterthrough several letters and telephone calls that it was renewing its lease over the property. Whileits letter of 17 March 1988 was answered by Antonio A. Henson, General Manager of NDC, who promised immediate action on the matter, the rest of its communications remainedunacknowledged. FIRESTONE's predicament worsened when rumors of NDC's supposed plansto dispose of the subject property in favor of petitioner Polytechnic University of the Philippinescame to its knowledge. Forthwith, FIRESTONE served notice on NDC conveying its desire to purchase the property in the exercise of its contractual right of first refusal. Apprehensive that itsinterest in the property would be disregarded, FIRESTONE instituted an action for specific performance to compel NDC to sell the leased property in its favor. Following the denial of its petition, FIRESTONE amended its complaint to include PUP and Executive Secretary CatalinoMacaraeg, Jr., as party-defendants, and sought the annulment of Memorandum Order No. 214.

After trial, judgment was rendered declaring the contracts of lease executed betweenFIRESTONE and NDC covering the 2.60-hectare property and the warehouses constructedthereon valid and existing until 2 June 1999. The Court of Appeals affirmed the decision of thetrial court ordering the sale of the property in favor of FIRESTONE.

ISSUE:

Whether or not the Court of Appeals decided a question of substance in a way definitelynot in accord with law or jurisprudence.



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RULING:

The courts a quo did not hypothesize, much less conjure, the sale of the disputed property by NDC in favor of petitioner PUP. Aside from the fact that the intention of NDC and PUP to

enter into a contract of sale was clearly expressed in the Memorandum Order No. 214, a close perusal of the circumstances of this case strengthens the theory that the conveyance of the property from NDC to PUP was one of absolute sale, for a valuable consideration, and not amere paper transfer as argued by petitioners.

A contract of sale, as defined in the Civil Code, is a contract where one of the partiesobligates himself to transfer the ownership of and to deliver a determinate thing to the other orothers who shall pay therefore a sum certain in money or its equivalent. It is therefore a generalrequisite for the existence of a valid and enforceable contract of sale that it be mutuallyobligatory, i.e., there should be a concurrence of the promise of the vendor to sell a determinatething and the promise of the vendee to receive and pay for the property so delivered andtransferred. The Civil Code provision is, in effect, a "catch-all" provision which effectively

brings within its grasp a whole gamut of transfers whereby ownership of a thing is ceded for aconsideration.Contrary to what petitioners PUP and NDC propose, there is not just one party involved in thequestioned transaction. Petitioners NDC and PUP have their respective charters and thereforeeach possesses a separate and distinct individual personality.




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SPS. LITONJUA vs. L & R CORPORATIONG.R. No. 130722. December 9, 1999

320 SCRA 405

FACTS:

This stems from loans obtained by the spouses Litonjua from L&R Corporation in theaggregate sum of P400,000.00; P200,000.00 of which was obtained on August 6, 1974 and theremaining P200,000.00 obtained on March 27, 1978. The loans were secured by a mortgage

constituted by the spouses upon their two parcels of land and the improvements thereon Themortgage was duly registered with the Register of Deeds.

Spouses Litonjua sold to Philippine White House Auto Supply, Inc. (PWHAS) the parcels of land they had previously mortgaged to L & R Corporation for the sum of P430,000.00.Meanwhile, with the spouses Litonjua having defaulted in the payment of their loans, L & RCorporation initiated extrajudicial foreclosure proceedings with the Ex-Oficio Sheriff of QuezonCity. The mortgaged properties were sold at public auction to L & R Corporation as the only

bidder for the amount of P221,624.58.The Deputy Sheriff informed L & R Corporation of the payment by PWHAS of the fullredemption price and advised it that it can claim the payment upon surrender of its owner‘sduplicate certificates of title. The spouses Litonjua presented for registration the Certificate ofRedemption issued in their favor to the Register of Deeds of Quezon City. The Certificate alsoinformed L & R Corporation of the fact of redemption and directed the latter to surrender theowner‘s duplicate certificates of title within five days. On April 22, 1981, L & R Corporation wrote a letter to the Sheriff, copy furnished to theRegister of Deeds, stating: (1) that the sale of the mortgaged properties to PWHAS was withoutits consent, in contravention of paragraphs 8 and 9 of their Deed of Real Estate Mortgage; and(2) that it was not the spouses Litonjua, but PWHAS, who was seeking to redeem the foreclosed properties, when under Articles 1236 and 1237 of the New Civil Code, the latter had no legal personality or capacity to redeem the same.

On the other hand, the spouses Litonjua asked the Register of Deeds to annotate theirCertificate of Redemption as an adverse claim on the titles of the subject properties on account ofthe refusal of L & R Corporation to surrender the owner‘s duplicate copies of the titles to thesubject properties. With the refusal of the Register of Deeds to annotate their Certificate ofRedemption, the Litonjua spouses filed a Petition on July 17, 1981 against L & R Corporationfor the surrender of the owner‘s duplicate of Transfer Certificates of Title No. 197232 and197233 before the then CFI.

While the said case was pending, L & R Corporation executed an Affidavit ofConsolidation of Ownership. The Register of Deeds cancelled Transfer Certificates of Title No.197232 and 197233 and in lieu thereof, issued Transfer Certificates of Title No. 280054 and28055 in favor of L & R Corporation, free of any lien or encumbrance. A complaint for Quietingof Title, Annulment of Title and Damages with preliminary injunction was filed by the spousesLitonjua and PWHAS against herein respondents before the then CFI.

ISSUE:

Whether or not the Court of Appeals erred in its decision.

RULING:

In the case at bar, PWHAS cannot claim ignorance of the right of first refusal granted toL & R Corporation over the subject properties since the Deed of Real Estate Mortgagecontaining such a provision was duly registered with the Register of Deeds. As such, PWHAS is presumed to have been notified thereof by registration, which equates to notice to the wholeworld. Thus, the Decision appealed from was AFFIRMED with the followingMODIFICATIONS.



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JOSEFA VS. ZHANDONG TRADING CORPORATION417 SCRA 269

G.R. NO. 150903 DECEMBER 8, 2003

FACTS:

Respondent Zhandong delivered to petitioner Josefa, who was introduced to it as a client by Mr. Tan, the total volume of 313 crates of boards valued at P4,558,100.00 payable within 60days from delivery. Instead of paying respondent, petitioner remitted his payments to Tan who inturn delivered various checks to respondent, who accepted them upon Tan‘s assurance that said checks came from petitioner. When a number of the checks bounced, Tan issued his own checksand those of his mother, but Tan later stopped payments. Respondent demanded payment fromTan and petitioner but was ignored; hence he filed the instant complaint.

In his answer petitioner averred that he had already paid all his obligations to respondentthrough Tan. Furthermore, he claimed he is not privy to the agreements between Tan and

respondent, and hence, in case his payments were not remitted to respondent, then it was not his(petitioner) fault and that respondent should bear the consequences.

ISSUE:

Whether or not petitioner is liable for payment of the boards to respondent when he didnot negotiate the transaction with it, rather through Tan as intermediary.

RULING:

No. The transaction was negotiated between Tan and petitioner who only received thegoods delivered by respondent. Petitioner was not privy to the arrangement between Tan andrespondent. Petitioner has fully paid for the goods to Tan with whom he had arranged thetransaction.

Contracts take effect only between the parties, their successors in interest, heirs, andassigns. When there is no privity of contract, there is likewise no obligation or liability and thus,no cause of action arises. Petitioner, being not privy to the transaction between Tan andrespondent, should not be made liable for the failure of Tan to deliver the payment to respondent.

Therefore, respondent should recover the payment from Tan.



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SALUDO V. SBCG.R. No. 184041 Oct 13, 2010

FACTS:

On 30 May 1996, Booklight was extended an omnibus line credit facility by SBC in theamount of P10,000,000.00. Said loan was covered by a Credit Agreement and a ContinuingSuretyship with petitioner as surety, both documents dated 1 August 1996, to secure full paymentand performance of the obligations arising from the credit accommodation. Booklight drewseveral availments of the approved credit facility from 1996 to 1997 and faithfully complied withthe terms of the loan. On 30 October 1997, SBC approved the renewal of credit facility ofBooklight in the amount of P10,000,000.00 under the prevailing security lending rate. FromAugust 3 to 14, 1998, Booklight executed nine promissory notes in favor of SBC in theaggregate amount of P9,652,725.00. For failure to settle the loans upon maturity, demands weremade on Booklight and petitioner for the payment of the obligation but the duo failed to pay. As

of 15 May 2000, the obligation of Booklight stood at P10,487,875.41, inclusive of interest pastdue and penalty. On 16 June 2000, SBC filed against Booklight and herein petitioner an actionfor collection of sum of money with the RTC. Booklight initially filed a motion to dismiss,which was later on denied for lack of merit. In his Answer, Booklight asserted that the amountdemanded by SBC was not based on the omnibus credit line facility of 30 May 1996, but ratheron the amendment of the credit facilities on 15 October 1996 increasing the loan line fromP8,000,000.00 to P10,000,000.00. Booklight denied executing the promissory notes. It alsoclaimed that it was not in default as in fact, it paid the sum of P1,599,126.11 on 30 September1999 as a prelude to restructuring its loan for which it earnestly negotiated for a mutuallyacceptable agreement until 5 July 2000, without knowing that SBC had already filed thecollection case.

In his Answer to the complaint, herein petitioner alleged that under the ContinuingSuretyship, it was the parties‘ understanding that his undertaking and liability was merely as anaccommodation guarantor of Booklight. He countered that he came to know that Booklightoffered to pay SBC the partial payment of the loan and proposed the restructuring of theobligation. Petitioner argued that said offer to pay constitutes a valid tender of payment whichdischarged Booklight‘s obligation to the extent of the offer. Petitioner also averred that theimposition of the penalty on the supposed due and unpaid principal obligation based on the penalty rate of 2% per month is clearly unconscionable. On 7 March 2005, Booklight wasdeclared in default. Consequently, SBC presented its evidence ex-parte. The case against petitioner, however, proceeded and the latter was able to present evidence on his behalf. Aftertrial, the RTC ruled that petitioner is jointly and solidarily liable with Booklight under theContinuing Suretyship Agreement. The Court of Appeals affirmed in toto the ruling of the RTC.Petitioner filed a motion for reconsideration but it was denied by the Court of Appeals on 7August 2008. Hence, the instant petition.

ISSUE:

Whether or not petitioner should be held solidarily liable for the second credit facilityextended to Booklight.

HELD:

We rule in the affirmative. There is no doubt that Booklight was extended two (2) creditfacilities, each with a one-year term, by SBC. Booklight availed of these two (2) credit lines.While Booklight was able to comply with its obligation under the first credit line, it defaulted inthe payment of the loan obligation amounting to P9,652,725.00 under the second credit line.There is likewise no dispute that the first credit line facility, with a term from 30 June 1996 to 30June 1997, was covered by a Continuing Suretyship with petitioner acting as the surety. Thedispute is on the coverage by the Continuing Suretyship of the loan contracted under the secondcredit facility. Comprehensive or continuing surety agreements are, in fact, quite commonplace



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in present day financial and commercial practice. A bank or financing company whichanticipates entering into a series of credit transactions with a particular company, normallyrequires the projected principal debtor to execute a continuing surety agreement along with itssureties. By executing such an agreement, the principal places itself in a position to enter into the projected series of transactions with its creditor; with such suretyship agreement, there would be

no need to execute a separate surety contract or bond for each financing or credit accommodationextended to the principal debtor.Petitioner argues that the approval of the second credit facility necessitates his consent

considering the onerous and solidary liability of a surety. This is contrary to the express waiverof his consent to such renewal, contained in paragraph 12 of the Continuing Suretyship.Respondent, as last resort, harps on the novation of the first credit facility to exculpate itself fromliability from the second credit facility. At the outset, it must be pointed out that the CreditAgreement is actually the principal contract and it covers ―all credit facilities now or hereafterextended by SBC to Booklight;‖ and that the suretyship agreement was executed precisely toguarantee these obligations, i.e., the credit facilities arising from the credit agreement. The principal contract is the credit agreement covered by the Continuing Suretyship. The two loan

facilities availed by Booklight under the credit agreement are the Omnibus Line amounting toP10,000,000.00 granted to Booklight in 1996 and the other one is the Loan Line of the sameamount in 1997. Petitioner however seeks to muddle the issue by insisting that these twoavailments were two separate principal contracts, conveniently ignoring the fact that it is thecredit agreement which constitutes the principal contract signed by Booklight in order to avail ofSBC‘s credit facilities. The two credit facilities are but loans made available to Booklight pursuant to the credit agreement. On these facts the novation argument advanced by petitionermust fail. There is no novation to speak of. It is the first credit facility that expired and not theCredit Agreement. There was a second loan pursuant to the same credit agreement. The termsand conditions under the Credit Agreement continue to apply and the Continuing Suretyshipcontinues to guarantee the Credit Agreement. Hence the petition is denied.



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PCI VS NG SHUENG NGORA.M. No. P-05-1973. March 18, 2005

FACTS:

Complainant EPCIB is the defendant in Civil Case No. CEB-26983 before the RegionalTrial Court (RTC), Branch 16, Cebu City, entitled, ―Ng Sheung Ngor, doing business under thename and style ‗Ken Marketing,‘ Ken Appliance Division, Inc. and Benjamin Go, Plaintiffs, vs.Equitable PCI Bank, Aimee Yu and Ben Apas, Defendants‖ for Annulment and/or Reformationof Documents and Contracts.

Respondents Antonio A. Bellones and Generoso B. Regalado are the sheriffs in Branches9 and 16, respectively, of the RTC of Cebu City.

For garnishing accounts maintained by Equitable PCI Bank, Inc. (EPCIB) at Citibank, N.A., and Hongkong and Shanghai Bank Corporation (HSBC), allegedly in violation of Section9(b) of Rule 39 of the Rules of Court, a complaint for grave abuse of authority was filed by Atty.Paulino L. Yusi against Sheriffs Antonio A. Bellones and Generoso B. Regalado. There was an

offer of other real property by petitioner.

ISSUE:

Did respondents violate the Rules of Court?

RULING:

By serving notices of garnishment on Citibank, N.A., HSBC and PNB, Sheriff Regaladoviolated EPCIB‘s right to choose which property may be levied upon to be sold at auction for thesatisfaction of the judgment debt. Thus, it is clear that when EPCIB offered its real properties, itexercised its option because it cannot immediately pay the full amount stated in the writ ofexecution and all lawful fees in cash, certified bank check or any other mode of paymentacceptable to the judgment obligee.

In the case at bar , EPCIB cannot immediately pay by way of Manager‘s Check so itexercised its option to choose and offered its real properties. With the exercise of the option,Sheriff Regalado should have ceased serving notices of garnishment and discontinued theirimplementation. This is not true in the instant case. Sheriff Regalado was adamant in his posture even if real properties have been offered which were sufficient to satisfy the judgmentdebt.



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TERESITA DIO vs. ST. FERDINAND MEMORIALPARK, INC.G.R. No. 169578 November 30, 2006

509 SCRA 453

FACTS:

On December 11, 1973, Teresita Dio agreed to buy, on installment basis, a memorial lotfrom the St. Ferdinand Memorial Park, Inc. (SFMPI) in Lucena City. The purchase wasevidenced by a Pre-Need Purchase Agreement. She obliged herself to abide by all such rules andregulations governing the SFMPI dated May 25, 1972. SFMPI issued a Deed of Sale andCertificate of Perpetual. The ownership of Dio over the property was made subject to the rulesand regulations of SFMPI, as well as the government, including all amendments, additions andmodifications that may later be adopted. According to the Rules (Rule 69) Mausoleum buildingand memorials should be constructed by the Park Personnel. Lot Owners cannot contract othercontractors for the construction of the said buildings and memorial, however, the lot owner isfree to give their own design for the mausoleum to be constructed, as long as it is in accordance

with the park standards. The construction shall be under the close supervision of the ParkSuperintendent.

The mortal remains of Dio‘s husband, father and daughter were interred in the lot at herown expense, without the knowledge and intervention of SFMPI..

In October 1986, Dio informed SFMPI, through its president and controlling stockholder,Mildred F. Tantoco, that she was planning to build a mausoleum on her lot and sought theapproval thereof. Dio showed to Tantoco the plans and project specifications accomplished byher private contractor at an estimated cost of P60,000.00. The plans and specifications wereapproved, but Tantoco insisted that the mausoleum be built by it or its agents at a minimum costof P100,000.00 as provided in Rule 69 of the Rules and Regulations the SFMPI issued on May25, 1972. The total amount excluded certain specific designs in the approved plan which ifincluded would cost Dio much more. Dio, through counsel, demanded that she be allowed toconstruct the mausoleum within 10 days, otherwise, she would be impelled to file the necessaryaction/s against SFMPI and Tantoco. Dio filed a Complaint for Injunction with Damages againstSFMPI and Tantoco before the RTC. She averred that she was not aware of Rule 69 of theSFMPI Rules and Regulations; the amount of P100,000.00 as construction cost of themausoleum was unconscionable and oppressive. She prayed that, after trial, judgment berendered in her favor, granting a final injunction perpetually restraining defendants fromenforcing the invalid Rule 69 of SFMPI‘s ―Rules for Memorial Work in the Mausoleum of thePark‖ or from refusing or preventing the construction of any improvement upon her property inthe park. The court issued a cease and desist order against defendants.

The trial court rendered judgment in favor of defendants. On appeal, the CA affirmed thedecision of the trial court.

ISSUE:Whether or not petitioner had knowledge of Rule 69 of SFMPI Rules and Regulations for

memorial works in the mausoleum areas of the park when the Pre-Need Purchase Agreement andthe Deed of Sale was executed and whether the said rule is valid and binding upon petitioner.

RULING:

Plaintiff‘s allegation that she was not aware of the said Rules and Regulations lackscredence. Admittedly, in her Complaint and during the trial, plaintiff testified that she informedthe defendants of her intention to construct a mausoleum. Even counsel for the plaintiff, who isthe son of the plaintiff, informed the Court during the trial in this case that her mother, the plaintiff herein, informed the defendants of her plan to construct and erect a mausoleum. This act

of the plaintiff clearly shows that she was fully aware of the said rules and regulations otherwiseshe should not consult, inform and seek permission from the defendants of her intention to builda mausoleum if she is not barred by the rules and regulations to do the same. When she signed



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the contract with the defendants, she was estopped to question and attack the legality of saidcontract later on.

Further, a contract of adhesion, wherein one party imposes a readymade form of contracton the other, is not strictly against the law. A contract of adhesion is as binding as ordinarycontracts, the reason being that the party who adheres to the contract is free to reject it entirely.

Contrary to petitioner‘s contention, not every contract of adhesion is an invalid agreement.Thus, the petition was denied.



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PILIPINO TELEPHONE CORPORATION vs. DELFINO TECSONG.R. No. 156966. May 7, 2004

FACTS:

On various dates in 1996, Delfino C. Tecson applied for 6 cellular phone subscriptionswith petitioner Pilipino Telephone Corporation (PILTEL), a company engaged in thetelecommunications business, which applications were each approved and covered, respectively, by six mobiline service agreements. On 05 April 2001, respondent filed with the Regional TrialCourt a complaint against petitioner for a ―Sum of Money and Damages.‖ Petitioner moved forthe dismissal of the complaint on the ground of improper venue, citing a common provision inthe mobiline service agreements to the effect that - ―Venue of all suits arising from thisAgreement or any other suit directly or indirectly arising from the relationship between PILTELand subscriber shall be in the proper courts of Makati, Metro Manila. Subscriber herebyexpressly waives any other venues.‖ The Regional Trial Court of Iligan City, Lanao del Norte,denied petitioner‘s motion to dismiss and required it to file an answer within 15 days from

receipt thereof.Petitioner filed a petition for certiorari before the Court of Appeals. The Court ofAppeals saw no merit in the petition and affirmed the assailed orders of the trial court.

ISSUE:Whether or not the Court of Appeals erred in affirming the orders of the trial court.

RULING:

The contract herein involved is a contract of adhesion. But such an agreement is not per

se inefficacious. The rule instead is that, should there be ambiguities in a contract of adhesion,such ambiguities are to be construed against the party that prepared it. If, however, thestipulations are not obscure, but are clear and leave no doubt on the intention of the parties, theliteral meaning of its stipulations must be held controlling. A contract of adhesion is just as binding as ordinary contracts. It is true that this Court has, on occasion, struck down suchcontracts as being assailable when the weaker party is left with no choice by the dominant bargaining party and is thus completely deprived of an opportunity to bargain effectively. Nevertheless, contracts of adhesion are not prohibited even as the courts remain careful inscrutinizing the factual circumstances underlying each case to determine the respective claims ofcontending parties on their efficacy. In the case at bar, respondent secured 6 subscriptioncontracts for cellular phones on various dates. It would be difficult to assume that, during each ofthose times, respondent had no sufficient opportunity to read and go over the terms andconditions embodied in the agreements. Respondent continued, in fact, to acquire in the pursuitof his business subsequent subscriptions and remained a subscriber of petitioner for quitesometime.

Hence, the petition was granted by the Court and the decision of the Court of Appeals isreversed and set aside. The Civil Case pending before the Regional Trial Court of Iligan City,Branch 4, was DISMISSED without prejudice to the filing of an appropriate complaint byrespondent against petitioner with the court of proper venue.



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PHILIPPINE AIRLINES VS. COURT OF APPEALS255 SCRA 48

G.R. No. 119706 March 14, 1996

FACTS:

On January 27, 1990, plaintiff Gilda C. Mejia shipped thru defendant, PhilippineAirlines, one (1) unit microwave oven under PAL Air Waybill No. 0-79-1013008-3, with a grossweight of 33 kilograms from San Francisco, U.S.A. to Manila, Philippines. Upon arrival,however, of said article in Manila, Philippines, plaintiff discovered that its front glass door was broken and the damage rendered it unserviceable. Demands both oral and written were made by plaintiff against the defendant for the reimbursement of the value of the damaged microwaveoven, and transportation charges paid by plaintiff to defendant company. But these demands fellon deaf ears. This is because, according to petitioner, was filed out of time under paragraph 12, a(1) of the Air Waybill which provides: "(a) the person entitled to delivery must make a complaintto the carrier in writing in case: (1) of visible damage to the goods, immediately after discovery

of the damage and at the latest within 14 days from the receipt of the goods.

On September 25, 1990, Gilda C. Mejia filed an action for damages against the petitionerin the lower court. The latter rendered a decision rendering PAL liable to pay, actual, moral andexemplary damages as well as attorney‘s fees. On appeal, the Court of A ppeals similarly ruledin favor of private respondent by affirming in full the trial court's judgment, with costs against petitioner.

ISSUE:

Whether or not the respondent court erred in affirming the conclusions of the trial courtthat since the air waybill is a contract of adhesion, its provisions should be strictly construedagainst herein petitioner.

RULING:

The Supreme Court affirmed the appealed decision.

The trial court relied on the ruling in the case of Fieldmen's Insurance Co., Inc. vs. Vda.De Songco, et al. in finding that the provisions of the air waybill should be strictly construedagainst petitioner.

The Air Waybill is a contract of adhesion considering that all the provisions thereof are prepared and drafted only by the carrier. The only participation left of the other party is to affixhis signature thereto. In the earlier case of Angeles v. Calasanz, the Supreme Court ruled that theterms of a contract of adhesion must be interpreted against the party who drafted the same.



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ERMITAÑO VS. COURT OF APPEALS306 SCRA 218

FACTS:

Petitioner Luis Ermitaño applied for a credit card from private respondent BPI ExpressCard Corp. (BECC) on October 8, 1986 with his wife, Manuelita, as extension card holder. Thespouses were given credit limit of P10, 000.00. They often exceeded this credit limit without protest from BCC.

On August 9, 1989, Manuelita‘s bag was snatched from her as she was shopping at thegreenbelt mall in Makati. Among the items inside the bag was her BECC credit card. That samenight she informed, by telephone, BECC of the loss. The call was received by BECC officesthrough a certain Gina Banzon. This was followed by a letter dated August 30, 1989. She alsosurrendered Luis‘ credit card and requested for replacement cards. In her letter, Manuelita statedthat she ―shall not be responsible for any and all charges incurred [through the use of the lost

card] after August 29, 1989.

However, when Luis received his monthly billing statement from BECC dated September20, 1989, the charges included amounts for purchases were made, one amounting to P2,350.05and the other, P607.50. Manuelita received a billing statement dated October 20,1989 whichrequired her to immediately pay the total amount of P3,197.70 covering the same (unauthorized) purchases. Manuelita wrote again BECC disclaiming responsibility for those charges, whichwere made after she had served BECC with notice of loss of her card.

However, BECC, in a letter dated July 13, 1990, pointed to Luis the stipulation in theircontract. However, Luis stressed that the contract BECC was referring to was a contract ofadhesion and warned that if BECC insisted on charging him and his wife for the unauthorized purchases, they will sue BECC continued to bill the spouses for said purchases.

ISSUE:

Whether or not the Court of Appeals gravely erred in relying on the case of Serra v. Courtof appeals, 229 SCRA 60, because unlike that case, petitioners have no chance at all to contestthe stipulations appearing in the credit card application that was drafted entirely by privaterespondent, thus, a clear contract of adhesion.

RULING:

The contract between the parties in this case is indeed a contract of adhesion, so-called because its terms are prepared by only one party while the other party merely affixes hissignature signifying his adhesion thereto. Such contracts are not void in themselves. They are as binding as ordinary contracts. Parties who enter in to such contracts are free to reject thestipulations entirely.

In this case, the cardholder, Manuelita, has complied with what was required of her underthe contract with BECC, She immediately notified BECC of loss of her card on the same day itwas lost and, the following day, she sent a written notice of the loss to BECC.

Clearly, what happened in this case was that BECC failed to notify promptly theestablishment in which the unauthorized purchases were made with the use of Manuelita‘s lostcard.



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UNIWIDE SALES REALTY AND RESOURCES CORPORATION,vs. TITAN-IKEDA CONSTRUCTIONAND DEVELOPMENT CORPORATION

G.R. No. 126619 December 20, 2006511 SCRA 335

FACTS: PROJECT 1. The first agreement was a written ―Construction Contract‖ entered into by

Titan and Uniwide sometime in May 1991 whereby Titan undertook to construct Uniwide‘sWarehouse Club and Administration Building in Libis, Quezon City for a fee ofP120,936,591.50, payable in monthly progress billings to be certified to by Uniwide‘srepresentative. The parties stipulated that the building shall be completed not later than 30 November 1991. As found by the CIAC, the building was eventually finished on 15 February1992 and turned over to Uniwide.

PROJECT 2. Sometime in July 1992, Titan and Uniwide entered into the second

agreement whereby the former agreed to construct an additional floor and to renovate the latter‘swarehouse located at the EDSA Central Market Area in Mandaluyong City. There was nowritten contract executed between the parties for this project. Construction was allegedly to beon the basis of drawings and specifications provided by Uniwide‘s structural engineers. The parties proceeded on the basis of a cost estimate of P21,301,075.77 inclusive of Titan‘s 20%mark-up. Titan conceded in its complaint to having received P15,000,000.00 of this amount. This project was completed in the latter part of October 1992 and turned over to Uniwide.

PROJECT 3. The parties executed the third agreement in May 1992. In a written―Construction Contract,‖ Titan undertook to construct the Uniwide Sales Department StoreBuilding in Kalookan City for the price of P118,000,000.00 payable in progress billings to becertified to by Uniwide‘s representative. It was stipulated that the project shall be completed notlater than 28 February 1993. The project was completed and turned over to Uniwide in June1993.

Uniwide asserted in its petition that: (a) it overpaid Titan for unauthorized additionalworks in Project 1 and Project 3; (b) it is not liable to pay the Value-Added Tax for Project 1; (c)it is entitled to liquidated damages for the delay incurred in constructing Project 1 and Project 3;and (d) it should not have been found liable for deficiencies in the defectively constructedProject 2.

The decision:On Project 1 – Libis: Uniwide is absolved of any liability for the claims made by [Titan]

on this Project.Project 2 – Edsa Central: Uniwide is absolved of any liability for VAT payment on this

project, the same being for the account of Titan. On the other hand, Titan is absolved of anyliability on the counterclaim for defective construction of this project. Uniwide is held liable forthe unpaid balance in the amount of P6,301,075.77 which is ordered to be paid to the Titan with12% interest per annum commencing from 19 December 1992 until the date of payment.

On Project 3 – Kalookan: Uniwide is held liable for the unpaid balance in the amount ofP5,158,364.63 which is ordered to be paid to Titan with 12% interest per annum commencingfrom 08 September 1993 until the date of payment. Uniwide is held liable to pay in full the VATon this project, in such amount as may be computed by the Bureau of Internal Revenue to be paid directly thereto. The BIR is hereby notified that Uniwide Sales Realty and ResourcesCorporation has assumed responsibility and is held liable for VAT payment on this project. Thisaccordingly exempts Claimant Titan-Ikeda Construction and Development Corporation from thisobligation.

ISSUE:Whether or not the decision rendered is correct.

RULING:

The petition is DENIED and the Decision of the Court of Appeals was AFFIRMED.



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HEIRS OF AUGUSTO L. SALAS, JR. vs. LAPERAL REALTY CORPORATIONG.R. NO. 135362. December 13, 1999

FACTS:

Salas, Jr. was the registered owner of a vast tract of land in Lipa City, Batangas spanning1,484,354 square meters. On May 15, 1987, he entered into an Owner-Contractor Agreementwith respondent Laperal Realty Corporation to render and provide complete (horizontal)construction services on his land. On September 23, 1988, Salas, Jr. executed a Special Power ofAttorney in favor of respondent Laperal Realty to exercise general control, supervision andmanagement of the sale of his land, for cash or on installment basis. On June 10, 1989, Salas, Jr.left his home in the morning for a business trip to Nueva Ecija. He never returned.On August 6,1996, Teresita Diaz Salas filed with the Regional Trial Court a verified petition for thedeclaration of presumptive death of her husband, Salas, Jr., who had then been missing for morethan seven (7) years. It was granted on December 12, 1996.

Meantime, respondent Laperal Realty subdivided the land of Salas, Jr. and soldsubdivided portions thereof to respondents Rockway Real Estate Corporation and South RidgeVillage, Inc. on February 22, 1990; to respondent spouses Abrajano and Lava and Oscar Dacilloon June 27, 1991; and to respondents Eduardo Vacuna, Florante de la Cruz and Jesus VicenteCapalan on June 4, 1996.

On February 3, 1998, petitioners as heirs of Salas, Jr. filed in the Regional Trial Court aComplaint for declaration of nullity of sale, reconveyance, cancellation of contract, accountingand damages against herein respondents. Laperal Realty filed a Motion to Dismiss on the groundthat petitioners failed to submit their grievance to arbitration as required under Article VI of theAgreement. Spouses Abrajano and Lava and respondent Dacillo filed a Joint Answer withCounterclaim and Crossclaim praying for dismissal of petitioners‘ Complaint for the samereason.

The trial court issued an Order dismissing petitioners‘ Complaint for non-compliancewith the arbitration clause.

ISSUE:

Whether or not the trial court erred in dismissing the complaint.

RULING:

A submission to arbitration is a contract. As such, the Agreement, containing thestipulation on arbitration, binds the parties thereto, as well as their assigns and heirs. But onlythey. Petitioners, as heirs of Salas, Jr., and respondent Laperal Realty are certainly bound by theAgreement. If respondent Laperal Realty, had assigned its rights under the Agreement to a third party, making the former, the assignor, and the latter, the assignee, such assignee would also be bound by the arbitration provision since assignment involves such transfer of rights as to vest inthe assignee the power to enforce them to the same extent as the assignor could have enforcedthem against the debtor or in this case, against the heirs of the original party to the Agreement.However, respondents Rockway Real Estate Corporation, South Ridge Village, Inc., MaharamiDevelopment Corporation, spouses Abrajano, spouses Lava, Oscar Dacillo, Eduardo Vacuna,Florante de la Cruz and Jesus Vicente Capellan are not assignees of the rights of respondentLaperal Realty under the Agreement to develop Salas, Jr.‘s land and sell the same. They are,rather, buyers of the land that respondent Laperal Realty was given the authority to develop andsell under the Agreement. As such, they are not ―assigns‖ contemplated in Art. 1311 of the NewCivil Code which provides that ―contracts take effect only between the parties, their assigns andheirs‖.



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Laperal Realty, as a contracting party to the Agreement, has the right to compel petitioners to first arbitrate before seeking judicial relief. However, to split the proceedings intoarbitration for respondent Laperal Realty and trial for the respondent lot buyers, or to hold trial inabeyance pending arbitration between petitioners and respondent Laperal Realty, would in effectresult in multiplicity of suits, duplicitous procedure and unnecessary delay. On the other hand, it

would be in the interest of justice if the trial court hears the complaint against all hereinrespondents and adjudicates petitioners‘ rights as against theirs in a single and complete proceeding.

Hence, the trial court‘s decision was nullified and set aside. Said court was ordered to proceed with the hearing.



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BIENVENIDO R. MEDRANO and IBAAN RURAL BANK vs . CA, PACITA G. BORBON,JOSEFINA E. ANTONIO and ESTELA A. FLOR

G.R. No. 150678. February 18, 2005

FACTS:

Bienvenido R. Medrano was the Vice-Chairman of Ibaan Rural Bank, a bank owned bythe Medrano family. In 1986, Mr. Medrano asked Mrs. Estela Flor, a cousin-in-law, to look for a buyer of a foreclosed asset of the bank, a 17-hectare mango plantation priced at P2,200,000.00.Mr. Dominador Lee, a businessman from Makati City, was a client of respondent Mrs. Pacita G.Borbon, a licensed real estate broker. Borbon relayed to her business associates and friends thatshe had a ready buyer for a mango orchard. Flor then advised her that her cousin-in-law owned amango plantation which was up for sale. She told Flor to confer with Medrano and to give thema written authority to negotiate the sale of the property. Thus, Medrano issued the Letter ofAuthority in favor of Pacita G. Borbon and Josefina E. Antonio.

A Deed of Sale was eventually executed between the bank, represented by its

President/General Manager Teresa M. Ganzon (as Vendor) and KGB Farms, Inc., represented byDominador Lee (as Vendee), for the purchase price of P1,200,000.00. Since the sale of the property was consummated, the respondents asked from the petitioners their commission, or 5%of the purchase price. The petitioners refused to pay and offered a measly sum of P5,000.00each. Hence, the respondents were constrained to file an action against herein petitioners.

The trial court rendered a Decision in favor of the respondents. It found that the letter ofauthority was valid and binding as against Medrano and the Ibaan Rural bank. Medrano signedthe said letter for and in behalf of the bank, and as owner of the property, promising to pay therespondents a 5% commission for their efforts in looking for a purchaser of the property. He is,therefore, estopped from denying liability on the basis of the letter of authority he issued in favorof the respondents. The trial court further stated that the sale of the property could not have been possible without the representation and intervention of the respondents. As such, they are entitledto the broker‘s commission of 5% of the selling price of P1,200,000.00 as evidenced by the deedof sale. On appeal, the CA affirmed the trial court‘s decision.

ISSUE:Whether or not the Court of Appeals erred in affirming the trial court‘s decision.

RULING:There can be no other conclusion than the respondents are indeed the procuring cause of

the sale. If not for the respondents, Lee would not have known about the mango plantation beingsold by the petitioners. The sale was consummated. The bank had profited from suchtransaction. It would certainly be iniquitous if the respondents would not be rewarded theircommission pursuant to the letter of authority. Hence, the Court of Appeal‘s decision is affirmed.



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MANUEL B. TAN, GREGG M. TECSON and ALEXANDER SALDAÑA,vs. EDUARDO R. GULLAS and NORMA S. GULLAS

G.R. No. 143978. December 3, 2002

FACTS:

Spouses Eduardo R. Gullas and Norma S. Gullas, were the registered owners of a parcelof land measuring 104,114 sq. m., with Transfer Certificate of Title No. 31465. On June 29,1992, they executed a special power of attorney authorizing petitioners Manuel B. Tan, alicensed real estate broker, and his associates Gregg M. Tecson and Alexander Saldaña, tonegotiate for the sale of the land at P550.00 per square meter, at a commission of 3% of the gross price. The power of attorney was non-exclusive and effective for one month from June 29, 1992.On the same date, petitioner Tan contacted Engineer Ledesma, construction manager of theSisters of Mary of Banneaux, Inc. (hereafter, Sisters of Mary), a religious organization interestedin acquiring a property.

On 1, 1992, petitioner Tan visited the property with Engineer Ledesma. Thereafter, thetwo men accompanied Sisters Michaela Kim and Azucena Gaviola, representing the Sisters of

Mary, who had seen and inspected the land, found the same suitable for their purpose andexpressed their desire to buy it. However, they requested that the selling price be reduced toP530.00 per square meter instead of P550.00 per square meter. Private respondent EduardoGullas referred the prospective buyers to his wife.

It was the first time that the buyers came to know that private respondent Eduardo Gullaswas the owner of the property. Private respondents agreed to sell the property to the Sisters ofMary, and subsequently executed a special power of attorney in favor of Eufemia Cañete, givingher the special authority to sell, transfer and convey the land at a fixed price of P200.00 persquare meter. Attorney-in-fact Cañete executed a deed of sale in favor of the Sisters of Mary forthe price of P20,822,800.00, or at the rate of P200.00 per square meter. The buyers subsequently paid the corresponding taxes. Thereafter, the Register of Deeds of issued TCT No. 75981 in thename of the Sisters of Mary of Banneaux, Inc.

Earlier, on July 3, 1992, petitioners went to see private respondent Eduardo Gullas toclaim their commission, but the latter told them that he and his wife have already agreed to sellthe pro perty to the Sisters of Mary. Private respondents refused to pay the broker‘s fee andalleged that another group of agents was responsible for the sale of land to the Sisters of Mary.

petitioners filed a complaint against the defendants for recovery of their broker‘s fee inthe sum of P1,655,412.60, as well as moral and exemplary damages and attorney‘s fees. Theyalleged that they were the efficient procuring cause in bringing about the sale of the property tothe Sisters of Mary, but that their efforts in consummating the sale were frustrated by the privaterespondents who, in evident bad faith, malice and in order to evade payment of broker‘s fee,dealt directly with the buyer whom petitioners introduced to them. They further pointed out thatthe deed of sale was undervalued obviously to evade payment of the correct amount of capitalgains tax, documentary stamps and other internal revenue taxes.In their answer, private respondents countered that, contrary to petitioners‘ claim, they were notthe efficient procuring cause in bringing about the consummation of the sale because another broker, Roberto Pacana, introduced the property to the Sisters of Mary ahead of the petitioners.Private respondents maintained that when petitioners introduced the buyers to private respondentEduardo Gullas, the former were already decided in buying the property through Pacana, whohad been paid his commission. Private respondent Eduardo Gullas admitted that petitioners werein his office on July 3, 1992, but only to ask for the reimbursement of their cellular phoneexpenses.

After trial, the lower court rendered judgment in favor of petitioners. Eduardo and NormaGullas were ordered to pay jointly and severally plaintiffs Manuel Tan, Gregg Tecson andAlexander Saldaña the sum of P624,684.00 as broker‘s fee with legal interest at the rate of 6% per annum from the date of filing of the complaint; and the sum of P50,000.00 as attorney‘s feesand costs of litigation.

The Court of Appeals reversed and set aside the lower court‘s de cision and renderedanother judgment dismissing the complaint.



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ISSUE:

Whether or not the Court of Appeals erred in dismissing the complaint.

RULING:

It is readily apparent that private respondents are trying to evade payment of thecommission which rightfully belongs to petitioners as brokers with respect to the sale. There wasno dispute as to the role that petitioners played in the transaction. At the very least, petitioners setthe sale in motion. They were not able to participate in its consummation only because they were prevented from doing so by the acts of the private respondents. In the case of Alfred Hahn v.

Court of Appeals and Bayerische Motoren Werke Aktiengesellschaft (BMW) the SC ruled that,―An agent receives a commission upon the successful conclusion of a sale. On the other hand, abroker earns his pay merely by bringing the buyer and the seller together, even if no sale iseventually made.‖ Clearly, therefore, petitioners, as brokers, should be entitled to thecommission whether or not the sale of the property subject matter of the contract was concluded

through their efforts.Hence, the trial court‘s decision is reinstated.



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JESUS M. GOZUN vs. JOSE TEOFILO T. MERCADOG.R. No. 167812 December 19, 2006

FACTS:

In the local elections of 1995, respondent vied for the gubernatorial post in Pampanga.Upon respondent‘s request, petitioner, owner of JMG Publishing House, a printing shop,submitted to respondent draft samples and price quotation of campaign materials.

By petitioner‘s claim, respondent‘s wife had told him that respondent already approvedhis price quotation and that he could start printing the campaign materials, hence, he did printcampaign materials. Given the urgency and limited time to do the job order, petitioner availed ofthe services and facilities of Metro Angeles Printing and of St. Joseph Printing Press, owned byhis daughter Jennifer Gozun and mother Epifania Macalino Gozun, respectively.

Petitioner delivered the campaign materials to respondent‘s headquarters. On March 31, 1995, respondent‘s sister -in-law, Lilian Soriano obtained from petitioner

―cash advance‖ of P253,000 allegedly for the allowances of poll watchers who were attending a

seminar and for other related expenses. Lilian acknowledged on petitioner‘s 1995 diary receipt ofthe amount.Petitioner later sent respondent a Statement of Account in the total amount of P2,177,906

itemized as follows: P640,310 for JMG Publishing House; P837,696 for Metro Angeles Printing;P446,900 for St. Joseph Printing Press; and P253,000, the ―cash advance‖ obtained by Lilian.Respondent‘s wife partially paid P1,000,000 to petitioner who issued a receipt therefor. Despiterepeated demands and respondent‘s promise to pay, respondent failed to settle the balance of hisaccount to petitioner.

Petitioner thus filed with the RTC a complaint against respondent to collect the remainingamount of P1,177,906 plus ―inflationary adjustment‖ and attorney‘s fees. The trial courtrendered judgment in favor of the petitioner. The CA however, reversed the trial court‘s decisionand dismissed the complaint for lack of cause of action.

ISSUE:

Whether or not the Court of Appeals erred in reversing the trial courts‘ decision.

RULING:

Petitioner is the real party in interest in this case. The trial court‘s findings on the matterwere affirmed by the appellate court. It erred, however, in not declaring petitioner as a real partyin interest insofar as recovery of the cost of campaign materials made by petitioner‘s mother andsister are concerned, upon the wrong notion that they should have been, but were not, impleadedas plaintiffs.

Thus, respondent has the obligation to pay the total cost of printing his campaignmaterials delivered by petitioner in the total of P1,924,906, less the partial payment ofP1,000,000, or P924,906.



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STA. LUCIA REALTY V. SPS. BUENAVENTURAG.R. No. 177113 Oct 2, 2009

FACTS:

Respondent-spouses Francisco Segismundo and Emilia Buenaventura, represented byRicardo Segismundo, filed before the Housing and Land Use Regulatory Board (HLRUB) aComplaint against petitioner Sta. Lucia Realty & Development, Inc. for Specific Performance,Damages and Attorney‘s Fees. Respondents alleged that they bought a lot known as Lot 3,Block 4, Phase II at Greenwood Executive Village, Cainta, Rizal from Loida Gonzales Alfonso;that the said lot is part of a subdivision project owned and being developed by petitioner; that inthe course of the construction of their house, respondents discovered that their lot had beensubdivided and occupied by Marilou Panlaque and Ma. Veronica Banez; and that likerespondents, the two occupants were also issued a construction permit by petitioner.Respondents thus demanded from petitioner the rightful possession of their lot; but to no avail. Inits Answer, petitioner averred that respondents had no cause of action against it because it has no

transaction record regarding Lot 3, Block 4, Phase II; that the said lot actually belonged to ACLDevelopment Corporation, its joint-venture partner; that it was RCD Realty Corporation whichcaused the subdivision of the lot and constructed separate residential buildings thereon; that RCDRealty Corporation‘s lot was actually Lot 3, Block 4, Phase II-A; and that respondents, in badfaith and in a retaliatory manner, erected their own house on Lot 4 which belonged to a differentowner. Petitioner suggested that to remedy the situation, respondents, RCD Realty Corporation,and the real owner of Lot 4, should agree to a three-way exchange of their respective propertiesas it has been verified that the areas of their lots are the same.

On September 1, 1997, petitioner filed a third-party complaint against ACL DevelopmentCorporation and RCD Realty Corporation. Petitioner prayed that in the event that it be adjudgedliable for any of the claims of respondents, ACL Development Corporation and RCD RealtyCorporation should be held jointly and severally liable for said claims or an amount equivalentthereto. ACL Development Corporation alleged that petitioner was responsible for the issuanceof all construction permits on the subdivision project; hence, it was the one that caused theconfusion among all parties. On the other hand, RCD Realty Corporation alleged that it was a builder in good faith. On June 16, 1998, the HLURB‘s Arbiter for the National Capital RegionField Office issued a Decision directing respondent Sta. Lucia Realty and DevelopmentCorporation, Inc. to cause to be vacated complainant‘s lot denominated as Lot No. 3, Block No.4, Phase II, Greenwood Executive Village, Cainta, Rizal; and In the alternative, the aforesaidrespondent is ordered to reimburse the complainant the current market value of the subdivisionlot which shall in no case be less than P4,500.00 per square meter, the prevailing price in thearea. On June 24, 1999, the HLURB Board of Commissioners affirmed the Decision of theHLURB Arbiter with modification that the market value of the subject lot, stated in paragraph 2of the dispositive portion, be reduced from P4,500.00 to P3,200.00 per square meter, plus 12%interest per annum from the time of the filing of the complaint. On July 18, 2003, the Office ofthe President issued a Decision affirming the June 24, 1999 Decision of the HLURB Board ofCommissioners. Subsequently, it issued a Resolution dated November 28, 2003 denying petitioner‘s Motion for Reconsideration. On December 21, 2006, the Court of Appeals affirmedthe Decision of the Office of the President. The appellate court found that it was petitioner whocaused the confusion in the identity of the lots by its issuance of a construction permit to RCDRealty Corporation; that petitioner was remiss and negligent in complying with its obligationstowards its buyers, their heirs, assignees, and/or successors-in-interest when it failed to deliverthe property described in respondents‘ title. On March 21, 2007, the Court of Appeals denied petitioner‘s Motion for Reconsideration. Hence, this Petition for Review on Certiorari.

ISSUE:

Whether or not the CA erred in affirming that the petitioner is liable in a complaint forspecific performance.



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HELD:

The Supreme Court held that the petition was without merit. Article 1311 of the NewCivil Code states that, ―contracts take effect only between the parties, their assigns and heirs,

except in case where the rights and obligations arising from the contract are not transmissible bytheir nature, or by stipulation or by provision of law.‖ In this case, the rights and obligations between petitioner and Alfonso are transmissible. There was no mention of a contractualstipulation or provision of law that makes the rights and obligations under the original salescontract for Lot 3, Block 4, Phase II intransmissible. Hence, Alfonso can transfer her ownershipover the said lot to respondents and petitioner is bound to honor its corresponding obligations tothe transferee or new lot owner in its subdivision project. Having transferred all rights andobligations over Lot 3, Block 4, Phase II to respondents, Alfonso could no longer be consideredas an indispensable party. An indispensable party is one who has such an interest in thecontroversy or subject matter that a final adjudication cannot be made in his absence, withoutinjuring or affecting that interest. Contrary to petitioner‘s claim, Alfonso no longer has an

interest on the subject matter or the present controversy, having already sold her rights andinterests on Lot 3, Block 4, Phase II to herein respondents. We agree with the appellate court‘sfinding that petitioner was remiss and negligent in the performance of its obligations towards its buyers, their heirs, assignees, and/or successors-in-interest; and that it was petitioner‘snegligence which caused the confusion on the identity of the lot, which likewise resulted to theerroneous construction done by RCD Realty Corporation. Petitioner cannot pass the blame toRCD Realty Corporation because it is undisputed that it issued a construction permit for Lot 3,Block 4, Phase II – the property of respondents.

For its gross negligence which resulted to the erroneous construction on Lot 3, Block 4,Phase II and caused respondents undue damage and prejudice, petitioner is rightfully adjudged by the HLURB Arbiter liable for P100,000.00 moral damages, P50,0000.00 exemplary damages,and P50,000.00 attorney‘s fees. We agree with the ruling of the HLURB Arbiter that it will bemore equitable and practicable to rescind the obligation of petitioner to deliver possession of Lot3, Block 4, Phase II to respondents; and in exchange, pay the value of the lot by way ofreimbursement in accordance with the price modification stated by the HLURB Board ofCommissioners. Moreover, this ruling comes within the purview of respondents‘ final prayer for―other reliefs, just or equitable under the premises‖ and they are evidently in accord with suchoutcome as they did not appeal the case or insist on claiming back their lot. However, we findthat the applicable interest rate for the amount to be reimbursed to respondents is 6% per annum,reckoned from the time of the filing of the complaint, because the case at bar involves a breachof obligation and not a loan or forbearance of money. Thus the petition for Review on Certiorariis PARTIALLY GRANTED. The assailed Decision of the Court of Appeals in CA-G.R. SP No.81732, affirming the July 18, 2003 Decision of the Office of the President in O.P. Case No. 20-A-8937, and the Resolution denying the motion for reconsideration are AFFIRMED withMODIFICATION that the applicable interest rate for the amount to be reimbursed torespondents is 6% per annum, computed from the time of the filing of respondents‘ complaint,and 12% per annum from the finality of the judgment until the amount awarded is fully paid.



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JOSEPH CHAN, WILSON CHAN and LILY CHAN VS. BONIFACIO S. MACEDA, JR402 SCRA

G.R. No. 142591 352 2003 Apr 30

FACTS:

On July 28, 1976, Bonifacio S. Maceda, Jr., herein respondent, obtained a P7.3 millionloan from the Development Bank of the Philippines for the construction of his New Gran HotelProject in Tacloban City. Thereafter, on September 29, 1976, respondent entered into a buildingconstruction contract with Moreman Builders Co., Inc. They agreed that the construction would be finished not later than December 22, 1977. Respondent purchased various constructionmaterials and equipment in Manila. Moreman, in turn, deposited them in the warehouse ofWilson and Lily Chan, herein petitioners. The deposit was free of charge. Unfortunately,Moreman failed to finish the construction of the hotel at the stipulated time. Hence, on February1, 1978, respondent filed with the then CFI an action for rescission and damages againstMoreman. On November 28, 1978, the CFI rendered its Decision rescinding the contract

between Moreman and respondent and awarding to the latter P445,000.00 as actual, moral andliquidated damages; P20,000.00 representing the increase in the construction materials; andP35,000.00 as attorney‘s fees. Moreman interposed an appeal to the Court of Appeals but thesame was dismissed on March 7, 1989 for being dilatory. He elevated the case to the SC via a petition for review on certiorari. In a Decision dated February 21, 1990, the Court denied the petition. On April 23, 1990 an Entry of Judgment was issued.

