Civil Law Review 2 Case Digests

Compilation of Case Digests in CIVIL LAW Review 2
June 2014
Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon
Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade
Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

CHARLES BUMAGAT, JULIAN BACUDIO, ROSARIO PADRE, SPOUSES ROGELIO and ZOSIMA
PADRE, and FELIPE DOMINCIL, Petitioners,
vs. REGALADO ARRIBAY, Respondent.
G.R. No. 194818.June 9, 2014
Facts: Petitioners are the registered owners, successors-in-interest, or possessors of agricultural

land, consisting of about eight hectares.Petitioners filed a Complaint for forcible entry against
respondent.
Respondent filed a Motion to Dismiss,claiming that the subject properties are agricultural lands
which thus renders the dispute an agrarian matter and subject to the exclusive jurisdiction of the
Department of Agrarian Reform Adjudication Board (DARAB). However, in a January 30, 2006
Order,17 the MCTC denied the motion, finding that the pleadings failed to show the existence of a
tenancy or agrarian relationship between the parties that would bring their dispute within the
jurisdiction of the DARAB. Respondents motion for reconsideration was similarly rebuffed.
Respondent alleged among others that petitioners titles have been ordered cancelled in a
December 1, 2001 Resolution issued by the Department of Agrarian Reform, Region 2 in
Administrative Case No. A0200 0028 94; that he is the absolute owner of approximately 3.5 hectares
of the subject parcels of land, and is the administrator and overseer of the remaining portion thereof,
which belongs to his principals Leonardo and Evangeline Taggueg (the Tagguegs); that petitioners
abandoned the subject properties in 1993, and he planted the same with corn; that in 2004, he
planted the land to rice; that he sued petitioners before the Municipal Agrarian Reform Office (MARO)
for non-payment of rentals since 1995; and that the court has no jurisdiction over the ejectment case,
which is an agrarian controversy
During the proceedings before the MCTC, respondent presented certificates of title,
supposedly issued in his name and in the name of the Tagguegs in 2001, which came as a result of
the supposed directive in Administrative Case No. A0200 0028 94 to cancel petitioners titles.
Meanwhile, Romulo Sr. died and his heirs instituted Administrative Case No. A0200 0028 94 to
cancel petitioners titles. The heirs won the case, and later on new titles over the property were issued
in their favor. In turn, one of the heirs transferred his title in favor of respondent.
Issue: Whether or not there was tenurial arrangement between the parties.
Held: There is no tenurial arrangement, not even an implied one. As correctly argued by petitioners, a
case involving agricultural land does not immediately qualify it as an agrarian dispute. The mere fact
that the land is agricultural does not ipso facto make the possessor an agricultural lessee or tenant.
There are conditions or requisites before he can qualify as an agricultural lessee or tenant, and the
subject being agricultural land constitutes just one condition.41 For the DARAB to acquire jurisdiction
over the case, there must exist a tenancy relation between the parties. "[I]n order for a tenancy
agreement to take hold over a dispute, it is essential to establish all its indispensable elements, to wit:
1) that the parties are the landowner and the tenant or agricultural lessee; 2) that the subject matter of

the relationship is an agricultural land; 3) that there is consent between the parties to the relationship;
4) that the purpose of the relationship is to bring about agricultural production; 5) that there is
personal cultivation on the part of the tenant or agricultural lessee; and 6) that the harvest is shared
between the landowner and the tenant or agricultural lessee."In the present case, it is quite evident
that not all of these conditions are present. For one, there is no tenant, as both parties claim
ownership over the property.
By: Stephanie Mariz C. Khan
AVELINA ABARIENTOS REBUSQUILLO [substituted by her heirs, except Emelinda R. Gualvez]

and SALVADOR A. OROSCO, Petitioners,vs. SPS. DOMINGO and EMELINDA REBUSQUILLO
GUALVEZ and the CITY ASSESSOR OF LEGAZPI CITY, Respondents.
G.R. No. 204029.June 4, 2014
Facts: Petioners Avelina Abarientos Rebusquillo (Avelina) and Salvador Orosco (Salvador) filed a
Complaint for annulment and revocation of an Affidavit of Self-Adjudication and a Deed of Absolute
Sale before the court a quo. In it, petitioners alleged that Avelina was one of the children of Eulalio
Abarientos (Eulalio) and Victoria Villareal (Victoria). Eulalio died intestate on July 3, 1964, survived by
his wife Victoria, six legitimate children, and one illegitimate child, namely: (1) Avelina AbarientosRebusquillo, petitioner in this case; (2) Fortunata Abarientos-Orosco, the mother of petitioner
Salvador; (3) Rosalino Abarientos; (4) Juan Abarientos; (5) Feliciano Abarientos; (6) Abraham
Abarientos; and (7) Carlos Abarientos. His wife Victoria eventually died intestate on June 30, 1983.
On his death, Eulalio left behind an untitled parcel of land in Legazpi City consisting of two thousand
eight hundred sixty-nine(2,869) square meters, more or less, which was covered by Tax Declaration
ARP No. (TD) 0141.
In 2001, Avelina was supposedly made to sign two (2) documents by her daughter Emelinda
Rebusquillo-Gualvez (Emelinda) and her son-in-law Domingo Gualvez (Domingo), respondents in this
case, on the pretext that the documents were needed to facilitate the titling of the lot. It was only in
2003, so petitioners claim, that Avelina realized that what she signed was an Affidavit of SelfAdjudication and a Deed of Absolute Sale in favor of respondents.
As respondents purportedly ignored her when she tried to talk to them, Avelina sought the
intervention of the RTC to declare null and void the two (2) documents in order to reinstat TD0141
and so correct the injustice done to the other heirs of Eulalio.
Issue: Whether or not there was a simulation of contract.
Held: The Civil Code provides:
Art. 1345. Simulation of a contract may be absolute or relative. The former takes place when the
parties do not intend to be bound at all; the latter, when the parties conceal their true agreement.
(emphasis supplied)

Art. 1346. An absolutely simulated or fictitious contract is void. A relative simulation, when it does not
prejudice a third person and is not intended for any purpose contrary to law, morals, good customs,
public order or public policy binds the parties to their real agreement.
In absolute simulation, there is a colorable contract but it has no substance as the parties have
no intention to be bound by it. The main characteristic of an absolute simulation is that the apparent
contract is not really desired or intended to produce legal effect or in any way alter the juridical
situation of the parties. As a result, an absolutely simulated or fictitious contract is void, and the
parties may recover from each other what they may have given under the contract. However, if the
parties state a false cause in the contract to conceal their real agreement, the contract is relatively
simulated and the parties are still bound by their real agreement. Hence, where the essential
requisites of a contract are present and the simulation refers only to the content or terms of the
contract, the agreement is absolutely binding and enforceable between the parties and their
successors in interest. (emphasis supplied)
In the present case, the true intention of the parties in the execution of the Deed of Absolute
Sale is immediately apparent from respondents very own Answer to petitioners Complaint. As
respondents themselves acknowledge, the purpose of the Deed of Absolute Sale was simply to
"facilitate the titling of the [subject] property," not to transfer the ownership of the lot to them.
Furthermore, respondents concede that petitioner Salvador remains in possession of the property
and that there is no indication that respondents ever took possession of the subject property after its
supposed purchase. Such failure to take exclusive possession of the subject property or, in the
alternative, to collect rentals from its possessor, is contrary to the principle of ownership and is a clear
badge of simulation that renders the whole transaction void.
HECTOR L. UY, Petitioner, v. VIRGINIA G. FULE; HEIRS OF THE LATE AMADO A. GARCIA,
NAMELY: AIDA C. GARCIA, LOURDES G. SANTAYANA, AMANDO C. GARCIA, JR., MANUEL C.
GARCIA, CARLOS C. GARCIA, AND CRISTINA G. MARALIT; HEIRS OF THE LATE GLORIA
GARCIA ENCARNACION, NAMELY: MARVIC G. ENCARNACION, IBARRA G. ENCARNACION,
MORETO G. ENCARNACION, JR., AND CARINA G. ENCARNACION; HEIRS OF THE LATE
PABLO GARCIA, NAMELY: BERMEDIO GARCIA, CRISTETA GARCIA, NONORATO GARCIA,
VICENTE GARCIA, PABLO GARCIA, JR., AND TERESITA GARCIA; HEIRS OF THE LATE ELISA
G. HEMEDES, NAMELY: ROEL G. HEMEDES, ELISA G. HEMEDES, ROGELIO G. HEMEDES,
ANDORA G. HEMEDES, AND FLORA G. HEMEDES, Respondents.
G.R. No. 164961, June 30, 2014
Facts: The dispute herein involves the parcel of land registered under Transfer Certificate of Title
(TCT) No. 30111 of the Registry of Deeds of Camarines Sur with an area of 180,150square meters
located in San Agustin, Pili, Camarines Sur that was part of the vast tract of land covered by TCT No.
1128 registered in the name of the late Conrado Garcia. TCT No. 1128 was derived from Original
Certificate of Title (OCT) No. 854 registered on November 23, 1933 in the Registration Book of the

Register of Deeds of Camarines Sur pursuant to Decree No. 517240, No. 854, issued in LRC GLRO
Record No. 47802.
Upon the death of Conrado Garcia on November 23, 1972, his heirs entered into an
extrajudicial settlement of his estate, including the vast track of land. Thereafter, his heirs caused the
registration on March 7, 1973 of the vast track of land under TCT No. RT-8922 (16498), covering Lot
1, PSU-81269 and Lot 2, PSU-81269.
In September 1985, the Department of Agrarian Reform (DAR) engaged Geodetic Engr.
Rolando A. Sales (Engr. Sales) to conduct a survey of the disputed land, referring to it as Lot 562,
Cad. 291 (Csd-05-003874). Together with DAR Technologist Carmen Sorita and DAR Team Leader
Julian F. Israel, Engr. Sales issued a joint certification dated August 30, 1988 to the effect that the
disputed land was an "untitled" property owned by Conrado Garcia. The joint certification dated
August 30, 1988 was buttressed by the certification issued on January 30, 1989 by the Office of the
Register of Deeds of Camarines Sur to the effect that no title covering Lot 562, Cad. 291 (Csd-05003874) appeared on record. As a result, the disputed land was included in the Operation Land
Transfer (OLT) program of the DAR pursuant to Presidential Decree No. 27.
In 1988, the DAR and the Office of the Register of Deeds of Camarines Sur respectively
issued emancipation patents (EPs) and original certificates of title (OCTs) coveringthe disputed land
to the farmersbeneficiaries, namely: Catalino Alcaide, Mariano Ronda, Ponciano Ermita, Felipe
Marcelo, Salvador Pedimonte, Fabiana Pedimonte and Leonila Pedimonte (farmers-beneficiaries).
In the interim, farmer-beneficiary Mariano Ronda sold his portion to Chisan Uy who then
registered his title thereto under TCT No. 29948 and TCT No. 29949 of the Registry of Deeds of
Camarines Sur. On the other hand, the heirs of farmer-beneficiary Mariano Ronda (Isabel Ronda, et
al.) sold their land to petitioner Hector Uy for P10 million. The petitioner registered his title thereto
under TCT No. 31436 and TCT No. 31437, both of the Registry of Deeds of Camarines Sur.
In 1997, TCT No. RT-8922 (16498)was cancelled following the partition of the property covered
therein. Subsequently, TCT No. 30136 and TCT No. 30111 were issued in the names of respondents
heirs of the late Conrado Garcia. TCT No. 30111 covered the disputed land.
Issue: Whether or not petitioner is a purchaser in good faith.
Held: A buyer for value in good faith is one who buys property of another, without notice that some
other person has a right to, or interest in, such property and pays full and fair price for the same, at
the time of such purchase, or before he has notice of the claim or interest of some other persons in
the property. He buys the property with the well- founded belief that the person from whom he
receives the thing had title to the property and capacity to convey it.
To prove good faith, a buyer of registered and titled land need only show that he relied on the
face of the title to the property. He need not prove that he made further inquiry for he is not obliged to
explore beyond the four corners of the title. Such degree of proof of good faith, however, is sufficient
only when the following conditions concur: first, the seller is the registered owner of the land; second,
the latter is in possession thereof; and third, at the time of the sale, the buyer was not aware of any

claim or interest of some other person in the property, or of any defect or restriction in the title of the
seller or in his capacity to convey title to the property. Absent one or two of the foregoing conditions,
then the law itself puts the buyer on notice and obliges the latter to exercise a higher degree of
diligence by scrutinizing the certificate of title and examining all factual circumstances in order to
determine the sellers title and capacity to transfer any interest in the property. Under such
circumstance, it was no longer sufficient for said buyer to merely show that he had relied on the face
of the title; he must now also show that he had exercised reasonable precaution by inquiring beyond
the title. Failure to exercise such degree of precaution makes him a buyer in bad faith.
An examination of the deed of sale executed between Isabel Ronda, et al. and the petitioner
respecting the portions covered by TCT No. 31120 and TCT No. 31121 indicates that the TCTs were
issued only on August 17, 1998 but the deed of sale was executed on July 31, 1998. While it is true,
as the petitioner argues, that succession occurs from the moment of death of the decedent pursuant
to Article 777 of the Civil Code, his argument did not extend to whether or not he was a buyer in good
faith, but only to whether or not, if at all, Isabel Ronda, et al., as the heirs of Mariano Ronda, held the
right to transfer ownership over their predecessors property. The argument did not also address
whether or not the transfer to the petitioner was valid.
Evidently, the petitioner entered into the deed of sale without having been able to inspect TCT
No. 31120 and TCT No. 31121 by virtue of such TCTs being not yet in existence at that time. If at all,
it was OCT No. 9852 and OCT No. 9853 that were available at the time of the execution of the deed
of sale, and such OCTs were presumably inspected by petitioner before he signed the deed of sale. It
is notable that said OCTs categorically stated that they were entered pursuant to an emancipation
patent of the Ministry of Agrarian Reform pursuant to the Operation Land Transfer (OLT) Program of
the government. Furthermore, said OCTs plainly recited the following prohibition: "it shall not be
transferred except by hereditary succession or to the Government in accordance with the provisions
of Presidential Decree No. 27, Code of Agrarian Reforms of the Philippines and other existing laws
and regulations."
The foregoing circumstances negated the third element of good faith cited in Bautista v. Silva,
i.e., that "at the time of sale, the buyer was not aware of any claim or interest of some other person in
the property, or of any defect or restriction in the title of the seller or in his capacity to convey title to
the property." As we have ruled in Bautista v. Silva, the absence of the third condition put the
petitioner on notice and obliged him to exercise a higher degree of diligence by scrutinizing the
certificates of title and examining all factual circumstances in order to determine the sellers title and
capacity to transfer any interest in the lots. Consequently, it is not sufficient for him to insist that he
relied on the face of the certificates of title, for he must further show that he exercised reasonable
precaution by inquiring beyond the certificates of title. Failure to exercise such degree of precaution
rendered him a buyer in bad faith. "It is a well-settled rule that a purchaser cannot close his eyes to
facts which should put a reasonable man upon his guard, and then claim that he acted in good faith
under the belief that there was no defect in the title of the vendor."
The petitioner was not an innocent purchaser for value; hence, he cannot be awarded the
disputed land.
By: Reeve Marlo Arturo S. Goteesan
ARCO PULP AND PAPER CO., INC. and CANDIDA A. SANTOS, Petitioners,
vs. DAN T. LIM, doing business under the name and style of QUALITY PAPERS & PLASTIC
PRODUCTS ENTERPRISES, Respondent.
G.R. No. 206806. June 25, 2014
Facts: Dan T. Lim works in the business of supplying scrap papers, cartons, and other raw materials,
under the name Quality Paper and Plastic Products, Enterprises, to factories engaged in the paper
mill business. From February 2007 to March 2007, he delivered scrap papers worth 7,220,968.31 to
Arco Pulp and Paper Company, Inc. (Arco Pulp and Paper) through its Chief Executive Officer and
President, Candida A. Santos. The parties allegedly agreed that Arco Pulp and Paper would either
pay Dan T. Lim the value of the raw materials or deliver to him their finished products of equivalent
value.
Dan T. Lim alleged that when he delivered the raw materials, Arco Pulp and Paper issued a
post-dated check dated April 18, 2007 in the amount of 1,487,766.68 as partial payment, with the
assurance that the check would not bounce. When he deposited the check on April 18, 2007, it was
dishonored for being drawn against a closed account.
On the same day, Arco Pulp and Paper and a certain Eric Sy executed a memorandum of
agreement where Arco Pulp and Paper bound themselves to deliver their finished products to
Megapack Container Corporation, owned by Eric Sy, for his account. According to the memorandum,
the raw materials would be supplied by Dan T. Lim, through his company, Quality Paper and Plastic
Products. The memorandum of agreement reads as follows:
Per meeting held at ARCO, April 18, 2007, it has been mutually agreed between Mrs. Candida
A. Santos and Mr. Eric Sy that ARCO will deliver 600 tons Test Liner 150/175 GSM, full width 76
inches at the price of P18.50 per kg. to Megapack Container for Mr. Eric Sys account.
It has been agreed further that the Local OCC materials to be used for the production of the
above Test Liners will be supplied by Quality Paper & Plastic Products Ent., total of 600 Metric Tons
at P6.50 per kg. (price subject to change per advance notice). Quantity of Local OCC delivery will be
based on the quantity of Test Liner delivered to Megapack Container Corp. based on the above
production schedule.
On May 5, 2007, Dan T.Lim sent a letter to Arco Pulp and Paper demanding payment of the
amount of 7,220,968.31, but no payment was made to him.
Issue: Whether or not there was novation.
Held: Novation is a mode of extinguishing an obligation by changing its objects or principal
obligations, by substituting a new debtor in place of the old one, or by subrogating a third person to
the rights of the creditor. Article 1293 of the Civil Code defines novation as follows:

"Art. 1293. Novation which consists in substituting a new debtor in the place of the original one, may
be made even without the knowledge or against the will of the latter, but not without the consent of
the creditor. Payment by the new debtor gives him rights mentioned in articles 1236 and 1237."
In general, there are two modes of substituting the person of the debtor: (1) expromision and
(2) delegacion. In expromision, the initiative for the change does not come from and may even be
made without the knowledge of the debtor, since it consists of a third persons assumption of the
obligation. As such, it logically requires the consent of the third person and the creditor. In delegacion,
the debtor offers, and the creditor accepts, a third person who consents to the substitution and
assumes the obligation; thus, the consent of these three persons are necessary. Both modes of
substitution by the debtor require the consent of the creditor.
Novation may also be extinctive or modificatory. It is extinctive when an old obligation is
terminated by the creation of a new one that takes the place of the former. It is merely modificatory
when the old obligation subsists to the extent that it remains compatible with the amendatory
agreement. Whether extinctive or modificatory, novation is made either by changing the object or the
principal conditions, referred to as objective or real novation; or by substituting the person of the
debtor or subrogating a third person to the rights of the creditor, an act known as subjective or
personal novation. For novation to take place, the following requisites must concur:
1) There must be a previous valid obligation.
2) The parties concerned must agree to a new contract.
3) The old contract must be extinguished.
4) There must be a valid new contract.
Novation may also be express or implied. It is express when the new obligation declares in
unequivocal terms that the old obligation is extinguished. It is implied when the new obligation is
incompatible with the old one on every point. The test of incompatibility is whether the two obligations
can stand together, each one with its own independent existence.
Because novation requires that it be clear and unequivocal, it is never presumed, thus:
In the civil law setting, novatio is literally construed as to make new. So it is deeply rooted in the
Roman Law jurisprudence, the principle novatio non praesumitur that novation is never
presumed.At bottom, for novation tobe a jural reality, its animus must be ever present, debitum pro
debito basically extinguishing the old obligation for the new one. There is nothing in the
memorandum of agreement that states that with its execution, the obligation of petitioner Arco Pulp
and Paper to respondent would be extinguished. It also does not state that Eric Sy somehow
substituted petitioner Arco Pulp and Paper as respondents debtor. It merely shows that petitioner
Arco Pulp and Paper opted to deliver the finished products to a third person instead.
The consent of the creditor must also be secured for the novation to be valid:
Novation must be expressly consented to. Moreover, the conflicting intention and acts of the parties
underscore the absence of any express disclosure or circumstances with which to deduce a clear and
unequivocal intent by the parties to novate the old agreement.

In this case, respondent was not privy to the memorandum of agreement, thus, his conformity
to the contract need not be secured.
If the memorandum of agreement was intended to novate the original agreement between the
parties, respondent must have first agreed to the substitution of Eric Sy as his new debtor. The
memorandum of agreement must also state in clear and unequivocal terms that it has replaced the
original obligation of petitioner Arco Pulp and Paper to respondent. Neither of these circumstances is
present in this case.
Petitioner Arco Pulp and Papers act of tendering partial payment to respondent also conflicts
with their alleged intent to pass on their obligation to Eric Sy. When respondent sent his letter of
demand to petitioner Arco Pulp and Paper, and not to Eric Sy, it showed that the former neither
acknowledged nor consented to the latter as his new debtor. These acts, when taken together, clearly
show that novation did not take place. Since there was no novation, petitioner Arco Pulp and Papers
obligation to respondent remains valid and existing.
SPOUSES VICTOR and EUNA BINUA, Petitioners,

vs. LUCIA P. ONG, Respondent.
G.R. No. 207176
June 18, 2014
Facts: In a Joint Decision dated January 10, 2006 by the Regional Trial Court of Tuguegarao City,
Branch 2 (RTC-Branch 2), in Criminal Cases Nos. 8230, 8465-70, petitioner Edna was found guilty of
Estafa and was sentenced to imprisonment from six ( 6) years and one ( 1) day of prision mayor, as
minimum, to thirty (30) years of reclusion perpetua, as maximum, for each conviction. Petitioner Edna
was also ordered to pay the respondent the amount of P2,285,000.00, with ten percent (10%)
interest, and damages.
Petitioner Edna sought to avoid criminal liability by settling her indebtedness through the
execution of separate real estate mortgages over petitioner Victors properties on February 2, 2006,
and covering the total amount of P7,000,000.00. Mortgaged were portions of Lot No. 1319 covered by
Transfer Certificate of Title (TCT) No. T-15232 and Lot No. 2399 covered by TCT No. T-15227, both
located in Tuguegarao City.
Petitioner Edna, however, failed to settle her obligation, forcing the respondent to foreclose the
mortgage on the properties, with the latter as the highest bidder during the public sale.
The petitioners then filed the case for the Declaration of Nullity of Mortgage Contracts, alleging
that the mortgage documents were "executed under duress, as the [petitioners] at the time of the
execution of said deeds were still suffering from the effect of the conviction of [petitioner] Edna, and
could not have been freely entered into said contracts."

Issue: WON THE LOWER COURT ERRED IN REFUSING TO DECLARE NULL AND VOID THE
MORTGAGE CONTRACTS DESPITE ITS FINDING THAT SAID CONTRACTS WERE EXECUTED
UNDER FEAR, DURESS AND THREAT
Held: The petitioners claim that they were compelled by duress or intimidation when they executed
the mortgage contracts. According to them, they "were still suffering from the effect of the conviction
of [petitioner] Edna, and could not have been freely entered into said contracts." The petitioners also
allege that the respondent subsequently "rammed the two (2) mortgage contracts involving two (2)
prime properties on [petitioner Victors] throat, so to speak[,] just so to make him sign the said
documents," and that the respondent took advantage of the misfortune of the petitioners and was
able to secure in her favor the real estate mortgages.
Article 1390(2) of the Civil Code provides that contracts where the consent is vitiated by
mistake, violence, intimidation, undue influence or fraud are voidable or annullable. Article 1335 of the
Civil Code, meanwhile, states that "[t]here is intimidation when one of the contracting parties is
compelled by a reasonable and well-grounded fear of an imminent and grave evil upon his person or
property, or upon the person or property of his spouse, descendants or ascendants, to give his
consent." The same article, however, further states that "[a] threat to enforce ones claim through
competent authority, if the claim is just or legal, does not vitiate consent."
In De Leon v. Court of Appeals, the Court held that in order that intimidation may vitiate
consent and render the contract invalid, the following requisites must concur: (1) that the intimidation
must be the determining cause of the contract, or must have caused the consent to be given; (2) that
the threatened act be unjust or unlawful; (3) that the threat be real and serious, there being an evident
disproportion between the evil and the resistance which all men can offer, leading to the choice of the
contract as the lesser evil; and (4) that it produces a reasonable and well-grounded fear from the fact
that the person from whom it comes has the necessary means or ability to inflict the threatened injury.
In cases involving mortgages, a preponderance of the evidence is essential to establish its
invalidity, and in order to show fraud, duress, or undue influence of a mortgage, clear and convincing
proof is necessary.
Based on the petitioners own allegations, what the respondent did was merely inform them of
petitioner Ednas conviction in the criminal cases for estafa. It might have evoked a sense of fear or
dread on the petitioners part, but certainly there is nothing unjust, unlawful or evil in the respondent's
act. The petitioners also failed to show how such information was used by the respondent in coercing
them into signing the mortgages. The petitioners must remember that petitioner Edna's conviction
was a result of a valid judicial process and even without the respondent allegedly "ramming it into
petitioner Victor's throat," petitioner Edna's imprisonment would be a legal consequence of such
conviction.
In Callanta v. National Labor Relations Commission, the Court stated that the threat to
prosecute for estafa not being an unjust act, but rather a valid and legal act to enforce a claim, cannot
at all be considered as intimidation. As correctly ruled by the CA, "[i]f the judgment of conviction is the
only basis of the [petitioners] in saying that their consents were vitiated, such will not suffice to nullify

the real estate mortgages and the subsequent foreclosure of the mortgaged properties. No proof was
adduced to show that [the respondent] used [force], duress, or threat to make [petitioner] Victor
execute the real estate mortgages.
NORA B. CALALANG-PARULAN and ELVIRA B. CALALANG, Petitioners,

vs. ROSARIO CALALANG-GARCIA, LEONORA CALALANG-SABILE, and CARLITO S.
CALALANG, Respondents.
G.R. No. 184148. June 9, 2014
Facts: In a Complaint for Annulment of Sale and Reconveyance of Property , the respondents
Rosario Calalang-Garcia, Leonora Calalang-Sabile, and Carlito S. Calalang asserted their ownership
over a certain parcel of land against the petitioners Nora B. Calalang-Parulan and Elvira B. Calalang.
The said lot with was allegedly acquired by the respondents from their mother Encarnacion Silverio,
through succession as the latters compulsory heirs.
According to the respondents, their father, Pedro Calalang contracted two marriages during his
lifetime. The first marriage was with their mother Encarnacion Silverio. During the subsistence of this
marriage, their parents acquired the above-mentioned parcel of land from their maternal grandmother
Francisca Silverio. Despite enjoying continuous possession of the land, however, their parents failed
to register the same. On June 7, 1942, the first marriage was dissolved with the death of Encarnacion
Silverio.
Pedro Calalang entered into a second marriage with Elvira B. Calalang who then gave birth to
Nora B. Calalang-Parulan and Rolando Calalang. According to the respondents, it was only during
this time that Pedro Calalang filed an application for free patent over the parcel of land with the
Bureau of Lands. Pedro Calalang committed fraud in such application by claiming sole and exclusive
ownership over the land since 1935 and concealing the fact that he had three children with his first
spouse. As a result, on September 22, 1974, the Register of Deeds of Bulacan issued Original
Certificate of Title (OCT) No. P-28715 in favor of Pedro Calalang only.
Pedro Calalang sold the said parcel of land to Nora B. Calalang-Parulan.
The respondents assailed the validity of TCT No. 283321 on two grounds. First, the
respondents argued that the sale of the land was void because Pedro Calalang failed to obtain the
consent of the respondents who were co-owners of the same. As compulsory heirs upon the death of
Encarnacion Silverio, the respondents claimed that they acquired successional rights over the land.
Thus, in alienating the land without their consent, Pedro Calalang allegedly deprived them of their pro
indiviso share in the property. Second, the respondents claimed that the sale was absolutely
simulated as Nora B. Calalang-Parulan did not have the capacity to pay for the consideration stated
in the Deed of Sale.

The trial court rendered decision in favor of the respondents. The CA reversed the factual
findings of the trial court and held that Pedro Calalang was the sole and exclusive owner of the
subject parcel of land.
Issue: Whether or not the contract of sale was valid.
Held: As the sole and exclusive owner, Pedro Calalang had the right to convey his property in favor
of Nora B. Calalang-Parulan by executing a Deed of Sale on February 17, 1984. The CA therefore
erred in ruling that Pedro Calalang deprived his heirs of their respective shares over the disputed
property when he alienated the same.
It is hornbook doctrine that successional rights are vested only at the time of death. Article 777
of the New Civil Code provides that "[t]he rights to the succession are transmitted from the moment of
the death of the decedent." In Butte v. Manuel Uy and Sons, Inc.,19 we proclaimed the fundamental
tenets of succession:
The principle of transmission as of the time of the predecessor's death is basic in our Civil
Code, and is supported by other related articles. Thus, the capacity of the heir is determined as of the
time the decedent died (Art. 1034); the legitime is to be computed as of the same moment (Art. 908),
and so is the in officiousness of the donation inter vivas (Art. 771). Similarly, the legacies of credit and
remission are valid only in the amount due and outstanding at the death of the testator (Art. 935), and
the fruits accruing after that instant are deemed to pertain to the legatee (Art. 948).
Thus, it is only upon the death of Pedro Calalang on December 27, 1989 that his heirs
acquired their respective inheritances, entitling them to their pro indiviso shares to his whole estate.
At the time of the sale of the disputed property, the rights to the succession were not yet bestowed
upon the heirs of Pedro Calalang. And absent clear and convincing evidence that the sale was
fraudulent or not duly supported by valuable consideration (in effect an in officious donation inter
vivas), the respondents have no right to question the sale of the disputed property on the ground that
their father deprived them of their respective shares. Well to remember, fraud must be established by
clear and convincing evidence. Mere preponderance of evidence is not even adequate to prove
fraud.20 The Complaint for Annulment of Sale and Reconveyance of Property must therefore be
dismissed.
JOSE ESPINELI a.k.a. DANILO ESPINELI, Petitioner,
vs. PEOPLE OF THE PHILIPPINES, Respondent.
G.R. No.179535. June 9, 2014
Facts: An Information charging petitioner with the crime of murder was filed. The facts show that in
the early evening of December 15, 1996, Alberto Berbon y Downie (Alberto), a 49-year old Senior
Desk Coordinator of the radio station DZMM, was shot in the head and different parts of the body in

front of his house in Imus, Cavite by unidentified malefactors who immediately fled the crime scene
on board a waiting car.
Meanwhile, the group of Atty. Orly Dizon (Atty. Dizon) of the National Bureau of Investigation
(NBI) arrested and took into custody one Romeo Reyes (Reyes) for the crime of Illegal Possession of
Deadly Weapon. Reyes confided to the group of Atty. Dizon that he was willing to give vital
information regarding the Berbon case. In due course, NBI Agent Dave Segunial(NBI Agent Segunial)
interviewed Reyes on February 10, 1997 and reduced his statement into writing whereby Reyes
claimed that on December 15, 1996, he saw petitioner and Sotero Paredes (Paredes) board a red car
while armed with a .45 caliber firearm and armalite, respectively; and that petitioner told Paredes that
"ayaw ko nang abutin pa ng bukas yang si Berbon."Subsequently, Reyes posted bail and was
released on February 14, 1997. Thenceforth, he jumped bail and was never again heard of. NBI
Agent Segunial testified on these facts during the trial.
Issue: Whether or not the accused is liable for damages.
Held: While the CA correctly imposed the amount of P50,000.00 as civil indemnity, it failed, however,
to award moral damages. These awards are mandatory without need of allegation and proof other
than the death of the victim, owing to the fact of the commission of murder or homicide. Thus, for
moral damages, the award of P50,000.00 to the heirs of the victim is only proper.
Anent the award of actual damages, this Court sees no reason to disturb the amount awarded
by the trial court as upheld by the CA since the itemized medical and burial expenses were duly
supported by receipts and other documentary evidence.
The CA did not grant any award of damages for loss of earning capacity and rightly so. Though
Sabina testified as to the monthly salary of the deceased, the same remains unsubstantiated. "Such
indemnity cannot be awarded in the absence of documentary evidence except where the victim was
either self-employed or a daily wage worker earning less than the minimum wage under current labor
laws.The exceptions find no application in this case.
In addition and in conformity with current policy, an interest at the legal rate of 6% per annum
is imposed on all the monetary awards for damages from date of finality of this judgment until fully
paid.
GADRINAB vs. SALAMANCA et al.

G.R. No. 194560 June 11, 2014
Facts: Respondents, together with Adoracion Gadrinab and Arsenia Talao, are siblings and heirs of
the late Spouses Talao, who died intestate, leaving a parcel of land in Sta. Ana, Manila.

The five Talao children divided the property among themselves through an extrajudicial
settlement. Arsenia Talao waived her share over the property in favor of her siblings.
Respondent Salamanca filed a complaint for partition against her siblings. All parties claimed
their respective shares in the property and later on entered into a compromise agreement, which was
approved by the court and became final and executory.
During the execution thereof, however, petitioner Nestor refused to vacate a portion of the
property. The siblings then agreed to partition the accrued rentals to only three, leaving Nestor with
the only portion of the property which is unsold. Now, respondent Salamanca moved for the physical
partition of the property occupied by petitioner Nestor. Nestor opposed the motion claiming that the
judgment on the compromise agreement had already become final and executory and had the effect
of res judicata.
The RTC granted the motion for physical partition. On appeal, the CA affirmed the RTC and
dismissed the appeal. Hence this petition.
Issue: Whether the courts may allow the physical partition of a property despite finality of a previous
judgment on compromise agreement involving the division of the same property.
Held: No. In a compromise agreement, the parties freely enter into stipulations. "A judgment based
on a compromise agreement is a judgment on the merits" of the case. It has the effect of res judicata.
In Spouses Romero v. Tan, the Court said that a judicial compromise has the effect of res
judicata and is immediately executory and not appealable unless set aside by mistake, fraud,
violence, intimidation, undue influence, or falsity of documents that vitiated the compromise
agreement.
There are two rules that embody the principle of res judicata. The first rule refers to "bar by
prior judgment," which means that actions on the same claim or cause of action cannot be relitigated.
The second rule refers to "conclusiveness of judgment." This means that facts already tried and
determined in another action involving a different claim or cause of action cannot anymore be
relitigated.
Under the doctrine of finality of judgment or immutability of judgment, a decision that has
acquired finality becomes immutable and unalterable, and may no longer be modified in any respect,
even if the modification is meant to correct erroneous conclusions of fact and law, and whether it be
made by the court that rendered it or by the Highest Court of the land.
Doctrines on bar by prior judgment and immutability of judgment apply whether judgment is
rendered after a full- blown trial or after the parties voluntarily execute a compromise agreement duly
approved by the court. Because a judicial compromise agreement is in the nature of both an
agreement between the parties and a judgment on the merits, it is covered by the Civil Code
provisions on contracts. It can be avoided on grounds that may avoid an ordinary contract, e.g., it is
not in accord with the law; lack of consent by a party; and existence of fraud or duress.
Further, the pertinent Civil Code provisions on compromise agreements provide:

Article 2038. A compromise in which there is mistake, fraud, violence, intimidation, undue influence,
or falsity of documents is subject to the provisions of Article 1330 of this Code.
Article 1330. A contract where consent is given through mistake, violence, intimidation, undue
influence, or fraud is voidable.
Therefore, courts cannot entertain actions involving the same cause of action, parties, and
subject matter without violating the doctrines on bar by prior judgment and immutability of judgments,
unless there is evidence that the agreement was void, obtained through fraud, mistake or any vice of
consent, or would disrupt substantial justice. In this case, there was no issue as to the fact that the
parties freely entered into the compromise agreement. There was also no dispute about the clarity of
its terms. Some of the parties simply do not wish to abide by the compromise agreements terms.
Judges have the ministerial and mandatory duty to implement and enforce a compromise
agreement. Absent appeal or motion to set aside the judgment, courts cannot modify, impose terms
different from the terms of a compromise agreement, or set aside the compromises and reciprocal
concessions made in good faith by the parties without gravely abusing their discretion.
By: JOANALEN G. BERMAS
CABLING vs. LUMAPAS
G.R. No. 196950, 18 June 2014
Facts: Petitioner Cabling was the highest bidder in an extrajudicial foreclosure sale over a property
situated in Sta. Rita, Olongapo City. The Final Deed of Sale was issued by the Sheriff of Olongapo
City and the title to the property was duly transferred to the petitioner after more than one year
therefrom.
Petitioner Cabling filed an Application for the Issuance of a Writ of Possession with the RTC.
Petitioners application was granted and the RTC subsequently issued a Writ of Possession and
Notice to Vacate.
Respondent Lumapas, however, filed a Motion for Intervention as a third party in actual
possession of the foreclosed property. She claimed that the property had previously been sold to her
by Aida Ibabao, the propertys registered owner and the judgment debtor/mortgagor in the
extrajudicial foreclosure sale, pursuant to a Deed of Conditional Sale.
The RTC issued an order holding in abeyance the implementation of the petitioners writ of
possession until after the resolution of the respondents motion. Thereafter, the RTC rendered the
assailed decision stating that "an ex-parte writ of possession issued pursuant to Act No. 355, as
amended, cannot be enforced against a third person who is in actual possession of the foreclosed
property and who is not in privity with the debtor/mortgagor."

On appeal, the CA dismissed the petition and affirmed in toto the RTCs assailed orders
holding that the obligation of the trial court to issue a writ of possession ceases to be ministerial once
it appears that there is a third party in possession of the property claiming a right adverse to that of
the debtor/mortgagor and where such third party exists, the trial court should conduct a hearing to
determine the nature of his adverse possession. Hence, this petition.
Issue: Whether respondent may be considered as having an adverse title against petitioner, thus
warranting the abeyance of the implementation of the writ of possession.
Held: No. In the present case, the respondent cannot be said to possess the subject property by
adverse title or right as her possession is merely premised on the alleged conditional sale of the
property to her by the judgment debtor/mortgagor. The execution of a contract of conditional sale
does not immediately transfer title to the property to be sold from seller to buyer. In such contract,
ownership or title to the property is retained by the seller until the fulfillment of a positive suspensive
condition which is normally the payment of the purchase price in the manner agreed upon.
Here, the Deed of Conditional Sale between the respondent (buyer) and the subject propertys
registered owner (seller) expressly reserved to the latter ownership over the property until full
payment of the purchase price, despite the delivery of the subject property to the respondent. It
appears from the records that no deed of absolute sale over the subject property has been executed
in the respondent's favor. Thus, the respondent's possession from the time the subject property was
"delivered" to her by the seller cannot be claimed as possession in the concept of an owner, as the
ownership and title to the subject property still then remained with the seller until the title to the
property was transferred to the petitioner in March 2009.
As a rule, in the extrajudicial foreclosure of real estate mortgages under Act No. 3135 (as
amended), the writ of possession issues as a matter of course, without need of a bond or of a
separate and independent action, after the lapse of the period of redemption, and after the
consolidation of ownership and the issuance of a new TCT in the purchasers name. An exemption is
that the possession of the property shall be given to the purchaser or last redemptioner unless a third
party is actually holding the property in a capacity adverse to the judgment obligor.
In order for the respondent not to be ousted by the ex parte issuance of a writ of possession,
her possession of the property must be adverse in that she must prove a right independent of and
even superior to that of the judgment debtor/mortgagor.
DOLORES CAMPOS, Petitioner, vs. DOMINADOR ORTEGA, SR.
and JAMES SILOS, Respondent.
G.R. No. 171286. June 2, 2014
Facts: On August 17, 1999, petitioner Dolores Campos filed a case for specific performance with
damages against respondents Dominador Ortega, Sr. and James Silos. Plaintiff occupied the entire

second level as well as the front portion of the ground level of a residential structure located at No.
2085 F. Blumentritt Street, Mandaluyong City. The lot on which the said structure is standing is
owned by the government, while the structure itself is owned by Dominga Boloy from whom plaintiff
leased the same beginning in 1966.
Under the Zonal Improvement Program Guideline Circular No. 1 dated September 16, 1977 of
the National Housing [Authority], plaintiff is a qualified beneficiary of NHAs Zonal Improvement
Program, she being in the premises since 1966 as lessee of a residential structure. According to the
aforementioned circular, only occupants who have been actually residing in the ZIP project area
either as sharer or renter before August 15, 1975 are qualified beneficiaries under this NHA program.
The plaintiff was given until December 19, 1987 within which to buy the property located at Lot 17,
Block 7[,] Phase III of the Hulo estate but did not exercise her right because the property involved is
different from what she had been occupying since 1966 until they left. Before any clarification was
made on this matter and before plaintiff could exercise [her] right to purchase, [she] learned that the
property, Lot 18, Block [7], Phase III of Hulo estate was already sold to herein defendants in violation
of her right.
Issues:
1. Whether or not petioner acquired a vested and cognizable right respecting their property
2. Whether or not specific performance is the correct remedy
Held:
1. While it is true that NHA recognizes plaintiff as the censused owner of the structure built on the lot,
the issuance of the tag number is not a guarantee for lot allocation. Plaintiff had petitioned the NHA
for the award to her of the lot she is occupying. However, the census, tagging, and plaintiff's petition,
did not vest upon her a legal title to the lot she was occupying, but a mere expectancy that the lot will
be awarded to her. A vested right is one that is absolute, complete and unconditional and no obstacle
exists to its exercise. It is immediate and perfect in itself and not dependent upon any contingency. To
be vested, a right must have become a title legal or equitable to the present or future enjoyment
of property. Neither does petitioner have a "cognizable" right respecting the lot in question. Notably,
she readily admitted not exercising their option to buy Boloys property despite the knowledge that
one of the requirements before an entitlement to an award of the government-owned lot is that they
must own the subject house.
In this case, petitioner, as the party alleging fraud in the transaction and the one who bears the
burden of proof, miserably failed to demonstrate that respondents committed fraud or that they
connived with government officials and employees to cause undue damage or prejudice to petitioner.
Petitioner did not present even a single evidence to support the view that the repetitive absences of
the persons necessary for the meetings before the Arbitration and Awards Committee were
intentional or done with malicious intent. Also, as the CA found, records would show that respondent
Ortega, Sr. initially purchased 1/3 of the residential structure on November 23, 1987, per Deed of
Absolute Sale, which, recognizing his co-occupancy with others, also gave respondent Silos and
petitioner the similar option to buy their respective 1/3 portion. Petitioner did not exercise the option

given. Hence, upon such failure, the entire structure was eventually sold to both respondents through
the Deed of Sale dated February 19, 1988.
2. We agree with the CA that the case for specific performance with damages instituted by petitioner
effectively attacks the validity of respondents' Torrens title over the subject lot. It is evident that,
ultimately, the objective of such claim is to nullify the title of respondents to the property in question,
which, in turn, challenges the judgment pursuant to which the title was decreed. This is a collateral
attack that is not permitted under the principle of indefeasibility of Torrens title. Section 48 of
Presidential Decree No. 1529, otherwise known as the Property Registration Decree, unequivocally
states:
SEC. 48. Certificate not subject to collateral attack. - A certificate of title shall not be subject to
collateral attack. It cannot be altered, modified, or cancelled except in a direct proceeding in
accordance with law.
A collateral attack transpires when, in another action to obtain a different relief and as an
incident to the present action, an attack is made against the judgment granting the title while a direct
attack (against a judgment granting the title) is an action whose main objective is to annul, set aside,
or enjoin the enforcement of such judgment if not yet implemented, or to seek recovery if the property
titled under the judgment had been disposed of. The issue on the validity of title, i.e., whether or not it
was fraudulently issued, can only be raised in an action expressly instituted for that purpose.
The appropriate legal remedy that petitioner should have availed is an action for
reconveyance. Proof of actual fraud is not required as it may be filed even when no fraud intervened
such as when there is mistake in including the land for registration.
Under the principle of constructive trust, registration of property by one person in his name,
whether by mistake or fraud, the real owner being another person, impresses upon the title so
acquired the character of a constructive trust for the real owner, which would justify an action for
reconveyance. In the action for reconveyance, the decree of registration is respected as
incontrovertible but what is sought instead is the transfer of the property wrongfully or erroneously
registered in another's name to its rightful owner or to one with a better right. If the registration of the
land is fraudulent, the person in whose name the land is registered holds it as a mere trustee, and the
real owner is entitled to file an action for reconveyance of the property.
An action for reconveyance resulting from fraud prescribes four years from the discovery of the
fraud, which is deemed to have taken place upon the issuance of the certificate of title over the
property, and if based on an implied or a constructive trust it prescribes ten (10) years from the
alleged fraudulent registration or date of issuance of the certificate of title over the property.
However, an action for reconveyance based on implied or constructive trust is imprescriptible if
the plaintiff or the person enforcing the trust is in possession of the property. In effect, the action for
reconveyance is an action to quiet title to the property, which does not prescribe.
In this case, petitioner, taking into account Article 1155 of the Civil Code and jurisprudence on
the matter, should be guided by the following facts in enforcing her legal remedy/ies, if still any: (1)

her judicial admission that they no longer possess the subject lot, claiming that they stayed therein
from 1966 until 1997 when they were ejected by the sheriff of Pasig RTC; (2) TCT No. 13342 was
issued on December 9, 1997; and (3) the instant case for specific performance with damages was
filed on August 17, 1999.
By: Aliah M. Comagul
Alvin Patrimonio v. Napoleon Gutierrez and Octavio Marasigan III

G.R. No. 187769 June 4, 2014
Facts: The petitioner and the Gutierrez entered into a business venture named Slam Dunk
Corporation (Slum Dunk), a production outfit that produced mini-concerts and shows related to
basketball. Petitioner was a professional basketball player while Gutierrez was a sports columnist.
In the course of their business, the petitioner pre-signed several checks to answer for the
expenses of Slam Dunk. Although signed, these checks had no payees name, date or amount. The
blank checks were entrusted to Gutierrez with the specific instruction not to fill them out without
previous notification to and approval by the petitioner. According to petitioner, the arrangement was
made so that he could verify the validity of the payment and make the proper arrangements to fund
the account.
In the middle of 1993, without the petitioners knowledge and consent, Gutierrez went to a
former teammate of petitioner (Marasigan), to secure a loan in the amount of P200,000.00 on the
excuse that the petitioner needed the money for the construction of his house. In addition to the
payment of the principal, Gutierrez assured Marasigan that he would be paid an interest of 5% per
month from March to May 1994. Marasigan granted it. Gutierrez simultaneously delivered to
Marasigan one of the blank checks the petitioner pre-signed with the words Cash Two Hundred
Thousand Pesos Only, and the amount of P200,000.00. Marasigan deposited the check but it was
dishonoured. Marasigan sought recovery from Gutierrez, to no avail. He thereafter sent several
demands which went unheeded. Consequently, he filed a criminal case for violation of B.P. 22
against the petitioner.
Petitioner then filed before the RTC a Complaint for Declaration of Nullity of Loan and
Recovery of Damages against Gutierrez and co-respondent Marasigan. He completely denied
authorizing the loan or the checks negotiation, and asserted that he was not privy to the parties loan
agreement.
RTC ruled in favour of Marasigan. The appellate court did not reverse the decision of the RTC,
hence this present petition.
Issue: Whether or not the petitioner is liable for the contract entered into between Gutierrez and
Marasigan.

Held: No. As a general rule, a contract of agency may be oral. However, it must be written when the
law requires a specific form. Article 1878 paragraph 7 of the Civil Code expressly requires a special
power of authority before an agent can loan or borrow money in behalf of the principal. Article 1878
does not state that the authority be in writing. As long as the mandate is express, such authority may
be either oral or written. In the earlier case of Lim Pin v. Liao Tian, et al., that the requirement under
Article 1878 of the Civil Code refers to the nature of the authorization and not to its form. Be that as it
may, the authority must be duly established by competent and convincing evidence other than the
self serving assertion of the party claiming that such authority was verbally given.
A review of the records reveals that Gutierrez did not have any authority to borrow money in
behalf of the petitioner. Records do not show that the petitioner executed any special power of
attorney (SPA) in favor of Gutierrez. In fact, the petitioners testimony confirmed that he never
authorized Gutierrez (or anyone for that matter), whether verbally or in writing, to borrow money in his
behalf, nor was he aware of any such transaction. In the absence of any authorization, Gutierrez
could not enter into a contract of loan in behalf of the petitioner.
In the absence of any showing of any agency relations or special authority to act for and in
behalf of the petitioner, the loan agreement Gutierrez entered into with Marasigan is null and void.
Thus, the petitioner is not bound by the parties loan agreement.
Another significant point that the lower courts failed to consider is that a contract of loan, like
any other contract, is subject to the rules governing the requisites and validity of contracts in general.
In this case, the contract is made without the consent of petitioner, and hence, one element of a valid
contract is lacking.
SPOUSES DOMINADOR PERALTA AND OFELIA PERALTA, Petitioners,

vs. HEIRS OF BERNARDINA ABALON, represented by MANSUETO ABALON, Respondents.
G.R. No. 183448. June 30, 2014
HEIRS OF BERNARDINA ABALON, represented by MANSUETO ABALON, Petitioners,vs.
MARISSA ANDAL, LEONIL AND AL, ARNEL AND AL, SPOUSES DOMINDOR PERALTA AND
OFELIA PERALTA, and HEIRS of RESTITUTO RELLAMA, represented by his children ALEX,
IMMANUEL, JULIUS and SYLVIA, all surnamed RELLAMA.
G.R. No. 183464. June 30, 2014
Facts: The civil case before the RTC of Legaspi City involved a parcel of land registered under the
name of Bernardina Abalon and fraudulently transferred to Restituto Rellama and who, in turn,
subdivided the subject property and sold it separately to the other parties to this case Spouses
Dominador and Ofelia Peralta; and Marissa, Leonil and Arnel, all surnamed Andal. Thereafter,
Spouses Peralta and the Andals individually registered the respective portions of the land they had
bought under their names. The heirs of Bernardina were claiming back the land, alleging that since it

was sold under fraudulent circumstances, no valid title passed to the buyers. On the other hand, the
buyers, who were now title holders of the subject parcel of land, averred that they were buyers in
good faith and sought the protection accorded to them under the law.
It appears that a Deed of Absolute Sale was executed over the subject property in favor of
Restituto M. Rellama (Rellama) on June 10, 1975.
Likewise, they alleged that Abalon had always been in possession of the subject property through her
tenant Pedro Bellen who was thereafter succeeded by his wife, Ruperta Bellen, and then his son,
Godofredo Bellen. On the other hand, they said that Rellama had never set foot on the land he was
claiming. They alleged that the defendants-appellants are not buyers in good faith as they were
aware that the subject land was in the possession of the plaintiffs-appellees at the time they made the
purchase. They thus claim that the titles issued to the defendants-appellants are null and void.
In his answer, Rellama alleged that the deed of absolute sale executed by Abalon is genuine
and that the duplicate copy of OCT No. (O) 16 had been delivered to him upon the execution of the
said deed of transfer.
As for Spouses Peralta and the Andals, who filed their separate answers to the complaint, they
mainly alleged that they are buyers in good faith and for value.
The court a quo rendered judgment in favor of the plaintiffs-appellees and ordered the
restoration of OCT No. (O) 16 in the name of Abalon and the cancellation of the titles issued to the
defendants-appellants. The fact that only a xerox copy of the purported deed of sale between
Rellama and Abalon was presented before the Register of Deeds for registration and the absence of
such xerox copy on the official files of the said Office made the court a quo conclude that the said
document was a mere forgery. The CA reversed the decision.
Issue: Whether a forged instrument may become the root of a valid title in the hands of an innocent
purchaser for value, even if the true owner thereof has been in possession of the genuine title, which
is valid and has not been cancelled.
Held: The assailed Decision of the CA held that the Andals were buyers in good faith, while Spouses
Peralta were not. Despite its determination that fraud marred the sale between Bernardina Abalon
and Rellama, a fraudulent or forged document of sale may still give rise to a valid title. The appellate
court reasoned that if the certificate of title had already been transferred from the name of the true
owner to that which was indicated by the forger and remained as such, the land is considered to have
been subsequently sold to an innocent purchaser, whose title is thus considered valid. The CA
concluded that this was the case for the Andals.
After executing the Deed of Sale with Bernardina Abalon under fraudulent circumstances,
Rellama succeeded in obtaining a title in his name and selling a portion of the property to the Andals,
who had no knowledge of the fraudulent circumstances involving the transfer from Abalon to Rellama.
The records of the RTC and the CA have a finding that when Rellama sold the properties to
the Andals, it was still in his name; and there was no annotation that would blight his clean title. To

the Andals, there was no doubt that Rellama was the owner of the property being sold to them, and
that he had transmissible rights of ownership over the said property. Thus, they had every right to rely
on the face of his title alone.
The established rule is that a forged deed is generally null and cannot convey title, the
exception thereto, pursuant to Section 55 of the Land Registration Act, denotes the registration of
titles from the forger to the innocent purchaser for value. Thus, the qualifying point here is that there
must be a complete chain of registered titles.This means that all the transfers starting from the
original rightful owner to the innocent holder for value and that includes the transfer to the forger
must be duly registered, and the title must be properly issued to the transferee. In the instant case,
there is no evidence that the chain of registered titles was broken in the case of the Andals. Neither
were they proven to have knowledge of anything that would make them suspicious of the nature of
Rellamas ownership over the subject parcel of land. Hence, we sustain the CAs ruling that the
Andals were buyers in good faith.
Consequently, the validity of their title to the parcel of the land bought from Rellama must be
upheld.
As for Spouses Peralta, we sustain the ruling of the CA that they are indeed buyers in bad
faith. The appellate court made a factual finding that in purchasing the subject property, they merely
relied on the photocopy of the title provided by Rellama. The CA concluded that a mere photocopy of
the title should have made Spouses Peralta suspicious that there was some flaw in the title of
Rellama, because he was not in possession of the original copy. This factual finding was supported
by evidence.
GOLDEN VALLEY EXPLORATION, INC. (GVEI) vs. PINKIAN MINING COMPANY (PMC)
and COPPER VALLEY, INC. (CVI).
G.R. No. 190080, 11 June 2014
Facts: PMC is the owner of 81 mining claims 15 of which were covered by Mining Lease Contract
(MLC) while the remaining 66 had pending applications for lease.
PMC entered into an Operating Agreement (OA) with GVEI, granting the latter "full, exclusive
and irrevocable possession, use, occupancy , and control over the mining claims for a period of 25
years, with a stipulation that GVEIs non-payment of royalties would give PMC sufficient cause to
cancel or rescind the OA,
In a letter, PMC extra-judicially rescinded the OA upon GVEIs violations of thereof.
GVEI contested PMCs extra-judicial rescission of the OA through a Letter.

