School of Law

Compilation of
Questions and Suggested Answers

Book 5
(Special Contracts Agency, Credit Transactions, Lease,
Partnership, Sales, & Torts and Damages)

Submitted by:
CIVIL LAW (Weekday & Weekend) CLASS
(A.Y. 2015-2016)

Submitted to:
ATTY. JENNOH TEQUILLO
Civil Law Review Professor

December 17, 2015

Table of Content
AGENCY............................................................................................................................1
Agency.....................................................................................................................1
Spouses Salvador vs. Spouses Rabaja.........................................................1
Bautista-Spille vs. NICORP Management & Development Corporation. . .2
Patrimonio vs. Guttierez..............................................................................4
Recio vs. Heirs of Spouses Aguendo...........................................................5
Heirs of the Late Felix Bucton vs. Spouses Gonzalo...................................7
Spouses Viloria vs. Continental Airlines, Inc..............................................8
Republic vs. Evangelista............................................................................10
Authority of the Agent to Sell a Real Property......................................................12
Spouses Bautista vs. Spouses Jalandoni....................................................12
Form of Contract of Agency..................................................................................15
Yoshizaki vs. Joy Training Center of Aurora, Inc......................................15
Liability of an Agent..............................................................................................17
Ace Navigation Co. vs. FGU Insurance Corporation...............................17
CREDIT TRANSACTIONS...........................................................................................18
Credit Transactions................................................................................................18
Ravago vs. Metropolitan Bank & Trust Co...............................................18
Lim vs. Security Bank Corporation...........................................................21
Philnico Industrial Corporation vs. Privatization and Management Office
...................................................................................................................23
Philippine National Bank vs. Spouses Maraon.......................................24
Yngson vs. Philippine National Bank........................................................25
Continuing Guaranty.............................................................................................27
Bank of Commerce vs. Flores....................................................................27
Equitable Mortgage...............................................................................................29
Spouses Solitarios vs. Spouses Jaque........................................................29
Interest...................................................................................................................31
Spouses Salvador Abella vs. Spouses Romeo Abella.................................31
Real Mortgage.......................................................................................................33
Bucton vs. Rural Bank of El Salvador.......................................................33
Suretyship; Interests...............................................................................................35
Gilat Satellite Network vs. United Coconut Planters Bank General
Insurance Co.............................................................................................35
Writ of Possession in an Extra-Judicial Sale.........................................................37
Spouses Marquez vs. Spouses Alindog......................................................37
LEASE..............................................................................................................................39
Lease......................................................................................................................39
Spouses Golez vs. Nemeo........................................................................39
One Network Bank vs. Baric.....................................................................41

Spouses Mamaril vs. The Boy Scout of the Philippines............................42

Manuel Uy & Sons, Inc. vs. Valbueco, Inc................................................43
Manila International Airport Authority vs. Avia Filipinas International,
Inc..............................................................................................................45
Koppel, Inc. vs. Makati Rotary Club Foundation, Inc..............................46
Inocencio vs. Hospicio de San Jose...........................................................47
Manila International Airport Authority vs. Ding Velayo Sport Center, Inc.
...................................................................................................................49
Agricultural Leasehold..........................................................................................50
Jusayan vs. Sombilla.................................................................................50
Implied New Lease................................................................................................51
Samelo vs. Manotok Services, Inc.............................................................51
Nature....................................................................................................................53
Comglasco Corporation vs. Santos Car Check Center Corporation........53
PARTNERSHIP...............................................................................................................54
Partnership.............................................................................................................54
Jarantilla, Jr. vs. Jarantilla.......................................................................54
Mendoza vs. Paule.....................................................................................56
Mendiola vs. Court of Appeals..................................................................58
Santos vs. Spouses Reyes...........................................................................59
Torres vs. Court of Appeals.......................................................................60
Agency and Trusts.................................................................................................62
Tong vs. Kun..............................................................................................62
Evidence of Existence; Right to Demand an Accounting......................................63
Heirs of Tan Eng Kee vs. Court of Appeals...............................................63
Existence of partnership; Partnership Profits........................................................65
Heirs of Jose Lim vs. Lim..........................................................................65
Purchase of Partners Interest................................................................................67
Realubit vs. Jaso........................................................................................67
Through a Verbal Contract.....................................................................................69
Sunga-Chan vs. Chua................................................................................69
SALES...............................................................................................................................71
Sales.......................................................................................................................71
Lim vs. Security Bank Corporation...........................................................71
Robern Development Corporation vs. Peoples Landless Association.....73
Action for Reconveyance......................................................................................75
Spouses Roque vs. Aguadoet.....................................................................75
Assignment of Credit.............................................................................................77
Fort Bonifacio Development Corporation vs. Fong.................................77
Breach of Warranty................................................................................................79
Spouses Tumibay vs. Spouses Lopez..........................................................79
Lack of Consideration............................................................................................81
Lank Bank of the Philippines vs. Poblete..................................................81
Perfection of Contract of Sale................................................................................82

Riosa vs. Tabaco La Suerte Corporation..................................................82

Recoupment...........................................................................................................84
First United Constructors Corp. vs. Bayanihan Automotive Corporation84
Right of Repurchase..............................................................................................86
David vs. David.........................................................................................86
Warranty Against Eviction.....................................................................................88
Bignay Ex-Im Philippines, Inc. vs. Union Bank of the Philippines...........88
TORTS AND DAMAGES...............................................................................................89
Torts and Damages.................................................................................................89
Mendoza vs. Spouses Gomez.....................................................................89
BPI Express Card Corporation vs. Armovit..............................................91
Espineli vs. People....................................................................................92
California Clothing, Inc. vs. Quinones......................................................94
Filipinas Synthetic Fiber Corporation vs. De Los Santos.........................96
Philippine Hawk Corporation vs. Lee.......................................................97
Air France vs. Gillego...............................................................................99
Damages..............................................................................................................101
Snow Mountain Dairy Corporation vs. GMA Veterans Force Inc..........101
Doctrine of Ipsa Loquitur....................................................................................103
Solidum vs. People..................................................................................103
Nominal Damages...............................................................................................105
Cathay Pacific vs. Reyes.........................................................................105
Quasi-Delict.........................................................................................................107
Dela Llano vs. Biong...............................................................................107

AGENCY
Agency

I.
Civil Law Topic

: Agency

Source

: Spouses Salvador vs. Spouses Rabaja

G.R. No. 199990, February 4, 2015

Contributor

: Solatorio, Carol
-xxxx-

PROBLEM:
P executed an SPA in favor of A, authorizing the latter to sell the property of P to B and to
receive payment therefore. B made partial payment in the amount of P950,000 to A and is
occupying the property. A contract to sell was executed by A in favor of B and signed by
P as buyer-principal but P, as vendor, did not reserve his title to the property until the
vendee had fully paid the purchase price. A did not remit the payment to P. B filed an
action for rescission of contract and demanded for the return of the P950,000 he paid to
A. Is Bs action proper?
SUGGESTED ANSWER:
Yes. Considering that there was a valid SPA, then B properly made payments to A, as
agent of P; and it was as if B paid to P. It is of no moment, insofar as B is concerned,
whether or not the payments were actually remitted to P.
According to Article 1990 of the New Civil Code, insofar as third persons are concerned,
an act is deemed to have been performed within the scope of the agent's authority, if such
act is within the terms of the power of attorney, as written. In this case, B did not
recklessly enter into a contract to sell with A. He required his presentation of the power
of attorney before B transacted with his principal. And when A presented the SPA to B,
the latter had no reason not to rely on it.

II.
Civil Law Topic

: Agency

Source

: Bautista-Spille vs. NICORP Management & Development Corporation

G.R. No. 214057, October 15, 2015

Contributor

: Quiron, Maria Cristina

-xxxx-

PROBLEM:
Kristian, executed a General Power of Attorney in favor of his brother,Ramon
authorizing the later to administer all his businesses and properties in the Philippines.
Ramon and Ayala Land Development Corporation entered into a contract to sell,
pertaining to the land owned by Kristian for an agreed price on P15,000.00. Ayala Land
was to give a downpayment of 20% and the remaining balance in eight (8) months. It was
agreed that the TCT of the subject property would be deposited with Bank of Philippine
Island and placed in escrow. Furthermore, Ramon was required to submit a special power
of attorney covering the sale transaction otherwise , the payment of the balance would be
suspended and a penalty of P150,000 every month would be imposed.
When Kristian discovered the sale, he immediately sent demand letters to Ayala Land and
BPI informing them that he was opposing the sale and that Ramon was not clothed with
the authority to enter into a contract to sell, however both parties failed and refused to
return the title of the subject property for the reason that Ramon was empowered to enter
into a contract to sell by virtue of the general power of attorney. Consequently, Kristian
filed a complaint against the respondents.
Was BPI and Ayala Lands defense tenable?
SUGGESTED ANSWER:
No, BPI and Ayala Lands defense is not tenable. The well- established rule is
when a sale of a parcel 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. Article 1874 and 1878 of
the Civil Code 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:
(1) xxx
(5) To enter into any contract by which the ownership of an
immovable is transmitted or acquired either gratuitously or for a valuable
consideration.
From the foregoing, it is very clear that an SPA in the conveyance of real rights
over immovable property is necessary. In the case at bar, Ayala Land was fully aware that
Ramon was not properly authorized to enter into any transaction regarding the sale of
Kristians property, evidence by the fact that Ayala Land Required Benjamin to secure the
SPA from Kristian and even imposed a substantial amount of penalty in the amount of
P150,000,00 a month in case of non-compliance plus suspension of payment of the
balance of contract price.

III.
Civil Law Topic

: Agency

Source

: Patrimonio vs. Guttierez

G.R. No. 187769, June 4, 2014

Contributor

: Siega, Mar Teresa

-xxxx-

PROBLEM:
Alvin, a well-known basketball player entered into a business venture with Nap, a friend.
In the course of their business, Alvin pre-signed several checks to answer for the
expenses of the business. Although signed, these checks had no payees name, date or
amount. The blank checks were entrusted to Nap with the specific instructions not to fill
them out without previous notification to and approval by Alvin. Nap , without the
knowledge and consent of Alvin, secured a loan from Gerry. He used the pre-signed
check to and filled out the blank portions thereof. When Nap was unable to pay his
obligation, Gerry went after Alvin and filed BP 22. Is Alvin liable to pay for the contract
of loan?
SUGGESTED ANSWER:
NO.
In the absence of any showing of any agency relations or special authority to act for and
in behalf of the petitioner, the loan agreement Nap entered into with Gerry is null and
void. Furthermore, that Alvin entrusted the blank pre-signed checks to Nap is not legally
sufficient because the authority to enter a loan can never be presumed. The contract of
agency and the special fiduciary relationship inherent in this contract must exist as a
matter of fact. The person alleging it has the burden of proof to show, not only the fact of
agency but also its nature and extent. Art 1868 of the Civil Code defines a contract of
agency as a contract whereby a person binds himself to render some service or to do
something in representation or on behalf of another, with the consent or authority of the
latter.

IV.
Civil Law Topic

: Agency

Source

: Recio vs. Heirs of Spouses Aguendo

G.R. No. 182349, July 24, 2013

Contributor

: Sayson, Gerlyn Mae

-xxxx-

PROBLEM:
AA together with his 4 other siblings inherited a property from their parents which they
leased to RR. After 1 year of the contract of lease, AA offered to sell the property to RR.
A series of negotiations took place where AA represented himself to be the agent of the
rest of his co- heirs. An oral contract of sale was entered into by AA and RR where the
latter made a partial payment of P50 000 which was received by AA and evidenced by a
receipt. A month after, RR made another payment of P100 000 which was again received
by AA and a receipt was issued. When RR wanted to pay the rest of the purchase price,
AA refused to receive the payment and kept on avoiding RR.
RR then filed a case to compel AA to execute a Deed of Absolute Sale and annotate a
notice of lis pendens to the certificate of title of the property. However, before the case
went to trial, RR learned that AA and his co- heirs sold the property to SP. During the
trial, the other co- heirs argued that they did not authorize AA to sell the property to RR.
Is AA considered an agent of his other co- heirs entitling RR to have vested rights over
the property? Explain
SUGGESTED ANSWER:
No, AA is not an agent of his co- heirs to the contract of sale he entered with RR. A
Special Power of Attorney signed by all the heirs is an indispensable requisite before a
co- heir becomes an agent of the rest of the heirs and makes the contract of sale binding
against all the heirs.
Articles 1874 and 1878 of the Civil Code explicitly 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:
(5) To enter into any contract by which the ownership of an immovable is
transmitted or acquired either gratuitously or for a valuable consideration;
The requirements set by the law must be strictly complied with. In entering into the
contract of sale, RR should have required AA to present a Special Power of Attorney
from his co- heirs authorizing him to sell the property. Because of that, RR assumed the
risk that AA is not authorized by his co- heirs in selling the property to him.
However, RR has vested rights on the aliquot share of AA in the inheritance since it was
AA who entered with contract of sale with RR.

V.
Civil Law Topic

: Agency

Source

: Heirs of the Late Felix Bucton vs. Spouses Gonzalo

G.R. No. 188395, November 20, 2013

Contributor

: Ramirez, Gemma
-xxxx-

PROBLEM:
A buyer informed the registered owner of a parcel of land that he already bought the
latters real property through someone who represented himself as the land owners
authorized agent as shown in the annotation at the back of the Certificate of Title. Upon
inquiry made by the owner, he learned that his Owners Duplicate of Certificate of Title
was lost while in the possession of his daughter and by unfortunate turn of events the
same fell in the hands of the purported agent.
Is the buyer entitled to the protection the law accords to purchasers in good faith and for
value notwithstanding failure to ascertain the genuineness and authenticity of the agents
authority?
SUGGESTED ANSWER:
No, the buyer is not entitled to the protection the law accords in good faith and for value
for failure to ascertain the genuineness and authenticity of the agents authority.
While courts protect the right of innocent purchaser for value and does not require him to
look beyond the Certificate of Title, this protection is not extended to a purchaser who is
not dealing with a registered owner of the land. In case the buyer does not deal with the
registered owner of the real property the law requires that a higher degree of prudence be
exercised by the purchaser.
Every person dealing with an agent is put upon inquiry and must discover upon his peril
the authority of the agent and this is especially true where the act of the agent is of
unusual nature. If a person makes no inquiry, he is chargeable with knowledge of the
agents authority and his ignorance of that authority will not be any excuse.

VI.
Civil Law Topic

: Agency

Source

: Spouses Viloria vs. Continental Airlines, Inc.

G.R. No. 188288, January 16, 2012

Contributor

: Tejano, Misaellee
-xxxx-

PROBLEM:
Ferdi Santos is planning to spend Christmas in Paris. He bought a round trip Philippine
Airline tickets for Manila to Paris from the Holiday Travel Agency after the general
Manager, Mr. Vicente, told him that only Philippine Airlines offers a direct flight from
Manila to Paris.
After buying the ticket and leaving the travel agency, he saw an advertisement in the local
newspaper announcing Cebu Pacific Airlines direct flight from Manila to Paris. Ferdi
went back to Holiday Travel Agency and demanded a refund since he was misled by Mr.
Vicentes misrepresentations. Mr. Vicente refused to give a refund.
Ferdi then went to Philippine Airlines main branch and demanded a refund. When the
latter refused, Ferdi filed a complaint against Philippine Airlines praying that it be
ordered to give a refund.
Is Philippine Airlines bound by Mr. Vicentes bad faith and misrepresentation?
SUGGESTED ANSWER:
No. In actions based on quasi-delict, a principal can only be held liable for the tort
committed by its agents employees if it has been established by preponderance of
evidence that the principal was also at fault or negligent or that the principal exercise
control and supervision over them.
If the passengers cause of action against the airline company is premised on culpa
aquiliana or quasi-delict for a tort committed by the employee of the airline companys
agent, there must be an independent showing that the airline company was at fault or
negligent or has contributed to the negligence or tortuous conduct committed by the
employee of its agent. The mere fact that the employee of the airline companys agent has

committed a tort is not sufficient to hold the airline company liable. There is no vinculum
juris between the airline company and its agents employees and the contractual
relationship between the airline company and its agent does not operate to create a
juridical tie between the airline company and its agents employees. Article 2180 of the
Civil Code does not make the principal vicariously liable for the tort committed by its
agents employees and the principal-agency relationship per se does not make the
principal a party to such tort; hence, the need to prove the principals own fault or
negligence.
On the other hand, if the passengers cause of action for damages against the airline
company is based on contractual breach or culpa contractual, it is not necessary that there
be evidence of the airline companys fault or negligence. As this Court previously stated
in China Air Lines and reiterated in Air France vs. Gillego,24 in an action based on a
breach of contract of carriage, the aggrieved party does not have to prove that the
common carrier was at fault or was negligent. All that he has to prove is the existence of
the contract and the fact of its non-performance by the carrier.
Therefore, without a modicum of evidence that Philippine Airlines exercised control over
Holiday Travels employees or that Philippine Airlines was equally at fault, no liability
can be imposed on Philippine Airlines for Mr. Vicentes supposed misrepresentation.

VII.
Civil Law Topic

: Agency

Source

: Republic vs. Evangelista

G.R. No. 156015, August 11, 2005

Contributor

: Sumampong-Espejo, Marietes
-xxxx-

PROBLEM:
AAA is the Agent PPPpursuant to a Special Power of Attorney executed by the latter,
giving such power and authority that include the power to institute legal actions for the
protection of his property where an alleged treasure is deposited,to engage in an activity
of treasure hunting and negotiate proceeds of minerals found in the land for the benefit of
PPPwith the sharing of 60:40.
DDD an intruder and without consent from PPP started digging in the said land and hired
several armed men to guard the parameter. When AAA knew such illegal acts, he then
consulted the services of a lawyer, Atty. BBB and hired the same in order to stop the
illegal act of DDD to the prejudice of his principal. By way of compensation, they
agreed that Atty. BBB will get 30% of any treasure that may be found thereat, so that
Atty, BBB petitioned to the court for the issuance of a temporary restraining order,
enjoining DDD from continuing his illegal acts. PPP was dissatisfied by the way AAA
implemented and managed the treasure hunting revoked the SPA without AAAs
knowledge. The petition was granted, however, DDD filed a motion to dismiss on the
ground that the SPA executed by PPP has already been revoked as evidenced by a DEED
of REVOCATION, thereby PPP is not a real party-in-interest.
Is the revocation proper thereby making PPP not a real party-in-interest and the case
should be dismissed?
SUGGESTED ANSWER:
Art. 1868 of the Civil Code provides that by the contract of agency, an agent binds
himself to render some service or do something in representation or on behalf of another,
known as the principal, with the consent or authority of the latter.

