SAINT LOUIS UNIVERSITY

Obligations and Contracts

Case Book



Cabson, Claire
Ignacio, Regine
Kiwang, Chesty Joy
Pocais, Laurice
Poserio, Chrissan Mae
Abad, Kendal
Paraan, Brian Jonathan
Vehemente, Joseph Harvey

March 7, 2014
Table of Contents
MARIANO UN OCAMPO III v PEOPLE OF THE PHILIPPINES ......................................................................... 18
LEUNG BEN v P. J. O'BRIEN ......................................................................................................................... 20
ARTURO PELAYO v MARCELO LAURON ET AL. ............................................................................................ 22
ASJ CORPORATION AND ANTONIO SAN JUAN v SPS. EFREN & MAURA EVANGELISTA .............................. 24
ERNESTO RAMAS UYPITCHING and RAMAS UYPITCHING SONS, INC., v. ERNESTO QUIAMCO .................. 26
NIKKO HOTEL MANILA GARDEN and RUBY LIM vs ROBERTO REYES, a.k.a. AMAY BISAYA, .................... 29
ST. MARYS ACADEMY vs. WILLIAM CARPITANOS and LUCIA S. CARPITANOS et al. .................................. 32
SPOUSES LUIGI M. GUANIO and ANNA HERNANDEZ-GUANIO v. MAKATI SHANGRI-LA ............................ 34
TSPIC CORPORATION v TSPIC EMPLOYEES UNION (FFW) .......................................................................... 36
KHRISTINE REA M. REGINO v PANGASINAN COLLEGES OF SCIENCE AND TECHNOLOGY ........................... 38
PHILIPPINE SCHOOL OF BUSINESS ADMINISTRATION v. COURT OF APPEALS ............................................ 40
Cosmo Entertainment Mgmt, Inc. vs. La Ville Commercial Corporation .................................................. 42
AYALA CORP v. ROSA-DIANA REALTY AND DEVT. CORP. ........................................................................... 44
BRICKTOWN DEVELOPMENT CORP. vs. AMOR TIERRA DEVELOPMENT CORP. .......................................... 46
PILIPINAS HINO, INC. vs. COURT OF APPEALS ............................................................................................. 48
ARTURO SARTE FLORES vs. SPS ENRICO L. LINDO, JR. and EDNA C. LINDO ................................................ 50
PHILIPPINE REALTY AND HOLDINGS CORPORATION vs. LEY CONST. AND DEVT CORP ............................. 53
Titan-Ikeda Construction v Primetown Property ........................................................................................ 57
PADCOM CONDO v ORTIGAS ASSOC CENTER ............................................................................................ 61
State Investment vs. Court of Appeals ........................................................................................................ 65
People v Nufrashir Hashim.......................................................................................................................... 67
FELIXBERTO A. ABELLANA VS. PEOPLE ........................................................................................................ 69
PEOPLE vs. EDWIN MALICSI ........................................................................................................................ 71
PEOPLE vs. ROSAURO SIA ............................................................................................................................ 73
PEOPLE OF THE PHILIPPINES vs. LUDOVICO C. DOCTOLERO ...................................................................... 76
PEOPLE vs. ROLLY ABULENCIA ................................................................................................................... 78
REYNALDO BERMUDEZ, SR and ADONITA YABUT BERMUDEZ v. JUDGE A. MELENCIO-HERRERA ............ 79
PEOPLE OF THE PHILIPPINES vs. Hon. Judge BENJAMIN RELOVA ............................................................... 82
GEORGE MANANTAN vs. THE COURT OF APPEALS..................................................................................... 84
PEOPLE OF THE PHILIPPINES vs. ROGELIO BAYOTAS .................................................................................. 87
FAUSTO BARREDO vs. SEVERINO GARCIA ................................................................................................... 89
OSCAR DEL CARMEN, JR., vs. GERONIMO BACOY ...................................................................................... 93
LUDO AND LUYM CORPORATION vs. COURT OF APPEALS ......................................................................... 96
THERMOCHEM INC vs. LEONORA NAVAL and CA ....................................................................................... 99
PHILIPPINE HAWK CORP vs VIVIAN TAN LEE ........................................................................................... 101
DY TEBAN TRADING, INC. vs. JOSE CHING ................................................................................................ 104
SAFEGUARD SECURITY AGENCY INC vs. LAURO TANGCO et al ................................................................ 107
NOSTRADAMUS VILLANUEVA vs. PRISCILLA R. DOMINGO and LEANDRO LUIS R. DOMINGO ................. 110
VICENTE CALALAS vs. FRANCISCO SALVA ................................................................................................. 112
AMADO PICART vs. FRANK SMITH, JR. ...................................................................................................... 115
DURBAN APARTMENTS CORP vs PIONEER INSURANCE AND SURETY CORP ............................................ 117
JOSE LAGON vs. HOOVEN COMALCO INDUSTRIES INC ............................................................................ 119
SPS LORENZO G. FRANCISCO and LORENZA D. FRANCISCO vs. COURT OF APPEALS ............................... 121
JACINTO TANGUILIG vs. COURT OF APPEALS and VICENTE HERCE JR. ..................................................... 123
DR. FERNANDO PERIQUET, JR. vs. HEIRS OF THE LATE FELIX R. FRANCISCO ............................................ 126
LEGASPI OIL CO. INC. vs CA and BERNARD OSERAOS ............................................................................... 128
PHILIPPINE CHARTER INSURANCE CORPORATION v CENTRAL COLLEGES OF THE PHILIPPINES............... 130
Titan-Ikeda Construction v Primetown Property ...................................................................................... 133
PNB MADECOR vs. GERARDO C. UY .......................................................................................................... 137
IGNACIO BARZAGA vs. COURT OF APPEALS and ANGELITO ALVIAR ......................................................... 139
JOSEFINA TAYAG et al v COURT OF APPEALS ............................................................................................ 141
DR. FERNANDO PERIQUET, JR vs. HEIRS OF FRANCISCO .......................................................................... 143
ARMAND O. RAQUEL-SANTOS vs CA and FINVEST SECURITIES CO., INC .................................................. 145
RCBC vs. CA and FELIPE LUSTRE ................................................................................................................ 147
BPI INVESTMENT CORPORATION vs. CA and ALS MGMT & DEVT CORP .................................................. 149
CARMELITA LEAO vs. CA and HERMOGENES FERNANDO ...................................................................... 151
HEIRS OF LUIS BACUS vs. CA and SPS FAUSTINO DURAY and VICTORIANA DURAY ................................. 153
INTEGRATED PACKAGING CORP vs. CA and FIL-ANCHOR PAPER CO., INC. .............................................. 155
ROBERTO Z. LAFORTEZA et al vs. ALONZO MACHUCA ............................................................................. 157
RODOLFO N. REGALA vs. FEDERICO P. CARIN ........................................................................................... 160
THE INTERNATIONAL CORPORATE BANK (UNION BANK) vs. SPS. FRANCIS S. GUECO and MA. LUZ E.
GUECO ....................................................................................................................................................... 162
REPUBLIC vs. THE COURT OF TAX APPEALS and AGFHA, INCORPORATED ............................................... 164
Antonio Diaz vs. Davao Light and Power Co., Inc...................................................................................... 166
Ms. Violeta Yasona vs. De Ramos ............................................................................................................. 169
Asian Terminals, Inc., vs. Philam Insurance Co., Inc. ................................................................................ 171
Cecilia Yambao vs. Melchorita Zuniga et al. ............................................................................................. 173
Smith Bell Dodwell Shipping Agency Corporation vs. Catalino Borja and International to Wage and
Transport Corporation .............................................................................................................................. 175
Ramon Ilusorio vs. Court of Appeals and The Manila Banking Corporation ............................................. 177
National Power Corporation vs. Court of Appeals and Engineering Construction, Inc. ........................... 179
Anabelle Muaje-Tuazon and Almer Abing vs. Wenphil Corporation, et al. .............................................. 181
Radio Communication of the Philippines, Inc. vs. Alfonso Verchez, et al. ................................................ 183
Victory Liner, Inc. vs. Rosalito Gammad, et al .......................................................................................... 185
FGU Insurance Corporation vs. G.P Sarmiento Trucking Corporation and Lambert Eroles...................... 187
Light Rail Transit Authority & Rodolfo Roman vs. Marjorie Navidad, et al............................................... 189
Rodzssen Supply Co., Inc. vs. Far East Bank & Trust Co. ........................................................................... 191
University of the East vs. Romeo Jader ..................................................................................................... 193
Bayne Adjusters and Surveyors, Inc. vs. Court of Appeals and Insurance Company of North America ... 195
Delsan Transport Lines, Inc. vs. C & A Construction, Inc. ......................................................................... 197
Philippine Commercial International Bank vs. Court of Appeals, et al ..................................................... 199
San Miguel Corporation vs. Heirs of Sabiniano Inguito and Julius Ouano ................................................ 201
Heirs of Jose Marcial Ochoa, et al. vs. G & S Transport Corporation........................................................ 203
Alfredo Pacis and Cleopatra Pacis vs. Jerome Jovanne Morales .............................................................. 205
Philippine Hawk Corporation vs. Vivian Tan Lee ...................................................................................... 207
Mercury Drug Corporation and Rolando Del Rosario vs. Spouses Richard Huang, et al. ......................... 208
Flordeliza Mendoza vs. Mutya Soriano, et al. ........................................................................................... 210
Hermana R. Cerezo vs. David Tuazon ....................................................................................................... 212
Filcar Transport Services vs. Jose Espinas ................................................................................................. 214
FEB Leasing and Finance Corporation vs. Spouses Sergio Baylon, et al. .................................................. 216
Filipinas Synthetic Fiber Corporation vs. Wilfredo De Los Santos, et al. .................................................. 218
Viron Transportation Co., Inc. vs. Alberto Delos Santos y Natividad and Rudy Samidan ......................... 220
Mercury Drug Corporation vs. Sebastian Baking ...................................................................................... 222
Safeguard Security Agency, Inc., and Admer Pajarillo vs. Lauro Tangco, et al. ........................................ 224
Ernesto Pleyto and Philippine Rabbit Bus Lines, Inc. vs. Maria Lomboy and Carmela Lomboy ............... 226
Viron Transportation Co., Inc. vs. Alberto Delos Santos y Natividad and Rudy Samidan ......................... 228
Ernesto Syki vs. Salvador Begasa .............................................................................................................. 230
Cecilia Yambao vs. Melchorita Zuniga, et al ............................................................................................. 232
Mindanao Terminal and Brokerage Service, Inc. vs. Phoenix Assurance Company of New York/ MCGEE &
Co., Inc....................................................................................................................................................... 234
YHT Realty Corporation, Erlinda Lainez and Anicia Payam vs. Court of Appeals and Maurice McLoughlin
.................................................................................................................................................................. 236
Rogelio Ramos, et al vs. Court of Appeals, et al. ...................................................................................... 239
Leah Alesna Reyes, et al vs. Sisters of Mercy Hospital, et al..................................................................... 242
Rogelio Nogales, et al vs. Capitol Medical Center, et al............................................................................ 245
Professional Services, Inc., Juan Fuentes, Miguel Ampil vs. Natividad and Enrique Agana ..................... 247
Professional Services, Inc. vs. Court of Appeals, Natividad and Enrique Agana ....................................... 250
Dr. Milagros Cantre vs. Spouses John David Go and Nora Go .................................................................. 252
Dr. Rubi Li vs. Spouses Reynaldo and Lina Soliman, as parents/heirs of deceased Angelica Soliman ..... 254
People of the Philippines vs. Glenn De Los Santos ................................................................................... 257
L.G. Foods Corporation and Victorino Gabor, Vice-President and General Manager vs. Hon. Philadelfa
Pagapong-Agraviador, in her capacity as Presiding Judge of Regional Trial Court, Branch 43, Bacolod City,
and Spouses Florentino and Theresa Vallejera ......................................................................................... 260
Victorino Magat vs. Hon. Leo Medialdea and Santiago Guerrero ............................................................ 262
Fidela Del Castillo Vda. De Mistica vs. Spouses Bernardino Naguiat and Maria Paulina Gerona-Naguiat
.................................................................................................................................................................. 264
Spouses Henry Co and Elizabeth Co and Melody Co vs. Court of Appeals, et al ...................................... 266
Heirs of Sofia Quirong, represented by Romeo Quirong vs. Development Bank of the Philippines ........ 268
Heirs of Ramon Gaite, et al vs. the Plaza, Inc. and FGU Insurance Corporation....................................... 270
Solar Harvest, Inc. vs. Davao Corrugated Carton Corporation ................................................................. 273
Mila Reyes vs. Victoria Tuparan ................................................................................................................ 275
G.G. Sportswear MFG. Corporation vs. World Class Properties, Inc. ....................................................... 278
Valentin Movido, substituted by Marginito Movido vs. Luis Reyes Pastor .............................................. 280
Spouses Carmen Tongson and Jose Tongson, et al vs. Emergency Pawnshop Bula, Inc. and Danilo Napala
.................................................................................................................................................................. 282
Bonifacio Sanz Maceda, Jr. vs. Development Bank of the Philippines...................................................... 284
Armando Raquel-Santos and Annalissa Mallari vs. Court of Appeals and Finvest Securities Co., Inc. ..... 286
Spouses Lino Francisco & Guia Francisco vs. DEAC Construction, Inc. and Geomar Dadula .................... 288
Spouses Felipe and Leticia Cannu vs. Spouses Gil and Fernandina Galang and National Home Mortgage
Finance Corporation ................................................................................................................................. 291
Generoso Villanueva and Raul Villanueva, Jr. vs. Estate of Gerardo Gonzaga/Ma. Villa Gonzaga, in her
capacity as Administratrix ......................................................................................................................... 293
Spouses Domingo and Lourdes Paguyo vs, Pierre Astorga and St. Andrew Realty, Inc. .......................... 295
Bienvenido Casino, Jr. vs. Court of Appeals and Octagon Realty Development Corporation .................. 298
Fernando Carrascoso, Jr. vs. Court of Appeal, et al. ................................................................................. 300
Goldenrod, Inc. vs. Court of Appeals, et al. .............................................................................................. 303
Roberto Serrano vs. Court of Appeals, et al.............................................................................................. 306
Perla Palma Gil, Vicente Hizon, Jr., and Angel Palma Gil vs. Court of Appeals, et al. ............................... 308
David Reyes vs Jose Lim ............................................................................................................................ 310
Ong Yong, et. al. vs David Tiu .................................................................................................................... 312
Equatorial Realty Devt Inc. vs Mayfair Theater, Inc. ................................................................................ 314
Sps. Mariano and Avelina Velarde vs Court of Appeals ............................................................................ 316
Alexander Asuncion vs Eduardo Evangelista ............................................................................................ 318
William Uy vs Court of Appeals ................................................................................................................. 320
Constancia Tamayo, et. al. vs Rosalia Abad Senora, et. al. ....................................................................... 322
Leticia Tan, et. al. vs OMC Carriers, Inc. .................................................................................................... 324
Victory Liner, Inc. vs Heirs of Andres Malecdan ....................................................................................... 326
GSIS vs Sps. Gonzalo and Matilde Labung-Deang ..................................................................................... 329
BPI Investment Corp. vs DG Carreon Commercial Corp. .......................................................................... 331
Khe Kong Cheng vs Court of Appeals ........................................................................................................ 333
Philippine Realty and Holdings Corp. vs Ley Construction and Development Corp. ................................ 335
Megaworld Globus Asia, Inc. vs Mila Tanseco .......................................................................................... 337
Roberto Sicam vs Lulu Jorge ..................................................................................................................... 339
Florencia Huibonhua vs Court of Appeals ................................................................................................. 341
Ace-Agro Development Corp. vs Court of Appeals ................................................................................... 343
Pedro Dioquino vs Federico Laureano, et. al. ........................................................................................... 345
Bachelor Express, Inc. vs Court of Appeals ............................................................................................... 347
Pedro Vasquez, et. al. vs Court of Appeals ............................................................................................... 349
Alberta & Cresencio Yobido vs Court of Appeals ...................................................................................... 351
Roberto Juntilla vs Clemente Fontanar ..................................................................................................... 353
PhilAm Gen Insurance Co. vs MGG Marine Services, Inc. ......................................................................... 355
Mindex Resourced Development vs Ephraim Morillo .............................................................................. 357
NAPOCOR vs Philipp Brothers Oceanic, Inc. ............................................................................................. 359
William Ong Genato vs Benjamin Bayhon, et. al. ..................................................................................... 361
Union Bank of the Philippines vs Edmund Santibaez ............................................................................. 363
Jesus San Agustin vs Court of Appeals ...................................................................................................... 365
Project Builders, Inc. vs Court of Appeals ................................................................................................. 367
Hong Kong and Shanghai Banking Corp. (HSBC) vs Sps. Broqueza ........................................................... 369
Development Bank of the Philippines vs Court of Appeals ...................................................................... 371
Maria Soledad Tomimbang vs Atty. Jose Tomimbang .............................................................................. 372
Felix Gonzales vs Heirs of Cruz .................................................................................................................. 374
Insular Life Assurance Company vs Robert Young, et. al. ......................................................................... 376
Direct Funders Holdings Corp. vs Judge Celso Lavia ............................................................................... 378
Fidela Vda. de Mistica vs Sps. Naguiat ...................................................................................................... 380
Luz Hermosa vs Epifanio Longara ............................................................................................................. 382
Nazario Trillana vs Quezon College, Inc. ................................................................................................... 384
Visayan Sawmill Company, Inc. vs Court of Appeals ................................................................................ 386
Carmelita Leao vs Court of Appeals ........................................................................................................ 388
Raymundo De Leon vs Benita Ong ............................................................................................................ 390
Heirs of Remedios Sandejas vs Alex Lina .................................................................................................. 392
Commissioner of Internal Revenue vs Primetown Property Group ......................................................... 394
National Marketing Corp. (NAMARCO) vs. Tecson, et. al. ........................................................................ 396
Ernest Berg vs Magdalena Estate, Inc. ...................................................................................................... 398
Lirag Textile Mills, Inc. vs Court of Appeals .............................................................................................. 400
Daguhoy Enterprises, Inc. vs Rita Ponce ................................................................................................... 402
Victoria Planters Association, Inc. vs Victorias Milling Co., Inc. ................................................................ 404
Jespajo Realty Corporation vs Court of Appeals ....................................................................................... 406
Pilar Borromeo et. al. vs Court of appeals ................................................................................................ 408
Benito Gonzales vs Florentino de Jose ...................................................................................................... 410
Guillermina Baluyut vs Eulogio Poblete et. al. .......................................................................................... 412
Malayan Realty, Inc. vs Uy Han Yong ........................................................................................................ 414
Kasapian ng Malayang Manggagawa sa Coca-Cola vs Court of Appeals .................................................. 416
Zenaida Santos vs Santos et. al. ................................................................................................................ 418
Manuel Melotindos vs Melecio Tobias ..................................................................................................... 420
LL and Company Development vs Huang Chao Chun ............................................................................... 422
Brent School, Inc. vs Ronaldo Zamora ...................................................................................................... 424
Lourdes Valerio Lim vs People of the Philippines ..................................................................................... 426
Pacific Banking Corporation vs Court of Appeals ...................................................................................... 428
Felipe Agoncillo vs Crisanto Javier ............................................................................................................ 430
Ong Guan Can vs The Century Incurance Co., Ltd. ................................................................................... 432
Clara Tambunting de Legards, et. al. vs Victoria Desbarats Miailhe ......................................................... 434
Alejandro Reyes vs Francisco Martinez .................................................................................................... 436
Martina Quizana vs Gaudencio Redugerio ............................................................................................... 437
Marsman vs. Philippine Geoanalytics ....................................................................................................... 439
Purita Alipio vs. the Court of Appeals and Romeo G. Jaring ..................................................................... 441
PH Credit Corporation vs. Court of Appeals and Carlos M. Ferrales ........................................................ 442
Construction Development Corporation of the Philippines vs. Rebecca G. Estrella, et. al. ..................... 443
Republic Glass Corporation and Gervel Inc., vs. Lawrence C. Qua ........................................................... 445
Industrial Management International Development Corp. (INIMACO) vs National Laabor Relations
Commission ............................................................................................................................................... 447
Metro Manila Transit Coprporation vs Court of Appeals ......................................................................... 449
Baldomero Inciong, Jr. vs Court of Appeals and Philippine Bank of Communications ............................. 451
Philippine Blooming Mill, Inc. vs Court of Appeals ................................................................................... 452
Queensland Tokyo Commodities, Inc. vs Thomas George ........................................................................ 455
Shrimp-Specialist vs. Fuji-Triumph Agri-Industrial Corporation ............................................................... 457
Asset Builders Corporation vs. Stronghold Insurance Company, Inc. ....................................................... 459
Eparwa Security and Janitorial Services, Inc. vs Liceo de Cagayan University .......................................... 461
P.T. Cerna Corporation vs Court of Appeals ............................................................................................. 463
Natividad P. Nazareno vs Court of Appeals .............................................................................................. 465
Aurelio P. Alonzo vs Jaime and Perlita San Juan ....................................................................................... 467
Jesus T. David vs. Court of Appeals ........................................................................................................... 470
Republic of the Philippines vs. Thi Thu Thuy T. De Guzman ..................................................................... 472
Jose Marques and Maxilite Technologies, Inc. vs Far East Bank and Trust Company .............................. 474
PRISMA Construction and Development Corporation vs Arthur F. Menchavez ....................................... 476
Theresa Macalalag vs People of the Philippines ....................................................................................... 478
Antonio Tan vs. Court of Appeals ............................................................................................................. 479
Eastern Shipping Lines, Inc. vs Court of Appeals ...................................................................................... 481
Rodelo G. Polotan, Sr. vs Court of Appeals ............................................................................................... 483
New Sampaguita Builders Construction, Inc. (NSBCI) vs Philippine National Bank .................................. 484
Dario Nacar vs Gallery Frames and/or Felipe Bordey, Jr. ......................................................................... 486
Land Bank of the Philippines vs Alfredo Ong ............................................................................................ 488
Spouses Florentino T. Mallari and Aurea V. Mallari vs Prudential Bank (now Bank of the Philippine
Islands) ...................................................................................................................................................... 491
RGM Industries vs United Pacific Capital Corporation ............................................................................. 493
Philippine National Bank vs Spouses Wilfredo and Estela Encina ............................................................ 495
Restituta M. Imperial vs Alexa Jaucian ..................................................................................................... 497
Teddy G. Pabugais vs Dave P. Sahijwani ................................................................................................... 499
Antonio Lo vs Court of Appeals ................................................................................................................. 501
Tolomeo Ligutan vs Court of Appeals ....................................................................................................... 503
Spouses Silvestre vs Rodrigo V. Ramos ..................................................................................................... 505
First Metro Investment Corporation vs Este del Sol Mountain Reserve .................................................. 507
DOMEL Trading Corporation vs Court of Appeals ..................................................................................... 509
Leticia Y. Medel, et. al. vs Court of Appeals .............................................................................................. 511
Pacita F. Reformina vs The Honorable Valeriano P. Tomol ...................................................................... 513
Sonny Lo vs KJS Eco-Formwork System Phil., Inc. ..................................................................................... 515
Philippine National Bank vs Court of Appeals and Loreto Tan ................................................................. 517
Cathay Pacific Airways, Ltd. Vs Spouses Daniel Vazquez and Maria Luisa Madrigal Vazquez .................. 519
Citibank, N.A. and Investors Finance Corporation vs Modesta R. Sabeniano ......................................... 521
Telengtan Brothers & Sons, INC. vs. United States Lines.......................................................................... 523
C.F. Sharp & Co., Inc. vs Northwest Airlines, Inc. ...................................................................................... 525
Albert R. Padilla vs Spouses Floresco Paredes and Adelina Paredes ........................................................ 526
Norberto Tibajia, Jr. and Armen Tibajia vs Court of Appeals .................................................................... 528
Development Bank of the Philippines vs Court of Appeals ...................................................................... 530
Vitarich Corporation vs. Chona Losin ........................................................................................................ 532
Metropolitan Bank and Trust Company vs Renato D. Cabilzo .................................................................. 534
Almeda vs Bathala Marketing ................................................................................................................... 536
Simplicio A. Palanca vs Ulyssis Guides ...................................................................................................... 538
PHILIPPINE COMMERCIAL INTERNATIONAL BANK (formerly INSULAR BANK OF ASIA AND AMERICA) vs.
COURT OF APPEALS ................................................................................................................................... 540
Jose V. Lagon vs Hooven Comalco Industries, Inc. .................................................................................... 542
Audion Electric Co., Inc. vs National Labor Relations Commission ........................................................... 544
BINALBAGAN VS. CA.................................................................................................................................. 546
LORENZO SHIPPING COMPANY v. BJ MARTHEL INTERNATIONAL ............................................................ 548
LUZON DEVELOPMENT BANK vs. ENRIQUEZ ............................................................................................ 549
ESTANISLAO REYES vs. SEBASTIANA MARTINEZ ET AL., ........................................................................... 551
AGRIFINA AQUINTEY vs. SPOUSES FELICIDAD AND RICO TIBONG............................................................ 553
MAMENTA Vda. De JAYME vs. CA ............................................................................................................ 555
Caltex vs. IAC ............................................................................................................................................. 557
Lo vs. CA .................................................................................................................................................... 559
ASJ Corporation vs. Evangelista ................................................................................................................ 561
Paculdo vs. Regalado ................................................................................................................................ 563
CBC vs. CA ................................................................................................................................................. 565
Mobil vs. CA .............................................................................................................................................. 567
Sps. Bonrostro vs. Sps. Luna ..................................................................................................................... 568
Dalton vs. FGR Reality and Development Corp. ........................................................................................ 570
Benos vs. Lawilao ...................................................................................................................................... 572
Peoples Industrial vs. CA .......................................................................................................................... 574
Eternal Gardens vs. CA .............................................................................................................................. 576
Rayos vs. Reyes ......................................................................................................................................... 577
Cebu International vs. CA .......................................................................................................................... 579
De Mesa vs. CA .......................................................................................................................................... 581
Occena vs. CA ............................................................................................................................................ 583
Ortigas vs Feati Bank ................................................................................................................................. 585
So vs. Food Fest Land, Inc. ........................................................................................................................ 587
Magat vs. CA ............................................................................................................................................. 589
PNCC vs. CA ............................................................................................................................................... 591
NATELCO vs. CA ......................................................................................................................................... 593
Reyna vs. COA ........................................................................................................................................... 594
Trans Pacific vs. CA .................................................................................................................................... 596
Dalupan vs. Harden ................................................................................................................................... 598
Lopez Liso vs. Tambunting ........................................................................................................................ 600
Testate Estate of Mota vs. Serra ............................................................................................................... 601
Yek Tong Lim Fire vs. Yusingco .................................................................................................................. 603
EGV Realty vs. CA ...................................................................................................................................... 604
AEROSPACE CHEMICAL INDUSTRIES, INC. vs. COURT OF APPEALS .......................................................... 606
ERNESTO M. APODACA vs. NATIONAL LABOR RELATIONS COMMISSION ................................................ 609
SPOUSES VICTORIANO CHUNG and DEBBIE CHUNG vs. ULANDAY CONSTRUCTION, INC. ....................... 611
MONDRAGON PERSONAL SALES, INC. vs. VICTORIANO S. SOLA, JR. ........................................................ 613
INSULAR INVESTMENT AND TRUST CORPORATION vs. CAPITAL ONE EQUITIES CORP. .......................... 615
SELWYN F. LAO and EDGAR MANANSALA vs. SPECIAL PLANS, INC. ......................................................... 617
UNITED PLANTERS SUGAR MILLING CO., INC., (UPSUMCO) vs. CA .......................................................... 619
SILAHIS MARKETING CORPORATION vs. IAC ............................................................................................. 622
ENGRACIO FRANCIA vs. IAC ...................................................................................................................... 624
HERMENEGILDO M. TRINIDAD vs. ESTRELLA ACAPULCO ......................................................................... 626
HEIRS OF SERVANDO FRANCO vs. SPOUSES VERONICA AND DANILO GONZALES ................................... 628
CAROLINA HERNANDEZ-NIEVERA vs. WILFREDO HERNANDEZ ................................................................ 630
ST. JAMES COLLEGE OF PARAAQUE vs. EQUITABLE PCI BANK ............................................................... 633
MARIA SOLEDAD TOMIMBANG vs. ATTY. JOSE TOMIMBANG ................................................................. 636
MINDANAO SAVINGS AND LOAN ASSOCIATION, INC. vs. EDWARD WILLKOM ........................................ 638
AGRIFINA AQUINTEY vs. SPOUSES FELICIDAD AND RICO TIBONG............................................................ 640
ASIAN TERMINALS, INC. vs. PHILAM INSURANCE CO., INC. ...................................................................... 642
LOADMASTERS CUSTOMS SERVICES, INC. vs. GLODEL BROKERAGE CORPORATION ............................... 643
METROPOLITAN BANK AND TRUST COMPANY vs. RURAL BANK OF GERONA, INC.................................. 645
SWAGMAN HOTELS AND TRAVEL, INC. vs. CA .......................................................................................... 647
AZOLLA FARMS and FRANCISCO R. YUSECO vs. CA .................................................................................. 649
CALIFORNIA BUS LINES, INC. vs. STATE INVESTMENT HOUSE, INC. ......................................................... 651
GLORIA OCAMPO-PAULE vs. CA ................................................................................................................ 654
SPOUSES ARSENIO R. REYES and NIEVES S. REYES vs. CA ......................................................................... 656
SPOUSES FLORANTE and LAARNI BAUTISTA vs. PILAR DEVELOPMENT CORPORATION ........................... 658
EVADEL REALTY and DEVELOPMENT CORPORATION vs. SPOUSES ANTERO AND VIRGINIA SORIANO .... 660
FRANCISCO L. ROSARIO, JR. vs. LELLANI DE GUZMAN .............................................................................. 662
VECTOR SHIPPING CORPORATION vs. AMERICAN HOME ASSURANCE COMPANY .................................. 664
ERNESTO VILLEZA vs. GERMAN MANAGEMENT AND SERVICES ............................................................... 666
INSURANCE OF THE PHILIPPINE ISLANDS CORPORATION vs. SPOUSES VIDAL S. GREGORIO and JULITA
GREGORIO ................................................................................................................................................. 668
ROMEO D. MARIANO vs. PETRON CORPORATION ................................................................................... 670
SPOUSES PATRICIO and MYRNA BERNALES vs. HEIRS OF JULIAN SAMBAAN ........................................... 672
B & I REALTY CO., INC., petitioner, vs. TEODORO CASPE .......................................................................... 674
Felicisima Mesina vs. Atty. Honorio Valisno Garcia .................................................................................. 676
Heirs of Gaudiane vs. Court of Appeals .................................................................................................... 678
Menandro Laureano vs CA ........................................................................................................................ 680
Banco Filipino Savings vs Court of Appeals ............................................................................................... 681
MARIA VDA. DE DELGADO vs. COURT OF APPEALS .................................................................................. 683
Josefa Maestrado vs. CA ........................................................................................................................... 685
F.A.T. KEE COMPUTER SYSTEMS vs. ONLINE NETWORKS INTERNATIONAL ............................................. 686
Tanay Recreation vs Catalina Fausto ........................................................................................................ 688
Danilo Mendoza vs CA .............................................................................................................................. 689
Jefferson Lim vs. Queensland Tokyo ......................................................................................................... 691
Placewell International vs. Ireneo Camote ............................................................................................... 693
Heirs of Ragua vs. CA ................................................................................................................................ 695
Metropolitan Bank vs Court of Appeals .................................................................................................... 697
Spouses Manuel vs. CA ............................................................................................................................. 699
Miguel Cuenco vs. Concepcion cuenco ..................................................................................................... 701
Spouses Hanopol vs SM ............................................................................................................................ 702
Terminal Facilities vs. PPA ......................................................................................................................... 704
Mendoza vs. Court of Appeals .................................................................................................................. 706
Roblett Industrial Construction vs. CA ...................................................................................................... 709
Sime Darby Inc. vs. Good Year Philippines ................................................................................................ 711
Kings Properties Corporation vs. Galido ................................................................................................... 713
Metrobank vs. Cabilzo............................................................................................................................... 716
Mesina vs. Garcia ...................................................................................................................................... 718
Pahamatong vs PNB .................................................................................................................................. 720
Shoppers Paradise Corporation vs. Efren Roques ................................................................................... 721
Meatmaster vs Lelis Integrated ................................................................................................................ 724
Larena vs. Mapili ..................................................................................................................................... 726
Santos vs Santos ..................................................................................................................................... 728
Villanueva-Mijares vs CA ........................................................................................................................ 730
Garcia vs. Villar .......................................................................................................................................... 731
Spouses Edralin vs Philippine Veterans Bank ........................................................................................... 733
University Physicians Services vs. Marian Clinics ...................................................................................... 735
MARTIN vs DBS BANK Philippines, INC. .................................................................................................... 737
Heirs of Zabala vs. CA ................................................................................................................................ 739
DUNCAN ASSOCIATION OF DETAILMAN PTGW vs. GLAXOWELLCOM PHILIPPINES ................................. 740
Star Paper vs. Simbol ................................................................................................................................ 742
Tiu vs. Platinum Plans Philippines ............................................................................................................. 744
Avon Cosmetics vs Luna ............................................................................................................................ 746
Del Castillo vs. Richmond .......................................................................................................................... 749
ARWOOD INDUSTRIES, INC. vs. DM CONSUNJI, INC. ................................................................................ 750
Sps. Tecklo v Rural Bank of Pamplona ...................................................................................................... 751
Banate vs. Philippine Countryside ............................................................................................................ 753
Pascual vs. Ramos ..................................................................................................................................... 755
Chua Tee Dee vs. Ca .................................................................................................................................. 757
G.C Garments vs. Miranda ........................................................................................................................ 759
Barcero vs Capitol Development .............................................................................................................. 761
Maxima Hemedes vs. CA ........................................................................................................................... 762
PUP vs. Golden Horizon ............................................................................................................................ 764
Joselito and Dominga Villegas vs. CA ........................................................................................................ 767
EQUATORIAL REALTY DEVELOPMENT, INC. & CARMELO & BAUERMANN, INC vs. MAYFAIR THEATER, INC
.................................................................................................................................................................. 769
PUP V CA ................................................................................................................................................... 771
Sps. Litonjua vs. L & R Corporation ........................................................................................................... 774
Josefa VS. Zhandong Trading Corporation ................................................................................................ 776
Saludo vs. Security Bank ........................................................................................................................... 777
PCI VS NG Sheung Ngor ............................................................................................................................. 779
Teresita Dio vs. St. Ferdinand Memorial Park ........................................................................................... 780
PILITEL vs. Delfino Tecson ......................................................................................................................... 782
PAL vs. CA .................................................................................................................................................. 783
ERMITAO VS. COURT OF APPEALS .......................................................................................................... 784
Uniwide vs Titan-Ikeda .............................................................................................................................. 786
Heirs of Augusto Salas, Jr. vs. Laperal ....................................................................................................... 788
BIENVENIDO R. MEDRANO and IBAAN RURAL BANK vs. COURT OF APPEALS, PACITA G. BORBON,
JOSEFINA E. ANTONIO and ESTELA A. FLOR .............................................................................................. 790
MANUEL B. TAN, GREGG M. TECSON and ALEXANDER SALDAA vs. EDUARDO R. GULLAS and NORMA S.
GULLAS ...................................................................................................................................................... 792
JESUS M. GOZUN vs. JOSE TEOFILO T. MERCADO a.k.a. DON PEPITO MERCADO ................................... 794
STA. LUCIA REALTY & DEVELOPMENT, INC. vs. SPOUSES FRANCISCO & EMELIA BUENAVENTURA ......... 796
JOSEPH CHAN, WILSON CHAN and LILY CHAN vs. BONIFACIO S. MACEDA, JR. ........................................ 798
TIMOTEO BALUYOT, JAIME BENITO, BENIGNO EUGENIO, ROLANDO GONZALES, FORTUNATO FULGENCIO
and CRUZ-NA-LIGAS HOMESITE ASSOCIATION, INC. vs. THE HONORABLE COURT OF APPEALS, THE
QUEZON CITY GOVERNMENT and UNIVERSITY OF THE PHILIPPINES ....................................................... 800
SPOUSES ADELINA S. CUYCO and FELICIANO U. CUYCO vs. SPOUSES RENATO CUYCO and FILIPINA
CUYCO ....................................................................................................................................................... 802
ALLAN C. GO, doing business under the name and style, ACG Express Liner vs. MORTIMER F. CORDERO
.................................................................................................................................................................. 804
HERMINIO TAYAG vs. AMANCIA LACSON, ROSENDO LACSON, ANTONIO LACSON, JUAN LACSON,
TEODISIA LACSON-ESPINOSA and THE COURT OF APPEALS ..................................................................... 806
SO PING BUN vs. COURT OF APPEALS, TEK HUA ENTERPRISING CORP. and MANUEL C. TIONG ............. 808
INTERNATIONAL FREEPORT TRADERS, INC. vs. DANZAS INTERCONTINENTAL, INC. ................................ 809
ROCKLAND CONSTRUCTION COMPANY, INC. vs. MID-PASIG LAND DEVELOPMENT CORPORATION ...... 811
METROPOLITAN MANILA DEVELOPMENT AUTHORITY vs. JANCOM ENVIRONMENTAL CORPORATION and
JANCOM INTERNATIONAL DEVELOPMENT PROJECTS PTY. LIMITED OF AUSTRALIA ............................... 813
ROCKLAND CONSTRUCTION COMPANY, INC. vs. MID-PASIG LAND DEVELOPMENT CORPORATION ...... 815
MANILA METAL CONTAINER CORPORATION vs. PHILIPPINE NATIONAL BANK ........................................ 817
RIDO MONTECILLO vs. IGNACIA REYNES and SPOUSES REDEMPTOR and ELISA ABUCAY ....................... 819
JASMIN SOLER vs. COURT OF APPEALS, COMMERCIAL BANK OF MANILA, and NIDA LOPEZ .................. 821
YOLANDA PALATTAO vs. THE COURT OF APPEALS, HON. ANTONIO J. FINEZA, as Presiding Judge of the
Regional Trial Court of Caloocan City, Branch 131 and MARCELO CO...................................................... 823
ABS-CBN BROADCASTING CORPORATION vs. HONORABLE COURT OF APPEALS, REPUBLIC
BROADCASTING CORP., VIVA PRODUCTIONS, INC., and VICENTE DEL ROSARIO ..................................... 825
LOURDES ONG LIMSON vs. COURT OF APPEALS, SPOUSES LORENZO DE VERA and ASUNCION SANTOS-DE
VERA, TOMAS CUENCA, JR., and SUNVAR REALTY DEVELOPMENT CORPORATION ................................ 827
REYNALDO VILLANUEVA vs. PHILIPPINE NATIONAL BANK (PNB) ............................................................. 829
CORAZON CATALAN, et. al. vs. JOSE BASA, et.al. ...................................................................................... 831
EUGENIO DOMINGO, CRISPIN MANGABAT and SAMUEL CAPALUNGAN vs. HON. COURT OF APPEALS,
FELIPE C. RIGONAN and CONCEPCION R. RIGONAN ................................................................................. 833
MARIO J. MENDEZONA and TERESITA M. MENDEZONA, et. al. vs. JULIO H. OZAMIZ, et.al. .................... 836
MARIANO T. LIM, et. al. vs. COURT OF APPEALS, LORENZO O. TAN and HERMOGENES O. TAN ............. 838
CORAZON G. RUIZ vs. COURT OF APPEALS and CONSUELO TORRES ........................................................ 840
EPIFANIA DELA CRUZ, substituted by LAUREANA V. ALBERTO vs. SPS. EDUARDO C. SISON and EUFEMIA S.
SISON ......................................................................................................................................................... 842
RURAL BANK OF STA. MARIA, PANGASINAN vs. THE HONORABLE COURT OF APPEALS, ROSARIO R.
RAYANDAYAN, CARMEN R.ARCEO ......................................................................................................... 843
DOMINGO CARABEO vs. SPOUSES NORBERTO and SUSAN DINGCO ....................................................... 845
FRANCISCO I. CHAVEZ vs. PUBLIC ESTATES AUTHORITY and AMARI COASTAL BAY DEVELOPMENT
CORPORATION .......................................................................................................................................... 846
DOMINGO CARABEO vs. SPOUSES NORBERTO and SUSAN DINGCO ....................................................... 848
PIO SIAN MELLIZA vs. CITY OF ILOILO, UNIVERSITY OF THE PHILIPPINES and THE COURT APPEALS ....... 849
MANUEL CATINDIG, represented by his legal representative EMILIANO CATINDIG-RODRIGO vs. AURORA
IRENE VDA. DE MENESES .......................................................................................................................... 851
ANTHONY ORDUA, DENNIS ORDUA, and ANTONITA ORDUA vs. EDUARDO J. FUENTEBELLA, MARCOS
S. CID, BENJAMIN F. CID, BERNARD G. BANTA, and ARMANDO GABRIEL, JR. .......................................... 852
CARMELA BROBIO MANGAHAS vs. EUFROCINA A. BROBIO ..................................................................... 853
GOLDEN APPLE REALTY AND DEVELOPMENT CORPORATION and ROSVIBON REALTY CORPORATION vs.
SIERRA GRANDE REALTY CORPORATION, MANPHIL INVESTMENT CORPORATION, RENAN V. SANTOS and
PATRICIO MAMARIL .................................................................................................................................. 855
ASKAY vs. FERNANDO A. COSALAN ........................................................................................................... 857
HEIRS OF THE LATE SPOUSES AURELIO AND ESPERANZA BALITE; Namely, ANTONIO T. BALITE, FLOR T.
BALITE-ZAMAR, VISITACION T. BALITE-DIFUNTORUM, PEDRO T. BALITE, PABLO T. BALITE, GASPAR T.
BALITE, CRISTETA T. BALITE and AURELIO T. BALITE JR., All Represented by GASPAR T. BALITE vs.
RODRIGO N. LIM ....................................................................................................................................... 858
RAFAEL G. SUNTAY, substituted by his heirs, namely: ROSARIO, RAFAEL, JR., APOLINARIO, RAYMUND,
MARIA VICTORIA, MARIA ROSARIO and MARIA LOURDES, all surnamed SUNTAY vs. THE HON. COURT OF
APPEALS and FEDERICO C. SUNTAY .......................................................................................................... 860
WILLIAM UY and RODEL ROXAS vs. COURT OF APPEALS, HON. ROBERT BALAO and NATIONAL HOUSING
AUTHORITY ............................................................................................................................................... 862
PENTACAPITAL INVESTMENT CORPORATION vs. MAKILITO B. MAHINAY................................................ 864
HEIRS OF RAMON C. GAITE, CYNTHIA GOROSTIZA GAITE and RHOGEN BUILDERS vs. THE PLAZA, INC. and
FGU INSURANCE CORPORATION .............................................................................................................. 866
HICOBLINO M. CATLY (Deceased), Substituted by his wife, LOURDES A. CATLY vs. WILLIAM NAVARRO,
ISAGANI NAVARRO, BELEN DOLLETON, FLORENTINO ARCIAGA, BARTOLOME PATUGA, DIONISIO
IGNACIO, BERNARDINO ARGANA, AND ERLINDA ARGANA-DELA CRUZ, and AYALA LAND, INC. ............. 868
CONCHITA LIGUEZ vs. THE HONORABLE COURT OF APPEALS, MARIA NGO VDA. DE LOPEZ, ET AL. ....... 870
PHILIPPINE BANKING CORPORATION, representing the estate of JUSTINA SANTOS Y CANON FAUSTINO,
deceased vs. LUI SHE in her own behalf and as administratrix of the intestate estate of Wong Heng,
deceased ................................................................................................................................................... 872
SONIA F. LONDRES, ARMANDO V. FUENTES, CHI-CHITA FUENTES QUINTIA, ROBERTO V. FUENTES,
LEOPOLDO V. FUENTES, OSCAR V. FUENTES and MARILOU FUENTES ESPLANA vs. THE COURT OF
APPEALS, THE DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS, THE DEPARTMENT OF
TRANSPORTATION AND COMMUNICATIONS, ELENA ALOVERA SANTOS and CONSOLACION ALIVIO
ALOVERA ................................................................................................................................................... 874
SPS. ANTONIO & LETICIA VEGA vs. SOCIAL SECURITY SYSTEM (SSS) & PILAR DEVELOPMENT
CORPORATION .......................................................................................................................................... 876
CLARA M. BALATBAT vs. COURT OF APPEALS and Spouses JOSE REPUYAN and AURORA REPUYAN ...... 878
UNIVERSAL ROBINA SUGAR MILLING CORPORATION vs. HEIRS OF ANGEL TEVES................................... 879
RITA SARMING, et.al. vs. CRESENCIO DY, et.al. ........................................................................................ 881
CEBU CONTRACTORS CONSORTIUM CO. vs. COURT OF APPEALS and MAKATI LEASING & FINANCE
CORPORATION .......................................................................................................................................... 883
ADR SHIPPING SERVICES, INC. vs. MARCELINO GALLARDO and THE HONORABLE COURT OF APPEALS . 885
VALENTIN MOVIDO, substituted by MARGINITO MOVIDO vs. LUIS REYES PASTOR ................................ 887
TSPIC CORPORATION vs. TSPIC EMPLOYEES UNION (FFW), representing MARIA FE FLORES, et.al. ........ 889
SPS. RAFAEL P. ESTANISLAO AND ZENAIDA ESTANISLAO vs. EAST WEST BANKING ................................. 891
AGRIFINA AQUINTEY vs. SPOUSES FELICIDAD AND RICO TIBONG ............................................................ 893
ADORACION E. CRUZ, THELMA DEBBIE E. CRUZ, GERRY E. CRUZ and NERISSA CRUZ-TAMAYO vs. THE
HONORABLE COURT OF APPEALS, SUMMIT FINANCING CORP., VICTOR S. STA. ANA, MAXIMO C.
CONTRERAS, RAMON G. MANALASTAS, and VICENTE TORRES ................................................................ 895
NAPOLEON H. GONZALES vs. HONORABLE COURT OF APPEALS AND SPOUSES GABRIEL AND LUZVIMINDA
CABALLERO ............................................................................................................................................... 897
JUANA ALMIRA, RENATO GARCIA, ROGELIO GARCIA, RODOLFO GARCIA, ROSITA GARCIA, RHODORA
GARCIA, ROSALINDA GARCIA, ROLANDO GARCIA and RAFAEL GARCIA Represented in this suit by
EDGARDO ALVAREZ vs. COURT OF APPEALS AND FEDERICO BRIONES .................................................... 899
PHILIPPINE BANK OF COMMUNICATIONS vs. ELENA LIM, RAMON CALDERON, and TRI-ORO
INTERNATIONAL TRADING & MANUFACTURING CORPORATION ............................................................ 901
SPOUSES EFREN N. RIGOR and ZOSIMA D. RIGOR, for themselves and as owners of CHIARA
CONSTRUCTION vs. CONSOLIDATED ORIX LEASING and FINANCE CORPORATION .................................. 902
RODOLFO P. VELASQUEZ vs. COURT OF APPEALS, and PHILIPPINE COMMERCIAL INTERNATIONAL BANK,
INC. ............................................................................................................................................................ 904
HEIRS OF SOFIA QUIRONG, Represented by ROMEO P. QUIRONG vs. DEVELOPMENT BANK OF THE
PHILIPPINES ............................................................................................................................................... 906
SAMUEL U. LEE and PAULINE LEE and ASIATRUST DEVELOPMENT BANK, INC. vs. BANGKOK BANK PUBLIC
COMPANY, LIMITED .................................................................................................................................. 908
EQUATORIAL REALTY DEVELOPMENT, Inc. vs. MAYFAIR THEATER, Inc. .................................................. 911
MARIA ANTONIA SIGUAN vs. ROSA LIM, LINDE LIM, INGRID LIM and NEIL LIM ...................................... 913
KHE HONG v. COURT OF APPEALS ............................................................................................................ 915
SUNTAY v. COURT OF APPEALS ................................................................................................................. 917
MANGAHAS v. BROBIO ............................................................................................................................. 919
HERNANDEZ v. HERNANDEZ ..................................................................................................................... 921
FUENTES v ROCA ....................................................................................................................................... 923
ASSOCIATED BANK v. MONTANO ET.AL.................................................................................................... 925
WILLIAM ALAIN MIAILHE v. COURT OF APPEALS ...................................................................................... 927
FIRST PHILIPPINE HOLDINGS CORPORATION v. TRANS MIDDLE EAST EQUITIES INC. .............................. 928
SANCHEZ v. MAPALAD .............................................................................................................................. 930
OESMER v. PARAISO DEVELOPMENT CORPORATION ............................................................................... 932
PERPETUA VDA. DE APE v. COURT OF APPEALS........................................................................................ 934
JULIAN FRANCISCO v. PASTOR HERRERA .................................................................................................. 936
ROSARIO L. DE BRAGANZA v. FERNANDO F. DE VILLA ABRILLE ................................................................ 938
MIGUEL KATIPUNAN v. BRAULIO KATIPUNAN, JR. ................................................................................... 939
NILO R. JUMALON v.COURT OF APPEALS .................................................................................................. 941
CABALES, ET. AL vs COURT OF APPEALS ................................................................................................... 942
ANUNCIACION VDA. DE OUANO v. REPUBLIC OF THE PHILIPPINES ......................................................... 943
SHOEMAKER v. LA TONDENA .................................................................................................................... 945
PNB v. PHILIPPINE VEGETABLE OIL COMPANY ......................................................................................... 946
ANUNCIACION VDA. DE OUANO v. REPUBLIC OF THE PHILIPPINES ......................................................... 948
MUNICIPALITY OF HAGONOY v. DUMDUM .............................................................................................. 950
TAN v. VILLAPAZ ........................................................................................................................................ 952
SPOUSES DAVID v. TIONGSON ................................................................................................................. 954
GENARO CORDIAL v. DAVID MIRANDA ..................................................................................................... 955
VILLANUEVA-MIJARES v. THE COURT OF APPEALS ................................................................................... 956
ROSENCOR v. INQUING ............................................................................................................................. 957
FIRME v.BUKAL .......................................................................................................................................... 959
HEIRS OF M. DORONIO v. HEIR OF F. DORONIO ...................................................................................... 960
GURREA v SUPLICO ................................................................................................................................... 961
FRENZEL v. CATITO .................................................................................................................................... 963
LA BUGAAL-BLAAN v. RAMOS .................................................................................................................. 965
AGAN v. PIATCO ........................................................................................................................................ 967
COMMISSION ON ELECTIONS v. JUDGE MA. LUISA QUIJANO-PADILLA ................................................... 969
SENATOR ROBERT S. JAWORSKI v. PAGCOR ............................................................................................. 971
OESMER v . PARAISO DEVELOPMENT CORPORATION .............................................................................. 972
HEIRS OF BALITE v. RODRIGO N. LIM ........................................................................................................ 974
PINEDA v. COURT OF APPEALS .................................................................................................................. 976
CRUZ vs. BANCOM FINANCE CORPORATION ............................................................................................ 978
CUATON v. REBECCA SALUD ..................................................................................................................... 980
INFOTECH v. COMELEC ............................................................................................................................. 982
PABUGAIS v. SAHIJWANI ........................................................................................................................... 984
LIGUEZ v. COURT OF APPEALS .................................................................................................................. 987
PHILIPPINE BANKING CORPORATION v. LUI SHE ...................................................................................... 989
VIGILAR v. AQUINO ................................................................................................................................... 990
EPG CONSTRUCTION v. VIGILAR ............................................................................................................... 992
GO CHAN v YOUNG ................................................................................................................................... 994
FRANCISCO v. HERRERA ............................................................................................................................ 996
MENDEZONA v. OZAMIZ ........................................................................................................................... 998
MANZANILLA v. CA ................................................................................................................................. 1000
RURAL BANK OF PARAQUE v. REMOLADO......................................................................................... 1002
COJUANGCO v. REPUBLIC ....................................................................................................................... 1004
RINGOR v. RINGOR .................................................................................................................................. 1006
SALVADOR v. CA ...................................................................................................................................... 1008
SPOUSES RICARDO AND MILAGROS HUANG v. COURT OF APPEALS ..................................................... 1009
VDA. DE ESCONDE v. COURT OF APPEALS .............................................................................................. 1011
TALA REALTY SERVICES CORPORATION vs. BANCO FILIPINO SAVINGS AND MORTGAGE BANK ............ 1012
HEIRS OF MEDINA v. COURT OF APPEALS ............................................................................................... 1016
FILIPINAS PORT SERVICES vs. GO ............................................................................................................ 1020
MENDIZABEL v. APAO ............................................................................................................................. 1023
VDA. DE GUALBERTO v. GO..................................................................................................................... 1026
HEIRS OF YAP v. Court of Appeals ........................................................................................................... 1028
HEIRS OF KIONOSALA v. DACUT .............................................................................................................. 1030
RAMOS v. RAMOS ................................................................................................................................... 1032
THE INTESTATE ESTATE OF TY vs. COURT OF APPEALS ........................................................................... 1034
VDA. DE RETUERTO v. BARZ .................................................................................................................... 1036
CHIA LIONG TAN v. COURT OF APPEALS ................................................................................................. 1038
EILIA OLACO v. CO CHO CHIT ................................................................................................................. 1040


MARIANO UN OCAMPO III v PEOPLE OF THE PHILIPPINES
G.R Nos. 156547-51. February 4, 2008

FACTS:
The Department of Budget and Management (DBM) released National Aid for Local
Government Units (NALGU) funds in the total amount of P100 million to the Province of
Tarlac. The NALGU is a fund set aside in the General Appropriations Act to assist local
governments in their various projects and services.
Petitioner Ocampo, provincial governor of Tarlac from February 22, 1988 up to June 30,
1992, loaned out P56.6 million of the P100 million to the Lingkod Tarlac Foundation, Inc.
(LTFI) for the implementation of various livelihood projects. The loan was made
pursuant to a Memorandum of Agreement (MOA) entered into by the Province of
Tarlac, represented by petitioner Ocampo, and LTFI, represented by petitioner Flores,
on August 8, 1988.
How the P56.6 million released to LTFI was utilized became the subject matter of 25
criminal cases.
Petitioner Ocampo, as governor of Tarlac, neglected to set up safeguards for the proper
handling of the NALGU funds in the hands of LTFI which resulted in the disappearance of
P1,132,739 and P58,000 of the said funds.
Petitioners presented five documents to show that LTFIs obligations to the Province of
Tarlac, in the amount of P56.6 million, have been extinguished: the Tripartite
Memorandum of Agreement (TMOA) executed by the Province of Tarlac, LTFI and the
Barangay Unity for Industrial and Leadership Development (BUILD) Foundation
whereby the liability of LTFI in favor of the Province of Tarlac was transferred and
assumed by BUILD in the total amount of P40 million; Deed of Assignment between
Tarlac and LTFI whereby the latter assigned its loan portfolios (including interests and
certificates of time deposit), the Juki embroidery machines and other assignable
documents to the Province of Tarlac in the total amount of P16,618,403.



ISSUE: Whether the amount loaned was private in nature.

Held: Yes.
The MOA shows that LTFI is allowed to borrow funds directly from the Provincial Government
to fund Lingkod Tarlac Foundation projects provided the projects are livelihood projects under
the Rural Industrialization Can Happen Program. Moreover, the agreement stipulates under
the Conditions for Release of Funds that the Province of Tarlac shall release in lump sum the
appropriate funds for the approved projects covered by individual loan documents upon signing
of the respective loan agreement
Art. 1953 of the Civil Code provides that [a] person who receives a loan of money or any other
fungible thing acquires the ownership thereof, and is bound to pay to the creditor an equal
amount of the same kind and quality.
Hence, petitioner Ocampo correctly argued that the NALGU funds shed their public character
when they were lent to LTFI as it acquired ownership of the funds with an obligation to repay
the Province of Tarlac the amount borrowed. The relationship between the Province of Tarlac
and the LTFI is that of a creditor and debtor. Failure to pay the indebtedness would give rise to
a collection suit.






























LEUNG BEN v P. J. O'BRIEN
G.R. No. L-13602 April 6, 1918


Facts:

PJ O Brien instituted an action for recovery of the money in the amount of 15,000
which he won from Leung Ben in a series of gambling, banking and percentage games
conducted ruing the two or three months prior to the institution of the suit.

In his verified complaint the OBrien asked for an attachment, under section 424, and
412 (1) of the Code of Civil Procedure, against the property of Leung Ben, on the ground
that the latter was about to depart from the Philippine islands with intent to defraud his
creditors. This attachment was issued; and acting under the authority thereof, the
sheriff attached the sum of P15,000 which had been deposited by the herein plaintiff
with the International Banking Corporation


The contention of the petitioner is that the statutory action to recover money lost at
gaming is that the statutory action to recover money lost at gaming is no such an action
as is contemplated in this provision, and he therefore insists that the original complaint
shows on its face that the remedy of attachment is not available in aid thereof; that the
Court of First Instance acted in excess of its jurisdiction in granting the writ of
attachment

Issue: Whether or not the statutory obligation to restore money won at gaming
an obligation arising from "contract, express or implied.



