Case Digests

Obligations and Contracts 1
Obligation and Contracts

(Cases)
SUBMITTED TO:
Atty. Lulu Reyes
SUBMITTED BY:
Pic-it, Christian B.
Aguilar, Joana Rose
Balusdan, Septfonette Fe
Belvis, Eunice
Bondad, Nicole Y.
Cortez, Kimberly Agniezka R.
Datario, Mary Ruth V.
De Guzman, Chanell Dolor D.
Fango-ok, Cita C.
(LL.B. I; Block B)
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Table of Contents
Note: For Easy Navigation of Cases, Press Ctrl then click the case of choice.
OCAMPO III. VS. PEOPLE ........................................................................................................................ 16
Leung Ben v. O'Brien ............................................................................................................................. 17
Pelayo v. Lauron .................................................................................................................................... 18
ASJ Corporation v. Sps. Evangelista ........................................................................................................ 20
RAMAS VS.QUIAMCO.............................................................................................................................. 21
Nikko Hotel Manila Garden v. Reyes ...................................................................................................... 22
St. Mary's Academy v. Carpitanos .......................................................................................................... 24
TSPI, INCORPORATION VS. TSPIC EMPLOYEES UNION ............................................................................ 26
REGINO VS. PCST ................................................................................................................................... 27
PSBA v. Court of Appeals ....................................................................................................................... 28
Cosmo Entertainment v. La Ville ............................................................................................................ 30
Ayala Corp. vs. Rosa Diana Realty .......................................................................................................... 31
Bricktown Development vs. Amor Tierra Development.......................................................................... 33
Sarte Flores v. Sps. Lindo ....................................................................................................................... 38
Philippine Realty and Holding Corp. v. Ley Const. and Dev. Corp. ........................................................... 40
Titan-Ikeda Construction v. Primetown Property ................................................................................... 42
PADCOM v. Ortigas................................................................................................................................ 44
MC Engineering v. Court of Appeals ....................................................................................................... 46
BPI v. Pineda.......................................................................................................................................... 48
State Investment v. CA .......................................................................................................................... 49
People v. Nurfrasir Hashim, et al............................................................................................................ 51
Abellana v. People ................................................................................................................................. 53
People v. Malicsi.................................................................................................................................... 56
People v. Sia .......................................................................................................................................... 58
People v. Doctolero ............................................................................................................................... 59
People v. Abulencia ............................................................................................................................... 61
Bermudez v. Melencio-Herrera.............................................................................................................. 62
People v. Relova .................................................................................................................................... 64
Manantan v. Court of Appeals ............................................................................................................... 65
People v. Bayotas .................................................................................................................................. 67
Barredo v. Garcia ................................................................................................................................... 69
Del Carmen, Jr. v. Geronimo Bacoy et.al ................................................................................................ 70
Ludo and Luym Corp. v. Court of Appeals .............................................................................................. 72
Thermochem v. Naval............................................................................................................................ 73
Philippine Hawk Corp. v. Lee.................................................................................................................. 75
Cita
Dy Teban v. Ching .................................................................................................................................. 77

Safeguard Security v. Tangco ................................................................................................................. 78
Villanueva v. Domingo ........................................................................................................................... 79
Calalas v. Court of Appeals .................................................................................................................... 80
Picart v. Smith ....................................................................................................................................... 82
Durban apartments v. Pioneer Insurance ............................................................................................... 83
Lagon v. Hooven Comalco...................................................................................................................... 85
Francisco v. Court of Appeals ................................................................................................................. 87
Spouses Lorenzo G. Francisco and Lorenza D. Francisco, Petitioners, versus Honorable Court of Appeals,
and Bienvenido C. Mercado, respondents.............................................................................................. 87
Tanguilig v. Court of Appeals. ................................................................................................................ 88
Periquet v. Court of Appeals .................................................................................................................. 90
Legaspi Oil v. Court of Appeals............................................................................................................... 92
Philippine Charter v. Central Colleges .................................................................................................... 93
Titan-Ikeda Construction v. Primetown Property ................................................................................... 95
PNB Madecor vs. Uy .............................................................................................................................. 96
Barzaga vs. Court of Appeals.................................................................................................................. 97
Tanguilig v Court of Appeals .................................................................................................................. 98
Tayag vs. Court of Appeals ..................................................................................................................... 99
Periquet v. Court of Appeals ................................................................................................................ 100
Raquel-Santos vs. Court of Appeals ..................................................................................................... 101
RCBC vs. Court of Appeals.................................................................................................................... 102
State Investment vs. Court of Appeals ................................................................................................. 103
BPI Investment vs. Court of Appeals .................................................................................................... 105
Leano vs. Court of Appeals .................................................................................................................. 106
Heirs of Bacus v. Court of Appeals ....................................................................................................... 107
Integrated Packaging Corp. v. Court of Appeals ................................................................................... 108
Laforteza v. Machuca .......................................................................................................................... 111
Regala v. Carin..................................................................................................................................... 113
International Corporate Bank v. Gueco ................................................................................................ 115
Republic v. CTA.................................................................................................................................... 117
Diaz v. Davao Light and Power Co. ....................................................................................................... 118
Yasona v. De Ramos............................................................................................................................. 119
Yambao v. Zuniga ................................................................................................................................ 122
Smith bell Corp v. Borja ....................................................................................................................... 123
Ilusorio v. Court of Appeals .................................................................................................................. 124
NPC v. Court of Appeals ....................................................................................................................... 126
Cita
Muaje-Tuazon v. Verchez .................................................................................................................... 127

RCPI v. Verchez.................................................................................................................................... 128
Victory Liner v Gammad, 444 S 355 ..................................................................................................... 130
FGU v. Sarmiento, 386 S 355................................................................................................................ 131
LRTA v. Natividad ................................................................................................................................ 132
Rodzssen v. Far East Bank, 357 S 618 ................................................................................................... 134
UE v. Jader........................................................................................................................................... 136
Bayne Adjusters v. Court of Appeals .................................................................................................... 137
Delsan v. C & A Construction ............................................................................................................... 139
Philippine Commercial Bank v. Court of Appeals ................................................................................. 142
SMC v. Court of Appeals ...................................................................................................................... 144
Heirs of Ochoa v. G & S Transport Corp................................................................................................ 147
Pacis v. Morales................................................................................................................................... 148
Philippine Hawk Corporation v. Lee ..................................................................................................... 150
Mercury Drug Corp., v. Huang ............................................................................................................. 152
Mendoza v. Soriano ............................................................................................................................. 153
Cerezo v. Tuazon ................................................................................................................................. 155
Filcar Transport Services v. Espinas ...................................................................................................... 157
FEB Leasing v. Sps. Baylon ................................................................................................................... 160
Filipinas Synthetic v. De Los Santos ...................................................................................................... 163
Viron v. De Los Santos ......................................................................................................................... 164
Mercury Drug v. Baking ....................................................................................................................... 166
Safeguard Security v. Tangco ............................................................................................................... 168
Pleyto v. Lomboy ................................................................................................................................. 171
SYKL VS. BEGASA ................................................................................................................................. 173
Yambao v. Zuniga ................................................................................................................................ 175
Mindanao Terminal v. Phoenix ............................................................................................................ 178
YHT Realty v. CA .................................................................................................................................. 180
Ramos v. CA ........................................................................................................................................ 181
Reyes v. Sister of Mercy ....................................................................................................................... 184
Nogales v. Capitol Medical Center ....................................................................................................... 186
Professional Services v. Agana ............................................................................................................. 188
Professional Services v. CA .................................................................................................................. 190
Cantre v. Sps. Go ................................................................................................................................. 191
Dr. Rubi Li v. Sps Soliman ..................................................................................................................... 193
People v. Delos Santos......................................................................................................................... 195
L.G. Foods v. Agraviador ...................................................................................................................... 196
Cita
Magat v. Medialdea............................................................................................................................. 198

Vda. De Mistica v. Naguiat ................................................................................................................... 199
Co v. Court of Appeals ......................................................................................................................... 200
Heirs of Quirong v. DBP ....................................................................................................................... 202
Heirs of Gaite v. The Plaza ................................................................................................................... 204
Solar Harvest Incorporated vs. Davao Corrugated ................................................................................ 207
Reyes v. Tuparan ................................................................................................................................. 209
G.G. Sportwear Mfg. Corp v. World Class Properties, Inc. .................................................................... 211
Movido v. Reyes Pastor ....................................................................................................................... 213
Spouse Tongson v. Emergency Pawnshop ............................................................................................ 214
Sanz Maceda v. DBO ............................................................................................................................ 216
Raquel-Santos v. CA............................................................................................................................. 218
Francisco v. DEAC Const. Inc. ............................................................................................................... 220
Cannu V. Galang .................................................................................................................................. 222
Villanueva v. Estate of Gonzaga ........................................................................................................... 224
Paguyo v. Astorga ................................................................................................................................ 226
Casino v. CA......................................................................................................................................... 228
Carrascoso v. CA .................................................................................................................................. 230
Goldenrod v. CA .................................................................................................................................. 233
Serrano v. CA....................................................................................................................................... 236
Gil v. Court of Appeals ......................................................................................................................... 236
Reyes v. Lim ........................................................................................................................................ 238
Ong v. Tui ............................................................................................................................................ 239
Equatorial Realty v. Mayfair Theater .................................................................................................... 241
Velarde v. CA ....................................................................................................................................... 243
Asuncion v. Evangelista ....................................................................................................................... 244
Uy v. Court of Appeals ......................................................................................................................... 246
Tamayo et al. v. Abad Senora .............................................................................................................. 248
Tan v. OMC Carriers............................................................................................................................. 249
Victory liner v. Heirs ............................................................................................................................ 251
GSIS v. Labung-Deang .......................................................................................................................... 253
BPI Investment v. D.G. Carreon ............................................................................................................ 255
Khe Hong v. Court of Appeals .............................................................................................................. 256
Philippine Realty v. Ley Const. and Dev. Corp....................................................................................... 258
Megaworld Globus Asia, Inc. v. Tanseco .............................................................................................. 259
Sicam v. Jorge ...................................................................................................................................... 260
Huibonhoa v. Court of Appeals ............................................................................................................ 262
Cita
Ace Agro v. Court of Appeals ............................................................................................................... 263

Dioquino v. Laureano.......................................................................................................................... 265
Bachelor Express v. Court of Appeals ................................................................................................... 266
Vasquez v. Court of Appeals ................................................................................................................ 267
Yobido v. Court of Appeals .................................................................................................................. 268
Juntilla v. Fontanar .............................................................................................................................. 270
Philamgen Insurance v. MGG Marine................................................................................................... 271
Mindex v. Morillo ................................................................................................................................ 273
NAPOCOR v. Phillip Bros. ..................................................................................................................... 275
Ong Genato v. Bayhon, et al. ............................................................................................................... 278
Union Bank v. Santibanez .................................................................................................................... 279
San Agustin v. Court of Appeals ........................................................................................................... 281
Project Builders, Inc. v. Court of Appeals ............................................................................................. 282
Hong Kong and Shanghai Bank v. Sps. Broqueza .................................................................................. 283
DBP v. Court of Appeals ....................................................................................................................... 285
Tomimbang v. Tomimbang .................................................................................................................. 287
Gonzales v. Heirs ................................................................................................................................. 288
Insular Life v. Young............................................................................................................................. 290
Direct Funders v. Lavina....................................................................................................................... 291
Vda. De Mistica v. Naguiat ................................................................................................................... 292
Hermosa v. Longara............................................................................................................................. 293
Trillana v. Quezon Colleges .................................................................................................................. 294
Visayan Sawmill v. Court of Appeals .................................................................................................... 295
Leano v. Court of Appeals .................................................................................................................... 296
De Leon v. Ong .................................................................................................................................... 297
Heirs of Sandejas v. Lina ...................................................................................................................... 298
CIR v. Primetown ................................................................................................................................. 299
NAMARCO v. Tecson ........................................................................................................................... 301
Berg v. Magdalena Estates ................................................................................................................... 302
Lirag v. Court of Appeals ...................................................................................................................... 304
Daguhoy v. Ponce ................................................................................................................................ 306
Victoria Planters v. Victoria Milling ...................................................................................................... 307
Jespajo v. CA........................................................................................................................................ 308
Borromeo v. Court of Appeals ............................................................................................................. 309
Gonzales v. Jose .................................................................................................................................. 310
Baluyut v. Poblete ............................................................................................................................... 311
Malayan Realty v. Uy ........................................................................................................................... 313
Cita
Kasapian ng Manggagawa ng Coca-cola v. Court of Appeals................................................................. 314

Santos vs. Santos ................................................................................................................................. 315
Melotindos v. Tobias ........................................................................................................................... 318
LL and Co. v. Huang ............................................................................................................................. 319
Brent School v. Zamora........................................................................................................................ 322
Lim v. People ....................................................................................................................................... 322
Pacific Banking v. Court of Appeals ...................................................................................................... 323
Agoncillo v. Javier ................................................................................................................................ 325
Ong Guan v. Century ........................................................................................................................... 327
Legarda v. Miailhe ............................................................................................................................... 328
Reyes v. Martinez ................................................................................................................................ 329
Quizana v. Redugerio........................................................................................................................... 330
Marsman v. Philippine Geoanalytics .................................................................................................... 331
Alipio v. Court of Appeals .................................................................................................................... 333
PH Credit Corp. v. Court of Appeals ..................................................................................................... 334
CDCP VS ESTRELLA ............................................................................................................................... 336
Republic Glass Corp. v. Qua ................................................................................................................. 337
Industrial Management v. NLRC........................................................................................................... 338
Metro Manila Transit Corp. v. Court of Appeals ................................................................................... 339
Inciong v.Court of Appeals ................................................................................................................... 341
Philippine Blooming Mills v. Court of Appeals ...................................................................................... 344
Queensland-Tokyo v. George............................................................................................................... 346
Shrimp Specialist, Inc., v. Fuji Triumph ................................................................................................. 348
Asset Builders v. Stronghold ................................................................................................................ 350
Eparwa Secutrity v. Liceo de Cagayan .................................................................................................. 352
Carlos Dimayuga v.PCIB ....................................................................................................................... 354
Cerna v. Court of Appeals .................................................................................................................... 356
Nazareno v. Court of Appeals .............................................................................................................. 358
Alonzo v. San Juan ............................................................................................................................... 359
David v. Court of Appeals .................................................................................................................... 361
RP v. Thi Thu Thuy ............................................................................................................................... 361
Marques v. Far East Bank..................................................................................................................... 364
Prisma Construction v. Menchavez ...................................................................................................... 366
Macalalag v. People ............................................................................................................................. 367
Tan v. Court of Appeals........................................................................................................................ 369
Eastern Shipping v. Court of Appeals ................................................................................................... 370
PCI vs Ng Shueng Ngor......................................................................................................................... 372
Cita
NSBC v. PNB ........................................................................................................................................ 374

Polotan v. Court of Appeals ................................................................................................................. 375
NSBC v. PNB ........................................................................................................................................ 377
Estores v. Sps Supangan ...................................................................................................................... 379
Hung v. BPI Card .................................................................................................................................. 381
Land Bank v. Ong ................................................................................................................................. 385
RGM Industries v. United Pacific .......................................................................................................... 386
Prisma Industries v. United Pacific ....................................................................................................... 388
Maceda, Jr. v. DBO .............................................................................................................................. 389
PNB v. Encina ...................................................................................................................................... 391
Imperial v. Jaucian ............................................................................................................................... 393
Pabugais v. Sahijwani .......................................................................................................................... 395
Lo v. Court of Appeals .......................................................................................................................... 397
Ligutan v. Court of Appeals .................................................................................................................. 400
Pascual v. Ramos ................................................................................................................................. 402
First Metro Investment v. Este Del Sol ................................................................................................. 403
Domel Trading v. Court of Appeals ...................................................................................................... 405
Medel v. Court of Appeals ................................................................................................................... 407
Reformina v. Tomol ............................................................................................................................. 409
Lo v. KJH .............................................................................................................................................. 411
PNB v. Court of Appeals ....................................................................................................................... 412
Cathay Pacific Airways v. Vazquez..................................................................................................... 413
Citibank v. Sabeniano .......................................................................................................................... 414
Telengton Bros. v. US Lines .................................................................................................................. 415
C.F. Sharp v. Northwest Airlines .................................................................................................... 416
Padilla v. Paredes ................................................................................................................................ 417
Tibajia v. Court of Appeals ................................................................................................................... 418
DBP v. Court of Appeals ....................................................................................................................... 419
Vitarich vs. Losin.................................................................................................................................. 421
Metrobank vs. Cabilzo ......................................................................................................................... 422
Almeda v. Bathala Marketing............................................................................................................... 424
PCI vs Ng Shueng Ngor......................................................................................................................... 426
Palanca v. Guides ................................................................................................................................ 427
PCIB v. Court of Appeals ...................................................................................................................... 428
Lagon v. Hooven Comalco.................................................................................................................... 429
BPI v. Court of Appeals ........................................................................................................................ 431
Cita
Republic v. Thi Thu Thuy De Guzman ................................................................................................... 432

Audion Electric v. NLRC........................................................................................................................ 433
Land Bank of the Philippines v. Ong ..................................................................................................... 435
Binalbagan v. CA .................................................................................................................................. 437
Lorenzo Shipping v. BJ Marthel ............................................................................................................ 438
Luzon Development Bank v. Enriquez .................................................................................................. 439
Estanislao v. East-West Bank Corp. ...................................................................................................... 441
Aquintey v. Tibong............................................................................................................................... 442
Vda de Jayme v. CA.............................................................................................................................. 443
Caltex v IAC ......................................................................................................................................... 444
Lo v. Court of Appeals .......................................................................................................................... 446
ASI Corp. v. Evangelista........................................................................................................................ 447
Paculdo v. Regalado ............................................................................................................................ 448
CBC v. Court of Appeals ....................................................................................................................... 449
Mobil v. Court of Appeals .................................................................................................................... 450
Dalton v. FGR Realty and Development Corp. ...................................................................................... 451
Benos v. Lawilao .................................................................................................................................. 452
Peoples Industrial v. Court of Appeals................................................................................................. 453
Eternal Gardens v. Court of Appeals .................................................................................................... 454
Rayos v. Reyes ..................................................................................................................................... 455
Cebu International v. Court of Appeals ................................................................................................ 456
De Mesa v. Court of Appeals ................................................................................................................ 457
Occena v. Court of Appeals .................................................................................................................. 458
Ortigas v. Feati Bank ............................................................................................................................ 459
So v. Food Fest Land, Inc. ..................................................................................................................... 460
Magat v. Court of Appeals ................................................................................................................... 462
PNCC v. Court of Appeals..................................................................................................................... 463
NATELCO v. Court of Appeals ............................................................................................................... 465
Reyna v. COA ....................................................................................................................................... 466
Trans Pacific v. Court of Appeals .......................................................................................................... 467
Dalupan v. Harden ............................................................................................................................... 468
Lopez Vito v. Tambunting .................................................................................................................... 469
Estate of Mota v. Serra ........................................................................................................................ 470
Yek Ton Lin v. Yusingco ........................................................................................................................ 471
EGV Realty v. Court of Appeals ............................................................................................................ 472
Aerospace Chemical v. Court of Appeals .............................................................................................. 473
Apodaca v. NLRC ................................................................................................................................. 474
Cita
Sps Chung v. Ulanday Construction ...................................................................................................... 475

Insular Investment v. Capital One ........................................................................................................ 476
Lao, et al. v. Special Plans Inc. .............................................................................................................. 477
United Planters Sugar v. Court of Appeals............................................................................................ 478
PNB Management v. R&R Metal .......................................................................................................... 479
Silahis Marketing Corp. v. IAC .............................................................................................................. 480
Francia v. IAC ....................................................................................................................................... 482
Trinidad v. Acapulco ............................................................................................................................ 484
Heirs of Franco v. Sps. Gonzales........................................................................................................... 486
Hernandez-Nievera v. Hernandez ........................................................................................................ 488
St. James College of Paranaque v. Equitable PCI .................................................................................. 489
Tomimbang v. Tomimbang .................................................................................................................. 490
Mindanao Savings and Loan Association, Inc. v. Willkom ..................................................................... 491
Aquintey v. Sps. Tibong ....................................................................................................................... 493
Loadmasters Customs Services, Inc. v. Glodel Brokerage Corp. ............................................................ 495
Metropolitan Bank v. Rural Bank of Gerona ......................................................................................... 497
Swagman Hotels and Travel, Inc. v. Court of Appeals ........................................................................... 498
Yuseco v. Court of Appeals .................................................................................................................. 500
California bus lines, inc. V. State investment house, Inc. ...................................................................... 502
Ocampo-Paule v. Court of Appeals ...................................................................................................... 504
Reyes v. Court of Appeals .................................................................................................................... 505
Sps. Bautista v. Pilar Development Corp. ............................................................................................. 506
Evadel Realty and Development Corp. v. Sps. Soriano .......................................................................... 509
Villeza v. German Management and Services, Inc. ............................................................................... 511
Insurance of the Philippine Islands Corp. v. Sps. Gregorio .................................................................... 512
Mariano v. Petron Corp. ...................................................................................................................... 514
Sps. Bernales v. Heirs of Sambaan ....................................................................................................... 515
B & I Realty Co. v. Caspe ...................................................................................................................... 517
Mesina v. Garcia .................................................................................................................................. 519
Laureano v. Court of Appeals ............................................................................................................... 523
Banco Filipino v. Court of Appeals........................................................................................................ 524
Vda. De Delgado v. Court of Appeals.................................................................................................... 525
Maestrado v. Court of Appeals ............................................................................................................ 527
F.A.T. Kee Computer System v. Online Networks International ............................................................ 528
Tanay Recreation Center v. Fausto ...................................................................................................... 530
Mendoza v. Court of Appeals ............................................................................................................... 532
Lim v. Queensland Tokyo Commodities ............................................................................................... 533
Cita
Placewell International v. Camote ....................................................................................................... 535

Heirs of Ragua v. Court of Appeals ....................................................................................................... 537
Metrobank v. Court of Appeals ............................................................................................................ 539
Sps. Del Ocampo v. Court of Appeals ................................................................................................... 540
Cuenco v. Vda. De Manguerra ............................................................................................................. 541
Laurel v. Desierto ................................................................................................................................ 543
Hanopo v. Shoemart Incorporated....................................................................................................... 545
Terminal Facilities v. PPA ..................................................................................................................... 547
Mendoza v. Court of Appeals ............................................................................................................... 549
Roblett Construction v. CA ................................................................................................................... 553
Simedarby v. Goodyear ....................................................................................................................... 555
Far East Bank v. Borja .......................................................................................................................... 557
Kings Properties Corporation, Inc. v. Galido ......................................................................................... 558
Metrobank v. Cabilzo........................................................................................................................... 560
Mesina v. Garcia .................................................................................................................................. 562
Pahamotang v. PNB ............................................................................................................................. 564
Shopper's Paradise v. Roque ................................................................................................................ 565
Meatmasters v. Lelis Integrated........................................................................................................... 567
Larena v. Mapili ................................................................................................................................... 568
Santos v. Santos .................................................................................................................................. 570
Villanueva- Mijares v. CA ..................................................................................................................... 572
Garcia v. Villar ..................................................................................................................................... 573
Sps. Edralin v. Phil. Veterans Bank ....................................................................................................... 574
University Physicians Services v. Marian Clinics................................................................................... 576
Martin, et al. v. DBS Bank Philippines, Inc., et al., ................................................................................. 577
Heirs of Zabala, et al. v. CA .................................................................................................................. 581
Duncan v. Glaxo................................................................................................................................... 582
Star Paper v. Simbol ............................................................................................................................ 584
Tiu v. Platinum Plans ........................................................................................................................... 587
Avon Cosmetics v. Luna ....................................................................................................................... 588
Del Castillo v. Richmond ...................................................................................................................... 590
Arwood v. DM Consunji ....................................................................................................................... 591
Sps. Tecklo v. Rural Bank of Pamplona ................................................................................................. 593
Banate v. Phil. Countryside .................................................................................................................. 594
Pascual v. Ramos ................................................................................................................................. 597
GQ Garments v. Miranda ..................................................................................................................... 601
Cita
Bercero v. Capitol Development .......................................................................................................... 605

Hemedes v. CA .................................................................................................................................... 606
PUP v. Golden Horizon......................................................................................................................... 609
Villegas v. CA ....................................................................................................................................... 612
Equatorial Realty v. Carmelo................................................................................................................ 613
PUP v. CA ............................................................................................................................................ 616
Litonjua v. L and R ............................................................................................................................... 617
Josefa v Zhandong ............................................................................................................................... 621
Saludo v. Security Bank ........................................................................................................................ 623
PCI v. Ng Sheung Ngor ......................................................................................................................... 625
Dio v. St. Ferdinand Memorial ............................................................................................................. 628
PILTEL v. Tecson .................................................................................................................................. 632
PAL v. CA ............................................................................................................................................. 634
Ermitano v. CA..................................................................................................................................... 636
Uniwide v. Titan-Ikeda ......................................................................................................................... 639
Heirs of Salas v. Laperal ....................................................................................................................... 643
Medrano v. CA..................................................................................................................................... 645
Tan v. Gullas ........................................................................................................................................ 648
Gozun v. Mercado ............................................................................................................................... 651
Sta. Lucia Realty vs. Sps. Buenaventura ............................................................................................... 652
Chan v. Maceda ................................................................................................................................... 656
Baluyot vs. CA...................................................................................................................................... 661
Cuyco v Cuyco ..................................................................................................................................... 663
Go, doing business under the name and style of ACG Express Liner v Cordero .................................. 664
Tayag vs. CA ........................................................................................................................................ 667
So vs. CA.............................................................................................................................................. 669
International Freeport v. Danzas.......................................................................................................... 672
Rockland V Mid-Pasig Development .................................................................................................... 676
MMDA v. JANCOM .............................................................................................................................. 679
Rockland V Mid-Pasig Development .................................................................................................... 681
Manila Metal v. PNB ............................................................................................................................ 682
Montecillo v. Reynes ........................................................................................................................... 685
Soler v CA ............................................................................................................................................ 687
Palattao vs. CA .................................................................................................................................... 689
ABS-CBN v. CA ..................................................................................................................................... 692
Limson v. CA ........................................................................................................................................ 694
Villanueva v. PNB................................................................................................................................. 696
Cita
Catalan v. Basa .................................................................................................................................... 699

Domingo v. CA ..................................................................................................................................... 702
Mendozana v. Ozamiz ......................................................................................................................... 704
Lim v. CA ............................................................................................................................................. 705
Ruiz v. CA ............................................................................................................................................ 706
Dela Cruz v. Sison ................................................................................................................................ 711
Rural Bank of Sta. Maria v. CA.............................................................................................................. 713
Carabeo v. Sps. Dingco ........................................................................................................................ 716
Melliza v. City of Iloilo.......................................................................................................................... 717
Catindig v. Vda. De Meneses................................................................................................................ 720
Orduna, et al. v. Fuentabella................................................................................................................ 722
Brobio Mangahas v. Brobio.................................................................................................................. 724
Golden Apple Realty v. Sierra Grande Realty........................................................................................ 726
Askay v. Cosalan .................................................................................................................................. 729
Heirs of Balite v. Lim ............................................................................................................................ 731
Suntay v. CA ........................................................................................................................................ 732
Uy v. Court of Appeals ......................................................................................................................... 734
Pentacapital v. Makilito Mahinay ......................................................................................................... 736
Heirs of Gaite v. The Plaza ................................................................................................................... 737
Catly v. Navarro, et al. ......................................................................................................................... 740
Liguez v. CA ......................................................................................................................................... 742
Philbank v. Lui She ............................................................................................................................... 743
Londres v. CA....................................................................................................................................... 744
Sps. Vega v. SSS ................................................................................................................................... 745
Balatbat v. Court of Appeals ................................................................................................................ 746
Universal Robina v. Heirs of Teves ....................................................................................................... 748
Sarming v. Dy ...................................................................................................................................... 749
Cebu v. Court of Appeals ..................................................................................................................... 751
ADR Shipping v. Gallardo ..................................................................................................................... 751
Movido v. Pastor ................................................................................................................................. 752
TSPIC Corp. v. TSPIC Employees Union ................................................................................................. 754
Estanislao v. East-West Banking Corp. ................................................................................................. 755
Aquintey v. Tibong............................................................................................................................... 756
Cruz vs. Court of Appeals ..................................................................................................................... 757
Gonzales v. Court of Appeals ............................................................................................................... 759
Almira v. Court of Appeals ................................................................................................................... 761
Philbank v. Lim .................................................................................................................................... 763
Cita
Rigor v. Consolidated Leasing .............................................................................................................. 765

Heirs of Quiring v. DBP ........................................................................................................................ 768
Lee v. Bangkok Bank ............................................................................................................................ 770
Equatorial Realty v. Mayfair Theater .................................................................................................... 771
Siguan v. Lim ....................................................................................................................................... 773
Khe Hong v. Court of Appeals .............................................................................................................. 775
Suntay v. Court of Appeals ................................................................................................................... 777
Brobio Mangahas v. Brobio.................................................................................................................. 779
Hernandez v. Hernandez ..................................................................................................................... 781
Fuentes, et al v. Roca ........................................................................................................................... 782
Associated Bank v. Sps. Montano ........................................................................................................ 784
Miailhe v. Court of Appeals.................................................................................................................. 785
First Philippine Holdings v. Trans Middle East ...................................................................................... 786
Sanchez v. Mapalad Realty .................................................................................................................. 787
Oesmer v. PDC..................................................................................................................................... 788
Vda. De Ape v. Court of Appeals .......................................................................................................... 789
Francisco v. Herrera............................................................................................................................. 790
Braganza v. Villa Abrille ....................................................................................................................... 791
Katipunan v. Katipunan ....................................................................................................................... 792
Jumalon v. Court of Appeals ................................................................................................................ 793
Cabales v. Court of Appeals ................................................................................................................. 793
VDA. DE OUANO v. RP ......................................................................................................................... 795
SHOEMAKER v. LA TONDEA ............................................................................................................... 796
PNB v. PHILIPPINE VEGETABLE OIL CO., INC., ....................................................................................... 797
VDA. DE OUANO v. RP ......................................................................................................................... 798
THE MUNICIPALITY OF HAGONOY, BULACAN v. DUMDUM, JR. ............................................................ 800
Sps. Tan v. Villapaz .............................................................................................................................. 801
Sps. David v. Tiongson ......................................................................................................................... 802
Cordial v. Miranda ............................................................................................................................... 804
Villanueva-Mijares v. Court of Appeals ................................................................................................ 805
Rosencor v. Inquing ............................................................................................................................. 808
Firme v. UKAL ...................................................................................................................................... 810
Heirs of M. Doronio v. Heirs of F. Doronio ........................................................................................... 811
Gurrea v. Suplico ................................................................................................................................. 812
Frenzel v. Catito................................................................................................................................... 813
La Buga'al-Blaan v. Ramos ................................................................................................................... 814
Agan v. PIATCO.................................................................................................................................... 815
Cita
COMELEC v. Quijano-Padilla ................................................................................................................ 816

Jaworski v. PAGCOR ............................................................................................................................. 818
Oesmer v. PDC..................................................................................................................................... 819
Heirs of Balite v. Lim ............................................................................................................................ 819
Pineda v. CA ........................................................................................................................................ 824
Cruz v. Bancom .................................................................................................................................... 827
Cuaton v. Salud ................................................................................................................................... 831
Infotech v. COMELEC ........................................................................................................................... 833
Pabugais v. Sahijwan ........................................................................................................................... 837
Liguez v. CA ......................................................................................................................................... 841
Philbank v. Lui She ............................................................................................................................... 842
Vigilar v. Aquino .................................................................................................................................. 845
EPG Construction v. Vigilar .................................................................................................................. 848
Go Chan v. Young ................................................................................................................................ 851
Francisco v. Herrera............................................................................................................................. 853
Mendezona v. Ozamiz ......................................................................................................................... 855
Manzanilla v. Court of Appeals ............................................................................................................ 856
Rural Bank of Paranaque v. Remolado ................................................................................................. 858
Republic v. Cojuangco.......................................................................................................................... 860
Ringor v. Ringor ................................................................................................................................... 864
Salvador v. Court of Appeals ................................................................................................................ 866
Huang v. Court of Appeals ................................................................................................................... 867
Vda. De Esconde v. Court of Appeals ................................................................................................... 869
Medina v. Court of Appeals ................................................................................................................. 873
Filipinas Port v. Go............................................................................................................................... 874
Mendizabel v. Apao ............................................................................................................................. 875
Heirs of Yap v. Court of Appeals ........................................................................................................... 877
Heirs of Kionisala v. Heirs of Dacut ...................................................................................................... 879
Ramos v. Ramos .................................................................................................................................. 881
Ty v. Court of Appeals .......................................................................................................................... 883
Vda. De Retuerto v. Barz ...................................................................................................................... 884
Chia Liong Tan v. Court of Appeals ....................................................................................................... 886
O'laco v. Co Cho Chit ........................................................................................................................... 888
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OCAMPO III. VS. PEOPLE

MARIANO UN OCAMPO III, Petitioner, versus PEOPLE OF THE
PHILIPPINES, Respondent.
G.R. Nos. 156547-51, 2008 Feb 6, 1st Division
AZCUNA, J.:
FACTS: The Department of Budget and Management(DBM) released the
amountof Php 100 Million for the support of the local government unit
of the province of Tarlac. However, petitioner Ocampo, governor of
Tarlac,loaned out more than P 56.6 million in which he contracted with
Lingkod Tarlac Foundation, Inc., thus, it was the subject of 25
criminal charges against the petitioner. Th e S a n d i g a n b a y a n c o n v i c t e d
t h e p e t i t i o n e r o f t h e c r i m e o f malversation of public funds. However,
the petitioner contended that the loan was private in character since it
was a loan contracted with the Taralc Foundation.
ISSUE: Whether or not the amount loaned out was private in nature.
HELD: Yes, the loan was private in nature because Art. 1953 of the
NewCivil Code provides that a person who receives a loan of money or
anyother fungible thing acquires the ownership thereof, and is bound to
paythe creditor an equal amount of the same kind and quality. The fact that
the petitioner-Governor contracted the loan, the publicfund changed its
nature to private character, thus it is not malversation which is the
subject of this case, instead it must be a simple collection of money suit
against the petitioner in case of non payment . Therefore, thepetitioner is
acquitted for the crime of malversation.
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Leung Ben v. O'Brien

LEUNG BEN; plaintiff, VS. P. J. OBRIEN, JAMES A. OSTRAND and GEO. R.
HARVEY, Judgesof First Instance of the City of Manila, defendants
April 6, 1918
FACTS: On December 12, 1917, an action was instituted in the Court of

First Instance of Manila by P.J. OBrien to recover of Leung Ben the sum of
P15, 000, all a l l e g e d t o h a v e b e e n l o s t b y t h e p l a i n t i f f t o t h e
d e f e n d a n t i n a s e r i e s o f gambling, banking, and percentage games
conducted during the two or three months prior to the institution of the
suit. The plaintiff asked for an attachment against the property of the
defendant, on the ground that the latter was about to depart from the
Philippines with intent to defraud his creditors. This attachment was issued.
The provision of law under which this attachment was issued requires
that there should be a cause of action arising upon contract, express or
implied. The contention of the petitioner is that the statutory action to
recover money lost at gaming is not such an action as is contemplated in this
provision, and he insists that the original complaint shows on its face
that the remedy of attachment is not available in aid thereof; that the Court
of First Instance acted in excess of its jurisdiction in granting the writ of
attachment; that the petitioner has no plain, speedy, and adequate
remedy by appeal or otherwise; and that consequently the writ of
certiorari supplies the appropriate remedy for this relief.
ISSUE: Whether or not the statutory obligation to restore money won at gaming
is an obligation arising from contract, express or implied.
HELD: Yes. In permitting the recovery money lost at play, Act No. 1757
has introduced modifications in the application of Articles 1798, 1801, and
1305 of the Civil Code. The first two of these articles relate to gambling
contracts, while article 1 3 0 5 t r e a t s o f t h e n u l l i t y o f c o n t r a c t s
p r o c e e d i n g f r o m a v i c i o u s o r i l l i c i t consideration. Taking all these
provisions together, it must be apparent that the obligation to return money
lost at play has a decided affinity to contractual obligation; and the
Court believes that it could, without violence to the doctrines of the civil law, be
held that such obligations is an innominate quasi-contract. It is however,
unnecessary to place the decision on this ground. In the opinion of
the Court, the cause of action stated in the compla int in the court
below is based on a contract, express or implied, and is therefore of such
nature that the court had authority to issue the writ of attachment. The
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application for the writ of certiorari must therefore be denied and the
proceedings dismissed.
Pelayo v. Lauron
Cita
ARTURO PELAYO, plaintiff-appellant VS. MARCELO LAURON, defendant-

appellee
12 Phil 453 January 12, 1909
FACTS: On November 23, 1906, Arturo Pelayo, a physician, filed a

complaint against Marcelo and Juana Abella. He alleged that on October 13,
1906 at night, Pelayo was called to the house of the defendants to assist their
daughter-in-law who was about to give birth to a child. Unfortunately, the
daughter-in-law died as a consequence of said childbirth. Thus, the
defendant refuses to pay. The d e f e n d a n t s a r g u e t h a t t h e i r
d a u g h t e r - i n - l a w l i v e d w i t h h e r h u s b a n d independently and in a
separate house without any relation, that her stay there was accidental and
due to fortuitous event.
ISSUE: W h e t h e r o r n o t t h e d e f e n d a n t s s h o u l d b e h e l d l i a b l e
f o r t h e f e e s demanded by the plaintiff upon rendering medical assistance
to the defendants daughter-in-law.
HELD: No. The Court held that the rendering of medical assistance is one of
the o b l i g a t i o n s t o w h i c h s p o u s e s a r e b o u n d b y m u t u a l
s u p p o r t , e x p r e s s l y determined by law and readily demanded. Therefore,
there was no obligation on the part of the in-laws but rather on the part of the
husband who is not a party. Thus, decision affirmed.
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ASJ Corporation v. Sps. Evangelista

ASJ CORPORATION and ANTONIO SAN JUAN, Petitioners, versus SPS.
EFREN & MAURA EVANGELISTA, Respondents.,
G.R. No. 158086, 2008 Feb 14, 2nd Division
QUISUMBING, J.:
FACTS: Private respondent Evangelista contracted
P e t i t i o n e r A S J Corporation for the incubation and hatching of eggs
and by products owned by Evangelista Spouses. The contract includes
the scheduled payments of the service of ASJ Corporation that the amount of
installment s h a l l b e p a i d a f t e r t h e d e l i v e r y o f t h e c h i c k s .
H o w e v e r , t h e A S J Corporation detained the chicks because
Evangelista Spouses failed to pay the installment on time.
ISSUE: W h e t h e r o r n o t t h e d e t e n t i o n o f t h e a l l e g e d c h i c k s v a l i d
a n d recognized under the law.
HELD: N o , b e c a u s e A S J C o r p o r a t i o n m u s t g i v e d u e t o t h e
E v a n g e l i s t a Spouses in paying the installment, thus, it must not delay the
delivery of the chicks. Thus, under the law, they are obliged to pay
damages with each other for the breach of the obligation. Therefore, in a
contract of service, each party must be in good faith i n t h e p e r f o r m a n c e o f
t h e i r o b l i g a t i o n , t h u s w h e n t h e p e t i t i o n e r h a d detained the hatched
eggs of the respondents spouses, it is an implication of putting prejudice to
the business of the spouses due to the delay of paying installment to the
petitioner.
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RAMAS VS.QUIAMCO
NESTO RAMAS UYPITCHING and RAMAS UYPITCHING SONS, INC.,
Petitioners, versus ERNESTO QUIAMCO, Respondent.,
G.R. No. 146322, 2006 Dec 6, 2nd Division
CORONA, J.:
FACTS: Q u i a m c o has amicably settled with Davalan,
G a b u t e r o a n d Generoso for the crime of robbery and that in
r e t u r n , t h e t h r e e h a d surrendered to Quiamco a motorcycle with its
registration. However, Atty. Ramas has sold to Gabutero the motorcycle
in installment but when the latter did not able to pay the installment,
Davalon continued the payment but when he became insolvent, he said that
the motorcycle was taken by Q u i a m c o s m e n . H o w e v e r , a f t e r s e v e r a l
y e a r s , t h e p e t i t i o n e r R a m a together with policemen took the
motorcycle without the respondents permit and shouted that the
respondent Quiamco is a thief of motorcycle. Respondent then filed an
action for damages against petitioner alleging t h a t p e t i t i o n e r i s
l i a b l e f o r u n l a w f u l t a k i n g o f t h e m o t o r c y c l e a n d utterance of a
defamatory remark and filing a baseless complaint. Also, p e t i t i o n e r s
claim that they should not be held liable for petitioners
exercise of its right as seller -mortgagee to recover the
m o r t g a g e d motorcycle preliminary to the enforcement of its right to foreclose
on the mortgage in case of default.
ISSUE: Whether or not the act of the petitioner is correct.
HELD: No. The petitioner being a lawyer must know the legal procedure
for the recovery of possession of the alleged mortgaged property in which said
procedure must be conducted through judicial action. Furthermore, t h e
petitioner acted in malice and intent to cause damage to the
respondent when even without probable cause, he still instituted an
act against the law on mortgage.
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Nikko Hotel Manila Garden v. Reyes

NIKKO HOTEL MANILA GARDEN AND RUBY LIMVS. ROBERTO REYES
a.k.a. AMAY BISAYA
G.R. No. 154259 2005 Feb 28
FACTS: In the evening of October 13, 1994, while drinking coffee at the
lobby of Hotel Nikko, respondent was invited by a friend, Dr. Filart to join her
in a party in celebration of the birthday of the hotels manager. During
the party and when respondent was lined-up at the buffet table, he
was stopped by Ruby Lim, the Executive Secretary of the hotel, and
asked to leave the party. Shocked and embarrassed, he tried to
explain that he was invited by Dr. Filart, who was h e r s e l f a g u e s t .
N o t l o n g a f t e r , a M a k a t i p o l i c e m a n a p p r o a c h e d h i m a n d escorted
him out of her party. Ms. Lim admitted having asked respondent to leave
the party but not under the ignominious circumstances painted by Mr.
Reyes, that she did the act politely and discreetly. Mindful of the wish of
the celebrant to keep the party intimate and exclusive, she spoke to
the respondent herself when she saw him by the buffet table with no
other guests in the immediate vicinity. She asked him to leave the
party after he finished eating. After she had turned to leave, the latter
screamed and made a big scene. Dr. Filart testified that she did not want
the celebrant to think that she invited Mr. Reyes to the party. Respondent
filed an action for actual, moral and/or exemplary damages and
attorneys fees. The lower court dismissed the complaint. On appeal,
the Court of Appeals reversed the HELD of the trial court,
consequently imposing upon Hotel Nikko moral and exemplary damages and
attorneys fees. On motion for reconsideration, the Court of Appeals affirmed its
decision. Thus, this instant petition for review.
ISSUES: Whether or not Ms. Ruby Lim is liable under Articles 19 and 21 of the
Civil C o d e i n a s k i n g M r . R e y e s t o l e a v e t h e p a r t y a s h e w a s n o t
i n v i t e d b y t h e celebrant thereof and whether or not Hotel Nikko, as the
employer of Ms. Lim, be solidarily liable with her.
HELD: The Court found more credible the lower courts findings of
facts. There was no proof of motive on the part of Ms. Lim to humiliate
Mr. Reyes and to e x p o s e h i m t o r i d i c u l e a n d s h a m e . M r . R e y e s
v e r s i o n o f t h e s t o r y w a s unsupported, failing to present any witness
to back his story. Ms. Lim, not having abused her right to ask Mr. Reyes to
leave the party to which he was not invited, cannot be made liable for damages
under Articles 19 and 21 of the Civil Code. Necessarily, neither can her
employer, Hotel Nikko, be held liable as its liability springs from that of
its employees. When a right is exercised in a manner which does not
conform with the norms enshrined in Article 19 and results in damage to
another, a legal wrong is thereby committed for which the wrongdoer
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must be responsible. Article 21states that any person who willfully causes
loss or injury to another in a manner that is contrary to morals, good
customs or public policy shall compensate the latter for the damage.
Without proof of any ill-motive on her part, Ms. Lims act cannot amount to
abusive conduct. The maxim Volenti Non Fit Injuria (self-inflicted
injury) was upheld by the Court, that is, to which a person assents is
not esteemed in law as injury, t h a t c o n s e n t t o i n j u r y p r e c l u d e s
t h e r e c o v e r y o f d a m a g e s b y o n e w h o h a s knowingly and voluntarily
exposed himself to danger.
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St. Mary's Academy v. Carpitanos

ST. MARYS ACADEMY, petitioner,VS. WILLIAM CARPITANOS and LUCIA S.
CARPITANOS, GUADA DANIEL, JAMES DANIEL II, JAMES DANIEL, SR., and
VIVENCIO VILLANUEVA,respondents
February 6, 2002
FACTS: From February 13 to 20, 1995, defendant-appellant St. Marys

Academy of Dipolog City conducted an enrollment drive for the school year
1995-1996. As a student of St. Marys Academy, Sherwin Carpitanos was part
of the campaigning group. Accordingly, Sherwin, along with other high school
students were riding in a Mitsubishi jeep owned by defendant Vivencio
Villanueva on their way to Larayan Elementary School, Larayan,
Dapitan City. The jeep was driven by James Daniel II then 15 years
old and a student of the same school. Allegedly, the latter drove the
jeep in a reckless manner and as a result the jeep turned turtle.
Sherwin Carpitanos died as a result of the injuries he sustained from the
accident. The trial court ordered the defendants, St. Marys Academy
principally liable and the parents of James Daniel as subsidiarily liable for
damages.
The Court of Appeals affirmed the decision of the trial court. The Court of
Appeals held petitioner St. Marys Academy liable for the death of
Sherwin Carpitanos under Articles 218 and 219 of the Family Code,
pointing out that petitioner was negligent in allowing a minor to drive and in
not having a teacher accompany the minor students in the jeep.
ISSUE: Whether or not the appellant St. Marys Academy is principally

liable for damages for the death of Sherwin.
HELD: No. Under Article 219 of the Family Code, if the person under custody is
a minor, those exercising special parental authority are principally
and solidarily liable for damages caused by the acts or omissions of the
unemancipated minor while under their supervision, instruction, or custody.
However, for petitioner to be liable, there must be a finding that the act or
omission considered as negligent was the proximate cause of the injury caused
because the negligence must have a causal connection to the accident.
Respondents Daniel spouses and Villanueva admitted that the immediate
cause of the accident was not the negligence of petitioner or the reckless
driving of James Daniel II, but the detachment of the steering wheel guide of
the jeep. Hence, liability for the accident, whether caused by the negligence of
the minor driver or mechanical detachment of the steering wheel guide of the
jeep, must be pinned on the minors parents primarily. The negligence
of petitioner St. Marys Academy was only a remote cause of the
accident. Between the remote cause and the injury, there intervened
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the negligence of the minors parents or the detachment of the steering

wheel guide of the jeep. Considering that the negligence of the minor driver or
the detachment of the steering wheel guide of the jeep owned by
respondent Villanueva was an event over which petitioner St. Marys
Academy had no control, and which was the proximate cause of the
accident, petitioner may not be held liable for the death resulting from
such accident.
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TSPI, INCORPORATION VS. TSPIC EMPLOYEES UNION

TSPIC CORPORATION, Petitioner, versus TSPIC EMPLOYEES UNION
(FFW), representing MARIA FE FLORES, FE CAPISTRANO, AMY DURIAS,[1]
CLAIRE EVELYN VELEZ, JANICE OLAGUIR, JERICO ALIPIT, GLEN
BATULA, SER JOHN HERNANDEZ, RACHEL NOVILLAS, NIMFA ANILAO,
ROSE SUBARDIAGA, VALERIE CARBON, OLIVIA EDROSO, MARICRIS
DONAIRE, ANALYN AZARCON, ROSALIE RAMIREZ, JULIETA ROSETE,
JANICE NEBRE, NIA ANDRADE, CATHERINE YABA, DIOMEDISA ERNI,[2]
MARIO SALMORIN, LOIDA COMULLO,[3] MARIE ANN DELOS SANTOS,[4]
JUANITA YANA, and SUZETTE DULAY, Respondents.,
G.R. No. 163419, 2008 Feb 13, 2nd Division
VELASCO, JR., J.:
FACTS: TSPI Corporation entered into a Collective Bargaining
Agreement w i t h t h e c o r p o r a t i o n U n i o n f o r t h e i n c r e a s e o f s a l a r y
f o r t h e l a t t e r s members for the year 2000 to 2002 starting from January
2000. Thus, the increased in salary was materialized on January 1,
2000. However, on October 6, 2000, the Regional Tripartite Wage and
production Board raised daily minimum wage from P 223.50 to P 250.00
starting November1, 2000. Conformably, the wages of the 17 probationary
employees were increased to P250.00 and became regular employees therefore
receiving another 10% increase in salary. In January 2001, TSPIC implemented
the new wage rates as mandated by the CBA. As a result, the nine employees
who were senior to the 17 recently regularized employees received fewer wage.
On January 19, 2001, TSPICs HRD notified the 24 employees who are private
respondents, that due to an error in the automated payroll system,
they were overpaid and the overpayment would be deducted from their
salaries starting February 2001. The Union on the other hand ,
asserted that there was no error and the deduction of the
a l l e g e d over payment constituted diminution of pay.
ISSUE: Whether the alleged overpayment constitutes diminution of pay as

alleged by the Union.
HELD: Yes, because it is considered that Collective Bargaining Agreement

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

REGINO VS. PCST
G.R No. 156109. November 18, 2004
FACTS: P e t i t i o n e r K r i s t i n e R e g i n o w a s a p o o r s t u d e n t e n r o l l e d a t
t h e P a n g a s i n a n C o l l e g e o f S c i e n c e a n d Te c h n o l o g y . Th u s , a
f u n d r a i s i n g project pertaining to a dance party was organized by
PCST, requiring all its students to purchase two tickets in consideration as a
prerequisite for the final exam. Regino, an underprivileged, failed to
purchase the tickets because of her status as well as that project was
against her religious belief, thus, she was not allowed to take the final
examination by her two professors.
ISSUE: Was the refusal of the university to allow Regino to take the
final examination valid?
HELD: No, the Supreme Court declared that the act of PCST was not valid,
though, it can impose its administrative policies, necessarily, and the amount
of tickets or payment shall be included or expressed in the
s t u d e n t handbooks given to every student before the start of the regular
classes of the semester. In this case, the fund raising project was not included
in the activities to be undertaken by the university during the semester. The
petitioner is entitled for damages due to her traumatic experience on the acts
of the university causing her to stop studying sand later transfer to
another school.
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PSBA v. Court of Appeals

PHILIPPINE SCHOOL OF BUSINESS ADMINISTRATION, JUAN D. LIM,
BENJAMIN P. PAULINO, ANTONIO M. MAGTALAS, COL. PEDRO SACRO and
LT. M. SORIANO, petitioners, versus COURT OF APPEALS, HON. REGINA
ORDOEZ-BENITEZ, in her capacity as Presiding Judge of Branch 47,
Regional Trial Court, Manila, SEGUNDA R. BAUTISTA and ARSENIA D.
BAUTISTA, respondents.
(G.R. No. 84698, February 4, 1992, 2nd Division)
PADILLA, J.:
FACTS: A stabbing incident on 30 August 1985 which caused the death of

Carlitos Bautista while on the second-floor premises of the Philippine School of
Business Administration (PSBA) prompted the parents of the deceased to file
suit in the Regional Trial Court of Manila (RTC Branch 47) presided over by
Judge Regina Ordoez-Benitez, for damages against the said PSBA and its
corporate officers. At the time of his death, Carlitos was enrolled in the third
year commerce course at the PSBA. It was established that his assailants were
not members of the school's academic community but were elements from
outside the school.
The plaintiffs (now private respondents) sought to adjudge them liable for
the victim's untimely demise due to their alleged negligence, recklessness and
lack of security precautions, means and methods before, during and after the
attack on the victim. On the other side, defendants a quo (now petitioners)
sought to have the suit dismissed, alleging that since they are presumably
sued under Article 2180 of the Civil Code, the complaint states no cause of
action against them, as jurisprudence on the subject is to the effect
that academic institutions, such as the PSBA, are beyond the ambit of the rule
in the afore-stated article.
The respondent trial court, however, overruled petitioners' contention
and thru an order dated 8 December 1987, denied their motion to dismiss. A
subsequent motion for reconsideration was similarly dealt with by an order
dated 25 January 1988. Petitioners then assailed the trial court's disposition
before the respondent appellate court which, in a decision promulgated on 10
June 1988, affirmed the trial court's orders. On 22 August 1988, the
respondent appellate court resolved to deny the petitioners' motion for
reconsideration. Hence, this petition is.
ISSUE: Whether or not the case should be dismiss base on the contention that
the complaint states no cause of action against them.
HELD: No. Based on the petitioners contention, it is true that this is not under
the provision of Article 2180 in conjunction with Article 2176 of the Civil Code
as established by jurisprudence that, it had been stressed that the law (Article
2180) plainly provides that the damage should have been caused or inflicted
by pupils or students of the educational institution sought to be held liable for
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the acts of its pupils or students while in its custody. The victims assailant is
not a student neither an employee of the petitioner so it must be absolve of
damages. However as ruled by this court, the respondent cause of action is
based on a bilateral contract or obligation which the parties are bound to
comply with not based on the precepts of quasi-delicts as the petitioner based
its contention to dismiss the said case.
When an academic institution accepts students for enrolment, there is
established a contract between them, resulting in bilateral obligations which
both parties are bound to comply with. For its part, the school undertakes to
provide the student with an education that would presumably suffice to equip
him with the necessary tools and skills to pursue higher education or a
profession. On the other hand, the student covenants to abide by the school's
academic requirements and observe its rules and regulations. Aside from this,
academic institution must meet also the implicit obligation which to provide an
atmosphere which is conducive to learning and this cannot be achieve if upon
entering the school premises there is a fear or threat against to students life or
limb. In order to held the petitioners liable this should be proven in court
according to rule of evidence that there is a lack of negligence corresponding to
the circumstance of person, time and place to fulfil its obligation. It is also
unduly oppressive to the academic institution to just make them liable res ipsa
loquitor on the damage itself. This case is now remanded to the lower court of
origin to continue the proceedings.
Petition denied.
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Cosmo Entertainment v. La Ville

COSMO ENTERTAINMENT MANAGEMENT, INC., petitioner, versus LA VILLE
COMMERCIAL CORPORATION, respondent.
(G.R. No. 152801, August 20, 2004, 2nd Division)
CALLEJO, SR., J.:
FACTS: The respondent, La Ville Commercial Corporation, is the registered

owner of a parcel of land covered by Transfer Certificate of Title (TCT) No.
174250 of the Registry of Deeds of Makati City together with the commercial
building thereon situated at the corner of Kalayaan and Neptune Streets in
Makati City. On March 17, 1993, it entered into a Contract of Lease with
petitioner Cosmo Entertainment Management, Inc. over the subject property
for a period of seven years with a monthly rental of P250 per square meter of
the floor area of the building and a security deposit equivalent to three monthly
rentals in the amount of P447,000 to guarantee the faithful compliance of the
terms and conditions of the lease agreement. Upon execution of the contract,
the petitioner took possession of the subject property.
The petitioner, however, suffered business reverses and was constrained
to stop operations in September 1996. Thereafter, the petitioner defaulted in
its rental payments. Consequently, on February 1, 1997, the respondent made
a demand on the petitioner to vacate the premises as well as to pay the accrued
rentals plus interests. After negotiations between the parties failed, the
respondent, on May 27, 1997, reiterated its demand on the petitioner to pay
the unpaid rentals as well as to vacate and surrender the premises to the
respondent. When the petitioner refused to comply with its demand, the
respondent filed with the Metropolitan Trial Court (MeTC) of Makati City,
Branch 62, a complaint for illegal detainer.
The petitioner, in its answer to the complaint, raised the defense that,
under the contract, it had the right to sublease the premises upon prior written
consent by the respondent and payment of transfer fees. However, the
respondent, without any justifiable reason, refused to allow the petitioner to
sublease the premises. After due proceedings, the MeTC rendered judgment in
favor of the respondent holding that the petitioner was bound by the terms of
the contract that it could only sublease the premises upon the respondents
consent and as consequence order the petitioner all accrued rentals, interest
and tax dues. The Regional Trial Court (RTC) affirmed the decision of MeTC
and furnished the copy on its decision to the petitioner which he received on
July 6, 2000.
On July 21, 2000, the last day to file its petition for review on certiorari of
the RTC decision, the petitioner filed with the Court of Appeals (CA) a Motion
for Extension to File Petition for Review which was duly granted.
Notwithstanding the clear tenor of the said resolution granting a non-
extendible period, the petitioner filed, on August 4, 2000, a second Motion for
Extension to File Petition for Review asking that it be given another fifteen (15)
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days from August 5, 2000, or until August 20, 2000, within which to file the
said pleading. On August 18, 2000, the petitioner filed its Petition for Review
on Certiorari with the CA but was dismissed base on the fact that it was filed
beyond the extended period granted to the petitioner. Hence, the recourse to
this Court is sought by the petitioner.
ISSUE: Whether or not the petition for review on certiorari should be dismissed
for having been filed out of time.
HELD: Yes. In accordance to the provision of Rule 42 of the 1997 Rule of

Court, the CA may grant an additional period of fifteen (15) days only within
which to file the petition for review and no further extension shall be granted
except the most compelling reason and in no case to extend fifteen (15) days.
As adjudge by the Court, the granting is based not on a matter of right but
upon the sound discretion of the court.
The reason of the petitioner that heavy volume of work and equally
urgent filings in courts and administrative agencies, was not considered a
compelling reason by the CA as it subsequently denied the petition for review
for being filed out of time. The CA could not be faulted for this. In fact,
jurisprudence had held that pressure and large volume of work do not excuse a
party for filing the petition for certiorari out of time. When the petitioner thus
filed its petition for review on certiorari beyond the extended period, the CA had
the reason to deny the same outright. Wise to consider also is the directive
qualification expressly provided by appellate court on not further extending the
filing of the petition thus behoved the petitioner to comply on it. Granting
liberally would tantamount of not following an express provision of law which is
against public order and our system of justice for the sake of only a single
private individual.
Petition denied.
Ayala Corp. vs. Rosa Diana Realty
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AYALA CORPORATION, petitioner, vs. ROSA-DIANA REALTY AND

DEVELOPMENT CORPORATION, respondent.
(G.R. No. 134284, December 1, 2000 2nd Division)
DE LEON, JR., J.:
FACTS: Petitioner Ayala Corporation (Ayala) was the registered owner of a

parcel of land located in Alfaro Street, Salcedo Village, Makati City with an area
of 840 square meters, more or less and covered by Transfer Certificate of Title
(TCT) No. 233435 of the Register of Deeds of Rizal.
On April 20, 1976, Ayala sold the lot to Manuel Sy married to Vilma Po
and Sy Ka Kieng married to Rosa Chan. The Deed of Sale executed between
Ayala and the buyers contained Special Conditions of Sale and Deed
Restrictions. Among the Special Conditions of Sale were:
a) The vendees shall build on the lot and submit the building plans to the
vendor before September 30, 1976 for the latters approval
b) the construction of the building shall start on or before March 30, 1977
and completed before 1979. Before such completion, neither the deed
of sale shall be registered nor the title released even if the purchase
price shall have been fully paid
c) There shall be no resale of the property
The Deed Restrictions, on the other hand, contained the stipulation that
the gross floor area of the building to be constructed shall not be more than
five (5) times the lot area and the total height shall not exceed forty two (42)
meters. The restrictions were to expire in the year 2025.
Manuel Sy and Sy Ka Kieng failed to construct the building in violation of
the Special Conditions of Sale. Notwithstanding the violation, Manuel Sy and
Sy Ka Kieng, in April 1989, were able to sell the lot to respondent Rosa-Diana
Realty and Development Corporation (Rosa-Diana) with Ayalas approval. As a
consideration for Ayala to release the Certificate of Title of the subject property,
Rosa-Diana, on July 27, 1989 executed an Undertaking promising to abide by
said special conditions of sale executed between Ayala and the original
vendees. Upon the submission of the Undertaking, together with the building
plans for a condominium project, known as The Peak, Ayala released title to
the lot, thereby enabling Rosa-Diana to register the deed of sale in its favor and
obtain Certificate of Title No. 165720 in its name. The title carried as
encumbrances the special conditions of sale and the deed restrictions. Rosa-
Dianas building plans as approved by Ayala were subject to strict compliance
of cautionary notices appearing on the building plans and to the restrictions
encumbering the Lot regarding the use and occupancy of the same.
Thereafter, Rosa-Diana submitted to the building official of Makati
another set of building plans for The Peak which were substantially different
from those that it earlier submitted to Ayala for approval. While the building
plans which Rosa-Diana submitted to Ayala for approval envisioned a 24-meter
high, seven (7) storey condominium project with a gross floor area of 3,968.56
square meters, the building plans which Rosa-Diana submitted to the building
official of Makati, contemplated a 91.65 meter high, 38 storey condominium
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building with a gross floor area of 23,305.09 square meters. Needless to say,
while the first set of building plans complied with the deed restrictions, the
latter set exceeded the same.
Because of this, Ayala filed an injunctive relief but was denied by the
Regional Trial Court (RTC) that led Rosa-Diana to complete the building. Ayala
then filed a violation of the Deed of Restriction but was denied by the RTC
based on no cause of action. The Court of Appeals affirmed the lower court
base on the principle of estoppel and/or abandonment, hence this petition is.
ISSUE: Whether or not there is a violation of the Deed of Restriction which can
be a valid ground to grant the plaintiff for its prayer of either rescission or
specific performance.
HELD: Yes. It is obvious base on the facts that there is a violation of the Deed
of Restriction but this cannot be used as a valid ground to grant the petitioner
its prayer of either rescission of contract of its specific performance. It is true
that Article 1159 of the New Civil Code provides that Obligations arising from
contracts have the force of the law of the contracting parties and should be
complied with in good faith, and this is clearly violated not only negligently but
with bad faith but the prayer of relief is not justifiable base on merit of the
case. First, the specific performance is not feasible as the building already
completed neither the cancellation of the sale because the original parties are
not impleaded (Manuel Sy and Sy Ka Kieng). Second, rescinding the sale is not
granted as the original parties already violated the first requirement of the
contract and Ayala did nothing to it impliedly allowing or ratifying it. Third,
Ayala allowed other corporation to violate the Deed of Restriction which they
made and instead of praying relief of specific performance or cancellation of
sale, they prayed instead for damages.
Therefore, instead of Rescission or Specific Performance as the petitioner
prayed, the Court grants instead damages to the petitioner by virtue of the
violation of the Deed of Restriction by the defendant in accordance to case
decided by this court Ayala vs. Rey Burton Development Corporation.
Bricktown Development vs. Amor Tierra Development
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BRICKTOWN DEVELOPMENT CORP. (its new corporate name

MULTINATIONAL REALTY DEVELOPMENT CORPORATION) and MARIANO
Z. VERALDE, petitioners, vs. AMOR TIERRA DEVELOPMENT
CORPORATION and the HON. COURT OF APPEALS, respondents.
(G.R. No. 112182, December 12, 1994 3rd Division)
VITUG, J.:
FACTS: On 31 March 1981, Bricktown Development Corporation (petitioner),

represented by its President and co-petitioner Mariano Z. Velarde, executed two
Contracts to Sell in favor of Amor Tierra Development Corporation (private),
represented in these acts by its Vice-President, Moises G. Petilla, covering a
total of 96 residential lots, situated at the Multinational Village Subdivision, La
Huerta, Paraaque, Metro Manila, with an aggregate area of 82,888 square
meters. The total price of P21,639,875.00 was stipulated to be paid by private
respondent in such amounts and maturity dates, as follows: P2,200,000.00 on
31 March 1981; P3,209,968.75 on 30 June 1981; P4,729,906.25 on 31
December 1981; and the balance of P11,500,000.00 to be paid by means of an
assumption by private respondent of petitioner corporation's mortgage liability
to the Philippine Savings Bank or, alternatively, to be made payable in cash.
On even date, 31 March 1981, the parties executed a Supplemental Agreement,
providing that private respondent would additionally pay to petitioner
corporation the amounts of P55,364.68, or 21% interest on the balance of
down payment for the period from 31 March to 30 June 1981, and of
P390,369.37 representing interest paid by petitioner corporation to the
Philippine Savings Bank in updating the bank loan for the period from 01
February to 31 March 1981.
Private respondent was only able to pay petitioner corporation the sum of
P1,334,443.21. In the meanwhile, however, the parties continued to negotiate
for a possible modification of their agreement, although nothing conclusive
would appear to have ultimately been arrived at.
Finally, on 12 October 1981, Petitioner Corporation, through its legal
counsel, sent private respondent a "Notice of Cancellation of Contract" on
account of the latter's continued failure to pay the instalment due 30 June
1981 and the interest on the unpaid balance of the stipulated initial payment.
Petitioner Corporation advised private respondent, however, that it (private
respondent) still had the right to pay its arrearages within 30 days from receipt
of the notice "otherwise the actual cancellation of the contract (would) take
place."
Several months later, or on 26 September 1983, private respondent,
through counsel, demanded the refund of private respondent's various
payments to petitioner corporation, allegedly "amounting to P2,455,497.71,"
with interest within fifteen days from receipt of said letter, or, in lieu of a cash
payment, to assign to private respondent an equivalent number of
unencumbered lots at the same price fixed in the contracts.
The Regional Trial Court (RTC) grant the respondent relief and order the
return of P1,334,443.21 representing the payment made by the respondent to
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the petitioner with legal interest. The Court of Appeals affirmed in toto the RTC
decision, hence this petition is.
ISSUE: Whether or not the initial payment should be forfeited in favor of the
petitioner as liquidated damages in accordance to the contract as the contract
is validly rescinded.
HELD: No. It is established in the decision of the Court that the contract is
validly rescinded as it clearly establish in the contract the right of the petitioner
to rescind it if there is a failure of payment. But this will not give rise or
guarantee the right also of the petitioner to forfeit the initial payment. As stated
in the contract, The OWNER shall have the right to resell the lot/s subject
hereof to another buyer and all payments made, together with all
improvements introduced on the aforementioned lot/s shall be forfeited in favor
of the OWNER as liquidated damages, and in this connection, the PURCHASER
obligates itself to peacefully vacate the aforesaid lot/s without necessity of notice
or demand by the OWNER. This give rise that there is a reciprocal condition
before forfeiture is guaranteed that the respondent should have been in
possession of the said land in order for him to vacate it. It is well establish on
the facts that the respondent never had the possession of the land. This
argument not only guarantee the return of the initial payment but also the
payment of interest as the petitioner enjoy the benefit of the money when in its
possession that should have been use to benefit the respondent.
The Court also in its decision highlight the good faith of the respondent
as there are negotiation happened in order to amend the contract but this
contract never materialize. The court therefore orders the petitioner to return
the initial payment made by the respondent to the petitioner with interest.
Decision of the lower courts is hereby affirmed.
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Pilipinas Hino vs. Court of Appeals

PILIPINAS HINO, INC., petitioner, vs. COURT OF APPEALS, FERNANDO V.
REYES, PONCIANO REYES, and TERESITA R. TAN, respondents.
(G.R. No. 126570, August 18, 2000 1st Division)
KAPUNAN, J.:
FACTS: This is an action for Sum of Money and Damages filed by Pilipinas
Hino, Inc., thereinafter referred to as the plaintiff against Fernando V. Reyes,
Ponciano V. Reyes, and Teresita R. Tan, hereinafter referred to as the
defendants.
That on or about 15 August 1989, a contract of lease was entered into
between herein parties, under which the defendants, as lessors, leased real
property located at Bigaa, Balagtas, Bulacan, to herein plaintiff for a term of
two (2) years, from 16 August 1989 to 15 August 1991. Pursuant to the
contract of lease, plaintiff-lessee deposited with the defendants-lessors the
amount of Four Hundred Thousand (P400,000.00) Pesos to answer for repairs
and damages that may be caused by the lessee on the leased premises during
the period of the lease. After the expiration of the lease contract, the plaintiff
and defendants made a joint inspection of the premises to determine the extent
of the damages thereon, both agreed that the cost of repairs would amount to
P60,000.00 and that the amount of P340,000.00 shall then be returned by the
defendants to plaintiff. However, defendants returned to plaintiff only the
amount of P200,000.00, still having a balance of P140,000.00.
Notwithstanding repeated demands, defendants unjustifiably refused to return
the balance of P140,000.00 holding that the true and actual damage on the
lease premises amounted to P298,738.90.
On August 10, 1990, plaintiff and defendants entered into a contract to
sell denominated as a Memorandum of Agreement to sell whereby the latter
agreed to sell to the former the leased property subject of this suit in the
amount of P45,611,000.00. The aforesaid Memorandum of Agreement to sell
granted the owner (defendants) the option to rescind the same upon failure of
the buyer (plaintiff) to pay any of the first six (6) installments with the
corresponding obligation to return to the buyer any amount paid by the buyer
in excess of the downpayment as stated in paragraphs 7 and 9 of the
Memorandum of Agreement. Pursuant to said Memorandum of Agreement,
plaintiff remitted on August 10, 1990 to the defendants the amount of
P1,811,000.00 as downpayment. Subsequently, plaintiff paid the first and
second installments in the amount of P1,800,000.00 and P5,250,000.00,
respectively, thereby making the total amount paid by the plaintiff to the
defendants, on top of the downpayment, P7,050,000.00. Unfortunately,
plaintiff failed to pay the 3rd installment and subsequent installments: and
thereupon, defendants decided to, and in fact did, in a letter dated 20
November 1990, rescinded and terminated the contract and promised to return
to the plaintiff all the amounts paid in excess of the downpayment after
deducting the interest due from 3rd to 6th installments, inclusive. Thus, from
the amount of P7,050,000.00 due to be returned to the plaintiff, defendants
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deducted P924,000.00 as interest and P220,000.00 as rent for the period from
15 February to 15 March 1991, thereby returning to the plaintiff the amount of
P5,906,000.00 only, as acknowledged by plaintiff in the letter dated 4 April
1991.
The Regional Trial Court, as affirmed by the Court of Appeals, partly
grant the petition and required the defendant to return the P924,000.00 with
interest but dismiss the claim of balance of P140,000.00 base on no cause of
action. Not satisfied with the judgement, the plaintiff elevated the suit. Hence
this petition is.
ISSUE: Whether or not the amount of P924,000.00 is unjustly withhold as

interest by defendant and the claim of balance of P140,000.00 claiming that
defendant has no cause of action.
HELD: The decision of lower court is hereby affirmed ordering the return of
P924,000.00 and dismissing the claim of balance of P140,000.00.
As to the case of claim of balance of P140,000.00, the contention of the
plaintiff that they agreed for only the P60,000.00 as payment for repairs and
damages of the subject property has no merit. There is no evidence presented
in the proceeding that would support that contention so it is justified for the
defendant to claim that amount to cover the damages and repairs as per agreed
upon in the contract. Worthy to mention is, the total amount that was claim by
defendant as repairs and damages is far lesser than actual damages proven in
court.
As to the case of the amount of P924,000.00, this is unjustly withhold as
interest because it is expressly stated in the contract that no interest should be
collected when the defendant exercise their right to forfeit, When the owners
exercise their option to forfeit the downpayment, they shall return to the buyer
any amount paid by the buyer in excess of the downpayment with no obligation
to pay interest thereon.. This is very categorical and should be complied as
expressly state pursuant to Article 1159 of the New Civil Code which state that
Obligation arising from contract have the force of the law between the
contracting parties and should be complied with in good faith. There is
nothing wrong against this stipulation to make it void as this never contradict
any law, morals, good customs, public policy and public order. Therefore, the
defendant is required to return this amount to the petitioner.
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Sarte Flores v. Sps. Lindo

ARTURO SARTE FLORES, petitioner, VS. SPOUSES ENRICO L. LINDO, JR.
AND EDNA C. LINDO, respondent.
(G.R. No. 183984, April 13, 2011, 2nd Division)
CARPIO, J.:
FACTS: On 31 October 1995, Edna Lindo (Respondent) obtained a loan from

Arturo Flores (petitioner) amounting to P400,000 payable on 1 December 1995
with 3% compounded monthly interest and 3% surcharge in case of late
payment. To secure the loan, Edna executed a Deed of Real Estate Mortgage
(the Deed) covering a property in the name of Edna and her husband Enrico
(Enrico) Lindo, Jr. (collectively, respondents). Edna also signed a Promissory
Note and the Deed for herself and for Enrico as his attorney-in-fact. Edna
issued three checks as partial payments for the loan. All checks were
dishonored for insufficiency of funds, prompting petitioner to file a Complaint
for Foreclosure of Mortgage with Damages against respondents. Regional Trial
Court (RTC), Branch 33 ruled that petitioner was not entitled to judicial
foreclosure of the mortgage. The RTC, Branch 33 found that the Deed was
executed by Edna without the consent and authority of Enrico. The RTC,
Branch 33 noted that the Deed was executed on 31 October 1995 while the
Special Power of Attorney (SPA) executed by Enrico was only dated 4 November
1995.
On 8 September 2004, petitioner filed a Complaint for Sum of Money
with Damages against respondents at RTC, Branch 22. Respondents filed their
Answer with Affirmative Defenses and Counterclaims where they admitted the
loan but stated that it only amounted to P340,000. Respondents further
alleged that Enrico was not a party to the loan because it was contracted by
Edna without Enrico's signature. Respondents prayed for the dismissal of the
case on the grounds of improper venue, res judicata and forum-shopping,
invoking the Decision of the RTC, Branch 33. The RTC grant the petition.
Respondents filed a Petition for Certiorari and Mandamus with Prayer for
a Writ of Preliminary Injunction and/or Temporary Restraining Order before
the Court of Appeals. In its 30 May 2008 Decision, the Court of Appeals set
aside the 22 July 2005 and 8 February 2006 Orders of the RTC, Branch 42 for
having been issued with grave abuse of discretion. The Court of Appeals ruled
that while the general rule is that a motion to dismiss is interlocutory and not
appealable, the rule admits of exceptions. The Court of Appeals ruled that the
RTC, Branch 42 acted with grave abuse of discretion in denying respondents'
motion to dismiss. The Court of Appeals ruled that under Section 3, Rule 2 of
the 1997 Rules of Civil Procedure, a party may not institute more than one suit
for a single cause of action. If two or more suits are instituted on the basis of
the same cause of action, the filing of one on a judgment upon the merits in
any one is available ground for the dismissal of the others. The Court of
Appeals ruled that on a non-payment of a note secured by a mortgage, the
creditor has a single cause of action against the debtor, that is recovery of the
credit with execution of the suit. Thus, the creditor may institute two
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alternative remedies: either a personal action for the collection of debt or a real
action to foreclose the mortgage, but not both. The Court of Appeals ruled that
petitioner had only one cause of action against Edna for her failure to pay her
obligation and he could not split the single cause of action by filing separately a
foreclosure proceeding and a collection case. By filing a petition for foreclosure
of the real estate mortgage, the Court of Appeals held that petitioner had
already waived his personal action to recover the amount covered by the
promissory note.
Petitioner filed a motion for reconsideration but was denied. Hence this
petition.
ISSUE: Whether or not the loan obtained by the defendant can be recovered
without violating the multiplicity of suit base on single action or cause.
HELD: Yes. There is unjust enrichment "when a person unjustly retains a

benefit to the loss of another, or when a person retains money or property of
another against the fundamental principles of justice, equity and good
conscience." The principle of unjust enrichment requires two conditions: (1)
that a person is benefited without a valid basis or justification, and (2) that
such benefit is derived at the expense of another. The cause is not justified as
it did not foreclose the property or payment was made and the benefit was
enjoyed by the respondent at petitioner expense. The requisite is therefore
fulfilled rendering the respondent responsible for the payment of the loaned as
Article 22 of the New Civil Code state Every person who through an act of
performance by another, or any other means, acquires or comes into
possession of something at the expense of the latter without just or legal
ground, shall return the same to him.
The multiplicity of suit is a procedural law and cannot bar the filling of
this suit considering the circumstances of this case, the principle against
unjust enrichment, being a substantive law, should prevail over the procedural
rule on multiplicity of suits. The lower courts performed numerous errors in
this case in the interpretation and application of the law like not recognizing
the RATIFICATION made by the husband as it is a continuing offer cited in
Article 96 of the Family Code in its last sentences and declaring the mortgage
null and void. The CA even recognized these decisions and did not reverse it. As
conclusion, the defendant should not be allowed to unjustly enrich at expense
of others just for the reason of wrong interpretation and misapplication done by
the various lower courts.
The lower court decision is hereby set aside and further ordering the RTC
Branch 42 to proceed with the claim of loan and damages base on the merit of
evidence.
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Philippine Realty and Holding Corp. v. Ley Const. and Dev. Corp.
PHILIPPINE REALTY AND HOLDINGS CORPORATION, Petitioner, vs LEY
CONSTRUCTION AND DEVELOPMENT CORPORATION, Respondent.
(G. R. No. 165548, June 13, 2011 3rd Division)
SERENO, J.:
FACTS: Ley Construction and Development Corporation (LCDC) was the

project contractor for the construction of several buildings and other
improvements for Philippine Realty & Holdings Corporation (PRHC), the project
owner. Engineer Dennis Abcede (Abcede) was the project construction manager
of PRHC, while Joselito Santos (Santos) was its general manager and vice-
president for operations.
In their contract they expressly stipulate the rule on what to do if there
increase in prices and changes in the project. It is stated that The Contract
Price shall not be subject to escalation except due to work addition, (approved
by the OWNER and the ARCHITECT) and to official increase in minimum wage
as covered by the Labor Adjustment Clause below. All costs and expenses over
and above the Contract Price except as provided in Article V hereof shall be for
the account of the CONTRACTOR. It is understood that there shall be no
escalation on the price of materials. However, should there be any increase in
minimum daily wage level, the adjustment on labor cost only shall be
considered based on conditions as stipulated below. The embodied term in the
construction of several buildings agreements were almost identical.
In the course of the construction of the one of its building specifically
Tektile Building, it became evident to both parties that LCDC would not be able
to finish the project within the agreed period. Thus, through its president,
LCDC met with Abcede to discuss the cause of the delay. LCDC explained that
the unanticipated delay in construction was due mainly to the sudden,
unexpected hike in the prices of cement and other construction materials. It
claimed that without the corresponding increase in the fixed prices found in
the agreements, it would be impossible for it to finish the construction of the
Tektile Building. In their analysis of the project plans for the building and of
all the external factors affecting the completion of the project, the parties
discovered that even if LCDC were able to collect the entire balance from the
contract, the collected amount would still be insufficient to purchase all the
materials needed to complete the construction of the building. In spite of these,
Abcede indicate that the most important is the Tektile Building should be
completed on scheduled and agreed to reimburse the cost that LCDC will incur
up to P36,000,000.00 disregarding the stipulation above mention about the
restriction with regard to the hike of the price of the materials.
After the project and LCDC demand the payment, PRHC refuse to pay
some of the amount stipulated including the P36,000,000.00 claiming that it
was offset due to the delay in finishing of the construction rendering PRHC to
incur damage. LCDC then file in the Regional Trial Court (RTC) and was
granted for its demand. PRHC then appealed in the Court of Appeals( CA) and
the CA reversed the decision of the RTC. Hence this petition is.
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ISSUE: Whether or not the claim of LCDC is valid including the

P36,000,000.00 in spite of the agreement that an increase of the price of the
material should be the liability of LCDC.
HELD: Yes. All the claim of LCDC is valid and should not be offset to the claim
of PRHC except the overpayment and the expenses of repaired that was done
by PRHC on the poorly done waterproofing construction. Actually the claim
that the P36,000,000.00 that was used to augment the increase of the price of
the material is valid because it was tacitly authorize by the agent of PRHC base
on the circumstances and facts presented rendering the first agreement which
the increase in price of material should be bore by LCDC amended. Acts of
agent always bind the principal unless contrary is proven as he is its alter ego.
Actually the excess which is P2,248,463.00 which was infuse by LCDC beyond
this amount agreed was correctly decided by lower court that it should be on
the account of LCDC. This cannot be claim through the virtue of unjust
enrichment. In unjust enrichment one of its elements is the one should be
unjustly benefited at the others expense. Unjustly benefited should be cause or
derive or confer through mistake, fraud, coercion, or request. LCDC knowing
that they only agreed the maximum amount of P36,000,000.00 spent more and
did not confer it through mistake, coercion, fraud or request.
The claim of PRHC that the damage incurred by it from the delay of the
completion cannot also be tenable. The increase in the material price and lack
of supply of the materials was not due solely to LCDC fault or LCDC act in bad
faith to delay the completion but due to fortuitous event such us typhoon,
power failure and interruption of water supplies. The elements of fortuitous
event that would lead the excuse of the debtor to its obligation are: (a) the
cause of the breach of the obligation must be independent of the will of the
debtor; (b) the event must be either unforeseeable or unavoidable; (c) the event
must be such as to render it impossible for the debtor to fulfil his obligation in
a normal manner; and (d) the debtor must be free from any participation in, or
aggravation of the injury to the creditor. These elements are all satisfied as
base on presented facts and circumstance.
Therefore, the PRHC is oblige to pay the remaining contract price unpaid
including the payment of P36,000,000.00 and offset the overpayment made to
LCDC including the repairs of the work of waterproofing which was poorly
done.
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Titan-Ikeda Construction v. Primetown Property

TITAN-IKEDA CONSTRUCTION & DEVELOPMENT CORPORATION,
Petitioner, vs. PRIMETOWN PROPERTY GROUP, INC., Respondent.
(G.R. No. 158768, February 12, 2008 1st Division)
CORONA, J.:
FACTS: In 1992, respondent Primetown Property Group, Inc. awarded the

contract for the structural works of its 32-storey Makati Prime Tower (MPT) to
petitioner Titan-Ikeda Construction and Development Corporation. The parties
formalized their agreement in a construction contract dated February 4, 1993.
Upon the completion of MPT's structural works, respondent awarded the
P130,000,000 contract for the tower's architectural works (project) to
petitioner. Thus, on January 31, 1994, the parties executed a supplemental
agreement. It was agreed that upon the posting and acceptance by respondent
of the performance bond an 80% payment should be made through the delivery
of the condominium unit as payment. Pursuant to this agreement the
respondent deliver by executing a deed of sale covering 114 condominium units
and 20 parkings slots of the MPT collectively valued by the parties at
P112,416,716.88. Shortly thereafter, petitioner sold some of its units to third
persons.
In September 1995, respondent engaged the services of Integratech, Inc.
(ITI), an engineering consultancy firm, to evaluate the progress of the project.
In its September 7, 1995 report, ITI informed respondent that petitioner, at
that point, had only accomplished 31.89% of the project (or was 11 months
and six days behind schedule). Meanwhile, petitioner and respondent were
discussing the possibility of the latters takeover of the projects supervision.
Despite ongoing negotiations, respondent did not obtain petitioners consent in
hiring ITI as the projects construction manager. Neither did it inform petitioner
of ITIs September 7, 1995 report. In its September 7, 1995 report, ITI
estimated that petitioner should have accomplished 48.71% of the project as of
the October 12, 1995 takeover date. Petitioner repudiated this figure but
qualifiedly admitted that it did not finish the project. Records showed that
respondent did not merely take over the supervision of the project but took full
control thereof. Petitioner consequently conducted an inventory. On the basis
thereof, petitioner demanded from respondent the payment of its cost
amounting to P1,779,744.85 and sent a second demand amounting to
P2,023,876.25 because of additional material delivered recently. The
respondent did not heed this demand instead it send a demand amounting to
P69,785,023.47 as a reimbursement of actual cost incurred to complete the
project.
Petitioner then filed a specific performance of the demand in the Housing
and Land Use Regulatory Board (HLURB) and the HLURB granted the
petitioner relief. The petitioner instead of appealing this file a complaint for the
collection of the actual cost incurred to complete the project to Regional Trial
Court (RTC) but the RTC dismissed this. Respondent appealed then in the
Court of Appeals which overturned the decision and order the petitioner to pay
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the actual cost of completing the project amounting to P66,677,00.00. The

petitioner then appealed CA decision to Supreme Court (SC) hence this petition
is.
ISSUE: Whether or not the petitioner is liable to the actual cost of completing
the project.
HELD: No. But the petitioner is liable to return the condominiums to the
respondent in excess of the compensation it justly would receive for the service
work it rendered to the respondent in building the towers architectural work of
MPT. The SC then remanded this case to the lower court for the proper
identification of the value of the condominiums in order to offset it to the actual
finish work made by the petitioner before the actual takeover so that the excess
will be return to the respondent. This is in accordance to the concept of
solution indebiti as this is mistakenly delivered to the petitioner as payment of
the construction but unfortunately it was not completed.
The claim that delay was incurred is no merit because the respondent
never sent a written demand letter to the petitioner as required in the contract.
It should have sent this demand letter before it takeover of the said project but
the respondent instead just came and takeover the project. The report of ITI
also is not binding because as evidence of delay of the on-going construction
because the petitioner did not consent for it to take over the management as
the respondent just authorize it to assess the percentage of accomplishment in
spite of the present of a construction manager.
Therefore the decision of the lower court is reversed and the proceeding
should be in accordance to the decision of the SC. This case is therefore
remanded.
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PADCOM v. Ortigas
PADCOM CONDOMINIUM CORPORATION, petitioner, vs. ORTIGAS CENTER
ASSOCIATION, INC., respondent.
(G.R. No. 146807, May 9, 2002 1st Division)
DAVIDE, JR., C.J.:
FACTS: Petitioner Padcom Condominium Corporation (PADCOM) owns and

manages the Padilla Office Condominium Building (PADCOM Building) located
at Emerald Avenue, Ortigas Center, Pasig City. The land on which the building
stands was originally acquired from the Ortigas & Company, Limited
Partnership (OCLP), by Tierra Development Corporation (TDC) under a Deed of
Sale dated 4 September 1974. Among the terms and conditions in the deed of
sale was the requirement that the transferee and its successor-in-interest must
become members of an association for realty owners and long-term lessees in
the area later known as the Ortigas Center. Subsequently, the said lot,
together with improvements thereon, was conveyed by TDC in favor of
PADCOM in a Deed of Transfer dated 25 February 1975.
In 1982, respondent Ortigas Center Association, Inc. (hereafter the
Association) was organized to advance the interests and promote the general
welfare of the real estate owners and long-term lessees of lots in the Ortigas
Center. It sought the collection of membership dues in the amount of two
thousand seven hundred twenty-four pesos and forty centavos (P2,724.40) per
month from PADCOM. The corporate books showed that PADCOM owed the
Association P639,961.47, representing membership dues, interests and penalty
charges from April 1983 to June 1993. The letters exchanged between the
parties through the years showed repeated demands for payment, requests for
extensions of payment, and even a settlement scheme proposed by PADCOM in
September 1990.
In view of PADCOMs failure and refusal to pay its arrears in monthly
dues, including interests and penalties thereon, the Association filed a
complaint for collection of sum of money before the trial court. The Association
averred that purchasers of lands within the Ortigas Center complex from OCLP
are obligated under their contracts of sale to become members of the
Association. This obligation was allegedly passed on to PADCOM when it
bought the lot from TDC, its predecessor-in-interest. The trial court dismiss
this petition but was reversed by the Court of Appeals. Hence, this petition is.
ISSUE: Whether or not the petitioner based on the foregoing facts can be
required to be a member of the respondent association and should pay the
corresponding membership fee.
HELD: Yes. This is in accordance to Article 1159, Obligation arising from

contracts have the force of the law between the contracting parties and should
be complied with in good faith. It is stipulated on the contract that a buyer of
the said property should be automatically a member of the respondent
association. The freedom of association as enshrined in our Constitution is not
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violated in here because petitioner corporation has the right not to buy it in
order for it to escape the membership requirement. The petitioner at the first
place buy it knowing that the contract required membership and it should be
complied with in good faith. By virtue of this he should pay the membership fee
as it is required to all members.
The membership fee also can be based on the principle of unjust
enrichment. Assuming in gratis argumenti that PADCOM is not a member of
the Association, it cannot evade payment without violating the equitable
principles underlying quasi-contracts. Article 2142 of the Civil Code provides:
Certain lawful, voluntary and unilateral acts give rise to the juridical relation of
quasi-contract to the end that no one shall be unjustly enriched or benefited at
the expense of another. Generally, it may be said that a quasi-contract is based
on the presumed will or intent of the obligor dictated by equity and by the
principles of absolute justice. Examples of these principles are: (1) it is
presumed that a person agrees to that which will benefit him; (2) nobody wants
to enrich himself unjustly at the expense of another; or (3) one must do unto
others what he would want others to do unto him under the same
circumstances. As resident and lot owner in the Ortigas area, PADCOM was
definitely benefited by the Associations acts and activities to promote the
interests and welfare of those who acquire property therein or benefit from the
acts or activities of the Association.
The petition is therefore denied.
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MC Engineering v. Court of Appeals

MC ENGINEERING, INC., petitioner, vs. THE COURT OF APPEALS, GERENT
BUILDERS, INC. and STRONGHOLD INSURANCE CO.,
INC., respondents.
(G.R. No. 104047, April 3, 2002 3rd Division)
CARPIO, J.:
FACTS: On October 29, 1984, Mc Engineering, Inc. and Surigao Coconut

Development Corporation (Sucodeco) signed a contract for the restoration of
the latters building, land improvement, electrical, and mechanical equipment
located at Lipata, Surigao City, which was damaged by typhoon Nitang. The
agreed consideration was P5,150,000.00 of which P2,500,000.00 was for the
restoration of the damaged buildings and land improvement, while
the P3,000,000.00 was for the restoration of the electrical and mechanical
works.
The next day, on October 30, 1984 defendant Mc Engineering and
plaintiff Gerent Builders, Inc. entered into an agreement wherein defendant
subcontracted to plaintiff the restoration of the buildings and land
improvement phase of its contract with Sucodeco but defendant retained for
itself the restoration of the electrical and mechanical works. The subcontracted
work covered the restoration of the buildings and improvement
forP1,665,000.00.
Two (2) months later, on December 3, 1984, Sucodeco and defendant Mc
Engineering entered into an agreement amending provision No. VII, par 1 of
their contract dated October 29, 1984, by increasing the price of the civil works
from P2,250,000.00 to P3,104,851.51, or an increase of P854,851.51, with the
express proviso that except for the amendment above specified, all the other
provisions of the original contract shall remain the same).
The civil work aspect consisting of the building restoration and land
improvement from which plaintiff would get P1,665,000.00 was completed and
the corresponding certificate of acceptance was executed but the electrical
works were cancelled. On January 2, 1985, plaintiff received from defendant
the amount of P1,339,720.00 as full payment of the sub-contract price, after
deducting earlier payments made by defendant to plaintiff, as evidenced by the
affidavit executed by plaintiffs president, Mr. Narciso C. Roque wherein the
latter acknowledged complete satisfaction for such payment on the basis of the
Statement of Account which plaintiff had earlier forwarded to defendant.
Nevertheless, plaintiff is still claiming from defendant the sum
of P632,590.13 as its share in the adjusted contract cost in the amount of
P854,851.51, alleging that the sub-contract is subject to the readjustment
provided for in Section VII of the agreement, and also the sum of P166,252.00
in payment for additional electrical and civil works outside the scope of the
sub-contract.
Petitioner refused to pay respondent Gerent. Thus, respondent Gerent
filed the complaint against petitioner. On March 28, 1985, the trial court
issued the corresponding writ of preliminary attachment upon the filing by
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respondent Gerent of a P632,590.13 bond issued by respondent Surety. On

April 24, 1985, petitioner moved to quash the writ on the ground that it was
improperly issued. The trial court denied the motion but the Court of Appeals
(CA) reverses it.
On January 5, 1988, petitioner filed an application against the
attachment bond to recover damages it suffered due to the wrongful issuance
of the writ of attachment. Respondent Surety opposed the application. The trial
court dismissed the petition but CA reversed it ordering petitioner to pay
P632,590.13 and attorneys fee, hence this petition is.
ISSUE: Whether or not the petitioner is liable for the increase in the price of
the main contract to the respondent amounting to P632,590.13.
HELD: No. The main contract clearly provides that as a condition precedent
for any upward or downward adjustment in the contract price, there must first
be a TRUE VALUATION of the materials and labor costs to be determined
through evaluation and inspection by representatives of petitioner and
Sucodeco. A similar provision is found in the subcontract requiring, before any
change in the subcontract price, for a TRUE VALUATION to be determined by
Sucodeco, petitioner and respondent Gerent. The records establish that
respondent Gerent was responsible for making the estimates of the actual cost
of the civil works which served as basis for the original price of the main
contract. But actually there is no true valuation that was made and only
estimate. The claim should have been granted if the increase in the contract is
based on true valuation but is not. There is no true valuation that happened so
there is no cause to support the claim.
The contention of the respondent that its claim is based on the principle
of unjust enrichment particularly accion in rem verso as enshrined in Article
22 of the Civil Code has no merit. Article 22 of the Civil Code provides that
[e]very person who through an act or performance by another, or by any other
means, acquires or comes into possession of something at the expense of the
latter without just or legal ground, shall return the same to him. Two
conditions must generally concur before the rule on unjust enrichment can
apply, namely: (a) a person is unjustly benefited, and (b) such benefit is derived
at anothers expense or damage. Such a situation does not exist in this
case. The benefit or profit derived by petitioner neither comes from respondent
Gerent nor makes the Gerent any poorer. The profit derived by petitioner
comes from Sucodeco by virtue of the main contract to which respondent
Gerent is not a party. Respondent Gerents rights under the subcontract are
not diminished in any way, and Gerent remains fully compensated according to
the terms of its own subcontract. The profit derived by petitioner is neither
unjust, nor made at the expense of respondent Gerent.
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BPI v. Pineda
Bank of the Philippine Islands, as Successor to Peoples Bank and Trust
Company, Petitioner, versus Benjamin Pineda, doing business under the
name and style of Pioneer Iron Works, Respondent.
(G.R. No. L-62441, December 14, 1987, 3rd Division)
BIDIN, J:
FACTS: Southern Industrial Project, Inc. (SIP) and Bacong Shipping Company
(Bacong) purchased the three vessels thru financing furnished by Peoples Bank
and Trust Company, now the Bank of the Philippine Islands (BPI). To secure
payment, said vessels were mortgaged to BPI. The operation of the said vessels
were placed under the booking agency of Interocean Shipping Corporation
(Interocean), with the undertaking that the freight revenues from their charter
and operation shall be deposited with the Trust Department of BPI and that
disbursements made therefrom shall be covered by vouchers bearing the
approval of SIP.
BPI and SIP were not satisfied with the amount of revenues being
deposited with the said bank, and so S.A. Gacet, Inc. (Gacet) was organized
to manage and supervise the operation of the vessels, as such, a Management
Contract was entered into by the parties. Gacet and Interocean contracted the
services of respondent Benjamin Pineda to carry out repairs, fabrication and
installation of necessary parts in said vessels in order to make them seaworthy
and in good working operation which amounted to 84,522.70 pesos leaving
a balance of 62,095.95 pesos.
Pineda instituted a civil action before the Court of First Instance of

Manila, seeking to recover from SIP, Gacet, Interocean and the Peoples Bank
and Trust Company the principal sum of 62,095.92 pesos with interests
thereon, which amount was allegedly the total unpaid balance of the cost of
repairs, fabrication and installation of necessary parts carried out by the
former on the a forenamed vessels. The trial court rendered a decision ordering
SIP and BPI to pay Pineda jointly and severally the amount of 62,095.92 pesos
with interest, while the complaint against Interocean and Gacet was
dismissed. Upon appeal of SIP and BPI, the appellate court affirmed the trial.
Hence, this petition.
ISSUE: Whether or not the petitioner is liable for the cost of repairs undertaken
by the respondent on the subject vessels based on a juridical relation of quasi-
contract.
HELD: Yes. The petitioner is liable for the cost of repairs undertaken on the
subject vessels.
The repairs made on the vessels ultimately redounded to the benefit of

the new owner for without said repairs, those vessels would not be
seaworthy. Under Article 2142 of the Civil Code, such acts give rise to the
juridical relation of quasi-contract to the end that no one shall be unjustly
enriched or benefited at the expense of another.
When the parties executed the Deed of Confirmation of Obligation they

intended to confirm and acknowledge the existing obligations. The primary
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purpose of the contracts is the protection of the vessels. Among them are liens
on the same under which the obligation to private respondent properly belongs.
Petition denied and the decision appealed from is affirmed.
State Investment v. CA
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State Investment House, Inc., Petitioner, versus Court of Appeals and

Nora B. Moulic, Respondents.
(G.R. No. 101163, January 11, 1993, 1st Division)
BELLOSILLO, J:
FACTS: Private respondent Nora Moulic issued to Corazon Victoriano, as

security for pieces of jewelry to be sold on commission, two post-dated
Equitable Banking Corporation checks in the amount of 50,000.00 pesos each.
the payee, negotiated the checks to petitioner State Investment House, Inc.
(State). Moulic failed to sell the pieces of jewelry and returned them to the
payee before maturity of the checks. The checks, however, could no longer be
retrieved as they had already been negotiated. Before their maturity dates,
Moulic withdrew her funds from the drawee bank and the checks which were
dishonored for insufficiency of funds. On December 20, 1979, State allegedly
notified Moulic of the dishonor of the checks and requested that it be paid in
cash instead, although Moulic avers that no such notice was given to her.
State sued Moulic to recover the value of the checks. In her Answer,
Moulic contends that she incurred no obligation on the checks because the
jewelry was never sold and the checks were negotiated without her knowledge
and consent. She also instituted a Third-Party Complaint against Corazon
Victoriano, who later assumed full responsibility for the checks. The trial court
dismissed the Complaint as well as the Third-Party Complaint. State elevated
the order of dismissal to the Court of Appeals, but the appellate court affirmed
the trial court on the ground that the Notice of Dishonor to Moulic was made
beyond the period prescribed by the Negotiable Instruments Law. Hence, this
petition.
ISSUE: Whether or not petitioner was a holder of the checks in due course and
may enforce full payment of the checks.
HELD: Yes. The petitioner was a holder of the checks in due course and may
enforce full payment of the checks.
A prima facie presumption exists that the holder of a negotiable

instrument is a holder in due course. The burden of proving that State is not a
holder in due course lies in the person who disputes the presumption. In this
regard, Moulic failed. The evidence clearly shows that: (a) on their faces the
post-dated checks were complete and regular; (b) petitioner bought these
checks from the payee, Corazon Victoriano, before their due dates; (c) petitioner
took these checks in good faith and for value, albeit at a discounted price; and,
(d) petitioner was never informed nor made aware that these checks were
merely issued to payee as security and not for value. The petitioner is indeed a
holder in due course. As such, it holds the instruments free from any defect of
title of prior parties, and from defenses available to prior parties among
themselves; it may, therefore, enforce full payment of the checks.
Allowing recovery on the checks would not constitute unjust enrichment

on the part of the petitioner. Correspondingly, Moulic may not unilaterally
discharge herself from her liability by the mere expediency of withdrawing her
funds from the drawee bank.
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Petition granted. The decision appealed from is reversed and a new one
entered declaring private respondent Nora Moulic liable to petitioner State
Investment House, Inc.
People v. Nurfrasir Hashim, et al.
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The People of the Philippines, Plaintiff-Appellee, versus Nurfrasir Hashim

y Saraban a.k.a Franz/Frans, Makdul Jamad y Bukin (Al) a.k.a. Macky,
a certain Tas, and a certain Jun, Accused, Bernadette Pansacala a.k.a.
Neneng Awid, Accused-Appellant.
(G.R. No. 194255, June 13, 2012, 2nd Division)
SERENO, J:
FACTS: Accused-appellant encouraged and invited AAA and BBB to work

abroad which they accepted. On their journey to Malaysia, they met the
accused and they were brought to Golden Lotus Barber Salon where the latter
were introduced to a certain person named Mommy Cindy, the alleged owner of
the salon, and their purported manager Hako who was called Mommy Susan.
Allegedly, BBB was forced on numerous occasions to have sexual

intercourse with Franz at his bidding, even in the presence of other people. She
followed his orders for fear that he would inflict physical harm on her. The
complainants were forced to become sex workers to earn money and pay off the
debts they incurred from their travel from Zamboanga City to Labuan,
Malaysia. Thus, AAA and BBB worked as prostituted women. BBB had a
customer who was a law enforcer at Kota Kinabalu, Malaysia. She sought his
help for her return to the Philippines, and he agreed. The following day, the
Golden Lotus was raided by the Immigration Officers of Kota Kinabalu,
Malaysia, and the prostituted Filipino women, including AAA and BBB, were
detained at the Police Department in Labuan until all the women were deported
to the Philippines.
The Regional Trial Court of Zamboanga City rendered a decision finding

both accused Nurfrasir Hashim a.k.a Franz/Frans and Bernadette Pansacala
a.k.a Neneng Awid guilty beyond reasonable doubt of the crime of Illegal
Recruitment defined under Section 6 and penalized under Section 7(b) of
Republic Act No. 8042 otherwise known as the Migrant Workers and Overseas
Filipinos Act of 1995, as principals by direct participation, committed by a
syndicate, against BBB and AAA, and sentences each of said accused to suffer
the penalty of life imprisonment and to pay damages. On appeal, the Court of
Appeals affirmed the conviction of the accused-appellant and her co-accused
but modified the award of damages. Hence, this appeal.
ISSUE: Whether or not the conviction of accused-appellant and co-accused in

the criminal offense charged carries with it the civil liability to pay damages to
the victims.
HELD: Yes. The conviction of accused-appellant and co-accused in the criminal

offense charged carries with it the civil liability to pay damages to the victims.
In the case of People v. Lalli, the Court increased the amount of moral
and exemplary damages having convicted the accused therein of the crime of
trafficking in persons. The payment of 500,000.00 pesos as moral damages and
100,000.00 pesos as exemplary 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 analogous cases of seduction, abduction,
rape, or other lascivious acts, to which the criminal case of Trafficking in
Persons as a Prostitute fits.
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The appealed decision is affirmed with modifications on the award of

damages.
Abellana v. People
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Felixberto Abellana, Petitioner, versus People of the Philippines and

Spouses Saapia Alonto and Diaga Alonto, Respondents.
(G.R. No. 174654, August 17, 2011, 1st Division)
DEL CASTILLO, J:
FACTS: Petitioner extended a loan to private respondents spouses Diaga and

Saapia Alonto (spouses Alonto), secured by a Deed of Real Estate Mortgage.
Petitioner prepared a Deed of Absolute Sale conveying said lots to him. The
Deed of Absolute Sale was signed by spouses Alonto in Manila. However, it
was notarized in Cebu City allegedly without the spouses Alonto appearing
before the notary public. Thereafter, petitioner caused the transfer of the titles
to his name and sold the lots to third persons. On August 12, 1999, an
Information was filed charging petitioner with Estafa through Falsification of
Public Document. During arraignment, petitioner entered a plea of "not guilty".
After the termination of the pre-trial conference, trial ensued.
The Regional Trial Court found the petitioner guilty of Falsification of a

Public Document by a private individual under Article 172(1) in relation to
Article 171(2) of the Revised Penal Code and not Estafa through Falsification of
Public Document as charged in the Information. On appeal, the Court of
Appeals held that petitioner's conviction cannot be sustained because it
infringed on his right to be informed of the nature and cause of the accusation
against him. The Court of Appeals, however, found no reversible error on the
civil liability of petitioner as determined by the trial court and thus sustained
the same. Petitioner filed a motion for reconsideration which was denied.
ISSUE: Whether or not the petitioner could be held civilly liable

notwithstanding his acquittal.
HELD: No. The petitioner cannot be held civilly liable.
In Banal v. Tadeo, Jr., the Court elucidated on the civil liability of the
accused despite his exoneration in this wise: While an act or omission is
felonious because it is punishable by law, it gives rise to civil liability not so
much because it is a crime but because it caused damage to another. Viewing
things pragmatically, we can readily see that what gives rise to the civil liability
is really the obligation and moral duty of everyone to repair or make whole the
damage caused to another by reason of his own act or omission, done
intentionally or negligently, whether or not the same be punishable by law.
Civil liability arises when one, by reason of his own act or omission, done
intentionally or negligently, causes damage to another. Hence, for petitioner to
be civilly liable to spouses Alonto, it must be proven that the acts he committed
had caused damage to the spouses. Based on the records of the case, the acts
allegedly committed by the petitioner did not cause any damage to spouses
Alonto.
The Supreme Court affirmed the decision of the Court of Appeals insofar
as they set aside the conviction of the petitioner for the crime of falsification of
public document. The portion which affirmed the imposition of civil liabilities
on the petitioner, i.e., the restoration of ownership and possession, the
payment of 1,103,000.00 pesos representing the value of the property, and the
payment of damages is deleted for lack of factual and legal basis.
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Petition granted.
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People v. Malicsi
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People of the Philippines, Appellee, versus Edwin Malicsi, Appellant.

(G.R. No. 175833, January 29, 2008, 2nd Division)
CARPIO, J:
FACTS: In four separate Informations, the prosecution charged appellant with

raping AAA. AAA testified that one evening when her father asked her to buy
wine from a store, she chanced upon the accused-appellant on her way home.
Appellant placed AAA on his lap, embraced her and succeeded in having carnal
knowledge against her consent by threatening the victim. Dr. Dela Rosa
testified that he examined AAA and executed a Medical Certificate finding that
the victim lost her virginity and the hymenal lacerations were inflicted possibly
by the insertion of a hard object. The defense presented appellant as its only
witness. Appellant denied the accusations of rape and alleged that he and AAA
were sweethearts and they mutually agreed to engage in sexual intercourse.
Appellant claimed that AAA visits their house about thrice a week when his
wife is not at home. Appellant then recounted the incidents of his sexual
intercourse with AAA.
The trial court rendered its decision, finding appellant guilty of four
counts of qualified rape. The trial court sentenced appellant to suffer the
penalty of death for each count of rape, and to pay AAA 300,000.00 pesos for
all counts as civil indemnity and 200,000.00 as moral damages for all counts.
On appeal, the Court of Appeals affirmed the trial courts decision with
modification, finding appellant guilty of four counts of simple rape instead of
qualified rape and reducing the penalty imposed to reclusion perpetua. Hence,
this appeal.
ISSUE: Whether or not the award of moral damages were properly granted to
the victim upon conviction of the appellant.
HELD: Yes. The award of moral damages were properly granted to the victim
upon conviction of the appellant.
The appellate court was correct in imposing the penalty of reclusion

perpetua on appellant and it also correctly affirmed the award by the trial court
of 200,000.00 pesos in moral damages because moral damages are
automatically granted to the rape victim without presentation of further proof
other than the commission of the crime. However, the Court reduced the award
of civil indemnity from 300,000.00 pesos to 200,000.00 pesos in accordance
with prevailing jurisprudence. Civil indemnity in the amount of 50,000.00
pesos for each count of simple rape is automatically granted once the fact of
rape is established.
The appealed decision is affirmed with modification that the award of

civil indemnity is reduced to 200,000.00 pesos.
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People v. Sia
People of the Philippines, Plaintiff-Appellee, versus Rosauro Sia y Dichoso,
Johnny Balalio y Deza, Jimmy Ponce y Tol and John Doe and Pedro
Munoz (at large), Accused-Appellants.
(G.R. No. 137457, November 21, 2001, En Banc)
YNARES-SANTIAGO, J:
FACTS: Christian Bermudez was a taxicab driver whose service was engaged
by accused-appellant Rosauro Sia. The former followed the latters instructions
and returned to the Sia residence. As soon as he alighted from the Tamaraw
FX taxi he was driving, his hands were tied by Johnny Balalio and was handed
to a certain Pedro and was taken to accused Rosauro. Christian was beaten to
death and accused Jimmy Ponce saw Rosauro hand the carton-wrapped
lifeless body of the victim inside the taxicab which was later on taken by the
assailants. The victims lifeless body, wrapped in a carton box, was recovered
several days later in a fishpond in Meycauayan, Bulacan. For the felonies, the
accused were indicted for violation of Republic Act 6539, otherwise known as
the Anti-Carnapping Law, and Murder in two separate Informations.
At the arraignment, only Johnny Balalio and Jimmy Ponce appeared and
pleaded not guilty. The third accused, Rosauro Sia, escaped from police
custody while on the way to the hospital for treatment. As a consequence, the
two cases were subsequently consolidated and jointly tried against accused
Johnny Balalio and Jimmy Ponce only.
After trial, the Regional Trial Court rendered a judgment against both
accused imposing upon them the supreme penalty of death and payment of
damages. The cases of accused Rosauro Sia who escaped from custody before
he was arraigned and as against Peter Doe who was never apprehended and
whose identity has never been known were ordered to be archived, subject to
activation when they are arrested and brought before the bar of justice. The
case was subjected to automatic review by the Supreme Court on automatic
review.
ISSUE: Whether or not upon the conviction of the accused, the award of
damages were correctly granted to the heirs of the victim.
HELD: Yes. The award of damages were correctly granted to the heirs of the
victim, however, the award for the burial and other expenses incurred in
connection with the death of the victim were deleted.
The Court finds no reason to reverse the HELD lower courts

HELD insofar as the crimes were committed. The Court finds the amount of
50,000.00 pesos as death indemnity proper, in line with controlling
policy. The award of civil indemnity may be granted without any need of proof
other than the death of the victim. The victims heirs are likewise entitled
to moral damages of 50,000.00 pesos by controlling case law, taking
into consideration the pain and anguish of the victims family brought
about by his death.
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However, the award of 200,000.00 pesos as burial and other expenses

incurred in connection with the death of the victim must be deleted. The
records are bereft of any receipt or voucher to justify such award.
The decision of the trial court was affirmed.
People v. Doctolero
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People of the Philippines, Plaintiff-Appellee, versus Carlos Doctolero, Sr.,

Accused-Appellant.
BUENA, J:
FACTS: Vicente Ganongan Jr. and Roderick Litorco went to their friends
boarding house on Honeymoon Road, Baguio City. Thereat, Vicente Ganongan,
Roderick Litorco, Regie Daodaoan, Rex Tabanganay, Jeffrey Alimani and
Florencio Dagson had a drinking spree in a nearby store. On their way home,
they stopped as a gun was pointed at them b y a man who identified himself as
a barangay kagawad. At this time, Carlos Doctolero Sr. was standing at the
edge of Honeymoon road. He then put his arm over Daodaoans
shoulder. Daoadaoan shoved Doctoleros hand and retreated. Doctolero
stepped back and fired twice at Daodaoan but missed. Tabanganay asked
Daodaoan if he was hit and upon answering that he was not, Tabanganay
shouted at his friends to run. When Ganongan turned around to run, Doctolero
fired at him, hitting him twice. Oliver Alimani came to Ganongans aid when
the latter yelled that he was hit. Thereafter, they hailed a taxi and rushed
Ganongan to Saint Louis University Hospital where he expired.
In his defense, accused-appellant denied the accusation against him. The

trial court rendered a decision convicting the accused-appellant of murder after
appreciating the aggravating circumstance of treachery. He was sentenced to
suffer the penalty of reclusion perpetua and was ordered to indemnify the heirs
of Ganongan. Hence, this appeal.
ISSUE: Whether or not the damages awarded to the heirs of the victim proper
based on the conviction of the accused-appellant on the crime charged.
HELD: No. The damages awarded to the heirs of the victim were not proper
based on the conviction of the accused-appellant.
Since treachery was not proven to be resent in this case, the Court
deemed it proper to convict the accused of the crime of homicide
instead of murder, thus damages were reduced to 112,413.40 pesos
representing funeral expenses which were duly proven and covered by
receipts. Expenses relating to the 9 t h day, 40 t h day and 1 st year
anniversaries of death cannot be considered in the award of actual
damages as these were incurred after a considerable lapse of time
from the burial of the victim. With respect to the award of moral
damages, the same was reduced to 50,000.00 pesos in accordance
with existing jurisprudence.
The decision appealed from is affirmed with modification.
Cita
People v. Abulencia
People of the Philippines, Plaintiff-Appellee, versus Rolly Abulencia y
Coyos, Defendant-Appellant.
(G.R. No. 138403. August 22, 2001, En Banc)
PER CURIAM:
FACTS: Reynaldo Garcia, Jr. met the defendant-appellant on August 4, 1998

and later, both engaged in a drinking spree. They slept on Garcias house and
upon waking up, the defendant-appellant left to buy in a nearby store tagging
along the minor victim Rebelyn. Both of them never returned and on the
evening of the same day, the defendant-appellant surrendered to Mayor
Sevilleja reporting that he was with the victim when the latter allegedly fell
from the bridge after he accidentally tripped the victim and he admitted that he
also raped the latter in a tape interview by Dennis Mojares. The following
morning, the victim was found dead and her body floating in a creek. Autopsy
revealed that she was sexually abused and thereafter brutally killed.
An information was filed against Rolly Abulencia for rape with homicide
and he was thereafter convicted by the trial court of the crime charged
sentenced to suffer the penalty of death and to indemnify the heirs of the
victim. Hence, this appeal.
ISSUE: Whether or not the civil liability imposed upon defendant-

appellant is reasonable based on the circumstances of the crime committed.
HELD: No. The civil liability imposed upon the defendant-appellant was not
reasonable based on the circumstances of the crime committed.
The Court modified the decision on the civil aspect of the case. Although
this matter has not been raised by the parties, especially the Solicitor General,
it is a settled rule that in a criminal case, an appeal to the Supreme Court
throws the whole case open for review, and it becomes the duty of the Court to
correct such errors as may be found in the appealed judgment, whether they
are made the subject of assignments of error or not.
With regard to the civil indemnity, the trial court awarded only 75,000.00
pesos. Current jurisprudence has fixed at 100,000.00 pesos the civil indemnity
in cases of rape with homicide, which is fully justified and properly
commensurate with the seriousness of that special complex crime. The trial
court did not award moral damages to the victims family. Based on prevailing
jurisprudence, however, moral damages may be awarded to the heirs of the
victim without need for pleading or proof of its basis for their mental, physical
and psychological sufferings are too obvious to still require their recital at the
trial. Hence, moral damages in the amount of 50,000.00 pesos must be
awarded.
In People vs. Lagarto, the Court held that attendant circumstances may be
considered to determine civil liability. Thus, in view of the evident cruelty
inflicted upon Rebelyn, as shown by the multiple burns and contusions on her
body, the Court grants the award of exemplary damages in the amount of
25,000.00 pesos.
Cita
The decision appealed from is affirmed with modification insofar as the civil
aspect is concerned.
Bermudez v. Melencio-Herrera
Cita
Reynaldo Bermudez, Sr., and, Adonita Yabut Bermudez, Petitioners-

Appellants, versus Hon. Judge A. Melencio-Herrera, Domingo Pontino y
Tacorda and Cordova Ng Sun Kwan, Respondents-Appellees.
(G.R. No. L-32055, February 26, 1988, 2nd Division)
YAP, J:
FACTS: A cargo truck, driven by Domingo Pontino and owned by Cordova Ng

Sun Kwan, bumped a jeep on which Rogelio, a six-year old son of plaintiffs-
appellants, was riding. The boy sustained injuries which caused his death. As
a result, a criminal case for Homicide through Reckless Imprudence was filed
against Domingo Pontino by the Manila City Fiscal's Office. The plaintiffs-
appellants mader a reservation to file an independent civil action and thereafter
filed a civil case for damages with the Court of First Instance of Manila. Finding
that the plaintiffs instituted the action on the assumption that defendant
Pontino's negligence in the accident constituted a quasi-delict, the trial court
stated that plaintiffs had already elected to treat the accident as a crime by
reserving in the criminal case their right to file a separate civil action. That
being so, the trial court decided to order the dismissal of the complaint against
defendant Cordova Ng Sun Kwan and to suspend the hearing of the case
against Domingo Pontino until after the criminal case for Homicide Through
Reckless Imprudence is finally terminated. From said order, plaintiffs filed the
present appeal.
ISSUE: Whether or not the present civil action is based on delict and
cannot proceed independently of the criminal case.
HELD: No. The present civil action is not based on delict but on quasi-delict,
thus it can proceed independently of the criminal case.
In cases of negligence, the injured party or his heirs has the choice
between an action to enforce the civil liability arising from crime under Article
100 of the Revised Penal Code and an action for quasi-delict under Article
2176-2194 of the Civil Code. If a party chooses the latter, he may hold the
employer solidarily liable for the negligent act of his employee, subject to the
employer's defense of exercise of the diligence of a good father of the family.
In the case at bar, the action filed by appellant was an action for
damages based on quasi-delict. The fact that they reserved their right in the
criminal case to file an independent civil action did not preclude them from
choosing to file a civil action based on quasi-delict. Even without such a
reservation, the Court allowed the injured p a r t y i n t h e c r i m i n a l
c a s e w h i c h r e s u l t e d i n t h e a c q u i t t a l o f t h e a c c u s e d t o re cover
damages based on quasi-delict. It does not follow that a person who is not
criminally liable is also free from civil liability. While the guilt of the
accused in a criminal prosecution must be established beyond reasonable
doubt, only a preponderance of evidence is required in a civil action
for damages under Article 29 of the Civil Code. The judgment of
acquittal extinguishes the civil liability of the accused only when it
includes a declaration that the facts from which the civil liability might arise
did not exist.
Petition granted and the appealed orders of the trial court were annulled.
Cita
People v. Relova
People of the Philippines, Petitioner, versus Hon. Benjamin Relova and
Manuel Opulencia, Respondents.
(G.R. No. L-45129, March 6, 1987, 1st Division)
FELICIANO, J:
FACTS: The members of the Batangas City Police together with

personnel of the Batangas Electric Light System, equipped with a search
warrant issued by a Judge of Batangas City, searched and examined the
premises of the Opulencia Carpena Ice Plant and Cold Storage owned
and operated by the private respondent Manuel Opulencia. The police
discovered that electric wiring, devices and contraptions had been
installed, without the necessary authority from the city government, and
architecturally concealed inside the walls of the building owned by the private
respondent. These devices and contraptions were allegedly designed purposely
to lower the readings of the electric current consumption in the electric meter
of the said plant.
During the subsequent investigation, Manuel Opulencia admitted

in a written statement that he had caused the installation of the electrical
devices in order to lower the readings of his electric meter. An Information was
filed against the private respondent for violation of C i t y Ordinance No. 1 of
Batangas City which was dismissed based on prescription.
The Acting City Fiscal of Batangas then filed before the Court of First
Instance another Information against private respondent for Theft of electric
power under Article 308 in relation to Article 309, paragraph (1), of the Revised
Penal Code. Private respondent filed a M o t i o n t o Q u a s h a l l e g i n g
t h a t h e h a d b e e n p r e v i o u s l y acquitted of the offense charged in the
second information and that the filing thereof was violative of his
constitutional right against double jeopardy. The respondent Judge
granted said motion and ordered the dismissal of the case. Hence, this
petition.
ISSUES: Whether or not private respondent can still be held civilly liable after
an acquittal from a city ordinance violation.
HELD: Yes. The private respondent can still be held civilly liable after an
acquittal from a city ordinance violation.
The Supreme Court held that the accused was placed in double jeopardy;
hence, he could not be tried again in a criminal case for violation of the Revised
Penal Code after being acquitted from a violation of city ordinance based on the
same act.
The extinction of criminal liability whether by prescription or by the bar

of double jeopardy does not carry with it the extinction of civil liability arising
from the offense charged. In the present case, private respondent freely
admitted during the police investigation having stolen electric current
through the installation and u s e of unauthorized electrical
c o n n e c t i o n s o r d e v i c e s . The related civil action which has not been
waived expressly or impliedly should be r e m a n d e d t o t h e l o w e r c o u r t
for proper determination.
Cita
Petition denied.
Manantan v. Court of Appeals
Cita
George Manantan, Petitioner, versus Court of Appeals, Spouses Marcelino

Nicolas and Maria Nicolas, Respondents.(G.R. No. 107125, January 29,
2001, 2nd Division) QUISUMBING,J:
FACTS: On June 1, 1983, the Provincial Fiscal of Isabela filed an

information charging petitioner Manantan with reckless imprudence
resulting to homicide, a l l e g e d l y c o m m i t t e d o n o r a b o u t t h e 2 5 th
d a y o f S e p t e m b e r 1 9 8 2 , i n t h e municipality of Santiago, Isabela.
The said accused being then the driver and person -in-charge of an
automobile bearing Plate No. NGA-816 willfully and unlawfully drove
and operated the same while along the Daang Maharlika of the said
municipality, in a negligent manner causing the automobile to sideswipe a
passenger jeepney, thereby causing the said automobile to turn turtle
to the death Ruben Nicolas passenger of the said automobile.
In its decision dated June 30, 1988, promulgated on August 4 ,

1988, the trial court decided the criminal case in favor of Manantan.
Subsequently, the private respondent spouses Nicolas filed their notice
of appeal on the civil aspect of the trial courts judgment. The Nicolas
spouses prayed that the decision appealed from be modified and that
the appellee be ordered to pay indemnity and damages. In its decision,
the Court of Appeals decided in favor of the pr ivate respondents. In
finding petitioner civil liability, the court a quo noted that at the time the
accident occurred, Manantan was in a state of intoxication, due to his
having consume all in all a total amount of at least twelve bottles of beer
between 9 a.m. to 11 p.m. The petitioner moved for reconsideration but
the appellate court denied the motion.
ISSUE: Whether or not the acquittal of the accused also extinguished

his civil liability.
HELD: NO. Our law recognizes two kinds of acquittal, with differ ent
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 as a felony. This instance closes the door to civil liability, for a person who
has been found not to be 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 will be
instituted must be based on ground other than the delict complained of.
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 the case at bar, the
accuseds acquittal is based on reasonable doubt. The decision of the
trial court did not state in clear and equivocal terms that petitioner was
not recklessly imprudent or negligent. Hence, impliedly, the trial court
acquitted him on reasonable doubt. Since civil liability is not extinguished in
Cita
criminal cases if the accused acquittal is based on reasonable doubt,

the decision of the Court of Appeals finding that the defendant is civilly liable
for his negligent and reckless act of driving his car which was the
proximate cause of the vehicular accident, and sentenced him to
indemnify plaintiff-appellants in the amount of P74, 400.00 for the death
of Ruben Nicolas.
People v. Bayotas
Cita
People of the Philippines, Plaintiff-appellee, versus Rogelio Bayotas Y

Cordova, Accused-appellant.
(236 SCRA 239, September 2, 1994, En Banc)
ROMERO, J:
FACTS: Rogelio Bayotas was charged with rape and eventually convicted on
June19, 1991. While the appeal was pending, Bayotas died. The
Supreme Court dismissed the criminal aspect of the appeal; however,
it required the Solicitor -G e n e r a l t o c o m m e n t w i t h r e g a r d t o
B a y o t a s c i v i l l i a b i l i t y a r i s i n g f r o m h i s commission of the offense
charged. In his comment, the Solicitor-General expressed his view that the
death of a c c u s e d - a p p e l l a n t d i d n o t e x t i n g u i s h h i s c i v i l l i a b i l i t y
a s a r e s u l t o f h i s commission of the offense charged. This comment was
opposed by the counsel of accused-appellant, arguing that the death of
the accused while judgment of the conviction is pending appeal
extinguishes both criminal and civil penalties, he cited in support and
invoked the HELD of the Court of Appeals in People v. Castillo, which
was held that the civil obligation in a criminal case takes root in the
criminal responsibility and therefore civil liability is extinguished if accused
should die before final judgment is rendered.
ISSUE: Whether or not the death of the accused pending appeal of his
conviction extinguishes his civil liability.
HELD: Y e s . T h e d e a t h o f t h e a c c u s e d p e n d i n g a p p e a l o f h i s
c o n v i c t i o n extinguishes his civil liability because tire liability is based
solely on the criminal act committed. Corollarily, the claim for civil liability
survives notwithstanding the death of the accused, if the same may also
be predicted as one source of obligation other than delict. Moreover, when
a defendant dies before judgment becomes executory, there cannot be
any determination by final judgment whether or not the felony upon which the
civil action might arise exists,' for the simple reason that `there is no party
defendant.' The Rules of Court state that a judgment in a criminal
case becomes final 'after the lapse of the period for perfecting an
appeal or w h e n t h e s e n t e n c e h a s b e e n p a r t i a l l y o r t o t a l l y
s a t i s f i e d o r s e r v e d , o r t h e defendant has expressly waived in writing his
right to appeal. 'In addition, where the civil liability does not exist
independently of the c r i m i n a l r e s p o n s i b i l i t y , t h e e x t i n c t i o n o f t h e
l a t t e r b y d e a t h , i p s o f a c t o extinguishes the former, provided, of course,
that death supervenes before final judgment. As in this case, the right to
institute a separate civil action is not r e s e r v e d , t h e d e c i s i o n t o b e
rendered must, of necessity, cover 'both the criminal and the
civil aspects of the case.' Th e accused died before
final judgment was rendered, thus, he is absolved of both his
c r i m i n a l a n d c i v i l liabilities based solely on delict or the crime committed.
Appeal dismissed.
Cita
Barredo v. Garcia
Fausto Barredo, Petitioner, versus Severino Garcia and Timoteo Almario,
Respondents.
(73 PHIL 607, July 8, 1942, En Banc)
BOCOBO, J:
FACTS: O n M a y 3 , 1 9 3 6 , t h e r e w a s a h e a d - o n c o l l i s i o n b e t w e e n
a t a x i o f t h e Malate Taxi driven by Fontanilla and a carretela guided
by Dimapilis. The carretela was overturned and a passenger, 16 -year-
old boy Garcia, suffered injuries from which resulted to his death. A
criminal action was filed against Fontanilla, and he was convicted .
The court in the criminal case granted the petition to reserve the civil
action against Barredo, the proprietor of the Malate Ta x i a n d t h e
employer of Fontanilla, making him primarily and directly
responsible under culpa aquiliana. It was undisputed that
F o n t a n i l l a s negligence was the cause of the accident as he was driving on
the wrong side of the road at high speed, and there was no showing that
Barredo exercised the diligence of a good father of a family. B a r r e d o s
theory of defense is that Fontanilla s negligence being
punishable by the Revised Penal Code, that his liability as employer is
only subsidiary liable but Fontanilla was sued for civil liability, hence, Barredo
claims that he cannot be held liable.
ISSUE: Whether or not complainants liability as employer of Fontanilla was

only subsidiary and not as primarily and directly responsible under Article
1903 of the Civil Code.
HELD: N o , t h e S u p r e m e C o u r t r u l e d t h a t c o m p l a i n a n t s l i a b i l i t y
i s n o t o n l y subsidiary but also primary liability. The Court affirmed the
decision of the Court of Appeals which ruled that the liability sought to
be imposed upon Barredo in t h i s a c t i o n i s n o t a c i v i l o b l i g a t i o n
a r i s i n g f r o m a f e l o n y , b u t a n o b l i g a t i o n imposed in Article 1903 of
the Civil Code by reason of his negligence in the selection or supervision
of his servant or employee.
QUASI-DELICT OR CULPA AQUILIANA is a separate legal institution

under the Civil Code and is entirely distinct and independent from a delict or
crime as punished under the Revised Penal Code (RPC). In this
jurisdiction, the same negligent act causing damage may produce civil
liability (subsidiary) arising froma crime under Art. 103 of the RPC; or
create an action for the quasi delict or culpa aquiliana (primary) and the
parties injured are free to choice which course to take. In the instant case, the
negligent act of Fontanilla produced two liabilities of Barredo. First, a
subsidiary one because of the civil liability of Fontanilla arising from
the latters criminal negligence; and second, Barredos primary and direct
responsibility arising from his presumed negligence as an employer in the
selection of his employees or their supervision, under Art.1903 of the Civil
Code. The parties instituted an action for damages under Art.1903 of
the Civil C o d e . B a r r e d o w a s f o u n d g u i l t y o f n e g l i g e n c e f o r
Cita
c a r e l e s s l y e m p l o y i n g Fontanilla, who had been caught several times

for violation of the Automobile L a w a n d s p e e d i n g v i o l a t i o n .
Th u s , t h e p e t i t i o n i s d e n i e d . B a r r e d o m u s t indemnify plaintiffs
under the provisions of Art. 1903 of the Civil Code.
Del Carmen, Jr. v. Geronimo Bacoy et.al
Cita
Oscar Del Carmen, Jr., Petitioner, versus Geronimo Bacoy, Guardian and
representing the children, namely:Mary Marjorie B. Monsalud, Metzie Ann
B. Monsalud, Kareen B. Monsalud, Leonardo B. Monsalud, Jr., and Cristina
B. Monsalud, Respondents.
(G.R. No. 173870, April 25, 2012, 1st Division)
DEL CASTILLO, J:
FACTS: Sometime in 1993, Emilia Bacoy Monsalud (Emilia), along with her
spouse Leonardo Monsalud, Sr. and their daughter Glenda Monsalud, were on
their way home from a Christmas party they attended when they were run over
by a Fuso passenger jeep bearing plate number UV-PEK-600 that was being
driven by Allan Maglasang (Allan). The jeep was registered in the name of
petitioner Oscar del Carmen, Jr. (Oscar Jr.) and used as a public utility vehicle
plying the Molave, Zamboanga del Sur to Sominot, Zamboanga del Sur and vice
versa route. Reckless Imprudence Resulting in Multiple Homicide was filed
against Allan before the Regional Trial Court said court declared Allan guilty
beyond reasonable doubt of the crime charged.
During the pendency of said criminal case, Emilias father, Geronimo

Bacoy (Geronimo), in behalf of the six minor children of the Monsaluds, filed
Civil Case which is an independent civil action for damages based on culpa
aquiliana. Aside from Allan, also impleaded therein were his alleged employers,
namely, the spouses Oscar Del Carmen, Sr. (Oscar Sr.) and Norma del Carmen
(Spouses del Carmen) and the registered owner of the jeep, their son Oscar Jr.
Geronimo prayed for the reimbursement of funeral and burial expenses, as well
as the award of attorneys fees, moral and exemplary damages resulting from
the death of the three victims, and loss of net income earnings of Emilia who
was employed as a public school teacher at the time of her death.
The RTC exculpated the spouses Del Carmen from civil liability for
insufficiency of evidence. However, their son Oscar Jr. was held civilly liable in
a subsidiary capacity anchoring their on the principle of res ipsa loquitur.
Oscar Jr. moved for reconsideration contending that the provision on

vicarious liability of the employer under Article 2180 of the Civil Code requires
the existence of employer-employee relationship and that the employee was
acting within the scope of his employment when the tort occurred.
ISSUE: Whether or not the principle of Res Ipsa Loquitor is applicable in the
instant case and that the employer can be subsidiarily liable.
HELD: The court also declared the doctrine of res ipsa loquitur inapplicable
since the property owner cannot be made responsible for the damages caused
by his property by reason of the criminal acts of another. It then adjudged
that only Allan should bear the consequences of his criminal acts.
Furthermore, the court cited Article 103 of the Revised Penal Code which
provides that for an employer to be subsidiarily liable for the criminal acts of
his employee, the latter should have committed the same in the discharge of
his duties. The court agreed with Oscar Jr. that this condition is wanting in
Cita
Allans case as he was not acting in the discharge of his duties as a conductor
when he drove the jeep.
WHEREFORE, premises considered, the MOTION FOR

RECONSIDERATION is granted, and defendant OSCAR DEL CARMEN JR. is
hereby absolved from all civil liability arising from the felonious acts of
convicted accused ALLAN MAGLASANG.
Ludo and Luym Corp. v. Court of Appeals
Cita
Ludo and Luym Corp., Petitioner, versus, Court of Appeals, Gabisan

Shipping Lines, INC. and/or Anselmo Olasiman, Respondents. (1351 SCRA
35, February 1, 2001, 2nd Division) QUISUMBING, J:
FACTS: Private respondent Anselmo Olasiman, as captain, was

maneuvering the ship MV Miguela owned by respondent Gabisan Shipping
lines, at the pier owned b y p e t i t i o n e r L u d o a n d L u y m C o r p o r a t i o n
w h e n i t r a m m e d t h e p i l e c l u s t e r damaging it and deforming the cable
wires wound around it. In an action for recovery of damages filed by Petitioner,
the Regional Trial Court ruled against respondents for incompetence and
negligence. In an appeal t h e C o u r t o f A p p e a l s r e v e r s e d t h e l o w e r
c o u r t s d e c i s i o n , s a y i n g t h a t t h e petitioners witness Naval was
incompetent to testify on the negligence of the crew and that
petitioners evidence did not positively identify that MV Miguela caused
the damage. Thus, petitioner filed this petition for review.
ISSUE: Whether or not the private respondents are responsible for the
damage done to the pier by the ship based on the doctrine of RES IPSA
LOQUITOR
HELD: The Supreme Court sustained the Regional Trial Court decision
partly on the ground that the incompetence of eyewitness Naval was
not an assigned error at the appellate court. The doctrine of RES IPSA
LOQUITOR says that when the thing that causes the damage is in the
control and management of the respondent, and in the ordinary
course of things the accident does not happen if those who hav e the
management use proper care, it affords reasonable evidence, in the absence
of explanation, that the accident arose from want of care. The
principle applies here. The MV Miguela was in the exclusive control of
respondent Olasiman, and a s i d e f r o m p e t i t i o n e r s w i t n e s s t e s t i m o n y
t h a t t h e v e s s e l r a m m e d t h e p i l e cluster, respondent did not show
persuasively other possible causes of the damage. Therefore,
respondents were responsible for the damage. Petition is granted and
the decision of the Regional Trial Court reinstated.
Thermochem v. Naval
Cita
Thermochem Inc. and Jerome O. Castro, Petitioners, versus Leonora

Naval and The Court of Appeals, Respondents. (G.R. No. 131541, October
20, 2000, 1st Division) YNARES-SANTIAGO, J:
FACTS: On May 10, 1992, at around 12:00 o'clock midnight, Eduardo

Edem was driving a "Luring Taxi" along Ortigas Avenue, near Rosario, Pasig,
going towards Cainta. Prior to the collision, the taxicab was parked
along the right side of O r t i g a s A v e n u e , n o t f a r f r o m t h e R o s a r i o
B r i d g e , t o u n l o a d a p a s s e n g e r . Thereafter, the driver executed a U-turn
to traverse the same road, going to the direction of EDSA. At this point, the
Nissan Pathfinder traveling along the same road going to the direction of
Cainta collided wit h the taxicab. The point of impact was so great that
the taxicab was hit in the middle portion and was pushed sideward,
causing the driver to lose control of the vehicle. The taxicab w a s t h e n
d r a g g e d i n t o t h e n e a r b y Q u e s t i o n Ta i l o r i n g S h o p , t h u s , c a u s i n g
damage to the said tailoring shop, and its driver, Eduardo Eden,
sustained injuries as a result of the incident. Private respondent, as owner
of the taxi, filed a damage suit against petitioner, Thermochem
Incorporated, as the owner of the Nissan Pathfinder, and its driver, petitioner
Jerome Castro. A f t e r t r i a l , t h e l o w e r c o u r t a d j u d g e d p e t i t i o n e r
C a s t r o n e g l i g e n t a n d ordered petitioners, jointly and severally, to
pay private respondent actual, compensatory and exemplary damages plus
attorney's fees and costs of suit. On appeal, the Court of Appeals affirmed the
judgment of the court a quo. Hence, this petition for review on certiorari.
ISSUE: Whether or not the petitioners are liable based on quasi-delict.
HELD: Yes. The Court held that the driver of the onc oming Nissan Path
finder vehicle was liable and the driver of the U -turning taxicab was
contributorily liable. From petitioner Castro's testimonial admissions, it is
established that he was driving at a speed faster than 50 kilometers per
hour. But as he allegedly stepped on the brake, it locked causing his
Nissan Pathfinder to skid to the left and consequently hit the taxicab. The
sudden malfunction of the vehicle's brake system is the usual excuse of drivers
involved in collisions which are the result of speedy driving. Malfunction or loss
of brake is not a fortuitous event. The owner and his driver are presumed
to know about the conditions of the vehicle and is duty bound to take
care thereof with the diligence of a good father of the family. A mechanically
defective vehicle should avoid the streets. Moreover, the record shows that the
Nissan Pathfinder was on the wrong lane when the collision occurred. This
was a disregard of traffic safety rules. The law considers what would be
reckless, blameworthy or negligent in a man of ordinary diligence and prudence
and determines liability by that. As mentioned earlier, the driver of the taxi is
contributorily liable. U-turns are not generally advisable particularly on
major streets. The driver of the taxi ought to have known that vehicles
coming from the Rosario bridge are on a downhill slope. Obviously,
there was lack of foresight on his part, making him contributorily liable.
Considering the contributory negligence of the driver of
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p r i v a t e respondent's taxi, the award of P47, 850.00, for the repair of the
taxi, should be reduced in half. All other awards for damages are deleted for
lack of merit.
Philippine Hawk Corp. v. Lee
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Philippine Hawk Corporation, Petitioner, versus Vivian Tan Lee,

Respondent. (G.R. No. 166869, February 16, 2010, 3rd Division) PERALTA,
J.:
FACTS: On March 17, 1991, in Bgy. Buensoceso, Gumaca, Quezon, plaintiff

Vivian Lee Tan and her husband Silvino Tan, while on board a motorcycle,
driven by the latter, and a Metro Bus of the Philippine Hawk driven by
Margarito Avila, were involved in an accident. As a result of the accident,
Silvino Tan died on the spot while plaintiff Vivian Lee Tan suffered physical
injuries which necessitated medical attention and hospitalization. The
deceased Silvino Tan is survived by his wife, plaintiff Vivian Lee Tan and four
children, three of whom are now residents of the United States.
On June 18, 1992, respondent filed an Amended Complaint, [3] in her

own behalf and in behalf of her children, in the civil case for damages against
petitioner. Respondent sought the payment of indemnity for the death of
Silvino Tan, moral and exemplary damages, funeral and interment expenses,
medical and hospitalization expenses, the cost of the motorcycles repair,
attorneys fees, and other just and equitable reliefs but the petitioner denied
liability for the vehicular accident, alleging that the immediate and proximate
cause of the accident was the recklessness or lack of caution of Silvino Tan.
Petitioner asserted that it exercised the diligence of a good father of the family
in the selection and supervision of its employees, including Margarito Avila.
The trial court rendered judgment against petitioner and defendant Margarito
Avila, adjudging the latter guilty of simple negligence petitioner bus company
liable for failing to exercise the diligence of a good father of the family in the
selection and supervision of Avila, having failed to sufficiently inculcate in him
discipline and correct behavior on the road.
On appeal, the Court of Appeals affirmed the decision of the trial court
with modification in the award of damages. Hence, this petition.
ISSUE: Whether or not negligence may be attributed to petitioners driver and

that such negligence was the proximate cause of the accident, resulting in the
death of Silvino Tan and causing physical injuries to respondent; and whether
or not petitioner is liable to respondent for damages.
HELD: To be negligent, a defendant must have acted or failed to act in such a

way that an ordinary reasonable man would have realized that certain interests
of certain persons were unreasonably subjected to a general but definite class
of risks.
In this case, the bus driver, who was driving on the right side of the road,
already saw the motorcycle on the left side of the road before the collision.
However, he did not take the necessary precaution to slow down, but drove on
and bumped the motorcycle, and also the passenger jeep parked on the left
side of the road, showing that the bus was negligent in veering to the left lane,
causing it to hit the motorcycle and the passenger jeep.
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Whenever an employees negligence causes damage or injury to another,

there instantly arises a presumption that the employer failed to exercise the
due diligence of a good father of the family in the selection or supervision of its
employees. To avoid liability for a quasi-delict committed by his employee, an
employer must overcome the presumption by presenting convincing proof that
he exercised the care and diligence of a good father of a family in the selection
and supervision of his employee.
The Court upholds the finding of the trial court and the Court of Appeals
that petitioner is liable to respondent, since it failed to exercise the diligence of
a good father of the family in the selection and supervision of its bus driver,
Margarito Avila, for having failed to sufficiently inculcate in him discipline and
correct behavior on the road. Indeed, petitioners tests were concentrated on
the ability to drive and physical fitness to do so. It also did not know that Avila
had been previously involved in sideswiping incidents.
In fine, the Court of Appeals correctly awarded civil indemnity for the
death of respondents husband, temperate damages, and moral damages for
the physical injuries sustained by respondent in addition to the damages
granted by the trial court to respondent. The trial court overlooked awarding
the additional damages, which were prayed for by respondent in her Amended
Complaint. The appellate court is clothed with ample authority to review
matters, even if they are not assigned as errors in the appeal, if it finds that
their consideration is necessary in arriving at a just decision of the case.
WHEREFORE, the petition is DENIED. The Decision of the Court of

Appeals dated August 17, 2004 is hereby AFFIRMED with MODIFICATION.
Dy Teban v. Ching
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Dy Teban Trading Inc., Petitioner, versus Jose Ching and/or Liberty

Forest, Inc. and Cresilito M. Limbaga, Respondent.
(G.R. No. 161803, February 4, 2008, 3rd Division)
REYES, R.T., J:
FACTS: A Prime Mover Trailer suffered a tire blow out during the night of its
travel at a national highway. The trailer was owned by the respondent
Liberty Forest. The driver allegedly put earl warning devices but the only
evidence being witnessed was a banana trunks and candles. Since the car was
placed at the right wing of the road, thus it caused the swerving of a
Nissan van owned by the petitioner when a passenger bus was coming in
between the trailer. The Nissan van owner claimed for damages
against the respondent. The trial court found that the proximate
cause of the three way accident is the negligence and carelessness of
driver of the respondent. However, it reversed the decision of the trial court.
ISSUE: Whether there was negligence on the part of the respondent.
HELD: Yes. There was negligence on the part of the respondent when the latter
failed to put and used an early warning device because it was found out that
there was no early warning device being prescribed by law that was used by
the driver in order to warn incoming vehicle. Fu rthermore, the
proximate cause of the accident was due to the position of the trailer where it
covered a cemented part of the road, thus confused and made trick
way for other vehicles to pass by. Thus the respondent is declared
liable due to violation of road rules and regulations.
Safeguard Security v. Tangco
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Safeguard Security Agency, Inc. and Admer Pajarillo, Petitioners, versus

Lauro Tangco, Vern Larry Tangco, Van Lauro Tangco, Von Larrie Tangco,
Vien Lari Tangco and Vivien Lauriz Tangco, Respondents.
(G.R. No. 165732, December 14, 2006, 1st Division)
AUSTRIA-MARTINEZ, J:
FACTS: The victim Evangeline Tangco was depositor of Ecology Bank.
She was also a licensed-fire arm holder, thus during the incident, she
was entering the bank to renew her time deposit and along with her
was her firearm. Suddenly, the security guard of the bank, upon knowing that
the victim carries a firearm, the security guard shot the victim causing
the latters instant death. The heirs of the victim filed a criminal case against
security guard and an action against Safeguard Security for failure to
observe diligence of a goof father implied upon the act of its agent.
ISSUE: Whether Safeguard Security can be held liable for the acts of
its agent.
HELD: Yes. The law presumes that any injury committed either by fault or
omission of an employee reflects the negligence of the employer. In
quasi-delicts cases, in order to overcome this presumption, the employer must
prove that there was no negligence on his part in the supervision of his
employees. It w a s d e c l a r e d t h a t i n t h e s e l e c t i o n o f e m p l o y e e s a n d
agents, employers are required to examine them as to their
q u a l i f i c a t i o n s , experience and service records. Thus, due diligence
on the supervision and operation of employees includes the formulation of
suitable rules and regulations for the guidance of employees and the
issuance of proper instructions intended for the protection of the
public and persons with whom the employer has relations through his
employees. Thus, in this case, Safeguard Security committed
negligence in identifying the qualifications and ability of its agents.
Villanueva v. Domingo
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Nostradamus Villanueva, Petitioner, versus Priscilla R. Domingo and

Leandro Luis R. Domingo, Respondents.
(G.R. No. 144274, September 20, 2004, 3rd Division)
CORONA, J:
FACTS: In 1991, a collision was made by a green Mitsubishi lancer owned by
Ocfemia against a silver Mitsubishi lancer driven by Leandro Domingo and
owned by petitioner Priscilla Domingo. The incident caused the car
of D o m i n g o b u m p e d a n o t h e r t w o p a r k e d v e h i c l e s . A c h a r g e d w a s
f i l e d against Ocfemia and the owner Villanueva. Villanueva claimed
that he must not be held liable for the incident because he is no longer the
owner of the car since it was already swapped to another car. However, the trial
court ordered the petitioner to pay the damages incurred by the silver
Mitsubishi lancer car.
ISSUE: Whether the owner Villanueva be held liable for the mishap.
HELD: Under the Motor Vehicle law, it was declared that the registered
owner of any vehicle is primary land directly liable for any injury it incurs
while it is being operated. Thus, even the petitioner claimed that he
was no longer the present owner of the car, still the registry was
under his name, thus it is presumed that he still possesses the car
and that the damages caused by the car be charge against him being
the registered owner. The primary function of Motor vehicle registration is to
identify the owner so that if any accident happens, or that any damage
or injury is caused by the vehicle, responsibility therefore can be fixed on a
definite individual, the registered owner.
Calalas v. Court of Appeals
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Vicente Calalas, Petitioner, versus Court Of Appeals, Eliza Jujeurche

Sunga and Francisco Salva, Respondents.
(G.R. No. 122039 May 31, 2000, 2nd Division)
MENDOZA, J.:
FACTS: Eliza Sunga was a passenger of a jeepney owned and operated by the
petitioner Calalas. Private respondent Sunga sat in the rear protion of the
jeepney where the conductor gave Sunga an extension seat. When the jeep
stopped, Sunga gave way to a passenger going outside the jeep. However, an
Isuzu Truck driven by Verene and owned by Salva, accidentally hit Sunga
causing the latter to suffer physical injuries where the attending physician
ordered a three months of rest. Sunga filed an action for damages against the
petitioner for breach of contract of common carriage by the petitioner.
On the other hand, the petitioner Calalas filed an action against Salva,
being the owner of the truck. The lower court ruled in favor of ther petitioner,
thus the truck owner is liable for the damage to the jeep of the petitioner.
ISSUE: Whether or not the petitioner is liable for the injury suffered by Sunga.
HELD: Yes. The petitioner is liable for the injury suffered by Sunga.
Under Article 1756 of the New Civil Code, it provides that common
carriers are presumed to have been at fault or to have acted negligently unless
they prove that they observed extraordinary diligence as defined in Arts. 1733
and 1755 of the Code. This provision necessarily shifts to the common carrier
the burden of proof.
In this case, the law presumes that any injury suffered by a passenger of
the jeep is deemed to be due to the negligence of the driver. This is a case on
Culpa Contractual where there was pre-existing obligations and that the fault
is incidental to the performance of the obligation. Thus, it was clearly observed
that the petitioner has negligence in the conduct of his duty when he allowed
Sunga to seat in the rear portion of the jeep which is prone to accident.
Decision affirmed.
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Picart v. Smith
Amado Picart, Plaintiff-appellant, versus Frank Smith, Jr., Defendant-
appellee, Alejo Mabanag for appellant, G. E. Campbell for appellee.
(G.R. No. L-12219, March 15, 1918, En banc)
STREET, J.:
FACTS: The plaintiff, riding on his pony was half way across the Carlatan
bridge when the defendant approached from the opposite direction in an
automobile, going at the rate of about ten or twelve miles per hour. As the
defendant neared the bridge he saw a horseman on it and blew his horn to give
warning of his approach. He continued his course and after he had taken the
bridge he gave two more successive blasts, as it appeared to him that the man
on horseback before him was not observing the rule of the road. The plaintiff
saw the automobile coming and heard the warning signals. However, thinking
that he has no sufficient time to go to the other side of the road, he pulled the
pony closely up against the railing on the right side of the bridge instead of
going to the left. The defendant, instead of veering to the right while yet some
distance away or slowing down, continued to approach directly toward the
horse. When he had gotten quite near, there being then no possibility of the
horse getting across to the other side, the defendant quickly turned his car
sufficiently to the right to escape hitting the horse alongside of the railing
where it as then standing; but in so doing the automobile passed in such close
proximity to the animal that it became frightened and turned its body across
the bridge with its head toward the railing. In so doing, it was struck on the
hock of the left hind leg by the flange of the car and the limb was broken. The
horse fell and its rider was thrown off with some violence. As a result of its
injuries the horse died. The plaintiff received contusions which caused
temporary unconsciousness and required medical attention for several days.
ISSUE: Whether or not the defendant is guilty of negligence.
HELD: Yes. The defendant is guilty of negligence.
As the defendant started across the bridge, he had the right to assume
that the horse and the rider would pass over to the proper side; but as he
moved toward the center of the bridge he clearly saw that this would not be
done; and he must in a moment have perceived that it was too late for the
horse to cross with safety in front of the moving vehicle. The control of the
situation had then passed entirely to the defendant; and it was his duty either
to bring his car to an immediate stop or, seeing that there were no other
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persons on the bridge, to take the other side and pass sufficiently far away
from the horse to avoid the danger of collision. Instead of doing this, the
defendant ran straight on until he was almost upon the horse.
The plaintiff himself was not free from fault, for he was guilty of
antecedent negligence in planting himself on the wrong side of the road. But it
was the defendant who had the last clear chance to avoid the impending harm
and when he failed to do so, he is deemed negligent, thus liable to pay damages
in favor of the plaintiff.
Petition granted.
Durban apartments v. Pioneer Insurance
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Durban Apartments Corporation, doing business under the name and style
of City Garden Hotel, Petitioner, versus Pioneer Insurance and Surety
Corporation, Respondent.
NACHURA, J.:
FACTS: On July 22, 2003, respondent Pioneer Insurance and Surety Corporation by
right of subrogation, filed a complaint for Recovery of Damages against petitioner,
Durban Apartments Corporation. On April 30, 2002, See arrived and checked in at the
City Garden Hotel in Makati corner Kalayaan Avenues, Makati City before midnight,
and its parking attendant, defendant Justimbaste got the key of Vitara from See to
park it. On May 1, 2002, See was awakened in his room by a call from the Hotel Chief
Security Officer who informed him that his Vitara was carnapped. The Vitara was lost
due to the negligence of petitioner and defendant because it was discovered during the
investigation that this was the second time that a similar incident of carnapping
happened in the valet parking service of Durban Apartments and no necessary
precautions were taken to prevent its repetition. Durban Apartments was wanting in
due diligence in the selection and supervision of its employees. The petitioner failed
and refused to pay its valid, just, and lawful claim despite written demands. The
Regional Trial Court rendered a decision ordering petitioner Durban Apartments
Corporation to pay respondent Pioneer Insurance and Surety Corporation the sum
of P1,163,250.00 with legal interest until the obligation is fully paid and attorneys
fees and litigation expenses amounting toP120,000.00. The petitioner appealed on the
appellate court but it affirmed the trial courts decision. Hence, this petition.
ISSUE: Whether or not the petitioner is liable to respondent for the loss of Sees
vehicle.
HELD: Yes. The petitioner is liable to respondent for the loss of Sees vehicle.
Article 1962, in relation to Article 1998, of the Civil Code defines a

contract of deposit and a necessary deposit made by persons in hotels or inns:
Art. 1962. A deposit is constituted from the moment a person receives a

thing belonging to another, with the obligation of safely keeping it and
returning the same.
Art. 1998. The deposit of effects made by travelers in hotels or inns shall
also be regarded as necessary. The keepers of hotels or inns shall be
responsible for them as depositaries, provided that notice was given to them, or
to their employees, of the effects brought by the guests and that, on the part of
the latter, they take the precautions which said hotel-keepers or their
substitutes advised relative to the care and vigilance of their effects.
Plainly, from the facts found by the lower courts, the insured See
deposited his vehicle for safekeeping with petitioner, through the latters
employee, Justimbaste. In turn, Justimbaste issued a claim stub to See. Thus,
the contract of deposit was perfected from Sees delivery, when he handed over
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to Justimbaste the keys to his vehicle, which Justimbaste received with the
obligation of safely keeping and returning it. Ultimately, petitioner is liable for
the loss of Sees vehicle.
Petition denied.
Lagon v. Hooven Comalco
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Jose V. Lagon, Petitioner, versus Hooven Comalco Industries,

Inc., Respondent.
BELLOSILLO, J.:
FACTS: Sometime in April 1981 Lagon, a businessman and HOOVEN entered

into two (2) contracts, denominated Proposal, whereby for a total consideration
of P104,870.00 HOOVEN agreed to sell and install various aluminum materials
in Lagons commercial building in Tacurong, Sultan Kudarat. HOOVEN filed an
action against Lagon claiming that the latter failed to pay his due despite
HOOVENs performance of its obligation. Lagon, in his answer, denied liability
and averred that HOOVEN was the party guilty of breach of contract by failing
to deliver and install some of the materials specified in the proposals; that as a
consequence he was compelled to procure the undelivered materials from other
sources; that as regards the materials duly delivered and installed by
HOOVEN, they were fully paid.
ISSUE: Whether or not the petitioner is entitled to moral damages.
HELD: Yes. The petitioner is entitled to moral damages.
HOOVEN's bad faith lies not so much on its breach of contract - as there
was no showing that its failure to comply with its part of the bargain was
motivated by ill will or done with fraudulent intent - but rather on its appalling
temerity to sue petitioner for payment of an alleged unpaid balance of the
purchase price notwithstanding knowledge of its failure to make complete
delivery and installation of all the materials under their contracts. Although
petitioner was found to be liable to respondent to the extent of P6,377.66,
petitioner's right to withhold full payment of the purchase price prior to the
delivery and installation of all the merchandise cannot be denied since under
the contracts the balance of the purchase price became due and demandable
only upon the completion of the project. Consequently, the resulting social
humiliation and damage to petitioner's reputation as a respected businessman
in the community, occasioned by the filing of this suit provide sufficient
grounds for the award of P50,000.00 as moral damages. On the part of Lagon,
he is ordered by the court to pay HOOVEN the amount corresponding to the
value of the materials admittedly delivered to him.
Decision is modified.
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Francisco v. Court of Appeals

Spouses Lorenzo G. Francisco and Lorenza D.
Francisco, Petitioners, versus Honorable Court of Appeals, and Bienvenido
C. Mercado, respondents.
CARPIO, J.:
FACTS: On 3 February 1984, the spouses Lorenzo and Lorenza Francisco and
Engineer Bienvenido C. Mercado entered into a Contract of Development for the
development into a subdivision of several parcels of land in Pampanga. Under the
Contract, respondent agreed to undertake at his expense the development work for the
Franda Village Subdivision. Respondent committed to complete the construction
within 27 months. Respondent also advanced P200,000.00 for the initial expenses of
the development work. In return, respondent would receive 50% of the total gross
sales of the subdivision lots and other income of the subdivision. Respondent also
enjoyed the exclusive and irrevocable authority to manage, control and supervise the
sales of the lots within the subdivision. The Contract required respondent to submit to
petitioners, within the first 15 days of every month, a report on payments collected
from lot buyers with copies of all the contracts to sell. However, respondent failed to
submit the monthly report. On 27 February 1987, respondent filed with the trial court
an action to rescind the Contract with a prayer for damages. Petitioners countered
that respondent breached the Contract by failing to finish the subdivision within the
27 months agreed upon, and therefore respondent was in delay.
ISSUE: Whether or not the respondent incurred the delay.
HELD: No. The respondent did not incur the delay.
It is the petitioners breached the contract by: (1) hiring Rosales to do

development work on the subdivision within the 27-month period exclusively granted
to respondent; (2) interfering with the latter's development work; and (3) stopping
respondent from managing the sale of lots and collection of payments. Because
petitioners were the first to breach the contract and even interfered with the
development work, respondent did not incur delay even if he completed only 28% of
the development work. Further, the petitioner extended the Contract up to July 1987.
Since the Contract had not expired at the time respondent filed the action for
rescission, petitioners' defense that respondent did not finish the development work on
time was without basis. The law provides that delay may exist when the obligor fails to
fulfill his obligation within the time expressly stipulated. In this case, the petitioner
extended the period for respondent to finish the development work until 30 July 1987.
Respondent did not incur delay since the period granted him to fulfill his obligation
had not expired at the time respondent filed the action for rescission on 27 February
1987. Moreover, since petitioners stopped respondent from selling lots and collecting
payments from lot buyers, which was the primary source of development funds, they
in effect, rendered respondent incapable, or at least made it difficult for him, to
develop the subdivision within the allotted period. In reciprocal obligations, neither
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party incurs in delay if the other does not comply or is not ready to comply with what
is incumbent upon him. It is only when one of the parties fulfills his obligation that
delay by the other begins.
Decision affirmed.
Tanguilig v. Court of Appeals.
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Jacinto Tanguilig doing business under the name and style J.M.T.
Engineering and General Merchandising, Petitioner, versus Court Of
Appeals and Vicente Herce Jr., Respondents.
(G.R. No. 117190 January 2, 1997, 1st Division)
BELLOSILLO, J.:
FACTS: Petitioner Jacinto M. Tanguilig proposed to respondent Vicente Herce Jr. to

construct a windmill system for him. After some negotiations they agreed on the
construction of the windmill for a consideration of P60,000.00. On 14 March 1988,
due to the refusal and failure of respondent to pay the balance, petitioner filed a
complaint to collect the amount. Respondent denied the claim saying that he had
already paid this amount to the San Pedro General Merchandising Inc. (SPGMI) which
constructed the deep well to which the windmill system was to be connected.
According to respondent, since the deep well formed part of the system the payment
he tendered to SPGMI should be credited to his account by petitioner. Moreover,
assuming that he owed petitioner a balance of P15,000.00, this should be offset by the
defects in the windmill system which caused the structure to collapse after a strong
wind hit their place.
Petitioner denied that the construction of a deep well was included in the
agreement to build the windmill system, for the contract price of P60,000.00 was
solely for the windmill assembly and its installation. He also disowned any obligation
to repair or reconstruct the system since its collapse was attributable to a typhoon, a
force majeure, which relieved him of any liability.
ISSUE: Whether or not Tanguilig is liable to reconstruct the damaged windmill.
HELD: Yes. Tanguilig is liable to reconstruct the damaged windmill considering that
its collapse is due to a typhoon.
The Supreme Court has consistently held that in order for a party to claim
exemption from liability by reason of fortuitous event under Art. 1174 of the Civil Code
four (4) requisites must concur: (a) the cause of the breach of the obligation must be
independent of the will of the debtor; (b) the event must be either unforeseeable or
unavoidable; (c) the event must be such as to render it impossible for the debtor to
fulfill his obligation in a normal manner; and, (d) the debtor must be free from any
participation in or aggravation of the injury to the creditor. Petitioner failed to show
that the collapse of the windmill was due solely to a fortuitous event. Petitioner
merely stated that there was a "strong wind." But a strong wind in this case cannot be
fortuitous. On the contrary, a strong wind should be present in places where
windmills are constructed. Petitioner is ordered to "reconstruct subject defective
windmill system, in accordance with the one-year guaranty".
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Decision is modified.
Periquet v. Court of Appeals
Cita
DR. FERNANDO PERIQUET, JR., Petitioner, versus HONORABLE FOURTH

CIVIL CASES DIVISION OF THE INTERMEDIATE APPELLATE COURT and
the HEIRS OF THE LATE FELIX R. FRANCISCO, Respondents.
(G.R. No. L-69996, December 5, 1994, 1st Division)
KAPUNAN, J.:
FACTS: Spouses Fernando Periquet and Petra Francisco were left childless after the
death of their only child, Elvira, so they took in a son out of wedlock of Marta
Francisco-Reyes, sister of Petra. Though he was not legally adopted, the boy was given
the name Fernando Periquet, Jr. and was reared to manhood by the spouses Periquet.
On March 20, 1966, Fernando Periquet died. When Petra died, she was survived by
her siblings, nieces and nephews and by the petitioner. But a few days before her
death, Petra asked her lawyer to prepare her last will and testament. However, she
died before she could sign it. In the said will, Petra left her estate to petitioner,
Fernando Periquet, Jr. and provided for certain legacies to her other heirs. Felix
Franciso, brother of Petra, assigned his hereditary rights to the petitioner. However,
later on, he filed an action for annulment of the Assignment of Hereditary Rights
claiming "gross misrepresentation and fraud," "grave abuse of confidence," "mistake
and undue influence," and "lack of cause and/or consideration" in the execution of the
challenged deed of assignment.
ISSUE: Whether or not the Assignment of Hereditary Rights is tainted with fraud.
HELD: No. The Assignment of Hereditary Rights is not tainted with fraud.
The kind of fraud that will vitiate a contract refers to those insidious words or
machinations resorted to by one of the contracting parties to induce the other to enter
into a contract which without them he would not have agreed to. In the case at bench,
no such fraud was employed by herein petitioner. Resultantly, the assignment of
hereditary rights executed by Felix Francisco in favor of herein petitioner is valid and
effective.
Felix Francisco could not be considered to have been deceived into signing the
subject deed of assignment for the following reasons: The assignment was executed
and signed freely and voluntarily by Felix Francisco in order to honor, respect and give
full effect to the last wishes of his deceased sister, Petra. The same was read by him
and was further explained by Atty. Diosdado Guytingco. Furthermore, witnesses for
petitioner, who also served as witnesses in the execution and signing of the deed of
assignment, declared that Felix Francisco was neither forced nor intimidated to sign
the assignment of hereditary rights.
Petition granted.
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Legaspi Oil v. Court of Appeals

Legaspi Oil Co., Inc., Petitioner, versus The Court Of Appeals and Bernard
Oseraos, Respondent.
(G.R. No. 96505 July 1, 1993, 1st Division)
MELO, J.:
FACTS: Bernard Oseraos had several transactions with Legaspi Oil Co. for the sale of
copra to the latter. The price at which appellant sells the copra varies from time to
time, depending on the prevailing market price when the contract is entered into. On
February 16, 1976, appellant's agent Jose Llover signed contract No. 3804 for the sale
of 100 tons of copra at P82.00 per 100 kilos with delivery terms of 20 days effective
March 8, 1976. After the period to deliver had lapsed, appellant sold only 46,334 kilos
of copra thus leaving a balance of 53,666 kilos. Accordingly, demands were made
upon appellant to deliver the balance with a final warning that failure to deliver will
mean cancellation of the contract, the balance to be purchased at open market and
the price differential to be charged against appellant. On October 22, 1976, since there
was still no compliance, appellee exercised its option under the contract and
purchased the undelivered balance from the open market at the prevailing price of
P168.00 per 100 kilos, or a price differential of P86.00 per 100 kilos, a net loss of
P46,152.76 chargeable against appellant.
ISSUE: Whether or not the private respondent is guilty of breach of contract.
HELD: Yes. The private respondent is guilty of breach of contract
Private respondent is guilty of fraud in the performance of his obligation under

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

intent to evade his contractual obligation for the price of copra had in the meantime
more than doubled from P82.00 to P168 per 100 kilograms. Under Article 1170 of the
Civil Code of the Philippines, those who in the performance of their obligation are
guilty of fraud, negligence, or delay, and those who in any manner contravene the
Cita
tenor thereof, are liable for damages. Pursuant to said article, private respondent is
liable for damages.
Petition granted.
Philippine Charter v. Central Colleges
Cita
Philippine Charter Insurance Corporation, Petitioner, versus. Central

Colleges of the Philippines and Dynamic Planners and Construction
Corporation, Respondents.
(G.R. Nos. 180631-33, February 22, 2012, 3rd Division)
MENDOZA, J.:
FACTS: On May 16, 2000, Central Colleges of the Philippines (CCP), an

educational institution, contracted the services of Dynamic Planners and
Construction Corporation (DPCC) to be its general contractor for the
construction of its five (5)-storey school building at No. 39 Aurora Boulevard,
Quezon City, with a total contract price of P248,000,000.00. As embodied in a
Contract Agreement, the construction of the entire building would be done in
two phases with each phase valued at P124,000,000.00. To guarantee the
fulfillment of the obligation, DPCC posted three (3) bonds, all issued by the
Philippine Charter Insurance Corporation (PCIC). All the bonds were callable on
demand and set to expire on October 30, 2003.
Phase 1 of the project was completed without issue. The Phase 2 of the
project, however, encountered numerous delays. All negotiations came to a
dead end thus a complaint was filed in court. Philippine Charter Insurance
Corporation and Dynamic Planners and Construction Corporation are ordered
jointly and severally to pay Central Colleges of the Philippines the total amount
of P13,924,351.47. PCIC moved for the reconsideration of the said decision,
but the CA disposed of it with a denial in its November 19, 2007 Resolution.
ISSUE: Whether or not Dynamic Planners and Construction Corporation

incurred delay.
HELD: Yes. DPCC incurred delay from the time CCP called its attention that it
had breached the contract and extrajudicially demanded the fulfillment of its
commitment against the bonds.
The Court finds itself unable to agree. Article 1169 of the New Civil Code
provides:
Art. 1169. 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.
The civil law concept of delay or default commences from the time the
obligor demands, judicially or extrajudicially, the fulfillment of the obligation
from the obligee. In legal parlance, demand is the assertion of a legal or
procedural right. Hence, DPCC incurred delay from the time CCP called its
attention that it had breached the contract and extrajudicially demanded the
fulfillment of its commitment against the bonds.
It is the obligors culpable delay, not merely the time element, which
gives the obligee the right to seek the performance of the obligation. As such,
CCPs cause of action accrued from the time that DPCC became in culpable
delay as contemplated in the surety and performance bonds.
Petition partly granted.
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Titan-Ikeda Construction v. Primetown Property

Titan-Ikeda Construction & Development
CORPORATION, Petitioner, versus Primetown Property Group,
Inc., Respondent.
(G.R. No. 158768, February 12, 2008, 1st Division)
CORONA, J.:
FACTS: In 1992, respondent Primetown Property Group, Inc. awarded the contract for
the structural works of its 32-storey Makati Prime Tower (MPT) to petitioner Titan-
Ikeda Construction and Development Corporation. In September 1995, respondent
engaged the services of Integratech, Inc. (ITI), an engineering consultancy firm, to
evaluate the progress of the project. In its report, ITI informed respondent that
petitioner, at that point, had only accomplished 31.89% of the project (or was 11
months and six days behind schedule). Meanwhile, petitioner and respondent were
discussing the possibility of the latters takeover of the projects supervision. Despite
ongoing negotiations, respondent did not obtain petitioners consent in hiring ITI as
the projects construction manager. Neither did it inform petitioner of ITIs September
7, 1995 report.
Subsequently, both parties agreed that Primetown will take over the project.
Petitioner then demanded for the payment due him in relation to its partial
performance of its obligation. For failure of Primetown to pay despite repeated
demands, petitioner filed a case for specific performance against Primetown.
Meanwhile, Primetown demanded reimbursement for the amount it spent in having
the project completed.
ISSUE: Whether or not Titan-Ikeda incurred delay in the performance of its obligation.
HELD: No. Titan-Ikeda did not incur delay in the performance of its obligation.
It was found that because respondent modified the MPT's architectural design,
petitioner had to adjust the scope of work. Moreover, respondent belatedly informed
petitioner of those modifications. It also failed to deliver the concrete mix and rebars
according to schedule. For this reason, petitioner was not responsible for the project's
delay. Mora or delay is the failure to perform the obligation in due time because of dolo
(malice) or culpa (negligence). A debtor is deemed to have violated his obligation to the
creditor from the time the latter makes a demand. Once the creditor makes a demand,
the debtor incurs mora or delay. Respondent never sent petitioner a written demand
asking it to accelerate work on the project and reduce, if not eliminate, slippage. In
view of the foregoing, we hold that petitioner did not incur delay in the performance of
its obligation.
Petition granted.
Cita
PNB Madecor vs. Uy

PNB MADECOR, Petitioner, versus Gerardo C. Uy, Respondent.
QUISUMBING, J:
FACTS: Petitioner PNB Management and Development Corporation (PNB

MADECOR) is indebted to Pantranco North Express Inc. (PNEI) for P7,
884,921.10 per a promissory note dated October 31, 1982 executed by its
precursor National Real Estate Development Corporation (NAREDECO) in
PNEIs favor. Said amount earns an 18% interest/year in case NAREDECO fails
to pay the principal after notice; PNEIs receivables were thereafter conveyed to
PNB in payment of PNEIs loan obligation to the latter, in accordance with a
dacion en pago agreement executed between PNEI and PNB. Allegedly
compensation took place between petitioners debts to PNEI and the latters
obligation to it. Nevertheless, PNEI, through respondent, sued petitioner for the
latters debts.
The Regional Trial Court rendered its judgment against PNEI which was
affirmed by the Court of Appeals.
ISSUE: Whether or not there was delay for the payment of the legal
compensation.
HELD: No. There was no delay in the payment of the legal compensation.
Legal compensation could not have occurred in the case at bar due to the
absence of one requisite: that both debts must be due and demandable.
Petitioners obligation to PNEI is payable on demand, and there being no
demand made, it follows that the obligation is not yet due. Thus, this obligation
may not be subject to compensation for lack of a requisite under the law.
Without compensation having taking place, petitioner remains obligated to
PNEI to the extent stated in the promissory note. This obligation may
undoubtedly be garnished in respondents favor to satisfy PNEIs judgment
debt.
Petition denied.
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Barzaga vs. Court of Appeals

Ignacio Barzaga, Petitioner, versus Court of Appeals and Angelito Alviar,
Respondents.
BELLOSILLO, J:
FACTS: Petitioners wife died and her wish is to be buried before Christmas.
After her death on Dec 21, 1990, in fulfillment of her wishes, petitioner went to
respondents store to inquire the availability of materials to be used in building
his wifes niche. Respondents employee advised petitioner that to come back
the following morning. That following morning, petitioner made a payment of
P2,100 to secure the delivery of the materials. However, the materials were not
delivered on time.
Several times petitioner went to respondents store to ask for the delivery.
Later that day, the petitioner was forced to dismiss his laborer since there is
nothing to work with for the materials did not arrive. Petitioner however
purchased the materials from other stores. After his wife was buried, he sued
respondent for damages because of delay. For his part, respondent offered a
lame excuse of fortuitous event that the reason for delay is because the trucks
tires were flat.
ISSUE: Whether or not respondent is guilty of delay that will entitle petitioner
for damages, although it was not specified in the invoice the exact time of
delivery.
HELD: Yes. Respondent is guilty of delay that will entitle petitioner for
damages, although it was not specified in the invoice the exact time of delivery.
The law expressly provides that those who in the performance of their
obligation are guilty of fraud, negligence, or delay and those who in any
manner contravene the tenor thereof, are liable for damages. The appellate
court appears to have belittled petitioners submission that under the
prevailing circumstances time was of the essence in the delivery of the
materials to the grave site. In their contract of purchase and sale, petitioner
had already complied fully with what was required of him as purchaser, i.e.,
the payment of the purchase price of P2,110.00. It was incumbent upon
respondent to immediately fulfill his obligation to deliver the goods otherwise
delay would attach.
Decision of the Court of Appeals reversed and set aside.
Cita
Tanguilig v Court of Appeals

Jacinto Tanguilig Doing Business Under The Name And Style J.M.T.
Engineering And General Merchandising, Petitioner, versus Court Of
Appeals And Vicente Herce Jr., Respondents.
BELLOSILLO, J:
FACTS: Respondent Herce contracted petitioner Tanguilig to construct a

windmill system for him, for consideration of 60,000.00. Pursuant to the
agreement, respondent paid the down payment of 30,000.00 and installment of
15,000.00 leaving a 15,000.00 balance.
Respondent refused to pay the balance because he had already paid this
amount to SPGMI which constructed a deep well to which the windmill system
was to be connected since the deep well, and assuming that he owed the
15,000.00 this should be offset by the defects in the windmill system which
caused the structure to collapse after strong winds hit their place. According to
petitioner, the 60,000.00 consideration is only for the construction of the
windmill and the construction of the deep well was not part of it. The collapse
of the windmill cannot be attributed to him as well, since he delivered it in good
and working condition and respondent accepted it without protest. Respondent
contested that the collapse is attributable to a typhoon, a force majeure that
relieved him of liability.
The Regional Trial Court ruled in favor of petitioner, but this decision
was overturned by the Court of Appeals which ruled in favor of respondent.
ISSUE: Whether or not the collapse of the windmill can be attributed to force
majeure thus extinguishing the liability of petitioner.
HELD: Yes. The collapse of the windmill can be attributed to force majeure
thus extinguishing the liability of petitioner.
In order for a party to claim exemption from liability by reason of
fortuitous event under Art 1174 of the Civil Code the event should be the sole
and proximate cause of the loss or destruction of the object of the contract.
In Nakpil vs. Court of Appeals, the Supreme Court held that 4 requisites
must concur that there must be a (a) the cause of the breach of the obligation
must be independent of the will of debtor (b) the event must be either
unforeseeable or unavoidable; (c) the event be such to render it impossible for
the debtor to fulfill his obligation in a normal manner; and (d) the debtor must
be free from any participation in or aggravation of the injury to the creditor.
Petitioner merely stated that there was a strong wind, and a strong wind
in this case is not fortuitous, it was neither unforeseeable nor unavoidable,
places with strong winds are the perfect locations to put up a windmill, since it
needs strong winds for it to work.
Appealed decision modified.
Cita
Tayag vs. Court of Appeals

Corito Ocampo Tayag, Petitioner, versus Hon. Court Of Appeals And
Emilie Dayrit Cuyugan, Respondent.
(G.R. No. 95229, June 9, 1992, 1st Division)
REGALADO, J:
FACTS: Siblings Juan Galicia Sr. and Celerina Labuguin entered into a
contract to sell a parcel of land in Nueva Ecija to a certain Albrigido Leyva:
3,000 upon agreement, 10,000 ten days after the agreement, 10,000
representing vendors indebtedness to Phil Veterans Bank, and 27,000 payable
within one year from execution of contract. Leyva only paid parts of the
obligation. But even after the grace period for payment made in the contract
and while litigation of such case, the petitioners still allowed Leyva to make
payments.
With regard to the obligation payable to the Phil Veterans bank by the
vendee, as they deemed that it was not paid in full, such obligation they
completed by adding extra amount to fulfill such obligation. This was fatal in
their case as this is Leyvas argument that they constructively fulfilled the
obligation which is rightfully due to him.
Petitioners claim that they are only OBLIGEES with regards to the
contract, so the principle of constructive fulfillment cannot be invoked against
them. Petitioners, being both creditor and debtor to private respondent, in
accepting piecemeal payment even after the grace period, are barred to take
action through estoppel.
ISSUE: Whether or not there was constructive fulfillment in the part of the
petitioners that shall make rise the obligation to deliver to Leyva the deed of
sale.
HELD: Yes. There was constructive fulfillment in the part of the petitioners that
shall make rise the obligation to deliver to Leyva the deed of sale.
In a contract of purchase, both parties are mutually obligors and also

obligees, and any of the contracting parties may, upon non-fulfillment by the
other privy of his part of the prestation, rescind the contract or seek fulfillment
In short, it is puerile for petitioners to say that they are the only obligees
under the contract since they are also bound as obligors to respect the
stipulation in permitting private respondent to assume the loan with the
Philippine Veterans Bank which petitioners impeded when they paid the
balance of said loan. As vendors, they are supposed to execute the final deed of
sale upon full payment of the balance as determined hereafter.
Petition denied.
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Periquet v. Court of Appeals

Dr. Fernando Periquet, Jr., Petitioner, versus Honorable Fourth Civil
Cases Division Of The Intermediate Appellate Court And The Heirs Of The
Late Felix R. Francisco, Respondents.
(G.R. No. L-69996, December 5, 1994, 1st Division)
KAPUNAN, J:
FACTS: Petitioner Fernando Periquet Jr. is the adopted son of spouses

Fernando Periquet and Petra Francisco. When the Fernando Sr. died, he left
his estate to his wife. When Petra died, she left the estate to their adopted son,
herein petitioner, with certain legacies to her siblings.
Felix Francisco is one of the beneficiaries of the estate of Petra. After

signing an Assignment of Hereditary Rights with petitioner as the assignee,
which was approved by the trial court, Felix filed the instant action to annul
the assignment. and to recover his one-fourth (1/4) share in the estate. The
action for annulment was based on gross misrepresentation and fraud, grave
abuse of confidence, mistake and undue influence, and lack of cause and/or
consideration in the execution of the challenged deed of assignment.
On appeal, the Intermediate Appellate Court modified the decision

annulling the Assignment of Hereditary Rights.
ISSUE: Whether or not the assignment is vitiated.
HELD: No. The assignment is not vitiated.
The kind of fraud that will vitiate a contract refers to those insidious
words or machinations resorted to by one of the contracting parties to induce
the other to enter into a contract which without them he would not have agreed
to. It must have a determining influence on the consent of the victim. The will
of the victim, in effect, is maliciously vitiated by means of a false appearance of
reality.
In the case at bench, no such fraud was employed by herein petitioner.

Resultantly, the assignment of hereditary rights executed by Felix Francisco in
favor of herein petitioner is valid and effective.
Petition granted.
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Raquel-Santos vs. Court of Appeals

Armand O. Raquel-Santos And Annalissa Mallari,
Petitioners, Versus Court Of Appeals And Finvest Securities Co., Inc.,
Respondents.
Philippine Stock Exchange, Inc.,
Petitioner, Versus Finvest Securities Co., Inc.,
Respondent.
Finvest Securities Co., Inc.,
Petitioner, Versus Trans-Phil Marine Ent., Inc. And Roland H. Garcia,
Respondents.
(G.R. Nos. 174986, G.R. No. 175071, 181415, July 7, 2009, 3rd Division)
NACHURA, J:
FACTS: Petitioner Armand Raquel-Santos was Finvests President and nominee

to the PSE from February 20, 1990 to July 16, 1998. Annalissa Mallari
(Mallari) was Finvests Administrative Officer until December 31, 1998.
In the course of its trading operations, Finvest incurred liabilities to PSE

representing fines and penalties for non-payment of its clearing house
obligations. PSE also received reports that Finvest was not meeting its
obligations to its clients. Consequently, PSE indefinitely suspended Finvest
from trading. The Securities and Exchange Commission (SEC) also suspended
its license as broker.
ISSUE: Whether or not Finvest can be deemed to have incurred in delay in the
payment of its obligations to PSE.
HELD: No. Finvest cannot be deemed to have incurred in delay in the payment
of its obligations to PSE.
In the present petition, PSE insists that Finvests liability for fines,
penalties and charges has been established, determined and substantiated,
hence, liquidated. A debt is liquidated when the amount is known or is
determinable by inspection of the terms and conditions of relevant documents.
Under the attendant circumstances, it cannot be said that Finvests debt is
liquidated. At the time PSE left the negotiating table, the exact amount of
Finvests fines, penalties and charges was still in dispute and as yet
undetermined. Consequently, Finvest cannot be deemed to have incurred in
delay in the payment of its obligations to PSE. It cannot be made to pay an
obligation the amount of which was not fully explained to it. The public sale of
the pledged seat would, thus, be premature.
Petition denied.
Cita
RCBC vs. Court of Appeals

Rizal Commercial Banking Corporation, Petitioner, versus Court Of
Appeals and Felipe Lustre, Respondents.
(G.R. No. 133107, March 25, 1999, 1st Division)
KAPUNAN, J:
FACTS: On March 10, 1993, private respondent Atty. Felipe Lustre purchased
a Toyota Corolla from Toyota Shaw, Inc. for which he made a down payment of
P164,620.00, the balance of the purchase price to be paid in 24 equal monthly
installments. Private respondent thus issued 24 postdated checks for the
amount of P14,976.00 each. The first was dated April 10, 1991; subsequent
checks were dated every 10th day of each succeeding month.
To secure the balance, private respondent executed a promissory note

and a contract of chattel mortgage over the vehicle in favor of Toyota Shaw, Inc.
The contract of chattel mortgage provided for an acceleration clause stating
that should the mortgagor default in the payment of any installment, the whole
amount remaining unpaid shall become due. In addition, the mortgagor shall
be liable for 25% of the principal due as liquidated damages.
On the theory that respondent defaulted in his payments, the check

representing the payment for August 10, 1991 being unsigned, petitioner, in a
letter dated January 21, 1993, demanded from private respondent the payment
of the balance of the debt, including liquidated damages. The latter refused,
prompting petitioner to file an action for replevin and damages before the Pasay
City Regional Trial Court (RTC). Private respondent, in his Answer, interposed
a counterclaim for damages.
The trial court dismissed the complaint which was affirmed by the
appellate court.
ISSUE: Whether or not the default was a case of failure to pay.
HELD: No. The default was not a case of failure to pay.
In the case at bench, plaintiff-appellant's imputation of default to

defendant-appellee rested solely on the fact that the 5th check issued by
appellee was recalled for lack of signature. However, the check was recalled
only after the amount covered thereby had been deducted from defendant-
appellee's account, as shown by the testimony of plaintiff's own witness
Francisco Bulatao who was in charge of the preparation of the list and trial
balances of bank customers. The "default" was therefore not a case of failure
to pay, the check being sufficiently funded, and which amount was in fact
already debitted [sic] from appellee's account by the appellant bank which
subsequently re-credited the amount to defendant-appellee's account for lack
of signature. All these actions RCBC did on its own without notifying
defendant until sixteen (16) months later when it wrote its demand letter dated
January 21, 1993.
Decision affirmed.
Cita
State Investment vs. Court of Appeals

State Investment House, Inc., Petitioner, versus Court Of Appeals And
Nora B. Moulic, Respondents.
BELLOSILLO, J:
FACTS: Respondent Nora Moulic issued to Corazon Victoriano, as security for

pieces of jewelry to be sold on commission, 2 post-dated Equitable Banking
Corporation. Thereafter, the payee negotiated the checks to the State
Investment House Inc. (SIHI). Moulic failed to sell the pieces of jewelry, so she
returned them to the payee before maturity of the checks. The checks,
however, could no longer be retrieved as they had already been negotiated.
Consequently, before their maturity dates, Moulic withdrew her funds from the
drawee bank. Upon presentment for payment, the checks were dishonored for
insufficiency of funds.
SIHI allegedly notified Moulic of the dishonor of the checks and

requested that it be paid in cash instead, although Moulic avers that no such
notice was given her. SIHI sued to recover the value of the checks. Moulic
contends that she incurred no obligation on the checks because the jewelry
was never sold and the checks were negotiated without her knowledge and
consent. She also instituted a Third-Party Complaint against Corazon
Victoriano, who later assumed full responsibility for the checks. The trial court
dismissed the Complaint as well as the Third-Party Complaint. SIHI elevated
the order of dismissal to the Court of Appeals, but the appellate court affirmed
the trial court on the ground that the Notice of Dishonor to Moulic was made
beyond the period prescribed by the Negotiable Instruments Law and that even
if SIHI did serve such notice on Moulic within the reglementary period it would
be of no consequence as the checks should never have been presented for
payment. SIHI filed the petition for review.
ISSUE: Whether or not the alleged issuance of the post-dated checks as mere
security is a ground for the discharge of the instrument.
HELD: No. The alleged issuance of the post-dated checks as mere security is
not a ground for the discharge of the instrument
Section 119 of the Negotiable Instrument Law outlined the grounds in

which an instrument is discharged. The grounds are (a) payment by or on
behalf of the principal debtor; (b) payment by accommodated; (c) intentional
cancellation of instrument by the holder; (d) any act which discharges a
contract; (e) reacquisition of principal debtor in his own right.
Section 119 of the NIL is exclusive to its enumerations. Obviously,

MOULIC may only invoke paragraphs (c) and (d) as possible grounds for the
discharge of the instrument. But, the intentional cancellation contemplated
under paragraph (c) is that cancellation effected by destroying the instrument
either by tearing it up, burning it, or writing the word "cancelled" on the
instrument.
Cita
Petition granted.
Cita
BPI Investment vs. Court of Appeals

BPI Investment Corporation, Petitioner, versus Hon. Court Of Appeals And
ALS Management & Development Corporation, Respondents.
QUISUMBING, J:
FACTS: Frank Roa obtained a loan at 16 1/4% interest rate per annum from
Ayala Investment and Development Corporation. For security, Roa's house and
lot were mortgaged. Later, Roa sold the house and lot to ALS and Antonio
Litonjua, who assumed Roa's debt to Ayala Investment. Ayala Investment,
however, granted a new loan to be applied to Roa's debt, secured by the same
property at a different interest rate of 20% per annum.
When ALS and Litonjua failed to pay, BPIIC, successor to Ayala

Investment, filed for foreclosure of mortgage.
ISSUE: Whether or not a contract of loan is a consensual contract.
HELD: No. A contract of loan is not a consensual contract.
A loan contract is not a consensual contract but a real contract. It is

perfected upon delivery of the object of the contract. Although a perfected
consensual contract can give rise to an action for damages, it does not
constitute a real contract which requires delivery for perfection. A perfected
real contract gives rise only to obligations on the part of the borrower.
In the present case, the loan contract was only perfected on the date of
the second release of the loan.
A contract of loan involves a reciprocal obligation, wherein the obligation

or promise of each party is the consideration for that of the other. It is a basic
principle in reciprocal obligations that neither party incurs in delay, if the other
does not comply or is not ready to comply in a proper manner with what is
incumbent upon him. Only when a party has performed his part of the contract
can he demand that the other party also fulfills his own obligation and if the
latter fails, default sets in.
Decision affirmed.
Cita
Leano vs. Court of Appeals

Carmelita Leao, assisted by her husband Gregorio Cuachon, Petitioner,
versus Court Of Appeals and Hermogenes Fernando, Respondents.
(G.R. No. 129018, November 15, 2001, 1st Division)
PARDO, J:
FACTS: Hermogenes Fernando, as vendor and Carmelita Leao, as vendee

executed a contract to sell involving a piece of land. In the contract, Leao
bond herself to pay Fernando the sum of P107,750 as the total purchase price.
Should the 90 days elapse from the expiration of the grace period, Respondent
was authorized to declare the contract cancelled & to dispose of the land.
Carmelita Leao made several payments in lump sum. Thereafter she
constructed a house. Last payment she made was on April 1989.
The trial court rendered decision in an ejectment case filed by Fernando.

Leao filed with the trial court for specific performance with preliminary
injunction and assailing that for being violative of her right to due process
being contrary to R.A 6552 regarding protection to buyers of lots on
installments. According to Trial Court, transaction was an absolute sale,
making Leao the owner upon actual & constructive delivery thereof. Fernando
divested of ownership & cannot recover the same unless rescinded under Art.
1592.
ISSUE: Whether or not petitioner is in delay.
HELD: Yes. Petitioner is in delay.
Leao was in delay because under Art. 1169, provides that Reciprocal
Obligation; Neither party incurs in delay if the other does not comply or is not
ready to comply in a proper manner with what is incumbent upon him. From
the moment one of the parties fulfills his obligation, delay by the other begins.
Fernando performed his part by allowing Leao to continue in possession

& use of the property. Clearly, when Leao did not pay the monthly
amortization, she was in delay and liable for damages.
Petition denied.
Cita
Heirs of Bacus v. Court of Appeals

HEIRS OF LUIS BACUS, namely: CLARA RESMA BACUS, ROQUE R. BACUS,
SR., SATURNINO R. BACUS, PRISCILA VDA. DE CABANERO, CARMELITA
B. SUQUIB, BERNARDITA B. CARDENAS, RAUL R. BACUS, MEDARDO R.
BACUS, ANSELMA B. ALBAN, RICARDO R. BACUS, FELICISIMA B. JUDICO,
and DOMINICIANA B. TANGAL, petitioners, vs. HON. COURT OF APPEALS
and SPOUSES FAUSTINO DURAY and VICTORIANA DURAY, respondents.,
(G.R. No. 127695, 2001 Dec 3, 2nd Division)
QUISUMBING, J.:
FACTS: On 1984 Luis Bacus leased to Faustino Duray a parcel of agricultural

land with total land area of 3,002 of square meters, in Cebu. The lease was for
six years ending in 1990, the contract contained an option to buy clause.
Under the said option, the lessee had the exclusive and irrevocable right to buy
2,000 square meters 5 years from a year after the effectivity of the contract, at
P200 per square meter. That rate shall be proportionately adjusted depending
on the peso rate against the US dollar, which at the time of the execution of the
contract was 14 pesos.
Close to the expiration of the contract Luis Bacus died on 1989, after
Duray informed the heirs of Bacus that they are willing and ready to purchase
the property under the option to buy clause. The heirs refused to sell, thus
Duray filed a complaint for specific performance against the heirs of Bacus. He
showed that he is ready and able to meet his obligations under the contract
with Bacus. The RTC ruled in favor of the Durays and the CA later affirmed the
decision.
ISSUE: Whether or not Duray incur delay when they did not deliver the
purchase price or consign it in court on or before the expiration of the contract.
HELD: No. The obligation under option to buy is a reciprocal obligation. The
performance of one obligation is conditioned on the simultaneous fulfillment of
the other obligation. The payment of the purchase price by the creditor is
contingent upon the execution and delivery of a deed of sale by the debtor.
In this case, private respondent Duray opted to buy the property, their
obligation was to advise petitioner of their decision & readiness to pay the
price. They were not obliged to make actual payment. Only upon execution of
deed of sale were they required to pay.
Notice of the creditors decision to exercise his option to buy need not be
coupled with actual payment of the price, so long as this is delivered to the
owner of the property upon performance of his part of the agreement.
Consequently, since the obligation was not yet due, consignation in court of the
purchase price was not yet required (Nietes vs CA, 46 SCRA 654).
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. Consignation is not proper
because the debt is not due and owing.
Under Art. 1169, provides that reciprocal obligation, neither party incurs
in delay if the other does not comply or is not ready to comply in a proper
manner with what is incumbent upon him. Only from the moment one of the
parties fulfills his obligation, does delay by the other begins.
In this case, private respondent Duray already communicated their interest to
buy before the contact expires & it was the petitioner who refused because they
want the money first. Thus, as there was no compliance yet with what is
Cita
incumbent upon the petitioner, PR had not incurred delay when the cashiers
check was issued even after the contract expired.
Petition denied.
Integrated Packaging Corp. v. Court of Appeals
Cita
INTEGRATED PACKAGING CORP., petitioner, vs. COURT OF APPEALS and

FIL-ANCHOR PAPER CO., INC., respondents.
(G.R. No. 115117 June 8, 2000 Second Division)
QUISUMBING, J.:
FACTS: Integrated Packaging Corp agreed to deliver to Fil-anchor paper co.,

Inc. 3,450 reams of printing paper. Materials were to be paid within 30-90
days.
On June 7, 1978, Integrated entered into a contract with Philippine
Appliance Corporation (Philacor) to print three volumes of "Philacor Cultural
Books". July 30, 1979, only 1,097 out of the 3,450 had been delivered so it
wrote to Fil-anchor that delay will prejudice them. Fil-anchor delivered
amounting to P766,101.70 of printing paper. Integrated paid P97,200.00 which
was applied to its back accounts covered by delivery invoices dated September
29-30, 1980 and October 1-2, 1980
Integrated entered into an additional printing contract with Philacor but it
failed to comply so Philacor demanded compensation for the delay and damage
it suffered on account of Integrated's failure
Fil-anchor filed a collection suit of P766,101.70 against Integrated representing
unpaid purchase price of printing paper bought on credit.
By way of counterclaim, Fil-anchor alleged the delivery was short of
2,875 reams so it suffered actual damages and failed to realize expected profits
and that complaint was prematurely filed. Integrated was ordered to pay Fil-
anchor P27,222.60 as compensatory and actual damages after deducting
P763,101.70 for the value of materials received, P100K as moral damages,
P30K for attorney's fees and cost of suit. However, the counterclaim is also
meritorious - Integrated could have sold books to Philacor and realized profit of
P790,324.30 for which the award of moral damages was justified
The court of Appeals reversed and set aside the judgment of the trial court
ordered to pay Fil-anchor P763,101.70 for unpaid printing paper and deleted
the award of P790,324.30 as compensatory damages as well as the award of
moral damages and attorney's fees, for lack of factual and legal basis.
ISSUE: Whether or not Integrated should be awarded compensatory and moral

damages.
HELD: YES. The suspension of its deliveries to Integrated whenever the latter
failed to pay on time, as in this case, is legally justified under the second
paragraph of Article 1583 of the Civil Code hence the Fil-anchor did not violate
the order agreement. Fil-anchor is not a party to the agreement between
Philacor neither is it a contract pour autrui so no direct bearing
indemnification for damages comprehends not only the loss suffered, that is to
say actual damages (damnum emergens), but also profits which the obligee
failed to obtain, referred to as compensatory damages (lucrum cessans).
However, to justify a grant of actual or compensatory damages, it is necessary
to prove with a reasonable degree of certainty, premised upon competent proof
and on the best evidence obtainable by the injured party, the actual amount of
loss. Trial court in arriving at the amount merely estimates or self-serving
claim of unrealized profit prepared by Integrated. Deletion of the award of
moral damages is proper, since private respondent could not be held liable for
breach of contract. Moral damages may be awarded when in a breach of
contract the defendant acted in bad faith, or was guilty of gross negligence
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amounting to bad faith, or in wanton disregard of his contractual obligation.

Finally, since the award of moral damages is eliminated, so must the award for
attorney's fees be also deleted.
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Laforteza v. Machuca
ROBERTO Z. LAFORTEZA, GONZALO Z. LAFORTEZA, MICHAEL Z.
LAFORTEZA, DENNIS Z. LAFORTEZA, and LEA Z. LAFORTEZA, petitioners,
vs. ALONZO MACHUCA, respondent.
G.R. No. 137552; 2000 Jun 16; 3rd Division
Gonzaga-Reyes, J.:
FACTS: Roberto Laforteza and Gonzalo Laforteza, Jr. were authorized to sell
the subject property and sign any document for the settlement of the estate of
the late Francisco Q. Laforteza by virtue of a Special Power of Attorney (SPA)
executed in their favor by Michael, Dennis and Lea Laforteza. The SPA
contained a provision that in any document or paper to exercise authority
granted, the signature of both attorneys-in-fact must be affixed.
Pursuant to such, the agents entered into a Contract to Sell subject
property in favor of Alonzo Machuca. Said contract contained that a P30 000
earnest money should be paid and after which, 30 days will be allotted for the
buyer to pay P600 000 prior conveyance of property.
The earnest money was paid. Machuca asked for an extension of the 30
day period which was acceded to by Roberto. However, when Machuca notified
that he's already ready to pay P600 000, Roberto told him that the subject
property is no longer on sale and that their contract is rescinded for his failure
to comply with the contractual obligations. Machuca then filed an action for
specific performance with which he was favored. The Court of Appeals affirmed
said decision. Hence, a petition for review was filed.
ISSUE: Whether or not the petitioners may invoke rescission.
HELD: No. The failure of the respondent to pay the balance of the purchase
price was a breach of the contract and was a ground for rescission thereof. The
extension of thirty (30) days allegedly granted to the respondent by Roberto Z.
Laforteza (assisted by his counsel Attorney Romeo Gutierrez) was correctly
found by the Court of Appeals to be ineffective inasmuch as the signature of
Gonzalo Z. Laforteza did not appear thereon as required by the Special Powers
of Attorney.
Even assuming for the sake of argument that the petitioners were ready
to comply with their obligation, we find that rescission of the contract will still
not prosper.
It is not disputed that the petitioners did not make a judicial or notarial
demand for rescission. The November 20, 1989 letter of the petitioners
informing the respondent of the automatic rescission of the agreement did not
amount to a demand for rescission, as it was not notarized. It was also made
five days after the respondents attempt to make the payment of the purchase
price. This offer to pay prior to the demand for rescission is sufficient to defeat
the petitioners right under article 1592 of the Civil Code. Besides, the
Memorandum Agreement between the parties did not contain a clause
expressly authorizing the automatic cancellation of the contract without court
intervention in the event that the terms thereof were violated. A seller cannot
unilaterally and extrajudicially rescind a contract of sale where there is no
express stipulation authorizing him to extrajudicially rescind. Neither was
there a judicial demand for the rescission thereof. Thus, when the respondent
filed his complaint for specific performance, the agreement was still in force
inasmuch as the contract was not yet rescinded. At any rate, considering that
the six-month period was merely an approximation of the time it would take to
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reconstitute the lost title and was not a condition imposed on the perfection of
the contract and considering further that the delay in payment was only thirty
days which was caused by the respondents justified but mistaken belief that
an extension to pay was granted to him, we agree with the Court of Appeals
that the delay of one month in payment was a mere casual breach that would
not entitle the respondents to rescind the contract. Rescission of a contract will
not be permitted for a slight or casual breach, but only such substantial and
fundamental breach as would defeat the very object of the parties in making
the agreement.
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Regala v. Carin
RODOLFO REGALA, Petitioner, vs. FEDERICO P. CARIN, Respondent.
(G.R. No. 188715 April 6, 2011 Third Division)
CARPIO MORALES, J.:
FACTS: Armando Regala appeals from the judgment in Criminal Case No. 7929
rendered by the Regional Trial Court of Masbate, Masbate, Branch 46, 5th
Judicial Region, convicting him of the crime of Robbery with Rape.
That on or about September 11, 1995, in the evening thereof, at Barangay

Bangon, Municipality of Aroroy, Province of Masbate, Philippines, the said
accused confederating together and helping one another, with intent to gain,
violence and intimidation upon persons, did then and there wilfully, unlawfully
and feloniously enter the kitchen of the house of Consuelo Arevalo and when
inside, hogtied said Consuelo Arevalo and granddaughter Nerissa Regala (sic),
take, steal, rob and carry away cash amount of P3,000.00 and two (2) gold
rings worth P6,000.00, to the damage and prejudice of owner Consuelo Arevalo
in the total amount of P9,000.00, Philippine Currency; and in pursuance of the
commission of the crime of robbery against the will and consent of the
granddaughter Nerissa Regala (sic) wilfully, unlawfully and feloniously accused
Armando Regala y Abriol has for two times sexually abused and/or
intercoursed with her, while hogtied on the bed and in the kitchen.
Accused-appellant was apprehended by the police four days after the incident.
He was identified at a police line-up by Nerissa and her grandmother.
The defense presented accused-appellant who testified that on September 11,

1995, he was staying in the house of Antonio Ramilo at barangay Syndicate,
Aroroy, Masbate. Ramilo was the manager in the gold panning business where
accused-appellant was employed. Antonio Ramilo testified and corroborated his
defense and stated that accused-appellant was in his house, which is about 5
kilometers away from Barangay Bangon.
The trial court held that the defense of alibi cannot overcome the positive
identification of the accused. The Court found accused Armando Regala y
Abriol guilty beyond reasonable doubt of the crime of Robbery with Rape.
ISSUE: Whether or not malice is an essential element for claim of moral

damages.
HELD: Malice or bad faith implies a conscious and intentional design to do a

wrongful act for a dishonest purpose or moral obliquity; it is different from the
negative idea of negligence in that malice or bad faith contemplates a state of
mind affirmatively operating with furtive design or ill will.[27] While the Court
harbors no doubt that the incidents which gave rise to this dispute have
brought anxiety and anguish to respondent, it is unconvinced that the damage
inflicted upon respondents property was malicious or willful, an element
crucial to merit an award of moral damages under Article 2220 of the Civil
Code.
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In fine, an award of moral damages calls for the presentation of 1) evidence of

besmirched reputation or physical, mental or psychological suffering sustained
by the claimant; 2) a culpable act or omission factually established; 3) proof
that the wrongful act or omission of the defendant is the proximate cause of
the damages sustained by the claimant; and 4) the proof that the act is
predicated on any of the instances expressed or envisioned by Article 2219 and
Article 2220 of the Civil Code.
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International Corporate Bank v. Gueco

THE INTERNATIONAL CORPORATE BANK (now UNION BANK OF THE
PHILIPPINES), petitioner, vs. SPS. FRANCIS S. GUECO and MA. LUZ E.
GUECO, respondents.,
(G.R. No. 141968, 2001 Feb 12, 1st Division)
KAPUNAN, J.:
FACTS: Respondent Gueco spouses obtained a loan from petitioner

International Corporate Bank (now Union Bank of Philippines) to purchase a
car Nissan Sentra 1989 model.
In consideration, spouses executed promissory note which were payable
in monthly installment & chattel mortgage over the car.
The spouses defaulted payment. Dr. Gueco had a meeting & the unpaid
installment of P184k was reduced to P150k. However, the car was detained by
the bank.
When Dr. Gueco delivered the mangers check of P150k, the car was not
released because of his refusal to sign the Joint Motion to Dismiss.
The bank insisted that the JMD is a standard operating procedure to effect a
compromise & to preclude future filing of claims or suits for damages.
Gueco spouses filed an action against the bank for fraud, failing to inform
them regarding JMD during the meeting & for not releasing the car if they do
not sign the said motion.
ISSUE: Whether or not the bank was guilty of fraud.
HELD: No. Fraud has been defined as the deliberate intention to cause damage
or prejudice. It is the voluntary execution of a wrongful act, or a willful
omission, knowing and intending the effects which naturally and necessarily
arise from such act or omission. the fraud referred to in Article 1170 of the
Civil Code is the deliberate and intentional evasion of the normal fulfillment of
obligation.
We fail to see how the act of the petitioner bank in requiring the
respondent to sign the joint motion to dismiss could constitute as fraud.
The JMD cannot in any way have prejudiced Dr. Gueco. The motion to dismiss
was in fact also for the benefit of Dr. Gueco, as the case filed by petitioner
against it before the lower court would be dismissed with prejudice. The whole
point of the parties entering into the compromise agreement was in order that
Dr. Gueco would pay his outstanding account and in return petitioner would
return the car and drop the case for money and replevin before the
Metropolitan Trial Court. The joint motion to dismiss was but a natural
consequence of the compromise agreement and simply stated that Dr. Gueco
had fully settled his obligation, hence, the dismissal of the case. Petitioners act
of requiring Dr. Gueco to sign the joint motion to dismiss cannot be said to be
a deliberate attempt on the part of petitioner to renege on the compromise
agreement of the parties.
The law presumes good faith. Dr. Gueco failed to present an iota of
evidence to overcome this presumption. In fact, the act of petitioner bank in
lowering the debt of Dr. Gueco from P184,000.00 to P150,000.00 is indicative
of its good faith and sincere desire to settle the case. If respondent did suffer
any damage, as a result of the withholding of his car by petitioner, he has only
himself to blame. Necessarily, the claim for exemplary damages must fail. In no
way, may the conduct of petitioner be characterized as wanton, fraudulent,
reckless, oppressive or malevolent.
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Petition denied.
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Republic v. CTA
REPUBLIC OF THE PHILIPPINES, represented by the COMMISSIONER OF
CUSTOMS, petitioner, vs. THE COURT OF TAX APPEALS and AGFHA,
INCORPORATED, respondents., G.R. No. 139050, 2001 Oct 2, 3rd
Division)
Vitug, J.:
FACTS: A shipment of bales of textile cloth arrived at the Manila International

Container Port (MICP) addressed to GQ Garments, Inc. The Clean Report of
Findings (CRF) issued by the Societe Generale de Surveilance (SGS), however,
mentioned AGFHA, Incorporated, to be the consignee of the shipment.
Forthwith, the shipping agent, FIL-JAPAN, requested for an amendment of the
Inward Foreign Manifest so as to correct the name of the consignee from that of
GQ GARMENTS, Inc., (GQ) to that of AGFHA, Inc. (AGFHA).
Subsequently, the Customs Intelligence Investigation Services (CIIS) put
the items on hold on the ground that since GQ Garments, Inc. could not be
found in the addressed stated, the same is alleged to be of a fictitious
character. AGFHA filed a motion for intervention which was granted and a draft
decision in favor of the same was resolved but was opposed by the CIIS
insisting the fictitious character of GQ.
Consequently, GQ and AGFHA filed a motion for reconsideration but was
denied and the shipments were ordered forfeited. An appeal before the Office of
the Commissioner of Custom was filed but was dismissed. They then filed a
petition for review before the Court of Tax Appeals which was granted. Court of
Appeals affirmed such decision. Hence, a petition for review was filed by the
Petitioners.
ISSUE: Whether or not the Respondent Companies committed fraud

consenting then forfeiture.
HELD: No.
The requisites for the forfeiture of goods under Section 2530(f), in
relation to (1) (3-5), of the Tariff and Customs Code are: (a) the wrongful
making by the owner, importer, exporter or consignee of any declaration or
affidavit, or the wrongful making or delivery by the same person of any invoice,
letter or paper - all touching on the importation or exportation of merchandise;
(b) the falsity of such declaration, affidavit, invoice, letter or paper; and (c) an
intention on the part of the importer/consignee to evade the payment of the
duties due.
The Collector of Customs, Court of Tax Appeals and the Court of Appeals
are unanimous in concluding that no fraud has been committed by private
respondent in the importation of the bales of cloth. The records do appear to
sustain this conclusion.
Fraud must be proved to justify forfeiture.[8] It must be actual,
amounting to intentional wrong-doing with the clear purpose of avoiding the
tax.[9] Forfeiture is not favored in law nor in equity.[10] Mere negligence is not
equivalent to the fraud contemplated by law.[11] What is here involved is an
honest mistake, not even directly attributable to private respondent, which will
not deprive the government of its right to collect the proper tax. The conclusion
of the appellate court, being consistent with the evidence on record and not
contrary to law and jurisprudence, hardly can be overturned by this Court.
Petition denied.
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Diaz v. Davao Light and Power Co.