PMC no longer responded to GVEIs letter. Instead, it entered into a Memorandum of
Agreement (MOA) with CVI, whereby the latter was granted the right to enter, possess, occupy and
control the mining claims and to explore and develop the mining claims, among others, for a period of
25 years.
Due to the foregoing, GVEI filed a Complaint Annulment of Contract and Damages against
PMC and CVI.
The RTC declared the rescission of the OA void and the execution of the MOA between PMC
and CVI without force and effect. On appeal, the CA reversed the RTC ruling and upheld the validity
of PMCs rescission of the OA and its subsequent execution of the MOA with CVI.
Issue: Whether there was a valid rescission of the OA.
Held: Yes. In reciprocal obligations, either party may rescind the contract upon the others substantial
breach of the obligation/s he had assumed thereunder. Article 1191 of the Civil Code which states
that the power to rescind obligations is implied in reciprocal ones, in case one of the obligors should
not comply with what is incumbent upon him. The injured party may choose between the fulfillment
and the rescission of the obligation, with the payment of damages in either case. He may also seek
rescission, even after he has chosen fulfillment, if the latter should become impossible.
As a general rule, the power to rescind an obligation must be invoked judicially and cannot be
exercised solely on a partys own judgment that the other has committed a breach of the obligation.
This is so because rescission of a contract will not be permitted for a slight or casual breach, but only
for such substantial and fundamental violations as would defeat the very object of the parties in
making the agreement.
As a well-established exception, however, an injured party need not resort to court action in
order to rescind a contract when the contract itself provides that it may be revoked or cancelled upon
violation of its terms and conditions.
By expressly stipulating in the OA that GVEIs non-payment of royalties would give PMC
sufficient cause to cancel or rescind the OA, the parties clearly had considered such violation to be a
substantial breach of their agreement. Thus, in view of the above-stated jurisprudence on the matter,
PMCs extra-judicial rescission of the OA based on the said ground was valid.
July 2014

SPOUSES EDUARDO and LYDIA SILOS vs. PHILIPPINE NATIONAL BANK.
G.R. No. 181045. July 2, 2014.
Del Castillo
Doctrine: In loan agreements, it cannot be denied that the rate of interest is a principal condition, if
not the most important component. Thus, any modification thereof must be mutually agreed upon;
otherwise, it has no binding effect. Moreover, the Court cannot consider a stipulation granting a party
the option to prepay the loan if said party is not agreeable to the arbitrary interest rates imposed.
Premium may not be placed upon a stipulation in a contract which grants one party the right to
choose whether to continue with or withdraw from the agreement if it discovers that what the other
party has been doing all along is improper or illegal.
Facts: Spouses Eduardo and Lydia Silos have been in business for about two decades of operating a
department store and buying and selling of ready-to-wear apparel. In August 1987 the spouses
constituted a REM over a 370 sq m lot in Kalibo, Aklan, in order to secure a one-year revolving credit
line of P150,000.00 obtained from PNB. In July 1988, and July 1989 the credit line was increased to
P1.8 million and P2.5 million respectively. Additional security was given in the form of a 134-sq m. lot.
The Silos issued eight Promissory Notes and signed a Credit Agreement. All the Promissory Notes
contained a stipulation granting PNB the right to increase or reduce interest rates "within the limits
allowed by law or by the Monetary Board." The Real Estate Mortgage agreement provided the same
right to increase or reduce interest rates "at any time depending on whatever policy PNB may adopt
in the future".
In August 1991, an Amendment to Credit Agreement was executed by the parties. Under this
Amendment to Credit Agreement, the Silos issued PNB 18 Promissory Notes with varying interest
rates, which they settled except the last (the note covering the principal). The 9th up to the 17th
promissory notes provide for the payment of interest at the "rate the Bank may at any time without
notice, raise within the limits allowed by law . . . ." On the other hand, the 18th up to the 26th
promissory notes including PN 9707237, which is the 26th promissory note carried the following
provision:
. . . For this purpose, I/We agree that the rate of interest herein stipulated may be increased or
decreased for the subsequent Interest Periods, with prior notice to the Borrower in the event of
changes in interest rate prescribed by law or the Monetary Board of the Central Bank of the
Philippines, or in the Bank's overall cost of funds. I/We hereby agree that in the event I/we are not
agreeable to the interest rate fixed for any Interest Period, I/we shall have the option to prepay the
loan or credit facility without penalty within ten (10) calendar days from the Interest Setting Date.
(Emphasis supplied)
PNB regularly renewed the line from 1990 up to 1997, and the Silos made good on the
promissory notes, religiously paying the interests without objection or fail. But in 1997, the spouses
failed when the interest rates soared due to the Asian financial crisis. The Silos' sole outstanding
promissory note for P2.5 million PN 9707237 executed in July 1997 became past due, and despite
repeated demands, they failed to make good on the note. Said PN 9707237 provided for the penalty
equivalent to 24% per annum in case of default. Thus, PNB foreclosed on the two mortgage, and
were sold to it at auction.
More than a year later, or on March 24, 2000, the Silos filed a civil case, seeking annulment of
the foreclosure sale and an accounting of the PNB credit. On February 28, 2003, the trial court
rendered judgment dismissing the civil case. The Silos moved for reconsideration, but the trial court
granted only a modification in the award of attorney's fees, reducing the same from 10% to 1%. Thus,
PNB was ordered to refund to petitioner the excess in attorney's fees in the amount of P356,589.90.
Hence the spouses appealed to the CA, which partly ruled for the spouses. The CA noted that, based
on receipts presented by petitioners during trial, the latter dutifully paid a total of P3,027,324.60 in
interest, over and above the P2.5 million principal obligation. But the spouses are stopped from
questioning the interest since they paid the same religiously and without fail for seven years. The CA
nevertheless noted that PNB wrongly applied an interest rate of 25.72% instead of the agreed 25%;
thus it overcharged petitioners, and the latter paid, an excess of P736.56 in interest. The CA then
proceeded to declare valid the foreclosure and sale of properties, which came as a necessary result
of petitioners' failure to pay the outstanding obligation upon demand.
Finally, the CA ruled that petitioners are entitled to P377,505.09 surplus, which is the difference
between PNB's bid price of P4,324,172.96 and petitioners' total computed obligation as of January
14, 1999, or the date of the auction sale, in the amount of P3,946,667.87.
Hence, the present Petition.
Issue/s: (1) Whether or not the interest rate as stipulated in the escalation clause (increases made by
the PNB) is valid.
(2) Whether or not Estoppel will apply to the spouses Silos.
(3) Whether or not legal interest rate will apply.
(4) Whether or not the penalty charge of 24% per annum based on the defaulted principal
amount shall be imposed.
Held:
(1) NO. It appears that PNB's practice, more than once proscribed by the Court, has been carried
over once more to the Silos spouses. In a number of decided cases, the Court struck down provisions
in credit documents issued by PNB to, or required of, its borrowers which allow the bank to increase
or decrease interest rates "within the limits allowed by law at any time depending on whatever policy it
may adopt in the future."
In the first case, PNB v. CA, such stipulation and similar ones were declared in violation of
Article 1308 of the Civil Code. P.D. No. 1684 and C.B. Circular No. 905 no more than allow
contracting parties to stipulate freely regarding any subsequent adjustment in the interest rate that
shall accrue on a loan or forbearance of money, goods or credits. In fine, they can agree to adjust,
upward or downward, the interest previously stipulated. However, contrary to the stubborn insistence
of petitioner bank, the said law and circular did not authorize either party to unilaterally raise the

interest rate without the other's consent. It is basic that there can be no contract in the true sense in
the absence of the element of agreement, or of mutual assent of the parties.
In the second case, PNB v. CA, et al., 196 SCRA 536, 544-545 (1991) we held that the
unilateral action of the PNB in increasing the interest rate on the private respondent's loan violated
the mutuality of contracts ordained in Article 1308 of the Civil Code:
Art. 1308. The contract must bind both contracting parties; its validity or compliance cannot be left to
the will of one of them.
Then again, in a third case, Spouses Almeda v. Court of Appeals, the Court invalidated the
very same provisions in the respondent's prepared Credit Agreement, declaring thus:
The binding effect of any agreement between parties to a contract is premised on two settled
principles: (1) that any obligation arising from contract has the force of law between the parties; and
(2) that there must be mutuality between the parties based on their essential equality. Any contract
which appears to be heavily weighed in favor of one of the parties so as to lead to an unconscionable
result is void. Any stipulation regarding the validity or compliance of the contract which is left solely to
the will of one of the parties, is likewise, invalid.
Still, in a fourth case, PNB v. CA, the above doctrine was reiterated. PNB's argument rests on
a misapprehension of the import of the appellate court's ruling. The Court of Appeals nullified the
interest rate increases not because the promissory note did not comply with P.D. No. 1684 by
providing for a de-escalation, but because the absence of such provision made the clause so onesided as to make it unreasonable. That ruling is correct. It is in line with our decision in Banco Filipino
Savings & Mortgage Bank v. Navarro that although P.D. No. 1684 is not to be retroactively applied to
loans granted before its effectivity, there must nevertheless be a de-escalation clause to mitigate the
one-sidedness of the escalation clause.
We made the same pronouncement in a fifth case, New Sampaguita Builders Construction,
Inc. v. Philippine National Bank, thus
Courts have the authority to strike down or to modify provisions in promissory notes that grant the
lenders unrestrained power to increase interest rates, penalties and other charges at the latter's sole
discretion and without giving prior notice to and securing the consent of the borrowers. This unilateral
authority is anathema to the mutuality of contracts and enable lenders to take undue advantage of
borrowers. Although the Usury Law has been effectively repealed, courts may still reduce iniquitous
or unconscionable rates charged for the use of money. Furthermore, excessive interests, penalties
and other charges not revealed in disclosure statements issued by banks, even if stipulated in the
promissory notes, cannot be given effect under the Truth in Lending Act.
Yet again, in a sixth disposition, Philippine National Bank v. Spouses Rocamora, the above
pronouncements were reiterated to debunk PNB's repeated reliance on its invalidated contract
stipulations.
Verily, all these cases, including the present one, involve identical or similar provisions found in
respondent's credit agreements and promissory notes. These stipulations must be once more
invalidated, as was done in previous cases, there is the lack of agreement of the parties to the

imposed interest rates. For this case, this lack of consent by the petitioners has been made obvious
by the fact that they signed the promissory notes in blank for the respondent to fill. We find credible
the testimony of Lydia in this respect. Respondent failed to discredit her; in fact, its witness PNB
Kalibo Branch Manager Aspa admitted that interest rates were fixed solely by its Treasury
Department in Manila, which were then simply communicated to all PNB branches for
implementation. If this were the case, then this would explain why petitioners had to sign the
promissory notes in blank, since the imposable interest rates have yet to be determined and fixed by
respondent's Treasury Department in Manila.
To repeat what has been said in the above-cited cases, any modification in the contract, such
as the interest rates, must be made with the consent of the contracting parties. The minds of all the
parties must meet as to the proposed modification, especially when it affects an important aspect of
the agreement. In the case of loan agreements, the rate of interest is a principal condition, if not the
most important component. Thus, any modification thereof must be mutually agreed upon; otherwise,
it has no binding effect. What is even more glaring in the present case is that, the stipulations in
question no longer provide that the parties shall agree upon the interest rate to be fixed; instead, they
are worded in such a way that the borrower shall agree to whatever interest rate respondent fixes.
(2) NO, with the present credit agreement, the element of consent or agreement by the borrower is
now completely lacking, which makes respondent's unlawful act all the more reprehensible.
Accordingly, the spouses are correct in arguing that estoppel should not apply to them, for "[e]stoppel
cannot be predicated on an illegal act. As between the parties to a contract, validity cannot be given
to it by estoppel if it is prohibited by law or is against public policy."
It appears that by its acts, respondent violated the Truth in Lending Act, or Republic Act No.
3765, which was enacted "to protect . . . citizens from a lack of awareness of the true cost of credit to
the user by using a full disclosure of such cost with a view of preventing the uninformed use of credit
to the detriment of the national economy." Section 4 thereof provides that a disclosure statement
must be furnished prior to the consummation of the transaction. Under Section 4 (6), "finance charge"
represents the difference between (1) the aggregate consideration (down payment plus installments)
on the part of the debtor, and (2) the sum of the cash price and non-finance charges. By requiring the
petitioners to sign the credit documents and the promissory notes in blank, and then unilaterally filling
them up later on, respondent violated the Truth in Lending Act, and was remiss in its disclosure
obligations. However, the one-year period within which an action for violation of the Truth in Lending
Act may be filed evidently prescribed long ago, or sometime in 2001, one year after petitioners
received the March 2000 demand letter which contained the illegal charges.
The fact that petitioners later received several statements of account detailing its outstanding
obligations does not cure respondent's breach. To repeat, the belated discovery of the true cost of
credit does not reverse the ill effects of an already consummated business decision.
(3) YES, legal interest rate will apply starting from the 2nd promissory note.
With regard to interest, the Court finds that since the escalation clause is annulled, the
principal amount of the loan is subject to the original or stipulated rate of interest, and upon maturity,

the amount due shall be subject to legal interest at the rate of 12% per annum. This is the uniform
ruling adopted in previous cases, including those cited here. The interests paid by petitioners should
be applied first to the payment of the stipulated or legal and unpaid interest, as the case may be, and
later, to the capital or principal. Respondent should then refund the excess amount of interest that it
has illegally imposed upon petitioners; "[t]he amount to be refunded refers to that paid by petitioners
when they had no obligation to do so." Thus, the parties' original agreement stipulated the payment of
19.5% interest; however, this rate was intended to apply only to the first promissory note which
expired on November 21, 1989 and was paid by petitioners; it was not intended to apply to the whole
duration of the loan. Subsequent higher interest rates have been declared illegal; but because only
the rates are found to be improper, the obligation to pay interest subsists, the same to be fixed at the
legal rate of 12% per annum. However, the 12% interest shall apply only until June 30, 2013. Starting
July 1, 2013, the prevailing rate of interest shall be 6% per annum pursuant to our ruling in Nacar v.
Gallery Frames and Bangko Sentral ng Pilipinas-Monetary Board Circular No. 799.
(4) NO. Petitioners claim that this penalty should be excluded from the foreclosure amount or bid
price because the Real Estate Mortgage and the Supplement thereto did not specifically include it as
part of the secured amount. Respondent justifies its inclusion in the secured amount, saying that the
purpose of the penalty or a penal clause is to ensure the performance of the obligation and substitute
for damages and the payment of interest in the event of non-compliance. Respondent adds that the
imposition and collection of a penalty is a normal banking practice, and the standard rate per annum
for all commercial banks, at the time, was 24%. Its inclusion as part of the secured amount in the
mortgage agreements is thus valid and necessary.
The Court sustains petitioners' view that the penalty may not be included as part of the
secured amount. Having found the credit agreements and promissory notes to be tainted, we must
accord the same treatment to the mortgages. After all, "[a] mortgage and a note secured by it are
deemed parts of one transaction and are construed together." Being so tainted and having the
attributes of a contract of adhesion as the principal credit documents, we must construe the mortgage
contracts strictly, and against the party who drafted it. An examination of the mortgage agreements
reveals that nowhere is it stated that penalties are to be included in the secured amount. Construing
this silence strictly against the respondent, the Court can only conclude that the parties did not intend
to include the penalty allowed under PN 9707237 as part of the secured amount. Given its resources,
respondent could have if it truly wanted to conveniently prepared and executed an amended
mortgage agreement with the petitioners, thereby including penalties in the amount to be secured by
the encumbered properties. Yet it did not.
By: Ellaine Janica T. Galias

ERLINDA K. ILUSORIO vs. BAGUIO COUNTRY CLUB CORPORATION
AND ANTHONY R. DE LEON.
G.R. No. 179571, July 02, 2014
Perez
Facts: Spouses Potenciano and Erlinda Ilusorio (Spouses Ilusorio) are the owners of a parcel of land
and a cottage situated inside the recreational complex of respondent Baguio Country Club
Corporation (BCCC). The said property was accessible only through the property of BCCC, basic
facilities such as access to the main road, electricity and water supply. Sometime in 1999, BCCC,
thru its Manager, respondent Anthony R. De Leon (De Leon), without prior notice to the Spouses
Ilusorio, allegedly cut-off electric and water supply at the cottage, rendering it unusable to the
Spouses Ilusorios guests. This prompted Erlinda Ilusorio (Erlinda) to initiate a complaint for
injunction, mandamus and damages against BCCC and De Leon before the RTC of Makati City. The
complaint prayed that respondents be directed to provide access from the cottage to the main road,
and, to supply water and electric services to the subject property. The payment of actual, moral and
exemplary damages and attorneys fees in the aggregate amount of P5,500,000.00 was likewise
sought by Erlinda.
In their Answer the respondents averred that Erlinda has no legal capacity to sue because the
property is registered in the name of Potenciano and that the water and electric services at the
cottage were cut-off and the personal properties found therein were removed and delivered to
Potencianos residence in Paraaque City upon his direct instruction since the cottage pose a fire
hazard to the recreational center. For lack of cause of action, therefore, respondents moved for the
dismissal of the complaint.
The trial court refused to grant the Motion to Dismiss filed by the respondents. Both parties
moved for the reconsideration of the Orde but were denied.
In view of the death of Potenciano on 28 June 2001, the appellate court, in a Decision dated
25 October 2001, dismissed the petition filed by Erlinda for being moot and academic.
After the procedural incidents before the appellate court were settled, respondents went back
to the lower court to file a Motion to Dismiss the complaint for being moot and academic considering
that the cottage in dispute was already removed as early as 2003 to pave way for the construction of
log cabins. The motion was opposed by Erlinda, asserting that even if her main action for injunction
and mandamus could no longer prosper due to the removal of the cottage, she still has existing
claims for damages, separate and distinct from the main action, occasioned by respondents unlawful
deprivation of her right to use the subject property.
The RTC dismissed the case for being moot and academic. Erlinda appealed with the Court of
Appeals and argued that the action for damages could stand alone even if her actions
for mandamus and injunction had become moot and academic for the fact remained that when she
was denied beneficial use of her property, her right as its owner was violated, giving rise to a cause of
action for damages. The Court of Appeals affirmed the decision of the RTC.

Issue: Whether or not the Court of Appeals erred in ruing that the cause of action for damages was
already moot and academic and that Erlinda is no longer entitled to the award of actual and moral
damages
as
well
as
attorneys
fees.
Held: The Court has ruled that an issue becomes moot and academic when it ceases to present a
justiciable controversy so that a declaration on the issue would be of no practical use or value. In
such cases, there is no actual substantial relief to which the plaintiff would be entitled to and which
would be negated by the dismissal of the complaint. Courts will decline jurisdiction over moot cases
because there is no substantial relief to which petitioner will be entitled and which will anyway be
negated by the dismissal of the petition. The Court will therefore abstain from expressing its opinion in
a case where no legal relief is needed or called for.
There is no dispute that the action for mandamus and injunction filed by Erlinda has been
mooted by the removal of the cottage from the premises of BCCC. The staleness of the claims
becomes more manifest considering the reliefs sought by Erlinda, i.e., to provide access and to
supply water and electricity to the property in dispute, are hinged on the existence of the cottage.
Collolarily, the eventual removal of the cottage rendered the resolution of issues relating to the
prayers for mandamus and injunction of no practical or legal effect. A perusal of the complaint,
however, reveals that Erlinda did not only pray that BCCC be enjoined from denying her access to the
cottage and be directed to provide water and electricity thereon, but she also sought to be
indemnified in actual, moral and exemplary damages because her proprietary right was violated by
the respondents when they denied her of beneficial use of the property. In such a case, the court
should not have dismissed the complaint and should have proceeded to trial in order to determine the
propriety of the remaining claims. Instructive on this point is the Courts ruling in Garayblas v. Atienza
Jr.:
The Court has ruled that an issue becomes moot and academic when it ceases to present a
justiciable controversy so that a declaration on the issue would be of no practical use or value. In
such cases, there is no actual substantial relief to which the plaintiff would be entitled to and which
would be negated by the dismissal of the complaint. However, a case should not be dismissed simply
because one of the issues raised therein had become moot and academic by the onset of a
supervening event, whether intended or incidental, if there are other causes which need to be
resolved after trial. When a case is dismissed without the other substantive issues in the case having
been resolved would be tantamount to a denial of the right of the plaintiff to due process.
It is clear enough that the issue of whether Erlinda is entitled to actual, moral and exemplary
damages and attorneys fees because of BCCCs acts in denying her access and discontinuing water
and electric supply to the property has not been mooted by the removal of the cottage. The acts
complained of have, if true and are of good bases, already caused damage to Erlinda when the suit
was commenced below. The issue of damages being sought by Erlinda against respondents should
be taken up during the trial on the merits where and when the allegations of the parties may properly
be addressed. A remand of this case for that purpose is necessary.
By: Gykslyn L. Gicos

CITY OF DAGUPAN, REPRESENTED BY THE CITY MAYOR
BENJAMIN S. LIM vs. ESTER F. MARAMBA, REPRESENTED BY HER ATTORNEY-IN-FACT
JOHNNY FERRER
Leonel.
Facts: Respondent Maramba was a grantee of a DENR miscellaneous lease contract for a 284sqm
property in Dagupan City, for a period of 25 years, causing the construction of a commercial fish
center thereon. Petitioner city caused the demolition of the commercial fish center, prompting
respondent to file a complaint for injunction and damages with prayer for a writ of preliminary
injunction and/or TRO.
The complaint alleged that the demolition was unlawful and that the complete demolition and
destruction of the previously existing commercial fish center of plaintiff is valued at Five Million
(P10,000,000.00) pesos. The word, ten, was handwritten on top of the word, five.
In the complaints prayer, Maramba asked for a judgment ordering defendant corporation to
pay plaintiff the amount of P10,000.00 for the actual and present value of the commercial fish center
completely demolished by public defendant. The word, million, was handwritten on top of the word,
thousand, and an additional zero was handwritten at the end of the numerical figure.
RTC ruled in favor of Maramba and awarded P10 million as actual damages. Petitioner city
filed a motion for reconsideration denied.
On August 25, 2005, the trial court granted the petition for relief and consequently modified its
July 30, 2004 decision. It reduced the award of actual damages from P10 million to P75,000.00.
Issue/s: 1. Whether actual damages must be substantiated in order to be awarded?

2. Whether or not the amount of damages is proper?
Held:
1.
Yes. It must be substantiated.
First, nowhere in the trial courts decision penned by Judge Laron did it state or refer to any
document presented by Maramba to substantiate her claimed costs. In fact, the amounts she testified
on did not even add up to the P10 million the court awarded as actual damages.
Second, the body of the trial courts July 30, 2004 decision mentioned that Maramba was
entitled to P1 million as moral damages and P500,000.00 as attorneys fees. This is inconsistent with
the dispositive portion that awarded P500,000.00 as moral damages and P500,000.00 as attorneys
fees.

The affidavit of merit discussed that Maramba testified on her shock, sleepless nights, and
mental anguish, but she never expressly asked for moral damages or specified the amount of
P500,000.00.
2.
The issue on the amount of damages is a factual question that this court may not resolve in a
Rule 45 petition.
Article 2199 of the Civil Code defines actual damages. It states that [e]xcept as provided by
law or by stipulation, one is entitled to an adequate compensation only for such pecuniary loss
suffered by him as he has duly proven. Competent proof of the amount claimed as actual damages
is required before courts may grant the award.
Petitioner city emphasized the argument it made in its motion for reconsideration that the
improvements allegedly destroyed or damaged consists only of G.I. sheets and some makeshift stalls
used for buying and selling of fishery products and by no stretch of imagination would said materials
amount to Php10,000,000.00 as claimed by the plaintiff.
By: Parlade, Julie Pearl Claudine T.
SPOUSES RODOLFO BEROT AND LILIA BEROT vs. FELIPE C. SIAPNO.
G.R. No. 188944. July 9, 2014.
Sereno
Facts: On May 23, 2002, Macaria Berot and spouses Rodolfo and Lilia P. Berot obtained a loan from
Felipe C. Siapno in the sum of PhP250,000.00, payable within one year together with interest thereon
at the rate of 24% per annum from that date until fully paid. As security for the loan, Macaria, and Lilia
mortgaged to Siapno a portion, consisting of 147 sq m. of a parcel of land with an area of 718 sq. m,
situated in Banaoang, Calasiao, Pangasinan. The lot is in the names of Macaria and her husband
Pedro Berot, deceased. On June 23, 2003, Macaria died.
Because of the mortgagors' default, Siapno filed an action against them for foreclosure of
mortgage and damages on July 15, 2004 in the RTC of Dagupan City. After trial, the lower court
rendered a decision allowing the foreclosure of the subject mortgage. Accordingly, the Spouses are
hereby ordered to pay the plaintiff within 90 days from notice of this Decision the amount of
PhP250,000.00 representing the principal loan, with interest at 2% monthly from February, 2004 and
30% of the amount to be collected as and for attorney's fees. Defendants are also assessed to pay
the sum of PhP20,000.00 as litigation expenses and another sum of PhP10,000.00 as exemplary
damages for their refusal to pay their aforestated loan obligation. The spouses filed a motion for
reconsideration of the decision but it was denied.
On appeal, the CA affirmed with modification in that the award of exemplary damages,
attorney's fees and expenses of litigation is deleted. The spouses moved for the reconsideration of
the CA Decision, but their motion was denied. Hence, the present Petition for Review on Certiorari
under Rule 45, proffering purely questions of law.

Issue: Whether or not the nature of the loan obligation is joint or solidary.
Held: The nature of the loan obligation contracted by petitioners is joint.
Under Article 1207 of the Civil Code of the Philippines, the general rule is that when there is a
concurrence of two or more debtors under a single obligation, the obligation is presumed to be joint:
Art. 1207.
The concurrence of two or more creditors or of two or more debtors in one and the
same obligation does not imply that each one of the former has a right to demand, or that each one of
the latter is bound to render, entire compliance with the prestations. There is a solidary liability only
when the obligation expressly so states, or when the law or the nature of the obligation requires
solidarity.
The law further provides that to consider the obligation as solidary in nature, it must expressly
be stated as such, or the law or the nature of the obligation itself must require solidarity. In PH Credit
Corporation v. Court of Appeals, we held that:
A solidary obligation is one in which each of the debtors is liable for the entire obligation, and each of
the creditors is entitled to demand the satisfaction of the whole obligation from any or all of the
debtors. On the other hand, a joint obligation is one in which each debtors is liable only for a
proportionate part of the debt, and the creditor is entitled to demand only a proportionate part of the
credit from each debtor. The well-entrenched rule is that solidary obligations cannot be inferred
lightly. They must be positively and clearly expressed. A liability is solidary "only when the obligation
expressly so states, when the law so provides or when the nature of the obligation so requires."
In the instant case, the trial court expressly ruled that the nature of petitioners' obligation to
respondent was solidary. It scrutinized the real estate mortgage and arrived at the conclusion that
petitioners had bound themselves to secure their loan obligation by way of a real estate mortgage in
the event that they failed to settle it. But such pronouncement was not expressly stated in its 30 June
2006 Decision.
However, a closer scrutiny of the records would reveal that the RTC expressly pronounced that
the obligation of petitioners to the respondent was solidary. To this the SC does not agree with the
finding by the trial court, we found no record of the principal loan instrument, except an evidence that
the REM was executed by Macaria and petitioners. When Rodolfo Berot testified in court, he admitted
that he and his mother, Macaria had contracted the loan for their benefit. The testimony of petitioner
Rodolfo only established that there was that existing loan to respondent, and that the subject property
was mortgaged as security for the said obligation. His admission of the existence of the loan made
him and his late mother liable to respondent. We have examined the contents of the real estate
mortgage but found no indication in the plain wordings of the instrument that the debtors the late
Macaria and herein petitioners had expressly intended to make their obligation to respondent
solidary in nature. Absent from the mortgage are the express and indubitable terms characterizing the
obligation as solidary. Respondent was not able to prove by a preponderance of evidence that
petitioners' obligation to him was solidary. Hence, applicable to this case is the presumption under the
law that the nature of the obligation herein can only be considered as joint. It is incumbent upon the
party alleging otherwise to prove with a preponderance of evidence that petitioners' obligation under
the loan contract is indeed solidary in character.
OLIVAREZ REALTY CORPORATION AND DR. PABLO R. OLIVAREZ vs. BENJAMIN CASTILLO.
G.R. No. 196251, July 09, 2014
Leonen
Facts:
Benjamin Castillo was the registered owner of a 346,918-square-meter parcel of land
located in Laurel, Batangas, which the Philippine Tourism Authority claims ownership based on a
different TCT.
On April 5, 2000, Castillo and Olivarez Realty Corporation, represented by Dr. Pablo R.
Olivarez, entered into a contract of conditional sale over the property. Under the deed of conditional
sale, Castillo agreed to sell his property to Olivarez Realty Corporation for P19,080,490.00. Olivarez
Realty Corporation agreed to a down payment of P5,000,000.00 as to the balance of 14,080,490.00,
Olivarez Realty Corporation agreed to pay in 30 equal monthly installments every eighth day of the
month beginning in the month that the parties would receive a decision voiding the Philippine Tourism
Authoritys title to the property. Under the deed of conditional sale, Olivarez Realty Corporation shall
file the action against the Philippine Tourism Authority with the full assistance of
[Castillo]. Paragraph C of the deed of conditional sale provides:
[Olivarez Realty Corporation] assumes the responsibility of taking necessary legal
action thru Court to have the claim/title TCT T-18493 of Philippine Tourism Authority over the
above-described property be nullified and voided; with the full assistance of [Castillo]
Should the action against the Philippine Tourism Authority be denied, Castillo agreed to reimburse all
the amounts paid by Olivarez Realty Corporation. Paragraph D of the deed of conditional sale
provides:
In the event that the Court denie[s] the petition against the Philippine Tourism Authority, all
sums received by [Castillo] shall be reimbursed to [Olivarez Realty Corporation] without interest).
As to the legitimate tenants occupying the property, Olivarez Realty Corporation undertook to
pay them disturbance compensation, while Castillo undertook to clear the land of the tenants within
six months from the signing of the deed of conditional sale. Should Castillo fail to clear the land within
six months, Olivarez Realty Corporation may suspend its monthly down payment until the tenants
vacate the property. Paragraphs E and F of the deed of conditional sale provide:
That [Olivarez Realty Corporation] shall pay the disturbance compensation to legitimate agricultural
tenants and fishermen occupants which in no case shall exceed ONE MILLION FIVE HUNDRED
THOUSAND (P1,500,000.00) PESOS. Said amount shall not form part of the purchase price. In
excess of this amount, all claims shall be for the account of [Castillo];

That [Castillo] shall clear the land of [the] legitimate tenants within a period of six (6) months upon
signing of this Contract, and in case [Castillo] fails, [Olivarez Realty Corporation] shall have the right
to suspend the monthly down payment until such time that the tenants [move] out of the land[.]
The parties agreed that Olivarez Realty Corporation may immediately occupy the property
upon signing of the deed of conditional sale. Should the contract be cancelled, Olivarez Realty
Corporation agreed to return the propertys possession to Castillo and forfeit all the improvements it
may have introduced on the property.
On September 2, 2004, Castillo filed a complaint against Olivarez Realty Corporation and Dr.
Olivarez with the Regional Trial Court of Tanauan City, Batangas alleging that Dr. Olivarez convinced
him into selling his property to Olivarez Realty Corporation on the representation that the corporation
shall be responsible in clearing the property of the tenants and in paying them disturbance
compensation. He further alleged that Dr. Olivarez solely prepared the deed of conditional sale and
that he was made to sign the contract with its terms not adequately explained [to him] in Tagalog.
After the parties had signed the deed of conditional sale, Olivarez Realty Corporation
immediately took possession of the property. However, the corporation only paid P2,500,000.00 of
the purchase price. Contrary to the agreement, the corporation did not file any action against the
Philippine Tourism Authority to void the latters title to the property. The corporation neither cleared
the land of the tenants nor paid them disturbance compensation. Despite demand, Olivarez Realty
Corporation refused to fully pay the purchase price.
Arguing that Olivarez Realty Corporation committed substantial breach of the contract of
conditional sale and that the deed of conditional sale was a contract of adhesion, Castillo prayed for
rescission of contract under Article 1191 of the Civil Code of the Philippines. He further prayed that
Olivarez Realty Corporation and Dr. Olivarez be made solidarily liable for moral damages, exemplary
damages, attorneys fees, and costs of suit.
In their answer, Olivarez Realty Corporation and Dr. Olivarez admitted that the corporation
only paid P2,500,000.00 of the purchase price. In their defense, defendants alleged that Castillo
failed to fully assist the corporation in filing an action against the Philippine Tourism Authority.
Neither did Castillo clear the property of the tenants within six months from the signing of the deed of
conditional sale. Thus, according to defendants, the corporation had all the legal right to withhold the
subsequent payments to [fully pay] the purchase price.
Olivarez Realty Corporation and Dr. Olivarez prayed that Castillos complaint be dismissed. By
way of compulsory counterclaim, they prayed for P100,000.00 litigation expenses and P50,000.00
attorneys fees.The trial court found that Olivarez Realty Corporation and Dr. Olivarezs answer
substantially [admitted the material allegations of Castillos] complaint and did not raise any genuine
issue [as to any material fact].
According to the trial court, the corporation was responsible for suing the Philippine Tourism Authority
and for paying the tenants disturbance compensation. Since defendant corporation neither filed any

case nor paid the tenants disturbance compensation, the trial court ruled that defendant corporation
had no right to withhold payments from Castillo.
With these findings, the trial court ruled that Olivarez Realty Corporation breached the contract
of conditional sale. In its decision dated April 23, 2007, the trial court ordered the deed of conditional
sale rescinded and the P2,500,000.00 forfeited in favor of Castillo as damages under Article 1191 of
the Civil Code. The trial court declared Olivarez Realty Corporation and Dr. Olivarez solidarily liable
to Castillo for P500,000.00 as moral damages, P50,000.00 as exemplary damages, and P50,000.00
as costs of suit.
Olivarez Realty Corporation and Dr. Olivarez appealed to the Court of Appeals. In its decision,
Court of Appeals affirmed in toto the trial courts decision.
As to the trial courts award of damages, the appellate court ruled that a court may award
damages through summary judgment if the parties contract categorically [stipulates] the respective
obligations of the parties in case of default. As found by the trial court, paragraph I of the deed of
conditional sale categorically states that in case [the deed of conditional sale] is cancelled, any
improvement introduced by [Olivarez Realty Corporation] on the property shall be forfeited in favor of
[Castillo]. Considering that Olivarez Realty Corporation illegally retained possession of the property,
Castillo forewent rent to the property and lost business opportunities. The P2,500,000.00 down
payment, according to the appellate court, should be forfeited in favor of Castillo. Moral and
exemplary damages and costs of suit were properly awarded.
Hence,
this
petition.
Issue: Whether the Court of Appeals erred in rendering their decision.

Held: The petition lacks merit.
Contrary to petitioners claim, there is no obvious ambiguity as to which should occur first
the payment of the disturbance compensation or the clearing of the land within six months from the
signing of the deed of conditional sale. The obligations must be performed simultaneously. In this
case, the parties should have coordinated to ensure that tenants on the property were paid
disturbance compensation and were made to vacate the property six months after the signing of the
deed of conditional sale.
On one hand, pure obligations, or obligations whose performance do not depend upon a future
or uncertain event, or upon a past event unknown to the parties, are demandable at once. On the
other hand, obligations with a resolutory period also take effect at once but terminate upon arrival of
the day certain. Olivarez Realty Corporations obligation to pay disturbance compensation is a pure
obligation. The performance of the obligation to pay disturbance compensation did not depend on any
condition. Moreover, the deed of conditional sale did not give the corporation a period to perform the
obligation. As such, the obligation to pay disturbance compensation was demandable at once.
Olivarez Realty Corporation should have paid the tenants disturbance compensation upon execution
of the deed of conditional sale.
With respect to Castillos obligation to clear the land of the tenants within six months from the
signing of the contract, his obligation was an obligation with a resolutory period. The obligation to
clear the land of the tenants took effect at once, specifically, upon the parties signing of the deed of
conditional sale. Castillo had until October 2, 2000, six months from April 5, 2000 when the parties
signed the deed of conditional sale, to clear the land of the tenants.
Olivarez Realty Corporation, therefore, had no right to withhold payments of the purchase
price. As the trial court ruled, Olivarez Realty Corporation can only claim non-compliance [of the
obligation to clear the land of the tenants in] October 2000.
The claim that Castillo sold the property to another is fictitious and was made in bad faith to
prevent the trial court from rendering summary judgment. Petitioners did not elaborate on this
defense and insisted on revealing the identity of the buyer only during trial. Even in their petition for
review on certiorari, petitioners never disclosed the name of this alleged buyer. Thus, as the trial court
ruled, this defense did not tender a genuine issue of fact, with the defense bereft of details.
As demonstrated, there are no genuine issues of material fact in this case. These are issues
that can be resolved judiciously by plain resort to the pleadings, affidavits, depositions, and other
papers on file. As the trial court found, Olivarez Realty Corporation illegally withheld payments of the
purchase price. The trial court did not err in rendering summary judgment.
Castillo is entitled to cancel the contract of conditional sale, since Olivarez Realty Corporation
illegally withheld payments of the purchase price, Castillo is entitled to cancel his contract with
petitioner corporation. However, we properly characterize the parties contract as a contract to sell,
not a contract of conditional sale.In both contracts to sell and contracts of conditional sale, title to the
property remains with the seller until the buyer fully pays the purchase price.Both contracts are
subject to the positive suspensive condition of the buyers full payment of the purchase price.
In a contract of conditional sale, the buyer automatically acquires title to the property upon full
payment of the purchase price his transfer of title is by operation of law without any further act having
to be performed by the seller. In a contract to sell, transfer of title to the prospective buyer is not
automatic.The prospective seller [must] convey title to the property [through] a deed of conditional
sale.
The distinction is important to determine the applicable laws and remedies in case a party
does not fulfill his or her obligations under the contract. In contracts of conditional sale, our laws on
sales under the Civil Code of the Philippines apply. On the other hand, contracts to sell are not
governed by our law on sales but by the Civil Code provisions on conditional obligations.
Specifically, Article 1191 of the Civil Code on the right to rescind reciprocal obligations does
not apply to contracts to sell, As this court explained in Ong v. Court of Appeals, failure to fully pay
the purchase price in contracts to sell is not the breach of contract under Article 1191. Failure to fully
pay the purchase price is merely an event which prevents the [sellers] obligation to convey title from
acquiring binding force. This is because there can be no rescission of an obligation that is still nonBeltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon

existent, the suspensive condition not having [happened]. In this case, Castillo reserved his title to the
property and undertook to execute a deed of absolute sale upon Olivarez Realty Corporations full
payment of the purchase price.122 Since Castillo still has to execute a deed of absolute sale to
Olivarez Realty Corporation upon full payment of the purchase price, the transfer of title is not
automatic. The contract in this case is a contract to sell. As this case involves a contract to sell,
Article 1191 of the Civil Code of the Philippines does not apply. The contract to sell is instead
cancelled, and the parties shall stand as if the obligation to sell never existed.
Olivarez Realty Corporation is liable for moral and exemplary damages and attorneys fees.We
note that the trial court erred in rendering summary judgment on the amount of damages. Under
Section 3, Rule 35 of the 1997 Rules of Civil Procedure, summary judgment may be rendered, except
as to the amount of damages.
In this case, the trial court erred in forfeiting the P2,500,000.00 in favor of Castillo as damages
under Article 1191 of the Civil Code of the Philippines. As discussed, there is no breach of contract
under Article 1191 in this case.
The trial court likewise erred in rendering summary judgment on the amount of moral and
exemplary damages and attorneys fees.
Nonetheless, we hold that Castillo is entitled to moral damages, exemplary damages, and
attorneys fees.
Moral damages may be awarded in case the claimant experienced physical suffering, mental
anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social
humiliation, and similar injury.
As for exemplary damages, they are awarded in addition to moral damages by way of example
or correction for the public good. Specifically in contracts, exemplary damages may be awarded if the
defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.
Under the deed of conditional sale, Olivarez Realty Corporation may only suspend the monthly
down payment in case Castillo fails to clear the land of the tenants six months from the signing of the
instrument. Yet, even before the sixth month arrived, Olivarez Realty Corporation withheld payments
for Castillos property. It even used as a defense the fact that no case was filed against the Philippine
Tourism Authority when, under the deed of conditional sale, Olivarez Realty Corporation was clearly
responsible for initiating action against the Philippine Tourism Authority. These are oppressive and
malevolent acts, and we find Castillo entitled to P500,000.00 moral damages and P50,000.00
exemplary damages. Plaintiff Castillo is entitled to moral damages because of the evident bad faith
exhibited by defendants in dealing with him regarding the sale of his lot to defendant [Olivarez Realty
Corporation]. He suffered much prejudice due to the failure of defendants to pay him the balance of
purchase price which he expected to use for his needs which caused him wounded feelings, sorrow,
mental anxiety and sleepless nights for which defendants should pay P500,000.00 as moral damages
more than six (6) years had elapsed and defendants illegally and unfairly failed and refused to pay
their legal obligations to plaintiff, unjustly taking advantage of a poor uneducated man like plaintiff

causing much sorrow and financial difficulties. Moral damages in favor of plaintiff is clearly justified . .
. [Castillo] is also entitled to P50,000.00 as exemplary damages to serve as a deterrent to other
parties to a contract to religiously comply with their prestations under the contract.
We likewise agree that Castillo is entitled to attorneys fees in addition to the exemplary
damages. Considering that Olivarez Realty Corporation refused to satisfy Castillos plainly valid, just,
and demandable claim, the award of P50,000.00 as attorneys fees is in order.
However, we find that Dr. Pablo R. Olivarez is not solidarily liable with Olivarez Realty
Corporation for the amount of damages.
Under Article 1207 of the Civil Code of the Philippines, there is solidary liability only when the
obligation states it or when the law or the nature of the obligation requires solidarity. In case of
corporations, they are solely liable for their obligations. The directors or trustees and officers are not
liable with the corporation even if it is through their acts that the corporation incurred the obligation.
This is because a corporation is separate and distinct from the persons comprising it. As an exception
to the rule, directors or trustees and corporate officers may be solidarily liable with the corporation for
corporate obligations if they acted in bad faith or with gross negligence in directing the corporate
affairs
In this case, we find that Castillo failed to prove with preponderant evidence that it was through
Dr. Olivarezs bad faith or gross negligence that Olivarez Realty Corporation failed to fully pay the
purchase price for the property. Dr. Olivarezs alleged act of making Castillo sign the deed of
conditional sale without explaining to the latter the deeds terms in Tagalog is not reason to hold Dr.
Olivarez solidarily liable with the corporation. Castillo had a choice not to sign the deed of conditional
sale. He could have asked that the deed of conditional sale be written in Tagalog. Thus, Olivarez
Realty Corporation is solely liable for the moral and exemplary damages and attorneys fees to
Castillo.
Although we discussed that there is no rescission of contract to speak of in contracts of
conditional sale, we hold that an action to cancel a contract to sell, similar to an action for rescission
of contract of sale, is an action incapable of pecuniary estimation. Like any action incapable of
pecuniary estimation, an action to cancel a contract to sell demands an inquiry into other
factors aside from the amount of money to be awarded to the claimant. Specifically in this case, the
trial court principally determined whether Olivarez Realty Corporation failed to pay installments of the
propertys purchase price as the parties agreed upon in the deed of conditional sale. The principal
nature of Castillos action, therefore, is incapable of pecuniary estimation.

SPS. ALEJANDRO MANZANILLA AND REMEDIOS VELASCO VS. WATERFIELDS INDUSTRIES
CORPORATION, REPRESENTED BY ITS PRESIDENT, ALIZA MA.
Del Castillo.
Facts: Spouses Manzanilla leased a 6,000sqm portion of their 25,000sqm land to Waterfields, as
represented by its President Aliza R. Ma (Ma). Beginning April 1997, however, Waterfields failed to
pay the monthly rental. Hence, demand to pay and vacate was made to Waterfields but the same
remained unheeded.
The MTC found Mas letter of July 9, 1997 to have amended the Contract of Lease. In
particular, Section 4 of the Contract of Lease which provides that the rental deposit shall answer for
any unpaid rentals, damages, penalties and unpaid utility charges was superseded by the portion in
Mas July 9, 1997 letter which states that the deposit stipulated in our lease contract shall be used
exclusively for the payment of unpaid utilities, if any, and other incidental expenses only and applied
at the termination of the lease. Consequently, the MTC declared that Waterfields violated the lease
agreement due to non-payment of rentals and disposed of the case as follows. RTC affirmed.
The CA, however, had a different take. It gave weight to the spouses Manzanillas allegation
that they terminated the Contract of Lease. Upon such termination, it held that the rental deposit
should have been applied as payment for unpaid utilities and other incidental expenses, if any.
Issue: Whether or not CA decided a question of substance not in accord with laws and applicable
decisions of this honorable court when it held that the provisions of Art. 1278 of the New Civil Code
was applicable and that compensation had taken place?
Held: There can be no issue as to the due execution, effectivity and enforceability of Mas July 9,
1997 letter since aside from the fact that Waterfields itself admitted in its Answer that the Contract of
Lease was amended on July 9, 1997, the MTC and the RTC had uniformly ruled that the said letter
operates as an amendment to the original contract. And as the rental deposit cannot be applied as
payment for the monthly rentals pursuant to the amendment, Waterfields is considered in default in its
payment thereof. Conversely, Waterfields has committed a violation of the Contract of Lease which
gave rise to a cause of action for ejectment against it.
VICENTE JOSEFA vs. MANILA ELECTRIC COMPANY.

G.R. No. 182705. July 18, 2014.
Brion.
Facts: At around 1:45 p.m. on April 21, 1991, a dump truck, a jeepney and a car figured in a
vehicular accident along Ortigas Avenue, Pasig City. As a result of the accident, a 45-foot wooden
electricity post, 3 75 KVA transformers, and other electrical line attachments were damaged. Upon
investigation, Meralco discovered that it was a truck registered in Josefa's name that hit the electricity

post. Meralco demanded from Josefa reimbursement for the replacement cost of the electricity post
and its attachments, but Josefa refused to pay. Thus, Meralco sued Josefa and Pablo Manoco, the
truck driver, for damages before the RTC of Pasig City.
In its complaint, Meralco alleged that (Bautista) Manoco's reckless driving resulted in damage
to its properties. It also imputed primary liability on Josefa for his alleged negligence in the selection
and supervision of Manoco. The RTC dismissed the complaint for insufficiency of evidence. The RTC
held that Meralco failed to establish that it was the truck that hit the electricity post. The RTC ruled
that SPO2 Galang's account of the accident was merely hearsay since he did not personally witness
the incident. It also did not give probative value to the police blotter entry dated January 7, 1994 since
the accident had long occurred in 1991.
The CA reversed the RTC ruling and held that the RTC erred in disregarding the parties'
stipulation at the pre-trial that it was the truck that hit the electricity post. The CA also found that
Bautista was Josefa's employee when the accident occurred since Josefa did not specifically deny
this material allegation in the amended complaint. It likewise noted that the sheriff's return stated that
Bautista was under Josefa's employ until 1993. The CA concluded that the fact that the truck hit the
electricity post was sufficient to hold Josefa vicariously liable regardless of whether Bautista was
negligent in driving the truck. In the same breath, the CA also stated that the employer's presumptive
liability in quasi-delicts was anchored on injuries caused by the employee's negligence. Even
assuming that Bautista was not Josefa's employee, the CA maintained that Josefa would still be liable
for damages since the law presumes that the registered owner has control of his vehicle and its driver
at the time of the accident. It thus ordered Josefa to pay Meralco. Josefa filed the present petition
after the CA denied his motion for reconsideration.
Issue/s: (1) Whether or not Bautista exercised due diligence in driving when the truck hit the
electricity post;
(2)
Whether or not Josefa is vicariously liable for Bautista's negligence under paragraph 5, Article
2180 of the Civil Code;
(3)
Whether Meralco is entitled to actual damages, attorney's fees, and expenses of litigation.
Held:
(1) Bautista did not exercise due diligence. Bautista's negligence was the proximate cause of the
property damage caused to Meralco. Bautista is presumed to be negligent in driving the truck under
the doctrine of res ipsa loquitur.
Whoever by act or omission causes damage to another, there being fault or negligence, is
obliged to pay for the damage done. This fault or negligence, if there is no pre-existing contractual
relation between the parties, is called quasi-delict. Thus, for a quasi-delict case to prosper, the
complainant must establish: (1) damages to the complainant; (2) negligence, by act or omission, of
the defendant or by some person for whose acts the defendant must respond, was guilty; and (3) the
connection of cause and effect between such negligence and the damages. With respect to the third
element, the negligent act or omission must be the proximate cause of the injury.
Contrary to the CA's finding, the parties did not stipulate that the truck hit the electricity post.
The pre-trial order shows that the parties merely agreed that the truck "was involved in an accident on
April 21, 1991. Nonetheless, Meralco has sufficiently established the direct causal link between the
truck and the electricity post through Abio's testimony. Abio categorically stated during trial that he
saw the truck hit the electricity post. We find his first-hand account of the incident during the directexamination frank and straightforward. Even without Abio's testimony, it does not escape this Court's
attention that Josefa judicially admitted in his motions and pleading that his truck hit the electricity
post. These statements constitute deliberate, clear and unequivocal admissions of the causation in
fact between the truck and the electricity post.
Contrary to the CA's opinion, the finding that it was the truck that hit the electricity post would
not immediately result in Josefa's liability. It is a basic rule that it is essentially the wrongful or
negligent act or omission that creates the vinculum juris in extra-contractual obligations. In turn, the
employee's negligence established to be the proximate cause of the damage would give rise to the
disputable presumption that the employer did not exercise the diligence of a good father of a family in
the selection and supervision of the erring employee.
The procedural effect of res ipsa loquitur in quasi-delict cases is that the defendant's
negligence is presumed. For this doctrine to apply, the complainant must show that: (1) the accident
is of such character as to warrant an inference that it would not have happened except for the
defendant's negligence; (2) the accident must have been caused by an agency or instrumentality
within the exclusive management or control of the person charged with the negligence complained of;
and (3) the accident must not have been due to any voluntary action or contribution on the part of the
person injured. The present case satisfies all the elements of res ipsa loquitur. It is very unusual and
extraordinary for the truck to hit an electricity post, an immovable and stationary object, unless
Bautista, who had the exclusive management and control of the truck, acted with fault or negligence.
We cannot also conclude that Meralco contributed to the injury since it safely and permanently
installed the electricity post beside the street. Thus, in Republic v. Luzon Stevedoring Corp., we
imputed vicarious responsibility to Luzon Stevedoring Corp. whose barge rammed the bridge, also an
immovable and stationary object.
(2) YES. Josefa is vicariously liable under paragraph 5, Article 2180 of the Civil Code because there
is an employer-employee relations between Bautista and Josefa, and Josefa failed to show that he
exercised the diligence of a good father of a family in the selection and supervision of Bautista.
The finding that Bautista acted with negligence in driving the truck gives rise to the application
of paragraph 5, Article 2180 of the Civil Code which holds the employer vicariously liable for damages
caused by his employees within the scope of their assigned tasks. In the present case, Josefa avoids
the application of this provision by denying that Bautista was his employee at the time of the incident.
Josefa cannot evade his responsibility by mere denial of his employment relations with
Bautista in the absence of proof that his truck was used without authorization or that it was stolen
when the accident occurred. In quasi-delict cases, the registered owner of a motor vehicle is the
employer of its driver in contemplation of law. The registered owner of any vehicle, even if not used

for public service, would primarily be responsible to the public or to third persons for injuries caused
while the vehicle was being driven on highways or streets.
In order for Josefa to be relieved of his vicarious liability, he must show that he exercised due
diligence in the selection and supervision of Bautista. In concrete terms, Josefa should show by
competent object or documentary evidence that he examined Bautista as to the latter's qualifications,
experience and service records prior to employment. He should likewise prove by competent object
or documentary evidence that he formulated standard operating procedures, monitored their
implementation and imposed disciplinary measures for breach of these procedures. However, Josefa
failed to overcome the presumption of negligence against him since he waived his right to present
evidence during trial.
(3) Meralco is only entitled to temperate damages with interest at legal rate. Notwithstanding Josefa's
vicarious liability, Meralco failed to point out the specific facts that afford a basis for its claim for actual
damages. Actual damages cannot be presumed; they must be pleaded and proven in court in order to
be recoverable. One is entitled to an adequate compensation only for the pecuniary loss that he has
adequately proved based upon competent proof and on the best evidence obtainable by him. We
cannot give weight to Exhibit "D" as to the amount of actual damages for being hearsay. Exhibit "D"
constitutes hearsay evidence since it was derived on alleged pieces of documentary evidence that
were not identified and authenticated in court during trial.
Meralco is entitled to temperate damages because it clearly suffered pecuniary loss as a result
of Bautista and Josefa's negligence. When the court finds that some pecuniary loss has been
suffered but the amount cannot, from the nature of the case, be proven with certainty, the court may
award temperate damages in the exercise of its sound discretion. Considering the attendant
circumstances of this case, we find the amount of P200,000.00 to be a fair and sufficient award by
way of temperate damages.
Meralco is not entitled to attorney's fees and expenses of litigation. The CA likewise erred in
awarding Meralco attorney's fees and expenses of litigation without explaining its basis. In Buan v.
Camaganacan, we held that the text of the decision should state the reason why attorney's fees are
being awarded; otherwise, the award should be disallowed. Besides, no bad faith has been imputed
to Josefa that would warrant the award of attorney's fees under Article 2208 (5) of the Civil Code. It is
a settled rule that attorney's fees shall not be recovered as cost where the party's persistence in
litigation is based on his mistaken belief in the righteousness of his cause. There is also no factual,
legal, or equitable justification that would justify the Court's award of attorney's fees under Article
2208 (11) of the Civil Code.
Finally, we impose an interest rate of 6% per annum on temperate damages pursuant to the
guidelines enunciated in Eastern Shipping Lines v. CA, as modified by Nacar v. Gallery Frames.