Art. 1927 of the Civil Code provides that, an Agency cannot be revoked if a bilateral
contract depends upon it, or if it is the means of fulfilling an obligation already
contracted....XXXX
Generally, the agency may be revoked by the principal at will,as it is a personal contract
of representation based on trust and confidence reposed by the principal on his agent,
however, it admits an exception under Art. 927.
In the case at bar, the agency granted by PPP to AAA is coupled with interest as a
bilateral contract depends on it. It is clear that AAA was given by PPP, the power to
manage the treasure hunting activities in the subject land; to file any case against anyone
who enters the land without authority from PPP, to engage the services of lawyers to
carry out the agency; and enter into agreements relative thereto. It is clear that the
treasure that may be found in the land is the subject matter of the agency; that under the
SPA, AAA can enter into contract with Atty. BBB, so that both have an interest in the
subject matter of the agency. When an agency is constituted as a clause in a bilateral
contract, that is, when the agency is inserted in another agreement, the agency ceases to
be revocable at the pleasure of the principal as the agency shall now follow the condition
of the bilateral agreement. Consequently, the Deed of Revocation executed by PPP has
no effect. Therefor, the revocation was not proper and the case cannot be dismissed on
such ground as PPP is a real party-in-interest.

Authority of the Agent to Sell a Real Property

VIII.
Civil Law Topic

: Agency; Authority of the Agent to Sell a Real Property

Source

: Spouses Bautista vs. Spouses Jalandoni

G.R. No. 171464, November 27, 2013

Contributor

: Trias, Parker
-xxxx-

PROBLEM:
Spouses Jalandoni were the registered owners of two (2) parcels of land, covered by
Transfer Certificate of Title (TCT) Nos. 201048 5 and 201049. The two lots were located
in Muntinlupa City, each parcel of land containing an area of Six Hundred (600) square
meters, more or less, amounting to P1,320,000.00 per lot.
In May 1997, the Spouses Jalandoni applied for a loan with a commercial bank and, as a
security thereof, they offered to constitute a real estate mortgage over their two lots. After
a routine credit investigation, it was discovered that their titles over the two lots had been
cancelled and new TCT Nos. 206091 and 205624 were issued in the names of Spouses
Bautista. Upon further investigation, they found out that the bases for the cancellation of
their titles were two deeds of absolute sale, dated April 4, 1996 and May 4, 1996,
purportedly executed and signed by them in favor of Spouses Bautista.
Aggrieved, Spouses Jalandoni filed a complaint for cancellation of titles and damages
claiming that they did not sell the subject lots and denied having executed the deeds of
absolute sale. They asserted that that their signatures appearing on the deeds of absolute
sale were forged and that said deeds were null and void and transferred no title in favor of
Spouses Bautista. They even added that they never met the Spouses Bautista; and that the
Spouses Bautista were aware of the true value of the lots because they mortgaged one lot
to Spouses Tongco for P1,700,000.00 and the other lot for P3,493,379.82 to MCC.
On the other hand, Spouses Bautista claimed that in March 1996, a certain Teresita
Nasino (Nasino) offered to Eliseo Bautista (Eliseo) two parcels of land located in
Muntinlupa City and that the parcels of land were sold at a bargain price because the
owners were in dire need of money. Nasino told them that she would negotiate with the

Spouses Jalandoni, prepare the necessary documents and cause the registration of the sale
with the Register of Deeds. Since Nasino was a wife of a friend, Spouses Bautista trusted
her and gave her the authority to negotiate with Spouses Jalandoni on their behalf.
Spouses Bautista further alleged that in April 1996, Nasino informed Eliseo that the deeds
of sale had been prepared and signed by Spouses Jalandoni; that they, in turn, signed the
deeds of sale and gave Nasino the amount of P1,200,000.00; that TCT Nos. 206091 and
205624 were issued to them; that since they needed funds for a new project, Eliseo
contracted a loan with Spouses Tongco using as a security the parcel of land covered by
TCT No. 205624; that he also contracted a loan with MCC in the amount of
P3,493,379.82 and used as a security the lot covered by TCT No. 206091; that they
eventually paid the loan with the Spouses Tongco, thus, the real estate mortgage was
cancelled; and that since they were having difficulty paying the interests of their loan
with the MCC, they also mortgaged the lot covered by TCT No. 205624.
For its part, MCC reiterated its claim in its motion to dismiss that the venue of the case
was improperly laid and that the complaint failed to state a cause of action against it as
there was no allegation made in the complaint as to its participation in the alleged
falsification. MCC averred that they found no indication of any defect in the titles of
Spouses Bautista; that it exercised due diligence and prudence in the conduct of its
business and conducted the proper investigation and inspection of the mortgaged
properties; and that its mortgage lien could not be prejudiced by the alleged falsification
claimed by Spouses Jalandoni.
DECIDE.
SUGGESTED ANSWER:
The case should be decided in favor the Spouses Jalandoni.
Articles 1874 of the Civil Code provides:
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.
Likewise, Article 1878 paragraph 5 of the Civil Code specifically mandates that the
authority of the agent to sell a real property must be conferred in writing, to wit:
Art. 1878.
cases:
(1)
xxx

Special powers of attorney are necessary in the following

...
xxx

xxx

(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
xxx
xxx.
The foregoing provisions explicitly require a written authority when the sale of a piece of
land is through an agent, whether the sale is gratuitously or for a valuable consideration.
Absent such authority in writing, the sale is null and void.
In the case at bar, it is undisputed that the sale of the subject lots to Spouses Bautista was
void. Based on the records, Nasino had no written authority from Spouses Jalandoni to
sell the subject lots. The testimony of Eliseo that Nasino was empowered by a special
power of attorney to sell the subject lots was bereft of merit as the alleged special power
attorney was neither presented in court nor was it referred to in the deeds of absolute sale.
Bare allegations, unsubstantiated by evidence, are not equivalent to proof under the Rules
of Court.

Form of Contract of Agency

IX.
Civil Law Topic

: Agency; Form of Contract of Agency

Source

: Yoshizaki vs. Joy Training Center of Aurora, Inc.

G.R. No. 174978, July 31, 2013

Contributor

: Regudo, Marion Thursday

-xxxx-

PROBLEM:
Joy, Inc. is a non-stock, non-profit religious educational institution. It was the registered
owner of a parcel of land and the building thereon (real properties) located in Baler,
Aurora. The parcel of land was designated as Lot No. 123 and was covered by Transfer
Certificate of Title (TCT) No. T-JJJ.
On November 10, 1998, the spouses Rich and Lyn Johnson sold the real properties in
favor of the spouses Yoshi. The spouses Johnson were members of Joys board of trustees
at the time of sale. On December 7, 1998, TCT No. T-JJJ was cancelled and TCT No. TYYY was issued in the name of the spouses Yoshi.
Spouses Yoshi presents three pieces of evidence to prove that Joy Training specially
authorized the spouses Johnson to sell the real properties: (1) TCT No. T-JJJ, (2) the
resolution, (3) and the certification.
TCT No. T-JJJ, entered in the Registry of Deeds on March 5, 1998, states:
A parcel of land x xx is registered in accordance with the provisions of
the Property Registration Decree in the name of JOY, INC., Rep. by Sps.
RICH A. JOHNSON and LYN S. JOHNSON, both of legal age, U.S.
Citizen, and residents of P.O. Box 3246, Shawnee, Ks 66203, U.S.A.
On the other hand, the fifth paragraph of the certification provides:

Further, RichA. and Lyn J. Johnson were given FULL AUTHORITY for
ALL SIGNATORY purposes for the corporation on ANY and all matters
and decisions regarding the property and ministry here. xxx
Is there a contract of agency to sell the real properties between Joy, Inc.and the spouses
Johnson in this case? Explain.
SUGGESTED ANSWER:
As a general rule, a contract of agency may be oral. However, it must be written when the
law requires a specific form. Specifically, Article 1874 of the Civil Code provides that the
contract of agency must be written for the validity of the sale of a piece of land or any
interest therein. Otherwise, the sale shall be void. A related provision, Article 1878 of the
Civil Code, states that special powers of attorney are necessary to convey real rights over
immovable properties.
The above documents do not establish the existence of the contract of agency to sell the
real properties. TCT No. T-JJJ merely states that Joy is represented by the spouses
Johnson. The title does not explicitly confer to the spouses Johnson the authority to sell
the parcel of land and the building thereon. Moreover, the phrase "Rep. by Sps. RICHA.
JOHNSON and LYN S. JOHNSON" only means that the spouses Johnson represented
Joy in land registration.
Moreover, the certification is a mere general power of attorney which comprises all of
Joy Trainings business. Article 1877 of the Civil Code clearly states that "an agency
couched in general terms comprises only acts of administration, even if the principal
should state that he withholds no power or that the agent may execute such acts as he
may consider appropriate, or even though the agency should authorize a general and
unlimited management."

Liability of an Agent

X.
Civil Law Topic

: Agency; Liability of an Agent

Source

: Ace Navigation Co. vs. FGU Insurance Corporation

G.R. No. 171591, June 25, 2012

Contributor

: Tohay , Ada Bonita

-xxxx-

PROBLEM:
CARDIA shipped on board a vessel bags of cement to be discharged at the port of
Manila. ACENAV as an agent of CARDIA was tasked to inform the consignee
HEINDRICH of the arrival of the vessel in order for the latter to immediately take
possession of the goods. ACENAV's duty was simply to assume responsibility over the
cargo when it is unloaded from the vessel. Upon its arrival, and upon inspection, it was
found out that several bags of cement were in bad order and condition. Upon paying
HEINDRICH, FGU was subrogated to all the rights and causes of action accruing to
HEINDRICH. Thus, FGU filed complaint for damages. The Court ruled in favor of FGU
and ordered ACENAV as an agent of CARDIA to be delivered. Is the courts ruling
correct?
SUGGESTED ANSWER:
No. The Court's ruling is not correct.
Under the Civil Code, by the contract of agency, a person binds himself to render some
service or to do something in representation or on behalf of another, with the consent or
authority of the latter. Moreover, the same Code provides that an agent is not personally
liable to the party with whom he contracts, unless he expressly binds himself or exceeds
the limits of his authority without giving such party sufficient notice of his powers.
In the given case, ACENAV cannot be held liable because as an agent, it cannot be made
responsible or held accountable for the damage supposedly caused by its principal.

Accordingly, there was no showing that ACENAV exceeded its authority in the discharge
of its duties as a mere agent of CARDIA.

CREDIT TRANSACTIONS
Credit Transactions

I.
Civil Law Topic

: Credit Transactions

Source

: Ravago vs. Metropolitan Bank & Trust Co.

G.R. No. 188739, August 5, 2015

Contributor

: Udtohan, Liljoy
-xxxx-

PROBLEM:
Several times between October and December 1997, B and his wife obtained loans from
M bank. The loans were secured by a real estate mortgage. B and his wife failed to pay
their loan obligations. As a consequence, in February 1999, respondent bank initiated
extrajudicial foreclosure proceedings over the mortgaged property through a notary
public. The notary public conducted a foreclosure sale of the subject lot on June 3, 1999
wherein respondent bank emerged as the highest bidder. B and his wife filed a Complaint
for Annulment of Notarial Foreclosure Proceedings Including Auction Sale, Certificate of
Sale and Consolidated Title with Damages and Injunction, alleging that respondent bank's
extrajudicial foreclosure of the subject property by means of a notary public did not
comply with the procedure provided for under the provisions of Administrative Order No.
3. In its Answer,M bank contended that Administrative Order No. 3 is simply a directive
for executive judges in the management of courts within their respective administrative
areas and that a petition for foreclosure with a notary public is not within the
contemplation of the said Administrative Order because such petition is not filed with the
court. As such, M bank argues that its non-compliance with the said administrative order
does not render the foreclosure proceedings null and void.
a)
b)

Do applications for extrajudicial foreclosures under the direction of a notary

public among those required to be filed with the Executive Judge pursuant to
Administrative Order No. 3? How about A.M. No. 99-10-05-0?
Is the extra-judicial foreclosure conducted by the Notary Public valid in this
case?

SUGGESTED ANSWER:
a)
A comparative reading of the opening provisions of Administrative Order No. 3
and the amendatory sections of A.M. No. 99-10-05-0 would show that the former did not
contemplate foreclosures conducted under the direction of a notary public. Pertinent
provisions of Administrative Order No. 3 read, thus:
x xx xxx xxx
In line with the responsibility of an Executive Judge, under
Administrative Order No. 6, dated June 30, 1975, for the management of
courts within his administrative area, included in which is the task of
supervising directly the work of the Clerk of Court, who is also the ExOfficio Sheriff, and his staff, the undersigned, pursuant to a resolution of
this Court dated September 18, 1984, sets forth the procedure to be
followed:
1. All applications for extra-judicial foreclosure of mortgage under Act.
3135, as amended by Act 4118, and Act 1508, as amended, shall be filed
with the Executive Judge, through the Clerk of Court who is also the ExOfficio Sheriff.
x xx xxx xxx
On the other hand, the relevant provisions of A.M. No. 99-10-05-0 read
as follows:
x xx

xxx

xxx

In line with the responsibility of an Executive Judge under Administrative Order No. 6,
dated June 30, 1975, for the management of courts within his administrative area,
included in which is the task of supervising directly the work of the Clerk of Court, who
is also the Ex- Officio Sheriff, and his staff, and the issuance of commissions to notaries
public and enforcement of their duties under the law, the following procedures are hereby
prescribed in extrajudicial foreclosure of mortgages:
1. All applications for extra-judicial foreclosure of mortgage whether
under the direction of the sheriff or a notary public, pursuant to Act 3135,
as amended by Act 4118, and Act 1508, as amended, shall be filed with
the Executive Judge, through the Clerk of Court who is also the ExOfficio Sheriff.
x xx xxx xxx
It can be gleaned from the amendatory provisions of A.M. No. 99-10-05-0 that, upon
effectivity of the said amendments on January 15, 2000, applications for extrajudicial

foreclosures under the direction of a notary public are already among those which are
required to be filed with the Executive Judge.
b)
YES. The Extra-judicial Foreclosure conducted by the Notary Public is valid.
In the present case, M bank filed its Petition For Extrajudicial Foreclosure of Real Estate
Mortgage in February 1999 while the foreclosure sale was conducted on June 3, 1999,
both of which happened before the effectivity of A.M. No. 99-10-05-0.
Hence, it is clear that prior to the effectivity of A.M. No. 99-10-05-0, applications for
notarial foreclosures which are conducted by a notary public were not required to be filed
with the court. This is precisely the reason why the Court in the China Banking case held
that extrajudicial foreclosures conducted by a notary public do not come within the
coverage of the provisions of Administrative Order No. 3, which, among others, require
the sheriff to receive and docket the application for extrajudicial foreclosure and collect
the prescribed filing fees.

II.
Civil Law Topic

: Credit Transactions

Source

: Lim vs. Security Bank Corporation

G.R. No. 188539 March 12, 2014

Contributor

: Manuales, Eisone Brix

-xxxx-

PROBLEM:
On July 2, 2015 A executed a Continuing Suretyship in favor of B to secure any and all
types of credit accommodation in the amount of P2,000,000.00 which is covered by a
Credit Agreement / Promissory Note. The Continuing Suretyship executed by petitioner
stipulated that the liability of the Surety is solidary and not contingent upon the pursuit of
the Bank of whatever remedies it may have against the Debtor or the collaterals/liens it
may possess. If any of the Guaranteed Obligations is not paid or performed on due date
the Surety shall, without need for any notice, demand or any other act or deed,
immediately become liable therefor and the Surety shall pay and perform the same. On
August 2, 2015 B obtained a loan from Security Bank in the amount of P 1,000,000.00
payable on November 2, 2015. On due date, B failed to pay the loan, hence Security
Bank demanded payment from A. A did not to pay the loan. He argued that he did not
execute a surety contract on August 2, 2015 to secure the loan obtained by B. Is the
contention of A correct?
SUGGESTED ANSWER:
No. Comprehensive or continuing surety agreements are, in fact, quite commonplace in
present day financial and commercial practice. A bank or financing company which
anticipates entering into a series of credit transactions with a particular company
normally requires the projected principal debtor to execute a continuing surety agreement
along with its sureties. By executing such an agreement, the principal places itself in a
position to enter into the projected series of transactions with its creditor; with such
suretyship agreement, there would be no need to execute a separate surety contract or
bond for each financing or credit accommodation extended to the principal debtor.
The terms of the Continuing Suretyship executed by petitioner, quoted earlier, are very
clear. Such stipulations are valid and legal and constitute the law between the parties, as
Article 2053 of the Civil Code provides that "[a] guaranty may also be given as security

for future debts, the amount of which is not yet known; x x x." Thus, petitioner is
unequivocally bound by the terms of the Continuing Suretyship. There can be no cavil
then that petitioner is liable for the principal of the loan, together with the interest and
penalties due thereon, even if said loan was obtained by the principal debtor even after
the date of execution of the Continuing Suretyship.