ANTONIO DIAZ, Petitioner, versus DAVAO LIGHT AND POWER CO., INC.,
MANUEL M. ORIG and ELISEO R. BRAGANZA, JR., Respondents., G.R. No.
160959, 2007 Apr 3, 3rd Division)
CALLEJO, SR., J.:
FACTS: The Davao Light and Power Co., Inc. (DLPC) supply electricity to Doa
Segunda Hotel owned by Diaz Realty Inc. with which Antonio Diaz (Diaz) is the
Vice-President. A notice of disconnection was sent by DLPC for non-payment of
electric consumption of the hotel in the amount of P190,111.02 with a warning
that if such will not be paid, services will be discontinued. Said letter was
ignored which prompted DLPC to file a complaint for collection of sum of
money.
Meanwhile, National Food Authority (NFA) established its KADIWA store
on a portion of the building of Diaz. DLPC connected service for the former's
electric meter after a contract has been perfected between them pursuant to an
application by KADIWA.
Later on, KADIWA closed and it informed DLPC that the light and power
connection rights of NFA/KADIWA would be transferred to Diaz and that the
P1,020.00 deposit of NFA/KADIWA for the power connection had been
refunded to it by Diaz. Then, Diaz requested that a new electrical connection
for the building in his name be installed, separate from the one assigned to him
by NFA pursuant to a new leased entered. Said request was denied on ground
of the company's closed classification thereby allowing simulation with a
reminder of payment of its dues. Diaz informed assumption of the KADIWA
account but DLPC maintained its position and submits that it has no
knowledge of the deposit of P1 020.
However, Mendiola, who replaced the leased area of the KADIWA, and
DLPC entered into another service contract. Petitions for injunctions were filed
by Diaz against DLPC. Following such, DLPC filed a criminal action for theft of
electricity. In defense, Diaz alleged the following: (1) that the complaint was
intended to harass him; (2) he was entitled to electric service by virtue of his
subrogation to the right of NFA/KADIWA; (3) the installation of Meter No.
86673509 was made with the knowledge and consent of DLPC; (4) there is a
pending case between the parties regarding Meter Nos. 84738 and 86673509;
and (5) the filing of the action is premature.
ISSUE: Whether or not there is a case of malicious prosecution from the

foregoing circumstances.
HELD: No. Malicious prosecution has been defined as an action for damages
brought by or against whom a criminal prosecution, civil suit or other legal
proceeding has been instituted maliciously and without probable cause, after
the termination of such prosecution, suit, or other proceeding in favor of the
defendant therein. It is an established rule that in order for malicious
prosecution to prosper, the following requisites must be proven by petitioner:
(1) the fact of prosecution and the further fact that the defendant (respondent)
was himself the prosecutor, and that the action finally terminated with an
acquittal; (2) that in bringing the action, the prosecutor acted without probable
cause; and (3) that the prosecutor was actuated or impelled by legal malice,
that is, by improper or sinister motive. The foregoing are necessary to preserve
a persons right to litigate which may be emasculated by the undue filing of
malicious prosecution cases. From the foregoing requirements, it can be
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inferred that malice and want of probable cause must both be clearly
established to justify an award of damages based on malicious prosecution.
While the institution of separate criminal actions under the provisions of
P.D. 401, as amended by B.P. Blg. 876, and under the provisions of the
Revised Penal Code on theft may refer to identical acts committed by petitioner,
the prosecution thereof cannot be limited to one offense because a single
criminal act may give rise to a multiplicity of offenses; and where there is
variance or difference between the elements of an offense in one law and
another law, as in the case at bar, there will be no double jeopardy because
what the rule on double jeopardy prohibits refers to identity of elements in the
two (2) offenses. Otherwise stated, prosecution for the same act is not
prohibited; what is forbidden is prosecution for the same offense. Hence, no
fault could be attributed to respondent DLPC when it instituted the two
separate actions.
Petition denied.
Yasona v. De Ramos
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MS. VIOLETA YASOA, personally and as heir of deceased sister

defendant PELAGIA YASOA and as attorneyinfact of her brothers
ALEJANDRO and EUSTAQUIO, both YASOA and sisters: TERESITA
YASOA BALLESTERO and ERLINDA YASOA TUGADI, and mother
AUREA VDA. DE YASOA, petitioners, vs. RODENCIO and JOVENCIO, both
surnamed DE RAMOS, respondents.
(G.R. No. 156339 October 6, 2004 Third Division)
CORONA, J.:
FACTS: In August 1993, Aurea filed an estafa complaint against brothers
Jovencio and Rodencio de Ramos on the ground that she was deceived by them
when she asked for their assistance in 1971 concerning her mortgaged
property. Aurea in her complaint alleged that Rodencio asked her to sign a
blank paper on the pretext that it would be used in the redemption of the
mortgaged property. Aurea signed the blank paper without further inquiry
because she trusted her nephew, Rodencio. Thereafter, they heard nothing
from Rodencio and this prompted Nimpha Yasoa Bondoc to confront Rodencio
but she was told that the title was still with the Register of Deeds. However,
when Nimpha inquired from the Register of Deeds, she was shocked to find out
that the lot had been divided into two, pursuant to a deed of sale apparently
executed by Aurea in favor of Jovencio. Aurea averred that she never sold any
portion of her property to Jovencio and never executed a deed of sale. Aurea
was thus forced to seek the advice of Judge Enrique Almario, another relative,
who suggested filing a complaint for estafa. On February 21, 1994, Assistant
Provincial Prosecutor Rodrigo B. Zayen is dismissed the criminal complaint for
estafa for lack of evidence. Jovencio and Rodencio filed a complaint for
damages on the ground of malicious prosecution with the Regional Trial Court
alleging that the filing of the estafa complaint against them was done with
malice and it caused irreparable injury to their reputation, as Aure knew fully
well that she had already sold half of the property to Jovencio. On October 5,
2000, the trial court rendered a decision in favor of Jovencio and Rodencio.
Petitioner Violeta Yasoa, personally and on behalf of her brothers and sisters
and mother Aurea, filed a petition for certiorari under Rule 65 with the Court of
Appeals which dismissed the same on June 14, 2002 on the ground that
petitioners availed of the wrong remedy. Their subsequent motion for
reconsideration was likewise denied.
ISSUE: Whether the filing of the criminal complaint for estafa by petitioners
against respondents constituted malicious prosecution.
HELD: The court held that "malicious prosecution is an action for damages
brought by one against whom a criminal prosecution, civil suit, or other legal
proceeding has been instituted maliciously and without probable cause, after
the termination of such prosecution, suit, or other proceeding in favor of the
defendant therein." To constitute "malicious prosecution," there must be proof
that the prosecution was prompted by a sinister design to vex or humiliate a
person, and that it was initiated deliberately by the defendant knowing that his
charges were false and groundless.
Concededly, the mere act of submitting a case to the authorities for
prosecution does not make one liable for malicious prosecution.
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In this case, however, there is reason to believe that a malicious intent was
behind the filing of the complaint for estafa against respondents. The records
show that the sale of the property was evidenced by a deed of sale duly
notarized and registered with the local Register of Deeds. After the execution of
the deed of sale, the property was surveyed and divided into two portions.
Separate titles were then issued in the names of Aurea Yasoa (TCT No. 73252)
and Jovencio de Ramos (TCT No. 73251). Since 1973, Jovencio had been
paying therealty taxes of the portion registered in his name. In 1974, Aurea
even requested Jovencio to use his portion as bond for the temporary release of
her son who was charged with malicious mischief. Also, when Aurea borrowed
money from the Rural Bank of Lumban in 1973and the PNB in 1979, only her
portion covered by TCT No. 73252 was mortgaged. All these pieces of evidence
indicate that Aurea had long acknowledged Jovencios ownership of half of the
property. Furthermore, it was only in 1993 when petitioners decided to file the
estafa complaint against respondents. If petitioners had honestly believed that
they still owned the entire property, it would not have taken them 22 years to
question Jovencios ownership of half of the property. The only conclusion that
can be drawn from the circumstances is that Aurea knew all along that she
was no longer the owner of Jovencios portion after having sold it to him way
back in 1971. Likewise, other than petitioners bare allegations, no other
evidence was presented by them to substantiate their claim. Malicious
prosecution, both in criminal and civil cases, requires the elements of (1)
malice and (2) absence of probable cause.
These two elements are present in thepresent controversy. Petitioners
were completely awarethat Jovencio was the rightful owner of the lot covered
byTCT No. 73251, clearly signifying that they were impelledby malice and
avarice in bringing the unfounded action.That there was no probable cause at
all for the filing of the estafa case against respondents led to the dismissalof the
charges filed by petitioners with the ProvincialProsecutors Office in Siniloan,
Laguna.
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Yambao v. Zuniga
CECILIA YAMBAO, petitioner, vs. MELCHORITA C. ZUIGA, LEOVIGILDO
C. ZUIGA, REGINALDO C. ZUIGA, AND THE MINORS, HERMINIGILDO C.
ZUIGA, JR., AND LOVELY EMILY C. ZUIGA both represented by their
legal guardian, the aforenamed MELCHORITA C. ZUIGA, respondents.,
(G.R. No. 146173, 2003 Dec 11, 2nd Division)
QUISUMBING, J.:
FACTS: Petitioner Cecilia Yambao is the owner of the bus driven by Ceferino
Venturina which bumped a pedestrian in the person of Herminigildo Zuiga.
By virtue of such incident, Herminigildo died.
Heirs of the deceased filed a Complaint against petitioner and her driver,
Venturina, for damages alleging that Venturina drove the bus in a reckless,
careless and imprudent manner, in violation of traffic rules and regulations,
without due regard to public safety, thus resulting in the victims premature
death.
Petitioner denied the allegations and shift blame to the Deceased
theorizing that the latter was the one who bumped her bus. She further alleged
that she was not liable for any damages because as an employer, she exercised
the proper diligence of a good father of a family, both in the selection and
supervision of her bus driver.
The court favored the heirs which the Court of Appeals affirmed. Hence,
a Petition for Review was filed.
ISSUE: Whether a person is negligent or not is a question of fact.
HELD: No. At the outset, we must state that the first issue raised by the
petitioner is a factual one. Whether a person is negligent or not is a question of
fact, which this Court cannot pass upon in a petition for review on certiorari,
as our jurisdiction is limited to reviewing errors of law. The resolution of factual
issues is the function of the trial court and its findings on these matters are, as
a general rule, binding on this Court, more so where these have been affirmed
by the Court of Appeals. We have carefully examined and weighed the
petitioners arguments on the first issue submitted, as well as the evidence on
record, and find no cogent reason to disregard the cited general rule, much less
to reverse the factual findings of the trial court as upheld by the court a quo.
Hence, we sustain the trial courts finding, as affirmed by the Court of Appeals,
that it was Venturinas reckless and imprudent driving of petitioners bus,
which is the proximate cause of the victims death.
when an employee, while performing his duties, causes damage to
persons or property due to his own negligence, there arises the juris tantum
presumption that the employer is negligent, either in the selection of the
employee or in the supervision over him after the selection. For the employer to
avoid the solidary liability for a tort committed by his employee, an employer
must rebut the presumption by presenting adequate and convincing proof that
in the selection and supervision of his employee, he or she exercises the care
and diligence of a good father of a family. In the instant case, we find that
petitioner has failed to rebut the presumption of negligence on her part.
Petition denied.
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Smith bell Corp v. Borja

SMITH BELL DODWELL SHIPPING AGENCY CORPORATION, petitioner, vs.
CATALINO BORJA and INTERNATIONAL TO WAGE AND TRANSPORT
CORPORATION, respondents.,
(G.R. No. 143008, 2002 Jun 10, 3rd Division)
PANGANIBAN, J.:
FACTS: On September 23, 1987, Smith Bell-petitioner filed a written request

with the Bureau of Customs for the attendance of the latter's inspection team
on vessel M/T King Family which was due to arrive at the port of Manila on
September 24, 1987.Said vessel contained 750metric tons of alkyl benzene and
methyl methacrylate monomer. On the same day, Supervising Customs
Inspector instructed Respondent Catalino Borja to board said vessel and
perform his duties as inspector upon the vessel's arrival until its departure. At
about 11o'clock in the morning on September 24, 1987, while M/T King Family
was unloading chemicals unto two (2) owned by Respondent ITTC, a sudden
explosion occurred setting the vessels afire. Upon hearing the explosion, Borja,
who was at that time inside the cabin preparing reports, ran outside to check
what happened. Again, another explosion was heard. Seeing the fire and
fearing for his life, Borja hurriedly jumped over board to save himself. However,
the water was likewise on fire due mainly to the spilled chemicals. Despite the
tremendous heat, Borja swam his way until he was rescued by the people living
in the squatters' area and sent to San Juan De Dios Hospital. After weeks of
intensive care at the hospital, his attending physician diagnosed Borja to be
permanently disabled due to the incident. Borja made demands against Smith
Bell and ITTC for the damages caused by the explosion. However, both denied
liabilities and attributed to each other negligence. The trial court ruled in favor
of Respondent Borja and held petitioner liable for damages and loss of income.
Affirming the trial court, the CA rejected the plea of petitioner that it be
exonerated from liability for Respondent Borja's injuries. Hence, this Petition.
ISSUE: Whether or not petitioner should be held liable for the injuries of
Catalino Borja.
HELD: We find no cogent reason to overturn these factual findings. Nothing is

more settled in jurisprudence than that this Court is bound by the factual
findings of the Court of Appeals when these are supported by substantial
evidence and are not under any of the exceptions in Fuentes v. Court of
Appeals; More so, when such findings affirm those of the trial court.
Verily, this Court reviews only issues of law. Negligence is conduct that
creates undue risk of harm to another. It is the failure to observe that degree of
care, precaution and vigilance that the circumstances justly demand, whereby
that other person suffers injury.
Petitioner's vessel was carrying chemical cargo-- alkyl benzene and
methyl methacrylate monomer. While knowing that their vessel was carrying
dangerous inflammable chemicals, its officers and crew failed to take all the
necessary precautions to prevent an accident. Petitioner was, therefore,
negligent. The three elements of quasi delict are: (a) damages suffered by the
plaintiff, (b) fault or negligence of the defendant, and (c) the connection of
cause and effect between the fault or negligence of the defendant and the
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damages inflicted on the plaintiff. All these elements were established in this
case. Knowing fully well that it was carrying dangerous chemicals, petitioner
was negligent in not taking all the necessary precautions in transporting the
cargo.
Ilusorio v. Court of Appeals
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RAMON K. ILUSORIO, Petitioner, versus HON. COURT OF APPEALS, and

THE MANILA BANKING CORPORATION, Respondents.
(G.R. No. 139130, November 27, 2002, 2nd Division)
QUISUMBING, J.:
FACTS: The petitioner is a prominent businessman who was the Managing

Director of Multinational Investment Bancorporation and the Chairman and/or
President of several other corporations. He was a depositor in good standing of
respondent bank, the Manila Banking Corporation, under current Checking
Account No. 06-09037-0. As he was then running about 20 corporations, and
was going out of the country a number of times, petitioner entrusted to his
secretary, Katherine E. Eugenio, his credit cards and his checkbook with blank
checks. It was also Eugenio who verified and reconciled the statements of said
checking account.
For a material period of time, the secretary was able to encash
and deposit in her personal account money from the account of
petitioner. Upon knowledge of her acts, she was fired immediately and
criminal actions were filed against her for estafa thru falsification before the
Office of the Provincial Fiscal of Rizal. Thereafter, petitioner then requested the
respondent bank to credit back and restore to its account the value of the
checks which were wrongfully encashed but respondent bank refused.
The RTC rendered a judgment dismissing the case filed due to lack of
sufficient basis. The petitioner filed a petition for review to the Court of
Appeals. However, the appellate court affirmed the judgment rendered by the
RTC and held that petitioners own negligence was the proximate cause of his
loss. Hence, the present petition for review on certiorari.
ISSUE: Whether or not petitioner has a cause of action against private

respondent.
HELD: No. The petitioner has a cause of action against private respondent.
To be entitled to damages, petitioner has the burden of proving

negligence on the part of the bank for failure to detect the discrepancy in the
signatures on the checks. It is incumbent upon petitioner to establish the fact
of forgery, by submitting his specimen signatures and comparing them with
those on the questioned checks. The petitioner failed to submit additional
specimen signatures as requested by the National Bureau of Investigation from
which to draw a conclusive finding regarding forgery. The bank was not also
remiss in performance of its duties, it practices due diligence in encashing
checks. It was petitioner who was negligent in this case. He failed to examine
his bank statements and this was the proximate cause of his own
damage. Because of this negligence, he is precluded from setting up the
defense of forgery with regard the checks.
In the present case, it appears that petitioner accorded his secretary
unusual degree of trust and unrestricted access to his credit cards, passbooks,
check books, bank statements, including custody and possession of cancelled
checks and reconciliation of accounts.
Petition dismissed.
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NPC v. Court of Appeals

National Power Corporation, Petitioner, versus Honorable Court of Appeals
and Engineering Construction Incorporated, Respondents.
(G.R. No. L-47379, May 16, 1988, 3rd Division)
GUTIERREZ, JR.,
J.:
FACTS: Plaintiff Engineering Construction, Inc., being a successful bidder,

executed a contract in Manila with the National Waterworks and Sewerage
Authority (NAWASA), whereby the former undertook to furnish all tools, labor,
equipment, and materials (not furnished by Owner), and to construct the
proposed 2nd lpo-Bicti Tunnel, Intake and Outlet Structures, and Appurtenant
Structures, and Appurtenant Features, at Norzagaray, Bulacan, and to
complete said works within eight hundred (800) calendar days from the date
the Contractor receives the formal notice to proceed. The project involved two
(2) major phases.
By September 1967, the plaintiff corporation already had completed the

first major phase of the work, namely, the tunnel excavation work. As soon as
the plaintiff corporation had finished the tunnel excavation work at the Bicti
site, all the equipment no longer needed there were transferred to the Ipo site
where some projects were yet to be completed.
The record shows that, typhoon 'Welming' hit Central Luzon, passing
through defendant's Angat Hydro-electric Project and Dam at lpo, Norzagaray,
Bulacan. Strong winds struck the project area, and heavy rains intermittently
fell. Due to the heavy downpour, the water in the reservoir of the Angat Dam
was rising perilously at the rate of sixty (60) centimeters per hour. To prevent
an overflow of water from the dam, since the water level had reached the
danger height of 212 meters above sea level, the defendant corporation caused
the opening of the spillway gates."
The RTC and Court of Appeals adjudged the National Power Corporation
liable for damages against Engineering Construction, Inc. The appellate court,
however, reduced the amount of damages awarded by the trial court. Hence,
this present petition for review.
ISSUE: Whether or not NPC performed negligently.
HELD: Yes. NPC performed negligently.
It is clear from the appellate court's decision that based on its findings of
fact and that of the trial court's, petitioner NPC was undoubtedly negligent
because it opened the spillway gates of the Angat Dam only at the height of
typhoon "Welming" when it knew very well that it was safer to have opened the
same gradually and earlier, as it was also undeniable that NPC knew of the
coming typhoon at least four days before it actually struck. And even though
the typhoon was an act of God or what we may call force majeure, NPC cannot
escape liability because its negligence was the proximate cause of the loss and
damage.
Petition is dismissed.
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Muaje-Tuazon v. Verchez
Anabelle Muaje-Tuazon and Almer R. Abing, Petitioners, versus
Wenphil Corporation, Elizabeth P. Orbita*, and Court of Appeals,
Respondents.
(G.R. No. 162447, December 27, 2006, 3rd Division)
QUISUMBING, J.:
FACTS: Petitioners Annabelle M. Tuazon and Almer R. Abing worked as branch

managers of the Wendy's food chains in MCU Caloocan and Meycauayan,
respectively, of respondent Wenphil Corporation. Wendys had a promotion
contest. The branch with the highest sales of "Biggie Size It" wins. The
Meycauayan and MCU Caloocan branches won first and second places,
respectively. Because of its success, respondent had a second run of the
contest from April 26 to July 4, 1999. The Meycauayan branch won again. The
MCU Caloocan branch failed to make it among the winners.
Before the start of the third round from October 18, 1999 to January 16,
2000, Abing was assigned to the SM North Edsa Annex branch while Tuazon
was assigned to the Meycauayan branch. Before the announcement of the third
round winners, management received reports that as early as the first round of
the contest, the Meycauayan, MCU Caloocan, Tandang Sora and Fairview
branches cheated. An internal investigation ensued.
On February 3, 2000, petitioners were summoned to the main office

regarding the reported anomaly. Petitioners denied that there was cheating.
Immediately thereafter, petitioners were notified, in writing, of hearings and of
their immediate suspension. Thereafter, petitioners were dismissed.
The Labor Arbiter ruled in favor of the petitioners. The judgment is

hereby rendered finding the suspension and dismissal of complainants Almer
R. Abing and Annabelle M. Tuazon illegal. Respondents appealed to the
National Labor Relations Commission (NLRC), which affirmed with modification
the decision of the Labor Arbiter. Denied reconsideration, respondents elevated
the case to the Court of Appeals, which found substantial proof of petitioners'
misconduct. It also ruled that respondent Wenphil sufficiently complied with
the due process requirement. Hence, this present petition for review.
ISSUE: Whether or not there is compliance with the due process requirement.
HELD: Yes. There is compliance with the due process requirement.
The records show that the petitioners were given written notices
informing them that they were charged with serious misconduct and
dishonesty in relation to the "Biggie Size It! Crew Challenge" program, and
notifying them of the scheduled hearings on February 4 and 7, 2000. Although
notices were given to them only on February 3, 2000, it will be noted that there
were other investigations or hearings set after February 4 and 7 where they
had the opportunity to explain their side after they were apprised of their
alleged infractions. We note likewise that petitioners, thinking that their verbal
explanations were sufficient, opted to forego a written explanation, and did not
appear during the set hearing. These actions were choices that petitioners
voluntarily made.
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Petition is denied.
RCPI v. Verchez
Cita
Radio Communications of the Philippines, Inc. (RCPI), Petitioner, versus

Alfonso Verchez, Grace Verchez-Infante, Mardonio Infante, Zenaida
Verchez-Catibog, And Fortunato Catibog, Respondents.
(G.R. No. 164349, January 31, 2006, 3rd Division)
CARPIO MORALES, J.:
FACTS: Editha Hebron Verchez was confined due to an ailment. Grace

Verchez-Infante (daughter) went to the Radio Communications of the
Philippines, Inc. (RCPI) to send a telegram to her sister Zenaida Verchez-
Catibog who was residing at Quezon City reading: "Send check money Mommy
is in hospital." Grace paid was issued a receipt. Three days after, no response
received from her, Grace sent a letter to Zenaida, thru JRS Delivery Service,
reprimanding her for not sending any financial aid. After Zenaida received
Graces letter, with her husband Fortunato Catibog, left for Sorsogon. On her
arrival she disclaimed having received any telegram. Zenaida, and her
husband, brought Editha to the Veterans Memorial Hospital. The telegram
from RCPI was delivered to Zenaida 25 days later, Edithas husband Alfonso
Verchez by letter demanded an explanation from the manager of the Service
Quality Control Department of the RCPI, Mrs. Lorna D. Fabian, who replied,
that due to the occurrence of radio link connecting the points of
communication encountered radio noise and interferences such that subject
telegram did not initially registered in the receiving teleprinter machine
.Verchezs lawyer thereupon wrote RCPIs manager Fabian, by letter requesting
for a conference but no representative of RCPI showed up at said date and
time. On April 17, 1992, Editha died.
Verchez, with his daughters Grace and Zenaida and spouses, filed a
complaint against RCPI before the RTC for damages, the judgment of RTC
rendered in favor of the plaintiffs and against the defendant, and on appeal, the
Court of Appeals, affirmed the trial courts decision. Hence, RCPIs present
petition for review on certiorari at the Supreme Court.
ISSUE: Whether or not RCPI is liable for breach of contract.
HELD: Yes. RCPI is liable for breach of contract.
RCPIs liability is anchored on culpa contractual or breach of contract

with regard to Grace and on tort with regard to her co-plaintiffs herein co-
respondents. Base on Article 1170 of the Civil Code providing that: Those who
in the performance of their obligations are guilty of fraud, negligence, or delay,
and those who in any manner contravene the tenor thereof, are liable for
damages. In culpa contractual, the mere proof of the existence of the contract
and the failure of its compliance justify, prima facie, a corresponding right of
relief. The law, recognizing the obligatory force of contracts, will not permit a
party to be set free from liability for any kind of misperformance of the
contractual undertaking or a contravention of the tenor thereof. A breach of
contract confers upon the injured party a valid cause for recovering that which
may have been lost or suffered.
In the case at bar, RCPI bound itself to deliver the telegram within the
shortest possible time. It took 25 days, however, for RCPI to deliver it.
Petition is denied.
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Victory Liner v Gammad, 444 S 355

Victory Liner, Petitioner, versus Rosalito Gammad, April Rossan P.
Gammad, Roi Rozano P. Gammad and Diana Frances P. Gammad,
Respondents
YNARES-SANTIAGO, J.:
FACTS: Respondent Rosalito Gammad show that on March 14, 1996, his wife
Marie Grace Pagulayan-Gammad, was on board an air-conditioned Victory
Liner bus bound for Tuguegarao, Cagayan from Manila. At about 3:00 a.m.,
the bus while running at a high speed fell on a ravine somewhere in Barangay
Baliling, Sta. Fe, Nueva Vizcaya, which resulted in the death of Marie Grace
and physical injuries to other passengers.
Respondent heirs of the deceased filed a complaint for damages arising

from culpa contractual against petitioner. In its answer, the petitioner claimed
that the incident was purely accidental and that it has always exercised
extraordinary diligence in its 50 years of operation. After several re-settings,
pre-trial was set on April 10, 1997. For failure to appear on the said date,
petitioner was declared as in default. However, on petitioners motion to lift the
order of default, the same was granted by the trial court.
At the pre-trial, petitioner did not want to admit the proposed stipulation
that the deceased was a passenger of the Victory Liner Bus which fell on the
ravine and that she was issued Passenger Ticket No. 977785. Respondents, for
their part, did not accept petitioners proposal to pay P50,000.00.
The trial court rendered its decision in favor of respondents. On appeal

by petitioner, the Court of Appeals affirmed the decision of the trial court with
modification. Hence, this present petition for review on certiorari.
ISSUE: Whether or not petitioners counsel was guilty of gross negligence.
HELD: Yes. The petitioners counsel was guilty of gross negligence.
It is settled that the negligence of counsel binds the client. This is based
on the rule that any act performed by a counsel within the scope of his general
or implied authority is regarded as an act of his client. Consequently, the
mistake or negligence of counsel may result in the rendition of an unfavorable
judgment against the client. However, the application of the general rule to a
given case should be looked into and adopted according to the surrounding
circumstances obtaining. Thus, exceptions to the foregoing have been
recognized by the court in cases where reckless or gross negligence of counsel
deprives the client of due process of law, or when its application will result in
outright deprivation of the clients liberty or property or where the interests of
justice so require, and accord relief to the client who suffered by reason of the
lawyers gross or palpable mistake or negligence.
Petition is partially granted.
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FGU v. Sarmiento, 386 S 355

FGU Insurance Corporation, Petitioner, versus G.P. Sarmiento Trucking
Corporation and Lambert M. Eroles, Respondents.
VITUG, J.:
FACTS: G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on 18

June 1994 thirty (30) units of Condura S.D. white refrigerators aboard one of
its Isuzu truck, driven by Lambert Eroles. While the truck was traversing the
north diversion road along McArthur highway in Barangay Anupol, Bamban,
Tarlac, it collided with an unidentified truck, causing it to fall into a deep
canal, resulting in damage to the cargoes.
FGU Insurance Corporation (FGU), an insurer of the shipment, paid to

Concepcion Industries, Inc., the value of the covered cargoes: P204, 450.00.
FGU, in turn, being the subrogee of the rights and interests of the insured
sought reimbursement of the amount, from GPS. Since GPS failed to heed the
claim, FGU filed a complaint for damages and breach of contract of carriage
against GPS and its driver with the Regional Trial Court, Branch 66, of Makati
City. In its answer, respondents asserted that GPS was the exclusive hauler
only of Concepcion Industries, Inc., since 1988, and it was not so engaged in
business as a common carrier. Respondents further claimed that the cause of
damage was purely accidental. GPS, instead of submitting its evidence, filed
with leave of court a motion to dismiss the complaint by way of demurrer to
evidence on the ground that petitioner had failed to prove that it was a
common carrier.
The RTC and CA both ruled in favor of the respondent. Hence, this
present petition for review.
ISSUE: Whether or not the respondent be presumed to have been negligent

when it undertook to transport the goods.
HELD: Yes. The respondent acted negligently when it undertook to transport

the goods.
In culpa contractual, upon which the action of petitioner rests as being

the subrogee of Concepcion Industries, Inc., the mere proof of the existence of
the contract and the failure of its compliance justify, prima facie, a
corresponding right of relief. Thus, FGU has a claim for the amount paid out.
GPS recognizes the existence of a contract of carriage between it and
petitioners assured, and admits that the cargoes it has assumed to deliver
have been lost or damaged while in its custody. In such a situation, a default
on, or failure of compliance with, the obligation in this case, the delivery of the
goods in its custody to the place of destination gives rise to a presumption of
lack of care and corresponding liability on the part of the contractual obligor
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the burden being on him to establish otherwise. GPS has failed to do so.
Petition is granted.
LRTA v. Natividad
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Light Rail Transit Authority & Rodolfo Roman, Petitioners,

versus Marjorie Navidad, Heirs of the Late Nicanor Navidad & Prudent
Security Agency, Respondents.
(G.R. No. 145804 , February 6, 2003, 1st Division)
VITUG, J.:
FACTS: On 14 October 1993, about half an hour past 7:00 p.m., Nicanor
Navidad, then drunk, entered the EDSA LRT station after purchasing a token
(representing payment of the fare). While Navidad was standing on the platform
near the LRT tracks, Junelito Escartin, the security guard assigned to the area
approached Natividad. A misunderstanding or an altercation between the two
apparently ensued that led to a fist fight. No evidence, however, was adduced
to indicate how the fight started or who, between the two, delivered the first
blow or how Natividad later fell on the LRT tracks. At the exact moment that
Natividad fell, an LRT train, operated by Rodolfo Roman, was coming in.
Natividad was struck by the moving train, and he was killed instantaneously.
The heirs of Nicanor filed a complaint for damages against Junelito Escartin,
Rodolfo Roman, the LRTA, the Metro Transit Organization, Inc. (Metro Transit),
and Prudent fotir the death of her husband. LRTA and Roman filed a
counterclaim against Natividad and a cross-claim against Escartin and
Prudent. Prudent, in its answer, denied liability and averred that it had
exercised due diligence in the selection and supervision of its security guards.
The LRTA and Roman presented their evidence while Prudent and Escartin,
instead of presenting evidence, filed a demurrer contending that Natividad had
failed to prove that Escartin was negligent in his assigned task.
On 11 August 1998, the trial court rendered its decision, ordering

Prudent Security and Escartin to jointly and severally pay damages to
Natividad The court also dismissed the complaint against LRTA and Rodolfo
Roman for lack of merit, and the compulsory counterclaim of LRTA and
Roman. Prudent appealed to the Court of Appeals. Thus, the appellate court
promulgated its decision exonerating Prudent from any liability for the death of
Nicanor Natividad and, instead, holding the LRTA and Roman jointly and
severally liable. The appellate court modified the judgment ordering Roman and
the LRTA solidarily liable to pay Natividad. The appellate court denied LRTAs
and Romans motion for reconsideration in its resolution of 10 October 2000.
Hence, this appeal.
ISSUE: Whether or not the liability of LRTA arises from the breach of contract
due to failure to exercise diligence.
HELD: Yes. The liability of LRTA arises from the breach of contract due to
failure to exercise diligence.
The foundation of LRTAs liability is the contract of carriage and its

obligation to indemnify the victim arises from the breach of that contract by
reason of its failure to exercise the high diligence required of the common
carrier. In the discharge of its commitment to ensure the safety of passengers,
a carrier may choose to hire its own employees or avail itself of the services of
an outsider or an independent firm to undertake the task. In either case, the
common carrier is not relieved of its responsibilities under the contract of
carriage.
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The decision of the appellate court is affirmed with modification.
Rodzssen v. Far East Bank, 357 S 618
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Rodzssen Supply Co. Inc., Petitioner, versus Far East Bank & Trust Co.,
Respondent.
(G.R. No. 109087, May 9, 2001, 3rd Division)
PANGANIBAN, J.:
FACTS: On January 15, 1979, defendant Rodzssen Supply, Inc. opened with
plaintiff Far East Bank and Trust Co. a 30-day domestic letter of credit, in the
amount of P190,000.00 in favor of Ekman and Company, Inc. (Ekman) for the
purchase from the latter of five units of hydraulic loaders, to expire on
February 15, 1979. The three loaders were delivered to defendant for which
plaintiff paid Ekman and which defendant paid plaintiff before expiry date of
letter of credit. The remaining two loaders were delivered to defendant but the
latter refused to pay. Ekman pressed payment to plaintiff. Plaintiff paid Ekman
for the two loaders and later demanded from defendant such amount as it paid
Ekman. Defendant refused payment contending that there was a breach of
contract by plaintiff who in bad faith paid Ekman, knowing that the two units
of hydraulic loaders had been delivered to defendant after the expiry date of
subject.
The RTC rendered judgment in favor of herein respondent, stating that
upon delivery by Ekman of the loaders, Rodzssen became liable for the
payment of the units. In the honest belief that it was still under obligation to,
and upon presentation of necessary documents by Ekman, FEBTC was in good
faith in paying Ekman. The RTC further noted that Rodzssens offer to return
the 2 units to FEBTC was made only 3 years after it received the goods and
when FEBTC pressed for the payments. Hence, this present petition for review
on certiorari.
ISSUE: Whether or not both parties are mutually negligent.
HELD: Yes. Both parties are mutually negligent.
The Supreme Court agrees with the Court of Appeals that petitioner
should pay respondent bank the amount the latter expended for the equipment
belatedly delivered by Ekman and voluntarily received and kept by petitioner.
Equitable considerations behoove us to allow recovery by respondent. True, it
erred in paying Ekman, but petitioner itself was not without fault in the
transaction. It must be noted that the latter had voluntarily received and kept
the loaders since October 1979.
FEBTCs right to seek recovery from petitioner is anchored not upon the
inefficacious LC, but on Article 2142 of the Civil Code, which reads, Certain
lawful, voluntary and unilateral acts give rise to the juridical relation of quasi-
contract to the end that no one shall be unjustly enriched or benefited at the
expense of another. When both parties to a transaction are mutually negligent
in the performance of their obligations, the fault of one cancels the negligence
of the other and, as in this case, their rights and obligations may be
determined equitably under the law proscribing unjust enrichment.
Petition is denied.
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UE v. Jader
University of the East, Petitioner, versus. Romeo A. Jader, Respondent.
FACTS: Romeo Jader graduated at UE College of law from 1984-88. During

his last year, 1st semester, he failed to take the regular final examination in
Practical Court 1where he was given an incomplete grade remarks. He filed an
application for removal of the incomplete grade given by Prof. Carlos Ortega on
February 1, 1988 which was approved by Dean Celedonio Tiongson after the
payment of required fees. He took the exam on March 28 and on May 30, the
professor gave him a grade of 5.
The commencement exercise of UE College of law was held April 16,

1988, 3PM. In the invitation, his name appeared. In preparation for the bar
exam, he took a leave of absence from work from April 20- Sept 30, 1988. He
had his pre-bar class review in FEU. Upon learning of such deficiency, he
dropped his review classes and was not able to take the bar exam.
Jader sued UE for damages resulting to moral shock, mental anguish,

serious anxiety, besmirched reputation, wounded feelings, sleepless nights due
to UEs negligence.
ISSUE: Whether or not the petitioner is guilty of negligence.
HELD: Yes. The petitioner is guilty of negligence.
The Supreme Court held that petitioner was guilty of negligence and this
liable to respondent for the latters actual damages. Educational institutions
are duty-bound to inform the students of their academic status and not wait
for the latter to inquire from the former. However, respondent should not have
been awarded moral damages though JADER suffered shock, trauma, and pain
when he was informed that he could not graduate and will not be allowed to
take the bar examinations as what CA held because its also respondents duty
to verify for himself whether he has completed all necessary requirements to be
eligible for the bar examinations. As a senior law student, he should have been
responsible in ensuring that all his affairs specifically those in relation with his
academic achievement are in order. Before taking the bar examinations, it
doesnt only entail a mental preparation on the subjects but there are other
prerequisites such as documentation and submission of requirements which
prospective examinee must meet.
The decision of the Court of Appeals is affirmed with modification.
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Bayne Adjusters v. Court of Appeals

Bayne Adjusters and Surveyors, Inc., Petitioner, versus Court of Appeals
and Insurance Company of North America, Respondents.
(G. R. No. 116332, January 25, 2000, 3rd Division)
GONZAGA-REYES, J.:
FACTS: Bayne Adjuster had a contract with consignee, Colgate-Palmolive

Philippines, to supervise the proper handling and discharge of their import
liquid alkyl benzene(from Japan, totally amounting to USD 255,802.88) from
the chemical tanker to a receiving barge until the cargo is pumped into
consignees shore tank. Such arrangement was insured by Col-Pal to Private
Respondent , Insurance of NA, against all risks for its full value.
June 27, 1987, 1020pm: the said pumping commenced. Due to a

mechanical failure, pump broke down several times. June 29, 1987, 1pm:
pump broke down again. At that time, petitioners surveyor already left the
premises without leaving any instruction with the barge foreman on what to do
in the event that the pump becomes operational again. Later that say,
consignee asked petitioner to send a surveyor to conduct tank sounding.
Petitioner sent Amado Fontillas, a cargo surveyor, not a liquid bulk surveyor to
check. Fontillas wanted to inform the bargemen and the assigned surveyor to
resume pumping, but they were nowhere, so he left.
Bargemen arrived in the evening, found the valves of the tank open and
resumed pumping in absence of any instruction. The following morning, an
undetermined amount of alkyl benzene was lost due to overflow. Consignee,
surveyor and a marine surveyor had a conference to determine the amount of
loss. A compromise quantity of 67.649MT was lost, amounting to
PHP811,609,53. Private respondent instituted a collection suit as subrogee of
consignee after their failure to extrajudicially settle with petitioners.
The RTC and Court of Appeals ruled that Bayne must pay. Hence, this
present petition for review.
ISSUE: Whether or not Baynes failure to supervise is the proximate cause of

the loss, thus making them liable for damages.
HELD: Yes. Baynes failure to supervise is the proximate cause of the loss, thus
making them liable for damages.
According to the Standard Operating Procedure (SOP) for Handling

Liquid Bulk Cargo, it is the duty of the surveyor that he closes the valves of the
tank when pumping operations are suspended due to pump break down. The
petitioner did not deny such failure. Their failure to comply is the proximate
cause of the loss. This failure enabled bargemen , without any instruction or
supervision, to resume pumping, leading to the overflow of liquid cargo from
the tank.
Negligence of the obligor in the performance of his obligation renders him

liable for damages for the resulting loss suffered by the obligee. Fault or
negligence of the obligor consists of the failure to exercise due care and
prudence in the performance of the obligation as the nature of the obligation
demands.
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Delsan v. C & A Construction

Delsan Transport, Petitioner, versus C & A Construction, Respondents.
(G.R. No. 156034, October 1, 2003, 1st Division)
YNARES-SANTIAGO, J:
FACTS: On October 9, 1994, M/V Delsan Express, a ship owned and operated
by petitioner Delsan Transport Lines, Inc., anchored at the Navotas Fish Port
for the purpose of installing a cargo pump and clearing the cargo oil tank. At
around 12:00 midnight of October 20, 1994, Captain Demetrio T. Jusep of M/V
Delsan Express received a report from his radio head operator in Japan that a
typhoon was going to hit Manila in about eight (8) hours. At approximately 8:35
in the morning of October 21, 1994, Capt. Jusep tried to seek shelter at the
North Harbor but could not enter the area because it was already congested. At
10:00 a.m., Capt. Jusep decided to drop anchor at the vicinity of Vitas mouth,
4 miles away from a Napocor power barge. At that time, the waves were already
reaching 8 to 10 feet high. Capt. Jusep ordered his crew to go full ahead to
counter the wind which was dragging the ship towards the Napocor power
barge. To avoid collision, Capt. Jusep ordered a full stop of the vessel.[9] He
succeeded in avoiding the power barge, but when the engine was re-started
and the ship was maneuvered full astern, it hit the deflector wall constructed
by respondent.
Respondent demanded payment of the damage from petitioner but the

latter refused to pay. The trial court ruled that petitioner was not guilty of
negligence because it had taken all the necessary precautions to avoid the
accident. Applying the "emergency rule", it absolved petitioner of liability
because the latter had no opportunity to adequately weigh the best solution to
a threatening situation. It further held that even if the maneuver chosen by
petitioner was a wrong move, it cannot be held liable as the cause of the
damage sustained by respondent was typhoon "Katring", which is an act of
God.
On appeal to the Court of Appeals, the decision of the trial court was
reversed and set aside. It found Capt. Jusep guilty of negligence in deciding to
transfer the vessel to the North Harbor only at 8:35 a.m. of October 21, 1994
and thus held petitioner liable for damages.
ISSUES:1. Whether or not Capt. Jusep was negligent;
2. If yes, whether or not petitioner is solidarily liable under for the

quasi-delict committed by Capt. Jusep?
HELD: Yes. Article 2176 of the Civil Code provides that whoever 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 called a quasi-delict. The test for
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determining the existence of negligence in a particular case may be stated as

follows: Did the defendant in doing the alleged negligent act use the reasonable
care and caution which an ordinary prudent person would have used in the
same situation? If not, then he is guilty of negligence.
In the case at bar, the Court of Appeals was correct in holding that Capt.
Jusep was negligent in deciding to transfer the vessel only at 8:35 in the
morning of October 21, 1994. As early as 12:00 midnight of October 20, 1994,
he received a report from his radio head operator in Japan that a typhoon was
going to hit Manila after 8 hours. This, notwithstanding, he did nothing, until
8:35 in the morning of October 21, 1994, when he decided to seek shelter at
the North Harbor, which unfortunately was already congested.
The finding of negligence cannot be rebutted upon proof that the ship
could not have sought refuge at the North Harbor even if the transfer was done
earlier. It is not the speculative success or failure of a decision that determines
the existence of negligence in the present case, but the failure to take
immediate and appropriate action under the circumstances. Capt. Jusep,
despite knowledge that the typhoon was to hit Manila in 8 hours, complacently
waited for the lapse of more than 8 hours thinking that the typhoon might
change direction. Furthermore, he did not transfer as soon as the sun rose
because, according to him, it was not very cloudy and there was no weather
disturbance yet.
Yes. Anent the second issue, we find petitioner vicariously liable for the
negligent act of Capt. Jusep. Under Article 2180 of the Civil Code an employer
may be held solidarily liable for the negligent act of his employee. Thus -
Art. 2180. The obligation imposed in Article 2176 is demandable not only
for ones own acts or omissions, but also for those of persons for whom one is
responsible.
Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even though
the former are not engaged in any business or industry.
Whenever an employees negligence causes damage or injury to another,

there instantly arises a presumption juris tantum that the employer failed to
exercise diligentissimi patris families in the selection (culpa in eligiendo) or
supervision (culpa in vigilando) of its employees. To avoid liability for a quasi-
delict committed by his employee, an employer must overcome the
presumption by presenting convincing proof that he exercised the care and
diligence of a good father of a family in the selection and supervision of his
employee.
There is no question that petitioner, who is the owner/operator of M/V

Delsan Express, is also the employer of Capt. Jusep who at the time of the
incident acted within the scope of his duty. The defense raised by petitioner
was that it exercised due diligence in the selection of Capt. Jusep because the
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latter is a licensed and competent Master Mariner. It should be stressed,

however, that the required diligence of a good father of a family pertains not
only to the selection, but also to the supervision of employees. It is not enough
that the employees chosen be competent and qualified, inasmuch as the
employer is still required to exercise due diligence in supervising its employees.
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Philippine Commercial Bank v. Court of Appeals

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

that its check in the amount of P4,746,114.41 was not paid to the government
or its authorized agent and instead encashed by unauthorized persons, hence,
plaintiff has to pay the said amount within fifteen days from receipt of the
letter. Upon advice of the plaintiffs lawyers, plaintiff paid to the Bureau of
Internal Revenue, the amount of P4,746,114.41, representing payment of
plaintiffs percentage tax for the third quarter of 1977. Plaintiff demanded
defendant to reimburse him of the said amount paid for the second time to BIR
but the latter refused.
ISSUE: Whether or not PCIB is liable to Ford Philippines the amount of several
checks which were allegedly embezzled by a syndicate group.
HELD: Yes. Jurisprudence regarding the imputed negligence of employer in a

master-servant relationship is instructive. Since a master may be held for his
servants wrongful act, the law imputes to the master the act of the servant,
and if that act is negligent or wrongful and proximately results in injury to a
third person, the negligence or wrongful conduct is the negligence or wrongful
conduct of the master, for which he is liable. The general rule is that if the
master is injured by the negligence of a third person and by the concurring
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contributory negligence of his own servant or agent, the latters negligence is

imputed to his superior and will defeat the superiors action against the third
person, assuming, of course that the contributory negligence was the
proximate cause of the injury of which complaint is made.
It appears that although the employees of Ford initiated the transactions

attributable to an organized syndicate, in our view, their actions were not the
proximate cause of encashing the checks payable to the CIR. The degree of
Fords negligence, if any, could not be characterized as the proximate cause of
the injury to the parties.
Citibank should have scrutinized Citibank Check before paying the

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

Citibank Checks because of the contractual relationship existing between the
two. Citibank, as the drawee bank breached its contractual obligation with
Ford and such degree of culpability contributed to the damage caused to the
latter.
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SMC v. Court of Appeals

San Miguel Corporation and Heirs of Ouana, Petitioners, versus Court of
Appeals, Respondent.
(G.R. No. 141716, July 4, 2002, 1st Division)
YNARES-SANTIAGO, J:
FACTS: San Miguel Corporation entered into a Time Charter Party Agreement
with Julius Ouano, doing business under the name and style J. Ouano Marine
Services. Under the terms of the agreement, SMC chartered the M/V Doa
Roberta owned by Julius Ouano for a period of two years, from June 1, 1989 to
May 31, 1991, for the purpose of transporting SMCs beverage products from
its Mandaue City plant to various points in Visayas and Mindanao.
On November 11, 1990, during the term of the charter, SMC issued
sailing orders to the Master of the MN Doa Roberta, Captain Sabiniano
Inguito, to sail for Opol, Cagayan Nov. 12, 1990. Meanwhile, at 4:00 a.m. of
November 12, 1990, typhoon Ruping was spotted 570 kilometers east-
southeast of Borongan, Samar, moving west-northwest at 22 kilometers per
hour in the general direction of Eastern Visayas. The typhoon had maximum
sustained winds of 240 kilometers per hour near the center with gustiness of
up to 280 kilometers per hour.
At 7:00 a.m., November 12, 1990, one hour after the M/V Doa Roberta
departed from Mandaue City SMC Radio Operator Rogelio P. Moreno contacted
Captain Inguito through the radio and advised him to take shelter. Captain
Inguito replied that they will proceed since the typhoon was far away from
them, and that the winds were in their favor.
At 1:15 a.m., November 13, 1990, Captain Inguito called Moreno over the
radio and requested him to contact Rico Ouano, son of Julius Ouano, because
they needed a helicopter to rescue them. The vessel was about 20 miles west of
Sulauan Point.
Upon being told by SMCs radio operator, Rico Ouano turned on his radio
and read the distress signal from Captain Ingiuto. When he talked to the
captain, the latter requested for a helicopter to rescue them. Rico Ouano talked
to the Chief Engineer who informed him that they can no longer stop the water
from coming into the vessel because the crew members were feeling dizzy from
the petroleum fumes.
At 2:30 a.m. of November 13, 1990, the M/V Doa Roberta sank. Out of
the 25 officers and crew on board the vessel, only five survived.
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ISSUE: Whether or nor Ouano is liable for the negligence of his employee.
Held: Yes. A charter party is a contract by virtue of which the owner or the
agent of a vessel binds himself to transport merchandise or persons for a fixed
price. It has also been defined as a contract by virtue of which the owner or the
agent of the vessel leases for a certain price the whole or a portion of the vessel
for the transportation of goods or persons from one port to another.
If the charter is a contract of affreightment, which leaves the general

owner in possession of the ship as owner for the voyage, the rights and the
responsibilities of ownership rest on the owner. The charterer is free from
liability to third persons in respect of the ship.
SC concur with the findings of the Court of Appeals that the charter
party in these cases was a contract of affreightment, contrary to petitioner
Ouanos protestation that it was a demise charter.
It appearing that Ouano was the employer of the captain and crew of the
M/V Doa Roberta during the term of the charter, he therefore had command
and control over the vessel. His son, Rico Ouano, even testified that during the
period that the vessel was under charter to SMC, the Captain thereof had
control of the navigation of all voyages.
Under the foregoing definitions, as well as the clear terms of the Charter
Party Agreement between the parties, the charterer, SMC, should be free from
liability for any loss or damage sustained during the voyage, unless it be shown
that the same was due to its fault or negligence.
The evidence does not show that SMC or its employees were amiss in
their duties. The facts indubitably establish that SMCs Radio Operator, Rogelio
P. Moreno, who was tasked to monitor every shipment of its cargo, contacted
Captain Inguito as early as 7:00 a.m., one hour after the M/V Doa Roberta
departed from Mandaue, and advised him to take shelter from typhoon Ruping.
This advice was reiterated at 2:00 p.m. At that point, Moreno thought of calling
Ouanos son, Rico, but failed to find him. At 4:00 p.m., Moreno again advised
Captain Inguito to take shelter and stressed the danger of venturing into the
open sea. The Captain insisted that he can handle the situation.
In the assailed decision, the Court of Appeals found that the proximate cause
of the sinking of the vessel was the negligence of Captain Sabiniano Inguito
SC likewise agrees with the CA that Ouano is vicariously liable for the
negligent acts of his employee, Captain Inguito. Under Articles 2176 and 2180
of the Civil Code, owners and managers are responsible for damages caused by
the negligence of a servant or an employee, the master or employer is
presumed to be negligent either in the selection or in the supervision of that
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employee. This presumption may be overcome only by satisfactorily showing

that the employer exercised the care and the diligence of a good father of a
family in the selection and the supervision of its employee.39
Ouano miserably failed to overcome the presumption of his negligence. He

failed to present proof that he exercised the due diligence of a bonus
paterfamilias in the selection and supervision of the captain of the M/V Doa
Roberta. Hence, he is vicariously liable for the loss of lives and property
occasioned by the lack of care and negligence of his employee.
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Heirs of Ochoa v. G & S Transport Corp.

The Heirs of Jose Marcial Ochoa, Petitioner, versus G & S Transport
DEL CASTILLO, J:
FACTS: On the night of March 10, 1995, Jose Marcial K. Ochoa died while on board an
Avis taxicab owned and operated by G& S Transport Corporation, a common carrier.
The death certificate issued by the Office of the Civil Registrar of Quezon Citycited the
cause of his death as vehicular accident it was found that the death of Jose Marcial
Ochoa was caused by negligence on the part of the taxicab driver employed by G & S
Transport Corporation, Bibiano Padilla. However, the taxicab driver,Bibiano Padilla,
was acquitted of the crime of reckless imprudence resulting in homicide. Regardless,
the petitioners alleged that respondent, as a common carrier, was under legal
obligation to observe and exercise extraordinary diligence in transporting its
passengers to their destination safely and securely. The contract was entered the
moment Ochoa entered the vehicle owned by the respondent. The failure of the
respondent, as evidenced by the death of Ochoa, led the petitioners to aver that they, the
respondents, are liable for having breached the contract of common carriage. The heirs thus prayed
for G& S to pay them actual damages, moral damages, exemplary damages, and attorneys fees and
expenses of litigation.
ISSUE: Whether or not the petitioner may proceed with the civil action given that there
was already an acquittal in the related criminal case.
HELD: Yes. The Supreme Court declared the HELD of Cancio, Jr., v. Isip, which stated
that in the instant case, it must be stressed that the action filed by petitioner is an
independent civil action, which remains separate and distinct from any criminal
prosecution based on the same act. Not being deemed instituted in the criminal action
based on culpa criminal, a HELD on the culpability of the offender will have no
bearing on said independent civil action based on an entirely different cause of action,
i.e., culpa contractual. Considering Article 31 of the Civil Code, the petitioners claim
for damages is valid considering that the civil action, being based on an obligation,
proceeded independently of the criminal proceedings and regardless of the result of
the latter. Thus, the respondent is liable to pay the petitioners for damages because by
not transporting Jose Marcial Ochoa safely to his destination the former breached its
contract with the passenger.
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Pacis v. Morales
Alfredo P. Pacis and Cleopatra D. Pacis, Petitioners, versus Jerome
Jovanne Morales, Respondent.
CARPIO, J:
FACTS: Petitioners Alfredo P. Pacis and Cleopatra D. Pacis filed with the trial
court a civil case for damages against respondent Jerome Jovanne Morales.
Petitioners are the parents of Alfred Dennis Pacis,Jr. who died in a shooting
incident inside the Gun Store in Baguio City. Alfred Dennis Pacis, then 17years
old and a first year student at the BCF taking up BS Computer Science, died
due to a gunshot wound in the head which he sustained while he was at the
Gun store owned and operated by defendant Jerome Jovanne Morales. The
bullet which killed Alfred Dennis Pacis was fired from a gun brought in by a
customer of the gun store for repair. The gun was left by defendant Morales in
a drawer of a table located inside the gun store. Defendant Morales was in
Manila at the time. His employee Armando Jarnague, who was the
regular caretaker of the gun store was also not around. He left earlier and
requested sales agents Matibag and Herbolario to look after the gun store while
he and defendant Morales were away. Jarnague entrusted to Matibag and
Herbolario a bunch of keys used in the gun store which included the key to the
drawer where the fatal gun was kept. It appears that Matibag and Herbolario
later brought out the gun from the drawer and placed it on top of the table. The
Alfred got hold of the same. Matibag asked Alfred to return the gun. The latter
followed and handed the gun to Matibag. It went off, the bullet hitting the
Alfred in the head. A criminal case for homicide was filed against Matibag,
however, was acquitted of the charge against him because of the exempting
circumstance of accident. By agreement of the parties, the evidence adduced in
the criminal case for homicide against Matibag was reproduced and adopted by
them as part of their evidence in the instant case. The trial court rendered its
decision in favor of petitioners. Respondent appealed to the CA. The CA
reversed the trial courts Decision and absolved respondent from civil liability
under Article 2180 of the Civil Code. Petitioners filed a motion for
reconsideration,which the Court of appeals denied. Hence, this petition. The trial
court held respondent civilly liable for the death of Alfred under Article 2180 in
relation to Article 2176 of the Civil Code.
ISSUE: Whether or not the Court of Appeals committed serious error in

rendering the decision and resolution in questioning disregard of law and
jurisprudence by reversing the order of the regional trial court (branch 59) of
Baguio City notwithstanding clear, authentic records and testimonies
presented during the trial which negate and contradict its findings.
HELD: Yes. In this case, instead of enforcing their claim for damages in the
homicide case filed against Matibag, petitioners opted to file an independent
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civil action for damages against respondent whom they alleged was Matibags
employer. Petitioners based their claim for damages under Articles 2176and
2180 of the Civil Code. Unlike the subsidiary liability of the employer under
Article 102 of the Revised Penal Code, the liability of the employer, or any
person for that matter, under Article 2176 of the Civil Code is primary and
direct, based on a persons own negligence. Article 2176 states: Art. 2176.
Whoever 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 called
quasi-delict and is governed by the provisions of this Chapter. This case
involves the accidental discharge of a firearm inside a gun store. Under PNP
Circular No.9, entitled the Policy on Firearms and Ammunition
Dealership/Repair, a person who is in the business of purchasing and selling
of firearms and ammunition must maintain basic security and safety
requirements of a gun dealer, otherwise his License to Operate Dealership will
be suspended or canceled.
For failing to insure that the gun was not loaded, respondent himself was
negligent. Furthermore, it was not shown in this case whether respondent had
a License to Repair which authorizes him to repair defective firearms to restore
its original composition or enhance or upgrade firearms. Clearly, respondent did
not exercise the degree of care and diligence required of a good father of a family, much
less the degree of care required of someone dealing with dangerous weapons, as would
exempt him from liability in this case.
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Philippine Hawk Corporation v. Lee

Philippine Hawk Corporation, Petitioner, versus Vivian Lee, Respondent.
PERALTA, J:
FACTS: On March 15, 2005, respondent Vivian Tan Lee filed before the RTC of
Quezon City a Complaint against petitioner Philippine Hawk Corporation and
defendant Margarito Avila for damages based on quasi-delict, arising from a
vehicular accident that occurred on March 17, 1991 in Barangay Buensoceso,
Gumaca, Quezon. The accident resulted in the death of respondents husband,
Silvino Tan, and caused respondent physical injuries.
On June 18, 1992, respondent filed an Amended Complaint, in her own behalf
and in behalf of her children, in the civil case for damages against
petitioner. Respondent sought the payment of indemnity for the death of
Silvino Tan, moral and exemplary damages, funeral and interment expenses,
medical and hospitalization expenses, the cost of the motorcycles repair,
attorneys fees, and other just and equitable reliefs.
The accident involved a motorcycle, a passenger jeep, and a bus with Body No.
119. The bus was owned by petitioner Philippine Hawk Corporation, and was
then being driven by Margarito Avila.
In its Answer, petitioner denied liability for the vehicular accident, alleging
that the immediate and proximate cause of the accident was the recklessness
or lack of caution of Silvino Tan. Petitioner asserted that it exercised the
diligence of a good father of the family in the selection and supervision of its
employees, including Margarito Avila.
On March 25, 1993, the trial court issued a Pre-trial Order stating that the
parties manifested that there was no possibility of amicable settlement between them.
The trial court found that before the collision, the motorcycle was on the left side of
the road, just as the passenger jeep was. Prior to the accident, the motorcycle was in
a running position moving toward the right side of the highway. The trial court agreed
with the bus driver that the motorcycle was moving ahead of the bus from the left side
of the road toward the right side of the road, but disagreed that the motorcycle crossed
the path of the bus while the bus was running on the right side of the road.
The trial court held that if the bus were on the right side of the highway, and
Margarito Avila turned his bus to the right in an attempt to avoid hitting the
motorcyle, then the bus would not have hit the passenger jeep, which was then parked
on the left side of the road. The fact that the bus also hit the passenger jeep showed
that the bus must have been running from the right lane to the left lane of the
highway, which caused the collision with the motorcycle and the passenger jeep
parked on the left side of the road. The trial court stated that since Avila saw the
motorcycle before the collision, he should have stepped on the brakes and slowed
down, but he just maintained his speed and veered to the left. The trial court found
Margarito Avila guilty of simple negligence.
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The trial court held petitioner bus company liable for failing to exercise the
diligence of a good father of the family in the selection and supervision of Avila, having
failed to sufficiently inculcate in him discipline and correct behavior on the road.
ISSUE: Whether or not negligence may be attributed to petitioners driver, and

whether negligence on his part was the proximate cause of the accident, resulting in
the death of Silvino Tan and causing physical injuries to respondent.
HELD: Yes. The Court agrees with the bus driver Margarito that the motorcycle
was moving ahead of the bus towards the right side from the left side of the
road, but disagrees with him that it crossed the path of the bus while the bus
was running on the right side of the highway.
If the bus were on the right side of the highway and Margarito turned his
bus to the right in an attempt to avoid hitting it, then the bus would not have
hit the passenger jeep vehicle which was then parked on the left side of the
road. The fact that the bus hit the jeep too, shows that the bus must have been
running to the left lane of the highway from right to the left, that the collision
between it and the parked jeep and the moving rightways cycle became
inevitable. Besides, Margarito said he saw the motorcycle before the collision
ahead of the bus; that being so, an extra-cautious public utility driver should
have stepped on his brakes and slowed down. Here, the bus never slowed
down, it simply maintained its highway speed and veered to the left. This is
negligence indeed.
Petitioner contends that the Court of Appeals was mistaken in stating that the
bus driver saw respondents motorcycle about 15 meters away before the collision,
because the said distance, as testified to by its witness Efren Delantar Ong, was Ongs
distance from the bus, and not the distance of the bus from the motorcycle. Petitioner
asserts that this mistaken assumption of the Court of Appeals made it conclude that
the bus driver, Margarito Avila, had the last clear chance to avoid the accident, which
was the basis for the conclusion that Avila was guilty of simple negligence.
A review of the records showed that it was petitioners witness, Efren Delantar
Ong, who was about 15 meters away from the bus when he saw the vehicular
accident. Nevertheless, this fact does not affect the finding of the trial court that
petitioners bus driver, Margarito Avila, was guilty of simple negligence as affirmed by
the appellate court. Foreseeability is the fundamental test of negligence.
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Mercury Drug Corp., v. Huang

Mercury Drug Corporation, Petitioner, versus Huang, Respondent
PUNO, C.J:
FACTS: Petitioner Mercury Drug is the registered owner of a six-wheeler 1990

Mitsubishi Truck. It has in its employ petitioner Rolando Del Rosario as driver.
Respondent spouses Richard and Carmen Huang are the parents of respondent
Stephen Huang and own the red 1991 Toyota Corolla. These two vehicles figured in a
road accident. At the time of the accident, petitioner Del Rosario only had a Traffic
Violation Receipt. A drivers license had been confiscated because he had been
previously apprehended for reckless driving. Respondent Stephen Huang sustained
massive injuries to his spinal cord, head, face and lung. He is paralyzed for life from
his chest down and requires continuous medical and rehabilitation treatment.
Respondents fault petitioner Del Rosario for committing gross negligence and reckless
imprudence while driving, and petitioner Mercury Drug for failing to exercise the
diligence of a good father of a family in the selection and supervision of its driver.
The trial court found Mercury Drug and Del Rosario jointly and severally liable
to pay respondents. The Court of Appeals affirmed the said decision.
ISSUE: Whether or not petitioner Mercury Drug is liable for the negligence of its
employee.
HELD: Yes. Article 2176 and 2180 of the Civil Code provide:
Whoever by act or omission causes damage to another, there being fault

or negligence, is obliged to pay for the damages done. Such fault or negligence, if there
is no pre-existing contractual relationship between the parties, is called a quasi-delict
and is governed by the provisions of this Chapter.
The obligation imposed by article 2176 is demandable not only for ones
own acts or omissions, but also for those of persons for whom one is responsible.
The liability of the employer under Article 2180 is direct and immediate. It is
not conditioned on a prior recourse against the negligent employee, or a prior showing
of insolvency of such employee. It is also joint and solidary with the employee. To be
relieved f the liability, petitioner should show that it exercised the diligence of a good
father of a family, both in the selection of the employee and in the supervision of the
performance of his duties.
In this case, the petitioner Mercury Drug does not provide for back-up driver for
long trips. As the time of the accident, Del Rosario has been driving for more than
thirteen hours, without any alternate. Moreover, Del Rosario took the driving test and
psychological exam for the position of Delivery Man and not as Truck Man.
With this, petitioner Mercury Drug is liable jointly and severally liable to pay
the respondents.
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Mendoza v. Soriano
Flordeliza Mendoza, Petitioner, versus Mutya Soriano, Respondent.
QUISUMBING, J:
FACTS: Sonny Soriano, while crossing Commonwealth Avenue near Luzon Avenue,
was hit by a speeding Tamaraw FX driven by Lomer Macasasa. Soriano was thrown
five meters away, while the vehicle stopped some 25 meters from the point of impact.
Gerard Villaspin, one of Sorianos companions, asked Macasasa to bring Soriano to
the hospital, but the first flee. Respondents wife and daughter filed a complaint for
damages against Macasasa and petitioner Flordeliza Mendoza, the registered owner of
the vehicle.
Petitioner Mendoza contends that she was not liable since as owner of the
vehicle, she had exercised the diligence of a good father of a family over her employee.
Macasas.
The trial court dismissed the complaint against Macasasa and Mendoza. It
found Soriano negligent for crossing not in the pedestrian overpass. The Court of
Appeals, on the other hand, reversed the assailed decision of the lower court.
ISSUE: Whether or not petitioner is liable for damages.
HELD: Yes. While the appellate court agreed that Soriano was negligent, it also found
Macasasa negligent for speeding, such that he was unable to avoid hitting the victim.
It observed that Sorianos own negligence did not preclude recovery for damages from
Macasasas negligence. It further held that since petitioner failed to present evidenced
to the contrary and conformably with Article 2180 of the Civil Code, the presumption
of negligence of the employer in the selection and supervision of employees stood.
The records show that Macasasa violated two traffic rules under the Land
Transportation and Office Code. Under Article 2185 of the Civil Code, a person driving
a motor vehicle is presumed negligent if at the time of the mishap, he was violating
traffic regulations.
Further, under Article 2180, employers are liable for the damages caused by
their employees acting within the scope of their assigned tasks. The liability arises due
to the presumed negligence of the employers in supervising their employees unless
they prove that they observed all the diligence of a good father of a family to prevent
the damage. In this case petitioner is held primarily and solidarily liable for the
damages caused by Macasasa.
However, Article 2179 states that when the plaintiffs own negligence was the
immediate and proximate cause of his injury, he cannot recover damages. But if his
negligence was only contributory, the immediate and proximate cause of the injury
being the defendants lack of due care, the plaintiff may recover damages, but the
court shall mitigate the damages awarded.
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HELD that Soriano was guilty of contributory negligence for not using the
pedestrian overpass, 20% reduction of the amount of the damages awarded was
awarded to petitioner.
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Cerezo v. Tuazon
Hermana Cerezo, Petitioner, versus David Tuazon
CARPIO, J:
FACTS: Country Bus Lines passenger bus collided with a tricycle. Tricycle driver
Tuazon filed a complaint for damages against Mrs. Cerezo, as owner of the bus line,
her husband Attorney Juan Cerezo, and bus driver Danilo A. Foronda.
After considering Tuazons testimonial and documentary evidence, the trial

court ruled in Tuazons favor. The trial court made no pronouncement on Forondas
liability because there was no service of summons on him. The trial court did not hold
Atty. Cerezo liable as Tuazon failed to show that Mrs. Cerezos business benefited the
family, pursuant to Article 121(3) of the Family Code. The trial court held Mrs.
Cerezo solely liable for the damages sustained by Tuazon arising from the negligence
of Mrs. Cerezos employee, pursuant to Article 2180 of the Civil Code.
ISSUE: Whether or not petitioner is solidarily liable.
HELD: Yes. Contrary to Mrs. Cerezos assertion, Foronda is not an indispensable party
to the case. An indispensable party is one whose interest is affected by the courts
action in the litigation, and without whom no final resolution of the case is possible.
However, Mrs. Cerezos liability as an employer in an action for a quasi-delict is not
only solidary, it is also primary and direct. Foronda is not an indispensable party to
the final resolution of Tuazons action for damages against Mrs. Cerezo.
The responsibility of two or more persons who are liable for a quasi-delict is
solidary. Where there is a solidary obligation on the part of debtors, as in this case,
each debtor is liable for the entire obligation. Hence, each debtor is liable to pay for
the entire obligation in full. There is no merger or renunciation of rights, but only
mutual representation. Where the obligation of the parties is solidary, either of the
parties is indispensable, and the other is not even a necessary party because complete
relief is available from either. Therefore, jurisdiction over Foronda is not even
necessary as Tuazon may collect damages from Mrs. Cerezo alone.
Moreover, an employers liability based on a quasi-delict is primary and direct,

while the employers liability based on a delict is merely subsidiary. The words
primary and direct, as contrasted with subsidiary, refer to the remedy provided by
law for enforcing the obligation rather than to the character and limits of the
obligation. Although liability under Article 2180 originates from the negligent act of
the employee, the aggrieved party may sue the employer directly.
When an employee causes damage, the law presumes that the employer has
himself committed an act of negligence in not preventing or avoiding the damage. This
is the fault that the law condemns. While the employer is civilly liable in a subsidiary
capacity for the employees criminal negligence, the employer is also civilly liable
directly and separately for his own civil negligence in failing to exercise due diligence
in selecting and supervising his employee. The idea that the employers liability is
solely subsidiary is wrong.
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To hold the employer liable in a subsidiary capacity under a delict, the

aggrieved party must initiate a criminal action where the employees delict and
corresponding primary liability are established. If the present action proceeds from a
delict, then the trial courts jurisdiction over Foronda is necessary.
However, the present action is clearly for the quasi-delict of Mrs. Cerezo and
not for the delict of Foronda.
Thus, the petition was denied ordering the defendant Hermana Cerezo to pay
the plaintiff.
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Filcar Transport Services v. Espinas

Filcar Transport Services, Petitioner, versus Jose Espinas, Respondent.
BRION, J.:
FACTS: On November 22, 1998, at around 6:30 p.m., respondent Jose A. Espinas was
driving his car along Leon Guinto Street in Manila. Upon reaching the intersection of
Leon Guinto and President Quirino Streets, Espinas stopped his car. When the signal
light turned green, he proceeded to cross the intersection. He was already in the
middle of the intersection when another car, traversing President Quirino Street and
going to Roxas Boulevard, suddenly hit and bumped his car. As a result of the impact,
Espinas car turned clockwise. The other car escaped from the scene of the incident,
but Espinas was able to get its plate number.
After verifying with the Land Transportation Office, Espinas learned that the
owner of the other car, with plate number UCF-545, is Filcar.
Espinas sent several letters to Filcar and to its President and General Manager
Carmen Flor, demanding payment for the damages sustained by his car. On May 31,
2001, Espinas filed a complaint for damages against Filcar and Carmen Flor before
the Metropolitan Trial Court (MeTC) of Manila, and the case was raffled to Branch 13.
In the complaint, Espinas demanded that Filcar and Carmen Flor pay the amount
of P97,910.00, representing actual damages sustained by his car.
Filcar argued that while it is the registered owner of the car that hit and
bumped Espinas car, the car was assigned to its Corporate Secretary Atty. Candido
Flor, the husband of Carmen Flor. Filcar further stated that when the incident
happened, the car was being driven by Atty. Flors personal driver, Timoteo Floresca.
Atty. Flor, for his part, alleged that when the incident occurred, he was
attending a birthday celebration at a nearby hotel, and it was only later that night
when he noticed a small dent on and the cracked signal light of the car. On seeing the
dent and the crack, Atty. Flor allegedly asked Floresca what happened, and the driver
replied that it was a result of a hit and run while the car was parked in front of
Bogota on Pedro Gil Avenue, Manila.
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Filcar denied any liability to Espinas and claimed that the incident was not due
to its fault or negligence since Floresca was not its employee but that of Atty. Flor.
Filcar and Carmen Flor both said that they always exercised the due diligence required
of a good father of a family in leasing or assigning their vehicles to third parties.
ISSUE: Whether or not Filcar, as registered owner of the motor vehicle which figured
in an accident, may be held liable for the damages caused to Espinas.
HELD: Yes. The rationale for the rule that a registered owner is vicariously liable for
damages caused by the operation of his motor vehicle is explained by the principle
behind motor vehicle registration, which has been discussed by this Court
in Erezo, and cited by the CA in its decision:
The main aim of motor vehicle registration is to identify the

owner so that if any accident happens, or that any damage or
injury is caused by the vehicle on the public highways,
responsibility therefor can be fixed on a definite individual,
the registered owner. Instances are numerous where vehicles
running on public highways caused accidents or injuries to
pedestrians or other vehicles without positive identification of the
owner or drivers, or with very scant means of identification. It is to
forestall these circumstances, so inconvenient or prejudicial to the
public, that the motor vehicle registration is primarily ordained, in
the interest of the determination of persons responsible for
damages or injuries caused on public highways. [emphasis ours]
Thus, whether there is an employer-employee relationship between the

registered owner and the driver is irrelevant in determining the liability of the
registered owner who the law holds primarily and directly responsible for any accident,
injury or death caused by the operation of the vehicle in the streets and highways.
As explained by this Court in Erezo, the general public policy involved in motor
vehicle registration is the protection of innocent third persons who may have no
means of identifying public road malefactors and, therefore, would find it difficult if
not impossible to seek redress for damages they may sustain in accidents resulting
in deaths, injuries and other damages; by fixing the person held primarily and directly
liable for the damages sustained by victims of road mishaps, the law ensures that
relief will always be available to them.
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To identify the person primarily and directly responsible for the damages would
also prevent a situation where a registered owner of a motor vehicle can easily escape
liability by passing on the blame to another who may have no means to answer for the
damages caused, thereby defeating the claims of victims of road accidents. We take
note that some motor vehicles running on our roads are driven not by their registered
owners, but by employed drivers who, in most instances, do not have the financial
means to pay for the damages caused in case of accidents.
These same principles apply by analogy to the case at bar. Filcar should not be
permitted to evade its liability for damages by conveniently passing on the blame to
another party; in this case, its Corporate Secretary, Atty. Flor and his alleged driver,
Floresca. Following our reasoning in Equitable, the agreement between Filcar and Atty.
Flor to assign the motor vehicle to the latter does not bind Espinas who was not a
party to and has no knowledge of the agreement, and whose only recourse is to the
motor vehicle registration.
Neither can Filcar use the defenses available under Article 2180 of the Civil
Code - that the employee acts beyond the scope of his assigned task or that it
exercised the due diligence of a good father of a family to prevent damage - because
the motor vehicle registration law, to a certain extent, modified Article 2180 of the Civil
Code by making these defenses unavailable to the registered owner of the motor
vehicle. Thus, for as long as Filcar is the registered owner of the car involved in the
vehicular accident, it could not escape primary liability for the damages caused to
Espinas.
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FEB Leasing v. Sps. Baylon

FEB LEASING AND FINANCE CORPORATION (now BPI LEASING
CORPORATION), Petitioner, vs.SPOUSES SERGIO P. BAYLON and
MARITESS VILLENA-BAYLON, BG HAULER, INC., and MANUEL Y.
ESTILLOSO, Respondents.
CARPIO, J.:
FACTS: On 2 September 2000, an Isuzu oil tanker running along Del Monte
Avenue in Quezon City hit Loretta V. Baylon, daughter of respondent spouses
Sergio P. Baylon and MaritessVillena-Baylon. At the time of the accident, the
oil tanker was registered in the name of petitioner FEB Leasing and Finance
Corporation (petitioner). The oil tanker was leased to BG Hauler, Inc. and was
being driven by the latters driver, Manuel Y. Estilloso. The oil tanker was
insured8 by FGU Insurance Corp.
The accident took place at around 2:00 p.m. as the oil tanker was
coming from Balintawak and heading towards Manila. Upon reaching the
intersection of Bonifacio Street and Del Monte Avenue, the oil tanker turned
left. While the driver of the oil tanker was executing a left turn side by side with
another vehicle towards Del Monte Avenue, the oil tanker hit Loretta who was
then crossing Del Monte Avenue coming from Mayon Street. Due to the strong
impact, Loretta was violently thrown away about three to five meters from the
point of impact. She fell to the ground unconscious. She was brought for
treatment to the Chinese General Hospital where she remained in a coma until
her death two days after.
The spouses Baylon filed with the Regional Trial Court a Complaint for
damages against petitioner, BG Hauler, the driver, and FGU Insurance.
Petitioner filed its answer with compulsory counterclaim while FGU Insurance
filed its answer with counterclaim. On the other hand, BG Hauler filed its
answer with compulsory counterclaim and cross-claim against FGU Insurance.
Petitioner claimed that the spouses Baylon had no cause of action

against it because under its lease contract with BG Hauler, Petitioner was not
liable for any loss, damage, or injury that the leased oil tanker might cause.
Petitioner claimed that no employer-employee relationship existed between
Petitioner and the driver.
BG Hauler alleged that neither do the spouses Baylon have a cause of

action against it since the oil tanker was not registered in its name. BG Hauler
contended that the victim was guilty of contributory negligence in crossing the
street. BG Hauler claimed that even if its driver was at fault, BG Hauler
exercised the diligence of a good father of a family in the selection and
supervision of its driver. BG Hauler also contended that FGU Insurance is
obliged to assume all liabilities arising from the use of the insured oil tanker.
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FGU Insurance on the other hand, averred that the victim was guilty of
contributory negligence. FGU Insurance concluded that the spouses Baylon
could not expect to be paid the full amount of their claims. FGU Insurance
pointed out that the insurance policy covering the oil tanker limited any claim
to a maximum of P400,000.00.
During trial, FGU Insurance moved that (1) it be allowed to deposit in

court the amount of P450,000.00 in the joint names of the spouses Baylon,
petitioner, and BG Hauler and (2) it be released from further participating in
the proceedings. After the RTC granted the motion, FGU Insurance deposited in
the Branch Clerk of Court a check in the names of the spouses Baylon,
petitioner, and BG Hauler. The Regional Trial Court then released FGU
Insurance from its contractual obligations under the insurance policy.
The Regional Trial Court found that the death of Loretta was due to the
negligent act of the driver. The RTC held that BG Hauler, as the employer, was
solidarily liable with the driver. The RTC further held that petitioner, as the
registered owner of the oil tanker, was also solidarily liable.
Petitioner, BG Hauler, and the driver appealed the RTC Decision to the
Court of Appeals. The Court of Appeals affirmed the decision of the Regional
Trial Court. Two separate motions for reconsideration were filed by the
petitioner but the same were denied by the court.
ISSUE: Whether or not the registered owner of a financially leased vehicle

remains liable for loss, damage, or injury caused by the vehicle
notwithstanding an exemption provision in the financial lease contract.
HELD: Yes.Under Section 5 of Republic Act No. 4136, as amended, all motor
vehicles used or operated on or upon any highway of the Philippines must be
registered with the Bureau of Land Transportation (now Land Transportation
Office) for the current year. Furthermore, any encumbrances of motor vehicles
must be recorded with the Land Transportation Office in order to be valid
against third parties.
In accordance with the law on compulsory motor vehicle registration, this

Court has consistently ruled that, with respect to the public and third persons,
the registered owner of a motor vehicle is directly and primarily responsible for
the consequences of its operation regardless of who the actual vehicle owner
might be. Well-settled is the rule that the registered owner of the vehicle is
liable for quasi-delicts resulting from its use. Thus, even if the vehicle has
already been sold, leased, or transferred to another person at the time the
vehicle figured in an accident, the registered vehicle owner would still be liable
for damages caused by the accident. The sale, transfer or lease of the vehicle,
which is not registered with the Land Transportation Office, will not bind third
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persons aggrieved in an accident involving the vehicle. The compulsory motor

vehicle registration underscores the importance of registering the vehicle in the
name of the actual owner.
In this case, petitioner admits that it is the registered owner of the oil
tanker that figured in an accident causing the death of Loretta. As the
registered owner, it cannot escape liability for the loss arising out of negligence
in the operation of the oil tanker. Its liability remains even if at the time of the
accident, the oil tanker was leased to BG Hauler and was being driven by the
latters driver, and despite a provision in the lease contract exonerating the
registered owner from liability.
Petition denied.
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Filipinas Synthetic v. De Los Santos

FILIPINAS SYNTHETIC FIBER CORPORATION, Petitioner, vs. WILFREDO
DE LOS SANTOS, BENITO JOSE DE LOS SANTOS, MARIA ELENA DE LOS
SANTOS and CARMINA VDA. DE LOS SANTOS, Respondents.
(G.R. No. 152033, March 16, 2011, 2nd Division)
PERALTA, J.:
FACTS:On the night of September 30, 1984, Teresa Elena Legarda-de los
Santos (Teresa Elena), the wife of respondent Wilfredo de los Santos (Wilfredo),
performed at the Rizal Theater in Makati City, Metro Manila as a member of the
cast for the musical play, Woman of the Year.
On that same night, at the request of Wilfredo, his brother Armando de

los Santos (Armando), husband of respondent CarminaVda. De los Santos went
to the Rizal Theater to fetch Teresa Elena after the latter's performance. He
drove a 1980 Mitsubishi Galant Sigma, a company car assigned to Wilfredo.
Two other members of the cast of Woman of the Year, namely, Annabel
Vilches (Annabel) and Jerome Macuja, joined Teresa Elena in the Galant
Sigma.
Around 11:30 p.m., while travelling along the Katipunan Road (White
Plains), the Galant Sigma collided with the shuttle bus owned by petitioner and
driven by Alfredo S. Mejia (Mejia), an employee of petitioner. The Galant Sigma
was dragged about 12 meters from the point of impact, across the White Plains
Road landing near the perimeter fence of Camp Aguinaldo, where the Galant
Sigma burst into flames and burned to death beyond recognition all four
occupants of the car.
A criminal charge for reckless imprudence resulting in damage to

property with multiple homicide was brought against Mejia, which was decided
in favor of Mejia. The family of Annabel filed a civil case against Petitioner and
Mejia before the Regional Trial Court of Quezon City. Wilfredo and Carmina,
joined by their minor children, also filed separate actions for damages against
petitioner and Mejia. The said cases were eventually consolidated.
After trial on the merits, the Regional Trial Court decided in favor of the
Respondents.
After the denial of the motion for reconsideration, petitioner appealed to

the Court Appeals, and the latter affirmed the decision of the Regional Trial
Court.
The subsequent motion for reconsideration was also denied.

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Hence, the present petition.
ISSUE: Whether or Petitioner FILSYN exercised the due diligence of a good

father of a family in the selection and supervision of its employees.
HELD: No. Under Article 2180 of the New Civil Code, when an injury is caused
by the negligence of the employee, there instantly arises a presumption of law
that there was negligence on the part of the master or employer either in the
selection of the servant or employee, or in supervision over him after selection
or both. The liability of the employer under Article 2180 is direct and
immediate; it is not conditioned upon prior recourse against the negligent
employee and a prior showing of the insolvency of such employee. Therefore, it
is incumbent upon the private respondents (in this case, the petitioner) to
prove that they exercised the diligence of a good father of a family in the
selection and supervision of their employee.
In the present case, Filsyn merely presented evidence on the alleged care
it took in the selection or hiring of Mejia way back in 1974 or ten years before
the fatal accident. Neither did Filsyn present any proof of the existence of the
rules and regulations governing the conduct of its employees. It is significant to
note that in employing Mejia, who is not a high school graduate, Filsyn waived
its long-standing policy requirement of hiring only high school graduates. It
insufficiently failed to explain the reason for such waiver other than their
allegation of Mejia's maturity and skill for the job.
Petition is DENIED.
Viron v. De Los Santos
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VIRON TRANSPORTATION CO., INC., petitioner, vs. ALBERTO DELOS

SANTOS y NATIVIDAD and RUDY SAMIDAN, respondents.
(G.R. No. 138296. November 22, 2000, 3rd Division)
GONZAGA-REYES, J.:
FACTS:Defendant Alberto delos Santos was the driver of defendant Rudy

Samidan of the latters vehicle, a Forward Cargo Truck. At about 12:30 in the
afternoon of August 16, 1993, he was driving said truck along the National
Highway within the vicinity of Barangay Parsolingan, Gerona, Tarlac. The
Viron bus, driven by Wilfredo Villanueva y Gaudia, tried to overtake his truck,
and he swerved to the right shoulder of the highway, but as soon as he
occupied the right lane of the road, the cargo truck which he was driving was
hit by the Viron bus on its left front side, as the bus swerved to his lane to
avoid an incoming bus on its opposite direction. With the driver of another
truck dealing likewise in vegetables, Dulnuan, the two of them and the driver of
the Viron bus proceeded to report the incident to the Gerona Police Station. A
Vehicular Traffic Report was prepared by the police, with a Sketch of the
relative positions of the circumstances leading to the vehicular collision.
After trial, the lower court dismissed Petitioners complaint and

sustained the private Respondents counterclaim for damages.
Not satisfied therewith, petitioner appealed to the Court of Appeals which

affirmed in toto the decision of the lower court. Its motion for reconsideration
having been denied, petitioner brought the case to the Supreme Court.
ISSUE:Whether or not the lower courts erred in finding the Petitioner liable for
damages when the counterclaim failed to state a cause of action for there is no
averment whatsoever therein that said petitioner failed to exercise due diligence
of a good father of a family in the selection and supervision of its drivers or
employees.
HELD: No. The imputed error was without merit. Petitioner contends that
private Respondents counterclaim failed to state a cause of action for there is
no averment therein that petitioner failed to exercise the diligence of a good
father of a family in the selection and supervision of its drivers or employees. It
is to be noted that petitioner Viron Transportation Co., Inc., as the registered
owner of the bus involved in the subject vehicular accident originally brought
the action for damages against private respondents. Private respondents as
defendants in the court a quo denied any liability and filed instead a
counterclaim for damages claiming that it was the driver of the bus who was at
fault in the operation of the bus. We find that the counterclaim of private
respondents alleges the ultimate facts constituting their cause of action. It is
not necessary to state that petitioner was negligent in the supervision or
selection of its employees, as its negligence is presumed by operation of law.
The liability of the employer was explained in a case thus:
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As employers of the bus driver, the petitioner is, under Article 2180 of the Civil
Code, directly and primary liable for the resulting damages. The presumption
that they are negligent flows from the negligence of their employee. That
presumption, however, is only juristantum, not juriset de jure. Their only
possible defense is that they exercised all the diligence of a good father of a
family to prevent the damage. Article 2180 states that, the obligation imposed
by Article 2176 is demandable not only for ones own acts or omissions, but
also for those of persons for whom one is responsible.
Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even though
the former are not engaged in any business or industry.
Petition is denied.
Mercury Drug v. Baking
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MERCURY DRUG CORPORATION, Petitioner, vs.

SEBASTIAN M. BAKING, Respondent.
(G.R. No. 156037, May 28, 2007, 1st Division)
SANDOVAL-GUTIERREZ, J.:
FACTS:On November 25, 1993, Sebastian M. Baking, respondent, went to the

clinic of Dr. Cesar Sy for a medical check-up. On the following day, after
undergoing an ECG, blood, and hematology examinations and urinalysis, Dr.
Sy found that respondents blood sugar and triglyceride were above normal
levels. Dr. Sy then gave respondent two medical prescriptions Diamicron for
his blood sugar and Benalize tablets for his triglyceride.
Respondent then proceeded to petitioner Mercury Drug Corporation

(Alabang Branch) to buy the prescribed medicines. However, the saleslady
misread the prescription for Diamicron as a prescription for Dormicum. Thus,
what was sold to respondent was Dormicum, a potent sleeping tablet.
Unaware that what was given to him was the wrong medicine,
respondent took one pill of Dormicum on three consecutive days.
On the third day he took the medicine, respondent figured in a vehicular

accident. The car he was driving collided with the car of one Josie Peralta.
Respondent fell asleep while driving. He could not remember anything about
the collision nor felt its impact.
Suspecting that the tablet he took may have a bearing on his physical
and mental state at the time of the collision, respondent returned to Dr. Sys
clinic. Upon being shown the medicine, Dr. Sy was shocked to find that what
was sold to respondent was Dormicum, instead of the prescribed Diamicron.
Thus, on April 14, 1994, respondent filed with the Regional Trial Court
(RTC), of Quezon City a complaint for damages against petitioner.
After hearing, the trial court rendered its decision in favor of respondent.
On appeal, the Court of Appeals, in its Decision, affirmed in toto the

Regional Trial Court judgment. Petitioner filed a motion for reconsideration but
it was denied.
ISSUE: Whether petitioner was negligent, and if so, whether such negligence
was the proximate cause of respondents accident.
HELD: Yes, Proximate cause is defined as any cause that produces injury in a
natural and continuous sequence, unbroken by any efficient intervening cause,
such that the result would not have occurred otherwise. Proximate cause is
determined from the facts of each case, upon a combined consideration of logic,
common sense, policy, and precedent.
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Here, the vehicular accident could not have occurred had petitioners
employee been careful in reading Dr. Sys prescription. Without the potent
effects of Dormicum, a sleeping tablet, it was unlikely that respondent would
fall asleep while driving his car, resulting in a collision.
Complementing Article 2176 is Article 2180 of the same Code which

states:
ART. 2180. The obligation imposed by Article 2176 is demandable not

only for ones own acts or omissions, but also for those of persons for whom
one is responsible.
The owners and managers of an establishment or enterprise are likewise

responsible for damages caused by their employees in the service of the
branches in which the latter are employed or on the occasion of their functions.
The responsibility treated of in this article shall cease when the persons
herein mentioned prove that they observed the diligence of a good father of a
family to prevent damage.
It is thus clear that the employer of a negligent employee is liable for the
damages caused by the latter. When an injury is caused by the negligence of an
employee, there instantly arises a presumption of the law that there has been
negligence on the part of the employer, either in the selection of his employee
or in the supervision over him, after such selection. The presumption, however,
may be rebutted by a clear showing on the part of the employer that he has
exercised the care and diligence of a good father of a family in the selection and
supervision of his employee.6 Here, petitioner's failure to prove that it exercised
the due diligence of a good father of a family in the selection and supervision of
its employee will make it solidarily liable for damages caused by the latter.
Petition denied.
Safeguard Security v. Tangco
Cita
SAFEGUARD SECURITY AGENCY, INC., and ADMER PAJARILLO,

petitioners, vs. LAURO TANGCO, VAL TANGCO, VERN LARRY TANGCO,
VAN LAURO TANGCO, VON LARRIE TANGCO, VIEN LARI TANGCO and
VIVIEN LAURIZ TANGCO, respondent.
AUSTRIA-MARTINEZ, J.:
FACTS:On November 3, 1997, at about 2:50 p.m., Evangeline Tangco

(Evangeline) went to Ecology Bank, Katipunan Branch, Quezon City, to renew
her time deposit per advise of the bank's cashier as she would sign a specimen
card. Evangeline, a duly licensed firearm holder with corresponding permit to
carry the same outside her residence, approached security guard Pajarillo, who
was stationed outside the bank, and pulled out her firearm from her bag to
deposit the same for safekeeping. Suddenly, Pajarillo shot Evangeline with his
service shotgun hitting her in the abdomen instantly causing her death.
LauroTangco, Evangeline's husband, together with his six minor children

(respondents) filed with the Regional Trial Court (RTC) of Quezon City, a
criminal case of Homicide against Pajarillo. Respondents reserved their right to
file a separate civil action in the said criminal case. The Regional Trial Court
subsequently convicted Pajarillo of Homicide.
On appeal to the Court of Appeals, the Regional Trial Court decision was
affirmed with modification.
Petitioners filed their Motion for Reconsideration which the CA denied.
Hence this petition.
ISSUE: Whether Safeguard should be held solidarily liable for the damages
awarded to respondents.
HELD: Yes. The responsibility treated of in this Article 2176 shall cease when
the persons herein mentioned prove that they observed all the diligence of a
good father of a family to prevent damage.
As the employer of Pajarillo, Safeguard is primarily and solidarily liable

for the quasi-delict committed by the former. Safeguard is presumed to be
negligent in the selection and supervision of his employee by operation of law.
This presumption may be overcome only by satisfactorily showing that the
employer exercised the care and the diligence of a good father of a family in the
selection and the supervision of its employee.
In the selection of prospective employees, employers are required to

examine them as to their qualifications, experience, and service records.35 On
the other hand, due diligence in the supervision of employees includes the
formulation of suitable rules and regulations for the guidance of employees and
the issuance of proper instructions intended for the protection of the public
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and persons with whom the employer has relations through his or its
employees and the imposition of necessary disciplinary measures upon
employees in case of breach or as may be warranted to ensure the performance
of acts indispensable to the business of and beneficial to their employer. To
this, we add that actual implementation and monitoring of consistent
compliance with said rules should be the constant concern of the employer,
acting through dependable supervisors who should regularly report on their
supervisory functions.36 To establish these factors in a trial involving the issue
of vicarious liability, employers must submit concrete proof, including
documentary evidence.
It was found that Safeguard had exercised the diligence in the selection
of Pajarillo since the record shows that Pajarillo underwent a psychological and
neuro-psychiatric evaluation conducted by the St. Martin de Porres Center
where no psychoses ideations were noted, submitted a certification on the Pre-
licensing training course for security guards, as well as police and NBI
clearances.
However this court ruled that Safeguard fell short of the diligence
required in the supervision of its employee, particularly Pajarillo.
Petition denied.
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Pleyto v. Lomboy
ERNESTO PLEYTO and PHILIPPINE RABBIT BUS LINES,
INC., petitioners, vs. MARIA D. LOMBOY and CARMELA
LOMBOY, respondents.
(G.R. No. 148737, June 16,2004, 2nd Division)
QUISUMBING, J.:
FACTS:Petitioner Philippine Rabbit Bus Lines, Inc. (PRBL), with principal office
at Tarlac City, Tarlac, is a public carrier, engaged in carrying passengers and
goods for a fare. It serviced various routes in Central and Northern Luzon.
Petitioner Ernesto Pleyto was a bus driver employed by PRBL at the time of the
incident in question.
Respondent Maria D. Lomboy of Calasiao, Pangasinan, is the surviving
spouse of the late Ricardo Lomboy, who died in Pasolingan, Gerona, Tarlac, in
a vehicular accident at around 11:30 a.m. of May 16, 1995. The accident was a
head-on collision between the PRBL bus driven by petitioner Pleyto and the car
where Ricardo was a passenger. Respondent Carmela Lomboy is the eldest
daughter of Ricardo and Maria Lomboy. Carmela suffered injuries requiring
hospitalization in the same accident which resulted in her fathers death.
On November 29, 1995, herein respondents, as pauper-litigants, filed an
action for damages against PRBL and its driver, Pleyto, with the Regional Trial
Court of Dagupan City. In their complaint, the Lomboys prayed that they be
indemnified for the untimely death of Ricardo Lomboy, his lost earnings, the
medical and hospitalization expenses of Carmela, and moral damages.
The Regional Trial Court found Pleyto negligent and lacking in precaution
when he overtook the tricycle with complete disregard of the approaching car in
the other lane.
Petitioners appealed the judgment of the trial court to the Court of Appeals.
The appellate court, however, affirmed the decision of the trial court, with
modification in the award of damages.
Petitioners then moved for reconsideration, but the appellate court denied
it.
ISSUE: Whether or not petitioner PRBL is liable for the negligence of driver
Pleyto.
HELD: Yes.Under Article 2180, when an injury is caused by the negligence of a

servant or an employee, the master or employer is presumed to be negligent
either in the selection or in the supervision of that employee. This presumption
may be overcome only by satisfactorily showing that the employer exercised the
care and the diligence of a good father of a family in the selection and the
supervision of its employee.
In fine, when the employee causes damage due to his own negligence while
performing his own duties, there arises the juristantumpresumption that the
employer is negligent, rebuttable only by proof of observance of the diligence of
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a good father of a family. Thus, in the selection of prospective employees,

employers are required to examine them as to their qualifications, experience
and service records. With respect to the supervision of employees, employers
must formulate standard operating procedures, monitor their implementation
and impose disciplinary measures for breaches thereof. These facts must be
shown by concrete proof, including documentary evidence.
In the present case, petitioners presented several documents in evidence to
show the various tests and pre-qualification requirements imposed upon
petitioner Pleyto before his hiring as a driver by PRBL. However, no
documentary evidence was presented to prove that petitioner PRBL exercised
due diligence in the supervision of its employees, including Pleyto.
Petition Denied.
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SYKL VS. BEGASA

ERNESTO SYKI, petitioner, vs. SALVADOR BEGASA, respondent.
(GR No. 149149, October 23, 2003, 3rd Division)
CORONA, J.:
FACTS:Respondent Salvador Begasa and his three companions flagged down a

passenger jeepney driven by Joaquin Espina and owned by Aurora Pisuena.
While respondent was boarding the passenger jeepney (his right foot already
inside while his left foot still on the boarding step of the passenger jeepney), a
truck driven by Elizalde Sablayan and owned by petitioner Ernesto Syki
bumped the rear end of the passenger jeepney. Respondent fell and fractured
his left thigh bone. Respondent filed a complaint for damages for breach of
common carriers contractual obligations and quasi-delict against Aurora
Pisuena, the owner of the passenger jeepney;, herein petitioner Ernesto Syki,
theowner of the truck;, and Elizalde Sablayan, the driver of the truck. After
hearing, the trial court dismissed the complaint against Aurora Pisuena, the
owner and operator of the passenger jeepney, but ordered petitioner Ernesto
Syki and his truck driver, Elizalde Sablayan, to pay respondent Salvador
Begasa, jointly and severally
ISSUES:
1. Whether or not petitioner is liable for the act of his employee.
2. Whether he exercised the diligence of a good father of a family.
HELD:
1. Article 2180 of the Civil Code provides: Employers shall be liable for the
damages caused by their employees and household helpers acting within the
scope of their assigned tasks, even though the former are not engaged in any
business or industry. From the above provision, when an injury is caused by
the negligence of an employee, a legal presumption instantly arises that the
employer was negligent, either or both, in the selection and/or supervision of
his said employee duties. The said presumption may be rebutted only by a
clear showing on the part of the employer that he had exercised the diligence of
a good father of a family in the selection and supervision of his employee. If the
employer successfully overcomes the legal presumption of negligence, he is
relieved of liability. In other words, the burden of proof is on the employer.2.
The question is: how does an employer prove that he had indeed exercised the
diligence of a good father of a family in the selection and supervision of his
employee. Making proof in its or his case, it is paramount that the best and
most complete evidence is formally entered. In the case at bar, while there is no
rule which requires that testimonial evidence, to hold sway, must be
corroborated by documentary evidence, inasmuch as the witnesses testimonies
dwelt on mere generalities, we cannot consider the same as sufficiently
persuasive proof that there was observance of due diligence in the selection
and supervision of employees. Petitioners attempt to prove its
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deligentissimipatrisfamilias in the selection and supervision of employees

through oral evidence must fail as it was unable to buttress the same with any
other evidence, object or documentary, which might obviate the apparentbiased
nature of the testimony. In the selection of prospective employees, employers
are required to examine them as to their qualifications, experience, and service
records. On the other hand, with respect to the supervision of employees,
employers should formulate standard operating procedures, monitor their
implementation, and impose disciplinary measures for breaches thereof. To
establish these factors in a trial involving the issue of vicarious liability,
employers must submit concrete proof, including documentary evidence. The
employer must not merely present testimonial evidence to prove that he had
observed the diligence of a good father of a family in the selection and
supervision of his employee, but he must also support such testimonial
evidence with concrete or documentary evidence. The reason for this is to
obviate the biased nature of the employers testimony or that of his witnesses.
In this case, petitioners evidence consisted entirely of testimonial evidence. He
testified that before he hired ElizaldeSablayan, he requiredhim to submit a
police clearance in order to determine if he was ever involved in any vehicular
accident. He also required Sablayan to undergoa driving test with conducted by
his mechanic, Esteban Jaca. Petitioner claimed that he, in fact, accompanied
Sablayan during the driving test and that during the test, Sablayan was taught
to read and understand traffic signs like Do Not Enter, One Way, Left
Turn, and Right Turn. Petitioners mechanic, Esteban Jaca, on the other
hand, testified that Sablayan passed the driving test and had never figured in
any vehicular accident except the one in question. He also testified that he
maintained in good condition all the trucks of petitioner by checking the
brakes, horns and tires thereof before leaving for providing hauling
services.Petitioner, however, never presented the alleged police clearance given
to him by Sablayan, nor the results of Sablayans driving test. Petitioner also
did not present records of the regular inspections that his mechanic allegedly
conducted. In sum, the sole and proximate cause of the accident was the
negligence of petitioners driver who, as found by the lower courts, did not slow
down even when he was already approaching a busy intersection within the
city proper. The passenger jeepney had long stopped to pick up respondent and
his three companions and, in fact, respondent was already partly inside the
jeepney, when petitioners driver bumped the rear end of rear-ended it. Since
the negligence of petitioners driver was the sole and proximate cause of the
accident, in the present case, petitioner is liable, under Article 2180 of the Civil
Code, to pay damages to respondent Begasa for the injuries sustained by latter.
Petition is Denied.
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Yambao v. Zuniga
CECILIA YAMBAO, petitioner, vs. MELCHORITA C. ZUIGA, LEOVIGILDO
C. ZUIGA, REGINALDO C. ZUIGA, AND THE MINORS, HERMINIGILDO C.
ZUIGA, JR., AND LOVELY EMILY C. ZUIGA both represented by their
legal guardian, the aforenamed MELCHORITA C. ZUIGA, respondents.
(G.R. No. 146173. December 11, 2003, 2nd Division)
QUISUMBING, J.:
FACTS:Petitioner Cecilia Yambao is the registered owner of Lady Cecil and

Rome Trans passenger bus, with a public transport franchise to ply the
Novaliches-via Quirino-Alabang route.
The respondents are the legal heirs of the late HerminigildoZuiga.

MelchoritaZuiga is the surviving spouse, while Leovigildo, Reginaldo,
Herminigildo, Jr., and Lovely Emily are their children.
At around 3:30 p.m. of May 6, 1992, the bus owned by the petitioner was
being driven by her driver, one Ceferino G. Venturina along the northbound
lane of Epifaniodelos Santos Avenue (EDSA), within the vicinity of Bagong
Barrio, Kalookan City. With Venturina was the bus conductor, Fernando
Dumaliang. Suddenly, the bus bumped HerminigildoZuiga, a pedestrian.
Such was the force of the impact that the left side of the front windshield of the
bus was cracked. Zuiga was rushed to the Quezon City General Hospital
where he was given medical attention, but due to the massive injuries
sustained, he succumbed shortly thereafter.
Private respondents, as heirs of the victim, filed a Complaint against

petitioner and her driver, Venturina, for damagesat the Regional Trial Court of
Malolos City. The complaint essentially alleged that Venturina drove the bus in
a reckless, careless and imprudent manner, in violation of traffic rules and
regulations, without due regard to public safety, thus resulting in the victims
premature death.
The trial court rendered judgment in favor of the plaintiffs and against
the defendants ordering the defendants jointly and severally, with Plaridel
Surety & Insurance Co., and Times Surety & Insurance Co. Inc. to the extent of
their respective liabilities under their respective insurance policies to pay the
herein plaintiffs.
Dissatisfied, Yambao filed an appeal with the Court of Appeals. On

September 8, 2000, the Court of Appeals affirmed the decision of the Regional
Trial Court.
Yambao then duly moved for reconsideration, but her motion was denied
for want of merit.
Hence, this petition for review.
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ISSUE:Whether petitioner exercised the diligence of a good father of a family in

the selection and supervision of her employees, thus absolving her from any
liability.
HELD:No.The diligence of a good father means diligence in the selection and

supervision of employees. Thus, when an employee, while performing his
duties, causes damage to persons or property due to his own negligence, there
arises the juristantum presumption that the employer is negligent, either in the
selection of the employee or in the supervision over him after the selection. For
the employer to avoid the solidary liability for a tort committed by his
employee, an employer must rebut the presumption by presenting adequate
and convincing proof that in the selection and supervision of his employee, he
or she exercises the care and diligence of a good father of a family. In the
instant case, we find that petitioner has failed to rebut the presumption of
negligence on her part.
Petitioners claim that she exercised due diligence in the selection and
supervision of her driver, Venturina, deserves but scant consideration. Her
allegation that before she hired Venturina she required him to submit his
drivers license and clearances is worthless, in view of her failure to offer in
evidence certified true copies of said license and clearances. Bare allegations,
unsubstantiated by evidence, are not equivalent to proof under the rules of
evidence. Moreover, as the court a quo aptly observed, petitioner contradicts
herself. She declared that Venturina applied with her sometime in January
1992 and she then required him to submit his license and clearances.
However, the record likewise shows that she did admit that Venturina
submitted the said requirements only on May 6, 1992, or on the very day of the
fatal accident itself. In other words, petitioners own admissions clearly and
categorically show that she did not exercise due diligence in the selection of her
bus driver.
In any case, assuming arguendo that Venturina did submit his license
and clearances when he applied with petitioner in January 1992, the latter still
fails the test of due diligence in the selection of her bus driver. For an employer
to have exercised the diligence of a good father of a family, he should not be
satisfied with the applicants mere possession of a professional drivers license;
he must also carefully examine the applicant for employment as to his
qualifications, his experience and record of service.Petitioner failed to present
convincing proof that she went to this extent of verifying Venturinas
qualifications, safety record, and driving history. The presumption juristantum
that there was negligence in the selection of her bus driver, thus, remains
unrebutted.
Nor did petitioner show that she exercised due supervision over
Venturina after his selection. For as pointed out by the Court of Appeals,
petitioner did not present any proof that she drafted and implemented training
programs and guidelines on road safety for her employees. In fact, the record
is bare of any showing that petitioner required Venturina to attend periodic
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seminars on road safety and traffic efficiency. Hence, petitioner cannot claim
exemption from any liability arising from the recklessness or negligence of
Venturina.
In sum, petitioners liability to private respondents for the negligent and

imprudent acts of her driver, Venturina, under Article 2180 of the Civil Code is
both manifest and clear. Petitioner, having failed to rebut the legal
presumption of negligence in the selection and supervision of her driver, is
responsible for damages, the basis of the liability being the relationship of pater
familias or on the employers own negligence.
The instant petition is DENIED
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Mindanao Terminal v. Phoenix

MINDANAO TERMINAL AND BROKERAGE SERVICE, INC. Petitioner,
vs. PHOENIX ASSURANCE COMPANY OF NEW YORK/MCGEE & CO., INC.,
Respondent.
(G.R. No. 162467, May 8, 2009, 2nd Division)
FACTS:Del Monte Philippines, Inc. (Del Monte) contracted petitioner Mindanao

Terminal and Brokerage Service, Inc. (Mindanao Terminal), a stevedoring
company, to load and stow a shipment of 146,288 cartons of fresh green
Philippine bananas and 15,202 cartons of fresh pineapples belonging to Del
Monte Fresh Produce International, Inc. (Del Monte Produce) into the cargo
hold of the vessel M/V Mistrau. The vessel was docked at the port of Davao
City and the goods were to be transported by it to the port of Inchon, Korea in
favor of consignee Taegu Industries, Inc. Del Monte Produce insured the
shipment under an "open cargo policy" with private respondent Phoenix
Assurance Company of New York (Phoenix), a non-life insurance company, and
private respondent McGee & Co. Inc. (McGee), the underwriting manager/agent
of Phoenix.
Mindanao Terminal loaded and stowed the cargoes aboard the M/V
Mistrau. The vessel set sail from the port of Davao City and arrived at the port
of Inchon, Korea. It was then discovered upon discharge that some of the cargo
was in bad condition. The Marine Cargo Damage Surveyor of Incok Loss and
Average Adjuster of Korea, through its representative Byeong Yong Ahn
(Byeong), surveyed the extent of the damage of the shipment. In a survey
report, it was stated that 16,069 cartons of the banana shipment and 2,185
cartons of the pineapple shipment were so damaged that they no longer had
commercial value.
Del Monte Produce filed a claim under the open cargo policy for the
damages to its shipment. McGees Marine Claims Insurance Adjuster evaluated
the claim and recommended that payment in the amount of $210,266.43 be
made. A check for the recommended amount was sent to Del Monte Produce;
the latter then issued a subrogation receipt to Phoenix and McGee.
Phoenix and McGee instituted an action for damages against Mindanao

Terminal in the Regional Trial Court (RTC) of Davao City. After trial, the
Regional Trial Court held that the only participation of Mindanao Terminal was
to load the cargoes on board the M/V Mistrau under the direction and
supervision of the ships officers, who would not have accepted the cargoes on
board the vessel and signed the foremans report unless they were properly
arranged and tightly secured to withstand voyage across the open seas.
Accordingly, Mindanao Terminal cannot be held liable for whatever happened
to the cargoes after it had loaded and stowed them. Moreover, citing the survey
report, it was found by the Regional Trial Court that the cargoes were damaged
on account of a typhoon which M/V Mistrau had encountered during the
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voyage. It was further held that Phoenix and McGee had no cause of action
against Mindanao Terminal because the latter, whose services were contracted
by Del Monte, a distinct corporation from Del Monte Produce, had no contract
with the assured Del Monte Produce. The RTC dismissed the complaint and
awarded the counterclaim of Mindanao Terminal in the amount of P83,945.80
as actual damages and P100,000.00 as attorneys fees.9 The actual damages
were awarded as reimbursement for the expenses incurred by Mindanao
Terminals lawyer in attending the hearings in the case wherein he had to
travel all the way from Metro Manila to Davao City.
Phoenix and McGee appealed to the Court of Appeals. The appellate

court reversed and set aside the decision of the Regional Trial Court.
Mindanao Terminal filed a motion for reconsideration, which the Court of

Appeals.
Hence, the present petition for review.
ISSUE:Whether or not petitioner Mindanao Terminal is liable to pay for

damages.
HELD:No.It was established that Mindanao Terminal loaded and stowed the
cargoes of Del Monte Produce aboard the M/V Mistrau in accordance with the
stowage plan, a guide for the area assignments of the goods in the vessels
hold, prepared by Del Monte Produce and the officers of M/V Mistrau. The
loading and stowing was done under the direction and supervision of the ship
officers. The vessels officer would order the closing of the hatches only if the
loading was done correctly after a final inspection. The said ship officers would
not have accepted the cargoes on board the vessel if they were not properly
arranged and tightly secured to withstand the voyage in open seas. They would
order the stevedore to rectify any error in its loading and stowing. A foremans
report, as proof of work done on board the vessel, was prepared by the
checkers of Mindanao Terminal and concurred in by the Chief Officer of M/V
Mistrau after they were satisfied that the cargoes were properly loaded.
The petition is GRANTED.
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YHT Realty v. CA
YHT REALTY CORPORATION, ERLINDA LAINEZ and ANICIA
PAYAM, petitioners, versus THE COURT OF APPEALS and MAURICE
McLOUGHLIN, respondents.
TINGA, J.:
FACTS: Private respondent McLoughlin, an Australian businessman-

philanthropist, used to stay at Sheraton Hotel during his trips to the
Philippines prior to 1984 when he met Tan. Tan befriended McLoughlin by
showing him around, introducing him to important people, accompanying him
in visiting impoverished street children and assisting him in buying gifts for the
children and in distributing the same to charitable institutions for poor
children. Tan convinced McLoughlin to transfer from Sheraton Hotel to
Tropicana owned by YHT Realty Corporation and where Lainez, Payam and
Danilo Lopez were employed. Lopez served as manager of the hotel while Lainez
and Payam had custody of the keys for the safety deposit boxes of Tropicana.
Tan took care of McLoughlin's booking at the Tropicana where he started
staying during his trips to the Philippines from December 1984 to September
1987.
On 30 October 1987, McLoughlin arrived from Australia and registered
with Tropicana. He rented a safety deposit box as it was his practice to rent a
safety deposit box every time he registered at Tropicana in previous trips. As a
tourist, McLoughlin was aware of the procedure observed by Tropicana relative
to its safety deposit boxes. The safety deposit box could only be opened through
the use of two keys, one of which is given to the registered guest, and the other
remaining in the possession of the management of the hotel. When a registered
guest wished to open his safety deposit box, he alone could personally request
the management who then would assign one of its employees to accompany the
guest and assist him in opening the safety deposit box with the two keys.
On 12 December 1987, before leaving for a brief trip to Hongkong,
McLoughlin opened his safety deposit box with his key and with the key of the
management and took therefrom some of his money. When he arrived in
Hongkong, he noticed that some of his money is missing which he took in the
deposit bank but he assumed it due to bad accounting. When he returned
again in Manila, he deposit again his money and took it when he when he went
to Australia. He noticed again that some of his money is missing including
jewelry. Upon returning to Manila, he registered again in the same hotel and
deposited his belonging and inquired to the Hotel and Tan whether they found
his money and jewelry which was missing but they said no one found such
items. After few days of staying, he requested the petitioner to open his deposit
box and again some of his money was missing. He confronted Tan and the
latter admit stealing the money with the aid of the petitioners. He then
complained to the management and consulted his lawyer regarding the matter.
He then imposed that it should be paid by the management but the hotel
refused.
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After investigation done by the police, the respondent sued the petitioner
for reimbursement and damages which the lower court granted. So, this
petition is.
ISSUE: Whether or not the employee including the hotel will be liable in spite of
written agreement that the employer should not be liable as stipulated in the
safety deposit contract.
HELD: Yes. The employee including the hotel who employed them should be
solidarily liable as in accordance to the provision of Article 2180 of the Civil
Code which state that the owners and managers of an establishment or
enterprise are likewise responsible for damages caused by their employees in
the service of the branches in which the latter are employed or on the occasion
of their functions. The stipulation stating that, To release and hold free and
blameless TROPICANA APARTMENT HOTEL from any liability arising from any
loss in the contents and/or use of the said deposit box for any cause
whatsoever, including but not limited to the presentation or use thereof by any
other person should the key be lost., is void. This is in accordance to Article
2003 of the Civil code which state that The hotel-keeper cannot free himself
from responsibility by posting notices to the effect that he is not liable for the
articles brought by the guest. Any stipulation between the hotel-keeper and the
guest whereby the responsibility of the former as set forth in Articles 1998 to
2001 is suppressed or diminished shall be void.
The Supreme Court then affirmed the decision of the lower court and
ordered that the petitioners are jointly and severally liable with the loss of the
money and the expenses of the respondent in connection with the case. Moral
damage also was awarded because his reputation was tainted due to the filing
of the case as he is a known philanthropist and businessman.
Ramos v. CA
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ROGELIO E. RAMOS and ERLINDA RAMOS, in their own behalf and as

natural guardians of the minors, ROMMEL RAMOS, ROY RODERICK
RAMOS and RON RAYMOND RAMOS, petitioners, versus COURT OF
APPEALS, DELOS SANTOS MEDICAL CENTER, DR. ORLINO HOSAKA and
DRA. PERFECTA GUTIERREZ, respondents.
(G.R. No. 124354 December 29, 1999 1st Division)
(G.R. No. 124354 April 11, 2002 1st Division)
KAPUNAN, J.:
FACTS: Sometime in 1985, petitioner Erlinda Ramos, after seeking

professional medical help, was advised to undergo an operation for the removal
of a stone in her gall bladder (cholecystectomy). She was referred to Dr. Hosaka,
a surgeon, who agreed to perform the operation on her. The operation was
scheduled for June 17, 1985 at 9:00 in the morning at private respondent De
Los Santos Medical Center (DLSMC). Since neither petitioner Erlinda nor her
husband, petitioner Rogelio, knew of any anesthesiologist, Dr. Hosaka
recommended to them the services of Dr. Gutierrez.
Petitioner Erlinda was admitted to the DLSMC the day before the
scheduled operation. By 7:30 in the morning of the following day, petitioner
Erlinda was already being prepared for operation. Upon the request of
petitioner Erlinda, her sister-in-law, Herminda Cruz, who was then Dean of the
College of Nursing at the Capitol Medical Center, was allowed to accompany
her inside the operating room.
At around 9:30 in the morning, Dr. Hosaka had not yet arrived so Dr.
Gutierrez tried to get in touch with him by phone. Thereafter, Dr. Gutierrez
informed Cruz that the operation might be delayed due to the late arrival of Dr.
Hosaka. In the meantime, the patient, petitioner Erlinda said to Cruz,
"Mindy, inip na inip na ako, ikuha mo ako ng ibang Doctor."
By 10:00 in the morning, when Dr. Hosaka was still not around,
petitioner Rogelio already wanted to pull out his wife from the operating room.
He met Dr. Garcia, who remarked that he was also tired of waiting for Dr.
Hosaka. Dr. Hosaka finally arrived at the hospital at around 12:10 in the
afternoon, or more than three (3) hours after the scheduled operation.
Cruz, who was then still inside the operating room, heard about Dr. Hosakas
arrival. While she held the hand of Erlinda, Cruz saw Dr. Gutierrez trying to
intubate the patient. Cruz heard Dr. Gutierrez utter: "ang hirap ma-intubate
nito, mali yata ang pagkakapasok. O lumalaki ang tiyan." Cruz noticed a bluish
discoloration of Erlindas nailbeds on her left hand. She (Cruz) then heard Dr.
Hosaka instruct someone to call Dr. Calderon, another anesthesiologist. When
he arrived, Dr. Calderon attempted to intubate the patient. The nailbeds of the
patient remained bluish, thus, she was placed in a trendelenburg position a
position where the head of the patient is placed in a position lower than her
feet. At this point, Cruz went out of the operating room to express her concern
to petitioner Rogelio that Erlindas operation was not going well.
Cruz quickly rushed back to the operating room and saw that the patient
was still in trendelenburg position. At almost 3:00 in the afternoon, she saw
Erlinda being wheeled to the Intensive Care Unit (ICU). The doctors explained
to petitioner Rogelio that his wife had bronchospasm. Erlinda stayed in the ICU
for a month. She was released from the hospital only four months later or on
November 15, 1985. Since the ill-fated operation, Erlinda remained in
comatose condition until she died on August 3, 1999.
Petitioners filed with the Regional Trial Court of Quezon City a civil case
for damages against private respondents. After due trial, the court a
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quo rendered judgment in favor of petitioners. Essentially, the trial court found
that private respondents were negligent in the performance of their duties to
Erlinda. On appeal by private respondents, the Court of Appeals reversed the
trial courts decision and directed petitioners to pay their "unpaid medical bills"
to private respondents. So, this petition is.
ISSUE: Whether or not all respondents named herein in this petition should be
liable jointly and severally.
HELD: In the first decision of the Supreme Court they upheld the decision of
the Regional Trial Court rendering all respondents liable for being negligence in
their respective duties and responsibilities. In accordance to the principle of
Res Ipsa Loquitor the Court did not give merit to the expert testimonies
presented by respondent. This simply a recognition of the postulate that, as a
matter of common knowledge and experience, the very nature of certain types
of occurrences may justify an inference of negligence on the part of the person
who controls the instrumentality causing the injury in the absence of some
explanation by the defendant who is charged with negligence. Still, before
resort to the doctrine may be allowed, the following requisites must be
satisfactorily shown:
1. The accident is of a kind which ordinarily does not occur in the
absence of someone's negligence;
2. It is caused by an instrumentality within the exclusive control of the
defendant or defendants; and
3. The possibility of contributing conduct which would make the plaintiff
responsible is eliminated.
On the part of Dr. Perfecta Gutierrez, this Court finds that she
omitted to exercise reasonable care in not only intubating the patient,
but also in not repeating the administration of atropine (TSN, August 20,
1991, pp. 5-10), without due regard to the fact that the patient was
inside the operating room for almost three (3) hours. For after she
committed a mistake in intubating [the] patient, the patient's nailbed
became bluish and the patient, thereafter, was placed in trendelenburg
position, because of the decrease of blood supply to the patient's brain.
The evidence further shows that the hapless patient suffered brain
damage because of the absence of oxygen in her (patient's) brain for
approximately four to five minutes which, in turn, caused the patient to
become comatose.
On the part of Dr. Orlino Hosaka, this Court finds that he is liable
for the acts of Dr. Perfecta Gutierrez whom he had chosen to administer
anesthesia on the patient as part of his obligation to provide the patient a
good anesthesiologist', and for arriving for the scheduled operation
almost three (3) hours late.
On the part of DLSMC (the hospital), this Court finds that it is
liable for the acts of negligence of the doctors in their "practice of
medicine" in the operating room. Moreover, the hospital is liable for
failing through its responsible officials, to cancel the scheduled operation
after Dr. Hosaka inexcusably failed to arrive on time.
However in the second decision of the Supreme Court, they absolve Delos
Santos Medical Center base on the doctrine of Control Test. It has been
consistently held that in determining whether an employer-employee
relationship exists between the parties, the following elements must be present:
(1) selection and engagement of services; (2) payment of wages; (3) the power to
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hire and fire; and (4) the power to control not only the end to be achieved, but
the means to be used in reaching such an end.
DLSMC maintains that first, a hospital does not hire or engage the services of a
consultant, but rather, accredits the latter and grants him or her the privilege
of maintaining a clinic and/or admitting patients in the hospital upon a
showing by the consultant that he or she possesses the necessary
qualifications, such as accreditation by the appropriate board (diplomate),
evidence of fellowship and references. Second, it is not the hospital but the
patient who pays the consultants fee for services rendered by the latter. Third,
a hospital does not dismiss a consultant; instead, the latter may lose his or her
accreditation or privileges granted by the hospital. Lastly, DLSMC argues that
when a doctor refers a patient for admission in a hospital, it is the doctor who
prescribes the treatment to be given to said patient. The hospitals obligation is
limited to providing the patient with the preferred room accommodation, the
nutritional diet and medications prescribed by the doctor, the equipment and
facilities necessary for the treatment of the patient, as well as the services of
the hospital staff who perform the ministerial tasks of ensuring that the
doctors orders are carried out strictly. Based on this, there is no employer-
employee relationship which can make the hospital liable with the Doctors
jointly and severally.
Reyes v. Sister of Mercy
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LEAH ALESNA REYES, ROSE NAHDJA, JOHNNY, and minors LLOYD and
KRISTINE, all surnamed REYES, represented by their mother, LEAH
ALESNA REYES, petitioners, versus
SISTERS OF MERCY HOSPITAL, SISTER ROSE PALACIO, DR. MARVIE
BLANES, and DR. MARLYN RICO,respondents.
(G.R. No. 130547 October 3, 2000 2nd Division)
MENDOZA, J.:
FACTS: Petitioner Leah Alesna Reyes is the wife of the late Jorge Reyes. The
other petitioners, namely, Rose Nahdja, Johnny, Lloyd, and Kristine, all
surnamed Reyes, were their children. Five days before his death on January 8,
1987, Jorge had been suffering from a recurring fever with chills. After he failed
to get relief from some home medication he was taking, which consisted of
analgesic, antipyretic, and antibiotics, he decided to see the doctor.
On January 8, 1987, he was taken to the Mercy Community Clinic by his
wife. He was attended to by respondent Dr. Marlyn Rico, resident physician
and admitting physician on duty, who gave Jorge a physical examination and
took his medical history. She noted that at the time of his admission, Jorge
was conscious, ambulatory, oriented, coherent, and with respiratory
distress. Typhoid fever was then prevalent in the locality, as the clinic had been
getting from 15 to 20 cases of typhoid per month. Suspecting that Jorge could
be suffering from this disease, Dr. Rico ordered a Widal Test, a standard test
for typhoid fever, to be performed on Jorge. Blood count, routine urinalysis,
stool examination, and malarial smear were also made. After about an hour,
the medical technician submitted the results of the test from which Dr. Rico
concluded that Jorge was positive for typhoid fever. As her shift was only up to
5:00 p.m., Dr. Rico indorsed Jorge to respondent Dr. Marvie Blanes.
Dr. Marvie Blanes attended to Jorge at around six in the evening. She
also took Jorges history and gave him a physical examination. Like Dr. Rico,
her impression was that Jorge had typhoid fever. Antibiotics being the accepted
treatment for typhoid fever, she ordered that a compatibility test with the
antibiotic chloromycetin be done on Jorge. Said test was administered by nurse
Josephine Pagente who also gave the patient a dose of triglobe. As she did not
observe any adverse reaction by the patient to chloromycetin, Dr. Blanes
ordered the first five hundred milligrams of said antibiotic to be administered
on Jorge at around 9:00 p.m. A second dose was administered on Jorge about
three hours later just before midnight.
At around 1:00 a.m. of January 9, 1987, Dr. Blanes was called as Jorges
temperature rose to 41C. The patient also experienced chills and exhibited
respiratory distress, nausea, vomiting, and convulsions. Dr. Blanes put him
under oxygen, used a suction machine, and administered hydrocortisone,
temporarily easing the patients convulsions. When he regained consciousness,
the patient was asked by Dr. Blanes whether he had a previous heart ailment
or had suffered from chest pains in the past. Jorge replied he did not. After
about 15 minutes, however, Jorge again started to vomit, showed restlessness,
and his convulsions returned. Dr. Blanes re-applied the emergency measures
taken before and, in addition, valium was administered. Jorge, however, did
not respond to the treatment and slipped into cyanosis, a bluish or purplish
discoloration of the skin or mucous membrane due to deficient oxygenation of
the blood. At around 2:00 a.m., Jorge died. He was forty years old. The cause of
his death was "Ventricular Arrythemia Secondary to Hyperpyrexia and typhoid
fever."
Cita
After this the petitioner filed a case to the court and their principal
contention was that Jorge did not die of typhoid fever. Instead, his death was
due to the wrongful administration of chloromycetin.
ISSUE: Whether or not the attending physician including the hospital will be
liable base on the principle of Res Ipsa Loquitor.
HELD: No. In the present case, there is no doubt that a physician-patient

relationship existed between respondent doctors and Jorge Reyes. Respondents
were thus duty-bound to use at least the same level of care that any reasonably
competent doctor would use to treat a condition under the same
circumstances. It is breach of this duty which constitutes actionable
malpractice. As to this aspect of medical malpractice, the determination of the
reasonable level of care and the breach thereof, expert testimony is essential
because the causation cannot be establish merely relying on common
knowledge. Therefore, the doctrine of Res Ipsa Loquitor cannot be applied here.
Inasmuch as the causes of the injuries involved in malpractice actions are
determinable only in the light of scientific knowledge, it has been recognized
that expert testimony is usually necessary to support the conclusion as to
causation.
Dr. Rico was justified in recommending the administration of the drug
chloromycetin, the drug of choice for typhoid fever. This was also well
established in the evidence presented. Test was also duly done to determine if
the victim is compatible with this kind of medicine. The burden of proving that
Jorge Reyes was suffering from any other illness that had an adverse effect on
the medicine rested with the petitioners. As they failed to present expert
opinion on this, preponderant evidence to support their contention is clearly
absent.
Nogales v. Capitol Medical Center
Cita
ROGELIO P. NOGALES, for himself and on behalf of the minors, ROGER

ANTHONY, ANGELICA, NANCY, and MICHAEL CHRISTOPHER, all
surnamed NOGALES, petitioners, versus CAPITOL MEDICAL CENTER, DR.
OSCAR ESTRADA, DR. ELY VILLAFLOR, DR. ROSA UY, DR. JOEL
ENRIQUEZ, DR. PERPETUA LACSON, DR. NOE ESPINOLA, and NURSE J.
DUMLAO, respondents.
(G.R. No. 142625 December 19, 2006 3rd Division)
CARPIO, J.:
FACTS: Pregnant with her fourth child, Corazon Nogales ("Corazon"), who was
then 37 years old, was under the exclusive prenatal care of Dr. Oscar Estrada.
Around midnight of 25 May 1976, Corazon started to experience mild labor
pains prompting Corazon and Rogelio Nogales ("Spouses Nogales") to see Dr.
Estrada at his home. After examining Corazon, Dr. Estrada advised her
immediate admission to the Capitol Medical Center ("CMC"). Corazon was then
brought to the labor room of the CMC. Dr. Rosa Uy ("Dr. Uy"), who was then a
resident physician of CMC, conducted an internal examination of Corazon. Dr.
Uy then called up Dr. Estrada to notify him of her findings.
Dr. Estrada ordered for 10 mg. of valium to be administered immediately
by intramuscular injection. Dr. Estrada later ordered the start of intravenous
administration of syntocinon admixed with dextrose, 5%, in lactated Ringers'
solution, at the rate of eight to ten micro-drops per minute. At 6:13 a.m.,
Corazon started to experience convulsions.
At 6:15 a.m., Dr. Estrada ordered the injection of ten grams of
magnesium sulfate. However, Dr. Ely Villaflor ("Dr. Villaflor"), who was
assisting Dr. Estrada, administered only 2.5 grams of magnesium sulfate. At
6:22 a.m., Dr. Estrada, assisted by Dr. Villaflor, applied low forceps to extract
Corazon's baby. At 6:27 a.m., Corazon began to manifest moderate vaginal
bleeding which rapidly became profuse.afterwhich Corazon died.
ISSUE: Whether CMC is vicariously liable for the negligence of Dr. Estrada.
HELD: After a thorough examination of the voluminous records of this case,

the Court finds no single evidence pointing to CMC's exercise of control over
Dr. Estrada's treatment and management of Corazon's condition. It is
undisputed that throughout Corazon's pregnancy, she was under the exclusive
prenatal care of Dr. Estrada. At the time of Corazon's admission at CMC and
during her delivery, it was Dr. Estrada, assisted by Dr. Villaflor, who attended
to Corazon. There was no showing that CMC had a part in diagnosing
Corazon's condition. While Dr. Estrada enjoyed staff privileges at CMC, such
fact alone did not make him an employee of CMC.42 CMC merely allowed Dr.
Estrada to use its facilities when Corazon was about to give birth, which CMC
considered an emergency. Considering these circumstances, Dr. Estrada is not
an employee of CMC, but an independent contractor.
In general, a hospital is not liable for the negligence of an independent
contractor-physician. There is, however, an exception to this principle. The
hospital may be liable if the physician is the "ostensible" agent of the hospital.
This exception is also known as the "doctrine of apparent authority."
Under the doctrine of apparent authority a hospital can be held
vicariously liable for the negligent acts of a physician providing care at the
hospital, regardless of whether the physician is an independent contractor,
unless the patient knows, or should have known, that the physician is an
independent contractor.
Cita
In the instant case, CMC impliedly held out Dr. Estrada as a member of
its medical staff. Through CMC's acts, CMC clothed Dr. Estrada with apparent
authority thereby leading the Spouses Nogales to believe that Dr. Estrada was
an employee or agent of CMC. CMC cannot now repudiate such authority.
Professional Services v. Agana
Cita
PROFESSIONAL SERVICES, INC., Petitioner, versus NATIVIDAD and

ENRIQUE AGANA, Respondents.
(G.R. No. 126297 January 31, 2007 1st Division)
FACTS: On April 4, 1984, Natividad Agana was rushed to the Medical City
General Hospital (Medical City Hospital) because of difficulty of bowel
movement and bloody anal discharge. After a series of medical examinations,
Dr. Miguel Ampil, petitioner in G.R. No. 127590, diagnosed her to be suffering
from "cancer of the sigmoid. On April 11, 1984, Dr. Ampil, assisted by the
medical staff of the Medical City Hospital, performed an anterior resection
surgery on Natividad. After Dr. Fuentes had completed the hysterectomy, Dr.
Ampil took over, completed the operation and closed the incision. After a
couple of days, Natividad complained of excruciating pain in her anal region.
On August 31, 1984, Natividad flew back to the Philippines, still
suffering from pains. Two weeks thereafter, her daughter found a piece of
gauze protruding from her vagina. Upon being informed about it, Dr. Ampil
proceeded to her house where he managed to extract by hand a piece of gauze
measuring 1.5 inches in width. Dr. Ampils assurance did not come true.
Instead, the pains intensified, prompting Natividad to seek treatment at the
Polymedic General Hospital. Dr. Ramon Gutierrez detected the presence of
another foreign object in her vagina -- a foul-smelling gauze measuring 1.5
inches in width which badly infected her vaginal vault.
ISSUE: Whether or not Dr. Ampil is liable for negligence and malpractice and
whether PSI may be held solidarily liable for the negligence of Dr. Ampil.
HELD: First, it is not disputed that the surgeons used gauzes as sponges to
control the bleeding of the patient during the surgical operation.
Second, immediately after the operation, the nurses who assisted in the
surgery noted in their report that the sponge count (was) lacking 2 that such
anomaly was announced to surgeon and that a search was done but to no avail
prompting Dr. Ampil to continue for closure.
Third, after the operation, two (2) gauzes were extracted from the same
spot of the body of Mrs. Agana where the surgery was performed.
To put it simply, such act is considered so inconsistent with due care as
to raise an inference of negligence. There are even legions of authorities to the
effect that such act is negligence per se.
This is a clear case of medical malpractice or more appropriately, medical
negligence. Private hospitals, hire, fire and exercise real control over their
attending and visiting consultant staff. While consultants are not, technically
employees, the control exercised, the hiring, and the right to terminate
consultants all fulfill the important hallmarks of an employer-employee
relationship, with the exception of the payment of wages. In assessing whether
such a relationship in fact exists, the control test is determining. Accordingly,
on the basis of the foregoing, the purpose of allocating responsibility in medical
negligence cases, an employer-employee relationship in effect exists between
hospitals and their attending and visiting physicians.
Cita
Professional Services v. CA
PROFESSIONAL SERVICES, INC., petitioner, versus THE COURT OF
APPEALS and NATIVIDAD and ENRIQUE AGANA, respondents,
G.R. No. 126297 February 11, 2008 1st Division
G.R. No. 126297 February 2, 2010 EN BANC
CORONA, J.:
FACTS: On April 4, 1984, Natividad Agana was admitted at the Medical City
General Hospital (Medical City) because of difficulty of bowel movement and
bloody anal discharge. Dr. Ampil diagnosed her to be suffering from "cancer of
the sigmoid." Thus, on April 11, 1984, Dr. Ampil, assisted by the medical
staff1 of Medical City, performed an anterior resection surgery upon her.
During the surgery, he found that the malignancy in her sigmoid area had
spread to her left ovary, necessitating the removal of certain portions of it.
Thus, Dr. Ampil obtained the consent of Atty. Enrique Agana, Natividads
husband, to permit Dr. Juan Fuentesto perform hysterectomy upon Natividad.
Dr. Fuentes performed and completed the hysterectomy. Afterwards, Dr. Ampil
took over, completed the operation and closed the incision. However, the
operation appeared to be flawed. In the corresponding Record of Operation
dated April 11, 1984, the attending nurses entered these remarks:
1. sponge count lacking 2
2. announced to surgeon searched done but to no avail continue for
closure.
After a couple of days, Natividad complained of excruciating pain in her
anal region. She consulted both Dr. Ampil and Dr. Fuentes about it. They told
her that the pain was the natural consequence of the surgical operation
performed upon her. Dr. Ampil recommended that Natividad consult an
oncologist to treat the cancerous nodes which were not removed during the
operation.
On May 9, 1984, Natividad, accompanied by her husband, went to the
United States to seek further treatment. After four (4) months of consultations
and laboratory examinations, Natividad was told that she was free of cancer.
Hence, she was advised to return to the Philippines.
On August 31, 1984, Natividad flew back to the Philippines, still
suffering from pains. Two (2) weeks thereafter, her daughter found a piece of
gauze protruding from her vagina. Dr. Ampil was immediately informed. He
proceeded to Natividads house where he managed to extract by hand a piece of
gauze measuring 1.5 inches in width. Dr. Ampil then assured Natividad that
the pains would soon vanish.
Despite Dr. Ampils assurance, the pains intensified, prompting
Natividad to seek treatment at the Polymedic General Hospital. While confined
thereat, Dr. Ramon Gutierrez detected the presence of a foreign object in her
vagina -- a foul-smelling gauze measuring 1.5 inches in width. The gauze had
badly infected her vaginal vault. A recto-vaginal fistula had formed in her
reproductive organ which forced stool to excrete through the vagina. Another
surgical operation was needed to remedy the situation. Thus, in October 1984,
Natividad underwent another surgery.
ISSUE: Whether or not the petitioner here in the case and Doctor Ampil is
jointly and severally liable of the obligation due to the respondent because of
medical malpractice.
Cita
HELD: Yes. The Supreme Court is firm in its decision on rendering them liable
to the respondent as it prove that there are two motions for reconsideration but
it never flip flop.
It should be borne in mind that the corporate negligence ascribed to PSI
is different from the medical negligence attributed to Dr. Ampil. The duties of
the hospital are distinct from those of the doctor-consultant practicing within
its premises in relation to the patient; hence, the failure of PSI to fulfill its
duties as a hospital corporation gave rise to a direct liability to the Aganas
distinct from that of Dr. Ampil.
Clearly, PSI is estopped from passing the blame solely to Dr. Ampil. Its
act of displaying his name and those of the other physicians in the public
directory at the lobby of the hospital amounts to holding out to the public that
it offers quality medical service through the listed physicians. This justifies
Atty. Aganas belief that Dr. Ampil was a member of the hospitals staff. It
must be stressed that under the doctrine of apparent authority, the
question in every case is whether the principal has by his voluntary act
placed the agent in such a situation that a person of ordinary prudence,
conversant with business usages and the nature of the particular
business, is justified in presuming that such agent has authority to
perform the particular act in question. In these cases, the circumstances
yield a positive answer to the question.
The challenged Decision also anchors its HELD on the doctrine of
corporate responsibility. The duty of providing quality medical service is no
longer the sole prerogative and responsibility of the physician. This is because
the modern hospital now tends to organize a highly-professional medical
staff whose competence and performance need also to be monitored by the
hospital commensurate with its inherent responsibility to provide quality
medical care. Such responsibility includes the proper supervision of the
members of its medical staff. Accordingly, the hospital has the duty to
make a reasonable effort to monitor and oversee the treatment prescribed
and administered by the physicians practicing in its premises.
Unfortunately, PSI had been remiss in its duty. It did not conduct
an immediate investigation on the reported missing gauzes to the great
prejudice and agony of its patient.
Cantre v. Sps. Go
Cita
DR. MILAGROS L. CANTRE, Petitioner, versus SPS. JOHN DAVID Z. GO and

NORA S. GO, Respondents.
(G.R. No. 160889 April 27, 2007 2nd Division)
QUISUMBING, J.:
FACTS: Nora Go gave birth to her 4th child. Two hours later, she suffered
profuse bleeding inside her womb due to some placenta parts which were not
completely expelled after delivery. She then suffered hypovolemic shock, so her
BP dropped to 40/0. Dr. Milagros Cantre, an Ob-Gyne specialist and Nora's
attending physician, together with an assisting resident physician, performed
various medical procedures to stop the bleeding and to restore Nora's BP. While
Dr. Cantre was massaging Nora's uterus for it to contract and stop bleeding,
she ordered a droplight to warm Nora and her baby. At that time, she was
unconscious.
While in the recovery room, Nora's husband John David noticed a fresh
gaping wound (2 1/2 x 3 1/2 in) in the inner portion of her left arm near the
armpit. When he asked the nurses about the cause of the injury, he was
informed that it was due to a burn. John David filed a request for investigation.
Dr. Cantre said that what caused the injury was the blood pressure cuff. John
David brought Nora to the NBI for a physical examination. The medico-legal
said that the injury appeared to be a burn and that a droplight when placed
near the skin for about 10 minutes could cause such burn. He dismissed the
likelihood that the wound was caused by a blood pressure cuff since the scar
was not around the arm, but just on one side of the arm. Nora's injury was
referred to a plastic surgeon for skin grafting. However, her arm would never be
the same--the surgery left an unsightly scar, her movements are restricted, and
the injured arm aches at the slightest touch.
Sps. Go filed a complaint for damages against Dr. Cantre, the medical
director, and the hospital. In the RTC, parties have rested their respective
cases, but the court admitted additional exhibits [consist mostly of medical
records produced by the hospital during trial pursuant to a subpoena duces
tecum] offered by Sps. Go, which were not testified to by any witness. RTC
ruled in favor of the spouses. CA affirmed RTC with modification (complaint
dismissed with respect to the medical director and the hospital; only moral
damages awarded).
ISSUE: Whether or not Dr. Cantre is liable for the injury suffered by Nora Go.
HELD: Yes. Dr. Cantre's counsel admitted the existence of the additional
exhibits when they were formally offered for admission by the RTC. In any case,
given the circumstances of this case, a HELD on Dr. Cantre's negligence may
be made based on the res ipsa loquitur doctrine even in the absence of the
additional exhibits.
The Hippocratic Oath mandates physicians to give primordial
consideration to their patients' well-being, and if a doctor fails to live up to this
precept, he is accountable for his acts. This notwithstanding, courts face a
unique restraint in adjudicating medical negligence
cases because physicians are not guarantors of care, and they never set
out to intentionally cause injury to their patients. HOWEVER, intent is
immaterial in these cases because where negligence exists and is proven, it
automatically gives the injured a right to reparation for the damage
caused.
Res ipsa loquitur x Medical negligence cases
Cita
In medical negligence cases, the doctrine of res ipsa loquitur allows

the mere existence of an injury to justify a presumption of negligence on
the part of the person who controls the instrument causing the
injury, provided that the following requisites concur:
1. Accident is of a kind which ordinarily does not occur absent
someone's negligence
Wound not an ordinary occurrence in the act of delivering a baby;
could not have happened unless negligence set in somewhere
2. Caused by an instrumentality within defendant's exclusive
control
It doesn't matter WON the injury was caused by the droplight or by
the blood pressure cuff, since both are within the exclusive control of the
physician in charge [Dr. Cantre] under the captain of the ship doctrine
[surgeon in charge of an operation is held liable for his assistants'
negligence during the time when they are under the surgeon's control].
3. Possibility of contributing conduct which would make plaintiff
responsible is eliminated
Wound could only be caused by something external to and outside
the control of Nora since she was unconscious while in hypervolemic
shock.
On Dr. Cantre's other arguments + what would have been her saving grace
BP cuff defense does not afford her an escape. The medical practice is
to deflate the cuff immediately after use, or else, it could cause an injury
similar to what happened to Nora. If the wound was caused by the constant
taking of BP, it must have been done so negligently as to inflict a gaping
wound.
The argument that the failed plastic surgery was a measure to prevent
complication (and not intended as a cosmetic procedure) does not negate
negligence on Dr. Cantre's part.
Dr. Cantre has been Nora's ob-gyne for her past 3 deliveries, and this is
the first time that Dr. Cantre is being held liable for damages due to negligence
in the practice of her profession. She promptly took care of the wound before
infection set in. Since Nora was in a critical condition at that time, saving her
life became Dr. Cantre's elemental concern. Still, her good intentions
characteristics do not justify negligence.
NCC provisions applied
NCC 2176. Whoever by act or omission causes damage to another, there
being fault or negligence, is obliged to pay for the damage done. [...]
NCC 2217. Moral damages include physical suffering, mental anguish,
fright, serious anxiety, besmirched reputation, wounded feelings, moral shock,
social humiliation, and similar injury. Though incapable of pecuniary
computation, moral damages may be recovered if they are the proximate result
of the defendant's wrongful act or omission. [200k moral damages awarded]
Dr. Rubi Li v. Sps Soliman
Cita
DR. RUBI LI, Petitioner, versus SPOUSES REYNALDO and LINA SOLIMAN,
as parents/heirs of deceased Angelica Soliman, Respondents.
G.R. No. 165279 June 7, 2011 EN BANC
VILLARAMA, JR., J.:
FACTS: This case involved the death of Angelica Soliman, respondents 11-year
old daughter. Previously, Angelica was diagnosed
withosteosarcoma, osteoblastic type, a highly malignant cancer of the [thigh]
bone. To remove the tumor, her right leg was amputated. And to eliminate any
remaining cancer cells and minimize the chances of recurrence and prevent the
disease from spreading to other parts of her body (metastasis), she
subsequently underwent chemotherapy. The chemotherapy was administered
by petitioner Dr. Rubi Li, an oncologist at St. Lukes Medical Center (SLMC)
upon consent by her parents, herein respondents. Angelica died just eleven
days after the administration of the first cycle of the chemotherapy regimen.
The parents of the child thereafter sued the doctor for damages before
the RTC, charging the latter (along with other doctors and the SLMC itself) with
negligence in causing Angelicas untimely demise. It was specifically averred in
the complaint that the doctor assured the parents that Angelica would recover
in view of 95% chance of healing with chemotherapy (Magiging normal na ang
anak nyo basta ma-chemo. 95% ang healing), and when asked regarding the
side effects, petitioner mentioned only slight vomiting, hair loss and weakness
(Magsusuka ng kaunti. Malulugas ang buhok. Manghihina). The parents thus
claimed that they would not have given their consent to chemotherapy had the
doctor not falsely assured them of its side effects.
The trial court however dismissed the case. It found that the doctor was
not liable for damages as she observed the best known procedures and
employed her highest skill and knowledge in the administration of
chemotherapy drugs on Angelica [though] despite all efforts said patient died.
The parents appealed to the Court of Appeals (CA). While concurring with
the trial courts finding that there was no negligence committed by the
petitioner in the administration of chemotherapy treatment to Angelica, the CA
found that the doctor failed to fully explain to the parents of the patient all the
known side effects of chemotherapy. The CA thus adjudged the doctor liable
for damages.
ISSUE: Whether or not Dr. Rubi Li can be held liable [of failing] to fully disclose
serious side effects of chemotherapy to the parents of her patient despite the
absence of finding that she was negligent in administering the said treatment.
HELD: No. The four essential elements that a plaintiff must prove in a medical
malpractice action based on the doctrine of informed consent, paraphrased as
follows: (1) the physicians duty to disclose material risks; (2) the physicians
failure to disclose, or inadequate disclosure, of those risks; (3) the patients
consent to the treatment she otherwise would not have consented to, which
is a direct and proximate result of the physicians failure to disclose; and
(4) plaintiffs injury as a consequence the proposed treatment. The gravamen
in an informed consent case requires the plaintiff to point to significant
undisclosed information relating to the treatment which would have altered her
decision to undergo it.
Applying the foregoing to this case, it was held that petitioner Dr. Rubi
Li, an oncologist who performed chemotherapy on respondents daughter, who
was sick with malignant bone cancer, adequately disclosed material risks
Cita
inherent in the chemotherapy procedure performed with respondents consent.

When petitioner informed the respondents beforehand of the side effects of
chemotherapy, which includes lowered counts of white and red blood cells,
decrease in blood platelets, possible kidney or heart damage and skin
darkening, there is reasonable expectation on the part of the doctor that the
parents of the child understood very well that the severity of these side effects
will not be the same for all patients undergoing the procedure.
Thus, the Court REVERSED the CA and REINSTATED the decision of the
RTC dismissing the case.
People v. Delos Santos
Cita
PEOPLE OF THE PHILIPPINES, plaintiff-appellee, versus GLENN DE LOS

SANTOS, accused-appellant.
G.R. No. 13158 March 27, 2001 EN BANC
DAVIDE, JR., J.:
FACTS: A Special Counter Insurgency Operation Unit Training of the

Philippine National Police (PNP), was held at Camp Damilag, Manolo Fortich,
Bukidnon, from September 1, 1995 to October 15, 1995. The last phase of the
training was the 35 kilometer "endurance run" from said Camp to Camp
Alagar, Cagayan de Oro City. The run which took place October 5, 1995 started
at 2:20 a.m. The trainees were wearing black T-shirts, black short pants, and
green and black combat shoes.
While they were negotiating Maitum Highway, they saw an Isuzu Elf
truck, driven by respondent Glenn delos Santos, coming at high speed towards
them. The vehicle lights were in the high beam. At a distance of 100 meters,
the rear security guards started waving their hands for the vehicle to take the
other side of the road, but the vehicle just kept its speed, apparently ignoring
their signals and coming closer and closer to them. As a result thereof, twelve
(12) PNP trainees were killed on the spot, 11 others were seriously wounded
while 10 (PO1) sustained minor injuries.
ISSUE: Whether or not Glenn de los Santos is criminally liable, and

consequently civilly liable for said acts.
HELD: Glenn showed an inexcusable lack of precaution. Article 365 of the

Revised Penal Code states that reckless imprudence consists in voluntarily, but
without malice, doing or failing to do an act from which material damage
results by reason of inexcusable lack of precaution on the part of the person
performing or failing to perform such act, taking into consideration (1) his
employment or occupation; (2) his degree of intelligence; (4) his physical
condition; and (3) other circumstances regarding persons, time and place.
Being then a young college graduate and an experienced driver, Glenn
should have known to apply the brakes or swerve to a safe place immediately
upon hearing the first bumping thuds to avoid further hitting the other
trainees. By his own testimony, it was established that the road was slippery
and slightly going downward; and, worse, the place of the incident was foggy
and dark. He should have observed due care in accordance with the conduct of
a reasonably prudent man, such as by slackening his speed, applying his
brakes, or turning to the left side even if it would mean entering the opposite
lane. It is highly probable that he was driving at high speed at the time. And
even if he was driving within the speed limits, this did not mean that he was
exercising due care under the existing circumstances and conditions at the
time.
Considering that the incident was not a product of a malicious intent but
rather the result of a single act of reckless driving, Glenn is criminally liable
therefore civilly liable as well.
L.G. Foods v. Agraviador
Cita
L.G. FOODS CORPORATION and VICTORINO GABOR, Vice-President and

General Manager, petitioners, versus HON. PHILADELFA B. PAGAPONG-
AGRAVIADOR, in her capacity as Presiding Judge of Regional Trial Court,
Branch 43, Bacolod City, and SPS. FLORENTINO and THERESA
VALLEJERA, respondents.
(G.R. No. 158995 September 26, 2006 2nd Division)
GARCIA, J.:
FACTS: On February 26, 1996, Charles Vallereja, a 7-year old son of the
spouses Florentino Vallejera and Theresa Vallejera, was hit by a Ford Fiera van
owned by the petitioners and driven at the time by their employee, Vincent
Norman Yeneza y Ferrer. Charles died as a result of the accident.
In time, an Information for Reckless Imprudence Resulting to
Homicide was filed against the driver before the Municipal Trial Court in Cities
(MTCC), Bacolod City, docketed as Criminal Case No. 67787, entitled People of
the Philippines v. Vincent Norman Yeneza. Unfortunately, before the trial could
be concluded, the accused driver committed suicide, evidently bothered by
conscience and remorse. On account thereof, the MTCC, in its order of
September 30, 1998, dismissed the criminal case.
On June 23, 1999, in the RTC of Bacolod City, the spouses Vallejera filed
a complaint for damages against the petitioners as employers of the deceased
driver, basically alleging that as such employers, they failed to exercise due
diligence in the selection and supervision of their employees.
ISSUE: Whether or not the employer which is the petitioner here in the case is
liable on the damages incurred by its employee.
HELD: Yes. Under Article 2180 of the Civil Code, the liability of the employer is
direct or immediate. It is not conditioned upon prior recourse against the
negligent employee and a prior showing of insolvency of such employee. Here,
the complaint sufficiently alleged that the death of the couple's minor son was
caused by the negligent act of the petitioners' driver; and that the petitioners
themselves were civilly liable for the negligence of their driver for failing "to
exercise the necessary diligence required of a good father of the family in the
selection and supervision of its employee, the driver, which diligence, if
exercised, would have prevented said accident."
Had the respondent spouses elected to sue the petitioners based on
Article 103 of the Revised Penal Code, they would have alleged that the guilt of
the driver had been proven beyond reasonable doubt; that such accused driver
is insolvent; that it is the subsidiary liability of the defendant petitioners as
employers to pay for the damage done by their employee (driver) based on the
principle that every person criminally liable is also civilly liable. Since there
was no conviction in the criminal case against the driver, precisely because
death intervened prior to the termination of the criminal proceedings, the
spouses' recourse was, therefore, to sue the petitioners for their direct and
primary liability based on quasi-delict.
The circumstance that no reservation to institute a separate civil action
for damages was made when the criminal case was filed is of no moment for
the simple reason that the criminal case was dismissed without any
pronouncement having been made therein. In reality, therefor, it is as if there
was no criminal case to speak of in the first place. And for the petitioners to
insist for the conviction of their driver as a condition sine qua non to hold them
liable for damages is to ask for the impossible.
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Magat v. Medialdea
VICTORINO D. MAGAT, petitioner, versus HON. LEO D. MEDIALDEA and
SANTIAGO A. GUERRERO, respondents.
(G.R. No. L-37120 April 20, 1983 2nd Division)
ESCOLIN, J.:
FACTS: Defendant Santiago Guerrero entered into a contract with the U.S.
Navy Exchange, Subic Bay, Philippines for the operation of a fleet of taxicabs.
Guerrero and his aforesaid agent Isidro Aligada were able to import from Japan
with the assistance of the plaintiff Magat and his Japanese business associates
the necessary taximeters for Guerreros taxicabs in partial fulfillment of
commitments with the U.S. Navy Exchange, Subic Bay, Philippines.
Guerrero and his agent have repeatedly assured Magat of his financial
capabilities to pay for the goods ordered by him and in fact he accomplished
the necessary application for a letter of credit with his banker, but he
subsequently instructed his banker not to give due course to his application for
a letter of credit and that for reasons only known to him, he failed and refused
to open the necessary letter of credit to cover payment of the goods ordered by
him.
Meanwhile, Guerrero has been operating his taxicabs without the
required radio transceivers and when the U.S. Navy Authorities were pressing
defendant for compliance with his commitments with respect to the
installations of radio transceivers on his taxicabs, he impliedly laid the blame
for the delay upon Magat, thus destroying his reputation with the said Naval
Authorities of Subic Bay, Philippines, with whom he transacts business.
Victorino Magat filed a complaint for alleged breach of contract against
Santiago Guerrero.
ISSUE: Whether or not the complaint for breach of contract states a valid
cause of action.
HELD: Article 1170 of the Civil Code provides: those who in the performance
of their obligation are guilty of fraud, negligence, or delay, and those who in
any manner contravene the tenor thereof are liable for damages.
The phrase "in any manner contravene the tenor" of the obligation
includes any ilicit act or omission which impairs the strict and faithful
fulfillment of the obligation and every kind of defective performance.
The damages which the obligor is liable for includes not only the value of
the loss suffered by the obligee (dao emergente) but also the profits which the
latter failed to obtain (lucro cesante). If the obligor acted in good faith, he shall
be liable for those damages that are the natural and probable consequences of
the breach of the obligation and which the parties have foreseen or could have
reasonably foreseen at the time the obligation was constituted; and in case of
fraud, bad faith, malice or wanton attitude, he shall be liable for all damages
which may be reasonably attributed to the non-performance of the obligation.
In the case at bar, petitioner had fulfilled his part of the bargain while
private respondent failed to comply with his correlative obligation by refusing to
open a letter of credits to cover payment of the goods ordered by him, and that
consequently, petitioner suffered not only loss of his expected profits, but
moral and exemplary damages as well. Therefore he is liable for the damages
he caused to the petitioner.
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Vda. De Mistica v. Naguiat

FIDELA DEL CASTILLO Vda. DE MISTICA, petitioner, versus Spouses
BERNARDINO NAGUIAT and MARIA PAULINA GERONA-
NAGUIAT, respondents.
PANGANIBAN, J.:
FACTS: Eulalio Mistica, predecessor-in-interest of herein petitioner, is the

owner of the parcel of land which was leased to respondent Bernardinio
Naguiat sometime in 1970.
On April 5, 1979 Mistica entered into a contract to sell with respondent
over a portion of the aforementioned lot containing an area of 200 square
meters. This agreement was reduced to writing in a document. Pursuant to
said agreement, respondent gave a down payment of P2, 000. He made another
partial payment of P1, 000 on February 8, 1980. He failed to make any
payments thereafter. Mistica died sometime in October 1986.
On December 4, 1991 petitioner filed a complaint for rescission alleging
that the failure and refusal of respondent to pay the balance of the purchase
price constitute a violation of the contract which established her to rescind the
same. That respondent have been in possession of the subject matter, should
be ordered to vacate and surrender possession of the same.
The CA, Disallowing rescission, Held that respondents did not breach the
Contract of Sale. It explained that the conclusion of the ten-year period was not
a resolutory term, because the Contract had stipulated that payment -- with
interest of 12 percent -- could still be made if respondents failed to pay within
the period. According to the appellate court, petitioner did not disprove the
allegation of respondents that they had tendered payment of the balance of the
purchase price during her husbands funeral, which was well within the ten-
year period.
Moreover, rescission would be unjust to respondents, because they had
already transferred the land title to their names. The proper recourse, the CA
Held, was to order them to pay the balance of the purchase price, with 12
percent interest.
ISSUE: Whether or not the Court of Appeals erred in the application of Article
1191 of the Civil Code, as it ruled that there is no breach of obligation inspite
of the lapse of their stipulated period and the failure of the respondent to pay.
HELD: No. The failure of respondent to pay the value of the purchase price
within ten (10) years from execution of the deed did not amount to a
substantial breach.
The transaction between Eulalio Mistica and respondents, as evidenced
by the Kasulatan, was clearly a Contract of Sale. A deed of sale is considered
absolute in nature when there is neither a stipulation in the deed that title to
the property sold is reserved to the seller until the full payment of the price;
nor a stipulation giving the vendor the right to unilaterally resolve the contract
the moment the buyer fails to pay within a fixed period.
In a contract of sale, the remedy of an unpaid seller is either specific
performance or rescission. Rescission, however, is allowed only where the
breach is substantial and fundamental to the fulfillment of the obligation. In
the present case, the failure of respondents to pay the balance of the purchase
price within ten years from the execution of the Deed did not amount to a
substantial breach.
Cita
Moreover, it is undisputed that during the ten year period, petitioner

never made any demand for the balance of the purchase price. Petitioner even
refused the payment tendered by respondents during her husbands funeral,
thus showing she was not exactly blameless for the lapse of the ten year
period.
Co v. Court of Appeals
Cita
SPS. HENRY CO AND ELIZABETH CO AND MELODY CO, petitioners, versus

COURT OF APPEALS AND MRS. ADORACION CUSTODIO, represented by
her Attorney-in-fact, TRINIDAD KALAGAYAN, respondents.
G.R. No. 112330 August 17, 1999 3rd Division
GONZAGA-REYES, J.:
FACTS: Sometime in October 9, 1984, Mrs. Adoracion Custodio entered into a

verbal contract with spouses Henry and Elizabeth Co for the purchase of the
spouses house and lot and in consideration of the sum of $100,000.00. One
week thereafter and shortly before Mrs. Custodio left for the United States,
plaintiff paid to the defendant the amount of $1000.00 and P40,000.00 as
earnest money, in order that the same may be reserved for her purchase. Said
earnest money is to be deducted from the total purchase price of the property.
The purchase price is payable in two payments; particularly, $40,000.00 on
December 1984 and the balance of $60, 000.00 on January 5, 1985.
On January 25, 1985, plaintiff paid to the defendant the sum of $30,000
as partial payment. Defendants counsel Atty. Leopoldo Cotaco wrote a letter to
plaintiff demanding that she pay the balance. Not having received any response
thereto, said lawyer wrote another letter informing her that she lost her option
to purchase the property subject of the case.
On September 5, 1986, Atty. Estrella O. Laysa, counsel of Custodio,
wrote a letter to Atty. Leopoldo Cotaco informing him that Custodio is now
ready to pay the remaining balance to complete the sum of $100,000.00, the
agreed amount as selling price and on October 24, 1986, plaintiff filed the
instant complaint.
The trial court ruled in favor of Custodio and ordered the spouses Co to
refund the amount of $30,000.00. Not satisfied with the decision, the spouses
Co appealed to the Court of Appeals, which affirmed the decision of the RTC.
Hence, this appeal.
ISSUE: Whether or not the Court of Appeals erred in ordering the spouses Co
to return the $30,000.00 paid by Custodio pursuant to the option granted to
her over the property.
HELD: An option is a contract granting a privilege to buy or sell within an

agreed time and at a determined price. It is a separate and distinct contract
from that which the parties may enter into upon the consummation of the
option and it must be supported by consideration. However, the contract
entered into by the Cos and Custodio reveal that what the parties entered into
is a perfected contract of sale and not an option contract.
A contract of sale is a consensual contract and is perfected at the
moment there is a meeting of the minds upon the thing which is the object of
the contract and upon the price. From that moment, the parties may
reciprocally demand performance subject to the provisions of the law governing
the form of contracts.
The elements of a valid contract of sale under Article 1458 of the Civil
Code are: (1) consent or meeting of the minds; (2) determinate subject matter;
and (3) price certain in money or its equivalent. As evidenced by the March 15,
1985 letter, all three elements of a contract of sale are present in the
transaction between the petitioners and respondent. Custodios offer to
purchase the Beata property, subject of the sale at a price of $100,000.00 was
accepted by the Cos. Even the manner of payment of the price was set forth in
the letter. Earnest money in the amounts of US$1,000.00 and P40,000.00 was
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already received by the Cos. Under Article 1482 of the Civil Code, earnest
money given in a sale transaction is considered part of the purchase price and
proof of the perfection of the sale.
Despite the fact that Custodio failed to pay the amounts of
US$40,000.00 and US$60,000.00 on or before December 4, 1984 and January
5, 1985 respectively, the Cos did not sue for either specific performance or
rescission of the contract. The Cos were of the mistaken belief that Custodio
had lost her option over the Beata property when she failed to pay the
remaining balance of $70,000.00 pursuant to their August 8, 1986 letter. In
the absence of an express stipulation authorizing the sellers to extrajudicially
rescind the contract of sale, the Cos cannot unilaterally and extrajudicially
rescind the contract of sale.
Accordingly, Custodio acted well within her rights when she attempted to
pay the remaining balance of $70,000.00 to complete the sum owed of
$100,000.00 as the contract was still subsisting at that time. When the Cos
refused to accept said payment and to deliver the Beata property, Custodio
immediately sued for the rescission of the contract of sale and prayed for the
return of the $30,000.00 she had initially paid.
Under Article 1385 of the Civil Code, rescission creates the obligation to
return the things, which were the object of the contract, but such rescission
can only be carried out when the one who demands rescission can return
whatever he may be obliged to restore. This principle has been applied to
rescission of reciprocal obligations under Article 1191 of the Civil Code. The
Court of Appeals therefore did not err in ordering the Cos to return the amount
of $30,000.00 to Custodio after ordering the rescission of the contract of sale
over the property.
Heirs of Quirong v. DBP
Cita
HEIRS OF SOFIA QUIRONG, Represented by ROMEO P.

QUIRONG, Petitioners, versus DEVELOPMENT BANK OF THE
PHILIPPINES, Respondent.
(G.R. No. 173441 December 3, 2009 2nd Division)
ABAD, J.:
FACTS: When the late Emilio Dalope died, he left a 589-square meter untitled
lot in Sta. Barbara, Pangasinan, to his wife, Felisa Dalope (Felisa) and their
nine children, one of whom was Rosa Dalope-Funcion. To enable Rosa and her
husband Antonio Funcion (the Funcions) get a loan from respondent
Development Bank of the Philippines (DBP), Felisa sold the whole lot to the
Funcions. With the deed of sale in their favor and the tax declaration
transferred in their names, the Funcions mortgaged the lot with the DBP. On
February 12, 1979, after the Funcions failed to pay their loan, the DBP
foreclosed the mortgage on the lot and consolidated ownership in its name on
June 17, 1981.
Four years later or on September 20, 1983 the DBP conditionally sold
the lot to Sofia Quirong for the price of P78,000.00. In their contract of sale,
Sofia Quirong waived any warranty against eviction. The contract provided that
the DBP did not guarantee possession of the property and that it would not be
liable for any lien or encumbrance on the same. Quirong gave a down payment
of P14,000.00. Two months after that sale or on November 28, 1983 Felisa and
her eight children (collectively, the Dalopes) filed an action for partition and
declaration of nullity of documents with damages against the DBP and the
Funcions before the Regional Trial Court (RTC) of Dagupan City. On December
27, 1984, notwithstanding the suit, the DBP executed a deed of absolute sale of
the subject lot in Sofia Quirongs favor. The deed of sale carried substantially
the same waiver of warranty against eviction and of any adverse lien or
encumbrance.
On May 11, 1985, Sofia Quirong having since died, her heirs (petitioner
Quirong heirs) filed an answer in intervention in Civil Case D-7159 in which
they asked the RTC to award the lot to them and, should it instead be given to
the Dalopes, to allow the Quirong heirs to recover the lots value from the DBP.
But, because the heirs failed to file a formal offer of evidence, the trial court did
not rule on the merits of their claim to the lot and, alternatively, to relief from
the DBP. On December 16, 1992 the RTC rendered a decision, declaring the
DBPs sale to Sofia Quirong valid only with respect to the shares of Felisa and
Rosa Funcion in the property. It declared Felisas sale to the Funcions, the
latters mortgage to the DBP, and the latters sale to Sofia Quirong void insofar
as they prejudiced the shares of the eight other children of Emilio and Felisa
who were each entitled to a tenth share in the subject lot.
On June 10, 1998 the Quirong heirs filed the present action against the DBP
before the RTC of Dagupan City, Branch 44, in Civil Case CV-98-02399-D for
rescission of the contract of sale between Sofia Quirong, their predecessor, and
the DBP and praying for the reimbursement of the price of P78,000.00 that she
paid the bank plus damages. The heirs alleged that they were entitled to the
rescission of the sale because the decision in Civil Case D-7159 stripped them
of nearly the whole of the lot that Sofia Quirong, their predecessor, bought from
the DBP. The DBP filed a motion to dismiss the action on ground of
prescription and res judicata but the RTC denied their motion.
On June 14, 2004, after hearing the case, the RTC rendered a
decision, rescinding the sale between Sofia Quirong and the DBP and ordering
the latter to return to the Quirong heirs the P78,000.00 Sofia Quirong paid the
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bank. On appeal by the DBP, the Court of Appeals (CA) reversed the RTC
decision and dismissed the heirs action on the ground of prescription. The CA
concluded that, reckoned from the finality of the December 16, 1992 decision
in Civil Case D-7159, the complaint filed on June 10, 1998 was already barred
by the four-year prescriptive period under Article 1389 of the Civil Code. The
Quirong heirs filed a motion for reconsideration of the decision but the
appellate court denied it, thus, this petition.
ISSUE: Whether or not the Quirong heirs action for rescission of respondent
DBPs sale of the subject property can be granted.
HELD: No. Action for rescission, which is based on a subsequent economic loss
suffered by the buyer, was precisely the action that the Quirong heirs took
against the DBP. Consequently, it prescribed as Article 1389 provides in four
years from the time the action accrued. Since it accrued on January 28, 1993
when the decision in Civil Case became final and executory and ousted the
heirs from a substantial portion of the lot, the latter had only until January 28,
1997 within which to file their action for rescission. Given that they filed their
action on June 10, 1998, they did so beyond the four-year period.
The remedy of "rescission" is not confined to the rescissible contracts
enumerated under Article 1381. Article 1191 of the Civil Code gives the injured
party in reciprocal obligations, such as what contracts are about, the option to
choose between fulfillment and "rescission." Arturo M. Tolentino, a well-known
authority in civil law, is quick to note, however, that the equivalent of Article
1191 in the old code actually uses the term "resolution" rather than the
present "rescission." The calibrated meanings of these terms are distinct.
"Rescission" is a subsidiary action based on injury to the plaintiffs economic
interests as described in Articles 1380 and 1381. "Resolution," the action
referred to in Article 1191, on the other hand, is based on the defendants
breach of faith, a violation of the reciprocity between the parties. As an action
based on the binding force of a written contract, therefore, rescission
(resolution) under Article 1191 prescribes in 10 years. Ten years is the period
of prescription of actions based on a written contract under Article 1144.
The distinction makes sense. Article 1191 gives the injured party an
option to choose between, first, fulfillment of the contract and, second, its
rescission. An action to enforce a written contract (fulfillment) is definitely an
"action upon a written contract," which prescribes in 10 years (Article 1144). It
will not be logical to make the remedy of fulfillment prescribe in 10 years while
the alternative remedy of rescission (or resolution) is made to prescribe after
only four years as provided in Article 1389 when the injury from which the two
kinds of actions derive is the same.
Heirs of Gaite v. The Plaza
Cita
HEIRS OF RAMON C. GAITE, CYNTHIA GOROSTIZA GAITE and RHOGEN

BUILDERS, Petitioners, versus THE PLAZA, INC. and FGU INSURANCE
CORPORATION, Respondents.
(G.R. No. 177685 January 26, 2011 3rd Division)
VILLARAMA, JR., J.:
FACTS: On July 16, 1980, The Plaza, Inc. (The Plaza), a corporation engaged in
the restaurant business, through its President, Jose C. Reyes, entered into a
contract with Rhogen Builders (Rhogen), represented by Ramon C. Gaite, for
the construction of a restaurant building in Greenbelt, Makati, Metro Manila
for the price ofP7,600,000.00. On July 18, 1980, to secure Rhogens
compliance with its obligation under the contract, Gaite and FGU Insurance
Corporation (FGU) executed a surety bond in the amount of P1,155,000.00 in
favor of The Plaza. On July 28, 1980, The Plaza paid P1,155,000.00 less
withholding taxes as down payment to Gaite. Thereafter, Rhogen commenced
construction of the restaurant building.
In a letter dated September 10, 1980, Engineer Angelito Z. Gonzales, the
Acting Building Official of the Municipality of Makati, ordered Gaite to cease
and desist from continuing with the construction of the building for violation of
Sections 301 and 302 of the National Building Code (P.D. 1096) and its
implementing rules and regulations. The letter was referred to The Plazas
Project Manager, Architect Roberto L. Tayzon.
Gaite notified Reyes that he is suspending all construction works until
Reyes and the Project Manager cooperate to resolve the issue he had raised to
address the problem. This was followed by another letter dated November 18,
1980 in which Gaite expressed his sentiments on their aborted project and
reiterated that they can still resolve the matter with cooperation from the side
of The Plaza. In his reply-letter dated November 24, 1980, Reyes asserted that
The Plaza is not the one to initiate a solution to the situation, especially after
The Plaza already paid the agreed down payment of P1,155,000.00, which
compensation so far exceeds the work completed by Rhogen before the
municipal authorities stopped the construction for several violations. Reyes
made it clear they have no obligation to help Rhogen get out of the situation
arising from non-performance of its own contractual undertakings, and that
The Plaza has its rights and remedies to protect its interest.
On January 9, 1981, Gaite informed The Plaza that he is terminating
their contract based on the Contractors Right to Stop Work or Terminate
Contracts as provided for in the General Conditions of the Contract. In his
letter, Gaite accused Reyes of not cooperating with Rhogen in solving the
problem concerning the revocation of the building permits, which he described
as a "minor problem." Additionally, Gaite demanded the payment ofP63,058.50
from The Plaza representing the work that has already been completed by
Rhogen.
On January 13, 1981, The Plaza, through Reyes, countered that it will
hold Gaite and Rhogen fully responsible for failure to comply with the terms of
the contract and to deliver the finished structure on the stipulated date. Reyes
argued that the down payment made by The Plaza was more than enough to
cover Rhogens expenses.
On March 26, 1981, The Plaza filed Civil Case No. 40755 for breach of
contract, sum of money and damages against Gaite and FGU in the Court of
First Instance (CFI) of Rizal. The court granted the petition and uphold by CA
with modification to award of damages.
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ISSUE:
1. Whether or not the rescission is valid.
2. Whether or not quantum meruit is to be appreciated here.
HELD:
1. Yes. Reciprocal obligations are those which arise from the same cause,
and in which each party is a debtor and a creditor of the other, such that
the obligation of one is dependent upon the obligation of the other. They
are to be performed simultaneously such that the performance of one is
conditioned upon the simultaneous fulfillment of the other. Respondent
The Plaza predicated its action on Article 1191 of the Civil Code, which
provides for the remedy of "rescission" or more properly resolution, a
principal action based on breach of faith by the other party who violates
the reciprocity between them. The breach contemplated in the provision
is the obligors failure to comply with an existing obligation. Thus, the
power to rescind is given only to the injured party. The injured party is
the party who has faithfully fulfilled his obligation or is ready and willing
to perform his obligation.
The construction contract between Rhogen and The Plaza provides for
reciprocal obligations whereby the latters obligation to pay the contract price
or progress billing is conditioned on the formers performance of its
undertaking to complete the works within the stipulated period and in
accordance with approved plans and other specifications by the owner.
Pursuant to its contractual obligation, The Plaza furnished materials and paid
the agreed down payment. It also exercised the option of furnishing and
delivering construction materials at the jobsite pursuant to Article III of the
Construction Contract. However, just two months after commencement of the
project, construction works were ordered stopped by the local building official
and the building permit subsequently revoked on account of several violations
of the National Building Code and other regulations of the municipal
authorities.
2. No. Under the principle of quantum meruit, a contractor is allowed to

recover the reasonable value of the thing or services rendered despite the
lack of a written contract, in order to avoid unjust enrichment. Quantum
meruit means that in an action for work and labor, payment shall be
made in such amount as the plaintiff reasonably deserves. To deny
payment for a building almost completed and already occupied would be
to permit unjust enrichment at the expense of the contractor.
Rhogen failed to finish even a substantial portion of the works due to the
stoppage order issued just two months from the start of construction. Despite
the down payment received from The Plaza, Rhogen, upon evaluation of the
Project Manager, was able to complete a meager percentage much lower than
that claimed by it under the first progress billing between July and September
1980. Moreover, after it relinquished the project in January 1981, the site
inspection appraisal jointly conducted by the Project Manager, Building
Inspector Engr. Gregory and representatives from FGU and Rhogen, Rhogen
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was found to have executed the works not in accordance with the approved
plans or failed to seek prior approval of the Municipal Engineer. Article 1167 of
the Civil Code is explicit on this point that if a person obliged to do something
fails to do it, the same shall be executed at his cost.
Art. 1167. If a person obliged to do something fails to do it,

the same shall be executed at his cost.
This same rule shall be observed if he does it in

contravention of the tenor of the obligation. Furthermore, it may be
decreed that what has been poorly done be undone.
Solar Harvest Incorporated vs. Davao Corrugated
Cita
SOLAR HARVEST, INC., Petitioner, versus DAVAO CORRUGATED CARTON

CORPORATION, Respondent.
(G.R. No. 176868 July 26, 2010 2nd Division)
NACHURA, J.:
FACTS: In the first quarter of 1998, Solar Harvest and Davao corrugated
entered into an unwritten agreement. Solar Harvest placed orders for
customized boxes for its business of exporting bananas at USD 1.1o each.
Petitioner made a full payment of USD 40150. By January 3, 2001 petitioner
had not received any of the ordered boxes. On February 19, 2001 Davao
corrugated replied that as early as April 3, 1998, order/boxes are completed
and Solar Harvest failed to pick them up from their warehouse within 30 days
from completion as agreed upon. Respondent mentioned that petitioner even
placed additional order of 24,000.00 boxes, out of which, 14,000 had already
been manufactured without any advance payment from Solar Harvest. Davao
Corrugated then demanded that Solar Harvest remove boxes from their
warehouse, pay balance of USD 15,400.00 for the additional boxes and
P132,000.00 as storage fee. On August 17, 2001 Solar Harvest filed complaint
against Davao Corrugated for sum of money and damages claiming that the
agreement was for the delivery of the boxes, which Davao Corrugated did not
do. They further alleged that whenever repeated follow-up was made to Davao
Corrugated, they would only see sample boxes and get promise of delivery. Due
to Davao Corrugateds failure to deliver, Solar Harvest had to cancel the order
and demanded payment and/or refund which Davao Corrugated refused to
pay. Davao Corrugated counterclaimed that they had already completed
production of the 36,500 boxes plus additional 14,000 boxes (which was part
of the additional 24,000 order that is unpaid). The agreement was for Solar
Harvest to pick up the boxes, which they did not do. They even averred that on
October 8, 1998 Solar Harvests representative Bobby Que even went to the
warehouse to inspect and saw that indeed boxes were ready for pick up. On
Febuary 20, 1999, Que visited the factory again and said that they ought to sell
the boxes to recoup some of the costs fo the 14,000 additional orders because
their transaction to ship the bananas did not materialize. Solar Harvest denies
that they made the additional order. On March 20, 2004 the Regional Trial
Court ruled in favour of Davao Corrugated.
ISSUE: Whether or not Davao Corrugated was responsible for breach of

contract as Solar Harvest had not yet demanded from it the delivery of the
Boxes.
HELD: No. The Court of Appeals held that it was unthinkable that for around
two years petitioner merely followed up and did not demand the delivery of the
boxes. Even assuming that the agreement is for delivery by Davao Corrugated,
respondent would not be liable for breach of contract as petitioner had not yet
demanded from it the delivery of the boxes. There is no error in the decision of
the Regional Trial Court. Furthermore, the claim for reimbursement is actually
one for rescission or resolution of contract under Article 1191 of the Civil Code.
The right to rescind contracts arises once the party defaults in the performance
of his obligation. Article 1191 should be taken in conjunction with Article 1169:
Those obliged to deliver or to do something in delay from the time oblige
judicially or extrajudicially demands form them the fulfilment of their
obligation. However the demand from creditor shall not necessary that delay
may exist:
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1. When the obligation of the law expressly os declares, or

2. When form the nature and the circumstance of the obligation it appears
that the designation of the time when the thing is to be delivered or the
service to be rendered was a controlling motive for the establishment of
the contract; or
3. When the demand would be useless, as when the obligor has rendered it
beyond his power to perform.
In reciprocal obligations, the general rule is that the fulfilment of the
partiess respective obligations should be simultaneous. No demand is
necessary once a party fulfils his obligation and the other party fails to do his,
the latter automatically incurs delay. When dates are set, the default for each
obligation is determined by the rules given in the first paragraph of the article.
Thus even in reciprocal obligations, if the periods for the fulfilment of the
obligation is fixed, demand from the obligee is still necessary before the obligor
can be considered in default and before a cause of action for rescission will
accrue. In the case of Solar Harvest, merely following up the order was not the
same as demanding for the boxes. The Supreme Court held that Solar Harvests
petition is denied and that Davao Corrugated did not commit breach of
contract and may remove the boxes from their premises after petitioner is given
a period of time to remove them from their warehouse as they deem proper.
The court gave them 30 day to comply with this.
Reyes v. Tuparan
Cita
MILA A. REYES, Petitioner, versus VICTORIA T. TUPARAN, Respondent.

(G.R. No. 188064 June 1, 2011 2nd Division)
MENDOZA, J.:
FACTS: On September 10, 1992, Mila A. Reyes (petitioner) filed a complaint for
Rescission of Contract with Damages against Victoria T. Tuparan (respondent)
before the RTC. In her Complaint, petitioner alleged, among others, that she
was the registered owner of a 1,274 square meter residential and commercial
lot located in Karuhatan, Valenzuela City, and covered by TCT No. V-4130; that
on that property, she put up a three-storey commercial building known as RBJ
Building and a residential apartment building; that since 1990, she had been
operating a drugstore and cosmetics store on the ground floor of RBJ Building
where she also had been residing while the other areas of the buildings
including the sidewalks were being leased and occupied by tenants and street
vendors.
In December 1989, respondent leased from petitioner a space on the
ground floor of the RBJ Building for her pawnshop business for a monthly
rental of 4,000.00. A close friendship developed between the two which led to
the respondent investing thousands of pesos in petitioners financing/lending
business from February 7, 1990 to May 27, 1990, with interest at the rate of
6% a month.
On June 20, 1988, petitioner mortgaged the subject real properties to the
Farmers Savings Bank and Loan Bank, Inc. (FSL Bank) to secure a loan of
2,000,000.00 payable in installments. On November 15, 1990, petitioners
outstanding account on the mortgage reached 2,278,078.13. Petitioner then
decided to sell her real properties for at least 6,500,000.00 so she could
liquidate her bank loan and finance her businesses. As a gesture of friendship,
respondent verbally offered to conditionally buy petitioners real properties for
4,200,000.00 payable on installment basis without interest and to assume the
bank loan. To induce the petitioner to accept her offer, respondent offered the
following conditions/concessions.
After petitioners verbal acceptance of all the conditions/concessions,
both parties worked together to obtain FSL Banks approval for respondent to
assume her (petitioners) outstanding bank account. The assumption would be
part of respondents purchase price for petitioners mortgaged real properties.
FSL Bank approved their proposal on the condition that petitioner would sign
or remain as co-maker for the mortgage obligation assumed by respondent.
Respondent, however, defaulted in the payment of her obligations on
their due dates. Instead of paying the amounts due in lump sum on their
respective maturity dates, respondent paid petitioner in small amounts from
time to time. To compensate for her delayed payments, respondent agreed to
pay petitioner an interest of 6% a month. As of August 31, 1992, respondent
had only paid 395,000.00, leaving a balance of 805,000.00 as principal on
the unpaid installments and 466,893.25 as unpaid accumulated interest.
ISSUE: Whether or not the rescission is tenable.
HELD: No. The Court agrees with the HELD of the courts below that the
subject Deed of Conditional Sale with Assumption of Mortgage entered into by
and among the two parties and FSL Bank on November 26, 1990 is a contract
to sell and not a contract of sale. The title and ownership of the subject
properties remains with the petitioner until the respondent fully pays the
balance of the purchase price and the assumed mortgage obligation.
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Thereafter, FSL Bank shall then issue the corresponding deed of cancellation of
mortgage and the petitioner shall execute the corresponding deed of absolute
sale in favor of the respondent.
Accordingly, the petitioners obligation to sell the subject properties
becomes demandable only upon the happening of the positive suspensive
condition, which is the respondents full payment of the purchase price.
Without respondents full payment, there can be no breach of contract to speak
of because petitioner has no obligation yet to turn over the title. Respondents
failure to pay in full the purchase price is not the breach of contract
contemplated under Article 1191 of the New Civil Code but rather just an event
that prevents the petitioner from being bound to convey title to the respondent.
Thus, the Court fully agrees with the CA when it resolved: "Considering,
however, that the Deed of Conditional Sale was not cancelled by Vendor Reyes
(petitioner) and that out of the total purchase price of the subject property in
the amount of 4,200,000.00, the remaining unpaid balance of Tuparan
(respondent) is only 805,000.00, a substantial amount of the purchase price
has already been paid. It is only right and just to allow Tuparan to pay the said
unpaid balance of the purchase price to Reyes."
Granting that a rescission can be permitted under Article 1191, the
Court still cannot allow it for the reason that, considering the circumstances,
there was only a slight or casual breach in the fulfillment of the obligation.
Unless the parties stipulated it, rescission is allowed only when the breach of
the contract is substantial and fundamental to the fulfillment of the obligation.
Whether the breach is slight or substantial is largely determined by the
attendant circumstances.
On the issue of interest, petitioner failed to substantiate her claim that
respondent made a personal commitment to pay a 6% monthly interest on the
805,000.00 from the date of delinquency, December 31, 1991. As can be
gleaned from the contract, there was a stipulation stating that: "All the
installments shall not bear interest." The CA was, however, correct in imposing
interest at the rate of 6% per annum starting from the filing of the complaint
on September 11, 1992.
G.G. Sportwear Mfg. Corp v. World Class Properties, Inc.
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G.G. SPORTSWEAR MFG. CORP., Petitioner, versus WORLD CLASS

PROPERTIES, INC., Respondent.
(G.R. No. 182720 March 2, 2010 2nd Division)
BRION, J.:
FACTS: World Class is the owner/developer of Global Business Tower (now

Antel Global Corporate Center), an office condominium project located on Julia
Vargas Avenue and Jade Drive, Ortigas Center, Pasig City slated for completion
on December 15, 1998.
GG Sportswear, a domestic corporation, offered to purchase the 38th
floor penthouse unit and 16 parking slots for 32 cars in World Class's
condominium project for the discounted, pre-selling price of P89,624,272.82.
After GG Sportswear paid the P500,000.00 reservation fee, the parties, on May
15, 1996, signed a Reservation Agreement (Agreement) that provides for the
schedule of payments, including the stipulated monthly installments on the
down payment and the balance on the purchase price.
Based on the Agreement, the contract to sell pertaining to the entire
38th floor Penthouse unit and the parking slots would be executed upon the
payment of thirty percent (30%) of the total purchase price. It also
stipulated that all its provisions would be deemed incorporated in the contract
to sell and other documents to be executed by the parties thereafter. The
Agreement also specified that the failure of the buyer to pay any of the
installments on the stipulated date would give the developer the right either to:
(1) charge 3% interest per month on all unpaid receivables, or (2) rescind and
cancel the Agreement without the need of any court action and, upon
cancellation, automatically forfeit the reservation fee and other payments made
by the buyer.
From May to December 1996, GG Sportswear timely paid the
installments due; the eight monthly installment payments amounted to a
total of P19,717,339.50, or 21% of the total contract price.
In a letter dated January 30, 1997, GG Sportswear requested the return
of the outstanding postdated checks it previously delivered to World Class
because it (GG Sportswear) intended to replace these old checks with new ones
from the corporations new bank. World Class acceded, but suggested the
execution of a new Reservation Agreement to reflect the arrangement involving
the replacement checks, with the retention of the other terms and conditions of
the old Agreement. GG Sportswear did not object to the execution of a new
Reservation Agreement, but requested that World Class defer the deposit of the
replacement checks for 90 days. World Class denied this request, contending
that a deferment would delay the subsequent monthly installment payments. It
likewise demanded that GG Sportswear immediately pay its overdue January
1997 installment to avoid the penalties provided in the Agreement.
On March 5, 1997, GG Sportswear delivered the replacement checks
and paid the January 1997 installment payment which had been delayed
by two months. World Class in turn issued a second Reservation Agreement,
which it transmitted to GG Sportswear for the latters conformity. World Class
also sent GG Sportswear a provisional Contract to Sell, which stated that the
condominium project would be ready for turnover to the buyer not later
than December 15, 1998.
GG Sportswear did not sign the second Reservation Agreement. Instead,
it sent a letter to World Class, requesting that its check dated April 24, 1997 be
deposited on May 15, 1997 because it was experiencing financial difficulties.
When World Class rejected GG Sportswears request, GG Sportswear sent
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another letter informing World Class that the second Reservation Agreement
was incomplete because it did not expressly provide the time of
completion of the condominium unit. World Class countered that the
provisional Contract to Sell it previously submitted to GG Sportswear expressly
provided for the completion date (December 15, 1998) and insisted that GG
Sportswear pay its overdue account. So, this petition is.
ISSUE: Whether or not rescission is tenable.
HELD: No. There was no breach on the part of World Class to justify the
rescission and refund. GG Sportswear likewise has no legal basis to demand
either the rescission of the Agreement or the refund of payments it made to
World Class under the Agreement.
Unless the parties stipulated it, rescission is allowed only when the breach of
the contract is substantial and fundamental to the fulfillment of the
obligation. Whether the breach is slight or substantial is largely determined by
the attendant circumstances. But this is not the real issue here because no
breach was made by the respondent.
Even if we apply Article 1191 of the Civil Code, which provides:
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 court observe that GG Sportswear, not World Class, substantially
breached its obligations under the Agreement when it was remiss in the timely
payment of its obligations, such that its January 1997 installment was paid
only in March 1997, or two months after due date. GG Sportswear did not pay
the succeeding installment dated April 1997 (presumably for February 1997)
until it had filed its complaint in June 1997. A substantial breach of a
reciprocal obligation, like failure to pay the price in the manner prescribed by the
contract, entitles the injured party to rescind the obligation. Under this
contractual term, it was World Class, not GG Sportswear, which had the
ground to demand the rescission of the Agreement, as well as the prerogative to
secure the forfeiture of all the payments already made by GG Sportswear.
Movido v. Reyes Pastor
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VALENTIN MOVIDO, substituted by MARGINITO

MOVIDO, Petitioner, versus LUIS REYES PASTOR, Respondent.
(G.R. No. 172279 February 11, 2010 3rd Division)
CORONA, J.:
FACTS: Respondent Luis Reyes Pastor filed a complaint for specific

performance in the Regional Trial Court (RTC) of Imus, Cavite, praying that
petitioner Valentin Movido be compelled to cause the survey of a parcel of land
subject of their contract to sell.
In his complaint, respondent alleged that he and petitioner executed
a kasunduan sa bilihan ng lupa where the latter agreed to sell a parcel of land
located in Paliparan, Dasmarias, Cavite with an area of some 21,000 sq. m.
out of the 22,731 sq. m. covered by Transfer Certificate of Title (TCT) No.
362995 at P400/sq. m.
Respondent further alleged that another kasunduan was later executed
supplementing the kasunduan sa bilihan ng lupa. It provided that, if a Napocor
power line traversed the subject lot, the purchase price would be lowered
toP200/sq. m. beyond the distance of 15 meters on both sides from the center
of the power line while the portion within a distance of 15 meters on both sides
from the center of the power line would not be paid.
Respondent alleged that he already paid petitioner P5 million out of the
original purchase price of P8.4 million stated in the kasunduan sa bilihan ng
lupa. He was willing and ready to pay the balance of the purchase price but
due to petitioners refusal to have the property surveyed despite incessant
demands, his unpaid balance could not be determined with certainty.
ISSUE: Whether or not rescission is tenable.
HELD: No. Rescission is only allowed when the breach is so substantial and
fundamental as to defeat the object of the parties in entering into the
contract. We find no such substantial or material breach.
It is true that respondent failed to pay the 7th and 8th installments of
the purchase price. However, considering the circumstances of the instant
case, particularly the provisions of the kasunduan, respondent cannot be
deemed to have committed a serious breach. In the first place, respondent was
not in default as petitioner never made a demand for payment.1avvphi1
Moreover, the kasunduan sa bilihan ng lupa and the kasunduan should
both be given effect rather than be declared conflicting, if there is a way of
reconciling them. Petitioner and respondent would not have entered into either
of the agreements if they did not intend to be bound or governed by them.
Indeed, taken together, the two agreements actually constitute a single
contract pertaining to the sale of a land to respondent by petitioner. Their
stipulations must therefore be interpreted together, attributing to the doubtful
ones that sense that may result from all of them taken jointly. Their proper
construction must be one that gives effect to all and favour the efficacy of the
contract.
Spouse Tongson v. Emergency Pawnshop
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SPOUSES CARMEN S. TONGSON and JOSE C. TONGSON substituted by his

children namely: JOSE TONGSON, JR., RAUL TONGSON, TITA TONGSON,
GLORIA TONGSON ALMA TONGSON, Petitioners, versus EMERGENCY
PAWNSHOP BULA, INC. and DANILO R. NAPALA, Respondents.
(G.R. No. 167874 January 15, 2010 2nd Division)
CARPIO, J.:
FACTS: In May 1992, Napala offered to purchase from the Spouses Tongson
their 364-square meter parcel of land, situated in Davao City and covered by
Transfer Certificate of Title (TCT) No. 143020, for P3,000,000. Finding the offer
acceptable, the Spouses Tongson executed with Napala a Memorandum of
Agreement dated 8 May 1992.
On 2 December 1992, respondents lawyer Atty. Petronilo A. Raganas, Jr.
prepared a Deed of Absolute Sale indicating the consideration as
only P400,000. When Carmen Tongson "noticed that the consideration was
very low, she [complained] and called the attention of Napala but the latter told
her not to worry as he would be the one to pay for the taxes and she would
receive the net amount of P3,000,000."
To conform with the consideration stated in the Deed of Absolute Sale, the
parties executed another Memorandum of Agreement, which allegedly replaced
the first Memorandum of Agreement, showing that the selling price of the land
was only P400,000.
Upon signing the Deed of Absolute Sale, Napala paid P200,000 in cash to
the Spouses Tongson and issued a postdated Philippine National Bank (PNB)
check in the amount of P2,800,000, representing the remaining balance of the
purchase price of the subject property. Thereafter, TCT No. 143020 was
cancelled and TCT No. T-186128 was issued in the name of EPBI.
When presented for payment, the PNB check was dishonored for the reason
"Drawn Against Insufficient Funds." Despite the Spouses Tongson's repeated
demands to either pay the full value of the check or to return the subject parcel
of land, Napala failed to do either. Left with no other recourse, the Spouses
Tongson filed with the Regional Trial Court, Branch 16, Davao City a
Complaint for Annulment of Contract and Damages with a Prayer for the
Issuance of a Temporary Restraining Order and a Writ of Preliminary
Injunction.
In their Answer, respondents countered that Napala had already
delivered to the Spouses Tongson the amount ofP2,800,000 representing the
face value of the PNB check, as evidenced by a receipt issued by the Spouses
Tongson. Respondents pointed out that the Spouses Tongson never returned
the PNB check claiming that it was misplaced. Respondents asserted that the
payment they made rendered the filing of the complaint baseless.
At the pre-trial, Napala admitted, among others, issuing the postdated PNB
check in the sum of P2,800,000. The Spouses Tongson, on the other hand,
admitted issuing a receipt which showed that they received the PNB check from
Napala. Thereafter, trial ensued.
ISSUE: Whether or not rescission is not tenable because the contract entered
into is based on fraud employed.
HELD: Yes. Indisputably, the Spouses Tongson as the sellers had already
performed their obligation of executing the Deed of Sale, which led to the
cancellation of their title in favor of EPBI. Respondents as the buyers, on the
other hand, failed to perform their correlative obligation of paying the full
amount of the contract price. While Napala paidP200,000 cash to the Spouses
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Tongson as partial payment, Napala issued an insufficiently funded PNB check

to pay the remaining balance of P2.8 million. Despite repeated demands and
the filing of the complaint, Napala failed to pay the P2.8 million until the
present. Clearly, respondents committed a substantial breach of their
reciprocal obligation, entitling the Spouses Tongson to the rescission of the
sales contract. The law grants this relief to the aggrieved party, thus:
Article 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 payment of damages in either case. He
may also seek rescission, even after he has chosen fulfillment, if the
latter should become impossible.
ART. 1385. Rescission creates the obligation to return the things
which were the object of the contract, together with their fruits, and the
price with its interest; consequently, it can be carried out only when he
who demands rescission can return whatever he may be obliged to
restore.
Neither shall rescission take place when the things which are the
object of the contract are legally in the possession of third persons who
did not act in bad faith.
While they did not file an action for the rescission of the sales contract,
the Spouses Tongson specifically prayed in their complaint for the annulment
of the sales contract, which one effect is rescission, for the immediate execution
of a deed of reconveyance, and for the return of the subject property to
them. The Spouses Tongson likewise prayed "for such other reliefs which may
be deemed just and equitable in the premises." In view of such prayer, and
considering respondents substantial breach of their obligation under the sales
contract, the rescission of the sales contract is but proper and justified.
Accordingly, respondents must reconvey the subject property to the Spouses
Tongson, who in turn shall refund the initial payment of P200,000 less the
costs of suit.
Sanz Maceda v. DBO
Cita
BONIFACIO SANZ MACEDA, JR., Petitioner, versus DEVELOPMENT BANK

OF THE PHILIPPINES, Respondent.
(G.R. No. 174979 August 11, 2010 2nd Division)
CARPIO, J.:
FACTS: It appears that on July 28, 1976 plaintiff Bonifacio Maceda, Jr.
(Maceda) obtained a loan from the defendant DBP in the amount of P7.3
million to finance the expansion of the Old Gran Hotel in Leyte. Upon approval
of said loan, plaintiff Maceda executed a promissory note and a mortgage of
real estate. Project cost of the New Gran Hotel wasP10.5M. DBP fixed a debt-
equity ratio of 70%-30%, corresponding to DBP and Macedas respective
infusion in the hotel project. Macedas equity infusion was P2.93M, or 30%
of P10.5M. The DBP Governor at that time, Recio Garcia, in-charge of loans for
hotels, allegedly imposed the condition that DBP would choose the building
contractor, namely, Moreman Builders Co. (Moreman). The contractor would
directly receive the loan releases from DBP, after verification by DBP of the
construction progress. The period of loan availment was 360 days from date of
initial release of the loan. Similarly, suppliers of equipment and furnishings for
the hotel were also to be paid directly by DBP. The construction deadline was
set for December 22, 1977.
Maceda filed a complaint for Rescission of the building contract with
Damages against the contractor Moreman, before the then Manila Court of
First Instance Branch 39, which was docketed as Civil Case No. 113498. In its
decision dated November 28, 1978, the CFI rescinded the building contract,
suspended the period of availment, allowed Maceda to himself take over
construction, and directed DBP to release to Maceda the sum of P1.003M,
which had previously been approved for release in January 1978. The DBP was
further ordered to give plaintiff Maceda such other amounts still pending
release. Moreman filed an appeal which was subsequently dismissed in 1990
by the Supreme Court. Entry of judgment on this case was issued on April 23,
1990.
In the meantime, Maceda also instituted the case a quo for Specific
Performance with Damages against defendant DBP before the Makati RTC in
1984. The Manila CFIs November 28, 1978 Decision and the factual findings
therein contained became part of the evidence submitted before the Makati
RTC. In essence, Macedas complaint before the Makati RTC alleged that DBP
conspired with the contractor, Moreman, by approving anomalous loan
releases to the latter despite exaggerated charges and valuation made by said
contractor on the hotel project. In effect, it was alleged that despite only a 15%
accomplishment which should have cost only P700,000.00, the contractor,
thru the active connivance of the DBP, was able to rake in a total
ofP3,174,358.38 or 60% of the cost of the projected hotel building. When
plaintiff Maceda himself tried to resume the completion and construction of the
hotel project, after the building contract with Moreman was already rescinded
by the CFI Manila, defendant allegedly blocked efforts of the plaintiff by
delaying the release of funds from his loan with the DBP and imposing onerous
conditions which made it difficult for plaintiff to pursue the construction of the
New Gran Hotel. It was further alleged that due to such delays on the part of
the DBP, the period of availment of the loan expired without the plaintiffs [sic]
having availed of the total approved amount of their loan. The construction of
the hotel was never finished. Worse, due to interests and penalties, the
obligation of the plaintiff has ballooned to P11,817,365.90 as of January 31,
1984, not to mention the amount ofP810,702.68 supposedly representing
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interests and charges for the period of February 1, 1978 to October 1979.
Finally, DBP allegedly threatened to foreclose the mortgaged properties of the
plaintiff.
ISSUE: Whether or not the rescission is properly granted as the specific

performance is impossible.
HELD: Yes. The court finds credit in the finding that DBP actively connived
with the contractor in the anomalous loan releases. DBP falsely argues that
releases on the loan were coursed thru the plaintiff-appellant and the checks
were drawn jointly in the names of Maceda and Moreman. As found by the
RTC, the records show that checks were drawn only in the name of Moreman
and plaintiffs conformity to fund releases were solicited by DBP after the fact of
release, not before. Direct releases to the plaintiff, instead of Moreman, began
only after Moreman was discharged as contractor. Further, it was agreed that
payment to Moreman Builders would be assessed against actual construction
of the project upon DBPs verification. Thus, DBP contributed in the swindling
perpetrated by Moreman against the plaintiff because it improperly discharged
its duty as verifier of the construction project.
Under Article 1191 of the Civil Code, the aggrieved party has a choice
between specific performance and rescission with damages in either case.
However, we have ruled that if specific performance becomes impractical or
impossible, the court may order rescission with damages to the injured party.
After the lapse of more than 30 years, it is now impossible to implement the
loan agreement as it was written, considering the absence of evidence as to the
rising costs of construction, as well as the obvious changes in market
conditions on the viability of the operations of the hotel. We deem it equitable
and practicable to rescind the obligation of DBP to deliver the balance of the
loan proceeds to Maceda. In exchange, we order DBP to pay Maceda the value
of Macedas cash equity of P6,153,398.05 by way of actual damages, plus the
applicable interest rate. The present HELD comes within the purview of
Macedas and DBPs prayers for "other reliefs, just or equitable under the
premises."
Raquel-Santos v. CA
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ARMAND O. RAQUEL-SANTOS and ANNALISSA

MALLARI, Petitioners, versus COURT OF APPEALS and FINVEST
SECURITIES CO., INC., Respondents.
(G.R. No. 174986 July 7, 2009 3rd Division)
FINVEST SECURITIES CO., INC., Petitioner, versus TRANS-PHIL MARINE
ENT., INC. and ROLAND H. GARCIA, Respondents.
NACHURA, J.:
FACTS: This is a consolidated case decided by the Supreme Court. Finvest is a

stock brokerage corporation duly organized under Philippine laws and is a
member of the PSE with one membership seat pledged to the latter. Armand O.
Raquel-Santos (Raquel-Santos) was Finvests President and nominee to the
PSE from February 20, 1990 to July 16, 1998. Annalissa Mallari (Mallari) was
Finvests Administrative Officer until December 31, 1998.
In the course of its trading operations, Finvest incurred liabilities to PSE
representing fines and penalties for non-payment of its clearing house
obligations. PSE also received reports that Finvest was not meeting its
obligations to its clients. Consequently, PSE indefinitely suspended Finvest
from trading. The Securities and Exchange Commission (SEC) also suspended
its license as broker.
TMEI and Roland Garcia filed a complaint against Finvest with the SEC
praying for the delivery of stock certificates and payment of dividends on the
stocks they purchased. The Complaint alleged that, from February 4, 1997 to
July 31, 1997, TMEI and Roland Garcia purchased shares of stock of Piltel
Corporation through Finvest. In particular, TMEI purchased 63,720 shares
for P1,122,863.13 while Garcia purchased 40,000 shares forP500,071.25.
Finvest failed to deliver to them the stock certificates despite several demands.
TMEI and Roland Garcia also claimed that they were entitled to the dividends
declared by Piltel from the time they purchased the shares of stock.
This happened because of Raquel-Santos and Mallari took undue
advantage of their positions by diverting to their personal use and benefit the
unaccounted stock certificates and sales proceeds.
ISSUE: Whether or not the rescission is valid.
FACTS: Yes. The CA was correct in applying Article 1191 of the Civil Code,
which indicates the remedies of the injured party in case there is a breach of
contract:
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.
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
Initially, respondents sought the fulfillment of Finvests obligation to
deliver the stock certificates, instead of a rescission. They changed their minds
later and amended the prayer in their complaint and opted for a refund of the
purchase price plus damages. The trial court allowed the amendment, there
being no objection from Finvest.
For a valid transfer of stocks, the requirements are as follows: (a) there
must be delivery of the stock certificate; (b) the certificate must be endorsed by
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the owner or his attorney-in-fact or other persons legally authorized to make

the transfer; and (c) to be valid against third parties, the transfer must be
recorded in the books of the corporation.
Clearly, Finvests failure to deliver the stock certificates representing the
shares of stock purchased by TMEI and Garcia amounted to a substantial
breach of their contract which gave rise to a right to rescind the sale.
Francisco v. DEAC Const. Inc.
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SPS. LINO FRANCISCO & GUIA FRANCISCO, petitioners, versus DEAC

CONSTRUCTION, INC. and GEOMAR A. DADULA, respondents.
(G.R. No. 171312 February 4, 2008 2nd Division)
TINGA, J.:
FACTS: Plaintiffs-appellees Lino Francisco and Guia Francisco obtained the

services of defendant-appellant DEAC Construction, Inc. (DEAC) to construct a
3-storey residential building with mezzanine and roof deck on their lot located
at 118 Pampanga Street, Gagalangin, Tondo, Manila for a contract price
of P3,500,000.00. As agreed upon, a downpayment of P2,000,000.00 should be
paid upon signing of the contract of construction, and the remaining balance
of P1,500,000.00 was to be paid in two equal installments: the first installment
ofP750,000.00 should be paid upon completion of the foundation structure and
the ground floor, which amount would be used primarily for the construction of
the second floor to the roof deck while the final amount of P750,000.00 should
be paid upon completion of the second floor up to the roof deck structure to
defray the expenses necessary for finishing and completion of the building. To
undertake the said project, DEAC engaged the services of a sub-contractor,
Vigor Construction and Development Corporation, but allegedly without the
plaintiffs-appellees' knowledge and consent.
On September 12, 1994, even prior to the execution of the contract, the
plaintiffs-appellees had paid the downpayment of P2,000,000.00. The amount
of P200,000.00 was again paid to DEAC on February 27, 1995 followed by the
payment of P550,000.00 on April 2, 1995. Plaintiff-appellant Guia Francisco
likewise paid the amount of P80,000.00 on June 5, 1995 for the requested
"additional works" on the project.
The construction of the residential building commenced in October 1994
although DEAC, upon which the obligation pertained, had not yet obtained the
necessary building permit for the proposed construction. It was on this basis
that the owner Lino Francisco was charged with violation of Section 301,
Chapter 3 (Illegal Construction) of [P.D. No.] 1096 otherwise known as the
National Building Code of the Philippines with the Metropolitan Trial Court of
Manila, Branch 12.
On March 7, 1995, the Office of the Building Official of the City of Manila
finally issued the requisite Building Permit. Thus, the complaint against owner
Lino Francisco was accordingly dismissed. As admitted by DEAC, the release of
the said permit was withheld because of the erroneous designation of the
location of the lot in one of the building plans. Thus, DEAC had to make the
necessary adjustment. However, before the Office of the Building Official finally
approved the amended building plan, it made some necessary corrections
therein. And to facilitate the said approval and the subsequent release of the
building permit, the signatures of plaintiff-appellee Guia Francisco in the said
amended and corrected building plans were forged by DEAC's representative.
But aside from [the] lack of building permit, the building inspector also
observed, after periodic inspections of the construction site, that the contractor
deviated, on some specifications, from the approved plans. Thus, on April 7,
1995, the Office of the Building Official of Manila issued another Notice of
Violation against owner Lino Francisco, while at the same time calling the
attention of the contractor, on account of deviations and violations.
ISSUE: Whether or not rescission should be granted here in the case.
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HELD: Yes. Article 1191 of the Civil Code provides 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 rescission referred to in this
article, more appropriately referred to as resolution, is not predicated on injury
to economic interests on the part of the party plaintiff, but of breach of faith by
the defendant which is violative of the reciprocity between the parties. The
right to rescind may be waived, expressly or impliedly.
The petitioner maintain that they did not waive their right to demand
rescission as a result of the disputed deviations and because of the fact that
DEAC commenced construction without first securing a building permit as was
incumbent upon it under their contract. In fact, apart from the present case,
the Spouses Francisco filed a criminal suit against respondent Dadula taking
him to task for these violations, of which the latter was found guilty.
Respondents DEAC and Dadula, to whom the obligation of securing the
building permit pertained, should obviously have ensured compliance with the
requirements set forth by law. At the very least, good faith and fair dealing
ordain that they inform the Spouses Francisco that the building permit had not
yet been issued especially that they had already received a substantial amount
of money from the latter and had already started the construction of the
building.
Given the fact that the construction in this case is already 75% complete,
the trial court was correct in ordering partial rescission only of the undelivered
or unfinished portion of the construction. Equitable considerations justify
rescission of the portion of the obligation which had not been delivered.
Cannu V. Galang
SPS. FELIPE AND LETICIA CANNU, petitioners, versus SPS. GIL AND
FERNANDINA GALANG AND NATIONAL HOME MORTGAGE FINANCE
CORPORATION,respondents.
Cita
(G.R. No. 139523 May 26, 2005 2nd Division)

CHICO-NAZARIO, J.:
FACTS: Respondents-spouses Gil and Fernandina Galang obtained a loan from

Fortune Savings & Loan Association for P173,800.00 to purchase a house and
lot located at Pulang Lupa, Las Pias, in the names of respondents-spouses.
To secure payment, a real estate mortgage was constituted on the said house
and lot in favor of Fortune Savings & Loan Association. In early 1990, NHMFC
purchased the mortgage loan of respondents-spouses from Fortune Savings &
Loan Association for P173,800.00. Petitioner Leticia Cannu agreed to buy the
property for P120,000.00 and to assume the balance of the mortgage
obligations with the NHMFC and with CERF Realty (the Developer of the
property).
A Deed of Sale with Assumption of Mortgage Obligation dated 20 August
1990 was made and entered into by and between spouses Fernandina and Gil
Galang (vendors) and spouses Leticia and Felipe Cannu (vendees) over the
house and lot and petitioners immediately took possession and occupied the
house and lot. However, despite requests from Adelina R. Timbang and
Fernandina Galang to pay the balance of P45,000.00 or in the alternative to
vacate the property in question, petitioners refused to do so. Because the
Cannus failed to fully comply with their obligations, respondent Fernandina
Galang, on 21 May 1993, paid P233,957.64 as full payment of her remaining
mortgage loan with NHMFC.
From 1991 until the present, no other payments were made by plaintiffs-
appellants to defendants-appellees spouses Galang. Out of the P250,000.00
purchase price which was supposed to be paid on the day of the execution of
contract in July, 1990 plaintiffs-appellants have paid, in the span of eight (8)
years, from 1990 to present, the amount of only P75,000.00. Plaintiffs-
appellants should have paid the P250,000.00 at the time of the execution of
contract in 1990. Eight (8) years have already lapsed and plaintiffs-appellants
have not yet complied with their obligation.
ISSUE: Whether or not the action for rescission will be granted due that there
was a substantial breach of the obligation.
HELD: Yes. Rescission or, more accurately, resolution, of a party to an

obligation under Article 1191 is predicated on a breach of faith by the other
party that violates the reciprocity between them. Art. 1191 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. The
court shall decree the rescission claimed, unless there be just cause
authorizing the fixing of a period.
Rescission will not be permitted for a slight or casual breach of the
contract. Rescission may be had only for such breaches that are substantial
and fundamental as to defeat the object of the parties in making the
agreement. The question of whether a breach of contract is substantial
depends upon the attending circumstances and not merely on the percentage
of the amount not paid. Thus, the petitioners failure to pay the remaining
balance of P45,000.00 is substantial. Even assuming arguendo that only said
amount was left out of the supposed consideration of P250,000.00, or eighteen
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percent thereof, this percentage is still substantial. Their failure to fulfill their
obligation gave the respondents-spouses Galang the right to rescission.
Villanueva v. Estate of Gonzaga
Cita
GENEROSO V. VILLANUEVA and RAUL C. VILLANUEVA, JR., Petitioners,

versus ESTATE OF GERARDO L. GONZAGA/MA. VILLA GONZAGA, in her
capacity as Administratrix, Respondents.
(G.R. No. 157318 August 9, 2006 2nd Division)
PUNO, J.:
FACTS: On January 15, 1990, petitioners Generoso Villanueva and Raul