JUANITO M. GOPIAO vs. METROPOLITAN BANK & TRUST CO.
G.R. No. 188931. 28 July 2014
Peralta.
Facts: Respondent Metropolitan Bank & Trust Co. filed a Petition for the Issuance of Writ of
Possession of real properties located in San Fernando, Pampanga. RTC issued the writ in favor of
respondent Bank when it purchased the subject properties at a public auction and registered the
same in its name. Consequently, a Notice to Vacate was served on Green Asia Construction and
Development Corporation, represented by the spouses Legaspi.
Upon learning of the notice to vacate, petitioner filed an Affidavit of Third Party Claim on and a
Very Urgent Motion for Intervention and to Recall and/or Stop the Enforcement/Implementation of the
Writ of Possession. In said actions, petitioner alleged to be in actual occupation of the subject
properties and claimed ownership thereof by virtue of a Deed of Sale dated May 20, 1995 executed
by the Spouses Legaspi in his favor. Court denied. Petitioner filed a motion for reconsideration which
was also denied. He elevated his claim to CA via petition for certiorari but petition was also
dismissed. MR denied again.
Issues:
Whether or not the CA erred in ruling on a non-issue: the good faith of respondent as mortgagee?
Whether or not CA erred in ruling on the existence of double sale?
Held:
1. It is a well-established rule that the issuance of a writ of possession to a purchaser in a
public auction is a ministerial function of the court, which cannot be enjoined or restrained, even by
the filing of a civil case for the declaration of nullity of the foreclosure and consequent auction sale.
The foregoing rule, however, admits of a few exceptions, one of which is when a third party in
possession of the property claims a right adverse to that of the debtor-mortgagor.
However, petitioners possession of the subject properties in this case is questionable. As
correctly observed by the courts below, petitioner failed to substantiate his possession with sufficient
evidence. Apart from the un-notarized and unrecorded Deed of Absolute Sale, petitioner did not
present other convincing evidence to bolster his claim of ownership and/or possession.
2. Going now to the contention of the petitioner that the CA erred in ruling that there exists a
double sale in this case and thus, the good faith of respondent Bank is material. According to the
petitioner, the rule on double sales under Article 1544 of the Civil Code is inapplicable herein since
there is no double sale to speak of; the first transaction, a sale and the second, a mortgage. As such,
the CA erred in giving credence to the good faith of respondent Bank, which is really a non-issue
herein.

We disagree. On the contrary, jurisprudence is replete with rulings that apply the double sales
rule to cases where one of the two sales was conducted in a public auction.
In contrast, the CA aptly noted the good faith of respondent Bank in this case. In its decision, it
ruled that respondent Bank has sufficiently shown that prior to the approval of the loan application of
the Spouses Legaspi, it checked the records of the properties offered as collaterals at the Register of
Deeds and verified that the titles were clean. Moreover, it inspected the premises and found no
occupants. Thus, respondent Bank cannot be said to have acquired the subject properties in bad faith
as to negate its right of possession thereof.
LEONARDO C. CASTILLO REPRESENTED BY LENNARD V. CASTILLO vs. SECURITY BANK

CORPORATION, JRC POULTRY FARMS OR SPOUSES LEON C. CASTILLO, JR., AND
TERESITA FLORES-CASTILLO
G.R. No. 196118. July 30, 2014.
PERALTA.
Facts: Leonardo C. Castillo and Leon C. Castillo, Jr. are siblings. Leon and Teresita Flores-Castillo
(the Sps Castillo) were doing business under the name of JRC Poultry Farms. Sometime in 1994, the
Sps.. Castillo obtained a loan from SBC for P45 Million. To secure said loan, they executed a REM
over 11 parcels of land belonging to different members of the Castillo family and which are all located
in San Pablo City. They also procured a second loan amounting to P2.5 M, which was covered by a
mortgage on a land in Pasay City. Subsequently, the Sps. Castillo failed to settle the loan, prompting
SBC to proceed with the foreclosure of the properties. SBC was then adjudged as the winning bidder
in the foreclosure sale, nevertheless the Sps. Castillo were able to redeem the foreclosed properties,
with the exception of two lots.
On January 30, 2002, Leonardo filed a complaint for the partial annulment of the REM. He
alleged that he owns one of the properties in REM and that the Sps. Castillo used it as one of the
collaterals for a loan without his consent. He contested his supposed SPA in Leon's favor, claiming
that it is falsified. He also assailed the foreclosure of the lots under TCT Nos. 20030 and 10073
which were still registered in the name of their deceased father. Lastly, Leonardo attacked SBC's
imposition of penalty and interest on the loans as being arbitrary and unconscionable.
On the other hand, the Sps. Castillo insisted on the validity of Leonardo's SPA. They alleged
that they incurred the loan not only for themselves, but also for the other members of the Castillo
family. Upon receiving the proceeds of the loan, they distributed the same to their family members, as
agreed upon. However, when the loan became due, their relatives failed to pay their respective
shares such that Leon was forced to use his own money until SBC had to finally foreclose the
mortgage. In a Decision dated October 16, 2006, the RTC of San Pablo City ruled in Leonardo's
favor.

Both parties elevated the case to the CA. The CA denied Leonardo's appeal and granted that
of the Sps. Castillo and SBC. It reversed and set aside the RTC Decision, essentially ruling that the
real estate mortgage is valid. Leonardo filed a Motion for Reconsideration, but the same was denied
for lack of merit. Hence, this case to the Court.
Issue/s:
(1) Whether or not the real estate mortgage constituted over the property under TCT No. T-28297 is
valid and binding.
(2) Whether or not the interest and penalty charges imposed by SBC are just, and not excessive or
unconscionable.
Held: YES. The Court finds the petition to be without merit.
The following are the legal requisites for a mortgage to be valid:
(1)
It must be constituted to secure the fulfillment of a principal obligation;
(2)
The mortgagor must be the absolute owner of the thing mortgaged;
(3)
The persons constituting the mortgage must have the free disposal of their property, and in the
absence thereof, they should be legally authorized for the purpose.
Leonardo asserts that his signature in the SPA authorizing his brother, Leon, to mortgage his
property covered by TCT No. T-28297 was falsified. He claims that he was in America at the time of
its execution. As proof of the forgery, he focuses on his alleged CTC used for the notarization of the
SPA on May 5, 1993 and points out that it appears to have been issued on January 11, 1993 when, in
fact, he only obtained it on May 17, 1993. But it is a settled rule that allegations of forgery must be
proved by clear, positive, and convincing evidence by the party alleging it. Here, Leonardo simply
relied on his self-serving declarations and he did not even bother comparing the alleged forged
signature on the SPA with samples of his real and actual signature. However, if the Court were to
assume, that Leonardo indeed secured his CTC only on May 17, 1993, this does not automatically
render the SPA invalid.
The appellate court aptly held that defective notarization will simply strip the document of its
public character and reduce it to a private instrument, but nonetheless, binding, provided its validity is
established by preponderance of evidence. Article 1358 of the Civil Code requires that the form of a
contract that transmits or extinguishes real rights over immovable property should be in a public
document, yet the failure to observe the proper form does not render the transaction invalid. The
necessity of a public document for said contracts is only for convenience; it is not essential for validity
or enforceability. Even a sale of real property, though not contained in a public instrument or formal
writing, is nevertheless valid and binding, for even a verbal contract of sale or real estate produces
legal effects between the parties. Consequently, when there is a defect in the notarization of a
document, the clear and convincing evidentiary standard originally attached to a duly-notarized
document is dispensed with, and the measure to test the validity of such document is preponderance
of evidence. Here, the preponderance of evidence indubitably tilts in favor of the respondents, still
making the SPA binding between the parties even with the aforementioned assumed irregularity.

There are several telling circumstances that would clearly demonstrate that Leonardo was
aware of the mortgage and he indeed executed the SPA to entrust Leon with the mortgage of his
property. Leon had in his possession all the titles covering the 11 properties mortgaged, including that
of Leonardo. Leonardo and the rest of their relatives could not have just blindly ceded their
respective TCTs to Leon. It is likewise ridiculous how Leonardo seemed to have been totally oblivious
to the status of his property for 8 long years, and would only find out about the mortgage and
foreclosure from a nephew who himself had consented to the mortgage of his own lot. Considering
the lapse of time from the alleged forgery on May 5, 1993 and the mortgage on August 5, 1994, to the
foreclosure on July 29, 1999, and to the supposed discovery in 2001, it appears that the suit is a
mere afterthought or a last-ditch effort on Leonardo's part to extend his hold over his property and to
prevent SBC from consolidating ownership over the same. More importantly, Leonardo himself
admitted on cross-examination that he granted Leon authority to mortgage, only that, according to
him, he thought it was going to be with China Bank, and not SBC.
(2) YES. The Court finds that the interest and penalty charges imposed by SBC are just, and not
excessive or unconscionable.
SBC's 16% rate of interest is not computed per month, but rather per annum or only 1.33% per
month. In Spouses Bacolor v. Banco Filipino Savings and Mortgage Bank, the Court held that the
interest rate of 24% per annum on a loan of P244,000.00 is not considered as unconscionable and
excessive. As such, the Court ruled that the debtors cannot renege on their obligation to comply with
what is incumbent upon them under the contract of loan as they are bound by its stipulations. Also,
the 24% per annum rate or 2% per month for the penalty charges imposed on account of default,
cannot be considered as skyrocketing. The enforcement of penalty can be demanded by the creditor
in case of non-performance due to the debtor's fault or fraud. The non-performance gives rise to the
presumption of fault and in order to avoid the penalty, the debtor has the burden of proving that the
failure of the performance was due to either force majeure or the creditor's own acts. In the instant
case, petitioner failed to discharge said burden and thus cannot avoid the payment of the penalty
charge agreed upon.
HEIRS OR REYNALDO DELA ROSA, Namely: TEOFISTA DELA ROSA, JOSEPHINE SANTIAGO
AND JOSEPH DELA ROSA, vs. MARIO A. BA TONGBACAL, IRENEO BATONGBACAL,
JOCELYN BA TONGBACAL, NESTOR BATONGBACAL AND LOURDES BA TONGBACAL.
G.R. No. 179205.July 30, 2014
Perez
Facts:
The subject property consists of a 3, 750 square meter-portion of the 15,00 square
meters parcel of land situated in Barrio Saog, Marilao, Bulacan denominated as Lot No. 1, and
registered under Transfer Certificate of Title (TCT) No. T-107449 under the names of Reynaldo Dela
Rosa (Reynaldo), Eduardo Dela Rosa (Eduardo), Araceli Dela Rosa (Araceli) and Zenaida Dela Rosa
(Zenaida).
Sometime in 1984, Reynaldo offered to sell the subject property to Guillermo Batongbacal
(Guillermo) and Mario Batongbacal (Mario) for P50.00 per square meter or for a total of P187,500.00.
Pursuant to the agreement, Reynaldo received an advance payment of P31,500.00 leaving a balance
of P156,000.00. As shown in the document denominated as Resibo and signed by Reynaldo on 18
February 1987, the parties agreed that the amount of P20,000.00 as part of the advance payment
shall be paid upon the delivery of the Special Power-of-Attorney (SPA), which would authorize
Reynaldo to alienate the subject property on behalf of his co-owners and siblings namely, Eduardo,
Araceli and Zenaida. The balance thereon shall be paid in P10,000.00 monthly installments until the
purchase price is fully settled.
Subsequent to the execution of the said agreement, Mario and Guillermo, on their own
instance, initiated a survey to segregate the area of 3,750 square meters from the whole area
covered by the TCT. As a result, they came up with a subdivision plan specifically designating the
subject property. Mario and Guillermo thereafter made several demands from Reynaldo to deliver the
SPA as agreed upon, but such demands all went unheeded.
Consequently, Guillermo and Mario initiated an action for Specific Performance or Rescission
and Damages before the Regional Trial Court (RTC) of Malolos, Bulacan, seeking to enforce their
Contract to Sell and they asserted that they have a better right over the subject property and alleged
that the subsequent sale thereof effected by Reynaldo to third persons is void as it was done in bad
faith. It was prayed in the Complaint that Reynaldo be directed to deliver the SPA and, in case of its
impossibility, to return the amount of P31,500.00 with legal interest and with damages in either case.
To protect their interest, they executed a Notice of Lis Pendens over the title of the property and
registered their claim thereon.
Reynaldo in his Answer countered that the purported Contract to Sell is void, because he
never gave his consent thereto. Reynaldo insisted that he was made to understand that the contract
between him and the Batongbacals was merely an equitable mortgage whereby it was agreed that
the latter will loan to him the amount of P3l, 500.00 payable once he receives his share in the
proceeds of the sale of the land registered under TCT No. T-107449.
RTC, dismissed the civil case for failure of the plaintiffs to produce sufficient evidence and
ordered Reynaldo to return the sum of P28,000.00 with 12% annual interest for failure to prove that
the contract entered with Mario was an equitable mortgage. It was held by the trial court, however,
that the supposed Contract to Sell denominated as Resibo is unenforceable under Article 1403 of the
New Civil Code because Reynaldo cannot bind his co-owners into such contract without an SPA
authorizing him to do so
On appeal, the Court of Appeals brushed aside the claim of equitable mortgage and held that
the sale effected by Reynaldo of his undivided share in the property is valid and enforceable.
According to the appellate court, no SPA is necessary for Reynaldo's disposition of his undivided
share as it is limited to the portion that may be allotted to him upon the termination of the coownership. The appellate court thus proceeded to rescind the contract and ordered Reynaldo to

return the amount he received as consideration thereby restoring the parties to their situation before
entering into the agreement
On 9 September 2007, the appellate court was notified of the death or Reynaldo, and his heirs
sought to be substituted as party in this case. Petitioners Heirs of Reynaldo are now before this Court
via this instant Petition for Review on Certiorari praying that the Court of Appeals Decision and
Resolution be reversed on the ground that it was rendered not in accordance with the applicable law
and jurisprudence.
Issue:
Whether or not the contract entered into by parties was a Contract to Sell or an
equitable mortgage.
Held: Petition denied. CA decision is affirmed.
An equitable mortgage is defined as one although lacking in some formality, or form or words,
or other requisites demanded by a statute, nevertheless reveals the intention of the parties to charge
real property as security for a debt, and contains nothing impossible or contrary to law. For the
presumption of an equitable mortgage to arise, two requisites must concur: (1) that the parties
entered into a contract denominated as a sale; and (2) the intention was to secure an existing debt by
way of mortgage. Consequently, the non-payment of the debt when due gives the mortgagee the right
to foreclose the mortgage, sell the property and apply the proceeds of the sale for the satisfaction of
the loan obligation. While there is no single test to determine whether the deed of absolute sale on its
face is really a simple loan accommodation secured by a mortgage, the Civil Code, however,
enumerates several instances when a contract is presumed to be an equitable mortgage, to wit:
Article 1602. The contract shall be presumed to be an equitable mortgage, in any of the following
cases:
1) When the price of a sale with right to repurchase is unusually inadequate;
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right to repurchase another instrument extending the
period of redemption or granting a new period is executed;
(4) When the purchaser retains for himself a part of the purchase price;
(5) When the vendor binds himself to pay the taxes on the thing sold;
(6) In any other case where it may be fairly inferred that the real intention of the parties is that the
transaction shall secure the payment of a debt or the performance of any other obligation.
A perusal of the contract denominated as Resibo reveals the utter frailty of petitioners' position
because nothing therein suggests, even remotely, that the subject property was given to secure a
monetary obligation. The terms of the contract set forth in no uncertain terms that the instrument was
executed with the intention of transferring the ownership of the subject property to the buyer in
exchange for the price. Nowhere in the deed is it indicated that the transfer was merely intended to
secure a debt obligation.
On the contrary, the document clearly indicates the intent of Reynaldo to sell his share in the
property. The primary consideration in determining the true nature of a contract is the intention of the

parties. If the words of a contract appear to contravene the evident intention of the parties, the latter
shall prevail. Such intention is determined not only from the express terms of their agreement, but
also from the contemporaneous and subsequent acts of the parties. That the parties intended some
other acts or contracts apart from the express terms of the agreement, was not proven by Reynaldo
during the trial or by his heirs herein. Beyond their bare and uncorroborated asseverations that the
contract failed to express the true intention of the parties, the record is bereft of any evidence
indicative that there was an equitable mortgage.
Neither could the allegation of gross inadequacy of the price carry the day for the petitioners. It
must be underscored at this point that the subject of the Contract to Sell was limited only to '14 proindiviso share of Reynaldo consisting an area of 3,750 square meter and not the entire 15,001-square
meter parcel of land. As a co-owner of the subject property, Reynaldo's right to sell, assign or
mortgage his ideal share in the property held in common is sanctioned by law. The applicable law is
Article 493 of the New Civil Code, which spells out the rights of co-owners over a co-owned property
Pursuant to this law, a co-owner has the right to alienate his pro-indiviso share in the co-owned
property even without the consent of his co-owners. This right is absolute and in accordance with the
well-settled doctrine that a co-owner has a full ownership of his pro-indiviso share and has the right to
alienate, assign or mortgage it, and substitute another person for its enjoyment. In other words, the
law does not prohibit a co-owner from selling, alienating, mortgaging his ideal share in the property
held in common.
NATIONAL TRANSMISSION CORPORATION, vs. ALPHAOMEGA INTEGRATED CORPORATION

G.R. No. 184295. July 30, 2014
Perlas-Bernabe, J.:
Facts: AIC, a duly licensed transmission line contractor, participated in the public biddings conducted
by TRANSCO and was awarded six (6) government construction projects.
In the course of the performance of the contracts, AIC encountered difficulties and incurred losses
allegedly due to TRANSCOs breach of their contracts, prompting it to surrender the projects to
TRANSCO under protest. In accordance with an express stipulation in the contracts, AIC submitted a
request for arbitration before the CIAC and, thereafter, filed an Amended Complaint against
TRANSCO alleging breach of contract.
AIC prayed for judgment declaring all six (6) contracts rescinded and ordering TRANSCO to
pay, in addition to what had already been paid under the contracts, moral damages, exemplary
damages, and attorneys fees at P100,000.00 each, and a total of P40,201,467.19 as actual and
compensatory damages.
CIAC rendered its final award 2006 ordering the payment of actual and compensatory
damages in favor of AIC. Unconvinced, TRANSCO instituted a petition for review with the CA.
Before filing its comment to the petition, AIC moved for the issuance of awrit of execution, not
for the amount of P17,495,117.44 awarded in the Final Award, but for the increased amount of
P18,967,318.49.
Issues: 1. Whether or not AIC was entitled to its claims for damages as a result of project delays, and
2. Whether or not CA erred in increasing the award of damages?
Held:
1. Jurisprudence teaches that mathematical computations as well as the propriety of the arbitral
awards are factual determinations. The Court finds no reason to disturb the factual findings of the
CIAC Arbitral Tribunal on the matter of AICs entitlement to damages which the CA affirmed as being
well supported by evidence and properly referred to in the record. It is well-settled that findings of fact
of quasi-judicial bodies, which have acquired expertise because their jurisdiction is confined to
specific matters, are generally accorded not only respect, but also finality, especially when affirmed
by the CA. The CIAC possesses that required expertise in the field of construction arbitration and the
factual findings of its construction arbitrators are final and conclusive, not reviewable by this Court on
appeal.
2. While the CA correctly affirmed in full the CIAC Arbitral Tribunals factual determinations, it
improperly modified the amount of the award in favor of AIC, which modification did not observe the
proper procedure for the correction of an evident miscalculation of figures, including typographical or
arithmetical errors, in the arbitral award. Section 17.1 of the CIAC Rules mandates the filing of a
motion for the foregoing purpose within fifteen (15) days from receipt thereof. Failure to file said
motion would consequently render the award final and executory under Section 18. 1 of the same
rules.
The Arbitral Tribunal eventually denied AICs aforesaid motion for execution because, despite
its merit, the Arbitral Tribunal could not disregard the time-limitation under the CIAC Rules.
August 2014

MIDWAY MARITIME AND TECHNOLOGICAL FOUNDATION, REPRESENTED BY ITS
CHAIRMAN/PRESIDENT PHD IN EDUCATION DR. SABINO M. MANGLICMOT vs. MARISSA E.
CASTRO, ET AL.
G.R. No. 189061, August 06, 2014.
Facts: Petitioner Midway Maritime and Technological Foundation is the lessee of two parcels of land
in Cabanatuan City. Its president, Dr. Manglicmot, is married to Adoracion, who is the registered
owner of the property under TCT Nos. T-71321 and T-71322. Inside said property stands a residential
building, which is now the subject matter of the dispute, owned by the respondents. The two parcels
of land, on a portion of which the residential building stand, were originally owned by the respondents
father Louis Castro, Sr. who is also the president of Cabanatuan City Colleges (CCC). On August 15,
1974, Castro mortgaged the property to Bancom Development Corporation (Bancom) to secure a
loan. During the subsistence of the mortgage, CCCs board of directors agreed to a 15-year lease of
a portion of the property to the Castro children, herein respondents, who subsequently built the
residential house now in dispute.
The lease was to expire in 1992.When CCC failed to pay its obligation, Bancom foreclosed the
mortgage and the property was sold at public auction in 1979, with Bancom as the highest bidder.
Bancom thereafter assigned the credit to Union Bank, and later on, consolidated its ownership over
the properties in 1984 due to CCCs failure to redeem the property. When Union Bank sought the
issuance of a writ of possession over the properties, which included the residential building,
respondents opposed the same. The case reached the Court
in G.R. No. 97401 entitled, Castro, Jr. v. CA, and in a Decision dated December 6, 1995, the
Court ruled that the residential house owned by the respondents should not have been included in the
writ of possession issued by the trial court as CCC has no title over it. In the meantime, Adoracions
father, Tomas Cloma (Tomas), bought the two parcels of land from Union Bank in an auction sale
conducted on July 13, 1993. Tomas subsequently leased the property to the petitioner and thereafter,
sold the same to Adoracion. Several suits were brought by the respondents against the petitioner,
including an action for Ownership, Recovery of Possession and Damages, docketed as Civil Case
No. 3700 (AF). The respondents prayed that they be declared as the owners of the residential
building, and that the petitioner be ordered to vacate the same and pay rent arrearages and
damages.
The petitioner, however, denied respondents ownership of the residential building and claimed
that Adoracion owns the building, having bought the same together with the land on which it stands.
RTC, rendered judgment in favor of the respondents, declared them as the absolute owners of the
residential building and ordered petitioner to pay the respondents unpaid rentals from August 1995
until fully paid. CA dismissed the petitioners appeal and affirmed the RTC decision.
Issue: Whether there was a lease agreement between the petitioner and the respondents as regards
the residential building.

Held: YES, the Court ruled that such issue is a question of fact that has been resolved by the RTC in
the affirmative.
It is settled that [o]nce a contact of lease is shown to exist between the parties, the lessee
cannot by any proof, however strong, overturn the conclusive presumption that the lessor has a valid
title to or a better right of possession to the subject premises than the lessee.Section 2(b), Rule 131
of the Rules of Court prohibits a tenant from denying the title of his landlord at the time of the
commencement of the relation of landlord and tenant between them. In Santos v. National Statistics
Office, the Court expounded on the rule on estoppel against a tenant and further clarified that what a
tenant is estopped from denying is the title of his landlord at the time of the commencement of the
landlord-tenant relation. If the title asserted is one that is alleged to have been acquired subsequent
to the commencement of that relation, the presumption will not apply.
In this case, the petitioners basis for insisting on Adoracions ownership dates back to the
latters purchase of the two parcels of land from her father, Tomas. It was Tomas who bought the
property in an auction sale by Union Bank in 1993 and leased the same to the petitioner in the same
year. Note must be made that the petitioners president, Manglicmot, is the husband of Adoracion and
son-in-law of Tomas. It is not improbable that at the time the petitioner leased the residential building
from the respondents mother in 1993, it was aware of the circumstances surrounding the sale of the
two parcels of land and the nature of the respondents claim over the residential house. Yet, the
petitioner still chose to lease the building. Consequently, the petitioner is now estopped from denying
the respondents title over the residential building.
More importantly, the respondents ownership of the residential building is already an
established fact. Nemo dat quod non habet. One can sell only what one owns or is authorized to sell,
and the buyer can acquire no more right than what the seller can transfer legally.18 It must be pointed
out that what Tomas bought from Union Bank in the auction sale were the two parcels of land
originally owned and mortgaged by CCC to Bancom, and which mortgage was later assigned by
Bancom to Union Bank. Contrary to the petitioners assertion, the property subject of the mortgage
and consequently the auction sale pertains only to these two parcels of land and did not include the
residential house. This was precisely the tenor of Castro, Jr. v. CA where the Court nullified the writ of
possession issued by the trial court insofar as it affected the residential house constructed by the
respondents on the mortgaged property as it was not owned by CCC, which was the mortgagor. The
Court ruled: [Article 2127 of the Civil Code] extends the effects of the real estate mortgage to
accessions and accessories found on the hypothecated property when the secured obligation
becomes due. The law is predicated on an assumption that the ownership of such accessions and
accessories also belongs to the mortgagor as the owner of the principal. The provision has thus been
seen by the Court, x x x, to mean that all improvements subsequently introduced or owned by
the mortgagor on the encumbered property are deemed to form part of the mortgage. That the
improvements are to be considered so incorporated only if so owned by the mortgagor is a rule that

can hardly be debated since a contract of security, whether real or personal, needs as an
indispensable element thereof the ownership by the pledgor or mortgagor of the property pledged or
mortgaged. The rationale should be clear enough in the event of default on the secured obligation,
the foreclosure sale of the property would naturally be the next step that can expectedly follow. A sale
would result in the transmission of title to the buyer which is feasible only if the seller can be in a
position to convey ownership of the thing sold (Article 1458, Civil Code). It is to say, in the instant
case, that a foreclosure would be ineffective unless the mortgagor has title to the property to
be foreclosed.
The rule is that when a decision becomes final and executory, it becomes valid and binding
upon the parties and their successors in interest. Such being the case, Castro, which already
determined with finality the respondents ownership of the residential house in question, is applicable
and binding in this case and the petitioner cannot be allowed to challenge the same. Thus, as
correctly ruled by the CA, [t]o our mind, the pronouncement resolving the said issue necessarily
touches also the issue on the ownership of the building. x x x The finding of the Court [in Castro], now
being final and executory, is no longer open for inquiry and therefore, has attained its immutability.
By: Jo Ann Liza M. Narag
UPSI PROPERTY HOLDINGS, INC.,
vs. DIESEL CONSTRUCTION CO., INC..
G.R. No. 200250, August 06, 2014
Facts: The controversy stemmed from a complaint filed by respondent Diesel Construction Co., Inc.
(Diesel) against UPSI before the Construction Industry Arbitration Commission (CIAC) for collection
of unpaid balance of the contract price and retention money under their construction agreement,
damages for unjustified refusal to grant extension of time, interest, and attorneys fees. On December
4, 2001, Arbitral award was rendered by the CIAC in favor of Diesel.
The CIAC judgment became the subject of a petition for review before the CA, which rendered
a decision. UPSI filed its Motion for Partial Reconsideration, while Diesel filed its Motion for
Reconsideration. The CA denied that of UPSI, but partially granted that of Diesel. Unsatisfied, Diesel
and UPSI filed their separate petitions for review before the Court, which were later consolidated. The
Court then rendered judgment which rendered that Diesels petition is partially granted and UPSIs
Petition is denied with qualification. UPSI moved for a reconsideration and Diesel filed its Motion for
Leave to File and Admit Attached Comment and/or Opposition which the Court denied with finality the
motion filed by UPSI and granted that of Diesels. Decision of the Court became final and executory.
Eventually, Diesel filed the Motion for Issuance of Writ of Execution with the CIAC. On February 17,
2009, despite numerous pleadings filed by UPSI opposing the execution of the Courts decision, the
CIAC granted the execution sought by Diesel. Still unsatisfied, UPSI questioned by certiorari the
execution granted by the CIAC before the CA which the latter denied the UPSI petition and later its

motion for reconsideration. Pending the resolution of the petition for certiorari, Diesel sought the
amendment of the writ of execution before the CIAC so that the payment of legal interest be included
in the writ as well as in the reimbursement of half of the arbitration costs. Despite the opposition by
UPSI, CIAC partially granted Diesels motion in its Order, which considered the interest being claimed
by Diesel. But as far as the reimbursement of half of the arbitration costs was concerned, the CIAC
denied it. UPSI questioned the CIAC order via a petition for certiorari with the CA, docketed arguing
that the CIAC gravely abused its discretion when it substantially modified the writ of execution by
holding that Diesel was entitled to legal interest. The CA, however, denied the petition.
Issue: Whether or not the inclusion of the legal interest in the writ of execution despite the silence of
the Court in the dispositive portion of its judgment which has become final and executory is valid.
Held: YES, it is valid.
It is true that a decision that has attained finality becomes immutable and unalterable and
cannot be modified in any respect, even if the modification was meant to correct erroneous
conclusions of fact and law, and whether the modification was made by the court that rendered it or
by this Court as the highest court of the land. Any attempt on the part of the x x x entities charged
with the execution of a final judgment to insert, change or add matters not clearly contemplated in the
dispositive portion violates the rule on immutability of judgments." The rule is that in case of ambiguity
or uncertainty in the dispositive portion of a decision, the body of the decision may be scanned for
guidance in construing the judgment. After scrutiny of the subject decision, nowhere can it be found
that the Court intended to delete the award of legal interest especially that, as Diesel argues, it was
never raised. In fact, what the Court carefully reviewed was the principal amount awarded as well as
the liquidated damages because they were specifically questioned. Recall that the CA modified the
awards granted by the CIAC, but not the legal interest. In finally resolving the controversy, the
Court affirmed the amount of unpaid balance of the contract price in favor of Diesel but expressly
deleted the award of liquidated damages. There being no issue as to the legal interest, the Court did
not find it necessary anymore to disturb the imposition of such. Thus, contrary to UPSIs argument,
there is no substantial variance between the March 24, 2008 final and executory decision of the Court
and the writ of execution issued by the CIAC to enforce it. The Courts silence as to the payment of
the legal interests in the dispositive portion of the decision is not tantamount to its deletion or reversal.
The CA was correct in holding that if such was the Courts intention, it should have also expressly
declared its deletion together with its express mandate to remove the award of liquidated damages to
UPSI.
Corollarily, had the inclusion of the legal interest in the writ been violative of the rule on
immutability of judgment, the CIAC would not have granted it. Consequently, the Court, in Nacar vs.
Gallery Frames, instructs:

To recapitulate and for future guidance, the guidelines laid down in the case of Eastern Shipping Lines are accordingly
modified
to
embody
BSP-MB
Circular
No.
799,
as
follows:
I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasidelicts is breached, the contravenor can be held liable for damages. The provisions under Title XVIII
on "Damages" of the Civil Code govern in determining the measure of recoverable damages.
II. With regard particularly to an award of interest in the concept of actual and compensatory
damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:
When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In
the absence of stipulation, the rate of interest shall be 6% per annum to be computed from default,
i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the
Civil Code.
When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per
annum. No interest, however, shall be adjudged on unliquidated claims or damages, except when or
until the demand can be established with reasonable certainty. Accordingly, where the demand is
established with reasonable certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code), but when such certainty cannot be so reasonably
established at the time the demand is made, the interest shall begin to run only from the date the
judgment of the court is made (at which time the quantification of damages may be deemed to have
been reasonably ascertained). The actual base for the computation of legal interest shall, in any case,
be on the amount finally adjudged.
When the judgment of the court awarding a sum of money becomes final and executory, the rate of
legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 6% per
annum from such finality until its satisfaction, this interim period being deemed to be by then an
equivalent to a forbearance of credit.
And, in addition to the above, judgments that have become final and executory prior to July 1,
2013, shall not be disturbed and shall continue to be implemented applying the rate of interest fixed
therein.
Following the foregoing ruling by the Court, the legal interest remains at 6% and 12% per annum, as
the case may be, since the judgment subject of the execution became final on March 24, 2008.
Interests accruing after July 1, 2013, however, shall be at the rate of 6% per annum.
By: Jo Ann Liza M. Narag

ECE vs. HERNANDEZ
G.R. No. 212689, August 11, 2014
Facts: On September 7, 2006, Haydyn Hernandez (respondent) filed a Complaint for specific
performance, with damages, against Emir Realty and Development Corporation (EMIR) and ECE
Realty and Development Incorporated (ECE) before the Housing and Land Use Regulatory Board
Expanded National Capital Region Field Office (HLURB-Regional Office) for failure of latter to deliver
the 30 sqm. condominium unit in the agreed period. This is also despite the payment respondent a
total of P452,551.65. Moreover, the respondent discovered that Unit 808 contained only 26 sq m, not
30 sq m as contracted, thus, he asked for a corresponding reduction in the price by P120,000.00,
based on the price per sq m of P30,000.00. Instead, EMIR and ECE demanded that he settle all his
amortizations in arrears with interest.
Sometime in 2005, the respondent learned that unit were sold to a third party. HLURBRegional Office ordered EMIR and ECE to reimburse the respondent the amount of P452,551.65,
plus legal interest, from the filing of the complaint, and to pay the respondent P50,000.00 as
moral damages, P50,000.00 as attorneys fees, and P50,000.00 as exemplary damages. ECE and
EMIR appealed to HLURB Board of Commissioners which upheld the decision but dropped EMIR as
respondent. ECE then appealed to the OP. OP dismissed the appeal and ECEs MR. On petition to
review before the CA, the decision of the OP was affirmed with modification deleting award of moral
and exemplary damages. Hence this petition.
Issue(s): Whether or not CA is correct in its decision in the imposition of six (6) percent being the
amount refunded is neither a loan nor a forbearance of money, goods or credit and the interest
imposed after finality at the legal rate at 12%.
Held: YES. The SC affirmed the CA decision with modification by reducing the interest imposable
after finality from 12% to 6 %.
From the finality of the judgment awarding a sum of money until it is satisfied, the award shall
be considered a forbearance of credit. Pursuant to Central Bank Circular No. 416 issued on July 29,
1974, in the absence of written stipulation the interest rate to be imposed in judgments involving a
forbearance of credit was twelve percent (12%) per annum, up from six percent (6%) under Article
2209 of the Civil Code. This was reiterated in Central Bank Circular No. 905, which suspended the
effectivity of the Usury Law beginning on January 1, 1983.
But since July 1, 2013, the rate of twelve percent (12%) per annum from finality of the
judgment until satisfaction has been brought back to six percent (6%). Section 1 of Resolution No.
796 of the Monetary Board of the Bangko Sentral ng Pilipinas dated May 16, 2013 provides: The rate
of interest for the loan or forbearance of any money, goods or credits and the rate allowed in
judgments, in the absence of an express contract as to such rate of interest, shall be six percent (6%)

per annum. Thus, the rate of interest to be imposed from finality of judgments is now back at six
percent (6%), the rate provided in Article 2209 of the Civil Code.
By: Jenz Rivera
HEIRS OF FRANCISCO I. NARVASA, SR. et al. vs.
EMILIANA IMBORNAL et al.
G.R. No. 182908, August 06, 2014
Facts: Basilia Imbornal+ (Basilia) had four (4) children, namely, Alejandra, Balbina, Catalina, and
Pablo. Francisco I. Narvasa, Sr. (Francisco) and Pedro Ferrer (Pedro) were the children of Alejandra,
while petitioner Petra Imbornal (Petra) was the daughter of Balbina. Petitioners are the heirs and
successors-in-interest of Francisco, Pedro, and Petra (Francisco, et al.). On the other hand,
respondents Emiliana, Victoriano, Felipe, Mateo, Raymundo, Maria, and Eduardo, all surnamed
Imbornal, are the descendants of Pablo. During her lifetime, Basilia owned a parcel of land situated at
Sabangan, Barangay Nibaliw West, San Fabian, Pangasinan with an area of 4,144 square meters
(sq. m.), more or less(Sabangan property), which she conveyed to her three (3) daughters Balbina,
Alejandra, and Catalina (Imbornal sisters) sometime in 1920. Catalinas husband Ciriaco, applied for
and was granted a homestead patent over a 31,367-sq. m. riparian land (Motherland) On December
5, 1933, OCT No. 1462 was issued in his name and later was cancelled, and TCT No. 101495 was
issued in the name of Ciriacos heirs. Ciriaco and his heirs had since occupied the northern portion of
the Motherland, while respondents occupied the southern portion. Sometime in 1949, the First
Accretion, approximately 59,772 sq. m. in area,adjoined the southern portion of the Motherland. On
August 15, 1952, OCT No. P-318 was issued in the name of respondent Victoriano, married to
Esperanza Narvarte, covering the First Accretion. Decades later, or in 1971, the Second Accretion,
which had an area of 32,307 sq. m., more or less, abutted the First Accretion on its southern
portion.19 On November 10, 1978, OCT No. 21481 was issued in the names of all the respondents
covering the Second Accretion.
Claiming rights over the entire Motherland, Francisco, et al., filed an Amended Complaint for
reconveyance, partition, and/or damages against respondents. They anchored their claim on the
allegation that Ciriaco, with the help of his wife Catalina, urged Balbina and Alejandra to sell the
Sabangan property, and that Ciriaco used the proceeds therefrom to fund histhen-pending
homestead patent application over the Motherland. In return, Ciriaco agreed that once his homestead
patent is approved, he will be deemed to be holding the Motherland which now included both
accretions in trust for the Imbornal sisters. Likewise, Francisco, et al. alleged that through deceit,
fraud, falsehood, and misrepresentation, respondent Victoriano, with respect to the First Accretion,
and the respondents collectively, with regard to the Second Accretion, had illegally registered the said
accretions in their names, notwithstanding the fact that they were not the riparian owners (as they did
not own the Motherland to which the accretions merely formed adjacent to). In this relation,

Francisco, et al. explained that they did not assert their inheritance claims over the Motherland and
the two (2) accretions because they respected respondents rights, until they discovered in 1983 that
respondents have repudiated their (Francisco, et al.s) shares thereon.22 Thus, bewailing that
respondents have refused them their rights not only with respect to the Motherland, but also to the
subsequent accretions, Francisco, et al. prayed for the reconveyance of said properties, or, in the
alternative, the payment of their value, as well as the award of moral damages in the amount of
P100,000.00, actual damages in the amount of P150,000.00, including attorneys fees and other
costs.
RTC rendered a Decision in favor of Francisco, et al. and thereby directed respondents to: (a)
reconvey to Francisco, et al. their respective portions in the Motherland and in the accretions thereon,
or their pecuniary equivalent; and (b) pay actual damages in the amount of P100,000.00, moral
damages in the amount of P100,000.00, and attorneys fees in the sum of P10,000.00, as well as
costs of suit. On appeal, the CA rendered a Decision reversing and setting aside the RTC Decision
and entering a new one declaring: (a) the descendants of Ciriaco as the exclusive owners of the
Motherland; (b) the descendants of respondent Victoriano as the exclusive owners of the First
Accretion; and (c)the descendants of Pablo (i.e., respondents collectively) as the exclusive owners of
the Second Accretion. Hence this petition.
Issue(s): One of the issues raised is whether or not implied trust existed between the Imbornal
sisters and Ciriaco.
Held: NO. An implied trust arises, not from any presumed intention of the parties, but by operation
of law in order to satisfy the demands of justice and equity and to protect against unfair
dealing or downright fraud. Article 1456 of the Civil Code states that[i]f property is acquired
through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied
trust for the benefit of the person from whom the property comes.
The burden of proving the existence of a trust is on the party asserting its existence, and such
proof must be clear and satisfactorily show the existence of the trust and its elements. While implied
trusts may be proven by oral evidence, the evidence must be trustworthy and received by the courts
with extreme caution, and should not be made to rest on loose, equivocal or indefinite declarations.
Trustworthy evidence is required because oral evidence can easily be fabricated.
In this case, it cannot be said, merely on the basis of the oral evidence offered by Francisco, et
al. that the Motherland had been either mistakenly or fraudulently registered in favor of Ciriaco.
Accordingly, it cannot be said either that he was merely a trustee of an implied trust holding the
Motherland for the benefit of the Imbornal sisters or their heirs.
Homestead patent award requires proof that the applicant meets the stringent conditions set
forth under Commonwealth Act No. 141, as amended, which includes actual possession, cultivation,
and improvement of the homestead. It must be presumed, therefore, that Ciriaco underwent the rigid

process and duly satisfied the strict conditions necessary for the grant of his homestead patent
application. As such, it is highly implausible that the Motherland had been acquired and registered by
mistake or through fraud as would create an implied trust between the Imbornal sisters and Ciriaco,
especially considering the dearth of evidence showing that the Imbornal sisters entered into the
possession of the Motherland, or a portion thereof, or asserted any right over the same at any point
during their lifetime. Hence, when OCT No. 1462 covering the Motherland was issued in his name
pursuant to Homestead Patent No. 24991 on December 15, 1933, Ciriacos title to the Motherland
had become indefeasible. It bears to stress that the proceedings for land registration that led to the
issuance of Homestead Patent No. 24991 and eventually, OCT No. 1462 in Ciriacos name are
presumptively regular and proper, which presumption has not been overcome by the evidence
presented by Francisco, et al.
In this light, the Court cannot fully accept and accord evidentiary value to the oral testimony
offered by Francisco, et al. on the alleged verbal agreement between their predecessors, the
Imbornal sisters, and Ciriaco with respect to the Motherland. Weighed against the presumed
regularity of the award of the homestead patent to Ciriaco and the lack of evidence showing that the
same was acquired and registered by mistake or through fraud, the oral evidence of Francisco, et al.
would not effectively establish their claims of ownership. It has been held that oral testimony as to a
certain fact, depending as it does exclusively on human memory, is not as reliable as written or
documentary evidence, especially since the purported agreement transpired decades ago, or in the
1920s. Hence, with respect to the Motherland, the CA did not err in holding that Ciriaco and his heirs
are the owners thereof, without prejudice to the rights of any subsequent purchasers for value of the
said property.
By: Jenz Rivera
HEIRS OF SPOUSES JOAQUIN MANGUARDIA AND SUSAN MANALO vs.
HEIRS OF SIMPLICIO AND MARTA VALLES
G.R. NO. 177616, AUGUST 27, 2014
Facts: Simplicio and Marta Valles were registered owners of a lot designated Lot 835. It appeared
that they sold the lot, by way of notarized Deeds of Sale, to Simplicios daughter, Adelaida; their
brothers Melquiades and Rustico; and Martas daughter Encarnacion. Melquiades sold his parcel, Lot
835-B, to Encarnacion and Roberto Araza, who later sold the lot to Robertos Aunt, Soledad Araza.
Soledad later sold the parcel to the Spouses Joaquin Manguardia and Susan Manalo (Spouses
Manguardia). Rustico sold his part of the lot, Lot 835-D, to Pedro and Soledad Araza, who later sold
the parcel to the Spouses Leonardo and Rebecca Araza (Spouses Araza). Thereafter, the heirs of
Simplicio and Marta Valles (Respondents) commenced an action for the Declaration of Nullity of
Certificates of Title and Deeds of Sale, Cancellation of Certificates of Title, Recovery of Possession
and Damages against the heirs of spouses Manguardia and the heirs of spouses Leonardo and
Rebecca (Petitioners) before the Regional Trial Court (RTC). Respondents alleged that Simplicio and

Marta were long dead when the documents were executed. Therefore, the sale was null and void. In
their respective Answers, Petitioners alleged that their predecessors-in-interest were purchasers in
good faith and that their ownership was never questioned despite Respondents knowledge thereof.
The RTC ruled that the sale was void ab initio, finding that the vendees in the questioned sale
document, who were predecessors-in-interest of the present Petitioners, could not feign ignorance of
the death of the purported vendors because two of them are their brothers, while each of the other
two are children of each of the said vendors. The Court of Appeals affirmed the Decision of the RTC.
Issue :Whether or not predecessors-in-interest of Petitioners were purchasers in good faith.
Held: Petitioners were not purchasers in good faith. If circumstances exist that require a prudent man
to investigate and he does not, he is deemed to have acted in mala fide, and his mere refusal to
believe that a defect exists or his willful closing of his eyes to the possibility of the existence of a
defect in his vendors title will not make him an innocent purchaser for value. Here, the relationships
by consanguinity or affinity, between and among the vendors and vendees in the series of sales of
the subject properties, were established by testimonial evidence. it can reasonably be assumed from
these relations that the spouses Manguardia and Leonardo were not buyers in good faith.
By: Leonardo Dingayan
ANCHOR SAVINGS BANK vs.
PINZMAN REALTY AND DEVELOPMENT CORPORATION
G.R. NO. 192304, AUGUST 13, 2014
Facts: Pinzman Realty and Development Corporation (Respondent) obtained a loan in the amount of
PHP 3,000,000.00 from Anchor Savings Bank (Petitioner) secured by a mortgage over lots owned by
Marilyn Maalac (Maalac). Maalac also executed a Promissory Note and Disclosure Statement in
favor of the petitioner in the total amount of P3,308,447.74 which amount already included payment
for three months interest. There were no stipulations on the interest rate for the entire debt. Of the
three checks issued by Maalac in payment of the obligation, only the first was cleared, leaving a
balance of PHP 3,012,525.32. When she received the Second Notice of Extrajudicial Foreclosure, the
principal amount was PHP 4,577,269.42, excluding penalties, charges, attorneys fees and costs of
foreclosure. Petitioner appeared to have applied an interest rate of 30.33%. Private respondents filed
a Complaint for the Annulment of Extrajudicial Foreclosure of Mortgaged Properties, Auction Sale,
Certificate of Sale and Damages against the petitioner before the Regional Trial Court (RTC) alleging
that the amount demanded in the Notice of Extrajudicial Sale was exorbitant and excessive and
contending that the proper amount should only be PHP 3,825,907.16 if the balance of the loan were
computed with interest at the rate of 3% reckoned from the date of last payment. The RTC dismissed
the Complaint finding did not take any measures to enjoin the foreclosure sale despite their
knowledge of the alleged usurious interest charges. The Court of Appeals (CA) reversed the
Decision, finding that the Promissory Note and Disclosure Statement did not contain any stipulation
on the rate of interest. Thus, the CA held that petitioner erred in unilaterally imposing an interest rate
of 30.33% on the unpaid portion of the loan. Instead, the CA applied an interest rate of 12% per
annum.
Issue:Whether or not the foreclosure sale of Maalacs property was invalid.

Held: The foreclosure sale was invalid. A foreclosure sale arising from a usurious mortgage cannot
be given legal effect because a mortgagor cannot be legally compelled to pay for a grossly inflated
loan. A judgment ordering a foreclosure sale is conditioned upon a finding on the correct amount of
the unpaid obligation and the failure of the debtor to pay the said amount. Here, Petitioner unilaterally
imposed an exorbitant interest rate of 30.33%, hence, the rate was usurious and the foreclosure
proceeding therefrom was invalid.
ROWENA SOLANTE vs. COMMISSION ON AUDIT
G.R. No. 207348, August 20, 2014
VELASCO, J.
Doctrine: If the period in the contract is merely an estimate, then the lapse of the said period will not
make the obligation immediately demandable because it cannot be deemed a day certain in the
context of Article 1193, the first paragraph of which provides that Obligations for whose fulfillment a
day certain has been fixed, shall be demandable only when that day comes.
Facts: In 1989, the City of Mandaue (the City) and F.F. Cruz and Co., Inc. (F.F. Cruz) entered into a
Contract of Reclamation in which F.F. Cruz, in consideration of a defined land sharing formula thus
stipulated, agreed to undertake, at its own expense, the reclamation of foreshore and submerged
lands from the Cabahug Causeway in that city. The project was to be completed in six (6) years or
until 1995. In connection with the reclamation project, the parties also agreed, by way of a
Memorandum of Agreement, on the use of a parcel of land belonging to the city where, as a
compensation for its use for building housing facilities for F.F. Cruzs employees, the improvements
introduced thereto by F.F. Cruz shall be owned by the City. The project was not completed by that
date.
Thereafter, in 1997, the Department of Public Works and Highways entered into an agreement
with F.F. Cruz to demolish the said housing facilities because these improvements stand in the way of
the Metro Cebu Development Project II (MCDP II), which included the widening of the Plaridel
Extension Mandaue Causeway. Petitioner Rowena Solante, then the Human Resources
Management Officer III, prepared disbursement vouchers in favor of F.F. Cruz in the amount of PHP
1,084,836.42 for the cost of the housing facilities. This was done with approval of Samuel Darza,
Project Director of the MCDP II, who addressed the said disbursement through a Letter-Complaint,
alleging that F.F. Cruz was no longer the owner of the property as the ownership thereof has passed
to the City pursuant to the Contract of Reclamation. The Commission on Audit (COA) disallowed the
disbursement, ruling that the fact that the project was not completed in 1995 did not negate the
governments ownership of the improvements. Also, it was the intention of the parties that the
government be compensated for the use of the land for the housing facilities, and making the
government pay for the use of the land would render such intention of the parties inutile.