Meanwhile, during the pendency of the case, respondent ordered petitioners to return tohim the construction materials and equipment which Moreman deposited in their warehouse.Petitioners, however, told them that Moreman withdrew those construction materials in 1977.Hence, on December 11, 1985, respondent filed with the RTC an action for damages with anapplication for a writ of preliminary attachment against petitioners.

ISSUE:

Whether or not respondent have the right to demand the release of the said materials andequipment or claim for damages.

RULING:

At the outset, the case should have been dismissed outright by the trial court because of patent procedural infirmities. Even without such serious procedural flaw, the case should also bedismissed for utter lack of merit. Under Article 1311 of the Civil Code, contracts are bindingupon the parties (and their assigns and heirs) who execute them. When there is no privity ofcontract, there is likewise no obligation or liability to speak about and thus no cause of actionarises. Specifically, in an action against the depositary, the burden is on the plaintiff to prove the bailment or deposit and the performance of conditions precedent to the right of action. Adepositary is obliged to return the thing to the depositor, or to his heirs or successors, or to the person who may have been designated in the contract.

In the present case, the record is bereft of any contract of deposit, oral or written, between petitioners and respondent. If at all, it was only between petitioners and Moreman. Andgranting arguendo that there was indeed a contract of deposit between petitioners and Moreman,it is still incumbent upon respondent to prove its existence and that it was executed in his favor.However, respondent miserably failed to do so. The only pieces of evidence respondent presented to prove the contract of deposit were the delivery receipts. Significantly, they areunsigned and not duly received or authenticated by either Moreman, petitioners or respondent orany of their authorized representatives. Hence, those delivery receipts have no probative value atall. While our laws grant a person the remedial right to prosecute or institute a civil actionagainst another for the enforcement or protection of a right, or the prevention or redress of awrong, every cause of action ex-contractu must be founded upon a contract, oral or written,



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express or implied. Moreover, respondent also failed to prove that there were constructionmaterials and equipment in petitioners‘ warehouse at the time he made a demand for their return.Considering that respondent failed to prove (1) the existence of any contract of deposit betweenhim and petitioners, nor between the latter and Moreman in his favor, and (2) that there wereconstruction materials in petitioners‘ warehouse at the time of respondent‘s demand to return the

same, we hold that petitioners have no corresponding obligation or liability to respondent withrespect to those construction materials.



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TIMOTEO BALUYOT, et al. VS. COURT OF APPEALS1999 Jul 22

FACTS:

Petitioners are residents of Barangay Cruz-na-Ligas. Diliman, Quezon City. The Cruz-na-Ligas Homesite Association, Inc. is a non-stock corporation of which petitioners and otherresidents of Barangay Cruz-na-Ligas are members.

Petitioners filed a complaint for specific performance and damages against privaterespondent University of the Philippines before the RTC. The complaint was later on amended toinclude private respondent Quezon City government as defendant.

that plaintiffs and their ascendants are owners since memory can no longer recall of that parcel of riceland known Sitio Libis, Barrio Cruz-na-Ligas, Quezon City (now Diliman, QuezonCity), while the members of the plaintiff Association and their ascendants have possessed since

time immemorial openly, adversely, continuously and also in the concept of an owner, the rest ofthe area embraced by and within the Barrio Cruz-na-Ligas, Diliman, Quezon City;

that since October 1972, the claims of the plaintiffs and/or members of plaintiffAssociation have been the subject of quasi-judicial proceedings and administrative investigationsin the different branches of the government penultimately resulting in the issuance of thatIndorsement dated May 7, 1975 by the Bureau of Lands, and ultimately, in the issuance of theIndorsement of February 12, 1985, by the office of the President of the Rep. of the Philippinesconfirming the rights of the bonafide residents of Barrio Cruz-na-Ligas to the parcel of land theyhave been possessing or occupying;

that defendant UP, pursuant to the said Indorsement from the Office of the President ofthe Rep. of the Philippines, issued that Reply Indorsement wherein it approved the donation ofabout 9.2 hectares of the site, directly to the residents of Brgy. Krus Na Ligas. After severalnegotiations with the residents, the area was increased to 15.8 hectares (158,379 square meters);

that, however, defendant UP backed-out from the arrangement to donate directly to the plaintiff Association for the benefit of the qualified residents and high-handedly resumed tonegotiate the donation thru the defendant Quezon City Government under the termsdisadvantageous or contrary to the rights of the bonafide residents of the Barrio; that plaintiffAssociation forthwith amended its petition and prayed for a writ of preliminary injunction torestrain defendant UP from donating the area to the defendant Quezon City Government whichwas granted;

that in the hearing of the Motion for Reconsideration filed by defendant UP, plaintiffAssociation finally agreed to the lifting of the said Order granting the injunction after defendantUP made an assurance in their said Motion that the donation to the defendant Quezon CityGovernment will be for the benefit of the residents of Cruz-Na-Ligas;

that, however, defendant UP took exception to the aforesaid Order lifting the Order ofInjunction and insisted on the dismissal of the case;

that plaintiff manifested its willingness to the dismissal of the case, provided, that thearea to be donated thru the defendant Quezon City government be subdivided into lots to begiven to the qualified residents together with the certificate of titles, without cost;

that defendant UP failed to deliver the certificate of title covering the property to bedonated thus the defendant Quezon City Government was not able to register the ownership sothat the defendant Quezon City Government can legally and fully comply with their obligationsunder the said deed of donation;that upon expiration of the period of eighteen (18) months, foralleged non-compliance of the defendant Quezon City Government with terms and conditions



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quoted in par. 16 hereof, defendant UP thru its President, Mr. Jose Abueva, unilaterally,capriciously, whimsically and unlawfully issued that Administrative Order No. 21 declaring thedeed of donation revoked and the donated property be reverted to defendant UP.

The petitioners, then, prayed that a writ of preliminary injunction or at least a temporaryrestraining order be issued, ordering defendant UP to observe status quo; thereafter, after due

notice and hearing, a writ of preliminary injunction be issued; (a) to restrain defendant UP or totheir representative from ejecting the plaintiffs from and demolishing their improvements on thericeland or farmland situated at Sitio Libis; (b) to order defendant UP to refrain from executinganother deed of donation in favor another person or entity and in favor of non-bonafide residentsof Barrio Cruz-na-Ligas different from the Deed of Donation, and after trial on the merits, judgment be rendered:declaring the Deed of Donation as valid and subsisting and ordering thedefendant UP to abide by the terms and conditions thereof.

The Court of Appeals reversed the decision of the trial court.

ISSUE:Whether or not defendant UP could execute another deed of donation in favor of third

person.

RULING:

The Court found all the elements of a cause of action contained in the amended complaintof petitioners. While, admittedly, petitioners were not parties to the deed of donation, theyanchor their right to seek its enforcement upon their allegation that they are intended beneficiaries of the donation to the Quezon City government. Art. 1311, second paragraph, ofthe Civil Code provides:

If a contract should contain some stipulation in favor of a third person, he may demand its

fulfillment provided he communicated his acceptance to the obligor before its revocation. A mereincidental benefit or interest of a person is not sufficient. The contracting parties must have

clearly and deliberately conferred a favor upon a third person.

Under this provision of the Civil Code, the following requisites must be present in orderto have a stipulation pour autrui:(1) there must be a stipulation in favor of a third person; (2) thestipulation must be a part, not the whole of the contract;(3) the contracting parties must haveclearly and deliberately conferred a favor upon a third person, not a mere incidental benefit orinterest; (4) the third person must have communicated his acceptance to the obligor before itsrevocation; and (5) neither of the contracting parties bears the legal representation orauthorization of the third party.

The allegations in the following paragraphs of the amended complaint are sufficient to bring petitioners‘ action within the purview of the second paragraph of Art. 1311 on stipulations pour autrui:

1. Paragraph 17, that the deed of donation contains a stipulation that the Quezon Citygovernment, as donee, is required to transfer to qualified residents of Cruz-na-Ligas, by way ofdonations, the lots occupied by them;

2. The same paragraph, that this stipulation is part of conditions and obligations imposed by UP,as donor, upon the Quezon City government, as donee;

3. Paragraphs 15 and 16, that the intent of the parties to the deed of donation was to confer afavor upon petitioners by transferring to the latter the lots occupied by them;

4. Paragraph 19, that conferences were held between the parties to convince UP to surrender thecertificates of title to the city government, implying that the donation had been accepted by petitioners by demanding fulfillment thereof and that private respondents were aware of suchacceptance; and



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5. All the allegations considered together from which it can be fairly inferred that neither of private respondents acted in representation of the other; each of the private respondents had itsown obligations, in view of conferring a favor upon petitioners.

The amended complaint further alleges that respondent UP has an obligation to transfer

the subject parcel of land to the city government so that the latter can in turn comply with itsobligations to make improvements on the land and thereafter transfer the same to petitioners butthat, in breach of this obligation, UP failed to deliver the title to the land to the city governmentand then revoked the deed of donation after the latter failed to fulfill its obligations within thetime allowed in the contract. For the purpose of determining the sufficiency of petitioners‘ causeof action, these allegations of the amended complaint must be deemed to be hypothetically true.So assuming the truth of the allegations, we hold that petitioners have a cause of action againstUP.

The decision of the Court of Appeals is reversed and the case is remanded to the RTC ofQuezon City for trial on the merits.



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SPOUSES ADELINA S. CUYCO and FELICIANO U. CUYCOvs.

SPOUSES RENATO CUYCO and FILIPINA CUYCOG.R. No. 168736 April 19, 2006

FACTS:Petitioners obtained a loan in the amount of P1,500,000.00 from respondents payable

within one year at 18% interest per annum, and secured by a Real Estate Mortgage over a parcelof land with improvements thereon situated in Cubao, Quezon City covered by a TCT.

Subsequently, petitioners obtained additional loans from the respondents in the aggregateamount of P1,250,000.00, broken down as follows: (1) P150,000.00 on May 30, 1992; (2)P150,000.00 on July 1, 1992; (3) P500,000.00 on September 5, 1992; (4) P200,000.00 onOctober 29, 1992; and (5) P250,000.00 on January 13, 1993.

Petitioners made payments amounting to P291,700.00, but failed to settle theiroutstanding loan obligations. Respondents filed a complaint for foreclosure of mortgage with theRTC. They alleged that petitioners‘ loans were secured by the real estate mortgage; that as ofAugust 31, 1997, their indebtedness amounted to P6,967,241.14, inclusive of the 18% interestcompounded monthly; and that petitioners‘ refusal to settle the same entitles the respondents toforeclose the real estate mortgage.

Petitioners filed a motion to dismiss on the ground that the complaint states no cause ofaction which was denied by the RTC for lack of merit. Petitioners admitted their loan obligations but argued that only the original loan of P1,500,000.00 was secured by the real estate mortgageat 18% per annum and that there was no agreement that the same will be compounded monthly.

The RTC rendered judgment in favor of the respondents and ordered the petitioners to pay to the Court or to the respondents the amounts of P6,332,019.84, plus interest until fully paid, P25,000.00 as attorney‘s fees, and costs of suit, within a period of 120 days from the entryof judgment, and in case of default of such payment and upon proper motion, the property shall be ordered sold at public auction to satisfy the judgment.

The CA partially granted the petition and modified the RTC decision insofar as theamount of the loan obligations secured by the real estate mortgage. It held that by expressintention of the parties, the real estate mortgage secured the original P1,500,000.00 loan and thesubsequent loans of P150,000.00 and P500,000.00 obtained on July 1, 1992 and September 5,1992, respectively. As regards the loans obtained on May 31, 1992, October 29, 1992 andJanuary 13, 1993 in the amounts of P150,000.00, P200,000.00 and P250,000.00, respectively, theappellate tribunal held that the parties never intended the same to be secured by the real estatemortgage.

Hence, this petition.

ISSUE:

Whether or not petitioners must pay respondents legal interest of 12% per annum on thestipulated interest of 18% per annum, computed from the filing of the complaint until fully paid.

RULING:

Applying the rules in the computation of interest, the principal amount of loans subject ofthe real estate mortgage must earn the stipulated interest of 18% per annum, which interest, aslong as unpaid, also earns legal interest of 12% per annum, computed from the date of the filingof the complaint on September 10, 1997 until finality of the Court‘s Decision. Such interest isnot due to stipulation but due to the mandate of the law as embodied in Article 2212 of the CivilCode. From such date of finality, the total amount due shall earn interest of 12% per annum untilsatisfied



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Certainly, the computed interest from the filing of the complaint on September 10, 1997would no longer be true upon the finality of this Court‘s decision. In accordance with the ruleslaid down in Eastern Shipping Lines, Inc. v. Court of Appeals, the SC derived the followingformula for the RTCs guidance:

TOTAL AMOUNT DUE = [principal + interest + interest on interest] - partial paymentsmadeInterest = principal x 18 % per annum x no. of years from due date until finality of

judgmentInterest on interest = Interest computed as of the filing of the complaint (September 10,

1997) x 12% x no. of years until finality of judgmentTotal amount due as of the date of finality of judgment will earn an interest of 12% per

annum until fully paid.

Hence, the SC affirmed the CA decision with modifications. It ordered petitioners to paythe respondents (1) the total amount due, as computed by the RTC in accordance with the

formula specified above, (2) the legal interest of 12% per annum on the total amount due fromsuch finality until fully paid, (3) the reasonable amount of P25,000.00 as attorney‘s fees, and (4)the costs of suit, within a period of not less than 90 days nor more than 120 days from the entryof judgment, and in case of default of such payment the property shall be sold at public auctionto satisfy the judgment.



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GO V. CORDEROG.R. No. 164703 May 4, 2010

FACTS:

Mortimer F. Cordero, Vice-President of Pamana Marketing Corporation (Pamana),ventured into the business of marketing inter-island passenger vessels. After contacting variousoverseas fast ferry manufacturers from all over the world, he came to meet Tony Robinson, anAustralian national based in Brisbane, Australia, who is the Managing Director of AluminiumFast Ferries Australia (AFFA). Between June and August 1997, Robinson signed documentsappointing Cordero as the exclusive distributor of AFFA catamaran and other fast ferry vesselsin the Philippines. As such exclusive distributor, Cordero offered for sale to prospective buyersthe 25-meter Aluminium Passenger catamaran known as the SEACAT 25. After negotiationswith Felipe Landicho and Vincent Tecson, lawyers of Allan C. Go who is the owner/operator ofACG Express Liner of Cebu City, a single proprietorship, Cordero was able to close a deal for

the purchase of two SEACAT 25. Accordingly, the parties executed Shipbuilding Contract No.7825 for one high-speed catamaran (SEACAT 25) for the price of US$1,465,512.00. Peragreement between Robinson and Cordero, the latter shall receive commissions totallingUS$328,742.00, or 22.43% of the purchase price, from the sale of each vessel. Cordero madetwo trips to the AFFA Shipyard in Brisbane, Australia, and on one occasion even accompaniedGo and his family and Landicho, to monitor the progress of the building of the vessel. Heshouldered all the expenses for airfare, food, hotel accommodations, transportation andentertainment during these trips. He also spent for long distance telephone calls to communicateregularly with Robinson, Go, Tecson and Landicho. However, Cordero later discovered that Gowas dealing directly with Robinson when he was informed by Dennis Padua of WartsilaPhilippines 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 tofax the requested quotation of the second engine to the Park Royal Hotel in Brisbane where Gowas then staying. Cordero tried to contact Go and Landicho to confirm the matter but they werenowhere to be found, while Robinson refused to answer his calls. Cordero immediately flew toBrisbane to clarify matters with Robinson, only to find out that Go and Landicho were alreadythere in Brisbane negotiating for the sale of the second SEACAT 25. Despite repeated follow-upcalls, 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 handwrittenletter dated June 24, 1998, Cordero informed Go that such act of dealing directly with Robinsonviolated his exclusive distributorship and demanded that they respect the same, without prejudiceto legal action against him and Robinson should they fail to heed the same. Cordero‘s lawyer,Atty. Ernesto A. Tabujara, Jr. of ACCRA law firm, also wrote ACG Express Liner assailing thefraudulent actuations and misrepresentations committed by Go in connivance with his lawyers in breach of Cordero‘s exclusive distributorship appointment. On August 21, 1998, Corderoinstituted 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 exclusivedistributorship in bad faith and wanton disregard of his rights, thus depriving him of his duecommissions (balance of unpaid commission from the sale of the first vessel in the amount ofUS$31,522.01 and unpaid commission for the sale of the second vessel in the amount ofUS$328,742.00) and causing him actual, moral and exemplary damages, including P800,000.00representing expenses for airplane travel to Australia, telecommunications bills andentertainment, on account of AFFA‘s untimely cancellation of the exclusive distributorshipagreement. Cordero also prayed for the award of moral and exemplary damages, as well asattorney‘s f ees and litigation expenses. The trial court rendered its decision in favor of Plaintiffand against defendants Allan C. Go, Tony Robinson, Felipe Landicho, and Vincent Tecson. As prayed for, defendants are hereby ordered to pay Plaintiff jointly and solidarilY. On January 29,2001, the CA rendered judgment granting the petition for certiorari hence the appeal.



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ISSUE:

Whether or not the CA erred in holding the prtitioner liable for the breach.

HELD:

In the case at bar, it was established that petitioner Cordero was not paid the balance ofhis commission by respondent Robinson. From the time petitioner Go and respondent Landichodirectly dealt with respondent Robinson in Brisbane, and ceased communicating through petitioner Cordero as the exclusive distributor of AFFA in the Philippines, Cordero was nolonger informed of payments remitted to AFFA in Brisbane. In other words, Cordero had clearly been cut off from the transaction until the arrival of the first SEACAT 25 which was soldthrough his efforts. When Cordero complained to Go, Robinson, Landicho and Tecson abouttheir acts prejudicial to his rights and demanded that they respect his exclusive distributorship,Go simply let his lawyers led by Landicho and Tecson handle the matter and tried to settle it by promising to pay a certain amount and to purchase high-speed catamarans through Cordero.However, Cordero was not paid anything and worse, AFFA through its lawyer in Australia even

terminated his exclusive dealership insisting that his services were engaged for only onetransaction, that is, the purchase of the first SEACAT 25 in August 1997.We find that contrary to the claims of petitioner Cordero, there was indeed no sufficient

evidence that respondents actually purchased a second SEACAT 25 directly from AFFA. Butthis circumstance will not absolve respondents from liability for invading Cordero‘s rights underthe exclusive distributorship. Respondents clearly acted in bad faith in bypassing Cordero asthey completed the remaining payments to AFFA without advising him and furnishing him withcopies of the bank transmittals as they previously did, and directly dealt with AFFA throughRobinson regarding arrangements for the arrival of the first SEACAT 25 in Manila andnegotiations for the purchase of the second vessel pursuant to the Memorandum of Agreementwhich Cordero signed in behalf of AFFA. As a result of respondents‘ actuations, Corderoincurred losses as he was not paid the balance of his commission from the sale of the first vesseland his exclusive distributorship revoked by AFFA. While it is true that a third person cannot possibly be sued for breach of contract because only parties can breach contractual provisions, acontracting party may sue a third person not for breach but for inducing another to commit such breach. Article 1314 of the Civil Code provides that any third person who induces another toviolate his contract shall be liable for damages to the other contracting party. The elements oftort interference are: (1) existence of a valid contract; (2) knowledge on the part of the third person of the existence of a contract; and (3) interference of the third person is without legal justification. Thus the petitions was denied. The Decision dated March 16, 2004 as modified bythe Resolution dated July 22, 2004 of the Court of Appeals in CA-G.R. CV No. 69113 arehereby affirmed with modification in that the awards of moral and exemplary damages arehereby reduced to P300,000.00 and P200,000.00.



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TAYAG VS. COURT OF APPEALS219 SCRA 481

FACTS:

Petitioners are the heirs of Juan Galicia, Sr. who are seeking to rescind the deed ofconveyance executed by Galicia, Sr. together with Celerina Labuguin, in favor of AlbrigidoLeyva, respondent involving the undivided one-half portion of a piece of land situated atPoblacion, Guimba, Nueva Ecija. They contend that respondent is in breach of the conditions ofthe deed. Contained in the deed were stipulations regarding the payment and settlement of the purchase price of the land. The respondent however did not strictly comply this with. Despitethe posterior payments however, petitioners accepted them. Respondent, on the contention thathe fulfilled his obligation to pay filed this case for specific performance by the petitioners.

The court of origin which tried the suit for specific performance on account of the herein

petitioner‘s reluctance to abide by the covenant, ruled in favor of the vendee while respondentcourt practically agreed with the trial court except as to the amount to be paid to petitioners andthe refund to private respondent are concerned.

ISSUE:

The issue is whether or not petitioners‘ prayer for the rescission of the deed can prosper.

RULING:

The Supreme Court affirmed the decision of the lower courts.

The suggestion of petitioners that the covenant must be cancelled in the light of privaterespondent‘s so-called breach seems to overlook petitioners‘ demeanor who, instead ofimmediately filing the case precisely to rescind the instrument because of non-compliance,allowed private respondent to effect numerous payments posterior to the grace periods providedin the contract. This apathy of petitioners, who even permitted private respondent to take theinitiative in filing the suit for specific performance against them, is akin to waiver ofabandonment of the right to rescind.



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SO PING BUN VS. COURT OF APPEALS314 SCRA 751

FACTS:

In 1963, Tek Hua Trading Co., through its managing partner, So Pek Giok, entered intolease agreements with lessor Dee C. Chuan and Sons Inc (DCCSI). Subjects of four (4) leasecontracts were premises located at Nos. 930, 930- Int., 924-B and 924-C, Soler Street, Binondo,Manila. Tek Hua used the areas to store its textiles. The contracts each had a one year term.They provided that should the lessee continue to occupy the premises after the term, the leaseshall be on a month to month basis.

When the contracts expired, the parties did not renew the contracts, but Tek Huacontinued to occupy the premises in 1976 Tek Hua Trading Corp. was dissolved. Later, theoriginal members of Tek Hua Trading Co., including Manuel C.Tiong, formed Tek HuaEnterprising Corp., herein respondent corporation.

So Pek Giok, managing partner of Tek Hua Trading, died in 1986. So Pek Giok‘sgrandson, petitioner So Ping Bun, occupied the warehouse for his own textile business,Trendsetter Marketing.

On August 1, 1989, lessor DCCSI sent letters addressed to Tek Hua enterprises,informing the latter of the 25% increase in rent effective September 1, 1989. The rent increasewas later on reduced to 20% effective January 1, 1990, upon other lessees‘ demand. Again onDecember 1, 1990, the lessor implemented a 30% rent increase. Enclosed in these letters werenew lease contracts for signing. DCCSI warned that failure of the lessee to accomplish thecontracts shall be deemed as lack of interest on the lessee‘s part, and agreement to thetermination of the lese. Private respondents did not answer any of these letters. Still, the leasecontracts were not rescinded.

On March 1, 1991, private respondent Tiong sent a letter to petitioner asking Mr. So PingBun to vacate the premise because he used a warehouse.

Petitioner refused to vacate. On March 4, 1992, petitioner requested formal contracts oflease with DCCSI in favor Trendsetter Marketing. So Ping Bun claimed that after the death ofhis grandfather, So Pek Giok, he had been occupying the premises for his textile business andreligiously paid rent. DCCSI acceded to petitioner‘s request. The lease contracts in favor ofTrendsetter were executed.

ISSUE:

Whether the appellate court erred in affirming the trial court‘s decision finding So PingBun guilty of tortuous interference of contact.

RULING:

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

A duty which the law of torts is concerned with is respect for the property of others, andcause of action ex delicto may be predicated upon an unlawful interference by one person of theenjoyment 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, petitioner‘s Trendsetter Marketing asked DCCSI to execute lease contracts in its favor,and as a result petitioner deprived respondent corporation of the latter‘s property right. Clearly,



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and as correctly viewed by the appellate court, the three elements of tort interference abovementioned are present in the instant case.

Authorities debate on whether interference may be justified where the defendant acts forthe 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 exist where theactor‘s motive is to benefit himself. Such justification does not exist where his sole motive is tocause harm to the other. Added to this, some authorities believe that it is not necessary that theinterferer‘s interest outweigh that of the party whose rights are invaded, and that an individualacts under an economic interest that is substantial, not merely I de minimis for he acts in self protection. Moreover, justification for protecting ones financial position should not be made todepend on a comparison of his economic interest in the subject matter with that of others. It issufficient if the impetus of his conduct lies in a proper business interest rather than in wrongfulmotives.

As early as Gilchrist vs. Cuddy we held that where there was no malice in the

interference of a contract, and the impulse behind one‘s conduct lies in a proper business interestrather than in wrongful motives, a party cannot be a malicious interferer. Where the allegedinterferer is financially interested and such interest motivates his conduct it cannot be said that heis an officious or malicious intermeddler.



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INTERNATIONAL FREEPORT V. DANZASG.R. No. 181833, January 26, 2011

FACTS:

Petitioner International Freeport Traders, Inc. (IFTI) ordered a shipment of Tobleronechocolates and assorted confectioneries from Jacobs Suchard Tobler Ltd. of Switzerland throughits Philippine agent, Colombo Merchants Phils., Inc., under the delivery term "F.O.B. Ex-Works." To ship the goods, Jacobs dealt with Danmar Lines of Switzerland which issued toJacobs negotiable house bills of lading [1] signed by its agent, respondent DanzasIntercontinental, Inc.. The bills of lading stated that the terms were "F.O.B." and "freight payable at destination," with Jacobs as the shipper, China Banking Corporation as the consignee,and IFTI as the party to be notified of the shipment. The shipment was to be delivered at theClark Special Economic Zone with Manila as the port of discharge. The goods were alsocovered by Letters of Credit MK-97/0467 and MK-97/0468 under a "freight collect"arrangement.

Since Danmar did not have its own vessel, it contracted Orient Overseas Container Line(OOCL) to ship the goods from Switzerland. OOCL issued a non-negotiable master bill oflading, stating that the freight was prepaid with Danmar as the shipper and Danzas as theconsignee and party to be notified. The shipment was to be delivered at Angeles City inPampanga. Danmar paid OOCL an arbitrary fee of US$425.00 to process the release of thegoods from the port and ship the same to Clark in Angeles City. The fee was to cover brokerage,trucking, wharfage, arrastre, and processing expenses.The goods were loaded on board theOOCL vessel on April 20, 1997 and arrived at the port of Manila on May 14, 1997. Uponlearning from Danmar that the goods had been shipped, Danzas immediately informed IFTI of itsarrival. IFTI prepared the import permit needed for the clearing and release of the goods fromthe Bureau of Customs and advised Danzas on May 20, 1997 to pick up the document. Danzasgot the import permit on May 26, 1997. At the same time, it asked IFTI to surrender the original bills of lading to secure the release of the goods, and 2) submit a bank guarantee inasmuch as theshipment was consigned to China Banking Corporation to assure Danzas that it will becompensated for freight and other charges. But IFTI did not provide Danzas a bank guarantee,claiming that letters of credit already covered the shipment. IFTI insisted that Danzas shouldalready endorse the import permit and bills of lading to OOCL since the latter had been paid anarbitrary fee. But Danzas did not do this. Because IFTI did not provide Danzas with the original bills of lading and the bank guarantee, the latter withheld the processing of the release of thegoods. Danzas reiterated to IFTI that it could secure the release of the goods only if IFTIsubmitted a bank guarantee. Ultimately, IFTI yielded to the request and applied for a bankguarantee which was approved on May 23, 1997. It claimed to have advised Danzas on evendate of its availability for pick up but Danzas secured it only on June 6, 1997.

On January 2, 2002, [3] the MeTC rendered a decision in favor of Danzas and orderedIFTI to pay (1) P181,809.45 plus legal interest to be computed from March 26, 1998 until fully paid; (2) P25,000.00 as attorney's fees; and (3) the costs of suit. On appeal, however, theRegional Trial Court (RTC) [4] of Parañaque City, Branch 274, dismissed the complaint. Danzaselevated the case to the Court of Appeals (CA) which reversed the RTC decision. The CA ruledthat IFTI's fax letters dated June 10, 1997 showed the parties engaged in negotiation stage.When IFTI heeded Danzas' request for a bank guarantee, its action brought about a perfectedcontract of lease of service. The bank guarantee, procured by IFTI, contained all the requisitesof a perfected contract. The cause of the contract was the release of the goods from the port andits delivery at Clark; the consideration was the compensation for the release and delivery of thegoods to IFTI.



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ISSUES:

Whether or not a contract of lease of service exists between IFTI and Danzas; andWhether or not IFTI is liable to Danzas for the costs of the delay in the release of the goods from the

port

HELD:

The facts show the existence of several contracts: one between IFTI and Jacobs,another between Jacobs and Danmar, and still another between Danmar and OOCL. IFTI boughtchocolates and confectioneries from Jacobs; Jacobs got Danmar to deliver the goods to itsdestination; Danmar got OOCL to carry the goods for it by ship to Manila. For this purpose,Danmar paid OOCL an arbitrary fee to process the release of the goods from the port of Manilaand deliver the same to Clark. In all these transactions, Danzas acted as an agent of Danmar whosigned the house bills of lading in favor of Jacobs. What is clear to the Court is that, by accedingto all the documentary requirements that Danzas imposed on it, IFTI voluntarily accepted its

services. The bank guarantee IFTI gave Danzas assured the latter that it would eventually be paidall freight and other charges arising from the release and delivery of the goods to it. Everycontract has the elements of consent of the contracting parties; object certain which is the subjectmatter of the contract; and cause of the obligation which is established. A contract is perfected by mere consent, which is manifested by the meeting of the offer and the acceptance upon thething and the cause which are to constitute the contract.

There is no dispute that under arbitraryshipments, imported goods are allowed to stay, free of charge, in the port for three working days,and in the storage for five to six calendar days. Beyond this period, storage fees, electriccharges, and the demurrage are due. Since the goods arrived at the Port of Manila on May 14,1997, they could remain there until May 20, 1997 free of charge. The fact that IFTI had the

import permit ready by May 20, 1997 was immaterial since it had not yet given the bankguarantee required of it. The Court is not convinced that IFTI had the bank guarantee ready asearly as May 23, 1997 for, if that were the case, surely it did not make sense for it not to handover such document to Danzas when the latter claimed the import permit on May 26, 1997. Sincethe delay in the processing of the release of the goods was due to IFTI's fault, the CA rightlyadjudged it liable for electric charges, demurrage, and storage fees of P122,191.75 from May 20,1997 to June 13, 1999. Hence the Court denied the petition and affirmed the decision datedOctober 25, 2007 of the Court of Appeals in CA-G.R. SP 79597



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ROCKLAND CONSTRUCTION COMPANY, INC vs. MID-PASIG LANDDEVELOPMENT CORPORATIONG.R. No. 164587, February 04, 2008

FACTS:

Rockland Construction Company, Inc. in a letter dated March 1, 2000, offered to leasefrom Mid-Pasig Land Development Corporation the latter‘s 3.1-hectare property in Pasig City.This property is covered by Transfer Certificate of Title Nos. 469702 and 337158 under thecontrol of the Presidential Commission on Good Government. Upon instruction of Mid-Pasig toaddress the offer to the PCGG, Rockland wrote the PCGG on April 15, 2000. The letter,addressed to PCGG Chairman Magdangal Elma, included Rockland‘ proposed terms andconditions for the lease. This letter was also received by Mid-Pasig on April 18, 2000, but Mid-Pasig made no response.

Again, in another letter dated June 8, 2000 addressed to the Chairman of Mid-Pasig, Mr.Ronaldo Salonga, Rockland sent a Metropolitan Bank and Trust Company Check No.2930050168 for P1 million as a sign of its good faith and readiness to enter into the lease

agreement under the certain terms and conditions stipulated in the letter. Mid-Pasig received thisletter on July 28, 2000.In a subsequent follow-up letter dated February 2, 2001, Rockland then said that it

presumed that Mid-Pasig had accepted its offer because the P1 million check it issued had beencredited to Mid-Pasig‘s account on December 5, 2000.

Mid-Pasig, however, denied it accepted Rockland‘s offer and claimed that no check wasattached to the said letter. It also vehemently denied receiving the P1 million check, much lessdepositing it in its account.

In its letter dated February 6, 2001, Mid-Pasig replied to Rockland that it was only uponreceipt of the latter‘s February 2 letter that the former came to know where the check came fromand what it was for. Nevertheless, it categorically informed Rockland that it could not entertainthe latter‘s lease application. Mid-Pasig reiterated its refusal of Rockland‘s offer in a letter datedFebruary 13, 2001.

Rockland then filed an action for specific performance. Rockland sought to compel Mid-Pasig to execute in Rockland‘s favor, a contract of lease over a 3.1-hectare portion of Mid-Pasig‘s property in Pasig City.

The RTC‘s decision:

1. the plaintiff and the defendant have duly agreed upon a valid and enforceable leaseagreement of subject portions of defendant‘s properties comprising an area of 5,000square meters, 11,000 square meters and 15,000 square meters, or a total of 31,000square meters;

2. the principal terms and conditions of the aforesaid lease agreement are as stated in plaintiff‘s June 8, 2000 letter;

3. defendant to execute a written lease contract in favor of the plaintiff containing the principal terms and conditions mentioned in the next-preceding paragraph, within sixty(60) days from finality of this judgment, and likewise ordering the plaintiff to pay rent tothe defendant as specified in said terms and conditions;

4. defendant to keep and maintain the plaintiff in the peaceful possession and enjoyment ofthe leased premises during the term of said contract;

5. defendant to pay plaintiff attorney‘s fees in the sum of One Million Pesos(P1,000,000.00), plus P2,000.00 for every appearance made by counsel in court;

6. The temporary restraining order dated April 2, 2001 is made PERMANENT;7. Dismissed defendant‘s counterclaim.

The Court of Appeals reversed the trial court‘s decision.

ISSUES:1. Was there a perfected contract of lease?2. Had estoppel in pais set in?



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RULING:

1. A close review of the events in this case, in the light of the parties‘ evidence,shows that there was no perfected contract of lease between the parties. Mid-Pasig was not awarethat Rockland deposited the P1 million check in its account. It only learned of Rockland‘s check

when it received Rockland‘s February 2, 2001 letter. Mid-Pasig, upon investigation, also learnedthat the check was deposited at the Philippine National Bank San Juan Branch, instead of PNBOrtigas Branch where Mid-Pasig maintains its account. Immediately, Mid-Pasig wrote Rocklandon February 6, 2001 rejecting the offer, and proposed that Rockland apply the P1 million to itsother existing lease instead. These circumstances clearly show that there was no concurrence ofRockland‘s offer and Mid-Pasig‘s acceptance.

2. Mid-Pasig is also not in estoppel in pais. The doctrine of estoppel is based on thegrounds of public policy, fair dealing, good faith and justice, and its purpose is to forbid one tospeak against his own act, representations, or commitments to the injury of one to whom theywere directed and who reasonably relied thereon. Since estoppel is based on equity and justice, itis essential that before a person can be barred from asserting a fact contrary to his act or conduct,

it must be shown that such act or conduct has been intended and would unjustly cause harm tothose who are misled if the principle were not applied against him.




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METROPOLITAN MANILA DEVELOPMENT AUTHORITY, VS. JANCOMENVIRONMENTAL CORPORATION

G.R. No. 147465 January 30, 2002

FACTS:

The Philippine Government under the Ramos Administration, and through the MetroManila Development Authority (MMDA) Chairman, and the Cabinet Officer for RegionalDevelopment-National Capital Region (CORD-NCR), entered into a contract with respondentJANCOM, on waste-to-energy projects for the waste disposal sites in San Mateo, Rizal andCarmona, Cavite under the build-operate-transfer (BOT) scheme.

However, before President Ramos could have signed the said contract, there was achange in the Administration and EXECOM. Said change caused the passage of the law, theClean Air Act, prohibiting the incineration of garbage and thus, against the contents of saidcontract. The Philippine Government, through the MMDA Chairman, declared said contract

inexistent for several reasons. Herein respondent filed a suit against petitioner. The RegionalTrial Court ruled in favor of the respondent. Instead of filing an appeal to the decision, petitionerfiled a writ of certiorari on the Court of Appeals, which the latter granted. The Regional TrialCourt declared its decision final and executory, for which the petitioner appealed to the CA,which the CA denied such appeal and affirming RTC‘s decision.

ISSUE:

Whether or not a valid contract is existing between herein petitioner and respondent.

RULING:

Under Article 1305 of the Civil Code, ―a contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to rendersome service.‖ A contract undergoes three distinct stages- preparation or negotiation, its perfection, and finally, its consummation. Negotiation begins from the time the prospectivecontracting parties manifest their interest in the contract and ends at the moment of agreement ofthe parties. The perfection or birth of the contract takes place when the parties agree upon theessential elements of the contract. The last stage is the consummation of the contract whereinthe parties fulfill or perform the terms agreed upon in the contract, culminating in theextinguishment thereof. Article 1315 of the Civil Code, provides that a contract is perfected bymere consent. Consent, on the other hand, is manifested by the meeting of the offer and the

acceptance upon the thing and the cause which are to constitute the contract. In the case at bar,the signing and execution of the contract by the parties clearly show that, as between the parties,there was a concurrence of offer and acceptance with respect to the material details of thecontract, thereby giving rise to the perfection of the contract. The execution and signing of thecontract is not disputed by the parties. As the Court of Appeals aptly held: Contrary to petitioners‘ insistence that there was no perfected contract, the meeting of the offer andacceptance upon the thing and the cause, which are to constitute the contract (Arts. 1315 and1319, New Civil Code), is borne out by the records.

Admittedly, when petitioners accepted private respondents‘ bid proposal (offer), therewas, in effect, a meeting of the minds upon the object (waste management project) and the cause

(BOT scheme). Hence, the perfection of the contract. In City of Cebu vs. Heirs of Candido Rubi, the Supreme Court held that ―the effect of an unqualified acceptance of the offer or proposal of the bidder is to perfect a contract, upon notice of the award to the bidder.

In fact, in asserting that there is no valid and binding contract between the parties,MMDA can only allege that there was no valid notice of award; that the contract does not bear



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the signature of the President of the Philippines; and that the conditions precedent specified inthe contract were not complied with.

In asserting that the notice of award to JANCOM is not a proper notice of award, MMDA points to the Implementing Rules and Regulations of Republic Act No. 6957, otherwise known

as the BOT Law, which require that i) prior to the notice of award, an Investment CoordinatingCommittee clearance must first be obtained; and ii) the notice of award indicate the time withinwhich the awardee shall submit the prescribed performance security, proof of commitment ofequity contributions and indications of financing resources.

Admittedly, the notice of award has not complied with these requirements. However, thedefect was cured by the subsequent execution of the contract entered into and signed byauthorized representatives of the parties; hence, it may not be gainsaid that there is a perfectedcontract existing between the parties giving to them certain rights and obligations (conditions precedents) in accordance with the terms and conditions thereof. We borrow the words of theCourt of Appeals:

Petitioners belabor the point that there was no valid notice of award as to constituteacceptance of private respondent‘s offer. They maintain that former MMDA Chairman Oreta‘sletter to JANCOM EC dated February 27, 1997 cannot be considered as a valid notice of awardas it does not comply with the rules implementing Rep. Act No. 6957, as amended. Theargument is untenable.



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ROCKLAND CONSTRUCTION COMPANY, INC vs. MID-PASIG LANDDEVELOPMENT CORPORATIONG.R. No. 164587, February 04, 2008

FACTS:

Rockland Construction Company, Inc. in a letter dated March 1, 2000, offered to leasefrom Mid-Pasig Land Development Corporation the latter‘s 3.1-hectare property in Pasig City.This property is covered by Transfer Certificate of Title Nos. 469702 and 337158 under thecontrol of the Presidential Commission on Good Government. Upon instruction of Mid-Pasig toaddress the offer to the PCGG, Rockland wrote the PCGG on April 15, 2000. The letter,addressed to PCGG Chairman Magdangal Elma, included Rockland‘ proposed terms andconditions for the lease. This letter was also received by Mid-Pasig on April 18, 2000, but Mid-Pasig made no response.

Again, in another letter dated June 8, 2000 addressed to the Chairman of Mid-Pasig, Mr.Ronaldo Salonga, Rockland sent a Metropolitan Bank and Trust Company Check No.2930050168 for P1 million as a sign of its good faith and readiness to enter into the lease

agreement under the certain terms and conditions stipulated in the letter. Mid-Pasig received thisletter on July 28, 2000.In a subsequent follow-up letter dated February 2, 2001, Rockland then said that it

presumed that Mid-Pasig had accepted its offer because the P1 million check it issued had beencredited to Mid-Pasig‘s account on December 5, 2000.

Mid-Pasig, however, denied it accepted Rockland‘s offer and claimed that no check wasattached to the said letter. It also vehemently denied receiving the P1 million check, much lessdepositing it in its account.

In its letter dated February 6, 2001, Mid-Pasig replied to Rockland that it was only uponreceipt of the latter‘s February 2 letter that the former came to know where the check came fromand what it was for. Nevertheless, it categorically informed Rockland that it could not entertainthe latter‘s lease application. Mid-Pasig reiterated its refusal of Rockland‘s offer in a letter datedFebruary 13, 2001.

Rockland then filed an action for specific performance. Rockland sought to compel Mid-Pasig to execute in Rockland‘s favor, a contract of lease over a 3.1-hectare portion of Mid-Pasig‘s property in Pasig City.

The RTC‘s decision:

8. the plaintiff and the defendant have duly agreed upon a valid and enforceable leaseagreement of subject portions of defendant‘s properties comprising an area of 5,000square meters, 11,000 square meters and 15,000 square meters, or a total of 31,000square meters;

9. the principal terms and conditions of the aforesaid lease agreement are as stated in plaintiff‘s June 8, 2000 letter;

10. defendant to execute a written lease contract in favor of the plaintiff containing the principal terms and conditions mentioned in the next-preceding paragraph, within sixty(60) days from finality of this judgment, and likewise ordering the plaintiff to pay rent tothe defendant as specified in said terms and conditions;

11. defendant to keep and maintain the plaintiff in the peaceful possession and enjoyment ofthe leased premises during the term of said contract;

12. defendant to pay plaintiff attorney‘s fees in the sum of One Million Pesos(P1,000,000.00), plus P2,000.00 for every appearance made by counsel in court;

13. The temporary restraining order dated April 2, 2001 is made PERMANENT;14. Dismissed defendant‘s counterclaim.

The Court of Appeals reversed the trial court‘s decision.

ISSUES:3. Was there a perfected contract of lease?4. Had estoppel in pais set in?



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RULING:

3. A close review of the events in this case, in the light of the parties‘ evidence,shows that there was no perfected contract of lease between the parties. Mid-Pasig was not awarethat Rockland deposited the P1 million check in its account. It only learned of Rockland‘s check

when it received Rockland‘s February 2, 2001 letter. Mid-Pasig, upon investigation, also learnedthat the check was deposited at the Philippine National Bank San Juan Branch, instead of PNBOrtigas Branch where Mid-Pasig maintains its account. Immediately, Mid-Pasig wrote Rocklandon February 6, 2001 rejecting the offer, and proposed that Rockland apply the P1 million to itsother existing lease instead. These circumstances clearly show that there was no concurrence ofRockland‘s offer and Mid-Pasig‘s acceptance.

4. Mid-Pasig is also not in estoppel in pais. The doctrine of estoppel is based on thegrounds of public policy, fair dealing, good faith and justice, and its purpose is to forbid one tospeak against his own act, representations, or commitments to the injury of one to whom theywere directed and who reasonably relied thereon. Since estoppel is based on equity and justice, itis essential that before a person can be barred from asserting a fact contrary to his act or conduct,

it must be shown that such act or conduct has been intended and would unjustly cause harm tothose who are misled if the principle were not applied against him.




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MANILA METAL CONTAINER CORPORATION, petitionerREYNALDO C. TOLENTINO, intervenor,

vs.PHILIPPINE NATIONAL BANK, respondent,

DMCI-PROJECT DEVELOPERS, INC., intervenor

G.R. No. 166862 December 20, 2006FACTS:

Petitioner was the owner of a 8,015 square meter parcel of land and to secure aP900,000.00 loan it had obtained from respondent PNB, petitioner executed a real estatemortgage over the lot. Respondent PNB later granted petitioner a new credit accommodation ofP1,000,000.00; and, on November 16, 1973, petitioner executed an Amendment of Real EstateMortgage over its property. On March 31, 1981, petitioner secured another loan of P653,000.00from respondent PNB, payable in quarterly installments of P32,650.00, plus interests and othercharges.

PNB filed a petition for extrajudicial foreclosure of the real estate mortgage and sought tohave the property sold at public auction for P911,532.21, petitioner's outstanding obligation torespondent PNB as of June 30, 1982, plus interests and attorney's fees. After due notice and publication, the property was sold at public auction where respondent PNB was declared thewinning bidder for P1,000,000.00. The period to redeem the property was to expire on February17, 1984. Petitioner sent a letter dated August 25, 1983 to respondent PNB, requesting that it begranted an extension of time to redeem/repurchase the property. Respondent PNB informed petitioner that the request had been referred to its Pasay City Branch for appropriate action andrecommendation

Petitioner reiterated its request for a one year extension from February 17, 1984 withinwhich to redeem/repurchase the property on installment basis. It reiterated its request torepurchase the property on installment. Meanwhile, some PNB Pasay City Branch personnelinformed petitioner that as a matter of policy, the bank does not accept "partial redemption‖.

Since petitioner failed to redeem the property, the Register of Deeds cancelled TCT No.32098 and issued a new title in favor of respondent PNB. Petitioner's offers had not yet beenacted upon by respondent PNB.

Meanwhile, the Special Assets Management Department (SAMD) had prepared astatement of account, and as of June 25, 1984 petitioner's obligation amounted to P1,574,560.47.This included the bid price of P1,056,924.50, interest, advances of insurance premiums,advances on realty taxes, registration expenses, miscellaneous expenses and publication cost.

When apprised of the statement of account, petitioner remitted P725,000.00 to respondent PNBas "deposit to repurchase," and an Official Receipt was issued. The SAMD recommended to themanagement of respondent PNB that petitioner be allowed to repurchase the property forP1,574,560.00. In a letter dated November 14, 1984, the PNB management informed petitionerthat it was rejecting the offer and the recommendation of the SAMD. It was suggested that petitioner purchase the property for P2,660,000.00, its minimum market value. Respondent PNBgave petitioner until December 15, 1984 to act on the proposal; otherwise, its P725,000.00deposit would be returned and the property would be sold to other interested buyers.

Petitioner, however, did not agree to respondent PNB's proposal. Instead, it wrote anotherletter dated December 12, 1984 requesting for a reconsideration. Respondent PNB replied in aletter dated December 28, 1984, wherein it reiterated its proposal that petitioner purchase the property for P2,660,000.00. PNB again informed petitioner that it would return the depositshould petitioner desire to withdraw its offer to purchase the property. On February 25, 1985, petitioner, through counsel, requested that PNB reconsider its letter dated December 28, 1984.Petitioner declared that it had already agreed to the SAMD's offer to purchase the property forP1,574,560.47, and that was why it had paid P725,000.00. Petitioner warned respondent PNBthat it would seek judicial recourse should PNB insist on the position.

On June 4, 1985, respondent PNB informed petitioner that the PNB Board of Directorshad accepted petitioner's offer to purchase the property, but for P1,931,389.53 in cash less theP725,000.00 already deposited with it. Petitioner did not respond, so PNB requested petitioner ina letter dated June 30, 1988 to submit an amended offer to repurchase. Petitioner rejected



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respondent's proposal in a letter dated July 14, 1988. It maintained that respondent PNB hadagreed to sell the property for P1,574,560.47, and that since its P725,000.00 downpayment had been accepted, respondent PNB was proscribed from increasing the purchase price of the property. Petitioner averred that it had a net balance payable in the amount of P643,452.34.Respondent PNB, however, rejected petitioner's offer to pay the balance of P643,452.34 in a

letter dated August 1, 1989.Petitioner filed a complaint against respondent PNB for "Annulment of Mortgage andMortgage Foreclosure, Delivery of Title, or Specific Performance with Damages.‖ RespondentPNB averred, as a special and affirmative defense, that it had acquired ownership over the property after the period to redeem had elapsed. It claimed that no contract of sale was perfected between it and petitioner after the period to redeem the property had expired. The trial courtrendered judgment dismissing the amended complaint and respondent PNB's counterclaim. Itordered respondent PNB to refund the P725,000.00 deposit petitioner had made. The trial courtruled that there was no perfected contract of sale between the parties; hence, petitioner had nocause of action for specific performance against respondent. The Court of Appeals affirmed theRTC‘s decision.

ISSUE:Whether or not petitioner and respondent PNB had entered into a perfected contract for

petitioner to repurchase the property from respondent.

RULING:

The ruling of the appellate court that there was no perfected contract of sale between the parties is correct.

It appears that although respondent requested petitioner to conform to its amendedcounter-offer, petitioner refused and instead requested respondent to reconsider its amendedcounter-offer. Petitioner's request was ultimately rejected and respondent offered to refund itsP725,000.00 deposit. In sum, then, there was no perfected contract of sale between petitioner andrespondent over the subject property.



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MONTECILLO VS. REYNES385 SCRA 244

FACTS:

Respondents Ignacia Reynes and spouses Abucay filed on June 20, 1984 a complaint forDeclaration of Nullity and Quieting of Title against petitioner Rico Montecillo. Reynes assertedthat she is the owner of a lot situated in Mabolo, Cebu City. In 1981 Reynes sold 185 squaremeters of the Mabolo Lot to the Abucay Spouses who built a residential house on the lot they bought.

Reynes alleged further that she signed a Deed of Sale of the Mabolo Lot in favor ofMontecillo. Reynes, being illiterate signed by affixing her thumb-mark on the document.Montecillo promised to pay the agreed P47,000.00 purchase price within one month from thesigning of the Deed of Sale. And that Montecillo failed to pay the purchase price after the lapseof the one-month period, prompting Reynes to demand from Montecillo the return of the Deed of

Sale. Since Montecillo refused to return the Deed of Sale, Reynes executed a documentunilaterally revoking the sale and gave a copy of the document to Montecillo.