Villanueva, Jr., business entrepreneurs engaged in the operation of
transloading stations and sugar trading, and respondent Estate of Gerardo L.
Gonzaga, represented by its Judicial Administratrix, respondent Ma. Villa J.
Gonzaga, executed a MOA. As stipulated in the agreement, petitioners
introduced improvements after paying P291,600.00 constituting sixty (60%)
percent of the total purchase price of the lots. Petitioners then requested
permission from respondent Administratrix to use the premises for the next
milling season. Respondent refused on the ground that petitioners cannot use
the premises until full payment of the purchase price. Petitioners informed
respondent that their immediate use of the premises was absolutely necessary
and that any delay will cause them substantial damages. Respondent remained
firm in her refusal, and demanded that petitioners stop using the lots as a
transloading station to service the Victorias Milling Company unless they pay
the full purchase price. In a letter-reply dated April 5, 1991, petitioners
assured respondent of their readiness to pay the balance but reminded
respondent of her obligation to redeem the lots from mortgage with the
Philippine National Bank (PNB). Petitioners gave respondent ten (10) days
within which to do so.
On April 10, 1991, respondent Administratrix wrote petitioners informing
them that the PNB had agreed to release the lots from mortgage. She
demanded payment of the balance of the purchase price. Enclosed with the
demand letter was the PNBs letter of approval dated April 8, 1991. Petitioners
demanded that respondent show the clean titles to the lots first before they pay
the balance of the purchase price. Respondent merely reiterated the demand
for payment. Petitioners stood pat on their demand. On May 28, 1991,
respondent Administratrix executed a Deed of Rescission rescinding the MOA.
In their Letter dated June 13, 1991, petitioners, through counsel, formally
demanded the production of the titles to the lots before they pay the balance of
the purchase price. The demand was ignored. Consequently, on June 19, 1991,
petitioners filed a complaint against respondents for breach of contract, specific
performance and damages before the RTC-Bacolod City. The trial court decided
the case in favor of respondents. Petitioners filed a petition for review before the
Court of Appeals. The Court of Appeals affirmed the trial courts decision but
deleted the award for moral damages on the ground that petitioners were not
guilty of bad faith in refusing to pay the balance of the purchase price.
ISSUE: Whether or not there is legal, or even a factual, ground for the
rescission of the Memorandum of Agreement.
HELD: No. There is no legal basis for the rescission. The remedy of rescission
under Art. 1191 of the Civil Code is predicated on a breach of faith by the other
party that violates the reciprocity between them. The MOA between petitioners
and respondents is a conditional contract to sell. Ownership over the lots is not
to pass to the petitioners until full payment of the purchase price. Petitioners
obligation to pay, in turn, is conditioned upon the release of the lots from
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mortgage with the PNB to be secured by the respondents. Although there was
no express provision regarding reserved ownership until full payment of the
purchase price, the intent of the parties in this regard is evident from the
provision that a deed of absolute sale shall be executed only when the lots have
been released from mortgage and the balance paid by petitioners. Since
ownership has not been transferred, no further legal action need have been
taken by the respondents, except an action to recover possession in case
petitioners refuse to voluntarily surrender the lots.
The records show that the lots were finally released from mortgage in
July 1991. Petitioners have always expressed readiness to pay the balance of
the purchase price once that is achieved. Hence, petitioners should be allowed
to pay the balance now, if they so desire, since it is established that
respondents demand for them to pay in April 1991 was premature.
Paguyo v. Astorga
Cita
SPOUSES DOMINGO and LOURDES PAGUYO, Petitioners, versusPierre

astorga and St. Andrew Realty, Inc., Respondent.
G.R. No. 130982 September 16, 2005
CHICO-NAZARIO, J.:
FACTS: Herein petitioners were the owners of a small five-storey building

located at Makati City. This lot which the Paguyo building stands was the
subject of a civil case, rendered a decision on January 20, 1998 approving a
compromise agreement made between the Armases and the petitioners. In
order for the petitioners to complete their title and ownership over the lots in
question, there was an urgent need to make complete payment to the Armases.
On November 29, 1998, in order to raise the much needed amount, petitioner
Lourdes Paguyo entered into an agreement captioned as Receipt of Earnest
Money with respondent Astoga, for the sale of the formers property consisting
of the lot which was to be purchased from the Armases. However, contrary to
their express representation with respect to the subject lot, petitioners failed to
comply with their obligation to acquire the lot from the Armas family despite
the full financial support of respondents. Due also to the urgent necessity of
obtaining money to finance their construction business, petitioner proposed to
respondent the separate sale of the building in question while she continued to
work on the acquisition of the lot from the Armas family. Respondents agreed
to petitioners proposal to buy the building first, thus, the parties executed four
documents. Thereafter, the respondents renamed the building into GINZA
building and registered the same in the name of respondents St. Andrew Realty
Inc. Pursuant to their agreement contained in the Mutual Undertaking,
respondent company filed an ejectment case and obtained a favorable decision
against petitioners
The petitioners then filed a complaint for the rescission of the Receipt of
Earnest Money with the undertaking to return the sum of P763, 890.50 and
rescission of the other four documents they signed.
ISSUE: Whether or not rescission is proper.
HELD: Yes. The right to rescind a contract involving reciprocal obligations is

provided for in Article 1191 of the Civil Code. Article 1191 states: The power to
rescind obligations 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.
Moreover, Articles 1355 and 1470 of the Civil Code state: Art. 1355.
Except in cases specified by law, lesion or inadequacy of cause shall not
invalidate a contract, unless there has been fraud, mistake or undue influence.
Art. 1470. Gross inadequacy of price does not affect a contract of sale, except
as may indicate a defect in the consent, or that the parties really intended a
donation or some other act or contract.
Petitioners failed to prove any of the instances mentioned in Articles
1355 and 1470 of the Civil Code, which would invalidate, or even affect, the
Deed of Sale of the Building and the related documents. Indeed, there is no
requirement that the price be equal to the exact value of the subject matter of
sale. In sum, petitioners pray for rescission of the Deed of Sale of the building
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and offer to repay the purchase price after their liquidity position would have
improved and after respondents would have refurbished the building, updated
the real property taxes, and turned the building into a profitable business
venture. The court stated however that, it will not allow itself to be an
instrument to the dissolution of contract validly entered into, for a party should
not, after its opportunity to enjoy the benefits of an agreement, be allowed to
later disown the arrangement when the terms thereof ultimately would prove to
operate against its hopeful expectations.
Casino v. CA
Cita
BIENVENIDO M. CASIO, JR., Petitioners, versus THE COURT OF APPEALS and

OCTAGON REALTY DEVELOPMENT CORPORATION, Respondent.
G.R. No. 133803 September 16, 2005 3rd Division
GARCIA, J.:
FACTS: Respondent alleges that on December 22, 1989, it entered into a

contract with petitioner for the supply and installation by the latter of narra
wood parquet to the Manila Luxury Condominium Project of which respondent
is the developer. The contract stipulated that full delivery by petitioner of labor
and material was in May 1990. Respondent paid to petitioner 40% of the total
contract price; that after delivery only 26, 727.02 sq. ft. of wood parquet
materials, petitioner incurred in delay in the delivery of the remainder of 34,
245.98 sq. ft.; that petitioner misrepresented to respondent that he is qualified
to do the work contracted when in truth and in fact he was not and,
furthermore, he lacked the necessary funds to execute the work. That in order
to minimize loses, the respondent contracted the services of another to
complete the unfinished work. The respondent in its complaint prays for
rescission of contract.
ISSUE: Whether or not the rescission of the contract by the private respondent
is valid.
HELD: Under the contract, petitioner and respondent had respective

obligations, i.e., the former to supply and deliver the contracted volume of
narra wood parquet materials and install the same at respondents
condominium project by May, 1990, and the latter, to pay for said materials in
accordance with the terms of payment set out under the parties agreement.
But while respondent was able to fulfill that which is incumbent upon it by
making a down payment representing 40% of the agreed price upon the signing
of the contract and even paid the first billing of petitioner, the latter failed to
comply with his contractual commitment. For, after delivering only less than
one-half of the contracted materials, petitioner failed, by the end of the agreed
period, to deliver and install the remainder despite demands for him to do so.
Thus, it is petitioner who breached the contract. The petitioner therefore, has
failed to comply with his prestations under his contract with respondent, the
latter is vested by law with the right to rescind the parties agreement,
conformably with Article 1191 of the Civil Code.
However, the right to rescind a contract for non-performance of its
stipulations is not absolute. The general rule is that 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. Contrary to petitioners asseveration, the
breach he committed cannot, by any measure, be considered as slight or
casual. For petitioners failure to make complete delivery and installation way
beyond the time stipulated despite respondents demands, is doubtless a
substantial and fundamental breach, more so when viewed in the light of the
large amount of money respondent had to pay another contractor to complete
petitioners unfinished work.
Likewise, contrary to petitioners claim, it cannot be said that he had no
inkling whatsoever of respondents recourse to rescission. Petitioner cannot
feign ignorance of respondents intention to rescind, fully aware, as he was, of
his non-compliance with what was incumbent upon him, and not to mention
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the several letters respondent sent to him demanding compliance with his
obligation.
Carrascoso v. CA
Cita
FERNANDO CARRASCOSO, JR., Petitioner, versus THE HONORABLE COURT OF

APPEALS, LAURO LEVISTE, as Director and Minority Stockholder and On Behalf
of Other Stockholders of El Dorado Plantation, Inc. and EL DORADO
PLANTATION, INC., represented by one of its minority stockholders, Lauro P.
Leviste, Respondents
G.R. No. 123672 December 14, 2005 3rd Division
CARPIO MORALES, J.:
FACTS: El Dorado Plantation, Inc. was the registered owner of a parcel of land
with an area of approximately 1,825 hectares covered by Transfer Certificate of
Title (TCT) No. T-93 situated in Sablayan, Occidental Mindoro.
On February 15, 1972, at a special meeting of El Dorados Board of
Directors, a Resolution was passed authorizing Feliciano Leviste, then
President of El Dorado, to negotiate the sale of the property and sign all
documents and contracts bearing thereon.
On March 23, 1972, by a Deed of Sale of Real Property, El Dorado,
through Feliciano Leviste, sold the property to Fernando O. Carrascoso, Jr.
From the provisions of the Deed of Sale, Carrascoso was to pay the full
amount of the purchase price on March 23, 1975.
The 3-year period for Carrascoso to fully pay for the property on March
23, 1975 passed without him having complied therewith.
Lauro Leviste (Lauro), a stockholder and member of the Board of
Directors of El Dorado, through his counsel, Atty. Benjamin Aquino, by letter
dated December 27, 1976, called the attention of the Board to Carrascosos
failure to pay the balance of the purchase price of the property amounting to
P1,300,000.00. And Lauros lawyer manifested that:
Lauros desire to rescind the sale was reiterated in two other letters
addressed to the Board dated January 20, 1977 and March 3, 1977.
Jose P. Leviste, as President of El Dorado, later sent a letter of February
21, 1977 to Carrascoso informing him that in view of his failure to pay the
balance of the purchase price of the property, El Dorado was seeking the
rescission of the March 23, 1972 Deed of Sale of Real Property.
Lauro and El Dorado finally filed on March 15, 1977 a complaint for
rescission of the March 23, 1972 Deed of Sale of Real Property between El
Dorado and Carrascoso with damages before the Court of First Instance (CFI)
of Occidental Mindoro, docketed as Civil Case No. R-226.
Lauro and El Dorado also sought the cancellation of TCT No. T-6055 in
the name of Carrascoso and the revival of TCT No. T-93 in the name of El
Dorado, free from any liens and encumbrances. Furthermore, the two prayed
for the issuance of an order for Carrascoso to: (1) reconvey the property to El
Dorado upon return to him of P500,000.00, (2) secure a discharge of the real
estate mortgage constituted on the property from HSB, (3) submit an
accounting of the fruits of the property from March 23, 1972 up to the return
of possession of the land to El Dorado, (4) turn over said fruits or the
equivalent value thereof to El Dorado and (5) pay the amount of P100,000.00
for attorneys fees and other damages.
Also on March 15, 1977, Lauro and El Dorado caused to be annotated on
TCT No. T-6055 a Notice of Lis Pendens, inscribed as Entry No. 39737.
In his Answer with Compulsory Counterclaim, Carrascoso alleged that:
(1) he had not paid his remaining P1,300,000.00 obligation under the March
23, 1972 Deed of Sale of Real Property in view of the extensions of time to
comply therewith granted him by El Dorado; (2) the complaint suffered from
fatal defects, there being no showing of compliance with the condition
precedent of exhaustion of intra-corporate remedies and the requirement that a
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derivative suit instituted by a complaining stockholder be verified under oath;

(3) El Dorado committed a gross misrepresentation when it warranted that the
property was not being cultivated by any tenant to take it out of the coverage of
the Land Reform Code; and (4) he suffered damages due to the premature filing
of the complaint for which Lauro and El Dorado must be held liable.
The Regional Trial Court dismissed the complaint on the ground of
prematurity but on January 31, 1996, the appellate court reversed the decision
of the trial court.
ISSUE: Whether or not the Court of Appeals acted with grave abude of
discretion and committed a mistake of law in not declaring that the action for
rescission was prematurely filed.
HELD: Art. 1191 of the Civil Code 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.
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
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.
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.
The right of rescission of a party to an obligation under Article 1191 is
predicated on a breach of faith by the other party who violates the reciprocity
between them.
A contract of sale is a reciprocal obligation. The seller obligates itself to
transfer the ownership of and deliver a determinate thing, and the buyer
obligates itself to pay therefor a price certain in money or its equivalent. The
non-payment of the price by the buyer is a resolutory condition which
extinguishes the transaction that for a time existed, and discharges the
obligations created thereunder. Such failure to pay the price in the manner
prescribed by the contract of sale entitles the unpaid seller to sue for collection
or to rescind the contract.
In the case at bar, El Dorado already performed its obligation through
the execution of the March 23, 1972 Deed of Sale of Real Property which
effectively transferred ownership of the property to Carrascoso. The latter, on
the other hand, failed to perform his correlative obligation of paying in full the
contract price in the manner and within the period agreed upon.
The terms of the Deed are clear and unequivocal: Carrascoso was to pay
the balance of the purchase price of the property amounting to P1,300,000.00
plus interest thereon at the rate of 10% per annum within a period of three (3)
years from the signing of the contract on March 23, 1972. When Jose Leviste
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informed him that El Dorado was seeking rescission of the contract by letter of
February 21, 1977, the period given to him within which to fully satisfy his
obligation had long lapsed.
The El Dorado Board Resolution and the Affidavit of Jose Leviste
interposing no objection to Carrascosos mortgaging of the property to any
bank did not have the effect of suspending the period to fully pay the purchase
price, as expressly stipulated in the Deed, pending full payment of any
mortgage obligation of Carrascoso.
Goldenrod v. CA
Cita
GOLDENROD, INC., petitioner, versus COURT OF APPEALS, PIO BARRETO

& SONS, INC., PIO BARRETO REALTY DEVELOPMENT, INC. and ANTHONY
QUE, respondents.
G.R. No. 126812 November 24, 1998 1st Division
BELLOSILLO, J.:
FACTS: Pio Barreto and Sons, Inc. owned forty-three (43) parcels of registered
land with a total area of 18,500 square meters located at Carlos Palanca St.,
Quiapo, Manila, which were mortgaged with United Coconut Planters Bank
(UCPB). In 1988, the obligation of the corporation with UCPB remained unpaid
making foreclosure of the mortgage imminent.
Goldenrod, Inc. offered to buy the property from BARRETO & SONS. On
25 May 1988, through its president, petitioner wrote respondent Anthony Que,
President of respondent BARRETO & SONS, as follows:
.we prefer that the lots be reconsolidated back to its mother
titles.
Enclosed is the earnest money of P1 million which shall form part of
the purchase price.
Payment of the agreed total consideration shall be effected in
accordance with our offer as you have accepted and upon execution of the
necessary documents of sale to be implemented after the said
reconsolidation of the lots.
Kindly acknowledge receipt of the earnest money.
When the term of existence of BARRETO & SONS expired, all its assets
and liabilities including the property located in Quiapo were transferred to Pio
Barreto Realty Development, Inc. Petitioner's offer to buy the property resulted
in its agreement with respondent BARRETO REALTY that petitioner would pay
the following amounts: (a) P24.5 million representing the outstanding
obligations of BARRETO REALTY with UCPB on 30 June 1988, the deadline set
by the bank for payment; and, (b) P20 million which was the balance of the
purchase price of the property to be paid in installments within a 3-year period
with interest at 18% per annum.
On 30 August 1988 Alicia P. Logarta, President of Logarta Realty and
Development Corporation, which acted as agent and broker of petitioner, wrote
private respondent Anthony Que informing him on behalf of petitioner that it
could not go through with the purchase of the property due to circumstances
beyond its fault.
On 31 August 1988 respondent BARRETTO REALTY sold to Asiaworld
Trade Center Phils., Inc., Lot 2, one of the two (2) consolidated lots, for the
price of P23 million. On 13 October 1988 respondent BARRETTO REALTY
executed a deed transferring by way of " dacion " the property reconsolidated as
Lot 1 in favor of UCPB, which in turn sold the property to ASIAWORLD for P24
million.
On 12 December 1988 Logarta again wrote respondent Que demanding
the return of the earnest money to GOLDENROD. On 7 February 1989
petitioner through its lawyer reiterated its demand, but the same remained
unheeded by private respondents. This prompted petitioner to file a complaint
with the Regional Trial Court of Manila against private respondents for the
return of the amount of P1 million and the payment of damages including lost
interests or profits.
On 15 March 1991 the trial court rendered a decision ordering private
respondents jointly and severally to pay petitioner P1,000.000.00 with legal
interest from 9 February 1989 until fully paid.The trial court found that there
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was no written agreement between the parties concerning forfeiture of the

earnest money if the sale did not push through. On appeal, the Court of
Appeals reversed the trial court decision and ordered the dismissal of the
complaint; hence, this petition.
ISSUE: Whether or not the Court of Appeals erred in disregarding the finding of
the trial court that the earnest money given by petitioner to respondent
BARRETTO REALTY should be returned to the former.
HELD: Under Art. 1482 of the Civil Code, whenever earnest money is given in a
contract of sale, it shall be considered as part of the purchase price and as
proof of the perfection of the contract. Petitioner clearly stated without any
objection from private respondents that the earnest money was intended to
form part of the purchase price. It was an advance payment which must be
deducted from the total price. Hence, the parties could not have intended that
the earnest money or advance payment would be forfeited when the buyer
should fail to pay the balance of the price, especially in the absence of a clear
and express agreement thereon.
In University of the Philippines v. de los Angeles , the right to rescind
contracts is not absolute and is subject to scrutiny and review by the proper
court. We held further, in the more recent case of Adelfa Properties, Inc. v.
Court of Appeals , that rescission of reciprocal contracts may be extrajudicially
rescinded unless successfully impugned in court. If the party does not oppose
the declaration of rescission of the other party, specifying the grounds
therefore, and it fails to reply or protest against it, its silence thereon suggests
an admission of the veracity and validity of the rescinding party's claim.
Private respondents did not interpose any objection to the rescission by
petitioner of the agreement. As found by the Court of Appeals, private
respondent BARRETTO REALTY even sold Lot 2 of the subject consolidated lots
to another buyer, ASIAWORLD, one day after its President Anthony Que
received the broker's letter rescinding the sale. Subsequently, on 13 October
1988 respondent BARRETO REALTY also conveyed ownership over Lot 1 to
UCPB which, in turn, sold the same to ASIAWORLD.
Art. 1385 of the Civil Code provides that rescission creates the obligation
to return the things which were the object of the contract together with their
fruits and interest. The vendor is therefore obliged to return the purchase price
paid to him by the buyer if the latter rescinds the sale, or when the transaction
was called off and the subject property had already been sold to a third person,
as what obtained in this case. Therefore, by virtue of the extrajudicial
rescission of the contract to sell by petitioner without opposition from private
respondents who, in turn, sold the property to other persons, private
respondent BARRETTO REALTY, as the vendor, had the obligation to return
the earnest money of P1000,000.00 plus legal interest from the date it received
notice of rescission from petitioner
WHEREFORE, the Petition is GRANTED. The decision of the Court of
Appeals is REVERSED and SET ASIDE. Private respondent Pio Barretto Realty
Development, Inc., its successors and assigns are ordered to return to
petitioner Goldenrod, Inc., the amount of P1,000,000.00 with legal interest
thereon.
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Serrano v. CA
SPOUSES ARTURO AND NICETA SERRANO, petitioners, versus COURT OF
APPEALS AND HEIRS OF EMILIO S. GELI, respondents.
(G.R. No. 133883. December 10, 2003 2nd Division)
CALLEJO, SR., J.:
FACTS: Petitioner spouses Arturo and Niceta Serrano are the owners of a
parcel of land and the house constructed thereon located in Quezon City; and
another parcel of land located again in Quezon City. The couple mortgaged said
properties in favor of Government Service Insurance System (GSIS) for a
security loan of P50,000.00 They were able to pay P18,000.00 on 1969. On the
same year, the spouses Serrano as vendors and spouses Emilio and Evelyn
Geli as vendees executed a deed of absolute sale with partial assumption of the
mortgage for the price of P70, 000. Spouses Geli paid the amount of
P38,000.00 and the balance of P32,000.00 to be paid to GSIS. Emilio Geli and
his children, respondents herein, failed to settle the amount to the GSIS.
Petitioners filed a complaint for the rescission of the deed of absolute sale
with partial assumption of mortgage on September 6, 1984. The trial court
rendered a decision ordering rescission of the deed. Emilio and petitioners
appealed the decision to the Court of Appeals (CA). The GSIS foreclosed the
mortgage during the pendency of the appeal. A certificate of sale over the
property was Issued in favor of the GSIS it being the highest bidder. In 1987,
Emilio paid the redemption price of P67, 701.84 to GSIS. Accordingly, the GSIS
executed a deed of transfer and turned over to Emilio the transfer certificate
title (TCT) without informing Serrano and the CA. In 1991, the CA dismissed
Emilio and petitioners appeal for failure to pay the requisite docket fees which
became final and executory.
ISSUE: Whether or not the trial courts judgment ordering the rescission of the
deed of absolute sale with partial assumption of mortgage executed by
petitioners and respondents is proper.
HELD: The payment by Emilio of the redemption price to the GSIS was made
pending appeal by the respondents from the trial courts order and concealed
said payment to petitioners. The respondents appealed the decision before the
CA which was subsequently dismissed for failure to pay the requisite docket
fees. Neither did respondents file any motion for reconsideration for the
dismissal of the appeal. Consequently, the trial courts decision became final
and executory.
With the rescission of the deed of sale, the rights of Emilio Geli under
said deed to redeem the property had been extinguished. The petitioners
cannot even be compelled to subrogate the respondents to their right under the
real estate mortgage over the property which the petitioners executed in favor
of GSIS since the payment of the redemption price was made without the
knowledge of the petitioners. The respondents, however, are entitled to be
reimbursed by the petitioners to the extent that the latter were benefited.
Gil v. Court of Appeals
Cita
PERLA PALMA GIL, VICENTE HIZON, JR., and ANGEL PALMA

GIL, petitioners, versus HON. COURT OF APPEALS, HEIRS OF EMILIO
MATULAC, CONSTANCIO MAGLANA, AGAPITO PACETES & The
REGISTER OF DEEDS OF DAVAO CITY, respondents.
(G.R. No. 127206. September 12, 2003 2nd Division)
CALLEJO, SR., J.:
FACTS: Concepcion Palma Gil, and her sister, Nieves Palma Gil, were the co-
owners of a parcel of commercial land with an area of 829 square meters,
identified as Lot No. 59-C, covered by Transfer Certificate of Title (TCT) No. 432
located in Davao City. The spouses Angel and Nieves Villarica had constructed
a two-storey commercial building on the property. On October 13, 1953,
Concepcion filed a complaint against her sister Nieves with the then Court of
First Instance of Davao City, for specific performance, to compel the defendant
to cede and deliver to her an undivided portion of the said property with an
area of 256.2 square meters. After due proceedings, the court rendered
judgment in favor of Concepcion, ordering the defendant to deliver to the
plaintiff an undivided portion of the said property with an area of 256.2 square
meters.
Nieves appealed to the Court of Appeals which affirmed the assailed
decision. On motion of the Concepcion, the court Issued a writ of execution.
Nieves, however, refused to execute the requisite deed in favor of her sister. The
court Issued an order authorizing the sheriff to execute the requisite deed of
transfer to the plaintiff over an undivided portion of the property with a total
area of 256.2 square meters. The sheriff thereafter executed a Deed of Transfer
to Concepcion over Lot 59-C-1 and Lot 59-C-2 with a total area of 256.2 square
meters. On October 24, 1956, Concepcion executed a deed of absolute sale
over Lot 59-C-1 in favor of Iluminada Pacetes. In the said deed, the area of Lot
59-C-1 appeared as 256 square meters although under the subdivision plan,
the area of the property was only 218 square meters. The spouses Angel and
Nieves Villarica filed a complaint against the sheriff and Concepcion with the
Court of First Instance of Davao City for the nullification of the deed of transfer
executed by the sheriff.
ISSUE: Whether or not Iluminada Pacetes had the right to sell the two parcels
of land to Maglana.
HELD: Article 1191 in tandem with Article 1592 of the New Civil Code were
central to the issues at bar. In reciprocal obligations, neither party incurred
delay if the other does not comply in a proper manner with that which was
incumbent upon him. From the moment one of the parties fulfills his
obligation, delay in the other begins. Thus, reciprocal obligations should be
performed simultaneously for the performance of one is conditioned and the
simultaneous fulfillment of the other. The right of rescission of a party to an
obligation under Article 1191 is predicated on a breach of faith by the other
party that violates the reciprocity between them. The consignation of the
vendee of the purchase price of the property is sufficient to defeat the right of
the petitioners to demand for the rescission of the said deed of absolute sale.
The deed of absolute sale executed by Concepcion Gil in favor of
Iluminada Pacetes is an executory contract and not an executed contra t is a
settle matter. In a perfect contract of sale of realty, the right to rescind the said
contract depends upon the fulfillment or non-fulfillment of the prescribed
condition
Cita
The non-payment of the purchase price of property constitutes a very

good reason to rescind a sale for it violates the very essence of the contract of
sale and it is a resolutory condition for which the remedy is either rescission or
specific performance under Article 1191 of the New Civil Code. The vendee is
entitled to retain the purchase price or a part of the purchase price of realty if
the vendor fails to perform any essential obligation of the contract.
The decision of the Court of Appeals affirming the decision of the
Regional Trial Court dismissing the complaint of the petitioners is affirmed.
Reyes v. Lim
Cita
DAVID REYES (Substituted by Victoria R. Fabella), petitioner, versus JOSE

LIM, CHUY CHENG KENG and HARRISON LUMBER, INC., respondents.
(G.R. No. 134241 August 11, 2003 1st Division)
CARPIO, J.:
FACTS: On November 7, 1994, petitioner David Reyes as seller, and Jose Lim
as buyer, entered into a contract to sell a parcel of land located at Pasay City.
Harrison Lumber Inc. occupied the property as lessee. The contract contained
terms and conditions which are as follows: 1) the total consideration of
property is P28M, 2) P10M to be paid upon the signing of the contract, the
balance payable on March 8, 1995 upon vacation of tenants and occupants of
the property and the execution of deed of absolute sale, 3) that in the event
that the property is not vacated on the date stipulated, vendee shall withhold
the balance and vendor agrees to pay a penalty of 4% of the downpayment
(P10M) until its complete vacation. Lim paid the amount of P10M to Reyes as
provided in the contract.
On March 23, 1995, petitioner filled a complaint for annulment of
contract and damages against respondents Lim, Chuy Cheng Keng and
Harrison. The complaint alleged that Reyes informed Harrison to vacate
property before the end of January and that failure to do so would make them
liable for the penalty as provided in the contract. It was further alleged that
Lim connived with Harrison not to vacate the property until the unpaid
purchase price had been equaled by the accumulated penalty.
On March 1, 1995, Lim denied connivance with Keng and Harrison to
defraud Reyes.
ISSUE: Whether or not the petitioner should deposit the P10 million down
payment to the custody of the trial court as an effect of rescission of the
Contract to Sell.
HELD: The Supreme Court Held that an action for rescission could prosper
only if the party demanding rescission can return whatever he may be obliged
to restore should the court grant the rescission. The trial court in the exercise
of its equity jurisdiction may validly order the deposit of P10 million down
payment in court. The purpose of the exercise of equity jurisdiction in this
case is to prevent unjust enrichment and to ensure restitution. Reyes is
seeking rescission of the Contract to Sell.
To subscribe top Reyes contention will unjustly enrich Reyes at the
expense of Lim. Reyes sold to Line One Foods Corporation the property. Reyes
cannot claim ownership of the P10 million down payment because Reyes had
already sold to another buyer the property for which Lim made the down
payment. The Supreme Court find the equities weigh heavily in favor of Lim,
who paid the P10 million down payment in good faith only to discover later that
Reyes had subsequently sold the property to another buyer.
Ong v. Tui
Cita
ONG YONG, JUANITA TAN ONG, WILSON T. ONG, ANNA L. ONG, WILLIAM
T. ONG, WILLIE T. ONG, And JULIE ONG ALONZO, petitioners,
versus DAVID S. TIU, CELY Y. TIU, MOLY YU GAW, BELEN SEE YU, D.
TERENCE Y. TIU, JOHN YU, LOURDES C. TIU, INTRALAND RESOURCES
DEVELOPMENT CORP., MASAGANA TELAMART, INC., REGISTER OF
DEEDS OF PASAY CITY, And the SECURITIES AND EXCHANGE
COMMISSION, respondents.
(G.R. No. 144476. February 1, 2002 2nd Division)
BUENA, J.:
FACTS: The Masagana Citimall, a commercial complex owned and managed by

the First Landlink Asia Development Corporation (FLADC), was threatened with
incompletion because of financial distress in the amount of P190M for being
indebted to the Philippine National Bank (PNB). FLADC was then fully owned
by the Tiu group. In order to recover, the Tius invited the Ongs to invest in
FLADC. Hence the two groups executed a Presubscription Agreement. By the
agreement, the parties agreed to maintain equal shareholdings in FLADC with
the Ongs investing cash while the Tius contributing property. Specifically, the
Ongs were to subscribe to 1 million shares of FLADC. Commensurate to their
proposed subscriptions, the Ongs were to pay P100M in cash while the Tius
were to contribute their properties namely; a four-storey building, a parcel of
land valued at P30M, a parcel of land adjacent to said properties. Also for
purposes of equality, among the agreements was that the positions of President
and Secretary of FLADC shall be Held by the Ongs while the Vice President and
the Treasurer shall be Held by the Tius. In order to liquidate the FLADCs loan
from the PNB, the parties proposed payment of P100M to be invested by Ongs
to FLADC.
Intraland Resources and Development Corporation (Tius) executed of
assignment over the 4-storey building in favor of FLADC. Masagana Telemart
Inc. executed a deed of assignment over the said land properties in favor of
FLADC and the title was transferred in the latters name. The loan from the
PNB was also settled but not in accord with the provisions of the agreement.
The controversy arose when the Ongs refused to credit the number of
FLADC shares in the name of Masagana Telemart commensurate to its
property contributions and when the Ongs refused to credit the number of
FLADC shares in favor of the Tius commensurate to their land property
contribution and when the Tius were proscribed from assuming and
performing their duties as Vice President and Treasurer.
The Tius sought the Securities and Exchange Commission (SEC)
confirmation of the rescission of the PreSubscription Agreement. The SEC
confirmed the rescission of the said agreement. Both the Ong and the Tiu
group appealed the order of the SEC to the SEC en banc. The SEC Issued an
order confirming the first SEC order with modifications. The Ongs appealed to
the Court of Appeals (CA). The CA affirmed the SEC en banc orders and
confirmed the rescission of the Pre Subscription Agreement with modifications.
ISSUE: Whether or not the decision of the CA confirming the rescission of the
Pre Subscription Agreement entered into by the Tiu group and the Ong group is
proper.
HELD: The Court of Appeals did not err in HELD that the "Pre-Subscription
Agreement" of the parties dated August 15, 1994 may be rescinded under
Article 1191 of the New Civil Code. Reciprocity in a contract of sale, is the
Cita
correlative duty of the obligation of the seller to deliver the property is the
obligation of the buyer to pay the agreed price. In the case at bar, the
correlative obligation of the Tius is to let the Ongs have and exercise the
functions of the positions of President and Secretary and the obligation of the
Ongs is to let the Tius have and exercise the functions of Vice-President and
Treasurer. The Ongs allege that rescission is applicable only to reciprocal
obligations and the "Pre-Subscription Agreement" does not provide for
reciprocity, hence, the remedy of rescission is not available.
The Ongs cited the case of Songcuan vs. IAC, to illustrate their point that
"As in the Songcuan case, there are here two (2) separate and distinct
obligations each independent of the other the obligation to subscribe to, and to
pay, 50% of the increased capital stock of FLADC; and the obligation to install
the Ongs and the Tius as members of the Board of Directors and to certain
corporate positions, but only after the Ongs and the Tius have subscribed each
to 50% of the increased capital stock of FLADC." In this petition, in lieu of Art.
1191, the Ongs invoke Articles 1156 and 1159 of the New Civil Code which
state:
"Art. 1156. An obligation is a juridical necessity to give, to do or
not to do.
"Art. 1159. Obligations arising from contracts have the force of
law between the contracting parties and should be complied with in
good faith."
and that should there be any violation, those who failed to fulfill their
obligations should be required to perform their obligations under the
agreement.Contrary to the Ongs' assertion, the Songcuan case does not apply
squarely to this case.
In the Songcuan case, the Court ruled that Art. 1191 to rescind the right
of the Alviars to repurchase does not apply because their corresponding
obligations can hardly be called reciprocal because the obligation of the Alviars
to lease to Songcuan the subject premise arises only after the latter had
reconveyed the realties to them. On the other hand, in the instant case, the
obligations of the two (2) groups to pay 50% of the increased capital stock of
FLADC and to install them as members of the Board of Directors and to certain
corporate positions are simultaneous and arise upon the execution of the pre-
subscription agreement.
The Ongs illustrate reciprocity in the following manner: In a contract of
sale, the correlative duty of the obligation of the seller to deliver the property is
the obligation of the buyer to pay the agreed price. In the case at bar, the
correlative obligation of the Tius to let the Ongs have and exercise the
functions of the positions of President and Secretary is the obligation of the
Ongs to let the Tius have and exercise the functions of Vice-President and
Treasurer.
Equatorial Realty v. Mayfair Theater
Cita
EQUATORIAL REALTY DEVELOPMENT, INC., petitioner, versus MAYFAIR

THEATER, INC., respondent.
(G.R. No. 133879 November 21, 2001 EN BANC)
PANGANIBAN, J.:
FACTS: Carmelo & Bauermann, Inc. used to own a parcel of land, together
with two two-storey buildings constructed thereon. On June 1, 1967, Carmelo
entered into a lease with Mayfair Theater, Inc. for a period of 20 years. The
lease covered a portion of the second floor and mezzanine. Two years later,
Mayfair entered into a second lease with Carmelo for the lease of another
property, a part of the second floor and two spaces on the ground floor. The
lease was also for a period of twenty years. Both leases contained a provision
granting Mayfair a right of first refusal to purchase the said properties.
However, on July 30, 1978, within the 20-year-lease term, the subject
properties were sold by Carmelo to Equatorial Realty Development, Inc. for the
sum of P11.3M without their first being offered to Mayfair.
As a result, Mayfair filed a complaint for specific performance and
damages. After trial, the court ruled in favor of Equatorial. On appeal, the
Court of Appeals reversed and set aside the judgment of the lower court. On
November 21, 1996, the Supreme Court denied Equatorials petition for review
and declared the contract between Carmelo and Equatorial rescinded. The
decision became final and executory.
On September 18, 1997, Equatorial filed an action for the collection of
sum of money against Mayfair claiming payment of rentals or reasonable
compensation for the defendants use of the premises after its lease contracts
had expired. The lower court debunked the claim of the petitioner for unpaid
rentals, holding that the rescission of the Deed of Absolute Sale in the mother
case did not confer on Equatorial any vested or residual proprietary rights,
even in expectancy.
ISSUE: Whether or not Equatorial may collect rentals or reasonable

compensation for Mayfairs use of subject premises after its lease contracts had
expired.
HELD: Equatorial did not obtain right of ownership over the property when it
entered into the Deed of Absolute Sale. Ownership of the property is acquired
by buyer only upon the delivery of the thing to him. There is delivery if the
thing sold is placed in the control and possession of the vendee. While the
execution of a public instrument of sale is recognized by law as the equivalent
of delivery of the thing sold, such constructive or symbolic delivery, being only
presumptive, is deemed negated by the failure of the vendee to take actual
possession of the property sold. Since Mayfair was in actual possession of the
property by virtue of the lease contract with Carmelo, there was no
consummation of the sale, and therefore, Equatorial did not get ownership
right (real right).
Further, the Deed of Absolute Sale entered into by Carmelo and
Equatorial was a violation of the right of first refusal granted by Carmelo to
Mayfair. The execution of the deed of absolute sale as a form of constructive
delivery is a legal fiction. It holds true only if there is no legal impediment that
may prevent the passing of the property from the vendor to the vendee. The
right of first refusal Held by Mayfair was such legal impediment. Therefore,
there was no transfer of ownership from Camelot to Equatorial. As a result, no
rental can be collected by equatorial from Mayfair.
Cita
Velarde v. CA
Spouses MARIANO Z. VELARDE and AVELINA D.
VELARDE, petitioners, versus COURT OF APPEALS, DAVID A. RAYMUNDO
and GEORGE RAYMUNDO, respondents.
PANGANIBAN, J.:
FACTS: David Raymundo (private respondent) is the absolute

andregistered owner of a parcel of land, located at 1918 Kamias St.,
Dasmarias Village Makati, together with the house and other improvements,
which was under lease. It was negotiated by Davids father with plaintiffs
Avelina and Mariano Velarde (petitioners). A Deed of Sale with Assumption of
Mortgage was executed in favor of the plaintiffs. Part of the consideration of the
sale was the vendees assumption to pay the mortgage obligations of the
property sold in the amount of P 1,800,000.00 in favor of the Bank of the
Philippine Islands. And while their application for the assumption of the
mortgage obligations is not yet approved by the mortgagee bank, they have
agreed to pay the mortgage obligations on the property with the bank in the
name of Mr. David Raymundo. It was further stated that in the event Velardes
violate any of the terms and conditions of the said Deed of Real Estate
Mortgage, they agree that the downpayment P800,000.00, plus all the
payments made with the BPI on the mortgage loan, shall be forfeited in Favor
of Mr. Raymundo, as and by way of liquidated damages, w/out necessity of
notice or any judicial declaration to that effect, and Mr. Raymundo shall
resume total and complete ownership and possession of the property, and the
same shall be deemed automatically cancelled, signed by the Velardes.
Pursuant to said agreements, plaintiffs paid BPI the monthly interest
loan for three months but stopped in paying the mortgage when informed that
their application for the assumption of mortgage was not approved. The
defendants through a counsel, wrote plaintiffs informing the latter that their
non-payment to the mortgagee bank constituted non-performance of their
obligation and the cancellation and rescission of the intended sale. And after
two days, the plaintiffs responded and advised the vendor that he is willing to
pay provided that Mr. Raymundo: (1) delivers actual possession of the property
to them not later than January 15, 1987 for their occupancy (2) causes the
release of title and mortgage from the BPI and make the title available and free
from any liens and encumbrances (3) executes an absolute deed of sale in their
favor free from any liens and encumbrances not later than Jan. 21, 1987.
The RTC of Makati dismissed the complaint of the petitioners against Mr.
Raymundo for specific performance, nullity of cancellation, writ of possession
and damages. However, their Motion for Reconsideration was granted and the
Court instructed petitioners to pay the balance of P 1.8 million to private
respondent who, in turn were ordered to execute a deed of absolute sale and to
surrender possession of the disputed property to petitioners.
Upon the appeal of the private respondent to the CA, the court upheld
the earlier decision of the RTC regarding the validity of the rescission made by
private respondents.
ISSUE: Whether the rescission of contract made by the private respondent is

valid.
HELD: There is a breach of contract because the petitioners did not merely
stopped paying the mortgage obligations but they also failed to pay the balance
Cita
purchase price. Their conditional offer to Mr. Raymundo cannot take the place
of actual payment as would discharge the obligation of the buyer under
contract of sale.
Mr. Raymundos source of right to rescind the contract is Art. 1191 of the
Civil Code predicated on a breach of faith by the other party who violates the
reciprocity between them. Moreover, the new obligations as preconditions to
the performance of the petitioners own obligation were repudiation of an
existing obligation, which was legally due and demandable under the contract
of sale.
The breach committed by the petitioners was the non-performance of a
reciprocal obligation. The mutual restitution is required to bring back the
parties to their original situation prior to the inception of the contract. The
initial payment and the mortgage payments advanced by petitioners should be
returned by private respondents, lest the latter unjustly enriched at the
expense of the other. Rescission creates the obligation to return the obligation
of contract. To rescind, is to declare a contract void at its inception and to put
an end to it as though it never was.
The decision of the CA is affirmed with modification that private
respondents are ordered to return to petitioners, the amount they have
received in advanced payment.
Asuncion v. Evangelista
Cita
ALEXANDER G. ASUNCION, petitioner, versus EDUARDO B. EVANGELISTA

and COURT OF APPEALS, respondents.
(G.R. No. 133491 October 13, 1999 1st Division)
PUNO, J.:
FACTS: Private respondent Evangelista was the majority stockholder of the

Embassy Farm, Inc., with 90% of the shares in his name. He also served as its
president and CEO. Its principal office was established at the piggery facility
that has been existing on the landholdings of private respondents in Barangay
Loma de Gato, Marilao, Bulacan, consisting about 104, 447 sq. m.
In 1980, 1981, and 1982, private respondent obtained three personal
loans in three different banks to provide himself working capital to run the
farm and sustain its operations. His debt exposure totaled P3,056, 625.78.
By June 24, 1984, private respondents aggregate debt had ballooned to
almost P6,000,000 in overdue principal payments, interests, penalties and
other financial charges.
On August 2, 1984, petitioner Asuncion and private respondent executed
a Memorandum of Agreement. Among the terms and conditions contained in
the agreement was the stipulation that petitioner has purchased private
respondents landholdings and shares of stock in Embassy Farms, Inc. for the
price equivalent to private respondents total outstanding loans which
petitioner shall assume. For his part, private respondent was obligated to
execute, sign and deliver any and all documents necessary for the transfer and
conveyance of several parcels of land he owned and to cede, transfer and
convey in a manner absolute and irrevocable any and all of his shares of stocks
in the said corporation.
As of August, 1985, the total amount paid by petitioner to private
respondent was P3,194,941.88. However, the landholdings over the subject
parcels of land and the shares of stock in the corporation remained is still in
the name of private respondent.
Petitioner demanded for the performance of obligation but private
respondent resisted. Eventually, case was filed for rescission of the
Memorandum of Agreement on April 10, 1986.
On July, 1, 1994, the trial court rendered a decision in favor of private
respondent holding that petitioner can not demand the delivery of the
landholdings and the share of stock because he has not yet fully paid the whole
loan of private respondent. The Court of Appeals affirmed it.
ISSUE: Whether or not rescission is a valid legal recourse in the case at bar.
HELD: Article 1191 of the Civil Code governs the situation where there is non-
compliance by one party in case of reciprocal obligations.
The Supreme Court found that private respondent failed to perform his
substantial obligations under the MOA. Hence, petitioner sought the
rescission of the agreement and ceased infusing capital into the piggery
business of private respondent. He later justified his refusal to execute any
deed of sale and deliver the certificates of stock by accusing petitioner of having
failed to assume his debts.
The Court holds that the respondents insistence that petitioner execute
a formal assumption of mortgage independent and separate from his own
execution of a deed of cases is legally untenable, considering that a recorded
real estate mortgage is a lien inseparable from the property mortgaged and
until discharged, it follows the property.
Cita
In fine, that the MOA entered into by petitioner and private respondent
should indeed be rescinded. The respondent appellate court erred in assessing
damages against petitioner for his refusal to fully pay private respondents
overdue loans. Such refusal was justified, considering that private respondent
was the first to refuse to deliver to petitioner the lands and certificates of stock
that were the consideration for the almost 6M in debt that petitioner was to
assume and pay.
The instant petition was granted. Decisions of the lower and appellate
courts were reversed and set aside. The MOA entered into by the parties is
declared rescinded.
Uy v. Court of Appeals
Cita
WILLIAM UY and RODEL ROXAS, petitioners, versus COURT OF APPEALS,

HON. ROBERT BALAO and NATIONAL HOUSING AUTHORITY, respondents.
(G.R. No. 120465 September 9, 1999 1st Division)
KAPUNAN, J.:
FACTS: Petitioners William Uy and Rodel Roxas are agents authorized to sell
eight (8) parcels of land by the owners thereof. By virtue of such authority,
petitioners offered to sell the lands, located in Tuba, Tadiangan, Benguet to
respondent National Housing Authority (NHA) to be utilized and developed as a
housing project.
On February 14, 1989, NHA approved the acquisition of the said parcels
of land with an area of 31.8231 hectares at the cost of P23.867 million,
pursuant to which the parties executed a series of Deeds of Absolute Sale
covering the subject lands. Of the eight parcels of lands, however, only five
were paid for by the NHA because of the report it received from the Land
Geosciences Bureau of the Department of Environment and Natural Resources
that the remaining area is located at an active landslide area and therefore, not
suitable for development into a housing project. NHA eventually cancelled the
sale over the remaining three (3) parcels of land.
On March 9, 1992, petitioners filed a complaint for damages. After trial,
the RTC of Quezon City rendered the cancellation of contract to be justified and
awarded P1.255 million as damages in favor of petitioners.
Upon appeal by petitioners, the Court of Appeals reversed the decision
and entered a new one dismissing the complaint including the award of
damages.
The motion for reconsideration having been denied, petitioners seek relief
from this court contending, inter alia, that the CA erred in declaring that NHA
had any legal basis to rescind the subject sale.
ISSUE: Whether or not the cancellation of the sale has sufficient justifiable
basis.
HELD: The cancellation of the sale was based on the negation of the cause
arising from the realization that the land, which were the object of the sale,
were not suitable for housing cause is the essential reason which moves the
contracting parties to enter into a contract. The National Housing Authority
would not have entered into the contract were the lands not suitable for
housing. In other words, the quality of the land was an implied condition for
the NHA to enter into the contract. NHA was justified in canceling the contract.
Petitioners confuse the cancellation of the contract by the NHA as a
rescission of the contract under Article 1191 of the Civil Code. The right to
rescission is predicated on a breach of faith by the other party that violates the
reciprocity between them. The power to rescind is given to the injured party.
In this case, the NHA did not rescind the contract. Indeed, it did not have the
right to do so for the other parties to the contract, the vendors did not commit
any breach, much less a substantial breach, of their obligation. The NHA did
not suffer any injury. The cancellation was not therefore a rescission under
Article 1191. Rather, it was based on the negation of the cause arising from
the realization that the lands, which were the objects of the sale, were not
suitable for housing.
Cita
Tamayo et al. v. Abad Senora

CONSTANCIA G. TAMAYO, JOCELYN G. TAMAYO, and ARAMIS G.
TAMAYO, collectively known as HEIRS OF CIRILO
TAMAYO, Petitioners, versus ROSALIA ABAD SEORA, ROAN ABAD
SEORA, and JANETE ABAD SEORA, Respondents.
(G.R. No. 176946 November 15, 2010 2nd Division)
NACHURA, J.:
FACTS: On September 28, 1995, at about 11:00 a.m., Antonieto M. Seora

(Seora), then 43 years old and a police chief inspector of the Philippine
National Police (PNP),4 was riding a motorcycle and crossing the intersection of
Sucat Road towards Filipinas Avenue, when a tricycle allegedly bumped his
motorcycle from behind. As a result, the motorcycle was pushed into the path
of an Isuzu Elf Van (delivery van), which was cruising along Sucat Road and
heading towards South Superhighway. The delivery van ran over Seora, while
his motorcycle was thrown a few meters away. He was recovered underneath
the delivery van and rushed to the Medical Center of Paraaque, where he was
pronounced dead on arrival.
The tricycle was driven by Leovino F. Amparo (Amparo), who testified
that it was the delivery van that bumped Seoras motorcycle. He said that he
did not see how the motorcycle could have been hit by his tricycle since he was
looking at his right side, but when he heard a sound, he looked to his left and
saw Seora already underneath the delivery van. He also said that when he
was brought to the police station for investigation, he brought his tricycle to
disprove the claim of the delivery van driver by showing that his tricycle
sustained no damage.
The delivery van, on the other hand, was driven by Elmer O. Polloso
(Polloso) and registered in the name of Cirilo Tamayo (Cirilo). While trial was
ongoing, Cirilo was suffering from lung cancer and was bedridden. His wife,
petitioner Constancia, testified on his behalf. Constancia narrated that she and
her husband were managing a single proprietorship known as Tamayo and
Sons Ice Dealer. She testified that it was Cirilo who hired their drivers. She
claimed that, as employer, her husband exercised the due diligence of a good
father of a family in the selection, hiring, and supervision of his employees,
including driver Polloso. Cirilo would tell their drivers not to drive fast and not
to be too strict with customers.
One of Cirilos employees, Nora Pascual (Pascual), also testified. She
alleged that she was working as auditor and checker for Tamayo and Sons Ice
Dealer. She testified that she and another employee were with Polloso in the
delivery van at the time of the incident. She narrated that, while they were
traversing Sucat Road, she saw a motorcycle going towards Filipinas Avenue.
Pascual said that, when they reached the intersection of Sucat Road and
Filipinas Avenue, Polloso blew the horn. She then saw a tricycle bump the rear
of the motorcycle. She said that Polloso stopped the delivery van. When they
alighted, they saw the motorcycle already under the delivery van. Pascual
further testified that Polloso was a careful driver who drove the truck slowly
and followed traffic rules. She also said that Cirilo called for a meeting before
the delivery trucks left and told his drivers to be careful in their driving and to
be courteous to their customers.
Leovino F. Amparo, Elmer O. Polloso and Cirilo Tamayo are found liable
jointly and severally to plaintiffs and the court order them to indemnify the
victim heirs.
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ISSUE: Whether or not lost of earning capacity of the victim should be included
as part of civil indemnification.
HELD: Yes. The award of damages for loss of earning capacity is concerned
with the determination of losses or damages sustained by respondents, as
dependents and intestate heirs of the deceased. This consists not of the full
amount of his earnings, but of the support which they received or would have
received from him had he not died as a consequence of the negligent act. Thus,
the amount recoverable is not the loss of the victims entire earnings, but
rather the loss of that portion of the earnings which the beneficiary would have
received.
The victims heirs presented in evidence Seoras pay slip from the PNP,
showing him to have had a gross monthly salary of P12,754.00. Meanwhile, the
victims net income was correctly pegged at 50% of his gross income in the
absence of proof as regards the victims living expenses.
Deceaseds net earning capacity should be computed in this method. The
formula is:
Net earning capacity = life expectancy x gross annual income less
living expenses
with life expectancy computed as 3/4
2/3 x (80 - age of deceased)
and living expenses fixed at half of the victims gross income.
Thus, Seoras net earning capacity was computed to be P1,887,847.00.
Tan v. OMC Carriers
Cita
LETICIA TAN, MYRNA MEDINA, MARILOU SPOONER, ROSALINDA TAN,

and MARY JANE TAN, MARY LYN TAN, CELEDONIO TAN, JR., MARY JOY
TAN, and MARK ALLAN TAN, represented herein by their mother, LETICIA
TAN, Petitioners, versus OMC CARRIERS, INC. and BONIFACIO
ARAMBALA, Respondents.
BRION, J.:
FACTS: On September 27, 1996, the petitioners filed a complaint for damages
with the RTC against OMC and Bonifacio Arambala. The complaint states that
on November 24, 1995, at around 6:15 a.m., Arambala was driving a truck
with a trailer owned by OMC, along Meralco Road, Sucat, Muntinlupa City.
When Arambala noticed that the truck had suddenly lost its brakes, he told his
companion to jump out. Soon thereafter, he also jumped out and abandoned
the truck. Driverless, the truck rammed into the house and tailoring shop
owned by petitioner Leticia Tan and her husband Celedonio Tan, instantly
killing Celedonio who was standing at the doorway of the house at the time.
The petitioners alleged that the collision occurred due to OMCs gross
negligence in not properly maintaining the truck, and to Arambalas
recklessness when he abandoned the moving truck. Thus, they claimed that
the respondents should be held jointly and severally liable for the actual
damages that they suffered, which include the damage to their properties, the
funeral expenses they incurred for Celedonio Tans burial, as well as the loss of
his earning capacity. The petitioners also asked for moral and exemplary
damages, and attorneys fees.
The respondents denied any liability for the collision, essentially claiming that
the damage to the petitioners was caused by a fortuitous event, since the truck
skidded due to the slippery condition of the road caused by spilled motor oil.
ISSUE: Whether or not damages can be justly awarded in this case.
HELD: Yes. As both the RTC and the CA found that the respondents gross
negligence led to the death of Celedonio Tan, as well as to the destruction of
the petitioners home and tailoring shop, we see no reason to disturb this
factual finding. We, thus, concentrate on the sole issue of what damages the
petitioners are entitled to.
Respondents OMC Carriers, Inc. and Bonifacio Arambala are ordered to
jointly and severally pay the petitioners the following:
(1) P50,000.00 as indemnity for the death of Celedonio Tan;
(2) P72,295.00 as actual damages for funeral expenses;
(3) P200,000.00 as temperate damages for the damage done to petitioner
Leticias house, tailoring shop, household appliances and shop
equipment;
(4) P300,000.00 as damages for the loss of Celedonio Tans earning
capacity;
(5) P500,000.00 as moral damages;
(6) P200,000.00 as exemplary damages; and
(7) 10% of the total amount as attorneys fees; and costs of suit.
In addition, the total amount adjudged shall earn interest at the rate of
6% per annum from May 14, 2003, and at the rate of 12% per annum, from the
finality of this Resolution on the balance and interest due, until fully paid.
Death of person would automatically entitle heirs of decedent actual
damages. The funeral expense also is fully proven. The temperate damages are
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also awarded because actual cost of damages on properties and the exact
earning capacity of the decedent cannot be determined. Exemplary damages
also was awarded base on the nature of offense to avoid repetition. Attorneys
fee is also proper in this case. Accordingly, legal interest at the rate of 6% per
annum on the amounts awarded starts to run from May 14, 2003, when the
trial court rendered judgment. From the time this judgment becomes final and
executory, the interest rate shall be 12% per annum on the judgment amount
and the interest earned up to that date, until the judgment is wholly satisfied.
Victory liner v. Heirs
Cita
VICTORY LINER, INC. petitioner, versus HEIRS OF ANDRES

MALECDAN, respondents.
(G. R. No. 154278 December 27, 2002 2nd Division)
MENDOZA, J.:
FACTS: Andres Malecdan was a 75 year-old farmer. On July 15, 1994, at

around 7:00 p.m., while Andres was crossing the National Highway on his way
home from the farm, a Dalin Liner bus on the southbound lane stopped to
allow him and his carabao to pass. However, as Andres was crossing the
highway, a bus of petitioner Victory Liner, driven by Ricardo C. Joson, Jr.,
bypassed the Dalin Bus. In so doing, respondent hit the old man and the
carabao on which he was riding. As a result, Andres Malecdan was thrown off
the carabao, while the beast toppled over. The Victory Liner bus sped past the
old man, while the Dalin bus proceeded to its destination without helping him.
The incident was witnessed by Andres Malecdans neighbor, Virgilio

Lorena, who was resting in a nearby waiting shed after working on his farm.
Malecdan sustained a wound on his left shoulder, from which bone fragments
protruded. He was taken by Lorena and another person to the district hospital
where he died a few hours after arrival. The carabao also died soon afterwards.
Lorena executed a sworn statement before the police authorities.
Subsequently, a criminal complaint for reckless imprudence resulting in
homicide and damage to property was filed against the Victory Liner bus driver
Ricardo Joson, Jr.
Private respondents brought the suit for damages in the RTC which
found the driver guilty of gross negligence in the operation of his vehicle and
Victory Liner, Inc. also guilty of gross negligence in the selection and
supervision of Joson, Jr. Petitioner and its driver were Held liable jointly and
severally for damages.
On appeal, the decision was affirmed by the Court of Appeals, with the
modification that the award of attorneys fees was fixed at P50,000.00.
ISSUE: Whether or not the affirmation by the CA of granting the award of

moral and exemplary damages and attorneys fees considering that there is no
finding of bad faith and gross negligence on the part of the petitioner was not
established.
HELD: Article 2176 provides: Whoever 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 called a quasi-delict and is governed by the provisions of this
Chapter. Article 2180 provides for the solidary liability of an employer for the
quasi-delict committed by an employee. The responsibility of employers for the
negligence of their employees in the performance of their duties is primary and,
therefore, the injured party may recover from the employers directly, regardless
of the solvency of their employees.
Employers may be relieved of responsibility for the negligent acts of their
employees acting within the scope of their assigned task only if they can show
that "they observed all the diligence of a good father of a family to prevent
damage." For this purpose, they have the burden of proving that they have
indeed exercised such diligence, both in the selection of the employee and in
the supervision of the performance of his duties.
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In the selection of prospective employees, employers are required to

examine them as to their qualifications, experience and service records. With
respect to the supervision of employees, employers must formulate standard
operating procedures, monitor their implementation and impose disciplinary
measures for breaches thereof. These Facts must be shown by concrete proof,
including documentary evidence.
In the instant case, petitioner presented the results of Joson, Jr.s
written examination, actual driving tests, x-ray examination, psychological
examination, NBI clearance, physical examination, hematology examination,
urinalysis, student driver training, shop training, birth certificate, high school
diploma and reports from the General Maintenance Manager and the Personnel
Manager showing that he had passed all the tests and training sessions and
was ready to work as a professional driver. However, the trial court noted that
petitioner did not present proof that Joson, Jr. had nine years of driving
experience. Petitioner also presented testimonial evidence that drivers of the
company were given seminars on driving safety at least twice a year. However,
the trial court noted that there is no record of Joson, Jr. ever attending such a
seminar. Petitioner likewise failed to establish the speed of its buses during its
daily trips or to submit in evidence the trip tickets, speed meters and reports of
field inspectors. The finding of the trial court that petitioners bus was running
at a very fast speed when it overtook the Dalin bus and hit the deceased was
not disputed by petitioner. Thus it was Held that the trial court did not err in
finding petitioner to be negligent in the supervision of its driver Joson, Jr.
GSIS v. Labung-Deang
Cita
Government Service Insurance System, Petitioner, versus Spouses

Gonzalo and Matilde Labung-Deang, Respondents.
(G.R. No. 135644, September 17, 2001, 1st Division)
PARDO, J:
FACTS: The respondents obtained a housing loan from the petitioner

amounting to 8,500.00 pesos and due on December 23, 1979. The loan was
secured by a real estate mortgage constituted over the spouses' property issued
by the Register of Deeds of Pampanga. Respondents deposited the owner's
duplicate copy of the title with the petitioner to comply with the requirement.
Eleven (11) months before the maturity of the loan, respondents settled their
debt with the petitioner and requested for the release of the owner's duplicate
copy of the title since they intended to secure a loan from a private lender and
use the land covered by it as collateral security for the said loan; that they
would use the proceeds for the renovation of the spouses' residential house and
for business.
The owner's duplicate copy of the title could not be found despite diligent
search and so the personnel of the petitioner were not able to release the same.
Subsequently, petitioner commenced the reconstitution proceedings with the
Court of First Instance of Pampanga for the issuance of a new owner's copy of
the same. After the completion of judicial proceedings, petitioner secured and
released the reconstituted copy of the owner's duplicate of title to the
respondents. However, respondents filed a complaint against the petitioner for
damages because of the consequences of undue delay as they were not able to
secure a loan; the proceeds of which could have been used in defraying the
estimated cost of the renovation of their residential house and which could
have been invested in some profitable business undertaking. The lower court
ruled in favor of the respondents. The petitioner appealed to the Court of
Appeals which affirmed the appeal judgment. Hence, this petition.
ISSUE: Whether or not the petitioner, as a government-owned and controlled

corporation primarily performing governmental functions, is liable for damages
to the respondents for the negligent act of its employees acting within the scope
of their assigned duties.
HELD: Yes. The petitioner is liable for damages to the respondents for the
negligent act of its employees acting within the scope of their assigned duties.
Since government owned and controlled corporations whose charters

provide that they can sue and be sued have a legal personality separate and
distinct from the government, petitioner is not covered by the exemption
provided for in the Civil Code. The loss of the owner's duplicate copy of the title
in the possession of petitioner as security for the mortgage without justifiable
cause constitutes negligence on the part of the employee of petitioner who lost
it, making the petitioner liable for damages.
For insufficient reason and no legal basis found, moral damages and
attorneys fees were removed. The Court granted only temperate damages
considering that petitioner spent for the reconstitution of the owners' duplicate
copy of the title.
Petition denied. The decision appealed from is affirmed with modification.
Cita
BPI Investment v. D.G. Carreon

BPI Investment Corporation, Petitioner, versus D.G. Carreon Commercial
Corporation, Daniel G. Carreon, Aurora J. Carreon, and Josefa M. Jeciel,
Respondents.
PARDO, J:
FACTS: D. G. Commercial Corporation (D.G.) placed with BPI

Investments Corporation (BPI) 318,981.59 pesos in money market placement
with a maturity term up to December 17, 1979, at a maturity value
of 323,518.22 pesos. BPI Investments issued the corresponding sales order
slip for straight sale and confirmation slip. D. G. did not make any money
placement and Aurora Carreon instructed BPI to roll over the maturity value.
According to petitioner, their bookkeeper made an error in posting 12-17 on
the sales order slip for 12-12. BPI Investments wrote respondent spouses
Daniel and Aurora Carreon (spouses), demanding the return of the
overpayment of 410,937.09 pesos. The spouses sent to BPI a proposed
memorandum of agreement, to which BPI did not respond.
BPI filed with the Court of First Instance of Rizal a complaint for recovery
of a sum of money against D. G. with preliminary attachment. The trial court
issued an order for preliminary attachment but was subsequently lifted. BPI
moved for reconsideration, but the trial court denied. D. G. filed with the trial
court a counterclaim asking for compensatory damages while spouses and
asked Josefa Jeceil asked for moral damages; and all of them claimed for
exemplary damages and attorneys fees. Both the complaint and counterclaim
filed were dismissed. Both parties appealed to the appellate court affirming the
dismissal of the complaint but reversing the dismissal of the counterclaim in
favor of the respondents. Hence, this petition.
ISSUE: Whether or not the petitioner is guilty of gross negligence making it

liable for exemplary damages.
HELD: No. The petitioner is not guilty of gross negligence in the handling of the
money market placement of respondents, thus not liable to pay exemplary
damages.
Gross negligence implies a want or absence of or failure to exercise slight

care or diligence, or the entire absence of care. It evinces a thoughtless
disregard of consequences without exerting any effort to avoid them. However,
while petitioner BPI Investments may not be guilty of gross negligence, it failed
to prove by clear and convincing evidence that D. G. Carreon indeed received
money in excess of what was due them.
Exemplary damages are imposed by way of example or correction for the

public good, in addition to moral, temperate, liquidated, or compensatory
damages. They are recoverable if the defendant acted in a wanton, fraudulent,
reckless, oppressive, or malevolent manner. BPI did not act in such a manner.
There is no doubt, however, that the damages sustained by respondents were
due to petitioners fault or negligence, short of gross negligence. Temperate or
moderate damages may be recovered when the court finds that some pecuniary
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loss has been suffered but its amount cannot, from the nature of the case, be
proved with certainty. The Court deems it prudent to award reasonable
temperate damages to respondents under the circumstances.
Khe Hong v. Court of Appeals
Cita
Khe Hong Cheng, alias Felix Khe, Sandra Joy Khe and Ray Steven Khe,
Petitioners, versus Court of Appeals, Hon. Teofilo Guadiz, and Philam
Insurance Co., Inc., Respondents.
KAPUNAN, J:
FACTS: The Philippine Agricultural Trading Corporation shipped on board a

vessel owned by Khe Hong, 3400 bags of copra from Masbate to Zamboanga.
The shipment was covered by a marine insurance policy by Philam Insurance
Company Incorporated (Philam). However, the ship sank resulting to the loss of
the shipment, which was paid by Philam in the amount of 354,000.00 pesos to
the consignee.
Having been subrogated into the rights of the consignee, Philam filed
with the Regional Trial Court (RTC) of Makati an action to recover the sum of
money paid to the consignee against Khe Hong. While the case was pending,
Khe Hong executed deeds of donation of parcels of land in favor of his children,
herein co-petitioners; and new transfer certificate of title were issued in their
names. The RTC rendered a favorable judgment to Philam and after the
decision became final, a writ of execution was issued.
Despite earnest efforts of the sheriff, he could not find any property of
Khe Hong that can be levied to satisfy the judgment because he had already
conveyed his properties to his children. Philam filed for the rescission of the
deeds of donation executed by Khe Hong in fraud of his creditor and for
nullification of the titles issued in the names of his children with the RTC.
Petitioners moved for the dismissal of the case, to which the RTC denied. On
appeal by petitioners, the RTCs decision in favor of Philam was affirmed by the
Court of Appeals. Hence, this petition.
ISSUE: Whether or not the petitioner Khe Hong Cheng is guilty of executing the
deeds of donation in fraud of his creditor, warranting the rescission of the same
in an accion pauliana.
HELD: Yes. Petitioner Khe Hong Cheng is guilty of executing the deeds of
donation in fraud of his creditor, warranting the rescission of the same in an
accion pauliana.
An accion pauliana accrues only when the creditor discovers that he has
no other legal remedy for the satisfaction of his claim against the debtor other
than an accion pauliana. It presupposes the following: 1) A judgment; 2) the
issuance by the trial court of a writ of execution for the satisfaction of the
judgment; and 3) the failure of the sheriff to enforce and satisfy the judgment
of the court. It requires that the creditor has exhausted the property of the
debtor.
Philam has a demandable credit prior to the alienation of Khe Hongs

properties. Khe Hongs conveyance, of the properties to his children in order to
avoid payment and to defraud Philam, warrants rescission of the same as all
legal means have been exhausted, and it is the last resort to satisfy the trial
court's judgment.
Petition denied for lack of merit.
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Philippine Realty v. Ley Const. and Dev. Corp.

Philippine Realty and Holdings Corporation, Petitioner, versus Ley
Construction and Development Corporation, Respondent.
(G.R. No. 165548, June 13, 2011, 3rd Division)
SERENO, J:
FACTS: Ley Construction and Development Corporation (LCDC) and Philippine

Realty & Holdings Corporation (PRHC) entered into four major construction
projects, as evidenced by four duly notarized construction agreements. LCDC
committed itself to the construction of the buildings needed by PRHC, which in
turn committed itself to pay the contract price agreed upon. In order to jump-
start the construction operations, LCDC was required to submit a performance
bond as provided for in the construction agreements. As stated in these
agreements, as soon as PRHC received the performance bond, it would deliver
its initial payment to LCDC. The remaining balance was to be paid in monthly
progress payments based on actual work completed. In practice, these monthly
progress payments were used by LCDC to purchase the materials needed to
continue the construction of the remaining parts of the building.
In the course of the construction of the Tektite Building, it became

evident to both parties that LCDC would not be able to finish the project within
the agreed period. LCDC explained that the unanticipated delay in
construction was due mainly to the sudden, unexpected hike in the prices of
cement and other construction materials. It claimed that, without a
corresponding increase in the fixed prices found in the agreements, it would be
impossible for it to finish the construction of the Tektite Building.
Consequently, it continued with the construction despite authorization of the
other party. Seeking to recover the amount expended, LCDC filed a Complaint
with Application for the Issuance of a Writ of Preliminary Attachment before the
Regional Trial Court (RTC) of Makati City which rendered a favorable order to
LCDC. On appeal, the Court of Appeals reversed the decision of the RTC.
ISSUE: Whether or not respondent can be held liable for the delay caused by
circumstances falling under force majeure.
HELD: No. Respondent cannot be held liable for the delay caused by
circumstances falling under force majeure.
Under Article 1174 of the Civil Code the obligor is exempt from liability
for a breach of an obligation due to an act of God or force majeure. The
shortage in supplies and cement may be characterized as force majeure. In the
present case, hardware stores did not have enough cement available in their
supplies or stocks at the time of the construction in the 1990s. Likewise,
typhoons, power failures and interruptions of water supply all clearly fall
under force majeure. Since LCDC could not possibly continue constructing the
building under the circumstances prevailing, it cannot be held liable for any
delay that resulted from the causes aforementioned. A perusal of the
construction agreements shows that the parties never agreed to make LCDC
liable even in cases of force majeure.
The Court reversed the decision appealed from.
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Megaworld Globus Asia, Inc. v. Tanseco

Megaworld Globus Asia, Inc., Petitioner, versus Mila S. Tanseco,
Respondent.
CARPIO-MORALES, J:
FACTS: Petitioner Megaworld Globus Asia, Inc. (Megaworld) and respondent

Mila S. Tanseco (Tanseco) entered into a Contract to Buy and Sell a
condominium unit at a pre-selling project. Tanseco paid the installments due,
however leaving a balance pending delivery of the unit. Megaworld failed to
deliver the unit within the stipulated period and three years thereafter, by
notice of turnover, it informed Tanseco that the unit was ready for inspection
preparatory to delivery. Tanseco replied through counsel, by letter, that in view
of Megaworlds failure to deliver the unit on time, she was demanding the
return of the total installment payment she had made, with interest at 12% per
annum from the expiration of the six-month grace period. Tanseco pointed out
that none of the excepted causes of delay existed, however her demands were
unheeded.
Tanseco then filed with the Housing and Land Use Regulatory Boards
(HLURB) Expanded National Capital Region Field Office a complaint against
Megaworld for rescission of contract, refund of payment, and damages. In its
Answer, Megaworld attributed the delay to the 1997 Asian financial crisis
which was beyond its control; and argued that default had not set in, Tanseco
not having made any judicial or extrajudicial demand for delivery before receipt
of the notice of turnover. The HLURB Arbiter dismissed Tansecos complaint for
lack of cause of action. On appeal by Tanseco, the HLURB Board of
Commissioners sustained the HLURB Arbiters Decision on the ground of
laches for failure to demand rescission when the right thereto accrued.
Tansecos Motion for Reconsideration having been denied, she appealed to the
Office of the President which dismissed the appeal for failure to show that the
findings of the HLURB were tainted with grave abuse of discretion. Tanseco
filed a Petition for Review with the Court of Appeals which granted the petition.
Hence, Megaworld filed the present Petition for Review.
ISSUE: Whether or not the petitioner cannot be held liable for breach of
obligation in view of the happening of a fortuitous event.
HELD: No. Petitioner is liable for breach of obligation stipulated in the contract
between the parties.
The Contract to Buy and Sell of the parties contains reciprocal

obligations, i.e., to complete and deliver the condominium unit the period
stipulated, and to pay the balance of the purchase price at or about the time of
delivery on the part of Tanseco. Compliance by Megaworld with its obligation is
determinative of compliance by Tanseco with her obligation to pay the balance
of the purchase price. Megaworld having failed to comply with its obligation
under the contract, it is liable therefor.
The Court cannot generalize the 1997 Asian financial crisis to be

unforeseeable and beyond the control of a business corporation. A real estate
enterprise engaged in the pre-selling of condominium units is concededly a
master in projections on commodities and currency movements, as well as
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business risks. The fluctuating movement of the Philippine peso in the foreign
exchange market is an everyday occurrence, hence, not an instance of caso
fortuito. Megaworlds excuse for its delay does not thus lie.
Sicam v. Jorge
Cita
Roberto C. Sicam and Agencia de R.C. Sicam, Inc., Petitioners, versus

Lulu V. Jorge and Cesar Jorge, Respondents.
(G.R. No. 159617, August 8, 2007, 3rd Division)
FACTS: To secure a loan, Respondent Lulu V. Jorge (Lulu) pawned several

pieces of jewelry with Petitioner Agencia de R. C. Sicam (Sicam). On October
19, 1987, two armed men entered the pawnshop and took away whatever cash
and jewelry were found inside the pawnshop vault. Sicam sent Lulu a letter
informing her of the loss of her jewelry due to the robbery incident in the
pawnshop. Lulu expressed disbelief stating that when the robbery happened,
all jewelry pawned were deposited with Far East Bank near the pawnshop since
it had been the practice that before they could withdraw, advance notice must
be given to the pawnshop so it could withdraw the jewelry from the bank. Lulu
then requested Sicam to prepare the pawned jewelry for withdrawal but the
latter failed to return the jewelry.
Lulu joined by her husband, Cesar Jorge, filed a complaint against

Sicam with the Regional Trial Court (RTC) of Makati seeking indemnification for
the loss of pawned jewelry and payment of damages. Petitioner is interposing
the defense of caso fortuito on the robbery committed against the pawnshop
and filed a Motion to Dismiss. The RTC held that petitioner Sicam could not be
made personally liable for a claim arising out of a corporate transaction.
Respondents appealed the RTC Decision and the appellate court found
Petitioners liable applying the doctrine of piercing the veil of corporate entity.
ISSUE: Whether or not petitioners cannot be held liable for the loss of the
pawned articles due to a fortuitous event.
HELD: No. Petitioners are liable for the loss of the pawned articles for being
negligent in securing the pawnshop.
Fortuitous events by definition are extraordinary events not foreseeable

or avoidable. It is therefore, not enough that the event should not have been
foreseen or anticipated, as is commonly believed but it must be one impossible
to foresee or to avoid. The mere difficulty to foresee the happening is not
impossibility to foresee the same.
Robbery per se is not a fortuitous event. Petitioners failed to exercise

reasonable care and caution that an ordinarily prudent person would have
used in the same situation. Petitioners were guilty of negligence in the
operation of their pawnshop business. No sufficient precaution and vigilance
were adopted by petitioners to protect the pawnshop from unlawful intrusion.
There was no clear showing that there was any security guard at all and the
vault was open at the time of robbery, a proof of failure of petitioner to observe
the care, precaution and vigilance that the circumstances justly demanded.
Also, the robbery in this case took place in 1987 when robbery was already
prevalent and petitioners in fact had already foreseen it as they wanted to
deposit the pawn with a nearby bank for safekeeping.
The Court affirmed the decision appealed from.
Cita
Huibonhoa v. Court of Appeals

Florencia T. Huibonhoa, Petitioner, versus Court of Appeals, Spouses
Rufina G. Lim and Anthony Lim, Loreta Gojocco Chua and Spouses
Severino and Priscilla Gojocco, Respondents.
PURISIMA, J:
FACTS: Petitioner Florencia Huibonhoa (Huibonhoa) entered into a contract of

lease with siblings Rufina Gojocco Lim, Severino Gojocco and Loreta Gojocco
Chua stipulating that Huibonhoa would lease from them 3 commercial lots for
a period of 15 years and renewable upon agreement of the parties. Based on
the said contract, the lessors authorized Huibonhoa to construct a building
that must be completed within 8 months from the date of the execution of the
contract. During the construction of the building, former Senator Benigno
Aquino, Jr. was assassinated. This incident affected adversely the construction
of the building such that Huibonhoa failed to complete the same with the
stipulated eight-month period. It was completed only seven months after the
target date and failed to pay the rental despite demand by the creditor.
Huibonhoa brought an action for reformation of contract alleging that

by reason of mistake or accident, the lease contract failed to provide that
should an unforeseen event dramatically increase the cost of construction,
such as the assassination of Sen. Aquino, the monthly rental would be reduced
and the term of the lease would be extended for such duration as may fair and
equitable to both the lessors and the lessee. Subsequently, the lessors filed a
complaint for ejectment against Huibonhoa and the trial court dismissed the
complaint. On appeal, the Court of Appeals affirmed the decision of the trial
court. Hence, this petition.
ISSUE: Whether or not the assassination of former Senator Benigno Aquino,

Jr. a fortuitous event which justified the adjustment of the terms of the
contract of lease.
HELD: No. The assassination of former Senator Benigno Aquino, Jr. is not a
fortuitous event that will justify the adjustment of the terms of the contract of
lease.
A fortuitous event is that which could not be foreseen, or which even if
foreseen, was inevitable. To exempt the obligor from liability for a breach of an
obligation due to an act of God, the following requisites must concur: (a) the
cause of the breach of the obligation must be independent of the will of the
debtor; (b) the event must be either unforeseeable or unavoidable; (c) the event
must be such as to render it impossible for the debtor to fulfill his obligation in
a normal manner; and (d) the debtor must be free from any participation in, or
aggravation of the injury to the creditor.
For Huibonhoa to claim exemption from liability by reason of fortuitous

event under Article 1174 of the Civil Code, she must prove that inflation was
the sole and proximate cause of the loss or destruction of the contract. Having
failed to do so, Huibonhoas contention is untenable.
Cita
The order of ejectment was upheld and the decision appealed from was
set aside.
Ace Agro v. Court of Appeals
Cita
Ace-Agro Development Corporation, Petitioner, versus Court of Appeals

and Cosmos Bottling Corporation, Respondents.
MENDOZA, J:
FACTS: Private respondent Cosmos Bottling Corp. is engaged in the

manufacture of soft drinks. Since 1979 petitioner Ace-Agro Development Corp.
had been cleaning soft drink bottles and repairing wooden shells for Cosmos,
rendering its services within the company premises in San Fernando,
Pampanga. The parties entered into service contracts which they renewed every
year. Private respondent had earlier contracted the services of Aren Enterprises
in view of the fact that petitioner could handle only from 2,000 to 2,500 cases a
day and could not cope with private respondent's daily production of 8,000
cases.
Fire broke out in private respondent's plant, destroying, among other

places, the area where petitioner did its work. As a result, petitioner's work was
stopped. Petitioner asked private respondent to allow it to resume its service,
but petitioner was advised that on account of the fire, which had practically
burned all old soft drink bottles and wooden shells, private respondent was
terminating their contract. Petitioner expressed surprise at the termination of
the contract and requested private respondent to reconsider its decision and
allow petitioner to resume its work. As it received no reply from private
respondent, petitioner informed its employees of the termination of their
employment and brought the case against private respondent for breach of
contract and damages in the Regional Trial Court (RTC) of Malabon.
In its decision, the RTC found private respondent guilty of breach of

contract and ordered it to pay damages to petitioner. Private respondent
appealed to the Court of Appeals, which reversed the trial court's decision and
dismissed petitioner's complaint. Hence, this petition.
ISSUE: Whether or not the happening of a fortuitous event or force majeure

stops the running of the period stipulated in a contract.
HELD: No. The stipulation that in the event of a fortuitous event or force
majeure the contract shall be deemed suspended during said period does not
mean that the happening of any of those events stops the running of the period
the contract has been agreed upon to run. It only relieves the parties from the
fulfillment of their respective obligations during that time.
Both parties admitted that the April 25, 1990 fire was a force majeure or
unforeseen event and that the same even burned practically all the softdrink
bottles and wooden shells which are the objects of the agreement. However, the
court says that there was no cause for terminating the contract but at most a
temporary suspension of work. Thus, as a result of the fire, the obligation has
not been extinguished.
Cita
Dioquino v. Laureano
Pedro D. Dioquino, Plaintiff-Appellee, versus Federico Laureano, Aida De
Laureano and Juanito Laureano, Defendants-Appellants.
(G.R. No. L-25906, May 28, 1970, En Banc)
FERNANDO, J:
FACTS: Plaintiff Attorney Pedro Dioquino, went to an office in Masbate to

register his car. He met the defendant Federico Laureano, a patrol officer, who
was waiting for a jeepney to take him to the office of the Provincial Commander
in Masbate. Attorney Dioquino requested the defendant to introduce him to one
of the clerks in the office, who could facilitate the registration of his car and the
request was graciously attended to.
The defendant rode on the car of plaintiff on his way to the Barracks in
Masbate. While about to reach their destination, the car was stoned by some
mischievous boys, and its windshield was broken. Defendant chased the boys
and he was able to catch one of them. The boy was taken to the plaintiff and
admitted having thrown the stone that broke the car's windshield. The plaintiff
and the defendant together with the boy returned to the barracks and the
father of the boy was called, but no satisfactory arrangements were made.
Defendant refused to file any charges against the boy and his parents because
he thought that the stone-throwing was merely accidental and that it is an
event of force majeure.
However, plaintiff held defendant accountable for the loss thus

sustained, including in the action filed the wife, Aida de Laureano, and the
father, Juanito Laureano before the trial court. Plaintiff prevailed in the lower
court, the judgment however going only against the principal defendant, his
spouse and his father being absolved of any responsibility. Nonetheless, all
three of them appealed directly to the Supreme Court, raising questions of law.
ISSUE: Whether or not the stone-throwing incident can be considered as a

force majeure, thus respondent cannot be held liable.
HELD: Yes. The stone-throwing incident can be considered as force majeure,

thus respondent cannot be held liable.
Under the Civil Code, the rule was well-settled that in the absence of a
legal provision or an express covenant, no one should be held to account for
fortuitous cases. If it could be shown that such indeed was the case, liability is
ruled out. There is no requirement of diligence beyond what human care and
foresight can provide.
What happened in this case was clearly unforeseen. It was a fortuitous

event resulting in a loss which must be borne by the owner of the car. It would
be an affront, not only to the logic but to the realities of the situation, if in the
light of what transpired, as found by the lower court, defendant Federico
Laureano could be held as bound to assume a risk of this nature. There was no
such obligation on his part.
The decision appealed from is hereby reversed.
Cita
Bachelor Express v. Court of Appeals

Bachelor Express, Inc. and Cresencio Rivera, Petitioners, versus The
Honorable Court of Appeals, Ricardo Beter, Sergia Beter, Teofilo Rautraut
and Zoetera Rautraut, Respondents.
(G.R. No. 85691, July 31, 1990, 3rd Division)
GUTIERREZ, JR., J:
FACTS: A bus owned by Bachelor Express, Inc. and driven by Cresencio

Rivera, came from Davao City on its way to Cagayan de Oro City passing
Butuan City. While at Tabon-Tabon, Butuan City, the bus picked up a
passenger. About 15 minutes later, a passenger at the rear portion suddenly
stabbed a soldier which caused commotion and panic among the passengers.
When the bus stopped, two passengers, Ornominio Beter and Narcisa
Rautraut, were found lying down the road, the former already dead as a result
of head injuries and the latter also suffering from severe injuries which caused
her death later. It was found out that the victims jumped off the bus without
the knowledge and consent of the driver or the conductor of the bus. The
passenger-assailant alighted from the bus and ran toward the bushes but was
killed by the police.
The heirs of the two passengers filed a complaint for sum of money
against Bachelor Express, its alleged owner Samson Yasay, and the driver
Rivera. After due trial, the trial court issued an order dismissing the complaint.
Upon appeal, the Court of Appeals reversed the trial courts decision. Hence,
this petition.
ISSUE: Whether or not the case at bar is within the context of force majeure.
HELD: Yes. The case at bar is within the context of force majeure.
The sudden act of the passenger who stabbed another passenger in the
bus is within the context of force majeure. However, in order that a common
carrier may be absolved from liability in case of force majeure, it is not enough
that the accident was caused by force majeure. The common carrier must still
prove that it was not negligent in causing the injuries resulting from such
accident.
It is clear that petitioner has failed to overcome the presumption of fault

and negligence found in the law governing common carriers-the bus driver did
not immediately stop the bus at the height of the commotion; the bus was
speeding from a full stop; the victims fell from the bus door when it was opened
or gave way while the bus was still running; the conductor panicked and blew
his whistle after people had already fallen off the bus; and the bus was not
properly equipped with doors in accordance with law. The argument that the
petitioners are not insurers of their passengers deserves no merit in view of the
failure of the petitioners to observe extraordinary diligence in transporting
safely the passengers to their destination as warranted by law.
Petition is dismissed and the decision appealed from is affirmed.
Cita
Vasquez v. Court of Appeals

Pedro Vasquez, Soledad Ortega, Cleto Bagaipo, Agustina Virtudes, Romeo
Vasquez and Maximina Cainay, Petitioners, versus Court of Appeals and
Filipinas Pioneer Lines, Inc., Respondents.
(G.R. No. L-42926, September 13, 1985, 1st Division)
MELENCIO-HERRERA, J:
FACTS: MV Pioneer Cebu was owned and operated by the defendant and used
in the transportation of goods and passengers in the interisland shipping. It
had a passenger capacity of three hundred twenty-two including the crew. It
undertook the said voyage on a special permit issued by the Collector of
Customs inasmuch as, upon inspection, it was found to be without an
emergency electrical power system. The special permit authorized the vessel to
carry only two hundred sixty passengers due to the said deficiency and for lack
of safety devices for 322 passengers. A headcount was made of the passengers
on board, resulting on the tallying of 168 adults and 20 minors, although the
passengers manifest only listed 106 passengers. It has been admitted, however,
that the headcount is not reliable.
When the vessel left Manila, its officers were already aware of the
typhoon Klaring building up somewhere in Mindanao. There being no typhoon
signals on the route from Manila to Cebu, and the vessel having been cleared
by the Customs authorities, the MV Pioneer Cebu left on its voyage to Cebu
despite the typhoon. When it left the Port of Manila, it had on board the
spouses Alfonso Vasquez and Filipinas Bagaipo and a four-year old boy, Mario
Marlon Vasquez. The MV Pioneer Cebu encountered typhoon 'Klaring' and
struck a reef on the southern part of Malapascua Island, located somewhere
north of the island of Cebu and subsequently sunk.
Due to the loss of their children, petitioners sued for damages before the
Court of First Instance of Manila. Respondent defended on the plea of force
majeure and the extinction of its liability by the actual total loss of the vessel.
The lower court held the respondent liable. On appeal, respondent Court
reversed the aforementioned judgment and absolved private respondent from
any and all liability. Hence, this Petition for Review on Certiorari,
ISSUE: Whether or not the respondent would be exempt from liability due to its
defense of fortuitous event.
HELD: No. The respondent is not exempted from liability. To constitute a caso
fortuito, the event must have been impossible to foresee, or if it could be
foreseen, must have been impossible to avoid. There must be an entire
exclusion of human agency from the cause of injury or loss.
While the typhoon was an inevitable occurrence, yet, having been kept
posted on the course of the typhoon by weather bulletins at intervals of six
hours, the captain and crew were well aware of the risk they were taking as
they hopped from island to island from Romblon up to Tanguingui. They held
frequent conferences, and oblivious of the utmost diligence required of very
cautious persons, they decided to take a calculated risk. In so doing, they failed
to observe that extraordinary diligence required of them explicitly by law.
Cita
The decision appealed is reversed and the judgment of the lower court is
reinstated.
Yobido v. Court of Appeals
Cita
Alberta Yobido and Cresencia Yobido, Petitioners, versus Court of Appeals,

Leny Tumboy, Ardee Tumboy and Jasmin Tumboy, Respondents.
(G.R. No. 113003, October 17, 1997, 3rd Division)
ROMERO, J:
FACTS: Spouses Tito and Leny Tumboy and their minor children named Ardee
and Jasmin, boarded at a Yobido Liner bus bound for Davao City. Along Picop
Road in Km. 17, Sta. Maria, Agusan del Sur, the left front tire of the bus
exploded. The bus fell into a ravine around three feet from the road and struck
a tree. The incident resulted in the death of 28-year-old Tito Tumboy and
physical injuries to other passengers. Hence, a complaint for breach of contract
of carriage, damages and attorney's fees was filed by Leny and her children
against Alberta Yobido, the owner of the bus, and Cresencio Yobido, its driver,
before the Regional Trial Court of Davao City. When the defendants therein
filed their answer to the complaint, they raised the affirmative defense of caso
fortuito. The lower court rendered a decision dismissing the action for lack of
merit. Dissatisfied, the plaintiffs appealed to the Court of Appeals, which
reversed the lower courts decision. Hence, this petition.
ISSUE: Whether or not the explosion of the front tire of the bus is considered to
be a fortuitous event which would exempt the petitioner from liability.
HELD: No. The explosion of the front tire of the bus is not considered a
fortuitous event which would exempt the petitioner from liability.
A fortuitous event is possessed of the following characteristics: (a) the

cause of the unforeseen and unexpected occurrence, or the failure of the debtor
to comply with his obligations, must be independent of human will; (b) it must
be impossible to foresee the event which constitutes the caso fortuito, or if it
can be foreseen, it must be impossible to avoid; (c) the occurrence must be
such as to render it impossible for the debtor to fulfill his obligation in a
normal manner; and (d) the obliger must be free from any participation in the
aggravation of the injury resulting to the creditor.
The explosion of the new tire may not be considered a fortuitous event
because there are human factors involved in the situation. The fact that the
tire was new did not imply that it was entirely free from manufacturing defects
or that it was properly mounted on the vehicle. Neither may the fact that the
tire bought and used in the vehicle is of a brand name noted for quality,
resulting in the conclusion that it could not explode within five days' use. Be
that as it may, it is settled that an accident caused either by defects in the
automobile or through the negligence of its driver is not a caso fortuito that
would exempt the carrier from liability for damages.
Cita
Juntilla v. Fontanar
Roberto Juntilla, Petitioner, versus Clemente Fontanar, Fernando Banzon
and Berfol Camoro, Respondents.
(G.R. No. L-45637, May 31, 1985, 1st Division)
GUTIERREZ, JR., J:
FACTS: The petitioner was a passenger of the public utility jeepney on the
course of the trip from Danao City to Cebu City. The jeepney was driven by
defendant Berfol Camoro. It was registered under the franchise of defendant
Clemente Fontanar but was actually owned by defendant Fernando Banzon.
When the jeepney reached Mandaue City, the right rear tire exploded causing
the vehicle to turn turtle. In the process, the plaintiff who was sitting at the
front seat was thrown out of the vehicle. Upon landing on the ground, the
plaintiff momentarily lost consciousness. Upon his arrival in Danao City, he
immediately entered the Danao City Hospital to attend to his injuries, and also
requested his father-in-law to proceed immediately to the place of the accident
and look for his lost wrist watch. In spite of the efforts of his father-in-law, the
wrist watch could no longer be found.
Petitioner filed a civil case for breach of contract with damages before the
City Court of Cebu City, Branch I against Clemente Fontanar, Fernando
Banzon and Berfol Camoro. The respondents filed their answer, alleging inter
alia that the accident that caused losses to the petitioner was beyond the
control of the respondents taking into account that the tire that exploded was
newly bought and was only slightly used at the time it blew up. The City Court
rendered judgment in favor of the petitioner. The respondents appealed to the
Court of First Instance of Cebu, which reversed the judgment of the City Court
upon a finding that the accident in question was due to a fortuitous event.
ISSUE: Whether or not the incident in this case was due to a fortuitous event,
absolving the respondents from any obligation.
HELD: No. The incident was not due to a fortuitous event. In the case at bar,
the cause of the unforeseen and unexpected occurrence was not independent
of the human will.
There are specific acts of negligence on the part of the respondents. The
records show that the passenger jeepney turned turtle and jumped into a ditch
immediately after its right rear tire exploded. The evidence shows that the
passenger jeepney was running at a very fast speed before the accident. There
is also evidence to show that the passenger jeepney was overloaded at the time
of the accident. The petitioner stated that there were three passengers in the
front seat and fourteen passengers in the rear.
While it may be true that the tire that blew-up was still good because the
grooves of the tire were still visible, this fact alone does not make the explosion
of the tire a fortuitous event. No evidence was presented to show that the
accident was due to adverse road conditions or that precautions were taken by
the jeepney driver to compensate for any conditions liable to cause accidents.
The accident was caused either through the negligence of the driver or because
of mechanical defects in the tire.
Cita
Philamgen Insurance v. MGG Marine
Cita
The Philippine American General Insurance Co., Inc., Petitioner, versus

MGG Marine Services, Inc. and Doroteo Gaerlan, Respondents.
KAPUNAN, J:
FACTS: San Miguel Corporation insured several beer bottle cases with an
aggregate value of P5, 836, 222.80 with petitioner Philippine American General
Insurance Company. The cargo was loaded on board the M/V Peatheray
Patrick-G to be transported from Mandaue City to Bislig, Surigao Del Sur. After
having been cleared by the Coast Guard Station in Cebu the previous day, the
vessel left the port of Mandaue City for Bislig, Surigao Del Sur. The weather
was calm when the vessel started its voyage. The following day, M/V Peatheray
Patrick-G listed and subsequently sunk off Cawit Point, Cortes, Surigao Del
Sur. As a consequence thereof, the cargo belonging to San Miguel Corporation
was lost.
Subsequently, San Miguel Corporation claimed the amount of its loss

from petitioner. Upon petitioner's request, , Mr. Eduardo Sayo, a surveyor from
the Manila Adjusters and Surveyors Co., went to Taganauan Island, Cortes,
Surigao Del Sur where the vessel was cast ashore, to investigate the
circumstances surrounding the loss of the cargo. In his report, Mr. Sayo stated
that the vessel was structurally sound and that he did not see any damage or
crack thereon. He concluded that the proximate cause of the listing and
subsequent sinking of the vessel was the shifting of ballast water from
starboard to portside. The said shifting of ballast water allegedly affected the
stability of the M/V Peatheray Patrick-G. Thereafter, petitioner paid San Miguel
Corporation the full amount of P5, 836, 222.80 pursuant to the terms of their
insurance contract.
Petitioner as subrogee of San Miguel Corporation filed with the Regional

Trial Court (RTC) of Makati City a case for collection against private
respondents to recover the amount it paid to San Miguel Corporation for the
loss of the latter's cargo. Meanwhile, the Board of Marine Inquiry conducted its
own investigation of the sinking and rendered its decision exonerating the
captain and crew of the ill-fated vessel for any administrative liability because
the sinking was due to a fortuitous event. The RTC promulgated its decision
finding respondents solidarily liable for the loss of San Miguel Corporation's
cargo. Private respondents appealed to the Court of Appeals which reversed the
HELD of the RTC. Hence, this petition.
ISSUE: Whether or not the sinking of the M/V Peatherav Patrick-G was due to
a fortuitous event.
HELD: Yes. The sinking of the M/V Peatherav Patrick-G was due to a
fortuitous event.
Since the presence of strong winds and enormous waves at Cortes,

Surigao del Sur was shown to be the proximate and only cause of the sinking
of the M/V Peatheray Patrick-G and the loss of the cargo belonging to San
Miguel Corporation, private respondents cannot be held liable for the said loss.
It is a general rule that no obligee shall be held liable for the loss or destruction
or the non-performance of a prestation due to events that are unforeseen or if
foreseeable, are inevitable.
Cita
Mindex v. Morillo
Cita
Mindex Resources Development, Petitioner, versus Ephraim Morillo,

Respondent.
(G.R. No. 138123, March 12, 2002, 3rd Division)
PANGANIBAN, J:
FACTS: A verbal agreement was entered into between Ephraim Morillo and
Mindex Resources Corporation (MINDEX) for the lease of the formers 6 x 6 ten-
wheeler cargo truck for use in MINDEXs mining operations in Binaybay,
Bigaan, San Teodoro, Oriental Mindoro, at the stipulated rental of P300.00 per
hour for a minimum of eight (8) hours a day or a total of P2, 400.00 daily.
MINDEX has been paying the rentals until April 10, 1991. Unknown to Morillo,
on April 11, 1991, the truck was burned by unidentified persons while it was
parked unattended at Sitio Aras, Bigaan, San Teodoro, Oriental Mindoro, due
to mechanical trouble. Upon learning of the burning incident, Morillo offered to
sell the truck to MINDEX but the latter refused. Instead, it replaced the
vehicles burned tires and had it towed to a shop for repair and overhauling.
Both parties presented their proposals as a remedy for the said incident.
The Regional Trial Court (RTC) found petitioner responsible for the destruction
or loss of the leased 6 x 6. The appellate court sustained the RTCs finding that
petitioner was not without fault for the loss and destruction of the truck and,
thus, liable therefore. Petitioner claims that the burning of the truck was a
fortuitous event. Hence, this petition.
ISSUE: Whether or not a fortuitous event is involved in the damage dealt to the
rented truck.
HELD: No. A fortuitous event is not involved in the damage dealt to the rented
truck.
Both the RTC and the CA found petitioner negligent and thus liable for the loss
or destruction of the leased truck. True, both parties may have suffered from
the burning of the truck but as found by both lower courts, the negligence of
petitioner makes it responsible for the loss. Well-settled is the rule that factual
findings of the trial court, particularly when affirmed by the CA, are binding on
the Supreme Court.
Article 1667 of the Civil Code holds lessees responsible for the
deterioration or loss of the thing leased, unless they prove that it took place
without their fault.
In order for a fortuitous event to exempt one from liability, it is necessary

that one has committed no negligence or misconduct that may have occasioned
the loss. An act of God cannot be invoked to protect a person who has failed to
take steps to forestall the possible adverse consequences of such a loss. Ones
negligence may have concurred with an act of God in producing damage and
injury to another; nonetheless, showing that the immediate or proximate cause
of the damage or injury was a fortuitous event would not exempt one from
liability. When the effect is found to be partly the result of a persons
participation whether by active intervention, neglect or failure to act -- the
whole occurrence is humanized and removed from the rules applicable to acts
of God.
Cita
Petition denied and the decision appealed from is affirmed with

modification.
NAPOCOR v. Phillip Bros.
Cita
National Power Corporation, Petitioner, versus Phillip Brothers Oceanic,

Inc., Respondent.
(G.R. No. 126204, November 20, 2001, 3rd Division)
SANDOVAL-GUTIERREZ, J:
FACTS: The National Power Corporation (NAPOCOR) issued invitations to bid

for the supply and delivery of 120,000 metric tons of imported coal for its
Batangas Coal-Fired Thermal Power Plant in Calaca, Batangas. The Phillip
Brothers Oceanic, Inc. (PHIBRO) prequalified and was allowed to participate in
the bidding. After the public bidding was conducted, PHIBROs bid was
accepted.
PHIBRO informed NAPOCOR that industrial disputes might soon plague

Australia, the shipments point of origin, which could seriously hamper
PHIBROs ability to supply the needed coal. PHIBRO again apprised NAPOCOR
of the situation in Australia, particularly informing the latter that the ship
owners therein are not willing to load cargo unless a strike-free clause is
incorporated in the charter party or the contract of carriage. In order to hasten
the transfer of coal, PHIBRO proposed to NAPOCOR that they equally share the
burden of a strike-free clause. NAPOCOR refused. PHIBRO received from
NAPOCOR a confirmed and workable letter of credit. Instead of delivering the
coal on or before the thirtieth day after receipt of the Letter of Credit, PHIBRO
effected its first shipment only on November 17, 1987.
NAPOCOR once more advertised for the delivery of coal to its Calaca
thermal plant. PHIBRO participated anew in this subsequent bidding.
NAPOCOR disapproved PHIBROs application for pre-qualification to bid for not
meeting the minimum requirements. Upon further inquiry, PHIBRO found that
the real reason for the disapproval was its purported failure to satisfy
NAPOCORs demand for damages due to the delay in the delivery of the first
coal shipment. This prompted PHIBRO to file an action for damages with
application for injunction against NAPOCOR with the Regional Trial Court
(RTC), Makati City. The trial court rendered a decision in favor of PHIBRO.
Unsatisfied, NAPOCOR, through the Solicitor General, elevated the case to the
Court of Appeals (CA). The Court of Appeals rendered a Decision affirming in
toto the Decision of the Regional Trial Court. Hence, this petition.
ISSUE: Whether or not PHIBROs delay in the delivery of imported coal was due
to a fortuitous event.
HELD: Yes. PHIBROs delay in the delivery of imported coal was due to a
fortuitous event.
It is worthy to note that PHIBRO and NAPOCOR explicitly agreed in

Section XVII of the Bidding Terms and Specifications that neither seller
(PHIBRO) nor buyer (NAPOCOR) shall be liable for any delay in or failure of the
performance of its obligations, other than the payment of money due, if any
such delay or failure is due to Force Majeure. Specifically, they defined force
majeure as any disabling cause beyond the control of and without fault or
negligence of the party, which causes may include but are not restricted to Acts
of God or of the public enemy; acts of the Government in either its sovereign or
contractual capacity; governmental restrictions; strikes, fires, floods, wars,
typhoons, storms, epidemics and quarantine restrictions.
Cita
Cita
Ong Genato v. Bayhon, et al.

William Ong Genato, Petitioner, versus Benjamin Bayhon, Melanie
Bayhon, Benjamin Bayhon, Jr., Brenda Bayhon, Alina Bayhon-Campos,
Irene Bayhon-Tolosa, and the minor Gino Bayhon, as represented by his
natural mother as guardian ad litem, Jesusita Bayhon, Respondents.
PUNO, J:
FACTS: Respondent Benjamin Bayhon obtained from the petitioner a loan

amounting to PhP 1,000,000.00; that to cover the loan, he executed a Deed of
Real Estate Mortgage over the property covered by Transfer Certificate of Title
(TCT) No. 38052; that, however, the execution of the Deed of Real Estate
Mortgage was conditioned upon the personal assurance of the petitioner that
the said instrument is only a private memorandum of indebtedness and that it
would neither be notarized nor enforced according to its tenor. He filed a
separate proceeding for the reconstitution of TCT No. 38052 before the trial
court. Petitioner William Ong Genato filed an Answer in Intervention in the said
proceeding and attached a copy of an alleged dacion en pago covering said
lot. Respondent assailed the dacion en pago as a forgery alleging that neither
he nor his wife, who had died 3 years earlier, had executed it. Respondents
filed an action before the Regional Trial Court of Quezon City, seeking the
declaration of nullity of a dacion en pago allegedly executed by respondent in
favor of petitioner William Ong Genato. Petitioner filed an action for specific
performance, before the trial court against respondent for failure to pay the
loan.
The two cases were consolidated. With respect to the dacion en pago, the
trial court held that the parties have novated the agreement. The trial court
likewise concluded that the lot could not have been validly mortgaged by the
respondent alone; the deed of mortgage was not enforceable and only served as
evidence of the obligation of the respondent. Respondents appealed before the
Court of Appeals which held that the real estate mortgage and the dacion en
pago were both void. While the case was on appeal, the respondent died.
ISSUE: Whether or not the loan contracted by respondent must first be

satisfied before any portion of the inheritance may be transmitted to his heirs.
HELD: Yes. The loan contracted by respondent must first be satisfied before
any portion of the inheritance may be transmitted to his heirs.
As a general rule, obligations derived from a contract are transmissible.

Article 1311 of the Civil Code provides: Contracts take effect only between the
parties, their assigns and heirs, except in case where the rights and obligations
arising from the contract are not transmissible by their nature, or by
stipulation or by provision of law. The heir is not liable beyond the value of the
property he received from the decedent.
While the deceased respondent may no longer be compelled to pay the

loan, the debt subsists against his estate. No property or portion of the
inheritance may be transmitted to his heirs unless the debt has first been
satisfied. Petitioners remedy lies in filing a claim against the estate of the
deceased respondent.
Cita
Union Bank v. Santibanez
Cita
Union Bank of the Philippines, Petitioner, versus Edmund Santibanez and

Florence Santibanez Ariola, Respondents.
CALLEJO, SR., J:
FACTS: Efraim Santibaez (Efraim) secured loans from First Countryside

Credit Corp. (FCCC) for the purchase of tractors. These loans were evidenced
by promissory notes signed by Efraim and her son Eduard. Efraim died leaving
holographic will. Subsequently, testate proceeding, the surviving heirs Edmund
and his sister Florence Santibaez Ariola, executed a joint Agreement wherein
they agreed to divide themselves and take possession of the three tractors.
Each of them to assume the indebtedness of their late father to FCCC
corresponding the tractor respectively taken by them. A deed of Assignment
with assumption of liabilities was executed by and between FCCC and Union
Savings and Mortgage Bank, wherein FCCC as assignor, assigned all its assets
and liabilities to Union Savings and Mortgage Bank.
Petitioner filed a complaint for sum of money against Efraim, Edmund

and Florence, before the RTC of Makati City. Summonses were issued against
both, but the one intended for Edmund was not served since he was in United
States an there was no information on his address or date of his return to the
Philippines. Accordingly, the complaint was narrowed down to respondent
Florence. The trial court dismissed the complaint, holding that the claim of the
petitioner should have been filed with probate court before which testate estate
of the late Efraim. On appeal, the Court of Appeals sustained the trial court.
ISSUE: Whether or not the heirs assumption of the indebtedness of the

deceased is binding.
HELD: No. The heirs assumption of the indebtedness is not binding.
The assumption of liability was conditioned upon the happening of an

event, that is, that each heir shall take possession and use of their respective
share under the agreement. It was made dependent on the validity of the
partition, and that they were to assume the indebtedness corresponding to the
chattel that they were each to receive. The partition being invalid, the heirs in
effect did not receive any such tractor. It follows then that the assumption of
liability cannot be given any force and effect.
Florence S. Ariola could not be held accountable for any liability incurred
by her late father. The documentary evidence presented, particularly the
promissory notes and the continuing guaranty agreement, were executed and
signed only by the late Efraim Santibaez and his son Edmund. As the
petitioner failed to file its money claim with the probate court, at most, it may
only go after Edmund as co-maker of the decedent under the said promissory
notes and continuing guaranty, of course, subject to any defenses Edmund
may have as against the petitioner.
The decision appealed from is affirmed.
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San Agustin v. Court of Appeals

Jesus San Agustin, Petitioner, versus The Honorable Court of Appeals and
Maximo Menez, Jr., Respondents.
(G.R. No. 121940, December 4, 2001, 2nd Division)
QUISUMBING, J:
FACTS: The Government Service Insurance System (GSIS) sold to a certain

Macaria Vda. de Caiquep, a parcel of residential land with an area of 168
square meters as part of the Government Service and Insurance System Low
Cost Housing Project. The sale is evidenced by a Deed of Absolute Sale subject
to the condition that any violation of which shall entitle the vendor to cancel.
The purpose of the sale be to aid the vendee in acquiring a lot for
himself/themselves and not to provide him/them with a means for speculation
or profit by a future assignment of his/their right herein acquired or the resale
of the lot through rent, lease or subletting to others of the lot and subject of
this deed. Sometime in 1979, for being suspected as a subversive, an Arrest,
Search and Seizure Order (ASSO) was issued against private respondent. When
he was released, he discovered that the subject Transfer Certificate of Title
(TCT) was missing. He filed a petition for the issuance of the owners duplicate
copy of the TCT to replace the lost one. Trial ensued and it went uncontested
leaving the court to grant his petition. Petitioner received a copy of the decision.
He claimed this was the first time he became aware of the case of her aunt,
Macaria Vda. de Caiquep who, according to him, died sometime in 1974.
Claiming that he was the present occupant of the property and the heir of
Macaria, he filed his Motion to Reopen Reconstitution Proceedings; however,
the trial court issued an order denying said motion. Petitioner filed an appeal
with the Court of Appeals, which was denied. Hence, this petition.
ISSUE: Whether the petitioner have an interest in the property.
HELD: No. Petitioner does not have an interest in the property.
The petitioner does not appear to have an interest in the property based on the
memorandum of encumbrances annotated at the back of the title. His claim
that he is an heir (nephew) of the original owner of the lot covered by the
disputed lot and the present occupant thereof is not annotated in the said
memorandum of encumbrances. Neither was his claim entered on the
Certificate of Titles in the name of their original/former owners on file with the
Register of Deeds. Also, private respondent's compliance of the RTCs order of
publication of the petition in a newspaper of general circulation is sufficient
notice of the petition to the public at large.
The GSIS has not filed any action for the annulment of the deed of sale,
nor for the forfeiture of the lot in question. Therefore, the contract of sale
remains valid between the parties, unless and until annulled in the proper suit
filed by the rightful party and remains binding upon all heirs and their
predecessors in interest.
Petition is denied and the decision appealed from is affirmed.
Cita
Project Builders, Inc. v. Court of Appeals

Project Builders, Inc., Galicano A. Calapatia, Jr., and Leandro Enriquez,
Petitioners, versus The Court of Appeals and Industrial Finance
VITUG, J:
FACTS: Plaintiff and Project Builders, Inc. (PBI) entered into an agreement
whereby it was agreed that plaintiff would provide a maximum amount of
P2,000,000.00 against which said defendant would discount and assign to
plaintiff on a with recourse non-collection basis its accounts receivable under
the contracts to sell specified in said agreement. And on June 15, 1976, the
same parties entered into an agreement whereby it was agreed that PBIs credit
line with plaintiff be increased to P5,000,000.00. It was stipulated that the
credit line of P5,000,000.00 granted includes the amount already
assigned/discounted. The discounts were on different date accounts
receivables with different maturity dates from different condominium-unit
buyers. And each time a certain account receivable was discounted, the
covering Contract to Sell was assigned by defendant to plaintiff.
The total amount of receivables discounted by defendant PBI is

P7,986,815.38 and consists of twenty accounts. Of such receivables amounting
to P7,986,815.38 plaintiff released to defendant PBI the amount of
P4,549,132.72 and the difference of P3,437,682.66 represents the discounting
fee or finance fee. To secure compliance, defendants executed a Deed of Real
Estate Mortgage in favor of plaintiff. When defendants allegedly defaulted in the
payment of the subject account, plaintiff foreclosed the mortgage and plaintiff
was the highest bidder in the amount of P3,500,000.00.
The foreclosed property was redeemed a year later, but after application
of the redemption payment, plaintiff claims that there is still a deficiency in the
amount of P1,323,053.08. The trial court dismissed the complaint. The Court
of Appeals however overturned the judgment of the trial court. Hence, this
petition.
ISSUE: Whether or not the assignment of credit is valid.
HELD: Yes. The assignment of credit is valid.
An assignment of credit is an act of transferring, either onerously or

gratuitously, the right of an assignor to an assignee who would then be capable
of proceeding against the debtor for enforcement or satisfaction of the credit.
The transfer of rights takes place upon perfection of the contract, and
ownership of the right, including all appurtenant accessory rights, is thereupon
acquired by the assignee.
In the case, the assignment, was with recourse, and default in the
payment of installments had been duly established when petitioner corporation
foreclosed on the mortgaged parcels of land. The resort to foreclosure of the
mortgaged properties did not preclude private respondent from collecting
interest from the assigned Contracts to Sell from the time of foreclosure to the
redemption of the foreclosed property. The imposition of interest was a mere
Cita
enforcement or exercise of the right to the ownership of the credit or receivables

which the parties stipulated in the 1976 financing agreement.
Petition is denied and the decision of the trial court is affirmed.
Hong Kong and Shanghai Bank v. Sps. Broqueza
Cita
Hong Kong and Shanghai Banking Corp., Ltd. Staff Retirement Plan,
Petitioner, versus Spouses Bienvenido and Editha Broqueza, Respondents.
CARPIO, J:
FACTS: Petitioners Fe Gerong and Editha Broqueza are employees of

Hongkong and Shanghai Banking Corporation (HSBC). They are also members
of respondent Hongkong Shanghai Banking Corporation, Ltd. Staff Retirement
Plan (HSBCL-SRP). The HSBCL-SRP is a retirement plan established by HSBC
through its Board of Trustees for the benefit of the employees.
Petitioner Editha Broqueza obtained a car loan in the amount of

Php175,000.00. She again applied and was granted an appliance loan in the
amount of Php24,000.00. On the other hand, petitioner Gerong applied and
was granted an emergency loan in the amount of Php35,780.00.These loans
are paid through automatic salary deduction.
Meanwhile, a labor dispute arose between HSBC and its employees.

Majority of HSBCs employees were terminated, among whom are petitioners
Editha Broqueza and Fe Gerong. The employees then filed an illegal dismissal
case before the National Labor Relations Commission (NLRC) against HSBC.
Because of their dismissal, petitioners were not able to pay the monthly
amortizations of their respective loans. Thus, respondent HSBCL-SRP
considered the accounts of petitioners delinquent. Demands to pay the
respective obligations were made upon petitioners, but they failed to pay.
HSBCL-SRP, acting through its Board of Trustees and represented by

Alejandro L. Custodio, filed civil case against the spouses Broqueza and a civil
case Gerong. Both suits were civil actions for recovery and collection of sums of
money. The Metropolitan Trial Court (MeTC) promulgated its decision in favor
of HSBCL-SRP. Gerong and the spouses Broqueza filed a joint appeal of the
MeTCs decision before the Regional Trial Court (RTC). The RTC affirmed the
MeTCs decision in toto. Gerong and the spouses Broqueza then filed a Petition
for Review before the Court of Appeals (CA). The CA reversed the RTC decision.
ISSUE: Whether or not the HSBCL-SRP has the right to demand immediate
payment since the Promissory Notes do not contain a period.
HELD: Yes. The HSBCL-SRP has the right to demand immediate payment since
the Promissory Notes do not contain a period.
Article 1179 of the Civil Code applies. Article 1179 provides: Every obligation
whose performance does not depend upon a future or uncertain event, or upon
a past event unknown to the parties, is demandable at once. Every obligation
which contains a resolutory condition shall also be demandable, without
prejudice to the effects of the happening of the event.
The spouses Broquezas obligation to pay HSBCL-SRP is a pure

obligation. The fact that HSBCL-SRP was content with the prior monthly
check-off from Editha Broquezas salary is of no moment. Once Editha
Broqueza defaulted in her monthly payment, HSBCL-SRP made a demand to
enforce a pure obligation.
Cita
Petition granted. The decision appealed from is reversed and set aside.
DBP v. Court of Appeals
Cita
Development Bank of the Philippines, Petitioner, versus Court of Appeals

and Lydia Cuba, Respondents.
DAVIDE, JR., J:
FACTS: Private respondents were the original owners of a parcel of land which
they mortgaged to petitioner bank and were subsequently foreclosed for the
formers default on their obligation. A Transfer Certificate of Title was
eventually issued in petitioners name being the sole bidder in the auction sale
conducted during the foreclosure of said land. Petitioner and private
respondents entered into a Deed of Conditional Sale wherein petitioner agreed
to reconvey the foreclosed property to private respondents under the condition
that petitioner shall deliver to private respondents, their heirs, administrators
and assigns a good and sufficient deed of conveyance covering the property,
subject matter of the said deed of conditional sale, upon completion of payment
by said private respondents.
Petitioner then informed private respondents that the prestation to
execute and deliver a deed of conveyance in their favor had become legally
impossible in view of Sec.6 of Republic Act 6657 (Comprehensive Agrarian
Reform Law) and Sec.1 of Executive Order 407. The former law annulling all
sales, dispositions, leases, management contracts or transfers of possession of
private lands executed by the original landowner in violation of the retention
limits provided thereof upon its effectivity while the latter law requires all
government instrumentalities to immediately execute deeds of transfer in favor
of the Republic of the Philippines as represented by the Department of Agrarian
Reform and to surrender to the latter department all landholdings suitable for
agriculture. Aggrieved, private respondents filed a complaint for specific
performance with damages against petitioner before the trial court. Judgment
was rendered in favor of the private respondents. Upon appeal, the Court of
Appeals reversed the trial courts decision. Hence, this petition.
ISSUE: Whether or not said laws had rendered legally impossible compliance
by petitioner with its obligation to execute a deed of conveyance of the subject
land in favor of private respondents.
HELD: No. The laws mentioned in this case did not render it legally impossible
for petitioner to comply with its obligation.
It is a rule that if the obligation depends upon a suspensive

condition, the demandability as well as the acquisition of effectivity of the
rights arising from the obligation is suspended pending the happening or
fulfillment of the fact or event which constitutes the condition. Once the event
which constitutes the condition is fulfilled resulting in the effectivity of the
obligation, its effects retroact to the moment when the essential elements
which gave birth to the obligation have taken place. Applying this precept to
the case, the full payment by the appellees on April 6, 1990 retroacts to the
time the contract of conditional sale was executed on April 6, 1984. From that
time, all elements of the contract were present and the contract of sale was
perfected. Said sale does not come under the coverage of Republic Act No. 6657
and Executive Order No. 407. Republic Act No. 6657 refers to the original
owners of said agricultural lands and petitioner is not as such.
The decision appealed from is reversed.

Cita
Tomimbang v. Tomimbang
Maria Soledad Tomimbang, Petitioner, versus Atty. Jose Tomimbang,
Respondent.
PERALTA, J:
FACTS: Petitioner and respondent are siblings. Their parents donated to

petitioner an eight-door apartment located, with the condition that during the
parents' lifetime, they shall retain control over the property and petitioner shall
be the administrator thereof. Petitioner failed to obtain a loan from PAG-IBIG
Fund, hence, respondent offered to extend a credit line to petitioner on the
following conditions: (1) petitioner shall keep a record of all the advances; (2)
petitioner shall start paying the loan upon the completion of the renovation; (3)
upon completion of the renovation, a loan and mortgage agreement based on
the amount of the advances made shall be executed by petitioner and
respondent; and (4) the loan agreement shall contain comfortable terms and
conditions which petitioner could have obtained from PAG-IBIG.
Respondent and petitioner entered into a new agreement whereby

petitioner was to start making monthly payments on her loan. Upon
respondent's demand, petitioner turned over to respondent all the records of
the cash advances for the renovations. Petitioner however discontinued the
renovations and her whereabouts could not be located. Respondent filed a
complaint demanding the former to pay the loan plus interest. The trial court
and the Court of Appeals rendered judgment in favor of the plaintiff. Hence,
this petition.
ISSUE: Whether or not petitioners obligation is due and demandable.
HELD: Yes. The petitioners obligation is due and demandable.
The evidence on record clearly shows that after renovation of seven out of the
eight apartment units had been completed, petitioner and respondent agreed
that the former shall already start making monthly payments on the loan even
if renovation on the last unit was still pending. She agreed and complied with
respondent's demand for her to begin paying her loan, since she believed this
was in accordance with her commitment to pay whenever she was able. By her
very own admission and partial performance of her obligation, there can be no
other conclusion but that under the novated agreement, petitioner's obligation
is already due and demandable.
Evidently, by virtue of the subsequent agreement, the parties mutually

dispensed with the condition that petitioner shall only begin paying after the
completion of all renovations. There was, in effect, a partial novation, of
petitioner's obligation. As can be gleaned from the foregoing, the
aforementioned four essential elements and the requirement that there be total
incompatibility between the old and new obligation, apply only to extinctive
novation. In partial novation, only the terms and conditions of the obligation
are altered, thus, the main obligation is not changed and it remains in force.
Her partial performance of her obligation is unmistakable proof that indeed the
original agreement between her and respondent had been novated by the
Cita
deletion of the condition that payments shall be made only after completion of
renovations.
Gonzales v. Heirs
Cita
Feliz L. Gonzales, Petitioner, versus The Heirs of Thomas and Paula Cruz,
herein represented by Elena C. Talens, Respondents.
PANGANIBAN, J:
FACTS: Paula Ao Cruz together with the heirs of Thomas and Paula Cruz,
entered into a Contract of Lease/Purchase with the defendant, Felix L.
Gonzales, of a half-portion of a parcel of land containing an area 12 hectares,
more or less, and an accretion of two hectares in Rizal. The defendant Gonzales
paid the annual rental on the property in accordance with the provisions of the
Contract of Lease/Purchase and thereafter took possession of the property,
installing thereon the defendant Jesus Sambrano as his caretaker. The
defendant Gonzales did not, however, exercise his option to purchase the
property immediately after the expiration of the one-year lease. He remained in
possession of the property without paying the purchase price provided for in
the Contract of Lease/Purchase and without paying any further rentals
thereon. A letter was sent by one of the plaintiffs-heirs to the defendant
Gonzales informing him of the lessors' decision to rescind the Contract due to a
breach thereof committed by the defendant and asked him to vacate the
premises within 10 days. The defendant Gonzales refused to vacate the
property and continued possession thereof. The plaintiffs filed a complaint for
recovery of possession of the property. The trial court ruled that the plaintiffs
could not validly rescind the contract and thereafter take possession of the
land in question. On appeal, the Court of Appeals reversed the trial courts
decision. Hence, this petition.
ISSUE: Whether or not the condition of the contract is a precedent before the
defendant is to pay the down payment
HELD: Yes. The condition of the contract is a precedent before the defendant is
to pay the down payment
When the obligation assumed by a party to a contract is expressly

subjected to a condition, the obligation cannot be enforced against him unless
the condition is complied with. The contract clearly indicates that the lessors-
plaintiffs shall obtain a Transfer Certificate of Title in the name of the lessee
within 4 years before a new contract is to be entered into under the same terms
and conditions as the original Contract of Lease/Purchase. Thus, before a deed
of Sale can be entered into between the plaintiffs and the defendant, the
plaintiffs have to obtain the Transfer Certificate of Title in favor of the
defendant. The failure of the plaintiffs to secure the Transfer Certificate of Title,
as provided for in the contract, does not entitle them to rescind the contract.
The failure to secure the Transfer Certificate of Title in favor of the

defendant entitles not the plaintiffs but, rather, the defendant to either rescind
or to ask for specific performances. Petitioner should first purchase the
property before respondents could be obliged to transfer the TCT to his name.
Verily, the petitioner's obligation to purchase has not yet ripened and cannot
be enforced until and unless respondents can prove their title to the property
subject of the Contract.
Petition granted and the decision appealed from is reversed and set
aside.
Cita
Insular Life v. Young

Insular Life Assurance Company, Ltd., Insular Savings Bank and Jacinto
D. Jimenez, Petitioners, versus Robert Young, Gabriel Lao II, Arthur Tan,
Lope Juban, Jr., Maria Lourdes Ongpin, Antonio Ongpin, Elsie Dizon,
Yolanda Bayer, Cecilia Viray, Manuel Viray, Jose Vito Borromeo,
Respondents.
FACTS: Respondent Robert Young obtained a short term loan of

170,000,000.00 pesos from interbank to finance the purchase 45% equity in
Insular Savings Bank. He did this under the assumption that Araneta would
purchase 99.82% of the banks outsanding capital stock and consolidate all
shares in Youngs name. However, Araneta backed and Young was left with a
massive debt. Young entered into a Memorandum of Agreement (MOA) where
Insular Life and its Pension Fund whereby Insular Life would purchase shares
of stock if Young would abide by certain conditions: one of them being to infuse
additional capital of 50,000,000.00 pesos into the Bank.
It was discovered that Young was pilfering funds from the bank through
check kiting operations and he tendered his resignation. He also defaulted on
his obligations. His shares of stock were purchased by Insular Life in a public
auction. The shares were then consolidated in its name. Young filed a case for
annulment of notarial sale, specific performance and damages. The case was
dismissed by the trial court. On appeal, the Court of Appeals (CA) considered
the MOA as a contract of sale. Hence, this petition.
ISSUE: Whether or not Insular Life is bound to comply with its obligations in
favor of Young.
HELD: No. Insular Life is bound to comply with its obligations in favor of
Robert Young.
The provisions of the MOA negate the existence of a perfected contract of

sale. The MOA is merely a contract to sell since the parties therein specifically
undertook to enter into a contract of sale if the stipulated conditions are met
and the representation and warranties given by Young prove to be true. Here,
the MOA provides that Young shall infuse additional capital of 50,000,000.00
pesos into the Bank. Young failed to infuse the required additional capital.
Moreover, the due diligence audit shows that Young was involved in fraudulent
schemes like check kiting. Since no sale transpired between the parties, the CA
erred in concluding that Insular Life purchased 55% of the total shares of the
Bank under the MOA. It would be unfair on the part of Robert Young to
demand compliance by Insular Life of its obligations when he himself was
remiss in his own.
Petition granted and the decision appealed from is reversed and set
aside.
Cita
Direct Funders v. Lavina

Direct Funders Holdings Corporation, Petitioner, versus Judge Celso D.
Lavina and Kambiak Y. Chan, Jr., Respondents.
PARDO, J:
FACTS: It is alleged by the petitioner that the respondent Judge issued the writ
of preliminary injunction, despite clear and express prayer in the Amended
Complaint that private respondent Kambiak Y. Chan, Jr. (Chan) sought the
issuance of a writ of preliminary mandatory injunction. During the hearing for
the issuance of temporary restraining order, it was made clear to the
respondent Judge that the property in question was occupied by the petitioner
by virtue of a writ of possession issued by the Regional Trial Court in a petition
for the issuance of writ of possession thereof. Despite the lawful order of a
coordinate and co-equal court, the respondent Judge issued the questioned
orders to restore possession to private respondent Chan, alleging an obviously
grave abuse of discretion, tantamount to lack of jurisdiction. The respondent
Judge issued the questioned order granting the issuance of a writ of
preliminary injunction who subsequently denied the petitioners motion to
dismiss and supplemental motion to dismiss and the very urgent motion for
reconsideration. The motion for inhibition and the motion to dissolve the writ of
preliminary injunction were also denied
Petitioner filed with the Court of Appeals a petition for certiorari and
prohibition assailing the trial courts issuance of a writ of preliminary
injunction. The Court of Appeals promulgated a decision dismissing the
petition HELD that the trial court had jurisdiction to issue the injunction that
did not interfere with the writ of possession of a coordinate court. Hence, this
appeal.
ISSUE: Whether or not the conditional sale agreement is consummated and
effectual.
HELD: No. The conditional sale agreement is consummated and effectual.
The conditional sale agreement was the only document that the
respondent presented during the summary hearing of the application for a
temporary restraining order before the Regional Trial Court. The conditional
sale agreement is officious and ineffectual. First, it was not consummated.
Second, it was not registered and duly annotated on the Transfer Certificate of
Title (TCT) covering the subject property. Third, it was executed about eight
years after the execution of the real estate mortgage over the subject property.
The mortgagee did not give its consent to the change of debtor. It is a
fundamental axiom in the law on contracts that a person not a party to an
agreement cannot be affected thereby. Worse, not only was the conditional sale
agreement executed without the consent of the mortgagee-creditor, United
Savings Bank, the same was also a material breach of the stipulations of the
real estate mortgage over the subject property. The petitioner as opposed to
Chan bears a TCT, deeds of assignment, and certificates of sale in its favor
showing that it has a better right to possession of the disputed land.
The decision appealed from is reversed.
Cita
Vda. De Mistica v. Naguiat

Fidela Del Castillo Vda. De Mistica, Petitioner, versus Spouses Bernardino
Naguiat and Maria Paulina Gerona-Naguiat, Respondents.
PANGANIBAN, J:
FACTS: Eulalio Mistica, predecessor-in-interest of herein petitioner, entered

into a contract to sell with respondent Bernardino Naguiat over a lot. Pursuant
to said agreement, respondent gave a downpayment of 2,000.00 pesos. He
made another partial payment of 1,000.00 pesos on February 7, 1980. He
failed to make any payments thereafter. Eulalio Mistica died sometime in
October 1986. Petitioner filed a complaint for rescission alleging that the failure
and refusal of respondents to pay the balance of the purchase price constitutes
a violation of the contract which entitles her to rescind the same. In their
answer and amended answer, respondents contended that the contract cannot
be rescinded on the ground that it clearly stipulates that in case of failure to
pay the balance as stipulated, a yearly interest of 12% is to be paid.
After the presentation of the evidence, the trial court rendered a decision
dismissing the complaint for lack of merit. Upon appeal, The Court of Appeals
held that respondents did not breach the Contract of Sale and disallowed the
rescission. Hence, this petition.
ISSUE: Whether or not petitioner entitled to rescission of contract.
HELD: No. The petitioner is not entitled to rescission of contract.
The transaction between Eulalio Mistica and respondents, as evidenced

by the Kasulatan, was clearly a Contract of Sale. A deed of sale is considered
absolute in nature when there is neither a stipulation in the deed that title to
the property sold is reserved to the seller until the full payment of the price;
nor a stipulation giving the vendor the right to unilaterally resolve the contract
the moment the buyer fails to pay within a fixed period.
In a contract of sale, the remedy of an unpaid seller is either specific

performance or rescission. Rescission, however, is allowed only where the
breach is substantial and fundamental to the fulfillment of the obligation. In
the present case, the failure of respondents to pay the balance of the purchase
price within ten years from the execution of the Deed did not amount to a
substantial breach.
Moreover, it is undisputed that during the ten year period, petitioner

never made any demand for the balance of the purchase price. Petitioner even
refused the payment tendered by respondents during her husbands funeral,
thus showing she was not exactly blameless for the lapse of the ten year
period.
Cita
Hermosa v. Longara
Luz Hermosa, as Administratrix of the Intestate Estate of Fernando
Hermosa, Sr., and Fernando Hermosa, Jr., Petitioners, versus Epifanio M.
Longara, Respondents.
(G.R. No. L- 5267, October 27, 1953, En Banc)
LABRADOR, J:
FACTS: The claims by Epifanio M. Longara against the testate estate of

Fernando Hermosa, Sr. are of three kinds, namely, 2,341.41 pesos
representing credit advances made to the intestate from 1932 to 1944,
12,924.12 pesos made to his son Francisco Hermosa, and 3,772.00 pesos
made to his grandson, Fernando Hermosa, Jr. from 1945 to 1947, after the
death of the intestate, which occurred in December, 1944.
The claimant presented evidence and the Court of Appeals found, in

accordance therewith, that the intestate had asked for the said credit advances
for himself and for the members of his family on condition that their payment
should be made by Fernando Hermosa, Sr. as soon as he receive funds derived
from the sale of his property in Spain. Claimant had testified without
opposition that the credit advances were to be payable as soon as Fernando
Hermosa, Sr.'s property in Spain was sold and he receive money derived from
the sale. The Court of Appeals held that payment of the advances did not
become due until the administratrix received the sum of 20,000.00 pesos from
the buyer of the property. Upon authorization of the probate court in October,
1947, and the same was paid for subsequently. Hence, this appeal.
ISSUE: Whether or not the condition of the obligation is a potestative

condition, hence void and unenforceable.
HELD: No. The condition of the obligation is a potestative condition, hence void
and unenforceable.
A careful consideration of the condition upon which payment of the sums

advanced was made to depend, "as soon as he (intestate) receive funds derived
from the sale of his property in Spain," discloses the fact that the condition in
question does not depend exclusively upon the will of the debtor, but also upon
other circumstances beyond his power or control. Circumstances show that the
intestate had already decided to sell his house lest he meant to fool his
creditors. But in addition of the sale to him (the intestate-vendor), there were
still other conditions that had no concur to effect the sale, mainly that of the
presence of a buyer, ready, able and willing to purchase the property under the
conditions demanded by the intestate. It is evident, therefore, that the
condition of the obligation was not a purely protestative one, depending
exclusively upon the will of the intestate, but a mixed one, depending partly
upon the will of intestate and partly upon chance.
Cita
Trillana v. Quezon Colleges

Nazario Trillana, Administrator-Appellee, versus Quezon College, Inc.,
Claimant-Appellant.
(G.R. No. L-5003, June 27, 1953, En Banc)
PARAS, J:
FACTS: On June 1, 1948, Damasa Crisostomo applied for 200 shares of stock
worth PhP100.00 each at Quezon Colleges, Inc. Within her letter of application,
she stipulated, You will find (Babayaran kong lahat pagkatapos na ako ay
makapag-pahuli ng isda) pesos as my initial payment and the balance payable
in accordance with law and the rules and regulations of the Quezon College.
Damasa Crisostomo died on October 26, 1948. As no payment appears to have
been made on the subscription mentioned in the foregoing letter, the Quezon
College, Inc. presented a claim before the Court of First Instance of Bulacan in
her testate proceeding, for the collection of the sum of 20,000.00 pesos
representing the value of the subscription to the capital stock of the Quezon
College, Inc. This claim was opposed by the administrator of the estate, and the
Court of First Instance of Bulacan, after hearing issued an order dismissing the
claim of the Quezon College, Inc. on the ground that the subscription in
question was neither registered in nor authorized by the Securities and
Exchange Commission. From this order the Quezon College, Inc. has appealed.
ISSUE: Whether or not the condition in the obligation is a potestative

condition, thus invalid.
HELD: Yes. The condition in the obligation is a potestative condition, thus

invalid.
There is nothing in the record to show that the Quezon College, Inc.
accepted the term of payment suggested by Damasa Crisostomo, or that if
there was any acceptance the same came to her knowledge during her lifetime.
As the application of Damasa Crisostomo is obviously at variance with the
terms evidenced in the form letter issued by the Quezon College, Inc., there
was absolute necessity on the part of the College to express its agreement to
Damasa's offer in order to bind the latter. Conversely, said acceptance was
essential, because it would be unfair to immediately obligate the Quezon
College, Inc. under Damasa's promise to pay the price of the subscription after
she had caused fish to be caught. Thus, it cannot be said that the letter
ripened into a contract.
Indeed, the need for express acceptance on the part of the Quezon
College, Inc. becomes the more imperative, in view of the proposal of Damasa
Crisostomo to pay the value of the subscription after she has harvested fish, a
condition obviously dependent upon her sole will and, therefore, facultative in
nature, rendering the obligation void. Under the Civil Code it is provided that if
the fulfillment of the condition should depend upon the exclusive will of the
debtor, the conditional obligation shall be void.
The appealed order is affirmed.
Cita
Visayan Sawmill v. Court of Appeals

Visayan Sawmill Company, Inc., and Ang Tay, Petitioners, versus The
Honorable Court of Appeals and RJH Trading, represented by Ramon
Hibionada, Proprietor-Respondents.
(G.R. No. 83851, March 3, 1993, En Banc)
DAVIDE, JR., J:
FACTS: herein plaintiff-appellee and defendants appellants entered into a sale

involving scrap iron, subject to the condition that plaintiff appellee will open a
letter of credit in the amount of P250,00.00 in favor of defendant-appellant
corporation on or before May 15, 1983. On May 24, 1983, plaintiff-appellee
informed defendans-appellants by telegram that the letter of credit was opened
May 12, 1983 at the BPI main office in Ayala, but that transmittal was delayed.
On May 26, 1983, defendants-appellants received a letter advice from the
Dumaguete City Branch of BPI dated May 26, 1983, that a domestic letter of
credit had been opened in favor of Visayan Sawmill Company.
Plaintiffs then demanded that defendants comply with the deed of sale.
On July 20, 1983 Defendant Corporation informed plaintiffs lawyer that it is
unwilling to continue with the sale due to plaintiffs failure to comply with the
essential preconditions of the contract. Private respondent prayed for judgment
ordering the petitioner corporation to comply with the contract by delivering to
him the scrap iron subject thereof. The lower courts ruled in favor of
respondent. Hence, this petition.
ISSUE: Whether or not petitioner can be compelled by specific performance to

comply with its prestation.
HELD: No. Petitioner can be compelled by specific performance to comply with

its prestation.
The petitioner corporations obligation to sell is unequivocally subject to

a positive suspensive condition. The failure of the private respondent to comply
with the positive suspensive condition cannot even be considered a breach
casual or serious but simply an event that prevented the obligation of
Petitioner Corporation to convey title from acquiring binding force.
The letter of credit in favor of petitioner was indisputably not in

accordance with the stipulation in the contract signed by the parties on at
three counts: (1) it was not opened, made or indorsed by the private
respondent, but by a corporation which is not a party to the contract; (2) it was
not opened with the bank agreed upon and; (3) it is not irrevocable and
unconditional, for it is without recourse, it is set to expire on a specific date
and it stipulates certain conditions with respect to shipment.
In this case, the obligation of petitioner to sell did not arise; it therefore
cannot be compelled by specific performance to comply with its prestation.
Petition granted and the decision appealed from is reversed.
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Leano v. Court of Appeals

Carmelita Leano, assisted by her husband Gregorio Cuachon, Petitioner,
versus Court of Appeals and Hermogenes Fernando, Respondents.
PARDO, J:
FACTS: On November 13, 1985, Hermogenes Fernando, as vendor and

Carmelita Leao, as vendee executed a contract to sell involving a piece of land.
In the contract, Carmelita Leao bound herself to pay Hermogenes Fernando
the sum of PhP107,750.00 as the total purchase price of the lot.
The contract also provided for a grace period of one month within which
to make payments, together with the one corresponding to the month of grace.
Should the month of grace expire without the installments for both months
having been satisfied, an interest of 18% per annum will be charged on the
unpaid installments. Should a period of ninety days elapse from the expiration
of the grace period without the overdue and unpaid installment paid with
proper interests, Fernando, as vendor, was authorized to declare the contract
cancelled. The defendant later filed an ejectment case for failure of petitioner to
pay within the terms of contract.
ISSUE: Whether or not the transaction between the parties was a conditional
sale.
HELD: Yes. The transaction between the parties was a conditional sale not an
absolute sale.
The intention of the parties was to reserve the ownership of the land in
the seller until the buyer has paid the total purchase price. The ownership of
the lot was not transferred to Carmelita Leao. In a contract to sell real
property on installments, the full payment of the purchase price is a positive
suspensive condition, the failure of which is not considered a breach, casual or
serious, but simply an event that prevented the obligation of the vendor to
convey title from acquiring any obligatory force. In the case at bar, petitioners
non-payment of the installments after April 1, 1989, prevented the obligation of
respondent to convey the property from arising. In fact, it brought into effect
the provision on cancellation.
However, in view of RA No. 6552, that the default committed by

petitioner in respect of the obligation could be compensated by the interest and
surcharges imposed upon her under the contract in question.
Petition denied.
Cita
De Leon v. Ong
Raymundo S. De Leon, Petitioner, versus Benita T. Ong, Respondents.
CORONA, J:
FACTS: Petitioner Raymundo S. de Leon sold three parcels of land with

improvements situated in Antipolo, Rizal to respondent Benita T. Ong. As these
properties were mortgaged to Real Savings and Loan Association, Incorporated
(RSLAI), petitioner and respondent executed a notarized deed of absolute sale
with assumption of mortgage. Pursuant to this deed, respondent gave
petitioner 415,500.00 pesos as partial payment. Petitioner, on the other hand,
handed the keys to the properties and wrote a letter informing RSLAI of the
sale and authorizing it to accept payment from respondent and release the
certificates of title. Thereafter, respondent undertook repairs and made
improvements on the properties. Respondent likewise informed RSLAI of her
agreement with petitioner for her to assume petitioners outstanding loan.
RSLAI required her to undergo credit investigation. Subsequently, respondent
learned that petitioner again sold the same properties to one Leona Viloria after
March 10, 1993 and changed the locks, rendering the keys he gave her useless.
Respondent thus proceeded to RSLAI to inquire about the credit investigation.
However, she was informed that petitioner had already paid the amount due
and had taken back the certificates of title. Respondent persistently contacted
petitioner but her efforts proved futile.
Respondent filed a complaint for specific performance, declaration of

nullity of the second sale and damages6 against petitioner and Viloria in the
Regional Trial Court (RTC) of Antipolo, Rizal. Because respondent was a
licensed real estate broker, the RTC concluded that she knew that the validity
of the sale was subject to a condition. The perfection of a contract of sale
depended on RSLAIs approval of the assumption of mortgage. Since RSLAI did
not allow respondent to assume petitioners obligation, the RTC held that the
sale was never perfected. The RTC dismissed the complaint for lack of cause of
action. Aggrieved, respondent appealed to the Court of Appeals (CA) which
found that the contract executed by the parties did not impose any condition
on the sale and held that the parties entered into a contract of sale. Hence, this
petition.
ISSUE: Whether or not the transaction is a contract of sale.
HELD: Yes. The transaction entered into was a contract of sale. In a contract of
sale, the seller conveys ownership of the property to the buyer upon the
perfection of the contract. Should the buyer default in the payment of the
purchase price, the seller may either sue for the collection thereof or have the
contract judicially resolved and set aside.
Petitioner executed a notarized deed of absolute sale in favor of

respondent. Moreover, not only did petitioner turn over the keys to the
properties to respondent, he also authorized RSLAI to receive payment from
respondent and release his certificates of title to her. The totality of petitioners
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acts clearly indicates that he had unqualifiedly delivered and transferred

ownership of the properties to respondent.
Heirs of Sandejas v. Lina
Cita
Heirs of Spouses Remedios Sandejas and Eliodoro Sandejas, Sr.,

Petitioners, versus Alex A. Lina, Respondents.
PANGANIBAN, J:
FACTS: Eliodoro Sendejas, Sr., served as administrator of the estate of

Remedios R. Sandejas. Eliodoro, in his capacity as seller, bound and obligated
himself, administrators, and assigns, to sell forever and absolutely and in their
entirety parcels of lands which formed part of the estate of the late Remedios to
one Mr. Alex A. Lina for the consideration of P1 Million. Eliodoro died and Mr.
Alex Lina served as temporary administrator of the estate until he was replaced
by the heir of Eliodoro, Sixto Sandejas. Mr. Lina filed an Omnibus motion to
approve the deed of conditional sale executed between Plaintiff-in-Intervention
Alex A. Lina and Eliodoro Sandejas, Sr. on June 7, 1982. The administrator
Sixto filed a motion to dismiss which was denied. Hence, this petition.
ISSUE: Whether or not the agreement between Eliodoro, Sr. and respondent is
subject to a suspensive condition.
HELD: Yes. The agreement between Eliodoro, Sr. and respondent is subject to
a suspensive condition, the procurement of a court approval, not full payment.
In a contract to sell, the payment of the purchase price is a positive

suspensive condition. The vendors obligation to convey the title does not
become effective in case of failure to pay. There was no reservation of
ownership in the agreement. In accordance with paragraph 1 of the Receipt,
petitioners were supposed to deed the disputed lots over to respondent. This
they could do upon the courts approval, even before full payment. Hence, their
contract was a conditional sale, rather than a contract to sell as determined by
the CA.
Because petitioners did not consent to the sale of their ideal shares in the
disputed lots, the CA correctly limited the scope of the Receipt to the pro-
indiviso share of Eliodoro, Sr. Thus, it correctly modified the intestate courts
HELD by excluding their shares from the ambit of the transaction.
The petition was partially granted. The appealed decision and resolution
are affirmed with modification.
CIR v. Primetown
Cita
Commissioner of Internal Revenue and Arturo Parcero, Petitioners, versus

Primetown Property Group, Inc., Respondents.
CORONA, J:
FACTS: Gilbert Yap, vice chair of respondent Primetown Property Group, Inc.,
applied for the refund or credit of income tax respondent paid in 1997.
According to Yap, because respondent suffered losses, it was not liable for
income taxes. Nevertheless, respondent paid its quarterly corporate income tax
and remitted creditable withholding tax from real estate sales to the BIR in the
total amount of P26,318,398.32. Therefore, respondent was entitled to tax
refund or tax credit.
On May 13, 1999, revenue officer Elizabeth Y. Santos required
respondent to submit additional documents to support its claim. Respondent
complied but its claim was not acted upon. Thus, on April 14, 2000, it filed a
petition for review in the Court of Tax Appeals (CTA). On December 15, 2000,
the CTA dismissed the petition as it was filed beyond the two-year prescriptive
period for filing a judicial claim for tax refund or tax credit. Respondents now
assail that decision for dismissal of the CTA.
ISSUE: Whether or not the period for the filing of the action has already
expired.
HELD: No. The period for the filing of the action has not yet expired.
Both Article 13 of the Civil Code and Section 31, Chapter VIII, Book I of
the Administrative Code of 1987 deal with the same subject matter the
computation of legal periods. Under the Civil Code, a year is equivalent to 365
days whether it be a regular year or a leap year. Under the Administrative Code
of 1987, however, a year is composed of 12 calendar months. Needless to state,
under the Administrative Code of 1987, the number of days is irrelevant.
There obviously exists a manifest incompatibility in the manner of

computing legal periods under the Civil Code and the Administrative Code of
1987. For this reason, we hold that Section 31, Chapter VIII, Book I of the
Administrative Code of 1987, being the more recent law, governs the
computation of legal periods.
Following this formula, respondents petition (filed on April 14, 2000) was
filed on the last day of the 24th calendar month from the day respondent filed
its final adjusted return. Hence, it was filed within the reglementary period.
Petition denied.
Cita
NAMARCO v. Tecson
National Marketing Corporation, Plaintiff-Appellant, versus Miguel Tecson,
et al., Defendants; Miguel Tecson, Defendant-Appellee; The Insurance
Commissioner, Petitioner.
(G.R. No. L-29131, August 27, 1969, En Banc)
CONCEPCION, C. J:
FACTS: The instant case stemmed from Price Stabilization Corporation vs.
Tecson. Said case became final and executory on December 21, 1955. National
Marketing Corporation, as successor to Price Stabilization Corporation, filed a
motion for revival of judgment on December 21, 1965. Defendant Tecson
moved for the dismissal of the case on the ground of prescription, the
prescriptive period being ten (10) years. On a previous court case, the CFI
rendered judgment: (a) Ordering the defendants Miguel D. Tecson and Alto
Surety Insurance Co., Inc. to pay jointly and severally plaintiff PRATRA the
sum of P7,200.00 plus 7% interest from May 25, 1960 until the amount is fully
paid, plus P500.00 for attorney's fees, and plus costs; (b) ordering defendant
Miguel D. Tecson to indemnify his co-defendant Alto Surety & Insurance Co.,
Inc. on the cross-claim for all the amounts it would be made to pay in this
decision, in case defendant Alto Surety & Insurance Co., Inc. pay the amount
adjudged to plaintiff in this decision. From the date of such payment defendant
Miguel D. Tecson would pay the Alto Surety & Insurance Co., Inc., interest at
12% per annum until Miguel D. Tecson has fully reimbursed plaintiff of the
said amount.
Defendant Miguel Tecson seeks the dismissal of the complaint on the

ground of lack of jurisdiction and prescription. This case was filed exactly on
December 21, 1965 but more than ten years have passed a year is a period of
365 days (Art. 13, CCP). Plaintiff forgot that 1960, 1964 were both leap years
so that when this present case was filed it was filed two days too late.
ISSUE: Whether or not a month shall be counted as 30 days.
HELD: Yes. A month shall be counted as 30 days, except when it it specifically

named, that it shall be computed as to how many days it actually consists.
In People vs. Del Rosario, with the approval of the Civil Code of the
Philippines, the Court have reverted to the provisions of the Spanish Civil Code
in accordance with which a month is to be considered as the regular 30-day
month and not the solar or civil month, with the particularity that, whereas the
Spanish Code merely mentioned months, days or nights, ours has added
thereto the term years and explicitly ordains that it shall be understood that
years are of three hundred sixty-five days.
The very conclusion thus reached by appellant shows that its theory
contravenes the explicit provision of Art. 13 limiting the connotation of each
year, as the term were used in our laws, to 365 days. The action to enforce a
judgment which became final on December 21, 1955 prescribes in 10 years.
Since the Civil Code computes years in terms of 365 days each, the action has
prescribed on December 19, 1955, since the two intervening leap years added
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two more days to the computation. It is not the calendar year that is
considered.
The decision appealed from was affirmed.
Berg v. Magdalena Estates
Cita
Ernest Berg, Plaintiff-Appellee, versus Magdalena Estate, Inc., Defendant-

Appellant.
(G.R. No. L-3784, October 17, 1952, En Banc)
BAUTISTA ANGELO, J:
FACTS: The complaint avers that plaintiff and defendant are co-owners of said
property, the former being the owner of one-third interest and the latter of the
remaining two-thirds. The division is asked because plaintiff and defendant are
unable to agree upon the management of the property and upon the partition
thereof. Plaintiff and defendant were co owners pro indiviso of the property
known as Crystal Arcade in the proportion of one-third interest belonging to
the former and two-thirds to the latter. In the deed of sale executed by the
parties on said date, they stipulated that, should either of them decide to sell
his or her share, the other party will have an irrevocable option to purchase it
at the seller's price. Then a disagreement ensued between the parties as to
what really occurred concerning the deal.
Defendant claims that on September 22, 1943, it sold to plaintiff one-

third of the property in litigation subject to the express condition that should
either vendor or vendee decide to sell his or its undivided share, the party
selling would grant to the other part first an irrevocable option to purchase the
same at the seller's price. It avers that on January 1946 plaintiff fixed the sum
of P200,000 as the price of said share and offered to sell it to defendant, which
offer was accepted, and for the payment of said price plaintiff gave defendant a
period of time which, including the extensions granted, would expire on May
31, 1947. Defendant claims that, in spite of the acceptance of the offer, plaintiff
refused to accept the payment of the price, and for this refusal defendant
suffered damages in the amount of P100,000. For these reasons, defendant
asks for specific performance. The lower court found for the plaintiff holding
that no agreement has been reached between the parties relative to the
purchase and sale of the property in question. Hence, this appeal.
ISSUE: Whether or not the contract was with a term.
HELD: No. The contract was without a term.
The clause on which defendant relies for the enforcement of its right to
buy the property, it would seem that it is not a term, but a condition.
Considering the first alternative, that is, until defendant shall have obtained a
loan from the National City Bank of New York, it is clear that the granting of
such loans is not definite and cannot be held to come within the terms "day
certain" provided for in the Civil code, for it may or it may not happen. As a
matter of fact, the loan did not materialize. And if we consider that the period
given was until such time as defendant could raise money from other sources,
we also find it to be indefinite and contingent and so it is also a condition and
not a term within the meaning of the law.
In any event it is apparent that the fulfillment of the condition contained

in this second alternative is made to depend upon the defendant's exclusive
will, and viewed in this light, we are of the opinion that plaintiff's obligation to
sell did not arise, for, under Article 1115 of the old Civil Code, when the
fulfillment of the condition depends upon the exclusive will of the debtor the
conditional obligation shall be void.
Cita
Lirag v. Court of Appeals
Cita
Lirag Textile Mills Inc. and Felix Lirag, Petitioners, versus Court of
Appeals and Cristan Alcantara, Respondents.
(G.R. No. L-6515, October 18, 1954, 1st Division)
ESGUERRA, J:
FACTS: Petitioners Lirag Textile Mills, Inc. and Felix K. Lirag seek a review by
certiorari of the decision of the respondent Court of Appeals in favor of
respondent. Respondent Court of Appeals affirmed the decision of the lower
court, principally its conclusion that the trial court did not commit any error in
its evaluation of the evidence when it found that it was not true that petitioner
Lirag Textile Mills suffered pecuniary loss and in market opportunities which it
used as a justification to terminate the services of plaintiff Alcantara; that it
was not also true that the latter suffered from lack of skill; that, therefore,
there was a violation of the written contract of employment executed by and
between petitioners and private respondent Alcantara; that petitioner Lirag was
responsible for inducing private respondent Alcantara to leave his employment
with the Philippine Chamber of Industries where he was holding a permanent
position and to accept employment with petitioner Lirag Textile Mills; and that
appellee Alcantara was correctly awarded moral damages and attorney's fees.
ISSUE: Whether or not the petitioners are liable to pay respondent back
salaries.
HELD: Yes. The petitioners are liable to pay respondent back salaries.
As could be clearly seen from the stipulation of facts between the

parties in and as a fact recognized by both the trial court and the respondent
Appellate Court, the contract of employment was for an indefinite period as it
shall continue without ending, subject to a resolutory period, unless sooner
terminated by reason of voluntary resignation or by virtue of a valid cause or
causes. There is an indefinite period of time for employment agreed upon by
and between petitioners and the private respondent, subject only to the
resolutory period agreed upon which may end the indeterminate period of
employment, namely voluntary resignation on the part of private respondent
Alcantara or termination of employment at the option of petitioner Lirag Textile
Mills, but for a valid cause or causes.
The measure of an employer's liability provided for in Republic Act

1052 as amended, is solely intended for contracts of employment without a
stipulated period. It cannot possibly apply as a limitation to an employer's
liability in cases where the employer commits a breach of contract by violating
an indefinite period of employment expressly agreed upon through his wrongful
act of terminating said employment without any valid cause or causes, which
act may even amount to bad faith on the employer's part.
Petitioner Lirag Textile Mills, Inc. violated the contract of employment

with private respondent Alcantara when the former terminated his services
without a valid cause. The act was attended with bad faith and deceit because
said petitioner made false allegations of a supposed valid cause.
Cita
Daguhoy v. Ponce
Daguhoy Enterprises, Inc., Plaintiff-Appellee, versus Rita L. Ponce and
Domingo Ponce, Defendants-Appellants.
(G.R. No. L-6515, October 18, 1954, En Banc)
MONTEMAYOR, J:
FACTS: Rita L. Ponce, executed in favor of plaintiff Daguhoy Enterprises a deed

of mortgage over a parcel of land including the improvements thereon, situated
in Manila, to secure the payment of a loan of PhP5,000.00 granted to her by
said corporation, payable within six years with interest at 12 per cent per
annum. Rita and her husband Domnigo attempted to register the deeds in the
office of the register of deeds, but the register noted defects and deficiencies
and advised the couple to cure such and furnish the necessary data. Instead of
compliance, the couple withdrew the deeds and mortgaged the same in favor of
the Rehabilitation Finance Corporation (RFC) to secure a loan. Potenciano
Gapol, a majority stockholder in the corporation, discovered the withdrawal of
the deeds from the office of the register of deeds, and filed a case in court to
collect the amount of the loan.
The Daguhoy Enterprises, Inc., filed in the Court of First Instance of the
City a civil case against Rita L. Ponce and her husband Domingo Ponce, for the
collection of a loan of 6,190.00 pesos with interest at 12 per cent per annum
from June 24, 1950, plus 2,500.00 pesos as attorney's fees and 34.00 pesos as
expenses of litigation. Defendant filed an answer admitting practically all the
allegations of the complaint, set up affirmative defenses, and a counterclaim
asking for the cancellation of the mortgage which secured the payment of the
loan of 6,190.00 pesos. They also filed a petition for the inclusion of Potenciano
Gapol as a third party litigant, at the same time filing a third party complaint
against him asking for damages in the amount of 25,000.00 pesos. The plaintiff
corporation answered the counterclaim and opposed the petition for the
inclusion of a third party litigant. Thereafter, Plaintiff Corporation filed a
motion for judgment on the pleadings which petition was opposed by the
defendants. Defendants are appealing from the adverse decision rendered by
the lower court.
ISSUE: Whether or not the loans immediately demandable despite the six year
installment for payments.
HELD: Yes. The loans immediately demandable despite the six year installment
for payments.
Although the original loan including the increase was payable within six
years from June 1950, and so did not become due and payable until 1956, it
was held that under Article 1198 of the new Civil Code, the debtor lost the
benefit of the period by reason of her failure to give the security in the form of
the two deeds of mortgage and register them including defendants act in
withdrawing said two deeds from the office of the register of deeds and then
mortgaging the same property in favor of the RFC; and so the obligation
became pure and without any condition and consequently, the loan became
due and immediately demandable.
Cita
Victoria Planters v. Victoria Milling

Victorias Planters Association, Inc., North Negros Planters Association,
Inc., Fernando Gonzaga, Jose Gaston and Cesar Lopez, on their ow behalf
and on behalf of other sugar cane planters in Manapla, Cadiz and Victorias
Districts, Petitioners-Appellees, versus Victorias Milling Co., Inc.,
Respondent-Appellant.
(G.R. No. L-6648, July 25, 1995, En Banc)
PADILLA, J:
FACTS: From 1917 to 1934, the sugar cane planters Manapla and Cadiz,
Negros Occidental, executed identical milling contracts, under which the sugar
central "North Negros Sugar Co. Inc." would mill the sugar produced by the
sugar cane planters of the Manapla and Cadiz districts.
Beginning with the year 1948, and in the following years, when the
planters-members of the North Negros Planters Association, Inc. considered
that the stipulated 30-year period of their milling contracts executed in the
year 1918 had already expired and terminated in the crop year 1947-1948, and
the planters-members of the Victorias Planters Association, Inc. likewise
considered the stipulated 30-year period of their milling contracts, as having
likewise expired and terminated in the crop year 1948-1949, under the
pertinent provisions of the standard milling contract. Notwithstanding the
repeated representations made by the herein petitioners with the respondent
corporation, the herein respondent has refused and still refuses to accede to
the same, contending that under the provisions of the milling contract. A
complaint was filed and the trial court rendered judgment in favor of the
petitioners and against the respondent and declares that the milling contracts
expired and terminated upon the lapse of the therein stipulated 30-year period.
From this judgment the respondent corporation has appealed.
ISSUE: Whether or not the milling contracts expired and terminated upon the
lapse of the therein stipulated 30-year period.
HELD: Yes. The milling contracts expired and terminated upon the lapse of the
therein stipulated 30-year period.
The fact that the contracts make reference to "first milling" does not
make the period of thirty (30) years one of thirty (30) milling years. The term
first milling used in the contracts under consideration was for the purpose of
reckoning the thirty-year period stipulated therein. At most on the last year of
the thirty-year period stipulated in the contracts the delivery of sugar cane
could be extended up to a time when all the amount of sugar cane raised and
harvested should have been delivered to the appellant's mill as agreed upon.
Further, the parties stipulated that in the event of flood, typhoon, earthquake,
or other force majeure, war, insurrection, civil commotion, organized strike,
etc., the contract shall be deemed suspended during said period, does not
mean that the happening of any of those events stops the running of the period
agreed upon. It only relieves the parties from the fulfillment of their respective
obligations during that time, the planters from delivering sugar cane and the
central from milling it.
The judgment appealed from is affirmed.
Cita
Jespajo v. CA
Jespajo Realty Corporation, Petitioner, versus Honorable Court of
Appeals, Tan Te Gutierrez and Co Tong, Respondents.
(G.R. No. 113626, September 27, 2002, 2nd Division)
FACTS: The subject of this controversy is an apartment building located at 619

Asuncion Street, Binondo, Manila and owned by Jespajo Realty Corporation.
On February 1, 1985, said corporation, represented by its President, Jesus L.
Uy, entered into separate contracts of lease with Tan Te Gutierrez and Co
Tong.xxx Pursuant to the contract; Tan Te occupied room No. 217 of the
subject building at a monthly rent of P847.00 while Co Teng occupied the
Penthouse at a monthly rent of P910.00. Since the effectivity of the lease
agreement on February 1985, the lessees religiously paid their respective
monthly rentals together with the 20% yearly increased (sic) in the monthly
rentals as stipulated in the contract.
The lessor corporation sent a written notice to the lessees informing them
of the formers intention to increase the monthly rentals on the occupied
premises to P3,500.00 monthly effective February 1, 1990. The lessees through
its counsel in a letter dated March 10, 1990 manifested their opposition
alleging that the same is in contravention of the terms of the contract of lease
as agreed upon. Due to the opposition and the failure of the lessees to pay the
increased monthly rentals in the amount of P3,500.00, the lessor through its
counsel in a letter dated April 10,1990 demanded that the lessees vacate the
premises and pay the amount of P7,000.00 corresponding to the months of
February and March, 1990.
ISSUE: Whether or not a contract of lease entered into stipulated for an

indefinite period and shall continue for as long as the lessee is paying the rent,
is terminable alone by the lessor.
HELD: No. A contract of lease entered into stipulated for an indefinite period
and shall continue for as long as the lessee is paying the rent, is interminable
by the lessor alone.
The lease contract between petitioner and respondents is with a period

subject to a resolutory condition. The wording of the agreement is unequivocal:
The lease period shall continue for an indefinite period provided the lessee is
up-to-date in the payment of his monthly rentals. The condition imposed in
order that the contract shall remain effective is that the lessee is up-to-date in
his monthly payments. It is undisputed that the lessees Gutierrez and Co Tong
religiously paid their rent at the increasing rate of 20% annually. The
agreement between the lessor and the lessees are therefore still subsisting,
with the original terms and conditions agreed upon, when the petitioner
unilaterally increased the rental payment to more than 20% or P3,500.00 a
month.
Lastly, after having the lessees believe that their lease contract is one
with an indefinite period subject only to prompt payment of the monthly
rentals by the lessees, we agree with private respondents that the lessor is
estopped from claiming otherwise.
Cita
Borromeo v. Court of Appeals
Cita
Pilar N. Borromeo, Maria B. Putong, Federico V. Borromeo, Jose

Borromeo, Consuelo B. Morales and Canuto V. Borromeo, Jr., petitioners,
versus Court of Appeals and Jose A. Villamor (deceased), suctituted by
Felisa Villamor, Rosario V. Liao Lamco, Manuel Villamore, Amparo V.
Cotton, Miguel Villamor and Carmencita Villamor, repondents. (47 SCRA
65 or G.R. No. L-43429, September 28, 1972, En Banc)
Fernando, J.:
FACTS: Before the year 1933, Jose A. Villamor was a distributor of lumber
belonging to Mr. Miller who was the agent of the Insular Lumber Company in
Cebu City. Defendant being a friend and former classmate of plaintiff,
Borromeo, used to borrow from the latter certain amounts from time to time.
On one occasion with some pressing obligation to settle with Mr. Miller,
defendant borrowed from plaintiff a large sum of money for which he
mortgaged his land and house in Cebu City. Mr. Miller filed civil action against
the defendant and attached his properties including those mortgaged to
plaintiff, inasmuch as the deed of mortgage in favor of plaintiff could not be
registered because it was not properly drawn up. Plaintiff then pressed the
defendant for the settlement of his obligation, but defendant instead offered to
execute a document promising to pay his indebtedness even after the lapse of
ten (10) years. Liquidation was made and defendant was found to be indebted
to plaintiff in the sum of P7,220, for which defendant signed a promissory note
on November 29, 1933 with interest at the rate of 12% per annum, agreeing
topay-as soon as I have money . The note further stipulates that defendant
hereby relinquish, renounce, or otherwise waive my rights to the prescriptions
established by our Code of Civil Procedure for the collection or recovery of the
above sum of P7,220.
ISSUE: Whether or not prescription extinguished the obligation.
HELD: NO. The obligation in this case is one which is subject to a potestative
condition, one which is dependent solely on the will of the debtor. The
statement as soon as I have money is the condition which is dependent on
the debtors will. Although this condition is void, it has been relied upon by the
creditor resulting to the delayed filing of the action. Prescription in this case
cannot be applied strictly for it will result to grave injustice on the part of the
creditor. For as was also made clear therein, there had been since then verbal
requests on the part of the creditor made to the debtor for the settlement of the
loan. Furthermore, plaintiff did not file any complaint against the defendant
within ten (10) years from the execution of the document as there was no
property registered in defendants name who furthermore assured him that he
could collect even after the lapse of ten years. The debtor is therefore liable for
the amount of the obligation plus interests.
Gonzales v. Jose
Cita
Banito Gonzalez, plaintiff-appellee, versus Florentino De Jose, defendant-

appellant.
(PHIL 369 or G.R. No. L-43429, October 24, 1938, En Banc)
Imperial, J.:
FACTS: Defendant Florentino de Jose executed two (2) promissory notes on

June22, 1922 and September 13, 1922 in favor of plaintiff Benito Gonzales.
The two (2) promissory notes were both worded as follows: I promise to pay
Mr. Benito Gonzalez the sum of P (amount) as soon as possible. Defendant
appealed from the decision of the Court of First Instance of Manila ordering
him to pay the plaintiff the sum of P547.95 within thirty (30) days from the
date of notification of said decision, plus the costs. The defendant interposed
the defense of prescription because the action was not filed by the plaintiff
within the prescriptive period prescribed by law.
ISSUE: Whether or not the action has already prescribed.
HELD: NO. The words as soon as possible in the promissory notes denote
that such is an obligation subject to a potestative condition. Article 1128 of the
Civil Code provides: If the obligation does not specify a term, but it is to be
inferred from its nature and circumstances that it was intended to grant the
debtor time for its performance, the period of the term shall be fixed by the
court. The action to ask the court to fix the period has already prescribed in
accordance with section 43 (1) of the Code of Civil Procedure. This period of
prescription is ten (10) years, which has already elapsed from the execution of
the promissory notes until the filing of the action on June 1, 1934. The
actionwhich should be brought in accordance with Article 1128 is different
from theaction for the recovery of the amount of the notes, although the effects
of bothare the same, being, like other civil actions, subject to the rules of
prescription.
Baluyut v. Poblete
Cita
Guillermina Baluyut, petitioner, versus Eulogio Poblete, Salud Poblete and

The Hon. Court of Appeals, respondents.
(GR No. 144435, February 6, 2007, Tird Division)
Austria-Maritnez, J.:
FACTS: On July 20, 1981, Guillermina Baluyut, mortgaged her house to

secure a loan in the amount of PhP850, 000.00 from the spouses Eulogio and
Salud Poblete. The load was set to mature in one month. After a month had
passed, she was unable to pay her indebtedness which led the spouses to
extrajudicially foreclose the mortgage. The property was then sold on Auction
to the Poblete spouses who asked Baluyut to vacate the premises. Baluyut
instead filed an action for annulment of mortgage. His claim was rejected by
the RTC and the CA. Petitioner claims that based on the testimony of Atty.
Edwina Mendoza that the maturity of the loan which she incurred is only for
one year.
ISSUE: Is petitioners contention tenable?
HELD: Evidence of a prior or contemporaneous verbal agreement is generally

not admissible to vary, contradict or defeat the operation of a valid contract. In
the instant case, aside from the testimony of Atty. Mendoza, no other evidence
was presented to prove that the real date of maturity is one year. The terms
that were thusly reduced to writing is deemed to contain all the terms agreed
upon and no evidence of such terms can be admitted other than the contents
of the agreement itself. The promissory note is the law between petitioner and
private respondents and it clearly states that the loan shall mature in one
month from date of the said Promissory Note.
Cita
Malayan Realty v. Uy
Cita
Malayan Realty, Inc. represented by Alberto C. Dy., petitioner versus Uy

Han Yong, respondent.
(GR No. 163763, November 10, 2006, Third Division)
Carpio Morales, J.:
FACTS: Malayan Realty, Inc. (Malayan), is the owner of an apartment unit

known as 3013 Interior No. 90 (the property), located at Nagtahan Street,
Sampaloc, Manila. In 1958, Malayan entered into a verbal lease contract with
Uy Han Yong (Uy) over the property at a monthly rental of P262.00. The
monthly rental was increased yearly starting 1989, and by 2001, the monthly
rental was P4,671.65.On July 17, 2001, Malayan sent Uy a written notice
informing him that the lease contract would no longer be renewed or extended
upon its expiration on August 31, 2001, and asking him to vacate and turn
over the possession of the property within five days from August 31, 2001, or
on September 5, 2001. Despite Uys receipt of the notice on June 18,2001, he
refused to vacate the property, prompting Malayan to file before the
Metropolitan Trial Court (MeTC) of Manila a complaint for ejectment, docketed
as Civil Case No. 171256, and was raffled to Branch 3 thereof. The Court ruled
in favor of Uy and granted an extension period of five years.
ISSUE: Is respondent Uy entitled to a grant of extension by the Court?
HELD: The 2nd paragraph of Article 1687 provides that in the event that the
lessee has occupied the leased premises for over a year, the courts may fix a
longer term for the lease. The power of the courts to establish a grace period is
potestative or discretionary, depending on the particular circumstances of the
case. Thus, a longer term may be granted where equities come into play, and
may be denied where none appears, always with due deference to the parties
freedom to contract. In the present case, respondent has remained in
possession of the property from the time the complaint for ejectment was filed
on September 18, 2001 up to the present time. Effectively, respondents lease
has been extended for more than five years, which time is, under the
circumstances, deemed sufficient as an extension and for him to find another
place to stay.
Kasapian ng Manggagawa ng Coca-cola v. Court of Appeals
Cita
Kasapian ng Manggagawa sa Coca-cola (KASAMA-CCO)-CFW LOCAL 245,

petitioner, versus The Hon. Court of Appelas and Coca-cola Bottlers
Phils., Inc., respondents.
(GR No. 159828, April 19, 2006, First Division)
Chico-Nazario, J.:
FACTS: On June 1998, a Collective Bargaining Agreement which was in effect

between petitioner union and private respondent company expired. With the
intervention of the NCMB Administrator, on December 26, 1998, both parties
executed and signed a MOA providing for salary increases and other economic
and non-economic benefits. As part of the MOA, 61employees were regularized.
Consequently, petitioner demanded the payment and benefits of the newly
regularized employees retroactive to December 1, 1998. Petitioner then
demanded renegotiation of the CBA which private respondent refused. On
December 9, 1999, despite the pendency of petitioners complaint before the
NLRC, private respondent closed its Manila and Antipolo plants resulting in the
termination of employment of 646 employees. The affected employees were
considered on paid leave from December 9, 1999 to February 29, 2009 and
were paid their corresponding salaries. The Petitioners amended their
complaint to include union busting, illegal dismissal, etc.
ISSUE: Is the closure of the Manila and Antipolo plants valid?
HELD: Under Article 280 of the Labor Code, all those who have been with the
company for one year by said date must automatically be considered regular
employees by operation of law. The 61 employees all qualify as regular
employees by this provision. The characterization of the employees services as
no longer necessary or sustainable, and therefore properly terminable, is an
exercise of business judgment on the part of the employer. The wisdom or
soundness of such characterizing or decision is not subject to discretionary re
view on the part of the Labor Arbiter nor of the NLRC so long, of course, as
violation of law or merely arbitrary and malicious action is not shown. As found
by the NLRC, the private respondents decision to close the plant was a result
of a study conducted which established that the most prudent course of action
for the private respondent was to stop operations in said plants and transfer
production to other more modern and technologically advanced plants of
private respondent.
Santos vs. Santos
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Santos Ventura Hocorma Foundation, Inc., petitioner, versus Ernesto V.

Santos and Riverland, Inc., respondents
(2000G.R. No. 153004 or 441 SCRA 472, November 4, First Division)
Quisumbing, J.:
FACTS: Ernesto V. Santos and Santos Ventura Hocorma Foundation, Inc.

(SVHFI) were the plaintiff and defendant, respectively, in several civil cases filed
indifferent courts in the Philippines. On October 26, 1990, the parties executed
a Compromise Agreement which amicably ended all their pending litigations.
The pertinent portions of the Agreement read as follows:1.Defendant
Foundation shall pay Plaintiff Santos P14.5 Million in the following manner: a)
P1.5 Million immediately upon the execution of this agreement; and, b) the
balance of P13 Million shall be paid, whether in one lump sum or in
installments, at the discretion of the Foundation, within a period of not more
than two (2)years from the execution of this agreement; provided, however, that
in the event that the Foundation does not pay the whole or any part of such
balance, the same shall be paid with the corresponding portion of the land or
real properties subject of the aforesaid cases and previously covered by the
notices of lis pendens, under such terms and conditions as to area, valuation,
and location mutually acceptable to both parties; but in no case shall the
payment of such balance be later than two (2) years from the date of this
agreement; otherwise, payment of any unpaid portion shall only be in the form
of land aforesaid; 2. Immediately upon the execution of this agreement (and
[the] receipt of the P1.5 Million), plaintiff Santos shall cause the dismissal with
prejudice of Civil Cases Nos. 88-743, 1413OR, TC-1024, 45366 and 18166 and
voluntarily withdraw the appeals in Civil Cases Nos. 4968 (C.A.-G.R. No.
26598) and 88-45366 (C.A.-G.R. No. 24304) respectively and for the immediate
lifting of the aforesaid various notices of lis pendens on the real properties
aforementioned (by signing herein attached corresponding documents, for such
lifting); provided, however, that in the event that defendant Foundation shall
sell or dispose of any of the lands previously subject of lis pendens, the
proceeds of any such sale, or any part thereof as may be required, shall be
partially devoted to the payment of the Foundations obligations under this
agreement as may still be subsisting and payable at the time of any such sale
or sales;XXX5. Failure of compliance of any of the foregoing terms and
conditions by either or both parties to this agreement shall ipso facto and ipso
jure automatically entitle the aggrieved party to a writ of execution for the
enforcement of this agreement. In compliance with the Compromise Agreement,
respondent Santos moved for the dismissal of the aforesaid civil cases. He also
caused the lifting of the notices of lis pendens on the real properties involved.
For its part, petitioner SVHFI, paid P1.5 million to respondent Santos, leaving a
balance of P13 million. Subsequently, petitioner SVHFI sold to Development
Exchange Livelihood Corporation two real properties, which were previously
subjects of lis pendens. Discovering the disposition made by the petitioner,
respondent Santos sent a letter to the petitioner demanding the payment of the
remaining P13 million, which was ignored by the latter. Meanwhile, on
September 30, 1991, the Regional Trial Court of Makati City, Branch 62,
issued a Decision approving the compromise agreement. On October 28, 1992,
respondent Santos sent another letter to petitioner inquiring when it would pay
the balance of P13 million. There was no response from petitioner.
Consequently, respondent Santos applied with the Regional Trial Court of
Makati City, Branch 62, for the issuance of a writ of execution of its
compromise judgment dated September 30, 1991. The RTC granted the writ.
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Thus, on March 10, 1993, the Sheriff levied on the real properties of petitioner,
which were formerly subjects of the lis pendens. Petitioner, however, filed
numerous motions to block the enforcement of the said writ. The challenge of
the execution of the aforesaid compromise judgment even reached the Supreme
Court. All these efforts, however, were futile. On November 22, 1994,
petitioners real properties located in Mabalacat, Pampanga were auctioned. In
the said auction, Riverland, Inc. was the highest bidder for P12 million and it
was issued a Certificate of Sale covering the real properties subject of the
auction sale. Subsequently, another auction sale was held on February 8,
1995, for the sale of real properties of petitioner in Bacolod City. Again,
Riverland, Inc. was the highest bidder. The Certificates of Sale issued for both
properties provided for the right of redemption within one yearfrom the date of
registration of the said properties. On June 2, 1995, Santos and Riverland Inc.
filed a Complaint for Declaratory Relief and Damages alleging that there was
delay on the part of petitioner in paying the balance of P13 million. They
further alleged that under the Compromise Agreement, the obligation became
due on October 26, 1992, but payment of the remaining P12 million was
effected only on November 22, 1994. Thus, respondents prayed that petitioner
be ordered to pay legal interest on the obligation, penalty, attorneys fees and
costs of litigation. Furthermore, they prayed that the aforesaid sales be
declared final and not subject to legal redemption. In its Answer, petitioner
countered that respondents have no cause of action against it since it had fully
paid its obligation to the latter. It further claimed that the alleged delay in the
payment of the balance was due to its valid exercise of its rights to protect its
interests as provided under the Rules. Petitioner counterclaimed for attorneys
fees and exemplary damages. On October 4, 1996, the trial court rendered a
Decision dismissing herein respondents complaint and ordering them to pay
attorneys fees and exemplary damages to petitioner. Respondents then
appealed to the Court of Appeals. The appellate court reversed the HELD of the
trial court.
ISSUE: Whether or not the Court of Appeals was correct in its decision,
reversing the trial courts decision, regarding the legal interest of herein
respondents on aforementioned properties.
HELD: The Supreme Court held the decision of the Court of Appeals correct. A
compromise is a contract whereby the parties, by making reciprocal
concessions, avoid litigation or put an end to one already commenced. It is an
agreement between two or more persons, who, for preventing or putting an end
to a lawsuit, adjust their difficulties by mutual consent in the manner which
they agree on, and which every one of them prefers in the hope of gaining,
balanced by the danger of losing. The general rule is that a compromise has
upon the parties the effect and authority of res judicata, with respect to the
matter definitely stated therein, or which by implication from its terms should
be deemed to have been included therein. This holds true even if the agreement
has not been judicially approved. In the case at bar, the Compromise
Agreement was entered into by the parties on October 26, 1990. It was
judicially approved on September 30, 1991. Applying existing jurisprudence,
the compromise agreement as a consensual contract became binding between
the parties upon its execution and not upon its court approval. From the time a
compromise is validly entered into, it becomes the source of the rights and
obligations of the parties thereto. The purpose of the compromise is precisely to
replace and terminate controverted claims. In accordance with the compromise
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agreement, the respondents asked for the dismissal of the pending civil cases.
The petitioner, on the other hand, paid the initial P1.5 million upon the
execution of the agreement. This act of the petitioner showed that it
acknowledges that the agreement was immediately executory and enforceable
upon its execution. As to the remaining P13 million, the terms and conditions
of the compromise agreement are clear and unambiguous. The two-year period
must be counted from October 26, 1990, the date of execution of the
compromise agreement, and not on the judicial approval of the compromise
agreement on September 30, 1991. When respondents wrote a demand letter to
petitioner on October 28, 1992, the obligation was already due and
demandable. When the petitioner failed to pay its due obligation after the
demand was made, it incurred delay. Article 1169 of the New Civil Code
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. Delay as used in this article is synonymous to default or
mora, which means delay in the fulfillment of obligations. It is the non-
fulfillment of the obligation with respect to time. In order for the debtor to be in
default, it is necessary that the following requisites be present: (1) that the
obligation be demandable and already liquidated; (2) that the debtor delays
performance; and (3) that the creditor requires the performance judicially or
extrajudicially. In the case at bar, the obligation was already due and
demandable after the lapse of the two-year period from the execution of the
contract. The two-year period ended on October 26, 1992. When the
respondents gave a demand letter on October 28, 1992, to the petitioner, the
obligation was already due and demandable. Furthermore, the obligation is
liquidated because the debtor knows precisely how much he owes and when he
should pay the amount due. The second requisite is also present. Petitioner
delayed in the performance. It was able to fully settle its outstanding balance
only on February8, 1995, which is more than two years after the extra-judicial
demand. Moreover, it filed several motions and elevated adverse resolutions to
the appellate court to hinder the execution of a final and executory judgment,
and further delay the fulfillment of its obligation. Third, the demand letter sent
to the petitioner on October 28, 1992, was in accordance with an extra-judicial
demand contemplated by law. Verily, the petitioner is liable for damages for the
delay in the performance of its obligation. This is provided for in Article 1170 of
the New Civil Code. When the debtor knows the amount and period when he is
to pay, interest as damages is generally allowed as a matter of right. The
complaining party has been deprived of funds to which he is entitled by virtue
of their compromise agreement. The goal of compensation requires that the
complainant be compensated for the loss of use of those funds. This
compensation is in the form of interest. In the absence of agreement, the legal
rate of interest shall prevail. The legal interest for loan as forbearance of money
is 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.
Melotindos v. Tobias
Cita
Manuel D. Melotindos, petitioner, versus Melecio Tobias, represented by

Josefina Pineda, respondent.
(G.R. No. 146658 or 391 SCRA 299, October 28, 2002, Second Division)
Bellosillo, J.:
FACTS: Eighty-seven-year old petitioner, Atty. Manuel D. Melontindos, was the

lessee of the ground floor of a house in Malate, Manila. He had been renting the
place since 1983 on a month-to-month basis from its owner, respondent
Melecio Tobias, who was then residing in Canada. Sometime in the last quarter
of 1995, owing to his sickly mother who needed constant medical attention and
filial care, respondent demanded from petitioner either to pay an increased rate
of monthly rentals or else to vacate the place so he and his mother could use
the house during her regular medical check-up in Manila. For two (2) years
nothing came out of the demand to vacate, hence, in 1997 respondent insisted
upon raising the rental fee once again. On 1 June 1998 respondent asked
petitioner to restore the premises to him for some essential repairs of its
dilapidated structure. This time he did not offer petitioner anymore the option
to pay higher rentals. The renovation of the house was commenced but had to
stop midway because petitioner refused to vacate the portion he was occupying
and worse he neglected to pay for the lease for four (4) months from May to
August 1998. Hence for the second time, or on 19 October 1998, respondent
demanded the payment of the rental arrears as well as the restoration of the
house to him. On 3 February 1999, since petitioner was insisting on keeping
possession of the house but did not pay the rental for January 1999, although
he had settled the arrears of four (4) months, respondent was compelled to file
a complaint for ejectment. The MeTC of Manila decided the ejectment
complaint in favor of respondent and ordered petitioner to vacate the leased
premises and to pay rental arrears in the amount of P60, 000.00 as of
December 1998 and P6,000.00 for every month thereafter until he finally
restored possession thereof to respondent plus attorneys fees of P15,000.00
and the costs of suit. The RTC of Manila upheld in toto the MeTC Decision and
denied the subsequent motion for reconsideration for failure to set the date of
hearing thereof not later than ten (10) days from its filing. Petitioners recourse
to the Court of Appeals by petition for review was also unsuccessful since the
assailed Decision was affirmed in its entirety as the ensuing motion for
reconsideration thereof was denied for late filling, i.e., the motion was filed only
on 30 October 2000 beyond the fifteen (15) day period from his receipt of the
CA Decision on 9 October 2000 as shown by the registry return receipt.
ISSUE: Whether or not the lower courts erred in their HELDs.
HELD: It is not only the evidence on record but petitioners pleadings

themselvesthat confirm his default in paying the rental fees for more than three
(3) monthsin 1999 and 1998 prior to the filing of the ejectment complaint.
There is alsosufficient basis for the courts a quo to conclude that respondent
desperatelyneeded the property in good faith for his own family and for the
repair andrenovation of the house standing thereon. These facts represent legal
groundsto eject a tenant. The Petition for Review is DENIED for lack of merit.
LL and Co. v. Huang
Cita
LL and Company Development and Agro-Industrial Corp., petitioner,

versus Huang Chao Chun and Yang Tung Fa, respondents.
(G.R. No. 142378 or 378 SCRA 612, Mar 7, 2000, Third Division)
Panganiban, J.:
FACTS: The case originated from an unlawful detainer case filed by petitioner
before the trial court alleging that respondents Huang Chao Chun and Yang
TungFa violated their amended lease contract over a 1,112 square meter lot it
owns, when they did not pay the monthly rentals thereon in the total amount
of P4,322,900.00. It also alleged that the amended lease contract already
expired on September 16, 1996 but respondents refused to surrender
possession thereof plus the improvements made thereon, and pay the rental
arrearages despite repeated demands. The parties entered into the amended
lease contract sometime in August 1991. The same amended the lease contract
previously entered into by the parties on August 8, 1991.Respondent were
joined by the Tsai Chun International Resources Inc. in their answer to the
Complaint, wherein they alleged that the actual lessee is the corporation.
Respondents and the corporation denied petitioners allegations. The MTC
dismissed the case. The MTC ruled that the lessees could extend the contract
entered into by the parties unilaterally for another five years for reasons of
justice and equity. It also ruled that the corporations failure to pay the
monthly rentals as they fell due was justified by the fact that petitioner refused
to honor the basis of the rental increase as stated in their Lease Agreement.
This was affirmed by the RTC. It also held that the parties had a reciprocal
obligation: unless and until petitioner presented the increased realty tax,
private respondents were not under any obligation to pay the increased
monthly rental. The decision was likewise affirmed by the Court of Appeals.
ISSUE: Whether or not the court could still extend the term of the lease, after
its expiration.
HELD: In general, the power of the courts to fix a longer term for a lease is
discretionary. Such power is to be exercised only in accordance with the
particular circumstances of a case: a longer term to be granted where equities
demanding extension come into play; to be denied where none appear - always
with due deference to the parties freedom to contract. Thus, courts are not
bound to extend the lease. Article 1675 of the Civil Code excludes cases falling
under Article 1673from those under Article 1687. Article 1673 provides among
others, that the lessor may judicially eject the lessee upon the expiration of
the period agreed upon or that, which is fixed for the duration of the leases.
Where no period has been fixed by the parties, the courts, pursuant to Article
1687, have the potestative authority to set a longer period of lease. In the case,
the Contract of Lease provided for a fixed period of five (5) years -- specifically
from September 16, 1991 to September 15, 1996.Because the lease period was
for a determinate time, it ceased, by express provision of Article 1669 of the
Civil Code, on the day fixed, without need of a demand. Here, the five-year
period expired on September 15, 1996, whereas the Complaint for ejectment
was filed on October 6, 1996. Because there was no longer any lease that could
be extended, the MeTC, in effect, made a new contract for the parties, a power
it did not have. As stated in Bacolod-Murcia Milling v. Banco Nacional Filipino,
It is not the province of the court to alter a contract by construction or to
make a new contract for the parties; its duty is confined to the interpretation of
the one which they have made for themselves, without regard to its wisdom or
Cita
folly, as the court cannot supply material stipulations or read into contract
words which it does not contain. Furthermore, the extension of a lease
contract must be made before the term of the agreement expires, not after.
Upon the lapse of the stipulated period, courts cannot belatedly extend or
make a new lease for the parties, even on the basis of equity. Because the
Lease Contract ended on September15, 1996, without the parties reaching any
agreement for renewal, respondent scan be ejected from the premises. On the
other hand, respondents and the lower courts argue that the Contract of Lease
provided for an automatic renewal of the lease period. Citing Koh v. Ongsiaco
and Cruz v. Alberto, the MeTC -- upheld by the RTC and the CA-- ruled that
the stipulation in the Contract of Lease providing an option to renew should be
construed in favor of and for the benefit of the lessee. This HELD has however,
been expressly reversed in Fernandez v. CA and was recently reiterated in Heirs
of Amando Dalisay v. Court of Appeals. Thus, pursuant to Fernandez, Dalisay
and Article 1196 of the Civil Code, the period of the lease contract is deemed to
have been set for the benefit of both parties. Its renewal may be authorized only
upon their mutual agreement or at their joint will. Its continuance, effectivity or
fulfillment cannot be made to depend exclusively upon the free and
uncontrolled choice of just one party. While the lessee has the option to
continue or to stop paying the rentals, the lessor cannot be completely deprived
of any say on the matter. Absent any contrary stipulation in a reciprocal
contract, the period of lease is deemed to be for the benefit of both parties. In
the instant case, there was nothing in the aforesaid stipulation or in the
actuation of the parties that showed that they intended an automatic renewal
or extension of the term of the contract. First, demonstrating petitioners
disinterest in renewing the contract was its letter dated August 23, 1996,
demanding that respondents vacate the premises for failure to pay rentals
since1993. As a rule, the owner-lessor has the prerogative to terminate the
lease upon its expiration. Second, in the present case, the disagreement of the
parties over the increased rental rate and private respondents failure to pay it
precluded the possibility of a mutual renewal. Third, the fact that the lessor
allowed the lessee to introduce improvements on the property was indicative,
not of the formers intention to extend the contract automatically, but merely of
its obedience to its express terms allowing the improvements. After all, at the
expiration of the lease, those improvements were to become its property.As to
the contention that it is not fair to eject respondents from the premises after
only five years, considering the value of the improvements they introduced
therein, suffice it to say that they did so with the knowledge of the risk -- the
contract had plainly provided for a five-year lease period.
Parties are free to enter into any contractual stipulation, provided it is
not illegal or contrary to public morals. When such agreement, freely and
voluntarily entered into, turns out to be disadvantageous to a party, the courts
cannot rescue it without crossing the constitutional right to contract. They are
not authorized to extricate parties from the necessary consequences of their
acts, and the fact that the contractual stipulations may turn out to be
financially disadvantageous will not relieve the latter of their obligations.
Petition granted. Decision set aside. Respondents ordered to vacate the
premises, to restore peaceful possession thereof to petitioner, and to pay
accrued rentals.
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Brent School v. Zamora

Brent School, Inc., and Rev. Gabriel Demache, petitiponers versus
Ronaldo Zamora, the Presidential Assistant for Legal Affairs, Office of the
President, and Doroteo R. Alegre, respondents.
(181 SCRA 702 or G.R. No. L-48494, February 5, 1990, En Banc)
Narvasa, J.:
FACTS: The root of the controversy at bar is an employment contract in virtue

of which Doroteo R. Alegre as engaged as athletic director by Brent School, Inc.
at a yearly compensation of P20,000. The contract fixed a specific term for its
existence, five (5) years, i.e., from July 18, 1971, the date of execution of the
agreement, to July 17, 1976. Subsequent subsidiary agreements dated
March15, 1973, August 28, 1973, and September 14, 1974 reiterated the same
terms and conditions, including the expiry date, as those contained in the
original contract. Some three (3) months before the expiration of the stipulated
period, or more precisely on April 20, 1976, Alegre was given a copy of the
report filed by Brent School with the Department of Labor advising of the
termination of his services effective on July 16, 1976. Alegre objected to this
termination of his employment contending that since his services were
necessary and desirable in the usual business of his employer, and his
employment had lasted for five (5) years, he had acquired the status of a
regular employee and could not be removed except for valid cause.
ISSUE: Whether or not Alegres contention is tenable.
HELD: NO. The provisions of the Labor Code recognize the existence and
legality of term employments. The case at bar is one which involves term
employment. Therefore, Alegres employment was terminated upon the
expiration of his last contract with Brent School on July 16, 1976 without the
necessity of any notice. The advance written advice given the Department of
Labor with copy to said petitioner was a mere reminder of the impending
expiration of his contract, not a letter of termination, nor an application for
clearance to terminate which needed the approval of the Department of Labor
to make the termination of his services effective. In any case, such clearance
should properly have been given, not denied.
Lim v. People
Cita
Lourdes Valerio Lim, petitioner, versus People of the Philippines,

respondent.
(G.R. No. L-34338 or 133 SCRA 333, November 21, 1984, First Division)
Relova, J.:
FACTS: On January 10, 1966, Lim (Appellant) went to the house of Maria
Ayrosoand proposed to sell Ayroso's tobacco. Ayroso agreed to the proposition
of theappellant to sell her tobacco consisting of 615 kilos at P1.30 a kilo.
Theappellant was to receive the over price for which she could sell the
tobacco.Of the total value of P799.50, the appellant had paid to Ayroso
onlyP240.00, and this was paid on three different times. Demands for the
paymentof the balance of the value of the tobacco were made upon the
appellant byAyroso, and particularly by her sister, Salud Bantug. Salud
Bantug furthertestified that she had gone to the house of the appellant several
times, but theappellant often eluded her; and that the 'camarin' of the
appellant was empty.Although the appellant denied that demands for payment
were made upon her, it is a fact that on October 19, 1966, she wrote a letter to
Salud Bantug statingthat she could not pay in full the amount of P799.50
because it is also hard todemand payment from her suki in the market of
Cabanatuan. Pursuant to thisletter, the appellant sent a money order for
P100.00 on October 24, 1967, andanother for P50.00 on March 8, 1967; and
she paid P90.00 on April 18, 1967 or a total of P240.00. As no further amount
was paid, the complainant filed acomplaint against the appellant for estafa.
ISSUE: Whether or not the Article 1197 of the Civil Code can be applied in
thiscase
HELD: NO. It is clear in the agreement that the proceeds of the sale of
thetobacco should be turned over to the complainant as soon as the same was
sold, or, that the obligation was immediately demandable as soon as the
tobacco wasdisposed of. Hence, Article 1197 of the New Civil Code, which
provides that thecourts may fix the duration of the obligation if it does not fix a
period, does notapply.Anent the argument that petitioner was not an agent
because theagreement does not say that she would be paid the commission if
the goodswere sold, the fact that appellant received the tobacco to be sold at
P1.30 perkilo and the proceeds to be given to complainant as soon as it was
sold, strongly negates transfer of ownership of the goods to the petitioner. The
agreement constituted her as an agent with the obligation to return the tobacco
if the same was not sold.
Pacific Banking v. Court of Appeals
Cita
Pacific Banking Corp. and Chester G. Babst, petitioners, versus Court of

Appeals, Joseph C. Hart and Eleanor Hart, respondents.
(G. R. No. 45656 or 173 SCRA 102, May 5, 1989, Third Division)
Gutierrez, Jr., J.:
FACTS: On April 15, 1955, private respondents Joseph and Eleanor

Hartdiscovered an area consisting of 480 hectares of tidewater land in Tambac,
Gulf of Lingayen which had great potential for the cultivation of fish and
saltmaking. They organized Insular Farms, Inc., applied for and after eleven
months, obtained a lease from the Department of Agriculture for a period of 25
years, renewable for another 25 years. Joseph Hart approached businessman
John Clarkin, then President of Pepsi-Cola Bottling Co. in Manila, for
financialassiatance. On July 15, 1956, Joseph Hart and Clarkin signed a
Memorandum of Agreement. Due to financial difficulties, Insular Farms, Inc.
borrowed fromPacific Banking Corporation sometime in July 1956. On July 31,
1956, InsularFarms, Inc. executed a Promissory Note of P250, 000 to the bank
payable on orbefore July 1957. Such note provided that upon default in the
payment of anyinstallment when due, all other installments shall become due
and payable. Thisloan was effected and the money released without any
security except for theContinuing Guaranty, executed on July 18, 1956, of
John Clarkin, who ownedseven and half percent of the capital stock of the
bank and his wife Helen.Unfortunately, the business floundered; nevertheless,
petitioner Pacific Banking Corporation and its then Executive Vice President,
petitioner Chester Babst, didnot demand payment for the initial July 1957
installment nor of the entireobligation, but instead opted for more collateral in
addition to the guaranty of Clarkin. As the business further deteriorated, Hart
agreed to Clarkins proposalthat all Insular Farms shares of stocks be pledged
to petitioner bank in lieu of additional collateral and to insure and extension of
the period to pay the July1957 installment. On March 3, 1958, Pacific Farms,
Inc. was organized toengage in the same business as Insular Farms, Inc. The
next day, PacificBanking Corporation, through petitioner Chester Babst wrote
Insular Farms, Inc.giving the latter 48 hours to pay its entire obligation.On
March 7, 1958, Hart received a notice that the pledged shared of stocks of
Insular Farms, Inc. would be sold at public auction on March 10, 1958to
satisfy Insular Farms obligation. Hart filed a complaint for reconveyance
anddamages with prayer for a writ of preliminary injunction and the Court of
FirstInstance granted the writ. However, upon petitions for dissolution of
preliminaryinjunction filed by the petitioners PBC and Babst, the court lifted
the writ of preliminary injunction. On March 20, 1958, respondent Hart
received a noticefrom PBC signed by Babst that the shares of stocks on Insular
Farms Inc. will besold at public auction on March 21, 1958. On March 21,
1958, PBC sold the 1,000 shares of stocks of Insular Farms to Pacific Farms.
The latter then sold itsshares of stocks to its own stockholders, who
constituted themselves asstockholders of Insular Farms and then resold back
to Pacific Farms Inc. all of Insular Farms assets except for a certificate of public
convenience to operate anice plant. On September 28, 1959, Hart filed another
case for recovery of sum of money comprising his investments and earnings.
The trial court rendered a decision ordering Pacific Farms Inc. to pay Joseph
Hart for unpaid salaries and for loans made by private respondents to Insular
Farms, Inc. the private respondents, dissatisfied with the decision, appealed to
the Court of Appeals. The appellate court modified the lowercourts decision,
directing Pacific Banking Corporation to pay Joseph HartP100,000.00, subject
to reimbursement from Babst.
Cita
ISSUES: Whether or not the sale by the petitioner bank of the shares of stocks
of private respondent on March 21, 1958 is valid since the shares of stocks
hadbeen pledged to insure an extension of the period to pay the July
installment.Whether or not the Court may fix a period in the parties agreement
toextend the payment of the loan, including the installment which was due on
orbefore July 1957 it being imprecise.
HELD: The Supreme Court held that since there was an agreement to extend
indefinitely the payment of the installment of P50,000.00 in July 1957
asprovided in the promissory note, consequently, petitioner Pacific Banking
Corporation was precluded form enforcing the payment of the said installment
of July 1957, before the expiration of the indefinite period of extension, which
period had to be fixed by the court as provided in Article 1197 of the Civil
Code.Hence, the disputed foreclosure and subsequent sale was premature.
Wherefore, the petition is dismissed. YES. In case the period of extension is not
precise, the provisions of Article 1197 of the Civil Code should apply. The
pledge executed as collateral security no longer contained a provision on
installment due on or before July1957. The pledge constituted on February 19,
1958 on the shares of stocks of Insular was sufficient consideration for the
extension, considering that pledgewas additional collateral required by the
Pacific in addition to the continuingguaranty of Carkin. Even the ledge did not
provide for dates of payment of installments; or any fixed date for maturity of
the whole indebtedness.Accordingly, the date of maturity of the indebtedness
should be as may bedetermined by the court under Article 1197 of the Civil
Code.
Agoncillo v. Javier
Cita
Felipe Agoncillo, and his wife, Marcela Marino, plaintiff-appellees, versus

Crisanto Javier, administrator of the estate of the late Anastacio Alano,
Florencio Alano and Jose Alano, defendant-appellants.
(G.R. No. L-12611 or 38 PHIL124, August 7, 1918, En Banc)
Fisher, J.:
FACTS: On February 27 1904, Anastasio Alano, Jlose Alano and Florencio

Alanoexecuted in favor of the plaintiff, Dra. Marcela Marino a document
stipulatingthat the Alanos as testamentary heirs of deceased Rev. Anastacio
Cruz, wouldpay the sum of P2,730.50 within one (1) year with interest of 12
percent perannum representing the amount of debt incurred by Cruz.
Moreover, theagreement provided that the Alanos are to convey the house and
lot bequeathedto them by Cruz in the event of failure to pay the debt in money
at its maturity.No part of interest or principal due has been paid except the
sum of P200paid in 1908 by Anastacio Alano. In 1912, Anastasio died
intestate. On August8, 1914, CFI of Batangas appointed Crisanto Javier as
administrator of Anastasios estate. On March 17, 1916, the plaintiffs filed the
complaint againstFlorencio, Jose and Crisanto praying that unless defendants
pay the debt for therecovery of which the action was brought, they be required
to convey toplaintiffs the house and lot described in the agreement, that the
property beappraised and if its value is found to be less than the amount of the
debt, withaccrued interest at the stipulation rate, judgment be rendered in
favor of theplaintiffs for the balance.
ISSUE: Whether or not the agreement that the defendant-appellant, at

thematurity of the debt, will pay the sum of the money lent by the appellees or
willtransfer the rights to the ownership and possession of the house and
lotbequeathed to the former by the testator in favor of the appellees, is valid.
HELD: YES, this stipulation is valid because it is simply an alternative

obligation, which is expressly allowed by law. The agreement to convey the
house and loton an appraised value in the event of failure to pay the debt in
money at itsmaturity is valid. It is simply an undertaking that if debt is not
paid in money, itwill be paid in another way. The agreement is not open to the
objection that theagreement is pacto comisorio. It is not an attempt to permit
the creditor todeclare the forfeiture of the security upon the failure of the
debtor to pay at itsmaturity. It is simply provided that if the debt is not paid in
money, it shall bepaid by the transfer of the property at a valuation. Such an
agreement unrecorded, creates no right in rem, but as between the parties, it is
perfectlyvalid and specific performance by its terms may be enforced unless
preventedby the creation of superior rights in favor of third persons. The
contract is not susceptible of the interpretation that the title to thehouse and
lot in question was to be transferred to the creditor ipso facto upon the mere
failure of the debtors to pay the debt at its maturity. The obligationsassumed
by the debtors were in the alternative, and they had the right to electwhich
they would perform. The conduct of parties shows that it was not
theirunderstanding that the right to discharge the obligation by the payment of
themoney was lost to the debtors by their failure to pay the debt at its
maturity. The plaintiff accepted the payment from Anastacio in 1908, several
years afterthe debt matured.It is quite clear therefore that under the terms of
the contract, and theparties themselves have interpreted it, the liability of the
defendant as to theconveyance of the house and lot is subsidiary and
Cita
conditional, being dependentupon their failure to pay the debt in money. It

must follow therefore that if theaction to recover the debt was prescribed, the
action to compel a conveyance of the house and lot is likewise barred, as the
agreement to make such conveyancewas not an independent principal
undertaking, but merely a subsidiaryalternative pact relating to the method by
which the debt must be paid.
Ong Guan v. Century
Cita
Ong Guan Cuan and The Bank of The Philippine Islands, Plaintiff-
appellees, versus Century Insurance Company, LTD., defendant-appelant.
(G.R. No. L-22738 or 46 SCRA 592, December 2, 1924, En Banc)
Villamor (Ignacio), J.:
FACTS: A building of plaintiff Ong Guan Cuan was insured with defendant
CenturyInsurance Company (Century) against fire for P30,000 as well as
themerchandise therein for P15,000. On February 28 1923, the building and
themerchandise were burned while the policies issued were in force. Under
theconditions of the policies, the defendant may at its option reinstate or
replacethe destroyed property instead of paying for the amount of the loss and
that it isnot bound to reinstate exactly or completely the damaged property.
Century proposed reconstruction of the house destroyed but plaintiff denied
that the new house which will be constructed would be smaller and of
materials of lower kind than those employed in the construction of the
housewhich was destroyed. Plaintiff filed a complaint compelling defendant to
pay thesum of P45,000, the value of the insurance of the building and the
merchandise.On April 19, 1924, the CFI of Iloilo City rendered judgment in
favor of theplaintiff.Hence the defendant appealed from the judgment and
prayed that it bepermitted to rebuild the house as provided in the conditions of
the insurancepolicies.
ISSUE: Whether or not defendant Century may be allowed to rebuild the house
asits option instead of payment of the insured value as stipulated in the
insurancepolicies.
HELD: NO. The conditions in the insurance policies that the parties entered
intoallowed Century to either pay the insured value of the house, or rebuild
itmaking the obligation of the company an alternative one. In
alternativeobligations, the debtor, Century, must notify the creditor of his
election statingwhich of the two prestations it is disposed to fulfill. The
objective is to give thecreditor opportunity to give consent or deny the election
of the debtor. Onlyafter said notice shall election take legal effect when
consented by the creditor (Article 120 Civil Code) or if impugned by the latter
when declared proper by acompetent court. In the instant case, appellant
company did not give formalnotice of its election to rebuild the house and the
proposed reconstruction of thehouse was rejected by the creditor.In alternative
obligations, the value of the prestations must be equivalentor similar in value
to each other. The proposed rebuilding of the house by the insurance company
would be of lesser value than the other prestation. Thepetitioner would build a
smaller house and of materials of lower kind than thoseemployed in the
construction of the burned house. The other prestation ispayment of the
amount of P45,000 corresponding to the value of the burnedbuilding (P30, 000)
and the value of the merchandise burned (P15,000). Therefore, the only
recourse of the insurer is to pay the stipulated value of theinsurance policy.
Legarda v. Miailhe
Cita
Clara Tambunting De Legarda, Et. Al., plaintiff-appellants, versus Victoria

Desbarats Miailhe, substituting William J.B. Burke, defendant-appellee.
(G.R. No. L-3435 or 88 S 637, April 28, 1951, En Banc)
Bautista Angelo, J.:
FACTS: On June 3, 1944, plaintiffs filed a complaint against the

originaldefendant William J.B. Burke, alleging defendants unjustified refusal
toaccept payment in discharge of a mortgage indebtedness in his favor,
andpraying that the latter be order (1) to receive the sum of P75, 920.83; (2) to
execute the corresponding deed of release of mortgage, and; (3) to paydamages
in the sum of P1,000. The Court then decided in favor of plaintiff Legarda. After
the war and the subsequent defeat of the Japaneseoccupants, defendant filed a
case in court claiming that plaintiff Clara deLegarda violated her agreement
with defendant, by forcing to depositworthless Japanese military notes when
they originally agreed that theinterest was to be condoned until after the
occupation and that paymentwas rendered either in Philippine or English
currency. Defendant was latersubstituted upon death by his heir Miailhe and
the Courts judged indefendants favor. Plaintiff now assails said decision.
ISSUE: Is the tender of payment by plaintiff valid?
HELD: On February 17, 1943, the only currency available was the Philippine
currency, or the Japanese Military notes, because all other currencies,
including the English, were outlawed by a proclamation issued by the
Japanese Imperial Commander on January 3, 1942. The right toelection ceased
to exist on the date of plaintiffs payment because it had become legally
impossible. And this is so because in alternativeobligations there is no right to
choose undertakings that are impossible orillegal. In other words, the
obligation on the part of the debtor to pay the mortgage indebtedness has since
then ceased to be alternative. It appears therefore, that the tender of payment
in Japanese Military noteswas a valid tender because it was the only currency
permissible at thetime and its payment was tantamount to payment in
Philippine currency. However, payment with the clerk of court did not have any
legal effect because it was made in certified check, and a check does not
meetthe requirements of legal tender. Therefore, her consignation did not
havethe effect of relieving her from her obligation of the defendant.
Reyes v. Martinez
Cita
Estanislao Reyes, plaintiff-appellant, versus Sebastiana Martinez, et. Al.,

defendant-appellants.
(55 Phil 493, December 29, 1930, En Banc)
Avancena, J.:
FACTS: Estanislao Reyes filed an action before the Court of First Instance of
Laguna against the Martinez heirs upon four several causes of action in
whichthe plaintiff seeks to recover five parcels of land, containing proximately
onethousand coconut trees, and to obtain a declaration of ownership in his
favor asagainst the defendants with respect to said parcels; to recover from
thedefendants the sum of P9,377.50, being the alleged proceeds of some
coconuttrees; to recover from the defendants the sum of P43,000, as alleged
value of the proceeds of the lands involved in the receivership in the case of
Martinez vs.Grano, to which the plaintiff supposes himself to be entitled, but
which havegone, so he claims, to the benefit of the defendants in said
receivership andlastly, to recover the sum of the P10,000 from the defendants
as damages resulting from their improper meddling in the administration of the
receiver ship property. The plaintiff has been laboring along for several years in
an unsuccessfullegal battle with the defendants, springing from his claim to be
the owner of theproperty involved in the receivership. This cause of action is
founded upon thecontract and the claim put forth by the plaintiff is to have the
five parcelsadjudge to him in lieu of another parcel formerly supposed to
contain onethousand trees between him and certain of the Martinez heirs. By
this contract,Reyes was to be given the parcel described in clause 8, but in a
proviso to saidclause, the parties contracting with Reyes agreed to assure to
him certain otherland containing an equivalent number of trees in case he
should so elect. Thelitigation shows that the plaintiff elected to take and hold
the parcel described inclause 8, and his right thereto has all along been
recognized in the dispositionsmade by the court with respect to said land.
Thus, Reyes must be taken to have elected to take that particular parcel and
he is now estopped from asserting acontrary election to take the five parcels of
land described in his complaint.However, the title of the parcel is in the heirs of
Inocente Martinez and itdoes not appear that they have transferred said title to
Reyes.
ISSUE: Whether or not Reyes is entitled to the damages against the

partyssignatory to the contract of March 5, 1921 for the value of the said
property.
HELD: Yes. The claim of the defendants to the interest of P8,000 from July
31,1926 cannot be conceded as the judgment itself bears interest at the lawful
ratefrom the date the same was rendered. The Martinez heirs are ordered
toprocure the sufficient deed conveying to appellant Estanislao Reyes the
parcelsof land mentioned in paragraph 8 of the contract. The judgment against
Reyesin favor of the Martinez heirs is enjoined.
Quizana v. Redugerio
Cita
Martina Quizana, plaintiff-appellee, versus Gaudencio Redugerio and

Josefa Postrado, defendant-appellants.
(94 PHIL. 922, May 7, 1954, en banc)
Labrador, J.:
FACTS: This is an appeal to the Court from a decision rendered by the Court of
theFirst Instance of Marinduque, wherein the defendant Gaudencio Redugerio
wasto pay the plaintiff Martina Quizana the sum of P550 with the interest from
thetime of the filing of the complaint and from an order of the same court
denying amotion of the defendant for the reconsideration of the judgment on
the groundthat they were deprived of their day in court. There were actionable
documents attached to the complaint signed by thedefendant-appellant
spouses Redugerio and Pastrado on October 4, 1948 andcontaining the
provision that Quizana is to be paid on January 1949 and in caseof failure,
they will mortgage the coconut plantation in Sta. Cruz, Marinduque. The
defendants admitted that they offered the transfer of possession but was
eventually refused by the petitioner.So eventually, the defendants appealed in
the CFI which set the hearing on August 16, 1951.However, the counsel for
defendants presented an urgent motion for continuance for the date of
hearing coincides with his appearance in two (2) criminal cases previously set
for trial before hearing on the aforesaid date. The motion was not acted upon
until the day of the trial. The CFI denied the motion for continuance, and in the
absence of defendants, rendered its questioned decision.
ISSUE: Whether or not the trial court was correct in ignoring the 2nd part of
thewritten obligation and solely basing its decision on the last part of the
1stpart; i.e., that payment should have been made on January 21, 1949.
HELD: YES, the acceptance of plaintiff of the written obligation without

objectionand protest and the fact that he kept and based his action therein, are
concreteand positive proof that he agreed and consented to all the terms,
including theparagraph on the constitution of the mortgage.Article 1206
provides: When only one prestation has been agreed uponbut the obligation
may render substitution, the obligation is facultativeobligation. The defendant-
appellant shall present a duly executed deed of mortgageover the property in
the written obligation, with a period of payment to beagreed upon by the
parties with the approval of the court.
Marsman v. Philippine Geoanalytics
Cita
Marsman Drysdale Land Inc., petitioner versus Philippine Geoanalytics

Inc. and Gotesco Inc., respondents.
Carpio Morales, J.:
FACTS: On February 12, 1997, Marsman Drysdale Land, Inc. (Marsman

Drysdale) and Gotesco Properties, Inc. (Gotesco) entered into a Joint Venture
Agreement (JVA) for the construction and development of an office building on
a land owned by Marsman Drysdale in Makati City. For this purpose,
[Marsman Drysdale] shall deliver the Property in a buildable condition within
ninety (90) days from signing of this Agreement barring any unforeseen
circumstances over which [Marsman Drysdale] has no control. Buildable
condition shall mean that the old building/structure which stands on the
Property is demolished and taken to ground level. A joint account shall be
opened and maintained by both Parties for handling of said balance, among
other Project concerns.
Via Technical Services Contract (TSC) dated July 14, 1997, the joint
venture engaged the services of Philippine Geoanalytics, Inc. (PGI) to provide
subsurface soil exploration, laboratory testing, seismic study and geotechnical
engineering for the project. PGI, was, however, able to drill only four of five
boreholes needed to conduct its subsurface soil exploration and laboratory
testing, justifying its failure to drill the remaining borehole to the failure on the
part of the joint venture partners to clear the area where the drilling was to be
made. PGI was able to complete its seismic study though. PGI then billed the
joint venture on November 24, 1997 for P284,553.50 representing the cost of
partial subsurface soil exploration; and on January 15, 1998 for P250,800
representing the cost of the completed seismic study.
Despite repeated demands from PGI, the joint venture failed to pay its
obligations.Meanwhile, due to unfavorable economic conditions at the time, the
joint venture was cut short and the planned building project was eventually
shelved. PGI subsequently filed on November 11, 1999 a complaint for
collection of sum of money and damages at the Regional Trial Court (RTC) of
Quezon City against Marsman Drysdale and Gotesco.
In its Answer with Counterclaim and Cross-claim, Marsman Drysdale
passed the responsibility of paying PGI to Gotesco which, under the JVA, was
solely liable for the monetary expenses of the project.
By Decision of June 2, 2004, Branch 226 of the Quezon City RTC
rendered judgment in favor of PGI. Marsman Drysdale moved for partial
reconsideration, contending that it should not have been held jointly liable with
Gotesco on PGIs claim as well as on the awards of exemplary damages and
attorneys fees. The motion was, by Resolution of October 28, 2005, denied.
Both Marsman Drysdale and Gotesco appealed to the Court of Appeals which,
by Decision of January 28, 2008, affirmed with modification the decision of the
trial court.
ISSUE: Whether or not Marsman Drysdale and Gotesco are jointly liable to PGI.
HELD: PGI executed a technical service contract with the joint venture and was
never a party to the JVA. While the JVA clearly spelled out, inter alia, the
capital contributions of Marsman Drysdale (land) and Gotesco (cash) as well as
the funding and financing mechanism for the project, the same cannot be used
to defeat the lawful claim of PGI against the two joint venturers-partners. The
Cita
TSC clearly listed the joint venturers Marsman Drysdale and Gotesco as the
beneficial owner of the project, and all billing invoices indicated the consortium
therein as the client. The only time that the JVA may be made to apply in the
present petitions is when the liability of the joint venturers to each other would
set in.
In the absence of stipulation, the share of each in the profits and losses
shall be in proportion to what he may have contributed, but the industrial
partner shall not be liable for the losses. As for the profits, the industrial
partner shall receive such share as may be just and equitable under the
circumstances. If besides his services he has contributed capital, he shall also
receive a share in the profits in proportion to his capital. In the JVA, Marsman
Drysdale and Gotesco agreed on a 50-50 ratio on the proceeds of the project.
They did not provide for the splitting of losses, however. Applying the above-
quoted provision of Article 1797 then, the same ratio applies in splitting the
P535,353.50 obligation-loss of the joint venture.
The appellate courts decision must be modified, however. Marsman
Drysdale and Gotesco being jointly liable, there is no need for Gotesco to
reimburse Marsman Drysdale for 50% of the aggregate sum due to PGI.
Allowing Marsman Drysdale to recover from Gotesco what it paid to PGI would
not only be contrary to the law on partnership on division of losses but would
partake of a clear case of unjust enrichment at Gotescos expense. The grant
by the lower courts of Marsman Drysdale cross-claim against Gotesco was thus
erroneous. Marsman Drysdales supplication for the award of attorneys fees in
its favor must be denied. It cannot claim that it was compelled to litigate or
that the civil action or proceeding against it was clearly unfounded, for the JVA
provided that, in the event a party advances funds for the project, the joint
venture shall repay the advancing party. Marsman Drysdale was thus not
precluded from advancing funds to pay for PGIs contracted services to abate
any legal action against the joint venture itself. It was in fact hardline
insistence on Gotesco having sole responsibility to pay for the obligation,
despite the fact that PGIs services redounded to the benefit of the joint
venture, that spawned the legal action against it and Gotesco. Finally, an
interest of 12% per annum on the outstanding obligation must be imposed
from the time of demand as the delay in payment makes the obligation one of
forbearance of money, conformably with this Courts HELD in Eastern Shipping
Lines, Inc. v. Court of Appeals. Marsman Drysdale and Gotesco should bear
legal interest on their respective obligations.
Alipio v. Court of Appeals
Cita
Purita Alipio, petitioner, versus Court of Appeals and Romeo G. Jaring,

represented by his Atoorney-in-Fact Ramon G. Jaring, respondents.
(341 SCRA 441, September 29, 2000, Second Division)
Mendoza, J.:
FACTS: Respondent Romeo Jaring was the lessee of a 14.5 hectares fishpond
inBarilto, Bataan. The lease was for a period of five (5) years ending
September12, 1990. On June 19, he subleased the fishpond for the remaining
period of hislease to the spouses Placido and Purita Alipio and the spouses
Bienvenido andRemedons Manuel. The stipulated amount of the rent was P
485,600.00 payablein two (2) installments of P300,00.00 and P185,600 with
second installment falling due on June 30, 1989. Each of the four sublease
parties signed thecontract. The first installment was duly paid, but the second
installment the sublessees only satisfied a portion thereof, leaving an unpaid of
P50,600.00.Despite due demand, the lessees failed to comply with their
obligation so that onOctober 13,1989 private respondent sued Alipio and
Manuel spouses for thecollection of the said amount before the RTC, and in the
alternative, he prayedfor the rescission of the sublease contract should the
defendant failed to pay thebalance.Petitioner Purita moved to dismiss the case
on the ground that herhusband had passed away on December 1988. She
based her action on Rule 3Section 31 of 1964 Rules of Court.
ISSUE: Whether or not a creditor can sue the surviving spouses for the
collectionof debt which is owned by the conjugal partnership of gains, and not
in aproceeding for the settlement of the estate of the decedent.
HELD: NO, creditor cannot sue the surviving spouse of a decedent in an

ordinaryproceeding for the collection of the sum of money chargeable against
theconjugal partnership and that the proper remedy is for him to file a claim in
thesettlement of the estate of the decedent.Article 161(1) states that:
All debts and obligation contracted by thehusband for the benefits of the
conjugal partnership, and those contracted by the wife, also for the same
purpose, in the cases where she may legally bind the partnership. When
petitioners husband died, their conjugal partnership was automatically
dissolved and debts chargeable against it are to be paid in the settlement of
estate proceeding in accordance with Rule 73 Section 2:
When marriage dissolved by death of the husband or wife, the community
property shall be inventoried, administered and liquidated, and the debts
thereof paid inthe testate or intestate proceeding of the deceased spouse. If
both spouses havedied, the conjugal partnership shall be liquidated in the
testate or intestate proceeding of either.
PH Credit Corp. v. Court of Appeals
Cita
PH Credit Corp., petitioner, versus Court of Appelas and Carlos M.