Held:
Upon general principles, recognize both the civil and common law, money lost in gaming
and voluntarily paid by the loser to the winner cannot in the absence of statute, be
recovered in a civil action. But Act No. 1757 of the Philippine Commission, which defines
and penalizes several forms of gambling, contains numerous provisions recognizing the
right to recover money lost in gambling or in the playing of certain games (secs. 6, 7, 8,
9, 11). The original complaint in the action in the Court of First Instance is not clear as to
the particular section of Act No. 1757 under which the action is brought, but it is alleged
that the money was lost at gambling, banking, and percentage game in which the
defendant was banker. It must therefore be assumed that the action is based upon the
right of recovery given in Section 7 of said Act, which declares that an action may be
brought against the banker by any person losing money at a banking or percentage
game.
In the case now under consideration the duty of the defendant to refund the money
which he won from the plaintiff at gaming is a duty imposed by statute. It therefore
arises ex lege. Furthermore, it is a duty to return a certain sum which had passed from
the plaintiff to the defendant. By all the criteria which the common law supplies, this a
duty in the nature of debt and is properly classified as an implied contract. It is well-
settled by the English authorities that money lost in gambling or by lottery, if
recoverable at all, can be recovered by the loser in an action of indebitatus assumpsit
for money had and received. This means that in the common law the duty to return
money won in this way is an implied contract, or quasi-contract.
It is no argument to say in reply to this that the obligation here recognized is called an
implied contract merely because the remedy commonly used in suing upon ordinary
contract can be here used, or that the law adopted the fiction of promise in order to
bring the obligation within the scope of the action of assumpsit. Such statements fail to
express the true import of the phenomenon. Before the remedy was the idea; and the
use of the remedy could not have been approved if it had not been for historical
antecedents which made the recognition of this remedy at one logical and proper.
Furthermore, it should not be forgotten that the question is not how this duty but what
sort of obligation did the author of the Code of Civil Procedure intend to describe when
he sued the term implied contract in section 412.

















ARTURO PELAYO v MARCELO LAURON ET AL.
G.R. No. L-4089 January 12, 1909

FACTS:
On the 23rd of November, 1906, Arturo Pelayo, a physician residing in Cebu, filed a
complaint against Marcelo Lauron and Juana Abella setting forth that on or about the
13th of October of said year, at night, the plaintiff was called to the house of the
defendants, situated in San Nicolas, he was requested by them to render medical
assistance to their daughter-in-law who was about to give birth to a child; after
consultation with the attending physician, Dr. Escao, it was found necessary, on
account of the difficult birth, to remove the fetus by means of forceps which operation
was performed by the plaintiff, who also had to remove the afterbirth.

The just and equitable value of the services rendered by him was P500, which the
defendants refuse to pay without alleging any good reason therefor;

In answer to the complaint counsel for the defendants denied all of the allegation
therein contained and alleged as a special defense, that their daughter-in-law had died
in consequence of the said childbirth, and that when she was alive she lived with her
husband independently and in a separate house without any relation whatever with
them, and that, if on the day when she gave birth she was in the house of the
defendants, her stay there was accidental and due to fortuitous circumstances

ISSUE: Whether or not the defendants are liable to pay the professional fee.
HELD:
Obligations arising from law are not presumed. Those expressly determined in the code
or in special laws, etc., are the only demandable ones. Obligations arising from contracts
have legal force between the contracting parties and must be fulfilled in accordance
with their stipulations. (Arts. 1090 and 1091.)
The rendering of medical assistance in case of illness is comprised among the mutual
obligations to which the spouses are bound by way of mutual support. (Arts. 142 and
143.)
If every obligation consists in giving, doing or not doing something (art. 1088), and
spouses are mutually bound to support each other, there can be no question but that,
when either of them by reason of illness should be in need of medical assistance, the
other is under the unavoidable obligation to furnish the necessary services of a
physician in order that health may be restored, and he or she may be freed from the
sickness by which life is jeopardized; the party bound to furnish such support is
therefore liable for all expenses, including the fees of the medical expert for his
professional services. This liability originates from the above-cited mutual obligation
which the law has expressly established between the married couple.
In the face of the above legal precepts it is unquestionable that the person bound to pay
the fees due to the plaintiff for the professional services that he rendered to the
daughter-in-law of the defendants during her childbirth, is the husband of the patient
and not her father and mother- in-law, the defendants herein. The fact that it was not
the husband who called the plaintiff and requested his assistance for his wife is no bar
to the fulfillment of the said obligation, as the defendants, in view of the imminent
danger, to which the life of the patient was at that moment exposed, considered that
medical assistance was urgently needed, and the obligation of the husband to furnish
his wife in the indispensable services of a physician at such critical moments is specially
established by the law, as has been seen, and compliance therewith is unavoidable;
therefore, the plaintiff, who believes that he is entitled to recover his fees, must direct
his action against the husband who is under obligation to furnish medical assistance to
his lawful wife in such an emergency.

























ASJ CORPORATION AND ANTONIO SAN JUAN v SPS.
EFREN & MAURA EVANGELISTA
G.R. NO. 158086 February 14, 2008

FACTS:

Respondents, under the name and style of R.M. Sy Chicks, are engaged in the large-scale
business of buying broiler eggs, hatching them, and selling their hatchlings (chicks) and
egg by-products in Bulacan and Nueva Ecija. For the incubation and hatching of these
eggs, respondents availed of the hatchery services of ASJ Corp., a corporation duly
registered in the name of San Juan and his family.

On February 3, 1993, respondent Efren went to the hatchery to pick up the chicks and
by-products covered by Setting Report No. 108, but San Juan refused to release the
same due to respondents failure to settle accrued service fees on several setting
reports starting from Setting Report No. 90. Nevertheless, San Juan accepted from
Efren 10,245 eggs covered by Setting Report No. 113 and P15,000.00 in cash as partial
payment for the accrued service fees.

On February 10, 1993, Efren returned to the hatchery to pick up the chicks and by-
products, but San Juan again refused to release the same unless respondents fully settle
their accounts. In the afternoon of the same day, respondent Maura, with her son
Anselmo, tendered P15,000.00 to San Juan, and tried to claim the chicks and by-
products. She explained that she was unable to pay their balance because she was
hospitalized for an undisclosed ailment. San Juan accepted the P15,000.00, but insisted
on the full settlement of respondents accounts before releasing the chicks and by-
products.

Believing firmly that the total value of the eggs delivered was more than sufficient to
cover the outstanding balance, Maura promised to settle their accounts only upon
proper accounting by San Juan. San Juan disliked the idea and threatened to impound
their vehicle and detain them at the hatchery compound if they should come back
unprepared to fully settle their accounts with him.

ISSUE: Whether or not petitioners retention of the chicks and by-products on account of
respondents failure to pay the corresponding service fees unjustified.
HELD:
Under Article 1248 of the Civil Code, the creditor cannot be compelled to accept partial
payments from the debtor, unless there is an express stipulation to that effect. More so,
respondents cannot substitute or apply as their payment the value of the chicks and by-
products they expect to derive because it is necessary that all the debts be for the same kind,
generally of a monetary character. Needless to say, there was no valid application of payment
in this case.
Furthermore, it was respondents who violated the very essence of reciprocity in contracts,
consequently giving rise to petitioners right of retention. This case is clearly one among the
species of non-performance of a reciprocal obligation. Reciprocal obligations are those which
arise from the same cause, wherein each party is a debtor and a creditor of the other, such that
the performance of one is conditioned upon the simultaneous fulfillment of the other. From the
moment one of the parties fulfills his obligation, delay by the other party begins.
Nonetheless, San Juans subsequent acts of threatening respondents should not remain among
those treated with impunity. Under Article 19 of the Civil Code, an act constitutes an abuse of
right if the following elements are present: (a) the existence of a legal right or duty; (b) which is
exercised in bad faith; and (c) for the sole intent of prejudicing or injuring another. Here, while
petitioners had the right to withhold delivery, the high-handed and oppressive acts of
petitioners, as aptly found by the two courts below, had no legal leg to stand on. We need not
weigh the corresponding pieces of evidence all over again because factual findings of the trial
court, when adopted and confirmed by the appellate court, are binding and conclusive and will
not be disturbed on appeal
Since it was established that respondents suffered some pecuniary loss anchored on
petitioners abuse of rights, although the exact amount of actual damages cannot be
ascertained, temperate damages are recoverable.
[b X (d X e) + c X (d X f)] = Temperate Damages
b and c - representing the average rates of conversion of broiler eggs into hatched chicks and
egg by-products as tabulated by the trial court based on available statistical data which was
unrebutted by petitioners (41% and 17%).d- 68,784 eggs, or the total number of broiler eggs
under Setting Report Nos. 109 to 113; and e and f- P14.00 and P1.20, or the then unit market
price of the chicks and by-products, respectively.
41% X (68,784 eggs X P14) = P394,820.16
17% X (68,784 eggs X P1.20) = P 14,031.94
[P394,820.16 + P14,031.94] = P408,852.10








ERNESTO RAMAS UYPITCHING and RAMAS UYPITCHING SONS,
INC., v. ERNESTO QUIAMCO
G.R. No. 146322 December 6, 2006
FACTS:

In 1982, respondent Ernesto C. Quiamco was approached by Juan Davalan, Josefino
Gabutero and Raul Generoso to amicably settle the civil aspect of a criminal case for
robbery filed by Quiamco against them. They surrendered to him a red Honda XL-100
motorcycle and a photocopy of its certificate of registration. Respondent asked for the
original certificate of registration but the three accused never came to see him again.

It turned out that, in October 1981, the motorcycle had been sold on installment basis
to Gabutero by petitioner Ramas Uypitching Sons, Inc., a family-owned corporation
managed by petitioner Atty. Ernesto Ramas Uypitching. To secure its payment, the
motorcycle was mortgaged to petitioner-corporation.


When Gabutero could no longer pay the installments, Davalan assumed the obligation
and continued the payments. In September 1982, however, Davalan stopped paying the
remaining installments and told petitioner corporations collector, Wilfredo Verao, that
the motorcycle had allegedly been taken by respondents men.

Nine years later, on January 26, 1991, petitioner Uypitching, accompanied by policemen,
went to Avesco-AVNE Enterprises to recover the motorcycle. Uypitching uttered that
Quiamco is a thief and he took the motorcycle and left.


On February 18, 1991, petitioner Uypitching filed a criminal complaint for qualified theft
and/or violation of the Anti-Fencing Law against respondent in the Office of the City
Prosecutor of Dumaguete City. Respondent moved for dismissal because the complaint
did not charge an offense as he had neither stolen nor bought the motorcycle. The
Office of the City Prosecutor dismissed the complaint and denied petitioner Uypitchings
subsequent motion for reconsideration.

Respondent filed an action for damages against petitioners in the RTC of Dumaguete
City, Negros Oriental, Branch 37. He sought to hold the petitioners liable for the
following: (1) unlawful taking of the motorcycle; (2) utterance of a defamatory remark
(that respondent was a thief) and (3) precipitate filing of a baseless and malicious
complaint. These acts humiliated and embarrassed the respondent and injured his
reputation and integrity.


RTC Ruling: Petitioner Uypitching was motivated with malice and ill will when he called
respondent a thief, took the motorcycle in an abusive manner and filed a baseless
complaint for qualified theft and/or violation of the Anti-Fencing Law. Petitioners acts
were found to be contrary to Articles 19 and 20 of the Civil Code. Hence, the trial court
held petitioners liable to respondent for P500,000 moral damages, P200,000 exemplary
damages and P50,000 attorneys fees plus costs.

CA Ruling: Affirmed the trial courts decision with modification, reducing the award of
moral and exemplary damages to P300,000 and P100,000, respectively. Petitioners
sought reconsideration but it was denied

ISSUE: Whether or not petitioner abused the right of respondent


HELD:
Petitioner corporation failed to bring the proper civil action necessary to acquire legal
possession of the motorcycle. Instead, petitioner Uypitching descended on respondents
establishment with his policemen and ordered the seizure of the motorcycle without a
search warrant or court order. Worse, in the course of the illegal seizure of the motorcycle,
petitioner Uypitching even mouthed a slanderous statement.
No doubt, petitioner corporation, acting through its co-petitioner Uypitching, blatantly
disregarded the lawful procedure for the enforcement of its right, to the prejudice of
respondent. Petitioners acts violated the law as well as public morals, and transgressed the
proper norms of human relations.
The basic principle of human relations, embodied in Article 19 of the Civil Code,
provides:
Art. 19. Every person must in the exercise of his rights and in the performance of his
duties, act with justice, give every one his due, and observe honesty and good faith.
Article 19, also known as the principle of abuse of right, prescribes that a person should
not use his right unjustly or contrary to honesty and good faith, otherwise he opens himself
to liability. It seeks to preclude the use of, or the tendency to use, a legal right (or duty) as a
means to unjust ends.
There is an abuse of right when it is exercised solely to prejudice or injure another. The
exercise of a right must be in accordance with the purpose for which it was established and
must not be excessive or unduly harsh; there must be no intention to harm another.
Otherwise, liability for damages to the injured party will attach.
In this case, the manner by which the motorcycle was taken at petitioners instance was not
only attended by bad faith but also contrary to the procedure laid down by law. Considered
in conjunction with the defamatory statement, petitioners exercise of the right to recover
the mortgaged vehicle was utterly prejudicial and injurious to respondent. On the other
hand, the precipitate act of filing an unfounded complaint could not in any way be
considered to be in accordance with the purpose for which the right to prosecute a crime
was established. Thus, the totality of petitioners actions showed a calculated design to
embarrass, humiliate and publicly ridicule respondent. Petitioners acted in an excessively
harsh fashion to the prejudice of respondent. Contrary to law, petitioners willfully caused
damage to respondent. Hence, they should indemnify him.







NIKKO HOTEL MANILA GARDEN and RUBY LIM vs ROBERTO
REYES, a.k.a. AMAY BISAYA,
[G.R. No. 154259. February 28, 2005] 452 S 352

FACTS:
Roberto Reyes alleged that he was humiliated by Ruby Lim during the party of the hotel
manager Mr. Masakazu Tsuruoka. In a loud voice and within the presence and hearing
of the other guests who were making a queue at the buffet table, Ruby Lim told him to
leave the party (huwag ka nang kumain, hindi ka imbitado, bumaba ka na lang).

Mr. Reyes tried to explain that he was invited by Dr. Filart. Dr. Filart, who was within
hearing distance, however, completely ignored him thus adding to his shame and
humiliation. Not long after, while he was still recovering from the traumatic experience,
a Makati policeman approached and asked him to step out of the hotel. Like a common
criminal, he was escorted out of the party by the policeman. Claiming damages, Mr.
Reyes asked for One Million Pesos actual damages, One Million Pesos moral and/or
exemplary damages and Two Hundred Thousand Pesos attorneys fees.

Ruby Lim, for her part, admitted having asked Mr. Reyes to leave the party but not
under the ignominious circumstance painted by the latter. Ms. Lim narrated that she
was the Hotels Executive Secretary for the past twenty (20) years. One of her functions
included organizing the birthday party of the hotels former General Manager, Mr.
Tsuruoka.

Ruby Lim claims that she asked Reyes to leave courteously prior, therefor, inquiring
about his presence from Dr. Filarts sister Zenaida Fruto and she affirmed that her sister
did not invite him which Dr.Filart assented to during the trial that she did not invite
Reyes he merely offered to carry the fruit basket and started having a conversation with
Capt.Batung.

Issues:
1. Whether or not Ruby Lim acted abusively in asking Roberto Reyes, a.k.a. Amay Bisaya,
to leave the party where he was not invited by the celebrant thereof
2. . Parenthetically, and if Ruby Lim were so liable, whether or not Hotel Nikko, as her
employer, is solidarily liable with her.
Held:
1. In the absence of any proof of motive on the part of Ms. Lim to humiliate Mr. Reyes and
expose him to ridicule and shame, it is highly unlikely that she would shout at him from
a very close distance. Ms. Lim having been in the hotel business for twenty years
wherein being polite and discreet are virtues to be emulated, the testimony of Mr.
Reyes that she acted to the contrary does not inspire belief and is indeed incredible.
Thus, the lower court was correct in observing that
Considering the closeness of defendant Lim to plaintiff when the request for the latter
to leave the party was made such that they nearly kissed each other, the request was
meant to be heard by him only and there could have been no intention on her part to
cause embarrassment to him. It was plaintiffs reaction to the request that must have
made the other guests aware of what transpired between them.
Moreover, another problem with Mr. Reyess version of the story is that it is
unsupported. It is a basic rule in civil cases that he who alleges proves. Mr. Reyes,
however, had not presented any witness to back his story up. All his witnesses Danny
Rodinas, Pepito Guerrero and Alexander Silva - proved only that it was Dr. Filart who
invited him to the party.
Ms. Lim, not having abused her right to ask Mr. Reyes to leave the party to which he was
not invited, cannot be made liable to pay for damages under Articles 19 and 21 of the
Civil Code. Necessarily, neither can her employer, Hotel Nikko, be held liable as its
liability springs from that of its employee.
Article 19, known to contain what is commonly referred to as the principle of abuse of
rights, is not a panacea for all human hurts and social grievances. Article 19 states:
Art. 19. 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.
Elsewhere, we explained that when a right is exercised in a manner which does not
conform with the norms enshrined in Article 19 and results in damage to another, a
legal wrong is thereby committed for which the wrongdoer must be responsible. The
object of this article, therefore, is to set certain standards which must be observed not
only in the exercise of ones rights but also in the performance of ones duties. These
standards are the following: act with justice, give everyone his due and observe honesty
and good faith. Its antithesis, necessarily, is any act evincing bad faith or intent to
injure.
Its elements are the following:
(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.
When Article 19 is violated, an action for damages is proper under Articles 20 or 21 of
the Civil Code. Article 20 pertains to damages arising from a violation of law which does
not obtain herein as Ms. Lim was perfectly within her right to ask Mr. Reyes to leave.
Article 21, on the other hand, states:
Art. 21. Any person who willfully causes loss or injury to another in a manner
that is contrary to morals, good customs or public policy shall compensate the
latter for the damage.
Article 21 refers to acts contra bonus mores and has the following elements: (1) There is
an act which is legal;
(2) but which is contrary to morals, good custom, public order, or public policy; and
(3) it is done with intent to injure.
A common theme runs through Articles 19 and 21, and that is, the act complained of
must be intentional.
2. Petitioners Lim and Hotel Nikko contend that pursuant to the doctrine of volenti non fit
injuria, they cannot be made liable for damages as respondent Reyes assumed the risk
of being asked to leave (and being embarrassed and humiliated in the process) as he
was a gate-crasher.

The doctrine of volenti non fit injuria (to which a person assents is not esteemed in law
as injury) refers to self-inflicted injury or to the consent to injury which precludes the
recovery of damages by one who has knowingly and voluntarily exposed himself to
danger, even if he is not negligent in doing so. As formulated by petitioners, however,
this doctrine does not find application to the case at bar because even if respondent
Reyes assumed the risk of being asked to leave the party, petitioners, under Articles 19
and 21 of the New Civil Code, were still under obligation to treat him fairly in order not
to expose him to unnecessary ridicule and shame.


ST. MARYS ACADEMY vs. WILLIAM CARPITANOS and LUCIA S.
CARPITANOS et al.
[G.R. No. 143363. February 6, 2002]

Facts:
From 13 to 20 February 1995, defendant-appellant St. Marys Academy of Dipolog City
conducted an enrollment drive for the school year 1995-1996. A facet of the enrollment
campaign was the visitation of schools from where prospective enrollees were studying.

As a student of St. Marys Academy, Sherwin Carpitanos was part of the campaigning
group. Accordingly, on the fateful day, Sherwin, along with other high school students
were riding in a Mitsubishi jeep owned by defendant Vivencio Villanueva on their way to
Larayan Elementary School, Larayan, Dapitan City. The jeep was driven by James Daniel
II then 15 years old and a student of the same school. Allegedly, the latter drove the
jeep in a reckless manner and as a result the jeep turned turtle. Sherwin Carpitanos
died as a result of the injuries he sustained from the accident.


RTC & CA Ruling: Petioner is ordered to pay damages to the parents of the deceased
Issue: Whether or not St. Marys Academy should he held primarily liable.
Held:
Under Article 218 of the Family Code, the following shall have special parental authority over a
minor child while under their supervision, instruction or custody: (1) the school, its
administrators and teachers; or (2) the individual, entity or institution engaged in child care.
This special parental authority and responsibility applies to all authorized activities, whether
inside or outside the premises of the school, entity or institution. Thus, such authority and
responsibility applies to field trips, excursions and other affairs of the pupils and students
outside the school premises whenever authorized by the school or its teachers.
Under Article 219 of the Family Code, if the person under custody is a minor, those exercising
special parental authority are principally and solidarily liable for damages caused by the acts or
omissions of the unemancipated minor while under their supervision, instruction, or custody.
However, for petitioner to be liable, there must be a finding that the act or omission considered
as negligent was the proximate cause of the injury caused because the negligence must have a
causal connection to the accident.
In order that there may be a recovery for an injury, however, it must be shown that the injury
for which recovery is sought must be the legitimate consequence of the wrong done; the
connection between the negligence and the injury must be a direct and natural sequence of
events, unbroken by intervening efficient causes. In other words, the negligence must be the
proximate cause of the injury. For, negligence, no matter in what it consists, cannot create a
right of action unless it is the proximate cause of the injury complained of. And the proximate
cause of an injury is that cause, which, in natural and continuous sequence, unbroken by any
efficient intervening cause, produces the injury, and without which the result would not have
occurred.
In this case, the respondents failed to show that the negligence of petitioner was the proximate
cause (is that cause, which, in natural and continuous sequence, unbroken by any efficient
intervening cause, produces the injury, and without which the result would not have occurred
of) the death of the victim.
Respondents Daniel spouses and Villanueva admitted that the immediate cause of the accident
was not the negligence of petitioner or the reckless driving of James Daniel II, but the
detachment of the steering wheel guide of the jeep.
Significantly, respondents did not present any evidence to show that the proximate cause of
the accident was the negligence of the school authorities, or the reckless driving of James
Daniel II. Hence, the respondents reliance on Article 219 of the Family Code that those given
the authority and responsibility under the preceding Article shall be principally and solidarily
liable for damages caused by acts or omissions of the unemancipated minor was unfounded.
Further, there was no evidence that petitioner school allowed the minor James Daniel II to drive
the jeep of respondent Vivencio Villanueva. It was Ched Villanueva, grandson of respondent
Vivencio Villanueva, who had possession and control of the jeep. He was driving the vehicle
and he allowed James Daniel II, a minor, to drive the jeep at the time of the accident.
Hence, liability for the accident, whether caused by the negligence of the minor driver or
mechanical detachment of the steering wheel guide of the jeep, must be pinned on the minors
parents primarily. The negligence of petitioner St. Marys Academy was only a remote cause of
the accident. Between the remote cause and the injury, there intervened the negligence of the
minors parents or the detachment of the steering wheel guide of the jeep.














SPOUSES LUIGI M. GUANIO and ANNA HERNANDEZ-GUANIO v.
MAKATI SHANGRI-LA
G.R. No. 190601 February 7, 2011


Facts:
For their wedding reception on July 28, 2001, spouses Luigi M. Guanio and Anna
Hernandez-Guanio (petitioners) booked at the Shangri-la Hotel Makati (the hotel).

Petitioners claim that during the reception, respondents representatives, Catering
Director Bea Marquez and Sales Manager Tessa Alvarez, did not show up despite their
assurance that they would; their guests complained of the delay in the service of the
dinner; certain items listed in the published menu were unavailable; the hotels waiters
were rude and unapologetic when confronted about the delay; and despite Alvarezs
promise that there would be no charge for the extension of the reception beyond 12:00
midnight, they were billed and paid P8,000 per hour for the three-hour extension of the
event up to 4:00 A.M. the next day.

Petitioners thus sent a letter-complaint to the Makati Shangri-la Hotel and Resort, Inc.
(respondent) and received an apologetic reply from Krister Svensson, the hotels
Executive Assistant Manager in charge of Food and Beverage. They nevertheless filed a
complaint for breach of contract and damages before the Regional Trial Court (RTC) of
Makati City.


RTC Ruling: The trial court observed that from the tenor of the letter . . . the
defendant[-herein respondent] admits that the services the plaintiff[-herein petitioners]
received were unacceptable and definitely not up to their standards.

CA Ruling: reversed the trial courts decision, it holding that the proximate cause of
petitioners injury was an unexpected increase in their guests
Issue: Whether or not there is breach of contract.
Held:
The pertinent provisions of the Banquet and Meeting Services Contract between
the parties read:
4.5. The ENGAGER must inform the HOTEL at least forty eight (48) hours
before the scheduled date and time of the Function of any change in the
minimum guaranteed covers. In the absence of such notice, paragraph 4.3 shall
apply in the event of under attendance. In case the actual number of attendees
exceed the minimum guaranteed number by ten percent (10%), the HOTEL shall
not in any way be held liable for any damage or inconvenience which may be
caused thereby. The ENGAGER shall also undertake to advise the guests of the
situation and take positive steps to remedy the same.
Breach of contract is defined as the failure without legal reason to comply with the
terms of a contract. It is also defined as the [f]ailure, without legal excuse, to perform
any promise which forms the whole or part of the contract.
The exculpatory clause notwithstanding, the Court notes that respondent could have managed
the situation better, it being held in high esteem in the hotel and service industry. Given
respondents vast experience, it is safe to presume that this is not its first encounter with
booked events exceeding the guaranteed cover. It is not audacious to expect that certain
measures have been placed in case this predicament crops up. That regardless of these
measures, respondent still received complaints as in the present case, does not amuse.
Respondent admitted that three hotel functions coincided with petitioners reception. To the
Court, the delay in service might have been avoided or minimized if respondent exercised
prescience in scheduling events. No less than quality service should be delivered especially in
events which possibility of repetition is close to nil. Petitioners are not expected to get married
twice in their lifetimes.
In the present petition, under considerations of equity, the Court deems it just to award the
amount of P50,000.00 by way of nominal damages to petitioners, for the discomfiture that they
were subjected to during to the event. The Court recognizes that every person is entitled to
respect of his dignity, personality, privacy and peace of mind. Respondents lack of prudence is
an affront to this right.

















TSPIC CORPORATION v TSPIC EMPLOYEES UNION (FFW)
G.R. No. 163419 545 S 215

Facts:
In 1999, TSPIC and the Union entered into a Collective Bargaining Agreement (CBA) for
the years 2000 to 2004. The CBA included a provision on yearly salary increases starting
January 2000 until January 2002.

The CBA also provided that employees who acquire regular employment status within
the year but after the effectivity of a particular salary increase shall receive a
proportionate part of the increase upon attainment of their regular status.


Then on October 6, 2000, the Regional Tripartite Wage and Productivity Board, National
Capital Region, issued Wage Order No. NCR-08 (WO No. 8) which raised the daily
minimum wage from PhP 223.50 to PhP 250 effective November 1, 2000. Conformably,
the wages of 17 probationary employees, were increased to PhP 250.00 effective
November 1, 2000.

In January 2001, TSPIC implemented the new wage rates as mandated by the CBA. As a
result, the nine employees (first group), who were senior to the above-listed recently
regularized employees, received less wages.


On January 19, 2001, a few weeks after the salary increase for the year 2001 became
effective, TSPICs Human Resources Department notified 24 employees, namely: Maria
Fe Flores, Janice Olaguir, Rachel Novillas, Fe Capistrano, Jerico Alipit, Amy Durias, Glen
Batula, Claire Evelyn Velez, Ser John Hernandez, Nimfa Anilao, Rose Subardiaga, Valerie
Carbon, Olivia Edroso, Maricris Donaire, Analyn Azarcon, Rosalie Ramirez, Julieta Rosete,
Janice Nebre, Nia Andrade, Catherine Yaba, Diomedisa Erni, Mario Salmorin, Loida
Comullo, and Marie Ann Delos Santos, that due to an error in the automated payroll
system, they were overpaid and the overpayment would be deducted from their salaries
in a staggered basis, starting February 2001. TSPIC explained that the correction of the
erroneous computation was based on the crediting provision of Sec. 1, Art. X of the CBA.

Issue: Whether or not CBA is legal and binding among the parties.
Held:
It is familiar and fundamental doctrine in labor law that the CBA is the law between the parties
and they are obliged to comply with its provisions. We said so in Honda Phils., Inc. v. Samahan
ng Malayang Manggagawa sa Honda:
A collective bargaining agreement or CBA refers to the negotiated contract between a
legitimate labor organization and the employer concerning wages, hours of work and all
other terms and conditions of employment in a bargaining unit. As in all contracts, the
parties in a CBA may establish such stipulations, clauses, terms and conditions as they
may deem convenient provided these are not contrary to law, morals, good customs,
public order or public policy. Thus, where the CBA is clear and unambiguous, it becomes
the law between the parties and compliance therewith is mandated by the express policy
of the law.
As a general rule, in the interpretation of a contract, the intention of the parties is to be
pursued. Littera necat spiritus vivificat. An instrument must be interpreted according to the
intention of the parties. It is the duty of the courts to place a practical and realistic
construction upon it, giving due consideration to the context in which it is negotiated and the
purpose which it is intended to serve. Absurd and illogical interpretations should also be
avoided.
TSPIC granted the salary increases under the condition that any wage order that may be
subsequently issued shall be credited against the previously granted increase. The intention of
the parties is clear: As long as an employee is qualified to receive the 12% increase in salary, the
employee shall be granted the increase; and as long as an employee is granted the 12%
increase, the amount shall be credited against any wage order issued after WO No. 7.

KHRISTINE REA M. REGINO v PANGASINAN COLLEGES OF SCIENCE
AND TECHNOLOGY
[G.R. No. 156109. November 18, 2004]

Facts:
Petitioner Khristine Rea M. Regino was a first year computer science student at
Respondent Pangasinan Colleges of Science and Technology (PCST).
In February 2002, PCST held a fund raising campaign dubbed the Rave Party and Dance
Revolution, the proceeds of which were to go to the construction of the schools tennis
and volleyball courts. Each student was required to pay for two tickets at the price of
P100 each. The project was allegedly implemented by recompensing students who
purchased tickets with additional points in their test scores; those who refused to pay
were denied the opportunity to take the final examinations.
Financially strapped and prohibited by her religion from attending dance parties and
celebrations, Regino refused to pay for the tickets. On March 14 and March 15, 2002,
the scheduled dates of the final examinations in logic and statistics, her teachers --
Respondents Rachelle A. Gamurot and Elissa Baladad -- allegedly disallowed her from
taking the tests. According to petitioner, Gamurot made her sit out her logic class while
her classmates were taking their examinations.

Issue: Whether or not respondent has an obligation to petitioner arising from contract.

Held:
The school-student relationship is also reciprocal. Thus, it has consequences appurtenant to
and inherent in all contracts of such kind -- it gives rise to bilateral or reciprocal rights and
obligations. The school undertakes to provide students with education sufficient to enable
them to pursue higher education or a profession. On the other hand, the students agree to
abide by the academic requirements of the school and to observe its rules and regulations.
The terms of the school-student contract are defined at the moment of its inception -- upon
enrolment of the student. Standards of academic performance and the code of behavior and
discipline are usually set forth in manuals distributed to new students at the start of every
school year. Further, schools inform prospective enrollees the amount of fees and the terms of
payment.
In practice, students are normally required to make a down payment upon enrollment, with the
balance to be paid before every preliminary, midterm and final examination. Their failure to
pay their financial obligation is regarded as a valid ground for the school to deny them the
opportunity to take these examinations.
The foregoing practice does not merely ensure compliance with financial obligations; it also
underlines the importance of major examinations. Failure to take a major examination is
usually fatal to the students promotion to the next grade or to graduation. Examination results
form a significant basis for their final grades. These tests are usually a primary and an
indispensable requisite to their elevation to the next educational level and, ultimately, to their
completion of a course.
Thus, students expect that upon their payment of tuition fees, satisfaction of the set academic
standards, completion of academic requirements and observance of school rules and
regulations, the school would reward them by recognizing their completion of the course
enrolled in.
The acts of respondents supposedly caused her extreme humiliation, mental agony and
demoralization of unimaginable proportions in violation of Articles 19, 21 and 26 of the Civil
Code. These provisions of the law state thus:
Article 19. 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.
Article 21. Any person who wilfully causes loss or injury to another in a manner that is contrary
to morals, good customs or public policy shall compensate the latter for the damage.
Article 26. Every person shall respect the dignity, personality, privacy and peace of mind of his
neighbors and other persons. The following and similar acts, though they may not constitute a
criminal offense, shall produce a cause of action for damages, prevention and other relief:
(1) Prying into the privacy of anothers residence;
(2) Meddling with or disturbing the private life or family relations of another;
(3) Intriguing to cause another to be alienated from his friends;
(4) Vexing or humiliating another on account of his beliefs, lowly station in
life, place of birth, physical defect, or other personal condition.
Generally, liability for tort arises only between parties not otherwise bound by a contract. An
academic institution, however, may be held liable for tort even if it has an existing contract with
its students, since the act that violated the contract may also be a tort.


PHILIPPINE SCHOOL OF BUSINESS ADMINISTRATION v. COURT OF
APPEALS
G.R. No. 84698, February 4, 1992
FACTS:
A stabbing incident on 30 August 1985 which caused the death of Carlitos Bautista while
on the second-floor premises of the Philippine School of Business Administration (PSBA)
prompted the parents of the deceased to file suit in the Regional Trial Court of Manila
for damages against the said PSBA and its corporate officers.
At the time of his death, Carlitos was enrolled in the third year commerce course at the
PSBA. It was established that his assailants were not members of the school's academic
community but were elements from outside the school. Substantially, the plaintiffs (now
private respondents) sought to adjudge them liable for the victim's untimely demise due
to their alleged negligence, recklessness and lack of security precautions, means and
methods before, during and after the attack on the victim.
Defendants a quo (now petitioners) sought to have the suit dismissed, alleging that
since they are presumably sued under Article 2180 of the Civil Code, the complaint
states no cause of action against them, as jurisprudence on the subject is to the effect
that academic institutions, such as the PSBA, are beyond the ambit of the rule in the
afore-stated article.
The respondent trial court, however, overruled petitioners contention and thru an
order dated 8 December 1987, denied their motion to dismiss. Said decision of the
respondent appellate court was primarily anchored on the law of quasi-delicts, as
enunciated in Articles 2176 and 2180 of the Civil Code.
Article 2180, in conjunction with Article 2176 of the Civil Code, establishes the rule of in
loco parentis. It had been stressed that the law (Article 2180) plainly provides that the
damage should have been caused or inflicted by pupils or students of the educational
institution sought to be held liable for the acts of its pupils or students while in its
custody. However, this material situation does not exist in the present case for the
assailants of Carlitos were not students of the PSBA, for whose acts the school could be
made liable.

ISSUE:
Whether or not petitioner incurs civil liability as regards the death of their student.

HELD:
It does not necessarily follow. When an academic institution accepts students for enrollment,
there is established a contract between them, resulting in bilateral obligations which both
parties are bound to comply with. For its part, the school undertakes to provide the student
with an education that would presumably suffice to equip him with the necessary tools and
skills to pursue higher education or a profession. On the other hand, the student covenants to
abide by the school's academic requirements and observe its rules and regulations.Institutions
of learning must also meet the implicit or "built-in" obligation of providing their students with
an atmosphere that promotes or assists in attaining its primary undertaking of imparting
knowledge.
Certainly, no student can absorb the intricacies of physics or higher mathematics or explore the
realm of the arts and other sciences where there looms around the school premises a constant
threat to life and limb. Necessarily, the school must ensure that adequate steps are taken to
maintain peace and order within the campus premises and to prevent the breakdown thereof.
Because the circumstances of the present case evince a contractual relation between the PSBA
and Carlitos Bautista, the rules on quasi-delict do not apply.
However, there is, as yet, no finding that the contract between the school and Bautista had
been breached thru the former's negligence in providing proper security measures. Even if
there be a finding of negligence, the same could give rise generally to a breach of contractual
obligation only. Using the test of Cangco, supra, the negligence of the school would not be
relevant absent a contract. In fact, that negligence becomes material only because of the
contractual relation between PSBA and Bautista. In other words, a contractual relation is a
condition sine qua non to the school's liability. The negligence of the school cannot exist
independently of the contract, unless the negligence occurs under the circumstances set out in
Article 21 of the Civil Code.












Cosmo Entertainment Mgmt, Inc. vs. La Ville Commercial
Corporation

G.R. No. 152801, August 20, 2004

437 SCRA 145

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

On March 17, 1993, it entered into a Contract of Lease with petitioner Cosmo
Entertainment Management, Inc. over the subject property for a period of seven years
with a monthly rental of P250 per square meter of the floor area of the building and a
security deposit equivalent to three monthly rentals in the amount of P447, 000.00 to
guarantee the faithful compliance of the terms and conditions of the lease agreement.
Upon execution of the contract, the petitioner took possession of the subject property.

The petitioner, however, suffered business reverses and was constrained to stop
operations in September 1996. Thereafter, the petitioner defaulted in its rental
payments. Consequently, the respondent made a demand on the petitioner to vacate
the premises as well as to pay the accrued rentals plus interests which, as of January 31,
1997, amounted to P740, 478.91. In reply to the demand, the petitioner averred that its
unpaid rentals amounted to P698, 500 only and since it made a security deposit of P419,
100 with the respondent, the said amount should be applied to the unpaid rentals;
hence, the outstanding accounts payable would only be P279, 400. The respondent
requested that the interest charges be waived and it be given time to find a solution to
its financial problems.

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

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

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













AYALA CORP v. ROSA-DIANA REALTY AND DEVT. CORP.
[G.R. No. 134284. December 1, 2000] 346 S 663
Facts:
Petitioner Ayala Corporation (hereinafter referred to as Ayala) was the registered owner
of a parcel of land located in Alfaro Street, Salcedo Village, Makati City with an area of
840 square meters.
On April 20, 1976, Ayala sold the lot to Manuel Sy married to Vilma Po and Sy Ka Kieng
married to Rosa Chan. The Deed of Sale executed between Ayala and the buyers
contained Special Conditions of Sale and Deed Restrictions. Among the Special
Conditions of Sale were:
a) the vendees shall build on the lot and submit the building plans to the vendor
before September 30, 1976 for the latters approval
b) the construction of the building shall start on or before March 30, 1977 and
completed before 1979. Before such completion, neither the deed of sale shall be
registered nor the title released even if the purchase price shall have been fully
paid
c) there shall be no resale of the property
The Deed Restrictions, on the other hand, contained the stipulation that the gross floor
area of the building to be constructed shall not be more than five (5) times the lot area
and the total height shall not exceed forty two (42) meters. The restrictions were to
expire in the year 2025.
Manuel Sy and Sy Ka Kieng, in April 1989, were able to sell the lot to respondent Rosa-
Diana Realty and Development Corporation (hereinafter referred to as Rosa-Diana) with
Ayalas approval.
Rosa-Diana submitted to the building official of Makati another set of building plans for
The Peak which were substantially different from those that it earlier submitted to
Ayala for approval. While the building plans which Rosa-Diana submitted to Ayala for
approval envisioned a 24-meter high, seven (7) storey condominium project. Needless
to say, while the first set of building plans complied with the deed restrictions, the latter
set exceeded the same.


During the construction of Rosa-Dianas condominium project, Ayala filed an action with
the Regional Trial Court (RTC) of Makati, Branch 139 for specific performance, with
application for a writ of preliminary injunction/temporary restraining order against
Rosa-Diana Realty seeking to compel the latter to comply with the contractual
obligations under the deed of restrictions annotated on its title as well as with the
building plans it submitted to the latter. In the alternative, Ayala prayed for rescission
of the sale of the subject lot to Rosa- Diana Realty.
Issue: Whether or not stipulations of a contract is legal and binding.
Held:
Contractual obligations between parties have the force of law between them and absent any
allegation that the same are contrary to law, morals, good customs, public order or public
policy, they must be complied with in good faith. Hence, Article 1159 of the New Civil Code
provides
Obligations arising from contracts have the force of law between the contracting parties and
should be complied with in good faith.
It was inappropriate therefore for the trial court to rule that in the absence of any authority or
confirmation from the Board of Directors of respondent Rosa-Diana, its Chairman and the
President cannot validly enter into an undertaking relative to the construction of the building
on the lot within one year from July 27, 1989 and in accordance with the deed restrictions.
Curiously, while the trial court stated that it cannot be presumed that the Chairman and the
President can validly bind respondent Rosa-Diana to enter into the aforesaid Undertaking in
the absence of any authority or confirmation from the Board of Directors, the trial court held
that the ordinary presumption of regularity of business transactions is applicable as regards the
Deed of Sale which was executed by Manuel Sy and Sy Ka Kieng and respondent Rosa-Diana. In
the light of the fact that respondent Rosa-Diana never alleged in its Answer that its president
and chairman were not authorized to execute the Undertaking, the aforesaid ruling of the trial
court is without factual and legal basis and surprising to say the least.
The fact alone that respondent Rosa-Diana conveniently prepared two sets of building plans -
with one set which fully conformed to the Deed Restrictions and another in gross violation of
the same - should have cautioned the trial court to conclude that respondent Rosa-Diana was
under the erroneous impression that the Deed Restrictions were no longer enforceable and
that it never intended to be bound by the Undertaking signed by its President and Chairman.
We reiterate that contractual obligations have the force of law between parties and unless the
same are contrary to public policy morals and good customs, they must be complied by the
parties in good faith.


BRICKTOWN DEVELOPMENT CORP. vs. AMOR TIERRA
DEVELOPMENT CORP.
G.R. No. 112182 December 12, 1994

Facts:
On 31 March 1981, Bricktown Development Corporation (herein petitioner corporation),
represented by its President and co-petitioner Mariano Z. Velarde, executed two
Contracts to Sell in favor of Amor Tierra Development Corporation (herein private
respondent), represented in these acts by its Vice-President, Moises G. Petilla, covering
a total of 96 residential lots.
Private respondent was only able to pay petitioner corporation the sum of P1,334,443.2.
In the meanwhile, however, the parties continued to negotiate for a possible
modification of their agreement, although nothing conclusive would appear to have
ultimately been arrived at.
Petitioner corporation, through its legal counsel, sent private respondent a "Notice of
Cancellation of Contract" on account of the latter's continued failure to pay the
installment due 30 June 1981 and the interest on the unpaid balance of the stipulated
initial payment. Petitioner corporation advised private respondent, however, that it
(private respondent) still had the right to pay its arrearages within 30 days from receipt
of the notice "otherwise the actual cancellation of the contract (would) take place."

Several months later, or on 26 September 1983, private respondent, through counsel,
demanded (Exh. "E") the refund of private respondent's various payments to petitioner
corporation, allegedly "amounting to P2,455,497.71," with interest within fifteen days
from receipt of said letter, or, in lieu of a cash payment, to assign to private respondent
an equivalent number of unencumbered lots at the same price fixed in the contracts.
Issue: Whether or not the contract is validly rescinded.
Held:
Admittedly, the terms of payment agreed upon by the parties were not met by private
respondent. Of a total selling price of P21,639,875.00, private respondent was only able to
remit the sum of P1,334,443.21 which was even short of the stipulated initial payment of
P2,200,000.00. No additional payments, it would seem, were made. A notice of cancellation
was ultimately made months after the lapse of the contracted grace period. Paragraph 15 of
the Contracts to Sell provided thusly:
15. Should the PURCHASER fail to pay when due any of the installments
mentioned in stipulation No. 1 above, the OWNER shall grant the purchaser a
sixty (60)-day grace period within which to pay the amount/s due, and should the
PURCHASER still fail to pay the due amount/s within the 60-day grace period, the
PURCHASER shall have the right to ex-parte cancel or rescind this contract,
provided, however, that the actual cancellation or rescission shall take effect only
after the lapse of thirty (30) days from the date of receipt by the PURCHASER of
the notice of cancellation of this contract or the demand for its rescission by a
notarial act, and thereafter, the OWNER shall have the right to resell the lot/s
subject hereof to another buyer and all payments made, together with all
improvements introduced on the aforementioned lot/s shall be forfeited in favor
of the OWNER as liquidated damages, and in this connection, the PURCHASER
obligates itself to peacefully vacate the aforesaid lot/s without necessity of notice
or demand by the OWNER.
3

A grace period is a right, not an obligation, of the debtor. When unconditionally conferred, such
as in this case, the grace period is effective without further need of demand either calling for
the payment of the obligation or for honoring the right. The grace period must not be likened
to an obligation, the non-payment of which, under Article 1169 of the Civil Code, would
generally still require judicial or extrajudicial demand before "default" can be said to arise.
4

Verily, in the case at bench, the sixty-day grace period under the terms of the contracts to sell
became ipso facto operative from the moment the due payments were not met at their stated
maturities. On this score, the provisions of Article 1169 of the Civil Code would find no
relevance whatsoever.
The cancellation of the contracts to sell by petitioner corporation accords with the contractual
covenants of the parties, and such cancellation must be respected. It may be noteworthy to add
that in a contract to sell, the
non-payment of the purchase price (which is normally the condition for the final sale) can
prevent the obligation to convey title from acquiring any obligatory force (Roque vs. Lapuz, 96
SCRA 741; Agustin vs. Court of Appeals, 186 SCRA 375).
The forfeiture of the payments thus far remitted under the cancelled contracts in question,
given the factual findings of both the trial court and the appellate court, must be viewed
differently. While clearly insufficient to justify a foreclosure of the right of petitioner
corporation to rescind or cancel its contracts with private respondent, the series of events and
circumstances described by said courts to have prevailed in the interim between the parties,
however, warrant some favorable consideration by this Court.


PILIPINAS HINO, INC. vs. COURT OF APPEALS
[G.R. No. 126570. August 18, 2000] 338 S 335

Facts:
A contract of lease was entered into between herein parties, under which the
defendants, as lessors, leased real property located at Bigaa, Balagtas, Bulacan, to
herein plaintiff for a term of two (2) years, from 16 August 1989 to 15 August 1991.
Pursuant to the contract of lease, plaintiff-lessee deposited with the defendants-lessors
the amount of Four Hundred Thousand (P400,000.00) Pesos to answer for repairs and
damages that may be caused by the lessee on the leased premises during the period of
the lease.
After the expiration of the lease contract, the plaintiff and defendants made a joint
inspection of the premises to determine the extent of the damages thereon, both
agreed that the cost of repairs would amount to P60,000.00 and that the amount of
P340,000.00 shall then be returned by the defendants to plaintiff. However, defendants
returned to plaintiff only the amount of P200,000.00, still having a balance of
P140,000.00.
Notwithstanding repeated demands, defendants unjustifiably refused to return the
balance of P140,000.00 holding that the true and actual damage on the lease premises
amounted to P298,738.90.
It is stated in paragraph 6 in the Memorandum of Agreement that an interest equivalent
to three (3%) percent per thirty days period shall be imposed on any installment due but
not paid for the duration of the delay.
Plaintiff's request to return the amount of P924,000.00 to which defendants however
refused for reasons that the said amount represents interest due and demandable from
the plaintiff when it incurred the delay which by virtue of legal compensation, was set-
off by operation of law and the said amount was rightfully deducted from the amount of
P7,050,000.00.

Since plaintiff failed to pay the third and subsequent installments, defendants' right to
the 3% interest, therefore, readily accrued and became demandable at the time of the
non-payment. The grace period granted to the plaintiff likewise lapsed. Consequently,
the defendants decided to, and in fact did in a letter dated 20 November 1990,
terminate the contract to sell. The defendants as agreed upon returned to the plaintiff
the amount of P5,906,000.00 representing the amount due to the plaintiff as
reimbursement of the installments for the 1st and 2nd installments. Considering that
the plaintiff has failed to pay the installments due on time, the interest in the amount of
P924,000.00 was charged against the plaintiff (which interest, in turn, represents the
unproductive use of the money which should have been made by the defendants had
the payment been made on time). The amount of P220,000.00 was likewise deducted
by the defendants representing rentals for the period. Thus, only the amount of
P5,906,000.00 was rightfully returned by the defendants.

Issues: Does private respondent have the right to retain the P924,000.00 representing the
interest due for the unpaid installments, despite the fact that the respondent has exercised
his option to rescind the memorandum of agreement?

Held: No.
It may be conceded, as the trial court endeavored to rationalize, that for failure of the buyer to
pay the installments, private respondents were consequently deprived of the productive use
of the supposed money they should have received as per contract. However, the private
respondents withholding of the amount corresponding to the interest violated the specific and
clear stipulation in paragraph 9 of the memorandum of agreement that except for the
downpayment, all amounts paid shall be returned to the buyer with no obligation to pay
interest thereon. The parties are bound by their agreement. Thus, Article 1159 of the Civil
Code expressly provides:
Obligation arising from contracts have the force of law between the contracting parties and
should be complied with in good faith.
Paragraph 9 of the memorandum of agreement between the parties, not being contrary to law,
morals, good customs, public policy, or public order has therefore the force of law between the
parties. Aside from equity considerations, the lower courts failed to provide a basis for the
retention by the respondent of the interest. Equity is applied only in the absence of, and never
against, statutory law or judicial rules of procedure. The memorandum of agreement, being the
law between the parties, must therefore, govern.
The distinction between contracts of sale and contracts to sell with reserved title has been
recognized by this Court in repeated decisions upholding the power of promisors under
contracts to sell in case of failure of the other party to complete payment, to extrajudicially
terminate the operation of the contract, refuse conveyance and retain the sums or installments
already received, where such rights are expressly provided for, as in the case at bar.
Sadly for private respondents, our ruling in the above case defeats rather than sustains their
claim. While this Court recognizes that in contracts to sell even if the contract is terminated the
seller can retain the sums already received or paid, such can be done only if it is expressly
provided for in the contract. Such proviso is not contained in the memorandum of agreement,
as what is merely provided for in paragraphs 7 and 9 is the retention of the downpayment.
ARTURO SARTE FLORES vs. SPS ENRICO L. LINDO, JR. and EDNA C.
LINDO
G.R. No. 183984 April 13, 2011

Facts:
On 31 October 1995, Edna Lindo (Edna) obtained a loan from Arturo Flores (petitioner)
amounting to P400,000 payable on 1 December 1995 with 3% compounded monthly
interest and 3% surcharge in case of late payment. To secure the loan, Edna executed a
Deed of Real Estate Mortgage

(the Deed) covering a property in the name of Edna and
her husband Enrico (Enrico) Lindo, Jr. (collectively, respondents). Edna also signed a
Promissory Note and the Deed for herself and for Enrico as his attorney-in-fact.
Edna issued three checks as partial payments for the loan. All checks were dishonored
for insufficiency of funds, prompting petitioner to file a Complaint for Foreclosure of
Mortgage with Damages against respondents.
In its 30 September 2003 Decision, the RTC, Branch 33 ruled that petitioner was not
entitled to judicial foreclosure of the mortgage. The RTC, Branch 33 found that the Deed
was executed by Edna without the consent and authority of Enrico. The RTC, Branch 33
noted that the Deed was executed on 31 October 1995 while the Special Power of
Attorney (SPA) executed by Enrico was only dated 4 November 1995.
The RTC, Branch 33 further ruled that petitioner was not precluded from recovering the
loan from Edna as he could file a personal action against her. However, the RTC, Branch
33 ruled that it had no jurisdiction over the personal action which should be filed in the
place where the plaintiff or the defendant resides in accordance with Section 2, Rule 4
of the Revised Rules on Civil Procedure.
On 8 September 2004, petitioner filed a Complaint for Sum of Money with Damages
against respondents.
Issue: Whether or not petitioner has a valid cause of action grounded on unjust enrichment.
Held:
The rule is that a mortgage-creditor has a single cause of action against a mortgagor-debtor,
that is, to recover the debt. The mortgage-creditor has the option of either filing a personal
action for collection of sum of money or instituting a real action to foreclose on the mortgage
security. An election of the first bars recourse to the second, otherwise there would be
multiplicity of suits in which the debtor would be tossed from one venue to another depending
on the location of the mortgaged properties and the residence of the parties.
Article 124 of the Family Code provides:
Art. 124. The administration and enjoyment of the conjugal partnership property shall belong
to both spouses jointly. In case of disagreement, the husbands decision shall prevail, subject to
recourse to the court by the wife for proper remedy, which must be availed of within five years
from the date of contract implementing such decision.
In the event that one spouse is incapacitated or otherwise unable to participate in the
administration of the conjugal properties, the other spouse may assume sole powers of
administration. These powers do not include disposition or encumbrance without authority of
the court or the written consent of the other spouse. In the absence of such authority or
consent the disposition or encumbrance shall be void. However, the transaction shall be
construed as a continuing offer on the part of the consenting spouse and the third person, and
may be perfected as a binding contract upon the acceptance by the other spouse or
authorization by the court before the offer is withdrawn by either or both offerors.
In this case, the Promissory Note and the Deed of Real Estate Mortgage were executed on 31
October 1995. The Special Power of Attorney was executed on 4 November 1995. The
execution of the SPA is the acceptance by the other spouse that perfected the continuing offer
as a binding contract between the parties, making the Deed of Real Estate Mortgage a valid
contract.
Nevertheless, petitioner still has a remedy under the law.
In Chieng v. Santos, this Court ruled that a mortgage-creditor may institute against the
mortgage-debtor either a personal action for debt or a real action to foreclose the mortgage.
The Court ruled that the remedies are alternative and not cumulative and held that the filing of
a criminal action for violation of Batas Pambansa Blg. 22 was in effect a collection suit or a suit
for the recovery of the mortgage-debt. In that case, however, this Court pro hac vice, ruled that
respondents could still be held liable for the balance of the loan, applying the principle that no
person may unjustly enrich himself at the expense of another.
The principle of unjust enrichment is provided under Article 22 of the Civil Code which provides:
Art. 22. Every person who through an act of performance by another, or any other means,
acquires or comes into possession of something at the expense of the latter without just or
legal ground, shall return the same to him.
There is unjust enrichment "when a person unjustly retains a benefit to the loss of another, or
when a person retains money or property of another against the fundamental principles of
justice, equity and good conscience." The principle of unjust enrichment requires two
conditions: (1) that a person is benefited without a valid basis or justification, and (2) that such
benefit is derived at the expense of another.
The main objective of the principle against unjust enrichment is to prevent one from enriching
himself at the expense of another without just cause or consideration. The principle is
applicable in this case considering that Edna admitted obtaining a loan from petitioners, and
the same has not been fully paid without just cause. The Deed was declared void erroneously at
the instance of Edna, first when she raised it as a defense before the RTC, Branch 33 and
second, when she filed an action for declaratory relief before the RTC, Branch 93. Petitioner
could not be expected to ask the RTC, Branch 33 for an alternative remedy, as what the Court
of Appeals ruled that he should have done, because the RTC, Branch 33 already stated that it
had no jurisdiction over any personal action that petitioner might have against Edna.
Considering the circumstances of this case, the principle against unjust enrichment, being a
substantive law, should prevail over the procedural rule on multiplicity of suits. The Court of
Appeals, in the assailed decision, found that Edna admitted the loan, except that she claimed it
only amounted to P340,000. Edna should not be allowed to unjustly enrich herself because of
the erroneous decisions of the two trial courts when she questioned the validity of the Deed.













PHILIPPINE REALTY AND HOLDINGS CORPORATION vs. LEY
CONST. AND DEVT CORP
G. R. No. 165548 June 13, 2011

Facts
Sometime between April 1988 and October 1989, the two corporations entered into
four major construction projects. Ley Construction and Development Corporation
(LCDC) was the project contractor for the construction of several buildings for Philippine
Realty & Holdings Corporation (PRHC), the project owner. Engineer Dennis Abcede
(Abcede) was the project construction manager of PRHC, while Joselito Santos (Santos)
was its general manager and vice-president for operations.

Under the Contract Agreement: ARTICLE IV The Contract Price shall not be
subject to escalation except due to work addition, (approved by the OWNER and
the ARCHITECT) and to official increase in minimum wage as covered by the
Labor Adjustment Clause below. All costs and expenses over and above the
Contract Price except as provided in Article V hereof shall be for the account of
the CONTRACTOR. It is understood that there shall be no escalation on the price
of materials.


LCDC explained that the unanticipated delay in construction was due mainly to the
sudden, unexpected hike in the prices of cement and other construction materials. It
claimed that, without a corresponding increase in the fixed prices found in the
agreements, it would be impossible for it to finish the construction of the Tektite
Building. The board of directors turned down the request for an escalation agreement.
Neither PRHC nor Abcede gave notice to LCDC of the alleged denial of the proposal.


However, on 9 August 1991 Abcede sent a formal letter to LCDC, asking for its
conformity, to the effect that should it infuse P36 million into the project, a contract
price escalation for the same amount would be granted in its favor by PRHC .
Notwithstanding the absence of a signature above PRHCs name, LCDC proceeded with
the construction of the Tektite Building, expending the entire amount necessary to
complete the project. From August to December 1991, it infused amounts totaling P
38,248,463.92.