Issue: Whether or not the ownership of the improvements built by F.F. Cruz on the land owned by the
City already passed to the government.
Held: The ownership of the improvements did not pass to the government and F.F. Cruz remained to
be the owner of the improvements, notwithstanding that project had not been completed. The COA
concluded that after the six (6)-year period, F.F. Cruz was automatically deemed to be in delay, the
contract considered as completed, and the ownership of the structures built in accordance with the
MOA transferred to the City of Mandaue. But this position was erroneous, because a reading of the
contract of reclation showed that the period of six (6) years was an estimate and not a day certain in
the context of Article 1193, the first paragraph of which provides that Obligations for whose fulfillment
a day certain has been fixed, shall be demandable only when that day comes. Thus, the lapse of six
(6) years from the perfection of the contract did not, by itself, make the obligation to finish the
reclamation project demandable, such as to put the obligor in a state of actionable delay for its
inability to finish. Thus, F.F. Cruz was not in delay. The lapse of six (6) years from the perfection of
the subject reclamation contract, without more, could not have automatically vested Mandaue City,
under the MOA, with ownership of the structures.
Even if the allotted six (6) years within which F.F. Cruz was the completion date of the reclamation
project, the lapse thereof does not automatically mean that F.F. Cruz was in delay. As may be noted,
the City never made a demand for the fulfillment of its obligation under the Contract of Reclamation.
The first paragraph of Article 1169 provides: Those obliged to deliver or to do something incur in
delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their
obligation. Here, the records were bereft of any document whence to deduce that the City of
Mandaue exacted from F.F. Cruz the fulfillment of its obligation under the reclamation contract. As it
were, the Mandaue-F.F.Cruz MOA states that the structures built by F.F. Cruz on the property of the
city will belong to the latter only upon the completion of the project. Clearly, the completion of the
project is a suspensive condition that has yet to be fulfilled. Until the condition arises, ownership of
the structures properly pertains to F.F. Cruz.
KRYSTLE REALTY DEVELOPMENT CORPORATION, REPRESENTED BY CHAIRMAN OF THE

BOARD, WILLIAM C. CU, vs DOMINGO ALIBIN, AS SUBSTITUTED BY HIS HEIRS, NAMELY:
BEATRIZ A. TORZAR, VIRGINIA A. TARAYA, ROSARIO A. MARCO, JESUS A. ALIBIN, AND
JAY ALIBIN, AS SUBSTITUTED BY HIS CHILDREN, NAMELY: JAYNES ALIBIN, JAY ALIBIN,
AND JESUS ALIBIN, JR.s.
G.R. No. 196117, August 13, 2014
PERLAS-BERNABE, J.
Facts: Respondent Domingo Alibin owned an undivided one-half portion of Lot No. 1680 situated at
Tahao, Legazpi City, Albay, and registered in his name and that of Mariano Rodrigueza. On the

strength of a contract to sell purporting to convey Domingos one-half () share of the said lot to
Caridad Rodrigueza as well as a Deed of Absolute Sale whereby Mariano and Caridad transferred
their respective rights to the subject lot in favor of petitioner Krystle Realty Development Corporation
(Krystle Realty), the original certificate of title was cancelled. In lieu thereof, three (3) TCTs were
issued all on the same day in the names of the Rodriguezas at one-half () share each, and in the
name of Krystle Realty covering the entire lot.
Claiming that he had not sold his share to Caridad nor received any consideration for the
alleged transfer, and that the signature on the deed of sale was not his, Domingo sought to annul the
said deed. He died, however, during the pendency of the case, and was consequently substituted by
his heirs, herein respondents.
Caridad, on the other hand, insisted that she had paid Domingo in two (2) instalments. She
then took possession of Domingos one-half () portion of the subject lot and declared the same for
taxation purposes. For its part, Krystle Realty claimed that it was a purchaser in good faith, and that
the action, if at all, should be directed against Caridad.
Caridad likewise died, and was substituted first by her brother, Mariano, and upon the latters
death, by Rufino Rodrigueza.
The parties agreed to submit to a handwriting expert of the NBI the determination of the
genuineness of Domingos signature on the deed of sale. NBI issued stating that the questioned and
the standard/sample signatures of Domingo submitted to it for examination were written by one and
the same person.
The RTC declared Krystle Realty to be a purchaser in bad faith in view of the admission of its
representative, Mr. William Cu, that he was aware of the fact that Domingo was part owner of the
subject lot and that he even asked a certain Rudy Gueco to talk to Domingo about the sale of his onehalf () share.
Aggrieved, Krystle Realty and Caridad elevated their cases on appeal before the CA. CA
affirmed
the
findings
of
the
RTC.
Issue: Whether or not the Krystle Realty as a purchaser in bad faith.
Held: No. Krystle Realtys claim that it is a buyer in good faith, the Court finds that the latter cannot
veer away from the admission of its representative, Mr. William Cu, i.e., that he was aware of
Domingos interest in the subject lot, and that Caridad had no title in her name at the time of the sale,
thus, giving rise to the conclusion that it (Krystle Realty) had been reasonably apprised of the
ownership controversy over the subject lot. This notwithstanding, records show that Krystle Realty
proceeded with the transaction without further examining the sellers title and thus, could not claim to
have purchased the subject lot in good faith. Verily, one is considered a buyer in bad faith not only
when he purchases real estate with knowledge of a defect or lack of title in his seller but also when he
has knowledge of facts which should have alerted him to conduct further inquiry or investigation, as

Krystle Realty in this case. Further, the irregularities attending the issuance of TCT as pointed out by
the CA are equally indicative of lack of good faith on Krystle Realtys part. Indeed, what it failed to
realize is that, as one asserting the status of a buyer in good faith and for value, it had the burden of
proving such status, which goes beyond a mere invocation of the ordinary presumption of good faith.
By: De Mesa, Nadia Marie T.
ELIZABETH DEL CARMEN, vs. SPOUSES RESTITUTO SABORDO
AND MIMA MAHILUM-SABORDOs.
G.R. No. 181723, August 11, 2014
PERALTA, J.
Facts: Spouses Toribio and Eufrocina Suico (Suico spouses), along with several business partners,
entered into a business venture by establishing a rice and corn mill at Cebu. They obtained a loan
from the Development Bank of the Philippines (DBP), and to secure the said loan, four parcels of land
owned by the Suico spouses, and another lot owned by their business partner, Juliana Del Rosario,
were mortgaged. Subsequently, the Suico spouses and their business partners failed to pay their loan
obligations forcing DBP to foreclose the mortgage. After the Suico spouses and their partners failed
to redeem the foreclosed properties, DBP consolidated its ownership over the same. DBP later
allowed the Suico spouses and Reginald and Beatriz Flores (Flores spouses), as substitutes for
Juliana Del Rosario, to repurchase the subject lots by way of a conditional sale.
The Suico and Flores spouses were able to pay. Threatened with the cancellation of the
conditional sale, the Suico and Flores spouses sold their rights over the said properties to herein
respondents Restituto and Mima Sabordo, subject to the condition that the latter shall pay the
balance of the sale price. DBP approved the sale of rights of the Suico and Flores spouses in favor of
herein respondents. Subsequently, respondents were able to repurchase the foreclosed properties of
the Suico and Flores spouses.
Respondent Restituto Sabordo (Restituto) filed with the then Court of First Instance of Negros
Occidental an original action for declaratory relief with damages and prayer for a writ of preliminary
injunction. The Regional Trial Court ruled in favor of the Suico spouses. On appeal, the CA, in its
Decision modified the RTC decision by giving the Suico spouses to exercise their option to purchase
or redeem the subject lots from respondents.
Toribio Suico died leaving his widow, Eufrocina, and several others, including herein
petitioner, as legal heirs. Later, they discovered that respondents mortgaged the Lots with Republic
Planters Bank (RPB) as security for a loan which, subsequently, became delinquent.
Thereafter, claiming that they are ready with the payment, but alleging that they cannot
determine as to whom such payment shall be made, petitioner and her co-heirs filed a Complaint with
the RTC seeking to compel herein respondents and RPB to interplead and litigate between
themselves their respective interests on the abovementioned sum of money.
Respondents filed their Answer with Counterclaim praying for the dismissal of the above Complaint.
RPB filed a Motion to Dismiss the subject Complaint on the ground that petitioner and her coheirs had no valid cause of action and that they have no primary legal right which is enforceable and
binding against RPB.
RTC rendered judgment, dismissing the Complaint of petitioner and her co-heirs for lack of
merit. Respondents' Counterclaim was likewise dismissed.
Petitioner filed an appeal with the CA contending that the judicial deposit or consignation of the
money was valid and binding and produced the effect of payment of the purchase price of the subject
lots. CA denied the above appeal for lack of merit and affirmed the disputed RTC Decision.
Petitioner and her co-heirs filed a Motion for Reconsideration, but it was likewise denied by the
CA. Hence, the present petition for review on certiorari.
Issue: Whether or not that the consignation of the Petitioner and her co-heirs made was a judicial
deposit based on a final judgment and, as such, does not require compliance with the requirements of
Articles 1256 and 1257 of the Civil Code.
Held: Consignation is the act of depositing the thing due with the court or judicial authorities
whenever the creditor cannot accept or refuses to accept payment, and it generally requires a prior
tender of payment. It should be distinguished from tender of payment which is the manifestation by
the debtor to the creditor of his desire to comply with his obligation, with the offer of immediate
performance. Tender is the antecedent of consignation, that is, an act preparatory to the
consignation, which is the principal, and from which are derived the immediate consequences which
the debtor desires or seeks to obtain. Tender of payment may be extrajudicial, while consignation is
necessarily judicial, and the priority of the first is the attempt to make a private settlement before
proceeding to the solemnities of consignation. Tender and consignation, where validly made,
produces the effect of payment and extinguishes the obligation.
In the instant case, the Court finds no cogent reason to depart from the findings of the CA and
the RTC that petitioner and her co-heirs failed to make a prior valid tender of payment to
respondents.
It is settled that compliance with the requisites of a valid consignation is mandatory. Failure to
comply strictly with any of the requisites will render the consignation void. One of these requisites is a
valid prior tender of payment.
Under Article 1256, the only instances where prior tender of payment is excused are: (1) when
the creditor is absent or unknown, or does not appear at the place of payment; (2) when the creditor
is incapacitated to receive the payment at the time it is due; (3) when, without just cause, the creditor
refuses to give a receipt; (4) when two or more persons claim the same right to collect; and (5) when
the title of the obligation has been lost. None of these instances are present in the instant case.
Hence, the fact that the subject lots are in danger of being foreclosed does not excuse petitioner and

her co-heirs from tendering payment to respondents, as directed by the court.
BY: De Mesa, Nadia Marie T.
September 2014

ECE REALTY AND DEVELOPMENT, INC. vs. RACHEL G. MANDAP
G.R. No. 196182. 1 September 2014
Facts: Petitioner is engaged in the building and development of condominium units. In 1995, it started
a project condominium building in Pasay. However, printed advertisements were made indicating
therein that the said project was to be built in Makati. In December 1995, respondent agreed to buy a
unit and on 18 June 1996, both parties executed a Contract to Sell wherein it was indicated that the
project is located in Pasay. More than two years after the execution of the Contract to Sell, Mandap
demanded the return of the payments she made on the ground that she discovered that the project
was being built in Pasay and not in Makati as was advertised. The demand was unheeded, prompting
her to file a complaint with the HLURB which was dismissed and later on, the Office of the President
had the same verdict. On appeal with the CA, the earlier decisions were reversed, now prompting the
petitioner to elevate the case before the SC.
Issue: Was there fraud in the execution of the Contract to Sell?
Held: There was no fraud.
Case law has shown that in order to constitute fraud that provides basis to annul contracts, it
must fulfil two conditions. First, the fraud must be dolo causante or it must be fraud in obtaining the
consent of the party. Second, fraud must be proven by clear and convincing evidence and not just by
preponderance of evidence. In the case, petitioner was guilty of false representation of a fact but this
does not constitute causal fraud which would have served as basis for annulling the contract. Mandap
failed to prove that the location of the project was the causal consideration which led her into buying
her unit in the project. Assuming arguendo that the misrepresentation consists of fraud, Mandaps act
of signing the contract, after knowing the propertys actual location, can be construed as an implied
ratification thereof under Article 1393 of the Civil Code.
By: Clara Maria Beatriz S. Calayan
MEYER ENTRPRISES VS CORDERO
GR No. 197336. 3 September 2014
Facts: Petitioner filed an action for damages against respondent for the caused by the latters dike
constructed which disrupted the flow of the sea, causing damage to petitioners property. He prayed
for moral, exemplary and actual damages.
Defendant says he is merely doing what has been authorized by the city government and that
the petitioners quarrying was the proximate cause of the damage. He prayed for moral and
exemplary damages plus litigation expenses. The trial court dismissed petitioners action, ordering
petitioner to pay damages to respondent.
Issue: Is the payment of damages to Cordero proper?

Held: Petitioner is guilty of malicious prosecution. Its accusations were merely to vex and humiliate
the respondent, who opposed its quarrying. Hence, the award of damages is proper.
By: Jimmy Jerard Castro
Rolando C. De La Paz vs L & J Development Company

GR. No. 183360. September 8, 2014
Facts: Petitioner lent P350,000 to respondent without a specified maturity date at 6% monthly
interest. Respondent failed to pay, so petitioner filed a complaint for collection. Respondent claims
the interest rate is unconscionable. Interest rate upheld by the RTC and increased by the CA to 12%
Issue: Was the CA correct in increasing the interest?
Held: The lack of a written stipulation to pay interest on the loaned amount disallows a creditor from
charging monetary interest.
Under Article 1956 of the Civil Code, no interest shall be due unless it has been expressly
stipulated in writing. Jurisprudence on the matter also holds that for interest to be due and payable,
two conditions must concur: a) express stipulation for the payment of interest; and b) the agreement
to pay interest is reduced in writing.
Here, it is undisputed that the parties did not put down in writing their agreement. Thus, no
interest is due. The collection of interest without any stipulation in writing is prohibited by law.
Even if the payment of interest has been reduced in writing, a 6% monthly interest rate on a
loan is unconscionable, regardless of who between the parties proposed the rate.
NAPOCOR VS TARCELO
GR. No. 198939. September 8 2014
Facts: Petitioner filed action in court to expropriate lots belonging to private respondent. The purpose
is to lay underground pipelines. They are disputing the amount of just compensation to be paid.

Petitioner wants to pay only 10% of the full market value of the property, while respondents want the
full amount. RTC orders petitioner to pay full value, upheld by the CA.
Issue: How much should be paid as just compensation?
Held: The exercise of the right of eminent domain, whether directly by the State or by its authorized
agents, is necessarily in derogation of private rights
At bar, it cannot be gainsaid that the construction of underground pipeline is a simple case of
mere passage of gas pipeline. It will surely cause damage and prejudice to the agricultural potentials
of appellees property. Deep excavation will have to be done whereby plants and trees will be
uprooted. A possible leakage could certainly do harm and adversely restrict the agricultural and
economic activity of the land. This is not to mention that it will create an environmental health hazard
dangerous to the occupants life and limb.
Hence, defendants-appellees are entitled for (sic) just compensation to (sic) the fullmarket value of
their property notjust ten percent (10%) of it.
NAPOCOR VS SAMAR
GR. No. 197329. September 8 2014
Facts: Petitioner filed action to expropriate the property of respondent for the purpose of laying
transmission lines. Expropriation case dismissed for failure to prosecute. Sometime later,
respondents file action for payment of compensation and damages, alleging petitioner did not pay.
RTC orders the payment of P1000/sqm. CA ruled that the rules on expropriation did not apply, and
the case was simply a claim for damages.
Issue: Does the rules on expropriation apply?
Held: The procedure for determining just compensation is set forth in Rule 67 of the 1997 Rules of
Civil Procedure. Section 5 of Rule 67 partly states that upon the rendition of the order of
expropriation, the court shall appoint not more than three (3) competent and disinterested persons as
commissioners to ascertain and report to the court the just compensation for the property sought to
be taken. Records show that sometime in 1990, NPC filed an expropriation case docketed as Civil
Case No. IR-2243. However, in an Order dated July 12, 1994, the expropriation case was dismissed
by the RTC for failure of NPC to prosecute. Subsequently, or on December 5, 1994, respondents
filed Civil Case No. IR-2678 which is a complaint for compensation and recovery of damages.
Nevertheless, just compensation for the property must be based on its value at the time of the
taking of said property, not at the time of the filing of the complaint. Consequently, the RTC should
have fixed the value of the property at the time NPC took possession of the same in 1990, and not at

the time of the filing of the complaint for compensation and damages in 1994 or its fair market value
in 1995.
RAL BUILDERS, INC. v. FOUNDATION SPECIALISTS, INC.
G.R. NO. 194507. September 8, 2014.
Peralta, J.
Facts: On August 20, 1990, Federal Builders, Inc. (FBI) entered into an agreement with Foundation
Specialist, Inc. (FSI) whereby the latter, as subcontractor, undertook the construction of the
diaphragm wall, capping beam, and guide walls of the Trafalgar Plaza located at Salcedo Village,
Makati City (the Project). Under the agreement, FBI was to pay a downpayment equivalent to twenty
percent (20%) of the contract price and the balance, through a progress billing every fifteen (15) days,
payable not later than one (1) week from presentation of the billing.
On January 9, 1992, FSI filed a complaint for Sum of Money against FBI before the RTC of
Makati City seeking to collect the amount of P1,635,278.91, representing Billing No. 3 and 4, with
accrued interest from August 1, 1991 plus moral and exemplary damages with attorneys fees. FSI
alleged that FBI refused to pay said amount despite demand and its completion of 97& of the
contracted works.
In its Answer with Counterclaim, FBI claimed that FSI completed only 85% of the contracted
works, failing to finish the diaphragm wall and component works in accordance with the plans and
specifications and abandoning the jobsite. FBI maintains that because of FSIs inadequacy, its
schedule in finishing the Project has been delayed resulting in the Project owners deferment of its
own progress billings. It further interposed counterclaimsfor amounts it spent for the remedial works
on the alleged defects in FSIs work.
Issues: 1. WON Federal Builders, Inc. was liable to pay the balance of P1,024,600.00 less the
amount of P33,354.40 notwithstanding that the diaphragm wall constructed by Foundation
Specialists, Inc. was concededly defective and out-of-specifications and that petitioner had to redo it
at its own expense.
2. WON the legal interest should be 12%
Held: Contrary to the allegations of FBI, FSI had indeed completed its assigned obligations, with the
exception of certain assigned tasks, which was due to the failure if FBI to fulfill its end of the bargain.
The defects FBI complained of, such as the misaligned diaphragm wall and the erroneous location of
the rebar dowels, were not only anticipated by the parties, having stipulated alternative plans to
remedy the same, but more importantly, are also attributable to the very actions of FBI. Accordingly,

considering that the alleged defects in FSIs contracted works were not so much due to the fault or
negligence of the FSI, but were satisfactorily proven to be caused by FBIs own acts, FBIs claim of
P8,582,756.29 representing the cost of the measures it undertook to rectify the alleged defects must
necessarily fail.
Thus, in the absence of any record to otherwise prove FSIs neglect in the fulfillment of its
obligations under the contract, this Court shall refrain from reversing the findings of the courts below,
which are fully supported by and deducible from, the evidence on record. Indeed, FBI failed to
present any evidence to justify its refusal to pay FSI for the works it was contracted to perform. As
such, We do not see any reason to deviate from the assailed rulings.
Second assignment of error, 12% interest rate is inapplicable, since this case does not involve a
loan or forbearance of money. Eastern Shipping Lines, Inc. v. Court of Appeals guidelines in
computing legal interest:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded.
In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from
default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article
1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on
the amount of damages awarded may be imposed at the discretion of the court at the rate of 6%
per annum. No interest, however, shall be adjudged on unliquidated claims or damages except
when or until the demand can be established with reasonable certainty. Accordingly, where the
demand is established with reasonable certainty, the interest shall begin to run from the time the
claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be
so reasonably established at the time the demand is made, the interest shall begin to run only
from the date the judgment of the court is made (at which time the quantification of damages may
be deemed to have been reasonably ascertained). The actual base for the computation of legal
interest shall, in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate
of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12%
per annum from such finality until its satisfaction, this interim period being deemed to be by then
an equivalent to a forbearance of credit.
In line, however, with the recent circular of the Monetary Board of the BangkoSentralngPilipinas
(BSP-MB) No. 799, we have modified the guidelines in Nacar v. Gallery Frames:

I.
When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasidelicts is breached, the contravenor can be held liable for damages. The provisions under Title
XVIII on "Damages" of the Civil Code govern in determining the measure of recoverable damages.
II.
With regard particularly to an award of interest in the concept of actual and compensatory
damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan
or forbearance of money, the interest due should be that which may have been stipulated in
writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of interest shall be 6% per annum to be
computed from default, i.e., from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest
on the amount of damages awarded may be imposed at the discretion of the court at the rate
of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages,
except when or until the demand can be established with reasonable certainty. Accordingly,
where the demand is established with reasonable certainty, the interest shall begin to run from
the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code), but when such
certainty cannot be so reasonably established at the time the demand is made, the interest
shall begin to run only from the date the judgment of the court is made (at which time the
quantification of damages may be deemed to have been reasonably ascertained). The actual
base for the computation of legal interest shall, in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the
rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be
6% per annum from such finality until its satisfaction, this interim period being deemed to be
by then an equivalent to a forbearance of credit.
It should be noted, however, that the new rate could only be applied prospectively and not
retroactively. Consequently, the 12% per annum legal interest shall apply only until June 30, 2013.
Come July 1, 2013, the new rate of 6% per annum shall be the prevailing rate of interest when
applicable. Thus, the need to determine whether the obligation involved herein is a loan and
forbearance of money nonetheless exists.
In the absence of any stipulation as to interest in the agreement between the parties herein,
the matter of interest award arising from the dispute in this case would actually fall under the second
paragraph of the above-quoted guidelines in the landmark case of Eastern Shipping Lines, which
necessitates the imposition of interest at the rate of 6%, instead of 12% imposed by the courts below.

The 6% interest rate shall further be imposed from the finality of the judgment herein until
satisfaction thereof, in light of our recent ruling in Nacar v. Gallery Frames.
BY: Patricia Garvida
CESAR V. AREZA AND LOLITA B. AREZA v. EXPRESS SAVINGS BANK, INC.

AND MICHAEL POTENCIANO
G.R. No. 176697. September 10, 2014.
Perez, J:
Facts: Petitioners Cesar V. Areza and Lolita B. Areza maintained two bank deposits with respondent
Express Savings Banks Bian branch: 1) Savings Account No. 004-01-000185-5 and 2) Special
Savings Account No. 004-02-000092-3.
They were engaged in the business of buy and sell of brand new and second-hand motor
vehicles. On 2 May 2000, they received an order from a certain Gerry Mambuay (Mambuay) for the
purchase of a second-hand Mitsubishi Pajero and a brand-new Honda CRV.
The buyer, Mambuay, paid petitioners with nine (9) Philippine Veterans Affairs Office (PVAO)
checks payable to different payees and drawn against the Philippine Veterans Bank (drawee), each
valued at Two Hundred Thousand Pesos (P200,000.00) for a total of One Million Eight Hundred
Thousand Pesos (P1,800,000.00).
About this occasion, petitioners claimed that Michael Potenciano (Potenciano), the branch
manager of respondent Express Savings Bank (the Bank) was present during the transaction and
immediately offered the services of the Bank for the processing and eventual crediting of the said
checks to petitioners account. On the other hand, Potenciano countered that he was prevailed upon
to accept the checks by way of accommodation of petitioners who were valued clients of the Bank.
On 3 May 2000, petitioners deposited the said checks in their savings account with the Bank.
The Bank, in turn, deposited the checks with its depositary bank, Equitable-PCI Bank, in Bian,
Laguna. Equitable-PCI Bank presented the checks to the drawee, the Philippine Veterans Bank,
which honored the checks.
On 6 May 2000, Potenciano informed petitioners that the checks they deposited with the Bank
were honored. He allegedly warned petitioners that the clearing of the checks pertained only to the
availability of funds and did not mean that the checks were not infirmed.Thus, the entire amount of
P1,800,000.00 was credited to petitioners savings account. Based on this information, petitioners
released the two cars to the buyer.

Sometime in July 2000, the subject checks were returned by PVAO to the drawee on the
ground that the amount on the face of the checks was altered from the original amount of P4,000.00
to P200,000.00. The drawee returned the checks to Equitable-PCI Bank by way of Special Clearing
Receipts. In August 2000, the Bank was informed by Equitable-PCI Bank that the drawee dishonored
the checks on the ground of material alterations. Equitable-PCI Bank initially filed a protest with the
Philippine Clearing House. In February 2001, the latter ruled in favor of the drawee Philippine
Veterans Bank. Equitable-PCI Bank, in turn, debited the deposit account of the Bank in the amount
of P1,800,000.00.
On 9 March 2001, petitioners issued a check in the amount of P500,000.00. Said check was
dishonored by the Bank for the reason Deposit Under Hold. According to petitioners, the Bank
unilaterally and unlawfully put their account with the Bank on hold. On 22 March 2001, petitioners
counsel sent a demand letter asking the Bank to honor their check. The Bank refused to heed their
request and instead, closed the Special Savings Account of the petitioners with a balance of
P1,179,659.69 and transferred said amount to their savings account. The Bank then withdrew the
amount of P1,800,000.00 representing the returned checks from petitioners savings account.
Acting on the alleged arbitrary and groundless dishonoring of their checks and the unlawful
and unilateral withdrawal from their savings account, petitioners filed a Complaint for Sum of Money
with Damages against the Bank and Potenciano with the RTC of Calamba.
Issue: WON the Bank had the right to debit P1,800,000.00 from petitioners accounts
Held: The Bank cannot set-off the amount it paid to Equitable-PCI Bank with petitioners savings
account. Under Article 1278 of the New Civil Code, compensation shall take place when two
persons, in their own right, are creditors and debtors of each other. And the requisites for legal
compensation are:
Article 1278. In order that compensation may be proper, it is necessary:
1. That each one of the obligors be bound principally, and that he be at the same time a principal
creditor of the other;
2. That both debts consist in a sum of money, or if the things due are consumable, they be of the
same kind, and also of the same quality if the latter has been stated;
3. That the two debts be due;
4. That they be liquidated and demandable;
5. That over neither of them there be any retention or controversy, commenced by third persons
and communicated in due time to the debtor.
It is well-settled that the relationship of the depositors and the Bank or similar institution is that of
creditor-debtor. Article 1980 of the New Civil Code provides that fixed, savings and current deposits
of money in banks and similar institutions shall be governed by the provisions concerning simple

loans. The bank is the debtor and the depositor is the creditor. The depositor lends the bank money
and the bank agrees to pay the depositor on demand. The savings deposit agreement between the
bank and the depositor is the contract that determines the rights and obligations of the parties.
But as previously discussed, petitioners are not liable for the deposit of the altered checks. The
Bank, as the depositary and collecting bank ultimately bears the loss. Thus, there being no
indebtedness to the Bank on the part of petitioners, legal compensation cannot take place.
The Bank incurred a delay in informing petitioners of the checks dishonor. The Bank was
informed of the dishonor by Equitable-PCI Bank as early as August 2000 but it was only on 7 March
2001 when the Bank informed petitioners that it will debit from their account the altered amount. This
delay is tantamount to negligence on the part of the collecting bank which would entitle petitioners to
an award for damages under Article 1170 of the New Civil Code which reads:
Article 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or
delay, and those who in any manner contravene the tenor thereof, are liable for damages.
The damages in the form of actual or compensatory damages represent the amount debited by
the Bank from petitioners account.
We delete the award of moral damages. Contrary to the lower courts finding, there was no
showing that the Bank acted fraudulently or in bad faith. It may have been remiss in its duty to
diligently protect the account of its depositors but its honest but mistaken belief that petitioners
account should be debited is not tantamount to bad faith. We also delete the award of attorneys fees
for it is not a sound public policy to place a premium on the right to litigate. No damages can be
charged to those who exercise such precious right in good faith, even if done erroneously.
BY: Patricia Garvida

SPOUSES FRANCISCO SIERRA (SUBSTITUTED BY DONATO, TERESITA, TEODORA,
LORENZA, LUCINA, IMELDA, VILMA, AND MILAGROS SIERRA) AND ANTONINA SANTOS,
SPOUSES ROSARIO SIERRA AND EUSEBIO CALUMA LEYVA, AND SPOUSES SALOME
SIERRA AND FELIX GATLABAYAN (SUBSTITUTED BY BUENAVENTURA,
ELPIDIO, PAULINO, CATALINA, GREGORIO, AND EDGARDOGATLABAYAN,
LORETO REILLO, FERMINAPEREGRINA, AND NIDA HASHIMOTO)
vs. PAIC SAVINGS AND MORTGAGE BANK, INC.
G.R. No. 197857, 10 September 2014
Facts: On May 31, 1983, Goldstar Conglomerates, Inc. obtained from First Summa Savings and
Mortgage Bank, now respondent Paic Savings and Mortgage Bank, Inc., a loan of P 1.5 Million

wherein 6 promissory notes and a Deed of Real Estate Mortgage were executed. Petitioners
mortgaged 4 parcels of land and after signing the mortgage deed, Zaldaga, GCIs representative,
gave petitioner Francisco Sierra managers checks amounting to P200,000.00. GCI defaulted thereby
prompting PSMB to extrajudicially foreclose the mortgage. As petitioners also failed to redeem the
property, they filed a complaint for the declaration of nullity of the real estate mortgage and its
extrajudicial foreclosure before the RTC. They asserted that they were made to believe that they
applied for a loan, thus they unsuspectingly signed a document denominated as Deed of Real Estate
Mortgage which was not interpreted in a language/dialect known to them, and which was not
accompanied by the loan documents. PSMB averred that the mortgage was valid, having been duly
signed by petitioners before a notary public and that they allowed time to pass without pursuing their
purported right against Summa Bank and/or PSMB. The RTC ruled that the loan transaction was a
valid and binding agreement between Summa Bank and GCI; that the subject deed did not reflect the
true intent and agreement between Summa Bank and petitioners who were made to believe that they
were the principal obligors in the loan, thereby invalidating their consent to the mortgage. The CA
however ruled that petitioners had knowingly and voluntarily executed the subject deed and that the
action to annul the subject deed had already prescribed, since the same was brought more than four
(4) years from the discovery of the mistake or fraud, reckoned from the time the earliest checks
issued to petitioners were dishonored, or on January 9, 1984, this being the time the consideration or
price for the execution of the subject deed turned out to be false. Thus, they are already barred by
laches.
Issues: (1) Whether or not petitioners were aware that they were mere accommodation mortgagors
(2) Whether or not the case is dismissible on the grounds of prescription and laches.
Held:(1) Yes. There being valid consent on the part of petitioners to act as accommodation
mortgagors, petitioners are not entitled to the proceeds of the loan, nor were required to be furnished
with the loan documents or notice of the borrowers default in paying the principal, interests,
penalties, and other charges on due date, or of the extrajudicial foreclosure proceedings, unless
stipulated in the subject deed. An accommodation mortgagor is a third person who is not a debtor to a
principal obligation but merely secures it by mortgaging his or her own property.
(2) Yes. Since the complaint for annulment was anchored on a claim of mistake, i.e., that petitioners
are the borrowers under the loan secured by the mortgage, the action should have been brought
within four (4) years from its discovery. However, the complaint failed to disclose when petitioners
learned that they were not the borrowers under the loan secured by the subject mortgage. Thus,
laches applies. Despite notice on June 19, 1984 of the scheduled foreclosure sale, petitioners, for
unexplained reasons, failed to impugn the real estate mortgage and oppose the public auction sale
for a period of more than seven (7) years from said notice.
By: Ghyslaine D. San Andres

Re: ANONYMOUS LETTERCOMPLAINT ON THE ALLEGED INVOLVEMENT AND FOR
ENGAGING IN THE BUSINESS OF LENDING MONEY AT USURIOUS RATES OF INTEREST OF
MS. DOLORES T. LOPEZ, SC CHIEF JUDICIAL STAFF OFFICER, AND MR. FERNANDO M.
MONTALVO, SC SUPERVISING JUDICIAL STAFF OFFICER, CHECKS DISBURSEMENT
DIVISION, FISCAL MANAGEMENT AND BUDGET OFFICE
A.M. No. 2010-21-SC, 30 September 2014
Facts: An undated letter-complaint addressed to the Complaints and Investigation Division (CID) of
the Office of Administrative Services (OAS) of the Supreme Court triggered this administrative matter.
This was purportedly sent by a concerned employee who chose to remain anonymous, assailed the
profitable money-lending with usurious interest scheme engaged in by respondents Dolores T. Lopez,
an SC Chief Judicial Staff Officer, and Fernando M. Montalvo, an SC Supervising Judicial Staff
Officer, both of the Checks Disbursement Division of the Courts Fiscal Management and Budget
Office (FMBO). The said money-lending activities targeted low-salaried employees of the Court like
the drivers and employees of the janitorial services; that such money-lending had been going on with
the help of the personnel of the Checks Disbursement Division of FMBO by enticing employees of the
Court to pledge forthcoming benefits at a discounted rate. The OAS submitted its report and
recommendations, whereby it recommended the dismissal of the letter-complaint against Montalvo for
lack of merit; but endorsed Lopezs suspension for thirty (30) days for lending money with interest to
a number of economically challenged employees and janitors; and directed her to immediately cease
and desist from engaging in any form of personal business and other financial transactions, with a
warning that a repetition of the same or similar act in the future will be dealt with more severely.
Issue: WON the money-lending activity perpetrated by Lopez is in the nature of a contract of
loan.
Held: YES. The SC ruled that in a contract of loan, according to Article 1933 of the Civil Code, one
of the parties delivers to another, either something not consumable so that the latter may use the
same for a certain time and return it, in which case the contract is called a commodatum; or money or
other consumable thing, upon the condition that the same amount of the same kind and quality shall
be paid, in which case the contract is simply called a loan or mutuum. The fact of her parting with her
money in favor of another upon the condition that the same amount would be paid back was exactly
what constituted a loan under the law.
By: Myraflor L. Chavez
EMERITU C. BARUT vs. PEOPLE OF THE PHILIPPINES

G.R. No. 167454, 24 September 2014
Facts: SPO4 Vicente Ucag was coming from a picnic in Laguna and returning home to Taguig, Metro
Manila on board a passenger jeepney driven by his brother Rolando on the South Luzon Expressway.
Ucags wife and 16 year-old son Vincent were then riding an owner-type jeep driven by Rico Villas on
the same route. When the latter vehicle exited at the Sucat Interchange ahead of Ucags passenger
jeepney, PNCC guards Conrado Ancheta and Barut stopped Villas and directed him to park his

vehicle at the road side. After informing Villas that his vehicle had no headlights, Ancheta asked for
his driving license, but it took a while before Villas produced the same apparently waiting for his
companions in the passenger jeepney to arrive. Nonetheless, Villas ultimately surrendered his driving
license. The passenger jeepney carrying Ucag stopped where Villas jeep had parked. Ucag argued
with Ancheta and Barut as to the return of the drivers license. Later on, however, Ucag turned around
in order to avoid further argument, and simply told Villas to return for his driving license the next day.
This apparently irked Ancheta, who dared Ucag to finish the issue right there and then. Ancheta
suddenly pulled out his .38 caliber revolver and fired it several times, hitting Ucag on both thighs.
Ucag fired back and hit Ancheta. Upon seeing the exchange of gunshots, Vincent Ucag rushed
towards his father to go to his succor. Before Vincent could reach his father, however, Barut fired at
Vincent in the chest. Vincent was rushed to the Paraaque Medical Center, where he expired while
undergoing emergency surgery. His father was brought to the Camp Panopio Hospital in Quezon City
for treatment and medical attendance. Petitioner was found guilty of the crime of Homicide by the
Regional Trial Court. On appeal, the Court of Appeals affirmed the conviction of Barut.
Issue: WON the CA erred in affirming the award of civil liability by the RTC without specifying
the amounts corresponding to actual and moral damages, as well as to the civil indemnity for
the death of Vincent.
Held: YES. The SC ruled that both lower courts thereby erred on a matter of law. Actual and moral
damages are different in nature and purpose. To start with, different laws govern their grant, with the
amounts allowed as actual damages being dependent on proof of the loss to a degree of certainty,
while the amounts allowed as moral damages being discretionary on the part of the court. Secondly,
actual damages address the actual losses caused by the crime to the heirs of the victim; moral
damages assuage the spiritual and emotional sufferings of the heirs of the victim of the crime. On the
civil indemnity for death, law and jurisprudence have fixed the value to compensate for the loss of
human life. Thirdly, actual damages may not be granted without evidence of actual loss; moral
damages and death indemnity are always granted in homicide, it being assumed by the law that the
loss of human life absolutely brings moral and spiritual losses as well as a definite loss.
LEONARDO BOGNOT vs. RRI LENDING CORPORATION

G.R. No. 180144, 24 September 2014
Facts: The petitioner and his younger brother, Rolando A. Bognot, applied for and obtained a loan of
Five Hundred Thousand Pesos (P500,000.00) from the respondent, payable on November 30, 1996.
The loan was evidenced by a promissory note and was secured by a post dated check dated
November 30, 1996. Evidence on record shows that the petitioner renewed the loan several times on
a monthly basis. When the respondent sent the petitioner follow-up letters demanding payment of the
loan, plus interest and penalty charges, these demands went unheeded. On November 27, 1997, the
respondent, through Bernardez, filed a complaint for sum of money before the Regional Trial Court
(RTC) against the Bognot siblings. The RTC ruled in the respondents favor and ordered the Bognot
siblings to pay the amount of the loan, plus interest and penalty charges. It considered the wordings

of the promissory note and found that the loan they contracted was joint and solidary. On appeal, the
CA affirmed the RTCs findings. It found the petitioners defense of payment untenable and
unsupported by clear and convincing evidence.
Issues:
1. WON the CA erred in holding the petitioner solidarily liable with Rolando and his wife;
2. WON the parties obligation was extinguished by: (i) payment; and (ii) novation by
substitution of debtors.
HELD:
1. YES. The SC ruled that there is solidary liability when the obligation expressly so states, when the
law so provides, or when the nature of the obligation so requires. Thus, when the obligor undertakes
to be "jointly and severally" liable, the obligation is solidary. In the instant case, although the phrase
jointly and severally in the promissory note clearly and unmistakably provided for the solidary liability
of the parties, we note and stress that the promissory note is merely a photocopy of the original,
which was never produced. Other than the promissory note in question, the respondent has not
presented any other evidence to support a finding of solidary liability. The well-entrenched rule is that
solidary obligation cannot be inferred lightly. It must be positively and clearly expressed and cannot
be presumed.
2. NO. The SC ruled that petitioner failed to discharge his burden of proving payment and the
presence of novation. Article 1249, paragraph 2 of the Civil Code provides: The delivery of
promissory notes payable to order, or bills of exchange or other mercantile documents shall produce
the effect of payment only when they have been cashed, or when through the fault of the creditor they
have been impaired. Reliance by the petitioner on the legal presumption to prove payment is
misplaced. To reiterate, no cash payment was proven by the petitioner. The cancellation and return of
the check dated April 1, 1997, simply established his renewal of the loan not the fact of payment.
As to the issue of novation, the SC ruled that to give novation legal effect, the original debtor
must be expressly released from the obligation, and the new debtor must assume the original
debtors place in the contractual relationship. Depending on who took the initiative, novation by
substitution of debtor has two forms substitution by expromision and substitution by delegacion. The
petitioner contends that novation took place through a substitution of debtors when Mrs. Bognot
renewed the loan and assumed the debt. He alleged that Mrs. Bognot assumed the obligation by
paying the renewal fees and charges, and by executing a new promissory note. Contrary to the
petitioners contention, Mrs. Bognot did not substitute the petitioner as debtor. She merely attempted
to renew the original loan by executing a new promissory note and check. More importantly, the
respondent never agreed to release the petitioner from his obligation. In order to give novation legal
effect, the creditor should consent to the substitution of a new debtor. Novation must be clearly and
unequivocally shown, and cannot be presumed. Since the petitioner failed to show that the
respondent assented to the substitution, no valid novation took place with the effect of releasing the
petitioner from his obligation to the respondent.
PEDRITO DELA TORRE vs. DR. ARTURO IMBUIDO, DRA. NORMA IMBUIDO in their capacity
as owners and operators of DIVINE SPIRIT GENERAL
HOSPITAL and/or DR. NESTOR PASAMBA
G.R. No. 192973, 29 September 2014
Facts: The case stemmed from a complaint for damages filed by Pedrito against herein respondents.
Pedrito alleged in his complaint that he was married to one Carmen Castillo Dela Torre (Carmen),
who died while admitted at the Divine Spirit General Hospital on February 13, 1992. Carmen was due
to give birth on February 2, 1992 and was brought at around 11:30 p.m. on that day by Pedrito to the
Divine Spirit General Hospital. When Carmen still had not delivered her baby at the expected time,
Dr. Norma discussed with Pedrito the possibility of a caesarean section operation. Carmen was
brought to the hospitals operating room for her caesarian section operation, which was to be
performed by Dr. Nestor. On February 10, 1992, Pedrito noticed that Carmens stomach was getting
bigger, but Dr. Norma dismissed the patients condition as mere flatulence (kabag). The condition of
Carmen, however, did not improve. It instead worsened that on February 13, 1992, she vomited dark
red blood. At 9:30 p.m. on the same day, Carmen died. An autopsy report prepared by Dr. Richard
Patilano (Dr. Patilano), Medico-Legal Officer-Designate of Olongapo City, however, provided that the
cause of Carmens death was shock due to peritonitis, severe, with multiple intestinal adhesions;
Status post C[a]esarian Section and Exploratory Laparotomy. The Regional Trial Court (RTC) of
Olongapo City, Branch 75, rendered its Decision in favor of Pedrito. The trial court gave greater
weight to the testimony of Dr. Patilano. On appeal, the CA rendered its Decision reversing and setting
aside the decision of the RTC. For the appellate court, it was not established that the respondents
failed to exercise the degree of diligence required of them by their profession as doctors.
Issue: WON the respondents should be held liable for the death of Carmen.
Held: NO. The SC ruled that in medical negligence cases, there is a physician-patient relationship
between the doctor and the victim, but just like in any other proceeding for damages, four essential
elements must be established by the plaintiff, namely: (1) duty; (2) breach; (3) injury; and (4)
proximate causation. All four elements must be present in order to find the physician negligent and,
thus, liable for damages. To justify an award of damages, the negligence of the doctor must be
established to be the proximate cause of the injury. The Court agrees with the CA that the report and
testimony of Dr. Patilano failed to justify Pedritos entitlement to the damages awarded by the RTC.
Considering that it was not duly established that Dr. Patilano practiced and was an expert in the fields
that involved Carmens condition, he could not have accurately identified the said degree of care,
skill, diligence and the medical procedures that should have been applied by her attending
physicians. As the Court held in Spouses Flores v. Spouses Pineda, the critical and clinching factor in
a medical negligence case is proof of the causal connection between the negligence and the injuries.
The claimant must prove not only the injury but also the defendant's fault, and that such fault caused
the injury. A verdict in a malpractice action cannot be based on speculation or conjecture. Causation
must be proven within a reasonable medical probability based upon competent expert testimony


SUBIC BAY LEGEND RESORTS AND CASINOS, INC. vs. BERNARD C. FERNANDEZ
G.R. No. 193426, 29 September 2014
Facts: Petitioner Subic Bay Legend Resorts & Casinos, Inc., a duly organized and existing
corporation operating under Philippine laws, operates the Legenda Hotel and Casino (Legenda)
located in the Subic Bay Freeport Zone in Zambales. On the other hand, respondent Bernard C.
Fernandez is the plaintiff in Civil Case No. 237-0-97 prosecuted against petitioner in Olongapo RTC.
It turns out that the appellees brother and Ludwin Fernandez were zero-in by the petitioners security
section for their anomalous use of dollar denominated chips inside the casino. They were accosted
and interrogated by the security officers of the casino. The ultimatum was simple: they confess that
the chips were given by a certain employee, Michael Cabrera, or they would not be released from
questioning. The same line of questioning confronted them when they were later twned-over for
blotter preparation to the Intelligence and Investigation Office of the Subic Bay Metropolitan Authority
(IIO SBMA). Finally, the brothers succumbed to Legenda's instruction to execute a joint statement
implicating Cabrera as the illegal source of the chips. The trial court in this case ruled in favor of the
plaintiff (herein respondent) as there is no dispute that the subject chips were in the possession of the
plaintiff. He claims he got hold of them as payment for car services he rendered to a Chinese
individual. On appeal, the CA affirmed the decision of the trial court.
Issue: WON the court erred in granting the award of attorney's fees and costs of suit in favor
of the respondent.
Held: NO. The SC held that under Article 2208 of the Civil Code, attorney's fees may be recovered
when the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly
valid, just and demandable claim, or in any other case where the court deems it just and equitable
that attorney's fees and expenses of litigation should be recovered. Petitioner's act of arbitrarily
confiscating the casino chips and treating Ludwin and Deoven the way it did, and in refusing to satisfy
respondent's claim despite the fact that it had no basis to withhold the chips, confirm its bad faith, and
should entitle respondent to an award.
PHILIPPINE NATIONAL BANK vs. SPOUSES EDUARDO AND MA. ROSARIO TAJONERA and
EDUAROSA REALTY DEVELOPMENT INC.
G.R. No. 195889, 24 September 2014
Facts: Respondent Eduarosa Realty Development, Inc. (ERDI) was engaged in realty construction
and sale of condominium buildings. Respondent, Ma. Rosario Tajonera (Rosario), as the Vice
President of ERDI, also performed the duties of president and marketing director dealing with banks,
suppliers and contractors. ERDI, through Rosario, obtained loans from petitioner Philippine National
Bank (PNB) and entered into several credit agreements to finance the completion of the construction
of their 20-storey Eduarosa Tower Condominium located in Roxas Boulevard, Paranaque City. The
principal amount of loan extended by PNB to ERDI was Sixty Million Pesos (60,000,000.00). As

security for the initial loan, ERDI executed the Real Estate Mortgage (REM) consisting of three (3)
parcels of land covered by Transfer Certificate of Title (TCT) Nos. 38845, 38846 and 38847 with an
aggregate area of 1,352 square meters situated in Roxas Boulevard, Tambo, Paranaque, Metro
Manila, registered in the name of ERDI (Paranaque properties). In addition, the loan was secured by
the assignment of proceeds of contract receivables arising from the sale of condominium units to be
constructed on the mortgaged Paranaque properties. ERDI failed to settle its obligation. As a
consequence, PNB filed an application for foreclosure of the Greenhills property. As the highest
bidder, PNB was issued the Certificate of Sale, dated October 9, 1997. Upon ERDIs failure to
redeem the property, PNB consolidated its title and caused the cancellation of TCT No. 29733. A new
title, TCT No. 9424-R, was issued in the name of PNB. This prompted the respondents to file a
complaint against PNB for annulment of sale, cancellation of title, cancellation of mortgage, and
damages before the RTC. The RTC rendered its judgment in favor of the respondents. On appeal,
the CA affirmed the decision of the RTC, but deleted the award of moral and exemplary damages.
Issue: WON the CA erred in annulling the mortgage contract constituted over the Greenhills
property of the respondents.
Held: NO. The SC ruled that the agreement between PNB and the respondents was one of a loan.
Under the law, a loan requires the delivery of money or any other consumable object by one party to
another who acquires ownership thereof, on the condition that the same amount or quality shall be
paid. PNB, not having released the balance of the last loan proceeds in accordance with the Third
Amendment had no right to demand from the respondents compliance with their own obligation
under the loan. Indeed, if a party in a reciprocal contract like a loan does not perform its obligation,
the other party cannot be obliged to perform what is expected of them while the other's obligation
remains unfulfilled. When the respondents executed the Supplement to REM covering their Greenhills
property, they signified their willingness to pay the additional loans. It should be noted, as correctly
found by the CA, that the Supplement to REM was constituted not only as security for the execution
of the First Amendment but also in consideration of the Second and Third Amendments.
It is true that loans are often secured by a mortgage constituted on real or personal property to
protect the creditor's interest in case of the default of the debtor. By its nature, however, a mortgage
remains an accessory contract dependent on the principal obligation, such that enforcement of the
mortgage contract depends on whether or not there has been a violation of the principal obligation. In
this case, to repeat, PNB did not fulfill its principal obligation under the Third Amendment by failing to
release the amount of the last additional loan in full. Consequently, the Supplement to REM covering
the Greenhills property became unenforceable, as the said property could not be entirely foreclosed
to satisfy the respondents total debts to PNB. Moreover, the Supplement to REM was no longer
necessary because PNBs interest was amply protected as the loans had been sufficiently secured by
the Paranaque properties.

SPOUSES MICHELLE M. NOYNAY and NOEL S. NOYNAY vs. CITIHOMES BUILDER AND
DEVELOPMENT, INC.
G.R. No. 204160, 22 September 2014
Facts: Citihomes and Spouses Noynay executed a contract to sell covering the sale of a house and
lot located in San Jose Del Monte, Bulacan, and covered by Transfer Certificate of Title (TCT) No. T43469. Under the terms of the contract, the price of the property was fixed at P915,895.00, with a
downpayment of P183,179.00, and the remaining balance to be paid in 120 equal monthly
installments with an annual interest rate of 21% commencing on February 8, 2005 and every 8th day
of the month thereafter. Subsequently, on May 12, 2005, Citihomes executed the Deed of
Assignment of Claims and Accounts (Assignment) in favor of United Coconut Planters Bank (UCPB)
on May 12, 2005. Under the said agreement, UCPB purchased from Citihomes various accounts,
including the account of Spouses Noynay, for a consideration of 100,000,000.00. In February of
2007, Spouses Noynay allegedly started to default in their payments. Months later, Citihomes
decided to declare Spouses Noynay delinquent and to cancel the contract considering that nine
months of agreed amortizations were left unpaid. Citihomes sent its final demand letter asking
Spouses Noynay to vacate the premises due to their continued failure to pay the arrears. Spouses
Noynay did not heed the demand, forcing Citihomes to file the complaint for unlawful detainer before
the MTCC on July 29, 2009. The MTCC dismissed the complaint. It considered the annotation in the
certificate of title, which was dated prior to the filing of the complaint, which showed that Citihomes
had executed the Assignment favor of UCPB, as having the legal effect of divesting Citihomes of its
interest and right over the subject property. As far as the MTCC was concerned, Citihomes did not
have a cause of action against Spouses Noynay. The RTC, however, reversed the ruling of the
MTCC. On appeal, the CA affirmed the conclusion of the RTC that Citihomes still had the right and
interest over the property in its capacity as the registered owner.
Issue: WON Citihomes failed to comply with the procedures for the proper cancellation of the
contract to sell as prescribed by Maceda Law.
Held: YES. The SC in deciding the case cited the case of Pagtalunan v. Manzano, where it ruled
the importance of complying with the provisions of the Maceda Law as to the cancellation of contracts
to sell involving realty installment schemes. There it was held that the cancellation of the contract by
the seller must be in accordance with Section 3 (b) of the Maceda Law, which requires the notarial act
of rescission and the refund to the buyer of the full payment of the cash surrender value of the
payments made on the property. The actual cancellation of the contract takes place after thirty (30)
days from receipt by the buyer of the notice of cancellation or the demand for rescission of the
contract by a notarial act and upon full payment of the cash surrender value to the buyer. In this case,
Spouses Noynay had been paying the amortizations for three (3) years, there is no reason to doubt
Spouses Noynay's compliance with the minimum requirement of two years payment of amortization,
entitling them to the payment of the cash surrender value provided for by law and by the contract to
sell. To reiterate, Section 3(b) of the Maceda Law requires that for an actual cancellation to take
place, the notice of cancellation by notarial act and the full payment of the cash surrender value must
be first received by the buyer. Clearly, no payment of the cash surrender value was made to Spouses
Noynay. Necessarily, no cancellation of the Contract to Sell could be considered as validly effected.
October 2014

AUTOMAT REALTY AND DEVELOPMENT CORPORATION, LITO CECILIA AND LEONOR LIM
vs. SPOUSES MARCIANO DELA CRUZ, SR. AND OFELIA DELA CRUZ
G.R. No. 192026, 01 October 2014
LEONEN, J.
Facts: Petitioner Automat Realty and Development Corporation (Automat) is the registered owner of
two parcels of land located in Barangay Malitlit, Sta. Rosa, Laguna, covered by TCT Nos. T-210027
and T-209077. Petitioner Leonor Lim (petitioner Lim) was the real estate broker behind Automats
purchase of the property. The land was not occupied in 1990 when it was purchased by Automat.
Respondent Ofelia dela Cruz volunteered her services to petitioner Lim as caretaker to prevent
informal settlers from entering the property. Automat agreed, through its authorized administrator,
petitioner Lim, on the condition that the caretaker would voluntarily vacate the premises upon
Automats demand. Respondent spouses family stayed in the property as rent-paying tenants. They
cultivated and improved the land. They shared the produced palay with Automat through its
authorized agent, petitioner Lito Cecilia (petitioner Cecilia). He also remitted the rentals paid by
respondent Ofelia Dela Cruz to petitioner Lim in Makati and to Automat's office in Quezon City.
Sometime in August 2000, Automat asked respondent spouses to vacate the premises as it was
preparing the groundwork for developing the property. Respondent spouses refused to vacate unless
they were paid compensation. They claimed they were agricultural tenants [who] enjoyed security of
tenure under the law. On October 19, 2000, respondent spouses filed a petition for maintenance of
peaceful possession before PARAD. The latter dismissed the complaint declaring that no agricultural
tenancy can be established between [the parties] under the attending factual circumstances. But
DARAB and CA reversed and set aside the PARAD's decision.
Issue: Whether or not a lease contract exists between petitioner and respondent?
Held: Yes. Automat is considered to have consented to a civil lease. Article 1643 of the Civil Code
provides that [i]n the lease of things, one of the parties binds himself to give to another the
enjoyment or use of a thing for a price certain, and for a period which may be definite or indefinite. . .
. The Civil Code accommodates unwritten lease agreements such as Article 1682 that provides: The
lease of a piece of rural land, when its duration has not been fixed, is understood to have been for all
the time necessary for the gathering of the fruits which the whole estate leased may yield in one year,
or which it may yield once, although two or more years may have to elapse for the purpose. On the
other hand, Article 1687 states that [i]f the period for the lease has not been fixed, it is understood to
be from year to year, if the rent agreed upon is annual; from month to month, if it is monthly; from
week to week, if the rent is weekly; and from day to day, if the rent is to be paid daily. . . . Applying
this provision, the contract expires at the end of such month [year, week, or day] unless prior thereto,
the extension of said term has been sought by appropriate action and judgment is, eventually,
rendered therein granting the relief. Under the statute of frauds, an unwritten lease agreement for a
period of more than one year is unenforceable unless ratified. Respondent spouses were allowed to
stay in the property as caretakers and, in turn, they paid petitioners rent for their use of the property.
Petitioners acceptance of rental payments may be considered as ratification of an unwritten lease
agreement whose period depends on their agreed frequency of rental payments.
BY: BOHOLANO, MA. EVITA

BPI EXPRESS CARD CORPORATION vs MA. ANTONIA R. ARMOVIT
G.R. No. 163654, 08 October 2014
BERSAMIN, J.
Facts: Armovit, then a depositor of the Bank of the Philippine Islands at its Cubao Branch, was
issued by BPI Express Credit a pre-approved BPI Express Credit Card (credit card) in 1989 with a
credit limit of P20,000.00 that was to expire at the end of March 1993. On November 21, 1992, she
treated her British friends from Hong Kong to lunch at Mario's Restaurant in the Ortigas Center in
Pasig. As the host, she handed to the waiter her credit card to settle the bill, but the waiter soon
returned to inform her that her credit card had been cancelled upon verification with BPI Express
Credit and would not be honored. Inasmuch as she was relying on her credit card because she did
not then carry enough cash that day, her guests were made to share the bill to her extreme
embarrassment. Outraged, Armovit called BPI Express Credit to verify the status of her credit card.
She learned that her credit card had been summarily cancelled for failure to pay her outstanding
obligations. She vehemently denied having defaulted on her payments. Thus, by letter dated
February 3, 1993, she demanded compensation for the shame, embarrassment and humiliation she
had suffered in the amount of P2,000,000.00. The RTC and the CA rule in favor of the respondent.
Issue: Whether or not petitioner is liable to pay moral damages for breach of contract?
Held: Yes. The relationship between the credit card issuer and the credit card holder is a contractual
one that is governed by the terms and conditions found in the card membership agreement. Such
terms and conditions constitute the law between the parties. In case of their breach, moral damages
may be recovered where the defendant is shown to have acted fraudulently or in bad faith. Malice or
bad faith implies a conscious and intentional design to do a wrongful act for a dishonest purpose or
moral obliquity. However, a conscious or intentional design need not always be present because
negligence may occasionally be so gross as to amount to malice or bad faith. Hence, bad faith in the
context of Article 2220 of the Civil Code includes gross negligence.
The Court disagrees with the contentions of BPI Express Credit that it was not gross negligent.
The Terms and Conditions Governing the Issuance and Use of the BPI Express Credit Card printed
on the credit card application form spelled out the terms and conditions of the contract between BPI
Express Credit and its card holders, including Armovit. Such terms and conditions determined the
rights and obligations of the parties. Yet, a review of such terms and conditions did not reveal that
Armovit needed to submit her new application as the antecedent condition for her credit card to be
taken out of the list of suspended cards.
BPI Express Credit made an error of inadvertently including her credit card in Caution List No.
225 dated March 11, 1993 sent to its affiliated merchants. Bereft of the clear basis to continue with
the suspension of the credit card privileges of Armovit, BPI Express Credit acted in wanton disregard
of its contractual obligations with her. We concur with the apt observation by the CA that BPI Express
Credit's negligence was even confirmed by the telegraphic message it had addressed and sent to
Armovit apologizing for the inconvenience caused in inadvertently including her credit card in the
caution list. It was of no consequence that the telegraphic message could have been intended for
another client, as BPI Express Credit apparently sought to convey subsequently, because the tenor of

the apology included its admission of negligence in dealing with its clients, Armovit included. Indeed,
BPI Express Credit did not observe the prudence expected of banks whose business was imbued
with
public
interest.
FE U. QUIJANO vs. ATTY. DARYLL A. AMANTE

G.R. No. 164277, 08 October 2014
BERSAMIN, J.
Facts: The petitioner and her siblings, namely: Eliseo, Jose and Gloria, inherited from their father, the
late Bibiano Quijano, the parcel of land registered in the latter's name under Original Certificate of
Title (OCT) No. 0-188 of the Registry of Deeds in Cebu City with an area of 15,790 square meters,
more or less. On April 23, 1990, prior to any partition among the heirs, Eliseo sold a portion of his
share to respondent Atty. Daryll A. Amante (respondent). On September 30, 1992, petitioner Fe,
Eliseo, Jose and Gloria executed a deed of extrajudicial partition to divide their father's estate
(consisting of the aforementioned parcel of land) among themselves. Due to the petitioner's needing
her portion that was then occupied by the respondent, she demanded that the latter vacate it. Despite
several demands, the last of which was by the letter dated November 4, 1994,7 the respondent
refused to vacate, prompting her to file against him a complaint for ejectment and damages in MTCC.
The MTCC ruled in favor of petitioner but the RTC and CA reversed the aforesaid decision.
Issue: Whether or not may pass upon the issue of ownership in an ejectment case?
Held: Yes. An ejectment case can be either for forcible entry or unlawful detainer. It is a summary
proceeding designed to provide expeditious means to protect the actual possession or the right to
possession of the property involved.
The sole question for resolution in the case is the physical or material possession (possession
de facto) of the property in question, and neither a claim of juridical possession (possession de jure)
nor an averment of ownership by the defendant can outrightly deprive the trial court from taking due
cognizance of the case. Hence, even if the question of ownership is raised in the pleadings, like here,
the court may pass upon the issue but only to determine the question of possession especially if the
question of ownership is inseparably linked with the question of possession. The adjudication of
ownership in that instance is merely provisional, and will not bar or prejudice an action between the
same parties involving the title to the property. Considering that the parties are both claiming
ownership of the disputed property, the CA properly ruled on the issue of ownership for the sole
purpose of determining who between them had the better right to possess the disputed property. In a
co-ownership, the undivided thing or right belong to different persons, with each of them holding the
property pro indiviso and exercising her rights over the whole property. Each co-owner may use and
enjoy the property with no other limitation than that he shall not injure the interests of his co-owners.
The underlying rationale is that until a division is actually made, the respective share of each cannot

be determined, and every co-owner exercises, together with his co-participants, joint ownership of the
pro indiviso property, in addition to his use and enjoyment of it. Even if an heir's right
in the estate of the decedent has not yet been fully settled and partitioned and is thus merely
inchoate, Article 4932 of the Civil Code gives the heir the right to exercise acts of ownership.
Accordingly, when Eliseo sold the disputed property to the respondent in 1990 and 1991, he was only
a co-owner along with his siblings, and could sell only that portion that would be allotted to him upon
the termination of the co-ownership. The sale did not vest ownership of the disputed property in the
respondent but transferred only the seller's pro indiviso share to him, consequently making him, as
the buyer, a co-owner of the disputed property until it is partitioned. Respondent has a better right
over the subject property.