Farrales, respondents.
(370 SCRA 441, 2001 November 22, Third Division)
Panganiban, J.:
FACTS: I. CA-G.R. SP NO. 23324PH Credit Corp., filed a case against Pacific
Lloyd Corp., Carlos Farrales, Thomas H. Van Sebille and Federico C. Lim, for
sum of money. After service of summons upon the defendants, they failed to
file their answer within thereglementary period, hence they were declared in
default. Judgment is renderedin favor of plaintiff PH Credit Corporation. After
the aforesaid decision has become final and executory, a Writ of Execution was
issued and consequently implemented by the assigned Deputy Sheriff. Personal
and real properties of defendant Carlos M. Farrales were levied and sold at
public auction wherein PH Credit Corp. was the highest bidder. Motion for the
issuance of a writ of possession was filed and the same wasgranted. Petitioner
claims that she, as a third-party claimant with the courtbelow, filed an Urgent
Motion for Reconsideration and/or to suspend the Orderdated October 12,
1990, but without acting there [on], respondent Judge issued the writ of
possession on October 26, 1990. She claims that the actuations of respondent
Judge were tainted with grave abuse of discretion. Respondent Judgeissued an
order considering the assailed Order as well as the writ of possessionas of no
force and effect thus the issue here has become moot and academic.II. CA-G.R.
SP NO. 25714Petitioner claims that the respondent Judges Order dated
January 31, 1991 was tainted with grave abuse of discretion based on the
following grounds:1. Respondent Judge refused to consider as waived private
respondentsobjection that his obligation in the January 31, 1984 decision was
merely jointand not solidary with the defendants therein. According to
petitioner, privaterespondent assailed the levy on execution twice in 1984 and
once in 1985 butnot once did the latter even mention therein that his
obligation was joint forfailure of the dispositive portion of the decision to
indicate that it was solidary. Thus, private respondent must be deemed to have
waived that objection, petitioner concludes.
2. The redemption period after the auction sale of the properties had
longlapsed so much [so] that the purchaser therein became the absolute
ownerthereof. Thus, respondent Judge allegedly abused his discretion in
setting asidethe auction sale after the redemption period had expired.3.
Respondent Judge erred in applying the presumption of a joint obligation inthe
face of the conclusion of fact and law contained in the decision showing thatthe
obligation is solidary. The Court of Appeals affirmed the trial courts HELD
declaring null andvoid (a) the auction sale of Respondent Ferrales real property
and (b) the Writ of Possession issued in consequence thereof. It held that,
pursuant to the January31, 1984 Decision of the trial court, the liability of
Farrales was merely joint andnot solidary. Consequently, there was no legal
basis for levying and sellingFarrales real and personal properties in order to
satisfy the whole obligation.
ISSUE: Whether or not the Court of Appeals erred when it disregarded the body
of the decision and concluded that the obligation was merely a joint obligation
dueto the failure of the dispositive portion of the decision dated 31 January
1984 tostate that the obligation was joint and solidary.
HELD: No. A solidary obligation is one in which each of the debtors is liable
forthe entire obligation, and each of the creditors is entitled to demand
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thesatisfaction of the whole obligation from any or all of the debtors. On the
otherhand, a joint obligation is one in which each debtors is liable only for
aproportionate part of the debt, and the creditor is entitled to demand only
aproportionate part of the credit from each debtor. The well-entrenched rule
isthat solidary obligations cannot be inferred lightly. They must be positively
andclearly expressed. A liability is solidary only when the obligation expressly
sostates, when the law so provides or when the nature of the obligation
sorequires.In the dispositive portion of the January 31, 1984 Decision of the
trialcourt, the word solidary neither appears nor can it be inferred therefrom.
Thefallo merely stated that the following respondents were liable: Pacific
LloydCorporation, Thomas H. Van Sebille, Carlos M. Farrales and Federico C.
Lim.Under the circumstances, the liability is joint, as provided by the Civil
Code,which we quote: Art. 1208. If from the law, or the nature or the wording
of theobligations to which the preceding article refers[,] the contrary does not
appear,the credit or debt shall be presumed to be divided into as many equal
shares asthere are creditors or debtors x x x. Hence the execution must
conform withthat which is ordained or decreed in the dispositive portion of the
decision.Petitioner maintains that the Court of Appeals improperly and
incorrectlydisregarded the body of the trial courts Decision, which clearly
stated as follows:To support the Promissory Note, a Continuing Suretyship
Agreement wasexecuted by the defendants, Federico C. Lim, Carlos M. Farrales
and Thomas H.Van Sebille, in favor of the plaintiff corporation, to the effect
that if Pacific LloydCorporation cannot pay the amount loaned by plaintiff to
said corporation, thenFederico C. Lim, Carlos M. Farrales and Thomas H. Van
Sebille will holdthemselves jointly and severally together with defendant Pacific
LloydCorporation to answer for the payment of said obligation. The only
exception when the body of a decision prevails over the fallo iswhen the
inevitable conclusion from the former is that there was a glaring errorin the
latter, in which case the body of the decision will prevail. In this instance,there
was no clear declaration in the body of the January 31, 1984 Decision
towarrant a conclusion that there was an error in the fallo. Nowhere in the
formercan have we found a definite declaration of the trial court that, indeed,
respondentsliability was solidary. If petitioner had doubted this point, it
should have filed amotion for reconsideration before the finality of the Decision
of the trial court.
CDCP VS ESTRELLA
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Construction Development Corp. of the Philippines, petitioner, versus

Rebecca G. Estrella, Rachel E. Fletcher, Philippine Phoenix Surety &
Insurance, Inc., Batangas Laguna Tayabas Bus Co., and Wilfredo
Datingguinoo, respondents.
(GR No. 147791, September 8, 2006, First Division)
Ynares-Santiago, J.:
FACTS: On December 29, 1978, respondents Rebecca G. Estrella and

hergranddaughter, Rachel E. Fletcher, boarded in San Pablo City, a BLTB
busbound for Pasay City. However, they never reached their
destinationbecause their bus was rammed from behind by a tractor-truck of
CDCP in the South Expressway. The strong impact pushed forward their seats
andpinned their knees to the seats in front of them. They regained
consciousness only when rescuers created a hole in the bus and extricated
their legs from under the seats. They suffered physical injuriesas a result.
Thereafter, respondents filed a Complaint for damages against CDCP, BLTB,
Espiridion Payunan, Jr. and Wilfredo Datinguinoo before theRegional Trial
Court of Manila, Branch 13.
ISSUE: Are the accused jointly or solidarily liable?
HELD: The case filed by respondents against petitioner is an actionfor culpa

aquiliana or quasi delict under Article 2176 of the Civil Code. Theliability for
the negligent conduct of the subordinate is direct and primary, but is subject
to the defense of due diligence in the selection andsupervision of the employee.
In the instant case, the trial court found thatpetitioner failed to prove that it
exercised the diligence of a good father of a family in the selection and
supervision of Payunan, Jr.It is well-settled in Fabre, Jr. v. Court of Appeals,
that theowner of the other vehicle which collided with a common carrier is
solidarily liable to the injured passenger of the same. The Peitition wasthusly
DENIED.
Republic Glass Corp. v. Qua
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Republic Glass Corp. and Gervel, Inc., petitioners, versus Lawrence Qua,
respondent.
(G.R. No. 14413, July 30, 2004, First Division)
Carpio, J.:
FACTS: Petitioners and respondent were stockholders of Ladtek, Inc.,

whichobtained loans from Metrobank and PDCP where they stood as
sureties.Among themselves they executed Agreements for Contribution,
Indemnityand Pledge of shares of Stocks, stating that in case of default in
thepayment of loans, the parties would reimburse each other theproportionate
share of any sum that any might pay to creditors. Ladtekdefaulted on its loan
obligations, hence Metrobank filed a collection case.During the pendency
thereof, RGC and Gervel paid Metrobank where awaiver and quitclaim in favor
of the two was executed. Upon Quasrefusal to reimburse, RGC and Gervel
foreclosed the pledged shares of stocks owned by Qua at a public auction. On
appeal, the CA issued theassailed decision and held that there was an implied
novation of theagreement and that the payment did not extinguish the entire
obligationand did not benefit Qua. Hence, the petition, where the petitioners
claimthe following: (1) Qua is estopped from claiming that the payment
madewas not for the entire obligation, due to his judicial admissions;
(2)payment of the entire obligation is a condition sine qua non for thedemand
of reimbursement under the indemnity agreements; and (3)there is no novation
in the instant case.
ISSUES: (1) Whether payment of the entire obligation is an essential condition

for reimbursement; and (2) Whether there was no novation.
HELD: The petition is denied. Although the Agreement does not state
thatpayment of the entire obligation is an essential condition
forreimbursement, RGC and Gervel cannot automatically claim for
indemnityfrom Qua because Qua himself is liable directly to Metrobank and
PDCP. The elements of novation are not established in the instant
case.Contrary to RGC and Gervels claim, payment of any amount will
notautomatically result in reimbursement. If a solidary debtor pays
theobligation in part, he can recover reimbursement from the co-debtors onlyin
so far as his payment exceeded his share in the obligation. This isprecisely
because if a solidary debtor pays an amount equal to hisproportionate share in
the obligation, then he in effects pays only what isdue from him. If the debtor
pays less than his share in the obligation, hecannot demand reimbursement
because his payment is less than hisactual debt.
Industrial Management v. NLRC
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Industrial Management International Development Corp. (INIMACO),

petitioner, versus National Labor Relations Commission (4th Division)
Cebu City, and Enrique Sulit, Socorro Mahinay, Esmeraldo Pegarido, Tita
Bacusmo, Gino Niere, Virginia Bacus, Roberto Nemenzo, Dario Go, and
Roberto Alegarbes, respondents.
(331 SCRA 640 May 11, 2000, Second Division)
Carpio, J.:
FACTS: In September 1984, private respondents Enrique Sulit, Socorro

Mahinay,Esmeralco Pegarido, Tita Bacusimo, Nierre, Virginia Bagus, Nemenzo,
Dariogoand Roberto filed a complaint with the DOLE, Regional Arbitration
Branch No.111in Cebu City against Filipinas Carbon Mining Corp, Genardo
Sicaty, Gonzales,Dhin Gin, Lo Kuan Chin petitioner Industrial Management
Development Corporation for payment of separation pay and unpaid wages.
Labor Arbiter judgment-ordering Filipinas, Gonzales, Lo Kuan Chin to pay
complainant Enrique Sulit total amount of P82,800.00. On September 3, 1987
petitioner filed a motion to quash alias writ of execution and set aside decision
alleging among that the alias writ of executionaltered and charged the tenor of
the decision by charging the liability of thereinrespondent from joint to solidary
by the insertion of the words and/or betweenGonzales and Filipinas.
ISSUE: Whether or not the petitioners liability pursuant to the decision of

thelabor arbiter dated March 10, 1987 is solidary.
HELD: NO, the liability pursuant to the decision of the labor arbiter dated
March10, 1987 should be as it is hereby, considered joint and petitioners
paymentwhich has been accepted considered as full satisfaction of its liability,
withoutthe prejudice to the enforcement of the awards against the other
fiverespondents in the said case.A solidary or joint and several obligations is
one in which each debtor isliable for the entire obligation and each creditor is
entitled to demand theobligation. In a joint obligation each obligor answers
only a part of the wholeliability and to each obligation belong only a part of the
correlative rights. There is solidary liability only when the obligation expressly
so states,when the law so provides or when the nature of the obligation so
required.When it is not provided in a judgment that the defendant are liable to
pay jointlyand severally a certain sum of money, none of them may be
compelled to satisfyin full said judgment.
Metro Manila Transit Corp. v. Court of Appeals
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Metro Manila Transit Corporation, petitioner, versus The Court of Appeals

and Nenita Custodio, respondents.
(G.R. No. 104408, Jun 21, 1993, 2nd Division)
Regalado, J.:
FACTS: Plaintiff-appellant Nenita Custodio boarded as a passenger of a
publicutility jeepney, then driven by defendant Agudo Calebag and owned by
his co-defendant Victorino Lamayo, bound for her work at Dynetics
Incorporated located in Bicutan, Taguig, Metro Manila, where she then worked
as a machine operator. While the passenger jeepney was travelling at along
DBP Avenue, Bicutan, Taguig, Metro Manila another fast moving vehicle, a
Metro Manila Transit Corp. (MMTC) bus driven by defendant Godofredo C.
Leonardo bound forits terminal at Bicutan. As both vehicles approached the
intersection of DBP Avenue and Honeydew Road they failed to slow down and
slacken their speed; neither did they blow their horns to warn approaching
vehicles. As aconsequence, a collision between them occurred. The collision
impact causedplaintiff-appellant Nenita Custodio to hit the front windshield of
the passenger jeepney and was thrown out therefrom, falling onto the
pavement unconscious with serious physical injuries. She was brought to the
Medical City Hospitalwhere she regained consciousness only after 1 week.
Thereat, she was confinedfor 24 days, and as a consequence, she was unable
to work for three and onehalf months 3 1/2. Defendants denied all the material
allegations in thecomplaint and pointed an accusing finger at each other as
being the party atfault for the negligence in the failure to exercise due diligence
in the selectionand supervision of their respective employees.By order of the
trial court, defendant Calebag was declared in default forfailure to file an
answer. Trial ensued after no amicable settlements were made. The trial court
found both drivers of the colliding vehicles concurrently negligent for non-
observance of appropriate traffic rules and regulations and for failure totake
the usual precautions when approaching an intersection. As joint tortfeasors,
both drivers, as well as defendant Lamayo, were held solidarily liablefor
damages sustained by plaintiff Custodio. Plaintiff's motion to have that
portion of the trial court's decision absolvingMMTC from liability reconsidered
having been denied for lack of merit, an appealwas filed by her with respondent
appellate court. After consideration of the appropriate pleadings on appeal and
finding the appeal meritorious, the Court of Appeals modified the trial court's
decision by holding MMTC solidarily liable withthe other defendants for the
damages awarded by the trial court because of their concurrent negligence,
hence, this appeal.
ISSUE: Whether or not the appellate court erred in holding that MMTC should
besolidary liable with the other defendants.
HELD: No, the appellate court did not err in its decision. Whether or not
thediligence of a good father of a family has been observed by petitioner is a
matterof proof which under the circumstances in the case at bar has not been
clearly established. It is not felt by the Court that there is enough evidence on
recordas would overturn the presumption of negligence, and for failure to
submit allevidence within its control, assuming the putative existence thereof;
petitionerMMTC must suffer the consequences of its own inaction and
indifference. The mere formulation of various company policies on safety
without showing that they were being complied with is not sufficient to exempt
petitioner from liability arising from negligence of its employees. It is
incumbent uponpetitioner to show that in recruiting and employing the erring
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driver therecruitment procedures and company policies on efficiency and safety

werefollowed. As joint tortfeasors, all defendants, including MMTC will be
solidarily liable for damages awarded by the trial court. Decision affirmed.
Inciong v.Court of Appeals
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Baldomero Inciong, jr., petitioner, versus Court of Appeals and Philippine

Bank of Communications, respondents
Romero, J.:
FACTS: Petitioner, together with Gregorio Pantanosas Jr., and Rene Naybe,
hadtheir obligations arouse from the signing of a promissory note amounting to
P50, 000 holding themselves jointly and severally liable to private respondent
Philippine Bank of Communications, Cagayan de Oro City branch. The
promissory note was due on May 5, 1983. The promissors failed to fulfill their
obligations despite demand by thebank. As a consequence, an action to collect
was filed with the court but wasdismissed due to failure to prosecute. Said
dismissal was reconsidered by thetrial court and later ordered the sheriff to
serve the summons. On January 27,1987, the lower court dismissed the case
against defendant Pantanosas asprayed for by the private respondent herein.
Meanwhile, only the summonsaddressed to petitioner was served as the sheriff
learned that defendant Naybehad gone to Saudi Arabia.Petitioner argued that
said promissory note has vitiated his consentthrough fraud and deceit which
was later corroborated by Pantanosas for he onlysigned for the amount of
P5,000 on one of the copies of the promissory note,and not the alleged amount,
to buy chainsaw. He also claimed that since theliabilities of Pantanosas and
Naybe, his co-promissors, had extinguished, hisshould also be extinguished, as
provided for by Article 2080 of the Civil Code onguarantors. The Regional Trial
Court and the Court of Appeals rejected hispetitions and so a petition for
review on certiorari was filed with the SupremeCourt.
ISSUE: Whether or not the petitioner is solidary co-maker of the promissory

notein issue and not merely a guarantor.
HELD: The Supreme Court held that the petitioner signed the promissory note
asa solidary co-maker and not as a guarantor. A solidary or joint and several
obligations are one in which each debtor is liable for the entire obligation, and
eachcreditor is entitled to demand the whole obligation. On the other hand,
Article 2047 of the Civil Code states: By guaranty a person, called the
guarantor, binds himself to the creditor tofulfill the obligation of the principal
debtor in case the latter should fail to do so.
If a person binds himself solidarily with the principal debtor, the
provisionsof Section 4, Chapter 3, Title I of this Book shall be observed. In such
a case thecontract is called a suretyship. While a guarantor may bind himself
solidarilywith the principal debtor, the liability of a guarantor is different from
that of asolidary debtor. Thus, Tolentino explains: A guarantor who binds
himself in solidum with the principal debtor under theprovisions of the second
paragraph does not become a solidary co-debtor to allintents and purposes.
There is a difference between a solidary co-debtor and afiador in solidum
(surety). The latter, outside of the liability he assumes to paythe debt before the
property of the principal debtor has been exhausted, retainsall the other rights,
actions and benefits which pertain to him by reason of thefiansa; while a
solidary co-debtor has no other rights than those bestowed uponhim in Section
4, Chapter 3, Title I, Book IV of the Civil Code.Section 4, Chapter 3, Title I,
Book IV of the Civil Code states the law on joint andseveral obligations. Under
Art. 1207 thereof, when there are two or moredebtors in one and the same
obligation, the presumption is that the obligation is joint so that each of the
debtors is liable only for a proportionatepart of the debt. There is a solidary
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liability only when the obligation expresslyso states, when the law so provides
or when the nature of the obligation sorequires.Because the promissory note
involved in this case expressly states thatthe three signatories therein are
jointly and severally liable, any one, some or allof them may be proceeded
against for the entire obligation. The choice is left tothe solidary creditor to
determine against whom he will enforce collection. Consequently, the dismissal
of the case against Judge Pontanosas may not bedeemed as having discharged
petitioner from liability as well. As regardsNaybe, suffice it to say that the court
never acquired jurisdiction over him.Petitioner, therefore, may only have
recourse against his co-makers, as providedby law.
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Philippine Blooming Mills v. Court of Appeals
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Philippine Blooming Mills, Inc., and Alfredo Ching, petitioners versus

Court of Appeals and Traders Royal Bank, respondents.
(413 SCRA 445 October 15, 2003, 1st Division)
Carpio, J.:
FACTS: Alfredo Ching (Ching) was the Senior Vice President of Philippine
BloomingMills, Inc. (PBM). In his personal capacity and not as a corporate
officer, Chingsigned a Deed of Suretyship dated 21 July 1977 binding himself
solidarily liabletogether with the debtor PBM.On March 24 and August 6 1980,
Traders Royal Bank (TRB) granted PBM letters of Credit on application of Ching
in his capacity as Senior vice Presidentof PBM. Ching later accomplished and
delivered to TRB trust receipts, whichacknowledged receipt in trust for TRB of
the merchandise subject of the lettersof credit. Under the trust receipts, PBM
had the right to sell the merchandise forcash with the obligation to turn over
the entire proceeds of the sale to TRB aspayment of PBMs indebtedness. Ching
further executed an Undertaking for each trust receipt, whichuniformly granted
the TRB the right to take possession of the goods at any timeto protect the
TRBs interests.On 27 April 1981, PBM obtained a P3, 500,000 trust loan from
TRB. Chingsigned as co-maker in the notarized Promissory Note evidencing
said loan.PBM defaulted in its payment of the two (2) trust receipts as well as
thetrust loan.On 1 April 1982, PBM and Ching filed a petition for suspension of
payments with the Securities and Exchange Commission (SEC). The petition
sought to suspend payment of PBMs obligations and prayed that the SEC
allowPBM to continue its normal business operations free from the interference
of itscreditors. One of the listed creditors of PBM was TRB.On 9 July 1982; the
SEC placed all of PBMs assets, liabilities, and obligations under the
rehabilitation receivership of Kalaw, Escaler andAssociates. On 13 May 1983,
ten months after the SEC placed PBM underrehabilitation receivership, TRB
filed with the trial court a complaint for collection against PBM and Ching. TRB
asked the trial court to order defendants to pay solidarily the indebtedness of
PBM.On 25 May 1983, TRB moved to withdraw the complaint against PBM on
the ground that the SEC had already placed PBM under receivership. The trial
court thus dismissed the complaint against PBM.
On 23 July 1983, PBM and Ching also moved to dismiss the complaint
onthe ground that the trial court had no jurisdiction over the subject matter of
thecase. PBM and Ching invoked the assumption of jurisdiction by the SEC
over allof PBMs assets and liabilities. The trial court denied the motion to
dismiss with respect to Ching and affirmed its dismissal of the case with
respect to PBM. The trial court stressedthat TRB was holding Ching liable
under the Deed of Suretyship. As Chingsobligation was solidary, the trial court
ruled that TRB could proceed against Ching as surety upon default of the
principal debtor PBM.Upon the trial courts denial of his Motion for
Reconsideration, Ching fileda Petition for Certiorari and Prohibition before the
Court of Appeals. Theappellate court granted Chings petition and ordered the
dismissal of the case. The appellate court ruled that SEC assumed jurisdiction
over Ching and PBM tothe exclusion of courts or tribunals of coordinate rank.
TRB assailed the Court of Appeals decision before the Supreme Court. In
Traders Royal Bank v. Court of Appeals, the highest tribunal upheld the TRB
andruled that Ching was merely a nominal party in the SEC case. Creditors
may sueindividual sureties of debtor corporations, like Ching, in a separate
proceeding before regular courts despite the pendency of a case before the SEC
involvingthe debtor corporation.In his Answer dated 6 November 1989, Ching
denied liability as surety andaccommodation co-maker of PBM. He claimed that
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the SEC had already issued adecision approving a revised rehabilitation plan
for PBMs creditors. He further claimed that even as a surety, he has the right
to the defenses personal to PBM. Thus, his liability as surety would attach only
if, after the rehabilitation of payments scheduled under the rehabilitation plan,
there would remain a balanceof PBMs debt to TRB. The trial court ruled that
Ching is liable to TB under the Deed of Suretyship. On appeal, the Court of
Appeals affirmed the decision of the lowercourt. The Court of Appeals denied
Chings Motion for Reconsideration for lack of merit.
ISSUES: Whether or not Ching is liable for obligations PBM contracted after
theexecution of the Deed of Suretyship. Whether or not Chings liability is
limited to the amount stated in PBMs rehabilitation plan.
HELD: Ching is liable for credit obligations contracted by PBM against TRB
beforeand after the execution of the 21 July 1977 Deed of Suretyship. This is
evidentfrom the tenor of the deed itself, referring to amounts PBM may now
beindebted or may hereafter become indebted to TRB. The law expressly
allows asuretyship for future debts as provided for in Article 2053 of the Civil
Code.Under the Civil Code, a guaranty may be given to secure even future
debts; theamount of which may not be known at the time the guaranty is
executed. Acontinuing guaranty is one which is not limited to a single
transaction, but whichcontemplates a future course of dealing, covering a
series of transactions, generally for an indefinite time or until revoked.Anent
the second issue, in granting the loan to PBM, TRB required Chingssurety
precisely to insure full recovery of the loan in case PBM becomesinsolvent or
fails to pay in full. Ching cannot invoke Article 1222 of the CivilCode. Thus,
Ching cannot use PBMs failure to pay in full as justification for hisown
reduced liability to TRB. TRB, as creditor, has the right under the surety
toproceed against Ching for the entire amount of PBMs loan. This is clear
fromArticle 1216 of the Civil Code, which states that: the creditor may proceed
against any one of the solidary debtors or some or all of them
simultaneously.The demand made against one of them shall not be an obstacle
to those whichmay subsequently be directed against the others, so long as the
debt has not been fully collected.
Queensland-Tokyo v. George
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Queensland-Tokyo Commodities, Inc., Romero Y Lau and Charlie Collado,

peitioners, versus Thomas George, respondent.
Carpio, J.:
FACTS: Sometime in 1992, Benjamin Shia, a market analyst and trader of

Queensland, was introduced to petitioner Jefferson Lim by Marissa Bontia, one
of his employees. Marissas father was a former employee of Lims father. Shia
suggested that Lim invest in the Foreign Exchange Market, trading U.S. dollar
against the Japanese yen, British pound, Deutsche Mark and Swiss Franc.
Before investing, Lim requested Shia for proof that the foreign exchange was
really lucrative. They conducted mock tradings without money involved. As the
mock trading showed profitability, Lim decided to invest with a marginal
deposit of US$5,000 in managers check. The marginal deposit represented the
advance capital for his future tradings. It was made to apply to any authorized
future transactions, and answered for any trading account against which the
deposit was made, for any loss of whatever nature, and for all obligations,
which the investor would incur with the broker.
Petitioner Lim was then allowed to trade with respondent company which was
coursed through Shia by virtue of blank order forms all signed by Lim.
Respondent furnished Lim with the daily market report and statements of
transactions as evidenced by the receiving forms, some of which were received
by Lim.
Meanwhile, on October 22, 1992, respondent learned that it would take
seventeen (17) days to clear the managers check given by petitioner. Shia
returned the check to petitioner who informed Shia that petitioner would rather
replace the managers check with a travelers check. Shia noticed that the
travelers check was not indorsed but Lim told Shia that Queensland could sign
the endorsee portion. Because Shia trusted the latters good credit rating, and
out of ignorance, he brought the check back to the office unsigned. Inasmuch
as that was a busy Friday, the check was kept in the drawer of respondents
consultant. Later, the travelers check was deposited with Citibank.
On October 27, 1992, Citibank informed respondent that the travelers
check could not be cleared unless it was duly signed by Lim, the original
purchaser of the travelers check. A Miss Arajo, from the accounting staff of
Queensland, returned the check to Lim for his signature, but the latter, aware
of his P44,465 loss, demanded for a liquidation of his account and said he
would get back what was left of his investment.
ISSUE: Whether or not the CA erred in reversing the decision of the RTC which
dismissed the respondents complaint.
HELD: The essential elements of estoppel are: (1) conduct of a party amounting
to false representation or concealment of material facts or at least calculated to
convey the impression that the facts are otherwise than, and inconsistent with,
those which the party subsequently attempts to assert; (2) intent, or at least
expectation, that this conduct shall be acted upon by, or at least influence, the
other party; and (3) knowledge, actual or constructive, of the real facts. ere, it
is uncontested that petitioner had in fact signed the Customers Agreement in
the morning of October 22, 1992, knowing fully well the nature of the contract
he was entering into. The Customers Agreement was duly notarized and as a
public document it is evidence of the fact, which gave rise to its execution and
of the date of the latter.
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Next, petitioner paid his investment deposit to respondent in the form of

a managers check in the amount of US$5,000 as evidenced by PCI Bank
Managers Check No. 69007, dated October 22, 1992. All these are indicia that
petitioner treated the Customers Agreement as a valid and binding contract.
Shrimp Specialist, Inc., v. Fuji Triumph
Cita
Shrimp Specialist, Inc., petitioner, versus Fuji Triumph Agri-Industrial

Corp., respondent.
(G.R. No. 168256 December 7, 2009, 2nd Division)
Carpio, J.:
FACTS: Shrimp Specialists and Fuji entered into a Distributorship Agreement,

under which Fuji agreed to supply prawn feeds on credit basis to Shrimp
Specialists. The prawn feeds would be used in prawn farms under Shrimp
Specialists technical supervision and management. In 1987, Shrimp
Specialists began purchasing prawn feeds from Fuji and paid for them in the
regular course of business.
From 3 June 1989 to 24 July 1989, Fuji delivered prawn feeds, and
Shrimp Specialists issued 9 postdated checks as payment.
Shrimp Specialists alleges that it issued a stop-payment order for the
checks because it discovered that earlier deliveries were contaminated with
aflatoxin. Shrimp Specialists claims that it verbally informed Fuji about the
contamination and Fuji promised to send stocks of better quality. Shrimp
Specialists states that it continued to purchase prawn feeds from Fuji, but the
stocks were still contaminated with aflatoxin.
Fuji denies that the feeds were contaminated. Fuji asserts that Shrimp
Specialists requested to put on hold the deposit of the checks due to
insufficient funds. Fuji adds that when the checks were presented for payment,
the drawee bank dishonored all the checks due to a stop-payment order.
In January 1990, Ervin Lim, Fujis Vice-President and owner, and
Edward Lim, Shrimp Specialists Finance Officer, met in Ozamiz City to discuss
the unpaid deliveries. After the meeting, both agreed that Shrimp Specialists
would issue another set of checks to cover the ones issued earlier. This
agreement was reduced into writing and signed by both parties on behalf of
their corporations.
On 26 October 1990, Fuji filed a civil complaint for sum of money against
Shrimp Specialists and Eugene Lim. On 15 April 1997, the Regional Trial Court
of Quezon City (trial court), Branch 76, rendered a decision finding Shrimp
Specialists and Eugene Lim solidarily liable to pay P767,427 representing the
deliveries made from June to July 1989 plus interests. Fuji was also awarded
P30,000 as reasonable attorneys fees and the cost of the suit.
Shrimp Specialists and Eugene Lim elevated the case to the CA. On 28
June 2005, the CA rendered a decision modifying the trial courts decision. The
CA affirmed the trial courts decision to hold Shrimp Specialists liable to pay
Fuji P767, 427 for the prawn feeds delivered plus interests, P30,000 as
attorneys fees and cost of suit. However, the CA absolved Eugene Lim from any
liability.
ISSUE: The trial court held that Eugene Lim is solidarily liable with Shrimp
Specialists.
HELD: Shrimp Specialists asserts that Fuji has not presented any evidence to
show that Eugene Lim acted in bad faith. Fuji also failed to present any
evidence to prove that Eugene Lim had maliciously and deliberately caused
Shrimp Specialists to default on its obligation without any valid reason. Hence,
Eugene Lim cannot be made personally liable for the obligations of Shrimp
Specialists.
A corporation is vested by law with a personality separate and distinct
from the people comprising it. Ownership by a single or small group of
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stockholders of nearly all of the capital stock of the corporation is not by itself a
sufficient ground to disregard the separate corporate personality. Thus,
obligations incurred by corporate officers, acting as corporate agents, are direct
accountabilities of the corporation they represent. In Uy v. Villanueva, the
Court explained: The general rule is that obligations incurred by the
corporation, acting through its directors, officers, and employees, are its sole
liabilities.
In this case, none of these exceptional circumstances is present. In its
decision, the trial court failed to provide a clear ground why Eugene Lim was
held solidarily liable with Shrimp Specialists. The trial court merely stated that
Eugene Lim signed on behalf of the Shrimp Specialists as President without
explaining the need to disregard the separate corporate personality. The CA
correctly ruled that the evidence to hold Eugene Lim solidarily liable should be
more than just signing on behalf of the corporation because artificial entities
can only act through natural persons. Thus, the CA was correct in dismissing
the case against Eugene Lim.
Asset Builders v. Stronghold
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Asset Builders Corp., petitioner, versus Stronghold Insurance Company,

Inc., respondent.
(G.R. No 187116, Ocotber 10, 2010, 2nd Division)
Mendoza, J.:
FACTS: On April 28, 2006, Asset Builders Corporation (ABC) entered into an
agreement with Lucky Star Drilling & Construction Corporation (Lucky Star) as
part of the completion of its project to construct the ACG Commercial Complex
on NHA Avenue corner Olalia Street, Barangay Dela Paz, Antipolo City. As
can be gleaned from the Purchase Order, Lucky Star was to supply labor,
materials, tools, and equipment including technical supervision to drill one (1)
exploratory production well on the project site. The total contract price for the
said project was P1, 150,000.00.
To guarantee faithful compliance with their agreement, Lucky Star
engaged respondent Stronghold which issued two (2) bonds in favor of
petitioner. The first, SURETY BOND G.R. No. 141558, dated May 9,
2006, covers the sum of P575, 000.00 or the required downpayment for the
drilling work. On May 20, 2006, ABC paid Lucky Star P575, 000.00 (with 2%
withholding tax) as advance payment, representing 50% of the contract price.
Lucky Star, thereafter, commenced the drilling work. By July 18, 2006, just a
few days before the agreed completion date of 60 calendar days, Lucky Star
managed to accomplish only ten (10) % of the drilling work. On the same date,
petitioner sent a demand letter to Lucky Star for the immediate completion of
the drilling workwith a threat to cancel the agreement and forfeit the bonds
should it still fail to complete said project within the agreed period.
On August 3, 2006, ABC sent a Notice of Rescission of Contract with
Demand for Damages to Lucky Star.
On August 16, 2006, ABC sent a Notice of Claim for payment to
Stronghold to make good its obligation under its bonds.
Despite notice, ABC did not receive any reply either from Lucky Star or
Stronghold, prompting it to file its Complaint for Rescission with Damages
against both before the RTC on November 21, 2006. In its Answer (with
Compulsory Counterclaim and Cross-Claim), dated January 24, 2007,
Stronghold denied any liability arguing that ABC had not shown any proof that
it made an advance payment of 50% of the contract price of the project. It
further averred that ABCs rescission of its contract with Lucky Star virtually
revoked the claims against the two bonds and absolved them from further
liability.
Lucky Star, on the other hand, failed to file a responsive pleading within
the prescribed period and, thus, was declared in default by the RTC in its
Order dated August 24, 2007. On February 27, 2009, the RTC rendered the
assailed decision ordering Lucky Star to pay ABC but absolving Stronghold
from liability. Hence, this petition.
ISSUE: Whether or not respondent insurance company, as surety, can be held

liable under its bonds.
HELD: Respondent, along with its principal, Lucky Star, bound itself to the
petitioner when it executed in its favor surety and performance bonds. The
contents of the said contracts clearly establish that the parties entered into a
surety agreement as defined under Article 2047 of the New Civil Code.
Thus: Art. 2047. By guaranty a person, called the guarantor, binds
himself to the creditor to fulfill the obligation of the principal debtor in case the
latter should fail to do so.
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If a person binds himself solidarily with the principal debtor, the

provisions of Section 4, Chapter 3, Title I of this Book shall be observed. In
such case the contract is called a suretyship.
As provided in Article 2047, the surety undertakes to be bound solidarily
with the principal obligor. That undertaking makes a surety agreement an
ancillary contract as it presupposes the existence of a principal contract.
Although the contract of a surety is in essence 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. Let it be stressed that notwithstanding
the fact that the surety contract is secondary to the principal obligation, the
surety assumes liability as a regular party to the undertaking. Suretyship, in
essence, contains two types of relationship the principal relationship between
the obligee (petitioner) and the obligor (Lucky Star), and the accessory surety
relationship between the principal (Lucky Star) and the surety (respondent). In
this arrangement, the obligee accepts the suretys solidary undertaking to pay
if the obligor does not pay. Such acceptance, however, does not change in any
material way the obligees relationship with the principal obligor. Neither does
it make the surety an active party to the principal obligee-obligor relationship.
Thus, the acceptance does not give the surety the right to intervene in the
principal contract. The suretys role arises only upon the obligors default, at
which time, it can be directly held liable by the obligee for payment as a
solidary obligor.
In the case at bench, when Lucky Star failed to finish the drilling work
within the agreed time frame despite petitioners demand for completion, it was
already in delay. Due to this default, Lucky Stars liability attached and, as a
necessary consequence, respondents liability under the surety agreement
arose. Undeniably, when Lucky Star reneged on its undertaking with the
petitioner and further failed to return the P575,000.00 downpayment that was
already advanced to it, respondent, as surety, became solidarily bound with
Lucky Star for the repayment of the said amount to petitioner. The clause,
this bond is callable on demand, strongly speaks of respondents primary and
direct responsibility to the petitioner.
In fine, respondent should be answerable to petitioner on account of Lucky
Stars non-performance of its obligation as guaranteed by the performance
bond.
Eparwa Secutrity v. Liceo de Cagayan
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Eparwa Security and Janitorial Services, Inc., petitioner, versus Liceo

Cagayan University, respondent.
(508 SCRA 373, November 28, 2006, 3rd Division)
Carpio, J.:
FACTS: On 1 December 1997, Eparwa and LDCU, through their

representatives, entered into a Contract for Security Services. The pertinent
portion of the contract provides that: For and in consideration of this security,
protective and safety services, [LDCU] agrees to pay [Eparwa] FIVE THOUSAND
PESOS ONLY (P5,000.00), Philippine Currency per guard a month payable
within fifteen (15) days after [Eparwa] presents its service invoice. [Eparwa]
shall furnish [LDCU] a monthly copy of SSS contribution of guards and
monthly payroll of each guard assigned at [LDCUs] premises on a monthly
basis.
On 21 December 1998, 11 security guards (security guards) whom
Eparwa assigned to LDCU from 1 December 1997 to 30 November 1998 filed a
complaint before the National Labor Relations Commissions (NLRC) Regional
Arbitration Branch No. 10 in Cagayan de Oro City. Docketed as NLRC-RABX
Case No. 10-01-00102-99, the complaint was filed against both Eparwa and
LDCU for underpayment of salary, legal holiday pay, 13th month pay, rest day,
service incentive leave, night shift differential, overtime pay, and payment for
attorneys fees.
LDCU made a cross-claim and prayed that Eparwa should reimburse
LDCU for any payment to the security guards. In its decision dated 18 August
1999, the Labor Arbiter found that the security guards are entitled to wage
differentials and premium for holiday and rest day work. The Labor Arbiter
held Eparwa and LDCU solidarily liable pursuant to Article 109 of the Labor
Code.
LDCU filed an appeal before the NLRC. LDCU agreed with the Labor
Arbiters decision on the security guards entitlement to salary differential but
challenged the propriety of the amount of the award. LDCU alleged that
security guards not similarly situated were granted uniform monetary awards
and that the decision did not include the basis of the computation of the
amount of the award. Eparwa also filed an appeal before the NLRC. For its
part, Eparwa questioned its liability for the security guards claims and the
awarded cross-claim amounts.
The NLRC found that the security guards are entitled to wage
differentials and premium for holiday and rest day work. Although the NLRC
held Eparwa and LDCU solidarily liable for the wage differentials and premium
for holiday and rest day work, the NLRC did not require Eparwa to reimburse
LDCU for its payments to the security guards. The NLRC also ordered the
recomputation of the monetary awards according to the dates actually worked
by each security guard.
Eparwa and LDCU again filed separate motions for partial
reconsideration of the 19 January 2000 NLRC Resolution. LDCU questioned
the NLRCs deletion of LDCUs entitlement to reimbursement by Eparwa.
Eparwa, on the other hand, prayed that LDCU be made to reimburse Eparwa
for whatever amount it may pay to the security guards.
In its Resolution dated 14 March 2000, the NLRC declared that although
Eparwa and LDCU are solidarily liable to the security guards for the monetary
award, LDCU alone is ultimately liable. LDCU filed a petition for certiorari
before the appellate court assailing the NLRCs decision. LDCU took issue with
the NLRCs order that LDCU should reimburse Eparwa. LDCU stated that this
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would free Eparwa from any liability for payment of the security guards money
claims.
In its Decision promulgated on 20 April 2001, the appellate court
granted LDCUs petition and reinstated the Labor Arbiters decision. The
appellate court also allowed LDCU to claim reimbursement from Eparwa.
Eparwa filed a motion for reconsideration of the appellate courts decision.
Eparwa stressed that jurisprudence is consistent in HELD that the ultimate
liability for the payment of the monetary award rests with LDCU alone.
The appellate court denied Eparwas motion for reconsideration for lack
of merit. Hence, this petition.
ISSUE: Is LDCU alone ultimately liable to the security guards for the wage
differentials and premium for holiday and rest day pay?
HELD: The petition has merit. Eparwa and LDCUs Solidary Liability and
LDCUs Ultimate Liability
LDCUs ultimate liability comes into play because of the expiration of
the Contract for Security Services. There is no privity of contract between the
security guards and LDCU, but LDCUs liability to the security guards remains
because of Articles 106, 107 and 109 of the Labor Code. Eparwa is already
precluded from asking LDCU for an adjustment in the contract price because
of the expiration of the contract, but Eparwas liability to the security guards
remains because of their employer-employee relationship. In lieu of an
adjustment in the contract price, Eparwa may claim reimbursement from
LDCU for any payment it maymake to the security guards. However, LDCU
cannot claim anyreimbursement from Eparwa for any payment it may make to
the securityguards. Hence, the petition is granted.
Carlos Dimayuga v.PCIB
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Carlos Dimayuga, petitioner, versus Philippine Commercial & Industrial

Bank and Court of Appeals, respondents.
Bidin, J.:
FACTS: Petitioner is the defendant-appellant in a case for collection of sum of

money against whom the decision was rendered by the trial court on May
28,1974. Plaintiff, who is now the respondent in the instant petition, is a
bankinginstitution and is the creditor of petitioner.On February 6, 1962,
petitioner borrowed from the plaintiff the sum of P10,000.00 as evidenced by a
promissory note executed and signed by Pedro Tanjuatco and Carlos
Dimayuga. The indebtedness was to be paid on May 7,1962 with interest at the
rate of 10% per annum in case of non-payment atmaturity as evidenced by and
in accordance with the terms and conditions of thepromissory note executed
jointly and severally by defendants. Carlos Dimayugabound himself to pay
jointly and severally with Pedro Tanjuatco interest at therate of 10% per
annum on the said amount of P10,000.00 until fully paid.Moreover, both
undertook to "jointly and severally authorize the respondent Philippine
Commercial and Industrial Bank, at its option to apply to the paymentof this
note any and all funds, securities or other real or personal property of value
which hands (sic) on deposit or otherwise belonging to anyone or all of
us."Upon the default of the promissors to pay, bank filed a complaint for
thecollection of a sum of money. Defendant Carlos Dimayuga, now petitioner,
however, had remitted to the respondent the P4,000.00 by way of
partialpayments made from August 1, 1969 to May 7, 1970 as evidenced
bycorresponding receipts thereto. These payments were nevertheless applied
topast interests, charges and partly on the principal. The trial court held the
defendants jointly and severally liable to pay theplaintiff the sum of P9,139.60
with interest at 10% per annum until fully paidplus P913.96 as attorneys' fees
and costs against defendants. Petitioner thenfiled a motion alleging that since
Pedro Tanjuatco died on December 23, 1973,the money claim of the
respondents should be dismissed and prosecuted againstthe estate of the late
Pedro Tanjuatco as provided in Sec. 5, Rule 86, New Rulesof Court. The trial
court denied the motion for lack of merit. On appeal, theCourt of Appeals
dismissed the appeal for failure of the Record on Appeal toshow on its face that
the appeal was timely perfected.
ISSUE: Whether or not the money claim of PCIB should be dismissed

andprosecuted against the estate of the late Tanjuatco.
HELD: From the evidence presented, there can be no dispute that

CarlosDimayuga bound himself jointly and severally with Pedro C. Tanjuatco,
nowdeceased, to pay the obligation with PCIB in the amount of P10,000.00
plus 10%interest per annum. In addition, as above stated, in case of non-
payment, theyundertook among others to jointly and severally authorize
respondent bank, atits option to apply to the payment of this note, any and all
funds, securities, realor personal properties, etc. belonging to anyone or all of
them. Otherwisestated, the promissory note in question provides in
unmistakable language thatthe obligation of petitioner Dimayuga is joint and
several with Pedro C. Tanjuatco.It is well settled under the law and
jurisprudence that when the obligationis solidary, the creditor may bring his
action in toto against the debtors obligatedin solidum. As expressly allowed by
Article 1216 of the Civil Code, the creditormay proceed against any one of the
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solidary debtors or some or all of themsimultaneously. "Hence, there is nothing

improper in the creditor's filing of anaction against the surviving solidary
debtors alone, instead of instituting aproceeding for the settlement of the estate
of the deceased debtor wherein his claim could be filed." The notice is
undoubtedly left to the solidary creditor todetermine against whom he will
enforce collection.Court of Appeals decision reversed and set aside. Trial court
decision affirmed.
Cerna v. Court of Appeals
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Paula de la Cerna, et. Al., petitioners, versus Mnaul Rebaca Potot, et. Al.,
and The Honorable Court of the Philippines, respondents.
(220 SCRA 517, March 30, 1993, En Banc)
Reyes, J.B.L., J.:
FACTS: Celerino Delgado and Conrad Leviste entered into a loan agreement on
orabout October 16, 1972, which was evidenced by a promissory note. On
thesame date, Delgado executed a chattel mortgage over a jeep owned by
him.And acting as the attorney-in-fact of herein petitioner, Manolo P. Cerna
(petitioner), he also mortgaged a Taunus car owned by the latter. The period
lapsed without Delgado paying the loan. This prompted Leviste to file a
collection suit against Delgado and petitioner as solidarydebtors. Petitioner
filed a motion to dismiss. The grounds cited in the Motionwere lack of cause of
action and the death of Delgado. Anent the latter, petitioner claimed that the
claim should be filed in the proceedings for thesettlement of the estate of
Delgado as the action did not survive Delgadosdeath. Moreover, he also stated
that since Leviste already opted to collect onthe note, he could no longer
foreclose the mortgage. The trial court denied themotion to dismiss. The
petitioner then filed a special civil action for certiorari, mandamus, and
prohibition with preliminary injunction on the ground that the respondent
judge committed grave abuse of discretion. However, the Court of
Appealsdenied the petition because herein petitioner failed to prove the death
of Delgado and the consequent settlement of the latters estate.On February 18,
1977, petitioner filed his second motion to dismiss. Thetrial court again denied
the said motion. Petitioner filed a motion to reconsiderthe said order but this
was denied. Then, petitioner filed another petition forcertiorari and prohibition
with the Court of Appeals. The respondent court dismissed the petition. The
respondent court hold petitioner and Delgado were solidary debtors.
ISSUE: Whether or not petitioner is a co-debtor of Delgado; hence, liable to

paythe loan contracted by Delgado.
HELD: NO, petitioner is not a co-debtor of Delgado. Nowhere did it appear in

thepromissory note that petitioner was a co-debtor. Article 1311 of the Civil
Code isclear that contracts take effect only between the parties Moreover,
Article1207 of the Civil Code states that there is solidary liability only when
theobligation expressly so states, or when the law or nature of the obligation
sorequires. It was clear that petitioner had no part in the contract. It was
Delgado alone who signed the said agreement. Thus, nowhere could it be
seenfrom the agreement that petitioner was solidarily bound with Delgado for
thepayment of the loan. There is also no legal provision nor jurisprudence in
our jurisdiction whichmakes a third person who secures the fulfillment of
anothers obligation by mortgaging his own property solidarily bound with the
principal obligor. Achattel mortgage may be an accessory contract to a
contract of loan, but thatfact alone does not make a third-party mortgagor
solidarily bound with theprincipal debtor in the fulfilling of the principal
obligation that is, to pay the loan. The signatory of the principal contract
remains to be primarily bound. It is onlyupon the default of the latter that the
creditor may have recourse on the mortgagors by foreclosing the mortgaged
properties in lieu of an action forrecovery of the amount of the loan. And the
liability of the third-partymortgagors extends only to the property mortgaged.
Should there be any deficiency, the creditor has recourse on the principal
debtor.
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Nazareno v. Court of Appeals

Natividad P. Nazareno, Maximino P. Nazareno, Jr., petitioners, versus
Court of appeals, Estate of Maximino A. Nazareno, Sr., Romeo P. Nazareno
and Eliza Nazareno, respondents.
(G.R. No. 138842 or 343 SCRA 637, October 18, 2000, 2nd Division)
Mendoza, J.:
FACTS: Maximino Nazareno, Sr. and Aurea Poblete were husband and wife.
Aurea died on April 15, 1970, while Maximino, Sr. died on December 18, 1980.
They had five children, namely, Natividad, Romeo, Jose, Pacifico, and
Maximino, Jr.
Natividad and Maximino, Jr. are the petitioners in this case, while the
estate of Maximino, Sr., Romeo, and his wife Eliza Nazareno are the
respondents. Duringtheir marriage, Maximino Nazareno, Sr. and Aurea Poblete
acquired properties in Quezon City and in the Province of Cavite. Upon the
reorganization of the courtsin 1983, the case was transferred to the RTC of
Naic, Cavite. Romeo was appointed administrator of his fathers estate. In the
course of the intestateproceedings, Romeo discovered that his parents had
executed several deeds of sale conveying a number of real properties in favor of
his sister, Natividad. Oneof the deeds involved six lots in Quezon City which
were allegedly sold byMaximino, Sr., with the consent of Aurea, to Natividad on
January 29, 1970 forthe total amount of P47,800.00.Among the lots covered by
the above Deed of Sale is Lot 3-B which isregistered under TCT No. 140946.
This lot had been occupied by Romeo, hiswife Eliza, and by Maximino, Jr. since
1969. Unknown to Romeo, Natividad soldLot 3-B on July 31, 1982 to
Maximino, Jr., for which reason the latter was issued TCT No. 293701 by the
Register of Deeds of Quezon City. When Romeo found out about the sale to
Maximino, Jr., he and his wife Eliza locked Maximino, Jr. out of the house. On
August 4, 1983, Maximino, Jr. brought an action for recovery of possession
and damages with prayer for writs of preliminary injunction andmandatory
injunction with the RTC of Quezon City. On December 12, 1986, thetrial court
ruled in favor of Maximino, Jr. In CA-G.R. CV No. 12932, the CA affirmed the
decision of the trial court. On June 15, 1988, Romeo in turn filed on behalf of
the estate of Maximino, Sr., the present case for annulment of sale
withdamages against Natividad and Maximino, Jr. The case was filed in the
RTC of Quezon City. Romeo sought the declaration of nullity of the sale made
on January 29, 1970 to Natividad and that made on July 31, 1982 to
Maximino, Jr. onthe ground that both sales were void for lack of consideration.
On March 1,1990, Natividad and Maximino, Jr. filed a third-party complaint
against thespouses Romeo and Eliza. They alleged that Lot 3, which was
included in theDeed of Absolute Sale of January 29, 1970 to Natividad, had
been surreptitiously appropriated by Romeo by securing for himself a new title
in his name. They alleged that Lot 3 is being leased by the spouses Romeo and
Eliza to third persons.In the trial court, it rendered a decision declaring the
nullity of the Deed of Sale dated January 29, 1970 except as to lots 3, 3-b, 13
and 14 which hadpassed on to third persons. On motion for reconsideration,
the trial court modified its decision. On appeal to the Court of Appelas, the
decision of the trialcourt was modified in the sense that the titles to Lot 3 (in
the name of Romeo Nazareno) and Lot 3-B ( in the name of Maximino
Nazareno, Jr.), as well as toLots 10 and 11 were cancelled and ordered restored
to the estate of Maximino,Sr.
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ISSUE: Whether or not the the Deed of Absolute Sale on January 29, 1970 is
an indivisible contract founded on an indivisible obligation
HELD: An obligation is indivisible when it cannot be validly performed in parts,

whatever may be the nature of the thing which is the object thereof.
Theindivisibility refers to the prestation and not to the object thereof. In the
presentcase, the Deed of Sale of January 29, 1970 supposedly conveyed the six
lots toNatividad. The obligation is clearly indivisible because the performance of
thecontract cannot be done in parts; otherwise the value of what is transferred
isdiminished. Petitioners are therefore mistaken in basing the indivisibility of
acontract on the number of obligors. The decision of the Court of Appeals is
AFFIRMED.
Alonzo v. San Juan
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Aurelio P. Alonzo and Teresita A. Sison, petitiners, versus Jaime and

Perlita San Juan, respondents.
(G.R. No. 137549 or451 SCRA 45, February 11, 2005, 2nd Division)
Chico-Nazario, J.:
FACTS: Petitioners Alonzo and Sison alleged that they are the registered
ownersof a parcel of land located at Lot 3, Block 11, M. Agoncillo St.,
Novaliches, Quezon City, evidenced by TCT No. 152153. At around June 1996,
petitionersdiscovered that a portion on the left side of the parcel of land was
occupied bythe respondents San Juan, without their knowledge or consent. A
demand letterwas sent to the respondents requiring them to vacate the said
premises, butthey refused to comply. Petitioners then filed a complaint against
the respondents. During the pendency of the case, the parties agreed to enter
intoa Compromise Agreement which the trial court approved in a judgment
bycompromise dated May 7, 1997. In the Compromise Agreement, it was
expressly stipulated that should any two of the installments of the purchase
price be not paid by the respondents, the said agreement shall be considered
null and void. Alleging that the respondents failed to abide by the provisions of
the Compromise Agreement by their failure to pay the amounts due thereon,
petitioners then filed an Amended Motion for Execution. Petitioners alleged
thatthe respondents failed to pay the installments for July 31, 1997 and
August 31,1997 on their due dates, thus the Compromise Agreement
submitted by theparties became null and void. With this, the trial court found
no reason to directthe issuance of the writ of execution and denied the
petitioners Amended Motion for Execution. Petitioners filed their motion for
reconsideration to which the respondents opposed. The trial court likewise
denied the petitioners motion for reconsideration.
ISSUE: Whether or not the petitioners have a right to enforce the provision on
Compromise Agreement by asking for the issuance of a writ of execution
because of the failure of the respondents to pay.
HELD: The Supreme Court held that the items 11 and 12 of the Compromise
Agreement provided, in clear terms, that in case of failure to pay on the part of
the respondents, they shall vacate and surrender possession of the land that
they are occupying and the petitioners shall be entitled to obtain immediately
from the trial court the corresponding writ of execution for the ejectment of the
respondents. This provision must be upheld, because the Agreement
supplanted the complaint itself. When the parties entered into a Compromise
Agreement, the original action for recovery of possession was set aside and the
action waschanged to a monetary obligation. Once approved judicially, the
Compromise Agreement cannot and must not be disturbed except for vices of
consent orforgery. For failure of the respondents to abide by the judicial
compromise, petitioners are vested with the absolute right under the law and
the agreementto enforce it by asking for the issuance of the writ of execution.
Doctrinally, a Compromise Agreement is immediately final and executory.
Petitioners courseof action, asking for the issuance of a writ of execution was
in accordance withthe very stipulation in the agreement that the lower court
could not change. Hence, the petition is granted.
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David v. Court of Appeals

Jesus T. David, petitioner, versus The court of Appeals, Hon. Edgardo P.
Cruz, Melchor P. Pena and Valentin Afable, Jr., respondents.
(G.R. No. 115821, October 13, 1999, 2nd Division)
Quisumbing, J.:
FACTS: The RTC of Manila, Branch 27, with Judge Ricardo Diaz, then
presiding, issued a writ of attachment over real properties covered by TCT Nos.
80718 and10281 of private respondents. In his decision Judge Diaz ordered
privaterespondent Afable to pay petitioner until fully paid. Respondent Afable
appealed to the Court of Appeals and then to the Supreme Court. In both
instances, thedecision of the lower court was affirmed. Entries of judgment
were made andthe record of the case was remanded to Branch 27 presided at
that time byrespondent Judge Cruz. Petitioners elevated said orders to the
Court of Appealsin a petition for certiorari, prohibition and mandamus.
However, respondent appellate court dismissed the petiton.
ISSUE: Whether or not respondent appellate court erred in affirming

therespondent Judges order for the payment of simple interest only rather
than the compounded interest.
HELD: Petitioner insists that in computing the interest due should be

computedat 6% on the principal sum pursuant to Article 2209 and then
interest on thelegal interest should also be computed in accordance with the
language of article 2212 of the Civil Code. In view of this means Compound
interest.In cases where no interest had been stipulated by the parties, no
accruedconventional interest could further earn interest upon judicial demand.
The instant petition is denied. The decision of the Court of Appeals is affirmed.
RP v. Thi Thu Thuy
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Republic of the Philippines, represented by the Chief of the Philippine

National Police, petitioner, versus Thi Thu Thuy T. De Guzman,
respondent.
Leonardo-De Castro, J.:
FACTS: Respondent is the proprietress of Montaguz General Merchandise

(MGM), a contractor accredited by the PNP for the supply of office and
construction materials and equipment, and for the delivery of various services
such as printing and rental, repair of various equipment, and renovation of
buildings, facilities, vehicles, tires, and spare parts.
On December 8, 1995, the PNP Engineering Services (PNPES), released a
Requisition and Issue Voucher for the acquisition of various building materials
amounting to Two Million Two Hundred Eighty-Eight Thousand Five Hundred
Sixty-Two Pesos and Sixty Centavos (P2,288,562.60) for the construction of a
four-storey condominium building with roof deck at Camp Crame, Quezon City.
On November 5, 1997, the respondent, through counsel, sent a letter
dated October 20, 1997[18] to the PNP, demanding the payment of
P2,288,562.60 for the construction materials MGM procured for the PNP under
their December 1995 Contract.
On November 17, 1997, the PNP, through its Officer-in-Charge, replied
to respondents counsel, informing her of the payment made to MGM via Land
Bank of the Philippines (LBP) Check No. 0000530631, as evidenced by Receipt
No. 001, issued by the respondent to the PNP on April 23, 1996.
On November 26, 1997, respondent, through counsel, responded by
reiterating her demand and denying having ever received the LBP check,
personally or through an authorized person. She also claimed that Receipt No.
001, a copy of which was attached to the PNPs November 17, 1997 letter,
could not support the PNPs claim of payment as the aforesaid receipt belonged
to Montaguz Builders, her other company, which was also doing business with
the PNP, and not to MGM, with which the contract was made.
On May 5, 1999, respondent filed a Complaint for Sum of Money against
the petitioner, represented by the Chief of the PNP, before the RTC.
The petitioner filed a Motion to Dismiss on July 5, 1999, on the ground
that the claim or demand set forth in respondents complaint had already been
paid or extinguished, as evidenced by LBP Check No. 0000530631 dated April
18, 1996, issued by the PNP to MGM, and Receipt No. 001, which the
respondent correspondingly issued to the PNP. The petitioner also argued that
aside from the fact that the respondent, in her October 20, 1997 letter,
demanded the incorrect amount since it included the withholding tax paid to
the BIR, her delay in making such demand [did] not speak well of the
worthiness of the cause she espouse.
Respondent opposed petitioners motion to dismiss in her July 12, 1999
Opposition and September 10, 1999 Supplemental Opposition to Motion to
Dismiss.
After conducting hearings on the Motion to Dismiss, the RTC issued an
Order on May 4, 2001, denying the petitioners motion for lack of merit. The
petitioner thereafter filed its Answer, wherein it restated the same allegations in
its Motion to Dismiss.
With the issue then confined to whether respondent was paid or not, the
RTC proceeded with the trial.
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On April 29, 2003, petitioner presented Ms. Jesusa Magtira, who was
then the check releaser of the PNP, to prove that the respondent received the
LBP check due to MGM, and that respondent herself gave the check to Cruz.
On September 8, 2003, the RTC rendered its Decision in favor of
respondent and against petitioner.
The RTC declared that while Cruzs testimony seemed to offer a plausible
explanation on how and why the LBP check ended up with him, the petitioner,
already admitted in its Answer, and Pre-trial Brief, that MGM, did in fact
deliver the construction materials worth P2,288,562.60 to the PNP. The RTC
also pointed out the fact that the petitioner made the same admissions in open
court to expedite the trial, leaving only one issue to be resolved: whether the
respondent had been paid or not. Since this was the only issue, the RTC said
that it had no choice but to go back to the documents and the documentary
evidence clearly indicates that the check subject of this case was never received
by [respondent]. In addition, the PNPs own Warrant Register showed that it
was Edgardo Cruz who received the LBP check, and Receipt No. 001 submitted
by the petitioner to support its claim was not issued by MGM, but by Montaguz
Builders, a different entity. Finally, the RTC held that Cruzs testimony, which
appeared to be an afterthought to cover up the PNPs blunder, were
irreconcilable with the petitioners earlier declarations and admissions, hence,
not credit-worthy.
The petitioner appealed this decision to the Court of Appeals, which
affirmed with modification the RTCs HELD on September 27, 2006.
The Court of Appeals, in deciding against the petitioner, held that the
petitioners admissions and declarations, made in various stages of the
proceedings are express admissions, which cannot be overcome by allegations
of respondents implied admissions. The petitioner is now before this
Court, praying for the reversal of the lower courts decisions on the ground that
the Court of Appeals committed a serious error in law by affirming the
decision of the trial court.
ISSUE: Whether or not the contract executed with the respondent is actually a
fictitious contract to conceal the fact that only one contractor will be supplying
all the materials and labor for the PNP condominium project.
HELD: Both the RTC and the Court of Appeals upheld the validity of the
contract between the petitioner and the respondent on the strength of the
documentary evidence presented and offered in Court and on petitioners own
stipulations and admissions during various stages of the proceedings.
It is worthy to note that while this petition was filed under Rule 45 of the
Rules of Court, the assertions and arguments advanced herein are those that
will necessarily require this Court to re-evaluate the evidence on record.
This Court has, on many occasions, distinguished between a question of
law and a question of fact. We held that when there is doubt as to what the
law is on a certain state of facts, then it is a question of law; but when the
doubt arises as to the truth or falsity of the alleged facts, then it is a question
of fact.[58] Simply put, when there is no dispute as to fact, the question of
whether or not the conclusion drawn therefrom is correct, is a question of law.
The petitioner admitted to the existence and validity of the Contract of
Agreement executed between the PNP and MGM, as represented by the
respondent, on December 11, 1995. It likewise admitted that respondent
delivered the construction materials subject of the Contract, not once, but
several times during the course of the proceedings. The only matter petitioner
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assailed was respondents allegation that she had not yet been paid. If Cruzs
testimony were true, the petitioner should have put respondent in her place the
moment she sent a letter to the PNP, demanding payment for the construction
materials she had allegedly delivered. Instead, the petitioner replied that it had
already paid respondent as evidenced by the LBP check and the receipt she
supposedly issued. This line of defense continued on, with the petitioner
assailing only the respondents claim of nonpayment, and not the rest of
respondents claims, in its motion to dismiss, its answer, its pre-trial brief, and
even in open court during the respondents testimony.
Petitioners admissions were proven to have been made in various stages
of the proceedings, and since the petitioner has not shown us that they were
made through palpable mistake, they are conclusive as to the petitioner.
The RTC and the Court of Appeals correctly ruled that the petitioners
obligation has not been extinguished. The petitioners obligation consists of
payment of a sum of money. In order for petitioners payment to be effective in
extinguishing its obligation, it must be made to the proper person.
Payment made by the debtor to the person of the creditor or to one
authorized by him or by the law to receive it extinguishes the obligation. When
payment is made to the wrong party, however, the obligation is not
extinguished as to the creditor who is without fault or negligence even if the
debtor acted in utmost good faith and by mistake as to the person of the
creditor or through error induced by fraud of a third person.
In general, a payment in order to be effective to discharge an obligation,
must be made to the proper person. Thus, payment must be made to the
obligee himself or to an agent having authority, express or implied, to receive
the particular payment. Payment made to one having apparent authority to
receive the money will, as a rule, be treated as though actual authority had
been given for its receipt. Likewise, if payment is made to one who by law is
authorized to act for the creditor, it will work a discharge. The receipt of money
due on a judgment by an officer authorized by law to accept it will, therefore,
satisfy the debt.
Marques v. Far East Bank
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Arturo L. Marquez, petitioner, versus Far East Bank, respondent.

(G.R. No 147964, January 20, 2004, 1st Division)
Pannganiban, J.:
FACTS: On 13 March 1989, respondent Arturo Marquez entered into a

Contract to Sell with Transamerican Sales and Exposition (TSE), through the
latters Owner/General Manager Engr. Jesus Garcia, involving a 52.5 sq. m. lot
in Diliman, Quezon City with a three-storey townhouse unit denominated as
Unit No. 10 to be constructed thereon for a total consideration of P800,000.00.
The parcel of land in question is a portion of that property covered by TCT No.
156254 (now TCT No. 383697). On 22 May 1989, TSE obtained a loan from
petitioner FEBTC in the amount of P7,650,000.00 and mortgaged the property
covered by TCT No. 156254. For failure of TSE to pay its obligation, petitioner
FEBTC extra judicially foreclosed the real estate mortgage and became the
highest bidder (P15.7 million) in the auction sale conducted for the purpose.
Respondent had already paid a total of P600,000.00 when he stopped payment
because the construction of his townhouse unit slackened. He discovered later
on that this was due to the foreclosure. Consequently, [respondent] instituted a
case with the Office of Appeals, Adjudication and Legal Affairs (OAALA) of the
Housing and Land Use Regulatory Board (HLURB) on 29 January 1991
entitled Arturo Marquez vs. Transamerican Sales, et al docketed as HLRB
Case No. REM-012991-4712 to compel TSE to complete the construction of the
townhouse and to prevent the enforceability of the extra-judicial foreclosure
made by petitioner FEBTC and to have the mortgage between TSE and
petitioner FEBTC declared invalid, said mortgage having been entered into by
the parties in violation of section 18 of P.D. 957. The OAALA ruled in favor of
the respondent via a Decision dated 11 November 1991, the case was decided
in favor of the respondent and was affirmed by the CA. Hence, this Petition.
ISSUE: Whether or not the mortgage contract void insofar as third persons are
concerned.
HELD: No mortgage on any unit or lot shall be made by the owner or developer
without prior written approval of the Authority. Such approval shall not be
granted unless it is shown that the proceeds of the mortgage loan shall be used
for the development of the condominium or subdivision project and effective
measures have been provided to ensure such utilization. The loan value of
each lot or unit covered by the mortgage shall be determined and the buyer
thereof, if any, shall be notified before the release of the loan. The buyer may,
at his option, pay his installment for the lot or unit directly to the mortgagee
who shall apply the payments to the corresponding mortgage indebtedness
secured by the particular lot or unit being paid for, with a view to enabling said
buyer to obtain title over the lot or unit promptly after full payment thereof.
Petitioner cannot claim to be a mortgagee in good faith. Indeed it was
negligent, as found by the Office of the President and by the CA. Petitioner
should not have relied only on the representation of the mortgagor that the
latter had secured all requisite permits and licenses from the government
agencies concerned. The former should have required the submission of
certified true copies of those documents and verified their authenticity through
its own independent effort.
Having been negligent in finding out what respondents rights were over
the lot, petitioner must be deemed to possess constructive knowledge of those
rights.
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Prisma Construction v. Menchavez

Prisma Construction & Development Corp. and Rogelio S. Pantaleon,
petitioners, versus Arthur F. Menchavez, respondent.
Brion, J.:
FACTS: On December 8, 1993, Pantaleon, the President and Chairman of the

Board of PRISMA, obtained a P1,000,000.00 loan from the respondent, with a
monthly interest of P40,000.00 payable for six months, or a total obligation of
P1,240,000.00 to be paid within six (6) months, under a stipulated schedule of
payments.
As of January 4, 1997, the petitioners had already paid a total of
P1,108,772.00. However, the respondent found that the petitioners still had
an outstanding balance of P1,364,151.00 as of January 4, 1997, to which it
applied a 4% monthly interest. Thus, on August 28, 1997, the respondent filed
a complaint for sum of money with the RTC to enforce the unpaid balance, plus
4% monthly interest, P30,000.00 in attorneys fees, P1,000.00 per court
appearance and costs of suit.
In their Answer dated October 6, 1998, the petitioners admitted the loan
of P1,240,000.00, but denied the stipulation on the 4% monthly interest,
arguing that the interest was not provided in the promissory note. Pantaleon
also denied that he made himself personally liable and that he made
representations that the loan would be repaid within six (6) months.
The RTC rendered a Decision on October 27, 2000 finding that the
respondent issued a check for P1,000,000.00 in favor of the petitioners for a
loan that would earn an interest of 4% or P40,000.00 per month, or a total of
P240,000.00 for a 6-month period. It noted that the petitioners made several
payments amounting to P1,228,772.00, but they were still indebted to the
respondent for P3,526,117.00 as of February 11, 1999 after considering the 4%
monthly interest. Thus, the RTC ordered the petitioners to jointly and severally
pay the respondent the amount of P3,526,117.00 plus 4% per month interest
from February 11, 1999 until fully paid.
The petitioners elevated the case to the CA insisting that there was no
express stipulation on the 4% monthly interest. CA modified the RTC Decision
by imposing a 12% per annum interest, computed from the filing of the
complaint until finality of judgment, and thereafter, 12% from finality until
fully paid. After the CA's denial of their motion for reconsideration, the
petitioners filed the present petition for review on certiorari.
ISSUE: Whether the parties agreed to the 4% monthly interest on the loan. If
so, does the rate of interest apply to the 6-month payment period only or until
full payment of the loan.
HELD: The petition is meritorious. Interest due should be stipulated in writing;

otherwise, 12% per annum. Obligations arising from contracts have the force
of law between the contracting parties and should be complied with in good
faith. When the terms of a contract are clear and leave no doubt as to the
intention of the contracting parties, the literal meaning of its stipulations
governs. In such cases, courts have no authority to alter the contract by
construction or to make a new contract for the parties; a court's duty is
confined to the interpretation of the contract the parties made for themselves
without regard to its wisdom or folly, as the court cannot supply material
stipulations or read into the contract words the contract does not contain. It is
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only when the contract is vague and ambiguous that courts are permitted to
resort to the interpretation of its terms to determine the parties intent.
In the present case, the respondent issued a check for P1,000,000.00. In
turn, Pantaleon, in his personal capacity and as authorized by the Board,
executed the promissory note quoted above. Thus, the P1,000,000.00 loan
shall be payable within six (6) months, or from January 8, 1994 up to June 8,
1994. During this period, the loan shall earn an interest of P40,000.00 per
month, for a total obligation of P1,240,000.00 for the six-month period. We
note that this agreed sum can be computed at 4% interest per month, but no
such rate of interest was stipulated in the promissory note; rather a fixed sum
equivalent to this rate was agreed upon.
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.
Macalalag v. People
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Theresa Macalalag, petitioner, versus People of the Philippines,

respondent.
(G.R. No. 164358, December 20, 2006, First Division)
Chico-Nazario, J.:
FACTS: On two separate occasions, particularly on 30 July 1995 and

16October 1995, petitioner Theresa Macalalag obtained loans from
GraceEstrella (Estrella), each in the amount of P100,000.00, each bearing
aninterest of 10% per month. Macalalag consistently paid the interests.Finding
the interest rates so burdensome, Macalalag requested Estrellafor a reduction
of the same to which the latter agreed. On 16 April 1996and 1 May 1996,
Macalalag executed Acknowledgment/Affirmation Receipts promising to pay
Estrella the face value of the loans in the totalamount of P200,000.00 within
two months from the date of its executionplus 6% interest per month for each
loan. Under the twoAcknowledgment/Affirmation Receipts, she further
obligated herself topay for the two (2) loans the total sum of P100,000.00 as
liquidateddamages and attorney's fees in the total sum of P40,000.00 as
stipulatedby the parties the moment she breaches the terms and
conditionsthereof.As security for the payment of the aforesaid loans, Macalalag
issuedtwo Philippine National Bank (PNB) Checks on 30 June 1996, each in
theamount of P100,000.00, in favor of Estrella. However, the said checkswere
dishonored for the reason that the account against which the samewas drawn
was already closed. Estrella sent a notice of dishonor anddemand to make good
the said checks to Macalalag, but the latter failedto do so. Hence, Estrella filed
two criminal complaints for Violation of Batas Pambansa Blg. 22 before the
Municipal Trial Court in Cities (MTCC)of Bacolod City.The MTCC found the
accused Theresa Macalalag guiltybeyond reasonable doubt of the crime
charged and is likewise ordered topay as civil indemnity the total amount of
P200,000.00 with interest at thelegal rate from the time of the filing of the
informations until the amountis fully paid; less whatever amount was thus far
paid and validly deductedfrom the principal sum originally claimed. On
appealed, the Court of Appeals, affirmed the RTC and the MTCC decisions with
modification tothe effect that accused was convicted only of one (1) count of
Violation of Batas Pambansa Blg. 22.
ISSUE: Whether petitioner`s payments over and above the value of thesaid
checks would free her from criminal liability.
HELD: The Court argued that, Even if we agree with petitioner Macalalagthat
the interests on her loans should not be imputed to the face value of the
checks she issued, petitioner Macalalag is still liable for Violation of Batas
Pambansa Blg. 22. Petitioner Macalalag herself declares that beforethe
institution of the two cases against her, she has made a total paymentof
P156,000.00; Applying this amount to the first check (No. C-889835), what will
be left is P56,000.00, an amount insufficient to cover herobligation with respect
to the second check. As stated above, whenEstrella presented the checks for
payment; the same were dishonored onthe ground that they were drawn
against a closed account. Despite noticeof dishonor, petitioner Macalalag failed
to pay the full face value of thesecond check issued.Only a full payment of the
face value of the second check at the time of its presentment or during the five-
day grace period15 could haveexonerated her from criminal liability. A contrary
interpretation woulddefeat the purpose of Batas Pambansa Blg. 22, that of
safeguarding theinterest of the banking system and the legitimate public
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checking accountuser,16 as the drawer could very well have himself exonerated
by themere expediency of paying a minimal fraction of the face value of
thecheck. Hence, the Petition is denied.
Tan v. Court of Appeals
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Antonio Tan, petitioner, versus Court of Appelas and the Cultural Center
of the Philippines, respondents.
(367 SCRA 571 or GR NO. 116285, October 19, 2001, 2nd Division)
De Leon, Jr., J.:
FACTS: On May 14, 1978, petitioner Antonio Tan obtained two loans in the
totalamount of four million pesos from respondent Cultural Center of the
Philippines (CCP), evidenced by 2 promissory notes with maturity dates on May
14, 1979 and July 6, 1979, respectively. Petitioner defaulted but later he had
the loansrestructured by respondent CCP. Petitioner accordingly executed a
promissorynote on August 31, 1979 in the amount of P3,411,421.32 payable in
five (5)installments. Petitioner however, failed to pay any of the supposed
installmentsand again offered another mode of paying restructured loan which
respondentCCP refused to consent.On May 30, 1984, respondent wrote
petitioner demanding the fullpayment, within ten (10) days, from receipt of the
letter, of the lattersrestructured loan which as of April 30, 1984 amounted to
P6, 088,735. OnAugust 29, 1984, respondent CCP filed with the RTC of Manila
a complaint for acollection of a sum of money. Eventually, petitioner was
ordered to pay saidamount, with 25% thereof as attorneys fees and P500,
000.00 as exemplarydamages. On appeal, the Court of Appeals, reduced the
attorneys fees to 5%of the principal amount to be collected from petitioner and
deleted theexemplary damages.Still unsatisfied with the decision, petitioner
seeks for the deletion of theattorneys fees and the reduction of the penalties.
ISSUE: Whether or not interests and penalties may be both awarded.
HELD: YES. Article 1226 of the New Civil Code provides that in obligations with
apenal clause, the penalty shall substitute the indemnity for damages and
thepayment of interests in case of non-compliance, if there is no stipulation to
thecontrary. Nevertheless, damages shall be paid if the obligor refuses to pay
thepenalty or is guilty of fraud in the fulfillment of the obligation. The penalty
maybe enforced only when it is demandable in accordance with the
provisions.In the case at bar, the promissory note expressly provides for
theimposition of both interest and penalties in case of default on the part of
thepetitioner in the payment of the subject restructured loan. Since the said
stipulation has the force of law between the parties and does not appear to be
inequitable or unjust, it must be respected.
Eastern Shipping v. Court of Appeals
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Eastern Shipping Lines Inc., petitioner, versus Hon. Court of Appeals and
Mercantile Insurance Company, Inc., respondents.
(G.R. No. 97412, July 12, 1994, En Banc)
Vitug, J.:
FACTS: On December 4, 1981, two fiber drums of riboflavin were shippedfrom

Yokohama, Japan for delivery vessel `SS EASTERN COMET' owned
bydefendant Eastern Shipping Lines under Bill of Lading No. YMA-8
(Theshipment was insured under plaintiff's Marine Insurance Policy
No.81/01177 for P36,382,466.38.Upon arrival of the shipment in Manila on
December 12, 1981, itwas discharged unto the custody of defendant Metro Port
Services, Inc. The latter excepted to one drum, said to be in bad order, which
damagewas unknown to plaintiff. On January 7, 1982 defendant Allied
Brokerage Corporation received the shipment from defendant Metro Port
Service, Inc., one drum opened and without. On January 8 and 14, 1982,
defendant Allied Brokerage Corporation made deliveries of the shipment to
theconsignees' warehouse. The latter excepted to one drum which
containedspillages, while the rest of the contents was adulterated/fake Plaintiff
contended that due to the losses/damage sustained by said drum,
theconsignee suffered losses totaling P19,032.95, due to the fault
andnegligence of defendants. Claims were presented against defendants
whofailed and refused to pay the same "As a consequence of the
lossessustained, plaintiff was compelled to pay the consignee P19,032.95
underthe aforestated marine insurance policy, so that it became subrogated
toall the rights of action of said consignee against defendants.
ISSUE: a.)Whether the payment of legal interest on an award for loss ordamage
is to be computed from the time the complaint is filed or form thedate the
decision appealed from is rendered; and b)Whether theapplicable rate of
interest is twelve percent or six percent.
HELD: When an obligation, regardless of its source, i.e., law, contracts, quasi-
contracts, delicts or quasi-delicts is breached, the contravenor canbe held
liable for damages. With regard particularly to an award of interest in the
concept of actual and compensatory damages, the rate of interest, as well as
the accrual thereof, is imposed, as follows: When the obligation is breached,
and it consists in the payment of asum of money, i.e., a loan or forbearance of
money, the interest dueshould be that which may have been stipulated in
writing. Furthermore, the interest due shall itself earn legal interest from the
time it is judiciallydemanded. In the absence of stipulation, the rate of interest
shall be 12%per annum to be computed from default, i.e., from judicial or
extrajudicialdemand under and subject to the provisions of Article 1169 23 of
the CivilCode.2. When a obligation, not constituting a loan or forbearance of
money, isbreached, an interest on the amount of damages awarded may
beimposed at the discretion of the court at the rate of 6% per annum.
Nointerest, however, shall be adjudged on unliquidated claims or
damagesexcept when or until the demand can be established with
reasonablecertainty. Accordingly, where the demand is established with
reasonablecertainty, the interest shall begin to run from the time the claim is
made judicially or extrajudicially (Art. 1169, Civil Code) but when such
certaintycannot be so reasonably established at the time the demand is made,
theinterest shall begin to run only from the date of the judgment of the courtis
made (at which time the quantification of damages may be deemed tohave been
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reasonably ascertained).3. When the judgment of the court awarding a sum of

money becomesfinal and executory, the rate of legal interest, whether the case
falls underparagraph 1 or paragraph 2, above, shall be 12% per annum from
suchfinality until its satisfaction, this interim period being deemed to be
bythen an equivalent to a forbearance of credit.
PCI vs Ng Shueng Ngor
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Equitable PCI Bank, Aimee Yu and Bejan Lionel Apas, Petitioners,

versus Ng Shueng Ngor doing business under the name and style "KEN
MARKETING," Ken Appliance Division, Inc. and Benjamin E.
Go, Respondents.
CORONA, J:
FACTS: On October 7, 2001, respondents Ng Shueng Ngor (Ngor) and Benjamin Go

(Go) filed an action for amendment and/or reformation of documents and contracts
against Equitable Bank and its employees. They claimed that they were induced by the
bank to avail of its peso and dollar credit facilities by offering low interests so they
accepted and signed Equitable Banks proposal. They alleged that they were unaware
that the documents contained escalation clauses granting Equitable Bank authority to
increase interest without their consent. These were rebutted by the bank.
The Regional Trial Court ordered the use of the 1996 dollar exchange rate in
computing respondents dollar-denominated loans. The Court of Appeals granted the
banks application for injunction but the properties were sold to public auction.
ISSUE: Whether or not there was an extraordinary deflation.
HELD: No. There was no extraordinary deflation.
Extraordinary inflation exists when there is an unusual decrease in the

purchasing power of currency and such decrease could not be reasonably foreseen or
was beyond the contemplation of the parties at the time of the obligation. Deflation is
an inverse situation.
Despite the devaluation of the peso, Bangko Sentral ng Pilipinas never declared
a situation of extraordinary inflation. Respondents should pay their dollar
denominated loans at the exchange rate fixed by the Bangko Sentral on the date of
maturity.
Petition granted.
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NSBC v. PNB
New Sampaguita Builders Construction, Inc (NSBCI) and Spouses Eduardo R. Dee
and Arcelita M. Dee, Petitioners versus Philippine National Bank, Respondents.
PANGANIBAN, J:
FACTS: On February 11, 1989, Board Resolution No. 05, Series of 1989 was approved
by Petitioner New Sampaguita Builders Construction, Inc (NSBCI) authorizing the
company to apply for or secure a commercial loan with the Philippine National Bank
(PNB), under such terms agreed by the Bank and the NSBCI, using or mortgaging the
real estate properties registered in the name of its President and Chairman of the
Board Petitioner Eduardo R. Dee as collateral; and authorizing petitioner-spouses to
secure the loan and to sign any and all documents which may be required by PNB,
and that petitioner-spouses shall act as sureties or co-obligors who shall be jointly
and severally liable with NSBCI for the payment of any obligations. Later on, Petitioner
NSBCI failed to comply with its obligations under the promissory notes.
On June 18, 1991, NSBCI sent a letter to the Branch Manager of the PNB
Dagupan Branch requesting for a 90-day extension for the payment of interests.
Petitioner Eduardo Dee later tendered four post-dated checks. Upon presentment,
however, the checks were dishonored by the drawee bank. PNB wrote the petitioner
informing him that unless the dishonored checks were made good, PNB shall refer the
matter to its legal counsel for legal action. Petitioners nevertheless failed to pay their
loan obligations within the time frame given them and as a result, PNB filed with the
Provincial Sheriff of Pangasinan at Lingayen a Petition for Sale. The sheriff foreclosed
the real estate mortgage and sold at public auction the mortgaged properties of
petitioner-spouses, with respondent PNB being declared the highest bidder for the
amount of P10,334,000.00. PNB informed Petitioner NSBCI that the proceeds of the
sale conducted on February 26, 1992 were not sufficient to cover its total claim
amounting to P12,506,476.43 and thus demanded from the latter the deficiency of
P2,172,476.43 plus interest and other charges until the amount was fully paid.
Petitioners refused to pay the above deficiency claim which compelled PNB to institute
the instant complaint for the collection of its deficiency claim.
ISSUE: Whether or not the escalation clause is valid.
HELD: Yes. The escalation clause is valid.
Although escalation clauses are valid in maintaining fiscal stability and

retaining the value of money on long-term contracts, giving respondent an unbridled
right to adjust the interest independently and upwardly would completely take away
from petitioners the right to assent to an important modification in their agreement
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and would also negate the element of mutuality in their contracts. The clause cited
earlier made the fulfillment of the contracts dependent exclusively upon the
uncontrolled will of respondent and was therefore void. Besides, the pro forma
promissory notes have the character of a contract dadhsion, where the parties do
not bargain on equal footing, the weaker partys the debtors participation being
reduced to the alternative to take it or leave it.
Polotan v. Court of Appeals
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Rodelo G. Polotan, Sr., Petitioner, versus HON. Court Of Appeals (Eleventh

Division), Regional Trial Court in Makati City (Branch 132), and Security
Diners International Corporation, Respondents.
ROMERO, J:
FACTS: Private respondent Security Diners International Corporation (Diners Club), a

credit card company, extends credit accommodations to its cardholders for the
purchase of goods and other services from member establishments. Said goods and
services are reimbursed later on by cardholders upon proper billing. Petitioner Rodelo
G. Polotan, Sr. applied for membership and credit accommodations with Diners Club
in October 1985. The application form contained terms and conditions governing the
use and availment of the Diners Club card, among which is for the cardholder to pay
all charges made through the use of said card within the period indicated in the
statement of account and any remaining unpaid balance to earn 3% interest per
annum plus prime rate of Security Bank & Trust Company. Notably, in the
application form submitted by petitioner, Ofricano Canlas obligated himself to pay
jointly and severally with petitioner the latters obligation to private respondent.
Upon acceptance of his application, petitioner was issued Diners Club card
No. 3651-212766-3005. As of May 8, 1987, petitioner incurred credit charges plus
appropriate interest and service charges in the aggregate amount of P33,819.84 which
had become due and demandable. Demands for payment made against petitioner
proved futile. Hence, private respondent filed a complaint for Collection of Sum of
Money against petitioner before the lower court.
ISSUE: Whether or not the subject contract is one-sided in that the contract allows for
the escalation of interests, but does not provide for a downward adjustment of the
same in violation of Central Bank Circular 905.
HELD: No. The subject contract is not one-sided that it allows for the escalation of
interest.
The claim is without basis. First, by signing the contract, petitioner and private
respondent agreed upon the rate as stipulated in the subject contract. Such is now
allowed by C.B. Circular 905. Second, petitioner failed to cite any particular provision
of said Circular which was allegedly violated by the subject contract.
Be that as it may, there is nothing inherently wrong with escalation clauses.

Escalation clauses are valid stipulations in commercial contracts to maintain fiscal
stability and to retain the value of money in long term contracts.
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Escalation clauses are not basically wrong or legally objectionable as long as

they are not solely potestative but based on reasonable and valid grounds. Obviously,
the fluctuation in the market rates is beyond the control of private respondent.
Petition denied.
NSBC v. PNB
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New Sampaguita Builders Construction, Inc (NSBCI) and Spouses Eduardo R. Dee
and Arcelita M. Dee, Petitioners versus Philippine National Bank, Respondents.
PANGANIBAN, J:
FACTS: On February 11, 1989, Board Resolution No. 05, Series of 1989 was approved
by Petitioner New Sampaguita Builders Construction, Inc (NSBCI) authorizing the
company to apply for or secure a commercial loan with the Philippine National Bank
(PNB), under such terms agreed by the Bank and the NSBCI, using or mortgaging the
real estate properties registered in the name of its President and Chairman of the
Board Petitioner Eduardo R. Dee as collateral; and authorizing petitioner-spouses to
secure the loan and to sign any and all documents which may be required by PNB,
and that petitioner-spouses shall act as sureties or co-obligors who shall be jointly
and severally liable with NSBCI for the payment of any obligations. Later on, Petitioner
NSBCI failed to comply with its obligations under the promissory notes.
On June 18, 1991, NSBCI sent a letter to the Branch Manager of the PNB
Dagupan Branch requesting for a 90-day extension for the payment of interests.
Petitioner Eduardo Dee later tendered four post-dated checks. Upon presentment,
however, the checks were dishonored by the drawee bank. PNB wrote the petitioner
informing him that unless the dishonored checks were made good, PNB shall refer the
matter to its legal counsel for legal action. Petitioners nevertheless failed to pay their
loan obligations within the time frame given them and as a result, PNB filed with the
Provincial Sheriff of Pangasinan at Lingayen a Petition for Sale. The sheriff foreclosed
the real estate mortgage and sold at public auction the mortgaged properties of
petitioner-spouses, with respondent PNB being declared the highest bidder for the
amount of P10,334,000.00. PNB informed Petitioner NSBCI that the proceeds of the
sale conducted on February 26, 1992 were not sufficient to cover its total claim
amounting to P12,506,476.43 and thus demanded from the latter the deficiency of
P2,172,476.43 plus interest and other charges until the amount was fully paid.
Petitioners refused to pay the above deficiency claim which compelled PNB to institute
the instant complaint for the collection of its deficiency claim.
ISSUE: Whether or not the escalation clause is valid.
HELD: Yes. The escalation clause is valid.
Although escalation clauses are valid in maintaining fiscal stability and

retaining the value of money on long-term contracts, giving respondent an unbridled
right to adjust the interest independently and upwardly would completely take away
from petitioners the right to assent to an important modification in their agreement
and would also negate the element of mutuality in their contracts. The clause cited
earlier made the fulfillment of the contracts dependent exclusively upon the
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uncontrolled will of respondent and was therefore void. Besides, the pro forma
promissory notes have the character of a contract dadhsion, where the parties do
not bargain on equal footing, the weaker partys the debtors participation being
reduced to the alternative to take it or leave it.
Estores v. Sps Supangan
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Hermojina Estores, Petitioner, versus Spouses Arturo and Laura

Supangan, Respondents.
DEL CASTILLO, J:
FACTS: On October 3, 1993, petitioner Hermojina Estores and respondent-spouses

Arturo and Laura Supangan entered into a Conditional Deed of Sale 5 whereby
petitioner offered to sell, and respondent-spouses offered to buy, a parcel of land
located at Naic, Cavite for the sum of P4.7 million.
After almost seven years from the time of the execution of the contract and
notwithstanding payment of P3.5 million on the part of respondent-spouses, petitioner
still failed to comply with her obligation as expressly provided in the contract. Hence,
in a letter, respondent-spouses demanded the return of the amount of P3.5 million
within 15 days from receipt of the letter. When petitioner still failed to return the
amount despite demand, respondent-spouses were constrained to file a complaint for
sum of money before the Regional Trial Court of Malabon against herein petitioner as
well as Roberto U. Arias (Arias) who allegedly acted as petitioners agent.
On May 7, 2004, the Regional Trial Court rendered its decision finding
respondent-spouses entitled to interest but only at the rate of 6% per annum and not
12% as prayed by them. It also found respondent-spouses entitled to attorneys fees as
they were compelled to litigate to protect their interest. Aggrieved, petitioner and Arias
filed their notice of appeal in the Court of Appeals but it affirmed the lower courts
ISSUE: Whether or not the imposition of interest and attorneys fees is proper.
HELD: Yes. The imposition of interest and attorneys fees is proper.
The Court sustained the HELD of both the Regional Trial Court and the
Court of appeals that it is proper to impose interest notwithstanding the
absence of stipulation in the contract. Article 2210 of the Civil Code expressly
provides that "interest may, in the discretion of the court, be allowed upon
damages awarded for breach of contract."
In this case, there is no question that petitioner is legally obligated to

return the P3.5 million because of her failure to fulfill the obligation under the
Conditional Deed of Sale, despite demand. She has in fact admitted that the
conditions were not fulfilled and that she was willing to return the full amount
of P3.5 million but has not actually done so. Petitioner enjoyed the use of the
money from the time it was given to her until now. Thus, she is already in
default of her obligation from the date of demand.
The interest at the rate of 12% is applicable in the instant case.
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Petition denied.
Hung v. BPI Card
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Benny Y. Hung, Petitioner, versus Bank of the Philippine Islands Card

Finance Corp., Respondent.
PEREZ, J:
FACTS: Guess? Footwear and BPI Express Card Corporation entered into two
merchant agreements, whereby Guess? Footwear agreed to honor validly issued Bank
of the Philippine Islands (BPI) Express Credit Cards presented by cardholders in the
purchase of its goods and services. In the first agreement, petitioner Benny Hung
signed as owner and manager of Guess? Footwear. He signed the second agreement as
president of Guess? Footwear which he also referred to as B & R Sportswear
Enterprises. Respondent BPI mistakenly credited, through 352 checks, P3,480,427.23
to the account of Guess? Footwear. When informed of the overpayments, petitioner
Benny Hung transferred P963,604.03 from the bank account of B & R Sportswear
Enterprises to BPIs account as partial payment. In a letter, BPI demanded the balance
payment amounting to P2,516,826.68, but Guess? Footwear failed to pay. BPI filed a
collection suit before the Regional Trial Court of Makati City.
On 24 June 2002, the trial court rendered a decision ordering defendant

B & R Sportswear Distributor, Inc., to pay the plaintiff (BPI) P2,516,826.68
with 6% interest from 4 October 1999. The trial Court ruled that the
overpayment ofP3,480,427.43 was proven by checks credited to the account of
Guess? Footwear and the P963,604.03 partial payment proved that defendant
ought to pay P2,516,826.68 more. The Court of Appeals affirmed the order and
dismissed petitioners appeal.
ISSUE: Whether or not the obligation arose from a loan or forbearance of money.
HELD: No. The obligation did not arise from a loan or forbearance of money.
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. Since this case before us involves an obligation not arising from a
loan or forbearance of money, the applicable interest rate is 6% per annum. The legal
interest rate of 6% shall be computed from 4 October 1999, the date the letter of
demand was presumably received by the defendant. And in accordance with the
aforesaid decision, the rate of 12% per annum shall be charged on the total amount
outstanding, from the time the judgment becomes final and executory until its
satisfaction.
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Petition denied.
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Jose Marques and Maxilite Technologies, Inc., Petitioners, versus Far East
Bank and Trust Company, Far East Bank Insurance Brokers, Inc., and
Makati Insurance Company, Respondents.
CARPIO, J:
FACTS: Maxilite Technologies, Inc. (Maxilite) is a domestic corporation engaged

in the importation and trading of equipment for energy-efficiency systems. Jose
N. Marques (Marques) is the President and controlling stockholder of Maxilite.
Far East Bank and Trust Co. (FEBTC) is a local bank which handled the
financing and related requirements of Marques and Maxilite. Far East Bank
Insurance Brokers, Inc. (FEBIBI) is a local insurance brokerage corporation
while Makati Insurance Company is a local insurance company. Both
companies are subsidiaries of FEBTC. Maxilite and Marques entered into a
trust receipt transaction with FEBTC, in the sum of US$80,765.00, for the
shipment of various high-technology equipment from the United States, with
the merchandise serving as collateral. Maxilite paid the premiums for these
policies through debit arrangement. FEBTC would debit Maxilites account for
the premium payments, as reflected in statements of accounts sent by FEBTC
to Maxilite. Finding that Maxilite failed to pay the insurance premium but later
one settled the matter.
On March 9, 1995, a fire gutted the Aboitiz Sea Transport Building along
M.J. Cuenco Avenue, Cebu City, where Maxilites office and warehouse were
located. As a result, Maxilite suffered losses amounting to at least P2.1 million,
which Maxilite claimed against the fire insurance policy with Makati Insurance
Company. Makati Insurance Company denied the fire loss claim on the ground
of non-payment of premium. Maxilite and Marques sued FEBTC, FEBIBI, and
Makati Insurance Company. The Regional trial Court and Court of Appeals
ruled in favor of Maxilite.
ISSUE: Whether or not FEBTC, FEBIBI and Makati Insurance Company are
jointly and severally liable to pay respondents the full coverage of the subject
insurance policy.
HELD: No. FEBTC, FEBIBI and Makati Insurance Company are not jointly and
severally liable to pay respondents the full coverage of the subject insurance
policy.
FEBTC is solely liable for the payment of the face value of the insurance
policy and the monetary awards stated in the Court of Appeals decision.
Suffice it to state that FEBTC, FEBIBI, and Makati Insurance Company are
independent and separate juridical entities, even if FEBIBI and Makati
Insurance Company are subsidiaries of FEBTC. Absent any showing of its
illegitimate or illegal functions, a subsidiarys separate existence shall be
respected, and the liability of the parent corporation as well as the subsidiary
shall be confined to those arising in their respective business. Besides, the
records are bereft of any evidence warranting the piercing of corporate veil in
order to treat FEBTC, FEBIBI, and Makati Insurance Company as a single
entity. Likewise, there is no evidence showing FEBIBIs and Makati Insurance
Companys negligence as regards the non-payment of the insurance premium.
Decision affirmed with modifications.
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Land Bank v. Ong

Land Bank of the Philippines, Petitioner, versus Alfredo Ong, Respondent.
VELASCO, JR., J:
FACTS: Spouses Johnson and Evangeline Sy secured a loan from Land Bank Legazpi
City in the amount of PhP16 million. Under the loan agreement, PhP 6 million of the
loan would be short-term and would mature on February 28, 1997, while the balance
of PhP 10 million would be payable in seven years. The Notice of Loan Approval dated
February 22, 1996 contained an acceleration clause wherein any default in payment of
amortizations or other charges would accelerate the maturity of the loan.
Subsequently, however, the Spouses Sy found they could no longer pay their loan.
They sold three of their mortgaged parcels of land for PhP 150,000 to Angelina Gloria
Ong, Evangelines mother, under a Deed of Sale with Assumption of Mortgage.
Evangelines father, petitioner Alfredo Ong, later went to Land Bank to inform it
about the sale and assumption of mortgage. Atty. Edna Hingco, the Legazpi City Land
Bank Branch Head, told Alfredo and his counsel Atty. Ireneo de Lumen that there was
nothing wrong with the agreement with the Spouses Sy but provided them with
requirements for the assumption of mortgage. They were also told that Alfredo should
pay part of the principal which was computed at PhP 750,000 and to update due or
accrued interests on the promissory notes so that Atty. Hingco could easily approve
the assumption of mortgage. Two weeks later, Alfredo issued a check for PhP 750,000
and personally gave it to Atty. Hingco. He also submitted the other documents
required by Land Bank, such as financial statements. Atty. Hingco then informed
Alfredo that the certificate of title of the Spouses Sy would be transferred in his name
but this never materialized. No notice of transfer was sent to him. On December 12,
1997, Alfredo initiated an action for recovery of sum of money with damages against
Land Bank as Alfredos payment was not returned by Land Bank. The Regional Trial
Court held that that under the principle of equity and justice, the bank should return
the amount Alfredo had paid with interest at 12% per annum computed from the filing
of the complaint. The trial court further held that Alfredo was entitled to attorneys
fees and litigation expenses for being compelled to litigate. The Court of Appeals
affirmed the trial courts decision.
ISSUE: Whether or not Alfredos payment to Land Bank constitutes as forbearance of

money.
HELD: No. Alfredos payment to Land Bank does not constitute as forbearance of
money.
Forbearance of money refers to the contractual obligation of the lender or

creditor to desist for a fixed period from requiring the borrower or debtor to repay the
loan or debt then due and for which 12% per annum is imposed as interest in the
absence of a stipulated rate. In the instant case, Alfredos conditional payment to Land
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Bank does not constitute forbearance of money, since there was no agreement or
obligation for Alfredo to pay Land Bank the amount of PhP 750,000, and the obligation
of Land Bank to return what Alfredo has conditionally paid is still in dispute and has
not yet been determined. Thus, it cannot be said that Land Banks alleged obligation
has become a forbearance of money.
Appeal denied.
RGM Industries v. United Pacific
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RGM INDUSTRIES, INC., Petitioner, versus United Pacific Capital

REYES, J:
FACTS: The respondent is a domestic corporation engaged in the business of

lending and financing. The loan amount was sourced from individual funders
on the basis of a direct-match facility for which a series of promissory notes
were issued by the petitioner for the payment of the loan. The petitioner failed
to satisfy the said promissory notes as they fell due and the loan had to be
assumed in full by the respondent which thereby stepped into the shoes of the
individual funders. Consequently, the petitioner issued in favor of the
respondent a consolidated promissory note in the principal amount
of P27,852,075.98 for a term of fourteen days and maturing on April 28, 1998.
The stipulated interest on the consolidated promissory note was 32% per
annum. In case of default, a penalty charge was imposed in an amount
equivalent to 8% per month of the outstanding amount due and unpaid
computed from the date of default. The petitioner failed to satisfy the
consolidated promissory note, the principal balance of P27,668,167.87.
The respondent thus sent demand letters to the petitioner but the latter failed
to pay. The respondent filed the herein complaint for collection of sum of
money against the petitioner. The Regional Trial Court ruled in favor of the
respondent while the Court of Appeals affirmed the trials courts decision but
modified the interest rates and penalty charges imposed.
ISSUE: Whether or not the modified interest rates and penalty charges decreed by the
CA are exorbitant.
HELD: No. The modified interest rates and penalty charges decreed by the Court of
Appeals are not exorbitant.
As found by the Court of Appeals, the payments made by the petitioner before
the complaint was filed were duly deducted from the outstanding balance; while the
payments made during the pendency of the case were applied to the due and
outstanding penalty charges.
The Supreme Court affirms the interest rate decreed by the Court of Appeals.
Stipulated interest rates are illegal if they are unconscionable and courts are allowed
to temper interest rates when necessary. In exercising this vested power to determine
what is iniquitous and unconscionable, the Court must consider the circumstances of
each case. What may be iniquitous and unconscionable in one case, may be just in
another.
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Prisma Industries v. United Pacific

Prisma Construction & Development Corporation and Rogelio S.
Pantaleon, Petitioners, versus Arthur F. Menchavez, Respondent.
BRION, J:
FACTS: On December 8, 1993, Pantaleon, the President and Chairman of the Board of
PRISMA, obtained a P1,000,000.00 loan from the respondent, with a monthly interest
of P40,000.00 payable for six months, or a total obligation of P1,240,000.00 to be paid
within six months. To secure the payment of the loan, Pantaleon issued a promissory
note. As of January 4, 1997, the petitioners had already paid a total of P1,108,772.00.
However, the respondent found that the petitioners still had an outstanding balance of
P1,364,151.00 as of January 4, 1997, to which it applied a 4% monthly interest. Thus,
on August 28, 1997, the respondent filed a complaint for sum of money with the
Regional Trial Court to enforce the unpaid balance, plus 4% monthly interest,
P30,000.00 in attorneys fees, P1,000.00 per court appearance and costs of suit.
ISSUE: Whether the parties agreed to the 4% monthly interest on the loan.
HELD: No. The parties did not agree to the 4% monthly interest on the loan.
In the present case, the respondent issued a check for P1,000,000.00. In turn,
Pantaleon, in his personal capacity and as authorized by the Board, executed the
promissory note quoted above. Thus, the P1,000,000.00 loan shall be payable within
six (6) months, or from January 8, 1994 up to June 8, 1994. During this period, the
loan shall earn an interest of P40,000.00 per month, for a total obligation of
P1,240,000.00 for the six-month period. We note that this agreed sum can be
computed at 4% interest per month, but no such rate of interest was stipulated in the
promissory note; rather a fixed sum equivalent to this rate was agreed upon.
Article 1956 of the Civil Code specifically mandates that "no interest shall be
due unless it has been expressly stipulated in writing." Under this provision, the
payment of interest in loans or forbearance of money is allowed only if: (1) there was
an express stipulation for the payment of interest; and (2) the agreement for the
payment of interest was reduced in writing. The concurrence of the two conditions is
required for the payment of interest at a stipulated rate. Thus, we held in Tan v.
Valdehueza and Ching v. Nicdao that collection of interest without any stipulation in
writing is prohibited by law.
In the absence of stipulation, the rate of interest shall be 12% per annum to be
computed from default, from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.
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Decision reversed and set aside.
Maceda, Jr. v. DBO
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Bonifacio Sanz Maceda, Jr., Petitioner, versus Development Bank of the

Philippines, Respondent.
CARPIO, J:
FACTS: On July 28, 1976 plaintiff Bonifacio Maceda, Jr. (Maceda) obtained a loan
from the defendant Development Bank of the Philippines (DBP) in the amount of P7.3
million to finance the expansion of the Old Grand Hotel in Leyte. Upon approval of
said loan, plaintiff Maceda executed a promissory note and a mortgage of real estate.
Project cost of the New Gran Hotel wasP10.5M. DBP fixed a debt-equity ratio of 70%-
30%, corresponding to DBP and Macedas respective infusion in the hotel project.
Macedas equity infusion was P2.93M, or 30% of P10.5M. The DBP Governor at that
time, Recio Garcia, in-charge of loans for hotels, allegedly imposed the condition that
DBP would choose the building contractor, namely, Moreman Builders Co. (Moreman).
The contractor would directly receive the loan releases from DBP, after verification by
DBP of the construction progress. The period of loan availment was 360 days from
date of initial release of the loan. Similarly, suppliers of equipment and furnishings for
the hotel were also to be paid directly by DBP.
Maceda filed a complaint for rescission of the building contract with

damages against the contractor Moreman, before the then Manila Court of First
Instance (CFI). In its decision, the CFI rescinded the building contract,
suspended the period of availment, allowed Maceda to himself take over
construction, and directed DBP to release to Maceda the sum of P1.003M. The
DBP was further ordered to give plaintiff Maceda such other amounts still
pending release. Moreman filed an appeal which was subsequently dismissed
in 1990 by the Supreme Court. In the meantime, Maceda also instituted the
case for Specific Performance with Damages against defendant DBP before the
Makati Regional Trial Court.
ISSUE: Whether or not the damages awarded in favor of Maceda are unreasonable and
excessive.
HELD: No. The damages awarded in favor of Maceda are not unreasonable and
excessive.
Under Article 1191 of the Civil Code, the aggrieved party has a choice
between specific performance and rescission with damages in either case.
However, we have ruled that if specific performance becomes impractical or
impossible, the court may order rescission with damages to the injured party.
After the lapse of more than 30 years, it is now impossible to implement the
loan agreement as it was written, considering the absence of evidence as to the
rising costs of construction, as well as the obvious changes in market
conditions on the viability of the operations of the hotel. We deem it equitable
and practicable to rescind the obligation of DBP to deliver the balance of the
loan proceeds to Maceda. In exchange, we order DBP to pay Maceda the value
of Macedas cash equity of P6,153,398.05 by way of actual damages, plus the
applicable interest rate. The trial court also awarded the following
amounts: P700,000 as moral damages; P150,000 as exemplary
damages; P500,000 as temperate damages; and P100,000 as attorneys fees.
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We find these amounts appropriate under the circumstances, and not

unconscionable or exorbitant.
Petition granted.
PNB v. Encina
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Philippine Nantional Bank, Petitioner, versus Spouses Wilfredo and Estela

Encina, Respondents.
TINGA, J:
FACTS: On September 13, 1995, as additional capital for their metal craft business,
plaintiffs-appellants ENCINA obtained a P500,000.00 loan with defendant-appellee
PNB, secured by a promissory note, a real estate mortgage, and a credit agreement, on
parcels of land located at Occidental Mindoro. Thereafter, plaintiffs-appellants
obtained an additional P200,000.00 and P400,000.00 loan from PNB. It subsequently
granted a P1,250,000.00 all purpose credit facility to plaintiffs-appellants ENCINA.
On the maturity date of the P1,250,000.00 loan obligation, plaintiffs-

appellants ENCINA failed to pay, prompting PNB to demand from plaintiffs-
appellants in letters. Demands from PNB were left unheeded, prompting PNB to
file a petition for sale of the mortgaged properties with defendant-appellee Ex-
Officio Sheriff of the Regional Trial Court of San Jose, Occidental Mindoro. The
foreclosure sale was conducted on November 15, 1999 with PNB as the highest
bidder. On November 15, 2001, a contract of lease was executed between
defendant-appellee PNB and plaintiffs-appellants ENCINA over the subject
properties, pursuant to a request made by ENCINA that they be allowed by
defendant-appellee PNB to lease the subject premises for a monthly rental
ofP7,500.00.
Finally, on July 18, 2002, plaintiffs-appellants ENCINA sued defendants-

appellees in an action for the nullification of foreclosure sale and damages, that
the extra-judicial foreclosure sale of their properties was null and void; that for
being in violation of the Usury Law, the loan contracts and all accessory
contracts pertaining thereto were null and void.
ISSUE: Whether or not there is a violation of the Usury Law?
HELD: No. There is not Violation of the Usury Law.
As borne by the records, the Encina spouses never challenged the validity of
their loan and the accessory contracts with PNB on the ground that they violated the
principle of mutuality of contracts in view of the provision therein that the interest rate
shall be set by management. Their only contention concerning the interest rate was
that the charges imposed by the bank violated the Usury Law. This was the essence of
the second cause of action alleged in the complaint.
It should be definitively ruled in this regard that the Usury Law had been
rendered legally ineffective by Resolution No. 224 dated December 3, 1982 of the
Monetary Board of the Central Bank, and later by Central Bank Circular No. 905
which took effect on January 1, 1983 and removed the ceiling on interest rates for
secured and unsecured loans regardless of maturity. The effect of these circulars is to
allow the parties to agree on any interest that may be charged on a loan. The virtual
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repeal of the Usury Law is within the range of judicial notice which courts are bound
to take into account. After all, the fundamental tenet is that the law is deemed part of
the contract. Thus, the trial court was correct in HELD that the second cause of action
was without basis.
Imperial v. Jaucian
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Restituta M. Imperial, Petitioner, versus Alex A. Jaucian, Respondent.

PANGANIBAN, J:
FACTS: The present controversy arose from a case for collection of money, filed by
Alex A. Jaucian against Restituta Imperial, on October 26, 1989. The complaint
alleges, inter alia, that defendant obtained from plaintiff six separate loans for which
the former executed in favor of the latter six separate promissory notes and issued
several checks as guarantee for payment. When the said loans became overdue and
unpaid, especially when the defendants checks were dishonored, plaintiff made
repeated oral and written demands for payment.
The loans were covered by six separate promissory notes executed by

defendant. The face value of each promissory notes is bigger than the amount
released to defendant because said face value already included the interest from date
of note to date of maturity. Said promissory notes indicate the interest of 16% per
month, date of issue, due date, the corresponding guarantee checks issued by
defendant, penalties and attorneys fees. The trial courts clear and detailed
computation of petitioners outstanding obligation to respondent was affirmed by the
Court of Appeals for being convincing and satisfactory. However, the Court held that
without judicial inquiry, it was improper for the Regional Trial Court to rule on the
constitutionality of Section 1, Central Bank Circular No. 905, Series of 1982.
ISSUE: Whether or not the penalties charged per month is in the guise of hidden
interest.
HELD: Yes. The penalties charged per month was in the guise of hidden interest.
Article 1229 of the Civil Code states that the judge shall equitably reduce the
penalty when the principal obligation has been partly or irregularly complied with by
the debtor. Even if there has been no performance, the penalty may also be reduced
by the courts if it is iniquitous or unconscionable. In exercising this power to
determine what is iniquitous and unconscionable, courts must consider the
circumstances of each case. What may be iniquitous and unconscionable in one may
be totally just and equitable in another. In the present case, iniquitous and
unconscionable was the parties stipulated penalty charge of 5 percent per month or
60 percent per annum, in addition to regular interests and attorneys fees. Also, there
was partial performance by petitioner when she remitted P116,540 as partial payment
of her principal obligation of P320,000. Under the circumstances, the trial court was
justified in reducing the stipulated penalty charge to the more equitable rate of 14
percent per annum. Nevertheless, it appears that petitioners failure to comply fully
with her obligation was not motivated by ill will or malice. The twenty-nine partial
payments she made were a manifestation of her good faith. Again, Article 1229 of the
Civil Code specifically empowers the judge to reduce the civil penalty equitably, when
the principal obligation has been partly or irregularly complied with. Upon this
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premise, we hold that the RTCs reduction of attorneys fees -- from 25 percent to 10
percent of the total amount due and payable -- is reasonable.
Petition denied.
Pabugais v. Sahijwani
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TEDDY G. PABUGAIS, Petitioner versus DAVE P. SAHIJWANI, Respondent.

YNARES-SANTIAGO, J:
FACTS: On December 3, 1993, petitioner Teddy G. Pabugais, in consideration of the

amount of P15,487,500.00, agreed to sell to respondent Dave P. Sahijwani a lot
containing 1,239 square meters located at Jacaranda Street, North Forbes Park,
Makati, Metro Manila. Respondent paid petitioner the amount of P600,000.00 as
option/reservation fee and the balance of P14,887,500.00 to be paid within 60 days
from the execution of the contract. The parties further agreed that failure on the part
of respondent to pay the balance of the purchase price entitles petitioner to forfeit the
P600,000.00 option/reservation fee; while non-delivery by the latter of the necessary
documents obliges him to return to respondent the said option/reservation fee with
interest at 18% per annum.
Petitioner failed to deliver the required documents. In compliance with their

agreement, he returned to respondent the latters P600,000.00 option/reservation fee
by way of Far East Bank & Trust Company Check, which was, however, it was
dishonored. On August 11, 1994, petitioner wrote a letter to respondent saying that he
is consigning the amount tendered with the Regional Trial Court of Makati City. On
August 15, 1994, petitioner filed a complaint for consignation.
On November 29, 1996, the trial court rendered a decision declaring the
consignation invalid for failure to prove that petitioner tendered payment to
respondent and that the latter refused to receive the same. Petitioner appealed the
decision to the Court of Appeals. Petitioners motion to withdraw the amount
consigned was denied by the Court of Appeals and the decision of the trial court was
affirmed. On a motion for reconsideration, the Court of Appeals declared the
consignation as valid in an Amended Decision dated January 16, 2003. It held that
the validity of the consignation had the effect of extinguishing petitioners obligation to
return the option/reservation fee to respondent. Hence, petitioner can no longer
withdraw the same.
ISSUE: Whether or not the amount consigned with the trial court can be withdrawn by
the petitioner.
HELD: No. The amount consigned with the trial court can no longer be withdrawn by
petitioner.
Respondents prayer in his answer that the amount consigned be awarded to

him is equivalent to an acceptance of the consignation, which has the effect of
extinguishing petitioners obligation.
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Moreover, petitioner failed to manifest his intention to comply with the

Agreement And Undertaking by delivering the necessary documents and the lot
subject of the sale to respondent in exchange for the amount deposited. Withdrawal of
the money consigned would enrich petitioner and unjustly prejudice respondent.
Petition denied.
Lo v. Court of Appeals
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Antonio Lo, Petitioner, versus The Hon. Court of Appeals and National
Onions Growers Cooperative Marketing Association,
Inc., Respondents.
CORONA, J:
FACTS: Antonio Lo acquired two parcels of land with an office constructed thereon in
an auction sale on November 9, 1995 from the Land Bank of the Philippines. At
variance, private respondent National Onion Growers Cooperative Marketing
Association, Inc. was the occupant of the parcels of land under a subsisting contract
of lease with Land Bank. The lease was valid until December 31, 1995.
Upon the expiration of the lease contract, Lo demanded that private respondent
vacate the leased premises and surrender its possession to him. The agricultural
cooperative refused on the ground of a contest against petitioners acquisition of the
parcels of land in an action for annulment of sale, redemption and damages.
On February 23, 1996, petitioner filed an action for ejectment and subsequently
asked for imposition of the contractually stipulated penalty of P5, 000 per day of delay
in surrendering the possession of the property. Thereafter, the trial court decided the
case in favor of petitioner. Private respondent was ordered to vacate the leased
premises. On appeal to the Regional Trial Court, the trial courts decision was affirmed
in toto. The agricultural cooperative then elevated the case to the Court of Appeals
that affirmed the lower courts decision but modified that the penalty to be imposed
must be reduced to P1, 000. Unsatisfied with the decision of the court, Lo filed the
instant petition for review.
ISSUE: Whether or not the Court of Appeals has the authority to reduce the penalty
awarded by the trial court, the same having been stipulated by the parties in their
contract of lease.
HELD: Yes. The Court of Appeals has the authority to reduce the penalty awarded by
the trial court, the same having been stipulated by the parties in their contract of
lease.
While courts are not at liberty to ignore the freedom of the parties to agree on
such terms and conditions as they see fit as long as they are not contrary to law,
morals, good customs, public order or public policy, courts may equitably reduce a
stipulated penalty if it is iniquitous or unconscionable, or if the principal obligation
has been partly or irregularly complied with. This power of the courts is explicitly
sanctioned by Article 1229 of the Civil Code which provides that the judge shall
equitably reduce the penalty when the principal obligation has been partly or
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irregularly complied with by the debtor. Even if there has been no performance, the
penalty may also be reduced by courts if it is iniquitous or unconscionable.
Petition denied.
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Ligutan v. Court of Appeals
Tolomeo Ligutan and Leonidas De La Llana, Petitioners, v. Hon. Court of

Appeals and Security Bank and Trust Company, Respondents.
VITUG, J:
FACTS: Petitioners Tolomeo Ligutan and Leonidas dela Llana obtained on May 11,
1981 a loan in the amount of P120, 000.00 from respondent Security Bank and Trust
Company. Petitioners executed a promissory note binding themselves, jointly and
severally, to pay the sum borrowed with an interest of 15.189% per annum upon
maturity and to pay a penalty of 5% every month on the outstanding principal and
interest in case of default. In addition, petitioners agreed to pay 10% of the total
amount due by way of attorneys fees if the matter were indorsed to a lawyer for
collection or if a suit were instituted to enforce payment. The obligation matured on
September 8, 1981; the bank, however, granted an extension but only until December
29, 1981.
When petitioners defaulted on their obligation, the bank filed a complaint for
recovery of the due amount. On September 5, 1988, the trial court ruled in favor of the
bank. It ordered the petitioners to pay, jointly and severally, the sum of P114, 416.00
with interest thereon at the rate of 15.189% per annum, 2% service charge and 5% per
month penalty charge, commencing on May 20, 1982 until fully paid.
The Court of Appeals affirmed it but deleted the 2% service charge. Not fully
satisfied with the decision, both parties moved for reconsideration. Petitioners prayed
for the reduction of the 5% penalty for being unconscionable. The bank, on the other
hand, asked that the payment of interest and penalty be commenced not from the date
of filing of complaint but from the time of default as so stipulated in the contract of the
parties.
ISSUE: Whether or not the penalty is reasonable and not iniquitous.
HELD: No. The penalty is not unreasonable.
The Court held that the question of whether a penalty is reasonable or

iniquitous can be partly subjective and partly objective. Its resolution would depend
on such factors as, but not necessarily confide to, the type, extent and purpose of the
penalty, the nature of the obligation, the mode of breach and its consequences, the
supervening realities, the standing and relationship of the parties, and the like, the
application of which, by and large, is addressed to the sound discretion of the court.
The stipulated penalty might even be deleted such as when there has been substantial
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performance in good faith by the obligor, when the penalty clause itself suffers from
fatal infirmity, and when exceptional circumstances so exist as to warrant it.
In the case at bar, given the circumstances, not to mention the repeated acts of
breach by petitioners of their contractual obligation, this Court sees no cogent ground
to HELD of the appellate court.
Petition denied.
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Pascual v. Ramos
Spouses Silvestre and Celia Pascual, Petitioners, v. Rodrigo V.
Ramos, Respondent.
DAVIDE, JR., C.J.:
FACTS: Ramos alleged that on June 3, 1987, for and in consideration of P150,000,
the Spouses Pascual executed in his favor a Deed of Absolute Sale with Right to
Repurchase over 2 parcels of land and the improvements thereon located in Bambang,
Bulacan, Bulacan. This document was annotated at the back of the title. The Pascuals
did not exercise their right to repurchase the property within the stipulated one-year
period; hence, Ramos prayed that the title or ownership over the subject parcels of
land and improvements thereon be consolidated in his favor.
In their Answer, the Pascuals admitted having signed the Deed of Absolute Sale
with Right to Repurchase for a consideration of P150, 000 but averred that what the
parties had actually agreed upon and entered into was a real estate mortgage. They
further alleged that there was no agreement limiting the period within which to
exercise the right to repurchase and that they had even overpaid Ramos. The trial
court found that the transaction between the parties was actually a loan in the
amount of P150, 000.00, the payment of which was secured by a mortgage of the
property. It also found that the Pascuals had made payments in the total sum of
P344,000.00, and that with interest at 7% per annum, they had overpaid the loan by
P141,500.00. Accordingly, the trial court ruled in favor of the defendants.
ISSUE: Whether or not the stipulated interest is valid.
HELD: Yes. The stipulated interest is valid.
After the trial court sustained petitioners claim that their agreement with
Ramos was actually a loan with real estate mortgage, the Pascuals should not be
allowed to turn their back on the stipulation in that agreement to pay interest at the
rate of 7% per month. The Pascuals should accept not only the favorable aspect of the
courts declaration that the document is actually an equitable mortgage but also the
necessary consequence of such declaration, that is, that interest on the loan as
stipulated by the parties in that same document should be paid. Besides, when
Ramos moved for a reconsideration of the decision of the trial court pointing out that
the interest rate to be used should be 7% per month, the Pascuals never lifted a finger
to oppose the claim. It was only in their motion for the reconsideration of the decision
of the Court of Appeals that the Pascuals made an issue of the interest rate and
prayed for its reduction to 12% per annum.
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The interest rate of 7% per month was voluntarily agreed upon by Ramos and
the Pascuals. There is nothing from the records and, in fact, there is no allegation
showing that petitioners were victims of fraud when they entered into the agreement
with Ramos. Neither is there a showing that in their contractual relations with
Ramos, the Pascuals were at a disadvantage on account of their moral dependence,
ignorance, mental weakness, tender age or other handicap, which would entitle them
to the vigilant protection of the courts as mandated by Article 24 of the Civil Code.
Petition denied.
First Metro Investment v. Este Del Sol
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First Metro Investment Corporation, Petitioner, versus Este Del Sol

Mountain Reserve, Inc., Valentin S. Daez, Jr., Manuel Q. Salientes, Ma.
Rocio A. De Vega, Alexander G. Asuncion, Alberto M. Ladores, Vicente M.
De Vera, Jr., and Felipe B. Sese, Respondents.
DE LEON, JR., J:
FACTS: Petitioner First Metro granted respondent Este Del Sol a loan of
P7,385,500.00 to finance the construction and development of respondents Mountain
Reserve. The loan was payable on 36 consecutive monthly amortizations and the
interest on the loan was egged at 16% per annum based on the diminishing balance.
In case of deposit, a 20% one time penalty on the amount due and such mount shall
bear interest at the highest rate permitted by law plus liquidated damages at the rate
of 2% per month and attorneys fees equivalent to 25% of the sum sought to be
received. In accordance with the terms of the loan agreement, respondents Este Del
Sol executed several documents as security for payment. Moreover, it executed as
provided for by the loan agreement, an Underwriting Agreement whereby Forts Metro
shall underwrite on a best efforts basis the public offering of one hundred twenty
thousand common shares of Este Del Sol. In addition, the Underwriting Agreement
provided that for supervising the public offering of the shares, Este Del Sol shall pay
First Metro an annual supervision fee of P 200,000.00 per annum and a consultancy
fee of P 332,500.00 per annum for a period of four (4) consecutive years.
Simultaneous with the execution of and in accordance with the terms of the
Underwriting Agreement, a consultancy Agreement was also executed whereby Este
Del Sol engaged the services of petitioner First Metro for a fee as consultant to render
general consultancy services.
Since Este Del Sol failed to meet the schedule of repayment it appeared to have
incurred a total obligation of P 12,679,630.98. Thus First Metro caused the extra
judicial foreclosure of the real estate mortgage where First Metro was the highest
bidder. However, there remained a balance of P 6,863,297.73 Hence, First Metro
instituted an instant collection suit against respondent, including those other
respondents who have securities of the loan of respondent Este Del Sol by virtue of
their continuing surety agreements.
ISSUE: Whether or not the underwriting and consultancy agreements are mere
subterfuges to camouflage the usurious interest charged by First Metro.
HELD: No. The underwriting and consultancy agreements are not mere subterfuges to
camouflage the usurious interest charged by First Metro.
The form of the contract entered into between the petitioner and respondent is
not conclusive for the law will not permit a usurious loan to hide itself behind a legal
form. An apparently legal loan is usurious when it is intended that additional
compensation for the loan providing for payment by the borrower for the leaders
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services which of little value or which are not in fact to be rendered. Here, the loan
Underwriting and Consultancy Agreement are not separate and independent
transactions rather they were executed and delivered contemporaneous by and
executed by First Metro as essential conditions for the grant of the loan. However, in
usurious loans, the entire obligation does not become void because the unpaid
principal debt still stands and remains.
Petition denied.
Domel Trading v. Court of Appeals
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Domel Trading Corporation, Petitioner, versus Honorable Court of Appeals

and NDC-NACIDA Raw Materials, Corporation, Respondents,
(G.R. No. 84813 September 22, 1999, 1st Division)
YNARES-SANTIAGO, J:
FACTS: On June 3, 1981, private respondent NDC-NACIDA Raw Materials

Corporation (NNRMC) ordered from petitioner Domel Trading Corporation (DOMEL)
22,000 bundles of buri midribs at P16.00 per bundle to be delivered within 30 working
days from the date of the opening of a letter of credit. On June 4, 1981, private
respondent again ordered 300,000 pieces of rattan poles at P9.65 per piece for a total
price of P2,895,000.00, also to be delivered within 60 days from the date of the
opening of a letter of credit. The specifications and provisions of both transactions,
which served as their agreement, were printed in two separate purchase orders.
In accordance with their agreement, NNRMC, on July 9, 1981, opened a letter

of credit with Philippine National Bank (PNB) in favor of DOMEL in the amount of
P1,997,000.00 to cover its order for 206,943 pieces of rattan poles. On July 13, 1981,
NNRMC opened another letter of credit in favor of DOMEL in the amount of
P1,236,000.00 to cover the price of 93,057 pieces of rattan poles and 22,000 bundles
of buri midribs.
In violation of their agreement, DOMEL failed to deliver the buri midribs and
rattan poles within the stipulated period. Thus, on September 23, 1981, DOMEL and
NNRMC agreed to restructure the latters purchase orders in a Memorandum of
Agreement. Under the agreement, NNRMC extended the expiry date of its two letters
of credit to November 5, 1981. It also reduced the quantity of the rattan poles from
300,000 to only 100,000 pieces while the quantity of buri midribs remained at 22,000
bundles. Further, DOMEL undertook to deliver the goods on or before October 31,
1981. However, no deliveries were again made on the said date. Consequently,
demands were made by NNRMC on January 19, 1982 for the payment of damages,
which demands were ignored by DOMEL. Hence, NNRMC filed a complaint for
damages before the Regional Trial Court of Pasig. After trial, judgment was rendered
in favor of plaintiff and against defendant.
ISSUE: Whether or not the penalty clause is iniquitous and unconscionable.
HELD: Yes. The penalty clause us iniquitous and unconscionable.
The amount of P2,000.00 as penalty for every day of delay is excessive and
unconscionable. In determining whether a penalty clause is iniquitous and
unconscionable, a court may very well take into account the actual damages
sustained by a creditor who was compelled to sue the defaulting debtor, which actual
damages would include the interest and penalties the creditor may have had to pay on
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its own from its funding source. In this case, NNRMC was only able to prove that it
incurred the amounts of P5,995.83 as opening charges on the two Letters of Credit
and an additional P1,911.85 as amendment charges on the same Letters of Credit.
Other than that, NNRMC failed to prove it had suffered actual damages resulting from
the non-delivery of the specified buri midribs and rattan poles. In fact, what it
allegedly suffered are what it calls Foregone Interest Income and Foregone Profit
from the two Letters of Credit. Such could not be considered as actual damages.
Decision affirmed in toto.
Medel v. Court of Appeals
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Leticia Y. Medel, Dr. Rafael Medel and Servando Franco, Petitioners,

versus Court of Appeals, Spouses Veronica R. Gonzales and Danilo G.
Gonzales, Jr. doing lending business under the trade name and style
"GONZALES CREDIT ENTERPRISES", Respondents.
(G.R. No. 131622, November 27, 1998, 3rd Division)
PARDO, J:
FACTS: The Medel spouses obtained several loans of which they were unable to pay in
full. On July 23, 1986, Servando and Leticia with the latter's husband, Dr. Rafael
Medel, consolidated all their previous unpaid loans totaling P440,000.00, and sought
from Veronica another loan in the amount of P60,000.00, bringing their indebtedness
to a total of P500,000.00, payable on August 23, 1986. They executed a promissory
note indicating payment for the balance.
On maturity of the loan, the borrowers failed to pay the indebtedness of

P500,000.00, plus interests and penalties, evidenced by the above-quoted
promissory note. On February 20, 1990, Veronica R. Gonzales, joined by her
husband Danilo G. Gonzales, filed with the Regional Trial Court of Bulacan,
Branch 16, at Malolos, Bulacan, a complaint for collection of the full amount of
the loan including interests and other charges.
ISSUE: Whether or not the stipulated interest rate is excessive, iniquitous and
unconscionable.
HELD: Yes, the stipulated rate of interest per month is excessive, iniquitous
and unconscionable.
Basically, the issue revolves on the validity of the interest rate stipulated
upon. Thus, the question presented is whether or not the stipulated rate of
interest at 5.5% per month on the loan in the sum of P500,000.00, that
plaintiffs extended to the defendants is usurious. In other words, is the Usury
Law still effective, or has it been repealed by Central Bank Circular No. 905,
adopted on December 22, 1982, pursuant to its powers under P.D. No. 116, as
amended by P.D. No. 1684?
We agree with petitioners that the stipulated rate of interest at 5.5% per
month on the P500,000.00 loan is excessive, iniquitous, unconscionable and
exorbitant. However, we cannot consider the rate "usurious" because this
Court has consistently held that Circular No. 905 of the Central Bank, adopted
on December 22, 1982, has expressly removed the interest ceilings prescribed
by the Usury Law and that the Usury Law is now "legally inexistent".
Nevertheless, we find the interest at 5.5% per month, or 66% per annum,
stipulated upon by the parties in the promissory note iniquitous or
unconscionable, and, hence, contrary to morals ("contra bonos mores"), if not
against the law. The stipulation is void. The courts shall reduce equitably
liquidated damages, whether intended as an indemnity or a penalty if they are
iniquitous or unconscionable. Consequently, the Court of Appeals erred in
upholding the stipulation of the parties. Rather, we agree with the trial court
that, under the circumstances, interest at 12% per annum, and an additional
1% a month penalty charge as liquidated damages may be more reasonable.
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Reformina v. Tomol
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Pacita F. Reformina and Heirs of Francisco Reformina, Petitioners, versus

The Honorable Valeriano P. Tomol, Jr., as Judge of the Court of First
Instance, Branch XI, Cebu City, Shell Refining Company (PHILS.), Inc.,
and Michael, Inc., Respondents.
(G.R. No. L-59096 October 11, 1985, En Banc)
CUEVAS, J:
FACTS: An action for Recovery of Damages for Injury to Person and Loss of Property
was filed. The Regional Trial Court rendered judgment in favor of the plaintiffs and
against the defendants, ordering the latter to pay jointly and severally the former. On
appeal, the decision was modified. In the computation of the legal interest decreed
sought to be executed, petitioners claimed that it should be at 12% per annum
invoking Central bank Circular. The respondents, however, insist that said legal
interest should be at the rate of 6% per annum pursuant to Article 2209 of the New
Civil code
ISSUE: Whether or not the judgment covers all kinds of monetary judgment.
HELD: No. The judgment covers all kinds of monetary judgment.
The judgments spoken of and referred to are Judgments in litigations involving

loans or forbearance of any money, goods or credits. Any other kind of monetary
judgment which has nothing to do with, nor involving loans or forbearance of any
money, goods or credits does not fall within the coverage of the said law for it is not
within the ambit of the authority granted to the Central Bank. The Monetary Board
may not tread on forbidden grounds. It cannot rewrite other laws. That function is
vested solely with the legislative authority. It is axiomatic in legal hermeneutics that
statutes should be construed as a whole and not as a series of disconnected articles
and phrases. In the absence of a clear contrary intention, words and phrases in
statutes should not be interpreted in isolation from one another. A word or phrase in a
statute is always used in association with other words or phrases and its meaning
may thus be modified or restricted by the latter.
Petition dismissed.
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Lo v. KJH
Sonny Lo, Petitioner, versus KJS Eco-Formwork System Phil.,
Inc., Respondent.
YNARES-SANTIAGO, J:
FACTS: KJS Eco-Formwork System Phil. (KJS) is engaged in the sale of steel
scaffoldings while Sonny Lo (Lo) is a building contractor. On February 22, 1990,
petitioner ordered scaffolding equipments from respondent worth P540,425.80. He
paid a down payment in the amount of P150,000. The balance was made payable in
10 monthly installments. Respondent delivered the equipments. Petitioner was able to
pay the first two monthly installments. His business suffered financial difficulties and
he was unable to settle his obligations despite demands.
On October 11, 1990, the parties executed a deed of assignment whereby

petitioner assigned to respondent his receivables from Jonero Realty. However, Jonero
refused to honor the deed of assignment because it claimed that petitioner was
indebted to it. Petitioner refused to pay claiming that his obligation had been
extinguished when they executed the deed of assignment. The Regional Trial Court
dismissed the complaint on the ground that the assignment of credit extinguished the
obligation. Court of Appeals reversed the decision and ordered Lo to pay the plaintiff
KJS with legal interests of 6% per annum until fully paid.
ISSUE: Whether or not the deed of assignment extinguished the obligation.
HELD: Yes, the deed of assignment extinguished the obligation.
An assignment of credit, by virtue of which the owner of the credit, the

assignor, by a legal cause, such as sale, dacion en pago, exchange or donation and
without the consent of the debtor transfers his credit and accessory rights to another,
the assignee, who acquires the power to enforce it against the debtor. Petitioner, as
assignor, is bound to warrant the existence and legality of the credit at the time of the
sale or assignment. When Jonero claimed that it was no longer indebted to petitioner
since the latter had also as unpaid obligation to it, it essentially meant that its
obligation to the petitioner has been extinguished by compensation. Petitioner was
found in breach of his obligation under the Deed of assignment.
Decision affirmed with modification.
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PNB v. Court of Appeals

Philippine National Bank, Petitioner, versus Court of Appeals and Loreto
Tan, Respondents.
ROMERO, J:
FACTS: Private respondent Loreto Tan (Tan) is the owner of a parcel of land abutting
the national highway. Expropriation proceedings were instituted by the government.
Tan filed a motion requesting the issuance of an order for the release to him of the
expropriation price of P32,480.00. Philippine National Bank (PNB) was required by the
trial court to release to Tan the amount and deposited it by the government.
Petitioner, through its assistant manager Tagamolila, issued a check and

delivered the same to Sonia Gonzaga on the strength of the Special Power of Attorney,
without Tans knowledge, consent and authority. The Regional Trial Court ordered
petitioner and Tagamolila to pay private respondent jointly and severally the amount
worth legal interests, damages and attorneys fees. The Court of Appeals affirmed the
decision.
ISSUE: Whether or not the Special Power of Attorney authorized Sonia Gonzaga to
receive payment intended for private respondent.
HELD: No. The Special Power of Attorney did not authorized Sonia Gonzaga to receive
payment intended for private respondent.
Contrary to petitioner's contention that all that is needed to be proved is the

existence of the SPA, it is also necessary for evidence to be presented regarding the
nature and extent of the alleged powers and authority granted to Sonia Gonzaga; more
specifically, to determine whether the document indeed authorized her to receive
payment intended for private respondent. However, no such evidence was ever
presented.
There is no question that no payment had ever been made to private respondent
as to the check was never delivered to him. Under Article 1233 of the Civil Code, a
debt shall not be understood to have been paid unless the thing or service in which
the obligation consists has been completely delivered or rendered, as the case may be.
The burden of proof of sad payment lies with the debtor. The decision of the Court of
Appeals is affirmed with the modification that the award by the Regional Trial Court of
P5,000 as attorneys fees is reinstated.
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Cathay Pacific Airways v. Vazquez

Cathay Pacific Airways, LTD., Petitioner, versus Spouses Daniel Vazquez
and Maria Luisa Madrigal Vazquez, Respondents.
DAVIDE, JR., C.J.:
FACTS: Cathay is a common carrier engaged in transporting passenger and goods by

air. Spouses Vazquez are Gold Card Members of its Marc Polo Club. The Spouses, with
two friends and a maid went to Hong Kong for business. Spouses have the Business
class boarding passes and economy class for the maid. When boarding, the ground
stewardess declared a seat change from Business Class to First Class for the Vazquez.
The Spouses refused but after insistence by the stewardess, the spouses gave in.
When they arrived in Manila, spouses demanded to be indemnified in the amount of
one million for the humiliation and embarrassment caused by the employee.
The Regional Trial Court ruled for the Vazquez ordering Cathay Airways to pay
the spouses, stating further that there was a breach of contract not because of
overbooking but because the latter pushed through with the upgrading despite
objections of the spouses.
ISSUE: Whether or not an involuntary upgrading of an airlines accommodation at no

extra costs caused a breach of contract of carriage.
HELD: Yes. An involuntary upgrading of an airlines accommodation at no extra costs

caused a breach of contract of carriage.
The Vazquezes are aware of the privileges, but such privileges may be waived.
Spouses should have been consulted first. It should not have been imposed on them
over their vehement objection. By insisting of the upgrade, Pacific Airways breached its
contract of carriage with the Vazquezes. Nominal damages are adjudicated in order
that the right of the plaintiff, which have been violated may be vindicated or
recognized and not for indemnifying the plaintiff for any loss suffered by him.
Petition is partly granted.
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Citibank v. Sabeniano
Citibank, N.A. (Formerly First National City Bank) and Investors Finance
Corporation, doing business under the name and style of FNCB
Finance, Petitioners, versus Modesta R. Sabeniano, Respondent.
CHICO-NAZARIO, J:
FACTS: Petitioner Citibank is a banking corporation duly authorized under the laws of
the United States of America to do commercial banking activities n the Philippines.
Sabeniano was a client of both Petitioners Citibank and First National City Bank
(FNCB) Finance. Respondent filed a complaint against petitioners claiming to have
substantial deposits, the proceeds of which were supposedly deposited automatically
and directly to respondents account with the petitioner Citibank and that allegedly
petitioner refused to despite repeated demands. Petitioner alleged that respondent
obtained several loans from the former and in default, Citibank exercised its right to
set-off respondents outstanding loans with her deposits and money.
The Regional Trial Court declared the act illegal, null and void and ordered the
petitioner to refund the amount plus interest, ordering Sabeniano, on the other hand
to pay Citibank her indebtedness. The Court of Appeals affirmed the decision entirely
in favor of the respondent.
ISSUE: Whether or not petitioner may exercise its right to set-off respondents loans
with her deposits and money in Citibank-Geneva.
HELD: No. The petitioner cannot exercise its right to set-off respondents loans with
her deposits and money in Citibank-Geneva.
The Court maintains its original position in the Decision that the off-
setting or compensation of respondents loans with Citibank-Manila using her
dollar accounts with Citibank-Geneva cannot be effected. The parties cannot be
considered principal creditor of the other. As for the dollar accounts,
respondent was the creditor and Citibank-Geneva was the debtor; and as for
the outstanding loans, petitioner Citibank, particularly Citibank-Manila, was
the creditor and respondent was the debtor. Since legal compensation was not
possible, petitioner Citibank could only use respondents dollar accounts with
Citibank-Geneva to liquidate her loans if she had expressly authorized it to do
so by contract.
Respondent cannot be deemed to have authorized the use of her dollar

deposits with Citibank-Geneva to liquidate her loans with petitioner Citibank
when she signed the promissory notes for her loans which all contained the
provision.
Motion denied.
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Telengton Bros. v. US Lines

Telengtan Brothers & Sons, Inc., Petitioner, versus United States Lines,
Inc. and the Court of Appelas, Respondents.
GARCIA, J:
FACTS: Petitioner Telengtan Brothers and Sons is a domestic corporation while United
States Lines is a foreign corporation engaged in overseas shipping. It was made
applicable that consignees who fail to take delivery of their containerized cargo within
the 10-day free period are liable to pay demurrage charges.
On June 22, 1981, United States Lines filed a suit against petitioner seeking
payment of demurrage charges plus interest and damages. Petitioner incurred
P94,000 which the latter refused to pay despite repeated demands. Petitioner
disclaims liability alleging that it has never entered into a contract nor signed an
agreement to be bound by it.
The Regional Trial Court ruled that petitioner is liable to respondent and all be
computed as of the date of payment in accordance with Article 1250 of the Civil Code.
The Court of Appeals affirmed the decision.
ISSUE: Whether the re-computation of the judgment award is in accordance with

HELD: No. The re-computation of the judgment award is not in accordance with
The Supreme Court found as erroneous the trial courts decision as affirmed by
the Court of Appeals. The Court holds that there has been no extraordinary inflation
within the meaning of Article 1250 of the Civil Code. Accordingly, there is no plausible
reason for ordering the payment of an obligation in an amount different from what has
been agreed upon because of the purported supervention of extraordinary inflation.
In other words, an agreement is needed for the effects of an extraordinary

inflation to be taken into account to alter the value of the currency at the time of the
establishment of the obligation which, as a rule, is always the determinative element,
to be varied by agreement that would find reason only in the supervention of
extraordinary inflation or deflation.
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C.F. Sharp v. Northwest Airlines

C.F. Sharp & Co., Inc., Petitioner, versus Northwest Airlines,
Inc., Respondent.
YNARES-SANTIAGO, J:
FACTS: On May 9, 1974, respondent Northwest Airlines, through its Japan

Branch, entered into an International Passenger Sales Agency Agreement with
petitioner, authorizing the latter to sell its air transport tickets. Petitioner failed
to remit the proceeds of the ticket sales, for which reason, respondent filed a
collection suit against petitioner before the Tokyo District Court which
rendered judgment on January 29, 1981, ordering petitioner to pay respondent
the amount of "83,158,195 Yen and damages for the delay at the rate of 6%
per annum from August 28, 1980 up to and until payment is completed."
Unable to execute the decision in Japan, respondent filed a case to

enforce said foreign judgment with the Regional Trial Court of Manila, Branch
54. However, the case was dismissed on the ground of failure of the Japanese
Court to acquire jurisdiction over the person of the petitioner. Respondent
appealed to the Court of Appeals, which affirmed the decision of the trial court.
Respondent filed a petition for review with the Supreme Court.
ISSUE: Whether or not the Court of Appeals applied the correct legal rate of interest to
which respondent is lawfully entitled.
HELD: No. The Court of Appeals did not apply the correct legal rate of interest to
which respondent is lawfully entitled.
In the case at bar, the Court of Appeals failure to apply the correct legal rate of
interest, to which respondent is lawfully entitled, amounts to a "plain error."
In Eastern Shipping Lines, Inc. v. Court of Appeals, it was held that absent any
stipulation, the legal rate of interest in obligations which consists in the payment of a
sum of money, as in the present case, is 12% per annum. As stated in the decision of
the Court, which is final and executory, petitioner is liable to pay respondent the
amount adjudged in the foreign judgment, with "interest thereon at the legal rate
12% per annum from the filing of the complaint therein on August 28, 1980 until the
said foreign judgment is fully satisfied." Since petitioner already made partial
payments, his obligation was reduced to 61,734,633 Yen.
Thus, petitioner should pay respondent the amount of 61,734,633 Yen plus
"damages for the delay at the rate of 6% per annum from August 28, 1980 up to and
until payment is completed," with interest thereon at the rate of 12% per annum from
the filing of the complaint on August 28, 1980, until fully satisfied.
Petition denied.
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Padilla v. Paredes
Albert R. Padilla, Petitioner, versus Spouses Floresco Paredes and Adelina
Paredes, and The Honorable Court of Appeals, Respondents.
QUISUMBING, J:
FACTS: On October 20, 1988, petitioner Albert R. Padilla and private

respondents Floresco and Adelina Paredes entered into a contract to
sell involving a parcel of land in San Juan, La Union. At that time, the land was
untitled although private respondents were paying taxes thereon. Under the
contract, petitioner undertook to secure title to the property in private
respondents' names. Of the P312,840.00 purchase price, petitioner was to pay
a down payment of P50,000.00 upon signing of the contract, and the balance
was to be paid within ten days from the issuance of a court order directing
issuance of a decree of registration for the property. On December 27, 1989,
the court ordered the issuance of a decree of land registration for the subject
property. Petitioner made several payments to private respondents, some even
before the court issued an order for the issuance of a decree of
registration. Still, petitioner failed to pay the full purchase price even after the
expiration of the period set. In a letter dated February 14, 1990, private
respondents, through counsel, demanded payment of the remaining balance,
with interest and attorney's fees, within five days from receipt of the letter. On
February 28, 1990, petitioner made a payment of P100,000.00 to private
respondents, still insufficient to cover the full purchase price. On May 14,
1990, petitioner instituted an action for specific performance against private
respondents, alleging that he had already substantially complied with his
obligation under the contract to sell.
After trial, the lower court ruled in favor of petitioner, saying that even if
petitioner indeed breached the contract to sell, it was only a casual and slight
breach that did not warrant rescission of the contract. The Court of Appeals,
however, reversed the HELD of the trial court and confirmed private
respondents' rescission of the contract to sell.
ISSUE: Whether or not the private respondents are entitled to rescind the contract to
sell the land to petitioner.
HELD: Yes. The private respondents are entitled to rescind the contract to sell the
land to petitioner.
The Supreme Court sustained the HELD of the Court of Appeals that private
respondent may validly rescind the contract to sell, however, the reason for this is not
that respondents have the power to rescind but because their obligation there under
did not arise. The Court of Appeals is correct in ordering the return to petitioner of the
amounts received from him by private respondents, on the precept that no one shall
be unjustly enriched himself at the expense of another.
Petition denied.
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Tibajia v. Court of Appeals

Norberto Tibajia, JR. and Carmen Tibajia, Petitioners, versus The
Honorable Court of Appeals and Eden Tan, Respondents.
PADILLA, J:
FACTS: A suit for collection of a sum of money was filed by Eden Tan against the
Norberto and Carmon Tibajia. A writ of attachment was issued by the trial court on 17
August 1987 and on 17 September 1987, the Deputy Sheriff filed a return stating that
a deposit made by the Tibajia spouses in the Regional Trial Court of Kalookan City in
the amount of P442,750.00 in another case, had been garnished by him. On 10 March
1988, the Regional Trial Court, Branch 151 of Pasig, Metro Manila rendered its
decision in favor of the plaintiff Eden Tan, ordering the Tibajia spouses to pay her an
amount in excess of Three Hundred P300,000.00. On appeal, the Court of Appeals
modified the decision by reducing the award of moral and exemplary damages. The
decision having become final, Eden Tan filed the corresponding motion for execution
and thereafter, the garnished funds which by then were on deposit with the cashier of
the Regional Trial Court of Pasig, Metro Manila, were levied upon.
On 14 December 1990, the Tibajia spouses delivered to Deputy Sheriff Eduardo

Bolima the total money judgment. Private respondent, Eden Tan, refused to accept the
payment made by the Tibajia spouses and instead insisted that the garnished funds
deposited with the cashier of the Regional Trial Court of Pasig, Metro Manila be
withdrawn to satisfy the judgment obligation. On 15 January 1991, defendant spouses
(petitioners) filed a motion to lift the writ of execution on the ground that the judgment
debt had already been paid. On 29 January 1991, the motion was denied by the trial
court on the ground that payment in cashier's check is not payment in legal tender
and that payment was made by a third party other than the defendant. A motion for
reconsideration was denied on 8 February 1991. Thereafter, the spouses Tibajia filed a
petition for certiorari, prohibition and injunction in the Court of Appeals. The appellate
court dismissed the petition on 24 April 1991 holding that payment by cashier's check
is not payment in legal tender as required by Republic Act No. 529. The motion for
reconsideration was denied on 27 May 1991.
ISSUE: Whether or not payment by means of check is considered payment in legal

tender.
HELD: No. The payment by means of check is considered payment in legal tender.
The HELD applies the statutory provisions which lay down the rule that a check
is not legal tender and that a creditor may validly refuse payment by check, whether it
be a managers check, cashiers or personal check. The decision of the Court of
Appeals is affirmed.
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Petition denied.
DBP v. Court of Appeals
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Development Bank of the Philippines and Privatization and Management

Office (formerly Asset Privatization Trust), Petitioners, versus Hon. Court
of Appeals, Philippine United Foundry and Machinery Corp. and Philippine
Iron Manufacturing Co., Inc., Respondents.
AZCUNA, J:
FACTS: In March 1968, Development Bank of the Philippines (DBP) granted to private
respondents an industrial loan in the amount of P2,500,000 P500,000 in cash and
P2,000,000 in DBP Progress Bank. It was evidenced by a promissory note and secured
by a mortgage executed by respondents over their present and future properties.
Another loan was granted by DBP in the form of a 5-year revolving guarantee to
P1,700,000.
In 1975, the outstanding accounts with DBP were restructured in view of

failure to pay. Amounting to P4,655,992.35 were consolidated into a single account.
On the other hand, all accrued interest and charges due amounting to P3,074,672.21
were denominated as Notes Taken for Interests and evidenced by a separate
promissory note. For failure to comply with its obligation, DBP initiated foreclosure
proceedings upon its computation that respondents loans were arrears by
P62,954,473.68. Respondents contended that the collection was unconscionable if not
unlawful or usurious. The Regional Trial Court, as affirmed by the Court of Appeals,
ruled in favor of the respondents.
ISSUE: Whether or not the prestation to collect by the DBP is unconscionable or

usurious.
HELD: Yes. The prestation to collect by the DBP is unconscionable and usurious.
Due to the variable factors mentioned above, it cannot be determined whether

DBP did in fact apply an interest rate higher than what is prescribed under the law. It
appears on the records, however, that DBP attempted to explain how it arrived at the
amount stated in the Statement of Account it submitted in support of its claim but
was not allowed by the trial court to do so citing the rule that the best evidence of the
same is the document itself. DBP should have been given the opportunity to explain its
entries in the Statement of Account in order to place the figures that were cited in the
proper context. Assuming the interest applied to the principal obligation did, in fact,
exceed 12%, in addition to the other penalties stipulated in the note, this should be
stricken out for being usurious.
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Vitarich vs. Losin

Vitarich Corporation, Petitioner, versus Chona Losin, Respondent.
MENDOZA, J:
FACTS: Respondent Chona Losin (Losin) was in the fastfood and catering services
business named Glamours Chicken House. Since 1993, Vitarich Corp (Vitarich),
particularly its Davao Branch, had been her supplier of poultry meat. In the months of
July to November 1996, Losins orders of dressed chicken and other meat products
allegedly amounted to P921,083.10. During this said period, Losins poultry meat
needs for her business were serviced by Rodrigo Directo (Directo) and Allan Rosa
(Rosa), both salesmen and authorized collectors of Vitarich, and Arnold Baybay
(Baybay), a supervisor of said corporation.
On August 24, 1996, Directos services were terminated by Vitarich without

Losins knowledge. He left without turning over some supporting invoices covering the
orders of Losin. Rosa and Baybay, on the other hand, resigned on November 30, 1996
and December 30, 1996, respectively. Just like Directo, they did not also turn over
pertinent invoices covering Losins account. On February 12, 1997, demand letters
were sent to Losin covering her alleged unpaid account amounting to P921,083.10. It
appears that Losin had issued three (3) checks amounting to P288,463.30 which were
dishonored either for reasons - Drawn Against Insufficient Funds (DAIF) or Stop
Payment.
On March 2, 1998, Vitarich filed a complaint for Sum of Money against Losin,
Directo, Rosa, and Baybay before the Regional Trial Court. The Regional Trial Court
rendered its decision in favor of Vitarich, however the Court of Appeals rendered the
assailed decision in favor of Losin.
ISSUE: Whether or not there is already payment on the part of Losin.
HELD: No. There was no payment on the part of Losin
As a general rule, one who pleads payment has the burden of proving it. The
burden rests on the debtor to prove payment, rather than on the creditor to prove non-
payment. The debtor has the burden of showing with legal certainty that the obligation
has been discharged by payment. True, the law requires in civil cases that the party
who alleges a fact has the burden of proving it. Section 1, Rule 131 of the Rules of
Court provides that the burden of proof is the duty of a party to prove the truth of his
claim or defense, or any fact in issue by the amount of evidence required by law. In
this case, however, the burden of proof is on Losin because she alleges an affirmative
defense, namely, payment. Losin failed to discharge that burden. After examination of
the evidence presented, this Court is of the opinion that Losin failed to present a single
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official receipt to prove payment. This is contrary to the well-settled rule that a receipt,
which is a written and signed acknowledgment that money and goods have been
delivered, is the best evidence of the fact of payment although not exclusive. All she
presented were copies of the list of checks allegedly issued to Vitarich through its
agent Director, a Statement of Payments Made to Vitarich, and apparently copies of
the pertinent history of her checking account with Rizal Commercial Banking
Corporation (RCBC).
Appeal granted.
Metrobank vs. Cabilzo
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Metropolitan Bank and Trust Company, Petitioners, versus Renato D.

Cabilzo, Respondent.
CHICO-NAZARIO, J:
FACTS: On November 12, 1994, Renato Cabilzo (Cabilzo) issued a Metrobank check,
payable to CASH and postdated on 24 November 1994 in the amount of P1, 000.00.
The check was drawn against Cabilzos Account with Metrobank Pasong Tamo Branch
and was paid by Cabilzo to a certain Mr. Marquez, as his sales commission.
Subsequently, the check was presented to Westmont Bank for payment. Westmont
Bank, in turn, indorsed the check to Metrobank for appropriate clearing. After the
entries thereon were examined, including the availability of funds and the authenticity
of the signature of the drawer, Metrobank cleared the check for encashment in
accordance with the Philippine Clearing House Corporation (PCHC) Rules. On
November 16, 1994, Cabilzos representative was at Metrobank Pasong Tamo Branch
to make some transaction when he was asked by bank personnel if Cabilzo had issued
a check in the amount of P91, 000.00 to which the former replied in the negative. On
the afternoon of the same date, Cabilzo himself called Metrobank to reiterate that he
did not issue a check in the amount of P91, 000.00 and requested that the questioned
check be returned to him for verification, to which Metrobank complied. Upon receipt
of the check, Cabilzo discovered that Metrobank Check which he issued in the amount
of P1, 000.00 was altered to P91, 000.00 and the date November 24 1994 was changed
to November 14,1994. Hence, Cabilzo demanded that Metrobank re-credit the amount
of P91, 000.00 to his account. Metrobank, however, refused reasoning that it has to
refer the matter first to its Legal Division for appropriate action. Repeated verbal
demands followed but Metrobank still failed to re-credit the amount of P91, 000.00 to
Cabilzos account. On 30 June 1995, Cabilzo, thru counsel, finally sent a letter-
demand to Metrobank for the payment of P90, 000.00, after deducting the original
value of the check in the amount of P1, 000.00. Such written demand
notwithstanding, Metrobank still failed or refused to comply with its obligation.
Consequently, Cabilzo instituted a civil action for damages against Metrobank.
ISSUE: Whether or not equitable estoppel can be appreciated in favor of petitioner.
HELD: Yes. The equitable estoppel can be appreciated in favor of petitioner.
Metrobank cannot lightly impute that Cabilzo was negligent and is therefore
prevented from asserting his rights under the doctrine of equitable estoppel when the
facts on record are bare of evidence to support such conclusion. The doctrine of
equitable estoppel states that when one of the two innocent persons, each guiltless of
any intentional or moral wrong, must suffer a loss, it must be borne by the one whose
erroneous conduct, either by omission or commission, was the cause of injury.
Metrobanks reliance on this dictum is misplaced. For one, Metrobanks
representation that it is an innocent party is flimsy and evidently, misleading. At the
same time, Metrobank cannot asseverate that Cabilzo was negligent and this
negligence was the proximate cause of the loss in the absence of even a scintilla proof
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to buttress such claim. Negligence is not presumed but must be proven by the one
who alleges it, which petitioner failed to.
Petition denied.
Almeda v. Bathala Marketing
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Eufemia Almeda and Romel Almeda, Petitioners, versus Bathala Marketing

Industries, Inc., Respondent.
NACHURA, J:
FACTS: In May 1997, respondent Bathala Marketing, renewed its Contract of Lease
with Ponciano Almeda. Under the contract, Ponciano agreed to lease a porton of
Almeda Compound for a monthly rental of P1,107,348.69 for four years. On January
26, 1998, petitioner informed respondent that its monthly rental be increased by 73%
pursuant to the condition No. 7 of the contract and Article 1250. Respondent refused
the demand and insisted that there was no extraordinary inflation to warrant such
application. Respondent refused to pay the Value Added Tax (VAT) and adjusted
rentals as demanded by the petitioners but continually paid the stipulated amount.
The Regional Trial Court ruled in favor of the respondent and declared that
plaintiff is not liable for the payment of VAT and the adjustment rental, there being no
extraordinary inflation or devaluation. The Court of Appeals affirmed the decision
deleting the amounts representing 10% VAT and rental adjustment.
ISSUE: Whether or not the amount of rentals due the petitioners should be adjusted
by reason of extraordinary inflation or devaluation.
HELD: No. The amount of rentals due the petitioners should not be adjusted by
reason of extraordinary inflation or devaluation.
Petitioners are stopped from shifting to respondent the burden of paying the
VAT. The sixth Condition states that respondent can only be held liable for new taxes
imposed after the effectivity of the contract of lease, after 1977, VAT cannot be
considered a new tax. Neither can petitioners legitimately demand rental adjustment
because of extraordinary inflation or devaluation. Absent an official pronouncement or
declaration by competent authorities of its existence, its effects are not to be applied.
Petition denied.
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PCI vs Ng Shueng Ngor

Equitable PCI Bank, Aimee Yu and Bejan Lionel Apas, Petitioners,
versus Ng Shueng Ngor doing business under the name and style "KEN
MARKETING," Ken Appliance Division, Inc. and Benjamin E.
Go, Respondents.
CORONA, J:
FACTS: On October 7, 2001, respondents Ng Shueng Ngor (Ngor) and Benjamin Go

(Go) filed an action for amendment and/or reformation of documents and contracts
against Equitable Bank and its employees. They claimed that they were induced by the
bank to avail of its peso and dollar credit facilities by offering low interests so they
accepted and signed Equitable Banks proposal. They alleged that they were unaware
that the documents contained escalation clauses granting Equitable Bank authority to
increase interest without their consent. These were rebutted by the bank.
The Regional Trial Court ordered the use of the 1996 dollar exchange rate in
computing respondents dollar-denominated loans. The Court of Appeals granted the
banks application for injunction but the properties were sold to public auction.
ISSUE: Whether or not there was an extraordinary deflation.
HELD: No. There was no extraordinary deflation.
Extraordinary inflation exists when there is an unusual decrease in the

purchasing power of currency and such decrease could not be reasonably foreseen or
was beyond the contemplation of the parties at the time of the obligation. Deflation is
an inverse situation.
Despite the devaluation of the peso, Bangko Sentral ng Pilipinas never declared
a situation of extraordinary inflation. Respondents should pay their dollar
denominated loans at the exchange rate fixed by the Bangko Sentral on the date of
maturity.
Petition granted.
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Palanca v. Guides
Simplicio A. Palanca, Petitioner, versus Ulyssis Guides joined by her
husband Lorenzo Guides, Respondent.
TINGA, J:
FACTS: In August 1983, petitioner Simplicio Palanca (Palanca) executed a

contract to sell a parcel of land on installment with Jopson for P11,250. Jopson
paid petitioner P1,650 as downpayment, leaving a balance of P9600. In
December 1983, Jopson assigned ad transferred all her rights and interests
over the property to respondent Guides. Believing that she had fully paid the
purchase prize, respondent found out when she verified with the Register of
Deeds that the property in question was not in the name of the petitioner and it
was in the name of a certain Carissa T. de Leon. Respondent went to
petitioners office to secure the title to the lot, but petitioner informed her that
she could not as she still had unpaid accounts. Thereafter, respondent,
through a lawyer, sent a letter to petitioner demanding compliance with his
obligation and the release of the title in her name. As petitioner did not heed
her demands, respondent, joined by her husband, filed a Complaint for specific
performance with damages on 16 December 1987. Petitioner sought the
dismissal of the complaint on the ground of respondents alleged failure to
comply with the mandatory requirement of Presidential Decree (P.D.) No. 1508.
Petitioner stated that she refused to execute the document of sale in favor of
the respondent since the latter failed with the said obligation- that he was not
paid the complete amount in the contract. The Regional Trial Court ruled in
favor of the plaintiff and against Palanca, ordering him to execute a Deed of
Absolute Sale, reimburse plaintiff the amount paid n excess and for damages.
ISSUE: Whether or not the petitioners claim of unpaid charges from the respondent is
proper.
HELD: No. The petitioners claim of unpaid charges from the respondent was not
proper.
Petitioner was deemed to have waived his right to present evidence and thus
was unable to adduce evidence of such inflation or fluctuation. Even if there were
such, petitioner did not make a demand on respondent for the satisfaction of the
claim.
When petitioner accepted respondents installment payments despite the

alleged charges, and without any showing that he protested the irregularity of such
payment, nor demanded the payment of the alleged charges, respondents liability, if
any for said charges is deemed fully satisfied.
Petition denied.
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PCIB v. Court of Appeals

Philippine Commercial International Bank, Petitioner, versus Court of
Appeals, Atlas Consolidated Mining & Development
TINGA, J:
FACTS: Philippine Commercial International Bank (PCIB) and Manila Banking

Corporation (MBC) were joint bidders in a foreclosure sale held of assorted mining
machinery and equipment previously mortgaged to them by Philippine Iron Mines.
Atlas Consolidated Mining & Development Corporation (Atlas) agreed to purchase
some of these properties and the sale was evidenced by a Deed of Sale with a down
payment of P12,000,000 and the balance of P18,000,000 payable in 6 monthly
installments. In compliance with the contract, Atlas issued Hong Kong and Shanghai
Bank check amounting to P12,000,000.
Atlas paid to National Mines and Allied Workers Union (NAMAWU) the amount
of P4,298,307.77 in compliance with the writ of garnishment issued against Atlas to
satisfy the judgment in favor of NAMAWU. Atlas alleged that there was overpayment,
hence the suit against PCIB to obtain reimbursement. PCIB contended that Atlas still
owed P908,398.75 because NAMAWU had been partially paid in the amount of
P601,260.00. The Regional Trial Court ruled against Atlas to pay P908,398.75 to
PCIB. However, the Court of Appeals reversed the decision.
ISSUE: Whether Atlas had complied with its obligation to PCIB.
HELD: No. Atlas did not comply with its obligation
While the original amount sought to be garnished was P4,298,307.77,

the partial payment of P601,260.00 naturally reduced it to P3,697,047.77.
Clearly, Atlas overpaid NAMAWU. It will be recalled that upon receipt of the
writ of garnishment, Atlas immediately paid NAMAWU, without making any
investigation or consultation with PCIB.
Article 1236 of the Civil Code applies in this instance. It provides that
whoever pays for another may demand from the debtor what he has paid,
except that if he paid without the knowledge or against the will of the debtor,
he can recover only insofar as the payment has been beneficial to the debtor.
PCIB is the debtor in this case, it having purchased along with MBC
legally garnished properties, while Atlas is the third person who paid the
obligation of the debtor without the latters knowledge and consent. Since Atlas
readily paid NAMAWU without the knowledge and consent of PCIB, Atlas may
only recover from PCIB or, more precisely charge to PCIB, only the amount of
payment which has benefited the latter.
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Lagon v. Hooven Comalco
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Jose V. Lagon, Petitioner, versus Hooven Comalco Industries,

Inc., Respondent.
BELLOSILLO, J:
FACTS: Petitioner Jose Lagon (Lagon) is the owner of a commercial building while
respondent is a domestic corporation known to be the biggest manufacturer and
installer of aluminum materials in the country. Parties entered into two contracts
whereby for a total consideration of P104,870. Hooven Comalco Industries (Hooven)
agreed to sell and install various aluminum materials in Lagons building. Upon
execution of contracts, Lagon paid Hooven P48,000 in advance.
On February 24, 1987, Hooven commenced an action for sum of money. It was
alleged that materials were delivered and installed but P69,329 remained unpaid even
after the completion of the project and despite repeated demands. The Regional Trial
Court held partly on the basis of the ocular inspection finding that the total actual
deliveries cost P87,140 deducting there from P48,000. The Court of Appeals set aside
the decision and held in favor of Hooven.
ISSUE: Whether or not all the materials specified in the contracts had been delivered
and installed by respondent in petitioners commercial building.
HELD: No. Not all of the materials specified in the contracts had been delivered and
installed by respondent in petitioners commercial building.
Essentially, respondent has the burden of establishing its affirmative

allegations of complete delivery and installation of the materials, and petitioner's
failure to pay therefor. In this regard, its evidence on its discharge of that duty is
grossly anemic. We emphasize that litigations cannot be properly resolved by
suppositions, deductions, or even presumptions, with no basis in evidence, for the
truth must have to be determined by the hard rules of admissibility and proof.
Decision modified.
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BPI v. Court of Appeals

Bank of the Philippine Islands (successor-in- interest of COMMERCIAL
AND TRUST CO.), Petitioner, versus Hon. Court of Appeals, Eastern
Plywood Corp. and Benigno D. Lim, Respondents.
(G.R. No. 104612 May 10, 1994, 1st Division)
DAVIDE, JR., J:
FACTS: Private respondent, Eastern Plywood Corporation (Eastern) and

Benigno D. Lim (Lim), an officer and stock holder of Eastern held at least one joint
bank account with the Commercial Bank and Trust Co. (CBTC), the predecessor-in
interest of the petitioner Bank of the Philippine Islands (BPI). In March 1975, checking
account with Lim in the amount of P120,000 was opened by Mariano Velasco (Velasco)
with funds withdrawn from the account of Eastern and Lim. Velasco died and at the
time of his death, the outstanding balance of the account stood at P662,522.87.
Thereafter, Eastern obtained a loan of P73,000 from CBTC in addition, Eastern and
Lim and CBTC signed another document entitled Holdout agreement.
In the settlement proceeding of Velascos estate, the whole balance of

P331,261.44 in the joint account of Velasco and Lim was claimed as part of Velascos
estate. The interstate court granted the urgent motion of heirs of Velasco to withdraw
the deposit and authorize them to divide among themselves the amount. BPI filed a
complaint against Lim and Eastern demanding payment of promissory note for
P73,000. The Regional Trial Court ruled that the promissory note is subject to the
holdout agreement. The Court of Appeals affirmed the division.
ISSUE: Whether or not BPI is still liable to the private respondent on the account
subject to the holdout agreement after it is withdrawn by the heirs of Velasco.
HELD: Yes. BPI is still liable to the private respondent on the account subject to the
holdout agreement after it is withdrawn by the heirs of Velasco.
The account was proved to belong to Eastern even if it was in the names of Lim
and Velasco. As the real creditor of the bank, Eastern has the right to withdraw it or
demand payment thereof. BPI cannot be relieved of its duty to pay Eastern simply
because it already allowed the heirs of Velasco to withdraw the whole balance of the
account. Payment made by the debtor to the wrong party does not extinguish the
obligation as to the creditor who is without fault or negligence.
Petition granted.
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Republic v. Thi Thu Thuy De Guzman

Republic of the Philippines, represented by the Chief of the Philippine
National Police, Petitioner, versus Thi Thu Thuy T. De
Guzman, Respondent.
LEONARDO-DE CASTRO, J:
FACTS: On December 8, 1995, the PNP Engineering Services (PNP), released a

Requisition and Issue Voucher for the acquisition of various building materials
amounting to P2,288,562.60 for the construction of a four-storey condominium
building with roof deck at Camp Crame, Quezon City. Respondent averred that on
December 11, 1995, Montaguz General Merchandise (MGM) and petitioner,
represented by the PNP, through its chief, executed a Contract of Agreement (the
Contract) wherein MGM, for the price of P2,288,562.60, undertook to procure and
deliver to the PNP the construction materials itemized in the purchase order attached
to the Contract. Respondent claimed that after the PNP Chief approved the Contract
and purchase order, MGM, proceeded with the delivery of the construction materials,
as evidenced by Delivery Receipts and the "Report of Public Property Purchase" issued
by the PNPs Receiving and Accounting Officers. Respondent asseverated that following
the PNPs inspection of the delivered materials on March 4, 1996, the PNP issued two
Disbursement Vouchers. The respondent sent a letter dated to the PNP, demanding
the payment of P2,288,562.60 for the construction materials MGM procured for the
PNP under their December 1995 Contract. The PNP, replied to respondents counsel,
informing her of the payment made to MGM via Land Bank of the Philippines (LBP).
Respondent denied having ever received the LBP check. On May 5, 1999, respondent
filed a Complaint for Sum of Money against the petitioner.
ISSUE: Whether or not there is already extinguishment of obligation.
HELD: No. The obligation is not yet extinguished
In general, a payment in order to be effective to discharge an obligation must be

made to the proper person. Thus, payment must be made to the obligee himself or to
an agent having authority, express or implied, to receive the particular payment.
Payment made to one having apparent authority to receive the money will, as a rule,
be treated as though actual authority had been given for its receipt. Likewise, if
payment is made to one who by law is authorized to act for the creditor, it will work a
discharge. The receipt of money due on a judgment by an officer authorized by law to
accept it will, therefore, satisfy the debt.
The respondent was able to establish that the LBP check was not received by
her or by her authorized personnel. The PNPs own records show that it was claimed
and signed for by Cruz, who is openly known as being connected to Highland
Enterprises, another contractor. Hence, absent any showing that the respondent
agreed to the payment of the contract price to another person, or that she authorized
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Cruz to claim the check on her behalf, the payment, to be effective must be made to
her.
Petition denied.
Audion Electric v. NLRC
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Audio Electric Co., Inc., Petitioner, versus National Labor Relations

Commissions and Nicolas Madolid, Respondents.
GONZAGA-REYES, J:
FACTS: Complainant Nicolas Madolid was employed by respondent Audion

Electric Company on June 30, 1976 as fabricator and continuously rendered
service assigned in different offices or projects as helper electrician, stockman
and timekeeper. He had rendered 13 years of continuous, loyal and dedicated
service with a clean record. On August 3, complainant was surprised to receive
a letter informing him that he will be considered terminated after the turnover
of materials, including respondents, tools and equipment not later than August
15, 1989. Complainant claims that he was dismissed without justifiable cause
and due process and that his dismissed was done in bad faith which renders
the dismissal illegal. For this reason, he claims that he is entitled to
reinstatement with full backwages. He also claims that he is entitled to moral
and exemplary damages. He includes payment of his overtime pay, project
allowance, minimum wage increase adjustment, proportionate 13th month pay
and attorney's fees.
On November 15, 1990, Labor Arbiter Cresencio R. Iniego rendered a

decision in favor of complainant. Petitioner appealed to the National Labor
Relations Commission (NLRC) which rendered the questioned Resolution dated
March 24, 1992 dismissing the appeal. The motion for reconsideration filed by
petitioner was denied by the NLRC in its Order dated July 31, 1992.
ISSUE: Whether the respondent NLRC committed grave abuse of discretion when it
ruled that private respondent was a regular employee and not a project employee.
HELD: No. The respondent NLRC did not commit grave abuse of discretion when it
ruled that private respondent was a regular employee and not a project employee.
Private respondents employment status was established by the certification of

employment issued by the petitioner. The rule is that findings of facts of the NLRC
affirming those of the Labor Arbiter are entitled to a great weight and will not be
disturbed if they were supported by substantial evidence. There was no grave abuse of
discretion committed by NLRC in finding that respondent was not a project employee.
Decision of NLRC is affirmed with modification deleting the awards of damages and
attorneys fees.
Resolutions are affirmed with modifications.
Cita
Land Bank of the Philippines v. Ong

LAND BANK OF THE PHILIPPINES, Petitioner, versus ALFREDO ONG,
Respondent.
VELASCO, JR., J:
FACTS: Spouses Johnson and Evangeline Sy secured a loan from Land Bank
Legazpi City in the amount of PhP16 million. The loan was secured by three (3)
residential lots, five (5) cargo trucks, and a warehouse. Under the loan
agreement, PhP6 million of the loan would be short-term and would mature on
February 28, 1997, while the balance of PhP 10 million would be payable in
seven (7) years. The Notice of Loan Approval dated February 22, 1996
contained an acceleration clause wherein any default in payment of
amortizations or other charges would accelerate the maturity of the loan.
Subsequently, however, the Spouses Sy found they could no longer pay their
loan. They sold three (3) of their mortgaged parcels of land for PhP 150,000 to
Angelina Gloria Ong, Evangelines mother, under a Deed of Sale with
Assumption of Mortgage.
Evangelines father, petitioner Alfredo Ong, later went to Land Bank to
inform it about the sale and assumption of mortgage. Atty. Edna Hingco, the
Legazpi City Land Bank Branch Head, told Alfredo and his counsel Atty. Ireneo
de Lumen that there was nothing wrong with the agreement with the Spouses
Sy but provided them with requirements for the assumption of mortgage. They
were also told that Alfredo should pay part of the principal which was
computed at PhP 750,000 and to update due or accrued interests on the
promissory notes so that Atty. Hingco could easily approve the assumption of
mortgage. Two weeks later, Alfredo issued a check for PhP 750,000 and
personally gave it to Atty. Hingco. On December 12, 1997, Alfredo initiated an
action for recovery of sum of money with damages against Land Bank in Civil
Case No. T-1941, as Alfredos payment was not returned by Land Bank. The
RTC held that that under the principle of equity and justice, the bank should
return the amount Alfredo had paid with interest at 12% per annum computed
from the filing of the complaint.
The Regional Trial Court (RTC) further held that Alfredo was entitled to
attorneys fees and litigation expenses for being compelled to litigate. The Court
of Appeals affirmed the RTC Decision.
ISSUE: Whether or not Art. 1236 of the Civil Code should apply in the instant
case.
HELD: Yes. Art. 1236 of the Civil Code should apply in the instant case.
The Court agrees with Land Bank on this point as to the first part of
paragraph 1 of Art. 1236. Land Bank was not bound to accept Alfredos
payment, since as far as the former was concerned, he did not have an interest
in the payment of the loan of the Spouses Sy. It is clear from the records that
Land Bank required Alfredo to make payment before his assumption of
mortgage would be approved. He was informed that the certificate of title would
be transferred accordingly. He, thus, made payment not as a debtor but as a
prospective mortgagor.
Alfredo, as a third person, did not, therefore, have an interest in the
fulfilment of the obligation of the Spouses Sy, since his interest hinged on Land
Banks approval of his application, which was denied. The circumstances of the
instant case show that the second paragraph of Art. 1236 does not apply.
Cita
Appeal denied.
Cita
Binalbagan v. CA
BINALBAGAN TECH. INC., and HERMILO J. NAVA, petitioners, versus THE
COURT OF APPEALS, MAGDALENA L. PUENTEVELLA, ANGELINA P.
ECHAUS, ROMULO L. PUENTEVELLA, RENATO L. PUENTEVELLA, NOLI L.
PUENTEVELLA and NELIA LOURDES P. JACINTO, respondents.
MELO, J:
FACTS: On May 11, 1967, private respondents, through Angelina P. Echaus, in

her capacity as Judicial Administrator of the intestate estate of Luis B.
Puentevella, executed a Contract to Sell and a Deed of Sale of forty-two
subdivision lots within the Phib-Khik Subdivision of the Puentevella family,
conveying and transferring said lots to petitioner Binalbagan Tech., Inc.
(hereinafter referred to as Binalbagan). In turn Binalbagan, through its
president, petitioner Hermilo J. Nava (hereinafter referred to as Nava), executed
an Acknowledgment of Debt with Mortgage Agreement, mortgaging said lots in
favor of the estate of Puentevella.
It appears that there was a pending case, Civil Case No. 7435 of Regional
Trial Court stationed at Himamaylan, Negros Occidental. In this pending case
the intestate estate of the late Luis B. Puentevella, thru Judicial Administratrix,
Angelina L. Puentevella sold said aforementioned lots to Raul Javellana with
the condition that the vendee-promisee would not transfer his rights to said
lots without the express consent of Puentevella and that in case of the
cancellation of the contract by reason of the violation of any of the terms
thereof, all payments therefor made and all improvements introduced on the
property shall pertain to the promissor and shall be considered as rentals for
the use and occupation thereof.
The trial court rendered a decision in favor of the petitioner because of
prescription. Nonetheless, the Court of Appeals reversed said decision.
ISSUE: Whether or not the petition is with merit.
HELD: No. The petition is without merit.

A party to a contract cannot demand performance of the other party's
obligations unless he is in a position to comply with his own obligations.
Similarly, the right to rescind a contract can be demanded only if a party
thereto is ready, willing and able to comply with his own obligations there
under (Art. 1191, Civil Code).
The prescriptive period within which to institute an action upon a written
contract is ten years (Art. 1144, Civil Code). The cause of action of private
respondent Echaus is based on the deed of sale afore-mentioned. The deed of
sale whereby private respondent Echaus transferred ownership of the
subdivision lots was executed on May 11, 1967. She filed Civil Case No. 1354
for recovery of title and damages only on October 8, 1982. From May 11, 1967
to October 8, 1982, more than fifteen (15) years elapsed. Seemingly, the 10-
year prescriptive period had expired before she brought her action to recover
title
Petition denied.
Cita
Lorenzo Shipping v. BJ Marthel

LORENZO SHIPPING CORP., Petitioner, versus BJ MARTHEL
INTERNATIONAL, INC., Respondent.
CHICO-NAZARIO, J:
FACTS: Petitioner Lorenzo Shipping is engaged in coastwise shipping and owns

the cargo M/V Dadiangas Express. BJ Marthel is engaged in trading,
marketing an dselling various industrial commodities. Lorenzo Shipping
ordered for the second time cylinder lines from the respondent stating the term
of payment to be 25% upon delivery, the balance payable in 5 bi-monthly equal
installments, no again stating the date of the cylinders delivery. It was
allegedly paid through post dated checks but the same was dishonored due to
insufficiency of funds. Despite due demands by the respondent, petitioner
falied contending that time was of the essence in the delivery of the cylinders
and that there was a delay since the respondent committed said items within
two months after receipt of fir order.
The Regional Trial Court held respondents bound to the quotation with
respect to the term of payment, which was reversed by the Court of appeals
ordering appellee to pay appellant P954,000 plus interest. There was no delay
since there was no demand.
ISSUE: Whether or not respondent incurred delay in performing its obligation

under the contract of sale
HELD: No. Respondent did not incur delay in performing its obligation under
the contract of sale.
By accepting the cylinders when they were delivered to the warehouse,
petitioner waived the claimed delay in the delivery of said items. Supreme
Court held that time was not of the essence. There having been no failure on
the part of the respondent to perform its obligations, the power to rescind the
contract is unavailing to the petitioner.
Petition is denied. Court of appeals decision is affirmed.
Cita
Luzon Development Bank v. Enriquez

LUZON DEVELOPMENT BANK, Petitioner, versus ANGELES CATHERINE
ENRIQUEZ, Respondent.
x-----------------------------------------------------x
DELTA DEVELOPMENT and MANAGEMENT SERVICES, INC., Petitioner,
versus ANGELES CATHERINE ENRIQUEZ and LUZON DEVELOPMENT
BANK, Respondents.
(G.R. No. 168646-66, January 12, 2011, 1st Division)
DEL CASTILLO, J:
FACTS: On July 3, 1995, De Leon (owner of Delta) and his spouse obtained a
P4 million loan from the BANK for the express purpose of developing Delta
Homes I. To secure the loan, the spouses De Leon executed in favor of the
BANK a real estate mortgage (REM) on several of their properties, including Lot
4. Subsequently, this REM was amended10 by increasing the amount of the
secured loan from P4 million to P8 million. Both the REM and the amendment
were annotated on TCT No. T-637183.
Sometime in 1997, DELTA executed a Contract to Sell with respondent
Angeles Catherine Enriquez (Enriquez) over the house and lot in Lot 4 with the
condition that upon full payment of the total consideration the Owner shall
execute a final deed of sale in favor of the Vendee/s.
When DELTA defaulted on its loan obligation, the BANK, instead of
foreclosing the REM, agreed to a dation in payment or a dacion en pago.
Enriquez filed a complaint against DELTA and the BANK before Office of the
HLURB19 alleging that DELTA violated the terms of its License to Sell. The
HLURB Arbiter Atty. Raymundo A. Foronda upheld the validity of the purchase
price, but ordered DELTA to accept payment of the balance of P108,013.36
from Enriquez, and (upon such payment) to deliver to Enriquez the title to the
house and lot free from liens and encumbrances.
DELTA appealed the arbiters Decision to the HLURB Board of
Commissioners. The Commission ordered [Enriquez] to pay [DELTA] the
amount due from the time she suspended payment up to filing of the complaint
with 12% interest thereon per annum; thereafter the provisions of the Contract
to Sell shall apply until full payment is made.
The OP adopted by reference the findings of fact and conclusions of law
of the HLURB Decisions, which it affirmed in toto. The CA ruled against the
validity of the dacion en pago executed in favor of the BANK on the ground that
DELTA had earlier relinquished its ownership over Lot 4 in favor of Enriquez
via the Contract to Sell.
ISSUE: Whether or not the dacion en pago extinguished the loan obligation,
such that Delta has no more obligations to the Bank.
HELD: The violation of Section 18 renders the mortgage executed by DELTA

void therefore the 8 million loans are unsecured. Since the Contract to sell did
not transfer ownership of Lot 4 to Enriquez, said ownership remained with
DELTA. DELTA could then validly transfer such ownership (as it did) to
another person (the BANK). However, the transferee BANK is bound by the
Contract to Sell and has to respect Enriquezs rights thereunder.
BANK is also not entitled to payment of the equivalent value of the lot 4
from DELTA when this court ruled in favor of ENRIQUEZ over lot 4. Like in all
contracts, the intention of the parties to the dation in payment is paramount
and controlling.
Cita
Appealed decision affirmed
Cita
Estanislao v. East-West Bank Corp.

SPS. RAFAEL P. ESTANISLAO and ZENAIDA ESTANISLAO, Petitioners,
versus EAST WEST BANKING CORPORATION, Respondent.
YNARES-SANTIAGO, J:
FACTS: On July 24,1997, petitioner obtained a loan from the respondent in

the amount of P3,925,000 evidenced by a promissory note and secured by two
deeds of chattel mortgage covering two dump trucks and a bull dozer .
Petitioner defaulted entire obligation became due and demandable. A deed of
assignment was drafted by the respondent on October 6, 2000 and March 8,
2001 respectively. Petitioners completed the delivery of heavy equipment
mentioned in the deed of assignment to respondent which accepted the same
without protest or objection. Respondent manifested to admit an amended
complaint for the seizure and delivery of two more heavy equipments which are
covered under the second deed of the chattel mortgage.
The Regional Trial Court ruled that the deed of assignment and the
petitioners delivery of the heavy equipment effectively extinguished the
petitioners obligation and respondent as stopped. CA reversed the decision
ordering the petitioner the outstanding debt of P4,275,919.69 plus interests.
ISSUE: Whether or not the Deed of Assignment operate to extinguish

petitioners debt to the respondent such that the replevin suit could no longer
prosper.
HELD: Yes. The Deed of Assignment operate to extinguish petitioners debt to

the respondent such that the replevin suit could no longer prosper.
The deed of assignment was a perfected agreement which extinguished
petitioners total outstanding obligation to the respondent. The nature of the
assignment was a dacion en pago whereby property is alienated to the creditor
in the satisfaction of a debt in money. Since the agreement was consummated
by the delivery of the last unit of heavy equipment under the deed, petitioners
are deemed to have been released from all their obligations from the
respondents.
Petition granted.
Cita
Aquintey v. Tibong
AGRIFINA AQUINTEY, Petitioner, versus SPOUSES FELICIDAD AND RICO
TIBONG, Respondents.
CALLEJO, SR., J:
FACTS: On May 6, 1999, petitioner Aquintey filed before Regional Trial Court
Baguio, a complaint for sum of money and damages against respondents.
Agrifina alleged that Felicidad secured loans from her on several occasions at
monthly interest rates of 6% to 7%. Despite demands, spouses Tibong failed to
pay their outstanding loans of P773,000,00 exclusive of interests. However,
spouses Tiong alleged that they had executed deeds of assignment in favor of
Agrifina amounting to P546,459 and that their debtors had executed
promissory notes in favor of Agrifina. Spouses insisted that by virtue of these
documents, Agrifina became the new collector of their debts. Agrifina was able
to collect the total amount of P301,000 from Felicdads debtors. She tried to
collect the balance of Felicidad and when the latter reneged on her promise,
Agrifina filed a complaint in the office of the barangay for the collection of
P773,000.00. There was no settlement.
The Regional Trial Court favored Agrifina. The Court of Appeals affirmed
the decision with modification ordering defendant to pay the balance of total
indebtedness in the amount of P51,341,00 plus 6% per month.
ISSUE: Whether or not the deed of assignment in favor of petitioner has the
effect of payment of the original obligation that would partially extinguish the
same
HELD: Yes. The deed of assignment in favor of petitioner has the effect of
payment of the original obligation that would partially extinguish the same.
Substitution of the person of the debtor may be affected by delegacion.
Meaning, the debtor offers, the creditor accepts a third person who consent of
the substitution and assumes the obligation. It is necessary that the old debtor
be released from the obligation and the third person or new debtor takes his
place in the relation. Without such release, there is no novation. Court of
Appeals correctly found that the respondents obligation to pay the balance of
their account with petitioner was extinguished pro tanto by the deeds of credit.
Court of Appeals decision is affirmed with the modification that the principal
amount of the respondents is P33,841.
Petition denied.
Cita
Vda de Jayme v. CA
MAMERTA VDA. DE JAYME, and her children and/or heirs of the late
GRACIANO JAYME, namely: WILFREDO, MARCIAL, MANUEL, ANTONIO, all
surnamed JAYME; the heirs of DOMINADOR JAYME, namely: SUPREMA
(surviving spouse) and his children, namely: ARMANDO, NICANOR,
ZENAIDA, CATHERINE, ROSALINE, DORIS, VICKY and MARILYN, all
surnamed JAYME; and the heirs of the late NILIE JAYME SANCHEZ,
namely, INOCENCIO SANCHEZ (surviving spouse) and her children: ELSA,
CONCEPCION, CLEOFE, ALEJANDRO, EFREN and MACRINA, all surnamed
SANCHEZ; and FLORA JAYME RAVANES, assisted by her husband, CESAR
RAVANES, Petitioners, versus HON. COURT OF APPEALS, SIXTEENTH
DIVISION, CEBU ASIANCARS INC., GEORGE NERI, CONNIE NERI, WILLIAM
LEONG KOC LEE, EDUARD JAMES LEE, ROBERTO UY KIM, AND CHARLES
UY KIM;[1] METROPOLITAN BANK AND TRUST COMPANY, RENE
NATIVIDAD AND/OR JOHN DOE in substitution of MAXIMO PEREZ, sued
in his capacity as City Sheriff of Mandaue City, Respondents.
QUISUMBING, J:
FACTS: On January 8, 1973, the spouses Graciano and Mamerta Jayme

entered into a Contract of Lease with George Neri covering one-half of Lot 2700
owned and registered to the former. The lease was for twenty (20) years. The
terms and conditions of the lease contract stipulated that Cebu Asiancars Inc.
may use the leased premises as a collateral to secure payment of a loan which
Asiancars may obtain from any bank, provided that the proceeds of the loan
shall be used solely for the construction of a building which, upon the
termination of the lease or the voluntary surrender of the leased premises
before the expiration of the contract, shall automatically become the property
of the Jayme spouses (the lessors).
In October 1977, Asiancars obtained a loan of P6,000,000 from the
Metropolitan Bank and Trust Company (MBTC). The entire Lot 2700 was
offered as one of several properties given as collateral for the loan. Meeting
financial difficulties and incurring an outstanding balance on the loan, MBTC
extrajudicially foreclosed the mortgage. A public auction was held on February
4, 1981. MBTC was the highest bidder for P1,067,344.35.
The trial court ruled that the REM is valid and binding upon the Jaymes.
The Court of Appeals affirmed with modifications. Both the trial and appellate
courts found that no fraud attended the execution of the deed of mortgage. The
Motion for Reconsideration was denied.
ISSUE: Whether or not the dacion en pago by Asiancars in favor of MBTC is

valid and binding despite the stipulation in the lease contract that ownership of
the building will vest on the Jaymes at the termination of the lease.
HELD: YES. The alienation of the building by Asiancars in favor of MBTC for
the partial satisfaction of its indebtedness is valid.
The ownership of the building had been effectively in the name of the
lessee-mortgagor (Asiancars), though with the provision that said ownership be
transferred to the Jaymes upon termination of the lease or the voluntary
surrender of the premises. The lease was constituted on January 8, 1973 and
was to expire 20 years thereafter, or on January 8, 1993. The alienation via
dacion en pago was made by Asiancars to MBTC on December 18, 1980,
during the subsistence of the lease. At this point, the mortgagor, Asiancars,
Cita
could validly exercise rights of ownership, including the right to alienate it, as
it did to MBTC.
Assailed decision affirmed.
Caltex v IAC
Cita
CALTEX PHILIPPINES, INC., Petitioner, versus THE INTERMEDIATE

APPELLATE COURT and HERBERT MANZANA, Respondents.
MEDIALDEA, J:
FACTS: On January 12, 1975, Asia Pacific entered into an agreement with
Caltex whereby petitioner agreed to supply private respondents aviation fuel
for 2 years. As of June 30, 1980, asia Pacific had an outstanding obligation n
the total amount of P 4,072,682.13. Caltex executed a Ded of Assignment
wherein it assigned to petitioner its receivables from the National treasury of
the Philippines. Pursuant to the Deed of assignment, National Treasury
warrant the amount of P5,475,294 representing the refund. Caltex refused to
return the excess amount of P510,550.63 because it represented the interest
and service charges and the rate of 18% per annum on the unpaid and overdue
account of respondent.
The Regional Trial Court dismissed the case. The Intermediate Appellate
Court reversed the decision and ordered petitioner to return the amount of
P510,550.63 to private respondent.
ISSUE: Whether or not the Deed of Assignment entered into by the parties
constituted dacion en pago, such that the obligation is totally extinguished,
hence, no interest and service charges could anymore be imposed.
HELD: No. The Deed of Assignment entered into by the parties does not
constitute dacion en pago
The Deed of Assignment executed by the parties is not a dation in
payment in payment and did not totally extinguish respondents obligation. It
is clear that in this case, dation in payment does not necessarily mean total
extinguishment of the obligation. The obligation is totally extinguished only
when the parties, by agreement, express or implied, or by their silence,
consider the thing a equivalent to the obligation.
Decision of Intermediate Appellate Court set aside.
Cita
Lo v. Court of Appeals
ANTONIO LO, Petitioner, versus THE HON. COURT OF APPEALS AND
NATIONAL ONIONS GROWERS COOPERATIVE MARKETING ASSOCIATION,
INC., Respondents.
CORONA, J:
FACTS: At the core of the present controversy are two parcels of land
measuring a total of 2,147 square meters, with an office building constructed
thereon. Petitioner acquired the subject parcels of land in an auction sale on
November 9, 1995 for P20,170,000 from the Land Bank of the Philippines
(Land Bank). Private respondent National Onion Growers Cooperative
Marketing Association, Inc., an agricultural cooperative, was the occupant of
the disputed parcels of land under a subsisting contract of lease with Land
Bank. The lease was valid until December 31, 1995. Upon the expiration of the
lease contract, petitioner demanded that private respondent vacate the leased
premises and surrender its possession to him. Private respondent refused on
the ground that it was, at the time, contesting petitioners acquisition of the
parcels of land in question in an action for annulment of sale, redemption and
damages.
Petitioner filed an action for ejectment before the MTC. He asked, inter
alia, for the imposition of the contractually stipulated penalty of P5,000 per day
of delay in surrendering the possession of the property to him. On September
3, 1996, the trial court decided the case in favor of petitioner. On appeal to the
RTC, the MTC decision was affirmed in toto. The CA rendered its assailed
decision affirming the decision of the trial court, with the modification that the
penalty imposed upon private respondent for the delay in turning over the
leased property to petitioner was reduced from P 5,000 to P 1000 per day.
ISSUE: Whether or not the Court of Appeals erred in reducing the penalty
awarded by the trial court, the same having been stipulated by the parties.
HELD: No. the Court of Appeals did not err in reducing the penalty awarded by
the trial court, the same having been stipulated by the parties.
Generally, courts are not at liberty to ignore the freedom of the parties to
agree on such terms and conditions as they see fit as long as they are not
contrary to law, morals, good customs, public order or public policy.
Nevertheless, courts may equitably reduce a stipulated penalty in the contract
if it is iniquitous or unconscionable, or if the principal obligation has been
partly or irregularly complied with. This power of the courts is explicitly
sanctioned by Article 1229 of the Civil Code which provides:
Article 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.
The question of whether a penalty is reasonable or iniquitous is
addressed to the sound discretion of the court and depends on several factors,
including, but not limited to, the following: the type, extent and purpose of the
penalty, the nature of the obligation, the mode of breach and its consequences,
the supervening realities, the standing and relationship of the parties.
In this case, the stipulated penalty was reduced by the appellate court
for being unconscionable and iniquitous. Petition denied; CA decision affirmed.
Petition dismissed.
Cita
ASI Corp. v. Evangelista

ASJ CORPORATION and ANTONIO SAN JUAN, petitioners, versus SPS.
EFREN & MAURA EVANGELISTA, Respondents.
QUISUMBING, J:
FACTS: Private respondent Evangelista contracted Petitioner ASJ Corporation

for the incubation and hatching of eggs and by products owned by Evangelista
Spouses. The contract includes the scheduled payments of the service of ASJ
Corporation that the amount of installment shall be paid after the delivery of
the chicks. However, the ASJ Corporation detained the chicks because
Evangelista Spouses failed to pay the installment on time.
ISSUE: Whether or not the detention of the alleged chicks valid and recognized
under the law.
HELD: No. The detention of the alleged chicks is not valid and not recognized
under the law.
ASJ Corporation must give due to the Evangelista Spouses in paying the
installment, thus, it must not delay the delivery of the chicks. Thus, under the
law, they are obliged to pay damages with each other for the breach of the
obligation.
Therefore, in a contract of service, each party must be in good faith in
the performance of their obligation, thus when the petitioner had detained the
hatched eggs of the respondents spouses, it is an implication of putting
prejudice to the business of the spouses due to the delay of paying installment
to the petitioner.
Cita
Paculdo v. Regalado
NEREO J. PACULDO, Petitioner, versus BONIFACIO C. REGALADO,
Respondent.
PARDO, J:
FACTS: On December 27, 1990, petitioner Paculdo and respondent Regalado

entered into a contract of lease over a parcel of land for 25 years. For the first 5
years, Paculdo would pay monthly rental of P450,000 payable within 5 days of
each month, with 2% penalty for very month of delay. Aside from the above
lease, petitioner leased 11 other property from respondent. Petitioner failed to
pay. Without the knowledge of petitioner, respondent ortgaged the land subject
of the lease contract including the improvements to Monte de Piedad. On
August 12, 1995, and on subsequent dates thereafter, respondent refused to
accept petitioners daily rental payments. Petitioner filed an action for
injunction to enjoin respondent from disturbing his possession while
respondent filed a complaint for ejectment attaching the demand letters.
The Municipal Trial Court held in favor of the plaintiff which was
affirmed by the Regional Trial Court. The Court of Appeals found that the
petitioner impliedly consented to respondents application of payment to his
obligations, thus, dismissed the petition for lack of merit.
ISSUE: Whether or not petitioner was truly in arrears in the payment of rentals
on the subject property at the time of the filing of the complaint of ejectment.
HELD: No. The petitioner was not in arrears in the payment of rentals on the
subject property at the time of the filing of the complaint for ejectment.
The lease over the Fairview wet market property is the most onerous
among all the obligations of petitioner to respondent. It was established that
the wet market is a going concern and that petitioner has invested about
P35,000,000 in form of improvements, over the property. Hence, petitioner
would stand to lose more if the lease would not proceed. CA decision was based
on a misapprehension of the facts and the law on the application of payment.
Hence, the ejectment case must be dismissed. CA decision is set aside.
Petition granted.
Cita
CBC v. Court of Appeals

CHINA BANKING CORPORATION, ATTYS. REYNALDO M. CABUSORA and
RENATO C. TAGUIAM, Petitioners, versus COURT OF APPEALS, HON.
PEDRO T. SANTIAGO, SPS. SO CHING and CRISTINA SO, and NATIVE
WEST INTERNATIONAL TRADING CORP., Respondents.
FRANCISCO, J:
FACTS: China Banking Corporation extended several loans to Native West and
so Ching, Native Wests President. Native west executed a promissory note in
favor of China Bank. So Ching, with the marital consent of his wife additionally
executed two real estate mortgages over their properties. The promissory notes
matured and despite due demands, neither private respondents paid. China
Bank filed petition for the extrajudicial foreclosure of the mortgaged properties.
Upon receipt of the foreclosure, private respondents filed a complaint before
RTC for accounting with damages and with temporary restraining order.
ISSUE: Whether or not the subject additional mortgaged properties of the

spouses are not included in the notice of foreclosure
HELD: It is well-settled that mortgages given to secure future advancements or

loans are valid and legal contracts, and that the amounts named as
considerations in said contracts do not limit the amount for which the
mortgage may stand as security if from the four corners of the instrument the
intent to secure future and their indebtedness can be gathered. Supreme Court
found that petitioners are entitled to foreclose the mortgages.
Petition granted.
Cita
Mobil v. Court of Appeals

MOBIL OIL PHILIPPINES, INC., and CALTEX (PHILS.), INC., Petitioners,
versus HON. COURT OF APPEALS and CONTINENTAL CEMENT
VITUG, J:
FACTS: In May 1982, petitioner Mobil Oil entered into a supply agreement with
private respondent Continental Cement, under which the former would supply
the latters industrial fuel oil or bunker fuel oil requirements. MOP extended to
CCC an unsecured credit line of P2,000,000 against which CCCs purchases of
oil could initially be charged. MOP made a total of 67 deliveries of BFO, each
delivery consisting of 20,000 liters to CCCs factory. CCC discovered that, the
supposed BFO was in fact, pure water. A joint undertaking was initiated.
On August 23, 1983, Caltex informed CCC that it would be the new
owner of Mop effective September 1, 1983 and that Caltex would assume all
rights and obligations of MOP under all its existing contracts. CA upheld the
findings of the trial court that the water-contaminated BFO delivered by MOP
caused damages to CCCs rotary kin.
ISSUE: Whether or not petitioners can be held liable for the contaminated BO
delivered on the ground that CFS, as carrier-hauler, was an agent of Mobil.
HELD: The Court of Appeals correctly ruled that MOP could be held liable for
the acts of CFS. The hauling contract executed by and between MOP and CFS
laid out the responsibilities of CFS. The presumption LAID DOWN IN Article
1523 of the Civil Code is not applicable.
Decision of the Court of Appeals in affirmed.
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Dalton v. FGR Realty and Development Corp.

SOLEDAD DALTON, Petitioner, versus FGR REALTY AND DEVELOPMENT
CORPORATION, FELIX NG,
CARPIO, J:
FACTS: Flora R. Dayrit (Dayrit) owned a 1,811-square meter parcel of land

located at the corner of Rama Avenue which Dalton leased portions of the
property.
In June 1985, Dayrit sold the property to respondent FGR Realty and
Development Corporation (FGR). In August 1985, Dayrit and FGR stopped
accepting rental payments because they wanted to terminate the lease
agreements with Dalton and Sasam, et al.
Soledad Dalton built a house which she initially used as a dwelling and store
space. She vacated the premises when her children got married. She
transferred her residence near F. Ramos Public Market, Cebu City.
She constructed the 20 feet by 20 feet floor area house sometime in 1973. The
last monthly rental was P69.00. When defendants refused to accept rent al and
demanded vacation of the premises, she consignated [sic] her monthly rentals
in court.
The Regional Trial Court dismissed the 11 September 1985 complaint
and ordered Dalton to vacate the property
ISSUE: Whether or not the consignation was void.
HELD: No. The consignation was valid.

