Civil Law Review Ii: Case Digest

CIVIL LAW REVIEW II
CASE DIGEST
ATTY. CRISOSTOMO A. URIBE
Submitted by
#33
CABBUAG, JAYTRICH L.
Sunday 8:00-12:00
TABLE OF CONTENTS
I. Obligations
A. In General
1. Definition
2. Kinds of Obligations as to basis & enforceability
3. Prescription of Actions
4. Elements of Obligations
B. Sources of Civil Obligations

1. Law
2. Contracts
3. Quasi-contracts
a. Negotiorum Gestio
b. Solutio Indebiti
c. Other Quasi-Contracts
4. Acts or omissions punished by law
5. Quasi-delicts
C. Compliance with Obligations
D. Kinds of Civil Obligations

1. As to Perfection & Extinguishment
a. Pure
b. Conditional
c. With a term or period
2. As to Plurality of Prestation
a. Conjunctive
b. Alternative
c. Facultative
3. As to rights & obligations of multiple parties
a. Joint
b. Solidary
c. Disjunctive
4. As to performance of prestation
a. Divisible
b. Indivisible
c. Joint indivisible
d. Solidary indivisible
Spouses Lam v. Kodak G.R. No. 167615 January 11, 2016………..1
5. As to the presence of an accessory undertaking in case

of breach
a. With a Penal Clause distinguished from liquidated
damages
E. Breach of Obligations
Manner of Breach
1. Fraud
2. Negligence
3. Delay
Cabanting v. BPI G.R. No. 201927, February 17, 2016…….………..3

i
4. Any other manner of contravention
Excuses for non-performance
1. Fortuitous Event
Sps. Poon v. PSB G.R. No. 183794, June 13, 2016……………….5
2. Act of creditor
F. Remedies for Breach of Obligations

1. Extra-judicial remedies
a. Expressly granted by law
b. Stipulated
2. Judicial remedies
a. Principal remedies
b. Subsidiary remedies
c. Ancillary remedies
NCLPI vs. LMI G.R. No. 176986, January 13, 2016…...........7
G. Modes of Extinguishment of Obligations

1. Payment or performance
Special Forms of Payment
a. Dation in Payment
Villarta v. Talavera G.R. No. 208021, February 03, 2016………..9
b. Application of Payments
c. Payment by Cession or Assignment
d. Tender of payment and Consignation
2. Loss of the thing due or Impossibility of Performance
3. Condonation or Remission of debt
4. Confusion or Merger of Rights
5. Compensation
Kinds of Compensation
a. Legal
b. Conventional
c. Facultative
d. Judicial
6. Novation
Kinds of Novation
a. As to its nature
i. Subjective or personal
ii. Objective or real
b. As to its form
i. Express
ii. Implied
Odiamar v. Valencia G.R. NO. 213582, JUNE 28, 2016…………...11
ii
7. Other Modes
Sps. Jonsay v. Solidbank Corp. .................................................13

G.R. No. 206459, April 6, 2016
II. Contracts
A. In General
1. Definition
Auto- Contract
2. Elements of Contracts
a. Essential
b. Natural
c. Accidental
B. Fundamental Characteristics/Principles of Contracts

1. Consensuality of Contracts
Contract of Adhesion
Cabanting v. BPI G.R. No. 201927, February 17, 2016……………..15

Buenaventura v. Metrobank ………………………………………….17
GR. NO. 167082, AUGUST 3, 2016
2. Autonomy of Contract
3. Mutuality of Contracts
Acceleration Clause
Escalation Clause
4. Obligatory Force of Contracts

5. Relativity of Contracts
Privity of Contracts
Vda. de Rosales v. Dime ………………………………………............18

G.R. No. 194548, February 10, 2016
C. Classification of Contracts
1. According to degree of dependence
a. Preparatory
b. Principal
c. Accessory
2. According to perfection
a. Consensual
b. Real
c. Formal
3. According to solemnity or form\
a. Any form
b. Special form
4. According to purpose
a. Transfer of ownership
iii
b. Conveyance of use
c. Rendition of service
5. According to nature of obligation produced
a. Bilateral
b. Unilateral
6. According to cause
a. Onerous
b. Gratuitous or lucrative
c. Remuneratory
7. According to risk
a. Commutative
b. Aleatory
8. According to name
a. Nominate
b. Innominate
9. According to subject matter
a. Thing
b. Right
c. Services
D. Stages of Contracts
1. Negotiation
2. Perfection
3. Performance
4. Consummation
E. Essential elements of contracts

1. Consent of the contracting parties
Cognition Theory
Manifestation Theory
2. Object certain which is the subject matter of the

contract
3. Cause of the obligation
4. Delivery
5. Due observance of prescribed formalities
MCIAA vs. Heirs of Ijordan ………………………………………………20

G.R. No. 173140, January 11, 2016
F. Form of Contracts
1. Any form – oral
2. Special form
a. Validity
b. Enforceability
c. Greater efficacy or convenience
G. Reformation of Contracts
H. Interpretation of Contracts
I. Kinds of Contracts as to Validity
1. Valid and binding
2. Valid but defective
i) Rescissible Contracts
ii) Voidable Contracts
iv
iii) Unenforceable Contracts
3. Void or inexistent
Tan v. Hosana G.R. No. 190846, February 03, 2016 …………….22
Special Contracts
A. Sales
1. In General
2. Elements
3. Obligations of Seller/Buyer
4. Remedies
5. Extinguishment of Sale
Lukban v. Optimum Development Bank …………………………….24

G.R. No. 205785, January 20, 2016
Cahayag v. CCC G.R. No. 168078, January 13, 2016 ……………25
Sps. Gallent v. Velasquez G.R. No. 203949 (April 6, 2016)……..27
Bacalso v. Aca-ac G.R. No. 172919, January 13, 2016……… 29
Alba v. Malapajo G.R. No. 198752, January 13, 2016…………31
Pena v. delos Santos G.R. No. 202223, March 02, 2016………….. 32
Ambray v. Tsourous G.R. No. 209264, July 5, 2016………………….34
B. Barter or Exchange
C. Lease
1. In General
2. Elements
3. Obligations of Lessor/Lessee
4. Remedies
5. Termination of Lease
Orix Metro Lesisng and Finance Corp. vs. Cardline Inc …..........36
G.R. No. 201417, January 13, 2016
Gamaliel v. Sps. Ravanes G.R. No. 183645, July 20, 2016…………….38
D. Loan
1. In General
2. Kinds of Loan
a. Commodatum
b. Mutuum
E. Deposit – Warehouse Receipts Law/Trust Receipts Law

1. In General
2. Kinds of Deposit
a. Judicial
b. Extra-judicial
v
i) Voluntary
ii) Necessary\
3. Nature/Characteristics
4. Subject Matter
5. Rights & Obligations of Depositor and Depository
6. Modes of Extinguishment
F. Aleatory Contracts – Insurance, Gambling, Life Annuity
Special Contracts: Accessory Contracts
G. Guaranty and Suretyship

1. Definition
2. Nature/Characteristics/Extent
3. Effects of Guaranty
a. Between the Guarantor and the Creditor
b. Between the Guarantor and the Debtor
c. Between Co-Guarantors
4. Modes of Extinguishment
Carodan v. China Banking Corp. ……………………………………40

G.R. No. 210542, February 24, 2016
H. Pledge, Mortgage and Antichresis

1. In General
2. Essential Elements
3. Effects/Rights & Obligations
4. Extinguishment/Foreclosure
Vitug vs. Abuda G.R. No. 201264, January 11, 2016 …………….42
Lukban vs. Optimum Bank ……………………………………………..44
G.R. No. 205785, January 20, 2016
BDO vs. Sunnyside Heights Homeowners Association, Inc. …………..45
G.R. No. 198745, January 13, 2016
Galido v. Magrare G.R. No. 206584, January 11, 2016…………..46
Sps. Pen v. Sps. Julian …………………………………………………..47
G.R. No. 160408, January 11, 2016
PNB v. Vila G.R. No. 213241, August 1, 2016……………………… 49
Special Contracts: Preparatory Contracts

(Business Associations and Relations)
I. Agency
1. In General
2. Kinds, Creation & Existence
3. Obligations of the Agent/Principal
4. Modes of Extinguishment of Agency
vi
Oliver vs. PSB G.R. No. 214567, April 4, 2016 …………… 51
MCIAA v. Unchuan G.R. No. 182537, June 01, 2016…………53
J. Partnership
1. In General
2. Classes of Partnership and Partners
3. Creation and Duration
4. Obligations of Partners to one another
5. Property Rights of a Partner
6. Relations and Dealings with Third Persons
7. Dissolution, Winding Up and Termination
8. Limited Partnership
Guy vs. Gacott G.R. No. 206147, January 13, 2016 ………...55
K. Trusts
1. In General
2. Kinds of Trusts
a. Express
b. Implied
III. Extra- Contractual Obligations

A. Law
B. Quasi-Contracts
C. Delicts
D. Quasi-Delicts
IV. Damages
A. In General
B. Kinds of Damages
1. Actual or Compensatory
2. Moral
3. Nominal
4. Temperate or Moderate
5. Liquidated
6. Exemplary or Corrective
Tiorosio-Espinosa v. Hofilena-Europa ……………………………..57

G.R. No. 185746, January 20, 2016
The Orchard Golf & Country Club v. Yu ……………………………..59
G.R. No. 191033, January 11, 2016
vii
Petitioners: Spouses Alexander and Julie Lam
vs.
Respondent: Kodak Philippines, Ltd.
G.R. No. 167615, January 11, 2016
Second Division
Ponente: LEONEN, J.:
Nature of the Action: Petition for Review on Certiorari.
Facts:
The Lam Spouses and Kodak Philippines, Ltd. entered into an agreement for the
sale of three (3) units of Minilab Equipment in the amount of ₱1,796,000.00 per unit with
the following terms:
1. Said Minilab Equipment packages will avail a total of 19% multiple order
discount based on prevailing equipment price provided said equipment packages
will be purchased not later than June 30, 1992.
xxx
4. Minilab Equipment Package shall be payable in 48 monthly installments at

THIRTY FIVE THOUSAND PESOS (P35,000.00) inclusive of 24% interest rate
for the first 12 months; the balance shall be re-amortized for the remaining 36
months and the prevailing interest shall be applied.
On January 15, 1992, Kodak Philippines, Ltd. delivered one (1) unit of the Minilab
Equipment in Tagum, Davao Province. The Lam Spouses issued postdated checks. Both
checks were negotiated by Kodak Philippines, Ltd. and were honored by the depository
bank. The 10 other checks were subsequently dishonored after the Lam Spouses ordered
the depository bank to stop payment.
Kodak Philippines, Ltd. canceled the sale and demanded that the Lam Spouses return
the unit it delivered together with its accessories. Kodak Philippines, Ltd. gained
possession of the Minilab Equipment unit.
Spouses Lam argue that the Letter Agreement it executed with respondent for three
(3) Minilab Equipment units was not severable, divisible, and susceptible of partial
performance. Respondent's recovery of the delivered unit was unjustified. They assert
that the obligations of the parties were not susceptible of partial performance since the
Letter Agreement was for a package deal consisting of three (3) units. They argue that the
divisibility of the object does not necessarily determine the divisibility of the obligation
since the latter is tested against its susceptibility to a partial performance. They argue that
even if the object is susceptible of separate deliveries, the transaction is an indivisible if
the parties intended the realization of all parts of the agreed obligation.
Kodak argues that the parties' Letter Agreement contained divisible obligations
susceptible of partial performance as defined by Article 1225 of the New Civil Code. The
three (3) Minilab Equipment are intended by petitioners LAM for install[a]tion at their
Tagum, Davao del Norte, Sta. Cruz, Manila and Cotabato City outlets. Each of these
units [is] independent from one another, as many of them may perform its own job
without the other. Clearly the objective or purpose of the prestation, the obligation is
divisible.
1
Issue:
Whether the contract between Spouses Alexander and Julie Lam and Kodak
Philippines, Ltd. pertained to obligations that are severable, divisible, and susceptible of
partial performance under Article 1225 of the New Civil Code.
Ruling:
No.
The Letter Agreement contained an indivisible obligation.

xxx, the Letter Agreement contemplated a "package deal" involving three (3) units of the
Kodak Minilab System 22XL xxx.
xxx the intention of the parties is for there to be a single transaction covering all
three (3) units of the Minilab Equipment. Respondent's obligation was to deliver all
products purchased under a "package," and, in turn, petitioners' obligation was to pay for
the total purchase price, payable in installments.
The intention of the parties to bind themselves to an indivisible obligation can be