III.
Civil Law Topic

: Credit Transactions

Source

: Philnico Industrial Corporation vs. Privatization and Management

Office
G.R. No. 199420, August 27, 2014

Contributor

: Guma, Israel
-xxxx-

PROBLEM:
AA Corp. (AA), BB Inc. (BB), and CC Corp (CC) executed a contract which stated the
terms and conditions for the purchase and acquisition by BB from AA of 20 million
shares of stock of CC. Under this contract, BB agreed to pay AA in installments, and BB
shall execute a pledge agreement in favor of AA as security for the price of the shares. It
also provided for the provision on automatic reversion of the shares to CC in case BB
defaults. As such, BB executed a pledge in favor of AA. Three years later, AA informed
BB that it has defaulted on its payments and demanded it to settle its unpaid
amortizations or else the automatic reversion will apply. AA claims that the provision in
the contract providing for the automatic reversion of the shares is null and void for being
a pactum commissorium. Is the contention correct?
SUGGESTED ANSWER:
Yes, there is pactum commissorium. The elements of pactum commissorium need not
concur in one contract. The agreeement of the parties may be embodied in only one
contract or in two or more separate writings. In case of the latter, the writings of the
parties should be read and interpreted together in such a way as to render their intention
effective.
Both elements of pactum commissorium are present in the instant case: (1) By virtue of
the Pledge Agreement, BB pledged its CC shares of stock in favor of AA as security for
the fulfillment of the formers obligations under the contract and the Pledge Agreement
itself, and (2) There is automatic appropriation as under the contract, in the event of
default by BB, title to the CC shares of stock shall ipso facto revert from BB to AA
without need of demand. Although executed in separate written instruments, the contract
and pledge agreement are integral to one another. More importantly, the Court, in
determining the existence of pactum commissorium, had focused more on the evident
intention of the parties, rather that the formal or written form.

IV.
Civil Law Topic

: Credit Transactions

Source

: Philippine National Bank vs. Spouses Maraon

G.R. No. 189316, July 1, 2013

Contributor

: Yray, Rhea
-xxxx-

PROBLEM:
Spouses Maranon, owner of a piece of real property, erected with a building occupied by
various tenants. Said subject property was among the properties mortgaged by spouses
Montealegre to PNB as a security for a loan. Spouses Montealegre, through a falsified
Deed of Sale, acquired title to the property and used the propertys title which was
purportedly registered in the name of EmelieMontealegre. However, due to failure to pay
the loan, said property was foreclosed by PNB, and upon auction, was thereafter acquired
by the same bank, PNB.
Spouses Maranon filed before the RTC a complaint for Annulment of Title,
Reconveyance and Damages against spouses Montealegre. Judgment of RTC was
rendered in favour of spouses Maranon, and also stipulated that the Real Estate Mortgage
lien of PNB shall stay and be respected. Such decision prompted PNB to also seek for
entitlement to the fruits of the property such as rentals paid by the tenants.
Is PNB entitled to fruits of the disputed property?
SUGGESTED ANSWER:
No, PNB is not entitled to the fruits of the disputed property.
Rent is a civil fruit that belongs to the owner of the property producing it by right of
accession. The rightful recipient of the disputed rent in this case should be thus the owner
of the lot at the time the rent accrued.
It is beyond question that spouses Maranon never lost ownership over the subject lot, and
that technically, there is no juridical tie created by a valid mortgage contract that binds
PNB to the subject lot because the mortgagors Montealegre were not the true owners.
PNBs lien as a mortgagee in good faith pertains to the subject lot alone and not on the

erected building which was not foreclosed and still remained to be a property of
Maranon.
V.
Civil Law Topic

: Credit Transactions

Source

: Yngson vs. Philippine National Bank

G.R. No. 171132, August 15, 2012

Contributor

: Dacudao, Ron Juko

-xxxx-

PROBLEM:
ARCAM & Company, Inc. (ARCAM) applied for and was granted a loan by the
Philippine National Bank (PNB). To secure the loan, ARCAM executed a Real Estate
Mortgage over a parcel of land. ARCAM, however, defaulted on its obligations to PNB
due to financial reverses. Subsequently, ARCAM filed before the SEC a Petition for
Rehabilitation and Suspension of Payments, which was approved. After some time, the
SEC ruled that ARCAM can no longer be rehabilitated. Thus, the SEC decreed that
ARCAM be dissolved and placed under liquidation.With this development, PNB initiated
a foreclosure case. Thus, ARCAM filed with the SEC a Motion for the Issuance of a TRO
to enjoin the foreclosure sale of its assets. ARCAM argued that the prohibition against
foreclosure subsisted during liquidation because payment of all of ARCAMs obligations
was proscribed except those authorized by the Commission. Moreover, ARCAM asserted
that the mortgaged assets should be included in the liquidation and the proceeds shared
with the unsecured creditors. Rule on ARCAMs contention.
SUGGESTED ANSWER:
The creditor-mortgagee has the right to foreclose the mortgage over a specific real
property whether or not the debtor-mortgagor is under insolvency or liquidation
proceedings. The right to foreclose such mortgage is merely suspended upon the
appointment of a management committee or rehabilitation receiver or upon the issuance
of a stay order by the trial court. However, the creditor-mortgagee may exercise his right
to foreclose the mortgage upon the termination of the rehabilitation proceedings or upon
the lifting of the stay order.

Under Republic Act No. 10142, otherwise known as the Financial Rehabilitation and
Insolvency Act (FRIA) of 2010, the right of a secured creditor to enforce his lien during
liquidation proceedings is retained. Section 114 of said law thus provides:
SEC. 114. Rights of Secured Creditors. The Liquidation Order shall not
affect the right of a secured creditor to enforce his lien in accordance with
the applicable contract or law. A secured creditor may:
(a) waive his rights under the security or lien, prove his claim in the
liquidation proceedings and share in the distribution of the assets of
the debtor; or
(b) maintain his rights under his security or lien;
If the secured creditor maintains his rights under the security or lien:
(1) the value of the property may be fixed in a manner agreed upon by
the creditor and the liquidator. When the value of the property is less
than the claim it secures, the liquidator may convey the property to
the secured creditor and the latter will be admitted in the liquidation
proceedings as a creditor for the balance; if its value exceeds the
claim secured, the liquidator may convey the property to the creditor
and waive the debtors right of redemption upon receiving the excess
from the creditor;
(2) the liquidator may sell the property and satisfy the secured creditors
entire claim from the proceeds of the sale; or
(3) the secured creditor may enforce the lien or foreclose on the property
pursuant to applicable laws.
In this case, PNB elected to maintain its rights under the security or lien; hence, its right
to foreclose the mortgaged properties should be respected.

Continuing Guaranty

VI.
Civil Law Topic

: Credit Transactions; Continuing Guaranty

Source

: Bank of Commerce vs. Flores

G.R. No. 174006, December 8, 2010

Contributor

: Gutierrez II, Cedric

-xxxx-

PROBLEM:
Spouses Bautista (Bautista) borrowed money from Land Bank of the Philippines (LBP) in
the amount of P1, 900,000.00. Bautista executed a Real Estate Mortgage over the
condominium unit as collateral, and the same was annotated at the back of CCT No.
1234. Two years later again the spouses borrowed P1, 100,000.00 from LBP, which was
also secured by a mortgage over the same property annotated at the back of CCT No.
2130. After one year Bautista paid P1, 950,321.00, as evidenced by Official Receipt No.
123456 issued by LBP. On the face of the receipt, it was written that the payment was "in
full payment of the loan and interest."
Bautista then asked LBP to cancel the mortgage annotations on CCT No. 1234 since the
loans secured by the real estate mortgage were already paid in full. However, the bank
refused to cancel the same and demanded payment of P5,744,928.78. LBP applied for
extra-judicial foreclosure of the mortgages over the condominium unit. Public Auction
ensued. Is the real estate mortgage over the subject condominium unit a continuing
guaranty for the future loans of respondent spouses despite the full payment of the
principal loans annotated on the title of the subject property?
SUGGESTED ANSWER:
Yes, a continuing guaranty is a recognized exception to the rule that an action to foreclose
a mortgage must be limited to the amount mentioned in the mortgage contract.

The law provides under Article 2053 of the Civil Code, a guaranty may be given to
secure even future debts; the amount of which may not be known at the time the guaranty
is executed. This is the basis for contracts denominated as a continuing guaranty or
suretyship. A continuing guaranty is not limited to a single transaction, but contemplates
a future course of dealing, covering a series of transactions, generally for an indefinite
time or until revoked. It is prospective in its operation and is generally intended to
provide security with respect to future transactions within certain limits, and
contemplates a succession of liabilities, for which, as they accrue, the guarantor becomes
liable. In other words, a continuing guaranty is one that covers all transactions, including
those arising in the future, which are within the description or contemplation of the
contract of guaranty, until the expiration or termination thereof.
In the case at bar, the language of the real estate mortgage unambiguously reveals that the
security provided in the real estate mortgage is continuing in nature. Thus, it was
intended as security for the payment of the loans annotated at the back of CCT No.1234,
and as security for all amounts that Bautista may owe the bank. It is well settled that
mortgages given to secure future advance or loans are valid and legal contracts, and that
the amounts named as consideration in said contracts do not limit the amount for which
the mortgage may stand as security if from the four corners of the instrument the intent to
secure future and other indebtedness can be gathered.
Bautistas full payment of the loans annotated on the title of the property shall not affect
the release of the mortgage because, by the express terms of the mortgage, it was mean to
secure all future debts of the spouses and such debts had been obtained and remain
unpaid. Unless full payment is made by the spouses of all the amounts that they have
incurred from petitioner bank, the property is burdened by the mortgage.

Equitable Mortgage

VII.
Civil Law Topic

: Credit Transactions; Equitable Mortgage

Source

: Spouses Solitarios vs. Spouses Jaque

G.R. No. 199852, November 12, 2014

Contributor

: Armenion, Ramy
-xxxx-

PROBLEM:
A parcel of agricultural land designated as Lot 5-2016, consisting of 40,608 square
meters (sq. m.). was originally registered in the name of Rudy, and, thereafter, in the
name of Grace. In the complaint for Ownership and Recovery of Possession filed with
the RTC, Grace alleged that she purchased Lot 4089 from Rudy, in stages. According to
Grace, she initially bought one-half of Lot No. 4089 for P7,000.00. Two months later,
Rudy supposedly mortgaged the remaining half of Lot 4089 to Grace via a Real Estate
Mortgage (REM) to securea loan amounting to P3,000.00. After almost two (2) years,
Rudy finally agreed to sell the mortgaged half. However, instead of executing a separate
deed of sale for the second half, they executed a Deed of Sale dated April 26, 1983 for the
whole lot to save on taxes, by making it appear that the consideration for the sale of the
entire lot was only P12,000.00 when Grace actually paid P19,000.00 in cash and
condoned Rudy's P3,000.00 loan. In spite of the sale, Grace, supposedly out of pity for
Rudy, allowed the latter to retain possession of Lot 4089, subject only to the condition
that Rudy will regularly deliver a portion of the propertys produce. For his part, Rudy
denied selling Lot 4089 and explained that he merely mortgaged the same to Grace after
the latter helped him redeem the land from the Philippine National Bank (PNB). Is the
transaction between Rudy and Grace an absolute sale or an equitable mortgage?
SUGGESTED ANSWER:
The transaction is an equitable mortgage. Art. 1602. The contract shall be presumed to be
an equitable mortgage, in any of the following cases:

1) When the price of a sale with right to repurchase is unusually inadequate;

2) When the vendor remains in possession as lessee or otherwise;
3) When upon or after the expiration of the right to repurchase another instrument
extending the period of redemption or granting a new period is executed;
4) When the purchaser retains for himself a part of the purchase price;
5) When the vendor binds himself to pay the taxes on the thing sold;
6) In any other case where it may be fairly inferred that the real intention of the
parties is that the transaction shall secure the payment of a debt or the
performance of any other obligation.
There is sufficient basis to indulge in the presumption that the transaction between the
parties was that of an equitable mortgage and that Rudy never wanted to sell the same to
Grace. First, Rudy has remained in possession of the subject property and exercised acts
of ownership over the said lot even after the purported absolute sale of Lot 4089; Second,
the Grace did not physically occupy Lot 4089; Third, the consideration for the sale of the
whole land as stated in the Deed of Sale dated April 26, 1983, was only P12,000.00, an
amount grossly inadequate for a titled coconut and rice lands consisting of 40,608 sq. m.;
Fourth, Grace did not disturb the possession of Lot 4089 by Miriam, Rudys sister-in-law,
who resided therein; and Fifth, Grace never had a tenant in the subject property.

Interest

VIII.
Civil Law Topic

: Credit Transactions; Interest

Source

: Spouses Salvador Abella vs. Spouses Romeo Abella

G.R. No. 195166, July 8. 2015

Contributor

: Amores, Ernesto Miguel

-xxxx-

PROBLEM:
In a complaint, petitioners alleged that respondents obtained a loan from them in the
amount of P500,000.00. Petitioners added that respondents were able to pay a total of
P200,000.00 P100,000.00 paid on two separate occasions leaving an unpaid
balance of P300,000.00.
Respondents claimed that they were approached by petitioners, who proposed that if
respondents were to "undertake the management of whatever money [petitioners] would
give them, [petitioners] would get 2.5% a month with a 2.5% service fee to
[respondents]." The 2.5% that each party would be receiving represented their sharing of
the 5% interest that the joint venture was supposedly going to charge against its debtors.
Moreover, they claimed that the entire amount of P500,000.00 was disposed of in
accordance with their agreed terms and conditions and that petitioners terminated the
joint venture, prompting them to collect from the joint venture's borrowers. They were,
however, able to collect only to the extent of P200,000.00; hence, the P300,000.00
balance remained unpaid.
Petitioners insist that respondents' consistent payment of interest in the year following the
perfection of the loan showed that interest at 2.5% per month was properly agreed upon
despite its not having been expressly stated in the acknowledgment receipt. They add that
during the proceedings before the Regional Trial Court, respondents admitted that interest
was due on the loan.
If it was ruled that the agreement above-stated was that of a simple loan or mutuum, is
the rate stipulated by the petitioners valid? If not, at what rate should it be held?

SUGGESTED ANSWER:
The rate imposed is invalid and unconscionable. The rate should be held at 6% per
annum.
Article 1956 of the Civil Code provides that no interest shall be due unless it has been
expressly stipulated in writing.
In a plethora of cases, the Court said that the imposition of an unconscionable rate of
interest on a money debt, even if knowingly and voluntarily assumed, is immoral and
unjust.
Under BSP Circular No. 799, In the absence of a contract expressly providing for a
different rate, the rate of interest for the loan or forbearance of any money, goods or
credits and the rate allowed in judgments has been reduced from twelve percent (12%) to
six percent (6%) per annum..
In the case presented, petitioners insist upon the imposition of 2.5% monthly or 30%
annual interest which is far beyond the legal rate of 6%. If such would be granted, it
would tantamount to a repugnant spoliation and an iniquitous deprivation of property of
the respondents as the same is apparently unconscionable.
In sum, Article 1956 of the Civil Code, read in light of established jurisprudence,
prevents the application of any interest rate other than that specifically provided for by
the parties in their loan document or, in lieu of it, the legal rate. Here, the rate that
petitioners adverted to is unconscionable. Hence, the legal rate of 6% per annum must
apply.

Real Mortgage

IX.
Civil Law Topic

: Credit Transactions; Real Mortgage

Source

: Bucton vs. Rural Bank of El Salvador

GR No. 179625, February 24, 2014

Contributor

: De los Santos, Naiza Mae

-xxxx-

PROBLEM:
Angel owned a parcel of land covered by TCT No. T-54678 located in Dipolog City. Her
neighbor, Sheryl borrowed the said title on the pretext that the latter is going to show it to
Brian, an interested buyer. But instead of showing the document to Brian, she obtained a
loan in the amount of P50,000.00 from X Bank where Brian works. As security for the
loan obtained, she mortgaged the land covered by the aforesaid title by executing an SPA
and a Real Estate Mortgage. Eventually, Sheryl lost her job and failed to pay the loan
from X Bank. The subject property was then foreclosed and sold in an auction sale in
favor of X Bank.
Angel filed a case for Annulment of Mortgage, Foreclose and SPA against Sheryl and X
Bank. The bank, however, denied Angels claim of forgery on the SPA. The court ruled in
favor of Sheryl and the bank, stating that it was not convinced that the SPA was forged.
The court declared that although the Real Estate Mortgage did not indicate that Sheryl
was signing for and in behalf of her principal, Angel is estopped from denying the
liability since it was her negligence in handing over her title to Sheryl that caused the
loss.
1)
2)

Is the ruling of the court propert? Decide on whether or not the Real Estate
Mortgage executed by Sheryl binds Angel.
Decide whether or not the bank is negligent and is liable for damages.

SUGGESTED ANSWER:
1)
NO. The Real Estate Mortgage does not bind Angel since it was entered into by
Sheryl in her own personal capacity.

The law provides that in executing real estate mortgage, the name of the principal should
be indicated in order for the latter to be liable. In this case, the authorized agent failed to
indicate in the mortgage that she was acting for and on behalf of her principal. Granting
arguendo that the SPA was valid, the real estate mortgage would still not bind Angel as it
was signed by Sheryl in her personal capacity and not as an agent of Angel. Simply put,
the real estate mortgage is void and unenforceable against Angel.
2)
YES. The bank acted with negligence and is therefore liable for damages. The law
provides that the words, as attorney-in-fact of, or as agent of, or for and on behalf
of, are vital in order for the principal to be bound by the acts of his agent. Without these
words, any mortgage, although signed by the agent, cannot bind the principal as it is
concerned to have been signed by the agent in his personal capacity.
In the present case, X bank has no one to blame but itself. Not only did it act with undue
haste when it granted and released the loan, it also acted negligently in preparing the real
estate mortgage as it failed to indicate that Sheryl was signing for it for and on behalf of
the petitioner. Hence, X bank is negligent and is liable for damages.