Compliance with the requisites of a valid consignation is mandatory.
Failure to comply strictly with any of the requisites will render the consignation
void. Substantial compliance is not enough. The requisites of a valid
consignation: (1) a debt due; (2) the creditor to whom tender of payment was
made refused without just cause to accept the payment, or the creditor was
absent, unknown or incapacitated, or several persons claimed the same right
to collect, or the title of the obligation was lost; (3) the person interested in the
performance of the obligation was given notice before consignation was made;
(4) the amount was placed at the disposal of the court; and (5) the person
interested in the performance of the obligation was given notice after the
consignation was made.
Substantial compliance is not enough for that would render only a
directory construction to the law. The use of the words "shall" and "must"
which are imperative, operating to impose a duty which may be enforced,
positively indicate that all the essential requisites of a valid consignation must
be complied with. The Civil Code Articles expressly and explicitly direct what
must be essentially done in order that consignation shall be valid and effectual.
Petition denied.
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Benos v. Lawilao
SPS. JAIME BENOS and MARINA BENOS, Petitioners, versus SPS.
GREGORIO LAWILAO and JANICE GAIL LAWILAO, Respondents.
YNARES-SANTIAGO, J:
FACTS: On February 11,1999, petitioner-spouses Benos and respondent

Lawilao executed a Pacto de Retro Sale where Benos sold their lot and the
building erected thereon for P300,000, one-half of which to be paid in cash to
the Benos and the other half to be paid to the bank to pay off the loans of the
Benos which was secured by the same lot and building. Under the contract,
Benos could redeem the property within 18 months from the date of execution
by returning the contract price, otherwise, the sale would become irrevocable.
After paying the P150,000, Lawilao took possession of the property,
restructured it twicw, eventually the loan become due and demandable. On
August 14, 2000, a son of Benos and Lawilao paid the bankl but the bank
refused. Lawilao filed for consignation against the bank and deposited the
amount of P159,000.00.
The Regional Trial Court declared Lawilao of the ownership of the subject
property, which was affirmed by the Court of Appeals.
ISSUE: Whether or not the contract of Pacto de Retro Sale be rescinded by the
petitioner.
HELD: In the instant case, records show that Lawilao filed the petition for
consignation against the bank in Civil Case without notifying the Benos.
Hence, Lawilao failed to prove their offer to pay the balance, even before the
filing of the consignation case. Lawilao never notified the Benos. Thus, as far as
the Benos are concerned, there was no full and complete payment of the
contract price which gives them the right to rescind.
Petition granted.
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Peoples Industrial v. Court of Appeals

PEOPLES INDUSTRIAL AND COMMERCIAL CORPORATION, Petitioner,
versus COURT OF APPEALS AND MAR-ICK INVESTMENT CORPORATION,
Respondents.
ROMERO, J:
FACTS: Private respondent is the registered owner of Mar-ick Subdivision

which entered into 6 agreements with petitioner, whereby to sell 6 subdivision
lots. Except for lot no. 8. All the lots measure 240 sq each. Lot nos. 3,4,5,6
and 7 similarly stipulate that petitioner agreed to pay for each lot P7,333.20,
P480 as down payment. The balance shall be payable n 120 equal monthly
installments of P57.11 every 30th of the month, for 10 years. With lot no. 8,
they agreed to the purchase price of P7,730 with a down payment of P506 and
equal installments of P60.20. Petitioner failed to perform its obligation. After
series of negotiations, the parties agreed to enter into a new contract to sell 8
lots. Checks issued in favor of the private respondent were received but not
encashed. Private respondent filed a suit against the petitioner.
The Regional Trial Court directed petitioner to return the lots, which was
affirmed in toto by the Court of Appeals.
ISSUE: Whether or not there was a perfected and enforceable contracts of sale
on October 11,1983 which modified the earlier contracts to sell which had not
been validly rescinded.
HELD: It is apropos to stress that the agreements are contracts to sell and not
contract of sale, hence, rescission either by judicial action or notarial act is not
applicable. Private respondents act of cancelling the contract to sell was not
done arbitrarily. Because the contracts to sell had long been cancelled when
private respondent fled the accion publiciana de possession, there was no more
installment buyer and seller relationship to speak of. It had been reduced to a
mere case of an owner claiming possession of its property that had long been
illegally withheld from it by another.
Petition denied.
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Eternal Gardens v. Court of Appeals

ETERNAL GARDENS MEMORIAL PARK CORPORATION, Petitioner, versus
COURT OF APPEALS and SPS. LILIA SEVILLA and JOSE SEELIN,
Respondents.
MARTINEZ, A.M., J:
FACTS: Petitioner Eternal Gardens and private NPUM entered into a Land
Development Agreement. Under the agreement, EG was to develop a parcel of
land owned by NPUM into a memorial park. The P1.5 million initial installment
mentioned in the Deed of Absolute Sale, shall be deducted out of the proceeds
from the First Partys 40% at the end of the 5th year. Subsequent payment
should be changed against what is due to the first Party under the Land
Development agreement. Later, 2 claimants of the land surfaced but were
dismissed.
The case was remanded to the Court of Appeals (CA) for proper
determination and dispositions. CA required EG to produce documents
necessary for accounting but failed to do so, hence, the right is waived. CA
directed EG to pay private respondent the amounts of P167,065,195.00 as
principal and P167,235,451.00 interest.
ISSUE: Whether or not the petitioner is liable for interest despite the land
dispute
HELD: Even during the pendency of the land dispute cases, EG was required to
deposit the accruing interests with a reputable commercial bank to avoid
possible wastage of funds when the case was given due course. Yet, EG
hedged in depository the amounts due and made obvious attempts to stay
payment by filing sundry motions and pleadings. CA correctly held EG liable
for interest of 12%. It is tantamount to a forbearance of money.
Petition denied.
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Rayos v. Reyes
SPOUSES TEOFILO and SIMEONA RAYOS, and GEORGE RAYOS,
Petitioners, versus DONATO REYES, SATURNINO REYES, TOMASA R.
BUSTAMANTE and TORIBIA R. CAMELO, Respondents.
BELLOSILLO, J:
FACTS: Three parcels were formerly owned by the spouses Francisco and
Asuncion Tazal who on 1 September 1957 sold them for P724.00 to
respondents predecessor-in-interest, one Mamerto Reyes, with right to
repurchase within two (2) years from date thereof by paying to the vendee the
purchase price and all expenses incident to their reconveyance. After the sale
the vendee a retro took physical possession of the properties and paid the taxes
thereon.
The otherwise inconsequential sale became controversial when two (2) of
the three (3) parcels were again sold on 24 December 1958 by Francisco Tazal
for P420.00 in favor of petitioners predecessor-in-interest Blas Rayos without
first availing of his right to repurchase the properties.
ISSUE: Whether or not there was a valid consignation and tender of payment
made in the instant case.
HELD: In order that consignation may be effective the debtor must show that
(a) there was a debt due; (b) the consignation of the obligation had been made
because the creditor to whom a valid tender of payment was made refused to
accept it; (c) previous notice of the consignation had been given to the person
interested in the performance of the obligation; (d) the amount due was placed
at the disposal of the court; and, (e) after the consignation had been made the
person interested was notified thereof.
In the instant case, petitioners failed, first, to offer a valid and
unconditional tender of payment; second, to notify respondents of the intention
to deposit the amount with the court; and third, to show the acceptance by the
creditor of the amount deposited as full settlement of the obligation, or in the
alternative, a declaration by the court of the validity of the consignation. The
failure of petitioners to comply with any of these requirements rendered the
consignation ineffective.
Consignation and tender of payment must not be encumbered by
conditions if they are to produce the intended result of fulfilling the obligation.
In the instant case, the tender of payment of P724.00 was conditional and void
as it was predicated upon the argument of Francisco Tazal that he was paying
a debt which he could do at any time allegedly because the 1 September 1957
transaction was a contract of equitable mortgage and not a deed of sale with
right to repurchase
Petition denied.
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Cebu International v. Court of Appeals

CEBU INTERNATIONAL FINANCE CORPORATION, Petitioner, versus
COURT OF APPEALS, VICENTE ALEGRE, Respondents.
QUISUMBING, J:
FACTS: On April 25, 1991, private respondent, Vicente Alegre, invested with
CIFC, P500,000.00 pesos, in cash. Petitioner issued a promissory note to
mature on May 27, 1991. The note for P516,238.67 covered private
respondent's placement plus interest at twenty and a half percent for thirty-two
days. On May 27, 1991, CIFC issued BPI Check No. 513397 P514,390.94 in
favor of the private respondent as proceeds of his matured investment plus
interest. The CHECK was drawn from petitioner's current account number
0011-0803-59, maintained with BPI, main branch at Makati City. On June 17,
1991, private respondent's wife deposited the CHECK with RCBC, in Puerto
Princesa, Palawan. BPI dishonored the CHECK with the annotation, that the
"Check (is) Subject of an Investigation." BPI took custody of the CHECK
pending an investigation of several counterfeit checks drawn against CIFC's
aforestated checking account. BPI used the check to trace the perpetrators of
the forgery. Immediately, private respondent notified CIFC of the dishonored
CHECK and demanded, on several occasions, that he be paid in cash. CIFC
refused the request, and instead instructed private respondent to wait for its
ongoing bank reconciliation with BPI.
ISSUE: Whether or not there was valid tender of payment in the instant case.
HELD: A check is not a legal tender, and therefore cannot constitute valid
tender of payment. "Since a negotiable instrument is only a substitute for
money and not money, the delivery of such an instrument does not, by itself,
operate as payment. A check, whether a manager's check or ordinary check, is
not legal tender, and an offer of a check in payment of a debt is not a valid
tender of payment and may be refused receipt by the obligee or creditor. Mere
delivery of checks does not discharge the obligation under a judgment. The
obligation is not extinguished and remains suspended until the payment by
commercial document is actually realized
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.
Petition denied.
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De Mesa v. Court of Appeals

DOLORES LIGAYA DE MESA, Petitioner, versus THE COURT OF APPEALS,
OSSA HOUSE, INC. AND DEVELOPMENT BANK OF THE PHILIPPINES,
Respondents.
(G.R. No. 106467-68, October 19, 1999, 3rd Division)
PURISIMA, J:
FACTS: Petitioner Dolores Ligaya de Mesa owns several parcels of land in

Makati, Pasay City, Cavite, and General Santos City3 I. Two (2) parcels of land
situated in Makati, Metro Manila, with TCT no. (232345) S-60337 containing
an area of 188 square meters and TCT No. (232344) S-50336 containing an
area of 236 square meters.
Two parcels of land situated in Makan, General Santos City, with TCT
No. T-11067 containing an area of 837 square meters. which were mortgaged
to the Development Bank of the Philippines (DBP) as security for a loan she
obtained from the bank. Failing to pay her mortgage debt, all her mortgaged
properties were foreclosed and sold at public auction held on different days. On
April 30, 1977, the Makar property was sold and the corresponding certificate
of sale inscribed on March 10, 1978. On August 25, 1977, the Naic, Cavite
property was sold and the certificate of sale registered on the same day. On
August 30, 1977, the two (2) parcels of land in Makati were sold at public
auction and the certificate of sale was inscribed on November 25, 1977. And on
January 12, 1978, the three (3) parcels of land in Pasay City were also sold and
the certificate of sale was recorded on the same date. In all the said auction
sales, DBP was the winning bidder.
ISSUE: Whether or not the Court can supplant its own reading of an
ambiguous contract for the actual intention of the contracting parties as
testified to in open court and under oath.
HELD: Art. 1370. If the terms of a contract are clear and leave no doubt upon
the intention of the contracting parties, the literal meaning of its stipulation
shall control.
When the words of a contract are plain and readily understood, there is
no room for construction. As the agreement of the parties are reduced to
writing, such agreement is considered as containing all its terms and there can
be, between the parties and their successors-in-interest, no evidence of the
terms of the written agreement other than the contents of the writing.
In the case under consideration, the terms of the "Deed of Sale with
Assumption of Mortgage Debt" are clear and leave no doubt as to what were
sold thereunder.
The contract under scrutiny is so explicit and unambiguous that it does
not justify any attempt to read into it any supposed intention of the parties, as
the said contract is to be understood literally, just as they appear on its face.
Petition denied.
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Occena v. Court of Appeals

JESUS V. OCCENA and EFIGENIA C. OCCENA, Petitioners, versus HON.
RAMON V. JABSON, Presiding Judge of the Court Of First Instance of
Rizal, Branch XXVI; COURT OF APPEALS and TROPICAL HOMES, INC.,
respondents.
(G.R. No. L-44349, October 29, 1976, 1st Division)
TEEHANKEE, J.:
FACTS: Private respondent Tropical Homes, Inc had a subdivision contract

with petitioners who are the owners of the land subject of subdivision
development by private respondent. The contract stipulated that the
petitioners fixed and sole share and participation is the land which is
equivalent to forty percent of all cash receipts from the sale of the subdivision
lots. When the development costs increased to such level not anticipated
during the signing of the contract and which threatened the financial viability
of the project as assessed by the private respondent, respondent filed at the
lower court a complaint for the modification of the terms and conditions of the
contract by fixing the proper shares that should pertain to the parties therein
out of the gross proceeds from the sales of the subdivision lots.
Petitioners moved for the dismissal of the complaint for lack of cause of
action. The lower court denied the motion for dismissal which was upheld by
the CA based on the civil code provision that when the service has become so
difficult as to be manifestly beyond the contemplation of the parties, the obligor
may also be released therefrom, in whole or in part. Insisting that the
worldwide increase in prices cited by private respondent does not constitute a
sufficient cause of action for the modification of the terms and conditions of the
contract, petitioners filed the instant petition.
ISSUE: Whether or not private respondent may demand modification of the

terms of the contract on the ground that the prestation has manifestly come
beyond the contemplation of the parties.
HELD: If the prayer of the private respondent is to be released from its

contractual obligations on account of the fact that the prestation has become
beyond the contemplation of the parties, then private respondent can rely on
said provision of the civil code. But the prayer of the private respondent was for
the modification of their valid contract. The above-cited civil code provision
does not grant the court the power to remake, modify, or revise the contract or
to fix the division of the shares between the parties as contractually stipulated
with the force of law between the parties. Therefore, private respondents
complaint for modification of its contract with petitioner must be dismissed.
The decision of respondent court is reversed.
Petition granted.
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Ortigas v. Feati Bank

ORTIGAS & CO., LIMITED PARTNERSHIP, Plaintiff-appellant, versus
FEATI BANK AND TRUST CO., Defendant-appellee.
(G.R. No. L-24670, December 14, 1979, En Banc)
SANTOS, J:
FACTS: On March 4, 1952, Ortigas sold Lot 5 and 6, Block 31 of the Highway
Hills Subdivision at Mandaluyong to Augusto Padilla y Angeles and Natividad
Angeles. The latter transferred their rights in favour of Emma Chavez, upon
completion of payment a deed was executed with stipulations, one of which is
that the use of the lots are to be exclusive for residential purposes only. This
was annotated in the Transfer Certificate of Titles No. 101509 and 101511.
Feati then acquired Lot 5 directly from Emma Chavez and Lot 6 from Republic
Flour Mills.
On May 5, 1963, Feati started construction of a building on both lots to
be devoted for banking purposes but could also be for residential use. Ortigas
sent a written demand to stop construction but Feati continued contending
that the building was being constructed according to the zoning regulations as
stated in Municipal Resolution 27 declaring the area along the West part of
EDSA to be a commercial and industrial zone. Civil case No. 7706 was made
and decided in favour of Feati.
ISSUE: Whether or not Resolution number 27 declaring Lot 5 and 6 to be part

of an industrial and commercial zone is valid considering the contract
stipulation in the Transfer Certificate of Titles.
HELD: Resolution No. 27 prevails over the contract stipulations. Section 3 of

RA 2264 of the Local Autonomy Act empowers a Municipal Council to adopt
zoning and subdivision ordinances or regulations for the Municipality. Section
12 or RA 2264 states that implied power of the municipality should be
liberally construed in its favour, to give more power to the local government
in promoting economic conditions, social welfare, and material progress in the
community. This is found in the General Welfare Clause of the said act.
Although non-impairment of contracts is constitutionally guaranteed, it is not
absolute since it has to be reconciled with the legitimate exercise of police
power, e.g. the power to promote health, morals, peace, education, good order
or safety and general welfare of the people.
Resolution No. 27 was obviously passed in exercise of police power to
safeguard health, safety, peace and order and the general welfare of the people
in the locality as it would not be a conducive residential area considering the
amount of traffic, pollution, and noise which results in the surrounding
industrial and commercial establishments.
Decision dismissing the complaint affirmed.
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So v. Food Fest Land, Inc.

DANIEL T. SO, Petitioner, versus FOOD FEST LAND, INC., Respondent
FOOD FEST LAND, INC., Petitioner, versus DANIEL T. SO, Respondent
CARPIO MORALES, J:
FACTS: Food Fest Land Inc. (Food Fest) entered into a September 14, 1999
Contract of Lease1 with Daniel T. So (So) over a commercial space in San
Antonio Village, Makati City for a period of three years (1999-2002) on which
Food Fest intended to operate a Kentucky Fried Chicken carry out branch.
Before forging the lease contract, the parties entered into a preliminary
agreement dated July 1, 1999, the pertinent portion of which states that the
lease shall not become binding upon us unless and until the government
agencies concerned shall authorize, permit or license us to open and maintain
our business at the proposed Lease Premises.
While Food Fest was able to secure the necessary licenses and permits for the
year 1999, it failed to commence business operations. For the year 2000, Food
Fests application for renewal of barangay business clearance was "held in
abeyance until further study of [its] kitchen facilities."
As the barangay business clearance is a prerequisite to the processing of
other permits, licenses and authority by the city government, Food Fest was
unable to operate. Fearing further business losses, Food Fest, by its claim,
communicated its intent to terminate the lease contract to So who, however,
did not accede and instead offered to help Food Fest secure authorization from
the barangay.
On April 26, 2001, So filed a complaint for ejectment and damages
against Food Fest before the Metropolitan Trial Court (MeTC) of Makati City.
The MeTC, by Decision of July 4, 2005,7 rendered judgment in favor of So.The
Regional Trial Court (RTC), by Decision of November 30, 2006,9 reversed the
MeTC Decision.
Court of Appeals however, declared that Food Fests obligation to pay
rent was not extinguished upon its failure to secure permits to operate.
ISSUE: Whether or not the principle of rebus sic stantibus is applicable to the
instant case.
HELD: No. The principle of rebus sic stantibus is not applicable to the instant
case.
As for Food Fests invocation of the principle of rebus sic stantibus as
enunciated in Article 1267 of the Civil Code to render the lease contract
functus officio, and consequently release it from responsibility to pay rentals,
the Court is not persuaded.
This article, which enunciates the doctrine of unforeseen events, is not,
however, an absolute application of the principle of rebus sic stantibus, which
would endanger the security of contractual relations. The parties to the
contract must be presumed to have assumed the risks of unfavorable
developments. It is, therefore, only in absolutely exceptional changes of
circumstances that equity demands assistance for the debtor.19
Food Fest was able to secure the permits, licenses and authority to
operate when the lease contract was executed. Its failure to renew these
permits, licenses and authority for the succeeding year, does not, however,
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suffice to declare the lease functus officio, nor can it be construed as an

unforeseen event to warrant the application of Article 1267.
Decision affirmed.
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Magat v. Court of Appeals

VICTORINO MAGAT, JR. substituted by heirs, OLIVIA D. MAGAT, and
minors MA. DULCE MAGAT, MA. MAGNOLIA MAGAT, RONALD MAGAT and
DENNIS MAGAT, Petitioners, versus COURT OF APPEALS and SANTIAGO
A. GUERRERO, Respondents.
PARDO, J:
FACTS: Basilisa Comerciante is a mother of five children. One of them,
Leonardo died during World War II. Basilisa later bought a parcel of land which
is the subject of the document entitled Kasulatan sa Kaloobpala executed in
favor of the four children.
Later, Basilisa executed a deed of absolute sale in favor of herein
petitioner and as a result, a transfer certificate of title was issued in favor of
Apolinaria.
The respondents filed a petition for the annulment of such deed. The trial
court dismissed the complaint and ruled that the donation made in favor of
respondents was a donation mortis causa and as such was void for having
been executed without the formalities of will. Hence the subsequent sale was
valid.
The Court of Appeals reversed such decision.
ISSUE: Whether or not the donation made is a mortis causa or an inter vivos
donation.
HELD: The donation is a conveyance inter vivos.

Whether the donation is mortis causa or inter vivos depends on whether
the donor intended to transfer ownership over the properties upon the
execution of the deed. The characteristics of a donation mortis causa are the
following: (1) It conveys no title or ownership to the transferee before the death
of the transferor; or what amounts to the same thing, that the transferor
should retain the ownership (full or naked) and control of the property while
alive; (2) That before his death, the transfer should be revocable by the
transferor at will, ad nutum; but revocability may be provided for indirectly by
means of a reserved power in the donor to dispose of the properties conveyed;
and (3) That the transfer should be void if the transferor should survive the
transferee.
The express irrevocability of the donation is the distinctive standard that
identifies that document as an inter vivos. The provisions which state the same
will only take effect upon the death of the donor and that there is a prohibition
to alienate, encumber, sell or dispose the same should be harmonized with its
express irrevocability. Such are only necessary assurances that during the
donors lifetime, the latter would still enjoy the right of possession over the
property; but his naked title of ownership has been passed on to the donees;
and that upon the donors death, the donees would get all the rights of
ownership over the same including the right to use and possess the same.
Furthermore, it also appeared that the prohibition to alienate the property is
couched in general terms that even the donor is deemed included in such
prohibition. The prohibition on the donor to alienate the property during her
lifetime is a proof that naked ownership has been transferred to the donees.
Decision affirmed.
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PNCC v. Court of Appeals

PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, Petitioner, versus
COURT OF APPEALS, MA. TERESA S. RAYMUNDO-ABARRA, JOSE S.
RAYMUNDO, ANTONIO S. RAYMUNDO, RENE S. RAYMUNDO, and AMADOR
S. RAYMUNDO, Respondents.
DAVIDE, JR., J:
FACTS: On 18 November 1985, private respondents and petitioner entered into
a contract of lease of a parcel of land owned by the former. The terms and
conditions of said contract of lease are as follows: a) the lease shall be for a
period of five (5) years which begins upon the issuance of permit by the
Ministry of Human Settlement and renewable at the option of the lessee under
the terms and conditions, b) the monthly rent is P20, 000.00 which shall be
increased yearly by 5% based on the monthly rate, c) the rent shall be paid
yearly in advance, and d) the property shall be used as premises of a rock
crushing plan.
On January 7, 1986, petitioner obtained permit from the Ministry which
was to be valid for two (2) years unless revoked by the Ministry. Later,
respondent requested the payment of the first annual rental. But petitioner
alleged that the payment of rental should commence on the date of the
issuance of the industrial clearance not on the date of signing of the contract.
It then expressed its intention to terminate the contract and decided to cancel
the project due to financial and technical difficulties. However, petitioner
refused to accede to respondents request and reiterated their demand for the
payment of the first annual rental. But the petitioner argued that it was only
obligated to pay P20, 000.00 as rental for one month prompting private
respondent to file an action against the petitioner for specific performance with
damages before the RTC of Pasig. The trial court rendered decision in favor of
private respondent. Petitioner then appealed the decision of the trial court to
the Court of Appeals but the later affirmed the decision of the trial court and
denied the motion for reconsideration.
ISSUE: Whether or not petitioner can avail of the benefit of Article 1267 of the
New Civil Code.
HELD: No. Petitioner cannot avail of the benefit of Article 1267 of the New Civil
Code.
The petitioner cannot take refuge of the said article. Article 1267 of the
New Civil Code provides that when the service has become so difficult as to
manifestly beyond the contemplation of the parties, the obligor may also be
released therefrom, in whole or in part. This article, which enunciates the
doctrine of unforeseen events, is not, however an absolute application of the
principle of rebus sic stantibus, which would endanger the security of
contractual relations. The principle of rebus sic stantibus neither fits in with
the facts of the case. Under this theory, the parties stipulate in the light of
certain prevailing conditions, and once these conditions cease to exist, the
contract also ceases to exist.
In this case, petitioner averred that three (3) abrupt change in the
political climate of the country after the EDSA Revolution and its poor financial
condition rendered the performance of the lease contract impractical and
inimical to the corporate survival of the petitioner. However, as held in Central
Bank v. CA, mere pecuniary inability to fulfill an engagement does not
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discharge a contractual obligation, nor does it constitute a defense of an action

for specific performance.
Petition denied.
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NATELCO v. Court of Appeals

NAGA TELEPHONE CO., INC. (NATELCO) AND LUCIANO M. MAGGAY,
Petitioners, versus THE COURT OF APPEALS AND CAMARINES SUR II
ELECTRIC COOPERATIVE, INC. (CASURECO II), Respondents.
(G.R. No. 107112 February 24, 1994, 2nd Division)
NOCON, J:
FACTS: Petitioner Naga Telephone Co., Inc. (NATELCO) is a telephone company

rendering local as well as long distance service in Naga City while private
respondent Camarines Sur II Electric Cooperative, Inc. (CASURECO II) is a
private corporation established for the purpose of operating an electric power
service in the same city. On November 1, 1977, the parties entered into a
contract (Exh. "A") for the use by petitioners in the operation of its telephone
service the electric light posts of private respondent in Naga City. In
consideration therefor, petitioners agreed to install, free of charge, ten (10)
telephone connections for the use by private respondent
After the contract had been enforced for over ten (10) years, private
respondent filed on January 2, 1989 with the Regional Trial Court of Naga City
(Br. 28) C.C. No. 89-1642 against petitioners for reformation of the contract
with damages, on the ground that it is too one-sided in favor of petitioners; that
it is not in conformity with the guidelines of the National Electrification
Administration (NEA) which direct that the reasonable compensation for the
use of the posts is P10.00 per post, per month; that after eleven (11) years of
petitioners' use of the posts, the telephone cables strung by them thereon have
become much heavier with the increase in the volume of their subscribers,
worsened by the fact that their linemen bore holes through the posts at which
points those posts were broken during typhoons.
ISUUE: Whether or not respondent court erred in making a contract for the
parties by invoking Article 1267 of the New Civil Code.
HELD: Article 1267 speaks of "service" which has become so difficult. Taking
into consideration the rationale behind this provision, 9 the term "service"
should be understood as referring to the "performance" of the obligation. In the
present case, the obligation of private respondent consists in allowing
petitioners to use its posts in Naga City, which is the service contemplated in
said article.
Furthermore, a bare reading of this article reveals that it is not a
requirement thereunder that the contract be for future service with future
unusual change. According to Senator Arturo M. Tolentino, 10 Article 1267
states in our law the doctrine of unforseen events. This is said to be based on
the discredited theory of rebus sic stantibus in public international law; under
this theory, the parties stipulate in the light of certain prevailing conditions,
and once these conditions cease to exist the contract also ceases to exist.
Considering practical needs and the demands of equity and good faith, the
disappearance of the basis of a contract gives rise to a right to relief in favor of
the party prejudiced.
Petition denied.
Cita
Reyna v. COA
RUBEN REYNA and LLOYD SORIA, Petitioners, versus COMMISSION ON
AUDIT, Respondent.
(G.R. No. 167219, February 8, 2011, En Banc)
PERALTA, J:
FACTS: The Land Bank of the Philippines (Land Bank) was engaged in a cattle-
financing program wherein loans were granted to various cooperatives.
Pursuant thereto, Land Bank's Ipil, Zamboanga del Sur Branch (Ipil Branch)
went into a massive information campaign offering the program to
cooperatives.Cooperatives who wish to avail of a loan under the program must
fill up a Credit Facility Proposal (CFP) which will be reviewed by the Ipil
Branch. The Ipil Branch approved the applications of four cooperatives.One of
the conditions stipulated in the CFP is that prior to the release of the loan, a
Memorandum of Agreement (MOA) between the supplier of the cattle, Remad
Livestock Corporation (REMAD), and the cooperative, shall have been signed.
As alleged by petitioners, the terms of the CFP allowed for pre-payments or
advancement of the payments prior to the delivery of the cattle by the supplier
REMAD but such was not stipulated in the contracts.
Three checks were issued by the Ipil Branch to REMAD to serve as
advanced payment for the cattle. REMAD, however, failed to supply the cattle
on the dates agreed upon.
In post audit, the Land Bank Auditor disallowed the amount of
P3,115,000.00 under CSB No. 95-005 dated December 27, 1996 and Notices of
Disallowance Nos. 96-014 to 96-019 in view of the non-delivery of the cattle.
Also made as the basis of the disallowance was the fact that advanced payment
was made in violation of bank policies and COA rules and regulations.
Petitioners were made liable for the amount
ISSUE: Whether or not the writing off of a loan is considered as condonation
HELD: The Court rules that writing-off a loan does not equate to a condonation
or release of a debt by the creditor.
As an accounting strategy, the use of write-off is a task that can help a
company maintain a more accurate inventory of the worth of its current assets.
In general banking practice, the write-off method is used when an account is
determined to be uncollectible and an uncollectible expense is recorded in the
books of account.
If in the future, the debt appears to be collectible, as when the debtor
becomes solvent, then the books will be adjusted to reflect the amount to be
collected as an asset. In turn, income will be credited by the same amount of
increase in the accounts receivable.
Write-off is not one of the legal grounds for extinguishing an obligation under
the Civil Code. It is not a compromise of liability. Neither is it a condonation,
since in condonation gratuity on the part of the obligee and acceptance by the
obligor are required. In making the write-off, only the creditor takes action by
removing the uncollectible account from its books even without the approval or
participation of the debtor.
Petition denied.
Cita
Trans Pacific v. Court of Appeals

TRANS-PACIFIC INDUSTRIAL SUPPLIES, INC., Petitioner, versus The
COURT OF APPEALS and ASSOCIATED BANK, Respondents.
BIDIN, J:
FACTS: Sometime in 1979, petitioner applied for and was granted several
financial accommodations amounting to P1,300,000.00 by respondent
Associated Bank. The loans were evidence and secured by four (4) promissory
notes, a real estate mortgage covering three parcels of land and a chattel
mortgage over petitioner's stock and inventories.
Unable to settle its obligation in full, petitioner requested for, and was granted
by respondent bank, a restructuring of the remaining indebtedness which then
amounted to P1,057,500.00, as all the previous payments made were applied
to penalties and interests.
The mortgaged parcels of land were substituted by another mortgage
covering two other parcels of land and a chattel mortgage on petitioner's stock
inventory. The released parcels of land were then sold and the proceeds
amounting to P1,386,614.20, according to petitioner, were turned over to the
bank and applied to Trans-Pacific's restructured loan. Subsequently,
respondent bank returned the duplicate original copies of the three promissory
notes to Trans-Pacific with the word "PAID" stamped thereon. Despite the
return of the notes, or on December 12, 1985, Associated Bank demanded from
Trans-Pacific payment of the amount of P492,100.00 representing accrued
interest on PN No. TL-9077-82. According to the bank, the promissory notes
were erroneously released.
ISSUE: Whether or not petitioner has indeed paid in full its obligation to
respondent bank.
HELD: Art. 1271. The delivery of a private document evidencing a credit,

made voluntarily by the creditor to the debtor, implies the renunciation of the
action which the former had against the latter."
The surrender and return to plaintiffs of the promissory notes evidencing
the consolidated obligation as restructured, produces a legal presumption that
Associated had thereby renounced its actionable claim against plaintiffs (Art.
1271, NCC). The presumption is fortified by a showing that said promissory
notes all bear the stamp "PAID", and has not been otherwise overcome. Upon a
clear perception that Associated's record keeping has been less than exemplary
. . . , a proffer of bank copies of the promissory notes without the "PAID"
stamps thereon does not impress the Court as sufficient to overcome presumed
remission of the obligation vis-a-vis the return of said promissory notes.
Indeed, applicable law is supportive of a finding that in interest bearing
obligations-as is the case here, payment of principal (sic) shall not be deemed
to have been made until the interests have been covered (Art. 1253, NCC).
Conversely, competent showing that the principal has been paid, militates
against postured entitlement to unpaid interests.
Petition denied.
Cita
Dalupan v. Harden
FRANCISCO DALUPAN, Plaintiff-appellant, versus FRED M. HARDEN,
Defendant-appellant.
(G.R. No. L-3975, November 27, 1951, En Banc)
BAUTISTA ANGELO, J:
FACTS: The case is an appeal taken from an order of the First Instance of
Manila dated May 19, 1950, setting aside the writs of execution and
garnishment issued to the sheriff of Manila commanding him to levy on two (2)
checks, one for P9,028.50, and another for P24,546.00, payable to Fred M.
Harden which were then in possession of the receiver appointed in case
involving the liquidation of the conjugal partnership of the spouses Fred M.
Harden and Esperanza P. de Harden.
On August 26, 1948, plaintiff filed an action against the defendant for
the collection of P113,837.17, with interest thereon from the filing of the
complaint, which represents 50 per cent of the reduction plaintiff was able to
secure from the Collector of Internal Revenue in the amount of unpaid taxes
claimed to be due from the defendant. Defendant acknowledged this claim and
prayed that judgment be rendered accordingly. In the meantime, the receiver in
the liquidation case No. R-59634 and the wife of the defendant, Esperanza P.
de Harden, filed an answer in intervention claiming that the amount sought by
the plaintiff was exorbitant and prayed that it be reduced to 10 per cent of the
rebate. By reason of the acquiescence of the defendant to the claim on one
hand, and the opposition of the receiver and of the wife on the other, an
amicable settlement was concluded by the plaintiff and the intervenor whereby
it was agreed that the sum of P22,767.43 be paid to the plaintiff from the funds
under the control of the receiver "and the balance of P91,069.74 shall be
charged exclusively against the defendant Fred M. Harden from whatever share
he may still have in the conjugal partnership between him and Esperanza P. de
Harden.
ISSUE: Whether or not the proffer made by the plaintiff to the defendant is
binding.
HELD: YES, the proffer made by the plaintiff to the defendant is binding.
Examining the terms the court finds that the stipulation limits the right
of the plaintiff to ask for the execution of the judgment to whatever share Fred
M. Harden may still have in the conjugal partnership between him and his wife
after the final liquidation and partition thereof. The execution of the judgment
is premised upon a condition precedent, which is the final liquidation and
partition of the conjugal partnership. Note that the condition does not refer to
the liquidation of a particular property of the partnership. It refers to the over-
all and final liquidation of the partnership. Such being the stipulation of the
parties which was sanctioned and embodied by the Court in its decision, it is
clear that the writ of execution asked for by the plaintiff on the two checks is
premature.
Order affirmed.
Cita
Lopez Vito v. Tambunting

LEONIDES LOPEZ LISO, Plaintiff-appellee, versus MANUEL TAMBUNTING,
Defendant-appellant.
(G.R. No. L-9806, January 19, 1916, En banc)
ARAULLO, J:
FACTS: These proceedings were brought to recover from the defendant the
sum of P2,000, amount of the fees, which, according to the complaint, are
owing for professional medical services rendered by the plaintiff to a daughter
of the defendant from March 10 to July 15, 1913, which fees the defendant
refused to pay, notwithstanding the demands therefor made upon him by the
plaintiff.
The defendant denied the allegations of the complaint, and furthermore
alleged that the obligation which the plaintiff endeavored to compel him to
fulfill was already extinguished.
ISSUE: Whether or not implied condonation can be legally pressumed in the

instant case
HELD: It is true that number 8 of section 334 of the Code of Civil Procedure
provides as a legal presumption "that an obligation delivered up to the debtor
has been paid." Article 1188 of the Civil Code also provides that the voluntary
surrender by a creditor to his debtor, of a private instrument proving a credit,
implies the renunciation of the right of action against the debtor; and article
1189 prescribes that whenever the private instrument which evidences the
debt is in the possession of the debtor, it will be presumed that the creditor
delivered it of his own free will, unless the contrary is proven.
But the legal presumption established by the foregoing provisions of law
cannot stand if sufficient proof is adduced against it. In the case at bar the trial
court correctly held that there was sufficient evidence to the contrary, in view
of the preponderance thereof in favor of the plaintiff and of the circumstances
connected with the defendant's possession of said receipt Exhibit 1.
Furthermore, in order that such a presumption may be taken into account, it
is necessary, as stated in the laws cited, that the evidence of the obligation be
delivered up to the debtor and that the delivery of the instrument proving the
credit be made voluntarily by the creditor to the debtor. In the present case, it
cannot be said that these circumstances concurred, inasmuch as when the
plaintiff sent the receipt to the defendant for the purpose of collecting his fee, it
was not his intention that that document should remain in the possession of
the defendant if the latter did not forthwith pay the amount specified therein.
Judgment appealed from affirmed.
Cita
Estate of Mota v. Serra

TESTATE ESTATE OF LAZARO MOTA, deceased, ET AL., Plaintiffs-
appellants, versus SALVADOR SERRA, Defendant-appellee.
(G.R. No. L-22825, February 14, 1925, En Banc)
VILLAMOR, J:
FACTS: On February 1, 1919, plaintiffs and defendant entered into a contract

of partnership, marked Exhibit A, for the construction and exploitation of a
railroad line from the "San Isidro" and "Palma" centrals to the place known as
"Nandong". The original capital stipulated was P150,000. It was covenanted
that the parties should pay this amount in equal parts and the plaintiffs were
entrusted with the administration of the partnership.
January 29, 1920, the defendant entered into a contract of sale with
Venancio Concepcion, Phil. C. Whitaker, and Eusebio R. de Luzuriaga, whereby
he sold to the latter the estate and central known as "Palma" with its running
business, as well as all the improvements, machineries and buildings, real and
personal properties, rights, choses in action and interests, including the sugar
plantation of the harvest year of 1920 to 1921, covering all the property of the
vendor. Before the delivery to the purchasers of the hacienda thus sold,
Eusebio R. de Luzuriaga renounced all his rights under the contract of January
29, 1920, in favor of Messrs. Venancio Concepcion and Phil. C. Whitaker.
Afterwards, on January 8, 1921, Venancio Concepcion and Phil. C. Whitaker
bought from the plaintiffs the one half of the railroad line pertaining to the
latter executing therefor the document Exhibit 5. The price of this sale was
P237,722.15, excluding any amount which the defendant might be owing to the
plaintiffs.
ISSUE: Whether or not there was confusion of the rights of the creditor and
debtor
HELD: The purchasers, Phil. C. Whitaker and Venancio Concepcion, to secure

the payment of the price, executed a mortgage in favor of the plaintiffs on the
same rights and titles that they had bought and also upon what they had
purchased from Mr. Salvador Serra. In other words, Phil C. Whitaker and
Venancio Concepcion mortgaged unto the plaintiffs what they had bought from
the plaintiffs and also what they had bought from Salvador Serra. If Messrs.
Phil. C. Whitaker and Venancio Concepcion had purchased something from Mr.
Salvador Serra, the herein defendant, regarding the railroad line, it was
undoubtedly the one-half thereof pertaining to Mr. Salvador Serra. This clearly
shows that the rights and titles transferred by the plaintiffs to Phil. C.
Whitatker and Venancio Concepcion were only those they had over the other
half of the railroad line.
Therefore, as already stated, since there was no novation of the contract
between the plaintiffs and the defendant, as regards the obligation of the latter
to pay the former one-half of the cost of the construction of the said railroad
line, and since the plaintiffs did not include in the sale, evidenced by Exhibit 5,
the credit that they had against the defendant, the allegation that the
obligation of the defendant became extinguished by the merger of the rights of
creditor and debtor by the purchase of Messrs. Phil. C. Whitaker and Venancio
Concepcion is wholly untenable.
Judgment appealed from reversed.
Cita
Yek Ton Lin v. Yusingco

THE YEK TONG FIRE and MARINE INSURANCE CO., LTD., Plaintiff-
appellant, versus PELAGIO YUSINGCO, ET AL., Defendants. VICENTE
MADRIGAL, Appellant.
(G.R. No. L-43608, July 20, 1937, En Banc)
DIAZ, J:
FACTS: Defendant Pelagio Yusingco was the owner of the steamship Yusingco
and, as such, he executed, on November 19, 1927, a power of attorney in favor
of Yu Seguioc to administer, lease, mortgage and sell his properties, including
his vessels or steamship. Yu Seguioc mortgaged to the plaintiff Yek Tong Lin
Fire & Marine Insurance Co., Ltd., with the approval of the Bureau of Customs,
the steamship Yusingco belonging to the defendant. One year and some
months later, the steamship Yusingco needed some repairs which were made
by the Earnshaw Docks & Honolulu Iron Works. The repairs were made upon
the guaranty of the defendant and appellant Vicente Madrigal at a cost of
P8,244.66.
When neither A. Yusingco Hermanos nor Pelagio Yusingco could pay said
sum to the Earnshaw Docks & Honolulu Iron Works, the defendant and
appellant Vicente Madrigal had to make payment thereof with the stipulated
interest thereon, which was at the rate of 9 per cent per annum, on March 9,
1932, because he was bound thereto by reason of the bond filed by him, the
payment then made by him having amounted to P8,777.60. When said
defendant discovered that he was not to be reimbursed for the repairs made on
the steamship Yusingco, he brought an action against his codefendant Pelagio
Yusingco and A. Yusingco Hermanos to compel them to reimburse, thereby
giving rise to civil case No. 41654 of the Court of First Instance of Manila,
entitled "Vicente Madrigal, plaintiff, vs. Pelagio Yusingco and A. Yusingco
Hermanos, defendants" which resulted in a judgment favorable to him and
adverse to the Yusingcos.
ISSUE: Whether or not obligations were extinguished by reason of the merger

of the rights of the debtor and creditor.
HELD: After the steamship Yusingco had been sold by virtue of the judicial writ
issued in civil case No. 41654 for the execution of the judgment rendered in
favor of Vicente Madrigal, the only right left to the plaintiff was to collect its
mortgage credit from the purchaser thereof at public auction, inasmuch as the
rule is that a mortgage directly and immediately subjects the property on which
it is imposed, whoever its possessor may be, to the fulfillment of the obligation
for the security of which it was created (article 1876, Civil code); but it so
happens that it cannot take such steps now because it was the purchaser of
the steamship Yusingco at public auction, and it was so with full knowledge
that it had a mortgage credit on said vessel. Obligations are extinguished by
the merger of the rights of the creditor and debtor (articles 1156 and 1192,
Civil Code).
Appealed judgment reversed.
Cita
EGV Realty v. Court of Appeals

E.G.V. REALTY DEVELOPMENT CORPORATION and CRISTINA
CONDOMINIUM CORPORATION, Petitioners, versus COURT OF APPEALS
and UNISHPERE INTERNATIONAL, INC. Respondents.
(G.R. No,120236. July 20, 1999, 1st Division)
KAPUNAN, J:
FACTS:Petitioner E.G.V. Realty Development Corporation is the

owner/developer of a seven-storey condominium building known as Cristina
Condominium. Cristina Condominium Corporation holds title to all common
areas of Cristina Condominium and is in charge of managing, maintaining and
administering the condominiums common areas and providing for the
buildings security. Respondent Unisphere International, Inc. (hereinafter
referred to as Unisphere) is the owner/occupant of Unit 301 of said
condominium. On November 28, 1981, respondent Unispheres Unit 301 was
allegedly robbed of various items valued at P6,165.00. The incident was
reported to petitioner CCC.
On July 25, 1982, another robbery allegedly occurred at Unit 301 where
the items carted away were valued at P6,130.00, bringing the total value of
items lost to P12,295.00. This incident was likewise reported to petitioner CCC.
On October 5, 1982, respondent Unisphere demanded compensation and
reimbursement from petitioner CCC for the losses incurred as a result of the
robbery. On January 28, 1987, petitioners E.G.V. Realty and CCC jointly filed a
petition with the Securities and Exchange Commission (SEC) for the collection
of the unpaid monthly dues in the amount of P13,142.67 against respondent
Unisphere.
ISSUE: Whether or not set-off or compensation has taken place in the instant
case.
HELD: Compensation or offset under the New Civil Code takes place only when
two persons or entities in their own rights, are creditors and debtors of each
other. (Art. 1278).
A distinction must be made between a debt and a mere claim. A debt is
an amount actually ascertained. It is a claim which has been formally passed
upon by the courts or quasi-judicial bodies to which it can in law be submitted
and has been declared to be a debt. A claim, on the other hand, is a debt in
embryo. It is mere evidence of a debt and must pass thru the process
prescribed by law before it develops into what is properly called a debt. Absent,
however, any such categorical admission by an obligor or final adjudication, no
compensation or off-set can take place. Unless admitted by a debtor himself,
the conclusion that he is in truth indebted to another cannot be definitely and
finally pronounced, no matter how convinced he may be from the examination
of the pertinent records of the validity of that conclusion the indebtedness
must be one that is admitted by the alleged debtor or pronounced by final
judgment of a competent court or in this case by the Commission.
There can be no doubt that Unisphere is indebted to the Corporation for
its unpaid monthly dues in the amount of P13,142.67. This is admitted.
Petition granted.
Cita
Aerospace Chemical v. Court of Appeals

AEROSPACE CHEMICAL INDUSTRIES, INC., Petitioner, versus COURT OF
APPEALS, PHILIPPINE PHOSPHATE FERTILIZER, CORP., Respondents.
QUISUMBING, J:
FACTS: On June 27, 1986, petitioner Aerospace Industries, Inc. (Aerospace)

purchased five hundred (500) metric tons of sulfuric acid from private
respondent Philippine Phosphate Fertilizer Corporation (Philphos). Initially set
beginning July 1986, the agreement provided that the buyer shall pay its
purchases in equivalent Philippine currency value, five days prior to the
shipment date. Petitioner as buyer committed to secure the means of transport
to pick-up the purchases from private respondent's loadports. Per agreement,
one hundred metric tons (100 MT) of sulfuric acid should be taken from Basay,
Negros Oriental storage tank, while the remaining four hundred metric tons
(400 MT) should be retrieved from Sangi, Cebu.
On December 18, 1986, M/T Sultan Kayumanggi docked at Sangi, Cebu,
but withdrew only 157.51 MT of sulfuric acid. Again, the vessel tilted. Further
loading was aborted. Two survey reports conducted by the Societe Generale de
Surveillance (SGS) Far East Limited, dated December 17, 1986 and January 2,
1987, attested to these occurrences. Later, on a date not specified in the
record, M/T Sultan Kayumanggi sank with a total of 227.51 MT of sulfuric acid
on board. Petitioner chartered another vessel, M/T Don Victor, with a capacity
of approximately 500 MT.6 [TSN, September 1, 1989, pp. 28-29.] On January
26 and March 20, 1987, Melecio Hernandez, acting for the petitioner,
addressed letters to private respondent, concerning additional orders of
sulfuric acid to replace its sunken purchases.
ISSUE: Whether or not expenses for the storage and preservation of the
purchased fungible goods, namely sulfuric acid, be on seller's account
pursuant to Article 1504 of the Civil Code
HELD: Petitioner tries to exempt itself from paying rental expenses and other
damages by arguing that expenses for the preservation of fungible goods must
be assumed by the seller. Rental expenses of storing sulfuric acid should be at
private respondent's account until ownership is transferred, according to
petitioner. However, the general rule that before delivery, the risk of loss is
borne by the seller who is still the owner, is not applicable in this case because
petitioner had incurred delay in the performance of its obligation. Article 1504
of the Civil Code clearly states: "Unless otherwise agreed, the goods remain at
the seller's risk until the ownership therein is transferred to the buyer, but
when the ownership therein is transferred to the buyer the goods are at the
buyer's risk whether actual delivery has been made or not, except that: (2)
Where actual delivery has been delayed through the fault of either the buyer or
seller the goods are at the risk of the party at fault."
On this score, the Court quoted with approval the findings of the
appellate court, thus: The defendant [herein private respondent] was not
remiss in reminding the plaintiff that it would have to bear the said expenses
for failure to lift the commodity for an unreasonable length of time. But even
assuming that the plaintiff did not consent to be so bound, the provisions of
Civil Code come in to make it liable for the damages sought by the defendant.
Petition denied.
Cita
Apodaca v. NLRC
ERNESTO M. APODACA, Petitioner, versus NATIONAL LABOR RELATIONS
COMMISSION, JOSE M. MIRASOL and INTRANS PHILS., INC.,
Respondents.
GANCAYCO, J:
FACTS: Petitioner was employed in respondent corporation. On August 28,

1985, respondent Jose M. Mirasol persuaded petitioner to subscribe to P1,500
shares of respondent corporation it P100.00 per share or a total of
P150,000.00. He made an initial payment of P37,500.00. On September 1,
1975, petitioner was appointed President and General Manager of the
respondent corporation. However, on January 2, 1986, he resigned.
On December 19, 1986, petitioner instituted with the NLRC a complaint
against private respondents for the payment of his unpaid wages, his cost of
living allowance, the balance of his gasoline and representation expenses and
his bonus compensation for 1986. Petitioner and private respondents
submitted their position papers to the labor arbiter. Private respondents
admitted that there is due to petitioner the amount of P17,060.07 but this was
applied to the unpaid balance of his subscript in the amount of P95,439.93.
Petitioner questioned the set-off alleging that there was no call or notice for the
payment of unpaid subscription and that, accordingly, the alleged obligation is
not enforceable.
ISSUE: Whether or not the National Labor Relations Commission (NLRC) has
jurisdiction to resolve a claim for non-payment of stock subscriptions to a
corporation.
HELD: Firstly, the NLRC has no jurisdiction to determine such intra-corporate

dispute between the stockholder and the corporation as in the matter of unpaid
subscriptions. This controversy is within the exclusive jurisdiction of the
Securities and Exchange Commission.
Secondly, assuming arguendo that the NLRC may exercise jurisdiction
over the said subject matter under the circumstances of this case, the unpaid
subscriptions are not due and payable until a call is made by the corporation
for payment. Private respondents have not presented a resolution of the board
of directors of respondent corporation calling for the payment of the unpaid
subscriptions. It does not even appear that a notice of such call has been sent
to petitioner by the respondent corporation.
Petition granted.
Cita
Sps Chung v. Ulanday Construction

SPOUSES VICTORIANO CHUNG and DEBBIE CHUNG, Petitioners, versus
ULANDAY CONSTRUCTION, INC.,* Respondent.
BRION, J:
FACTS: In February 1985, the petitioners contracted with respondent Ulanday

Construction, Inc. to construct, within a 150-day period,the concrete structural
shell of the formers two-storey residential house in Urdaneta Village, Makati
City at the contract price of P3, 291,142.00.
The contract stipulated among others that the petitioners shall pay a
P987,342.60 downpayment, with the balance to be paid in progress payments
based on actual work completed; (c) the Construction Manager or Architect
shall check the respondents request for progress payment and endorse it to
the petitioners for payment within 3 days from receipt, (d) the petitioners shall
pay the respondents within 7 days from receipt of the Construction Managers
or Architects certificate; (e) the respondent cannot change or alter the plans,
specifications, and works without the petitioners prior written approval.
Respondent gave 12 progress billings but the petitioners were only able to pay
7 of them. On their part, the respondent effected 19 change orders without the
consent of the petitioners amounting to P912, 885.91. Respondents demanded
the remaining balance from the petitioners which the petitioners denied
asserting that the respondents violated the contract.
ISSUE: Whether or not the petitioners are liable for the remaining balance
HELD: In contractual relations, the law allows the parties leeway and considers
their agreement as the law between them.Contract stipulations that are not
contrary to law, morals, good customs, public order or public policy shall be
binding and should be complied with in good faith. No party is permitted to
change his mind or disavow and go back upon his own acts, or to proceed
contrary thereto, to the prejudice of the other party. In the present case, we
find that both parties failed to comply strictly with their contractual
stipulations on the progress billings and change orders that caused the delays
in the completion of the project.
Under the circumstances, fairness and reason dictate that we simply
order the set-off of the petitioners contractual liabilities totaling P575,922.13
against the repair cost for the defective gutter, pegged at P717,524.00, leaving
the amount of P141,601.87 still due from the respondent. Support in law for
this HELD for partial legal compensation proceeds from Articles 1278, 1279,
1281, and 1283 of the Civil Code. In short, both parties are creditors and
debtors of each other, although in different amounts that are already due and
demandable.
Petition granted.
Cita
Insular Investment v. Capital One

INSULAR INVESTMENT and TRUST CORPORATION, Petitioner versus
CAPITAL ONE EQUITIES CORP. (now known as CAPITAL ONE HOLDINGS
CORP.) and PLANTERS DEVELOPMENT BANK, Respondents.
(G.R. No. 183308, April 25, 2012, 3rd Division)
MENDOZA, J:
FACTS: Petitioner Insular Investment and Trust Corporation (IITC) and

respondents Capital One Equities Corporation (COEC) and Planters
Development Bank (PDB) are regularly engaged in the trading, sale and
purchase of Philippine treasury bills. On various dates in 1994, IITC purchased
from COEC treasury bills with an aggregate face value of P260,683,392.51 (the
IITC T-Bills), as evidenced by the confirmations of purchase issued by IITC.
The purchase price for the said treasury bills were fully paid by IITC to COEC
which was able to deliver P121,050,000.00 worth of treasury bills to IITC.
On May 2, 1994, PDB issued confirmations of sale in favor of IITC for the
sale of treasury bills and IITC, in turn, issued confirmations of purchase in
favor of PDB over treasury bills with a total face value of P186,790,000.00.
On May 10, 1994, COEC wrote a letter to IITC demanding the physical
delivery of the treasury bills which the former purchased from the latter on
May 2, 1994. Despite repeated demands, however, PDB failed to deliver the
balance of P136,790,000.00 worth of treasury bills which IITC purchased from
PDB allegedly for COEC.
ISSUE: Whether or not the Regional Trial Court correctly ruled that COEC may
validly set-off its claims for undelivered treasury bills against that of IITCs
claims.
HELD: Yes. The Regional Trial Court correctly ruled that COEC may validly set-
off its claims for undelivered treasury bills against that of IITCs claims.
The Court finds in favor of respondent, COEC, when it pointed out that it
has already unquestionably proven that IITC acted as a principal, and not as a
conduit, in the sale of treasury bills to COEC. Furthermore, it asserts that the
treasury bills in question are generic in nature because the confirmations of
sale and purchase do not mention specific treasury bills with serial numbers.
The securities were sold as indeterminate objects which have a monetary
equivalent, as acknowledged by the parties in the Tripartite Agreement. As
such, because both IITC and COEC are principal creditors of the other over
debts which consist of consumable things or a sum of money, the RTC
correctly ruled that COEC may validly set-off its claims for undelivered
treasury bills against that of IITCs claims.
Petition partially granted.
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Lao, et al. v. Special Plans Inc.

SELWIN LAO and EDGAR MANANSALA, Petitioners versus SPECIAL PLANS,
INC., Respondent
(GR No. 164729; June 29, 2010, 1st Division)
DEL CASTILLO, J:
FACTS: Petitioners Selwyn F. Lao and Edgar Manansala (Manansala), together

with Benjamin Jim (Jim), entered into a Contract of Lease with respondent
Special Plans, Inc. (SPI) for the period January 16, 1993 to January 15, 1995
over SPIs building at No. 354 Quezon Avenue, Quezon City. Petitioners
intended to use the premises for their karaoke and restaurant business known
as Saporro Restaurant.
Upon expiration of the lease contract, it was renewed for a period of eight
months at a monthly rate of P23, 000.00. On June 3, 1996, SPI sent a Demand
Letter to the petitioners asking for full payment of rentals in arrears.Receiving
no payment, SPI filed on July 23, 1996 a Complaint for sum of money with the
MeTC of Quezon City, claiming unpaid rentals of P118, 000.00 covering the
period March 16, 1996 to August 16, 1996.
Petitioners answered faulting SPI for making them believe that it owns
the leased property and that SPI did not deliver the leased premises in a
condition fit for petitioners intended use. Thus, petitioners claimed that they
were constrained to incur expenses for necessary repairs as well as expenses
for the repair of structural defects, which SPI failed and refused to reimburse.
Petitioners prayed that the complaint be dismissed and judgment on their
counterclaims be rendered ordering SPI to pay them the sum of P422, 920.40
as actual damages, as well as moral damages, attorneys fees and exemplary
damages.
ISSUE: Whether or not the cost of repairs incurred by the petitioners should be
compensated against the unpaid rentals.
HELD: Petitioners failed to properly discharge their burden to show that the
debts are liquidated and demandable. Consequently, legal compensation is
inapplicable.
The petitioners attempted to prove that they spent for the repair of the
roofing, ceiling and flooring, as well as for waterproofing. However, they failed
to appreciate that, as per their lease contract, only structural repairs are for
the account of the lessor, herein respondent SPI. In which case, they
overlooked the need to establish that aforesaid repairs are structural in nature,
in the context of their earlier agreement. It would have been an altogether
different matter if the lessor was informed of the said structural repairs and he
implicitly or expressly consented and agreed to take responsibility for the said
expenses. Such want of evidence on this respect is fatal to this appeal.
Consequently, their claim remains unliquidated and, legal compensation is
inapplicable.
Petition denied.
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United Planters Sugar v. Court of Appeals

UNITED PLANTERS SUGAR MILLING CO., INC. (UPSUMCO), Petitioner,
versus
THE HONORABLE COURT OF APPEALS, PHILIPPINE NATIONAL BANK
(PNB) and ASSET PRIVATIZATION TRUST (APT), AS TRUSTEE OF THE
REPUBLIC OF THE PHILIPPINES Respondents.
(G.R. No. 126890, March 9, 2010, En Banc)
PERALTA, J:
FACTS: In 1987, the Republic of the Philippines lost around 1.5 Billion Pesos
after it had waived its right to collect on an outstanding indebtedness from
petitioner, by virtue of a so-called friendly foreclosure agreement that
ultimately was friendly only to petitioner.
Petitioner United Planters Sugar Milling Co. (UPSUMCO) was engaged in
the business of milling sugar. In 1974, as UPSUMCO commenced operations, it
obtained a set of loans from respondent Philippine National Bank (PNB). The
loans were secured over two parcels of land where the milling plant stood and
chattel mortgages over the machineries and equipment.
On 27 February 1987, through a Deed of Transfer, PNB assigned to the
Government its rights, titles and interests over UPSUMCO, among several
other assets.[6] The Deed of Transfer acknowledged that said assignment was
being undertaken in compliance with Presidential Proclamation No. 50. The
Government subsequently transferred these rights, titles and interests over
UPSUMCO to the respondent Asset and Privatization Trust (APT).
ISSUE: Whether or not there was compensation in the present case.
HELD: The right of PNB to set-off payments from UPSUMCO arose out of
conventional compensation rather than legal compensation, even though all of
the requisites for legal compensation were present as between those two
parties. The determinative factor is the mutual agreement between PNB and
UPSUMCO to set-off payments. Even without an express agreement stipulating
compensation, PNB and UPSUMCO would have been entitled to set-off of
payments, as the legal requisites for compensation under Article 1279 were
present.
As soon as PNB assigned its credit to APT, the mutual creditor-debtor
relation between PNB and UPSUMCO ceased to exist. However, PNB and
UPSUMCO had agreed to a conventional compensation, a relationship which
does not require the presence of all the requisites under Article 1279. And PNB
too had assigned all its rights as creditor to APT, including its rights under
conventional compensation. The absence of the mutual creditor-debtor relation
between the new creditor APT and UPSUMCO cannot negate the conventional
compensation. Accordingly, APT, as the assignee of credit of PNB, had the right
to set-off the outstanding obligations of UPSUMCO on the basis of conventional
compensation before the condonation took effect on 3 September 1987.
Motion denied.
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PNB Management v. R&R Metal

PNB MANAGEMENT and DEVELOPMENT CORP. (PNB MADECOR),
Petitioner, versus R&R METAL CASTING and FABRICATING, INC.,
Respondent.
(G.R. No. 132245. January 2, 2002, 2nd Division)
QUISUMBING, J:
FACTS: It appears that on November 19, 1993, respondent R&R Metal Casting
and Fabricating, Inc. (R&R) obtained a judgment in its favor against Pantranco
North Express, Inc. (PNEI). PNEI was ordered to pay respondent P213,050 plus
interest as actual damages, P50,000 as exemplary damages, 25 percent of the
total amount payable as attorneys fees, and the costs of suit. However, the writ
of execution was returned unsatisfied since the sheriff did not find any
property of PNEI recorded at the Registries of Deeds of the different cities of
Metro Manila. Neither did the sheriff receive a reply to the notice of
garnishment he sent to PNB-Escolta.On March 27, 1995, respondent filed with
the trial court a motion for the issuance of subpoenae duces tecum and ad
testificandum requiring petitioner PNB Management and Development Corp.
(PNB MADECOR) to produce and testify on certain documents pertaining to
transactions between petitioner and PNEI from 1981 to 1995.
ISSUE: Whether or not legal compensation have occured in the instant case.
HELD: Legal compensation could not have occurred because of the absence of
one requisite in this case: that both debts must be due and demandable.
Petitioners obligation to PNEI appears to be payable on demand, following the
above observation made by the CA and the assertion made by petitioner.
Petitioner is obligated to pay the amount stated in the promissory note upon
receipt of a notice to pay from PNEI. If petitioner fails to pay after such notice,
the obligation will earn an interest of 18 percent per annum.
Since petitioners obligation to PNEI is payable on demand, and there
being no demand made, it follows that the obligation is not yet due. Therefore,
this obligation may not be subject to compensation for lack of a requisite under
the law. Without compensation having taken place, petitioner remains
obligated to PNEI to the extent stated in the promissory note. This obligation
may undoubtedly be garnished in favor of respondent to satisfy PNEIs
judgment debt.
Petition denied.
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Silahis Marketing Corp. v. IAC

SILAHIS MARKETING CORPORATION, Petitioner, versus
INTERMEDIATE APPELLATE COURT and GREGORIO DE LEON, doing business
under the name and style of "MARK INDUSTRIAL SALES", Respondents.
(G.R.No. 74027, December 7, 1989, 3rd Division)
FERNAN, J.:
FACTS:Petitioner Silahis Marketing Corporation seeks in this petition for review on

certiorari a reversal of the decision of the then Intermediate Appellate Court (IAC) in
AC-G.R. CV No. 67162 entitled "De Leon, etc. v. Silahis Marketing Corporation",
disallowing petitioner's counterclaim for commission to partially offset the claim
against it of private respondent Gregorio de Leon for the purchase price of certain
merchandise. A review of the record shows that on various dates in October,
November and December, 1975, Gregorio de Leon doing business under the name and
style of Mark Industrial Sales sold and delivered to Silahis Marketing Corporation
various items of merchandise covered by several invoices in the aggregate amount of
P22,213.75 payable within thirty (30) days from date of the covering invoices.Allegedly
due to Silahis' failure to pay its account upon maturity despite repeated demands, de
Leon filed before the then Court of First Instance of Manila a complaint for the
collection of the said accounts including accrued interest thereon in the amount of
P661.03 and attorney's fees of P5,000.00 plus costs of litigation.
ISSUE: Whether or not private respondent is liable to the petitioner for the
commission or margin for the direct sale which the former concluded and
consummated with Dole Philippines, Incorporated without coursing the same through
herein petitioner.
HELD: No. Private respondent is not liable to the petitioner for the commission or
margin for the direct sale which the former concluded and consummated with Dole
Philippines, Incorporated without coursing the same through herein petitioner.
It must be remembered that compensation takes place when two persons, in their own
right, are creditors and debtors to each other. Article 1279 of the Civil Code provides
that: "In order that compensation may be proper, it is necessary: [1] that each one of
the obligors be bound principally, and that he be at the same time a principal creditor
of the other; [2] that both debts consist in a sum of money, or if the things due are
consumable, they be of the same kind, and also of the same quality if the latter has
been stated; [3] that the two debts be due; [4] that they be liquidated and demandable;
[5] that over neither of them there be any retention or controversy, commenced by
third persons and communicated in due time to the debtor."
When all the requisites mentioned in Art. 1279 of the Civil Code are present,
compensation takes effect by operation of law, even without the consent or knowledge
of the creditors and debtors. 5 Article 1279 requires, among others, that in order that
legal compensation shall take place, "the two debts be due" and "they be liquidated
and demandable." Compensation is not proper where the claim of the person asserting
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the set-off against the other is not clear nor liquidated; compensation cannot extend to
unliquidated, disputed claim existing from breach of contract. Undoubtedly, petitioner
admits the validity of its outstanding accounts with private respondent in the amount
of P22,213.75 as contained in its answer. But whether private respondent is liable to
pay the petitioner a 20% margin or commission on the subject sale to Dole
Philippines, Inc. is vigorously disputed. This circumstance prevents legal
compensation from taking place.
The Decision of the Appellate Court is Affirmed.
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Francia v. IAC
ENGRACIO FRANCIA, Petitioner, versus
INTERMEDIATE APPELLATE COURT and HO FERNANDEZ, Respondents.
(G.R.No. 67649, June 28, 1998, 3rd Division)
GONZALES, JR., J.:
FACTS: Engracio Francia is the registered owner of a residential lot and a two-story
house built upon it situated at Barrio San Isidro, now District of Sta. Clara, Pasay
City, Metro Manila. On October 15, 1977, a 125 square meter portion of Francia's
property was expropriated by the Republic of the Philippines for the sum of P4,116.00
representing the estimated amount equivalent to the assessed value of the aforesaid
portion.Since 1963 up to 1977 inclusive, Francia failed to pay his real estate taxes.
Thus, on December 5, 1977, his property was sold at public auction by the City
Treasurer of Pasay City pursuant to Section 73 of Presidential Decree No. 464 known
as the Real Property Tax Code in order to satisfy a tax delinquency of P2,400.00. Ho
Fernandez was the highest bidder for the property. Francia was not present during the
auction sale since he was in Iligan City at that time helping his uncle ship bananas.
On March 3, 1979, Francia received a notice of hearing of LRC Case No. 1593-P "In re:
Petition for Entry of New Certificate of Title" filed by Ho Fernandez, seeking the
cancellation of TCT No. 4739 (37795) and the issuance in his name of a new certificate
of title. On March 20, 1979, Francia filed a complaint to annul the auction sale. He
later amended his complaint on January 24, 1980.
ISSUE: Whether or not Francias tax delinquency of P2,400.00 has been extinguished
by legal compensation.
HELD: No. Francias tax delinquency of P2,400.00 has not been extinguished by legal
compensation.
There is no legal basis for the contention. By legal compensation, obligations of

persons, who in their own right are reciprocally debtors and creditors of each other,
are extinguished (Art. 1278, Civil Code). The circumstances of the case do not satisfy
the requirements provided by Article 1279, to wit:
"(1) that each one of the obligors be bound principally and that he be at the same time
a principal creditor of the other;
We have consistently ruled that there can be no off-setting of taxes against the claims
that the taxpayer may have against the government. A person cannot refuse to pay a
tax on the ground that the government owes him an amount equal to or greater than
the tax being collected. The collection of a tax cannot await the results of a lawsuit
against the government.
A claim for taxes is not such a debt, demand, contract or judgment as is

allowed to be set-off under the statutes of set-off, which are construed uniformly, in
the light of public policy, to exclude the remedy in an action or any indebtedness of
the state or municipality to one who is liable to the state or municipality for taxes.
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Neither are they a proper subject of recoupment since they do not arise out of the
contract or transaction sued on. "The general rule based on grounds of public policy is
well-settled that no set-off admissible against demands for taxes levied for general or
local governmental purposes. The reason on which the general rule is based, is that
taxes are not in the nature of contracts between the party and party but grow out of
duty to, and are the positive acts of the government to the making and enforcing of
which, the personal consent of individual taxpayers is not required.
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Trinidad v. Acapulco
HERMENEGILDO M. TRINIDAD, Petitioner, versus

ESTRELLA ACAPULCO, Respondent
(G.R.No. 147477, June 27, 2006, 1st Division)
FACTS:On May 6, 1991, respondent Estrella Acapulco filed a Complaint before the
RTC seeking the nullification of a sale she made in favor of petitioner Hermenegildo M.
Trinidad. She alleged: Sometime in February 1991, a certain Primitivo Caete
requested her to sell a Mercedes Benz for P580,000.00. Caete also said that if
respondent herself will buy the car, Caete was willing to sell it for P500,000.00.
Petitioner borrowed the car from respondent for two days but instead of returning the
car as promised, petitioner told respondent to buy the car from Caete for
P500,000.00 and that petitioner would pay respondent after petitioner returns from
Davao. Following petitioners instructions, respondent requested Caete to execute a
deed of sale covering the car in respondents favor for P500,000.00 for which
respondent issued three checks in favor of Caete. Respondent thereafter executed a
deed of sale in favor of petitioner even though petitioner did not pay her any
consideration for the sale. When petitioner returned from Davao, he refused to pay
respondent the amount of P500,000.00 saying that said amount would just be
deducted from whatever outstanding obligation respondent had with petitioner. Due
to petitioners failure to pay respondent, the checks that respondent issued in favor of
Caete bounced, thus criminal charges were filed against her. Respondent then
prayed that the deed of sale between her and petitioner be declared null and void; that
the car be returned to her; and that petitioner be ordered to pay damages.
ISSUE:Whether or not petitioners claim for legal compensation was already too late
HELD: No. Petitioners claim for legal compensation was not too late.
The court ruled in favor of the petitioner. Compensation takes effect by operation of
law even without the consent or knowledge of the parties concerned when all the
requisites mentioned in Article 1279 of the Civil Code are present. This is in
consonance with Article 1290 of the Civil Code which provides that: Article 1290.
When all the requisites mentioned in article 1279 are present, compensation takes
effect by operation of law, and extinguishes both debts to the concurrent amount, even
though the creditors and debtors are not aware of the compensation. Since it takes
place ipso jure, when used as a defense, it retroacts to the date when all its requisites
are fulfilled.
Petitioners stance is that legal compensation has taken place and operates
even against the will of the parties because: (a) respondent and petitioner were
personally both creditor and debtor of each other; (b) the monetary obligation of
respondent was P566,000.00 and that of the petitioner was P500,000.00 showing that
both indebtedness were monetary obligations the amount of which were also both
known and liquidated; (c) both monetary obligations had become due and
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demandablepetitioners obligation as shown in the deed of sale and respondents

indebtedness as shown in the dishonored checks; and (d) neither of the debts or
obligations are subject of a controversy commenced by a third person.
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Heirs of Franco v. Sps. Gonzales

HEIRS OF SERVANDO FRANCO, Petitioners, versus
SPOUSES VERONICA AND DANILO GONZALES, Respondents.
BERSAMIN, J.:
FACTS: On November 7, 1985, Servando Franco and Leticia Medel (hereafter
Servando and Leticia) obtained a loan from Veronica R. Gonzales (hereafter
Veronica), who was engaged in the money lending business under the name
Gonzales Credit Enterprises, in the amount of P50,000.00, payable in two
months. Veronica gave only the amount of P47,000.00, to the borrowers, as
she retained P3,000.00, as advance interest for one month at 6% per month.
Servado and Leticia executed a promissory note for P50,000.00, to evidence the
loan, payable on January 7, 1986. On November 19, 1985, Servando and
Leticia obtained from Veronica another loan in the amount of P90,000.00,
payable in two months, at 6% interest per month. They executed a promissory
note to evidence the loan, maturing on January 19, 1986. They received
only P84,000.00, out of the proceeds of the loan.
On maturity of the two promissory notes, the borrowers failed to pay the
indebtedness.
On June 11, 1986, Servando and Leticia secured from Veronica still
another loan in the amount of P300,000.00, maturing in one month, secured by
a real estate mortgage over a property belonging to Leticia Makalintal
Yaptinchay, who issued a special power of attorney in favor of Leticia Medel,
authorizing her to execute the mortgage. Servando and Leticia executed a
promissory note in favor of Veronica to pay the sum of P300,000.00, after a
month, or on July 11, 1986. However, only the sum of P275,000.00, was given
to them out of the proceeds of the loan.
Like the previous loans, Servando and Medel failed to pay the third
loan on maturity.
ISSUE: Whether or not there was a novation of the August 23, 1986 promissory
note when respondent Veronica Gonzales issued the February 5, 1992 receipt.
HELD: No. There was no novation of the August 23, 1986 promissory note
when respondent Veronica Gonzales issued the February 5, 1992 receipt.
A novation arises when there is a substitution of an obligation by a

subsequent one that extinguishes the first, either by changing the object or the
principal conditions, or by substituting the person of the debtor, or by
subrogating a third person in the rights of the creditor. For a valid novation to
take place, there must be, therefore: (a) a previous valid obligation; (b) an
agreement of the parties to make a new contract; (c) an extinguishment of the
old contract; and (d) a valid new contract. In short, the new obligation
extinguishes the prior agreement only when the substitution is unequivocally
declared, or the old and the new obligations are incompatible on every point. A
compromise of a final judgment operates as a novation of the judgment
obligation upon compliance with either of these two conditions.
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To be clear, novation is not presumed. This means that the parties to a contract
should expressly agree to abrogate the old contract in favor of a new one. In the
absence of the express agreement, the old and the new obligations must be
incompatible on every point. The issuance of the receipt created no new obligation.
Instead, the respondents only thereby recognized the original obligation by stating in
the receipt that the P400,000.00 was partial payment of loan and by referring to the
promissory note subject of the case in imposing the interest. The loan mentioned in
the receipt was still the same loan involving the P500,000.00 extended to
Servando. Advertence to the interest stipulated in the promissory note indicated that
the contract still subsisted, not replaced and extinguished, as the petitioners claim.
The Court AFFIRMS the decision of the Court of Appeals promulgated on

March 19, 2003.
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Hernandez-Nievera v. Hernandez
CAROLINA HERNANDEZ-NIEVERA, DEMETRIO P. HERNANDEZ, JR., and
MARGARITA H. MALVAR, Petitioners, versus WILFREDO HERNANDEZ, HOME
INSURANCE AND GUARANTY CORPORATION, PROJECT MOVERS REALTY AND
DEVELOPMENT CORPORATION, MARIO P. VILLAMOR and LAND BANK OF THE
PHILIPPINES, Respondents.
(GR No. 171165, February 14, 2011, 2nd Division)
PERALTA, J.:
FACTS:Project Movers Realty & Development Corporation (PMRDC) is a duly organized

domestic corporation engaged in real estate development. It entered into a
Memorandum of Agreement (MOA) whereby it was given the option to buy pieces of
land owned by petitioners Carolina Hernandez-Nievera, Margarita H. Malvar and
Demetrio P. Hernandez, Jr. Demetrio, under authority of a Special Power of Attorney
to Sell or Mortgage, signed the MOA also in behalf of Carolina and Margarita. In the
aggregate, the realty measured 4,580,451 square meters and was segregated by
agreement into Area I and Area II.
On March 23, 1998, the PMRDC entered with LBP and Demetrio - the latter
purportedly acting under authority of the same special power of attorney as in the
MOA - into a Deed of Assignment and Conveyance (DAC). PMRDC delivered to
petitioners certain checks representing the money, the same however allegedly
bounced. Hence, on January 8, 1999, petitioners demanded the return of the
corresponding TCTs over the land but PMRDC said that the TCTs could no longer be
delivered back to petitioners as the covered properties had already been conveyed and
assigned to the Asset Pool pursuant to the March 23, 1998 DAC. Petitioner contended
that Demetrio could not have entered into the said agreement as his power of attorney
was limited only to selling or mortgaging the properties and not conveying the same to
the Asset Pool.
ISSUE:Whether or not the novation of the MOA is valid.
HELD: No. The novation of the MOA is invalid.

Thus, it becomes clear that Demetrio's special power of attorney to sell is sufficient to
enable him to make a binding commitment under the DAC in behalf of Carolina and
Margarita. In particular, it does include the authority to extinguish PMRDC's
obligation under the MOA to deliver option money and agree to a more flexible term by
agreeing instead to receive shares of stock in lieu thereof and in consideration of the
assignment and conveyance of the properties to the Asset Pool. Indeed, the terms of
his special power of attorney allow much leeway to accommodate not only the terms of
the MOA but also those of the subsequent agreement in the DAC which, in this case,
necessarily and consequently has resulted in a novation of PMRDC's integral
obligations.
There are two ways which could indicate, in fine, the presence of novation and
thereby produce the effect of extinguishing an obligation by another which substitutes
the same. The first is when novation has been explicitly stated and declared in
unequivocal terms. The second is when the old and the new obligations are
incompatible on every point. The test of incompatibility is whether the two obligations
can stand together, each one having its independent existence. If they cannot, they
are incompatible, and the latter obligation novates the first.
Petition is denied.
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St. James College of Paranaque v. Equitable PCI

ST. JAMES COLLEGE OF PARAAQUE; JAIME T. TORRES, represented by his
legal representative, JAMES KENLEY M. TORRES; and MYRNA M.
TORRES, Petitioners, versus EQUITABLE PCI BANK, Respondent.
(GR No. 179441, August 9, 2010, 1st Division)
VELASCO, JR., J.;
FACTS:Petitioners-spouses owned and operated St. James College of Paranaque.

Sometime in 1995, the Philippine Commercial and International Bank (PCIB),
respondent, granted the Torres spouses and/or St. James College a credit line facility
of up to 25,000,000 secured by a real estate mortgage over a parcel of land in
Paranaque. Petitioners had defaulted in the payment of the loan obtained from the
secured credit accommodation, their total unpaid loan obligation, as of September
2001, stood at 18,300,000. Respondent proposed a payment scheme to pay annually
which the petitioners agreed upon but failed to comply with. Respondent then
demanded full settlement of the loan. Petitioners contended that the the full amount is
still not due owing to the implied novation of the terms of payment previously agreed
upon. As petitioners assert in this regard that the acceptance by respondent,
particularly of the June 23, 2003 PhP 2,521,609.62 payment, without any objection
on the new terms set forth in their June 23, 2003 complementing covering letter,
novated the terms of payment of the 18,300,000 secured loan.
ISSUE: Whether or not there was novation of contract
HELD: No. There was no novation of contract.

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

following requisites must concur:
1) There must be a previous valid obligation.
2) The parties concerned must agree to a new contract.
3) The old contract must be extinguished.
4) There must be a valid new contract.
Petition is denied.
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Tomimbang v. Tomimbang
MARIA SOLEDAD TOMIMBANG, Petitioner, versus ATTY. JOSE
TOMIMBANG, Respondent.
(GR No. 165116, August 4, 2009, 3rd Division)
PERALTA, J.;
FACTS:Petitioner and respondent are siblings. Their parents donated to petitioner an

eight-door apartment located at 149 Santolan Road, Murphy, Quezon City. Petitioner
failed to obtain a loan from PAG-IBIG Fund, hence, respondent offered to extend a
credit line to petitioner on the following conditions: (1) petitioner shall keep a record of
all the advances; (2) petitioner shall start paying the loan upon the completion of the
renovation; (3) upon completion of the renovation, a loan and mortgage agreement
based on the amount of the advances made shall be executed by petitioner and
respondent; and (4) the loan agreement shall contain comfortable terms and
conditions which petitioner could have obtained from PAG-IBIG.
A conflict between the siblings ensued leading to a new agreement whereby
petitioner was to start making monthly payments on her loan. Upon respondent's
demand, petitioner turned over to respondent all the records of the cash advances for
the renovations. Subsequently, or from June to October of 1997, petitioner made
monthly payments of P18, 700.00, or a total ofP93, 500.00. Petitioner never denied
the fact that she started making such monthly payments. Thereafter, the petitioner
can no longer be found and also stopped making the monthly payments. Thus, a
complaint was filed against the petitioner demanding payment of the loan plus
interest. Petitioner contended that the loan is not yet due and demandable as the
renovation of the apartment is not yet completed.
ISSUE: Whether or not the loan is already due and demandable.
HELD: Yes. The loan is already due and demandable.
The loan is already due and demandable due to the subsequent agreement
entered in to by the parties.
Article 1291 of the Civil Code provides, thus:
Art. 1291. Obligations may be modified by:

(1) Changing their object or principal conditions;
(2) Substituting the person of the debtor;
(3) Subrogating a third person in the rights of the creditor.
The petitioner admitted that she started to comply with the demand of the
respondent to pay on a monthly basis. Her partial performance of her obligation is
unmistakable proof that indeed the original agreement between her and respondent
had been novated by the deletion of the condition that payments shall be made only
after completion of renovations. Hence, by her very own admission and partial
performance of her obligation, there can be no other conclusion but that under the
novated agreement, petitioner's obligation is already due and demandable.
Petition is affirmed with modification.
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Mindanao Savings and Loan Association, Inc. v. Willkom
MINDANAO SAVINGS AND LOAN ASSOCIATION, INC., represented by its

Liquidator, THE PHILIPPINE DEPOSIT INSURANCE CORPORATION, Petitioner,
versus EDWARD WILLKOM; GILDA GO; REMEDIOS UY; MALAYO BANTUAS, in his
capacity as the Deputy Sheriff of Regional Trial Court, Branch 3, Iligan City; and
the REGISTER OF DEEDS of Cagayan de Oro City, Respondent.
(GR No. 178618, October 11, 2010, 2nd Division)
NACHURA, J.;
FACTS:The First Iligan Savings and Loan Association, Inc. (FISLAI) and
the Davao Savings and Loan Association, Inc. (DSLAI) banks that entered into a
merger, with DSLAI as the surviving corporation. The articles of merger were
not registered with the SEC but when DSLAI changed its corporate name to MSLAI the
amendment was approved by the SEC.Meanwhile, the Board of Directors of FISLAI
passed a resolution, assigning its assets in favor of DSLAI which in turn assumed the
formers liabilities.The business of MSLAI, however, failed was ordered its closure and
placed under receivership.
Prior to the closure of MSLAI, Uy filed an action for collection of sum of money
against FISLAI. The RTC issued a summary decision in favor of Uy, directing
defendants therein (which included FISLAI) to pay the former the sum of P136,
801.70. Therafter,sheriff Bantuas levied on six (6) parcels of land owned by FISLAI and
Willkom was the highest bidder. New certificates of title covering the subject
properties were issued in favor of Willkom who sold one of the subject parcels of land
to Go.
MSLAI, represented by PDIC, filed a complaint forAnnulment of Sheriffs Sale,
Cancellation of Title and Reconveyance of Properties against respondents.
Therespondents averred that MSLAI had no cause of action against them or the right
to recover the subject properties because MSLAI is a separate and distinct entity from
FISLAI as the merger did not take effect.
ISSUE: Whether or not there was novation of the obligation by substituting the person
of the debtor
HELD: No. There was no novation of the obligation by substituting the person of the
debtor.
It is a rule that novation by substitution of debtor must always be made with the
consent of the creditor. Article 1293 of the Civil Code is explicit, thus:
Art. 1293. Novation which consists in substituting a new debtor in the place of
the original one, may be made even without the knowledge or against the will of the
latter, but not without the consent of the creditor. Payment by the new debtor gives
him the rights mentioned in Articles 1236 and 1237.
In this case, there was no showing that Uy, the creditor, gave her consent to the
agreement that DSLAI (now MSLAI) would assume the liabilities of FISLAI. Such
agreement cannot prejudice Uy. Thus, the assets that FISLAI transferred to DSLAI
remained subject to execution to satisfy the judgment claim of Uy against FISLAI. The
subsequent sale of the properties by Uy to Willkom, and of one of the properties by
Willkom to Go, cannot, therefore, be questioned by MSLAI.
The consent of the creditor to a novation by change of debtor is as
indispensable as the creditors consent in conventional subrogation in order that a
novation shall legally take place. Since novation implies a waiver of the right which the
creditor had before the novation, such waiver must be express.
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Petition is denied.
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Aquintey v. Sps. Tibong

AGRIFINA AQUINTEY, Petitioner, versus SPOUSES FELICIDAD AND RICO
TIBONG, Respondents.
CALLEJO, SR., J.;
FACTS:On May 6, 1999, petitioner Aquintey filed before RTC Baguio, a complaint for
sum of money and damages against respondents. Agrifina alleged that Felicidad
secured loans from her on several occasions at monthly interest rates of 6% to 7%.
Despite demands, spouses Tibong failed to pay their outstanding loans of P773,000,00
exclusive of interests. However, spouses Tiong alleged that they had executed deeds of
assignment in favor of Agrifina amounting to P546,459 and that their debtors had
executed promissory notes in favor of Agrifina. Spouses insisted that by virtue of these
documents, Agrifina became the new collector of their debts. Agrifina was able to
collect the total amount of P301,000 from Felicdads debtors. She tried to collect the
balance of Felicidad and when the latter reneged on her promise, Agrifina filed a
complaint in the office of the barangay for the collection of P773,000.00. There was no
settlement. RTC favored Agrifina. Court of Appeals affirmed the decision with
modification ordering defendant to pay the balance of total indebtedness in the
amount of P51,341,00 plus 6% per month.
ISSUE: Whether or not there is valid novation in the instant case.
HELD: Yes. There is valid novation in the instant case.
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. Substitution of the person of the debtor may be
effected by delegacion, meaning, the debtor offers, and the creditor, accepts a third
person who consents to the substitution and assumes the obligation. Thus, the
consent of those three persons is necessary. In this kind of novation, it is not enough
to extend the juridical relation to a third person; it is necessary that the old debtor be
released from the obligation, and the third person or new debtor take his place in the
relation. Without such release, there is no novation; the third person who has
assumed the obligation of the debtor merely becomes a co-debtor or a surety. If there
is no agreement as to solidarity, the first and the new debtor are considered obligated
jointly.
In the case at bar, the court found that respondents obligation to pay the
balance of their account with petitioner was extinguished, pro tanto, by the deeds of
assignment of credit executed by respondent Felicidad in favor of petitioner. As
gleaned from the deeds executed by respondent Felicidad relative to the accounts of
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her other debtors, petitioner was authorized to collect the amounts of P6,000.00 from
Cabang, and P63,600.00 from Cirilo. They obliged themselves to pay petitioner.
Respondent Felicidad, likewise,unequivocably declared that Cabang and Cirilo no
longer had any obligation to her.
Petition is denied.
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Loadmasters Customs Services, Inc. v. Glodel Brokerage Corp.

LOADMASTERS CUSTOMS SERVICES, INC., Petitioner, versus GLODEL
BROKERAGE CORPORATION and R&B INSURANCE CORPORATION, Respondents.
MENDOZA, J.:
FACTS: On August 28, 2001, R&B Insurance issued Marine Policy No. MN
00105/2001 in favor of Columbia to insure the shipment of 132 bundles of electric
copper cathodes against All Risks. On August 28, 2001, the cargoes were shipped on
board the vessel "Richard Rey" from Isabela, Leyte, to Pier 10, North Harbor, Manila.
They arrived on the same date.
Columbia engaged the services of Glodel for the release and withdrawal of the
cargoes from the pier and the subsequent delivery to its warehouses/plants. Glodel, in
turn, engaged the services of Loadmasters for the use of its delivery trucks to
transport the cargoes to Columbias warehouses/plants in Bulacan
and Valenzuela City.
The goods were loaded on board twelve (12) trucks owned by Loadmasters,
driven by its employed drivers and accompanied by its employed truck helpers. Of the
six (6) trucks route to Balagtas, Bulacan, only five (5) reached the destination. One (1)
truck, loaded with 11 bundles or 232 pieces of copper cathodes, failed to deliver its
cargo.
Later on, the said truck, was recovered but without the copper cathodes.
Because of this incident, Columbia filed with R&B Insurance a claim for insurance
indemnity in the amount ofP1,903,335.39. After the investigation, R&B Insurance
paid Columbia the amount ofP1,896,789.62 as insurance indemnity.
R&B Insurance, thereafter, filed a complaint for damages against both

Loadmasters and Glodel before the Regional Trial Court, Branch 14, Manila (RTC), It
sought reimbursement of the amount it had paid to Columbia for the loss of the
subject cargo. It claimed that it had been subrogated "to the right of the consignee to
recover from the party/parties who may be held legally liable for the loss."
On November 19, 2003, the RTC rendered a decision holding Glodel liable for
damages for the loss of the subject cargo and dismissing Loadmasters counterclaim
for damages and attorneys fees against R&B Insurance.
ISSUE: Whether or not Loadmasters and Glodel are common carriers to determine
their liability for the loss of the subject cargo.
HELD: Yes. Loadmasters and Glodel are common carriers to determine their liability
for the loss of the subject cargo.
Under Article 1732 of the Civil Code, common carriers are persons, corporations,
firms, or associations engaged in the business of carrying or transporting passenger or
goods, or both by land, water or air for compensation, offering their services to the
public. Loadmasters and Glodel, being both common carriers, are mandated from the
nature of their business and for reasons of public policy, to observe the extraordinary
diligence in the vigilance over the goods transported by them according to all the
circumstances of such case, as required by Article 1733 of the Civil Code.
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Loadmasters should be made answerable for the damages caused by its

employees who acted within the scope of their assigned task of delivering the goods
safely to the warehouse. Glodel is also liable because of its failure to exercise
extraordinary diligence. It failed to ensure that Loadmasters would fully comply with
the undertaking to safely transport the subject cargo to the designated destination.
Glodel should, therefore, be held liable with Loadmasters.
The petition is partially granted.
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Metropolitan Bank v. Rural Bank of Gerona

METROPOLITAN BANK AND TRUST COMPANY, Petitioner, versus RURAL BANK OF
GERONA, INC. Respondent.
BRION, J.:
FACTS: RBG is a rural banking corporation organized under Philippine laws and
located in Gerona, Tarlac. In the 1970s, the Central Bank and the RBG entered into
an agreement providing that RBG shall facilitate the loan applications of farmers-
borrowers under the Central Bank-International Bank for Reconstruction and
Developments (IBRDs) 4th Rural Credit Project. The agreement required RBG to open
a separate bank account where the IBRD loan proceeds shall be deposited. The RBG
accordingly opened a special savings account with Metrobanks Tarlac Branch. As the
depository bank of RBG, Metrobank was designated to receive the credit advice
released by the Central Bank representing the proceeds of the IBRD loan of the
farmers-borrowers; Metrobank, in turn, credited the proceeds to RBGs special savings
account for the latters release to the farmers-borrowers.
On September 27, 1978, the Central Bank released a credit advice in
Metrobanks favor and accordingly credited Metrobanks demand deposit account in
the amount of P178,652.00, for the account of RBG. The amount, which was credited
to RBGs special savings account represented the approved loan application of farmer-
borrower Dominador de Jesus. RBG withdrew the P178,652.00 from its account.
On the same date, the Central Bank approved the loan application of another
farmer-borrower, Basilio Panopio, for P189,052.00, and credited the amount to
Metrobanks demand deposit account. Metrobank, in turn, credited RBGs special
savings account. Metrobank claims that the RBG also withdrew the entire credited
amount from its account.
On October 3, 1978, the Central Bank approved Ponciano Lagmans loan
application for P220,000.00. As with the two other IBRD loans, the amount was
credited to Metrobanks demand deposit account, which amount Metrobank later
credited in favor of RBGs special savings account. Of the P220,000.00, RBG only
withdrew P75,375.00.
On November 3, 1978, more than a month after RBG had made the above
withdrawals from its account with Metrobank, the Central Bank issued debit advices,
reversing all the approved IBRD loans.6 The Central Bank implemented the reversal by
debiting from Metrobanks demand deposit account the amount corresponding to all
three IBRD loans.
ISSUE: Whether or not the farmers-borrowers to whom credits have been extended,
are primarily liable for the payment of the borrowed amounts.
HELD: Yes. The farmers-borrowers to whom credits have been extended, are primarily
liable for the payment of the borrowed amounts.
The Terms and Conditions of the IBRD 4th Rural Credit Project (Project Terms and
Conditions) executed by the Central Bank and the RBG shows that the farmers-
borrowers to whom credits have been extended, are primarily liable for the payment of
the borrowed amounts. The loans were extended through the RBG which also took
care of the collection and of the remittance of the collection to the Central Bank. RBG,
however, was not a mere conduit and collector. While the farmers-borrowers were the
principal debtors, RBG assumed liability under the Project Terms and Conditions by
solidarily binding itself with the principal debtors to fulfill the obligation.1awphi
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Swagman Hotels and Travel, Inc. v. Court of Appeals

SWAGMAN HOTELS AND TRAVEL, INC., Petitioners, versus HON. COURT OF
APPEALS, and NEAL B. CHRISTIAN, Respondents.
(G.R.No. 161135, April 8, 2005, 1st Division)
DAVIDE, JR., J.;
FACTS:Sometime in 1996 and 1997, petitioner Swagman Hotels and Travel, Inc.,
through Atty. Leonor L. Infante and Rodney David Hegerty, its president and vice-
president, respectively, obtained from private respondent Neal B. Christian loans
evidenced by three promissory notes dated 7 August 1996, 14 March 1997, and 14
July 1997. Each of the promissory notes is in the amount of US$50,000 payable after
three years from its date with an interest of 15% per annum payable every three
months. In a letter dated 16 December 1998, Christian informed the petitioner
corporation that he was terminating the loans and demanded from the latter payment
in the total amount of US$150,000 plus unpaid interests in the total amount of
US$13,500. On 2 February 1999, private respondent Christian filed with the Regional
Trial Court of Baguio City, Branch 59, a complaint for a sum of money and damages
against the petitioner corporation, Hegerty, and Atty. Infante. The petitioner
corporation, together with its president and vice-president, filed an Answer raising as
defenses lack of cause of action and novation of the principal obligations. According
to them, Christian had no cause of action because the three promissory notes were
not yet due and demandable.
ISSUE: Whether or not there is a valid novation, may the original terms of contract
which has been novated still prevail.
HELD: Yes. There is a valid novation, the original terms of contract which has been
novated may still prevail.
The receipts, as well as private respondents summary of payments, lend credence to

petitioners claim that the payments were for the principal loans and that the interests
on the three consolidated loans were waived by the private respondent during the
undisputed renegotiation of the loans on account of the business reverses suffered by
the petitioner at the time.
There was therefore a novation of the terms of the three promissory notes in
that the interest was waived and the principal was payable in monthly installments of
US$750. Alterations of the terms and conditions of the obligation would generally
result only in modificatory novation unless such terms and conditions are considered
to be the essence of the obligation itself.[25] The resulting novation in this case was,
therefore, of the modificatory type, not the extinctive type, since the obligation to pay a
sum of money remains in force.
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Thus, since the petitioner did not renege on its obligation to pay the monthly
installments conformably with their new agreement and even continued paying
during the pendency of the case, the private respondent had no cause of action to file
the complaint. It is only upon petitioners default in the payment of the monthly
amortizations that a cause of action would arise and give the private respondent a
right to maintain an action against the petitioner.
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Yuseco v. Court of Appeals

AZOLLA FARMS and FRANCISCO R. YUSECO, Petitioners, versus COURT OF
APPEALS and SAVINGS BANK OF MANILA, Respondents.
(G.R.No. 138085, November 11, 2004, 2nd Division)
AUSTRIA-MARTINEZ, J.;
FACTS:Petitioner Francis R. Yuseco, Jr., is the Chairman, President and Chief

Operating Officer of petitioner Azolla Farms International Philippines. In 1982, Azolla
Farms undertook to participate in the National Azolla Production Program wherein it
will purchase all the Azolla produced by the Azolla beneficiaries in the amount not
exceeding the peso value of all the inputs provided to them. The project also involves
the then Ministry of Agriculture, the Kilusang Kabuhayan at Kaunlaran, and the
Kiwanis. To finance its participation, petitioners applied for a loan with Credit Manila,
Inc., which the latter endorsed to its sister company, respondent Savings Bank of
Manila (Savings Bank). The Board of Directors of Azolla Farms, meanwhile, passed a
board resolution on August 31, 1982, authorizing Yuseco to borrow from Savings
Bank in an amount not exceeding P2,200,000.00.
The loan having been approved, Yuseco executed a promissory note on

September 13, 1982, promising to pay Savings Bank the sum of P1,400,000.00 on or
before September 13, 1983. the Azolla Farms project collapsed. Blaming Savings
Bank, petitioners Yuseco and Azolla Farms filed on October 3, 1983 with the Regional
Trial Court of Manila (Branch 25), a complaint for damages. In essence, their
complaint alleges that Savings Bank unjustifiably refused to promptly release the
remaining P300,000.00 which impaired the timetable of the project and inevitably
affected the viability of the project resulting in its collapse, and resulted in their failure
to pay off the loan. Thus, petitioners pray for P1,000,000.00 as actual damages,
among others.
ISSUE: Whether or not the trial court erred in admitting petitioners amended
complaint.
HELD: No. The trial court did not err in admitting petitioners amended complaint.
SEC. 5. Amendment to conform to or authorize presentation of evidence .When

issues not raised by the pleadings are tried by express or implied consent of the
parties, they shall be treated in all respects, as if they had been raised in the
pleadings. Such amendment of the pleadings as may be necessary to cause them to
conform to the evidence and to raise these issues may be made upon motion of any
party at any time, even after judgment; but failure so to amend does not affect the
result of the trial of these issues. If evidence is objected to at the trial on the ground
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that it is not within the issues made by the pleadings, the court may allow the
pleadings to be amended and shall do so freely when the presentation of the merits of
the action will be subserved thereby and the objecting party fails to satisfy the court
that the admission of such evidence would prejudice him in maintaining his action or
defense upon the merits.
As can be gleaned from the records, it was petitioners belief that respondents
evidence justified the amendment of their complaint. The trial court agreed thereto
and admitted the amended complaint. On this score, it should be noted that courts
are given the discretion to allow amendments of pleadings to conform to the evidence
presented during the trial.
Petition is denied.
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California bus lines, inc. V. State investment house, Inc.

CALIFORNIA BUS LINES, INC., Petitioner, versus STATE INVESTMENT HOUSE,
INC., Respondent.
(G.R.No. 147950, December 11, 2003, 2nd Division)
QUISUMBING, J.;
FACTS:Sometime in 1979, Delta Motors CorporationM.A.N. Division (Delta) applied

for financial assistance from respondent State Investment House, Inc.
SIHI agreed to extend a credit line to Delta for P25,000,000.00 in three separate credit
agreements dated May 11, June 19, and August 22, 1979. Delta eventually became
indebted to SIHI to the tune of P24,010,269.32
From April 1979 to May 1980, petitioner California Bus Lines, Inc. (hereafter
CBLI), purchased on installment basis 35 units of M.A.N. Diesel Buses and two (2)
units of M.A.N. Diesel Conversion Engines from Delta. To secure the payment of the
purchase price of the 35 buses, CBLI and its president, Mr. Dionisio O. Llamas,
executed sixteen (16) promissory notes in favor of Delta on January 23 and April 25,
1980.[5] In each promissory note, CBLI promised to pay Delta or order, P2,314,000
payable in 60 monthly installments starting August 31, 1980, with interest at 14% per
annum. CBLI further promised to pay the holder of the said notes 25% of the amount
due on the same as attorneys fees and expenses of collection, whether actually
incurred or not, in case of judicial proceedings to enforce collection. In addition to the
notes, CBLI executed chattel mortgages over the 35 buses in Deltas favor. When CBLI
defaulted on all payments due, it entered into a restructuring agreement with Delta on
October 7, 1981, to cover its overdue obligations under the promissory notes.CBLI
continued having trouble meeting its obligations to Delta. This prompted Delta to
threaten CBLI with the enforcement of the management takeover clause.
ISSUE:Whether or not the Restructuring Agreement dated October 7, 1981, between

petitioner CBLI and Delta Motors, Corp. novated the five promissory notes Delta
Motors, Corp. assigned to respondent SIHI.
HELD: No. The Restructuring Agreement dated October 7, 1981, between petitioner
CBLI and Delta Motors, Corp. did not novate the five promissory notes Delta Motors,
Corp. assigned to respondent SIHI.
Novation has been defined as the extinguishment of an obligation by the substitution

or change of the obligation by a subsequent one which terminates the first, either by
changing the object or principal conditions, or by substituting the person of the
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debtor, or subrogating a third person in the rights of the creditor.For novation to take
place, four essential requisites have to be met, namely, (1) a previous valid obligation;
(2) an agreement of all parties concerned to a new contract; (3) the extinguishment of
the old obligation; and (4) the birth of a valid new obligation.
In this case, the attendant facts do not make out a case of novation. The
restructuring agreement between Delta and CBLI executed on October 7, 1981, shows
that the parties did not expressly stipulate that the restructuring agreement novated
the promissory notes. Absent an unequivocal declaration of extinguishment of the
pre-existing obligation, only a showing of complete incompatibility between the old and
the new obligation would sustain a finding of novation by implication.
The Decision of the Court of Appeals is affirmed.
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Ocampo-Paule v. Court of Appeals

GLORIA OCAMPO-PAULE, Petitioner, versus HONORABLE COURT OF APPEALS and
PEOPLE OF THE PHILIPPINES, Respondents.
(G.R.No. 145872, February 4, 2002, 1st Division)
KAPUNAN, J.;
FACTS:During the period August, 1991 to April, 1993, petitioner received from private
complainant Felicitas M. Calilung several pieces of jewelry with a total value of One
hundred Sixty Three Thousand One hundred Sixty Seven Pesos and Ninety Five
Centavos (P163,167.95). The agreement between private complainant and petitioner
was that the latter would sell the same and thereafter turn over and account for the
proceeds of the sale, or otherwise return to private complainant the unsold pieces of
jewelry within two months from receipt thereof. Since private complainant and
petitioner are relatives, the former no longer required petitioner to issue a receipt
acknowledging her receipt of the jewelry.When petitioner failed to remit the proceeds of
the sale of the jewelry or to return the unsold pieces to private complainant, the latter
sent petitioner a demand letter. Notwithstanding receipt of the demand letter,
petitioner failed to turn over the proceeds of the sale or to return the unsold pieces of
jewelry. Private complainant was constrained to refer the matter to the barangay
captain of Sta. Monica, Lubao, Pampanga.
ISSUE:Whether or not there was a novation of petitioners criminal liability when she
and private complainant executed the Kasunduan sa Bayaran.
HELD: No. There was no novation of petitioners criminal liability when she and
private complainant executed the Kasunduan sa Bayaran.
It is well-settled that the following requisites must be present for novation to take
place: (1) a previous valid obligation; (2) agreement of all the parties to the new
contract; (3) extinguishment of the old contract; and (4) validity of the new one.
Novation, in its broad concept, may either be extinctive or modificatory. It is extinctive

when an old obligation is terminated by the creation of a new obligation that takes the
place of the former; it is merely modificatory when the old obligation subsists to the
extent it remains compatible with the amendatory agreement.
The execution of the Kasunduan sa Bayaran does not constitute a novation of

the original agreement between petitioner and private complainant. Said Kasunduan
did not change the object or principal conditions of the contract between them. The
change in manner of payment of petitioners obligation did not render the Kasunduan
incompatible with the original agreement, and hence, did not extinguish petitioners
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liability to remit the proceeds of the sale of the jewelry or to return the same to private
complainant.
An obligation to pay a sum of money is not novated, in a new instrument

wherein the old is ratified, by changing only the terms of payment and adding other
obligations not incompatible with the old one, or wherein the old contract is merely
supplemented by the new one.
In any case, novation is not one of the grounds prescribed by the Revised Penal
Code for the extinguishment of criminal liability.
Petition is denied.
Reyes v. Court of Appeals
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SPOUSES ARSENIO R. REYES and NIEVES S. REYES, Petitioners,

versus COURT OF APPEALS and PABLO V. REYES, Respondents.
(G.R.NO. 147758, June 26, 2002, 2nd Division)
BELLOSILLO, J.;
FACTS:This petition arose from a civil case for collection of a sum of money with
preliminary attachment filed by respondent Pablo V. Reyes against his first cousin
petitioner Arsenio R. Reyes and spouse Nieves S. Reyes. According to private
respondent, petitioner-spouses borrowed from him P600,000.00 with interest at five
percent (5%) per month, which totalled P1,726,250.00 at the time of filing of the
Complaint. The loan was to be used supposedly to buy a lot in Paraaque. It was
evidenced by an acknowledgment receipt dated 15 July 1990 signed by the petitioner-
spouses Arsenio R. Reyes and Nieves S. Reyes and witness Romeo Rueda.
In their Answer petitioners admitted their loan from respondent but averred that there
was a novation so that the amount loaned was actually converted into respondent's
contribution to a partnership formed between them on 23 March 1990.
ISSUE:Whether or not there was novation in the instant case.
HELD: No. There was no novation in the instant case.
For novation to take place, the following requisites must concur: (a) there must be a
previous valid obligation; (b) there must be an agreement of the parties concerned to a
new contract; (c) there must be the extinguishment of the old contract; and, (d) there
must be the validity of the new contract.
In the case at bar, the third requisite is not present. The parties did agree that
the amount loaned would be converted into respondent's contribution to the
partnership, but this conversion did not extinguish the loan obligation. The date when
the acknowledgment receipt/promissory note was made negates the claim that the
loan agreement was extinguished through novation since the note was made while the
partnership was in existence.
Significantly, novation is never presumed. It must appear by express agreement

of the parties, or by their acts that are too clear and unequivocal to be mistaken for
anything else. An obligation to pay a sum of money is not novated in a new instrument
wherein the old is ratified by changing only the terms of payment and adding other
obligations not incompatible with the old one, or wherein the old contract is merely
supplemented by the new one.
The Decision of the Court of Appeals is modified.
Sps. Bautista v. Pilar Development Corp.
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SPOUSES FLORANTE and LAARNI BAUTISTA, Petitioners, versus PILAR

DEVELOPMENT CORPORATION, Respondent.
(G.R.NO. 135046, August 17, 1999, 1st Division)
PUNO, J.;
FACTS:In 1978, petitioner spouses Florante and Laarni Bautista purchased a house
and lot in Pilar Village, Las Pinas, Metro Manila. To partially finance the purchase,
they obtained from the Apex Mortgage & Loan Corporation a loan in the amount of
P100,180.00. They executed a promissory note on December 22, 1978 obligating
themselves, jointly and severally, to pay the "principal sum of P100,180.00 with
interest rate of 12% and service charge of 3%" for a period of 240 months, or twenty
years, from date, in monthly installments of P1,378.83. Late payments were to be
charged a penalty of one and one-half per cent (1 1/2%) of the amount due. In the
same promissory note, petitioners authorized Apex to "increase the rate of interest
and/or service charges" without notice to them in the event that a law, Presidential
Decree or any Central Bank regulation should be enacted increasing the lawful rate of
interest and service charges on the loan. Payment of the promissory note was secured
by a second mortgage on the house and lot purchased by petitioners.Petitioner
spouses failed to pay several installments. On September 20, 1982, they executed
another promissory note in favor of Apex. This note was in the amount of
P142,326.43 at the increased interest rate of twenty-one per cent (21%) per annum
with no provision for service charge but with penalty charge of 1 1/2% for late
payments.
ISSUE: Whether or not there was valid novation in the case at bar.
HELD: Yes. There was a valid novation in the case at bar.
Novation has four (4) essential requisites: (1) the existence of a previous valid
obligation; (2) the agreement of all parties to the new contract; (3) the extinguishment
of the old contract; and (4) the validity of the new one. In the instant case, all four
requisites have been complied with. The first promissory note was a valid and
subsisting contract when petitioner spouses and Apex executed the second promissory
note. The second promissory note absorbed the unpaid principal and interest of
P142,326.43 in the first note which amount became the principal debt therein,
payable at a higher interest rate of 21% per annum. Thus, the terms of the second
promissory note provided for a higher principal, a higher interest rate, and a higher
monthly amortization, all to be paid within a shorter period of 16.33 years. These
changes are substantial and constitute the principal conditions of the obligation. Both
parties voluntarily accepted the terms of the second note; and also in the same note,
they unequivocally stipulated to extinguish the first note. Clearly, there was animus
novandi, an express intention to novate. The first promissory note was cancelled and
replaced by the second note. This second note became the new contract governing the
parties' obligations.
Cita
Petition is denied.
Cita
Evadel Realty and Development Corp. v. Sps. Soriano

EVADEL REALTY and DEVELOPMENT CORPORATION, Petitioners, versus
SPOUSES ANTERO AND VIRGINIA SORIANO, Respondents.
(G.R.No. 144291, April 20, 2001, 1st Division)
KAPUNAN, J.:
FACTS:On April 12, 1996, the spouses Antero and Virginia Soriano (respondent
spouses), as sellers, entered into a "Contract to Sell " with Evadel Realty and
Development Corporation (petitioner), as buyer, over a parcel of land denominated as
Lot 5536-C of the Subdivision Plan of Lot 5536 covered by Transfer Certificate of Title
No. 125062 which was part of a huge tract of land known as the Imus Estate. Upon
payment of the first installment, petitioner introduced improvements thereon and
fenced off the property with concrete walls. Later, respondent spouses discovered that
the area fenced off by petitioner exceeded the area subject of the contract to sell by
2,450 square meters. Upon verification by representatives of both parties, the area
encroached upon was denominated as Lot 5536-D-1 of the subdivision plan of Lot
5536-D of Psd-04-092419 and was later on segregated from the mother title and
issued a new transfer certificate of title, TCT No. 769166, in the name of respondent
spouses. Respondent spouses successively sent demand letters to petitioner on
February 14, March 7, and April 24, 1997, to vacate the encroached area. Petitioner
admitted receiving the demand letters but refused to vacate the said area.
ISSUE: Whether or not there was novation of contract.
HELD: No. There was no novation of contract.
Petitioner's claim that there was a novation of contract because there was a "second"
agreement between the parties due to the encroachment made by the national road on
the property subject of the contract by 1,647 square meters, is unavailing. Novation,
one of the modes of extinguishing an obligation, requires the concurrence of the
following: (1) there is a valid previous obligation; (2) the parties concerned agree to a
new contract; (3) the old contract is extinguished; and (4) there is valid new contract.
Novation may be express or implied. In order that an obligation may be extinguished
by another which substitutes the same, it is imperative that it be so declared in
unequivocal terms (express novation) or that the old and the new obligations be on
every point incompatible with each other (implied novation).
In the instant case, there was no express novation because the "second"
agreement was not even put in writing. Neither was there implied novation since it was
not shown that the two agreements were materially and substantially incompatible
with each other. We quote with approval the following findings of the trial court: Since
the alleged agreement between the plaintiffs [herein respondents] and defendant
[herein petitioner] is not in writing and the alleged agreement pertains to the novation
of the conditions of the contract to sell of the parcel of land subject of the instant
litigation, ipso facto, novation is not applicable in this case since, as stated above,
novation must be clearly proven by the proponent thereof and the defendant in this
case is clearly barred by the Statute of Frauds from proving its claim.
Cita
Petition is denied.
Cita
Villeza v. German Management and Services, Inc.

ERNESTO VILLEZA, Petitioner, versus GERMAN MANAGEMENT AND SERVICES,
INC., DOMINGO RENE JOSE, PIO DIOKNO, SESINANDO FAJARDO, BAYANI
OLIPINO, ROLANDO ROMILO and JOHN DOES, Respondents.
MENDOZA, J.:
FACTS: This petition sprouted from an earlier Supreme Court HELD in German
Management v. Court of Appeals, G.R. Nos. 72616-76217, September 14, 1989, which
has already become final and executory. The decision, however, remains unenforced
due to the prevailing partys own inaction. This petition, therefore, is the struggle of a
victor trying to retrieve the prize once won. It appears that German Management v.
Court of Appeals stemmed from a forcible entry case instituted by petitioner Ernesto
Villeza against respondent German Management, the authorized developer of the
landowners, before the Metropolitan Trial Court of Antipolo City. The Decision of this
Court favoring the petitioner became final and executory on October 5, 1989.
Petitioner may validly claim ownership based on the muniments of title it
presented, such evidence does not responsively address the issue of prior actual
possession raised in a forcible entry case. It must be stated that regardless of the
actual condition of the title to the property, the party in peaceable quiet possession
shall not be turned out by a strong hand, violence or terror. Thus, a party who can
prove prior possession, can recover such possession even against the owner himself.
Whatever may be the character of his prior possession if he has in his favor priority in
time, he has the security that entitles him to remain on the property until he is
lawfully ejected by a person having a better right by accion publiciana or accion
reinvindicatoria.
ISSUE: Whether or not the interruption or suspension granted by the MeTC must be
considered in computing the period because it has the effect of tolling or stopping the
counting of the period for execution.
HELD: Yes. The interruption or suspension granted by the MeTC must be considered
in computing the period because it has the effect of tolling or stopping the counting of
the period for execution.
Sec. 6. Execution by motion or by independent action. A final and executory judgment
or order may be executed on motion within five (5) years from the date of its entry.
After the lapse of such time, and before it is barred by the statute of limitations, a
judgment may be enforced by action. The revived judgment may also be enforced by
motion within five (5) years from the date of its entry and thereafter by action before it
is barred by the statute of limitations.
The rules are clear. Once a judgment becomes final and executory, the
prevailing party can have it executed as a matter of right by mere motion within five
years from the date of entry of judgment. If the prevailing party fails to have the
decision enforced by a motion after the lapse of five years, the said judgment is
reduced to a right of action which must be enforced by the institution of a complaint
in a regular court within ten years from the time the judgment becomes final.
When petitioner Villeza filed the complaint for revival of judgment on October 3,
2000, it had already been eleven (11) years from the finality of the judgment he sought
to revive. Clearly, the statute of limitations had set in.
The May 9, 2008 Decision of the Court of Appeals in CA-GR No. SP No. 84035 is
AFFIRMED.
Cita
Insurance of the Philippine Islands Corp. v. Sps. Gregorio

INSURANCE OF THE PHILIPPINE ISLANDS CORPORATION, Petitioner, versus
SPOUSES VIDAL S. GREGORIO and JULITA GREGORIO, Respondents.
PERALTA, J.:
FACTS: Respondent spouses Vidal S. Gregorio and Julita Gregorio obtained

loan from petitioner Insurance of the Philippine Islands Corporation. As a security,
the s p o u s e s e x e c u t e d a R e a l E s t a t e M o r t g a g e o f a p a r c e l o f l a n d i n
R i z a l . A g a i n , they obtained another loan along with a security of another parcel of
land in the same property in Rizal. For the third time, a loan was obtained
and this time two parcels of land was executed as mortgage. Th e G r e g o r i o
s p o u s e s f a i l e d t o p e r f o r m t h e i r o b l i g a t i o n t o p a y . H e n c e , their
mortgaged properties were extrajudicially foreclosed. In the extrajudicial
foreclosure sale, Insurance of the Philippine Islands was the highest bidder. The
latter assumed ownership because the Gregorio spouses were
n o t a b l e t o redeem their properties.
Then the peti tioner Corpora tion filed a Complaint against the
s p o u s e s because they found out while processing the documents for the application
and confirmation of its title over the foreclosed properties that the parcels of
land w e r e a l r e a d y r e g i s t e r e d u n d e r t h e n a m e s o f t h i r d p e r s o n s a n d
t h e T r a n s f e r C e r t i f i c a t e s o f Ti t l e w e r e a l s o i s s u e d t o t h e r m . T h e y
alleged that the Grego rio spouses committed fraud in obtaini ng
loans from them by misrepresenting ownership over the foreclosed
properties. On the other ha nd, the spouses argue tha t petitio ners
cause of action and rig ht of action a re already barred by
prescription a nd laches.
ISSUE: Whether or not the Court of Appeals erred in HELD that petitioner's
right to any relief under the law has already prescribed or is barred by laches.
HELD: No. The Court of Appeals did not err in HELD that petitioner's right to
any relief under the law has already prescribed or is barred by laches.
Under the provisions of Article 1146 of the Civil Code, actions upon an injury to
the rights of the plaintiff o r u p o n a q u a s i - d e l i c t m u s t b e i n s t i t u t e d w i t h i n
f o u r y e a r s f r o m t h e t i m e t h e cause of action accrued. T h e C o u r t f i n d s
n o e r r o r i n t h e H E L D o f t h e C A t h a t I n s u r a n c e o f t h e Philippine
Island's cause of action accrued at the time it discovered the alleged fraud
committed by the Gregorio spouses. It is at this point that the four -year
prescriptive period should be counted. However, the Court does not
agree with the CA in its HELD that the discovery of the fraud should
be reckoned from the time of registration of the titles covering the subject
properties. Neither may the principle of laches apply in the present case.
The essence of laches or stale demands is the failure or neglect for
an unreasonable and unexplained length of time to do that which, by
exercising d u e d i l i g e n c e , c o u l d o r s h o u l d h a v e b e e n d o n e e a r l i e r ,
t h u s , g i v i n g r i s e t o a presumption that the party entitled to assert it either has
abandoned or declined t o a s s e r t i t . I t i s n o t c o n c e r n e d w i t h m e r e
l a p s e o f t i m e ; t h e f a c t o f d e l a y , standing alone, being insufficient to
constitute laches. I n a d d i t i o n , i t i s a r u l e o f e q u i t y a n d a p p l i e d n o t t o
p e n a l i z e n e g l e c t o r sleeping on one's rights, but rather to avoid
recognizing a right when to do so would result in a clearly unfair situation.
Cita
Cita
Mariano v. Petron Corp.

ROMEO D. MARIANO, Petitioner, versus PETRON CORPORATION, Respondent.
CARPIO, J.:
FACTS: On 5 November 1968, Pacita V. Aure, Nicomedes Aure Bundac, and Zeny
Abundo (Aure Group), owners of a 2,064 square meter parcel of land in Tagaytay
City (Property), leased the Property to ESSO Standard Eastern, Inc., (ESSO Eastern), a
foreign corporation doing business in the country through its subsidiary ESSO
Standard Philippines, Inc. (ESSO Philippines). The lease period is 90 years and the
rent is payable monthly for the first 10 years, and annually for the remaining period.
The lease contract (Contract) contained an assignment veto clause barring the parties
from assigning the lease without prior consent of the other. Excluded from the
prohibition were certain corporations to whom ESSO Eastern may unilaterally assign
its leasehold right.
ESSO Eastern sold ESSO Philippines to the Philippine National Oil Corporation
(PNOC). Apparently, the Aure Group was not informed of the sale. ESSO Philippines,
whose corporate name was successively changed to Petrophil Corporation then to
Petron Corporation (Petron), took possession of the Property.
Petitioner Romeo D. Mariano (petitioner) bought the Property from the Aure
Group and obtained title to the Property issued in his name bearing an annotation of
ESSO Easterns lease. He sent to Petron a notice to vacate the Property. Petitioner
informed Petron that Presidential Decree No. 471 (PD 471), dated 24 May 1974,
reduced the Contracts duration from 90 to 25 years, ending on 13 November 1993.
Despite receiving the notice to vacate on 21 December 1998, Petron remained on the
Property.
Petitioner sued Petron in the Regional Trial Court of Tagaytay City, Branch 18,
(trial court) to rescind the Contract and recover possession of the Property. Aside from
invoking PD 471, petitioner alternatively theorized that the Contract was terminated
on 23 December 1977 when ESSO Eastern sold ESSO Philippines to PNOC, thus
assigning to PNOC its lease on the Property, without seeking the Aure Groups prior
consent.
ISSUE: Whether or not the Contract subsists between petitioner and Petron.
HELD: Yes. The Contract subsists between petitioner and Petron.

PNOCs buy-out of ESSO Philippines was total and unconditional, leaving no residual
rights to ESSO Eastern. Logically, this change of ownership carried with it the transfer
to PNOC of any proprietary interest ESSO Eastern may hold through ESSO
Philippines, including ESSO Easterns lease over the Property. Petrons objection to
this conclusion, sustained by the Court of Appeals, is rooted on its reliance on its
separate corporate personality and on the unstated assumption that ESSO Philippines
(not ESSO Eastern) initially held the leasehold right over the Property. Petron is wrong
on both counts.
The facts compel the conclusion that ESSO Philippines was a mere branch of
ESSO Eastern in the execution and breach of the Contract. First, by ESSO Easterns
admission in the Contract, it is "a foreign corporation organized under the laws of the
State of Delaware, U.S.A., duly licensed to transact business in the Philippines, and
doing business therein under the business name and style of Esso Standard
Philippines x x x". In effect, ESSO Eastern was ESSO Philippines for all of ESSO
Easterns Philippine business. Second, the Contract was executed by ESSO Eastern,
not ESSO Philippines, as lessee, with the Aure Group as lessor. ESSO Eastern leased
the Property for the use of ESSO Philippines, acting as ESSO Easterns Philippine
branch. Consistent with such status, ESSO Philippines took possession of the
Property after the execution of the Contract. Thus, for purposes of the Contract, ESSO
Philippines was a mere alter ego of ESSO Eastern.
Petition is denied.
Cita
Sps. Bernales v. Heirs of Sambaan

SPOUSES PATRICIO and MYRNA BERNALES, Petitioners, versus HEIRS OF JULIAN
SAMBAAN, namely: EMMA S. FELICILDA, ANITA S. SAMBAAN, VIOLETA S.
DADSANAN, ABSALON S. SAMBAAN, AGUSTINE S. SAMBAAN, EDITHA S.
MANGUIRAN, GRACE S. NITCHA, CLODUALDO S. SAMBAAN, GINA S. SAMBAAN
and FE S. YAP, Respondents.
DEL CASTILLO, J.:
FACTS: Spouses Julian and Guillerma Sambaan were the registered owner of a
property located in Bulua, Cagayan de oro City. The respondents and the petitioner
Myrna Bernales are the children of Julian and Guillerma. Myrna, who is the eldest of
the siblings, is the present owner and possessor of the property in question.
Julian died in an ambush in 1975. Before he died, he requested that the
property in question be redeemed from Myrna and her husband Patricio Bernales.
Thus, in 1982 one of Julians siblings offered to redeem the property but the
petitioners refused because they were allegedly using the property as tethering place
for their cattle. In January 1991, respondents received an information that the subject
property was already transferred to Myrna Bernales. The Deed of Absolute Sale dated
December 7, 1970 bore the forged signatures of their parents, Julian and Guillerma.
On April 1993, the respondents, together with their mother Guillerma, filed a
complaint for Annulment of Deed of Absolute Sale and cancellation of TCT No. T-
14204 alleging that their parents signatures were forged. The trial court rendered a
decision on August 2, 2001 cancelling the TCT and ordering another title to be issued
in the name of the late Julian Sambaan.
Petitioners went to the CA and appealed the decision. The CA affirmed the
decision of the lower court. A motion for reconsideration of the decision was, likewise,
denied in 2004.
ISSUE: Whether or not the Deed of Absolute Sale is authentic as to prove the
ownership of the petitioners over the subject property.
HELD: No. The Deed of Absolute Sale is not authentic as to prove the ownership of the
petitioners over the subject property.
It is a question of fact rather than of law. Well-settled is the rule that the Supreme
Court is not a trier of facts. Factual findings of the lower courts are entitled to great
weight and respect on appeal, and in fact accorded finality when supported by
substantial evidence on the record. Substantial evidence is more than a mere scintilla
of evidence. It is that amount of relevant evidence that a reasonable mind might accept
as adequate to support a conclusion, even if other minds, equally reasonable, might
conceivably opine otherwise. But to erase any doubt on the correctness of the assailed
HELD, we have carefully perused the records and, nonetheless, arrived at the same
conclusion. We find that there is substantial evidence on record to support the Court
of Appeals and trial courts conclusion that the signatures of Julian and Guillerma in
the Deed of Absolute Sale were forged.
Conclusions and findings of fact by the trial court are entitled to great weight on
appeal and should not be disturbed unless for strong and cogent reasons because the
trial court is in a better position to examine real evidence, as well as to observe the
demeanor of the witnesses while testifying in the case. The fact that the CA adopted
the findings of fact of the trial court makes the same binding upon this court.
With the presentation of the forged deed, even if accompanied by the owners duplicate
certificate of title, the registered owner did not thereby lose his title, and neither does
the assignee in the forged deed acquire any right or title to the said property.
Cita
Petition is denied.
Cita
B & I Realty Co. v. Caspe

B & I REALTY CO., INC., Petitioner, versus TEODORO CASPE and PURIFICACION
AGUILAR CASPE, Respondents.
CORONA, J.:
FACTS:Consorcia L. Venegas was the owner of a parcel of land located in Barrio

Bagong-Ilog in Pasig, Rizal and covered by TCT No. 247434. She delivered said title to,
and executed a simulated deed of sale in favor of, Datuin for purposes of obtaining a
loan with the RCBC. Datuin claimed that he had connections with the management of
RCBC and offered his assistance to Venegas in obtaining a loan from the bank. He
issued a receipt to the Venegases, acknowledging that the lot was to be used as a
collateral for bank financing and that the deed of sale was executed only as a device to
obtain the loan. However, Datuin prepared a deed of absolute sale and, through
forgery, made it appear that the spouses Venegas executed the document in his favor.
Venegas learned of Datuin's fraudulent scheme when she sold the lot to herein
respondents for P160,000 in a deed of conditional sale. She, along with her husband,
instituted a complaint against Datuin in the then Court of First Instance CFI of Rizal,
Branch 11, docketed as Civil Case No. 188893, for recovery of property and
nullification of TCT No. 377734, with damages. However, when the case was called for
pre-trial, the Venegases' counsel failed to appear and the complaint was eventually
dismissed without prejudice.
ISSUE: Whether or not filing of Civil Case No. 36852 by the Venegases had the effect
of interrupting the prescriptive period for the filing of the complaint for judicial
foreclosure of mortgage.
HELD: No. The filing of Civil Case No. 36852 by the Venegases does not have the effect
of interrupting the prescriptive period for the filing of the complaint for judicial
foreclosure of mortgage.
We agree with the CA's HELD that Civil Case No. 36852 did not have the effect of
interrupting the prescription of the action for foreclosure of mortgage as it was not an
action for foreclosure but one for annulment of title and nullification of the deed of
mortgage and the deed of sale. It was not at all the action contemplated in Article 1155
of the Civil Code which explicitly provides that the prescription of an action is
interrupted only when the action itself is filed in court. Petitioner could have protected
its right over the property by filing a cross-claim for judicial foreclosure of mortgage
against respondents in Civil Case No. 36852. The filing of a cross-claim would have
been proper there. All the issues pertaining to the mortgage validity of the mortgage
and the propriety of foreclosure would have been passed upon concurrently and not
on a piecemeal basis. This should be the case as the issue of foreclosure of the subject
mortgage was connected with, or dependent on, the subject of annulment of mortgage
in Civil Case No. 36852. The actuations clearly manifested that petitioner knew its
rights under the law but chose to sleep on the same.
Cita
Petition is denied.
Cita
Mesina v. Garcia
MELANIE M. MESINA, DANILO M. MESINA, and SIMEON M. MESINA, Petitioners,
versus GLORIA C. GARCIA, Respondent.
CHICO-NAZARIO, J.:
FACTS: Atty. Honorio Valisno Garcia and Felicisima Mesina, during their lifetime,
enstered into a Contract to Sell over a lot consisting of 235 square meters, situated at
Diversion Road, Sangitan, Cabanatuan City, covered and embraced by TCT No. T-
31643 in the name of Felicisima Mesina which title was eventually cancelled and TCT
No. T-78881 was issued in the name of herein petitioners. The Contract to Sell
provides that the cost of the lot is P70.00 per square meter for a total amount of
P16,450.00; payable within a period not to exceed 7 years at an interest rate of 12%
per annum, in successive monthly installments of P260.85 per month, starting May
1977. Thereafter, the succeeding monthly installments are to be paid within the first
week of every month, at the residence of the vendor at Quezon City, with all unpaid
monthly installments earning an interest of 1% per month. Instituting this case at
bar, respondent asserts that despite the full payment made on 7 February 1984
for the consideration of the subject lot, petitioners refused to issue the necessary Deed
of Sale to effect the transfer of the property to her.
ISSUE: Whether or not respondents cause of action had already prescribed.
HELD: Yes. Respondents cause of action had already prescribed.
Article 1155 of the Civil Code is explicit that the prescriptive period is interrupted
when an action has been filed in court; when there is a written extrajudicial demand
made by the creditors; and when there is any written acknowledgment of the debt by
the debtor.
The records reveal that starting 19 April 1986 until 2 January 1997 respondent
continuously demanded from the petitioners the execution of the said Deed of
Absolute Sale but the latter conjured many reasons and excuses not to execute the
same. Respondent even filed a Complaint before the Housing and Land Use
Regulatory Board way back in June, 1986, to enforce her rights and to compel the
mother of herein petitioners, who was still alive at that time, to execute the necessary
Deed of Absolute Sale for the transfer of title in her name. On 2 January 1997,
respondent, through her counsel, sent a final demand letter to the petitioners for the
execution of the Deed of Absolute Sale, but still to no avail. Consequently, because of
utter frustration of the respondent, she finally lodged a formal Complaint for Specific
Performance with Damages before the trial court on 20 January 1997.
Hence, from the series of written extrajudicial demands made by respondent to

have the execution of the Deed of Absolute Sale in her favor, the prescriptive period of
10 years has been interrupted. Therefore, it cannot be said that the cause of action of
the respondent has already been prescribed.
Cita
Petition is denied.
Cita
Heirs of Gaudiane v. Court of Appeals

HEIRS OF JUANA GAUDIANE, namely: DATIVA M. PASTOR, MARIA M. ALCORIZA,
BEATRIZ M. PATROCIO, SOLOMON I. MARIO, BENJAMIN I. MARIO, LILI
MARIO, VERONICA I. MARIO, SEVERINA MARIO VDA. DE ISO, ROSITA ISO,
AGRIPINO ISO, ELIZABETH ISO, VIRGINIA ISO, LEOPOLDO ISO, NAPOLEON ISO,
Petitioners, versus COURT OF APPEALS and THE HEIRS OF FELIX GAUDIANE,
namely: ARNULFO GAUDIANE, GEORGE GAUDIANE, RODOLFO GAUDIANE,
RAYMUNDO GAUDIANE, SANDRA GAUDIANE, CEFERINA GAUDIANE, JONNA
GAUDIANE, MILLARD GAUDIANE, GLORIA TORRES-GAUDIANE, WILFREDO
GAUDIANE, ROLANDO GAUDIANE, ANTONIO GAUDIANE, KATHRYN GAUDIANE,
PRISCILLA GAUDIANE, CATALINA PACIOS, DONATELLA PACIOS, REMEDIOS
PACIOS, GUALBERTO GAUDIANE, VICTOR GAUDIANE, LORNA GAUDIANE,
DOLORES GAUDIANE, Respondents.
(G.R.No. 119879, March 11, 2004, 3rd Division)
CORONA, J.:
FACTS: The lot in controversy is Lot 4389 located at Dumaguete City and covered by
Original Certificate of Title No. 2986-A (OCT 2986-A) in the names of co-owners Felix
and Juana Gaudiane. Felix died in 1943 while his sister Juana died in 1939. Herein
respondents are the descendants of Felix while petitioners are the descendants of
Juana.
On November 4, 1927, Felix executed a document entitled Escritura de Compra-Venta

(Escritura, for brevity) whereby he sold to his sister Juana his one-half share in Lot
No. 4156 covered by Transfer Certificate of Title No. 3317-A.
Petitioners predecessors-in-interest, Geronimo and Ines Iso (the Isos), believed

that the sale by Felix to their mother Juana in 1927 included not only Lot 4156 but
also Lot 4389. In 1974, they filed a pleading in the trial court seeking to direct the
Register of Deeds of Dumaguete City to cancel OCT 2986-A covering Lot 4389 and to
issue a new title in favor of the Isos. This was later withdrawn after respondents
predecessors-in-interest, Procopio Gaudiane and Segundo Gaudiane, opposed it on
the ground that the Isos falsified their copy of the Escritura by erasing Lot 4156 and
intercalating in its place Lot 4389.
ISSUE: Whether the court gravely erred in not giving due course to the claim of
petitioners and legal effect of prescription and laches adverted by defendants-
appellants in their answer and affirmative defenses proven during the hearing by
documentary and testimonial evidence.
HELD: No. The court did not gravely err in not giving due course to the claim of
petitioners and legal effect of prescription and laches adverted by defendants-
appellants in their answer and affirmative defenses proven during the hearing by
documentary and testimonial evidence.
Cita
As a general rule, ownership over titled property cannot be lost through

prescription.[12] Petitioners, however, invoke our HELD in Tambot vs. Court of
Appeals[13] which held that titled property may be acquired through prescription by a
person who possessed the same for 36 years without any objection from the registered
owner who was obviously guilty of laches.
Petitioners claim is already rendered moot by our HELD barring petitioners

from raising the defense of exclusive ownership due to res judicata. Even assuming
arguendo that petitioners are not so barred, their contention is erroneous. As correctly
observed by the appellate court.
As explained earlier, only Lot No. 4156 was sold. It was through this
misrepresentation that appellees predecessor-in-interest succeeded in withholding
possession of appellees share in Lot No. 4389. Appellees cannot, by their own
fraudulent act, benefit therefrom by alleging prescription and laches.
Petition is denied.
Cita
Laureano v. Court of Appeals

MENANDRO B. LAUREANO, Petitioner, versus.
COURT OF APPEALS AND SINGAPORE AIRLINES LIMITED, Respondents.
(G.R.No. 114776, February 2, 2000, 2nd Division)
QUISUMBING, J.:
FACTS:Petitioner was employed in the singapore airlines limited as the pilot captain of
B-707. Sometime in 1982, defendant, hit by a recession, initiated cost-cutting
measures. Seventeen expatriate captains in the Airbus fleet were found in excess of
the defendant's requirement. Consequently, defendant informed its expatriate pilots
including plaintiff of the situation and advised them to take advance leaves. Realizing
that the recession would not be for a short time, defendant decided to terminate its
excess personnel. It did not, however, immediately terminate it's A-300 pilots. It
reviewed their qualifications for possible promotion to the B-747 fleet. Among the 17
excess Airbus pilots reviewed, twelve were found qualified. Unfortunately, plaintiff was
not one of the twelve. Aggrieved, plaintiff on June 29, 1983, instituted a case for illegal
dismissal before the Labor Arbiter. Defendant moved to dismiss on jurisdictional
grounds. Before said motion was resolved, the complaint was withdrawn.
ISSUE : Whether or not the action has already prescribed.
HELD: Yes. The action has already prescribed.
Article 291. Money claims. - All money claims arising from employee-employer
relations accruing during the effectivity of this Code shall be filed within three (3)
years from the time the cause of action accrued; otherwise they shall be forever
barred.
It should be noted further that Article 291 of the Labor Code is a special law
applicable to money claims arising from employer-employee relations; thus, it
necessarily prevails over Article 1144 of the Civil Code, a general law. Basic is the rule
in statutory construction that 'where two statutes are of equal theoretical application
to a particular case, the one designed therefore should prevail.'
In the instant case, the action for damages due to illegal termination was filed
by plaintiff-appellee only on January 8, 1987 or more than four (4) years after the
effectivity date of his dismissal on November 1, 1982. Clearly, plaintiff-appellee's
action has already prescribed.
Cita
Banco Filipino v. Court of Appeals

BANCO FILIPINO SAVINGS and MORTGAGE BANK, Petitioner,
versus COURT OF APPEALS, HON. EDGAR D. GUSTILO, Presiding Judge, Branch
28, Regional Trial Court, Iloilo City, TALA REALTY SERVICES CORPORATION,
NANCY L. TY, PEDRO B. AGUIRRE, REMEDIOS A. DUPASQUIER, PILAR D.
ONGKING, ELIZABETH H. PALMA, DOLLY W. LIM, RUBENCITO M. DEL MUNDO,
ADD INTERNATIONAL SERVICES, INC., Respondents.
DE LEON, JR., J.:
FACTS: Elsa Arcilla and her husband, Calvin Arcilla secured on three occasions, loans
from the Banco Filipino Savings and Mortgage bank in the amount of Php.107,946.00
as evidenced by the Promissory Note executed by the spouses in favor of the said
bank. To secure payment of said loans, the spouses executed Real Estate Mortgages
in favor of the appellants (Banco Filipino) over their parcels of land. The appellee
spouses failed to pay their monthly amortization to appellant. On September 2, 1985
the appellees filed a complaint for Annulment of the Loan Contracts, Foreclosure Sale
with Prohibitory and Injunction which was granted by the RTC. Petitioners appealed
to the Court of Appeals, but the CA affirmed the decision of the RTC.
ISSUE: Whether or not the CA erred when it held that the cause of action of the
private respondents accrued on October 30, 1978 and the filing of their complaint for
annulment of their contracts in 1085 was not yet barred by the prescription.
HELD: No. The Court of Appeals did not err when it held that the cause of action of
the private respondents accrued on October 30, 1978 and the filing of their complaint
for annulment of their contracts in 1085 was not yet barred by the prescription.
The court held that the petition is unmeritorious. Petitioners claim that the action of
the private respondents have prescribed is bereft of merit. Under Article 1150 of the
Civil Code, the time for prescription of all kinds of action where there is no special
provision which ordains otherwise shall be counted from the day they may be brought.
Thus the period of prescription of any cause of action is reckoned only from the date of
the cause of action accrued. The period should not be made to retroact to the date of
the execution of the contract, but from the date they received the statement of account
showing the increased rate of interest, for it was only from the moment that they
discovered the petitioners unilateral increase thereof.
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Vda. De Delgado v. Court of Appeals

MARIA ALVAREZ VDA. DE DELGADO, CATALINA C. DELGADO, NATIVIDAD D.
CLUTARIO, ANTONIA DELGADO, FLORINTINO DELGADO, PACIENCIA D.
CAZORLA, GLORIA D. SOTIANGCO, JOSE DELGADO, JR., MARLENE D. SENNER,
JOEL DELGADO, MARISSA DELGADO, JESUS DELGADO, JANICE DELGADO,
VICTORINO DELGADO, and JUAN DELGADO, Petitioners, versus HON. COURT OF
APPEALS and REPUBLIC OF THE PHILIPPINES, Respondents.
QUISUMBING, J.:
FACTS: Carlos Delgado was the absolute owner of a parcel of land with an area of
692,549 square meter situated in the Municipality of Catarman Samar. Carlos
Delgado granted and conveyed by way of donation with quitclaim all rights, title,
interest claim and demand over a portion of land with an area of 165,000 square
meter in favor of the Commonwealth of the Philippines. The acceptance was then
made to President Quezon in his capacity as Commander-in-Chief. The Deed of
Donation was executed with a condition that the said land will be used for the
formation of the National Defense of the Philippines. The said parcel of land then
covered by the Torrens System of the Philippines and was registered in the name of
Commonwealth of the Philippines for a period of 40 years. The land was registered
under TCT 0-2539-160 in favor of the Commonwealth however without any
annotation.
Upon declaration of independence, the Commonwealth was replaced by

Republic of the Philippines which took over the subject land and turned over to Civil
Aeronautics Administration, later named Bureau of Air Transportation Office. The
said agency utilizes the said land a domestic airport.
Jose Delgado filed a petition for reconveyance for a violation of the condition.
The RTC ruled in favor of the plaintiff Delgado. But the CA reversed the said decision
because of prescription. The petitioner filed only before 24 years o discovery which the
law only requires 10 years of filing.
ISSUE: Whether or not the petitioners action for reconveyance is already barred by
prescription.
HELD: Yes. The petitioners action for reconveyance is already barred by prescription.
The Supreme Court denied the petition and affirmed the decision of the Court of
Appeals because the time of filing has been prescribed. Under Article 1144 of the Civil
Code on Prescription based on written contracts, the filing of action for reconveyance
is within 10 years from the time the condition in the Deed of Donation was violated.
The petitioner herein filed only 24 years in the first action and 43 years in the second
filing of the 2nd action.
The action for reconveyance on the alleged excess of 33, 607 square meter
mistakenly included in the title was also prescribed Article 1456 of the Civil Code
states, if property is acquired through mistake or fraud, the person obtaining it is, by
force of law, considered a trustee of an implied trust for the benefits of the person from
whom the property comes, if within 10 years such action for reconveyance has not
been executed.
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Petition is denied.
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Maestrado v. Court of Appeals

JOSEFA CH. MAESTRADO, as substituted by her daughter LOURDES
MAESTRADO-LAVIA and CARMEN CH. ABAYA, Petitioners, versus THE
HONORABLE COURT OF APPEALS, Ninth Division and JESUS C. ROA, JR.,
RAMON P. CHAVES and NATIVIDAD S. SANTOS, Respondents.
DE LEON, JR. J.:
FACTS:These consolidated cases involve Lot No. 5872 and the rights of the contending
parties thereto. The lot has an area of 57.601 sq.m. and is registered in the name of
the deceased spouses Ramon and Rosario Chaves. The spouses died intestate in 1943
and 1944, respectively. They were survived by six heirs. To settle the estate of said
spouse, Angel Chaves, one of the heirs, initiated intestate proceedings and was
appointed administrator of said estates in the process. An inventory of the estates was
made and thereafter, the heirs agreed on a project partition. The court approved the
partition but a copy of said decision was missing. Nonetheless, the estate was divided
among the heirs. Subsequently, in 1956, the partition case effected and the respective
shares of the heirs were delivered to them.
Significantly, Lot No.5872 was not included in a number of documents. Parties

offered different explanations as to the omission of said lot in the documents.
Petitioners maintain the existence of an oral partition agreement entered into by all
heirs after the death of their parents. To set things right, petitioners then prepared a
quitclaim to confirm the alleged oral agreement. Respondents dispute voluntariness of
their consent to the quitclaims.
Six years after the execution of the quitclaims, respondents discovered that indeed
subject lot was still a common property in the name of the deceased spouses.
Eventually, an action for Quieting of Title was filed by petitioners on December 22,
1983.
The trial court considered Lot No. 5872 as still a common property and
therefore must be divided into six parts, there being six heirs. Petitioners appealed to
the Court of Appeals which sustained the decision of the trial court.
ISSUE: Whether or not the action for quieting of title had already prescribed.
HELD: No. The action for quieting of title did not prescribe.
The Supreme Court ruled that an action for quieting of title is imprescriptible
especially if the plaintiff is in possession of the property being litigated. One who is in
actual possession of a land, claiming to be the owner thereof may wait until his
possession is disturbed or his title is attacked before making steps to vindicate his
right because his undisturbed possession gives him a continuing right to seek the aid
of the courts to ascertain the nature of the adverse claim and its effect on his title.
Moreover, the Court held that laches is inapplicable in this case. This is because, as
mentioned earlier, petitioners possession of the subject lot has rendered their right to
bring an action for quieting of title imprescriptible.
Petitions are granted.
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F.A.T. Kee Computer System v. Online Networks International

F.A.T. KEE COMPUTER SYSTEMS, INC., Petitioner, versus ONLINE NETWORKS
INTERNATIONAL, INC., Respondent.
LEONARDODE CASTRO, J.:
FACTS: Petitioner F.A.T. Kee Computer Systems, Inc. is engaged in the business
of selling computer equipment and in the rendering of maintenance services for its
sold units. On the other hand, ONLINE is engaged in bu
s i n e s s o f s e l l i n g computer units, parts, and software.
In its complaint, it was alleged that ONLINE sold computer printers to FATKEE
which was evidenced by invoice receipts containing a stipulation that an
interest of 28% per annum is to be charged on all accounts overdue and an
additional sum equal to 25% of the amount will be charged b
y v e n d o r f o r attorneys fees plus cost of collection in case of suit. It was
also said that the president of FAT KEE, President Frederick Huang, Jr.,
made an offer to pay the a m o u n t w h i c h w a s o r i g i n a l l y i n U S d o l l a r s
i n t o P h i l i p p i n e l e g a l t e n d e r w h i c h ONLINE accepted.
After payments made in March to May 1998, ONLINE decided to stop the
application of interest in view of its good relationship with FAT KEE.FAT KEE
continued to pay; however, a balance remained according to ONLINEs computations.
Despite the repeated demands of ONLINE, FAT KEE failed to pay the remaining
balance without a valid reason.FAT KEE answered the complaint stating that they
were never informed of O N L I N E s a g r e e m e n t t o i t s o f f e r o f p a y i n g U S
d o l l a r s . I t a l s o a l l e g e d t h a t t h e invoice receipts were unilaterally prepared by
ONLINE. Furthermore, FAT KEE stated that the payments tendered were in
Philippine peso, in accordance with the Statement of Account, and that these were
accepted by ONLINE. They said they already had paid the total amount of the debt.
According to the testimony of Huang, he said that t
h e r e w a s n o agreement between FAT KEE and ONLINE for the payment in US
dollars. There was neither an agreement to a specific exchange rate.
ISSUE: Whether or not O N L I N E w a s e s t o p p e d b y t h e D e c e m b e r S t a t e m e n t

o f Account.
HELD: No. FAT KEE cannot invoke estoppel against

ONLINE for the latters issuance of the SOA on December 9, 1997.
In the instant case, we find that FAT KEE cannot invoke estoppel against
ONLINE for the latters issuance of the SOA on December 9, 1997. The testimonial
evidence of both ONLINE and FAT KEE establish that, during the meeting, the parties
tried but failed to reach an agreement as regards the payment of FAT
KEEs outstanding obligation and the exchange rate to be applied thereto.
By their act of submitting their respective proposals and counter-proposals on
the mode of payment and the exchange rate, FAT KEE and ONLINE demonstrated
that it was not their intention to be further bound by the SOA, especially with respect
to the exchange rate to be used. Moreover, FATKEE only started making payments vis-
-vis the subject invoice receipts on March 17, 1998, or two months after the
aforementioned meeting.
At this point, Mijares v. Court of Appeals is instructive in declaring that: One
who claims the benefit of an estoppel on the ground that he has been misled by the
representations of another must not have been misled through his own want of
reasonable care and circumspection. A lack of diligence by a party claiming an
estoppels is generally fatal. If the party conducts himself with careless indifference to
means of information reasonably at hand, or ignores highly suspicious circumstances,
he may not invoke the doctrine
of estoppel. Good faith is generally regarded as requiring the
exercise of reasonable diligence to learn the truth, and accordingly estoppel is denied
where the party claiming it was put on inquiry as to the truth and had available
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means for ascertaining it, at least where actual fraud has not been practiced on the
party claiming the estoppel.
Petition is denied.
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Tanay Recreation Center v. Fausto

TANAY RECREATION CENTER AND DEVELOPMENT CORP., Petitioners,
versus CATALINA MATIENZO FAUSTO* and ANUNCIACION FAUSTO
PACUNAYEN, Respondents.
FACTS:Petitioner Tanay Recreation Center and Development Corp. (TRCDC) is the
lessee of a 3,090-square meter property located in Sitio Gayas, Tanay, Rizal, owned by
Catalina Matienzo Fausto, under a Contract of Lease. On this property stands the
Tanay Coliseum Cockpit operated by petitioner. The lease contract provided for a 20-
year term, subject to renewal within sixty days prior to its expiration. The contract
also provided that should Fausto decide to sell the property, petitioner shall have the
priority right to purchase the same.
On June 17, 1991, petitioner wrote Fausto informing her of its intention to
renew the lease. However, it was Faustos daughter, respondent Anunciacion F.
Pacunayen, who replied, asking that petitioner remove the improvements built
thereon, as she is now the absolute owner of the property. It appears that Fausto had
earlier sold the property to Pacunayen and title has already been transferred in her
name. Petitioner filed an Amended Complaint for Annulment of Deed of Sale, Specific
Performance with Damages, and Injunction
In her Answer, respondent claimed that petitioner is estopped from assailing

the validity of the deed of sale as the latter acknowledged her ownership when it
merely asked for a renewal of the lease. According to respondent, when they met to
discuss the matter, petitioner did not demand for the exercise of its option to purchase
the property, and it even asked for grace period to vacate the premises.
ISSUE: Whether or not the contention in this case refers to petitioners priority right to
purchase, also referred to as the right of first refusal.
HELD: No. Petitioners priority right to purchase, does not refer to as the right of first
refusal.
When a lease contract contains a right of first refusal, the lessor is under a legal duty
to the lessee not to sell to anybody at any price until after he has made an offer to sell
to the latter at a certain price and the lessee has failed to accept it. The lessee has a
right that the lessor's first offer shall be in his favor. Petitioners right of first refusal is
an integral and indivisible part of the contract of lease and is inseparable from the
whole contract. The consideration for the lease includes the consideration for the
right of first refusal and is built into the reciprocal obligations of the parties.
It was erroneous for the CA to rule that the right of first refusal does not apply
when the property is sold to Faustos relative. When the terms of an agreement have
been reduced to writing, it is considered as containing all the terms agreed upon. As
such, there can be, between the parties and their successors in interest, no evidence
of such terms other than the contents of the written agreement, except when it fails to
express the true intent and agreement of the parties. In this case, the wording of the
stipulation giving petitioner the right of first refusal is plain and unambiguous, and
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leaves no room for interpretation. It simply means that should Fausto decide to sell
the leased property during the term of the lease, such sale should first be offered to
petitioner. The stipulation does not provide for the qualification that such right may
be exercised only when the sale is made to strangers or persons other than Faustos
kin. Thus, under the terms of petitioners right of first refusal, Fausto has the legal
duty to petitioner not to sell the property to anybody, even her relatives, at any price
until after she has made an offer to sell to petitioner at a certain price and said offer
was rejected by petitioner.
Petition is partially granted.
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Mendoza v. Court of Appeals

GENEROSO MENDOZA, substituted by his wife and administratrix DIEGA DE
LEON VDA. DE MENDOZA, Petitioner, versus THE HON. COURT OF APPEALS,
DANIEL GOLE CRUZ and DOLORES MENDOZA, Respondents.
(G.R. No. L-36637, February 18, 2005, 2nd Division)
SANTOS, J.:
FACTS: Manotok was the administrator of a parcel of land which it leased to Benjamin
Mendoza; that the contract of lease expired on December 31, 1988; that even after the
expiration of the lease contract, Benjamin Mendoza, and after his demise, his son,
Romeo, continued to occupy the premises and thus incurred a total of P44,011.25 as
unpaid rentals from January 1, 1989 to July 31, 1996; that on July 16, 1996,
Manotok made a demand on Benjamin Mendoza to pay the rental arrears and to
vacate the premises within fifteen (15) days from receipt of the demand letter; that
despite receipt of the letter and after the expiration of the 15-day period, the Mendozas
refused to vacate the property and to pay the rentals. The complaint prayed that the
court order Mendoza and those claiming rights under him to vacate the premises and
deliver possession thereof to Manotok, and to pay the unpaid rentals from January 1,
1989 to July 31, 1996 plus P875.75 per month starting August 1, 1996, subject to
such increase allowed by law, until he finally vacates the premise.
ISSUE: Whether or not the Honorable Court of Appeals committed error in giving
efficacy to a lease contract signed in 1988 when the alleged signatory was already
dead since 1986.
HELD: No. The Honorable Court of Appeals did not commit error in giving efficacy to a
lease contract signed in 1988 when the alleged signatory was already dead since 1986.
This is a case for unlawful detainer. It appears that respondent corporation leased
the property subject of this case to petitioners father. After expiration of the lease,
petitioner continued to occupy the property but failed to pay the rentals. On July 16,
1996, respondent corporation made a demand on petitioner to vacate the premises
and to pay their arrears.
An action for unlawful detainer may be filed when possession by a landlord,

vendor, vendee or other person of any land or building is unlawfully withheld after the
expiration or termination of the right to hold possession by virtue of a contract,
express or implied. The only issue to be resolved in an unlawful detainer case is
physical or material possession of the property involved, independent of any claim of
ownership by any of the parties involved. In the case at bar, petitioner lost his right to
possess the property upon demand by respondent corporation to vacate the rented
lot. Petitioner cannot now refute the existence of the lease contract because of his
prior admissions in his pleadings regarding his status as tenant on the subject
property.
The decision of the Court of Appeals dated February 17, 1973 is hereby
affirmed with costs against petitioner.
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Lim v. Queensland Tokyo Commodities
JEFFERSON LIM, Petitioner, versus QUEENSLAND TOKYO COMMODITIES,

INC., Respondent.
QUISUMBING, J.:
FACTS: Sometime in 1992, Benjamin Shia, a market analyst and trader of

Queensland, was introduced to petitioner Jefferson Lim by Marissa Bontia, one of his
employees. Marissas father was a former employee of Lims father. Shia suggested
that Lim invest in the Foreign Exchange Market, trading U.S. dollar against the
Japanese yen, British pound, Deutsche Mark and Swiss Franc. Before investing, Lim
requested Shia for proof that the foreign exchange was really lucrative. They
conducted mock tradings without money involved. As the mock trading showed
profitability, Lim decided to invest with a marginal deposit of US$5,000 in managers
check. The marginal deposit represented the advance capital for his future tradings. It
was made to apply to any authorized future transactions, and answered for any
trading account against which the deposit was made, for any loss of whatever nature,
and for all obligations, which the investor would incur with the broker. Petitioner Lim
was then allowed to trade with respondent company which was coursed through Shia
by virtue of blank order forms all signed by Lim. Respondent furnished Lim with the
daily market report and statements of transactions as evidenced by the receiving
forms, some of which were received by Lim.
Meanwhile, on October 22, 1992, respondent learned that it would take

seventeen (17) days to clear the managers check given by petitioner. Shia returned the
check to petitioner who informed Shia that petitioner would rather replace the
managers check with a travelers check. Shia noticed that the travelers check was not
indorsed but Lim told Shia that Queensland could sign the endorsee portion. Because
Shia trusted the latters good credit rating, and out of ignorance, he brought the check
back to the office unsigned. Inasmuch as that was a busy Friday, the check was kept
in the drawer of respondents consultant. Later, the travelers check was deposited
with Citibank.
On October 27, 1992, Citibank informed respondent that the travelers check
could not be cleared unless it was duly signed by Lim, the original purchaser of the
travelers check. A Miss Arajo, from the accounting staff of Queensland, returned the
check to Lim for his signature, but the latter, aware of his P44,465 loss, demanded for
a liquidation of his account and said he would get back what was left of his
investment.
ISSUE: Whether or not the CA erred in reversing the decision of the RTC which
dismissed the respondents complaint.
HELD: No. The Court of Appeals did not err in reversing the decision of the RTC
which dismissed the respondents complaint.
The essential elements of estoppel are: (1) conduct of a party amounting to

false representation or concealment of material facts or at least calculated to
convey the impression that the facts are otherwise than, and inconsistent with,
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those which the party subsequently attempts to assert; (2) intent, or at least
expectation, that this conduct shall be acted upon by, or at least influence, the
other party; and (3) knowledge, actual or constructive, of the real facts. ere, it is
uncontested that petitioner had in fact signed the Customers Agreement in the
morning of October 22, 1992, knowing fully well the nature of the contract he was
entering into. The Customers Agreement was duly notarized and as a public
document it is evidence of the fact, which gave rise to its execution and of the date
of the latter.
Next, petitioner paid his investment deposit to respondent in the form of a

managers check in the amount of US$5,000 as evidenced by PCI Bank Managers
Check No. 69007, dated October 22, 1992. All these are indicia that petitioner treated
the Customers Agreement as a valid and binding contract.
Petition is denied.
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Placewell International v. Camote

PLACEWELL INTERNATIONAL SERVICES
CORPORATION, Petitioner, versus IRENEO B. CAMOTE, Respondent.
FACTS:Petitioner Placewell International Services Corporation (PISC) deployed

respondent Ireneo B. Camote to work as building carpenter for SAAD Trading and
Contracting Co. (SAAD) at the Kingdom of Saudi Arabia (KSA) for a contract duration
of two years, with a corresponding salary of US$370.00 per month. At the job site,
respondent was allegedly found incompetent by his foreign employer; thus the latter
decided to terminate his services. However, respondent pleaded for his retention and
consented to accept a lower salary of SR 800.00 per month. Thus, SAAD retained
respondent until his return to the Philippines two years after.
On November 27, 2001, respondent filed a sworn Complaint for monetary

claims against petitioner alleging that when he arrived at the job site, he and his fellow
Filipino workers were required to sign another employment contract written in Arabic
under the constraints of losing their jobs if they refused; that for the entire duration of
the new contract, he received only SR 590.00 per month; that he was not given his
overtime pay despite rendering nine hours of work every day; that he and his co-
workers sought assistance from the Philippine Embassy but they did not succeed in
pursuing their cause of action because of difficulties in communication.
ISSUE: Whether or not there is estoppel by laches.
HELD: No. There is no estoppels by laches.
R.A. No. 8042 explicitly prohibits the substitution or alteration to the prejudice of the
worker, of employment contracts already approved and verified by the Department of
Labor and Employment (DOLE) from the time of actual signing thereof by the parties
up to and including the period of the expiration of the same without the approval of
the DOLE. The subsequently executed side agreement of an overseas contract worker
with her foreign employer which reduced her salary below the amount approved by the
POEA is void because it is against our existing laws, morals and public policy. The
said side agreement cannot supersede her standard employment contract approved by
the POEA.
Petitioners contention that respondent is guilty of laches is without basis.

Laches has been defined as the failure of or neglect for an unreasonable and
unexplained length of time to do that which by exercising due diligence, could or
should have been done earlier, or to assert a right within reasonable time, warranting
a presumption that the party entitled thereto has either abandoned it or declined to
assert it. Thus, the doctrine of laches presumes that the party guilty of negligence had
the opportunity to do what should have been done, but failed to do so. Conversely, if
the said party did not have the occasion to assert the right, then, he can not be
adjudged guilty of laches. Laches is not concerned with the mere lapse of time; rather,
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the party must have been afforded an opportunity to pursue his claim in order that
the delay may sufficiently constitute laches.
In the instant case, respondent filed his claim within the three-year prescriptive
period for the filing of money claims set forth in Article 291 of the Labor Code from the
time the cause of action accrued. Thus, we find that the doctrine of laches finds no
application in this case.
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Heirs of Ragua v. Court of Appeals

HEIRS OF EULALIO RAGUA, namely, DOMINGO, MARCIANA, MIGUEL,
FRANCISCO, VALERIANA, JUANA, and REMEDIOS, all surnamed RAGUA; DANILO
and CARLOS, both surnamed LARA, Petitioners, versus COURT OF APPEALS,
REPUBLIC OF THE PHILIPPINES, NATIONAL HOUSING AUTHORITY, PHILIPPINE
AMERICAN LIFE INSURANCE CO., INC., J.M. TUASON & CO., INC. and HEIRS OF
D. TUASON, INC., Respondents.
(G.R. Nos. 88521-22, January 31, 2000, 1st Division)
PARDO, J.:
FACTS:These consolidated cases involve a prime lot consisting of 4,399,322 square

meters, known as the Diliman Estate, situated in Quezon City. On this 439 hectares of
prime land now stand the following: the Quezon City Hall, Philippine Science High
School, Quezon Memorial Circle, Visayas Avenue, Ninoy Aquino Parks and Wildlife,
portions of UP Village and East Triangle, the entire Project 6 and Vasha Village,
Veterans Memorial Hospital and golf course, Department of Agriculture, Department of
Environment and Natural Resources, Sugar Regulatory Administration, Philippine
Tobacco Administration, Land Registration Authority, Philcoa Building, Bureau of
Telecommunications, Agricultural Training Institute building, Pagasa Village, San
Francisco School, Quezon City Hospital, portions of Project 7, Mindanao Avenue
subdivision, part of Bago Bantay resettlement project, SM City North EDSA, part of
Phil-Am Life Homes compound and four-fifths of North Triangle. This large estate was
the subject of a petition for judicial reconstitution originally filed by Eulalio Ragua in
1964, which gave rise to protracted legal battles between the affected parties, lasting
more than thirty-five (35) years.
ISSUE: Whether or not estoppel by laches exists on the part of petitioner.
HELD: Yes. Estoppel by laches exists on the part of petitioner.
Petitioners filed the petition for reconstitution of OCT 632 nineteen (19) years after the
title was allegedly lost or destroyed. We thus consider petitioners guilty of laches.
Laches is negligence or omission to assert a right within a reasonable time, warranting
the presumption that the party entitled to assert it either has abandoned or declined
to assert it.
Petitioners were not parties in the case before the trial court for the judicial
reconstitution of OCT 632. It was Eulalio Ragua, later succeeded by his heirs, who
filed the petition for reconstitution. Not being parties to the petition, petitioners have
no personality to file the motion for execution of judgment. In any event, the decision
cannot be executed as timely appeals therefrom were taken by the parties.
In a petition for judicial reconstitution of title, the Register of Deeds is merely a
nominal party. In fact, it is not even required to implead him. In the instant cases, the
Republic of the Philippines together with other intervenors and oppositors, interposed
appeals to the Court of Appeals within the prescribed period.
There is no merit to petitioners' argument that the Court of Appeals' decision in
CA-G.R. CV No. 20701 is legally incompatible with its decision in CA-G.R. CV Nos.
00705-00706. CA-G.R. CV No. 20701 confirmed the legal rights of petitioners over the
parcels of land ceded to them by virtue of the deeds of assignments executed by
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Eulalio Ragua. The decision of the Court of Appeals in CA-G.R. CV No. 20701 did not
involve the validity of the Ragua title.
Petitions are denied.
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Metrobank v. Court of Appeals

METROPOLITAN BANK & TRUST COMPANY, Petitioner, versus COURT OF
APPEALS and G.T.P. DEVELOPMENT CORPORATION, Respondents.
BUENA, J.:
FACTS:Mr. Chia offered the subject property for sale to private respondent G.T.P.
Development Corporation (hereafter, GTP), with assumption of the mortgage
indebtedness in favor of petitioner METROBANK secured by the subject property.
Pending negotiations for the proposed sale, Atty. Bernardo Atienza, acting in behalf of
respondent GTP, went to METROBANK to inquire on Mr. Chia's remaining balance on
the real estate mortgage. METROBANK obliged with a statement of account of Mr.
Chia amounting to about P115,000.00 as of August ,1980. The deed of sale and the
memorandum of agreement between Mr. Chia and respondent GTP were eventually
executed and signed. Atty. Atienza went to METROBANK Quiapo Branch and paid one
hundred sixteen thousand four hundred sixteen pesos and seventy-one centavos
(P116,416.71) for which METROBANK issued an official receipt acknowledging
payment. This notwithstanding, petitioner METROBANK refused to release the real
estate mortgage on the subject property despite repeated requests from Atty. Atienza,
thus prompting respondent GTP to file an action for specific performance against
petitioner METROBANK and Mr. Chia.
ISSUE: Whether or not the CA erred in reversing the decision of the lower court.
HELD: No. The Court of Appeals did not err in reversing the decision of the lower
court.
The Court found no compelling reasons to disturb the assailed decision. All things
studiedly viewed in proper perspective, the Court are of the opinion, and so rule, that
whatever debts or loans mortgagor Chia contracted with Metrobank after September 4,
1980, without the conformity of plaintiff-appellee, could not be adjudged as part of the
mortgage debt the latter so assumed. We are persuaded that the contrary HELD on
this point in Our October 24, 1994 decision would be unfair and unjust to plaintiff-
appellee because, before buying subject property and assuming the mortgage debt
thereon, the latter inquired from Metrobank about the exact amount of the mortgage
debt involved.
Petitioner METROBANK is estopped from refusing the discharge of the real

estate mortgage on the claim that the subject property still secures "other
unliquidated past due loans."
petition is denied.
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Sps. Del Ocampo v. Court of Appeals

SPOUSES MANUEL and SALVACION DEL CAMPO, Petitioners, versus HON. COURT
OF APPEALS and HEIRS OF JOSE REGALADO, SR., Respondents.
QUISUMBING, J.:
FACTS: Salome, Consorcia, Alfredo, Maria, Rosalia, Jose, Quirico and Julita, all
surnamed Bornales, were the original co-owners of the lot in question.
On July 14, 1940, Salome sold part of her 4/16 share to Soledad Daynolo. Thereafter,
Soledad Daynolo immediately took possession of the land described above and built a
house thereon. A few years later, Soledad and her husband, Simplicio Distajo,
mortgaged the subject portion of the lot as security for a debt to Jose Regalado, Sr.
This transaction was evidenced by a Deed of Mortgage.
On April 14, 1948, three of the eight co-owners of Lot 162, specifically, Salome,
Consorcia and Alfredo, sold 24,993 square meters of said lot to Jose Regalado, Sr. On
May 4, 1951, Simplicio Distajo, heir of Soledad Daynolo who had since died, paid the
mortgage debt and redeemed the mortgaged portion of Lot 162 from Jose Regalado, Sr.
The latter, in turn, executed a Deed of Discharge of Mortgage in favor of Soledads
heirs, namely: Simplicio Distajo, Rafael Distajo and Teresita Distajo-Regalado. On
same date, the said heirs sold the redeemed portion of Lot 162 for P1,500.00 to herein
petitioners, the spouses Manuel Del Campo and Salvacion Quiachon.
ISSUE: Whether or not the sale of the subject portion constitutes a sale of a concrete
or definite portion of land owned in common does not absolutely deprive herein
petitioners of any right or title thereto.
HELD: No. The sale of the subject portion constitutes a sale of a concrete or definite
portion of land owned in common does not absolutely deprive herein petitioners of any
right or title thereto.
There can be no doubt that the transaction entered into by Salome and Soledad
could be legally recognized in its entirety since the object of the sale did not even
exceed the ideal shares held by the former in the co-ownership. As a matter of fact, the
deed of sale executed between the parties expressly stipulated that the portion of Lot
162 sold to Soledad would be taken from Salomes 4/16 undivided interest in said lot,
which the latter could validly transfer in whole or in part even without the consent of
the other co-owners. Salomes right to sell part of her undivided interest in the co-
owned property is absolute in accordance with the well-settled doctrine that a co-
owner has full ownership of his pro-indiviso share and has the right to alienate, assign
or mortgage it, and substitute another person in its enjoyment.
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Cuenco v. Vda. De Manguerra

MIGUEL CUENCO, Substituted by MARIETTA C. CUYEGKENG, Petitioner,
versus CONCEPCION CUENCO Vda. DE MANGUERRA, Respondent.
PANGANIBAN, J.:
FACTS:On September 19, 1970, the [respondent] filed the initiatory complaint herein
for specific performance against her uncle [Petitioner] Miguel Cuenco which averred,
inter alia that her father, the late Don Mariano Jesus Cuenco (who became Senator)
and said [petitioner] formed the Cuenco and Cuenco Law Offices; that on or around
August 4, 1931, the Cuenco and Cuenco Law Offices served as lawyers in two (2) cases
entitled Valeriano Solon versus Zoilo Solon (Civil Case 9037) and Valeriano Solon
versus Apolonia Solon (Civil Case 9040) involving a dispute among relatives over
ownership of lot 903 of the Banilad Estate which is near the Cebu Provincial Capitol;
that records of said cases indicate the name of the [petitioner] alone as counsel of
record, but in truth and in fact, the real lawyer behind the success of said cases was
the influential Don Mariano Jesus Cuenco; that after winning said cases, the
awardees of Lot 903 subdivided said lot into three (3) parts as follows:
Lot 903-A: 5,000 [square meters]: Mariano Cuencos attorneys fees
Lot 903-B: 5,000 [square meters]: Miguel Cuencos attorneys fees
Lot 903-C: 54,000 [square meters]: Solons retention
Petitioner later claimed the property after the death of his brother.
ISSUES: Whether or not the laches barred the right of action of respondent.
HELD: Yes. The laches barred the right of action of respondent.
From the time Lot 903-A was subdivided and Marianos six children -- including
Concepcion -- took possession as owners of their respective portions, no whimper of
protest from petitioner was heard until 1963. By his acts as well as by his omissions,
Miguel led Mariano and the latters heirs, including Concepcion, to believe that
Petitioner Cuenco respected the ownership rights of respondent over Lot 903-A-6.
That Mariano acted and relied on Miguels tacit recognition of his ownership thereof is
evident from his will, executed in 1963. Indeed, as early as 1947, long before Mariano
made his will in 1963, Lot 903-A -- situated along Juana Osmea Extension,
Kamputhaw, Cebu City, near the Cebu Provincial Capitol -- had been subdivided and
distributed to his six children in his first marriage. Having induced him and his heirs
to believe that Lot 903-A-6 had already been distributed to Concepcion as her own,
petitioner is estopped from asserting the contrary and claiming ownership thereof.
The principle of estoppel in pais applies when -- by ones acts, representations,
admissions, or silence when there is a need to speak out -- one, intentionally or
through culpable negligence, induces another to believe certain facts to exist; and the
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latter rightfully relies and acts on such belief, so as to be prejudiced if the former is
permitted to deny the existence of those facts.
Petitioner claims that respondents action is already barred by laches. Laches is

negligence or omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to it has either abandoned or declined to assert
it.[40] In the present case, respondent has persistently asserted her right to Lot 903-
A-6 against petitioner. Concepcion was in possession as owner of the property from
1949 to 1969. When Miguel took steps to have it separately titled in his name, despite
the fact that she had the owners duplicate copy of TCT No. RT-6999 -- the title
covering the entire Lot 903-A -- she had her adverse claim annotated on the title in
1967. When petitioner ousted her from her possession of the lot by tearing down her
wire fence in 1969, she commenced the present action on September 19, 1970, to
protect and assert her rights to the property. We find that she cannot be held guilty of
laches, as she did not sleep on her rights.
Petition is denied.
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Laurel v. Desierto
SALVADOR H. LAUREL, Petitioner, versus HON. ANIANO A. DESIERTO, in his
capacity as Ombudsman, Respondent.
KAPUNAN, J.:
FACTS: On June 13, 1991, President Corazon C. Aquino issued Administrative Order
No. 223 "constituting a Committee for the preparation of the National Centennial
Celebration in 1998." The Committee was mandated "to take charge of the nationwide
preparations for the National Celebration of the Philippine Centennial of the
Declaration of Philippine Independence and the Inauguration of the Malolos
Congress." Subsequently, President Fidel V. Ramos issued Executive Order No. 128,
"reconstituting the Committee for the preparation of the National Centennial
Celebrations in 1988." It renamed the Committee as the "National Centennial
Commission." Appointed to chair the reconstituted Commission was Vice-President
Salvador H. Laurel. Presidents Diosdado M. Macapagal and Corazon C. Aquino were
named Honorary Chairpersons.
Petitioner Salvador H. Laurel moves for a reconsideration of this Courts
decision declaring him, as Chair of the National Centennial Commission (NCC), a
public officer. Petitioner also prays that the case be referred to the Court En Banc.
On November 14, 2000, the Evaluation and Preliminary Investigation Bureau

issued a resolution finding "probable cause to indict respondents SALVADOR H.
LAUREL and TEODORO Q. PEA before the Sandiganbayan for conspiring to violate
Section 3(e) of Republic Act No. 3019, in relation to Republic Act No. 1594." The
resolution also directed that an information for violation of the said law be filed
against Laurel and Pea. Ombudsman Aniano A. Desierto approved the resolution
with respect to Laurel but dismissed the charge against Pea.
ISSUE: Whether or not Laurel is a public officer as Chair of the NCC.
HELD: Yes. Laurel is a public officer as Chair of the NCC.
The issue in this case is whether petitioner, as Chair of the NCC, is a public officer
under the jurisdiction of the Ombudsman. Assuming, as petitioner proposes, that the
designation of other members to the NCC runs counter to the Constitution, it does not
make petitioner, as NCC Chair, less a public officer. Such serious constitutional
repercussions do not reduce the force of the rationale behind this Courts decision.
Second, petitioner invokes estoppel. He claims that the official acts of the
President, the Senate President, the Speaker of the House of Representatives, and the
Supreme Court, in designating Cabinet members, Senators, Congressmen and
Justices to the NCC, led him to believe that the NCC is not a public office.
The contention has no merit. In estoppel, the party representing material facts
must have the intention that the other party would act upon the representation. It is
preposterous to suppose that the President, the Senate President, the Speaker and the
Supreme Court, by the designation of such officials to the NCC, intended to mislead
petitioner just so he would accept the position of NCC Chair. Estoppel must be
unequivocal and intentional. Moreover, petitioner himself admits that the principle of
estoppel does not operate against the Government in the exercise of its sovereign
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powers.
Third, as ground for the referral of the case to the Court En Banc, petitioner
submits that our decision in this case modified or reversed doctrines rendered by this
Court, which can only be done by the Court En Banc.It is argued that by designating
three of its then incumbent members to the NCC, the Court took the position that the
NCC was not a public office. The argument is a bit of a stretch. Section 4 (3), Article
VIII of the Constitution provides that no doctrine or principle of law laid down by the
court in a decision rendered en banc or in division may be modified or reversed except
by the court sitting en banc. In designating three of its incumbent members to the
NCC, the Court did not render a decision, in the context of said constitutional
provision, which contemplates an actual case. Much less did the Court, by such
designation, articulate any doctrine or principle of law. Invoking the same provision,
petitioner asserts that the decision in this case reversed or modified Macalino vs.
Sandiganbayan, holding that the Assistant Manager of the Treasury Division and the
Head of the Loans Administration & Insurance Section of the Philippine National
Construction Corporation (PNCC) is not a public officer under Republic Act No. 3019.
This contention also has no merit. The rationale for the HELD in Macalino is that the
PNCC has no original charter as it was incorporated under the general law on
corporations. However, as we pointed out in our decision, a conclusion that
EXPOCORP is a government-owned or controlled corporation would not alter the
outcome of this case because petitioners position and functions as Chief Executive
Officer of EXPOCORP are by virtue of his being Chairman of the NCC. The other issues
raised by petitioner are mere reiterations of his earlier arguments. The Court, however,
remains unswayed thereby.
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Hanopo v. Shoemart Incorporated

SPOUSES MANUEL R. HANOPOL and BEATRIZ T. HANOPOL, Petitioners,
versus SHOEMART INCORPORATED, Represented by Executive Vice President,
SENEN T. MENDIOLA, Respondent.
FACTS: Shoemart, Inc., is a corporation duly organized and existing under the laws of
the Philippines engaged in the operation of department stores. On December 4, 1985,
Shoemart, through its Executive Vice-President, Senen T. Mendiola, and spouses
Manuel R. Hanopol and Beatriz T. Hanopol executed a Contract of Purchase on Credit.
Under the terms of the contract, Shoemart extended credit accommodations, in

the amount of Three Hundred Thousand Pesos (P300,000.00), for purchases on credit
made by holders of SM Credit Card issued by spouses Hanopol for one year, renewable
yearly thereafter. Spouses Hanopol were given a five percent (5%) discount on all
purchases made by their cardholders, deductible from the semi-monthly payments to
be made to Shoemart by spouses Hanopol.
For failure of spouses Hanopol to pay the principal amount of One Hundred
Twenty-Four Thousand Five Hundred Seventy-One Pesos and Eighty-Nine Centavos
(P124,571.89) as of October 6, 1987, Shoemart instituted extrajudicial foreclosure
proceedings against the mortgaged properties.
Spouses Hanopol alleged that Shoemart breached the contract when the latter
failed to furnish the former with the requisite documents by which the formers
liability shall be determined, namely: charge invoices, purchase booklets and purchase
journal, as provided in their contract; that without the requisite documents, spouses
Hanopol had no way of knowing that, in fact, they had already paid, even overpaid,
whatever they owed to Shoemart; that despite said breach, Shoemart even had the
audacity to apply for extrajudicial foreclosure with the Sheriff.
ISSUE: Whether or not Shoemart acted with manifest bad faith in pursuing with the
foreclosure and auction sale of the property of spouses Hanopol, and, accordingly,
should be held liable for damages.
HELD: No. Shoemart did not act with manifest bad faith in pursuing with the
foreclosure and auction sale of the property of spouses Hanopol, and, accordingly,
should be held liable for damages.
All the three (3) elements for litis pendentia as a ground for dismissal of an action are
present, namely: (a) identity of parties, or at least such parties who represent the same
interest in both actions; (b) identity of rights asserted and relief prayed for, the relief
being founded on the same facts; and (c) the identity, with respect to the two (2)
preceding particulars in the two (2) cases, in such that any judgment that may be
rendered in the pending case, regardless of which party is successful, would amount
to res judicata in the other.
In the case at bench, the parties are the same; the relief sought in the case
before the Court of Appeals and the trial court are the same, that is, to permanently
enjoin the foreclosure of the real estate mortgage executed by spouses Hanopol in
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favor of Shoemart; and, both are premised on the same facts. The judgment of the
Court of Appeals would constitute a bar to the suit before the trial court.
Petition is denied.
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Terminal Facilities v. PPA

TERMINAL FACILITIES AND SERVICES CORPORATION, Petitioner, versus
PHILIPPINE PORTS AUTHORITY and PORT MANAGER, and PORT DISTRICT
OFFICER OF DAVAO CITY, Respondents.
DE LEON, JR., J.:
FACTS: Before us are two (2) consolidated petitions for review, one filed by the
Terminal Facilities and Services Corporation (TEFASCO) and the other by the
Philippine Ports Authority (PPA). TEFASCO is a domestic corporation organized and
existing under the laws of the Philippines with principal place of business at Barrio
Ilang, Davao City. It is engaged in the business of providing port and terminal facilities
as well as arrastre, stevedoring and other port-related services at its own private port
at Barrio Ilang. Sometime in 1975 TEFASCO submitted to PPA a proposal for the
construction of a specialized terminal complex with port facilities and a provision for
port services in Davao City. To ease the acute congestion in the government ports at
Sasa and Sta. Ana, Davao City, PPA welcomed the proposal and organized an inter-
agency committee to study the plan. The committee recommended approval. On April
21, 1976 the PPA Board of Directors passed Resolution No. 7 accepting and approving
TEFASCO's project proposal. Long after TEFASCO broke round with massive
infrastructure work, the PPA Board curiously passed on October 1, 1976 Resolution
No. 50 under which TEFASCO, without asking for one, was compelled to submit an
application for construction permit. Without the consent of TEFASCO, the application
imposed additional significant conditions. The series of PPA impositions did not stop
there. Two (2) years after the completion of the port facilities and the commencement
of TEFASCO's port operations, or on June 10, 1978, PPA again issued to TEFASCO
another permit, under which more onerous conditions were foisted on TEFASCO's port
operations. In the purported permit appeared for the first time the contentious
provisions for ten percent (10%) government share out of arrastre and stevedoring
gross income and one hundred percent (100%) wharfage and berthing charges. On
February 10, 1984 TEFASCO and PPA executed a Memorandum of Agreement (MOA)
providing among others for (a) acknowledgment of TEFASCO's arrears in government
share at Three Million Eight Hundred Seven Thousand Five Hundred Sixty-Three
Pesos and Seventy-Five Centavos (P3,807,563.75) payable monthly, with default
penalized by automatic withdrawal of its commercial private port permit and permit to
operate cargo handling services; (b) reduction of government share from ten percent
(10%) to six percent (6%) on all cargo handling and related revenue (or arrastre and
stevedoring gross income); (c) opening of its pier facilities to all commercial and third-
party cargoes and vessels for a period coterminous with its foreshore lease contract
with the National Government; and, (d) tenure of five (5) years extendible by five (5)
more years for TEFASCO's permit to operate cargo handling in its private port
facilities. In return PPA promised to issue the necessary permits for TEFASCO's port
activities. TEFASCO complied with the MOA and paid the accrued and current
government share.
On August 30, 1988 TEFASCO sued PPA and PPA Port Manager, and Port
Officer in Davao City for refund of government share it had paid and for damages as a
result of alleged illegal exaction from its clients of one hundred percent (100%)
berthing and wharfage fees. The complaint also sought to nullify the February 10,
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1984 MOA and all other PPA issuances modifying the terms and conditions of the
April 21, 1976 Resolution No. 7 above-mentioned. PPA appealed the decision of the
trial court to the Court of Appeals. The appellate court in its original decision
recognized the validity of the impositions and reversed in toto the decision of the trial
court. TEFASCO moved for reconsideration which the Court of Appeals found partly
meritorious. Thus the Court of Appeals in its Amended Decision partially affirmed the
RTC decision only in the sense that PPA was directed to pay TEFASCO (1) the
amounts of Fifteen Million Eight Hundred Ten Thousand Thirty-Two Pesos and Seven
Centavos (P15,810,032.07) representing fifty percent (50%) wharfage fees and Three
Million Nine Hundred Sixty-One Thousand Nine Hundred Sixty-Four Pesos and Six
Centavos (P3,961,964.06) representing thirty percent (30%) berthing fees which
TEFASCO could have earned as private port usage fee from 1977 to 1991. The Court
of Appeals held that the one hundred percent (100%) berthing and wharfage fees were
unenforceable because they had not been approved by the President under P.D. No.
857, and discriminatory since much lower rates were charged in other private ports as
shown by PPA issuances effective 1995 to 1997. Both PPA and TEFASCO were
unsatisfied with this disposition hence these petitions.
ISSUE: Whether or not the collection by PPA of one hundred percent (100%) wharfage
fees and berthing charges; (c) the propriety of the award of fifty percent (50%) wharfage
fees and thirty percent (30%) berthing charges as actual damages in favor of TEFASCO
for the period from 1977 to 1991 is valid.
HELD: The imposition by PPA of ten percent (10%), later reduced to six percent (6%),
government share out of arrastre and stevedoring gross income of TEFASCO is void.
This exaction was never mentioned in the contract, much less is it a binding
prestation, between TEFASCO and PPA. What was clearly stated in the terms and
conditions appended to PPA Resolution No. 7 was for TEFASCO to pay and/or secure
from the proper authorities "all fees and/or permits pertinent to the construction and
operation of the proposed project." The government share demanded and collected
from the gross income of TEFASCO from its arrastre and stevedoring activities in
TEFASCO's wholly owned port is certainly not a fee or in any event a proper condition
in a regulatory permit. Rather it is an onerous "contractual stipulation" which finds no
root or basis or reference even in the contract aforementioned.
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Mendoza v. Court of Appeals

DANILO D. MENDOZA, also doing business under the name and style of
ATLANTIC EXCHANGE PHILIPPINES, Petitioner, vs. COURT OF APPEALS,
PHILIPPINE NATIONAL BANK, FERNANDO MARAMAG, JR., RICARDO G.
DECEPIDA and BAYANI A. BAUTISTA,Respondents.
(G.R. No. 116710. June 25, 2001, 2nd Division)
DE LEON, JR., J.:
FACTS: Petitioner Danilo D. Mendoza is engaged in the domestic and international

trading of raw materials and chemicals. He operates under the business name
Atlantic Exchange Philippines (Atlantic), a single proprietorship registered with the
Department of Trade and Industry (DTI). Sometime in 1978 he was granted by
respondent Philippine National Bank (PNB) a Five Hundred Thousand Pesos
(P500,000.00) credit line and a One Million Pesos (P1,000,000.00) Letter of
Credit/Trust Receipt (LC/TR) line.
As security for the credit accommodations and for those which may thereinafter
be granted, petitioner mortgaged to respondent PNB the following: 1) three (3) parcels
of land with improvements in F. Pasco Avenue, Santolan, Pasig; 2) his house and lot in
Quezon City; and 3) several pieces of machinery and equipment in his Pasig coco-
chemical plant.
Petitioner executed in favor of respondent PNB three (3) promissory notes

covering the Five Hundred Thousand Pesos (P500,000.00) credit line, one dated March
8, 1979 for Three Hundred Ten Thousand Pesos (P310,000.00); another dated March
30, 1979 for Forty Thousand Pesos (P40,000.00); and the last dated September 27,
1979 for One Hundred Fifty Thousand Pesos (P150,000.00).
Petitioner made use of his LC/TR line to purchase raw materials from foreign
importers. He signed a total of eleven (11) documents denominated as "Application
and Agreement for Commercial Letter of Credit," on various dates
In a letter dated January 3, 1980 and signed by Branch Manager Fil S. Carreon
Jr., respondent PNB advised petitioner Mendoza that effective December 1, 1979, the
bank raised its interest rates to 14% per annum, in line with Central Bank's Monetary
Board Resolution No. 2126 dated November 29, 1979.
On March 9, 1981, he wrote a letter to respondent PNB requesting for the

restructuring of his past due accounts into a five-year term loan and for an additional
LC/TR line of Two Million Pesos (P2,000,000.00). According to the letter, because of
the shut-down of his end-user companies and the huge amount spent for the
expansion of his business, petitioner failed to pay to respondent bank his LC/TR
accounts as they became due and demandable.
Ceferino D. Cura, Branch Manager of PNB Mandaluyong replied on behalf of the

respondent bank and required petitioner to submit the following documents before the
bank would act on his request: 1) Audited Financial Statements for 1979 and 1980; 2)
Projected cash flow (cash in - cash out) for five (5) years detailed yearly; and 3) List of
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additional machinery and equipment and proof of ownership thereof. Cura also
suggested that petitioner reduce his total loan obligations to Three Million Pesos
(P3,000,000.00).
On September 25, 1981, petitioner sent another letter addressed to PNB Vice-
President Jose Salvador, regarding his request for restructuring of his loans. He
offered respondent PNB the following proposals: 1) the disposal of some of the
mortgaged properties, more particularly, his house and lot and a vacant lot in order to
pay the overdue trust receipts; 2) capitalization and conversion of the balance into a 5-
year term loan payable semi-annually or on annual installments; 3) a new Two Million
Pesos (P2,000,000.00) LC/TR line in order to enable Atlantic Exchange Philippines to
operate at full capacity; 4) assignment of all his receivables to PNB from all domestic
and export sales generated by the LC/TR line; and 5) maintenance of the existing Five
Hundred Thousand Pesos (P500,000.00) credit line.
The petitioner testified that respondent PNB Mandaluyong Branch found his
proposal favorable and recommended the implementation of the agreement. However,
Fernando Maramag, PNB Executive Vice-President, disapproved the proposed release
of the mortgaged properties and reduced the proposed new LC/TR line to One Million
Pesos (P1,000,000.00). Petitioner claimed he was forced to agree to these changes and
that he was required to submit a new formal proposal and to sign two (2) blank
promissory notes.
In a letter dated July 2, 1982, petitioner offered the following revised proposals
to respondent bank: 1) the restructuring of past due accounts including interests and
penalties into a 5-year term loan, payable semi-annually with one year grace period on
the principal; 2) payment of Four Hundred Thousand Pesos (P400,000.00) upon the
approval of the proposal; 3) reduction of penalty from 3% to 1%; 4) capitalization of the
interest component with interest rate at 16% per annum; 5) establishment of a One
Million Pesos (P1,000,000.00) LC/TR line against the mortgaged properties; 6)
assignment of all his export proceeds to respondent bank to guarantee payment of his
Petitioner failed to pay the subject two (2) Promissory Notes Nos. 127/82 and
128/82 as they fell due. Respondent PNB extra-judicially foreclosed the real and
chattel mortgages, and the mortgaged properties were sold at public auction to
respondent PNB, as highest bidder, for a total of Three Million Seven Hundred Ninety
Eight Thousand Seven Hundred Nineteen Pesos and Fifty Centavos (P3,798,719.50).
The petitioner filed a complaint for specific performance, nullification of the

extra-judicial foreclosure and damages against respondents PNB. He alleged that the
Extrajudicial Foreclosure Sale of the mortgaged properties was null and void since his
loans were restructured to a five-year term loan; hence, it was not yet due and
demandable. On March 16, 1992, the trial court rendered judgment in favor of the
petitioner and ordered the nullification of the extrajudicial foreclosure of the real
estate mortgage, the Sheriffs sale of the mortgaged real properties by virtue of
consolidation thereof and the cancellation of the new titles issued to PNB; that PNB
vacate the subject premises in Pasig and turn the same over to the petitioner; and also
the nullification of the extrajudicial foreclosure and sheriff's sale of the mortgaged
chattels, and that the chattels be returned to petitioner Mendoza if they were removed
from his Pasig premises or be paid for if they were lost or rendered unserviceable.
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The trial court decided for the petitioner. Upon appeal, the Court of Appeals
reversed the decision of the trial court and dismissed the complaint.
ISSUE: Whether or not respondent promised to be bound by the proposal of the

petitioner for a five-year restructuring of his overdue loan.
HELD:No. Respondent Court of Appeals held that there is no evidence of a promise

from respondent PNB, admittedly a banking corporation, that it had accepted the
proposals of the petitioner to have a five-year restructuring of his overdue loan
obligations. It found and held, on the basis of the evidence adduced, that "appellee's
(Mendoza) communications were mere proposals while the bank's responses were not
categorical that the appellee's request had been favorably accepted by the bank."
Nowhere in those letters presented by the petitioner is there a categorical

statement that respondent PNB had approved the petitioners proposed five-year
restructuring plan. It is stretching the imagination to construe them as evidence that
his proposed five-year restructuring plan has been approved by the respondent PNB
which is admittedly a banking corporation. Only an absolute and unqualified
acceptance of a definite offer manifests the consent necessary to perfect a contract. If
anything, those correspondences only prove that the parties had not gone beyond the
preparation stage, which is the period from the start of the negotiations until the
moment just before the agreement of the parties.
The doctrine of promissory estoppel is an exception to the general rule that a

promise of future conduct does not constitute an estoppel. In some jurisdictions, in
order to make out a claim of promissory estoppel, a party bears the burden of
establishing the following elements: (1) a promise reasonably expected to induce action
or forebearance; (2) such promise did in fact induce such action or forebearance, and
(3) the party suffered detriment as a result.
It is clear from the forgoing that the doctrine of promissory estoppel

presupposes the existence of a promise on the part of one against whom estoppel is
claimed. The promise must be plain and unambiguous and sufficiently specific so
that the Judiciary can understand the obligation assumed and enforce the promise
according to its terms. For petitioner to claim that respondent PNB is estopped to deny
the five-year restructuring plan, he must first prove that respondent PNB had
promised to approve the plan in exchange for the submission of the proposal. As
discussed earlier, no such promise was proven, therefore, the doctrine does not apply
to the case at bar. A cause of action for promissory estoppel does not lie where an
alleged oral promise was conditional, so that reliance upon it was not reasonable. It
does not operate to create liability where it does not otherwise exist.
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FAR EAST BANK AND TRUST COMPANY and MAKATI INSURANCE

COMPANY,Petitioners, versus JOSE MARQUES and MAXILITE TECHNOLOGIES,
INC.,Respondents
(G.R. No. 171419, January 10, 2011, 1 st Division)
CARPIO, J.,
FACTS: Maxilite Technologies, Inc. (Maxilite) is a domestic corporation engaged in the

importation and trading of equipment for energy-efficiency systems. Jose N. Marques
(Marques) is the President and controlling stockholder of Maxilite. Far East Bank and
Trust Co. (FEBTC) is a local bank which handled the financing and related
requirements of Marques and Maxilite. Marques and Maxilite maintained accounts
with FEBTC. Accordingly, FEBTC financed Maxilites capital and operational
requirements through loans secured with properties of Marques under the latters
name. Far East Bank Insurance Brokers, Inc. (FEBIBI) is a local insurance brokerage
corporation while Makati Insurance Company is a local insurance company. Both
companies are subsidiaries of FEBTC. On 17 June 1993, Maxilite and Marques
entered into a trust receipt transaction with FEBTC, in the sum of US$80,765.00, for
the shipment of various high-technology equipment from the United States, with the
merchandise serving as collateral. The foregoing importation was covered by a trust
receipt document signed by Marques on behalf of Maxilite. Sometime in August 1993,
FEBIBI, upon the advice of FEBTC, facilitated the procurement and processing from
Makati Insurance Company of four separate and independent fire insurance policies
over the trust receipted merchandise.Maxilite paid the premiums for these policies
through debit arrangement. FEBTC would debit Maxilites account for the premium
payments, as reflected in statements of accounts sent by FEBTC to Maxilite. On 9
March 1995, a fire gutted the Aboitiz Sea Transport Building along M.J. Cuenco
Avenue, Cebu City, where Maxilites office and warehouse were located. As a result,
Maxilite suffered losses amounting to at least P2.1 million, which Maxilite claimed
against the fire insurance policy with Makati Insurance Company. Makati Insurance
Company denied the fire loss claim on the ground of non-payment of premium. FEBTC
and FEBIBI disclaimed any responsibility for the denial of the claim.Maxilite and
Marques sued FEBTC, FEBIBI, and Makati Insurance Company.
ISSUE: Whether or not FEBTC is estopped from claiming that the insurance premium
has been unpaid.
HELD: Both trial and appellate courts basically agree that FEBTC is estopped from
claiming that the insurance premium has been unpaid. That FEBTC induced Maxilite
and Marques to believe that the insurance premium has in fact been debited from
Maxilites account is grounded on the the following facts: (1) FEBTC represented and
committed to handle Maxilites financing and capital requirements, including the
related transactions such as the insurance of the trust receipted merchandise; (2)
prior to the subject Insurance Policy No. 1024439, the premiums for the three
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separate fire insurance policies had been paid through automatic debit arrangement;
(3) FEBIBI sent FEBTC, not Maxilite nor Marques, written reminders dated 19 October
1994, 24 January 1995, and 6 March 1995 to debit Maxilites account, establishing
FEBTCs obligation to automatically debit Maxilites account for the premium amount;
(4) there was no written demand from FEBTC or Makati Insurance Company for
Maxilite or Marques to pay the insurance premium; (5) the subject insurance policy
was released to Maxilite on 19 August 1994; and (6) the subject insurance policy
remained uncancelled despite the alleged non-payment of the premium, making it
appear that the insurance policy remained in force and binding.
Roblett Construction v. CA
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ROBLETT INDUSTRIAL CONSTRUCTION CORPORATION, Petitioner, versus

COURT OF APPEALS and CONTRACTORS EQUIPMENT
(G.R. No. 116682. January 2, 1997, 1st Division)
FACTS: On 23 September 1986 respondent Contractors Equipment Corporation (CEC)

instituted an action for a sum of money against petitioner Roblett Industrial
Construction Corporation (RICC) before the Regional Trial Court of Makati alleging
that in 1985 it leased to the latter various construction equipment which it used in its
projects. As a result RICC incurred unpaid accounts amounting to P342,909.38.On 19
December 1985 RICC through its Assistant Vice President for Finance Candelario S.
Aller Jr. entered into an Agreement with CEC where it confirmed petitioner's account.
As an off-setting arrangement respondent received from petitioner construction
materials worth P115,000.00 thus reducing petitioner's balance to P227,909.38. A day
before the execution of their Agreement, or on 18 December 1985, RICC paid CEC
P10,000.00 in postdated checks which when deposited were dishonored. As a
consequence the latter debited the amount to petitioner's account of P227,909.38 thus
increasing its balance to P237,909.38. On 24 July 1986 Mariano R. Manaligod, Jr.,
General Manager of CEC, sent a letter of demand to petitioner through its Vice
President for Finance regarding the latter's overdue account of P237,909.38 and
sought settlement thereof on or before 31 July 1986. In reply, petitioner requested for
thirty (30) days to have enough time to look for funds to substantially settle its
account.Traversing the allegations of respondent, Candelario S. Aller Jr. declared that
he signed the Agreement with the real intention of having proof of payment. In fact
Baltazar Banlot, Vice President for Finance of petitioner, claimed that after
deliberation and audit it appeared that petitioner overpaid respondent by P12,000.00
on the basis of the latter's Equipment Daily Time Reports for 2 May to 14 June 1985
which reflected a total obligation of only P103,000.00. He claimed however that the
Agreement was not approved by the Board and that he did not authorize Aller Jr. to
sign thereon.On rebuttal, Manaligod Jr. declared that petitioner had received a
statement of account covering the period from 28 March to 12 July 1985 in the
amount of P376,350.18 which it never questioned. From this amount P3,440.80,
based on respondent's account with petitioner and P30,000.00, representing
payments made by the latter, were deducted thus leaving a balance of P342,909.38 as
mentioned in the Agreement. On 19 December 1990 the trial court rendered judgment
ordering petitioner to pay respondent
ISSUE: Whether or not the agreement between the parties is binding upon them.
HELD: Yes. It must be emphasized that the same agreement was used by plaintiff as
the basis for claiming defendant's obligation of P237,909.38 and also used by
defendant as the same basis for its alleged payment in full of its obligation to plaintiff.
But while plaintiff treats the entire agreement as valid, defendant wants the court to
treat that portion which treats of the offsetting of P115,000.00 as valid, whereas it
considers the other terms and conditions as "onerous, illegal and want of prior
consent and Board approval." This Court cannot agree to defendant's contention. It
must be stressed that defendant's answer was not made under oath, and therefore,
the genuineness and due execution of the agreement which was the basis for
plaintiff's claim is deemed admitted (Section 8, Rule 8, Rules of Court). Such
admission, under the principle of estoppel, is rendered conclusive upon defendant and
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cannot be denied or disproved as against plaintiff (Art. 1431, Civil Code). Either the
agreement is valid or void. It must be treated as a whole and not to be divided into
parts and consider only those provisions which favor one party (in this case the
defendant). Contracts must bind both contracting parties, its validity or compliance
cannot be left to the will of one of them (Art. 1308, New Civil Code).
Simedarby v. Goodyear
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SIME DARBY PILIPINAS, INC., Petitioner, versus GOODYEAR

PHILIPPINES, INC., Respondent
(GR No. 182148, June 8, 2011, 2nd Division)
MENDOZA, J.:
FACTS: Macgraphics leased a billboard to Sime Darby to bare its name and
logo at a monthly rental of P120, 000.00 for four years and was set to expire on
March 30, 1998. Sime Darby paid Macgraphics a total of P1.2 million
representing the ten-month deposit which the latter would apply to the last ten
months of the lease. Thereafter, Sime Darby was bought by Goodyear for a total
of P1.65 billion including the assignment of the receivables in connection with
its billboard advertising. Sime Darby then notified Macgraphics of the
assignment of the Magallanes billboard in favor of Goodyear.
Macgraphics then sent a letter to Sime Darby, dated July 11, 1996, informing
the latter that it could not give its consent to the assignment of lease to
Goodyear and advised Goodyear that any advertising service it intended to get
from them would have to wait until after the expiration or valid pre-termination
of the lease then existing with Sime Darby. Goodyear demanded partial
rescission of deed and the refund of P1, 239,000.00value of Sime Darby's
leasehold rights over the Magallanes billboard. Sime Darby refused and a
complaint was filed by Goodyear.
ISSUE: Whether or not the doctrine of laches can be applied in the present
case
HELD:The Court finds that the doctrine of laches cannot be applied in this
case. Laches is the failure or neglect, for an unreasonable and unexplained
length of time, to do that which, by exercising due diligence, could or should
have been done earlier; it is negligence or omission to assert a right within a
reasonable time, warranting the presumption that the party entitled to assert it
either has abandoned or declined to assert it. There is no absolute rule as to
what constitutes laches or staleness of demand; each case is to be determined
according to its particular circumstances, with the question of laches
addressed to the sound discretion of the court. Because laches is an equitable
doctrine, its application is controlled by equitable considerations and should
not be used to defeat justice or to perpetuate fraud or injustice.
From the records, it appears that Macgraphics first learned of the assignment
when Sime Darby sent its letter-notice dated May 3, 1996. From the letters
sent by Macgraphics to Goodyear, it is apparent that Macgraphics had to study
and determine both the legal and practical implications of entertaining
Goodyear as a client. After review, Macgraphics found that consenting to the
assignment would entail the commitment of manpower and resources that it
did not foresee at the inception of the lease. It thereafter communicated its
non-conformity to the assignment. To the mind of the Court, there was never a
delay.
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Far East Bank v. Borja

Far East Bank and Trust Company (Now Bank of the Philippine Islands) and
Rolando Borja, Deputy Sherrif, Petitioners, versus Sps. Ernesto and Leonor C.
Cayetano, Respondents.
VILLARAMA, JR., J.:
FACTS: The principal executed a special power of attorney in favor of her daughter
authorizing her to contract a loan from a bank and to mortgage the principals two
lots. The principal also executed an affidavit of non-tenancy for the approval of the
loan. The bank granted a loan secured by two promissory notes and a real estate
mortgage over the principals two lots. The mortgage document was signed by the
agent and her husband as mortgagors in their individual capacities, without stating
that the agent was executing the mortgage contract for and in behalf of the
principal. The bank foreclosed the mortgage due to non-payment of the loan. A notice
of public auction sale was sent to principal. The latters lawyer responded with a letter
to the bank requesting that the public auction be postponed. The letter went
unheeded and the public auction was held as scheduled wherein the mortgaged
properties were sold to the bank. Subsequently, the bank consolidated its title and
obtained new titles in its name after the redemption period lapsed without the
principal taking any action. Around five years later, the principal filed a complaint for
annulment of mortgage and extrajudicial foreclosure of the properties with damages
with the regional trial court (RTC) of Naga City. The principal sought nullification of
the real estate mortgage and extrajudicial foreclosure sale, as well as the cancellation
of the banks title over the properties.
ISSUE: Whether or not the principal can be bound by the real estate mortgage
executed by the agent.
HELD: The RTC rendered judgment in favor of the principal, holding that the principal
cannot be bound by the real estate mortgage executed by the agent unless it is shown
that the same was made and signed in the name of the principal; hence, the mortgage
will bind the agent only. The Court of Appeals (CA) affirmed the RTCs HELD. It held
that it must be shown that the real estate mortgage was executed by the agent on
behalf of the principal, otherwise the agent may be deemed to have acted on his own
and the mortgage is void. However, the CA further declared that the principal loan
agreement was not affected, which had become an unsecured credit. The Supreme
Court held that the principal is not bound by the real estate mortgage executed by the
authorized agent in her own name without indicating the principal. It is not sufficient
for the principal to have authorized the agent through a special power of attorney to
execute the mortgage on behalf of the principal; the mortgage contract itself must
clealy state that the agent was executing the mortgage contract for and on behalf of
the principal.
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Kings Properties Corporation, Inc. v. Galido

KINGS PROPERTIES
CORPORATION, Petitioner, versus CANUTO A. GALIDO,Respondent.
(G.R. No. 170023, November 27, 2009, 2nd Division
CARPIO, J.:
FACTS: Kings Properties Corporation (petitioner) filed this Petition for Review on
Certiorari assailing the Court of Appeals Decision[2] dated 20 December 2004 in CA-
G.R. CV No. 68828 as well as the Resolution[3] dated 10 October 2005 denying the
Motion for Reconsideration. In the assailed decision, the Court of Appeals reversed the
Regional Trial Courts Decision dated 4 July 2000. This case involves an action for
cancellation of certificates of title, registration of deed of sale and issuance of
certificates of title filed by Canuto A. Galido before Branch 71 of the Regional Trial
Court of Antipolo City (trial court). On 18 April 1966, the heirs of Domingo Eniceo,
namely Rufina Eniceo and Maria Eniceo, were awarded with Homestead Patent No.
112947 consisting of four parcels of land located in San Isidro, Antipolo, Rizal and
particularly described as follows; Lot No. 1 containing an area of 96,297 square
meters; Lot No. 3 containing an area of 25,170 square meters; Lot No. 4 containing an
area of 26,812 square meters; and Lot No. 5 containing an area of 603 square meters.
The Antipolo property with a total area of 14.8882 hectares was registered under
Original Certificate of Title (OCT) No. 535. Subsequently a deed of sale covering the
Antipolo property was executed between Rufina Eniceo and Maria Eniceo as vendors
and respondent as vendee. They sold the Antipolo property to respondent for
P250,000. A certain Carmen Aldana delivered the owners duplicate copy of OCT No.
535 to respondent.Petitioner alleges that when Maria Eniceo died in June 1975,
Rufina Eniceo and the heirs of Maria Eniceo, who continued to occupy the Antipolo
property as owners, thought that the owners duplicate copy of OCT No. 535 was lost.
On 5 April 1988, the Eniceo heirs registered with the Registry of Deeds of Marikina
City a Notice of Loss dated 2 April 1988 of the owners copy of OCT No. 535. The
Eniceo heirs also filed a petition for the issuance of a new owners duplicate copy of
OCT No. 535 with Branch 72 of the Regional Trial Court of Antipolo, Rizal. The RTC
rendered a decision finding that the certified true copy of OCT No. 535 contained no
annotation in favor of any person, corporation or entity. The RTC ordered the Registry
of Deeds to issue a second owners copy of OCT No. 535 in favor of the Eniceo heirs
and declared the original owners copy of OCT NO. 535 cancelled and considered of no
further value. Thus the Registry of Deeds issued a second owners copy of OCT No.
535 in favor of the Eniceo heirs. Petitioner states that as early as 1991, respondent
knew of the RTC decision in LRC Case No. 584-A because respondent filed a criminal
case against Rufina Eniceo and Leonila Bolinas for giving false testimony upon a
material fact during the trial of LRC Case No. 584-A. Petitioner alleges that sometime
in February 1995, Bolinas came to the office of Alberto Tronio Jr. , petitioners general
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manager, and offered to sell the Antipolo property. Tronio ascertained that OCT No.
535 was clean and had no lien and encumbrances. After the necessary verification,
petitioner decided to buy the Antipolo property. On 14 March 1995, respondent
caused the annotation of his adverse claim in OCT No. 535. On 20 March 1995, the
Eniceo heirs executed a deed of absolute sale in favor of petitioner covering lots 3 and
4 of the Antipolo property for P500,000. On the same date, Transfer Certificate of Title
(TCT) Nos. 277747 and 277120 were issued. TCT No. 277747 covering lots 1 and 5 of
the Antipolo property was registered in the names of Rufina Eniceo, Ambrosio Eniceo,
Rodolfo Calove, Fernando Calove and Leonila Calove Bolinas. TCT No. 277120
covering lots 3 and 4 of the Antipolo property was registered in the name of petitioner.
On 5 April 1995, the Eniceo heirs executed another deed of sale in favor of petitioner
covering lots 1 and 5 of the Antipolo property for P1,000,000. TCT No. 278588 was
issued in the name of petitioner and TCT No. 277120 was cancelled. On 17 August
1995, the Secretary of the Department of Environment and Natural Resources (DENR
Secretary) approved the deed of sale between the Eniceo heirs and respondent. On 16
January 1996, respondent filed a civil complaint with the trial court against the
Eniceo heirs and petitioner. Respondent prayed for the cancellation of the certificates
of title issued in favor of petitioner, and the registration of the deed of sale and
issuance of a new transfer certificate of title in favor of respondent. The trial
court rendered its decision dismissing the case for lack of legal and factual basis.
Respondent appealed to the Court of Appeals. On 20 December 2004, the CA rendered
a decision reversing the trial courts decision. Aggrieved by the CAs decision and
resolution, petitioner elevated the case before the High Court.
ISSUES: Whether the adverse claim of respondent over the Antipolo property should
be barred by laches
Whether the deed of sale delivered to respondent should be presumed an

equitable mortgage pursuant to Article 1602(2) and 1604 of the Civil Code.
HELD:The contract between the Eniceo heirs and respondent executed was a perfected
contract of sale. A contract is perfected once there is consent of the contracting parties
on the object certain and on the cause of the obligation. In the present case, the object
of the sale is the Antipolo property and the price certain is P250,000. The contract of
sale has also been consummated because the vendors and vendee have performed
their respective obligations under the contract. In a contract of sale, the seller
obligates himself to transfer the ownership of the determinate thing sold, and to
deliver the same to the buyer, who obligates himself to pay a price certain to the seller.
The execution of the notarized deed of sale and the delivery of the owners duplicate
copy of OCT No. 535 to respondent is tantamount to a constructive delivery of the
object of the sale. The Eniceo heirs also claimed in their answer that the deed of sale is
fake and spurious. However, as correctly held by the CA, forgery can never be
presumed. The party alleging forgery is mandated to prove it with clear and convincing
evidence. Whoever alleges forgery has the burden of proving it. In this case, petitioner
and the Eniceo heirs failed to discharge this burden.
Petitioner contends that respondent is guilty of laches because he slept on his

rights by failing to register the sale of the Antipolo property at the earliest possible
time. Petitioner claims that despite respondents knowledge of the subsequent sale in
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1991, respondent still failed to have the deed of sale registered with the Registry of
Deeds. The essence of laches is the failure or neglect, for an unreasonable and
unexplained length of time, to do that which, through due diligence, could have been
done earlier, thus giving rise to a presumption that the party entitled to assert it had
either abandoned or declined to assert it. Respondent discovered in 1991 that a new
owners copy of OCT No. 535 was issued to the Eniceo heirs. Respondent filed a
criminal case against the Eniceo heirs for false testimony. When respondent learned
that the Eniceo heirs were planning to sell the Antipolo property, respondent caused
the annotation of an adverse claim. On 16 January 1996, when respondent learned
that OCT No. 535 was cancelled and new TCTs were issued, respondent filed a civil
complaint with the trial court against the Eniceo heirs and petitioner. Respondents
actions negate petitioners argument that respondent is guilty of laches. True,
unrecorded sales of land brought under Presidential Decree No. 1529 or the Property
Registration Decree (PD 1529) are effective between and binding only upon the
immediate parties. The registration required in Section 51 of PD 1529 is intended to
protect innocent third persons, that is, persons who, without knowledge of the sale
and in good faith, acquire rights to the property. Petitioner, however, is not an
innocent purchaser for value. Hence the petition was denied.
Metrobank v. Cabilzo
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METROPOLITAN BANK AND TRUST COMPANY, Petitioners,

versus RENATO D. CABILZO, Respondent.
CHICO-NAZARIO, J.:
FACTS: On 12 November 1994, Cabilzo issued a Metrobank Check No. 985988,

payable to CASH and postdated on 24 November 1994 in the amount of One
Thousand Pesos (P1, 000.00). The check was drawn against Cabilzos Account with
Metrobank Pasong Tamo Branch under Current Account No. 618044873-3 and was
paid by Cabilzo to a certain Mr. Marquez, as his sales commission. Subsequently, the
check was presented to Westmont Bank for payment. Westmont Bank, in turn,
indorsed the check to Metrobank for appropriate clearing. After the entries thereon
were examined, including the availability of funds and the authenticity of the
signature of the drawer, Metrobank cleared the check for encashment in accordance
with the Philippine Clearing House Corporation (PCHC) Rules.
On 16 November 1994, Cabilzos representative was at Metrobank Pasong Tamo

Branch to make some transaction when he was asked by bank personnel if Cabilzo
had issued a check in the amount of P91, 000.00 to which the former replied in the
negative. On the afternoon of the same date, Cabilzo himself called Metrobank to
reiterate that he did not issue a check in the amount of P91, 000.00 and requested
that the questioned check be returned to him for verification, to which Metrobank
complied. Upon receipt of the check, Cabilzo discovered that Metrobank Check No.
985988 which he issued on 12 November 1994 in the amount of P1, 000.00 was
altered to P91, 000.00 and the date 24 November 1994 was changed to 14 November
1994.Hence, Cabilzo demanded that Metrobank re-credit the amount of P91, 000.00 to
his account. Metrobank, however, refused reasoning that it has to refer the matter
first to its Legal Division for appropriate action. Repeated verbal demands followed
but Metrobank still failed to re-credit the amount of P91, 000.00 to Cabilzos account
On 30 June 1995, Cabilzo, thru counsel, finally sent a letter-demand to