further discerned through their direct acts in relation to the package deal. There was only
one agreement covering all three (3) units of the Minilab Equipment and their
accessories. The Letter Agreement specified only one purpose for the buyer, which was
to obtain these units for three different outlets. If the intention of the parties were to have
a divisible contract, then separate agreements could have been made for each Minilab
Equipment unit instead of covering all three in one package deal. Furthermore, the 19%
multiple order discount as contained in the Letter Agreement was applied to all three
acquired units.99 The "no downpayment" term contained in the Letter Agreement was
also applicable to all the Minilab Equipment units. Lastly, the fourth clause of the Letter
Agreement clearly referred to the object of the contract as "Minilab Equipment Package."
2
Petitioners: VICENTE D. CABANTING AND LALAINE V. CABANTING
vs.
Respondent: BPI FAMILY SAVINGS BANK, INC.
G.R. No. 201927, February 17, 2016
Third Division
Ponente: PERALTA, J.:
Nature of the Action: Petition for Review on Certiorari under Rule 45 of the Rules of
Court.
Facts:
Petitioners bought on installment basis from Diamond Motors Corporation a 2002
Mitsubishi Adventure SS MT and for value received, petitioners also signed, executed
and delivered to Diamond Motors a Promissory Note with Chattel Mortgage. Therein,
petitioners jointly and severally obligated themselves to pay Diamond Motors the sum of
P836,032.00, payable in monthly instalments. On the day of the execution of the
document, Diamond Motors, with notice to petitioners, executed a Deed of Assignment,
thereby assigning to BPI Family Savings Bank, Inc. (BPI Family) all its rights, title and
interest to the Promissory Note with Chattel Mortgage.
A Complaint was filed by BPI Family against petitioners for Replevin and
damages before the Regional Trial Court of Manila (RTC), praying that petitioners be
ordered to pay the unpaid portion of the vehicle's purchase price. BPI Family alleged that
petitioners failed to pay three (3) consecutive installments and despite written demand
sent to petitioners through registered mail, petitioners failed to comply with said demand
to pay or to surrender possession of the vehicle to BPI Family.
In their Answer, petitioners alleged that they sold the subject vehicle to one Victor
S. Abalos, with the agreement that the latter shall assume the obligation to pay the
remaining monthly installments. It was then Abalos who made payments to BPI Family
through his personal checks, and BPI Family accepted the post-dated checks delivered to
it by Abalos. Petitioners pointed out that BPI Family should have sued Abalos instead of
them.
Trial ensued even if the petitioners failed to present evidence.
The RTC ruled in favour of BPI. The CA affirmed with modification the decision
of RTC.
Issue:
Whether demand is not necessary to make petitioners’ obligation due and
demandable.
Ruling:
Yes.
The Promissory Note with Chattel Mortgage clearly stipulated that "[i]n case of
my/our [petitioners'] failure to pay when due and payable, any sum which I/We x x x or
any of us may now or in the future owe to the holder of this note x x x then the entire sum
outstanding under this note shall immediately become due and payable without the
necessity of notice or demand which I/We hereby waive." xxx
xxx
3
Verily, petitioners are bound by the aforementioned stipulation in the Promissory
Note with Chattel Mortgage waiving the necessity of notice and demand to make the
obligation due and payable. xxx
4
Petitioners: SPOUSES JAIME and MATILDE POON
vs
Respondents: PRIME SAVINGS BANK
G.R. No. 183794, June 13, 2016
First Division
Ponente: SERENO, CJ.:
Facts:
Spouses Poon owned a commercial building which they used for their bakery
business. Matilde Poon and PSB executed a 10-year Contract of Lease over the building
for the latter's use as its branch office. They agreed to a fixed monthly rental of P60,000,
with an advance payment of the rentals for the first 100 months in the amount of
P6,000,000. As agreed, the advance payment was to be applied immediately, while the
rentals for the remaining period of the Contract were to be paid on a monthly basis.
Barely three years later, however, the BSP placed PSB under the receivership of
the Philippine Deposit Insurance Corporation (PDIC) by virtue of BSP Monetary Board
Resolution No. 22. The BSP eventually ordered PSB's liquidation under Monetary Board
Resolution No. 664. PSB vacated the leased premises and surrendered them to
petitioners. Subsequently, the PDIC issued Spouses Poon a demand letter asking for the
return of the unused advance rental amounting to P3,480,000 on the ground that the lease
agreement had become inoperative, because respondent's closure constituted force
majeure. The PDIC likewise invoked the principle of rebus sic stantibus under Article
1267 of Republic Act No. 386 (Civil Code) as alternative legal basis for demanding the
refund.
Spouses Poon, however, refused the PDIC's demand. They maintained that they
were entitled to retain the remainder of the advance rentals following their Contract.
The RTC ordered the partial rescission of the lease agreement. The CA affirmed
the RTC decision.
Issue:
Whether or not the PSB may be released from its contractual obligations to
petitioners on grounds of fortuitous event under Article 1174 of the Civil Code and
unforeseen event under Article 1267 of the Civil Code;
Ruling:
No.
The closure of respondent's business was neither a fortuitous nor an unforeseen

event that rendered the lease agreement functus officio.
5
Respondent posits that it should be released from its contract with petitioners,
because the closure of its business upon the BSP' s order constituted a fortuitous event as
the Court held in Provident Savings Bank. The cited case, however, must always be read
in the context of the earlier Decision in Central Bank v. Court of Appeals. The Court
ruled in that case that the Monetary Board had acted arbitrarily and in bad faith in
ordering the closure of Provident Savings Bank. Accordingly, in the subsequent case of
Provident Savings Bank it was held that fuerza mayor had interrupted the prescriptive
period to file an action for the foreclosure of the subject mortgage.
In contrast, there is no indication or allegation that the BSP's action in this case
was tainted with arbitrariness or bad faith. Instead, its decision to place respondent under
receivership and liquidation proceedings was pursuant to Section 30 of Republic Act No.
7653. Moreover, respondent was partly accountable for the closure of its banking
business. It cannot be said, then, that the closure of its business was independent of its
will as in the case of Provident Savings Bank. The legal effect is analogous to that
created by contributory negligence in quasi-delict actions.
The theory of rebus sic stantibus in public international law is often cited as the
basis of the above article. Under this theory, the parties stipulate in light of certain
prevailing conditions, and the theory can be made to apply when these conditions cease
to exist.35 The Court, however, has once cautioned that Article 1267 is not an absolute
application of the principle of rebus sic stantibus, otherwise, it would endanger the
security of contractual relations. After all, parties to a contract are presumed to have
assumed the risks of unfavorable developments. It is only in absolutely exceptional
changes of circumstance, therefore, that equity demands assistance for the debtor.
6
Petitioner: NISSAN CAR LEASE PHILS., INC
vs.
Respondents: LICA MANAGEMENT, INC. AND PROTON PILIPINAS, INC.
G.R. No. 176986, January 13, 2016
Third Division
Ponente: JARDELEZA, J.:
Nature of the Action: Petition for Review on Certiorari
Facts:
LMI is the absolute owner of a property. It entered into a contract with NCLPI for
the latter to lease the property for a term often (10) years with a monthly rental of
P308,000.00 and an annual escalation rate often percent (10%). NCLPI, with LMFs
consent, allowed its subsidiary Nissan Smartfix Corporation (NSC) to use the leased
premises.
NCLPI became delinquent in paying the monthly rent, such that its total rental
arrearages amounted to P1,741,520.85. Nissan and Lica verbally agreed to convert the
arrearages into a debt to be covered by a promissory note and twelve (12) postdated
checks, each amounting to P162,541.95 as monthly payments.
While NCLPI was able to deliver the postdated checks per its verbal agreement
with LMI, it failed to sign the promissory note and pay the checks. Thus, in a letter, LMI
informed NCLPI that it was terminating their Contract of Lease due to arrears in the
payment of rentals. It also demanded that NCLPI (1) pay the amount of P2,651,570.39
for unpaid rentals and (2) vacate the premises within five (5) days from receipt of the
notice.
NCLPI replied to LMI's letter acknowledging the arrearages incurred by it under

their Contract of Lease. Claiming, however, that it has no intention of abandoning the
lease and citing efforts to negotiate a possible sublease of the property.
LMI, entered into a Contract of Lease with Proton over the subject premises.
NCLPI demanded Proton to vacate the leased premises. However, Proton replied that it
was occupying the property based on a lease contract with LMI. In a letter of even date
addressed to LMI, NCLPI asserted that its failure to pay rent does not automatically
result in the termination of the Contract of Lease nor does it give LMI the right to
terminate the same.23 NCLPI also informed LMI that since it was unlawfully ousted from
the leased premises and was not deriving any benefit therefrom, it decided to stop
payment of the checks issued to pay the rent.
NCLPI alleged that LMI and Proton "schemed" and "colluded" to unlawfully force
NCLPI (and its subsidiary NSC) from the premises. Since it has not abandoned its
leasehold right, NCLPI asserts that the lease contract between LMI and Proton is void for
lack of a valid cause or consideration.
The trial court ruled in favour of LMI. The CA affirmd the trial court’s decision.
Hence, this petition.
Issue:
Whether the extrajudicial rescission of lease contract is valid.
7
Ruling:
Yes.
It is clear from the records that NCLPI committed substantial breaches of its
Contract of Lease with LMI.
It is true that NCLP1 and LMI's Contract of Lease does not contain a provision
expressly authorizing extrajudicial rescission. LMI can nevertheless rescind the contract,
without prior court approval, pursuant to Art. 1191 of the Civil Code.
Art. 1191 provides that the power to rescind is implied in reciprocal obligations, in
cases where one of the obligors should fail to comply with what is incumbent upon him.
Otherwise stated, an aggrieved party is not prevented from extrajudicially rescinding a
contract to protect its interests, even in the absence of any provision expressly providing
for such right.
8
Petitioner: OSCAR S. VILLARTA
vs.
Respondent: GAUDIOSO TALAVERA, JR.
G.R. No. 208021, February 03, 2016
Second Division
Ponente: CARPIO, J.:
Nature of the Action: Petition for Review.
Facts:
Oscar Villarta owned four parcels of land. He obtained several loans from
Talavera. The loans were secured by the parcels of land. Villarta failed to settle his
obligations despite repeated demands. Villarta told Talavera that he could no longer raise
the sum to pay off his loans, and, instead offered his properties to satisfy his obligation.
The properties were delivered to Talavera via two deeds of absolute sale. The
consideration for both lots was set at P500,000.00 each, on appellant's own request, in
order to reduce his capital gains tax liability and other expenses. The true consideration
for both lots was P4,826,552.00, the amount of appellant's total obligation. Talavera had
constantly demanded that Villarta vacate the lots, but the latter refused. there could be no
equitable mortgage over TCT T-214950 for the same was never made a collateral for the
loan; there could also be no equitable mortgage over TCT T-130095 for though it was
true that the same initially served as security, the arrangement was novated when
appellant offered the lot as payment; appellant's complaint failed to state a cause of
action; the transfer of the properties to him was by virtue of dacion en pago; he justly
acted within his rights and in the performance of his duties, gave appellant his due, and
observed honesty and good faith; appellant's claim for moral damages, attorney's fees,
and litigation expenses had no legal or factual basis.
The RTC rendered judgment in favor of respondent Gaudioso Talavera, Jr. The
CA affirmed the RTC’s decision.
Issue:
Whether there is dacion en pago in the instant case.
Ruling:
Yes.
The conduct of the parties prior to, during, and after the execution of the deeds of
sale adequately shows that petitioner sold to respondent the lots in question to satisfy his
debts.
Respondent was able to sufficiently explain why the presumption of an equitable

mortgage does not apply in the present case. The inadequacy of the purchase price in the
two deeds of sale dated 18 May 2001 was supported by an Affidavit of True
Consideration of the Absolute Sale of the Property. Respondent did not tolerate
petitioner's possession of the lots. Respondent caused the registration and subsequent
transfer of TCT No. T-214950 to TCT No. T-333921 under his name, and paid taxes
thereon. There were no extensions of time for the payment of petitioner's loans; rather,
petitioner offered different modes of payment for his loans. It was only after three
instances of bounced checks that petitioner offered TCT Nos. T-130095 and T-214950 as
payment for his loans and executed deeds of sale in respondent's favor.
The transaction between petitioner and respondent is thus not an equitable
mortgage, but is instead a dacion en pago.
9
Dacion en pago is the delivery and transmission of ownership of a thing by the
debtor to the creditor as an accepted equivalent of the performance of an existing
obligation. It is a special mode of payment where the debtor offers another thing to
the creditor who accepts it as equivalent to the payment of an outstanding debt. For
dacion en pago to exist, the following elements must concur: (a) existence of a money
obligation; (b) the alienation to the creditor of a property by the debtor with the consent
of the former; and (c) satisfaction of the money obligation of the
debtor.chanroblesvirtuallawlibrary
10
Petitioner: NYMPHA ODIAMAR
vs.
Respondent: LINDA ODIAMAR VALENCIA
G.R. NO. 213582, JUNE 28, 2016
First Division
Ponente: PERLAS-BERNABE, J.:
Nature of the Action: Petition for review on certiorari.
Facts:
On August 20, 2003, respondent filed a complaint for sum of money and damages
against petitioner, alleging that the latter owed her P2,100,000.00. Petitioner purportedly
issued China Bank a check for the said amount to guarantee the payment of the debt, but
upon presentment, the same was dishonored. For her part, petitioner sought the dismissal
of the complaint on the ground that it was her deceased parents who owed respondent
money.
The RTC ruled in favor of respondent and ordered petitioner to pay. The CA
concurred with the RTC that novation took place insofar as petitioner was substituted in
place ·of petitioner's late parents, considering that petitioner undertook to pay her
deceased parents' debt. However, the CA opined that there was no novation with respect
to the object of the contract, following the rule that an obligation is not novated by an
instrument which expressly recognizes the old obligation and changes only the terms of
paying the same, as in this case where the parties merely modified the terms of payment
of the P2, 100,000.00.
Issue:
Whether or not petitioner should be held liable to respondent for the entire debt in
the amount of P2, 100,000.00 due to novation.
Ruling:
Yes.
Having admitted that she obtained loans from respondent without showing that
the same had already been paid or otherwise extinguished, petitioner cannot now aver
otherwise. It is settled that judicial admissions made by the parties in the pleadings or in
the course of the trial or other proceedings in the same case are conclusive and do not
require further evidence to prove them. They are legally binding on the party making it,
except when it is shown that they have been made through palpable mistake or that no
such admission was actually made, neither of which was shown to exist in this case.
Accordingly, petitioner is bound by her admission of liability and the only material
question remaining is the extent of such liability.
Based on the records of this case, respondent, for her part, admitted that petitioner's
deceased parents owed her P700,000.00 of the P2, 100,000.00 debt and that petitioner
owed her Pl ,400,000.00 only. While it is observed that petitioner had indeed admitted
that she agreed to settle her late parents' debt, which was supposedly evinced by (a) the
P2,100,000.00 check she issued therefor, and (b) several installment payments she made
to respondent from December 29, 2000 to May 31, 2003, there was no allegation, much
less any proof 'to show, that the estates of her deceased parents were released from
liability thereby. In S.C. Megaworld Construction and Development Corporation v.
Parada, the Court held that to constitute novation by substitution of debtor, the former
debtor must be expressly released from the obligation and the third person or new debtor
must assume the former's place in the contractual relations. Moreover, the Court ruled
that the "fact that the creditor accepts payments from a third person, who has assumed the
11
obligation, will result merely in the addition of debtors and not novation." At its core,
novation is never presumed, and the animus novandi, whether totally or partially, must
appear by express agreement of the parties, or by their acts that are too clear and
unequivocal to be mistaken. 46 Here, the intent to novate was not satisfactorily proven by
respondent. At best, petitioner only manifested her desire to shoulder the debt of her
parents, which, as above-discussed, does not amount to novation. Thus, the courts a quo
erred in holding petitioner liable for the debts obtained by her deceased parents on
account of novation by substitution of the debtor.
12
PETITIONERS: Spouses Florante E. Jonsay and Luzviminda L. Jonsay and
Momarco Import Co, Inc.
vs.
RESPONDENT: Solidbank Corporation (now Metropolitan Bank and Trust
Company)
G.R. No. 206459, April 6, 2016
Third Division
Ponente: Reyes, J.
FACTS:
Momarco, controlled and owned by the Spouses Jonsay, is an importer,
manufacturer and distributor of animal health and feedmill products catering to cattle,
hog and poultry producers. On November 9, 1995, and again on April 28, 1997,
Momarco obtained loans of P40,000,000.00 and P20,000,000.00, respectively from
Solidbank for which the Sps. Jonsay executed a blanket mortgage over three parcels of
land they owned in Calamba, Laguna registered in their names containing a total of
23,733 square meters.
On November 3, 1997, the loans were consolidated under one promissory note,
signed by Florante as President of Momarco. The stipulated rate of interest was 18.75%
per annum along with an escalation clause, by which Solidbank was eventually able to
unilaterally increase the interest charges up to 30% per annum.
Momarco religiously paid the monthly interest charged by Solidbank from

November 1995 until January 1998. Claiming that business reverses brought on by the
1997 Asian financial crisis and persistent demands by Solidbank, Momarco made its last
monthly interest payment in April 1998 in the amount of P1,000,000.00. Solidbank
applied the said payment to Momarco’s accrued interest for February 1998.
Solidbank proceeded to extrajudicially foreclose on the mortgage. On September