In a letter dated 8 September 1992, when 96.43% of Tektite Building had been
completed, LCDC requested the release of the P 36 million escalation price. PRHC did
not reply. LCDC, through counsel, demanded payment of the agreed escalation price of
P 36 million. In its reply on 16 February 1993, PRHC suddenly denied any liability for the
escalation price. In the same letter, it claimed that LCDC had incurred 111 days of delay
in the construction of the Tektite Building and demanded that the latter pay P
39,326,817.15 as liquidated damages.
Issue: Whether or not PRHC is liable to pay LCDC for the escalation price.
Held:
LCDC additionally argues that a subsequent escalation agreement was validly entered into,
even on the following assumptions: (a) that Abcede and Santos had no authority to agree to the
escalation of the contract price without the approval of the board of directors; and (b) that the
7 December 1992 letter cannot be construed as an acknowledgment by PRHC that it owed LCDC
P36 million. It posits that the actions of Abcede and Santos, assuming they were beyond the
authority given to them by PRHC which they were representing, still bound PRHC under the
doctrine of apparent authority. 1[42] Thus, the lack of authority on their part should not be
used to prejudice it, considering that the two were clothed with apparent authority to execute
such agreements. In addition, PRHC is allegedly barred by promissory estoppel from denying
the claims of the other corporation.
In Yao Ka Sin Trading v. Court of Appeals, et al,.1[43] this Court discussed the applicable rules
on the doctrine of apparent authority, to wit:
The rule is of course settled that [a]lthough an officer or agent acts without, or
in excess of, his actual authority if he acts within the scope of an apparent
authority with which the corporation has clothed him by holding him out or
permitting him to appear as having such authority, the corporation is bound
thereby in favor of a person who deals with him in good faith in reliance on such
apparent authority, as where an officer is allowed to exercise a particular
authority with respect to the business, or a particular branch of it, continuously
and publicly, for a considerable time. Also, if a private corporation intentionally
or negligently clothes its officers or agents with apparent power to perform acts
for it, the corporation will be estopped to deny that such apparent authority is
real, as to innocent third persons dealing in good faith with such officers or
agents. 1[44]
Consequently, the escalation agreement entered into by LCDC and Abcede is a valid agreement
that PRHC is obligated to comply with. This escalation agreement whether written or verbal
has lifted, through novation, the prohibition contained in the Tektite Building Agreement.
In Peoples Aircargo and Warehousing Co. Inc. v. Court of Appeals, et al.,1[45] we held that
apparent authority is derived not merely from practice:
Its existence may be ascertained through (1) the general manner in which the
corporation holds out an officer or agent as having the power to act or, in other
words, the apparent authority to act in general, with which it clothes him; or (2)
the acquiescence in his acts of a particular nature, with actual or constructive
knowledge thereof, whether within or beyond the scope of his ordinary powers.
In order for novation to take place, the concurrence of the following requisites is indispensable:
1. There must be a previous valid obligation.
2. The parties concerned must agree to a new contract.
3. The old contract must be extinguished.
4. There must be a valid new contract.
All the aforementioned requisites are present in this case. The obligation of both parties not to
increase the contract price in the Tektite Building Agreement was extinguished, and a new
obligation increasing the old contract price by P 36 million was created by the parties to take its
place.
What makes this Court believe that it is incorrect to allow PRHC to escape liability for the
escalation price is the fact that LCDC was never informed of the board of directors supposed
non-approval of the escalation agreement until it was too late. Instead, PRHC, for its own
benefit, waited for the former to finish infusing the entire amount into the construction of the
building before informing it that the said agreement had never been approved by the board of
directors. LCDC diligently informed PRHC each month of the partial amounts the former infused
into the project. PRHC must be deemed estopped from denying the existence of the escalation
agreement for having allowed LCDC to continue infusing additional money spending for its own
project, when it could have promptly notified LCDC of the alleged disapproval of the proposed
escalation price by its board of directors.
This liability of PRHC, however, has a ceiling. The escalation agreement entered into was for P
36 millionthe maximum amount that LCDC contracted itself to infuse and that PRHC agreed
to reimburse. Thus, the Court of Appeals was correct in ruling that the P 2,248,463.92 infused
by LCDC over and above the P 36 million should be for its account, since PRHC never agreed to
pay anything beyond the latter amount. While PRHC benefited from this excess infusion, this
did not result in its unjust enrichment, as defined by law.
Unjust enrichment exists when a person unjustly retains a benefit to the loss of another, or
when a person retains money or property of another against the fundamental principles of
justice, equity and good conscience. Under Art. 22 of the Civil Code, there is unjust enrichment
when (1) a person is unjustly benefited, and (2) such benefit is derived at the expense of or with
damages to another. The term is further defined thus:
Unjust enrichment is a term used to depict result or effect of failure to make
remuneration of or for property or benefits received under circumstances that
give rise to legal or equitable obligation to account for them; to be entitled to
remuneration, one must confer benefit by mistake, fraud, coercion, or request.
In order for an unjust enrichment claim to prosper, one must not only prove that the other
party benefited from ones efforts or the obligations of others; it must also be shown that the
other party was unjustly enriched in the sense that the term unjustly could mean illegally or
unlawfully.1[52] LCDC was aware that the escalation agreement was limited to P36 million. It
is not entitled to remuneration of the excess, since it did not confer this benefit by mistake,
fraud, coercion, or request. Rather, it voluntarily infused the excess amount with full knowledge
that PRHC had no obligation to reimburse it.














Titan-Ikeda Construction v Primetown Property
G.R. No. 158768 February 12, 2008 544 S 466

Facts:
In 1992, respondent Primetown Property Group, Inc. awarded the contract for the
structural works of its 32-storey Makati Prime Tower (MPT) to petitioner Titan-Ikeda
Construction and Development Corporation. The parties formalized their agreement in a
construction contract.
On June 30, 1994, respondent executed a deed of sale (covering 114 condominium units
and 20 parking slots of the MPT collectively valued by the parties at P112,416,716.88) in
favor of petitioner pursuant to the full-swapping payment provision of the
supplemental agreement. Shortly thereafter, petitioner sold some o In September 1995,
respondent engaged the services of Integratech, Inc. (ITI), an engineering consultancy
firm, to evaluate the progress of the project. In its September 7, 1995 report, ITI
informed respondent that petitioner, at that point, had only accomplished 31.89% of
the project f its units to third persons.
Records showed that respondent did not merely take over the supervision of the project
but took full control thereof
Petitioner consequently conducted an inventory. On the basis thereof, petitioner
demanded from respondent the payment of its balance amounting to P1,779,744.85.
petitioner demanded from respondent the delivery of MPT's management certificate
and the keys to the condominium units and the payment of its (respondent's) balance.
Because respondent ignored petitioner's demand, petitioner, on December 9, 1996,
filed a complaint for specific performance in the Housing and Land Use Regulatory
Board (HLURB).
While the complaint for specific performance was pending in the HLURB, respondent
sent a demand letter to petitioner asking it to reimburse the actual costs incurred in
finishing the project (or P69,785,923.47).1[30] In view of the pendency of the HLURB
case, petitioner did not heed respondent's demands.
During trial, the RTC found that because respondent modified the MPT's architectural
design, petitioner had to adjust the scope of work. Moreover, respondent belatedly
informed petitioner of those modifications. It also failed to deliver the concrete mix and
rebars according to schedule. For this reason, petitioner was not responsible for the
project's delay
The appellate court found that respondent fully performed its obligation when it
executed the June 30, 1994 deed of absolute sale in favor of petitioner. Moreover, ITI's
report clearly established that petitioner had completed only 48.71% of the project as of
October 12, 1995, the takeover date. Not only did it incur delay in the performance of
its obligation but petitioner also failed to finish the project. The CA ruled that
respondent was entitled to recover the value of the unfinished portion of the project
under the principle of unjust enrichment
Issue:
1. Whether or not petitioner is obliged to return the excess from the overpayment to
respondent.
2. Whether or not petitioner is in delay in the performance of the obligation.
Held:
1. Because the parties agreed to extinguish the supplemental agreement, they were no
longer required to fully perform their respective obligations. Petitioner was relieved of
its obligation to complete the project while respondent was freed of its obligation to
pay the entire contract price. However, respondent, by executing the June 30, 1994
deed of absolute sale, was deemed to have paid P112,416,716.88. Nevertheless,
because petitioner applied part of what it received to respondents outstanding
liabilities, it admitted overpayment.
Because petitioner acknowledged that it had been overpaid, it was obliged to return the excess
to respondent. Embodying the principle of solutio indebiti, Article 2154 of the Civil Code
provides:

Article 2154. If something is received when there is no right to demand it and it
was unduly delivered through mistake, the obligation to return it arises.
For the extra-contractual obligation of solutio indebiti to arise, the following
requisites must be proven:
1. the absence of a right to collect the excess sums and
2. the payment was made by mistake.
With regard to the first requisite, because the supplemental agreement had been extinguished
by the mutual agreement of the parties, petitioner became entitled only to the cost of services
it actually rendered (i.e., that fraction of the project cost in proportion to the percentage of its
actual accomplishment in the project). It was not entitled to the excess (or extent of
overpayment).
On the second requisite, Article 2163 of the Civil Code provides:
Article 2163. It is presumed that there was a mistake in the payment if
something which had never been due or had already been paid was delivered;
but, he from whom the return is claimed may prove that the delivery was made
out of liberality or for any other just cause. (emphasis supplied)
In this instance, respondent paid part of the contract price under the assumption that
petitioner would complete the project within the stipulated period. However, after the
supplemental agreement was extinguished, petitioner ceased working on the project.
Therefore, the compensation petitioner received in excess of the cost of its actual
accomplishment as of October 12, 1995 was never due. The condominium units and parking
slots corresponding to the said excess were mistakenly delivered by respondent and were
therefore not due to petitioner.

Stated simply, respondent erroneously delivered excess units to petitioner and the
latter, pursuant to Article 2154, was obliged to the return them to respondent. Article 2160 of
the Civil Code provides:
Article 2160. He who in good faith accepts an undue payment of a thing
certain and determinate shall only be responsible for the impairment or loss of
the same or its accessories and accessions insofar as he has thereby been
benefited. If he has alienated it, he shall return the price or assign the action to
collect the sum.
One who receives payment by mistake in good faith is, as a general rule, only liable to return
the thing delivered. If he benefited therefrom, he is also liable for the impairment or loss of the
thing delivered and its accessories and accessions. If he sold the thing delivered, he should
either deliver the proceeds of the sale or assign the action to collect to the other party.
Under Article 2160 in relation to Article 2154, it should return to respondent the condominium
units and parking slots in excess of the value of its actual accomplishment (i.e., the amount due
to it) as of October 12, 1995. If these properties include units and/or slots already sold to third
persons, petitioner shall deliver the proceeds of the sale thereof or assign the actions for
collection to respondent as required by Article 2160.
2. Mora or delay is the failure to perform the obligation in due time because of dolo
(malice) or culpa (negligence). A debtor is deemed to have violated his obligation to the
creditor from the time the latter makes a demand. Once the creditor makes a demand,
the debtor incurs mora or delay.
The construction contract provided a procedure for protesting delay:
Article XIV
DELAYS AND ABANDONMENT
15.1. If at any time during the effectivity of this contract, [PETITIONER] shall
incur unreasonable delay or slippages of more than fifteen percent (15%) of the
scheduled work program, [RESPONDENT] should notify [PETITIONER] in writing
to accelerate the work and reduce, if not erase, slippage.
Respondent never sent petitioner a written demand asking it to accelerate work on the project
and reduce, if not eliminate, slippage. If delay had truly been the reason why respondent took
over the project, it would have sent a written demand as required by the construction contract.
Moreover, according to the October 12, 1995 letter-agreement, respondent took over the
project for the sole reason that such move was part of its (respondent's) long-term plan.
Respondent, on the other hand, relied on ITI's September 7, 1995 report. The construction
contract named GEMM, not ITI, as construction manager. Because petitioner did not consent to
the change of the designated construction manager, ITI's September 7, 1995 report could not
bind it.













PADCOM CONDO v ORTIGAS ASSOC CENTER
G.R. No. 146807. May 9, 2002

Facts:
Petitioner Padcom Condominium Corporation (hereafter PADCOM) owns and manages
the Padilla Office Condominium Building (PADCOM Building). The land on which the
building stands was originally acquired from the Ortigas & Company, Limited
Partnership (OCLP), by Tierra Development Corporation (TDC) under a Deed of Sale
dated 4 September 1974. Among the terms and conditions in the deed of sale was the
requirement that the transferee and its successor-in-interest must become members of
an association for realty owners and long-term lessees in the area later known as the
Ortigas Center. Subsequently, the said lot, together with improvements thereon, was
conveyed by TDC in favor of PADCOM in a Deed of Transfer dated 25 February 1975.

In 1982, respondent Ortigas Center Association, Inc. (hereafter the Association) was
organized to advance the interests and promote the general welfare of the real estate
owners and long-term lessees of lots in the Ortigas Center. It sought the collection of
membership dues in the amount of two thousand seven hundred twenty-four pesos and
forty centavos (P2,724.40) per month from PADCOM. The corporate books showed that
PADCOM owed the Association P639,961.47, representing membership dues, interests
and penalty charges from April 1983 to June 1993. The letters exchanged between the
parties through the years showed repeated demands for payment, requests for
extensions of payment, and even a settlement scheme proposed by PADCOM in
September 1990.


The Association averred that purchasers of lands within the Ortigas Center complex
from OCLP are obligated under their contracts of sale to become members of the
Association. This obligation was allegedly passed on to PADCOM when it bought the lot
from TDC, its predecessor-in-interest.

In its answer, PADCOM contended that it is a non-stock, non-profit association, and for
it to become a special member of the Association, it should first apply for and be
accepted for membership by the latters Board of Directors. No automatic membership
was apparently contemplated in the Associations By-laws. PADCOM added that it could
not be compelled to become a member without violating its right to freedom of
association. And since it was not a member of the Association, it was not liable for
membership dues, interests and penalties.
Issue: Whether or not PADCOM is liable to pay the membership fees.
Held:
Having ruled that PADCOM is a member of the Association, it is obligated to pay its dues
incidental thereto. Article 1159 of the Civil Code mandates:
Art. 1159. Obligations arising from contracts have the force of law between the contracting
parties and should be complied with in good faith.
Assuming in gratis argumenti that PADCOM is not a member of the Association, it cannot evade
payment without violating the equitable principles underlying quasi-contracts. Article 2142 of
the Civil Code provides:
Art. 2142. Certain lawful, voluntary and unilateral acts give rise to the juridical relation of
quasi-contract to the end that no one shall be unjustly enriched or benefited at the expense of
another.
Generally, it may be said that a quasi-contract is based on the presumed will or intent of the
obligor dictated by equity and by the principles of absolute justice. Examples of these
principles are: (1) it is presumed that a person agrees to that which will benefit him; (2) nobody
wants to enrich himself unjustly at the expense of another; or (3) one must do unto others
what he would want others to do unto him under the same circumstances.
As resident and lot owner in the Ortigas area, PADCOM was definitely benefited by the
Associations acts and activities to promote the interests and welfare of those who acquire
property therein or benefit from the acts or activities of the Association.
MC Engineering v CA 380 S 116
[G.R. No. 104047. April 3, 2002]
MC ENGINEERING, INC., petitioner, vs. THE COURT OF APPEALS, GERENT BUILDERS, INC. and
STRONGHOLD INSURANCE CO., INC., respondents.
Facts:
On October 29, 1984, Mc Engineering, Inc. and Surigao Coconut Development
Corporation (Sucodeco, for short) signed a contract, for the restoration of the latters
building, land improvement, electrical, and mechanical equipment located at Lipata,
Surigao City, which was damaged by typhoon Nitang.

The next day, on October 30, 1984 defendant Mc Engineering and plaintiff Gerent
Builders, Inc. entered into an agreement wherein defendant subcontracted to plaintiff
the restoration of the buildings and land improvement phase of its contract with
Sucodeco but defendant retained for itself the restoration of the electrical and
mechanical works. The subcontracted work covered the restoration of the buildings and
improvement for P1,665,000.00.


On January 2, 1985, plaintiff received from defendant the amount of P1,339,720.00* as
full payment of the sub-contract price, after deducting earlier payments made by
defendant to plaintiff, as evidenced by the affidavit executed by plaintiffs president,
wherein the latter acknowledged complete satisfaction for such payment.

Nevertheless, plaintiff is still claiming from defendant the sum of P632,590.13 as its
share in the adjusted contract cost in the amount of P854,851.51, alleging that the sub-
contract is subject to the readjustment provided for in Section VII of the agreement, and
also the sum of P166,252.00 in payment for additional electrical and civil works outside
the scope of the sub-contract.


Petitioner refused to pay respondent Gerent. Thus, on March 21, 1985, respondent
Gerent filed the complaint against petitioner. Nevertheless, plaintiff is still claiming
from defendant the sum of P632,590.13 as its share in the adjusted contract cost in the
amount of P854,851.51, alleging that the sub-contract is subject to the readjustment
provided for in Section VII of the agreement, and also the sum of P166,252.00 in
payment for additional electrical and civil works outside the scope of the sub-contract
which plaintiff had earlier forwarded to defendant.
Issue: Whether or not respondent has a share in the increase of the subcontract price.
Held:
Respondent Gerent claims that petitioner cannot be allowed to evade its lawful obligation
arising from the subcontract, citing the well-known principle of law against unjust enrichment.
Article 22 of the Civil Code provides that [e]very person who through an act or performance by
another, or by any other means, acquires or comes into possession of something at the expense
of the latter without just or legal ground, shall return the same to him.
Two conditions must generally concur before the rule on unjust enrichment can apply, namely:
(a) a person is unjustly benefited, and (b) such benefit is derived at anothers expense or
damage.
Such a situation does not exist in this case. The benefit or profit derived by petitioner neither
comes from respondent Gerent nor makes the Gerent any poorer. The profit derived by
petitioner comes from Sucodeco by virtue of the main contract to which respondent Gerent is
not a party. Respondent Gerents rights under the subcontract are not diminished in any way,
and Gerent remains fully compensated according to the terms of its own subcontract. The
profit derived by petitioner is neither unjust, nor made at the expense of respondent Gerent.
That a main contractor is able to secure a price increase from the project owner does not
automatically result in a corresponding price increase to the subcontractor in the absence of an
agreement to the contrary. In this case, there is no stipulation in the subcontract that
respondent Gerent will automatically receive 74% of whatever price increase petitioner may
obtain in the civil works portion of the main contract. Neither has the subcontract been
changed to reflect a higher subcontract price.
In a subcontract transaction, the benefit of a main contractor is not unjust even if it does less
work, and earns more profit, than the subcontractor. The subcontractor should be satisfied
with its own profit, even though less than the main contractors, because that is what it
bargained for and contracted with the main contractor. Article 22 of the Civil Code is not
intended to insure that every party to a commercial transaction receives a profit corresponding
to its effort and contribution. If a subcontractor knowingly agrees to receive a profit less than
its proportionate contribution, that is its own lookout. The fact that a subcontractor accepts
less does not make it dumb for that may be the only way to beat its competitors. The winning
subcontractor cannot be allowed to later on demand a higher price after bagging the contract
and beating competitors who asked for higher prices. Even if the subcontractor incurs a loss
because of its low price, it cannot invoke Article 22 of the Civil Code to save it from financial
loss. Article 22 is not a safety net against bad or overly bold business decisions.
Under the foregoing circumstances, we hold that Gerent is not entitled to any share in the price
increase in the main contract. Whatever price increase petitioner obtained in the main
contract, whether for the civil works portion or otherwise, was solely for the benefit of
petitioner.







State Investment vs. Court of Appeals
G.R. No. 90676, June 19, 1991 198 SCRA 392

FACTS:
Respondent spouses Rafael and Refugio Aquino pledged certain shares of stock to
petitioner State Investment House Inc. in order to secure a loan of P120, 000.00. Prior to
the execution of the pledge, respondent spouses Jose and Marcelina Aquino signed an
agreement with Petitioner for the latters purchase of receivables amounting to P375,
000.00.

When the 1st Account fell due, respondent spouses paid the same partly with their own
funds and partly from the proceeds of another loan which they obtained also from
Petitioner designated as the 2nd Account. This new loan was secured by the same
pledge agreement executed in relation to the 1st Account. When the new loan matured,
State demanded payment. Respondents expressed willingness to pay, requesting that
upon payment, the shares of stock pledged be released. State denied the request on the
ground that the loan which it had extended to the spouses Jose and Marcelina Aquino
has remained unpaid.


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

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

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

HELD:

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










People v Nufrashir Hashim
G.R. No. 194255 June 13, 2012

Facts:
Accused-appellant Bernadette Pansacala a.k.a Neneng Awid, together with co-accused
Nurfrasir Hashim y Saraban a.k.a Franz/Frans, Makdul Jamad y Bukin a.k.a. Macky, a
certain Tas and a certain Jun for the crime of illegal recruitment as defined under
Section 6 in relation to Section 7(b) of Republic Act. No. (R.A.) 8042 or the Migrant
Workers and Overseas Filipinos Act of 1995.

The prosecution alleged that, BBB was forced on numerous occasions to have sexual
intercourse with Franz at his bidding, even in the presence of other people. She
followed his orders for fear that he would inflict physical harm on her.


Private complainants were not aware of the circumstances surrounding their
employment at the Golden Lotus. It was only after they agreed to stay there for
employment that they were forced to become sex workers to earn money and pay off
the debts they incurred from their travel from Zamboanga City to Labuan, Malaysia.

From 21 June 2003 to 13 July 2003, AAA and BBB worked as prostituted women. Each of
the girls would be booked to a customer for the whole night for 300 Ringgit at a certain
hotel near the Golden Lotus. Meanwhile, during the day, they would be hired by
customers for a short time for 150 Ringgit in one of the rooms of the Golden Lotus.
The girls were told that they would be made to pay a fine of 150 Ringgit if they refused
to have sexual intercourse with the customers.
Issue: Whether or not accused are obliged to pay for damages.
Held:
On 12 May 2003, Congress passed R.A. 9208 or the Anti-Trafficking in Persons Act. This law was
approved on 26 May 2003. Ironically, only a few days after, private complainants found
themselves in a situation that this law had sought to prevent.
In People v. Lalli, we increased the amount of moral and exemplary damages from 50,000 to
500,000 and from 50,000 to 100,000, respectively, having convicted the accused therein of
the crime of trafficking in persons. In so doing, we said:
The Civil Code describes moral damages in Article 2217:
Art. 2217. Moral damages include physical suffering, mental anguish,
fright, serious anxiety, besmirched reputation, wounded feelings, moral
shock, social humiliation, and similar injury. Though incapable of
pecuniary computation, moral damages may be recovered if they are the
proximate result of the defendant's wrongful act for omission.
Exemplary damages, on the other hand, are awarded in addition
to the payment of moral damages, by way of example or correction for
the public good, as stated in the Civil Code:
Art. 2229. Exemplary or corrective damages are imposed, by way of
example or correction for the public good, in addition to the moral,
temperate, liquidated or compensatory damages.
Art. 2230. In criminal offenses, exemplary damages as a part of the
civil liability may be imposed when the crime was committed with one or
more aggravating circumstances. Such damages are separate and distinct
from fines and shall be paid to the offended party.
The payment of 500,000 as moral damages and 100,000 as exemplary
damages for the crime of Trafficking in Persons as a Prostitute finds basis in
Article 2219 of the Civil Code, which states:
Art. 2219. Moral damages may be recovered in the following and
analogous cases:
(1) A criminal offense resulting in physical injuries;
(2) Quasi-delicts causing physical injuries;
(3) Seduction, abduction, rape, or other lascivious acts;
(4) Adultery or concubinage;
(5) Illegal or arbitrary detention or arrest;
(6) Illegal search;
(7) Libel, slander or any other form of defamation;
(8) Malicious prosecution;
(9) Acts mentioned in Article 309;
(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32,
34, and 35.
The parents of the female seduced, abducted, raped, or abused, referred
to in No. 3 of this article, may also recover moral damages.

FELIXBERTO A. ABELLANA VS. PEOPLE
[G.R. No. 174654 : August 17, 2011]

Facts:
In 1985, petitioner extended a loan to private respondents spouses Diaga and Saapia
Alonto (spouses Alonto), secured by a Deed of Real Estate Mortgage over Lot Nos. 6471
and 6472 located in Cebu City. Subsequently, or in 1987, petitioner prepared a Deed of
Absolute Sale conveying said lots to him. The Deed of Absolute Sale was signed by
spouses Alonto in Manila. However, it was notarized in Cebu City allegedly without the
spouses Alonto appearing before the notary public. Thereafter, petitioner caused the
transfer of the titles to his name and sold the lots to third persons.

On August 12, 1999,

an Information

was filed charging petitioner with Estafa through
Falsification of Public Document.

RTC Ruling: Based on the evidence presented by both parties, the trial court found that
petitioner did not intend to defraud the spouses Alonto; that after the latter failed to
pay their obligation, petitioner prepared a Deed of Absolute Sale which the spouses
Alonto actually signed; but that the Deed of Absolute Sale was notarized without the
spouses Alonto personally appearing before the notary public. From these, the trial
court concluded that petitioner can only be held guilty of Falsification of a Public
Document by a private individual under Article 172(1)in relation to Article 171(2) of the
Revised Penal Code (RPC) and not estafa through falsification of public document as
charged in the Information.


CA Ruling: the CA opined that the conviction of the petitioner for an offense not alleged
in the Information or one not necessarily included in the offense charged violated his
constitutional right to be informed of the nature and cause of the accusation against
him.
Issue: Whether or not the accused can still be held civilly liable despite the acquittal from an
offense charged different from the Information.
Held:
In Banal v. Tadeo, Jr., we elucidated on the civil liability of the accused despite his exoneration
in this wise:
While an act or omission is felonious because it is punishable by law, it gives rise to civil liability
not so much because it is a crime but because it caused damage to another. Viewing things
pragmatically, we can readily see that what gives rise to the civil liability is really the obligation
and moral duty of everyone to repair or make whole the damage caused to another by reason
of his own act or omission, done intentionally or negligently, whether or not the same be
punishable by law.
Simply stated, civil liability arises when one, by reason of his own act or omission, done
intentionally or negligently, causes damage to another. Hence, for petitioner to be civilly liable
to spouses Alonto, it must be proven that the acts he committed had caused damage to the
spouses.

Based on the records of the case, we find that the acts allegedly committed by the petitioner
did not cause any damage to spouses Alonto.

First, the Information charged petitioner with fraudulently making it appear that the spouses
Alonto affixed their signatures in the Deed of Absolute Sale thereby facilitating the transfer of
the subject properties in his favor. However, after the presentation of the parties' respective
evidence, the trial court found that the charge was without basis as the spouses Alonto indeed
signed the document and that their signatures were genuine and not forged.

Second, even assuming that the spouses Alonto did not personally appear before the notary
public for the notarization of the Deed of Absolute Sale, the same does not necessarily nullify or
render void ab initio the parties' transaction. Such non-appearance is not sufficient to
overcome the presumption of the truthfulness of the statements contained in the deed. "To
overcome the presumption, there must be sufficient, clear and convincing evidence as to
exclude all reasonable controversy as to the falsity of the [deed]. In the absence of such proof,
the deed must be upheld." And since the defective notarization does not ipso facto invalidate
the Deed of Absolute Sale, the transfer of said properties from spouses Alonto to petitioner
remains valid. Hence, when on the basis of said Deed of Absolute Sale, petitioner caused the
cancellation of spouses Alonto's title and the issuance of new ones under his name, and
thereafter sold the same to third persons, no damage resulted to the spouses Alonto.

Moreover, we cannot sustain the alternative sentence imposed upon the petitioner, to wit: to
institute an action for the recovery of the properties of spouses Alonto or to pay them actual
and other kinds of damages. First, it has absolutely no basis in view of the trial court's finding
that the signatures of the spouses Alonto in the Deed of Absolute Sale are genuine and not
forged. Second, "[s]entences should not be in the alternative. There is nothing in the law
which permits courts to impose sentences in the alternative." While a judge has the discretion
of imposing one or another penalty, he cannot impose both in the alternative.


PEOPLE vs. EDWIN MALICSI
G.R. No. 175833 January 29, 2008 543 S 93

Facts:
AAA was raped by her uncle the accused-appellant three times, once when she was
thirteen and thrice when she was fifteen years old. She was threatened to not say
anything to her parents.

In the house of Malicsi her cousin saw them and he told the odious incident to AAAs
mother. It was confirmed by medical findings that AAA lost her virginity there were
lacerations in the hymen.


Malicsi refuted the allegations against him saying that she consented to the sexual
intercourse and that they were sweethearts and that her lack of outcry and tenacious
resistance signify that it was consensual.
Issue: Whether or not there is a civil obligation arising from the crime of rape.
The Court of Appeals was correct in affirming with modification the ruling of the trial court that
four counts of rape were clearly established by the prosecution witnesses. The findings and
observations of the trial court on the credibility of the prosecution witnesses are binding and
conclusive on the appellate court unless some facts or circumstances of weight and substance
have been overlooked, misapprehended or misinterpreted.
This Court is not persuaded by appellants contention that the lack of outcry, lack of tenacious
resistance, and delay in reporting the incidents signify that the sexual encounters were
consensual
First, appellant exercised moral ascendancy over AAA, being AAAs uncle. Second, appellant had
instilled fear upon AAAs young mind during the sexual assaults by using a knife and threatening
to kill her. These circumstances have led AAA to keep her ordeals in secret until her mother
learned of the incidents from AAAs cousin. This Court declared in People v. Garcia:
[R]ape is committed when intimidation is used on the victim and this includes the moral
kind of intimidation or coercion. Intimidation is a relative term, depending on the age,
size and strength of the parties, and their relationship with each other. It can be
addressed to the mind as well. Moreover, the intimidation must be viewed in the light
of the victims perception and judgment at the time of rape and not by any hard and
fast rule. It is therefore enough that it produces fear fear that if the victim does not
yield to the lustful demands of the accused, something would happen to her at the
moment or thereafter.
AAAs tender age and appellants moral ascendancy made AAA subservient to appellants
sexual desires. This psychological predicament explains why AAA did not give any outcry or
offer any resistance when appellant was raping her. Moreover, the physical differences
between appellant, who was a man in his early 30s then, and AAA, a 13 and 15-year-old girl
during the rape incidents, afforded appellant the greater advantage such that no amount of
resistance from AAA could have overcome the coercive physical force of appellant.
The appellate court also correctly affirmed the award by the trial court of P200,000 in moral
damages. Moral damages are automatically granted to the rape victim without presentation of
further proof other than the commission of the crime.
Civil indemnity in the amount of P50,000 for each count of simple rape is automatically granted
once the fact of rape is established.











PEOPLE vs. ROSAURO SIA
[G.R. No. 137457. November 21, 2001]

Facts:
Christian Bermudez was beaten to death and the taxicab he was driving was taken by
the assailants. His lifeless body, wrapped in a carton box, was recovered several days
later in a fishpond in Meycauayan, Bulacan. For the felonies, the above-named accused
were indicted for violation of R.A. 6539, otherwise known as the Anti-Carnapping Law,
and Murder

The taxi was last seen at the vicinity of the Pegasus Night Club in Quezon City at about
10:30 p.m. on the said date with an unidentified passenger who surfaced later as the
accused Rosauro Sia, whose true name is allegedly Antonio Labrador (Mang Tony) and
who resides at San Francisco Del Monte. Accused Rosauro Sia appears to have gypped
driver Christian Bermudez to service him the following day (August 24, 1995) in the
morning and to be paid P150.00 per hour .


In their lone assigned error, accused-appellants contend in sum that the extra-judicial
confessions of accused Rosauro Sia and Johnny Balalio, which the trial court heavily
relied upon, are inadmissible in evidence since they were executed in violation of their
right to counsel.

Issue: Whether or not accused should be acquitted based on inadmissibility of extrajudicial
confession.

Held:
Direct evidence of the commission of the crime is not the only matrix wherefrom a court may
draw its conclusions and findings of guilt. The rules on evidence and case law sustain the
conviction of the accused through circumstantial evidence when the following requisites
concur: (1) there must be more than one circumstance; (2) the facts from which the inferences
are derived are proven; and (3) the combination of all circumstances is such as to produce a
conviction beyond reasonable doubt of the guilt of the accused.
First, when the police apprehended accused Rosauro Sia while he was in possession of the
carnapped vehicle, he immediately pointed to accused-appellants as his accomplices in taking
away the victims vehicle
By way of exception, the testimony of a co-conspirator may, even if uncorroborated, be
sufficient as when it is shown to be sincere in itself, because given unhesitatingly and in a
straightforward manner, and is full of details which by their nature could not have been the
result of deliberate afterthought
Second, defense witness Porferio Fernando testified that accused-appellants were with Rosauro
Sia from August 25-28, 1995
Third, upon his arrest, accused-appellant Jimmy Ponce voluntarily surrendered to the police
authorities a ring admittedly belonging to the victim
In the absence of an explanation of how one has come into the possession of stolen effects
belonging to a person wounded and treacherously killed, he must necessarily be considered the
author of the aggression and death of the said person and of the robbery committed on him.
Anent the civil indemnity award, this Court finds the amount of P50,000.00 as death indemnity
proper, following prevailing jurisprudence and in line with controlling policy. The award of civil
indemnity may be granted without any need of proof other than the death of the victim.
Though not awarded by the trial court, the victims heirs are likewise entitled to moral
damages, pegged at P50,000.00 by controlling case law. The award of P200,000.00 as burial and
other expenses incurred in connection with the death of the victim must be deleted. The
records are bereft of any receipt or voucher to justify the trial courts award of burial and other
expenses incurred in connection with the victims death. The rule is that every pecuniary loss
must be established by credible evidence before it may be awarded
In determining the amount of lost income, the following must be taken into account: (1) the
number of years for which the victim would otherwise have lived; and (2) the rate of the loss
sustained by the heirs of the deceased. The second variable is computed by multiplying the life
expectancy by the net earnings of the deceased, meaning total earnings less expenses
necessary in the creation of such earnings or income less living and other incidental expenses.
Considering that there is no proof of living expenses of the deceased, net earnings are
computed at fifty percent (50%) of the gross earnings. The formula used by this Court in
computing loss of earning capacity is:
Net Earning Capacity = [2/3 x (80 age at time of death) x (gross annual income
reasonable and necessary living expenses)]
In this case, the Court notes that the victim was 27 years old at the time of his death and his
mother testified that as a driver of the Tamaraw FX taxi, he was earning P650.00 a day. Hence,
the damages payable for the loss of the victims earning capacity is computed thus:
Gross Annual Earnings = P650 x 261 working days in a year
= P169,650.00
Net Earning Capacity = 2/3 x (80-27) x [P169,650.00 P84,825.00]
= 35.33 x 84,825.00
= P2,996,867.20














PEOPLE OF THE PHILIPPINES vs. LUDOVICO C. DOCTOLERO
G.R. No. 34386 February 7, 1991

Facts:
The evidence for the prosecution tend to show that the three (3) accused, Ludovico,
Conrado and Virgilio, all surnamed Doctolero, were responsible for the death(s) of
Epifania Escosio and Lolita de Guzman, and in inflicting physical injuries to (sic) Jonathan
Oviedo. And immediately thereafter, with their father and co-accused, Antonio
Doctolero, they hacked Marcelo Doctolero, with their bolos which caused the death of
the latter.
According to Marcial Sagun, at about 6:30 in the evening on November 8, 1970, he and
his wife, Maria Oviedo-Sagun and Lolita de Guzman-Oviedo (sister-in-law of Maria
Oviedo-Sagun) were on their way home to Barrio Binday. They came from the field
where they bundled their harvests. Upon reaching a crossing of the road in Bo. Binday
they met the accused Ludovico Doctolero who, without warning and without cause or
reason, held the left shoulder of Marcial Sagun with his left hand and struck Marcial
Sagun with a bolo.
Paciencia Sagun-Diamoy (sister of Marcial Sagun) testified that she saw the three
accused hacked Marcelo repeatedly with their bolos and that when Marcia Sagun was
about to go home to get her children the accused hit 81-year old Epifania Escosio and
Jonathan.
In their defense, they averred that it was a case of self-defense that Marcelo and his
brother in law Antonio Oviedo hit struck Ludovico ergo boloing Maria to escape.
During the pendency of this appeal Virgilio died.
Issue: Whether or not the accused Virgilios civil liability is extinguished upon his death.
Held:
The court below, however, erred in the penalty imposed for the physical injuries inflicted on
Jonathan Oviedo. The child required medical attention for fifteen (15) days, hence the liability
of appellants therefor is for less serious physical injuries punished with arresto mayor under
Article 265 of the Revised Penal Code. There being no modifying circumstances, a penalty of
twenty (20) days of arresto menor should be imposed for said offense on appellant Conrado
Doctolero as an accomplice.
The death of appellant Virgilio Doctolero during the pendency of this appeal terminated only
his criminal liability but not his civil liability.
27
Also, while the death indemnity has been
increased to P50,000.00 under current case law, the same should not apply to Ludovico
Doctolero, he having heretofore withdrawn his appeal and the judgment rendered by the trial
court having long since become final and executory with respect to him.



















PEOPLE vs. ROLLY ABULENCIA
G.R. No. 138403. August 22, 2001

Facts:
On August 4, 1998, a cold-blooded ravager, Rolly Abulencia y Coyos, preyed on ten-year
old Rebelyn Garcia.
In the early morning of the following day, Rebelyns lifeless, naked body was found
floating at the Colobong creek in San Manuel, Pangasinan, with marks of bruises, burns
and injuries manifesting that she was defiled and later drowned to death.
Abulencia invited the victims brother to a drinking spree and thereafter went out to buy
dilis Rebelyn tagged along and they were never seen again.
Abulencia surrendered to the police saying that she followed him all the way to the
market where he decided he no longer wanted to buy dilis. Exasperated, he told her to
go home because he will go to San Manuel. When they were crossing the bridge she ran
towards him and tripped causing her to fall.
RTC Ruling: civil indemnity of 75,000.
Issue: Whether or not damages should be modified.
Held:
With regard to the civil indemnity, the trial court awarded only P75,000.00 Current
jurisprudence has fixed at P100,000.00 the civil indemnity in cases of rape with homicide, which
is fully justified and properly commensurate with the seriousness of that special complex crime.
The trial court did not award moral damages to the victims family. Based on prevailing
jurisprudence, however, moral damages may be awarded to the heirs of the victim without
need for pleading or proof of its basis for their mental, physical and psychological sufferings are
too obvious to still require their recital at the trial. Hence, moral damages in the amount of
P50,000.00 must be awarded.
In People vs. Lagarto, we held that attendant circumstances may be considered to determine
civil liability. Thus, in view of the evident cruelty inflicted upon Rebelyn, as shown by the
multiple burns and contusions on her body, we grant the award of exemplary damages in the
amount of P25,000.00.

REYNALDO BERMUDEZ, SR and ADONITA YABUT BERMUDEZ v.
JUDGE A. MELENCIO-HERRERA
G.R. No. L-32055 February 26, 1988
Facts:
A cargo truck, driven by Domingo Pontino and owned by Cordova Ng Sun Kwan, bumped
a jeep on which Rogelio, a six-year old son of plaintiffs-appellants, was riding. The boy
sustained injuries which caused his death. As a result, Criminal Case No.92944 for
Homicide Through Reckless Imprudence was filed against Domingo Pontino by the
Manila City Fiscal's Office. Plaintiffs-appellants filed on July 27,1969 in the said criminal
case "A Reservation to File Separate Civil Action."

On July 28,1969, the plaintiffs-appellants filed a civil case for damages with the Court of
First Instance of Manila . Finding that the plaintiffs instituted the action "on the
assumption that defendant Pontino's negligence in the accident of May 10, 1969
constituted a quasi-delict," the trial court stated that plaintiffs had already elected to
treat the accident as a "crime" by reserving in the criminal case their right to file a
separate civil action.


Issue: Whether the civil action filed by the plaintiffs-appellants is founded on crime or on quasi-
delict.

Held:
In Joaquin vs. Aniceto, the Court held:
The issue in this case is: May an employee's primary civil liability for crime and
his employer's subsidiary liability therefor be proved in a separate civil action
even while the criminal case against the employee is still pending?
To begin with, obligations arise from law, contract, quasi-contract, crime and
quasi-delict. According to appellant, her action is one to enforce the civil liability
arising from crime. With respect to obligations arising from crimes, Article 1161
of the New Civil Code provides:
Civil obligations arising from criminal offenses shall be governed
by the penal laws, subject to the provisions of article 21 77, and of
the pertinent provisions of Chapter 2, Preliminary, Title, on
Human Relations, and of Title XVIII of this book, regulating
damages.
It is now settled that for an employer to be subsidiarily liable, the
following requisites must be present: (1) that an employee has
committed a crime in the discharge of his duties; (2) that said
employee is insolvent and has not satisfied his civil liability; (3)
that the employer is engaged in some kind of industry. (1 Padilla,
Criminal Law, Revised Penal Code 794 [1964])
Without the conviction of the employee, the employer cannot be subsidiarily
liable.
In cases of negligence, the injured party or his heirs has the choice between an action to
enforce the civil liability arising from crime under Article 100 of the Revised Penal Code and an
action for quasi- delict under Article 2176-2194 of the Civil Code. If a party chooses the latter,
he may hold the employer solidarity liable for the negligent act of his employee, subject to the
employer's defense of exercise of the diligence of a good father of the family.
In the case at bar, the action filed b appellant was an action for damages based on quasi-delict.
The fact that appellants reserved their right in the criminal case to file an independent civil
action did not preclude them from choosing to file a civil action for quasi-delict.
The appellants invoke the provisions of Sections 1 and 2 of Rule 111 of the Rules of Court,
which provide:
Section 1. Institution of criminal and civil action. When a criminal action is
instituted, the civil action for recovery of civil liability arising from the offense
charged is impliedly instituted with the criminal action, unless the offended party
expressly waives the civil action or reserves his right to institute it separately.
Section 2. Independent civil action.-In the cases provided for in Articles 31, 32,
33, 34 and 2177 of the Civil Code of the Philippines, an independent civil action
entirely separate and distinct from the criminal action, may be brought by the
injured party during the pendency of the criminal case, provided the right is
reserved as required in the preceding section. Such civil action shall proceed
independently of the criminal prosecution, and shall require only a
preponderance of evidence.
Article 2177 of the Civil Code, cited in Section 2, of Rule 111, provides that
Article 2177. Responsibility for fault or negligence under the preceding article is
entirely separate and distinct from the civil liability arising from negligence under
the Penal Code. But the plaintiff cannot recover damages twice for the same act
or omission of the defendant.
The appellant precisely made a reservation to file an independent civil action in accordance
with the provisions of Section 2 of Rule 111, Rules of Court. In fact, even without such a
reservation, we have allowed the injured party in the criminal 1 case which resulted in the
acquittal of the accused to recover damages based on quasi-delict.

In People vs. Ligon, G.R. No. 74041, we held:
However, it does not follow that a person who is not criminally liable is also free
from civil liability. While the guilt of the accused in a criminal prosecution must
be established beyond reasonable doubt, only a preponderance of evidence is
required in a civil action for damages (Article 29, Civil Code). The judgment of
acquittal extinguishes the civil liability of the accused only when it includes a
declaration that the facts from which the civil liability might arise did not exist
(Padilla vs. Court of Appeals, 129 SCRA 559).










PEOPLE OF THE PHILIPPINES vs. Hon. Judge BENJAMIN RELOVA
G.R. No. L-45129 March 6, 1987

Facts:
On 1 February 1975, members of the Batangas City Police together with personnel of
the Batangas Electric Light System, equipped with a search warrant searched and
examined the premises of the Opulencia Carpena Ice Plant and Cold Storage owned and
operated by the private respondent Manuel Opulencia.

The police discovered that electric wiring, devices and contraptions had been installed,
without the necessary authority from the city government, and "architecturally
concealed inside the walls of the building."


These electric devices and contraptions were, in the allegation of the petitioner
"designed purposely to lower or decrease the readings of electric current consumption
in the electric meter of the said electric [ice and cold storage] plant.

The accused Manuel Opulencia pleaded not guilty to the above information. On 2
February 1976, he filed a motion to dismiss the information upon the grounds that the
crime there charged had already prescribed and that the civil indemnity there sought to
be recovered was beyond the jurisdiction of the Batangas City Court to award which was
awarded, it appearing that the offense charged was a light felony which prescribes two
months from the time of discovery thereof, and it appearing further that the
information was filed by the fiscal more than nine months after discovery of the offense
charged in February 1975.
Fourteen (14) days later, another information against Manuel Opulencia, this time for
theft of electric power under Article 308 in relation to Article 309, paragraph (1), of the
Revised Penal Code.

Before he could be arraigned thereon, Manuel Opulencia filed a Motion to Quash
alleging that he had been previously acquitted of the offense charged in the second
information and that the filing thereof was violative of his constitutional right against
double jeopardy.

Issue: Whether or not the extinction of criminal liability carries with it the extinction of civil
liability proceeding from prescription and/or double jeopardy.
Held:
The civil liability aspects of this case are another matter. Because no reservation of the right to
file a separate civil action was made by the Batangas City electric light system, the civil action
for recovery of civil liability arising from the offense charged was impliedly instituted with the
criminal action both before the City Court of Batangas City and the Court of First Instance of
Batangas. The extinction of criminal liability whether by prescription or by the bar of double
jeopardy does not carry with it the extinction of civil liability arising from the offense charged.
In the present case, as we noted earlier, accused Manuel Opulencia freely admitted during the
police investigation having stolen electric current through the installation and use of
unauthorized elctrical connections or devices. While the accused pleaded not guilty before the
City Court of Batangas City, he did not deny having appropriated electric power. However,
there is no evidence in the record as to the amount or value of the electric power appropriated
by Manuel Opulencia, the criminal informations having been dismissed both by the City Court
and by the Court of First Instance (from which dismissals the Batangas City electric light system
could not have appealed) before trial could begin. Accordingly, the related civil action which
has not been waived expressly or impliedly, should be remanded to the Court of First Instance
of Batangas City for reception of evidence on the amount or value of the electric power
appropriated and converted by Manuel Opulencia and rendition of judgment conformably with
such evidence.










GEORGE MANANTAN vs. THE COURT OF APPEALS
[G.R. No. 107125. January 29, 2001]

Facts:
The accused was driving at a speed of about 40 kilometers per hour along the Maharlika
Highway at Malvar, Santiago, Isabela, at the middle portion of the highway (although
according to Charles Cudamon, the car was running at a speed of 80 to 90 kilometers
per hours on [the] wrong lane of the highway because the car was overtaking a tricycle)
when they met a passenger jeepney with bright lights on. The accused immediately
tried to swerve the car to the right and move his body away from the steering wheel but
he was not able to avoid the oncoming vehicle and the two vehicles collided with each
other at the center of the road.

As a result of the collision the car turned turtle twice and landed on its top at the side of
the highway immediately at the approach of the street going to the Flores Clinic while
the jeep swerved across the road so that one half front portion landed on the lane of
the car while the back half portion was at its right lane five meters away from the point
of impact.


Petitioner George Manantan was acquitted by the trial court of homicide through
reckless imprudence without a ruling on his civil liability. On appeal from the civil aspect
of the judgment , the appellate court found petitioner Manantan civilly liable and
ordered him to indemnify private respondents Marcelino Nicolas and Maria Nicolas
P104,400.00 representing loss of support, P50,000.00 as death indemnity, and moral
damages of P20,000.00 or a total of P174,400.00 for the death of their son, Ruben
Nicolas.


Issues:
1. Whether or not the petitioner should be civilly liable despite that his guilt was not
proven beyond reasonable doubt.
2. Whether or not the filing fee is included as part of recovery of damages and that
damages should be paid eventhough not alleged in the Information.
Held:

1. Our law recognizes two kinds of acquittal, with different effects on the civil liability of
the accused.
First is an acquittal on the ground that the accused is not the author of the act or
omission complained of. This instance closes the door to civil liability, for a person who
has been found to be not the perpetrator of any act or omission cannot and can never
be held liable for such act or omission. There being no delict, civil liability ex delicto is
out of the question, and the civil action, if any, which may be instituted must be based
on grounds other than the delict complained of. This is the situation contemplated in
Rule 111 of the Rules of Court.
The second instance is an acquittal based on reasonable doubt on the guilt of the
accused. In this case, even if the guilt of the accused has not been satisfactorily
established, he is not exempt from civil liability which may be proved by preponderance
of evidence only. This is the situation contemplated in Article 29 of the Civil Code where
the civil action for damages is for the same act or omission. Although the two actions
have different purposes, the matters discussed in the civil case are similar to those
discussed in the criminal case. However, the judgment in the criminal proceeding
cannot be read in evidence in the civil action to establish any fact there determined,
even though both actions involve the same act or omission. The reason for this rule is
that the parties are not the same and secondarily, different rules of evidence are
applicable. Hence, notwithstanding herein petitioners acquittal, the Court of Appeals in
determining whether Article 29 applied, was not precluded from looking into the
question of petitioners negligence or reckless imprudence.

2. At the time of the filing of the information in 1983, the implied institution of civil actions
with criminal actions was governed by Rule 111, Section 1 of the 1964 Rules of Court. As
correctly pointed out by private respondents, under said rule, it was not required that
the damages sought by the offended party be stated in the complaint or information.
With the adoption of the 1985 Rules of Criminal Procedure, and the amendment of Rule
111, Section 1 of the 1985 Rules of Criminal Procedure by a resolution of this Court
dated July 7, 1988, it is now required that:
When the offended party seeks to enforce civil liability against the accused by way of moral,
nominal, temperate or exemplary damages, the filing fees for such civil action as provided in
these Rules shall constitute a first lien on the judgment except in an award for actual
damages.
In cases wherein the amount of damages, other than actual, is alleged in the complaint or
information, the corresponding filing fees shall be paid by the offended party upon the filing
thereof in court for trial.
Thus, where the civil action is impliedly instituted together with the criminal action, the
actual damages claimed by the offended parties, as in this case, are not included in the
computation of the filing fees. Filing fees are to be paid only if other items of damages such
as moral, nominal, temperate, or exemplary damages are alleged in the complaint or
information, or if they are not so alleged, shall constitute a first lien on the judgment.
Recall that the information in Criminal Case No. 066 contained no specific allegations of
damages. Considering that the Rules of Criminal Procedure effectively guarantee that the
filing fees for the award of damages are a first lien on the judgment, the effect of the
enforcement of said lien must retroact to the institution of the criminal action. The filing
fees are deemed paid from the filing of the criminal complaint or information. We
therefore find no basis for petitioners allegations that the filing fees were not paid or
improperly paid and that the appellate court acquired no jurisdiction.













PEOPLE OF THE PHILIPPINES vs. ROGELIO BAYOTAS
G.R. No. 102007 September 2, 1994

Facts:
Rogelio Bayotas y Cordova was charged with Rape and eventually convicted thereof on
June 19, 1991 in a decision penned by Judge Manuel E. Autajay. Pending appeal of his
conviction, Bayotas died on February 4, 1992 at the National Bilibid Hospital.
Consequently, the Supreme Court in its Resolution of May 20, 1992 dismissed the
criminal aspect of the appeal. However, it required the Solicitor General to file its
comment with regard to Bayotas' civil liability arising from his commission of the offense
charged.
In his comment, the Solicitor General expressed his view that the death of accused-
appellant did not extinguish his civil liability as a result of his commission of the offense
charged. The Solicitor General, relying on the case of People v. Sendaydiego, insists that
the appeal should still be resolved for the purpose of reviewing his conviction by the
lower court on which the civil liability is based.
Counsel for the accused-appellant, on the other hand, opposed the view of the Solicitor
General arguing that the death of the accused while judgment of conviction is pending
appeal extinguishes both his criminal and civil penalties. In support of his position, said
counsel invoked the ruling of the Court of Appeals in People v. Castillo and Ocfemia
2

which held that the civil obligation in a criminal case takes root in the criminal liability
and, therefore, civil liability is extinguished if accused should die before final judgment is
rendered.

Issue: Does death of the accused pending appeal of his conviction extinguish his civil liability?

Held: Yes.
1. Death of the accused pending appeal of his conviction extinguishes his criminal liability as
well as the civil liability based solely thereon. As opined by Justice Regalado, in this regard, "the
death of the accused prior to final judgment terminates his criminal liability and only the civil
liability directly arising from and based solely on the offense committed, i.e., civil liability ex
delicto in senso strictiore."
2. Corollarily, the claim for civil liability survives notwithstanding the death of accused, if the
same may also be predicated on a source of obligation other than delict. Article 1157 of the
Civil Code enumerates these other sources of obligation from which the civil liability may arise
as a result of the same act or omission:
a) Law
b) Contracts
c) Quasi-contracts
d) . . .
e) Quasi-delicts
3. Where the civil liability survives, as explained in Number 2 above, an action for recovery
therefor may be pursued but only by way of filing a separate civil action and subject to Section
1, Rule 111 of the 1985 Rules on Criminal Procedure as amended. This separate civil action may
be enforced either against the executor/administrator or the estate of the accused, depending
on the source of obligation upon which the same is based as explained above.
4. Finally, the private offended party need not fear a forfeiture of his right to file this separate
civil action by prescription, in cases where during the prosecution of the criminal action and
prior to its extinction, the private-offended party instituted together therewith the civil action.
In such case, the statute of limitations on the civil liability is deemed interrupted during the
pendency of the criminal case, conformably with provisions of Article 1155
21
of the Civil Code,
that should thereby avoid any apprehension on a possible privation of right by prescription.
22

Applying this set of rules to the case at bench, we hold that the death of appellant Bayotas
extinguished his criminal liability and the civil liability based solely on the act complained of,
i.e., rape.









FAUSTO BARREDO vs. SEVERINO GARCIA
G.R. No. L-48006 July 8, 1942

Facts:
At about half past one in the morning of May 3, 1936, on the road between Malabon
and Navotas, Province of Rizal, there was a head-on collision between a taxi of the
Malate Taxicab driven by Pedro Fontanilla and a carretela guided by Pedro Dimapalis.
The carretela was overturned, and one of its passengers, 16-year-old boy Faustino
Garcia, suffered injuries from which he died two days later.
Severino Garcia and Timotea Almario, parents of the deceased on March 7, 1939,
brought an action in the Court of First Instance of Manila against Fausto Barredo as the
sole proprietor of the Malate Taxicab and employer of Pedro Fontanilla., the Court of
First Instance of Manila awarded damages in favor of the plaintiffs for P2,000 plus legal
interest from the date of the complaint.
This decision was modified by the Court of Appeals by reducing the damages to P1,000
with legal interest from the time the action was instituted. It is undisputed that
Fontanilla 's negligence was the cause of the mishap, as he was driving on the wrong
side of the road, and at high speed. As to Barredo's responsibility, the Court of Appeals
found:
... It is admitted that defendant is Fontanilla's employer. There is proof that he
exercised the diligence of a good father of a family to prevent damage. In fact it
is shown he was careless in employing Fontanilla who had been caught several
times for violation of the Automobile Law and speeding -- violation which
appeared in the records of the Bureau of Public Works available to be public and
to himself. Therefore, he must indemnify plaintiffs under the provisions of article
1903 of the Civil Code.