Subsequently, on May 23, 1984 Reynes signed a Deed of Sale transferring to the AbucaySpouses the entire Mabolo Lot, at the same time confirming the previous sale in 1981 of a 185square meter portion of the lot.

Reynes and the Abucay Spouses alleged that they received information that the Registerof Deeds of Cebu City issued a Certificate of Title in the name of Montecillo for the Mabolo Lot.They argued that ―for lack for consideration there (was no meeting of the minds) betweenReynes and Montecillo. Thus, the trial court should declare null and void ab initio Monticello‘sDeed of sale, and order the cancellation of certificates of title No. 90805 in the name ofMontecillo.

In his Answer, Montecillo a bank executive claimed he was a buyer in good faith and hadactually paid the P47,000.00 consideration stated on his Deed of Sale. Montecillo howeveradmitted he still owned Reynes a balance of P10,000.00. He also alleged that he paid P50,000.00for the release of the chattel mortgage which he argued constituted a lien on the Mabolo Lot. Hefurther alleged that he paid for the real property tax as well as the capital gains tax on the sale ofthe Mabolo Lot.

In their reply, Reynes and the Abucay Spouses contended that Montecillo did not haveauthority to discharge the chattel mortgage especially after Reynes revoked Montecillo‘s Deed ofSale and gave the mortgagee a copy of the document of revocation. Reynes and the AbucaySpouses claimed that Montecillo secured the release of the chattel mortgage throughmachination. They further asserted that Montecillo took advantage of the real property taxes paid by the Abucay Spouses and surreptitiously caused the transfer of the title to the Mabolo Lot inhis name.

During pre-trial Montecillo claimed that the consideration for the sale of the Mabolo Lotwas the amount he paid to Cebu Iced and Cold Storage Corporation for the mortgage debt ofBienvenido Jayag. Montecillo argued that the release of the mortgage was necessary since themortgage constituted a lien on the Mabolo Lot.

Reynes, however stated that she had nothing to do with Jayag‘s mortgage debt except thatthe house mortgaged by Jayag stood on a portion of the Mabolo Lot. Reynes further stated thatthe payment by Montecillo to release the mortgage on Jayag‘s house is a matter betweenMontecillo and Jayag. The mortgage on the house being a chattel mortgage could not beinterpreted in any way as an encumbrance on the Mabolo Lot. Reynes further claimed that themortgage debt had long prescribed since the P47,000.00 mortgage debt was due for payment onJanuary 30,1967.



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ISSUE:

Whether or not there was a valid consent in the case at bar to have a valid contract.

RULING:

One of the three essential requisites of a valid contract is consent of the parties on theobject and cause of the contract. In a contract of sale, the parities must agree not only on the price, but also on the manner of payment of the price. An agreement on the price but adisagreement on the manner of its payment will not result in consent, thus preventing theexistence of a valid contract for a lack of consent. This lack of consent is separate and distinct forlack of consideration where the contract states that the price has been paid when in fact it hasnever been paid.

Reynes expected Montecillo to pay him directly the P47, 000.00 purchase price withinone month after the signing of the Deed of Sale. On the other hand, Montecillo thought that his

agreement with Reynes required him to pay the P47,000.00-purchase price to Cebu Ice Storageto settle Jayag‘s mortgage debt. Montecillo also acknowledged a balance of P10, 000.00 in favorof Reynes although this amount is not stated in Montecillo‘s Deed of Sale. Thus, there was noconsent or meeting of the minds, between Reynes and Montecillo on the manner of payment.This prevented the existence of a valid contract because of lack of consent.

In summary, Montecillo‘s Deed of Sale is null and void ab initio not only for lack ofconsideration, but also for lack of consent. The cancellation of TCT No. 90805 in the name ofMontecillo is in order as there was no valid contract transferring ownership of the Mabolo Lotfrom Reynes to Montecillo.



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JASMIN SOLER VS. COURT OF APPEALSG.R. No. 123892 May 2, 2001

FACTS:

Petitioner is a professional interior designer. In November 1986, her friend Rosario Pardoasked her to talk to Nida Lopez, who was manager of the COMBANK Ermita Branch for theywere planning to renovate the branch offices. Even prior to November 1986, petitioner and NidaLopez knew each other because of Rosario Pardo, the latter‘s sister. During their meeting, petitioner was hesitant to accept the job because of her many out of town commitments, and alsoconsidering that Ms. Lopez was asking that the designs be submitted by December 1986, whichwas such a short notice. Ms. Lopez insisted, however, because she really wanted petitioner to dothe design for renovation. Petitioner acceded to the request. Ms. Lopez assured her that shewould be compensated for her services. Petitioner even told Ms. Lopez that her professional feewas P10,000.00, to which Ms. Lopez acceded.

During the November 1986 meeting between petitioner and Ms. Lopez, there werediscussions as to what was to be renovated. Ms. Lopez again assured petitioner that the bankwould pay her fees. After a few days, petitioner requested for the blueprint of the building so thatthe proper design, plans and specifications could be given to Ms. Lopez in time for the boardmeeting in December 1986. Petitioner then asked her draftsman Jackie Barcelon to go to the jobsite to make the proper measurements using the blue print. Petitioner also did her research onthe designs and individual drawings of what the bank wanted. Petitioner hired Engineer Ortanezto make the electrical layout, architects Frison Cruz and De Mesa to do the drafting. For theservices rendered by these individuals, petitioner paid their professional fees. Petitioner alsocontacted the suppliers of the wallpaper and the sash makers for their quotation. So comeDecember 1986, the lay out and the design were submitted to Ms. Lopez. She even told petitioner that she liked the designs.

Subsequently, petitioner repeatedly demanded payment for her services but Ms. Lopez just ignored the demands. In February 1987, by chance petitioner and Ms. Lopez saw each otherin a concert at the Cultural Center of the Philippines. Petitioner inquired about the payment forher services, Ms. Lopez curtly replied that she was not entitled to it because her designs did notconform to the bank‘s policy of having a standard design, and that there was no agreement between her and the bank.

Petitioner, through her lawyers, who wrote Ms. Lopez, demanding payment for her professional fees in the amount of P10,000.00 which Ms. Lopez ignored. The lawyers wrote Ms.Lopez once again demanding the return of the blueprint copies petitioner submitted which Ms.Lopez refused to return. The petitioner then filed at the trial court a complaint againstCOMBANK and Ms. Lopez for collection of professional fees and damages.

In its answer, COMBANK stated that there was no contract between COMBANK and petitioner; that Ms. Lopez merely invited petitioner to participate in a bid for the renovation ofthe COMBANK Ermita Branch; that any proposal was still subject to the approval of theCOMBANK‘s head office.

The trial court rendered judgment in favor of plaintiff. On appeal, the Court of Appealsreversed the decision. Hence, this petition.

ISSUE:Whether or not the Court of Appeals erred in ruling that there was no contract between

petitioner and respondents, in the absence of the element of consent.

RULING:



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A contract is a meeting of the minds between two persons whereby one binds himself togive something or to render some service to bind himself to give something to render someservice to another for consideration. There is no contract unless the following requisites concur:1. Consent of the contracting parties; 2. Object certain which is the subject matter of the contract;and 3. Cause of the obligation which is established.

In the case at bar, there was a perfected oral contract. When Ms. Lopez and petitioner metin November 1986, and discussed the details of the work, the first stage of the contractcommenced. When they agreed to the payment of the P10,000.00 as professional fees of petitioner and that she should give the designs before the December 1986 board meeting of the bank, the second stage of the contract proceeded, and when finally petitioner gave the designs toMs. Lopez, the contract was consummated. Petitioner believed that once she submitted thedesigns she would be paid her professional fees. Ms. Lopez assured petitioner that she would be paid.

It is familiar doctrine that if a corporation knowingly permits one of its officers, or any

other agent, to act within the scope of an apparent authority, it holds him out to the public as possessing the power to do those acts; and thus, the corporation will, as against anyone who hasin good faith dealt with it through such agent, be estopped from denying the agent‘s authority.

Also, petitioner may be paid on the basis of quantum meruit. "It is essential for the properoperation of the principle that there is an acceptance of the benefits by one sought to be chargedfor the services rendered under circumstances as reasonably to notify him that the lawyer performing the task was expecting to be paid compensation therefor. The doctrine of quantummeruit is a device to prevent undue enrichment based on the equitable postulate that it is unjustfor a person to retain benefit without paying for it."

The designs petitioner submitted to Ms. Lopez were not returned. Ms. Lopez, an officerof the bank as branch manager used such designs for presentation to the board of the bank. Thus,the designs were in fact useful to Ms. Lopez for she did not appear to the board without anydesigns at the time of the deadline set by the board.

Decision reversed and set aside. Decision of the trial court affirmed.



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PALATTAO VS. COURT OF APPEALS381 SCRA 681 MAY 7, 2002

FACTS:

Petitioner Yolanda Palattao entered into a lease contract whereby she leased to privaterespondent a house and a 490-square-meter lot located in 101 Caimito Road, Caloocan City,covered by a Transfer Certificate of Title and registered in the name of petitioner. The durationof the lease contract was for three years, commencing from January 1, 1991, to December 31,1993, renewable at the option of the parties. The agreed monthly rental was P7,500.00 for thefirst year; P 8,000.00 for the second year: and P8,500.l00 for the third year. The contract gaverespondent lessee the first option to purchase the leased property.

During the last year of the contract, the parties began negotiations for the sale of theleased premises to private respondent. In a letter, petitioner offered to sell to private respondents413.28 square meters of the leased lot at P 7,800.00 per square meter, or for the total amount of

P3,223,548.00. Private respondents replied on April 15, 1993 wherein he informed petitioner thathe ―shall definitely exercise his option to buy‖ the leased property. Private respondent, however,manifested his desire to buy the whole 490-square meters inquired from petitioner the reasonwhy only 413.28 square meters of the leased lot were being offered for sale. In a letter dated November 6, 1993, petitioner made a final offer to sell the lot at P7,500.00 per square meter witha down payment of 50% upon the signing of the contract of conditional sale, the balance payablein one year with a monthly lease/interest payment P 14,000.00 which must be paid on or beforethe fifth day every month that the balance is still outstanding. Private respondents accepted petitioners offer and reiterated his request for respondent accepted petitioner‘s offers andreiterated his request for clarification as to the size of the lot for sale. Petitioner acknowledged private respondent‘s acceptance of the offer in his letter dated November 10, 1993.

Petitioner gave private respondent on or before November 24, 1993, within which to paythe 50% downpayment in cash or manager‘s check. Petitioner stressed that failure to pay thedownpayment on the stipulated period will enable petitioner to freely sell her property to others.Petitioner likewise notified private respondent, that she is no longer renewing the leaseagreement upon its expiration on December 31, 1993.

Private respondent did not accept the terms proposed by petitioner. Neither were thereany documents of sale nor payment by private respondent of the required downpayment. Privaterespondent wrote a letter to petitioner on November 29, 1993 manifesting his intention toexercise his option to renew their lease contract for another three years, starting January 1, 1994to December 31, 1996. This was rejected by petitioner, reiterating that she was no longerrenewing the lease. Petitioner demanded that private respondent vacate the premises, but thelatter refused.

Hence, private respondent filed with the Regional Trial Court a case for specified performance seeking to compel petitioner to sell to him the leased property. Private respondentfurther prayed for the issuance of a writ preliminary injunction to prevent petitioner from filingan ejectment case upon the expiration of the lease contract on December 31, 1993.

During the proceedings in the specific performance case, the parties agreed to maintainthe status quo. After they failed to reach an amicable settlement, petitioner filed the instantejectment case before the Metropolitan Trial Court. In his answer, private respondent alleged thathe refused to vacate the leased premises because there was a perfected contract of sale of theleased property between him and petitioner. Private respondent argued that he did not abandonhis option to buy the leased property and that his proposal to renew the lease was but analternative proposal to the sale. He further contended that the filing of the ejectment case violatedtheir agreement to maintain the status quo.

ISSUE:



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Whether or not there was a valid consent in the case at bar.

RULING:

There was no valid consent in the case at bar. Contracts that are consensual in nature, like a contract of sale, are perfected upon mere

meeting of the minds. Once there is concurrence between the offer and the acceptance upon thesubject matter, consideration, and terns of payment, a contract is produced. The offer must becertain. To convert the offer into a contract, the acceptance must be absolute and must notqualify the terms of the offer; it must be plain, unequivocal, unconditional, and without varianceof any sort from the proposal. A qualified acceptance, or one that involves a new proposal,constitutes a counter-offer and is a rejection of the original offer. Consequently, when somethingis desired which is not exactly is proposed in the offer, such acceptance is not sufficient togenerate consent because any modification or variation from the terms of the offer annuals the

offer.

In the case at bar, while it is true that private respondent informed petitioner that he isaccepting the latter‘s offer to sell the leased property, it appears that they did not reach anagreement as to the extent of the lot subject of the proposed sale.

Letters reveal that private respondent did not give his consent to buy only 413.28 squaremeters of the leased lot, as he desired to purchase the whole 490 square-meter- leased premiseswhich, however, was not what was exactly proposed in petitioner‘s offer. Clearly, therefore, private respondent‘s acceptance of petitioner‘s offer was not absolute, and will consequently notgenerate consent that would perfect a contract.



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ABS-CBN BROADCASTING CORPORATION VS. COURT OF APPEALS301 SCRA 573

G.R. No. 128690 January 21, 1999

FACTS:

In 1990, ABS-CBN and VIVA executed a Film Exhibition Agreement whereby Vivagave ABS-CBN an exclusive right to exhibit some Viva films. Viva, through defendant DelRosario, offered ABS-CBN, through its vice-president Charo Santos-Concio, a list of three film packages (36 title) from which ABS-CBN may exercise its right of first refusal under the afore-said agreement. ABS-CBN, however through Mrs. Concio, "can tick off only ten titles" (from thelist) "we can purchase" and therefore did not accept said list. The titles ticked off by Mrs. Concioare not the subject of the case at bar except the film "Maging Sino Ka Man."

On February 27, 1992, defendant Del Rosario approached ABS-CBN‘s Ms. Concio, witha list consisting of 52 original movie titles (i.e., not yet aired on television) including the 14 titles

subject of the present case, as well as 104 re-runs (previously aired on television) from whichABS-CBN may choose another 52 titles, as a total of 156 titles, proposing to sell to ABS-CBNairing rights over this package of 52 originals and 52 re-runs for P60,000,000.00 of whichP30,000,000.00 will be in cash and P30,000,000.00 worth of television spots.

On April 2, 1992, defendant Del Rosario and ABS-CBN‘s general manager, EugenioLopez III discussed the package proposal of VIVA. Mr. Lopez testified that he and Mr. DelRosario allegedly agreed that ABS-CBN was granted exclusive film rights to fourteen (14) filmsfor a total consideration of P36 million; that he allegedly put this agreement as to the price andnumber of films in a "napkin" and signed it and gave it to Mr. Del Rosario. On the other hand,Del Rosario denied having made any agreement with Lopez regarding the 14 Viva films; deniedthe existence of a napkin in which Lopez wrote something; and insisted that what he and Lopezdiscussed at the lunch meeting was Viva‘s film package offer of 104 films (52 originals and 52re-runs) for a total price of P60 million.

Del Rosario and Mr. Graciano Gozon of RBS Senior vice-president for Finance discussedthe terms and conditions of Viva‘s offer to sell the 104 films, after the rejection of the same package by ABS-CBN. On the following day, Del Rosario received a draft contract from Ms.Concio which contains a counter-proposal of ABS-CBN on the offer made by VIVA includingthe right of first refusal to 1992 Viva Films. However, the proposal was rejected by the Board ofDirectors of VIVA and such was relayed to Ms. Concio.

On April 29, 1992, after the rejection of ABS-CBN and following several negotiationsand meetings defendant Del Rosario and Viva‘s President Teresita Cruz, in consideration of P60million, signed a letter of agreement dated April 24, 1992, granting RBS the exclusive right to air104 Viva-produced and/or acquired films including the fourteen films subject of the present case.

On 27 May 1992, ABS-CBN filed before the RTC a complaint for specific performancewith a prayer for a writ of preliminary injunction and/or temporary restraining order against private respondents Republic Broadcasting System (now GMA Network Inc.) On 28 May 1992,the RTC issued a temporary restraining order.

The RTC then rendered decision in favor of RBS and against ABS-CBN. On appeal, thesame decision was affirmed. Hence, this decision.

ISSUE:Whether or not there exists a perfected contract between ABS-CBN and VIVA.

RULING:



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A contract is a meeting of minds between two persons whereby one binds himself to givesomething or render some service to another [Art. 1305, Civil Code.] for a consideration. Thereis no contract unless the following requisites concur:

(1) consent of the contracting parties;(2) object certain which is the subject of the contract; and

(3)

cause of the obligation, which is established. [Art. 1318, Civil Code.]

A contract undergoes three stages:(a) preparation, conception, or generation, which is the period of negotiation and

bargaining rending at the moment of agreement of the parties;(b) perfection or birth of the contract, which is the moment when the parties come to

agree on the terms of the contract; and(c) consummation or death, which is the fulfillment or performance of the terms

agreed upon in the contract.

In the present case, when Mr. Del Rosario of Viva met Mr. Lopez of ABS-CBN on 2

April 1992 to discuss the package of films, said package of 104 VIVA films was VIVA‘s offer toABS-CBN to enter into a new Film Exhibition Agreement. But ABS-CBN, sent through Ms.Concio, counter-proposal in the form a draft contract proposing exhibition of 53 films for aconsideration of P35 million. This counter-proposal could be nothing less than the counter-offerof Mr. Lopez during his conference with Del Rosario at Tamarind Grill Restaurant. Clearly,there was no acceptance of VIVA‘s offer, for it was met by a counter -offer which substantiallyvaried the terms of the offer.

Furthermore, ABS-CBN made no acceptance of VIVA‘s offer hence, they underwent period of bargaining. ABS-CBN then formalized its counter-proposals or counter-offer in a draftcontract. VIVA through its Board of Directors, rejected such counter-offer. Even if it beconceded arguendo that Del Rosario had accepted the counter-offer, the acceptance did not bindVIVA, as there was no proof whatsoever that Del Rosario had the specific authority to do so.

The instant petition was GRANTED.



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LOURDES ONG LIMSON VS. COURT of APPEALS, et al357 SCRA 209

G. R. No. 135929 April 20, 2001

FACTS:In July 1978, respondent spouses Lorenzo de Vera and Asuncion Santos-de Vera, through

their agent Marcosa Sanchez, offered to sell to petitioner Lourdes Ong Limson a parcel of land.The respondent spouses were the owners of the subject property.

On July 31, 1978, she agreed to but the property at the price of P34. 00 per square meterand gave P20, 000.00 as ―earnest money‖. The respondent spouses signed a receipt thereafterand gave her a 10-day option period to purchase the property. Respondent spouses informed petitioner that the subject property was mortgaged to Emilio Ramos and Isidro Ramos. Petitionerwas asked to pay the balance of the purchase price to enable the respondent spouses to settle

their obligation with the Ramoses. Petitioner agreed to meet respondent spouses and theRamoses on August 5, 1978, to consummate the transaction; however, the respondent spousesand the Ramoses did not appear, same with their second meeting.

On August 23, 1978, petitioner allegedly gave respondent spouses three checks for thesettlement the back taxes of property. On September 5, 1978, the agent of the respondentspouses informed petitioner that the property was the subject of a negotiation for the sale torespondent Sunvar Realty Development Corporation.

Petitioner alleged that it was only on September 15, 1978, that TCT No. S-72946covering the property was issued to respondent spouses. On the same day, petitioner filed andAffidavit of Adverse Claim with the Office of the Registry of Deeds of Makati, Metro Manila.The Deed of Sale between respondent spouses and respondent Sunvar was executed onSeptember 15, 1978 and TCT No. S-72377 was issued in favor of Sunvar on September 26, 1978with the Adverse Claim of petitioner annotated thereon.

Respondent spouses and Sunvar filed their Answers and Answers to Cross-Claim,respectively. On appeal, the Court of Appeals completely reversed the decision of the trial courtand ordered the Register of Deeds of Makati City to lift the Adverse Claim and ordered petitioner to pay respondent Sunvar and respondent spouses exemplary and nominal damagesand attorney‘s fees. Hence, this petition.

ISSUE:

Whether or not the agreement between petitioner and respondent spouses was a mereoption or a contract to sell.

RULING:

The Supreme Court held that the agreement between the parties was a contract of optionand not a contract to sell. An option is continuing offer or contract by which the owner stipulateswith another that the latter shall have the right to buy the property at a fixed price within a timecertain, or under, or in compliance with, certain terms and conditions, or which gives the ownerof the property the right to sell or demand a sale. It is also sometimes called an ―unacceptedoffer‖. An option is not of itself a purchase, but merely secures the privilege to buy. It is not asale of property but a sale of the right to purchase. Its distinguishing characteristic is that itimposes no binding obligation on the person holding the option, aside from the consideration forthe offer.



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REYNALDO VILLANUEVA vs. PHILIPPINE NATIONAL BANKG.R. NO. 154493 December 6, 2006

FACTS:

The Special Assets Management Department (SAMD) of PNB issued an advertisementfor the sale thru bidding of certain PNB properties including Lot No. 17, covered by TCT No. T-15042, with an advertised floor price of P1,409,000.00, and Lot No. 19, covered by TCT No. T-15036, with an advertised floor price of P2,268,000.00. Bidding was subject to the followingconditions: 1) that cash bids be submitted not later than April 27, 1989; 2) that said bids beaccompanied by a 10% deposit in manager‘s or cashier‘s check; and 3) that all acceptable bids besubject to approval by PNB authorities.

In a June 28, 1990 letter to the Manager, Reynaldo Villanueva offered to purchase Lot Nos. 17 and 19 for P3,677,000.00. He also manifested that he was depositing P400,000.00 to

show his good faith but with the understanding that said amount may be treated as part of the payment of the purchase price only when his offer is accepted by PNB. At the bottom of saidletter there appears an unsigned marginal note stating that P400,000.00 was deposited intoVillanueva‘s account (Savings Account No. 43612) with PNB-General Santos Branch.

Guevara, the vice-president informed Villanueva that only Lot No. 19 is available andthat the asking price therefor is P2,883,300.00. PNB also stated that if quoted price is acceptableto Villanueva, then the latter must submit a revised offer to purchase. And Sale shal l be subject

to its Board of Director’s approval and to other terms and conditions imposed by the Bank on

sale of acquired assets .

Instead of submitting a revised offer, Villanueva merely inserted at the bottom ofGuevara‘s letter a July 11, 1990 marginal note, which reads:

C O N F O R M E:

PRICE OF P2,883,300.00 (downpayment of P600,000.00 and the balance payable in

two (2) years at quarterl y amorti zations .)

Villanueva paid P200,000.00 to PNB which issued O.R. No. 16997 to acknowledgereceipt of the ―partial payment deposit on offer to purchase.‖ On the dorsal portion of OfficialReceipt No. 16997, Villanueva signed a typewritten note, stating:

This is a deposit made to show the sincerity of my purchase offer with the understandingthat it shall be returned without interest if my offer is not favorably considered or be forfeited ifmy offer is approved but I fail/refuse to push through the purchase.

Also, on July 24, 1990, P380,000.00 was de bited from Villanueva‘s Savings Account No.43612 and credited to SAMD.

On October 11, 1990, however, Guevara wrote Villanueva that upon orders of the PNBBoard of Directors to conduct another appraisal and public bidding of Lot No. 19, SAMD isdeferring negotiations with him over said property and returning his deposit of P580,000.00.Undaunted, Villanueva attempted to deliver postdated checks covering the balance of the purchase price but PNB refused the same.

Hence, Villanueva filed with the RTC a Complaint for specific performance and damagesagainst PNB. The RTC rendered judgment in favor of the plaintiff and against the defendantdirecting it to execute a deed of sale in favor of the plaintiff over Lot 19 comprising after payment of the balance in cash in the amount of P2,303,300.00 and to pay the plaintiff



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P1,000,000.00 as moral damages; P500,000.00 as attorney‘s fees, plus litigation expenses andcosts of the suit.

PNB appealed to the CA which reversed and set aside the RTC decision.

ISSUE:Whether or not a perfected contract of sale exists between petitioner and respondent

PNB.

RULING:

The Court sustained the CA. The CA held that the case at bench, consent, in respect tothe price and manner of its payment, is lacking. The record shows that appellant, thru Guevara‘sJuly 6, 1990 letter, made a qualified acceptance of appellee‘s letter -offer dated June 28, 1990 byimposing an asking price of P2,883,300.00 in cash for Lot 19. The letter dated July 6, 1990

constituted a counter-offer (Art. 1319, Civil Code), to which appellee made a new proposal, i.e.,to pay the amount of P2,883,300.00 in staggered amounts, that is, P600,000.00 as downpaymentand the balance within two years in quarterly amortizations.

A qualified acceptance, or one that involves a new proposal, constitutes a counter-offerand a rejection of the original offer (Art. 1319, id.). Consequently, when something is desiredwhich is not exactly what is proposed in the offer, such acceptance is not sufficient to generateconsent because any modification or variation from the terms of the offer annuls the offer.Appellee‘s new proposal, which constitutes a counter-offer, was not accepted by appellant, its board having decided to have Lot 19 reappraised and sold thru public bidding.



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CATALAN vs. BASAJULY 31, 2007

FACTS:

On October 20, 1948, FELICIANO CATALAN Feliciano was discharged from activemilitary service. The Board of Medical Officers of the Department of Veteran Affairs found thathe was unfit to render military service due to his ― schizophrenic reaction, catatonic type, which

incapacitates him because of flattening of mood and affect, preoccupation with worries,

withdrawal, and sparse and pointless speech.‖ On September 28, 1949, Feliciano married Corazon Cerezo.On June 16, 1951, a document was executed, titled ―Absolute Deed of Donation,‖

wherein Feliciano allegedly donated to his sister MERCEDES CATALAN one-half of the real property described, viz :

A parcel of land located at Barangay Basing, Binmaley, Pangasinan. Bounded on the North by heirs of Felipe Basa; on the South by Barrio Road; On the East by heirs of Segundo

Catalan; and on the West by Roman Basa. Containing an area of Eight Hundred One (801)square meters, more or less. The donation was registered with the Register of Deeds.On December 11, 1953, People‘s Bank and Trust Company filed a Special Proceedings

before the Court of First Instance to declare Feliciano incompetent. On December 22, 1953, thetrial court issued its Order for Adjudication of Incompetency for Appointing Guardian for theEstate and Fixing Allowance of Feliciano. The following day, the trial court appointed People‘sBank and Trust Company as Feliciano‘s guardian. People‘s Bank and Trust Company has beensubsequently renamed, and is presently known as the Bank of the Philippine Islands (BPI).

On November 22, 1978, Feliciano and Corazon Cerezo donated Lots 1 and 3 of their property, registered under Original Certificate of Title (OCT) No. 18920, to their son EulogioCatalan.

Mercedes sold the property in issue in favor of her children Delia and Jesus Basa. TheDeed of Absolute Sale was registered with the Register of Deeds and a Tax Declaration wasissued in the name of respondents.

Feliciano and Corazon Cerezo donated Lot 2 of the aforementioned property registeredunder OCT No. 18920 to their children Alex Catalan, Librada Catalan and Zenaida Catalan. OnFebruary 14, 1983, Feliciano and Corazon Cerezo donated Lot 4 (Plan Psu-215956) of the sameOCT No. 18920 to Eulogio and Florida Catalan.

BPI, acting as Feliciano‘s guardian, filed a case for Declaration of Nu llity of Documents,Recovery of Possession and Ownership, as well as damages against the herein respondents. BPIalleged that the Deed of Absolute Donation to Mercedes was void ab initio, as Feliciano neverdonated the property to Mercedes. In addition, BPI averred that even if Feliciano had trulyintended to give the property to her, the donation would still be void, as he was not of soundmind and was therefore incapable of giving valid consent. Thus, it claimed that if the Deed ofAbsolute Donation was void ab initio, the subsequent Deed of Absolute Sale to Delia and JesusBasa should likewise be nullified, for Mercedes Catalan had no right to sell the property toanyone. BPI raised doubts about the authenticity of the deed of sale, saying that its registrationlong after the death of Mercedes Catalan indicated fraud. Thus, BPI sought remuneration forincurred damages and litigation expenses.

On August 14, 1997, Feliciano passed away. The original complaint was amended tosubstitute his heirs in lieu of BPI as complainants in Civil Case No. 17666.

The trial court found that the evidence presented by the complainants was insufficient toovercome the presumption that Feliciano was sane and competent at the time he executed thedeed of donation in favor of Mercedes Catalan. Thus, the court declared, the presumption of

sanity or competency not having been duly impugned, the presumption of due execution of the

donation in question must be upheld. The Court of Appeals upheld the trial court‘s decision.

ISSUE:

Whether said decision of the lower courts is correct.



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RULING:

Petitioners questioned Feliciano‘s capacity at the time he donated the property, yet didnot see fit to question his mental competence when he entered into a contract of marriage withCorazon Cerezo or when he executed deeds of donation of his other properties in their favor.

The presumption that Feliciano remained competent to execute contracts, despite his illness, is bolstered by the existence of these other contracts. Competency and freedom from undueinfluence, shown to have existed in the other acts done or contracts executed, are presumed tocontinue until the contrary is shown.

Needless to state, since the donation was valid, Mercedes had the right to sell the property to whomever she chose. Not a shred of evidence has been presented to prove the claimthat Mercedes‘ sale of the property to her children was tainted with fraud or falsehood. It is oflittle bearing that the Deed of Sale was registered only after the death of Mercedes. What ismaterial is that the sale of the property to Delia and Jesus Basa was legal and binding at the timeof its execution. Thus, the property in question belongs to Delia and Jesus Basa.

petitioners raised the issue of prescription and laches for the first time on appeal before

this Court. It is sufficient for this Court to note that even if the present appeal had prospered, theDeed of Donation was still a voidable, not a void, contract. As such, it remained binding as itwas not annulled in a proper action in court within four years.

IN VIEW WHEREOF, there being no merit in the arguments of the petitioners, the petition is DENIED. The CA decision was affirmed in toto.



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DOMINGO V. COURT OF APPEALSG.R. No. 127540. October 17, 2001

FACTS:

Paulina Rigonan owned three parcels of land including the house and warehouse on one parcel.She allegedly sold them to private respondents, the spouses Felipe and Concepcion Rigonan,who claim to be her relatives. In 1966, petitioners who claim to be her closest survivingrelatives, allegedly took possession of the properties by means of stealth, force and intimidation,and refused to vacate the same. According to defendants, the alleged deed of absolute sale wasvoid for being spurious as well as lacking consideration. They said that Paulina Rigonan did notsell her properties to anyone. As her nearest surviving kin within the fifth degree ofconsanguinity, they inherited the three lots and the permanent improvements thereon whenPaulina died. They said they had been in possession of the contested properties for more than 10years.

ISSUE:1.) Whether or not the consideration in Deed of Sale can be used to impugn the validity of theContract of Sale.2.) Whether or not the alleged Deed of Sale executed by Paulina Rigonan in favor of the privaterespondents is valid.

RULING:

1.) Consideration is the why of a contract, the essential reason which moves the contracting parties to enter into the contract. The Court had seen no apparent and compelling reason for herto sell the subject 9 parcels of land with a house and warehouse at a meager price of P850 only.On record, there is unrebutted testimony that Paulina as landowner was financially well off. Sheloaned money to several people. Undisputably, the P850.00 consideration for the nine (9) parcelsof land including the house and bodega is grossly and shockingly inadequate, and the sale is nulland void ab initio.

2.) The Curt ruled in the negative. Private respondents presented only a carbon copy of this deed.When the Register of Deeds was subpoenaed to produce the deed, no original typewritten deed but only a carbon copy was presented to the trial court. None of the witnesses directly testifiedto prove positively and convincingly Paulina‘s execution of the original deed of sale. The carboncopy did not bear her signature, but only her alleged thumbprint. Juan Franco testified during thedirect examination that he was an instrumental witness to the deed. However, when cross-examined and shown a copy of the subject deed, he retracted and said that said deed of sale wasnot the document he signed as witness.



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MENDOZANA, ET AL. V. OZAMIZ ET AL.G.R. No. 143370, February 6, 2002

FACTS:

Petitioner spouses Mario J. Mendezona and Teresita M. Mendezona, petitioner spousesLuis J. Mendezona and Maricar L. Mendezona, and petitioner Teresita Adad Vda. de Mendezonaown a parcel of land each with almost similar areas of 3,462 square meters, 3,466 square metersand 3,468 square meters. The petitioners ultimately traced their titles of ownership over theirrespective properties from a notarized Deed of Absolute Sale executed in their favor by CarmenOzamiz. The petitioners initiated the suit to remove a cloud on their said respective titles caused by the inscription thereon. The respondents opposed the petitioners‘ claim of ownership of thesaid parcels of land alleging that the titles issued in the petitioners‘ names are defective andillegal, and the ownership of the said property was acquired in bad faith and without valueinasmuch as the consideration for the sale is grossly inadequate and unconscionable.Respondents further alleged that at the time of the sale as alleged, Carmen Ozamiz was already

ailing and not in full possession of her mental faculties; and that her properties having been placed in administration, she was in effect incapacitated to contract with petitioners. They arguethat the Deed of Absolute sale is a simulated contract.

ISSUE:

Whether or not the Deed of Absolute Sale in the case at bar was simulated.

RULING:

The Court ruled that the Deed in the case at bar is not a simulated contract. Simulation isdefined as ―the declaration of a fictitious will, deliberately made by agreement of the parti es, inorder to produce, for the purposes of deception, the appearances of a juridical act which does notexist or is different from what that which was really executed.‖ The requisites of simulation are: (a) an outward declaration of will different from the will of the parties; (b) the false appearancemust have been intended by mutual agreement; and (c) the purpose is to deceive third persons. None of these were clearly shown to exist in the case at bar. The Deed of Absolute Sale is anotarized document duly acknowledged before a notary public. As such, it has in its favor the presumption of regularity, and it carries the evidentiary weight conferred upon it with respect toits due execution. It is admissible in evidence without further proof of its authenticity and isentitled to full faith and credit upon its face. The burden fell upon the respondents to prove theirallegations attacking the validity and due execution of the said Deed of Absolute Sale.Respondents failed to discharge that burden; hence, the presumption in favor of the said deedstands.



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LIM VS. COURT OF APPEALSG.R. No. 55201, February 3, 1994

FACTS:

The deceased spouses Tan Quico and Josefa Oraa, who both died intestate left 96hectares of land. The late spouses were survived by four children; Cresencia, Lorenzo,Hermogenes and Elias. Elias died on May 2, 1935. Cresencia died on December 20, 1967. Shewas survived by her husband, Lim Chay Sing, and children, Mariano, Jaime, Jose Jovita,Anacoreta, Antonietta, Ruben, Benjamin and Rogelio who are now the petitioners in the case at bench.

The Cresencia only reached the second grade of elementary school. She could not read orwrite in English. On the other hand, Lorenzo is a lawyer and a CPA. Heirs of Cresencia allegedthat since the demise of the spouses Tan Quico and Josefa Oraa, the subject properties had beenadministered by respondent Lorenzo. They claimed that before her death, Cresencia had

demanded their partition from Lorenzo. After Cresencia‘s death, they likewise clamored for their partition. Their effort proved fruitless.Respondents Lorenzo and Hermogenes‘ unyielding stance against partition is based on

various contentions. They cited as evidence the ―Deed of Confirmation of Extra JudicialSettlement of the Estate of Tan Quico and Josefa Oraa‖ and a receipt of payment. Principally,they urge that the properties had already been partitioned, albeit, orally; and during her lifetime,the late Cresencia had sold and conveyed all her interests in said properties to respondentLorenzo.

ISSUE:

Whether or not there is error or mistake in the signing of the Deed.

RULING:

There is an error in the signing of the Deed.Article 1332 of the Civil Code provides: ―When one of the parties is unable to read, or if

the contract is in a language not understood by him, and mistake or fraud is alleged, the personenforcing the contract must show that the terms thereof have been fully explained to the former.‖

In the case at bar, the questioned Deed is written in English, a language not understood by Cresencia an illiterate in the said language. It was prepared by the respondent Lorenzo, alawyer and CPA. Lorenzo did not cause the notarization of the Deed. Considering thesecircumstances, the burden was on private respondents to prove that the content of the Deed wasexplained to the illiterate Cresencia before she signed it. In this regard, the evidence adduced bythe respondents failed to discharge their burden.

This substantive law came into being due to the finding of the Code Commission thatthere is still a fairly large number of illiterates in this country, and documents are usually drawnup in English or Spanish. It is also in accord with our state policy of promoting social justice. Italso supplements Article 24 of the Civil Code which calls on court to be vigilant in the protectionof the rights of those who are disadvantaged in life.



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RUIZ VS. COURT OF APPEALSG.R. NO. 146942 APRIL 22, 2003

FACTS:

Petitioner Corazon Ruiz is engaged in the business of buying and selling jewelry. Sheobtained loans from private respondent Consuelo Torres on different occasions and in differentamounts. Prior to their maturity, the loans were consolidated under 1 promissory note worthP750 000 secured by real estate mortgage of a land registered to petitioner.

Petitioner obtained 3 more loans from private respondent worth P100 000 each. Thesecombined loans of P300 000 were secured by jewelry pledged by petitioner to private respondentworth P571 000.

Petitioner paid the stipulated 3% monthly interest on the P750 000 loan, amounting toP270 000. After March 1996, petitioner was unable to make interest payments as she haddifficulties collecting from her clients in her jewelry business.

Because of petitioner‘s failure to pay the principal loan of P750 000, as well as the

interest payment, private respondent demanded payment not only of the P750 000 loan but alsoof the P300 000 loan. When petitioner failed to pay, private respondent sought the extrajudicialforeclosure of the aforementioned real estate mortgage.

ISSUE:

Whether or not there is undue influence in the signing of the promissory note.

RULING:

The fact that petitioner and private respondent had entered into not only one but severalloan transactions shows that petitioner was not in any way compelled to accept the termsallegedly imposed by private respondent.

The promissory notes in question did not contain any fine print provision which couldhave escaped the attention of the petitioner. Petitioner had all the time to go over and study thestipulations embodied in the promissory notes. These promissory notes contain similar terms andconditions, with a little variance in the terms of interests and surcharges. Moreover, petitioner,in her complaint never claimed that she was forced to sign the subject note.



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DELA CRUZ V. SISONG.R. No. 163770 February 17, 2005

FACTS:

Epifania Dela Cruz alleged that in 1992, she discovered that her rice land in has beentransferred and registered in the name of her nephew, Eduardo C. Sison, without her knowledgeand consent, purportedly on the strength of a Deed of Sale she executed.Epifania then filed a complaint praying to declare the deed of sale null and void. She allegedthat Eduardo tricked her into signing the Deed of Sale, by inserting the deed among thedocuments she signed pertaining to the transfer of her residential land, house and camarin, infavor of Demetrio, her foster child and the brother of Eduardo.Respondents, spouses Eduardo and Eufemia Sison denied that they employed fraud or trickery inthe execution of the Deed of Sale. They claimed that they purchased the property from Epifaniafor P20 000 and that the deed was duly notarized, complied with all requisites for its registration,as evidenced by the Investigation Report by the Department of Agrarian Reform, Affidavit of

Seller/Transferor, Affidavit of Buyer/Transferee, Certification issued by the Provincial AgrarianReform Officer, Letter for the Secretary of Agrarian Reform, Certificate Authorizing Payment ofCapital Gains Tax, and the payment of the registration fees. Some of these documents even borethe signature of Epifania which only proves that she agreed to the transfer of the property.

ISSUE:

1.) Whether fraud attended the execution of a contract2.) Whether the deed of absolute sale is valid.

RULING:

1.) A comparison of the deed of sale in favor of Demetrio and the deed of sale in favor Eduardo,draws out the conclusion that there was no trickery employed. One can readily see that the firstdeed of sale is in all significant respects different from the second deed of sale. A casual perusal,even by someone as old as Epifania, would enable one to easily spot the differences. Epifaniacould not have failed to miss them.The Court is bound by the appellate court‘s findings, unless they are contrary to those of the trialcourt, in which case we may wade into the factual dispute to settle it with finality.

2.) After a careful perusal of the records, we sustain the Court of Appeals‘ ruling that the Deed ofAbsolute Sale dated November 24, 1989 is valid.There being no evidence adduced to support her bare allegations, thus, Epifania failed tosatisfactorily establish her inability to read and understand the English language.Although Epifania was 79 years old at the time of the execution of the assailed contract, her agedid not impair her mental faculties as to prevent her from properly and intelligently protectingher rights. Even at 83 years, she exhibited mental astuteness when she testified in court. It is,therefore, inconceivable for her to sign the assailed documents without ascertaining theircontents, especially if, as she alleges, she did not direct Eduardo to prepare the same.



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RURAL BANK OF ST. MARIA, PANGASINAN V. COURT OF APPEALSG.R. No. 110672. September 14, 1999

FACTS:

Real Estate Mortgage as a security for loans obtained amounting to P156 270 wasexecuted by Manuel Behis on a land in favor of Rural Bank of St. Maria, Pangasinan. ButManuel, being a delinquent, sold the land, evidenced by a Deed of Absolute Sale withAssumption of Mortgage to Rayandayan and Arceño for the sum of P250 000. On the same day,Rayandayan and Arceño, together with Manual Behis executed another Agreement embodyingthe consideration of the sale of the land in the sum of P2.4 million. The land, however, remainedin the name of Behis because the former did not present to the Register of Deeds the contracts.

Rayandaran and Arceño presented the Deed of Absolute Sale to the bank and negotiatedwith the principal stockholder of the bank for the assumption of the indebtedness of ManuelBehis and the subsequent release of the mortgage on the property by the bank. Rayandaran andArceño did not show to the bank the agreement with Manuel Behis providing for the real

consideration of P2.4 million. Subsequently, the bank consented to the substitution of plaintiffsas mortgage debtors in place of Manuel Behis in a Memorandum of Agreement between privaterespondents and the bank with restricted and liberalized terms for the payment of the mortgagedebt including the initial payment of P143 782.22.

Due to the appearance of Christina Behis, Manuel‘s wife and a co -signatory in themortgaged land alleging that her signature in the deed of sale was forged, the bank discontinuedto comply with the Memorandum of Agreement considering it to be void.

In a letter, plaintiffs demanded that the bank comply with its obligation under theMemorandum of Agreement to which the latter denied. Petitioner bank argued that theMemorandum of Agreement is voidable on the ground that its consent to enter said agreementwas vitiated by fraud because private respondents withheld from petitioner bank the materialinformation that the real consideration for the sale with assumption of mortgage of the property by Manuel Behis to Rayandayan and Arceño is P2,400,000.00, and not P250,000.00 asrepresented to petitioner bank. According to petitioner bank, had it known for the realconsideration for the sale, i.e. P2.4 million, it would not have consented into entering theMemorandum of Agreement with Rayandayan and Arceño as it was put in the dark as to the realcapacity and financial standing of private respondents to assume the mortgage from ManuelBehis.

ISSUE:

Whether or not there existed a fraud in the case at bar.

RULING:

The Court ruled that there was no fraud in the case at bar. It is believed that the non-disclosure to the bank of the purchase price of the sale of the land between private respondentsand Manuel Behis cannot be the ―fraud‖ contemplated by Article 1338 of the Civil Code.

The kind of fraud that will vitiate a contract refers to those insidious words ormachinations resorted to by one of the contracting parties to induce to the other to enter into acontract which without them he would not have agreed to. Simply stated, the fraud must bedetermining cause of the contract, or must have caused the consent to be given.

Pursuant to Art. 1339 of the Code, silence or concealment, by itself, does not constitutefraud unless there is a special duty to disclose certain facts. In the case at bar, privaterespondents had no duty to do such.

From the sole reason submitted by the petitioner bank that it was kept in the dark as to thefinancial capacity of private respondents, the Court cannot see how the omission or concealmentof the real purchase price could have induced the bank into giving its consent to the agreement;or that the bank would not have otherwise given its consent had it known of the real purchase price.



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CARABEO VS DINGCOG.R. No. 190823, April 04, 2011

FACTS:On July 10, 1990, Domingo Carabeo (petitioner) entered into a contract denominated as

"Kasunduan sa Bilihan ng Karapatan sa Lupa" with Spouses Norberto and Susan Dingco(respondents) whereby petitioner agreed to sell his rights over a 648 square meter parcel ofunregistered land situated in Purok III, Tugatog, Orani, Bataan to respondents for P38,000.Respondents tendered their initial payment of P10,000 upon signing of the contract, theremaining balance to be paid on September 1990. Respondents were later to claim that whenthey were about to hand in the balance of the purchase price, petitioner requested them to keep itfirst as he was yet to settle an on-going "squabble" over the land. Sometime in 1994, respondentslearned that the alleged problem over the land had been settled and that petitioner had caused itsregistration in his name on December 21, 1993 under Transfer Certificate of Title No. 161806.They thereupon offered to pay the balance but petitioner declined, drawing them to file acomplaint before the Katarungan Pambarangay. No settlement was reached, however, hence,

respondent filed a complaint for specific performance before the Regional Trial Court (RTC) ofBalanga, Bataan.The trial court ruled in favor of respondents. CA affirmed RTC. Hence this petition.

ISSUE:

Whether or not the CA erred in their decision by favoring respondents.

RULING:

The Supreme Court denied the petition. The court contends that the KASUNDUANwhich pertinent portion reads ― Na ako ay may isang partial na lupa na matatagpuan sa Purok111, Tugatog, Orani Bataan, na may sukat na 27 x 24 metro kuwadrado, ang nasabing lupa aymay sakop na dalawang punong santol at isang punong mangga, kaya't ako ay nakipagkasundosa mag-asawang Norby Dingco at Susan Dingco na ipagbili sa kanila ang karapatan ng nasabinglupa sa halagang P38,000.00‖, That the kasunduan did not specify the technical boundaries of the property did not render the sale a nullity. The requirement that a sale must have for its object adeterminate thing is satisfied as long as, at the time the contract is entered into, the object of thesale is capable of being made determinate without the necessity of a new or further agreement between the parties. As the above-quoted portion of the kasunduan shows, there is no doubt thatthe object of the sale is determinate. In the present case, respondents are pursuing a propertyright arising from the kasunduan, whereas petitioner is invoking nullity of the kasunduan to protect his proprietary interest. Assuming arguendo, however, that the kasunduan is deemedvoid, there is a corollary obligation of petitioner to return the money paid by respondents, andsince the action involves property rights. The death of a client immediately divests the counsel ofauthority. Thus, in filing a Notice of Appeal, petitioner's counsel of record had no personality toact on behalf of the already deceased client who, it bears reiteration, had not been substituted as a party after his death.



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CHAVEZ VS. PUBLIC ESTATES AUTHORITYG.R. No. 133250, 9 July 2002

FACTS:

The Senate Blue Ribbon Committee and Committee on Accountability of Public Officersconducted public hearings to determine the actual market value of the public lands along RoxasBoulevard under controversy. The investigation found out that the sale of such was lands grosslyundervalued based on official documents submitted by the proper government agencies duringthe investigations. It was found out that the Public Estates Authority, under the Joint VentureAgreement, sold it to Amari Coastal Bay Development Corporation 157.84 hectares of reclaimed public lands totaling to P 1.89 B or P 1,200 per square meter. However during the investigation process, the BIR pitted the value at P 7,800 per square meter, while the Municipal Assessor ofParañaque at P 6,000 per square meter and by the Commission on Audit (COA) at P21,333 persquare meter. Based on the official appraisal of the COA, the actual loss on the part of thegovernment is a gargantuan value of P 31.78 B. However, PEA justified the purchase price based

from the various appraisals of private real estate corporations, amounting from P 500 – 1,000 persquare meter. Further, it was also found out that there were various offers from different privateentities to buy the reclaimed public land at a rate higher than the offer of Amari, but still, PEAfinalized the JVA with Amari. During the process of investigation, Amari did not hide the factthat they agreed to pay huge commissions and bonuses to various persons for professional effortsand services in successfully negotiating and securing for Amari the JVA. The amountconstituting the commissions and bonuses totaled to a huge P 1.76 B; an indicia of great bribery.

ISSUE:

Whether or not the sale of public lands between PEA and Amari is constitutional.

RULING:

The Court found that the sale is unconstitutional, because what was sold or alienated arelands of the public domain. Taking the fact the sold parcel of land is submerged land isinalienable. As unequivocally stated in Article XII, Section 2 of the Constitution, all lands of the public domain, waters, minerals, coals, petroleum, forces which are potential energies, fisheries,forests or timber, wildlife, flora and fauna, and other natural resources, with the exception ofagricultural lands, are inalienable. Submerged lands fall within the scope of such provision.

Ergo, the submerged lands, being inalienable and outside the commerce of man, couldnot be the subject of the commercial transactions specified in the Amended JVA. Hence, thecontract between Amari and the PEA is void.



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MELLIZA VS. CITY OF ILOILOG.R No. L-24732, April 30, 1968

FACTS:

Juliana Melliza owned three parcels of residential land. She sold to the Municipality ofIloilo a certain lot to serve as site for the municipal hall. The donation was however revoked bythe parties for the reason that area was found inadequate to meet the requirements of thedevelopment plan. Subsequently the said lot was divided into several divisions. She then soldher remaining interest on the said lot to Remedios San Villanueva. Remedios in turn transferredthe rights to said portion of land to Pio Sian Melliza. The transfer Certificate of title in Melliza‘sname bears on annotation stating that a portion of said lot belongs to the Municipality of Iloilo.

Later the City of Iloilo donated the city hall site to the University of the Philippines,Iloilo which fenced the same with iron wires.

Pio Sian Melliza then filed action against Iloilo City and the University of the Philippinesfor recovery of the parcel of land or of its value.

Petitioner contends that the claimed lot was not included in those lots which were sold byJuliana Melliza to Iloilo City and further asserts that the Deed of Sale invalid because the lawrequires as an essential element of sale, determinate object, which was blur in the case at bar.

ISSUE:

Whether or not the Deed of Sale should be declared invalid because the object is not determinateas required by law.

RULING:

Article 1460 of the Civil Code states that the sale must have for its object a determinatething, is fulfilled as long as, at the time the contract is entered into, the object of the sale is cableof being determinate without the necessity of a new or further agreement between the parties.