Metrobank for the payment of P90, 000.00, after deducting the original value of the
check in the amount of P1, 000.00. Such written demand notwithstanding,
Metrobank still failed or refused to comply with its obligation. Consequently, Cabilzo
instituted a civil action for damages against Metrobank before the RTC of Manila,
Branch 13. In his Complaint docketed as Civil Case No. 95-75651, Renato D. Cabilzo
v. Metropolitan Bank and Trust Company, Cabilzo prayed that in addition to his claim
for reimbursement, actual and moral damages plus costs of the suit be awarded in his
favor.
ISSUE: Whether equitable estoppel can be appreciated in favor of petitioner
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HELD: The degree of diligence required of a reasonable man in the exercise of his
tasks and the performance of his duties has been faithfully complied with by Cabilzo.
In fact, he was wary enough that he filled with asterisks the spaces between and after
the amounts, not only those stated in words, but also those in numerical figures, in
order to prevent any fraudulent insertion, but unfortunately, the check was still
successfully altered, indorsed by the collecting bank, and cleared by the drawee bank,
and encashed by the perpetrator of the fraud, to the damage and prejudice of Cabilzo.
Metrobank cannot lightly impute that Cabilzo was negligent and is therefore
prevented from asserting his rights under the doctrine of equitable estoppel when the
facts on record are bare of evidence to support such conclusion. The doctrine of
equitable estoppel states that when one of the two innocent persons, each guiltless of
any intentional or moral wrong, must suffer a loss, it must be borne by the one whose
erroneous conduct, either by omission or commission, was the cause of injury.
Metrobanks reliance on this dictum is misplaced. For one, Metrobanks
representation that it is an innocent party is flimsy and evidently, misleading. At the
same time, Metrobank cannot asseverate that Cabilzo was negligent and this
negligence was the proximate cause of the loss in the absence of even a scintilla proof
to buttress such claim. Negligence is not presumed but must be proven by the one
who alleges it, which petitioner failed to.
Mesina v. Garcia
Cita
MELANIE M. MESINA, DANILO M. MESINA, and SIMEON M. MESINA, Petitioner,

versus GLORIA C. GARCIA, Respondent.
CHICO-NAZARIO, J.:
FACTS: Atty. Honorio Valisno Garcia and Felicisima Mesina, during their lifetime,
enstered into a Contract to Sell over a lot consisting of 235 square meters, situated at
Diversion Road, Sangitan, Cabanatuan City, covered and embraced by TCT No. T-
31643 in the name of Felicisima Mesina which title was eventually cancelled and TCT
No. T-78881 was issued in the name of herein petitioners. The Contract to Sell
provides that the cost of the lot is P70.00 per square meter for a total amount of
P16,450.00; payable within a period not to exceed 7 years at an interest rate of 12%
per annum, in successive monthly installments of P260.85 per month, starting May
1977. Thereafter, the succeeding monthly installments are to be paid within the first
week of every month, at the residence of the vendor at Quezon City, with all unpaid
monthly installments earning an interest of 1% per month. Instituting this case at
bar, respondent asserts that despite the full payment made on 7 February 1984
for the consideration of the subject lot, petitioners refused to issue the necessary Deed
of Sale to effect the transfer of the property to her.
ISSUE: Whether or not respondents cause of action had already prescribed.
HELD: Article 1155 of the Civil Code is explicit that the prescriptive period is
interrupted when an action has been filed in court; when there is a written
extrajudicial demand made by the creditors; and when there is any written
acknowledgment of the debt by the debtor.
The records reveal that starting 19 April 1986 until 2 January 1997 respondent
continuously demanded from the petitioners the execution of the said Deed of
Absolute Sale but the latter conjured many reasons and excuses not to execute the
same. Respondent even filed a Complaint before the Housing and Land Use
Regulatory Board way back in June, 1986, to enforce her rights and to compel the
mother of herein petitioners, who was still alive at that time, to execute the necessary
Deed of Absolute Sale for the transfer of title in her name. On 2 January 1997,
respondent, through her counsel, sent a final demand letter to the petitioners for the
execution of the Deed of Absolute Sale, but still to no avail. Consequently, because of
utter frustration of the respondent, she finally lodged a formal Complaint for Specific
Performance with Damages before the trial court on 20 January 1997.
Hence, from the series of written extrajudicial demands made by respondent to

have the execution of the Deed of Absolute Sale in her favor, the prescriptive period of
10 years has been interrupted. Therefore, it cannot be said that the cause of action of
the respondent has already been prescribed.
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Pahamotang v. PNB
JOSEPHINE PAHAMOTANG and ELEANOR PAHAMOTANG-BASA, Petitioners,
versus THE PHILIPPINE NATIONAL BANK (PNB) and the HEIRS OF ARTURO
ARGUNA, Respondents.
GARCIA, J.:
FACTS: On July 1, 1972, Melitona Pahamotang died. She was survived by her
husband Agustin Pahamotang, and their eight (8) children, namely: Ana, Genoveva,
Isabelita, Corazon, Susana, Concepcion and herein petitioners Josephine and Eleonor,
all surnamed Pahamotang. On September 15, 1972, Agustin filed with the then Court
of First Instance of Davao City a petition for issuance of letters administration over the
estate of his deceased wife. The petition, docketed as Special Case No. 1792, was
raffled to Branch VI of said court, hereinafter referred to as the intestate court. In his
petition, Agustin identified petitioners Josephine and Eleonor as among the heirs of
his deceased spouse. It appears that Agustin was appointed petitioners' judicial
guardian in an earlier case - Special Civil Case No. 1785 also of the CFI of Davao
City, Branch VI. On December 7, 1972, the intestate court issued an order granting
Agustins petition.
The late Agustin then executed several mortgages and later sale of the
properties with the PNB and Arguna respectively. The heirs later questioned the
validity of the transactions prejudicial to them. The trial court declared the real estate
mortgage and the sale void but both were valid with respect to the other parties. The
decision was reversed by the Court of Appeals; to the appellate court, petitioners
committed a fatal error of mounting a collateral attack on the foregoing orders instead
of initiating a direct action to annul them.
ISSUE: Whether the Court of Appeals erred in reversing the decision of the trial court
HELD: In the present case, the appellate court erred in appreciating laches against
petitioners. The element of delay in questioning the subject orders of the intestate
court is sorely lacking. Petitioners were totally unaware of the plan of Agustin to
mortgage and sell the estate properties. There is no indication that mortgagor PNB and
vendee Arguna had notified petitioners of the contracts they had executed with
Agustin. Although petitioners finally obtained knowledge of the subject petitions
filed by their father, and eventually challenged the July 18, 1973, October 19, 1974,
February 25, 1980 and January 7, 1981 orders of the intestate court, it is not
clear from the challenged decision of the appellate court when they (petitioners)
actually learned of the existence of said orders of the intestate court. Absent any
indication of the point in time when petitioners acquired knowledge of those
orders, their alleged delay in impugning the validity thereof certainly cannot be
established. And the Court of Appeals cannot simply impute laches against them.
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Shopper's Paradise v. Roque

SHOPPERS PARADISE REALTY & DEVELOPMENT CORPORATION, Petitioner,
versus EFREN P. ROQUE, Respondent.
VITUG, J.:
FACTS: On 23 December 1993, petitioner Shopper's Paradise Realty & Development

Corporation, represented its president, Veredigno Atienza, entered into a twenty-five
year lease with Dr. Felipe C. Roque, now deceased, over a parcel of land, Petitioner
issued to Dr. Roque a check for P250,000.00 by way of "reservation payment."
Simultaneously, petitioner and Dr. Roque likewise entered into a memorandum of
agreement for the construction, development and operation of a commercial building
complex on the property. Conformably with the agreement, petitioner issued a check
for another P250,000.00 "downpayment" to Dr. Roque.
The annotations, however, were never made because of the untimely demise of
Dr. Felipe C. Roque. The death of Dr. Roque on 10 February 1994 constrained
petitioner to deal with respondent Efren P. Roque, one of the surviving children of the
late Dr. Roque, but the negotiations broke down due to some disagreements. In a
letter, dated 3 November 1994, respondent advised petitioner "to desist from any
attempt to enforce the aforementioned contract of lease and memorandum of
agreement". On 15 February 1995, respondent filed a case for annulment of the
contract of lease and the memorandum of agreement, with a prayer for the issuance of
a preliminary injunction. Efren P. Roque alleged that he had long been the absolute
owner of the subject property by virtue of a deed of donation inter vivos executed in
his favor by his parents, Dr. Felipe Roque and Elisa Roque, on 26 December 1978,
and that the late Dr. Felipe Roque had no authority to enter into the assailed
agreements with petitioner. The donation was made in a public instrument duly
acknowledged by the donor-spouses before a notary public and duly accepted on the
same day by respondent before the notary public in the same instrument of donation.
The title to the property, however, remained in the name of Dr. Felipe C. Roque, and it
was only transferred to and in the name of respondent sixteen years later, or on 11
May 1994, while he resided in the United States of America, delegated to his father the
mere administration of the property. Respondent came to know of the assailed
contracts with petitioner only after retiring to the Philippines upon the death of his
father. On 9 August 1996, the trial court dismissed the complaint of respondent; it
explained:
Ordinarily, a deed of donation need not be registered in order to be valid

between the parties. Registration, however, is important in binding third persons.
Thus, when Felipe Roque entered into a lease contract with defendant corporation,
plaintiff Efren Roque (could) no longer assert the unregistered deed of donation and
say that his father, Felipe, was no longer the owner of the subject property at the time
the lease on the subject property was agreed upon. "The registration of the Deed of
Donation after the execution of the lease contract did not affect the latter unless he
had knowledge thereof at the time of the registration which plaintiff had not been able
to establish. Plaintiff knew very well of the existence of the lease. He, in fact, met with
the officers of the defendant corporation at least once before he caused the registration
of the deed of donation in his favor and although the lease itself was not registered, it
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remains valid considering that no third person is involved. Plaintiff cannot be the third
person because he is the successor-in-interest of his father, Felipe Roque, the lessor,
and it is a rule that contracts take effect not only between the parties themselves but
also between their assigns and heirs (Article 1311, Civil Code) and therefore, the lease
contract together with the memorandum of agreement would be conclusive on plaintiff
Efren Roque. He is bound by the contract even if he did not participate therein.
Moreover, the agreements have been perfected and partially executed by the receipt of
his father of the downpayment and deposit totaling to P500,000.00." The trial court
ordered respondent to surrender TCT No. 109754 to the Register of Deeds of Quezon
City for the annotation of the questioned Contract of Lease and Memorandum of
Agreement.
On appeal, the Court of Appeals reversed the decision of the trial court and held
to be invalid the Contract of Lease and Memorandum of Agreement. While it shared
the view expressed by the trial court that a deed of donation would have to be
registered in order to bind third persons, the appellate court, however, concluded that
petitioner was not a lessee in good faith having had prior knowledge of the donation in
favor of respondent, and that such actual knowledge had the effect of registration
insofar as petitioner was concerned. The appellate court based its findings largely on
the testimony of Veredigno Atienza during cross-examination.
ISSUE: Whether or not the respondent is barred by laches and estoppel from denying
the contracts.
HELD: The Court cannot accept petitioner's argument that respondent is guilty of
laches. Laches, in its real sense, is the failure or neglect, for an unreasonable and
unexplained length of time, to do that which, by exercising due diligence, could or
should have been done earlier; it is negligence or omission to assert a right within a
reasonable time, warranting a presumption that the party entitled to assert it either
has abandoned or declined to assert it. Respondent learned of the contracts only in
February 1994 after the death of his father, and in the same year, during November,
he assailed the validity of the agreements. Hardly, could respondent then be said to
have neglected to assert his case for an unreasonable length of time.
Neither is respondent estopped from repudiating the contracts. The essential

elements of estoppel in pais, in relation to the party sought to be estopped, are: 1) a
clear conduct amounting to false representation or concealment of material facts or, at
least, calculated to convey the impression that the facts are otherwise than, and
inconsistent with, those which the party subsequently attempts to assert; 2) an intent
or, at least, an expectation, that this conduct shall influence, or be acted upon by, the
other party; and 3) the knowledge, actual or constructive, by him of the real facts.
With respect to the party claiming the estoppel, the conditions he must satisfy are: 1)
lack of knowledge or of the means of knowledge of the truth as to the facts in question;
2) reliance, in good faith, upon the conduct or statements of the party to be estopped;
and 3) action or inaction based thereon of such character as to change his position or
status calculated to cause him injury or prejudice. 12 It has not been shown that
respondent intended to conceal the actual facts concerning the property; more
importantly, petitioner has been shown not to be totally unaware of the real ownership
of the subject property. Altogether, there is no cogent reason to reverse the Court of
Appeals in its assailed decision.
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Meatmasters v. Lelis Integrated

MEATMASTERS INTERNATIONAL CORPORATION, Petitioner, versus LELIS
INTEGRATED DEVELOPMENT CORPORATION, Respondent.
(G.R. No. 163022. February 28, 2005, 1st Division)
FACTS: On November 11, 1993, petitioner Meatmasters International Corporation

engaged the services of respondent Lelis Integrated Development Corporation to
undertake the construction of a slaughterhouse and meat cutting and packing plant.
The Construction Agreement provided that the construction of petitioners
slaughterhouse should be completed by March 10, 1994. Respondent failed to finish
the construction of the said facility within the stipulated period, hence, petitioner filed
a complaint for rescission of contract and damages on August 9, 1996 before the
Regional Trial Court.
On November 23, 1998, the trial court rendered decision RESCINDING the
Construction Agreement between plaintiff Meatmaster Intl. Corp. and defendant Lelis
Integrated Devt. Corp. with both parties shouldering their own respective damage.
A copy of the decision was received by the respondent on December 9, 1998. A

motion for reconsideration was filed by respondent on December 22, 1998, but the
same was denied. A copy of the resolution denying the motion for reconsideration was
received on March 25, 1999. Respondent filed its notice of appeal on March 29, 1999.
Initially, the trial court dismissed the appeal for failure of the respondent to pay
the requisite docket fees within the reglementary period. Upon motion by the
respondent however, the trial court reconsidered and gave due course to the notice of
appeal because respondent paid the docket fees.
In a motion to dismiss filed before the appellate court, the petitioner alleged
that respondents appeal suffers from jurisdictional infirmity because of late payment
of docket fees.
CA set aside the decision of the trial court and directed petitioner to pay
respondent the amount of P1,863,081.53. Petitioners motion for reconsideration was
denied Hence, the instant petition.
ISSUE: Whether or not the Court of Appeals erred in entertaining the appeal of
respondent despite the finality of the trial courts decision.
HELD: Yes. It is well-established that the payment of docket fees within the prescribed
period is mandatory for the perfection of an appeal. This is so because a court
acquires jurisdiction over the subject matter of the action only upon the payment of
the correct amount of docket fees regardless of the actual date of filing of the case in
court. The payment of the full amount of the docket fee is a sine qua non requirement
for the perfection of an appeal. The court acquires jurisdiction over the case only upon
the payment of the prescribed docket fees.
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In the case at bar, the respondent seasonably filed the notice of appeal but it paid the
docket fees one (1) month after the lapse of the appeal period. As admitted by the
respondent, the last day for filing the notice of appeal was on March 29, 1999, but it
paid the docket fees only on April 30, 1999 because of oversight. Obviously, at the
time the said docket fees were paid, the decision appealed from has long attained
finality and no longer appealable.
Respondents contention that the petitioner is now estopped from raising the
issue of late payment of the docket fee because of his failure to assail promptly the
trial courts order approving the notice of appeal and accepting the appeal fee, is
untenable. Estoppel by laches arises from the negligence or omission to assert a right
within a reasonable time, warranting a presumption that the party entitled to assert it
either has abandoned or declined to assert it. In the case at bar, petitioner raised at
the first instance the non-payment of the docket fee in its motion for reconsideration
before the trial court. Petitioner reiterated its objection in the motion to dismiss before
the appellate court and finally, in the instant petition. Plainly, petitioner cannot be
faulted for being remiss in asserting its rights considering that it vigorously registered
a persistent and consistent objection to the Court of Appeals assumption of
jurisdiction at all stages of the proceedings.
Larena v. Mapili
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AQUILA LARENA joined by her husband, CANDIDO

MERCADERA, Petitioners, versus FRUCTUOSA MAPILI, JOSE MAPILI and
ROSELA VENELES, Respondents.
(G.R. No. 146341. August 7, 2003, 3rd Division)
PANGANIBAN, J.:
FACTS: Hipolito Mapili during his lifetime owned a parcel of unregistered land
declared for taxation purposes in his name. The property had descended by
succession from Hipolito to his only son Magno and on to the latters own widow and
children. These heirs, the herein respondents, took possession of the property up to
the outbreak of World War II when they evacuated to the hinterlands.
On the other hand, petitioner Aquilina Larena took possession of the property in
the1970s alleging that she had purchased it from her aunt (Filomena Larena) on
February 17, 1968. Filomena Larena in turn claimed to have bought it from Hipolito
on October 28, 1949, as evidence by the Affidavit of Transfer of Real Property executed
on the same date. The Regional Trial Court, however, declared the said affidavit as
spurious because Hipolito was already dead when the alleged transfer was made to
Filomena Larena.
On appeal, the Court of Appeals declared that respondents had never lost their
right to the land in question as they were the heirs to whom the property had
descended upon the death of the original claimant and possessor.
ISSUE: Whether or not Filomena Larena acquired the subject property by means of
sale, prescription, and/or laches.
HELD: No, Filomena did not acquire said property by means of sale, prescription
and/or laches. First, the tax declarations are not a conclusive evidence of ownership,
but a proof that the holder has a claim of title over the property. It is good indicia of
possession in the concept of owner. It may strengthen Aquilinas bona fide claim of
acquisition of ownership. However, petitioners failed to present the evidence needed to
tack the date of possession on the property in question.
Second, acquisitive prescription is a mode of acquiring ownership by a

possessor through the requisite lapse of time. Since the claims of purchase were
unsubstantiated, petitioners acts of possessory character have been merely tolerated
by the owner. Hence, it did not constitute possession. Moreover, there is lack of just
title on the part of Aquilina and therefore, ordinary acquisitive prescription of ten (10)
years as provided under Article 1134 of the Civil Code cannot be applied. Under Article
1137 of the Civil Code, the lapse of time required for extra-ordinary acquisitive
prescription is thirty (30) years, and records show that the lapse of time was only
twenty-seven (27) yearsa period that was short of three (3) years, when the
complaint was filed.
Finally, laches is a failure or neglect for an unreasonable and unexplained

length of time to do that which could or should have been done earlier through the
exercise of due diligence. The filing by respondents of the complaint in 1977
completely negates the decision that the latter were negligent in asserting their claim.
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Santos v. Santos
LEOUEL SANTOS, Petitioner,
versus THE HONORABLE COURT OF APPEALS AND JULIA ROSARIO BEDIA-
SANTOS, Respondents.
VITUG, J.:
FACTS: Petitioner Zenaida M. Santos is the widow of Salvador Santos, a brother of

private respondents Calixto, Alberto, Antonio, all surnamed Santos and Rosa Santos-
Carreon.
The spouses Jesus and Rosalia were the parents of the respondents and the
husband of the petitioner. The spouses owned a parcel of registered land with a four-
door apartment administered by Rosalia who rented them out. On January 19, 1959,
the spouses executed a deed of sale of the properties in favor of their children Salvador
and Rosa. Rosa in turn sold her share to Salvador on November 20, 1973, which
resulted in the issuance of new TCT. Despite the transfer of the property to Salvador,
Rosalia continued to lease and receive rentals from the apartment units.
On January 9, 1985, Salvador died, followed by Rosalia who died the following
month. Shortly after, petitioner Zenaida, claiming to be Salvadors heir, demanded the
rent from Antonio Hombrebueno, a tenant of Rosalia. When the latter refused to pay,
Zenaida filed an ejectment suit against him with the Metropolitan Trial Court of
Manila, which eventually decided in Zenaidas favor.
On January 5, 1989, private respondent instituted an action for reconveyance

of property with preliminary injunction against petitioner in the Regional Trial Court of
Manila, where they alleged that the two deeds of sale were simulated for lack of
consideration. The petitioner on the other hand denied the material allegations in the
complaint and that she further alleged that the respondents right to reconveyance
was already barred by prescription and laches considering the fact that from the date
of sale from Rosa to Salvador up to his death, more or less twelve (12) years had
lapsed, and from his death up to the filing of the case for reconveyance, four (4) years
has elapsed. In other words, it took respondents about sixteen (16) years to file the
case. Moreover, petitioner argues that an action to annul a contract for lack of
consideration prescribes in ten (10) years and even assuming that the cause of action
has not prescribed, respondents are guilty of laches for their inaction for a long period
of time.
The trial court decided in favor of private respondents in as much as the deeds
of sale were fictitious, the action to assail the same does not prescribe.Upon appeal,
the Court of Appeals affirmed the trial courts decision. It held that the subject deeds
of sale did not confer upon Salvador the ownership over the subject property, because
even after the sale, the original vendors remained in dominion, control, and possession
thereof.
ISSUE: Whether or not the cause of action of the respondents had prescribed and/or
barred by laches.
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HELD: No, the cause of action by the respondents had not prescribed nor is it barred
by laches.
First, the right to file an action for the reconveyance of the subject property to
the estate of Rosalia has not prescribed since deeds of sale were simulated and
fictitious. The complaint amounts to a declaration of nullity of a void contract, which
is imprescriptible. Hence, respondents cause of action has not prescribed.
Second, neither is their action barred by laches. The elements of laches are: 1)
conduct on the part of the defendant, or of one under whom he claims, giving rise to
the situation of which the complainant seeks a remedy; 2) delay in asserting the
complainants rights, the complainant having knowledge or notice of the defendants
conduct as having been afforded an opportunity to institute a suit; 3) lack of
knowledge or notice on the part of the defendant that the complainant would assert
the right in which he bases his suit; and 4) injury or prejudice to the defendant in the
event relief is accorded to the complainant, or the suit is not held barred. These
elements must all be proved positively. The lapse of four (4) years is not an
unreasonable delay sufficient to bar respondents action. Moreover, the fourth (4 th)
element is lacking in this case. The concept of laches is not concerned with the lapse
of time but only with the effect of unreasonable lapse. The alleged sixteen (16) years of
respondents inaction has no adverse effect on the petitioner to make respondents
guilty of laches.
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Villanueva- Mijares v. CA
JOSEFINA VILLANUEVA-MIJARES, WALDETRUDES VILLANUEVA-NOLASCO,
GODOFREDO VILLANUEVA, EDUARDO VILLANUEVA, GERMELINA VILLANUEVA-
FULGENCIO, MILAGROS VILLANUEVA-ARQUISOLA, and CONCEPCION
MACAHILAS VDA. DE VILLANUEVA,Petitioners, versus THE COURT OF APPEALS,
PROCERFINA VILLANUEVA, PROSPERIDAD VILLANUEVA, RAMON VILLANUEVA,
ROSA VILLANUEVA, VIRGINIA NEPOMUCENO, PAULA NEPOMUCENO, TARCELA
NEPOMUCENO, MERCEDES VILLANUEVA, ADELAIDA VILLANUEVA, APARICION
VILLANUEVA, JOSEFINA VILLANUEVA, BETTY VILLANUEVA, BOBBY
VILLANUEVA, MERLINDA VILLANUEVA, MORBINA VILLANUEVA, FLORITA
VILLANUEVA, DIONISIO VILLANUEVA, and EDITA VILLANUEVA, Respondents.
(G.R. No. 108921. April 12, 2000, 2nd Division)
QUISUMBING, J.:
FACTS: Felipe Villanueva left a 15,336-square-meter parcel of land in Kalibo, Capiz to

his eight children: Simplicio, Benito, Leon, Eustaquio, Camila, Fausta and Pedro. In
1952, Pedro declared under his name 1/6 portion of the property (1,905 sq. m.). He
held the remaining properties in trust for his co-heirs who demanded the subdivision
of the property but to no avail. After Leons death in 1972, private respondents
discovered that the shares of Simplicio, Nicolasa, Fausta and Maria Baltazar had been
purchased by Leon through a deed of sale dated August 25, 1946 but registered only
in 1971. In July 1970, Leon also sold and partitioned the property in favor of
petitioners, his children, who thereafter secured separate and independent titles over
their respective pro- indiviso shares.
Private respondents, who are also descendants of Felipe, filed an action for
partition with annulment of documents and/or reconveyance and damages against
petitioners. They contended that Leon fraudulently obtained the sale in his favor
through machinations and false pretenses. The RTC declared that private respondents
action had been barred by res judicata and that petitioners are the legal owners of the
property in question in accordance with the individual titles issued to them.
ISSUE: Whether or not laches apply against the minors property that was held in
trust.
HELD: No. At the time of the signing of the Deed of Sale of August 26,1948, private
respondents Procerfina, Prosperedad, Ramon and Rosa were minors. They could not
be faulted for their failure to file a case to recover their inheritance from their uncle
Leon, since up to the age of majority, they believed and considered Leon their co-heir
administrator. It was only in 1975, not in 1948, that they became aware of the
actionable betrayal by their uncle. Upon learning of their uncles actions, they filed for
recovery. Hence, the doctrine of stale demands formulated in Tijam cannot be applied
here. They did not sleep on their rights, contrary to petitioners assertion.
Furthermore, when Felipe Villanueva died, an implied trust was created by

operation of law between Felipes children and Leon, their uncle, as far as the 1/6
share of Felipe. Leons fraudulent titling of Felipes 1/6 share was a betrayal of that
implied trust.
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Garcia v. Villar
PABLO P. GARCIA, Petitioner,

versus YOLANDA VALDEZ VILLAR, Respondent.
LEONARDO-DE CASTRO, J.:
FACTS: Lourdes V. Galas (Galas) was the original owner of a piece of property
(subject property) located at Malindang St., Quezon City. On July 6, 1993,
Galas, with her daughter, Ophelia G. Pingol (Pingol), as co-maker, mortgaged
the subject property to Yolanda Valdez Villar (Villar) as security for a loan.On
October 10, 1994, Galas, again with Pingol as her co-maker, mortgaged the
same subject property to Pablo P. Garcia (Garcia) to secure her loan of One
Million Eight Hundred Thousand Pesos (P1,800,000.00). On November 21,
1996, Galas sold the subject property to Villar. On October 27, 1999, Garcia
filed a Petition for Mandamus with Damages against Villar. Garcia
subsequently amended his petition to a Complaint for Foreclosure of Real
Estate Mortgage with Damages. Garcia alleged that when Villar purchased the
subject property, she acted in bad faith and with malice as she knowingly and
willfully disregarded the provisions on laws on judicial and extrajudicial
foreclosure of mortgaged property. Garcia further claimed that when Villar
purchased the subject property, Galas was relieved of her contractual
obligation and the characters of creditor and debtor were merged in the person
of Villar. Therefore, Garcia argued, he, as the second mortgagee, was
subrogated to Villars original status as first mortgagee, which is the creditor
with the right to foreclose. Garcia further asserted that he had demanded
payment from Villar, whose refusal compelled him to incur expenses in filing
an action in court.
ISSUE: Whether or not Garcias demand upon Villar is proper to either pay
Galass debt of P1,800,000.00, or to judicially foreclose the subject property to
satisfy the aforesaid debt
HELD: Villars purchase of the subject property did not violate the prohibition
on pactum commissorium. The power of attorney provision above did not
provide that the ownership over the subject property would automatically pass
to Villar upon Galass failure to pay the loan on time. What it granted was the
mere appointment of Villar as attorney-in-fact, with authority to sell or
otherwise dispose of the subject property, and to apply the proceeds to the
payment of the loan.This provision is customary in mortgage contracts, and is
in conformity with Article 2087 of the Civil Code, which reads:Art. 2087. It is
also of the essence of these contracts that when the principal obligation
becomes due, the things in which the pledge or mortgage consists may be
alienated for the payment to the creditor.Galass decision to eventually sell the
subject property to Villar for an additional P1,500,000.00 was well within the
scope of her rights as the owner of the subject property. The subject property
was transferred to Villar by virtue of another and separate contract, which is
the Deed of Sale. Garcia never alleged that the transfer of the subject property
to Villar was automatic upon Galass failure to discharge her debt, or that the
sale was simulated to cover up such automatic transfer.
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Sps. Edralin v. Phil. Veterans Bank

SPOUSES FERNANDO AND ANGELINA EDRALIN, PETITIONERS, versus
PHILIPPINE VETERANS BANK, RESPONDENT.
DEL CASTILLO, J.:
FACTS: Respondent Philippine Veterans Bank is a commercial banking institution

created under Republic Act (RA) No. 3518, as amended by RA No. 7169. On February
5, 1976, Veterans Bank granted petitioner spouses Fernando and Angelina Edralin a
loan in the amount of Two Hundred Seventy Thousand Pesos (P270,000.00). As
security thereof, petitioners executed a Real Estate Mortgage in favor of Veterans Bank
over a real property situated in the Municipality of Paraaque and registered in the
name of petitioner Fernando Edralin. The mortgaged property is more particularly
described in Transfer Certificate of Title (TCT) No. 204889. The REM was registered
with the Registry of Deeds of the Province of Rizal. The REM and its subsequent
amendments were all duly annotated at the back of TCT No. 204889. The Edralins
failed to pay their obligation to Veterans Bank. Thus, on June 28, 1983, Veterans
Bank filed a Petition for Extrajudicial Foreclosure of the REM with the Office of the
Clerk of Court and Ex-Officio Sheriff of Rizal. In due course it was foreclosed and a
sale was held in which the Ex-Officio Sheriff of Rizal sold the mortgaged property at
public auction. Veterans Bank emerged as the highest bidder at the said foreclosure
sale and was issued the corresponding Certificate of Sale. The said Certificate of Sale
was registered with the Registry of Deeds of the Province of Rizal and annotated at the
back of TCT No. 204889 under Entry No. 83-62953/T-No. 43153-A. Upon the
Edralins failure to redeem the property during the one-year period provided under Act
No. 3135, Veterans Bank acquired absolute ownership of the subject property.
Consequently, Veterans Bank caused the consolidation of ownership of the subject
property in its name on January 19, 1994. Subsequently the Register of Deeds of
Paraaque, Metro Manila cancelled TCT No. 204889 under the name of Fernando
Edralin and replaced it with a new transfer certificate of title, TCT No. 78332, in the
name of Veterans Bank. Despite the foregoing, the Edralins failed to vacate and
surrender possession of the subject property to Veterans Bank. Thus, on May 24,
1996, Veterans Bank filed an Ex-Parte Petition for the Issuance of a Writ of
Possession, docketed as Land Registration Case No. 06-060 before Branch 274 of the
Regional Trial Court (RTC) of Paraaque City. The same, however, was dismissed for
Veterans Banks failure to prosecute. Veterans Bank again filed an Ex-Parte Petition
for Issuance of Writ of Possession, this time docketed as Land Registration Case No.
03-0121, before the RTC of Paraaque City. Veterans Bank divulged in its
Certification against Forum-Shopping that the earlier case, LRC No. 96-060, involving
the same subject matter and parties, was dismissed. The Edralins moved to dismiss
the petition on the ground that the dismissal of LRC No. 96-060 constituted res
judicata. The trial court denied the motion to dismiss explaining that the ground of
failure to present evidence is not a determination of the merits of the case hence does
not constitute res judicata on the petition for issuance of a writ of possession. The
appellate court ruled in favor of Veterans Bank hence the petition.
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ISSUE: Whether the consolidation of ownership of the extrajudicially foreclosed

property through a Deed of Sale is in accordance with law.
HELD: Petitioners assail the CA's HELD that the issuance of a writ of possession does
not prescribe.[48] They maintain that Articles 1139, 1149, and 1150 of the Civil Code
regarding prescriptive periods cover all kinds of action, which necessarily include the
issuance of a writ of possession. Petitioners posit that, for purposes of the latter, it is
the five-year prescriptive period provided in Article 1149 of the Civil Code which
applies because Act No. 3135 itself did not provide for its prescriptive period. Thus,
Veterans Bank had only five years from September 12, 1983, the date when the
Certificate of Sale was issued in its favor, to move for the issuance of a writ of
possession. Respondent argues that jurisprudence has consistently held that a
registered owner of the land, such as the buyer in an auction sale, is entitled to a writ
of possession at any time after the consolidation of ownership.
The Court could not accept petitioners' contention. We have held before that
the purchaser's right "to request for the issuance of the writ of possession of the land
never prescribes. "The right to possess a property merely follows the right of
ownership," and it would be illogical to hold that a person having ownership of a
parcel of land is barred from seeking possession thereof. Moreover, the provisions
cited by petitioners refer to prescription of actions. An action is "defined as an ordinary
suit in a court of justice, by which one party prosecutes another for the enforcement
or protection of a right, or the prevention or redress of a wrong." On the other hand "a
petition for the issuance of the writ, under Section 7 of Act No. 3135, as amended, is
not an ordinary action filed in court, by which one party `sues another for the
enforcement or protection of a right, or prevention or redress of a wrong.' It is in the
nature of an ex parte motion [in] which the court hears only one side. It is taken or
granted at the instance and for the benefit of one party, and without notice to or
consent by any party adversely affected. Accordingly, upon the filing of a proper
motion by the purchaser in a foreclosure sale, and the approval of the corresponding
bond, the writ of possession issues as a matter of course and the trial court has no
discretion on this matter."Hence the Petition was denied for lack of merit. The CA
Decision dated June 10, 2005 in CA-G.R. SP No. 89248 was affirmed.
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University Physicians Services v. Marian Clinics

University Physicians Services, Inc., Petitioner, versus Marian Clinics and
Dr. Mabanta, Respondents.
(G.R. No. 152303, September 1, 2010, 1st Division)
LEONARDO-DE CASTRO, J.:
FACTS: On May 31, 1973, Marian Clinics, Inc. (MCI) and University Physicians
Services, Incorporated (UPSI) entered into a Lease Agreement whereby the former
leased to the latter the Marian General Hospital (MGH) and four schools for a period of
ten (10) years, from June 1, 1973 to May 31, 1983. The land, buildings, facilities,
fixtures and equipment appurtenant thereto, including the Soledad Building, were
included in the lease, for which a monthly rental of P70,000 was agreed upon.
On October 7, 1975, UPSI filed a complaint for specific performance against

MCI, alleging that (1) MCI failed to deliver Certificates of Occupancy on certain
buildings, and (2) there were some defective electrical installations that caused the
issuance of a Condemned Installation Notice by the Office of the City Electrician of the
City of Manila. UPSI prayed for the delivery of the Certificates of Occupancy of the
buildings leased, for the correction of the defects in the electrical installations thereon,
and damages. The City Court rendered its Decision in Civil Case No. 006665-CV,
dismissing the unlawful detainer case on the finding that (1) UPSIs suspension of
rental payments was justified; and (2) there was no ground to cause the rescission of
the lease and warrant the ejectment of UPSI
On November 29, 1990, UPSI appealed the above Order to the Court of Appeals,
claiming that said Order varies the term of the IAC judgment, arguing that said
judgment did not order the replacement of the leased properties lost or deteriorated
and/or to pay their value if replacement cannot be made. UPSI further claims that the
Court erred in giving MCI the discretion to determine the circumstances when
replacement or payment of value shall be made.
ISSUE: Whether or not Article 1667 of the Civil Code is applicable.
HELD: UPSI further argues that Article 1667 of the Civil Code is not applicable
considering that the inventories of the leased properties which it was obligated to
return was not yet established. UPSI also asserts that the order for the replacement of
the subject fixtures had been rendered moot as it had already been extinguished by
thedacion en pago dated September 1, 1980 with the DBP, by the deed of conditional
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sale executed by the DBP in favor of UPSI, and by UPSIs payment in full. As regards
Article 1667 of the Civil Code, we hold that the applicability thereof, or of the provision
of the lease contract holding UPSI liable in case of loss or deterioration of the subject
properties, are not dependent on the presence, at the moment, of inventories. The
execution court may conduct hearings to determine the existence of such an inventory
and, if found that such is unavailable, further hearings may be conducted to
reconstruct the same and determine the value of the properties that should be
returned or replaced, if necessary.
Martin, et al. v. DBS Bank Philippines, Inc., et al.,
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Felicidad T. Martin, Melissa M. Isidro, Petitioners, versus DBS Bank Philippines

Inc., Respondent
ABAD, J.:
FACTS: Felicidad T. Martin, Melissa M. Isidro, Grace M. David, Caroline M. Garcia,

Victoria M. Roldan, and Benjamin T. Martin, Jr., as lessors, entered into a lease
contract with the DBS Bank Philippines, Inc., covering a commercial warehouse and
lots that DBS was to use for office, warehouse, and parking yard for repossessed
vehicles. The lease was for five years, from March 1, 1997 to March 1, 2002, at a
monthly rent of P300,000.00 for the first year, P330,000.00 for the second year,
P363,000.00 for the third year, P399,300.00 for the fourth year, and P439,230.00 for
the final year, all net of withholding taxes. DBS paid a deposit of P1,200,000.00 and
advance rentals of P600,000.00. On May 25 and August 13, 1997 heavy rains flooded
the leased property and submerged into water the DBS offices there along with its 326
repossessed vehicles. As a result, on February 11, 1998 DBS wrote the Martins
demanding that they take appropriate steps to make the leased premises suitable as a
parking yard for its vehicles. DBS suggested the improvement of the drainage system
or the raising of the propertys ground level. In response, the Martins filled the
propertys grounds with soil and rocks. But DBS lamented that the property remained
unsuitable for its use since the Martins did not level the grounds. Worse, portions of
the perimeter fence collapsed because of the excessive amount of soil and rock that
were haphazardly dumped on it. In June 1998, DBS vacated the property but
continued paying the monthly rents. On September 11, 1998, however, it made a final
demand on the Martins to restore the leased premises to tenantable condition on or
before September 30, 1998, otherwise, it would rescind the lease contract. On
September 24, 1998 the Martins contracted the services of Altitude Systems &
Technologies Co. for the reconstruction of the perimeter fence on the property. On
October 13, 1998 DBS demanded the rescission of the lease contract and the return of
its deposit. At that point, DBS had already paid the monthly rents from March 1997 to
September 1998. The Martins refused, however, to comply with DBS demand. On July
7, 1999 DBS filed a complaint against the Martins for rescission of the contract of
lease with damages before the Regional Trial Court of Makati City, Branch 141, in Civil
Case 99-1266. Claiming that the leased premises had become untenantable, DBS
demanded rescission of the lease contract as well as the return of its deposit of
P1,200,000.00.
The Makati City RTC rendered a decision, dismissing the complaint against the
Martins. The trial court found that, although the floods submerged DBS vehicles, the
leased premises remained tenantable and undamaged. Moreover, the Martins had
begun the repairs that DBS requested but were not given sufficient time to complete
the same. It held that DBS unjustifiably abandoned the leased premises and breached
the lease contract. Thus, the trial court ordered its deposit of P1,200,000.00 deducted
from the unpaid rents due the Martins and ordered DBS to pay them the remaining
P15,198,360.00 in unpaid rents.
On appeal to the Court of Appeals, the court rendered judgment reversing and
setting aside the RTC decision. The CA found that floods rendered the leased premises
untenantable and that the RTC should have ordered the rescission of the lease
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contract especially since the contract provided for such remedy. The CA ordered the
Martins to apply the deposit of P1,200,000.00 to the rents due up to July 7, 1999
when DBS filed the complaint and exercised its option to rescind the lease. The CA
ordered the Martins to return the remaining balance of the deposit to DBS. With the
denial of their separate motions for reconsideration DBS and the Martins filed their
respective petitions for review before this Court in G.R. 174632 and 174804. The
Court eventually consolidated the two cases.
ISSUE: Whether or not the CA erred in holding that DBS is entitled to the rescission of
the lease contract only from July 7, 1999 when it filed its action for rescission,
entitling the Martins to collect rents until that time.
HELD: Unless the terms of a contract are against the law, morals, good customs, and
public policy, such contract is law between the parties and its terms bind them. In
Felsan Realty & Development Corporation v. Commonwealth of Australia,13 the Court
regarded as valid and binding a provision in the lease contract that allowed the lessee
to pre-terminate the same when fire damaged the leased building, rendering it
uninhabitable or unsuitable for living. Here, paragraph VIII14 of the lease contract
between DBS and the Martins permitted rescission by either party should the leased
property become untenantable because of natural causes. Thus In case of damage to
the leased premises or any portion thereof by reason of fault or negligence attributable
to the lessee, its agents, employees, customers, or guests, the lessee shall be
responsible for undertaking such repair or reconstruction. In case of damage due to
fire, earthquake, lightning, typhoon, flood, or other natural causes, without fault or
negligence attributable to the lessee, its agents, employees, customers or guests, the
lessor shall be responsible for undertaking such repair or reconstruction. In the latter
case, if the leased premises become untenantable, either party may demand for the
rescission of this contract and in such case, the deposit referred to in paragraph III
shall be returned to the lessee immediately. The Martins claim that DBS cannot
invoke the above since they undertook the repair and reconstruction of the leased
premises, incurring P1.6 million in expenses. The Martins point out that the option to
rescind was available only if they failed to do the repair work and reconstruction.
But, under their agreement, the remedy of rescission would become unavailable
to DBS only if the Martins, as lessors, made the required repair and reconstruction
after the damages by natural cause occurred, which meant putting the premises after
the floods in such condition as would enable DBS to resume its use of the same for
the purposes contemplated in the agreement, namely, as office, warehouse, and
parking space for DBS repossessed vehicles. Here, it is undisputed that the floods of
May 25 and August 13, 1997 submerged the DBS offices and its 326 repossessed
vehicles. The floods rendered the place unsuitable for its intended uses. And, while the
Martins did some repairs, they did not restore the place to meet DBS needs. The
photographs16 taken of the place show that the Martins filled the grounds with soil
and rocks to raise the elevation but did not level and compact the same so they could
accommodate the repossessed vehicles. Moreover, the heaviness of the filling materials
caused portions of the perimeter walls to collapse or lean dangerously.17 Indeed, the
Office of the City Engineer advised DBS that unless those walls were immediately
demolished or rehabilitated, they would endanger passersby
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Undeniably, the DBS suffered considerable damages when flood waters deluged
its offices and 326 repossessed vehicles. Notably, DBS vacated the leased premises in
June of 1998, without rescinding the lease agreement, evidently to allow for
unhindered repair of the grounds. In fact, DBS continued to pay the monthly rents
until September 1998, showing how DBS leaned back to enable the Martins to finish
the repair and rehabilitation of the place. 19 The Martins provided basis for rescission
by DBS when they failed to do so.
Hence the Court denied the petition and affirmed with mocifications the April
26, 2006 decision of the Court of Appeals in CA-G.R. CV 76210 in that Felicidad T.
Martin, Melissa M. Isidro, Grace M. David, Caroline M. Garcia, Victoria M. Roldan, and
Benjamin T. Martin, Jr. are ORDERED to return the full deposit of P1,200,000.00 to
DBS Bank Philippines, Inc. (formerly known as Bank of Southeast Asia, now merged
with and into BPI Family Bank) with interest of 12% per annum to be computed from
the finality of this decision until the amount is fully paid.
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Heirs of Zabala, et al. v. CA

HEIRS OF ALFREDO ZABALA, represented by MENEGILDA ZABALA, ROLANDO
ZABALA, MANUEL ZABALA, MARILYN ZABALA, and ADELINA ZABALA, Petitioners,
versus HON. COURT OF APPEALS, VICENTE T. MANUEL AND/OR HEIRS OF
VICENTE T. MANUEL, Respondents.
NACHURA, J.:
FACTS: On April 1, 2002, respondent Vicente T. Manuel filed a Complaint for

ejectment with damages against Alfredo Zabala before the Municipal Trial Court in
Cities of Balanga, Bataan. Respondent alleged that he was in actual and peaceful
possession of a fishpond (Lot No. 1483) located in Ibayo, Balanga City. On October 15,
2001, Zabala allegedly entered the fishpond without authority, and dumped soil into
the fishpond without an Environment Compliance Certificate. Zabala continued such
action until the time of the filing of the Complaint, killing the crabs and the bangus
that respondent was raising in the fishpond. Thus, respondent asked that Zabala be
restrained from touching and destroying the fishpond; that Zabala be ejected
therefrom permanently; and for actual and moral damages and attorneys fees. Zabala
promptly moved for the dismissal of the Complaint for non-compliance with the
requirement under the Local Government Code to bring the matter first to barangay
conciliation before filing an action in court.
Respondent subsequently filed a Motion for Judgment on the ground of petitioners

failure to file a responsive pleading or answer. The MTCC, in an Order dated May 27,
2003, granted Zabalas motion and dismissed the Complaint, holding that respondent
indeed violated the requirement of barangay conciliation. Respondent then appealed
the HELD to the Balanga, Bataan Regional Trial Court. In a decision dated March 30,
2004,[5] the RTC reversed the MTCCs May 27, 2003 Order and rendered judgment
directing Zabala, his heirs or subalterns to immediately vacate Lot No. 1483 and
restore respondent to his peaceful possession thereof. The RTC also directed Zabala to
pay respondent actual damages, moral damages, and attorneys fees. The RTC found
that Zabala did not, in fact, file an answer to the Complaint. Zabala then filed a
Petition for Review before the Court of Appeal. The CA promulgated a Decision
upholding the RTCs reversal of the MTCCs Order. The CA held that, based on the
allegations in the Complaint, the requirement for prior conciliation proceedings under
the Local Government Code was inapplicable to the suit before the MTCC, the action
being one for ejectment and damages, with application for a writ of preliminary
injunction, even without the use of those actual terms in the Complaint. However, the
CA granted Zabalas prayer for the deletion of the awards for actual and moral
damages, and for attorneys fees. Zabala filed a Motion for Reconsideration, which the
CA denied. Zabalas heirs filed this Verified Petition for Certiorari. They prayed for the
annulment of the CAs December 19, 2008 Decision and August 26, 2009 Resolution,
and for the reinstatement of the MTCCs May 27, 2003 Order. In the alternative, they
prayed that the Court remand the records to the MTCC, so that they could file their
Answer, and that due proceedings be undertaken before judgment. In a Resolution
dated November 18, 2009, respondents were required to file their Comment on the
Petition. Subsequently a Compromise Agreement was entered into by the parties.
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ISSUE: Whether or not the case must prosper and continue considering the present
circumstances
HELD : No. The Court ruled that Under Article 2028 of the Civil Code, a compromise
agreement is a contract whereby the parties, by making reciprocal concessions, avoid
litigation or put an end to one already commenced. Compromise is a form of amicable
settlement that is not only allowed, but also encouraged in civil cases. Contracting
parties may establish such stipulations, clauses, terms, and conditions as they deem
convenient, provided that these are not contrary to law, morals, good customs, public
order, or public policy. Thus, finding the above Compromise Agreement to have been
validly executed and not contrary to law, morals, good customs, public order, or
public policy, we approve the same. Thus the Compromise Agreement was and
judgment is hereby rendered in accordance therewith. By virtue of such approval, this
case was deemed terminated.
Duncan v. Glaxo
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DUNCAN ASSOCIATION OF DETAILMAN-PTGWO and PEDRO A.

TECSON, Petitioners, versus GLAXO WELLCOME PHILIPPINES, INC.,Respondent.
TINGA, J.:
FACTS: Tecson was hired by Glaxo as a medical representative on Oct. 24, 1995.
Contract of employment signed by Tecson stipulates, among others, that he agrees to
study and abide by the existing company rules; to disclose to management any
existing future relationship by consanguinity or affinity with co-employees or
employees with competing drug companies and should management find that such
relationship poses a prossible conflict of interest, to resign from the company.
Company's Code of Employee Conduct provides the same with stipulation that
management may transfer the employee to another department in a non-
counterchecking position or preparation for employment outside of the company after
6 months.
Tecson was initially assigned to market Glaxo's products in the Camarines Sur-
Camarines Norte area and entered into a romantic relationship with Betsy, an
employee of Astra, Glaxo's competition. Before getting married, Tecson's District
Manager reminded him several times of the conflict of interest but marriage took place
in Sept. 1998. In Jan. 1999, Tecson's superiors informed him of conflict of intrest.
Tecson asked for time to comply with the condition (that either he or Betsy resign from
their respective positions). Unable to comply with condition, Glaxo transferred Tecson
to the Butuan-Surigao City-Agusan del Sur sales area. After his request against
transfer was denied, Tecson brought the matter to Glaxo's Grievance Committee and
while pending, he continued to act as medical representative in the Camarines Sur-
Camarines Norte sales area. On Nov. 15, 2000, the National Conciliation and
Mediation Board ruled that Glaxo's policy was valid...
ISSUE: Whether or not the policy of a pharmaceutical company prohibiting its

employees from marrying employees of any competitor company is valid
HELD: Glaxo has a right to guard its trade secrets, manufacturing formulas,
marketing strategies, and other confidential programs and information from
competitors. The prohibition against pesonal or marital relationships with employees
of competitor companies upon Glaxo's employees is reasonable under the
circumstances because relationships of that nature might compromise the interests of
the company. That Glaxo possesses the right to protect its economic interest cannot
be denied. It is the settled principle that the commands of the equal protection clause
are addressed only to the state or those acting under color of its authority. Corollarily,
it has been held in a long array of US Supreme Court decisions that the equal
protection clause erects to shield against merely privately conduct, however,
discriminatory or wrongful. The company actually enforced the policy after repeated
requests to the employee to comply with the policy. Indeed the application of the policy
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was made in an impartial and even-handed manner, with due regard for the lot of the
employee.
Star Paper v. Simbol
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STAR PAPER CORPORATION, JOSEPHINE ONGSITCO & SEBASTIAN

CHUA, Petitioners, versus
RONALDO D. SIMBOL, WILFREDA N. COMIA & LORNA E.
ESTRELLA, Respondents.
PUNO, J.:
FACTS: Petitioner was the employer of the respondents. Under the policy of Star Paper
the employees are:1. New applicants will not be allowed to be hired if in case he/she
has a relative, up to the 3rd degree of relationship, already employed by the
company.2. In case of two of our employees (singles, one male and another female)
developed a friendly relationship during the course of their employment and then
decided to get married, one of them should resign to preserve the policy stated above.
Respondents Comia and Simbol both got married to their fellow employees.
Estrella on the other hand had a relationship with a co-employee resulting to her
pregnancy on the belief that such was separated. The respondents allege that they
were forced to resign as a result of the implementation of the said assailed company
policy.
The Labor Arbiter and the NLRC ruled in favor of petitioner. The decision was
appealed to the Court of Appeals which reversed the decision.
ISSUE: Whether the prohibition to marry in the contract of employment is valid.
HELD: It is significant to note that in the case at bar, respondents were hired after
they were found fit for the job, but were asked to resign when they married a co-
employee. Petitioners failed to show how the marriage of Simbol, then a Sheeting
Machine Operator, to Alma Dayrit, then an employee of the Repacking Section, could
be detrimental to its business operations. Neither did petitioners explain how this
detriment will happen in the case of Wilfreda Comia, then a Production Helper in the
Selecting Department, who married Howard Comia, then a helper in the cutter-
machine. The policy is premised on the mere fear that employees married to each
other will be less efficient. If we uphold the questioned rule without valid justification,
the employer can create policies based on an unproven presumption of a perceived
danger at the expense of an employees right to security of tenure.
Petitioners contend that their policy will apply only when one employee marries
a co-employee, but they are free to marry persons other than co-employees. The
questioned policy may not facially violate Article 136 of the Labor Code but it creates a
disproportionate effect and under the disparate impact theory, the only way it could
pass judicial scrutiny is a showing that it is reasonable despite the discriminatory,
albeit disproportionate, effect. The failure of petitioners to prove a legitimate business
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concern in imposing the questioned policy cannot prejudice the employees right to be
free from arbitrary discrimination based upon stereotypes of married persons working
together in one company.
Lastly, the absence of a statute expressly prohibiting marital discrimination in

our jurisdiction cannot benefit the petitioners. The protection given to labor in our
jurisdiction is vast and extensive that we cannot prudently draw inferences from the
legislatures silence that married persons are not protected under our Constitution
and declare valid a policy based on a prejudice or stereotype. Thus, for failure of
petitioners to present undisputed proof of a reasonable business necessity, we rule
that the questioned policy is an invalid exercise of management prerogative. Corollary,
the issue as to whether respondents Simbol and Comia resigned voluntarily has
become moot and academic.
In the case of Estrella, the petitioner failed to adduce proof to justify her
dismissal. Hence, the Court ruled that it was illegal.
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Tiu v. Platinum Plans

DAISY B. TIU, Petitioner, versus
PLATINUM PLANS PHIL., INC., Respondent.
FACTS: Respondent Platinum Plans Philippines, Inc. is a domestic corporation

engaged in the pre-need industry. From 1987 to 1989, petitioner Daisy B. Tiu was its
Division Marketing Director. On January 1, 1993, respondent re-hired petitioner as
Senior Assistant Vice-President and Territorial Operations Head in charge of its Hong
Kong and Asean operations. The parties executed a contract of employment valid for
five years.On September 16, 1995, petitioner stopped reporting for work. In November
1995, she became the Vice-President for Sales of Professional Pension Plans, Inc., a
corporation engaged also in the pre-need industry.
Consequently, respondent sued petitioner for damages before the RTC of Pasig
City, Branch 261. Respondent alleged, among others, that petitioners employment
with Professional Pension Plans, Inc. violated the non-involvement clause in her
contract of employment. In upholding the validity of the non-involvement clause, the
trial court ruled that a contract in restraint of trade is valid provided that there is a
limitation upon either time or place. In the case of the pre-need industry, the trial
court found the two-year restriction to be valid and reasonable. On appeal, the Court
of Appeals affirmed the trial courts HELD. It reasoned that petitioner entered into the
contract on her own will and volition. Thus, she bound herself to fulfill not only what
was expressly stipulated in the contract, but also all its consequences that were not
against good faith, usage, and law. The appellate court also ruled that the stipulation
prohibiting non-employment for two years was valid and enforceable considering the
nature of respondents business.
ISSUE: Whether the Court of Appeals erred in sustaining the validity of the non-
involvement clause
HELD: In this case, the non-involvement clause has a time limit: two years from the
time petitioners employment with respondent ends. It is also limited as to trade,
since it only prohibits petitioner from engaging in any pre-need business akin to
respondents. More significantly, since petitioner was the Senior Assistant Vice-
President and Territorial Operations Head in charge of respondents Hongkong and
Asean operations, she had been privy to confidential and highly sensitive marketing
strategies of respondents business. To allow her to engage in a rival business soon
after she leaves would make respondents trade secrets vulnerable especially in a
highly competitive marketing environment. In sum, The Court finds the non-
involvement clause not contrary to public welfare and not greater than is necessary to
afford a fair and reasonable protection to respondent. Hence the restraint is valid and
such stipulation prevails.
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Avon Cosmetics v. Luna

AVON COSMETICS, INCORPORATED and JOSE MARIE FRANCO, Petitioners,
versus LETICIA H. LUNA, Respondent.
CHICO-NAZARIO, J.:
FACTS: The present petition stemmed from a complaint[3] dated 1 December 1988,
filed by herein respondent Luna alleging, inter alia that she began working for
Beautifont, Inc. in 1972, first as a franchise dealer and then a year later, as a
Supervisor. Sometime in 1978, Avon Cosmetics, Inc. (Avon), herein petitioner,
acquired and took over the management and operations of Beautifont, Inc.
Nonetheless, respondent Luna continued working for said successor company. Aside
from her work as a supervisor, respondent Luna also acted as a make-up artist of
petitioner Avons Theatrical Promotions Group, for which she received a per diem for
each theatrical performance. The contract was that:The Company agrees:1) To
allow the Supervisor to purchase at wholesale the products of the Company.The
Supervisor agrees:1) To purchase products from the Company exclusively for
resale and to be responsible for obtaining all permits and licenses required to sell the
products on retail. The Company and the Supervisor mutually agree:1) That this
agreement in no way makes the Supervisor an employee or agent of the Company,
therefore, the Supervisor has no authority to bind the Company in any contracts with
other parties. 2) That the Supervisor is an independent retailer/dealer insofar as
the Company is concerned, and shall have the sole discretion to determine where and
how products purchased from the Company will be sold. However, the Supervisor
shall not sell such products to stores, supermarkets or to any entity or person who
sells things at a fixed place of business. 3) That this agreement supersedes any
agreement/s between the Company and the Supervisor. 4) That the Supervisor
shall sell or offer to sell, display or promote only and exclusively products sold by the
Company. 5) Either party may terminate this agreement at will, with or without
cause, at any time upon notice to the other.
Later, respondent Luna entered into the sales force of Sandre Philippines which
caused her termination for the alleged violation of the terms of the contract. The trial
court ruled in favor of Luna that the contract was contrary to public policy thus the
dismissal was not proper. The Court of Appeals affirmed the decision, hence this
petition.
ISSUE: Whether the Court of Appeals erred in HELD that the Supervisors Agreement
was invalid for being contrary to public policy.
Whether there was subversion of the autonomy of contracts by the lower courts.
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HELD: Agreements in violation of orden pblico must be considered as those which

conflict with law, whether properly, strictly and wholly a public law (derecho) or
whether a law of the person, but law which in certain respects affects the interest of
society. Plainly put, public policy is that principle of the law which holds that no
subject or citizen can lawfully do that which has a tendency to be injurious to the
public or against the public good. As applied to contracts, in the absence of express
legislation or constitutional prohibition, a court, in order to declare a contract void as
against public policy, must find that the contract as to the consideration or thing to be
done, has a tendency to injure the public, is against the public good, or contravenes
some established interests of society, or is inconsistent with sound policy and good
morals, or tends clearly to undermine the security of individual rights, whether of
personal liability or of private property.
From another perspective, the main objection to exclusive dealing is its

tendency to foreclose existing competitors or new entrants from competition in the
covered portion of the relevant market during the term of the agreement. Only those
arrangements whose probable effect is to foreclose competition in a substantial share
of the line of commerce affected can be considered as void for being against public
policy. The foreclosure effect, if any, depends on the market share involved. The
relevant market for this purpose includes the full range of selling opportunities
reasonably open to rivals, namely, all the product and geographic sales they may
readily compete for, using easily convertible plants and marketing organizations.
Applying the preceding principles to the case at bar, there is nothing invalid or
contrary to public policy either in the objectives sought to be attained by paragraph 5,
i.e., the exclusivity clause, in prohibiting respondent Luna, and all other Avon
supervisors, from selling products other than those manufactured by petitioner Avon.
Having held that the exclusivity clause as embodied in paragraph 5 of the

Supervisors Agreement is valid and not against public policy, we now pass to a
consideration of respondent Lunas objections to the validity of her termination as
provided for under paragraph 6 of the Supervisors Agreement giving petitioner Avon
the right to terminate or cancel such contract. The paragraph 6 or the termination
clause therein expressly provides that:The Company and the Supervisor mutually
agree:6) Either party may terminate this agreement at will, with or without cause,
at any time upon notice to the other.
In the case at bar, the termination clause of the Supervisors Agreement clearly
provides for two ways of terminating and/or canceling the contract. One mode does
not exclude the other. The contract provided that it can be terminated or cancelled for
cause, it also stated that it can be terminated without cause, both at any time and
after written notice. Thus, whether or not the termination or cancellation of the
Supervisors Agreement was for cause, is immaterial. The only requirement is that of
notice to the other party. When petitioner Avon chose to terminate the contract, for
cause, respondent Luna was duly notified thereof.
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Worth stressing is that the right to unilaterally terminate or cancel the

Supervisors Agreement with or without cause is equally available to respondent Luna,
subject to the same notice requirement. Obviously, no advantage is taken against
each other by the contracting parties.
Del Castillo v. Richmond
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ALFONSO DEL CASTILLO, Plaintiff-Appellant,

versus
SHANNON RICHMOND, Defendant-Appellee.
(G.R. No. L-21127, February 9, 1924, 1st Division)
JOHNSON, J.:
FACTS: The plaintiff alleges that the provisions and conditions contained in the third
paragraph of their contract constitute an illegal and unreasonable restriction upon his
liberty to contract, are contrary to public policy, and are unnecessary in order to
constitute a just and reasonable protection to the defendant; and asked that the same
be declared null and void and of no effect. The defendant interposed a general and
special defense. In his special defense he alleges that during the time the plaintiff was
in the defendant's employ he obtained knowledge of his trade and professional secrets
and came to know and became acquainted and established friendly relations with his
customers so that to now annul the contract and permit plaintiff to establish a
competing drugstore in the town of Legaspi, as plaintiff has announced his intention
to do, would be extremely prejudicial to defendant's interest." The defendant further,
in an amended answer, alleges that this action not having been brought within four
years from the time the contract referred to in the complaint was executed, the same
has prescribed.
ISSUE: Whether the contract is valid and the autonomy of contracts be upheld
HELD: Considering the nature of the business in which the defendant is engaged, in
relation with the limitation placed upon the plaintiff both as to time and place, The
Court is of the opinion, and so decide, that such limitation is legal and reasonable and
not contrary to public policy, otherwise, the autonomy of the contract will be
subverted.
Arwood v. DM Consunji
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ARWOOD INDUSTRIES, INC., Petitioner, vs. D.M. CONSUNJI, INC., Respondent.
CORONA, J .:
FACTS: Petitioner and respondent, as owner and contractor, respectively, entered into
a civil, structural and architectural works Agreement dated February 6, 1989 for the
construction of petitioners Westwood condominium at No. 23 Eisenhower St.,
Greenhills, San Juan, Metro Manila. The contract price for the condominium project
aggregated P20, 800,000.00.
Despite the completion of the condominium project, the amount of P962,

434.78 remain unpaid by petitioner. Repeated demands by respondent for petitioner to
pay went unheeded.
Thus on August 13, 1993, respondent as plaintiff in a civil case filed its
complaint for the recovery of the balance of the contract price and for damages against
petitioner.
Respondent specifically prayed for the payment of the: (a) amount of P962,
434.78 with interest of 2% per month or a fraction thereof, from November 1990 up to
the time of payment; (b) the amount of P250,000 as Attorneys fees and litigation
expenses; (c) amount of P150,000.00 as exemplary damages; and (d)cost of suit.
On appeal, the Court of Appeals affirmed the lower courts decision with
modification
ISSUE: Whether or not the imposition of two percent interest on the amount adjudged
is proper.
HELD: Yes. It must be noted that the agreement provided the contractor, respondent
in this case, two (2) options in case of delay in monthly payments, to wit: a) suspend
works on the project until payment is remitted by the owner or continue the work but
the owner shall be required to pay interest at a rate of two (2) percent per month or a
fraction thereof. Evidently, respondent chose the latter option, as the condominium
project was in fact already completed. Since the agreement stands as the law between
the parties, the court cannot ignore the existence of such provision providing for a
penalty for every months delay.
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v. Rural Bank of Pamplona

SPOUSES BENEDICT and MARICEL DY
TECKLO, Petitioners, versusRURAL BANK OF PAMPLONA, INC.
represented by its President/Manager, JUAN Respondent.
CARPIO, J.:
FACTS: On 20 January 1994, spouses Roberto and Maria Antonette Co obtained from
respondent Rural Bank of Pamplona, Inc. a P100,000.00 loan due in three months or
on 20 April 1994. The loan was secured by a real estate mortgage on a 262-square
meter residential lot owned by spouses Co located in San Felipe, Naga City and
covered by Transfer Certificate of Title (TCT) No. 24196. Petitioners, spouses Benedict
and Maricel Dy Tecklo, meanwhile instituted an action for collection of sum of money
against spouses Co. When the two loans remained unpaid after becoming due and
demandable, respondent bank instituted extrajudicial foreclosure proceedings. In its 5
September 1994 petition for extrajudicial foreclosure, respondent bank sought the
satisfaction solely of the first loan although the second loan had also become due. At
the public auction scheduled on 19 December 1994, respondent bank offered the
winning bid of P142,000.00, which did not include the second loan. The provisional
certificate of sale to respondent bank was annotated on the TCT of the mortgaged
property as Entry No. 60794. Petitioners then exercised the right of redemption as
successors-in-interest of the judgment debtor. Stepping into the shoes of spouses Co,
petitioners tendered on 9 August 1995 the amount of P155,769.50, based on the
computation made by the Office of the Provincial Sheriff.
ISSUE: Whether or not the redemption amount includes the second loan in the
amount of P150,000.00 even if it was not included in respondent banks application
for extrajudicial foreclosure.
HELD: Petitioners pointed out that the second loan was not annotated as an
additional loan on the TCT of the mortgaged property. Petitioners argued that the
second loan was just a private contract between respondent bank and spouses Co,
which could not bind third parties unless duly registered. Petitioners stressed that
respondent banks application for extrajudicial foreclosure referred solely to the first
loan.
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Respondent bank insisted that the mortgage secured not only the first loan but
also future loans spouses Co might obtain from respondent bank. According to
respondent bank, this was specifically provided in the mortgage contract. Respondent
bank contended that petitioners, as redemptioner by virtue of the preliminary
attachment they obtained against spouses Co, should assume all the debts secured by
the mortgaged property. In order to effect redemption, the judgment debtor or his
successor -in-interest need only pay the purchaser at the public auction sale the
redemption amount composed of (1) the price which the purchaser at the public
auction sale paid for the property and (2) the amount of any assessment or taxes
which the purchaser may have paid on the property after the purchase, plus the
applicable interest. Respondent banks demand that the second loan be added to the
actual amount paid for the property at the public auction sale finds no basis in law or
jurisprudence.
Banate v. Phil. Countryside
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VIOLETA TUDTUD BANATE, MARY MELGRID M. CORTEL, BONIFACIO

CORTEL, ROSENDO MAGLASANG, and PATROCINIA MONILAR,
Petitioners,versus PHILIPPINE COUNTRYSIDE RURAL BANK
(LILOAN, CEBU), INC. and TEOFILO SOON, JR., Respondents.
BRION, J.:
FACTS: On July 22, 1997, petitioner spouses Rosendo Maglasang and Patrocinia
Monilar (spouses Maglasang) obtained a loan (subject loan) from PCRB
forP1,070,000.00. The subject loan was evidenced by a promissory note and was
payable on January 18, 1998. To secure the payment of the subject loan, the spouses
Maglasang executed, in favor of PCRB a real estate mortgage over their property, Lot
12868-H-3-C, [6] including the house constructed thereon (collectively referred to
as subject properties), owned by petitioners Mary Melgrid and Bonifacio Cortel
(spouses Cortel), the spouses Maglasangs daughter and son-in-law, respectively. Aside
from the subject loan, the spouses Maglasang obtained two other loans from PCRB
which were covered by separate promissory notes [7] and secured by mortgages on their
other properties.
Sometime in November 1997 (before the subject loan became due), the spouses
Maglasang and the spouses Cortel asked PCRBs permission to sell the subject
properties. They likewise requested that the subject properties be released from the
mortgage since the two other loans were adequately secured by the other mortgages.
The spouses Maglasang and the spouses Cortel claimed that the PCRB, acting through
its Branch Manager, Pancrasio Mondigo, verbally agreed to their request but required
first the full payment of the subject loan. The spouses Maglasang and the spouses
Cortel thereafter sold to petitioner Violeta Banate the subject properties
for P1,750,000.00. The spouses Magsalang and the spouses Cortel used the amount to
pay the subject loan with PCRB. After settling the subject loan, PCRB gave the
owners duplicate certificate of title of Lot 12868-H-3-C to Banate, who was able to
secure a new title in her name. The title, however, carried the mortgage lien in favor of
PCRB, prompting the petitioners to request from PCRB a Deed of Release of
Mortgage. As PCRB refused to comply with the petitioners request, the petitioners
instituted an action for specific performance before the RTC to compel PCRB to
execute the release deed.
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The petitioners additionally sought payment of damages from PCRB, which,

they claimed, caused the publication of a news report stating that they
surreptitiously caused the transfer of ownership of Lot 12868-H-3-C. The petitioners
considered the news report false and malicious, as PCRB knew of the sale of the
subject properties and, in fact, consented thereto.
On appeal, the CA reversed the RTCs decision. The CA did not consider as valid
the petitioners new agreement with Mondigo, which would novate the original
mortgage contract containing the cross-collateral stipulation. It ruled that Mondigo
cannot orally amend the mortgage contract between PCRB, and the spouses
Maglasang and the spouses Cortel; therefore, the claimed commitment allowing the
release of the mortgage on the subject properties cannot bind PCRB. Since the cross-
collateral stipulation in the mortgage contract (requiring full settlement of all three
loans before the release of any of the mortgages) is clear, the parties must faithfully
comply with its terms. The CA did not consider as material the release of the owners
duplicate copy of the title, as it was done merely to allow the annotation of the sale of
the subject properties to Banate.[11]
Dismayed with the reversal by the CA of the RTCs HELD, the petitioners filed
the present appeal by certiorari, claiming that the CA HELD is not in accord with
established jurisprudence.
ISSUE: Whether the purported agreement between the petitioners and Mondigo
novated the mortgage contract over the subject properties and is thus binding upon
PCRB.
HELD: We find the petitioners argument unpersuasive. Novation, in its broad concept,
may either be extinctive or modificatory. It is extinctive when an old obligation is
terminated by the creation of a new obligation that takes the place of the former; it is
merely modificatory when the old obligation subsists to the extent that it remains
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compatible with the amendatory agreement. An extinctive novation results either by

changing the object or principal conditions (objective or real), or by substituting the
person of the debtor or subrogating a third person in the rights of the creditor
(subjective or personal). Under this mode, novation would have dual functions one to
extinguish an existing obligation, the other to substitute a new one in its place
requiring a conflux of four essential requisites: (1) a previous valid obligation; (2) an
agreement of all parties concerned to a new contract; (3) the extinguishment of the old
obligation; and (4) the birth of a valid new obligation. The second requisite is lacking
in this case. Novation presupposes not only the extinguishment or modification of an
existing obligation but, more importantly, the creation of a valid new obligation. For
the consequent creation of a new contractual obligation, consent of both parties is,
thus, required. As a general rule, no form of words or writing is necessary to give effect
to a novation. Nevertheless, where either or both parties involved are juridical entities,
proof that the second contract was executed by persons with the proper authority to
bind their respective principals is necessary.
Pascual v. Ramos
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SPOUSES SILVESTRE and CELIA PASCUAL, Petitioners, versus RODRIGO V.

RAMOS, Respondent.
(G.R. No. 144712. July 4, 2002, 1st Division)
DAVIDE, JR., C.J.:
FACTS: Ramos alleged that on 3 June 1987, for and in consideration of P150,000, the
Spouses Pascual executed in his favor a Deed of Absolute Sale with Right to
Repurchase over two parcels of land and the improvements thereon located in
Bambang, Bulacan, Bulacan. This document was annotated at the back of the title.
The Pascuals did not exercise their right to repurchase the property within the
stipulated one-year period; hence, Ramos prayed that the title or ownership over the
subject parcels of land and improvements thereon be consolidated in his favor.
In their Answer, the Pascuals admitted having signed the Deed of Absolute Sale
with Right to Repurchase for a consideration of P150, 000 but averred that what the
parties had actually agreed upon and entered into was a real estate mortgage. They
further alleged that there was no agreement limiting the period within which to
exercise the right to repurchase and that they had even overpaid Ramos. The trial
court found that the transaction between the parties was actually a loan in the
amount of P150,000, the payment of which was secured by a mortgage of the property
covered by TCT No. 305626. It also found that the Pascuals had made payments in the
total sum of P344,000, and that with interest at 7% per annum, they had overpaid the
loan by P141,500. Accordingly, in its Decision of 15 March 1995 the trial court ruled
in favor of the defendants. The Pascuals interposed the following defenses: (a) the trial
court had no jurisdiction over the subject or nature of the petition; (b) Ramos had no
legal capacity to sue; (c) the cause of action, if any, was barred by the statute of
limitations; (d) the petition stated no cause of action; (e) the claim or demand set forth
in Ramoss pleading had been paid, waived, abandoned, or otherwise extinguished;
and (f) Ramos has not complied with the required confrontation and conciliation before
the barangay.
The Court of Appeals affirmed in toto the trial courts Orders of 5 June 1995
and 7 September 1995.
ISSUE: Whether or not the contract entered into is a contract of loan.
HELD: The Pascuals are actually raising as issue the validity of the stipulated interest
rate. It must be stressed that they never raised as a defense or as basis for their
counterclaim the nullity of the stipulated interest. While overpayment was alleged in
the Answer, no ultimate facts which constituted the basis of the overpayment was
alleged. In their pre-trial brief, the Pascuals made a long list of issues, but not one of
them touched on the validity of the stipulated interest rate. Their own evidence clearly
shows that they have agreed on, and have in fact paid interest at, the rate of 7% per
month.
After the trial court sustained petitioners claim that their agreement with
RAMOS was actually a loan with real estate mortgage, the Pascuals should not be
allowed to turn their back on the stipulation in that agreement to pay interest at the
rate of 7% per month. The Pascuals should accept not only the favorable aspect of the
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courts declaration that the document is actually an equitable mortgage but also the
necessary consequence of such declaration, that is, that interest on the loan as
stipulated by the parties in that same document should be paid. Besides, when
Ramos moved for a reconsideration of the 15 March 1995 Decision of the trial court
pointing out that the interest rate to be used should be 7% per month, the Pascuals
never lifted a finger to oppose the claim. Admittedly, in their Motion for
Reconsideration of the Order of 5 June 1995, the Pascuals argued that the interest
rate, whether it be 5% or 7%, is exorbitant, unconscionable, unreasonable, usurious
and inequitable. However, in their Appellants Brief, the only argument raised by the
Pascuals was that Ramoss petition did not contain a prayer for general relief and,
hence, the trial court had no basis for ordering them to pay Ramos P511,000
representing the principal and unpaid interest. It was only in their motion for the
reconsideration of the decision of the Court of Appeals that the Pascuals made an
issue of the interest rate and prayed for its reduction to 12% per annum.
It is a basic principle in civil law that parties are bound by the stipulations in
the contracts voluntarily entered into by them. Parties are free to stipulate terms and
conditions which they deem convenient provided they are not contrary to law, morals,
good customs, public order, or public policy.
The interest rate of 7% per month was voluntarily agreed upon by Ramos and
the Pascuals. There is nothing from the records and, in fact, there is no allegation
showing that petitioners were victims of fraud when they entered into the agreement
with Ramos. Neither is there a showing that in their contractual relations with
Ramos, the Pascuals were at a disadvantage on account of their moral dependence,
ignorance, mental weakness, tender age or other handicap, which would entitle them
to the vigilant protection of the courts as mandated by Article 24 of the Civil Code.
Chua Tee Dee v. CA

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CHUA TEE DEE, doing business under the name and style of PIONEER
ENTERPRISES, Petitioner versus COURT OF APPEALS and J.C. AGRICOM
DEVELOPMENT CORPORATION, INC., Respondents.
(G.R. No. 135721, May 27, 2004, 2nd Division)
CALLEJO, SR., J.:
FACTS: On May 22, 1985, Agricom and Dee entered into a 15-year lease contract over
the rubber plantation owned by the former. Among the stipulations in the contract
was the payment of deposit in the amount of P135,000.00 and payment of back
rentals in case of non-payment of rentals for three months. The contract also
stipulated that Agricom had the duty to maintain Dee in the quiet peaceful possession
and enjoyment of the leased premises. However, sometime in 1986, a labor case for
illegal dismissal and unfair labor practice was filed against Agricom, Amado Dee (Chua
Tee Dees husband) and Pioneer. This case arose from the fact that some of the
plantation laborers were dismissed from work due to the contract of lease with Dee.
The labor case dragged on for a number of years. In addition, Dee also complained of
being pestered by some individuals who claimed portions of the plantation as their
own property.
Later on, Pioneer defaulted in its monthly payments, prompting Agricom to file a
complaint for sum of money. In its Answer, Dee asserted that Agricom
committed breach of contract for its failure to maintain her in peaceful possession and
enjoyment of the leased premises. The breach, in turn, entitled her to suspend
payment of rentals. While the case was pending, Dee extended a personal loan of
P30,000 to Lillian Carreido. When judgment was finally rendered, the complaint was
dismissed and the lease contract terminated, the court stating that it was Agricoms
duty as lessor to maintain the lessee in peaceful possession and enjoyment of the
leased premises. Upon motion for recommendation, the lower court reversed its own
HELD, ordering Dee to pay Agricom back rentals and rentals for the first three years of
the lease already paid for. The CA affirmed the order.
ISSUE: Whether or not CA committed grave abuse of discretion in upholding the

validity of the lease contract and holding Dee liable for back rentals, including rentals
already paid for.
HELD: The Supreme Court ruled partly in favor of Dee.

On the issue of suspension of payment of rentals, Dee anchors her argument on Art.
1658, NCC, which entitles the lessee to suspend payment of rent in case the lessor
fails to make the necessary repairs or to maintain the lessee in peaceful and adequate
enjoyment of the property leased. Dee asserted that she was harassed by squatters
and several claimants of the leased premises.
The duty to maintain the lessee in the peaceful and adequate enjoyment of the lease
for the duration of the contract is merely a warranty that the lessee shall not be
disturbed in his legal, and not physical, possession. In the present case, however,
petitioner had not been disturbed in her legal possession of the property. As to the
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claims of loss due to the labor dispute, the Supreme Court agreed with the CA that
Dee failed to prove this. During the period of pendency of the labor case, Dee regularly
paid the monthly rentals. It was only after the labor case has been resolved that she
started to fail to pay her rentals, strongly indicating that the labor case has not
dampened her peaceful and adequate possession of the leased premises.
The Supreme Court, however, ruled that Dee should not be made to pay rentals for the
first three years of the lease, since those rentals were already paid for. Moreover, the
personal loan extended by Dee to Lillian Carriedo should not be charged against
Agricom. While it is true that the petitioner and Carriedo had agreed that the
personal loan of the latter shall be chargeable against Agricoms account, the private
respondent is not privy to the agreement; nor did it agree to pay the said loan. It must
be stressed that the private respondent has a personality separate and distinct from
its stockholders.
GQ Garments v. Miranda
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G.Q. GARMENTS, INC., Petitioner,

vs.
ANGEL MIRANDA, FLORENDA MIRANDA and EXECUTIVE MACHINERIES
and EQUIPMENT CORPORATION,Respondents.
CALLEJO, SR., J.:
FACTS: Angel Miranda is the registered owner of a 9,646 square meters parcel
of land located at Niog, Bacoor, Cavite ("Property"). The property was covered by
Transfer Certificate of Title (TCT) No. T-606793 of the Registry of Deeds of
Cavite.
In 1984, Angelito Miranda, the son of Angel Miranda, established the Executive
Machineries and Equipment Corporation (EMECO), a domestic corporation
engaged primarily in the manufacture and fabrication of rubber rollers.
Angelito owned 80% of the stocks of the corporation, while his wife Florenda
owned 10%. That year, Angel entered into a verbal contract of lease over the
Property with EMECO, and allowed it to build a factory thereon. The agreement
was on a month-to-month basis, at the rate of P8,000 per month. EMECO
constructed its factory on the property. At the outset, EMECO paid the monthly
rentals. However, after Angelito died on June 21, 1988, EMECO failed to pay
the rentals but still continued possessing the leased premises.
On November 19, 1989, the factory of EMECO was totally razed by fire. In a
letter to EMECO dated June 3, 1991, Angel demanded the payment of accrued
rentals in the amount of P280,000.00 as of May 1991. EMECO was also
informed that the oral contract of lease would be terminated effective June 30,
1991. However, EMECO failed to pay the accrued rentals and to vacate the
property. Another demand letter dated September 27, 1991 was sent to
EMECO. It vacated the leased premises, but the accrued rentals remained
unpaid.
Sometime in November 1991, Florenda arrived at the office of petitioner and

offered to sublease the property to Wilson Kho, the Officer-in Charge of the
corporation. Florenda showed Kho a purported copy of a contract of lease4 over
the said property allegedly executed by Angel in favor of EMECO. After visiting
and viewing the property, Kho agreed to rent the area upon the condition that
its true and registered owner would personally sign the lease contract in his
presence. When Florenda failed to present Angel for said purpose, Kho turned
down her proposal.
Later, Kho was able to locate Angel at Noveleta, Cavite and offered, in behalf of
petitioner, to lease the property, as to which Angel agreed. On December 23,
1991, Angel and the corporation, represented by its Executive Vice-President,
Davy John Barlin, executed a contract of lease5 over the subject property. The
lease was for a period of 15 years, commencing on February 1, 1992 until
January 31, 2007 for a monthly rental of P30,000.00. Petitioner
paid P90,000.00 representing two months deposit and advance rental for one
month. As lessee, it was authorized to introduce improvements, structures,
and buildings on the property as it may deem necessary and for the purpose
for which it was leased.
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Consequently, petitioner secured the following documents: mayor's permit,

sanitary permit, business sticker, and an application for municipal license.
Thereafter, it moved into the property with its equipment, machinery,
appliances, supplies, and other construction materials. The construction of a
building and factory in the leased premises commenced.
However, on January 27, 1992, Florenda, together with several armed men
who identified themselves as policemen, forcibly evicted petitioner from the
leased premises, claiming that she was the owner and that the place was
already covered by another existing contract of lease. During the encounter,
Florenda and her men took some equipment, machinery and other properties
belonging to petitioner, thereby causing loss and damage to said properties.
In the meantime, Angel secured a copy of the purported contract of lease he

allegedly executed in favor of EMECO. On March 12, 1992, he forthwith filed a
complaint for declaration of nullity of the contract of lease before the Regional
Trial Court (RTC) of Makati, Branch 66, docketed as Civil Case No. 92-699.
Angel alleged therein that his signature as lessor in the purported contract was
a forgery. He prayed that judgment be rendered in his favor declaring the said
contract null and void.
Meanwhile, petitioner sought the help of the Philippine National Police (PNP).
General Gerardo N. Flores, Deputy Director General and Chief Directorial Staff,
issued a Memorandum6 to Superintendent Wenceslao A. Soberano, Provincial
Director of the Cavite PNP Provincial Command, ordering the latter to prevent
his men from interfering with the pending civil case. Petitioner subsequently
regained possession over the leased premises. However, Florenda and her
group were undaunted. They went back to the place and ousted the guards and
other personnel manning the corporation's office, and even removed their
equipment, and ransacked anew their raw materials, electric wire and other
valuables inside.
On April 20, 1992, petitioner instituted an action for damages and recovery of
possession of the property before the RTC of Cavite City, Branch 17, with
Angel, EMECO and Florenda, as alternative defendants.
The appellate court absolved Angel of any liability due to the absence of evidence
showing that he had participated, directly or indirectly, in the looting of GQ Garment's
properties and in forcibly ejecting the latter from the premises in question. While
under Article 1654, paragraph 3, of the New Civil Code, a lessor is obliged to maintain
the lessee in peaceful and adequate enjoyment of the lease for the entire duration of
the contract, the law, however, does not apply to him since the unlawful acts were
caused by a third person or an intruder. Under Article 1664, he is not obliged to
answer for a mere act of trespass which a third person may cause on the use of the
thing leased, but the lessee shall have a direct action against the intruder.
ISSUE: Whether or not respondent Angel Miranda should likewise be held liable for
damages to the petitioner.
HELD: The duty of the lessor to maintain the lessee in the peaceful and
adequate enjoyment of the leased property for the entire duration of the
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contract is merely a warranty that the lessee shall not be disturbed in having
legal and not physical possession of the property.
In this case, the trespass perpetrated by respondent Florenda Miranda and her
confederates was merely trespass in fact. They forcibly entered the property
and caused damage to the equipment and building of petitioner, because the
latter refused to enter into a contract of lease with EMECO over the property
upon respondent Florenda Miranda's failure to present respondent Angel
Miranda to sign the contract of lease. It turned out that respondent Florenda
Miranda attempted to hoodwink petitioner and forged respondent Angel
Miranda's signature on the contract of lease she showed to petitioner. It
appears that respondent Florenda Miranda tried to coerce the petitioner into
executing a contract of lease with EMECO over the property, only to be
rebuffed by the petitioner.
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Bercero v. Capitol Development
PEDRO T. BERCERO, Petitioner,

versus CAPITOL DEVELOPMENT CORPORATION,Respondent.
FACTS: On January 31, 1983, Capitol Development Corporation (respondent)

leased its commercial building and lot located at 1194 EDSA, Quezon City to
R.C. Nicolas Merchandising, Inc., (R.C. Nicolas) for a 10-year period or until
January 31, 1993 with the option for the latter to make additional
improvements in the property to suit its business and to sublease portions
thereof to third parties.
R.C. Nicolas converted the space into a bowling and billiards center and
subleased separate portions thereof to Midland Commercial Corporation, Jerry
Yu, Romeo Tolentino, Julio Acuin, Nicanor Bas, and Pedro T. Bercero
(petitioner). Petitioners sublease contract with R.C. Nicolas was for a three-
year period or until August 16, 1988.
Meanwhile, for failure to pay rent, respondent filed an ejectment case against
R.C. Nicolas before the Metropolitan Trial Court. Respondent also impleaded
the sub-lessees of R.C. Nicolas as parties-defendants.
During the pendency of Civil Case No. 52933, several sub-lessees including
petitioner, entered into a compromise settlement with respondent. In the
compromise settlement, the sub-lessees recognized respondent as the lawful
and absolute owner of the property and that the contract between respondent
and R.C. Nicolas had been lawfully terminated because of the latters non-
payment of rent; and that the sub-lessees voluntarily surrendered possession
of the premises to respondent; that the sub-lessees directly executed lease
contracts with respondent considering the termination of leasehold rights of
R.C. Nicolas.
Petitioner entered into a lease contract with respondent for a three-year period,
from August 16, 1988 to August 31, 1991.
On October 21, 1988, respondent and petitioner, as well as several other sub-
lessees of R.C. Nicolas, filed a Joint Manifestation and Motion in Civil Case No.
52933, manifesting to the MeTC-Branch 41 that they entered into a
compromise settlement and moved that the names of the sub-lessees as
parties-defendants be dropped and excluded.
On November 14, 1988, R.C. Nicolas filed a complaint for ejectment and
collection of unpaid rentals against petitioner before the Metropolitan Trial
Court, rendered a Decision in favor of R.C. Nicolas and ordered the eviction of
petitioner from the leased premises.
ISSUE: Whether or not the principle of estoppel shall be applied to petitioner
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HELD: Void are all contracts in which the cause or object does not exist at the
time of the transaction. In the present case, the lease contract between
petitioner and respondent is void for having an inexistent cause - respondent
did not have the right to lease the property to petitioner considering that its
lease contract with R.C. Nicolas was still valid and subsisting, albeit pending
litigation. Having granted to R.C. Nicolas the right to use and enjoy its property
from 1983 to 1993, respondent could not grant that same right to petitioner in
1988. When petitioner entered into a lease contract with respondent, the latter
was still obliged to maintain R.C. Nicolass peaceful and adequate possession
and enjoyment of its lease for the 10-year duration of the contract.
Respondents unilateral rescission of its lease contract with R.C. Nicolas,

without waiting for the final outcome of the ejectment case it filed against the
latter, is unlawful. A lease is a reciprocal contract and its continuance,
effectivity or fulfillment cannot be made to depend exclusively upon the free
and uncontrolled choice of just one party to a lease contract. Thus, the lease
contract entered into between petitioner and respondent, during the pendency
of the lease contract with R.C. Nicolas, is void.
Hemedes v. CA
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MAXIMA HEMEDES, Petitioner, versus THE HONORABLE COURT OF

APPEALS, DOMINIUM REALTY AND CONSTRUCTION CORPORATION,
ENRIQUE D. HEMEDES, and R & B INSURANCE
GONZAGA_REYES, J.:
FACTS: Jose Hemedes executed a document entitled Donation Inter Vivos

With Resolutory Conditions conveying ownership a parcel of land, together
with all its improvements, in favor of his third wife, Justa Kauapin, subject to
the resolutory condition that upon the latters death or remarriage, the title to
the property donated shall revert to any of the children, or heirs, of the DONOR
expressly designated by the DONEE.
Pursuant to said condition, Justa Kausapin executed a Deed of Conveyance of
Unregistered Real Property by Reversion conveying to Maxima Hemedes the
subject property.
Maxima Hemedes and her husband Raul Rodriguez constituted a real estate
mortgage over the subject property in favor of R & B Insurance to serve as
security for a loan which they obtained.
R & B Insurance extrajudicially foreclosed the mortgage since Maxima

Hemedes failed to pay the loan even. The land was sold at a public auction
with R & B Insurance as the highest bidder. A new title was subsequently
issued in favor the R&B. The annotation of usufruct in favor of Justa Kausapin
was maintained in the new title.
Despite the earlier conveyance of the subject land in favor of Maxima Hemedes,
Justa Kausapin executed a Kasunduan whereby she transferred the same
land to her stepson Enrique D. Hemedes, pursuant to the resolutory condition
in the deed of donation executed in her favor by her late husband Jose
Hemedes. Enrique D. Hemedes obtained two declarations of real property,
when the assessed value of the property was raised. Also, he has been paying
the realty taxes on the property from the time Justa Kausapin conveyed the
property to him. In the cadastral survey, the property was assigned in the
name of Enrique Hemedes. Enrique Hemedes is also the named owner of the
property in the records of the Ministry of Agrarian Reform office at Calamba,
Laguna.
Enriques D. Hemedes sold the property to Dominium Realty and Construction

Corporation (Dominium).
Dominium leased the property to its sister corporation Asia Brewery, Inc. (Asia
Brewery) who made constructions therein. Upon learning of Asia Brewerys
constructions, R & B Insurance sent it a letter informing the former of its
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ownership of the property. A conference was held between R & B Insurance

and Asia Brewery but they failed to arrive at an amicable settlement.
Maxima Hemedes also wrote a letter addressed to Asia Brewery asserting that
she is the rightful owner of the subject property and denying the execution of
any real estate mortgage in favor of R&B.
Dominium and Enrique D. Hemedes filed a complaint with the CFI for the
annulment of TCT issued in favor of R & B Insurance and/or the reconveyance
to Dominium of the subject property alleging that Dominion was the absolute
owner of the land.
The trial court ruled in favor of Dominium and Enrique Hemedes.
ISSUE: Whether or not the donation in favor of Enrique Hemedes was valid.
HELD: NO. Enrique D. Hemedes and his transferee, Dominium, did not acquire
any rights over the subject property. Justa Kausapin sought to transfer to her
stepson exactly what she had earlier transferred to Maxima Hemedes the
ownership of the subject property pursuant to the first condition stipulated in
the deed of donation executed by her husband. Thus, the donation in favor of
Enrique D. Hemedes is null and void for the purported object thereof did not
exist at the time of the transfer, having already been transferred to his sister.
Similarly, the sale of the subject property by Enrique D. Hemedes to Dominium
is also a nullity for the latter cannot acquire more rights than its predecessor-
in-interest and is definitely not an innocent purchaser for value since Enrique
D. Hemedes did not present any certificate of title upon which it relied.
The declarations of real property by Enrique D. Hemedes, his payment of realty
taxes, and his being designated as owner of the subject property in the
cadastral survey of Cabuyao, Laguna and in the records of the Ministry of
Agrarian Reform office in Calamba, Laguna cannot defeat a certificate of title,
which is an absolute and indefeasible evidence of ownership of the property in
favor of the person whose name appears therein. Particularly, with regard to
tax declarations and tax receipts, this Court has held on several occasions that
the same do not by themselves conclusively prove title to land.
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PUP v. Golden Horizon

POLYTECHNIC UNIVERSITY OF THE PHILIPPINES,Petitioner, versus
GOLDEN HORIZON REALTY
CORPORATION,Respondent.
VILLARAMA, JR., J.:
FACTS: Petitioner National Development Company (NDC) is a government- owned and

controlled corporation, created under Commonwealth Act No. 182, as amended by
Com. Act No. 311 and Presidential Decree (P.D.) No. 668. Petitioner Polytechnic
University of the Philippines (PUP) is a public, non-sectarian, non-profit educational
institution created in 1978 by virtue of P.D. No. 1341. In the early sixties, NDC had in
its disposal a ten -hectare property located along Pureza St., Sta. Mesa, Manila. The
estate was popularly known as the NDC Compound and covered by Transfer
Certificate of Title Nos. 92885, 110301 and 145470.On September 7, 1977, NDC
entered into a Contract of Lease (C-33-77) with Golden Horizon Realty Corporation
(GHRC) over a portion of the property, with an area of 2,407 square meters for a
period of ten years, renewable for another ten years with mutual consent of the
parties.On May 4, 1978, a second Contract of Lease (C-12-78) was executed between
NDC and GHRC covering 3,222.80 square meters, also renewable upon mutual
consent after the expiration of the ten (10)-year lease period. In addition, GHRC as
lessee was granted the "option to purchase the area leased, the price to be negotiated
and determined at the time the option to purchase is exercised." Under the lease
agreements, GHRC was obliged to construct at its own expense buildings of strong
material at no less than the stipulated cost, and other improvements which shall
automatically belong to the NDC as lessor upon the expiration of the lease period.
Accordingly, GHRC introduced permanent improvements and structures as required
by the terms of the contract. After the completion of the industrial complex project, for
which GHRC spent P5 million, it was leased to various manufacturers, industrialists
and other businessmen thereby generating hundreds of jobs. On June 13, 1988,
before the expiration of the ten (10)-year period under the second lease contract,
GHRC wrote a letter to NDC indicating its exercise of the option to renew the lease for
another ten years. As no response was received from NDC, GHRC sent another letter
on August 12, 1988, reiterating its desire to renew the contract and also requesting for
priority to negotiate for its purchase should NDC opt to sell the leased premises. NDC
still did not reply but continued to accept rental payments from GHRC and allowed the
latter to remain in possession of the property. Sometime after September 1988, GHRC
discovered that NDC had decided to secretly dispose the property to a third party. On
October 21, 1988, GHRC filed in the RTC a complaint for specific performance,
damages with preliminary injunction and temporary restraining order.
On February 20, 1989, the RTC issued a writ of preliminary injunction

enjoining NDC and its attorneys, representatives, agents and any other persons
assisting it from proceeding with the sale and disposition of the leased premises. On
February 23, 1989, PUP filed a motion to intervene as party defendant, claiming that
as a purchaser pendente lite of a property subject of litigation it is entitled to intervene
in the proceedings. The RTC granted the said motion and directed PUP to file its
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Answer-in-Intervention.PUP also demanded that GHRC vacate the premises, insisting

that the latters lease contract had already expired. Its demand letter unheeded by
GHRC, PUP filed an ejectment case (Civil Case No. 134416) before the Metropolitan
Trial Court (MeTC) of Manila on January 14, 1991.
Due to this development, GHRC filed an Amended and/or Supplemental

Complaint to include as additional defendants PUP, Honorable Executive Secretary
Oscar Orbos and Judge Ernesto A. Reyes of the Manila MeTC, and to enjoin the afore-
mentioned defendants from prosecuting Civil Case No. 134416 for ejectment. A
temporary restraining order was subsequently issued by the RTC enjoining PUP from
prosecuting and Judge Francisco Brillantes, Jr. from proceeding with the ejectment
case.
On November 14, 2001, this Court rendered a decision in G.R. Nos. 143513
(Polytechnic University of the Philippines v. Court of Appeals) and 143590 (National
Development Corporation v. Firestone Ceramics, Inc.),15 which declared that the sale
to PUP by NDC of the portion leased by Firestone pursuant to Memorandum Order No.
214 violated the right of first refusal granted to Firestone under its third lease contract
with NDC.
ISSUE: Whether or not our HELD in Polytechnic University of the Philippines v. Court
of Appeals applies in this case involving another lessee of NDC who claimed that the
option to purchase the portion leased to it was similarly violated by the sale of the
NDC Compound in favor of PUP pursuant to Memorandum Order No. 214.
HELD: The CA was correct in declaring that there exists no justifiable reason not to
apply the same rationale in Polytechnic University of the Philippines v. Court of
Appeals in the case of respondent who was similarly prejudiced by petitioner NDCs
sale of the property to PUP, as to entitle the respondent to exercise its option to
purchase until October 1988 inasmuch as the May 4, 1978 contract embodied the
option to renew the lease for another ten (10) years upon mutual consent and giving
respondent the option to purchase the leased premises for a price to be negotiated and
determined at the time such option was exercised by respondent. It is to be noted that
Memorandum Order No. 214 itself declared that the transfer is "subject to such
liens/leases existing on the subject property."
The option in this case was incorporated in the contracts of lease by NDC for
the benefit of firestone which, in view of the total amount of its investments in the
property, wanted to be assured that it would be given the first opportunity to buy the
property at a price for which it would be offered. Consistent with their agreement, it
was then implicit for NDC to have first offered the leased premises of 2.60 hectares to
FIRESTONE prior to the sale in favor of PUP. Only if FIRESTONE failed to exercise its
right of first priority could NDC lawfully sell the property to petitioner PUP.
In the light of the foregoing, the Court held that respondent, which did not offer
any amount to petitioner NDC, and neither disputed the P1,500.00 per square meter
actual value of NDCs property at that time it was sold to PUP at P554.74 per square
meter, as duly considered by this Court in the Firestone case, should be bound by
such determination. Accordingly, the price at which the leased premises should be
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sold to respondent in the exercise of its right of first refusal under the lease contract
with petitioner NDC, which was pegged by the RTC at P554.74 per square meter,
should be adjusted to P1,500.00 per square meter, which more accurately reflects its
true value at that time of the sale in favor of petitioner PUP. Indeed, basic is the rule
that a party to a contract cannot unilaterally withdraw a right of first refusal that
stands upon valuable consideration.40 We have categorically ruled that it is not
correct to say that there is no consideration for the grant of the right of first refusal if
such grant is embodied in the same contract of lease. Since the stipulation forms part
of the entire lease contract, the consideration for the lease includes the consideration
for the grant of the right of first refusal. In entering into the contract, the lessee is in
effect stating that it consents to lease the premises and to pay the price agreed upon
provided the lessor also consents that, should it sell the leased property, then, the
lessee shall be given the right to match the offered purchase price and to buy the
property at that price. We have further stressed that not even the avowed public
welfare or the constitutional priority accorded to education, invoked by petitioner PUP
in the Firestone case, would serve as license for us, and any party for that matter, to
destroy the sanctity of binding obligations. While education may be prioritized for
legislative and budgetary purposes, it is doubtful if such importance can be used to
confiscate private property such as the right of first refusal granted to a lessee of
petitioner NDC.42 Clearly, no reversible error was committed by the CA in sustaining
respondents contractual right of first refusal and ordering the reconveyance of the
leased portion of petitioner NDCs property in its favor. Hence the petition was denied.
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Villegas v. CA
JOSELITO VILLEGAS and DOMINGA VILLEGAS, Petitioners, versus COURT OF
APPEALS, Respondent
VILLARAMA, JR., J.:
FACTS: Before September 6, 1973, Lot B-3-A, with an area of 4 hectares was
registered under TCT No. 68641 in the names of Ciriaco D. Andres and Henson
Caigas. This land was also declared for real estate taxation under Tax Declaration No.
C2-4442. On September 6, 1973, Andres and Caigas, with the consent of their
respective spouses, Anita Barrientos and Consolacion Tobias, sold the land to Fortune
Tobacco Corporation for P60,000.00. Simultaneously, they executed a joint affidavit
declaring that they had no tenants on said lot. On the same date, the sale was
registered in the Office of the Register of Deeds of Isabela. TCT No. 68641 was
cancelled and TCT No. T-68737 was issued in Fortunes name. On August 6, 1976,
Andres and Caigas executed a Deed of Reconveyance of the same lot in favor of
Filomena Domingo, the mother of Joselito Villegas, defendant in the case before the
trial court. Although no title was mentioned in this deed, Domingo succeeded in
registering this document in the Office of the Register of Deeds on August 6, 1976,
causing the latter to issue TCT No. T-91864 in her name. It appears in this title that
the same was a transfer from TCT No. T-68641. On April 13, 1981, Domingo declared
the lot for real estate taxation under Tax Declaration No. 10-5633. On December 4,
1976, the Office of the Register of Deeds of Isabela was burned together with all titles
in the office. On December 17, 1976, the original of TCT No. T-91864 was
administratively reconstituted by the Register of Deeds. On June 2, 1979, a Deed of
Absolute Sale of a portion of 20,000 square meters of Lot B-3-A was executed by
Filomena Domingo in favor of Villegas for a consideration of P1,000.00. This document
was registered on June 3, 1981 and as a result TCT No. T-131807 was issued by the
Register of Deeds to Villegas. On the same date, the technical description of Lot B-3-A-
2 was registered and TCT No. T-131808 was issued in the name of Domingo. On
January 22, 1991, this document was registered and TCT No. 154962 was issued to
the defendant, Joselito Villegas.
On April 10, 1991, the trial court upon a petition filed by Fortune ordered the
reconstitution of the original of TCT No. T-68737. After trial on the merits, the trial
court rendered its assailed decision in favor of Fortune Tobacco, declaring it to be
entitled to the property. Petitioners thus appealed this decision to the Court of
Appeals, which affirmed the trial courts decision.
ISSUE: Whether or not the Court of Appeals was correct in affirming the trial courts
decision.
HELD: Even if Fortune had validly acquired the subject property, it would still be
barred from asserting title because of laches. The failure or neglect, for an
unreasonable length of time to do that which by exercising due diligence could or
should have been done earlier constitutes laches. It is negligence or omission to assert
a right within a reasonable time, warranting a presumption that the party entitled to
assert it has either abandoned it or declined to assert it. While it is by express
provision of law that no title to registered land in derogation of that of the registered
owner shall be acquired by prescription or adverse possession, it is likewise an
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enshrined rule that even a registered owner may be barred from recovering possession
of property by virtue of laches.
Equatorial Realty v. Carmelo
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EQUATORIAL REALTY DEVELOPMENT, INC. & CARMELO & BAUERMANN, INC,

Petitioners versus MAYFAIR THEATER, INC, Respondent.
(G.R. No. 106063, November 21, 1996, 1 st Division)
VILLARAMA, JR., J.:
FACTS: Carmelo owned a parcel of land, together with two 2-storey buildings
constructed thereon. On June 1, 1967 Carmelo entered into a contract of lease with
Mayfair for the latters lease of a portion of Carmelos property. Two years later, on
March 31, 1969, Mayfair entered into a second contract of lease with Carmelo for the
lease of another portion of Carmelos property.
Both contracts of lease provide identically worded paragraph 8, which reads:
That if the LESSOR should desire to sell the leased premises, the LESSEE shall
be given 30-days exclusive option to purchase the same.
In the event, however, that the leased premises is sold to someone other than
the LESSEE, the LESSOR is bound and obligated, as it hereby binds and obligates
itself, to stipulate in the Deed of Sale thereof that the purchaser shall recognize this
lease and be bound by all the terms and conditions thereof.
Mr. Henry Pascal of Carmelo informed Mr. Henry Yang, President of Mayfair, through
a telephone conversation that Carmelo was desirous of selling the entire Claro M.
Recto property. Mr. Pascal told Mr. Yang that a certain Jose Araneta was offering to
buy the whole property for US Dollars 1,200,000, and Mr. Pascal asked Mr. Yang if the
latter was willing to buy the property for Six to Seven Million Pesos.
Under your companys two lease contracts with our client, it is uniformly provided:
8. That if the LESSOR should desire to sell the leased premises the LESSEE shall be
given 30-days exclusive option to purchase the same. In the event, however, that the
leased premises is sold to someone other than the LESSEE, the LESSOR is bound and
obligated, as it here binds and obligates itself, to stipulate in the Deed of Sale thereof
that the purchaser shall recognize this lease and be bound by all the terms and
conditions hereof.
Carmelo did not reply to this letter.
On September 18, 1974, Mayfair sent another letter to Carmelo purporting to

express interest in acquiring not only the leased premises but the entire building and
other improvements if the price is reasonable. However, both Carmelo and Equatorial
questioned the authenticity of the second letter.
Four years later, on July 30, 1978, Carmelo sold its entire C.M. Recto Avenue
land and building, which included the leased premises housing the Maxim and
Miramar theatres, to Equatorial by virtue of a Deed of Absolute Sale, for the total sum
of P11,300,000.00.
In September 1978, Mayfair instituted the action a quo for specific performance
and annulment of the sale of the leased premises to Equatorial. It dismissed the
complaint with costs against the plaintiff. The Court of Appeals reversed the decision
of the trial court.
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ISSUE: Whether or not the decision of the Court of Appeals decision was correct.
HELD: The Court agrees with the Court of Appeals that the aforecited contractual
stipulation provides for a right of first refusal in favor of Mayfair. It is not an option
clause or an option contract. It is a contract of a right of first refusal.
As early as 1916, in the case of Beaumont vs. Prieto, unequivocal was our
characterization of an option contract as one necessarily involving the choice granted
to another for a distinct and separate consideration as to whether or not to purchase a
determinate thing at a predetermined fixed price.
Further, what Carmelo and Mayfair agreed to, by executing the two lease
contracts, was that Mayfair will have the right of first refusal in the event Carmelo
sells the leased premises. It is undisputed that Carmelo did recognize this right of
Mayfair, for it informed the latter of its intention to sell the said property in 1974.
There was an exchange of letters evidencing the offer and counter-offers made by both
parties. Carmelo, however, did not pursue the exercise to its logical end. While it
initially recognized Mayfairs right of first refusal, Carmelo violated such right when
without affording its negotiations with Mayfair the full process to ripen to at least an
interface of a definite offer and a possible corresponding acceptance within the 30-day
exclusive option time granted Mayfair, Carmelo abandoned negotiations, kept a low
profile for some time, and then sold, without prior notice to Mayfair, the entire Claro
M. Recto property to Equatorial.
Since Equatorial is a buyer in bad faith, this finding renders the sale to it of the
property in question rescissible. We agree with respondent Appellate Court that the
records bear out the fact that Equatorial was aware of the lease contracts because its
lawyers had, prior to the sale, studied the said contracts. As such, Equatorial cannot
tenably claim to be a purchaser in good faith, and, therefore, rescission lies.
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PUP v. CA
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES, Petitioner versus COURT OF
APPEALS and FIRESTONE CERAMICS, INC., Respondents.
(G.R. No. 143513, November 14, 2001, 1 st Division)
VILLARAMA, JR., J.:
FACTS: In the early sixties, petitioner National Development Corporation (NDC), had
in its disposal a ten-hectare property located along Pureza St., Sta. Mesa, Manila. The
estate was popularly known as the NDC compound and covered by Transfer
Certificates of Title Nos. 92885, 110301 and 145470. Private respondent Firestone
Ceramics Inc. manifested its desire to lease a portion of the property for its ceramic
manufacturing business. NDC and FIRESTONE entered into a contract of lease
denominated as Contract No. C-30-65 covering a portion of the property measured at
2.90118 hectares for use as a manufacturing plant for a term of ten years, renewable
for another ten years under the same terms and conditions. In consequence of the
agreement, FIRESTONE constructed on the leased premises several warehouses and
other improvements needed for the fabrication of ceramic products. Three and a half
years later, FIRESTONE entered into a second contract of lease with NDC over the
latter's four-unit pre-fabricated reparation steel warehouse stored in Daliao, Davao.
FIRESTONE agreed to ship the warehouse to Manila for eventual assembly within the
NDC compound. The second contract, denominated as Contract No. C-26-68, was for
similar use as a ceramic manufacturing plant and was agreed expressly to be "co-
extensive with the lease of LESSEE with LESSOR on the 2.60 hectare-lot. The parties
signed a similar contract concerning a six-unit pre-fabricated steel warehouse which,
as agreed upon by the parties, would expire on 2 December 1978. Prior to the
expiration of the aforementioned contract, FIRESTONE wrote NDC requesting for an
extension of their lease agreement. Consequently, the Board of Directors of NDC
adopted the Resolution extending the term of the lease, subject to several conditions
among which was that in the event NDC "with the approval of higher authorities,
decide to dispose and sell these properties including the lot, priority should be given to
the LESSEE". In pursuance of the resolution, the parties entered into a new agreement
for a ten-year lease of the property, renewable for another ten years, expressly
granting FIRESTONE the first option to purchase the leased premises in the event that
it decided "to dispose and sell these properties including the lot.
The parties' lessor-lessee relationship went smoothly until early 1988 when
FIRESTONE, cognizant of the impending expiration of their lease agreement with NDC,
informed the latter through several letters and telephone calls that it was renewing its
lease over the property. While its letter of 17 March 1988 was answered by Antonio A.
Henson, General Manager of NDC, who promised immediate action on the matter, the
rest of its communications remained unacknowledged. FIRESTONE's predicament
worsened when rumors of NDC's supposed plans to dispose of the subject property in
favor of petitioner Polytechnic University of the Philippines came to its knowledge.
Forthwith, FIRESTONE served notice on NDC conveying its desire to purchase the
property in the exercise of its contractual right of first refusal. Apprehensive that its
interest in the property would be disregarded, FIRESTONE instituted an action for
specific performance to compel NDC to sell the leased property in its favor. Following
the denial of its petition, FIRESTONE amended its complaint to include PUP and
Executive Secretary Catalino Macaraeg, Jr., as party-defendants, and sought the
annulment of Memorandum Order No. 214.
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After trial, judgment was rendered declaring the contracts of lease executed
between FIRESTONE and NDC covering the 2.60-hectare property and the warehouses
constructed thereon valid and existing until 2 June 1999. The Court of Appeals
affirmed the decision of the trial court ordering the sale of the property in favor of
FIRESTONE.
ISSUE: Whether or not the Court of Appeals decided a question of substance in a way
definitely not in accord with law or jurisprudence.
HELD: The courts a quo did not hypothesize, much less conjure, the sale of the
disputed property by NDC in favor of petitioner PUP. Aside from the fact that the
intention of NDC and PUP to enter into a contract of sale was clearly expressed in the
Memorandum Order No. 214, a close perusal of the circumstances of this case
strengthens the theory that the conveyance of the property from NDC to PUP was one
of absolute sale, for a valuable consideration, and not a mere paper transfer as argued
by petitioners.
A contract of sale, as defined in the Civil Code, is a contract where one of the
parties obligates himself to transfer the ownership of and to deliver a determinate
thing to the other or others who shall pay therefore a sum certain in money or its
equivalent. It is therefore a general requisite for the existence of a valid and
enforceable contract of sale that it be mutually obligatory, i.e., there should be a
concurrence of the promise of the vendor to sell a determinate thing and the promise
of the vendee to receive and pay for the property so delivered and transferred. The
Civil Code provision is, in effect, a "catch-all" provision which effectively brings within
its grasp a whole gamut of transfers whereby ownership of a thing is ceded for a
consideration.
Contrary to what petitioners PUP and NDC propose, there is not just one party
involved in the questioned transaction. Petitioners NDC and PUP have their respective
charters and therefore each possesses a separate and distinct individual personality.
Litonjua v. L and R
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SPS. LITONJUA, Petitioners, versus L & R CORPORATION, Respondent.

(G.R. No. 130722, December 9, 1999, 1 st Division)
VILLARAMA, JR., J.:
FACTS: This stems from loans obtained by the spouses Litonjua from L&R
Corporation in the aggregate sum of P400,000.00; P200,000.00 of which was obtained
on August 6, 1974 and the remaining P200,000.00 obtained on March 27, 1978. The
loans were secured by a mortgage constituted by the spouses upon their two parcels of
land and the improvements thereon The mortgage was duly registered with the
Register of Deeds.
Spouses Litonjua sold to Philippine White House Auto Supply, Inc. (PWHAS) the
parcels of land they had previously mortgaged to L & R Corporation for the sum of
P430,000.00. Meanwhile, with the spouses Litonjua having defaulted in the payment
of their loans, L & R Corporation initiated extrajudicial foreclosure proceedings with
the Ex-Oficio Sheriff of Quezon City. The mortgaged properties were sold at public
auction to L & R Corporation as the only bidder for the amount of P221,624.58.
The Deputy Sheriff informed L & R Corporation of the payment by PWHAS of
the full redemption price and advised it that it can claim the payment upon surrender
of its owners duplicate certificates of title. The spouses Litonjua presented for
registration the Certificate of Redemption issued in their favor to the Register of Deeds
of Quezon City. The Certificate also informed L & R Corporation of the fact of
redemption and directed the latter to surrender the owners duplicate certificates of
title within five days.
On April 22, 1981, L & R Corporation wrote a letter to the Sheriff, copy furnished to
the Register of Deeds, stating: (1) that the sale of the mortgaged properties to PWHAS
was without its consent, in contravention of paragraphs 8 and 9 of their Deed of Real
Estate Mortgage; and (2) that it was not the spouses Litonjua, but PWHAS, who was
seeking to redeem the foreclosed properties, when under Articles 1236 and 1237 of the
New Civil Code, the latter had no legal personality or capacity to redeem the same.
On the other hand, the spouses Litonjua asked the Register of Deeds to
annotate their Certificate of Redemption as an adverse claim on the titles of the
subject properties on account of the refusal of L & R Corporation to surrender the
owners duplicate copies of the titles to the subject properties. With the refusal of the
Register of Deeds to annotate their Certificate of Redemption, the Litonjua spouses
filed a Petition on July 17, 1981 against L & R Corporation for the surrender of the
owners duplicate of Transfer Certificates of Title No. 197232 and 197233 before the
then CFI.
While the said case was pending, L & R Corporation executed an Affidavit of
Consolidation of Ownership. The Register of Deeds cancelled Transfer Certificates of
Title No. 197232 and 197233 and in lieu thereof, issued Transfer Certificates of Title
No. 280054 and 28055 in favor of L & R Corporation, free of any lien or encumbrance.
A complaint for Quieting of Title, Annulment of Title and Damages with preliminary
injunction was filed by the spouses Litonjua and PWHAS against herein respondents
before the then CFI.
ISSUE: Whether or not the Court of Appeals erred in its decision.
HELD: In the case at bar, PWHAS cannot claim ignorance of the right of first refusal
granted to L & R Corporation over the subject properties since the Deed of Real Estate
Mortgage containing such a provision was duly registered with the Register of Deeds.
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As such, PWHAS is presumed to have been notified thereof by registration, which

equates to notice to the whole world. Thus, the Decision appealed from was affirmed
with the following modifications.
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Josefa v Zhandong
VICENTE JOSEFA, petitioner, vs. ZHANDONG TRADING
CORPORATION, respondent.
FACTS: On June 6, 1996, Zhandong Trading Corporation,respondent,

filed with the Regional Trial Court a complaint for sum of money against
Vicente Josefa, petitioner, Tan Y. Ching (also known as Antonio Tan) and
Evelyn Chua (Tans mother).
The complaint allegesthat respondent Zhandong is engaged in the
importation and sale of hardboards/staple boards and other
merchandise. In the course of its business, its president, Eleanor Chy,
met Tan, who referred petitioner Vicente Josefa, as a client, to
Chy. Relying on Tans assurance that petitioner is a good customer and
owns a construction supply store, respondent, on various dates in
February, March and April, 1996, sold and delivered to said petitioner a
total of 313 crates of boards, valued at P4,558,100.00 payable within
sixty (60) days from date of delivery. However, petitioner, instead of
paying respondent, remitted his payments to Tan. In turn, Tan delivered
various checks to respondent, which accepted them upon Tans
declaration that they came from petitioner. A number of the checks
bounced. When respondent confronted Tan, the latter issued his own
checks and those of his mother, Evelyn Chua. Later, without any valid
reason, Tan stopped payment by checks. Those issued by his mother
bounced. This prompted respondent to send petitioner and Tan a
demand letter but they ignored it. Consequently, respondent suffered
damages and was constrained to file the instant complaint with the
assistance of counsel for a fee.
After hearing, the trial court rendered its Decision ordering defendant
Vicente Josefa to pay to the plaintiff the amount of P4,558,100.00
representing the value of 47,980 pieces of hardboards at P95.00 per
piece, with interest at 12% per annum from the filing of the complaint
until fully paid;to pay to the plaintiff the amount of P200,000.00 as
attorneys fees plus P100,000.00 as litigation expenses; Ordering
defendant Tan Y Ching, aka Tony Tan, to reimburse to co-defendant
Vicente Josefa the amount of P4,474,200.00 which Josefa paid to Tan
with interest at the legal rate from the date Josefa paid the amount to
Tan until fully paid. The court also dismissed the counterclaims of
defendants Tan and Josefa for lack of merit.
On appeal, the Court of Appeals affirmed the trial courts

Decision. Petitioner filed a motion for reconsideration but was denied.
ISSUE:Whether or not petitioner is liable to pay the respondent.

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HELD: No. Since petitioner had fully paid Tan for all the hardboards,
respondent Zhandong has no right to demand payments from him. To be
sure, he cannot be made responsible for Tans failure to pay respondent
for the subject hardboards. Contracts take effect only between the
parties, their successors in interest, heirs and assigns.When there is no
privity of contract, there is likewise no obligation or liability to speak
about and thus no cause of action arises. Clearly, petitioner, not being
privy to the transaction between respondent and Tan, should not be
made to answer for the latters default.
Actually, what appears to have transpired was that Tan ordered 313
crates of hardboards from respondent with instructions to deliver them
to petitioners establishment; that petitioner paid Tan the corresponding
amounts; that in turn, Tan paid respondent with checks which were
eventually dishonored; that Chy went to Tans house to protest; that Tan
replaced these checks with his personal checks and those of his mother;
and that after these checks bounced, respondent realized that it could
not collect from Tan, hence, it turned to petitioner to recover the
amounts. As explained earlier, petitioner has no liability to
respondent. Consequently, the latters complaint against him cannot, in
any way, prosper and must accordingly be dismissed. Since petitioner
was able to prove that he paid Tan the amount of P4,474,200.00 for the
hardboards, then respondent Zhandong should collect the amount from
the latter.
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Saludo v. Security Bank

ANICETO G. SALUDO, JR., Petitioner, -versus- SECURITY BANK
PEREZ, J.:
FACTS:
On 30 May 1996, Booklight was extended an omnibus line credit
facility by SBC in the amount of P10,000,000.00. Said loan was covered
by a Credit Agreement and a Continuing Suretyship with petitioner as
surety, to secure full payment and performance of the obligations arising
from the credit accommodation.
Booklight drew several availments of the approved credit facility

from 1996 to 1997 and faithfully complied with the terms of the
loan. On 30 October 1997, SBC approved the renewal of credit facility of
Booklight in the amount of P10,000,000.00 under the prevailing security
lending rate.From August 3 to 14, 1998, Booklight executed nine (9)
promissory notesin favor of SBC in the aggregate amount
of P9,652,725.00. For failure to settle the loans upon maturity,
demands were made on Booklight and petitioner for the payment of the
obligation but the duo failed to pay. As of 15 May 2000, the obligation of
Booklight stood atP10,487,875.41, inclusive of interest past due and
penalty.
On 16 June 2000, SBC filed against Booklight and herein petitioner

an action for collection of sum of money with the RTC. Booklight initially
filed a motion to dismiss, which was later on denied for lack of merit.
On 7 March 2005, Booklight was declared in
default. Consequently, SBC presented its evidence ex-parte. The case
against petitioner, however, proceeded and the latter was able to present
evidence on his behalf.
After trial, the RTC ruled that petitioner is jointly and solidarily
liable with Booklight under the Continuing Suretyship Agreement.
The Court of Appeals affirmed in toto the HELD of the

RTC.Petitioner filed a motion for reconsideration but it was denied by the
Court of Appeals on 7 August 2008.
Hence, the instant petition.
ISSUE: Whether or not petitioner should be held solidarily liable for the
second credit facility extended to Booklight.
HELD: Yes. There is no novation to speak of. It is the first credit facility
that expired and not the Credit Agreement. There was a second loan
pursuant to the same credit agreement. The terms and conditions under
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the Credit Agreement continue to apply and the Continuing Suretyship

continues to guarantee the Credit Agreement.
The lameness of petitioners stand is pointed up by his attempt to

escape from liability by labelling the Continuing Suretyship as a contract
of adhesion.
A contract of adhesion is defined as one in which one of the parties
imposes a ready-made form of contract, which the other party may
accept or reject, but which the latter cannot modify. One party prepares
the stipulation in the contract, while the other party merely affixes his
signature or his adhesion thereto, giving no room for negotiation and
depriving the latter of the opportunity to bargain on equal footing.
A contract of adhesion presupposes that the party adhering to the

contract is a weaker party. That cannot be said of petitioner. He is a
lawyer. He is deemed knowledgeable of the legal implications of the
contract that he is signing.
It must be borne in mind, however, that contracts of adhesion are

not invalid per se. Contracts of adhesion, where one party imposes a
ready-made form of contract on the other, are not entirely
prohibited. The one who adheres to the contract is, in reality, free to
reject it entirely; if he adheres, he gives his consent.
The petition is DENIED
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PCI v. Ng Sheung Ngor
EQUITABLE PCI BANK,AIMEE YU and BEJAN LIONEL

APAS, Petitioners, NG SHEUNG NGORdoing business under the
name and style KEN MARKETING, KEN APPLIANCE DIVISION,
INC. and BENJAMIN E. GO, Respondents
G.R. No. 171545, December 19, 2007, 1st Division)
CORONA, J.:
FACTS: On October 7, 2001, respondents Ng Sheung Ngor, Ken

Appliance Division, Inc. and Benjamin E. Go filed an action for
annulment and/or reformation of documents and contracts against
petitioner Equitable PCI Bank and its employees, Aimee Yu and Bejan
Lionel Apas, in the Regional Trial Court. They claimed that Equitable
induced them to avail of its peso and dollar credit facilities by offering
low interest ratesso they accepted Equitable's proposal and signed the
bank's pre-printed promissory notes on various dates beginning 1996.
They, however, were unaware that the documents contained identical
escalation clauses granting Equitable authority to increase interest rates
without their consent.
Equitableasserted that respondents knowingly accepted all the

terms and conditions contained in the promissory notes.In fact, they
continuously availed of and benefited from Equitable's credit facilities for
five years.
After trial, the RTC upheld the validity of the promissory notes. It
found that, in 2001 alone, Equitable restructured respondents' loans
amounting to US$228,200 and P1,000,000. The trial court, however,
invalidated the escalation clause contained therein because it violated
the principle of mutuality of contracts. Nevertheless, it took judicial
notice of the steep depreciation of the peso during the intervening
period and declared the existence of extraordinary
deflation. Consequently, the RTC ordered the use of the 1996 dollar
exchange rate in computing respondents' dollar-denominated loans.
Lastly, because the business reputation of respondents was (allegedly)
severely damaged when Equitable froze their accounts, the trial court
awarded moral and exemplary damages to them.
Equitable and respondents filed their respective notices of appeal.
In the March 1, 2004 order of the RTC, both notices were denied
due course because Equitable and respondents failed to submit proof
that they paid their respective appeal fees.
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Equitable moved for the reconsideration of the March 1, 2004

order of the RTC on the ground that it did in fact pay the appeal
fees. Respondents, on the other hand, prayed for the issuance of a writ
of execution.
On March 24, 2004, the RTC issued an omnibus order denying

Equitable's motion for reconsideration for lack of merit and ordered the
issuance of a writ of execution in favor of respondents. According to the
RTC, because respondents did not move for the reconsideration of the
previous order (denying due course to the parties notices of appeal), the
February 5, 2004 decision became final and executory as to both parties
and a writ of execution against Equitable was in order.
A writ of execution was thereafter issuedand three real properties

of Equitable were levied upon.
On March 26, 2004, Equitable filed a petition for relief in the RTC
from the March 1, 2004 order. It, however, withdrew that petition on
March 30, 2004and instead filed a petition for certiorari with an
application for an injunction in the CA to enjoin the implementation and
execution of the March 24, 2004 omnibus order.
On June 16, 2004, the CA granted Equitable's application for

injunction. A writ of preliminary injunction was correspondingly issued.
Notwithstanding the writ of injunction, the properties of Equitable

previously levied upon were sold in a public auction on July 1, 2004.
Respondents were the highest bidders and certificates of sale were issued
to them.
On August 10, 2004, Equitable moved to annul the July 1, 2004

auction sale and to cite the sheriffs who conducted the sale in contempt
for proceeding with the auction despite the injunction order of the CA.
On October 28, 2005, the CA dismissed the petition for

certiorari. It found Equitable guilty of forum shopping because the bank
filed its petition for certiorari in the CA several hours before withdrawing
its petition for relief in the RTC. Moreover, Equitable failed to disclose,
both in the statement of material dates and certificate of non-forum
shopping (attached to its petition for certiorari in the CA), that it had a
pending petition for relief in the RTC.
Equitable moved for reconsideration but it was denied. Thus, this

petition.
ISSUES:
1. Whether or not the promissory notes are valid.
2. Whether or not the escalation clause violated the principle of
mutuality of contract.
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HELD:
1.YES.The RTC upheld the validity of the promissory notes despite
respondents assertion that those documents were contracts of
adhesion.
A contract of adhesion is a contract whereby almost all of its
provisions are drafted by one party. The participation of the other party
is limited to affixing his signature or his adhesion to the contract. For
this reason, contracts of adhesion are strictly construed against the
party who drafted it.
It is erroneous, however, to conclude that contracts of adhesion

are invalid per se. They are, on the contrary, as binding as ordinary
contracts. A party is in reality free to accept or reject it. A contract of
adhesion becomes void only when the dominant party takes advantage of
the weakness of the other party, completely depriving the latter of the
opportunity to bargain on equal footing.
That was not the case here. As the trial court noted, if the terms
and conditions offered by Equitable had been truly prejudicial to
respondents, they would have walked out and negotiated with another
bank at the first available instance. But they did not. Instead, they
continuously availed of Equitable's credit facilities for five long years.
While the RTC categorically found that respondents had

outstanding dollar- and peso-denominated loans with Equitable, it,
however, failed to ascertain the total amount due (principal, interest and
penalties, if any) as of July 9, 2001. The trial court did not explain how
it arrived at the amounts of US$228,200 and P1,000,000.[62] In Metro
Manila Transit Corporation v. D.M. Consunji, we reiterated that this Court
is not a trier of facts and it shall pass upon them only for compelling
reasons which unfortunately are not present in this case.Hence, we
ordered the partial remand of the case for the sole purpose of
determining the amount of actual damages.
2. YES.Escalation clauses are not void per se. However, one

which grants the creditor an unbridled right to adjust the interest
independently and upwardly, completely depriving the debtor of the right
to assent to an important modification in the agreement is void. Clauses
of that nature violate the principle of mutuality of contracts. Article
1308 of the Civil Code holds that a contract must bind both contracting
parties; its validity or compliance cannot be left to the will of one of them.
For this reason, we have consistently held that a valid escalation

clause provides:
1. that the rate of interest will only be increased if

the applicable maximum rate of interest is increased by
law or by the Monetary Board; and
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2. that the stipulated rate of interest will be

reduced if the applicable maximum rate of interest is
reduced by law or by the Monetary Board (de-escalation
clause).
Equitable dictated the interest rates if the term (or period for
repayment) of the loan was extended. Respondents had no choice but to
accept them. This was a violation of Article 1308 of the Civil Code.
Furthermore, the assailed escalation clause did not contain the
necessary provisions for validity, that is, it neither provided that the rate
of interest would be increased only if allowed by law or the Monetary
Board, nor allowed de-escalation. For these reasons, the escalation
clause was void.
With regard to the proper rate of interest, in New Sampaguita

Builders v. Philippine National Bank we held that, because the escalation
clause was annulled, the principal amount of the loan was subject to the
original or stipulated rate of interest. Upon maturity, the amount due
was subject to legal interest at the rate of 12% per annum.
Consequently, respondents should pay Equitable the interest rates

of 12.66% p.a. for their dollar-denominated loans and 20% p.a. for their
peso-denominated loans from January 10, 2001 to July 9, 2001.
Thereafter, Equitable was entitled to legal interest of 12% p.a. on all
amounts due.
Dio v. St. Ferdinand Memorial
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TERESITA DIO, Petitioner, vs. ST. FERDINAND MEMORIAL

PARK, INC. and MILDRED F. TANTOCO, Respondents.
CALLEJO, SR., J.:

FACTS:
On December 11, 1973, Teresita Dio agreed to buy, on installment
basis, a memorial lot from the St. Ferdinand Memorial Park, Inc. (SFMPI)
in Lucena City. The 36-square-meter memorial lot is particularly
described as Block 2, Section F, Lot 15. The purchase was evidenced by
a Pre-Need Purchase Agreementdated December 11, 1973 and
denominated as Contract No. 384. She obliged herself to abide by all
such rules and regulations governing the SFMPI dated May 25, 1972.
SFMPI issued a Deed of Sale and Certificate of Perpetual Care

dated April 1, 1974 denominated as Contract No. 284. The ownership of
Dio over the property was made subject to the rules and regulations of
SFMPI, as well as the government, including all amendments, additions
and modifications that may later be adopted. All these were
encompassed in Rule 69 of the Rules and Regulation.
Meanwhile, the mortal remains of Dios husband and father were

interred in the lot at her own expense, without the knowledge and
intervention of SFMPI. She engaged the services of a private contractor
for the fabrication of niches and improvements on her lot. In August
1974, the remains of Dios daughter were likewise interred in the niche
constructed on the lot, again without the knowledge and intervention of
SFMPI.
In 1986, Dio decided to build a mausoleum on the lot. In

September that year, she caused the preparation of a design-plan for the
construction of a mausoleum and the bidding out of the project.
In the early part of October 1986, Dio informed SFMPI, through its
president and controlling stockholder, Mildred F. Tantoco, that she was
planning to build a mausoleum on her lot and sought the approval
thereof. Dio even showed to Tantoco the plans and project specifications
accomplished by her private contractor at an estimated cost of
P60,000.00. The plans and specifications were approved, but Tantoco
insisted that the mausoleum be built by it or its agents at a minimum
cost of P100,000.00 as provided in Rule 69 of the Rules and Regulations
the SFMPI. The total amount excluded certain specific designs in the
approved plan which if included would cost Dio much more. In a
letterdated October 13, 1986, Dio, through counsel, demanded that she
be allowed to construct the mausoleum within 10 days, otherwise, she
would be impelled to file the necessary action/s against SFMPI and
Tantoco.
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On October 17, 1986, SFMPI wrote Dio informing her that under
Rule 69 of SFMPI Rules and Regulations, she was prohibited from
engaging an outside contractor for the construction of buildings,
improvements and memorials. A lot owner was only allowed to submit a
preferred design as long as it is in accordance with park standards.
On December 23, 1986, Dio filed a Complaint for Injunction with

Damagesagainst SFMPI and Tantoco before the RTC of Lucena City. She
averred that she was not aware of Rule 69 of the SFMPI Rules and
Regulations; the amount of P100,000.00 as construction cost of the
mausoleum was unconscionable and oppressive. She prayed that, after
trial, judgment be rendered in her favor, granting a final injunction
perpetually restraining defendants from enforcing the invalid Rule 69 of
SFMPIs Rules for Memorial Work in the Mausoleum of the Park or from
refusing or preventing the construction of any improvement upon her
property in the park. The court issued a cease and desist order against
defendants.
On August 3, 1995, the trial court rendered judgment in favor of

defendants.
On appeal, the CA affirmed the decision of the trial court. The

appellate court ratiocinated that when the parties executed the Pre-Need
Purchase Agreement, Dio agreed to be bound not only by the existing
rules and regulations for the use and governance of the cemetery, but
also future ones.
Aggrieved, Dio, now petitioner, filed the present petition for review
on certiorari.
ISSUE:
1. Whether or not petitioner had knowledge of Rule 69 of SFMPI
Rules and Regulations for memorial works in the mausoleum areas of
the park when the Pre-Need Purchase Agreement and the Deed of Sale
was executed;
2. Whether the said rule is valid and binding upon petitioner.
HELD:
1. YES. Under the Pre-Need Purchase Agreement executed by
petitioner and respondents, the parties covenanted that upon the
completion of all payments by the purchaser, the seller would convey to
the purchaser a certificate of ownership to the aforesaid interment
property for the interment of human remains only. The certificate of
SFMPI now existing or which may hereafter be adopted for the
government of said cemetery and said certificate shall be in the form
used by the seller, a copy of which petitioner acknowledged she had
examined and approved. Petitioner agreed to abide by all such rules and
regulations governing SFMPI, among them Rule 69 which prevents lot
owners from contract[ing] other contractors for the construction of the
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said buildings and memorial but gives the owners free rein to give their
own design for the mausoleum to be constructed, as long as it is in
accordance with the park standards.
Under the Deed of Sale and Certificate of Perpetual Care, petitioner

agreed to be bound not only by the existing rules but also by future rules
and regulations that may be adopted by respondent SFMPI.
Thus, when petitioner executed the Pre-Need Purchase Agreement and

conformed to the Deed of Sale, it was with full knowledge of the terms
and conditions thereof, including the rules and regulations issued by
respondent SFMPI. Hence, petitioner is precluded from asserting that
she had no knowledge of said rules and regulations, and that she never
consented to comply with them. More importantly, petitioner cannot
feign ignorance of said rules. In law, whatever fairly puts a person on
inquiry is sufficient notice, where the means of knowledge are at hand,
which if pursued by the proper inquiry, the full truth might have been
ascertained.
2. YES. Petitioner is obliged to abide by the terms and conditions of

the Pre-Need Purchase Agreement and the Deed of Sale, as well as said
rules and regulations which formed integral parts of said deeds.
Basic is the principle that contracts, once perfected, bind both

contracting parties. The parties may establish such stipulations, clauses,
terms and conditions as they may deem convenient, provided these are
not contrary to law, morals, good customs, public order, or public policy.
It follows that obligations arising from contracts have the force of law
between the contracting parties and should be complied with in good
faith.
The petition is denied.
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PILTEL v. Tecson
PILIPINO TELEPHONE CORPORATION, petitioner, vs. DELFINO
TECSON, respondent.
(G. R. No. 156966, May 7, 2004, 3rd Division)
VITUG, J.:
FACTS:On various dates in 1996, Delfino C. Tecson applied for six (6)
cellular phone subscriptions with petitioner Pilipino Telephone
Corporation (PILTEL), a company engaged in the telecommunications
business, which applications were each approved and covered,
respectively, by six mobiline service agreements.
On 05 April 2001, respondent filed with the Regional Trial Court of
Iligan City, Lanao Del Norte, a complaint against petitioner for a "Sum of
Money and Damages." Petitioner moved for the dismissal of the
complaint on the ground of improper venue, citing a common provision
in the mobiline service agreements to the effect that:
"Venue of all suits arising from this Agreement or any other suit
directly or indirectly arising from the relationship between PILTEL and
subscriber shall be in the proper courts of Makati, Metro Manila.
Subscriber hereby expressly waives any other venues."
The Regional Trial Court of Iligan City, Lanao del Norte, denied
petitioners motion to dismiss and required it to file an answer within 15
days from receipt thereof.
Petitioner PILTEL filed a motion for the reconsideration, through
registered mail, of the order of the trial court. In its subsequent order,
the trial court denied the motion for reconsideration.
Petitioner filed a petition for certiorari before the Court of Appeals.
The Court of Appeals, in its decision, saw no merit in the petition
and affirmed the assailed orders of the trial court. Petitioner moved for
reconsideration, but the appellate courtdenied the motion.
ISSUE: Whether or not the contract is valid and binding.
HELD:YES.Section 4, Rule 4, of the Revised Rules of Civil
Procedure allows the parties to agree and stipulate in writing, before the
filing of an action, on the exclusive venue of any litigation between them.
Such an agreement would be valid and binding provided that the
stipulation on the chosen venue is exclusive in nature or in intent, that it
is expressed in writing by the parties thereto, and that it is entered into
before the filing of the suit. The provision contained in paragraph 22 of
the "Mobile Service Agreement," a standard contract made out by
petitioner PILTEL to its subscribers, apparently accepted and signed by
respondent, states that the venue of all suits arising from the agreement,
or any other suit directly or indirectly arising from the relationship
between PILTEL and subscriber, "shall be in the proper courts of Makati,
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Metro Manila." The added stipulation that the subscriber "expressly

waives any other venue" should indicate, clearly enough, the intent of the
parties to consider the venue stipulation as being preclusive in character.
The appellate court, however, would appear to anchor its decision
on the thesis that the subscription agreement, being a mere contract of
adhesion, does not bind respondent on the venue stipulation.
Indeed, the contract herein involved is a contract of adhesion. But
such an agreement is not per se inefficacious. The rule instead is that,
should there be ambiguities in a contract of adhesion, such ambiguities
are to be construed against the party that prepared it. If, however, the
stipulations are not obscure, but are clear and leave no doubt on the
intention of the parties, the literal meaning of its stipulations must be
held controlling.
A contract of adhesion is just as binding as ordinary contracts. It is
true that this Court has, on occasion, struck down such contracts as
being assailable when the weaker party is left with no choice by the
dominant bargaining party and is thus completely deprived of an
opportunity to bargain effectively. Nevertheless, contracts of adhesion are
not prohibited even as the courts remain careful in scrutinizing the
factual circumstances underlying each case to determine the respective
claims of contending parties on their efficacy.
In the case at bar, respondent secured six (6) subscription
contracts for cellular phones on various dates. It would be difficult to
assume that, during each of those times, respondent had no sufficient
opportunity to read and go over the terms and conditions embodied in
the agreements. Respondent continued, in fact, to acquire in the pursuit
of his business subsequent subscriptions and remained a subscriber of
petitioner for quite sometime.
The instant petition is GRANTED.
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PAL v. CA
PHILIPPINE AIRLINES, INC., petitioner, vs. COURT OF APPEALS and
GILDA C. MEJIA, respondents.
REGALADO, J.:
FACTS:On January 27, 1990, plaintiff Gilda C. Mejia shipped thru
defendant, Philippine Airlines, one (1) unit microwave oven, with a gross
weight of 33 kilograms from San Francisco, U.S.A. to Manila, Philippines.
Upon arrival, however, of said article in Manila, Philippines, plaintiff
discovered that its front glass door was broken and the damage rendered
it unserviceable. Demands both oral and written were made by plaintiff
against the defendant for the reimbursement of the value of the damaged
microwave oven, and transportation charges paid by plaintiff to
defendant company. But these demands fell on deaf ears.
On September 25, 1990, plaintiff Gilda C. Mejia filed the instant
action for damages against defendant in the lower court.
The damaged oven is still with defendant. Plaintiff is engaged in
(the) catering and restaurant business. Hence, the necessity of the oven.
Plaintiff suffered sleepless nights when defendant refused to pay her (for)
the broken oven and claims P10,000.00 moral damages, P20,000.00
exemplary damages, P10,000.00 attorney's fees plus P300.00 per court
appearance and P15,000.00 monthly loss of income in her business
beginning February, 1990.
As stated at the outset, respondent Court of Appeals similarly ruled
in favor of private respondent by affirming in full the trial court's
judgment, with costs against petitioner.
ISSUE: Whether or not the air waybill is a contract of adhesion.

HELD: YES. The Air Waybill is a contract of adhesion considering that all
the provisions thereof are prepared and drafted only by the carrier. The
only participation left of the other party is to affix his signature thereto.
A review of jurisprudence on the matter reveals the consistent
holding of the Court that contracts of adhesion are not invalid per se and
that it has on numerous occasions upheld the binding effect thereof. As
explained in Ong Yiu vs. Court of Appeals, et al.
Such provisions have been held to be a part of the contract of
carriage, and valid and binding upon the passenger regardless of the
latter's lack of knowledge or assent to the regulation. It is what is known
as a contract of "adhesion," in regards which it has been said that
contracts of adhesion wherein one party imposes a ready-made form of
contract on the other, as the plane ticket in the case at bar, are contracts
not entirely prohibited. The one who adheres to the contract is in reality
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free to reject it entirely; if he adheres, he gives his consent, a contract

limiting liability upon an agreed valuation does not offend against the
policy of the law forbidding one from contracting against his own
negligence.
Thus, there can be no further question as to the validity of the
terms of the air waybill, even if the same constitutes a contract of
adhesion. Whether or not the provisions thereof particularly on the
limited liability of the carrier are binding on private respondent in this
instance must be determined from the facts and circumstances
involved vis-a-vis the nature of the provisions sought to be enforced,
taking care that equity and fair play should characterize the transaction
under review.
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Ermitano v. CA
SPOUSES LUIS M. ERMITAO and MANUELITA C. ERMITAO,
petitioners, vs. THE COURT OF APPEALS AND BPI EXPRESS CARD
CORP., respondents.
(G.R. No. 127246, April 21, 1999, 2 nd division)
QUISUMBING, J
FACTS:Petitioner Luis Ermitao applied for a credit card from private
respondent BPI Express Card Corp. (BECC) on October 8, 1986 with his
wife, Manuelita, as extension cardholder. The spouses were given credit
cards with a credit limit of P10,000.00. They often exceeded this credit
limit without protest from BECC.
On August 29, 1989, Manuelita's bag was snatched from her as
she was shopping at the Greenbelt Mall in Makati, Metro Manila. Among
the items inside the bag was her BECC credit card. That same night she
informed, by telephone, BECC of the loss. The call was received by BECC
offices through a certain Gina Banzon. This was followed by a letter
dated August 30, 1989. She also surrendered Luis' credit card and
requested for replacement cards. In her letter, Manuelita stated that she
"shall not be responsible for any and all charges incurred [through the
use of the lost card] after August 29, 1989.
However, when Luis received his monthly billing statement from
BECC dated September 20, 1989, the charges included amounts for
purchases made on August 30, 1989 through Manuelita's lost card. Two
purchases were made, one amounting to P2,350.05 and the other,
P607.50. Manuelita received a billing statement dated October 20, 1989
which required her to immediately pay the total amount of P3,197.70
covering the same (unauthorized) purchases. Manuelita again wrote
BECC disclaiming responsibility for those charges, which were made
after she had served BECC with notice of the loss of her card.
Despite the spouses' refusal to pay and the fact that they
repeatedly exceeded their monthly credit limit, BECC sent them a notice
stating that their cards had been renewed until March 1991.
Notwithstanding this, however, BECC continued to include in the
spouses' billing statements those purchases made through Manuelita's
lost card. Luis protested this billing in his letter dated June 20, 1990.
However, BECC, in a letter dated July 13, 1990, pointed out to Luis
the following stipulation in their contract:
In the event the card is lost or stolen, the cardholder agrees to
immediately report its loss or theft in writing to BECC . . . purchases
made/incurred arising from the use of the lost/stolen card shall be for the
exclusive account of the cardholder and the cardholder continues to be
liable for the purchases made through the use of the lost/stolen BPI
Express Card until after such notice has been given to BECC and the latter
has communicated such loss/theft to its member establishments.
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Pursuant to this stipulation, BECC held Luis liable for the amount
of P3,197.70 incurred through the use of his wife's lost card, exclusive of
interest and penalty charges.
In his reply, Luis stressed that the contract BECC was referring to
was a contract of adhesion and warned that if BECC insisted on charging
him and his wife for the unauthorized purchases, they will sue BECC for
damages. This warning notwithstanding, BECC continued to bill the
spouses for said purchases.
On April 10, 1991, Luis used his credit card to purchase gasoline
at a Caltex station. The latter, however, dishonored his card. In reply to
Luis' demand for an explanation, BECC wrote that it transferred the
balance of his old credit card to his new one, including the unauthorized
charges. Consequently, his outstanding balance exceeded his credit limit
of P10,00000. He was informed that his credit card had not been
cancelled but, since he exceeded his credit limit, he could not avail of his
credit privileges.
Once more, Luis pointed out that notice of the lost card was given
to BECC before the purchases were made.
Subsequently, BECC cancelled the spouses' credit cards and
advised them to settle the account immediately or risk being sued for
collection of said account.
Constrained, petitioners sued BECC for damages. The trial court
ruled in their favor, stating that there was a waiver on the part of BECC
in enforcing the spouses' liability.
But, on appeal this decision was reversed. The Court of Appeals
stated that the spouses should be bound by the contract, even though it
was one of adhesion.
Hence, this recourse by petitioners.
ISSUE: Whether or not the respondents are liable for damages.

HELD: YES. The contract between the parties in this case is indeed a
contract of adhesion, so-called because its terms are prepared by only
one party while the other party merely affixes his signature signifying his
adhesion thereto. Such contracts are not void in themselves. They are
as binding as ordinary contracts. Parties who enter into such contracts
are free to reject the stipulations entirely. This Court, however, will not
hesitate to rule out blind adherence to such contracts if they prove to be
too one-sided under the attendant facts and circumstances.
In this case, the cardholder, Manuelita, has complied with what
was required of her under the contract with BECC. She immediately
notified BECC of the loss of her card on the same day it was lost and, the
following day, she sent a written notice of the loss to BECC. That she
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gave such notices to BECC is admitted by BECC in the letter sent to Luis
by Roberto L. Maniquiz, head of BECC's Collection Department.
Having thus performed her part of the notification procedure, it was
reasonable for Manuelita and Luis, for that matter to expect that
BECC would perform its part of the procedure, which is to forthwith
notify its member-establishments. It is not unreasonable to assume that
BECC would do this immediately, precisely to avoid any unauthorized
charges.
Clearly, what happened in this case was that BECC failed to notify
promptly the establishment in which the unauthorized purchases were
made with the use of Manuelita's lost card. Thus, Manuelita was being
liable for those purchases, even if there is no showing that Manuelita
herself had signed for said purchases, and after notice by her concerning
her card's loss was already given to BECC.
The cardholder was no longer in control of the procedure after it
has notified BECC of the card's loss or theft. It was already BECC's
responsibility to inform its member-establishments of the loss or theft of
the card at the soonest possible time. We note that BECC is not a
neophyte financial institution, unaware of the intricacies and risks of
providing credit privileges to a large number of people. It should have
anticipated an occurrence such as the one in this case and devised
effective ways and means to prevent it, or otherwise insure itself against
such risk.
Prompt notice by the cardholder to the credit card company of the
loss or theft of his card should be enough to relieve the former of any
liability occasioned by the unauthorized use of his lost or stolen card.
The questioned stipulation in this case, which still requires the
cardholder to wait until the credit card company has notified all its
member-establishments, puts the cardholder at the mercy of the credit
card company which may delay indefinitely the notification of its
members to minimize if not to eliminate the possibility of incurring any
loss from unauthorized purchases. Or, as in this case, the credit card
company may for some reason fail to promptly notify its members
through absolutely no fault of the cardholder. To require the cardholder
to still pay for unauthorized purchases after he has given prompt notice
of the loss or theft of his card to the credit card company would simply
be unfair and unjust. The Court cannot give its assent to such a
stipulation which could clearly run against public policy.
The Decision of the Regional Trial Court is reinstated.
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Uniwide v. Titan-Ikeda
UNIWIDE SALES REALTY AND RESOURCES
CORPORATION, petitioner, vs. TITAN-IKEDA CONSTRUCTION AND
DEVELOPMENT CORPORATION, respondent.
TINGA, J.:
FACTS:The case originated from an action for a sum of money filed by
Titan-Ikeda Construction and Development Corporation against Uniwide
Sales Realty and Resources Corporation with the Regional Trial Court
arising from Uniwide's non-payment of certain claims billed by Titan
after completion of three projects covered by agreements they entered
into with each other. Upon Uniwide's motion to dismiss/suspend
proceedings and Titan's open court manifestation agreeing to the
suspension, Civil Case No. 98-0814 was suspended for it to undergo
arbitration. Titan's complaint was thus re-filed with the CIAC. Before the
CIAC, Uniwide filed an answer which was later amended and re-
amended, denying the material allegations of the complaint, with
counterclaims for refund of overpayments, actual and exemplary
damages, and attorney's fees. The agreements between Titan and
Uniwide are briefly described below.
The first agreement (Project 1) was a written "Construction
Contract" entered into by Titan and Uniwide sometime in May 1991
whereby Titan undertook to construct Uniwide's Warehouse Club and
Administration Building in Libis, Quezon City for a fee
of P120,936,591.50, payable in monthly progress billings to be certified
to by Uniwide's representative. The parties stipulated that the building
shall be completed not later than 30 November 1991. As found by the
CIAC, the building was eventually finished on 15 February 19928 and
turned over to Uniwide.
Sometime in July 1992, Titan and Uniwide entered into the second
agreement (Project 2) whereby the former agreed to construct an
additional floor and to renovate the latter's warehouse located at the
EDSA Central Market Area in Mandaluyong City. There was no written
contract executed between the parties for this project. Construction was
allegedly to be on the basis of drawings and specifications provided by
Uniwide's structural engineers. The parties proceeded on the basis of a
cost estimate of P21,301,075.77 inclusive of Titan's 20% mark-up. Titan
conceded in its complaint to having received P15,000,000.00 of this
amount. This project was completed in the latter part of October 1992
and turned over to Uniwide.
The parties executed the third agreement (Project 3) in May 1992.
In a written "Construction Contract," Titan undertook to construct the
Uniwide Sales Department Store Building in Kalookan City for the price
ofP118,000,000.00 payable in progress billings to be certified to by
Uniwide's representative.It was stipulated that the project shall be
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completed not later than 28 February 1993. The project was completed
and turned over to Uniwide in June 1993.
Uniwide asserted in its petition that: (a) it overpaid Titan for
unauthorized additional works in Project 1 and Project 3; (b) it is not
liable to pay the Value-Added Tax (VAT) for Project 1; (c) it is entitled to
liquidated damages for the delay incurred in constructing Project 1 and
Project 3; and (d) it should not have been found liable for deficiencies in
the defectively constructed Project 2.
The Arbitral Tribunal conducted a preliminary conference with the
parties and thereafter issued a Terms of Reference (TOR) which was
signed by the parties. The tribunal also conducted an ocular inspection,
hearings, and received the evidence of the parties consisting of affidavits
which were subject to cross-examination. On 17 April 1995, after the
parties submitted their respective memoranda, the Arbitral Tribunal
promulgated a Decision rendering that: (as to project 1) Uniwide is
absolved of any liability for the claims made by Titan on this Project; as
to project 2, Uniwide is absolved of any liability for VAT payment on this
project, the same being for the account of the Titan. On the other hand,
Titan is absolved of any liability on the counterclaim for defective
construction of this project; Uniwide is held liable for the unpaid balance
in the amount of P6,301,075.77 which is ordered to be paid to the Titan
with 12% interest per annum commencing from 19 December 1992 until
the date of payment; as to project 3, Uniwide is held liable for the unpaid
balance in the amount of P5,158,364.63 which is ordered to be paid to
the Titan with 12% interest per annum commencing from 08 September
1993 until the date of payment. Lastly, Uniwide is held liable to pay in
full the VAT on this project, in such amount as may be computed by the
Bureau of Internal Revenue to be paid directly thereto.
Uniwide filed a motion for reconsideration which was denied by the
CIAC. Uniwide accordingly filed a petition for review with the Court of
Appeals, which rendered its decision. Uniwide's motion for
reconsideration was likewise denied by the Court of Appeals.
ISSUES:
(1) Whether or not Uniwide is entitled to a return of the amount it
allegedly paid by mistake to Titan for additional works done on Project 1;
(2) Whether or not Uniwide is liable for the payment of the Value-
Added Tax (VAT) on Project 1;
(3) Whether or not Uniwide is entitled to liquidated damages for
Projects 1 and 3; and
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HELDS:
(1) NO. Yet even conceding that the additional works on Project 1
were not authorized or committed into writing, the undisputed fact
remains that Uniwide paid for these additional works. Thus, to claim a
refund of payments made under the principle of solutio indebiti, Uniwide
must be able to establish that these payments were made through
mistake. Again, this is a factual matter that would have acquired a
mantle of invulnerability had it been determined by both the CIAC and
the Court of Appeals. However, both bodies failed to arrive at such a
conclusion. Moreover, Uniwide is unable to direct the attention of the
Court to any pertinent part of the record that would indeed establish that
the payments were made by reason of mistake.
(2) Yes. Uniwide claims that the VAT was already included in the
contract price for Project 1. Citing Sections 99 and 102 of the National
Internal Revenue Code, Uniwide asserts that VAT, being an indirect tax,
may be shifted to the buyer by including it in the cash or selling price
and it is entirely up to the buyer to agree or not to agree to absorb the
VAT.Thus, Uniwide concludes, if there is no provision in the contract as
to who should pay the VAT, it is presumed that it would be the seller.
The contract for Project 1 is silent on which party should shoulder
the VAT while the contract for Project 3 contained a provision to the
effect that Uniwide is the party responsible for the payment of the
VAT. Thus, when Uniwide paid the amount of P2,400,000.00 as billed by
Titan for VAT, it assumed that it was the VAT for Project 3. However, the
CIAC and the Court of Appeals found that the same was for Project 1.
Thus the amount of P2,400,000.00which was paid by Uniwide is
the VAT for Project 1. This conclusion was drawn from an Order of
Paymentwherein Titan billed Uniwide the amount of P2,400,000.00 as
"Value Added Tax based on P60,000,000.00 Contract," computed on the
basis of 4% of P60,000,000.00. Said document which was approved by
the President of Uniwide expressly indicated that the project involved was
the "UNIWIDE SALES WAREHOUSE CLUB & ADMIN BLDG." located at
"90 E. RODRIGUEZ JR. AVE., LIBIS," The reduced base for the
computation of the tax, according to the Court of Appeals, was an
indication that the parties agreed to pass the VAT for Project 1 to
Uniwide but based on a lower contract price.
(3) No. The Rule of Procedure Governing Construction Arbitration
promulgated by the CIAC contains no provision on the application of the
Rules of Court to arbitration proceedings, even in a suppletory capacity.
Hypothetically admitting that there is such a provision, suppletory
application is made only if it would not contravene a specific provision in
the arbitration rules and the spirit thereof. The Tribunal holds that such
importation of the Rules of Court provision on amendment to conform to
evidence would contravene the spirit, if not the letter of the CIAC
rules. This is for the reason that the formulation of the Terms of
Reference is done with the active participation of the parties and their
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counsel themselves. The TOR is further required to be signed by all the

parties, their respective counsel and all the members of the Arbitral
Tribunal. Unless the issues thus carefully formulated in the Terms of
Reference were expressly showed to be amended, issues outside thereof
may not be resolved. As already noted in the Decision, "no attempt was
ever made by the Uniwide to modify the TOR in order to accommodate
the issues related to its belated counterclaim" on this issue.
Arbitration has been defined as "an arrangement for taking and
abiding by the judgment of selected persons in some disputed matter,
instead of carrying it to established tribunals of justice, and is intended
to avoid the formalities, the delay, the expense and vexation of ordinary
litigation."Voluntary arbitration, on the other hand, involves the
reference of a dispute to an impartial body, the members of which are
chosen by the parties themselves, which parties freely consent in
advance to abide by the arbitral award issued after proceedings where
both parties had the opportunity to be heard. The basic objective is to
provide a speedy and inexpensive method of settling disputes by allowing
the parties to avoid the formalities, delay, expense and aggravation which
commonly accompany ordinary litigation, especially litigation which goes
through the entire hierarchy of courts.As an arbitration body, the CIAC
can only resolve issues brought before it by the parties through the TOR
which functions similarly as a pre-trial brief. Thus, if Uniwide's claim for
liquidated damages was not raised as an issue in the TOR or in any
modified or amended version of it, the CIAC cannot make a HELD on it.
The Rules of Court cannot be used to contravene the spirit of the CIAC
rules, whose policy and objective is to "provide a fair and expeditious
settlement of construction disputes through a non-judicial process which
ensures harmonious and friendly relations between or among the
parties."
Thus it must further be shown that delay was attributable to the
contractor if not otherwise justifiable. Contrarily, Uniwide's belated claim
constitutes an admission that the delay was justified and implies a
waiver of its right to such damages.
The petition is DENIED.
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Heirs of Salas v. Laperal

HEIRS OF AUGUSTO L. SALAS, JR., namely: TERESITA D. SALAS for
herself and as legal guardian of the minor FABRICE CYRILL D.
SALAS, MA. CRISTINA S. LESACA, and KARINA TERESA D.
SALAS, petitioners, vs. LAPERAL REALTY CORPORATION, ROCKWAY
REAL ESTATE CORPORATION, SOUTH RIDGE VILLAGE, INC.,
MAHARAMI DEVELOPMENT CORPORATION, Spouses THELMA D.
ABRAJANO and GREGORIO ABRAJANO, OSCAR DACILLO, Spouses
VIRGINIA D. LAVA and RODEL LAVA, EDUARDO A. VACUNA,
FLORANTE DE LA CRUZ, JESUS VICENTE B. CAPELLAN, and the
REGISTER OF DEEDS FOR LIPA CITY, respondents.
(G.R. No. 135362, December 13, 1999, 2nd division)
DE LEON, JR., J.:
FACTS:
Salas, Jr. was the registered owner of a vast tract of land in Lipa
City, Batangas spanning 1,484,354 square meters.
On May 15, 1987, he entered into an Owner-Contractor Agreement
with respondent Laperal Realty Corporation to render and provide
complete (horizontal) construction services on his land.
On September 23, 1988, Salas, Jr. executed a Special Power of
Attorney in favor of respondent Laperal Realty to exercise general control,
supervision and management of the sale of his land, for cash or on
installment basis.
On June 10, 1989, Salas, Jr. left his home in the morning for a
business trip to Nueva Ecija. He never returned.
On August 6, 1996, Teresita Diaz Salas filed with the Regional Trial
Court of Makati City a verified petition for the declaration of presumptive
death of her husband, Salas, Jr., who had then been missing for more
than seven (7) years. It was granted on December 12, 1996.
Meantime, respondent Laperal Realty subdivided the land of Salas,
Jr. and sold subdivided portions thereof to respondents Rockway Real
Estate Corporation and South Ridge Village, Inc. on February 22, 1990;
to respondent spouses Abrajano and Lava and Oscar Dacillo on June 27,
1991; and to respondents Eduardo Vacuna, Florante de la Cruz and
Jesus Vicente Capalan on June 4, 1996 (all of whom are hereinafter
referred to as respondent lot buyers).
On February 3, 1998, petitioners as heirs of Salas, Jr. filed in the
Regional Trial Court of Lipa City a Complaint for declaration of nullity of
sale, reconveyance, cancellation of contract, accounting and damages
against herein respondents.
On April 24, 1998, respondent Laperal Realty filed a Motion to
Dismiss on the ground that petitioners failed to submit their grievance to
arbitration as required under Article VI of the Agreement.
On August 9, 1998, the trial court issued the herein assailed Order
dismissing petitioners' Complaint for non-compliance with the foregoing
arbitration clause.
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ISSUE:Whether or not rescission is the proper remedy.
HELD:No. For while rescission, as a general rule, is an arbitrable

issue, they impleaded in the suit for rescission the respondent lot
buyers who are neither parties to the Agreement nor the latter's assigns
or heirs. Consequently, the right to arbitrate as provided in Article VI of
the Agreement was never vested in respondent lot buyers.
Respondent Laperal Realty, as a contracting party to the
Agreement, has the right to compel petitioners to first arbitrate before
seeking judicial relief. However, to split the proceedings into arbitration
for respondent Laperal Realty and trial for the respondent lot buyers, or
to hold trial in abeyance pending arbitration between petitioners and
respondent Laperal Realty, would in effect result in multiplicity of suits,
duplicitous procedure and unnecessary delay. On the other hand, it
would be in the interest of justice if the trial court hears the complaint
against all herein respondents and adjudicates petitioners' rights as
against theirs in a single and complete proceeding.
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Medrano v. CA
BIENVENIDO R. MEDRANO and IBAAN RURAL BANK, petitioners, vs.
COURT OF APPEALS, PACITA G. BORBON, JOSEFINA E. ANTONIO
and ESTELA A. FLOR, respondents.
(G.R. No. 150678, February 18, 2005, 2 nd Division)
CALLEJO, SR., J.:
FACTS:Bienvenido R. Medrano was the Vice-Chairman of Ibaan Rural

Bank, a bank owned by the Medrano family. In 1986, Mr. Medrano asked
Mrs. Estela Flor, a cousin-in-law, to look for a buyer of a foreclosed asset
of the bank, a 17-hectare mango plantation priced at P2,200,000.00,
located in Ibaan, Batangas.
Mr. Dominador Lee, a businessman from Makati City, was a client

of respondent Mrs. Pacita G. Borbon, a licensed real estate broker. The
two met through a previous transaction where Lee responded to an ad in
a newspaper put up by Borbon for an 8-hectare property in Lubo,
Batangas, planted with atis trees. Lee expressed that he preferred a land
with mango trees instead. Borbon promised to get back to him as soon as
she would be able to find a property according to his specifications.
Borbon relayed to her business associates and friends that she had
a ready buyer for a mango orchard. Flor then advised her that her
cousin-in-law owned a mango plantation which was up for sale. She told
Flor to confer with Medrano and to give them a written authority to
negotiate the sale of the property. Thus, on September 3, 1986, Medrano
issued the Letter of Authority to respondents. The letter served as the
authority of the latter to negotiate with any prospective buyer for the sale
of a certain real estate property more specifically a mango plantation.
Medrano also promised to pay the respondents for their labor and effort
in finding a purchaser thereof, a commission of 5% of the total purchase
price to be agreed upon by the buyer and seller.
The respondents arranged for an ocular inspection of the property

together with Lee which never materialized the first time was due to
inclement weather; the next time, no car was available for the tripping to
Batangas. Lee then called up Borbon and told her that he was on his way
to Lipa City to inspect another property, and might as well also take a
look at the property Borbon was offering. Since Lee was in a hurry, the
respondents could no longer accompany him at the time. Thus, he asked
for the exact address of the property and the directions on how to reach
the lot in Ibaan from Lipa City. Thereupon, Lee was instructed to get in
touch with Medranos daughter and also an officer of the bank, Mrs.
Teresa Ganzon, regarding the property.
Two days after the visit, respondent Josefina Antonio called Lee to
inquire about the result of his ocular inspection. Lee told her that the
mango trees "looked sick" so he was bringing an agriculturist to the
property. Three weeks thereafter, Antonio called Lee again to make a
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follow-up of the latters visit to Ibaan. Lee informed her that he already
purchased the property and had made a down payment of
P1,000,000.00. The remaining balance of P1,200,000.00 was to be paid
upon the approval of the incorporation papers of the corporation he was
organizing by the Securities and Exchange Commission. According to
Antonio, Lee asked her if they had already received their commission.
She answered "no," and Lee expressed surprise over this.
A Deed of Sale was eventually executed on November 6, 1986

between the bank, represented by its President/General Manager Teresa
M. Ganzon (as Vendor) and KGB Farms, Inc., represented by Dominador
Lee (as Vendee), for the purchase price of P1,200,000.00. Since the sale
of the property was consummated, the respondents asked from the
petitioners their commission, or 5% of the purchase price. The
petitioners refused to pay and offered a measly sum of P5,000.00 each.
Hence, the respondents were constrained to file an action against
herein petitioners.
After the case was submitted for decision, Medrano died, but no
substitution of party was made at this time.
The trial court rendered a Decision in favor of the respondents. The

petitioners were ordered to pay, jointly and severally, the 5% brokers
commission to herein respondents. The trial court found that the letter of
authority was valid and binding as against Medrano and the Ibaan Rural
bank. Medrano signed the said letter for and in behalf of the bank, and
as owner of the property, promising to pay the respondents a 5%
commission for their efforts in looking for a purchaser of the property. He
is, therefore, estopped from denying liability on the basis of the letter of
authority he issued in favor of the respondents. The trial court further
stated that the sale of the property could not have been possible without
the representation and intervention of the respondents. As such, they are
entitled to the brokers commission of 5% of the selling price of
P1,200,000.00 as evidenced by the deed of sale.
On October 10, 1994, the heirs of Bienvenido Medrano filed a

Motion for Reconsideration praying that the late Bienvenido Medrano be
substituted by his heirs. The trial court denied the motion for
reconsideration. Hence, the heirs of Medrano also filed their notice of
appeal.
On appeal, the petitioners reiterated their stance that the letter of

authority was not binding and enforceable, as the same was signed by
Medrano, who was not actually the owner of the property. They refused
to give the respondents any commission, since the latter did not perform
any act to consummate the sale.
On May 3, 2001, the CA promulgated the assailed decision

affirming the finding of the trial court that the letter of authority was
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valid and binding. Applying the principle of agency, the appellate court
ruled that Bienvenido Medrano constituted the respondents as his
agents, granting them authority to represent and act on behalf of the
former in the sale of the 17-hectare mango plantation.
Undaunted by the CAs unfavorable decision, the petitioners filed

the instant petition.
ISSUE:Whether or not the Letter of Authority is valid and binding upon

the heirs of Medrano.
HELD:Yes. The letter of authority must be read as a whole and not in its
truncated parts. Certainly, it was not the intention of Medrano to expect
the respondents to do just that (to negotiate) when he issued the letter of
authority. The clear intention is to reward the respondents for procuring
a buyer for the property. Before negotiating a sale, a broker must first
and foremost bring in a prospective buyer. It has been held that a broker
earns his pay merely by bringing the buyer and the seller together, even
if no sale is eventually made. The essential feature of a brokers
conventional employment is merely to procure a purchaser for a property
ready, able, and willing to buy at the price and on the terms mutually
agreed upon by the owner and the purchaser. And it is not a prerequisite
to the right to compensation that the broker conduct the negotiations
between the parties after they have been brought into contact with each
other through his efforts.
The case of Macondray v. Sellner is quite instructive:
The business of a real estate broker or agent, generally, is only to find a
purchaser, and the settled rule as stated by the courts is that, in the
absence of an express contract between the broker and his principal, the
implication generally is that the broker becomes entitled to the usual
commissions whenever he brings to his principal a party who is able and
willing to take the property and enter into a valid contract upon the
terms then named by the principal, although the particulars may be
arranged and the matter negotiated and completed between the principal
and the purchaser directly.
Notably, there are cases where the right of the brokers to recover
commissions were upheld where they actually took no part in the
negotiations, never saw the customer, and even some in which they did
nothing except advertise the property, as long as it can be shown that
they were the efficient cause of the sale.
In the case at bar, the role of the respondents in the transaction is
undisputed. Whether or not they participated in the negotiations of the
sale is of no moment. Armed with an authority to procure a purchaser
and with a license to act as broker, we see no reason why the
respondents cannot recover compensation for their efforts when, in fact,
they are the procuring cause of the sale.
Medranos obligation to pay the respondents commission for their

labor and effort in finding a purchaser or a buyer for the described parcel
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of land is unquestionable. In the absence of fraud, irregularity or

illegality in its execution, such letter-authority serves as a contract, and
is considered as the law between the parties.
The petition is DENIED due course.
Tan v. Gullas
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MANUEL B. TAN, GREGG M. TECSON and ALEXANDER SALDAA,

petitioners, vs. EDUARDO R. GULLAS and NORMA S. GULLAS,
respondents.
(G.R. No. 143978 , December 3, 2002, 1 st Division)
FACTS: Private respondents, Spouses Eduardo R. Gullas and Norma S.

Gullas, were the registered owners of a parcel of land in the Municipality
of Minglanilla, Province of Cebu, measuring 104,114 square meters with
Transfer Certificate of Title No. 31465. On June 29, 1992, they executed
a special power of attorney authorizing petitioners Manuel B. Tan, a
licensed real estate broker, and his associates Gregg M. Tecson and
Alexander Saldaa, to negotiate for the sale of the land at Five Hundred
Fifty Pesos (P550.00) per square meter, at a commission of 3% of the
gross price. The power of attorney was non-exclusive and effective for one
month from June 29, 1992.7
On the same date, petitioner Tan contacted Engineer Edsel

Ledesma, construction manager of the Sisters of Mary of Banneaux, Inc.,
a religious organization interested in acquiring a property in the
Minglanilla area.
In the morning of July 1, 1992, petitioner Tan visited the property

with Engineer Ledesma. Thereafter, the two men accompanied Sisters
Michaela Kim and Azucena Gaviola, representing the Sisters of Mary, to
see private respondent Eduardo Gullas in his office at the University of
Visayas. The Sisters, who had already seen and inspected the land,
found the same suitable for their purpose and expressed their desire to
buy it. However, they requested that the selling price be reduced to Five
Hundred Thirty Pesos (P530.00) per square meter instead of Five
Hundred Fifty Pesos (P550.00) per square meter. Private respondent
Eduardo Gullas referred the prospective buyers to his wife.
It was the first time that the buyers came to know that private
respondent Eduardo Gullas was the owner of the property. On July 3,
1992, private respondents agreed to sell the property to the Sisters of
Mary, and subsequently executed a special power of attorney in favor of
Eufemia Caete, giving her the special authority to sell, transfer and
convey the land at a fixed price of Two Hundred Pesos (P200.00) per
square meter.
On July 17, 1992, attorney-in-fact Eufemia Caete executed a deed

of sale in favor of the Sisters of Mary for the price of Twenty Million Eight
Hundred Twenty Two Thousand Eight Hundred Pesos (P20,822.800.00),
or at the rate of Two Hundred Pesos (P200.00) per square meter. The
buyers subsequently paid the corresponding taxes. Thereafter, the
Register of Deeds of Cebu Province issued TCT No. 75981 in the name of
the Sisters of Mary of Banneaux, Inc.
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Earlier, on July 3, 1992, in the afternoon, petitioners went to see

private respondent Eduardo Gullas to claim their commission, but the
latter told them that he and his wife have already agreed to sell the
property to the Sisters of Mary. Private respondents refused to pay the
brokers fee and alleged that another group of agents was responsible for
the sale of land to the Sisters of Mary.
On August 28, 1992, petitioners filed a complaint against the

defendants for recovery of their brokers fee in the sum of One Million Six
Hundred Fifty Five Thousand Four Hundred Twelve and 60/100 Pesos
(P1,655,412.60), as well as moral and exemplary damages and attorneys
fees. They alleged that they were the efficient procuring cause in bringing
about the sale of the property to the Sisters of Mary, but that their efforts
in consummating the sale were frustrated by the private respondents
who, in evident bad faith, malice and in order to evade payment of
brokers fee, dealt directly with the buyer whom petitioners introduced to
them. They further pointed out that the deed of sale was undervalued
obviously to evade payment of the correct amount of capital gains tax,
documentary stamps and other internal revenue taxes.
After trial, the lower court rendered judgment in favor of

petitioners. Both parties appealed to the Court of Appeals. The Court of
Appeals reversed and set aside the lower courts decision and rendered
another judgment dismissing the complaint.
Hence, this appeal.
ISSUE:Whether or not the petitioners are entitled to the brokerage

commission.
HELD:Yes. Indeed, it is readily apparent that private respondents are

trying to evade payment of the commission which rightfully belongs to
petitioners as brokers with respect to the sale. There was no dispute as
to the role that petitioners played in the transaction. At the very least,
petitioners set the sale in motion. They were not able to participate in its
consummation only because they were prevented from doing so by the
acts of the private respondents. In the case of Alfred Hahn v. Court of
Appeals and Bayerische Motoren Werke Aktiengesellschaft (BMW) the
Court ruled that, "An agent receives a commission upon the successful
conclusion of a sale. On the other hand, a broker earns his pay merely
by bringing the buyer and the seller together, even if no sale is eventually
made. Clearly, therefore, petitioners, as brokers, should be entitled to
the commission whether or not the sale of the property subject matter of
the contract was concluded through their efforts.
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Gozun v. Mercado
JESUS M. GOZUN, petitioner, vs. JOSE TEOFILO T. MERCADO
a.k.a. DON PEPITO MERCADO, respondent.
(G.R. No. 167812, December 19, 2006, 3 rd Division)
CARPIO MORALES, J.:
FACTS:In the local elections of 1995, respondent vied for the

gubernatorial post in Pampanga. Upon respondents request, petitioner,
owner of JMG Publishing House, a printing shop located in San
Fernando, Pampanga, submitted to respondent draft samples and price
quotation of campaign materials.
By petitioners claim, respondents wife had told him that

respondent already approved his price quotation and that he could start
printing the campaign materials, hence, he did print campaign materials
like posters bearing respondents photograph, leaflets containing the
slate of party candidates, sample ballots, poll watcher identification
cards, and stickers.
Given the urgency and limited time to do the job order, petitioner
availed of the services and facilities of Metro Angeles Printing and of St.
Joseph Printing Press, owned by his daughter Jennifer Gozun and
mother Epifania Macalino Gozun, respectively.
Petitioner delivered the campaign materials to respondents

headquarters along Gapan-Olongapo Road in San Fernando, Pampanga.
Meanwhile, on March 31, 1995, respondents sister-in-law, Lilian Soriano
obtained from petitioner "cash advance" of P253,000 allegedly for the
allowances of poll watchers who were attending a seminar and for other
related expenses. Lilian acknowledged on petitioners 1995 diary receipt
of the amount.
Petitioner later sent respondent a Statement of Account in the total

amount of P2,177,906 itemized as follows:P640,310 for JMG Publishing
House; P837,696 for Metro Angeles Printing; P446,900 for St. Joseph
Printing Press; and P253,000, the "cash advance" obtained by Lilian.
On August 11, 1995, respondents wife partially paid P1,000,000 to
petitioner who issued a receipt therefor. Despite repeated demands and
respondents promise to pay, respondent failed to settle the balance of
his account to petitioner.
Petitioner and respondent being compadres, they having been

principal sponsors at the weddings of their respective daughters, waited
for more than three (3) years for respondent to honor his promise but to
no avail, compelling petitioner to endorse the matter to his counsel who
sent respondent a demand letter. Respondent, however, failed to heed
the demand.
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Petitioner thus filed with the Regional Trial Court a complaint

against respondent to collect the remaining amount of P1,177,906 plus
"inflationary adjustment" and attorneys fees.
The trial court rendered judgment in favor of petitioner. The Court

ordered respondent to pay the plaintiff the sum of P1,177,906.00 plus
12% interest per annum from the filing of this complaint until fully
paid;To pay the sum of P50,000.00 as attorneys fees and the costs of
suit.Also as earlier adverted to, the Court of Appeals reversed the trial
courts decision and dismissed the complaint for lack of cause of action.
Hence, the present petition.
ISSUE: Whether or not Lilian R. Soriano was authorized by the

respondent to receive the cash advance from the petitioner in the amount
of P253,000.00.
HELD:No.Nowhere in the note can it be inferred that defendant-appellant

was connected with the said transaction. Under Article 1317 of the New
Civil Code, a person cannot be bound by contracts he did not authorize
to be entered into his behalf.
It bears noting that Lilian signed in the receipt in her name alone,
without indicating therein that she was acting for and in behalf of
respondent. She thus bound herself in her personal capacity and not as
an agent of respondent or anyone for that matter.
It is a general rule in the law of agency that, in order to bind the

principal by a mortgage on real property executed by an agent, it must
upon its face purport to be made, signed and sealed in the name of the
principal, otherwise, it will bind the agent only. It is not enough merely
that the agent was in fact authorized to make the mortgage, if he has not
acted in the name of the principal.
The decision of the Regional Trial Court is reinstated.
Sta. Lucia Realty vs. Sps. Buenaventura
Cita
STA. LUCIA REALTY & DEVELOPMENT, INC., Petitioner, vs.

SPOUSES FRANCISCO & EMELIA* BUENAVENTURA, as represented
by RICARDO SEGISMUNDO,Respondents.
FACTS:On January 16, 1996, respondent-spouses Francisco
Segismundo and Emilia Buenaventura, represented by Ricardo
Segismundo, filed before the Housing and Land Use Regulatory Board
(HLRUB) a Complaint against petitioner Sta. Lucia Realty &
Development, Inc. for Specific Performance, Damages and Attorneys
Fees.Respondents alleged that they bought a lot known as Lot 3, Block 4,
Phase II at Greenwood Executive Village, Cainta, Rizal from Loida
Gonzales Alfonso on August 16, 1989; that the said lot is part of a
subdivision project owned and being developed by petitioner; that in the
course of the construction of their house, respondents discovered that
their lot had been subdivided and occupied by Marilou Panlaque and Ma.
Veronica Banez ; and that like respondents, the two occupants were also
issued a construction permit by petitioner. Respondents thus demanded
from petitioner the rightful possession of their lot; but to no avail.
On June 16, 1998, the HLURBs Arbiterfor the National Capital
Region (NCR) Field Office issued a Decision directing respondent Sta.
Lucia Realty and Development Corporation, Inc. to cause to be vacated
complainants lot; In the alternative, the aforesaid respondent is ordered
to reimburse the complainant the current market value of the
subdivision lot which shall in no case be less than P4,500.00 per square
meter, the prevailing price in the area;
The HLURB Arbiter found that while RCD Realty Corporation
constructed a residential building on the wrong lot, such construction
was allowed by petitioner as evidenced by the permit it issued. As the
owner-developer of the subdivision project, petitioner knew the location
of all lots therein and was tasked to properly enforce the restrictions it
caused to be annotated on their corresponding certificates of title. The
HLURB Arbiter thus concluded that it was petitioners neglect that
ultimately led to the instant dispute.
On June 24, 1999, the HLURB Board of Commissioners affirmed
the Decision of the HLURB Arbiter with modification that the market
value of the subject lot be reduced from P4,500.00 to P3,200.00 per
square meter, plus 12% interest per annum from the time of the filing of
the complaint.
On July 18, 2003, the Office of the President issued a
Decision affirming the Decision of the HLURB Board of Commissioners.
Subsequently, it issued a Resolution dated November 28, 2003 denying
petitioners Motion for Reconsideration.
On December 21, 2006, the Court of Appeals affirmed the Decision
of the Office of the President. The appellate court found that it was
petitioner who caused the confusion in the identity of the lots by its
issuance of a construction permit to RCD Realty Corporation; that
petitioner was remiss and negligent in complying with its obligations
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towards its buyers, their heirs, assignees, and/or successors-in-interest

when it failed to deliver the property described in respondents title.
On March 21, 2007, the Court of Appeals denied petitioners
Motion for Reconsideration. Hence, this Petition for Review on Certiorari.
ISSUE: Whether or notPetitioner has no privity of contract with

respondents as it did not directly sell the subject property to them.
HELD: No.Petitioner originally sold the subject lot to Alfonso, and the
latter subsequently sold the same to herein respondents. As assignees or
successors-in-interest of Alfonso to Lot 3, Block 4, Phase II in petitioners
subdivision project, respondents succeed to what rights the former had;
and what is valid and binding against Alfonso is also valid and binding
as against them. In effect, respondents stepped into the shoes of Alfonso
and such transfer of rights also vests upon them the power to claim
ownership and the authority to demand to build a residential house on
the lot to the same extent as Alfonso could have enforced them against
petitioner.
Article 1311 of the New Civil Code states that, "contracts take effect
only between the parties, their assigns and heirs, except in case where
the rights and obligations arising from the contract are not transmissible
by their nature, or by stipulation or by provision of law." In this case, the
rights and obligations between petitioner and Alfonso are transmissible.
There was no mention of a contractual stipulation or provision of law
that makes the rights and obligations under the original sales contract
for Lot 3, Block 4, Phase II intransmissible. Hence, Alfonso can transfer
her ownership over the said lot to respondents and petitioner is bound to
honor its corresponding obligations to the transferee or new lot owner in
its subdivision project.
Having transferred all rights and obligations over Lot 3, Block 4,

Phase II to respondents, Alfonso could no longer be considered as an
indispensable party. An indispensable party is one who has such an
interest in the controversy or subject matter that a final adjudication
cannot be made in his absence, without injuring or affecting that
interest. Contrary to petitioners claim, Alfonso no longer has an interest
on the subject matter or the present controversy, having already sold her
rights and interests on Lot 3, Block 4, Phase II to herein respondents.
Petitioner was remiss and negligent in the performance of its

obligations towards its buyers, their heirs, assignees, and/or successors-
in-interest; and that it was petitioners negligence which caused the
confusion on the identity of the lot, which likewise resulted to the
erroneous construction done by RCD Realty Corporation. Petitioner
cannot pass the blame to RCD Realty Corporation because it is
undisputed that it issued a construction permit for Lot 3, Block 4, Phase
II the property of respondents.
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The Petition is PARTIALLY GRANTED.
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Chan v. Maceda
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JOSEPH CHAN, WILSON CHAN and LILY CHAN, petitioners, vs.

BONIFACIO S. MACEDA, JR., respondent.
(G.R. No. 142591 , April 30, 2003, 3rd Division)
FACTS:On July 28, 1976, Bonifacio S. Maceda, Jr., herein respondent,

obtained a P7.3 million loan from the Development Bank of the
Philippines for the construction of his New Gran Hotel Project in
Tacloban City.
Thereafter, on September 29, 1976, respondent entered into a

building construction contract with Moreman Builders Co., Inc. They
agreed that the construction would be finished not later than December
22, 1977.
Respondent purchased various construction materials and

equipment in Manila. Moreman, in turn, deposited them in the
warehouse of Wilson and Lily Chan, herein petitioners. The deposit was
free of charge.
Unfortunately, Moreman failed to finish the construction of the

hotel at the stipulated time. Hence, on February 1, 1978, respondent
filed with the then Court of First Instance (CFI, now Regional Trial
Court), an action for rescission and damages against Moreman.
On November 28, 1978, the CFI rendered its Decision rescinding

the contract between Moreman and respondent and awarding to the
latter P445,000.00 as actual, moral and liquidated damages; P20,000.00
representing the increase in the construction materials; and P35,000.00
as attorney's fees. Moreman interposed an appeal to the Court of Appeals
but the same was dismissed on March 7, 1989 for being dilatory. He
elevated the case to this Court via a petition for review on certiorari. In a
Decision dated February 21, 1990, the Court denied the petition. On
April 23, 1990, an Entry of Judgment was issued.
Meanwhile, during the pendency of the case, respondent ordered

petitioners to return to him the construction materials and equipment
which Moreman deposited in their warehouse. Petitioners, however, told
them that Moreman withdrew those construction materials in 1977.
Hence, on December 11, 1985, respondent filed with the Regional

Trial Court an action for damages with an application for a writ of
preliminary attachment against petitioners.
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In the meantime, on October 30, 1986, respondent was appointed

Judge of the Regional Trial Court, Branch 12, San Jose Antique.
On August 25, 1989, or after almost four (4) years, the trial court
dismissed respondent's complaint for his failure to prosecute and for lack
of interest." On September 6, 1994, or five years thereafter, respondent
filed a motion for reconsideration, but the same was denied because of
the failure of respondent and his counsel to appear on the scheduled
hearing.
On October 14, 1994, respondent filed a second motion for

reconsideration. This time, the motion was granted and the case was
ordered reinstated on January 10, 1995, or ten (10) years from the time
the action was originally filed. Thereafter, summons, together with the
copies of the complaint and its annexes, were served on petitioners.
On March 2, 1995, counsel for petitioners filed a motion to dismiss

on several grounds. Respondent, on the other hand, moved to declare
petitioners in default on the ground that their motion to dismiss was filed
out of time and that it did not contain any notice of hearing.
On April 27, 1995, the trial court issued an order declaring

petitioners in default.
Petitioners filed with the Court of Appeals a petition for certiorari to

annul the trial court's order of default, but the same was dismissed. The
case reached this Court, and in a Resolution dated October 25, 1995, the
Court affirmed the assailed order of the Court of Appeals. On November
29, 1995, the corresponding Entry of Judgment was issued.
Thus, upon the return of the records to the RTC, respondent was
allowed to present his evidence ex-parte.
On December 26, 1996, the trial court rendered a decision

ordering defendants to jointly and severally pay plaintiff.
Petitioners then elevated the case to the Court of Appeals. On June

17, 1999, the Appellate Court affirmed in toto the trial court's judgment.
Hence, this petition for review on certiorari.
ISSUE:
(1) Has respondent presented proof that the construction materials

and equipment were actually in petitioners' warehouse when he asked
that the same be turned over to him?
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(2) If so, does respondent have the right to demand the release of
the said materials and equipment or claim for damages?
HELD:
(1)No. Under Article 1311 of the Civil Code, contracts are binding
upon the parties (and their assigns and heirs) who execute them. When
there is no privity of contract, there is likewise no obligation or liability to
speak about and thus no cause of action arises. Specifically, in an action
against the depositary, the burden is on the plaintiff to prove the
bailment or deposit and the performance of conditions precedent to the
right of action. A depositary is obliged to return the thing to the
depositor, or to his heirs or successors, or to the person who may have
been designated in the contract.
In the present case, the record is bereft of any contract of deposit,

oral or written, between petitioners and respondent. If at all, it was only
between petitioners and Moreman. And granting arguendo that there was
indeed a contract of deposit between petitioners and Moreman, it is still
incumbent upon respondent to prove its existence and that it was
executed in his favor. However, respondent miserably failed to do so. The
only pieces of evidence respondent presented to prove the contract of
deposit were the delivery receipts. Significantly, they areunsigned and
not duly received or authenticated by either Moreman, petitioners or
respondent or any of their authorized representatives. Hence, those
delivery receipts have no probative value at all. While our laws grant a
person the remedial right to prosecute or institute a civil action against
another for the enforcement or protection of a right, or the prevention or
redress of a wrong, every cause of action ex-contractu must be founded
upon a contract, oral or written, express or implied.
Moreover, respondent also failed to prove that there were

construction materials and equipment in petitioners' warehouse at the
time he made a demand for their return.
(2) No. Petitioners are still not liable because, as expressly provided
for in Article 2199 of the Civil Code, actual or compensatory damages
cannot be presumed, but must be proved with reasonable degree of
certainty. A court cannot rely on speculations, conjectures, or guesswork
as to the fact and amount of damages, but must depend upon competent
proof that they have been suffered by the injured party and on the best
obtainable evidence of the actual amount thereof. It must point out
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specific facts which could afford a basis for measuring whatever

compensatory or actual damages are borne.
Considering our findings that there was no contract of deposit

between petitioners and respondent or Moreman and that actually there
were no more construction materials or equipment in petitioners'
warehouse when respondent made a demand for their return, the Court
holds that he has no right whatsoever to claim for damages.
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Baluyot vs. CA
TIMOTEO BALUYOT, JAIME BENITO, BENIGNO EUGENIO, ROLANDO
GONZALES, FORTUNATO FULGENCIO and CRUZ-NA-LIGAS
HOMESITE ASSOCIATION, INC., petitioners, vs. THE HONORABLE
COURT OF APPEALS, THE QUEZON CITY GOVERNMENT and
UNIVERSITY OF THE PHILIPPINES, respondents.
(G.R. No. 122947, July 22, 1999, 2nd Division)
MENDOZA, J.:
FACTS:Petitioners Timoteo Baluyot, Jaime Benito, Benigno Eugenio,

Rolando Gonzales, and Fortunato Fulgencio are residents of Barangay
Cruz-na-Ligas, Diliman, Quezon City. The Cruz-na-Ligas Homesite
Association, Inc. is a non-stock corporation of which petitioners and
other residents of Barangay Cruz-na-Ligas are members. On March 13,
1992, petitioners filed a complaint for specific performance and damages
against, private respondent University of the Philippines before the
Regional Trial Court. The complaint was later on amended to include
private respondent Quezon City government as defendant.
However, the Regional Trial Court denied the application.