Issue: Whether the plaintiffs may bring this separate civil action against Fausto Barredo, thus
making him primarily and directly, responsible under article 1903 of the Civil Code as an
employer of Pedro Fontanilla.
Held:
Article 1903 of the Civil Code not only establishes liability in cases of negligence, but also
provides when the liability shall cease. It says:
"The liability referred to in this article shall cease when the persons mentioned
therein prove that they employed all the diligence of a good father of a family to
avoid the damage."
From this article two things are apparent: (1) That when an injury is caused by the
negligence of a servant or employee there instantly arises a presumption of law that
there was negligence on the part of the matter or employer either in the selection of
the servant or employee, or in supervision over him after the selection, or both; and (2)
that presumption is juris tantum and not juris et de jure, and consequently, may be
rebutted. It follows necessarily that if the employer shows to the satisfaction of the
court that in selection and supervision he has exercised the care and diligence of a good
father of a family, the presumption is overcome and he is relieve from liability.
This theory bases the responsibility of the master ultimately on his own negligence and
not on that of his servant.
This Court, applying article 1903 and following the rule in Bahia vs. Litonjua and Leynes, said in
part (p. 41) that:
The master is liable for the negligent acts of his servant where he is the owner or
director of a business or enterprise and the negligent acts are committed while the
servant is engaged in his master's employment as such owner.
The foregoing authorities clearly demonstrate the separate individuality of cuasi-delitos or
culpa aquiliana under the Civil Code. Specifically they show that there is a distinction between
civil liability arising from criminal negligence (governed by the Penal Code) and responsibility for
fault or negligence under articles 1902 to 1910 of the Civil Code, and that the same negligent
act may produce either a civil liability arising from a crime under the Penal Code, or a separate
responsibility for fault or negligence under articles 1902 to 1910 of the Civil Code. Still more
concretely, the authorities above cited render it inescapable to conclude that the employer
in this case the defendant-petitioner is primarily and directly liable under article 1903 of the
Civil Code.
Firstly, the Revised Penal Code in article 365 punishes not only reckless but also simple
negligence. If we were to hold that articles 1902 to 1910 of the Civil Code refer only to fault or
negligence not punished by law, according to the literal import of article 1093 of the Civil Code,
the legal institution of culpa aquiliana would have very little scope and application in actual life.
Death or injury to persons and damage to property through any degree of negligence even
the slightest would have to be indemnified only through the principle of civil liability arising
from a crime. In such a state of affairs, what sphere would remain for cuasi-delito or culpa
aquiliana? We are loath to impute to the lawmaker any intention to bring about a situation so
absurd and anomalous. Nor are we, in the interpretation of the laws, disposed to uphold the
letter that killeth rather than the spirit that giveth life. We will not use the literal meaning of
the law to smother and render almost lifeless a principle of such ancient origin and such full-
grown development as culpa aquiliana or cuasi-delito, which is conserved and made enduring
in articles 1902 to 1910 of the Spanish Civil Code.
Secondly, to find the accused guilty in a criminal case, proof of guilt beyond reasonable doubt is
required, while in a civil case, preponderance of evidence is sufficient to make the defendant
pay in damages. There are numerous cases of criminal negligence which can not be shown
beyond reasonable doubt, but can be proved by a preponderance of evidence. In such cases,
the defendant can and should be made responsible in a civil action under articles 1902 to 1910
of the Civil Code. Otherwise, there would be many instances of unvindicated civil wrongs. Ubi
jus ibi remedium.
Thirdly, to hold that there is only one way to make defendant's liability effective, and that is, to
sue the driver and exhaust his (the latter's) property first, would be tantamount to compelling
the plaintiff to follow a devious and cumbersome method of obtaining relief. True, there is such
a remedy under our laws, but there is also a more expeditious way, which is based on the
primary and direct responsibility of the defendant under article 1903 of the Civil Code. Our view
of the law is more likely to facilitate remedy for civil wrongs, because the procedure indicated
by the defendant is wasteful and productive of delay, it being a matter of common knowledge
that professional drivers of taxis and similar public conveyance usually do not have sufficient
means with which to pay damages. Why, then, should the plaintiff be required in all cases to go
through this roundabout, unnecessary, and probably useless procedure? In construing the laws,
courts have endeavored to shorten and facilitate the pathways of right and justice.
At this juncture, it should be said that the primary and direct responsibility of employers and
their presumed negligence are principles calculated to protect society. Workmen and
employees should be carefully chosen and supervised in order to avoid injury to the public. It is
the masters or employers who principally reap the profits resulting from the services of these
servants and employees. It is but right that they should guarantee the latter's careful conduct
for the personnel and patrimonial safety of others. As Theilhard has said, "they should reproach
themselves, at least, some for their weakness, others for their poor selection and all for their
negligence." And according to Manresa, "It is much more equitable and just that such
responsibility should fall upon the principal or director who could have chosen a careful and
prudent employee, and not upon the injured person who could not exercise such selection and
who used such employee because of his confidence in the principal or director." (Vol. 12, p.
622, 2nd Ed.) Many jurists also base this primary responsibility of the employer on the principle
of representation of the principal by the agent. Thus, Oyuelos says in the work already cited
(Vol. 7, p. 747) that before third persons the employer and employee "vienen a ser como una
sola personalidad, por refundicion de la del dependiente en la de quien le emplea y utiliza."
("become as one personality by the merging of the person of the employee in that of him who
employs and utilizes him.")
Fourthly, because of the broad sweep of the provisions of both the Penal Code and the Civil
Code on this subject, which has given rise to the overlapping or concurrence of spheres already
discussed, and for lack of understanding of the character and efficacy of the action for culpa
aquiliana, there has grown up a common practice to seek damages only by virtue of the civil
responsibility arising from a crime, forgetting that there is another remedy, which is by invoking
articles 1902-1910 of the Civil Code. Although this habitual method is allowed by our laws, it
has nevertheless rendered practically useless and nugatory the more expeditious and effective
remedy based on culpa aquiliana or culpa extra-contractual. This will, it is believed, make for
the better safeguarding of private rights because it re-establishes an ancient and additional
remedy, and for the further reason that an independent civil action, not depending on the
issues, limitations and results of a criminal prosecution, and entirely directed by the party
wronged or his counsel, is more likely to secure adequate and efficacious redress.















OSCAR DEL CARMEN, JR., vs. GERONIMO BACOY
G.R. No. 173870 April 25, 2012

Facts:
At dawn on New Years Day of 1993, Emilia Bacoy Monsalud (Emilia), along with her spouse
Leonardo Monsalud, Sr. and their daughter Glenda Monsalud, were on their way home from a
Christmas party they attended in Poblacion, Sominot, Zamboanga Del Sur. Upon reaching Purok
Paglaom in Sominot, they were run over by a Fuso passenger jeep bearing plate number UV-
PEK-600 that was being driven by Allan Maglasang (Allan). The jeep was registered in the name
of petitioner Oscar del Carmen, Jr. (Oscar Jr.) and used as a public utility vehicle plying the
Molave, Zamboanga del Sur to Sominot, Zamboanga del Sur and vice versa route.
During the pendency of said criminal case, Emilias father, Geronimo Bacoy (Geronimo), in
behalf of the six minor children of the Monsaluds, filed an independent civil action for damages
based on culpa aquiliana.
Defendants refused to assume civil liability for the victims deaths. Oscar Sr. averred that the
Monsaluds have no cause of action against them because he and his wife do not own the jeep
and that they were never the employers of Allan. For his part, Oscar Jr. claimed to be a victim
himself. He alleged that Allan and his friends stole his jeep while it was parked beside his
drivers rented house to take it for a joyride.

Issues:
1. Whether or not damage arising from negligence is attributable to Oscar Jr.
2. Whether or not the registered owner of the vehicle should be liable for damages based
on quasi-delict.
Held:
1. Under the doctrine of res ipsa loquitur, [w]here the thing that caused the injury complained of
is shown to be under the management of the defendant or his servants; and the accident, in the
ordinary course of things, would not happen if those who had management or control used
proper care, it affords reasonable evidence in the absence of a sufficient, reasonable and
logical explanation by defendant that the accident arose from or was caused by the
defendants want of care. Res ipsa loquitur is merely evidentiary, a mode of proof, or a mere
procedural convenience, since it furnishes a substitute for, and relieves a plaintiff of, the burden
of producing a specific proof of negligence. It recognizes that parties may establish prima facie
negligence without direct proof, thus, it allows the principle to substitute for specific proof of
negligence. It permits the plaintiff to present along with proof of the accident, enough of the
attending circumstances to invoke the doctrine, create an inference or presumption of
negligence and thereby place on the defendant the burden of proving that there was no
negligence on his part. The doctrine is based partly on the theory that the defendant in
charge of the instrumentality which causes the injury either knows the cause of the accident or
has the best opportunity of ascertaining it while the plaintiff has no such knowledge, and is
therefore compelled to allege negligence in general terms.
The requisites of the doctrine of res ipsa loquitur as established by jurisprudence are as follows:
1) the accident is of a kind which does not ordinarily occur unless someone is
negligent;
2) the cause of the injury was under the exclusive control of the person in
charge and
3) the injury suffered must not have been due to any voluntary action or
contribution on the part of the person injured.

The above requisites are all present in this case.
First, no person just walking along the road would suddenly be sideswiped and run over by
an on-rushing vehicle unless the one in charge of the said vehicle had been negligent.
Second, the jeep which caused the injury was under the exclusive control of Oscar Jr. as its
owner. When Oscar Jr. entrusted the ignition key to Rodrigo, he had the power to instruct him
with regard to the specific restrictions of the jeeps use, including who or who may not drive it.
As he is aware that the jeep may run without the ignition key, he also has the responsibility to
park it safely and securely and to instruct his driver Rodrigo to observe the same precaution.
Lastly, there was no showing that the death of the victims was due to any voluntary action or
contribution on their part.
2. The contention is no longer novel. In Aguilar Sr. v. Commercial Savings Bank, the car of therein
respondent bank caused the death of Conrado Aguilar, Jr. while being driven by its assistant vice
president. Despite Article 2180, we still held the bank liable for damages for the accident as said
provision should defer to the settled doctrine concerning accidents involving registered motor
vehicles, i.e., that the registered owner of any vehicle, even if not used for public service, would
primarily be responsible to the public or to third persons for injuries caused the latter while the
vehicle was being driven on the highways or streets. We have already ratiocinated that:
The main aim of motor vehicle registration is to identify the owner so that if any
accident happens, or that any damage or injury is caused by the vehicle on the public
highways, responsibility therefor can be fixed on a definite individual, the registered
owner. Instances are numerous where vehicles running on public highways caused
accidents or injuries to pedestrians or other vehicles without positive identification of
the owner or drivers, or with very scant means of identification. It is to forestall these
circumstances, so inconvenient or prejudicial to the public, that the motor vehicle
registration is primarily ordained, in the interest of the determination of persons
responsible for damages or injuries caused on public highways.
Absent the circumstance of unauthorized use or that the subject vehicle was stolen which are
valid defenses available to a registered owner, Oscar Jr. cannot escape liability for quasi-delict
resulting from his jeeps use.















LUDO AND LUYM CORPORATION vs. COURT OF APPEALS
G.R. No. 125483. February 1, 2001
Facts:
Petitioner Ludo & Luym Corporation is a domestic corporation engaged in copra
processing with plant and business offices in Cebu City. Private Respondent Gabisan
Shipping Lines was the registered owner and operator of the motor vessel MV Miguela,
while the other private respondent, Anselmo Olasiman, was its captain.
On May 21, 1990, at around 1:30 P.M., while MV Miguela was docking at petitioners
wharf, it rammed and destroyed a fender pile cluster. Petitioner demanded damages
from private respondents. The latter refused. Hence, petitioner filed a complaint for
damages before the Regional Trial Court of Cebu.
Ireneo Naval, petitioners employee, guided the vessel to its docking place. After the
guide (small rope) was thrown from the vessel and while the petitioners security guard
was pulling the big rope to be tied to the bolar, MV Miguela did not slow down. The
crew did not release the vessels anchor. Naval shouted Reverse to the vessels crew,
but it was too late when the latter responded, for the vessel already rammed the pile
cluster.
Private respondents denied the incident and the damage. Their witnesses claimed that
the damage, if any, must have occurred prior to their arrival and caused by another
vessel or by ordinary wear and tear. They averred that MV Miguela started to slow
down at 100 meters and the crew stopped the engine at 50 meters from the pier; that
Capt. Anselmo Olasiman did not order the anchors release and chief mate Manuel
Gabisan did not hear Naval shout Reverse. Respondents claimed that Naval had no
business in the vessels maneuvering.
RTC Ruling: it found that it was able to prove by preponderance of evidence that MV
Miguela rammed and damaged the pile cluster; that petitioners witnesses, Naval and
Espina, actually saw the incident; that respondents failed to refute the testimony of
marine surveyor Degamo and skin diver Alferez on the damages; that the officers and
crew of MV Miguela were negligent; and that respondents are solidarily liable for the
damages.
CA Ruling: petitioners eyewitness Naval was incompetent to testify on the negligence of
the crew and officers of MV Miguela; that there were other vessels that used the wharf
for berthing and petitioners evidence did not positively prove that it was MV Miguela
that rammed the pile cluster; that the photographs of the pile cluster taken after the
incident showed no visible damages; that, as shown by private respondents witness,
there were seashells and seaweeds directly under the uprooted post, which indicated
that the breaking happened a long time ago.
Issue: Whether or not the doctrine of res ipsa loquitor is applicable.
Held:
Petitioner argues that the Court of Appeals erred when it reversed the trial court for the latters
heavy reliance on Navals testimony. The appellate court overlooked the fact that aside from
Navals testimony, the trial court also relied on the principle of res ipsa loquitur to establish
private respondents negligence.
The doctrine of res ipsa loquitur was explained in Batiquin vs. Court of Appeals, 258 SCRA 334
(1996), thus:
1. Where the thing which causes injury is shown to be under the management of the
defendant, and
2. the accident is such as in the ordinary course of things does not happen if those who
have the management use proper care, it affords reasonable evidence, in the absence of
an explanation by the defendant,
3. that the accident arose from want of care.
The doctrine recognizes that parties may establish prima facie negligence without direct
proof and allows the principle to substitute for specific proof of negligence. This is
invoked when under the circumstances, direct evidence is absent and not readily
available.
In our view, all the requisites for recourse to this doctrine exist.
First, MV Miguela was under the exclusive control of its officers and crew. Petitioner did not
have direct evidence on what transpired within as the officers and crew maneuvered the vessel
to its berthing place. We note the Court of Appeals finding that Naval and Espina were not
knowledgeable on the vessels maneuverings, and could not testify on the negligence of the
officers and crew.
Second, aside from the testimony that MV Miguela rammed the cluster pile, private respondent
did not show persuasively other possible causes of the damage.
Applying now the above, there exists a presumption of negligence against private respondents
which we opine the latter failed to overcome. Additionally, petitioner presented tangible proof
that demonstrated private respondents negligence. As testified by Capt. Olasiman, from
command of slow ahead to stop engine, the vessel will still travel 100 meters before it
finally stops. However, he ordered stop engine when the vessel was only 50 meters from the
pier. Further, he testified that before the vessel is put to slow astern, the engine has to be
restarted. However, Olasiman can not estimate how long it takes before the engine goes to
slow astern after the engine is restarted. From these declarations, the conclusion is that it was
already too late when the captain ordered reverse. By then, the vessel was only 4 meters from
the pier and thus rammed it.
Respondent companys negligence consists in allowing incompetent crew to man its vessel. As
shown also by petitioner, both Captain Olasiman and Chief Mate Gabisan did not have a formal
training in marine navigation. The former was a mere elementary graduate while the latter is a
high school graduate. Their experience in navigation was only as a watchman and a
quartermaster, respectively.


















THERMOCHEM INC vs. LEONORA NAVAL and CA
G.R. No. 131541. October 20, 2000

Facts:
(O)n May 10, 1992, at around 12:00 o'clock midnight, Eduardo Edem was driving
a "Luring Taxi" along Ortigas Avenue, near Rosario, Pasig, going towards Cainta.
Prior to the collision, the taxicab was parked along the right side of Ortigas
Avenue, not far from the Rosario Bridge, to unload a passenger.

Thereafter, the driver executed a U-turn to traverse the same road, going to the
direction of EDSA. At this point, the Nissan Pathfinder traveling along the same
road going to the direction of Cainta collided with the taxicab.


The point of impact was so great that the taxicab was hit in the middle portion
and was pushed sideward, causing the driver to lose control of the vehicle. The
taxicab was then dragged into the nearby Question Tailoring Shop, thus, causing
damage to the said tailoring shop, and its driver, Eduardo Eden, sustained
injuries as a result of the incident.
Issue: Whether or not petitioner should be held liable for damages.
Held:
Malfunction or loss of brake is not a fortuitous event. Between the owner and his driver,
on the one hand, and third parties such as commuters, drivers and pedestrians, on the
other, the former is presumed to know about the conditions of his vehicle and is duty
bound to take care thereof with the diligence of a good father of the family. A
mechanically defective vehicle should avoid the streets. As petitioner's vehicle was
moving downhill, the driver should have slowed down since a downhill drive would
naturally cause the vehicle to accelerate. Moreover, the record shows that the Nissan
Pathfinder was on the wrong lane when the collision occurred. This was a disregard of
traffic safety rules. The law considers what would be reckless, blameworthy or negligent
in a man of ordinary diligence and prudence and determines liability by that. Even
assuming arguendo that loss of brakes is an act of God, by reason of their negligence,
the fortuitous event became humanized, rendering the Nissan driver liable for the
ensuing damages.
As mentioned earlier, the driver of the taxi is contributorily liable. U-turns are not generally
advisable particularly on major streets. The taxi was hit on its side which means that it had not
yet fully made a turn to the other lane. The driver of the taxi ought to have known that vehicles
coming from the Rosario bridge are on a downhill slope. Obviously, there was lack of foresight
on his part, making him contributorily liable. Most public utility drivers disregard signs and
traffic rules especially during the night when traffic enforcers manning the streets disappear
with the light. In driving vehicles, the primary concern should be the safety not only of the
driver or his passengers, but also his fellow motorists.
Considering the contributory negligence of the driver of private respondent's taxi, the
award of P47,850.00, for the repair of the taxi, should be reduced in half (P23,925.00
jointly and severally). All other awards for damages are deleted for lack of merit.














PHILIPPINE HAWK CORP vs VIVIAN TAN LEE
G.R. No. 166869 February 16, 2010

Facts:
The accident involved a motorcycle, a passenger jeep, and a bus with Body No. 119. The
bus was owned by petitioner Philippine Hawk Corporation, and was then being driven
by Margarito Avila.
On March 17, 1991, she was riding on their motorcycle in tandem with her husband,
who was on the wheel, at a place after a Caltex gasoline station in Barangay
Buensoceso, Gumaca, Quezon. They were on a stop position at the side of the highway;
and when they were about to make a turn, she saw a bus running at fast speed coming
toward them, and then the bus hit a jeep parked on the roadside, and their motorcycle
as well.
She lost consciousness and was brought to the hospital. Respondents husband died
due to the vehicular accident. The immediate cause of his death was massive cerebral
hemorrhage.
For the defense, Margarito Avila, the driver of petitioners bus, testified that he was
driving his bus at 60 kilometers per hour on the Maharlika Highway. When they were
at Barangay Buensoceso, Gumaca, Quezon, a motorcycle ran from his left side of the
highway, and as the bus came near, the motorcycle crossed the path of the bus, and so
he turned the bus to the right. He heard a loud banging sound. From his side mirror, he
saw that the motorcycle turned turtle (bumaliktad). He did not stop to help out of
fear for his life, but drove on and surrendered to the police. He denied that he bumped
the motorcycle.
RTC Ruling: if the bus were on the right side of the highway, and Margarito Avila turned
his bus to the right in an attempt to avoid hitting the motorcyle, then the bus would not
have hit the passenger jeep, which was then parked on the left side of the road. The fact
that the bus also hit the passenger jeep showed that the bus must have been running
from the right lane to the left lane of the highway, which caused the collision with the
motorcycle and the passenger jeep parked on the left side of the road. RTC held
petitioner bus company liable for failing to exercise the diligence of a good father of the
family in the selection and supervision of Avila, having failed to sufficiently inculcate in
him discipline and correct behavior on the road.
CA Ruling: (a) P168,019.55 as actual damages; (b) P10,000.00 as temperate damages; (c)
P100,000.00 as moral damages; (d) P590,000.00 as unearned income; and (e)
P50,000.00 as civil indemnity.
Issue:
(1) whether or not negligence may be attributed to petitioners driver, and whether
negligence on his part was the proximate cause of the accident, resulting in the death of Silvino
Tan and causing physical injuries to respondent;
(2) whether or not the damages awarded by respondent Court of Appeals are proper.

Held:
(1) Foreseeability is the fundamental test of negligence. To be negligent, a defendant must have
acted or failed to act in such a way that an ordinary reasonable man would have realized that
certain interests of certain persons were unreasonably subjected to a general but definite class
of risks
Whenever an employees negligence causes damage or injury to another, there instantly arises
a presumption that the employer failed to exercise the due diligence of a good father of the
family in the selection or supervision of its employees. To avoid liability for a quasi-delict
committed by his employee, an employer must overcome the presumption by presenting
convincing proof that he exercised the care and diligence of a good father of a family in the
selection and supervision of his employee.
(2) 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
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 the absence of documentary
evidence, it is reasonable to peg necessary expenses for the lease and operation of the gasoline
station at 80 percent of the gross income, and peg living expenses at 50 percent of the net
income (gross income less necessary expenses).
Net Earning Capacity= Life Expectancy x Gross Annual Income Reasonable and
Necessary Expenses
Life expectancy= 2/3 x (80 minus age of deceased victim at time of death)
Reasonable and necessary expenses= 80% of GAI
Living expenses= 50% of net income
NEC= [{(2/3 x (80-65)} x {1,000,000- (80% x P 1M)}- (50% of Net Income)]
NEC= [{(2/3 x (15)} x {P200,000}- (50% x 200,000)]
NEC= 10 x 100,000 = 1,000,000.00
Actual damages must be substantiated by documentary evidence, such as receipts, in order to
prove expenses incurred as a result of the death of the victim
Moreover, the Court of Appeals correctly sustained the award of moral damages in the amount
of P50,000.00 for the death of respondents husband. Moral damages are not intended to
enrich a plaintiff at the expense of the defendant. They are awarded to allow the plaintiff to
obtain means, diversions or amusements that will serve to alleviate the moral suffering he/she
has undergone due to the defendants culpable action and must, perforce, be proportional to
the suffering inflicted
Under Art. 2224 of the Civil Code, temperate 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. The cost of the repair of the motorcycle was prayed for by
respondent in her Complaint. However, the evidence presented was merely a job estimate of
the cost of the motorcycles repair amounting to P17, 829.00. The Court of Appeals aptly held
that there was no doubt that the damage caused on the motorcycle was due to the negligence
of petitioners driver.
Under Art. 2219 of the Civil Code, moral damages may be recovered in quasi-delicts causing
physical injuries. However, the award of P50,000.00 should be reduced to P30,000.00 in
accordance with prevailing jurisprudence.
Further, the Court of Appeals correctly awarded respondent civil indemnity for the death of her
husband, which has been fixed by current jurisprudence at P50,000.00. The award is proper
under Art. 2206 of the Civil Code.




DY TEBAN TRADING, INC. vs. JOSE CHING
G.R. No. 161803 February 4, 2008

Facts
On July 4, 1995, at around 4:45 a.m., Rogelio Ortiz, with helper Romeo Catamora, was
driving a Nissan van owned by petitioner Dy Teban Trading, Inc. along the National
Highway in Barangay Sumilihon, Butuan City, going to Surigao City.
A Joana Paula passenger bus was cruising on the opposite lane towards the van. In
between the two vehicles was a parked prime mover with a trailer, owned by private
respondent Liberty Forest, Inc.
The night before, at around 10:00 p.m., the prime mover with trailer suffered a tire
blowout. The driver, private respondent Cresilito Limbaga, parked the prime mover
askew occupying a substantial portion of the national highway, on the lane of the
passenger bus. He parked the prime mover with trailer at the shoulder of the road with
the left wheels still on the cemented highway and the right wheels on the sand and
gravel shoulder of the highway. The prime mover was not equipped with triangular,
collapsible reflectorized plates, the early warning device required under Letter of
Instruction No. 229. As substitute, Limbaga placed a banana trunk with leaves on the
front and the rear portion of the prime mover to warn incoming motorists. It is alleged
that Limbaga likewise placed kerosene lighted tin cans on the front and rear of the
trailer.
To avoid hitting the parked prime mover occupying its lane, the incoming passenger bus
swerved to the right, onto the lane of the approaching Nissan van. Ortiz saw two bright
and glaring headlights and the approaching passenger bus. He pumped his break slowly,
swerved to the left to avoid the oncoming bus but the van hit the front of the stationary
prime mover. The passenger bus hit the rear of the prime mover.
Ortiz and Catamora only suffered minor injuries. The Nissan van, however, became
inoperable as a result of the incident.

The RTC held that the proximate cause of the three-way vehicular collision was
improper parking of the prime mover on the national highway and the absence of an
early warning device on the vehicle.
The CA held that the proximate cause of the vehicular collision was the failure of the
Nissan van to give way or yield to the right of way of the passenger bus.
Issue: Whether or not the prime mover is liable for the damages suffered by the Nissan van.
Held:
Article 2176 of the Civil Code provides that whoever by act or omission causes damage to
another, there being fault or negligence, is obliged to pay for the damage done. Such fault or
negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-
delict.
To sustain a claim based on quasi-delict, the following requisites must concur:
(a) damage suffered by plaintiff;
(b) fault or negligence of defendant; and
(c) connection of cause and effect between the fault or negligence of defendant and the
damage incurred by plaintiff.

Negligence is defined as the failure to observe for the protection of the interests of another
person that degree of care, precaution, and vigilance which the circumstances justly demand,
whereby such other person suffers injury.

Private respondent Limbaga was negligent in parking the prime mover on the national highway.
Private respondent Liberty Forest, Inc. was also negligent in failing to supervise Limbaga and in
ensuring that the prime mover was in proper condition.

Proximate cause is defined as that cause, which, in natural and continuous sequence, unbroken
by any efficient intervening cause, produces the injury, and without which the result would not
have occurred. More comprehensively, proximate cause is that cause acting first and producing
the injury, either immediately or by setting other events in motion, all constituting a natural
and continuous chain of events, each having a close causal connection with its immediate
predecessor, the final event in the chain immediately effecting the injury as natural and
probable result of the cause which first acted, under such circumstances that the person
responsible for the first event should, as an ordinarily prudent and intelligent person, have
reasonable ground to expect at the moment of his act or default that an injury to some person
might probably result therefrom.

Here, We agree with the RTC that the damage caused to the Nissan van was a natural and
probable result of the improper parking of the prime mover with trailer. As discussed, the
skewed parking of the prime mover posed a serious risk to oncoming motorists. Limbaga failed
to prevent or minimize that risk. The skewed parking of the prime mover triggered the series of
events that led to the collision, particularly the swerving of the passenger bus and the Nissan
van.

Even granting that the passenger bus was at fault, its fault will not necessarily absolve private
respondents from liability. If at fault, the passenger bus will be a joint tortfeasor along with
private respondents. The liability of joint tortfeasors is joint and solidary. This means that
petitioner may hold either of them liable for damages from the collision.

In Philippine National Construction Corporation v. Court of Appeals,1[31] this Court held:

where the concurrent or successive negligent acts or omission of two or more persons,
although acting independently of each other, are, in combination, the direct and
proximate cause of a single injury to a third person and it is impossible to determine in
what proportion each contributed to the injury, either is responsible for the whole
injury, even though his act alone might not have caused the entire injury

In Far Eastern Shipping Company v. Court of Appeals, the Court declared that the liability
of joint tortfeasors is joint and solidary, to wit:

Where several causes producing an injury are concurrent and each is an efficient
cause without which the injury would not have happened, the injury may be
attributed to all or any of the causes and recovery may be had against any or all
of the responsible persons although under the circumstances of the case, it may
appear that one of them was more culpable, and that the duty owed by them to
the injured person was not the same. No actors negligence ceases to be a
proximate cause merely because it does not exceed the negligence of other
actors. Each wrongdoer is responsible for the entire result and is liable as
though his acts were the sole cause of the injury.










SAFEGUARD SECURITY AGENCY INC vs. LAURO TANGCO et al
G.R. No. 165732 December 14, 2006 511 S 67


Facts:
On November 3, 1997, at about 2:50 p.m., Evangeline Tangco (Evangeline) went to
Ecology Bank, Katipunan Branch, Quezon City, to renew her time deposit per advise of
the bank's cashier as she would sign a specimen card.

Evangeline, a duly licensed firearm holder with corresponding permit to carry the same
outside her residence, approached security guard Pajarillo, who was stationed outside
the bank, and pulled out her firearm from her bag to deposit the same for safekeeping.
Suddenly, Pajarillo shot Evangeline with his service shotgun hitting her in the abdomen
instantly causing her death.

A complaint for damages against Pajarillo for negligently shooting Evangeline and
against Safeguard for failing to observe the diligence of a good father of a family to
prevent the damage committed by its security guard.

In their Answer, petitioners denied the material allegations in the complaint and alleged
that Safeguard exercised the diligence of a good father of a family in the selection and
supervision of Pajarillo; that Evangeline's death was not due to Pajarillo's negligence as
the latter acted only in self-defense.

Issues: Whether (1) quasi-delict only covers negligent acts and not intentional; and (2)
Safeguard should be held solidarily liable for the damages awarded to respondents.

Held:

(1)No.
An act or omission causing damage to another may give rise to two separate civil liabilities on
the part of the offender, i.e., (1) civil liability ex delicto, under Article 100 of the Revised Penal
Code; and (2) independent civil liabilities, such as those:

(a) not arising from an act or omission complained of as a felony, e.g., culpa contractual
or obligations arising from law under Article 31 of the Civil Code, intentional torts under
Articles 32 and 34, and culpa aquiliana under Article 2176 of the Civil Code; or

(b) where the injured party is granted a right to file an action independent and distinct
from the criminal action under Article 33 of the Civil Code. Either of these liabilities may
be enforced against the offender subject to the caveat under Article 2177 of the Civil
Code that the offended party cannot recover damages twice for the same act or
omission or under both causes.
ARTICLE 2176. Whoever by act or omission causes damage to another, there being fault
or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is
no pre-existing contractual relation between the parties is called a quasi-delict and is
governed by the provisions of this Chapter.
The scope of Article 2176 is not limited to acts or omissions resulting from negligence. In Dulay
v. Court of Appeals,
17
we held:
Article 2176, where it refers to "fault or negligence," covers not only acts "not punishable by
law" but also acts criminal in character, whether intentional and voluntary or negligent.
Consequently, a separate civil action lies against the offender in a criminal act, whether or not
he is criminally prosecuted and found guilty or acquitted, provided that the offended party is
not allowed, if he is actually charged also criminally, to recover damages on both scores, and
would be entitled in such eventuality only to the bigger award of the two, assuming the awards
made in the two cases vary. In other words, the extinction of civil liability referred to in Par. (e)
of Section 3, Rule 111, refers exclusively to civil liability founded on Article 100 of the Revised
Penal Code, whereas the civil liability for the same act considered as quasi-delict only and not
as a crime is not extinguished even by a declaration in the criminal case that the criminal act
charged has not happened or has not been committed by the accused. Briefly stated, We here
hold, in reiteration of Garcia, that culpa aquiliana includes voluntary and negligent acts which
may be punishable by law."
The civil action filed by respondents was not derived from the criminal liability of Pajarillo in the
criminal case but one based on culpa aquiliana or quasi-delict which is separate and distinct
from the civil liability arising from crime. The source of the obligation sought to be enforced in
the civil case is a quasi-delict not an act or omission punishable by law.
(2) Yes.
Article 2180 of the Civil Code provides:
Art. 2180. The obligation imposed by Article 2176 is demandable not only for one's own
acts or omissions, but also for those of persons for whom one is responsible.
x x x x
Employers shall be liable for the damages caused by their employees and household
helpers acting within the scope of their assigned tasks, even though the former are not
engaged in any business or industry.
x x x x
The responsibility treated of in this article shall cease when the persons herein
mentioned prove that they observed all the diligence of a good father of a family to
prevent damage.
As the employer of Pajarillo, Safeguard is primarily and solidarily liable for the quasi-delict
committed by the former. Safeguard is presumed to be negligent in the selection and
supervision of his employee by operation of law. This presumption may be overcome only by
satisfactorily showing that the employer exercised the care and the diligence of a good father of
a family in the selection and the supervision of its employee.
In the selection of prospective employees, employers are required to examine them as to their
qualifications, experience, and service records. On the other hand, due diligence in the
supervision of employees includes the formulation of suitable rules and regulations for the
guidance of employees and the issuance of proper instructions intended for the protection of
the public and persons with whom the employer has relations through his or its employees and
the imposition of necessary disciplinary measures upon employees in case of breach or as may
be warranted to ensure the performance of acts indispensable to the business of and beneficial
to their employer. To this, we add that actual implementation and monitoring of consistent
compliance with said rules should be the constant concern of the employer, acting through
dependable supervisors who should regularly report on their supervisory functions. To establish
these factors in a trial involving the issue of vicarious liability, employers must submit concrete
proof, including documentary evidence.
The RTC did not err in ruling that Safeguard fell short of the diligence required in the
supervision of its employee, particularly Pajarillo, it had also been established during Camero's
cross-examination that Pajarillo was not aware of such rules and regulations. Notwithstanding
Camero's clarification on his re-direct examination that these company rules and regulations
are lesson plans as a basis of guidelines of the instructors during classroom instructions and not
necessary to give students copy of the same the records do not show that Pajarillo had
attended such classroom instructions. The records also failed to show that there was adequate
training and continuous evaluation of the security guard's performance.




NOSTRADAMUS VILLANUEVA vs. PRISCILLA R. DOMINGO and
LEANDRO LUIS R. DOMINGO
G.R. No. 144274. September 20, 2004 438 S 485


Facts:
[Respondent] Priscilla R. Domingo is the registered owner of a silver Mitsubishi Lancer
Car model 1980 bearing plate No. NDW 781 91 with [co-respondent] Leandro Luis R.
Domingo as authorized driver. [Petitioner] Nostradamus Villanueva was then the
registered owner of a green Mitsubishi Lancer bearing Plate No. PHK 201 91.
On 22 October 1991, following a green traffic light, [respondent] Priscilla Domingos
silver Lancer car with Plate No. NDW 781 91 then driven by [co-respondent] Leandro
Luis R. Domingo was cruising along the middle lane of South Superhighway at moderate
speed from north to south. Suddenly, a green Mitsubishi Lancer with plate No. PHK 201
91 driven by Renato Dela Cruz Ocfemia darted from Vito Cruz Street towards the South
Superhighway directly into the path of NDW 781 91 thereby hitting and bumping its left
front portion. As a result of the impact, NDW 781 91 hit two (2) parked vehicles at the
roadside, the second hitting another parked car in front of it.
Per Traffic Accident Report prepared by Traffic Investigator Pfc. Patrocinio N. Acido,
Renato dela Cruz Ocfemia was driving with expired license and positive for alcoholic
breath. Hence, Manila Assistant City Prosecutor Oscar A. Pascua recommended the
filing of information for reckless imprudence resulting to (sic) damage to property and
physical injuries
[Petitioner] Nostradamus Villanueva claimed that he was no longer the owner of the
car at the time of the mishap because it was swapped with a Pajero owned by Albert
Jaucian/Auto Palace Car Exchange. For her part, Linda Gonzales declared that her
presence at the scene of the accident was upon the request of the actual owner of the
Mitsubishi Lancer (PHK 201 91) [Albert Jaucian] for whom she had been working as
agent/seller. On the other hand, Auto Palace Car Exchange represented by Albert
Jaucian claimed that he was not the registered owner of the car. Moreover, it could not
be held subsidiary liable as employer of Ocfemia because the latter was off-duty as
utility employee at the time of the incident. Neither was Ocfemia performing a duty
related to his employment.
Issue: May the registered owner of a motor vehicle be held liable for damages arising from a
vehicular accident involving his motor vehicle while being operated by the employee of its
buyer without the latters consent and knowledge?

Held: Yes
We have consistently ruled that the registered owner of any vehicle is directly and primarily
responsible to the public and third persons while it is being operated. The rationale behind
such doctrine was explained way back in 1957 in Erezo vs. Jepte:
The principle upon which this doctrine is based is that in dealing with vehicles registered
under the Public Service Law, the public has the right to assume or presume that the
registered owner is the actual owner thereof, for it would be difficult for the public to
enforce the actions that they may have for injuries caused to them by the vehicles being
negligently operated if the public should be required to prove who the actual owner is.
How would the public or third persons know against whom to enforce their rights in case
of subsequent transfers of the vehicles? We do not imply by his doctrine, however, that
the registered owner may not recover whatever amount he had paid by virtue of his
liability to third persons from the person to whom he had actually sold, assigned or
conveyed the vehicle.
The Revised Motor Vehicle Law (Act No. 3992, as amended) provides that no vehicle may be
used or operated upon any public highway unless the same is property registered. It has been
stated that the system of licensing and the requirement that each machine must carry a
registration number, conspicuously displayed, is one of the precautions taken to reduce the
danger of injury to pedestrians and other travelers from the careless management of
automobiles. And to furnish a means of ascertaining the identity of persons violating the laws
and ordinances, regulating the speed and operation of machines upon the highways (2 R.C.L.
1176). Not only are vehicles to be registered and that no motor vehicles are to be used or
operated without being properly registered for the current year, but that dealers in motor
vehicles shall furnish thee Motor Vehicles Office a report showing the name and address of
each purchaser of motor vehicle during the previous month and the manufacturers serial
number and motor number. (Section 5(c), Act No. 3992, as amended.)
One of the principal purposes of motor vehicles legislation is identification of the vehicle and of
the operator, in case of accident; and another is that the knowledge that means of detection
are always available may act as a deterrent from lax observance of the law and of the rules of
conservative and safe operation. Whatever purpose there may be in these statutes, it is
subordinate at the last to the primary purpose of rendering it certain that the violator of the
law or of the rules of safety shall not escape because of lack of means to discover him.

In synthesis, we hold that the registered owner, the defendant-appellant herein, is primarily
responsible for the damage caused to the vehicle of the plaintiff-appellee, but he (defendant-
appellant) has a right to be indemnified by the real or actual owner of the amount that he may
be required to pay as damage for the injury caused to the plaintiff-appellant.


VICENTE CALALAS vs. FRANCISCO SALVA
G.R. No. 122039. May 31, 2000
Facts:

Private respondent Eliza Jujeurche G. Sunga, took a passenger jeepney owned and
operated by petitioner Vicente Calalas. As the jeepney was filled to capacity of about 24
passengers, Sunga was given by the conductor an "extension seat," a wooden stool at
the back of the door at the rear end of the vehicle.

The jeepney stopped to let a passenger off. As she was seated at the rear of the vehicle,
Sunga gave way to the outgoing passenger. Just as she was doing so, an Isuzu truck
driven by Iglecerio Verena and owned by Francisco Salva bumped the left rear portion of
the jeepney. As a result, Sunga was injured.

On October 9, 1989, Sunga filed a complaint for damages against Calalas, alleging
violation of the contract of carriage by the former in failing to exercise the diligence
required of him as a common carrier.

Calalas, on the other hand, filed a third-party complaint against Francisco Salva, the
owner of the Isuzu truck.
The lower court rendered judgment against Salva as third-party defendant and absolved
Calalas of liability, holding that it was the driver of the Isuzu truck who was responsible
for the accident.
On appeal to the Court of Appeals, the ruling of the lower court was reversed on the
ground that Sungas cause of action was based on a contract of carriage, not quasi-
delict, and that the common carrier failed to exercise the diligence required under the
Civil Code.

Issue:
(1) Whether petitioner is liable based on breach of contract of carriage.
(2) Whether petitioners liability be extinguished grounded on caso fortuito
Held:
(1)Yes.
The first, quasi-delict, also known as culpa aquiliana or culpa extra contractual, has as its source
the negligence of the tortfeasor. The second, breach of contract or culpa contractual, is
premised upon the negligence in the performance of a contractual obligation.
Consequently, in quasi-delict, the negligence or fault should be clearly established because it is
the basis of the action, whereas in breach of contract, the action can be prosecuted merely by
proving the existence of the contract and the fact that the obligor, in this case the common
carrier, failed to transport his passenger safely to his destination. In case of death or injuries to
passengers, Art. 1756 of the Civil Code provides that common carriers are presumed to have
been at fault or to have acted negligently unless they prove that they observed extraordinary
diligence as defined in Arts. 1733 and 1755 of the Code.

It is immaterial that the proximate cause of the collision between the jeepney and the truck
was the negligence of the truck driver. The doctrine of proximate cause is applicable only in
actions for quasi-delict, not in actions involving breach of contract. The doctrine is a device for
imputing liability to a person where there is no relation between him and another party. In such
a case, the obligation is created by law itself. But, where there is a pre-existing contractual
relation between the parties, it is the parties themselves who create the obligation, and the
function of the law is merely to regulate the relation thus created. Insofar as contracts of
carriage are concerned, some aspects regulated by the Civil Code are those respecting the
diligence required of common carriers with regard to the safety of passengers as well as the
presumption of negligence in cases of death or injury to passengers. It provides: Slxsc
Art. 1733. Common carriers, from the nature of their business and for reasons of
public policy, are bound to observe extraordinary diligence in the vigilance over
the goods and for the safety of the passengers transported by them, according
to all the circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is further expressed
in articles 1734, 1735, and 1746, Nos. 5,6, and 7, while the extraordinary
diligence for the safety of the passengers is further set forth in articles 1755 and
1756.
Art. 1755. A common carrier is bound to carry the passengers safely as far as
human care and foresight can provide, using the utmost diligence of very
cautious persons, with due regard for all the circumstances.
Art. 1756. In case of death of or injuries to passengers, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove
that they observed extraordinary diligence as prescribed by articles 1733 and
1755.
Now, did the driver of jeepney carry Sunga "safely as far as human care and foresight could
provide, using the utmost diligence of very cautious persons, with due regard for all the
circumstances" as required by Art. 1755? We do not think so. Several factors militate against
petitioners contention.
First, the jeepney was not properly parked, its rear portion being exposed about two meters
from the broad shoulders of the highway, and facing the middle of the highway in a diagonal
angle. This is a violation of the R.A. No. 4136, as amended, or the Land Transportation and
Traffic Code, which provides:
Sec. 54. Obstruction of Traffic. - No person shall drive his motor vehicle in such a
manner as to obstruct or impede the passage of any vehicle, nor, while
discharging or taking on passengers or loading or unloading freight, obstruct the
free passage of other vehicles on the highway.
Second, it is undisputed that petitioners driver took in more passengers than the allowed
seating capacity of the jeepney, a violation of 32(a) of the same law. It provides: Mesm
Exceeding registered capacity. - No person operating any motor vehicle shall
allow more passengers or more freight or cargo in his vehicle than its registered
capacity.
(2)NO.

A caso fortuito is an event which could not be foreseen, or which, though foreseen, was
inevitable. This requires that the following requirements be present:
(a) the cause of the breach is independent of the debtors will;
(b) the event is unforeseeable or unavoidable;
(c) the event is such as to render it impossible for the debtor to fulfill his obligation in a
normal manner, and
(d) the debtor did not take part in causing the injury to the creditor.1[4] Petitioner
should have foreseen the danger of parking his jeepney with its body protruding two
meters into the highway.






AMADO PICART vs. FRANK SMITH, JR.
G.R. No. L-12219 March 15, 1918 37 P 183

Facts:

The accident occurred in the narrow Carlatan Bridge La Union.

The defendant while approaching the bridge saw the plaintiff riding on his horse. He
gave a warning signal and continued without decreasing his speed. When he had gotten
quite near, there being then no possibility of the horse getting across to the other side,
the defendant quickly turned his car sufficiently to the right to escape hitting the horse
alongside of the railing where it as then standing; but in so doing the automobile passed
in such close proximity to the animal that it became frightened and turned its body
across the bridge with its head toward the railing. In so doing, it as struck on the hock of
the left hind leg by the flange of the car and the limb was broken. The horse fell and its
rider was thrown off with some violence.

Issue: Whether or not defendant should be held liable given that he had the last clear chance.


Held:
Stated in these terms, the proper criterion for determining the existence of negligence in a
given case is this: Conduct is said to be negligent when a prudent man in the position of the
tortfeasor would have foreseen that an effect harmful to another was sufficiently probable to
warrant his foregoing conduct or guarding against its consequences.
Applying this test to the conduct of the defendant in the present case we think that negligence
is clearly established. A prudent man, placed in the position of the defendant, would in our
opinion, have recognized that the course which he was pursuing was fraught with risk, and
would therefore have foreseen harm to the horse and the rider as reasonable consequence of
that course. Under these circumstances the law imposed on the defendant the duty to guard
against the threatened harm.
It goes without saying that the plaintiff himself was not free from fault, for he was guilty of
antecedent negligence in planting himself on the wrong side of the road. But as we have
already stated, the defendant was also negligent; and in such case the problem always is to
discover which agent is immediately and directly responsible. It will be noted that the negligent
acts of the two parties were not contemporaneous, since the negligence of the defendant
succeeded the negligence of the plaintiff by an appreciable interval. Under these circumstances
the law is that the person who has the last fair chance to avoid the impending harm and fails to
do so is chargeable with the consequences, without reference to the prior negligence of the
other party.


























DURBAN APARTMENTS CORP vs PIONEER INSURANCE AND
SURETY CORP
G.R. No. 179419 January 12, 2011

Facts:
On July 22, 2003, [respondent] Pioneer Insurance and Surety Corporation x x x, by right
of subrogation, filed [with the RTC of Makati City] a Complaint for Recovery of Damages
against [petitioner] Durban Apartments Corporation.
[Respondent averred] that: it is the insurer for loss and damage of Jeffrey S. Sees [the
insureds] 2001 Suzuki Grand Vitara in the amount of P1,175,000.00;
See arrived and checked in at the City Garden Hotel in Makati corner Kalayaan Avenues,
Makati City before midnight, and its parking attendant, defendant x x x Justimbaste got
the key to said Vitara from See to park it.
O]n May 1, 2002, at about 1:00 oclock in the morning, See was awakened in his room
by [a] telephone call from the Hotel Chief Security Officer who informed him that his
Vitara was carnapped while it was parked unattended at the parking area of Equitable
PCI Bank along Makati Avenue between the hours of 12:00 [a.m.] and 1:00 [a.m.];
Durban Apartments and [defendant] Justimbaste filed their Answer with Compulsory
Counterclaim alleging that: See did not check in at its hotel, on the contrary, he was a
guest of a certain Ching Montero defendant Justimbaste did not get the ignition key of
Sees Vitara, on the contrary, it was See who requested a parking attendant to park the
Vitara at any available parking space, and it was parked at the Equitable Bank parking
area, which was within Sees view, while he and Montero were waiting in front of the
hotel;

Issue: Whether or not petitioner is liable for Sees vehicle.
Held:
Article 1962, in relation to Article 1998, of the Civil Code defines a contract of deposit and a
necessary deposit made by persons in hotels or inns:

Art. 1962. A deposit is constituted from the moment a person receives a
thing belonging to another, with the obligation of safely keeping it and returning
the same. If the safekeeping of the thing delivered is not the principal purpose of
the contract, there is no deposit but some other contract.

Art. 1998. The deposit of effects made by travelers in hotels or inns shall
also be regarded as necessary. The keepers of hotels or inns shall be responsible
for them as depositaries, provided that notice was given to them, or to their
employees, of the effects brought by the guests and that, on the part of the
latter, they take the precautions which said hotel-keepers or their substitutes
advised relative to the care and vigilance of their effects.


Plainly, from the facts found by the lower courts, the insured See deposited his vehicle
for safekeeping with petitioner, through the latters employee, Justimbaste. In turn,
Justimbaste issued a claim stub to See. Thus, the contract of deposit was perfected from Sees
delivery, when he handed over to Justimbaste the keys to his vehicle, which Justimbaste
received with the obligation of safely keeping and returning it. Ultimately, petitioner is liable for
the loss of Sees vehicle.













JOSE LAGON vs. HOOVEN COMALCO INDUSTRIES INC
[G.R. No. 135657. January 17, 2001] 349 S 363

Facts:
Petitioner Jose V. Lagon is a businessman and owner of a commercial building in
Tacurong, Sultan Kudarat. Respondent HOOVEN on the other hand is a domestic
corporation known to be the biggest manufacturer and installer of aluminum materials.
Sometime in April 1981 Lagon and HOOVEN entered into two (2) contracts, both
denominated Proposal, whereby for a total consideration of P104,870.00 HOOVEN
agreed to sell and install various aluminum materials in Lagons commercial building in
Tacurong, Sultan Kudarat.1[3] Upon execution of the contracts, Lagon paid HOOVEN
P48,00.00 in advance.
On 24 February 1987 respondent HOOVEN commenced an action for sum of money
with damages and attorneys fees against petitioner Lagon. HOOVEN alleged in its
complaint that on different occasions, it delivered and installed several construction
materials in the commercial building of Lagon pursuant to their contracts; that the total
cost of the labor and materials amounted to P117,329.00 out of which P69,329.00
remained unpaid even after the completion of the project; and, despite repeated
demands, Lagon failed and refused to liquidate his indebtedness.
Lagon, in his answer, denied liability and averred that HOOVEN was the party guilty of
breach of contract by failing to deliver and install some of the materials specified in the
proposals; that as a consequence he was compelled to procure the undelivered
materials from other sources; that as regards the materials duly delivered and installed
by HOOVEN, they were fully paid.
The trial court conducted an ocular inspection of Lagons commercial building. In due
course the trial court rendered a decision partly on the basis of the result of the ocular
inspection finding the total actual deliveries and installations made by HOOVEN cost
P87,140.00. Deducting therefrom P48,000.00 which Lagon paid in advance upon
execution of their contracts with no further payments appearing to have been made
thereafter, only P39,140.00 remained unpaid and where Lagon incurred in delay.
Issue: Whether or not the alleged authorized representative of Lagon is a party to receive the
delivery.
Held:
If, as claimed by HOOVEN, all the materials were completely delivered and installed in
petitioners building as early as August 1981, why then would it demand partial payment only
two (2) years later? This circumstance is very significant especially considering that under the
Proposals the terms of payment should be 50% down "and the balance to be paid in full" upon
completion. Moreover, it is surprising that the partial payment demanded was only "to cover
operation costs." As correctly observed by petitioner, demand for payment of operation costs is
typical of a still on-going project where the contractor needs funds to defray his expenses. If
there was complete installation, why would respondent demand payment for operation costs
only? Why not enforce the whole amount of indebtedness? All these clearly suggest that there
was no full and complete delivery and installation of materials ordered by petitioner.
All the delivery receipts did not appear to have been signed by petitioner or his duly authorized
representative acknowledging receipt of the materials listed therein. A closer examination of
the receipts clearly showed that the deliveries were made to a certain Jose Rubin, claimed to be
petitioners driver, Armando Lagon, and a certain bookkeeper. Unfortunately for HOOVEN, the
identities of these persons were never been established, and there is no way of determining
now whether they were indeed authorized representatives of petitioner. Paragraph 3 of each
Proposal is explicit on this point -
The sellers responsibility ends with delivery of the merchandise to carrier in good condition, to
buyer, or to buyers authorized "Receiver/Depository" named on the face of this proposal.
As above specifically stated, deliveries must be made to the buyer or his duly authorized
representative named in the contracts. In other words, unless the buyer specifically designated
someone to receive the delivery of materials and his name is written on the Proposals opposite
the words "Authorized Receiver/Depository," the seller is under obligation to deliver to the
buyer only and to no other person; otherwise, the delivery would be invalid and the seller
would not be discharged from liability. In the present case, petitioner did not name any person
in the Proposals who would receive the deliveries in his behalf, which meant that HOOVEN was
bound to deliver exclusively to petitioner.
Notwithstanding the breach of contract by respondent in failing to deliver and install in the
premises of petitioner all the stipulated materials, we nevertheless accede to the right of
respondent to recover the unpaid balance from petitioner for the materials actually delivered.





SPS LORENZO G. FRANCISCO and LORENZA D. FRANCISCO vs.
COURT OF APPEALS
G. R. No. 118749. April 25, 2003 401 S 594
Facts:
On 3 February 1984, the spouses Lorenzo and Lorenza Francisco (petitioners) and
Engineer Bienvenido C. Mercado (respondent) entered into a Contract of
Development (Contract) for the development into a subdivision of several parcels of
land in Pampanga.

Under the Contract, respondent agreed to undertake at his expense the development
work for the Franda Village Subdivision. Respondent committed to complete the
construction within 27 months. Respondent also advanced P200,000.00 for the initial
expenses of the development work. In return, respondent would receive 50% of the
total gross sales of the subdivision lots and other income of the subdivision.
Respondent also enjoyed the exclusive and irrevocable authority to manage, control and
supervise the sales of the lots within the subdivision. The Contract required respondent
to submit to petitioners, within the first 15 days of every month, a report on payments
collected from lot buyers with copies of all the contracts to sell. However, respondent
failed to submit the monthly report.


Within the 27-month period granted to respondent, petitioners also contracted a
certain Nicasio Rosales, Sr. (Rosales) to undertake the partial development of the
subdivision. On 16 July 1986, Rosales submitted his accomplishment report. On the
same day, petitioners demanded that respondent submit within 15 days an accounting
of his operation of the subdivision from the beginning of the project up to 15 July 1986.
Petitioners also requested for copies of contracts to sell, receipts of collections and
receipts of disbursements for development expenses.

Respondent secured from the Human Settlements Regulatory Commission (HSRC) an
extension of time to finish the subdivision development until 30 July 1987. On 8 August
1986, petitioners instructed respondent to stop selling subdivision lots and collecting
payments from lot buyers. Petitioners also demanded the turnover to them of all
official receipts in the name of Franda Village Subdivision. Nonetheless, respondent
continued to collect payments from lot buyers until September 1986.


On 20 January 1987, petitioners granted respondent an authority1[8] to resume the sale
of subdivision lots and the collection of payments subject to the following conditions:
(1) all collections shall be deposited in a joint account with China Banking Corporation,
San Fernando, Pampanga branch; (2) withdrawals shall be limited to 50% of the total
collections or to respondent's share, which can only be used for development expenses,
and any withdrawal shall be subject to the approval of petitioners; (3) only Franda
Village Subdivision receipts, duly countersigned by petitioners, shall be used; (4)
collections shall be subject to a weekly or monthly audit; and (5) any violation of these
conditions shall result in the automatic cancellation of the authority.

Respondent informed HSRC that he had stopped development work on the subdivision
because the conditional authority issued by petitioners violated the Contract.
Respondent attributed the delay in the development of the subdivision to petitioners
who contracted the services of another person during the effectivity of the Contract.
Petitioners also stopped respondent, without justification, from selling the lots and
collecting payments from lot buyers.

Issue: Whether or not contract should be rescinded by reason of delay made by petitioners.

Held:
The law provides that delay may exist when the obligor fails to fulfill his obligation within the
time expressly stipulated.1[25] In this case, the HSRC extended the period for respondent to
finish the development work until 30 July 1987. Respondent did not incur delay since the
period granted him to fulfill his obligation had not expired at the time respondent filed the
action for rescission on 27 February 1987.
Petitioners hampered and interfered with respondents development work. Petitioners also
stopped respondent from selling lots and collecting payments from lot buyers, which was the
primary source of development funds. In effect, petitioners rendered respondent incapable, or
at least made it difficult for him, to develop the subdivision within the allotted period. In
reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready
to comply with what is incumbent upon him. It is only when one of the parties fulfills his
obligation that delay by the other begins.
Respondents non-submission of the monthly report was merely a slight infraction of the
Contract. Respondents failure to submit the monthly report cannot serve as sufficient basis for
the cancellation of the Contract. The cancellation of a contract will not be permitted for a slight
or casual breach. Only a substantial and fundamental breach, which defeats the very object of
the parties in making the contract, will justify a cancellation. In the instant case, the
development work continued for more than two years despite the lack of a monthly report.

JACINTO TANGUILIG vs. COURT OF APPEALS and VICENTE HERCE
JR.
[G.R. No. 117190. January 2, 1997]

Facts:

Sometime in April 1987 petitioner Jacinto M. Tanguilig doing business under the name
and style J. M. T. Engineering and General Merchandising proposed to respondent
Vicente Herce Jr. to construct a windmill system for him. After some negotiations they
agreed on the construction of the windmill for a consideration of P60,000.00 with a
one-year guaranty from the date of completion and acceptance by respondent Herce Jr.
of the project. Pursuant to the agreement respondent paid petitioner a down payment
of P30,000.00 and an installment payment of P15,000.00, leaving a balance of
P15,000.00.

On 14 March 1988, due to the refusal and failure of respondent to pay the balance,
petitioner filed a complaint to collect the amount.

In his Answer before the trial court respondent denied the claim saying that he had
already paid this amount to the San Pedro General Merchandising Inc. (SPGMI) which
constructed the deep well to which the windmill system was to be connected.
According to respondent, since the deep well formed part of the system the payment he
tendered to SPGMI should be credited to his account by petitioner.

Moreover, assuming that he owed petitioner a balance of P15,000.00, this should be
offset by the defects in the windmill system which caused the structure to collapse after
a strong wind hit their place.


Petitioner denied that the construction of a deep well was included in the agreement to
build the windmill system, for the contract price of P60,000.00 was solely for the
windmill assembly and its installation, exclusive of other incidental materials needed for
the project. He also disowned any obligation to repair or reconstruct the system and
insisted that he delivered it in good and working condition to respondent who accepted
the same without protest. Besides, its collapse was attributable to a typhoon, a force
majeure, which relieved him of any liability.
Issues:
1. Whether or not deep well is included in the contract.
2. Whether or not petitioner should be held liable for the replacement or repair.
3. Whether or not SPGMI is a authorized to receive the unpaid amount.

Held:

(1) Notably, nowhere in either proposal is the installation of a deep well mentioned, even
remotely. Neither is there an itemization or description of the materials to be used in
constructing the deep well. There is absolutely no mention in the two (2) documents
that a deep well pump is a component of the proposed windmill system. The contract
prices fixed in both proposals cover only the features specifically described therein and
no other. While the words "deep well" and "deep well pump" are mentioned in both,
these do not indicate that a deep well is part of the windmill system. They merely
describe the type of deep well pump for which the proposed windmill would be
suitable. As correctly pointed out by petitioner, the words "deep well" preceded by the
prepositions "for" and "suitable for" were meant only to convey the idea that the
proposed windmill would be appropriate for a deep well pump with a diameter of 2 to 3
inches. For if the real intent of petitioner was to include a deep well in the agreement
to construct a windmill, he would have used instead the conjunctions "and" or "with."
Since the terms of the instruments are clear and leave no doubt as to their meaning
they should not be disturbed.
Moreover, it is a cardinal rule in the interpretation of contracts that the intention
of the parties shall be accorded primordial consideration and, in case of doubt, their
contemporaneous and subsequent acts shall be principally considered.

(2) While the law is clear that "payment shall be made to the person in whose favor
the obligation has been constituted, or his successor in interest, or

any person

authorized

to

receive it. It does not appear from the record that Pili and/or SPGMI
was so authorized.