The specific mention of some of the lots plus the statement that the lots object of the saleare the ones needed for city hall site sufficient provides a basis, as of the time, of the executionof the contract, for rendering determinate said lots without the need of a new further agreementof the parties.



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CATINDIG VS. VDA. DE MENESESG.R. No. 165851 : February 02, 201

FACTS:

The property subject of this controversy pertains to a parcel of land situated in Malolos,Bulacan, with an area of 49,139 square meters, titled in the name of the late Rosendo Meneses,Sr., under Transfer Certificate of Title (TCT) No. T-1749. Respondent Aurora Irene C. Vda. deMeneses is the surviving spouse of the registered owner, Rosendo Meneses, Sr.. She was issuedLetters of Administration over the estate of her late husband. On May 17, 1995, respondent, inher capacity as administratrix of her husband's estate, filed a Complaint for Recovery ofPossession, Sum of Money and Damages against petitioners Manuel Catindig and Silvino Roxas,Sr. before the Regional Trial Court of Malolos, Bulacan, to recover possession over theMasusuwi Fishpond.

Respondent alleged that in September 1975, petitioner Catindig, the first cousin of herhusband, deprived her of the possession over the Masusuwi Fishpond, through fraud, undue

influence and intimidation.Petitioner Catindig maintained that he bought the Masusuwi Fishpond from respondentand her children in January 1978, as evidenced by a Deed of Absolute Sale. Catindig furtherargued that even assuming that respondent was indeed divested of her possession of theMasusuwi Fishpond by fraud, her cause of action had already prescribed considering the lapse ofabout 20 years from 1975, which was allegedly the year when she was fraudulently deprived ofher possession over the property.

After trial, the trial court ruled in favor of respondent.The CA dismissed both the petitioners' appeals and affirmed the RTC.

ISSUE:

Whether the Court of Appeals seriously and gravely erred in disregarding thegenuineness and due execution of the deed of absolute sale.

RULING:

The Supreme Court denied the petition. The Supreme Court is convinced that the Deed ofAbsolute Sale relied upon by the defendants, petitioners herein is simulated and fictitious and hasno consideration. On its face, the Deed of Absolute sale is not complete and is not in due form.It is a 3-page document but with several items left unfilled or left blank, like the day thedocument was supposed to be entered into, the tax account numbers of the persons appearing assignatories to the document and the names of the witnesses. In other words, it was not witnessed by any one. More importantly, it was not notarized.

The Court also finds no compelling reason to depart from the court a quo's finding thatrespondent never received the consideration stipulated in the simulated deed of sale. Defendant[petitioner herein] Catindig declared that plaintiff and her children signed the instrument freelyand voluntarily and that the consideration of P150,000.00 as so stated in the document was paid by him to plaintiff . However, it is not denied that the title to this property is still in the name ofRosendo Meneses, Sr., and the owner's duplicate copy of the title is still in the possession of the plaintiff.

Since it was well established that the Deed of Sale is simulated and, therefore void, petitioners' claim that respondent's cause of action is one for annulment of contract, whichalready prescribed, is unavailing, because only voidable contracts may be annulled. On the otherhand, respondent's defense for the declaration of the inexistence of the contract does not prescribe.



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ORDUA VS. FUENTEBELLA et. AlG.R. No. 176841 : June 29, 2010

FACTS:

This case involves a residential lot with an area of 74 square meters located at FairviewSubdivision, Baguio City, originally registered in the name of Armando Gabriel, Sr. underTransfer Certificate of Title (TCT) No. 67181 of the Registry of Deeds of Baguio City.

Sometime in 1996 or thereabouts, Gabriel Sr. sold the subject lot to petitioner AntonitaOrdua, but no formal deed was executed to document the sale. The contract price was apparently payable in installments as Antonita remitted from time to time and Gabriel Sr. accepted partial payments. One of the Orduas would later testify that Gabriel Sr. agreed to execute a final deed ofsale upon full payment of the purchase price.

In 1979, Antonita and her sons, Dennis and Anthony Ordua, were already occupying thesubject lot on the basis of some arrangement undisclosed in the records and even constructed

their house thereon. They also paid real property taxes for the house and declared it for tax purposes, as evidenced by Tax Declaration in which they place the assessed value of thestructure at PhP 20,090.

After the death of Gabriel Sr., his son and namesake, respondent Gabriel Jr., secured TCT No. T-71499 over the subject lot and continued accepting payments from the petitioners. OnDecember 12, 1996, Gabriel Jr. wrote Antonita authorizing her to fence off the said lot and toconstruct a road in the adjacent lot. On December 13, 1996, Gabriel Jr. acknowledged receipt ofa PhP 40,000 payment from petitioners. Through a letter dated May 1, 1997, Gabriel Jr.acknowledged that petitioner had so far made an aggregate payment of PhP 65,000, leaving anoutstanding balance of PhP 60,000. A receipt Gabriel Jr. issued dated November 24, 1997reflected a PhP 10,000 payment. Despite all those payments made for the subject lot, Gabriel Jr.would later sell it to Bernard Banta (Bernard) obviously without the knowledge of petitioners.

On July 3, 2001, petitioners, joined by Teresita, filed a Complaint for Annulment of Title, Reconveyance with Damages against the respondents before the RTC.

The RTC ruled for the respondents. The CA dismissed the appeal, hence this petition.

ISSUE:

a. Whether or not the sale of the subject lot by Gabriel Sr. to Antonita is unenforceableunder the Statute of Frauds;

b. Whether or not such sale has adequate consideration;c. Whether the instant action has already prescribed; and whether or not respondents are

purchasers in good faith.

RULING:

On the first issue, the court notices that Gabriel Sr., during his lifetime, sold the subject property to Antonita, the purchase price payable on installment basis. Gabriel Sr. appeared tohave been a recipient of some partial payments. After his death, his son duly recognized the sale by accepting payments and issuing what may be considered as receipts therefor. Gabriel Jr., in agesture virtually acknowledging the petitioners' dominion of the property, authorized them toconstruct a fence around it. And no less than his wife, Teresita, testified as to the fact of sale andof payments received. Eduardo's assertion in his Answer that "persons appeared in the property"only after "he initiated ejectment proceedings" is clearly baseless.

On the second issue, the trial court's posture, with which the CA effectively concurred, is patently flawed. For starters, they equated incomplete payment of the purchase price withinadequacy of price or what passes as lesion, when both are different civil law concepts withdiffering legal consequences, the first being a ground to rescind an otherwise valid andenforceable contract. Perceived inadequacy of price, on the other hand, is not a sufficient groundfor setting aside a sale freely entered into, save perhaps when the inadequacy is shocking to theconscience. The Court to be sure takes stock of the fact that the contracting parties to the 1995 or



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1996 sale agreed to a purchase price of PhP 125,000 payable on installments. But the original lotowner, Gabriel Sr., died before full payment can be effected. Nevertheless, petitioners continuedremitting payments to Gabriel, Jr., who sold the subject lot to Bernard on June 30, 1999. Gabriel,Jr., as may be noted, parted with the property only for PhP 50,000. On the other hand, Bernardsold it for PhP 80,000 to Marcos and Benjamin. From the foregoing price figures, what is

abundantly clear is that what Antonita agreed to pay Gabriel, Sr., albeit in installment, was verymuch more than what his son, for the same lot, received from his buyer and the latter's buyerlater. The Court, therefore, cannot see its way clear as to how the RTC arrived at its simplisticconclusion about the transaction between Gabriel Sr. and Antonita being without "adequateconsideration."

On the third issue, the court finds no quibbling about the fraudulent nature of theconveyance of the subject lot effected by Gabriel Jr. in favor of Bernard. It is understandable thatafter his father's death, Gabriel Jr. inherited subject lot and for which he was issued TCT No. T-71499. Since the Gabriel Sr. - Antonita sales transaction called for payment of the contract pricein installments, it is also understandable why the title to the property remained with the Gabriels.And after the demise of his father, Gabriel Jr. received payments from the Orduas and even

authorized them to enclose the subject lot with a fence. In sum, Gabriel Jr. knew fully well aboutthe sale and is bound by the contract as predecessor-in-interest of Gabriel Sr. over the propertythus sold. The prescriptive period for the reconveyance of fraudulently registered real property is10 years, reckoned from the date of the issuance of the certificate of title, if the plaintiff is not in possession, but imprescriptible if he is in possession of the property. Thus, one who is in actual possession of a piece of land claiming to be the owner thereof may wait until his possession isdisturbed or his title is attacked before taking steps to vindicate his right. As it is, petitioners'action for reconveyance is imprescriptible.

In view of this case, the court ruled that petitioner Antonita Ordua is recognized to havethe right of ownership over subject lot covered by TCT No. T-3276 of the Baguio Registryregistered in the name of Eduardo J. Fuentebella and therefore granted the petition and set asidethe decision of the lower court.



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ASKAY V. COSALAN46 PHIL 179 September 15, 1924

FACTS:

Petitioner Askay is an illiterate Igorrote, aging between 70 and 80, who at various timeshas been the owner of mining property. While defendant Fernando A. Cosalan, the nephew bymarriage of Askay, and municipal president, who likewise has been interested along with hisuncle in mining enterprises. Askay obtained title to the Pet Kel Mineral Claim located in Tublay,Benguet then Askay sold this to Cosalan. Nine years later Askay instituted action in the Court ofFirst Instance to have the sale of the Pet Kel Mineral Claim declared null, to secure possessionof the mineral claim, and to obtain damages from the defendant in the amount of P10,500.Following the presentation of various pleadings including the answer of the defendant, andfollowing trial before Judge of First Instance, judgment was rendered dismissing the complaintand absolving the defendant from the same, with costs against the plaintiff. On being informedof the judgment of the trial court, plaintiff attacked the decision on two grounds: First,

jurisdictional, and the second, formal. Both motions were denied and an appeal was perfected.

ISSUE:

Whether or not the plaintiff has established his cause of action by a preponderance of theevidence.

RULING:

Plaintiff contends that the sale of the Pet Kel Mineral Claim was accomplished throughfraud and deceit on the part of the defendant. Plaintiff may be right but in our judgment he hasfailed to establish his claim. Fraud must be both alleged and proved. One fact exists in plaintiffsfavor, and this is the age and ignorance of the plaintiff who could be easily by the defendant, aman of greater intelligence. Another fact is the inadequacy of the consideration for the transferwhich, according to the conveyance, consisted of P1 and other valuable consideration, andwhich, according to the oral testimony, in reality consisted of P107 in cash, a bill-fold, one sheet,one cow, and two carabaos. Gross inadequacy naturally suggest fraud is some evidence thereof,so that it may be sufficient to show it when taken in connection with other circumstances, such asignorance or the fact that one of the parties has an advantage over the other. But the fact that the bargain was a hard one, coupled with mere inadequacy of price when both parties are in a position to form an independent judgment concerning the transaction, is not a sufficient groundfor the cancellation of a contract.

The Court concludes, therefore, that the complaint was properly dismissed. As a result, judgment is affirmed



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HEIRS OF THE LATE SPOUSES AURELIO AND ESPERANZA BALITE VS. LIMG.R. No. 152168, December 10, 2004

FACTS:

The spouses Aurelio and Esperanza Balite were the owners of a parcels of land. WhenAurelio died intestate, his wife Esperanza and their children inherited the subject property and became co-owners thereof. Esperanza became ill and was in dire need of money for her hospitalexpenses. She, through her daughter, Cristeta, offered to sell to Rodrigo Lim, her undividedshare for the price of P1,000,000.00. Esperaza and Rodrigo agreed that under the Deed ofAbsolute Sale, it will be made to appear that the purchase price of the property would beP150,000.00 although the actual price agreed upon by them for the property was P1,000,000.00.On April 16, 1996, Esperanza executed a Deed of Absolute Sale in favor of Rodrigo. They alsoexecuted on the same day a Joint Affidavit under which they declared that the real price of the property was P1,000,000.00 payable to Esperanza by installments. Only Esperanza and two ofher children Antonio and Cristeta knew about the said transaction. When the rest of the children

knew of the sale, they wrote to the Register of Deeds saying that their mother did not informthem of the sale of a portion of the said property nor did they give consent thereto. Nonetheless,Rodrigo made partial payments to Antonio who is authorized by his mother through a SpecialPower of Attorney.

Esperanza signed a letter addressed to Rodrigo informing the latter that her children didnot agree to the sale of the property to him and that she was withdrawing all her commitmentsuntil the validity of the sale is finally resolved. Then Esperanza died intestate and was survived by her children. Meanwhile, Rodrigo caused to be published the Deed of Absolute Sale.

Petitioners filed a complaint against Rodrigo for the annulment of sale, quieting of title,injunction and damages. Rodrigo secured a loan from the Rizal Commercial BankingCorporation in the amount of P2,000,000.00 and executed a Real Estate Mortgage over the property as security thereof. On motion of the petitioners, they were granted leave to file anamended complaint impleading the bank as additional party defendant. The court issued anorder rejecting the amended complaint of the petitioners. Likewise, the trial court dismissed thecomplaint. It held that pursuant to Article 493 of the Civil Code, a co-owner is not invalidated by the absence of the consent of the other co-owners. Hence, the sale by Esperanza of the property was valid; the excess from her undivided share should be taken from the undividedshares of Cristeta and Antonio, who expressly agreed to and benefit from the sale. The Court ofAppeals likewise held that the sale was valid and binding insofar as Esperanza Balite‘s undividedshare of the property was concerned. It affirmed the trial court‘s ruling that the lack of consentof the co-owners did not nullify the sale.

ISSUE:

Whether or not the Deed of Absolute Sale is null and void on the ground that it isfalsified; it has an unlawful cause; and it is contrary to law and/or public policy.

RULING:

The petition was denied and the ruling of the court below was affirmed by the Court.

The Deed of Sale is not null and void. It is an example of a simulated contract whichArticle 1345 of the Civil Code governs. The simulation of a contract may either be absolute orrelative. In absolute simulation, there is a colorable contract but without any substance, becausethe parties have no intention to be bound by it. An absolutely simulated contract is void, and the parties may recover from each other what they may have given under the ―contract‖. On theother hand, if the parties state a false cause is relatively simulated. Here, the parties‘ realagreement binds them. In the present case, the parties intended to be bound by the Contract, evenif it did not reflect the actual purchase price of the property. The letter of Esperanza to



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respondent and petitioner‘s admission that there was partial payment made on the basis of theAbsolute Sale reveals that the parties intended the agreement to produce legal effect.

Since the Deed of Absolute Sale was merely relatively simulated, it remains valid andenforceable. All the essential requisites prescribed by law for the validity and perfection of

contracts is present. However, the parties shall be bound by their real agreement for aconsideration of P1,000,000 as reflected by their Joint Affidavit..



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SUNTAY V. COURT OF APPEALSG.R. No. 114950, December 19, 1995

FACTS:

Respondent Federico Suntay is the owner of a parcel of land and a rice mill, warehouse,and other improvements situated in the said land. A rice miller, Federico, in a letter applied as amiller-contractor of the National Rice and Corn Corporation (NARIC). He informed the NARICthat he had a daily rice mill output of 400 cavans of palay and warehouse storage capacity of150,000 cavans of palay. His application, although prepared by his nephew-lawyer, RafaelSuntay, was disapproved, because at that time he was tied up with several unpaid loans.

For purposes of circumvention, he had thought of allowing Rafael to make theapplication for him. Rafael prepared an absolute deed of sale whereby Federico, for and inconsideration of P20,000.00 conveyed to Rafael said parcel of land with all its existingstructures. Said deed was notarized as Document No. 57 and recorded on Page 13 of Book 1,Series of 1962, of the Notarial Register of Atty. Herminio V. Flores. Less than three months

after this conveyance, a counter sale was prepared and signed by Rafael who also caused itsdelivery to Federico. Through this counter conveyance, the same parcel of land with all itsexisting structures was sold by Rafael back to Federico for the same consideration ofP20,000.00. Although on its face, this second deed appears to have been notarized as Document No. 56 and recorded on Page 15 of Book 1, Series of 1962, of the notarial register of Atty.Herminio V. Flores, an examination thereof will show that, recorded as Document No. 56 onPage 13, is not the said deed of sale but a certain "real estate mortgage on a parcel of land withTCT No. 16157 to secure a loan of P3,500.00 in favor of the Hagonoy Rural Bank."

Nowhere on page 13 of the same notarial register could be found any entry pertaining toRafael's deed of sale. Testifying on this irregularity, Atty. Flores admitted that he failed tosubmit to the Clerk of Court a copy of the second deed. Neither was he able to enter the same inhis notarial register. Even Federico himself alleged in his Complaint that, when Rafael deliveredthe second deed to him, it was neither dated nor notarized.

Upon the execution and registration of the first deed, Certificate of Title No. 0-2015 inthe name of Federico was cancelled and in lieu thereof, TCT No. T-36714 was issued in thename of Rafael. Even after the execution of the deed, Federico remained in possession of the property sold in concept of owner. Significantly, notwithstanding the fact that Rafael became thetitled owner of said land and rice mill, he never made any attempt to take possession thereof atany time, while Federico continued to exercise rights of absolute ownership over the property.

In a letter, dated August 14, 1969, Federico, through his new counsel, Agrava & Agrava,requested that Rafael deliver his copy of TCT No. T-36714 so that Federico could have thecounter deed of sale in his favor registered in his name. The request having been obviouslyturned down, Agrava & Agrava filed a petition with the Court of First Instance of Bulacanasking Rafael to surrender his owner's duplicate certificate of TCT No. T-36714. In oppositionthereto, Rafael chronicled the discrepancy in the notarization of the second deed of sale uponwhich said petition was premised and ultimately concluded that said deed was a counterfeit or "atleast not a public document which is sufficient to transfer real rights according to law." OnSeptember 8, 1969, Agrava & Agrava filed a motion to withdraw said petition, and, onSeptember 13, 1969, the Court granted the same.

On July 8, 1970, Federico filed a complaint for reconveyance and damages againstRafael. In his answer, Rafael scoffed at the attack against the validity and genuineness of thesale to him of Federico's land and rice mill. Rafael insisted that said property was "absolutelysold and conveyed . . . for a consideration of P20,000.00, Philippine currency, and for othervaluable consideration".

While the trial court upheld the validity and genuineness of the deed of sale executed byFederico in favor of Rafael, which deed is referred to above as Exhibit A, it ruled that thecounter-deed, referred to as Exhibit B, executed by Rafael in favor of Federico, was simulatedand without consideration, hence, null and void ab initio.

Moreover, while the trial court adjudged Rafael as the owner of the property in dispute, itdid not go to the extent of ordering Federico to pay back rentals for the use of the property as thecourt made the evidential finding that Rafael simply allowed his uncle to have continuous



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possession of the property because or their understanding that Federico would subsequentlyrepurchase the same.

From the aforecited decision of the trial court, both Federico and Rafael appealed. TheCourt of Appeals rendered judgment affirming the trial court's decision, with a modification thatFederico was ordered to surrender the possession of the disputed property to Rafael. Counsel of

Federico filed a motion for reconsideration of the aforecited decision. While the motion was pending resolution, Atty. Ricardo M. Fojas entered his appearance in behalf of the heirs ofRafael who had passed away on November 23, 1988. Atty. Fojas prayed that said heirs besubstituted as defendants-appellants in the case. The prayer for substitution was duly noted bythe court in a resolution dated April 6, 1993. Thereafter, Atty. Fojas filed in behalf of the heirs anopposition to the motion for reconsideration. The parties to the case were heard on oralargument on October 12, 1993. On December 15, 1993, the Court of Appeals reversed itself andrendered an amended judgment.

ISSUE:

Whether or not the deed of sale executed by Federico in favor of Rafael is simulated andfictitious and, hence, null and void.

RULING:

In the aggregate, the evidence on record demonstrate a combination of circumstancesfrom which may be reasonably inferred certain badges of simulation that attach themselves to thedeed of sale in question. The complete absence of an attempt on the part of the buyer to asserthis rights of ownership over the land and rice mill in question is the most protuberant index ofsimulation.

The deed of sale executed by Federico in favor of his now deceased nephew, Rafael, isabsolutely simulated and fictitious and, hence, null and void, said parties having entered into asale transaction to which they did not intend to be legally bound. As no property was validlyconveyed under the deed, the second deed of sale executed by the late Rafael in favor of hisuncle, should be considered ineffective and unavailing.

The allegation of Rafael that the lapse of seven years before Federico sought the issuanceof a new title in his name necessarily makes Federico's claim stale and unenforceable does nothold water. Federico's title was not in the hands of a stranger or mere acquaintance; it was in the possession of his nephew who, being his lawyer, had served him faithfully for many years.Federico had been all the while in possession of the land covered by his title and so there was no pressing reason for Federico to have a title in his name issued. Even when the relationship between the late Rafael and Federico deteriorated, and eventually ended, it is not at all strangefor Federico to have been complacent and unconcerned about the status of his title over thedisputed property since he has been possessing the same actually, openly, and adversely, to theexclusion of Rafael. It was only when Federico needed the title in order to obtain a collaterizedloan that Federico began to attend to the task of obtaining a title in his name over the subject landand rice mill.



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UY V. COURT OF APPEALSG.R. No. 120465, September 9, 1999

FACTS:

Being agents and authorized to sell eight (8) parcels of land by the owners thereof, petitioners William Uy and Rodel Roxas, by virtue of such authority, offered to sell the lands, torespondent National Housing Authority (NHA) to be utilized and developed as a housing project. NHA approved the acquisition of the said parcels of land with an area of 31.8231 hectares at thecost of P23.867 million, pursuant to which the parties executed a series of Deeds of AbsoluteSale covering the subject lands. NHA eventually cancelled the sale over three (3) parcels of landof the eight parcels of lands because of the report it received from the Land Geosciences Bureauof the Department of Environment and Natural Resources that the remaining area is located at anactive landslide area and therefore, not suitable for development into a housing project.

Petitioners then filed a complaint for damages but the trial court rendered the cancellationof contract to be justified and awarded P1.255 million as damages in favor of petitioners. Upon

appeal by petitioners, the Court of Appeals reversed the decision and entered a new onedismissing the complaint including the award of damages.

ISSUE:1.) Whether or not the contention of petitioner is correct.2.) Whether or not a par ty‘s entry into a contract affects the validity of the contract.

RULING:

1.) The Petitioners are not correct. They confuse the cancellation of the contract by the NHA as a rescission of the contract under Article 1191 of the Civil Code. The right to rescissionis predicated on a breach of faith by the other party that violates the reciprocity between them.The power to rescind is given to the injured party. In this case, the NHA did not rescind thecontract. Indeed, it did not have the right to do so for the other parties to the contract, thevendors did not commit any breach, much less a substantial breach, of their obligation. The NHA did not suffer any injury. The cancellation was not therefore a rescission under Article1191. Rather, it was based on the negation of the cause arising from the realization that thelands, which were the objects of the sale, were not suitable for housing.

2.) The general rule is that a party‘s motives for entering into a contract do not affect thecontract. However, when the motive predetermines the cause, the motive may be regarded as thecause. As held in Liguez v. CA, It is well to note, however, that Manresa himself, whilemaintaining the distinction and upholding the inoperativess of the motives of the parties todetermine the validity of the contract, expressly excepts from the rule those contracts that areconditioned upon the attainment of the motives of either party.



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CATLY VS. NAVARROG.R. No. 174719 : May 05, 2010

FACTS:This case involves Lot No. 9 which has 1,007 square meter parcel of land located at

Kinasang-an, Pardo, Cebu City and fronting the Cebu provincial highway. The lot originally belonged to Pastor Pacres who left it intestate to his heirs Margarita, Simplicia, Rodrigo,Francisco, Mario and Vearanda. Petitioners admitted that at the time of Pastor's death in 1962,his heirs were already occupying definite portions of Lot No. 9. The front portion along the provincial highway was occupied by the co-owned Pacres ancestral home, and beside it stoodRodrigo's hut. Mario's house stood at the back of the ancestral house according to Valentina'stestimony in 1968. On the same year, the heirs leased "the ground floor of the ancestral hometogether with a lot area of 300 square meters including the area occupied by the house" torespondent Hilario Ramirez, who immediately took possession thereof. Subsequently in 1974,four of the Pacres sibling namely, Rodrigo, Francisco, Simplicia and Margarita sold their sharesin the ancestral home and the lot on which it stood to Ramirez. The deeds of sale described the

subjects thereof as "part and portion of the 300 square meters actually in possession andenjoyment by vendee and her spouse, Hilario Ramirez, by virtue of a contract of lease in theirfavor."

In 1984, Ygoa filed a petition to survey and segregate the portions she bought from Lot No. 9. Mario objected on the ground that he wanted to exercise his right as co-owner to redeemhis siblings' shares. Vendee Rodrigo also opposed on the ground that he wanted to annul the salefor failure of consideration. On the other hand, Margarita and the widow of Francisco bothmanifested their assent to Ygoa's petition. By virtue of such manifestation, the court issued a writof possession respecting Margarita's and Francisco's shares in favor of Ygoa.

On June 18, 1993, the Republic of the Philippines, through the Department of PublicWorks and Highways (DPWH), expropriated the front portion of Lot No. 9 for the expansion ofthe Cebu south road.

On September 30, 1994, Mario, petitioners' predecessor-in-interest, filed an ejectmentsuit against Ramirez' successor-in-interest Vicentuan. Mario claimed sole ownership of the lotoccupied by Ramirez/Vicentuan by virtue of the oral partition. He argued thatRamirez/Vicentuan should pay rentals to him for occupying the front lot and should transfer tothe rear of Lot No. 9 where the lots of Ramirez's vendors are located.

The trial court ruled in favor of respondents. The appellate court sustained the ruling ofthe trial court. Hence this petition.

ISSUE:a. Whether petitioners were able to prove the existence of the alleged oral agreements

such as the partition and the additional obligations of surveying and titling b. Whether the issue of ownership regarding the front portion of Lot No. 9 and

entitlement to the expropriation payment may be resolved in this action

RULING:

On the first issue, the court find no compelling reason to deviate from the foregoing ruleand disturb the trial and appellate courts' factual finding that the existence of an oral partitionwas not proven. Our examination of the records indicates that, contrary to petitioners' contention,the lower courts' conclusion was justified. Petitioners' only piece of evidence to prove the allegedoral partition was the joint affidavit supposedly executed by some of the Pacres siblings and theirheirs in 1993, to the effect that such an oral partition had previously been agreed upon.Petitioners did not adequately explain why the affidavit was executed only in 1993, several yearsafter respondents Ygoa and Ramirez took possession of the front portions of Lot No. 9.

On the second issue, the Supreme Court affirmed the decision of the Court of Appeals,they found that the parties did not provide the Court with the pleadings filed in the expropriation



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case, which makes it impossible to know the extent of the issues already submitted by the partiesin the expropriation case and thereby assess whether there was forum-shopping. Nonetheless,while the court cannot rule on the existence of forum-shopping for insufficiency of evidence, it iscorrect that the issue of ownership should be litigated in the expropriation court. The courthearing the expropriation case is empowered to entertain the conflicting claims of ownership of

the condemned property and adjudge the rightful owner thereof, in the same expropriation case.This is due to the intimate relationship of the issue of ownership with the claim for theexpropriation payment. Petitioners' objection regarding respondents' claim over the expropriation payment should have been brought up in the expropriation court as opposition to respondent'smotion. The SC cannot agree with the trial court's order to partition the lot in accordance withExhibit No. 1 or the sketch prepared by petitioner Valentina. To do so would resolve the issue ofownership over portions of Lot No. 9 and effectively preempt the expropriation court, basedsolely on actual occupation.

In sum, the Supreme Court denied the petition.



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LIGUEZ V. COURT OF APPEALSG.R. No. L-11240, December 18, 1957

FACTS:

Liguez filed a complaint against the widow and heirs of the late Salvador P. Lopez torecover a parcel of 51.84 hectares of land. Plaintiff averred to be its legal owner, pursuant to adeed of donation of said land, executed in her favor by the late owner, Salvador P. Lopez. Thedefense interposed that the donation was null and void for having an illicit cause orconsideration, which was plaintiff's entering into marital relations with Salvador P. Lopez, amarried man; and that the property had been adjudicated to the appellees as heirs of Lopez by thecourt.The Court of Appeals held that the deed of donation was inoperative, and null and void (1) because the husband, Lopez, had no right to donate conjugal property to the plaintiff appellant;and (2) because the donation was tainted with illegal causa or consideration (illicit sexualrelation), of which donor and donee were participants.

Appellant vigorously contends that the Court of First Instance as well as the Court of

Appeals erred in holding the donation void for having an illicit cause or consideration. It isargued that under Article 1274 of the Civil Code of 1889 (which was the governing law in 1943,when the donation was executed), "in contracts of pure beneficence the consideration is theliberality of the donor", and that liberality per se can never be illegal, since it is neither againstlaw or morals or public policy.

ISSUE:

Whether or not the deed of donation made by Lopez in favor of Liguez was valid.

RULING:

Under Article 1274, liberality of the donor is deemed causa only in those contracts thatare of "pure" beneficence; that is to say, contracts designed solely and exclusively to procure thewelfare of the beneficiary, without any intent of producing any satisfaction for the donor;contracts, in other words, in which the idea of self-interest is totally absent on the part of thetransferor.

Here the fact that the late Salvador P. Lopez was not moved exclusively by the desire to benefit appellant Conchita Liguez, but also to secure her cohabiting with him, so that he couldgratify his sexual impulses. This is clear from the confession of Lopez to the witnessesRodriguez and Ragay that he was in love with appellant, but her parents would not agree unlesshe donated the land in question to her. Actually, therefore, the donation was but one part of anonerous transaction (at least with appellant's parents) that must be viewed in its totality. Thusconsidered, the conveyance was clearly predicated upon an illicit causa.

Appellant seeks to differentiate between the alleged liberality of Lopez, as causa for thedonation in her favor, and his desire for cohabiting with appellant, as motives that impelled himto make the donation, and quotes from Manresa and the jurisprudence of this Court on thedistinction that must be maintained between causa and motives. It is well to note, however, thatManresa himself, while maintaining the distinction and upholding the inoperativeness of themotives of the parties to determine the validity of the contract, expressly excepts from the rulethose contracts that are conditioned upon the attainment of the motives of either party.

Appellees, as successors of the late donor, being thus precluded from pleading thedefense of immorality or illegal causa of the donation, the total or partial ineffectiveness of thesame must be decided by different legal principles. In this regard, the Court of Appeals correctlyheld that Lopez could not donate the entirety of the property in litigation, to the prejudice of hiswife Maria Ngo, because said property was conjugal in character, and the right of the husband todonate community property is strictly limited by law.

Appellant Conchita Liguez was declared by the Supreme Court entitled to so much of thedonated property as may be found, upon proper liquidation, not to prejudice the share of thewidow Maria Ngo in the conjugal partnership with Salvador P. Lopez or the legitimes of theforced heirs of the latter.



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PHILIPPINE BANKING CORPORATION V. LUI SHE,21 SCRA 52

FACTS:

Justina who inherited parcels of land in Manila executed a contract of lease in favor of Wong,covering a portion already leased to him and another portion of the property. The lease was for50 years, although the lessee was give the right to withdraw at anytime from the agreement witha stipulated monthly rental.

She executed another contract giving Wong the option to buy the leased premises forP120,000 payable within 10 years at monthly installment of P1,000. The option was conditionedon his obtaining Philippine citizenship, which was then pending. His application fornaturalization was withdrawn when it was discovered that he was a resident of Rizal.

She executed two other contracts one extending the term to 99 years and the term fixingthe term of the option of 50 years. In the two wills, she bade her legatees to respect the contractshe had entered into with Wong, but it appears to have a change of heart in a codicil. Claiming

that the various contracts were made because of her machinations and inducements practiced byhim, she now directed her executor to secure the annulment of the contracts.The complaint alleged that Wong obtained the contracts through fraud. Wong denied

having taken advantage of her trust in order to secure the execution of the contracts on question.He insisted that the various contracts were freely and voluntarily entered into by the parties.

The lower court declared all the contracts null and void with the exception of the first,which is the contract of lease.

ISSUE:

Whether or not the contracts entered into by the parties are void.

RULING:

The contract is void. The Court held the lease and the rest of the contracts were obtainedwith the consent of Justina freely given and voluntarily, hence the claim that the consent wasvitiated due to fraud or machination is bereft of merit. However the contacts are not necessarilyvalid because the Constitution provides that aliens are not allowed to own lands in thePhilippines. The illicit purpose then becomes the illegal causa, rendering the contracts void.

It does not follow from what has been said that because the parties are in pari delicto theywill be left where they are, without relief. For one thing, the original parties who were guilty ofviolation of fundamental charter have died and have since substituted by their administrators towhom it would e unjust to impute their guilt. For another thing, Article 1416 of the Civil Code provides an exception to the pari de licto, that when the agreement is not illegal per se but ismerely prohibited, and the prohibition of the law is designed for the protection of the plaintiff, hemay recover what he has paid or delivered.



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LONDRES V. COURT OF APPEALSG.R. No. 136427, December 17, 2002

FACTS:

The present case stemmed from a battle of ownership over Lots 1320 and 1333 bothlocated in Barrio Baybay, Roxas City, Capiz. Paulina originally owned these two parcels of land.After Paulina‘s death, ownership of the lots passed to her daughter, Filomena. The survivingchildren of Filomena, namely, Sonia Fuentes Londres, Armando V. Fuentes, Chi-Chita FuentesQuintia, Roberto V. Fuentes, Leopoldo V. Fuentes and Marilou Fuentes Esplana, herein petitioners, now claim ownership over Lots 1320 and 1333. On the other hand, privaterespondents Consolacion and Elena anchor their right of ownership over Lots 1320 and 1333 onthe Absolute Sale executed by Filomena on April 24, 1959. Filomena sold the two lots in favorof Consolacion and her husband, Julian. Elena is the daughter of Consolacion and Julian.

On March 30, 1989, petitioners filed a complaint for the declaration of nullity of contract,damages and just compensation. Petitioners sought to nullify the Absolute Sale conveying Lots

1320 and 1333 and to recover just compensation from public respondents DPWH and DOTC.Petitioners claimed that as the surviving children of Filomena, they are the owners of Lots 1320and 1333. Petitioners claimed that these two lots were never sold to Julian. Petitioners doubt thevalidity of the Absolute Sale because it was tampered. The cadastral lot number of the second lotmentioned in the Absolute Sale was altered to read Lot 1333 when it was originally written asLot 2034. Petitioners pointed out that Lot 2034, situated in Barrio Culasi, Roxas City, Capiz, wasalso owned by their grandmother, Paulina. And that it was only recently that they learned of theclaim of private respondents when Consolacion filed a petition for the judicial reconstitution ofthe original certificates of title of Lots 1320 and 1333 with the Capiz Cadastre. Upon furtherinquiry, petitioners discovered that there exists a notarized Absolute Sale executed on April 24,1959 registered only on September 22, 1982 in the Office of the Register of Deeds of RoxasCity. The private respondents‘ copy of the Absolute Sale was tampered so that the second parcelof lot sold, Lot 2034 would read as Lot 1333. However, the Records Management and ArchivesOffice kept an unaltered copy of the Absolute Sale. This other copy shows that the objects of thesale were Lots 1320 and 2034.

Private respondents maintained that they are the legal owners of Lots 1333 and 1320.Julian purchased the lots from Filomena in good faith and for a valid consideration. Privaterespondents explained that Julian was deaf and dumb and as such, was placed in adisadvantageous position compared to Filomena. Julian had to rely on the representation of other persons in his business transactions. After the sale, Julian and Consolacion took possession of thelots. Up to now, the spouses‘ successors-in-interest are in possession of the lots in the conceptowners. Private respondents claimed that the alteration in the Absolute Sale was made byFilomena to make it conform to the description of the lot in the Absolute Sale. Privaterespondents filed a counterclaim with damages.

The cross-claim of petitioners against public respondents was for the recovery of justcompensation. Petitioners claimed that during the lifetime of Paulina, public respondents took a3,200-square meter portion of Lot 1320. The land was used as part of the Arnaldo Boulevard inRoxas City without any payment of just compensation. In 1988, public respondents alsoappropriated a 1,786-square meter portion of Lot 1333 as a vehicular parking area for the RoxasCity Airport. Sonia, one of the petitioners, executed a deed of absolute sale in favor of theRepublic of the Philippines over this portion of Lot 1333. According to petitioners, the vendeeagreed to pay petitioners P214,320.00. Despite demands, the vendee failed to pay the stipulatedamount.

The trial court issued its decision upholding the validity of the Absolute Sale. This wasaffirmed by the Court of Appeals.

ISSUE:

Whether or not the notarized copy should prevail.



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RULING:

Decision affirmed with the modification that the cross-claim against public respondents isdismissed.

Among others, petitioners harp on the fact that the notarized and registered copy of theAbsolute Sale should have, been correspondingly corrected. Petitioners believe that the notarizedand archived copy should prevail. We disagree. A contract of sale is perfected at the momentthere is a meeting of the minds upon the thing which is the object of the contract and upon the price. Being consensual, a contract of sale has the force of law between the contracting partiesand they are expected to abide in good faith with their respective contractual commitments.Article 1358 of the Civil Code, which requires certain contracts to be embodied in a publicinstrument, is only for convenience, and registration of the instrument is needed only toadversely affect third parties. Formal requirements are, therefore, for the purpose of binding orinforming third parties. Non-compliance with formal requirements does not adversely affect thevalidity of the contract or the contractual rights and obligations of the parties.



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SPOUSES ANTONIO & LETICIA VEGA V. SSSGR No. 181672, September 20, 2010

FACTS:

Magdalena V. Reyes (Reyes) owned a piece of titled land in Pilar Village, Las PiñasCity. On August 17, 1979 she got a housing loan from respondent Social Security System (SSS)for which she mortgaged her land. In late 1979, however, she asked the petitioner spousesAntonio and Leticia Vega (the Vegas) to assume the loan and buy her house and lot since shewanted to emigrate.

Upon inquiry with the SSS, an employee there told the Vegas that the SSS did notapprove of members transferring their mortgaged homes. The Vegas could, however, simplymake a private arrangement with Reyes provided they paid the monthly amortizations ontime. This practice, said the SSS employee, was commonplace. Armed with this information, theVegas agreed for Reyes to execute in their favor a deed of assignment of real property with

assumption of mortgage and paid Reyes P20,000.00 after she undertook to update theamortizations before leaving the country. The Vegas then took possession of the house inJanuary 1981.

But Reyes did not readily execute the deed of assignment. She left the country and gaveher sister, Julieta Reyes Ofilada (Ofilada), a special power of attorney to convey ownership ofthe property. Sometime between 1983 and 1984, Ofilada finally executed the deed promised byher sister to the Vegas. Ofilada kept the original and gave the Vegas two copies. The latter gaveone copy to the Home Development Mortgage Fund and kept the other. Unfortunately, a stormin 1984 resulted in a flood that destroyed the copy left with them.

ISSUE:

Whether or not the Vegas presented adequate proof of Reyes‘ sale of the subject propertyto them

RULING:

The CA ruled that the Vegas were unable to prove that Reyes assigned the subject property to them, given that they failed to present the deed of assignment in their favor upon aclaim that they lost it. But the rule requiring the presentation of the original of that deed ofassignment is not absolute. Secondary evidence of the contents of the original can be adduced,as in this case, when the original has been lost without bad faith on the part of the party offeringit.

Here, not only did the Vegas prove the loss of the deed of assignment in their favor and what thesame contained, they offered strong corroboration of the fact of Reyes‘ sale of the property tothem. They took possession of the house and lot after they bought it. Indeed, they lived on itand held it in the concept of an owner for 13 years before PDC came into the picture. They also paid all the amortizations to the SSS with Antonio Vega‘s personal check, even those that Reyes promised to settle but did not. And when the SSS wanted to foreclose the property, the Vegassent a manager‘s check to it for the balance of the loan. Neither Reyes nor any of her relativescame forward to claim the property. The Vegas amply proved the sale to them.



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BALATBAT V. COURT OF APPEALSG.R. No. 109410, August 28, 1996

FACTS:

The lot in question covered by Transfer Certificate of Title No. 51330 was acquired by plaintiff Aurelio Roque and Maria Mesina during their conjugal union and the house constructedthereon was likewise built during their marital union. Out of their union, plaintiff and MariaMesina had four children. When Maria Mesina died on August 28, 1966, the only conjugal properties left are the house and lot above stated of which plaintiff herein, as the legal spouse, isentitled to one-half share pro-indiviso thereof. With respect to the one-half share pro-indivisonow forming the estate of Maria Mesina, plaintiff and the four children, the defendants here, areeach entitled to one-fifth (1/5) share pro-indiviso.

Aurelio Roque then entered into a contract of Absolute Sale with the spouses Aurora andJose Repuyan. However, on August 20, 1980, Aurelio filed a complaint for Rescission ofContract against Spouses Repuyan for the latter‘s failure to pay the balance of the purchase price.

A deed of absolute sale was then executed on February 4, 1982 between Aurelio S. Roque,Corazon Roque, Feliciano Roque, Severa Roque and Osmundo Roque and Clara Balatbat,married to Alejandro Balatbat. On April 14, 1982, Clara Balatbat filed a motion for the issuanceof a writ of possession which was granted by the trial court on September 14, 1982 "subject,however, to valid rights and interest of third persons over the same portion thereof, other thanvendor or any other person or persons privy to or claiming any rights or interests under it." Thecorresponding writ of possession was issued on September 20, 1982. The lower court thenrendered judgment in favor of the Spouses Repuyan and declared the Deed of Absolute Sale asvalid. On appeal by petitioner Balatbat, the Court of Appeals affirmed the lower court‘s decision.

ISSUE:Whether or not the delivery of the owner‘s certificate of title to spouses Repuyan by

Aurelio Roque is for convenience or for validity or enforceability.

RULING:

The provision of Article 1358 on the necessity of a public document is only forconvenience, not for validity or enforceability. It is not a requirement for the validity of acontract of sale of a parcel of land that this be embodied in a public instrument.

The Supreme Court found that the sale between Aurelio and the Spouses Repuyan is notmerely for the reason that there was no delivery of the subject property and thatconsideration/price was not fully paid but the sale as consummated, hence, valid and enforceable.

The non-delivery of the possession of the subject property to the private respondent,suffice it to say that ownership of the thing sold is acquired only from the time of deliverythereof, either actual or constructive. Article 1498 of the Civil Code provides that when the saleis made through a public instrument, the execution thereof shall be equivalent to the delivery ofthe thing which is the object of the contract, if from the deed the contrary does not appear orcannot be inferred. The execution of the public instrument, without actual delivery of the thing,transfers the ownership from the vendor to the vendee, who may thereafter exercise the rights ofan owner over the same. In the instant case, vendor Roque delivered the owner's certificate oftitle to herein private respondent. It is not necessary that vendee be physically present at everysquare inch of the land bought by him, possession of the public instrument of the land issufficient to accord him the rights of ownership. Thus, delivery of a parcel of land may be done by placing the vendee in control and possession of the land (real) or by embodying the sale in a public instrument (constructive).

A contract of sale being consensual, it is perfected by the mere consent of the parties.Delivery of the thing bought or payment of the price is not necessary for the perfection of thecontract; and failure of the vendee to pay the price after the execution of the contract does notmake the sale null and void for lack of consideration but results at most in default on the part ofthe vendee, for which the vendor may exercise his legal remedies. Tthe petition for review ishereby dismissed for lack of merit.



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UNIVERSAL ROBINA SUGAR MILLING CORPORATION V. HEIRS OF ANGELTEVES

G.R. No. 128574, September 18, 2002

FACTS:

Andres Abanto owned two parcels of land situated in Campuyo, Manjuyod, NegrosOriental. One lot is registered in his name and the other lot is unregistered. When he died, hisheirs executed an "Extrajudicial Settlement of the Estate of the Deceased and SimultaneousSale." In this document, Abanto's heirs adjudicated unto themselves the two lots and sold theunregistered lot to the United Planters Sugar Milling Company, Inc. (UPSUMCO), and theregistered lot to Angel M. Teves, for a total sum of P115,000.00. The sale was not registered.

Out of respect for his uncle Montenegro, who was UPSUMCO's founder and president,Teves verbally allowed UPSUMCO to use the registered lot for pier and loading facilities, free ofcharge, subject to the condition that UPSUMCO shall shoulder the payment of real propertytaxes and that its occupation shall be co-terminus with its corporate existence. UPSUMCO then

built a guesthouse and pier facilities on the property. Years later, UPSUMCO‘s properties wereacquired by the Philippine National Bank (PNB). Later, PNB transferred the same properties tothe Asset Privatization Trust (APT) which, in turn, sold the same to the Universal Robina SugarMilling Corporation (URSUMCO). URSUMCO then took possession of UPSUMCO‘s properties, including Teves' lot.

Upon learning of the acquisition of his lot, Teves formally asked the corporation to turnover to him possession thereof or the corresponding rentals. He stated in his demand letters thathe merely allowed UPSUMCO to use his property until its corporate dissolution; and that it wasnot mortgaged by UPSUMCO with the PNB and, therefore, not included among the foreclosed properties acquired by URSUMCO.

URSUMCO refused to heed Teves' demand, claiming that it acquired the right to occupythe property from UPSUMCO which purchased it from Andres Abanto; and that it was merely placed in the name of Angel Teves, as shown by the "Deed of Transfer and Waiver of Rights andPossession" dated November 26, 1987. Under this document, UPSUMCO transferred toURSUMCO its application for agricultural and foreshore lease. The same document partly statesthat the lands subject of the foreshore and agricultural lease applications are bounded on thenorth by the "titled property of Andres Abanto bought by the transferor (UPSUMCO) but placedin the name of Angel Teves". URSUMCO further claimed that it was UPSUMCO, not Teves,which has been paying the corresponding realty taxes.

Consequently, Teves filed a complaint for recovery of possession of real property withdamages against URSUMCO. However, on September 4, 1992, Teves died and was substituted by his heirs. On April 6, 1994, the RTC held that URSUMCO has no personality to question thevalidity of the sale of the property between the heirs of Andres Abanto and Angel Teves since itis not a party thereto; that Teves' failure to have the sale registered with the Registry of Deedswould not vitiate his right of ownership, unless a third party has acquired the land in good faithand for value and has registered the subsequent deed; that the list of properties acquired byURSUMCO from the PNB does not include the disputed lot and, therefore, was not among thoseconveyed by UPSUMCO to URSUMCO.

On appeal by URSUMCO, the Court of Appeals affirmed the RTC decision, holding thatthe transaction between Angel Teves and Andres Abanto's heirs is a contract of sale, not one tosell, because ownership was immediately conveyed to the purchaser upon payment ofP115,000.00. On October 29, 1996, URSUMCO filed a motion for reconsideration but wasdenied by the Appellate Court. Hence, the instant petition for review on certiorari.

ISSUE:

Whether or not the respondents have established a cause of action against petitioner.



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RULING:

There is no established cause of action. Petitioner URSUMCO contends that respondentshave no cause of action because the "Extrajudicial Settlement of the Estate of the DeceasedAndres Abanto and Simultaneous Sale" is merely a promise to sell and not an absolute deed of

sale, hence, did not transfer ownership of the disputed lot to Angel Teves. Assuming that thedocument is a contract of sale, the same is void for lack of consideration because the total priceof P115,000.00 does not specifically refer to the registered lot making the price uncertain.Furthermore, the transaction, being unregistered, does not bind third parties.

Petitioner's contentions lack merit. As held by the RTC and the Court of Appeals, thetransaction is not merely a contract to sell but a contract of sale. In a contract of sale, title to the property passes to the vendee upon delivery of the thing sold; while in a contract to sell,ownership is, by agreement, reserved in the vendor and is not to pass to the vendee until full payment of the purchase price. In the case at bar, the subject contract, duly notarized, providesthat the Abanto heirs sold to Teves the lot covered by TCT No. H-37. There is no showing thatthe Abanto heirs merely promised to sell the said lot to Teves.

The absolute ownership over the registered land was indeed transferred to Teves isfurther shown by his acts subsequent to the execution of the contract. As found by the trial court,it was Teves, not Andres Abanto's heirs, who allowed UPSUMCO to construct pier facilities andguesthouse on the land. When the property was erroneously included among UPSUMCO's properties that were transferred to petitioner URSUMCO, it was Teves, not the heirs of AndresAbanto, who informed petitioner that he owns the same and negotiated for an arrangementregarding its use. Teves even furnished petitioner documents and letters showing his ownershipof the lot, such as a copy of the "Extrajudicial Settlement of the Estate of the Deceased AndresAbanto and Simultaneous Sale" and a certified true copy of TCT No. H-37 covering the disputedlot. Indeed, the trial court and the Court of Appeals correctly ruled that Teves purchased the lotfrom the Abanto heirs.

That the contract of sale was not registered does not affect its validity. Being consensualin nature, it is binding between the parties, the Abanto heirs and Teves. Article 1358 of the NewCivil Code, which requires the embodiment of certain contracts in a public instrument, is onlyfor convenience, and the registration of the instrument would merely affect third persons.Formalities intended for greater efficacy or convenience or to bind third persons, if not done,would not adversely affect the validity or enforceability of the contract between the contracting parties themselves. Thus, by virtue of the valid sale, Angel Teves stepped into the shoes of theheirs of Andres Abanto and acquired all their rights to the property.



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SARMING VS. DY383 SCRA 131, JUNE 6, 2002

FACTS:

A controversy arose regarding the sale of Lot 4163 which was half-owned by the originaldefendant, Silveria Flores, although it was solely registered under her name. The other half wasoriginally owned by Silveria‘s brother, Jose. On January 1956, the heirs of Jose entered into acontract with plaintiff Alejandra Delfino, for the sale of their one-half share of Lot 4163 afteroffering the same to their co-owner, Silveria, who declined for lack of money. Silveria did notobject to the sale of said portion to Alejandra.

Atty. Deogracias Pinili, Alejandra‘s lawyer then prepared the document of sale. In the preparation of the document however, OCT no. 4918-A, covering Lot 5734, and not the correcttitle covering Lot 4163 was the one delivered to Pinili.

Unaware of the mistake committed, Alejandra immediately took possession of Lot 4163

and introduced improvements on the said lot.Two years later, when Alejandra Delfino purchased the adjoinin portion of the lot she had been occupying, she discovered that what was designated in the deed, Lot 5734, was the wronglot. Thus, Alejandra and the vendors filed for the feformation of the Deed of Sale.

ISSUE:

Whether or not reformation is proper in this case.

RULING:

The Court ruled that reformation is proper in the case at bar. Reformation is that remedyin equity by means of which a written instrument is made or construed so as to express or informto the real intention of the parties.