CENTENNIAL GUARANTEE ASSURANCE CORPORATION vs. UNIVERSAL MOTORS
CORPORATION, RODRIGO T. JANEO, JR., GERARDO GELLE, NISSAN CAGAYAN DE ORO
DISTRIBUTORS, INC.,
JEFFERSON U. ROLIDA, AND PETER YAP
G.R. No. 189358, 08 October 2014
PERLAS-BERNABE, J.
Facts: A Complaint for Breach of Contract with Damages and Prayer for Preliminary Injunction and
TRO was filed by Nissan Specialist Sales Corporation (NSSC) and its President and General
Manager Orimaco against herein respondents Universal Motors Corporation (UMC), Janeo, Jr., Gelle,
Nissan Cagayan de Oro Distributors, Inc. (NCOD), Rolida, and Yap before the RTC.
The TRO prayed for was eventually issued by the RTC upon the posting by NSSC and
Orimaco of a P1,000,000.00 injunction bond issued by their surety, CGAC. The TRO enjoined the
respondents from selling, dealing, and marketing all models of motor vehicles and spare parts of
Nissan, and from terminating the dealer agreement between UMC and NSSC. It likewise restrained
UMC from supplying and doing trading transactions with NCOD, which, in turn, was enjoined from
entering and doing business on Nissan Products within the dealership territory of NSSC as defined in
the Dealer Agreement. The TRO was converted to a writ of preliminary injunction in 2002.
Respondents filed a petition for certiorari and prohibition before the CA to assail the issuance
of the aforesaid injunctive writ. The CA rendered a Decision holding that the RTC committed grave
abuse of discretion in issuing the writ absent a clear legal right thereto on the part of NSSC and
Orimaco. Consequently, the Writ of Preliminary Injunction issued by the RTC was ordered dissolved.
Respondents filed an application for damages against the injunction bond issued by CGAC in
the amount of P1,000,000.00.

The RTC dismissed the complaint for breach of contract with damages for lack of merit and
further ruled that respondents were entitled to recover damages against the injunction bond. The RTC
ordered NSSC, Orimaco, and CGAC to jointly and severally pay respondents actual damages and
lost opportunities suffered by UMC in the amounts of P928,913.68 and P14,271,266.00, respectively;
P50,000.00 as attorneys fees and P500,000.00 as lost income in favor of NCOD, Rolida, and Yap;
and exemplary damages of P300,000.00 for each of the respondents. CGAC assailed the order
before the CA, questioning the existence of good reasons to warrant the grant of execution pending
appeal and the propriety of enforcing it against one which is not the losing party in the case but a
mere bondsman whose liability is limited to the surety bond it issued. The CA affirmed in part the
assailed order by limiting the amount of CGACs liability to only P1,000,000.00.
Issue: WON CGAC, as a surety, is liable in relation to whatever is adjudged to the principal.
Held: YES
That CGACs financial standing differs from that of NSSC does not negate the order of
execution pending appeal. As the latters surety, CGAC is considered by law as being the same party
as the debtor in relation to whatever is adjudged touching the obligation of the latter, and their
liabilities are interwoven as to be inseparable. Verily,in a contract of suretyship, one lends his credit
by joining in the principal debtors obligation so as to render himself directly and primarily responsible
with him, and without reference to the solvency of the principal. Thus, execution pending appeal
against NSSC means that the same course of action is warranted against its surety, CGAC.
and
CGACs liability should, as the CA correctly ruled, be confined to the amount of P1,000,000.00,
not
P500,000.00
as
the
latter
purports.
Section 4(b), Rule 58 of the Rules provides that the injunction bond is answerable for all
damages that may be occasioned by the improper issuance of a writ of preliminary injunction.
The bond insures with all practicable certainty that the defendant may sustain no ultimate loss
in the event that the injunction could finally be dissolved. Consequently, the bond may obligate the
bondsmen to account to the defendant in the injunction suit for all: (1) such damages; (2) costs and
damages; (3) costs, damages and reasonable attorneys fees as shall be incurred or sustained by the
person enjoined in case it is determined that the injunction was wrongfully issued.
In this case, the RTC, in view of the improvident issuance Writ of Preliminary Injunction,
adjudged CGACs principals, NSSC and Orimaco, liable not only for damages as against NCOD,
Rolida, and Yap but also as against UMC. Since CGAC is answerable jointly and severally with
NSSC and Orimaco for their liabilities to the above-mentioned parties for all damages caused by the
improvident issuance of the said injunctive writ, and considering that the total amount of damages
evidently exhausts the full P1,000,000.00 amount of the injunction bond, there is perforce no reason
to reverse the assailed CA Decision even on this score.
By: GARCIA , NIKKI A.

ESPERANZA C. CARINAN vs. SPOUSES GAVINO CUETO AND
CARMELITA CUETO
G.R. No. 198636, 08 October 2014
REYES, J.
Facts: The case originated from a complaint for specific performance with damages filed by Spouses
Cueto (respondents) against Esperanza and her son, Jazer. The respondents alleged that sometime
in May 1986, Esperanza and her husband, Jose, acquired from one Roberto the rights over a parcel
of land formerly covered by Transfer Certificate of Title (TCT) No. T-129128 under the name of the
GSIS, measuring 180 square meters. Their transaction was covered by a Deed of Assignment and
Transfer of Rights with Assumption of Obligations. Esperanza and Jose were to assume the payment
of the applicable monthly amortizations for the subject land to the GSIS.
Several amortizations remained unpaid by Esperanza and Jose, resulting in an impending
cancellation in 2005 of GSIS conditional sale of the subject property to Roberto. It was then that
Esperanza, then already a widow, sought financial assistance from her brother, Gavino, in 2005. The
respondents then paid from their conjugal savings Esperanzas total obligation of P785,680.37 under
the subject deed of assignment.
The respondents alleged that Esperanza and Jazer undertook to execute a Deed of Absolute
Sale in favor of the respondents once the title over the subject property was transferred to their
names, subject to the condition that they would be given the first option to buy it back within three
years by reimbursing the expenses incurred by the respondents on the property. Besides satisfaction
of the unpaid amortizations to GSIS, the respondents paid for the transfer of the subject property from
Roberto to Esperanza, and the renovation of the residential house erected on the subject land,
resulting in additional expenses of P515,000.00. TCT was already under the name of Esperanza was
surrendered to the respondents.
In 2006, the respondents demanded from Esperanza and Jazer the fulfillment of their
commitment to transfer the subject property to the respondents names through the execution of a
deed of sale. When Esperanza and Jazer failed to comply despite efforts for an amicable settlement,
the respondents filed with the RTC the subject complaint for specific performance with damages.
Esperanza and Jazer disputed these claims. They argued that there was neither a written or
verbal agreement for the transfer of the disputed property to the respondents names, nor a promise
for the repayment of the amounts that were paid by the respondents. Esperanza believed that Gavino
paid her outstanding balance with the GSIS out of sheer generosity and pity upon her. She denied
having borrowed the respondents money because given her financial standing, she knew that she
could not afford to pay it back. Furthermore, to require her to execute a deed of sale for the propertys
full conveyance would totally disregard the payments that she personally made for the purchase.
Issue(s): 1. WON Petitioners should be compelled to convey the subject property to the respondents.
2. WON the money paid by the respondents for Esperanzas arrears is considered as a
donation.

Held:
1. Esperanza and Jazer could not be compelled to convey the subject property to the
respondents. Even granting that a promise to sell was made by Esperanza, the same was
unenforceable as it was not reduced into writing.
2. The Court adopts the RTCs and CAs finding that between Esperanza and the respondents,
there was a clear intention for a return of the amounts which the respondents spent for the
acquisition, transfer and renovation of the subject property. The respondents then reasonably
expected to get their money back from Esperanza. Esperanzas claim that the expenses and
payments in her behalf were purely gratuitous remained unsupported by records.
The absence of intention to be reimbursed is negated by the facts of this case. The respondents
conduct never at any time intimated any intention to donate in favor of Esperanza and Jazer. A
donation is a simple act of liberality where a person gives freely of a thing or right in favor of another,
who accepts it (Article 725, New Civil Code, as amended). But when a large amount of money is
involved, as in this case, this court is constrained to take Esperanza and Jazers claim of generosity
by the respondents with more than a grain of salt.
Esperanzas refusal to pay back would likewise result in unjust enrichment, to the clear
disadvantage of the respondents. The main objective of the principle against unjust enrichment is to
prevent one from enriching himself at the expense of another without just cause or consideration.21
While Esperanza claims that her brothers generosity was the consideration for the respondents
payment of her obligations, this was not sufficiently established, that even the respondents
vehemently denied the allegation.
In order to sufficiently substantiate her claim that the money paid by the respondents was actually
a donation, Esperanza should have also submitted in court a copy of their written contract evincing
such agreement. Article 748 of the New Civil Code (NCC), which applies to donations of money, is
explicit on this point as it reads:
Art. 748. The donation of a movable may be made orally or in writing.
An oral donation requires the simultaneous delivery of the thing or of the document representing
the right donated.
If the value of the personal property donated exceeds five thousand pesos, the donation and the
acceptance shall be made in writing. Otherwise, the donation shall be void.
A donation must comply with the mandatory formal requirements set forth by law for its validity.
When the subject of donation is purchase money, Article 748 of the NCC is applicable. Accordingly,
the donation of money as well as its acceptance should be in writing. Otherwise, the donation is
invalid for non-compliance with the formal requisites prescribed by law.
Although the Court affirms the trial and appellate courts Held that, first, there was no donation
in this case and, second, the respondents are entitled to a return of the amounts which they spent for
the subject property, it still cannot sustain the respondents plea for Esperanzas full conveyance of
the subject property. To impose the propertys transfer to the respondents names would totally

disregard Esperanzas interest and the payments which she made for the propertys purchase. Thus,
the principal amount to be returned to the respondents shall only pertain to the amounts that they
actually paid or spent. The Court finds no cogent reason to disturb the trial courts resolve to require
in its Decision dated December 15, 2009, around four years after the sums were paid for the subject
propertys acquisition and renovation, the immediate return of the borrowed amounts.
ELIZA ZUIGA-SANTOS,* REPRESENTED BY HER ATTORNEY-IN FACT, NYMPHA Z. SALES,

v. MARIA DIVINA GRACIA SANTOS-GRAN** AND REGISTER OF DEEDS OF MARIKINA CITY.
G.R. No. 197380, 08 October 2014
PERLAS-BERNABE, J.
Facts: In 2006, petitioner through her authorized representative, Sales, filed a Complaint for
annulment of sale and revocation of title against respondents Gran and the Register of Deeds of
Marikina City before the RTC.
In her Complaint, petitioner alleged, among others, that: (a) she was the registered owner of
three (3) parcels of land prior to their transfer in the name of private respondent Gran; (b) she has a
second husband by the name of , with whom she did not have any children; (c) she was forced to
take care of Lambertos alleged daughter, Gran, whose birth certificate was forged to make it appear
that the latter was petitioners daughter; (d) pursuant to void and voidable documents, i.e., a Deed of
Sale, Lamberto succeeded in transferring the subject properties in favor of and in the name of Gran;
(e) despite diligent efforts, said Deed of Sale could not be located; and (f) she discovered that the
subject properties were transferred to Gran sometime in November 2005. Accordingly, petitioner
prayed, inter alia, that Gran surrender to her the subject properties and pay damages, including costs
of suit.
For her part, Gran filed a Motion to Dismiss, contending that (a) the action filed by petitioner
had prescribed since an action upon a written contract must be brought within ten (10) years from the
time the cause of action accrues, or in this case, from the time of registration of the questioned
documents before the Registry of Deeds; and (b) the Amended Complaint failed to state a cause of
action as the void and voidable documents sought to be nullified were not properly identified nor the
substance thereof set forth, thus, precluding the RTC from rendering a valid judgment in accordance
with the prayer to surrender the subject properties.
The RTC granted Grans motion and dismissed the Amended Complaint for its failure to state
a cause of action, considering that the deed of sale sought to be nullified was not attached. It likewise
held that the certificates of title covering the subject properties cannot be collaterally attacked and
that since the action was based on a written contract, the same had already prescribed under Article
1144 of the Civil Code.

The CA sustained the dismissal of petitioners Amended Complaint but on the ground of
insufficiency of factual basis.
It disagreed with the RTCs finding that the said pleading failed to state a cause of action since
it had averred that: (a) petitioner has a right over the subject properties being the registered owner
thereof prior to their transfer in the name of Gran; (b) Lamberto succeeded in transferring the subject
properties to his daughter, Gran, through void and voidable documents; and (c) the latters refusal
and failure to surrender to her the subject properties despite demands violated petitioners rights over
them. The CA likewise ruled that the action has not yet prescribed since an action for nullity of void
deeds of conveyance is imprescriptible. Nonetheless, it held that since the Deed of Sale sought to be
annulled was not attached to the Amended Complaint, it was impossible for the court to determine
whether petitioners signature therein was a forgery and thus, would have no basis to order the
surrender or reconveyance of the subject properties.
Issue: Whether or not the dismissal of petitioners complaint should be sustained.
Held: The Court finds the Complaints dismissal to be in order considering that petitioners cause of
action had already prescribed.
It is evident that petitioner ultimately seeks for the reconveyance to her of the subject
properties through the nullification of their supposed sale to Gran. An action for reconveyance is one
that seeks to transfer property, wrongfully registered by another, to its rightful and legal owner.
Having alleged the commission of fraud by Gran in the transfer and registration of the subject
properties in her name, there was, in effect, an implied trust created by operation of law pursuant to
Article 1456 of the Civil Code which provides:
Art. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force
of law, considered a trustee of an implied trust for the benefit of the person from whom the
property comes.
To determine when the prescriptive period commenced in an action for reconveyance, the
plaintiffs possession of the disputed property is material. If there is an actual need to reconvey the
property as when the plaintiff is not in possession, the action for reconveyance based on implied trust
prescribes in ten (10) years, the reference point being the date of registration of the deed or the
issuance of the title. On the other hand, if the real owner of the property remains in possession of the
property, the prescriptive period to recover title and possession of the property does not run against
him and in such case, the action for reconveyance would be in the nature of a suit for quieting of title
which is imprescriptible.
In the case at bar, a reading of the allegations of the Complaint failed to show that petitioner
remained in possession of the subject properties in dispute. On the contrary, it can be reasonably
deduced that it was Gran who was in possession of the subject properties, there being an admission
by the petitioner that the property covered was being used by Grans mother-in-law.
In fact,
petitioners relief in the Amended Complaint for the surrender of three (3) properties to her bolsters
such stance. And since the new titles to the subject properties in the name of Gran were issued by

the Registry of Deeds of Marikina on the following dates: TCT No. 224174 on July 27, 1992,44 TCT
No. N-5500 on January 29, 1976,45 and TCT No. N-4234 on November 26, 1975,46 the filing of the
petitioners complaint before the RTC on January 9, 2006 was obviously beyond the ten-year
prescriptive period, warranting the Complaints dismissal all the same.

EXTRAORDINARY DEVELOPMENT CORPORATION, v. HERMINIA F. SAMSON-BICO AND ELY
B. FLESTADOs.
G.R. No. 191090, 13 October 2014
PEREZ, J.
Facts: During his lifetime, Apolonio owned a parcel of land consisting of 29,748 square meters
situated at Barangay Pantok, Binangonan, Rizal cover. When Apolonio and Maria died, the property
was inherited by Juan and Irenea. When the latter died, the heirs of Juan and Irenea became coowners of the property.
On 16 April 2002, the heirs of Juan, without the consent of respondents, the heirs of Irenea
executed in favor of petitioner EDC a Deed of Absolute Sale4 covering the subject property for
P2,974,800.00. EDC was able to cause the registration of the Deed of Absolute Sale with the Office
of the Provincial Assessor Rizal and transfer the tax declaration over the subject property in its
name. This prompted respondents to file the Complaint for Annulment of Contract and
Reconveyance of Possession with Damages.
In its Answer, EDC alleged that it is a buyer in good faith and for value of the subject property
because it was of the honest belief that the heirs of Juan are the only heirs of the late Apolonio. EDC
counterclaimed for damages.On the other hand, the heirs of Juan asserted that respondents were
aware of and were parties to the contract to sell entered into by them and EDC.
Issue: Would the sale by a co-owner of a physical portion of an undivided property held in common
be valid?
Held: Yes. The fact that the agreement in question purported to sell a concrete portion of the
hacienda does not render the sale void, for it is a well-established principle that the binding force of a
contract must be recognized as far as it is legally possible to do so. Quando res non valet ut ago,
valeat quantum valere potest. (When a thing is of no force as I do it, it shall have as much force as it
can have.)
Applying this principle to the instant case, there can be no doubt that the transaction entered
into by Salome and Soledad could be legally recognized in its entirety since the object of the sale did
not even exceed the ideal shares held by the former in the co-ownership. As a matter of fact, the
deed of sale executed between the parties expressly stipulated that the portion of Lot 162 sold to
Soledad would be taken from Salomes 4/16 undivided interest in said lot, which the latter could

validly transfer in whole or in part even without the consent of the other co-owners. Salomes right to
sell part of her undivided interest in the co-owned property is absolute in accordance with the wellsettled doctrine that a co-owner has full ownership of his pro-indiviso share and has the right to
alienate, assign or mortgage it, and substitute another person in its enjoyment. Since Salomes clear
intention was to sell merely part of her aliquot share in Lot 162, in our view no valid objection can be
made against it and the sale can be given effect to the full extent.
We are not unaware of the principle that a co-owner cannot rightfully dispose of a particular
portion of a co-owned property prior to partition among all the co-owners. However, this should not
signify that the vendee does not acquire anything at all in case a physically segregated area of the
co-owned lot is in fact sold to him. Since the co-owner/vendors undivided interest could properly be
the object of the contract of sale between the parties, what the vendee obtains by virtue of such a
sale are the same rights as the vendor had as co-owner, in an ideal share equivalent to the
consideration given under their transaction. In other words, the vendee steps into the shoes of the
vendor as co-owner and acquires a proportionate abstract share in the property held in common.
By: RESMA, JOSE CRIS G.
SPOUSES DOMINADOR MARCOS AND GLORIA MARCOS, Petitioners, v. HEIRS OF ISIDRO

BANGI AND GENOVEVA DICCION, REPRESENTED BY NOLITO SABIANOs.
G.R. No. 185745, 15 October 2014
REYES, J.
Facts: On June 26, 1998, respondents, filed with the RTC a complaint, for annulment of documents,
cancellation of transfer certificates of titles, restoration of original certificate of title and recovery of
ownership plus damages against spouses Dominador Marcos (Dominador) and Gloria Marcos
(Gloria) petitioners.
In their complaint, the respondents averred that on November 5, 1943, their parents, Isidro and
Genoveva, bought the one-third portion of a 2,138-square meter parcel of land situated in San
Manuel, Pangasinan and) from Eusebio Bangi (Eusebio), as evidenced by a Deed of Absolute Sale
executed by the latter. After the sale, the respondents claimed that Isidro and Genoveva took
possession of the subject property until they passed away. Further, the respondents alleged that
sometime in 1998, they learned that the title to the subject property, including the portion sold to
Isidro and Genoveva, was transferred to herein petitioner.Thus, the respondents sought the
nullification of the Deeds of Absolute Sale.
In their answer, herein petitioners, together with the spouses Jose and Pacita, Ceasaria and
the spouses Emilio and Zenaida, denied the allegations of the respondents, claiming that they are the
owners of the subject property, including the one-third portion thereof allegedly sold by Eusebio to the
respondents parents Isidro and Genoveva. They averred that the subject property was originally
owned by Alipio; that after his death, his children Eusebio, Espedita and Jose Bangi inherited the

same. That on May 8, 1995, Espedita and Jose Bangi executed a deed of extrajudicial partition with
quitclaim wherein they waived their rights over the subject property in favor of Eusebios children
Ceasaria,
Zenaida,
Pacita
and
herein
petitioner
Gloria.
Issue: Whether the CA committed reversible error in affirming the RTC Decision which upheld the
Deed of Absolute Sale dated November 5, 1943 over the one-third portion of the subject property
executed by Eusebio in favor of the spouses Isidro and Genoveva?
Held: No. The evidence presented by the parties indubitably show that, after the death of Alipio, his
heirs Eusebio, Espedita and Jose Bangi had orally partitioned his estate, including the subject
property, which was assigned to Eusebio. On this score, the CAs disquisition is instructive, viz:
Even so, We are of the considered view that in 1943, when Eusebio Bangi executed the deed
of sale in favor of Isidro Bangi, Eusebio already had acquired interest in the property covered by OCT
No. 22361 through succession from his father, Alipio Bangi, who died in 1918. Further, it appears that
such interest extends to the entire property embraced by OCT No. 22361. This much can be gleaned
from the testimony of appellant Gloria Marcos herself, who said that her father Eusebio owned the
entire lot because his siblings Espedita and Jose already had their share from other properties.
That there was no written memorandum of the partition among Alipio Bangis heirs cannot
detract from appellees cause. It has been ruled that oral partition is effective when the parties have
consummated it by the taking of possession in severalty and the exercise of ownership of the
respective portions set off to each. Here, it is obvious that Eusebio took possession of his share and
exercised ownership over it. Thus, the preponderant evidence points to the validity of the sale
executed between Eusebio Bangi and Isidro Bangi on November 5, 1943 over the one-third portion of
the property covered by OCT No. 22361.
The foregoing circumstances cast doubt as to the petitioners insinuation that the estate of
Alipio had only been partitioned in 1995, when Espedita and Jose Bangi executed the said Deed of
Extrajudicial Partition with Quitclaim. As pointed out by the CA, the execution of the Deed of
Extrajudicial Partition with Quitclaim is but a ruse to defeat the rights of the respondents over the onethird portion of the subject property. If at all, the Deed of Extrajudicial Partition with Quitclaim
executed by Espedita and Jose Bangi merely confirms the partition of Alipios estate that was earlier
had, albeit orally, in which the subject property was assigned to Eusebio.
Accordingly, considering that Eusebio already owned the subject property at the time he sold
the one-third portion thereof to the spouses Isidro and Genoveva on November 5, 1943, having been
assigned the same pursuant to the oral partition of the estate of Alipio effected by his heirs, the lower
courts correctly nullified the Deeds of Absolute Sale dated August 10, 1995 and November 21, 1995,
as well as TCT No. T-47829 and T-48446.

CARLOS A. LORIA, v. LUDOLFO P. MUOZ, JR..
G.R. No. 187240, 15 October 2014
LEONEN, J.
Facts: In his complaint, Muoz alleged that he has been engaged in construction under the name,
Ludolfo P. Muoz, Jr. Construction. In August 2000, Loria visited Muoz in his office in Doa Maria
Subdivision in Daraga, Albay. He invited Muoz to advance P2,000,000.00 for a subcontract of a
P50,000,000.00 river-dredging project in Guinobatan.
Loria represented that he would make arrangements such that Elizaldy Co, owner of Sunwest
Construction and Development Corporation, would turn out to be the lowest bidder for the project.
Elizaldy Co would pay P8,000,000.00 to ensure the projects award to Sunwest. After the award to
Sunwest, Sunwest would subcontract 20% or P10,000,000.00 worth of the project to Muoz.
The project to dredge the Masarawag and San Francisco Rivers in Guinobatan was subjected
to public bidding. The project was awarded to the lowest bidder, Sunwest Construction and
Development Corporation. Sunwest allegedly finished dredging the Masarawag and San Francisco
Rivers without subcontracting Muoz. With the project allegedly finished, Muoz demanded Loria to
return his P2,000,000.00. Loria, however, did not return the money.
Loria answered Muozs complaint. He admitted receiving P481,800.00 from Muoz but
argued that the complaint did not state a cause of action against him. According to Loria, he followed
up the projects approval with the Central Office of the Department of Public Works and Highways as
the parties agreed upon. He was, therefore, entitled to his representation expenses.
Issue: Whether or not Loria must return Munozs P2,000,000.00under the principle of unjust
enrichment?
Held: Yes. The principle of unjust enrichment has two conditions. First, a person must have been
benefited without a real or valid basis or justification. Second, the benefit was derived at another
persons expense or damage.
In this case, Loria received P2,000,000.00 from Muoz for a subcontract of a government
project to dredge the Masarawag and San Francisco Rivers in Guinobatan, Albay. However, contrary
to the parties agreement, Muoz was not subcontracted for the project. Nevertheless, Loria retained
the P2,000,000.00.
Thus, Loria was unjustly enriched. He retained Muozs money without valid basis or
justification. Under Article 22 of the Civil Code of the Philippines, Loria must return the
P2,000,000.00 to Muoz. Contrary to Lorias claim, Section 6 of the Presidential Decree No. 1594
does not prevent Muoz from recovering his money.
Under Section 6 of the Presidential Decree No. 1594, a contractor shall not subcontract a part
or interest in a government infrastructure project without the approval of the relevant department
secretary:
Section 6. Assignment and Contract. The contractor shall not assign, transfer, pledge,
subcontract or make any other disposition of the contract or any part or interest therein except
with the approval of the Minister of Public Works, Transportation and Communications, the
Minister of Public Highways, or the Minister of Energy, as the case may be. Approval of the
subcontract shall not relieve the main contractor from any liability or obligation under his
contract with the Government nor shall it create any contractual relation between the
subcontractor and the Government.
A subcontract, therefore, is void only if not approved by the department secretary.
ROLANDO ROBLES, REPRESENTED BY ATTY. CLARA C. ESPIRITU, v. FERNANDO FIDEL

YAPCINCO, PATROCINIO B. YAPCINCO, MARIA CORAZON B. YAPCINCO, AND MARIA
ASUNCION B. YAPCINCO-FRONDAs.
G.R. No. 169568, 22 October 2014
BERSAMIN, J.
Facts: The property subject of this case was originally owned and was in the name of Fernando F.
Yapcinco. Yapcinco, sometime in 1944 constituted a mortgage over the said property in favor of Jose
C. Marcelo to secure the performance of his obligation. In turn, Marcelo transferred his rights as the
mortgagee to Apolinario Cruz. When Yapcinco failed to make good his obligation, Cruz was prompted
to foreclose the property. The CFI of Tarlac ruled that the administratrix of the late Yapcinco to pay
Apolinario Cruz the indebtedness secured by the mortgage plus interest; and in case of the failure to
pay after 90 days from the date of the decision, the property would be sold at a public auction.
Apolinario Cruz was adjudged the highest bidder in the public auction held on March 18, 1959.
In his favor was then issued the certificate of absolute sale,6 and he took possession of the property
in due course. However, he did not register the certificate of sale; nor was a judicial confirmation of
sale issued.
On September 5, 1972, Apolinario Cruz donated the property to his grandchildren, namely:
Carlos C. de la Rosa, Apolinario Bernabe, Ferdinand Cruz, and petitioner Rolando Robles. On
August 29, 1991, however, Apolinario Bernabe falsified a deed of absolute sale. As a consequence of
which, a new TCT was issued in the name of Bernabe and his co-vendees. this prompted the other
donees to file a complaint for the nullification of the contract of sale, cancellation of title and
reconveyance against Apolinario Bernabe and his co-vendees but such was not pursued
aggressively.
On January 2, 2000, the respondents, all heirs of the Spouses Yapcinco, instituted an action
against Apolinario Bernabe and his co-vendees in the RTC in Tarlac City for the annulment of TCT in
Bernabes name, document restoration, reconveyance and damages. The RTC declared the deed of

sale in favor of Bernabe and his co-vendee null and void and ordered the restoration of the TCT in the
name of Fernando Yapcinco.
On December 17, 2002, the petitioner filed an action for the nullification of document,
cancellation of title, reconveyance and damages against the respondents. He averred that the heirs of
Yapcinco had acted in bad faith in causing the issuance of TCT No. 354061 because they had known
fully well that the property had long been excluded from the estate of Yapcinco by virtue of the CFI
decision dated July 27, 1956, and which the CA affirmed on April 25, 1958; that a certificate of
absolute sale was issued in the name of Apolinario Cruz as early as 1959; and that he had a vested
right in the property pursuant to the deed of donation executed on September 5, 1972 by Apolinario
Cruz in his favor, among others.
The RTC ruled rendered in favor of the plaintiff by declaring the subject land covered by TCT
No. 354067 to be owned by the late Apolinario Cruz and is part of his estate. But this was
subsequently reversed by the CA. The CA held that due to the non-registration of the certificate of
sale, the period of redemption did not commence to run. It also held that Apolinario Cruz never
acquired title to the property and could not have conveyed and transferred ownership over the same
to his grandchildren through the deed of donation.
Issue: Whether or not the CA correctly ruled that Apolinario Cruz, as purchaser in a judicial
foreclosure of sale, never acquired title to the subject property by the mere omission to register the
certificate of sale and that therefore it is still the respondents who has the better right over the subject
property.
Held: No, the CA erred in Held that the mere omission on the part of Fernando Cruz to register the
Certificate of Sale resulted in non-acquisition of title over the subject property.
The registration of the sale is required only in extra-judicial foreclosure sale because
the date of the registration is the reckoning point for the exercise of the right of redemption. In
contrast, the registration of the sale is superfluous in judicial foreclosure because only the equity of
redemption is granted to the mortgagor, except in mortgages with banking institutions. The equity of
redemption is the right of the defendant mortgagor to extinguish the mortgage and retain
ownership of the property by paying the secured debt within the 90-DAY PERIOD AFTER THE
JUDGMENT BECOMES FINAL, OR EVEN AFTER THE FORECLOSURE SALE BUT PRIOR TO
THE CONFIRMATION OF THE SALE. In this light, it was patent error for the CA to declare that: "By
Apolinario Cruz's failure to register the 18 March 1958 Certificate of Absolute Sale in the Office of the
Register of Deeds, the period of redemption did not commence to run."
In the case at bar, It was not denied that Fernando F. Yapcinco, as the mortgagor, did not pay
his obligation, and that his default led to the filing of the action for judicial foreclosure against him, in
which he actively participated in the proceedings, and upon his death was substituted by the
administratrix of his estate. In the end, the decision in the action for judicial foreclosure called for the
holding of the public sale of the mortgaged property. Due to the subsequent failure of the estate of
Fernando F. Yapcinco to exercise the equity of redemption, the property was sold at the public sale,
and Apolinario Cruz was declared the highest bidder. Under the circumstances, the respondents as

the successors-in-interest of Fernando F. Yapcinco were fully bound by that decision and by the
result of the ensuing foreclosure sale.
Being the heirs and successors-in-interest of the late Fernando F. Yapcinco, they could
not repudiate the foreclosure sale and its consequences, and escape such consequences that
bound and concluded their predecessor-in-interest whose shoes they only stepped into.
Given their position on the lack of judicial confirmation of the sale in favor of Apolinario Cruz,
they should have extinguished the mortgage by exercising their equity of redemption through
paying the secured debt. They did not do so, and, instead, they sought the annulment of TCT
No. 243719 and caused the issuance of another title in their name.
The effect of the failure of Apolinario Cruz to obtain the judicial confirmation was only to
prevent the title to the property from being transferred to him. For sure, such failure did not
give rise to any right in favor of the mortgagor or the respondents as his successors-ininterest to take back the property already validly sold through public auction. Nor did such
failure invalidate the foreclosure proceedings. To maintain otherwise would render nugatory the
judicial foreclosure and foreclosure sale, thus unduly disturbing judicial stability.
The decision by the CA is hereby REVERSED and SET ASIDE.
By: TORRES, ALJEANE F.
SPOUSES JAIME SEBASTIAN AND EVANGELINE SEBASTIAN,vs..

BPI FAMILY BANK, INC., CARMELITA ITAPO AND BENJAMIN HAO.
G.R. No. 160107, 22 October 2014
BERSAMIN, J.
Facts: Herein Petitioner Spouses were employees of the Respondent BPI, Jaime being a Branch
Manager and Evangeline a bank teller. On October 30, 1987, they availed themselves of a housing
loan from BPI Family as one of the benefits extended to its employees. Their loan amounted to
P273,000.00, and was covered by a Loan Agreement, whereby they agreed that the loan would be
payable in 108 equal monthly amortizations of P3,277.57 starting on January 10, 1988 until
December 10, 19963 and that the monthly amortizations would be deducted from his monthly salary.
To secure the payment of the loan, they executed a real estate mortgage in favor of BPI Family5 over
the property situated in Bo. Ibayo, Marilao, Bulacan and covered by TCT No. T-30.827 (M) of the
Register of Deeds of Bulacan.
The petitioners amortizations were regularly deducted from Jaimes salary until he received a
notice of termination from BPI. Evangeline also received notice of her termination. The notices of
termination contain a demand for the full payment of the outstanding loan balance. The spouses both
questioned their dismissal before the NLRC.

About a year after their termination from employment, the petitioners received a demand letter
dated January 28, 1991 from BPI Familys counsel requiring them to pay their total outstanding
obligation amounting to P221,534.50. In the meantime, BPI Family instituted a petition for the
foreclosure of the real estate mortgage.
The petitioners received on March 6, 1991 the notice of extrajudicial foreclosure of mortgage
dated February 21, 1991. To prevent the foreclosure of their property, the petitioners filed against the
respondents their complaint for injunction and damages with application for preliminary injunction and
restraining order in the RTC in Malolos, Bulacan. They therein alleged that their obligation was not yet
due and demandable considering that the legality of their dismissal was still pending resolution by the
labor court; hence, there was yet no basis for the foreclosure of the mortgaged property; and that the
property sought to be foreclosed was a family dwelling in which they and their four children resided.
The RTC dismissed the spouses complaint. Subsequently, the CA promulgated its assailed
decision affirming the judgment of the RTC in toto. The petitioners then filed their motion for
reconsideration,22 in which they contended for the first time that their rights under Republic Act No.
6552 (Realty Installment Buyer Protection Act) had been disregarded, considering that Section 3 of
the law entitled them to a grace period within which to settle their unpaid installments without interest.
The MR was denied.
Issue: Whether or not the foreclosure of the real estate mortgage on petitioners family home proper.
Held: Yes, the foreclosure of petitioners family home was proper.
Accordingly, the petitioners could not raise the applicability of Republic Act No. 6552, or the
strict construction of the loan agreement for being a contract of adhesion as issues for the first time
either in their motion for reconsideration or in their petition filed in this Court. To allow them to do so
would violate the adverse parties right to fairness and due process.
It is well-settled that no question will be entertained on appeal unless it has been raised in the
proceedings below. Points of law, theories, issues and arguments not brought to the attention of the
lower court, administrative agency or quasi-judicial body, need not be considered by the viewing
court, as they cannot be raised for the first time at that late stage. Basic considerations of fairness
and due process impel this rule. Any issue raised for the first time on appeal is barred by estoppel.
Republic Act No. 6552 was enacted to protect buyers of real estate on installment
payments against onerous and oppressive conditions. Having paid monthly amortizations for two
years and four months, the petitioners now insist that they were entitled to the grace period within
which to settle the unpaid amortizations without interest provided under Section 3, supra. Otherwise,
the foreclosure of the mortgaged property should be deemed premature inasmuch as their obligation
was not yet due and demandable.
The petitioners insistence would have been correct if the monthly amortizations being paid to
BPI Family arose from a sale or financing of real estate. In their case, however, the monthly

amortizations represented the installment payments of a housing loan that BPI Family had extended
to them as an employees benefit. The monthly amortizations they were liable for was derived
from a loan transaction, not a sale transaction, thereby giving rise to a lender-borrower
relationship between BPI Family and the petitioners. It bears emphasizing that Republic Act No.
6552 aimed to protect buyers of real estate on installment payments, not borrowers or
mortgagors who obtained a housing loan to pay the costs of their purchase of real estate and
used the real estate as security for their loan. The financing of real estate in installment
payments referred to in Section 3, supra, should be construed only as a mode of payment vis--vis
the seller of the real estate, and excluded the concept of bank financing that was a type of loan.
Accordingly, Sections 3, 4 and 5, supra, must be read as to grant certain rights only to defaulting
buyers of real estate on installment, which rights are properly demandable only against the seller of
real estate.
There was basis to declare the petitioners entire outstanding loan obligation mature as to
warrant the foreclosure of their mortgage. It is settled that foreclosure is valid only when the debtor is
in default in the payment of his obligation. The petitioners, having signed a deed of mortgage in
favor of appellee bank, appellants should have foreseen that when their principal obligation
was not paid when due, the mortgagee has the right to foreclose the mortgage and to have the
property seized and sold with a view to applying the proceeds to the payment of the principal
obligation.
Petition DENIED.
FOREST HILLS GOLF AND COUNTRY CLUB, INC. vs. GARDPRO, INC..
G.R. No. 164686, 22 October 2014
BERSAMIN, J.
Facts:
Petitioner Forest Hills Golf and Country Club, Inc. (interchangeably Forest Hills or Club),
a non-profit stock corporation, was established to promote social, recreational and athletic activities
among its members. Members. In March 1993, Fil-Estate Properties, Inc., a party to a Project
Agreement to develop the Forest Hills Residential Estates and the Forest Hills Golf and Country Club,
undertook to market the golf club shares of Forest Hills for a fee. In July 1995, Fil-Estate Properties,
Inc. (FEPI) assigned its rights and obligations under the Project Agreement to Fil- Estate Golf and
Development, Inc. (FEGDI).
In 1995, FEPI and FEGDI engaged Fil-Estate Marketing Associates Inc., (FEMAI) to market
and offer for sale the shares of stocks of Forest Hills. President of FEMAI made it clear that
membership in the Club was a privilege, such that purchasers of shares of stock would not
automatically become members of the Club, but must apply for and comply with all the requirements
in order to qualify them for membership, subject to the approval of the Board of Directors.

In 1996, Gardpro, Inc. (Gardpro) bought class C common shares of stock, which were special
corporate shares that entitled the registered owner to designate two nominees or representatives for
membership in the Club. When the general manager of the club, notified the shareholders that they
were already accepting applicants, Gardpro designated Fernando R. Martin and Rolando N. Reyes to
be its corporate nominees; hence, the two applied for membership in the Club. Forest Hills charged
them membership fees of P50,000.00 each, prompting Martin to immediately call up Albert and
complain about being thus charged despite having been assured that no such fees would be
collected from them. With Albert assuring that the fees were temporary, both nominees of Gardpro
paid the fees.
Later, Gardpro decided to change its designated nominees, and Forest Hills charged Gardpro
new membership fees of P75,000.00 per nominee. When Gardpro refused to pay, the replacement
did not take place and for this, it filed a complaint before the SEC.
The Sec hearing officer decided in favor of Gardpro. SEC En Banc affirmed the findings of the
hearing officer. The SEC En Banc found that what the by-laws authorizes is the collection of a
transfer fee, in such amount as may be prescribed by the Board, for every change in the designated
nominees of a juridical entity (Art. II, Sec. 2.2 Subsection 2.2.2). This should be differentiated from the
provision of Art. III, Sec. 13.6 of the By-laws, which authorizes the collection of transfer fee of
P60,000 for corporate members for each transfer of stock in the club's books. The transfer fee under
the former provision refers to the one imposed on the change in the corporate member's designated
nominee only while the transfer fee under the latter provision refers to the a transfer of the stock itself
from one corporate member to another which necessitates entry in the club's books. CA affirmed the
findings of SEC.
Issue: Whether or not under the applicable provisions of law on the interpretation of contracts, the
replacement nominees of Gardpro, Inc., who were applying for membership in Forest Hills, should
pay the required membership fees.
Held: No, Forest Hills was not authorized under its articles of incorporation and by-laws to collect
new membership fees for the replacement nominees of Gardpro.
Under Section 2.2.6 of the Clubs by-laws, membership fees of P45,000.00 must be paid by
the applicant within 30 days from the approval of the application before the share could be registered
in the Stock and Transfer Books of the Club. Non-payment of the membership fees within the 30-day
period would be deemed a withdrawal of the application. The amount of the fees could be waived,
increased or decreased by the Board of Directors. Pursuant to the Clubs articles of incorporation and
by-laws, the membership fees should be paid by the corporate member. Based on the procedure set
forth in Section 2.2.7 of the by-laws, the applicant was the juridical entity, not its nominee or
nominees. Although the nominee or nominees also accomplished their application forms for
membership in the Club, it was the corporate member that was obliged to pay the membership
fees in its own capacity because the share was registered in its name in the Stock and
Transfer Book.

Golf clubs usually sell shares to individuals and juridical entities in order to raise capital for the
construction of their recreational facilities. In that regard, golf clubs accept juridical entities to
become regular members, and allow such entities to designate corporate nominees because
only natural persons can enjoy the sports facilities. In the context of this arrangement, Gardpros
two nominees held playing rights. But the articles of incorporation of Forest Hills and Section 2.2.2 of
its by-laws recognized the right of the corporate member to replace the nominees, subject to
the payment of the transfer fee in such amount as the Board of Directors determined for every
change. The replacement could take place for any of the following reasons, namely: (a) if the
nominee should cease to be an officer of the corporate member;24 or (b) if the corporate member
should request the replacement. In case of a replacement, the playing rights would also be
transferred to the new nominees.
According to the second paragraph of Section 13.6 of the by-laws, the transfer of playing
rights entailed the payment of P10,000.00. Yet, Section 2.2.2 of the by-laws stipulated a
transfer fee for every replacement. This warranted the conclusion that Gardpro should pay to
Forest Hills the transfer fee of P10,000.00 because it desired to change its nominees. Also,
there was inconsistency in the amounts of membership fees. On one hand, Section 13.7
(Membership Fees) of the by-laws stated that the membership fee of Forty Five Thousand Pesos
(P45,000.00) x x x for corporate members must be paid by the applicant; on the other, Alberts
affidavit alleged that each nominee shall pay the P75,000.00 membership fee. To resolve the
inconsistency, the by-laws should prevail because they constituted the private statutes of the
corporation and its members and must be strictly complied with and applied to the letter.
The relevant provisions of the articles of incorporation and the bylaws of Forest Hills
governed the relations of the parties as far as the issues between them were concerned.
Indeed, the articles of incorporation of Forest Hills defined its charter as a corporation and the
contractual relationships between Forest Hills and the State, between its stockholders and the
State, and between Forest Hills and its stockholder; hence, there could be no gainsaying that
the contents of the articles of incorporation were binding not only on Forest Hills but also on
its shareholders. The charter and the by-laws were thus the fundamental documents governing the
conduct of Forest Hills corporate affairs; they established norms of procedure for exercising rights,
and reflected the purposes and intentions of the incorporators. Until repealed, the by-laws were a
continuing rule for the government of Forest Hills and its officers, the proper function being to
regulate the transaction of the incidental business of Forest Hills. The bylaws constituted a
binding contract as between Forest Hills and its members, and as between the members
themselves. Every stockholder governed by the by-laws was entitled to access them.
In construing and applying the provisions of the articles of incorporation and the by-laws of
Forest Hills, the CA has leaned on the plain meaning rule embodied in Article 1370 of the Civil
Code, to the effect that if the terms of the contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of its stipulations shall control. Our
Held in Benguet Corporation, et al. v. Cesar Cabildo is instructive:
The cardinal rule in the interpretation of contracts is embodied in the first paragraph of Article
1370 of the Civil Code: [i]f the terms of a contract are clear and leave no doubt upon the

intention of the contracting parties, the literal meaning of its stipulations shall control.
This provision is akin to the plain meaning rule applied by Pennsylvania courts, which
assumes that the intent of the parties to an instrument is embodied in the writing itself, and
when the words are clear and unambiguous the intent is to be discovered only from the
express language of the agreement.
The process of interpreting a contract requires the court to make a preliminary inquiry as to
whether the contract before it is ambiguous. A contract provision is ambiguous if it is
susceptible of two reasonable alternative interpretations. Where the written terms of the
contract are NOT AMBIGUOUS and can only be read one way, the court will interpret the
contract as a matter of law. If the contract is determined to be ambiguous, then the
interpretation of the contract is left to the court, to resolve the ambiguity in the light of the
intrinsic evidence.
The CA was also guided by Article 1374 of the Civil Code, which declares that [t]he
various stipulations of a contract shall be interpreted together, attributing to the doubtful ones
that sense which may result from all of them taken jointly. Verily, all stipulations of the
contract are considered and the whole agreement is rendered valid and enforceable, instead of
treating some provisions as superfluous, void, or inoperable.
The Court AFFIRMS the decision promulgated on September 26, 2003.
November 2014
MCMP CONSTRUCTION CORP., vs. MONARK EQUIPMENT CORP..

G.R. No. 201001, November 10, 2014
VELASCO JR., J.:
Doctrine: Art. 1229. The judge shall equitably reduce the penalty when the principal obligation has
been partly or irregularly complied with by the debtor. Even if there has been no performance, the
penalty may also be reduced by the courts if it is iniquitous or unconscionable.
In exercising this power to determine what is iniquitous and unconscionable, courts must
consider the circumstances of each case since what may be iniquitous and unconscionable in one
may be totally just and equitable in another.
Facts: MCMP Construction Corporation (MCMP) leased heavy equipment from Monark Equipment
Corporation (Monark) for various periods in 2000, the lease covered by a Rental Equipment Contract
(Contract). Thus, Monark delivered five (5) pieces of heavy equipment to the project site of MCMP in
Tanay, Rizal and Llavac, Quezon, the delivery evidenced by invoices as well as Documents
Acknowledgment Receipt Nos. 04667 and 5706, received and signed by representatives of MCMP,
namely, Jorge Samonte on December 5, 2000 and Rose Takahashi on January 29, 2001,
respectively. Notably, the invoices state:
"Credit sales are payable within 30 days from the date of invoice. Customer agrees to
pay interest at 24% p.a. on all amounts. In addition, customer agrees to pay a collection fee of
1% compounded monthly and 2% per month penalty charge for late payment on amounts
overdue. Customer agrees to pay a sum equal to 25% of any amount due as attorney's fees in
case of suit, and expressly submit to the jurisdiction of the courts of Quezon City, Makati,
Pasig or Manila, Metro Manila, for any legal action arising from, this transactions."
Despite the lapse of the thirty (30)-day period indicated in the invoices, MCMP failed to pay the
rental fees. Upon demands made upon MCMP to pay the amount due, partial payments were made.
Further demands went unheeded. As of April 30, 2002, MCMP owed Monark the amount of
PhP1,282,481.83.
Thus, on June 18, 2002, Monark filed a suit for a Sum of Money with the RTC. On November
20, 2007, the RTC issued its Decision in favor of the plaintiff, and ordering the defendant to pay the
former:
From this Decision of the RTC, MCMP filed a Motion for Reconsideration dated January 31,
2008 while Monark interposed a Motion for Clarification and/or Partial Reconsideration. On April 28,
2008, the RTC issued an Order, disposing as follows:
"WHEREFORE, in light of the foregoing, the Court finds no reversible error in the
assailed decision henceforth, the Motion for Reconsideration of defendant is hereby DENIED
for lack of merit. On the other hand, the plaintiffs Motion for Clarification and/or Partial
Reconsideration is hereby GRANTED for being meritorious. Therefore, in the dispositive
portion of the assailed decision dated 20 November 2007, the following should be included:
'The payment of interests, charges and fees due after April 30, 2002 and up to the time when

all the obligations of the defendant to the plaintiff shall have been fully paid, computed in
accordance with the stipulations entered into between the parties.
The CA affirmed in toto the decision of the RTC.
Issue: Whether or Not the interest rate is iniquitous and unconscionable.
Held: The Court takes notice that the trial court imposed upon MCMP a 24% per annum interest on
the rental fees as well as a collection fee of 1% per month compounded monthly and a 2% per month
penalty charge. In all then, the effective interest rate foisted upon MCMP is 60% per annum. On top
of this, MCMP was assessed for attorney's fees at the rate of 25% of the total amount due. These are
exorbitant and unconscionable rates and, following jurisprudence, must be equitably reduced.
In Macalinao v. Bank of the Philippine Islands, the Court reduced the interest imposed by the
bank of 36% for being excessive and unconscionable:
"x x x Nevertheless, it should be noted that this is not the first time that this Court has
considered the interest rate of 36% per annum as excessive and unconscionable. We held in
Chua vs. Timan:
The stipulated interest rates of 7% and 5% per month imposed on respondents' loans must be
equitably reduced to 1% per month or 12% per annum. We need not unsettle the principle we had
affirmed in a plethora of cases that stipulated interest rates of 3% per month and higher are
excessive, iniquitous, unconscionable and exorbitant. Such stipulations are void for being contrary to
morals, if not against the law. While C.B. Circular No. 905-82, which took effect on January 1, 1983,
effectively removed the ceiling on interest rates for both secured and unsecured loans, regardless of
maturity, nothing in the said circular could possibly be read as granting carte blanche authority to
lenders to raise interest rates to levels which would either enslave their borrowers or lead to a
hemorrhaging of their assets.
Since the stipulation on the interest rate is void, it is as if there was no express contract
thereon. Hence, courts may reduce the interest rate as reason and equity demand.
The same is true with respect to the penalty charge. Notably, under the Terms and Conditions
Governing the Issuance and Use of the BPI Credit Card, it was also stated therein that respondent
BPI shall impose an additional penalty charge of 3% per month. Pertinently, Article 1229 of the Civil
Code states:
Art. 1229. The judge shall equitably reduce the penalty when the principal obligation has
been partly or irregularly complied with by the debtor. Even if there has been no performance,
the penalty may also be reduced by the courts if it is iniquitous or unconscionable.
In exercising this power to determine what is iniquitous and unconscionable, courts must
consider the circumstances of each case since what may be iniquitous and unconscionable in one
may be totally just and equitable in another.

Following the above principles previously laid down by the Court, the interest and penalty
charges imposed upon MCMP must also be considered as iniquitous, unconscionable and, therefore,
void. As such, the rates may validly be reduced. Thus, the interest rate of 24% per annum is hereby
reduced to 12% per annum. Moreover, the interest shall start to accrue thirty (30) days after receipt of
the second set of invoices on January 21, 2001, or March 1, 2001 in accordance with the provisions
in the invoices themselves.
Additionally, the penalty and collection charge of 3% per month, or 36% per annum, is also
reduced to 6% per annum. And the amount of attorney's fees is reduced from 25% of the total amount
due to 5%.
By: George D. Rocero
SPS. FELIPE SOLITARIOS AND JULIA TORDA, petitioners, vs. SPS. GASTON JAQUE AND
LILIA JAQUEs.
G.R. No. 199852, November 12, 2014
VELASCO JR., J.:
Doctrines: (1) It is further established that when doubt exists as to the true nature of the parties'
transaction, courts must construe such transaction purporting to be a sale as an equitable mortgage,
as the latter involves a lesser transmission of rights and interests over the property in controversy.
Thus, in several cases, the Court has not hesitated to declare a purported contract of sale to be an
equitable mortgage based solely on one of the enumerated circumstances under Article 1602.
(2) The only right of a mortgagee in case of non-payment of debt secured by mortgage would be to
foreclose the mortgage and have the encumbered property sold to satisfy the outstanding
indebtedness. The mortgagor's default does not operate to automatically vest on the mortgagee the
ownership of the encumbered property, for any such effect is against public policy
Facts: The property subject of this suit is a parcel of agricultural land designated as Lot 4089,
consisting of 40,608 square meters (sq. m.), and located in Calbayog, Samar. It was originally
registered in the name of petitioner Felipe Solitarios under Original Certificate of Title (OCT) No.
1249, and, thereafter, in the name of the respondents, spouses Gaston and Lilia Jaque (the Jaques),
under Transfer Certificate of Title (TCT) No. 745.
In a Complaint for Ownership and Recovery of Possession with the RTC of Calbayog City, the
respondents spouses Jaque alleged that they purchased Lot 4089 from the petitioners, spouses
Solitarios in stages. This sale is allegedly evidenced by a notarized Deed of Sale dated May 8, 1981.
Two months later, the spouses Solitarios supposedly mortgaged the remaining half of Lot 4089 to the
Jaques via a Real Estate Mortgage (REM) to secure a loan amounting to P3,000.00.