Respondent cannot claim the benefit of the law concerning "payments made by a third
person." The Civil Code provisions do not apply in the instant case because no creditor-
debtor relationship between petitioner and Guillermo Pili and/or SPGMI has been
established regarding the construction of the deep well. Specifically, witness Pili did not
testify that he entered into a contract with petitioner for the construction of
respondent's deep well. If SPGMI was really commissioned by petitioner to construct
the deep well, an agreement particularly to this effect should have been entered into.

(3) In a long line of cases this Court has consistently held that in order for a party to claim
exemption from liability by reason of fortuitous event under Art. 1174 of the Civil Code
the event should be the sole and proximate cause of the loss or destruction of the
object of the contract. In Nakpil vs. Court of Appeals, four (4) requisites must concur:
(a) the cause of the breach of the obligation must be independent of the will of
the debtor;
(b) the event must be either unforeseeable or unavoidable;
(c) the event must be such as to render it impossible for the debtor to fulfill his
obligation in a normal manner; and,
(d) the debtor must be free from any participation in or aggravation of the injury
to the creditor.

Petitioner failed to show that the collapse of the windmill was due solely to a fortuitous
event. Interestingly, the evidence does not disclose that there was actually a typhoon
on the day the windmill collapsed. Petitioner merely stated that there was a "strong
wind." But a strong wind in this case cannot be fortuitous - unforeseeable nor
unavoidable. On the contrary, a strong wind should be present in places where
windmills are constructed, otherwise the windmills will not turn.

The appellate court correctly observed that "given the newly-constructed windmill
system, the same would not have collapsed had there been no inherent defect in it
which could only be attributable to the appellee. It emphasized that respondent had
in his favor the presumption that "things have happened according to the ordinary
course of nature and the ordinary habits of life." This presumption has not been
rebutted by petitioner.













DR. FERNANDO PERIQUET, JR. vs. HEIRS OF THE LATE FELIX R.
FRANCISCO
G.R. No. L-69996 December 5, 1994 ( 238 S 697)

Facts:

Spouses Fernando Periquet and Petra Francisco were left childless after the death of
their only child, Elvira,

so they took in a son, herein petitioner, out of wedlock

of Marta
Francisco-Reyes, sister of Petra. Though he was not legally adopted, the boy was given
the name Fernando Periquet, Jr. and was reared to manhood by the spouses Periquet.

On March 20, 1966, Fernando Periquet died. He left a will dated March 28, 1940
wherein he named his wife Petra as his universal heir.

A few days before her death, Petra asked her lawyer to prepare her last will and
testament. However, she died before she could sign it. In the said will, Petra left her
estate to petitioner, Fernando Periquet, Jr. and provided for certain legacies for her
brothers and sisters.

An affidavit was executed by Petras successors-in-interest in favor of petitioner but
Felix Francisco retracted and alleged that the assignment was vitiated by fraud that he
was forced.


Issue: Whether or not the assignment of interest is void.

The kind of fraud that will vitiate a contract refers to those insidious words or machinations
resorted to by one of the contracting parties to induce the other to enter into a contract which
without them he would not have agreed to. It must have a determining influence on the
consent of the victim. The will of the victim, in effect, is maliciously vitiated by means of a false
appearance of reality.

First, the assignment was executed and signed freely and voluntarily by Felix Francisco in order
to honor, respect and give full effect to the last wishes of his deceased sister, Petra.

Second, there was valid cause or consideration in the execution of the assignment of hereditary
rights. Contrary to the trial court's finding that the amount of P10,000.00 as promised by Dr.
Fernando Periquet, Jr. to Felix Francisco is the cause or considereation of the assignment, we
find and so rule that it was the generosity or liberality of Felix Francisco that impelled him to
execute the questioned instrument. Pure beneficence, not monetary consideration, was the
moving force because Felix wanted to respect the wishes of a deceased sibling.

Third, the allegation of fraud is an afterthought on the part of the assignor, Felix Francisco who
filed the instant case to annul the deed of assignment on the ground of fraud only in 1970,
almost four (4) years after he executed the instrument.
Clearly, Felix slept on his rights and allowed laches to set in. This is fatal to his case. Laches is
failure or neglect, for an unreasonable length of time to do that which by exercising due
diligence could or should have been done, earlier; it is negligence or omission to assert a right
within a reasonable time warranting a presumption that the party entitled to assert it either
has abandoned it or declined to assert it.


Well-settled is the rule that a compromise agreement, once approved by the court, cannot and
should not be disturbed except for vices of consent or forgery, it being the obvious purpose of
such compromise agreement to settle, once and for all, the claims of the parties, and bar all
future disputes and controversies thereon.

A compromise agreement cannot bind persons who
are not parties thereto.

Neither would a person not party to a compromise agreement be
entitled to enforce the same.

Similarly, a person who is not a party to an agreement, as in this
case, cannot seek the amendment or modification of the same. Neither can a court of law rule
that the compromise agreement be amended and modified pursuant only to the wishes of a
person not party to the said agreement.










LEGASPI OIL CO. INC. vs CA and BERNARD OSERAOS
G.R. No. 96505 July 1, 1993 (224 S 213)

Facts

The price at which Oseraos sells the copra varies from time to time, depending on the
prevailing market price when the contract is entered into. One of his authorized agents,
Jose Llover, had previous transactions with Oseraos for the sale and delivery of copra.
On November 6, 1975, another designated agent signed a contract in behalf of Legaspi
Oil Inc. for the sale of 100 tons of copra at P79.00 per 100 kilos with the delivery terms
of 25 days effective December 15, 1975 (Exhibit G-2). At this point, it must be noted that
the price of copra had been fluctuating (going up and down), indicating its unsteady
position in the market.
On February 16, 1976, appellant's agent Jose Llover signed contract No. 3804 for the
sale of 100 tons of copra at P82.00 per 100 kilos with delivery terms of 20 days.
As compared to appellant's transaction on November 6, 1975, the current price agreed
upon is slightly higher than the last contract. In all these contracts though, the selling
price had always been stated as "total price" rather than per 100 kilos. However, the
parties had understood the same to be per 100 kilos in their previous transactions.
After the period to deliver had lapsed, appellant sold only 46,334 kilos of copra thus
leaving a balance of 53,666 kilos.
Accordingly, demands were made upon appellant to deliver the balance with a final
warning embodied in a letter dated October 6, 1976, that failure to deliver will mean
cancellation of the contract, the balance to be purchased at open market and the price
differential to be charged against appellant.
On October 22, 1976, since there was still no compliance, appellee exercised its option
under the contract and purchased the undelivered balance from the open market at the
prevailing price of P168.00 per 100 kilos, or a price differential of P86.00 per 100 kilos, a
net loss of P46,152.76 chargeable against appellant.
Issue: Whether the overpriced amount should be paid by appellant due to breach arising from
fraud or bad faith.

Held: Yes.

In general, fraud may be defined as the voluntary execution of a wrongful act, or a wilfull
omission, knowing and intending the effects which naturally and necessarily arise from such act
or omission; the fraud referred to in Article 1170 of the Civil Code of the Philippines is the
deliberate and intentional evasion of the normal fulfillment of obligation; it is distinguished
from negligence by the presence of deliberate intent, which is lacking in the latter.

The conduct of private respondent clearly manifests his deliberate fraudulent intent to evade
his contractual obligation for the price of copra had in the meantime more than doubled from
P82.00 to P168 per 100 kilograms. Under Article 1170 of the Civil Code of the Philippines, those
who in the performance of their obligation are guilty of fraud, negligence, or delay, and those
who in any manner contravene the tenor thereof, are liable for damages. Pursuant to said
article, private respondent is liable for damages.
The next point of inquiry, therefore, is the amount of damages which private respondent is
liable to pay petitioner. As aforementioned, on account of private respondent's deliberate
breach of his contractual obligation, petitioner was compelled to buy the balance of 53,666
kilos of copra in the open market at the then prevailing price of P168 per 100 kilograms thereby
paying P46,152.76 more than he would have paid had private respondent completed delivery
of the copra as agreed upon. Thus, private respondent is liable to pay respondent the amount
of P46,152.76 as damages. In case of fraud, bad faith, malice, or wanton attitude, the guilty
party is liable for all damages which may be reasonably attributed to the non performance of
the obligation (Magat vs. Medialdea, 121 SCRA 418 [1983]).



















PHILIPPINE CHARTER INSURANCE CORPORATION v CENTRAL
COLLEGES OF THE PHILIPPINES
G.R. Nos. 180631-33 February 22, 2012

Facts:
On May 16, 2000, Central Colleges of the Philippines (CCP), an educational institution,
contracted the services of Dynamic Planners and Construction Corporation (DPCC) to be
its general contractor for the construction of its five (5)-storey school building with a
total contract price of P248,000,000.00.

As embodied in a Contract Agreement, the construction of the entire building would be
done in two phases with each phase valued at P124,000,000.00.


To guarantee the fulfillment of the obligation, DPCC posted three (3) bonds, all issued by
the Philippine Charter Insurance Corporation (PCIC).

The Phase 1 of the project was completed without issue. Thereafter, CCP paid DPCC
P14,880,000.00 or 12% of the agreed price of P124,000,000.00 with a check dated
March 14, 2002 as downpayment for the Phase 2 of the project.


The Phase 2 of the project, however, encountered numerous delays. When CCP audited
DPCC on July 25, 2003, only 47% of the work to be done was actually finished.

On November 6, 2003, CCP notified DPCC and PCIC that only 51% of the project was
completed, which was way behind the construction schedule, prompting it to declare
the occurrence of default against DPCC. It formally requested PCIC to remit the
proceeds of the bonds.


CCP notified PCIC that because of DPCCs inability to complete the project on time, it
decided to terminate its contract with the latter and to continue the construction on its
own.

Eventually, negotiations to continue on with the construction between CCP and DPCC
reached a dead end. CCP hired another contractor to work on the school site.


On August 20, 2004, PCIC denied CCPs claims against the three bonds.
Issues:
1. Whether or not PCIC incurred delay.
2. Whether or not PCIC is held liable for the surety bonds.
Held

1. Article 1169 of the New Civil Code provides:
Those obliged to deliver or to do something incur in delay from the time the obligee
judicially or extrajudicially demands from them the fulfillment of their obligation.
The civil law concept of delay or default commences from the time the obligor demands,
judicially or extrajudicially, the fulfillment of the obligation from the obligee. In legal
parlance, demand is the assertion of a legal or procedural right.1[43] Hence, DPCC
incurred delay from the time CCP called its attention that it had breached the contract
and extrajudicially demanded the fulfillment of its commitment against the bonds.

It is the obligors culpable delay, not merely the time element, which gives the obligee
the right to seek the performance of the obligation. As such, CCPs cause of action
accrued from the time that DPCC became in culpable delay as contemplated in the
surety and performance bonds.

2. Upon notice of default of obligor DPCC, PCICs liability, as surety, was already attached.
A surety under Article 2047 of the New Civil Code solidarily binds itself with the principal
debtor to assure the fulfillment of the obligation:

Art. 2047. By guaranty a person, called the guarantor, binds himself to
the creditor to fulfill the obligation of the principal debtor in case the latter
should fail to do so.

If a person binds himself solidarily with the principal debtor, the
provisions of Section 4, Chapter 3, Title I of this Book shall be observed. In such
case the contract is called a suretyship
Having acted as a surety, PCIC is duty bound to perform what it has guaranteed on its
surety and performance bonds, all of which are callable on demand, occasioned by its
principals default.

















Titan-Ikeda Construction v Primetown Property
G.R. No. 158768 February 12, 2008 544 S 466

Facts:
In 1992, respondent Primetown Property Group, Inc. awarded the contract for the
structural works of its 32-storey Makati Prime Tower (MPT) to petitioner Titan-Ikeda
Construction and Development Corporation. The parties formalized their agreement in a
construction contract.
On June 30, 1994, respondent executed a deed of sale (covering 114 condominium units
and 20 parking slots of the MPT collectively valued by the parties at P112,416,716.88) in
favor of petitioner pursuant to the full-swapping payment provision of the
supplemental agreement. Shortly thereafter, petitioner sold some o In September 1995,
respondent engaged the services of Integratech, Inc. (ITI), an engineering consultancy
firm, to evaluate the progress of the project. In its September 7, 1995 report, ITI
informed respondent that petitioner, at that point, had only accomplished 31.89% of
the project f its units to third persons.
Records showed that respondent did not merely take over the supervision of the project
but took full control thereof
Petitioner consequently conducted an inventory. On the basis thereof, petitioner
demanded from respondent the payment of its balance amounting to P1,779,744.85.
petitioner demanded from respondent the delivery of MPT's management certificate
and the keys to the condominium units and the payment of its (respondent's) balance.
Because respondent ignored petitioner's demand, petitioner, on December 9, 1996,
filed a complaint for specific performance in the Housing and Land Use Regulatory
Board (HLURB).
While the complaint for specific performance was pending in the HLURB, respondent
sent a demand letter to petitioner asking it to reimburse the actual costs incurred in
finishing the project (or P69,785,923.47).1[30] In view of the pendency of the HLURB
case, petitioner did not heed respondent's demands.
During trial, the RTC found that because respondent modified the MPT's architectural
design, petitioner had to adjust the scope of work. Moreover, respondent belatedly
informed petitioner of those modifications. It also failed to deliver the concrete mix and
rebars according to schedule. For this reason, petitioner was not responsible for the
project's delay
The appellate court found that respondent fully performed its obligation when it
executed the June 30, 1994 deed of absolute sale in favor of petitioner. Moreover, ITI's
report clearly established that petitioner had completed only 48.71% of the project as of
October 12, 1995, the takeover date. Not only did it incur delay in the performance of
its obligation but petitioner also failed to finish the project. The CA ruled that
respondent was entitled to recover the value of the unfinished portion of the project
under the principle of unjust enrichment
Issue:
1. Whether or not petitioner is obliged to return the excess from the overpayment to
respondent.
2. Whether or not petitioner is in delay in the performance of the obligation.
Held:
1. Because the parties agreed to extinguish the supplemental agreement, they were no
longer required to fully perform their respective obligations. Petitioner was relieved of
its obligation to complete the project while respondent was freed of its obligation to
pay the entire contract price. However, respondent, by executing the June 30, 1994
deed of absolute sale, was deemed to have paid P112,416,716.88. Nevertheless,
because petitioner applied part of what it received to respondents outstanding
liabilities, it admitted overpayment.
Because petitioner acknowledged that it had been overpaid, it was obliged to return the
excess to respondent. Embodying the principle of solutio indebiti, Article 2154 of the
Civil Code provides:

Article 2154. If something is received when there is no right to demand it and it
was unduly delivered through mistake, the obligation to return it arises.
For the extra-contractual obligation of solutio indebiti to arise, the following
requisites must be proven:
1. the absence of a right to collect the excess sums and
2. the payment was made by mistake.
With regard to the first requisite, because the supplemental agreement had been
extinguished by the mutual agreement of the parties, petitioner became entitled only to
the cost of services it actually rendered (i.e., that fraction of the project cost in
proportion to the percentage of its actual accomplishment in the project). It was not
entitled to the excess (or extent of overpayment).
On the second requisite, Article 2163 of the Civil Code provides:
Article 2163. It is presumed that there was a mistake in the payment if
something which had never been due or had already been paid was delivered;
but, he from whom the return is claimed may prove that the delivery was made
out of liberality or for any other just cause. (emphasis supplied)
In this instance, respondent paid part of the contract price under the assumption that
petitioner would complete the project within the stipulated period. However, after the
supplemental agreement was extinguished, petitioner ceased working on the project.
Therefore, the compensation petitioner received in excess of the cost of its actual
accomplishment as of October 12, 1995 was never due. The condominium units and
parking slots corresponding to the said excess were mistakenly delivered by respondent
and were therefore not due to petitioner.

Stated simply, respondent erroneously delivered excess units to petitioner and the
latter, pursuant to Article 2154, was obliged to the return them to respondent. Article
2160 of the Civil Code provides:
Article 2160. He who in good faith accepts an undue payment of a thing
certain and determinate shall only be responsible for the impairment or loss of
the same or its accessories and accessions insofar as he has thereby been
benefited. If he has alienated it, he shall return the price or assign the action to
collect the sum.
One who receives payment by mistake in good faith is, as a general rule, only liable to return
the thing delivered. If he benefited therefrom, he is also liable for the impairment or loss of the
thing delivered and its accessories and accessions. If he sold the thing delivered, he should
either deliver the proceeds of the sale or assign the action to collect to the other party.
Under Article 2160 in relation to Article 2154, it should return to respondent the condominium
units and parking slots in excess of the value of its actual accomplishment (i.e., the amount due
to it) as of October 12, 1995. If these properties include units and/or slots already sold to third
persons, petitioner shall deliver the proceeds of the sale thereof or assign the actions for
collection to respondent as required by Article 2160.
2. Mora or delay is the failure to perform the obligation in due time because of dolo
(malice) or culpa (negligence). A debtor is deemed to have violated his obligation to the
creditor from the time the latter makes a demand. Once the creditor makes a demand,
the debtor incurs mora or delay.
The construction contract provided a procedure for protesting delay:
Article XIV
DELAYS AND ABANDONMENT
15.1. If at any time during the effectivity of this contract, [PETITIONER] shall
incur unreasonable delay or slippages of more than fifteen percent (15%) of the
scheduled work program, [RESPONDENT] should notify [PETITIONER] in writing
to accelerate the work and reduce, if not erase, slippage.
Respondent never sent petitioner a written demand asking it to accelerate work on the
project and reduce, if not eliminate, slippage. If delay had truly been the reason why
respondent took over the project, it would have sent a written demand as required by
the construction contract. Moreover, according to the October 12, 1995 letter-
agreement, respondent took over the project for the sole reason that such move was
part of its (respondent's) long-term plan.
Respondent, on the other hand, relied on ITI's September 7, 1995 report. The
construction contract named GEMM, not ITI, as construction manager. Because
petitioner did not consent to the change of the designated construction manager, ITI's
September 7, 1995 report could not bind it.











PNB MADECOR vs. GERARDO C. UY
G.R. No. 129598. August 15, 2001 363 S 128
Facts:
Guillermo Uy, doing business under the name G.U. Enterprises, assigned to respondent
Gerardo Uy his receivables due from Pantranco North Express Inc. (PNEI) amounting to
P4,660,558.00.

On January 23, 1995, Gerardo Uy filed with the RTC a collection suit with an application
for the issuance of a writ of preliminary attachment against PNEI. He sought to collect
from PNEI the amount of P8,397,440.00. He alleged that PNEI was guilty of fraud in
contracting the obligation sued upon, hence his prayer for a writ of preliminary
attachment.


PNB MADECOR claimed PNEI has not been paying its rentals from October 1990 to
March 24, 1994 -- when it (PNEI) vacated the property. As of the latter date, PNB
MADECORs receivables against PNEI amounted to P8,784,227.48, representing
accumulated rentals, inclusive of interest;

On the other hand, PNB MADECOR has payables to PNEI in the amount of P7,884,000.00
as evidenced by a promissory note executed on October 31, 1982 by then NAREDECO in
favor of PNEI;


PNB MADECOR and PNEI are therefore creditors and debtors of each other; and by force
of the law on compensation, both obligations of PNB MADECOR and PNEI are already
considered extinguished to the concurrent amount or up to P7,884,000.00 so that PNEI
is still obligated to pay PNB MADECOR the amount of P900,227.48.

Respondent alleges that PNEI had already demanded payment. The alleged demand
letter reads in part:
We wish to inform you that as of August 31, 1984 your outstanding accounts
amounted to P10,376,078.67, inclusive of interest.
In accordance with our previous arrangement, we have conveyed in favor of the
Philippine National Bank P7,884,921.10 of said receivables from you. With this
conveyance, the unpaid balance of your account will be P2,491,157.57.
To forestall further accrual of interest, we request that you take up with PNB the
implementation of said arrangement.

Issue: Whether or not the letter constitutes extrajudicial demand.
Held:
We agree with petitioner that this letter was not one demanding payment, but one that merely
informed petitioner of (1) the conveyance of a certain portion of its obligation to PNEI per a
dacion en pago arrangement between PNEI and PNB, and (2) the unpaid balance of its
obligation after deducting the amount conveyed to PNB. The import of this letter is not that
PNEI was demanding payment, but that PNEI was advising petitioner to settle the matter of
implementing the earlier arrangement with PNB.
Apart from the aforecited letter, no other demand letter appears on record, nor has any of the
parties adverted to another demand letter.
Since petitioners obligation to PNEI is payable on demand, and there being no demand made,
it follows that the obligation is not yet due. Therefore, this obligation may not be subject to
compensation for lack of a requisite under the law. Without compensation having taken place,
petitioner remains obligated to PNEI to the extent stated in the promissory note. This
obligation may undoubtedly be garnished in favor of respondent to satisfy PNEIs judgment
debt.









IGNACIO BARZAGA vs. COURT OF APPEALS and ANGELITO ALVIAR
G.R. No. 115129. February 12, 1997] 268 S 105
Facts:
Barzaga ordered costruction materials from Alviar for the construction of his wifes
niche and told the storekeeper, Boncales, that it has to be delivered at the Memorial
Cemetery in Dasmarias, Cavite, by eight o'clock that morning since his hired workers
were already at the burial site and time was of the essence. Marina Boncales agreed to
deliver the items at the designated time, date and place. With this assurance, Barzaga
purchased the materials and paid in full the amount of P2,110.00. Thereafter he joined
his workers at the cemetery, which was only a kilometer away, to await the delivery.

The construction materials did not arrive at eight o'clock as promised. At nine o' clock,
the delivery was still nowhere in sight. Barzaga returned to the hardware store to
inquire about the delay. Boncales assured him that although the delivery truck was not
yet around it had already left the garage and that as soon as it arrived the materials
would be brought over to the cemetery in no time at all.


After hours of waiting - which seemed interminable to him - Barzaga became extremely
upset. He decided to dismiss his laborers for the day.

On 21 January 1991, tormented perhaps by his inability to fulfill his wife's dying wish,
Barzaga wrote private respondent Alviar demanding recompense for the damage he
suffered. Alviar did not respond. Consequently, petitioner sued him before the
Regional Trial Court.


Resisting petitioner's claim, private respondent contended that legal delay could not be
validly ascribed to him because no specific time of delivery was agreed upon between
them. He pointed out that the invoices evidencing the sale did not contain any
stipulation as to the exact time of delivery and that assuming that the materials were
not delivered within the period desired by petitioner, the delivery truck suffered a flat
tire on the way to the store to pick up the materials.

According to Alviar, it was this obstinate refusal of petitioner to accept delivery that
caused the delay in the construction of the niche and the consequent failure of the
family to inter their loved one on the twenty-fourth of December, and that, if at all, it
was petitioner and no other who brought about all his personal woes.

Issue: Whether or not there has been delay in the absence of demand.

Held:
An assiduous scrutiny of the record convinces us that respondent Angelito Alviar was negligent
and incurred in delay in the performance of his contractual obligation. This sufficiently entitles
petitioner Ignacio Barzaga to be indemnified for the damage he suffered as a consequence of
delay or a contractual breach. The law expressly provides that those who in the performance of
their obligation are guilty of fraud, negligence, or delay and those who in any manner
contravene the tenor thereof, are liable for damages.
This case is clearly one of non-performance of a reciprocal obligation. In their contract of
purchase and sale, petitioner had already complied fully with what was required of him as
purchaser, i.e., the payment of the purchase price of P2,110.00. It was incumbent upon
respondent to immediately fulfill his obligation to deliver the goods otherwise delay would
attach.












JOSEFINA TAYAG et al v COURT OF APPEALS
G.R. No. 96053 March 3, 1993

Facts:
The deed of conveyance executed on May 28, 1975 by Juan Galicia, Sr., prior to his
demise in 1979, and Celerina Labuguin, in favor of Albrigido Leyva involving the
undivided one-half portion of a piece of land is the subject matter of the present
litigation between the heirs of Juan Galicia, Sr. who assert breach of the conditions as
against private respondent's claim anchored on full payment and compliance with the
stipulations thereof. For the sum of P50,000.00 under the following terms:
1. The sum of PESOS: THREE THOUSAND (P3,000.00) is HEREBY acknowledged to
have been paid upon the execution of this agreement;
2. The sum of PESOS: TEN THOUSAND (P10,000.00) shall be paid within ten (10)
days from and after the execution of this agreement;
3. The sum of PESOS: TEN THOUSAND (P10,000.00) represents the VENDORS'
indebtedness with the Philippine Veterans Bank which is hereby assumed by the
VENDEE; and
4. The balance of PESOS: TWENTY SEVEN THOUSAND (P27,000.00.) shall be paid
within one (1) year from and after the execution of this instrument. (p. 53, Rollo)
There is no dispute that the sum of P3,000.00 listed as first installment was received by
Juan Galicia, Sr. According to petitioners, of the P10,000.00 to be paid within ten days
from execution of the instrument, only P9,707.00 was tendered to, and received by,
them on numerous occasions from May 29, 1975, up to November 3, 1979. Concerning
private respondent's assumption of the vendors' obligation to the Philippine Veterans
Bank, the vendee paid only the sum of P6,926.41 while the difference the indebtedness
came from Celerina Labuguin. Moreover, petitioners asserted that not a single centavo
of the P27,000.00 representing the remaining balance was paid to them.

Issue: Whether or not the contract may be rescinded due to breach.
Held:
The suggestion of petitioners that the covenant must be cancelled in the light of private
respondent's so-called breach seems to overlook petitioners' demeanor who, instead of
immediately filing the case precisely to rescind the instrument because of non-compliance,
allowed private respondent to effect numerous payments posterior to the grace periods
provided in the contract. This apathy of petitioners who even permitted private respondent to
take the initiative in filing the suit for specific performance against them, is akin to waiver or
abandonment of the right to rescind normally conferred by Article 1191 of the Civil Code.
In Development Bank of the Philippines vs. Sarandi:
In a perfected contract of sale of land under an agreed schedule of payments,
while the parties may mutually oblige each other to compel the specific
performance of the monthly amortization plan, and upon failure of the buyer to
make the payment, the seller has the right to ask for a rescission of the contract
under Art. 1191 of the Civil Code, this shall be deemed waived by acceptance of
posterior payments.

















DR. FERNANDO PERIQUET, JR vs. HEIRS OF FRANCISCO
G.R. No. L-69996 December 5, 1994 ( 238 S 697)

Facts:

Spouses Fernando Periquet and Petra Francisco were left childless after the death of
their only child, Elvira,

so they took in a son, herein petitioner, out of wedlock

of Marta
Francisco-Reyes, sister of Petra. Though he was not legally adopted, the boy was given
the name Fernando Periquet, Jr. and was reared to manhood by the spouses Periquet.

On March 20, 1966, Fernando Periquet died. He left a will dated March 28, 1940
wherein he named his wife Petra as his universal heir.

A few days before her death, Petra asked her lawyer to prepare her last will and
testament. However, she died before she could sign it. In the said will, Petra left her
estate to petitioner, Fernando Periquet, Jr. and provided for certain legacies for her
brothers and sisters.

An affidavit was executed by Petras successors-in-interest in favor of petitioner but
Felix Francisco retracted and alleged that the assignment was vitiated by fraud that he
was forced.


Issue: Whether or not the assignment of interest is void.

The kind of fraud that will vitiate a contract refers to those insidious words or machinations
resorted to by one of the contracting parties to induce the other to enter into a contract which
without them he would not have agreed to.
13
It must have a determining influence on the
consent of the victim.
14
The will of the victim, in effect, is maliciously vitiated by means of a
false appearance of reality.

First, the assignment was executed and signed freely and voluntarily by Felix Francisco in order
to honor, respect and give full effect to the last wishes of his deceased sister, Petra.

Second, there was valid cause or consideration in the execution of the assignment of hereditary
rights. Contrary to the trial court's finding that the amount of P10,000.00 as promised by Dr.
Fernando Periquet, Jr. to Felix Francisco is the cause or considereation of the assignment, we
find and so rule that it was the generosity or liberality of Felix Francisco that impelled him to
execute the questioned instrument. Pure beneficence, not monetary consideration, was the
moving force because Felix wanted to respect the wishes of a deceased sibling.

Third, the allegation of fraud is an afterthought on the part of the assignor, Felix Francisco who
filed the instant case to annul the deed of assignment on the ground of fraud only in 1970,
almost four (4) years after he executed the instrument.
Clearly, Felix slept on his rights and allowed laches to set in. This is fatal to his case. Laches is
failure or neglect, for an unreasonable length of time to do that which by exercising due
diligence could or should have been done, earlier; it is negligence or omission to assert a right
within a reasonable time warranting a presumption that the party entitled to assert it either
has abandoned it or declined to assert it.


Well-settled is the rule that a compromise agreement, once approved by the court, cannot and
should not be disturbed except for vices of consent or forgery, it being the obvious purpose of
such compromise agreement to settle, once and for all, the claims of the parties, and bar all
future disputes and controversies thereon.
27
A compromise agreement cannot bind persons
who are not parties thereto.
28
Neither would a person not party to a compromise agreement
be entitled to enforce the same.
29
Similarly, a person who is not a party to an agreement, as in
this case, cannot seek the amendment or modification of the same. Neither can a court of law
rule that the compromise agreement be amended and modified pursuant only to the wishes of
a person not party to the said agreement.











ARMAND O. RAQUEL-SANTOS vs CA and FINVEST SECURITIES CO.,
INC
G.R. No. 174986 July 7, 2009
Facts:
Finvest is a stock brokerage corporation duly organized under Philippine laws and is a
member of the PSE with one membership seat pledged to the latter. Armand O. Raquel-
Santos (Raquel-Santos) was Finvests President and nominee to the PSE from February
20, 1990 to July 16, 1998.1[3] Annalissa Mallari (Mallari) was Finvests Administrative
Officer until December 31, 1998.

In the course of its trading operations, Finvest incurred liabilities to PSE representing
fines and penalties for non-payment of its clearing house obligations. PSE also received
reports that Finvest was not meeting its obligations to its clients. Consequently, PSE
indefinitely suspended Finvest from trading. The Securities and Exchange Commission
(SEC) also suspended its license as broker.

Finvest was duly informed of the SECs decision and was advised to refrain from making
any payment, delivery of securities, or selling or otherwise encumbering any of its assets
without PSEs approval.

In its Letter of February 23, 1999, PSE informed Finvest that it would only issue a written
clearance after Finvest had settled its obligations to PSE and paid all acknowledged
liabilities to various clients.

On April 21, 1999, PSE again sent a demand letter to Finvest, reminding the latter of the
March 31, 1999 deadline.

Pursuant to its Pledge Agreement with Finvest. Finvest protested the imposition of the
deadline for being arbitrary on the ground that the claims against it had not yet been
established.

Issue: Whether or not Finvest is already in default.


Held:
Under the law on contracts, mora solvendi or debtors default is defined as a delay in the
fulfillment of an obligation, by reason of a cause imputable to the debtor. There are three
requisites necessary for a finding of default. First, the obligation is demandable and liquidated;
second, the debtor delays performance; and third, the creditor judicially or extrajudicially
requires the debtors performance.
In the present petition, PSE insists that Finvests liability for fines, penalties and charges has
been established, determined and substantiated, hence, liquidated.
They plainly show that the parties were negotiating to determine the exact amount of Finvests
obligations to PSE, during which period PSE repeatedly moved the deadlines it imposed for
Finvest to pay the fines, penalties and charges, apparently to allow for more time to thresh
out the details of the computation of said penalties. In the middle of those talks, PSE
unceremoniously took steps to sell the pledged seat at public auction, without allowing the
negotiations to come to a conclusion. This sudden decision of PSE deprived Finvest a sporting
chance to settle its accountabilities before forfeiting its seat in the stock exchange. Without
that seat, Finvest will lose its standing to trade and do business in the stock exchange.
A debt is liquidated when the amount is known or is determinable by inspection of the terms
and conditions of relevant documents. Under the attendant circumstances, it cannot be said
that Finvests debt is liquidated. At the time PSE left the negotiating table, the exact amount of
Finvests fines, penalties and charges was still in dispute and as yet undetermined.
Consequently, Finvest cannot be deemed to have incurred in delay in the payment of its
obligations to PSE. It cannot be made to pay an obligation the amount of which was not fully
explained to it. The public sale of the pledged seat would, thus, be premature.











RCBC vs. CA and FELIPE LUSTRE
[G.R. No. 133107. March 25, 1999] 305 S 449

Facts :
On March 10, 1993, private respondent Atty. Felipe Lustre purchased a Toyota Corolla
from Toyota Shaw, Inc. for which he made a down payment of P164,620.00, the balance
of the purchase price to be paid in 24 equal monthly installments.
Private respondent thus issued 24 postdated checks for the amount of P14,976.00 each.
The first was dated April 10, 1991; subsequent checks were dated every 10
th
day of each
succeeding month.
To secure the balance, private respondent executed a promissory note and a contract of
chattel mortgage over the vehicle in favor of Toyota Shaw, Inc. The contract of chattel
mortgage, in paragraph 11 thereof, provided for an acceleration clause stating that
should the mortgagor default in the payment of any installment, the whole amount
remaining unpaid shall become due. In addition, the mortgagor shall be liable for 25%
of the principal due as liquidated damages.
All the checks dated April 10, 1991 to January 10, 1993 were thereafter encashed and
debited by RCBC from private respondent's account, except for RCBC Check No. 279805
representing the payment for August 10, 1991, which was unsigned.
Previously, the amount represented by RCBC Check No. 279805 was debited from
private respondent's account but was later recalled and re-credited to him. Because of
the recall, the last two checks, dated February 10, 1993 and March 10, 1993, were no
longer presented for payment. This was purportedly in conformity with petitioner
bank's procedure that once a client's account was forwarded to its account
representative, all remaining checks outstanding as of the date the account was
forwarded were no longer presented for payment.
On the theory that respondent defaulted in his payments, the check representing the
payment for August 10, 1991 being unsigned, petitioner, in a letter dated January 21,
1993, demanded from private respondent the payment of the balance of the debt,
including liquidated damages.


Issue: Whether or not the respondent is in default.

Held:
Article 1170 of the Civil Code states that those who in the performance of their obligations are
guilty of delay are liable for damages. The delay in the performance of the obligation, however,
must be either malicious or negligent. Thus, assuming that private respondent was guilty of
delay in the payment of the value of the unsigned check, private respondent cannot be held
liable for damages. There is no imputation, much less evidence, that private respondent acted
with malice or negligence in failing to sign the check. Indeed, we agree with the Court of
Appeals' finding that such omission was mere "inadvertence" on the part of private respondent.
The "default" was therefore not a case of failure to pay, the check being sufficiently funded,
and which amount was in fact already debitted [sic] from appellee's account by the appellant
bank which subsequently re-credited the amount to defendant-appellee's account for lack of
signature. All these actions RCBC did on its own without notifying defendant until sixteen (16)
months later when it wrote its demand letter dated January 21, 1993.
Clearly, appellant bank was remiss in the performance of its functions for it could have easily
called the defendant's attention to the lack of signature on the check and sent the check to, or
summoned, the latter to affix his signature.






















BPI INVESTMENT CORPORATION vs. CA and ALS MGMT & DEVT
CORP
G.R. No. 133632. February 15, 2002

Facts
Frank Roa obtained a loan at an interest rate of 16 1/4% per annum from Ayala
Investment and Development Corporation (AIDC), the predecessor of petitioner BPIIC,
for the construction of a house on his lot. Said house and lot were mortgaged to AIDC to
secure the loan.

Sometime in 1980, Roa sold the house and lot to private respondents ALS and Antonio
Litonjua for P850,000. They paid P350,000 in cash and assumed the P500,000 balance of
Roas indebtedness with AIDC. The latter, however, was not willing to extend the old
interest rate to private respondents and proposed to grant them a new loan of P500,000
to be applied to Roas debt and secured by the same property, at an interest rate of 20%
per annum and service fee of 1% per annum on the outstanding principal balance
payable within ten years in equal monthly amortization of P9,996.58 and penalty
interest at the rate of 21% per annum per day from the date the amortization became
due and payable.


On August 13, 1982, ALS and Litonjua updated Roas arrearages by paying BPIIC the sum
of P190,601.35. This reduced Roas principal balance to P457,204.90 which, in turn, was
liquidated when BPIIC applied thereto the proceeds of private respondents loan of
P500,000.

In June 1984, BPIIC instituted foreclosure proceedings against private respondents on
the ground that they failed to pay the mortgage indebtedness which from May 1, 1981
to June 30, 1984, amounted to (P475,585.31).


ALS and Litonjua alleged, among others, that they were not in arrears in their payment,
but in fact made an overpayment. They maintained that they should not be made to
pay amortization before the actual release of the P500,000 loan in August and
September 1982. Further, out of the P500,000 loan, only the total amount of
P464,351.77 was released to private respondents. Hence, applying the effects of legal
compensation, the balance of P35,648.23 should be applied to the initial monthly
amortization for the loan.

Issue: Whether or not contract of loan is a reciprocal obligation and that respondent is in
default.
Held:
A loan contract is not a consensual contract but a real contract. It is perfected only upon the
delivery of the object of the contract.
In the present case, the loan contract between BPI, on the one hand, and ALS and Litonjua, on
the other, was perfected only on September 13, 1982, the date of the second release of the
loan. Following the intentions of the parties on the commencement of the monthly
amortization, as found by the Court of Appeals, private respondents obligation to pay
commenced only on October 13, 1982, a month after the perfection of the contract.
We also agree with private respondents that a contract of loan involves a reciprocal obligation,
wherein the obligation or promise of each party is the consideration for that of the other. As
averred by private respondents, the promise of BPIIC to extend and deliver the loan is upon the
consideration that ALS and Litonjua shall pay the monthly amortization commencing on May 1,
1981, one month after the supposed release of the loan. It is a basic principle in reciprocal
obligations that neither party incurs in delay, if the other does not comply or is not ready to
comply in a proper manner with what is incumbent upon him. Only when a party has
performed his part of the contract can he demand that the other party also fulfills his own
obligation and if the latter fails, default sets in. Consequently, petitioner could only demand for
the payment of the monthly amortization after September 13, 1982 for it was only then when it
complied with its obligation under the loan contract. Therefore, in computing the amount due
as of the date when BPIIC extrajudicially caused the foreclosure of the mortgage, the starting
date is October 13, 1982 and not May 1, 1981.








CARMELITA LEAO vs. CA and HERMOGENES FERNANDO
G.R. No. 129018 November 15, 2001

Facts
On November 13, 1985, Hermogenes Fernando, as vendor and Carmelita Leao, as
vendee executed a contract to sell. In the contract, Carmelita Leao bound herself to
pay Hermogenes Fernando the sum of one hundred seven thousand and seven hundred
and fifty pesos (P107,750.00) as the total purchase price of the lot. P10,775.00 as DOWN
PAYMENT the balance (P96,975.00) shall be paid within a period of TEN (10) years at a
monthly amortization of P1,747.30 to begin from December 7, 1985 with interest at
eighteen per cent (18%) per annum based on balances.
The contract also provided for a grace period of one month within which to make
payments, together with the one corresponding to the month of grace. Should the
month of grace expire without the installments for both months having been satisfied,
an interest of 18% per annum will be charged on the unpaid installments.
After the execution of the contract, Carmelita Leao made several payments in lump
sum.
7
Thereafter, she constructed a house on the lot valued at P800,000. The last
payment that she made was on April 1, 1989.
On September 16, 1991, the trial court rendered a decision in an ejectment case
9
earlier
filed by respondent Fernando ordering petitioner Leao to vacate the premises and to
pay P250.00 per month by way of compensation for the use and occupation of the
property from May 27, 1991 until she vacated the premises, attorney's fees and costs of
the suit.

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

Held:
While the contract provided that the total purchase price was payable within a ten-year period,
the same contract specified that the purchase price shall be paid in monthly installments for
which the corresponding penalty shall be imposed in case of default. Petitioner Leao cannot
ignore the provision on the payment of monthly installments by claiming that the ten-year
period within which to pay has not elapsed.
Article 1169 of the Civil Code provides that in reciprocal obligations, neither party incurs in
delay if the other does not comply or is not ready to comply in a proper manner with what is
incumbent upon him. From the moment one of the parties fulfills his obligation, delay by the
other begins.
In the case at bar, respondent Fernando performed his part of the obligation by allowing
petitioner Leao to continue in possession and use of the property. Clearly, when petitioner
Leao did not pay the monthly amortizations in accordance with the terms of the contract, she
was in delay and liable for damages.

However, we agree with the trial court that the default
committed by petitioner Leao in respect of the obligation could be compensated by the
interest and surcharges imposed upon her under the contract in question.
It is a cardinal rule in the interpretation of contracts that if the terms of a contract are clear and
leave no doubt upon the intention of the contracting parties, the literal meaning of its
stipulation shall control. Thus, as there is no ambiguity in the language of the contract, there is
no room for construction, only compliance













HEIRS OF LUIS BACUS vs. CA and SPS FAUSTINO DURAY and
VICTORIANA DURAY
G.R. No. 127695. December 3, 2001 371 S 295

Facts:
Luis Bacus leased to private respondent Faustino Duray a parcel of agricultural land in
Bulacao, Talisay, Cebu.
The lease was for six years, ending May 31, 1990. The contract contained an option to
buy clause. Under said option, the lessee had the exclusive and irrevocable right to buy
2,000 square meters of the property within five years from a year after the effectivity of
the contract, at P200 per square meter.
Close to the expiration of the contract, Luis Bacus died on October 10, 1989. Thereafter,
on March 15, 1990, the Duray spouses informed Roque Bacus, one of the heirs of Luis
Bacus, that they were willing and ready to purchase the property under the option to
buy clause.
Due to the refusal of petitioners to sell the property, Faustino Durays adverse claim
Duray filed a complaint for specific performance against the heirs of Luis Bacus asking
that he be allowed to purchase the lot specifically referred to in the lease contract with
option to buy.
Petitioners alleged that before Luis Bacus death, private respondents conveyed to them
the formers lack of interest to exercise their option because of insufficiency of funds,
but they were surprised to learn of private respondents demand. In turn, they
requested private respondents to pay the purchase price in full but the latter refused.


Issues: Whether or not private respondent incurred delay.

Held:

Obligations under an option to buy are reciprocal obligations. The performance of one
obligation is conditioned on the simultaneous fulfillment of the other obligation. In other
words, in an option to buy, the payment of the purchase price by the creditor is contingent
upon the execution and delivery of a deed of sale by the debtor. In this case, when private
respondents opted to buy the property, their obligation was to advise petitioners of their
decision and their readiness to pay the price. They were not yet obliged to make actual
payment. Only upon petitioners actual execution and delivery of the deed of sale were they
required to pay. As earlier stated, the latter was contingent upon the former.

In Nietes vs. Court of Appeals, 46 SCRA 654 (1972), we held that notice of the creditors decision
to exercise his option to buy need not be coupled with actual payment of the price, so long as
this is delivered to the owner of the property upon performance of his part of the agreement.
Consequently, since the obligation was not yet due, consignation in court of the purchase price
was not yet required.
Consignation is the act of depositing the thing due with the court or judicial authorities
whenever the creditor cannot accept or refuses to accept payment and it generally requires a
prior tender of payment. In instances, where no debt is due and owing, consignation is not
proper. Therefore, petitioners contention that private respondents failed to comply with their
obligation under the option to buy because they failed to actually deliver the purchase price or
consign it in court before the contract expired and before they execute a deed, has no leg to
stand on.
Corollary, private respondents did not incur in delay when they did not yet deliver payment nor
make a consignation before the expiration of the contract. In reciprocal obligations, neither
party incurs in delay if the other does not comply or is not ready to comply in a proper manner
with what is incumbent upon him. Only from the moment one of the parties fulfills his
obligation, does delay by the other begin.














INTEGRATED PACKAGING CORP vs. CA and FIL-ANCHOR PAPER CO.,
INC.
G.R. No. 115117. June 8, 2000

Facts
Petitioner and private respondent executed on May 5, 1978, an order agreement
whereby private respondent bound itself to deliver to petitioner 3,450 reams of printing
paper, coated, 2 sides basis, 80 lbs., 38" x 23", short grain, worth P1,040,060.00 u
Petitioner entered into a contract with Philippine Appliance Corporation (Philacor) to
print three volumes of "Philacor Cultural Books."
As of July 30, 1979, private respondent had delivered to petitioner 1,097 reams of
printing paper out of the total 3,450 reams stated in the agreement. Petitioner alleged it
wrote private respondent to immediately deliver the balance because further delay
would greatly prejudice petitioner.
From June 5, 1980 and until July 23, 1981, private respondent delivered again to
petitioner various quantities of printing paper amounting to P766,101.70. However,
petitioner encountered difficulties paying private respondent said amount. Accordingly,
private respondent made a formal demand upon petitioner to settle the outstanding
account. On July 23 and 31, 1981 and August 27, 1981, petitioner made partial
payments totalling P97,200.00 which was applied to its back accounts.
Meanwhile, petitioner entered into an additional printing contract with Philacor.
Unfortunately, petitioner failed to fully comply with its contract with Philacor for the
printing of books VIII, IX, X and XI. Thus, Philacor demanded compensation from
petitioner for the delay and damage it suffered on account of petitioners failure.
Private respondent filed a collection suit against petitioner for the sum of P766,101.70,
representing the unpaid purchase price of printing paper bought by petitioner on credit.
In its answer, petitioner denied the material allegations of the complaint. By way of
petitioner alleged that private respondent was able to deliver only 1,097 reams of
printing paper which was short of 2,875 reams, in total disregard of their agreement;
that private respondent failed to deliver the balance of the printing paper despite
demand therefor, hence, petitioner suffered actual damages and failed to realize
expected profits; and that petitioners complaint was prematurely filed.

Issue: Whether or not private respondent committed delay in the performance of the
obligation.

Held:
The transaction between the parties is a contract of sale whereby private respondent (seller)
obligates itself to deliver printing paper to petitioner (buyer) which, in turn, binds itself to pay
therefor a sum of money or its equivalent (price). Both parties concede that the order
agreement gives rise to a reciprocal obligation such that the obligation of one is dependent
upon the obligation of the other. Reciprocal obligations are to be performed simultaneously, so
that the performance of one is conditioned upon the simultaneous fulfillment of the other.
Thus, private respondent undertakes to deliver printing paper of various quantities subject to
petitioners corresponding obligation to pay, on a maximum 90-day credit, for these materials.
Note that in the contract, petitioner is not even required to make any deposit, down payment
or advance payment, hence, the undertaking of private respondent to deliver the materials is
conditional upon payment by petitioner within the prescribed period. Clearly, petitioner did not
fulfill its side of the contract as its last payment
There is no dispute that the agreement provides for the delivery of printing paper on different
dates and a separate price has been agreed upon for each delivery. It is also admitted that it is
the standard practice of the parties that the materials be paid within a minimum period of
thirty (30) days and a maximum of ninety (90) days from each delivery. Accordingly, the private
respondents suspension of its deliveries to petitioner whenever the latter failed to pay on
time, as in this case, is legally justified under the second paragraph of Article 1583 of the Civil
Code which provides that:
"When there is a contract of sale of goods to be delivered by stated installments,
which are to be separately paid for, and the seller makes defective deliveries in
respect of one or more installments, or the buyer neglects or refuses without
just cause to take delivery of or pay for one or more installments, it depends in
each case on the terms of the contract and the circumstances of the case,
whether the breach of contract is so material as to justify the injured party in
refusing to proceed further and suing for damages for breach of the entire
contract, or whether the breach is severable, giving rise to a claim for
compensation but not to a right to treat the whole contract as broken."
(Emphasis supplied)

In this case, as found a quo petitioners evidence failed to establish that it had paid for the
printing paper covered by the delivery invoices on time. Consequently, private respondent has
the right to cease making further delivery, hence the private respondent did not violate the
order agreement. On the contrary, it was petitioner which breached the agreement as it failed
to pay on time the materials delivered by private respondent. Respondent appellate court
correctly ruled that private respondent did not violate the order agreement.

ROBERTO Z. LAFORTEZA et al vs. ALONZO MACHUCA
[G.R. No. 137552. June 16, 2000]
Facts:
An SPA was signed by some of the heirs in favor of Roberto and Gonzalo.
They used the SPA to sell the subject property for 630,000; 30,000 as earnest money
which shall be forfeited in favor of the defendants if the sale was not effected due to the
fault of the plaintiff and upon full payment of the unpaid balance the TCT. Upon
issuance by the proper Court of the new title, the BUYER-LESSEE shall be notified in
writing and said BUYER-LESSEE shall have thirty (30) days to produce the balance of
P600,000.00 which shall be paid to the SELLER-LESSORS upon the execution of the
Extrajudicial Settlement with sale.

Plaintiff sent the defendant heirs a letter requesting for an extension of the THIRTY (30)
DAYS deadline up to November 15, 1989 within which to produce the balance of SIX
HUNDRED THOUSAND PESOS (P600,000.00)
Defendant Roberto Z. Laforteza, assisted by his counsel Atty. Romeo L. Gutierrez, signed
his conformity to the plaintiffs letter request. The extension, however, does not appear
to have been approved by Gonzalo Z. Laforteza.
On November 15, 1989, plaintiff informed the defendant heirs, through defendant
Roberto Z. Laforteza, that he already had the balance of P600,000.00
However, the defendants, refused to accept the balance. Defendant Roberto Z.
Laforteza had told him that the subject property was no longer for sale.

Issue: Whether or not the memorandum of agreement constitutes reciprocal obligations.

Held:
A contract of sale is a consensual contract and is perfected at the moment there is a meeting of
the minds upon the thing which is the object of the contract and upon the price. From that
moment the parties may reciprocally demand performance subject to the provisions of the law
governing the form of contracts. The elements of a valid contract of sale under Article 1458 of
the Civil Code are (1) consent or meeting of the minds; (2) determinate subject matter and (3)
price certain in money or its equivalent.
The six-month period during which the respondent would be in possession of the property as
lessee, was clearly not a period within which to exercise an option. An option is a contract
granting a privilege to buy or sell within an agreed time and at a determined price. An option
contract is a separate and distinct contract from that which the parties may enter into upon the
consummation of the option. An option must be supported by consideration. An option
contract is governed by the second paragraph of Article 1479 of the Civil Code, which reads:
"Article 1479. xxx
An accepted unilateral promise to buy or to sell a determinate thing for a price
certain is binding upon the promissor if the promise is supported by a
consideration distinct from the price."
In the present case, the six-month period merely delayed the demandability of the contract of
sale and did not determine its perfection for after the expiration of the six-month period, there
was an absolute obligation on the part of the petitioners and the respondent to comply with
the terms of the sale. The parties made a "reasonable estimate" that the reconstitution of the
lost title of the house and lot would take approximately six months and thus presumed that
after six months, both parties would be able to comply with what was reciprocally incumbent
upon them. The fact that after the expiration of the six-month period, the respondent would
retain possession of the house and lot without need of paying rentals for the use therefor,
clearly indicated that the parties contemplated that ownership over the property would already
be transferred by that time.
Failure to comply with the first condition results in the failure of a contract, while the failure to
comply with the second condition only gives the other party the option either to refuse to
proceed with the sale or to waive the condition. Thus, Art. 1545 of the Civil Code states:
"Art. 1545. Where the obligation of either party to a contract of sale is subject to
any condition which is not performed, such party may refuse to proceed with the
contract or he may waive performance of the condition. If the other party has
promised that the condition should happen or be performed, such first
mentioned party may also treat the nonperformance of the condition as a
breach of warranty.
Where the ownership in the things has not passed, the buyer may treat the
fulfillment by the seller of his obligation to deliver the same as described and as
warranted expressly or by implication in the contract of sale as a condition of the
obligation of the buyer to perform his promise to accept and pay for the thing.
In the case at bar, there was already a perfected contract. The condition was imposed only on
the performance of the obligations contained therein. Considering however that the title was
eventually "reconstituted" and that the petitioners admit their ability to execute the
extrajudicial settlement of their fathers estate, the respondent had a right to demand
fulfillment of the petitioners obligation to deliver and transfer ownership of the house and lot.
Earnest money is something of value to show that the buyer was really in earnest, and given to
the seller to bind the bargain. Whenever earnest money is given in a contract of sale, it is
considered as part of the purchase price and proof of the perfection of the contract.
We do not subscribe to the petitioners view that the Memorandum Agreement was a contract
to sell. There is nothing contained in the Memorandum Agreement from which it can
reasonably be deduced that the parties intended to enter into a contract to sell, i.e. one
whereby the prospective seller would explicitly reserve the transfer of title to the prospective
buyer, meaning, the prospective seller does not as yet agree or consent to transfer ownership
of the property subject of the contract to sell until the full payment of the price, such payment
being a positive suspensive condition, the failure of which is not considered a breach, casual or
serious, but simply an event which prevented the obligation from acquiring any obligatory
force. There is clearly no express reservation of title made by the petitioners over the property,
or any provision which would impose non-payment of the price as a condition for the contracts
entering into force.






















RODOLFO N. REGALA vs. FEDERICO P. CARIN
G.R. No. 188715 April 6, 2011

Facts:
Petitioner and respondent are adjacent neighbors.
When petitioner decided to renovate his one storey residence by constructing a second
floor, he under the guise of merely building an extension to his residence, approached
respondent sometime in May 1998 for permission to bore a hole through a perimeter
wall shared by both their respective properties, to which respondent verbally consented
on condition that petitioner would clean the area affected by the work.
Petitioners real intention was to build a second floor, in fact with a terrace atop the
dividing wall.

In the course of the construction of the second floor, respondent and his wife Marietta
suffered from the dust and dirt which fell on their property.

Petitioner, denying respondents allegations, claimed in his Answer that he was the sole
and exclusive owner of the wall referred to as a perimeter wall, the same having been
built within the confines of his property and being part and parcel of the house and lot
package he purchased from the developer.

The trial court declared that, apart from the fact that petitioner knowingly commenced
the renovation of his house without the requisite building permit from the City
Engineers Office, he misrepresented to respondent his true intent of introducing
renovations. For, it found that instead of just boring a hole in the perimeter wall as
originally proposed, petitioner divided the wall into several sections to serve as a
foundation for his firewall (which ended up higher than the perimeter wall) and the
second storey of his house.

Issue: Whether there is fraud as a source of damages.


Held: Yes. Petitioner is liable to pay respondent P25,000 as nominal damages.

In fine, an award of moral damages calls for the presentation of 1) evidence of besmirched
reputation or physical, mental or psychological suffering sustained by the claimant; 2) a
culpable act or omission factually established; 3) proof that the wrongful act or omission of the
defendant is the proximate cause of the damages sustained by the claimant; and 4) the proof
that the act is predicated on any of the instances expressed or envisioned by Article 2219 and
Article 2220 of the Civil Code.
Respondent failed to establish by clear and convincing evidence that the injuries he sustained
were the proximate effect of petitioners act or omission. It thus becomes necessary to instead
look into the manner by which petitioner carried out his renovations to determine whether this
was directly responsible for any distress respondent may have suffered since the law requires
that a wrongful or illegal act or omission must have preceded the damages sustained by the
claimant.
Malice or bad faith implies a conscious and intentional design to do a wrongful act for a
dishonest purpose or moral obliquity; it is different from the negative idea of negligence in that
malice or bad faith contemplates a state of mind affirmatively operating with furtive design or
ill will. While the Court harbors no doubt that the incidents which gave rise to this dispute have
brought anxiety and anguish to respondent, it is unconvinced that the damage inflicted upon
respondents property was malicious or willful, an element crucial to merit an award of moral
damages under Article 2220 of the Civil Code.
Petitioner, however, cannot steer clear from any liability whatsoever. Respondent and his
familys rights to the peaceful enjoyment of their property have, at the very least, been
inconvenienced from the incident borne of petitioners construction work. Any pecuniary loss
or damage suffered by respondent cannot be established as the records are bereft of any
factual evidence to establish the same. Nominal damages may thus be adjudicated in order
that a right of the plaintiff, respondent herein, which has been violated or invaded by the
defendant, petitioner herein, may be vindicated or recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered by him.










THE INTERNATIONAL CORPORATE BANK (UNION BANK) vs. SPS.
FRANCIS S. GUECO and MA. LUZ E. GUECO
G.R. No. 141968. February 12, 2001 351 S 516

Facts:
The respondents Gueco Spouses obtained a loan from petitioner International
Corporate Bank (now Union Bank of the Philippines) to purchase a car a Nissan Sentra.

In consideration thereof, the Spouses executed promissory notes which were payable in
monthly installments and chattel mortgage over the car to serve as security for the
notes.

The Spouses defaulted in payment of installments.

Desi Tomas, the Banks Assistant Vice President demanded payment of the amount of
P184,000.00 which represents the unpaid balance for the car loan. After some
negotiations and computation, the amount was lowered to P154,000.00, However, as a
result of the non-payment of the reduced amount on that date, the car was detained
inside the banks compound.


Dr. Gueco went to the bank and talked with its Administrative Support. The negotiations
resulted in the further reduction of the outstanding loan to P150,000.00.

Dr. Gueco delivered a managers check in the amount of P150,000.00 but the car was
not released because of his refusal to sign the Joint Motion to Dismiss. It is the
contention of the Gueco spouses and their counsel that Dr. Gueco need not sign the
motion for joint dismissal considering that they had not yet filed their Answer.
Petitioner, however, insisted that the joint motion to dismiss is standard operating
procedure in their bank to effect a compromise and to preclude future filing of claims,
counterclaims or suits for damages.