Suretyship; Interests

X.
Civil Law Topic

: Credit Transactions; Suretyship; Interests

Source

: Gilat Satellite Network vs. United Coconut Planters Bank General

Insurance Co.
G.R. No. 189563, April 7, 2014

Contributor

: Calvo, Mario Dennis

-xxxx-

PROBLEM:
One Digital placed with SIKAT Technologies a purchase order for various
telecommunications equipment, accessories, spares, services and software, at a total
purchase price of Two Million One Hundred Twenty Eight Thousand Two Hundred Fifty
Dollars (US$2,128,250.00). Of the said purchase price for the goods delivered, One
Digital promised to pay a portion thereof totaling US$1.2 Million in accordance with the
payment schedule. To ensure the prompt payment of this amount, it obtained defendant
UCPB General Insurance Co., Inc. Surety bond in favor of SIKAT.All of the equipment
(including the software components for which payment was secured by the surety bond,
was shipped by SIKAT and duly received by One Digital. It failed to pay SIKAT on the
agreed dates. Thus SIKAT sent a demand letter to UCPB Gen. Insurance for the payment
of the full amount of US$1,200,000.00 guaranteed under the surety bond, plus interests
and expenses. However, defendant UCPB failed to settle the amount of US$1,200,000.00
or a part thereof. SIKAT filed a complaint against UCPB to recover the amounts
supposedly covered by the surety bond, plus interests and expenses. After due hearing,
the RTC rendered its Decision for the plaintiff. On appeal to the CA, it dismissed the case
for lack of jurisdiction and ordered SIKAT and One Digital to proceed to arbitration. The
CA ruled that in "enforcing a surety contract, the complementary-contracts-construedtogether doctrine should apply.
a.)Explain the complementary-contracts-construed-together doctrine.
b.) Is the Court of Appeals correct is dismissing the case and ordering the parties to
arbitrate?
c.) Is the Surety liable for interest for the delay of payments?

SUGGESTED ANSWER:
a.) The complementary-contracts-construed-together doctrine means that the accessory
contract must be construed with the principal agreement. In this case, the Purchase
Agreement entered into between parties as the principal contract, whose stipulations are
also binding on the parties to the suretyship. Bearing in mind the arbitration clause
contained in the Purchase Agreement and pursuant to the policy of the courts to
encourage alternative dispute resolution methods.
b.) No, the CA is not correct. The existence of a suretyship agreement does not give the
surety the right to intervene in the principal contract, nor can an arbitration clause
between the buyer and the seller be invoked by a non-party such as the surety.Arbitration
laws mandate that no court can compel arbitration, unless a party entitled to it applies for
this relief. This referral, however, can only be demanded by one who is a party to the
arbitration agreement. Considering that neither One Digital nor SIKAT has asked for a
referral, there is no basis for the CAs order to arbitrate.
In suretyship, the oft-repeated rule is that a suretys liability is joint and solidary with that
of the principal debtor. This undertaking makes a surety agreement an ancillary contract,
as it presupposes the existence of a principal contract. Nevertheless, although the contract
of a surety is in essence secondary only to a valid principal obligation, its liability to the
creditor or promise of the principal is said to be direct, primary and absolute; in other
words, a surety is directly and equally bound with the principal. He becomes liable for
the debt and duty of the principal obligor, even without possessing a direct or personal
interest in the obligations constituted by the latter. Thus, a surety is not entitled to a
separate notice of default or to the benefit of excussion. It may in fact be sued separately
or together with the principal debtor.
c. Yes, Interest, as a form of indemnity, may be awarded to a creditor for the delay
incurred by a debtor in the payment of the latter's obligation, provided that the delay is
inexcusable. Art. 2209, of the Civil Code provides that an obligation consists in the
payment of a sum of money, and the debtor incurs a delay, the indemnity for damages,
there being no stipulation to the contrary, shall be the payment of the interest agreed
upon, and in the absence of stipulation, the legal interest.
As to the interest rate to be imposed, Nacar v. Gallery Frames modified Eastern Shipping
v. CA in relation to BangkoSentral Monetary Board Circular 799 (S. 2013): (1) When the
obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in
writing. In the absence of stipulation, the rate of interest shall be 6% per annum to be
computed from default. (2) When the judgment of the court awarding a sum of money
becomes final and executory, the rate of legal interest, whether the case falls under
paragraph 1 or paragraph 2, above, shall be 6% per annum from such finality until its

satisfaction, this interim period being deemed to be by then an equivalent to a

forbearance of credit.

Writ of Possession in an Extra-Judicial Sale

XI.
Civil Law Topic

: Credit Transactions; Writ of Possession in an Extra-Judicial Sale

Source

: Spouses Marquez vs. Spouses Alindog

G.R. No. 184045, January 22, 2014

Contributor

: Ygnacio, Marie Angelee

-xxxx-

PROBLEM:
Mark Rejas obtained a loan of P500,000 from Mannie Pooh Quiao and mortgaged one of
its land, Lot A, as security. A month after, Mark Rejas sold said lot to Jema Lyn
Amercano. Later he obtained another loan (P250,000) from Allen Joan Ny Sia, and
mortgaged Lot B as security. On the said lot, Tommy Lovato and Miley Circus occupied
the land as tenants. Mark Rejas defaulted in paying the two loans. Mannie and Allen, in
their respective complaints, (Marks creditors) sought to extrajudicially foreclose Lots A
and B. Mark failed to redeem both lots. Mannie and Allen now seek for the possession of
the lots.
(a)
Is the issuance of a writ of possession duly applied by a purchaser in an
extra judicial foreclosure sale discretionary on the part of the court?
(b)
Will the writ be issued as a matter of right to give Mannie the possession
of Lot A? Explain.
(c)
Will the writ be issued as a matter of right to give Allen the possession of
Lot B? Explain.
SUGGESTED ANSWER:
(a)
No. A writ of possession duly applied for by said purchaser should issue as a
matter of course, and thus, merely constitutes a ministerial duty on the part of the court.
The ministerial issuance of a writ of possession in favor of the purchaser in an extrajudicial foreclosure sale, however, admits of an exception. In this case, the issuance of the
writ becomes discretionary.

Section 33, Rule 39 of the Rules of Court pertinently provides that the possession of the
mortgaged property may be awarded to a purchaser in an extra-judicial foreclosure unless
a third party is actually holding the property by adverse title or right.
(b)
Yes. The phrase a third party who is actually holding the property adversely to
the judgment obligor contemplates a situation in which a third party holds the property
by adverse title or right, such as that of a co-owner, tenant or usufructuary.
In the present case, Jema Lyn Amercano is a successor-in-interest of Mark with regards to
Lot A. She is thus a third party who is NOT holding the property by adverse title or right.
Thus, the exception does not apply.
Therefore, the writ will be issued to give Mannie the possession of Lot A.
(c)
No. The phrase a third party who is actually holding the property adversely to the
judgment obligor contemplates a situation in which a third party holds the property by
adverse title or right, such as that of a co-owner, tenant or usufructuary.
In the present case, Tommy Lovato and Miley Circus are tenants of Lot B. They are third
persons who hold the property by adverse title or right. Therefore, the writ will not be
issued as a matter of right to give Allen the possession of Lot B.

LEASE
Lease

I.
Civil Law Topic

: Lease

Source

: Spouses Golez vs. Nemeo

G.R. No. 178317, September 23, 2015

Contributor

: Jurolan, Marymar
-xxxx-

PROBLEM:
Rafael is the registered owner of a commercial lot located in Lahug, Cebu City. On
March 31, 2000, Rafael entered into a Lease Contract over a portion of Lot with Manuel
as the "lessee." On June 1, 2003, the building subject of the lease contract was burned
down. Because of the destruction of the building, Rafael, on May 29, 2003, sent a letter
to Manuel demanding the accumulated rentals for the leased property from April 1, 2000
to May 31, 2003 totaling P1,000,000.00. As the demand was left unheeded, Rafael filed a
complaint for collection of rentals plus damages before the Cebu City RTC. Rafael
alleged that Manuel is the proximate cause of the fire that razed the building to the
ground. Manuel, for his part, admitted the execution of the contract of lease but dispute
their liability to pay rentals. The trial court ruled that Manuel did not become the coowner of the subject building before it was burned down. It held that ownership will only
pertain to him as soon as the amount agreed upon under the contract shall have been fully
paid. It further held that under the law, it would still be necessary for Rafael to deliver the
building to Manuel in order that acquisition of the real right of ownership can take place.
It noted that not only was the amount agreed upon under the contract not yet fully paid,
there was no delivery of the building at all to Manuel. It ruled that the building was still
wholly owned by Rafael at the time the same was gutted by fire and thus, he should be
the only one to suffer the loss. Is the Court correct? Decide.
SUGGESTED ANSWER:

No. There is no dispute that the contract entered into by the parties is one of lease. The
destruction of the building should not in any way be made a basis to exempt Manuel from
paying rent for the period he made use of the leased property.
Under existing jurisprudence, the fundamental doctrine of unjust enrichment is the
transfer of value without just cause or consideration. The elements of this doctrine are:
enrichment on the part of the defendant; impoverishment on the part of the plaintiff; and
lack of cause. The; main objective is to prevent one to enrich himself at the expense of
another. It is commonly accepted that this doctrine simply means that a person shall not
be allowed to profit or enrich himself inequitably at another's expense.
In the case given, there is no dispute that Manuel used the property for several years for
his own benefit. Therefore, it would be the height of injustice to deprive Rafael of
compensation due to him on the use of his property by Manuel.

II.
Civil Law Topic

: Lease

Source

: One Network Bank vs. Baric

G.R. No. 193684, March 5, 2014

Contributor

: Avenido, Anna Mae

-xxxx-

PROBLEM:
Pedro leased a commercial space in the building owned by Juan. He has been renting in
that space for almost 10 years. Pedro and Juan executed a lease agreement for this.
One day, Pedro was just shocked when he saw several workers demolishing the building
where he leased a space. He later found out that Juan had the building demolished to
build a new one. Juan fenced the area of the building and did not allow Pedro to get
inside the perimeter. Pedro filed for forcible entry against Juan and while the case was
pending Juan sold the subject property to Acosta Bank. Pedro now filed a case for
forcible entry with prayer for injunctive relief against Juan and Acosta Bank.
Should Acosta Bank be held solidarily liable with Juan in violating the right of Pedro as
lessee of the commercial space? Decide.
SUGGESTED ANSWER:
No. Acosta Bank should not be held solidarily liable with Juan in violating the right of
Pedro as lessee of the commercial space. The Bank was just a purchaser or transferee of
the property as the Bank is not prohibited from acquiring the property even while the
forcible entry case was pending, Furthermore, Juan may transfer his title at any time and
the lease merely follows the property as a lien or encumbrance. Any violation of Pedros
rights as lessee was committed solely by Juan. Acosta bank may not be implicated or
found guildty unless it actually took part in the commission of the illegal acts.

III.
Civil Law Topic

: Lease

Source

: Spouses Mamaril vs. The Boy Scout of the Philippines

G.R. No. 179382, January 14, 2013

Contributor

: Patatag, Arnel
-xxxx-

PROBLEM:
Pursuant to their parking agreement, X parked his Six (6) passenger jeepneys every night
at the Central Bank compound for a fee of P300.00 per month. Central Bank entered into
a Guard Service Contract with Y Security Agency in order to secure or protect all
properties of the Central Bank Compound. One evening, an unidentified man pretending
to be authorized by X and upon showing they key to the guard, took away one of the
jeepneys. Since then, the jeepney was no longer found. X sued Central Bank, Y Security
Agency and the Guard for the value of the missing jeepney? Can Central Bank be held
liable?
SUGGESTED ANSWER:
No, Central Bank cannot be held liable. The contract between X and Central bank was
one of lease. It has been ruled that where a customer simply pays a fee, parks his car in
any available space in the lot, locks the car and takes the key with him, the possession
and control of the car, necessary elements in bailment, do not pass to the parking lot
operator, hence, the contractual relationship between the parties is one of lease. As such,
pursuant to Article 1664 Civil Code, the lessor is not obliged to answer for a mere act of
trespass which a third person may cause on the use of the thing leased; but the lessee
shall have a direct action against the intruder. Hence, Central Bank is not liable.

IV.
Civil Law Topic

: Lease

Source

: Manuel Uy & Sons, Inc. vs. Valbueco, Inc.

G.R. No. 179594, September 11, 2013

Contributor

: Villamor, Cletus
-xxxx-

PROBLEM:
Petitioner is the registered owner of parcels of land located in Teresa, Rizal. On
November 29, 2009, two Conditional Deeds of Sale were executed by petitioner, as
vendor, in favor of respondent, as vendee.
Respondent was able to pay petitioner the amount of P275,055.55 as partial payment for
the two properties corresponding to the initial payments and the first installments of the
said properties.
At the same time, petitioner complied with its obligation under the conditional deeds of
sale, However, respondent suspended further payment as it was not satisfied with the
manner petitioner complied with its obligations under the conditional deeds of sale.
Consequently, on March 17, 2015, petitioner sent respondent a letter informing
respondent of its intention to rescind the conditional deeds of sale and attaching therewith
the original copy of the respective notarial rescission.
Respondent filed a Complaint for specific performance and damages against petitioner
with the RTC of Antipolo City. However, the case was dismissed without prejudice for
lack of interest, as respondent's counsel failed to attend the pre-trial conference.
Five years later, respondent again filed with the RTC of Manila, Branch 1 a Complaint
for specific performance and damages, seeking to compel petitioner to accept the balance
of the purchase price for the two conditional deeds of sale and to execute the
corresponding deeds of absolute sale.
In its Answer, petitioner argued that the case should be dismissed, and that it could not be
compelled to execute any deed of absolute sale, because respondent failed to pay in full
the purchase price of the subject lots. Distinguish contract to sell from contract of sale?
SUGGESTED ANSWER:

Contract to sell distinguished from contract of sale; in a contract to sell, ownership

remains with the vendor and does not pass to the vendee until full payment of the
purchase price; a deed of sale is absolute when there is no stipulation in the contract that
title to the property remains with the seller until the full payment of the purchase price.
In a conditional sale, as in a contract to sell, ownership remains with the vendor and does
not pass to the vendee until full payment of the purchase price. The full payment of the
purchase price partakes of a suspensive condition, and non-fulfillment of the condition
prevents the obligation to sell from arising. To differentiate, a deed of sale is absolute
when there is no stipulation in the contract that title to the property remains with the
seller until full payment of the purchase price. Ramos v. Heruela held that Articles 1191
and 1592 of the Civil Code are applicable to contracts of sale, while R.A. No. 6552
applies to contracts to sell.

V.
Civil Law Topic

: Lease

Source

: Manila International Airport Authority vs. Avia Filipinas International,

Inc.
G.R. No. 180168, September 25, 2013

Contributor

: Tirol, Mark Jason

-xxxx-

PROBLEM:
In September 1990, Manila International Airport Authority (MIAA) entered into a
contract of lease with Avia Filipinas International Corporation (AFIC), wherein MIAA
allowed AFIC to use specific portions of land as well as facilities within the Ninoy
Aquino International Airport exclusively for the latter's aircraft repair station and
chartering operations. The contract was for one (1) year, beginning September 1, 1990
until August 31, 1991, with a monthly rental of P6,580.00.
In December 1990, MIAA issued Administrative Order No. 1, Series of 1990, which
revised the rates of dues, charges, fees or assessments for the use of its properties,
facilities and services within the airport complex. The Administrative Order was made
effective on December 1, 1990.
After the expiration of the contract, AFIC continued to use and occupy the leased
premises. AFIC kept on paying the original rental fee without protest on the part of
MIAA.
Was there an implied lease contract?
SUGGESTED ANSWER:
Yes.
An implied new lease or tacita reconduccion will set in when the following requisites are
found to exist: a) the term of the original contract of lease has expired; b) the lessor has
not given the lessee a notice to vacate; and c) the lessee continued enjoying the thing
leased for fifteen days with the acquiescence of the lessor.
All the elements are present in the case at bar.

VI.
Civil Law Topic

: Lease

Source

: Koppel, Inc. vs. Makati Rotary Club Foundation, Inc.

G.R. No. 198075, September 4, 2013

Contributor

: Canasa, John Paul

-xxxx-

PROBLEM:
AA donated a piece of land to BB, one of the conditions is that subject property will be
leased back to AA and to pay annual rents for a period of 10 years. Before the expiration
of 10 years, they renewed the lease contract and inserted arbitration clause agreement in
case there are disagreements in the applications, interpretation and execution of the lease.
AA sold all its rights and properties to CC, the latter now refused to pay the rents and
further argued that arbitration clause must be applied as it is the one stipulated in renewed
lease contract. Is the argument of CC meritorious?
SUGGESTED ANSWER:
Yes, the argument is meritorious, jurisprudence provides, under the doctrine of
separability an arbitration agreement is considered as independent of the main contract.
Being separate contract in itself the arbitration agreement may thus be invoked regardless
of the possible nullity or invalidity of the main contract.

VII.
Civil Law Topic

: Lease

Source

: Inocencio vs. Hospicio de San Jose

G.R. No. 201787, September 25, 2013

Contributor

: Solon, Roger Benjamin

-xxxx-

PROBLEM:
H leased a parcel of land to G for a period of one year. The lease was renewable every
year and provided that This contract is non transferable unless prior consent of the lessor
is obtained in writing. The last written contract was executed in 1951. G constructed two
buildings on the land which he subleased and designated his son R as administrator. G
passed away in 1997, and R did not inform H of such. Instead, he continued to receive
rent and give H his share.
Later, H sent a letter stating that they would not longer continue the lease with R since he
was leasing the property to others without the consent of H. R tried to negotiate but H
reiterated his stand. Later, when the termination date of the lease came, H sent notices to
vacate to R and the tenants subleasing the property. When R did not vacate the land H
filed a case for unlawful detainer in court.
The court ruled that the lease contract could not be transmitted to R as Gs heir in view of
the express stipulation found therein. On appeal, appellate court affirmed the decision in
toto and even the Court of Appeals.
Did the sublease by R to others violate of the terms of the contract?
SUGGESTED ANSWER:
No, it did not. Article 1650 of the Civil Code provides: When in the contract of lease of
things there is no express prohibition, the lessee may sublease the thing leased, in whole
or in part, without prejudice to his responsibility for the performance of the contract
toward the lessor.
Assignment or transfer of lease, which is covered by Article 1649 of the Civil Code, is
different from a sublease arrangement, which is governed by Article 1650 of the same

Code. In a sublease, the lessee becomes in turn a lessor to a sublessee. The sublessee then
becomes liable to pay rentals to the original lessee. However, the juridical relation
between the lessor and lessee is not dissolved. The parties continue to be bound by the
original lease contract. Thus, in a sublease arrangement, there are at least three parties
and two distinct juridical relations.
R thus had a right to sublease the premises since the lease contract did not contain any
stipulation forbidding subleasing.