22, 1999, Sheriff Adelio Perocho issued a certificate of sale to Solidbank, duly annotated
on April 15, 1999 on the lots’ titles. The spouses filed a complaint against Solidbank,
Sheriff Perocho and the Register of Deeds of Calamba, Laguna for Annulment of the
Extrajudicial Foreclosure of Mortgage, Injunction, Accounting and Damages with a
Prayer for the Immediate Issuance of a Writ of Preliminary Prohibitory Injuction.
The RTC granted the petitioners’ application, thus suspending the consolidation
of Solidbank’s titles to the lots. The CA, in its amended decision, upheld the validity of
the extrajudicial foreclosure proceedings, the consolidation of titles of Solidbank in the
foreclosed properties.
ISSUE:
Whether or not the petitioners’ mere proposal to extinguish their loan obligations
by way of dacion en pago novate the mortgage contract.
HELD:
No.
On the question of the petitioners’ failed proposal to extinguish their loan

obligations by way of dacion en pago, no bad faith can be imputed to Solidbank for
refusing the offered settlement as to render itself liable for moral and exemplary damages
after opting to extrajudicially foreclose on the mortgage. In Tecnogas Philippines
Manufacturing Corporation v. Philippine National Bank, the Court held:
13
Dacion en pago is a special mode of payment whereby the debtor offers another
thing to the creditor who accepts it as equivalent of payment of an outstanding obligation.
The undertaking is really one of sale, that is, the creditor is really buying the thing or
property of the debtor, payment for which is to be charged against the debtor’s debt. As
such, the essential of a contract of sale, namely, consent, object certain, and cause or
consideration must be present. It is only when the thing offered as an equivalent is
accepted by the creditor that novation takes place, thereby, totally extinguishing the debt.
On the first issue, the Court of Appeals did not err in ruling that Tecnogas has no
clear legal right to an injunctive relief because its proposal to pay by way of dacion en
pago did not extinguish its obligation. Undeniably, Tecnogas’ proposal to pay by way of
dacion en pago was not accepted by PNB. Thus, the unaccepted proposal neither novates
the parties’ mortgage contract nor suspends its execution as there was no meeting of the
minds between the parties on whether the loan will be extinguished by way of dacion en
pago. Necessarily, upon Tecnogas’ default in its obligations, the foreclosure of the REM
becomes a matter of right on the part of PNB, for such is the purpose of requiring security
for the loans.
14
Petitioners: VICENTE D. CABANTING AND LALAINE V. CABANTING
vs.
Respondent: BPI FAMILY SAVINGS BANK, INC.
G.R. No. 201927, February 17, 2016
Third Division
Court.
Facts:
Petitioners bought on installment basis from Diamond Motors Corporation a 2002
Mitsubishi Adventure SS MT and for value received, petitioners also signed, executed
and delivered to Diamond Motors a Promissory Note with Chattel Mortgage. Therein,
petitioners jointly and severally obligated themselves to pay Diamond Motors the sum of
P836,032.00, payable in monthly instalments. On the day of the execution of the
document, Diamond Motors, with notice to petitioners, executed a Deed of Assignment,
thereby assigning to BPI Family Savings Bank, Inc. (BPI Family) all its rights, title and
interest to the Promissory Note with Chattel Mortgage.
A Complaint was filed by BPI Family against petitioners for Replevin and
damages before the Regional Trial Court of Manila (RTC), praying that petitioners be
ordered to pay the unpaid portion of the vehicle's purchase price. BPI Family alleged that
petitioners failed to pay three (3) consecutive installments and despite written demand
sent to petitioners through registered mail, petitioners failed to comply with said demand
to pay or to surrender possession of the vehicle to BPI Family.
In their Answer, petitioners alleged that they sold the subject vehicle to one Victor
S. Abalos, with the agreement that the latter shall assume the obligation to pay the
remaining monthly installments. It was then Abalos who made payments to BPI Family
through his personal checks, and BPI Family accepted the post-dated checks delivered to
it by Abalos. Petitioners pointed out that BPI Family should have sued Abalos instead of
them.
The RTC ruled in favour of BPI. The CA affirmed with modification the decision
of RTC.
Petitioners argue that the following stipulation should be deemed invalid as the
document executed was a contract of adhesion:
"[i]n case of my/our [petitioners'] failure to pay when due and payable, any sum
which I/We x x x or any of us may now or in the future owe to the holder of this note x x
x then the entire sum outstanding under this note shall immediately become due and
payable without the necessity of notice or demand which I/We hereby waive."
Issue:
Whether the stipulation in a contract of adhesion stating that ‘failure to pay will
make the obligation due and demandable’ is an invalid stipulatin.
Ruling:
No.
A contract of adhesion, wherein one party imposes a ready-made form of contract

on the other, is not strictly against the law. A contract of adhesion is as binding as
ordinary contracts, the reason being that the party who adheres to the contract is
15
free to reject it entirely. Contrary to petitioner's contention, not every contract of
adhesion is an invalid agreement.
xxx
The validity or cnforceability of the impugned contracts will have to be

determined by the peculiar circumstances obtaining in each case and the situation of
the parties concerned. Indeed, Article 24 of the New Civil Code provides that "[in] all
contractual, property or other relations, when one of the parties is at a disadvantage on
account of his moral dependence, ignorance, indigence, mental weakness, tender age, or
other handicap, the courts must be vigilant for his protection." x x x
Here, there is no proof that petitioners were disadvantaged, uneducated or utterly

inexperienced in dealing with financial institutions; thus, there is no reason for the court
to step in and protect the interest of the supposed weaker party.
16
Petitioner: TERESITA I. BUENAVENTURA
vs.
Respondent: METROPOLITAN BANK AND TRUST COMPANY
GR. NO. 167082, AUGUST 3, 2016
First Division
Ponente: BERSAMIN, J.:
Nature of the Action: Appeal from the Decision of the Court of Appeals.
Facts:
Buenaventura executed two Promisory Notes in the amount of Php 1,500,000.00
payable to Metropolitan Bank and Trust Company. Both PNs provide for penalty of 18%
per annum on the unpaid principal from date of default until full payment of the
obligation. Despite demands, the obligation remains unpaid. Thus, Metrobank filed a case
for recovery of the amounts, interest, penalty and attorney's fees before the Regional Trial
Court of Makati City.
Petitioner claimed that she is not liable because the notes were only executed
security for the rediscounted checks issued by her nephew.
The RTC ruled in favor of Metrobank. On appeal the Court of Appeals affirmed.
Issue:
Whether the promissory notes executed are contract of adhesion.
Ruling:
No.
xxx
The respondent is correct. The promissory notes were written as follows:
FOR VALUE RECEIVED, I/we jointly and severally promise to pay

Metropolitan Bank and Trust Company, at its office x x x the principal sum of
PESOS xx x, Philippine currency, together with interest and credit evaluation and
supervision fee (CESF) thereon at the effective rate of x x x per centum x x x per
annum, inclusive, from date hereof and until fully paid.
What the petitioner advocates is for the Court to now read into the promissory notes
terms and conditions that would contradict their clear and unambiguous terms in the
guise of such promissory notes being contracts of adhesion. This cannot be permitted, for,
even assuming that the promissory notes were contracts of adhesion, such circumstance
alone did not necessarily entitle her to bar their literal enforcement against her if their
terms were unequivocal. It is preposterous on her part to disparage the promissory notes
for being contracts of adhesion, for she thereby seems to forget that the validity and
enforceability of contracts of adhesion were the same as those of other valid contracts.
17
Petitioner: JUANA VDA. DE ROJALES, SUBSTITUTED BY HER HEIRS,
REPRESENTED BY CELERINA ROJALES-SEVILLA vs.
Respondent: MARCELINO DIME, SUBSTITUTED BY HIS HEIRS,

REPRESENTED BY BONIFACIA MANIBAY
G.R. No. 194548, February 10, 2016
Third Division
PERALTA, J.:
Facts:
Juana Vda. de Rojales owned a parcel of land. Marcelino Dime alleged that
petitioner conveyed under a pacto de retro contract in favor of respondent for and in
consideration of the sum of P2,502,932.10. Petitioner reserved the right to repurchase the
property for the same price within a period of nine (9) months. Despite repeated verbal
and formal demands to exercise her right, petitioner refused to exercise her right to
repurchase the subject property.
In her answer, petitioner denied the execution of the pacto de retro sale in favor
of respondent and alleged that she had not sold the subject property. She claimed that the
document presented by respondent was falsified since the fingerprint appearing therein
was not hers and the signature of the Notary Public Modesto S. Alix was not his.
It was concluded therein that the questioned thumbmark appearing on the

original-duplicate copy of the notarized pacto de retro sale and the standard right
thumbmark, taken by Police Officer Marcelo Quintin Sosing, were impressed by and
belong to the same person, the petitioner.
Respondent passed away before the trial on the merits of the case ensued. Being
his compulsory heirs, respondent's estranged wife Bonifacia Dime and their children
Cesario Antonio Dime and Marcelino Dime, Jr., substituted him in the suit.
The heirs of respondent filed a Manifestation and Motion to Dismiss the

Complaint on the ground that it was Rufina Villamin, respondent's common law wife,
who was the source of the fund in purchasing. They alleged that the consolidation of
ownership and title to respondent would be prejudicial to Villamin and would unjustly
enrich them.
Issue:
Whether Rufina Villamin substituted respondent in the personal rights and
obligations in the pacto de retro sale.
Ruling:
No.
We have consistently held that the parties to a contract are the real parties-in-
interest in an action upon it. The basic principle of relativity of contracts is that contracts
can only bind the parties who entered into it, and cannot favor or prejudice a third person,
even if he is aware of such contract and has acted with knowledge thereof. Hence, one
who is not a party to a contract, and for whose benefit it was not expressly made, cannot
maintain an action on it. One cannot do so, even if the contract performed by the
contracting parties would incidentally inure to one's benefit.
18
As evidenced by the contract of Pacto de Retro sale, petitioner, the vendor, bound
herself to sell the subject property to respondent, the vendee, and reserved the right to
repurchase the same property for the same amount within a period of nine (9) months
from March 24, 1999 to December 24, 1999. Therefore, in an action for the consolidation
of title and ownership in the name of vendee in accordance with Article 1616 of the Civil
Code, the indispensable parties are the parties to the Pacto de Retro Sale - the vendor, the
vendee, and their assigns and heirs.
Villamin, as the alleged source of the consideration, is not privy to the contract of
sale between the petitioner and the respondent. Therefore, she could not maintain an
action for consolidation of ownership and title of the subject property in her name since
she was not a party to the said contract.
19
Petitioner: MACTAN CEBU INTERNATIONAL AIRPORT
AUTHORITY vs.
Respondents: HEIRS OF GAVINA IJORDAN, NAMELY, JULIAN

CUISON, FRANCISCA CUISON, DAMASTNA CUISON,
PASTOR CUISON, ANGELINA CUISON, MANSUETO
CUISON, BONIFACIA CUISON, BASILIO CUISON,
MOISES CUISON, AND FLORENCIO CUISON
G.R. No. 173140, January 11, 2016
First Division
Nature of the Action:
Facts:
Julian Cuizon executed a Deed of Extrajudicial Settlement and Sale covering the
subject lot in favor of the Civil Aeronautics Administration (CAA), the predecessor-in-
interest of petitioner Manila Cebu International Airport Authority (MCIAA). Since then
until the present, MCIAA remained in material, continuous, uninterrupted and adverse
possession of the subject lot through the CAA, later renamed the Bureau of Air
Transportation (BAT), and is presently known as the Air Transportation Office (ATO).
The subject lot was transferred and conveyed to MCIAA by virtue of Republic Act No.
6958.
The respondents caused the judicial reconstitution of the original certificate of

title covering the subject lot. Consequently, Original Certificate of Title (OCT) was
reconstituted in the names of the respondents' predecessors-in-interest, namely, Gavina
Ijordan, and Julian, Francisca, Damasina, Marciana, Pastor, Angela, Mansueto,
Bonifacia, Basilio, Moises and Florencio, all surnamed Cuison. They asserted that they
had not sold their shares in the subject lot, and had not authorized Julian to sell their
shares to MCIAA's predecessor-in-interest.
The failure of the respondents to surrender the owner's copy of the OCT prompted
MCIAA to sue them for the cancellation of title in the RTC, alleging in its complaint that
the certificate of title conferred no right in favor of the respondents because the lot had
already been sold to the Government in 1957; that the subject lot had then been declared
for taxation purposes in the name of the BAT; and that by virtue of the Deed, the
respondents came under the legal obligation to surrender the certificate of title for
cancellation to enable the issuance of a new one in its name.
The RTC dismissed MCIAA's complaint insofar as it pertained to the shares of

the respondents in Lot No. 4539 but recognized the sale as to the 1/22 share of Julian.
The CA affirmed the orders of the RTC.
Issue:
Whether the subject lot was validly conveyed in its entirety to MCIAA.
Ruling:
No.
xxx. The Deed was void as far as the respondents' shares in the subject lot were
concerned, but valid as to Julian's share. Their conclusion was based on the absence of
the authority from his co-heirs in favor of Julian to convey their shares in the subject lot.
xxx. Hence, the conveyance by Julian of the entire property pursuant to the Deed did not
bind the respondents for lack of their consent and authority in his favor. As such, the
20
Deed had no legal effect as to their shares in the property. Article 1317 of the Civil Code
provides that no person could contract in the name of another without being authorized
by the latter, or unless he had by law a right to represent him; the contract entered into in
the name of another by one who has no authority or legal representation, or who has
acted beyond his powers, is unenforceable, unless it is ratified, expressly or impliedly, by
the person on whose behalf it has been executed, before it is revoked by the other
contracting party. But the conveyance by Julian through the Deed had full force and
effect with respect to his share of 1/22 of the entire property consisting of 546 square
meters by virtue of its being a voluntary disposition of property on his part.
21
Petitioner: TOMAS P. TAN, JR. vs.
Respondent: JOSE G. HOSANA
G.R. No. 190846, February 03, 2016
Second Division
Ponente: BRION, J.:
Facts:
Jose G. Hosana married Milagros C. Hosana. During their marriage, Jose and
Milagros bought a house and lot.
Milagros sold to the petitioner Tomas P. Tan, Jr. the subject property, as
evidenced by a deed of sale executed by Milagros herself and as attorney-in-fact of Jose,
by virtue of a Special Power of Attorney (SPA) executed by Jose in her favor. The Deed
of Sale stated that the purchase price for the lot was P200,000.00. After the sale, TCT No.
21229 was cancelled and TCT No. 32568 was issued in the name of Tomas.
Jose filed a Complaint for Annulment of Sale/Cancellation of Title/Reconveyance

and Damages against Milagros, Tomas, and the Register of Deeds of Naga City. Jose
averred that while he was working in Japan, Milagros, without his consent and
knowledge, conspired with Tomas to execute the SPA by forging Jose's signature making
it appear that Jose had authorized Milagros to sell the subject property to Tomas.
Tomas maintained that he was a buyer in good faith and for value. Furthermore,
he alleged that the SPA authorizing Milagros to sell the property was annotated at the
back of the title.
The RTC decided in favor of Jose and nullified the sale of the subject property to
Tomas. The CA affirmed the RTC ruling.
Tomas filed the present petition for review on certiorari to challenge the CA
ruling which ordered the reimbursement of P200,000.00 only, instead of the actual
purchase price he paid in the amount of P700,000.00.
Issue:
Whether Tomas can recover what he has paid in a void deed of sale.
Ruling:
No.
xxx Tomas' bare allegation that he paid Milagros the sum of P700,000.00 cannot
be considered as proof of payment, without any other convincing evidence to establish
this claim. Tomas' bare allegation, while uncontroverted, does not automatically entitle it
to be given weight and credence.
xxx
A void or inexistent contract has no force and effect from the very beginning. 47
This rule applies to contracts that are declared void by positive provision of law, as in the
case of a sale of conjugal property without the other spouse's written consent.48 A void
contract is equivalent to nothing and is absolutely wanting in civil effects.49 It cannot be
validated either by ratification or prescription.50 When, however, any of the terms of a
void contract have been performed, an action to declare its inexistence is necessary to
allow restitution of what has been given under it.51chanroblesvirtuallawlibrary
22
It is basic that if a void contract has already "been performed, the restoration of
what has been given is in order."52 This principle springs from Article 22 of the New
Civil Code which states that "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." Hence, the
restitution of what each party has given is a consequence of a void and inexistent
contract.
xxx
In the present case, the consideration stated in the deed of sale constitutes prima
facie evidence of the amount paid by Tomas for the transfer of the property to his name.
Tomas failed to adduce satisfactory evidence to rebut or contradict the consideration
stated as the actual consideration and amount paid to Milagros and Jose.
The deed of sale was declared null and void by a positive provision of law
requiring the consent of both spouses for the sale of conjugal property. There is, however,
no question on the presence of the consideration of the sale, except with respect to the
actual amount paid. While the deed of sale has no force and effect as a contract, it
remains prima facie evidence of the actual consideration paid.
As earlier discussed, Tomas failed to substantiate his claim that he paid to