Petitioners moved for a reconsideration of the above order. Without
resolving petitioners' motion, the trial court ordered petitioners to amend
their complaint to implead respondent Quezon City government as
defendant.
On July 27, 1992, respondent city government filed its Answer to

the Amended Complaint with Cross-Claim. However, on November 29,
1993, it moved to withdraw its cross-claim against UP on the ground
that, after conferring with university officials, the city government had
recognized "the propriety, validity and legality of the revocation of the
Deed of Donation."
The motion was granted by the trial court. On the same day, a
Joint Motion to Dismiss was filed by UP and the Quezon City government
on the ground that the complaint fails to state a cause of
action. Petitioners opposed the motion.
On April 26, 1995, the trial court denied respondents' motion to

dismiss on the ground that "a perusal of [petitioners'] amended
complaint shows that it necessarily alleges facts entitling petitioners to
acquire ownership over the land in question, by reason of laches, which
cannot be disposed of and resolved at this stage without a trial on the
merits." The trial court, however, reiterated its HELD that petitioners did
not have a cause of action for specific performance on the ground that
the deed of donation had already been revoked as stated in its order
denying injunction.
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On August 14, 1995, respondents filed a petition for certiorari with

the Court of Appeals. The appellate court rendered a decision setting
aside the trial court's order and ordering the dismissal of the case.
Hence, this petition for review on certiorari.
ISSUE:Whether or not the complaint states a cause of action.
HELD:Yes. A cause of action exists if the following elements are present,

namely: (1) a right in favor of the plaintiff by whatever means and under
whatever law it arises or is created; (2) an obligation on the part of the
defendant to respect or not to violate such right; and (3) an act or
omission on the part of such defendant in violation of the right of the
plaintiff or constituting a breach of the obligations of the defendant to the
plaintiff for which the latter may maintain an action for recovery of
damages.
All the elements of a cause of action were contained in the

amended complaint of petitioners. While, admittedly, petitioners were not
parties to the deed of donation, they anchor their right to seek its
enforcement upon their allegation that they are intended beneficiaries of
the donation to the Quezon City government. Art. 1311, second
paragraph, of the Civil Code provides:
If a contract should contain some stipulation in favor of a third
person, he may demand its fulfillment provided he communicated his
acceptance to the obliger before its revocation. A mere incidental benefit or
interest of a person is not sufficient. The contracting parties must have
clearly and deliberately conferred a favor upon a third person.
Under this provision of the Civil Code, the following requisites must be
present in order to have a stipulation pour autrui:
(1) there must be a stipulation in favor of a third person;
(2) the stipulation must be a part, not the whole of the contract;
(3) the contracting parties must have clearly and deliberately
conferred a favor upon a third person, not a mere incidental benefit or
interest;
(4) the third person must have communicated his acceptance to the
obliger before its revocation; and
(5) neither of the contracting parties bears the legal representation
or authorization of the third party.
The allegations in the amended complaint are sufficient to bring
petitioners' action within the purview of the second paragraph of Art.
1311 on stipulations pour autrui.
The decision of the Court of Appeals is REVERSED and the case is

REMANDED to the Regional Trial Court.
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Cuyco v Cuyco
SPOUSES ADELINA S. CUYCO and FELICIANO U. CUYCO,
Petitioners, vs. SPOUSES RENATO CUYCO and FILIPINA
CUYCO,Respondents.
FACTS: Petitioners, spouses Adelina and Feliciano Cuyco, obtained a loan in

the amount of P1,500,000.00 from respondents, spouses Renato and Filipina
Cuyco, payable within one year at 18% interest per annum, and secured by a
Real Estate Mortgage over a parcel of land with improvements thereon situated
in Cubao, Quezon City covered by TCT No. RT-43723 (188321). Subsequently,
petitioners obtained additional loans from the respondents in the aggregate
amount of P1,250,000.00, broken down as follows: (1) P150,000.00 on May 30,
1992; (2) P150,000.00 on July 1, 1992; (3) P500,000.00 on September 5, 1992;
(4) P200,000.00 on October 29, 1992; and (5) P250,000.00 on January 13,
1993.Petitioners made payments amounting to P291,700.00, but failed to settle
their outstanding loan obligations. Thus, on September 10, 1997, respondents
filed a complaint for foreclosure of mortgage with the RTC of Quezon City,
which was docketed as Civil Case No. Q-97-32130. They alleged that
petitioners loans were secured by the real estate mortgage; that as of August
31, 1997, their indebtedness amounted to P6,967,241.14, inclusive of the 18%
interest compounded monthly; and that petitioners refusal to settle the same
entitles the respondents to foreclose the real estate mortgage.
ISSUE: Whether or not the contract established a right in this case.
HELD: As a general rule, a mortgage liability is usually limited to the amount

mentioned in the contract. However, the amounts named as consideration in a
contract of mortgage do not limit the amount for which the mortgage may
stand as security if from the four corners of the instrument the intent to secure
future and other indebtedness can be gathered. This stipulation is valid and
binding between the parties and is known in American Jurisprudence as the
blanket mortgage clause, also known as a dragnet clause. A dragnet
clause operates as a convenience and accommodation to the borrowers as it
makes available additional funds without their having to execute additional
security documents, thereby saving time, travel, loan closing costs, costs of
extra legal services, recording fees, et cetera. While a real estate mortgage may
exceptionally secure future loans or advancements, these future debts must be
sufficiently described in the mortgage contract. An obligation is not secured by
a mortgage unless it comes fairly within the terms of the mortgage contract.
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Go, doing business under the name and style of ACG Express Liner v
Cordero
ALLAN C. GO, doing business under the name and style "ACG
Express Liner," Petitioner, vs. MORTIMER F.
CORDERO, Respondent.
MORTIMER F. CORDERO, Petitioner, vs. ALLAN C. GO, doing

business under the name and style "ACG Express Liner," FELIPE M.
LANDICHO and VINCENT D. TECSON, Respondents.
G.R. No. 164747
VILLARAMA, JR., J.:
FACTS: Sometime in 1996, Mortimer F. Cordero, Vice-President of

Pamana Marketing Corporation (Pamana), ventured into the business of
marketing inter-island passenger vessels. After contacting various
overseas fast ferry manufacturers from all over the world, he came to
meet Tony Robinson, an Australian national based in Brisbane,
Australia, who is the Managing Director of Aluminium Fast Ferries
Australia (AFFA).
Between June and August 1997, Robinson signed documents
appointing Cordero as the exclusive distributor of AFFA catamaran and
other fast ferry vessels in the Philippines. As such exclusive distributor,
Cordero offered for sale to prospective buyers the 25-meter Aluminium
Passenger catamaran known as the SEACAT 25.
After negotiations with Felipe Landicho and Vincent Tecson,

lawyers of Allan C. Go who is the owner/operator of ACG Express Liner
of Cebu City, a single proprietorship, Cordero was able to close a deal for
the purchase of two (2) SEACAT 25 as evidenced by the Memorandum of
Agreement dated August 7, 1997. Accordingly, the parties executed
Shipbuilding Contract No. 7825 for one (1) high-speed catamaran
(SEACAT 25) for the price of US$1,465,512.00. Per agreement between
Robinson and Cordero, the latter shall receive commissions totalling
US$328,742.00, or 22.43% of the purchase price, from the sale of each
vessel.
Cordero made two (2) trips to the AFFA Shipyard in Brisbane, Australia,
and on one (1) occasion even accompanied Go and his family and
Landicho, to monitor the progress of the building of the vessel. He
shouldered all the expenses for airfare, food, hotel accommodations,
transportation and entertainment during these trips. He also spent for
long distance telephone calls to communicate regularly with Robinson,
Go, Tecson and Landicho.
However, Cordero later discovered that Go was dealing directly with

Robinson when he was informed by Dennis Padua of Wartsila Philippines
that Go was canvassing for a second catamaran engine from their
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company which provided the ship engine for the first SEACAT 25. Padua
told Cordero that Go instructed him to fax the requested quotation of the
second engine to the Park Royal Hotel in Brisbane where Go was then
staying. Cordero tried to contact Go and Landicho to confirm the matter
but they were nowhere to be found, while Robinson refused to answer his
calls. Cordero immediately flew to Brisbane to clarify matters with
Robinson, only to find out that Go and Landicho were already there in
Brisbane negotiating for the sale of the second SEACAT 25. Despite
repeated follow-up calls, no explanation was given by Robinson, Go,
Landicho and Tecson who even made Cordero believe there would be no
further sale between AFFA and ACG Express Liner.
On August 21, 1998, Cordero instituted Civil Case No. 98-35332

seeking to hold Robinson, Go, Tecson and Landicho liable jointly and
solidarily for conniving and conspiring together in violating his exclusive
distributorship in bad faith and wanton disregard of his rights, thus
depriving him of his due commissions (balance of unpaid commission
from the sale of the first vessel in the amount of US$31,522.01 and
unpaid commission for the sale of the second vessel in the amount of
US$328,742.00) and causing him actual, moral and exemplary
damages, including P800,000.00 representing expenses for airplane
travel to Australia, telecommunications bills and entertainment, on
account of AFFAs untimely cancellation of the exclusive distributorship
agreement. Cordero also prayed for the award of moral and exemplary
damages, as well as attorneys fees and litigation expenses.
Robinson filed a motion to dismiss grounded on lack of jurisdiction

over his person and failure to state a cause of action, asserting that there
was no act committed in violation of the distributorship agreement. Said
motion was denied by the trial court on December 20, 1999. Robinson
was likewise declared in default for failure to file his answer within the
period granted by the trial court. As for Go and Tecson, their motion to
dismiss based on failure to state a cause of action was likewise denied by
the trial court on February 26, 1999. Subsequently, they filed their
Answer denying that they have anything to do with the termination by
AFFA of Corderos authority as exclusive distributor in the Philippines.
On the contrary, they averred it was Cordero who stopped
communicating with Go in connection with the purchase of the first
vessel from AFFA and was not doing his part in making progress status
reports and airing the clients grievances to his principal, AFFA, such
that Go engaged the services of Landicho to fly to Australia and attend to
the documents needed for shipment of the vessel to the Philippines. As
to the inquiry for the Philippine price for a Wartsila ship engine for
AFFAs other on-going vessel construction, this was merely requested by
Robinson but which Cordero misinterpreted as indication that Go was
buying a second vessel. Moreover, Landicho and Tecson had no
transaction whatsoever with Cordero who had no document to show any
such shipbuilding contract. As to the supposed meeting to settle their
dispute, this was due to the malicious demand of Cordero to be given
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US$3,000,000 as otherwise he will expose in the media the alleged

undervaluation of the vessel with the BOC. In any case, Cordero no
longer had cause of action for his commission for the sale of the second
vessel under the memorandum of agreement dated August 7, 1997
considering the termination of his authority by AFFAs lawyers on June
26, 1998.
On May 31, 2000, the trial court rendered its judgment in favor of
Plaintiff and against defendants Allan C. Go, Tony Robinson, Felipe
Landicho, and Vincent Tecson. On January 29, 2001, the CA rendered
judgment granting the petition for certiorari in CA-G.R. SP No. 60354
and setting aside the trial courts orders of execution pending appeal.
The case before the Supreme Court is a consolidation of the petitions for
review under Rule 45 separately filed by Go (G.R. No. 164703) and
Cordero (G.R. No. 164747).
ISSUE:
(1) Whether petitioner Cordero has the legal personality to sue the
respondents for breach of contract; and
(2) whether the respondents may be held liable for damages to Cordero
for his unpaid commissions and termination of his exclusive
distributorship appointment by the principal, AFFA.
HELD:
While it is true that a third person cannot possibly be sued for
breach of contract because only parties can breach contractual
provisions, a contracting party may sue a third person not for breach but
for inducing another to commit such breach. Article 1314 of the Civil
Code provides:
Art. 1314. Any third person who induces another to violate his
contract shall be liable for damages to the other contracting party.
The elements of tort interference are: (1) existence of a valid contract; (2)
knowledge on the part of the third person of the existence of a contract;
and (3) interference of the third person is without legal justification.
The presence of the first and second elements is not disputed. Through
the letters issued by Robinson attesting that Cordero is the exclusive
distributor of AFFA in the Philippines, respondents were clearly aware of
the contract between Cordero and AFFA represented by Robinson. In
fact, evidence on record showed that respondents initially dealt with and
recognized Cordero as such exclusive dealer of AFFA high-speed
catamaran vessels in the Philippines. In that capacity as exclusive
distributor, petitioner Go entered into the Memorandum of Agreement
and Shipbuilding Contract No. 7825 with Cordero in behalf of AFFA.
The rule is that the defendant found guilty of interference with

contractual relations cannot be held liable for more than the amount for
which the party who was inducted to break the contract can be held
liable. Respondents Go, Landicho and Tecson were therefore correctly
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held liable for the balance of petitioner Corderos commission from the
sale of the first SEACAT 25, in the amount of US$31,522.09 or its peso
equivalent, which AFFA/Robinson did not pay in violation of the
exclusive distributorship agreement, with interest at the rate of 6% per
annum from June 24, 1998 until the same is fully paid.
Respondents having acted in bad faith, moral damages may be
recovered under Article 2219 of the Civil Code.
Tayag vs. CA
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HERMINIO TAYAG, petitioner, vs. AMANCIA LACSON, ROSENDO

LACSON, ANTONIO LACSON, JUAN LACSON, TEODISIA LACSON-
ESPINOSA and THE COURT OF APPEALS, respondents.
(G.R. No. 134971,March 25, 2004, 2nd Division)
CALLEJO, SR., J.:
FACTS:Respondents were the registered owners of three parcels of

tenanted agricultural land, covered by Transfer Certificates of Titles,
registered in the Register of Deeds. The properties were administered by
Renato Espinosa.
On March 17, 1996, a group of original farmers/tillers, individually
executed in favor of the petitioner separate Deeds of Assignment in which
the assignees assigned to the petitioner their respective rights as
tenants/tillers of the landholdings possessed and tilled by them for and
in consideration of P50.00 per square meter. The price was payable
"when the legal impediments to the sale of the property to the petitioner
no longer existed." The petitioner was also granted the exclusive right to
buy the property if the respondents would sell such land.
The petitioner called a meeting in order to work out the implementation
of their separate agreements. However, the defendants-tenants, through
Joven Mariano, gave a notice of their collective decision to sell all their
rights and interests, as tenants/lessees, over the landholding to the
respondents.
The petitioner then filed a complaint against the defendants asking the
court to fix a period to which the agreed amounts under the Deed of
Assignment be paid. The petitioner also prayed for a writ of preliminary
injunction against the defendants and the respondents therein.
Petitioner claims that the defendant tenants were merely sub-tenants
over the land and had no right to deal with the Lacsons or with any third
persons while their contracts are subsisting.
ISSUE:Whether or not the tenants are allowed to sell their rights over the
land to the Lacsons
HELD:The petitioner failed to establish the essential requisites for the
issuance of a writ of preliminary injunction.
The trial court cannot enjoin the respondents, at the instance of the
petitioner, from selling, disposing of and encumbering their property. As
the registered owners of the property, the respondents have the right to
enjoy and dispose of their property without any other limitations than
those established by law, in accordance with Article 428 of the Civil
Code. Under Article 1306 of the New Civil Code, the respondents may
enter into contracts covering their property with another under such
terms and conditions as they may deem beneficial provided they are not
contrary to law, morals, good conduct, public order or public policy.
The respondents cannot be enjoined from selling or encumbering their
property simply and merely because they had executed Deeds of
Assignment in favor of the petitioner, obliging themselves to assign and
transfer their rights or interests as agricultural farmers/laborers/sub-
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tenants over the landholding, and granting the petitioner the exclusive
right to buy the property subject to the occurrence of certain conditions.
The respondents were not parties to the said deeds. There is no evidence
that the respondents agreed, expressly or impliedly, to the said deeds or
to the terms and conditions set forth therein. Indeed, they assailed the
validity of the said deeds on their claim that the same were contrary to
the letter and spirit of P.D. No. 27 and Rep. Act No. 6657. The petitioner
even admitted when he testified that he did not know any of the
respondents, and that he had not met any of them before he filed his
complaint in the RTC.
IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY
GRANTED. The Decision of the Court of Appeals nullifying the Orders of
the RTC is AFFIRMED. The writ of injunction issued by the Court of
Appeals permanently enjoining the RTC from further proceeding is
hereby LIFTED and SET ASIDE. The Regional Trial Court is ORDERED to
continue with the proceedings as provided for by the Rules of Court, as
amended.
So vs. CA
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SO PING BUN, petitioner, vs. COURT OF APPEALS, TEK HUA

ENTERPRISES CORP. and MANUEL C. TIONG, respondents.
(G.R. No. 120554 September 21, 1999, 2nd Division)
QUISUMBING, J.:
FACTS:In 1963, Tek Hua Trading Co., through its managing partner, So
Pek Giok, entered into lease agreements with lessor Dee C. Chuan and
Sons Inc (DCCSI). Subjects of four (4) lease contracts were premises
located at Nos. 930, 930- Int., 924-B and 924-C, Soler Street, Binondo,
Manila. Tek Hua used the areas to store its textiles. The contracts each
had a one year term. They provided that should the lessee continue to
occupy the premises after the term, the lease shall be on a month to
month basis.
When the contracts expired, the parties did not renew the
contracts, but Tek Hua continued to occupy the premises in 1976 Tek
Hua Trading Corp. was dissolved. Later, the original members of Tek Hua
Trading Co., including Manuel C.Tiong, formed Tek Hua Enterprising
Corp., herein respondent corporation.
So Pek Giok, managing partner of Tek Hua Trading, died in 1986.
So Pek Gioks grandson, petitioner So Ping Bun, occupied the warehouse
for his own textile business, Trendsetter Marketing.
On August 1, 1989, lessor DCCSI sent letters addressed to Tek Hua
enterprises, informing the latter of the 25% increase in rent effective
September 1, 1989. The rent increase was later on reduced to 20%
effective January 1, 1990, upon other lessees demand. Again on
December 1, 1990, the lessor implemented a 30% rent increase.
Enclosed in these letters were new lease contracts for signing. DCCSI
warned that failure of the lessee to accomplish the contracts shall be
deemed as lack of interest on the lessees part, and agreement to the
termination of the lese. Private respondents did not answer any of these
letters. Still, the lease contracts were not rescinded.
On March 1, 1991, private respondent Tiong sent a letter to
petitioner asking Mr. So Ping Bun to vacate the premise because he used
a warehouse.
Petitioner refused to vacate. On March 4, 1992, petitioner
requested formal contracts of lease with DCCSI in favor Trendsetter
Marketing. So Ping Bun claimed that after the death of his grandfather,
So Pek Giok, he had been occupying the premises for his textile business
and religiously paid rent. DCCSI acceded to petitioners request. The
lease contracts in favor of Trendsetter were executed.
ISSUE:Whether the appellate court erred in affirming the trial courts

decision finding So Ping Bun guilty of tortuous interference of contact.
HELD:In the instant case, it is clear that petitioner So Ping Bun

prevailed upon DCCSI to lease the warehouse to his enterprise at the
expense of respondent corporation. Though petitioner took interest in the
property of respondent corporation and benefited from it, nothing on
record imputes deliberate wrongful motives or malice on him.
Cita
A duty which the law of torts is concerned with is respect for the
property of others, and cause of action ex delicto may be predicated upon
an unlawful interference by one person of the enjoyment by the other of
his private property. This may pertain to a situation where a third person
induces a party to renege on or violate his undertaking under a contract.
In the case before us, petitioners Trendsetter Marketing asked DCCSI to
execute lease contracts in its favor, and as a result petitioner deprived
respondent corporation of the latters property right. Clearly, and as
correctly viewed by the appellate court, the three elements of tort
interference above mentioned are present in the instant case.
Authorities debate on whether interference may be justified where
the defendant acts for the sole purpose of furthering his own financial or
economic interest. One view is that, as a general rule, justification for
interfering with the business relations of another exist where the actors
motive is to benefit himself. Such justification does not exist where his
sole motive is to cause harm to the other. Added to this, some authorities
believe that it is not necessary that the interferers interest outweigh that
of the party whose rights are invaded, and that an individual acts under
an economic interest that is substantial, not merely I de minimis for he
acts in self protection. Moreover, justification for protecting ones
financial position should not be made to depend on a comparison of his
economic interest in the subject matter with that of others. It is sufficient
if the impetus of his conduct lies in a proper business interest rather
than in wrongful motives.
As early as Gilchrist vs. Cuddy we held that where there was no
malice in the interference of a contract, and the impulse behind ones
conduct lies in a proper business interest rather than in wrongful
motives, a party cannot be a malicious interferer. Where the alleged
interferer is financially interested and such interest motivates his
conduct it cannot be said that he is an officious or malicious
intermeddler.
Cita
International Freeport v. Danzas

INTERNATIONAL FREEPORT TRADERS, INC., Petitioner, vs. DANZAS
INTERCONTINENTAL, INC.,Respondent.
(G.R. No. 181833 , January 26, 2011, 2nd Division)
ABAD, J.:
FACTS: In March 1997 petitioner International Freeport Traders, Inc.
(IFTI) ordered a shipment of Toblerone chocolates and assorted
confectioneries from Jacobs Suchard Tobler Ltd. of Switzerland through
its Philippine agent, Colombo Merchants Phils., Inc., under the delivery
term "F.O.B. Ex-Works."
To ship the goods, Jacobs dealt with Danmar Lines of Switzerland
(Danmar) which issued to Jacobs negotiable house bills of lading1 signed
by its agent, respondent Danzas Intercontinental, Inc..The bills of lading
stated that the terms were "F.O.B." and "freight payable at destination,"
with Jacobs as the shipper, China Banking Corporation as the
consignee, and IFTI as the party to be notified of the shipment. The
shipment was to be delivered at the Clark Special Economic Zone with
Manila as the port of discharge. The goods were also covered by Letters of
Credit MK-97/0467 and MK-97/0468 under a "freight collect"
arrangement.
Since Danmar did not have its own vessel, it contracted Orient
Overseas Container Line (OOCL) to ship the goods from Switzerland.
OOCL issued a non-negotiable master bill of lading,2 stating that the
freight was prepaid with Danmar as the shipper and Danzas as the
consignee and party to be notified. The shipment was to be delivered at
Angeles City in Pampanga. Danmar paid OOCL an arbitrary fee of
US$425.00 to process the release of the goods from the port and ship the
same to Clark in Angeles City. The fee was to cover brokerage, trucking,
wharfage, arrastre, and processing expenses.
The goods were loaded on board the OOCL vessel on April 20, 1997
and arrived at the port of Manila on May 14, 1997. Upon learning from
Danmar that the goods had been shipped, Danzas immediately informed
IFTI of its arrival. IFTI prepared the import permit needed for the clearing
and release of the goods from the Bureau of Customs and advised
Danzas on May 20, 1997 to pick up the document. Danzas got the
import permit on May 26, 1997. At the same time, it asked IFTI to 1)
surrender the original bills of lading to secure the release of the goods,
and 2) submit a bank guarantee inasmuch as the shipment was
consigned to China Banking Corporation to assure Danzas that it will be
compensated for freight and other charges.
But IFTI did not provide Danzas a bank guarantee, claiming that
letters of credit already covered the shipment. IFTI insisted that Danzas
should already endorse the import permit and bills of lading to OOCL
since the latter had been paid an arbitrary fee. But Danzas did not do
this.
Cita
Because IFTI did not provide Danzas with the original bills of lading
and the bank guarantee, the latter withheld the processing of the release
of the goods. Danzas reiterated to IFTI that it could secure the release of
the goods only if IFTI submitted a bank guarantee. Ultimately, IFTI
yielded to the request and applied for a bank guarantee which was
approved on May 23, 1997. It claimed to have advised Danzas on even
date of its availability for pick up but Danzas secured it only on June 6,
1997.
In a letter dated June 6, 1997, Danzas told IFTI that the issuance
of a promissory note would assure the delivery of the goods to Clark. On
June 10, 1997 IFTI faxed a letter to Danzas, stating that Edwin Mabazza
of OOCL confirmed that it had been paid an arbitrary fee. IFTI
maintained, however, that it was not in a position to decide whether
Danzas was to be liable for the charges. Nonetheless, IFTI issued a
promissory note and requested that the goods be released to avoid any
further charges.
Minutes later, IFTI faxed another letter reiterating its request that
the goods be released pending payment of whatever charges Danzas had
incurred for the release and delivery of the goods to Clark. IFTI promised
to pay Danzas any charges within five days upon delivery of the goods as
soon as the investigation as to which company will shoulder the
expenses is settled.
On June 13, 1997 Danzas secured the release of the goods and
delivered the same to IFTI at Clark on June 16, 1997. IFTI faxed a letter
to Danzas, confirming the delivery. IFTI also said that Danzas General
Manager and OOCLs Mabazza visited IFTIs office to settle the charges
on the goods. Danzas agreed to charge IFTI only the electric charges and
storage fees totaling P56,000.00 (or roughly US$2,210.00) from the
original billing of about US$7,000.00. In turn, IFTI agreed to give Danzas
another opportunity to service its account and requested it to disregard
IFTIs June 10, 1997 fax letter where it said that it would no longer
employ Danzas for its future shipments for Subic and Clark.
On January 19, 1998, however, Danzas wrote IFTI, demanding payment
of P181,809.45 for its handling of the shipment. IFTI ignored the
demand. On March 26, 1998 Danzas filed separate complaints for sum of
money against IFTI and OOCL before the Metropolitan Trial Court (MeTC)
of Paraaque City, Branch 78. The court subsequently dismissed the
complaint against OOCL after it settled the case amicably.
In the main, Danzas claimed that IFTI engaged its services
for P181,809.45 to process the release of the goods from the port and
deliver it to IFTI at Clark but the latter reneged on its obligation,
compelling Danzas to file the suit.
IFTI countered that it had no liability to Danzas since IFTI was not
privy to the hiring of Danzas. Following normal procedure, IFTI coursed
the import permit to Danzas since it was the party that issued the house
bills of lading. IFTI added that under arbitrary shipments, imported
goods are allowed to stay free of charge in the port for three working days
and in the storage for five to six calendar days. Storage fees, electricity
charges, and demurrage become due only after such period. In this case,
Cita
IFTI informed Danzas on May 20, 1997 to pick up the import permit but
Danzas picked it up only on May 26, 1997. And instead of endorsing it
with the bills of lading to OOCL, Danzas itself processed the release of
the goods. Since Danzas failed to process the release or transshipment of
the goods within the three-day period, then it should shoulder all the
charges from May 20, 1997 to June 13, 1999.
On January 2, 2002, the MeTC rendered a decision in favor of
Danzas and ordered IFTI to pay (1) P181,809.45 plus legal interest to be
computed from March 26, 1998 until fully paid; (2) P25,000.00 as
attorneys fees; and (3) the costs of suit. On appeal, however, the
Regional Trial Court dismissed the complaint.
Danzas elevated the case to the Court of Appeals which reversed
the RTC decision. The CA ruled that IFTIs fax letters dated June 10,
1997 showed the parties engaged in negotiation stage. When IFTI heeded
Danzas request for a bank guarantee, its action brought about a
perfected contract of lease of service. The bank guarantee, procured by
IFTI, contained all the requisites of a perfected contract. The cause of the
contract was the release of the goods from the port and its delivery at
Clark; the consideration was the compensation for the release and
delivery of the goods to IFTI.
ISSUES:
1. Whether or not a contract of lease of service exists between IFTI

and Danzas; and
2. Whether or not IFTI is liable to Danzas for the costs of the delay
in the release of the goods from the port.
HELD:
1. The facts show the existence of several contracts: one between
IFTI and Jacobs, another between Jacobs and Danmar, and still another
between Danmar and OOCL. IFTI bought chocolates and confectioneries
from Jacobs; Jacobs got Danmar to deliver the goods to its destination;
Danmar got OOCL to carry the goods for it by ship to Manila. For this
purpose, Danmar paid OOCL an arbitrary fee to process the release of
the goods from the port of Manila and deliver the same to Clark. In all
these transactions, Danzas acted as an agent of Danmar who signed the
house bills of lading in favor of Jacobs.
In short, the combined services of different carriers were used for
the delivery of the goods: Danmar, as the initial carrier, assumed the
responsibility of conveyance when it received the goods for
transportation; OOCL, as the forwarding carrier, had the duty to deliver
the goods to Danzas which was designated as the consignee in the
master bill of lading; and Danzas, being the agent of Danmar, assumed
the responsibility for delivering the goods from Manila to IFTI at
Clark.6 Evidently, although Danmar intended the arbitrary fee that it
paid OOCL to cover the latters delivery of the goods all the way to
Danzas, the latter had no notion of and was not a party to such
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arrangement. Since the last leg of the delivery of the goods to IFTI at
Clark devolved on Danzas, the latter insisted that it was entitled to
collect a separate fee following the terms of the sale and the house bills of
lading .
At first, IFTI did not want to pay more but when Danzas would not
move the goods until it was assured that it would be paid, IFTI eventually
negotiated with Danzas for its services. IFTI prepared the import permit
and advised Danzas to pick up the document. But Danzas told IFTI that
it also needed the house bills of lading and the bank guarantee. If IFTI
believed that it was OOCLs responsibility to deliver the goods at its
doorsteps, then it should not have asked Danzas to pick up the import
permit and submit to it the bank guarantee and promissory note that it
required. IFTI should have instead addressed its demand to OOCL for the
delivery of the goods.
What is clear to the Court is that, by acceding to all the
documentary requirements that Danzas imposed on it, IFTI voluntarily
accepted its services. The bank guarantee IFTI gave Danzas assured the
latter that it would eventually be paid all freight and other charges
arising from the release and delivery of the goods to it.
Another indication that IFTI recognized its contract with Danzas is
when IFTI requested Danzas to have the goods released pending payment
of whatever expenses the latter would incur in obtaining the release and
delivery of the goods at Clark. It also admitted that it initially settled with
Danzas General Manager and OOCLs Mabazza the issue regarding the
charges on the goods after Danzas agreed to bill IFTI for the electric
charges and storage fees totaling P56,000.00. Certainly, this concession
indicated that their earlier agreement did not push through.
Every contract has the elements of (1) consent of the contracting
parties; (2) object certain which is the subject matter of the contract; and
(3) cause of the obligation which is established. A contract is perfected by
mere consent, which is manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are to constitute the
contract.
Generally, contracts undergo three distinct stages: (1) preparation
or negotiation; (2) perfection; and (3) consummation. Negotiation begins
from the time the prospective contracting parties manifest their interest
in the contract and ends at the moment of agreement of the parties. The
perfection or birth of the contract takes place when the parties agree
upon the essential elements of the contract. The last stage is the
consummation of the contract where the parties fulfill or perform the
terms they agreed on, culminating in its extinguishment. Here, there is
no other conclusion than that the parties entered into a contract of lease
of service for the clearing and delivery of the imported goods.
2. There is no dispute that under arbitrary shipments, imported

goods are allowed to stay, free of charge, in the port for three working
days, and in the storage for five to six calendar days. Beyond this period,
storage fees, electric charges, and the demurrage are due.
Cita
Since the goods arrived at the Port of Manila on May 14, 1997, they
could remain there until May 20, 1997 free of charge. The fact that IFTI
had the import permit ready by May 20, 1997 was immaterial since it
had not yet given the bank guarantee required of it. The Court is not
convinced that IFTI had the bank guarantee ready as early as May 23,
1997 for, if that were the case, surely it did not make sense for it not to
hand over such document to Danzas when the latter claimed the import
permit on May 26, 1997.
Since the delay in the processing of the release of the goods was
due to IFTIs fault, the CA rightly adjudged it liable for electric charges,
demurrage, and storage fees of P122,191.75 from May 20, 1997 to June
13, 1999.
Rockland V Mid-Pasig Development
Cita
ROCKLAND CONSTRUCTIONCOMPANY, INC., Petitioner, vs. MID

PASIG LAND DEVELOPMENT CORPORATION, Respondent
(G.R. No. 164587, February 4, 2008, 2 nd Division)
QUISUMBING, J.:
FACTS:Rockland Construction Company, Inc. in a letter dated March 1,

2000, offered to lease from Mid-Pasig Land Development Corporation the
latters 3.1-hectare property in Pasig City. This property is covered by
Transfer Certificate of Title Nos. 469702 and 337158 under the control of
the Presidential Commission on Good Government. Upon instruction of
Mid-Pasig to address the offer to the PCGG, Rockland wrote the PCGG on
April 15, 2000. The letter, addressed to PCGG Chairman Magdangal
Elma, included Rockland proposed terms and conditions for the lease.
This letter was also received by Mid-Pasig on April 18, 2000, but Mid-
Pasig made no response.
Again, in another letter dated June 8, 2000 addressed to the
Chairman of Mid-Pasig, Mr. Ronaldo Salonga, Rockland sent a
Metropolitan Bank and Trust Company Check No. 2930050168 for P1
million as a sign of its good faith and readiness to enter into the lease
agreement under the certain terms and conditions stipulated in the
letter. Mid-Pasig received this letter on July 28, 2000.
In a subsequent follow-up letterdated February 2, 2001, Rockland then
said that it presumed that Mid-Pasig had accepted its offer because the
P1 million check it issued had been credited to Mid-Pasigs account on
December 5, 2000.
Mid-Pasig, however, denied it accepted Rocklands offer and
claimed that no check was attached to the said letter. It also vehemently
denied receiving the P1 million check, much less depositing it in its
account.
In its letter dated February 6, 2001, Mid-Pasig replied to Rockland
that it was only upon receipt of the latters February 2 letter that the
former came to know where the check came from and what it was for.
Nevertheless, it categorically informed Rockland that it could not
entertain the latters lease application. Mid-Pasig reiterated its refusal of
Rocklands offer in a letter dated February 13, 2001.
Rockland then filed an action for specific performance. Rockland
sought to compel Mid-Pasig to execute in Rocklands favor, a contract of
lease over a 3.1-hectare portion of Mid-Pasigs property in Pasig City.
ISSUES:
Was there a perfected contract of lease?
Had estoppel in pais set in?
HELD:A close review of the events in this case, in the light of the parties
evidence, shows that there was no perfected contract of lease between
the parties. Mid-Pasig was not aware that Rockland deposited the P1
million check in its account. It only learned of Rocklands check when it
Cita
received Rocklands February 2, 2001 letter. Mid-Pasig, upon

investigation, also learned that the check was deposited at the Philippine
National Bank San Juan Branch, instead of PNB Ortigas Branch where
Mid-Pasig maintains its account. Immediately, Mid-Pasig wrote Rockland
on February 6, 2001 rejecting the offer, and proposed that Rockland
apply the P1 million to its other existing lease instead. These
circumstances clearly show that there was no concurrence of Rocklands
offer and Mid-Pasigs acceptance.
Mid-Pasig is also not in estoppel in pais. The doctrine of estoppel is
based on the grounds of public policy, fair dealing, good faith and justice,
and its purpose is to forbid one to speak against his own act,
representations, or commitments to the injury of one to whom they were
directed and who reasonably relied thereon. Since estoppel is based on
equity and justice, it is essential that before a person can be barred from
asserting a fact contrary to his act or conduct, it must be shown that
such act or conduct has been intended and would unjustly cause harm
to those who are misled if the principle were not applied against him.
Hence, the petition was denied.
Cita
MMDA v. JANCOM
METROPOLITAN MANILA DEVELOPMENT AUTHORITY, petitioner, vs.
JANCOM ENVIRONMENTAL CORPORATION and JANCOM INTERNATIONAL
DEVELOPMENT PROJECTS PTY. LIMITED OF AUSTRALIA, respondents.
(G.R. No. 147465. January 30, 2002, 3rd Division)
MELO, J.:
FACTS: The Philippine Government under the Ramos Administration,

and through the Metro Manila Development Authority (MMDA)
Chairman, and the Cabinet Officer for Regional Development-National
Capital Region (CORD-NCR), entered into a contract with respondent
JANCOM, on waste-to-energy projects for the waste disposal sites in San
Mateo, Rizal and Carmona, Cavite under the build-operate-transfer (BOT)
scheme.
However, before President Ramos could have signed the said
contract, there was a change in the Administration and EXECOM. Said
change caused the passage of the law, the Clean Air Act, prohibiting the
incineration of garbage and thus, against the contents of said contract.
The Philippine Government, through the MMDA Chairman, declared said
contract inexistent for several reasons. Herein respondent filed a suit
against petitioner. The Regional Trial Court ruled in favor of the
respondent. Instead of filing an appeal to the decision, petitioner filed a
writ of certiorari on the Court of Appeals, which the latter granted. The
Regional Trial Court declared its decision final and executory, for which
the petitioner appealed to the CA, which the CA denied such appeal and
affirming RTCs decision.
ISSUE: Whether or not a valid contract is existing between herein

petitioner and respondent.
HELD: Under Article 1305 of the Civil Code, a contract is a meeting of

minds between two persons whereby one binds himself, with respect to
the other, to give something or to render some service. A contract
undergoes three distinct stages- preparation or negotiation, its
perfection, and finally, its consummation. Negotiation begins from the
time the prospective contracting parties manifest their interest in the
contract and ends at the moment of agreement of the parties. The
perfection or birth of the contract takes place when the parties agree
upon the essential elements of the contract. The last stage is the
consummation of the contract wherein the parties fulfill or perform the
terms agreed upon in the contract, culminating in the extinguishment
thereof. Article 1315 of the Civil Code, provides that a contract is
perfected by mere consent. Consent, on the other hand, is manifested by
the meeting of the offer and the acceptance upon the thing and the cause
which are to constitute the contract. In the case at bar, the signing and
execution of the contract by the parties clearly show that, as between the
parties, there was a concurrence of offer and acceptance with respect to
the material details of the contract, thereby giving rise to the perfection of
Cita
the contract. The execution and signing of the contract is not disputed by
the parties. As the Court of Appeals aptly held: Contrary to petitioners
insistence that there was no perfected contract, the meeting of the offer
and acceptance upon the thing and the cause, which are to constitute
the contract (Arts. 1315 and 1319, New Civil Code), is borne out by the
records.
Admittedly, when petitioners accepted private respondents bid
proposal (offer), there was, in effect, a meeting of the minds upon the
object (waste management project) and the cause (BOT scheme). Hence,
the perfection of the contract. In City of Cebu vs. Heirs of Candido Rubi,
the Supreme Court held that the effect of an unqualified acceptance of
the offer or proposal of the bidder is to perfect a contract, upon notice of
the award to the bidder.
In fact, in asserting that there is no valid and binding contract
between the parties, MMDA can only allege that there was no valid notice
of award; that the contract does not bear the signature of the President
of the Philippines; and that the conditions precedent specified in the
contract were not complied with.
In asserting that the notice of award to JANCOM is not a proper
notice of award, MMDA points to the Implementing Rules and
Regulations of Republic Act No. 6957, otherwise known as the BOT Law,
which require that i) prior to the notice of award, an Investment
Coordinating Committee clearance must first be obtained; and ii) the
notice of award indicate the time within which the awardee shall submit
the prescribed performance security, proof of commitment of equity
contributions and indications of financing resources.
Admittedly, the notice of award has not complied with these
requirements. However, the defect was cured by the subsequent
execution of the contract entered into and signed by authorized
representatives of the parties; hence, it may not be gainsaid that there is
a perfected contract existing between the parties giving to them certain
rights and obligations (conditions precedents) in accordance with the
terms and conditions thereof. We borrow the words of the Court of
Appeals:
Petitioners belabor the point that there was no valid notice of award
as to constitute acceptance of private respondents offer. They maintain
that former MMDA Chairman Oretas letter to JANCOM EC dated
February 27, 1997 cannot be considered as a valid notice of award as it
does not comply with the rules implementing Rep. Act No. 6957, as
amended. The argument is untenable.
Cita
Rockland V Mid-Pasig Development

ROCKLAND CONSTRUCTIONCOMPANY, INC., Petitioner, vs. MID
PASIG LAND DEVELOPMENT CORPORATION, Respondent
QUISUMBING, J.:
FACTS: Rockland Construction Company, Inc. in a letter dated March 1,

2000, offered to lease from Mid-Pasig Land Development Corporation the
latters 3.1-hectare property in Pasig City. This property is covered by
Transfer Certificate of Title Nos. 469702 and 337158 under the control of
the Presidential Commission on Good Government. Upon instruction of
Mid-Pasig to address the offer to the PCGG, Rockland wrote the PCGG on
April 15, 2000. The letter, addressed to PCGG Chairman Magdangal
Elma, included Rockland proposed terms and conditions for the lease.
This letter was also received by Mid-Pasig on April 18, 2000, but Mid-
Pasig made no response.
Again, in another letter dated June 8, 2000 addressed to the
Chairman of Mid-Pasig, Mr. Ronaldo Salonga, Rockland sent a
Metropolitan Bank and Trust Company Check No. 2930050168 for P1
million as a sign of its good faith and readiness to enter into the lease
agreement under the certain terms and conditions stipulated in the
letter. Mid-Pasig received this letter on July 28, 2000.
In a subsequent follow-up letterdated February 2, 2001, Rockland then
said that it presumed that Mid-Pasig had accepted its offer because the
P1 million check it issued had been credited to Mid-Pasigs account on
December 5, 2000.
Mid-Pasig, however, denied it accepted Rocklands offer and
claimed that no check was attached to the said letter. It also vehemently
denied receiving the P1 million check, much less depositing it in its
account.
In its letter dated February 6, 2001, Mid-Pasig replied to Rockland
that it was only upon receipt of the latters February 2 letter that the
former came to know where the check came from and what it was for.
Nevertheless, it categorically informed Rockland that it could not
entertain the latters lease application. Mid-Pasig reiterated its refusal of
Rocklands offer in a letter dated February 13, 2001.
Rockland then filed an action for specific performance. Rockland
sought to compel Mid-Pasig to execute in Rocklands favor, a contract of
lease over a 3.1-hectare portion of Mid-Pasigs property in Pasig City.
ISSUES:
Was there a perfected contract of lease?
Had estoppel in pais set in?
HELD: A close review of the events in this case, in the light of the parties
evidence, shows that there was no perfected contract of lease between
the parties. Mid-Pasig was not aware that Rockland deposited the P1
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million check in its account. It only learned of Rocklands check when it

received Rocklands February 2, 2001 letter. Mid-Pasig, upon
investigation, also learned that the check was deposited at the Philippine
National Bank San Juan Branch, instead of PNB Ortigas Branch where
Mid-Pasig maintains its account. Immediately, Mid-Pasig wrote Rockland
on February 6, 2001 rejecting the offer, and proposed that Rockland
apply the P1 million to its other existing lease instead. These
circumstances clearly show that there was no concurrence of Rocklands
offer and Mid-Pasigs acceptance.
Mid-Pasig is also not in estoppel in pais. The doctrine of estoppel is
based on the grounds of public policy, fair dealing, good faith and justice,
and its purpose is to forbid one to speak against his own act,
representations, or commitments to the injury of one to whom they were
directed and who reasonably relied thereon. Since estoppel is based on
equity and justice, it is essential that before a person can be barred from
asserting a fact contrary to his act or conduct, it must be shown that
such act or conduct has been intended and would unjustly cause harm
to those who are misled if the principle were not applied against him.
Hence, the petition was denied.
Manila Metal v. PNB
Cita
MANILA METAL CONTAINER CORPORATION,Petitioner, REYNALDO

C. TOLENTINO, Intervenor, vs. PHILIPPINE NATIONAL BANK,
Respondent, DMCI-PROJECT DEVELOPERS, INC., Intervenor.
(G.R. No. 166862, December 20, 2006, 1 st Division)
CALLEJO, SR., J.:
FACTS: Manila Metal Corp. executed a real estate mortgage (TCT. 32098)
as a security for its loan from PNB amounting to 900,000 php, later on
1,000,000 php and 653,000 php. Aug. 5, 1982: PNB filed a petition for
extrajudicial foreclosure for the property to be sold at a public auction
911,532.21 php (outstanding as of June 30) + interest + attorney's fees.
Sept. 2, 1982: PNB won the public auction at 1,000,000 php; Feb. 17,
1983: Certificate of Sale was issued and registered at the Registry of
Deeds and was annotated at the dorsal portion of the title (Redeemable
until Feb 17,1983); Petitioner requested 1 year extension until Feb
17,1984 but was rejected by PNB saying it is their policy not to accept
partial redemption; Jun. 1,1984: Since petitioner failed to redeem, TCT.
32098 was cancelled and a new title was issued in favor of PNB
Meanwhile, Special Assets Management Department (SAMD) had

prepared a statement of account as of Jun 25,1984 amounting to
1,574,560.47 php. Petitioner deposited 725,000 php as deposit to
repurchase and was issued an O.R. PNB management rejected the
recommendation of SAMD and demanded that petitioner pay the markt
value of 2,660,000 php. On Jun 24, 1984: PNB informed petitioner that
its B.O.D had agreed to accept its offer to purchase but at 1,931,389.53
less the 725,000 php. PNB President did not conform to the letter but
merely indicated that he has received it. Petitioner rejected this since
PNB has already accepted its downpayment so it can no longer increase
the price. PNB also rejected petitioners payment for the balance.
Petitioner filed a complaint against PNB for Annulment of Mortgage and
Mortgage Foreclosure, Delivery of Title, or Specific Performance with
Damages. CA affirmed RTC: Favored PNB and demanded that it refund
the 725,000 php (no sale because no meeting of the minds in terms of
price). Lot was later transferred to its PNB President Bayani Gabriel
Petitioner filed a petition for certiorari
ISSUE: (1) Whether or not the statement of account by SAMD is only a

recommendation subject to the approval of the BOD - YES
(2) Whether or not there was a contract of sale - NO
(3) Whether or not earnest money establishes a contract of sale -

NO
Cita
HELD: Denied. Costs Against Petitioner.
(1).YES . Art. 1318 of NCC: no contract unless the following

requisites concur: Consent of the contracting parties; Object certain
which is the subject matter of the contract; Cause of the obligation which
is established. The fixing of the price can never be left to the decision of
one of the contracting parties. But a price fixed by one of the contracting
parties, if accepted by the other, gives rise to a perfected sale. When
there is merely an offer by one party without acceptance of the other,
there is no contract.
(2) NO. Section 23 of the Corporation Code: corporate powers of all

corporations shall be exercised by the board of directors. Just as a
natural person may authorize another to do certain acts in his behalf, so
may the board of directors of a corporation validly delegate some of its
functions to individual officers or agents appointed by it. Thus, contracts
or acts of a corporation must be made either by the board of directors or
by a corporate agent duly authorized by the board. Absent such valid
delegation/authorization, the rule is that the declarations of an
individual director relating to the affairs of the corporation, but not in the
course of, or connected with the performance of authorized duties of
such director, are held not binding on the corporation. a corporation can
only execute its powers and transact its business through its: Board of
Directors officers and agents when authorized by: a board resolution;or
its by-laws.
(3) NO. ART. 1482. Whenever earnest money is given in a contract

of sale, it shall be considered as part of the price and as proof of the
perfection of the contract. The deposit of P725,000 was accepted by PNB
on the condition that the purchase price is still subject to the approval of
the PNB Board. Absent proof of the concurrence of all the essential
elements of a contract of sale, the giving of earnest money cannot
establish the existence of a perfected contract of sale.
Cita
Montecillo v. Reynes
RIDO MONTECILLO, petitioner, vs. IGNACIA REYNES and SPOUSES
REDEMPTOR and ELISA ABUCAY, respondents.
(G.R. No. 138018 , July 26, 2002, 3rd Division)
CARPIO, J.:
FACTS:Respondents Ignacia Reynes and spouses Abucay filed on June

20, 1984 a complaint for Declaration of Nullity and Quieting of Title
against petitioner Rico Montecillo. Reynes asserted that she is the owner
of a lot situated in Mabolo, Cebu City. In 1981 Reynes sold 185 square
meters of the Mabolo Lot to the Abucay Spouses who built a residential
house on the lot they bought.
Reynes alleged further that she signed a Deed of Sale of the Mabolo
Lot in favor of Montecillo. Reynes, being illiterate signed by affixing her
thumb-mark on the document. Montecillo promised to pay the agreed
P47,000.00 purchase price within one month from the signing of the
Deed of Sale. And that Montecillo failed to pay the purchase price after
the lapse of the one-month period, prompting Reynes to demand from
Montecillo the return of the Deed of Sale. Since Montecillo refused to
return the Deed of Sale, Reynes executed a document unilaterally
revoking the sale and gave a copy of the document to Montecillo.
Subsequently, on May 23, 1984 Reynes signed a Deed of Sale
transferring to the Abucay Spouses the entire Mabolo Lot, at the same
time confirming the previous sale in 1981 of a 185 square meter portion
of the lot.
Reynes and the Abucay Spouses alleged that they received
information that the Register of Deeds of Cebu City issued a Certificate of
Title in the name of Montecillo for the Mabolo Lot. They argued that for
lack for consideration there (was no meeting of the minds) between
Reynes and Montecillo. Thus, the trial court should declare null and void
ab initio Monticellos Deed of sale, and order the cancellation of
certificates of title No. 90805 in the name of Montecillo.
In his Answer, Montecillo a bank executive claimed he was a buyer
in good faith and had actually paid the P47,000.00 consideration stated
on his Deed of Sale. Montecillo however admitted he still owned Reynes a
balance of P10,000.00. He also alleged that he paid P50,000.00 for the
release of the chattel mortgage which he argued constituted a lien on the
Mabolo Lot. He further alleged that he paid for the real property tax as
well as the capital gains tax on the sale of the Mabolo Lot.
In their reply, Reynes and the Abucay Spouses contended that
Montecillo did not have authority to discharge the chattel mortgage
especially after Reynes revoked Montecillos Deed of Sale and gave the
mortgagee a copy of the document of revocation. Reynes and the Abucay
Spouses claimed that Montecillo secured the release of the chattel
mortgage through machination. They further asserted that Montecillo
took advantage of the real property taxes paid by the Abucay Spouses
Cita
and surreptitiously caused the transfer of the title to the Mabolo Lot in
his name.
During pre-trial Montecillo claimed that the consideration for the
sale of the Mabolo Lot was the amount he paid to Cebu Iced and Cold
Storage Corporation for the mortgage debt of Bienvenido Jayag.
Montecillo argued that the release of the mortgage was necessary since
the mortgage constituted a lien on the Mabolo Lot.
Reynes, however stated that she had nothing to do with Jayags
mortgage debt except that the house mortgaged by Jayag stood on a
portion of the Mabolo Lot. Reynes further stated that the payment by
Montecillo to release the mortgage on Jayags house is a matter between
Montecillo and Jayag. The mortgage on the house being a chattel
mortgage could not be interpreted in any way as an encumbrance on the
Mabolo Lot. Reynes further claimed that the mortgage debt had long
prescribed since the P47,000.00 mortgage debt was due for payment on
January 30,1967.
ISSUE:Whether or not there was a valid consent in the case at bar to

have a valid contract.
HELD:One of the three essential requisites of a valid contract is consent

of the parties on the object and cause of the contract. In a contract of
sale, the parities must agree not only on the price, but also on the
manner of payment of the price. An agreement on the price but a
disagreement on the manner of its payment will not result in consent,
thus preventing the existence of a valid contract for a lack of consent.
This lack of consent is separate and distinct for lack of consideration
where the contract states that the price has been paid when in fact it has
never been paid.
Reynes expected Montecillo to pay him directly the P47, 000.00
purchase price within one month after the signing of the Deed of Sale.
On the other hand, Montecillo thought that his agreement with Reynes
required him to pay the P47,000.00-purchase price to Cebu Ice Storage
to settle Jayags mortgage debt. Montecillo also acknowledged a balance
of P10, 000.00 in favor of Reynes although this amount is not stated in
Montecillos Deed of Sale. Thus, there was no consent or meeting of the
minds, between Reynes and Montecillo on the manner of payment. This
prevented the existence of a valid contract because of lack of consent.
In summary, Montecillos Deed of Sale is null and void ab initio not
only for lack of consideration, but also for lack of consent. The
cancellation of TCT No. 90805 in the name of Montecillo is in order as
there was no valid contract transferring ownership of the Mabolo Lot
from Reynes to Montecillo.
Cita
Soler v CA
JASMIN SOLER, petitioner, vs. COURT OF APPEALS, COMMERCIAL
BANK OF MANILA, and NIDA LOPEZ, respondents.
(G.R. No. 123892 , May 21, 2001, 1 st Division)
PARDO, J.:
Facts:Petitioner is a professional interior designer. In November 1986,

her friend Rosario Pardo asked her to talk to Nida Lopez, who was
manager of the COMBANK Ermita Branch for they were planning to
renovate the branch offices. Even prior to November 1986, petitioner and
Nida Lopez knew each other because of Rosario Pardo, the latters sister.
During their meeting, petitioner was hesitant to accept the job because of
her many out of town commitments, and also considering that Ms. Lopez
was asking that the designs be submitted by December 1986, which was
such a short notice. Ms. Lopez insisted, however, because she really
wanted petitioner to do the design for renovation. Petitioner acceded to
the request. Ms. Lopez assured her that she would be compensated for
her services. Petitioner even told Ms. Lopez that her professional fee was
P10,000.00, to which Ms. Lopez acceded.
During the November 1986 meeting between petitioner and Ms.
Lopez, there were discussions as to what was to be renovated. Ms. Lopez
again assured petitioner that the bank would pay her fees. After a few
days, petitioner requested for the blueprint of the building so that the
proper design, plans and specifications could be given to Ms. Lopez in
time for the board meeting in December 1986. Petitioner then asked her
draftsman Jackie Barcelon to go to the jobsite to make the proper
measurements using the blue print. Petitioner also did her research on
the designs and individual drawings of what the bank wanted. Petitioner
hired Engineer Ortanez to make the electrical layout, architects Frison
Cruz and De Mesa to do the drafting. For the services rendered by these
individuals, petitioner paid their professional fees. Petitioner also
contacted the suppliers of the wallpaper and the sash makers for their
quotation. So come December 1986, the lay out and the design were
submitted to Ms. Lopez. She even told petitioner that she liked the
designs.
Subsequently, petitioner repeatedly demanded payment for her
services but Ms. Lopez just ignored the demands. In February 1987, by
chance petitioner and Ms. Lopez saw each other in a concert at the
Cultural Center of the Philippines. Petitioner inquired about the payment
for her services, Ms. Lopez curtly replied that she was not entitled to it
because her designs did not conform to the banks policy of having a
standard design, and that there was no agreement between her and the
bank.
Petitioner, through her lawyers, who wrote Ms. Lopez, demanding
payment for her professional fees in the amount of P10,000.00 which Ms.
Lopez ignored. The lawyers wrote Ms. Lopez once again demanding the
return of the blueprint copies petitioner submitted which Ms. Lopez
refused to return. The petitioner then filed at the trial court a complaint
Cita
against COMBANK and Ms. Lopez for collection of professional fees and
damages.
In its answer, COMBANK stated that there was no contract between
COMBANK and petitioner; that Ms. Lopez merely invited petitioner to
participate in a bid for the renovation of the COMBANK Ermita Branch;
that any proposal was still subject to the approval of the COMBANKs
head office.
The trial court rendered judgment in favor of plaintiff. On appeal,
the Court of Appeals reversed the decision. Hence, this petition.
ISSUE:Whether or not the Court of Appeals erred in HELD that there was
no contract between petitioner and respondents, in the absence of the
element of consent.
HELD:A contract is a meeting of the minds between two persons whereby

one binds himself to give something or to render some service to bind
himself to give something to render some service to another for
consideration. There is no contract unless the following requisites
concur: 1. Consent of the contracting parties; 2. Object certain which is
the subject matter of the contract; and 3. Cause of the obligation which
is established.
In the case at bar, there was a perfected oral contract. When Ms.
Lopez and petitioner met in November 1986, and discussed the details of
the work, the first stage of the contract commenced. When they agreed to
the payment of the P10,000.00 as professional fees of petitioner and that
she should give the designs before the December 1986 board meeting of
the bank, the second stage of the contract proceeded, and when finally
petitioner gave the designs to Ms. Lopez, the contract was consummated.
Petitioner believed that once she submitted the designs she would be
paid her professional fees. Ms. Lopez assured petitioner that she would
be paid.
It is familiar doctrine that if a corporation knowingly permits one of
its officers, or any other agent, to act within the scope of an apparent
authority, it holds him out to the public as possessing the power to do
those acts; and thus, the corporation will, as against anyone who has in
good faith dealt with it through such agent, be estopped from denying
the agents authority.
Also, petitioner may be paid on the basis of quantum meruit. "It is
essential for the proper operation of the principle that there is an
acceptance of the benefits by one sought to be charged for the services
rendered under circumstances as reasonably to notify him that the
lawyer performing the task was expecting to be paid compensation
therefor. The doctrine of quantum meruit is a device to prevent undue
enrichment based on the equitable postulate that it is unjust for a
person to retain benefit without paying for it."
The designs petitioner submitted to Ms. Lopez were not returned.
Ms. Lopez, an officer of the bank as branch manager used such designs
for presentation to the board of the bank. Thus, the designs were in fact
Cita
useful to Ms. Lopez for she did not appear to the board without any
designs at the time of the deadline set by the board.
Decision reversed and set aside. Decision of the trial court affirmed.
Palattao vs. CA
Cita
YOLANDA PALATTAO, petitioner, vs. THE COURT OF APPEALS,

HON. ANTONIO J. FINEZA, as Presiding Judge of the Regional Trial
Court of Caloocan City, Branch 131 and MARCELO CO, respondents.
FACTS: Petitioner Yolanda Palattao entered into a lease contract

whereby she leased to private respondent a house and a 490-square-
meter lot located in 101 Caimito Road, Caloocan City, covered by a
Transfer Certificate of Title and registered in the name of petitioner. The
duration of the lease contract was for three years, commencing from
January 1, 1991, to December 31, 1993, renewable at the option of the
parties. The agreed monthly rental was P7,500.00 for the first year; P
8,000.00 for the second year: and P8,500.l00 for the third year. The
contract gave respondent lessee the first option to purchase the leased
property.
During the last year of the contract, the parties began negotiations
for the sale of the leased premises to private respondent. In a letter,
petitioner offered to sell to private respondents 413.28 square meters of
the leased lot at P 7,800.00 per square meter, or for the total amount of
P3,223,548.00. Private respondents replied on April 15, 1993 wherein he
informed petitioner that he shall definitely exercise his option to buy
the leased property. Private respondent, however, manifested his desire
to buy the whole 490-square meters inquired from petitioner the reason
why only 413.28 square meters of the leased lot were being offered for
sale. In a letter dated November 6, 1993, petitioner made a final offer to
sell the lot at P7,500.00 per square meter with a down payment of 50%
upon the signing of the contract of conditional sale, the balance payable
in one year with a monthly lease/interest payment P 14,000.00 which
must be paid on or before the fifth day every month that the balance is
still outstanding. Private respondents accepted petitioners offer and
reiterated his request for respondent accepted petitioners offers and
reiterated his request for clarification as to the size of the lot for sale.
Petitioner acknowledged private respondents acceptance of the offer in
his letter dated November 10, 1993.
Petitioner gave private respondent on or before November 24, 1993,
within which to pay the 50% downpayment in cash or managers check.
Petitioner stressed that failure to pay the downpayment on the stipulated
period will enable petitioner to freely sell her property to others.
Petitioner likewise notified private respondent, that she is no longer
renewing the lease agreement upon its expiration on December 31, 1993.
Private respondent did not accept the terms proposed by petitioner.
Neither were there any documents of sale nor payment by private
respondent of the required downpayment. Private respondent wrote a
letter to petitioner on November 29, 1993 manifesting his intention to
exercise his option to renew their lease contract for another three years,
starting January 1, 1994 to December 31, 1996. This was rejected by
petitioner, reiterating that she was no longer renewing the lease.
Cita
Petitioner demanded that private respondent vacate the premises,

but the latter refused.
Hence, private respondent filed with the Regional Trial Court a case
for specified performance seeking to compel petitioner to sell to him the
leased property. Private respondent further prayed for the issuance of a
writ preliminary injunction to prevent petitioner from filing an ejectment
case upon the expiration of the lease contract on December 31, 1993.
During the proceedings in the specific performance case, the
parties agreed to maintain the status quo. After they failed to reach an
amicable settlement, petitioner filed the instant ejectment case before the
Metropolitan Trial Court. In his answer, private respondent alleged that
he refused to vacate the leased premises because there was a perfected
contract of sale of the leased property between him and petitioner.
Private respondent argued that he did not abandon his option to buy the
leased property and that his proposal to renew the lease was but an
alternative proposal to the sale. He further contended that the filing of
the ejectment case violated their agreement to maintain the status quo.
ISSUE:Whether or not there was a valid consent in the case at bar.
HELD:There was no valid consent in the case at bar. Contracts that are
consensual in nature, like a contract of sale, are perfected upon mere
meeting of the minds. Once there is concurrence between the offer and
the acceptance upon the subject matter, consideration, and terns of
payment, a contract is produced. The offer must be certain. To convert
the offer into a contract, the acceptance must be absolute and must not
qualify the terms of the offer; it must be plain, unequivocal,
unconditional, and without variance of any sort from the proposal. A
qualified acceptance, or one that involves a new proposal, constitutes a
counter-offer and is a rejection of the original offer. Consequently, when
something is desired which is not exactly is proposed in the offer, such
acceptance is not sufficient to generate consent because any modification
or variation from the terms of the offer annuals the offer.
In the case at bar, while it is true that private respondent informed
petitioner that he is accepting the latters offer to sell the leased property,
it appears that they did not reach an agreement as to the extent of the lot
subject of the proposed sale.
Letters reveal that private respondent did not give his consent to
buy only 413.28 square meters of the leased lot, as he desired to
purchase the whole 490 square-meter- leased premises which, however,
was not what was exactly proposed in petitioners offer. Clearly,
therefore, private respondents acceptance of petitioners offer was not
absolute, and will consequently not generate consent that would perfect
a contract.
Cita
ABS-CBN v. CA
ABS-CBN BROADCASTING CORPORATION, petitioner, vs.
HONORABLE COURT OF APPEALS, REPUBLIC BROADCASTING
CORP, VIVA PRODUCTION, INC., and VICENTE DEL
ROSARIO, respondents.
DAVIDE, JR., CJ.:
FACTS:In 1990, ABS-CBN and VIVA executed a Film Exhibition

Agreement whereby Viva gave ABS-CBN an exclusive right to exhibit
some Viva films. Viva, through defendant Del Rosario, offered ABS-CBN,
through its vice-president Charo Santos-Concio, a list of three film
packages (36 title) from which ABS-CBN may exercise its right of first
refusal under the afore-said agreement. ABS-CBN, however through Mrs.
Concio, "can tick off only ten titles" (from the list) "we can purchase" and
therefore did not accept said list. The titles ticked off by Mrs. Concio are
not the subject of the case at bar except the film "Maging Sino Ka Man."
On February 27, 1992, defendant Del Rosario approached ABS-

CBNs Ms. Concio, with a list consisting of 52 original movie titles (i.e.,
not yet aired on television) including the 14 titles subject of the present
case, as well as 104 re-runs (previously aired on television) from which
ABS-CBN may choose another 52 titles, as a total of 156 titles, proposing
to sell to ABS-CBN airing rights over this package of 52 originals and 52
re-runs for P60,000,000.00 of which P30,000,000.00 will be in cash and
P30,000,000.00 worth of television spots.
On April 2, 1992, defendant Del Rosario and ABS-CBNs general

manager, Eugenio Lopez III discussed the package proposal of VIVA. Mr.
Lopez testified that he and Mr. Del Rosario allegedly agreed that ABS-
CBN was granted exclusive film rights to fourteen (14) films for a total
consideration of P36 million; that he allegedly put this agreement as to
the price and number of films in a "napkin" and signed it and gave it to
Mr. Del Rosario. On the other hand, Del Rosario denied having made any
agreement with Lopez regarding the 14 Viva films; denied the existence of
a napkin in which Lopez wrote something; and insisted that what he and
Lopez discussed at the lunch meeting was Vivas film package offer of
104 films (52 originals and 52 re-runs) for a total price of P60 million.
Del Rosario and Mr. Graciano Gozon of RBS Senior vice-president

for Finance discussed the terms and conditions of Vivas offer to sell the
104 films, after the rejection of the same package by ABS-CBN. On the
following day, Del Rosario received a draft contract from Ms. Concio
which contains a counter-proposal of ABS-CBN on the offer made by
VIVA including the right of first refusal to 1992 Viva Films. However, the
proposal was rejected by the Board of Directors of VIVA and such was
relayed to Ms. Concio.
Cita
On April 29, 1992, after the rejection of ABS-CBN and following

several negotiations and meetings defendant Del Rosario and Vivas
President Teresita Cruz, in consideration of P60 million, signed a letter of
agreement dated April 24, 1992, granting RBS the exclusive right to air
104 Viva-produced and/or acquired films including the fourteen films
subject of the present case.
On 27 May 1992, ABS-CBN filed before the RTC a complaint for

specific performance with a prayer for a writ of preliminary injunction
and/or temporary restraining order against private respondents Republic
Broadcasting System (now GMA Network Inc.) On 28 May 1992, the RTC
issued a temporary restraining order.
The RTC then rendered decision in favor of RBS and against ABS-
CBN. On appeal, the same decision was affirmed. Hence, this decision.
ISSUE:Whether or not there exists a perfected contract between ABS-

CBN and VIVA.
HELD:A contract is a meeting of minds between two persons whereby

one binds himself to give something or render some service to another
[Art. 1305, Civil Code.] for a consideration. There is no contract unless
the following requisites concur:
consent of the contracting parties;
object certain which is the subject of the contract; and
cause of the obligation, which is established. [Art. 1318, Civil
Code.]
A contract undergoes three stages:
(a) preparation, conception, or generation, which is the period of
negotiation and bargaining rending at the moment of agreement of the
parties;
(b) perfection or birth of the contract, which is the moment when
the parties come to agree on the terms of the contract; and
(c) consummation or death, which is the fulfillment or performance
of the terms agreed upon in the contract.
In the present case, when Mr. Del Rosario of Viva met Mr. Lopez of
ABS-CBN on 2 April 1992 to discuss the package of films, said package
of 104 VIVA films was VIVAs offer to ABS-CBN to enter into a new Film
Exhibition Agreement. But ABS-CBN, sent through Ms. Concio, counter-
proposal in the form a draft contract proposing exhibition of 53 films for
a consideration of P35 million. This counter-proposal could be nothing
less than the counter-offer of Mr. Lopez during his conference with Del
Rosario at Tamarind Grill Restaurant. Clearly, there was no acceptance
of VIVAs offer, for it was met by a counter-offer which substantially
varied the terms of the offer.
Furthermore, ABS-CBN made no acceptance of VIVAs offer hence,
they underwent period of bargaining. ABS-CBN then formalized its
counter-proposals or counter-offer in a draft contract. VIVA through its
Board of Directors, rejected such counter-offer. Even if it be conceded
Cita
arguendo that Del Rosario had accepted the counter-offer, the

acceptance did not bind VIVA, as there was no proof whatsoever that Del
Rosario had the specific authority to do so.
The instant petition was GRANTED.
Limson v. CA
Cita
LOURDES ONG LIMSON, petitioner, vs. COURT OF APPEALS,

SPOUSES LORENZO DE VERA and ASUNCION SANTOS-DE VERA,
TOMAS CUENCA, JR. and SUNVAR REALTY DEVELOPMENT
CORPORATION, respondents.
(G.R. No. 135929, April 20, 2001, 2 nd Division)
BELLOSILLO, J.:
FACTS:In July 1978, respondent spouses Lorenzo de Vera and Asuncion

Santos-de Vera, through their agent Marcosa Sanchez, offered to sell to
petitioner Lourdes Ong Limson a parcel of land. The respondent spouses
were the owners of the subject property.
On July 31, 1978, she agreed to but the property at the price of
P34. 00 per square meter and gave P20, 000.00 as earnest money. The
respondent spouses signed a receipt thereafter and gave her a 10-day
option period to purchase the property. Respondent spouses informed
petitioner that the subject property was mortgaged to Emilio Ramos and
Isidro Ramos. Petitioner was asked to pay the balance of the purchase
price to enable the respondent spouses to settle their obligation with the
Ramoses. Petitioner agreed to meet respondent spouses and the Ramoses
on August 5, 1978, to consummate the transaction; however, the
respondent spouses and the Ramoses did not appear, same with their
second meeting.
On August 23, 1978, petitioner allegedly gave respondent spouses

three checks for the settlement the back taxes of property. On September
5, 1978, the agent of the respondent spouses informed petitioner that the
property was the subject of a negotiation for the sale to respondent
Sunvar Realty Development Corporation.
Petitioner alleged that it was only on September 15, 1978, that TCT
No. S-72946 covering the property was issued to respondent spouses. On
the same day, petitioner filed and Affidavit of Adverse Claim with the
Office of the Registry of Deeds of Makati, Metro Manila. The Deed of Sale
between respondent spouses and respondent Sunvar was executed on
September 15, 1978 and TCT No. S-72377 was issued in favor of Sunvar
on September 26, 1978 with the Adverse Claim of petitioner annotated
thereon.
Respondent spouses and Sunvar filed their Answers and Answers

to Cross-Claim, respectively. On appeal, the Court of Appeals completely
reversed the decision of the trial court and ordered the Register of Deeds
of Makati City to lift the Adverse Claim and ordered petitioner to pay
respondent Sunvar and respondent spouses exemplary and nominal
damages and attorneys fees. Hence, this petition.
Cita
ISSUE:Whether or not the agreement between petitioner and respondent

spouses was a mere option or a contract to sell.
HELD:The Supreme Court held that the agreement between the parties
was a contract of option and not a contract to sell. An option is
continuing offer or contract by which the owner stipulates with another
that the latter shall have the right to buy the property at a fixed price
within a time certain, or under, or in compliance with, certain terms and
conditions, or which gives the owner of the property the right to sell or
demand a sale. It is also sometimes called an unaccepted offer. An
option is not of itself a purchase, but merely secures the privilege to buy.
It is not a sale of property but a sale of the right to purchase. Its
distinguishing characteristic is that it imposes no binding obligation on
the person holding the option, aside from the consideration for the offer.
Villanueva v. PNB
Cita
REYNALDO VILLANUEVA, petitioner, vs. PHILIPPINE NATIONAL

BANK (PNB), respondent.
(G.R. No. 154493 , December 6, 2006, 1 st Division)
FACTS:PNB published an invitation to bid two lands in General Santos

City: Lot 17, which costs P1,409,000.00, and Lot 19, which costs
P2,268,000.00.
Reynaldo Villanueva offered to purchase Lot Nos. 17 and 19 for

P3,677,000.00. He also manifested that he was depositing P400,000.00to
show his good faith but with the understanding that said amount may be
treated as part of the payment of the purchase price only when his offer
is accepted by PNB.
Guevara, the vice-president informed Villanueva that only Lot No.

19 is available and that the asking price therefor is P2,883,300.00. PNB
also stated that if quoted price is acceptable to Villanueva, then the latter
must submit a revised offer to purchase. And Sale shall be subject to its
Board of Directors approval and to other terms and conditions imposed
by the Bank on sale of acquired assets.
Villanueva accepted the counter-offer, but he provided also that he

will pay it through downpayment of P600,000.00 and the balance
payable in two (2) years at quarterly amortizations. He then proceeded to
pay for the same.
However, Guevara wrote Villanueva that upon orders of the PNB

Board of Directors to conduct another appraisal and public bidding of
Lot No. 19, they are deferring negotiations with him over said property
and returning his deposit of P580,000.00. Undaunted, Villanueva
attempted to deliver postdated checks covering the balance of the
purchase price but PNB refused the same.
Villanueva then filed a case of specific performance against PNB,

claiming that there was already an agreement between them.
ISSUE:Whether or not there is already a meeting of the minds between

Villanueva and PNB.
HELD:No, the acceptance allegedly made by Villanueva constituted a

counter-offer.
RATIO:Contracts of sale are perfected by mutual consent whereby the

seller obligates himself, for a price certain, to deliver and transfer
ownership of a specified thing or right to the buyer over which the latter
agrees. Mutual consent being a state of mind, its existence may only be
inferred from the confluence of two acts of the parties: an offer certain as
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to the object of the contract and its consideration, and an acceptance of

the offer which is absolute in that it refers to the exact object and
consideration embodied in said offer. Anything short of that level of
mutuality produces not a contract but a mere counter-offer awaiting
acceptance.
In this case, indeed Villanueva accepted the counter-offer made by
PNB wherein he the bank only Lot 19 is available and that the price was
increased. However, he qualified the acceptance by determining the
terms of the payment. The qualification turned the acceptance into a
counter-offer, thus it is not yet binding among the parties.
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Catalan v. Basa
CORAZON CATALAN, LIBRADA CATALAN-LIM, EULOGIO CATALAN,
MILA CATALAN-MILAN, ZENAIDA CATALAN, ALEX CATALAN, DAISY
CATALAN, FLORIDA CATALAN and GEMMA CATALAN, Heirs of the
late FELICIANO CATALAN, Petitioners, vs.JOSE BASA, MANUEL
BASA, LAURETA BASA, DELIA BASA, JESUS BASA and ROSALINDA
BASA, Heirs of the late MERCEDES CATALAN, Respondents.
(G.R. No. 159567, July 31, 2007, 1 st Division)
PUNO, C.J.:
FACTS:On October 20, 1948, FELICIANO CATALAN was discharged from

active military service. The Board of Medical Officers of the Department
of Veteran Affairs found that he was unfit to render military service due
to his "schizophrenic reaction, catatonic type, which incapacitates him
because of flattening of mood and affect, preoccupation with worries,
withdrawal, and sparce and pointless speech."
On September 28, 1949, Feliciano married Corazon Cerezo.
On June 16, 1951, a document was executed, titled "Absolute Deed

of Donation," wherein Feliciano allegedly donated to his sister
MERCEDES CATALAN one-half of the real property described.
The donation was registered with the Register of Deeds. The

Bureau of Internal Revenue then cancelled Tax Declaration No. 2876,
and, in lieu thereof, issued Tax Declaration No. 180804 to Mercedes for
the 400.50 square meters donated to her. The remaining half of the
property remained in Felicianos name under Tax Declaration No. 18081.
On December 11, 1953, Peoples Bank and Trust Company filed

Special Proceedings No. 45636 before the Court of First Instance of
Pangasinan to declare Feliciano incompetent. On December 22, 1953,
the trial court issued its Order for Adjudication of Incompetency for
Appointing Guardian for the Estate and Fixing Allowance of Feliciano.
The following day, the trial court appointed Peoples Bank and Trust
Company as Felicianos guardian. Peoples Bank and Trust Company has
been subsequently renamed, and is presently known as the Bank of the
Philippine Islands (BPI).
On November 22, 1978, Feliciano and Corazon Cerezo donated Lots

1 and 3 of their property, registered under Original Certificate of Title No.
18920, to their son Eulogio Catalan.
On March 26, 1979, Mercedes sold the property in issue in favor of

her children Delia and Jesus Basa. The Deed of Absolute Sale was
registered with the Register of Deeds of Pangasinan on February 20,
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1992, and Tax Declaration No. 12911 was issued in the name of
respondents.
On June 24, 1983, Feliciano and Corazon Cerezo donated Lot 2 of

the aforementioned property registered under OCT No. 18920 to their
children Alex Catalan, Librada Catalan and Zenaida Catalan. On
February 14, 1983, Feliciano and Corazon Cerezo donated Lot 4 (Plan
Psu-215956) of the same OCT No. 18920 to Eulogio and Florida
Catalan.12
On April 1, 1997, BPI, acting as Felicianos guardian, filed a case

for Declaration of Nullity of Documents, Recovery of Possession and
Ownership, as well as damages against the herein respondents. BPI
alleged that the Deed of Absolute Donation to Mercedes was void ab
initio, as Feliciano never donated the property to Mercedes. In addition,
BPI averred that even if Feliciano had truly intended to give the property
to her, the donation would still be void, as he was not of sound mind and
was therefore incapable of giving valid consent. Thus, it claimed that if
the Deed of Absolute Donation was void ab initio, the subsequent Deed of
Absolute Sale to Delia and Jesus Basa should likewise be nullified, for
Mercedes Catalan had no right to sell the property to anyone. BPI raised
doubts about the authenticity of the deed of sale, saying that its
registration long after the death of Mercedes Catalan indicated fraud.
Thus, BPI sought remuneration for incurred damages and litigation
expenses.
On August 14, 1997, Feliciano passed away. The original complaint

was amended to substitute his heirs in lieu of BPI as complainants.
On December 7, 1999, the trial court dismissed the plaintiffs

complaint and declared that the defendants Jesus Basa and Delia Basa
are the lawful owners of the land in question which is now declared in
their names under Tax Declaration No. 12911.
Petitioners appealed before the Court of Appeals which affirmed the

decision of the RTC. The appellate court held that the Regional Trial
Court did not commit a reversible error in disposing that plaintiff-
appellants failed to prove the insanity or mental incapacity of late
Feliciano Catalan at the precise moment when the property in dispute
was donated.
Thus, all the elements for validity of contracts having been present
in the 1951 donation coupled with compliance with certain solemnities
required by the Civil Code in donation inter vivos of real property under
Article 749.
Thus, petitioners filed the present appeal.
ISSUE: Whether or not the contract is valid.

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HELD:Yes. A donation is an act of liberality whereby a person disposes

gratuitously a thing or right in favor of another, who accepts it. Like any
other contract, an agreement of the parties is essential. Consent in
contracts presupposes the following requisites: (1) it should be intelligent
or with an exact notion of the matter to which it refers; (2) it should be
free; and (3) it should be spontaneous. The parties' intention must be
clear and the attendance of a vice of consent, like any contract, renders
the donation voidable.
In order for donation of property to be valid, what is crucial is the

donors capacity to give consent at the time of the donation. Certainly,
there lies no doubt in the fact that insanity impinges on consent freely
given. However, the burden of proving such incapacity rests upon the
person who alleges it; if no sufficient proof to this effect is presented,
capacity will be presumed.
A thorough perusal of the records of the case at bar indubitably

shows that the evidence presented by the petitioners was insufficient to
overcome the presumption that Feliciano was competent when he
donated the property in question to Mercedes. Petitioners make much
ado of the fact that, as early as 1948, Feliciano had been found to be
suffering from schizophrenia by the Board of Medical Officers of the
Department of Veteran Affairs. By itself, however, the allegation cannot
prove the incompetence of Feliciano.
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Domingo v. CA
EUGENIO DOMINGO, CRISPIN MANGABAT and SAMUEL
CAPALUNGAN, petitioners, vs. HON. COURT OF APPEALS, FELIPE C.
RIGONAN and CONCEPCION R. RIGONAN, respondents.
EUGENIO DOMINGO, CRISPIN MANGABAT and SAMUEL

CAPALUNGAN, petitioners, vs.HON.COURT OF APPEALS, THE
DIRECTOR OF LANDS, and FELIPE C. RIGONAN and CONCEPCION R.
RIGONAN, respondents.
QUISUMBNG, J.:
FACTS: Paulina Rigonan owned three parcels of land including the

house and warehouse on one parcel. She allegedly sold them to private
respondents, the spouses Felipe and Concepcion Rigonan, who claim to
be her relatives. In 1966, petitioners who claim to be her closest
surviving relatives, allegedly took possession of the properties by means
of stealth, force and intimidation, and refused to vacate the same.
According to defendants, the alleged deed of absolute sale was void for
being spurious as well as lacking consideration. They said that Paulina
Rigonan did not sell her properties to anyone. As her nearest surviving
kin within the fifth degree of consanguinity, they inherited the three lots
and the permanent improvements thereon when Paulina died. They said
they had been in possession of the contested properties for more than 10
years.
ISSUE:Whether or not the alleged Deed of Sale executed by Paulina

Rigonan in favor of the private respondents is valid.
HELD:Consideration is the why of a contract, the essential reason which

moves the contracting parties to enter into the contract. The Court had
seen no apparent and compelling reason for her to sell the subject 9
parcels of land with a house and warehouse at a meager price of P850
only. On record, there is unrebutted testimony that Paulina as
landowner was financially well off. She loaned money to several people.
Undisputably, the P850.00 consideration for the nine (9) parcels of land
including the house and bodega is grossly and shockingly inadequate,
and the sale is null and void ab initio.
Private respondents presented only a carbon copy of this deed.
When the Register of Deeds was subpoenaed to produce the deed, no
original typewritten deed but only a carbon copy was presented to the
trial court. None of the witnesses directly testified to prove positively and
convincingly Paulinas execution of the original deed of sale. The carbon
copy did not bear her signature, but only her alleged thumbprint. Juan
Franco testified during the direct examination that he was an
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instrumental witness to the deed. However, when cross-examined and

shown a copy of the subject deed, he retracted and said that said deed of
sale was not the document he signed as witness.
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Mendozana v. Ozamiz
MARIO J. MENDEZONA and TERESITA M. MENDEZONA, LUIS J.
MENDEZONA and MARICAR L. MENDEZONA and TERESITA ADAD
VDA. DE MENDEZONA, petitioners, vs.JULIO H. OZAMIZ, ROBERTO
J. MONTALVAN, JOSE MA. OZAMIZ, CARMEN H. OZAMIZ, PAZ O.
MONTALVAN, MA. TERESA O.F. ZARRAGA, CARLOS O. FORTICH,
JOSE LUIS O. ROS, PAULITA O. RODRIGUEZ, and LOURDES O.
LON, respondents.
[G.R. No. 143370. February 6, 2002, 2nd Division]
DE LEON, JR., J.:
FACTS:The Mendezonas own a parcel of land in Lahug, Cebu City, which

they acquired through sale from Carmen Ozamiz. However, such sale
was being sought to be nullified by the heirs of Ozamiz, claiming that
Carmen no longer have in possession her mental faculties when the sale
was made. They claim that her advanced age (86) made her
incapacitated, and as such, her properties were placed in administration.
ISSUE:Whether or not the sale between the Mendezonas and Carmen is

valid.
HELD:Yes, because the Heirs of Carmen failed to fully substantiate their

claim of her mental incapacity.It has been held that a person is not
incapacitated to contract merely because of advanced years or by reason
of physical infirmities. Only when such age or infirmities impair her
mental faculties to such extent as to prevent her from properly,
intelligently, and fairly protecting her property rights, is she considered
incapacitated. The respondents utterly failed to show adequate proof that
at the time of the sale on April 28, 1989 Carmen Ozamiz had allegedly
lost control of her mental faculties.
Also, the Court noted that the heirs only sought the nullification of
one document, while they did not dare touch other transactions made by
Carmen during the time of her alleged incapacity.
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Lim v. CA
MARIANO T. LIM, JAIME T. LIM, JOSE T. LIM, JOVITA T. LIM,
ANACORITA T. LIM, ANTONIETTA T. LIM, RUBEN T. LIM, BENJAMIN
T. LIM, ET AL., petitioners, vs. COURT OF APPEALS, LORENZO O.
TAN and HERMOGENES O. TAN, respondents.
(G.R. No. L-55201, February 3, 1994, 2nd division)
PUNO, J.:
FACTS: The deceased spouses Tan Quico and Josefa Oraa, who both
died intestate left 96 hectares of land. The late spouses were survived by
four children; Cresencia, Lorenzo, Hermogenes and Elias. Elias died on
May 2, 1935. Cresencia died on December 20, 1967. She was survived by
her husband, Lim Chay Sing, and children, Mariano, Jaime, Jose Jovita,
Anacoreta, Antonietta, Ruben, Benjamin and Rogelio who are now the
petitioners in the case at bench.
Cresencia only reached the second grade of elementary school. She

could not read or write in English. On the other hand, Lorenzo is a
lawyer and a CPA. Heirs of Cresencia alleged that since the demise of the
spouses Tan Quico and Josefa Oraa, the subject properties had been
administered by respondent Lorenzo. They claimed that before her death,
Cresencia had demanded their partition from Lorenzo. After Cresencias
death, they likewise clamored for their partition. Their effort proved
fruitless.
Lorenzo and Hermogenes unyielding stance against partition is

based on various contentions. They cited as evidence the Deed of
Confirmation of Extra Judicial Settlement of the Estate of Tan Quico and
Josefa Oraa and a receipt of payment. Principally, they urge that the
properties had already been partitioned, albeit, orally; and during her
lifetime, the late Cresencia had sold and conveyed all her interests in
said properties to respondent Lorenzo.
ISSUE:
Whether or not Cresencia indeed sold her share of the land to Lorenzo.
HELD: No, because Lorenzo failed to prove that he clearly adduced to

Cresencia the contents of the contract.First the SC ruled that despite the
insistence that the lands were partitioned among the siblings in 1930,
the failure to transfer the titles to them after a long period of time defeats
this claim. In effect, there could have been no partition of the lands.
Also, considering that Cresencia is an illiterate, the one executing
the contract must prove that everything was made to let the other party
understand the contract. When one of the parties is unable to read, or if
the contract is in a language not understood by him, and mistake or
fraud is alleged, the person enforcing the contract must show that the
terms thereof have been fully explained to the former.
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In this case, Lorenzo failed to prove that he sufficiently made Cresencia

the contents of the contract. With his educational background as lawyer
and CPA, he could have easily induced Cresencia to fraudulently sign the
Deed.
Ruiz v. CA
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SPOUSES LORENZO G. FRANCISCO and LORENZA D.

FRANCISCO, petitioners, vs. HONORABLE COURT OF APPEALS, and
BIENVENIDO C. MERCADO, respondents.
CARPIO, J.:
FACTS: On 3 February 1984, the spouses Francisco and Engineer

Bienvenido C. Mercado entered into a Contract of Development for the
development into a subdivision of several parcels of land in Pampanga.
Under the Contract, respondent agreed to undertake at his expense

the development work for the Franda Village Subdivision. Respondent
committed to complete the construction within 27 months. Respondent
also advanced P200,000.00 for the initial expenses of the development
work. In return, respondent would receive 50% of the total gross sales of
the subdivision lots and other income of the subdivision. Respondent
also enjoyed the exclusive and irrevocable authority to manage, control
and supervise the sales of the lots within the subdivision. The Contract
required respondent to submit to petitioners, within the first 15 days of
every month, a report on payments collected from lot buyers with copies
of all the contracts to sell. However, respondent failed to submit the
monthly report.
From 16 October 1985 to sometime in March 1986, within the 27-

month period granted to respondent, petitioners also contracted a certain
Nicasio Rosales, Sr. to undertake the partial development of the
subdivision. On 16 July 1986, Rosales submitted his accomplishment
report. On the same day, petitioners demanded that respondent submit
within 15 days an accounting of his operation of the subdivision from the
beginning of the project up to 15 July 1986. Petitioners also requested
for copies of contracts to sell, receipts of collections and receipts of
disbursements for development expenses.
On 5 August 1986, respondent secured from the Human

Settlements Regulatory Commission ("HSRC") an extension of time to
finish the subdivision development until 30 July 1987. On 8 August
1986, petitioners instructed respondent to stop selling subdivision lots
and collecting payments from lot buyers. Petitioners also demanded the
turnover to them of all official receipts in the name of Franda Village
Subdivision. Nonetheless, respondent continued to collect payments from
lot buyers until September 1986.
On 18 September 1986, petitioners wrote respondent that their

accountant was not satisfied with respondent's report which did not
include the necessary supporting documents. Petitioners required
respondent to submit a proper statement of collections with supporting
receipts and documents, and reiterated that respondent should stop
selling subdivision lots and collecting payments from lot buyers. For the
first time, petitioners also alleged that respondent violated certain
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provisions of the Contract. Petitioners mentioned the complaint of lot

buyers that respondent was not developing the subdivision within the
agreed period. Another complaint was that respondent issued two kinds
of receipts, one in the name of B. C. Mercado and the other in the name
of Franda Subdivision.
On 7 October 1986, petitioners informed the HSRC of the lot

buyers' complaints that respondent completed only 5% of the
development work and that he was issuing two kinds of receipts.
Petitioners also claimed that respondent was in serious violation of the
Contract because he did not properly remit to petitioners the proceeds
from the lot sales.
In a letter dated 25 November 1986, respondent requested

petitioners to provide him with the format of the statement of collections
they wanted or, alternatively, to send an accountant to audit his records.
He assured them that he could account for all the proceeds from the lot
sales. He countered that he could have finished the development of the
subdivision on time had petitioners not hampered him with their verbal
demands to stop the development and "fill up" the lots first. Respondent
suggested that he and petitioners settle their differences either by
mutually canceling the Contract and giving to each party its
corresponding share, or by continuing with the arrangement. In the
meantime, respondent informed petitioners that he would continue the
operation of the subdivision in accordance with the Contract.
On 20 January 1987, petitioners granted respondent an
authority to resume the sale of subdivision lots and the collection of
payments subject to the following conditions: (1) all collections shall be
deposited in a joint account with China Banking Corporation, San
Fernando, Pampanga branch; (2) withdrawals shall be limited to 50% of
the total collections or to respondent's share, which can only be used for
development expenses, and any withdrawal shall be subject to the
approval of petitioners; (3) only Franda Village Subdivision receipts, duly
countersigned by petitioners, shall be used; (4) collections shall be
subject to a weekly or monthly audit; and (5) any violation of these
conditions shall result in the automatic cancellation of the authority.
On 28 January 1987, respondent informed HSRC that he had

stopped development work on the subdivision because the conditional
authority issued by petitioners violated the Contract. Specifically,
respondent referred to the following provisions of the Contract that the
conditional authority contravened: (1) his exclusive and irrevocable right
to manage, control, and supervise the sale of lots; (2) his authority to
issue receipts as the developer without the participation of the
landowners; and (3) his right to withdraw his 50% share without the
approval of the landowners. Respondent attributed the delay in the
development of the subdivision to petitioners who contracted the services
of another person during the effectivity of the Contract. Petitioners also
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stopped respondent, without justification, from selling the lots and

collecting payments from lot buyers.
On 27 February 1987, respondent filed with the trial court an

action to rescind the Contract with a prayer for damages. Petitioners
countered that respondent breached the Contract by failing to finish the
subdivision within the 27 months agreed upon, and therefore respondent
was in delay. Petitioners also alleged that respondent sold one
subdivision lot to two different buyers.
Subsequently, petitioners obtained permission from the Housing

and Land Use Regulatory Board to takeover the development of the
subdivision.
After trial on the merits, the trial court ruled that petitioners
breached the Contract by: (1) hiring Rosales to do development work on
the subdivision within the 27-month period exclusively granted to
respondent; (2) interfering with the latter's development work; and (3)
stopping respondent from managing the sale of lots and collection of
payments.
Because petitioners were the first to breach the Contract and even
interfered with the development work, the trial court declared that
respondent did not incur delay even if he completed only 28% of the
development work. Further, the HSRC extended the Contract up to July
1987. Since the Contract had not expired at the time respondent filed the
action for rescission, petitioners' defense that respondent did not finish
the development work on time was without basis.
The trial court also found that respondent did not fail to pay the
50% share of petitioners from the proceeds of the lot sales. The trial
court viewed respondent's failure to submit the required report as only a
slight infraction not warranting petitioners' interference with
respondent's right to sell the lots and collect payments from sales
pursuant to Article X (3) of the Contract. The trial court noted that
petitioners had tolerated the non-submission of the monthly report until
petitioners made the demand for accounting on 16 July 1986, which
respondent readily complied. The trial court stressed that respondent's
right under the Contract to sell lots and collect payments was exclusive
and irrevocable.
The trial court decreed the rescission of the Contract and awarded
damages to respondent.
On appeal ,the Court of Appeals adopted the findings of fact of the

trial court. Declaring that there was no reversible error, the appellate
court in its Decision affirmed the HELD of the trial court in toto.
Petitioners filed a motion for reconsideration, which the Court of

Appeals denied in its Resolution of 17 January 1995.
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ISSUE: Whether or not Private respondent was entitled to the rescission

of the contract of development and damages because of intervention of
Nicasio Rosales, Sr. In the development of the subdivision during the
existence of the contract.
HELD: The Supreme Court found no reversible error in the HELD of the
trial and appellate courts that respondent's non-submission of the
monthly report was merely a slight infraction of the Contract.
Respondent's failure to submit the monthly report cannot serve as
sufficient basis for the cancellation of the Contract. The cancellation of a
contract will not be permitted for a slight or casual breach. Only a
substantial and fundamental breach, which defeats the very object of the
parties in making the contract, will justify a cancellation. In the instant
case, the development work continued for more than two years despite
the lack of a monthly report.
Petitioners further contend that, considering respondent's non-

submission of collection reports, they were merely enforcing their rights
under Article X (3) of the Contract33 in demanding that respondent stop
selling the subdivision lots and collecting payments from lot buyers.
Whether petitioners could have justifiably invoked Article X (3) of

the Contract based on respondent's failure to submit the required reports
is beside the point. It is clear from the records that petitioners did not
seek to stop respondent's activities due to the latter's failure to submit
the required reports. The non-submission of the required reports was
never mentioned in any of petitioners' letters. Indeed, petitioners' letter of
8 August 1986, which first instructed respondent to stop selling the lots
and collecting payments, did not mention any violation at all, while the
subsequent letters referred only to the complaints of lot buyers. Article X
(3) of the Contract required the "innocent party" to serve a written notice
of "a violation of the terms and conditions of this contract." Absent such
written notice, this provision cannot be invoked, much less enforced.
The Decision of the Court of Appeals in upholding the Decision of

the Regional Trial Court of San Fernando, Pampanga is AFFIRMED, with
the MODIFICATION that the award of attorney's fees, temperate and
exemplary damages is DELETED.
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Dela Cruz v. Sison

EPIFANIA DELA CRUZ, substituted by LAUREANA V.
ALBERTO, petitioner, vs. SPS. EDUARDO C. SISON and EUFEMIA S.
SISON, respondents.
(G.R. No. 163770 , February 17, 2005, 1st Division)
Facts:Epifania Dela Cruz alleged that in 1992, she discovered that her
rice land in has been transferred and registered in the name of her
nephew, Eduardo C. Sison, without her knowledge and consent,
purportedly on the strength of a Deed of Sale she executed.
Epifania then filed a complaint praying to declare the deed of sale

null and void. She alleged that Eduardo tricked her into signing the Deed
of Sale, by inserting the deed among the documents she signed
pertaining to the transfer of her residential land, house and camarin, in
favor of Demetrio, her foster child and the brother of Eduardo.
Respondents, spouses Eduardo and Eufemia Sison denied that

they employed fraud or trickery in the execution of the Deed of Sale. They
claimed that they purchased the property from Epifania for P20 000 and
that the deed was duly notarized, complied with all requisites for its
registration, as evidenced by the Investigation Report by the Department
of Agrarian Reform, Affidavit of Seller/Transferor, Affidavit of
Buyer/Transferee, Certification issued by the Provincial Agrarian Reform
Officer, Letter for the Secretary of Agrarian Reform, Certificate
Authorizing Payment of Capital Gains Tax, and the payment of the
registration fees. Some of these documents even bore the signature of
Epifania which only proves that she agreed to the transfer of the
property.
Issue:
1.) Whether fraud attended the execution of a contract
2.) Whether the deed of absolute sale is valid.
HELD:
1.) A comparison of the deed of sale in favor of Demetrio and the
deed of sale in favor Eduardo, draws out the conclusion that there was
no trickery employed. One can readily see that the first deed of sale is in
all significant respects different from the second deed of sale. A casual
perusal, even by someone as old as Epifania, would enable one to easily
spot the differences. Epifania could not have failed to miss them.
The Court is bound by the appellate courts findings, unless they are
contrary to those of the trial court, in which case we may wade into the
factual dispute to settle it with finality.
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2.) After a careful perusal of the records, we sustain the Court of

Appeals HELD that the Deed of Absolute Sale dated November 24, 1989
is valid.
There being no evidence adduced to support her bare allegations,

thus, Epifania failed to satisfactorily establish her inability to read and
understand the English language.
Although Epifania was 79 years old at the time of the execution of

the assailed contract, her age did not impair her mental faculties as to
prevent her from properly and intelligently protecting her rights. Even at
83 years, she exhibited mental astuteness when she testified in court. It
is, therefore, inconceivable for her to sign the assailed documents
without ascertaining their contents, especially if, as she alleges, she did
not direct Eduardo to prepare the same.
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Rural Bank of Sta. Maria v. CA

RURAL BANK OF STA. MARIA, PANGASINAN, petitioner vs. THE HON
ORABLE COURT OF APPEALS, ROSARIO R. RAYANDAYAN, CARMEN
R. ARCEO, respondents.
(G.R. No. 110672. September 14, 1999, 3rd Division)
GONZAGA_REYES, J.:
FACTS: A Deed of Absolute Sale with Assumption of Mortgage was

executed between Manuel Behis as vendor/assignor and Rayandayan
and Arceo as vendees/assignees for the sum of P250,000.00. On the
same day, Rayandayan and Arceo together with Manuel Behis executed
another Agreement embodying the real consideration of the sale of the
land in the sum of P2,400,000.00. Thereafter, Rayandayan and Arceo
negotiated with the principal stockholder of the bank, Engr. Edilberto
Natividad in Manila, for the assumption of the indebtedness of Manuel
Behis and the subsequent release of the mortgage on the property by the
bank. Rayandayan and Arceo did not show to the bank the Agreement
with Manuel Behis providing for the real consideration of P2,400,000.00
for the sale of the property to the former. Subsequently, the bank
consented to the substitution of plaintiffs as mortgage debtors in place of
Manuel Behis in a Memorandum of Agreement between private
respondents and the bank with restructured and liberalized terms for the
payment of the mortgage debt. Instead of the bank foreclosing
immediately for non-payment of the delinquent account, petitioner bank
agreed to receive only a partial payment of P143,000.00 by installment
on specified dates. After payment thereof, the bank agreed to release the
mortgage of Manuel Behis; to give its consent to the transfer of title to
the private respondents; and to the payment of the balance of
P200,000.00 under new terms with anew mortgage to be executed by the
private respondents over the same land. However, petitioner bank did not
comply with the MOA with respondents because of a supervening event
namely the protest made by Cristina Behis, wife of Manual Behis,
alleging that she did not consent to the negotiation made as regards the
Deed of absolute sale with Assumption of Mortgage by her husband with
the respondents and that her signature was forged by respondents. The
petitioner bank then told respondents to settle the matter with Mrs.
Behis. At that point, petitioner bank cancelled its MOA with respondents
because: first, the latter failed to settlethe protest of Mrs. Behis; and,
secondly, the terms of the Memorandum of Agreement have not been
fully complied with as the payments were not made on time on the dates
fixed therein; and third, their consent to the Memorandum of Agreement
was secured by the plaintiffs thru fraud as the Bank was not shown the
Agreement containing the real consideration of P2,400.000.00 of the sale
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of the land of Manuel Behis to plaintiffs.Thereafter, the petitioner bank

returned the initial payment of P143,000.00 to respondents. In the mean
time, petitioner entered into an agreement with Halsema Bank that the
latter would assume the mortgage of Manuel Behis in consideration of
P521,765.45.Thereafter, respondents brought the matter before the RTC
which ruled that the MOA is valid. The case was elevated to the CA on
certiorari. The respondent Court affirmed the validity of the MOA
dismissing the claim of the respondent that their consent to the
agreement made with respondents to assume the mortgage of Manuel
Behis, and awarding the respondents for damages. Hence this present
appeal.
Issues :Whether or not respondents are guilty of fraud (which would

make the contract between respondents andpetitioner viod) when it did
not show or it concealed from the petitioner the Agreement
(betweenrespondents and Manuel Behis) the consideration of P2.4, and
rather what was only shown was the firstagreement with regard to the
Deed of Sale with Assumption of Mortgage?
Held:No. This brings us to the first issue raised by petitioner bank that
the Memorandum of Agreement is voidable on the ground that its
consent to enter said agreement was vitiated by fraud because private
respondents withheld from petitioner bank the material information that
the real consideration for the sale with assumption of mortgage of the
property by Manuel Behis to Rayandayan and Arceo isP2,400,000.00,
and not P250,000.00 as represented to petitioner bank. According to
petitioner bank, had it known of the real consideration for the sale, i.e.
P2.4 million, it would not have consented into enteringthe Memorandum
of Agreement with Rayandayan and Arceo as it was put in the dark as
to the real capacity and financial standing of private respondents to
assume the mortgage from Manuel Behis. Petitioner bank pointed out
that it would not have assented to the agreement, as it could not expect
the private respondents to pay the bank the approximately P343,000.00
mortgage debt when private respondents have to pay at the same time
P2,400,000.00 to Manuel Behis on the sale of the land.
The kind of fraud that will vitiate a contract refers to those

insidious words or machinations resorted to by one of the contracting
parties to induce the other to enter into a contract which without them
he would not have agreed to. Simply stated, the fraud must be the
determining cause of the contract, or must have caused the consent to
be given. It is believed that the non-disclosure to the bank of the
purchase price of the sale of the land between private respondents and
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Manuel Behis cannot be the fraud contemplated by Article 1338 of the

Civil Code. From the sole reason submitted by the petitioner bank that it
was kept in the dark as to the financial capacity of private respondents,
we cannot see how the omission or concealment of the real purchase
price could have induced the bank into giving its consent to the
agreement; or that the bank would not have otherwise given its consent
had it known of the real purchase price. The deceit which voids the
contract exists where the party who obtains the consent does so by
means of concealing or omitting to state material facts, with intent to
deceive, by reason of which omission or concealment the other party was
induced to give a consent which he would not otherwise have given
(Tolentino, Commentaries and Jurisprudence on the Civil Code, Vol. IV,
p. 480). In thiscase, the consideration for the sale with assumption of
mortgage was not the inducement to defendant bank to give a consent
which it would not otherwise have given. Consequently, not all the
elements of fraud vitiating consent for purposes of annulling a contract
concur, to wit: (a) It was employed by a contracting party upon the other;
(b) It induced the other party to enter into the contract; (c) It was serious;
and; (d) It resulted in damages and injury to the party seeking
annulment. Petitioner bank has not sufficiently shown that it was
induced to enter into the agreement by the non-disclosure of the
purchase price, and that the same resulted in damages to the bank.
Indeed, the general rule is that whosoever alleges fraud or mistake in any
transaction must substantiate his allegation, since it is presumed that a
person takes ordinary care for his concerns and that private transactions
have been fair and regular. Petitioner banks allegation of fraud and
deceit have not been established sufficiently and competently to rebut
the presumption of regularity and due execution of the. agreement
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Carabeo v. Sps. Dingco

DOMINGO CARABEO, Petitioner, vs. SPOUSES NORBERTO and SUSAN
DINGCO, Respondents.
(G.R. No. 190823 , April 4, 2011, 3rd Division)
CARPIO MORALES, J.:
FACTS: On July 10, 1990, Domingo Carabeo entered into a contract

denominated as "Kasunduan sa Bilihan ng Karapatan sa Lupa" with
Spouses Norberto and Susan Dingco whereby petitioner agreed to sell his
rights over a 648 square meter parcel of unregistered land situated in
Purok III, Tugatog, Orani, Bataan to respondents for P38,000.
Respondents tendered their initial payment of P10,000 upon

signing of the contract, the remaining balance to be paid on September
1990.
Respondents were later to claim that when they were about to hand
in the balance of the purchase price, petitioner requested them to keep it
first as he was yet to settle an on-going "squabble" over the land.
Nevertheless, respondents gave petitioner small sums of money from
time to time which totaled P9,100, on petitioners request according to
them; due to respondents inability to pay the amount of the remaining
balance in full, according to petitioner.
By respondents claim, despite the alleged problem over the land,

they insisted on petitioners acceptance of the remaining balance
of P18,900 but petitioner remained firm in his refusal, proffering as
reason therefor that he would register the land first.
Sometime in 1994, respondents learned that the alleged problem

over the land had been settled and that petitioner had caused its
registration in his name on December 21, 1993 under Transfer
Certificate of Title No. 161806. They thereupon offered to pay the balance
but petitioner declined, drawing them to file a complaint before
the Katarungan Pambarangay. No settlement was reached, however,
hence, respondent filed a complaint for specific performance before the
Regional Trial Court.
Petitioner countered in his Answer to the Complaint that the sale

was void for lack of object certain, the kasunduan not having specified
the metes and bounds of the land. In any event, petitioner alleged that if
the validity of the kasunduan is upheld, respondents failure to comply
with their reciprocal obligation to pay the balance of the purchase price
would render the action premature. For, contrary to respondents claim,
petitioner maintained that they failed to pay the balance of P28,000 on
September 1990 to thus constrain him to accept installment payments
totaling P9,100.
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After the case was submitted for decision or on January 31,

2001,2 petitioner passed away. The records do not show that petitioners
counsel informed Branch 1 of the Bataan RTC, where the complaint was
lodged, of his death and that proper substitution was effected in
accordance with Section 16, Rule 3, Rules of Court.
The trial court ruled in favor of respondents, ordering the

defendant to sell his right over 648 square meters of land pursuant to
the contract dated July 10, 1990 by executing a Deed of Sale thereof
after the payment of P18,900 by the plaintiffs.
Petitioners counsel filed a Notice of Appeal on March 20, 2001.

By the herein challenged Decision, the Court of Appeals affirmed that of
the trial court.
Petitioners motion for reconsideration having been denied by

Resolution of January 8, 2010, the present petition for review was filed
by Antonio Carabeo, petitioners son.
ISSUE: Whether or not the object of the sale is determinate.
HELD: Yes. That the kasunduan did not specify the technical boundaries
of the property did not render the sale a nullity. The requirement that a
sale must have for its object a determinate thing is satisfied as long as,
at the time the contract is entered into, the object of the sale is capable
of being made determinate without the necessity of a new or further
agreement between the parties.9 As the above-quoted portion of the
kasunduan shows, there is no doubt that the object of the sale is
determinate.
Melliza v. City of Iloilo
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PIO SIAN MELLIZA, petitioner, versus CITY OF ILOILO, UNIVERSITY OF

THE PHILIPPINES and THE COURT APPEALS, respondents.
(G.R. No. L-24732 April 30, 1968 EN BANC)
BENGZON, J.P., J.:
FACTS: Juliana Melliza during her lifetime owned three parcels of residential land in
Iloilo City. On 1932, she donated to the then Municipality of Iloilo a certain lot to
serve as site for the municipal hall. The donation was however revoked by the parties
for the reason that area was found inadequate to meet the requirements of the
development plan. Subsequently the said lot was divided into several divisions.
Sometime in 1938, Juliana Melliza sold her remaining interest on the said lot to
Remedios San Villanueva. Remedios in turn transferred the rights to said portion of
land to Pio Sian Melliza. The transfer Certificate of title in Mellizas name bears on
annotation stating that a portion of said lot belongs to the Municipality of Iloilo.
Later the City of Iloilo, which succeeds to the Municipality of Iloilo, donated the
city hall sit to the University of the Philippines, Iloilo Branch. On 1952, the University
of the Philippines enclosed the site donated with a wire fence.
Pio Sian Melliza then filed action in the Court of First Instance of Iloilo against
Iloilo City and the University of the Philippines for recovery of the parcel of land or of
its value specifically LOT 1214-B.
Petitioner contends that LOT 1214-B was not included in those lots which were
sold by Juliana Melliza to the then municipality of Iloilo and to say he would render
the Deed of Sale invalid because the law requires as an essential element of sale,
determinate object.
ISSUE: Whether or not IF Lot 1214 B is included in the Deed of Sale, it would render
the contract invalid because the object would allegedly not be determinate as required
by law.
RULLING: No. The requirement of the law specifically Article 1460 of the Civil Code
that the sale must have for its object a determinate thing, is fulfilled as long as, at the
time the contract is entered into, the object of the sale is able of being determinate
without the necessity of a new or further agreement between the parties.
The specific mention of some of the lots plus the statement that the lots object
of the sale are the ones needed for city hall site sufficient provides a basis, as of
the time, of the execution of the contract, for rendering determinate said lots
without the need of a new further agreement of the parties. The Arellano plan
was in existence as early as 1928. As stated, the previous donation of land for
city hall site on November 27, 1931 was revoked on March 6, 1932 for being
inadequate in area under said Arellano plan. Appellant claims that although
said plan existed, its metes and bounds were not fixed until 1935, and thus it
could not be a basis for determining the lots sold on November 15, 1932.
Appellant however fails to consider that the area needed under that plan for
city hall site was then already known; that the specific mention of some of the
lots covered by the sale in effect fixed the corresponding location of the city hall
site under the plan; that, therefore, considering the said lots specifically
mentioned in the public instrument and the projected city hall site, with its
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area, as then shown in the Arellano plan it could be determined which, and
how much of the portions of land contiguous to those specifically named, were
needed for the construction of the city hall site.
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Catindig v. Vda. De Meneses
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MANUEL CATINDIG, represented by his legal representative EMILIANO

CATINDIG-RODRIGO, Petitioner, versus AURORA IRENE VDA. DE
MENESES, Respondent.
SILVINO ROXAS, SR., represented by FELICISIMA VILLAFUERTE
ROXAS, Petitioner, versus COURT OF APPEALS and AURORA IRENE VDA.
DE MENESES Respondents.
PERALTA, J.:
FACTS: The property subject of this controversy pertains to a parcel of land

situated in Malolos, Bulacan, with an area of 49,139 square meters, titled in
the name of the late Rosendo Meneses, Sr., under Transfer Certificate of Title
(TCT) No. T-1749 (hereinafter referred to as the Masusuwi Fishpond).
Respondent Aurora Irene C. Vda. de Meneses is the surviving spouse of the
registered owner, Rosendo Meneses, Sr.. She was issued Letters of
Administration over the estate of her late husband in Special Proceedings Case
pending before the then Court of First Instance of the City of Manila, Branch
22. On May 17, 1995, respondent, in her capacity as administratrix of her
husband's estate, filed a Complaint for Recovery of Possession, Sum of Money
and Damages against petitioners Manuel Catindig and Silvino Roxas, Sr. before
the Regional Trial Court of Malolos, Bulacan, to recover possession over the
Masusuwi Fishpond.
Respondent alleged that in September 1975, petitioner Catindig, the first
cousin of her husband, deprived her of the possession over the Masusuwi
Fishpond, through fraud, undue influence and intimidation. Since then,
petitioner Catindig unlawfully leased the property to petitioner Roxas.
Respondent verbally demanded that petitioners vacate the Masusuwi Fishpond,
but all were futile, thus, forcing respondent to send demand letters to
petitioners Roxas and Catindig. However, petitioners still ignored said
demands. Hence, respondent filed a suit against the petitioners to recover the
property and demanded payment of unearned income, damages, attorney's fees
and costs of suit.
In his Answer, petitioner Catindig maintained that he bought the
Masusuwi Fishpond from respondent and her children in January 1978, as
evidenced by a Deed of Absolute Sale. Catindig further argued that even
assuming that respondent was indeed divested of her possession of the
Masusuwi Fishpond by fraud, her cause of action had already prescribed
considering the lapse of about 20 years from 1975, which was allegedly the
year when she was fraudulently deprived of her possession over the property.
Petitioner Roxas, on the other hand, asserted in his own Answer that
respondent has no cause of action against him, because Catindig is the lawful
owner of the Masusuwi Fishpond, to whom he had paid his rentals in advance
until the year 2001.
ISSUE: Whether or not the cause or consideration in the case exist.
HELD: No. There is no consideration exist here as there is no contract of sale

exist. The deed of sale is not merely voidable, but void for being simulated.
Hence, she could not have filed an action for annulment of contract under
Articles 1390 and 1391 of the Civil Code, because this remedy applies to
voidable contracts. Instead, respondent filed an action for recovery of
possession of the Masusuwi Fishpond. The Court finds that there exists no
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reason for it to disturb the trial court's finding that the deed of sale was
simulated. The trial court's discussion on the said issue is hereby quoted:
After evaluating the evidence, both testimonial and documentary,
presented by the parties, this court is convinced that the Deed of
Absolute Sale relied upon by the defendants [petitioners herein] is
simulated and fictitious and has no consideration.
As registered owners of the lots in question, the private respondents have
a right to eject any person illegally occupying their property. This right is
imprescriptible. Even if it be supposed that they were aware of the petitioners'
occupation of the property, and regardless of the length of that possession, the
lawful owners have a right to demand the return of their property at any time
as long as the possession was unauthorized or merely tolerated, if at all. This
right is never barred by laches.
Orduna, et al. v. Fuentabella
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ANTHONY ORDUA, DENNIS ORDUA, and ANTONITA

ORDUA, Petitioners, versus EDUARDO J. FUENTEBELLA, MARCOS S. CID,
BENJAMIN F. CID, BERNARD G. BANTA, and ARMANDO GABRIEL,
JR., Respondents.
(G.R. No. 176841 June 29, 2010 1st Division)
VELASCO, JR., J.:
FACTS: Sometime in 1996 or thereabouts, Gabriel Sr. sold the subject lot with
an area of 74 square meters located at Fairview Subdivision, Baguio City, to
petitioner Antonita Ordua (Antonita), but no formal deed was executed to
document the sale. The contract price was apparently payable in installments
as Antonita remitted from time to time and Gabriel Sr. accepted partial
payments. One of the Orduas would later testify that Gabriel Sr. agreed to
execute a final deed of sale upon full payment of the purchase price.
As early as 1979, however, Antonita and her sons, Dennis and Anthony
Ordua, were already occupying the subject lot on the basis of some
arrangement undisclosed in the records and even constructed their house
thereon. They also paid real property taxes for the house and declared it for tax
purposes, as evidenced by Tax Declaration in which they place the assessed
value of the structure at PhP 20,090.
After the death of Gabriel Sr., his son and namesake, respondent Gabriel
Jr., secured TCT No. T-71499 over the subject lot and continued accepting
payments from the petitioners. On December 12, 1996, Gabriel Jr. wrote
Antonita authorizing her to fence off the said lot and to construct a road in the
adjacent lot. On December 13, 1996, Gabriel Jr. acknowledged receipt of a PhP
40,000 payment from petitioners. Through a letter dated May 1, 1997, Gabriel
Jr. acknowledged that petitioner had so far made an aggregate payment of PhP
65,000, leaving an outstanding balance of PhP 60,000. A receipt Gabriel Jr.
issued dated November 24, 1997 reflected a PhP 10,000 payment.
Subsequently, Bernard sold to the Cids the subject lot for PhP 80,000. Armed
with a Deed of Absolute Sale of a Registered Land dated January 19, 2000, the
Cids were able to cancel TCT No. T-72782 and secure TCT No. 72783 covering
the subject lot. Cids subsequently sold it to Eduardo J. Fuentebella (Eduardo),
instrumental witnesses of the first transaction aboved..
Sometime in May 2000, or shortly after his purchase of the subject lot,
Eduardo, through his lawyer, sent a letter addressed to the residence of Gabriel
Jr. demanding that all persons residing on or physically occupying the subject
lot vacate the premises or face the prospect of being ejected.
Learning of Eduardos threat, petitioners went to the residence of Gabriel
Jr. at No. 34 Dominican Hill, Baguio City. There, they met Gabriel Jr.s
estranged wife, Teresita, who informed them about her having filed an affidavit-
complaint against her husband and the Cids for falsification of public
documents on March 30, 2000. According to Teresita, her signature on the
June 30, 1999 Gabriel Jr.Bernard deed of sale was a forgery. Teresita further
informed the petitioners of her intent to honor the aforementioned 1996 verbal
agreement between Gabriel Sr. and Antonita and the partial payments they
gave her father-in-law and her husband for the subject lot.
On July 3, 2001, petitioners, joined by Teresita, filed a
Complaint for Annulment of Title, Reconveyance with Damages against the
respondents before the RTC, docketed as Civil Case No. 4984-R, specifically
praying that TCT No. T-3276 dated May 16, 2000 in the name of Eduardo be
annulled. Corollary to this prayer, petitioners pleaded that Gabriel Jr.s title to
the lot be reinstated and that petitioners be declared as entitled to acquire
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ownership of the same upon payment of the remaining balance of the purchase
price therefor agreed upon by Gabriel Sr. and Antonita.
ISSUE: Whether or not there is an adequate consideration.
HELD: Yes. The Court to be sure takes stock of the fact that the contracting
parties to the 1995 or 1996 sale agreed to a purchase price of PhP 125,000
payable on installments. But the original lot owner, Gabriel Sr., died before full
payment can be effected. Nevertheless, petitioners continued remitting
payments to Gabriel, Jr., who sold the subject lot to Bernard on June 30,
1999. Gabriel, Jr., as may be noted, parted with the property only for PhP
50,000. On the other hand, Bernard sold it for PhP 80,000 to Marcos and
Benjamin. From the foregoing price figures, what is abundantly clear is that
what Antonita agreed to pay Gabriel, Sr., albeit in installment, was very much
more than what his son, for the same lot, received from his buyer and the
latters buyer later. The Court, therefore, cannot see its way clear as to how the
RTC arrived at its simplistic conclusion about the transaction between Gabriel
Sr. and Antonita being without "adequate consideration."
It is undisputed on the facts that there is a Contract to Sale between the
original owner of the land and the petitioners. This must be given favourably
effect unless other circumstance in accordance to the law warrant otherwise.
Where the land sold is in the possession of a person other than the vendor, the
purchaser must go beyond the certificates of title and make inquiries
concerning the rights of the actual possessor. And where, as in the instant
case, Gabriel Jr. and the subsequent vendors were not in possession of the
property, the prospective vendees are obliged to investigate the rights of the one
in possession. Evidently, Bernard, Marcos and Benjamin, and Eduardo did not
investigate the rights over the subject lot of the petitioners who, during the
period material to this case, were in actual possession thereof. Bernard, et al.
are, thus, not purchasers in good faith and, as such, cannot be accorded the
protection extended by the law to such purchasers. Moreover, not being
purchasers in good faith, their having registered the sale, will not, as against
the petitioners, carry the day for any of them under Art. 1544 of the Civil Code
prescribing rules on preference in case of double sales of immovable
property. Occeav. Esponilla laid down the following rules in the application of
Art. 1544: (1) knowledge by the first buyer of the second sale cannot defeat the
first buyers rights except when the second buyer first register in good faith the
second sale; and (2) knowledge gained by the second buyer of the first sale
defeats his rights even if he is first to register, since such knowledge taints his
registration with bad faith.
Upon the facts obtaining in this case, the act of registration by any of the
three respondent-purchasers was not coupled with good faith. At the
minimum, each was aware or is at least presumed to be aware of facts which
should put him upon such inquiry and investigation as might be necessary to
acquaint him with the defects in the title of his vendor.
The petitioner contract with the Gabriel Sr. should be enforce and
accordingly ordered them to pay the balance and for Gabriel Jr. to execute a
Absulote Deed of Sale in favor the petitioner for the transfer of land unto them.
Brobio Mangahas v. Brobio
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CARMELA BROBIO MANGAHAS, Petitioner, versus EUFROCINA A.

BROBIO, Respondent.
(G.R. No. 183852 October 20, 2010 2nd Division)
NACHURA, J.:
FACTS: On January 10, 2002, Pacifico S. Brobio (Pacifico) died intestate,

leaving three parcels of land. He was survived by his wife, respondent
Eufrocina A. Brobio, and four legitimate and three illegitimate children;
petitioner Carmela Brobio Mangahas is one of the illegitimate children.
On May 12, 2002, the heirs of the deceased executed a Deed of
Extrajudicial Settlement of Estate of the Late Pacifico Brobio with Waiver. In
the Deed, petitioner and Pacificos other children, in consideration of their love
and affection for respondent and the sum of P150,000.00, waived and ceded
their respective shares over the three parcels of land in favor of respondent.
According to petitioner, respondent promised to give her an additional amount
for her share in her fathers estate. Thus, after the signing of the Deed,
petitioner demanded from respondent the promised additional amount, but
respondent refused to pay, claiming that she had no more money.
A year later, while processing her tax obligations with the Bureau of
Internal Revenue (BIR), respondent was required to submit an original copy of
the Deed. Left with no more original copy of the Deed, respondent summoned
petitioner to her office on May 31, 2003 and asked her to countersign a copy of
the Deed. Petitioner refused to countersign the document, demanding that
respondent first give her the additional amount that she promised. Considering
the value of the three parcels of land (which she claimed to be worth P20M),
petitioner asked for P1M, but respondent begged her to lower the amount.
Petitioner agreed to lower it to P600,000.00. Because respondent did not have
the money at that time and petitioner refused to countersign the Deed without
any assurance that the amount would be paid, respondent executed a
promissory note. When the promissory note become due despite demand, the
respondent fail to comply with it that lead the petitioner to file a claim suit in
the court.
ISSUE: Whether or not the contract is supported by a valid and adequate

consideration.
HELD: Yes. A contract is presumed to be supported by cause or

consideration. The presumption that a contract has sufficient consideration
cannot be overthrown by a mere assertion that it has no consideration. To
overcome the presumption, the alleged lack of consideration must be shown by
preponderance of evidence. The burden to prove lack of consideration rests
upon whoever alleges it, which, in the present case, is respondent.
Respondent failed to prove that the promissory note was not supported
by any consideration. From her testimony and her assertions in the pleadings,
it is clear that the promissory note was issued for a cause or consideration,
which, at the very least, was petitioners signature on the document.
It may very well be argued that if such was the consideration, it was
inadequate. Nonetheless, even if the consideration is inadequate, the contract
would not be invalidated, unless there has been fraud, mistake, or undue
influence. As previously stated, none of these grounds had been proven present
in this case.
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Golden Apple Realty v. Sierra Grande Realty

GOLDEN APPLE REALTY AND DEVELOPMENT CORPORATION AND
ROSVIBON REALTY CORPORATION,Petitioners, versus SIERRA GRANDE
REALTY CORPORATION, MANPHIL INVESTMENT CORPORATION, RENAN
V. SANTOS AND PATRICIO MAMARIL, Respondents.
PERALTA, J.:
FACTS: On December 1, 1981, Hayari Trading Corporation (Hayari), through a

Loan Agreement, borrowed from Manphil Investment Corporation (Manphil) the
amount of Two Million Five Hundred Thousand Pesos (P2,500,000.00) for the
benefit of Filipinas Textile Mills, Inc. (Filtex).
Thereafter, Bernardino Villanueva suggested that the Roberts property be
subdivided to make it easier for Sierra Grande to sell the same. On June 22,
1985, as suggested, the Board of Directors of Sierra Grande, composed of
brothers and sisters Robert Villanueva, Daniel Villanueva, Terry Villanueva Yu,
Susan Villanueva and Eden Villanueva, passed a resolution authorizing
General Manager Bernardino Villanueva, brother of their deceased father, to
hire a geodetic engineer and cause the subdivision plan to be approved by the
Land Registration Commission, and to sell the subdivided lots after approval of
the subdivision plan, if found to be necessary and for which the corporation
may need to carry its purpose.
Eventually, on June 22, 1985, Bernardino Villanueva executed a
Contract to Sell the Roberts property with Golden Apple Realty and
Development, Inc. (Golden Apple), majority of its stocks are owned by Elmer
Tan, a first cousin of the Villanueva brothers and sisters, and Rosvibon Realty
Corporation (Rosvibon), majority of its stocks are owned by Rosita So, another
sister of the father of the Villanueva brothers and sisters, for the amount
ofP441,032.00. The amount of P10,000.00 of the purchase price will have to be
paid to the vendor upon the signing of the contract and the balance to be paid
to the mortgagee Manphil, on or before October 31, 1987.
On July 26, 1985, Sierra Grande, through Bernardino Villanueva, finally
executed a Deed of Sale of Lots 1, 2 and 3, with a total land area of 1,402
square meters, to Golden Apple, for P382,080.00 and another Deed of Sale of
Lot 4, with a total land area of 499 sq. m., to Rosvibon for P119,760.00.
Meanwhile, Sierra Grande's Board, on August 29, 1985, passed a
resolution revoking the authority of Bernardo Villanueva to sell the Roberts
property. Hayari President Yu Han Yat, Jr., husband of Sierra Grande director
Terry Villanueva Yu, advised Manphil, through a letter dated August 30, 1985,
that all dealings with respect to its loan or credit facility with Manphil shall be
coursed through or effected with the express knowledge, representation or
consent of the President of Hayari. Thereafter, a resolution notarized on
September 3, 1985 was passed by the directors of Sierra Grande revoking the
authority previously granted to Bernardino Villanueva to negotiate and
contract the sale of the Roberts property and any other property, in behalf of
the corporation and place on notice all prospective buyers or vendees not to
negotiate or contract with any party other than the duly authorized officer or
officers of the corporation who are expressly empowered to enter into such
transaction and who can exhibit a formal board resolution duly certified by the
board secretary and signed by the majority of the board of directors who are
also the majority stockholders representing at least 2/3 of the capital stock .
Nevertheless, on September 16, 1985, Elmer Tan, on behalf of the buyer
corporations, paid to Manphil for Hayari's account an amortization
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of P57,819.72, for the principal sum due on July 27, 1985; P42,192.30, for
Int.-CBP; P27,329.05, for interest; and P3,423.40, as penalties.
Sometime in January 1986, Sierra Grande learned that Bernardino
Villanueva tried to secure the duplicate original title of the subject parcel of
land from Manphil claiming to be the President of Hayari. As a result, on
November 20, 1986, Sierra Grande, through Susan Villanueva Tan, the
Corporate Secretary, wrote Manphil stating that Bernardino Villanueva was not
in any way connected officially with Sierra Grande and was not authorized to
deal in any way with the Roberts property nor borrow the transfer certificate
title to the same property. Susan Tan also wrote the Bangko Sentral ng
Pilipinas (BSP), as the subject property was already on receivership, informing
the latter of the following: that Hayari had not made any request to borrow any
duplicate original title; that Bernardino Villanueva was not connected in any
way with Hayari; that Bernardino Villanueva had no authority to borrow any
duplicate original title; and that whatever authorization Bernardo Villanueva
had in dealing with the Roberts property had been withdrawn and abrogated
under a board resolution. The letter also requested that even if payments were
made on the loan of Hayari by a third party, the subject duplicate original title
must not be released without the express consent of Hayari.
However, on October 20, 1988, Manphil allowed Elmer Tan to pre-terminate
Hayari's obligation after making total payments to Manphil in the amount
of P3,134,921.00.
Hence, Golden Apple and Rosvibon, on November 28, 1988, filed with the
Regional Trial Court of Pasay City, a Complaint against Sierra Grande and
Manphil for specific performance and damages.
ISSUE: Whether or not the cause or consideration paid in the sale is sufficient.
HELD: No. It must be noted that the property in question, subject of the
Contract to Sell for the sum of P441,032.00, is a land with a contained area of,
more or less, One Thousand Nine Hundred and One (1,901) sq. m. with a two-
storey residential building located in Pasay City. In claiming that the said price
of the property is not inadequate, petitioners stated that the payment of Elmer
Tan to pre-terminate Hayari's obligation amounting to Three Million One
Hundred Thirty-Four Thousand Nine Hundred Twenty-One Pesos
(P3,134,921.00) as part of the consideration paid for the property should be
included. However, as correctly argued by respondent Sierra Grande, the
amortizations paid by Elmer Tan to Manphil was for a loan incurred by Hayari
and not by respondent Sierra Grande; thus, any payment of the amortizations
on the loan of Hayari cannot be considered as part of the consideration for the
sale of the land owned by respondent Sierra Grande. It is then safe to declare
that respondent Sierra Grande did not benefit from the loan or from its pre-
termination. Moreover, the records are bereft of any evidence to support the
claim of petitioners that the sum of money paid by Elmer Tan, on behalf of
Hayari, was part of the consideration for the same property. What only appears
is that the only consideration paid for the sale of the Roberts property was the
sum contained in the Contract to Sell, which was P441,032.00 which,
considering the size and location of the property, is inadequate. What prompted
Elmer Tan to pay the total amount of P3,134,921.00 cannot be gleaned from
the records, except that it was for the loan incurred by Hayari, which is an
independent juridical entity, separate and distinct from Sierra Grande. Hence,
the CA did not commit any error in declaring that there was an insufficiency of
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consideration or price as the same is shown on the very face of the Contract to
Sell.
Anent the contention of petitioners that inadequacy of price does not
invalidate a contract, the said rule is not without an exception. As provided in
the Civil Code:
Art. 1355. Except in cases specified by law, lesion or inadequacy of cause
shall not invalidate a contract, unless there has been fraud, mistake or
undue influence.
The CA was clear as to its main reason for invalidating the contracts in
question there was fraud. The inadequacy of price was merely one of the
circumstances upon which the CA was able to find the existence of fraud and
not the main cause for the invalidation of the subject contracts.
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Askay v. Cosalan
Cita
ASKAY, plaintiff-appellant, versus FERNANDO A. COSALAN, defendant-

appellee.
(G.R. No. 21943 September 15, 1924 EN BANC)
MALCOLM, J.:
FACTS: The plaintiff in this case is Askay, an illiterate Igorrote between 70 and
80 years of age, residing in the municipal district of Tublay, Province of
Benguet, who at various times has been the owner of mining property. The
defendant is Fernando A. Cosalan, the nephew by marriage of Askay, and
municipal president of Tublay, who likewise has been interested along with his
uncle in mining enterprises
About 1907, Askay obtained title to the Pet Kel Mineral Claim located in
Tublay, Benguet. On November 23, 1914, if we are to accept defendant's
Exhibit 1, Askay sold this claim to Cosalan. Nine years later, in 1923, Askay
instituted action in the Court of First Instance of Benguet to have the sale of
the Pet Kel Mineral Claim declared null, to secure possession of the mineral
claim, and to obtain damages from the defendant in the amount of P10,500.00.
Judgment was rendered dismissing the complaint and absolving the defendant
from the same, with costs against the plaintiff. On being informed of the
judgment of the trial court, plaintiff attacked it on two grounds: The first,
jurisdictional, and the second, formal. Both motions were denied and an
appeal was perfected.
ISSUE: Whether or not the plaintiff has established his cause of action by a
preponderance of the evidence.
HELD: Plaintiff contends that the sale of the Pet Kel Mineral Claim was
accomplished through fraud and deceit on the part of the defendant. Plaintiff
may be right but in our judgment he has failed to establish his claim. Fraud
must be both alleged and proved. One fact exists in plaintiffs favor, and this is
the age and ignorance of the plaintiff who could be easily by the defendant, a
man of greater intelligence. Another fact is the inadequacy of the consideration
for the transfer which, according to the conveyance, consisted of P1 and other
valuable consideration, and which, according to the oral testimony, in reality
consisted of P107 in cash, a bill-fold, one sheet, one cow, and two carabaos.
Gross inadequacy naturally suggest fraud is some evidence thereof, so that it
may be sufficient to show it when taken in connection with other
circumstances, such as ignorance or the fact that one of the parties has an
advantage over the other. But the fact that the bargain was a hard one,
coupled with mere inadequacy of price when both parties are in a position to
form an independent judgment concerning the transaction, is not a sufficient
ground for the cancellation of a contract. Against the plaintiff and in favor of
the defendant, the Court had the document itself executed in the presence of
witnesses and before a notary public and filed with the mining recorder. The
notary public, Nicanor Sison, and one of the attesting witnesses, Apolonio
Ramos, testified to the effect that in the presence of the plaintiff and the
defendant and of the notary public and the subscribing witnesses, the deed of
sale was interpreted to the plaintiff and that thereupon he placed his thumb
mark on the document. Two finger print experts, Dr. Charles S. Banks and A.
Simkus, have declared in depositions that the thumb mark on exhibit is that of
Askay. No less than four other witnesses testified that at various times Askay
had admitted to them that he had sold the Pet Kel Mine to Fernando A.
Cosalan.
Cita
Heirs of Balite v. Lim

HEIRS OF THE LATE SPOUSES AURELIO AND ESPERANZA BALITE;
Namely, ANTONIO T. BALITE, FLOR T. BALITE-ZAMAR, VISITACION T.
BALITE-DIFUNTORUM, PEDRO T. BALITE, PABLO T. BALITE, GASPAR T.
BALITE, CRISTETA T. BALITE and AURELIO T. BALITE JR., All
Represented by GASPAR T. BALITE,petitioners, versus RODRIGO N.
LIM, respondent.
(G.R. No. 152168 December 10, 2004 3rd Division)
PANGANIBAN, J.:
FACTS: The spouses Aurelio and Esperanza Balite were the owners of a parcel
of land at Catarman, Northern Samar. When Aurelio died intestate, his wife
Esperanza and their children inherited the subject property and became co-
owners thereof. In the meantime, Esperanza became ill and was in dire need of
money for her hospital expenses. She, through her daughter, Cristeta, offered
to sell to Rodrigo Lim, her undivided share for the price of P1,000,000.00.
Esperaza and Rodrigo agreed that under the Deed of Absolute Sale, it will be
made to appear that the purchase price of the property would be P150,000.00
although the actual price agreed upon by them for the property was
P1,000,000.00. On April 16, 1996, Esperanza executed a Deed of Absolute
Sale in favor of Rodrigo. They also executed on the same day a Joint Affidavit
under which they declared that the real price of the property was
P1,000,000.00 payable to Esperanza by installments. Only Esperanza and two
of her children Antonio and Cristeta knew about the said transaction. When
the rest of the children knew of the sale, they wrote to the Register of Deeds
saying that their mother did not inform them of the sale of a portion of the said
property nor did they give consent thereto. Nonetheless, Rodrigo made partial
payments to Antonio who is authorized by his mother through a Special Power
of Attorney.
On October 23, 1996, Esperanza signed a letter addressed to Rodrigo
informing the latter that her children did not agree to the sale of the property to
him and that she was withdrawing all her commitments until the validity of the
sale is finally resolved. On October 31, 1996, Esperanza died intestate and
was survived by her children. Meanwhile, Rodrigo caused to be published in
the Samar Reporter the Deed of Absolute Sale.
On June 27, 1997, petitioners filed a complaint against Rodrigo with the
Regional Trial Court for the annulment of sale, quieting of title, injunction and
damages. Subsequently, Rodrigo secured a loan from the Rizal Commercial
Banking Corporation in the amount of P2,000,000.00 and executed a Real
Estate Mortgage over the property as security thereof. On motion of the
petitioners, they were granted leave to file an amended complaint impleading
the bank as additional party defendant. On March 30, 1998, the court Issued
an order rejecting the amended complaint of the petitioners. Likewise, the trial
court dismissed the complaint. It Held that pursuant to Article 493 of the Civil
Code, a co-owner is not invalidated by the absence of the consent of the other
co-owners. Hence, the sale by Esperanza of the property was valid; the excess
from her undivided share should be taken from the undivided shares of
Cristeta and Antonio, who expressly agreed to and benefit from the sale. The
Court of Appeals likewise Held that the sale was valid and binding insofar as
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Esperanza Balites undivided share of the property was concerned. It affirmed

the trial courts HELD that the lack of consent of the co-owners did not nullify
the sale.
ISSUE: Whether or not the Deed of Absolute Sale is null and void on the
ground that it is falsified; it has an unlawful cause; and it is contrary to law
and/or public policy.
HELD: The contract is an example of a simulated contract. Article 1345 of the

Civil Code provides that the simulation of a contract may either be absolute or
relative. In absolute simulation, there is a colorable contract but without any
substance, because the parties have no intention to be bound by it. An
absolutely simulated contract is void, and the parties may recover from each
other what they may have given under the contract. On the other hand, if the
parties state a false cause is relatively simulated. Here, the parties real
agreement binds them. In the present case, the parties intended to be bound
by the Contract, even if it did not reflect the actual purchase price of the
property. The letter of Esperanza to respondent and petitioners admission
that there was partial payment made on the basis of the Absolute Sale reveals
that the parties intended the agreement to produce legal effect.
Since the Deed of Absolute Sale was merely relatively simulated, it

remains valid and enforceable. All the essential requisites prescribed by law
for the validity and perfection of contracts is present. However, the parties
shall be bound by their real agreement for a consideration of P1,000,000 as
reflected by their Joint Affidavit.
The petition is DENIED and the assailed decision AFFIRMED.
Suntay v. CA
Cita
RAFAEL G. SUNTAY, substituted by his heirs, namely: ROSARIO, RAFAEL,

JR., APOLINARIO, RAYMUND, MARIA VICTORIA, MARIA ROSARIO and
MARIA LOURDES, all surnamed SUNTAY, petitioners, versus THE HON.
COURT OF APPEALS and FEDERICO C. SUNTAY, respondents.
HERMOSISIMA, JR., J.:
FACTS: Petitioners and private respondent were buyers of condominium units

from Bayfront Development Corporation . Petitioners paid in advance the full
amount for their units. Bayfront, however, failed to deliver them despite the
due date stated in their contract to sell. Failing to get a reimbursement from
Bayfront, petitioners filed an action against it in the Housing and Land Use
Regulatory Board for violation of PD 957 and PD 1344, rescission of contract,
sum of money and damages.
The case, was decided in favor of petitioners. Bayfronts titled properties,
including the subject condominium Unit G and two parking slots in its name
with Condominium Certificate of Title were levied on by the sheriffs of the
Regional Trial Court of Manila. At the subsequent public auction of Bayfronts
properties, petitioners were the highest bidders.The sheriffs final deed of sale
was executed on April 16, 1996.
On the other hand, private respondent Eugenia Gocolay, chairperson
and president of Keyser Mercantile Co., Inc. (Keyser), claims that she entered
into a contract to sell with Bayfront for the purchase on installment basis of
the same Unit G, among others. She completed her payments in 1991 but
Bayfront executed the deed of absolute sale and delivered CCT No. 15802 only
on November 9, 1995.
Gocolay was about to transfer CCT No. 15802 to Keyser when she
discovered the annotations of notice of levy and certificate of sale at the back of
the said title. She was nevertheless Issued CCT No. 26474 in the name of
Keyser on March 12, 1996 with the annotations in favor of petitioners being
carried over.
Gocolay filed before the Expanded National Capital Regional Field Office
of the HLURB a complaint for annulment of auction sale and cancellation of
notice of levy from her title.
ISSUE: Whether or not the HLURB, a quasi-judicial agency, have jurisdiction

over an action seeking the annulment of an auction sale, cancellation of notice
of levy and damages with prayer for the issuance of a preliminary
injunction and/or temporary restraining order.
HELD: The HLURB had no jurisdiction over the spouses Suntay. Section 1 of
PD 1344 states the jurisdiction of the HLURB:
SECTION 1. In the exercise of its function to regulate the real estate
trade and business and in addition to its power provided for in
Presidential Decree No. 957, the [HLURB] shall have exclusive
jurisdiction to hear and decide cases of the following nature:
A. Unsound real estate business practices;
B. Claims involving refund and any other claims filed by
subdivision lot or condominium unit buyers against the
project owner, developer, dealer, broker or salesman; and
C. Cases involving specific performance of contractual and
statutory obligation filed by buyers of subdivision
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lot/condominium units against the owner, developer, dealer,

broker or salesman.
Petitioners were condominium buyers, not project/condominium owners,
developers, dealers, brokers or salesmen against whom a case cognizable by
the HLURB could be brought. Obviously the cause of action (unsound
business practice) could not have referred to them since they were mere buyers
of a condominium unit, but only to Bayfront as developer of the project. It was
therefore error for Gocolay to include petitioners in HLRB Case No. REM-
032196-9152 and for the HLURB to take cognizance of the complaint.
The HLURB had no jurisdiction over the Issue of ownership, possession
or interest in the disputed condominium unit. BP 129 vests jurisdiction over
these matters on the RTC which exercises exclusive original jurisdiction:
(1) in all civil actions in which the subject of the litigation is incapable
of pecuniary estimation;
(2) in all civil actions which involve the titles to, or possession of, real
property, or any interest therein except actions for forcible entry into
and unlawful detainer of lands or buildings, original jurisdiction over
which is conferred upon the Metropolitan Trial Courts, Municipal Trial
Courts, and Municipal Circuit Trial Courts;
(3) in all cases not within the exclusive jurisdiction of any court,
tribunal, person or body exercising jurisdiction of any court, tribunal,
person or body exercising judicial or quasi-judicial functions.
The decision in HLRB Case No. REM-032196-9152 was in effect a
determination of the ownership of the condominium unit because it directed
the annulment of the execution sale in HLRB Case No. REM-102193-5625 on
which petitioners title was based. This was clearly incorrect.
Uy v. Court of Appeals
Cita
WILLIAM UY and RODEL ROXAS, petitioners, versus COURT OF APPEALS,

HON. ROBERT BALAO and NATIONAL HOUSING AUTHORITY, respondents.
(G.R. No. 120465 September 9, 1999 1st Division)
KAPUNAN, J.:
FACTS: Petitioners William Uy and Rodel Roxas are agents authorized to sell
eight (8) parcels of land by the owners thereof. By virtue of such authority,
petitioners offered to sell the lands, located in Tuba, Tadiangan, Benguet to
respondent National Housing Authority (NHA) to be utilized and developed as a
housing project.
On February 14, 1989, NHA approved the acquisition of the said parcels
of land with an area of 31.8231 hectares at the cost of P23.867 million,
pursuant to which the parties executed a series of Deeds of Absolute Sale
covering the subject lands. Of the eight parcels of lands, however, only five
were paid for by the NHA because of the report it received from the Land
Geosciences Bureau of the Department of Environment and Natural Resources
that the remaining area is located at an active landslide area and therefore, not
suitable for development into a housing project. NHA eventually cancelled the
sale over the remaining three (3) parcels of land.
On March 9, 1992, petitioners filed a complaint for damages. After trial,
the RTC of Quezon City rendered the cancellation of contract to be justified and
awarded P1.255 million as damages in favor of petitioners.
Upon appeal by petitioners, the Court of Appeals reversed the decision
and entered a new one dismissing the complaint including the award of
damages.
The motion for reconsideration having been denied, petitioners seek relief
from this court contending, inter alia, that the CA erred in declaring that NHA
had any legal basis to rescind the subject sale.
ISSUE: Whether or not a partys entry into a contract affects the validity of the
contract.
HELD: Petitioners confuse the cancellation of the contract by the NHA as a

rescission of the contract under Article 1191 of the Civil Code. The right to
rescission is predicated on a breach of faith by the other party that violates the
reciprocity between them. The power to rescind is given to the injured party.
In this case, the NHA did not rescind the contract. Indeed, it did not have the
right to do so for the other parties to the contract, the vendors did not commit
any breach, much less a substantial breach, of their obligation. The NHA did
not suffer any injury. The cancellation was not therefore a rescission under
Article 1191. Rather, it was based on the negation of the cause arising from
the realization that the lands, which were the objects of the sale, were not
suitable for housing.
As a general rule, a partys motives for entering into a contract do not
affect the contract. However, when the motive predetermines the cause, the
motive may be regarded as the cause. As Held in Liguez v. CA, ... It is well to
note, however, that Manresa himself, while maintaining the distinction and
upholding the imperatives of the motives of the parties to determine the validity
of the contract, expressly excepts from the rule those contracts that are
conditioned upon the attainment of the motives of either party. The same view
is Held by the Supreme Court of Spain, in its decisions of February 4, 1941
and December 4, 1946, holding that the motive may be regarded as cause
when it predetermined the purpose of the contract.
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Pentacapital v. Makilito Mahinay

PENTACAPITAL INVESTMENT CORPORATION, Petitioner, versus MAKILITO
B. MAHINAY, Respondent.
NACHURA, J.:
FACTS: Petitioner filed a complaint for a sum of money against respondent

Makilito Mahinay based on two separate loans obtained by the latter,
amounting to P1,520,000.00 and P416,800.00, or a total amount
of P1,936,800.00. These loans were evidenced by two promissory notes5 dated
February 23, 1996. Despite repeated demands, respondent failed to pay the
loans, hence, the complaint.
In his Answer with Compulsory Counterclaim, respondent claimed that
petitioner had no cause of action because the promissory notes on which its
complaint was based were subject to a condition that did not occur. While
admitting that he indeed signed the promissory notes, he insisted that he never
took out a loan and that the notes were not intended to be evidences of
indebtedness.
Respondent explained that he was the counsel of Ciudad Real
Development Inc. (CRDI). In 1994, Pentacapital Realty Corporation
(Pentacapital Realty) offered to buy parcels of land known as the Molino
Properties, owned by CRDI, located in Molino, Bacoor, Cavite. The Molino
Properties, with a total area of 127,708 square meters, were sold at P400.00
per sq m. As the Molino Properties were the subject of a pending case,
Pentacapital Realty paid only the down payment amounting to P12,000,000.00.
CRDI allegedly instructed Pentacapital Realty to pay the formers creditors,
including respondent who thus received a check worth P1,715,156.90. It was
further agreed that the balance would be payable upon the submission of an
Entry of Judgment showing that the case involving the Molino Properties had
been decided in favor of CRDI.
Respondent, Pentacapital Realty and CRDI allegedly agreed that
respondent had a charging lien equivalent to 20% of the total consideration of
the sale in the amount of P10,277,040.00. Pending the submission of the Entry
of Judgment and as a sign of good faith, respondent purportedly returned
the P1,715,156.90 check to Pentacapital Realty. However, the Molino
Properties continued to be haunted by the seemingly interminable court
actions initiated by different parties which thus prevented respondent from
collecting his commission.
ISSUE: Whether or not respondent is bound by the promissory notes.
HELD: Yes. This emanates for the purpose of payment for an onerous contract
which is the commission of the respondent if the sale become perfect. It must
be established that all the elements of a contract of loan are present. Like any
other contract, a contract of loan is subject to the rules governing the
requisites and validity of contracts in general. It is elementary in this
jurisdiction that what determines the validity of a contract, in general, is the
presence of the following elements: (1) consent of the contracting parties; (2)
object certain which is the subject matter of the contract; and (3) cause of the
obligation which is established.
Cita
In this case, respondent denied liability on the ground that the

promissory notes lacked consideration as he did not receive the proceeds of the
loan. Under Article 1354 of the Civil Code, it is presumed that consideration
exists and is lawful unless the debtor proves the contrary. Moreover, under
Section 3, Rule 131 of the Rules of Court, the following are disputable
presumptions: (1) private transactions have been fair and regular; (2) the
ordinary course of business has been followed; and (3) there was sufficient
consideration for a contract. A presumption may operate against an adversary
who has not introduced proof to rebut it. The effect of a legal presumption
upon a burden of proof is to create the necessity of presenting evidence to meet
the legal presumption or the prima facie case created thereby, and which, if no
proof to the contrary is presented and offered, will prevail. The burden of proof
remains where it is, but by the presumption, the one who has that burden is
relieved for the time being from introducing evidence in support of the
averment, because the presumption stands in the place of evidence unless
rebutted.
In the present case, as proof of his claim of lack of consideration,
respondent denied under oath that he owed petitioner a single centavo. He
added that he did not apply for a loan and that when he signed the promissory
notes, they were all blank forms and all the blank spaces were to be filled up
only if the sale transaction over the subject properties would not push through
because of a possible adverse decision in the civil cases involving them (the
properties). He thus posits that since the sale pushed through, the promissory
notes did not become effective.
Respondents liability is not negated by the fact that he has uncollected
commissions from the sale of the Molino properties. As the records of the case
show, at the time of the execution of the promissory notes, the Molino
properties were subject of various court actions commenced by different
parties. Thus, the sale of the properties and, consequently, the payment of
respondents commissions were put on hold. The non-payment of his
commissions could very well be the reason why he obtained a loan from
petitioner.
Heirs of Gaite v. The Plaza
Cita
HEIRS OF RAMON C. GAITE, CYNTHIA GOROSTIZA GAITE and RHOGEN

BUILDERS, Petitioners, versus THE PLAZA, INC. and FGU INSURANCE
VILLARAMA, JR., J.:
FACTS: On July 16, 1980, The Plaza, Inc. (The Plaza), a corporation engaged in
the restaurant business, through its President, Jose C. Reyes, entered into a
contract with Rhogen Builders (Rhogen), represented by Ramon C. Gaite, for
the construction of a restaurant building in Greenbelt, Makati, Metro Manila
for the price ofP7,600,000.00. On July 18, 1980, to secure Rhogens
compliance with its obligation under the contract, Gaite and FGU Insurance
Corporation (FGU) executed a surety bond in the amount of P1,155,000.00 in
favor of The Plaza. On July 28, 1980, The Plaza paid P1,155,000.00 less
withholding taxes as down payment to Gaite. Thereafter, Rhogen commenced
construction of the restaurant building.
In a letter dated September 10, 1980, Engineer Angelito Z. Gonzales, the
Acting Building Official of the Municipality of Makati, ordered Gaite to cease
and desist from continuing with the construction of the building for violation of
Sections 301 and 302 of the National Building Code (P.D. 1096) and its
implementing rules and regulations. The letter was referred to The Plazas
Project Manager, Architect Roberto L. Tayzon.
Gaite notified Reyes that he is suspending all construction works until
Reyes and the Project Manager cooperate to resolve the issue he had raised to
address the problem. This was followed by another letter dated November 18,
1980 in which Gaite expressed his sentiments on their aborted project and
reiterated that they can still resolve the matter with cooperation from the side
of The Plaza. In his reply-letter dated November 24, 1980, Reyes asserted that
The Plaza is not the one to initiate a solution to the situation, especially after
The Plaza already paid the agreed down payment of P1,155,000.00, which
compensation so far exceeds the work completed by Rhogen before the
municipal authorities stopped the construction for several violations. Reyes
made it clear they have no obligation to help Rhogen get out of the situation
arising from non-performance of its own contractual undertakings, and that
The Plaza has its rights and remedies to protect its interest.
On January 9, 1981, Gaite informed The Plaza that he is terminating
their contract based on the Contractors Right to Stop Work or Terminate
Contracts as provided for in the General Conditions of the Contract. In his
letter, Gaite accused Reyes of not cooperating with Rhogen in solving the
problem concerning the revocation of the building permits, which he described
as a "minor problem." Additionally, Gaite demanded the payment ofP63,058.50
from The Plaza representing the work that has already been completed by
Rhogen.
On January 13, 1981, The Plaza, through Reyes, countered that it will
hold Gaite and Rhogen fully responsible for failure to comply with the terms of
the contract and to deliver the finished structure on the stipulated date. Reyes
argued that the down payment made by The Plaza was more than enough to
cover Rhogens expenses.
On March 26, 1981, The Plaza filed Civil Case No. 40755 for breach of
contract, sum of money and damages against Gaite and FGU in the Court of
First Instance (CFI) of Rizal. The court granted the petition and uphold by CA
with modification to award of damages.
Cita
ISSUE:
3. Whether or not the petitioner will be liable base on damages incurred by
the respondent.
4. Whether or not quantum meruit is to be appreciated here.
HELD:
3. Yes. Reciprocal obligations are those which arise from the same cause,
and in which each party is a debtor and a creditor of the other, such that
the obligation of one is dependent upon the obligation of the other. They
are to be performed simultaneously such that the performance of one is
conditioned upon the simultaneous fulfillment of the other. Respondent
The Plaza predicated its action on Article 1191 of the Civil Code, which
provides for the remedy of "rescission" or more properly resolution, a
principal action based on breach of faith by the other party who violates
the reciprocity between them. The breach contemplated in the provision
is the obligors failure to comply with an existing obligation. Thus, the
power to rescind is given only to the injured party. The injured party is
the party who has faithfully fulfilled his obligation or is ready and willing
to perform his obligation.
The construction contract between Rhogen and The Plaza provides for
reciprocal obligations whereby the latters obligation to pay the contract price
or progress billing is conditioned on the formers performance of its
undertaking to complete the works within the stipulated period and in
accordance with approved plans and other specifications by the owner.
Pursuant to its contractual obligation, The Plaza furnished materials and paid
the agreed down payment. It also exercised the option of furnishing and
delivering construction materials at the jobsite pursuant to Article III of the
Construction Contract. However, just two months after commencement of the
project, construction works were ordered stopped by the local building official
and the building permit subsequently revoked on account of several violations
of the National Building Code and other regulations of the municipal
authorities.
4. No. Under the principle of quantum meruit, a contractor is allowed to

recover the reasonable value of the thing or services rendered despite the
lack of a written contract, in order to avoid unjust enrichment. Quantum
meruit means that in an action for work and labor, payment shall be
made in such amount as the plaintiff reasonably deserves. To deny
payment for a building almost completed and already occupied would be
to permit unjust enrichment at the expense of the contractor.
Rhogen failed to finish even a substantial portion of the works due to the
stoppage order issued just two months from the start of construction. Despite
the down payment received from The Plaza, Rhogen, upon evaluation of the
Project Manager, was able to complete a meager percentage much lower than
that claimed by it under the first progress billing between July and September
1980. Moreover, after it relinquished the project in January 1981, the site
inspection appraisal jointly conducted by the Project Manager, Building
Cita
Inspector Engr. Gregory and representatives from FGU and Rhogen, Rhogen
was found to have executed the works not in accordance with the approved
plans or failed to seek prior approval of the Municipal Engineer. Article 1167 of
the Civil Code is explicit on this point that if a person obliged to do something
fails to do it, the same shall be executed at his cost.
Art. 1167. If a person obliged to do something fails to do it,

the same shall be executed at his cost.
This same rule shall be observed if he does it in

contravention of the tenor of the obligation. Furthermore, it may be
decreed that what has been poorly done be undone.
Catly v. Navarro, et al.
Cita
Hicoblino Catly (Deceased), Substituted by his wife, Lourdes Catly,

Petitioner, versus William Navarro, Isagani Navarro, Belen Dolleton,
Florentino Arciaga, Bartolome Patuga, Dionisio Ignacio, Bernardino
Argana, Erlinda Argana-Dela Cruz, and Ayala Land, Inc., Respondents.
PERALTA, J:
FACTS: This case involves Lot No. 9 which has 1,007 square meter parcel of
land located at Kinasang-an, Pardo, Cebu City and fronting the Cebu provincial
highway. The lot originally belonged to Pastor Pacres who left it intestate to his
heirs Margarita, Simplicia, Rodrigo, Francisco, Mario and Vearanda. On the
same year, the heirs leased "the ground floor of the ancestral home together
with a lot area of 300 square meters including the area occupied by the house"
to respondent Hilario Ramirez, who immediately took possession thereof.
Subsequently in 1974, four of the Pacres sibling namely, Rodrigo, Francisco,
Simplicia and Margarita sold their shares in the ancestral home and the lot on
which it stood to Ramirez. The deeds of sale described the subjects thereof as
part and portion of the 300 square meters actually in possession and
enjoyment by vendee and her spouse, Hilario Ramirez, by virtue of a contract of
lease in their favor.
Mario, petitioners' predecessor-in-interest, filed an ejectment suit against

Ramirez' successor-in-interest Vicentuan. Mario claimed sole ownership of the
lot occupied by Ramirez/Vicentuan by virtue of the oral partition. He argued
that Ramirez/Vicentuan should pay rentals to him for occupying the front lot
and should transfer to the rear of Lot No. 9 where the lots of Ramirez's vendors
are located. The trial court ruled in favor of respondents. The appellate court
sustained the HELD of the trial court. Hence this petition.
ISSUE: Whether or not petitioners were able to prove the existence of the
alleged oral agreements such as the partition and the additional obligations of
surveying and titling
HELD: No. Petitioners were able to prove the existence of the alleged oral
agreements such as the partition and the additional obligations of surveying
and titling.
The court find no compelling reason to deviate from the foregoing rule
and disturb the trial and appellate courts' factual finding that the existence of
an oral partition was not proven. Our examination of the records indicates
that, contrary to petitioners' contention, the lower courts' conclusion was
justified. Petitioners' only piece of evidence to prove the alleged oral partition
was the joint affidavit supposedly executed by some of the Pacres siblings and
their heirs in 1993, to the effect that such an oral partition had previously been
agreed upon. Petitioners did not adequately explain why the affidavit was
executed only in 1993, several years after respondents Ygoa and Ramirez took
possession of the front portions of Lot No. 9.
Petition denied.
Cita
Liguez v. CA
Conchita Liguez, Petitioner, versus Court of Appeals, Maria Ngo Vda. De
Lopez, et.al., Respondents.
(G.R. No. L-11240, December 18, 1957, En Banc)
REYES, J.B.L., J:
FACTS: Conchita Liguez filed a complaint against the widow and heirs of the
late Salvador P. Lopez to recover a parcel of 51.84 hectares of land. Plaintiff
averred to be its legal owner, pursuant to a deed of donation of said land,
executed in her favor by the late owner, Salvador P. Lopez. The defense
interposed that the donation was null and void for having an illicit cause or
consideration, which was plaintiff's entering into marital relations with
Salvador P. Lopez, a married man; and that the property had been adjudicated
to the appellees as heirs of Lopez by the court.
The Court of Appeals held that the deed of donation was inoperative, and
null and void (1) because the husband, Lopez, had no right to donate conjugal
property to the plaintiff appellant; and (2) because the donation was tainted
with illegal causa or consideration (illicit sexual relation), of which donor and
donee were participants. Appellant vigorously contends that the Court of First
Instance as well as the Court of Appeals erred in holding the donation void for
having an illicit cause or consideration. It is argued that under Article 1274 of
the Civil Code of 1889 which was the governing law in 1943, when the
donation was executed, in contracts of pure beneficence the consideration is
the liberality of the donor, and that liberality per se can never be illegal, since it
is neither against law or morals or public policy. Hence, this petition.
ISSUE: Whether or not the deed of donation made by Lopez in favor of Liguez
was valid.
HELD: No. The deed of donation made by Lopez in favor of Liguez was valid.
Under Article 1274, liberality of the donor is deemed causa only in those
contracts that are of "pure" beneficence; that is to say, contracts designed
solely and exclusively to procure the welfare of the beneficiary, without any
intent of producing any satisfaction for the donor; contracts, in other words, in
which the idea of self-interest is totally absent on the part of the transferor.
Appellees, as successors of the late donor, being thus precluded from

pleading the defense of immorality or illegal causa of the donation, the total or
partial ineffectiveness of the same must be decided by different legal principles.
In this regard, the Court of Appeals correctly held that Lopez could not donate
the entirety of the property in litigation, to the prejudice of his wife Maria Ngo,
because said property was conjugal in character, and the right of the husband
to donate community property is strictly limited by law.
Appellant Conchita Liguez was declared by the Supreme Court entitled to

so much of the donated property as may be found, upon proper liquidation, not
to prejudice the share of the widow Maria Ngo in the conjugal partnership with
Salvador P. Lopez or the legitimes of the forced heirs of the latter.
The decision appealed from is reversed and set aside.
Cita
Philbank v. Lui She

Philippine Banking Corporation, representing the estate of Justina Santos
y Canon Faustino, deceased, Plaintiff-Appellee, versus Lui She in her own
behalf and as administratrix of the estate of Wong Heng, deceased,
Defendant-Appellant.
(G.R. No. L-17587, September 12, 1967, En Banc)
CASTRO, J:
FACTS: Justina Santos who inherited parcels of land in Manila executed a

contract of lease in favor of Wong, covering a portion already leased to him and
another portion of the property. The lease was for 50 years, although the lessee
was give the right to withdraw at anytime from the agreement with a stipulated
monthly rental. She executed another contract giving Wong the option to buy
the leased premises for P120,000 payable within 10 years at monthly
installment of P1,000. The option was conditioned on his obtaining Philippine
citizenship, which was then pending. His application for naturalization was
withdrawn when it was discovered that he was a resident of Rizal.
Justina Santos executed two other contracts one extending the term to
99 years and the term fixing the term of the option of 50 years. In the two wills,
she bade her legatees to respect the contract she had entered into with Wong,
but it appears to have a change of heart in a codicil. Claiming that the various
contracts were made because of her machinations and inducements practiced
by him, she now directed her executor to secure the annulment of the
contracts. The complaint alleged that Wong obtained the contracts through
fraud. Wong denied having taken advantage of her trust in order to secure the
execution of the contracts on question. He insisted that the various contracts
were freely and voluntarily entered into by the parties. The lower court declared
all the contracts null and void with the exception of the first, which is the
contract of lease. Hence, this appeal.
ISSUE: Whether or not the contracts entered into by the parties are void.
HELD: Yes. The contracts entered into by the parties are void.
The Court held the lease and the rest of the contracts were obtained with
the consent of Justina freely given and voluntarily, hence the claim that the
consent was vitiated due to fraud or machination is bereft of merit. However
the contacts are not necessarily valid because the Constitution provides that
aliens are not allowed to own lands in the Philippines. The illicit purpose then
becomes the illegal causa, rendering the contracts void. Taken singly, the
contracts show nothing that is necessarily illegal, but considered collectively,
they reveal an insidious pattern to subvert by indirection what the Constitution
directly prohibits. To be sure, a lease to an alien for a reasonable period is
valid, so is an option giving an alien the right to buy real property on condition
that he is granted Philippine citizenship.
Article 1416 of the Civil Code provides an exception to the pari de licto,
that when the agreement is not illegal per se but is merely prohibited, and the
prohibition of the law is designed for the protection of the plaintiff, he may
recover what he has paid or delivered.
The contracts in question are annulled and set aside.
Cita
Londres v. CA
Sonia Londres, Armando Fuentes, Chi-chita Fuentes Quintia, Roberto
Fuentes, Leopoldo Fuentes, Oscar Fuentes, and Marilou Fuentes Esplana,
Petitioners, versus Court of Appeals, Department of Public Works and
Highways, Department of Transportation and Communications, Elena
Alovera Santos and Consolacion Alivio Alovera, Respondents.
CARPIO, J:
FACTS: The present case stemmed from a battle of ownership over Lots 1320
and 1333 both located in Barrio Baybay, Roxas City, Capiz. Paulina originally
owned these two parcels of land. After Paulinas death, ownership of the lots
passed to her daughter, Filomena. The surviving children of Filomena, namely,
Sonia Fuentes Londres, Armando V. Fuentes, Chi-Chita Fuentes Quintia,
Roberto V. Fuentes, Leopoldo V. Fuentes and Marilou Fuentes Esplana, herein
petitioners, now claim ownership over Lots 1320 and 1333. On the other hand,
private respondents Consolacion and Elena anchor their right of ownership
over Lots 1320 and 1333 on the Absolute Sale executed by Filomena on April
24, 1959. Filomena sold the two lots in favor of Consolacion and her husband,
Julian. Elena is the daughter of Consolacion and Julian.
Petitioners filed a complaint for the declaration of nullity of contract,

damages and just compensation. Petitioners sought to nullify the Absolute Sale
conveying Lots 1320 and 1333 and to recover just compensation from public
respondents DPWH and DOTC. Private respondents maintained that they are
the legal owners of Lots 1333 and 1320. Julian purchased the lots from
Filomena in good faith and for a valid consideration. Private respondents filed a
counterclaim with damages. The trial court issued its decision upholding the
validity of the Absolute Sale. This was affirmed by the Court of Appeals. Hence,
this petition.
ISSUE: Whether or not the notarized copy of the absolute sale should prevail.
HELD: No. The notarized copy of the absolute sale should not prevail.
A contract of sale is perfected at the moment there is a meeting of the

minds upon the thing which is the object of the contract and upon the price.
Being consensual, a contract of sale has the force of law between the
contracting parties and they are expected to abide in good faith with their
respective contractual commitments. Article 1358 of the Civil Code, which
requires certain contracts to be embodied in a public instrument, is only for
convenience, and registration of the instrument is needed only to adversely
affect third parties. Formal requirements are, therefore, for the purpose of
binding or informing third parties. Non-compliance with formal requirements
does not adversely affect the validity of the contract or the contractual rights
and obligations of the parties.
Decision affirmed with the modification that the cross-claim against

public respondents is dismissed.
Cita
Sps. Vega v. SSS

Spouses Antonio and Leticia Vega, Petitioner, versus Social Security
System and Pilar Development Corporation, Respondents.
ABAD, J:
FACTS: Magdalena V. Reyes (Reyes) owned a piece of titled

land in Pilar Village, Las Pias City. On August 17, 1979 she got a housing
loan from respondent Social Security System (SSS) for which she mortgaged
her land. In late 1979, however, she asked the petitioner spouses Antonio and
Leticia Vega (the Vegas) to assume the loan and buy her house and lot since
she wanted to emigrate.
Upon inquiry with the SSS, an employee there told the Vegas that the
SSS did not approve of members transferring their mortgaged homes. The
Vegas could, however, simply make a private arrangement with Reyes provided
they paid the monthly amortizations on time. This practice, said the SSS
employee, was commonplace. Armed with this information, the Vegas agreed
for Reyes to execute in their favor a deed of assignment of real property with
assumption of mortgage and paid Reyes P20,000.00 after she undertook to
update the amortizations before leaving the country. The Vegas then took
possession of the house in January 1981.
But Reyes did not readily execute the deed of assignment. She left the
country and gave her sister, Julieta Reyes Ofilada (Ofilada), a special power of
attorney to convey ownership of the property. Sometime between 1983 and
1984, Ofilada finally executed the deed promised by her sister to the
Vegas. Ofilada kept the original and gave the Vegas two copies. The latter gave
one copy to the Home Development Mortgage Fund and kept the
other. Unfortunately, a storm in 1984 resulted in a flood that destroyed the
copy left with them. Vegas filed an action for consignation, damages, and
injunction with application for preliminary injunction and temporary
restraining order against the SSS and the trial court ruled in favor of Vegas.
The SSS appealed to the Court of Appeals which reversed the trial courts
ISSUE: Whether or not the Spouses Vegas presented adequate proof of Reyes
sale of the subject property to them.
HELD: Yes. Spouses Vegas presented adequate proof of Reyes sale of the
subject property to them.
In this case, not only did the Vegas prove the loss of the deed of
assignment in their favor and what the same contained, they offered strong
corroboration of the fact of Reyes sale of the property to them. They took
possession of the house and lot after they bought it. Indeed, they lived on it
and held it in the concept of an owner for 13 years before PDC came into the
picture. They also paid all the amortizations to the SSS with Antonio Vegas
personal check, even those that Reyes promised to settle but did not. And
when the SSS wanted to foreclose the property, the Vegas sent a managers
check to it for the balance of the loan. Neither Reyes nor any of her relatives
came forward to claim the property. The Vegas amply proved the sale to them.
Cita
Petition granted.
Balatbat v. Court of Appeals
Cita
Clara M. Balatbat, Petitioner, versus Court of Appeals and Spouses Jose

Repuyan and Aurora Repuyan, Respondents.
TORRES, JR., J:
FACTS: The lot in question covered by Transfer Certificate of Title No. 51330
was acquired by plaintiff Aurelio Roque and Maria Mesina during their conjugal
union and the house constructed thereon was likewise built during their
marital union. Out of their union, plaintiff and Maria Mesina had four children.
When Maria Mesina died on August 28, 1966, the only conjugal properties left
are the house and lot above stated of which plaintiff herein, as the legal
spouse, is entitled to one-half share pro-indiviso thereof. With respect to the
one-half share pro-indiviso now forming the estate of Maria Mesina, plaintiff
and the four children, the defendants here, are each entitled to one-fifth (1/5)
share pro-indiviso.
Aurelio Roque then entered into a contract of Absolute Sale with the
spouses Aurora and Jose Repuyan. However, on August 20, 1980, Aurelio filed
a complaint for Rescission of Contract against Spouses Repuyan for the latters
failure to pay the balance of the purchase price. A deed of absolute sale was
then executed on February 4, 1982 between Aurelio S. Roque, Corazon Roque,
Feliciano Roque, Severa Roque and Osmundo Roque and Clara Balatbat,
married to Alejandro Balatbat. On April 14, 1982, Clara Balatbat filed a motion
for the issuance of a writ of possession which was granted by the trial court on
September 14, 1982 "subject, however, to valid rights and interest of third
persons over the same portion thereof, other than vendor or any other person
or persons privy to or claiming any rights or interests under it." The
corresponding writ of possession was issued on September 20, 1982. The lower
court then rendered judgment in favor of the Spouses Repuyan and declared
the Deed of Absolute Sale as valid. On appeal by petitioner Balatbat, the Court
of Appeals affirmed the lower courts decision. Hence, this petition.
ISSUE: Whether or not the delivery of the owners certificate of title to spouses
Repuyan by Aurelio Roque is for validity or enforceability.
HELD: Yes. The delivery of the owners certificate of title to spouses Repuyan
by Aurelio Roque is for validity or enforceability.
The provision of Article 1358 on the necessity of a public document is

only for convenience, not for validity or enforceability. It is not a requirement
for the validity of a contract of sale of a parcel of land that this be embodied in
a public instrument. The Supreme Court found that the sale between Aurelio
and the Spouses Repuyan is not merely for the reason that there was no
delivery of the subject property and that consideration/price was not fully paid
but the sale as consummated, hence, valid and enforceable.
Petition dismissed for lack of merit.
Cita
Universal Robina v. Heirs of Teves

Universal Robina Sugar Milling Corporation, Petitioner, versus Heirs of
Angel Teves, Respondents.
FACTS: Andres Abanto (Abanto) owned two parcels of land situated in

Campuyo, Manjuyod, Negros Oriental. One lot is registered in his name and
the other lot is unregistered. When he died, his heirs executed an Extrajudicial
Settlement of the Estate of the Deceased and Simultaneous Sale. In this
document, Abanto's heirs adjudicated unto themselves the two lots and sold
the unregistered lot to the United Planters Sugar Milling Company, Inc.
(UPSUMCO), and the registered lot to Angel M. Teves (Teves), for a total sum of
P115,000.00. The sale was not registered. Years later, UPSUMCOs properties
were acquired by the Philippine National Bank (PNB). Later, PNB transferred
the same properties to the Asset Privatization Trust (APT) which, in turn, sold
the same to the Universal Robina Sugar Milling Corporation (URSUMCO).
URSUMCO then took possession of UPSUMCOs properties, including Teves'
lot.
Upon learning of the acquisition of his lot, Teves formally asked the
corporation to turn over to him possession thereof or the corresponding
rentals. He stated in his demand letters that he merely allowed UPSUMCO to
use his property until its corporate dissolution; and that it was not mortgaged
by UPSUMCO with the PNB and, therefore, not included among the foreclosed
properties acquired by URSUMCO. URSUMCO refused to heed Teves' demand,
claiming that it acquired the right to occupy the property.
Teves filed a complaint for recovery of possession of real property with

damages against URSUMCO. However, on September 4, 1992, Teves died and
was substituted by his heirs. The trial court held that URSUMCO has no
personality to question the validity of the sale of the property between the heirs
of Andres Abanto and Angel Teves since it is not a party thereto. On appeal by
URSUMCO, the Court of Appeals affirmed the trial courts decision. Hence, the
instant petition for review on certiorari.
ISSUE: Whether or not the contract of sale is valid.
HELD: Yes. The contract of sale is valid.
The absolute ownership over the registered land was indeed transferred
to Teves is further shown by his acts subsequent to the execution of the
contract. That the contract of sale was not registered does not affect its validity.
Being consensual in nature, it is binding between the parties, the Abanto heirs
and Teves. Formalities intended for greater efficacy or convenience or to bind
third persons, if not done, would not adversely affect the validity or
enforceability of the contract between the contracting parties themselves. Thus,
by virtue of the valid sale, Angel Teves stepped into the shoes of the heirs of
Andres Abanto and acquired all their rights to the property.
Cita
Petition denied.
Sarming v. Dy
Cita
Rita Sarming, Rufino Sarming, Manuel Sarming, Leonora Vda. De Loy,

Erlinda Sarming, Nicandra Sarming, Mansueta Sarming, Arturo Corsame,
Fely Corsame, Federico Corsame, Isabelita Corsame, Norma Corsame,
Cesar Corsame, Rudy Corsame, Roberta Corsame, Artemio Corsame,
Elpidio Corsame, Enriquita Corsame and Guadalupe Corsame Tan,
Petitioner, versus Cresencio Dy, Ludivina Dy-Chan, Trinidad Flores, Luisa
Flores, Saturnina Organista, Remedios Organista, Ofelia Organista, Lydia
Organista, Zosimo Organista, Domisiano Flores, Florita Flores, Eduardo
Flores, Benigna Flores, Angelina Flores, Marcial Flores, and Mario Flores,
Respondents.
QUISUMBING, J:
FACTS: A controversy arose regarding the sale of Lot 4163 which was half-
owned by the original defendant, Silveria Flores (Silveria), although it was
solely registered under her name. The other half was originally owned by
Silverias brother, Jose. On January 1956, the heirs of Jose entered into a
contract with plaintiff Alejandra Delfino (Delfino), for the sale of their one-half
share of Lot 4163 after offering the same to their co-owner, Silveria, who
declined for lack of money. Silveria did not object to the sale of said portion to
Alejandra.
Atty. Deogracias Pinili (Pinili), Alejandras lawyer then prepared the

document of sale. In the preparation of the document however, OCT no. 4918-
A, covering Lot 5734, and not the correct title covering Lot 4163 was the one
delivered to Pinili. Unaware of the mistake committed, Alejandra immediately
took possession of Lot 4163 and introduced improvements on the lot.
Two years later, when Alejandra Delfino purchased the adjoining portion
of the lot she had been occupying, she discovered that what was designated in
the deed, Lot 5734, was the wrong lot. However, despite repeated demands,
Silveria did not do so, prompting Alejandra and the vendors to file a complaint
against Silveria for reformation of the deed of sale with damages before the
Regional Trial Court. The trial court ruled in favor of herein respondents.
Petitioners appealed the decision to the Court of Appeals, which affirmed the
HELD of the trial court. Hence, this petition.
ISSUE: Whether or not reformation is proper in this case.
HELD: Yes. The reformation is proper in the case at bar.
Reformation is that remedy in equity by means of which a written

instrument is made or construed so as to express or inform to the real
intention of the parties. An action for reformation of instrument under this
provision of law may prosper only upon the concurrence of the following
requisites: (1) there must have been a meeting of the minds of the parties to the
contract; (2) the instrument does not express the true intention of the parties;
and (3) the failure of the instrument to express the true intention of the parties
is due to mistake, fraud, inequitable conduct or accident. All of these requisites
are present in this case.
Cita
Cebu v. Court of Appeals

Cebu Contractors Consortium Co., Petitioner, versus Court of Appeals and
Makati Leasing and Finance Corporation, Respondents.
AZCUNA, J:
FACTS: Makati Leasing and Finance Corporation (MLFC) alleges that a lease
agreement relating to various equipments was entered into between MLFC, as
lessor, and Cebu Contractors Consortium Co. (CCCC), as lessee. The terms
and conditions of the lease were defined in said agreement and in two lease
schedules of payment. To secure the lease rentals, a chattel mortgage, and a
subsequent amendment thereto, were executed in favor of MLFC over other
various equipment owned by CCCC.
CCCC began defaulting on the lease rentals, prompting MLFC to send

demand letters. When the demand letters were not heeded, MLFC filed a
complaint for the payment of the rentals due and prayed that a writ of replevin
be issued in order to obtain possession of the equipment leased and to
foreclose on the equipment mortgaged. CCCs position is that it is no longer
indebted to MLFC because the total amounts collected by the latter from the
Ministry of Public Highways, by virtue of the deed of assignment, and from the
proceeds of the foreclosed chattels were more than enough to cover CCCs
liabilities. CCC submits that in any event, the deed of assignment itself already
freed CCC from its obligation to MLFC.
The trial court rendered decision upholding the lease agreement and
finding CCC liable to MLFC in lease rentals. On appeal, the appellate court
affirmed the trial courts decision. Hence, this petition.
ISSUE: Whether or not the right of action for reformation accrued from the
date of execution of the contract.
HELD: Yes. The right of action for reformation accrued from the date of
execution of the contract.
MLFCs own evidence discloses that it offers two types of financing lease:
a direct lease and a sale- lease back. The client sells to MLFC equipment that
it owns, which will be leased back to him. The transaction between CCC and
MLFC involved the second type of financing lease.CCC argues that the sale and
lease back scheme is nothing more than an equitable mortgage and
consequently, asks for its reformation. The right of action for reformation
accrued from the date of execution of the contract of lease in 1976. This was
properly exercised by CCC when it filed its answer with counterclaim to MLFCs
complaint in 1978 and asked for the reformation of the lease contract.
ADR Shipping v. Gallardo
Cita
ADR Shipping Servicess, Inc., petitioner, versus Marcelino Gallardo and

Court of Appeals, respondents.
De Leon, J.:
FACTS: Petitioner ADR Shipping Services, Inc. entered into a contract with
private respondent Gallardo for the use of the formers vessel MV Pacific Breeze
to transport logs to Taiwan. The logs were the subject of a sales agreement
between private respondent as seller being a timber concessionaire and log
dealer, and Sty wood Philippines, as buyer. Private respondent paid an advance
charter fee of P242,000 representing ten percent of the agreed charter fee.
Under the charter agreement, the boat should be ready to load by February
5,1988. The boat failed to arrive on time, prompting private respondent to
notify petitioner of its cancellation of the charter contract and the withdrawal of
the advance payment deposited to the account of ADR shipping. ADR Shipping
refused to return the advance payment to Gallardo claiming that the agreement
on the date of February 5, 1988 was just the reference commencing date and
the true loading date was February 16, 1988. This prompted the latter to file a
case for sum of money and damages. The Regional Trial Court ordered ADR
Shipping to pay Gallardo the advance payment with 6 percent interest per
annum and attorneys fees. The decision of the trial court was affirmed by the
Court of Appeals. Hence, this petition.
ISSUE: Whether or not private respondent is entitled to the refund of the

advance payment representing his deposit for the charter of the ship provided
by petitioner.
HELD: Yes. Private respondent is entitled to the refund of the advance payment
it made to petitioner. There was ambiguity in the interpretation of the contract
provisions as to the date of the loading of the ship. Ambiguities in a contract
are interpreted strictly, albeit not unreasonably, against the drafter thereof
when justified in light of the operative facts and surrounding circumstances. In
this case, ambiguity must be construed strictly against ADR which drafted and
caused the inclusion of the ambiguous provisions. The charter agreement
explicitly states that February 5, 1988 is the intended date when the ship is
expected ready to load while February 16, 1988 is merely the canceling date.
Considering that the subject contract contains the foregoing express
provisions, the parties have no other recourse but to apply the literal meaning
of the stipulations. The cardinal rule is that when the terms of the contract are
clear, leaving no doubt as to the intention of the parties, the literal meaning of
its stipulations is controlling. Pursuant to the provision of Art 1191 of the Civil
Code, 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, and the
injured party may rescind the obligation, with payment of damages. In this
case the private respondent is entitled to the return of his down payment,
subject to a legal interest of 6 percent per annum, and to the payment of
damages.
Movido v. Pastor
Cita
Valentin Movido, substituted by Marginito Movido, petitioner, versus Luis

Reyes Pastor, respondent.
Corona, J.:
FACTS: Respondent Luis Reyes Pastor filed a complaint for specific

performance in the Regional Trial Court (RTC) of Imus, Cavite, praying that
petitioner Valentin Movido be compelled to cause the survey of a parcel of land
subject of their contract to sell.
In his complaint, respondent alleged that he and petitioner executed a
kasunduan sa bilihan ng lupa where the latter agreed to sell a parcel of land
located in Paliparan, Dasmarias, Cavite with an area of some 21,000 sq. m.
out of the 22,731 sq. m. covered by Transfer Certificate of Title (TCT) No.
362995 at P400/sq. m.
Respondent further alleged that another kasunduan was later executed
supplementing the kasunduan sa bilihan ng lupa. It provided that, if a Napocor
power line traversed the subject lot, the purchase price would be lowered to
P200/sq. m. beyond the distance of 15 meters on both sides from the center of
the power line while the portion within a distance of 15 meters on both sides
from the center of the power line would not be paid
Respondent likewise claimed that petitioner undertook to cause the
survey of the property in order to determine the portion affected by the Napocor
power line.
Lastly, respondent alleged that he already paid petitioner P5 million out
of the original purchase price of P8.4 million stated in the kasunduan sa
bilihan ng lupa. He was willing and ready to pay the balance of the purchase
price but due to petitioners refusal to have the property surveyed despite
incessant demands, his unpaid balance could not be determined with
certainty.
In his answer, petitioner alleged that the original negotiation for the sale
of his property involved the entire area of 22,731 sq. m. However, as
respondent was not sure whether a Napocor power line traversed the property,
they then executed the kasunduan. After respondent personally inspected the
property, a final agreementthe kasunduan sa bilihan ng lupawas executed
where the area to be sold was 21,000 sq. m. for P400/sq. m. for a total sum of
P8.4 million. The final agreement also listed a schedule of payments of the
purchase price and included a penalty clause in case of default.
Petitioner also charged respondent with delay in paying several
installments due and did not pay the 7th installment in the amount of P1
million. This was allegedly a material breach because they agreed that the
survey of the property would only be done after respondent would have paid
the 7th installment. Due to respondents failure to fulfill his obligations,
petitioner claimed that he had no choice except to rescind the kasunduan sa
bilihan ng lupa. He, however, was willing to reimburse 50% of whatever
respondent had paid him so far.
After hearing, the RTC ruled in favor of petitioner and held that the
kasunduan preceded the kasunduan sa bilihan ng lupa. Thus, the RTC
dismissed the complaint of respondent for lack of merit and/or cause of action.
On appeal, the Court of Appeals (CA) reversed the RTC and held that the
kasunduan sa bilihan ng lupa was the first document executed by the parties,
not the kasunduan. Marginito Movidos motion for reconsideration did not have
its desired result. Hence, this petition for review on certiorari.
Cita
ISSUE: Whether or not there is impropriety of Rescission.
HELD: Rescission is only allowed when the breach is so substantial and

fundamental as to defeat the object of the parties in entering into the contract.
We find no such substantial or material breach.
It is true that respondent failed to pay the 7th and 8th installments of
the purchase price. However, considering the circumstances of the instant
case, particularly the provisions of the kasunduan, respondent cannot be
deemed to have committed a serious breach. In the first place, respondent was
not in default as petitioner never made a demand for payment. Moreover, the
kasunduan sa bilihan ng lupa and the kasunduan should both be given effect
rather than be declared conflicting, if there is a way of reconciling them.
Petitioner and respondent would not have entered into either of the agreements
if they did not intend to be bound or governed by them. Indeed, taken together,
the two agreements actually constitute a single contract pertaining to the sale
of a land to respondent by petitioner. Their stipulations must therefore be
interpreted together, attributing to the doubtful ones that sense that may
result from all of them taken jointly. Their proper construction must be one
that gives effect to all.
In this connection, the kasunduan sa bilihan ng lupa contains the
general terms and conditions of the agreement of the parties. On the other
hand, the kasunduan refers to a particular or specific matter, i.e., that portion
of the land that is traversed by a Napocor power line. As the kasunduan
pertains to a special area of the agreement, it constitutes an exception to the
general provisions of the kasunduan sa bilihan ng lupa, particularly on the
purchase price for that portion. Specialibus derogat generalibus.
Under both the kasunduan sa bilihan ng lupa and the kasunduan,
petitioner undertook to cause the survey of the property in order to determine
the portion excluded from the sale, as well as the portion traversed by the
Napocor power line. Despite repeated demands by respondent, however,
petitioner failed to perform his obligation. Thus, considering that there was a
breach on the part of petitioner (and no material breach on the part of
respondent), he cannot properly invoke his right to rescind the contract.
TSPIC Corp. v. TSPIC Employees Union
Cita
TSPIC Corp., petitioner, versus TSPIC Employees Union (FFW)

representing Maria Fe Flores, Fe Capistrano, Amy Durias, Claire Evelyn
Velez, Janice Olaguuir, Jerico Alipit, Glen Batula, Ser John Hernandez,
Rachel Novillas, Nimfa Anilao, Rose Subardiaga, Valerie Carbon, Olivia
Edroso, Maricirs Donaire, Analyn Azarcon, Rosalie Ramirez, Julieta
Rosete, Janice Nebre, Nia Andrade, Catherine Yaba, Diomedisa Erni, Mario
Salmorin, Loida Camullo, Marie Ann Delos Santos, Juanita Yana and
Suzette Dulay, respondents.
Velasco, J.:
FACTS: TSPIC is engaged in the business of designing, manufacturing, and

marketing integrated circuits to serve the communication, automotive, data
processing, and aerospace industries. TSPIC Employees Union (Union), on the
other hand, is the registered bargaining agent of the rank-and-file employees of
TSPIC. TSPIC and the Union entered into a Collective Bargaining Agreement.
As a result all the regular rank-and-file employees of TSPIC received a 10%
increase in their salary. A wage order was issued by the National Capital
Region which raised the daily minimum wage from PhP 223.50 to PhP 250,
hence, the wages of 17 probationary employees were increased to PhP 250.00.
TSPIC implemented the new wage rates as mandated by the CBA. As a result
several employees received fewer wage. A few weeks after the salary increase for
the year 2001 became effective, TSPIC notified some of their employees were
overpaid and the overpayment would be deducted from their salaries in a
staggered basis.
ISSUE: Whether or not deduction of the alleged overpayment from the salaries
of the affected members of the Union constitute diminution of benefits in
violation of law.
HELD: The deduction of the alleged overpayment from the salaries of the
respondents is a valid act. The CBA provided in its provision in the
computation for the increase in TSPICs employees, hence, the intention
therein must be pursued basing on the principle that littera necat spiritus
vivificate. The fundamental doctrine in labor law that the CBA is the law
between the parties and they are obliged to comply with its provisions.
Therefore, the error found by TSPIC in pursuance to the terms in the CBA
must be sustained. The Court also agrees that TSPIC in charging the over
payments made to the respondents through staggered deductions from their
salaries does not constitute diminution of benefits. Any amount given to the
employees in excess of what they were entitled to, as computed above, may be
legally deducted by TSPIC from the employees salaries because on the first
place that excess was not vested in them legally as aright because that will
amount to unjust enrichment.
Estanislao v. East-West Banking Corp.
Cita
SPS. Rafael P. Estanislao ans Zenaida Estanislao, petitioners, versus East-

West Banking Corporation, respondent.
Reyes, J.:
FACTS: Spouses Rafael and Zenaida Estanislao obtained a loan from East
West Banking Corporation evidenced by a promissory note and secured by two
deeds of chattel mortgage of two dump trucks and a bulldozer for the first and
bulldozer and a wheel loader for the other. Spouses defaulted in the
amortizations and the entire obligation became due and demandable. The bank
filed a suit for replevin with damages but subsequently, the bank moved for
suspension of the proceedings on account of an earnest attempt to arrive at an
amicable settlement of the case. Both parties executed a Deed of Assignment,
drafted by the bank, where it provides that the two dump trucks and the
bulldozer shall be transferred, assigned and conveyed for the full payment of
the debt. But the bank, for an unknown reason failed to sign on the deed, but
it accepted the three heavy vehicles freely and voluntarily upon delivery made
by the petitioner. After some time, the bank file a petition in court praying for
the delivery of the other heavy vehicles mortgaged in the second chattel
mortgage. The regional trial court dismissed the complaint for lack of merit but
it was reversed and set aside by the court of appeals.
ISSUE: Whether or not the Deed of Assignment, unsigned by private

respondent, extinguishes the whole and full obligation of the petitioner.
HELD: The deed of assignment was a perfected agreement which extinguished

petitioners total outstanding obligation to the respondent. The deed explicitly
provides that the assignor (petitioners), in full payment of its obligation, shall
deliver the three units of heavy equipment to the assignee (respondent), which
accepts the assignment in full payment of the above-mentioned debt. This
could only mean that should petitioners complete the delivery of the three units
of heavy equipment covered by the deed, respondents credit would have been
satisfied in full, and petitioners aggregate indebtedness would then be
considered to have been paid in full as well. The nature of the assignment was
a dation in payment, whereby property is alienated to the creditor in
satisfaction of a debt in money. Such transaction is governed by the law on
sales. Even if we were to consider the agreement as a compromise agreement,
there was no need for respondents signature on the same, because with the
delivery of the heavy equipment which the latter accepted, the agreement was
consummated. Respondents approval may be inferred from its unqualified
acceptance of the heavy equipment.
Aquintey v. Tibong
Cita
Agrifina Aquintey, petitioner, versus Spouses Felicidad and Rico Tibong,

respondents.
(G.R. No. 166704 December 20, 2006, 1st Division)
Callejo, Sr., J.:
FACTS: On May 6, 1999, petitioner Agrifina Aquintey filed before the RTC of
Baguio City, a complaint for sum of money and damages against the
respondents, spouses Felicidad and Rico Tibong. Agrifina alleged that Felicidad
had secured loans from her on several occasions, at monthly interest rates of
6% to 7%. Despite demands, the spouses Tibong failed to pay their outstanding
loan, amounting to P773, 000.00 exclusive of interests. In their Answer with
Counterclaim, spouses Tibong admitted that they had secured loans from
Agrifina. The proceeds of the loan were then re-lent to other borrowers at
higher interest rates. They, likewise, alleged that they had executed deeds of
assignment in favor of Agrifina, and that their debtors had executed promissory
notes in Agrifinas favor. According to the spouses Tibong, this resulted in a
novation of the original obligation to Agrifina. They insisted that by virtue of
these documents, Agrifina became the new collector of their debtors; and the
obligation to pay the balance of their loans had been extinguished.
ISSUE: Whether or not there is valid novation in the instant case?
HELD: 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. Substitution of the person of
the debtor may be effected by delegacion, meaning, the debtor offers, and the
creditor, accepts a third person who consents to the substitution and assumes
the obligation. Thus, the consent of those three persons is necessary. In this
kind of novation, it is not enough to extend the juridical relation to a third
person; it is necessary that the old debtor be released from the obligation, and
the third person or new debtor take his place in the relation. Without such
release, there is no novation; the third person who has assumed the obligation
of the debtor merely becomes a co-debtor or a surety. If there is no agreement
as to solidarity, the first and the new debtor are considered obligated jointly. In
the case at bar, the court found that respondents obligation to pay the balance
of their account with petitioner was extinguished, protanto, by the deeds of
assignment of credit executed by respondent Felicidad in favor of petitioner. As
gleaned from the deeds executed by respondent Felicidad relative to the
accounts of her other debtors, petitioner was authorized to collect the amounts
of P6,000.00 from Cabang, and P63,600.00 from Cirilo. They obliged
themselves to pay petitioner. Respondent Felicidad, likewise, unequivocably
declared that Cabang and Cirilo no longer had any obligation to her.
Cruz vs. Court of Appeals
Cita
Adoracion E. Cruz, Thelma Debbie E. Cruz, Gerry E. Cruz and Nerissa

Cruz-Tamayo, petitioners, versus The Honorable Court of Appeals,
Summit Financing Corp., Victor S. Sta. Ana, Maximo C. Contreras, Ramon
G. Manalastas, and Vicente Torres, respondents.
(456 SCRA 165, April 15, 2005, 2nd Division)
Tinga, J.:
FACTS: Herein petitioner is the mother of her co petitioners Thelma Cruz,

Gerry Cruz and Nerissa Cruz-Tamayo, as well as Arnel Cruz, who was one of
the defendants in Civil Case No. 49466. Petitioners files said case on February
11,1983 against Arnel Cruz and herein private respondents Summit Financing
Corporation (Summit), Victor S. Sta. Ana and Maximo C. Contreras, the last
two in their capacity as deputy sheriff and ex-officio sheriff of Rizal,
respectively, and Ramon G. Manalastas in his capacity as Acting Register of
Deeds of Rizal. The Complaint alleged that petitioners and Arnel Cruz were co-
owners of a parcel of land situated in Taytay, Rizal. Yet the property, which was
then covered by Transfer Certificate of Title (TCT) No. 495225, was registered
only in the name of Arnel Cruz. According to petitioners, the property was
among the properties they and Arnel Cruz inherited upon the death of Delfin
Cruz, husband of Adoracion Cruz. On August 22, 1977, petitioners and Arnel
Cruz executed a Deed of Partial Partition, distributing to each of them their
shares consisting of several lots previously held by them in common. Among
the properties adjudicated to defendant Cruz was the parcel of land covered at
the time by TCT No. 495225. It is the subject of this case. Subsequently, the
same parties to the Deed of Partition agreed in writing to share equally in the
proceeds of the sale of the properties although they have been subdivided and
individually titled in the names of the former co-owners pursuant to the Deed
of Partition. This arrangement was embodied in a Memorandum of Agreement
executed on August 23, 1977 or a day after the partition. The tenor of the
Memorandum of Agreement was annotated at the back of the TCT No. 495225
on September 1, 1977.Sometime in January 1983, petitioner Thelma Cruz
discovered that TCT No. 514477 was issued on October 18, 1982 in the name
of Summit. Upon investigation, petitioners learned that Arnel Cruz had
executed a Special Power of Attorney on May 16, 1980 in favor of one Nelson
Tamayo, husband of petitioner Nerissa Cruz Tamayo, authorizing him to obtain
a loan in the amount of One Hundred Four Thousand Pesos from respondent
Summit, to be secured by a real estate mortgage on the subject parcel of land.
Since the loan remained outstanding on maturity, Summit instituted extra-
judicial foreclosure proceedings, and at the foreclosure sale, it was declared the
highest bidder. Consequently, Sheriff Sta. Ana issued a Certificate of Sale to
respondent Summit which more than a year later consolidated its ownership of
the foreclosed property. Upon presentation of the affidavit of consolidation of
ownership, the Acting Register of Deeds of Rizal cancelled TCT No. 495225 and
issued and in lieu thereof, TCT No. 514477 in the name of respondent Summit.
In their complaint before the RTC, petitioners asserted that they co-owned the
properties with Arnel Cruz, as evidenced by the Memorandum of Agreement.
Hence, they argued that the mortgage was void since they did not consent to it.
ISSUE: Whether or not the real estate mortgage on the property then covered
by TCT No. 495225 is valid and whether the mortgaged property was the
exclusive property of Arnel Cruz when it was mortgaged.
Cita
HELD: A reading of the provisions of the Deed of Partition, no other meaning

can be gathered other than that petitioners and Arnel Cruz had put an end to
the co-ownership. In the aforesaid deed, the shares of petitioners and Arnel
Cruzs in the mass of co-owned properties were concretely determined and
distributed to each of them. In particular, to Arnel Cruz was assigned the
disputed property. There is nothing from the words of said deed which
expressly or impliedly stated that petitioners and Arnel Cruz intended to
remain as co-owners with respect to the disputed property or to any of the
properties for that matter. Petitioners do not question the validity or efficacy of
the Deed of Partial Partition. In fact, they admitted its existence in their
pleadings and submitted it as a part of their evidence. Thus, the deed is
accorded its legal dire effect. Since a partition legally made confers upon each
heir their exclusive ownership of the property adjudicated to him, it follows
that Arnel Cruz acquired absolute ownership over the specific parcels of land
assigned to him in the Deed of Partial Partition, including the property subject
of this case. As the absolute owner thereof then, Arnel Cruz had the right to
enjoy and dispose of the property, as well as the right to constitute a real estate
mortgage over the same without securing the consent of the petitioners. On the
other hand, there is absolutely nothing in the Memorandum of Agreement
which diminishes the right of Arnel Cruz to alienate or encumber the properties
allotted to him in the deed of partition.
As correctly held by the Court of Appeals, the parties only bound
themselves to share in the proceeds of the sale of the properties. The agreement
does not direct reconveyance of the properties to reinstate the common
ownership of the properties. Moreover, to ascertain the intent of the parties in a
contractual relationship, it is imperative that the various stipulations provided
for in the contracts be construed together, consistent with the parties
contemporaneous and subsequent acts as regards the execution of the
contract. Subsequent to the execution of the Deed of Partition and
Memorandum of Agreement, the properties were titled individually in the
names of the co-owners to which they were respectively adjudicated, to the
exclusion of the other co-owners. Petitioners Adoracion Cruz and Thelma Cruz
separately sold the properties distributed to them as absolute owners thereof.
Being clear manifestations of sole and exclusive dominion over the properties
affected, the acts signify total incongruence with the state of co-ownership
claimed by the petitioners. The real estate mortgage on the disputed property is
valid and does not contravene the agreement of the parties.
Gonzales v. Court of Appeals
Cita
Napoleon H. Gonzales, petitioner, versus Hon. Court of Appeals and

Spouses Gabriel and Luzviminda Caballero, respondents.
(354 SCRA 8, March 8, 2001, 2nd Division)
Quisumbing, J.:
FACTS: Private respondents, Mr. and Mrs. Gabriel Caballero, are the registered
owners of two parcels of land situated in Cubao, Quezon City described in
Transfer Certificate for Title No. 247309 (Lot 1) and TCT No. 247310 (Lot 2).
The spouses residence stood in Lot 2.Sometime in 1979, they obtained a loan
from the Cavite Development Bank in the amount of P225,000.00. The two lots
were mortgaged to secure their loan. The loan matured in 1984. To pay the
loan they offered Lot 1 for sale. The offer was advertised in the Bulletin Today.
However, offers to purchase from prospective buyers did not materialize. On
October 24, 1985, a certain Mrs. Lagrimas approached the spouses offering to
broker the sale to an interested buyer. Initially, the spouses told the broker
that they were selling only to direct buyers. Nonetheless, Mrs. Lagrimas
brought to the spouses her buyer, herein petitioner Napoleon H. Gonzales,
whoturned out to be Mrs. Lagrimas relative. Petitioner offered to buy the
vacant lot for P470, 000.00. Initially, respondents refused to reduce their
asking price. Petitioner bargained for a lower price with the suggestion that on
paper the price will be markedly lower so the spouses would pay lower capital
gains tax. Petitioner assured the spouses this could be done since he had
connections with the Bureau of Internal Revenue. The spouses agreed to sell at
P470.000.00. Petitioners paid the bankP375, 000.00, to be deducted from the
purchase price. After the mortgage was cancelled and upon release of the two
titles, Gonzales asked for the deeds of sale of the two lots and delivery of the
titles to him. Defendants signed the deed of sale covering only Lot 1 but refused
to deliver its title until petitioner paid the remaining balance of P70,000.00
This prompted petitioner to file a complaint for specific performance and
damages.
ISSUE: Whether or not the sale involved only Lot 1 and not both Lots.
HELD: YES. Principally, the issue here is whether the contract of sale between
the parties involved Lot 1 and 2 as claimed by petitioner or only Lot 1 as
private respondents contend. In a case where we have to judge conflicting
claims on the intent of the parties, as in this instance, judicial determination of
the parties intention is mandated. Contemporaneous and subsequent acts of
the parties material to the case are to be considered. Petitioner admits he
himself caused the preparation of the deed of sale presented before the lower
court. Yet he could not explain why I referred only to the sale of Lot 1 and not
to the two lots, if the intention of the parties was really to cover the sale of two
lots. As the courts a quo observed, even if it were true that two lots were
mortgaged and were about to be foreclosed, the ads private respondents placed
in the Bulletin Today offered only Lot 1 and was strong indication that they did
not intend to sell Lot 2. The 501 sq.m. Lot was offered forP1,150.00 per sq.m. It
alone would have fetched P576, 150.00. The loan still to be paid the bank was
only P375, 000.00 which was what petitioner actually paid the bank. As the
trial court observed, it was incomprehensible why the spouses would part with
two lots, one with a 2-storey house, and both situated at a prime commercial
district for less than the price of one lot. Contrary to what petitionerwould
make us believe, the sale of Lot 1 valued at P576,150.00 for P470,000.00, with
Cita
petitioner assuming the bank loan of P375,000.00 as well as payment of the

capital gains tax, appears more plausible.
Almira v. Court of Appeals
Cita
Juana Almira, Renato Garcia, Rogelio Garcia, Rodolfo Garcia, Rosita

Garcia, Rhodora Garcia, Rosalinda Garcia, Rolando Garcia and Rafael
Garcia represented in this suit by Edgardo Alvarez, petitioners, versus
Court of Appeals and Federico Briones, respondents.
(399 SCRA 351, March 20, 2003, 1st Division)
Azcuna, J.:
FACTS: Petitioners are the wife and the children of the late Julio Garcia who
inherited from his mother, Ma. Alibudbud, a portion of a 90,655 square meter
property denominated as lot 1642 of the Sta. Rosa Estate in Brgy. Caingin
Sta.Rosa Laguna. The lot was co-owned and registered in the names of three
persons with the following shares: Vicente de Guzman (1/2), Enrique
Hemedes(1/4) and Francisco Alibudbud, the father of Ma. Alibudbud (1/4).
Although there was no separate title in the name of Julio Garcia, there were tax
declaration in his name to the intent of his grandfathers share covering the
area of 21460square meter. On July 5, 1984, petitioner as heirs of Julio
Garcia, and respondent Federico Brines entered a Kasunduan ng Pagbibilihan
(Kasunduan for Brevity)over the 21460 square meter portion for the sum of
P150.000.00. Respondent paid P65, 000.00 upon execution of the contract
while the balance of P85,000.00 was made payable within six (6) months from
the date of the execution of the instrument. The time of the execution of the
kasunduan, petitionersallegedly informed respondent that TCT No. RT-1076
was in the possession of their cousin, Conchila Alibudbud, who having bought
Vicente de Guzmans shares, owned the bigger portion of lot 1642. This
standing notwithstanding, respondent willingly entered into the Kasunduan
provided that the full payment of the purchase price will be made upon delivery
to him of the title. Respondent took possession of the property subject of the
Kasunduan and made various payments to petitioiners amounting to
P58500.00. However upon failure of petitioner to deliver to him a separate title
to the property in the name of Julio Garcia he refused to make further
payments, prompting petitioner to file a civil action before the RTC for a
rescission of the Kasunduan, return by respondent to petitioner of the
possession of the subject parcel of land, and payment by respondent of
damages in favor of petitioners.
ISSUE: Whether or not the petitioner may rescind the Kasunduan pursuant to
Article 1191 of the Civil Code for the failure of respondent to give full payment
of the balance of the purchase price.
HELD: NO, the rights of the parties are governed by the terms and the nature
of the contract they entered. Hence, although the nature of the Kasunduan was
never places in dispute by both parties, it is necessary to ascertain whether the
Kasunduan is a contract to sell or a contract of Sale. Although both parties
haveconsistency referred to the Kasunduan as a contract to Sell, a careful
reading of the provision of the Kasunduan reveals that it is a contract of Sale. A
deed of sale is absolute in nature in the absence of any stipulation reserving
title to the vendor until full payment of the purchase price. The delivery of a
separation title in the name of Julio Garcia was a condition imposed on
respondents obligation to pay the balance of the purchase price. It was not a
condition imposed in the perfection of the contract of Sale. The rescission will
not prosper since the power to rescind is only given to the injured party. The
injured party is the party who has faithfully fulfilled his obligation. In the case
at bar, the petitioners were not ready, willing and able to comply with their
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obligation to deliver a separate title in the name of Julio Garcia to respondent

therefore, they are not in a position to ask for rescission. Failure to comply with
a condition imposed on the performance of an obligation gives the other party
the option either to refuse to proceed with the sale or to waive the condition
under Art 1545 of the civil code. Hence it is the respondent who has the option.
Philbank v. Lim
Cita
Philippine Bank of Communications, petitioner, versus Elena Lim, Ramon

Calderon and Tri-oro International Trading & Manufacturing Corporation,
respondents.
(G.R. NO. 158138, April 12, 2005, 3rd Division)
Panganiban, J.:
FACTS: On September 3, 1999, petitioner filed a complaint against

respondentsfo0r the collection of a deficiency amounting to P4, 014,297.23
exclusive of interest. Petitioner alleged that respondents obtained a loan from it
and executed a continuing surety agreement dated November 16, 1995 in favor
of petitioner for all loans, credits, etc., that were extended or may be extended
in the future to respondents. Petitioner granted a renewal of said loan upon
respondents request, the most recent being on January 21, 1998 as evidenced
by a promissory note renewal BD-Variable No. 8298021001 on the amount of
P3, 000,000.00. It was expressly stipulated therein that the venue for any legal
action that may arise out of said promissory note shall be Makati City to the
exclusion of all other courts. Respondent allegedly failed to pay said obligation
upon maturity. Thus petitioner foreclosed the real estate mortgage executed by
the respondents valued at P1, 081,600.00 leaving a deficiency balance of P4,
014,297.23 as of August 31, 1999.Respondents moved to dismiss the
complaint on the ground of improper venue, invoking the stipulation contained
in the last paragraph of the promissory note with respect to the
restriction/exclusive venue. The trial court denied said motion asseverating
that petitioners had separate causes of action arising from the promissory note
and the continuing surety agreement. Thus, under Rule 4, Section 2 of the
1997 Rules of Civil Procedure, as amended, venue was properly laid in Manila.
The trial court supported its order with cases where venue was held to be
permissive. A motion for reconsideration of said order was likewise denied.
ISSUE: Whether or not the complementary-contracts-construed together

principle is applicable in the case at bar.
HELD: According to this principle, an accessory contract must be read in its

entirety and together with the principal agreement. This principle is used in
construing contractual stipulations in order to arrive at their true meaning;
certain stipulations cannot be segregated and then made to control. This no-
segregation principle is based on Article 1374 of the Civil Code. The
aforementioned doctrine is applicable to the present case. In capable of
standing by itself, the surety agreement can be enforced only in conjuction with
the promissory note. The latter documents the debt that is sought to be
collected in the action against the sureties. The factual milieu of the present
case shows that the surety agreement was entered into to facilitate existing and
future loan agreements. Petitioner approved the loan covered by the promissory
note, partly because of the surety agreement that assured the payment of the
principal obligation. The circumstances that relate to the issuance of the
promissory note and the surety agreement are so intertwined that neither one
could be separated from the other. It makes no sense to argue that the parties
to the surety agreement were not bound by the stipulations in the promissory
note. Notably, the promissory note was a contract of adhesion that petitioner
required the principal debtor to execute as a condition of the approval of the
loan. It was made in the form and language prepared by the bank. By inserting
the provision of that Makati City would be the venue for any legal action that
may arise out of the promissory note, petitioner also restricted the venue of
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actions against the sureties. The legal action against the sureties arose not only
from the security agreement but also from the promissory note.
Rigor v. Consolidated Leasing
Cita
Spouses Efren N. Rigor and Zosima D. Rigor, for themselves and as owners
of Chiara Construction, petitioners, versus Consolidated Orix Leasing and
Finance Corporation,respondent.
387 SCRA 437, August 20, 2000, 3rd Division)
Carpio, J.:
FACTS: Petitioners obtained a loan from private respondent Consolidated Orix

Leasing and Finance Corporation in the amount of P1, 630,320.00. Petitioners
executed a promissory note on July 31, 1996 promising to pay the loan in
24equal monthly installments of P67, 930.00 every fifth day of the month
commencing on September 5, 1996. The promissory note also provides that
default in paying any installment renders the entire unpaid amount due and
payable. To secure payment of the loan, petitioners executed in favor of private
respondent a deed of chattel mortgage over two dump trucks. Petitioners failed
to pay several installments despite demand from private respondent. On
January 5, 1998, private respondent sought to foreclose the chattel mortgage
by filing a complaint for Replevin with Damages against petitioners before the
Regional Trial Court of Dagupan City. After service of summons, petitioners
moved to dismiss the complaint on the ground of improper venue based on a
provision in the promissory note which states that, x x x all legal actions
arising out of this note or in connection with the chattels subject hereof shall
only be brought in or submitted to the proper court in Makati City, Philippines.
Private respondent opposed the motion to dismiss and argued that venue was
properly laid in Dagupan City where it has a branch office based on a provision
in the deed of chattel mortgage which states that, x x x in case of litigation
arising out of the transaction that gave rise to this contract, complete
jurisdiction is given the proper court of the city of Makati or any proper court
within the province of Rizal, or any court in the city, or province where the
holder/mortgagee has a branch office, waiving for this purpose any proper
venue. After a further exchange of pleadings, the Dagupan trial court denied
petitioners motion to dismiss Not satisfied with the orders, petitioners filed a
petition for certiorari before the Court of Appeals imputing grave abuse of
discretion by the Dagupan trial court in denying the motion to dismiss which
was denied.
ISSUE: Whether or not venue was properly laid under the provisions of the
chattel mortgage contract in the light of Article 1374 of the Civil Code.
HELD: Yes. Art. 1374 provides that the 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. Applying the doctrine to the instant case,
we cannot sustain petitioners contentions. The promissory note and the deed
of chattel mortgage must be construed together. Private respondent explained
that its older standard promissory notes confined venue in Makati City where it
had its main office. After it opened a branch office in Dagupan City, private
respondent made corrections in the deed of chattel mortgage, but due to
oversight, failed to make the corresponding corrections in the promissory
notes. Petitioners affixed their signatures in both contracts. The presumption is
applied that a person takes ordinary care of his concerns. It is presumed that
petitioners did not sign the deed of chattel mortgage without informing
themselves of its contents. As aptly stated in a case, they being of age and
businessmen of experience, it must be presumed that they acted with due care
and have signed the documents in question with full knowledge of their import
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and the obligation they were assuming thereby. In any event, petitioners did
not contest the deed of chattel mortgage under Section 8, Rule 8 of the Revised
Rules of Civil Procedure. As held in Velasquez, this omission effectively
eliminated any defense relating to the authenticity and due execution of the
deed, e.g. that the document was spurious, counterfeit, or of different import
on its face as the one executed by the parties; or that the signatures appearing
thereon were forgeries; or that the signatures were unauthorized. Clearly, the
Court of Appeals did not err in HELD that venue was properly laid in Dagupan
City as provided in the deed of chattel mortgage. The Court holds that private
respondent is not barred from filing its case against petitioners in Dagupan
City where private respondent has a branch office as provided for in the deed of
chattel mortgage. Petition denied.
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Heirs of Quiring v. DBP
Cita
Heirs of Sofia Quirong, Represented by Romeo P.

Quirong, Petitioners, versus Development Bank of the
Philippines, Respondent.
(G.R. No. 173441, December 3, 2009, 2nd Division)
ABAD, J:
FACTS: When the late Emilio Dalope died, he left a 589-square meter untitled
lot in Sta. Barbara, Pangasinan, to his wife, Felisa Dalope and their nine
children, one of whom was Rosa Dalope-Funcion. To enable Rosa and her
husband Antonio Funcion get a loan from respondent Development Bank of the
Philippines (DBP), Felisa sold the whole lot to the Funcions. With the deed of
sale in their favor and the tax declaration transferred in their names, the
Funcions mortgaged the lot with the DBP. After the Funcions failed to pay
their loan, the DBP foreclosed the mortgage on the lot and consolidated
ownership in its name. Four years later the DBP conditionally sold the lot to
Sofia Quirong for the price of P78,000.00. In their contract of sale, Sofia
Quirong waived any warranty against eviction. The contract provided that the
DBP did not guarantee possession of the property and that it would not be
liable for any lien or encumbrance on the same. Quirong gave a down payment
of P14,000.00. Two months after that sale or Felisa and her eight children filed
an action for partition and declaration of nullity of documents with damages
against the DBP and the Funcions before the Regional Trial Court (RTC) of
Dagupan City. The trial court rendered a decision, declaring the DBP's sale to
Sofia Quirong valid only with respect to the shares of Felisa and Rosa Funcion
in the property. The DBP resisted the writ by motion to quash, claiming that
the decision could not be enforced because it failed to state by metes and
bounds the particular portions of the lot that would be assigned to the different
parties in the case. The trial court denied the DBP's motion. The Court of
Appeals reversed the trial courts decision and dismissed the heirs' action on
the ground of prescription. Hence, this petition.
ISSUE: Whether or not the Quirong heirs' action for rescission of respondent
DBP's sale of the subject property to Sofia Quirong was already barred by
prescription.
HELD: Yes. The Quirong heirs' action for rescission of respondent DBP's sale of
the subject property to Sofia Quirong was already barred by prescription.
The court finds that the incident did not affect the finality of the decision,
the prescriptive period remained to be reckoned from January 28, 1993, the
date of such finality. The remedy of "rescission" is not confined to the
rescissible contracts enumerated under Article 1381. Article 1191 of the Civil
Code gives the injured party in reciprocal obligations, such as what contracts
are about, the option to choose between fulfillment and "rescission."
"Rescission" is a subsidiary action based on injury to the plaintiff's economic
interests as described in Articles 1380 and 1381. As an action based on the
binding force of a written contract, therefore, rescission (resolution) under
Article 1191 prescribes in 10 years. Ten years is the period of prescription of
actions based on a written contract under Article 1144.
Petition denied.
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Lee v. Bangkok Bank

Samuel U. Lee and Pauline Lee and Asiatrust Development Bank,
Inc., Petitioners, versus Bangkok Bank Public Company,
Limited, Respondent.
VELASCO, JR., J:
FACTS: Midas Diversified Export Corporation (MDEC) and Manila Home

Textile, Inc. (MHI) entered into two separate Credit Line Agreements (CLAs)
with Respondent Bangkok Bank Public Company, Limited (Bangkok Bank).
MDEC and MHI are owned and controlled by the Lee family: Thelma U. Lee,
Maybelle L. Lim, Daniel U. Lee and Samuel U. Lee (Samuel). Both corporations
have interlocking directors and management led by the Lee family; and
engaged in the manufacturing and export of garments, ladies' bags and
apparel. MDEC was likewise granted a loan facility by Asiatrust Development
Bank, Inc. (Asiatrust). This facility had an available credit line of PhP
40,000,000 for letters of credit, advances on bills and export packing; and a
separate credit line of USD 2,000,000 for bills purchase.
In the meantime, Samuel bought several parcels of land in Cupang,
Antipolo, and later entered into a joint venture with Louisville Realty and
Development Corporation to develop the properties into a residential
subdivision, called Louisville Subdivision. MDEC and MHI initially had made
payments with their CLAs until they defaulted and incurred aggregate
obligations to Bangkok Bank in the amount of USD 1,998,554.60 for MDEC
and USD 800,000 for MHI. Similarly, the Lee corporations defaulted in their
obligations with other creditors. MDEC, MHI, and three other corporations
owned by the Lee family filed before the Securities and Exchange Commission
(SEC) a Consolidated Petition for the Declaration of a State of Suspension of
Payments and for Appointment of a Management Committee/Rehabilitation
Receiver.
ISSUE: Whether or not the Real Estate Mortgage executed over the subject
Antipolo properties and the foreclosure sale were committed in fraud and as a
consequence of such fraud can be rescinded.
HELD: No. The Real Estate Mortgage executed over the subject Antipolo
properties and the foreclosure sale was not committed in fraud and cannot be
rescinded.
No deception could have been used by the spouses Lee in including in

the list of properties, which they submitted to the SEC, the subject Antipolo
properties. First, it is undisputed that the list of properties submitted by the
Lee corporations to the SEC clearly indicated that the subject Antipolo
properties have already been earmarked, or have already been serving as
security, for its loan obligations with Asiatrust. Second, MDEC, through its
counsel, truly believed in good faith that the inclusion of the spouses Lees
private properties in the list submitted to the SEC is valid and regular. As can
be seen in the letter sent by the counsel of the Midas Group of Companies to
the Office of the Clerk of Court and Ex-Officio Sheriff of the Antipolo RTC on
April 4, 1998, at the time when the subject Antipolo properties were being
foreclosed by Asiatrust, its counsel vigorously countered the actions of
Asiatrust and stated that the subject Antipolo properties cannot be foreclosed
pursuant to the SEC Suspension Order.
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Petition granted.
Equatorial Realty v. Mayfair Theater
Cita
Equatorial Realty Development, Inc., Petitioner, versus Mayfair Theater,

Inc., Respondent.
PARDO, J:
FACTS: Carmelo & Bauermann, Inc. (Carmelo) used to own a parcel of land, together
with two two-storey buildings constructed thereon. On June 1, 1967, Carmelo entered
into a lease with Mayfair Theater, Inc. (Mayfair) for a period of 20 years. The lease
covered a portion of the second floor and mezzanine. Two years later, Mayfair entered
into a second lease with Carmelo for the lease of another property, a part of the second
floor and two spaces on the ground floor. The lease was also for a period of 20 years.
However, on July 30, 1978, within the 20-year-lease term, Carmelo sold the subject
properties to Equatorial Realty Development, Inc. (Equatorial) for the sum of P11.3M
without their first being offered to Mayfair. As a result, Mayfair filed a complaint for
specific performance and damages. After trial, the court ruled in favor of Equatorial.
On appeal, the Court of Appeals (CA) reversed and set aside the judgment of the lower
court. The Supreme Court denied Equatorials petition for review and declared the
contract between Carmelo and Equatorial rescinded. The decision became final and
executory and Mayfair filed a motion for its execution, which the court granted.
However, Carmelo could no longer be located thus Mayfair deposited with the court its
payment to Carmelo. On September 18, 1997, Equatorial filed an action for the
collection of sum of money against Mayfair claiming payment of rentals or reasonable
compensation for the defendants use of the premises after its lease contracts had
expired. The lower court debunked the claim of the petitioner for unpaid rentals,
holding that the rescission of the Deed of Absolute Sale in the mother case did not
confer on Equatorial any vested or residual proprietary rights, even in expectancy.
ISSUE: Whether or not Equatorial may collect rentals or reasonable compensation for
Mayfairs use of subject premises after its lease contracts had expired.
HELD: No. Equitorial may not collect rentals or reasonable compensation for Mayfairs
use of the subject premises after its lease contracts had expired.
Rent is a civil fruit that belongs to the owner of the property producing it by
right of accession. Consequently and ordinarily, the rentals that fell due from the time
of the perfection of the sale to petitioner until its rescission by final judgment should
belong to the owner of the property during that period. Petitioner never took actual
control and possession of the property sold, in view of the respondents timely
objection to the sale and continued actual possession of the property. The objection
took the form of a court action impugning the sale that was rescinded by a judgment
rendered by the Court in the mother case. It has been held that the execution of a
contract of sale as a form of constructive delivery is a legal fiction. It holds true only
when there is no impediment that may prevent the passing of the property from the
hands of the vendor into those of the vendee. When there is such impediment, fiction
yields to reality; the delivery has not been effected. Hence, respondents opposition to
the transfer of property by way of sale to Equatorial was a legally sufficient
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impediment that effectively prevented the passing of the property into the latters
hands.
The Court remanded the case to the trial court.
Siguan v. Lim
Cita
Maria Antonia Siguan, Petitioner, versus Rosa Lim, Linde Lim, Ingrid Lim
and Neil Lim, Respondents.
DAVIDE, JR., C.J.:
FACTS: Rosa Lim (Lim) issued two Metrobank checks in the sums of P300,000 and
P241,668, respectively, payable to "cash." Upon presentment by petitioner with the
drawee bank, the checks were dishonored for the reason "account closed." Demands
to make good the checks proved futile. As a consequence, a criminal case for violation
of Batas Pambansa were filed by petitioner against Lim. The court a quo convicted Lim
as charged. It also appears that on July 31, 1990, Lim was convicted of estafa by the
Regional Trial Court of Quezon City. This decision was affirmed by the Court of
Appeals. On appeal, however, the Supreme Court, in a decision promulgated on 7
April 1997, acquitted Lim but held her civilly liable in the amount of P169,000, as
actual damages, plus legal interest.
Meanwhile, on 2 July 1991, a Deed of Donation conveying parcels of land and

purportedly executed by Lim on August 10, 1989 in favor of her children, Linde, Ingrid
and Neil, was registered with the Office of the Register of Deeds of Cebu City. New
transfer certificates of title were thereafter issued in the names of the donees. On June
23, 1993, petitioner filed an accion pauliana against Lim and her children before the
Regional Trial Court of Cebu City to rescind the questioned Deed of Donation and to
declare as null and void the new transfer certificates of title issued for the lots covered
by the questioned Deed. The trial court ordered the rescission of the questioned deed
of donation; declared null and void the transfer certificates of title issued in the names
of private respondents Linde, Ingrid and Neil Lim; ordered the Register of Deeds of
Cebu City to cancel said titles and to reinstate the previous titles in the name of Rosa
Lim; and directed the LIMs to pay the petitioner, jointly and severally, the sum of
P10,000 as moral damages; P10,000 as attorney's fees; and P5,000 as expenses of
litigation.
ISSUE: Whether or not the deed of donation is valid.
HELD: Yes. The deed of donation is valid.
In the instant case, the alleged debt of Lim in favor of petitioner was incurred in
August 1990, while the deed of donation was purportedly executed on August 10,
1989. The Supreme Court is not convinced with the allegation of the petitioner that
the questioned deed was antedated to make it appear that it was made prior to
petitioner's credit. Notably, that deed is a public document, it having been
acknowledged before a notary public. As such, it is evidence of the fact which gave
rise to its execution and of its date, pursuant to Section 23, Rule 132 of the Rules of
Court.
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In the present case, the fact that the questioned Deed was registered only on
July 2, 1991 is not enough to overcome the presumption as to the truthfulness of the
statement of the date in the questioned deed, which is August 10, 1989. Petitioner's
claim against Lim was constituted only in August 1990, or a year after the questioned
alienation.
Petition dismissed.
Khe Hong v. Court of Appeals
Cita
Khe Hong Cheng, alias Felix Khe, Sandra Joy Khe and Ray Steven Khe,
Petitioners, v. Court Of Appeals, Hon. Teofilo Guadiz, RTC 147, Makati City and
Philam Insurance Co., Inc., Respondents.
KAPUNAN, J:
FACTS: Petitioner Khe Hong Chang alias Felix Khe is the owner of the vessel which
said vessel shipped 3,400 bags of copra at Masbate owned by the Philippine
Agricultural Trading Corporation. The shipment of copra was covered by an insurance
issued by American Home Insurance Company. The vessel sank while at sea which
resulted to the loss of bags of copra. The insurer paid the amount of Php 345,000.00
to the consignee. The American Home filed a case for the recovery of the money paid to
the consignee, based on breach of contract of carriage. During the pendency of the
case, petitioner executed deed of donation in favor of his children. The trial court
rendered its decision in favor of the plaintiff however when the Sheriff executed the
writ of execution they found out that petitioner no longer had any property and that
he conveyed the subject properties to his children. Respondent Philam filed a
complaint for the rescission of the deeds of donation executed by petitioner Khe Hong
Cheng in favor of his children and for the nullification of their titles. Respondent
Philam alleged, inter alia, that petitioner Khe Hong Cheng executed the aforesaid
deeds in fraud of his creditors, including respondent Philam. The Regional Trial Court
rendered its decision in favor of Philam. The Court of Appeals affirmed the decision of
the Regional Trial Court.
ISSUE: Whether or not the action for rescission has prescribed.
HELD: No. The action for rescission has not yet prescribed.
Article 1389 of the Civil Code simply provides that, "The action to claim
rescission must be commenced within four years." Since this provision of law is
silent as to when the prescriptive period would commence, the general rule,
from the moment the cause of action accrues, therefore, applies. Art. 1150. The
time for prescription for all kinds of actions, when there is no special provision
which ordains otherwise, shall be counted from the day they may be brought.
Article 1383 of the Civil Code provides as follows: Art. 1383. An action for
rescission is subsidiary; it cannot be instituted except when the party suffering
damage has no other legal means to obtain reparation for the same. It is thus
apparent that an action to rescind or an accion pauliana must be of last resort,
availed of only after all other legal remedies have been exhausted and have
been proven futile. As mentioned earlier, respondent Philam only learned about
the unlawful conveyances made by petitioner Khe Hong Cheng in January
1997 when its counsel accompanied the sheriff to Butuan City to attach the
properties of petitioner Khe Hong Cheng. There they found that he no longer
had any properties in his name. It was only then that respondent Philam's
action for rescission of the deeds of donation accrued because then it could be
said that respondent Philam had exhausted all legal means to satisfy the trial
court's judgment in its favor. Since respondent Philam filed its complaint
for accion pauliana against petitioners on February 25, 1997, barely a month
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from its discovery that petitioner Khe Hong Cheng had no other property to
satisfy the judgment award against him, its action for rescission of the subject
deeds clearly had not yet prescribed.
Petition denied.
Suntay v. Court of Appeals
Cita
Rafael G. Suntay, substituted by his heirs, namely: Rosario, Rafael, Jr.,

Apolinario, Raymund, Maria Victoria, Maria Rosario and Maria Lourdes, all
surnamed Suntay, Petitioners, versus The Hon. Court of Appeals and Federico C.
Suntay, Respondents.
(G.R. No. 114950 December 19, 1995, 1st Division)
HERMOSISIMA, JR., J:
FACTS: Federico Suntay was the registered owner of a parcel of land in dispute. He
applied as a miller contractor of the National Rice and Corn Corporation (NARIC) but
the same was disapproved by NARIC because he was tied up with several unpaid
loans. For purposes of circumvention, he asked his nephew-lawyer, Rafael to prepare
an absolute deed of sale of the said land in dispute in consideration of Php 20,000.00
in favor of Rafael. Less than three months after his conveyance, the same parcel of
land was sold back to Federico for the same consideration. However on the second sale
there was irregularity because it appears that said land was not sold but was
mortgaged in favor of the Hagonoy Rural Bank. Moreover, after the execution of the
deed, Federico remained in possession of the property sold.
Federico requested Rafael to deliver his copy of TCT no. T-36714 so that
Federico could have the counter deed of sale in his favor registered on his name but
Rafael refuses. Federico filed a complaint for reconveyance and damages against
Rafael. The trial court rendered its decision that Rafael is the owner of the property in
dispute but not to the extent of ordering Federico to pay back rentals for the use of the
property. The Court of Appeals rendered its decision in favor of Federico.
ISSUE: Whether or not said second deed of absolute sale is null and void.
HELD: Yes. The said second deed of absolute sale is null and void.
The cumulative effect of the evidence on record as chronicled aforesaid

identified badges of simulation proving that the sale by Federico to his deceased
nephew of his land and rice mill, was not intended to have any legal effect between
them. Though the notarization of the deed of sale in question vests in its favor the
presumption of regularity, it is neither the intention nor the function of the notary
public to validate and make binding an instrument never, in the first place, intended
to have any binding legal effect upon the parties thereto. The intention of the parties
still and always is the primary consideration in determining the true nature of a
contract.
The Supreme Court hold that the deed of sale executed by Federico in favor of
his now deceased nephew, Rafael, is absolutely simulated and fictitious and, hence,
null and void, said parties having entered into a sale transaction to which they did not
intend to be legally bound. As no property was validly conveyed under the deed, the
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second deed of sale executed by the late Rafael in favor of his uncle, should be
considered ineffective and unavailing.
The Amended Decision by the Court of Appeals is affirmed in toto.
Brobio Mangahas v. Brobio
Cita
Carmela Brobio Mangahas, Petitioner, versus Eufrocina A.

Brobio, Respondent.
NACHURA, J:
FACTS: On January 10, 2002, Pacifico S. Brobio died intestate, leaving three
parcels of land. He was survived by his wife, respondent Eufrocina A. Brobio,
and four legitimate and three illegitimate children; petitioner Carmela Brobio
Mangahas is one of the illegitimate children. On May 12, 2002, the heirs of the
deceased executed a Deed of Extrajudicial Settlement of Estate of the Late
Pacifico Brobio with Waiver. According to petitioner, respondent promised to
give her an additional amount for her share in her fathers estate. Thus, after
the signing of the Deed, petitioner demanded from respondent the promised
additional amount, but respondent refused to pay, claiming that she had no
more money.
A year later, while processing her tax obligations with the Bureau of
Internal Revenue (BIR), respondent was required to submit an original copy of
the Deed. Left with no more original copy of the Deed, respondent summoned
petitioner to her office and asked her to countersign a copy of the Deed.
Petitioner refused to countersign the document, demanding that respondent
first give her the additional amount that she promised. Considering the value of
the three parcels of land (which she claimed to be worth P20M), petitioner
asked for P1M, but respondent begged her to lower the amount. Petitioner
agreed to lower it to P600,000.00. Because respondent did not have the money
at that time and petitioner refused to countersign the Deed without any
assurance that the amount would be paid, respondent executed a promissory
note. Petitioner agreed to sign the Deed when respondent signed the
promissory note. When the promissory note fell due, respondent failed and
refused to pay despite demand. Petitioner made several more demands upon
respondent but the latter kept on insisting that she had no money. On January
28, 2004, petitioner filed a Complaint for Specific Performance with damages
against respondent.
ISSUE: Whether or not the promissory note was attended with intimidation.
HELD: No. The Promissory note was not attended with intimidation.
The Supreme Court ruled that contracts are voidable where consent
thereto is given through mistake, violence, intimidation, undue influence, or
fraud.
It is alleged that mistake, violence, fraud, or intimidation attended the

execution of the promissory note. Still, respondent insists that she was "forced"
into signing the promissory note because petitioner would not sign the
document required by the BIR. The fact that respondent may have felt
compelled, under the circumstances, to execute the promissory note will not
negate the voluntariness of the act. As rightly observed by the trial court, the
execution of the promissory note in the amount of P600,000.00 was, in fact,
the product of a negotiation between the parties. Respondent herself testified
that she bargained with petitioner to lower the amount.
The decision of the Court of Appeals is reversed and set aside.
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Hernandez v. Hernandez
Cornelia M. Hernandez, Petitioner, versus Cecilio F.
Hernandez, Respondent.
PEREZ, J:
FACTS: The Department of Public Works and Highways (DPWH), offered to

purchase a portion of a parcel of land in Sto. Tomas, Batangas, for use in the
expansion of the South Luzon Expressway. The land is pro-indiviso owned by
Cornelia M. Hernandez petitioner herein, Atty. Jose M. Hernandez, deceased
father of respondent Cecilio F. Hernandez represented by Paciencia Hernandez
and Mena Hernandez. The initial purchase price that was offered by the
government was allegedly at P35.00 per square meter for 14,643 square meters
of the aforementioned land. The Hernandez family rejected the offer. After a
series of negotiations with the DPWH, the last offer stood at P70.00 per square
meter. They still did not accept the offer and the government was forced to file
an expropriation case. On October 18, 1996, Cornelia, and her other co-owners
who were also signatories of the letter, executed an irrevocable Special Power of
Attorney (SPA) appointing Cecilio Hernandez as their "true and lawful attorney"
with respect to the expropriation of the subject property. The SPA stated that
the authority shall be irrevocable and continue to be binding all throughout the
negotiation. It further stated that the authority shall bind all successors and
assigns in regard to any negotiation with the government until its
consummation and binding transfer of a portion to be sold to that entity with
Cecilio as the sole signatory in regard to the rights and interests of the
signatories therein. There was no mention of the compensation scheme for
Cecilio, the attorney-in-fact. Cecilio, despite the service of summons and copy
of the complaint failed to file an answer. The trial court explained further that
Cecilio was present in the address supplied by the petitioner but refused to
receive the copy.
ISSUE: Whether or not the quitclaim document is null and void
HELD: Yes. The quitclaim document is null and void.
Cornelia received was a receipt and quitclaim document that was ready
for signing. As testified to by Cornelia, due to her frail condition and urgent
need of money in order to buy medicines, she nevertheless signed the quitclaim
in Cornelios favor. Quitclaims are also contracts and can be voided if there was
fraud or intimidation that leads to lack of consent. The facts show that a
simple accounting of the proceeds of the just compensation will be enough to
satisfy the curiosity of Cornelia. However, Cecilio did not disclose the truth and
instead of coming up with the request of his aunt, he made a contract intended
to bar Cornelia from recovering any further sum of money from the sale of her
property. The preparation by Cecilio of the receipt and quitclaim document
which he asked Cornelia to sign, indicate that even Cecilio doubted that he
could validly claim 83.07% of the price of Cornelias land on the basis of the 11
November 1993 agreement. Based on the attending circumstances, the receipt
and quitclaim document is an act of fraud perpetuated by Cecilio. Very clearly,
both the service contract of 11 November 1993 letter- agreement, and the later
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receipt and quitclaim document, the first vitiated by mistake and the second
being fraudulent, are void.
The decision of the Court of Appeals is reversed and set aside.
Fuentes, et al v. Roca
Cita
Manuel O. Fuentes and Leticia L. Fuentes, Petitioners, versus Conrado G.