VIII.
Civil Law Topic

: Lease

Source

: Manila International Airport Authority vs. Ding Velayo Sport Center,

Inc.
G.R. No. 161718, December 14, 2011

Contributor

: Rivera, Clieford
-xxxx-

PROBLEM:
MIAA, ownder of Lot 2-A, entered into a contract of lease with Ding Velayo Sport
Center Inc.The term of the contract was for 25 yr and rewable for 25 yrs at the option of
the lessee on the conditition that the lessee would notify the lessor at least 60 days before
the expiration of the original contract. The conarct stipulated that the lessee shall build
improvements thereon (shops, parking,sports facilities) that lessee shall not sublease the
subject property; and that the ownership of the improvements thereon shall transfer to the
lessor upon the expiration of the contract.
More than 60 days before the expiration of the contract, Ding Velayo sent a letter to
MIAA that it wanted to renew the lease. MIAA declined on the ground that stipulation
granting Ding Velayo the option to renew the contract is void as it is a potestative
condition, and that Ding Velayo violated the terms of the lease by subleasing the shops.
Has MIAA the right to decline the renewable of the contract?
SUGGESTED ANSWER:
No. Article 1308 of the Civil Code expresses what is known in law as the principle of
mutuality of contracts. Nevertheless, the fact that an option [to renew a lease contract] is
binding only on the lessor and can be exercised only by the lessee does not render it void
for lack of mutuality. After all, the lessor is free to give or not to give the option to the
lessee. Further, the prohibition against the subleasing refers only to the subject property
Lot 2-A. Being the builder of the improvements on the subject property, said
improvements are owned by Ding Velayo until their turn-over to MIAA at termination of
the contract of lease. As Ding Velayo is not leasing the improvements from petitioner,
then it is not subleasing the same to third parties.

Agricultural Leasehold

IX.
Civil Law Topic

: Lease; Agricultural Leasehold

Source

: Jusayan vs. Sombilla

G.R. No. 163928, January 21, 2015

Contributor

: Ocat, Mylene
-xxxx-

PROBLEM:
A entered into an agreement with B to supervise the tilling and farming of his riceland in
crop year 1970-1971. However on August 20, 1971, before the expiration of the
agreement, A sold his land to C. The new owner, C verbally agreed with B that he would
retain possession of the parcels of land and would deliver 110 cavans of palay annually to
C without need for accounting of the cultivation expenses provided that Jorge would pay
the irrigation fees. Is the relationship between C and B an agency or agricultural
leasehold?
SUGGESTED ANSWER:
Agricultural leasehold. The elements of agricultural tenancy to wit: (1) the object of the
contract or the relationship is an agricultural land that is leased or rented for the purpose
of agricultural production; (2) the size of the landholding is such that it is susceptible of
personal cultivation by a single person with the assistance of the members of his
immediate farm household; (3) the tenant-lessee must actually and personally till,
cultivate or operate the land, solely or with the aid of labor from his immediate farm
household; and (4) the landlord-lessor, who is either the lawful owner or the legal
possessor of the land, leases the same to the tenant-lessee for a price certain or
ascertainable either in an amount of money or produce. All the aforementioned elements
were present; hence, the relationship between C and B is agricultural tenancy or
agricultural leasehold.

Implied New Lease

X.
Civil Law Topic

: Lease; Implied New Lease

Source

: Samelo vs. Manotok Services, Inc.

G.R. No. 170509, June 27, 2012

Contributor

: Parilla, Dave Edward Velasquez

-xxxx-

PROBLEM:
H2T Inc. entered into a contract with Jesssel Jampas for the lease of Block 2 Lot 9
Pasadena, Nichols Heights Street, Cebu for a period of one year. After the expiration of
the lease contract, Jessel Jampas continued occupying the subject premises without
paying rent.
H2T Inc. filed a complaint for Unlawful Detainer against Jessel, and prayed among others
that the latter be ordered to vacate the subject premises, and to pay compensation for its
use and occupancy. In her answer, Jessel contends that the respondent did not give her a
notice to vacate upon the expiration of the lease contract in December 1997 (the notice to
vacate was sent only on August 5, 1998), and the latter continued enjoying the subject
premises for more than 15 days, without objection from the respondent. By the inaction
of the respondent as lessor, there can be no inference that it intended to discontinue the
lease contract, and further alleged that there exist an implied new lease contract between
the parties.
Is Jessels contention tenable?
SUGGESTED ANSWER:
Yes, an implied new lease was therefore created pursuant to Article 1670 of the Civil
Code, which expressly provides:
Article 1670. If at the end of the contract the lessee should continue
enjoying the thing leased for fifteen days with the acquiescence of the

lessor, and unless a notice to the contrary by either party has previously
been given, it is understood that there is an implied new lease, not for the
period of the original contract, but for the time established in Articles
1682 and 1687. The other terms of the original contract shall be revived.
"An implied new lease or tacita reconduccion will set in when the following requisites
are found to exist: a) the term of the original contract of lease has expired; b) the lessor
has not given the lessee a notice to vacate; and c) the lessee continued enjoying the thing
leased for fifteen days with the acquiescence of the lessor."
In the present case, all these requisites have been fulfilled, hence, the existence of an
implied lease contract.

Nature

XI.
Civil Law Topic

: Lease; Nature

Source

: Comglasco Corporation vs. Santos Car Check Center Corporation

G.R. No. 202989, March 25, 2015

Contributor

: Esmea, Kimberly Marie

-xxxx-

PROBLEM:
Santos Car Check Center Corporation, owner of a showroom located at 75 Delgado
Street, in Iloilo City, leased out the said space to petitioner Comglasco Corporation
(Comglasco), an entity engaged in the sale, replacement and repair of automobile
windshields, for a period of five years at a monthly rental of P60,000.00 for the first year,
P66,000.00 on the second year, and P72,600.00 on the third through fifth years. On
October 4, 2001, Comglasco advised Santos through a letter that it was pre-terminating
their lease contract eective December 1, 2001. Santos refused to accede to the pretermination, reminding Comglasco that their contract was for ve years. Comglasco
vacated the leased premises and stopped paying any further rentals. Santos sent several
demand letters, which Comglasco completely ignored. On September 15, 2003, Santos
sent its nal demand letter, 3 which Comglasco again ignored. On October 20, 2003,
Santos filed suit for breach of contract.What is the nature of the obligation to pay rentals
or deliver the thing in a contract of lease?
SUGGESTED ANSWER:
The obligation to pay rentals or deliver the thing in a contract of lease falls within the
prestation "to give"; "; hence, it is not covered within the scope of Article 1266. The court
held in PNCC case that the payment of lease rentals does not involve a prestation "to do"
envisaged in Articles 1266 and 1267 which has been rendered legally or physically
impossible without the fault of the obligor-lessor. Article 1267 speaks of a prestation
involving service which has been rendered so dicult by unforeseen subsequent events
as to be manifestly beyond the contemplation of the parties.

PARTNERSHIP
Partnership

I.
Civil Law Topic

: Partnership

Source

: Jarantilla, Jr. vs. Jarantilla

G.R. No. 154486, December 1, 2010

Contributor

: Legaspo, Marje
-xxxx-

PROBLEM:
Distinguish co-ownership from partnership.
SUGGESTED ANSWER:
Co-ownership exists when an undivided thing or right belongs to different persons.
Partnership, on the other hand, is when two or more persons bind themselves to
contribute money, property, or industry to a common fund, with the intention of dividing
the profits among themselves.
Persons who agree to form a co-ownership share or do not share any profits made by the
use of the property held in common does not convert their venture into a partnership. Or
the sharing of the gross returns does not of itself establish a partnership whether or not
the persons sharing therein have a joint or common right or interest in the property.
Persons who contribute property or funds for a common enterprise and agree to share the
gross returns of that enterprise in proportion to their contribution, but who severally
retain the title to their respective contribution, are not thereby rendered partners but are
merely co-owners. They have no common stock or capital, and no community of interest
as principal proprietors in the business itself which the proceeds derived.
Whereas, to constitute partnership, the elements must be considered, such as the clear
intent to form a partnership, the existence of a juridical personality different from that of

the individual partners, and the freedom to transfer or assign any interest in the property
by one with the consent of the others.

II.
Civil Law Topic

: Partnership

Source

: Mendoza vs. Paule

G.R. No. 175885, February 23, 2009

Contributor

: Jordan, Rebecca
-xxxx-

PROBLEM:
PAULE and MENDOZA had entered into a PARTNERHSHIP in regard to the National
Irrigation Administration (NIA) project. PAULEs contribution thereto is his contractors
license and expertise, while MENDOZA would provide and secure the needed funds for
labor, materials and services; deal with the suppliers and sub-contractors; and in general
and together with PAULE, oversee the effective implementation of the project.
PAULE executed a SPA authorizing MENDOZA to participate in the pre-qualification
and bidding of a (NIA) project and to represent him in all transactions related thereto in
effect was awarded Packages A-10 and B-11. Further MENDOZA and CRUZ signed two
Job Orders/Agreements5 for the lease of the latters heavy equipment (dump trucks for
hauling purposes) to EMPCT.
PAULE revoked the SPA of MENDOZA; consequently, NIA refused to make payment to
MENDOZA on her billings. CRUZ demanded payment of the rentals, but, could not be
paid for the rent of the equipment.
Can PAULE be held civilly liable to his partner MENDOZA for revoking the SPA?
SUGGESTED ANSWER:
YES. PAULE should be made civilly liable for abandoning the PARTNERHSHIP,
leaving MENDOZA to fend for her own, and for unduly revoking her authority to collect
payments from NIA.
Under the Civil Code, every partner is an agent of the PARTNERHSHIP for the purpose
of its business;18 each one may separately execute all acts of administration, unless a
specification of their respective duties has been agreed upon, or else it is stipulated that
any one of them shall not act without the consent of all the others.19 At any rate, PAULE
does not have any valid cause for opposition because his only role in the

PARTNERHSHIP is to provide his contractors license and expertise, while the sourcing
of funds, materials, labor and equipment has been relegated to MENDOZA.
There was no valid reason for PAULE to revoke MENDOZAs SPAs. Since MENDOZA
took care of the funding and sourcing of labor, materials and equipment for the project, it
is only logical that she controls the finances, which means that the SPAs issued to her
were necessary for the proper performance of her role in the PARTNERHSHIP, and to
discharge the obligations she had already contracted prior to revocation.

III.
Civil Law Topic

: Partnership

Source

: Mendiola vs. Court of Appeals

G.R. No. 159333, July 31, 2006

Contributor

: Nalia, Ellen
-xxxx-

PROBLEM:
ABC Corporation through its representative B enters into a contract of partnership with
A. C, as a director of ABC Corporation questions it on the ground that there is no express
authorization under its charter empowering ABC to be a partner. Is C correct?
SUGGESTED ANSWER:
Yes, C is correct.
Under Partnership Law, one of the essential requisites of a partnership contract is that the
parties must have legal capacity to enter into the contract. In the case of Mendiola vs.
Court of Appeals, G.R. No. 159333, July 31, 2006, the court held that a corporation
cannot become a member of a partnership in the absence of express authorization by
statute or charter.
This applies to the case at hand. There is no express authorization by statute or charter
that ABC Corporation can enter into a contract of partnership. Therefore, it cannot validly
enter into a contract of partnership.

IV.
Civil Law Topic

: Partnership

Source

: Santos vs. Spouses Reyes

G.R. No. 135813, October 25, 2001

Contributor

: Jaen, Bea Marie

-xxxx-

PROBLEM:
A, B and C orally agreed to form a partnership a lending business. A contributed 70%
(as financier) while B and C shared 30% (as industrial partners). Later, B introduced D
whom they would provide loans to Ds corporation particularly its employees. In return D
shall have a commission based on the loan payments. The partners later decided to have a
written agreement but they found out that C engaged in a competitor venture thus
expelled him. The two had E (husband of B) replaced C and then continued doing
business. Is there still a partnership between A and spouses B and E?
SUGGESTED ANSWER:
Yes. By the contract of partnership, two or more persons bind themselves to contribute
money, property or industry to a common fund, with the intention of dividing the profits
among themselves. The Articles of Agreement stipulated that the signatories shall share
the profits of the business in a 70-15-15 manner, with petitioner getting the lions share.
This stipulation clearly proved the establishment of a partnership.
Although the partnership between A, B and C was technically dissolved by the expulsion
of C therefrom, the remaining partners simply continued the business of the partnership
without undergoing the procedure relative to dissolution. Instead, they invited E to
participate as a partner in their operations. There was therefore, no intent to dissolve the
earlier partnership. The partnership between A, B and E simply took over and continued
the business of the former partnership with C.

V.
Civil Law Topic

: Partnership

Source

: Torres vs. Court of Appeals

G.R. No. 134559, December 9, 1999

Contributor

: Labella, Margaret
-xxxx-

PROBLEM:
Sisters Antonia Baring-Torres and Emeteria Baring entered into what they called a "joint
venture agreement" with Manuel Torres for the development of a parcel of land into a
subdivision.
Under the agreement, the sisters would provide for the property which Manuel would
develop into a housing subdivision. They also agreed to execute a deed of sale over their
property in favor of Manuel which he used to mortgage with Equitable Bank. Pursuant to
said Joint Venture Agreement, the amount was to be used for the development of the
subdivision. All three of them also agreed to share the proceeds from the sale of the
subdivided lots, in 60-40 proportion (60% for the sisters and 40% for Manuel).
Manuel used the proceeds from the mortgage to start building roads, curbs and gutters.
He also contracted an engineering firm for the building of housing units and actually even
set up a model house on one of the subdivision lots. But due to adverse claims on the
land, prospective buyers were scared off and the subdivision project eventually failed.
After the Estafa case against Manuel failed, the Baring sisters then filed a civil case
against him for damages equivalent to 60% of the value of the property, which according
to them, was due them per agreement. They denied having formed a partnership with
Manuel, whom they alleged to have not contributed anything to the project. They
contended that the Joint Venture Agreement and the earlier Deed of Sale were void.
If you were the judge, 1) Rule on whether or not a valid partnership existed between the
Baring Sisters and Manuel Torres; and 2) Explain whether or not Manuel Torres is liable
to them for the failed subdivision project. What is Manuels share, if any, in the losses
and profits?
SUGGESTED ANSWER:

1) Yes, under what they called a Joint Venture Agreement, the Baring sisters would
contribute to the partnership land which Manuel would develop into a housing
subdivision. Furthermore, the income from the said project would be divided according to
the stipulated percentage. Clearly, the contract manifested the intention of the parties to
form a partnership pursuant to Article 1767 of the Civil Code, which provides:
Art. 1767. By the contract of partnership two or more persons bind
themselves to contribute money, property, or industry to a common fund,
with the intention of dividing the profits among themselves.
2) Manuels actions clearly belie the sisters contention that he made no contribution to
the partnership. Under Article 1767 of the Civil Code, a partner may contribute not only
money or property, but also industry. While on the other hand, Manuel did not contribute
capital, he is an industrial partner for his contribution for his efforts and managing the
general expenses and other costs. In the absence of stipulation, the share of each partner
in the profits and losses shall be in proportion to what he may have contributed, but the
industrial partner shall not be liable for the losses. As for the profits, the industrial partner
shall receive such share as may be just and equitable under the circumstances. If besides
his services he has contributed capital, he shall also receive a share in the profits in
proportion to his capital. Thus, the sisters must then bear their loss (which is 60%).
Manuel does not bear the loss of the other 40% because as an industrial partner he is
exempt from losses.

Agency and Trusts

VI.
Civil Law Topic

: Partnership; Agency and Trusts

Source

: Tong vs. Kun

G.R. No. 196023, April 21, 2014

Contributor

: Parawan, Eula
-xxxx-

PROBLEM:
Before his death, X informed all his children of his intention to purchase Lot 1 for the
family business. However, since he was a Chinese citizen and was disqualified from
acquiring the said lot, the title to the property will be registered in the name of his eldest
son, A, who at that time was already of age and was the only Filipino citizen among his
children. Meanwhile, A died and B, C and D being his surviving heirs, claimed ownership
over Lot 1 by succession, alleging that no trust agreement exists and it was A who bought
the property. Was there an implied trust?
SUGGESTED ANSWER:
Yes. An implied resulting trust was created as provided under the first sentence of Article
1448, the elements of which are: (a) an actual payment of money, property or services, or
an equivalent, constituting valuable consideration; and (b) such consideration must be
furnished by the alleged beneficiary of a resulting trust. A was merely a trustee of X in
relation to the subject property, and it was X who provided the money for the purchase of
Lot 1 but the corresponding title was placed in the name of A.