After almost two (2) years, the spouses Solitarios finally agreed to sell the mortgaged half.
However, instead of executing a separate deed of sale for the second half, they executed a Deed of
Sale dated April 26, 1983 for the whole lot to save on taxes and condoned the spouses Solitarios'
P3,000.00 loan.
In spite of the sale, the Jaques, supposedly out of pity for the spouses Solitarios, allowed the
latter to retain possession of Lot 4089, subject only to the condition that the spouses Solitarios will
regularly deliver a portion of the property's produce. In an alleged breach of their agreement,
however, the spouses Solitarios stopped delivering any produce sometime in 2000. Worse, the
spouses Solitarios even claimed ownership over Lot 4089. Thus, the Jaques filed the adverted
complaint with the RTC.
For their part, the spouses Solitarios denied selling Lot 4089 and explained that they merely
mortgaged the same to the Jaques after the latter helped them redeem the land from the Philippine
National Bank (PNB).
The spouses Solitarios narrated that, way back in 1975, they obtained a loan from PNB
secured by a mortgage over Lot 4089. They were able to pay this loan and redeem their property with
their own funds. Shortly thereafter, in 1976, they again mortgaged their property to PNB to secure a
P5,000.00 loan. This time, the Jaques volunteered to pay the mortgage indebtedness, including
interests and charges and so gave the spouses Solitarios P7,000.00 for this purpose. It was their
understanding that they would pay back the Jaques by delivering to them a portion of the produce of
Lot 4089. The spouses Solitarios contended that this agreement was observed by the parties until
May 2000, when Gaston Jaque informed them that he was taking possession of Lot 4089 as owner.
And to their surprise, Gaston Jaque showed them the Deeds of Sale dated May 8, 1981 and April 26,
1983, the REM contract dated July 15, 1981, and TCT No. 745 to prove his claim. The spouses
Solitarios contended that these deeds of sale were fictitious and their signatures therein forged.
Further, the spouses Solitarios challenge the validity of TCT No. 745, alleging that the Jaques
acquired it through fraud and machinations and by taking advantage of their ignorance and
educational deficiency.
On April 15, 2004, the RTC rendered a Decision upholding the validity of the deeds of sale in
question and TCT No. 745, rejecting the allegations of forgery and fraud. However, in the same
breath, the RTC declared that what the parties entered into was actually an equitable mortgage as
defined under Article 1602 in relation to Article 1604 of the New Civil Code, and not a sale. The RTC
anchored its holding on the nature of the pertinent contracts in question on its findings that: (1) after
the alleged sale, the spouses Solitarios remained in possession of the land; (2) the Jaques did not
physically occupy Lot 4089; (3) the consideration for the sale of the whole land as stated in the Deed
of Sale dated April 26, 1983, was only P12,000.00, an amount grossly inadequate for a titled coconut
and rice lands consisting of 40,608 sq. m.; (3) the Jaques did not disturb the possession of Lot 4089
by Leonora Solitarios, Felipe's sister-in-law, who resided therein; and (4) the Jaques never had a
tenant in the subject property.
On appeal, the CA reversed and set aside the RTC Decision, rejecting the trial court's holding
that the contract between the parties constituted an equitable mortgage.
Issue: Whether the parties effectively entered into a contract of absolute sale or an equitable
mortgage.
Held: No. The petition is impressed with merit.
Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following
cases:
(1) When the price of a sale with right to repurchase is unusually inadequate;
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right to repurchase another instrument
extending the period of redemption or granting a new period is executed;
(4) When the purchaser retains for himself a part of the purchase price;c
(5) When the vendor binds himself to pay the taxes on the thing sold;
(6) In any other case where it may be fairly inferred that the real intention of the parties
is that the transaction shall secure the payment of a debt or the performance of any other
obligation.
In any of the foregoing cases, any money, fruits, or other benefit to be received by the
vendee as rent or otherwise shall be considered as interest which shall be subject to the usury
laws.
Art. 1604. The provisions of Article 1602 shall also apply to a contract purporting to be an
absolute sale.
As evident from Article 1602 itself, the presence of any of the circumstances set forth therein
suffices for a contract to be deemed an equitable mortgage. No concurrence or an overwhelming
number is needed.
With the foregoing in mind, We thus declare that the transaction between the parties of the
present case is actually one of equitable mortgage pursuant to the foregoing provisions of the Civil
Code. It has never denied by respondents that the petitioners, the spouses Solitarios, have remained
in possession of the subject property and exercised acts of ownership over the said lot even after the
purported absolute sale of Lot 4089. This fact is immediately apparent from the testimonies of the
parties and the evidence extant on record, showing that the real intention of the parties was for the
transaction to secure the payment of a debt. Nothing more.
The intention of the parties was for the transaction to secure the payment of a debt.
To stress, Article 1602(6) of the Civil Code provides that a transaction is presumed to be an
equitable mortgage:
(6) In any other case where it may be fairly inferred that the real intention of the parties
is that the transaction shall secure the payment of a debt or the performance of any other
obligation.

This provision may very well be applied in this case. There is sufficient basis to indulge in the
presumption that the transaction between the parties was that of an equitable mortgage and that the
spouses Solitarios never wanted to sell the same to the Jaques.
It is clear that the Jaques extended two loans to the spouses Solitarios, who in exchange,
offered to the former the subject property, not to transfer ownership thereto, but to merely secure the
payment of their debts. This may be deduced from the testimonies of both Felipe Solitarios and
Gaston Jaque, revealing the fact that they agreed upon terms for the payment of the loans, in
particular, the sharing in the produce of the lot.
Verily, the fact that the parties agreed on payment terms is inconsistent with the claim of the
Jaques that when the spouses Solitaries executed the questioned deeds of sale they had no other
intention but to transfer ownership over the subject property.
Thus, there is ground to presume that the transaction between the parties was an equitable mortgage
and not a sale. There is nothing in the records sufficient enough to overturn this presumption.
In negotiating the transactions, the parties did not deal with each other on equal terms.
The Civil Code provisions that consider certain types of sales as equitable mortgages are
intended for the protection of the unlettered such as the spouses Solitarios, who are penurious vis-avis their creditors. Without doubt, the spouses Solitarios need the protection afforded by the Civil
Code provisions on equitable mortgage. Certainly, the parties were negotiating on unequal footing.
Still another fact which militates against plaintiffs' cause is their failure to prove during trial that
they really endeavored to explain to the defendants the real nature of the contract they were entering
into, it appearing that the defendants are of low education compared to them especially plaintiff
Gaston Jaque who is a retired military officer. The law requires that in case one of the parties to a
contract is unable to read (or maybe of low education), and fraud is alleged, the person enforcing the
contract must show that the term thereof have been fully explained to the former (Spouses
NenaArriola and Francisco Adolfo, et.al. vs. Demetrio Lolita, Pedro, Nena, Brauliq and Dominga, all
surnamed Mahilum, et. al. G.R. No. 123490, August 9, 2000).
It is further established that when doubt exists as to the true nature of the parties' transaction,
courts must construe such transaction purporting to be a sale as an equitable mortgage, as the latter
involves a lesser transmission of rights and interests over the property in controversy. Thus, in several
cases, the Court has not hesitated to declare a purported contract of sale to be an equitable
mortgage based solely on one of the enumerated circumstances under Article 1602. So it should be
in the present case.
The transfer of the subject property is a pactum commissorium.
Further, We cannot allow the transfer of ownership of Lot 4098 to the Jaques as it would
amount to condoning the prohibited practice of pactum comissorium. Article 2088 of the Civil Code
clearly provides that a creditor cannot appropriate or consolidate ownership over a mortgaged
property merely upon failure of the mortgagor to pay a debt obligation, viz.:

Art. 2088. The creditor cannot appropriate the things given by way of pledge or
mortgage, or dispose of them. Any stipulation to the contrary is null and void.
The essence of pactum commissorium is that ownership of the security will pass to the creditor
by the mere default of the debtor. This Court has repeatedly declared such arrangements as contrary
to morals and public policy.
As We have repeatedly held, the only right of a mortgagee in case of non-payment of debt
secured by mortgage would be to foreclose the mortgage and have the encumbered property sold to
satisfy the outstanding indebtedness. The mortgagor's default does not operate to automatically vest
on the mortgagee the ownership of the encumbered property, for any such effect is against public
policy, as earlier indicated.
WHEREFORE, premises considered, the petition is GRANTED. The Decision of the Regional Trial
Court, Calbayog City is REINSTATED.
S.V. MORE PHARMA CORPORATION and ALBERTO A. SANTILLANA, petitioners, vs.

DRUGMAKERS LABORATORIES, INC.
and ELIEZER DEL MUNDOs.
G.R. No. 200408, November 12, 2014
S.V. MORE PHARMA CORPORATION and ALBERTO A. SANTILLANA, petitioners, vs.
DRUGMAKERS LABORATORIES, INC.
and ELIEZER DEL MUNDOs.
G.R. NO. 200416, November 12, 2014
Perlas-Bernabe, J.:
Doctrine: Temperate or moderate damages, which are more than nominal but less than
compensatory damages, may be recovered when the court finds that some pecuniary loss has been
suffered but its amount cannot, from the nature of the case, be proved with certainty.
Facts: Eliezer, Evangeline C. Del Mundo, and Atty. Quirico T. Carag (Del Mundo Group) are the
registered owners of 50% of E.A. Northam Pharma Corporation, a domestic corporation which
exclusively distributes and markets 28 various pharmaceutical products that are exclusively
manufactured by Drugmakers, a domestic corporation under the control of Eliezer. The remaining
50% in E.A. Northam are owned by Alberto and Nilo S. Valente (Santillana Group). The Del Mundo
Group ceded all their rights and interests in E.A. Northam in favor of the Santillana Group for a
consideration of P4,200,000.00, and they agreed that: (a) the said pharmaceutical products shall
remain jointly owned by Eliezer/Drugmakers and Alberto; (b) the products shall be exclusively
manufactured by Drugmakers as long as Eliezer maintains majority ownership and control of the said
company; and (c) the products will be sold, conveyed, and transferred to S.V. More, provided that
Alberto remains its chief executive officer with majority ownership and control thereof.
E.A. Northam entered into a Deed of Sale/Assignment with S.V. More, whereby E.A. Northam
agreed to convey, transfer, and assign all its rights over 28 pharmaceutical products in favor of S.V.
More which shall then have the right to have them sold, distributed, and marketed in the latters
name, subject to the condition that such pharmaceutical products will be exclusively manufactured by
Drugmakers based on their existing Contract Manufacturing Agreement (CMA) set to expire in
October 1993.
On October 20, 1993, S.V. More requested a copy of the existing CMA from Drugmakers, but
to no avail. Hence, on October 23, 1993, S.V. More entered into a Contract to Manufacture
Pharmaceutical Products (CMPP) with Hizon Laboratories, Inc., and, thereafter, caused the latter to
manufacture some of the pharmaceutical products covered by the Deed of Sale/Assignment. Then
the BFAD issued the corresponding Certificates of Product Registration (CPR) therefor, with S.V.
More as distributor, and Hizon Laboratories as manufacturer.
Drugmakers and Eliezer filed a Complaint for Breach of Contract and Damages against S.V.
More and Alberto, and Hizon Laboratories, and its President, Rafael H. Hizon, Jr. Petitioners denied
any liability, and alleged that the Deed of Sale/Assignment failed to state the true intention of the
parties. Further, petitioners maintained that they did not violate the stipulation in the Deed of
Sale/Assignment regarding the continuous manufacture of the subject pharmaceutical products by
Drugmakers because said stipulation did not confer to Drugmakers the exclusive right to manufacture
the said products.
The RTC ruled in favor of respondents, and ordered petitioners, Hizon Laboratories and
Rafael, to jointly and severally pay Drugmakers P6,000,000.00 as actual damages representing loss
of income and/or loss of business opportunity and damages. The CA affirmed the RTC Held but it
deleted the award for moral and exemplary damages and it absolved Rafael and Hizon Laboratories.
Issue: W/N the CA correctly affirmed petitioners liability for breach of contract.
Held: The consolidated petitions are partly meritorious.
Petitioner S.V More, through the CMPP and absent the prior written consent of respondent
Drugmakers, contracted the services of Hizon Laboratories to manufacture some of the
pharmaceutical products covered by the said contracts. Thus, since the CMPP with Hizon
Laboratories was executed on October 23, 1993, or seven (7) days prior to the expiration of the CMA
on October 30, 1993, it is clear that S.V. More who authorized the foregoing, breached the obligation
to recognize Drugmakers as exclusive manufacturer, thereby causing prejudice to the latter.
However, the award of actual damages (due to loss of profits) in the amount of P6,000,000.00 was
erroneous due to improper factual basis. The breach occurred only for a period of seven (7) days, or
from October 23, 1993 until October 30, 1993 that is, the date when the CMA expired. The CMA
from which stems S.V. Mores obligation to recognize Drugmakerss status as the exclusive
manufacturer of the subject pharmaceutical products and which was only carried over in the other two
(2) above-discussed contracts was never renewed by the parties, nor contained an automatic
renewal clause, rendering the breach and its concomitant effect, i.e., loss of profits on the part of

Drugmakers, only extant for the limited period of seven (7) days. It is also evident that only six (6) of
the 28 pharmaceutical products were caused by petitioners to be manufactured by Hizon
Laboratories.
Respondents palpably suffered some form of pecuniary loss resulting from petitioners breach
of contract, hence, the Court awarded in their favor the sum of P100,000.00 in the form of temperate
damages under Article 2224 of the Civil Code which states that temperate or moderate damages,
which are more than nominal but less than compensatory damages, may be recovered when the
court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the
case, be proved with certainty, as in this case.
BY: Brenda Dela Cruz Beltran
OWEN PROSPER A. MACKAY, vs.

SPOUSES DANA CASWELL AND CERELINA CASWELLs.
G.R. No. 183872, November 17, 2014
DEL CASTILLO, J.:
Facts: Petitioners needed electrical installation service in their newly built home in San Narciso,
Zambales. They asked Zambales II Electric Cooperative (Zameco II) how much its service for the
installation would be. Engr. Pulangco quoted an estimate of P456,000.00. However, petitioners
instead hired respondent Owen who offered to do the job for only P250,000.00. Respondent allegedly
completed the installation, by then, petitioners had paid him P227,000.00. At Cerelina Caswells
(Cerelina) request, Zameco II inspected the installation work and tested the distribution
transformers. The inspection showed defects, and thus, Zameco II refused to provide energization to
the Caswell home. The petitioners looked for respondent but he could not be found. Hence, they were
constrained to ask Zameco II to correct all the problems it found.
Petitioners file a case for Estafa against respondent Owen, however, on ground of reasonable
doubt, Owen was acquitted on May 15, 2003.
Owen in turn filed a Complaint for Collection of Sum of Money with Damages against the
Caswells
for
the
unpaid
P23,000.00
for
his
installation
work.
Issue: Whether or not respondent should be paid the unpaid balance for his services.
Held: We deny the Petition.
Owen failed to execute his work in such a manner that it has no defects which destroy or lessen its
value or fitness for its ordinary or stipulated use.

Suffice it to say that Owens job was not only to finish the electrical installation work. It was
likewise his obligation to do quality work and to provide quality materials to ensure that electricity
would flow in the Caswell home. For the Caswells to avail of this utility, it is definitely expected that
the electrical materials used should meet the technical requirements for a service entrance as
imposed by the only distributor of the electricity in the area, Zameco II, so that the latter can supply
residential electric service efficiently and safely to the Caswells. However, as shown above, Owen
failed to execute his work in such a manner that it has no defects which destroy or lessen its value or
fitness for its ordinary or stipulated use.
The CA correctly ruled that Caswells effort to communicate with Owen effectively
served as a demand to rectify the latters work.
Under Article 1715 of the Civil Code, if the work of a contractor has defects which destroy or
lessen its value or fitness for its ordinary or stipulated use, he may be required to remove the defect
or execute another work. If he fails to do so, he shall be liable for the expenses by the employer for
the correction of the work. The demand required of the employer under the subject provision need not
be in a particular form. In the case at bar, we agree with the CA that Owen was given the opportunity
to rectify his work. Subsequent to Zameco IIs disapproval to supply the Caswells electricity for
several reasons, the Court gives credence to the latters claim that they looked for Owen to demand a
rectification of the work, but Owen and his group were nowhere to be found. Had Owen really been
readily available to the Caswells to correct any deficiency in the work, the latter would not have
entertained the thought that they were deceived and would not have been constrained to undergo the
rigors of filing a criminal complaint and testifying therein. Without doubt, the Caswells exercised due
diligence when they demanded from Owen the proper rectification of his work. As correctly held by
the CA, the Caswells substantially complied with the requirement of Article 1715 of the Civil Code.
For Owens failure to provide quality work, he is to reimburse the rectification
costs the Caswells had shouldered as the latters actual damages; the unpaid compensation.
Owen is claiming shall be set-off from the Caswells monetary claims supported by receipts.
The Court recognizes that in view of the substandard work done, the Caswells necessarily
incurred expenses by purchasing materials to finally get a supply of electricity in their home. One is
entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly
proved. In the case at bar, we give credence to the documents relied upon by the CA and the MTC in
arriving at the rectification cost, i.e., a) Engr. Pulangcos handwritten receipt of P15,400.00, to which
he had testified before the court that he had indeed received such amount and b) the Sales Invoice
No. 2029 issued by Peter A. Eduria Enterprises reflecting the total cost of P53,805.00.00.
It must be noted en passant that Cerelina herself admitted that the contract price agreed upon
was the lump sum of P250,000.00, and that she only paid Owen P227,000.00, while the dispositive
portion of the MTC Decision stated that Owens claims are dismissed, the lower court implies that the

P23,000.00 unpaid compensation he sought to recover from the Caswells shall not be given directly
to him, offsetting the said amount from the rectification cost that the Caswells had prayed for. In
effect, under the circumstances, we deem this fair and just to measure the actual damages due the
Caswells by reducing the cost they shouldered to repair the defects with the unpaid amount of the
contract price due Owen.
WHEREFORE,
the
instant
petition
is DENIED. AFFIRMED in
toto. No
costs.
BY: Jeremy B. Luglug

NEDLLOYD LIJNEN B.V. ROTTERDAM and THE EAST ASIATIC CO., LTD., petitioners, vs.
GLOW LAKS ENTERPRISES, LTD..
G.R. No.156330, November 19, 2014
Perez, J.:
Doctrine: A common carrier is presumed to have been negligent if it fails to prove that it exercised
extraordinary vigilance over the goods it transported. When the goods shipped are either lost or
arrived in damaged condition, a presumption arises against the carrier of its failure to observe that
diligence, and there need not be an express finding of negligence to hold it liable. To overcome the
presumption of negligence, the common carrier must establish by adequate proof that it exercised
extraordinary diligence over the goods. It must do more than merely show that some other party could
be responsible for the damage.
Facts: Petitioner is a foreign corporation engaged in the business of carrying goods by sea and doing
business in the Philippines thru its local ship agent, co-petitioner East Asiatic Co., Ltd. Respondent is
likewise a foreign corporation not licensed to do, and it is not doing business in the Philippines. On or
about 14 September 1987 respondent loaded on board M/S Scandutch at the Port of Manila a total
343 cartoons of garments, complete and in good order for pre-carriage to the Port of Hong Kong. The
goods arrived in good condition in Hong Kong and were transferred to M/S Amethyst for final carriage
to Colon, Free Zone, Panama. Both vessels, M/S Scandutch and M/S Amethyst, are owned by
Nedlloyd represented in the Philippines by its agent, East Asiatic. The goods which were valued at
US$53,640.00 was agreed to be released to the consignee, Pierre Kasem, International, S.A., upon
presentation of the original bills of lading.
Upon arrival of vessel, petitioners purportedly notified the consignee of the arrival of the
shipments, and its custody was turned over to the National Ports Authority in accordance with the
laws, customs regulations and practice of trade in Panama. Unauthorized persons managed to forge
the covering bills of lading and on the basis of the falsified documents, the ports authority released
the goods. Respondent filed a formal claim with Nedlloyd for the recovery of the amount of
US$53,640.00 representing the invoice value of the shipment but to no avail. Hence, a case was filed
seeking for the recovery of the said amount.

Petitioners asserted that they were never remiss in their obligation as a common carrier and
the goods were discharged in good order and condition into the custody of the National Ports
Authority of Panama in accordance with the Panamanian law. They averred that they cannot be
faulted for the release of the goods to unauthorized persons, their extraordinary responsibility as a
common carrier having ceased at the time the possession of the goods were turned over to the
possession of the port authorities.
The RTC dismissed of the complaint but granted petitioners counterclaims. The RTC ruled
that Panama law was duly proven during the trial and pursuant to the said statute, carriers of goods
destined to any Panama port of entry have to discharge their loads into the custody of Panama Ports
Authority to make effective government collection of port dues, customs duties and taxes. The
subsequent withdrawal effected by unauthorized persons on the strength of falsified bills of lading
does not constitute misdelivery arising from the fault of the common carrier. On appeal, the Court of
Appeals reversed the findings of the RTC and held that foreign laws were not proven in the manner
provided by Section 24, Rule 132 of the Revised Rules of Court, and therefore, it cannot be given full
faith and credit.
Issue: Whether or not petitioners are liable for the misdelivery of goods under Philippine laws.
Held: Yes.
It is well settled that foreign laws do not prove themselves in our jurisdiction and our courts are
not authorized to take judicial notice of them. Like any other fact, they must be alleged and proved.
To prove a foreign law, the party invoking it must present a copy thereof and comply with Sections 24
and 25 of Rule 132 of the Revised Rules of Court .Contrary to the contention of the petitioners, the
Panamanian laws, particularly Law 42 and its Implementing Order No. 7, were not duly proven in
accordance with Rules of Evidence and as such, it cannot govern the rights and obligations of the
parties in the case at bar.
Under the New Civil Code, common carriers, from the nature of their business and for reasons
of public policy, are bound to observe extraordinary diligence in the vigilance over goods, according
to the circumstances of each case. Common carriers are responsible for loss, destruction or
deterioration of the goods unless the same is due to flood, storm, earthquake or other natural disaster
or calamity. Extraordinary diligence is that extreme care and caution which persons of unusual
prudence and circumspection use for securing or preserving their own property or rights. This
expecting standard imposed on common carriers in contract of carrier of goods is intended to tilt the
scales in favor of the shipper who is at the mercy of the common carrier once the goods have been
lodged for the shipment. Hence, in case of loss of goods in transit, the common carrier is presumed
under the law to have been in fault or negligent.
The fact that the shipments were not delivered to the consignee as stated in the bill of lading or
to the party designated or named by the consignee, constitutes misdelivery thereof, and under the
law it is presumed that the common carrier is at fault or negligent if the goods they transported, as in
this case, fell into the hands of persons who have no right to receive them.

Explicit is the rule under Article 1736 of the Civil Code that the extraordinary responsibility of
the common carrier begins from the time the goods are delivered to the carrier. This responsibility
remains in full force and effect even when they are temporarily unloaded or stored in transit, unless
the shipper or owner exercises the right of stoppage in transitu and terminates only after the lapse of
a reasonable time for the acceptance, of the goods by the consignee or such other person entitled to
receive them.
In this case, there is no dispute that the custody of the goods was never turned over to the
consignee or his agents but was lost into the hands of unauthorized persons who secured possession
thereof on the strength of falsified documents. The loss or the misdelivery of the goods in the instant
case gave rise to the presumption that the common carrier is at fault or negligent.
SNOW MOUNTAIN DAIRY CORPORATION, petitioner v. GMA VETERANS FORCE, INC..

G.R. No. 192446, November 19, 2014
Peralta, J.:
Doctrines: 1. Art. 2199. Except as provided by law or by stipulation, one is entitled to an adequate
compensation only for such pecuniary loss suffered by him as he has duly proved. Such
compensation is referred to as actual or compensatory damages. Indeed, no evidence was presented
by respondent establishing the actual amount of loss suffered by reason of the pre-termination. It is
elementary that to recover damages, there must be pleading and proof of actual damages suffered.
2. Article 2224. Temperate or moderate damages, which are more than nominal but less than
compensatory damages may be recovered when the court finds that some pecuniary loss has been
suffered but its amount cannot, from the nature of the case, be proved with certainty. Undeniably,
however, respondent suffered pecuniary loss because of the pre-termination of its services without
any valid cause. But since there was no proof capable of ascertaining the actual loss, we refer to
Article 2224 of the Civil Code.
Facts: Snow Mountain and GMA Veterans Force, Inc. entered into a ONE YEAR security service
agreement whereby the security agency would provide SNOW Mountain 7 security guards and under
the agreement, it was stipulated that The AGENCY shall charge the CLIENT for the Contract Price
equivalent to SIXTEEN THOUSAND FOURTEEN (PI 6,014.00) PESOS per month per guard per
twelve hours duty.
Barely 3 months into the agreement, Snow Mountain pre-terminated the contract. GMA
informed Snow Mountain that the contract was valid for a year and that it could only be terminated for
just cause and with 30 day notice.
As a result of the pre-termination of the contract, GMA filed a case for damages with the RTC.
GMA security agency alleged that it had entered in a security service agreement with
petitioner; that it had recruited seven security in compliance with the service agreement and in the

process, incurred expenses for training, physical and medical examinations, documentations,
procurement of equipments like service firearms, uniform and related expense and that it incurred
income opportunity loss worth P952,833.00 which it could have earned if the agreement was faithfully
honored up to the end of the contract period. Respondent prayed for actual, moral and exemplary
damages, and attorney's fees.
Snow Mountain on the other hand alleged that there was no basis for the claim of actual
damages in the form of unrealized income as said claim was premised on a contingent circumstance,
which was the fulfillment and completion of the security agreement.
RTC rendered decision in favor of security agency ordering Snow Mountain to pay
compensatory damages representing the unserved portion of the contract in the amount of P952,
833.50.
CA affirmed the award of compensatory damages.
Issue(s):
1. Was the award of actual damages proper in this case?
2. Is the Security Agency entitled to temperate damages?
Held:
1.NO. Art. 2199. Except as provided by law or by stipulation, one is entitled to an adequate
compensation is referred to as actual or compensatory damages.
Thus, actual or compensatory damages are those awarded in satisfaction of, or in recompense
for, loss or injury sustained. They proceed from a sense of natural justice and are designed to repair
the wrong that has been done, to compensate for the injury inflicted and not to impose a penalty. The
burden is to establish one's case by a preponderance of evidence which means that the evidence, as
a whole, adduced by one side, is superior to that of the other. Actual damages are not presumed. The
claimant must prove the actual amount of loss with a reasonable degree of certainty premised upon
competent proof and on the best evidence obtainable. Specific facts that could afford a basis for
measuring whatever compensatory or actual damages are borne must be pointed out. The award of
actual damages cannot be simply based on the mere allegation of a witness without any tangible
claim, such as receipts or other documentary proofs to support such claim.
Indeed, no evidence was presented by respondent establishing the actual amount of loss
suffered by reason of the pre-termination. It is elementary that to recover damages, there must be
pleading and proof of actual damages suffered. Clearly, there was no basis for the lower court's
award of actual damages in the absence of evidence proving the same.
2. YES. Undeniably, however, respondent suffered pecuniary loss because of the pretermination of its services without any valid cause. But since there was no proof capable of
ascertaining the actual loss, we refer to Article 2224 of the Civil Code which provides:

Article 2224. Temperate or moderate damages, which are more than nominal but less than
compensatory damages may be recovered when the court finds that some pecuniary loss has been
suffered but its amount cannot, from the nature of the case, be proved with certainty.
Temperate damages may be allowed in cases where from the nature of the case, definite proof
of pecuniary loss cannot be adduced, although the court is convinced that the aggrieved party
suffered some pecuniary loss. We also take into consideration that respondent certainly spent for the
security guard's training, firearms with ammunitions, uniforms and other necessary things before their
deployment to petitioner.
In Adriano v. Lasala, we found that respondents suffered pecuniary loss because of petitioners'
untimely termination of the former's security services for no cause at all. We then affirmed the CA's
award of temperate damages in the amount of P200, 000.00 in lieu of actual damages awarded by
the RTC since there was no proof capable of ascertaining the actual loss.
In this case, we find it just and proper to award temperate damages in the amount of P200,
000.00 in lieu of actual damages.
BY:
Eric Jason B. Dugyon
LAND BANK OF THE PHILIPPINES, vs. JAIME K. IBARRA, ANTONIO K. IBARRA, JR., LUZ
IBARRA VDA. DE JIMENEZ, LEANDRO K IBARRA, AND CYNTHIA IBARRA-GUERREROs.
G.R. No. 182472, November 24, 2014
Peralta, J.:
Facts:
Respondents are the registered owners of a parcel of agricultural land in Pampanga. Pursuant
to the government's Land Reform Program, the Department of Agrarian Reform (DAR) acquired
6.0191 hectares of said property and placed it under the coverage of Presidential Decree (PD) No.
27. Respondents filed a Complaint for the Determination of Just Compensation before the Regional
Trial Court. Thereafter, they filed with the RTC an Omnibus Motion for the Issuance of an Order
Authorizing Plaintiffs to Withdraw Amount Deposited in their Name and Amount to be Withdrawn Must
be Fixed in Accordance with Section 18 of Republic Act (RA) No. 6657.
RTC issued an Order directing petitioner Land Bank of the Philippines to make a provisional
payment to respondents in the amount of P136,110.64. Petitioner filed its Compliance manifesting its
conformity with said Order.
The RTC rendered a Decision in favor of the plaintiff by modifying the computation of the
respondent Department of Agrarian Reform (DAR).
The
CA
ruled
that
the
computations
should
be
based
on
RA
No.
6657.

Issue: Whether or not the computation should be based on RA No. 6657 as respondents contend or
under PD No. 27 in relation with EO No. 228 as petitioner contends.
Held: We rule in favor of respondents.
The issue in this case has long been laid to rest by this Court. In numerous cases, We have
repeatedly held that the seizure of landholdings or properties covered by PD No. 27 did not take
place on October 21, 1972, but upon the payment of just compensation. Indeed, acquisition of
property under the Operation Land Transfer Program under PD No. 27 does not necessarily mean
that the computation of just compensation thereof must likewise be governed by the same law. In
determining the applicable formula, the date of the payment of just compensation must be taken into
consideration for such payment marks the completion of the agrarian reform process. If the agrarian
reform process is still incomplete as when just compensation is not settled prior to the passage of RA
No. 6657, it should be computed in accordance with said law despite the fact that the property was
acquired under PD No. 27. Clearly, by law and jurisprudence, R.A. No. 6657, upon its effectivity,
became the primary law in agrarian reform covering all then pending and uncompleted processes,
with P.D. No. 27 and E.O. No. 228 being only suppletory to the said law.
It is, therefore, on equitable considerations that We base the retroactive application of RA No.
6657 for it would be highly inequitable on the part of the landowners to compute just compensation
using the values not at the time of the payment but at the time of the taking in1972, considering that
the government and the farmer-beneficiaries have already benefitted from the land.
Moreover, petitioner's contention that RA No. 6657 does not apply to tenanted rice and corn
lands is erroneous. We cannot see why Sec. 18 of RA 6657 should not apply to rice and corn
lands under PD 27. Section 75 of RA 6657 clearly states that the provisions of PD 27 and EO 228
shall only have a suppletory effect.
This eloquently demonstrates that RA 6657 includes PD 27 lands among the properties
which the DAR shall acquire and distribute to the landless. And to facilitate the acquisition
and distribution thereof, Sees. 16, 17, and 18 of the Act should be adhered to.
Attorneys fees are not ipso facto damages.
We likewise do not find any error in the CA's deletion of the award of attorney's fees in
favor of respondents for it is a settled rule that attorney's fees and litigation expenses cannot
automatically be recovered as part of damages in light of the policy that the right to litigate
should bear no premium. An adverse decision does not ipso facto justify an award of attorney's fees

to the winning party. Counsel's fees are awarded only in those cases enumerated in Article 2208 of
the Civil Code, which must always be reasonable. Thus, in the absence of facts which will justify the
award of attorney's fees to respondents herein, We find the deletion of the same proper. Petitioner's
belief in the righteousness of its claim does not necessarily connote ill motive.
Neither do we find error in the CA's Held that petitioner cannot be made to pay for the costs of
the suit for since it is an instrumentality performing a governmental function in agrarian reform
proceedings, charged with the disbursement of public funds, it is exempt from the payment of costs of
suit under Section 1, Rule 142 of the Rules of Court.
WHEREFORE,
is AFFIRMED.
premises
considered,
the
instant
petition
is DENIED. The
Decision
Metropolitan Bank And Trust Company, vs. Wilfred N. Chiok.

G.R. No. 172652
Bank of the Philippine Islands, vs. Wilfred N. Chiok. G.R.No. 175302
Global Business Bank, Inc., vs. Wilfred N. Chiok.
G.R. No. 175394. November 26, 2014
Leonardo-De Castro, J.:
Doctrine:
Reciprocal obligations are those which arise from the same cause, and in which each
party is a debtor and creditor of the other, such that the obligation of one is dependent upon the
obligation of the other. They are to be performed simultaneously such that the performance of one is
conditioned upon the simultaneous fulfillment of the other. When Nuguid failed to deliver the agreed
amount to Chiok, the latter had a cause of action against Nuguid to ask for the rescission of their
contract. On the other hand, Chiok did not have a cause of action agaist Metrobank and Global Bank
that would allow him to rescind the contracts of sale ofthe managers or cashier's checks, which
would have resulted in the crediting of the amounts thereof back to his accounts.
Otherwise stated, the right of rescission under Article 1191 of the civil code can only be
exercised in accordance with the principle of relativity of contracts under Article 1311 of the same
code.
Facts: Respondent Wilfred N. Chiok (Chiok) had been engaged in dollar trading for several years. He
usually buys dollars from Gonzalo B. Nuguid (Nuguid) at the exchange rate prevailing on the date of
the sale. Chiok pays Nuguid either in cash or managers check, to be picked up by the latter or
deposited in the latters bank account. Nuguid delivers the dollars either on the same day or on a later
date as may be agreed upon between them, up to a week later. Chiok and Nuguid had been dealing

in this manner for about six to eight years, with their transactions running into millions of pesos. For
this purpose, Chiok maintained accounts with petitioners Metropolitan Bank and Trust Company
(Metrobank) and Global Business Bank, Inc. (Global Bank), the latter being then referred to as the
Asian Banking Corporation (Asian Bank). Chiok likewise entered into a Bills Purchase Line
Agreement (BPLA) with Asian Bank. Under the BPLA, checks drawn in favor of, or negotiated to,
Chiok may be purchased by Asian Bank. Upon such purchase, Chiok receives a discounted cash
equivalent of the amount of the check earlier than the normal clearing period.
On July 5, 1995, pursuant to the BPLA, Asian Bank bills purchased Security Bank & Trust
Company (SBTC) Managers Check (MC) No. 037364 in the amount of P25,500,000.00 issued in the
name of Chiok, and credited the same amount to the latters Savings Account No. 2-007-03-00201-3.
On the same day, July 5, 1995, Asian Bank issued MC No. 025935 in the amount of
P7,550,000.00 and MC No. 025939 in the amount of P10,905,350.00 to Gonzalo Bernardo, who is
the same person as Gonzalo B. Nuguid. The two Asian Bank managers checks, with a total value of
P18,455,350.00 were issued pursuant to Chioks instruction and was debited from his account.
Likewise upon Chioks application, Metrobank issued Cashiers Check (CC) No. 003380 in the
amount of P7,613,000.00 in the name of Gonzalo Bernardo. The same was debited from Chioks
Savings Account No. 154-42504955. The checks bought by Chiok for payee Gonzalo Bernardo are
therefore
summarized
as
follows:
Drawee Bank/Check No.
Asian Bank MC No.
025935
Asian Bank MC No.

025939
Metrobank
CC
No.
003380
TOTAL
Amount (P)
Source of fund
7,550,000.00 Chioks Asian Bank Savings
Account No. 2-007-03-002013, which had been credited
with the value of SBTC MC
No. 037364(P25,500,000.00)
when the latter was purchased
by Asian Bank from Chiok
pursuant to their BPLA.
10,905,350.00 (aggregate value of Asian
Bank MCs: 18,455,350.00)
7,613,000.00 Chioks Metrobank
Savings
Account No. 154-425049553
26,068,350.00
On the following day, July 6, 1995, Chiok filed a Complaint for damages with application for ex
parte restraining order and/or preliminary injunction with the Regional Trial Court (RTC) of Quezon
City against the spouses Gonzalo and Marinella Nuguid, and the depositary banks, Asian Bank and
Metrobank. The complaint was later amended to include the prayer of Chiok to be declared the legal
owner of the proceeds of the subject checks and to be allowed to withdraw the entire proceeds
thereof.

On the same day, July 6, 1995, the RTC issued a TRO directing the spouses Nuguid to
refrain from presenting the said checks for payment and the depositary banks from honoring
the same until further orders from the court.
On August 29, 2002, the RTC rendered its Decision in favor Chiok and ordering Global
Business Bank and Metropolitan Bank & Trust Company to pay him.
The RTC went on to rule that due to the timely service of the TRO and the injunction, the value
of the three checks remained with Global Bank and Metrobank. The RTC concluded that since
Nuguid did not have a valid title to the proceeds of the managers and cashiers checks, Chiok is
entitled to be paid back everything he had paid to the drawees for the checks.
On May 5, 2006, the Court of Appeals rendered the assailed Decision affirming the RTC
Decision with modifications. The fallo of the Decision reads:
WHEREFORE, premises considered, the Decision dated August 29, 2000 of the RTC, Branch 96,
Quezon City is AFFIRMED with the following MODIFICATIONS:
1.)
The contract to buy foreign currency in the amount of $1,022,288.50
between plaintiff-appellee Wilfred N. Chiok and defendant Gonzalo B.
Nuguid is hereby rescinded. Corollarily, Managers Check Nos. 025935
and 025939 and Cashiers Check No. 003380 are ordered cancelled.
-XXXXAccording to the Court of Appeals, Article 1191 of the Civil Code provides a legal basis of the
right of purchasers of MCs and CCs to make a stop payment order on the ground of the failure of the
payee to perform his obligation to the purchaser. The appellate court ruled that such claim was
impliedly incorporated in Chioks complaint
Issue: Whether or not the purchaser of managers and cashiers checks has the right to have
the checks cancelled by filing an action for rescission of its contract with the payee
Held:
As it was construed by the Court of Appeals, the Amended Complaint of Chiok was in reality
an action for rescission of the contract to buy foreign currency between Chiok and Nuguid. The Court
of Appeals then proceeded to cancel the managers and cashiers checks as a consequence of the
granting of the action for rescission, explaining that the subject checks would not have been issued
were it not for the contract between Chiok and Nuguid. Therefore, they cannot be disassociated from
the contract and given a distinct and exclusive signification, as the purchase thereof is part and parcel
of the series of transactions necessary to consummate the contract.
We disagree with the above held by the CA.
The right to rescind invoked by the Court of Appeals is provided by Article 1191 of the Civil
Code, which reads:

Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of
the obligors should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the obligation, with
the payment of damages in either case. He may also seek rescission, even after he has chosen
fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be just cause authorizing the fixing
of a period.
This is understood to be without prejudice to the rights of third persons who have acquired the
thing, in accordance with Articles 1385 and 1388 and the Mortgage Law.
The cause of action supplied by the above article, however, is clearly predicated upon the
reciprocity of the obligations of the injured party and the guilty party. Reciprocal obligations are those
which arise from the same cause, and in which each party is a debtor and a creditor of the other,
such that the obligation of one is dependent upon the obligation of the other. They are to be
performed simultaneously such that the performance of one is conditioned upon the simultaneous
fulfillment of the other. When Nuguid failed to deliver the agreed amount to Chiok, the latter had a
cause of action against Nuguid to ask for the rescission of their contract. On the other hand, Chiok did
not have a cause of action against Metrobank and Global Bank that would allow him to rescind the
contracts of sale of the managers or cashiers checks, which would have resulted in the crediting of
the amounts thereof back to his accounts.
Otherwise stated, the right of rescission under Article 1191 of the Civil Code can only be
exercised in accordance with the principle of relativity of contracts under Article 1131 of the same
code, which provides:
Art. 1311. Contracts take effect only between the parties, their assigns and heirs, except
in case where the rights and obligations arising from the contract are not transmissible by their
nature, or by stipulation or by provision of law. x x x.
In several cases, this Court has ruled that under the civil law principle of relativity of contracts
under Article 1131, contracts can only bind the parties who entered into it, and it cannot favor or
prejudice a third person, even if he is aware of such contract and has acted with knowledge thereof.
Metrobank and Global Bank are not parties to the contract to buy foreign currency between Chiok and
Nuguid. Therefore, they are not bound by such contract and cannot be prejudiced by the failure of
Nuguid to comply with the terms thereof.
The petitions in G.R. No. 172652 and G.R. No. 175302 are GRANTED. The Decision of the
Court of Appeals dated May 5, 2006, and the Resolution on the same case dated November 6, 2006
are hereby REVERSED AND SET ASIDE, and a new one is issued ordering the DENIAL of the
Amended Complaint of for lack of merit.
The petition in G.R. No. 175394 is hereby rendered MOOT.
By: ERIC JASON B. DUGYON
LOADSTAR SHIPPING COMPANY, INC. and LOADSTAR INTERNATIONAL SHIPPING

COMPANY, INC., petitioners, vs.
MALAYAN INSURANCE COMPANY, INC..
G.R. No. 185565, November 26, 2014
Reyes, J.:
Doctrine: An insurer indemnifies the insured based on the loss or injury the latter actually suffered
from. If there is no loss or injury, then there is no obligation on the part of the insurer to indemnify the
insured. Should the insurer pay the insured and it turns out that indemnification is not due, or if due,
the amount paid is excessive, the insurer takes the risk of not being able to seek recompense from
the alleged wrongdoer. This is because the supposed subrogor did not possess the right to be
indemnified and therefore, no right to collect is passed on to the subrogee.
Facts: Petitioner and Philippine Associated Smelting and Refining Corporation (PASAR) entered into
a Contract of Affreightment for domestic bulk transport of the latters copper concentrates. On
September 10, 2000, 5,065.47 wet metric tons (WMT) of copper concentrates were loaded in Cargo
Hold Nos. 1 and 2 of MV Bobcat, a marine vessel owned by Loadstar International Shipping Co.,
Inc. and operated by Loadstar Shipping under a charter party agreement. While MV Bobcat on its
way going to Isabel, Leyte, it was found out that there is a crack on starboard side of the main deck
which caused seawater to enter and wet the cargo inside Cargo Hold No. 2 forward/aft.
PASAR and Philexs representatives inspected the vessel and the samples of copper
concentrates from Cargo Hold No. 2 were found to be contaminated by seawater. PASAR rejected
750 MT of the 2,300 MT cargo discharged from Cargo Hold No. 2, and sent a formal notice of claim in
the amount of P37,477,361.31 to Loadstar Shipping. Elite Surveyor recommended payment to the
assured the amount of P32,351,102.32 as adjusted, which amount was paid by Malayan to PASAR.
PASAR signed a subrogation receipt in favor of Malayan, which in turn, demanded
reimbursement from Loadstar Shipping. Loadstar refused to comply, hence, Malayan instituted with
the RTC a complaint for damages. Malayan also sought to declare the bill of lading as void since it
violates the provisions of Articles 1734 and 1745 of the Civil Code.
Petitioners denied plaintiff-appellants allegations and averred that: they are not engaged in the
business as common carriers but as private carriers; that the vessel was seaworthy and defendantsappellees exercised the required diligence under the law; that the entry of water into Cargo Hold No.

2 must have been caused by force majeure or heavy weather; that due to the inherent nature of the
cargo and the use of water in its production process, the same cannot be considered damaged or
contaminated.
The RTC dismissed the complaint stating that the vessel was seaworthy at the time of loading
and that the damage was attributable to the perils of the sea. The CA reversed the RTC Held and
ordered defendants-appellees to pay plaintiff-appellant P33,934,948.75 as actual damages and
deducted the amount US$90,000.00 from the amount of actual damages.
Issue: Whether or not petitioner is liable for actual damages against Malayan
Held: No.
Malayans claim against the petitioners is based on subrogation to the rights possessed by
PASAR as consignee of the allegedly damaged goods. The right of subrogation stems from Article
2207 of the New Civil Code which states:
Art. 2207. If the plaintiffs property has been insured, and he has received indemnity from the
insurance company for the injury or loss arising out of the wrong or breach of contract complained of,
the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the
person who has violated the contract. If the amount paid by the insurance company does not fully
cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person
causing the loss or injury.
An insurer indemnifies the insured based on the loss or injury the latter actually suffered from.
If there is no loss or injury, then there is no obligation on the part of the insurer to indemnify the
insured. Should the insurer pay the insured and it turns out that indemnification is not due, or if due,
the amount paid is excessive, the insurer takes the risk of not being able to seek recompense from
the alleged wrongdoer. This is because the supposed subrogor did not possess the right to be
indemnified and therefore, no right to collect is passed on to the subrogee.
Article 2199 of the New Civil Code speaks of how actual damages are awarded:
Art. 2199. Except as provided by law or by stipulation, one is entitled to an adequate
In the instant case, the CA modified its Decision dated April 14, 2008 by deducting the amount
of US$90,000.00 from the award, however, the same is still iniquitous for the petitioners because
PASAR and Malayan never proved the actual damages sustained by PASAR. It is a flawed notion to
merely accept that the salvage value of the goods is US$90,000.00, since the price was arbitrarily
fixed between PASAR and Malayan. Actual damages to PASAR, for example, could include the
diminution in value as appraised by experts or the expenses which PASAR incurred for the
restoration of the copper concentrates to its former condition, if there is damage and rectification is
still possible.
It is also noteworthy that when the expert witness for the petitioners, Engineer Francisco
Esguerra testified as regards the lack of any adverse effect of seawater on copper concentrates,
Malayan never presented evidence of its own in refutation to Esguerras testimony. And, even if the
Court will disregard the entirety of his testimony, the effect on Malayans cause of action is nil. As
Malayan is claiming for actual damages, it bears the burden of proof to substantiate its claim. CA
decision is reversed.
SEVEN BROTHERS SHIPPING CORPORATION, vs.
DMC-CONSTRUCTION RESOURCES, INC.
G.R. No. 193914, November 26, 2014
Sereno, CJ.:
Doctrine: Temperate or moderate damages may be recovered when the court finds that some
pecuniary loss has been suffered but its amount cannot, from the nature of the case, be provided with
certainty
Facts: Petitioner Seven Brothers Shipping Corporation is the owner of the cargo ship M/V "Diamond
Rabbit," (vessel), while respondent DMC-Construction Resource, Inc. is the owner of coal-conveyor
facility, which was destroyed when the vessel became uncontrollable and unmanueverable during a
storm.
On 5 March 1996, respondent sent a formal demand letter to petitioner, claiming the damages
sustained by their vessel. When petitioner failed to pay, respondent filed with the RTC a Complaint for
damages against respondent. Based on the pieces of evidence presented by both parties, the RTC
ruled that as a result of the incident, the loading conveyor and related structures of respondent were
indeed damaged. In the course of the destruction, the RTC found that no force majeure existed,
considering that petitioner's captain was well aware of the bad weather, and yet proceeded against
the strong wind and rough seas, instead of staying at the causeway and waiting out the passage of
the typhoon. It further concluded that "there was negligence on the part of the captain; hence,
defendant [petitioner] as his employer and owner of the vessel shall be liable for damages caused
thereby."
Regarding liability, the RTC awarded respondent actual damages in the amount of
P3,523,175.92 plus legal interest of 6%, based on the testimony of respondent's engineer, Loreto
Dalangin (Engr. Dalangin). The value represented 50% of the P7,046,351.84 claimed by the
respondent as the fair and reasonable valuation of the structure at the time of the loss, because as
manifested by Engr. Dalangin at the time of the incident, the loading conveyor and related structures
were almost five years old, with a normal useful life of 10 years.
Aggrieved, petitioner appealed via a Notice of Appeal which the CA DISMISSED, but
MODIFIED in that Seven Brothers Shipping Corporation is found liable to DMC Construction

Equipment Resources, Inc. for nominal damages in the amount of P3,523,175.92 due to the
destruction of the latter's coal conveyor post and terminal by the cargo ship M/V "Diamond Rabbit."
The CA affirmed the RTC's Decision with respect to the finding of negligence on the part of the
vessel's captain. However, the appellate court modified the nature of damages awarded (from actual
to nominal), on the premise that actual damages had not been proved. Respondent merely relied on
estimates to prove the cost of replacing the structures destroyed by the vessel, as no actual receipt
was presented.
Issue: Whether or not the CA erred in awarding nominal damages to respondent after having ruled
that the actual damages awarded by the RTC was unfounded.
Held: The SC rule that temperate, and not nominal, damages should be awarded to respondent in
the amount of P3,523,175.92.
To resolve the issue at hand, we must first determine whether there was indeed a violation of
petitioner's right. In this light, we are inclined to adopt the factual findings of the RTC and the CA.
Under the Civil Code, when an injury has been sustained, actual damages may be awarded under the
following condition:
Art. 2199. Except as provided by law or by stipulation, one is entitled to an adequate
Jurisprudence has consistently held that "[t]o justify an award of actual damages x x x
credence can be given only to claims which are duly supported by receipts." We take this to mean by
credible evidence. Otherwise, the law mandates that other forms of damages must be awarded, to
wit:
Art. 2216. No proof of pecuniary loss is necessary in order that moral, nominal,
temperate, liquidated or exemplary damages, may be adjudicated. The assessment of such
damages, except liquidated ones, is left to the discretion of the court, according to the
circumstances of each case.
Under Article 2221 of the Civil Code, nominal damages may be awarded in order that the
plaintiffs right, which has been violated or invaded by the defendant, may be vindicated or
recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered. We have laid
down the concept of nominal damages in the following wise:
Nominal damages are 'recoverable where a legal right is technically violated and must be vindicated
against an invasion that has produced no actual present loss of any kind or where there has been a
breach of contract and no substantial injury or actual damages whatsoever have been or can be
shown.

In contrast, under Article 2224, temperate or moderate damages may be recovered when the
court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the
case, be provided with certainty.
Given these findings, we are of the belief that temperate and not nominal damages should
have been awarded, considering that it has been established that respondent herein suffered a loss,
even if the amount thereof cannot be proven with certainty.
Consequently, in computing the amount of temperate or moderate damages, it is usually left to
the discretion of the courts, but the amount must be reasonable, bearing in mind that temperate
damages should be more than nominal but less than compensatory. For failure of respondent to
establish by competent evidence the exact amount of damages it suffered, we are constrained to
award temperate damages. Considering that the lower courts have factually established that the
conveyor facility had a remaining life of only five of its estimated total life often years during the time
of the collision, then the replacement cost of P7,046,351.84 should rightly be reduced to 50% or
P3,523,175.92. This is a fair and reasonable valuation, having taking into account the remaining
useful life of the facility.
SPOUSES TAGUMPAY N. ALBOS AND AIDA C. ALBOS, petitioners, vs. SPOUSES NESTOR M.
EMBISAN AND ILUMINADA A. EMBISAN, DEPUTY SHERIFF MARINO V. CACHERO, AND THE
REGISTER OF DEEDS OF QUEZON CITYs.
G.R. No. 210831, November 26, 2014
VELASCO JR., J.:
Doctrines: (The compounding of interest should be in writing) Payment of monetary interest
shall be due only if: (1) there was an express stipulation for the payment of interest; and (2) the
agreement for such payment was reduced in writing. Thus, We have held that collection of interest
without any stipulation thereof in writing is prohibited by law. Nevertheless, even if there was such an
agreement that interest will be compounded, We agree with the petitioners that the 5% monthly rate,
be it simple or compounded, written or verbal, is void for being too exorbitant.
A foreclosure should be nullified where the respondents thereof were deprived of the
opportunity to settle the debt, in view of the overstated amount demanded from them.
Facts: On October 17, 1984, petitioners entered into an agreement, denominated as Loan with Real
Estate Mortgage, with respondent spouses Nestor and Iluminada Embisan (spouses Embisan) in the
amount of P84,000.00 payable within 90 days with a monthly interest rate of 5%. To secure the

indebtedness, a parcel of land owned by the petitioners was mortgaged to the spouses Embisan. For
failure to settle their account upon maturity, petitioners requested and were given an extension of
eleven (11) months to pay the loan obligation. However, when said deadline came, petitioners once
again defaulted. Another extension of five (5) months was requested and set. The deadline came and
went but the obligation remained unpaid. Thus, when the petitioners requested a third extension, an
additional eight (8) months was granted on the condition that the monthly 5% interest from then on,
i.e. June 1986 onwards, will be compounded. This stipulation, however, was not reduced in writing.
On February 9, 1987, respondent spouses addressed a letter to petitioners demanding the
payment of P234,021.90, representing the unpaid balance and interests from the loan. This was
followed, on April 14, 1987, by another letter of the same tenor, but this time demanding from the
petitioners the obligation due amounting to P258,009.15.
Due to petitioners failure to settle their indebtedness, respondent spouses proceeded to extrajudicially foreclose the mortgaged property on October 12, 1987. Respondent spouses were the
highest bidders in the auction sale and were later issued a Sherriffs Certificate. The property was
never redeemed, and so the respondent spouses executed an Affidavit of Consolidation which was
then subsequently registered in the Registry of Deeds.
On August 14, 1989, herein petitioners filed a complaint for the annulment of the Loan with
Real Estate Mortgage, Certificate of Sale, Affidavit of Consolidation, Deed of Final Sale, before the
Regional Trial Court of Quezon City (RTC).
Following trial, the RTC rendered a Decision dismissing the complaint for lack of merit. The CA
promulgated the assailed Decision, affirming in toto the held of the trial court.
Hence, the instant petition.
Issue: Whether or not the extra-judicial foreclosure proceedings should be nullified for being based
on an allegedly erroneous computation of the loans interest.
Held: The petition is meritorious.