Issue: Whether the signing of the joint motion to dismiss is fraudulent.
Held: No.
Fraud has been defined as the deliberate intention to cause damage or prejudice. It is the
voluntary execution of a wrongful act, or a willful omission, knowing and intending the effects
which naturally and necessarily arise from such act or omission; the fraud referred to in Article
1170 of the Civil Code is the deliberate and intentional evasion of the normal fulfillment of
obligation.
We fail to see how the act of the petitioner bank in requiring the respondent to sign the joint
motion to dismiss could constitute as fraud. True, petitioner may have been remiss in
informing Dr. Gueco that the signing of a joint motion to dismiss is a standard operating
procedure of petitioner bank. However, this can not in anyway have prejudiced Dr. Gueco.
The motion to dismiss was in fact also for the benefit of Dr. Gueco, as the case filed by
petitioner against it before the lower court would be dismissed with prejudice. The whole point
of the parties entering into the compromise agreement was in order that Dr. Gueco would pay
his outstanding account and in return petitioner would return the car and drop the case for
money and replevin before the Metropolitan Trial Court. The joint motion to dismiss was but a
natural consequence of the compromise agreement and simply stated that Dr. Gueco had fully
settled his obligation, hence, the dismissal of the case.
The law presumes good faith. Dr. Gueco failed to present an iota of evidence to overcome this
presumption. In fact, the act of petitioner bank in lowering the debt of Dr. Gueco from
P184,000.00 to P150,000.00 is indicative of its good faith and sincere desire to settle the case. If
respondent did suffer any damage, as a result of the withholding of his car by petitioner, he has
only himself to blame. Necessarily, the claim for exemplary damages must fail. In no way, may
the conduct of petitioner be characterized as wanton, fraudulent, reckless, oppressive or
malevolent










REPUBLIC vs. THE COURT OF TAX APPEALS and AGFHA,
INCORPORATED
G.R. No. 139050. October 2, 2001 366 S 489

Facts:
A shipment of bales of textile gray cloth arrived at the Manila International Container
Port (MICP).

AGFHA, Incorporated, is the consignee of the shipment. Forthwith, the shipping agent,
FIL-JAPAN, requested for an amendment of the Inward Foreign Manifest so as to correct
the name of the consignee from that of GQ GARMENTS, Inc., to that of AGFHA, Inc.

FIL-JAPAN forwarded to AGFHA, Inc., the amended Inward Foreign Manifest which the
latter, in turn, submitted to the MICP Law Division. The MICP indorsed the document to
the Customs Intelligence Investigation Services (CIIS). The CIIS placed the subject
shipment under hold on the ground that GQ GARMENTS, Inc., could not be located in its
given address at 244 Escolta Street, Binondo, Manila, and was thus suspected to be a
fictitious firm.


The Collector of Customs came up with a draft decision ordering the lifting of the
warrant of seizure and detention on the basis of its findings that GQ GARMENTS, Inc.,
was not a fictitious corporation and that there was a valid waiver of rights over the bales
of cloth by GQ GARMENTS, Inc., in favor of AGFHA, Inc.


The draft decision was submitted to the Deputy Commissioner for clearance and
approval, who, in turn, transmitted it to the CIIS for comment. The CIIS opposed the
draft decision, insisting that GQ GARMENTS, Inc., was a fictitious corporation.



Issue: Whether or not there is fraud in the forfeiture of the merchandise by petitioner
Held:
The requisites for the forfeiture of goods under Section 2530(f), in relation to (1) (3-5), of the
Tariff and Customs Code are: (a) the wrongful making by the owner, importer, exporter or
consignee of any declaration or affidavit, or the wrongful making or delivery by the same
person of any invoice, letter or paper - all touching on the importation or exportation of
merchandise; (b) the falsity of such declaration, affidavit, invoice, letter or paper; and (c) an
intention on the part of the importer/consignee to evade the payment of the duties due.
Petitioner asserts that all of these requisites are present in this case. It contends that it did not
presume fraud, rather the events positively point to the existence of fraud. Private respondent
AGFHA, Inc., on the other hand, maintains that there has only been an inadvertent error and
not an intentional wrongful declaration by the shipper to evade payment of any tax due. The
resolution of this issue would entail a reevaluation of the attendant circumstances, a matter
that cannot be freely undertaken by this Tribunal. It has been a settled rule that the Supreme
Court is not a trier of facts. Findings of the appellate court are generally binding and cannot be
disturbed by this Court unless it is sufficiently shown that there has been no evidence on record
to support such findings. The assessment made by the appellate court carry even more weight
when it is consistent with that of the trial court. Consonantly, the factual determination of the
Court of Tax Appeals, when supported by substantial evidence, will not be reversed on appeal
unless it is clear that the said court has committed gross error in the process.
The Collector of Customs, Court of Tax Appeals and the Court of Appeals are unanimous in
concluding that no fraud has been committed by private respondent in the importation of the
bales of cloth. The records do appear to sustain this conclusion.
Fraud must be proved to justify forfeiture. It must be actual, amounting to intentional wrong-
doing with the clear purpose of avoiding the tax. Forfeiture is not favored in law nor in equity.
Mere negligence is not equivalent to the fraud contemplated by law. What is here involved is
an honest mistake, not even directly attributable to private respondent, which will not deprive
the government of its right to collect the proper tax. The conclusion of the appellate court,
being consistent with the evidence on record and not contrary to law and jurisprudence, hardly
can be overturned by this Court.

Antonio Diaz vs. Davao Light and Power Co., Inc.
G.R. No. 160959
April 3, 2007
Facts:
DLPC sent a Notice of Disconnection to Diaz and Co., Inc. informing it that the hotels
unpaid electric consumption bill amounted to P190,111.02. It also warned that if the
amount was not paid, DLPC would be impelled to discontinue its service. Since Diaz and
Co., Inc. ignored the letter, Meter No. 36510 was disconnected.
Meanwhile, the National Food Authority (NFA) established its KADIWA store at C.M.
Recto Avenue, Davao City. It leased a portion of the ground floor of the Imperial Hotel
Building from Diaz and Co., Inc. NFA/KADIWA also applied for electricity service with
DLPC, and a contract was later executed between the parties.
The Kadiwa Center IV closed, and NFA/KADIWA vacated the Doa Segunda Building. In a
letter, NFA/KADIWA Provincial Manager, Roberta R. Melendres, informed DLPC that the
light and power connection of NFA/KADIWA would be left behind; its right to the
connection would be transferred to Diaz. She also informed DLPC that the P1,020.00
deposit of NFA/KADIWA for the power connection had been refunded to it by Diaz.
Diaz informed respondent Manuel Orig that he had leased the untenanted portions of
the Doa Segunda Building from Diaz and Co., Inc., and requested that a new electrical
connection for the building in his name be installed, separate from the one assigned to
him by NFA which was denied by DLPC. Diaz filed a petition for mandamus before the
RTC, Davao City.
The portion of the building formerly leased by NFA/KADIWA was leased to Matias
Mendiola. Because he needed more electricity than what could be provided by the
existing electrical wirings, Mendiola opted to change the electrical installation from a
one-phase meter to a three-phase meter connection. Mendiolas application was
approved by DLPC. DLPC and Mendiola executed a service Contract for electricity
service.
Diaz filed an application for preliminary injunction to enjoin DLPC from disconnecting
the electric connections to Meter No. 84738. Also, an Inter-Office Memo, signed by
Officer-in-Charge, Rebecca Madrid, was issued to all security guards of the Doa
Segunda Building who were ordered to prevent anyone from disturbing Meter No.
84738. Because of this, DLPC failed to substitute its single-phase meter with a three-
phase meter. DLPCs linemen thus installed the three-phase meter without removing
the single-phase meter.
The RTC denied the motion for issuance of a writ of injunction filed by Diaz. He moved
for a reconsideration, which was, however, denied. DLPC then removed its single-phase
meter which rendered almost half of the building without power. That same day, Diaz
went to the DLPC building and threw stones at it, breaking four glass windows in the
process. He then bought his own electric meter, Meter No. 86673509, had it calibrated
by the Board of Energy, and unilaterally replaced Meter No. 84738. The electricity in the
building was then restored.
Diaz filed a Complaint for Damages with Prayer for Preliminary Prohibitory and
Mandatory Injunction and Restraining Order before the RTC, Davao City. In the said
complaint, Diaz claimed that DLPC arbitrarily and illegally removed Meter No. 84738 in
violation of their business franchise and Article 19 of the New Civil Code, and had
threatened to remove Meter No. 86673509. The RTC denied the motion and ordered
Diaz to immediately remove Meter No. 86673509 and disconnect the electrical wirings
he had unilaterally connected to the upper floor rooms. Diaz filed a motion for
reconsideration but was denied.
Undaunted, DLPC filed a criminal complaint against Diaz for Violation of P.D. 401, as
amended by B.P. Blg. 876 with the City Prosecutors Office, Davao City but the same was
denied and the motion for reconsideration was likewise denied.
Diaz, Ramos, and Arguellas, as complainants, filed a criminal complaint with the Office
of the Provincial Fiscal of Davao del Norte charging the officers of DLPC with estafa
through falsification of public documents. The RTC dismissed the case.
The officers of DLPC filed a Complaint before the RTC, Cebu City, for damages and
attorneys fees against the defendants for malicious prosecution.
Issue:
Whether or not DLPC acted in bad faith in instituting the criminal cases against Diaz.
Held:
Malicious prosecution has been defined as an action for damages brought by or against whom a
criminal prosecution, civil suit or other legal proceeding has been instituted maliciously and
without probable cause, after the termination of such prosecution, suit, or other proceeding in
favor of the defendant therein. It is an established rule that in order for malicious prosecution
to prosper, the following requisites must be proven by petitioner: (1) the fact of prosecution
and the further fact that the defendant (respondent) was himself the prosecutor, and that the
action finally terminated with an acquittal; (2) that in bringing the action, the prosecutor acted
without probable cause; and (3) that the prosecutor was actuated or impelled by legal malice,
that is, by improper or sinister motive. The foregoing are necessary to preserve a persons right
to litigate which may be emasculated by the undue filing of malicious prosecution cases. From
the foregoing requirements, it can be inferred that malice and want of probable cause must
both be clearly established to justify an award of damages based on malicious prosecution.
Thus, the element of malice and the absence of probable cause must be proved. There must be
proof that the prosecution was prompted by a sinister design to vex and humiliate a person,
and that it was initiated deliberately knowing that the charge was false and baseless to entitle
the victims to damages. The two elements must simultaneously exist; otherwise, the presence
of probable cause signifies, as a legal consequence, the absence of malice. In the instant case, it
is evident that respondent DLPC was not motivated by malicious intent or by a sinister design to
unduly harass petitioner, but only by a well-founded anxiety to protect its rights. Respondent
DLPC cannot therefore be faulted in availing of the remedies provided for by law.













Ms. Violeta Yasona vs. De Ramos
G.R. No. 156339
October 6, 2004
Facts:
Aurea Yasoa and her son, Saturnino, went to the house of Jovencio de Ramos to ask for
financial assistance in paying their loans to Philippine National Bank (PNB), otherwise
their residential house and lot would be foreclosed.
Jovencio paid Aureas bank loan. As agreed upon, Aurea executed a deed of absolute
sale in favor of Jovencio over half of the lot consisting of 123 square meters.
Twenty-two years later, Aurea filed an estafa complaint against brothers Jovencio and
Rodencio de Ramos on the ground that she was deceived by them when she asked for
their assistance in 1971 concerning her mortgaged property. Aurea averred that she
never sold any portion of her property to Jovencio and never executed a deed of sale.
Assistant Provincial Prosecutor Rodrigo B. Zayenis dismissed the criminal complaint for
estafa for lack of evidence. On account of this dismissal, Jovencio and Rodencio filed a
complaint for damages on the ground of malicious prosecution with the Regional Trial
Court of Sta. Cruz. They alleged that the filing of the estafa complaint against them was
done with malice and it caused irreparable injury to their reputation, as Aurea knew
fully well that she had already sold half of the property to Jovencio. The trial court
rendered a decision in favor of Jovencio and Rodencio which was affirmed by the CA.
Hence, the instant petition.
ISSUE:
Whether or not the filing of the criminal complaint for estafa by petitioners against
respondents constituted malicious prosecution.
HELD:
In this jurisdiction, the term malicious prosecution has been defined as an action for damages
brought by one against whom a criminal prosecution, civil suit, or other legal proceeding has
been instituted maliciously and without probable cause, after the termination of such
prosecution, suit, or other proceeding in favor of the defendant therein. To constitute malicious
prosecution, there must be proof that the prosecution was prompted by a sinister design to vex
or humiliate a person, and that it was initiated deliberately by the defendant knowing that his
charges were false and groundless. Concededly, the mere act of submitting a case to the
authorities for prosecution does not make one liable for malicious prosecution.
Malicious prosecution, both in criminal and civil cases, requires the elements of (1) malice and
(2) absence of probable cause. These two elements are present in the present controversy.
Petitioners were completely aware that Jovencio was the rightful owner of the lot covered by
TCT No. 73251, clearly signifying that they were impelled by malice and avarice in bringing the
unfounded action. That there was no probable cause at all for the filing of the estafa case
against respondents led to the dismissal of the charges filed by petitioners with the Provincial
Prosecutors Office in Siniloan, Laguna. A suit for malicious prosecution will prosper where legal
prosecution is carried out without probable cause.















Asian Terminals, Inc., vs. Philam Insurance Co., Inc.
G.R. No. 181163
July 24, 2013
Facts:
Nichimen Corporation shipped to Universal Motors Corporation (Universal Motors) 219
packages containing 120 units of brand new Nissan Pickup Truck Double Cab 4x2 model,
without engine, tires and batteries, on board the vessel S/S Calayan Iris from Japan to
Manila. The shipment, was insured with Philam against all risks.
The carrying vessel arrived at the port of Manila and when the shipment was unloaded
by the staff of ATI, it was found that the package marked as 03-245-42K/1 was in bad
order. The cargoes were stored for temporary safekeeping inside CFS Warehouse in Pier
No. 5.
The shipment was withdrawn by R.F. Revilla Customs Brokerage, Inc., the authorized
broker of Universal Motors, and delivered to the latters warehouse in Mandaluyong
City. Upon the request of Universal Motors, a bad order survey was conducted on the
cargoes and it was found that one Frame Axle Sub without LWR was deeply dented on
the buffle plate while six Frame Assembly with Bush were deformed and misaligned.
Owing to the extent of the damage to said cargoes, Universal Motors declared them a
total loss.
Universal Motors filed a formal claim for damages in the amount of P643,963.84 against
Westwind, ATIand R.F. Revilla Customs Brokerage, Inc. When Universal Motors
demands remained unheeded, it sought reparation from and was compensated in the
sum of P633,957.15 by Philam. Accordingly, Universal Motors issued a Subrogation
Receipt in favor of Philam.
Philam, as subrogee of Universal Motors, filed a Complaint for damages against
Westwind, ATI and R.F. Revilla Customs Brokerage, Inc. before the RTC of Makati City,
Branch 148.
On September 24, 1999, the RTC rendered judgment in favor of Philam and ordered
Westwind and ATI to pay Philam, jointly and severally, the sum of P633,957.15.
On appeal, the CA affirmed with modification the ruling of the RTC. The appellate court
directed Westwind and ATI to pay Philam, jointly and severally, the amount
of P190,684.48 with interest at the rate of 12% per annum until fully paid, attorneys
fees of P47,671 and litigation expenses.
ISSUE:
Whether or not Westwind and ATI are jointly and severally liable.
HELD:
Common carriers, from the nature of their business and for reasons of public policy, are bound
to observe extraordinary diligence in the vigilance over the goods transported by them. Subject
to certain exceptions enumerated under Article 1734of the Civil Code, common carriers are
responsible for the loss, destruction, or deterioration of the goods. The extraordinary
responsibility of the common carrier lasts from the time the goods are unconditionally placed in
the possession of, and received by the carrier for transportation until the same are delivered,
actually or constructively, by the carrier to the consignee, or to the person who has a right to
receive them.
It is settled in maritime law jurisprudence that cargoes while being unloaded generally remain
under the custody of the carrier. Since the damage to the cargo was incurred during the
discharge of the shipment and while under the supervision of the carrier, the latter is liable for
the damage caused to the cargo.This is not to say, however, that petitioner ATI is without
liability for the damaged cargo.
While it is true that an arrastre operator and a carrier may not be held solidarily liable at all
times, the facts of these cases show that apart from ATIs stevedores being directly in charge of
the physical unloading of the cargo, its foreman picked the cable sling that was used to hoist
the packages for transfer to the dock. Moreover, the fact that 218 of the 219 packages were
unloaded with the same sling unharmed is telling of the inadequate care with which ATIs
stevedore handled and discharged Case No. 03-245-42K/1.







Cecilia Yambao vs. Melchorita Zuniga et al.
G.R. No. 146173
December 11, 2003
Facts:
The bus owned by the petitioner was being driven by her driver, one Ceferino G.
Venturina along the northbound lane of Epifanio delos Santos Avenue (EDSA), within the
vicinity of Bagong Barrio, Kalookan City. With Venturina was the bus conductor,
Fernando Dumaliang. Suddenly, the bus bumped Herminigildo Zuiga, a pedestrian.
Such was the force of the impact that the left side of the front windshield of the bus was
cracked. Zuiga was rushed to the Quezon City General Hospital where he was given
medical attention, but due to the massive injuries sustained, he succumbed shortly
thereafter.
Private respondents, as heirs of the victim, filed a Complaint against petitioner and her
driver, Venturina, for damages at the RTC of Malolos City. The complaint essentially
alleged that Venturina drove the bus in a reckless, careless and imprudent manner, in
violation of traffic rules and regulations, without due regard to public safety, thus
resulting in the victims premature death.
The trial court rendered judgment in favor of the plaintiffs which was affirmed by the
appellate court. Yambao then duly moved for reconsideration, but her motion was
denied for want of merit. Hence, this petition for review.
Issue:
Whether or not petitioner exercised the diligence of a good father of a family in the selection
and supervision of her employees, thus absolving her from any liability.
Held:
Case law teaches that for an employer to have exercised the diligence of a good father of a
family, he should not be satisfied with the applicants mere possession of a professional drivers
license; he must also carefully examine the applicant for employment as to his qualifications,
his experience and record of service. Petitioner failed to present convincing proof that she went
to this extent of verifying Venturinas qualifications, safety record, and driving history. The
presumption juris tantum that there was negligence in the selection of her bus driver, thus,
remains unrebutted.
Nor did petitioner show that she exercised due supervision over Venturina after his selection.
Petitioner did not present any proof that she drafted and implemented training programs and
guidelines on road safety for her employees. In fact, the record is bare of any showing that
petitioner required Venturina to attend periodic seminars on road safety and traffic efficiency.
Hence, petitioner cannot claim exemption from any liability arising from the recklessness or
negligence of Venturina.


















Smith Bell Dodwell Shipping Agency Corporation vs. Catalino Borja
and International to Wage and Transport Corporation
G.R. No. 143008
June 10, 2002
Facts:
Smith Bell filed a written request with the Bureau of Customs for the attendance of the
latters inspection team on vessel M/T King Family which was due to arrive at the port of
Manila.
While M/T King Family was unloading chemicals unto two (2) barges ITTC 101 and CLC-
1002 owned by respondent ITTC, a sudden explosion occurred setting the vessels afire.
Upon hearing the explosion, Borja, who was at that time inside the cabin preparing
reports, ran outside to check what happened. Again, another explosion was heard.
Seeing the fire and fearing for his life, Borja hurriedly jumped over board to save
himself. However, the water was likewise on fire due mainly to the spilled chemicals.
Despite the tremendous heat, Borja swam his way for one hour until he was rescued by
the people living in the squatters area and sent to San Juan De Dios Hospital.
After weeks of intensive care at the hospital, his attending physician diagnosed Borja to
be permanently disabled due to the incident. Borja made demands against Smith Bell
and ITTC for the damages caused by the explosion. However, both denied liabilities and
attributed to each other negligence.
The trial court ruled in favor of Respondent Borja and held petitioner liable for damages
and loss of income. On appeal, the CA affirmed the decision of the lower court. Hence,
this Petition.
Issue:
Whether or not petitioner can be held liable for the injuries suffered by Borja.
Held:
Negligence is conduct that creates undue risk of harm to another. It is the failure to observe
that degree of care, precaution and vigilance that the circumstances justly demand, whereby
that other person suffers injury. Petitioners vessel was carrying chemical cargo - alkyl benzene
and methyl methacrylate monomer. While knowing that their vessel was carrying dangerous
inflammable chemicals, its officers and crew failed to take all the necessary precautions to
prevent an accident. Petitioner was, therefore, negligent.
Hence, the owner or the person in possession and control of a vessel and the vessel are liable
for all natural and proximate damage caused to persons and property by reason of negligent
management or navigation.


















Ramon Ilusorio vs. Court of Appeals and The Manila Banking
Corporation
G.R. No. 139130
November 27, 2002
Facts:
Eugenio, the secretary of petitioner, was able to encash and deposit to her personal
account about seventeen (17) checks drawn against the account of the petitioner at the
respondent bank, with an aggregate amount of P119,634.34. Petitioner did not bother
to check his statement of account until a business partner apprised him that he saw
Eugenio use his credit cards. Petitioner fired Eugenio immediately, and instituted a
criminal action against her for estafa thru falsification before the Office of the Provincial
Fiscal of Rizal. Private respondent, through an affidavit executed by its employee, Mr.
Dante Razon, also lodged a complaint for estafa thru falsification of commercial
documents against Eugenio on the basis of petitioners statement that his signatures in
the checks were forged.
Petitioner then requested the respondent bank to credit back and restore to its account
the value of the checks which were wrongfully encashed but respondent bank refused.
Hence, petitioner filed the instant case.
Issue:
Whether or not petitioner has a cause of action against private respondent.
HELD:
Petitioner has no cause of action against Manila Bank. To be entitled to damages, petitioner
has the burden of proving negligence on the part of the bank for failure to detect the
discrepancy in the signatures on the checks. It is incumbent upon petitioner to establish the
fact of forgery, i.e., by submitting his specimen signatures and comparing them with those on
the questioned checks. Curiously though, petitioner failed to submit additional specimen
signatures as requested by the National Bureau of Investigation from which to draw a
conclusive finding regarding forgery.
As borne by the records, it was petitioner, not the bank, who was negligent. Negligence is the
omission to do something which a reasonable man, guided by those considerations which
ordinarily regulate the conduct of human affairs, would do, or the doing of something which a
prudent and reasonable man would do. In the present case, it appears that petitioner accorded
his secretary unusual degree of trust and unrestricted access to his credit cards, passbooks,
check books, bank statements, including custody and possession of cancelled checks and
reconciliation of accounts.


















National Power Corporation vs. Court of Appeals and Engineering
Construction, Inc.
G.R. No. L-47379
May 16, 1988
Facts:
Respondent Engineering Construction, Inc., being a successful bidder, executed a
contract in Manila with the National Waterworks and Sewerage Authority (NAWASA),
whereby the former undertook to furnish all tools, labor, equipment, and materials (not
furnished by Owner), and to construct the proposed 2nd lpo-Bicti Tunnel, Intake and
Outlet Structures, and Appurtenant Structures, and Appurtenant Features, at
Norzagaray, Bulacan, and to complete said works within eight hundred (800) calendar
days from the date the Contractor receives the formal notice to proceed.
The respondent corporation already had completed the first major phase of the work,
namely, the tunnel excavation work. Some portions of the outworks at the Bicti site
were still under construction. As soon as the plaintiff corporation had finished the
tunnel excavation work at the Bicti site, all the equipment no longer needed there were
transferred to the Ipo site where some projects were yet to be completed.
The record shows that typhoon Welming hit Central Luzon, passing through defendant's
Angat Hydro-electric Project and Dam at lpo, Norzagaray, Bulacan. Strong winds struck
the project area, and heavy rains intermittently fell. Due to the heavy downpour, the
water in the reservoir of the Angat Dam was rising perilously at the rate of sixty (60)
centimeters per hour. To prevent an overflow of water from the dam, since the water
level had reached the danger height of 212 meters above sea level, the petitioner
corporation caused the opening of the spillway gates.
The appellate court sustained the findings of the trial court that the evidence
preponderantly established the fact that due to the negligent manner with which the
spillway gates of the Angat Dam were opened, an extraordinary large volume of water
rushed out of the gates, and hit the installations and construction works of ECI at the
lope site with terrific impact, as a result of which the latter's stockpile of materials and
supplies, camp facilities and permanent structures and accessories either washed away,
lost or destroyed.

Issue:
Whether or not petitioner can be held liable for the loss and damage of ECIs stockpile of
materials and supplies, camp facilities and permanent structures and accessories.
Held:
Petitioner NPC was undoubtedly negligent because it opened the spillway gates of the Angat
Dam only at the height of typhoon Welming when it knew very well that it was safer to have
opened the same gradually and earlier, as it was also undeniable that NPC knew of the coming
typhoon at least four days before it actually struck. And even though the typhoon was an act of
God or what we may call force majeure, NPC cannot escape liability because its negligence was
the proximate cause of the loss and damage.
Thus, it has been held that when the negligence of a person concurs with an act of God in
producing a loss, such person is not exempt from liability by showing that the immediate cause
of the damage was the act of God. To be exempt from liability for loss because of an act of God,
he must be free from any previous negligence or misconduct by which the loss or damage may
have been occasioned.











Anabelle Muaje-Tuazon and Almer Abing vs. Wenphil Corporation,
et al.
G.R. No. 162447
December 27, 2006
Facts:
Abing was assigned to the SM North Edsa Annex branch while Tuazon was assigned to
the Meycauayan branch. Before the announcement of the third round winners,
management received reports that as early as the first round of the contest, the
Meycauayan, MCU Caloocan, Tandang Sora and Fairview branches cheated. An internal
investigation ensued.
Petitioners were summoned to the main office regarding the reported anomaly.
Petitioners denied there was cheating. Immediately thereafter, petitioners were
notified, in writing, of hearings and of their immediate suspension. Thereafter,
petitioners were dismissed.
Petitioners filed, with the Regional Arbitration Branch, a complaint for illegal suspension
and dismissal against respondent Wenphil Corporation and its General Manager,
Elizabeth P. Orbita. Petitioners insisted that they were innocent of the accusations and
were dismissed without cause. In their defense, respondents maintained that
petitioners were terminated for dishonesty amounting to serious misconduct and willful
breach of trust.
The Labor Arbiter ruled in favor of the petitioners.
Respondents appealed to the National Labor Relations Commission (NLRC), which
affirmed with modification the decision of the Labor Arbiter.
Denied reconsideration, respondents elevated the case to the Court of Appeals, which
found substantial proof of petitioners' misconduct. Petitioners moved for
reconsideration but the same was denied. Hence, this petition.
Issue:
Whether or not petitioners were illegally dismissed.
Held:
In the present case, the tape receipts presented by respondents showed that there were
anomalies committed in the branches managed by the petitioners. On the principle of
respondeat superior or command responsibility alone, petitioners may be held liable for
negligence in the performance of their managerial duties, unless petitioners can positively show
that they were not involved. Their position requires a high degree of responsibility that
necessarily includes unearthing of fraudulent and irregular activities. Their bare,
unsubstantiated and uncorroborated denial of any participation in the cheating does not prove
their innocence nor disprove their alleged guilt. Additionally, some employees declared in their
affidavits that the cheating was actually the idea of the petitioners.
Petitioners make much of the fact that the affidavits were executed only after the investigation.
This is of no moment. For even without the affidavits, sufficient basis exists for respondents'
loss of trust and confidence on the petitioners as managerial officers.















Radio Communication of the Philippines, Inc. vs. Alfonso Verchez, et
al.
G.R. No. 164349
January 31, 2006
Facts:
Editha Hebron Verchez (Editha) was confined at the Sorsogon Provincial Hospital due to
an ailment. On even date, her daughter Grace Verchez-Infante (Grace) immediately
went to the Sorsogon Branch of the Radio Communications of the Philippines, Inc. (RCPI)
whose services she engaged to send a telegram to her sister Zenaida Verchez-Catibog
(Zenaida) who was residing at 18 Legal St., GSIS Village, Quezon City reading: Send check
money Mommy hospital. For RCPIs services, Grace paid P10.50 for which she was
issued a receipt.
As three days after RCPI was engaged to send the telegram to Zenaida no response was
received from her, Grace sent a letter to Zenaida, this time thru JRS Delivery Service,
reprimanding her for not sending any financial aid.
Immediately after she received Graces letter, Zenaida, along with her husband
Fortunato Catibog, left for Sorsogon. On her arrival at Sorsogon, she disclaimed having
received any telegram.
The telegram was finally delivered to Zenaida 25 days later.
Verchez, along with his daughters Grace and Zenaida and their respective spouses, filed
a complaint against RCPI before the Regional Trial Court (RTC) of Sorsogon for damages.
The RTC rendered a decision in favor of respondents.
On appeal, the Court of Appeals affirmed the trial courts decision.
Issue:
Whether or not petitioner is negligent in its failure to deliver the telegram within the shortest
possible time
Held:
In the case at bar, RCPI bound itself to deliver the telegram within the shortest possible time. It
took 25 days, however, for RCPI to deliver it.
Assuming arguendo that fortuitous circumstances prevented RCPI from delivering the telegram
at the soonest possible time, it should have at least informed Grace of the non-transmission
and the non-delivery so that she could have taken steps to remedy the situation. But it did not.
There lies the fault or negligence.
People depend on telecommunications companies in times of deep emotional stress or pressing
financial needs. Knowing that messages about the illnesses or deaths of loved ones, births or
marriages in a family, important business transactions, and notices of conferences or meetings
as in this case, are coursed through the petitioner and similar corporations, it is incumbent
upon them to exercise a greater amount of care and concern than that shown in this case.
Every reasonable effort to inform senders of the non-delivery of messages should be
undertaken.














Victory Liner, Inc. vs. Rosalito Gammad, et al
G.R. No. 159636
November 25, 2004
Facts:
Marie Grace Pagulayan-Gammad, respondents wife, was on board an air-conditioned
Victory Liner bus bound for Tuguegarao, Cagayan from Manila. The bus while running at
a high speed fell on a ravine somewhere in Barangay Baliling, Sta. Fe, Nueva Vizcaya,
which resulted in the death of Marie Grace and physical injuries to other passengers.
Respondent heirs of the deceased filed a complaint for damages arising from culpa
contractual against petitioner. In its answer, the petitioner claimed that the incident
was purely accidental and that it has always exercised extraordinary diligence in its 50
years of operation.
At the pre-trial, petitioner did not want to admit the proposed stipulation that the
deceased was a passenger of the Victory Liner Bus which fell on the ravine and that she
was issued Passenger Ticket No. 977785. Respondents, for their part, did not accept
petitioners proposal to pay P50,000.00.
The trial court rendered its decision in favor of respondents.
On appeal by petitioner, the Court of Appeals affirmed the decision of the trial court.
Hence, this petition.
Issue:
Whether or not petitioner should be held liable for breach of contract of carriage
Held:
A common carrier is bound to carry its passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious persons, with due regard to all the
circumstances. In a contract of carriage, it is presumed that the common carrier was at fault or
was negligent when a passenger dies or is injured. Unless the presumption is rebutted, the
court need not even make an express finding of fault or negligence on the part of the common
carrier. This statutory presumption may only be overcome by evidence that the carrier
exercised extraordinary diligence.
In the instant case, there is no evidence to rebut the statutory presumption that the proximate
cause of Marie Graces death was the negligence of petitioner.
Article 1764 in relation to Article 2206 of the Civil Code, holds the common carrier in breach of
its contract of carriage that results in the death of a passenger liable to pay the following: (1)
indemnity for death, (2) indemnity for loss of earning capacity, and (3) moral damages.


















FGU Insurance Corporation vs. G.P Sarmiento Trucking Corporation
and Lambert Eroles
G.R. No. 141910
August 6, 2002
Facts:
G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver thirty (30) units of
Condura S.D. white refrigerators aboard one of its Isuzu truck, driven by Lambert Eroles,
from the plant site of Concepcion Industries, Inc., along South Superhighway in Alabang,
Metro Manila, to the Central Luzon Appliances in Dagupan City. While the truck was
traversing the north diversion road along McArthur highway in Barangay Anupol,
Bamban, Tarlac, it collided with an unidentified truck, causing it to fall into a deep canal,
resulting in damage to the cargoes.
FGU Insurance Corporation (FGU), an insurer of the shipment, paid to Concepcion
Industries, Inc., the value of the covered cargoes in the sum of P204,450.00. FGU, in
turn, being the subrogee of the rights and interests of Concepcion Industries, Inc.,
sought reimbursement of the amount it had paid to the latter from GPS. Since the
trucking company failed to heed the claim, FGU filed a complaint for damages and
breach of contract of carriage against GPS and its driver Lambert Eroles with the
Regional Trial Court, Branch 66, of Makati City.
The RTC rendered a decision in favor of respondents. On appeal, the CA affirmed the
decision of the trial court and the motion for reconsideration was likewise denied.
Hence, this petition.
Issue:
Whether or not respondent GPS, either as a common carrier or a private carrier, may be
presumed to have been negligent when the goods it undertook to transport safely were
subsequently damaged while in its protective custody and possession.
Held:
Respondent trucking corporation recognizes the existence of a contract of carriage between it
and petitioners assured, and admits that the cargoes it has assumed to deliver have been lost
or damaged while in its custody. In such a situation, a default on, or failure of compliance with,
the obligation in this case, the delivery of the goods in its custody to the place of destination -
gives rise to a presumption of lack of care and corresponding liability on the part of the
contractual obligor the burden being on him to establish otherwise. GPS has failed to do so.
Respondent driver, on the other hand, without concrete proof of his negligence or fault, may
not himself be ordered to pay petitioner. The driver, not being a party to the contract of
carriage between petitioners principal and defendant, may not be held liable under the
agreement. A contract can only bind the parties who have entered into it or their successors
who have assumed their personality or their juridical position. Consonantly with the axiom res
inter alios acta aliis neque nocet prodest, such contract can neither favor nor prejudice a third
person. Petitioners civil action against the driver can only be based on culpa aquiliana, which,
unlike culpa contractual, would require the claimant for damages to prove negligence or fault
on the part of the defendant.














Light Rail Transit Authority & Rodolfo Roman vs. Marjorie Navidad,
et al.
G.R. No. 145804
February 6, 2003
Facts:
Nicanor Navidad, then drunk, entered the EDSA LRT station after purchasing a token
(representing payment of the fare). While Navidad was standing on the platform near
the LRT tracks, Junelito Escartin, the security guard assigned to the area approached
Navidad. A misunderstanding or an altercation between the two apparently ensued that
led to a fist fight. No evidence, however, was adduced to indicate how the fight started
or who, between the two, delivered the first blow or how Navidad later fell on the LRT
tracks. At the exact moment that Navidad fell, an LRT train, operated by petitioner
Rodolfo Roman, was coming in. Navidad was struck by the moving train, and he was
killed instantaneously.
The widow of Nicanor, herein respondent Marjorie Navidad, along with her children,
filed a complaint for damages against Junelito Escartin, Rodolfo Roman, the LRTA, the
Metro Transit Organization, Inc. (Metro Transit), and Prudent for the death of her
husband. LRTA and Roman filed a counterclaim against Navidad and a cross-claim
against Escartin and Prudent. Prudent, in its answer, denied liability and averred that it
had exercised due diligence in the selection and supervision of its security guards.
The trial court rendered its decision in favor of the respondent. On appeal, The CA
affirmed the decision of the trial court with modification that Prudent is exonerated
from liability. Petitioners filed a motion for reconsideration but was denied. Hence, this
petition.
Issue:
Whether or not petitioners are liable for the death of Nicanor.
Held:
The foundation of LRTAs liability is the contract of carriage and its obligation to indemnify the
victim arises from the breach of that contract by reason of its failure to exercise the high
diligence required of the common carrier. In the discharge of its commitment to ensure the
safety of passengers, a carrier may choose to hire its own employees or avail itself of the
services of an outsider or an independent firm to undertake the task. In either case, the
common carrier is not relieved of its responsibilities under the contract of carriage.
On the part of Prudent, there is nothing to link (Prudent) to the death of Nicanor, for the reason
that the negligence of its employee, Escartin, has not been duly proven.
There being, similarly, no showing that petitioner Rodolfo Roman himself is guilty of any
culpable act or omission, he must also be absolved from liability. Needless to say, the
contractual tie between the LRT and Navidad is not itself a juridical relation between the latter
and Roman; thus, Roman can be made liable only for his own fault or negligence.
















Rodzssen Supply Co., Inc. vs. Far East Bank & Trust Co.
G.R. No. 109087
May 9, 2001
Facts:
Rodzssen Supply, Inc. opened with Far East Bank and Trust Co. a 30-day domestic letter
of credit in the amount of P190,000.00 in favor of Ekman and Company, Inc. (Ekman) for
the purchase from the latter of five units of hydraulic loaders.
The three units of the hydraulic loaders were delivered to petitioner for which
respondent paid Ekman the sum of P114,000.00, which amount petitioner paid
respondent before the expiry date of the LC.
The shipment of the remaining two units of hydraulic loaders valued at P76,000.00 sent
by Ekman was readily received by respondent before the expiry date of the subject LC.
Upon Ekmans presentation of the documents for the P76,000.00 representing final
negotiation on the LC before the expiry date, and after a series of negotiations,
respondent paid to Ekman the amount of P76,000.00; and that upon respondents
demand from petitioner to pay for said amount (P76,000.00), petitioner refused to pay
without any valid reason. Respondent prays for judgment ordering defendant to pay
the abovementioned P76,000.00 plus due interest thereon.
The RTC rendered a decision in favor of the respondent. On appeal, the CA affirmed the
decision of the trial court. Hence, this petition.
Issue:
Whether or not petitioner is liable to respondent.
Held:
Petitioner should pay respondent bank the amount the latter expended for the equipment
belatedly delivered by Ekman and voluntarily received and kept by petitioner.
Respondent banks right to seek recovery from petitioner is anchored, not upon the
inefficacious Letter of Credit, but on Article 2142 of the Civil Code which reads as follows:
Certain lawful, voluntary and unilateral acts give rise to the juridical relation of quasi-contract
to the end that no one shall be unjustly enriched or benefited at the expense of another.
When both parties to a transaction are mutually negligent in the performance of their
obligations, the fault of one cancels the negligence of the other and, as in this case, their rights
and obligations may be determined equitably under the law proscribing unjust enrichment.



















University of the East vs. Romeo Jader
G.R. No. 132344
February 17, 2000
Facts:
Plaintiff was enrolled in the defendants College of Law from 1984 up to 1988. In the
first semester of his last year, he failed to take the regular final examination in Practice
Court 1 for which he was given an incomplete grade. He enrolled for the second
semester as fourth year law student and he filed an application for the removal of the
incomplete grade given him by Professor Carlos Ortega which was approved by Dean
Tiongson. Professor Ortega submitted his grade.
The plaintiffs name appeared in the tentative list of candidates for graduation for the
Degree of Bachelor of Laws.
The plaintiff attended the investiture ceremonies. He tendered a blow-out that evening
which was attended by neighbors, friends and relatives who wished him good luck in the
forthcoming bar examinations.
He took a leave of absence without pay from his job and enrolled at the pre-bar review
class in FEU. Having learned of the deficiency he dropped his review class and was not
able to take the bar examination.
Respondent sued petitioner for damages alleging that he suffered moral shock, mental
anguish, serious anxiety, besmirched reputation, wounded feelings and sleepless nights
when he was not able to take the 1988 bar examinations arising from the latters
negligence.
The trial court rendered a decision in favor of the plaintiff. The CA, on appeal, affirmed
the decision of the trial court. Hence, this petition.
Issue:
Whether or not petitioner is negligent.
Held:
Petitioner, in belatedly informing respondent of the result of the removal examination,
particularly at a time when he had already commenced preparing for the bar exams, cannot be
said to have been acting in good faith. Absence of good faith must be sufficiently established
for a successful prosecution by the aggrieved party in a suit for abuse of right under Article 19
of the Civil Code.
Considering further, that the institution of learning involved herein is a university which s
engaged in legal education, it should have practiced what it inculcates in its students, more
specifically the principle of good dealings.
Educational institutions are duty-bound to inform the students of their academic status and not
wait for the latter to inquire from the former. The conscious indifference of a person to the
rights or welfare of the person/persons who may be affected by his act or omission can support
a claim for damages.
Petitioners liability arose from its failure to promptly inform respondent of the result of an
examination and in misleading the latter into believing that he had satisfied all requirements for
the course.















Bayne Adjusters and Surveyors, Inc. vs. Court of Appeals and
Insurance Company of North America
G. R. No. 116332
January 25, 2000
Facts:
Colgate Palmolive Philippine, Inc., imported alkyl benzene from Japan valued at
US$255,802.88. The said liquid cargo was insured with herein private respondent
Insurance Company of North America against all risk for its full value. Petitioner Bayne
Adjusters and Surveyors Inc., was contracted by the consignee to supervise the proper
handling and discharge of the cargo from the chemical tanker to a receiving barge until
the cargo is pumped into the consignees shore tank.
When the cargo arrived in Manila petitioners surveyor supervised the transfer of the
cargo from the chemical tanker to the receiving barge. Pumping of the liquid cargo from
the barge to the consignees tank was interrupted several times due to mechanical
problems with the pump.
When the pump broke down once again, the petitioners surveyor left the premises
without leaving any instruction with the barge foreman what to do in the event that the
pump becomes operational again. No other surveyor was left in the premises and the
assigned surveyor did not seal the valves leading to the tank to avoid unsupervised
pumping of the cargo.
Later that day, the consignee asked the petitioner to send a surveyor to conduct tank
sounding. Petitioner sent Amado Fontillas, a cargo surveyor, not a liquid bulk surveyor,
to the premises and it was agreed that pumping operation would resume the following
day.
Fontillas tried to inform both the barge men and the assigned surveyor of the scheduled
resumption of pumping operation but he could not find them so he left the premises.
When the barge men arrived in the early evening, they found the valves of the tank
open and resumed pumping operation in the absence of any instruction from the
surveyor to the contrary.
The following morning it was found that an undetermined amount of alkyl benzene was
lost due to overflow. The consignee filed a claim with the private respondent insurance
corporation for the value of the lost liquid cargo. A compromise quantity of 67.649MT of
alkyl benzene was agreed to have been lost in the overflow and respondent insurance
corporation agreed to pay the consignee the net amount of P811,609.53. Private
respondent instituted an action for collection of sum of money as subrogee of the
consignee after failure to extrajudicially settle the matter with Bayne Adjusters.
Both the trial court and the appellate court found the petitioners failure to comply with
the Standard Operating Procedure for Handling Liquid Bulk Cargo when pumping
operation is suspended as the proximate cause of the loss.
Issue:
Whether or not petitioner is negligent.
Held:
The negligence of the obligor in the performance of the obligation renders him liable for
damages for the resulting loss suffered by the obligee. Fault or negligence of the obligor
consists in his failure to exercise due care and prudence in the performance of the obligation as
the nature of the obligation so demands. The factual findings and conclusions of the trial and
appellate court when supported by substantial evidence are entitled to great respect and will
not be disturbed on appeal except on very strong and cogent grounds.
The petitioners failure to closely supervise the discharge of the cargo in accordance with
accepted guidelines is the proximate cause of the loss. There is no cogent reason to overturn
the legal conclusion reached by the lower courts that the petitioner is negligent in the
performance of its duty as a marine superintendent surveyor under the Standard Operating
Procedure in handling liquid cargo and held the petitioner liable for damages for the loss of the
cargo.








Delsan Transport Lines, Inc. vs. C & A Construction, Inc.
G.R. No. 156034
October 1, 2003
Facts:
M/V Delsan Express, a ship owned and operated by petitioner Delsan Transport Lines,
Inc., anchored at the Navotas Fish Port for the purpose of installing a cargo pump and
clearing the cargo oil tank. Captain Demetrio T. Jusep of M/V Delsan Express received a
report from his radio head operator in Japan that a typhoon was going to hit Manila.
Capt. Jusep tried to seek shelter at the North Harbor but could not enter the area
because it was already congested. Capt. Jusep decided to drop anchor at the vicinity of
Vitas mouth, 4 miles away from a Napocor power barge. At that time, the waves were
already reaching 8 to 10 feet high. Capt. Jusep ordered his crew to go full ahead to
counter the wind which was dragging the ship towards the Napocor power barge. To
avoid collision, Capt. Jusep ordered a full stop of the vessel. He succeeded in avoiding
the power barge, but when the engine was re-started and the ship was maneuvered full
astern, it hit the deflector wall constructed by respondent. The damage caused by the
incident amounted to P456,198.24.
Respondent demanded payment of the damage from petitioner but the latter refused to
pay. Consequently, respondent filed a complaint for damages with the Regional Trial
Court of Manila, Branch 46. In its answer, petitioner claimed that the damage was
caused by a fortuitous event.
The complaint filed by respondent was dismissed. The trial court ruled that petitioner
was not guilty of negligence because it had taken all the necessary precautions to avoid
the accident.
On appeal to the Court of Appeals, the decision of the trial court was reversed and set
aside. It found Capt. Jusep guilty of negligence. Hence, this petition.
Issue:
Whether or not petitioner can be held liable for the negligence of Captain Jusep.
Held:
When Capt. Jusep ignored the weather report notwithstanding reasonable foresight of harm,
he showed an inexcusable lack of care and caution which an ordinary prudent person would
have observed in the same situation. Had he moved the vessel earlier, he could have had
greater chances of finding a space at the North Harbor considering that the Navotas Port where
they docked was very near North Harbor. Even if the latter was already congested, he would
still have time to seek refuge in other ports.
In the case at bar, however, petitioner presented no evidence that it formulated
rules/guidelines for the proper performance of functions of its employees and that it strictly
implemented and monitored compliance therewith. Failing to discharge the burden, petitioner
should therefore be held liable for the negligent act of Capt. Jusep.

















Philippine Commercial International Bank vs. Court of Appeals, et al
G.R. No. 121413
January 29, 2001
Facts:
Ford had been maintaining a checking account with Citibank; that Citibank Check No.
SN-04867 which was drawn and issued by the plaintiff in favor of the Commissioner of
Internal Revenue was a crossed check in that, on its face were two parallel lines and
written in between said lines was the phrase Payee's Account Only, and that Citibank
paid the full face value of the check in the amount of P4,746,114.41 to the defendant
IBAA.
Citibank Check No. SN-04867, together with the Revenue Tax Receipt No. 18747002,
was deposited with petitioner IBAA, through its Ermita Branch. The latter accepted the
check and sent it to the Central Clearing House for clearing on the same day. Thereafter,
IBAA presented the check for payment to Citibank and the latter paid the face value of
the check in the amount of P4,746,114.41. Consequently, the amount of P4,746,114.41
was debited in respondents account with the defendant Citibank and the check was
returned to the respondent.
Upon verification, respondent discovered that its Citibank Check No. SN-04867 in the
amount of P4,746,114.41 was not paid to the Commissioner of Internal Revenue. The
respondent notified the latter that in case it will be re-assessed by the BIR for the
payment of the taxes covered by the said checks, then respondent shall hold the IBAA
and Citibank liable for reimbursement of the face value of the same. Both denied
liability and refused to pay.
IBAA was merged with the Philippine Commercial International Bank (PCI Bank) with the
latter as the surviving entity.
An investigation by the NBI revealed that Citibank Check No. SN-04867 was recalled by
Godofredo Rivera, the General Ledger Accountant of Ford. He purportedly needed to
hold back the check because there was an error in the computation of the tax due to the
BIR. With Rivera's instruction, PCIBank replaced the check with two of its own
Manager's Checks (MCs). Alleged members of a syndicate later deposited the two MCs
with the Pacific Banking Corporation.
The trial court rendered its decision in favor of respondent which was affirmed by the
appellate court. Hence, this petition.
Issue:
Whether or not PCIBank is liable for negligence.
Held:
PCIBank failed to verify the authority of Mr. Rivera to negotiate the checks. The neglect of
PCIBank employees to verify whether his letter requesting for the replacement of the Citibank
Check No. SN-04867 was duly authorized, showed lack of care and prudence required in the
circumstances.
Banking business requires that the one who first cashes and negotiates the check must take
some percautions to learn whether or not it is genuine. And if the one cashing the check
through indifference or othe circumstance assists the forger in committing the fraud, he should
not be permitted to retain the proceeds of the check from the drawee whose sole fault was
that it did not discover the forgery or the defect in the title of the person negotiating the
instrument before paying the check. For this reason, a bank which cashes a check drawn upon
another bank, without requiring proof as to the identity of persons presenting it, or making
inquiries with regard to them, cannot hold the proceeds against the drawee when the proceeds
of the checks were afterwards diverted to the hands of a third party. In such cases the drawee
bank has a right to believe that the cashing bank (or the collecting bank) had, by the usual
proper investigation, satisfied itself of the authenticity of the negotiation of the checks. Thus,
one who encashed a check which had been forged or diverted and in turn received payment
thereon from the drawee, is guilty of negligence which proximately contributed to the success
of the fraud practiced on the drawee bank. The latter may recover from the holder the money
paid on the check.
Having established that the collecting bank's negligence is the proximate cause of the loss,
PCIBank is liable in the amount corresponding to the proceeds of Citibank Check No. SN-04867.







San Miguel Corporation vs. Heirs of Sabiniano Inguito and Julius
Ouano
G.R. No. 141716
July 4, 2002
Facts:
San Miguel Corporation entered into a Time Charter Party Agreement with Julius Ouano,
doing business under the name and style J. Ouano Marine Services.
During the term of the charter, SMC issued sailing orders to the Master of the MN Doa
Roberta, Captain Sabiniano Inguito.
SMC Radio Operator Rogelio P. Moreno contacted Captain Inguito through the radio and
advised him to take shelter. Captain Inguito replied that they will proceed since the
typhoon was far away from them, and that the winds were in their favor.
Moreno again communicated with Captain Inguito and advised him to take shelter. The
captain responded that they can manage. Hearing this, Moreno immediately tried to get
in touch with Rico Ouano to tell him that Captain Inguito did not heed their advice.
However, Rico Ouano was out of his office, so Moreno left the message with the
secretary.
Captain Inguito called Moreno over the radio and requested him to contact Rico Ouano,
son of Julius Ouano, because they needed a helicopter to rescue them.
The M/V Doa Roberta sank. Out of the 25 officers and crew on board the vessel, only
five survived.
The heirs of the deceased captain and crew, as well as the survivors, of the ill-fated M/V
Doa Roberta filed a complaint for tort against San Miguel Corporation and Julius
Ouano.
Julius Ouano filed an answer with cross-claim, alleging that the proximate cause of the
loss of the vessel and its officers and crew was the fault and negligence of SMC, which
had complete control and disposal of the vessel as charterer and which issued the
sailing order for its departure despite being forewarned of the impending typhoon.
Thus, he prayed that SMC indemnify him for the cost of the vessel and the unrealized
rentals and earnings thereof.
In its answer to the complaint and answer to the cross-claim, SMC countered that it was
Ouano who had the control, supervision and responsibilities over the navigation of the
vessel. This notwithstanding, and despite his knowledge of the incoming typhoon,
Ouano never bothered to initiate contact with his vessel.
The court a quo rendered judgment finding that the proximate cause of the loss of the
M/V Doa Roberta was attributable to SMC. On appeal, the CA rendered a decision
modifying the trial courts decision declaring SMC and Julian Ouano jointly and severally
liable to heirs of the deceased and survivors of the M/V Doa Roberta except to the
heirs of Capt. Sabiniano Inguito.
SMC and Ouano filed separate motions for reconsideration, which were denied by the
Court of Appeals for lack of merit. Hence, this petition.
Issue:
Whether or not petitioner is negligent.
Held:
It is very clear that Captain Sabiniano Inguito had sufficient time within which to secure his men
and the vessel. But he waited until the vessel was already in distress to seek help in saving his
men and the vessel. In any event, Capt. Inguito had full control and responsibility, whether to
follow a sailing order or to take shelter when already at sea. In fact, there was an incident when
a sailing order was issued by SMC to Inguito but he decided not to proceed with the voyage
because of a tropical storm.
Ouano miserably failed to overcome the presumption of his negligence. He failed to present
proof that he exercised the due diligence of a bonus paterfamilias in the selection and
supervision of the captain of the M/V Doa Roberta. Hence, he is vicariously liable for the loss
of lives and property occasioned by the lack of care and negligence of his employee.
SMC is not liable for the losses. The contention that it was the issuance of the sailing order by
SMC which was the proximate cause of the sinking is untenable. The fact that there was an
approaching typhoon is of no moment. It appears that on one previous occasion, SMC issued a
sailing order to the captain of the M/V Doa Roberta, but the vessel cancelled its voyage due to
typhoon. Likewise, it appears from the records that SMC issued the sailing order before
typhoon Ruping was first spotted on that day.





Heirs of Jose Marcial Ochoa, et al. vs. G & S Transport Corporation
G.R. No. 170071
July 16, 2012
Facts:
A Complaint for Damages was filed by the heirs against G & S with the Regional Trial
Court (RTC), Pasig City, Branch 164 on account of Jose Marcials death while onboard a
taxicab owned and operated by G & S.
The RTC adjudged G & S guilty of breach of contract of carriage and ordered it to pay the
heirs for damages.
On appeal, the Court of Appeals (CA) affirmed the RTC Decision but with the
modifications that the awards for loss of income in the amount of P6,537,244.96 be
deleted and that moral damages be reduced to P200,000.00.
The deletion was ordered on the ground that the income certificate issued by Jose
Marcials employer, the United States Agency for International Development (USAID), is
self-serving, unreliable and biased, and that the same was not supported by competent
evidence such as income tax returns or receipts. A Motion for Reconsideration was filed
but it was denied by the court. Hence, this petition.
Issue:
Whether or not respondent is liable to the heirs.
Held:
It is true that before a private document offered as authentic be received in evidence, its due
execution and authenticity must first be proved. However, it must be remembered that this
requirement of authentication only pertains to private documents and does not apply to public
documents, these being admissible without further proof of their due execution or
genuineness. Two reasons may be advanced in support of this rule, namely: said documents
have been executed in the proper registry and are presumed to be valid and genuine until the
contrary is shown by clear and convincing proof; and, second, because public documents are
authenticated by the official signature and seals which they bear and of which seals, courts may
take judicial notice. Hence, in the presentation of public documents as evidence, due execution
and authenticity thereof are already presumed.
And, there being no clear and sufficient evidence presented by G & S to overcome the
presumptions, the RTC is correct when it admitted in evidence the said document. The USAID
Certification could very well be used as basis for the award for loss of income to the heirs.
G & S failed to overcome the presumption that the common carrier is at fault or is negligent
when a passenger dies or is injured.


















Alfredo Pacis and Cleopatra Pacis vs. Jerome Jovanne Morales
G.R. No. 169467
February 25, 2010
Facts:
Alfred Dennis Pacis, then 17 years old and a first year student at the Baguio
Colleges Foundation taking up BS Computer Science, died due to a gunshot
wound in the head which he sustained while he was at the Top Gun Firearm[s]
and Ammunition[s] Store located at Upper Mabini Street, Baguio City. The gun
store was owned and operated by defendant Jerome Jovanne Morales.
The bullet which killed Alfred Dennis Pacis was fired from a gun brought in by a
customer of the gun store for repair.
Defendant Morales was in Manila at the time. His employee Armando Jarnague,
who was the regular caretaker of the gun store was also not around. He left
earlier and requested sales agents Matibag and Herbolario to look after the gun
store while he and defendant Morales were away. Jarnague entrusted to
Matibag and Herbolario a bunch of keys used in the gun store which included the
key to the drawer where the fatal gun was kept.
It appears that Matibag and Herbolario later brought out the gun from the
drawer and placed it on top of the table. Attracted by the sight of the gun, the
young Alfred Dennis Pacis got hold of the same. Matibag asked Alfred Dennis
Pacis to return the gun. The latter followed and handed the gun to Matibag. It
went off, the bullet hitting the young Alfred in the head.
A criminal case for homicide was filed against Matibag before branch VII of this
Court. Matibag, however, was acquitted of the charge against him because of the
exempting circumstance of accident under Art. 12, par. 4 of the Revised Penal
Code.
The trial court rendered its decision in favor of petitioners.
Respondent appealed to the Court of Appeals. The Court of Appeals reversed the
trial courts Decision and absolved respondent from civil liability under Article
2180 of the Civil Code.
Petitioners filed a motion for reconsideration, which the Court of Appeals
denied. Hence, this petition.

Issue:
Whether or not respondent is liable for the death of Alfred Pacis.
Held:
As a gun store owner, respondent is presumed to be knowledgeable about firearms safety and
should have known never to keep a loaded weapon in his store to avoid unreasonable risk of
harm or injury to others. Respondent has the duty to ensure that all the guns in his store are
not loaded. Firearms should be stored unloaded and separate from ammunition when the
firearms are not needed for ready-access defensive use. With more reason, guns accepted by
the store for repair should not be loaded precisely because they are defective and may cause
an accidental discharge such as what happened in this case. Respondent was clearly negligent
when he accepted the gun for repair and placed it inside the drawer without ensuring first that
it was not loaded. In the first place, the defective gun should have been stored in a vault.
Before accepting the defective gun for repair, respondent should have made sure that it was
not loaded to prevent any untoward accident. Indeed, respondent should never accept a
firearm from another person, until the cylinder or action is open and he has personally checked
that the weapon is completely unloaded. For failing to insure that the gun was not loaded,
respondent himself was negligent.
Clearly, respondent did not exercise the degree of care and diligence required of a good father
of a family, much less the degree of care required of someone dealing with dangerous
weapons, as would exempt him from liability in this case.