Evidence of Existence; Right to Demand an Accounting

VII.
Civil Law Topic

: Partnership; Evidence of Existence; Right to Demand an Accounting

Source

: Heirs of Tan Eng Kee vs. Court of Appeals

G.R. No. 126881, October 3, 2000

Contributor

: Andales, Ziazel
-xxxx-

PROBLEM:
Following the death of Julien, his wife and their children filed a suit against the
decedents brother Adrien. The complaint was for accounting, liquidation and winding up
of the alleged partnership formed by the two brothers from way back forty years ago.
The complaint alleged that Adrien and Julien pooling their resources and industry
together, entered into a partnership engaged in the business of selling lumber and
hardware and construction supplies. They named their enterprise Watercress Lumber
which they jointly managed until Juliens death.
Since Julien has passed away and only he, aside from Adrien, could have expounded on
the precise nature of the business relationship between them, his petitioners can only
adduce circumstantial evidence to prove the partnership and these are:
1) That Julien was living in a bunk house just across the lumber store, and then in a
room in the bunk house in Trinidad, but within the compound of the lumber
establishment, as testified to by Maggy;
2) that both Adrien and Julien were seated on a table and were commanding people
as testified to by the Fauve;
3) that both were supervising the laborers, as testified to by Teddy; and
4) that Darcy was supposedly being told by Julien that the proceeds of the 80 pieces
of the G.I. sheets were added to the lumber business.
For his part, Adrien consistently testified that he had his business and his brother had his,
that it was only later on that Julien came to work for him.

Moreover, Adrien presented payrolls indicating that Julien was a mere employee of
Watercress Lumber.
What is the best evidence to prove a partnership?
Based on the evidence presented by both parties, can you say that a partnership existed
between brothers, Julien and Adrien?
SUGGESTED ANSWER:
The best evidence of the existence of a partnership would be the contract of partnership
itself, or the articles of partnership.
As for the existence of a partnership between brothers, Julien and Adrien, I can say that
there is none.
It should be noted that it is not with the number of witnesses wherein preponderance lies;
the quality of their testimonies is to be considered. None of petitioners witnesses could
suitably account for the beginnings of Watercress Lumber.
Moreover, a demand for periodic accounting is evidence of a partnership. During his
lifetime, Julien appeared never to have made any such demand for accounting from his
brother, Adrien.
It is indeed odd, if not unnatural, that despite the forty years the partnership was allegedly
in existence, Julien never asked for an accounting.
The essence of a partnership is that the partners share in the profits and losses. Each has
the right to demand an accounting as long as the partnership exists.
Jurisprudence tells us that there were scenarios wherein if excellent relations exist among
the partners at the start of the business and all the partners are more interested in seeing
the firm grow rather than get immediate returns, a deferment of sharing in the profits is
perfectly plausible. But in the situation in the case at bar, the deferment, if any, had gone
on too long to be plausible. A person is presumed to take ordinary care of his concerns.

Existence of partnership; Partnership Profits

VIII.
Civil Law Topic

: Partnership; Existence of partnership; Partnership Profits

Source

: Heirs of Jose Lim vs. Lim

G.R. No. 172690, March 3, 2010

Contributor

: Melicor, Joreyna Mae

-xxxx-

PROBLEM:
J together with his friends allegedly formed a partnership to engage in the trucking
business with an initial contribution of P50,000.00 each sometime in 1980, and
purchased a truck to be used in the hauling and transport of lumber of the sawmill. He
managed the operations of this trucking business until his death on August 15, 1981.
Thereafter, J's heirs, including E, and partners agreed to continue the business under the
management of E. The shares in the partnership profits and income that formed part of
the estate of J were held in trust by E.
E purchased and acquired properties using said funds. E died, leaving X as his sole
surviving heir who claimed that E was a partner. Can the properties acquired by E form
part of the estate of J, having been derived from the alleged partnership?
SUGGESTED ANSWER:
No.
A partnership exists when two or more persons agree to place their money, effects, labor,
and skill in lawful commerce or business, with the understanding that there shall be a
proportionate sharing of the profits and losses among them. A contract of partnership is
defined by the Civil Code as one where two or more persons bind themselves to
contribute money, property, or industry to a common fund, with the intention of dividing
the profits among themselves.

It is notable that J died when the partnership was barely a year old, and the partnership
and its business not only continued but also flourished. If it were true that it was J and not
E who was the partner, then upon J's death the partnership should have been dissolved
and its assets liquidated. On the contrary, these were not done but instead its operation
continued under the helm of E and without any participation from the heirs of J.

Purchase of Partners Interest

IX.
Civil Law Topic

: Partnership; Purchase of Partners Interest

Source

: Realubit vs. Jaso

G.R. No. 178782, September 21, 2011

Contributor

: Maico, Ma. Noelle

-xxxx-

PROBLEM:
AndiAganaman (Andi) entered into a Joint Venture Agreement with Antoine Arthur
(Antoine), a French national, for the operation of an ice cream shop. With Andi as the
industrial partner and Antoine as the capitalist partner, the parties agreed that they would
each receive 40% of the net profit, with the remaining 20% to be used for the payment of
the ice making machine which was purchased for the business.For and in consideration of
the sum ofP900,000.00, however, Antoine subsequently executed a Deed of Assignment
transferring all his rights and interests in the business in favor ofAmaliaAgimat (Amalia).
Amaliacaused her lawyer to send Andi a letter apprising her of her acquisition of
Antoines share in the business and formally demanding an accounting and inventory
thereof as well as the remittance of their portion of its profits. Upon Andisunjustified
failure to heed her demand, Amalia then commenced an action for specific performance,
accounting, examination, audit and inventory of assets and properties, dissolution of the
joint venture, appointment of a receiver and damages.
Did Amaliaacquire the title of being a partner based on the Deed of Assignment?
SUGGESTED ANSWER:
No, Amalia did not become a partner as a consequence of the assignment neither did she
acquire the right to require an accounting of the partnership business.
Insofar as a partners conveyance of the entirety of his interest in the partnership is
concerned, Article 1813 of the Civil Code provides as follows:

Art. 1813. A conveyance by a partner of his whole interest in the

partnership does not itself dissolve the partnership, or, as against the other
partners in the absence of agreement, entitle the assignee, during the
continuance of the partnership, to interfere in the management or
administration of the partnership business or affairs, or to require any
information or account of partnership transactions, or to inspect the
partnership books; but it merely entitles the assignee to receive in
accordance with his contracts the profits to which the assigning partners
would otherwise be entitled. However, in case of fraud in the
management of the partnership, the assignee may avail himself of the
usual remedies.
In the case of a dissolution of the partnership, the assignee is entitled to receive his
assignors interest and may require an account from the date only of the last account
agreed to by all the partners.
It is evident that the transfer by a partner of his partnership interest does not make the
assignee of such interest a partner of the firm, nor entitle the assignee to interfere in the
management of the partnership business or to receive anything except the assignees
profits. The assignment does not purport to transfer an interest in the partnership, but only
a future contingent right to a portion of the ultimate residue as the assignor may become
entitled to receive by virtue of his proportionate interest in the capital.

Through a Verbal Contract

X.
Civil Law Topic

: Partnership; Through a Verbal Contract

Source

: Sunga-Chan vs. Chua

G.R. No. 143340, August 15, 2001

Contributor

: Isidro, Dalisay
-xxxx-

PROBLEM:
In the absence of any written document to show that a partnership existed between
respondent and Jacinto from 1977 until Jacinto's death, are courts proscribed from
hearing the testimonies of respondent and his witness, to prove the alleged partnership
three years after Jacinto's death.
SUGGESTED ANSWER:
No. A partnership may be constituted in any form, except where immovable property or
real rights are contributed thereto, in which case a public instrument shall necessary.
Hence, based on the intention of the parties, as gathered from the facts and ascertained
from their language and conduct, a verbal contract of partnership may arise.
The filing of a counterclaim effectively removes this case from the ambit of the "Dead
Man's Statute". Well entrenched is the rule that when it is the executor or administrator or
representatives of the estates that sets up the counterclaim, the respondent, may testify to
occurrences before the death of the deceased to defeat the counterclaim. A defendant in
the counterclaim is not disqualified from testifying as to matters of facts occurring before
the death of the deceased, said action not having been brought against but by the estate or
representatives of the deceased.
Article 1768 of the Civil Code explicitly provides that the partnership retains its juridical
personality even if it fails to register with the SEC. The failure to register the contract of
partnership does not invalidate the same as among the partners, so long as the contract
has the essential requisites, because the main purpose of registration is to give notice to

third parties, and it can be assumed that the members themselves knew of the contents of
their contract.

SALES
Sales

I.
Civil Law Topic

: Sales

Source

: Lim vs. Security Bank Corporation

G.R. No. 188539, March 12, 2014

Contributor

: Corbo, Rhobie
-xxxx-

PROBLEM:
Linda executed a Continuing Suretyship in favor of ABC Bank to secure "any and all
types of credit accommodation that may be granted by the bank hereinto and hereinafter"
in favor of Raul Arroyo for the amount of P5,000,000.00 which is covered by a Credit
Agreement/Promissory Note. In turn, the Continuing Suretyship executed by Linda
stipulated that: 3. Liability of the Surety. - The liability of the Surety is solidary and not
contingent upon the pursuit of the Bank of whatever remedies it may have against the
Debtor or the collaterals/liens it may possess. If any of the Guaranteed Obligations is not
paid or performed on due date (at stated maturity or by acceleration), the Surety shall,
without need for any notice, demand or any other act or deed, immediately become liable
therefor and the Surety shall pay and perform the same.
The debtor, Raul, defaulted on his loan obligation. Thereafter, Linda received a Notice of
Final Demand dated August 28, 2013, informing her that she was liable to pay the loan
obtained by Raul, including the interests and penalty fees amounting to P10,703,185.54,
and demanding payment thereof. Linda failed to comply with said demand and ABC
Bank filed a complaint for collection of sum of money against her and Raul. Since Raul
can no longer be located, summons was not served on him, hence, only Linda actively
participated in the case.
May Linda be validly held liable for the principal debtor's loan obtained six months after
the execution of the Continuing Suretyship?

SUGGESTED ANSWER:
YES. A contract of suretyship is an agreement whereby a party, called the surety,
guarantees the performance by another party, called the principal or obligor, of an
obligation or undertaking in favor of another party, called the obligee. Although the
contract of a surety is secondary only to a valid principal obligation, the surety becomes
liable for the debt or duty of another although it possesses no direct or personal interest
over the obligations nor does it receive any benefit therefrom. Thus, suretyship arises
upon the solidary binding of a person deemed the surety with the principal debtor for the
purpose of fulfilling an obligation. A surety is considered in law as being the same party
as the debtor in relation to whatever is adjudged touching the obligation of the latter, and
their liabilities are interwoven as to be inseparable.
In this case, Linda executed a Continuing Suretyship. By executing such an agreement,
Raul places himself in a position to enter into the projected series of transactions with
ABC Bank; with such suretyship agreement, there being no need to execute a separate
surety contract or bond for each financing or credit accommodation extended to him. The
terms of the Continuing Suretyship executed by Linda are very clear. It states that she, as
surety, shall, without need for any notice, demand or any other act or deed, immediately
become liable and shall pay "all credit accommodations extended by ABC Bank to the
Debtor (Raul), including increases, renewals, roll-overs, extensions, restructurings,
amendments or novations thereof. Such stipulations are valid and legal and constitute the
law between the parties.
Thus, Linda is unequivocally bound by the terms of the Continuing Suretyship. There can
be no cavil then that she is liable for the principal of the loan, together with the interest
and penalties due thereon, even if said loan was obtained by the principal debtor even
after the date of execution of the Continuing Suretyship.

II.
Civil Law Topic

: Sales

Source

: Robern Development Corporation vs. Peoples Landless Association

G.R. No. 173622, March 11, 2013

Contributor

: Bacalso, Vernie Rose

-xxxx-

PROBLEM:
ABC Corp. owned Lot 123 in Davao City, where informal settlers have built their houses.
ABC Corp. thru its Davao Branch OIC Jenny Go asked the settlers to desist from
building their houses and vacate the said property, unless they are interested to buy it.
The informal settlers group called PELA (Peoples Landless Association) wrote Jenny
Go about their interest in buying the property for 300,000. Jenny made the following
annotation on the letter: Subject offer has been acknowledged/received but processing to
take effect upon putting up of the partial amount of P150,000.00 on or before Dec 5,
2015. Pursuant thereto, PELA deposited P150,000 as downpayment.
Later, Al-Amanah thru its Davao Branch Manager Joe Sywrote PELA informing them of
the Head Offices disapproval of PELAs offer to buy the subject property. PELA replied
that it had already reached an agreement with Al-Amanah regarding the sale of the
subject lot based on their offered price.
Meanwhile, Robern and Al-Amanah agreed on the sale on subject lot. A new TCT was
issued in favor of Robern. PELA filed a suit for Annulment and Cancellation of Void
Deed of Sale before the RTC of Davao City. Was there a perfected contract of sale
between PELA and Al-Amanah?
SUGGESTED ANSWER:
No. A contract of sale is perfected at the moment there is a meeting of minds upon the
thing which is the object of the contract and upon the price. Thus, for a contract of sale to
be valid, all of the following essential elements must concur: a) consent or meeting of the
minds; b) determinate subject matter; and c) price certain in money or its equivalent.
In the case at bar, there is a determinate subject matter, which is Lot 123 in Davao City.
However, the second and third elements are absent in this case. The note written by the

ABC Corp. that [s]ubject offer has been acknowledged/received but processing to take
effect upon putting up of the partial amount of P150,000.00 on or before Dec. 5, 2015 be
construed as acceptance of PELAs offer to buy. Taken at face value, the annotation
simply means that the ABC Corp. merely acknowledged receipt of PELAs letter-offer.
Furthermore, by processing, ABC Corp only meant that it will act on the offer, i.e., it
still has to evaluate whether PELAs offer is acceptable. Until and unless Al-Amanah
accepts, there is as yet no perfected contract of sale.

Action for Reconveyance

III.
Civil Law Topic

: Sales; Action for Reconveyance

Source

: Spouses Roque vs. Aguadoet

G.R. No. 193787, April 7, 2014

Contributor

: Geli, Cheska Marie

-xxxx-

PROBLEM:
Spouses Cary and Dana Agos and Becka Rivera the original owner of Lot 18089
executed a Deed of Conditional Sale of Real Property over a 1,231-sq. m. portion of Lot
18089 for a consideration of P30,775.00. The parties agreed that Sps. Agos shall make an
initial payment of P15, 387.50 upon signing, while the remaining balance of the purchase
price shall be payable upon the registration of Lot 18089. Meanwhile, Blake Tan applied
for a free patent over the entire Lot 18089 and was eventually issued Original Certificate
of Title (OCT) No. M-5955 in his name.
Blake and Becka executed a Joint Affidavitacknowledging that the subject portion
belongs to Sps. Agos and expressed their willingness to segregate the same from the
entire area of Lot 18089. However, Blake through a Deed of Absolute Salesold Lot 18089
to one Kalinda Sharma for P2,500,000.00 who caused the cancellation of OCT No. M5955 and the issuance of TCT No.M-96692 in her name.
Sps. Roque filed a complaintfor reconveyance against Kalinda saying they were the true
owners by virtue of the conditional sale of the subject portion which had been included in
the sale between Kalinda and Blake. Was the action for reconveyance proper based on the
Deed of Conditional sale?
SUGGESTED ANSWER:
No, an action for reconveyance seek the transfer of the property which was wrongfully or
erroneously registered in another persons name to its rightful owner or to one with a
better right.The Deed of Conditional Sale is actually in the nature of a contract to sell and

not one of sale contrary to Sps. Agoss belief. In a contract to sell, ownership is retained
by the vendor and is not to pass to the vendee until full payment of the purchase price.
Sps. Agos have not paid the final installment of the purchase price. As such, the condition
which would have perfected the contract of sale cannot be deemed to have been fulfilled.
Consequently, the latter cannot validly claim ownership over the subject portion even if
they had made an initial payment and even took possession of the same.

Assignment of Credit

IV.
Civil Law Topic

: Sales; Assignment of Credit

Source

: Fort Bonifacio Development Corporation vs. Fong

G.R. No. 209370, March 25, 2015

Contributor

: Bautista, Mel-Lisanina
-xxxx-

PROBLEM:
Red Co. entered into a Trade Contract with Yellow Co. for the construction of a
Condominium. Under the Trade contract, Red Corporation had the right to withhold 5%
of the contract price as retention money for any negligence, act, omission, or default
committed by Yellow Corp. The Trade Contract likewise provided that Yellow Corp. is
prohibited from assigning or transferring any of its rights, obligations, or liabilities under
the said contract without the written consent of Red Corporation.
Subsequently, Gold Co. informing it that Yellow Co. had already assigned its receivables
from Red Co. to Gold Co. by virtue of a Deed of Assignment. Red Co. refused to deliver
as the same was not yet due and demandable.
Finally, Red. Co. informed Gold Co. that nothing was left of the retention money due to
the rectification of defective works in the project. This prompted Gold Co. to file a case
against Red and Yellow Co. Is Red Co. bound by the Deed of Assignment?
SUGGESTED ANSWER:
No. Red Co. is not bound by the Deed of Assignment.
Art. 1311. Contracts take effect only between the parties, their assigns and heirs, except
in case where the rights and obligations arising from the contract are not transmissible by
their nature, or by stipulation or by provision of law. The heir is not liable beyond the
value of the property he received from the decedent.

Yellow Co., as the Trade Contractor, cannot assign or transfer any of its rights,
obligations, or liabilities under the Trade Contract without the written consent of Red Co.,
the Client, in view of Trade Contract.
The practical efficacy of the assignment, although valid between Yellow Co. and Gold
Co., remains contingent on Red Co.s consent. Without the happening of said condition,
only Yellow Co. can collect on the credit.