The compounding of interest should be in writing
Article 1956 of the New Civil Code, which refers to monetary interest, provides:
Article 1956. No interest shall be due unless it has been expressly stipulated in writing.
As mandated by the foregoing provision, payment of monetary interest shall be due only if: (1)
there was an express stipulation for the payment of interest; and (2) the agreement for such payment

was reduced in writing. Thus, We have held that collection of interest without any stipulation thereof in
writing is prohibited by law.
In the case at bar, it is undisputed that the parties have agreed for the loan to earn 5% monthly
interest, the stipulation to that effect put in writing. When the petitioners defaulted, the period for
payment was extended, carrying over the terms of the original loan agreement, including the 5%
simple interest. However, by the third extension of the loan, respondent spouses decided to alter the
agreement by changing the manner of earning interest rate, compounding it beginning June 1986.
Given the circumstances, We rule that the first requirementthat there be an express
stipulation for the payment of interestis not sufficiently complied with, for purposes of imposing
compounded interest on the loan. The requirement does not only entail reducing in writing the interest
rate to be earned but also the manner of earning the same, if it is to be compounded. Failure to
specify the manner of earning interest, however, shall not automatically render the stipulation
imposing the interest rate void since it is readily apparent from the contract itself that the parties
herein agreed for the loan to bear interest. Instead, in default of any stipulation on the manner of
earning interest, simple interest shall accrue.
Imposing 5% monthly interest, whether compounded or simple, is unconscionable
Nevertheless, even if there was such an agreement that interest will be compounded, We
agree with the petitioners that the 5% monthly rate, be it simple or compounded, written or verbal, is
void for being too exorbitant, thus running afoul of Article 1306 of the New Civil Code, which provides:
Article 1306. The contracting parties may establish such stipulations, clauses, terms
and conditions as they may deem convenient, provided they are not contrary to law,
morals, good customs, public order, or public policy. (emphasis added)
As case law instructs, the imposition of an unconscionable rate of interest on a money debt,
even if knowingly and voluntarily assumed, is immoral and unjust. It is tantamount to a repugnant
spoliation and an iniquitous deprivation of property, repulsive to the common sense of man. It has no
support in law, in principles of justice, or in the human conscience nor is there any reason whatsoever
which may justify such imposition as righteous and as one that may be sustained within the sphere of
public or private morals.
In this case, the 5% monthly interest rate, or 60% per annum, compounded monthly,
stipulated in the Kasulatan is even higher than the 3% monthly interest rate imposed in the
Ruiz case. Thus, we similarly hold the 5% monthly interest to be excessive, iniquitous,
unconscionable and exorbitant, contrary to morals, and the law. It is therefore void ab initio
for being violative of Article 1306 of the Civil Code. With this, and in accord with the Medel and
Ruiz cases, we hold that the Court of Appeals correctly imposed the legal interest of 12% per
annum in place of the excessive interest stipulated in the Kasulatan.(emphasis added)
The foreclosure sale should be nullified

In view of the above disquisitions, We are constrained to nullify the foreclosure proceedings
with respect to the mortgaged property in this case, following the doctrine in Heirs of Zoilo and
Primitiva Espiritu v. Landrito.
The foreclosure proceeding in Heirs of Espiritu was eventually nullified by this Court because
the Landritos were deprived of the opportunity to settle the debt, in view of the overstated amount
demanded from them. As held:
Since the Spouses Landrito, the debtors in this case, were not given an opportunity to
settle their debt, at the correct amount and without the iniquitous interest imposed, no
foreclosure proceedings may be instituted. A judgment ordering a foreclosure sale is
conditioned upon a finding on the correct amount of the unpaid obligation and the failure of the
debtor to pay the said amount. In this case, it has not yet been shown that the Spouses
Landrito had already failed to pay the correct amount of the debt and, therefore, a foreclosure
sale cannot be conducted in order to answer for the unpaid debt. x x x
As a result, the subsequent registration of the foreclosure sale cannot transfer any rights over
the mortgaged property to the Spouses Espiritu. The registration of the foreclosure sale, herein
declared invalid, cannot vest title over the mortgaged property. x x x
Applying Espiritu, the extra-judicial foreclosure of the mortgaged property dated October 12,
1987 is declared null, void, and of no legal effect.
WHEREFORE, in view of the foregoing, the petition is GRANTED. The Decision is
REVERSED and SET ASIDE. Let a new Decision be entered, the dispositive portion of which reads:
1. The stipulation in the Loan with Real Estate Mortgage imposing an interest of 5% monthly is
declared void.
2. In view of the nullity of the interest imposed on the loan which affected the total arrearages
upon which foreclosure was based, the foreclosure of mortgage, Certificate of Sale, Affidavit of
Consolidation, Deed of Final Sale are declared void.
3. The case is remanded to the Regional Trial Court to compute the current arrearages of
petitioners taking into account the partial payments made by them and the imposition of the
simple interest rate of 12% per annum.
December 2014

CAGAYAN II ELECTRIC COOPERATIVE, INC., REPRESENTED BY ITS MANAGER AND CHIEF
EXECUTIVE OFFICER, GABRIEL A. TORDESILLAS v. ALLAN RAPANAN AND MARY GINE
TANGONAN
G.R. No. 199886, December 03, 2014
Facts: On October 31, 1998, around 9:00 p.m., a motorcycle with three passengers figured in a
mishap along the National Highway of Maddalero, Buguey, Cagayan. It was driven by its owner
Camilo Tangonan who died from the accident, while his companions respondent Rapanan and one
Erwin Coloma suffered injuries.
On March 29, 2000, Rapanan and Camilos common law wife, respondent Mary Gine
Tangonan, filed before the Regional Trial Court (RTC) of Aparri, Cagayan a complaint for damages
against petitioner. They alleged that while the victims were traversing the national highway, they were
struck and electrocuted by a live tension wire from one of the electric posts owned by petitioner. They
contended that the mishap was due to petitioners negligence when it failed to fix and change said
live tension wire despite being immediately informed by residents in the area that it might pose an
immediate danger to persons, animals and vehicles passing along the national highway.
The RTC rendered a decision in favor of petitioner and dismissed the complaint for damages of
respondents. It held that the proximate cause of the incident is the negligence and imprudence of
Camilo in driving the motorcycle. It further held that respondent Mary Gine has no legal personality to
institute the action since such right is only given to the legal heir of the deceased. Mary Gine is not a
legal heir of Camilo since she is only his common law wife.
On appeal, the CA reversed the RTC and held petitioner liable for quasi-delict.
Issue: Whether or not petitioner Cagayan II Electric Cooperative, Inc. liable for quasi-delict
resulting in the death of Camilo Tangonan and physical injuries of Rapanan, and ordering it to pay
respondents damages and attorneys fees
Held: Negligence is defined as the failure to observe for the protection of the interest of another
person that degree of care, precaution, and vigilance which the circumstances justly demand,
whereby such other person suffers injury. Article 2176 of the Civil Code provides that [w]hoever by
act or omission causes damage to another, there being fault or negligence, is obliged to pay for the
damage done. Such fault or negligence, if there is no pre-existing contractual relation between the
parties, is a quasi-delict. Under this provision, the elements necessary to establish a quasi-delict
case are: (1) damages to the plaintiff; (2) negligence, by act or omission, of the defendant or by some
person for whose acts the defendant must respond, was guilty; and (3) the connection of cause and
effect between such negligence and the damages.

The presence of the first element is undisputed because the unfortunate incident brought about
the death of Camilo and physical injuries to Rapanan. This Court, however, finds that the second and
third elements are lacking thus precluding the award of damages in favor of respondents.
Adviento, petitioners employee testified that their electric poles along the highways, including
the one where the mishap took place, were erected about four to five meters from the shoulder of the
road. Another employee of petitioner, Rasos, testified that after the typhoons hit Cagayan, he
together with his co-employees, after checking the damage to the electric lines, rolled the fallen
electric wires and placed them at the foot of the electric poles so as to prevent mishaps to
pedestrians and vehicles passing by. Their testimonies were corroborated by what was recorded in
the Police Blotter of the Buguey Police Station, Buguey, Cagayan after SPO2 Tactac investigated on
the incident.
The facts shows that the motorcycle was probably running too fast that it lost control and
started tilting and sliding eventually which made its foot rest cause the skid mark on the road.
Therefore, the mishap already occurred even while they were on the road and away from petitioners
electric wires and was not caused by the latter as alleged by respondents. It just so happened that
after the motorcycle tilted and slid, the passengers were thrown off to the shoulder where the electric
wires were.
This Court hence agrees with the trial court that the proximate cause of the mishap was the
negligence of Camilo. Had Camilo driven the motorcycle at an average speed, the three passengers
would not have been thrown off from the vehicle towards the shoulder and eventually strangulated by
the electric wires sitting thereon. Moreover, it was also negligent of Camilo to have allowed two
persons to ride with him and for Rapanan to ride with them when the maximum number of
passengers of a motorcycle is two including the driver.
This most likely even aggravated the situation because the motorcycle was overloaded which
made it harder to drive and control. When the plaintiffs own negligence was the immediate and
proximate cause of his injury, he cannot recover damages.
As to the second issue, assuming arguendo that petitioner was indeed negligent, the appellate
court erred in awarding damages in favor of Camilos legal heirs since they were not impleaded in the
case. It should be noted that it was Mary Gine, the common law wife of Camilo, who is the
complainant in the case. As a mere common law wife of Camilo, she is not considered a legal heir of
the latter, and hence, has no legal personality to institute the action for damages due to Camilos
death.
By: Maricris C. Ortega


PEOPLE VS. SHIRLEY A. CASIO
G.r. No. 211465, December 3, 2014
Facts: Chief PSI Ylanan, SPO1 Mendaros, SPO1 Altubar, PO1 Luardo, and PO1 Veloso composed
the team of police operatives. PO1 Luardo and PO1 Veloso were designated as decoys, pretending
to be tour guides looking for girls to entertain their guests. IJM provided them with marked money,
which was recorded in the police blotter. The team went to Queensland Motel and rented Rooms 24
and 25. These rooms were adjacent to each other. Room 24 was designated for the transaction while
Room 25 was for the rest of the police team.
PO1 Luardo and PO1 Veloso proceeded to D. Jakosalem Street in Barangay Kamagayan,
Cebu Citys red light district. Accused noticed them and called their attention by saying Chicks mo
dong?
At that point, PO1 Luardo sent a text message to PSI Ylanan that they found a prospective
subject. After a few minutes, accused returned with AAA and BBB, private complainants in this case.
Accused gave the assurance that the girls were good in sex. PO1 Luardo inquired how much their
services would cost. Accused replied, Tag kinientos (500.00). PO1 Veloso and PO1 Luardo
convinced accused to come with them to Queensland Motel.
Upon proceeding to Room 24, PO1 Veloso handed the marked money to accused. As accused
counted the money, PO1 Veloso gave PSI Ylanan a missed call. This was their pre-arranged signal.
The rest of the team proceeded to Room 24, arrested accused, and informed her of her constitutional
rights. The police confiscated the marked money from accused.
Meanwhile, AAA and BBB were brought to Room 25 and placed in the custody of the
representatives from the IJM and the DSWD.
Regional Trial Court, Branch 14 in Cebu City found accused guilty beyond reasonable doubt.
The Court finds accused, SHIRLEY A. CASIO, GUILTY beyond reasonable doubt of trafficking in
persons under paragraph (a), Section 4 as qualified under paragraph (a), Section 6 of R.A. 9208 and
sentenced to suffer imprisonment of TWENTY (20) YEARS and to pay a fine of ONE MILLION
(Php1,000,000.00). Finally, accused is ordered to pay the costs of these proceedings.
The Court of Appeals affirmed the findings of the trial court but modified the fine and awarded
moral damages. The accused-appellant is accordingly sentenced to suffer the penalty of life
imprisonment and a fine of Php2,000,000 and is ordered to pay each of the private complainants
Php150,000 as moral damages.
Hence, the instant petition.

Issue/s:
(1)
(2)
Whether the award of moral damages for the crime of Trafficking in persons as a
prostitute is proper?
Whether the award of exemplary damages for the crime of Trafficking in persons as a
prostitute is proper?
Held:
(1) YES.
The payment of P500,000 as moral damages for the crime of Trafficking in Persons as a
Prostitute finds basis in Article 2219 of the Civil Code, which states that MORAL DAMAGES MAY BE
RECOVERED IN THE FOLLOWING AND ANALOGOUS CASES:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
A criminal offense resulting in physical injuries;

Quasi-delicts causing physical injuries;
Seduction, abduction, rape, or other lascivious acts;
Adultery or concubinage;
Illegal or arbitrary detention or arrest;
Illegal search;
Libel, slander or any other form of defamation;
Malicious prosecution;
Acts mentioned in Article 309;
Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and 35
The criminal case of Trafficking in Persons as a Prostitute is an analogous case to the crimes
of seduction, abduction, rape, or other lascivious acts. In fact, it is worse. To be trafficked as a
prostitute without ones consent and to be sexually violated four to five times a day by different
strangers is horrendous and atrocious. There is no doubt that Lolita experienced physical suffering,
mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, and
social humiliation when she was trafficked as a prostitute in Malaysia.
2) YES.
The payment of P100,000 as exemplary damages shall be granted since the crime of
Trafficking in Persons was aggravated, being committed by a syndicate, the award of exemplary
damages is likewise justified. Human trafficking indicts the society that tolerates the kind of poverty
and its accompanying desperation that compels our women to endure indignities. It reflects the
weaknesses of that society even as it convicts those who deviantly thrive in such hopelessness. We
should continue to strive for the best of our world, where our choices of human intimacies are real
choices, and not the last resort taken just to survive. Human intimacies enhance our best and closest
relationships. It serves as a foundation for two human beings to face lifes joys and challenges while

continually growing together with many shared experiences. The quality of our human relationships
defines the world that we create also for others.
By
Catherine
A.
Padon
COMMISSIONER OF INTERNAL REVENUE., vs. THE STANLEY WORKS SALES (PHILS.),

INCORPORATED
G.R. NO. 187589, 03 December 2014
Facts: On January 1, 1979, respondent and Stanley Works Agencies (Pte.) Limited, Singapore
(Stanley-Singapore) entered into a Representation Agreement. Under such agreement, StanleySingapore appointed respondent as its sole agent for the selling of its products within the Philippines
on an indent basis.
On April 16, 1990, respondent filed with the BIR its Annual Income Tax Return for taxable year
1989.
On March 19, 1993, pursuant to Letter of Authority dated July 3, 1992, the BIR issued against
respondent a Pre-Assessment Notice (PAN) No. 002523 for 1989 deficiency income tax.
On March 29, 1993, respondent received its copy of the PAN.
On April 12, 1993, petitioner, through OTC Domingo C. Paz of Revenue Region No. 4B-2 of
Makati, issued to respondent Assessment Notice No. 002523-89-6014 for deficiency income tax for
taxable year 1989. The Notice was sent on April 15, 1993 and respondent received it on April 21,
1993.
On May 19, 1993, respondent, through its external auditors Punongbayan & Araullo, filed a
protest letter and requested reconsideration and cancellation of the assessment.
On November 16, 1993, a certain Mr. John Ang, on behalf of respondent, executed a Waiver
of the Defense of Prescription Under the Statute of Limitations of the National Internal Revenue
Code (Waiver). Under the terms of the Waiver, respondent waived its right to raise the defense of
prescription under Section 223 of the NIRC of 1977 insofar as the assessment and collection of any
deficiency taxes for the year ended December 31, 1989, but not after June 30, 1994. The Waiver was
not signed by petitioner or any of his authorized representatives and did not state the date of
acceptance as prescribed under Revenue Memorandum Order No. 20-90. Respondent did not
execute any other Waiver or similar document before or after the expiration of the November 16,
1993 Waiver on June 30, 1994.

On January 6, 1994, respondent, through its external auditors Punongbayan & Araullo, wrote a
letter to the Chief of the BIR Appellate Division and requested the latter to take cognizance of
respondent's protest/request for reconsideration, asserting that the dispute involved pure questions of
law. On February 22, 1994, respondent sent a similar letter to the Revenue District Officer (RDO) of
BIR Revenue Region No. 4B-2 and asked for the transmittal of the entire docket of the subject tax
assessment to the BIR Appellate Division.
On September 30, 1994, respondent, through its external auditors Punongbayan & Araullo,
submitted a Supplemental Memorandum on its protest to the BIR Revenue Region No. 4B-2.
On September 20, 1995, respondent, through its external auditors Punongbayan & Araullo,
filed
a
Supplemental
Memorandum
with
the
BIR
Appellate
Division.
On November 29, 2001, the Chief of the BIR Appellate Division sent a letter to respondent
requiring it to submit duly authenticated financial statements for the worldwide operations of Stanley
Works and a sworn declaration from the home office on the allocated share of respondent as a
branch
office.
On December 11, 2001, respondent, through its counsel, the Quisumbing Torres Law Offices,
wrote the BIR Appellate Division and asked for an extension of period within which to comply with the
request for submission of documents. On January 15, 2002, respondent sent a request for an
extension of period to submit a Supplemental Memorandum.
On March 4, 2002, respondent, through its counsel, the Quisumbing Torres Law Offices,
submitted a Supplemental Memorandum alleging, inter alia, that petitioner's right to collect the alleged
deficiency
income
tax
has
prescribed.
On March 22, 2004, petitioner rendered a Decision denying respondents request for
reconsideration and ordering respondent to pay the deficiency income tax plus interest that may have
accrued.
This constitutes the final decision of this Office on the matter.
On March 30, 2004, respondent received its copy of the assailed Decision. Hence, on April 28,
2004, respondent filed before the Court in Division a Petition for Review.
After trial on the merits, the CTA First Division found that although the assessment was made
within the prescribed period, the period within which petitioner may collect deficiency income taxes
had already lapsed. Accordingly, the court cancelled Assessment Notice No. 002523-89-6014 dated
12
April
1993.
The CTA Division ruled that the request for reconsideration did not suspend the running of the
prescriptive period to collect deficiency income tax. There was no valid waiver of the statute of
limitations, as the following infirmities were found: (1) there was no conformity, either by respondent

or his duly authorized representative; (2) there was no date of acceptance to show that both parties
had agreed on the Waiver before the expiration of the prescriptive period; and (3) there was no proof
that respondent was furnished a copy of the Waiver. Applying jurisprudence and relevant BIR rulings,
the waiver was considered defective; thus, the period for collection of deficiency income tax had
already prescribed.
CTA en banc ruling as to the issue of estoppel, the court ruled that this measure could not be
used against respondent, as it was petitioner who had failed to act within the prescribed period on the
protest asking for a reconsideration of the assessment
Issue/s:
(1)
(2)
Whether or not petitioners right to collect the deficiency income tax of respondent for
taxable year 1989 has prescribed.
Whether or not respondents repeated requests and positive acts constitute estoppel
from setting up the defense of prescription under the NIRC.
Held:
(1)
NO.
The statute of limitations on the right to assess and collect a tax means that once the period
established by law for the assessment and collection of taxes has lapsed, the governments
corresponding right to enforce that action is barred by provision of law.
The period to assess and collect deficiency taxes may be extended only upon a written
agreement between the CIR and the taxpayer prior to the expiration of the three-year prescribed
period in accordance with Section 222 (b) of the NIRC. In relation to the implementation of this
provision, the CIR issued Revenue Memorandum Order (RMO) No. 20-90 on 4 April 1990 to provide
guidelines on the proper execution of the Waiver of the Statute of Limitations. In the execution of this
waiver, there are procedures should be followed.
To emphasize, the Waiver was not a unilateral act of the taxpayer; hence, the BIR must act on
it, either by conforming to or by disagreeing with the extension. A waiver of the statute of limitations,
whether on assessment or collection, should not be construed as a waiver of the right to invoke the
defense of prescription but, rather, an agreement between the taxpayer and the BIR to extend the
period to a date certain, within which the latter could still assess or collect taxes due. The waiver
does not imply that the taxpayer relinquishes the right to invoke prescription unequivocally.
Although we recognize that the power of taxation is deemed inherent in order to support the
government, tax provisions are not all about raising revenue. Our legislature has provided
safeguards and remedies beneficial to both the taxpayer, to protect against abuse; and the
government, to promptly act for the availability and recovery of revenues. A statute of limitations on

the assessment and collection of internal revenue taxes was adopted to serve a purpose that would
benefit both the taxpayer and the government.
Under the former law, the right of the Government to collect the tax does not prescribe.
However, in fairness to the taxpayer, the Government should be estopped from collecting the tax
where it failed to make the necessary investigation and assessment within 5 years after the filing of
the return and where it failed to collect the tax within 5 years from the date of assessment thereof.
Just as the government is interested in the stability of its collection, so also are the taxpayers entitled
to an assurance that they will not be subjected to further investigation for tax purposes after the
expiration of a reasonable period of time.
The law prescribing a limitation of actions for the collection of the income tax is beneficial both to
the Government and to its citizens; to the Government because tax officers would be obliged to act
promptly in the making of assessment, and to citizens because after the lapse of the period of
prescription citizens would have a feeling of security against unscrupulous tax agents who will always
find an excuse to inspect the books of taxpayers, not to determine the latter's real liability, but to take
advantage of every opportunity to molest peaceful, law-abiding citizens. Without such legal defense
taxpayers would furthermore be under obligation to always keep their books and keep them open for
inspection subject to harassment by unscrupulous tax agents. The law on prescription being a
remedial measure should be interpreted in a way conducive to bringing about the beneficent purpose
of affording protection to the taxpayer within the contemplation of the Commission which
recommends the approval of the law.
(2)
NO.
Anent the second issue, SC do not agree with petitioner that respondent is now barred from
setting up the defense of prescription by arguing that the repeated requests and positive acts of the
latter constituted estoppels, as these were attempts to persuade the CIR to delay the collection of
respondents deficiency income tax.
True, respondent filed a Protest and asked for a reconsideration and cancellation of the
assessment on 19 May 1993; however, it is uncontested that petitioner failed to act on that Protest
until 29 November 2001, when the latter required the submission of other supporting documents. In
fact, the Protest was denied only on 22 March 2004.
Petitioners reliance on CIR v. Suyoc (Suyoc) is likewise misplaced. In Suyoc, the BIR was
induced to extend the collection of tax through repeated requests for extension to pay and for
reinvestigation, which were all denied by the Collector. Contrarily, herein respondent filed only one
Protest over the assessment, and petitioner denied it 10 years after. The subsequent letters of
respondent cannot be construed as inducements to extend the period of limitation, since the letters
were intended to urge petitioner to act on the Protest, and not to persuade the latter to delay the
actual collection.
Petitioner cannot take refuge in BPI either, considering that respondent and BPI are similarly
situated. Similar to BPI, this is a simple case in which the BIR Commissioner and other BIR officials
failed to act promptly in resolving and denying the request for reconsideration filed by the taxpayer
and in enforcing the collection on the assessment. Both in BPI and in this case, the BIR presented no
reason or explanation as to why it took many years to address the Protest of the taxpayer. The
statute of limitations imposed by the Tax Code precisely intends to protect the taxpayer from
prolonged and unreasonable assessment and investigation by the BIR.19
Even assuming arguendo that the Waiver executed by respondent on 16 November 1993 is
valid, the right of petitioner to collect the deficiency income tax for the year 1989 would have already
prescribed by 2001 when the latter first acted upon the protest, more so in 2004 when it finally denied
the reconsideration. Records show that the Waiver extends only for the period ending 30 June 1994,
and that there were no further extensions or waivers executed by respondent. Again, a waiver is not a
unilateral act of the taxpayer or the BIR, but is a bilateral agreement between two parties to extend
the period to a date certain.
Since the Waiver in this case is defective and therefore invalid, it produces no effect; thus, the
prescriptive period for collecting deficiency income tax for taxable year 1989 was never suspended or
tolled. Consequently, the right to enforce collection based on Assessment Notice No. 002523-896014
has
already
prescribed.
By:
Stephanie
H. Siason
IGLESIA FILIPINA INDEPENDIENTE VS. HEIRS OF BERNARDINO TAEZA

GR. No. 179597, December 3, 2014
Facts: This case stemmed from the decision of this Court on Iglesia Felipina Independiente v. Heirs
of Bernardino Taeza,G.R. No. 179597, February 3, 2014 which provides that it is erroneous for the
CA to ignore the fact that the laymens committee objected to the sale of the lot in question. The
Canons require that ALL the church entities listed in Article IV (a) thereof should give its approval to
the transaction. Thus, when the Supreme Bishop executed the contract of sale of petitioners lot
despite the opposition made by the laymens committee, he acted beyond his powers. This case
clearly falls under the category of unenforceable contracts mentioned in Article 1403, paragraph (1) of

the Civil Code, which provides, thus: Art. 1403. The following contracts are unenforceable, unless
they are ratified: (1) Those entered into in the name of another person by one who has been given no
authority or legal representation, or who has acted beyond his powers; In Mercado v. Allied Banking
Corporation, the Court explained that: x x x Unenforceable contracts are those which cannot be
enforced by a proper action in court, unless they are ratified, because either they are entered into
without or in excess of authority or they do not comply with the statute of frauds or both of the
contracting parties do not possess the required legal capacity.
After Respondents' Motion for Reconsideration of the aforementioned Decision was denied
with finality in a Resolution3 dated July 9, 2014. Nevertheless, herein parties filed a Joint
Manifestation dated July 14, 2014, wherein they prayed that the attached Compromise Agreement
dated June 27, 2014 be approved by the Court for the speedy resolution of the dispute between the
parties.
Issue: Whether the Supreme Bishop is authorized to enter into a contract of sale in behalf of the
petitioner?
Held: Note, however, that the only signatory to the Compromise Agreement is Right Rev. Ernesto M.
Tamayo, Bishop of the Diocesan Church of Tuguegarao, purportedly authorized by the Supreme
Bishop, Most Reverend Ephraim S. Fajutagana, via a Special Power of Attorney dated as far back as
September 27, 2011. This would give rise to the same question of whether the Supreme Bishop is
indeed authorized to enter into a contract of sale in behalf of petitioner. The Court stated in its
Decision dated February 3, 2014, that any sale of real property requires not just the consent of the
Supreme Bishop but also the concurrence of the laymen's committee, the parish priest, and the
Diocesan Bishop, as sanctioned by the Supreme Council. The Compromise Agreement, which
stipulates that the subject property would be sold to a third party and the proceeds therefrom divided
between herein parties, again raises the issue of the authority of the person acting in behalf of
petitioner.

METROPOLITAN BANK TRUST COMPANY, PETITIONER, -VERSUS- LEY CONSTRUCTION
AND DEVELOPMENT CORPORATION AND SPOUSES MANUEL LEY AND JANET LEY,
RESPONDENTS
Gr. No. 185590, December 3, 2014
Facts: This is an action for recovery of a sum of money and damages with a prayer for the issuance
of writ of preliminary attachment filed by the plaintiff Philippine Banking Corporation against the
defendants, namely: Ley Construction and Development Corporation (hereafter LCDC) and
Spouses Manuel and Janet C. Ley (hereafter [defendant]-spouses). The complaint alleges that:
Defendant LCDC, a general contracting firm, through the oral representations of defendant-spouses,
applied with plaintiff, a commercial bank, for the opening of a Letter of Credit. Plaintiff issued Letter of
Credit in favor of the supplier-beneficiary Global Enterprises Limited. The letter of credit covered the
importation by defendant LCDC of Fifteen Thousand (15,000) metric tons of Iraqi cement from Iraq.
Defendant applied for and filed with plaintiff two (2) Applications for Amendment of Letter of Credit
Thereafter, the supplier-beneficiary Global Enterprises, Inc. negotiated its Letter of Credit with
the negotiating bank Credit Suisse of Zurich, Switzerland. Credit Suisse then sent a reimbursement
claim by telex to American Express Bank Ltd., New York with a certification that all terms and
conditions of the credit were complied with. Accordingly, American Express Bank debited plaintiffs
account and credited Credit Suisse Zurich Account with American Express Bank, Ltd., New York for
the negotiation of Letter of Credit. Plaintiff received from Credit Suisse the necessary shipping
documents pertaining to Letter of Credit that were in turn delivered to the defendant. Upon receipt of
the aforesaid documents, defendants executed a trust receipt.
However, the cement that was to be imported through the opening of the subject Letter of
Credit never arrived in the Philippines. The prompt payment of the obligation of the defendant LCDC
was guaranteed by [defendant]-spouses under the Continuing Surety Agreement executed by the
latter in favor of the defendant. The obligation covered by the subject Letter of Credit has long been
overdue and unpaid, notwithstanding repeated demands for payment thereof.
Plaintiff, therefore, instituted the instant complaint for recovery.
Issue: Whether the Bank may hold LCDC liable for its obligations under the Letter of Credit, and the
spouses Ley for their obligations under the Continuing Surety Agreement which stands as security for
the Letter of Credit and not for the Trust Receipt?
Held: NO. A cause of action is an act or omission by which a party violates the right of another has
three essential elements:
1. The existence of a legal right in favor of the plaintiff;
2. A correlative legal duty of the defendant to respect such right; and

3. An act or omission by such defendant in violation of the right of the plaintiff with a resulting
injury or damage to the plaintiff for which the latter may maintain an action for the recovery
of relief from the defendant.
Although the first two elements may exist, a cause of action arises only upon the occurrence of
the last element, giving the plaintiff the right to maintain an action in court for recovery of damages or
other appropriate relief.
In this case, however, even the legal rights of the Bank and the correlative legal duty of LCDC
have not been sufficiently established by the Bank in view of the failure of the Bank's evidence to
show the provisions and conditions that govern its legal relationship with LCDC, particularly the
ABSENCE OF THE PROVISIONS AND CONDITIONS SUPPOSEDLY PRINTED AT THE BACK OF
THE APPLICATION AND AGREEMENT FOR COMMERCIAL LETTER OF CREDIT. Even assuming
arguendo that there was no impropriety in the negotiation of the Letter of Credit and the Bank's cause
of action was simply for the collection of what it paid under said Letter of Credit, the Bank did not
discharge its burden to prove every element of its cause of its action against LCDC.
This failure of the Bank to present preponderant evidence that will establish the liability of
LCDC under the Letter of Credit necessarily benefits the spouses Ley whose liability is supposed to
be based on a Continuing Surety Agreement guaranteeing the liability of LCDC under the Letter of
Credit.
Another thing, in a letter of credit, there are three distinct and independent contracts: (1) the
contract of sale between the buyer and the seller, (2) the contract of the buyer with the issuing bank,
and (3) the letter of credit proper in which the bank promises to pay the seller pursuant to the terms
and conditions stated therein.
Here, what is involved is the second contract the contract of LCDC, as the buyer of Iraqi
cement, with the Bank, as the issuer of the Letter of Credit. The Bank refers to that contract in the
Petition for Review on Certiorari and the Memorandum filed by the Bank in this case when the Bank
argues that, AS LCDC AND THE SPOUSES LEY HAVE ADMITTED THE ISSUANCE OF THE
LETTER OF CREDIT IN THEIR FAVOR, THEY ARE DEEMED TO HAVE LIKEWISE ADMITTED
THE TERMS AND CONDITIONS THEREOF, AS EVIDENCED BY THE STIPULATION THEREIN
APPEARING ABOVE THE SIGNATURE OF RESPONDENT JANET LEY, viz: In consideration of
your arranging, at my/o[u]r request[,] for the establishment of this commercial letter of credit
(thereinafter referred to as the []Credit[]) substantially in accordance with the foregoing, I/we hereby
covenant and agree to each and all of [the] provisions and conditions stipulated on the reverse side
hereof.
The above stipulation actually appears on the Application and Agreement for Commercial
Letter of Credit. IT IS THE CONTRACT WHICH CONTAINS THE PROVISIONS AND CONDITIONS

GOVERNING THE LEGAL RELATIONSHIP OF THE BANK AND LCDC, PARTICULARLY THEIR
RESPECTIVE RIGHTS AND OBLIGATIONS, IN CONNECTION WITH THE BANKS ISSUANCE OF
LETTER OF CREDIT NO. DC 90-303-C.
BY: Catherine
A. Padon
FLORENTINO W. LEONG AND ELENA LEONG, ET AL., vs. EDNA C. SEE

G.R. NO. 194077, 03 December 2014
Facts: This petition originated from two civil complaints involving the sale of a parcel of land in favor
of respondent Edna C. See (Edna). Before us is a petition for review assailing the Court of Appeals
(a) May 19, 2010 decision affirming in toto the trial court's July 9, 2008 decision granting Edna
possession and ownership over the land upon finding her to be a buyer in good faith and for value,
and (b) August 25, 2010 resolution denying reconsideration.
Petitioners pray for the reversal of the Court of Appeals decision and resolution, as well as the
trial courts decision. They pray that this court render its decision as follows:
(a) The Deed of Sale between Edna See and Carmelita Leong is hereby declared null and
void. The Register [of] Deeds for the City of Manila is hereby directed to cancel TCT No.
231105 in the name of Edna See and reinstating TCT No. 175628;
(b) Confirming the right of Elena Leong and those people claiming right under her, to the
possession
over
the
subject
property;
[and]
(c) Defendants Carmelita Leong and Edna See are declared to be jointly and severally liable to
pay plaintiff, Florentino Leong[,] the sum of Php50,000.00 as moral damages; the sum of
Php50,000.00 a[s] Attorneys Fees; and the cost of suit.
The spouses Florentino Leong (Florentino) and Carmelita Leong (Carmelita) used to own the
property located at No. 53941 Z.P. De Guzman Street, Quiapo, and Manila.
Petitioner Elena Leong (Elena) is Florentino's sister-in-law. She had stayed with her in-laws on
the property rental-free for over two decades until the building they lived in was razed by fire. They
then constructed makeshift houses, and the rental-free arrangement continued.
Florentino and Carmelita immigrated to the United States and eventually had their marriage
dissolved in Illinois. A provision in their marital settlement agreement states that Florentino shall
convey and quitclaim all of his right, title and interest in and to 540 De Guzman Street, Manila,

Philippines
to
Carmelita.
The Court of Appeals found that [a]pparently intercalated in the lower margin of page 12 of the
instrument was a long-hand scribbling of a proviso, purporting to be a footnote remark:
Neither party shall evict or charge rent to relatives of the parties, or convey title, until it has
been established that Florentino has clear title to the Malabon property. Clear title to be established
by the attorneys for the parties or the ruling of a court of competent jurisdiction. In the event
Florentino does not obtain clear title, this court reserves jurisdiction to reapportion the properties or
their values to effect a 50-50 division of the value of the 2 remaining Philippine properties.
On November 14, 1996, Carmelita sold the land to Edna. In lieu of Florentino's signature of
conformity in the deed of absolute sale, Carmelita presented to Edna and her father, witness Ernesto
See, a waiver of interest notarized on March 11, 1996 in Illinois. In this waiver, Florentino reiterated
his quitclaim over his right, title, and interest to the land. Consequently, the lands title, covered by
TCT No. 231105, was transferred to Edna's name.
Edna was aware of the Leong relatives staying in the makeshift houses on the land. Carmelita
assured her that her nieces and nephews would move out, but demands to vacate were unheeded.
On April 1, 1997, Edna filed a complaint for recovery of possession against Elena and the
other relatives of the Leong ex-spouses.
The complaint alleged that in 1995 after the fire had razed the building on the land, Elena
erected makeshift houses on the land without Carmelitas knowledge or consent.
In response, Elena alleged the titles legal infirmity for lack of Florentino's conformity to its sale.
She argued that Carmelita's non-compliance with the proviso in the property agreement that the
Quiapo property may not be alienated without Florentino first obtaining a clean title over the Malabon
property annulled the transfer to Edna.
On April 23, 1997, Florentino filed a complaint for declaration of nullity of contract, title, and
damages against Carmelita Leong, Edna C. See, and the Manila Register of Deeds, alleging that the
sale was without his consent. The two cases were consolidated.
RTC ruled in favor of Edna.CA affirmed in toto the trial courts decision.
Issue: Whether respondent Edna C. See is a buyer in good faith and for value.
Held: Yes. The Torrens system was adopted to obviate possible conflicts of title by giving the public
the right to rely upon the face of the Torrens certificate and to dispense, as a rule, with the necessity
of inquiring further.

One need not inquire beyond the four corners of the certificate of title when dealing with
registered property.58 Section 44 of Presidential Decree No. 1529 known as the Property Registration
Decree recognizes innocent purchasers in good faith for value and their right to rely on a clean title:
Section 44. Statutory liens affecting title. - Every registered owner receiving a certificate of title
in pursuance of a decree of registration, and every subsequent purchaser of registered land taking a
certificate of title for value and in good faith, shall hold the same free from all encumbrances except
those noted in said certificate and any of the following encumbrances which may be subsisting,
namely:
First. Liens, claims or rights arising or existing under the laws and Constitution of the
Philippines which are not by law required to appear of record in the Registry of Deeds in order to be
valid against subsequent purchasers or encumbrances of record.
Second. Unpaid real estate taxes levied and assessed within two years immediately preceding
the acquisition of any right over the land by an innocent purchaser for value, without prejudice to the
right of the government to collect taxes payable before that period from the delinquent taxpayer
alone.
Third. Any public highway or private way established or recognized by law, or any government
irrigation canal or lateral thereof, if the certificate of title does not state that the boundaries of such
highway or irrigation canal or lateral thereof have been determined.
Fourth. Any disposition of the property or limitation on the use thereof by virtue of, or pursuant
to, Presidential Decree No. 27 or any other law or regulations on agrarian reform.
Both lower courts found respondent to be an innocent purchaser in good faith for value. The
trial court discussed:
By her overt acts, Edna See with her father verified the authenticity of Carmelitas land title at
the Registry of Deeds of Manila. There was no annotation on the same thus deemed a clean title
(page 19, TSN, 12 January 2005). Also, she relied on the duly executed and notarized Certificate of
Authority issued by the State of Illinois and Certificate of Authentication issued by the Consul of the
Republic of the Philippines for Illinois in support to the Waiver of Interest incorporated in the Deed of
Absolute Sale presented to her by Carmelita (Exhibit 2). Examination of the assailed Certificate of
Authority shows that it is valid and regular on its face. It contains a notarial seal. . . .
The assailed Certificate of Authority is a notarized document and therefore, presumed to be
valid and duly executed. Thus, Edna Sees reliance on the notarial acknowledgment found in the duly
notarized Certificate of Authority presented by Carmelita is sufficient evidence of good faith.

Petitioners beg to disagree with the ruling of the Honorable Trial Court and the Honorable
Court of Appeals. Respondent Edna See is not a buyer in good faith. The ruling that every person
can rely on the correctness of the certificate of title and that the buyer need not go beyond the four
corners of the title to determine the condition of the property is not absolute and admits of exception.
As held in the case of Remegia Feliciano vs. Sps. Zaldivar, G.R. No. 162593, 2006 Sep 26 the
principle of indefeasibilty of a Torrens title does not apply where fraud attended the issuance of the
title. The Torrens title does not furnish a shield for fraud. As such, a title issued based on void
documents may be annulled.
Even assuming the procurement of title was tainted with fraud and misrepresentation, such
defective title may still be the source of a completely legal and valid title in the hands of an innocent
purchaser for value.
Respondent, an innocent purchaser in good faith and for value with title in her name, has a
better right to the property than Elena. Elenas possession was neither adverse to nor in the concept
of owner.
By:
Stephanie H. Siazon
OFFICE OF THE OMBUDSMAN., vs. AMALIO A. MALLARI
G.R. NO. 183161, 03 December 2014
Facts: On October 24, 1997, ECOBEL Land, Inc. (ECOBEL), represented by its Chairman,
Josephine Edralin Boright (Boright), applied for a medium term financial facility loan with the
Government Service Insurance System (GSIS) Finance Group for the construction of a 26-storey twin
tower condominium building, ECOBEL Tower, along Taft Avenue in Ermita, Manila. The loan
application was denied for the following reasons: insufficiency of collateral, ECOBEL did not have the
needed track record in property development, and the loan was sought during the Asian financial
crisis.
Subsequently, ECOBEL applied for a two-year surety bond with GSIS to guarantee payment of
a Ten Million US Dollar (US$10,000,000.00) loan with the Philippine Veterans Bank (PVB) acting as
the obligee.
On December 10, 1997, the ECOBEL bond application was approved in principle "subject to
analysis/evaluation of the project and the offered collaterals. After an evaluation by the GSIS Bond
Reinsurance Treaty Underwriting Committee, then chaired by Leticia G. Bernardo (Bernardo),
Manager of the Surety Department, General Insurance Group (GIG), the collateral offered was found
to be a second mortgage. Accordingly, the Committee informed ECOBEL of the rejection of the
collateral offered and requested for additional collateral.
Meanwhile, Alex M. Valencerina (Valencerina), then Vice-President for Marketing and Support
Services, GIG, submitted the ECOBEL bond application through his Memorandum, dated January 27,
1998, for the evaluation and endorsement of the GSIS Investment Committee (INCOM). In the said
Memorandum, Valencerina stated that the project was viable and the payment guarantee bond was
fully secured by reinsurance and real estate collaterals. He also cited that the funder has given the
principal limited time to avail of the loan. Failure to submit and/or present the payment guarantee
bond would lead to the cancellation of the booking of the funds. The memorandum was coursed
through Mallari, then Senior Vice-President of GSIS, GIG, addressed to the President and General
Manager of GSIS. Mallari scribbled his own endorsement by stating "Strongly reco. based on info and
collaterals
herein
stated."
On March 10, 1998, the INCOM, through Resolution approved the ECOBEL application.
The following day, March 11, 1998, the GSIS Surety Bond or G (16) GIF Bond No.
02913211 (ECOBEL bond) in the amount of Ten Million US Dollars (US$10,000,000.00) was
correspondingly issued in favor of ECOBEL with PVB as the obligee. The ECOBEL bond was signed
by Mallari on behalf of the GSIS GIG to guarantee the repayment of the principal and interest on the
loan granted to ECOBEL through the obligee to be used for the construction of its tower building.
Group
In the meantime, Mallari was reassigned to the Housing and Real Property Development
pursuant
to
Office
Order
No.
73-98,
dated
July
27,
1998.
On November 19, 1998, a Memorandum15 was issued by Federico Pascual, President and
General Manager of GSIS, ordering the suspension of the processing and issuance of guarantee
payment bonds.
Despite the directive, Valencerina and Fernando U. Campana (Campana), then Vice-President
of the London Representative Office (LRO), International Operations, GIG, issued a Certification,
dated January 14, 1999, stating that ECOBEL bond "is genuine, authentic, valid and binding
obligation of GSIS and may be transferred to Bear, Stearns International Ltd., and any of its
assignees and Aon Financial Products, Inc. and any of its assignees within the period commencing at
the date above. GSIS has no counterclaim, defense or right of set-off with respect to the surety bond
provided that DRAWING CONDITIONS have been satisfied."
On February 9, 1999, almost a year from the issuance of the ECOBEL bond, Valencerina
received from Boright the premium payment for the bond in the amount of ?12,731,520.00, in FEBTC
check, post-dated February 26, 1999 as a one-year premium for the period, March 11, 1998 to March
11, 1999.
Thereafter, Transfer Certificate of Title (TCT) No. 66289 covering the land located in Lipa City,
Batangas, consisting of 205,520 square meters, submitted as collateral, turned out to be not
genuine or spurious. The said land, with an appraised value of? 202,437,200.00, was the major
collateral for the issuance of the ECOBEL bond. The land was titled in the name of Vicente Yupangco
who did not appear to hold any interest in ECOBEL, either as officer or stockholder.
Thus, on February 12, 1999, the ECOBEL bond was cancelled by GSIS, through Atty.
Saludares of the Underwriting Department II. On the same day, Valencerina informed Boright that the
bond was invalid and unenforceable and that the FEBTC check, postdated February 26, 1999, was
disregarded by GSIS.
On February 19, 1999, despite the notice of the bond cancellation, ECOBEL was granted a
loan by Bear and Stearns International Ltd. (BSIL) in the face amount of US$10,000,000.00 using the
ECOBEL bond. The amount actually drawn and received by ECOBEL was US$9,307,000.00. After
the drawdown, Campaa at the LRO received the surety bond premium check payments, dated April
1, 1999 and April 15, 1999, in the total amount of US$200,629.00. The said checks were remitted to
GSIS Manila on May 10, 1999.
On March 7, 2000, a Notice of Default on Payment was issued against ECOBEL which placed
GSIS under threat of a suit. GSIS was furnished with a copy of the said notice and was similarly
advised
on
March
9,
2000.
In a Certification, dated March 20, 2000, PVB stated that it did not accept the proposal for it to
be named obligee in the ECOBEL bond, as there was no contract or agreement executed between
ECOBEL and PVB.
The CA ruled that there was no substantial evidence to hold Mallari administratively liable for
grave misconduct warranting the imposition of the supreme penalty of dismissal. Mallari affixed his
signature in the proposed bond after the GSIS INCOM approved the ECOBEL bond for the payment
guarantee bond. It added that the proposed bond signed by him did not legally come into existence
because PVB did not agree to be the obligee of the ECOBEL bond. Hence, it could never be the
source of any right or obligation.
Issue: Whether suretyship exits?

Held: At the outset it is well to quote the principles, policies and procedural guidelines involved in a
regularly issued surety bond.
A contract of suretyship is an agreement whereby a party, called the surety, guarantees the
performance by another party, called the principal or obligor, of an obligation or undertaking in favor
of another party, called the obligee. Although the contract of a surety is secondary only to a valid
principal obligation, the surety becomes liable for the debt or duty of another although it possesses no
direct or personal interest over the obligations nor does it receive any benefit therefrom. The contract
of suretyship is further elucidated, in this wise:
The surety's obligation is not an original and direct one for the performance of his own act, but
merely accessory or collateral to the obligation contracted by the principal. Nevertheless, although the
contract of a surety is in essence secondary only to a valid principal obligation, his liability to the

creditor or promisee of the principal is said to be direct, primary and absolute; in other words, he is
directly and equally bound with the principal.
Thus, suretyship arises upon the solidary binding of a person deemed the surety with the
principal debtor for the purpose of fulfilling an obligation. A surety is considered in law as being the
same party as the debtor in relation to whatever is adjudged touching the obligation of the latter, and
their liabilities are interwoven as to be inseparable.
Internally, GSIS is guided by its established guidelines, the Policy and Procedural Guidelines
(PPG) No. 16-76, dated November 26, 1976, which deals with Bond Underwriting Guidelines for the
General Insurance Fund. This was amended and supplemented by PPG No. 64-80-A, dated January
25, 1980, the pertinent provisions of which read:
Mallari, being a high-ranking GSIS official, was expected to exemplify competence and
exercise good judgment in upholding the interest of GSIS. By hastily approving and signing the
ECOBEL bond, he surely failed to perform his essential discretionary duties. When he affixed his
signature on the surety bond, deficiency and misrepresentation were obvious on its face as found by
the Ombudsman in its January 27, 2005 decision:
[T]he date of the contract agreement between principal (ECOBEL) and Obligee (Philippine
Veterans Bank) was left blank, indicating that the contract was not available up to the time the Bond
was signed. In fact, there was no such contract or agreement executed between Ecobel Land Inc.
and Philippine Veterans Bank! It runs counter to the provision that states a copy of which
contract/agreement is hereto attached and made a part hereof which appears in the bond itself.
Significantly and as aptly concluded by the OSG, ECOBEL did not possess the character,
capacity and capital as a debtor as required for the grant of the GSIS surety bond. Thus, Mallaris
approval, issuance and promotion of the ECOBEL bond evince bad faith, ill motive and corruption, in
contravention of his duty to protect the right and interest of GSIS, and to follow basic laws on surety
as GSIS policies and guidelines dictate, thereby constituting the administrative offense of grave
misconduct.
By: Stephanie H. Siazon
ANTONIO L. DALURAYA, PETITIONER, V. MARLA OLIVA, RESPONDENT

G.R. No. 210148, December 08, 2014
Facts:On January 4, 2006, Daluraya was charged in an Information for Reckless Imprudence
Resulting in Homicide in connection with the death of Marina Oliva. Records reveal that sometime in
the afternoon of January 3, 2006, Marina Oliva was crossing the street when a Nissan Vanette,
bearing plate number UPN-172 and traversing EDSA near the Quezon Avenue flyover in Quezon
City, ran her over. While Marina Oliva was rushed to the hospital to receive medical attention, she

eventually died, prompting her daughter, herein respondent Marla Oliva (Marla), to file a criminal case
for Reckless Imprudence Resulting in Homicide against Daluraya, the purported driver of the vehicle.
During the proceedings, the prosecution presented as witness Shem Serrano (Serrano), an
eye-witness to the incident, who testified that on said date, he saw a woman crossing EDSA heading
towards the island near the flyover and that the latter was bumped by a Nissan Vanette bearing plate
number UPN-172. The prosecution also offered the testimonies of (a) Marla, who testified as to the
civil damages sustained by her family as a result of her mothers death; (b) Dr. Paul Ortiz (Dr. Ortiz),
who presented his findings on the autopsy conducted upon the body of Marina Oliva; and (c)Police
Senior Inspector Lauro Gomez (PSI Gomez), who conducted the investigation following the incident
and claimed that Marina Olivawas hit by the vehicle being driven by Daluraya, albeit he did not
witness the incident.
After the prosecution rested its case, Daluraya filed an Urgent Motion to Dismiss (demurrer)
asserting,inter alia, that he was not positively identified by any of the prosecution witnesses as the
driver of the vehicle that hit the victim, and that there was no clear and competent evidence of how
the incident transpired.
Issue: Whether the Court of Appeals was correct in finding Daluraya civilly liable for Marina Olivas
death despite his acquittal in the criminal case for Reckless Imprudence Resulting in Homicide on the
ground of insufficiency of evidence
Held:No. Every person criminally liable for a felony is also civilly liable. The acquittal of an accused of
the crime charged, however, does not necessarily extinguish his civil liability. In Manantan v. CA, the
Court expounded on the two kinds of acquittal recognized by our law and their concomitant effects on
the civil liability of the accused, as follows:
Our law recognizes two kinds of acquittal, with different effects on the civil liability of the
accused. First is an acquittal on the ground that the accused is not the author of the act or omission
complained of. This instance closes the door to civil liability, for a person who has been found to be
not the perpetrator of any act or omission cannot and can never be held liable for such act or
omission. There being no delict, civil liability ex delicto is out of the question, and the civil action, if
any, which may be instituted must be based on grounds other than the delict complained of. This is
the situation contemplated in Rule 111 of the Rules of Court. The second instance is an acquittal
based on reasonable doubt on the guilt of the accused. In this case, even if the guilt of the accused
has not been satisfactorily established, he is not exempt from civil liability which may be proved by
preponderance of evidence only.
In Dayap v. Sendiong, the Court explained further that the acquittal of the accused does not
automatically preclude a judgment against him on the civil aspect of the case. The extinction of the
penal action does not carry with it the extinction of the civil liability where: (a) the acquittal is based on
reasonable doubt as only preponderance of evidence is required; (b) the court declares that the
liability of the accused is only civil; and (c) the civil liability of the accused does not arise from or is not
based upon the crime of which the accused is acquitted. However, the civil action based

on delict may be deemed extinguished if there is a finding on the final judgment in the criminal action
that the act or omission from which the civil liability may arise did not exist or where the accused did
not commit the acts or omission imputed to him.
Thus, if demurrer is granted and the accused is acquitted by the court, the accused has the
right to adduce evidence on the civil aspect of the case unless the court also declares that the act or
omission from which the civil liability may arise did not exist. This is because when the accused files a
demurrer to evidence, he has not yet adduced evidence both on the criminal and civil aspects of the
case. The only evidence on record is the evidence for the prosecution. What the trial court should do
is issue an order or partial judgment granting the demurrer to evidence and acquitting the accused,
and set the case for continuation of trial for the accused to adduce evidence on the civil aspect of the
case and for the private complainant to adduce evidence by way of rebuttal. Thereafter, the court
shall render judgment on the civil aspect of the case.
In case of an acquittal, the Rules of Court requires that the judgment state whether the
evidence of the prosecution absolutely failed to prove the guilt of the accused or merely failed to
prove his guilt beyond reasonable doubt. In either case, the judgment shall determine if the act or
omission from which the civil liability might arise did not exist.
A punctilious examination of the MeTCs Order, which the RTC sustained, will show that
Dalurayas acquittal was based on the conclusion that the act or omission from which the civil liability
may arise did not exist, given that the prosecution was not able to establish that he was the author of
the crime imputed against him. Such conclusion is clear and categorical when the MeTC declared
that the testimonies of the prosecution witnesses are wanting in material details and they did not
sufficiently establish that the accused precisely committed the crime charged against him.
Furthermore, when Marla sought reconsideration of the MeTCs Order acquitting Daluraya, said court
reiterated and firmly clarified that the prosecution was not able to establish that the accused was the
driver of the Nissan Vanette which bumped Marina Oliva and that there is no competent evidence on
hand which proves that the accused was the person responsible for the death of Marina Oliva.
Clearly, therefore, the CA erred in construing the findings of the MeTC, as affirmed by the
RTC, that Dalurayas acquittal was anchored on reasonable doubt, which would necessarily call for a
remand of the case to the court a quo for the reception of Dalurayas evidence on the civil aspect.
Records disclose that Dalurayas acquittal was based on the fact that the act or omission from which
the civil liability may arise did not exist in view of the failure of the prosecution to sufficiently establish
that he was the author of the crime ascribed against him. Consequently,his civil liability should be
deemed as non-existent by the nature of such acquittal.
By: Catherine A. Padon
PEOPLE VS. FRANCASIO DELFIN

Gr. No. 190349, December 10, 2014
Facts: The first rape incident happened on May 27, 2001. At around 10:00 to 11:00 p.m., AAA, then
an 11-year old girl, was watching television in a store at the public market in Naval, Biliran. When she
went outside the public market, appellant summoned her. AAA tried to run away, but appellant
threatened to shoot her with a slingshot. She thus approached appellant hesitantly. When already
near him, appellant suddenly grabbed AAAs hand and dragged her to the second floor of a newlyconstructed commercial building facing the public market. When they were already in a secluded
portion, appellant undressed AAA, spread her thighs, and inserted his penis into her vagina, causing
her pain and horror. Once satiated, appellant gave AAA P100.00 and told her not to tell anyone
about the incident or her family will be harmed.
The second rape incident happened during the evening of June 30, 2001. At about 11:00 p.m.,
AAA was sleeping inside a jeepney parked outside a billiard hall when appellant focused a flashlight
on her face. He then went inside the jeepney and removed AAAs panty and again raped her by
inserting his penis into her vagina which caused AAA pain. After having difficulty in urinating and
experiencing pain and swelling in her abdomen, AAA told her aunt, BBB, about the rape incidents
and pointed to appellant as her rapist. Suspecting that AAA was suffering from vaginal infection due
to the rape, BBB brought AAA to the hospital. Thereafter, AAAs family reported the incident to
the Department of Social Welfare and Development. Consequently, complaints were filed against
appellant.
RTC gave weight and credence to AAAs testimony. Hence, it declared appellant guilty of
two counts of statutory rape and liable to pay AAA the amount of P50, 000.00 in civil indemnity for
each rape committed
On appeal, the CA held that the prosecution was not able to satisfactorily prove that AAA
was under 12 years of age at the time of the alleged rape since no independent evidence of her age
such as her birth certificate was presented. It thus concluded that appellant could not be held liable
for statutory rape. However, it noted that in Criminal Case No. N-2130, force, threat and intimidation
were properly alleged in the Information as having attended the commission of the crime and was

also duly established by evidence. In view thereof, the CA held appellant liable for simple rape and
ordered to pay P75,000.00 as civil indemnity and P75,000.00 as moral damages.
Hence, this appeal.
Issue/s:
(1)
(2)
(3)
Whether the award of civil indemnity amounting to P75, 000 is proper?