An action for reformation of instrument under this provision of law may prosper onlyupon the concurrence of the following requisites:

(1) there must have been a meeting of the minds of the parties to the contract;(2) the instrument does not express the true intention of the parties; and(3) the failure of the instrument to express the true intention of the parties is dueto mistake, fraud, inequitable conduct or accident.

All of these requisites are present in this case. There was a meeting of the minds betweenthe parties to the contract but the deed did not express the true intention ot the parties due to thedesignation of the lot subject of the deed. There is no dispute as to the intention of the parties tosell the land to Alejandra Delfino but there was a mistake as to the designation of the lot intendedto be sold as stated in the Settlement of Estate and Sale.



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CEBU CONTRACTORS CONSORTIUM CO. V. COURT OF APPEALSG.R. No. 107199, July 22, 2003

FACTS:

MLFC alleges that a lease agreement relating to various equipment was entered into between MLFC, as lessor, and CCCC, as lessee. The terms and conditions of the lease weredefined in said agreement and in two lease schedules of payment. To secure the lease rentals, achattel mortgage, and a subsequent amendment thereto, were executed in favor of MLFC overother various equipment owned by CCCC.

CCCC began defaulting on the lease rentals, prompting MLFC to send demand letters.When the demand letters were not heeded, MLFC filed a complaint for the payment of therentals due and prayed that a writ of replevin be issued in order to obtain possession of theequipment leased and to foreclose on the equipment mortgaged.

CCC‘s position is that it is no longer indebted to MLFC because the total amountscollected by the latter from the Ministry of Public Highways, by virtue of the deed of

assignment, and from the proceeds of the foreclosed chattels were more than enough to coverCCC‘s liabilities. CCC submits that in any event, the deed of assignment itself already freedCCC from its obligation to MLFC.

The trial court rendered decision upholding the lease agreement and finding CCC liableto MLFC in lease rentals. On appeal, the appellate court affirmed the trial court‘s decision.

ISSUE:Whether or not respondent court erred in upholding the so- called sale-lease back scheme

of the private respondent when the same is in reality nothing but an equitable mortgage.

RULING:

The Court affirms the decision of the court below.MLFC‘s own evidence discloses that it offers two types of financing lease: a direc t lease

and a sale- lease back. The client sells to MLFC equipment that it owns, which will be leased back to him. The transaction between CCC and MLFC involved the second type of financinglease.CCC argues that the sale and lease back scheme is nothing more than an equitablemortgage and consequently, asks for its reformation. The right of action for reformation accruedfrom the date of execution of the contract of lease in 1976. This was properly exercised by CCCwhen it filed its answer with counterclaim to MLFC‘s complaint in 1978 and asked for thereformation of the lease contract.



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TSPIC CORPORATION VS. TSPIC EMPLOYEES UNIONG.R No. 163419. February 13, 2008

FACTS:

TSPI Corporation entered into a Collective Bargaining Agreement with the corporationUnion for the increase of salary for the latter‘s members for the year 2000 to 2002 starting fromJanuary 2000. thus, the increased in salary was materialized on January 1, 2000. However, onOctober 6, 2000, the Regional Tripartite Wage and production Board raised daily minimumwage from P 223.50 to P 250.00 starting November 1, 2000. Conformably, the wages of the 17 probationary employees were increased to P250.00 and became regular employees thereforereceiving another 10% increase in salary. In January 2001, TSPIC implemented the new wagerates as mandated by the CBA. As a result, the nine employees who were senior to the 17recently r egularized employees, received less wages. On January 19, 2001, TSPIC‘s HRDnotified the 24 employees who are private respondents, that due to an error in the automated payroll system, they were overpaid and the overpayment would be deducted from their salaries

starting February 2001. The Union on the other hand, asserted that there was no error and thededuction of the alleged overpayment constituted diminution of pay.

ISSUE:

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

RULING:

Yes, because it is considered that Collective Bargaining Agreement entered into byunions and their employers are binding upon the parties and be acted in strict compliancetherewith. Thus, the CBA in this case is the law between the employers and their employees.

Therefore, there was no overpayment when there was an increase of salary for themembers of the union simultaneous with the increasing of minimum wage for workers in the National Capital Region. The CBA should be followed thus, the senior employees who were first promoted as regular employees shall be entitled for the increase in their salaries and the samewith lower rank workers.



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SPOUSES RAFAEL ESTANISLAO v. EASTWEST BANKING CORPORATIONG.R. No. 178537,February 11, 2008

FACTS:

On July 24,1997, petitioner obtained a loan fro the respondent in the amount ofP3,925,000 evidenced by a promissory note and secured by two deeds of chattel mortgagecovering two dump trucks and a bull dozer . Petitioner defaulted entire obligation became dueand demandable. A deed of assignment was drafted by the respondent on October 6, 2000 andMarch 8, 2001 respectively. Petitioners completed the delivery of heavy equipment mentioned inthe deed of assignment to respondent which accepted the same without protest or objection.Respondent manifested to admit an amended complaint for the seizure and delivery of two moreheavy equipment which are covered under the second deed of the chattel mortgage. RTC ruledthat the deed of assignment and the petitioner‘s delivery of the heavy equipment effectivelyextinguished the petitioner‘s obligation and respondent as stopped. CA reversed the decision

ordering the petitioner the outstanding debt of P4,275,919.69 plus interests.

ISSUE:

Did the Deed of Assignment operate to extinguish petitioner‘s debt to the respondentsuch that the replevin suit could no longer prosper?

RULING:

The deed of assignment was a perfected agreement which extinguished petitioner‘s totaloutstanding obligation to the respondent. The nature of the assignment was a dacion en pagowhereby property is alienated to the creditor in the satisfaction of a debt in money. Since theagreement was consummated by the delivery of the last unit of heavy equipment under the deed, petitioner‘s are deemed to have been released from all their obligations from the respondents.



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AQUINTEY v. SPOUSES TIBONGG.R. No. 166704,December 20, 2006

FACTS:

On May 6, 1999, petitioner Aquintey filed before RTC Baguio, a complaint for sum ofmoney and damages against respondents. Agrifina alleged that Felicidad secured loans from heron several occasions at monthly interest rates of 6% to 7%. Despite demands, spouses Tibongfailed to pay their outstanding loans of P773,000,00 exclusive of interests. However, spousesTiong alleged that they had executed deeds of assignment in favor of Agrifina amounting toP546,459 and that their debtors had executed promissory notes in favor of Agrifina. Spousesinsisted that by virtue of these documents, Agrifina became the new collector of their debts.Agrifina was able to collect the total amount of P301,000 from Felicdad‘s debtors. She tried tocollect the balance of Felicidad and when the latter reneged on her promise, Agrifina filed acomplaint in the office of the barangay for the collection of P773,000.00. There was nosettlement. RTC favored Agrifina. Court of Appeals affirmed the decision with modification

ordering defendant to pay the balance of total indebtedness in the amount of P51,341,00 plus 6% per month.

ISSUE:

Whether or not the deeds of assignment in favor of petitioner has the effect of payment ofthe original obligation that would partially extinguish the same

RULING:

Substitution of the person of the debtor ay be affected by delegacion. Meaning, the debtoroffers, the creditor accepts a third person who consent of the substitution and assumes theobligation. It is necessary that the old debtor be released fro the obligation and the third person ornew debtor takes his place in the relation . Without such release, there is no novation. Court ofAppeals correctly found that the respondent‘s obligation to pay the balance of their account with petitioner was extinguished pro tanto by the deeds of credit. CA decision is affirmed with themodification that the principal amount of the respondents is P33,841.



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CRUZ V. COURT OF APPEALSG.R. NO.122904, April 15,2005

FACTS:

The Complaint alleged that petitioners and Arnel Cruz were co-owners of a parcel of landsituated in Taytay, Rizal. Yet the property, which was then covered by Transfer Certificate ofTitle (TCT) No. 495225, was registered only in the name of Arnel Cruz. According to petitioners, the property was among the properties they and Arnel Cruz inherited upon the deathof Delfin Cruz, husband of Adoracion Cruz.

Petitioners and Arnel Cruz executed a Deed of Partial Partition, distributing to each ofthem their shares consisting of several lots previously held by them in common. Among the properties adjudicated to defendant Cruz was the parcel of land covered at the time by TCT No.495225. It is the subject of this case.

Subsequently, the same parties to the Deed of Partition agreed in writing to share equallyin the proceeds of the sale of the properties although they have been subdivided and individually

titled in the names of the former co-owners pursuant to the Deed of Partition. This arrangementwas embodied in a Memorandum of Agreement executed on August 23, 1977 or a day after the partition. The tenor of the Memorandum of Agreement was annotated at the back of the TCT No.495225 on September 1, 1977.

Sometime in January 1983, petitioner Thelma Cruz discovered that TCT No. 514477 wasissued on October 18, 1982 in the name of Summit. Upon investigation, petitioners learned thatArnel Cruz had executed a Special Power of Attorney on May 16, 1980 in favor of one NelsonTamayo, husband of petitioner Nerissa Cruz Tamayo, authorizing him to obtain a loan in theamount of One Hundred Four Thousand Pesos from respondent Summit, to be secured by a realestate mortgage on the subject parcel of land.

Since the loan remained outstanding on maturity, Summit instituted extra-judicialforeclosure proceedings, and at the foreclosure sale, it was declared the highest bidder.Consequently, Sheriff Sta. Ana issued a Certificate of Sale to respondent Summit which morethan a year later consolidated its ownership of the foreclosed property. Upon presentation of theaffidavit of consolidation of ownership, the Acting Register of Deeds of Rizal cancelled TCT No. 495225 and issued and in lieu thereof, TCT No. 514477 in the name of respondent Summit.

In their complaint before the RTC, petitioners asserted that they co-owned the propertieswith Arnel Cruz, as evidenced by the Memorandum of Agreement. Hence, they argued that themortgage was void since they did not consent to it.

ISSUE:

Whether or not the real estate mortgage on the property is valid.

RULING:

A reading of the provisions of the Deed of Partition, no other meaning can be gatheredother than that petitioners and Arnel Cruz had put an end to the co-ownership. In the aforesaiddeed, the shares of petitioners and Arnel Cruz‘s in the mass of co -owned properties wereconcretely determined and distributed to each of them. In particular, to Arnel Cruz was assignedthe disputed property. There is nothing from the words of said deed which expressly or impliedlystated that petitioners and Arnel Cruz intended to remain as co-owners with respect to thedisputed property or to any of the properties for that matter.

Petitioners do not question the validity or efficacy of the Deed of Partial Partition. Infact, they admitted its existence in their pleadings and submitted it as a part of their evidence.Thus, the deed is accorded its legal dire effect. Since a partition legally made confers upon eachheir their exclusive ownership of the property adjudicated to him, it follows that Arnel Cruzacquired absolute ownership over the specific parcels of land assigned to him in the Deed ofPartial Partition, including the property subject of this case. As the absolute owner thereof then,Arnel Cruz had the right to enjoy and dispose of the property, as well as the right to constitute areal estate mortgage over the same without securing the consent of the petitioners.



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On the other hand, there is absolutely nothing in the Memorandum of Agreement whichdiminishes the right of Arnel Cruz to alienate or encumber the properties allotted to him in thedeed of partition.

As correctly held by the Court of Appeals, the parties only bound themselves to share inthe proceeds of the sale of the properties. The agreement does not direct reconveyance of the

properties to reinstate the common ownership of the properties.Moreover, to ascertain the intent of the parties in a contractual relationship, it isimperative that the various stipulations provided for in the contracts be construed together,consistent with the parties contemporaneous and subsequent acts as regards the execution of thecontract. Subsequent to the execution of the Deed of Partition and Memorandum of Agreement,the properties were titled individually in the names of the co-owners to which they wererespectively adjudicated, to the exclusion of the other co-owners. Petitioners Adoracion Cruzand Thelma Cruz separately sold the properties distributed to them as absolute owners thereof.Being clear manifestations of sole and exclusive dominion over the properties affected, the actssignify total incongruence with the state of co-ownership claimed by the petitioners.

The real estate mortgage on the disputed property is valid and does not contravene the

agreement of the parties.



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GONZALES VS. COURT OF APPEALS354 SCRA 8

FACTS:

Private respondents, Mr. and Mrs. Gabriel Caballero, are the registered owneres of two parcels of land situated in Cubao, Quezon City described in Transfer Certificate fo Title No.247309 (Lot 1) and TCT No. 247310 (Lot 2). The spouses‘ residence stood in Lot 2.

Sometime in 1979, they obtained a loan from the Cavite Development Bank in theamount of P225,000.00. The two lots were mortgaged to secure their loan. The loan matured in1984. To pay the loan they offered Lot 1 for sale. The offer was advertised in the BulletinToday. However, offers to purchase from prospective buyers did not materialize.

On October 24, 1985, a certain Mrs. Lagrimas approached the spouses offering to brokerthe sale to an interested buyer. Initially, the spouses told the broker that they were selling only todirect buyers. Nonetheless, Mrs. Lagrimas brought to the spouses her buyer, herein petitioner Napoleon H. Gonzales, who turned out to be Mrs. Lagrimas‘ relative.

Petitioner offered to buy the vacant lot for P470,000.00. Initially, respondents refused toreduce their asking price. Petitioner bargained for a lower price with the suggestion that on paper the price will be markedly lower so the spouses would pay lower capital gains tax.Petitioner assured the spouses this could be done since he had connections with the Bureau ofInternal Revenue. The spouses agreed to sell at P470.000.00. Petitioners paid the bankP375,000.00, to be deducted from the purchase price. After the mortgage was cancelled andupon release of the two titles, Gonzales asked for the deeds of sale of the two lots and delivery ofthe titles to him. Defendants signed the deed of sale covering only Lot 1 but refused to deliverits title until petitioner paid the remaining balance of P70,000.00

This prompted petitioner to file a complaint for specific performance and damages.

ISSUE:

Whether or not the sale involved only Lot 1 and not both Lots.

RULING:

The sale covers only one of the lots. Principally, the issue here is whether the contract ofsale between the parties involved Lot 1 and 2 as claimed by petitioner or only Lot 1 as privaterespondents contend. In a case where we have to judge conflicting claims on the intent of the parties, as in this instance, judicial determination of the parties‘ intention is mandated.Contemporaneous and subsequent acts of the parties material to the case are to be considered.Petitioner admits he himself caused the preparation of the deed of sale presented before the lowercourt. Yet he could not explain why I referred only to the sale of Lot 1 and not to the two lots, ifthe intention of the parties was really to cover the sale of two lots. As the courts a quo observed,even if it were true that two lots were mortgaged and were about to be foreclosed, the ads privaterespondents placed in the Bulletin Today offered only Lot 1 and was strong indication that theydid not intend to sell Lot 2. The 501 sq.m. lot was offered for P1,150.00 per sq.m. It alonewould have fetched P576,150.00. The loan still to be paid the bank was only P375,000.00 whichwas what petitioner actually paid the bank. As the trial court observed, it was incomprehensiblewhy the spouses would part with two lots, one with a 2-storey house, and both situated at a primecommercial district for less than the price of one lot. Contrary to what petitioner would make us believe, the sale of Lot 1 valued at P576,150.00 for P470,000.00, with petitioner assuming the bank loan of P375,000.00 as well as payment of the capital gains tax, appears more pla



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ALMIRA V. COURT OF APPEALS399 SCRA 351

FACTS:

Petitioners are the wife and the children of the late Julio Garcia who inherited from hismother, Ma. Alibudbud, a portion of a 90,655 square meter property denominated as lot 1642 ofthe Sta. Rosa Estate in Brgy. Caingin Sta. Rosa Laguna. The lot was co-owned and registered inthe names of three persons with the following shares: Vicente de Guzman (1/2), EnriqueHemedes (1/4) and Francisco Alibudbud, the father of Ma. Alibudbud (1/4). Although there wadno separate title in the name of Julio Garcia, there were tax declaration in his name to the intentof his grandfather‘s share covering the area of 21460 square meter.

On July 5, 1984, petitioner as heirs of Julio Garcia, and respondent Federico Brinesentered a Kasunduan ng Pagbibilihan (Kasunduan for Brevity) over the 21460 square meter portion for the sum of P150.000.00. Respondent paid P65, 000.00 upon execution of the contract

while the balance of P85, 000.00 was made payable within six (6) months from the date of theexecution of the instrument. The time of the execution of the kasunduan, petitioners allegedlyinformed respondent that TCT No. RT-1076 was in the possession of their cousin, ConchilaAlibudbud, who having bought Vicente de Guzman‘s ½ shares, owned the bigger portion of lot1642. This standing notwithstanding, respondent willingly entered into the Kasunduan providedthat the full payment of the purchase price will be made upon delivery to him of the title.

Respondent took possession of the property subject of the Kasunduan and made various payments to petitioiners amountiong to P58500.00. However upon failure of petitionere todeliver to him a separate title to the property in the name of Julio Garcia he refused to makefurther payments, prompting petitioner to file a civil action before the RTC for a rescission of theKasunduan, return by respondent to petitioner of the possession of the subject parcel of land, and payment by respondent of damages in favour of petitioners.

ISSUE:

Whether or not the petitioner may rescind the Kasunduan pursuant to Article 1191 of theCivil Code for the failure of respondent to give full payment of the balance of the purchase price.

RULING:

NO, the right of the parties are governed by the terms ands the nature of the contract theyentered. Hence, although the nature of the Kasunduan was never places in dispute by both parties, it is necessary to ascertain whether the Kasunduan is a contract to sell or a contract ofSale. Although both parties have consistency referred to the Kasunduan as a contract to Sell, acareful reading of the provision of the Kasunduan reveals that it is a contract of Sale. A deed ofsale is absolute in nature in the absence of an any stipulation reserving title to the vendor untilfull payment of the purchase price. The delivery of a separation title in the name of Julio Garciawas a condition imposed on respondent‘s obligation to pay the balance of the purchase price. Itwas not a condition imposed in the perfection of the contract of Sale.

The rescission will not prosper since the power to rescind is only given to the injured party. The injured party is the party who has faithfully fulfilled his obligation. In the case at bar,the petitioners were not ready, willing and able to comply with their obligation to deliver aseparate title in the name of Julio Garcia to respondent therefore, thy are not in a position to askfor rescission. Failure to comply with a condition imposed on the performance of an obligationgives the other party the option either to refuse to proceed with the sale or to waive the conditionunder Art 1545 of the civil code. Hence it is the respondent who has the option.



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PHILIPPINE BANK OF COMMUNICATIONS V. LIMG.R. NO. 158138, April 12, 2005

FACTS:

Petitioner filed a complaint against respondents for the collection of a deficiencyamounting to P4,014,297.23 exclusive of interest. Petitioner alleged that respondents obtained aloan from it and executed a continuing surety in favor of petitioner for all loans, credits, etc., thatwere extended or may be extended in the future to respondents. Petitioner granted a renewal ofsaid loan upon respondent‘s request as evidenced by a promissory note renewal BD-Variable No.8298021001 on the amount of P3,000,000.00. it was expressly stipulated therein that the venuefor any legal action that may arise out of said promissory note shall be Makati City ―to theexcklusion of all other courts.‖ Respondent allegedly failed to pay said obligation uponmaturity. Thus petitioner foreclosed the real estate mortgage executed by the respondents valuedat P1,081,600.00 leaving a deficiency balance of P4,014,297.23

Respondents moved to dismiss the complaint on the ground of improper venue, invoking

the stipulation contained in the last paragraph of the promissory note with respect to therestriction/exclusive venue. The trial court denied said motion asseverating that petitioners hadseparate causes of action arising from the promissory note and the continuing surety agreement.

ISSUE:

Whether or not the ―complementary-contracts-construed together‖ principle is applicablein the case at bar.

RULING:

The aforementioned doctrine is applicable to the present case. In capable of standing byitself, the surety agreement can be enforced only in conjuction with the promissory note. Thelatter documents the debt that is sought to be collected in the action against the sureties

According to this principle, an accessory contract must be read in its entirety and togetherwith the principal agreement. This principle is used in construing contractual stipulations inorder to arrive at their true meaning; certain stipulations cannot be segregated and then made tocontrol. This no-segregation principle is based on Article 1374 of the Civil Code.

Notably, the promissory note was a contract of adhesion that petitioner requiredthe principal debtor to execute as a condition of the approval of the loan. It was made in theform and language prepared by the bank. By inserting the provision of that Makati City would be the ―venue for any legal action that may arise out of the promissory note,‖ petitioner alsorestricted the venue of actions against the sureties. The legal action against the sureties arose notonly from the security agreement but also from the promissory note.



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RIGOR V. CONSOLIDATED ORIX LEASING AND FINANCE CORPORATIONG.R. No. 136423. August 20, 2002

FACTS:

Petitioners obtained a loan from private respondent Consolidated Orix Leasing andFinance Corporation in the amount of P1,630,320.00. Petitioners executed a promissory note promising to pay the loan in 24 equal monthly installments every fifth day of the monthcommencing on September 5, 1996. The promissory note also provides that default in payingany installment renders the entire unpaid amount due and payable. To secure payment of theloan, petitioners executed in favor of private respondent a deed of chattel mortgage over twodump trucks. Petitioners failed to pay several installments despite demand from privaterespondent.

Private respondent sought to foreclose the chattel mortgage by filing a complaint forReplevin with Damages against petitioners. After service of summons, petitioners moved todismiss the complaint on the ground of improper venue based on a provision in the promissory

note which states that, x x x all legal actions arising out of this note or in connection with thechattels subject hereof shall only be brought in or submitted to the proper court in Makati City,Philippines. Private respondent opposed the motion to dismiss and argued that venue was properly laid in Dagupan City where it has a branch office based on a provision in the deed ofchattel mortgage which states that, x x x in case of litigation arising out of the transaction thatgave rise to this contract, complete jurisdiction is given the proper court of the city of Makati orany proper court within the province of Rizal, or any court in the city, or province where theholder/mortgagee has a branch office, waiving for this purpose any proper venue. After a furtherexchange of pleadings, the Dagupan trial court denied petitioners‘ motion to dismiss Notsatisfied with the orders, petitioners filed a petition for certiorari before the Court of Appealsimputing grave abuse of discretion by the Dagupan trial court in denying the motion to dismisswhich was denied.

ISSUE:

Whether or not venue was properly laid under the provisions of the chattel mortgagecontract in the light of Article 1374 of the Civil Code.

RULING:

The Court holds that private respondent is not barred from filing its case against petitioners in Dagupan City where private respondent has a branch office as provided for in thedeed of chattel mortgage.

Art. 1374 of the Civil Code provides that the various stipulations of a contract shall beinterpreted together, attributing to the doubtful ones that sense which may result from all of themtaken jointly.

Ap plying the doctrine to the instant case, we cannot sustain petitioners‘ contentions. The promissory note and the deed of chattel mortgage must be construed together. Privaterespondent explained that its older standard promissory notes confined venue in Makati Citywhere it had its main office. After it opened a branch office in Dagupan City, private respondentmade corrections in the deed of chattel mortgage, but due to oversight, failed to make thecorresponding corrections in the promissory notes. Petitioners affixed their signatures in bothcontracts. The presumption is applied that a person takes ordinary care of his concerns. It is presumed that petitioners did not sign the deed of chattel mortgage without informing themselvesof its contents. As aptly stated in a case, they being of age and businessmen of experience, itmust be presumed that they acted with due care and have signed the documents in question withfull knowledge of their import and the obligation they were assuming thereby. In any event, petitioners did not contest the deed of chattel mortgage under Section 8, Rule 8 of the RevisedRules of Civil Procedure.



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VELASQUEZ V. COURT OF APPEALS G.R. No. 124049, June 30, 1999

FACTS:

]The Pick-up Fresh Farms, Inc. (PUFFI), of which petitioner Velasquez was an officerand stockholder, filed an application for a loan of P7,500,000.00 with PCIB under thegovernment's Guarantee Fund for Small and Medium Enterprises (GFSME). The partiesexecuted the corresponding loan agreement. As security for the loan, promissory notesnumbered TL 121231 and TL 121258 for the amounts of P4,000,000.00 and P3,500,000.00,respectively, were signed by officers of and for both PUFFI and Aircon and RefrigerationIndustries, Inc. (ARII). A chattel mortgage was also executed by ARII over its equipment andmachineries in favor of PCIB. Petitioner along with other officers also executed deeds ofsuretyship in favor of PCIB. Separate deeds of suretyship were further executed. When PUFFIdefaulted in the payment of its obligations PCIB foreclosed the chattel mortgage. The proceedsof the sale amounted to P678,000.00.

Thus, PCIB filed an action to recover the remaining balance of the entire obligationincluding interests, penalties and other charges. Exemplary damages and attorney‘s fees of 25%of the total amount due were also sought. A writ of preliminary attachment was granted by thetrial court. The trial court rendered a summary judgment in favor of PCIB holding petitioner andCanilao solidarily liable to pay P7,227,624.48 plus annual interest of 17%, and P700,000.00 asattorney‘s fees and the costs of suit. The case was dismissed without prejudice with regard to theother defendants as they were not properly served with summons.

ISSUE:

Whether or not the appellate court committed reversible error in sustaining or affirmingthe summary judgment despite the existence of genuine triable issues of facts and in refusing toset aside the default order against petitioner.

RULING:

The more appropriate doctrine in this case is that of the ―complementary contractsconstrued together‖ doctrine. The surety bond must be read in its entirety and together with thecontract between the NPC and the contractors. The provisions must be construed together toarrive at their true meaning. Certain stipulations cannot be segregated and then made to control.

That the ―complementary contracts construed together‖ doctrine applies in this case findssupport in the principle that the surety contract is merely an accessory contract and must beinterpreted with its principal contract, which in this case was the loan agreement. This doctrineclosely adheres to the spirit of Art. 1374 of the Civil Code.



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QUIRONG VS. DBPG.R. No. 173441 : December 3, 2009

FACTS:

When the late Emilio Dalope died, he left a 589-square meter untitled lot in Sta. Barbara,Pangasinan, to his wife, Felisa Dalope and their nine children, one of whom was Rosa Dalope-Funcion. To enable Rosa and her husband Antonio Funcion get a loan from respondentDevelopment Bank of the Philippines (DBP), Felisa sold the whole lot to the Funcions. With thedeed of sale in their favor and the tax declaration transferred in their names, the Funcionsmortgaged the lot with the DBP. On February 12, 1979, after the Funcions failed to pay theirloan, the DBP foreclosed the mortgage on the lot and consolidated ownership in its name on June17, 1981. Four years later or on September 20, 1983 the DBP conditionally sold the lot to SofiaQuirong for the price of P78,000.00. In their contract of sale, Sofia Quirong waived any warrantyagainst eviction. The contract provided that the DBP did not guarantee possession of the property

and that it would not be liable for any lien or encumbrance on the same. Quirong gave a down payment of P14,000.00. Two months after that sale or on November 28, 1983 Felisa and hereight children filed an action for partition and declaration of nullity of documents with damagesagainst the DBP and the Funcions before the Regional Trial Court (RTC) of Dagupan City.

On December 16, 1992 the RTC rendered a decision, declaring the DBP's sale to SofiaQuirong valid only with respect to the shares of Felisa and Rosa Funcion in the property. TheDBP resisted the writ by motion to quash, claiming that the decision could not be enforced because it failed to state by metes and bounds the particular portions of the lot that would beassigned to the different parties in the case.

The RTC denied the DBP's motion. The Court of Appeals (CA) reversed the RTCdecision and dismissed the heirs' action on the ground of prescription. Hence, this petition.

ISSUE:

a. Whether or not the Quirong heirs' action for rescission of respondent DBP's sale of thesubject property to Sofia Quirong was already barred by prescription; and

b. Whether or not the heirs of Quirong were entitled to the rescission of the DBP's sale ofthe subject lot to the late Sofia Quirong as a consequence of her heirs having been evicted fromit.

RULING:

On the first issue, the court find that the incident did not affect the finality of the decision,the prescriptive period remained to be reckoned from January 28, 1993, the date of such finality.

On the second issue, the remedy of "rescission" is not confined to the rescissiblecontracts enumerated under Article 1381. Article 1191 of the Civil Code gives the injured partyin reciprocal obligations, such as what contracts are about, the option to choose betweenfulfillment and "rescission." "Rescission" is a subsidiary action based on injury to the plaintiff'seconomic interests as described in Articles 1380 and 1381. "Resolution," the action referred to inArticle 1191, on the other hand, is based on the defendant's breach of faith, a violation of thereciprocity between the parties. As an action based on the binding force of a written contract,therefore, rescission (resolution) under Article 1191 prescribes in 10 years. Ten years is the period of prescription of actions based on a written contract under Article 1144.

The supreme court conclusion is that the Court has reached respecting the first issue presented in this case, it would serve no useful purpose for it to further consider the issue ofwhether or not the heirs of Quirong would have been entitled to the rescission of the DBP's sale



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of the subject lot to Sofia Quirong as a consequence of her heirs having been evicted from it. Asthe Court has ruled, their action was barred by prescription. The CA acted correctly in reversingthe RTC decision and dismissing their action.

In view of the case, the supreme court denied the petition and affirm the decision of the

CA.



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LEE VS. BANGKOK BANK PUBLIC COMPANY

G.R. No. 173349, February 09, 2011

FACTS:Midas Diversified Export Corporation (MDEC) and Manila Home Textile, Inc. (MHI)

entered into two separate Credit Line Agreements (CLAs) with Respondent Bangkok BankPublic Company, Limited (Bangkok Bank) on November 29, 1995 and April 17, 1996,respectively. MDEC and MHI are owned and controlled by the Lee family: Thelma U. Lee,Maybelle L. Lim, Daniel U. Lee and Samuel U. Lee (Samuel). Both corporations haveinterlocking directors and management led by the Lee family; and engaged in the manufacturingand export of garments, ladies' bags and apparel.

On July 25, 1996, MDEC was likewise granted a loan facility by Asiatrust Development

Bank, Inc. (Asiatrust). This facility had an available credit line of forty million pesos (PhP40,000,000) for letters of credit, advances on bills and export packing; and a separate credit lineof two million dollars (USD 2,000,000) for bills purchase.

In the meantime, in May 1997, Samuel bought several parcels of land in Cupang,Antipolo, and later entered into a joint venture with Louisville Realty and DevelopmentCorporation to develop the properties into a residential subdivision, called LouisvilleSubdivision. These properties in Cupang, Antipolo are the subject properties in the instant case(Antipolo properties) and are covered by Transfer Certificate of Title.

MDEC and MHI initially had made payments with their CLAs until they defaulted and

incurred aggregate obligations to Bangkok Bank in the amount of USD 1,998,554.60 for MDECand USD 800,000 for MHI. Similarly, the Lee corporations defaulted in their obligations withother creditors

On February 16, 1998, MDEC, MHI, and three other corporations owned by the Leefamily filed before the Securities and Exchange Commission (SEC) a Consolidated Petition forthe Declaration of a State of Suspension of Payments and for Appointment of a ManagementCommittee/Rehabilitation Receiver.

On February 20, 1998, the SEC issued a Suspension Order enjoining the Lee corporationsfrom disposing of their property in any manner except in the ordinary course of business, and

from making any payments outside the legitimate expenses of their business during the pendencyof the petition.

On July 20, 1999, Bangkok Bank filed the instant case before the RTC. The RTCdismissed the case. However, the CA granted the appeal, and reversed and set aside the RTCdecision. Hence, this petition.

ISSUE:

Whether or not Bangkok Bank can maintain an action to rescind the REM on the subjectAntipolo properties despite its failure to exhaust all legal remedies to satisfy its claim.

RULING:

The Supreme Court ruled that under Sec. 5.2 of RA 8799, the SEC's original andexclusive jurisdiction over all cases enumerated under Sec. 5 of PD 902-A was transferred to theappropriate RTC. RA 8799, Sec. 5.2, however, expressly stated as an exception, that the "the



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Commission shall retain jurisdiction over pending suspension of payment/rehabilitation casesfiled as of 30 June 2000 until finally disposed." Accordingly, the Consolidated Petition for theDeclaration of a State of Suspension of Payments and for Appointment of a ManagementCommittee/Rehabilitation Receiver filed on February 16, 1998 by MDEC, MHI and three othercorporations owned by the Lee family, remained under the jurisdiction of the SEC until finally

disposed of pursuant to the last sentence of Sec. 5.2 of RA 8799.

The SEC's jurisdiction is evident from the statutorily vested power of jurisdiction,supervision and control by the SEC over all corporations, partnerships or associations, which aregrantees of primary franchise, license or permit issued by the government to operate in thePhilippines, and its then original and exclusive jurisdiction over petitions for suspension of payments of said entities. Secs. 3 and 5 of PD 902-A pertinently provides:

Sec. 3. The Commission shall have absolute jurisdiction, supervision and control over allcorporations, partnerships or associations, who are the grantees of primary franchise and/or alicense or permit issued by the government to operate in the Philippines; and in the exercise of its

authority, it shall have the power to enlist the aid and support of any and all enforcementagencies of the government, civil or military.

Sec. 5. In addition to the regulatory and adjudicative functions of the Securities andExchange Commission over corporations, partnerships and other forms of associations registeredwith it as expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction to hear and decide cases involving: (d) Petitions of corporations, partnerships orassociations to be declared in the state of suspension of payments in cases where the corporation, partnership or association possesses sufficient property to cover all its debts but foresees theimpossibility of meeting them when they respectively fall due or in cases where the corporation, partnership or association has no sufficient assets to cover its liabilities, but is under the

management of a Rehabilitation Receiver or Management Committee created pursuant to thisDecree.In sum, the Supreme Court granted the petition.



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EQUATORIAL REALTY DEVELOPMENT, INC. V. MAYFAIR THEATER, INC.G.R. No. 136221 May 12, 2000

FACTS:

Carmelo & Bauermann, Inc. (Carmelo) used to own a parcel of land, together with twotwo-storey buildings constructed thereon. On June 1, 1967, Carmelo entered into a lease withMayfair Theater, Inc. (Mayfair) for a period of 20 years. The lease covered a portion of thesecond floor and mezzanine. Two (2) years later, Mayfair entered into a second lease withCarmelo for the lease of another property, a part of the second floor and two spaces on theground floor. The lease was also for a period of twenty (20) years. Both leases contained a provision granting Mayfair a right of first refusal to purchase the said properties. However, onJuly 30, 1978, within the 20-year-lease term, Carmelo sold the subject properties to EquatorialRealty Development, Inc. (Equatorial) for the sum of P11.3M without their first being offered toMayfair.

As a result, Mayfair filed a complaint for specific performance and damages. After trial,

the court ruled in favor of Equatorial. On appeal, the Court of Appeals (CA) reversed and setaside the judgment of the lower court. On November 21, 1996, the Supreme Court deniedEquatorial‘s petition for review and declared the contract between Carmelo and Equatorialrescinded. The decision became final and executory and Mayfair filed a motion for itsexecution, which the court granted on April 25, 1997. However, Carmelo could no longer belocated thus Mayfair deposited with the court its payment to Carmelo. The lower court issued adeed of reconveyance in favor of Carmelo and issued new certificates in the name of Mayfair.

On September 18, 1997, Equatorial filed an action for the collection of sum of moneyagainst Mayfair claiming payment of rentals or reasonable compensation for the defendant‘s useof the premises after its lease contracts had expired. The lower court debunked the claim of the petitioner for unpaid rentals, holding that the rescission of the Deed of Absolute Sale in themother case did not confer on Equatorial any vested or residual proprietary rights, even inexpectancy.

ISSUE:

Whether or not Equatorial may collect rentals or reasonable compensation for Mayfair‘suse of subject premises after its lease contracts had expired.

RULING:

Equitorial may not collect rentals or reasonable compensation for Mayfair‘s use of thesubject premises after its lease contracts had expired. Rent is a civil fruit that belongs to theowner of the property producing it by right of accession. Consequently and ordinarily, therentals that fell due from the time of the perfection of the sale to petitioner until its rescission byfinal judgment should belong to the owner of the property during that period.

Petitioner never took actual control and possession of the property sold, in view of therespondent‘s timely objection to the sale and continued actual possession of the property. Theobjection took the form of a court action impugning the sale that was rescinded by a judgmentrendered by the Court in the mother case. It has been held that the execution of a contract of saleas a form of constructive delivery is a legal fiction. It holds true only when there is noimpediment that may prevent the passing of the property from the hands of the vendor into thoseof the vendee. When there is such impediment, fiction yields to reality; the delivery has not beeneffected. Hence, respondent‘s opposition to the transfer of property by way of sale to Equatorialwas a legally sufficient impediment that effectively prevented the passing of the property into thelatter‘s hands.

Article 1386 of the Civil Code provides rescission, which creates the obligation to returnthe things, which were the object of the contract, together with their fruits, and the price with itsinterest, but also the rentals paid, if any, had to be returned by the buyer.



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SIGUAN V. LIMG.R. No. 134685, November 19, 1999

FACTS:

Lim issued two Metrobank checks in the sums of P300,000 and P241,668, respectively, payable to "cash." Upon presentment by petitioner with the drawee bank, the checks weredishonored for the reason "account closed." Demands to make good the checks proved futile.As a consequence, a criminal case for violation of Batas Pambansa were filed by petitioneragainst Lim.

The court a quo convicted Lim as charged. The case is pending before this Court forreview and docketed as G.R. No. 134685. It also appears that on 31 July 1990, Lim wasconvicted of estafa by the RTC of Quezon City in Criminal Case No. Q-89-22162 filed by acertain Victoria Suarez. This decision was affirmed by the Court of Appeals. On appeal,however, the Supreme Court, in a decision promulgated on 7 April 1997, acquitted Lim but heldher civilly liable in the amount of P169,000, as actual damages, plus legal interest.

Meanwhile, on 2 July 1991, a Deed of Donation conveying parcels of land and purportedly executed by Lim on 10 August 1989 in favor of her children, Linde, Ingrid and Neil,was registered with the Office of the Register of Deeds of Cebu City. New transfer certificatesof title were thereafter issued in the names of the donees.

On 23 June 1993, petitioner filed an accion pauliana against Lim and her children beforeBranch 18 of the RTC of Cebu City to rescind the questioned Deed of Donation and to declare asnull and void the new transfer certificates of title issued for the lots covered by the questionedDeed. The complaint was docketed as Civil Case No. CEB-14181. Petitioner claimed thereinthat sometime in July 1991, Lim, through a Deed of Donation, fraudulently transferred all herreal property to her children in bad faith and in fraud of creditors, including her; that Limconspired and confederated with her children in antedating the questioned Deed of Donation, to petitioner's and other creditors' prejudice; and that Lim, at the time of the fraudulent conveyance,left no sufficient properties to pay her obligations. On the other hand, Lim denied any liability to petitioner. She claimed that her convictions in Criminal Cases Nos. 22127-28 were erroneous,which was the reason why she appealed said decision to the Court of Appeals. As regards thequestioned Deed of Donation, she maintained that it was not antedated but was made in goodfaith at a time when she had sufficient property. Finally, she alleged that the Deed of Donationwas registered only on 2 July 1991 because she was seriously ill.

In its decision of 31 December 1994 the trial court ordered the rescission of thequestioned deed of donation; (2) declared null and void the transfer certificates of title issued inthe names of private respondents Linde, Ingrid and Neil Lim; (3) ordered the Register of Deedsof Cebu City to cancel said titles and to reinstate the previous titles in the name of Rosa Lim; and(4) directed the LIMs to pay the petitioner, jointly and severally, the sum of P10,000 as moraldamages; P10,000 as attorney's fees; and P5,000 as expenses of litigation.

On appeal, the Court of Appeals, in a promulgated on 20 February 1998, reversed thedecision of the trial court and dismissed petitioner's accion pauliana. It held that two of therequisites for filing an accion pauliana were absent, namely, (1) there must be a credit existing prior to the celebration of the contract; and (2) there must be a fraud, or at least the intent tocommit fraud, to the prejudice of the creditor seeking the rescission.

According to the Court of Appeals, the Deed of Donation, which was executed andacknowledged before a notary public, appears on its face to have been executed on 10 August1989. Under Section 23 of Rule 132 of the Rules of Court, the questioned Deed, being a publicdocument, is evidence of the fact which gave rise to its execution and of the date thereof. Noantedating of the Deed of Donation was made, there being no convincing evidence on record toindicate that the notary public and the parties did antedate it.

Since Lim's indebtedness to petitioner was incurred in August 1990, or a year after theexecution of the Deed of Donation, the first requirement for accion pauliana was not met.

Anent petitioner's contention that assuming that the Deed of Donation was not antedatedit was nevertheless in fraud of creditors because Victoria Suarez became Lim‘s creditor on 8October 1987, the Court of Appeals found the same untenable, for the rule is basic that the fraudmust prejudice the creditor seeking the rescission.



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ISSUE:

Whether or not the deed of donation is valid.

RULING:

The Supreme Court upheld the validity of the deed of donation.

Article 1381 of the Civil Code enumerates the contracts which are rescissible, and amongthem are "those contracts undertaken in fraud of creditors when the latter cannot in any othermanner collect the claims due them."

The action to rescind contracts in fraud of creditors is known as accion pauliana. For thisaction to prosper, the following requisites must be present:

(1) the plaintiff asking for rescission has a credit prior to the alienation,although demandable later;

(2) the debtor has made a subsequent contract conveying a patrimonial benefit to a third person;

(3) the creditor has no other legal remedy to satisfy his claim;(4) the act being impugned is fraudulent;(5) the third person who received the property conveyed, if it is by onerous

title, has been an accomplice in the fraud.The general rule is that rescission requires the existence of creditors at the time of the

alleged fraudulent alienation, and this must be proved as one of the bases of the judicial pronouncement setting aside the contract. Without any prior existing debt, there can neither beinjury nor fraud. While it is necessary that the credit of the plaintiff in the accion pauliana mustexist prior to the fraudulent alienation, the date of the judgment enforcing it is immaterial. Even

if the judgment be subsequent to the alienation, it is merely declaratory, with retroactive effect tothe date when the credit was constituted.

In the instant case, the alleged debt of Lim in favor of petitioner was incurred in August1990, while the deed of donation was purportedly executed on 10 August 1989.

The Supreme Court is not convinced with the allegation of the petitioner that thequestioned deed was antedated to make it appear that it was made prior to petitioner's credit. Notably, that deed is a public document, it having been acknowledged before a notary public.As such, it is evidence of the fact which gave rise to its execution and of its date, pursuant toSection 23, Rule 132 of the Rules of Court.

In the present case, the fact that the questioned Deed was registered only on 2 July 1991

is not enough to overcome the presumption as to the truthfulness of the statement of the date inthe questioned deed, which is 10 August 1989. Petitioner's claim against Lim was constitutedonly in August 1990, or a year after the questioned alienation. Thus, the first two requisites forthe rescission of contracts are absent.

Even assuming arguendo that petitioner became a creditor of Lim prior to the celebration ofthe contract of donation, still her action for rescission would not fare well because the thirdrequisite was not met. Under Article 1381 of the Civil Code, contracts entered into in fraudof creditors may be rescinded only when the creditors cannot in any manner collect theclaims due them. Also, Article 1383 of the same Code provides that the action for rescissionis but a subsidiary remedy which cannot be instituted except when the party sufferingdamage has no other legal means to obtain reparation for the same. The term "subsidiary

remedy" has been defined as "the exhaustion of all remedies by the prejudiced creditor tocollect claims due him before rescission is resorted to." It is, therefore, essential that the party asking for rescission prove that he has exhausted all other legal means to obtainsatisfaction of his claim. Petitioner neither alleged nor proved that she did so. On this score,her action for the rescission of the questioned deed is not maintainable even if the fraudcharged actually did exist." The fourth requisite for an accion pauliana to prosper is not present either.



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KHE HONG CHENG, alias FELIX KHE, SANDRA JOY KHE and RAY STEVEN KHE,petitioners,

vs.COURT OF APPEALS, HON. TEOFILO GUADIZ, RTC 147, MAKATI CITY andPHILAM INSURANCE CO., INC., respondents.

G.R. No. 144169 March 28, 200

FACTS:

Petitioner Khe Hong Chang is the owner of the vessel which said vessel shipped 3,400 bags ofcopra at Masbate owned by the Philippine Agricultural Trading Corporation. The shipment ofcopra was covered by an insurance issued by American Home Insurance Company. The vesselsank while at sea which resulted to the loss of bags of copra. The insurer paid the amount of Php345,000.00 to the consignee.

The American Home filed a case for the recovery of the money paid to the consignee, based on breach of contract of carriage. During the pendency of the case, petitioner executeddeed of donation in favor of his children Sandra and Ray.

The trial court rendered its deciusion in favor of the plaintiff however when the Sheriffexecuted the writ of executuin they found out that petitioner no longer had any property and thathe conveyed the subject propertiues to his children.Respondent Philam filed a complaint for the rescission of the deeds of donation executed by petitioner Khe Hong Cheng in favor of his children and for the nullification of their titles.Respondent Philam alleged, inter alia, that petitioner Khe Hong Cheng executed the aforesaiddeeds in fraud of his creditors, including respondent Philam.The RTC rendered its decision in favoir of Philam. The Ca affirmed the decision of RTC.

ISSUE:

When does accion pauliano accrues?

RULING:

An accion pauliana accrues only when the creditor discovers that he has no other legalremedy for the satisfaction of his claim against the debtor other than an accion pauliana. Theaccion pauliana is an action of a last resort. For as long as the creditor still has a remedy at lawfor the enforcement of his claim against the debtor, the creditor will not have any cause of actionagainst the creditor for rescission of the contracts entered into by and between the debtor andanother person or persons. Indeed, an accion pauliana presupposes a judgment and the issuance by the trial court of a writ of execution for the satisfaction of the judgment and the failure of theSheriff to enforce and satisfy the judgment of the court. It presupposes that the creditor hasexhausted the property of the debtor. The date of the decision of the trial court against the debtoris immaterial. What is important is that the credit of the plaintiff antedates that of the fraudulentalienation by the debtor of his property. After all, the decision of the trial court against the debtorwill retroact to the time when the debtor became indebted to the creditor.WHEREFORE, premises considered, the petition is hereby DENIED for lack of merit.



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RAFAEL G. SUNTAY, substituted by his heirs, namely: ROSARIO, RAFAEL, JR.,APOLINARIO, RAYMUND, MARIA VICTORIA, MARIA ROSARIO and MARIA

LOURDES, all surnamed SUNTAY, petitioners,vs.THE HON. COURT OF APPEALS and FEDERICO C. SUNTAY, respondents.

G.R. No. 114950 December 19, 1995

FACTS:

Federico Suntay was the registered owner of a parcel of land in dispute. He applied as amiller contractor of the National Rice and Corn Corporation (NARIC) but the same wasdisapproved by NARIC because he was tied up with several unpaid loans. For purposes ofcircumvention, he asked his nephew-lawyer, Rafael to prepare an absolute deed of sale of thesaid land in dispute in consideration of Php 20,000.00 in favor of Rafael. Less that 3 months afterhis conveyance, the same parcel of land was sold back to Federico for the same consideration.However on the second sale there was irregularity because it appears that said land was not sold but was mortgaged in favor of the Hagonoy Rural Bank. Moreover, after the execution of the

deed, Federico remained in possession of the property sold.Federico requested Rafael to deliver his copy of TCT no. T-36714 so that Federico couldhave the counter deed of sale in his favor registered on his name but Rafael refuses.

Federico filed a complaint for reconveyance and damages against Rafael. The trial courtrendered its decision that Rafael is the owner of the property in dispute but not to the extent ofordering Federico to pay back rentals for the use of the propert.

The CA rendered its decision in favor of Federico.

ISSUE:

Whether or not said second deed of absolute sale is null and void.

RUKING:

The cumulative effect of the evidence on record as chronicled aforesaid identified badges ofsimulation proving that the sale by Federico to his deceased nephew of his land and rice mill,was not intended to have any legal effect between them. Though the notarization of the deed ofsale in question vests in its favor the presumption of regularity, it is not the intention nor thefunction of the notary public to validate and make binding an instrument never, in the first place,intended to have any binding legal effect upon the parties thereto. The intention of the partiesstill and always is the primary consideration in determining the true nature of a contract.The SC hold that the deed of sale executed by Federico in favor of his now deceased nephew,Rafael, is absolutely simulated and fictitious and, hence, null and void, said parties havingentered into a sale transaction to which they did not intend to be legally bound. As no propertywas validly conveyed under the deed, the second deed of sale executed by the late Rafael infavor of his uncle, should be considered ineffective and unavailing.



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MANGAHAS VS. BROBIO

G.R. No. 183852 : October 20, 2010

FACTS:

On January 10, 2002, Pacifico S. Brobio died intestate, leaving three parcels of land. Hewas survived by his wife, respondent Eufrocina A. Brobio, and four legitimate and threeillegitimate children; petitioner Carmela Brobio Mangahas is one of the illegitimate children.

On May 12, 2002, the heirs of the deceased executed a Deed of Extrajudicial Settlementof Estate of the Late Pacifico Brobio with Waiver. In the Deed, petitioner and Pacificos otherchildren, in consideration of their love and affection for respondent and the sum of P150,000.00,waived and ceded their respective shares over the three parcels of land in favor of respondent.

According to petitioner, respondent promised to give her an additional amount for her share inher fathers estate. Thus, after the signing of the Deed, petitioner demanded from respondent the promised additional amount, but respondent refused to pay, claiming that she had no moremoney.

A year later, while processing her tax obligations with the Bureau of Internal Revenue(BIR), respondent was required to submit an original copy of the Deed. Left with no moreoriginal copy of the Deed, respondent summoned petitioner to her office on May 31, 2003 andasked her to countersign a copy of the Deed. Petitioner refused to countersign the document,demanding that respondent first give her the additional amount that she promised. Consideringthe value of the three parcels of land (which she claimed to be worth P20M), petitioner asked for

P1M, but respondent begged her to lower the amount. Petitioner agreed to lower it toP600,000.00. Because respondent did not have the money at that time and petitioner refused tocountersign the Deed without any assurance that the amount would be paid, respondent executeda promissory note. Petitioner agreed to sign the Deed when respondent signed the promissorynote.

When the promissory note fell due, respondent failed and refused to pay despite demand.Petitioner made several more demands upon respondent but the latter kept on insisting that shehad no money. On January 28, 2004, petitioner filed a Complaint for Specific Performance withdamagesaw against respondent.

The Regional Trial Court (RTC) rendered a decision in favor of petitioner. The CAreversed the RTC decision and dismissed the complaint. Hence, this petition.