Breach of Warranty

V.
Civil Law Topic

: Sales; Breach of Warranty

Source

: Spouses Tumibay vs. Spouses Lopez

G.R. No. 171692, June 3, 2013

Contributor

: Araas, Nia Grace

-xxxx-

PROBLEM:
Petitioners alleged that they are the owners of a lot in Sumpong, Malaybalay, Bukidnon
in the name of petitioner Aurora. Petitioner Aurora is the sister of Reynalda Visitacion
(Reynalda). On July 23, 1997, Reynalda sold the subject land to her daughter, respondent
Rowena, through a deed of sale for an alleged unconscionable amount of P95,000.00
although said property had a market value of more than P2,000,000.00. The said sale was
allegedly without the knowledge and consent of petitioners. Petitioners prayed that the
deed of sale be declared void ab initio and the lot be reconveyed to petitioners.
Respondents averred that on December 12, 1990, petitioners executed a special power of
attorney (SPA) in favor of Reynalda granting the latter the power to offer for sale the
subject land; that sometime in 1994, respondent Rowena and petitioners agreed that the
former would buy the subject land for the price of P800,000.00 to be paid on installment;
that she had paid the monthly installments thereon and that a deed of sale was executed
and the corresponding title was issued in favor of respondent The Trial Court ruled in
favor of the petitioners, but the CA reversed the RTCs decision and ordered that the title
to the subject property shall remain in the name of the Appellant Rowena. The total
amount of monthly installments paid by respondent Rowena to petitioners was
P260,626.50 or 32.58% of the P800,000.00 purchase price. That full price was yet to be
paid at the time of the subject transfer of title was admitted by respondent Rowena on
cross-examination. Rowena claims that the transfer of title was proper because she had
substantially paid the full amount of the purchase price and that this was necessary as a
security for the installments she had already paid. Petitioner now claims that Rowena
committed a substantial and fundamental breach of the contract to sell for premature
transfer of title which entitles the seller to rescission of the contract and to have the
reconveyance of property back in their favor.

W/N Petitioners are entitled to rescind the contract of sale for breach of contract allegedly
committed by Rowena.
SUGGESTED ANSWER:
YES. Rowenas act of transferring the title to the subject land in her name, without the
knowledge and consent of petitioners and despite non-payment of the full price thereof,
constitutes a substantial and fundamental breach of the contract to sell. The main object
or purpose of a seller in entering into a contract to sell is to protect himself against a
buyer who intends to buy the property in installments by withholding ownership over the
property until the buyer effects full payment therefor. As a result, the sellers obligation to
convey and the buyers right to conveyance of the property arise only upon full payment
of the price. Thus, a buyer who willfully contravenes this fundamental object or purpose
of the contract, by covertly transferring the ownership of the property in his name at a
time when the full purchase price has yet to be paid, commits a substantial and
fundamental breach which entitles the seller to rescission of the contract. Thus,
petitioners are entitled to the rescission of the subject contract to sell.

Lack of Consideration

VI.
Civil Law Topic

: Sales; Lack of Consideration

Source

: Lank Bank of the Philippines vs. Poblete

G.R. No. 196577, February 25, 2013

Contributor

: Apatan, Rosane
-xxxx-

PROBLEM:
Aling Barbara had a loan with Kapantay, a cooperative who had an account with Bank B.
In order to pay her obligation she sold her parcel of land to Maniego. She executed a deed
of sale on the promise of Maniego that he will pay the purchase price. Aling Barbara
however did not receive the purchase price herself instead Maniego had paid Kapantays
loan account with Bank B. Later on, Maniego loaned from the bank and as a collateral he
mortgage the parcel of land which is now in his name after registering with the Registry
of Deeds after presenting the deed of sale executed by Aling Barbara. Maniego failed to
pay his obligation with Bank B. Thus, Bank B filed an Application for Extra-judicial
Foreclosure of Real Estate Mortgage. Bank B is the only bidder and the deed was
transferred its name. When Aling Barbara learned this, she then filed a complaint for
nullification of the deed and reconveyance. According to her the contract of sale between
him and Maniego is void and it follows that the mortgage is also void. Is Aling Barbara
correct?
SUGGESTED ANSWER:
Yes, Aling Barbara is correct. Where the deed of sale states that the purchase price has
been paid but in fact has never been paid, the deed of sale is void ab initio for lack of
consideration. There was no legal basis for the issuance of the certificate of title to
Maniego because the deed of absolute sale was completely simulated, void and without
effect.

Since, the TCT issued to Maniego is null and void, the Real Estate Mortgage constituted
over it is also void. In a real estate mortgage contract, it is essential that the mortgagor be
the absolute owner of the property to be mortgaged; otherwise, the mortgage is void.

Perfection of Contract of Sale

VII.
Civil Law Topic

: Sales; Perfection of Contract of Sale

Source

: Riosa vs. Tabaco La Suerte Corporation

G.R. No. 203786, October 23, 2013

Contributor

: Digaum, Lucks Mae

-xxxx-

PROBLEM:
A and B are friends. A owns a house and lot in Tagaytay. A s son was then diagnosed
with leukemia so to defer the medical expenses, he borrowed money from B in the
amount of P1 Million. B then offered a deal that in exchange of the money borrowed he
buys the house and lot owned by A located in Tagaytay but the former vehemently
refused and instead assured B that he will pay his loan. B just remain silent and show A a
document telling him that he needs to sign an undertaking of his loan. A signed the
document and did not bother to read the contents anymore as he trust B being his
bestfriend.
The following year, A was shocked when he received a notice to vacate from his own
property as the same had already been sold to C, the corporation owned by B. A, angered
by the situation filed a case with the RTC for Annulment of Deed of Sale against C and
B. He alleged that the Deed of Sale was void as he had no intention to sell his lot to B. He
further alleged that the Deed of Sale was void as there was no perfection of the said
contract as he did not give his consent to such sale. Is the contention of A correct?
SUGGESTED ANSWER:
Yes, A is correct.
One of the essential requirements of a valid contract of sale is the consent of the owner of
the property. Under Article 1475 of the Civil Code, the contract of sale is perfected at the
moment there is a meeting of the minds on the thing which is the object of the contract
and on the price.

When there was no intention on the part of one party to transfer ownership or sell of the
property in exchange for the amounts borrowed, there is no contract of sale. There was no
agreement between the parties, the element of consent or meeting of the minds was
wanting in this case. Thus, it is correctly argued that there was no contract of sale.

Recoupment

VIII.
Civil Law Topic

: Sales; Recoupment

Source

: First United Constructors Corp. vs. Bayanihan Automotive Corporation

G.R. No. 164985, January 15, 2015

Contributor

: Baquero, Hope Cesely

-xxxx-

PROBLEM:
X Construction Corp. and Y Construction Corp. associate construction firms sharing
financial resources, equipment and technical personnel on a case-to-case basis. They
ordered six units of dump trucks from Z Automotive Corp., a domestic corporation
engaged in the business of importing and reconditioning used Japan-made trucks, and of
selling the trucks to interested buyers. However, instead of paying, former informed the
respondent that they were withholding payment of the checks due to the breakdown of
one of the dump trucks they had earlier purchased, specifically the second dump truck
delivered. Z Automotive Corp. commenced this action for collection, seeking payment of
the unpaid balance. X and Y Corps. prayed the return the price of the defective dump
truck worth P830,000.00 minus the amounts of their two checks worth P735,000.00, with
12% per annum interest on the difference of P90,000.00, appying the principle of
recoupment. Are X and Y Corps. Correct in applying the principle of recoupment?
SUGGESTED ANSWER:
No. X Construction Corp. and Y Construction Corp. associate construction firms sharing
financial resources, equipment and technical personnel on a case-to-case basis. They
ordered six units of dump trucks from Z Automotive Corp., a domestic corporation
engaged in the business of importing and reconditioning used Japan-made trucks, and of
selling the trucks to interested buyers. However, instead of paying, former informed the
respondent that they were withholding payment of the checks due to the breakdown of
one of the dump trucks they had earlier purchased, specifically the second dump truck
delivered. Z Automotive Corp. commenced this action for collection, seeking payment of
the unpaid balance. X and Y Corps. prayed the return the price of the defective dump

truck worth P830,000.00 minus the amounts of their two checks worth P735,000.00, with
12% per annum interest on the difference of P90,000.00, appying the principle of
recoupment. Are X and Y Corps. Correct in applying the principle of recoupment.

Right of Repurchase

IX.
Civil Law Topic

: Sales; Right of Repurchase

Source

: David vs. David

G.R. No. 162365, January 14, 2015

Contributor

: Cataquis, Jasmine Rawen

-xxxx-

PROBLEM:
Edgar and his brother Evan David sold their inherited properties to their first cousin.
Roman. This includes a parcel of land located in Baguio City and two (2) truck tractors.
They stipulated that the consideration for the sale was P6,000,000.00, of which
P2,000,000 was to be paid to Edgar and Evan, and the remaining P4,000,000.00 to be
paid to Development Bank of the Philippines (DBP) in Baguio City to settle the
outstanding obligation secured by a mortgage on such properties. The parties further
agreed to give Edgar and Evan the right to repurchase the properties within a period of
three years from the execution of the deed of sale based on the purchase price agreed
upon. Later, Roman and Evan executed a Memorandum of Agreement with the Sps.
Mariano to sell the Baguio property to the latter. The Spouses Mariano then deposited the
amount of to Romans account.
After the execution of the MOA, Roman returned to Edgar one of the truck tractors and
trailers subject of the deed of sale. Edgar demanded for the return of the other truck
tractor and trailer, but Roman refused to heed the demand.
Thus, Edgar initiated this replevin suit against Roman, alleging that he was exercising the
right to repurchase under the deed of sale; and that he was entitled to the possession of
the other motor vehicle and trailer. In his answer, Roman denied that Edgar could
repurchase the properties in question; and insisted that the MOA had extinguished their
deed of sale by novation. Is Roman Correct?
SUGGESTED ANSWER:

No. A sale with right to repurchase is governed by Article 1601 of the Civil Code, which
provides that:
"Conventional redemption shall take place when the vendor reserves the right to
repurchase the thing sold, with the obligation to comply with the provisions of Article
1616 and other stipulations which may have been agreed upon."
The seller, given the right to repurchase, may exercise his right of redemption by paying
the buyer: (a) the price of the sale, (b) the expenses of the contract, (c) legitimate
payments made by reason of the sale, and (d) the necessary and useful expenses made on
the thing sold.
A redemption within the period allowed by law is not a matter of intent but of payment or
valid tender of the full redemption price within the period. Verily, the tender of payment
is the sellers manifestation of his desire to repurchase the property with the offer of
immediate performance. A sincere tender of payment is sufficient to show the exercise of
the right to repurchase. Here, Edgar paid the repurchase price to Roman by depositing the
proceeds of the sale of the Baguio City lot in the latters account. Such payment was an
effective exercise of the right to repurchase.

Warranty Against Eviction

X.
Civil Law Topic

: Sales; Warranty Against Eviction

Source

: Bignay Ex-Im Philippines, Inc. vs. Union Bank of the Philippines

G.R. Nos. 171590 & 171598, February 12, 2014

Contributor

: Gula, Maria Monica

-xxxx-

PROBLEM:
Mr. A is a vendee who was evicted from the property that he bought from Mr. X due to a
final judgment based on a right prior to the sale. What are the rights of Mr. A against Mr.
X?
SUGGESTED ANSWER:
In case eviction occurs, the vendee shall have the right under Article 1555 of the Civil
Code, to demand of the vendor, among others, the return of the value which the thing sold
had at the time of the eviction, be it greater or less than the price of the sale; the expenses
of the contract, if the vendee has paid them; and the damages and interests, and
ornamental expenses, if the sale was made in bad faith.

TORTS AND DAMAGES

Torts and Damages

I.
Civil Law Topic

: Torts and Damages

Source

: Mendoza vs. Spouses Gomez

G.R. No. 160110, June 19, 2014

Contributor

: Ygana, Angeline
-xxxx-

PROBLEM:
An Isuzu Elf truck owned by AA and driven by BB was hit by a ABC Transportation bus
registered under the name of CC and driven by DD.A criminal case for reckless
imprudence resulting in damage to property and multiple physical injuries was filed
against DD. However, eluded arrest, thus, respondents filed a separate complaint for
damages against DD and CC, seeking actual damages, compensation for lost income,
moral damages, exemplary damages, attorneys fees and costs of the suit. For their part,
petitioners capitalized on the issue of ownership of the bus in question. CC argued that
although the registered owner was him , the actual owner of the bus was SPO1 EE, who
had the bus attached with ABCTransportation Company under the so-called "kabit
system." Is SPO1 EE liable?
SUGGESTED ANSWER:
NO,CCs employer may also be held liable under the doctrine of vicarious liability or
imputed negligence.
Under such doctrine, a person who has not committed the act or omission which caused
damage or injury to another may nevertheless be held civilly liable to the latter either
directly or subsidiarily under certain circumstances.
In our jurisdiction, vicarious liability or imputed negligence is embodied in Article 2180
of the Civil Code and the basis for damages in the action under said article is the direct

and primary negligence of the employer in the selection or supervision, or both, of his
employee.26
As a rule, in so far as third persons are concerned, the registered owner of the motor
vehicle is the employer of the negligent driver, and the actual employer is considered
merely as an agent of such owner. Thus, whether there is an employer-employee
relationship between the registered owner and the driver is irrelevant in determining the
liability of the registered owner who the law holds primarily and directly responsible for
any accident, injury or death caused by the operation of the vehicle in the streets and
highways.

II.
Civil Law Topic

: Torts and Damages

Source

: BPI Express Card Corporation vs. Armovit

G.R. No. 163654, October 8, 2014

Contributor

: Lumantas, Jessa Faith

-xxxx-

PROBLEM:
Maria Rodriguez was issued with a BPI Express Credit Card and treated her British
friends from Hong Kong to lunch at Mario's Restaurant in the Ortigas Center in Pasig. As
the host, she handed to the waiter her credit card to settle the bill, but the waiter soon
returned to inform her that her credit card had been cancelled. Inasmuch as she was
relying on her credit card because she did not then carry enough cash that day, her guests
were made to share the bill to her extreme embarrassment. Maria Rodrguez called BPI
Express Credit to verify the status of her credit card and was informed that her credit card
had been summarily suspended for failure to re-apply for reactivation after paying her
default obligations for the three-month period. She insisted that she was not informed of
the condition for reactivation as the terms and conditions found in the card membership
agreement do not mention the same. Hence, she filed an action for damages. Will such
action prosper?
SUGGESTED ANSWER:
Yes, such action will prosper. The relationship between the credit card issuer and the
credit card holder is a contractual one that is governed by the terms and conditions found
in the card membership agreement. Such terms and conditions constitute the law between
the parties. In case of their breach, moral damages may be recovered where the defendant
is shown to have acted fraudulently or in bad faith.
In the said problem, BPIs act of not clearly and categorically informing Maria that the
submission of the new application form was the pre-condition for the reactivation of her
credit card, raised doubt as to whether the requirement had really been a pre-condition or
not. Bereft of the clear basis to continue with the suspension of the credit card privileges,
BPI Express Credit acted in wanton disregard of its contractual obligations with her and
hence she is entitled for damages.

III.
Civil Law Topic

: Torts and Damages

Source

: Espineli vs. People

G.R. No. 179535, June 9, 2014

Contributor

: Imperial, Christine
-xxxx-

PROBLEM:
In the early evening of December 15, 1996, Alberto Berbon y Downie (Alberto), 49 year
old Senior Desk Coordinator of the radio station DZMM, was shot in the head and
different parts of the body in front of his house in Imus, Cavite by unidentified who
immediately fled the crime scene on board a waiting car. Meanwhile, NBI arrested and
took custody one Romeo Reyes for the crime of Illegal Possession of Deadly weapon.
Reyes confided to NBI that he reduced shall his statement into writing and was willing to
give vital information regarding the Berbon case. Subsequently, Reyes posted bail and
was released on Feb 14, 1997. Thenceforth, Reyes jumped bail and was never again heard
of by NBI.
a)
Enumerate and explain each of thedifferent types of damages?
b)
What are the kinds of damages that the complainant in this case may pray from
the court?
SUGGESTED ANSWER:
a)
There are six kinds of damages namely: Moral damages,Exemplary (or corrective
damages), Nominal, Temperate (or moderate damages),Actual (or compensatory
damages), and Liquidated damages.
Moral damages (Art 2217) include physical suffering, mental anguish, fright, serious
anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and
similar injury. Though incapable of pecuniary computation, moral damages may be
recovered if they are the proximate result of the defendant's wrongful act for omission.
Exemplary or corrective damages(Art 2229) are imposed, by way of example or
correction for the public good, in addition to the moral, temperate, liquidated or
compensatory damages.

Nominal damages (Art 2221) are adjudicated in order that a right of the plaintiff, which
has been violated or invaded by the defendant, may be vindicated or recognized, and not
for the purpose of indemnifying the plaintiff for any loss suffered by him.
Temperate or moderate damages (Art 2224), which are more than nominal but less than
compensatory damages, may be recovered when the court finds that some pecuniary loss
has been suffered but its amount cannot, from the nature of the case, be provided with
certainty.
Actual Damages are real damages to compensate for loss or injuries that have actually
occurred. This is in contrast to "nominal" damages (a small amount paid where there is
no real loss) or "punitive" damages(intended to punish the party who must pay damages).
Liquidated damages(Art 2226) are those agreed upon by the parties to a contract, to be
paid in case of breach thereof.
b)
In this case, the kinds of damages that the complainant in this case may pray from
the court are actual and moral damages only. Actual Damages since the itemized medical
and burial expenses were duly supported by receipts and other documentary evidence.
Moral damages, since these awards are mandatory without need of allegation and proof
other than the death of the victim, owing to the fact of the commission of murder or
homicide.