Milagros the amount of P700,000.00, instead of the amount of P200,000.00 stated in the
deed of sale. No documentary or testimonial evidence to prove payment of the higher
amount was presented, apart from Tomas' sole testimony. Tomas' sole testimony of
payment is self-serving and insufficient to unequivocally prove that Milagros received
P700,000.00 for the subject property.
23
Petitioner: Helen B. Lukban vs.
Respondent: Optimun Development Bank
G.R. No. 205785, January 20, 2016
Second Division
Facts:
The City Treasurer's Office of Marikina conducted an auction sale of tax
delinquent real properties, which included the real property of Melba T. Atienza. Helen
B. Lukban was the highest and winning bidder of the property during the public auction.
She filed a petition for the cancellation of TCT under the name of Atienza and the
issuance by the Marikina Register of Deeds of a new TCT in her favor. The trial court
found that there was an entry on TCT annotating a prior Notice of Levy in favor of
Capitol Bank (now Optimum Development Bank) - Mortgage. It was annotated more
than 12 years ahead of the Notice of Levy for tax delinquency.
Optimum Bank filed a motion on the ground that its rights would be affected
should the petition be granted. Optimum Bank alleged that while it was the registered
mortgagee of the property, it was not aware that it was sold by the City Treasurer in a
public auction and that Lukban was the highest bidder. Optimum Bank manifested that it
had the original duplicate title of the property in its possession.
The trial court ruled that Lukban was able to satisfactorily prove that she acquired
the property from a public auction sale, that the one-year redemption period lapsed
without Atienza redeeming the property, and that a Final Deed of Sale was issued in her
favor.
The Court of Appeals ruled that actual notice to the registered owner of the real
property is a conditionsine qua non for the validity of the auction sale. The Court of
Appeals ruled that the records of the case did not show that Atienza actually received a
notice of the auction sale. According to the Court of Appeals, such failure invalidated the
auction sale and as a consequence, Lukban did not acquire any right therefrom. However,
Optimum Bank, not being the registered owner of the property, was not entitled to the
notice of sale.
Hence, the petition before this Court.
Issue:
Whether Optimum Bank should have been notified of the delinquency sale
because as a person having legal interest in the property, it should have been given the
right to redeem the property.
Ruling:
No.
Only the registered owner of the property is deemed the taxpayer who is entitled
to a notice of delinquency and other proceedings relative to the tax sale. In this case,
Atienza received the Warrant of Levy and the Notice of Sale. Whether Atienza received
the Notice of Public Auction is a factual issue that was not raised by Optimum Bank
because it is an issue that only Atienza, being the registered owner, can raise.
24
Petitioner: FABIO CAHAYAG AND CONRADO RIVERA vs.
Respondents: COMMERCIAL CREDIT CORPORATION, et.al.
G.R. No. 168078, January 13, 2016
First Division
Ponente: SERENO, C.J.:
Nature of the Action: Rule 45 Petitions.
Facts:
Dulos Realty was the registered owner of certain residential lots. Dulos Realty
obtained a loan from respondent CCC in the amount of F300,000. To secure the loan, the
realty executed a Real Estate Mortgage over the subject properties in favor of respondent.
The mortgage was duly annotated on the certificates of title. Dulos Realty entered into a
Contract to Sell with petitioners Cahayag, Rivera and Escalona.
Dulos Realty defaulted in the payment of the mortgage loan, prompting

respondent CCC to initiate extrajudicial foreclosure proceedings. The auction sale was
held, with respondent CCC emerging as the highest bidder. A Certificate of Sale covering
the properties, together with all the buildings and improvements existing thereon, was
issued in favor of CCC. The Certificate of Sale was annotated on the corresponding titles
to the properties. By virtue of the affidavit, the old TCTs all in the name of Dulos Realty
were cancelled and new TCTs were issued in the name of respondent CCC.
Dulos Realty entered into a Deed of Absolute Sale with petitioner Baldoza over
the property together with the improvements existing thereon. respondent CCC, through a
Deed of Absolute Sale, sold to respondent Qua the same subject properties which were in
the name of respondent CCC. The sale was duly annotated on the corresponding titles to
the properties. Accordingly, TCTs in the name of CCC were cancelled; and new
TCTswere issued to respondent Qua.
Qua filed ejectment suits individually against petitioners Dulos Realty, Cahayag,
Escalona, and Rivera. The MTC rendered Decisions in favor of Qua. It ordered Dulos
Realty, Escalona, Cahayag, and Rivera to vacate the properties. Petitioners filed a
Complaint against respondents for the "Annulment of Sheriff's Sale.
Issue:
Whether the registration of the mortgage binds the buyers under the Contracts to
Sell.
Ruling:
Yes.
Registration of the mortgage establishes a real right or lien in favor of the

mortgagee, as provided by Articles 1312 and 2126 of the Civil Code. Corollary to the
rule, the lien has been treated as "inseparable from the property inasmuch as it is a right
in rem. In other words, it binds third persons to the mortgage.
The purpose of registration is to notify persons other than the parties to the contract
that a transaction concerning the property was entered into.65 Ultimately, registration,
because it provides constructive notice to the whole world, makes the certificate of title
reliable, such that third persons dealing with registered land need only look at the
certificate to determine the status of the property.
25
In this case, the Real Estate Mortgage over the property was registered on 3
February 1981. On the other hand, the Contracts to Sell were all executed after the
registration of the mortgage. xxx
Consequently, petitioners Cahayag, Rivera and Escalona, were bound to the

mortgage executed between mortgagor Dulos Realty and mortgagee CCC, by virtue of its
registration. Definitely, the buyers each had constructive knowledge of the existence of
the mortgage contract when they individually executed the Contracts to Sell.
26
PETITIONERS: Spouses George A. Gallent, Sr. and Mercedes M. Gallent
RESPONDENT: Juan G. Velasquez
G.R. No. 203949, April 6, 2016
Third Division
Ponente: Reyes, J.
Facts:
George A. Gallent, Sr. (George) was the registered owner of a 761-square-meter
residential property covered by Transfer Certificate of Title (TCT) No. S-99286, located
at No. 3, Angeles Street, Alabang Hills Village, Muntinlupa City, with improvements
thereon consisting of a two-storey house and a swimming pool. On December 20, 1996,
the Spouses George and Mercedes Gallent (Spouses Gallent) mortgaged the said property
to Allied Banking Corporation (Allied Bank) as security for a loan of Pl.5 Million. The
Spouses Gallent failed to pay their loan, thus, Allied Bank extrajudicially foreclosed the
mortgaged property.
Since the Spouses Gallent failed to redeem the subject property after one year,
Allied Bank consolidated its ownership over the subject property. On June 11, 2003,
Allied Bank agreed to sell back the foreclosed property to the Spouses Gallent for P4
Million, as evidenced by an Agreement to Sell, wherein the Spouses Gallent paid a down
payment of P3.5 Million, and the balance thereof was payable in 12 monthly
amortizations. It was also stipulated that the Spouses Gallent would be allowed to keep
the possession of the subject property as tenants or lessees of Allied Bank.
Due to financial difficulties, sometime in October 2003, the Spouses Gallent

sought the help of their close family friend, Juan Velasquez (Velasquez), to help them
settle their remaining monthly amortizations. As an inducement, they agreed that
Velasquez would have the subject property registered under his name until they have
repaid him.
On November 5, 2003, Allied Bank and Velasquez executed a Deed of Absolute

Sale over the subject property for the price of P4 Million, wherein George himself signed
as an instrumental witness. However, the said instrument was not registered.
Subsequently, Velasquez caused another Deed of Sale dated November 19, 2003, over
the subject property which showed a lower selling price of Pl.2 Million to be registered,
purportedly for tax purposes.
On June 27, 2008, Velasquez sent a demand letter to the Spouses Gallent to vacate
the subject property, but the latter refused to do so. On July 6, 2009, Velasquez filed
an ex parte petition for issuance of a writ of possession, in the RTC of Muntinlupa City.
The RTC ruled in favor of Velasquez and held that by virtue of the sale of the
properties involved, [Velasquez] became the new owner of the lots entitled to all rights
and interests its predecessor [Allied Bank] had therein, including the right to file an
application for writ of possession. Likewise, the CA ruled in favor of Velasquez, hence,
this petition.
Issue:
Whether or not the Deed of Assignment in favor of Velasquez is an equitable
mortgage under Art. 1602 of the Civil Code.
27
Ruling:
Yes.
An equitable mortgage has been defined as one which although lacking in some
formality, or form or words, or other requisites demanded by a statute, nevertheless
reveals the intention of the parties to charge real property as security for a debt, there
being no impossibility nor anything contrary to law in this intent. A contract where the
vendor/mortgagor remains in physical possession as lessee or otherwise has been held to
be an equitable mortgage. In determining the nature of a contract, the Court is not bound
by the title or name given to it by the parties, but by their intention, as shown not
necessarily by the terminology used in the contract but by their conduct, words, actions
and deeds prior to, during and immediately after executing the agreement.
x x x
It is important to note that this controversy can no longer be considered as an

offshoot of the extrajudicial foreclosure proceedings involving Allied Bank, but rather is
the result of a subsequent personal transaction between the Spouses Gallent and
Velasquez, which they called an assignment; but which the law otherwise recognizes as
an equitable mortgage. In the face then of the ex parte motion of Velasquez for a writ of
possession, it must be kept in mind that, under the facts laid down, the contending parties
are now Velasquez and the Spouses Gallent. The Spouses Gallent's defense of equitable
mortgage is upheld in law and, they have a superior right to retain the possession of the
subject property in their own right.
28
Petitioners: TIMOTEO BACALSO AND DIOSDADA BACALSO vs.
Respondents: GREGORIA B. ACA-AC, EUTIQUIA B. AGUILA, JULIAN

BACUS AND EVELYN SYCHANGCO
G.R. No. 172919, January 13, 2016
Third Division
Ponente: REYES, J.:
Nature of the Action: Petition for Review on Certiorari1 under Rule 45 of the Rules of
Court.
Facts:
The Bacus siblings were the registered owners of a parcel of land. The Bacus
siblings inherited the said property from their mother.
The Bacus siblings executed a Deed of Absolute Sale conveying a portion of the lot in
favor of their cousin, Timoteo for and in consideration of the amount of P8,000.00.
Timoteo and Diosdada Bacalso (petitioners) filed on a complaint for declaration of nullity
of contract and certificates of title, reconveyance and damages against the Bacus siblings
claiming ownership over the lot by virtue of the Deed of Absolute Sale. They claimed,
however, that the Bacus siblings reneged on their promise to cause the issuance of a new
TCT in the name of the petitioners.
Moreover, the petitioners alleged that the Bacus siblings have caused the subdivision of
the lot into four lots. After subdividing the property, the Bacus siblings without
knowledge of the petitioners, sold the lot again to respondent Evelyn Sychangco
(Sychangco) and that the covering the same property was issued in her name.
In their answer, the Bacus siblings denied the allegations of the petitioners and claimed
that the alleged sale in favor of the petitioners did not push through because the
petitioners foiled to pay the purchase price thereof.
For her part, Sychangco averred that she is a buyer in good faith and for value as she
relied on what appeared in the certificate of title of the property which appeared to be a
clean title as no lien or encumbrance was annotated therein.
The RTC issued a Decision declaring the Deed of Absolute Sale in favor of the Timoteo
void for want of consideration after finding that the petitioners failed to pay the price of
the subject property. The CA affirmed the ruling of the RTC.
Issue:
Whether the Deed of Sale in favour of Timoteo is void for want of consideration.
Ruling:
Yes.
This is not merely a case of failure to pay the purchase price which can only
amount to a breach of obligation with rescission as the proper remedy. As correctly
observed by the RTC, the disputed sale produces no effect and is considered void ab
initio for failure to or want of consideration since the petitioner failed to pay the
consideration stipulated in the Deed of Absolute Sale. xxx.
xxx. [Timoteo] lured him and his sisters into selling the said land by his promise
and representation that money was coming from his sister, Lucena Bacalso, from Jolo,
29
Sulu. Timoteo Bacalso asked for two weeks within which to produce the said money.
However, no such money came. xxx
[Timoteo] himself acted in such a manner as to confirm that he did not anymore
give significance or importance to the Deed of Sale of Lot 1809-G-2-C which, in turn,
creates an impression or conclusion that he did not pay for the consideration or price
thereof. Xxx
Thus, it is evident from all the foregoing circumstances that there was a failure to
or want of consideration of the supposed sale of the land in question to the [petitioners]
on October 15, 1987. So, the said sale could not be given effect. Article 1352 of the New
Civil Code of the Philippines is explicit in providing that 'contracts without cause
produce no effect whatsoever'. If there is no cause, the contract is void, x x x There being
no price paid, there is no cause or consideration; hence, the contract is void as a sale, x x
x Consequently, in the case at bench, the plaintiffs have not become absolute owners of
Lot 1809-G-2-C of Psd-07-022093 by virtue of the Deed of Sale thereof which was
executed on October 15, 1987 by the [Bacus siblings] in their favor.
30
Petitioner: ARTURO C. ALBA, JR., DULY REPRESENTED BY HIS
ATTORNEYS-IN-FACT, ARNULFO B. ALBA AND ALEXANDER
C. ALBA vs.
Respondents: RAYMUND D. MALAPAJO, RAMIL D. MALAPAJO AND THE R