ISSUE:

The Honorable Court of Appeals erred in the appreciation of the facts of this case whenit found that intimidation attended the execution of the promissory note subject of this case.

RULING:

The Supreme Court ruled that contracts are voidable where consent thereto is given

through mistake, violence, intimidation, undue influence, or fraud. In determining whetherconsent is vitiated by any of these circumstances, courts are given a wide latitude in weighing thefacts or circumstances in a given case and in deciding in favor of what they believe actuallyoccurred, considering the age, physical infirmity, intelligence, relationship, and conduct of the parties at the time of the execution of the contract and subsequent thereto, irrespective of whetherthe contract is in a public or private writing. It is alleged that mistake, violence, fraud, orintimidation attended the execution of the promissory note. Still, respondent insists that she was"forced" into signing the promissory note because petitioner would not sign the document



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required by the BIR. The fact that respondent may have felt compelled, under the circumstances,to execute the promissory note will not negate the voluntariness of the act. As rightly observed by the trial court, the execution of the promissory note in the amount of P600,000.00 was, in fact,the product of a negotiation between the parties. Respondent herself testified that she bargainedwith petitioner to lower the amount. The remedy suggested by the CA is not the proper one under

the circumstances. An action for partition implies that the property is still owned in common.

Considering that the heirs had already executed a deed of extrajudicial settlement and waivedtheir shares in favor of respondent, the properties are no longer under a state of co-ownership;there is nothing more to be partitioned, as ownership had already been merged in one person.

Wherefore, the decision of the CA is reversed and set aside and the decision of the RTCis reinstated.



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occurred, considering the age, physical infirmity, intelligence, relationship, and the conduct ofthe parties at the time of the making of the contract and subsequent thereto, irrespective ofwhether the contract is in public or private writing. And, in order that mistake may invalidateconsent, it should refer to the substance of the thing which is the object of the contract, or thoseconditions which have principally moved one or both parties to enter the contract.

It was the rejection likewise of the last offer that led to the filing of the expropriation caseon 9 August 1993. Clear as day, the conditions that moved the parties to the contract were the base price at P70.00 per square meter, the increase of which would be compensated by 20% ofwhatever may be added to the base price; and the ceiling price of P300.00 per square meter,which was considerably high reckoned from the base at P70.00, which would therefore, allowCecilio to get all that which would be in excess of the elevated ceiling. The ceiling was, fromthe base, extraordinarily high, justifying the extraordinary grant to Cornelio of all that wouldexceed the ceiling.

In view of this case, the decision of the CA is reversed and set aside. The decision of theRTC is reinstated with modification.



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FUENTES V ROCAG.R. NO. 178902, 21 APRIL 2010

FACTS:On October 11, 1982, Sabrina Taroza sold to her own son Tarciano T. Roca her titled

of 358 sq.m lot located at canelar, zamboanga under a deed of absolute sale. Six years later,Tarciano T. Roca offered to the spouses Fuentes the same titlle of land bought to her mother withstipulations that Fuentes should pay a downpayment of 60,000.00 php for the trnasfer of lot tothem and within 6 months Tarciano would have to vacate the lot of structures , occupants andsecure the consent of his stranged wife. upon compliance, Fuentes spouses must have to payTarciano the amount of 140,000.00 php.

On January 11, 1989 a document of absolute sale as issued to the Fuentes. One year

after, Tarciano T. Roca died, which was followed by his wife 9 months after. the children ofRoca filed for an action of annulment of sale and reconveynace of the land against the Fuenteson the ground that tarciano's wife didn't gave her consent upon her husband and that fraud andforgery. Spouses Fuentes denied such allegations and claim that the forgery case is personal toRosario the wife of Tarciano and she alone could claim it besaides the 4-year prescriptive period for nullifying the sale on the ground of fraud had already elapsed. The RTC ruled infavor of the Fuentes, however the Court of Appelas reversed the decision of the RTC.

ISSUE :

Whether or not Rosario's signature was forged.

Whether or not, Roca's action for declaration nullity of that sale to the spouses Fuenteshad alreadry prescribed.

HELD:

Yes, the Supreme Court agrees with CA's observation that Rosario's signature strokeson the affidavit apperas heavy, deliberate and forced. Her specimen signature on the other handare, consitently of a lighter stroke and more fluid. The way the letter "R" and "S" were written isalso remarkably different. The variance is obvious even to the untrained eye.

For the second issue, the SC held its decision based on Art. 173 which provides thatinorder that the wife may bring an action for annulment of sale on the ground of lack os spousalconsent during the marriage within 10 years from the transaction. Consequently, the action thatthe Rocas, her heirs, brought in 1997 fell within ten years of the January 11, 1989 sale. Thereforeit did not yet prescribe. Even if the claim of the spouses for prescription was based on fraud andforgery and that the prescriptive period to be applied is 4 years, the answer is still No, becausethe sale was void from the beginning and thus the land remained the property of Tarciano andRosario despite that sale. When the two died, they passed on the ownership to their heirs, namelythe Rocas, and as lawful owners thaey had the right to exclude any person from its enjoymentand disposal (Art 429 of the Civil Code). In fairness to the Fuentes, the SC held that they should be entitled among other things, to be recovered from the Tarciano's heirs the amount of 200,000.00php with legal interest until fully paid chargeable against his estate. They are also to beentitled to a reimbursement with the improvements they inroduced with a right of retention untilreimbursement is made (Art. 448).



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ASSOCIATED BANK V MONTANO ET.AL.G.R.NO. 166383, 16 OCTOBER, 2009

FACTS:In 1964 spouse Monatano owned 3 parcels of land situated in Tanza, Cavite hich was

utilized as an integrated farm and a stud farm used for raising horses. Respondent Monatanowent on self exile in USA to avoid the harrasment of Pres. Marcos during the Martial Lawregime, upon which they transfered said properties to Tres Cruces Agro- IndustrialCorporation(TCAIC) in exchange for shares of stocks in the company with a 98% control overTCAIC.

After a year, the TCAIC sold the properties to Inetrenational Country ClubIncorporation (ICCI)for 6,000,000.09 php, thus the title of properties were now transfered to the

ICCI. The ICCI then mortgaged the parcels of land to the Citizens bank and Trust corporationnow Associated Bank for an amount of 2,000,000.00 php. The mortgaged become mature butremain unpaid thereby promting the Associated Bank to forclosed the mortgaged and put in in a public auction. Associated Bank as the higgest bidder then buy the property with an amount of5,7000,000.00 php.

Meanwhile, the Montano returned to the country and after discovering the transfer ofthe properties the Montano immediately took physical possession of the same and begancultivating it. They also filed for a petition of reconveyance and pray for the declaration ofnullity upon transfer of CTC. On the other hand, the associated bank filed its Motion forPreliminary Hearing on the affirmative defense and motion to dismiss for the complaint stated

no cause of action, and that the case was already barred by the statute of limitations.

ISSUES:

Whether or not motion to dismiss is on its propriety.

Whether or not the complaint for reconveynace should be dismissed.

HELD:

As to the first issue, Yes the motion to dismiss was on its propriety. The SC held that

the rule is based on practicality, as when the issues involved in a particular case can be disposedof in a preliminary hearing and if there is no motion to dismiss was filed then the pleadinggorund as affirmative defenses can be heard in a preliminary hearing as that of the motion todismiss. Respondent on the other hand fails to oppose the motion to dismiss despite having beengiven the opportunity to do so, any right to contest the same was already waived by them.

As to the second issue, It is true that the action for reconveyance of property resultingfrom fraud may be barred by the statute of limitations which requires that the action shall be filedwithin 4 years from discovery of fraud, but be it noted that the basis of reconveyance by therespondent is threat, duress and intimidation. As provided in Art. 1391 of the civil code an actionfor annulment for it shall be brought within four years, thus when Marcos ouster from power onFebruary 21, 1986 and since the respondents filed its complaint for reconveynace on September15, 1989 the four years prescriptive period was not prescribed. The SC denied for the dismissalof reconveyance and remitted the case to the RTC for trial with cost against the petitioner.



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WILLIAM ALAIN MIAILHE, petitioner,vs. COURT OF APPEALS and REPUBLIC OF THE PHILIPPINES, respondents.

G.R. No. 108991 March 20, 2001

FACTS:

Petitioner, William Alain Miailhe, on his own behalf and on behalf of Victoria Desbarats-Miailhe, Monique Miailhe-Sichere and Elaine Miailhe-Lencquesaing filed a Complaint forAnnulment of Sale, Reconveyance and Damages against [Respondent] Republic of thePhilippines and defendant Development Bank of the Philippines.The petitioner alleged that DBP forged, threatened and intimidated petitioner to sell the propertyto DBP for the grossly low price. The RTC and CA rendered their decision in favor of DBP andthat the action is already prescribed.

ISSUE:

Whether or not extrajudicial demands did not interrupt prescription.

RULING:

In the present case, there is as yet no obligation in existence. Respondent has noobligation to reconvey the subject lots because of the existing Contract of Sale. Althoughallegedly voidable, it is binding unless annulled by a proper action in court.12 Not being adeterminate conduct that can be extrajudically demanded, it cannot be considered as anobligation either. Since Article 1390 of the Civil Code states that voidable "contracts are binding,unless they are annulled by a proper action in court," it is clear that the defendants were notobligated to accede to any extrajudicial demand to annul the Contract of Sale.13



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FIRST PHILIPPINE HOLDINGS CORPORATION V TRANS MIDDLE EASTEQUITIES INC.

G.R. NO. 179505, 04 DECEMBER 2009

FACTS:

FHPC formerly known as Meralco Securities Corporation incorporated on 30 June1961 by Filipino Entreprenuers led by Eugenio Lopez Sr. sold its 6,299,179.00 php shares ofcommon stock in Philippine Commercial International Bank (PCIB), now Equitable PCIB toTMEE. Such shares according to the FHPC were obtained by the TMEE through fraud, actscontrary to Law, Morals, Good Customs and Public Policy and such acquisition is eithervoidable, void or un forceable. FHPC filed then its motion for leave to intervene and admitcomplaint in intervention and was granted by the court. On the otehr hand, TMEE filed itsmotion to dismiss the complaint-in-intervention by the FHPC on the ground that the action ofFHPC has already prescribed under Article 1391 of the Civil Code. Since the action was filedonly on 28 December 1988 and the sale was 24 May 1984 the action was laready 7 months late

from the date of prescription.

ISSUE :

Whether or not the sale of property is void and the prescriptive period had elapsed.

HELD:

No, the SC found that the sale is not void for a suit for the annulment of voidbalecontract on account of fraud shall be filed within four years from the discovery of the same, here,from the time the questioned sale transaction on May 24, 1984 took place, FHPC didn't deny that

it had actual knowledge of the same. Simply, petitioner was fully aware of the sale of the PCIBshares to TMEE and espite full knowledge petitioners did not question the said sale from itsinception and sometime thereafter. it was only four years and seven months had elapsedfollowing the knowledge or discovery of the alleged fraudulent sale that the petitioner assailedthe same, by then it was too late for the petitioners to beset same transaction, since the prescriptive period had already come into play.

The SC therefore denied the instant petition and affirmed the resolution of the SB withcost against the petitioner.



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SANCHEZ vs. MAPALAD541 SCRA 397

FACTS:

Respondent Mapalad was the registered owner of four (4) parcels of land located alongRoxas Boulevard, Baclaran, ParañaqueThe PCGG issued writs of sequestration for Mapalad and all its properties.Josef, Vice president/treasurer and General Manager of Mapalad discovered that the 4 TCTswere missing, however the four missing tcts turned out to be in possession of NordelakDevelopment Corporation. Nordelak came into possession of the 4 TCTs by deed of sale purportedly executed by Miguel Magsaysay in his capacity as President and Board Chairman ofMapalad.

Mapalad filed an action for annulment of deed of sale and reconveyance of title withdamages against Nordelak.

RTC ruled in favour of Nordelak. The Ca reversed the decision of RTC.

ISSUE:

Whether or not there was a valid sale between Mapalad and Nordelak.

RULING:

In the present case, consent was purportedly given by Miguel Magsaysay, the person whosigned for and in behalf of Mapalad in the deed of absolute sale dated November 2, 1989.However, as he categorically stated on the witness stand during trial, he was no longer connectedwith Mapalad on the said date because he already divested all his interests in said corporation asearly as 1982. Even assuming, for the sake of argument, that the signatures purporting to be hiswere genuine, it would still be voidable for lack of authority resulting in his incapacity to giveconsent for and in behalf of the corporation.

Lack of consideration makes a contract of sale fictitious. A fictitious sale is void ab initio.The alleged deed of absolute sale dated November 2, 1989 notwithstanding, the contract of sale between Mapalad and Nordelak is not only voidable on account of lack of valid consent on the part of the purported seller, but also void ab initio for being fictitious on account of lack ofconsideration.

WHEREFORE, the petition is hereby DENIED and the appealed Court of Appealsdecision AFFIRMED in toto.



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OESMER, Petitioners,vs PARAISO DEVELOPMENT CORPORATION, Respondent.

G.R. No. 157493 February 5, 2007

FACTS:

Petitioner Ernesto to meet with a certain Sotero Lee, President of respondent ParaisoDevelopment Corporation, at Otani Hotel in Manila. The said meeting was for the purpose of brokering the sale of petitioners‘ properties to respondent corporation. A Contract to Sell was drafted. A check in the amount of P100,000.00, payable to Ernesto, wasgiven as option money. Sometime thereafter, Rizalino, Leonora, Bibiano, Jr., and Librado alsosigned the said Contract to Sell. However, two of the brothers, Adolfo and Jesus, did not sign thedocument. However petitioners informed respondent corporation about their intention to rescindthe Contract to Sell and to return the amount of Php 100,000.00. respondent did not respond tothe aforesaid letter. Petitioners, therefore, filed a complaint for Declaration of Nullity or forAnnulment of Option Agreement or Contract to Sell with damages.

The RTC rendered its decision in favor to respondent. CA affirmed the decision of RTC withmodification.

ISSUE:

Whether ot not Contract to Sell is void considering that on of the heirs did not sign it asto indicate its consent to be bound by its terms.

RULING:

It is well-settled that contracts are perfected by mere consent, upon the acceptance by theofferee of the offer made by the offeror. From that moment, the parties are bound not only to thefulfillment of what has been expressly stipulated but also to all the consequences which,according to their nature, may be in keeping with good faith, usage and law. To produce acontract, the acceptance must not qualify the terms of the offer. However, the acceptance may beexpress or implied. For a contract to arise, the acceptance must be made known to the offeror.Accordingly, the acceptance can be withdrawn or revoked before it is made known to the offeror.

In the case at bar, the Contract to Sell was perfected when the petitioners consented to thesale to the respondent of their shares in the subject parcels of land by affixing their signatures onthe said contract. Such signatures show their acceptance of what has been stipulated in theContract to Sell and such acceptance was made known to respondent corporation when theduplicate copy of the Contract to Sell was returned to the latter bearing petitioners‘ signatures.



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PERPETUA VDA. DE APE, petitioner,vs.THE HONORABLE COURT OF APPEALS and GENOROSA CAWIT VDA. DE

LUMAYNO, respondentsG.R. No. 133638 April 15, 2005

FACTS:Generosa Cawit de Lumayno (private respondent herein), joined by her husband, Braulio,

instituted a case for "Specific Performance of a Deed of Sale with Damages" against Fortunatoand his wife Perpetua (petitioner herein).

She supposedly demanded that Fortunato execute the corresponding deed of sale and toreceive the balance of the consideration. However, Fortunato unjustifiably refused to heed herdemands. Private respondent, therefore, prayed that Fortunato be ordered to execute and deliverto her "a sufficient and registrable deed of sale involving his one-eleventh (1/11) share or participation in Lot No. 2319 of the Escalante Cadastre

Private respondent testified that Fortunato went to her store at the time when their leasecontract was about to expire. He allegedly demanded the rental payment for his land but as shewas no longer interested in renewing their lease agreement, they agreed instead to enter into acontract of sale which Fortunato acceded to provided private respondent bought his portion ofLot No. 2319 for P5,000.00. Thereafter, she asked her son-in-law Flores to prepare theaforementioned receipt.

ISSUE:

Whether or not the receipt signed by Fortunato proves the existence of a contrct of sale between him and private respondent.

RULING:

Under Article 1332 of the Civil Code which provides that "[w]hen one of the parties isunable to read, or if the contract is in a language not understood by him, and mistake or fraud isalleged, the person enforcing the contract must show that the terms thereof have been fullyexplained to the former."

As can be gleaned from Flores's testimony, while he was very much aware of Fortunato'sinability to read and write in the English language, he did not bother to fully explain to the latterthe substance of the receipt (Exhibit "G"). He even dismissed the idea of asking somebody elseto assist Fortunato considering that a measly sum of thirty pesos was involved. Evidently, it didnot occur to Flores that the document he himself prepared pertains to the transfer altogether ofFortunato's property to his mother-in-law. It is precisely in situations such as this when thewisdom of Article 1332 of the Civil Code readily becomes apparent which is "to protect a partyto a contract disadvantaged by illiteracy, ignorance, mental weakness or some other handicap



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JULIAN FRANCISCO petitioner,vs.PASTOR HERRERA, respondent.

G.R. No. 139982 November 21, 2002

FACTS:

Petitioner bought 2 parcels of land from Eligio Herrera Sr. The children of Eligio, Sr.conteneded that the contract price for the two parcels of land was grossly inadequate so they triedto negotiate with petitioner. However petitioner refused.

The children of Herrera filed a complaint for annulment of sale. The RTC rendered itsdecision in favor of the children that Ca affirmed the decision of RTC.

ISSUE:

Whether or not said contract is void.

RULING:

In the present case, it was established that the vendor Eligio, Sr. entered into anagreement with petitioner, but that the former‘s capacity to consent was vitiated by seniledementia. Hence, we must rule that the assailed contracts are not void or inexistent per se; rather,these are contracts that are valid and binding unless annulled through a proper action filed incourt seasonably.

An annullable contract may be rendered perfectly valid by ratification, which can beexpress or implied. Implied ratification may take the form of accepting and retaining the benefitsof a contract. As found by the trial court and the Court of Appeals, upon learning of the sale,respondent negotiated for the increase of the purchase price while receiving the installment payments. It was only when respondent failed to convince petitioner to increase the price that theformer instituted the complaint for reconveyance of the properties. Clearly, respondent wasagreeable to the contracts, only he wanted to get more. Further, there is no showing thatrespondent returned the payments or made an offer to do so. This bolsters the view that indeedthere was ratification. One cannot negotiate for an increase in the price in one breath and in thesame breath contend that the contract of sale is void.



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ROSARIO L. DE BRAGANZA, ET AL., petitioners,vs.FERNANDO F. DE VILLA ABRILLE, respondent.

G.R. No. L-12471 April 13, 1959

FACTS:Rosario L. de Braganza and her sons Rodolfo and Guillermo petition for review of the

Court of Appeal's decision whereby they were required solidarily to pay Fernando F. de VillaAbrille the sum of P10,000 plus 2 % interest from October 30, 1944. Because payment had not been made, Villa Abrille sued them in March 1949.

The RTC and CA rendered its decision in favor of Abrile despite the fact tht Guillermoand Rodolfo are minors.

ISSUE:

Whether or not Guillermo and Rodolfo can be held liable to pay the loan.

RULING:

The SC held that being minors, Rodolfo and Guillermo could not be legally bound bytheir obligation.These minors may not be entirely absolved from monetary responsibility. Inaccordance with the provisions of Civil Code, even if their written contact is unenforceable because of non-age, they shall make restitution to the extent that they have profited by the moneythey received. (Art. 1340) There is testimony that the funds delivered to them by Villa Abrillewere used for their support during the Japanese occupation. Such being the case, it is but fair tohold that they had profited to the extent of the value of such money, which value has beenauthoritatively established in the so-called Ballantine Schedule: in October 1944, P40.00Japanese notes were equivalent to P1 of current Philippine money.



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MIGUEL KATIPUNAN, INOCENCIO VALDEZ, EDGARDO BALGUMA andLEOPOLDO BALGUMA, JR., petitioners,

vs.BRAULIO KATIPUNAN, JR., respondent.G.R. No. 132415 January 30, 2002

FACTS:Respondent Braulio Katipunan, Jr. is the owner of a 203 square meter lot and a five-door

apartment constructed thereon located at 385-F Matienza St., San Miguel, Manila.Petitioner Miguel Katipunan, entered into a Deed of Absolute Sale4 with brothers EdgardoBalguma and Leopoldo Balguma, Jr. (co-petitioners), represented by their father Atty. LeopoldoBalguma, Sr., involving the subject property for a consideration of P187,000.00.

Respondent filed a complaint for annulment of the Deed of Absolute Sale. He contendedthat the said contract was obtained through insidious words and machinations.The TRC dismissed the complaint. The CA reversed the decision of RTC.

ISSUE:

Whether or not CA ered when it overturned the factual findings of the trial court whichare amply supported by the evidence on record.

RULING:

The circumstances surrounding the execution of the contract manifest a vitiated consenton the part of respondent. Undue influence was exerted upon him by his brother Miguel andInocencio Valdez (petitioners) and Atty. Balguma. It was his brother Miguel who negotiatedwith Atty. Balguma. However, they did not explain to him the nature and contents of thedocument. Worse, they deprived him of a reasonable freedom of choice. It bears stressing that hereached only grade three. Thus, it was impossible for him to understand the contents of thecontract written in English and embellished in legal jargon.

A contract where one of the parties is incapable of giving consent or where consent isvitiated by mistake, fraud, or intimidation is not void ab initio but only voidable and is bindingupon the parties unless annulled by proper Court action. Since the Deed of Absolute Sale between respondent and the Balguma brothers is voidable and hereby annulled, then therestitution of the property and its fruits to respondent is just and proper. Petitioners should turnover to respondent all the amounts they received starting January, 1986 up to the time the property shall have been returned to the latter.



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NILO R. JUMALON, petitioner,vs.COURT OF APPEALS, HON. RUBEN D. TORRES, in his capacity as Executive

Secretary, HOUSING AND LAND USE REGULATORY BOARD, and MA. ASUNCIONDE LEON, respondents.

G.R. No. 127767 January 30, 2002

FACTS:Complainant De Leon and herein petitioner, Nilo R. Jumalon, executed a conditional

sales agreement whereby the former purchased from the latter a house and lot. Jumalon executedin favor of De Leon a Deed of Absolute Sale.

De Leon learned regarding the danger posed by the wires over the property. Also, DeLeon was informed by HLURB Enforcement Center, that construction of houses and buildings ofwhatever nature is strictly prohibited within the right-of – way of the transmission line.

De Leon filed a case for declaration of nullity or annulment of sale of real property whichwas subsequently dismissed. De Leon then, filed a complaint before the HLURB seeking therescission of the conditional sales agreement and the Absolute Deed of Sale.

HLURB arbiter rendered judgement in favor of De Leon. The Board of Commissionersof HLURB affirmed the decision of arbiter. The CA affirmed the appealed decision.

ISSUE:

Whether the Court of Appeals erred in affirming the decision of Executive SecretaryRuben D. Torres and the HLURB declaring the rescission of the contract of sale of a house andlot between the petitioner and private respondent

RULING:

The SC agree with the Court of Appeals that respondent de Leon was entitled to annul thesale. There was fraud in the sale of the subject house. It is not safely habitable. It is built in asubdivision area where there is an existing 30-meter right of way of the Manila ElectricCompany (Meralco) with high-tension wires over the property, posing a danger to life and property. The construction of houses underneath the high tension wires is prohibited ashazardous to life and property because the line carries 115,000 volts of electricity, generatestremendous static electricity and produces electric sparks whenever it rained.



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CABALES, ET. AL vs COURT OF APPEALSAugust 31, 2007

FACTS:

Saturnina and her children Bonifacio, Albino, Francisco, Leonara, Alberto and petitioner

Rito inherited a parcel of land. They sold such property to Dr. Cayetano Corrompido with a rightto repurchase within 8 years.Alberto secured a note from Dr. Corrompido in the amount of Php 300.00.Alberto died leaving a wife and son, petitioner Nelson.Within the 8-year redemption period, Bonifacio and Albino tendered their payment to Dr.

Corrompido. But Dr. Corrompido only released the document of sale with pacto de retro afterSaturnina paid the share of her deceased son, Alberto, plus the note.

Saturnina and her children executed an affidavit to the effect that petitioner Nelson wouldonly receive the amount of Php 176.34 from respondents-spouses when he reaches the age if 21considering that Saturnina paid Dr. Corrompido Php 966.66 for the obligation of petitioner Nelson‘s late father Alberto.

ISSUE:

Whether or not the slae entered into is valid and binding.

RULING:

The legal guardian only has the plenary power of administration of the minor‘s property.It does not include the power to alienation which needs judicial authority. Thus when Saturnina,as legal guardian of petitioner Rito, sold the latter‘s pro indiviso share in subject land, she did nothave the legal authority to do so. The contarct of sale as to the pro indiviso share of PetitionerRito was unenforceable. However when he acknowledged receipt of the proceeds of the sale onJuly24, 1986, petitioner Rito effectively ratified it. This act of ratification rendered the sale validand binding as to him.



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ANUNCIACION VDA. DE OUANO V. REPUBLIC OF THE PHILIPPINESG.R. NO. 168770, 9 FEBRUARY 2011

FACTS:

In 1949, the National Airport Corporation (NAC), MCIAA‘s predecessor agency pursued a program to expand the Lahug Airport in Cebu City. As an assurance from thegovernment, there is a promise of reconveyance or repurchase of said property so long as Lahugceases its operation or transfer its operation to Mactan – Cebu Airport. Some owners refused tosell, and that the Civil Aeronautics Administration filed a complaint for the expropriation of said properties for the expansion of the Lahug Airport. The trial court then declared said properties to be used upon the expansion of said projects and order for just compensation to the land owners,at the same time directed the latter to transfer certificate or ownership or title in the name of the plaintiff. At the end of 1991, Lahug Airport completely ceased its operation while the Mactan-Cebu airport opened to accommodate incoming and outgoing commercial flights. This then prompted the land owners to demand for the reconveynace of said properties being expropriated

by the trial court under the power of eminent domain. Hence these two consolidated cases arise.

In G.R. No. 168812 MCIAA is hereby ordered by court to reconvey said properties tothe land owners plus attorney‘s fee and cost of suit, while in G.R. No. 168770, the RTC ruled infavor of the petitioners Oaunos and against the MCIAA for the reconveynace of their properties but was appealed by the latter and the earlier decision was reversed, the case went up to the CA but the CA affirmed the reversed decision of the RTC.

ISSUE:

Whether or not the testimonials of the petitioners proving the promises, assurances andrepresentations by the airport officials and lawyers are inadmissible under the Statue of Frauds.

HELD:

The SC ruled that since the respondent didn‘t object during trial to the admissibility of petitioner‘s testimonial evidenc under the Statute of Frauds, it means then that they have waivedtheir objection and are now barred from raising the same. In any event, the Statute of Frauds is

not applicable herein. Consequently, petitioners‘ pieces of evidence are admissible and should beduly given weight and credence, since the records tend to support that the MCIAA did not as theOuanos and Inocians posit, object the introduction of parole evidence to prove its commitment toallow the fromer landowners to repurchase their properties upon the occurrence of certain events.



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SHOEMAKER vs. LA TONDENA68 Phil 24

FACTS:

Defendant company, La tondena, Inc. entered into a written contract of lease of serviceswith plaintiff Harry Ives Shoemaker for a period of 5 years, with a compensation consisting of8% of the net earnings of defendant. That during each year that the contract was in force, plaintiff would receive monthly during the period of the contract of the sum of Php 1,500.00 orPhp 18,000.00 per annum as minimum compensation if 8% of the net earnings of theaforementioned alleged business would not reach the amount.

The defendant company alleged that there were changes in the contract in which both the parties agreed upon.

Plaintiff filed a complaint against defendant company. The defendant interposed ademurrer based on the ground that the facts therein alleged do not constitute a cause of action,since it is not averred that the alleged mutual agreement modifying the contract of lease of

services, has been put in writing, whereas it states that its terms and conditions may only bemodified upon the written consent of both parties.

ISSUE:

Whether or not the ocurt a quo ered in sustaining the demurrer interposed by thedefendant company to the second amended complaint filed by plaintiff, on the ground that thefacts alleged therein do not constitute a couse of action.

RULING:

When in an oral contract which by its terms, is not to be performed within 1 year fromthe execution thereof, one of the contracting parties has complied within the year with theobligations imposed on him said contract, the other party cannot avoid the fulfillment of what isincumbent on him under the same contract by invoking the statute of frauds because the latteraims to prevent and not to protect fraud.



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PNB vs. PHILIPPINE VEGETABLE OIL COMPANY49 Phil 897

FACTS:

This appeal involves the legal right of the PNB to obtain a judgement against Vegetable Oil Co.,Inc., for Php 15,812,454 and to foreclose a mortgage on the property of the PVOC for Php17,000,000.00 and the legal right of the Phil C. Whitaker as intervenor to obtain a judgementdeclaring the mortgage which the PNB seeks to foreclose to be without force and effect,requiring an accouting from the PNB of the sales of the property and assets of the Vegetable Co.and ordering the PVOC and the PNB to pay him the sum of Php 4,424,418.37In 1920, the Vegetable Oil Company, found itself in financial straits. It was in debt to the extentof approximately Php 30,000,000.00. The PNB was the largest creditor. The VOC owed the bankPhp 17,000,000.00. The PNB was securedly principally by a real and chattel mortgage in favorof the bank on its vessels Tankerville and H.S. Everett to guarantee the payment of sums notexceed Php 4,000,000.00

ISSUE:

Whether or not the plaintiff had failed to comply with the contract, that it was alleged to havecelebrated with the defendant and the intervenor, that it would furnish funds to the defendant sothat it could continue operating its factory.

RULING:

In the present instance, it is found that the Board of Directors of the PNB had not consented to anagreement for practically unlimited backing of the V corporation and had not ratified any promise to trhat effect made by its general manager.All the evidence, documentary and oral, pertinent to the issue considered and found to discloseno binding promise, tacit, or express made by the PNB to continue indefinitely the operation ofthe V corporation. Accordingly, intervenor Whitaker is not entitled to recover damages from the bank.



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ANUNCIACION VDA. DE OUANO V. REPUBLIC OF THE PHILIPPINESG.R. NO. 168770, 9 FEBRUARY 2011

FACTS:

In 1949, the National Airport Corporation (NAC), MCIAA‘s predecessor agency pursued a program to expand the Lahug Airport in Cebu City. As an assurance from thegovernment, there is a promise of reconveyance or repurchase of said property so long as Lahugceases its operation or transfer its operation to Mactan – Cebu Airport. Some owners refused tosell, and that the Civil Aeronautics Administration filed a complaint for the expropriation of said properties for the expansion of the Lahug Airport. The trial court then declared said properties to be used upon the expansion of said projects and order for just compensation to the land owners,at the same time directed the latter to transfer certificate or ownership or title in the name of the plaintiff. At the end of 1991, Lahug Airport completely ceased its operation while the Mactan-Cebu airport opened to accommodate incoming and outgoing commercial flights. This then prompted the land owners to demand for the reconveynace of said properties being expropriated

by the trial court under the power of eminent domain. Hence these two consolidated cases arise.

In G.R. No. 168812 MCIAA is hereby ordered by court to reconvey said properties tothe land owners plus attorney‘s fee and cost of suit, while in G.R. No. 168770, the RTC ruled infavor of the petitioners Oaunos and against the MCIAA for the reconveynace of their properties but was appealed by the latter and the earlier decision was reversed, the case went up to the CA but the CA affirmed the reversed decision of the RTC.

ISSUE:

Whether or not the testimonials of the petitioners proving the promises, assurances andrepresentations by the airport officials and lawyers are inadmissible under the Statue of Frauds.

HELD:

The SC ruled that since the respondent didn‘t object during trial to the admissibility of petitioner‘s testimonial evidenc under the Statute of Frauds, it means then that they have waivedtheir objection and are now barred from raising the same. In any event, the Statute of Frauds is

not applicable herein. Consequently, petitioners‘ pieces of evidence are admissible and should beduly given weight and credence, since the records tend to support that the MCIAA did not as theOuanos and Inocians posit, object the introduction of parole evidence to prove its commitment toallow the fromer landowners to repurchase their properties upon the occurrence of certain events.



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MUNICIPALITY OF HAGONOY, BULACAN ET. AL. V HON. SIMEON P. DUMDUM,JR. ET. AL

G.R. NO. 168289, 22 MARCH 2010

FACTS:

Private respondent, Emily Rose Go Ko Lim Chao, who is engaged in buy and sell business of surplus business, equipment machineries, spare parts and related supplies filed acomplaint for collection of sum of money, including damages against the petitioners,Municipality of Hagonoy, Bulacan and its ormer chief executive, Mayor Felix V. Ople in hisofficial and personal capacity. The private respondent claimed that because of Ople‘s earnestrepresentation that funds had already been allowed for the project, she agreed to deliver from her personal principal business in Cebu City twenty-one motor vehicles whose valued totaled to5,820,000.00 php but the petitioners here instead filed a motion to dismiss on the ground that the

claim on which the action had been brought was unenforceable under the statute of frauds, pointing out that there was no written contract or document that would evince the supposedagreement they entered into with the respondent. The petitioners also filed for Motion toDissolve and /or Discharge the Writ of Preliminary Attachment already issued by the courtinvoking immunity of the State from suit, unenforceability of contract, and failure to substantiatethe allegation of fraud. But the trial court denied all the petitions of the petitioners; hence the petitioners brought this case to CA believing that the trial court committed grave abuse ofdiscretion upon issuing two orders .

ISSUES:

Whether or not complaint is unenforceable under the Statutes of Fraud.

Whether or not there is valid reason to deny petitioners‘ motion to dismiss the Writ ofPreliminary Attachment.

HELD:

The SC held that Statute of frauds is descriptive of statutes that require certain classesof contracts to be in writing, and that do not deprive the parties of the right to contract withrespect to the matters therein involved, but merely regulate the formalities of the contractnecessary to render its enforceability. In other words, the Statute of fraud only lays down the

method by which the enumerated contracts maybe proved. It does not also declare any contractinvalid because they are not reduced into writing inasmuch as, by law, contracts are obligatory inwhatever form they may have been entered into provided that all their essential requisites forvalidity are present. Thus the claim of the respondent is well-substantiated.

For the second issue, the Sc held that the Writ of Preliminary Attachment should bedismissed because it writ of attachment in this case would only prove to be useless andunnecessary under the premises since the property of the Municipality may not, in the event thatrespondent‘s claim is validated unless there has been a valid appropriation provided by law.

The petition is hereby granted in part, but affirmed the decision of CA in CA-G.R. NO.81888 is affirmed as it was held by the Regional Trial Court.



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TAN vs VILLAPAZ475 SCRA 720 November 22, 2005

FACTS:

Respondent Carmelito Villapaz issued a Philippine Bank of Communications (PBCom)crossed check in the amount of P250,000.00, payable to the order of petitioner Tony Tan.The Malita, Davao del Sur Police issued an invitation-request to petitioner Antonio Tan

inviting him to appear before the Deputy Chief of Police Office on June 27, 1994 at 9:00 o‘clockin the morning ―in connection with the request of [herein respondent] Carmelito Villapaz, forconference of vital importance.‖

The invitation-request was received by petitioner Antonio Tan on June 22, 1994 but on theadvice of his lawyer, he did not show up at the Malita, Davao del Sur Police Office.Respondent filed a Complaint for sum of money against petitioners-spouses, alleging that, , hisissuance of the February 6, 1992 PBCom crossed check which loan was to be settled interest-freein six (6) months; on the maturity date of the loan or on August 6, 1992, petitioner Antonio Tan

failed to settle the same, and despite repeated demands, petitioners never did.Petitioners alleged that they never received from respondent any demand for payment, be itverbal or written, respecting the alleged loan; since the alleged loan was one with a period — payable in six months, it should have been expressly stipulated upon in writing by the parties butit was not.

ISSUE:

Whether or not Honorable Court of Appeals erred in concluding that the transaction indispute was a contract of loan and not a mere matter of check encashment as found by the trialcourt.

RULING:

At all events, a check, the entries of which are no doubt in writing, could prove a loantransaction.

That petitioner Antonio Tan had, on February 6, 1992, an outstanding balance of morethan P950,000.00 in his account at PBCom Monteverde branch where he was later to depositrespondent‘s check did not rule out petitioners‘ securing a loan. It is pure naivete to believe thatif a businessman has such an outstanding balance in his bank account, he would have no need to borrow a lesser amount.

In fine, as petitioners‘ side of the case is incredible as it is inconsistent with the principles by which men similarly situated are governed, whereas respondent‘s claim that the proceeds ofthe check, which were admittedly received by petitioners, represented a loan extended to petitioner Antonio Tan is credible, the preponderance of evidence inclines on respondent.



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GENARO CORDIAL, petitioner, vs. DAVID MIRANDA, respondent.December 14, 2000

FACTS:

David Miranda, a businessman from Angeles City, was engaged in rattan business. GenerBuelva was the supplier of David but the former met an accident and died. Genero Cordial andMiranda met through Buelva‘s widow, Cecilla.

They agreed that Cordial will be his supplier of rattan poles. Cordial shipped rattan polesas to the agreed number of pieces and sizes however Miranda refused to pay the cost of the rattan poles delivered. Miranda alleged that there exist no privity of contract between Miranda andCordial.

Cordial filed a complaint againt Miranda. The RTC rendered its decision in favor of the petitioner. The CA reversed the decision of the RTC.

ISSUE:

Whether or not Statute of Frauds applies in this case.

RULING:

The CA and respondent Miranda stress the absence of a ―written memorandum of thealleged contract between the parties‖. Respondent implicity agrues that the alleged contract isunenforceable under the Statute of Frauds however, the statute of frauds applies only to executorand not to completed, executed, or partially executed contracts. Thus, were one party has performed one‘s obligation, oral evidence will be admitted to prove the agreement. In the presentcase, it has already been established that petitioner had delivered the rattan poles to respondent.The contract was partially executed, the Statute of Frauds does not apply.



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VI,LLANUEVA-MIJARES petitioners,vs.THE COURT OF APPEALS, respondents.

G.R. No. 108921 April 12, 2000

FACTS:During the lifetime, Felipe, owned real property, a parcel of land situated at Estancia,Kalibo, Capiz. Upong Felipe‘s death, ownership of the land was passed on to his children. Pedro,on of the children, got his share. The remaining undivided portion of the land was held in trust byleon. His co-heirs made several seasonable and lawful demands upon him to subdivide the partition the property, but no subdivision took place.

After the death of Leon, private respondents discovered that the shares of four of the heirsof Felipe was purchased by Leon as evidenced by Deed of Sale.

ISSUE:

Whether or not the appellate court erred in declaring the Deed of Sale unenforceableagainst the private respondent fro being unauthorized contract.

RULING:

The court has ruled that the nullity of the unenforceable contract is of a permanent natureand it will exist as long the unenforceable contract is not duly ratifired. The mere lapse of timecannot igve efficacy to such a contract. The defect is such that it cannot be cured except by thesubsequent ratification of the unenforceable contract by the person in whose name the contractwas executed. In the instant case, there is no showing of any express or implied ratification of theassailed Deed of Sale by the private respondents Procerfina, Ramon,. Prosperidad, and Rosa.Thus, the said Deed of Sale must remain unenforceable as to them.



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ROSENCOR DEVELOPMENT CORPORATION and RENE JOAQUIN, petitioners,vs.PATERNO INQUING, IRENE GUILLERMO, FEDERICO BANTUGAN, FERNANDO

MAGBANUA and LIZZA TIANGCO, respondents.G.R. No. 140479 March 8, 2000

FACTS:Plaintiffs and plaintiffs-intervenors averred that they are the lessess since 1971 of a two-

story residential apartment and owned by spouses Faustino and Cresencia Tiangco. The leasewas nocovered by any contract. The lesses were renting the premises then for Php 150.00 amonth and were allegedly verbally granted by the lessors the pre-emptive right to purchase the property if ever they decide to sell the same.

Upon the death of the spouses Tiangco, the management of the property was adjudicatedto their heirs who were represented by Eufrocina deLeon.The lessees received a letter from de Leon advising them that the heirs of the late spouses have

already sold the property to Resencor.

The lessees filed an action f\before th RTC praying for the following: a) rescission of theDeed of Absolute Sale between de Leon and Rocencor, b) the defendants Rosencor/Rene Joaquin be ordered to reconvey the property to de Leon, c) de Leon be ordered to reimburse the plaintiffsfor the repair of the property or apply the said amount as part of the purchase of the property.The RTC dismissed the complaint while the Ca reversed the decision of the RTC.

ISSUE:

Whether or not a right of first refusal is indeed covered by the provisions of the NCC onthe Statute of Frauds.

RULING:

A right of first refusal is not among those listed as unenforceable under the statute offrauds. Furthermore, the application of Article 1403, par. 2(e) of the NCC, presupposes theexistence of a perfected, albeit unwritten, contract of sale. A right of first refusal, such as the oneinvolved in the instant case, is not by any means a perfected contract of sale of real property. At best, it is a contractual grant, not of the sale of the real property involed byt of the right of firstrefusal over the property sought to be sold.

It is thus evident that the statute of frauds does not contemplate cases involving a right ofright of first refusal. As such, a right of first refusal need not be written to be enforceable andmay be proven by oral evidence.



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SPOUSES CONSTANTE FIRME AND AZUCENA E. FIRME, petitioners,vs.UKAL ENTERPRISES AND DEVELOPMENT CORPORATION, respondent.

G.R. No. 146608 October 23, 2003

FACTS:Petitioner Spouses Firme are the registered owner of a parcel of land located on Dahlia

Avenue, Fairview Park, Quezon City.Bukal Enterprises filed a complaint for specific performance and damges with the trial

court, aleeging that the Spouses Firme reneged on their agreement to sell the property. Thecomplaint asked the trial court to order the Spouses Firme to execute the deed of sale and todelover the title of the property to Bukal Enterpises upon payment of the agreed purchase price.

The RTC rendered its decision against Bukal. The CA reversed and set aside the decisionof the RTC.

ISSUE:Whether or not Statute of Frauds is applicable.

RULING:

The CA held that partial performance of the contract of sale takes the oral contract out ofthe scope of Statute of Frauds. This conclusion arose from the appellate court‘s erronouesfinding that there was a perfected contract of sale. The recors shoe that there was no perfectedcontract of sale. There is therefore no basis for the application of the Stature of Frauds. Theapplication of the Statute of Frauds presupposes the existence of a perfected contract.



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HEIRS OF M. DORONIO vs. HEIR OF F. DORONIO541 SCRA 479

FACTS:

Petitioners are the heirs of Maralino Doronio, while respondents are the heirs ofFortunato Doronio.The property in dispute is one of a private deed of donation propter nuptias who was

executed by Spouses Simeon Doronio and Cornelia Gante in facor of Maralino Doronio and hiswife Veronica Pico.

The heirs of Fortuanto Doronio contended that only the half of the property was actuallyincorporated in the deed of donation because it stated that Fortunato is the owner of the adjacent property. Eager to obtain the entire property, the heirs of Marcelino filed a petition ―For theRegistration of a Private Deed of Donation‖. The RTC granted the petition.

The heirs of Fortunato files a pleading in the form of petition. In the petition, they prayedthat an order be issued declaring null and void the registration of the private deed of donation.

The RTC ruled in favor of the heirs of Marcelino. The CA reversed the decision of RTC>

ISSUE:

Whether or not the donation propter nuptias is valid.

RULING:

Article 633 of the OCC provides that figts of real property , in order to be valid, mustappear in a public document. It is settled that a donation of real estate propter nuptias is voidunless made by public instrument.

In the instant case, the donation propter nuptias did not become valid. Neither did itcreate any right because it was not made in a public instrument. Hence, it conveyed no title to theland in question to petitioner‘s predecessors.



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NATIVIDAD ARIAGA VDA. DE GURREA, CARLOS GURREA, JULIETA GURREA,TERESA GURREA-RODRIGUEZ, RICARDO GURREA, Jr., MA. VICTORIA

GURREA-CANDEL, and RAMONA GURREA-MONTINOLA, Petitioners,vs ENRIQUE SUPLICO, RespondentG.R. No. 144320 April 26, 2006

FACTS:

The petition arose from a complaint for anuulment of tilte with prayer for preliminaryinjunction filed with the court of First Instance by Rosalina Gurrea in her capacity as attorney-in-fact of the heirs of Ricardo Gurrea. The complaint was filed against Atty. Enrique Suplico.

Atty. Suplico alleged that the property in dispurte was for the payment of his servicesrendered to the late Ricardo Gurrrea which the offered to him as payment.

ISSUE:

Whether or not petitioner‘s are entitled to the cancellation of respondent attorney‘s titleover the subject property and the reconveyance thereof to the herein petitioners or to be the estateof the Late Ricardo.

RULING:

Having been established that the subject property was still the object of litigation at thetime the subject deed of Transfer of Rights and Interest was executed, the assignment of rightsand interest over the subject property in favor of respondent is null and void for being violativeof the provisions of Article 1491 of the Civil Code which expressly prohibits lawyers fromacquiring property or rights which may be the object of any litigation in which they may take part by virtue of their profession.It follows that respondent‘s title over the subject property should be cancelled and the propertyreconveyed to the estate of Ricardo, the same to be distributed to the latter?s heirs. This iswithout prejudice, however, to respondent?s right to claim his attorney?s fees from the estate ofRicardo, it being undisputed that he rendered legal services for the latter.



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ALFRED FRITZ FRENZEL, petitioner, vs.EDERLINA P. CATITO, respondent.G.R. No. 143958 July 11, 2003

FACTS:

Alfred Frenzel and Ederlina Catito had an amorous relationship which started in King‘sCross, a night spot in Sydney.

During their relationship Alfred bought properties in the Philippines in the name ofEderlina. Their relationship started to deteriorate when the husband of Ederlina threatenedEderlina that he would file a bigamy case against her for having an illicit affair with Alfred, whowas also married.

Alfred filed a complaint against Ederlina for specific performance, declaration of real and personal properties, sum of money and damages.

ISSUE:

Whether or not acquisition of a parcel of land is valid.

RULING:

The sales of three parcels of land in favor of the petitioner who is a foreigner is illegal perse. The transactions are void ab initio because they were entered into in violation of theConstitution. Thus, to allow the petitioner to recover the properties or the money used in the purchase of the parcels of land would be subversive of public policy.

An action for recovery of what has been paid without just cause has been designated asan accion in rem verso. This provision does not apply if, as in this case, the action is proscribed by the Constitution or by the application of the pari delicto doctrine. 68 It may be unfair andunjust to bar the petitioner from filing an accion in rem verso over the subject properties, or fromrecovering the money he paid for the said properties, but, as Lord Mansfield stated in the earlycase of Holman vs. Johnson:69 "The objection that a contract is immoral or illegal as betweenthe plaintiff and the defendant, sounds at all times very ill in the mouth of the defendant. It is notfor his sake, however, that the objection is ever allowed; but it is founded in general principles of policy, which the defendant has the advantage of, contrary to the real justice, as between him andthe plaintiff."



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LA BUGA’AL-BLAAN vs RAMOSDecember 1, 2004

FACTS:

The Petition for Prohibition and Mandamus before the Court challenges the constitutionality of(1) Republic Act No. [RA] 7942 (The Philippine Mining Act of 1995); (2) its ImplementingRules and Regulations (DENR Administrative Order No. [DAO] 96-40); and (3) the FTAA datedMarch 30, 1995, executed by the government with Western Mining Corporation (Philippines),Inc. (WMCP).On January 27, 2004, the Court en banc promulgated its Decision granting the Petition anddeclaring the unconstitutionality of certain provisions of RA 7942, DAO 96-40, as well as of theentire FTAA executed between the government and WMCP, mainly on the finding that FTAAsare service contracts prohibited by the 1987 Constitution.

ISSUE:

Whether or nor it is a void contract.

RULING:

Section 7.9 of the WMCP FTAA has effectively given away the State's share withoutanything in exchange. Moreover, it constitutes unjust enrichment on the part of the local andforeign stockholders in WMCP, because by the mere act of divestment, the local and foreignstockholders get a windfall, as their share in the net mining revenues of WMCP is automaticallyincreased, without having to pay anything for it.Being grossly disadvantageous to governmentand detrimental to the Filipino people, as well as violative of public policy, Section 7.9 musttherefore be stricken off as invalid.

Section 7.8(e) of the WMCP FTAA likewise is invalid, since by allowing the sums spent by government for the benefit of the contractor to be deductible from the State's share in netmining revenues, it results in benefiting the contractor twice over. This constitutes unjustenrichment on the part of the contractor, at the expense of government. For being grosslydisadvantageous and prejudicial to government and contrary to public policy, Section 7.8(e) mustalso be declared without effect. It may likewise be stricken off without affecting the rest of theFTAA.



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AGAN vs. PIATCOJanuary 21, 2004

FACTS:Asia‘s Emerging Dragon Corp. (AEDC) submitted an unsolicited proposal to the PhilippineGovernment through the Department of Transportation and Communication (DOTC) and ManilaInternational Airport Authority (MIAA) for the construction and development of the NAIA IPTIII under a build-operate-and-transfer arrangement pursuant to R.A. No. 6957, as amended byR.A. No. 7718 (BOT Law).The DOTC issued the notice of award for the NAIA IPT III project to the Paircargo Consortium,which later organized into herein respondent PIATCO.Various petitions were filed before this Court to annul the 1997 Concession Agreement, theARCA and the Supplements and to prohibit the public respondents DOTC and MIAA from

implementing them.In a decision dated May 5, 2003, this Court granted the said petitions and declared the 1997Concession Agreement, the ARCA and the Supplements null and void.Respondent PIATCO, respondent-Congressmen and respondents-intervenors now seek thereversal of the May 5, 2003 decision and pray that the petitions be dismissed.

ISSUE:

Whether or not the contract is valid.

RULING:

Section 19, Article XII of the 1987 Constitution mandates that the State prohibit or regulatemonopolies when public interest so requires. Monopolies are not per se prohibited. Given itssusceptibility to abuse, however, the State has the bounden duty to regulate monopolies to protect public interest. Such regulation may be called for, especially in sensitive areas such as theoperation of the country‘s premier international airport, considering the public interest at stake.By virtue of the PIATCO contracts, NAIA IPT III would be the only international passengerairport operating in the Island of Luzon, with the exception of those already operating in SubicBay Freeport Special Economic Zone ("SBFSEZ"), Clark Special Economic Zone ("CSEZ") andin Laoag City. Undeniably, the contracts would create a monopoly in the operation of aninternational commercial passenger airport at the NAIA in favor of PIATCO.