Philippine Hawk Corporation vs. Vivian Tan Lee
G.R. No. 166869
February 16, 2010
Facts:
Respondent Vivian Tan Lee filed before the RTC of Quezon City a Complaint against
petitioner Philippine Hawk Corporation and defendant Margarito Avila for damages
based on quasi-delict, arising from a vehicular accident that occurred in Barangay
Buensoceso, Gumaca, Quezon. The accident resulted in the death of respondents
husband, Silvino Tan, and caused respondent physical injuries.
In its Answer, petitioner denied liability for the vehicular accident, alleging that the
immediate and proximate cause of the accident was the recklessness or lack of caution
of Silvino Tan. Petitioner asserted that it exercised the diligence of a good father of the
family in the selection and supervision of its employees, including Margarito Avila.
The trial court rendered judgment against petitioner and defendant Margarito Avila.
On appeal, the Court of Appeals affirmed the decision of the trial court with
modification in the award of damages.
Issue:
Whether or not petitioner is liable to respondent for damages.
Held:
Whenever an employees negligence causes damage or injury to another, there instantly arises
a presumption that the employer failed to exercise the due diligence of a good father of the
family in the selection or supervision of its employees. To avoid liability for a quasi-delict
committed by his employee, an employer must overcome the presumption by presenting
convincing proof that he exercised the care and diligence of a good father of a family in the
selection and supervision of his employee.
Petitioner is liable to respondent, since it failed to exercise the diligence of a good father of the
family in the selection and supervision of its bus driver, Margarito Avila, for having failed to
sufficiently inculcate in him discipline and correct behavior on the road. Indeed, petitioners
tests were concentrated on the ability to drive and physical fitness to do so. It also did not
know that Avila had been previously involved in sideswiping incidents.
Mercury Drug Corporation and Rolando Del Rosario vs. Spouses
Richard Huang, et al.
G.R. No. 172122
June 22, 2007
Facts:
Petitioner Mercury Drug Corporation (Mercury Drug) is the registered owner of a six-
wheeler 1990 Mitsubishi Truck with plate number PRE 641 (truck). It has in its employ
petitioner Rolando J. del Rosario as driver. Respondent spouses Richard and Carmen
Huang are the parents of respondent Stephen Huang and own the red 1991 Toyota
Corolla GLI Sedan with plate number PTT 775 (car).
These two vehicles figured in a road accident within the municipality of Taguig, Metro
Manila. Respondent Stephen Huang was driving the car, weighing 1,450 kg., while
petitioner Del Rosario was driving the truck, weighing 14,058 kg. Both were traversing
the C-5 Highway, north bound, coming from the general direction of Alabang going to
Pasig City. The car was on the left innermost lane while the truck was on the next lane
to its right, when the truck suddenly swerved to its left and slammed into the front right
side of the car. The collision hurled the car over the island where it hit a lamppost, spun
around and landed on the opposite lane. The truck also hit a lamppost, ran over the car
and zigzagged towards, and finally stopped in front of Buellah Land Church.
The car, valued at P300,000.00, was a total wreck. Respondent Stephen Huang
sustained massive injuries to his spinal cord, head, face, and lung. Despite a series of
operations, respondent Stephen Huang is paralyzed for life from his chest down and
requires continuous medical and rehabilitation treatment.
Respondents fault petitioner Del Rosario for committing gross negligence and reckless
imprudence while driving, and petitioner Mercury Drug for failing to exercise the
diligence of a good father of a family in the selection and supervision of its driver.
The trial court found petitioners Mercury Drug and Del Rosario jointly and severally
liable to pay respondents actual, compensatory, moral and exemplary damages,
attorneys fees, and litigation expenses.
The Court of Appeals affirmed the decision of the trial court but reduced the award of
moral damages to P1,000,000.00. The appellate court also denied the motion for
reconsideration filed by petitioners. Hence, this appeal.

Issue:
Whether or not petitioner is liable to respondents.
Held:
The liability of the employer under Art. 2180 of the Civil Code is direct or immediate. It is not
conditioned on a prior recourse against the negligent employee, or a prior showing of
insolvency of such employee. It is also joint and solidary with the employee.
To be relieved of liability, petitioner Mercury Drug should show that it exercised the diligence of
a good father of a family, both in the selection of the employee and in the supervision of the
performance of his duties. Thus, in the selection of its prospective employees, the employer is
required to examine them as to their qualifications, experience, and service records. With
respect to the supervision of its employees, the employer should formulate standard operating
procedures, monitor their implementation, and impose disciplinary measures for their breach.
To establish compliance with these requirements, employers must submit concrete proof,
including documentary evidence.
Petitioner Mercury Drug failed to show that it exercised due diligence on the supervision and
discipline over its employees. In fact, on the day of the accident, petitioner Del Rosario was
driving without a license. He was holding a TVR for reckless driving. He testified that he
reported the incident to his superior, but nothing was done about it. He was not suspended or
reprimanded. No disciplinary action whatsoever was taken against petitioner Del Rosario.
Petitioner Mercury Drug has failed to discharge its burden of proving that it exercised due
diligence in the selection and supervision of its employee, petitioner Del Rosario.








Flordeliza Mendoza vs. Mutya Soriano, et al.
G.R. No. 164012
June 8, 2007
Facts:
Sonny Soriano, while crossing Commonwealth Avenue near Luzon Avenue in Quezon
City, was hit by a speeding Tamaraw FX driven by Lomer Macasasa. Soriano was thrown
five meters away, while the vehicle only stopped some 25 meters from the point of
impact. Gerard Villaspin, one of Sorianos companions, asked Macasasa to bring Soriano
to the hospital, but after checking out the scene of the incident, Macasasa returned to
the FX, only to flee. A school bus brought Soriano to East Avenue Medical Center where
he later died. Subsequently, the Quezon City Prosecutor recommended the filing of a
criminal case for reckless imprudence resulting to homicide against Macasasa.
Respondents Mutya Soriano and Julie Ann Soriano, Sorianos wife and daughter,
respectively, filed a complaint for damages against Macasasa and petitioner Flordeliza
Mendoza, the registered owner of the vehicle.
In her answer, petitioner Mendoza maintained that she was not liable since as owner of
the vehicle, she had exercised the diligence of a good father of a family over her
employee, Macasasa. Upon respondents motion, the complaint for damages against
Macasasa was dismissed.
After trial, the trial court also dismissed the complaint against petitioner. It found
Soriano negligent for crossing Commonwealth Avenue by using a small gap in the
islands fencing rather than the pedestrian overpass.
Respondents appealed. The Court of Appeals reversed the trial courts decision. Hence,
this appeal.
Issue:
Whether or not petitioner is liable for damages.
Held:
While respondents could recover damages from Macasasa in a criminal case and petitioner
could become subsidiarily liable, still petitioner, as owner and employer, is directly and
separately civilly liable for her failure to exercise due diligence in supervising Macasasa. The
damage suit is for the quasi-delict of petitioner, as owner and employer, and not for the delict
of Macasasa, as driver and employee.
In this case, petitioner is primarily and solidarily liable for the damages caused by Macasasa.
Respondents could recover directly from petitioner since petitioner failed to prove that she
exercised the diligence of a good father of a family in supervising Macasasa.




















Hermana R. Cerezo vs. David Tuazon
G.R. No. 141538
March 23, 2004
Facts:
A Country Bus Lines passenger bus with plate number NYA 241 collided with a tricycle
bearing plate number TC RV 126 along Captain M. Palo Street, Sta. Ines, Mabalacat,
Pampanga. Tricycle driver Tuazon filed a complaint for damages against Mrs. Cerezo, as
owner of the bus line, her husband Attorney Juan Cerezo, and bus driver Danilo A.
Foronda.
At the time of the incident, Tuazon was in his proper lane when Foronda, being then the
driver and person in charge of the Country Bus with plate number NYA 241 without
taking the necessary precaution to prevent loss of lives or injuries, his negligence,
carelessness and imprudence resulted to severe damage to the tricycle and serious
physical injuries to Tuazon thus making him unable to walk and becoming disabled, with
his thumb and middle finger on the left hand being cut.
Tuazon filed a motion to litigate as a pauper.
The trial court rendered a decision in favor of Tuazon. On appeal, the CA affirmed the
decision of the trial court.
Issue:
Whether or not Cerezo is liable for damages.
Held:
The responsibility of two or more persons who are liable for a quasi-delict is solidary. Where
there is a solidary obligation on the part of debtors, as in this case, each debtor is liable for the
entire obligation. Hence, each debtor is liable to pay for the entire obligation in full. There is
no merger or renunciation of rights, but only mutual representation. Where the obligation of
the parties is solidary, either of the parties is indispensable, and the other is not even a
necessary party because complete relief is available from either. Therefore, jurisdiction over
Foronda is not even necessary as Tuazon may collect damages from Mrs. Cerezo alone.
Moreover, an employers liability based on a quasi-delict is primary and direct, while the
employers liability based on a delict is merely subsidiary. The words primary and direct, as
contrasted with subsidiary, refer to the remedy provided by law for enforcing the obligation
rather than to the character and limits of the obligation. Although liability under Article 2180
originates from the negligent act of the employee, the aggrieved party may sue the employer
directly. When an employee causes damage, the law presumes that the employer has himself
committed an act of negligence in not preventing or avoiding the damage. This is the fault that
the law condemns. While the employer is civilly liable in a subsidiary capacity for the
employees criminal negligence, the employer is also civilly liable directly and separately for his
own civil negligence in failing to exercise due diligence in selecting and supervising his
employee. The idea that the employers liability is solely subsidiary is wrong.


















Filcar Transport Services vs. Jose Espinas
G.R. No. 174156
June 20, 2012
Facts:
Respondent Jose A. Espinas was driving his car along Leon Guinto Street in Manila. Upon
reaching the intersection of Leon Guinto and President Quirino Streets, Espinas stopped
his car. When the signal light turned green, he proceeded to cross the intersection. He
was already in the middle of the intersection when another car, traversing President
Quirino Street and going to Roxas Boulevard, suddenly hit and bumped his car. As a
result of the impact, Espinas car turned clockwise. The other car escaped from the
scene of the incident, but Espinas was able to get its plate number.
Espinas sent several letters to Filcar and to its President and General Manager Carmen
Flor, demanding payment for the damages sustained by his car. Espinas filed a
complaint for damages against Filcar and Carmen Flor before the Metropolitan Trial
Court of Manila.
Filcar denied any liability to Espinas and claimed that the incident was not due to its
fault or negligence since Floresca was not its employee but that of Atty. Flor. Filcar and
Carmen Flor both said that they always exercised the due diligence required of a good
father of a family in leasing or assigning their vehicles to third parties.
The MeTC ruled in favor of Espinas, and ordered Filcar and Carmen Flor, jointly and
severally, to pay Espinas.
The Regional Trial Court of Manila, Branch 20, in the exercise of its appellate
jurisdiction, affirmed the MeTC decision.
On appeal, the CA partly granted the petition in CA-G.R. SP No. 86603; it modified the
RTC decision by ruling that Carmen Flor, President and General Manager of Filcar, is not
personally liable to Espinas.
Filcar filed a motion for reconsideration which the CA denied. Hence, this petition.
Issue:
Whether the driver of the motor vehicle, Floresca, is an employee of Filcar is irrelevant in
arriving at the conclusion that Filcar is primarily and directly liable for the damages sustained by
Espinas.

Held:
While Republic Act No. 4136 or the Land Transportation and Traffic Code does not contain any
provision on the liability of registered owners in case of motor vehicle mishaps, Article 2176, in
relation with Article 2180, of the Civil Code imposes an obligation upon Filcar, as registered
owner, to answer for the damages caused to Espinas car. This interpretation is consistent with
the strong public policy of maintaining road safety, thereby reinforcing the aim of the State to
promote the responsible operation of motor vehicles by its citizens.
This does not mean, however, that Filcar is left without any recourse against the actual
employer of the driver and the driver himself. Under the civil law principle of unjust
enrichment, the registered owner of the motor vehicle has a right to be indemnified by the
actual employer of the driver of the amount that he may be required to pay as damages for the
injury caused to another.
The set-up may be inconvenient for the registered owner of the motor vehicle, but the
inconvenience cannot outweigh the more important public policy being advanced by the law in
this case which is the protection of innocent persons who may be victims of reckless drivers and
irresponsible motor vehicle owners.












FEB Leasing and Finance Corporation vs. Spouses Sergio Baylon, et
al.
G.R. No. 181398
June 29, 2011
Facts:
An Isuzu oil tanker running along Del Monte Avenue in Quezon City and bearing plate
number TDY 712 hit Loretta, daughter of respondent spouses Baylon. At the time of the
accident, the oil tanker was registered in the name of petitioner FEB Leasing and
Finance Corporation (petitioner). The oil tanker was leased to BG Hauler, Inc. (BG
Hauler) and was being driven by the latters driver, Manuel Y. Estilloso. The oil tanker
was insured by FGU Insurance Corp. (FGU Insurance).
Petitioner claimed that the spouses Baylon had no cause of action against it because
under its lease contract with BG Hauler, petitioner was not liable for any loss, damage,
or injury that the leased oil tanker might cause. Petitioner claimed that no employer-
employee relationship existed between petitioner and the driver.
BG Hauler alleged that neither do the spouses Baylon have a cause of action against it
since the oil tanker was not registered in its name. BG Hauler contended that the victim
was guilty of contributory negligence in crossing the street.
For its part, FGU Insurance averred that the victim was guilty of contributory negligence.
FGU Insurance concluded that the spouses Baylon could not expect to be paid the full
amount of their claims.
The RTC found that the death of Loretta was due to the negligent act of the driver. The
RTC held that BG Hauler, as the employer, was solidarily liable with the driver. The RTC
further held that petitioner, as the registered owner of the oil tanker, was also solidarily
liable.
The RTC found that since FGU Insurance already paid the amount of P450,000.00 to the
spouses Baylon, BG Hauler, and petitioner, the insurers obligation has been
satisfactorily fulfilled. The RTC thus dismissed the cross-claim of BG Hauler against FGU
Insurance.
The Court of Appeals affirmed the RTC Decision but with the modification that the
award of attorneys fees be deleted for being speculative.
Dissatisfied, petitioner and BG Hauler, joined by the driver, filed two separate motions
for reconsideration. The Court of Appeals denied both motions for lack of merit.
Unconvinced, petitioner alone filed the present petition for review on certiorari
impleading the spouses Baylon, BG Hauler, and the driver as respondents.
Issue:
Whether or not the registered owner of a financially leased vehicle remains liable for loss,
damage, or injury caused by the vehicle notwithstanding an exemption provision in the
financial lease contract.
Held:
Well-settled is the rule that the registered owner of the vehicle is liable for quasi-delicts
resulting from its use. Thus, even if the vehicle has already been sold, leased, or transferred to
another person at the time the vehicle figured in an accident, the registered vehicle owner
would still be liable for damages caused by the accident. The sale, transfer or lease of the
vehicle, which is not registered with the Land Transportation Office, will not bind third persons
aggrieved in an accident involving the vehicle. The compulsory motor vehicle registration
underscores the importance of registering the vehicle in the name of the actual owner.
In this case, petitioner admits that it is the registered owner of the oil tanker that figured in an
accident causing the death of Loretta. As the registered owner, it cannot escape liability for the
loss arising out of negligence in the operation of the oil tanker. Its liability remains even if at the
time of the accident, the oil tanker was leased to BG Hauler and was being driven by the latters
driver, and despite a provision in the lease contract exonerating the registered owner from
liability.








Filipinas Synthetic Fiber Corporation vs. Wilfredo De Los Santos, et
al.
G.R. No. 152033
March 16, 2011
Facts:
On that same night, at the request of Wilfredo, his brother Armando de los Santos
(Armando), husband of respondent Carmina Vda. de los Santos, went to the Rizal
Theater to fetch Teresa Elena after the latter's performance. He drove a 1980 Mitsubishi
Galant Sigma (Galant Sigma) with Plate No. NSL 559, a company car assigned to
Wilfredo.
Two other members of the cast of Woman of the Year, namely, Annabel Vilches
(Annabel) and Jerome Macuja, joined Teresa Elena in the Galant Sigma.
While travelling along the Katipunan Road (White Plains), the Galant Sigma collided with
the shuttle bus owned by petitioner and driven by Alfredo S. Mejia (Mejia), an employee
of petitioner. The Galant Sigma was dragged about 12 meters from the point of impact,
across the White Plains Road landing near the perimeter fence of Camp Aguinaldo,
where the Galant Sigma burst into flames and burned to death beyond recognition all
four occupants of the car.
A criminal charge for reckless imprudence resulting in damage to property with multiple
homicide was brought against Mejia, which was decided in favor of Mejia. The family of
Annabel filed a civil case against petitioner and Mejia.
After trial on the merits, the RTC decided in favor of herein respondents.
Petitioner appealed to the CA. The CA affirmed the decision of the trial court. Hence,
this petition.
Issue:
Whether or not petitioner is liable for the negligent act of the driver.
Held:
Under Article 2180 of the New Civil Code, when an injury is caused by the negligence of the
employee, there instantly arises a presumption of law that there was negligence on the part of
the master or employer either in the selection of the servant or employee, or in supervision
over him after selection or both. The liability of the employer under Article 2180 is direct and
immediate; it is not conditioned upon prior recourse against the negligent employee and a prior
showing of the insolvency of such employee. Therefore, it is incumbent upon the private
respondents (in this case, the petitioner) to prove that they exercised the diligence of a good
father of a family in the selection and supervision of their employee.
Fylsin did not even sufficiently prove that it exercised the required supervision of Mejia by
ensuring rest periods, particularly for its night shift drivers who are working on a time when
most of us are usually taking rest. As correctly argued by the plaintiffs-appellees, this is
significant because the accident happened at 11:30 p.m., when the shuttle bus was under the
control of a driver having no passenger at all. Despite, the lateness of the hour and the darkness
of the surrounding area, the bus was travelling at a speed of 70 kilometers per hour.
In view of the absence of sufficient proof of its exercise of due diligence, Filsyn cannot escape
its solidary liability as the owner of the wayward bus and the employer of the negligent driver
of the wayward bus.













Viron Transportation Co., Inc. vs. Alberto Delos Santos y Natividad
and Rudy Samidan
G.R. No. 138296
November 22, 2000
Facts:
Plaintiff, a public utility transportation company, is the registered owner of Viron Transit
Bus No. 1080, with Plate No. TB-AVC-332; while the defendant Rudy Samidan is the
registered owner of the Forward Cargo Truck with Plate No. TDY-524 which, at the time
of the vehicular accident in question, was driven and operated by the defendant Alberto
delos Santos y Natividad.
The aforesaid bus was driven by plaintiffs regular driver Wilfredo Villanueva along
MacArthur Highway within the vicinity of Barangay Parsolingan, Gerona, Tarlac coming
from the North en route to its destination in Manila. It was following the Forward Cargo
Truck proceeding from the same direction then being driven, as aforesaid, by the
defendant Alberto delos Santos. The cargo truck swerved to the right shoulder of the
road and, while about to be overtaken by the bus, again swerved to the left to occupy
its lane. It was at that instance that the collision occurred, the left front side of the truck
collided with the right front side of the bus causing the two vehicles substantial
damages.
After trial, the lower court dismissed petitioners complaint and sustained the private
respondents counterclaim for damages.
Not satisfied therewith, petitioner appealed to the Court of Appeals which as mentioned
at the outset affirmed in toto the decision of the lower court. Its motion for
reconsideration has been denied. Hence, this petition.
Issue:
Whether or not petitioner is liable for the negligent acts of Wilfredo.
Held:
It is plain to see that the fault or negligence was attributable to the driver of the Viron
passenger bus. In any event, it is doctrinally entrenched that the assessment of the trial judge
as to the issue of credibility binds the appellate court because he is in a better position to
decide the issue, having heard the witnesses and observed their deportment and manner of
testifying during the trial, except when the trial court has plainly overlooked certain facts of
substance and value, that, if considered, might affect the result of the case, or where the
assessment is clearly shown to be arbitrary. Petitioner has not shown this case to fall under the
exception.
In fine, when the employee causes damage due to his own negligence while performing his own
duties, there arises the juris tantum presumption that the employer is negligent, rebuttable
only by proof of observance of the diligence of a good father of a family. Petitioner, through its
witnesses, namely, Danilo Azardon, a shop supervisor and Fernando Mallare, an administrative
officer, failed to rebut such legal presumption of negligence in the selection and supervision of
employees, thus, petitioner as the employer is responsible for damages, the basis of the
liability being the relationship of pater familias or on the employers own negligence. Hence,
with the allegations and subsequent proof of negligence against the bus driver of petitioner,
the lower courts correctly adjudged petitioner liable for damages.















Mercury Drug Corporation vs. Sebastian Baking
G.R. No. 156037
May 25, 2007
Facts:
Sebastian M. Baking, respondent, went to the clinic of Dr. Cesar Sy for a medical check-
up. On the following day, after undergoing an ECG, blood, and hematology examinations
and urinalysis, Dr. Sy found that respondents blood sugar and triglyceride were above
normal levels. Dr. Sy then gave respondent two medical prescriptions Diamicron for
his blood sugar and Benalize tablets for his triglyceride.
Respondent then proceeded to petitioner Mercury Drug Corporation (Alabang Branch)
to buy the prescribed medicines. However, the saleslady misread the prescription for
Diamicron as a prescription for Dormicum. Thus, what was sold to respondent was
Dormicum, a potent sleeping tablet.
Unaware that what was given to him was the wrong medicine, respondent took one pill
of Dormicum on three consecutive days.
On the third day he took the medicine, respondent figured in a vehicular accident. The
car he was driving collided with the car of one Josie Peralta. Respondent fell asleep
while driving. He could not remember anything about the collision nor felt its impact.
Suspecting that the tablet he took may have a bearing on his physical and mental state
at the time of the collision, respondent returned to Dr. Sys clinic. Upon being shown
the medicine, Dr. Sy was shocked to find that what was sold to respondent was
Dormicum, instead of the prescribed Diamicron.
Respondent filed with the Regional Trial Court (RTC), Branch 80 of Quezon City a
complaint for damages against petitioner. After hearing, the trial court rendered a
decision in favor of respondent.
On appeal, the Court of Appeals, affirmed in toto the RTC judgment. Petitioner filed a
motion for reconsideration but it was denied. Hence, this petition.
Issue:
Whether or not petitioner was negligent, and if so, whether such negligence was the proximate
cause of respondents accident.

Held:
It is generally recognized that the drugstore business is imbued with public interest. The health
and safety of the people will be put into jeopardy if drugstore employees will not exercise the
highest degree of care and diligence in selling medicines.
Obviously, petitioners employee was grossly negligent in selling to respondent Dormicum,
instead of the prescribed Diamicron. Considering that a fatal mistake could be a matter of life
and death for a buying patient, the said employee should have been very cautious in dispensing
medicines. She should have verified whether the medicine she gave respondent was indeed the
one prescribed by his physician. The care required must be commensurate with the danger
involved, and the skill employed must correspond with the superior knowledge of the business
which the law demands.
The vehicular accident could not have occurred had petitioners employee been careful in
reading Dr. Sys prescription. Without the potent effects of Dormicum, a sleeping tablet, it was
unlikely that respondent would fall asleep while driving his car, resulting in a collision.












Safeguard Security Agency, Inc., and Admer Pajarillo vs. Lauro
Tangco, et al.
G.R. No. 165732
December 14, 2006
Facts:
Evangeline Tangco (Evangeline) went to Ecology Bank, Katipunan Branch, Quezon City,
to renew her time deposit per advise of the bank's cashier as she would sign a specimen
card. Evangeline, a duly licensed firearm holder with corresponding permit to carry the
same outside her residence, approached security guard Pajarillo, who was stationed
outside the bank, and pulled out her firearm from her bag to deposit the same for
safekeeping. Suddenly, Pajarillo shot Evangeline with his service shotgun hitting her in
the abdomen instantly causing her death.
Lauro Tangco, Evangeline's husband, together with his six minor children (respondents)
filed with the Regional Trial Court (RTC) of Quezon City, a criminal case of Homicide
against Pajarillo. Respondents reserved their right to file a separate civil action in the
said criminal case. The RTC of Quezon City subsequently convicted Pajarillo of Homicide.
On appeal to the CA, the RTC decision was affirmed with modification as to the penalty.
Meanwhile, respondents filed with RTC, Branch 273, Marikina City, a complaint for
damages against Pajarillo for negligently shooting Evangeline and against Safeguard for
failing to observe the diligence of a good father of a family to prevent the damage
committed by its security guard.
In their Answer, petitioners denied the material allegations in the complaint and alleged
that Safeguard exercised the diligence of a good father of a family in the selection and
supervision of Pajarillo; that Evangeline's death was not due to Pajarillo's negligence as
the latter acted only in self-defense.
Trial thereafter ensued. The RTC rendered a decision in favor of respondent.
Petitioners appealed the RTC decision to the CA. The CA rendered a decision affirming
with modification that Safeguard Security Agency, Inc.'s civil liability is only subsidiary.
Petitioners filed their Motion for Reconsideration but the CA denied the motion. Hence,
this petition.


Issue:
Whether or not Safeguard should be held solidarily liable for the damages awarded to
respondents.
Held:
Pajarillo failed to substantiate his claim that Evangeline was seen roaming outside the vicinity of
the bank and acting suspiciously prior to the shooting incident. Evangeline's death was merely
due to Pajarillo's negligence in shooting her on his imagined threat that Evangeline will rob the
bank.
As the employer of Pajarillo, Safeguard is primarily and solidarily liable for the quasi-delict
committed by the former. Safeguard is presumed to be negligent in the selection and
supervision of his employee by operation of law. This presumption may be overcome only by
satisfactorily showing that the employer exercised the care and the diligence of a good father of
a family in the selection and the supervision of its employee.
The records failed to show that there was adequate training and continuous evaluation of the
security guard's performance. Pajarillo had only attended an in-service training conducted by
Toyota Sta. Rosa, his first assignment as security guard of Safeguard, which was in collaboration
with Safeguard. It was established that the concept of such training was purely on security of
equipments to be guarded and protection of the life of the employees.
It had not been established that after Pajarillo's training in Toyota, Safeguard had ever
conducted further training of Pajarillo when he was later assigned to guard a bank which has a
different nature of business with that of Toyota. In fact, Pajarillo testified that being on duty in
a bank is different from being on duty in a factory since a bank is a very sensitive area.







Ernesto Pleyto and Philippine Rabbit Bus Lines, Inc. vs. Maria
Lomboy and Carmela Lomboy
G.R. No. 148737
June 16, 2004
Facts:
PRBL Bus No. 1539, with Plate No. CVD 556, driven by petitioner Pleyto, was traveling
along MacArthur Highway in Gerona, Tarlac bound for Vigan, Ilocos Sur. It was drizzling
that morning and the macadam road was wet. Right in front of the bus, headed north,
was the tricycle with Plate No. CX 7844, owned and driven by one Rodolfo Esguerra.
According to Rolly Orpilla, a witness and one of the bus passengers, Pleyto tried to
overtake Esguerras tricycle but hit it instead. Pleyto then swerved into the left opposite
lane. Coming down the lane, some fifty meters away, was a southbound Mitsubishi
Lancer car, with Plate No. PRS 941, driven by Arnulfo Asuncion. The car was headed for
Manila with some passengers. Seated beside Arnulfo was his brother-in-law, Ricardo
Lomboy, while in the back seat were Ricardos 18-year old daughter Carmela and her
friend, one Rhino Daba. PRBL Bus No. 1539 smashed head-on the car, killing Arnulfo
and Ricardo instantly. Carmela and Rhino suffered injuries, but only Carmela required
hospitalization.
Petitioners PRBL and Ernesto Pleyto both claimed that the bus was running slowly at the
time of the accident. They pointed out that Bus No. 1539 had been inspected by driver
Pleyto and examined by a mechanic prior to the trip, in accordance with the companys
standard operating procedure. It was found in good working condition.
The trial court rendered a decision in favor of respondents.
On appeal, the CA affirmed with modification the decision of the trial court by reducing
the award of damages. Petitioners then moved for reconsideration, but the appellate
court denied it. Hence, the instant petition.
Issue:
Whether or not petitioner was negligent.
Held:
Petitioner Pleyto violated traffic rules and regulations when he overtook the tricycle despite the
presence of an oncoming car in the other lane. Article 2185 of the Civil Code lays down the
presumption that a person driving a motor vehicle has been negligent if at the time of the
mishap, he was violating any traffic regulation. As found by both the Court of Appeals and the
trial court, petitioners failed to present any convincing proof rebutting such presumption.
A driver abandoning his proper lane for the purpose of overtaking another vehicle in an
ordinary situation has the duty to see to it that the road is clear and not to proceed if he cannot
do so in safety. When a motor vehicle is approaching or rounding a curve, there is special
necessity for keeping to the right side of the road and the driver does not have the right to
drive on the left hand side relying upon having time to turn to the right if a car approaching
from the opposite direction comes into view.
In the present case, petitioners presented several documents in evidence to show the various
tests and pre-qualification requirements imposed upon petitioner Pleyto before his hiring as a
driver by PRBL. However, no documentary evidence was presented to prove that petitioner
PRBL exercised due diligence in the supervision of its employees, including Pleyto.













Viron Transportation Co., Inc. vs. Alberto Delos Santos y Natividad
and Rudy Samidan
G.R. No. 138296
November 22, 2000
Facts:
Plaintiff, a public utility transportation company, is the registered owner of Viron Transit
Bus No. 1080, with Plate No. TB-AVC-332; while the defendant Rudy Samidan is the
registered owner of the Forward Cargo Truck with Plate No. TDY-524 which, at the time
of the vehicular accident in question, was driven and operated by the defendant Alberto
delos Santos y Natividad.
The aforesaid bus was driven by plaintiffs regular driver Wilfredo Villanueva along
MacArthur Highway within the vicinity of Barangay Parsolingan, Gerona, Tarlac coming
from the North en route to its destination in Manila. It was following the Forward Cargo
Truck proceeding from the same direction then being driven, as aforesaid, by the
defendant Alberto delos Santos. The cargo truck swerved to the right shoulder of the
road and, while about to be overtaken by the bus, again swerved to the left to occupy
its lane. It was at that instance that the collision occurred, the left front side of the truck
collided with the right front side of the bus causing the two vehicles substantial
damages.
After trial, the lower court dismissed petitioners complaint and sustained the private
respondents counterclaim for damages.
Not satisfied therewith, petitioner appealed to the Court of Appeals which as mentioned
at the outset affirmed in toto the decision of the lower court. Its motion for
reconsideration has been denied. Hence, this petition.
Issue:
Whether or not petitioner is liable for the negligent acts of Wilfredo.
Held:
It is plain to see that the fault or negligence was attributable to the driver of the Viron
passenger bus. In any event, it is doctrinally entrenched that the assessment of the trial judge
as to the issue of credibility binds the appellate court because he is in a better position to
decide the issue, having heard the witnesses and observed their deportment and manner of
testifying during the trial, except when the trial court has plainly overlooked certain facts of
substance and value, that, if considered, might affect the result of the case, or where the
assessment is clearly shown to be arbitrary. Petitioner has not shown this case to fall under the
exception.
In fine, when the employee causes damage due to his own negligence while performing his own
duties, there arises the juris tantum presumption that the employer is negligent, rebuttable
only by proof of observance of the diligence of a good father of a family. Petitioner, through its
witnesses, namely, Danilo Azardon, a shop supervisor and Fernando Mallare, an administrative
officer, failed to rebut such legal presumption of negligence in the selection and supervision of
employees, thus, petitioner as the employer is responsible for damages, the basis of the
liability being the relationship of pater familias or on the employers own negligence. Hence,
with the allegations and subsequent proof of negligence against the bus driver of petitioner,
the lower courts correctly adjudged petitioner liable for damages.















Ernesto Syki vs. Salvador Begasa
G.R. No. 149149
October 23, 2003
Facts:
Respondent Salvador Begasa and his three companions flagged down a passenger
jeepney driven by Joaquin Espina and owned by Aurora Pisuena. While respondent was
boarding the passenger jeepney (his right foot already inside while his left foot still on
the boarding step of the passenger jeepney), a truck driven by Elizalde Sablayan and
owned by petitioner Ernesto Syki bumped the rear end of the passenger jeepney.
Respondent fell and fractured his left thigh bone (femur). He also suffered lacerations
and abrasions in his left leg.
Respondent filed a complaint for damages for breach of common carriers contractual
obligations and quasi-delict against Aurora Pisuena, the owner of the passenger jeepney
herein petitioner Ernesto Syki, the owner of the truck and Elizalde Sablayan, the driver
of the truck.
After hearing, the trial court dismissed the complaint against Aurora Pisuena, the owner
and operator of the passenger jeepney but ordered petitioner Ernesto Syki and his truck
driver, Elizalde Sablayan, to pay respondent Salvador Begasa, jointly and severally,
actual and moral damages plus attorneys fees.
Petitioner Syki and his driver appealed to the Court of Appeals. However, the appellate
court found no reversible error in the decision of the trial court and affirmed the same
in toto. The appellate court also denied their motion for reconsideration. Hence, this
petition.
Issue:
Whether or not petitioner had exercised the diligence of a good father of a family in the
selection and supervision of his employee.
Held:
When an injury is caused by the negligence of an employee, a legal presumption instantly arises
that the employer was negligent, either or both, in the selection and/or supervision of his
employee. The said presumption may be rebutted only by a clear showing on the part of the
employer that he had exercised the diligence of a good father of a family in the selection and
supervision of his employee. If the employer successfully overcomes the legal presumption of
negligence, he is relieved of liability. In other words, the burden of proof is on the employer.
The failure of the defendant company to produce in court any record or other documentary
proof tending to establish that it had exercised all the diligence of a good father of a family in
the selection and supervision of its drivers and buses, notwithstanding the calls therefore by
both the trial court and the opposing counsel, argues strongly against its pretensions.


















Cecilia Yambao vs. Melchorita Zuniga, et al
G.R. No. 146173
December 11, 2003
Facts:
The bus owned by the petitioner was being driven by her driver, one Ceferino G.
Venturina along the northbound lane of Epifanio delos Santos Avenue (EDSA), within the
vicinity of Bagong Barrio, Kalookan City. With Venturina was the bus conductor,
Fernando Dumaliang. Suddenly, the bus bumped Herminigildo Zuiga, a pedestrian.
Such was the force of the impact that the left side of the front windshield of the bus was
cracked. Zuiga was rushed to the Quezon City General Hospital where he was given
medical attention, but due to the massive injuries sustained, he succumbed shortly
thereafter.
Private respondents, as heirs of the victim, filed a Complaint against petitioner and her
driver, Venturina, for damages, The complaint essentially alleged that Venturina drove
the bus in a reckless, careless and imprudent manner, in violation of traffic rules and
regulations, without due regard to public safety, thus resulting in the victims premature
death.
The petitioner vehemently denied the material allegations of the complaint. She tried
to shift the blame for the accident upon the victim, theorizing that Herminigildo
bumped into her bus, while avoiding an unidentified woman who was chasing him. She
further alleged that she was not liable for any damages because as an employer, she
exercised the proper diligence of a good father of a family, both in the selection and
supervision of her bus driver.
The trial court rendered judgment in favor of the private respondents.
On appeal, the CA affirmed the decision of the trial court. Yambao then duly moved for
reconsideration, but her motion was denied for want of merit. Hence, this petition for
review.
Issue:
Whether or not petitioner exercised the diligence of a good father of a family in the selection
and supervision of her employees, thus absolving her from any liability.

Held:
Petitioner failed to present convincing proof that she went to this extent of verifying
Venturinas qualifications, safety record, and driving history. The presumption juris tantum that
there was negligence in the selection of her bus driver, thus, remains unrebutted.
Nor did petitioner show that she exercised due supervision over Venturina after his selection.
For as pointed out by the Court of Appeals, petitioner did not present any proof that she
drafted and implemented training programs and guidelines on road safety for her employees.
In fact, the record is bare of any showing that petitioner required Venturina to attend periodic
seminars on road safety and traffic efficiency. Hence, petitioner cannot claim exemption from
any liability arising from the recklessness or negligence of Venturina.















Mindanao Terminal and Brokerage Service, Inc. vs. Phoenix
Assurance Company of New York/ MCGEE & Co., Inc.
G.R. No. 162467
May 8, 2009
Facts:
Del Monte Philippines, Inc. (Del Monte) contracted petitioner Mindanao Terminal and
Brokerage Service, Inc. (Mindanao Terminal), a stevedoring company, to load and stow a
shipment of 146,288 cartons of fresh green Philippine bananas and 15,202 cartons of
fresh pineapples belonging to Del Monte Fresh Produce International, Inc. (Del Monte
Produce) into the cargo hold of the vessel M/V Mistrau. The vessel was docked at the
port of Davao City and the goods were to be transported by it to the port of Inchon,
Korea in favor of consignee Taegu Industries, Inc. Del Monte Produce insured the
shipment under an open cargo policy with private respondent Phoenix Assurance
Company of New York (Phoenix), a non-life insurance company, and private respondent
McGee & Co. Inc. (McGee), the underwriting manager/agent of Phoenix.
Mindanao Terminal loaded and stowed the cargoes aboard the M/V Mistrau. The vessel
set sail from the port of Davao City and arrived at the port of Inchon, Korea. It was then
discovered upon discharge that some of the cargo was in bad condition. The Marine
Cargo Damage Surveyor of Incok Loss and Average Adjuster of Korea, through its
representative Byeong Yong Ahn (Byeong), surveyed the extent of the damage of the
shipment. In a survey report, it was stated that 16,069 cartons of the banana shipment
and 2,185 cartons of the pineapple shipment were so damaged that they no longer had
commercial value.
Del Monte Produce filed a claim under the open cargo policy for the damages to its
shipment. McGees Marine Claims Insurance Adjuster evaluated the claim and
recommended that payment in the amount of $210,266.43 be made. A check for the
recommended amount was sent to Del Monte Produce; the latter then issued a
subrogation receipt to Phoenix and McGee.
Phoenix and McGee instituted an action for damages against Mindanao Terminal in the
Regional Trial Court (RTC) of Davao City, Branch 12. The RTC dismissed the complaint
and awarded the counterclaim of Mindanao Terminal.
Phoenix and McGee appealed to the Court of Appeals. The appellate court reversed and
set aside the decision of the RTC.
Mindanao Terminal filed a motion for reconsideration, which the Court of Appeals
denied. Hence, this present petition for review.
Issue:
Whether or not Mindanao Terminal observed the degree of diligence required by law of a
stevedoring company.
Held:
Phoenix and McGee failed to prove by preponderance of evidence that Mindanao Terminal had
acted negligently.
Mindanao Terminal loaded and stowed the cargoes of Del Monte Produce aboard the M/V
Mistrau in accordance with the stowage plan, a guide for the area assignments of the goods in
the vessels hold, prepared by Del Monte Produce and the officers of M/V Mistrau. The loading
and stowing was done under the direction and supervision of the ship officers. The vessels
officer would order the closing of the hatches only if the loading was done correctly after a final
inspection. The said ship officers would not have accepted the cargoes on board the vessel if
they were not properly arranged and tightly secured to withstand the voyage in open seas.
They would order the stevedore to rectify any error in its loading and stowing. A foremans
report, as proof of work done on board the vessel, was prepared by the checkers of Mindanao
Terminal and concurred in by the Chief Officer of M/V Mistrau after they were satisfied that the
cargoes were properly loaded.









YHT Realty Corporation, Erlinda Lainez and Anicia Payam vs. Court
of Appeals and Maurice McLoughlin
G.R. No. 126780
February 17, 2005
Facts:
McLoughlin arrived from Australia and registered with Tropicana. He rented a safety
deposit box as it was his practice to rent a safety deposit box every time he registered at
Tropicana in previous trips. As a tourist, McLoughlin was aware of the procedure
observed by Tropicana relative to its safety deposit boxes. The safety deposit box could
only be opened through the use of two keys, one of which is given to the registered
guest, and the other remaining in the possession of the management of the hotel.
When a registered guest wished to open his safety deposit box, he alone could
personally request the management who then would assign one of its employees to
accompany the guest and assist him in opening the safety deposit box with the two
keys.
After returning to Manila, he checked out of Tropicana and left for Australia. When he
arrived in Australia, he discovered that the envelope with Ten Thousand US Dollars
(US$10,000.00) was short of Five Thousand US Dollars (US$5,000). He also noticed that
the jewelry which he bought in Hongkong and stored in the safety deposit box upon his
return to Tropicana was likewise missing, except for a diamond bracelet.
When McLoughlin came back to the Philippines, he asked Lainez if some money and/or
jewelry which he had lost were found and returned to her or to the management.
However, Lainez told him that no one in the hotel found such things and none were
turned over to the management. He again registered at Tropicana and rented a safety
deposit box. He noticed that in the envelope containing Fifteen Thousand US Dollars
(US$15,000.00), Two Thousand US Dollars (US$2,000.00) were missing and in the
envelope previously containing Ten Thousand Australian Dollars (AUS$10,000.00), Four
Thousand Five Hundred Australian Dollars (AUS$4,500.00) were missing.
When McLoughlin discovered the loss, he immediately confronted Lainez and Payam
who admitted that Tan opened the safety deposit box with the key assigned to him.
McLoughlin went up to his room where Tan was staying and confronted her. Tan
admitted that she had stolen McLoughlins key and was able to open the safety deposit
box with the assistance of Lopez, Payam and Lainez. Lopez also told McLoughlin that Tan
stole the key assigned to McLoughlin while the latter was asleep.
Meetings were held between McLoughlin and his lawyer which resulted to the filing of a
complaint for damages against YHT Realty Corporation, Lopez, Lainez, Payam and Tan
(defendants) for the loss of McLoughlins money. After filing the complaint, McLoughlin
left again for Australia to attend to an urgent business matter. Tan and Lopez, however,
were not served with summons, and trial proceeded with only Lainez, Payam and YHT
Realty Corporation as defendants.
After trial, the RTC of Manila rendered judgment in favor of McLoughlin. The trial court
found that defendants acted with gross negligence in the performance and exercise of
their duties and obligations as innkeepers and were therefore liable to answer for the
losses incurred by McLoughlin.
The Court of Appeals affirmed the disquisitions made by the lower court except as to
the amount of damages awarded. Petitioners filed a motion for reconsideration but was
denied. Hence, this petition.
Issue:
Whether or not a hotel may evade liability for the loss of items left with it for safekeeping by its
guests, by having these guests execute written waivers holding the establishment or its
employees free from blame for such loss in light of Article 2003 of the Civil Code which voids
such waivers.
Held:
In the case at bar, the responsibility of securing the safety deposit box was shared not only by
the guest himself but also by the management since two keys are necessary to open the safety
deposit box. Without the assistance of hotel employees, the loss would not have occurred.
Thus, Tropicana was guilty of concurrent negligence in allowing Tan, who was not the
registered guest, to open the safety deposit box of McLoughlin, even assuming that the latter
was also guilty of negligence in allowing another person to use his key. To rule otherwise would
result in undermining the safety of the safety deposit boxes in hotels for the management will
be given imprimatur to allow any person, under the pretense of being a family member or a
visitor of the guest, to have access to the safety deposit box without fear of any liability that will
attach thereafter in case such person turns out to be a complete stranger. This will allow the
hotel to evade responsibility for any liability incurred by its employees in conspiracy with the
guests relatives and visitors.
Petitioners contend that McLoughlins case was mounted on the theory of contract, but the
trial court and the appellate court upheld the grant of the claims of the latter on the basis of
tort. There is nothing anomalous in how the lower courts decided the controversy for this Court
has pronounced a jurisprudential rule that tort liability can exist even if there are already
contractual relations. The act that breaks the contract may also be tort.





















Rogelio Ramos, et al vs. Court of Appeals, et al.
G.R. No. 124354
April 11, 2002
Facts:
Petitioner Erlinda Ramos, after seeking professional medical help, was advised to
undergo an operation for the removal of a stone in her gall bladder (cholecystectomy).
She was referred to Dr. Hosaka, a surgeon, who agreed to perform the operation on her.
Since neither petitioner Erlinda nor her husband, petitioner Rogelio, knew of any
anesthesiologist, Dr. Hosaka recommended to them the services of Dr. Gutierrez.
Petitioner Erlinda was admitted to the DLSMC the day before the scheduled operation.
By 7:30 in the morning of the following day, petitioner Erlinda was already being
prepared for operation. Upon the request of petitioner Erlinda, her sister-in-law,
Herminda Cruz, who was then Dean of the College of Nursing at the Capitol Medical
Center, was allowed to accompany her inside the operating room.
Dr. Hosaka had not yet arrived so Dr. Gutierrez tried to get in touch with him by phone.
Thereafter, Dr. Gutierrez informed Cruz that the operation might be delayed due to the
late arrival of Dr. Hosaka.
When Dr. Hosaka was still not around, petitioner Rogelio already wanted to pull out his
wife from the operating room. He met Dr. Garcia, who remarked that he was also tired
of waiting for Dr. Hosaka. Dr. Hosaka finally arrived at the hospital more than three (3)
hours after the scheduled operation.
Cruz, who was then still inside the operating room, heard about Dr. Hosakas arrival.
While she held the hand of Erlinda, Cruz saw Dr. Gutierrez trying to intubate the patient.
Cruz noticed a bluish discoloration of Erlindas nailbeds on her left hand. She (Cruz) then
heard Dr. Hosaka instruct someone to call Dr. Calderon, another anesthesiologist.
When he arrived, Dr. Calderon attempted to intubate the patient. The nailbeds of the
patient remained bluish, thus, she was placed in a trendelenburg position a position
where the head of the patient is placed in a position lower than her feet. At this point,
Cruz went out of the operating room to express her concern to petitioner Rogelio that
Erlindas operation was not going well.
Cruz quickly rushed back to the operating room and saw that the patient was still in
trendelenburg position. The doctors explained to petitioner Rogelio that his wife had
bronchospasm. Erlinda stayed in the ICU for a month. She was released from the
hospital only four months later. Since the ill-fated operation, Erlinda remained in
comatose condition until she died on August 3, 1999.
Petitioners filed with the Regional Trial Court of Quezon City a civil case for damages
against private respondents. After due trial, the court a quo rendered judgment in favor
of petitioners. Essentially, the trial court found that private respondents were negligent
in the performance of their duties to Erlinda. On appeal by private respondents, the
Court of Appeals reversed the trial courts decision and directed petitioners to pay their
unpaid medical bills to private respondents.
Issue:
Whether or not the doctrine of res ipsa loquitur applies to the case.
Held:
The doctrine of res ipsa loquitur is appropriate in the case at bar. The damage sustained by
Erlinda in her brain prior to a scheduled gall bladder operation presents a case for the
application of res ipsa loquitur.
In the present case, Erlinda submitted herself for cholecystectomy and expected a routine
general surgery to be performed on her gall bladder. On that fateful day she delivered her
person over to the care, custody and control of private respondents who exercised complete
and exclusive control over her. At the time of submission, Erlinda was neurologically sound
and, except for a few minor discomforts, was likewise physically fit in mind and body. However,
during the administration of anesthesia and prior to the performance of cholecystectomy she
suffered irreparable damage to her brain. Thus, without undergoing surgery, she went out of
the operating room already decerebrate and totally incapacitated. Obviously, brain damage,
which Erlinda sustained, is an injury which does not normally occur in the process of a gall
bladder operation. In fact, this kind of situation does not happen in the absence of negligence
of someone in the administration of anesthesia and in the use of endotracheal tube. Normally,
a person being put under anesthesia is not rendered decerebrate as a consequence of
administering such anesthesia if the proper procedure was followed. Furthermore, the
instruments used in the administration of anesthesia, including the endotracheal tube, were all
under the exclusive control of private respondents, who are the physicians-in-charge. Likewise,
petitioner Erlinda could not have been guilty of contributory negligence because she was under
the influence of anesthetics which rendered her unconscious.
Considering that a sound and unaffected member of the body (the brain) is injured or
destroyed while the patient is unconscious and under the immediate and exclusive control of
the physicians, we hold that a practical administration of justice dictates the application of res
ipsa loquitur. Upon these facts and under these circumstances the Court would be able to say,
as a matter of common knowledge and observation, if negligence attended the management
and care of the patient. Moreover, the liability of the physicians and the hospital in this case is
not predicated upon an alleged failure to secure the desired results of an operation nor on an
alleged lack of skill in the diagnosis or treatment as in fact no operation or treatment was ever
performed on Erlinda. Thus, upon all these initial determination a case is made out for the
application of the doctrine of res ipsa loquitur.



















Leah Alesna Reyes, et al vs. Sisters of Mercy Hospital, et al
G.R. No. 130547
October 3, 2000
Facts:
Petitioner Leah Alesna Reyes is the wife of the late Jorge Reyes. The other petitioners,
namely, Rose Nahdja, Johnny, Lloyd, and Kristine, all surnamed Reyes, were their
children. Five days before his death, Jorge had been suffering from a recurring fever
with chills. After he failed to get relief from some home medication he was taking, which
consisted of analgesic, antipyretic, and antibiotics, he decided to see the doctor.
He was taken to the Mercy Community Clinic by his wife. He was attended to by
respondent Dr. Marlyn Rico, resident physician and admitting physician on duty, who
gave Jorge a physical examination and took his medical history. She noted that at the
time of his admission, Jorge was conscious, ambulatory, oriented, coherent, and with
respiratory distress. Typhoid fever was then prevalent in the locality, as the clinic had
been getting from 15 to 20 cases of typhoid per month. Suspecting that Jorge could be
suffering from this disease, Dr. Rico ordered a Widal Test, a standard test for typhoid
fever, to be performed on Jorge. Blood count, routine urinalysis, stool examination, and
malarial smear were also made. After about an hour, the medical technician submitted
the results of the test from which Dr. Rico concluded that Jorge was positive for typhoid
fever. As her shift was only up to 5:00 p.m., Dr. Rico indorsed Jorge to respondent Dr.
Marvie Blanes.
Dr. Marvie Blanes attended to Jorge at around six in the evening. She also took Jorges
history and gave him a physical examination. Like Dr. Rico, her impression was that
Jorge had typhoid fever. Antibiotics being the accepted treatment for typhoid fever, she
ordered that a compatibility test with the antibiotic chloromycetin be done on Jorge.
Said test was administered by nurse Josephine Pagente who also gave the patient a
dose of triglobe. As she did not observe any adverse reaction by the patient to
chloromycetin, Dr. Blanes ordered the first five hundred milligrams of said antibiotic to
be administered on Jorge at around 9:00 p.m. A second dose was administered on Jorge
about three hours later just before midnight.
Dr. Blanes was called as Jorges temperature rose to 41C. The patient also experienced
chills and exhibited respiratory distress, nausea, vomiting, and convulsions. Dr. Blanes
put him under oxygen, used a suction machine, and administered hydrocortisone,
temporarily easing the patients convulsions. When he regained consciousness, the
patient was asked by Dr. Blanes whether he had a previous heart ailment or had
suffered from chest pains in the past. Jorge replied he did not. After about 15 minutes,
however, Jorge again started to vomit, showed restlessness, and his convulsions
returned. Dr. Blanes re-applied the emergency measures taken before and, in addition,
valium was administered. Jorge, however, did not respond to the treatment and slipped
into cyanosis, a bluish or purplish discoloration of the skin or mucous membrane due to
deficient oxygenation of the blood. At around 2:00 a.m., Jorge died.
Petitioners filed before the Regional Trial Court of Cebu City a complaint for damages
against respondents Sisters of Mercy, Sister Rose Palacio, Dr. Marvie Blanes, Dr. Marlyn
Rico, and nurse Josephine Pagente. Petitioners amended their complaint to implead
respondent Mercy Community Clinic as additional defendant and to drop the name of
Josephine Pagente as defendant since she was no longer connected with respondent
hospital. Their principal contention was that Jorge did not die of typhoid fever. Instead,
his death was due to the wrongful administration of chloromycetin.
The trial court rendered its decision absolving respondents from the charges of
negligence and dismissing petitioners action for damages. The trial court likewise
dismissed respondents counterclaim, holding that, in seeking damages from
respondents, petitioners were impelled by the honest belief that Jorges death was due
to the latters negligence.
Petitioners brought the matter to the Court of Appeals. The Court of Appeals affirmed
the decision of the trial court.
Hence this petition.
Issue:
Whether or not petitioners have established specific acts of negligence allegedly committed by
respondent doctors.
Held:
The petitioners were not able to establish the specific acts of negligence allegedly committed
by respondent doctors.
The two doctors presented by respondents clearly were experts on the subject. They vouched
for the correctness of Dr. Marlyn Ricos diagnosis. Dr. Peter Gotiong, a diplomate whose
specialization is infectious diseases and microbiology and an associate professor at the
Southwestern University College of Medicine and the Gullas College of Medicine, testified that
he has already treated over a thousand cases of typhoid fever. According to him, when a case of
typhoid fever is suspected, the Widal test is normally used, and if the 1:320 results of the Widal
test on Jorge Reyes had been presented to him along with the patients history, his impression
would also be that the patient was suffering from typhoid fever. As to the treatment of the
disease, he stated that chloromycetin was the drug of choice. He also explained that despite
the measures taken by respondent doctors and the intravenous administration of two doses of
chloromycetin, complications of the disease could not be discounted.
Indeed, the standard contemplated is not what is actually the average merit among all known
practitioners from the best to the worst and from the most to the least experienced, but the
reasonable average merit among the ordinarily good physicians. Here, Dr. Marlyn Rico did not
depart from the reasonable standard recommended by the experts as she in fact observed the
due care required under the circumstances. Though the Widal test is not conclusive, it remains
a standard diagnostic test for typhoid fever and, in the present case, greater accuracy through
repeated testing was rendered unobtainable by the early death of the patient. The results of
the Widal test and the patients history of fever with chills for five days, taken with the fact that
typhoid fever was then prevalent as indicated by the fact that the clinic had been getting about
15 to 20 typhoid cases a month, were sufficient to give upon any doctor of reasonable skill the
impression that Jorge Reyes had typhoid fever.














Rogelio Nogales, et al vs. Capitol Medical Center, et al.
G.R. No. 142625
December 19, 2006
Facts:
Pregnant with her fourth child, Corazon Nogales, who was then 37 years old, was under
the exclusive prenatal care of Dr. Oscar Estrada beginning on her fourth month of
pregnancy. While Corazon was on her last trimester of pregnancy, Dr. Estrada noted an
increase in her blood pressure and development of leg edema indicating preeclampsia,
which is a dangerous complication of pregnancy.
During the course of the delivery, Dr. Estrada, assisted by Dr. Villaflor, applied low
forceps to extract Corazons baby. In the process, a 1.0 x 2.5 cm. piece of cervical tissue
was allegedly torn. The baby came out in an apnic, cyanotic, weak and injured
condition. Consequently, the baby had to be intubated and resuscitated by Dr. Enriquez
and Dr. Payumo.
Corazon began to manifest moderate vaginal bleeding which rapidly became profuse.
Corazons blood pressure dropped from 130/80 to 60/40 within five minutes. There
was continuous profuse vaginal bleeding. The assisting nurse administered hemacel
through a gauge 19 needle as a side drip to the ongoing intravenous injection of
dextrose.
Upon being informed that Corazon was bleeding profusely, Dr. Espinola ordered
immediate hysterectomy. Rogelio was made to sign a Consent to Operation. Despite Dr.
Espinolas efforts, Corazon. The cause of death was hemorrhage, post partum.
Petitioners filed a complaint for damages with the Regional Trial Court of Manila against
CMC, Dr. Estrada, Dr. Villaflor, Dr. Uy, Dr. Enriquez, Dr. Lacson, Dr. Espinola, and a
certain Nurse J. Dumlao for the death of Corazon. Petitioners mainly contended that
defendant physicians and CMC personnel were negligent in the treatment and
management of Corazons condition. Petitioners charged CMC with negligence in the
selection and supervision of defendant physicians and hospital staff.
After more than 11 years of trial, the trial court rendered judgment finding Dr. Estrada
solely liable for damages.
Petitioners appealed the trial courts decision. Petitioners claimed that aside from Dr.
Estrada, the remaining respondents should be held equally liable for negligence.
Petitioners pointed out the extent of each respondents alleged liability.
The Court of Appeals affirmed the decision of the trial court. Petitioners filed a motion
for reconsideration but was denied by the Court of Appeals. Hence, this petition.
Issue:
Whether or not CMC is vicariously liable for the negligence of Dr. Estrada.
Held:
In general, a hospital is not liable for the negligence of an independent contractor-physician.
There is, however, an exception to this principle. The hospital may be liable if the physician is
the ostensible agent of the hospital. This exception is also known as the doctrine of apparent
authority.
CMCs defense that all it did was to extend to Corazon its facilities is untenable. The Court
cannot close its eyes to the reality that hospitals, such as CMC, are in the business of treatment.
Even simple negligence is not subject to blanket release in favor of establishments like hospitals
but may only mitigate liability depending on the circumstances. When a person needing urgent
medical attention rushes to a hospital, he cannot bargain on equal footing with the hospital on
the terms of admission and operation. Such a person is literally at the mercy of the hospital.
There can be no clearer example of a contract of adhesion than one arising from such a dire
situation. Thus, the release forms of CMC cannot relieve CMC from liability for the negligent
medical treatment of Corazon.