EGISTER OF DEEDS FOR THE CITY OF ROXAS
G.R. No. 198752, January 13, 2016
Third Division
Nature of the Action: Petition for review on certlorari.
Facts:
Arturo C. Alba, Jr., duly represented by his attorneys-in-fact, Arnulfo B. Alba and
Alexander C. Alba, filed with the Regional Trial Court (RTC), a Complaint against
respondents Raymund D. Malapajo, Ramil D. Malapajo and the Register of Deeds of
Roxas City for recovery of ownership and/or declaration of nullity or cancellation of title
and damages alleging, among others, that he was the previous registered owner of a
parcel of land; that his title was subsequently canceled by virtue of a deed of sale he
allegedly executed in favor of respondents Malapajo for a consideration of Five Hundred
Thousand Pesos (P500,000.00); that new TCT was issued in the name of respondents
Malapajo; that the deed of sale was a forged document which respondents Malapajo were
the co-authors of.
Malapajo filed their Answer contending that they were innocent purchasers for
value and that the deed was a unilateral document which was presented to them already
prepared and notarized.
Issue:
Wheteher the Deed of Absolute Sale is void because the signature of the seller
was forged.
Ruling:
No.
The Deed of Absolute Sale is a unilateral instrument, i.e., it was signed only by
the vendor, who is the plaintiff in this case and his instrumental witnesses, who are his
parents in this case. It was presented to defendants already completely prepared,
accomplished and notarized. Defendants had no hand in its preparation, accomplishment
and notarization.
While the plaintiff claims that his signature on the instrument is forged, he never
questioned the genuineness of the signatures of his instrumental witnesses, his parents
Arturo P. Alba, Sr. and Norma C. Alba, who signed the said instrument below the words
"SIGNED IN THE PRESENCE OF" and above the words "Father" and "Mother,"
respectively.
xxx
31
Petitioner: JOEY R. PEÑA vs.
Respondents: JESUS DELOS SANTOS AND THE HEIRS OF ROSITA DELOS

SANTOS FLORES
G.R. No. 202223, March 02, 2016
Third Division
Ponente: REYES, J.:
Facts:
Peña averred that he is the transferee of Jesus and Rosita's adjudged allotments
over the subject lots measuring 14,771 sq m.He claimed that he bought the same from
Atty. Romeo Robiso (Atty. Robiso) who in turn, acquired the properties from Jesus and
Rosita through assignment and sale. The plaintiffs opposed Peña's motion claiming that
the conveyance made by Jesus and Rosita in favor of Atty. Robiso was null and void for
being a prohibited transaction because the latter was their counsel in the case.
Atty. Robiso was engaged by Jesus and Rosita to be their counsel by virtue of
an Attorney's Agreement and Undertaking. Under the agreement, Atty. Robiso bound
himself to render his legal services in connection with Jesus and Rosita's involvement as
party-litigants in a Civil Case and to any proceedings that may arise in connection
therewith before the CA and this Court. Atty. Robiso undertook to advance his own funds
for all expenses and costs he may incur in relation to the case. In consideration thereof,
Jesus and Rosita obliged themselves to give or pay to him as contingent professional fees,
2,000 sq m of any and all lands that the courts will award to them in the case.
The RTC upheld that the conveyance made by Jesus and Rosita in favor of Atty.
Robiso is valid since it was not made during the pendency of litigation but after judgment
has been rendered. The CA reversed the RTC.
Issue:
Whether or not Peña acquires valid title from his predecessor-in-interest, Atty.
Robiso.
Ruling:
No.
The basis of Peña's motion for substitution is infirm because the lots were
transferred to his predecessor-in-interest, Atty. Robiso, through a prohibited sale
transaction. Article 1491(5) of the Civil Code expressly prohibits lawyers from acquiring
property or rights that may be the object of any litigation in which they may take part by
virtue of their profession.
“Art. 1491. The following persons cannot acquire by purchase, even at a public or
judicial auction, either in person or through the mediation of another:
32
xxx
(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and
other officers and employees connected with the administration of justice, the property
and rights in litigation or levied upon an execution before the court within whose
jurisdiction or territory they exercise their respective functions; this prohibition includes
the act of acquiring by assignment and shall apply to lawyers, with respect to the property
and rights which may be the object of any litigation in which they may take part by virtue
of their profession.”
Clearly then, since the property conveyed to Atty. Robiso by Jesus and Rosita was
still the object of litigation, the deeds of conveyance executed by the latter are deemed
inexistent. Under Article 1409 of the Code, contracts which are expressly prohibited or
declared void by law are considered inexistent and void from the beginning. This being
so, Atty. Robiso could not have transferred a valid title in favor of Peña over the lots
awarded to Jesus and Rosita in Civil Case No. 3683. Consequently, Peña has no legal
standing to be substituted in the stead of or joined with Jesus and Rosita as the first set of
intervenors and to move for issuance of a writ of execution in Civil Case No. 3683.
33
Petitioners: DAMASO T. AMBRAY and CEFERINO T. AMBRAY, JR.,
Respondents: SYLVIA A. TSOUROUS, CARMENCITA AMBRAYLAUREL,

HEDY AMBRAYAZORES, VIVIEN AMBRAYYATCO, NANCY
AMBRAYESCUDERO, MARIS TELA AMBRAY-ILAGAN,
ELIZABETH AMBRAYSORIANO, MA. LUISA FE AMBRAY-
ARCILLA, and CRISTINA AMBRAY-LABIT
G.R. No. 209264, July 5, 2016
First Division
Ponente: PERLAS-BERNABE, J.:
Facts:
A parcel of land was registered in the name of Damaso and Ceferino, Jr
(petitioners). They have other nine (9) siblings (respondents). Except for Sylvia, they are
the children of Cerino, Sr. and Estela.
During their lifetime, Ceferino, Sr. and Estela owned several properties, one of
which was a parcel of land located in San Pablo City, Laguna covered by TCT No. T-
112599 of the Register of Deeds of San Pablo City. The lot was subdivided into three (3)
lots: Lot 2-A, Lot 2-B, and the subject property, Lot 2-C, under the name of Ceferino,
Sr., married to Estela with TCT No. T-22749.
Maristela (one of the siblings) discovered that TCT No. T-22749 covering Lot 2-
C had been cancelled and in its stead, TCT No. T-41382 was issued in the name of
petitioners. It appears that by virtue of a notarized Deed of Absolute Sale14 (Deed of
Sale) dated January 16, 1978, Ceferino, Sr., with the consent of Estela, allegedly sold "a
portion of lot 2 of the consolidation subd. plan (LRC) Pcs-12441" 15 to petitioners for a
consideration of P150,000.00. The Deed of Sale was registered with the Register of
Deeds of San Pablo City only on February 5, 1996.16
Thereafter, respondents filed the instant complaint for annulment of title,

reconveyance, and damages against petitioners and Estela, alleging that TCT No. T-
41382 and the Deed of Sale were null and void because the signatures of Ceferino, Sr.
and Estela thereon were forgeries.
In refutation, petitioners offered in evidence, inter alia, the testimony of their

mother, Estela, in the falsification case where petitioners were previously acquitted. In
the course thereof, she identified the signatures on the Deed of Sale as hers and Ceferino,
Sr.' s, which was fully corroborated by Atty. Zosimo Tanalega (Atty. Tanalega), the
notary public who notarized the subject Deed of Sale and was present at the time the
Ambray spouses affixed their signatures thereon.
The RTC declared the Deed of Sale null and void. The CA affirmed the ruling of
the RTC.
Issues:
1. Whether the Deed of Sale is null and void because it did not specifically mention the
exact area that was being sold to petitioners.
2. Whether the delay in the transfer of title to petitioners would render the Deed of Sale
void.
34
Rulings:
1. No.
xxx Article 1463 of the Civil Code expressly states that "[t]he sole owner of
a thing may sell an undivided interest therein." As Ceferino, Sr. was the sole
owner of the original Lot 2 from whence came Lot 2-C, he is therefore
allowed by law to convey or sell an unspecified portion thereof. Hence, the
disposition of Lot 2-C to petitioners, a portion of Lot 2 yet to be subdivided
in 1978, was therefore valid.
2. No.
That Ceferino, Sr. requested the registration of the title of Lot 2-C in his
name in 1984, while the property was supposed to have already been sold to
petitioners in 1978, was likewise fully explained during trial. Damaso
clarified that their parents were apprehensive that he and Ceferino might
mortgage or squander the property while they were still alive. Moreover,
despite knowledge of the sale, they did not demand for its immediate
registration because during their father's lifetime, they never questioned his
decisions. This further explains why, despite the disposition in petitioners'
favor, it was Ceferino, Sr. himself who leased Lot 2-C to third parties,
which Damaso renewed in his father's name after the latter's death. The
delay in the transfer of the title over Lot 2-C to petitioners was also
occasioned by the fact that Estela kept the Deed of Sale in her custody and
gave it to petitioners only later on, by reason of her poor health. Be that as it
may, and to reiterate, the delay in the registration of the sale in favor of
petitioners neither affects nor invalidates the same, in light of the
authenticity of the Deed of Sale itself.
35
Petitioner: ORIX METRO LEASING AND FINANCE CORPORATION vs.
Respondents: CARDLINE INC., MARY C. CALUBAD, SONY N. CALUBAD, AND

NG BENG SHENG
G.R. No. 201417, January 13, 2016
Second Division
Ponente: BRION, J.:
Facts:
Cardline leased four machines from Orix as evidenced by three similarly-worded
lease agreements. Cardlirte's principal stockholders and officers - Mary C. Calubad, Sony
N. Calubad, and Ng Beng Sheng - signed the suretyship agreements in their personal
capacities to guarantee Cardline's obligations under each lease agreement.
Cardline defaulted in paying the rent. Orix formally demanded payment from
Cardline but the latter refused to pay. Orix filed a complaint for replevin, sum of money,
and damages with an application for a writ of seizure against Cardline and the individual
respondents before the RTC.
RTC ruled in favor of Orix. The respondents argued that the RTC erred in
declaring them in default. The CA granted the petition, annulled the RTC's order, and
prohibited the sheriff from executing the judgment.
The CA based its decision on Sections 19.2(d) in relation with Section 19.3 of the
lease agreements. The CA ruled that the respondents' debt amounting to P9,369,657.00
had been satisfied when Orix recovered the machines valued at P14,481,500.00 and
received the security deposit amounting to P1,635,638.89. Considering that the judgment
had been satisfied in full, the RTC's issuance of a writ of execution was no longer
necessary.
The CA denied Orix's motion for reconsideration; hence, this petition.
Issue:
Whether the market value of the returned machines and guaranty deposit were
intended to reduce Cardline’s debt.
Ruling:
No.
The lease agreements' default provisions are instructive. Section 19 of the

agreements provides that if Cardline fails to pay rent, Orix may cancel the agreements
and may avail of the following remedies under Section 19.2:
a) LESSOR may require LESSEE to surrender possession of the property x x x;
xxx
d) Subject to the provisions of Section 19.3, after repossessing the property, the
LESSOR may re-lease or sell the PROPERTY to any third person, in such manner
and upon such terms as the LESSOR may solely deem proper;
e) Recovery of all accrued and unpaid rental, including rentals up to the time
36
the PROPERTY is actually returned to the LESSOR xxx;" (Emphasis
supplied)
Should Orix choose to re-lease or sell the machines after repossessing them
pursuant to Section 19.2(d), Section 19.3 shall apply, to wit:
19.3 The proceeds derived from the sale or re-leasing of the PROPERTY, shall
xxx be applied first to the expenses incurred by the LESSOR in connection with
the repossession, sale, or releasing of the PROPERTY, a reasonable compensation
for undertaking such sale or re-lease, all legal costs and fees, OTHER
AMOUNTS, and the balance, if any, to the RENTAL due from the LESSEE, xxx.
(Emphasis supplied)
Applying these provisions, when Cardline defaulted in paying rent, Orix was authorized
to: (a) re-possess the machines; and (b) recover all unpaid rent. Considering that Orix
neither re-leased nor sold the machines, Sections 19.2(d) and 19.3 are not applicable.
xxx
As Orix correctly argued, the CA's decision leads to an absurd situation where Cardline
pays for its liabilities to Orix using Orix's own properties. The Court cannot affirm this
unreasonable and inequitable interpretation.
37
Petitioners: HEIRS OF GAMALIEL, vs.
Respondents: SPS. MENA C. RAVANES and ROBERTO RAVANES
G.R. No. 183645, July 20, 2016
Third Division
Court.
Facts:
Respondent Mena Ravanes (Mena), married to Roberto Ravanes (Roberto)
(collectively, the respondent-spouses), is the registered owner of a parcel of land covered
by Transfer Certificate of Title No. 57 414.
Petitioners' father, Gamaliel Albano, purchased the house in 1986 from a certain
Mary Ong Dee. Petitioners leased the property from Mena with the agreement that they
will vacate it, regardless of their rental payments, when the latter and her family would
need to use it.
In March 2000, respondent-spouses informed petitioners that their daughter,