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COMMISSION ON ELECTIONS petitioner, vs. JUDGE MA. LUISA QUIJANO-PADILLA respondents.

389 SCRA 353

FACTS:The Philippine Congress passed Republic Act No. 8189, otherwise known as the "Voter'sRegistration Act of 1996," providing for the modernization and computerization of the voters'registration list and the appropriate of funds therefor "in order to establish a clean, complete, permanent and updated list of voters."The COMELEC issued invitations to pre-qualify and bid for the supply and installations ofinformation technology equipment and ancillary services for its VRIS Project. Private respondentPhotokina Marketing Corporation (PHOTOKINA) won the bid however the budget appropriated by the Congress for the COMELEC‘s modernization project was only 1B which was notsufficient to PHOTOKINA bid in the amount of 6.588B.

Senator Edgardo J. Angara directed the creation of a technical working group to ―assist theCOMELEC in evaluating all programs for the modernization of the COMELEC which will alsoconsider the PHOTOKINA contract as an alternative program and various competing programsfor the purpose.‖ PHOTOKINA filed a petition for mandamus, prohibition and damages (with prayer fortemporary restraining order, preliminary prohibitory injunction and preliminary mandatoryinjunction) against the COMELEC and all its Commissioners.Judge Luisa Quijano-Padilla rendered her decision in favor of PHOTOKINA.

ISSUE:

May a successful bidder compel a government agency to formalize a contract with itnotwithstanding that its bid exceeds the amount appropriated by Congress for the project?

RULING:

The SC cannot accede to PHOTOKINA's contention that there is already a perfectedcontract. While we held in Metropolitan Manila Development Authority vs. JancomEnvironmental Corporation[50] that "the effect of an unqualified acceptance of the offer or proposal of the bidder is to perfect a contract, upon notice of the award to the bidder," however,such statement would be inconsequential in a government where the acceptance referred to is yetto meet certain conditions. To hold otherwise is to allow a public officer to execute a bindingcontract that would obligate the government in an amount in excess of the appropriations for the purpose for which the contract was attempted to be made.In the case at bar, there seems to be an oversight of the legal requirements as early as the biddingstage. The first step of a Bids and Awards Committee (BAC) is to determine whether the bidscomply with the requirements. The BAC shall rate a bid "passed" only if it complies with all therequirements and the submitted price does not exceed the approved budget for the contract.‖ The SC ruled that PHOTOKINA, though the winning bidder, cannot compel the COMELEC toformalize the contract. Since PHOTOKINA‘s bid is beyond the amount appropriated byCongress for the VRIS Project, the proposed contract is not binding upon the COMELEC and isconsidered void; and that in issuing the questioned preliminary writs of mandatory and prohibitory injunction and in not dismissing Special Civil Action No. Q-01-45405, respondent judge acted with grave abuse of discretion. Petitioners cannot be compelled by a writ ofmandamus to discharge a duty that involves the exercise of judgment and discretion, especiallywhere disbursement of public funds is concerned.



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SENATOR ROBERT S. JAWORSKI, petitioner,vs.PHILIPPINE AMUSEMENT AND GAMING CORPORATION and SPORTS AND

GAMES ENTERTAINMENT CORPORATION, respondents.G.R. No. 144463 January 14, 2004

FACTS:

PAGCOR‘s board of directors approved an instrument denominated as "Grant of Authority andAgreement for the Operation of Sports Betting and Internet Gaming", which granted SAGE theauthority to operate and maintain Sports Betting station in PAGCOR?s casino locations, andInternet Gaming facilities to service local and international bettors, provided that to thesatisfaction of PAGCOR, appropriate safeguards and procedures are established to ensure theintegrity and fairness of the games.Petitioner, in his capacity as member of the Senate and Chairman of the Senate Committee onGames, Amusement and Sports, files the instant petition, praying that the grant of authority by

PAGCOR in favor of SAGE be nullified.

ISSUE:Whether not not respondent PAGCOR‘s legislative franchise includes to operate Internet

gambling.

RULING:

While PAGCOR is allowed under its charter to enter into operator?s and/or managementcontracts, it is not allowed under the same charter to relinquish or share its franchise, much lessgrant a veritable franchise to another entity such as SAGE. PAGCOR can not delegate its powerin view of the legal principle of delegata potestas delegare non potest, inasmuch as there isnothing in the charter to show that it has been expressly authorized to do so. In Lim v.Pacquing,10 the Court clarified that "since ADC has no franchise from Congress to operate the jai-alai, it may not so operate even if it has a license or permit from the City Mayor to operate the jai-alai in the City of Manila." By the same token, SAGE has to obtain a separate legislativefranchise and not "ride on" PAGCOR?s franchise if it were to legally operate on-line Internetgambling.



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RIZALINO, substituted by his heirs, JOSEFINA, ROLANDO and FERNANDO,ERNESTO, LEONORA, BIBIANO, JR., LIBRADO and ENRIQUETA, all surnamed

OESMER, Petitioners, vs. PARAISO DEVELOPMENT CORPORATION, Respondent.G.R. No. 157493 February 5, 2007

FACTS:Petitioner Ernesto to meet with a certain Sotero Lee, President of respondent ParaisoDevelopment Corporation, at Otani Hotel in Manila. The said meeting was for the purpose of brokering the sale of petitioners‘ properties to respondent corporation. A Contract to Sell was drafted. A check in the amount of P100,000.00, payable to Ernesto, wasgiven as option money. Sometime thereafter, Rizalino, Leonora, Bibiano, Jr., and Librado alsosigned the said Contract to Sell. However, two of the brothers, Adolfo and Jesus, did not sign thedocument. However petitioners informed respondent corporation about their intention to rescindthe Contract to Sell and to return the amount of Php 100,000.00. respondent did not respond tothe aforesaid letter. Petitioners, therefore, filed a complaint for Declaration of Nullity or for

Annulment of Option Agreement or Contract to Sell with damages.The RTC rendered its decision in favor to respondent. CA affirmed the decision of RTC withmodification.

ISSUE:

Whether ot not Contract to Sell is void considering that on of the heirs did not sign it asto indicate its consent to be bound by its terms.

RULING:

It is well-settled that contracts are perfected by mere consent, upon the acceptance by theofferee of the offer made by the offeror. From that moment, the parties are bound not only to thefulfillment of what has been expressly stipulated but also to all the consequences which,according to their nature, may be in keeping with good faith, usage and law. To produce acontract, the acceptance must not qualify the terms of the offer. However, the acceptance may beexpress or implied. For a contract to arise, the acceptance must be made known to the offeror.Accordingly, the acceptance can be withdrawn or revoked before it is made known to the offeror.In the case at bar, the Contract to Sell was perfected when the petitioners consented to the sale tothe respondent of their shares in the subject parcels of land by affixing their signatures on thesaid contract. Such signatures show their acceptance of what has been stipulated in the Contractto Sell and such acceptance was made known to respondent corporation when the duplicate copyof the Contract to Sell was returned to the latter bearing petitioners‘ signatures



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HEIRS OF THE LATE SPOUSES AURELIO AND ESPERANZA BALITE petitioners, vsRODRIGO N. LIM, respondent.

G.R. No. 152168 December 10, 2004

FACTS:The spouses Aurelio and Esperanza Balite the owners of the disputed land, located at

Nothern Samar.Aurelio died intestate, Esperanza and their children became co-owners of the said

property. The said property remained undivided.Esperanza became ill and decided to sell the property without informing the other

children of the said sale to Rodrigo Lim, only Antonio and Cristeta knew of the said sale.

ISSUE:

When the other children knew about it, Esperanza signed a letter addressed to Rodrigoinforming the latter that her children did not agree to the sale of the property to him and that shewas withdrawing all her commitments until the validity of the sale is finally resolved.

Whether or not Deed of Absolute Sale is null and void.

RULING:

In the present case, the parties intended to be bound by the Contract, even if it did not reflect theactual purchase price of the property. That the parties intended the agreement to produce legaleffect is revealed by the letter of Esperanza Balite to respondent dated October 23, 1996 and petitioners? admission that there was a partial payment of P320,000 made on the basis of theDeed of Absolute Sale. There was an intention to transfer the ownership of over 10,000 squaremeters of the property . Clear from the letter is the fact that the objections of her children prompted Esperanza to unilaterally withdraw from the transaction.Since the Deed of Absolute Sale was merely relatively simulated, it remains valid andenforceable. All the essential requisites prescribed by law for the validity and perfection ofcontracts are present. However, the parties shall be bound by their real agreement for aconsideration of P1,000,000 as reflected in their Joint Affidavit.The juridical nature of the Contract remained the same. What was concealed was merely theactual price. Where the essential requisites are present and the simulation refers only to thecontent or terms of the contract, the agreement is absolutely binding and enforceable between the parties and their successors in interest.



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ALEJANDRIA PINEDA and SPOUSES ADEODATO DUQUE, JR., and EVANGELINEMARY JANE DUQUE, petitioners,

vs.COURT OF APPEALS and SPOUSES NELSON BAÑEZ and MERCEDES BAÑEZG.R. No. 127094, February 6, 2002

FACTS:

Appellees Nelson Bañez and Mercedes Bañez and the appellees and Alejandria Pineda, togetherwith the latter‘s spouse Alfredo Caldona, executed an ?Agreement to Exchange RealPropertiesIn the agreement, the parties agreed to: 1) exchange their respective properties; 2)Pineda to pay an earnest money in the total amount of $12,000.00 on or before the first week ofFebruary 1983; and 3) to consummate the exchange of properties not later than June 1983. Itappears that the parties undertook to clear the mortgages over their respective properties. At thetime of the execution of the exchange agreement, the White Plains property was mortgaged withthe Government Service Insurance System (GSIS) while the California property had a total

mortgage obligation of $84,000.00In the meantime, the appellees were allowed to occupy or lease to a tenant Pineda?s California property and Pineda was authorized to occupy appellees? White Plains property.unknown to the appellees, Alejandria Pineda and the appellants Adeodato C. Duque, Jr. andEvangeline Mary Jane Duque executed an ?Agreement to Sell? over the White Plains propertywhereby Pineda sold the property to the appellants for the amount of P1,600,000.00A series of communications ensued between the representatives of the appellees and Ms. Pinedawith regards to the status of the exchange agreement which resulted in its rescission for failure ofPineda to clear her mortgage obligation of the California property. Negotiations for the purchaseof the property were held between the appellants and the appellees but the same failed whichresulted in the appellees demanding for the appellants to vacate the property.

ISSUE:

Whether petitioners validly acquired the subject property.

RULING:

The Civil Code provides that in a sale of a parcel of land or any interest therein made through anagent, a special power of attorney is essential.This authority must be in writing, otherwise thesale shall be void. In his testimony, petitioner Adeodato Duque confirmed that at the time he"purchased" respondents‘ property from Pineda, the latter had no Special Power of Authority tosell the property.A special power of attorney is necessary to enter into any contract by which the ownership of animmovable is transmitted or acquired for a valuable consideration. Without an authority inwriting, petitioner Pineda could not validly sell the subject property to petitioners Duque. Hence,any "sale" in favor of petitioners Duque is void.



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EDILBERTO CRUZ and SIMPLICIO CRUZ, petitioners, vs. BANCOM FINANCECORPORATION (NOW UNION BANK OF THE PHILIPPINES), respondent.

397 SCRA 490

FACTS:

Brothers Rev. Fr. Edilberto Cruz and Simplicio Cruz, plaintiffs herein, were the registeredowners of a parcel of agricultural land together with improvements located in BulacanSometime in May 1978, defendant Norma Sulit, after being introduced by Candelaria Sanchez toFr. Cruz, offered to purchase the land. Plaintiffs‘ asking price for the land was P700,000.00, but Norma only had P25,000.00 which Fr. Cruz accepted as earnest money with the agreement thattitles would be transferred to Norma upon payment of the balance of P675,000.00. Norma succeeded in having the plaintiffs execute a document of sale of the land in favor ofCandelaria who would then obtain a bank loan in her name using the plaintiffs‘ land as collateral.On account of Norma‘s failure to pay the amount stipulated in the Special Agreement and hersubsequent disappearance from her usual address, plaintiffs were prompted to file the herein

complaint for the reconveyance of the land.

ISSUE:

Whether or not the Deeds of Sale and Mortgage are valid.

RULING:

Clearly, the Deeds of Sale were executed merely to facilitate the use of the property ascollateral to secure a loan from a bank. Being merely a subterfuge, these agreements could nothave been the source of any consideration for the supposed sales. Indeed, the execution of thetwo documents on the same day sustains the position of petitioners that the Contracts of Salewere absolutely simulated, and that they received no consideration therefor.

The failure of Sulit to take possession of the property purportedly sold to her was a clear badge of simulation that rendered the whole transaction void and without force and effect, pursuant to Article 1409of the Civil Code. The fact that she was able to secure a Certificate ofTitle to the subject property in her name did not vest her with ownership over it. A simulateddeed of sale has no legal effect; consequently any transfer certificate of title (TCT) issued inconsequence thereof should be cancelled. A simulated contract is not a recognized mode ofacquiring ownership.



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MANSUETO CUATON, petitioner,vs. REBECCA SALUD and COURT OF APPEALS (Special Fourteenth Division),

G.R. No. 15838 January 27, 2004

FACTS:Respondent Rebecca Salud, joined by her husband Rolando Salud, instituted a suit forforeclosure of real estate mortgage with damages against petitioner Mansueto Cuaton and hismother, Conchita Cuaton. The trial court rendered a decision declaring the mortgage constitutedon October 31, 1991 as void, because it was executed by Mansueto Cuaton in favor of RebeccaSalud without expressly stating that he was merely acting as a representative of Conchita Cuaton,in whose name the mortgaged lot was titled.The Court of Appeals rendered the assailed decision affirming the judgment of the trial court.

ISSUE:

Whether the 8% and 10% monthly interest rates imposed on the one-million-peso loan obligationof petitioner to respondent Rebecca Salud are valid.

RULING:

Stipulations authorizing iniquitous or unconscionable interests are contrary to morals(contra bonos mores), if not against the law. Under Article 1409 of the Civil Code, thesecontracts are inexistent and void from the beginning. They cannot be ratified nor the right to setup their illegality as a defense be waived.

Moreover, the contention regarding the excessive interest rates cannot be considered asan issue presented for the first time on appeal. The records show that petitioner raised thevalidity of the 10% monthly interest in his answer filed with the trial court. To deprive him of hisright to assail the imposition of excessive interests would be to sacrifice justice to technicality.Furthermore, an appellate court is clothed with ample authority to review rulings even if they arenot assigned as errors. This is especially so if the court finds that their consideration is necessaryin arriving at a just decision of the case before it. We have consistently held that an unassignederror closely related to an error properly assigned, or upon which a determination of the questionraised by the error properly assigned is dependent, will be considered by the appellate courtnotwithstanding the failure to assign it as an error. Since respondents pointed out the matter ofinterest in their Appellants‘ Brief before the Court of Appeals, the fairness of the impositionthereof was opened to further evaluation. The Court therefore is empowered to review the same.



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INFOTECH vs. COMELECJanuary 13, 2004

FACTS:

Before us is a Petition4 under Rule 65 of the Rules of Court, seeking (1) to declare null and voidResolution No. 6074 of the Commission on Elections (Comelec), which awarded "Phase II of theModernization Project of the Commission to Mega Pacific Consortium (MPC);" (2) to enjoin theimplementation of any further contract that may have been entered into by Comelec "either withMega Pacific Consortium and/or Mega Pacific eSolutions, Inc. (MPEI);" and (3) to compelComelec to conduct a re-bidding of the project.Congress passed Republic Act 8046,5 which authorized Comelec to conduct a nationwidedemonstration of a computerized election system and allowed the poll body to pilot-test thesystem in the March 1996 elections in the Autonomous Region in Muslim Mindanao (ARMM).On December 22, 1997, Congress enacted Republic Act 84366 authorizing Comelec to use anautomated election system (AES) for the process of voting, counting votes and

canvassing/consolidating the results of the national and local elections. It also mandated the poll body to acquire automated counting machines (ACMs), computer equipment, devices andmaterials; and to adopt new electoral forms and printing materials.

ISSUE:

Whether the Commission on Elections, the agency vested with the exclusiveconstitutional mandate to oversee elections, gravely abused its discretion when, in the exercise ofits administrative functions, it awarded to MPC the contract for the second phase of thecomprehensive Automated Election System.

RULING:

In the case of a consortium or joint venture desirous of participating in the bidding, itgoes without saying that the Eligibility Envelope would necessarily have to include a copy of the joint venture agreement, the consortium agreement or memorandum of agreement -- or a business plan or some other instrument of similar import -- establishing the due existence,composition and scope of such aggrupation. Otherwise, how would Comelec know who it wasdealing with, and whether these parties are qualified and capable of delivering the products andservices being offered for bidding.

In the instant case, no such instrument was submitted to Comelec during the bidding process. This fact can be conclusively ascertained by scrutinizing the two-inch thick "EligibilityRequirements" file submitted by Comelec last October 9, 2003, in partial compliance with thisCourt?s instructions given during the Oral Argument. This file purports to replicate the eligibilitydocuments originally submitted to Comelec by MPEI allegedly on behalf of MPC, in connectionwith the bidding conducted in March 2003. Included in the file are the incorporation papers andfinancial statements of the members of the supposed consortium and certain certificates, licensesand permits issued to them.However, there is no sign whatsoever of any joint venture agreement, consortium agreement,memorandum of agreement, or business plan executed among the members of the purportedconsortium.Comelec had no basis at all for determining that the alleged consortium really existed and waseligible and qualified, that the arrangements among the members were satisfactory and sufficientto ensure delivery on the Contract and to protect the government‘ interest. Hence, had the proponent MPEI been evaluated based solely on its own experience, financial andoperational track record or lack thereof, it would surely not have qualified and would have beenimmediately considered ineligible to bid, as respondents readily admit.At any rate, it is clear that Comelec gravely abused its discretion in arbitrarily failing to observeits own rules, policies and guidelines with respect to the bidding process, thereby negating a fair,honest and competitive bidding.



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TEDDY G. PABUGAIS v. DAVE P. SAHIJWANI G.R. No. 156846 February 23, 2004

423 SCRA 596

FACTS:

Pursuant to an ―Agreement And Undertaking‖ on December 3, 1993, petitioner Teddy G.Pabugais, in consideration of the amount of P15,487,500.00, agreed to sell to respondent Dave P.Sahijwani a lot containing 1,239 square meters located at Jacaranda Street, North Forbes Park,Makati, Metro Manila. Respondent paid petitioner the amount of P600,000.00 asoption/reservation fee and the balance of P14,887,500.00 to be paid within 60 days from theexecution of the contract, simultaneous with delivery of the owner‘s duplicate TransferCertificate of Title in respondent‘s name the Deed of Absolute Sale; the Certificate of Non -TaxDelinquency on real estate taxes and Clearance on Payment of Association Dues. The partiesfurther agreed that failure on the part of respondent to pay the balance of the purchase priceentitles petitioner to forfeit the P600,000.00 option/reservation fee; while non-delivery by the

latter of the necessary documents obliges him to return to respondent the said option/reservationfee with interest at 18% per annum.

Petitioner failed to deliver the required documents. In compliance with their agreement,he returned to respondent the latter‘s P600,000.00 option/reservation fee by way of Far EastBank & Trust Company Check, which was, however, dishonored.

Petitioner claimed that he twice tendered to respondent, through his counsel, the amountof P672,900.00 (representing the P600,000.00 option/reservation fee plus 18% interest perannum computed from December 3, 1993 to August 3, 1994) in the form of Far East Bank &Trust Company Manager‘s Check No. 088498, dated August 3, 1994, but said counsel refused toaccept the same. On August 11, 1994, petitioner wrote a letter to respondent saying that he isconsigning the amount tendered with the Regional Trial Court of Makati City. On August 15,1994, petitioner filed a complaint for consignation.

Respondent‘s counsel, on the other hand, admitted that his office received petitioner‘sletter dated August 5, 1994, but claimed that no check was appended thereto. He averred thatthere was no valid tender of payment because no check was tendered and the computation of theamount to be tendered was insufficient, because petitioner verbally promised to pay 3% monthlyinterest and 25% attorney‘s fees as penalty for default, in addition to the interest of 18% perannum on the P600,000.00 option/reservation fee.

On November 29, 1996, the trial court rendered a decision declaring the consignationinvalid for failure to prove that petitioner tendered payment to respondent and that the latterrefused to receive the same. Petitioner appealed the decision to the Court of Appeals.Petitioner‘s motion to withdraw the amount consigned was denied by the Court of Appeals andthe decision of the trial court was affirmed.

On a motion for reconsideration, the Court of Appeals declared the consignation as valid in anAmended Decision dated January 16, 2003. It held that the validity of the consignation had theeffect of extinguishing petitioner‘s obligation to return the option/reservation fee to respondent.Hence, petitioner can no longer withdraw the same.

Unfazed, petitioner filed the instant petition for review contending that he can withdraw theamount deposited with the trial court as a matter of right because at the time he moved for thewithdrawal thereof, the Court of Appeals has yet to rule on the consignation‘s validity and therespondent had not yet accepted the same.



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ISSUE:

Whether or not assigning the amount of P672, 900.00 to Atty. De Guzman is prohibited.

RULING:

The amount consigned with the trial court can no longer be withdrawn by petitioner because respondent‘s prayer in his answer that the amount consigned be awarded to him isequivalent to an acceptance of the consignation, which has the effect of extinguishing petitioner‘s obligation.

Moreover, petitioner failed to manifest his intention to comply with the ―Agreement AndUndertaking‖ by delivering the necessary documents and the lot subject of the sale to respondentin exchange for the amount deposited. Withdrawal of the money consigned would enrich petitioner and unjustly prejudice respondent.

The withdrawal of the amount deposited in order to pay attorney‘s fees to petitioner‘scounsel, Atty. De Guzman, Jr., violates Article 1491 of the Civil Code which forbids lawyersfrom acquiring by assignment, property and rights which are the object of any litigation in whichthey may take part by virtue of their profession. Furthermore, Rule 10 of the Canons ofProfessional Ethics provides that ―the lawyer should not purchase any interest in the subjectmatter of the litigation which he is conducting.‖ The assailed transaction falls within the prohibition because the Deed assigning the amount of P672,900.00 to Atty. De Guzman, Jr., as part of his attorney‘s fees was executed during the pendency of this case with the Court ofAppeals. In his Motion to Intervene, Atty. De Guzman, Jr., not only asserted ownership oversaid amount, but likewise prayed that the same be released to him. That petitioner knowinglyand voluntarily assigned the subject amount to his counsel did not remove their agreement withinthe ambit of the prohibitory provisions. To grant the withdrawal would be to sanction a voidcontract.

The instant petition for review was DENIED.



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LIGUEZ VS. COURT OF APPEALS102 PHIL 577

FACTS:

Petitioner filed a complaint for the recovery of parcel of land against the widow and heirsof Salvador Lopez. Petitioner averred that he is the owner of the aforementioned parcel of land pursuant to a Deed of Donation executed in her favor by the late owner, Salvador Lopez. Thedefense interposed that the donation was null and void for having illicit cause or considerationwhich was the petitioner‘s entering into a marital relations with Salvador, a married man, andthat the property had been adjudicated to the appellees as heirs of Salvador Lopez by the Courtof First Instance.

Meanwhile, the Court of Appeals found that the Deed of Donation was prepared by aJustice of Peace and was ratified and signed when petitioner Liquez was still a minor, 16 years ofage. It was the ascertainment of the Court of Appeals that the donated land belonged to the

conjugal partnership of Salvador and his wife and that the Deed of Donation was never recorded.Hence, the Court of Appeals held that the Deed of Donation was inoperative and null and void because the donation was tainted with illegal cause or consideration.

ISSUE:

Whether or not the Deed of Donation is void for having illicit cause or consideration.

RULING:

NO. Under Article 1279 of the Civil Code of 1989, which was the governing law duringthe execution of the Deed of Donation, the liberality of the donor is deemed cover only in thosecontracts that are pure beneficence. In these contracts, the idea of self interest is totally absent inthe part of the transferee. Here, the facts as found demonstrated that in making the donation,Salvador Lopez was not moved exclusively by the desire to benefit the petitioner but also tosecure her cohabiting with him. Petitioner seeks to differentiate between the liberality of Lopezas cause and his desire as a motive. However, motive may be regarded as cause when it predetermined the purpose of the contract. The Court of Appeals rejected the claim of petitioneron the ground on the rule on pari delicto embodied in Article 1912 of the Civil Code. However,this rule cannot be applied in the case because it cannot be said that both parties had equal guiltwhere petitioner was a mere minor when the donation was made and that it was not shown thatshe was fully aware of the terms of the said donation.



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PHILIPPINE BANKING CORPORATION V. LUI SHE,21 SCRA 52

FACTS:

Justina who inherited parcels of land in Manila executed a contract of lease in favor ofWong, covering a portion already leased to him and another portion of the property. The leasewas for 50 years, although the lessee was give the right to withdraw at anytime from theagreement with a stipulated monthly rental.

She executed another contract giving Wong the option to buy the leased premises forP120,000 payable within 10 years at monthly installment of P1,000. The option was conditionedon his obtaining Philippine citizenship, which was then pending. His application fornaturalization was withdrawn when it was discovered that he was a resident of Rizal.

She executed two other contracts one extending the term to 99 years and the term fixing

the term of the option of 50 years. In the two wills, she bade her legatees to respect the contractshe had entered into with Wong, but it appears to have a change of heart in a codicil. Claimingthat the various contracts were made because of her machinations and inducements practiced byhim, she now directed her executor to secure the annulment of the contracts.

The complaint alleged that Wong obtained the contracts through fraud. Wong deniedhaving taken advantage of her trust in order to secure the execution of the contracts on question.He insisted that the various contracts were freely and voluntarily entered into by the parties.

The lower court declared all the contracts null and void with the exception of the first,which is the contract of lease.

ISSUE:

Whether or not the contracts entered into by the parties are void.

RULING:

The contract is void. The Court held the lease and the rest of the contracts were obtainedwith the consent of Justina freely given and voluntarily, hence the claim that the consent wasvitiated due to fraud or machination is bereft of merit. However the contacts are not necessarilyvalid because the Constitution provides that aliens are not allowed to own lands in thePhilippines. The illicit purpose then becomes the illegal causa, rendering the contracts void.

It does not follow from what has been said that because the parties are in pari delicto theywill be left where they are, without relief. For one thing, the original parties who were guilty ofviolation of fundamental charter have died and have since substituted by their administrators towhom it would e unjust to impute their guilt. For another thing, Article 1416 of the Civil Code provides an exception to the pari de licto, that when the agreement is not illegal per se but ismerely prohibited, and the prohibition of the law is designed for the protection of the plaintiff, hemay recover what he has paid or delivered.



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VIGILAR v. AQUINOG.R. No. 180388 ;January 18, 2011

FACTS:

On 19 June 1992, petitioner Angelito M. Twaño, then Officer-in-Charge (OIC)-DistrictEngineer of the Department of Public Works and Highways (DPWH) 2nd Engineering Districtof Pampanga sent an Invitation to Bid to respondent Arnulfo D. Aquino, the owner of A.D.Aquino Construction and Supplies. The bidding was for the construction of a dike by bulldozinga part of the Porac River at Barangay Ascomo-Pulungmasle, Guagua, Pampanga.Subsequently,on 7 July 1992, the project was awarded to respondent, and a "Contract of Agreement" wasthereafter executed between him and concerned petitioners for the amount of PhP1,873,790.69,to cover the project cost.

By 9 July 1992, the project was duly completed by respondent, who was then issued aCertificate of Project Completion dated 16 July 1992. Respondent Aquino, however, claimed

that PhP1,262,696.20 was still due him, but petitioners refused to pay the amount. He thus filed aComplaint for the collection of sum of money with damages before the Regional Trial Court ofGuagua, Pampanga.

Petitioners avers that the complaint was a suit against the state; that respondent failed toexhaust administrative remedies; and that the "Contract of Agreement" covering the project wasvoid for violating Presidential Decree No. 1445, absent the proper appropriation and theCertificate of Availability of Funds.

On 28 November 2003, the lower court ruled in favor of respondent. On appeal, the CAreversed and set aside the decision of the lower court ,disposing that the "CONTRACT

AGREEMENT" entered into between the plaintiff-appellee‘s construction company, which herepresented, and the government, through the Department of Public Works and Highway(DPWH) – Pampanga 2nd Engineering District, is declared null and void ab initio.

ISSUE:

Whether or not the contract agreement is valid, thus making respondent liable.

HELD:

YES. Specifically, C.V. Canchela & Associates is similar to the case at bar, in that the

contracts involved in both cases failed to comply with the relevant provisions of PresidentialDecree No. 1445 and the Revised Administrative Code of 1987. Nevertheless, "the illegality ofthe subject Agreements proceeds, it bears emphasis, from an express declaration or prohibition by law, not from any intrinsic illegality. As such, the Agreements are not illegal per se, and the party claiming there under may recover what had been paid or delivered. The government projectinvolved in this case, the construction of a dike, was completed way back on 9 July 1992. Foralmost two decades, the public and the government benefitted from the work done byrespondent.

Petitioners cannot escape the obligation to compensate respondent for services renderedand work done by invoking the state‘s immunity from suit. This Court has long established thatthe doctrine of governmental immunity from suit cannot serve as an instrument for perpetratingan injustice to a citizen. Justice and equity sternly demand that the State's cloak of invincibilityagainst suit be shred in this particular instance, and that petitioners-contractors be dulycompensated — on the basis of quantum meruit — for construction done on the public workshousing project.



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EPG Construction vs VigilarGR No. 131544. March 16, 2001

FACTS:

In 1983, the Ministry of Human Settlement entered into a Memorandum of Agreement(MOA) with the Ministry of Public Works and Highways, where the latter undertook to developa housing project by the ministry and on the site construct thereon 145 housing units.

By virtue of the MOA, the Ministry of Public Works and Highways forged individualcontracts with herein petitioners EPG Construction Co., Ciper Electrical and Engineering, SeptaConstruction Co., Phil. Plumbing Co., Home Construction Inc., World Builders Inc., GlassWorld Inc., Performance Builders Development Co. and De Leon Araneta Construction Co., forthe construction of the housing units. Under the contracts, the scope of construction and fundingtherefor covered only around ―2/3 of each housing unit.‖ After complying with the terms of saidcontracts, and by reason of the verbal request and assurance of then DPWH Undersecretary Aber

Canlas that additional funds would be available and forthcoming, petitioners agreed to undertakeand perform ―additional constructions‖ for the completion of the housing units, despite theabsence of appropriations and written contracts to cover subsequent expenses for the ―additionalconstructions.‖

Petitioners received payment for what was originally stipulated. However, petitionersdemanded payment for the unpaid balance of P5,918,315.63 constituting payment for theadditional constructions which petitioners argued formed an implied contract. They claimed that payment should be based on the principle of quantum meruit. DPWH Secretary Gregorio Vigilardenied the subject money claims prompting herein petitioners to file before the Regional TrialCourt of Quezon City, Branch 226, a Petition for Mandamus praying for payment.

ISSUE: Are petitioners entitled to payment?

RULING:Although the Court agreed with respondent‘s postulation that the ―implied contracts‖,

which covered the additional constructions, are void, in view of violation of applicable laws,auditing rules and lack of legal requirements, it nonetheless find the instant petition laden withmerit and uphold, in the interest of substantial justice, petitioners-contractors‘ right to becompensated for the "additional constructions" on the public works housing project, applying the principle of quantum meruit.

To begin with, petitioners-contractors assented and agreed to undertake additionalconstructions for the completion of the housing units, believing in good faith and in the interestof the government and, in effect, the public in general, that appropriations to cover the additionalconstructions and completion of the public works housing project would be available andforthcoming. On this particular score, the records reveal that the verbal request and assurance ofthen DPWH Undersecretary Canlas led petitioners-contractors to undertake the completion of thegovernment housing project, despite the absence of covering appropriations, written contracts,and certification of availability of funds, as mandated by law and pertinent auditing rules andissuances. To put it differently, the ―implied contracts,‖ declared void in this case, covered onlythe completion and final phase of construction of the housing units, which structures,concededly, were already existing, albeit not yet finished in their entirety at the time the ―impliedcontracts‖ were entered into between the government and the contractors.



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GOCHAN VS YOUNGGR No. 131889. March 12, 2001

FACTS:

Felix Gochan Sr.‘s daughter, Alice, mother of [herein respondents], inherited 50 shares ofstock in Gochan Realty from the former. Alice died in 1955, leaving the 50 shares to herhusband, John Young, Sr. When their all their children reached the age of majority, John, Sr.requested Gochan Realty to partition the shares of his late wife by issuing the shares of stock to[herein respondents] and cancelling it in his name. Respondent corporation refused. On 1990,John, Sr. died, leaving the shares to the [respondents].

On February 8, 1994, [respondents] Cecilia Gochan Uy and Miguel Uy filed a complaintwith the SEC for issuance of shares of stock to he rightful owners, nullification of shares ofstock, reconveyance of property impressed with rust, accounting, removal of officers anddirectors and damages against petitioners. Petitioners then assert that respondents were not thereal parties in interest and had no capacity to sue, and respondents causes of action had already

been barred by the Statute of limitations.

ISSUE:

Do respondents have legal standing to push through with their complaint?

RULING:

On November 21, 1979, respondents Felix Gochan & Sons Realty Corporation did nothave unrestricted earnings in its books to cover the purchase price of the 208 shares of stock itwas then buying from complainant Cecilia Gochan Uy, thereby rendering said purchase null andvoid ab initio for being violative of the trust fund doctrine and contrary to law, morals, goodcustoms, public order, and public policy.

Thus, Cecilia remains a stockholder of the corporation in view of the nullity of theContract of Sale. Necessarily, petitioner‘s contention that the action has prescribed cannot besustained. Prescription cannot be invoked as a ground if the contract is alleged to be void abinitio. It is axiomatic that the action or defense for the declaration of nullity of a contract doesnot prescribe.

In Section 2 of Rule 87, while permitting an executor or administrator to represent or to bring suits on behalf of the deceased, do not prohibit the heirs from representing the deceased.The heirs can thusly represent Young in the present case.

Given the circumstances, the claim of petitioners was then dismissed and the caseremanded to the RTC for trial.



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FRANCISCO VS HERRERAGR No. 139982. November 21, 2002

FACTS:

Eligio Herrera, Sr., father of the respondent, was the owner of two parcels of land. Attwo incidents on 1991, petitioner bought the two parcels of land for Php1,000,000.00 andPhP750,000.00. Contending that the purchase price was inadequate, the children of Eligio, Sr.,namely, Josefina Cavettany, Eligio Herrera, Jr., and respondent Pastor Herrera tried to negotiatefor an increase of the purchase price. When petitioner refused respondents then filed a complaintfor annulment of sale on the ground that at the time of sale, Eligio Sr., was already afflicted withsenile dementia, characterized by deteriorating mental and physical condition including loss ofmemory. Both the RTC and CA decided in favor of respondent.

ISSUE:

Is the disputed contract void and therefore unenforceable?

RULING:

In the present case, it was established that the vendor Eligio, Sr., entered into anagreement with petitioner, but that the former‘s capacity to consent was vitiated by seniledementia. Hence, the assailed contracts are not void or inexistent per se; rather, these arecontracts that are valid and binding unless annulled through a proper action filed in courtseasonably.

An annullable contract may be rendered perfectly valid by ratification which can beexpress or implied. Implied ratification may take the form of accepting and retaining the benefitof a contract. This is what happened in this case. Respondent negotiated for the increase of the purchase price while receiving the installment payments.

One cannot negotiate for an increase in the price in one breath and in the same breathcontend that the contract of sale is void.



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MENDEZONA VS. OZAMIZGR No. 39752 February 6, 2002

FACTS:

Respondents (Montalvan and Ozamiz) were granted by the court with the guardianship of properties over the person of Carmen Ozamiz. As guardians, they filed the ―inventories andaccounts‖ of Carmen Ozamiz‘s properties, cash, shares of stocks, vehicles and f ixed assets,including a property known as the Lahug property. The sad property is the same propertycovered by the Deed of Absolute Sale executed by Carmen Ozamiz in favor of the petitioners(Mendezona).

Respondents opposed the petitioner‘s claim of ownership of the Lahug property andalleged that the titles issued were defective and illegal. Further, they alleged that at the time ofthe sale Carmen was already ailing and not in full possession of her mental faculties, she wasthen incapacitated to enter into a contract.

ISSUE:

Whether the property in question was sold to the petitioners.

RULING:

It is significant to note that the Deed of Absolute Sale dated April 28, 1989 is a notarizeddocument duly acknowledge before a notary public. As such, it has in its favor the presumptionof regularity, and it carries the evidentiary weight conferred upon it with respect to its dueexecution.

It has been held that a person is not incapacitated to contract merely because of advancedyears or by reason of physical infirmities. The respondents utterly failed to show adequate proofhat at the time of the sale Carmen lost her control of mental facilities. They want to impugn onedocument, the Lahug property, however, there are nine other important documents that weresigned by Carmen either before or after April 28, 1989.

Thus, the said property in question was duly proven to be sold by Carmen Ozamiz to the petitioners Mendezona.



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MANZANILLA VS. CAGR No. L-75342 March 15, 1990

FACTS:

Spouses Manzanilla sold on installment an undivided one-half portion of their residentialhouse and lot. At the time of the sale, the said property was mortgaged to the GovernmentService Insurance System (GSIS), which fact was known to the vendees, spouses Magdaleno andJustina Campo. The Campo spouses took possession of the premises upon payment of the firstinstallment. Some payments were made to petitioners while some were made directly to GSIS.The GSIS filed its application to foreclose the mortgage on the property for failure of theManzanilla spouses to pay their monthly amortizations. The property was sold at public auctionwhere GSIS was the highest bidder. Two months before the expiration of the period to redeem, the Manzanilla spouses executed a Deed of Absolute Sale of the undivided onehalf portion of their property in favor of the Campo spouses. Upon the expiration of the period to

redeem without the Manzanilla spouses exercising their right of redemption, title to the propertywas consolidated in favor of the GSIS and a new title issued in its name. TheManzanilla spouses succeeded in re-acquiring the property from the GSIS. An Absolute Deed ofSale was executed by GSIS in favor of the Manzanilla spouses and a new certificate of title wasissued to them.

The Manzanilla spouses mortgaged the property to the Biñan Rural Bank. Petitioner InesCarpio purchased the property from the Manzanilla spouses and agreed to assume the mortgagein favor of Biñan Rural Bank.

Private respondent Justina Campo registered her adverse claim over the said portion ofland with the Register of Deeds of Quezon City. On the other hand, petitioner Ines Carpio filedan ejectment case against private respondent Justina. Private respondent Justina Campo filed acase for quieting of title against the Manzanilla spouses and Ines Carpio praying for the issuanceto her of a certificate of title over the undivided one-half portion of the property in question.

ISSUE:

Whether petitioners Manzanillas are under any legal duty to reconvey the undivided one-half portion of the property to private respondent Justina Campo.

RULING:

In view of the failure of either the Manzanilla spouses or the Campo spouses to redeemthe property from GSIS, title to the property was consolidated in the name of GSIS. The new titlecancelled the old title in the name of the Manzanilla spouses. GSIS at this point had a clean titlefree from any lien in favor of any person including that of the Campo spouses.

Art. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit ofthe person from whom the property comes. There was no mistake or fraud on the part of petitioners when the subject property was re-acquired from the GSIS. The fact that they previously sold one-half portion thereof has no more significance in this re-acquisition. Privaterespondent's right over the one-half portion was obliterated when absolute ownership and title passed on to the GSIS after the foreclosure sale. The property as held by GSIS had a clean title.The property that was passed on to petitioners retained that quality of title. As regards the rightsof private respondent Ines Carpio, she is a buyer in good faith and for value. There was noshowing that at the time of the sale to her of the subject property, she knew of any lien on the property except the mortgage in favor of the Biñan Rural Bank. No other lien was annotated onthe certificate of title. She is also not required by law to go beyond what appears on the face ofthe title. When there is nothing on the certificate of title to indicate any cloud or vice in theownership of the property or any encumbrances thereon, the purchaser is not to explore furtherthan what the Torrens Title upon its face indicates in quest for any hidden defect or inchoateright thereof. Thus Quieting of title is dismissed.



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RURAL BANK OF PARAÑÀQUE VS REMOLADOGR No. L-62051. March 18, 1985

FACTS:

This case is about the repurchase of mortgage property after the period of redemption andhad expired. Isidra Remolado, 64, a widow, and resident of Makati, Rizal, owned a lot with anarea of 308 square meters, with a bungalow thereon, which was leased to Beatriz Cabagnot. OnApril 17, 1971 she mortgaged it again to petitioner. She eventually secured loans totallingP18,000 (Exh. At D). the loans become overdue. The bank foreclosed the mortagage on July 21,1972 and bought the property at the foreclosure sale for P22,192.70. The one-year period ofredemption was to expire on August 21, 1973.

On August 9, 1973 or 14 days before the expiration of the one-year redemption period,the bank gave her a statement showing that she should pay P25,491.96 for the redemption of the property on August 23. No redemption was made on that date. On September 3, 1973 the bankconsolidated its ownership over the property. Remolado's title was cancelled. Remolado was

offered a period until October 31, 1973 from which she could repurchase the lot. She onlyexercised that option on November 5. Remolado then filed an action for reconveyance which thelower courts granted her.

ISSUE:

Is Remolado entitled to reconveyance?

RULING:

There was no binding agreement for its repurchase. Even on the assumption that the bankshould be bound by its commitment to allow repurchase on or before October 31, 1973, stillRemolado had no cause of action because she did not repurchase the property on that date.

Justice is done according to law. As a rule, equity follows the law. There may be a moralobligation, often regarded as an equitable consideration (meaning compassion), but if there is noenforceable legal duty, the action must fail although the disadvantaged party deservescommiseration or sympathy.

In the instant case, the bank acted within its legal rights when it refused to give Remoladoany extension to repurchase after October 31, 1973. It had given her about two years to liquidateher obligation. She failed to do so. The decision of the CA affirming the decision of the RTC wasreversed.



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COJUANGCO V. REPUBLICGR No. 166859, April 12, 2011

FACTS:

Jacobo Ringor and his wife Gavina sired two children, Juan and and Catalina. Catalina pre-deceased her father, thereby leaving Juan as the lone heir of 3 lots owned by Jacobo. Juanmarried Gavina and sired 7 children with her. One of the children was Jose (the father and predecessors-in-interest of herein petitioners). Jacobo applied for the registration of his landsunder the Torrens system. He filed three land registration cases alone, with his son Juan, or hisgrandson Jose, applying jointly with him. Subsequently, in a Compraventa dated November 3,1928, Jacobo allegedly sold and transferred to Jose his one-half undivided interest in Parcel 1covered by OCT No. 25885. Jacobo's thumbmark appeared on the Compraventa.

During trial, witnesses attested that even after the decisions in the three land registrationcases and the Compraventas, Jacobo remained in possession of the lands and continuedadministering them as he did prior to their registration. According to witness Julio Monsis,

Jacobo did not partition the lands since the latter said that he still needed them. When Jacobodied on June 7, 1935, the lands under the three land registration applications, including thosewhich petitioners sought to partition in their counterclaim before the trial court, remainedundivided. Jose continued to function as administrator over said land and promised to divide itequally/ When he died sometime on 1971, Respondents demanded from Jose's children, herein petitioners, the partition and delivery of their share in the estate left by Jacobo and under Jose'sadministration. The petitioners refused and attempts at amicable settlement failed. On March 27,1973, respondents filed a Complaint for partition and reconveyance

ISSUE:

Is the exercise by Juan and Jose in the form of trust?

RULING:

Express trusts, sometimes referred to as direct trusts, are intentionally created by thedirect and positive acts of the settlor or the trustor by some writing, deed, or will, or oraldeclaration. Contrary to the claim of petitioners, oral testimony is allowed to prove that a trustexists. It is not error for the court to rely on parol evidence, - - i.e., the oral testimonies ofwitnesses Emeteria Ringor, Julio Monsis and Teofilo Abalos - - which the appellate court alsorelied on to arrive at the conclusion that an express trust exists.

Contrary to the claim of petitioners, oral testimony is allowed to prove that a trust exists.It is not error for the court to rely on parol evidence, - - i.e., the oral testimonies of witnessesEmeteria Ringor, Julio Monsis and Teofilo Abalos - - which the appellate court also relied on toarrive at the conclusion that an express trust exists.

A trustee who obtains a Torrens title over a property held in trust for him by anothercannot repudiate the trust by relying on the registration. A Torrens Certificate of Title in Jose'sname did not vest ownership of the land upon him. The Torrens system does not create or vesttitle. It only confirms and records title already existing and vested. The SC upheld the decision ofthe lower courts in favoring the respondents‘ claims.



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RINGOR VS RINGORGR No. 147863. August 13, 2004

FACTS:

Jacobo Ringor and his wife Gavina sired two children, Juan and and Catalina. Catalina pre-deceased her father, thereby leaving Juan as the lone heir of 3 lots owned by Jacobo. Juanmarried Gavina and sired 7 children with her. One of the children was Jose (the father and predecessors-in-interest of herein petitioners). Jacobo applied for the registration of his landsunder the Torrens system. He filed three land registration cases alone, with his son Juan, or hisgrandson Jose, applying jointly with him. Subsequently, in a Compraventa dated November 3,1928, Jacobo allegedly sold and transferred to Jose his one-half undivided interest in Parcel 1covered by OCT No. 25885. Jacobo's thumbmark appeared on the Compraventa.

During trial, witnesses attested that even after the decisions in the three land registrationcases and the Compraventas, Jacobo remained in possession of the lands and continuedadministering them as he did prior to their registration. According to witness Julio Monsis,

Jacobo did not partition the lands since the latter said that he still needed them. When Jacobodied on June 7, 1935, the lands under the three land registration applications, including thosewhich petitioners sought to partition in their counterclaim before the trial court, remainedundivided. Jose continued to function as administrator over said land and promised to divide itequally/ When he died sometime on 1971, Respondents demanded from Jose's children, herein petitioners, the partition and delivery of their share in the estate left by Jacobo and under Jose'sadministration. The petitioners refused and attempts at amicable settlement failed. On March 27,1973, respondents filed a Complaint for partition and reconveyance

ISSUE:

Is the exercise by Juan and Jose in the form of trust?

RULING:

Express trusts, sometimes referred to as direct trusts, are intentionally created by thedirect and positive acts of the settlor or the trustor by some writing, deed, or will, or oraldeclaration. Contrary to the claim of petitioners, oral testimony is allowed to prove that a trustexists. It is not error for the court to rely on parol evidence, - - i.e., the oral testimonies ofwitnesses Emeteria Ringor, Julio Monsis and Teofilo Abalos - - which the appellate court alsorelied on to arrive at the conclusion that an express trust exists.

Contrary to the claim of petitioners, oral testimony is allowed to prove that a trust exists.It is not error for the court to rely on parol evidence, - - i.e., the oral testimonies of witnessesEmeteria Ringor, Julio Monsis and Teofilo Abalos - - which the appellate court also relied on toarrive at the conclusion that an express trust exists.

A trustee who obtains a Torrens title over a property held in trust for him by anothercannot repudiate the trust by relying on the registration. A Torrens Certificate of Title in Jose'sname did not vest ownership of the land upon him. The Torrens system does not create or vesttitle. It only confirms and records title already existing and vested. The SC upheld the decision ofthe lower courts in favoring the respondents‘ claims.



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SALVADOR VS. CA313 PHIL 369(1995)

Facts:

On November 9, 1991, at around 11:00 o‘clock in the evening, along the MacArthurHighway in Valenzuela, Metro Manila, the Suzuki Supercarry Mini-van driven by privaterespondent Sameul King Sagaral III collided with a passenger bus onwed and operated by petitioner Five Star Bus Co. and driven by co-petitioner Ignacio Torres.

Private respondent Sagaral filed a civil action for damges against petitioner.To simplify the proceedings due to the various motions filed by petitioners, Judge

Bautista cancelled the 8 August 1996 hearing and reset it to 20 August 1996. He also set forhearing petitioner‘s motion for reconsideration on 20 August 1996.

The hearing set for 20 August 1996 was cancelled and the trial court on that day issuedinstead its order denying petitioner‘s motion for reconsideration of its order dated 16 July 1996which considered the case submitted for resolution. They applead to CA but the same was

dismissed.

Issue:

Whether or not appellate court erred in affirming the order of the trial court.

Held:

A review of the records shows that the trial court had scheduled a total six hearing datesfor the prosecution of evidence. From those repeated resetting, it can be gleaned that the delay inthe proceedings was largely, if not mainly, due to petitioners. Thus there could be no grave abuseof discretion when the trial court finally ordered petitioners‘ right to present evidence as waivedto put an end to their footdragging. Indeed, it is never too often to say that justice delayed is justice denied.



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SPOUSES RICARDO AND MILAGROS HUANG, petitioners,vs. COURT OF APPELAS, JUDGE, PEDRO N. LAGGUI, Presiding Judge, RTC, Makati,

Br. 60, and SPOUSES DOLORES AND ANICETO SANDOVAL,G.R. No. 108525 September 13, 1994

FACTS:Respondent Dolores Sandoval purchased Lot 21 and registered it in her name DasmariñasVillage, Makati. She also purchased the adjacent lot, Lot 20, but heading the advice of Milagros,the deed of sale was placed in the name of Ricardo and Registered in his name under TCT No.204783. Thereafter, Dolores constructed a residential house onLot 21. Ricardo also requested her permission to construct a small residential house on Lot 20 to which she agreed inasmuch as shewas then the one paying for apartment rentals of the Huang spouses. She also allowed Ricardo tomortgage Lot 20 to the Social Security System to secure the payment of his loan of P19,200.00to be spent in putting up the house. However, she actualy financed the construction of the house,the swimming pool and the fence thereon on the understanding that the Huang spouses wouldmerely hold title in trust for her beneficial interest.

To protect her rights and interests as the lawful owner of Lot 20 and its improvements,Dolores requested the Huangs to execute in her favor a deed of absolute sale with assumption ofmortgage over the property. The letter obliged.