Roca, Annabelle R. Joson, Rose Marie R. Cristobal and Pilar Malcampo,
Respondents.
(G.R. No. 178902, April 21, 2010, En Banc)
ABAD, J:
FACTS: On October 11, 1982, Sabina Taroza sold to her own son Tarciano T.
Roca her titled of 358 square meters lot located at Canelar, Zamboanga under
a Deed of Absolute Sale. Six years later, Tarciano T. Roca offered to sell the lot
to petitioners Manuel and Leticia Fuentes. The agreement required the Fuentes
spouses to pay Tarciano a down payment of P60,000.00 for the transfer of the
lots title to him. And, within six months, Tarciano was to clear the lot of
structures and occupants and secure the consent of his estranged wife, Rosario
Gabriel Roca (Rosario), to the sale. Upon Tarcianos compliance with these
conditions, the Fuentes spouses were to take possession of the lot and pay him
an additional P140,000.00 or P160,000.00, depending on whether or not he
succeeded in demolishing the house standing on it. If Tarciano was unable to
comply with these conditions, the Fuentes spouses would become owners of
the lot without any further formality and payment.
On January 11, 1989 a document of Absolute Deed of Sale as issued to

the Fuentes. One year after, Tarciano T. Roca died, which was followed by his
wife nine months after. The children of Roca filed for an action of annulment of
sale and reconveynace of the land against the Fuentes on the ground that
Tarciano's wife didn't gave her consent and that her signature on the affidavit
of consent had been forged. Spouses Fuentes denied such allegations and
claim that the forgery case is personal to Rosario and she alone could claim it.
Besides the four-year prescriptive period for nullifying the sale on the ground of
fraud had already elapsed. The Regional Trial Court ruled in favor of the
Fuentes, however the Court of Appeals reversed the decision of the Regional
Trial Court.
ISSUE : Whether or not the sale of conjugal was void.
HELD: Yes. The sale of conjugal land was void
The sale was void from the beginning. Consequently, the land remained
the property of Tarciano and Rosario despite that sale. When the two died, they
passed on the ownership of the property to their heirs, namely, the Rocas. As
lawful owners, the Rocas had the right, under Article 429 of the Civil Code, to
exclude any person from its enjoyment and disposal. In fairness to the Fuentes
spouses, however, they should be entitled, among other things, to recover from
Tarcianos heirs, the Rocas, the P200,000.00 that they paid him, with legal
interest until fully paid, chargeable against his estate. Further, the Fuentes
spouses appear to have acted in good faith in entering the land and building
improvements on it. The Fuentes spouses had no way of knowing that Rosario
did not come to Zamboanga to give her consent. There is no evidence that they
had a premonition that the requirement of consent presented some difficulty.
Indeed, they willingly made a 30 percent down payment on the selling price
months earlier on the assurance that it was forthcoming.
Petition denied.
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Associated Bank v. Sps. Montano

ASSOCIATED BANK, Petitioner versus SPOUSES JUSTINIANO S.
MONTANO, SR., AND LIGAYA MONTANO and TRES CRUCES AGRO-
INDUSTRIAL CORPORATION, Respondents.
(G.R.NO. 166383, October 16, 2009, 3rd Division)
NACHURA, J:
FACTS: In 1964 spouse Monatano owned 3 parcels of land situated in Tanza,

Cavite hich was utilized as an integrated farm and a stud farm used for raising
horses. Respondent Monatano went on self exile in USA to avoid the
harrasment of Pres. Marcos during the Martial Law regime, upon which they
transfered said properties to Tres Cruces Agro- Industrial Corporation(TCAIC)
in exchange for shares of stocks in the company with a 98% control over
TCAIC.
After a year, the TCAIC sold the properties to Inetrenational Country
Club Incorporation (ICCI)for 6,000,000.09 php, thus the title of properties were
now transfered to the ICCI. The ICCI then mortgaged the parcels of land to the
Citizens bank and Trust corporation now Associated Bank for an amount of
2,000,000.00 php. The mortgaged become mature but remain unpaid thereby
promting the Associated Bank to forclosed the mortgaged and put in in a
public auction. Associated Bank as the higgest bidder then buy the property
with an amount of 5,7000,000.00 php.
Meanwhile, the Montano returned to the country and after discovering
the transfer of the properties the Montano immediately took physical
possession of the same and began cultivating it. They also filed for a petition of
reconveyance and pray for the declaration of nullity upon transfer of CTC. On
the other hand, the associated bank filed its Motion for Preliminary Hearing on
the affirmative defense and motion to dismiss for the complaint stated no
cause of action, and that the case was already barred by the statute of
limitations.
ISSUES: Whether or not the complaint for reconveynace should be dismissed.
HELD: It is true that the action for reconveyance of property resulting from
fraud may be barred by the statute of limitations which requires that the action
shall be filed within 4 years from discovery of fraud, but be it noted that the
basis of reconveyance by the respondent is threat, duress and intimidation. As
provided in Art. 1391 of the civil code an action for annulment for it shall be
brought within four years, thus when Marcos ouster from power on February
21, 1986 and since the respondents filed its complaint for reconveynace on
September 15, 1989 the four years prescriptive period was not prescribed. The
SC denied for the dismissal of reconveyance and remitted the case to the RTC
for trial with cost against the petitioner.
Petition denied.
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Miailhe v. Court of Appeals

WILLIAM ALAIN MIAILHE, Petitioner, versus COURT OF APPEALS and
REPUBLIC OF THE PHILIPPINES, Respondents.
PANGANIBAN, J:
FACTS: Petitioner, William Alain Miailhe, on his own behalf and on behalf of
Victoria Desbarats-Miailhe, Monique Miailhe-Sichere and Elaine Miailhe-
Lencquesaing filed a Complaint for Annulment of Sale, Reconveyance and
Damages against [Respondent] Republic of the Philippines and defendant
Development Bank of the Philippines.
The petitioner alleged that DBP forged, threatened and intimidated
petitioner to sell the property to DBP for the grossly low price. The RTC and CA
rendered their decision in favor of DBP and that the action is already
prescribed.
ISSUE: Whether or not extrajudicial demands did not interrupt prescription.
HELD: In the present case, there is as yet no obligation in existence.

Respondent has no obligation to reconvey the subject lots because of the
existing Contract of Sale. Although allegedly voidable, it is binding unless
annulled by a proper action in court. Not being a determinate conduct that can
be extrajudically demanded, it cannot be considered as an obligation either.
Since Article 1390 of the Civil Code states that voidable "contracts are binding,
unless they are annulled by a proper action in court," it is clear that the
defendants were not obligated to accede to any extrajudicial demand to annul
the Contract of Sale.
Petition denied.
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First Philippine Holdings v. Trans Middle East

FIRST PHILIPPINE HOLDINGS CORPORATION, Petitioner versus TRANS
MIDDLE EAST (PHILS.) EQUITIES INC., Respondent.
(G.R. NO. 179505, December 4, 2009, 3rd Division)
CHICO-NAZARIO, J:
FACTS: FHPC formerly known as Meralco Securities Corporation incorporated

on 30 June 1961 by Filipino Entreprenuers led by Eugenio Lopez Sr. sold its
6,299,179.00 php shares of common stock in Philippine Commercial
International Bank (PCIB), now Equitable PCIB to TMEE. Such shares
according to the FHPC were obtained by the TMEE through fraud, acts
contrary to Law, Morals, Good Customs and Public Policy and such acquisition
is either voidable, void or unenforceable.
FHPC filed then its motion for leave to intervene and admit complaint in
intervention and was granted by the court. On the other hand, TMEE filed its
motion to dismiss the complaint-in-intervention by the FHPC on the ground
that the action of FHPC has already prescribed under Article 1391 of the Civil
Code. Since the action was filed only on 28 December 1988 and the sale was
24 May 1984 the action was already 7 months late from the date of
prescription.
ISSUE: Whether or not the sale of property is void and the prescriptive period
had elapsed.
HELD: No. The sale of property is valid and the prescriptive period has not
elapsed.
The Court found that the sale is not void for a suit for the annulment of
voidabale contract on account of fraud shall be filed within four years from the
discovery of the same, here, from the time the questioned sale transaction on
May 24, 1984 took place, FHPC didn't deny that it had actual knowledge of the
same. Simply, petitioner was fully aware of the sale of the PCIB shares to
TMEE and espite full knowledge petitioners did not question the said sale from
its inception and sometime thereafter. it was only four years and seven
months had elapsed following the knowledge or discovery of the alleged
fraudulent sale that the petitioner assailed the same, by then it was too late for
the petitioners to beset same transaction, since the prescriptive period had
already come into play.
The Court therefore denied the instant petition and affirmed the
resolution of the SB with cost against the petitioner.
Petition denied.
Cita
Sanchez v. Mapalad Realty

MANUEL LUIS SANCHEZ Petitioner, versus MAPALAD REALTY
REYES, J:
FACTS: Respondent Mapalad was the registered owner of four (4) parcels of
land located along Roxas Boulevard, Baclaran, Paraaque
The PCGG issued writs of sequestration for Mapalad and all its properties.
Josef, Vice president/treasurer and General Manager of Mapalad discovered
that the 4 TCTs were missing, however the four missing tcts turned out to be in
possession of Nordelak Development Corporation. Nordelak came into
possession of the 4 TCTs by deed of sale purportedly executed by Miguel
Magsaysay in his capacity as President and Board Chairman of Mapalad.
Mapalad filed an action for annulment of deed of sale and reconveyance
of title with damages against Nordelak.
The Regional Trial Court ruled in favor of Nordelak. The Court of Appeals
reversed the decision of trial court.
ISSUE: Whether or not there was a valid sale between Mapalad and Nordelak.
HELD: In the present case, consent was purportedly given by Miguel

Magsaysay, the person who signed for and in behalf of Mapalad in the deed of
absolute sale dated November 2, 1989. However, as he categorically stated on
the witness stand during trial, he was no longer connected with Mapalad on
the said date because he already divested all his interests in said corporation
as early as 1982. Even assuming, for the sake of argument, that the
signatures purporting to be his were genuine, it would still be voidable for lack
of authority resulting in his incapacity to give consent for and in behalf of the
corporation.
Lack of consideration makes a contract of sale fictitious. A fictitious sale
is void ab initio.
The alleged deed of absolute sale dated November 2, 1989
notwithstanding, the contract of sale between Mapalad and Nordelak is not
only voidable on account of lack of valid consent on the part of the purported
seller, but also void ab initio for being fictitious on account of lack of
consideration.
Petition denied.
Cita
Oesmer v. PDC
RIZALINO, substituted by his heirs, JOSEFINA, ROLANDO and FERNANDO,
ERNESTO, LEONORA, BIBIANO, JR., LIBRADO and ENRIQUETA, all
surnamed OESMER, Petitioners, versus PARAISO DEVELOPMENT
CHICO-NAZARIO, J:
FACTS: Petitioner Ernesto to meet with a certain Sotero Lee, President of

respondent Paraiso Development Corporation, at Otani Hotel in Manila. The
said meeting was for the purpose of brokering the sale of petitioners properties
to respondent corporation.
A Contract to Sell was drafted. A check in the amount of P100,000.00,
payable to Ernesto, was given as option money. Sometime thereafter, Rizalino,
Leonora, Bibiano, Jr., and Librado also signed the said Contract to Sell.
However, two of the brothers, Adolfo and Jesus, did not sign the document.
However petitioners informed respondent corporation about their intention to
rescind the Contract to Sell and to return the amount of Php 100,000.00.
respondent did not respond to the aforesaid letter. Petitioners, therefore, filed a
complaint for Declaration of Nullity or for Annulment of Option Agreement or
Contract to Sell with damages.
The Regional Trial Court (RTC) rendered its decision in favor to
respondent. The Court of Appeals affirmed the decision of RTC with
modification.
ISSUE: Whether or not Contract to Sell is void considering that one of the heirs
did not sign it as to indicate its consent to be bound by its terms.
HELD: It is well-settled that contracts are perfected by mere consent, upon the
acceptance by the offeree of the offer made by the offeror. From that moment,
the parties are bound not only to the fulfillment of what has been expressly
stipulated but also to all the consequences which, according to their nature,
may be in keeping with good faith, usage and law. To produce a contract, the
acceptance must not qualify the terms of the offer. However, the acceptance
may be express or implied. For a contract to arise, the acceptance must be
made known to the offeror. Accordingly, the acceptance can be withdrawn or
revoked before it is made known to the offeror.
In the case at bar, the Contract to Sell was perfected when the
petitioners consented to the sale to the respondent of their shares in the
subject parcels of land by affixing their signatures on the said contract. Such
signatures show their acceptance of what has been stipulated in the Contract
to Sell and such acceptance was made known to respondent corporation when
the duplicate copy of the Contract to Sell was returned to the latter bearing
petitioners signatures.
Petition denied.
Cita
Vda. De Ape v. Court of Appeals

PERPETUA VDA. DE APE, Petitioner, versus THE HONORABLE COURT OF
APPEALS and GENOROSA CAWIT VDA. DE LUMAYNO, Respondents.
CHICO-NAZARIO, J:
FACTS: Cleopas Ape died in 1950 and left a parcel of land (Lot 2319) to his 11
children. The children never formally divided the property amongst themselves
except through hantal-hantal whereby each just occupied a certain portion and
developed each.
On the other hand, the spouses Lumayno were interested in the land so
they started buying the portion of land that each of the heirs occupied. On 11
Apr 1973, one of the children, Fortunato, entered into a contract of sale with
Lumayno. In exchange of his lot, Lumayno agreed to pay P5,000.00. She paid
in advance P30.00. Fortunato was given a receipt prepared by Lumaynos son
in law (Andres Flores). Flores also acted as witness. Lumayno also executed
sales transactions with Fortunatos siblings separately.
In 1973, Lumayno compelled Fortunato to make the the delivery to her of
the registrable deed of sale over Fortunatos portion of the Lot No. 2319.
Fortunato assailed the validity of the contract of sale. He also invoked his right
to redeem (as a co-owner) the portions of land sold by his siblings to Lumayno.
Fortunato died during the pendency of the case.
ISSUE: Whether or not there was a valid contract of sale.
HELD: No. Fortunato was a no read no write person. It was incumbent for the
the other party to prove that details of the contract was fully explained to
Fortunato before Fortunato signed the receipt.
A contract of sale is a consensual contract, thus, it is perfected by mere
consent of the parties. It is born from the moment there is a meeting of minds
upon the thing which is the object of the sale and upon the price. Upon its
perfection, the parties may reciprocally demand performance, that is, the
vendee may compel the transfer of the ownership and to deliver the object of
the sale while the vendor may demand the vendee to pay the thing sold. For
there to be a perfected contract of sale, however, the following elements must
be present: consent, object, and price in money or its equivalent.
For consent to be valid, it must meet the following requisites: (a) it
should be intelligent, or with an exact notion of the matter to which it refers;
(b) it should be free and (c) it should be spontaneous. Intelligence in consent is
vitiated by error; freedom by violence, intimidation or undue influence;
spontaneity by fraud.
Lumayno claimed that she explained fully the receipt to Fortunato, but
Flores testimony belies it. Flores said there was another witness but the other
was a maid who was also lacked education. Further, Flores himself was not
aware that the receipt was to transfer the ownership of Fortunatos land to her
mom-in-law. It only occurred to him to explain the details of the receipt but he
never did.
Cita
Francisco v. Herrera
JULIAN FRANCISCO (Substituted by his Heirs, namely: CARLOS ALTEA
FRANCISCO; the heirs of late ARCADIO FRANCISCO, namely: CONCHITA
SALANGSANG-FRANCISCO (surviving spouse), and his children namely:
TEODULO S. FRANCISCO, EMILIANO S. FRANCISCO, MARIA THERESA S.
FRANCISCO, PAULINA S. FRANCISCO, THOMAS S. FRANCISCO; PEDRO
ALTEA FRANCISCO; CARINA FRANCISCO-ALCANTARA; EFREN ALTEA
FRANCISCO; DOMINGA LEA FRANCISCO-REGONDON; BENEDICTO ALTEA
FRANCISCO and ANTONIO ALTEA FRANCISCO), Petitioner, versus
PASTOR HERRERA, Respondent.
QUISUMBING, J:
FACTS: Petitioner bought 2 parcels of land from Eligio Herrera Sr. The children
of Eligio, Sr. conteneded that the contract price for the two parcels of land was
grossly inadequate so they tried to negotiate with petitioner. However petitioner
refused.
The children of Herrera filed a complaint for annulment of sale. The
Regional Trial Court (RTC) rendered its decision in favor of the children and the
Court of Appeals affirmed the decision of RTC.
ISSUE: Whether or not said contract is void.
HELD: In the present case, it was established that the vendor Eligio, Sr.
entered into an agreement with petitioner, but that the formers capacity to
consent was vitiated by senile dementia. Hence, we must rule that the assailed
contracts are not void or inexistent per se; rather, these are contracts that are
valid and binding unless annulled through a proper action filed in court
seasonably.
An annullable contract may be rendered perfectly valid by ratification,
which can be express or implied. Implied ratification may take the form of
accepting and retaining the benefits of a contract. As found by the trial court
and the Court of Appeals, upon learning of the sale, respondent negotiated for
the increase of the purchase price while receiving the installment payments. It
was only when respondent failed to convince petitioner to increase the price
that the former instituted the complaint for reconveyance of the properties.
Clearly, respondent was agreeable to the contracts, only he wanted to get more.
Further, there is no showing that respondent returned the payments or made
an offer to do so. This bolsters the view that indeed there was ratification. One
cannot negotiate for an increase in the price in one breath and in the same
breath contend that the contract of sale is void.
Petition granted.
Cita
Braganza v. Villa Abrille

ROSARIO L. DE BRAGANZA, ET AL., Petitioners, versus FERNANDO F. DE
VILLA ABRILLE, Respondent.
(G.R. No. L-12471, April 13, 1959, En Banc)
BENGZON, J:
FACTS: Rosario Braganza and her sons loaned from De Villa Abrille P70,000 in
Japanese war notes and in consideration thereof, promised in writing to pay
him P10,00 + 2% per annum in legal currency of the Philippines 2 years after
the cessation of the war. Because they have no paid, Abrille is sued them in
March 1949.
The Manila court of first instance and Court of Appeals held the family
solidarily liable to pay according to the contract they signed. The family
petitioned to review the decision of the CA whereby they were ordered to
solidarily pay De Villa Abrille P10,000 + 2% interest, praying for consideration
of the minority of the Braganza sons when they signed the contract.
ISSUE: Whether or not the boys, who were 16 and 18 respectively, are to be
bound by the contract of loan they have signed.
HELD: The Court found that Rosario will still be liable to pay her share in the
contract because they minority of her sons does not release her from liability.
She is ordered to pay 1/3 of P10,000 + 2% interest.
However with her sons, the SC reversed the decision of the CA which
found them similarly liable due to their failure to disclose their minority. The
SC sustained previous sources in Jurisprudence in order to hold the infant
liable, the fraud must be actual and not constructive. It has been held that his
mere silence when making a contract as to his age does not constitute a fraud
which can be made the basis of an action of deceit.
The boys, though not bound by the provisions of the contract, are still
liable to pay the actual amount they have profited from the loan. Art. 1340
states that even if the written contract is unenforceable because of their non-
age, they shall make restitution to the extent that they may have profited by
the money received. In this case, 2/3 of P70,00, which is P46,666.66, which
when converted to Philippine money is equivalent to P1,166.67.
Wherefore, as the share of these minors was 2/3 of P70,000 of
P46,666.66, they should now return P1,166.67.3 Their promise to pay P10,000
in Philippine currency, (Exhibit A) cannot be enforced, as already stated, since
they were minors incapable of binding themselves. Their liability, to repeat, is
presently declared without regard of said Exhibit A, but solely in pursuance of
Petition granted.
Cita
Katipunan v. Katipunan
MIGUEL KATIPUNAN, INOCENCIO VALDEZ, EDGARDO BALGUMA and
LEOPOLDO BALGUMA, JR., Petitioners, versus BRAULIO KATIPUNAN, JR.,
Respondent.
FACTS: Respondent Braulio Katipunan, Jr. is the owner of a 203 square meter
lot and a five-door apartment constructed thereon located at 385-F Matienza
St., San Miguel, Manila.
Petitioner Miguel Katipunan, entered into a Deed of Absolute Sale4 with
brothers Edgardo Balguma and Leopoldo Balguma, Jr. (co-petitioners),
represented by their father Atty. Leopoldo Balguma, Sr., involving the subject
property for a consideration of P187,000.00.
Respondent filed a complaint for annulment of the Deed of Absolute Sale.
He contended that the said contract was obtained through insidious words and
machinations. The Regional Trial Court (RTC) dismissed the complaint. The
Court of Appeals (CA) reversed the decision of RTC.
ISSUE: Whether or not CA ered when it overturned the factual findings of the
trial court which are amply supported by the evidence on record.
HELD: The circumstances surrounding the execution of the contract manifest

a vitiated consent on the part of respondent. Undue influence was exerted
upon him by his brother Miguel and Inocencio Valdez (petitioners) and Atty.
Balguma. It was his brother Miguel who negotiated with Atty. Balguma.
However, they did not explain to him the nature and contents of the document.
Worse, they deprived him of a reasonable freedom of choice. It bears stressing
that he reached only grade three. Thus, it was impossible for him to
understand the contents of the contract written in English and embellished in
legal jargon.
A contract where one of the parties is incapable of giving consent or
where consent is vitiated by mistake, fraud, or intimidation is not void ab initio
but only voidable and is binding upon the parties unless annulled by proper
Court action. Since the Deed of Absolute Sale between respondent and the
Balguma brothers is voidable and hereby annulled, then the restitution of the
property and its fruits to respondent is just and proper. Petitioners should turn
over to respondent all the amounts they received starting January, 1986 up to
the time the property shall have been returned to the latter.
Petition denied.
Cita
Jumalon v. Court of Appeals

NILO R. JUMALON, Petitioner, versus COURT OF APPEALS, HON. RUBEN
D. TORRES, in his capacity as Executive Secretary, HOUSING AND LAND
USE REGULATORY BOARD, and MA. ASUNCION DE LEON, Respondents.
PARDO, J:
FACTS: Complainant De Leon and herein petitioner, Nilo R. Jumalon, executed

a conditional sales agreement whereby the former purchased from the latter a
house and lot. Jumalon executed in favor of De Leon a Deed of Absolute Sale.
De Leon learned regarding the danger posed by the wires over the
property. Also, De Leon was informed by HLURB Enforcement Center, that
construction of houses and buildings of whatever nature are strictly prohibited
within the right-of way of the transmission line.
De Leon filed a case for declaration of nullity or annulment of sale of real
property which was subsequently dismissed. De Leon then, filed a complaint
before the HLURB seeking the rescission of the conditional sales agreement
and the Absolute Deed of Sale.
HLURB arbiter rendered judgment in favor of De Leon. The Board of
Commissioners of HLURB affirmed the decision of arbiter. The CA affirmed the
appealed decision.
ISSUE: Whether or not the Court of Appeals erred in affirming the decision of
Executive Secretary Ruben D. Torres and the HLURB declaring the rescission
of the contract of sale of a house and lot between the petitioner and private
respondent
HELD: The Court agreed with the Court of Appeals that respondent de Leon
was entitled to annul the sale. There was fraud in the sale of the subject house.
It is not safely habitable. It is built in a subdivision area where there is an
existing 30-meter right of way of the Manila Electric Company (Meralco) with
high-tension wires over the property, posing a danger to life and property. The
construction of houses underneath the high tension wires is prohibited as
hazardous to life and property because the line carries 115,000 volts of
electricity, generates tremendous static electricity and produces electric sparks
whenever it rained.
Petition denied.
Cabales v. Court of Appeals
Cita
NELSON CABALES and RITO CABALES, Petitioners, versus COURT OF

APPEALS, JESUS FELIANO and ANUNCIACION FELIANO, Respondents.
PUNO, C.J.:
FACTS: Saturnina and her children Bonifacio, Albino, Francisco, Leonara,

Alberto and petitioner Rito inherited a parcel of land. They sold such property
to Dr. Cayetano Corrompido with a right to repurchase within 8 years.
Alberto secured a note from Dr. Corrompido in the amount of Php
300.00.
Alberto died leaving a wife and son, petitioner Nelson.
Within the 8-year redemption period, Bonifacio and Albino tendered their
payment to Dr. Corrompido. But Dr. Corrompido only released the document of
sale with pacto de retro after Saturnina paid the share of her deceased son,
Alberto, plus the note.
Saturnina and her children executed an affidavit to the effect that

petitioner Nelson would only receive the amount of Php 176.34 from
respondents-spouses when he reaches the age if 21 considering that Saturnina
paid Dr. Corrompido Php 966.66 for the obligation of petitioner Nelsons late
father Alberto.
ISSUE: Whether or not the sale entered into is valid and binding.
HELD: No. The sale entered into is not valid and not binding.
The legal guardian only has the plenary power of administration of the minors
property. It does not include the power to alienation which needs judicial
authority. Thus when Saturnina, as legal guardian of petitioner Rito, sold the
latters pro indiviso share in subject land, she did not have the legal authority
to do so. The contarct of sale as to the pro indiviso share of Petitioner Rito was
unenforceable. However when he acknowledged receipt of the proceeds of the
sale on July24, 1986, petitioner Rito effectively ratified it. This act of
ratification rendered the sale valid and binding as to him.
Petition is denied.
Cita
VDA. DE OUANO v. RP
ANUNCIACION VDA. DE OUANO, MARIO P. OUANO, LETICIA OUANO
ARNAIZ, and CIELO OUANO MARTINEZ, Petitioners, versus THE REPUBLIC
OF THE PHILIPPINES, THE MACTAN-CEBU INTERNATIONAL AIRPORT
AUTHORITY, and THE REGISTER OF DEEDS FOR THE CITY OF
CEBU, Respondents.
(G.R. NO. 168770, FEBRUARY 9, 2011, 1st Division)
VELASCO, JR., J.:
FACTS: In 1949, the National Airport Corporation (NAC), MCIAAs predecessor

agency pursued a program to expand the Lahug Airport in Cebu City. As an
assurance from the government, there is a promise of reconveyance or
repurchase of said property so long as Lahug ceases its operation or transfer
its operation to Mactan Cebu Airport. Some owners refused to sell, and that
the Civil Aeronautics Administration filed a complaint for the expropriation of
said properties for the expansion of the Lahug Airport. The trial court then
declared said properties to be used upon the expansion of said projects and
order for just compensation to the land owners, at the same time directed the
latter to transfer certificate or ownership or title in the name of the plaintiff. At
the end of 1991, Lahug Airport completely ceased its operation while the
Mactan-Cebu airport opened to accommodate incoming and outgoing
commercial flights. This then prompted the land owners to demand for the
reconveynace of said properties being expropriated by the trial court under the
power of eminent domain. Hence these two consolidated cases arise.
In G.R. No. 168812 MCIAA is hereby ordered by court to reconvey said

properties to the land owners plus attorneys fee and cost of suit, while in G.R.
No. 168770, the RTC ruled in favor of the petitioners Oaunos and against the
MCIAA for the reconveynace of their properties but was appealed by the latter
and the earlier decision was reversed, the case went up to the CA but the CA
affirmed the reversed decision of the RTC.
ISSUE: Whether or not the testimonials of the petitioners proving the promises,
assurances and representations by the airport officials and lawyers are
inadmissible under the Statue of Frauds.
HELD: Yes. The testimonials of the petitioners proving the promises,

admissible under the Statue of Frauds.
The SC ruled that since the respondent didnt object during trial to the
admissibility of petitioners testimonial evidenc under the Statute of Frauds, it
means then that they have waived their objection and are now barred from
raising the same. In any event, the Statute of Frauds is not applicable herein.
Consequently, petitioners pieces of evidence are admissible and should be duly
given weight and credence, since the records tend to support that the MCIAA
did not as the Ouanos and Inocians posit, object the introduction of parole
evidence to prove its commitment to allow the fromer landowners to repurchase
their properties upon the occurrence of certain events.
Cita
SHOEMAKER v. LA TONDEA
HARRY IVES SHOEMAKER, Petitioner, versus LA TONDEA,
INC., Respondent.
(G.R. No. L-45667, May 9, 1939, En Banc)
VILLA-REAL, J.:
FACTS: Defendant company, La tondena, Inc. entered into a written contract

of lease of services with plaintiff Harry Ives Shoemaker for a period of 5 years,
with a compensation consisting of 8% of the net earnings of defendant. That
during each year that the contract was in force, plaintiff would receive monthly
during the period of the contract of the sum of Php 1,500.00 or Php 18,000.00
per annum as minimum compensation if 8% of the net earnings of the
aforementioned alleged business would not reach the amount.
The defendant company alleged that there were changes in the contract
in which both the parties agreed upon.
Plaintiff filed a complaint against defendant company. The defendant

interposed a demurrer based on the ground that the facts therein alleged do
not constitute a cause of action, since it is not averred that the alleged mutual
agreement modifying the contract of lease of services, has been put in writing,
whereas it states that its terms and conditions may only be modified upon the
written consent of both parties.
ISSUE: Whether or not the court a quo erred in sustaining the demurrer
interposed by the defendant company to the second amended complaint filed
by plaintiff, on the ground that the facts alleged therein do not constitute a
couse of action.
HELD: No. The court a quo did not err in sustaining the demurrer interposed
by the defendant company to the second amended complaint filed by plaintiff,
on the ground that the facts alleged therein do not constitute a couse of action.
When in an oral contract which by its terms, is not to be performed within 1

year from the execution thereof, one of the contracting parties has complied
within the year with the obligations imposed on him said contract, the other
party cannot avoid the fulfillment of what is incumbent on him under the same
contract by invoking the statute of frauds because the latter aims to prevent
and not to protect fraud.
The order appealed from is reversed and it is ordered that case be

remanded to the court of origin so that the same may overrule the demurrer
interposed by the defendant company, La Tondea, Inc., and the latter may be
required to answer the second amended complaint, with costs against the
appellee.
Cita
PNB v. PHILIPPINE VEGETABLE OIL CO., INC.,

THE PHILIPPINE NATIONAL BANK, plaintiff-appellee, versus THE
PHILIPPINE VEGETABLE OIL CO., INC., defendant-appellee.
PHIL. C. WHITAKER, intevenor-appellant.
(49 Phil 897, January 14, 1927, En Banc)

MALCOLM, J.:
FACTS: This appeal involves the legal right of the PNB to obtain a judgement
against Vegetable Oil Co., Inc., for Php 15,812,454 and to foreclose a mortgage
on the property of the PVOC for Php 17,000,000.00 and the legal right of the
Phil C. Whitaker as intervenor to obtain a judgement declaring the mortgage
which the PNB seeks to foreclose to be without force and effect, requiring an
accouting from the PNB of the sales of the property and assets of the Vegetable
Co. and ordering the PVOC and the PNB to pay him the sum of Php
4,424,418.37
In 1920, the Vegetable Oil Company, found itself in financial straits. It was in
debt to the extent of approximately Php 30,000,000.00. The PNB was the
largest creditor. The VOC owed the bank Php 17,000,000.00. The PNB was
securedly principally by a real and chattel mortgage in favor of the bank on its
vessels Tankerville and H.S. Everett to guarantee the payment of sums not
exceed Php 4,000,000.00
ISSUE: Whether or not the plaintiff had failed to comply with the contract, that
it was alleged to have celebrated with the defendant and the intervenor, that it
would furnish funds to the defendant so that it could continue operating its
factory.
HELD: Yes. The plaintiff failed to comply with the contract, that it was alleged
to have celebrated with the defendant and the intervenor, that it would furnish
funds to the defendant so that it could continue operating its factory.
In the present instance, it is found that the Board of Directors of the PNB had
not consented to an agreement for practically unlimited backing of the V
corporation and had not ratified any promise to trhat effect made by its general
manager.
All the evidence, documentary and oral, pertinent to the issue considered and
found to disclose no binding promise, tacit, or express made by the PNB to
continue indefinitely the operation of the V corporation. Accordingly, intervenor
Whitaker is not entitled to recover damages from the bank.
Cita
The case will be remanded to the lower court for the entry of judgment
and further proceedings as herein indicated. Judgment affirmed in part and
reversed in part, without special finding as to costs in either instance.
VDA. DE OUANO v. RP
Cita
ANUNCIACION VDA. DE OUANO, MARIO P. OUANO, LETICIA OUANO

ARNAIZ, and CIELO OUANO MARTINEZ, Petitioners, versus THE REPUBLIC
OF THE PHILIPPINES, THE MACTAN-CEBU INTERNATIONAL AIRPORT
AUTHORITY, and THE REGISTER OF DEEDS FOR THE CITY OF
CEBU, Respondents.
(G.R. NO. 168770, FEBRUARY 9, 2011, 1st Division)
VELASCO, JR., J.:
FACTS: In 1949, the National Airport Corporation (NAC), MCIAAs predecessor

agency pursued a program to expand the Lahug Airport in Cebu City. As an
assurance from the government, there is a promise of reconveyance or
repurchase of said property so long as Lahug ceases its operation or transfer
its operation to Mactan Cebu Airport. Some owners refused to sell, and that
the Civil Aeronautics Administration filed a complaint for the expropriation of
said properties for the expansion of the Lahug Airport. The trial court then
declared said properties to be used upon the expansion of said projects and
order for just compensation to the land owners, at the same time directed the
latter to transfer certificate or ownership or title in the name of the plaintiff. At
the end of 1991, Lahug Airport completely ceased its operation while the
Mactan-Cebu airport opened to accommodate incoming and outgoing
commercial flights. This then prompted the land owners to demand for the
reconveynace of said properties being expropriated by the trial court under the
power of eminent domain. Hence these two consolidated cases arise.
In G.R. No. 168812 MCIAA is hereby ordered by court to reconvey said
properties to the land owners plus attorneys fee and cost of suit, while in G.R.
No. 168770, the RTC ruled in favor of the petitioners Oaunos and against the
MCIAA for the reconveynace of their properties but was appealed by the latter
and the earlier decision was reversed, the case went up to the CA but the CA
affirmed the reversed decision of the RTC.
ISSUE: Whether or not the testimonials of the petitioners proving the promises,
inadmissible under the Statue of Frauds.
HELD: No.The testimonials of the petitioners proving the promises, assurances
and representations by the airport officials and lawyers are admissible under
the Statue of Frauds.
The SC ruled that since the respondent didnt object during trial to the
admissibility of petitioners testimonial evidenc under the Statute of Frauds, it
means then that they have waived their objection and are now barred from
raising the same. In any event, the Statute of Frauds is not applicable herein.
Consequently, petitioners pieces of evidence are admissible and should be duly
given weight and credence, since the records tend to support that the MCIAA
did not as the Ouanos and Inocians posit, object the introduction of parole
evidence to prove its commitment to allow the fromer landowners to repurchase
their properties upon the occurrence of certain events.
Cita
THE MUNICIPALITY OF HAGONOY, BULACAN v. DUMDUM, JR.

THE MUNICIPALITY OF HAGONOY, BULACAN, represented by the HON.
FELIX V. OPLE, Municipal Mayor, and FELIX V. OPLE, in his personal
capacity, Petitioners, versus HON. SIMEON P. DUMDUM, JR., in his
capacity as the Presiding Judge of the REGIONAL TRIAL COURT, BRANCH
7, CEBU CITY; HON. CLERK OF COURT & EX-OFFICIO SHERIFF of the
REGIONAL TRIAL COURT of CEBU CITY; HON. CLERK OF COURT & EX-
OFFICIO SHERIFF of the REGIONAL TRIAL COURT of BULACAN and his
DEPUTIES; and EMILY ROSE GO KO LIM CHAO, doing business under the
name and style KD SURPLUS, Respondents.
(G.R. NO. 168289, MARCH 22, 2010, 3rd Division)
PERALTA, J.:
FACTS: Private respondent, Emily Rose Go Ko Lim Chao, who is engaged in

buy and sell business of surplus business, equipment machineries, spare parts
and related supplies filed a complaint for collection of sum of money, including
damages against the petitioners, Municipality of Hagonoy, Bulacan and its
ormer chief executive, Mayor Felix V. Ople in his official and personal capacity.
The private respondent claimed that because of Oples earnest representation
that funds had already been allowed for the project, she agreed to deliver from
her personal principal business in Cebu City twenty-one motor vehicles whose
valued totaled to 5,820,000.00 php but the petitioners here instead filed a
motion to dismiss on the ground that the claim on which the action had been
brought was unenforceable under the statute of frauds, pointing out that there
was no written contract or document that would evince the supposed
agreement they entered into with the respondent. The petitioners also filed for
Motion to Dissolve and /or Discharge the Writ of Preliminary Attachment
already issued by the court invoking immunity of the State from suit,
unenforceability of contract, and failure to substantiate the allegation of fraud.
But the trial court denied all the petitions of the petitioners; hence the
petitioners brought this case to CA believing that the trial court committed
grave abuse of discretion upon issuing two orders .
ISSUE: Whether or not complaint is unenforceable under the Statutes of

Fraud.
HELD: No. The complaint is enforceable under the Statutes of Fraud.
The SC held that Statute of frauds is descriptive of statutes that require certain
classes of contracts to be in writing, and that do not deprive the parties of the
right to contract with respect to the matters therein involved, but merely
regulate the formalities of the contract necessary to render its enforceability. In
other words, the Statute of fraud only lays down the method by which the
enumerated contracts maybe proved. It does not also declare any contract
invalid because they are not reduced into writing inasmuch as, by law,
contracts are obligatory in whatever form they may have been entered into
provided that all their essential requisites for validity are present. Thus the
claim of the respondent is well-substantiated.
The petition is hereby granted in part, but affirmed the decision of

CA in CA-G.R. NO. 81888 is affirmed as it was held by the Regional Trial Court.
Cita
Sps. Tan v. Villapaz

SPOUSES ANTONIO and LOLITA TAN, Petitioners, versus CARMELITO
VILLAPAZ, Respondent.
(475 SCRA 720, November 22, 2005, 3rd Division)
CARPIO MORALES, J.:
FACTS: Respondent Carmelito Villapaz issued a Philippine Bank of

Communications (PBCom) crossed check in the amount of P250,000.00,
payable to the order of petitioner Tony Tan.
The Malita, Davao del Sur Police issued an invitation-request to
petitioner Antonio Tan inviting him to appear before the Deputy Chief of Police
Office on June 27, 1994 at 9:00 oclock in the morning in connection with the
request of [herein respondent] Carmelito Villapaz, for conference of vital
importance.
The invitation-request was received by petitioner Antonio Tan on June

22, 1994 but on the advice of his lawyer, he did not show up at the Malita,
Davao del Sur Police Office.
Respondent filed a Complaint for sum of money against petitioners-spouses,

alleging that, , his issuance of the February 6, 1992 PBCom crossed check
which loan was to be settled interest-free in six (6) months; on the maturity
date of the loan or on August 6, 1992, petitioner Antonio Tan failed to settle the
same, and despite repeated demands, petitioners never did.
Petitioners alleged that they never received from respondent any demand for
payment, be it verbal or written, respecting the alleged loan; since the alleged
loan was one with a period payable in six months, it should have been
expressly stipulated upon in writing by the parties but it was not.
ISSUE:Whether or not Honorable Court of Appeals erred in concluding that the

transaction in dispute was a contract of loan and not a mere matter of check
encashment as found by the trial court.
HELD: No. The Honorable Court of Appeals did not err in concluding that the
transaction in dispute was a contract of loan and not a mere matter of check
encashment as found by the trial court.
At all events, a check, the entries of which are no doubt in writing, could prove
a loan transaction.
That petitioner Antonio Tan had, on February 6, 1992, an outstanding

balance of more than P950,000.00 in his account at PBCom Monteverde
Cita
branch where he was later to deposit respondents check did not rule out
petitioners securing a loan. It is pure naivete to believe that if a businessman
has such an outstanding balance in his bank account, he would have no need
to borrow a lesser amount.
In fine, as petitioners side of the case is incredible as it is inconsistent

with the principles by which men similarly situated are governed, whereas
respondents claim that the proceeds of the check, which were admittedly
received by petitioners, represented a loan extended to petitioner Antonio Tan
is credible, the preponderance of evidence inclines on respondent.
Petition is denied.
Sps. David v. Tiongson
Cita
SPOUSES VENANCIO DAVID and PATRICIA MIRANDA DAVID and

FLORENCIA VENTURA VDA. DE BASCO, Petitioners,
versus ALEJANDRO and GUADALUPE TIONGSON, Respondents.
PARDO, J.:
FACTS:Three sets of plaintiffs, namely spouses Ventura, spouses David and

Vda. De Basco, filed a complaint for specific performance with damges, against
private respondents spouses Tiongson, alleging that the latter sold to them lots
located in Pampanga.
The parties expressly agredd that in case of payment has been fully paid
respondents would execute an individual deed of absolute sale in plaintiffs
flavor.
The respondents demanded the executuion of a deed of sale and

issuance of certificate of titile but the respondents refused to issue the same.
The trial court rendered its decision in favor of the respondents. However
the CA ruled that contract of sale was not been perfrected between spouses
David and/or Vda. De Basco and respondents. As with regard to the spouses
Ventura, the CA affirmed the RTC.
ISSUE:Whether or not contract of sale has not been perfected but petitioners
and respondents.
HELD: No. The contract of sale has been perfected but petitioners and
respondents.
The SC ruled that there was a perfected contact. However, the statute of frauds
is inapplicable. The rule is settled that the statute of frauds applies only to
executor and not to completed, executed or partially executed contract. In the
case of spouses David, the payment made rendered the sales contract beyong
the ambit of the statutre of frauds/
The CA erred in concluding that there was no perfected contract of sale.

However, in view of the stipulation of the parties that the deed of sale and
corresponding certificate of title would be issued after full payment, then, they
ad entered into a contract to sell and not a contract of sale.
The Decision of the Court of Appeals in CA G.R. CV No.

24667.REVERSE and SET ASIDE.
Cita
Cordial v. Miranda
GENARO CORDIAL, Petitioner, versus DAVID MIRANDA, Respondent.
PANGANIBAN, J.:
FACTS: David Miranda, a businessman from Angeles City, was engaged in
rattan business since 1980. He buys large quantities of rattan poles from
suppliers coming from Palawan, Isabela, Ilocos Sur, Baler, Quezon and
Cagayan de Oro City. Among his many regular suppliers, of particular interest
in this case, were Roberto Savilla. Her Villanueva, Roberto Savilla. Her
Villanueva, Roberto Santiago, and in 1990 one Gener Buelva.
Gener Buelva was an employee of one Mike Samaya, who was also a
supplier of rattan to Respondent Miranda. Gener Buelva, wanting to become an
independent rattan supplier in January 1990, was recommended by his
employer Samaya to Respondent Miranda who readily accepted him, thus,
started such business relationship.
In the business relations between Buelva and Miranda, the former was
given cash advances by the latter, to buy rattan in Palawan, shipping said
purchased rattan by boat to Manila, paid ex-Manila, after liquidating cash
advances. Buelva also paid forest royalties to the concessionaire, thru Roberto
Savilla. The business transactions, however, did not last long because Buelva
then in Manila met an accident and died on June 19, 1990.
They agreed that Cordial will be his supplier of rattan poles. Cordial
shipped rattan poles as to the agreed number of pieces and sizes however
Miranda refused to pay the cost of the rattan poles delivered. Miranda alleged
that there exist no privity of contract between Miranda and Cordial.
Cordial filed a complaint againt Miranda. The RTC rendered its decision
in favor of the petitioner. The CA reversed the decision of the RTC.
ISSUE: Whether or not Statute of Frauds applies in this case.
HELD: No. The Statute of Frauds does not apply in this case.
The CA and respondent Miranda stress the absence of a written memorandum

of the alleged contract between the parties. Respondent implicity agrues that
the alleged contract is unenforceable under the Statute of Frauds however, the
statute of frauds applies only to executor and not to completed, executed, or
partially executed contracts. Thus, were one party has performed ones
obligation, oral evidence will be admitted to prove the agreement. In the present
case, it has already been established that petitioner had delivered the rattan
poles to respondent. The contract was partially executed, the Statute of Frauds
does not apply.
Cita
Villanueva-Mijares v. Court of Appeals
Cita
JOSEFINA VILLANUEVA-MIJARES, WALDETRUDES VILLANUEVA-

NOLASCO, GODOFREDO VILLANUEVA, EDUARDO VILLANUEVA,
GERMELINA VILLANUEVA-FULGENCIO, MILAGROS VILLANUEVA-
ARQUISOLA, and CONCEPCION MACAHILAS VDA. DE
VILLANUEVA, Petitioners, versus THE COURT OF APPEALS, PROCERFINA
VILLANUEVA, PROSPERIDAD VILLANUEVA, RAMON VILLANUEVA, ROSA
VILLANUEVA, VIRGINIA NEPOMUCENO, PAULA NEPOMUCENO, TARCELA
NEPOMUCENO, MERCEDES VILLANUEVA, ADELAIDA VILLANUEVA,
APARICION VILLANUEVA, JOSEFINA VILLANUEVA, BETTY VILLANUEVA,
BOBBY VILLANUEVA, MERLINDA VILLANUEVA, MORBINA VILLANUEVA,
FLORITA VILLANUEVA, DIONISION VILLANUEVA, and EDITHA
VILLANUEVA, Respondents.
(G.R. No. 108921, April 12, 2000, 3rd Division)
QUISUMBING, J.:
FACTS: Petitioners Josefina Villanueva-Mijares, Waldetrudes Villanueva-

Nolasco, Godofredo Villanueva, Eduardo Villanueva, Germelina Villanueva-
Fulgencio, and Milagros Villanueva-Arquisola are the legitimate children of the
late Leon Villanueva. Petitioner Concepcion Macahilas vda. de Villanueva is his
widow. Leon was one of eight (8) children of Felipe Villanueva, predecessor-in-
interest of the parties in the present case.
During the lifetime, Felipe, owned real property, a parcel of land situated
at Estancia, Kalibo, Capiz. Upong Felipes death, ownership of the land was
passed on to his children. Pedro, on of the children, got his share. The
remaining undivided portion of the land was held in trust by leon. His co-heirs
made several seasonable and lawful demands upon him to subdivide the
partition the property, but no subdivision took place.
After the death of Leon, private respondents discovered that the shares of
four of the heirs of Felipe was purchased by Leon as evidenced by Deed of Sale
but registered only in 1971. It also came to light that Leon had, sometime in
July 1970, executed a sale and partition of the property in favor of his own
children, herein petitioners. By virtue of such Deed of Partition, private
respondents had succeeded in obtaining Original Certificate of Title (OCT) No.
C-256. On April 25, 1975, petitioners managed to secure separate and
independent titles over their pro-indiviso shares in their respective names.
ISSUE: Whether or not the appellate court erred in declaring the Deed of Sale
unenforceable against the private respondent fro being unauthorized contract.
HELD: No. The appellate court did not err in declaring the Deed of Sale
unenforceable against the private respondent fro being unauthorized contract.
Cita
The court has ruled that the nullity of the unenforceable contract is of a
permanent nature and it will exist as long the unenforceable contract is not
duly ratifired. The mere lapse of time cannot igve efficacy to such a contract.
The defect is such that it cannot be cured except by the subsequent ratification
of the unenforceable contract by the person in whose name the contract was
executed. In the instant case, there is no showing of any express or implied
ratification of the assailed Deed of Sale by the private respondents Procerfina,
Ramon,. Prosperidad, and Rosa. Thus, the said Deed of Sale must remain
unenforceable as to them.
Petition is denied.
Cita
Rosencor v. Inquing
Cita
ROSENCOR DEVELOPMENT CORPORATION and RENE JOAQUIN, Petitioners,

vs.PATERNO INQUING, IRENE GUILLERMO, FEDERICO BANTUGAN, FERNANDO
MAGBANUA and LIZZA TIANGCO, Respondents.
GONZAGA-REYES, J.:
FACTS: Plaintiffs and plaintiffs-intervenors averred that they are the lessess since
1971 of a two-story residential apartment and owned by spouses Faustino and
Cresencia Tiangco. The lease was nocovered by any contract. The lesses were renting
the premises then for Php 150.00 a month and were allegedly verbally granted by the
lessors the pre-emptive right to purchase the property if ever they decide to sell the
same.
Upon the death of the spouses Tiangco, the management of the property was
adjudicated to their heirs who were represented by Eufrocina deLeon.
The lessees received a letter from de Leon advising them that the heirs of the late
spouses have already sold the property to Resencor.
The lessees filed an action f\before th RTC praying for the following: a)
rescission of the Deed of Absolute Sale between de Leon and Rocencor, b) the
defendants Rosencor/Rene Joaquin be ordered to reconvey the property to de Leon, c)
de Leon be ordered to reimburse the plaintiffs for the repair of the property or apply
the said amount as part of the purchase of the property.
The RTC dismissed the complaint while the Ca reversed the decision of the RTC.
ISSUE: Whether or not a right of first refusal is indeed covered by the provisions of the
NCC on the Statute of Frauds.
HELD: A right of first refusal is not among those listed as unenforceable under the
statute of frauds. Furthermore, the application of Article 1403, par. 2(e) of the NCC,
presupposes the existence of a perfected, albeit unwritten, contract of sale. A right of
first refusal, such as the one involved in the instant case, is not by any means a
perfected contract of sale of real property. At best, it is a contractual grant, not of the
sale of the real property involed byt of the right of first refusal over the property sought
to be sold.
It is thus evident that the statute of frauds does not contemplate cases
involving a right of right of first refusal. As such, a right of first refusal need not be
written to be enforceable and may be proven by oral evidence.
Cita
Firme v. UKAL
SPOUSES CONSTANTE FIRME AND AZUCENA E. FIRME, Petitioners,
vs.UKAL ENTERPRISES AND DEVELOPMENT CORPORATION, Respondent.
CARPIO, J.:
FACTS: Petitioner Spouses Firme are the registered owner of a parcel of land located
on Dahlia Avenue, Fairview Park, Quezon City.
Bukal Enterprises filed a complaint for specific performance and damges with
the trial court, aleeging that the Spouses Firme reneged on their agreement to sell the
property. The complaint asked the trial court to order the Spouses Firme to execute
the deed of sale and to delover the title of the property to Bukal Enterpises upon
payment of the agreed purchase price.
The RTC rendered its decision against Bukal. The CA reversed and set aside the
decision of the RTC.
ISSUE: Whether or not Statute of Frauds is applicable.
HELD: The CA held that partial performance of the contract of sale takes the oral
contract out of the scope of Statute of Frauds. This conclusion arose from the
appellate courts erronoues finding that there was a perfected contract of sale. The
recors shoe that there was no perfected contract of sale. There is therefore no basis for
the application of the Stature of Frauds. The application of the Statute of Frauds
presupposes the existence of a perfected contract.
Cita
Heirs of M. Doronio v. Heirs of F. Doronio

HEIRS OF M. DORONIO, Petitioners vs. HEIR OF F. DORONIO, Respondent.

REYES, R.T., J.:
FACTS: Petitioners are the heirs of Maralino Doronio, while respondents are the heirs
of Fortunato Doronio.
The property in dispute is one of a private deed of donation propter nuptias who
was executed by Spouses Simeon Doronio and Cornelia Gante in facor of Maralino
Doronio and his wife Veronica Pico.
The heirs of Fortuanto Doronio contended that only the half of the property was
actually incorporated in the deed of donation because it stated that Fortunato is the
owner of the adjacent property. Eager to obtain the entire property, the heirs of
Marcelino filed a petition For the Registration of a Private Deed of Donation. The RTC
granted the petition.
The heirs of Fortunato files a pleading in the form of petition. In the petition,
they prayed that an order be issued declaring null and void the registration of the
private deed of donation.
The RTC ruled in favor of the heirs of Marcelino. The CA reversed the decision of
RTC>
ISSUE: Whether or not the donation propter nuptias is valid.
HELD: Article 633 of the OCC provides that figts of real property , in order to be valid,
must appear in a public document. It is settled that a donation of real estate propter
nuptias is void unless made by public instrument.
In the instant case, the donation propter nuptias did not become valid. Neither
did it create any right because it was not made in a public instrument. Hence, it
conveyed no title to the land in question to petitioners predecessors.
Cita
Gurrea v. Suplico
NATIVIDAD ARIAGA VDA. DE GURREA, CARLOS GURREA, JULIETA GURREA,
TERESA GURREA-RODRIGUEZ, RICARDO GURREA, Jr., MA. VICTORIA GURREA-
CANDEL, and RAMONA GURREA-MONTINOLA, Petitioners,
vs ENRIQUE SUPLICO, Respondent
REYES, R.T., J.:
FACTS: The petition arose from a complaint for anuulment of tilte with prayer for
preliminary injunction filed with the court of First Instance by Rosalina Gurrea in her
capacity as attorney-in-fact of the heirs of Ricardo Gurrea. The complaint was filed
against Atty. Enrique Suplico.
Atty. Suplico alleged that the property in dispurte was for the payment of his
services rendered to the late Ricardo Gurrrea which the offered to him as payment.
ISSUE: Whether or not petitioners are entitled to the cancellation of respondent

attorneys title over the subject property and the reconveyance thereof to the herein
petitioners or to be the estate of the Late Ricardo.
HELD: Having been established that the subject property was still the object of
litigation at the time the subject deed of Transfer of Rights and Interest was executed,
the assignment of rights and interest over the subject property in favor of respondent
is null and void for being violative of the provisions of Article 1491 of the Civil Code
which expressly prohibits lawyers from acquiring property or rights which may be the
object of any litigation in which they may take part by virtue of their profession.
It follows that respondents title over the subject property should be cancelled and the
property reconveyed to the estate of Ricardo, the same to be distributed to the latter?s
heirs. This is without prejudice, however, to respondent?s right to claim his attorney?s
fees from the estate of Ricardo, it being undisputed that he rendered legal services for
the latter.
Cita
Frenzel v. Catito
ALFRED FRITZ FRENZEL, Petitioner, vs.EDERLINA P. CATITO, Respondent.
REYES, R.T., J.:
FACTS: Alfred Frenzel and Ederlina Catito had an amorous relationship which started
in Kings Cross, a night spot in Sydney.
During their relationship Alfred bought properties in the Philippines in the
name of Ederlina. Their relationship started to deteriorate when the husband of
Ederlina threatened Ederlina that he would file a bigamy case against her for having
an illicit affair with Alfred, who was also married.
Alfred filed a complaint against Ederlina for specific performance, declaration of

real and personal properties, sum of money and damages.
ISSUE: Whether or not acquisition of a parcel of land is valid.
HELD: The sales of three parcels of land in favor of the petitioner who is a foreigner is
illegal per se. The transactions are void ab initio because they were entered into in
violation of the Constitution. Thus, to allow the petitioner to recover the properties or
the money used in the purchase of the parcels of land would be subversive of public
policy.
An action for recovery of what has been paid without just cause has been
designated as an accion in rem verso. This provision does not apply if, as in this case,
the action is proscribed by the Constitution or by the application of the pari delicto
doctrine. 68 It may be unfair and unjust to bar the petitioner from filing an accion in
rem verso over the subject properties, or from recovering the money he paid for the
said properties, but, as Lord Mansfield stated in the early case of Holman vs.
Johnson:69 "The objection that a contract is immoral or illegal as between the plaintiff
and the defendant, sounds at all times very ill in the mouth of the defendant. It is not
for his sake, however, that the objection is ever allowed; but it is founded in general
principles of policy, which the defendant has the advantage of, contrary to the real
justice, as between him and the plaintiff."
Cita
La Buga'al-Blaan v. Ramos
LA BUGAAL-BLAAN, Petitioners vs RAMOS, Respondent
PANGANIBAN, J.:
FACTS: The Petition for Prohibition and Mandamus before the Court challenges the
constitutionality of (1) Republic Act No. [RA] 7942 (The Philippine Mining Act of 1995);
(2) its Implementing Rules and Regulations (DENR Administrative Order No. [DAO] 96-
40); and (3) the FTAA dated March 30, 1995, executed by the government with
Western Mining Corporation (Philippines), Inc. (WMCP).
On January 27, 2004, the Court en banc promulgated its Decision granting the
Petition and declaring the unconstitutionality of certain provisions of RA 7942, DAO
96-40, as well as of the entire FTAA executed between the government and WMCP,
mainly on the finding that FTAAs are service contracts prohibited by the 1987
Constitution.
ISSUE: Whether or nor it is a void contract.
HELD: Section 7.9 of the WMCP FTAA has effectively given away the State's share
without anything in exchange. Moreover, it constitutes unjust enrichment on the part
of the local and foreign stockholders in WMCP, because by the mere act of divestment,
the local and foreign stockholders get a windfall, as their share in the net mining
revenues of WMCP is automatically increased, without having to pay anything for
it.Being grossly disadvantageous to government and detrimental to the Filipino people,
as well as violative of public policy, Section 7.9 must therefore be stricken off as
invalid.
Section 7.8(e) of the WMCP FTAA likewise is invalid, since by allowing the sums
spent by government for the benefit of the contractor to be deductible from the State's
share in net mining revenues, it results in benefiting the contractor twice over. This
constitutes unjust enrichment on the part of the contractor, at the expense of
government. For being grossly disadvantageous and prejudicial to government and
contrary to public policy, Section 7.8(e) must also be declared without effect. It may
likewise be stricken off without affecting the rest of the FTAA.
Cita
Agan v. PIATCO
AGAN, Petitioner vs. PIATCO, Respondent)
PUNO, J.:
FACTS: Asias Emerging Dragon Corp. (AEDC) submitted an unsolicited proposal to

the Philippine Government through the Department of Transportation and
Communication (DOTC) and Manila International Airport Authority (MIAA) for the
construction and development of the NAIA IPT III under a build-operate-and-transfer
arrangement pursuant to R.A. No. 6957, as amended by R.A. No. 7718 (BOT Law).
The DOTC issued the notice of award for the NAIA IPT III project to the Paircargo
Consortium, which later organized into herein respondent PIATCO.
Various petitions were filed before this Court to annul the 1997 Concession
Agreement, the ARCA and the Supplements and to prohibit the public respondents
DOTC and MIAA from implementing them.
In a decision dated May 5, 2003, this Court granted the said petitions and declared
the 1997 Concession Agreement, the ARCA and the Supplements null and void.
Respondent PIATCO, respondent-Congressmen and respondents-intervenors now seek

the reversal of the May 5, 2003 decision and pray that the petitions be dismissed.
ISSUE: Whether or not the contract is valid.
HELD: Section 19, Article XII of the 1987 Constitution mandates that the State
prohibit or regulate monopolies when public interest so requires. Monopolies are not
per se prohibited. Given its susceptibility to abuse, however, the State has the
bounden duty to regulate monopolies to protect public interest. Such regulation may
be called for, especially in sensitive areas such as the operation of the countrys
premier international airport, considering the public interest at stake.
By virtue of the PIATCO contracts, NAIA IPT III would be the only international
passenger airport operating in the Island of Luzon, with the exception of those already
operating in Subic Bay Freeport Special Economic Zone ("SBFSEZ"), Clark Special
Economic Zone ("CSEZ") and in Laoag City. Undeniably, the contracts would create a
monopoly in the operation of an international commercial passenger airport at the
NAIA in favor of PIATCO.
Cita
COMELEC v. Quijano-Padilla
COMMISSION ON ELECTIONS, Petitioner, vs. JUDGE MA. LUISA QUIJANO-
PADILLA, Respondents.
(G. R. No. 151992, September 18, 2002)
FACTS: The Philippine Congress passed Republic Act No. 8189, otherwise known as
the "Voter's Registration Act of 1996," providing for the modernization and
computerization of the voters' registration list and the appropriate of funds therefor "in
order to establish a clean, complete, permanent and updated list of voters."
The COMELEC issued invitations to pre-qualify and bid for the supply and
installations of information technology equipment and ancillary services for its VRIS
Project. Private respondent Photokina Marketing Corporation (PHOTOKINA) won the
bid however the budget appropriated by the Congress for the COMELECs
modernization project was only 1B which was not sufficient to PHOTOKINA bid in the
amount of 6.588B.
Senator Edgardo J. Angara directed the creation of a technical working group to

assist the COMELEC in evaluating all programs for the modernization of the
COMELEC which will also consider the PHOTOKINA contract as an alternative
program and various competing programs for the purpose.
PHOTOKINA filed a petition for mandamus, prohibition and damages (with prayer for
temporary restraining order, preliminary prohibitory injunction and preliminary
mandatory injunction) against the COMELEC and all its Commissioners.
Judge Luisa Quijano-Padilla rendered her decision in favor of PHOTOKINA.
ISSUE: May a successful bidder compel a government agency to formalize a contract

with it notwithstanding that its bid exceeds the amount appropriated by Congress
for the project?
HELD: The SC cannot accede to PHOTOKINA's contention that there is already a

perfected contract. While we held in Metropolitan Manila Development Authority vs.
Jancom Environmental Corporation[50] that "the effect of an unqualified acceptance
of the offer or proposal of the bidder is to perfect a contract, upon notice of the award
to the bidder," however, such statement would be inconsequential in a government
where the acceptance referred to is yet to meet certain conditions. To hold otherwise is
to allow a public officer to execute a binding contract that would obligate the
government in an amount in excess of the appropriations for the purpose for which
the contract was attempted to be made.
In the case at bar, there seems to be an oversight of the legal requirements as early as
the bidding stage. The first step of a Bids and Awards Committee (BAC) is to
determine whether the bids comply with the requirements. The BAC shall rate a bid
"passed" only if it complies with all the requirements and the submitted price does not
exceed the approved budget for the contract.
Cita
The SC ruled that PHOTOKINA, though the winning bidder, cannot compel the
COMELEC to formalize the contract. Since PHOTOKINAs bid is beyond the amount
appropriated by Congress for the VRIS Project, the proposed contract is not binding
upon the COMELEC and is considered void; and that in issuing the questioned
preliminary writs of mandatory and prohibitory injunction and in not dismissing
Special Civil Action No. Q-01-45405, respondent judge acted with grave abuse of
discretion. Petitioners cannot be compelled by a writ of mandamus to discharge a
duty that involves the exercise of judgment and discretion, especially where
disbursement of public funds is concerned.
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Jaworski v. PAGCOR
SENATOR ROBERT S. JAWORSKI, Petitioner,
vs.PHILIPPINE AMUSEMENT AND GAMING CORPORATION and SPORTS AND
GAMES ENTERTAINMENT CORPORATION, Respondents.
(G.R. No. 144463, January 14, 2004, 1 st Division)
FACTS: PAGCORs board of directors approved an instrument denominated as "Grant

of Authority and Agreement for the Operation of Sports Betting and Internet Gaming",
which granted SAGE the authority to operate and maintain Sports Betting station in
PAGCOR?s casino locations, and Internet Gaming facilities to service local and
international bettors, provided that to the satisfaction of PAGCOR, appropriate
safeguards and procedures are established to ensure the integrity and fairness of the
games.
Petitioner, in his capacity as member of the Senate and Chairman of the Senate
Committee on Games, Amusement and Sports, files the instant petition, praying that
the grant of authority by PAGCOR in favor of SAGE be nullified.
ISSUE:Whether not not respondent PAGCORs legislative franchise includes to operate

Internet gambling.
HELD: While PAGCOR is allowed under its charter to enter into operator?s and/or
management contracts, it is not allowed under the same charter to relinquish or share
its franchise, much less grant a veritable franchise to another entity such as SAGE.
PAGCOR can not delegate its power in view of the legal principle of delegata potestas
delegare non potest, inasmuch as there is nothing in the charter to show that it has
been expressly authorized to do so. In Lim v. Pacquing,10 the Court clarified that
"since ADC has no franchise from Congress to operate the jai-alai, it may not so
operate even if it has a license or permit from the City Mayor to operate the jai-alai in
the City of Manila." By the same token, SAGE has to obtain a separate legislative
franchise and not "ride on" PAGCOR?s franchise if it were to legally operate on-line
Internet gambling.
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Oesmer v. PDC
RIZALINO, substituted by his heirs, JOSEFINA, ROLANDO and FERNANDO,
ERNESTO, LEONORA, BIBIANO, JR., LIBRADO and ENRIQUETA, all surnamed
OESMER, Petitioners, vs. PARAISO DEVELOPMENT CORPORATION, Respondent.
FACTS: Petitioner Ernesto to meet with a certain Sotero Lee, President of respondent
Paraiso Development Corporation, at Otani Hotel in Manila. The said meeting was for
the purpose of brokering the sale of petitioners properties to respondent corporation.
A Contract to Sell was drafted. A check in the amount of P100,000.00, payable to
Ernesto, was given as option money. Sometime thereafter, Rizalino, Leonora, Bibiano,
Jr., and Librado also signed the said Contract to Sell. However, two of the brothers,
Adolfo and Jesus, did not sign the document. However petitioners informed
respondent corporation about their intention to rescind the Contract to Sell and to
return the amount of Php 100,000.00. respondent did not respond to the aforesaid
letter. Petitioners, therefore, filed a complaint for Declaration of Nullity or for
Annulment of Option Agreement or Contract to Sell with damages.
The RTC rendered its decision in favor to respondent. CA affirmed the decision of RTC
with modification.
ISSUE: Whether or not Contract to Sell is void considering that on of the heirs did not
sign it as to indicate its consent to be bound by its terms.
HELD: It is well-settled that contracts are perfected by mere consent, upon the
acceptance by the offeree of the offer made by the offeror. From that moment, the
parties are bound not only to the fulfillment of what has been expressly stipulated but
also to all the consequences which, according to their nature, may be in keeping with
good faith, usage and law. To produce a contract, the acceptance must not qualify the
terms of the offer. However, the acceptance may be express or implied. For a contract
to arise, the acceptance must be made known to the offeror. Accordingly, the
acceptance can be withdrawn or revoked before it is made known to the offeror.
In the case at bar, the Contract to Sell was perfected when the petitioners consented
to the sale to the respondent of their shares in the subject parcels of land by affixing
their signatures on the said contract. Such signatures show their acceptance of what
has been stipulated in the Contract to Sell and such acceptance was made known to
respondent corporation when the duplicate copy of the Contract to Sell was returned
to the latter bearing petitioners signatures
Heirs of Balite v. Lim
Cita
HEIRS OF THE LATE SPOUSES AURELIO AND ESPERANZA BALITE;

Namely, ANTONIO T. BALITE, FLOR T. BALITE-ZAMAR, VISITACION
T. BALITE-DIFUNTORUM, PEDRO T. BALITE, PABLO T. BALITE,
GASPAR T. BALITE, CRISTETA T. BALITE and AURELIO T. BALITE
JR., All Represented by GASPAR T. BALITE, petitioners,
vs.RODRIGO N. LIM, respondent.
(G.R. No. 152168 , December 10, 2004, 3 rd Division)
PANGANIBAN, J.:
FACTS:The spouses Aurelio and Esperanza Balite were the owners of a

parcel of land, located at Poblacion Catarman, Northern Samar, with an
area of seventeen thousand five hundred fifty-one (17,551) square
meters, and covered by Original Certificate of Title No. 10824. When
Aurelio died intestate in 1985, his wife, Esperanza Balite, and their
children, [petitioners] Antonio Balite, Flor Balite-Zamar, Visitacion
Balite-Difuntorum, Pedro Balite, Pablo Balite, Gaspar Balite, Cristeta
(Tita) Balite and Aurelio Balite, Jr., inherited the subject property and
became co-owners thereof, with Esperanza inheriting an undivided share
of 9,751 square meters.
In the meantime, Esperanza became ill and was in dire need of

money for her hospital expenses . She, through her daughter, Cristeta,
offered to sell to Rodrigo Lim, her undivided share for the price of
P1,000,000.00. Esperanza and Rodrigo agreed that, under the "Deed of
Absolute Sale", to be executed by Esperanza over the property, it will be
made to appear that the purchase price of the property would be
P150,000.00, although the actual price agreed upon by them for the
property was P1,000,000.00.
On April 16, 1996, Esperanza executed a "Deed of Absolute Sale" in

favor of Rodrigo N. Lim over a portion of the property with an area of
10,000 square meters, for the price of P150,000.00.
They also executed, on the same day, a "Joint Affidavit" under

which they declared that the real price of the property was
P1,000,000.00, payable to Esperanza by installments, as follows:
1. P30,000.00 upon signing today of the document of sale.
2. P170,000.00 payable upon completion of the actual relocation

survey of the land sold by a Geodetic Engineer.
3. P200,000.00 payable on or before May 15, 1996.

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4. P200,000.00 payable on or before July 15, 1996.
5. P200,000.00 payable on or before September 15, 1996.
6. P200,000.00 payable on or before December 15, 1996.
Only Esperanza and two of her children, namely, Antonio and

Cristeta, knew about the said transaction. Geodetic Engineer Bonifacio
G. Tasic conducted a subdivision survey of the property and prepared a
"Sketch Plan" showing a portion of the property, identified as Lot 243
with an area of 10,000 square meters, under the name Rodrigo N. Lim.
"The "Sketch Plan" was signed by Rodrigo and Esperanza.

Thereafter, Rodrigo took actual possession of the property and
introduced improvements thereon. He remitted to Esperanza and
Cristeta sums of money in partial payments of the property for which he
signed Receipts.
Gaspar, Visitacion, Flor, Pedro and Aurelio, Jr. learned of the sale,
and on August 21, 1996, they wrote a letter to the Register of Deeds
(RD), saying that they were not informed of the sale of a portion of the
said property by their mother nor did they give their consent thereto, and
requested the [RD] to hold in abeyance any processal or approval of any
application for registration of title of ownership in the name of the buyer
of said lot, which has not yet been partitioned judicially or
extrajudicially, until the issue of the legality/validity of the above sale
has been cleared."
On August 24, 1996, Antonio received from Rodrigo, the amount of

P30,000.00 in partial payment of the property and signed a Receipt for
the said amount, declaring therein that "the remaining balance of
P350,000.00 shall personally and directly be released to my mother,
Esperanza Balite, only. However, Rodrigo drew and issued RCBC Check
No. 309171, dated August 26, 1996, payable to the order of Antonio
Balite in the amount of P30,000.00 in partial payment of the property.
On October 1, 1996, Esperanza executed a "Special Power of

Attorney" appointing her son, Antonio, to collect and receive, from
Rodrigo, the balance of the purchase price of the property and to sign the
appropriate documents therefor.
On October 23, 1996, Esperanza signed a letter addressed to

Rodrigo informing the latter that her children did not agree to the sale of
the property to him and that she was withdrawing all her commitments
until the validity of the sale is finally resolved.
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On October 31, 1996, Esperanza died intestate and was survived

by her aforenamed children.
Meanwhile, Rodrigo caused to be published, in the Samar Reporter,

on November 14, 21 and 28, 1996, the aforesaid "Deed of Absolute Sale".
Earlier, on November 21, 1996, Antonio received the amount
ofP10,000.00 from Rodrigo for the payment of the estate tax due from the
estate of Esperanza.
Also, the capital gains tax, in the amount of P14,506.25, based on

the purchase price of P150,000.00 appearing on the "Deed of Absolute
Sale", was paid to the Bureau of Internal Revenue which issued a
"Certification" of said payments, on March 5, 1997, authorizing the
registration of the "Deed of Absolute Sale" . However, the [RD] refused to
issue a title over the property to and under the name of Rodrigo unless
and until the owners duplicate of OCT No. 10824 was presented to it.
Rodrigo filed a "Petition for Mandamus" against the RD with the Regional
Trial Court .On June 13, 1997, the court issued an Order to the RD to
cancel OCT No. 10824 and to issue a certificate of title over Lot 243
under the name of Rodrigo.
On June 27, 1997, petitioners filed a complaint against Rodrigo

with the RTC for Annulment of Sale, Quieting of Title, Injunction and
Damages.
The [petitioners] had a "Notice of Lis Pendens", dated June 23,

1997, annotated, on June 27, 1997, at the dorsal portion of OCT No.
10824.
In the meantime, the RD cancelled, on July 10, 1997, OCT No.

10824 and issued Transfer Certificate of Title No. 6683 to and under the
name of Rodrigo over Lot 243. The "Notice of Lis Pendens was carried
over in TCT No. 6683.
Subsequently, Rodrigo secured a loan from the Rizal Commercial

Banking Corporation in the amount of P2,000,000.00 and executed a
"Real Estate Mortgage" over the subject]property as security therefor.
On motion of the petitioners, they were granted leave to file an

"Amended Complaint" impleading the bank as additional]party-
defendant. On November 26, 1997, petitioners filed their "Amended
Complaint".
The respondent opposed the "Amended Complaint" contending that

it was improper for [petitioners] to join, in their complaint, an ordinary
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civil action for the nullification of the "Real Estate Mortgage" executed by
the respondent in favor of the Bank as the action of the petitioners before
the court was a special civil action.
On March 30, 1998, the court issued an Order rejecting the

"Amended Complaint" of the petitioners on the grounds that: (a) the
Bank cannot be impleaded as party-defendant under Rule 63, Section 1
of the 1997 Rules of Civil Procedure; (b) the "Amended Complaint"
constituted a collateral attack on TCT No. 6683. The petitioners did not
file any motion for the reconsideration of the order of the court."
The trial court dismissed the Complaint and ordered the

cancellation of the lis pendens annotated at the back of TCT No. 6683. It
held that a co-owner has the right to sell his/her undivided share. The
sale made by a co-owner is not invalidated by the absence of the consent
of the other co-owners. Hence, the sale by Esperanza of the 10,000-
square-meter portion of the property was valid; the excess from her
undivided share should be taken from the undivided shares of Cristeta
and Antonio, who expressly agreed to and benefited from the sale.
On appeal, the CA held that the sale was valid and binding insofar
as Esperanza Balites undivided share of the property was concerned. It
affirmed the trial courts HELD that the lack of consent of the co-owners
did not nullify the sale. The buyer, respondent herein, became a co-
owner of the property to the extent of the pro indiviso share of the
vendor, subject to the portion that may be allotted to him upon the
termination of the co-ownership. The appellate court disagreed with the
averment of petitioners that the registration of the sale and the issuance
of TCT No. 6683 was ineffective and that they became the owners of the
share of Esperanza upon the latters death.
Hence, this Petition.
ISSUES: Whether or not the Deed of Absolute Sale is valid, and
HELD:Yes. In the present case, the parties intended to be bound by the

Contract, even if it did not reflect the actual purchase price of the
property. That the parties intended the agreement to produce legal effect
is revealed by the letter of Esperanza Balite to respondent dated October
23, 1996 and petitioners admission that there was a partial payment of
P320,000 made on the basis of the Deed of Absolute Sale. There was an
intention to transfer the ownership of over 10,000 square meters of the
property . Clear from the letter is the fact that the objections of her
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children prompted Esperanza to unilaterally withdraw from the

transaction.
Since the Deed of Absolute Sale was merely relatively simulated, it

remains valid and enforceable. All the essential requisites prescribed by
law for the validity and perfection of contracts are present. However, the
parties shall be bound by their real agreement for a consideration of
P1,000,000 as reflected in their Joint Affidavit.
The juridical nature of the Contract remained the same. What was
concealed was merely the actual price. Where the essential requisites 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.
The Petition is DENIED.
Pineda v. CA
Cita
ALEJANDRIA PINEDA and SPOUSES ADEODATO DUQUE, JR., and

EVANGELINE MARY JANE DUQUE, petitioners, vs. COURT OF
APPEALS and SPOUSES NELSON BAEZ and MERCEDES
BAEZ, respondents.
[G. R. No. 127094. February 6, 2002, 1st Division]
PARDO, J.:
FACTS:Appellees Nelson Baez and Mercedes Baez are the original

owners of a parcel of land together with its improvements located
Quezon City while Ms. Alejandria Pineda is the owner of a house located
at Los Angeles, California.
On January 11, 1983, the appellees and Alejandria Pineda,

together with the latters spouse Alfredo Caldona, executed an
Agreement to Exchange Real Properties. In the agreement, the parties
agreed to:
1) exchange their respective properties;
2) Pineda to pay an earnest money in the total amount of

$12,000.00 on or before the first week of February 1983; and
3) to consummate the exchange of properties not later than June

1983. It appears that the parties undertook to clear the mortgages over
their respective properties.
At the time of the execution of the exchange agreement, the White

Plains property was mortgaged with the Government Service Insurance
System (GSIS) while the California property had a total mortgage
obligation of $84,000.00 .
In the meantime, the appellees were allowed to occupy or lease to a

tenant Pinedas California property and Pineda was authorized to
occupy appellees White Plains property. Pursuant to the exchange
agreement, Alejandria Pineda paid the appellees the total amount of
$12,000.00 broken down as follows: 1) $5,000.00, on January 1983; 2)
$4,000.00 on April 1983; 3) $3,000.00 on January 1985.
On December 18, 1984, unknown to

the appellees, Alejandria Pineda and the appellants Adeodato C. Duque,
Jr. and Evangeline Mary Jane Duque executed an Agreement to Sell
over the White Plains property whereby Pineda sold the property to the
appellants for the amount of P1,600,000.00 . The contract provides that:
1) upon signing of the agreement, the purchaser shall pay P450,000.00
and the seller shall cause the release of the property from any
encumbrance and deliver to the purchaser the title to the property; 2)
balance shall be paid by the purchaser to the seller on or before the end
of January 1985; 3) upon full payment, the seller shall deliver to the
purchaser a deed of absolute sale duly signed by its registered owner,
the appellees. On the same date, Pineda, out of
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the downpayment received from the appellants, paid the appellees

mortgage obligation with the GSIS in the sum of P112,690.75
Pineda then requested the appellees for a written authority for the
release of the title from the GSIS. On January 1, 1985, the appellees gave
Pineda the aforementioned authority with the understanding that Pineda
will personally deliver the title to the appellees. The record shows that
pursuant to the agreement to sell the following payments were made by
the appellants to Pineda: 1) $25,000.00 on December 26, 1984; 2)
$10,000.00 on January 18, 1985; 3) P50,000.00 on January 24, 1985; 4)
$500.00 on February 1, 1985; and 5) $330 on February 7, 1985 . The
appellants physically occupied the premises on June or July 1985.
Upon their return to the Philippines sometime in March

1985, the appellees discovered that the appellants were occupying
the White Plains property. They talked with appellant
Atty. Adeodato Duque who showed interest in buying the property and
the latter mentioned that they gave money to Mrs. Pineda to facilitate the
redemption of her property in the U.S.Appellees alleged that they
confronted Pineda on their title to the property but the latter replied that
she gave the title to the appellants. They did not insist on its return from
the appellants as the latter were interested in buying the property.
A series of communications ensued between the representatives of

the appellees and Ms. Pineda with regards to the status of the exchange
agreement which resulted in its rescission for failure of Pineda to clear
her mortgage obligation of the California property. Negotiations for the
purchase of the property were held between the appellants and
the appellees but the same failed which resulted in
the appellees demanding for the appellants to vacate the property.
On September 3, 1987, the present complaint was filed before the

court a quo. On February 17, 1992, the trial court rendered a decision
declaring plaintiffs spouses Nelson S. Baez and Mercedes Baez the
absolute owners in fee simple title of the house and lot in question
located at 32 Sarangaya St., White Plains, Quezon City.
In time, petitioners appealed the decision to the Court of Appeals.

On September 18, 1992, respondents Nelson and
Mercedes Baez filed with the Court of Appeals a motion for execution
pending appeal.On April 27, 1993, the Court of Appeals denied the
motion for lack of merit.
On May 20, 1996, the Court of Appeals affirmed the RTCs decision
with the modification that rental payments should commence on
January 1986 (not August 1985) and appellants are liable for attorneys
fees only in the sum of P50,000.00.
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On June 26, 1996, petitioners filed a motion for reconsideration of

the above quoted decision. On November 7, 1996, the Court of Appeals
denied the motion.
Hence, this appeal.
ISSUE: Whether or not petitioners validly acquired the subject property.
HELD:No. It appears that the Baez spouses were the original owners of
the parcel of land and improvements located at 32 Sarangaya St., White
Plains, Quezon City. On January 11, 1983, the Baez spouses and
petitioner Pineda executed an agreement to exchange real properties.
However, the exchange did not materialize.
Petitioner Pinedas sale of the property to petitioners Duque was not

authorized by the real owners of the land, respondent Baez. The Civil
Code provides that in a sale of a parcel of land or any interest therein
made through an agent, a special power of attorney is essential.This
authority must be in writing, otherwise the sale shall be void. In his
testimony, petitioner Adeodato Duque confirmed that at the time he
purchased respondents property from Pineda, the latter had no Special
Power of Authority to sell the property.
A special power of attorney is necessary to enter into any contract by
which the ownership of an immovable is transmitted or acquired for a
valuable consideration. Without an authority in writing, petitioner Pineda
could not validly sell the subject property to petitioners Duque. Hence,
any sale in favor of petitioners Duque is void.
Further, Article 1318 of the Civil Code lists the requisites of a valid
and perfected contract, namely: (1) consent of the contracting parties;
(2) object certain which is the subject matter of the contract; (3) cause of
the obligation which is established.Pineda was not authorized to enter
into a contract to sell the property. As the consent of the real owner of
the property was not obtained, no contract was perfected.
Consequently, petitioner Duque failed to validly acquire the subject
property.
Cruz v. Bancom
EDILBERTO CRUZ and SIMPLICIO CRUZ, petitioners, vs. BANCOM

FINANCE CORPORATION (NOW UNION BANK OF THE
PHILIPPINES), respondent.
Cita
[G.R. No. 147788. March 19, 2002, 3rd division]

PANGANIBAN, J.:
FACTS:Brothers Rev. Fr. Edilberto Cruz and Simplicio Cruz, plaintiffs

herein, were the registered owners of a 339,335 square meter or 33.9335
hectare parcel of agricultural land together with improvements located in
Angat, Bulacan.Sometime in May 1978, defendant Norma Sulit, after
being introduced by Candelaria Sanchez to Fr. Cruz, offered to purchase
the land. Plaintiffs asking price for the land was P700,000.00, but
Norma only had P25,000.00 which Fr. Cruz accepted as earnest money
with the agreement that titles would be transferred to Norma upon
payment of the balance of P675,000.00. Norma failed to pay the balance
and proposed to Fr. Cruz to transfer the property to her but the latter
refused, obviously because he had no reason to trust Norma. But
capitalizing on the close relationship of Candelaria Sanchez with the
plaintiffs, Norma succeeded in having the plaintiffs execute a document
of sale of the land in favor of Candelaria who would then obtain a bank
loan in her name using the plaintiffs land as collateral. On the same
day, Candelaria executed another Deed of Absolute Sale over the land in
favor of Norma. In both documents, it appeared that the consideration
for the sale of the land was only P150,000.00. Pursuant to the sale,
Norma was able to effect the transfer of the title to the land in her name
under TCT No. T-248262.
Aside from the P150,000.00, Candelaria undertook to pay the

plaintiffs the amount of P655,000.00 representing the balance of the
actual price of the land. In a Special Agreement dated September 1,
1978, Norma assumed Candelarias obligation, stipulating to pay the
plaintiffs the said amount within six months on pain of fine or penalty in
case of non-fulfillment. Unknown to the plaintiffs, Norma managed to
obtain a loan from Bancom in the amount of P569,000.00 secured by a
mortgage over the land now titled in her name.
On account of Normas failure to pay the amount stipulated in the

Special Agreement and her subsequent disappearance from her usual
address, plaintiffs were prompted to file the herein complaint for the
reconveyance of the land.
Norma filed an Answer on February 11, 1980 but failed to appear

in court and was eventually declared in default. On May 20, 1980,
Bancom filed a motion for leave to intervene which was granted by the
trial court. In its Answer in Intervention, Bancom claimed priority as
mortgagee in good faith; and that its contract of mortgage with Norma
had been executed before the annotation of plaintiffs interest in the title.
Meanwhile in the middle of 1980, Norma defaulted in her payment

to the Bank and her mortgage was foreclosed. At the subsequent auction
sale, Bancom was declared the highest bidder and was issued the
corresponding certificate of sale over the land.
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On January 25, 1996, the trial court rendered the herein assailed
Decision in favor of the plaintiffs. It ruled that the contract of sale
between plaintiffs and Candelaria was absolutely
simulated. Consequently, the second contract of sale, that is, between
Candelaria and Norma, produced no legal effect. As for Bancom, the trial
court held that the Bank was not a mortgagee in good faith thus it can
not claim priority of rights over plaintiffs property.
In reversing the RTC, the CA held that the Deeds of Sale were valid
and binding, not simulated. Thus, the Contract of Mortgage between
Sulit and respondent was likewise valid.
Petitioners, the CA ruled, intended to be bound by the Contracts of

Sale and Mortgage, because they did not seek to annul the same but
instead executed a special agreement to enforce payment of the balance
of the price in the amount of P665,000.00.
Furthermore, it upheld respondent as a mortgagee in good faith;
ergo, it had a preferential right to the land.
Hence, this Petition.
ISSUES:
(1) Whether or not the Deeds of Sale and Mortgage are valid.
(2) Whether or not the mortgagee acted in good faith.
HELD:
(1) No. As a general rule, when the terms of a contract are clear and
unambiguous about the intention of the contracting parties, the literal
meaning of its stipulations shall control. But if the words appear to
contravene the evident intention of the parties, the latter shall prevail
over the former. The real nature of a contract may be determined from
the express terms of the agreement, as well as from the
contemporaneous and subsequent acts of the parties thereto.
On the other hand, simulation takes place when the parties do not
really want the contract they have executed to produce the legal effects
expressed by its wordings. Simulation or vices of declaration may be
either absolute or relative. Article 1345 of the Civil Code distinguishes
an absolute simulation from a relative one while Article 1346 discusses
their effects, as follows:
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.
Art. 1346. An absolutely simulated contract is void. A relative

simulation, when it does not prejudice a third person and is not intended
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for any purpose contrary to law, morals, good customs, public order or
public policy binds the parties to their agreement.
Clearly, the Deeds of Sale were executed merely to facilitate the use of
the property as collateral to secure a loan from a bank. Being merely a
subterfuge, these agreements could not have been the source of any
consideration for the supposed sales.Indeed, the execution of the two
documents on the same day sustains the position of petitioners that the
Contracts of Sale were absolutely simulated, and that they received no
consideration therefor.
The failure of Sulit to take possession of the property purportedly sold
to her was a clear badge of simulation that rendered the whole
transaction void and without force and effect, pursuant to Article 1409 of
the Civil Code.The fact that she was able to secure a Certificate of Title to
the subject property in her name did not vest her with ownership over
it.A simulated deed of sale has no legal effect; consequently any transfer
certificate of title (TCT) issued in consequence thereof should be
cancelled. A simulated contract is not a recognized mode of acquiring
ownership.
(2) No. As a general rule, every person dealing with registered land
may safely rely on the correctness of the certificate of title and is no
longer required to look behind the certificate in order to determine the
actual owner. To do so would be contrary to the evident purpose of
Section 39 of Act 496 which we quote hereunder:
Sec. 39. Every person receiving a certificate of title in pursuance of a

decree of registration, and every subsequent purchaser of registered land
who takes a certificate of title for value in good faith shall hold the same
free of all encumbrances except those noted on said certificate, and any of
the following encumbrances which may be subsisting, namely:
First. Liens, claims, or rights arising or existing under the laws or

Constitution of the United States or of the Philippine Islands which the
statutes of the Philippine Islands cannot require to appear of record in the
Registry.
Second. Taxes within two years after the same became due and payable.
Third. Any public highway, way, private way established by law, or any
Government irrigation canal or lateral thereof, where the certificate of title
does not state that the boundaries of such highway, way, or irrigation
canal or lateral thereof, have been determined.
But if there are easements or other rights appurtenant to a parcel

of registered land which for any reason have failed to be registered, such
easements or rights shall remain so appurtenant notwithstanding such
failure, and shall be held to pass with the land until cut off or
extinguished by the registration of the servient estate, or in any other
manner.
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This rule is, however, subject to the right of a person deprived of land
through fraud to bring an action for reconveyance, provided the rights of
innocent purchasers for value and in good faith are not
prejudiced. An innocent purchaser for value or any equivalent phrase
shall be deemed, under Section 38 of the same Act, to include an
innocent lessee, mortgagee or any other encumbrancer for value.
Respondent, however, is not an ordinary mortgagee; it is a mortgagee-
bank. As such, unlike private individuals, it is expected to exercise
greater care and prudence in its dealings, including those involving
registered lands. A banking institution is expected to exercise due
diligence before entering into a mortgage contract.The ascertainment of
the status or condition of a property offered to it as security for a loan
must be a standard and indispensable part of its operations.
The evidence before us indicates that respondent bank was not a
mortgagee in good faith. First, at the time the property was mortgaged to
it, it failed to conduct an ocular inspection.Judicial notice is taken of the
standard practice for banks before they approve a loan.
Cuaton v. Salud
MANSUETO CUATON, petitioner, vs. REBECCA SALUD and COURT OF

APPEALS (Special Fourteenth Division), respondents.
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FACTS:On January 5, 1993, respondent Rebecca Salud, joined by her

husband Rolando Salud, instituted a suit for foreclosure of real estate
mortgage with damages against petitioner Mansueto Cuaton and his
mother, Conchita Cuaton, with the Regional Trial Court of General
Santos City.The trial court rendered a decision declaring the mortgage
constituted on October 31, 1991 as void, because it was executed by
Mansueto Cuaton in favor of Rebecca Salud without expressly stating
that he was merely acting as a representative of Conchita Cuaton, in
whose name the mortgaged lot was titled. The court ordered petitioner to
pay Rebecca Salud, inter alia, the loan secured by the mortgage in the
amount of One Million Pesos plus a total P610,000.00 representing
interests of 10% and 8% per month for the period February 1992 to
August 1992.
Both parties filed their respective notices of appeal.
On August 31, 2001, the Court of Appeals rendered the assailed

decision affirming the judgment of the trial court. Petitioner filed a
motion for partial reconsideration of the trial courts decision with
respect to the award of interest in the amount of P610,000.00, arguing
that the same was iniquitous and exorbitant. This was denied by the
Court of Appeals on May 7, 2003.
Hence, the instant petition.
ISSUE:Whether the 8% and 10% monthly interest rates imposed on the

one-million-peso loan obligation of petitioner to respondent Rebecca
Salud are valid.
HELD:.In Ruiz v. Court of Appeals, we declared that the Usury Law was
suspended by Central Bank Circular No. 905, s. 1982, effective on
January 1, 1983, and that parties to a loan agreement have been given
wide latitude to agree on any interest rate. However, nothing in the said
Circular grants lenders carte blanche authority to raise interest rates to
levels which will either enslave their borrowers or lead to a hemorrhaging
of their assets. The stipulated interest rates are illegal if they are
unconscionable.
Thus, in Medel v. Court of Appeals,10 and Spouses Solangon v.

Salazar, the Court annulled a stipulated 5.5% per month or 66% per
annum interest on a P500,000.00 loan and a 6% per month or 72% per
annum interest on a P60,000.00 loan, respectively, for being excessive,
iniquitous, unconscionable and exorbitant. In both cases, the interest
rates were reduced to 12% per annum.
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In the present case, the 10% and 8% interest rates per month on
the one-million-peso loan of petitioner are even higher than those
previously invalidated by the Court in the above cases. Accordingly, the
reduction of said rates to 12% per annum is fair and reasonable.
Stipulations authorizing iniquitous or unconscionable interests are

contrary to morals (contra bonos mores), if not against the law. Under
Article 1409 of the Civil Code, these contracts are inexistent and void
from the beginning. They cannot be ratified nor the right to set up their
illegality as a defense be waived.
Infotech v. COMELEC
INFORMATION TECHNOLOGY FOUNDATION OF THE PHILIPPINES,
MA. CORAZON M. AKOL, MIGUEL UY, EDUARDO H. LOPEZ,
AUGUSTO C. LAGMAN, REX C. DRILON, MIGUEL HILADO, LEY
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SALCEDO, and MANUEL ALCUAZ JR., petitioners,

vs.COMMISSION ON ELECTIONS; COMELEC CHAIRMAN BENJAMIN
ABALOS SR.; COMELEC BIDDING and AWARD COMMITTEE
CHAIRMAN EDUARDO D. MEJOS and MEMBERS GIDEON DE
GUZMAN, JOSE F. BALBUENA, LAMBERTO P. LLAMAS, and
BARTOLOME SINOCRUZ JR.; MEGA PACIFIC eSOLUTIONS, INC.; and
MEGA PACIFIC CONSORTIUM, respondents.
(G.R. No. 159139 ,January 13, 2004, EN BANC)
PANGANIBAN, J.:
FACTS:On June 7, 1995, Congress passed Republic Act 8046, which

authorized Comelec to conduct a nationwide demonstration of a
computerized election system and allowed the poll body to pilot-test the
system in the March 1996 elections in the Autonomous Region in Muslim
Mindanao (ARMM).
On December 22, 1997, Congress enacted Republic Act

84366 authorizing Comelec to use an automated election system (AES)
for the process of voting, counting votes and canvassing/consolidating
the results of the national and local elections. It also mandated the poll
body to acquire automated counting machines (ACMs), computer
equipment, devices and materials; and to adopt new electoral forms and
printing materials.
Initially intending to implement the automation during the May 11,

1998 presidential elections, Comelec -- in its Resolution No. 2985 dated
February 9, 19987 -- eventually decided against full national
implementation and limited the automation to the Autonomous Region in
Muslim Mindanao (ARMM). However, due to the failure of the machines
to read correctly some automated ballots in one town, the poll body later
ordered their manual count for the entire Province of Sulu.
In the May 2001 elections, the counting and canvassing of votes for
both national and local positions were also done manually, as no
additional ACMs had been acquired for that electoral exercise allegedly
because of time constraints.
On October 29, 2002, Comelec adopted in its Resolution 02-0170 a

modernization program for the 2004 elections. It resolved to conduct
biddings for the three (3) phases of its Automated Election System;
namely, Phase I - Voter Registration and Validation System; Phase II -
Automated Counting and Canvassing System; and Phase III - Electronic
Transmission.
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On January 24, 2003, President Gloria Macapagal-Arroyo issued

Executive Order No. 172, which allocated the sum of P2.5 billion to fund
the AES for the May 10, 2004 elections. Upon the request of Comelec,
she authorized the release of an additional P500 million.
On January 28, 2003, the Commission issued an "Invitation to

Apply for Eligibility and to Bid.
On February 17, 2003, the poll body released the Request for
Proposal (RFP) to procure the election automation machines. The Bids
and Awards Committee (BAC) of Comelec convened a pre-bid conference
on February 18, 2003 and gave prospective bidders until March 10, 2003
to submit their respective bids.
Among others, the RFP provided that bids from manufacturers,

suppliers and/or distributors forming themselves into a joint venture
may be entertained, provided that the Philippine ownership thereof shall
be at least 60 percent.Joint venture is defined in the RFP as "a group of
two or more manufacturers, suppliers and/or distributors that intend to
be jointly and severally responsible or liable for a particular contract.
Basically, the public bidding was to be conducted under a two-

envelope/two stage system. The bidders first envelope or the Eligibility
Envelope should establish the bidders eligibility to bid and its
qualifications to perform the acts if accepted. On the other hand, the
second envelope would be the Bid Envelope itself.
Out of the 57 bidders, the BAC found MPC and the Total
Information Management Corporation (TIMC) eligible. For technical
evaluation, they were referred to the BACs Technical Working Group
(TWG) and the Department of Science and Technology (DOST).
In its Report on the Evaluation of the Technical Proposals on Phase

II, DOST said that both MPC and TIMC had obtained a number of failed
marks in the technical evaluation. Notwithstanding these failures,
Comelec en banc, on April 15, 2003, promulgated Resolution No. 6074
awarding the project to MPC. The Commission publicized this Resolution
and the award of the project to MPC on May 16, 2003.
On May 29, 2003, five individuals and entities (including the herein
Petitioners Information Technology Foundation of the Philippines,
represented by its president, Alfredo M. Torres; and Ma. Corazon Akol)
wrote a letter to Comelec Chairman Benjamin Abalos Sr. They protested
the award of the Contract to Respondent MPC "due to glaring
irregularities in the manner in which the bidding process had been
conducted." Citing therein the noncompliance with eligibility as well as
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technical and procedural requirements (many of which have been

discussed at length in the Petition), they sought a re-bidding.
In a letter-reply dated June 6, 2003, the Comelec chairman --

speaking through Atty. Jaime Paz, his head executive assistant --
rejected the protest and declared that the award "would stand up to the
strictest scrutiny."
Hence, the present Petition.
ISSUE:Whether or not the contract is valid.
HELD: Instead of one multilateral agreement executed by, and effective

and binding on, all the five "consortium members" -- as earlier claimed
by Commissioner Tuason in open court -- it turns out that what was
actually executed were four (4) separate and distinct bilateral
Agreements.42 Obviously, Comelec was furnished copies of these
Agreements only after the bidding process had been terminated, as these
were not included in the Eligibility Documents. These Agreements are as
follows:
A Memorandum of Agreement between MPEI and SK C&C
A Memorandum of Agreement between MPEI and WeSolv
A "Teaming Agreement" between MPEI and Election.com Ltd.
A "Teaming Agreement" between MPEI and ePLDT
In sum, each of the four different and separate bilateral Agreements

is valid and binding only between MPEI and the other contracting party,
leaving the other "consortium" members total strangers thereto. Under
this setup, MPEI dealt separately with each of the "members," and the
latter in turn had nothing to do with one another, each dealing only with
MPEI.
Respondents assert that these four Agreements were sufficient for

the purpose of enabling the corporations to still qualify (even at that late
stage) as a consortium or joint venture, since the first two Agreements
had allegedly set forth the joint and several undertakings among the
parties, whereas the latter two clarified the parties respective roles with
regard to the Project, with MPEI being the independent contractor and
Election.com and ePLDT the subcontractors.
Additionally, the use of the phrase "particular contract" in the

Comelecs Request for Proposal (RFP), in connection with the joint and
several liabilities of companies in a joint venture, is taken by them to
mean that all the members of the joint venture need not be solidarily
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liable for the entire project or joint venture, because it is sufficient that
the lead company and the member in charge of a particular contract or
aspect of the joint venture agree to be solidarily liable.
At this point, it must be stressed most vigorously that the

submission of the four bilateral Agreements to Comelec after the end of
the bidding process did nothing to eliminate the grave abuse of discretion
it had already committed on April 15, 2003.
The Petition is GRANTED. nThe Court hereby

declares NULL and VOID Comelec Resolution No. 6074 awarding the
contract for Phase II of the AES to Mega Pacific Consortium (MPC). Also
declared null and void is the subject Contract executed between Comelec
and Mega Pacific eSolutions (MPEI). Comelec is furtherORDERED to
refrain from implementing any other contract or agreement entered into
with regard to this project.
Pabugais v. Sahijwan
TEDDY G. PABUGAIS, petitioner vs. DAVE P. SAHIJWANI, respondent.
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FACTS:Pursuant to an "Agreement And Undertaking" dated December 3,

1993, petitioner Teddy G. Pabugais, in consideration of the amount of
Fifteen Million Four Hundred Eighty Seven Thousand Five Hundred
Pesos (P15,487,500.00), agreed to sell to respondent Dave P. Sahijwani a
lot containing 1,239 square meters located at Jacaranda Street, North
Forbes Park, Makati, Metro Manila. Respondent paid petitioner the
amount of P600,000.00 as option/reservation fee and the balance of
P14,887,500.00 to be paid within 60 days from the execution of the
contract, simultaneous with delivery of the owners duplicate Transfer
Certificate of Title in respondents name the Deed of Absolute Sale; the
Certificate of Non-Tax Delinquency on real estate taxes and Clearance on
Payment of Association Dues. The parties further agreed that failure on
the part of respondent to pay the balance of the purchase price entitles
petitioner to forfeit the P600,000.00 option/reservation fee; while non-
delivery by the latter of the necessary documents obliges him to return to
respondent the said option/reservation fee with interest at 18% per
annum, thus :
5. DEFAULT In case the FIRST PARTY [herein respondent] fails to pay the
balance of the purchase price within the stipulated due date, the sum of
P600,000.00 shall be deemed forfeited, on the other hand, should the
SECOND PARTY [herein petitioner] fail to deliver within the stipulated
period the documents hereby undertaken, the SECOND PARTY shall return
the sum of P600,000.00 with interest at 18% per annum.
Petitioner failed to deliver the required documents. In compliance

with their agreement, he returned to respondent the latters P600,000.00
option/reservation fee by way of Far East Bank & Trust Company Check
No. 25AO54252P, which was, however, dishonored.
What transpired thereafter is disputed by both parties. Petitioner

claimed that he twice tendered to respondent, through his counsel, the
amount of P672,900.00 (representing the P600,000.00
option/reservation fee plus 18% interest per annum computed from
December 3, 1993 to August 3, 1994) in the form of Far East Bank &
Trust Company Managers Check No. 088498, dated August 3, 1994, but
said counsel refused to accept the same. His first attempt to tender
payment was allegedly made on August 3, 1994 through his
messenger;6 while the second one was on August 8, 1994, when he sent
via DHL Worldwide Services, the managers check attached to a letter
dated August 5, 1994. On August 11, 1994, petitioner wrote a letter to
respondent saying that he is consigning the amount tendered with the
Regional Trial Court of Makati City. On August 15, 1994, petitioner filed
a complaint for consignation.
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Respondents counsel, on the other hand, admitted that his office

received petitioners letter dated August 5, 1994, but claimed that no
check was appended thereto. He averred that there was no valid tender
of payment because no check was tendered and the computation of the
amount to be tendered was insufficient, because petitioner verbally
promised to pay 3% monthly interest and 25% attorneys fees as penalty
for default, in addition to the interest of 18% per annum on the
P600,000.00 option/reservation fee.
On November 29, 1996, the trial court rendered a decision

declaring the consignation invalid for failure to prove that petitioner
tendered payment to respondent and that the latter refused to receive the
same. It further held that even assuming that respondent refused the
tender, the same is justified because the managers check allegedly
offered by petitioner was not legal tender, hence, there was no valid
tender of payment. The trial court ordered petitioner to pay respondent
the amount of P600,000.00 with interest of 18% per annum from
December 3, 1993 until fully paid, plus moral damages and attorneys
fees.
Petitioner appealed the decision to the Court of Appeals.

Meanwhile, his counsel, Atty. Wilhelmina V. Joven, died and she was
substituted by Atty. Salvador P. De Guzman, Jr. On December 20, 2001,
petitioner executed a "Deed of Assignment" assigning in favor of Atty. De
Guzman, Jr., part of the P672,900.00 consigned with the trial court as
partial payment of the latters attorneys fees. Thereafter, on January 7,
2002, petitioner filed an Ex Parte Motion to Withdraw Consigned
Money.This was followed by a "Motion to Intervene" filed by Atty. De
Guzman, Jr., praying that the amount consigned be released to him by
virtue of the Deed of Assignment.
Petitioners motion to withdraw the amount consigned was denied

by the Court of Appeals and the decision of the trial court was affirmed
with modification as to the amount of moral damages and attorneys fees.
On a motion for reconsideration, the Court of Appeals declared the

consignation as valid in an Amended Decision dated January 16, 2003. It
held that the validity of the consignation had the effect of extinguishing
petitioners obligation to return the option/reservation fee to respondent.
Hence, petitioner can no longer withdraw the same.
Unfazed, petitioner filed the instant petition for review contending,

inter alia, that he can withdraw the amount deposited with the trial court
as a matter of right because at the time he moved for the withdrawal
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thereof, the Court of Appeals has yet to rule on the consignations

validity and the respondent had not yet accepted the same.
ISSUES:
(1) Was there a valid consignation?
(2) Can petitioner withdraw the amount consigned as a matter of

right?
HELD: YES. 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. In order that consignation may be effective, the debtor must
show that: (1) there was a debt due; (2) the consignation of the obligation
had been made because the creditor to whom tender of payment was
made refused to accept it, or because he was absent or incapacitated, or
because several persons claimed to be entitled to receive the amount due
or because the title to the obligation has been lost; (3) previous notice of
the consignation had been given to the person interested in the
performance of the obligation; (4) the amount due was placed at the
disposal of the court; and (5) after the consignation had been made the
person interested was notified thereof. Failure in any of these
requirements is enough ground to render a consignation ineffective.
The issues to be resolved in the instant case concerns one of the

important requisites of consignation, i.e, the existence of a valid tender of
payment. As testified by the counsel for respondent, the reasons why his
client did not accept petitioners tender of payment were (1) the check
mentioned in the August 5, 1994 letter of petitioner manifesting that he
is settling the obligation was not attached to the said letter; and (2) the
amount tendered was insufficient to cover the obligation. It is obvious
that the reason for respondents non-acceptance of the tender of payment
was the alleged insufficiency thereof and not because the said check
was not tendered to respondent, or because it was in the form of
managers check. While it is true that in general, a managers check is
not legal tender, the creditor has the option of refusing or accepting
it. Payment in check by the debtor may be acceptable as valid, if no
prompt objection to said payment is made. Consequently, petitioners
tender of payment in the form of managers check is valid.
There being a valid tender of payment in an amount sufficient to

extinguish the obligation, the consignation is valid.
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(2) NO. The amount consigned with the trial court can no longer be
withdrawn by petitioner because respondents prayer in his answer that
the amount consigned be awarded to him is equivalent to an acceptance
of the consignation, which has the effect of extinguishing petitioners
obligation.
Moreover, petitioner failed to manifest his intention to comply with

the "Agreement And Undertaking" by delivering the necessary documents
and the lot subject of the sale to respondent in exchange for the amount
deposited. Withdrawal of the money consigned would enrich petitioner
and unjustly prejudice respondent.
The withdrawal of the amount deposited in order to pay attorneys

fees to petitioners counsel, Atty. De Guzman, Jr., violates Article 1491 of
the Civil Code which forbids lawyers from acquiring by assignment,
property and rights which are the object of any litigation in which they
may take part by virtue of their profession.
The instant petition for review is DENIED.
Liguez v. CA
CONCHITA LIGUEZ, petitioner, vs.

THE HONORABLE COURT OF APPEALS, MARIA NGO VDA. DE
LOPEZ, ET AL., respondents.
(G.R. No. L-11240, December 18, 1957, EN BANC)
REYES, J.B.L., J.:
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FACTS: Petitioner-appellant Conchita Liguez filed a complaint against

the widow and heirs of the late Salvador P. Lopez to recover a parcel of
land. Liguez averred to be its legal owner, pursuant to a deed of donation
of said land, executed in her favor by the late owner, Salvador P. Lopez.
The defense interposed was that the donation was null and void for
having an illicit causa or consideration, which was the plaintiffs entering
into marital relations with Salvador P. Lopez, a married man; and that
the property had been adjudicated to the appellees as heirs of Lopez by
the court of First Instance.
ISSUE: WON the motive may be regarded as causa when it

predetermines the purpose of the contract.
HELD: Yes. In the present case, it is scarcely disputable that Lopez

would not have conveyed the property in question had he known that
appellant would refuse to cohabit with him; so that the cohabitation was
an implied condition to the donation, and being unlawful, necessarily
tainted the donation itself.
Philbank v. Lui She

PHILIPPINE BANKING CORPORATION, representing the estate of
JUSTINIA SANTOS Y CANON FAUSTINO, deceased, plaintiff-appellant,
vs. LUI SHE, in her own behalf and as administratrix of the intestate
estate of Wong Heng, deceased,defendant-appellant.
Cita
(G.R. No. L-17587 ,December 18, 1967, EN BANC)
CASTRO, J.:
FACTS: Justina Santos y Canon Faustino and her sister Lorenza were
the owners in common of a piece of land in Manila.
The sisters lived in one of the houses, while Wong Heng, a Chinese, lived
with his family in the restaurant. Wong had been a long-time lessee of a
portion of the property, having a monthly rental of P2,620.
On September 22, 1957 Justina Santos became the owner of the entire
property as her sister died with no other heir. Then already well
advanced in years, being at the time 90 years old, blind, crippled and an
invalid, she was left with no other relative to live with, but she was taken
cared of by Wong.
"In grateful acknowledgment of the personal services of the Lessee to

her," Justina Santos executed on November 15, 1957, a contract of
lease in favor of Wong, covering the portion then already leased to him
and another portion fronting Florentino Torres street. The lease was for
50 years, although the lessee was given the right to withdraw at any time
from the agreement; the monthly rental was P3,120. Ten days later
(November 25), the contract was amended so as to make it cover the
entire property, including the portion on which the house of Justina
Santos stood, at an additional monthly rental of P360.
On December 21 she executed contract giving Wong the option to buy

the leased premises for P120,000, payable within ten years at a monthly
installment of P1,000. The option was conditioned on his obtaining
Philippine citizenship,a petition for which was then pending in the Court
of First Instance of Rizal.
On November 18, 1958 she executed two other contracts, one extending
the term of the lease to 99 years, and another fixing the term of the
option at 50 years. Both contracts are written in Tagalog. In two wills
executed on August 24 and 29, 1959, she bade her legatees to respect
the contracts she had entered into with Wong, but in a codicil of a later
date (November 4, 1959) she appears to have a change of heart. Claiming
that the various contracts were made by her because of machinations
and inducements practised by him, she now directed her executor to
secure the annulment of the contracts.
Both parties however died, Wong Heng on October 21, 1962 and Justina
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Santos on December 28, 1964. Wong was substituted by his wife, Lui
She, the other defendant in this case, While Justina Santos was
substituted by the Philippine Banking Corporation. Justina Santos
maintained now reiterated by the Philippine Banking Corporation
that the lease contract should have been annulled along with the four
other contracts because it lacks mutuality, among others
Paragraph 5 of the lease contract states that "The lessee may at any time
withdraw from this agreement." It is claimed that this stipulation offends
article 1308 of the Civil Code which provides that "the contract must
bind both contracting parties; its validity or compliance cannot be left to
the will of one of them."
ISSUES:
1. Was the insertion in the contract of a resolutory condition, permitting

the cancellation of the contract by one of the parties, valid?
2. Was the contract between Wong (Lui She) and Justina Santos (Phil.
Banking) enforceable?
HELD:
1. Yes. In the early case of Taylor vs. Uy Tiong Piao, the Supreme Court
said: Article 1256 [now art. 1308] of the Civil Code in our opinion creates
no impediment to the insertion in a contract for personal service of a
resolutory condition permitting the cancellation of the contract by one of
the parties. Such a stipulation, as can be readily seen, does not make
either the validity or the fulfillment of the contract dependent upon the
will of the party to whom is conceded the privilege of cancellation; for
where the contracting parties have agreed that such option shall exist,
the exercise of the option is as much in the fulfillment of the contract as
any other act which may have been the subject of agreement. Indeed, the
cancellation of a contract in accordance with conditions agreed upon
beforehand is fulfillment
Further, in the case at bar, the right of the lessee to continue the lease or
to terminate it was so circumscribed by the term of the contract that it
cannot be said that the continuance of the lease depends upon his will.
At any rate, even if no term had been fixed in the agreement, this case
would at most justify the fixing of a period but not the annulment of the
contract.
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2. No. The contract of lease, as in this case, cannot be sustained.

However, to be sure, a lease to an alien for a reasonable period was valid,
so was an option giving an alien the right to buy real property on
condition that he is granted Philippine citizenship.
But if an alien was given not only a lease of, but also an option to buy, a
piece of land, by virtue of which the Filipino owner cannot sell or
otherwise dispose of his property, this to last for 50 years, then it became
clear that the arrangement was a virtual transfer of ownership whereby
the owner divested himself in stages not only of the right to enjoy the
land (jus possidendi, jus utendi, jus fruendi and jus abutendi) but also of
the right to dispose of it (jus disponendi) rights the sum total of which
make up ownership. It was just as if today the possession is transferred,
tomorrow, the use, the next day, the disposition, and so on, until
ultimately all the rights of which ownership is made up are consolidated
in an alien. And yet this was just exactly what the parties in this case did
within this pace of one year, with the result that Justina Santos'
ownership of her property was reduced to a hollow concept. If this can be
done, then the Constitutional ban against alien landholding in the
Philippines, is indeed in grave peril.
The contracts in question are annulled and set aside; the land subject-
matter of the contracts was ordered returned to the estate of Justina
Santos as represented by the Philippine Banking Corporation.
Vigilar v. Aquino
GREGORIO R. VIGILAR, SECRETARY OF THE DEPARTMENT OF
PUBLIC WORKS AND HIGHWAYS (DPWH), DPWH
UNDERSECRETARIES TEODORO E. ENCARNACION AND EDMUNDO
E. ENCARNACION AND EDMUNDO V. MIR, DPWH ASSISTANT
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SECRETARY JOEL L. ALTEA, DPWH REGIONAL DIRECTOR VICENTE

B. LOPEZ, DPWH DISTRICT ENGINEER ANGELITO M. TWAO, FELIX
A. DESIERTO OF THE TECHNICAL WORKING GROUP VALIDATION
AND AUDITING TEAM, AND LEONARDO ALVARO, ROMEO N. SUPAN,
VICTORINO C. SANTOS OF THE DPWH PAMPANGA
2NDENGINEERING DISTRICT, Petitioners, - versus - ARNULFO D.
AQUINO, Respondent.
(G.R. No. 180388, January 18, 2011, EN BANC)
SERENO, J.:
FACTS: On 19 June 1992, petitioner Angelito M. Twao, then Officer-in-

Charge (OIC)-District Engineer of the Department of Public Works and
Highways (DPWH) 2nd Engineering District of Pampanga sent an
Invitation to Bid to respondent Arnulfo D. Aquino, the owner of A.D.
Aquino Construction and Supplies. The bidding was for the construction
of a dike by bulldozing a part of the Porac River at Barangay Ascomo-
Pulungmasle, Guagua, Pampanga.
Subsequently, on 7 July 1992, the project was awarded to

respondent, and a Contract of Agreement was thereafter executed
between him and concerned petitioners for the amount of
PhP1,873,790.69, to cover the project cost.
By 9 July 1992, the project was duly completed by respondent, who

was then issued a Certificate of Project Completion dated 16 July 1992.
The certificate was signed by Romeo M. Yumul, the Project Engineer; as
well as petitioner Romeo N. Supan, Chief of the Construction Section,
and by petitioner Twao.
Respondent Aquino, however, claimed that PhP1,262,696.20 was

still due him, but petitioners refused to pay the amount. He thus filed a
Complaint for the collection of sum of money with damages before the
Regional Trial Court of Guagua, Pampanga. The complaint was docketed
as Civil Case No. 3137.
Petitioners, for their part, set up the defense that the Complaint
was a suit against the state; that respondent failed to exhaust
administrative remedies; and that the Contract of Agreement covering
the project was void for violating Presidential Decree No. 1445, absent
the proper appropriation and the Certificate of Availability of Funds.
On 28 November 2003, the lower court ruled in favor of

respondent.
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On appeal, the Court of Appeals reversed and set aside the

Decision of the lower court and disposed that the CONTRACT
AGREEMENT entered into between the plaintiff-appellees construction
company, which he represented, and the government, through the
Department of Public Works and Highway (DPWH) Pampanga, is
declared null and void ab initio.
Dissatisfied with the Decision of the Court of Appeals, petitioners
are now before this Court, seeking a reversal of the appellate courts
Decision and a dismissal of the Complaint.
ISSUE: whether or not the court of appeals erred in ordering the coa to
allow payment to respondent on a quantum meruit basis despite the
latters failure to comply with the requirements of presidential decree no.
1445.
HELD: In ordering the payment of the obligation due respondent on

a quantum meruit basis, the Court of Appeals correctly relied on Royal
Trust Corporation v. COA, Eslao v. COA, Melchor v. COA, EPG
Construction Company v. Vigilar, and Department of Health v. C.V.
Canchela & Associates, Architects. All these cases involved government
projects undertaken in violation of the relevant laws, rules and
regulations covering public bidding, budget appropriations, and release
of funds for the projects. Consistently in these cases, this Court has held
that the contracts were void for failing to meet the requirements
mandated by law; public interest and equity, however, dictate that the
contractor should be compensated for services rendered and work done.
Specifically, C.V. Canchela & Associates is similar to the case at

bar, in that the contracts involved in both cases failed to comply with the
relevant provisions of Presidential Decree No. 1445 and the Revised
Administrative Code of 1987. Nevertheless, (t)he illegality of the subject
Agreements proceeds, it bears emphasis, from an express declaration or
prohibition by law, not from any intrinsic illegality. As such, the
Agreements are not illegal per se, and the party claiming there under
may recover what had been paid or delivered.
Neither can petitioners escape the obligation to compensate

respondent for services rendered and work done by invoking the states
immunity from suit. This Court has long established in Ministerio v. CFI
of Cebu, and recently reiterated in Heirs of Pidacan v. ATO, that the
doctrine of governmental immunity from suit cannot serve as an
instrument for perpetrating an injustice to a citizen.
The Petition is DENIED for lack of merit.
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EPG Construction v. Vigilar
EPG CONSTRUCTION CO., CIPER ELECTRICAL & ENGINEERING,

SEPTA CONSTRUCTION CO., PHIL. PLUMBING CO., HOME
CONSTRUCTION INC., WORLD BUILDERS CO., GLASS WORLD INC.,
PERFORMANCE BUILDERS DEV'T. CO., DE LEON-ARANETA CONST.
CO., J.D. MACAPAGAL CONST. CO., All represented by their Atty. IN
FACT, MARCELO D, FORONDA, petitioners, vs.HON. GREGORIO R.
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VIGILAR, In His Capacity as Secretary of Public Works and

Highways, respondent.
(G.R. No. 131544 , March 16, 2001, 2nd Division)
BUENA, J.:
Facts:In 1983, the Ministry of Human Settlement entered into a

Memorandum of Agreement (MOA) with the Ministry of Public Works and
Highways, where the latter undertook to develop a housing project by the
ministry and on the site construct thereon 145 housing units.
By virtue of the MOA, the Ministry of Public Works and Highways

forged individual contracts with herein petitioners EPG Construction Co.,
Ciper Electrical and Engineering, Septa Construction Co., Phil. Plumbing
Co., Home Construction Inc., World Builders Inc., Glass World Inc.,
Performance Builders Development Co. and De Leon Araneta
Construction Co., for the construction of the housing units. Under the
contracts, the scope of construction and funding therefor covered only
around 2/3 of each housing unit. After complying with the terms of
said contracts, and by reason of the verbal request and assurance of
then DPWH Undersecretary Aber Canlas that additional funds would be
available and forthcoming, petitioners agreed to undertake and perform
additional constructions for the completion of the housing units,
despite the absence of appropriations and written contracts to cover
subsequent expenses for the additional constructions.
Petitioners received payment for what was originally stipulated.

However, petitioners demanded payment for the unpaid balance of
P5,918,315.63 constituting payment for the additional constructions
which petitioners argued formed an implied contract. They claimed that
payment should be based on the principle of quantum meruit. DPWH
Secretary Gregorio Vigilar denied the subject money claims prompting
herein petitioners to file before the Regional Trial Court of Quezon City,
Branch 226, a Petition for Mandamus praying for payment.
Issue:Are petitioners entitled to payment?
HELD:Although the Court agreed with respondents postulation that the

implied contracts, which covered the additional constructions, are void,
in view of violation of applicable laws, auditing rules and lack of legal
requirements, it nonetheless find the instant petition laden with merit
and uphold, in the interest of substantial justice, petitioners-contractors
right to be compensated for the "additional constructions" on the public
works housing project, applying the principle of quantum meruit.
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To begin with, petitioners-contractors assented and agreed to

undertake additional constructions for the completion of the housing
units, believing in good faith and in the interest of the government and,
in effect, the public in general, that appropriations to cover the additional
constructions and completion of the public works housing project would
be available and forthcoming. On this particular score, the records reveal
that the verbal request and assurance of then DPWH Undersecretary
Canlas led petitioners-contractors to undertake the completion of the
government housing project, despite the absence of covering
appropriations, written contracts, and certification of availability of
funds, as mandated by law and pertinent auditing rules and issuances.
To put it differently, the implied contracts, declared void in this

case, covered only the completion and final phase of construction of the
housing units, which structures, concededly, were already existing, albeit
not yet finished in their entirety at the time the implied contracts were
entered into between the government and the contractors.
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Go Chan v. Young
Gochan vs. Young
GR 131889, 12 March 2001
FACTS: Felix Gochan and Sons Realty Corporation (Gochan Realty) was
registered with the SEC on June 1951, with Felix Gochan, Sr., Maria Pan Nuy
Go Tiong, Pedro Gochan, Tomasa Gochan, Esteban Gochan and Crispo Gochan
as its incorporators. Felix Gochan Sr.'s daughter, Alice inherited 50 shares of
stock in Gochan Realty from the former. Alice died in 1955, leaving the 50
shares to her husband, John Young, Sr. In 1962, the Regional Trial Court of
Cebu adjudicated 6/14 of these shares to her children, Richard Young, David
Young, Jane Young Llaban, John Young Jr., Mary Young Hsu and Alexander
Thomas Young (the Youngs). Having earned dividends, these stocks numbered
179 by 20 September 1979. 5 days later (25 September), at which time all the
children had reached the age of majority, their father John Sr., requested
Gochan Realty to partition the shares of his late wife by cancelling the stock
certificates in his name and issuing in lieu thereof, new stock certificates in the
names of the Youngs. On 17 October 1979, Gochan Realty refused, citing as
reason, the right of first refusal granted to the remaining stockholders by the
Articles of Incorporation. In 1990, John, Sr. died, leaving the shares to the
Youngs. On 8 February 1994, Cecilia Gochan Uy and Miguel Uy filed a
complaint with the SEC for issuance of shares of stock to the rightful owners,
nullification of shares of stock, reconveyance of property impressed with trust,
accounting, removal of officers and directors and damages against Virginia
Gochan, et. al. (Gochans) A Notice of Lis Pendens was annotated to the real
properties of the corporation.
On 16 March 1994, the Gochans moved to dismiss the complaint alleging

that: (1) the SEC had no jurisdiction over the nature of the action; (2) the the
Youngs were not the real parties-in-interest and had no capacity to sue; and (3)
the Youngs' causes of action were barred by the Statute of Limitations. The
motion was opposed by the Youngs. On 29 March 1994, the Gochans filed a
Motion for cancellation of Notice of Lis Pendens. The Youngs opposed the said
motion. On 9 December 1994, the SEC, through its Hearing Officer, granted
the motion to dismiss and ordered the cancellation of the notice of lis pendens
annotated upon the titles of the corporate lands; holding that the Youngs never
been stockholders of record of FGSRC to confer them with the legal capacity to
bring and maintain their action, and thus, the case cannot be considered as an
intra-corporate controversy within the jurisdiction of the SEC; and that on the
allegation that the Youngs brought the action as a derivative suit on their own
behalf and on behalf of Gochan Realty, rhe failure to comply with the
jurisdictional requirement on derivative action necessarily result in the
dismissal of the complaint. The Youngs filed a Petition for Review with the
Court of Appeals. On 28 February 1996, the Court of Appeals ruled that the
SEC had no jurisdiction over the case as far as the heirs of Alice Gochan were
concerned, because they were not yet stockholders of the corporation. On the
other hand, it upheld the capacity of Cecilia Gochan Uy and her spouse Miguel
Uy. It also held that the Intestate Estate of John Young Sr. was an
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indispensable party. The appellate court further ruled that the cancellation of
the notice of lis pendens on the titles of the corporate real estate was not
justified. Moreover, it declared that the Youngs' Motion for Reconsideration
before the SEC was not pro forma; thus, its filing tolled the appeal period. The
Gochans moved for reconsideration but were denied in a Resolution dated 18
December 1997. The Gochans filed the Petition for Review on Certiorari.
ISSUE: Whether the action filed by the Spouses Uy was not a derivative suit,
because the spouses and not the corporation were the injured parties.
HELD: The following portions of the Complaint shows allegations of injury to

the corporation itself, to wit: "That on information and belief, in further
pursuance of the said conspiracy and for the fraudulent purpose of depressing
the value of the stock of the Corporation and to induce the minority
stockholders to sell their shares of stock for an inadequate consideration as
aforesaid, respondent Esteban T. Gochan . . ., in violation of their duties as
directors and officers of the Corporation . . ., unlawfully and fraudulently
appropriated [for] themselves the funds of the Corporation by drawing
excessive amounts in the form of salaries and cash advances . . . and by
otherwise charging their purely personal expenses to the Corporation"; and
"That the payment of P1,200,000.00 by the Corporation to complainant Cecilia
Gochan Uy for her shares of stock constituted an unlawful, premature and
partial liquidation and distribution of assets to a stockholder, resulting in the
impairment of the capital of the Corporation and prevented it from otherwise
utilizing said amount for its regular and lawful business, to the damage and
prejudice of the Corporation, its creditors, and of complainants as minority
stockholders." As early as 1911, the Court has recognized the right of a single
stockholder to file derivative suits. "Where corporate directors have committed
a breach of trust either by their frauds, ultra vires acts, or negligence, and the
corporation is unable or unwilling to institute suit to remedy the wrong, a
single stockholder may institute that suit, suing on behalf of himself and other
stockholders and for the benefit of the corporation, to bring about a redress of
the wrong done directly to the corporation and indirectly to the stockholders."
Herein, the Complaint alleges all the components of a derivative suit. The
allegations of injury to the Spouses Uy can coexist with those pertaining to the
corporation. The personal injury suffered by the spouses cannot disqualify
them from filing a derivative suit on behalf of the corporation. It merely gives
rise to an additional cause of action for damages against the erring directors.
This cause of action is also included in the Complaint filed before the SEC. The
Spouses Uy have the capacity to file a derivative suit in behalf of and for the
benefit of the corporation. The reason is that the allegations of the Complaint
make them out as stockholders at the time the questioned transaction
occurred, as well as at the time the action was filed and during the pendency of
the action.
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Francisco v. Herrera
JULIAN FRANCISCO (Substituted by his Heirs, namely: CARLOS ALTEA
FRANCISCO; the heirs of late ARCADIO FRANCISCO, namely: CONCHITA
SALANGSANG-FRANCISCO (surviving spouse), and his children namely:
TEODULO S. FRANCISCO, EMILIANO S. FRANCISCO, MARIA THERESA S.
FRANCISCO, PAULINA S. FRANCISCO, THOMAS S. FRANCISCO; PEDRO
ALTEA FRANCISCO; CARINA FRANCISCO-ALCANTARA; EFREN ALTEA
FRANCISCO; DOMINGA LEA FRANCISCO-REGONDON; BENEDICTO ALTEA
FRANCISCO and ANTONIO ALTEA FRANCISCO), petitioner, vs. PASTOR
HERRERA, respondent., G.R. No. 139982, 2002 Nov 21, 2nd Division)
QUISUMBING, J.:
FACTS: Eligio Herrera, Sr., the father of respondent, was the owner of two
parcels of land. Petitioner bought from said landowner the first parcel for the
price of P1,000,000, paid in installments, and the second parcel of land for
P750,000.
Contending that the contract price for the two parcels of land was grossly
inadequate, the children of Eligio, Sr., tried to negotiate with petitioner to
increase the purchase price. When petitioner refused, herein respondent then
filed a complaint for annulment of sale.
Trial court ruled in favor of respondents, which was affirmed by the Court of
Appeals. Hence, a petition for review was filed.
ISSUE: Whether or not the contract is prohibited and, thus, is void.
HELD: A void or inexistent contract is one which has no force and effect from
the very beginning. Hence, it is as if it has never been entered into and cannot
be validated either by the passage of time or by ratification. There are two types
of void contracts: (1) those where one of the essential requisites of a valid
contract as provided for by Article 1318[10] of the Civil Code is totally wanting;
and (2) those declared to be so under Article 1409[11] of the Civil Code. By
contrast, a voidable or annullable contract is one in which the essential
requisites for validity under Article 1318 are present, but vitiated by want of
capacity, error, violence, intimidation, undue influence, or deceit.
Article 1318 of the Civil Code states that no contract exists unless there
is a concurrence of consent of the parties, object certain as subject matter, and
cause of the obligation established. Article 1327 provides that insane or
demented persons cannot give consent to a contract. But, if an insane or
demented person does enter into a contract, the legal effect is that the contract
is voidable or annullable as specifically provided in Article 1390.
In the present case, it was established that the vendor Eligio, Sr. entered
into an agreement with petitioner, but that the formers capacity to consent
was vitiated by senile dementia. Hence, we must rule that the assailed
contracts are not void or inexistent per se; rather, these are contracts that are
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valid and binding unless annulled through a proper action filed in court
seasonably.
Implied ratification may take the form of accepting and retaining the
benefits of a contract.[13] This is what happened in this case. Respondents
contention that he merely received payments on behalf of his father merely to
avoid their misuse and that he did not intend to concur with the contracts is
unconvincing. If he was not agreeable with the contracts, he could have
prevented petitioner from delivering the payments, or if this was impossible, he
could have immediately instituted the action for reconveyance and have the
payments consigned with the court. None of these happened. As found by the
trial court and the Court of Appeals, upon learning of the sale, respondent
negotiated for the increase of the purchase price while receiving the installment
payments. It was only when respondent failed to convince petitioner to increase
the price that the former instituted the complaint for reconveyance of the
properties. Clearly, respondent was agreeable to the contracts, only he wanted
to get more. Further, there is no showing that respondent returned the
payments or made an offer to do so. This bolsters the view that indeed there
was ratification. One cannot negotiate for an increase in the price in one breath
and in the same breath contend that the contract of sale is void.
Petition granted.
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Mendezona v. Ozamiz
MARIO J. MENDEZONA and TERESITA M. MENDEZONA, LUIS J. MENDEZONA
and MARICAR L. MENDEZONA and TERESITA ADAD VDA. DE
MENDEZONA, petitioners, versus,
JULIO H. OZAMIZ, ROBERTO J. MONTALVAN, JOSE MA. OZAMIZ, CARMEN H.
OZAMIZ, PAZ O. MONTALVAN, MA. TERESA O.F. ZARRAGA, CARLOS O.
FORTICH, JOSE LUIS O. ROS, PAULITA O. RODRIGUEZ, and LOURDES O.
LON, respondents.
(G.R. No. 143370, 2002 February 6, 2ND Division)
DE LEON, JR., J.:
FACTS: Carmen Ozamiz sold to her nephews, Mario, Antonio and Luis Mendezona
three parcels of residential land in Cebu City, per a Deed of Absolute Sale in 1989 for
a consideration of P1,040,000.00, where a partition agreement was entered into by the
three vendees, where the usufructuary rights was reserved to the vendor
Carmen Ozamiz during her lifetime. The transfer was duly authorized by the Bureau of
Internal Revenue for the Register of Deeds to transfer the property to the vendees.
It appears that on January 15, 1991, the respondents instituted the petition for
guardianship with the Regional Trial Court of Oroquieta City, alleging therein that
Carmen Ozamiz, then 86 years old, after an illness in July 1987, had become
disoriented and could not recognize most of her friends; that she could no longer take
care of herself nor manage her properties by reason of her failing health, weak mind
and absent-mindedness. Thus, Paz O. Montalvan was designated as guardian over the
person of Carmen Ozamiz while petitioner Mario J. Mendezona, respondents Roberto
J. Montalvan and Julio H. Ozamiz were designated as joint guardians over the
properties of the said ward. Inventories and Accounts, listing therein Carmen Ozamizs
properties, cash, shares of stock, vehicles and fixed assets, including a 10,396 square
meter property known as the Lahug property was filed by Roberto Montalvan and
Julio Osamis. Said Lahug property is the same property covered by the Deed of
Absolute Sale executed by Carmen Ozamiz in favor of the petitioners. This caused the
inscription on the titles of petitioners a notice of lis pendens giving rise to the suit.
Carmen Ozamiz granted Mario Mendezona a General Power of Attorney on August 11,
1990 to relate to the administration of the property. The Regional trial court favored
the petitioners, thus, declaring the Deed of Sale valid. Court of Appeals reversed RTC
decision, hence, this petition.
ISSUE: Whether or not the deed of sale contracted by Carmen Ozamis is valid.
HELD: Yes, the Supreme Court held that the contract entered into by Carmen Ozamis
is valid for the reason that there are nine other important documents that were, signed
by Carmen Ozamiz either before or after April 28, 1989 which is contrary to their
assertion of complete incapacity of Carmen Ozamiz to handle her affairs since 1987.
Moreover, a person is presumed to be of sound mind at any particular time and the
condition is presumed to continue to exist, in the absence of proof to the
contrary. Competency and freedom from undue influence, shown to have existed in the
other acts done or contracts executed, are presumed to continue until the contrary is
shown, wherefore, the RTC decision is reinstated.
Petition granted.
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Manzanilla v. Court of Appeals

SPOUSES CELEDONIO MANZANILLA and DOLORES FUERTE, and INES
CARPIO, petitioners, vs. HON. COURT OF APPEALS and JUSTINA CAMPO,
respondents., G.R. No. 75342, 1990 Mar 15, 1st Division)
MEDIALDEA, J.:
FACTS: Spouses Celedonio and Dolores Manzanilla (spouses Manzanilla) sold
on installment an undivided one-half portion of their residential house and lot.
At the time of the sale, the said property was mortgaged to the Government
Service Insurance System (GSIS), which fact was known to the vendees,
spouses Magdaleno and Justina Campo. The Campo spouses took possession
of the premises upon payment of the first installment on April 17, 1963 and up
to the present. Some payments were made to petitioners while some were made
directly to GSIS.
The GSIS filed its application to foreclose the mortgage on the property
for failure of the Manzanilla spouses to pay their monthly amortizations. The
property was sold at public auction where GSIS was the highest bidder.
Two months before the expiration of the period to the Manzanilla spouses
executed a Deed of Absolute Sale the undivided one half portion of their
property in favor of the Campo spouses.
Upon the expiration of the period to redeem without the Manzanilla
spouses exercising their right of redemption, title
to the property was consolidated in favor of the GSIS and a new title (TCT No.
135031) issued in its name.
The Manzanilla spouses made representations and succeeded in re-
acquiring the property from the GSIS. Upon full payment of the purchase price,
an Absolute Deed of Sale was executed by GSIS in favor of the Manzanilla
spouses. Upon registration thereof, a new certificate of title (TCT No.-188293)
in the name of the Manzanilla spouses was issued by the Register of Deeds of
Quezon City.
Manzanilla spouses mortgaged the property to the Bian Rural Bank.
petitioner Ines Carpio purchased the property from the Manzanilla spouses and
agreed to assume the mortgage in favor of Bian Rural Bank. private
respondent Justina Campo registered her adverse claim over TCT No. 188293
with the Register of Deeds of Quezon City. petitioner Ines Carpio filed an
ejectment case against private respondent Justina Campo. On the other hand,
private respondent Justina Campo (already a widow) filed a complaint for
quieting of title against the Manzanilla spouses and Ines Carpio.
Trial court ruled in favor of private respondent, which the Court of
Appeals affirmed. Hence, petition for review was filed.
ISSUE: Whether or not petitioners Manzanillas are under any legal duty to
reconvey the undivided one-half portion of the property to private respondent
Justina Campo.
HELD: If it were true that petitioners deliberately allowed the loan to lapse and
the mortgage to be foreclosed, We do not see how these circumstances can be
utilized by them to their advantage. There was no guarantee that petitioners
would be able to redeem the property in the event the mortgage thereon was
foreclosed as in fact they failed to redeem because they had no money. On the
other hand, had they opted to eventually exercise their right of redemption
after foreclosure, they would be under a legal duty to convey one-half portion
thereof sold to the Campo spouses because by then, title to the property would
still be in their name. Either way, petitioners were bound to lose either the
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entire property in case of failure to redeem or the one-half portion thereof sold
to private respondent in the case of redemption. Further, should petitioners let
the period of redemption lapse without exercising the right of redemption, as
what happened in this case, there was no guarantee that the same could be re-
acquired by them from GSIS nor would GSIS be under any legal duty to resell
the property to them.
There may be a moral duty on the part of petitioners to convey the one-
half portion of the property previously sold to private respondents. However,
they are under no legal obligation to do so. Hence, the action to quiet title filed
by private respondent must fail.
Justice is done according to law. As a rule, equity follows the law. There
may be a moral obligation, often regarded as an equitable consideration
(meaning compassion), but if there is no enforceable legal duty, the action
must fail although the disadvantaged party deserves commiseration or
sympathy.
There was neither mistake nor fraud on the part of petitioners when the
subject property was re-acquired from the GSIS. The fact that they previously
sold one-half portion thereof has no more significance in this re-acquisition.
Private respondent's right over the one-half portion was obliterated when
absolute ownership and title passed on to the GSIS after the foreclosure sale.
The property as held by GSIS had a clean title. The property that was passed
on to petitioners retained that quality of title.
As regards the rights of private respondent Ines Carpio, she is a buyer in
good faith and for value. There was no showing that at the time of the sale to
her of the subject property, she knew of any lien on the property except the
mortgage in favor of the Bian Rural Bank. No other lien was annotated on the
certificate of title. She is also not required by law to go beyond what appears on
the face of the title. When there is nothing on the certificate of title to indicate
any cloud or vice in the ownership of the property or any encumbrances
thereon, the purchaser is not required to explore further than what the Torrens
Title upon its face indicates in quest for any hidden defect or inchoate right
thereof.
Petition granted.
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Rural Bank of Paranaque v. Remolado

RURAL BANK OF PARAAQUE, INC., petitioner, vs. ISIDRA REMOLADO
and COURT OF APPEALS, respondents., G.R. No. L-62051, 1985 Mar 18,
2nd Division)
AQUINO, J.:
FACTS: Isidra Remolado owned a lot with a bungalow which she mortgaged to
the Rural Bank of Paraaque, Inc. as security for a loan of P15,000. She paid
the loan. She mortgaged it again to the bank. She eventually secured loans
totaling P18,000. The loans become overdue. The bank foreclosed the mortgage
and bought the property at the foreclosure sale for P22,192.70.
14 days before the expiration of the one-year redemption period, the
bank gave her a statement showing that she should pay P25,491.96 for the
redemption of the property on August 23. No redemption was made on that
date.
Bank consolidated its ownership over the property. Remolado's title was
cancelled. A new title was issued to the bank.
The bank gave Remolado 37 days, within which to repurchase (not
redeem since the period of redemption had expired) the property. The bank did
not specify the price. Remolado and her daughter, Patrocinio Gomez, promised
to pay the bank P33,000 on October 31 for the repurchase of the property.
Contrary to her promise, Remolado did not repurchase the property. Five
days later, Remolado and her daughter delivered P33,000 cash to the bank's
assistant manager as repurchase price. The amount was returned to them the
next day. The assistant manager had no intention of receiving the money. It
was just left with her by Remolado. At that time, the bank was no longer willing
to allow the repurchase.
Remolado filed an action to compel the bank to reconvey the property to
her for P25,491.96 plus interest and other charges and to pay P35,000 as
damages. The repurchase price was not consigned. A notice of lis pendens was
registered. the bank sold the property to Pilar Aysip for P50,000. A new title
was issued to Aysip with an annotation of lis pendens.
The trial court ordered the bank to return the property to Remolado upon
payment of the redemption price of P25,491.96 plus interest and other bank
charges and to pay her P15,000 as damages. The Appellate Court affirmed the
judgment. Hence, appeal was filed.
ISSUE: Whether or not the bank is in good faith.
HELD: Justice is done according to law. As a rule, equity follows the law. There
may be a moral obligation, often regarded as an equitable consideration
(meaning compassion), but if there is no enforceable legal duty, the action
must fail although the disadvantaged party deserves commiseration or
sympathy.
The choice between what is legally just and what is morally just, when
these two options do not coincide, is explained by Justice Moreland in Vales vs.
Villa, 35 Phil. 769, 788 where he said:
"Courts operate not because one person has been defeated or overcome by
another, but because he has been defeated or overcome illegally. Men may do
foolish things, make ridiculous contracts, use miserable judgment, and lose
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money by them - indeed, all they have in the world; but not for that alone can
the law intervene and restore. There must be, in addition, a violation of law, the
commission of what the law knows as an actionable wrong before the courts
are authorized to lay hold of the situation and remedy it."
In the instant case, the bank acted within its legal rights when it refused
to give Remolado any extension to repurchase after October 31, 1973. It had
given her about two years to liquidate her obligation. She failed to do so.
Petition granted; judgment reversed.
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Republic v. Cojuangco
REPUBLIC OF THE PHILIPPINES,
Petitioner,
- versus -
SANDIGANBAYAN (FIRST DIVISION), EDUARDO M. COJUANGCO, JR.,

AGRICULTURAL CONSULTANCY SERVICES, INC., ARCHIPELAGO REALTY
CORP., BALETE RANCH, INC., BLACK STALLION RANCH, INC.,
CHRISTENSEN PLANTATION COMPANY, DISCOVERY REALTY CORP.,
DREAM PASTURES, INC., ECHO RANCH, INC., FAR EAST RANCH, INC.,
FILSOV SHIPPING COMPANY, INC., FIRST UNITED TRANSPORT, INC.,
HABAGAT REALTY DEVELOPMENT, INC., KALAWAKAN RESORTS, INC.,
KAUNLARAN AGRICULTURAL CORP., LABAYUG AIR TERMINALS, INC.,
LANDAIR INTERNATIONAL MARKETING CORP., LHL CATTLE CORP.,
LUCENA OIL FACTORY, INC., MEADOW LARK PLANTATIONS, INC.,
METROPLEX COMMODITIES, INC., MISTY MOUNTAIN AGRICULTURAL
CORP., NORTHEAST CONTRACT TRADERS, INC., NORTHERN CARRIERS
CORP., OCEANSIDE MARITIME ENTERPRISES, INC., ORO VERDE
SERVICES, INC., PASTORAL FARMS, INC., PCY OIL MANUFACTURING
CORP., PHILIPPINE TECHNOLOGIES, INC., PRIMAVERA FARMS, INC.,
PUNONG-BAYAN HOUSING DEVELOPMENT CORP., PURA ELECTRIC
COMPANY, INC., RADIO AUDIENCE DEVELOPERS INTEGRATED
ORGANIZATION, INC., RADYO PILIPINO CORP., RANCHO GRANDE, INC.,
REDDEE DEVELOPERS, INC., SAN ESTEBAN DEVELOPMENT CORP.,
SILVER LEAF PLANTATIONS, INC., SOUTHERN SERVICE TRADERS, INC.,
SOUTHERN STAR CATTLE CORP., SPADE ONE RESORTS CORP.,
UNEXPLORED LAND DEVELOPERS, INC., VERDANT PLANTATIONS, INC.,
VESTA AGRICULTURAL CORP. AND WINGS RESORTS CORP.,
Respondents.
x--------------------------x

Petitioner,
- versus -
SANDIGANBAYAN (FIRST DIVISION), EDUARDO M. COJUANGCO, JR.,

MEADOW LARK PLANTATIONS, INC., SILVER LEAF PLANTATIONS, INC.,
PRIMAVERA FARMS, INC., PASTORAL FARMS, INC., BLACK STALLION
RANCH, INC., MISTY MOUNTAINS AGRICULTURAL CORP., ARCHIPELAGO
REALTY CORP., AGRICULTURAL CONSULTANCY SERVICES, INC.,
SOUTHERN STAR CATTLE CORP., LHL CATTLE CORP., RANCHO GRANDE,
INC., DREAM PASTURES, INC., FAR EAST RANCH, INC., ECHO RANCH,
INC., LAND AIR INTERNATIONAL MARKETING CORP., REDDEE
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DEVELOPERS, INC., PCY OIL MANUFACTURING CORP., LUCENA OIL

FACTORY, INC., METROPLEX COMMODITIES, INC., VESTA
AGRICULTURAL CORP., VERDANT PLANTATIONS, INC., KAUNLARAN
AGRICULTURAL CORP., ECJ & SONS AGRICULTURAL ENTERPRISES, INC.,
RADYO PILIPINO CORP., DISCOVERY REALTY CORP., FIRST UNITED
TRANSPORT, INC., RADIO AUDIENCE DEVELOPERS INTEGRATED
ORGANIZATION, INC., ARCHIPELAGO FINANCE AND LEASING CORP., SAN
ESTEBAN DEVELOPMENT CORP., CHRISTENSEN PLANTATION COMPANY,
NORTHERN CARRIERS CORP., VENTURE SECURITIES, INC., BALETE
RANCH, INC., ORO VERDE SERVICES, INC., and KALAWAKAN RESORTS,
INC.,
Respondents.
x--------------------------x

Petitioner,
- versus -
EDUARDO M. COJUANGCO, JR., FERDINAND E. MARCOS, IMELDA R.

MARCOS, EDGARDO J. ANGARA,* JOSE C. CONCEPCION, AVELINO V.
CRUZ, EDUARDO U. ESCUETA, PARAJA G. HAYUDINI, JUAN PONCE
ENRILE, TEODORO D. REGALA, DANILO URSUA, ROGELIO A. VINLUAN,
AGRICULTURAL CONSULTANCY SERVICES, INC., ANGLO VENTURES, INC.,
ARCHIPELAGO REALTY CORP., AP HOLDINGS, INC., ARC INVESTMENT,
INC., ASC INVESTMENT, INC., AUTONOMOUS DEVELOPMENT CORP.,
BALETE RANCH, INC., BLACK STALLION RANCH, INC., CAGAYAN DE ORO
OIL COMPANY, INC., CHRISTENSEN PLANTATION COMPANY, COCOA
INVESTORS, INC., DAVAO AGRICULTURAL AVIATION, INC., DISCOVERY
REALTY CORP., DREAM PASTURES, INC., ECHO RANCH, INC., ECJ &
SONS AGRI. ENT., INC., FAR EAST RANCH, INC., FILSOV SHIPPING
COMPANY, INC., FIRST MERIDIAN DEVELOPMENT, INC., FIRST UNITED
TRANSPORT, INC., GRANEXPORT MANUFACTURING CORP., HABAGAT
REALTY DEVELOPMENT, INC., HYCO AGRICULTURAL, INC., ILIGAN
COCONUT INDUSTRIES, INC., KALAWAKAN RESORTS, INC., KAUNLARAN
AGRICULTURAL CORP., LABAYOG AIR TERMINALS, INC., LANDAIR
INTERNATIONAL MARKETING CORP., LEGASPI OIL COMPANY, LHL
CATTLE CORP., LUCENA OIL FACTORY, INC., MEADOW LARK
PLANTATIONS, INC., METROPLEX COMMODITIES, INC., MISTY
MOUNTAIN AGRICULTURAL CORP., NORTHEAST CONTRACT TRADERS,
INC., NORTHERN CARRIERS CORP., OCEANSIDE MARITIME
ENTERPRISES, INC., ORO VERDE SERVICES, INC., PASTORAL FARMS,
INC., PCY OIL MANUFACTURING CORP., PHILIPPINE RADIO CORP., INC.,
PHILIPPINE TECHNOLOGIES, INC., PRIMAVERA FARMS, INC., PUNONG-
BAYAN HOUSING DEVELOPMENT CORP., PURA ELECTRIC COMPANY,
INC., RADIO AUDIENCE DEVELOPERS INTEGRATED ORGANIZATION, INC.,
RADYO PILIPINO CORP., RANCHO GRANDE, INC., RANDY ALLIED
VENTURES, INC., REDDEE DEVELOPERS, INC., ROCKSTEEL RESOURCES,
INC., ROXAS SHARES, INC., SAN ESTEBAN DEVELOPMENT CORP., SAN
MIGUEL CORPORATION OFFICERS, INC., SAN PABLO MANUFACTURING
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CORP., SOUTHERN LUZON OIL MILLS, INC., SILVER LEAF PLANTATIONS,

INC., SORIANO SHARES, INC., SOUTHERN SERVICE TRADERS, INC.,
SOUTHERN STAR CATTLE CORP., SPADE 1 RESORTS CORP., TAGUM
AGRICULTURAL DEVELOPMENT CORP., TEDEUM RESOURCES, INC.,
THILAGRO EDIBLE OIL MILLS, INC., TODA HOLDINGS, INC.,
UNEXPLORED LAND DEVELOPERS, INC., VALHALLA PROPERTIES, INC.,
VENTURES SECURITIES, INC., VERDANT PLANTATIONS, INC., VESTA
AGRICULTURAL CORP. and WINGS RESORTS CORP.,
Respondents.
x------------------------x
JOVITO R. SALONGA, WIGBERTO E. TAADA, OSCAR F. SANTOS,

VIRGILIO M. DAVID, ROMEO C. ROYANDAYAN for himself and for
SURIGAO DEL SUR FEDERATION OF AGRICULTURAL COOPERATIVES
(SUFAC), MORO FARMERS ASSOCIATION OF ZAMBOANGA DEL SUR
(MOFAZS) and COCONUT FARMERS OF SOUTHERN LEYTE COOPERATIVE
(COFA-SL); PHILIPPINE RURAL RECONSTRUCTION MOVEMENT (PRRM),
represented by CONRADO S. NAVARRO; COCONUT INDUSTRY REFORM
MOVEMENT, INC. (COIR) represented by JOSE MARIE T. FAUSTINO;
VICENTE FABE for himself and for PAMBANSANG KILUSAN NG MGA
SAMAHAN NG MAGSASAKA (PAKISAMA); NONITO CLEMENTE for himself
and for the NAGKAKAISANG UGNAYAN NG MGA MALILIIT NA MAGSASAKA
AT MANGGAGAWA SA NIYUGAN (NIUGAN); DIONELO M. SUANTE, SR. for
himself and for KALIPUNAN NG MALILIIT NA MAGNINIYOG NG PILIPINAS
(KAMMPIL), INC.,
Petitioners-Intervenors.
G.R. No. 166859; G.R. No. 169203; G.R. No. 180702
April 12, 2011
BERSAMIN, J.:
FACTS: These cases are consolidated complaints.
For over two decades, the issue of whether the sequestered sizable block
of shares representing 20% of the outstanding capital stock of San Miguel
Corporation (SMC) at the time of acquisition belonged to their registered
owners or to the coconut farmers has remained unresolved. Through this
decision, the Court aims to finally resolve the issue and terminate the
uncertainty that has plagued that sizable block of shares since then.
Allegedly, Cojuangco purchased a block of 33,000,000 shares of SMC
stock through the 14 holding companies owned by the CIIF Oil Mills. For this
reason, the block of 33,133,266 shares of SMC stock shall be referred to as the
CIIF block of shares.
Several parties intervene. Several motions and amendments took place.
Consequently, on March 1, 2001, the Sandiganbayan issued a writ of
preliminary injunction to enjoin the PCGG from voting the sequestered shares
of stock of the UCPB.
ISSUE: Whether or not there exists a trust relationship.
HELD: The conditions for the application of Articles 1455 and 1456 of the Civil
Code (like the trustee using trust funds to purchase, or a person acquiring
property through mistake or fraud), and Section 31 of the Corporation Code
(like a director or trustee willfully and knowingly voting for or assenting to
patently unlawful acts of the corporation, among others) require factual
Cita
foundations to be first laid out in appropriate judicial proceedings. Hence,

concluding that Cojuangco breached fiduciary duties as an officer and member
of the Board of Directors of the UCPB without competent evidence thereon
would be unwarranted and unreasonable.
Thus, the Sandiganbayan could not fairly find that Cojuangco had committed
breach of any fiduciary duties as an officer and member of the Board of
Directors of the UCPB. For one, the Amended Complaint contained no clear
factual allegation on which to predicate the application of Articles 1455 and
1456 of the Civil Code, and Section 31 of the Corporation Code. Although the
trust relationship supposedly arose from Cojuangcos being an officer and
member of the Board of Directors of the UCPB, the link between this alleged
fact and the borrowings or advances was not established. Nor was there
evidence on the loans or borrowings, their amounts, the approving authority,
etc. As trial court, the Sandiganbayan could not presume his breach of
fiduciary duties without evidence showing so, for fraud or breach of trust is
never presumed, but must be alleged andproved.[128]
The thrust of the Republic that the funds were borrowed or lent might even
preclude any consequent trust implication. In a contract of loan, one of the
parties (creditor) delivers money or other consumable thing to another (debtor)
on the condition that the same amount of the same kind and quality shall be
paid.[129] Owing to the consumable nature of the thing loaned, the resulting
duty of the borrower in a contract of loan is to pay, not to return, to the
creditor or lender the very thing loaned. This explains why the ownership of the
thing loaned is transferred to the debtor upon perfection of the contract.[130]
Ownership of the thing loaned having transferred, the debtor enjoys all the
rights conferred to an owner of property, including the right to use and enjoy
(jus utendi), to consume the thing by its use (jus abutendi), and to dispose (jus
disponendi), subject to such limitations as may be provided by law.[131]
Evidently, the resulting relationship between a creditor and debtor in a
contract of loan cannot be characterized as fiduciary.[132]
To say that a relationship is fiduciary when existing laws do not provide for
such requires evidence that confidence is reposed by one party in another who
exercises dominion and influence. Absent any special facts and circumstances
proving a higher degree of responsibility, any dealings between a lender and
borrower are not fiduciary in nature.[133] This explains why, for example, a
trust receipt transaction is not classified as a simple loan and is characterized
as fiduciary, because the Trust Receipts Law (P.D. No. 115) punishes the
dishonesty and abuse of confidence in the handling of money or goods to the
prejudice of another regardless of whether the latter is the owner.[134]
Based on the foregoing, a debtor can appropriate the thing loaned

without any responsibility or duty to his creditor to return the very thing that
was loaned or to report how the proceeds were used. Nor can he be compelled
to return the proceeds and fruits of the loan, for there is nothing under our
laws that compel a debtor in a contract of loan to do so. As owner, the debtor
can dispose of the thing borrowed and his act will not be considered
misappropriation of the thing.[135] The only liability on his part is to pay the
loan together with the interest that is either stipulated or provided under
existing laws.
Cita
Ringor v. Ringor
ROSPERO RINGOR, SATURNINO RINGOR, ANDRES RINGOR, substituted
by SHAKUNTALA DEBIE, CLARO ALEJO, GERONIMA and SANDIE LOUR,
all surnamed RINGOR, RAYMUNDA RINGOR, LUISA R. RIMANDO,
EMILIANA R. TIU and HEIRS OF JOSE M. RINGOR, INC., Petitioners, vs.
CONCORDIA, FELIPA, EMETERIA, all surnamed RINGOR, MARCELINA
RINGOR, in behalf of her deceased father, AGAPITO RINGOR, AVELINA,
CRESENCIA, and FELIMON, all surnamed ALMASEN, in behalf of their
deceased mother, ESPIRITA RINGOR, and TEOFILO M. ABALOS, in behalf
of his deceased mother, GENOVEVA RINGOR, Respondents., G.R. No.
147863, 2004 Aug 13, 1st Division)
QUISUMBING, J.:
FACTS: Jacobo Ringor owns a parcel of land in Pangasinan. He had three
wives. He had Juan and Catalina as his children with his first wife and did not
have any child with his other wives. Catalina predeceased his father and left
Juan as his lone heir.
Juan got married and had 7 children. Later on, Jacobo applied for the
registration of his lands under the Torrens system. He filed three land
registration cases alone, with his son Juan, or his grandson Jose, applying
jointly with him.
Subsequently, in a Compraventa dated November 3, 1928, Jacobo
allegedly sold and transferred to Jose his one-half () undivided interest in
Parcel 1 covered by OCT No. 25885. Jacobos thumbmark appeared on the
Compraventa.[16] These lands are now covered by TCT No. 15916, in the name
of petitioner corporation, Heirs of Jose M. Ringor, Inc., organized after the
initiation of the instant case.[17] By another Compraventa also dated
November 3, 1928, the three-fourths () undivided interests of Jacobo in
Parcels 2 and 3 covered by OCT No. 25886 were likewise sold and transferred
to Jose. The Compraventas were duly registered sometime in 1940. The OCTs
were cancelled and new TCTs were issued in the name of Jose. Jacobo allegedly
sold to Jose for P800 all the lands declared to him in Expediente 4449.
This case involves partition of estate whereby a lot of heirs are claiming
share over the estate.
ISSUE: Whether or not a valid express trust was established by Jacobo Ringor.
HELD: Express trusts, sometimes referred to as direct trusts, are intentionally

created by the direct and positive acts of the settlor or the trustor - by some
writing, deed, or will, or oral declaration. It is created not necessarily by some
written words, but by the direct and positive acts of the parties. No particular
words are required, it being sufficient that a trust was clearly intended. Unless
required by a statutory provision, such as the Statute of Frauds, a writing is
not a requisite for the creation of a trust. Such a statute providing that no
instruments concerning lands shall be "created" or declared unless by written
instruments signed by the party creating the trust, or by his attorney, is not to
be construed as precluding a creation of a trust by oral agreement, but merely
as rendering such a trust unenforceable. Contrary to the claim of petitioners,
oral testimony is allowed to prove that a trust exists. It is not error for the
court to rely on parol evidence, - - i.e., the oral testimonies of witnesses
Emeteria Ringor, Julio Monsis and Teofilo Abalos - - which the appellate court
also relied on to arrive at the conclusion that an express trust exists. What is
crucial is the intention to create a trust. While oftentimes the intention is
manifested by the trustor in express or explicit language, such intention may
Cita
be manifested by inference from what the trustor has said or done, from the
nature of the transaction, or from the circumstances surrounding the creation
of the purported trust.
However, an inference of the intention to create a trust, made from
language, conduct or circumstances, must be made with reasonable certainty.
It cannot rest on vague, uncertain or indefinite declarations. An inference of
intention to create a trust, predicated only on circumstances, can be made only
where they admit of no other interpretation.
In the present case, credible witnesses testified that (1) the lands subject
of Expedientes 241 and 4449 were made and transferred in the name of Jose
merely for convenience since Juan predeceased Jacobo; (2) despite the
Compraventas, transferring all the lands in Joses name, Jacobo continued to
perform all the acts of ownership including possession, use and administration
of the lands; (3) Jacobo did not want to partition the lands because he was still
using them; (4) when Jacobo died, Jose took over the administration of the
lands and conscientiously and unfailingly gave his siblings their share in the
produce of the lands, in recognition of their share as co-owners; and (5) Jose
did not repudiate the claim of his siblings and only explained upon their
expression of the desire for partitioning, that it was not going to be an easy
task.
From all these premises and the fact that Jose did not repudiate the
claim of his co-heirs, it can be concluded that as far as the lands covered by
Expediente Nos. 241 and 4449 are concerned, when Jacobo transferred these
lands to Jose, in what the lower court said were simulated or falsified sales,
Jacobos intention impressed upon the titles of Jose a trust in favor of the true
party-beneficiaries, including herein respondents.
Cita
Salvador v. Court of Appeals

REMEDIOS G. SALVADOR and GRACIA G. SALVADOR, petitioners, Vs.
COURT OF APPEALS, ALBERTO and ELPIA YABO, FRANCISCA YABO, et
al., respondents.
G.R. No. 109910 April 5, 1995 FIRST DIVISION
DAVIDE, JR., J.:
FACTS: Alipio Yabo was the owner of Lot No. 6080 and Lot No. 6180. Title
thereto devolved upon his nine children, namely, Victoriano, Procopio, Lope,
Jose, Pelagia, Baseliza, Francisca, Maria, and Gaudencia, upon his death
sometime before or during the second world war.
Pastor Makibalo, who is the husband of Maria Yabo, one of Alipio's
children, filed against the spouses Alberto and Elpia Yabo for "Quieting of Title,
Annulment of Documents, and Damages alleging that he owned a total of eight
shares of the subject lots, having purchased the shares of seven of Alipio's
children and inherited the share of his wife, Maria, and that except for the
portion corresponding to Gaudencia's share which he did not buy, he occupied,
cultivated, and possessed continuously, openly, peacefully, and exclusively the
two parcels of land. The grandchildren and great-grandchildren of the late
Alipio Yabo 2 lodged with the same court a complaint for partition and quieting
of title with damages, against Pastor Makibalo, Enecia Cristal, and the spouses
Eulogio and Remedies Salvador alleging that Lot No. 6080 and Lot No. 6180
are the common property of the heirs of Alipio Yabo, namely, the plaintiffs,
defendant Enecia Cristal, Maria Yabo and Jose Yabo, whose share had been
sold to Alberto Yabo; that after Alipio's death, the spouses Pastor and Maria
Makibalo, Enecia Cristal and Jose Yabo became the de facto administrators of
the said properties; and that much to their surprise, they discovered that the
Salvador spouses, who were strangers to the family, have been harvesting
coconuts from the lots, which act as a cloud on the plaintiffs' title over the lots.
ISSUE: Whether or not there exists a trust relationship.
HELD: The Supreme Court held that held that the possession of a co-owner is
like that of a trustee and shall not be regarded as adverse to the other co-
owners but in fact as beneficial to all of them. Acts which may be considered
adverse to strangers may not be considered adverse insofar as co-owners are
concerned. A mere silent possession by a co-owner, his receipt of rents, fruits
or profits from the property, the erection of buildings and fences and the
planting of trees thereon, and the payment of land taxes, cannot serve as proof
of exclusive ownership, if it is not borne out by clear and convincing evidence
that he exercised acts of possession which unequivocably constituted an ouster
or deprivation of the rights of the other co-owners.
Thus, in order that a co-owner's possession may be deemed adverse to
the cestui que trust or the other co-owners, the following elements must
concur: (1) that he has performed unequivocal acts of repudiation amounting
to an ouster of the cestui que trust or the other co-owners; (2) that such
positive acts of repudiation have been made known to the cestui que trust or
the other co-owners; and (3) that the evidence thereon must be clear and
convincing.
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Huang v. Court of Appeals

SPOUSES RICARDO AND MILAGROS HUANG, petitioners, vs. COURT OF
APPEALS, JUDGE PEDRO N. LAGGUI, Presiding Judge, RTC, Makati, Br.
60, and SPOUSES DOLORES AND ANICETO SANDOVAL, respondents., G.R.
No. 108525, 1994 Sep 13, 1st Division)
BELLOSILLO, J.:
FACTS: Dolores Sandoval express her want to buy two (2) lots in Dasmarias
Village, Makati, but was advised by petitioner Milagros Huang, wife of her
brother, petitioner Ricardo Huang, that the policy of the subdivision owner
forbade the acquisition of two (2) lots by a single individual. Consequently,
Dolores purchased Lot 21 and registered it in her name. She also purchased
the adjacent lot, Lot 20, but heeding the advice of Milagros, the deed of sale
was placed in the name of Ricardo and registered in his name under TCT No.
204783. Thereafter, Dolores constructed a residential house on Lot 21. Ricardo
also requested her permission to construct a small residential house on Lot 20
to which she agreed inasmuch as she was then the one paying for apartment
rentals of the Huang spouses. She also allowed Ricardo to mortgage Lot 20 to
the Social Security System to secure the payment of his loan of P19,200.00 to
be spent in putting up the house. However, she actually financed the
construction of the house, the swimming pool and the fence thereon on the
understanding that the Huang spouses would merely hold title in trust for her
beneficial interest.
To protect her rights and interests as the lawful owner of Lot 20 and its
improvements, Dolores requested the Huangs to execute in her favor a deed of
absolute sale with assumption of mortgage over the property. The latter
obliged.
Huang spouses leased the house to Deltron-Sprague Electronics
Corporation for its various executives as official quarters without first securing
the permission of Dolores. Dolores tolerated the lease of the property as she did
not need it at that time. But, after sometime, the lessees started prohibiting the
Sandoval family from using the swimming pool and the Huangs then began
challenging the Sandovals' ownership of the property.
Dolores lodged a complaint before the Office of the Barangay Captain
praying that the spouses Ricardo and Milagros Huang be made to execute the
necessary request to the SSS for the approval of the deed of sale with
assumption of mortgage, as well as for the release in her favor of the owner's
duplicate certificate of title in its possession so that the deed could be duly
annotated on the title and/or a new certificate of title issued in her name. But
no amicable settlement was reached, so that on 16 December 1980 the Lupong
Tagapayapa issued a certification that the controversy was ripe for judicial
action.
Ricardo and Milagros Huang filed a complaint against the spouses
Dolores and Aniceto Sandoval seeking the nullity of the deed of sale with
assumption of mortgage and/or quieting of title to Lot 20.
Meanwhile, Dolores paid the balance of Ricardo's loan to the SSS and
requested the release to her of TCT No. 204783 and the real estate mortgage
thereon.
The complaint of the Huang spouses was dismissed. Ricardo, Milagros or
the SSS who has custody of the owner's copy of TCT No. 204783 was ordered
to surrender it to the Registry of Deeds of Rizal within ten (10) days from the
finality of the decision, otherwise, for failure to do so, the title shall be deemed
annulled. Court of Appeals affirmed the decision of the trial court. Hence,
petition for review was filed.
Cita
ISSUE: Whether or not trust exist between the parties.
HELD: Trust is a fiduciary relationship with respect to property which involves

the existence of equitable duties imposed upon the holder of the title to the
property to deal with it for the benefit of another. A person who establishes a
trust is called the trustor; one in whom confidence is reposed as regards
property for the benefit of another person is known as the trustee; and the
person for whose benefit the trust has been created is referred to as the
beneficiary or cestui que trust. Trust is either express or implied. Express trust
is created by the intention of the trustor or of the parties. Implied trust comes
into being by operation of law. The latter kind is either constructive or resulting
trust. A constructive trust is imposed where a person holding title to property
is subject to an equitable duty to convey it to another on the ground that he
would be unjustly enriched if he were permitted to retain it. The duty to convey
the property arises because it was acquired through fraud, duress, undue
influence or mistake, or through breach of a fiduciary duty, or through the
wrongful disposition of another's property. On the other hand, a resulting trust
arises where a person makes or causes to be made a disposition of property
under circumstances which raise an inference that he does not intend that the
person taking or holding the property should have the beneficial interest in the
property. It is founded on the presumed intention of the parties, and as a
general rule, it arises where, and only where such may be reasonably
presumed to be the intention of the parties, as determined from the facts and
circumstances existing at the time of the transaction out of which it is sought
to be established.
In the present case, Dolores provided the money for the purchase of Lot
20 but the corresponding deed of sale and transfer certificate of title were
placed in the name of Ricardo Huang because she was advised that the
subdivision owner prohibited the acquisition of two (2) lots by a single
individual. Guided by the foregoing definitions, we are in conformity with the
common finding of the trial court and respondent court that a resulting trust
was created. Ricardo became the trustee of Lot 20 and its improvements for the
benefit of Dolores as owner. The pertinent law is Art. 1448 of the New Civil
Code which provides that there is an implied trust when property is sold and
the legal estate is granted to one party but the price is paid by another for the
purpose of having the beneficial interest of the property. A resulting trust
arises because of the presumption that he who pays for a thing intends a
beneficial interest therein for himself.
Petition denied.
Cita
Vda. De Esconde v. Court of Appeals

CATALINA BUAN VDA. DE ESCONDE, CONSTANCIA ESCONDE VDA. DE
PERALTA, ELENITA ESCONDE and BENJAMIN ESCONDE, petitioners, vs.
HONORABLE COURT OF APPEALS and PEDRO ESCONDE, respondents.,
G.R. No. 103635, 1996 Feb 1, 2nd Division)
ROMERO, J.:
FACTS: Petitioners Constancia, Benjamin and Elenita, and private respondent
Pedro, are the children of the late Eulogio Esconde and petitioner Catalina
Buan. Eulogio Esconde was one of the children 3 and heirs of Andres Esconde.
Andres is the brother of Estanislao Esconde, the original owner of the disputed
lot who died without issue on April 1942. Survived by his only brother, Andres,
Estanislao left an estate consisting of four (4) parcels of land.
Eulogio died and was survived by petitioners and private respondent. At
that time, Lazara and Ciriaca, Eulogio's sisters, had already died without
having partitioned the estate of the late Estanislao Esconde.
The heirs of Lazara, Ciriaca and Eulogio executed a deed of extrajudicial
partition, 4 with the heirs of Lazara identified therein as the Party of the First
Part, that of Ciriaca, the Party of the Second Part and that of Eulogio, the Party
of the Third Part. Since the children of Eulogio, with the exception of
Constancia, were then all minors, they were represented by their mother and
judicial guardian, petitioner Catalina Buan vda. de Esconde who renounced
and waived her usufructuary rights over the parcels of land in favor of her
children in the same deed.
Pursuant to the same deed, transfer certificates of title were issued to the
new owners of the properties. 6 Transfer Certificate of Title No. 394 for Lot No.
1700 was issued on February 11, 1947 in the name of private respondent but
Catalina kept it in her possession until she delivered it to him in 1949 when
private respondent got married.
Meanwhile, Benjamin constructed the family home on Lot No. 1698-B 7
which is adjacent to Lot No. 1700. A portion of the house occupied an area of
twenty (20) square meters, more or less, of Lot No. 1700. Benjamin also built a
concrete fence and a common gate enclosing the two (2) lots, as well as an
artesian well within Lot No. 1700.
Sometime in December, 1982, Benjamin discovered that Lot No. 1700
was registered in the name of his brother, private respondent. Believing that
the lot was co-owned by all the children of Eulogio Esconde, Benjamin
demanded his share of the lot from private respondent. 8 However, private
respondent asserted exclusive ownership thereof pursuant to the deed of
extrajudicial partition and, in 1985 constructed a "buho" fence to segregate Lot
No. 1700 from Lot No. 1698-B.
Hence, on June 29, 1987, petitioners herein filed a complaint before the
Regional Trial Court of Bataan against private respondent for the annulment of
TCT No. 394.
The lower court dismissed the complaint and ruled that that the action
had been barred by both prescription and laches. The Court of Appeals
affirmed the decision of the lower court. Hence, petition for review was filed.
ISSUE: Whether or not trust exist.
HELD: Trust is the legal relationship between one person having an equitable
ownership in property and another person owning the legal title to such
property. the equitable ownership of the former entitling him to the
performance of certain duties and the exercise of certain powers by the latter.
Cita
Trusts are either express or implied. An express trust is created by the direct
and positive acts of the parties, by some writing or deed or will or by words
evidencing an intention to create a trust. No particular words are required for
the creation of an express trust, it being sufficient that a trust is clearly
intended.
On the other hand, implied trusts are those which, without being
expressed, are deducible from the nature of the transaction as matters of intent
or which are superinduced on the transaction by operation of law as matters of
equity, independently of the particular intention of the parties. In turn, implied
trusts are either resulting or constructive trusts.
Resulting trusts are based on the equitable doctrine that valuable
consideration and not legal title determines the equitable title or interest and
are presumed always to have been contemplated by the parties. They arise
from the nature or circumstances of the consideration involved in a transaction
whereby one person thereby becomes invested with legal title but is obligated
in equity to hold his legal title for the benefit of another. On the other hand,
constructive trusts are created by the construction of equity in order to satisfy
the demands of justice and prevent unjust enrichment. They arise contrary to
intention against one who, by fraud, duress or abuse of confidence, obtains or
holds the legal right to property which he ought not, in equity and good
conscience, to hold.
While the deed of extrajudicial partition and the registration of Lot No.
1700 occurred in 1947 when the Code of Civil Procedure or Act No. 190 was yet
in force, we hold that the trial court correctly applied Article 1456. In Diaz et al.
v. Gorricho and Aguado, 16 the Court categorically held that while it is not a
retroactive provision of the new Civil Code, Article 1456 "merely expresses a
rule already recognized by our courts prior to the Code's promulgation."
In the case at bench, petitioner Catalina Buan vda de Esconde, as
mother and legal guardian of her children, appears to have favored her elder
son, private respondent, in allowing that he be given Lot No. 1700 in its
entirety in the extrajudicial partition of the Esconde estate to the prejudice of
her other children. Although it does not appear on record whether Catalina
intentionally granted private respondent that privileged bestowal, the fact is
that, said lot was registered in private respondent's name. After TCT No. 394
was handed to him by his mother, private respondent exercised exclusive
rights of ownership therein to the extent of even mortgaging the lot when he
needed money.
If, as petitioners insist, a mistake was committed in allotting Lot No.
1700 to private respondent, then a trust relationship was created between
them and private respondent. However, private respondent never considered
himself a trustee. If he allowed his brother Benjamin to construct or make
improvements thereon, it appears to have been out of tolerance to a brother.
The rule that a trustee cannot acquire by prescription ownership over
property entrusted to him until and unless he repudiates the trust, applies to
express trusts 19 and resulting implied trusts. 20 However, in constructive
implied trusts, prescription may supervene 21 even if the trustee does not
repudiate the relationship. Necessarily, repudiation of the said trust is not a
condition precedent to the running of the prescriptive period.
Petition denied.
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TALA REALTY SERVICES CORPORATION, petitioner, vs. BANCO FILIPINO

SAVINGS AND MORTGAGE BANK, respondent., G.R. No. 147997, 2002 Apr
5, 2nd Division)
MENDOZA, J.:
FACTS: TALA is composed of 4 major stockholders of Banco Filipino. It was
formed for the purpose of unloading & then leasing back from petitioners
properties which it cannot retain under banking laws & regulations.
Petitioner leased 12 properties to Banco Filipino. In this particular case,
the property is located in Lucena City.
The 1st contract of lease contract of lease executed was for a period of 20
years & renewable for another 20 years at the option of respondent. A 2nd
contract of lease was allegedly executed involving the property in Lucena for a
period of 11 years & renewable for another 9 years at the option of respondent.
After the expiration of the 2nd contract, no new lease contract was
executed because the parties failed to reach an agreement.
Respondent, in its answer to the ejectment complaint, alleged that
petitioner is a mere trustee of the property and the second contract was
fabricated.
The MTC dismissed the complaint & the counterclaim on the ground that
the issues raised, validity of the 2nd contract & whether petitioner is a mere
trustee of respondent, are incapable of pecuniary estimation. The RTC affirmed
the decision. The Court of Appeals held the 1st contract to be the valid contract
and the refusal of respondent to pay the new demanded was justified because
the 20 years contract has not yet expired. It also held that non payment was
not the ground for petitioners for ejectment, thus, it could not be raised for the
first time on appeal.
ISSUE: Whether or not it is necessary to settle the question of ownership based

on the alleged warehousing agreement or trustor-trustee relationship in order
to settle the issue of possession.
HELD: Trust is either express or implied.

Art. 1448. There is an implied trust when property is sold, and the legal
estate is granted to one party but the price is paid by another for the
purpose of having the beneficial interest of the property. The former is
the trustee, while the latter is the beneficiary.
Art. 1453. When property is conveyed to a person in reliance upon his
declared intention to hold it for, or transfer it to another or the grantor,
there is an implied trust in favor of the person whose benefit is
contemplated.
An implied trust could not have been formed between the Bank and Tala
as this Court has held that where the purchase is made in violation of an
existing statute and in evasion of its express provision, no trust can result in
favor of the party who is guilty of the fraud.
A resulting trust is an intent-enforcing trust, based on a finding by the
court that in view of the relationship of the parties their acts express an intent
to have a trust, even though they did not use language to that effect. The trust
is said to result in law from the acts of the parties. However, if the purpose of
the payor of the consideration in having title placed in the name of another was
to evade some rule of the common or statute law, the courts will not assist the
payor in achieving his improper purpose by enforcing a resultant trust for him
in accordance with the clean hands doctrine. The court generally refuses to
give aid to claims from rights arising out of an illegal transaction, such as
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where the payor could not lawfully take title to land in his own name and he
used the grantee as mere dummy to hold for him and enable him to evade the
land laws Applying the Ramos HELD to the case at bar, the Bank cannot use
the defense of nor seek enforcement of its alleged implied trust with Tala since
its purpose was contrary to law. As admitted by the Bank, it warehoused its
branch site holdings to Tala to enable it to pursue its expansion program and
purchase new branch sites including its main branch in Makati, and at the
same time avoid the real property holdings limit under Sections 25(a) and 34 of
the General Banking Act which it had already reached.[70] The Bank stated in
its Memorandum that the (n)ew branch sites which the Respondent (Bank) will
be disqualified from buying, by reason of the aforecited limitations under
existing banking laws and regulations, will be acquired for it by the Petitioner
(Tala) which will forthwith lease them to the Respondent (Bank).[71] The Bank
also admitted that the agreement that the branch sites will be returned to the
bank anytime at its pleasure at the same transfer price was differently stated
in the lease contracts as a first preference to buy because the Bank was
apprehensive that the agreement to return property, if spelled out as-is in the
documents, might provide basis for the Central Bank to question the sale and
simultaneous lease back of the branch sites as simulated and accordingly,
derail the expansion program of the Respondent.
Clearly, the Bank was well aware of the limitations on its real estate
holdings under the General Banking Act and that its warehousing agreement
with Tala was a scheme to circumvent the limitation. Thus, the Bank opted
not to put the agreement in writing and call a spade a spade, but instead
phrased its right to reconveyance of the subject property at any time as a first
preference to buy at the same transfer price. This arrangement which the
Bank claims to be an implied trust is contrary to law. Thus, while we find the
sale and lease of the subject property genuine and binding upon the parties, we
cannot enforce the implied trust even assuming the parties intended to create
it. In the words of the Court in the Ramos case, the courts will not assist the
payor in achieving his improper purpose by enforcing a resultant trust for him
in accordance with the clean hands doctrine.[73] The Bank cannot thus
demand reconveyance of the property based on its alleged implied trust
relationship with Tala.
Petition dismiss.
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Medina v. Court of Appeals

THE HEIRS OF PEDRO MEDINA, represented by MARGARITA MEDINA,
petitioners, vs. THE HON. COURT OF APPEALS*, RESTITUTA ZURBITO
VDA. DE MEDINA and ANDRES NAVARRO, JR., respondents., G.R. No. L-
26107, 1981 Nov 27, 1st Division)
TEEHANKEE, J.:
FACTS: The late Francisco Medina had eight children all of whom are
deceased. Petitioner Margarita Medina, who filed the complaint on behalf of the
heirs of Pedro Medina is the daughter of Pedro Medina 1 who predeceased his
father Francisco Medina. Restituta Zurbito Vda. de Medina, herein private
respondent, and defendant in the trial court, is the widow of Sotero Medina
(brother of Pedro Medina); and Andres Navarro, Jr., her herein co-respondent
and co-defendant in the trial court, is her grandson.
petitioners filed the complaint in the trial court seeking to recover from
herein respondents a parcel of land and praying that respondents be ordered to
deliver to them possession and ownership thereof with accounting, damages
and costs and litigation expenses.
Judgment was rendered declaring petitioner Margarita Medina with her
co-heirs as the lawful owners of the land in question. Respondent Court of
Appeals reversed the trial court's decision and sustaining respondents'
defenses of prescription of action and acquisitive prescription, ordered the
dismissal of the complaint. Hence, petition for review was filed.
ISSUE: Whether or not trust was validly established.
HELD: Trusts are either express or implied. Express trusts are created by the
intention of the trustor or of the parties. Implied trusts come into being by
operation of law." (Art. 1441) "No express trusts concerning an immovable or
any interests therein may be proven by parol evidence." (Art. 1443) "An implied
trust may be proven by oral evidence." (Art. 1457) That rule applies squarely to
express trusts. The basis of the rule is that the possession of a trustee is not
adverse. Not being adverse, he does not acquire by prescription the property
held in trust. Thus, Section 38 of Act 190 provides that the law of prescription
does not apply `in the case of continuing and subsisting trust. With respect to
constructive trusts, the rule is different. The prescriptibility of an action for
reconveyance based on constructive trust is now settled. Prescription may
supervene in an implied trust.
Applied to the case at bar, if an express trust had been constituted upon
the occupancy of the property by respondents in favor of the petitioners,
prescription of action would not lie, the basis of the rule being that the
possession of the trustee is not adverse to the beneficiary. But if there were
merely a constructive or implied trust, the action to recover may be barred by
prescription of action or by acquisitive prescription by virtue of respondents'
continuous and adverse possession of the property in the concept of owner-
buyer for thirty-three years.
Judgment affirmed.
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Filipinas Port v. Go
FILIPINAS PORT V. GO
G.R. No. 161886 March 16, 2007
FACTS: Sept 4 1992: Eliodoro C. Cruz, Filports president from 1968-1991,
wrote a letter to the corporations BOD questioning the creation and election of
the following positions with a monthly remuneration of P13, 050.00 each. Cruz
requested the board to take necessary action/actions to recover from those
elected to the aforementioned positions the salaries they have received.
Jun 4 1993: Cruz, purportedly in representation of Filport and its
stockholders, among which is herein co-petitioner Mindanao Terminal and
Brokerage Services, Inc. (Minterbro), filed with the SEC a derivative suit against
Filport's BOD for acts of mismanagement detrimental to the interest of the
corporation and its shareholders at large.
Cruz prayed that the BOD be made to pay Filport, jointly and severally,
the sums of money variedly representing the damages incurred as a result of
the creation of the offices/positions complained of and the aggregate amount of
the questioned increased salaries.
RTC: BOD have the power to create positions not in the by-laws and can
increase salaries. But Edgar C. Trinidad under the third and fourth causes of
action to restore to the corporation the total amount of salaries he received as
assistant vice president for corporate planning; and likewise ordering
Fortunato V. de Castro and Arsenio Lopez Chua under the fourth cause of
action to restore to the corporation the salaries they each received as special
assistants respectively to the president and board chairman. In case of
insolvency of any or all of them, the members of the board who created their
positions are subsidiarily liable.
Appealed: creation of the positions merely for accommodation purposes -
GRANTED
ISSUES: Whether or not there was mismanagement.
HELD: NO
Section 35 of the Corporation Code, the creation of an executive
committee (as powerful as the BOD) must be provided for in the bylaws of the
corporation
Notwithstanding the silence of Filports bylaws on the matter, we cannot
rule that the creation of the executive committee by the board of directors is
illegal or unlawful. One reason is the absence of a showing as to the true
nature and functions of executive committee
But even assuming there was mismanagement resulting to corporate damages
and/or business losses, respondents may not be held liable in the absence of a
showing of bad faith in doing the acts complained of. ("dishonest
purpose","some moral obliquity","conscious doing of a wrong", "partakes of the
nature of fraud") determination of the necessity for additional offices and/or
positions in a corporation is a management prerogative which courts are not
wont to review in the absence of any proof that such prerogative was exercised
in bad faith or with malice.
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Mendizabel v. Apao
NESTOR MENDIZABEL, ELIZABETH MENDIZABEL, IGNACIO MENDIZABEL,
and ADELINA VILLAMOR, Petitioners, versus FERNANDO APAO and
TEOPISTA PARIDELA-APAO, Respondents., G.R. No. 143185, 2006 Feb 20,
3rd Division)
CARPIO, J.:
FACTS: Fernando Apao (Fernando) purchased from spouses Alejandro and
Teofila Magbanua (vendors) a parcel of land for P400. The vendors executed
a deed of sale with right of repurchase within six months for P400, failing
which, the sale would become absolute. The vendors failed to repurchase the
property. Fernando thus took possession of the same.
Fernando had the land surveyed which resulted in a subdivision of the
land into two separate and distinct lots identified as Lot Nos. 407 and 1080.
Fernando learned that Ignacio Mendizabel (Ignacio) had filed prior to the
Bureau of Lands survey a homestead application over Lot No. 1080.
Fernando became the claimant-protestant in Ignacios application. The lot was
awarded to Ignacio which the Secretary of Agriculture and Natural Resources
set aside and ruled that the free patent application No. 18-1481 of Fernando
Apao shall be given due course for Lot No. 407 and Homestead Application No.
18-8905 of Ignacio Mendizabel for Lot No. 1080.
Dissatisfied with the decision of the Secretary of Agriculture and Natural
Resources, Fernando appealed to the Office of the President. Fernando did not
receive any notice of the decision on his appeal. Barely 10 days after he filed
his appeal, Fernando found out from the Office of the Register of Deeds of
Pagadian City that Lot No. 1080 had been partitioned between Ignacio and his
son Nestor Mendizabel (Nestor). Fernando learned that Lot No. 1080 was
already titled separately as Lot No. 1080-A covered by Original Certificate of
Title No. P-29 822 in the name of Nestor, and Lot No. 1080-B covered by
Original Certificate of Title No. P-29 823 in the name of Ignacio. The Register of
Deeds issued the certificates of title on 14 December 1982.
Fernando talked to Nestor and Ignacio, pleading with them to reconvey
the property to him. Nestor and Ignacio rejected Fernandos request.
Fernando and his wife Teopista Paridela-Apao filed for Annulment of
Titles, Reconveyance and Damages against spouses Nestor and Elizabeth
Mendizabel and spouses Ignacio Mendizabel and Adelina Villamor. The trial
court ruled in favor of Fernando hold trust in the latter's benefit to which the
Court of Appeals affirmed. Hence, petition for review was filed.
ISSUE: Whether or not implied trust exist.
HELD: "Implied trusts are those without being expressed, which are deducible
from the nature of the transaction, as matters of intent, or which are super
induced on the transaction by operation of law, as matters of equity,
independently of the particular intention of the parties."
In turn, implied trusts are either resulting or constructive trusts.
Constructive trusts are created by the construction of equity in order to satisfy
the demands of justice and prevent unjust enrichment. They arise contrary to
intention against one who, by fraud, duress or abuse of confidence, obtains or
holds the legal right to property which he ought not, in equity and good
conscience, to hold.
The records show that respondents bought the property from spouses
Alejandro and Teofila Magbanua on 21 March 1955 as evidenced by a deed of
sale.[55] Fernando testified that he was in actual, open, peaceful, and
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continuous possession of the property at the time he filed his application for a
free patent and was then enjoying its fruits. These facts were corroborated by
the testimonies of Braanula and Lizardo, residents of Barangay Mabini,
Malangas, Zamboanga del Sur. Petitioners, however, assert that the deed of
sale, although Annex A of respondents complaint, should not be given weight
for it was not offered in evidence.
Considering the circumstances in the present case, therefore, we hold
that respondents have a better right to the property since they had long been in
possession of the property in the concept of owners. In contrast, petitioners
were never in possession of the property. Despite the irrevocability of the
Torrens titles issued in their names, petitioners, even if they are already the
registered owners under the Torrens system, may still be compelled under the
law to reconvey the property to respondents.
Petition dismiss.
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Heirs of Yap v. Court of Appeals

HEIRS OF LORENZO YAP, namely SALLY SUN YAP, MARGARET YAP-UY
and MANUEL YAP, petitioners, vs. THE HONORABLE COURT OF APPEALS,
RAMON YAP and BENJAMIN YAP, respondents., G.R. No. 133047, 1999
Aug 17, 3rd Division)
VITUG, J.:
FACTS: Ramon Yap purchased a parcel of land from the spouses Carlos and
Josefina Nery. The lot was thereupon registered in the name of Ramon Yap
under Transfer Certificate of Title No. 102132; forthwith, he also declared the
property in his name for tax purposes and paid the real estate taxes due
thereon from 1966 to 1992. In 1967, Ramon Yap constructed a two storey 3-
door apartment building for the use of the Yap family. One-fifth (1/5) of the
cost of the construction was defrayed by Ramon Yap while the rest was
shouldered by Chua Mia, the mother of Lorenzo, Benjamin and Ramon. Upon
its completion, the improvement was declared for real estate tax purposes in
the name of Lorenzo Yap in deference to the wishes of the old woman.
Lorenzo Yap died. A few months later, his heirs (herein petitioners) left
their family dwelling in Lucena City to reside permanently in Manila. Ramon
Yap allowed petitioners to use one unit of the apartment building.
Ramon Yap sold the land and his share of the 3-door apartment to his
brother, his herein co-respondent Benjamin Yap, for the sum of P337,500.00
pursuant to a Deed of Sale, recorded on even date in the Memorandum of
Encumbrances of the title to said property. Transfer Certificate of Title No.
73002 was in due time issued in the name of Benjamin Yap.
The controversy started when herein petitioners, by a letter of 08 June
1992, advised respondents of the formers claim of ownership over the property
and demanded that respondents execute the proper deed necessary to transfer
the title to them. At about the same time, petitioners filed a case for ejectment
against one of the bonafide tenants of the property. Respondents filed an action
for quieting of title against petitioners.
Trial court ruled in favor of respondents, which was affirmed by the
Court of Appeals. Hence, a petition for review was filed.
ISSUE: Whether or not a trust exist.
HELD: A trust may either be express or implied. Express trusts are those
which are created by the direct and positive acts of the parties, by some writing
or deed, or will, or by words evincing an intention to create a trust. Implied
trusts are those which, without being express, are deducible from the nature of
the transaction as matters of intent or, independently of the particular
intention of the parties, as being super induced on the transaction by operation
of law basically by reason of equity. These species of implied trust are
ordinarily subdivided into resulting and constructive trusts. A resulting trust is
one that arises by implication of law and presumed always to have been
contemplated by the parties, the intention as to which can be found in the
nature of their transaction although not expressed in a deed or instrument of
conveyance. Resulting trusts are based on the equitable doctrine that it is the
more valuable consideration than the legal title that determines the equitable
interest in property.Upon the other hand, a constructive trust is a trust not
created by any word or phrase, either expressly or impliedly, evincing a direct
intention to create a trust, but one that arises in order to satisfy the demands
of justice. It does not come about by agreement or intention but in main by
operation of law construed against one who, by fraud, duress or abuse of
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confidence, obtains or holds the legal right to property which he ought not, in
equity and good conscience, to hold.
ne basic distinction between an implied trust and an express trust is
that while the former may be established by parol evidence, the latter cannot.
Even then, in order to establish an implied trust in real property by parol
evidence, the proof should be as fully convincing as if the acts giving rise to the
trust obligation are proven by an authentic document. An implied trust, in fine,
cannot be established upon vague and inconclusive proof.
Furthermore, is the long standing and broad doctrine of clean hands that
will not allow the creation or the use of a juridical relation, a trust whether
express or implied included, to perpetrate fraud or tolerate bad faith nor to
subvert, directly or indirectly, the law. The trust agreement between Ramon
and Lorenzo, if indeed extant, would have been in contravention of, in fact, the
fundamental law.
Petition denied.
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Heirs of Kionisala v. Heirs of Dacut

HEIRS OF AMBROCIO KIONISALA, namely, ANA, ISABEL, GRACE, JOVEN
and CARMELO, all surnamed KIONISALA, petitioners, vs. HEIRS OF
HONORIO DACUT, namely: VISAMINDA D. OREVILLO, VIOLETA DACUT,
JOSEPHINE DACUT and ELIZABETH DACUT, respondents., G.R. No.
147379, 2002 Feb 27, 2nd Division)
BELLOSILLO, J.:
FACTS: This complaint for declaration of nullity of titles, reconveyance and

damages against petitioners involved two (2) parcels of land known as Lot No.
1017 and Lot No. 1015 with areas of 117,744 square meters and 69,974
square meters respectively. Lot No. 1017 was granted a free patent to
petitioners Heirs of Ambrocio Kionisala under Free Patent No. 603393, and Lot
1015 was bestowed upon Isabel Kionisala, one of the impleaded heirs of
Ambrocio Kionisala under Free Patent No. 101311-91-904. Thereafter, Lot 1017
was registered under the Torrens system and was issued Original Certificate of
Title No. P-19819 in petitioners name; while, Lot No. 1015 was registered in
the name of Isabel Kionisala under Original Certificate of Title No. P-20229.
Private respondents claimed absolute ownership of Lot 1015 and 1017 even
prior to the issuance of the corresponding free patents and certificates of title.
The trial court dismissed the complaint on the ground that the cause of
action of private respondents was truly for reversion so that only the Director of
Lands could have filed the complaint. A motion for reconsideration was filed
but was denied. The Court of Appeals reversed the order of dismissal.
Petitioners then moved for a motion for reconsideration but were denied due to
lack of merit. Hence, petition for review on certiorari was filed.
ISSUE: Whether or not the enforceability of the implied trust had prescribed.
HELD: Private respondents have sufficiently pleaded (in addition to the cause
of action for declaration of free patents and certificates of title) an action for
reconveyance, more specifically, one which is based on implied trust. An
implied trust arises where the defendant (or in this case petitioners) allegedly
acquires the disputed property through mistake or fraud so that he (or they)
would be bound to hold and reconvey the property for the benefit of the person
who is truly entitled to it.[18] In the complaint, private respondents clearly
assert that they have long been the absolute and exclusive owners and in
actual possession and cultivation of Lot 1015 and Lot 1017 and that they were
fraudulently deprived of ownership thereof when petitioners obtained free
patents and certificates of title in their names. These allegations certainly
measure up to the requisite statement of facts to constitute an action for
reconveyance.
neither the action for declaration of nullity of free patents and certificates
of title of Lot 1015 and Lot 1017 nor the action for reconveyance based on an
implied trust of the same lots has prescribed. We have ruled that a free patent
issued over private land is null and void, and produces no legal effects
whatsoever. Quos nullum est, nullum producit effectum.[21] Moreover, private
respondents claim of open, public, peaceful, continuous and adverse
possession of the two (2) parcels of land and its illegal inclusion in the free
patents of petitioners and in their original certificates of title also amounts to
an action for quieting of title which is imprescriptible.
The action for reconveyance based on implied trust, on the other hand,
prescribes only after ten (10) years from 1990 and 1991 when the free patents
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and the certificates of title over Lot 1017 and Lot 1015, respectively, were
registered. Obviously the action had not prescribed when private respondents
filed their complaint against petitioners on 19 December 1995. At any rate, the
action for reconveyance in the case at bar is also significantly deemed to be an
action to quiet title for purposes of determining the prescriptive period on
account of private respondents allegations of actual possession of the disputed
lots.[23] In such a case, the cause of action is truly imprescriptible.
Petition denied.
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Ramos v. Ramos
RAMOS V. RAMOS
61 SCRA 284
FACTS: Spouses Martin Ramos and Candida Tanate died on October 4, 1906
and October 26, 1880, respectively. They were survived by their 3 children.
Moreover, Martin was survived by his 7 natural children. In December 1906, a
special proceeding for the settlement of the intestate estate of said spouses was
conducted. Rafael Ramos, a brother of Martin, administered the estate for more
than 6 years. Eventually, a partition project was submitted which was signed
by the 3 legitimate children and 2 of the 7 natural children. A certain Timoteo
Zayco signed in representation of the other 5 natural children who were
minors. The partition was sworn to before a justice of peace.
The conjugal hereditary estate was appraised at P74,984.93, consisting of 18

parcels of land, some head of cattle and the advances to the legitimate
children. thereof represented the estate of Martin. 1/3 thereof was the free
portion or P12,497.98. The shares of the 7 natural children were to be taken
from that 1/3 free portion. Indeed, the partition was made in accordance with
the Old Civil code. Thereafter, Judge Richard Campbell approved the partition
project. The court declared that the proceeding will be considered closed and
the record should be archived as soon as proof was submitted that each he3ir
had received the portion adjudicated to him.
On February 3, 1914, Judge Nepumoceno asked the administrator to submit a

report showing that the shares of the heirs had been delivered to them as
required by the previous decision. Nevertheless, the manifestation was not in
strict conformity with the terms of the judges order and with the partition
project itself. 8 lots of the Himamaylan Cadastre were registered in equal
shares in the names of Gregoria (widow of Jose Ramos) and her daughter,
when in fact the administrator was supposed to pay the cash adjudications to
each of them as enshrined in the partition project. Plaintiffs were then
constrained to bring the suit before the court seeking for the reconveyance in
their favor their corresponding participations in said parcels of land in
accordance with Article 840 of the old Civil Code. Note that 1/6 of the subject
lots represents the 1/3 free portion of martins shares which will eventually
redound to the shares of his 7 legally acknowledged natural children. The
petitioners action was predicated on the theory that their shares were merely
held in trust by defendants. Nonetheless, no Deed of Trust was alleged and
proven. Ultimately, the lower court dismissed the complaint on the grounds of
res judicata, prescription and laches.
ISSUE: Whether or not the plaintiffs action was barred by prescription, laches
and res judicata to the effect that they were denied of their right to share in
their fathers estate.
HELD: YES, there was inexcusable delay thereby making the plaintiffs action
unquestionably barred by prescription and laches and also by res judicata.
Inextricably interwoven with the questions of prescription and res judicata is
the question on the existence of a trust. It is noteworthy that the main thrust
of plaintiffs action is the alleged holding of their shares in trust by defendants.
Emanating from such, the Supreme Court elucidated on the nature of trusts
and the availability of prescription and laches to bar the action for
reconveyance of property allegedly held in trust. It is said that trust is the
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right, enforceable solely in equity to the beneficial enjoyment of property, the

legal title to which is vested in another. It may either be express or implied. The
latter ids further subdivided into resulting and constructive trusts. Applying it
now to the case at bar, the plaintiffs did not prove any express trust. Neither
did they specify the kind of implied trust contemplated in their action.
Therefore, its enforcement maybe barred by laches and prescription whether
they contemplate a resulting or a constructive trust.
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Ty v. Court of Appeals
THE INTESTATE ESTATE OF ALEXANDER T. TY, represented by the
Administratrix, SYLVIA S. Ty, petitioner, VS. COURT OF APPEALS, HON.
ILDEFONSO E. GASCON, and ALEJANDRO B. TY, respondents
G.R. No. 112872 April 19, 2001
FACTS: Petitioner Sylvia S. Ty was married to Alexander T. Ty, son of private

respondent Alejandro b. ty, on January 11, 1981. Alexander died of leukemia
on May 19, 1988 and was survived by his wife, petitioner Silvia, and only child,
Krizia Katrina. In the settlement of his estate, petitioner was appointed
administratrix of her late husbands intestate estate.
On November 4, 1992, petitioner filed a motion for leave to sell or mortgage

estate property in order to generate funds for the payment of deficiency estate
taxes in the sum of P4,714,560.00.
Privite respondent Alejandro Ty then filed two complaints for the recovery of the
above-mentioned property, praying for the declaration of nullity of the deed of
absolute sale of the shares of stock executed by private respondent in favor of
the deceased Alexander, praying for the recovery of the pieces of property that
were placed in the name of deceased Alexander, they were acquired through
private-respondents money, without any cause or consideration from deceased
Alexander.
The motions to dismiss were denied. Petitioner then filed petitions for certiorari
in the Courts of Appeals, which were also dismissed for lack of merit. Thus, the
present petitions now before the Court.
ISSUE: Whether or not an express trust was created by private respondent

when he transferred the property to his son.
HELD: Private respondent contends that the pieces of property were

transferred in the name of the deceased Alexander for the purpose of taking
care of the property for him and his siblings. Such transfer having been
effected without cause of consideration, a resulting trust was created.
WHEREFORE, the petition for certiorari in G.R. No. 112872 is DISMISSED,

having failed to show that grave abuse of discretion was committed in declaring
that the regional trial court had jurisdiction over the case. The petition for
review on certiorari in G.R. 114672 is DENIED, having found no reversible
error was committed.
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Vda. De Retuerto v. Barz

CATALINA VDA. DE RETUERTO as surviving widow of the late PANFILO
RETUERTO; LORETO RETUERTO, represented by his surviving heirs
namely: ROMEO RETUERTO; ANTONIA RETUERTO, NARCISA RETUERTO,
CORAZON RETUERTO, and PATROCINIO RETUERTO; GAUDENCIO,
FRANCISCA, CRUZ, FRANCISCO, EFIGENIA and GUILLERMO, all surnamed
RETUERTO; and Spouses JOSE and ROSA GESALEM, petitioners, vs.
ANGELO P. BARZ and MERLINDA BARZ, respondents., G.R. No. 148180,
2001 Dec 19, 1st Division)
KAPUNAN, J.:
FACTS: Juana Perez, widow of Numeriano Barz, executed a deed to confirm

her execution of a Deed of Absolute Sale in favor of Panfilo Retuerto, married to
Catalina Ceniza, over a parcel of land. However, on April 26, 1935, Panfilo
Retuerto purchased the aforementioned parcel of land, this time, from the
Archbishop of Cebu, under a "Deed of Absolute Sale," for the price of P150.00
Meanwhile, San Carlos Seminary in Cebu filed a Petition for the issuance
of titles over several parcels of land including the lot earlier purchased by
Retuerto. The Court promulgated a Decision finding and declaring Panfilo
Retuerto the owner of the said lot. The Court issued an Order directing the
General del Registro de Terrenos (later the Land Registration Commission) for
the issuance of the appropriate Decree in favor of Panfilo Retuerto over the said
parcel of land. However, no such Decree was issued as directed by the Court
because the Second World War ensued in the Pacific. However, Panfilo Retuerto
failed to secure the appropriate decree after the war.
Two (2) decades elapsed.
Subsequently, Juana Perez Barz died intestate and was survived by her
son, Pedro Barz, who filed an application for the confirmation of his title over
Lot subject of this case to which Retuerto did not oppose. Hence, the decision
was rendered in favor of Pedro. By virtue thereof, Pedro sold the subject lot to
Jose Gesalem for P7,000.00. In the interim, Retuerto was able to declare the
property in his name. He then died intestate and was survived by his widow,
Catalina Retuerto and their children. The subject property was said to have
been included in the estate and was divided among the heirs in the
extrajudicial partition as done.
Angelo P. Barz and Merlinda Barz filed a complaint against Catalina
Retuerto and the other heirs of Panfilo Retuerto and the Spouses Jose
Gesalem, with the Regional Trial Court of Mandaue for Quieting of Title,
Damages and Attorneys Fees. RTC declared the property as owned by the
respondents to which the Court of Appeals affirmed. Hence, petition for review
on certiorari was filed in the Supreme Court.
ISSUE: Whether or not the period in which to enforce implied trust had
prescribed.
HELD: The contention is bereft of merit. Constructive trusts are created in

equity to prevent unjust enrichment, arising against one who, by fraud, duress
or abuse of confidence, obtains or holds the legal right to property which he
ought not, in equity and good conscience, to hold.[6] Petitioners failed to
substantiate their allegation that their predecessor-in-interest had acquired
any legal right to the property subject of the present controversy. Nor had they
adduced any evidence to show that the certificate of title of Pedro Barz was
obtained through fraud.
Cita
Even assuming arguendo that Pedro Barz acquired title to the property
through mistake or fraud, petitioners are nonetheless barred from filing their
claim of ownership. An action for reconveyance based on an implied or
constructive trust prescribes within ten years from the time of its creation or
upon the alleged fraudulent registration of the property.[7] Since registration of
real property is considered a constructive notice to all persons, then the ten-
year prescriptive period is reckoned from the time of such registering, filing or
entering.[8] Thus, petitioners should have filed an action for reconveyance
within ten years from the issuance of OCT No. 521 in November 16, 1968. This,
they failed to do so.
Relying on the case of Heirs of Jose Olviga vs. Court of Appeals,[9]
petitioners argue that the ten-year period for filing an action for reconveyance
of property arising from an implied or constructive trust applies only when the
person enforcing the trust is not in possession of the property, since if a person
claiming to be the owner is in actual possession of the property, the action to
seek reconveyance or to quiet title does not prescribe. Petitioners claim that
they and their predecessors-in-interest were the ones in actual possession of
the subject property alleging that in the survey made by Geodetic Engineer
Leopoldo Tuastumban, it was reported that there were nine houses and one
rattan shop owned by the heirs of Loreto Retuerto constructed thereon.
Petition denied.
Cita
Chia Liong Tan v. Court of Appeals
Cita
CHIAO LIONG TAN, petitioner, vs. THE HONORABLE COURT OF APPEALS, HON.
MANUEL T. MURO, Presiding Judge, RTC of Manila, Branch 54 and TAN BAN
YONG, respondents., G.R. No. 106251, 1993 Nov 19, 2nd Division)
NOCON, J.:
FACTS: Petitioner Chiao Liong Tan Claims to be the owner of an Isuzu Elf van As
owner thereof, petitioner says he has been in possession, enjoyment and utilization of
the said motor vehicle until it was taken from him by his older brother, Tan Ban Yong,
the private respondents herein.
Petitioner relies principally on the fact that the Isuzu Elf van is registered in his
name under Certificate of Registration No. 1501909. He claims in his testimony before
the trial court that the said vehicle was purchased from Balintawak Isuzu Motor
Center for a price of over P100,000.00; that he sent his brother to pay for the van and
the receipt for payment was placed in his (petitioner's) name because it was his money
that was used to pay for the vehicle; that he allowed his brother to use the van
because the latter was working for his company, the CLT Industries; and that his
brother later refused to return the van to him and appropriated the same for himself.
Judgment was rendered declaring Tan Ban Yong as owner, which the Court of
Appeals affirmed.
ISSUE: Whether or not the trust be repudiated.
HELD: Other than those enumerated, the New Civil Code had acknowledged the cases
of implied trust. Thus, although no specific provision could be cited to apply to the
parties herein, it is undeniable that an implied trust was created when the certificate
of registration of the motor vehicle was placed in the name of petitioner although the
price thereof was not paid by him but by private respondent. The principle that a
trustee who puts a certificate of registration in his name cannot repudiate the trust by
relying on the registration is one of the well-known limitations upon a title. A trust,
which derives its strength from the confidence one reposes on another especially
between brothers, does not lose that character simply because of what appears in a
legal document.
Even under the Torrens System of land registration, this Court in some
instances did away with the irrevocability or indefeasibility of a certificate of title to
prevent injustice against the rightful owner of the property.
It is true that the judgment in a replevin suit must only resolve in whom is the
right of possession. Primarily, the action of replevin is possessory in character and
determines nothing more than the right of possession. However, when the title to the
property is distinctly put in issue by the defendant's plea and by reason of the policy
to settle in one action all the conflicting claims of the parties to the possession of the
property in controversy, the question of ownership may be resolved in the same
proceeding.
Procedure-wise, the Court observes that the action by petitioner as plaintiff in
the trial court was only one for Replevin and Damages. Since replevin is only a
provisional remedy where the replevin plaintiff claims immediate delivery of personal
property pending the judgment of the trial court in a principal case, the petitioner
should have filed in the trial court as a main case an action to recover possession of
the Isuzu Elf van which was in the possession of the private respondent. Logically, the
basis of petitioner's cause of action should have been his ownership of said van.
Petition denied.
Cita
O'laco v. Co Cho Chit

EMILIA O'LACO and HUCO LUNA, petitioners, vs. VALENTIN CO CHO
CHIT, O LAY KIA and COURT OF APPEALS, respondents., G.R. No. 58010,
1993 Mar 31, 1st Division)
BELLOSILLO, J.:
FACTS: This case involves half-sisters, each claiming ownership over a parcel
of land.
Petitioner Emilia O'Laco asserts that she merely left the certificate of title
covering the property with private respondent O Lay Kia for safekeeping, the
latter who is the former's older sister insists that the title was in her possession
because she and her husband bought the property from their conjugal funds.
To be resolved therefore is the issue of whether a resulting trust was
intended by them in the acquisition of the property.
The trial court declared that there was no trust relation of any sort
between the sisters. The Court of Appeals ruled otherwise. Hence, the instant
petition for review on certiorari of the decision of the appellate court together
with its resolution denying reconsideration.
ISSUE: Whether or not trust between them prescribe.
HELD: As differentiated from constructive trusts, where the settled rule is that
prescription may supervene, in resulting trust, the rule of imprescriptibility
may apply, for as long as the trustee has not repudiated the trust. Once the
resulting trust is repudiated, however, it is converted into a constructive trust
and is subject to prescription.
A resulting trust is repudiated if the following requisites concur: (a) the
trustee has performed unequivocal acts of repudiation amounting to an ouster
of the cestui qui trust; (b) such positive acts of repudiation have been made
known to the cestui qui trust; and, (c) the evidence thereon is clear and
convincing.
Neither the registration of the Oroquieta property in the name of
petitioner Emilia O'Laco nor the issuance of a new Torrens title in 1944 in her
name in lieu of the alleged loss of the original may be made the basis for the
commencement of the prescriptive period. For, the issuance of the Torrens title
in the name of Emilia O'Laco could not be considered adverse, much less
fraudulent. Precisely, although the property was bought by respondent-
spouses, the legal title was placed in the name of Emilia O'Laco. The transfer of
the Torrens title in her name was only in consonance with the deed of sale in
her favor. Consequently, there was no cause for any alarm on the part of
respondent-spouses. As late as 1959, or just before she got married, Emilia
continued to recognize the ownership of respondent-spouses over the
Oroquieta property. Thus, until that point, respondent-spouses were not aware
of any act of Emilia which would convey to them the idea that she was
repudiating the resulting trust. The second requisite is therefore absent.
Hence, prescription did not begin to run until the sale of the Oroquieta
property, which was clearly an act of repudiation.
But immediately after Emilia sold the Oroquieta property which is

obviously a disavowal of the resulting trust, respondent-spouses instituted the
present suit for breach of trust. Correspondingly, laches cannot lie against
them.
After all, so long as the trustee recognizes the trust, the beneficiary may
rely upon the recognition, and ordinarily will not be in fault for omitting to
Cita
bring an action to enforce his rights. 44 There is no running of the prescriptive

period if the trustee expressly recognizes the resulting trust. 45 Since the
complaint for breach of trust was filed by respondent-spouses two (2) months
after acquiring knowledge of the sale, the action therefore has not yet
prescribed.
Petition granted.
Cita

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Obligations and Contracts 1

Obligation and Contracts

Dy Teban v. Ching .................................................................................................................................. 77

Muaje-Tuazon v. Verchez .................................................................................................................... 127

Magat v. Medialdea............................................................................................................................. 198

Ace Agro v. Court of Appeals ............................................................................................................... 263

Kasapian ng Manggagawa ng Coca-cola v. Court of Appeals................................................................. 314

NSBC v. PNB ........................................................................................................................................ 374

Republic v. Thi Thu Thuy De Guzman ................................................................................................... 432

Sps Chung v. Ulanday Construction ...................................................................................................... 475

Placewell International v. Camote ....................................................................................................... 535

Bercero v. Capitol Development .......................................................................................................... 605

Catalan v. Basa .................................................................................................................................... 699

Rigor v. Consolidated Leasing .............................................................................................................. 765

COMELEC v. Quijano-Padilla ................................................................................................................ 816

OCAMPO III. VS. PEOPLE

Leung Ben v. O'Brien

FACTS: On December 12, 1917, an action was instituted in the Court of

ARTURO PELAYO, plaintiff-appellant VS. MARCELO LAURON, defendant-

FACTS: On November 23, 1906, Arturo Pelayo, a physician, filed a

ASJ Corporation v. Sps. Evangelista

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Nikko Hotel Manila Garden v. Reyes

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the negligence of the minors parents or the detachment of the steering

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Cosmo Entertainment v. La Ville

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Ayala Corp. vs. Rosa Diana Realty

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FACTS: Petitioner Ayala Corporation (Ayala) was the registered owner of a

Bricktown Development vs. Amor Tierra Development

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Pilipinas Hino vs. Court of Appeals

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FACTS: In 1992, respondent Primetown Property Group, Inc. awarded the

the actual cost of completing the project amounting to P66,677,00.00. The

FACTS: Petitioner Padcom Condominium Corporation (PADCOM) owns and

HELD: Yes. This is in accordance to Article 1159, Obligation arising from

MC Engineering v. Court of Appeals

FACTS: On October 29, 1984, Mc Engineering, Inc. and Surigao Coconut

respondent Gerent of a P632,590.13 bond issued by respondent Surety. On

Pineda instituted a civil action before the Court of First Instance of

The repairs made on the vessels ultimately redounded to the benefit of

When the parties executed the Deed of Confirmation of Obligation they

Petition denied and the decision appealed from is affirmed.

State Investment House, Inc., Petitioner, versus Court of Appeals and