Rowena, is getting married and would need the property to build her house. However,
petitioners refused to vacate the property. Respondent-spouses filed a Complaint for
Ejectment 14 against petitioners in the MeTC of Pasig City.
Respondent-spouses stated that their daughter needs the property to build her
conjugal home. They pleaded that they do not own any other available residential units
within Pasig City or anywhere else. They also stated that the lease between them and
petitioners had already lapsed as of December 31, 1999. Respondent-spouses claimed
they notified petitioners of their intent to repossess the property at least three (3) months
in advance.
In their Answer dated October 4, 2000, 18 retitioncrs countered that respondent-

spouses and their predecessors-in-interest assured them that they can stay in the property
for as long as they are paying the agreed monthly rentals. Petitioners claimed that their
harmonious relationship with respondent-spouses changed in February 2000 when the
latter suddenly refused to accept the rental payments for January to June 2000.
The MeTC held that the lease between respondent-spouses and petitioners is one
in which no period of lease has actually been fixed. Thus, under Article 1687 of the New
Civil Code, the lease is deemed to be on a month to month basis since rentals were paid
monthly. Accordingly, the lease expires every end of the month which gives respondent-
spouses a ground for judicial ejectment.
Issue:
Whether the lease contract is one with a period.
Ruling:
Yes.
The lease between respondent-spouses and petitioners, although merely verbal, is

deemed to be one with a definite period which expires at the end of each month. The
lease is on a month-to-month basis because the rentals are paid monthly. xxx
xxx
38
It is admitted that no specific period for the duration of the lease was agreed upon
between the parties. Nonetheless, payment of the stipulated rents was made on a monthly
basis and, as such, the period of lease is considered to be from month to month in
accordance with Article 1687 of the Civil Code. Moreover, a lease from month-to-month
is considered to be one with a definite period which expires at the end of each month
upon a demand to vacate by the lessor.
39
Petitioner: ROSALINA CARODAN vs.
Respondent: CHINA BANKING CORPORATION
G.R. No. 210542, February 24, 2016
First Division
Ponente: SERENO, C.J.:
Facts:
Barbara and Rebecca, for value received, executed and delivered Promissory Note
No. TLS-98/007 to respondent bank under which they promised therein to jointly and
severally pay the amount of P2.8 million. As security for the payment of the loan,
Barbara, Rebecca and Rosalina also executed a Real Estate Mortgage over a property
registered in the name of Rosalina. Respondent alleged that a Surety Agreement in favor
of China Bank as creditor was also executed by Barbara and Rebecca as principals and
Rosalina and her niece Madeline as sureties. Through that agreement, the principals and
sureties warranted the payment of the loan obligation amounting to F2.8 million
including interests, penalties, costs, expenses, and attorney's fees.
Barbara and Rebecca failed to pay their loan obligation despite repeated demands
from China Bank. Their failure to pay prompted the bank institute extrajudicial
foreclosure proceedings on the mortgaged property. From the extrajudicial sale, it
realized only PI.5 million as evidenced by a Certificate of Sale. This amount, when
applied to the total outstanding loan obligation of PI,865,345.77, would still leave a
deficiency of P365,345.77. For that reason, the bank prayed that the court order the
payment of the deficiency amount with interest at 12% per annum; attorney's fees equal
to 10% of the deficiency amount; and litigation expenses and costs of suit.14
Issue:
Whether Rosalina is liable jointly and severally with Barbara and Rebecca for the
payment of China Bank’s claims.
Ruling:
Yes.
xxx. In the instant case, petitioner Rosalina admitted that she was a party to these
loan documents although she vehemently insisted that she had received nothing from the
proceeds of the loan.62 Meanwhile, respondent bank offered in evidence the Promissory
Note, the Real Estate Mortgage and the Surety Agreement signed by the parties.
We find that Rosalina is liable as an accommodation mortgagor.
xxx
Apart from being an accommodation mortgagor, Rosalina is also a surety, defined

under Article 2047 of the Civil Code.
xxx
When Rosalina affixed her signature to the Real Estate Mortgage as mortgagor
and to the Surety Agreement as surety which covered the loan transaction represented by
the Promissory Note, she thereby bound herself to be liable to China Bank in case the
principal debtors, Barbara and Rebecca, failed to pay. She consequently became liable to
40
respondent bank for the payment of the debt of Barbara and Rebecca when the latter two
actually did not pay.
China Bank, on the other hand, had a right to proceed after either the principal
debtors or the surety when the debt became due. It had a right to foreclose the mortgage
involving Rosalina's property to answer for the loan.
The proceeds from the extrajudicial foreclosure, however, did not satisfy the
entire obligation. For this reason, respondent bank instituted the present Complaint
against Barbara and Rebecca as principals and Rosalina as surety.
41
Petitioner: Florante Vitug vs.
Respondent: Evangeline A. Abuda
G.R. No. 201264 January 11, 2016
Second Division
Ponente: LEONEN, J.:
Nature of the Action: Petition for Review on Certiorari under Rule 45.
Facts:
Abuda loaned P250,000.00 to Vitug and his wife, Narcisa Vitug. As security for
the loan, Vitug mortgaged to Abuda his property in Tondo Foreshore. The property was
then subject of a conditional Contract to Sell between the National Housing Authority
and Vitug.
The mortgage deed provides that, upon consummation and completion of the sale
by the NHA of said property, the title-award thereof, shall be received by the Mortgagee
by virtue of a Special Power of Attorney, executed by Mortgagor in her favor,
authorizing Mortgagee to expedite, follow-up, cause the release and to received [sic] and
take possession of the title award of the said property from the NHA, until the mortgage
amount is fully paid for and settled.
The parties executed a "restructured" mortgage contract on the property to secure

the amount of P600,000.00 representing the original P250,000.00 loan, additional
loans, and subsequent credit accommodations given by Abuda to Vitug with an interest of
five (5) percent per month. By then, the property was covered by a TCT under Vitug's
name.
Spouses Vitug failed to pay their loans despite Abuda's demands. Abuda filed a
Complaint for Foreclosure of Property. The Regional Trial Court promulgated a Decision
in favor of Abuda. The Court of Appeals affirmed the decision of the RTC with
modification.
Vitug moved for reconsideration pointing out that not all the requisites of a valid
mortgage contract were present since he did not have free disposal of his property when
he mortgaged it to Abuda. His transfer certificate of title had an annotation by the
National Housing Authority, which restricted his right to dispose or encumber the
property. The restriction clause provided that the National Housing Authority's consent
must first be obtained before he may dispose or encumber his property. The Court of
Appeals denied the Motion for Reconsideration.
Hence, this petition.
Issue:
Whether the restriction clause in petitioner's title rendered invalid the real estate
mortgage he and respondent Evangeline Abuda executed.
Ruling:
No.
The National Housing Authority's restrictions were provisions in a contract it

executed with petitioner. This contract bound petitioner to certain conditions before
transferring or encumbering the property. Specifically, when the National Housing
42
Authority sold the property to petitioner, petitioner became obligated not to sell,
encumber, mortgage, lease, sublease, alter, or dispose the property without the National
Housing Authority's consent.
These restrictions do not divest petitioner of his ownership rights. They are mere burdens
or limitations on petitioner's jus disponendi. Thus, petitioner may dispose or encumber
his property. However, the disposition or encumbrance of his property is subject to the
limitations and to the rights that may accrue to the National Housing Authority. When
annotated to the title, these restrictions serve as notice to the whole world that the
National Housing Authority has claims over the property, which it may enforce against
others.
Contracts entered into in violation of restrictions on a property owner's rights do

not always have the effect of making them void ab initio. x x x
Contracts that only subject a property owner's property rights to conditions or

limitations but otherwise contain all the elements of a valid contract are merely voidable
by the person in whose favor the conditions or limitations are made.
The mortgage contract entered into by petitioner and respondent contains all the
elements of a valid contract of mortgage. The trial court and the Court of Appeals found
no irregularity in its execution. There was no showing that it was attended by fraud,
illegality, immorality, force or intimidation, and lack of consideration.
xxx
Having the right to assail the validity of the mortgage contract based on violation
of the restrictions, the National Housing Authority may seek the annulment of the
mortgage contract.79 Without any action from the National Housing Authority, rights and
obligations, including the right to foreclose the property in case of non-payment of the
secured loan, are still enforceable between the parties that executed the mortgage
contract.
43
Petitioner: Helen B. Lukban vs.
Respondent: Optimum Development Bank
G.R. No. 205785, January 20, 2016
Second Division
Facts:
The City Treasurer's Office of Marikina conducted an auction sale of tax
delinquent real properties, which included the real property of Melba T. Atienza. Helen
B. Lukban was the highest and winning bidder of the property during the public auction.
She filed a petition for the cancellation of TCT under the name of Atienza and the
issuance by the Marikina Register of Deeds of a new TCT in her favor. The trial court
found that there was an entry on TCT annotating a prior Notice of Levy in favor of
Capitol Bank (now Optimum Development Bank) - Mortgage. It was annotated more
than 12 years ahead of the Notice of Levy for tax delinquency.
Optimum Bank filed a motion on the ground that its rights would be affected
should the petition be granted. Optimum Bank alleged that while it was the registered
mortgagee of the property, it was not aware that it was sold by the City Treasurer in a
public auction and that Lukban was the highest bidder. Optimum Bank manifested that it
had the original duplicate title of the property in its possession.
Optimum Bank argued that Lukban did not proffer any proof that the mortgage debt had
been paid. It alleged that since the annotation of the mortgage on the property had not been
cancelled, the presumption was that the mortgage amount of P340,000 in its favor was still
unpaid.
Issue:
Whether the issuance of the new TCT in favor of Lukban will impair the rights of
Optimum Bank as a mortgagee.
Ruling:
No.
As for the opposition interposed in the instant petition by the oppositor, Optimum
Development Bank, the Court deemed that in the issuance of a new title under petitioner's
name, the oppositor's rights as a mortgagee should be annotated in the new title. This is in
line with the pronouncement in Ligon v. CA that, "It (the mortgage) is inseparable from
the property mortgaged as it is a right in rem - a lien on the property whoever its owner
may be. It subsists notwithstanding a change in ownership; in short, the personality of the
owner is disregarded. Thus, all subsequent purchasers must respect the mortgage whether
the transfer to them be with or without the consent of the mortgagee, for such mortgage
until discharged follows the property.
In the dispositive portion of its Decision, the trial court mandated that "[t]he
mortgage annotated on the subject title shall be incorporated in or carried over to the new
transfer certificate of title and its duplicates and shall also contain a memorandum of the
annulment of the outstanding duplicate." In short, the rights of Optimum Bank as a
mortgagee are amply protected, both by the Decision and by Section 180 of R.A. No.
7160, despite the cancellation of the old TCT and the issuance of a new TCT in favor of
Lukban. Even in the petition before this Court, Lukban stressed that she never alleged
and prayed for the cancellation of the encumbrances on TCT No. 234408.
44
Petitioner: BANCO DE ORO UNIBANK, INC. vs.
Respondent: SUNNYSIDE HEIGHTS HOMEOWNERS ASSOCIATION, INC.
G.R. No. 198745, January 13, 2016
Third Division
Ponente: REYES, J.:
Nature of the Action: Petition for Review on Certiorari1 under Rule 45 of the Rules of
Court.
Facts:
Mover Enterprises, Inc. (Mover) is the owner and developer of the Sunnyside
Heights Subdivision. Mover mortgaged Lot 5, Block 10 of Phase I of the said subdivision
containing 5,764 square meters to the Philippine Commercial International Bank (PCIB)
to secure a loan of P1,700,000.00. Mover failed to pay its loan and PCIB foreclosed on
the mortgage. After title was consolidated in PCIB, the Registry of Deeds issued a
Transfer Certificate of Title to the said bank.
PCIB advertised the aforesaid lot for sale in the newspapers. This prompted the
Sunnyside Heights Homeowners Association (SHHA) to file before the Housing and
Land Use Regulatory Board (ITLURB) a letter-complaint to declare the mortgage
between Mover and PCIB void on the ground that the subject property, originally covered
by TCT No. 366219, has been allocated as SHHA's open space pursuant to law. SHHA
thus sought reconveyance of the property.
PCIB maintained that the title to the said mortgaged lot bears no annotation that it
has been reserved as open space. PCIB claimed to be an innocent mortgagee in good faith
and for value.
Issue:
Whether an ‘open space’ pursuant to PD 12 16 can be mortgaged.
Ruling:
No.
SHHA's letter-complaint puts in issue the validity of the mortgage over Block 10,
now renamed as Block 7, of Sunnyside Heights Subdivision, and the detriment and
prejudice to the residents and the violation by Mover of its obligation to maintain its open
space under P.D. No. 1216 are all too plain, as the following "whereas" clauses of P.D.
No. 1216 underscore:
WHEREAS, there is a compelling need to create and maintain a healthy environment in

human settlements by providing open spaces, roads, alleys and sidewalks as may be
deemed suitable to enhance the quality of life of the residents therein;
WHEREAS, such open spaces, roads, alleys and sidewalks in residential subdivision
are for public use and are, therefore, beyond the commerce of men.
Coming now to Mover's liability, the Court agrees with the observation of the
HLURB Board of Commissioners that it would be unjust enrichment on the part of
Mover not to acknowledge its indebtedness to BDO in the amount of P1,700,000.00 in
view of the nullity of the mortgage. It should have known that its mortgage security was
invalid considering the alteration in its subdivision plan in May 1987. In equity, it must
therefore compensate PCIB for the loss thereof, reckoned from the filing of SHHA's
letter-complaint on September 14, 1994.
45
Petitioner: MAE FLOR GALIDO vs.
Respondents: NELSON P. MAGRARE, EVANGELINE M. PALCAT, RODOLFO

BAYOMBONG, AND REGISTER OF DEEDS OF ANTIQUE, SAN
JOSE, ANTIQUE
G.R. No. 206584, January 11, 2016
Second Division
Facts:
Andigan sold undivided portions of Lot 1052-A to Nelson P. Magrare, Evangeline
M. Palcat and Rodolfo Bayombong. Andigan caused the subdivision of Lot 1052-A into
five lots. The old TCT was cancelled and new certificates were issued for the subdivided
portions under the name of Andigan. Andigan did not turn over the new TCTs to
Magrare, Palcat and Bayombong, and the latter were unaware of the subdivision.
Andigan mortgaged the same three lots to Galido and the latter came into
possession of the owner's duplicate copies of the three TCTs. Magrare, Palcat and
Bayombong registered their respective adverse claims on TCTs. On the same day,
petitioner also registered her mortgage on the same TCTs.
Galido then filed with thed RTC a case for foreclosure of mortgage against the
heirs of Andigan. As a result, the Sheriff issued a Certificate of Sale in favor of Galido of
the properties. Galido filed a petition seeking to cancel all entries appearing on TCT
alleging that she had been a holder in good faith.
The trial court ruled in favor of respondents. The Court of Appeals denied
petitioner's appeal. Hence, the instant petition.
Issue:
Whether there is a valid mortgage in favor of Galido.
Ruling:
None.
Petitioner derives her title from Andigan, as mortgagor. However, at the time
Andigan mortgaged the lots to petitioner he had already sold the same to Magrare, Palcat
and Bayombong. xxx.
xxx It is therefore as if nothing was mortgaged to her because Isagani Andigan
was no longer the owner of the mortgaged real property. Under Art. 2085 of the Civil
Code, two of the prescribed requisites for a valid mortgage are, that, the mortgagor be the
absolute owner of the thing mortgaged and, that, he has the free disposal thereof. These
requisites are absent when Isagani Andigan and his wife mortgaged the lots alluded to
above to the herein petitioner.43cralawlawlibrary
A spring cannot rise higher than its source. Since Andigan no longer had any
interest in the subject properties at the time he mortgaged them to her, petitioner had
nothing to foreclose.
46
Petitioners: SPOUSES ROBERTO AND ADELAIDA PEN vs.
Respondents: SPOUSES SANTOS AND LINDA JULIAN
G.R. No. 160408, January 11, 2016
FIRST DIVISION
Nature of the Action:
Facts:
Spouses Julian obtained loans from Spouses Pen. As security, Spouses Julian
executed a Real Estate Mortgage over their property registered under the name of Santos
Julian, Jr. The owner’s duplicate of TCT was delivered to Spouses Pen. At the time the
mortgage was executed, Spouses Julian were required by the Adelaida to
sign a one (1) page document purportedly an "Absolute Deed of Sale". Said
document did not contain any consideration, and was "undated, unfilled and
unnotarized".
Linda Julian offered to pay Adelaida the amount of PI50,000.00. The

latter refused to accept the offer and demanded that she be paid the amount
of P250,000.00. Unable to meet the demand, appellee Linda desisted from
the offer and requested that she be shown the land title which she conveyed
to Adelaida, but the latter refused. Upon verification with the Registry of
Deeds, she was informed that the title to the mortgaged property had
already been registered in the name of Adelaida.
By reason of the foregoing discoveries, appellee filed an Affidavit of