The Huang spouses leased the house to Deltron-Sprague Electronics Corporation for itsvarious executives as official quarters without first securing the permission of Dolores. Dolorestolerated the lease of the property as she did not need it at that time. But, after sometime, thelessees started prohibiting the Sandoval family from using the swimming pool and the Huangsthen began challenging the Sandovals' ownership of the property.

Ricardo and Milagros Huang filed a complaint against the spouses Dolores and AnicetoSandoval seeking the nullity of the deed of sale with assumption of mortgage and/or quieting oftitle to Lot 20. They alleged that the Sandovals made them sign blank papers which turned out to be a deed of sale with assumption of mortgage over Lot 20.

ISSUE:

Whether or not the Court of Appeals erred in stating that there was an implied trust between them and Dolores is not supported by evidence. The exhaustive decision of the trialcourt based as it is on a painstaking review of the entire records deserves our affirmance. Indeed,we find no reason to disturb the factual conclusions therein.

HELD:

Trust is a fiduciary relationship with respect to property which involves the existence ofequitable duties imposed upon the holder of the title to the property to deal with it for the benefitof another. A person who establishes a trust is called the trustor; one in whom confidence isreposed as regards property for the benefit of another person is known as the trustee; and the person for whose benefit the trust has been created is referred to as the beneficiary or cestui quetrust.

In the present case, Dolores provided the money for the purchase of Lot 20 but thecorresponding deed of sale and transfer certificate of title were placed in the name of RicardoHuang because she was advised that the subdivision owner prohibited the acquisition of two (2)lots by a single individual. Guided by the foregoing definitions, we are in conformity with thecommon finding of the trial court and respondent court that a resulting trust was created. Ricardo became the trustee of Lot 20 and its improvements for the benefit of Dolores as owner. The pertinent law is Art. 1448 of the New Civil Code which provides that there is an implied trustwhen property is sold and the legal estate is granted to one party but the price is paid by anotherfor the purpose of having the beneficial interest for the property. A resulting trust arises becauseof the presumption that he who pays for a thing intends a beneficial interest therein for himself.Wherefor the petition is denied.



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VDA. DE ESCONDE VS. COURT OF APPEALSG.R. No. 103635. February 1, 1996

FACTS:Petitioner Catalina Vda. De Esconde received two transfer of certificates of land from the

partition of the estate of the brother of her deceased husband. The partition was made in 1947,thus, due to the minority of her children of the petitioner except Constancia, she divided the land,where the second title containing CTC 1700 (547 SQ.M) was given exclusively to PedroEsconde while the first lot containing CTC 1208 (20, 285 SQ.M) was given to the co petitionersBenjamin, Elenita, and Constancia.

However, when lot 1700 was given to Pedro Esconde, his brother Benjamin, hasintroduced improvements on a portion of the said lot owned by Pedro but the latter hasconstructed fences over the property. Benjamin noticed that the lot was named only to his brother

Pedro but the former believed that all of them as children of Catalina have the share to the lot.The action for reconveyance of the land was made on June 29, 1987 more than 30 years after the partition.

ISSUE:

Whether the reconveyance of the land has already prescribed.

RULING:

Yes. The action over immovable properties prescribes in thirty (30) years if the propertywas held by trust in bad faith. Thus, in this case, the action prescribed in 1977, thirty (30) yearsafter the partition. The action was already because there was a document of partition stating thetransfer of the certificate of title to Pedro Esconde, in which, the property was not given in trustto Pedro but as the exclusive owner of the lot. However, he shall indemnify his brother Benjaminfor the improvement the latter has introduced to the land.



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ANCOG VS. COURT OF APPEALSG.R. No.112260. June 30, 1997

FACTS:Petitioners Jovita Yap- Ancog and Gregorio Yap, Jr. sought for the invalidation of the

extrajudicial settlement made by their mother for the land the petitioner Jovita was residing. Hermother set the land as a security for a loan. This action was made when their mother planned tosell the property which was still a part of the conjugal property of their parents.

However, Rosario Diez, their mother, contended that petitioners have waived their rightsover the lot because petitioner Jovita accepted the fact that she was renting the lot in favor of hermother. However, Gregorio Yap, Jr. was still minor when the extrajudicial settlement was made.

ISSUE:

Whether petitioners are entitled to the subject lot.

RULING:

With respect to petitioner Jovita Yap Ancog, she is not entitled to the lot because shealready waived her right of possession over the property when she rented the lot and thus,secured the lot for a loan to the Development Bank of the Philippines. Furthermore, she can notalleged that the settlement was void because she was a graduate of law and she knew the proper procedure for the ownership of the lot.

However, Gregorio Yap, Jr. was not affected by laches and prescription of claiming hisrights over the partition of the lot because he was a minor during the creation of the extrajudicialsettlement.



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RODOLFO MORALES, represented by his heirs, and PRISCILA MORALES vs. COURTOF APPEALS, RANULFO ORTIZ, JR., and ERLINDA ORTIZ

G.R. No. 117228 1997 Jun 1

FACTS:

The Plaintiffs are the absolute and exclusive owners of the premises in question having purchased the same from Celso Avelino, evidenced by a Deed of Absolute Sale. They latercaused the transfer of its tax declaration in the name of the female plaintiff and paid the realtytaxes thereon.

Celso Avelino (Plaintiffs' predecessor in interest) purchased the land in questionconsisting of two adjoining parcels while he was still a bachelor and the City Fiscal of CalbayogCity from Alejandra Mendiola and Celita Bartolome, through a 'Escritura de Venta'. After the purchase, he caused the transfer of the tax declarations of the two parcels in his name as well asconsolidated into one the two tax declarations in his name. With the knowledge of the Intervenor

and the defendant, Celso Avelino caused the survey of the premises in question, in his name, bythe Bureau of Lands. He also built his residential house therein.

When the two-storey residential house was finished, he took his parents, RosendoAvelino and Juana Ricaforte, and his sister, Aurea, who took care of the couple, to live thereuntil their deaths. He also declared this residential house in his tax declaration to the premises inquestion and paid the corresponding realty taxes, keeping intact the receipts which he comes toget or Aurea would go to Cebu to give it to him.

After being the City Fiscal of Calbayog, his sister, Aurea, took care of the premises inquestion. While he was already in Cebu, the defendant, without the knowledge and consent ofthe former, constructed a small beauty shop in the premises in question.

Inasmuch as the Plaintiffs are the purchasers of the other real properties of CelsoAvelino, one of which is at Acedillo street, after they were offered by Celso Avelino to buy the premises in question, they examined the premises in question and talked with the defendantabout that fact, the latter encouraged them to purchase the premises in question rather than the property going to somebody else they do not know and that he will vacate the premises as soonas his uncle will notify him to do so. Thus, they paid the purchase price was executed in theirfavor. However, despite due notice from his uncle to vacate the premises in question, thedefendant refused to vacate or demolish the beauty shop unless he is reimbursed P35,000.00 forit although it was valued at less than P5,000.00. So, the Plaintiffs demanded, orally and inwriting to vacate the premises. The defendant refused.

ISSUES:

1. Whether or not Celso Avelino purchase the land in question as a mere trustee for his parents and siblings, and is the property he acquired a trust property

2. Whether petitioners discharged their burden to prove the existence of an implied trust.

RULING:

A trust is the legal relationship between one person having an equitable ownership in property and another person owning the legal title to such property, the equitable ownership ofthe former entitling him to the performance of certain duties and the exercise of certain powers by the latter.

Trusts are either express or implied. Express trusts are created by the intention of thetrustor or of the parties, while implied trusts come into being by operation of law, either through



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implication of an intention to create a trust as a matter of law or through the imposition of thetrust irrespective of, and even contrary to, any such intention.

In turn, implied trusts are either resulting or constructive trusts. Resulting trusts are basedon the equitable doctrine that valuable consideration and not legal title determines the equitable

title or interest and are presumed always to have been contemplated by the parties. They arisefrom the nature or circumstances of the consideration involved in a transaction whereby one person thereby becomes invested with legal title but is obligated in equity to hold his legal titlefor the benefit of another. On the other hand, constructive trusts are created by the constructionof equity in order to satisfy the demands of justice and prevent unjust enrichment. They arisecontrary to intention against one who, by fraud, duress or abuse of confidence, obtains or holdsthe legal right to property which he ought not, in equity and good conscience, to hold.

Based on Art. 1448 of the New Civil Code, there is an implied trust when property issold, and the legal estate is granted to one party but the price is paid by another for the purposeof having the beneficial interest of the property. The former is the trustee, while the latter is the

beneficiary. However, if the person to whom the title is conveyed is a child, legitimate orillegitimate, of the one paying the price of the sale, no trust is implied by law, it being disputably presumed that there is a gift in favor of the child.

There are recognized exceptions to the establishment of an implied resulting trust. Thefirst is stated in the last part of Article 1448 itself. Another exception is that in which an actualcontrary intention is proved. Also where the purchase is made in violation of an existing statuteand in evasion of its express provision, no trust can result in favor of the party who is guilty ofthe fraud.

As a rule, the burden of proving the existence of a trust is on the party asserting itsexistence, and such proof must be clear and satisfactorily show the existence of the trust and itselements. While implied trusts may be proved by oral evidence, the evidence must betrustworthy and received by the courts with extreme caution, and should not be made to rest onloose, equivocal or indefinite declarations. Trustworthy evidence is required because oralevidence can easily be fabricated.

In the case, petitioners' theory is that Rosendo Avelino owned the money for the purchaseof the property and he requested Celso, his son, to buy the property allegedly in trust for theformer. The fact remains, however, that title to the property was conveyed to Celso.Accordingly, the situation is governed by or falls within the exception under the third sentence ofArticle 1448. The preponderance of evidence, as found by the trial court and affirmed by theCourt of Appeals, established positive acts of Celso Avelino indicating, without doubt, that heconsidered the property he purchased from the Mendiolas as his exclusive property. He had itstax declaration transferred in his name, caused the property surveyed for him by the Bureau ofLands, and faithfully paid the realty taxes. Finally, he sold the property to private respondents.

2. The petitioners did not discharged their burden to prove the existence of an impliedtrust. Priscila's justification for her and her sisters' failure to assert co-ownership of the property based on the theory of implied trust is not tenable. Celso Avelino did not have actual possessionof the property because he "was away from Calbayog continuously for more than 30 years untilhe died on October 31, 1987, and the the tax declarations of the property were in Celso's nameand the latter paid the realty taxes thereon, there existed no valid and cogent reason why Priscilaand her sisters did not do anything to have their respective shares in the property conveyed tothem after the death of Rosendo Avelino in 1980. Neither is there any evidence that during hislifetime, Rosendo demanded from Celso that the latter convey the land to the former, whichRosendo could have done after Juana's death on 31 May 1965. The omission was mute andeloquent proof of Rosendo's recognition that Celso was the real buyer of the property in 1948and the absolute and exclusive owner thereof.



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TALA REALTY SERVICES CORPORATION vs. BANCO FILIPINO SAVINGS ANDMORTGAGE BANK

G.R. No. 137533. November 22, 2002

FACTS:

Petitioner Tala Realty Services Corporation alleges that it is the absolute owner of nine parcels of land and their improvements by virtue of separate Deeds of Absolute Sale executed between Tala and the respondent Banco Filipino Savings and Mortgage Bank on August 25,1981. The Bulacan property is the subject matter of the case. Thereafter, Tala and the Bankentered into separate lease contracts over the nine properties. The contracts had the same formand terms, except for the description of the property and the amount of the monthly rentals. Thecontracts provided for twenty-year lease periods renewable for another twenty years at the optionof the Bank. The monthly rental for the Bulacan property was P9,800.00.

Later that same day, the parties revised the nine lease contracts. The terms of the lease wereshortened to eleven years renewable for a period of nine years ―at the option of the lessee under

terms and conditions mutually agreeable to both parties‖, but the monthly rental for the Bulacan property remained P9,800.00.Almost eleven years after the execution of the nine lease contracts, Tala‘s director,

Elizabeth H. Palma, wrote to the Bank reminding the latter that the contracts were about toexpire on August 31, 1992, and that the Bank had earlier signified its interest to renew the leasecontracts. Meantime, Tala would lease the properties to the Bank on a month-to-month basisuntil the agreement was finalized. On January 20, 1993, the Bank requested Tala to send itsrepresentative to the Bank‘s office to negotiate the renewal of the lease. Tala‘s director,Elizabeth Palma, negotiated the renewal and submitted a proposal for increased rental. Talareiterated the increased rental which was agreed upon in the previous negotiation. Thus, the newmonthly rental rate for the Bulacan property was P31,800.00.

However, for several months from the time of negotiation, the Bank failed to take actionon Tala‘s proposed terms for the renewal of the lease contract. Tala also informed the Bank thatsince it had been ten months since the expiration of the lease contracts in August 1992 and theBank had not taken any definite action to renew the contracts despite being furnished copies ofthe same in December 1992, Tala declared itself free to ―lease, dispose, sell and/or in any wayalienate the bank branch sites subject of the lease agreement.‖ However, the Bank clarified that itis the one which had the option to renew the lease and that it had communicated to Tala it wasexercising its option to do so.

From the time the lease contract over the Bulacan property expired in August 1992 untilMarch 1994, the Bank continued to occupy the subject Bulacan property. It paid Tala monthlyrentals at the old rate of P9,800.00 from September 1, 1992 until March 1994, but refused to paythe P22,000.00 difference between the old monthly rate and the new rate of P31,800.00.Beginning April 1994 until the filing of the, the Bank did not pay any rent at all. Nor did it paythe goodwill money and deposit Tala required for the renewal of the lease.

On April 14, 1994, Tala wrote to the Bank demanding payment of the latter‘s outstandingobligations over the Bulacan property, consisting of unpaid rental adjustment, deposit, andgoodwill money. It also informed the Bank that at the end of the month, the month-to-monthlease would no longer be renewed, thus, it should vacate the premises by that time, otherwise, petitioner would resort to legal action. Still, the Bank refused to pay its outstanding obligations, prompting Tala‘s lawyer to demand the latter to vacate the premises and to pay its outstandingobligation within five days from receipt of the letter, otherwise a legal action would be filedagainst it. The Bank still did not comply with Tala‘s demands, the latter filed complaints forejectment and/or unlawful detainer.

The Bank‘s liquidator, on he other hand asserts that the amended 11-year lease contracts ofAugust 25, 1981 provided for the payment of security deposits and not advance rentals so thatsaid payment could not be used to cover unpaid rentals during the period that the Bank wasclosed and under receivership and liquidation. According to Tala‘s lawyer, the only time thatsaid security deposits may be applied to unpaid rents is when the rentals for the last year of thelease contracts were not paid, but the lease contracts were still due to expire in 1992. The Bank,



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therefore, could not apply the security deposits to the payment of rentals and thus had to pay itsaccrued rentals.

The MTC ruled in favor of the Bank. Based from the evidences, defendant has a betterright of possession over the subject property on the basis of a Contract of Lease. It cannot be saidthat the defendant failed to comply with the terms and conditions of the said Contract of Lease

because payment was made to the plaintiff on December 18, 1981 P487,500.00 as advancerentals, to be applied to the rentals due from the eleventh through the twentieth years of the leaseor from 1992 through the year 2001. Thus, the RTC dismissed petitioner‘s appeal of the decisionof the MTC for lack of merit. On appeal to the Court of Appeals, the decision of the RTC ofMalolos was affirmed.

ISSUE:

Whether or not the implied trust created under the obligation was valid.

RULING:

Tala‘s right to lease the property to the Bank proceeds from its (Tala‘s) claim of ownershipof the property based on a contract of sale executed between it and the Bank on August 25, 1981.The Bank, however, disputes Tala‘s ownership ―in fee simple‖ as stated in its 20-year leasecontract with Tala as it (the Bank) alleges that there is an implied trust relationship between theBank as trustor and beneficiary and Tala as trustee. Pursuant to this implied trust, the Bank inApril 1994 demanded Tala to perform its obligation as trustee and return the disputed property tothe Bank as trustor and beneficiary. The Bank is of the view, therefore, that since it had alreadysought enforcement of the implied trust and reconveyance of the subject property, the Bank hadthe right to its possession and Tala did not have a right to eject it from the property.

The Bank alleged that the sale and twenty-year lease of the disputed property were part of alarger implied trust ―warehousing agreement.‖ Concomitant with the Court‘s factual finding thatthe 20-year contract governs the relations between the parties, the court finds the Bank‘sallegation of circumstances surrounding its execution worthy of credence; the Bank and Talaentered into contracts of sale and lease back of the disputed property and created an implied trust―warehousing agreement‖ for the reconveyance of the property. However, the implied trust isinexistent and void for being contrary to law.

The Bank claims to be both the trustor and beneficiary while Tala is the trustee. It allegesthe existence of an implied trust between it and Tala, relies on Articles 1448 and 1453 of the New Civil Code. However, an implied trust could not have been formed between the Bank andTala as the Court has held that ―where the purchase is made in violation of an existing statute andin evasion of its express provision, no trust can result in favor of the party who is guilty of thefraud.‖

The Bank cannot use the defense of nor seek enforcement of its alleged implied trust withTala since its purpose was contrary to law. As admitted by the Bank, it ―warehoused‖ its branchsite holdings to Tala to enable it to pursue its expansion program and purchase new branch sitesincluding its main branch in Makati, and at the same time avoid the real property holdings limitunder Sections 25(a) and 34 of the General Banking Act which it had already reached. The Bankstated in its Memorandum that ―the (n)ew branch sites which the Respondent (Bank) will bedisqualified from buying, by reason of the aforecited limitations under existing banking laws andregulations, will be acquired for it by the Petitioner (Tala) which will forthwith lease them to theRespondent (Bank).‖ The Bank also admitted that the agreement that the branch sites ―will bereturned to the bank anytime at its pleasure at the same transfer price‖ was differently stated inthe lease contracts as a ―first preference to buy‖ because the Bank was apprehensive that theagreement to return property, ―if spelled out as-is in the documents, might provide basis for theCentral Bank to question the sale and simultaneous lease back of the branch sites as simulatedand accordingly, derail the expansion program of the Respondent.‖

Clearly, the Bank was well aware of the limitations on its real estate holdings under theGeneral Banking Act and that its ―warehousing agreement‖ with Tala was a scheme tocircumvent the limitation. Thus, the Bank opted not to put the agreement in writing and call aspade a spade, but instead phrased its right to reconveyance of the subject property at any time as



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a ―first preference to buy‖ at the ―same transfer price.‖ This arrangement which the Bank claimsto be an implied trust is contrary to law. Thus, while the sale and lease of the subject propertygenuine and binding upon the parties, the implied trust cannot be enforced even assuming the parties intended to create it. The Bank cannot thus demand reconveyance of the property basedon its alleged implied trust relationship with Tala.

WHEREFORE, the petition is dismissed.



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THE HEIRS OF PEDRO MEDINA, represented by MARGARITA MEDINA vs. THEHON. COURT OF APPEALS, RESTITUTA ZURBITO VDA. DE MEDINA and ANDRES

NAVARRO, JR.G.R. No. L-26107 1981 November 27

FACTS:On March 6, 1957, petitioners filed the complaint in the trial court seeking to recover

from respondents a parcel of land situated in the sitio of Oac, municipality of Milagros, provinceof Masbate, containing an area of 321.1156 hectares and praying that respondents be ordered todeliver to them possession and ownership thereof with accounting, damages and costs andlitigation expenses.

Complaint alleged that petitioner Margarita Medina as plaintiff inherited with her sisterAna Medina the said parcel of land from their father Pedro Medina. Upon their father's death, sheand her sister Ana Medina being then minors were placed under the care and custody of the

spouses Sotero Medina and Restituta Zurbito, as guardians of their persons and property.

The land in dispute was placed under the management of Sotero Medina as administratorthereof, and upon Sotero's death, under the management of his widow, Restituta Zurbito.Complainant later discovered that the land in question was surreptitiously declared for taxation purposes in the name of Andres Navarro, Jr., grandson of Restituta Zurbito, however,respondents as defendants had without color of title denied petitioners' ownership and insteadhad claimed ownership thereof since the year 1948 and exercised acts of possession andownership thereon to the exclusion of petitioners.

Petitioners demanded the respondents to vacate the premises and deliver possession andownership thereof, but the latter failed and refused to do so. On the other hand, respondentAndres Navarro, Jr. had excavated soil from the land in question and sold the same to theProvincial Government of Masbate without the knowledge and consent of petitioners andappropriated the proceeds thereof to his personal benefit to the damage and prejudice of the plaintiff. Respondent Restituta Zurbito Vda. de Medina never rendered an accounting of theincome of the property in question in spite of their repeated demands and instead appropriated allthe income therefrom to her personal use and benefit. However, the other party states otherwise.

In its decision, the court declared petitioner Margarita Medina with her co-heirs as thelawful owners of the land in question and ordered respondents to deliver unto them the "tituloreal No. 349581" and to restore to them the actual possession thereof; and also ordered them to pay them certain amounts representing the produce of the land. Upon appeal, respondent Courtof Appeals reversed the trial court's decision sustaining respondents' defenses of prescription ofaction and acquisitive prescription, ordered the dismissal of the complaint.

ISSUES:

1. Whether or not petitioners' action for recovery thereof has been barred by prescription.2. Whether or not an express trust over the property in litigation has been constituted by

petitioners' father Pedro Medina, upon his brother Sotero and Sotero's wife Restituta Zurbito forthe benefit of his children, petitioner Margarita Medina and her deceased sister Ana Medina andthe latter's heirs.

RULING:

1. Petitioners' cause of action had prescribed upon the lapse of the ten-year period ofacquisitive prescription provided by the then applicable statute for unregistered lands such as theland herein involved.



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As found by the Court of Appeals, the land was sold to Sotero Medina on June 29, 1924from which date Sotero and his wife took open, public, continuous and adverse possession of theland in the concept of owner. In 1957 when the present action was filed, thirty-three years, muchmore than the 10-year statutory period for acquisitive prescription, had already elapsed.

The appellate court further held that petitioners' action to recover was likewise time- barred, pointing out that "the ten-year period under the statute of limitation within which plaintiffs could file an action for recovery of real property commenced to run in 1933 when plaintiff Margarita Medina was informed that the land in dispute belonged to her father PedroMedina, for in that year she could have brought an action for reconveyance. The period of prescription commences to run from the day the action may be brought (Article 1150, Civil Codeof the Philippines), and in an action based on fraud, as is the basis of the present action, the period of prescription begins from the discovery of the fraud the reasons a party might have hadfor not immediately taking judicial action is immaterial and does not stop the running of the period.

2. A property held in trust cannot be acquired by prescription. Section 38 of Act 190 provides that the law of prescription does not apply `in the case of continuing and subsistingtrust.' However,if the prescriptibility of an action for reconveyance is based on constructive trust, prescription may supervene in an implied trust.

Therefore, the appellate court correctly held that the facts and evidence of record do notsupport petitioners' claim of the creation of an express trust and imprescriptibility of their claim.Although no particular words are required for the creation of an express trust, a clear intention tocreate a trust must be shown, and the proof of fiduciary relationship must be clear andconvincing.

In the case, if an express trust had been constituted upon the occupancy of the property by respondents in favor of the petitioners, prescription of action would not lie, the basis of therule being that the possession of the trustee is not adverse to the beneficiary. But if there weremerely a constructive or implied trust, the action to recover may be barred by prescription ofaction or by acquisitive prescription by virtue of respondents' continuous and adverse possessionof the property in the concept of owner-buyer for thirty-three years.

Express trusts are those intentionally created by the direct and positive act of the trustor, by some writing, deed or will, or oral declaration. The creation of an express trust must bemanifested with reasonable certainty and cannot be inferred from loose and vague declarations orfrom ambiguous circumstances susceptible of other interpretations. Nowhere in the record isthere any evidence, and the plaintiffs do not even raise the pretention, that the original owner ofthe property Pedro Medina, father of plaintiff Margarita Medina, appointed, designated orconstituted Sotero Medina (the husband of defendant Restituta Zurbito Medina) as the trustee ofthe land in dispute. Thus, it is concluded that there was realy no express trust.

The circumstances presented by the respondents do not make out the creation of anexpress trust. Respondents' possession of the Spanish title issued in the late Pedro Medina's namemay just be the consequence of the sale of the land by Narciso (to whom it had been adjudicatedin the partition) to the spouses Sotero Medina and Restituta Zurbito on June 29, 1924 and is byno means an evidence of an express trust created for the benefit of petitioners. Spanish titles aredefeasible, and although evidences of ownership may be lost through prescription. Neither is thedeed of partition (which apparently excluded Pedro Medina) entered into earlier any indicationof an express creation of a trust. In fact, the documents are adverse to petitioners' cause, and areevidences of transfer of ownership of the land from one owner/owners to another or others andthey in fact negate the creation or existence of an express trust.

Neither does the testimony of Sotero's widow, Restituta Zurbito, to the effect that herhusband and then later she herself "administered" the land support petitioners' claim of an



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express trust. There is no showing that the term "administration" as used by said respondent inher testimony is by reason of an appointment as such on behalf of another owner or beneficiary,such as to support the existence of an express trust. On the contrary, it appears clear from thecontext of her testimony that her use of the term "administer" was in the concept of an owner- buyer "administering" and managing his/her property.

Thus, the appealed decision is affirmed.



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FILIPINAS PORT SERVICES vs. GOG.R. No. 161886, March 16, 2007

FACTS:

The case is actually an intra-corporate dispute involving Filport, a domestic corporationengaged in stevedoring services with principal office in Davao City. It was initially institutedwith the Securities and Exchange Commission (SEC) where the case hibernated and remainedunresolved for several years until it was overtaken by the enactment into law, on 19 July 2000, ofRepublic Act (R.A.) No. 8799, otherwise known as the Securities Regulation Code. From theSEC and consistent with R.A. No. 8799, the case was transferred to the RTC of Manila, Branch14, sitting as a corporate court. Subsequently, upon respondents‘ motion, the case eventuallylanded at the RTC of Davao City where it was docketed as Civil Case No. 28,552-2001. RTC-Davao City, Branch 10, ruled in favor of the petitioners prompting respondents to go to the CAin CA-G.R. CV No. 73827.

In the same petition, docketed as SEC Case No. 06-93-4491, Cruz alleged that despitedemands made upon the respondent members of the board of directors to desist from creating the positions in question and to account for the amounts incurred in creating the same, the demandswere unheeded. Cruz thus prayed that the respondent members of the board of directors be madeto pay Filport, jointly and severally, the sums of money variedly representing the damagesincurred as a result of the creation of the offices/positions complained of and the aggregateamount of the questioned increased salaries.

In the same Answer, respondents further averred that Cruz and his co-petitionerMinterbro, while admittedly stockholders of Filport, have no authority nor standing to bring theso-called ―derivative suit‖ for and in behalf of the corporation; that respondent Mary Jean D. Cohas already ceased to be a corporate director and so with Fortunato V. de Castro, one of thoseholding an assailed position; and that no demand to cease and desist from further committing theacts complained of was made upon the board. By way of affirmative defenses, respondentsasserted that (1) the petition is not duly verified by petitioner Filport which is the real party-in-interest; (2) Filport, as represented by Cruz and Minterbro, failed to exhaust remedies for redresswithin the corporation before bringing the suit; and (3) the petition does not show that thestockholders bringing the suit are joined as nominal parties. In support of their counterclaim,respondents averred that Cruz filed the alleged derivative suit in bad faith and purely forharassment purposes on account of his non-reelection to the board in the 1991 generalstockholders‘ meeting.

ISSUE:

Whether the CA erred in holding that Filport‘s Board of Directors acted within its powersin creating the executive committee and the positions of AVPs for Corporate Planning,Operations, Finance and Administration, and those of the Special Assistants to the President andthe Board Chairman, each with corresponding remuneration, and in increasing the salaries of the positions of Board Chairman, Vice-President, Treasurer and Assistant General Manager

HELD:

In the present case, the board‘s creation of the positions of Assistant Vice Presidents forCorporate Planning, Operations, Finance and Administration, and those of the Special Assistantsto the President and the Board Chairman, was in accordance with the regular business operationsof Filport as it is authorized to do so by the corporation‘s by-laws, pursuant to the CorporationCode.

The election of officers of a corporation is provided for under Section 25 of the Codewhich reads:



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Sec. 25. Corporate officers, quorum. – Immediately after their election, the directors of acorporation must formally organize by the election of a president, who shall be a director, atreasurer who may or may not be a director, a secretary who shall be a resident and citizen of thePhilippines and such other officers as may be provided for in the by-laws.

As a matter of fact, it was during the term of appellee Cruz, as president and director, thatthe executive committee was created. What is more, it was appellee himself who moved for thecreation of the positions of assistant vice presidents for operations, for finance, and foradministration. He should not be heard to complain thereafter for similar corporate acts.

The increase in the salaries of the board chairman, president, treasurer, and assistantgeneral manager are indeed reasonable enough in view of the responsibilities assigned to them,and the special knowledge required, to be able to effectively discharge their respective functionsand duties.

By claiming that Filport suffered damages because the directors appointed to the assailed positions are not doing anything to deserve their compensation, petitioners are saddled with the burden of proving that salaries were actually paid. Since the trial court, in effect, found that the petitioners successfully proved payment of the salaries when it directed the reimbursements ofthe same, respondents necessarily have to raise the issue on appeal. And the CA rightly resolvedthe issue when it found that no evidence of actual payment of the salaries in question wasactually adduced.



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MENDIZABEL vs. APAOG.R. No. 143185, February 20, 2006

FACTS:

On 21 March 1955, Fernando Apao (―Fernando‖) purchased from spouses Alejandro andTeofila Magbanua (―vendors‖) a parcel of land with an area of 61,616 square meters (―property‖)situated in Malangas, Zamboanga del Sur. Fernando bought the property for P400. The vendorsexecuted a deed of sale which stated inter alia that they could purchase back the property withinsix months for P400, failing which, the sale would become absolute. The vendors failed torepurchase the property. Fernando thus took possession of the same.

On 1 April 1958, Fernando had the property surveyed by Engr. Ernesto Nuval togetherwith the piece of land adjacent to it, which he had previously purchased from one LeopoldoCarloto. The Bureau of Lands approved the survey on 2 July 1959 resulting in the issuance ofSurvey Plan Psu-173083 covering both lots. Upon receipt of the approved survey plan,

Fernando immediately filed an application with the Bureau of Lands for a free patent over theentirety of Psu-173083. His application was docketed as F.P.A. No. 18-1481.

After the survey of Fernando‘s land, the Survey Party of the Bureau of Lands surveyed thesame area. This latter survey resulted in a subdivision of the land into two separate and distinctlots identified as Lot Nos. 407 and 1080. Fernando learned that Ignacio Mendizabel (―Ignacio‖)had filed prior to the Bureau of Lands‘ survey a homestead application over Lot No. 1080.Fernando became the claimant- protestant in Ignacio‘s application, docketed as H.A. No. 18-8905(E-18-8521).

On 11 May 1962, the Bureau of Lands Regional Office in Zamboanga City rendered adecision awarding Lot No. 1080 to Ignacio.

ISSUE:

Whether there is implied trust exists in this case

HELD:

The act of petitioners in misrepresenting that they were in actual possession andoccupation of the property, obtaining patents and original certificates of title in their names]created an implied trust in favor of the actual possessors of the property. The Civil Code provides:

ART. 1456. If property is acquired through mistake or fraud, the person obtaining it is, byforce of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes.

In other words, if the registration of the land is fraudulent, the person in whose name theland is registered holds it as a mere trustee, and the real owner is entitled to file an action forreconveyance of the property.

Petitioners would nonetheless insist that respondents failed to present any proof offiduciary relation between them and respondents and ―breach of such trust by petitioners. Adeeper analysis of Article 1456 reveals that it is not a trust in the technical sense for in a typicaltrust, confidence is reposed in one person who is named a trustee for the benefit of another whois called the cestui que trust, respecting property which is held by the trustee for the benefit ofthe cestui que trust. A constructive trust, unlike an express trust, does not emanate from, orgenerate a fiduciary relation. While in an express trust, a beneficiary and a trustee are linked byconfidential or fiduciary relations, in a constructive trust, there is neither a promise nor any



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fiduciary relation to speak of and the so-called trustee neither accepts any trust nor intendsholding the property for the beneficiary. Implied trusts are those which, without being expressed,are deducible from the nature of the transaction as matters of intent or which are super inducedon the transaction by operation of law as matters of equity, independently of the particularintention of the parties. In turn, implied trusts are either resulting or constructive trusts.

Constructive trusts are created by the construction of equity in order to satisfy the demands of justice and prevent unjust enrichment. They arise contrary to intention against one who, byfraud, duress or abuse of confidence, obtains or holds the legal right to property which he oughtnot, in equity and good conscience, to hold.

The records show that respondents bought the property from spouses Alejandro andTeofila Magbanua on 21 March 1955 as evidenced by a deed of sale. Fernando testified that hewas in actual, open, peaceful, and continuous possession of the property at the time he filed hisapplication for a free patent and was then enjoying its fruits. These facts were corroborated bythe testimonies of Brañanula and Lizardo, residents of Barangay Mabini, Malangas, Zamboangadel Sur. Petitioners, however, assert that the deed of sale, ―although Annex A of respondents‘

complaint,‖ should not be given weight for it was not offered in evidence.

Petitioners‘ assertion has no merit. All documents attached to a complaint, the dueexecution and genuineness of which are not denied under oath by the defendant, must beconsidered as part of the complaint without need of introducing evidence. In petitioners‘ answer,there was no denial under oath of the due execution and genuineness of the deed of sale. Thus,the deed of sale is not only incorporated into respondents‘ complaint, it is also deemed admitted by petitioners. This has the effect of relieving respondents from the duty of expressly presentingsuch document as evidence. The court, for the proper resolution of the case, may and shouldconsider without the introduction of evidence the facts admitted by the parties



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VDA. DE GUALBERTO vs. GOG.R. No. 139843, July 21, 2005

FACTS:

Petitioners are the heirs of the late Generoso Gualberto, former registered owner of a parcel of land situated at Redor Street, Barangay Redor, Siniloan, Laguna under TransferCertificate of Title (TCT) No. 9203, containing an area of 169.59 square meters, more or less,and declared for taxation purposes under Tax Declaration No. 4869.

Sometime in 1965, the subject parcel of land was sold by Generoso Gualberto and hiswife, herein petitioner Consuelo Natividad Vda. De Gulaberto (Consuelo, for brevity), torespondents‘ father Go S. Kiang for P9, 000.00, as evidenced by a deed entitled ―Kasulatan ngBilihang Tuluyan‖ dated January 15, 1965 (―Kasulatan‖, for brevity), which deed appears tohave been duly notarized by then Municipal Judge Pascual L. Serrano of the Municipal Court ofSiniloan, Laguna and recorded in his registry as Doc. No. 9, Page No. 12, Book No.12, Series of

1965. On April 1, 1973, petitioner Consuelo executed an Affidavit attesting to the fact that theaforementioned parcel of land had truly been sold by her and her husband Generoso to thespouses Go S. Kiang and Rosa Javier Go, as borne by the said ―Kasulatan‖. Evidently, theaffidavit was executed for purposes of securing a new tax declaration in the name of the spousesGo.

In December, 1973, in a case for Unlawful Detainer filed by a certain Demetria Garciaagainst herein petitioners, the latter alleged that therein plaintiff Garcia ―is not a real party ininterest and therefore has no legal capacity and cause of action to sue the defendants; that the real parties in interest of the parcel of commercial land and the residential apartment in question areGeneroso Gualberto and Go S. Kiang respectively as shown by TCT No. 9203 issued by theRegister of Deeds of Laguna. In a Forcible Entry case filed by respondents against petitioners before the Municipal Circuit Trial Court of Siniloan-Famy, Siniloan, Laguna docketed as CivilCase No. 336, a decision was rendered in favor of respondents, which decision was affirmed intoto by the RTC of Siniloan, Laguna. When elevated to the Court of Appeals, that same decisionwas affirmed by the latter court, saying that ―the Court finds that the judgment of the court a quoaffirming the previous judgment of the municipal court is supported by sufficient andsatisfactory evidence and there is no reason for the Court to hold otherwise.

ISSUE:

Whether an action for reconveyance of property based on nullity of title prescribes

HELD:

Petitioners insist that their action for reconveyance is imprescriptible.An action for reconveyance of real property based on implied or constructive trust is not

barred by the aforementioned 10-year prescriptive period only if the plaintiff is in actual,continuous and peaceful possession of the property involved. Generally, an action forreconveyance based on an implied or constructive trust, such as the instant case, prescribes in 10years from the date of issuance of decree of registration. However, this rule does not apply whenthe plaintiff is in actual possession of the land. Thus, it has been held:

An action for reconveyance of a parcel of land based on implied or constructive trust prescribes in ten years, the point of reference being the date of registration of the deed or the dateof the issuance of the certificate of title over the property, but this rule applies only when the plaintiff or the person enforcing the trust is not in possession of the property, since if a personclaiming to be the owner thereof is in actual possession of the property, as the defendants are inthe instant case, the right to seek reconveyance, which in effect seeks to quiet title to the property, does not prescribe. The reason for this is that one who is in actual possession of a pieceof land claiming to be the owner thereof may wait until his possession is disturbed or his title is



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attacked before taking steps to vindicate his right, the reason for the rule being, that hisundisturbed possession gives him a continuing right to seek the aid of a court of equity toascertain and determine the nature of the adverse claim of a third party and its effect on his owntitle, which right can be claimed only by one who is in possession.‖

Here, it was never established that petitioners remained in actual possession of the property after their father‘s sale thereof to Go S. Kiang in 1965 and up to the filing of theircomplaint in this case on August 10, 1995. On the contrary, the trial court‘s factual conclusion isthat respondents had actual possession of the subject property ever since. The action forreconveyance in the instant case is, therefore, not in the nature of an action for quieting of title,and is not imprescriptible.



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HEIRS OF YAP V CAG.R.No. 133047 August 17, 1999

FACTS:

Ramon Yap purchased a parcel of land situated at 123 Batanes Street, Galas, QuezonCity, covered by Transfer Certificate of Title No. 82001/T-414, from the spouses Carlos andJosefina Nery. The lot was thereupon registered in the name of Ramon Yap under TransferCertificate of Title No. 102132; forthwith, he also declared the property in his name for tax purposes and paid the real estate taxes due thereon from 1966 to 1992. In 1967, Ramon Yapconstructed a two storey 3-door apartment building for the use of the Yap family. One-fifth (1/5)of the cost of the construction was defrayed by Ramon Yap while the rest was shouldered byChua Mia, the mother of Lorenzo, Benjamin and Ramon. Upon its completion, the improvementwas declared for real estate tax purposes in the name of Lorenzo Yap in deference to the wishesof the old woman.

The controversy started when herein petitioners, by a letter of 08 June 1992, advisedrespondents of the former‘s claim of ownership over the property and demanded that respondentsexecute the proper deed necessary to transfer the title to them. At about the same time, petitioners filed a case for ejectment against one of the bonafide tenants of the property.

ISSUE:

Whether or not there was implied trust in the instant case?

RULING:

The court found there was none. The Court of Appeals, sustaining the court a quo, hasfound the evidence submitted by petitioners to be utterly wanting, consisting mainly of the self-serving testimony of Sally Yap. She herself admitted that the business establishment of herhusband Lorenzo was razed by fire in 1964 that would somehow place to doubt the claim that heindeed had the means to purchase the subject land about two years later from the Nery spouses.Upon the other hand, Ramon Yap was by then an accountant with apparent means to buy the property himself. At all events, findings of fact by the Court of Appeals, particularly whenconsistent with those made by the trial court, should deserve utmost regard when not devoid ofevidentiary support. No cogent reason had been shown by petitioners for the Court to now holdotherwise.

One basic distinction between an implied trust and an express trust is that while theformer may be established by parol evidence, the latter cannot. Even then, in order to establishan implied trust in real property by parol evidence, the proof should be as fully convincing as ifthe acts giving rise to the trust obligation are proven by an authentic document. An implied trust,in fine, cannot be established upon vague and inconclusive proof.



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HEIRS OF KIONOSALA V DACUTG.R.No. 147379 February 27, 2002

FACTS:

On 19 December 1995 private respondents filed a complaint for declaration of nullity oftitles, reconveyance and damages against petitioners. This complaint involved 2 parcels of landknown as Lot No. 1017 and Lot No. 1015 with areas of 117,744 square meters and 69,974 squaremeters respectively, located in Pongol, Libona, Bukidnon. On 7 September 1990 Lot No. 1017was granted a free patent to petitioners Heirs of Ambrocio Kionisala under Free Patent No.603393, and on 13 November 1991 Lot 1015 was bestowed upon Isabel Kionisala, one of theimpleaded heirs of Ambrocio Kionisala under Free Patent No. 101311-91-904. Thereafter, on 19 November 1990 Lot 1017 was registered under the Torrens system and was issued OriginalCertificate of Title No. P-19819 in petitioners‘ name, while on 5 December 1991 Lot No. 1015was registered in the name of Isabel Kionisala under Original Certificate of Title No. P-20229.

In support of their causes of action for declaration of nullity of titles and reconveyance, private respondents claimed absolute ownership of Lot 1015 and 1017 even prior to the issuanceof the corresponding free patents and certificates of title.

ISSUE:

Whether or not the action for reconveyance based on an implied trust of the lots has prescribed?

RULING:

The action for reconveyance based on implied trust prescribes only after ten (10) yearsfrom 1990 and 1991 when the free patents and the certificates of title over Lot 1017 and Lot1015, respectively, were registered. Obviously the action had not prescribed when privaterespondents filed their complaint against petitioners on 19 December 1995. At any rate, theaction for reconveyance in the case at bar is also significantly deemed to be an action to quiettitle for purposes of determining the prescriptive period on account of private respondents‘allegations of actual possession of the disputed lots. In such a case, the cause of action is trulyimprescriptible.



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RAMOS V. RAMOSG.R. No. L-19872 December 3, 1974

FACTS:

The spouses Martin Ramos and Candida Tanate died on October 4, 1906 and October 26,1888, respectively. On December 10, 1906 a special proceeding was instituted in the Court ofFirst Instance of Negros Occidental for the settlement of the intestate estate of the said spouses.Rafael O. Ramos, a brother of Martin, was appointed administrator. The estate was administeredfor more than six years. A project of partition dated April 25, 1913 was submitted. It was signed by the three legitimate children, Jose, Agustin and Granada; by the two natural children,Atanacia and Timoteo, and by Timoteo Zayco in representation of the other five natural childrenwho were minors. It was sworn to before the justice of the peace. Plaintiffs, however, did notknow of any proceedings. They never received any sum of money in cash the allegedinsignificant sum of P1,785.35 each from said alleged guardian as their supposed share in theestate of their father under any alleged project of partition.

ISSUE:

Whether or not a trustee can acquire by prescription the ownership of property entrustedto him?

RULING:

There is a rule that a trustee cannot acquire by prescription the ownership of propertyentrusted to him, or that an action to compel a trustee to convey property registered in his namein trust for the benefit of the cestui qui trust does not prescribed or that the defense of prescription cannot be set up in an action to recover property held by a person in trust for the benefit of anothe, or that property held in trust can be recovered by the beneficiary regardless ofthe lapse of time.

That rule applies squarely to express trusts. The basis of the rule is that the possession ofa trustee is not adverse. Not being adverse, he does not acquire by prescription the property heldin trust. Thus, section 38 of Act 190 provides that the law of prescription does not apply in thecase of a continuing and subsisting trust.



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THE INTESTATE ESTATE OF TY vs. COURT OF APPEALSG.R. No. 112872. APRIL 19, 2001

FACTS:

Petitioner Sylvia S. Ty was married to Alexander T. Ty. Alexander died of leukemia onMay 19, 1988 and was survived by his wife, petitioner Sylvia, and only child, Krizia Katrina. Inthe settlement of his estate, petitioner was appointed administratrix of her late husband‘s intestateestate. On November 4, 1992, petitioner filed a motion for leave to sell or mortgage estate property in order to generate funds for the payment of deficiency estate taxes in the sum ofP4,714,560.00. Private respondent, the father of the deceased filed two complaints for therecovery of said property. He prayed for the recovery of the pieces of property that were placedin the name of deceased Alexander by private respondent, the same property being sought to besold out, mortgaged, or disposed of by petitioner. Private respondent claimed in both cases thateven if said property were placed in the name of deceased Alexander, they were acquiredthrough private respondent‘s money, without any cause or consideration from deceased

Alexander.

ISSUE:

Is the petitioner correct in her contention that there was an express trust between thedeceased and private respondent?

RULING:

Petitioner is in error when she contends that an express trust was created by privaterespondent when he transferred the property to his son. Express trust is those that are created bythe direct and positive acts of the parties, by some writing or deed or will or by words evidencingan intention to create a trust. On the other hand, implied trusts are those which, without beingexpressed, are deducible from the nature of the transaction by operation of law as matters ofequity, independently of the particular intention of the parties. Thus, if the intention to establisha trust is clear, the trust is express; if the intent to establish a trust is to be taken fromcircumstances or other matters indicative of such intent, then the trust is implied.

In the cases at hand, private respondent contends that the pieces of property weretransferred in the name of the deceased Alexander for the purpose of taking care of the propertyfor him and his siblings. Such transfer having been effected without cause of consideration, aresulting trust was created. A resulting trust arises in favor of one who pays the purchase moneyof an estate and places the title in the name of another, because of the presumption that he who pays for a thing intends a beneficial interest therein for himself. The trust is said to result in lawfrom the acts of the parties. Such a trust is implied in fact. Petitioner‘s assertion that privaterespondent‘s action is barred by the statute of limitations is erroneous. The statue of limitationscannot apply in this case. Resulting trusts generally do not prescribe except when the trusteerepudiates the trust.



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VDA. DE RETUERTO vs. BARZG.R. No. 148180. DECEMBER 19, 2001

FACTS:

When Spouses Esteban Perez and Lorenza Sanchez died intestate, their rights over the property were inherited by their daughter, Juana Perez, married to Numeriano Barz, who thendeclared the properly, for taxation purposes, under her name but with an area of only 13,160square meters, more or less. On April 16, 1929, Juana Perez, widow Barz, executed a deedconfirming her execution of a "Deed of Absolute Sale," in favor of Panfilo Retuerto, married toCatalina Ceniza, over a portion of the "Hacienda de Mandaue.‖ However, on April 26, 1935,Panfilo Retuerto purchased the aforementioned parcel of land, this time, from the Archbishop ofCebu. In the meantime, the San Carlos Seminary in Cebu filed a Petition with the Regional TrialCourt for the issuance of titles over several parcels of land in "Hacienda de Mandaue," includingLot No. 896-A, earlier purchased by Panfilo Retuerto from Juana Perez and from the Archbishopof Cebu. No such Decree was issued as directed by the Court because the Second World War

ensued in the Pacific. However, Panfilo Retuerto failed to secure the appropriate decree after thewar.

ISSUE:

Who has a right of ownership over the subject lot?

RULING:

Constructive trusts are created in equity to prevent unjust enrichment, arising against onewho, by fraud, duress or abuse of confidence, obtains or holds the legal right to property whichhe ought not, in equity and good conscience, to hold. Petitioners failed to substantiate theirallegation that their predecessor-in-interest had acquired any legal right to the property subject ofthe present controversy. Nor had they adduced any evidence to show that the certificate of title ofPedro Barz was obtained through fraud.

Even assuming arguendo that Pedro Barz acquired title to the property through mistake orfraud, petitioners are nonetheless barred from filing their claim of ownership. An action forreconveyance based on an implied or constructive trust prescribes within ten years from the timeof its creation or upon the alleged fraudulent registration of the property. Since registration ofreal property is considered a constructive notice to all persons, then the ten-year prescriptive period is reckoned from the time of such registering, filing or entering. Thus, petitioners shouldhave filed an action for reconveyance within ten years from the issuance of OCT No. 521 in November 16, 1968. This, they failed to do so. In the 1966 decision of the Land RegistrationCourt in LRC No. 529, it was found that Pedro Barz, private respondents' predecessor-in-interest,was the lawful owner of the subject property as he and his predecessors-in-interest had been in peaceful, continuous and open possession thereof in the concept of owner since 1915.



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CHIA LIONG TAN v. COURT OF APPEALSG.R. No. 106251, November 11, 1993

FACTS:

Petitioner claims to be the registered owner of the motor vehicle, Elf van which was purchased by his brother Tan Ban Yong, the private respondent. The petitioner principally relieson the fact that the vehicle is registered in his name. He testified that the said vehicle was purchased, that he sent his brother to pay for it and the receipt of payment was placed in petitioner‘s name because it was his money that was used to pay for the vehicle, that he allowedhis brother to use it and that his brother refused to return the same. RTC, as affirmed by the CAruled that ownership belongs to the private respondent as the testimonies of Tan Pit Sin, the onewhom he borrowed money fro for the sad purchase and the employee of the Isuzu motors weregiven weight.

ISSUE:Whether or not the petitioner has ownership of the property n question

RULING:

A certificate of registration of a motor vehicle in one‘s name indeed creates a strong presumption of ownership. The person in whose favor it, has been issued is virtually the ownerthereof unless proved otherwise. Such presumption is rebuttable by competent proof. It wasundeniable that an implied trust was created when the certificate of registration of the vehiclewas placed in the petitioner‘s name although the price thereof was paid by private respondent. Atrust, which drives its strength from the confidence one reposes on another especially between brothers, does not lose that character simply because of what appears is a legal document.Petition is denied.



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EILIA O’LACO V. CO CHO CHIT G.R. No. 58010, March 31, 1993

FACTS:

On May 17, 1060, private respondent-spouses Valentin Co Cho Chit and O Lay Kialearned fro the newspaper that O‘ laco sold the Oroquieta property to the Roman Catholicarchbishop for P230,000. Rspondent-spouses sued petitioners to recover the purchase price,asserting that petitioner knes that they were the real vendees and that the legal title thereto wasmerely placed in her name. They contend that O‘ laco breached the trust when she sold the land.While petitioners assert that she merely left the certificate of title covering the property with private respondent for safekeeping.

ISSUE:

Whether a resulting trust between the parties in the acquisition of the property has prescribed

RULING:

It has been established that a resulting trust between the parties occurred. Although the property was bought by the respondent-spouses, the legal title was placed n the name of O‘ laco.The transfer of the Torrens title in her name was only in consonance with the deed of sale n herfavor. The second requisite is absent., hence prescription did not begin to run until the sale of thesubject property which was clearly an act of repudiation.

But immediately after O‘ laco sold the property which is a disavowal of the resultingtrust, respondent-spouses instituted the present suit for breach of trust. Correspondingly, lachescannot lie against them.

Costs against petitioners.



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