Whether the award of P75, 000 moral damages is proper?
Whether the award of exemplary damages in rape cases is proper?
(1)
YES. With regard to the award of civil indemnity in the amount of P75, 000.00, the same
is proper and in consonance with the prevailing policy of the Court.
(2)
NO. The award of moral damages in the amount of P75, 000.00 must however be
reduced to P50, 000.00 in line with prevailing jurisprudence.
(3)
YES. In addition, exemplary damages in the amount of P30, 000.00 is awarded to the
victim "AAA." Prevailing jurisprudence on simple rape likewise awards exemplary
damages in order to set a public example and to protect hapless individuals from sexual
molestation.
Held:
Finally, all damages awarded shall earn interest at the rate of 6% per annum from date of
finality of this judgment until fully paid.
By:
Catherine
A.
Padon
SPOUSES CARLOS J. SUNTAY AND ROSARIO R. SUNTAY, Petitioners, v. KEYSER

MERCANTILE, INC., Respondent.
G.R. No. 208462, December 10, 2014
Facts: On October 20, 1989, Eugenia Gocolay, chairperson and president of respondent Keyser
Mercantile, Inc. (Keyser), entered into a contract to sell with Bayfront Development Corporation
(Bayfront) for the purchase on installment basis of a condominium unit in Bayfront Tower
Condominium. The subject of the sale was Unit G of the said condominium project with the privilege
to use two (2) parking slots. This Contract to Sell was not registered with the Register of Deeds of

Manila. Thus, the subject unit remained in the name of Bayfront with a clean title. On July 7, 1990,
petitioner spouses Carlos and Rosario Suntay (Spouses Suntay) also purchased several
condominium units on the 4th floor of Bayfront Tower Condominium through another contract to sell.
Despite payment of the full purchase price, however, Bayfront failed to deliver the condominium units.
When Bayfront failed to reimburse the full purchase price, Spouses Suntay filed an action against it
before the Housing and Land Use Regulatory Board (HLURB) for violation of Presidential Decree
(P.D.) No. 957 and P.D. No. 1344, rescission of contract, sum of money, and damages.
The HLURB rescinded the Contract to Sell between Bayfront and Spouses Suntay and ordered
Bayfront to pay Spouses Suntay the total amount of 2,752,068.60 as purchase price with interest.
Consequently, on November 16, 1994, the HLURB issued a writ of execution.
Upon the application of Spouses Suntay, the Sheriffs of the Regional Trial Court (RTC) of
Manila levied Bayfronts titled properties The levy on execution in favor of Spouses Suntay was duly
recorded in the Register of Deeds of Manila on January 18, 1995. The auction sale was conducted
Spouses Suntay were the highest bidder.
Keyser then filed a complaint for annulment of auction sale and cancellation of notice of levy
before the HLURB, the latter ruled in favor of Keyser. Spouses Suntay appealed the decision to the
Office of the President and later to the CA but both affirmed the HLURB judgment.
Undaunted, Keyser filed before the RTC of Manila a new complaint for annulment of auction
sale, writ of execution, declaration of nullity of title, and reconveyance of property with damages
against Spouses Suntay, docketed as Civil Case No. 06-114716. In their answer, Spouses Suntay
denied the material allegations of the complaint and interposed special and affirmative defenses
of res judicata, forum shopping, prescription, and lack of cause of action.
Spouses Suntay elevated the decision to the CA. In its September 7, 2012 Decision, the CA
denied the appeal as it found that Spouses Suntay did not acquire the subject property because at
the time it was levied, Bayfront had already sold the condominium unit to Keyser. Considering that the
judgment debtor had no interest in the property, Spouses Suntay, as purchasers at the auction sale,
also acquired no interest.
Issues:
1. Whether or not the court of appeals committed a reversible error in sustaining the trial courts
decision by not dismissing the complaint case of herein respondent on ground of prescription
of actions under article 1146 of the civil code of the Philippines, as well as, due to estoppel by
laches;
2. Whether or not the court of appeals in sustaining the decision of the court a quo committed a
serious reversible error in not applying section 52 of p.d. 1529 and article 1544 of the civil code
of the Philippines by finding that herein petitioners have better rights of ownership over the
subject condominium property in litigation.

3. Whether or not the court of appeals committed a reversible error in sustaining the trial courts
decision by not dismissing the complaint [on] ground of res judicata;
Held:
1. The defense of prescription is likewise unavailing. In Fulton Insurance Company v. Manila
Railroad Company, this Court ruled that the filing of the first action interrupted the running of
the period, and then declared that, at any rate, the second action was filed within the balance
of the remaining period. Applying Article 1155 of the New Civil Code in that case, the
interruption took place when the first action was filed in the Court of First Instance of Manila.
The interruption lasted during the pendency of the action until the order of dismissal for alleged
lack of jurisdiction became final.
In the present case, the prescriptive period was interrupted when HLURB Case No. REM032196-9152 was filed on March 21, 1996. The interruption lasted during the pendency of the action
and until the judgment of dismissal due to lack of jurisdiction was rendered on the September 23,
2005. Thus, the filing of Civil Case No. 06-114716 on March 24, 2006 was squarely within the
prescriptive period of four (4) years.
2. The Court disagrees with the lower courts. They had completely overlooked the significance of
a levy on execution. The doctrine is well-settled that a levy on execution duly registered takes
preference over a prior unregistered sale. Even if the prior sale was subsequently registered
before the sale in execution but after the levy was duly made, the validity of the execution sale
should be maintained because it retroacts to the date of the levy. Otherwise, the preference
created by the levy would be meaningless and illusory.
In this case, the contract to sell between Keyser and Bayfront was executed on October 20,
1989, but the deed of absolute sale was only made on November 9, 1995 and registered on March
12, 1996. The Notice of Levy in favor of Spouses Suntay was registered on January 18, 1995, while
the Certificate of Sale on April 7, 1995, both dates clearly ahead of Keysers registration of its Deed of
Absolute Sale. Evidently, applying the doctrine of primus tempore, potior jure (first in time, stronger in
right), Spouses Suntay have a better right than Keyser.
In the case of Uy v. Spouses Medina which dealt with essentially the same issues, the Court
wrote:
Considering that the sale was not registered earlier, the right of petitioner over the land
became subordinate and subject to the preference created over the earlier annotated levy in favor of
Swift. The levy of execution registered and annotated on September 1, 1998 takes precedence over
the sale of the land to petitioner on February 16, 1997, despite the subsequent registration on

September 14, 1998 of the prior sale. Such preference in favor of the levy on execution retroacts to
the date of levy for to hold otherwise will render the preference nugatory and meaningless.
3. First, the defense of res judicata must fail. The doctrine of res judicata is a fundamental
principle of law which precludes parties from re-litigating issues actually litigated and
determined by a prior and final judgment. Res judicata constituting bar by prior judgment
occurs when the following requisites concur: (1) the former judgment is final; (2) it is rendered
by a court having jurisdiction over the subject matter and the parties; (3) it is a judgment or an
order on the merits; and (4) there is identity of parties, of subject matter, and of causes of
action.
The previous case instituted by Keyser in the HLURB was denied on appeal by this Court
based on lack of jurisdiction. Thus, the third requisite of res judicata is not present because the
previous case was not adjudicated on the merits as it was denied on jurisdictional grounds.
PHILIPPINE ELECTRIC CORPORATION (PHILEC), PETITIONER VS. COURT

OF APPEALS, NATIONAL CONCILIATION AND MEDIATION BOARD (NCMB), DEPARTMENT OF
LABOR AND EMPLOYMENT, RAMON T. JIMENEZ, IN HIS CAPACITY AS VOLUNTARY
ARBITRATOR, PHILEC WORKERS' UNION (PWU), ELEODORO V. LIPIO, AND EMERLITO C.
IGNACIO
G.R. No. 168612, December 10, 2014
Facts: Tne Electric Corporation (PHILEC) is a domestic corporation engaged in the manufacture and
repairs of high voltage transformers. Among its rank-and-file employees were Eleodoro V. Lipio
(Lipio) and Emerlito C. Ignacio, Sr. (Ignacio, Sr.), former members of the PHILEC Workers Union
(PWU). PWU is a legitimate labor organization and the exclusive bargaining representative of
PHILECs rank-and-file employees. From June 1, 1989 to May 31, 1997, PHILEC and its rank-and-file
employees were governed by collective bargaining agreements providing for the following step
increases in an employees basic salary in case of promotion and with the previous collective
bargaining agreements already expired, PHILEC selected Lipio for promotion from Machinist under

Pay Grade VIII to Foreman I under Pay Grade B. PHILEC served Lipio a memorandum, instructing
him to undergo training for the position of Foreman I beginning on August 25, 1997. PHILEC
undertook to pay Lipio training allowance as provided in the memorandum Ignacio, Sr., then DTAssembler with Pay Grade VII, was likewise selected for training for the position of Foreman I.
PHILEC served Ignacio, Sr. a memorandum, instructing him to undergo training with the following
schedule of allowance. On September 17, 1997, PHILEC and PWU entered into a new collective
bargaining agreement, effective retroactively on June 1, 1997 and expiring on May 31, 1999.
Under Article X, Section 4 of the June 1, 1997 collective bargaining agreement, a rank-and-file
employee promoted shall be entitled to the following step increases in his or her basic salary. To be
promoted, a rank-and-file employee shall undergo training or observation and shall receive training
allowance as provided in Article IX, Section 1(f) of the June 1, 1997 collective bargaining agreement.
Claiming that the schedule of training allowance stated in the memoranda served on Lipio and
Ignacio, Sr. did not conform to Article X, Section 4 of the June 1, 1997 collective bargaining
agreement, PWU submitted the grievance to the grievance machinery. PWU and PHILEC failed to
amicably settle their grievance.
For PHILECs failure to apply the schedule of step increases under Article X of the June 1,
1997 collective bargaining agreement, PWU argued that PHILEC committed an unfair labor practice
under Article 248 of the Labor Code. In its position paper, PHILEC emphasized that it promoted Lipio
and Ignacio, Sr. while it was still negotiating a new collective bargaining agreement with PWU. Since
PHILEC and PWU had not yet negotiated a new collective bargaining agreement when PHILEC
selected Lipio and Ignacio, Sr. for training, PHILEC applied the Modified SGV pay grade scale in
computing Lipios and Ignacio, Sr.s training allowance. This Modified SGV pay grade scale, which
PHILEC and PWU allegedly agreed to implement beginning on May 9, 1997, covered both rank-andfile and supervisory employees. According to PHILEC, its past collective bargaining agreements with
the rank-and-file and supervisory unions resulted in an overlap of union membership in Pay Grade IX
of the rank-and-file employees and Pay Grade A of the supervisory employees. Worse, past collective
bargaining agreements resulted in rank-and-file. To preserve the hierarchical wage structure within
PHILECs enterprise, PHILEC and PWU allegedly agreed to implement the uniform pay grade scale
under the Modified SGV pay grade system, Pay grade bracket IIX covered rank-and-file
employees, while pay grade bracket AF covered supervisory employees.
Voluntary Arbitrator Jimenez held in the decision dated August 13, 1999, that PHILEC violated
its collective bargaining agreement with PWU. According to Voluntary Arbitrator Jimenez, the June 1,
1997 collective bargaining agreement governed when PHILEC selected Lipio and Ignacio, Sr. for
promotion on August 18 and 21, 1997. The provisions of the collective bargaining agreement being
the law between the parties, PHILEC should have computed Lipios and Ignacio, Sr.s training
allowance based on Article X, Section 4 of the June 1, 1997 collective bargaining agreement. As to
PHILECs claim that applying Article X, Section 4 would result in salary distortion within PHILECs

enterprise, Voluntary Arbitrator Jimenez ruled that this was a concern that PHILEC could have
anticipated and could have taken corrective action before signing the collective
bargaining agreement.
Voluntary Arbitrator Jimenez dismissed PWUs claim of unfair labor practice. According to him,
PHILECs acts cannot be considered a gross violation of the [collective bargaining agreement] nor . .
. [a] flagrant and/or malicious refusal to comply with the economic provisions of the [agreement].
Thus, Voluntary Arbitrator Jimenez ordered PHILEC to pay Lipio and Ignacio, Sr. training allowance
based on Article X, Section 4 and Article IX, Section 1 of the June 1, 1997 collective bargaining
agreement. PHILEC received a copy of Voluntary Arbitrator Jimenezs decision on August 16, 1999.
On August 26, 1999, PHILEC filed a motion for partial reconsideration of Voluntary Arbitrator
Jimenezs decision.
In the resolution dated July 7, 2000, Voluntary Arbitrator Jimenez denied PHILECs motion for
partial reconsideration for lack of merit. PHILEC received a copy of the July 7, 2000 resolution on
August 11, 2000. On August 29, 2000, PHILEC filed a petition for certiorari before the Court of
Appeals, alleging that Voluntary Arbitrator Jimenez gravely abused his discretion in rendering his
decision. PHILEC maintained that it did not violate the June 1, 1997 collective bargaining agreement.
It applied the Modified SGV pay grade rates to avoid salary distortion within its enterprise.
In addition, PHILEC argued that Article X, Section 4 of the collective bargaining agreement did
not apply to Lipio and Ignacio, Sr. Considering that Lipio and Ignacio, Sr. were promoted to a
supervisory position, their training allowance should be computed based on the provisions of
PHILECs collective bargaining agreement with ASSET, the exclusive bargaining representative of
PHILECs supervisory employees.
The Court of Appeals affirmed Voluntary Arbitrator Jimenezs decision. It agreed that PHILEC
was bound to apply Article X, Section 4 of its June 1, 1997 collective bargaining agreement with PWU
in computing Lipios and Ignacio, Sr.s training allowance. On September 27, 2006, PHILEC filed its
reply, reiterating its arguments in its petition for review on certiorari.
Issue:
(1)
(2)
Whether the provisions of the PWU collective bargaining agreement governs the
computation of Lipios and Ignacio Sr.s training allowance
Whether the 6% legal interest under Circular No. 799, Series of 2013, of the Bangko
Sentral ng Pilipinas Monetary Board applies in this case?

Held:
(1)
Yes.
Voluntary Arbitrator Jimenez correctly awarded both Lipio and Ignacio, Sr. training allowances
based on the amounts and formula provided in the June 1, 1997 collective bargaining agreement.
A collective bargaining agreement is a contract executed upon the request of either the
employer or the exclusive bargaining representative of the employees incorporating the agreement
reached after negotiations with respect to wages, hours of work and all other terms and conditions of
employment, including proposals for adjusting any grievances or questions arising under such
agreement.
A collective bargaining agreement being a contract, its provisions constitute the law between
the parties and must be complied with in good faith. PHILEC, as employer, and PWU, as the
exclusive bargaining representative of PHILECs rank-and-file employees, entered into a collective
bargaining agreement, which the parties agreed to make effective from June 1, 1997 to May
31, 1999.
Being the law between the parties, the June 1, 1997 collective bargaining agreement must
govern PHILEC and its rank-and-file employees within the agreed period. Lipio and Ignacio, Sr. were
rank-and-file employees when PHILEC selected them for training for the position of Foreman I
beginning August 25, 1997. Lipio and Ignacio, Sr. were selected for training during the effectivity of
the June 1, 1997 rank-and-file collective bargaining agreement.
Therefore, Lipios and Ignacio, Sr.s training allowance must be computed based on Article X,
Section 4 and Article IX, Section 1(f) of the June 1, 1997 collective bargaining agreement
(2)
NO.
Considering that Voluntary Arbitrator Jimenezs decision awarded sums of money, Lipio and
Ignacio, Sr. are entitled to legal interest on their training allowances. Voluntary Arbitrator Jimenezs
decision having become final and executory on August 22, 2000, PHILEC is liable for legal interest
equal to 12% per annum from finality of the decision until full payment as this court ruled in Eastern
Shipping Lines, Inc. v. Court of Appeals:
When the judgment of the court awarding a sum of money becomes final and executory, the
rate of legal interest. . . shall be 12% per annum from such finality until its satisfaction, this interim
period being deemed to be by then as equivalent to a forbearance of credit.

The 6% legal interest under Circular No. 799, Series of 2013, of the Bangko Sentral ng
Pilipinas Monetary Board shall not apply, Voluntary Arbitrator Jimenezs decision having become final
and executory prior to the effectivity of the circular on July 1, 2013.
In Nacar v. Gallery Frames, we held that: with regard to those judgments that have become
final and executory prior to July 1, 2013, said judgments shall not be disturbed and shall continue to
be implemented applying the rate of interest fixed therein.
Petitioner Philippine Electric Corporation is ORDERED to PAY respondent Eleodoro V. Lipio a
total of P3,549.00 for a four (4)-month training for the position of Foreman I with legal interest of 12%
per annum from August 22, 2000 until the amount's full satisfaction. For respondent Emerlito C.
Ignacio, Sr.,
Philippine Electric Corporation is ORDERED to PAY a total of P3,962.00 for a four (4)-month
training for the position of Foreman I with legal interest of 12o/o per annum from August 22, 2000 until
the amount's full satisfaction.
REPUBLIC OF THE PHILIPPINES., vs. HEIRS OF SPOUSES DONATO SANCHEZ AND JUANA
MENESES, REPRESENTED BY RODOLFO S. AGUINALDO
G.R. NO. 212388, 10 December 2014
VELASCO
Doctrine: IT IS SO BASIC UNDER REPUBLIC ACT NO. 26 THAT THE SAME SHALL ONLY APPLY
IN CASES WHERE THE ISSUANCE OF OCT HAS BEEN ESTABLISHED, ONLY THAT IT WAS
LOST OR DESTROYED UNDER CIRCUMSTANCES PROVIDED FOR UNDER SAID LAW. AGAIN,
WITHIN THE CONTEXT OF THIS DISCUSSION, RA NO. 26 WILL NOT APPLY BECAUSE IN THIS
CASE, THERE IS NO ESTABLISHED PROOF THAT AN OCT HAD BEEN ISSUED. IN OTHER
WORDS, THE APPLICABILITY OF RA NO. 26 HINGES ON THE EXISTENCE OF PRIORLY
ISSUED OCT.
Facts: Respondents filed an amended petition for reconstitution of Original Certificate of Title (OCT)
No. 45361 that covered Lot No. 854 of the Cadastral Survey of Dagupan, pursuant to Republic Act
(RA) No. 26. In said petition, respondents made the following allegations:
1. That OCT No. 45361 was issued in the name of their predecessor-in-interest, the spouses
Sanchez, pursuant to Decree No. 41812 issued in relation to a Decision dated March 12,

1930 of the then Court of First Instance (CFI) of Pangasinan;
2. Said lot was declared for taxation purposes in the name of the spouses Sanchez and that
when the latter died intestate; they executed a Deed of Extrajudicial Partition. Said Deed,
however, could not be registered because the owners copy of OCT No. 45361 was missing;
and
3. The Offices of the Register of Deeds (RD) of Lingayen and Dagupan, Pangasinan issued a
certification that the copies of Decree No. 41812 and OCT No. 45361 could not be found
among its records.
Finding the petition sufficient in form and substance, the CFI issued an Order dated June 24,
2001 giving due course thereto and ordered the requisite publication thereof, among others.
Meanwhile, the Administrator of the Land Registration Authority (LRA) requested the trial court, which
the latter granted through its October 11, 2002 Order, to require respondents to submit the following
documents.
1. Certification from the RD that OCT No. 45361 was either lost or destroyed;
2. Copies of the technical description of the lot covered by OCT No. 45361, certified by the
authorized officer of the Land Management Bureau/LRA; and
3. Sepia film plan of the subject lot prepared by the duly licensed geodetic engineer.
Due to difficulties encountered in securing said documents, respondents moved for the archiving
of the case, which motion was granted by the trial court. It was later revived when respondents finally
secured
the
said
documents.
The petition was published anew and trial later ensued, with the documents submitted by
respondents in evidence.
On January 11, 2008, the LRA submitted its Report pertaining to the legality of the reconstitution
sought in favor of respondents, the relevant portions of which, as quoted by the CA in the assailed
Decision,
are
as
follows:
(2) From Book No. 35 of the Record Book of Cadastral Lots on file at the Cadastral Decree
Section, this Authority, it appears that Decree No. 418121 was issued to Lot No. 854, Dagupan
Cadastre on January 12, 1931, in Cadastral Case No. 40, GLRO Cad. Record No. 920. Copy of the
said decree, however, is no longer available in this Authority.

The Regional Trial Court (RTC) rendered its Decision dismissing the petition for lack of sufficient
evidence, ruling that RA No. 26 only applies in cases where the issuance of the OCT sought to be
reconstituted has been established, only that it was lost or destroyed. While acknowledging the
existence of Decree No. 418121 which was issued for the lot subject of the case, the RTC
nevertheless held that there is no established proof that OCT No. 45361 was issued by virtue of said
Decree.
Disagreeing with the trial courts findings and holding that Lot 854 was judicially awarded to
respondents predecessor-in-interest in Cadastral Case the CA reversed the RTC ruling on appeal
and directed the reconstitution of OCT No. 45361 in favor of herein respondents.
The CA held that even though respondents were unable to present the documents necessary
for reconstitution of title as enumerated under Section 2 of RA No. 26, particularly (a) to (e) thereof,
the documentary pieces of evidence presented by respondents fall under paragraph (f) of said
provision and are sufficient to warrant the reconstitution of OCT No. 45361. In this regard, the CA
emphasized that the certificates of title which the RD manifested to have superseded OCT No. 45361
all bear the notation to the effect that Lot No. 854 was originally registered on January 29, 1931 as
OCT No. 45361 pursuant to Decree No. 418121 issued in G.L.R.O. Cadastral Record No. 920, the
name of the registered owner of which is not available. This, to the CA, substantially complies with
the requirement enunciated in Republic v. Tuastumban that the documents must come from official
sources which recognize the ownership of the owner and his predecessors-in-interest.
Issue: Whether or not the petition for reconstitution of Original Certificate of Title (OCT) No. 45361
should be granted.
Held: The Court agrees with the trial court that no clear and convincing proof has been adduced that
OCT No. 45361 was issued by virtue of Decree No. 418121. The Decision dated March 21, 1930 and
the Registrars Index Card containing the notation on OCT No. 45361 do not cite nor mention that
Decree No. 418121 was issued to support the issuance of OCT No. 45361. At this point, it is well to
emphasize that a petition for reconstitution of lost or destroyed OCT requires, as a condition
precedent, that an OCT has indeed been issued, for obvious reasons.
Assuming arguendo that respondents were able to sufficiently prove the existence of OCT No.
45361 considering the totality of the evidence presented, the Court finds that reconstitution thereof is
still not warranted, applying Section 15 of RA No. 26. Said provision reads:
Section 15. If the court, after hearing, finds that the documents presented, as supported by
parole evidence or otherwise, are sufficient and proper to warrant the reconstitution of the lost or
destroyed certificate of title, and that the petitioner is the registered owner of the property or has an
interest therein, that the said certificate of title was in force at the time it was lost or destroyed,
and that the description, area and boundaries of the property are substantially the same as those
contained in the lost or destroyed certificate of title, an order of reconstitution shall be issued. x x x
As explicitly stated in the above-quoted provision, before a certificate of title which has been
lost or destroyed may be reconstituted, it must first be proved by the claimants that said certificate of
title was still in force at the time it was lost or destroyed, among others. Here, the mere existence of
TCT No. 10202, later cancelled by TCT No. 44365, which, in turn, was superseded by TCT No.
80792, which bear the notations:
Originally registered on the 29th day of January, [1931] xxx as OCT No. 45361 pursuant to
Decree
No.
418121
issued
in
G.L.R.O.
Cadastral
Record
No.
920.
The name of the registered owner of OCT No. 45361 is not available as per certification of the
[RD of Lingayen], dated August 18, 1982, entries nos. 107415 and 107416, respectively.
Clearly shows that the OCT which respondents seek to be reconstituted is no longer in force,
rendering
the
procedure,
if
granted,
a
mere
superfluity.
Additionally, if indeed OCT No. 45361 was lost or destroyed, it is necessary that the RD issue a
certification that such was in force at the time of its alleged loss or destruction. Definitely, the RD
cannot issue such certification because of the dearth of records in support of the alleged OCT No.
45361 in its file. The presentation of alleged derivative titlesTCT No. 10202, TCT No. 44365 and
TCT No. 80792will not suffice to replace this certification because the titles do not authenticate the
issuance of OCT No. 45361 having been issued by the RD without any basis from its official records.
As a matter of fact, it is a wonder how the derivative titles were issued when the existence of OCT
No. 45361 could not be established based on the RDs records. The RD failed to explain how it was
able to make an annotation of the original registration of the lot under OCT No. 45361 when
respondents are now asking for its reconstitution. It is also highly suspicious why respondents are
asking the reconstitution of OCT No. 45361 when, supposedly, it has already been cancelled and
new titles have already been issued based on transfers purportedly made by respondents. Lastly, of
what use is the reconstituted OCT No. 45361 when the lot has already been transferred to other
persons.
It
will
practically
be
of
no
value
or
worth
to
respondents.
Again, we invite you back to the highlighted provision of Section 39 of PD 1529 which states
that: The original certificate of title shall be a true copy of the decree of registration. This
provision is significant because it contemplates an OCT which is an exact replica of the decree. If the
old decree will not be canceled and no new decree issued, the corresponding OCT issued today will
bear the signature of the present Administrator while the decree upon which it was based shall bear
the signature of the past Administrator. This is not consistent with the clear intention of the law which
states that the OCT shall be true copy of the decree of registration. Ostensibly, therefore, the
cancellation of the old decree and the issuance of a new one is necessary.

It is so basic under Republic Act No. 26 that the same shall only apply in cases where the
issuance of OCT has been established, only that it was lost or destroyed under circumstances
provided for under said law. Again, within the context of this discussion, RA No. 26 will not apply
because in this case, there is no established proof that an OCT had been issued. In other words, the
applicability of RA No. 26 hinges on the existence of priorly issued OCT.
Will reconstitution of Decree lie then? Again, the answer is no. There is no showing that the
decree is lost. In fact, it can be established that a decree, pursuant either to a cadastral proceeding
or an ordinary land registration case, has been issued. Under existing land registration laws and
jurisprudence, there is no such thing as reconstitution of a decree. RA No. 26 cannot likewise be the
basis because the latter refers to an OCT and not a decree of registration.
By: Stephanie
H. Siazon
ANNIE GERONIMO, SUSAN GERONIMO AND SILVERLAND ALLIANCE CHRISTIAN CHURCH

v. SPS. ESTELA C. CALDERON AND RODOLFO T. CALDERON
G.R. No. 201781, December 10, 2014
Facts:
Respondents spouses Estela and Rodolfo Calderon (respondents, for brevity) filed a
verified complaint before the HLURB Regional Office against Silverland Realty &Development
Corporation, SilverlandVillage I Homeowners Association, Silverland Alliance Christian Church
(SACC), Joel Geronimo, Annie Geronimo, Jonas Geronimo and Susan Geronimo,for specific
performance and for the issuance of cease and desist order and damages.
In their complaint, respondents alleged that they are residents of #31 Silverlane Street,
Silverland Subdivision, Pasong Tamo, Tandang Sora, Quezon City. Spouses Joel and Annie
Geronimo are residents of #48 Silverlane Street just across their house. Sometime in May 2005, a
building was erected beside the house of Joel and Annie. Jonas Geronimo directed the construction.
When respondents asked about the building, Susan Geronimo told them that her son, Joel, had
bought the adjacent lot to build an extension house in order to create a wider playing area for the
Geronimo grandchildren because their two-storey house could no longer accommodate their growing
family. When the construction was finished, the building turned out to be the church of petitioner
SACC. The church was used for different religious activities including daily worship services,
baptisms, summer school, choir rehearsals, band practices, playing of different musical instruments
and use of a loud sound system which would last until late in the evening. The noise allegedly
affected respondents health and caused inconvenience to respondents because they were forced to
leave their house if they want peace and tranquility.

Respondents sought assistance from the President of the homeowners association. SACC,
through Atty. Alan Alambra promised that it will take steps to avoid church activities beyond 10:00
p.m. However, the intolerable noise still continued. In fact, another residence situated at #36
Silverlane Street was used for Sunday school. Due to the added noise and tension, Estelas nose
bled. Respondents went to the Commission on Human Rights, but no settlement was reached.
SACC, Joel Geronimo, Annie Geronimo, Susan Geronimo and Jonas Geronimo denied the
allegations with regard to the activities that allegedly caused disturbance and stress to respondents.
They averred that the HLURB has no jurisdiction over the case which primarily involves abatement of
nuisance, primarily lodged with the regular courts. They also alleged lack of privity with respondents
and that they are not real parties-in-interest with respect to the subject matter of the complaint.
Issue: Whether or not the Court of Appeals erred in affirming that the HLURB has jurisdiction
over the present controversy.
Held: We agree with the CA that the HLURB has jurisdiction over the present controversy.
Jurisdiction over the subject matter of a case is conferred by law and determined by the allegations in
the complaint which comprise a concise statement of the ultimate facts constituting the plaintiffs
cause of action. The nature of an action, as well as which court or body has jurisdiction over it, is
determined based on the allegations contained in the complaint of the plaintiff, irrespective of whether
or not the plaintiff is entitled to recover upon all or some of the claims asserted therein. The
averments in the complaint and the character of the relief sought are the ones to be consulted. Once
vested by the allegations in the complaint, jurisdiction also remains vested irrespective of whether or
not the plaintiff is entitled to recover upon all or some of the claims asserted therein. We have ruled
that the jurisdiction of the HLURB to hear and decide cases is determined by the nature of the cause
of action, the subject matter or property involved and the parties.
In the present case, respondents are buyers of a subdivision lot from subdivision owner and
developer Silverland Realty & Development Corporation.Respondents action against Silverland
Realty & Development Corporation was for violation of its own subdivision plan when it allowed the
construction and operation of SACC. Respondents sued to stop the church activities inside the
subdivision which is in contravention of the residential use of the subdivision lots. Undoubtedly, the
present suit for the enforcement of statutory and contractual obligations of the subdivision developer
clearly falls within the ambit of the HLURBs jurisdiction.Needless to stress, when an administrative
agency or body is conferred quasi-judicial functions, all controversies relating to the subject matter
pertaining to its specialization are deemed to be included within the jurisdiction of said administrative
agency or body. Split jurisdiction is not favored.
Thus, respondents properly filed their complaint before the HLURB. The HLURB has exclusive
jurisdiction over complaints arising from contracts between the subdivision developer and the lot

buyer, or those aimed at compelling the subdivision developer to comply with its contractual and
statutory obligations to make the subdivision a better place to live in.
PEOPLE OF THE PHILIPPINES, PLAINTIFF-APPELLEE, V. JOSE ESTALIN
PRODENCIADO, ACCUSED-APPELLANT
G.R. NO. 192232, DECEMBER 10, 2014
Facts: AAA was born on December 13, 1985 to common[-]law spouses BBB, a housewife, and
Jose E. Prodenciado (a.k.a. Rommel), a fisherman. The couple has five (5) children[,] with AAA
being the eldest. At the time the rape incidents took place, appellant and AAA resided at Sta.
Barbara, Baliuag, Bulacan.
Sometime in 1993[,] at around noon, AAA brought food for appellant at the hut by the river
where her father usually rests after fishing. Suddenly, appellant pulled out a knife, poked it at her and
told her to go up the hut with him. As soon as they reached the hut, appellant removed both their
clothes and told AAA to lie down on the floor. Appellant lowered himself atop AAA and inserted his
penis into her vagina.
After satiating his lust, appellant dressed and warned AAA not to tell anybody what
happened[,] or else[,] he would kill her mother. At that time, AAA was only eight (8) years old. The
incident was repeated sometime in 1995 when AAA was then [10] years old and was in Grade III.
Prodenciado was charged and convicted with two counts each of Statutory Rape and Simple
Rape committed against his own daughter, AAA. For the statutory rape committed by Prodenciado
against AAA, we affirm the CAs award of P75,000.00 as civil indemnity. However, the award of
moral damages must be reduced to P50,000.00 while the award of exemplary damages must be
increased to P30,000.00.
As regards the three counts of qualified rape, AAA is entitled to the following awards:
P100,000.00 as civil indemnity for each count; P100,000.00 as moral damages for each count; and
P100,000.00 as exemplary damages for each count.50
Issue: Whether the damages awarded by the court earns interest? If yes, when is the reckoning
point?
Held: Yes. All damages awarded shall earn interest at the rate of 6% per annum from date of finality
of this judgment until fully paid.
HON. ORLANDO C. CASIMIRO, IN HIS CAPACITY AS ACTING OMBUDSMAN, OFFICE OF THE
OMBUDSMAN; HON. ROGELIO L. SINGSON, IN HIS CAPACITY AS DEPARTMENT OF PUBLIC
WORKS AND HIGHWAYS SECRETARY.,

vs. JOSEFINO N. RIGOR
G.R. NO. 206661, 10 December 2014
Facts: Sometime in 2005, the General Investigation Bureau-A of the OMB (GIB-A-OMB) conducted a
lifestyle check on respondent Josefino N. Rigor, then the Regional Director of the DPWH-National
Capital Region (DPWH-NCR). Thereafter, the GIB-A-OMB filed a complaint against Rigor charging
him criminally and administratively before the Office of the Ombudsman (OMB) for alleged
unexplained wealth and violation of Republic Act (R.A.) No. 3019 and R.A. 1379. Said complaint was
mainly based on certain irregularities on Rigors Statement of Assets, Liabilities and Net Worth
(SALNs), allegedly failing to declare therein several properties, business interests, and financial
connections. Its administrative aspect asserted that Rigor committed Dishonesty, Grave Misconduct,
and Falsification of Official Documents.
Among the properties he failed to declare was in his 1999 and 2000 SALN are the fourteen
(14) parcels of land located in Barrio Maluid, Victoria, Tarlac, covered by Transfer Certificate of Title
(TCT) Nos. 223271 to 223284, which were all issued by the Registry of Deeds for Tarlac province on
August 21, 1989 in the name of Josefino Rigor, married to Abigail S. Rigor.
On July 28, 2006, the OMB issued a Decision finding Rigor guilty of Dishonesty. Subsequently,
Rigor moved for a reconsideration, which the OMB granted on April 29, 2011. It thus ruled
accordingly, respondent is adjudged GUILTY of Simple Negligence and is hereby fined the amount of
One Thousand Pesos, with a warning that repetition of the same or similar act shall be dealt with
more strictly.
The DPWH Secretary then filed, through the Office of the Solicitor General (OSG), an
Omnibus Motion (for Leave to Intervene and to Admit Motion for Reconsideration), praying for its
intervention in the case to be allowed. The DPWH argued that there existed strong and compelling
reasons for the reversal of the April 29, 2011 OMB Order. On June 7, 2011, the OMB directed Rigor
to file his Comment on said Motion. On July 18, 2011; the OMB reversed its order of the April 29,
2011. This Order is immediately executory pursuant to Ombudsman Memorandum Circular No. 01,
Series of 2006, in relation to paragraph 1, Section 27 of R.A. 6770, and Section 7, Rule III,
Administrative Order No. 7, Rules of Procedure of the Office of the Ombudsman, as amended, and in
accordance with the ruling of the Supreme Court in Ombudsman vs. Joel Samaniego.
On Appeal CA reinstated the order of the OMB on April 29, 2011.
Issue: Whether or not Rigor, is correct in his allegation that he had no obligation to declare the
fourteen (14) parcels of land in Victoria, Tarlac because these properties were actually owned by
Riyacorp Piggery Form Incorporated, a family corporation which his parents owned. He was merely
authorized to mortgage these properties and was never the owner of the same prior to the
subsequent transfer to Metrobank, the present owner.

Held: No. However, the annotations on the Memorandum of Encumbrances of the titles showed that
said properties were the subject of a Deed of Sale in favor of the Associated Bank way back in 1987.
The ownership over these properties was also consolidated in the name of said bank in the same
year and new TCTs were consequently issued. Thus, in all likelihood, the owner of the properties
prior to Rigor was Associated Bank and not Riyacorp, and the latter could not have possibly
authorized Rigor to mortgage the properties. This proves that Rigor was, in fact, the owner of
the lots and not merely Riyacorps authorized mortgagor. As such, he was under obligation to
declare the same from 1989 to 2000, before the consolidation of ownership in favor of Metrobank in
2001.
By:
Stephanie
H.
Siason
January 2015
BANK OF THE PHILIPPINE ISLANDS (FORMERLY PRUDENTIAL BANK) VS. SPOUSES DAVID
M. CASTRO AND CONSUELO B. CASTRO,

G.R. No. 195272 dated 14 January 2015
PEREZ, J.
Facts: Spouses Castro contracted two loans from Prudential Bank in the amounts P100,000 and
P55,000 on July and August 1987. The loans were secured by a Real Estate Mortgage (REM) over
petitioners property in Quezon City and another in Alaminos, Laguna, registered in the name of
Davids mother.
The loans remained unpaid as of 30 April 1996 and the balance has ballooned to P290,205,05
and P96,870.20, respectively. Prudential Bank, through counsel, filed two separate for foreclosure of
the mortgage. In their first petition, Prudential Bank admitted that through inadvertence, the
photocopies in Laguna were mixed and attached to the photocopies of the last two pages of the REM,
covering the QC property. Thus, in the Notice of Sheriffs Sale, the name of Davids mother appeared
as mortgagor while the amount of mortgaged indebtedness P96,870.20. The real property pertained
to is the Quezon City property. It was subsequently sold at a public auction in favor of Prudential
Bank whose winning bid was P396,000.00
Spouses Castro filed a complaint alleging that the extrajudicial foreclosure and sale of the
Quezon City property is null and void for lack of notice and publication of the sale and further claiming
that the property is not covered by the REM executed by Davids mother, which was the basis of
Notice of Sheriffs sale, which was postponed and published.
Prudential Bank asserted that the spouses were fully aware of the foreclosure of the Quezon
City property because their loan remained unpaid. Prudential Bank admitted their clerical and
harmless inadvertence in the preparation of the petition for extrajudicial foreclosure but nonetheless
claimed that the spouses were notified and should have noticed the inadvertence and alerted the
Sheriff. Failure to do so amounted to laches.
Bank of the Philippine Islands (BPI) succeeded Prudential Bank by virtue of a merger. It filed a
petition for review. The spouses argued that the sale is not valid because public policy is involved in
the need for strict compliance with the requirements of the notice in extrajudicial foreclosure of
mortgage. It was posited that the lesser amount of indebtedness as stated in the notice would
mislead potential bidder in public auction and subject the value of the property to risk unwarranted
diminution and that the property was misidentified.
Issue: Whether or not the extrajudicial foreclosure of the mortgage is valid
Held: Yes. Foreclosure proceedings have in their favor the presumption of regularity and the party
who seeks to challenge the proceedings has the burden of evidence to rebut the same. The spouses
failed to prove that Prudential Bank has not complied with the notice requirement of the law. With
jurisprudence as the measure, the errors pointed out by the spouses appear to be harmless. The
evils that can result from an erroneous notice did not arise. There was no intention to mislead, as the
errors in fact did not mislead the bidders as shown by the fact that the winning bidders as shown by
the fact that the winning registered bid is over and above the real amount of indebted ness.
Moreover, there is no indication of collusion between the sheriff who conducted the sale and the

bank. The notice rule was complied with when the Notice of Sheriffs sale was published in Philippine
Recorder, a national newspaper of general circulation once a week for three consecutive weeks.
Lastly, David admitted on the witness stand that he know that there was an application for foreclosure
on their Quezon City property but the REM used as basis of the foreclosure covered the Laguna
properties. Upon learning this information, he should have registered his objection or sought
clarification from the sheriffs office. Instead, he let the public auction proceed and belatedly objected
the sale.
By: Gary Louie D. Martinez
ALMENDRAS vs. ALMENDRAS

G.R. NO.179491, January 14, 2015
Sereno, CJ.
Facts: Petitioner sent letters to House Speaker Jose de Venecia, Jr., and to Dr. Nemesio Prudente,
The controversial portion of the first and second letters reads as follows:
This is to notify your good self and your staff that one ALEXIS "DODONG" C. ALMENDRAS, a
brother, is not vested with any authority to liaison or transact any business with any department,
office, or bureau, public or otherwise, that has bearing or relation with my office, mandates or
functions. Noteworthy to mention, perhaps, is the fact that Mr. Alexis Dodong C. Almendras, a
renown blackmailer, is a bitter rival in the just concluded election of 1995 who ran against the wishes
of my father, the late Congressman Alejandro D. Almendras, Sr. He has caused pain to the family
when he filed cases against us: his brothers and sisters, and worst against his own mother. I deemed
that his act of transacting business that affects my person and official functions is malicious in
purpose, done with ill motive and part of a larger plan of harassment activities to perforce realise his
egoistic and evil objectives. May I therefore request the assistance of your office in circulating the
above information to concerned officials and secretariat employees of the House of
Representatives.These letters were allegedly printed, distributed, circulated and published by
petitioner, assisted by Atty. Roberto Layug, with evident bad faith and manifest malice to destroy
respondent Alexis C. Almendras good name.
Issue/s: Whether or not respondent is entitled to moral damages?
Held: Yes. In awarding damages in libel cases, the court is given ample discretion to determine the
amount, depending upon the facts of the particular case. Article 2219 of the Civil Code expressly
authorizes the recovery of moral damages in cases of libel, slander or any other form of defamation.
However while no proof of pecuniary loss is necessary in order that moral damages may be awarded,
x x x it is nevertheless essential that the claimant should satisfactorily show the existence of the

factual basis of damages and its causal connection to defendants acts. Considering that respondent
sufficiently justified his claim for damages (i.e. he testified that he was "embarrassed by the said
letters [and] ashamed to show his face in [sic] government offices") we find him entitled to moral and
exemplary damages.
By: ELIJAH DEL ROSARIO
SPOUSES JOSE O. GATUSLAO AND

ERMILA LEONILA LIMSIACO-GATUSLAO
Vs. LEO RAY Y. YANSON
G.R. No. 191540 21 JANUARY 2015
Facts:
Petitioner is the daughter of the late Felicisimo Limsiaco who died intestate on February
7, 1989 and was the registered owner of two (2) parcels of land with improvements in Bacolod City
described as Lots 10 and 11 Block 8 of the subdivision plan and covered by TCT Nos. T-33429 and
24331. Limsiaco mortgaged the said lots along with the house to the Philippine National Bank (PNB).
He defaulted and the bank subsequently foreclosed on the mortgage and caused the properties sale
at a public auction on June 24, 1991 where it emerged as the highest bidder. When the redemption
period expired without Limsiacos estate redeeming the properties, the bank caused the consolidation
of titles in its name. Thereafter, on November 10, 2006, PNB sold the above properties in favor of
respondent. As a consequence, respondent became the new owner of said properties.
Being the new owner, Respondent filed with the RTC an Ex-Parte Motion for Writ of
Possession and petitioners opposed the Motion as Respondent was not the buyer of the subject
properties at the public auction sale and only purchased the same through a subsequent sale made
by PNB. Further, the intestate estate of Limsiaco had already instituted an action for annulment of
foreclosure of mortgage and auction sale affecting the contested properties. The RTC granted the
issuance of the Writ of Possession. The petitioners filed with the Supreme Court a Petition for
Review on Certiorari.
Issue:
Whether or not Respondent is entitled to the issuance of writ of possession?
Held: The Supreme Court held that Respondent is entitled to the issuance of a writ of possession. It
held that Respondent, as a transferee or successor-in-interest of PNB by virtue of the contract of sale
between them, is considered to have stepped into the shoes of PNB and as such, is necessarily
entitled to avail of the provisions of Section 7 of Act 3135 as if he is PNB. Further, it stressed that the
issuance of a Writ of Possession may not be stayed by a pending action for annulment of mortgage
or the foreclosure itself as the trial court, where the application for a writ of possession is filed, does
not need to look into the validity of the mortgage or the manner of foreclosure. The purchaser is

entitled to a writ of possession without prejudice to the outcome of the pending annulment case.
Clearly, the petitioners argument is devoid of merit.
BY: Gerard Nelson C. Manalo
NFF INDUSTRIAL CORPORATION vs. G & L ASSOCIATED

BROKERAGE, and/or GERARDO TRINIDAD
G.R. No. 178169 12 JANUARY 2015
Facts: Petitioner is engaged in the business of manufacturing bulk bags while respondent is among
its custumers. Respondent Gerardo Trinidad is the general manager of respondent company.
Petitioner alleges that on July 20, 1999, respondent company ordered 1,000 pieces of bulk
bags from petitioner at Php 380.00 per piece or for a total of Php 380,000.00 payable within 30 days
from delivery covered by Purchase Order No. 97-002 dated 29 July 1999 and to be delivered to the
company c/o Hi-Cement Corporation, Norzagaray, Bulacan. Shortly therafter, respondent company
ordered an additional 1,000 pieces of bulk bags for a total of 2,000 pieces.
Accordingly, petitioner made delivery of the bulk bags to Hi-Cement Corporation on various
dates and were duly acknowledged by the representatives of respondent company and that all deliver
receipts were rubber stamped, dated and signed by the security guard-on-duty as well as other
representatives of respondent company and were all covered by sales invoices amounting to Php
760,000.00. Respondent contended that the bulk bags were not delivered to respondent company,
the same not having been received by the authorized representative in conformity with the terms of
the Purchase Order.
Thirty (30) days elapsed but no payment was made by respondent company prompting
petitioner to send a demand letter. Respondent company failed to respond to the demand letter,
petitioner followed up its claim through a series of telephone calls but to no avail. Petitioner sent
another demand letter and final demand letter and as the demand remained unheeded, petitioner
filed a complaint for sum of money against respondents. The RTC rendered a decision in favor of the
petitioners. The respondents appealed before the CA and reversed the RTCs decision. The
Petitioner filed a Motion for Reconsideration but was denied. Hence, the petition for review on
certiorari.
Issue:
Whether or not there was a valid delivery on the part of the petitioner in accordance
with law, which would give rise to an obligation to pay on the part of respondent for the value of the
bulk bags.

Held: The Supreme Court ruled in favor of the petitioner. It held that the petitioner has actually
delivered the bulk bags to respondent company, albeit the same was not delivered to the person
named in the Purchase Order. In addition, by allowing petitioners employee to pass through the
guard on duty, who allowed the entry of delivery into the premises of Hi-Cement, which is the
designated delivery site, respondents have effectively abandoned whatever infirmities may have
attended the delivery of the bulk bags. As a matter of fact, if respondents were wary about the
manner of delivery, such issue should have been brought up immediately after the first delivery was
made.
BY: CLARO C. CARINO
February 2015
ATTY. LEO CAUBANG vs. JESUS G. CRISOLOGO and NANETTE B. CRISOLOGO

GR. NO. 174581, FEBRUARY 4, 2015

PERALTA, J.:
Doctrine: The principal object of a notice of sale in a foreclosure of mortgage is not so much to notify
the mortgagor as to inform the public generally of the nature and condition of the property to be sold,
and of the time, place, and terms of the sale. Notices are given to secure bidders and prevent a
sacrifice of the property. Therefore, statutory provisions governing publication of notice of mortgage
foreclosure sales must be strictly complied with and slight deviations therefrom will invalidate the
notice and render the sale, at the very least, voidable. Certainly, the statutory requirements of posting
and publication are mandated and imbued with public policy considerations. Failure to advertise a
mortgage foreclosure sale in compliance with the statutory requirements constitutes a jurisdictional
defect, and any substantial error in a notice of sale will render the notice insufficient and will
consequently vitiate the sale.
Facts: Spouses Crisologo obtained two loans from PDCP Bank. The first is an Express Loan
amounting to 200K, while the other is a Term Loan in the amount of 1.5M. Both are secured by a
mortgage. Upon release of the term loan, they were given two PNs (500k & 1M). Under the PNs, they
agreed to pay in 3 years for 12 equal quarterly amortizations. Altough they were able to pay the
Express Loan, they defaulted in the other loan. Several demands were made but still failed to settle
their accounts. The bank filed a petition for the extrajudicial foreclosure of the mortgage. The
petitioner prepared the notice of sale, causing the posting in 3 public places and publication in
Oriental Daily Examiner, a local newspaper in Davao City. Caubang conducted the auction sale with
the bank as the only bidder. Thereafter, a certificate of sale was issued in favor of the bank. The
spouses filed for the nullity of the foreclosure and auction sale with damages against the bank and
Caubang. RTC ordered the nullification for failure to comply with the publication requirement. CA
affirmed RTCs decision. Hence, this petition.
Issue: Whether or not Oriental Daily Examiner is a newspaper of general circulation in the
municipality or city of Davao.
Held: NO. Under Section 3 of Act No. 3135:
Notice shall be given by posting notices of the sale for not less than twenty days in at least
three public places of the municipality or city where the property is situated, and if such
property is worth more than four hundred pesos, such notices shall also be published once a
week for at least three consecutive weeks in a newspaper of general circulation in the
municipality or city.

In this case, Caubang never made an effort to inquire as to whether the Oriental Daily
Examiner was indeed a newspaper of general circulation, as required by law. It was shown that the
Oriental Daily Examiner is not even on the list of newspapers accredited to publish legal notices, as
recorded in the Davao RTCs Office of the Clerk of Court. It also has no paying subscribers and it
would only publish whenever there are customers. Since there was no proper publication of the notice
of sale, the Spouses Crisologo, as well as the rest of the general public, were never informed that the
mortgaged property was about to be foreclosed and auctioned. As a result, PDCP Bank became the
sole bidder. This allowed the bank to bid for a very low price (P1,331,460.00) and go after the
spouses for a bigger amount as deficiency.
Wherefore, Petition is DENIED.
BY: MICHELLE M. YU

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Compilation of Case Digests in CIVIL LAW Review 2

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Facts: Petitioners are the registered owners, successors-in-interest, or possessors of agricultural

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AVELINA ABARIENTOS REBUSQUILLO [substituted by her heirs, except Emelinda R. Gualvez]

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SPOUSES VICTOR and EUNA BINUA, Petitioners,

Compilation of Case Digests in CIVIL LAW Review 2

Compilation of Case Digests in CIVIL LAW Review 2

NORA B. CALALANG-PARULAN and ELVIRA B. CALALANG, Petitioners,

Compilation of Case Digests in CIVIL LAW Review 2

Compilation of Case Digests in CIVIL LAW Review 2

GADRINAB vs. SALAMANCA et al.

Compilation of Case Digests in CIVIL LAW Review 2

Compilation of Case Digests in CIVIL LAW Review 2

Further, the pertinent Civil Code provisions on compromise agreements provide:

Compilation of Case Digests in CIVIL LAW Review 2

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Compilation of Case Digests in CIVIL LAW Review 2

Alvin Patrimonio v. Napoleon Gutierrez and Octavio Marasigan III

Compilation of Case Digests in CIVIL LAW Review 2

SPOUSES DOMINADOR PERALTA AND OFELIA PERALTA, Petitioners,

Compilation of Case Digests in CIVIL LAW Review 2

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By: Aliah M. Comagul

Compilation of Case Digests in CIVIL LAW Review 2

Compilation of Case Digests in CIVIL LAW Review 2

Compilation of Case Digests in CIVIL LAW Review 2

Compilation of Case Digests in CIVIL LAW Review 2

Compilation of Case Digests in CIVIL LAW Review 2

Compilation of Case Digests in CIVIL LAW Review 2

Compilation of Case Digests in CIVIL LAW Review 2

Compilation of Case Digests in CIVIL LAW Review 2

Compilation of Case Digests in CIVIL LAW Review 2

Compilation of Case Digests in CIVIL LAW Review 2

Issue/s: 1. Whether actual damages must be substantiated in order to be awarded?

Compilation of Case Digests in CIVIL LAW Review 2

Compilation of Case Digests in CIVIL LAW Review 2

Compilation of Case Digests in CIVIL LAW Review 2

By: Ellaine Janica T. Galias

Compilation of Case Digests in CIVIL LAW Review 2

Compilation of Case Digests in CIVIL LAW Review 2

Issue: Whether the Court of Appeals erred in rendering their decision.

Compilation of Case Digests in CIVIL LAW Review 2

Compilation of Case Digests in CIVIL LAW Review 2

Compilation of Case Digests in CIVIL LAW Review 2

Compilation of Case Digests in CIVIL LAW Review 2

VICENTE JOSEFA vs. MANILA ELECTRIC COMPANY.

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Compilation of Case Digests in CIVIL LAW Review 2

Compilation of Case Digests in CIVIL LAW Review 2

Compilation of Case Digests in CIVIL LAW Review 2

Compilation of Case Digests in CIVIL LAW Review 2

LEONARDO C. CASTILLO REPRESENTED BY LENNARD V. CASTILLO vs. SECURITY BANK

Compilation of Case Digests in CIVIL LAW Review 2

Compilation of Case Digests in CIVIL LAW Review 2

Compilation of Case Digests in CIVIL LAW Review 2