Adverse Claim. Spouses Julian formally demanded the reconveyance of the
title and/or the property to them, but the Spouses Pen refused. In the
process of obtaining other documents; the Spouses Julian also discovered
that Spouses Pen have obtained several Declarations of Real Property, and a
Deed of Sale consisting of two (2) pages which was notarized by one Atty.
Cesar Ching. Said document indicates a consideration of P70,000.00 for the
lot, and was made to appear as having been executed on October 22, 1986.
The RTC ruled in favor of the Spouses Julian. The CA affirmed the decision of
the RTC.
Issue:
Whether the deed of sale is a prohibited pactum commissorium.
Ruling:
Yes.
Article 2088 of the Civil Code prohibits the creditor from appropriating the things
given by way of pledge or mortgage, or from disposing of them; any stipulation to the
contrary is null and void. The elements for pactum commissorium to exist are as follows,
to wit: (a) that there should be a pledge or mortgage wherein property is pledged or
mortgaged by way of security for the payment of the principal obligation; and (b) that
there should be a stipulation for an automatic appropriation by the creditor of the thing
pledged or mortgaged in the event of non-payment of the principal obligation within the
stipulated period.9 The first element was present considering that the property of the
respondents was mortgaged by Linda in favor of Adelaida as security for the former's
indebtedness. As to the second, the authorization for Adelaida to appropriate the property
47
subject of the mortgage upon Linda's default was implied from Linda's having signed the
blank deed of sale simultaneously with her signing of the real estate mortgage. The haste
with which the transfer of property was made upon the default by Linda on her
obligation, and the eventual transfer of the property in a manner not in the form of a valid
dacion en pago ultimately confirmed the nature of the transaction as a pactum
commissorium.
48
Petitioner: PHILIPPINE NATIONAL BANK vs.
Respondent: JUAN F. VILA
G.R. No. 213241, August 1, 2016
Third Division
Ponente: PEREZ, J.:
Facts:
Spouses Comista obtained a loan from Traders Royal Bank. To secure the said
obligation, the Spouses Comista mortgaged to the bank a parcel of land designated as Lot
555-A-2 and registered under Transfer Certificate of Title (TCT) No. 131498 in their
names by the Register of Deeds of Pangasinan.
For failure of the Spouses Comista to make good of their loan obligation after it
has become due, Traders Bank foreclosed the mortgage constituted on the security of the
loan. After the notice and publication requirements were complied with, the subject
property was sold at the public auction on 23 December 1987. During the public sale,
respondent Juan F. Vila (Vila) was declared as the highest bidder after he offered to buy
the subject property for P50,000.00. The Certificate of Sale dated 13 January 1988 was
duly recorded in TCT No. 131498. To exercise his right of ownership, Vila immediately
took possession of the subject property and paid the real estate taxes corresponding
thereon.
Despite the lapse of the redemption period and the fact of issuance of a Certificate
of Final Sale to Vila, the Spouses Comista were nonetheless allowed to buy back the
subject property by tendering the amount of P50,000.00. A Certificate of Redemption
dated 14 March 1989 was issued for this purpose and was duly annotated in the title.
Claiming that the Spouses Cornista already lost their right to redeem subject property,
Vila filed an action for nullification of redemption.
The RTC rendered a Decision in favor of Vila thereby ordering the Register of
Deeds to cancel the registration of the certificate of redemption and the annotation
thereof. The decision of the appellate court became final and executor. By unfortunate
tum of events, the Sheriff could not successfully enforce the decision because the
certificate of title covering the subject property was no longer registered under the names
of the Spouses Comista.
It was found out that during the interregnum the Spouses Comista were able to
secure a loan from the PNB in the amount of P532,000.00 using the same property
subject of litigation as security. The Real Estate Mortgage (REM) was recorded.
Eventually, the Spouses Comista defaulted in the payment of their loan obligation with
the PNB prompting the latter to foreclose the property offered as security. The bank
emerged as the highest bidder during the public sale as shown at the Certificate of Sale
issued by the Sheriff. As with the prior mortgage, the Spouses Comista once again failed
to exercise their right of redemption within the required period allowing PNB to
consolidate its ownership over the subject property. Accordingly, TCT No. 131498 14 in
the name of the Spouses Comista was cancelled and a new one under TCT No. 216771
15 under the name of the PNB was issued.
Vila filedd a complaint against Spouses Cornista and PNB. Vila sought for the
nullification of TCT No. 216771 issued under the name of PNB and for the payment of
damages.
49
To refute the allegations of Vila, PNB pounded that at the time of the transaction,
the Spouses Cornista were still the absolute owners of the property possessing all the
rights to mortgage the same to third persons. PNB also harped on the fact that a close
examination of title was conducted and nowhere was it shown that there was any cloud in
the title of the Spouses Cornista, the latter having redeemed the property after they have
lost it in a foreclosure sale.
The RTC ruled in favour of Vila. The CA affirmed the RTC ruling.
Issue:
Whether PNB is a mortgagee in good faith.
Ruling:
No.
xxx PNB accepted outright the collateral offered by the Spouses Cornista without
making further inquiry as to the real status of the subject property. Had the bank been
prudent and diligent enough in ascertaining the condition of the property, it could have
discovered that the same was in the possession of Vila who, at that time, possessed a
colorable title thereon being a holder of a Final Certificate of Sale. The RTC further
exposed the frailty of PNB' s claim by pointing to the fact that it was Vila who was
paying the realty tax on the property, a crucial information that the bank could have
easily discovered had it exercised due diligence.
xxx
Clearly, the PNB failed to observe the exacting standards required of banking
institutions which are behooved by statutes and jurisprudence to exercise greater care and
prudence before entering into a mortgage contract.
50
PETITIONER: Dra. Mercedes Oliver vs.
RESPONDENTS: Philippine Savings Bank and Lilia Castro
G.R. No. 214567, April 4, 2016
First Division
Ponente: Mendoza, J.
FACTS:
Petitioner Mercedes Oliver (Oliver) was a depositor of respondent Philippine
Savings Bank (PSBank) Lilia Castro (Castro) was the Assistant Vice President of the
Acting Branch Manager of PSBank San Pedro, Laguna. She made an initial deposit of
P12 Million into her PSBank account. Castro convinced her to loan out her deposit as
interim or bridge financing for the approved loans of bank borrowers who were waiting
for the actual release of their loan proceeds.
Under this arrangement, Castro would first show the approved loan documents to
Oliver. Thereafter, Castro will withdraw the amount needed from Oliver’s account.
Castro would then charge 4% a month from the loan proceeds. Together with the interest
income, the principal amount previously withdrawn from Oliver’s bank account would be
deposited back to her account. Meanwhile, Castro would earn a commission of 10% from
the interest.
The arrangement went smoothly for months. Due to the frequency of bank
transactions, Oliver even entrusted her passbook to Castro. Because Oliver earned
substantial profit, she was further convinced by Castro to avail of an additional credit line
in the amount of P10M. The said credit line was secured by a real estate mortgage on her
house and lot in Ayala Alabang.
Oliver instructed Castro to pay P2M monthly to PSBank starting Sept. 3, 1998 so
that her credit line for P10M would be fully paid by Jan. 3, 1998. Beginning Sept. 1998,
Castro stopped rendering an account for Oliver. The latter demanded the return of her
passbook. When Castro showed her passbook, she noticed several erasures and
superimpositions therein.
In Oliver’s passbook, there were no entries from December 17, 1998 to December
27, 1998. The transaction history register, however, showed several transactions on these
very same dates including the crediting of P4.5 million and the debiting of P7 million on
December 21, 1998. Oliver then learned that the additional P4.5 million and
P1,396,310.45 loans were also secured by the real estate mortgage dated January 8, 1998,
covering the same property in Ayala Alabang.
Oliver received two collection letters, dated May 13, 1999 and June 18, 1999,
from PSBank referring to the non-payment of unpaid loans, to wit: (1) P4,491,250.00
from the additional loan and (2) P1,396,310.45 from the P10 million credit line. In her
response, Oliver protested that she neither availed of the said loans nor authorized the
withdrawal of P7 million from her account. She also claimed that the P10 million loan
from her credit line was already paid in full.
A final demand letter was sent to Oliver by PSBank, requiring her to pay the
unpaid loans. Oliver, however, still refused to pay. Subsequently, Oliver received a notice
of sale involving the property in Ayala Alabang informing her of the impending extra-
judicial foreclosure and sale of her house and lot to be held on October 21, 1999.
51
Oliver filed a complaint against Castro. The RTC rendered a decision in favor of
Oliver. On appeal, the CA reversed the lower court’s ruling. Hence, this case.
ISSUE:
Whether or not there was an implied agency between Oliver and Castro, thus the
loans were properly acquired.
HELD:
Yes.
A contract of agency may be inferred from all the dealings between Oliver and
Castro. Agency can be express or implied from the acts of the principal, from his silence
or lack of action, or his failure to repudiate the agency knowing that another person is
acting on his behalf without authority. The question of whether an agency has been
created is ordinarily a question which may be established in the same way as any other
fact, either by direct or circumstantial evidence. The question is ultimately one of
intention.
In this case, Oliver and Castro had a business agreement wherein Oliver would
obtain loans from the bank, through the help of Castro as its branch manager; and after
acquiring the loan proceeds, Castro would lend the acquired amount to prospective
borrowers who were waiting for the actual release of their loan proceeds. Oliver would
gain 4% to 5% interest per month from the loan proceeds of her borrowers, while Castro
would earn a commission of 10% from the interests. Clearly, an agency was formed
because Castro bound herself to render some service in representation or on behalf of
Oliver, in the furtherance of their business pursuit.
For months, the agency between Oliver and Castro benefited both parties. Oliver,
through Castro’s representations, was able to obtain loans, relend them to borrowers, and
earn interests; while Castro acquired commissions from the transactions. Oliver even
gave Castro her passbook to facilitate the transactions.
Accordingly, the laws on agency apply to their relationship. Article 1881 of the
New Civil Code provides that the agent must act within the scope of his authority. He
may do such acts as may be conducive to the accomplishment of the purpose of the
agency. Thus, as long as the agent acts within the scope of the authority given by his
principal, the actions of the former shall bind the latter.
x x x
52
Petitioner: MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY vs.
Respondent: RICHARD E. UNCHUAN
G.R. No. 182537, June 01, 2016
Second Division
Ponente: MENDOZA, J.:
Nature of the Action: Petition for review on certiorari1 under Rule 45 of the 1997 Rules
of Civil Procedure.
Facts:
Unchuan alleged that he was the legal and rightful owner of the subject lots and
that the titles was registered under the names of the heirs of Eugenio Godinez,
specifically, Teodora Tampus, Fernanda Godinez (the wife of Iscolastico Epe), Tomasa
Godinez (the wife of Mateo Ibañez), Sotera Godinez (the wife of Guillermo Pino),
Atanasio Godinez (married to Florencia Pino), Juana Godinez (the wife of Catalino
Cuison), and Ambrosio Godinez (married to Mamerta Inot); and that he bought the two
lots from the surviving heirs of the registered owners through several deeds of absolute
sale.
Unchuan further alleged that he came to know that Atanacio Godinez (Atanacio),
the supposed attorney-in-fact of all the registered owners and their heirs, already sold the
lots to Civil Aeronautics Administration (CAA), the predecessor of MCIAA; that the sale
covered by the Deed of Absolute Sale was null and void because the registered owners
and their heirs did not authorize Atanacio to sell their undivided shares in the subject lots
in favor of CAA.
MCIAA averred that, Atanacio, acting as the representative of the heirs of

Eugenio Godinez, sold the lots to the Republic of the Philippines, represented by CAA.
Thereafter, CAA took possession of the said property upon payment of the purchase
price. To corroborate the said transaction, Atanacio, along with other former registered
co-owners, signed a deed of partition attesting to the fact of sale of the two lots in favor
of the government and admitted its absolute right over the same. Since then, the said lots
had been in the possession of the Republic in the concept of an owner.
The RTC rendered judgment in favor of Unchuan. The CA affirmed the RTC
decision.
Issue:
Whether the sale between Anatacio and the CAA was void for lack of authority
and consideration.
Ruling:
It is valid as to the share of Anatacio but void as to the share of the other co-
owners. xxx
They were represented without a written authority from them clearly in violation
of the requirement under Articles 1874 and 1878 of the Civil Code, which provide:
Art. 1874. When a sale of a piece of land or any interest therein is through an agent, the
authority of the latter shall be in writing; otherwise, the sale shall be void.
Art. 1878. Special powers of attorney are necessary in the following cases:
xxx
53
(5) To enter into any contract by which the ownership of an immovable is transmitted or
acquired either gratuitously or for a valuable consideration;
xxx
Without a special power of attorney specifying his authority to dispose of an

immovable, Atanacio could not be legally considered as the representative of the other
registered co-owners of the properties in question. Atanacio's act of conveying the lots
cannot be a valid source of obligation to bind all the other registered co-owners and their
heirs because he was not clothed with any authority to enter into a contract with CAA.
The other heirs could not have given their consent as required under Article 1475 of the
New Civil Code because there was no meeting of the minds among the other registered
co-owners who gave no written authority to Atanacio to transact on their behalf.
Therefore, no contract was perfected insofar as the portions or shares of the other
registered co-owners or their heirs were concerned.
The transaction entered into by Atanacio and CAA, however, was not entirely void
because the lack of consent by the other co-owners in the sale was with respect to their
shares only. Article 493 of the New Civil Code expressly provides: xxx
54
Petitioner: MICHAEL C. GUY vs.
Respondent: ATTY. GLENN C. GACOTT
G.R. No. 206147, January 13, 2016
Second Division
Ponente: MENDOZA, J.:
Nature of the Action: Petition for review on certiorari under Rule 45.
Facts:
Atty. Glenn Gacott purchased two (2) brand new transreceivers from Quantech
Systems Corporation (QSC) through its employee Rey Medestomas, amounting to a total
of PI 8,000.00. Due to major defects, Gacott personally returned the transreceivers to
QSC and requested that they be replaced. Medestomas received the returned
transreceivers and promised to send him the replacement units within two (2) weeks.
Time passed and Gacott did not receive the replacement units as promised. QSC
informed him that there were no available units and that it could not refund the purchased
price. Despite several demands, both oral and written, Gacott was never given a
replacement or a refund. The demands caused Gacott to incur expenses in the total
amount of P40,936.44. Thus, Gacott filed a complaint for damages.
The RTC found that the two (2) transreceivers were defective and that QSC and
Medestomas failed to replace the same or return Gacott's money. The decision became
final as QSC and Medestomas did not interpose an appeal. Gacott then secured a Writ of
Execution. During the execution stage, Gacott learned that QSC was not a corporation,
but was in fact a general partnership registered with the Securities and Exchange
Commission (SEC). In the articles of partnership, Guy was appointed as General
Manager of QSC. Upon learning that Guy had vehicles registered in his name, Gacott
instructed the sheriff to proceed with the attachment of one of the motor vehicles of Guy.
Thereafter, Guy filed his Motion to Lift Attachment Upon Personalty, arguing that he
was not a judgment debtor and, therefore, his vehicle could not be attached.
The RTC issued an order denying Guy's motion. It explained that considering
QSC was not a corporation, but a registered partnership, Guy should be treated as a
general partner pursuant to Section 21 of the Corporation Code, and he may be held
jointly and severally liable with QSC and Medestomas. The Court of Appeals affirmed
the decision of the RTC. Hence, the present petition.
Issue:
Whether Guy is solidarily liable with the partnership for damages arising from the
breach of the contract of sale with Gacott.
Ruling:
No.
Although a partnership is based on delectus personae or mutual agency, whereby