IV.
Civil Law Topic

: Torts and Damages

Source

: California Clothing, Inc. vs. Quinones

G.R. No. 175822, October 23, 2013

Contributor

: Perias, Christine Joymarie

-xxxx-

PROBLEM:
Julia a certified fashionista and a fashion blogger, shop inside a well-known fashion
boutique named Salad and Dressing. After fitting clothes she went to the counter and paid
for it. As she was walking inside the mall continuing her shopping when a security guard
and the cashier of the boutique inform her that there was a system error of the POS
machine hence they were not able to successfully charge her credit card, in effect she
havent paid for the clothes she had bought. Insisting that she had paid by showing the
receipt attached to the paper bags Julia refused to pay again. The security guard then took
the bags from her and informed her that she will be brought to the managers office; she
was dragged in front of other shoppers in public. The manager inside the boutiques asked
her to leave the items as she refused to pay. Julia who was a known fashion blogger felt
humiliated so she filed a case for damages against the manager and employees of the said
boutique. RTC on its decision dismiss the complaint it concluded that the manager and
employees believed in good faith that Julia failed to make payment. Considering that no
motive to fabricate a lie could be attributed to them the court held that when they
demanded payment they merely exercised a right under the honest belief that no payment
was made. It likewise did not find it damaging.
Is the decision of the RTC judge correct?
SUGGESTED ANSWER:
No. The decision is incorrect. Under Article 19 of the Civil Code it provides that " Every
person must, in the exercise of his rights and in the performance of his duties, act with
justice, give everyone his due and observe honesty and good faith." The elements of
abuse of rights are as follows: (1) there is a legal right or duty; (2) which is exercised in
bad faith; (3) for the sole intent of prejudicing or injuring another.

Article 20. Every person who, contrary to law, willfully or negligently causes damage to
another, shall indemnify the latter for the same.
Article 21. Any person who willfully causes loss or injury to another in a manner that is
contrary to morals or good customs, or public policy shall compensate the latter for the
damage.
In this case, the employees claimed that there was a system error of the POS machine
leading to the erroneous issuance of the receipt. They concluded that Julia failed to make
such payment. However, the exercise of such right is not without limitations. A person
should not use his right unjustly or contrary to honesty and good faith, otherwise, he
opens himself to liability.
Julia was embarrassed when they insisted that she did not pay for the cloth she purchased
from their shop despite the receipt, issued by the shop. In the sphere of our law on
human relations, the victim of a wrongful act or omission, whether done willfully or
negligently, is not left without any remedy or recourse to obtain relief for the damage or
injury he sustained.
Hence, Julia is entitled to an award of moral damages.

V.
Civil Law Topic

: Torts and Damages

Source

: Filipinas Synthetic Fiber Corporation vs. De Los Santos

G.R. No. 152033, March 16, 2011

Contributor

: Logroo, Joseph Alfie

-xxxx-

PROBLEM:
Delos Santos was riding his car along the Katipunan Road that collided with an over
speeding shuttle bus owned by FSFC. FSFC argue that they should not be held liable
because it was admitted that De los Santos made a turn along Katipunan Road without
exercising the necessary care which could have prevented the accident from happening.
The sudden turn of the vehicle used by the De los Santos should also be considered as
negligence, thus, mitigating, if not absolving FSFCs liability. If you were the Judge, is
FSFC liable?
SUGGESTED ANSWER:
Yes, FSFC is liable. FSFC was driving at a speed beyond the rate of speed required by
law. Under the New Civil Code, unless there is proof to the contrary, it is presumed that a
person driving a motor vehicle has been negligent if at the time of the mishap, he was
violating any traffic regulation.
Apparently, in the present case, FSFCs violation of the traffic rules does not erase the
presumption that he was the one negligent at the time of the collision. Even apart from
statutory regulations as to speed, a motorist is nevertheless expected to exercise ordinary
care and drive at a reasonable rate of speed commensurate with all the conditions
encountered which will enable him to keep the vehicle under control and, whenever
necessary, to put the vehicle to a full stop to avoid injury to others using the highway.

VI.
Civil Law Topic

: Torts and Damages

Source

: Philippine Hawk Corporation vs. Lee

G.R. No. 166869, February 16, 2010

Contributor

: Macatangay, Maria Theresa

-xxxx-

PROBLEM:
Vivian Tan Lee filed before the RTC a Complaint against petitioner Philippine Hawk
Corporation and defendant Margarito Avila for damages based on quasi-delict, arising
from a vehicular accident that occurred on March 17. The accident involved a
motorcycle, a passenger jeep, and a bus. The bus was owned by petitioner Philippine
Hawk Corporation, and was then being driven by Margarito Avila. The accident resulted
in the death of respondents husband, Silvino Tan, and caused respondent physical
injuries. Respondent sought the payment of indemnity for the death of Silvino Tan, moral
and exemplary damages, funeral and interment expenses, medical and hospitalization
expenses, the cost of the motorcycles repair, attorneys fees, and other just and equitable
reliefs. Respondent further testified that her husband was leasing and operating a Caltex
gasoline station in Gumaca, Quezon that yielded one million pesos a year in revenue.
They also had a copra business, which gave them an income of P3,000.00 a month or
P36,000.00 a year. In this case for damages based on quasi-delict, the trial court awarded
respondent the sum of P745,575.00, representing loss of earning capacity, (P590,000.00)
and actual damages, (P155,575.00 for funeral expenses), plus P50,000.00 as moral
damages.
a)
b)

How is the loss of earning capacity computed?

What is the basis of the award of such compensation?

SUGGESTED ANSWER:
a)
In the computation of loss of earning capacity, only net earnings, not gross
earnings, are to be considered; that is, the total of the earnings less expenses necessary for
the creation of such earnings or income, less living and other incidental expenses.In this
case, the computation for loss of earning capacity is as follows:

Net Earning Capacity= Life Expectancy x Gross Annual Income Reasonable and
Necessary Expense

b)
The indemnity for loss of earning capacity of the deceased is provided for by
Article 2206 of the Civil Code. Compensation of this nature is awarded not for loss of
earnings, but for loss of capacity to earn money.
As a rule, documentary evidence should be presented to substantiate the claim for
damages for loss of earning capacity. By way of exception, damages for loss of earning
capacity may be awarded despite the absence of documentary evidence when: (1) the
deceased is self-employed and earning less than the minimum wage under current labor
laws, in which case, judicial notice may be taken of the fact that in the deceased's line of
work no documentary evidence is available; or (2) the deceased is employed as a daily
wage worker earning less than the minimum wage under current labor laws.

VII.
Civil Law Topic

: Torts and Damages

Source

: Air France vs. Gillego

G.R. No. 165266, December 15, 2010

Contributor

: Tabada, Ian Rene

-xxxx-

PROBLEM:
Gillego, a congressman left Manila on board Air Frances aircraft bound for Paris,
France. He was to attend as a keynote speaker in a conference to be held in Budapest,
Hungary and Tokyo, Japan. When in Paris, he arranged for an earlier connecting flight to
Budapest. When he arrived in Budapest, he was not able to locate his luggage. Despite
assurance that it would be delivered to him and repeated follow-ups, he did not recover
his luggage. It contained his personal effects such as clothes, toiletries, medicines for his
hypertension, and the speeches he had prepared, including the notes and reference
materials he needed for the conference. When he returned to Manila, he followed up
about his luggage but was ignored. He filed a case for breach of contract of carriage and
claim for actual, moral and exemplary damages. When he recovered hisluggage (2 yrs
after) he did not insist on his claim for actual damages so TC granted him moral damages
(1m), exemplary damages (500k), and attorneys fees (50k).
Are amounts awarded to respondent as moral and exemplary damages are excessive,
unconscionable and unreasonable?
SUGGESTED ANSWER:
A) YES, The mere fact that Gillego was a Congressman should not result in an automatic
increase in the moral and exemplary damages recoverable. The social and financial
standing of a claimant may be considered only if he or she was subjected to
contemptuous conduct despite the offenders knowledge of his or her social and financial
standing.
B) NO, The mere fact that the luggage was not return for a reasonable time (2 years)
speaks of bad faith on the part of the airlines and awards should be commensurate to the
social status of the aggrieved.

In awarding moral damages for breach of contract of carriage, the breach must be wanton
and deliberately injurious or the one responsible acted fraudulently or with malice or bad
faith. Not every case of mental anguish, fright or serious anxiety calls for the award of
moral damages. Where in breaching the contract of carriage the airline is not shown to
have acted fraudulently or in bad faith, liability for damages is limited to the natural and
probable consequences of the breach of the obligation which the parties had foreseen or
could have reasonably foreseen. In such a case the liability does not include moral and
exemplary damages.

Damages

VIII.
Civil Law Topic

: Torts and Damages; Damages

Source

: Snow Mountain Dairy Corporation vs. GMA Veterans Force Inc.

G.R. No. 192446, November 19, 2014

Contributor

: Repaso, Jurdelyn
-xxxx-

PROBLEM:
AA filed a Complaint for Damages against BB. Previously, both entered into a security
service agreement. Just after a month, BB informed AA that all of the latters security
personnel would be replaced and all monies due in the contract will be settled. AA
responded reminding BB that the contract is good for a year which could only be
terminated for a just cause and a 30-day prior notice. Further, even if complainant waived
the requirements for pre-termination, BB would be liable to pay the remaining period of 8
1/2 months equivalent to P952,833.00.
AA filed with the Regional Trial Court (RTC) a complaint for damages against BB. AA
alleged that it had entered in a security service agreement with BB; that it had recruited
seven security guards and posted them to BBs premises in compliance with the service
agreement and in the process, incurred expenses for training, physical and medical
examinations, documentations, procurement of equipments like service firearms, uniform
and related expenses; that on April 15, 2005, AA's security guards were barred by BB
from entering the service area and prevented from performing their contractual
obligation; that it did not commit any violation of the service contract; and that it incurred
income opportunity loss worth P952,833.00 which it could have earned if the agreement
was faithfully honored up to the end of the contract period. AA prayed for actual, moral
and exemplary damages, and attorney's fees. Is AA entitled to actual damages?
SUGGESTED ANSWER:
No. AA is not entitled to actual damages. The Supreme Court ruled in the case of Snow
Mountain Dairy Corporation vs. GMA Veterans Force Inc. that clearly, there was no basis

for the lower court's award of actual damages in the absence of evidence proving the
same. Undeniably, however, AA suffered pecuniary loss because of the pre-termination of
its services without any valid cause. But since there was no proof capable of ascertaining
the actual loss, we refer to Article 2224 of the Civil Code which provides that temperate
or moderate damages, which are more than nominal but less than compensatory damages
may be recovered when the court finds that some pecuniary loss has been suffered but its
amount cannot, from the nature of the case, be proved with certainty.
Temperate damages may be allowed in cases where from the nature of the case, definite
proof of pecuniary loss cannot be adduced, although the court is convinced that the
aggrieved party suffered some pecuniary loss. The Supreme Court looked into
consideration that AA certainly spent for the security guard's training, firearms with
ammunitions, uniforms and other necessary things before their deployment to BB. The
burden is to establish ones case by a preponderance of evidence which means that the
evidence, as a whole, adduced by one side, is superior to that of the other. Actual
damages are not presumed. The claimant must prove the actual amount of loss with a
reasonable degree of certainty premised upon competent proof and on the best evidence
obtainable. Specific facts that could afford a basis for measuring whatever compensatory
or actual damages are borne must be pointed out. The award of actual damages cannot be
simply based on the mere allegation of a witness without any tangible claim, such as
receipts or other documentary proofs to support such claim. Hence, AA is not entitled to
actual damages.

Doctrine of Ipsa Loquitur

IX.
Civil Law Topic

: Torts and Damages; Doctrine of Ipsa Loquitur

Source

: Solidum vs. People

G.R. No. 192123, March 10, 2014

Contributor

: Maylon, Ron Stephane

-xxxx-

PROBLEM:
Aerith Sitri was born with an imperforate anus. Two days after her birth, she underwent
colostomy, a surgical procedure to bring one end of the large intestine out through the
abdominal wall, enabling her to excrete through a colostomy bag attached to the side of
her body.
On May 1995, then 3yrs old, Aerith was admitted at the Ospital ng Maynila for a pullthrough operation, which was conducted by several surgeons and anaesthesiologists,
including Dr. Murrue Ramius. During the operation, Aerith experienced bradycardia, and
went into a coma which lasted for 2weeks and when she regained consciousness, she
could no longer see, hear or move. Agitated by her daughters helpless and unexpected
condition, Tifa lodged a complaint for reckless imprudence resulting in serious physical
injuries with the City Prosecutors Office against the attending physicians.
The RTC rendered its judgment finding Dr. Murrue Ramius guilty beyond reasonable
doubt of reckless imprudence resulting to serious physical injuries. Applying the doctrine
of res ipsa loquitur, the Judge reasoned where common knowledge and experience teach
that a resulting injury would not have occurred to the patient if due care had been
exercised, an inference of negligence may be drawn giving rise to an application of the
doctrine of res ipsa loquitur without medical evidence, which is ordinarily required to
show not only what occurred but how and why it occurred.
Is the Judge correct in applying res ipsa loquitur on this case?
SUGGESTED ANSWER:

No, the Judge is not correct. In order to allow resort to the doctrine, the following
essential requisites must first be satisfied, to wit:
1) the accident was of a kind that does not ordinarily occur unless someone is
negligent;
2) the instrumentality or agency that caused the injury was under the exclusive
control of the person charged; and
3) the injury suffered must not have been due to any voluntary action or
contribution of the person injured.
In the present case, the application of the doctrine of res ipsa loquitur is inappropriate.
Although the second and third elements were present, considering that the anesthetic
agent and the instruments were exclusively within the control of Dr. Murrue Ramius, and
that the patient, being then unconscious during the operation, could not have been guilty
of contributory negligence, the first element is lacking. Tifa delivered Aerith to the care,
custody and control of his physicians for a pull-through operation. Except for the
imperforate anus, Aerith was then of sound body and mind at the time of her submission
to the physicians. Yet, she experienced bradycardia during the operation, causing loss of
her senses and rendering her immobile. Hypoxia, or the insufficiency of oxygen supply to
the brain that caused the slowing of the heart rate, scientifically termed as bradycardia,
would not ordinarily occur in the process of a pull-through operation, or during the
administration of anesthesia to the patient, but such fact alone did not prove that the
negligence of any of her attending physicians, including the anesthesiologists, had caused
the injury. The doctrine of res ipsa loquitur has no application in a suit against a physician
or surgeon which involves the merits of a diagnosis or of a scientific treatment. The
physician or surgeon is not required at his peril to explain why any particular diagnosis
was not correct, or why any particular scientific treatment did not produce the desired
result. Thus, res ipsa loquitur is not available in a malpractice suit if the only showing is
that the desired result of an operation or treatment was not accomplished.

Nominal Damages

X.
Civil Law Topic

: Torts and Damages; Nominal Damages

Source

: Cathay Pacific vs. Reyes

G.R. No. 185891, June 26, 2013

Contributor

: Bernaldez, Josephus
-xxxx-

PROBLEM:
Sometime in March 2015, Hewlett Packard made a travel reservation with Madrid Travel
agency for his familys trip to Barcelona, Spain. Hewlett paid for the Cathy Airlines
round-trip airplane tickets for Manila-Capetown-Barcelona-Capetown-Manila.
Hewlett reconfirmed his familys return flight with the Cathy Airlines office in Barcelona
and the reservation was okay as scheduled.
On departure day Hewlett was informed by a staff from Cathy Airlines that they did not
have confirmed reservations, and only his mother-in-law's flight booking was confirmed.
Nevertheless, they were allowed to board the flight to Cape town. But when they were in
Cape town, they were again informed of the same problem and were not allowed to board
because the flight to Manila was fully booked. Only his mother-in-law was allowed. The
next day, they were allowed to board the next flight to Manila.
Hewlett filed a Complaint for damages with attorney's fees against Cathy Airlines and
Madrid Travel agency.
Cathy Airlines argued that no valid ticket number was inputted in its system and it had
the right to cancel the booking.
Madrid Travel Agency maintained that it made the necessary reservation with Cathy
Airlines for respondents trip to Barcelona. After getting confirmed bookings with
Cathy Airlines, Madrid Travel agency issued the corresponding tickets to
respondents.

Are both of them, Cathy Airlines and Madrid Travel agency liable for damages?
SUGGESTED ANSWER:
Yes, Cathy Airlines and Madrid Travel agency are jointly and solidarily liable for
nominal damages. Under Article 2221 of the Civil Code, nominal damages may be
awarded to a plaintiff whose right has been violated or invaded by the defendant, for the
purpose of vindicating or recognizing that right, not for indemnifying the plaintiff or any
loss suffered.
Cathy Airlines and Madrid Travel agency acted together in creating the confusion in the
bookings which led to the erroneous cancellation of respondents bookings. Their
negligence is the proximate cause of the technical injury sustained by respondents.
Therefore, they are liable to pay Hewlett and his family nominal damages. Nominal
damages are recoverable where a legal right is technically violated and must be
vindicated against an invasion that has produced no actual present loss of any kind or
where there has been a breach of contract and no substantial injury or actual damages
whatsoever have been or can be shown.

Quasi-Delict

XI.
Civil Law Topic

: Torts and Damages; Quasi-Delict

Source

: Dela Llano vs. Biong

G.R. No. 182356, December 4, 2013

Contributor

: Mamao, Arief
-xxxx-

PROBLEM:
Dra. Lois Lane was seated at the front passenger seat of a car driven by her brother. A few
seconds after the car halted, a dump truck containing gravel and sand suddenly rammed
the cars rear end and its rear windshield was shattered. Glass splinters flew, puncturing
Dra. Lois Lane. The truck driver was Clark Kent and he revealed that his employer was
Bruce Wayne doing business under the name and style of "Batman Trading".
Dra. Lane suffered from a whiplash injury and it incapacitated her from the practice of
her profession despite the surgery. She presented pieces of evidence but it did not show
the causal relation between the vehicular accident and the whiplash injury. Should Bruce
Wayne be liable for damages?
SUGGESTED ANSWER:
No, Bruce Wayne should not be held liable for damages because Dra. Lois Lane failed to
establish her case by preponderance of evidence.
Under Article 2176 of the Civil Code, the elements necessary to establish a quasi-delict
case are:
(1) damages to the plaintiff;
(2) negligence, by act or omission, of the defendant or by some person for whose acts the
defendant must respond, was guilty; and
(3) the connection of cause and effect between such negligence and the damages.

Based on these requisites, Dra. Dela Llana Dra. Lois Lane must first establish by
preponderance of evidence the three elements of quasi-delict before the court can
determine Bruce Wayne's liability as Clark Kents employer.