any partner can generally represent the partnership in its business affairs, it is non
sequitur that a suit against the partnership is necessarily a suit impleading each and every
partner. It must be remembered that a partnership is a juridical entity that has a distinct
and separate personality from the persons composing it.
xxx
55
xxx Article 1816 of the Civil Code governs the liability of the partners to third
persons, which states that:
Article 1816. All partners, including industrial ones, shall be liable pro rata with all
their property and after all the partnership assets have been exhausted, for the
contracts which may be entered into in the name and for the account of the partnership,
under its signature and by a person authorized to act for the partnership. However, any
partner may enter into a separate obligation to perform a partnership contract.
This provision clearly states that, first, the partners' obligation with respect to the
partnership liabilities is subsidiary in nature. It provides that the partners shall only be
liable with their property after all the partnership assets have been exhausted. To say that
one's liability is subsidiary means that it merely becomes secondary and only arises if the
one primarily liable fails to sufficiently satisfy the obligation. Resort to the properties of a
partner may be made only after efforts in exhausting partnership assets have failed or that
such partnership assets are insufficient to cover the entire obligation. The subsidiary
nature of the partners' liability with the partnership is one of the valid defenses against a
premature execution of judgment directed to a partner.
In this case, had he been properly impleaded, Guy's liability would only arise
after the properties of QSC would have been exhausted. The records, however, miserably
failed to show that the partnership's properties were exhausted. Xxx
xxx
Second, Article 1816 provides that the partners' obligation to third persons with
respect to the partnership liability is pro rata or joint. Xxx
In other words, only in exceptional circumstances shall the partners' liability be

solidary in nature. Articles 1822, 1823 and 1824 of the Civil Code provide for these
exceptional conditions.
xxx
In essence, these provisions articulate that it is the act of a partner which caused
loss or injury to a third person that makes all other partners solidarity liable with the
partnership because of the words "any wrongful act or omission of any partner acting in
the ordinary course of the business, " "one partner acting within the scope of his
apparent authority" and "misapplied by any partner while it is in the custody of the
partnership." The obligation is solidary because the law protects the third person, who in
good faith relied upon the authority of a partner, whether such authority is real or
apparent.
In the case at bench, it was not shown that Guy or the other partners did a wrongful act or
misapplied the money or property he or the partnership received from Gacott. A third
person who transacted with said partnership can hold the partners solidarity liable for the
whole obligation if the case of the third person falls under Articles 1822 or 1823.41
Gacott's claim stemmed from the alleged defective transreceivers he bought from QSC,
through the latter's employee, Medestomas. It was for a breach of warranty in a
contractual obligation entered into in the name and for the account of QSC, not due to the
acts of any of the partners. For said reason, it is the general rule under Article 1816 that
governs the joint liability of such breach, and not the exceptions under Articles 1822 to
1824. Thus, it was improper to hold Guy solidarity liable for the obligation of the
partnership.
56
Petitioner: Lucita Tiorosio-Espinosa vs.
Respondents: Honorable Presiding Judge Virginia Hofilena-Europa, Nicolas L.

Sumapig
G.R. No. 185746 January 20, 2016
Third Divison
Nature of the Action: Petition for review on certiorari under Rule 45 to appeal the CA's
dismissal of the case.
Facts:
Necefero Jovero filed an action for damages against Spouses Espinosa before the
Regional Trial Court. In the complaint, Jovero alleged that Spouses Espinosa maliciously
filed several cases for theft, estafa and perjury against him for the sole purpose of vexing,
harassing, and humiliating him. Accordingly, Jovero prayed that Spouses Espinosa be
ordered to pay compensatory damages, moral damages, exemplary damages, attorney's
fees, and costs of suit.
The RTC rendered a decision in favor of Jovero. RTC subsequently issued a writ
of execution pending appeal.
Spouses Espinosa contended that execution pending appeal involving awards of

moral and exemplary damages is improper because it is contrary to the decisions of the
Supreme Court.
The Court of Appeals' outright dismissal of a petition for certiorari on procedural

grounds. Hence, this petition.
Issue:
Whether the awards of moral and exemplary damages, as well as attorney's fees,
may be the subject of execution pending appeal.
Ruling:
No.
The resolution of this issue is straightforward. Jurisprudence is replete with

pronouncements that execution pending appeal of awards of moral and exemplary
damages, and attorney's fees is not allowed. In Radio Communications of the Philippines,
Inc. (RCPI) v. Lantin; we explained why these cannot be the subject of execution pending
appeal:
...The execution of any award for moral and exemplary damages is dependent on the
outcome of the main case. Unlike actual damages for which the petitioners may
clearly be held liable if they breach a specific contract and the amounts of which are
fixed and certain, liabilities with respect to moral and exemplary damages as well as
the exact amounts remain uncertain and indefinite pending resolution by the
Intermediate Appellate Court and eventually the Supreme Court. The existence of
the factual bases of these types of damages and their causal relation to the
petitioners' act will have to be determined in the light of the assignments of errors
57
on appeal. It is possible that the petitioners, after all, while liable for actual damages may
not be liable for moral and exemplary damages. Or as in some cases elevated to the
Supreme Court, the awards may be reduced. (Emphasis supplied.)
In Engineering Construct ion Inc. v. National Power Corporation, we expanded

the RCPI doctrine to likewise exclude consequential damages and attorney's fees from
execution pending appeal. xxx. Clearly, the RTC committed legal error when it ordered
the premature execution of the awards of moral damages, exemplary damages, and
attorney's fees. Nonetheless, we recognize that the RTC had the power to order the
execution pending appeal of actual or compensatory damages in accordance with the
cited authorities.
58
Petitioners: THE ORCHARD GOLF & COUNTRY CLUB, INC., EXEQUIEL
D. ROBLES, CARLO R.H. MAGNO, CONRADO L. BENITEZ II,
VICENTE R. SANTOS, HENRY CUA LOPING, MARIZA SANTOS-
TAN, TOMAS B. CLEMENTE III, AND FRANCIS C.
MONTALLANA vs.
Respondents: ERNESTO V. YU AND MANUEL C. YUHICO
G.R. No. 191033, January 11, 2016
Third Division
Nature of the Action: Petition for review on certiorari under Rule 45 of the Rules of
Court.
Facts:
Ernesto Yu and Manuel Yuhico went to the Orchard Golf & Country Club to play
a round of golf. Due to the "no twosome" policy of the Orchard contained in the
membership handbook prohibiting groups of less than three players from teeing off on
weekends and public holidays before 1:00 p.m., respondents requested management to
look for another player to join them. Because Orchard were unable to find their third
player, respondent Yu tried to convince Francis Montallana, Orchard's assistant golf
director, to allow them to play twosome, even if they had to tee off from hole no. 10 of
the Palmer golf course. Montallana refused. Yu then shouted invectives at Montallana, at
which point he told respondent Yuhico that they should just tee off anyway, regardless of
what management's reaction would be. Respondents then teed off without permission
from Montallana. They were thus able to play, although they did so without securing a
tee time control slip before teeing off, again in disregard of a rule in the handbook. As a
result of respondents' actions, Montallana filed a report on the same day with the board of
directors. The respondents were suspended.
With regard to the purported damages they incurred, respondents testified during
the trial to support their respective allegations. Yuhico stated that he distanced himself
from his usual group (the "Alabang Boys") and that he became the butt of jokes of fellow
golfers.36 On the other hand, Yu represented that some of his friends in the business like
Freddy Lim, a certain Atty. Benjie, and Jun Ramos started to evade or refuse to have
dealings with him after his suspension.
Issue:
Whteher repondents are entitled to dameges.
Ruling:
No.
In the present case, Yu acknowledged that there was an offense committed.29
Similarly, Yuhico admitted that he was aware or had prior knowledge of the Club's "no
twosome" policy as contained in the Club's Membership Handbook and that they teed off
without the required tee time slip. xxx
Way different from the trial court's findings, there is, therefore, no factual and
legal basis to grant moral and exemplary damages, attorney's fees and costs of suit in
favor of respondents. The damages suffered, if there are any, partake of the nature of a
damnum absque injuria. xxx
59
There is a material distinction between damages and injury. Injury is the illegal
invasion of a legal right; damage is the loss, hurt, or harm which results from the injury;
and damages are the recompense or compensation awarded for the damage suffered.
Thus, there can be damage without injury in those instances in which the loss or harm
was not the result of a violation of a legal duty. These situations are often called damnum
absque injuria.
xxx
In other words, in order that the law will give redress for an act causing damage,
that act must be not only hurtful, but wrongful. There must be damnum et injuria. If, as
may happen in many cases, a person sustains actual damage, that is, harm or loss to his
person or property, without sustaining any legal injury, that is, an act or omission which
the law does not deem an injury, the damage is regarded as damnum absque injuria.
The proper exercise of a lawful right cannot constitute a legal wrong for which an
action will lie, although the act may result in damage to another, for no legal right has
been invaded. One may use any lawful means to accomplish a lawful purpose and though
the means adopted may cause damage to another, no cause of action arises in the latter's
favor. Any injury or damage occasioned thereby is damnum absque injuria. The courts
can give no redress for hardship to an individual resulting from action reasonably
calculated to achieve a lawful end by lawful means.54chanroblesvirtuallawlibrary
"One who makes use of his own legal right does no injury. Qui jure suo utitur
nullum damnum facit. If damage results from a person's exercising his legal rights, it is
damnum absque injuria." In this case, respondents failed to prove by preponderance of
evidence that there is fault or negligence on the part of petitioners in order to oblige them
to pay for the alleged damage sustained as a result of their suspension as Club members.
Certainly, membership in the Club is a privilege. Regular members are entitled to use all
the facilities and privileges of the Club, subject to its rules and regulations. As correctly
pointed out by petitioners, the mental anguish respondents experienced, assuming to be
true, was brought upon them by themselves for deliberately and consciously violating the
rules and regulations of the Club. Considering that respondents were validly suspended,
there is no reason for the Club to compensate them. Indeed, the penalty of suspension
provided for in Section 1, Article XIV of the By-Laws is a means to protect and preserve
the interest and purposes of the Club. This being so, the suspension of respondents does
not fell under any of the provisions of the Civil Code pertaining to the grant of moral and
exemplary damages, attorney's fees, and litigation costs.
60

Civil Law Review Ii: Case Digest

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CIVIL LAW REVIEW II

ATTY. CRISOSTOMO A. URIBE

B. Sources of Civil Obligations

C. Compliance with Obligations

D. Kinds of Civil Obligations

Spouses Lam v. Kodak G.R. No. 167615 January 11, 2016………..1

5. As to the presence of an accessory undertaking in case

Cabanting v. BPI G.R. No. 201927, February 17, 2016…….………..3

Excuses for non-performance

Sps. Poon v. PSB G.R. No. 183794, June 13, 2016……………….5

F. Remedies for Breach of Obligations

NCLPI vs. LMI G.R. No. 176986, January 13, 2016…...........7

G. Modes of Extinguishment of Obligations

Villarta v. Talavera G.R. No. 208021, February 03, 2016………..9

Odiamar v. Valencia G.R. NO. 213582, JUNE 28, 2016…………...11

Sps. Jonsay v. Solidbank Corp. .................................................13

B. Fundamental Characteristics/Principles of Contracts

Cabanting v. BPI G.R. No. 201927, February 17, 2016……………..15

4. Obligatory Force of Contracts

Vda. de Rosales v. Dime ………………………………………............18

E. Essential elements of contracts

2. Object certain which is the subject matter of the

MCIAA vs. Heirs of Ijordan ………………………………………………20

Tan v. Hosana G.R. No. 190846, February 03, 2016 …………….22

Lukban v. Optimum Development Bank …………………………….24

Gamaliel v. Sps. Ravanes G.R. No. 183645, July 20, 2016…………….38

E. Deposit – Warehouse Receipts Law/Trust Receipts Law

F. Aleatory Contracts – Insurance, Gambling, Life Annuity

Special Contracts: Accessory Contracts

G. Guaranty and Suretyship

Carodan v. China Banking Corp. ……………………………………40

H. Pledge, Mortgage and Antichresis

Special Contracts: Preparatory Contracts

III. Extra- Contractual Obligations

Tiorosio-Espinosa v. Hofilena-Europa ……………………………..57

G.R. No. 167615, January 11, 2016

Nature of the Action: Petition for Review on Certiorari.

4. Minilab Equipment Package shall be payable in 48 monthly installments at

The Letter Agreement contained an indivisible obligation.

The intention of the parties to bind themselves to an indivisible obligation can be

G.R. No. 201927, February 17, 2016

Trial ensued even if the petitioners failed to present evidence.

G.R. No. 183794, June 13, 2016

Nature of the Action: Petition for Review on Certiorari.

The closure of respondent's business was neither a fortuitous nor an unforeseen

G.R. No. 176986, January 13, 2016

Nature of the Action: Petition for Review on Certiorari

NCLPI replied to LMI's letter acknowledging the arrearages incurred by it under

G.R. No. 208021, February 03, 2016

Nature of the Action: Petition for Review.

Respondent was able to sufficiently explain why the presumption of an equitable

G.R. NO. 213582, JUNE 28, 2016

Nature of the Action: Petition for review on certiorari.

G.R. No. 206459, April 6, 2016

Nature of the Action: Petition for Review on Certiorari

Momarco religiously paid the monthly interest charged by Solidbank from

Solidbank proceeded to extrajudicially foreclose on the mortgage. On September

On the question of the petitioners’ failed proposal to extinguish their loan

G.R. No. 201927, February 17, 2016

A contract of adhesion, wherein one party imposes a ready-made form of contract

The validity or cnforceability of the impugned contracts will have to be

Here, there is no proof that petitioners were disadvantaged, uneducated or utterly

GR. NO. 167082, AUGUST 3, 2016