Professional Services, Inc., Juan Fuentes, Miguel Ampil vs. Natividad
and Enrique Agana
G.R. No. 126297
January 31, 2007
Facts:
Natividad Agana was rushed to the Medical City General Hospital (Medical City Hospital)
because of difficulty of bowel movement and bloody anal discharge. After a series of
medical examinations, Dr. Miguel Ampil, diagnosed her to be suffering from cancer of
the sigmoid.
Dr. Ampil, assisted by the medical staff of the Medical City Hospital, performed an
anterior resection surgery on Natividad. He found that the malignancy in her sigmoid
area had spread on her left ovary, necessitating the removal of certain portions of it.
Thus, Dr. Ampil obtained the consent of Natividads husband, Enrique Agana, to permit
Dr. Juan Fuentes, to perform hysterectomy on her.
After Dr. Fuentes had completed the hysterectomy, Dr. Ampil took over, completed the
operation and closed the incision.
However, the operation appeared to be flawed.
Natividad was released from the hospital. After a couple of days, Natividad complained
of excruciating pain in her anal region. She consulted both Dr. Ampil and Dr. Fuentes
about it. They told her that the pain was the natural consequence of the surgery. Dr.
Ampil then recommended that she consult an oncologist to examine the cancerous
nodes which were not removed during the operation.
Natividad, accompanied by her husband, went to the United States to seek further
treatment. After four months of consultations and laboratory examinations, Natividad
was told she was free of cancer. Hence, she was advised to return to the Philippines.
Natividad flew back to the Philippines, still suffering from pains. Two weeks thereafter,
her daughter found a piece of gauze protruding from her vagina. Upon being informed
about it, Dr. Ampil proceeded to her house where he managed to extract by hand a
piece of gauze measuring 1.5 inches in width. He then assured her that the pains would
soon vanish.
Dr. Ampils assurance did not come true. Instead, the pains intensified, prompting
Natividad to seek treatment at the Polymedic General Hospital. While confined there,
Dr. Ramon Gutierrez detected the presence of another foreign object in her vagina -- a
foul-smelling gauze measuring 1.5 inches in width which badly infected her vaginal
vault. A recto-vaginal fistula had formed in her reproductive organs which forced stool
to excrete through the vagina. Another surgical operation was needed to remedy the
damage. Thus, in October 1984, Natividad underwent another surgery.
Natividad and her husband filed with the RTC, Branch 96, Quezon City a complaint for
damages against the Professional Services, Inc. (PSI), owner of the Medical City Hospital,
Dr. Ampil, and Dr. Fuentes. They alleged that the latter are liable for negligence for
leaving two pieces of gauze inside Natividads body and malpractice for concealing their
acts of negligence.
Pending the outcome of the above cases, Natividad died and was duly substituted by
her children.
The RTC rendered its Decision in favor of the Aganas, finding PSI, Dr. Ampil and Dr.
Fuentes liable for negligence and malpractice.
The Court of Appeals rendered a decision affirming the findings of the trial court. Hence,
this petition.
Issue:
Whether or not petitioners are liable for negligence and malpractice.
Held:
Dr. Ampil did not inform Natividad about the missing two pieces of gauze. Worse, he even
misled her that the pain she was experiencing was the ordinary consequence of her operation.
Had he been more candid, Natividad could have taken the immediate and appropriate medical
remedy to remove the gauzes from her body. What was initially an act of negligence by Dr.
Ampil has ripened into a deliberate wrongful act of deceiving his patient.
Under the Captain of the Ship rule, the operating surgeon is the person in complete charge of
the surgery room and all personnel connected with the operation. Their duty is to obey his
orders. As stated before, Dr. Ampil was the lead surgeon. In other words, he was the Captain of
the Ship. That he discharged such role is evident from his following conduct: (1) calling Dr.
Fuentes to perform a hysterectomy; (2) examining the work of Dr. Fuentes and finding it in
order; (3) granting Dr. Fuentes permission to leave; and (4) ordering the closure of the incision.
It was this act of ordering the closure of the incision notwithstanding that two pieces of gauze
remained unaccounted for, that caused injury to Natividads body. Clearly, the control and
management of the thing which caused the injury was in the hands of Dr. Ampil, not Dr.
Fuentes.
In the present case, it was duly established that PSI operates the Medical City Hospital for the
purpose and under the concept of providing comprehensive medical services to the public.
Accordingly, it has the duty to exercise reasonable care to protect from harm all patients
admitted into its facility for medical treatment. Unfortunately, PSI failed to perform such duty.
Not only did PSI breach its duties to oversee or supervise all persons who practice medicine
within its walls, it also failed to take an active step in fixing the negligence committed. This
renders PSI, not only vicariously liable for the negligence of Dr. Ampil under Article 2180 of the
Civil Code, but also directly liable for its own negligence under Article 2176.
Once a physician undertakes the treatment and care of a patient, the law imposes on him
certain obligations. In order to escape liability, he must possess that reasonable degree of
learning, skill and experience required by his profession. At the same time, he must apply
reasonable care and diligence in the exercise of his skill and the application of his knowledge,
and exert his best judgment.














Professional Services, Inc. vs. Court of Appeals, Natividad and
Enrique Agana
G.R. No. 126297
February 2, 2010
Facts:
PSI, together with Dr. Miguel Ampil (Dr. Ampil) and Dr. Juan Fuentes (Dr. Fuentes), was
impleaded by Enrique Agana and Natividad Agana (later substituted by her heirs), in a
complaint for damages filed in the Regional Trial Court (RTC) of Quezon City, Branch 96,
for the injuries suffered by Natividad when Dr. Ampil and Dr. Fuentes neglected to
remove from her body two gauzes which were used in the surgery they performed on at
the Medical City General Hospital. PSI was impleaded as owner, operator and manager
of the hospital.
The RTC held PSI solidarily liable with Dr. Ampil and Dr. Fuentes for damages. On appeal,
the Court of Appeals, absolved Dr. Fuentes but affirmed the liability of Dr. Ampil and PSI,
subject to the right of PSI to claim reimbursement from Dr. Ampil.
On petition for review, the SC, affirmed the CA decision. Hence, this motion for
reconsideration.
Issue:
Whether or not petitioner can be held liable for the negligence of Dr. Ampil.
Held:
Control as a determinative factor in testing the employer-employee relationship between
doctor and hospital under which the hospital could be held vicariously liable to a patient in
medical negligence cases is a requisite fact to be established by preponderance of evidence.
Here, there was insufficient evidence that PSI exercised the power of control or wielded such
power over the means and the details of the specific process by which Dr. Ampil applied his
skills in the treatment of Natividad.
There is ample evidence that the hospital (PSI) held out to the patient (Natividad) that the
doctor (Dr. Ampil) was its agent. Present are the two factors that determine apparent authority:
first, the hospital's implied manifestation to the patient which led the latter to conclude that
the doctor was the hospital's agent; and second, the patients reliance upon the conduct of the
hospital and the doctor, consistent with ordinary care and prudence.
PSI barred itself from arguing in its second motion for reconsideration that the concept of
corporate responsibility was not yet in existence at the time Natividad underwent treatment;
and that if it had any corporate responsibility, the same was limited to reporting the missing
gauzes and did not include taking an active step in fixing the negligence committed. An
admission made in the pleading cannot be controverted by the party making such admission
and is conclusive as to him, and all proofs submitted by him contrary thereto or inconsistent
therewith should be ignored, whether or not objection is interposed by a party.
The Court therefore maintain the ruling that PSI is vicariously liable for the negligence of Dr.
Ampil as its ostensible agent.















Dr. Milagros Cantre vs. Spouses John David Go and Nora Go
G.R. No. 160889
April 27, 2007
Facts:
Nora gave birth to her fourth child, a baby boy. However, suffered profuse bleeding
inside her womb due to some parts of the placenta which were not completely expelled
from her womb after delivery. Consequently, Nora suffered hypovolemic shock,
resulting in a drop in her blood pressure to 40 over 0. Petitioner and the assisting
resident physician performed various medical procedures to stop the bleeding and to
restore Noras blood pressure. Nora remained unconscious until she recovered.
While in the recovery room, her husband, respondent John David Z. Go noticed a fresh
gaping wound two and a half (2 ) by three and a half (3 ) inches in the inner portion
of her left arm, close to the armpit. He asked the nurses what caused the injury. He was
informed it was a burn. John David filed a request for investigation. Petitioner said the
blood pressure cuff caused the injury.
Noras injury was referred to a plastic surgeon at the Dr. Jesus Delgado Memorial
Hospital for skin grafting. Her wound was covered with skin sourced from her abdomen,
which consequently bore a scar as well.
Unfortunately, Noras arm would never be the same. Aside from the unsightly mark, the
pain in her left arm remains. When sleeping, she has to cradle her wounded arm. Her
movements now are also restricted. Her children cannot play with the left side of her
body as they might accidentally bump the injured arm, which aches at the slightest
touch.
Respondent spouses filed a complaint for damages against petitioner, Dr. Abad, and the
hospital. The trial court rendered a decision in favor of respondents.
Petitioner, Dr. Abad, and the hospital all appealed to the Court of Appeals, which
affirmed with modification the trial court decision.
Petitioners motion for reconsideration was denied by the Court of Appeals. Hence, the
instant petition.
Issue:
Whether or not petitioner liable for the injury suffered by respondent Nora Go.

Held:
In cases involving medical negligence, the doctrine of res ipsa loquitur allows the mere
existence of an injury to justify a presumption of negligence on the part of the person who
controls the instrument causing the injury, provided that the following requisites concur:
1. The accident is of a kind which ordinarily does not occur in the absence of someones
negligence;
2. It is caused by an instrumentality within the exclusive control of the defendant or
defendants; and
3. The possibility of contributing conduct which would make the plaintiff responsible is
eliminated.
As to the first requirement, the gaping wound on Noras arm is certainly not an ordinary
occurrence in the act of delivering a baby, far removed as the arm is from the organs involved
in the process of giving birth. Such injury could not have happened unless negligence had set in
somewhere.
Second, whether the injury was caused by the droplight or by the blood pressure cuff is of no
moment. Both instruments are deemed within the exclusive control of the physician in charge
under the "captain of the ship" doctrine. This doctrine holds the surgeon in charge of an
operation liable for the negligence of his assistants during the time when those assistants are
under the surgeons control. In this particular case, it can be logically inferred that petitioner,
the senior consultant in charge during the delivery of Noras baby, exercised control over the
assistants assigned to both the use of the droplight and the taking of Noras blood pressure.
Hence, the use of the droplight and the blood pressure cuff is also within petitioners exclusive
control.
Third, the gaping wound on Noras left arm, by its very nature and considering her condition,
could only be caused by something external to her and outside her control as she was
unconscious while in hypovolemic shock. Hence, Nora could not, by any stretch of the
imagination, have contributed to her own injury.
Based on the foregoing, the presumption that petitioner was negligent in the exercise of her
profession stands unrebutted.

Dr. Rubi Li vs. Spouses Reynaldo and Lina Soliman, as parents/heirs
of deceased Angelica Soliman
G.R. No. 165279
June 7, 2011
Facts:
Respondents 11-year old daughter, Angelica Soliman, underwent a biopsy of the mass
located in her lower extremity at the St. Lukes Medical Center (SLMC). Results showed
that Angelica was suffering from osteosarcoma, osteoblastic type, a high-grade (highly
malignant) cancer of the bone which usually afflicts teenage children. Following this
diagnosis and as primary intervention, Angelicas right leg was amputated by Dr. Jaime
Tamayo in order to remove the tumor. As adjuvant treatment to eliminate any
remaining cancer cells, and hence minimize the chances of recurrence and prevent the
disease from spreading to other parts of the patients body (metastasis), chemotherapy
was suggested by Dr. Tamayo. Dr. Tamayo referred Angelica to another doctor at
SLMC, herein petitioner Dr. Rubi Li, a medical oncologist.
Angelica was admitted to SLMC. However, just eleven (11) days after the (intravenous)
administration of the first cycle of the chemotherapy regimen. Because SLMC refused
to release a death certificate without full payment of their hospital bill, respondents
brought the cadaver of Angelica to the Philippine National Police (PNP) Crime
Laboratory at Camp Crame for post-mortem examination. The Medico-Legal Report
issued by said institution indicated the cause of death as Hypovolemic shock secondary
to multiple organ hemorrhages and Disseminated Intravascular Coagulation.
Respondents filed a damage suit against petitioner, Dr. Leo Marbella, Mr. Jose Ledesma,
a certain Dr. Arriete and SLMC. Respondents charged them with negligence and
disregard of Angelicas safety, health and welfare by their careless administration of the
chemotherapy drugs, their failure to observe the essential precautions in detecting early
the symptoms of fatal blood platelet decrease and stopping early on the chemotherapy,
which bleeding led to hypovolemic shock that caused Angelicas untimely demise.
In her answer, petitioner denied having been negligent in administering the
chemotherapy drugs to Angelica and asserted that she had fully explained to
respondents how the chemotherapy will affect not only the cancer cells but also the
patients normal body parts, including the lowering of white and red blood cells and
platelets.
In dismissing the complaint, the trial court held that petitioner was not liable for
damages as she observed the best known procedures and employed her highest skill
and knowledge in the administration of chemotherapy drugs on Angelica but despite all
efforts said patient died.
Respondents appealed to the CA which, while concurring with the trial courts finding
that there was no negligence committed by the petitioner in the administration of
chemotherapy treatment to Angelica, found that petitioner as her attending physician
failed to fully explain to the respondents all the known side effects of chemotherapy.
The CA ruled that petitioner is negligent in not informing respondent other side effects
which gravely affected their child and therefore petitioner is liable for damages.
Petitioner filed a motion for partial reconsideration which the appellate court denied.
Hence, this petition.
Issue:
Whether or not the petitioner can be held liable for failure to fully disclose serious side effects
to the parents of the child patient who died while undergoing chemotherapy, despite the
absence of finding that petitioner was negligent in administering the said treatment.
Held:
Examining the evidence on record, we hold that there was adequate disclosure of material risks
inherent in the chemotherapy procedure performed with the consent of Angelicas parents.
Respondents could not have been unaware in the course of initial treatment and amputation of
Angelicas lower extremity, that her immune system was already weak on account of the
malignant tumor in her knee. When petitioner informed the respondents beforehand of the
side effects of chemotherapy which includes lowered counts of white and red blood cells,
decrease in blood platelets, possible kidney or heart damage and skin darkening, there is
reasonable expectation on the part of the doctor that the respondents understood very well
that the severity of these side effects will not be the same for all patients undergoing the
procedure. In other words, by the nature of the disease itself, each patients reaction to the
chemical agents even with pre-treatment laboratory tests cannot be precisely determined by
the physician. That death can possibly result from complications of the treatment or the
underlying cancer itself, immediately or sometime after the administration of chemotherapy
drugs, is a risk that cannot be ruled out, as with most other major medical procedures, but such
conclusion can be reasonably drawn from the general side effects of chemotherapy already
disclosed.
As a physician, petitioner can reasonably expect the respondents to have considered the
variables in the recommended treatment for their daughter afflicted with a life-threatening
illness. On the other hand, it is difficult to give credence to respondents claim that petitioner
told them of 95% chance of recovery for their daughter, as it was unlikely for doctors like
petitioner who were dealing with grave conditions such as cancer to have falsely assured
patients of chemotherapys success rate. Besides, informed consent laws in other countries
generally require only a reasonable explanation of potential harms, so specific disclosures such
as statistical data, may not be legally necessary.



















People of the Philippines vs. Glenn De Los Santos
G.R. No. 131588
March 27, 2001
Facts:
Accused-appellant, with deliberate intent to kill, taking advantage of his driven motor
vehicle, an Isuzu Elf, and with treachery, killed and inflicted mortal wounds from behind
in a sudden and unexpected manner with the use of a vehicle members of the Philippine
National Police (PNP), undergoing a Special Training Course (Scout Class 07-95), wearing
black T-shirts and black short pants, performing an Endurance Run of 35 kilometers
coming from their camp in Manolo Fortich, Bukidnon, heading to Regional Training
Headquarters in Camp Alagar, Cagayan de Oro City. The accused proceeded to operate
his driven vehicle (an Isuzu Elf) on high speed directly towards the joggers, thus forcing
the rear guards to throw themselves to a nearby canal, to avoid injuries, then hitting,
bumping, or ramming the first four (4) victims, causing the bodies to be thrown towards
the windshields of said Isuzu Elf, breaking said windshield, and upon being aware that
bodies of the victims flew on the windshield of his driven vehicle, instead of applying his
brake, continued to travel on a high speed, this time putting off its headlights, thus
hitting the succeeding joggers on said 1st line, as a result thereof the 11 person were
killed on the spot.
While another trainee/victim, Antonio Palomino Mino, died few days after the incident,
while the following eleven (11) other trainee/victims were seriously wounded, the
accused thus performing all the acts of execution which would produce the crime of
Murder as a consequence but nevertheless did not produce it by reason of some cause
other than said accuseds spontaneous desistance, that is, by the timely and able
medical assistance rendered on the victims which prevented their death.
The evidence for the prosecution disclose that the Special Counter Insurgency Operation
Unit Training held at Camp Damilag, Manolo Fortich, Bukidnon, started on 1 September
1995 and was to end on 15 October 1995. The last phase of the training was the
endurance run from said Camp to Camp Alagar, Cagayan de Oro City. The run on 5
October 1995 started at 2:20 a.m. The PNP trainees were divided into three columns:
the first and second of which had 22 trainees each, and the third had 21. The trainees
were wearing black T-shirts, black short pants, and green and black combat shoes. At
the start of the run, a Hummer vehicle tailed the jogging trainees. When they reached
Alae, the driver of the Hummer vehicle was instructed to dispatch advanced security at
strategic locations in Carmen Hill. Since the jogging trainees were occupying the right
lane of the highway, two rear security guards were assigned to each rear column. Their
duty was to jog backwards facing the oncoming vehicles and give hand signals for other
vehicles to take the left lane.
Prosecution witnesses Lemuel Y. Pangca and Weldon Sacro testified that they were
assigned as rear guards of the first column. They recalled that from Alae to Maitum
Highway, Puerto, Cagayan de Oro City, about 20 vehicles passed them, all of which
slowed down and took the left portion of the road when signaled to do so.
While they were negotiating Maitum Highway, they saw an Isuzu Elf truck coming at
high speed towards them. The vehicle lights were in the high beam. At a distance of
100 meters, the rear security guards started waving their hands for the vehicle to take
the other side of the road, but the vehicle just kept its speed, apparently ignoring their
signals and coming closer and closer to them. Realizing that the vehicle would hit them,
the rear guards told their co-trainees to retract. The guards forthwith jumped in
different directions. Lemuel and Weldon saw their co-trainees being hit by the said
vehicle, falling like dominoes one after the other. Some were thrown, and others were
overrun by the vehicle. The driver did not reduce his speed even after hitting the first
and second columns. The guards then stopped oncoming vehicles to prevent their
comrades from being hit again.
The trial court judge, together with the City Prosecutor, GLENN and his counsel,
conducted an ocular inspection of the place where the incident happened.
The trial court convicted GLENN of the complex crime of multiple murder, multiple
frustrated murder and multiple attempted murder, with the use of motor vehicle as the
qualifying circumstance. It sentenced him to suffer the penalty of death and ordered
him to indemnify each group of the heirs of the deceased in the amount of P75,000;
each of the victims of frustrated murder in the amount of P30,000; and each of the
victims of attempted murder in the amount of P10,000. Hence, this automatic review.
Issue:
Whether or not accused-appelant is guilty of the criminal act and whether he is civilly liable for
the act commited.
Held:
The incident, tragic though it was in light of the number of persons killed and seriously injured,
was an accident and not an intentional felony. It is significant to note that there is no shred of
evidence that GLENN had an axe to grind against the police trainees that would drive him into
deliberately hitting them with intent to kill.
Considering that the incident was not a product of a malicious intent but rather the result of a
single act of reckless driving, GLENN should be held guilty of the complex crime of reckless
imprudence resulting in multiple homicide with serious physical injuries and less serious
physical injuries.
As far as the award of damages is concerned, the court find a necessity to modify the same.
Conformably with current jurisprudence, the court reduced the trial courts award of death
indemnity from P75,000 to P50,000 for each group of heirs of the trainees killed. Likewise, for
lack of factual basis, the awards of P30,000 to each of those who suffered serious physical
injuries and of P10,000 to each of those who suffered minor physical injuries is deleted.
















L.G. Foods Corporation and Victorino Gabor, Vice-President and
General Manager vs. Hon. Philadelfa Pagapong-Agraviador, in her
capacity as Presiding Judge of Regional Trial Court, Branch 43,
Bacolod City, and Spouses Florentino and Theresa Vallejera
G.R. No. 158995
September 26, 2006
Facts:
Charles Vallereja, a 7-year old son of the spouses Florentino Vallejera and Theresa
Vallejera, was hit by a Ford Fiera van owned by the petitioners and driven at the time by
their employee, Vincent Norman Yeneza y Ferrer. Charles died as a result of the
accident.
An Information for Reckless Imprudence Resulting to Homicide was filed against the
driver before the Municipal Trial Court in Cities (MTCC), Bacolod City.
Unfortunately, before the trial could be concluded, the accused driver committed
suicide, evidently bothered by conscience and remorse. On account thereof, the MTCC,
dismissed the criminal case.
In the RTC of Bacolod City, the spouses Vallejera filed a complaint for damages against
the petitioners as employers of the deceased driver, basically alleging that as such
employers, they failed to exercise due diligence in the selection and supervision of their
employees.
Petitioner prayed in their Answer for the dismissal of the complaint for lack of cause of
action on the part of the Vallejera couple.
The trial court denied the motion to dismiss for lack of merit and set the case for pre-
trial. With their motion for reconsideration having been denied by the same court, the
petitioners then went on certiorari to the CA.
The CA denied the petition and upheld the trial court.
Issue:
Whether or not the spouses Vallejeras has cause of action against petitioner.


Held:
Here, the complaint sufficiently alleged that the death of the couples minor son was caused
by the negligent act of the petitioners driver; and that the petitioners themselves were civilly
liable for the negligence of their driver for failing to exercise the necessary diligence required of
a good father of the family in the selection and supervision of their employee, the driver, which
diligence, if exercised, would have prevented said accident.
Had the respondent spouses elected to sue the petitioners based on Article 103 of the
Revised Penal Code, they would have alleged that the guilt of the driver had been proven
beyond reasonable doubt; that such accused driver is insolvent; that it is the subsidiary liability
of the defendant petitioners as employers to pay for the damage done by their employee
(driver) based on the principle that every person criminally liable is also civilly liable. Since there
was no conviction in the criminal case against the driver, precisely because death intervened
prior to the termination of the criminal proceedings, the spouses recourse was, therefore, to
sue the petitioners for their direct and primary liability based on quasi-delict.













Victorino Magat vs. Hon. Leo Medialdea and Santiago Guerrero
G.R. No. L-37120
April 20, 1983
Facts:
Isidro Q. Aligada, also acting as agent of the defendant, made representations with the
plaintiff herein to the effect that defendant desired to procure from Japan thru the
plaintiff herein the needed radio transceivers and to this end, Isidro Q. Aligada secured a
firm offer in writing.
Believing that the defendant would faithfully fulfill his contract with the plaintiff,
considering his signed conformity, the plaintiff took steps to advise the Japanese entity
entrusted with the manufacture of the items to the effect that the contract between the
defendant and the plaintiff has been perfected and that advice with regards to radio
frequency would follow as soon as same is received by the plaintiff from the defendant.
It has come to the knowledge of the plaintiff that the defendant has been operating his
taxicabs without the required radio transceivers and when the U.S. Navy Authorities of
Subic Bay, Philippines, were pressing defendant for compliance with his commitments
with respect to the installations of radio transceivers on his taxicabs, he impliedly laid
the blame for the delay upon the plaintiff, thus destroying the reputation of the plaintiff
with the said Naval Authorities of Subic Bay, Philippines, with whom plaintiff transacts
business;
Plaintiff wrote a letter thru his counsel to ascertain from the defendant as to whether it
is his intention to fulfill his part of the agreement with the plaintiff herein or whether he
desired to have the contract between them definitely cancelled, but defendant did not
even have the courtesy to answer plaintiff's demand.
The defendant entered into a contract with the plaintiff without the least intention of
faithfully complying with his obligation, he did so only in order to obtain the concession
from the U.S. Navy Exchange, Subic Bay, Philippines, of operating a fleet of taxicabs
inside the U.S. Naval Base to his financial benefit and at the expense and prejudice of
third parties such as the plaintiff.
That in view of the defendant's failure to fulfill his contractual obligations with the
plaintiff herein, the plaintiff will suffer damages.
Respondent Guerrero filed a motion to dismiss said complaint for lack of cause of
action.
The respondent judge, over petitioner's opposition, issued a minute order dismissing
the complaint.
Issue:
Whether or not respondent can be held liable for damages.
Held:
Indisputably, the parties, both businessmen, entered into the aforesaid contract with the
evident intention of deriving some profits therefrom. Upon breach of the contract by either of
them, the other would necessarily suffer loss of his expected profits. Since the loss comes into
being at the very moment of breach, such loss is real, fixed and vested and, therefore,
recoverable under the law.
The damages which the obligor is liable for includes not only the value of the loss suffered by
the obligee but also the profits which the latter failed to obtain. If the obligor acted in good
faith, he shall be liable for those damages that are the natural and probable consequences of
the breach of the obligation and which the parties have foreseen or could have reasonably
foreseen at the time the obligation was constituted; and in case of fraud, bad faith, malice or
wanton attitude, he shall be liable for all damages which may be reasonably attributed to the
non-performance of the obligation.
On the basis of the facts alleged in the complaint, the court rendered a valid judgment in
accordance with the prayer thereof.







Fidela Del Castillo Vda. De Mistica vs. Spouses Bernardino Naguiat
and Maria Paulina Gerona-Naguiat
G.R. No. 137909
December 11, 2003
Facts:
Eulalio Mistica, predecessor-in-interest of petitioner, is the owner of a parcel of land
located at Malhacan, Meycauayan, Bulacan. A portion thereof was leased to
Respondent Bernardino Naguiat.
Respondent Bernardino Naguiat gave a downpayment of P2,000.00. He made another
partial payment of P1,000.00. He failed to make any payments thereafter.
Eulalio Mistica died.
Petitioner filed a complaint for rescission alleging that the failure and refusal of
respondents to pay the balance of the purchase price constitutes a violation of the
contract which entitles her to rescind the same.
Respondents contended that the contract cannot be rescinded on the ground that it
clearly stipulates that in case of failure to pay the balance as stipulated, a yearly interest
of 12% is to be paid.
Respondents also filed a motion to dismiss which was denied by the court. The motion
for reconsideration was likewise denied.
The trial court rendered a decision in favor of petitioner.
On appeal, the CA held that respondents did not breach the Contract of Sale. The
appellate court ruled that the only remedy available was to order them to pay petitioner
the fair market value of the usurped portion. Hence, this Petition.
Issue:
Whether or not petitioner can rescind the contract.
Held:
In a contract of sale, the remedy of an unpaid seller is either specific performance or rescission.
Under Article 1191 of the Civil Code, the right to rescind an obligation is predicated on the
violation of the reciprocity between parties, brought about by a breach of faith by one of them.
Rescission, however, is allowed only where the breach is substantial and fundamental to the
fulfillment of the obligation.
In the present case, the failure of respondents to pay the balance of the purchase price within
ten years from the execution of the Deed did not amount to a substantial breach. In the
Kasulatan, it was stipulated that payment could be made even after ten years from the
execution of the Contract, provided the vendee paid 12 percent interest. The stipulations of
the contract constitute the law between the parties; thus, courts have no alternative but to
enforce them as agreed upon and written.


















Spouses Henry Co and Elizabeth Co and Melody Co vs. Court of
Appeals, et al
G.R. No. 112330
August 17, 1999
Facts:
Plaintiff entered into a verbal contract with defendant for her purchase of the latters
house and lot located at 316 Beata St., New Alabang Village, Muntinlupa, Metro Manila,
for and in consideration of the sum of $100,000.00. One week thereafter, and shortly
before she left for the United States, plaintiff paid to the defendants the amounts of
$1,000.00 and P40,000.00 as earnest money, in order that the same may be reserved
for her purchase, said earnest money to be deducted from the total purchase price.
Defendants counsel, Atty. Leopoldo Cotaco, wrote a letter to the plaintiff demanding
that she pay the balance of $70,000.00 and not receiving any response thereto, said
lawyer wrote another letter to plaintiff, informing her that she has lost her option to
purchase the property subject of this case and offered to sell her another property.
Atty. Estrella O. Laysa, counsel for plaintiff, wrote a letter to Atty. Leopoldo Cotaco
informing him that plaintiff is now ready to pay the remaining balance to complete the
sum of $100,000.00, the agreed amount as selling price and for that reason, plaintiff
filed the instant complaint.
The Regional Trial Court (RTC) ruled in favor of private respondent Adoracion Custodio
(CUSTODIO) and ordered the petitioner spouses Henry and Elizabeth Co (COS) to refund
the amount of $30,000.00 in CUSTODIOs favor.
Not satisfied with the decision, the COS appealed to the Court of Appeals which
affirmed the decision of the RTC. Hence, this appeal.
Issue:
Whether or not the contract entered into by the parties can be rescinded.
Held:
Since it has been shown that the appellee who was not in default, was willing to perform part of
the contract while the appellants were not, rescission of the contract is in order. The power to
rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply
with what is incumbent upon him, (Article 1191, same Code). Rescission creates the obligation
to return the things which were the object of the contract, together with their fruits, and the
price with its interest x x x x (Article 1385, same Code).
In the case at bar, the property involved has not been delivered to the appellee. She has
therefore nothing to return to the appellants. The price received by the appellants has to be
returned to the appellee as aptly ruled by the lower court, for such is a consequence of
rescission, which is to restore the parties in their former situations.



















Heirs of Sofia Quirong, represented by Romeo Quirong vs.
Development Bank of the Philippines
G.R. No. 173441
December 3, 2009
Facts:
When the late Emilio Dalope died, he left a 589-square meter untitled lot in Sta.
Barbara, Pangasinan, to his wife, Felisa Dalope (Felisa) and their nine children, one of
whom was Rosa Dalope-Funcion. To enable Rosa and her husband Antonio Funcion (the
Funcions) get a loan from respondent Development Bank of the Philippines (DBP), Felisa
sold the whole lot to the Funcions. With the deed of sale in their favor and the tax
declaration transferred in their names, the Funcions mortgaged the lot with the DBP.

After the Funcions failed to pay their loan, the DBP foreclosed the mortgage on the lot
and consolidated ownership in its name.

Four years later, the DBP conditionally sold the lot to Sofia Quirong for the price of
P78,000.00. In their contract of sale, Sofia Quirong waived any warranty against
eviction. The contract provided that the DBP did not guarantee possession of the
property and that it would not be liable for any lien or encumbrance on the same.
Quirong gave a down payment of P14,000.00.

Two months after that sale, Felisa and her eight children (collectively, the Dalopes) filed
an action for partition and declaration of nullity of documents with damages against the
DBP and the Funcions before the Regional Trial Court (RTC) of Dagupan City, Branch 42.

Notwithstanding the suit, the DBP executed a deed of absolute sale of the subject lot in
Sofia Quirongs favor. The deed of sale carried substantially the same waiver of
warranty against eviction and of any adverse lien or encumbrance.

Sofia Quirong having since died, her heirs (petitioner Quirong heirs) filed an answer in
intervention in which they asked the RTC to award the lot to them and, should it instead
be given to the Dalopes, to allow the Quirong heirs to recover the lots value from the
DBP. But, because the heirs failed to file a formal offer of evidence, the trial court did
not rule on the merits of their claim to the lot and, alternatively, to relief from the DBP.
The RTC rendered a decision, declaring the DBPs sale to Sofia Quirong valid only with
respect to the shares of Felisa and Rosa Funcion in the property. It declared Felisas sale
to the Funcions, the latters mortgage to the DBP, and the latters sale to Sofia Quirong
void insofar as they prejudiced the shares of the eight other children of Emilio and Felisa
who were each entitled to a tenth share in the subject lot.
The Quirong heirs filed the present action against the DBP before the RTC of Dagupan
City, Branch 44, for rescission of the contract of sale between Sofia Quirong, their
predecessor, and the DBP and praying for the reimbursement of the price of P78,000.00
that she paid the bank plus damages.
The RTC rendered a decision, rescinding the sale between Sofia Quirong and the DBP
and ordering the latter to return to the Quirong heirs the P78,000.00 Sofia Quirong paid
the bank.
On appeal by the DBP, the Court of Appeals (CA) reversed the RTC decision and
dismissed the heirs action on the ground of prescription. Hence, this petition.
Issue:
Whether or not the Quirong heirs action for rescission of respondent DBPs sale of the subject
property to Sofia Quirong was already barred by prescription.
Held:
An action for rescission, which is based on a subsequent economic loss suffered by the buyer,
was precisely the action that the Quirong heirs took against the DBP. Consequently, it
prescribed as Article 1389 provides in four years from the time the action accrued. Since it
accrued on January 28, 1993 when the decision became final and executory and ousted the
heirs from a substantial portion of the lot, the latter had only until January 28, 1997 within
which to file their action for rescission. Given that they filed their action on June 10, 1998, they
did so beyond the four-year period.


Heirs of Ramon Gaite, et al vs. the Plaza, Inc. and FGU Insurance
Corporation
G.R. No. 177685
January 26, 2011
Facts:
The Plaza, Inc. (The Plaza), a corporation engaged in the restaurant business, through its
President, Jose C. Reyes, entered into a contract with Rhogen Builders (Rhogen),
represented by Ramon C. Gaite, for the construction of a restaurant building in Greenbelt,
Makati, Metro Manila for the price of P7,600,000.00.
To secure Rhogens compliance with its obligation under the contract, Gaite and FGU
Insurance Corporation (FGU) executed a surety bond in the amount of P1,155,000.00 in
favor of The Plaza. The Plaza paid P1,155,000.00 less withholding taxes as down payment
to Gaite. Thereafter, Rhogen commenced construction of the restaurant building.
Engineer Angelito Z. Gonzales, the Acting Building Official of the Municipality of Makati,
ordered Gaite to cease and desist from continuing with the construction of the building
for violation of Sections 301 and 302 of the National Building Code (P.D. 1096) and its
implementing rules and regulations.
Engr. Gonzales informed Gaite that the building permit for the construction of the
restaurant was revoked for non-compliance with the provisions of the National Building
Code and for the additional temporary construction without permit.
Gaite notified Reyes that he is suspending all construction works until Reyes and the
Project Manager cooperate to resolve the issue he had raised to address the problem.
This was followed by another letter in which Gaite expressed his sentiments on their
aborted project and reiterated that they can still resolve the matter with cooperation
from the side of The Plaza.
However, Gaite informed The Plaza that he is terminating their contract based on the
Contractors Right to Stop Work or Terminate Contracts as provided for in the General
Conditions of the Contract. In his letter, Gaite accused Reyes of not cooperating with
Rhogen in solving the problem concerning the revocation of the building permits, which
he described as a minor problem. Additionally, Gaite demanded the payment of
P63,058.50 from The Plaza representing the work that has already been completed by
Rhogen.
The Plaza, through Reyes, countered that it will hold Gaite and Rhogen fully responsible
for failure to comply with the terms of the contract and to deliver the finished structure
on the stipulated date. Reyes argued that the down payment made by The Plaza was
more than enough to cover Rhogens expenses.
The Plaza notified Gaite that it could no longer credit any payment to Rhogen for the
work it had completed because the evaluation of the extent, condition, and cost of work
done revealed that in addition to the violations committed during the construction of
the building, the structure was not in accordance with plans approved by the
government and accepted by Ayala. Hence, The Plaza demanded the reimbursement of
the down payment, the cost of uprooting or removal of the defective structures, the
value of owner-furnished materials, and payment of liquidated damages.
Branch 63 of the RTC Makati rendered its decision granting the claims of The Plaza
against Rhogen, the Gaites and FGU, and the cross-claim of FGU against Rhogen and the
Gaites.
The CA affirmed the Decision of the trial court but modified the award of damages. The
motion for reconsideration of the decision was denied. Hence, this appeal.
Issue:
Whether or not petitioners are liable for breach of contract.
Held:
Rhogen committed a serious breach of its contract with The Plaza, which justified the latter in
terminating the contract. Petitioners are thus liable for damages for having breached their
contract with respondent The Plaza. Article 1170 of the Civil Code provides that those who in the
performance of their obligations are guilty of fraud, negligence or delay and those who in any
manner contravene the tenor thereof are liable for damages.
Under the principle of quantum meruit, a contractor is allowed to recover the reasonable value
of the thing or services rendered despite the lack of a written contract, in order to avoid unjust
enrichment. Quantum meruit means that in an action for work and labor, payment shall be
made in such amount as the plaintiff reasonably deserves. To deny payment for a building
almost completed and already occupied would be to permit unjust enrichment at the expense
of the contractor.
Rhogen failed to finish even a substantial portion of the works due to the stoppage order issued
just two months from the start of construction. Despite the down payment received from The
Plaza, Rhogen, upon evaluation of the Project Manager, was able to complete a meager
percentage much lower than that claimed by it under the first progress billing. Moreover, after
it relinquished the project, the site inspection appraisal jointly conducted by the Project
Manager, Building Inspector Engr. Gregory and representatives from FGU and Rhogen, Rhogen
was found to have executed the works not in accordance with the approved plans or failed to
seek prior approval of the Municipal Engineer. Article 1167 of the Civil Code is explicit on this
point that if a person obliged to do something fails to do it, the same shall be executed at his
cost.




















Solar Harvest, Inc. vs. Davao Corrugated Carton Corporation
G.R. No. 176868
July 26, 2010
Facts:
Petitioner, Solar Harvest, Inc., entered into an agreement with respondent, Davao
Corrugated Carton Corporation, for the purchase of corrugated carton boxes,
specifically designed for petitioners business of exporting fresh bananas, at US$1.10
each. The agreement was not reduced into writing. To get the production underway,
petitioner deposited, US$40,150.00 in respondents US Dollar Savings Account with
Westmont Bank, as full payment for the ordered boxes.
Despite such payment, petitioner did not receive any boxes from respondent. Petitioner
wrote a demand letter for reimbursement of the amount paid. Respondent replied that
the boxes had been completed and that petitioner failed to pick them up from the
formers warehouse 30 days from completion, as agreed upon. Respondent mentioned
that petitioner even placed an additional order of 24,000 boxes, out of which, 14,000
had been manufactured without any advanced payment from petitioner. Respondent
then demanded petitioner to remove the boxes from the factory and to pay the balance
of US$15,400.00 for the additional boxes and P132,000.00 as storage fee.
Petitioner filed a Complaint for sum of money and damages against respondent. The
Complaint averred that the parties agreed that the boxes will be delivered within 30
days from payment but respondent failed to manufacture and deliver the boxes within
such time.
The Regional Trial Court (RTC) ruled that respondent did not commit any breach of faith
that would justify rescission of the contract and the consequent reimbursement of the
amount paid by petitioner. The RTC said that respondent was able to produce the
ordered boxes but petitioner failed to obtain possession thereof because its ship did not
arrive.
On appeal, the appellate court affirmed the decision of the trial court.
Petitioner moved for reconsideration, but the motion was denied by the CA. Hence, this
petition.
Issue:
Whether or not respondent has breached its obligation and whether rescission of the obligation
is the proper remedy.
Held:
In reciprocal obligations, as in a contract of sale, the general rule is that the fulfillment of the
parties respective obligations should be simultaneous. Hence, no demand is generally
necessary because, once a party fulfills his obligation and the other party does not fulfill his, the
latter automatically incurs in delay. But when different dates for performance of the
obligations are fixed, the default for each obligation must be determined by the rules given in
the first paragraph of the present article, that is, the other party would incur in delay only from
the moment the other party demands fulfillment of the formers obligation. Thus, even in
reciprocal obligations, if the period for the fulfillment of the obligation is fixed, demand upon
the obligee is still necessary before the obligor can be considered in default and before a cause
of action for rescission will accrue.
Evident from the records and even from the allegations in the complaint was the lack of
demand by petitioner upon respondent to fulfill its obligation to manufacture and deliver the
boxes. The Complaint only alleged that petitioner made a follow-up upon respondent, which,
however, would not qualify as a demand for the fulfillment of the obligation. Petitioners
witness also testified that they made a follow-up of the boxes, but not a demand. Note is taken
of the fact that, with respect to their claim for reimbursement, the Complaint alleged and the
witness testified that a demand letter was sent to respondent. Without a previous demand for
the fulfillment of the obligation, petitioner would not have a cause of action for rescission
against respondent as the latter would not yet be considered in breach of its contractual
obligation.
In sum, the Court finds that petitioner failed to establish a cause of action for rescission, the
evidence having shown that respondent did not commit any breach of its contractual
obligation.








Mila Reyes vs. Victoria Tuparan
G.R. No. 188064
June 1, 2011
Facts:
Mila A. Reyes (petitioner) filed a complaint for Rescission of Contract with Damages
against Victoria T. Tuparan (respondent) before the RTC. In her Complaint, petitioner
alleged, among others, that she was the registered owner of a 1,274 square meter
residential and commercial lot located in Karuhatan, Valenzuela City; that on that
property, she put up a three-storey commercial building known as RBJ Building and a
residential apartment building; and that she had been operating a drugstore and
cosmetics store on the ground floor of RBJ Building where she also had been residing
while the other areas of the buildings including the sidewalks were being leased and
occupied by tenants and street vendors.
Respondent leased from petitioner a space on the ground floor of the RBJ Building for
her pawnshop business for a monthly rental of 4,000.00.
Petitioner mortgaged the subject real properties to the Farmers Savings Bank and Loan
Bank, Inc. (FSL Bank) to secure a loan of 2,000,000.00 payable in installments.
Petitioners outstanding account on the mortgage reached 2,278,078.13. Petitioner
then decided to sell her real properties for at least 6,500,000.00 so she could liquidate
her bank loan and finance her businesses. As a gesture of friendship, respondent
verbally offered to conditionally buy petitioners real properties for 4,200,000.00
payable on installment basis without interest and to assume the bank loan.
After petitioners verbal acceptance of all the conditions/concessions, both parties
worked together to obtain FSL Banks approval for respondent to assume her
(petitioners) outstanding bank account. The assumption would be part of respondents
purchase price for petitioners mortgaged real properties. FSL Bank approved their
proposal on the condition that petitioner would sign or remain as co-maker for the
mortgage obligation assumed by respondent.
The parties and FSL Bank executed the corresponding Deed of Conditional Sale of Real
Properties with Assumption of Mortgage. Due to their close personal friendship and
business relationship, both parties chose not to reduce into writing the other terms of
their agreement. Besides, FSL Bank did not want to incorporate in the Deed of
Conditional Sale of Real Properties with Assumption of Mortgage any other side
agreement between petitioner and respondent.
Respondent, however, defaulted in the payment of her obligations on their due dates.
Instead of paying the amounts due in lump sum on their respective maturity dates,
respondent paid petitioner in small amounts from time to time.
Petitioner further averred that despite her success in finding a prospective buyer for the
subject real properties within the 3-month period agreed upon, respondent reneged on
her promise to allow the cancellation of their deed of conditional sale. Instead,
respondent became interested in owning the subject real properties and even wanted
to convert the entire property into a modern commercial complex. Nonetheless, she
consented because respondent repeatedly professed friendship and assured her that all
their verbal side agreement would be honoured.
The residential building was gutted by fire which caused the petitioner to lose rental
income in the amount of 8,000.00 a month.
The RTC handed down its decision finding that respondent failed to pay in full the 4.2
million total purchase price of the subject real properties leaving a balance of
805,000.00.
The CA rendered its decision affirming with modification the RTC Decision. The CA
agreed with the RTC that the contract entered into by the parties is a contract to sell but
ruled that the remedy of rescission could not apply because the respondents failure to
pay the petitioner the balance of the purchase price in the total amount of 805,000.00
was not a breach of contract, but merely an event that prevented the seller (petitioner)
from conveying title to the purchaser (respondent).

Issue:
Whether or not the obligation between the parties can be rescinded.
Held:
Granting that a rescission can be permitted under Article 1191, the Court still cannot allow it for
the reason that, considering the circumstances, there was only a slight or casual breach in the
fulfillment of the obligation.
Unless the parties stipulated it, rescission is allowed only when the breach of the contract is
substantial and fundamental to the fulfillment of the obligation. Whether the breach is slight or
substantial is largely determined by the attendant circumstances.
From the records, it cannot be denied that respondent paid to FSL Bank petitioners mortgage
obligation in the amount of 2,278,078.13, which formed part of the purchase price of the
subject property. Likewise, it is not disputed that respondent paid directly to petitioner the
amount of 721,921.87 representing the additional payment for the purchase of the subject
property. Clearly, out of the total price of 4,200,000.00, respondent was able to pay the total
amount of 3,000,000.00, leaving a balance of 1,200,000.00 payable in three (3) installments.
Out of the 1,200,000.00 remaining balance, respondent paid on several dates the first and
second installments of 200,000.00 each. She, however, failed to pay the third and last
installment of 800,000.00. Nevertheless, respondent, through counsel, offered to pay the
amount of 751,000.00, which was rejected by petitioner for the reason that the actual balance
was 805,000.00 excluding the interest charges.
Considering that out of the total purchase price of 4,200,000.00, respondent has already paid
the substantial amount of 3,400,000.00, more or less, leaving an unpaid balance of only
805,000.00, it is right and just to allow her to settle, within a reasonable period of time, the
balance of the unpaid purchase price. The Court agrees that the respondent showed her
sincerity and willingness to comply with her obligation when she offered to pay the petitioner
the amount of 751,000.00.













G.G. Sportswear MFG. Corporation vs. World Class Properties, Inc.
G.R. No. 182720
March 2, 2010
Facts:
Petitioner offered to purchase the 38
th
floor penthouse unit and 16 parking slots for 32
cars in World Class condominium for the discounted , pre-selling price of P89, 624,
272.82.
GG Sportswear timely paid its installments due.
GG Sportswear requested the return of the outstanding postdated checks it previously
delivered to World Class because GG Sportswear intended to replace these old checks
with ne ones from the corporations new bank. World Class acceded, but suggested the
execution of a new reservation agreement to reflect the arrangement involving the
replacement checks, with the retention of the other terms and conditions of the Old
Agreement.
GG Sportswear delivered the replacement checks and paid the installment payment
which had been delayed for two months. World Class in turn issued a second
Reservation Agreement, which it transmitted to GG Sportswear for the latters
conformity. World Class also sent GG Sportswear a provisional Contract to Sell, which
stated that the condominium project would be ready for turnover to the buyer not later
than December 25, 1998.
GG Sportswear filed a Complaint with the HLURB claiming a refund of the installment
payments made to World Class because it was dissatisfied with the completion date
found in the Contract to Sell.
The HLURB rendered a decision rescinding the Agreement, after finding that the World
Class violated Sections 4 and 5 of P.D. No. 957 by entering into the Agreement without
the required Certificate of Registration and License to Sell.
World Class appealed to the HLURB Board of Commissioners. The Board modified the
Arbiters decision by ruling that the Agreement could no longer be rescinded for lack of
a CR/LS because World Class had already been issued a license to Sell before the
complaint was filed. Notwithstanding this pronouncement, the Board still awarded a
refund in petitioners favor.
On appeal to the CA, the CA rendered a decision in favor of World Class. Hence, this
petition.
Issue:
Whether or not rescission is allowed in the case.
Held:
Unless the parties stipulated it, rescission is allowed only when the breach of the contract is
substantial and fundamental to the fulfillment of the obligation. Whether the breach is slight or
substantial is largely determined by the attendant circumstances. Petitioner anchors its claim
for rescission of a reservation agreement for the purchase of units and parking slots in a
condominium property being developed by World Class, on to grounds: a) its dissatisfaction
with the completion date; and b) the lack of the Contract to Sell. However, petitioner cannot
claim that it did not know the time-frame for the projects completion when it entered into the
Agreement with respondent.
Moreover, the provisional Contract to Sell that accompanied the second reservation agreement
explicitly provided that the condominium project would be ready for turnover no later than
December 15, 1998, a clear expression of the projects completion date. Having known the date,
the fact of the dissatisfaction with it does not constitute a breach so substantial as to render
the Agreement rescissible.
Even if it had been unhappy with the completion date, this ground, standing alone, is not
sufficient basis to rescind the Agreement; unhappiness is a state of mind, not a defect available
in law as a basis to rescind a contract.









Valentin Movido, substituted by Marginito Movido vs. Luis Reyes
Pastor
G.R. No. 172279
February 11, 2010
Facts:
Respondent Luis Reyes Pastor filed a complaint for specific performance in the Regional
Trial Court (RTC) of Imus, Cavite, praying that petitioner Valentin Movido be compelled
to cause the survey of a parcel of land subject of their contract to sell.
In his complaint, respondent alleged that he and petitioner executed a kasunduan sa
bilihan ng lupa where the latter agreed to sell a parcel of land located in Paliparan,
Dasmarias, Cavite with an area of some 21,000 sq. m. out of the 22,731 sq. m.
Respondent further alleged that another kasunduan was later executed supplementing
the kasunduan sa bilihan ng lupa. It provided that, if a Napocor power line traversed the
subject lot, the purchase price would be lowered to P200/sq. m. beyond the distance of
15 meters on both sides from the center of the power line while the portion within a
distance of 15 meters on both sides from the center of the power line would not be
paid.
Respondent alleged that he already paid petitioner P5 million out of the original
purchase price of P8.4 million stated in the kasunduan sa bilihan ng lupa. He was willing
and ready to pay the balance of the purchase price but due to petitioners refusal to
have the property surveyed despite incessant demands, his unpaid balance could not be
determined with certainty.
In his answer, petitioner alleged that the original negotiation for the sale of his property
involved the entire area of 22,731 sq. m. However, as respondent was not sure whether
a Napocor power line traversed the property, they then executed the kasunduan. After
respondent personally inspected the property, a final agreementthe kasunduan sa
bilihan ng lupawas executed where the area to be sold was 21,000 sq. m. for P400/sq.
m. for a total sum of P8.4 million. The final agreement also listed a schedule of
payments of the purchase price and included a penalty clause in case of default.
Petitioner also charged respondent with delay in paying several installments due and did
not pay the 7
th
installment in the amount of P1 million. This was allegedly a material
breach because they agreed that the survey of the property would only be done after
respondent would have paid the 7
th
installment. Due to respondents failure to fulfill his
obligations, petitioner claimed that he had no choice except to rescind the kasunduan sa
bilihan ng lupa. He, however, was willing to reimburse 50% of whatever respondent had
paid him so far.
After hearing, the RTC ruled in favor of petitioner and held that the kasunduan preceded
the kasunduan sa bilihan ng lupa. Thus, the RTC dismissed the complaint of respondent
for lack of merit and/or cause of action.
On appeal, the Court of Appeals reversed the decision of the RTC. Hence, this petition.
Issue:
Whether or not respondent has breach its obligation which gives rise to the rescission of the
obligation.
Held:
Rescission is only allowed when the breach is so substantial and fundamental as to defeat the
object of the parties in entering into the contract. There is no such substantial or material
breach.
It is true that respondent failed to pay the 7
th
and 8
th
installments of the purchase price.
However, considering the circumstances of the instant case, particularly the provisions of the
kasunduan, respondent cannot be deemed to have committed a serious breach. In the first
place, respondent was not in default as petitioner never made a demand for payment.
Moreover, the kasunduan sa bilihan ng lupa and the kasunduan should both be given effect
rather than be declared conflicting, if there is a way of reconciling them. Petitioner and
respondent would not have entered into either of the agreements if they did not intend to be
bound or governed by them. Indeed, taken together, the two agreements actually constitute a
single contract pertaining to the sale of a land to respondent by petitioner. Their stipulations
must therefore be interpreted together, attributing to the doubtful ones that sense that may
result from all of them taken jointly. Their proper construction must be one that gives effect to
all.





Spouses Carmen Tongson and Jose Tongson, et al vs. Emergency
Pawnshop Bula, Inc. and Danilo Napala
G.R. No. 167874
January 15, 2010
Facts:
Napala offered to purchase from the Spouses Tongson their 364-square meter parcel of
land, situated in Davao City and for P3,000,000. Finding the offer acceptable, the
Spouses Tongson executed with Napala a Memorandum of Agreement.
Respondents lawyer Atty. Petronilo A. Raganas, Jr. prepared a Deed of Absolute Sale
indicating the consideration as only P400,000. When Carmen Tongson noticed that the
consideration was very low, she complained and called the attention of Napala but the
latter told her not to worry as he would be the one to pay for the taxes and she would
receive the net amount of P3,000,000.
To conform with the consideration stated in the Deed of Absolute Sale, the parties
executed another Memorandum of Agreement, which allegedly replaced the first
Memorandum of Agreement, showing that the selling price of the land was only
P400,000.
Upon signing the Deed of Absolute Sale, Napala paid P200,000 in cash to the Spouses
Tongson and issued a postdated Philippine National Bank (PNB) check in the amount of
P2,800,000, representing the remaining balance of the purchase price of the subject
property.
When presented for payment, the PNB check was dishonored for the reason Drawn
Against Insufficient Funds. Despite the Spouses Tongson's repeated demands to either
pay the full value of the check or to return the subject parcel of land, Napala failed to do
either. Left with no other recourse, the Spouses Tongson filed with the Regional Trial
Court, Branch 16, Davao City a Complaint for Annulment of Contract and Damages with
a Prayer for the Issuance of a Temporary Restraining Order and a Writ of Preliminary
Injunction.
In their Answer, respondents countered that Napala had already delivered to the
Spouses Tongson the amount of P2,800,000 representing the face value of the PNB
check, as evidenced by a receipt issued by the Spouses Tongson. Respondents pointed
out that the Spouses Tongson never returned the PNB check claiming that it was
misplaced. Respondents asserted that the payment they made rendered the filing of
the complaint baseless.
The trial court rendered a decision in favor of petitioner.
Respondents appealed to the Court of Appeals.
The Court of Appeals agreed with the trial courts finding that Napala employed fraud
when he misrepresented to the Spouses Tongson that the PNB check in the amount of
P2,800,000 would be properly funded at its maturity. However, the Court of Appeals
found that the issuance and delivery of the PNB check and fraudulent representation
made by Napala could not be considered as the determining cause for the sale of the
subject parcel of land. Hence, such fraud could not be made the basis for annulling the
contract of sale.
The Spouses Tongson filed a partial motion for reconsideration which was denied by the
Court of Appeals. Hence, this petition.
Issue:
Whether or not the contract of sale can be annulled based on the fraud employed by Napala.
Held:
However, while no causal fraud attended the execution of the sales contract, there is fraud in
its general sense, which involves a false representation of a fact, when Napala inveigled the
Spouses Tongson to accept the postdated PNB check on the representation that the check
would be sufficiently funded at its maturity. In other words, the fraud surfaced when Napala
issued the worthless check to the Spouses Tongson, which is definitely not during the
negotiation and perfection stages of the sale. Rather, the fraud existed in the consummation
stage of the sale when the parties are in the process of performing their respective obligations
under the perfected contract of sale.
Indisputably, the Spouses Tongson as the sellers had already performed their obligation of
executing the Deed of Sale, which led to the cancellation of their title in favor of EPBI.
Respondents as the buyers, on the other hand, failed to perform their correlative obligation of
paying the full amount of the contract price. While Napala paid P200, 000 cash to the Spouses
Tongson as partial payment, Napala issued an insufficiently funded PNB check to pay the
remaining balance of P2.8 million. Despite repeated demands and the filing of the complaint,
Napala failed to pay the P2.8 million until the present. Clearly, respondents committed a
substantial breach of their reciprocal obligation, entitling the Spouses Tongson to the rescission
of the sales contract.


Bonifacio Sanz Maceda, Jr. vs. Development Bank of the Philippines
G.R. No. 174979
August 11, 2010
Facts:
Plaintiff Bonifacio Maceda, Jr. (Maceda) obtained a loan from the defendant DBP
in the amount of P7.3 million to finance the expansion of the Old Gran Hotel in
Leyte. Upon approval of said loan, plaintiff Maceda executed a promissory note
and a mortgage of real estate. Project cost of the New Gran Hotel was P10.5M.
DBP fixed a debt-equity ratio of 70%-30%, corresponding to DBP and Macedas
respective infusion in the hotel project. Macedas equity infusion was P2.93M,
or 30% of P10.5M. The DBP Governor at that time, Recio Garcia, in-charge of
loans for hotels, allegedly imposed the condition that DBP would choose the
building contractor, namely, Moreman Builders Co. (Moreman). The contractor
would directly receive the loan releases from DBP, after verification by DBP of
the construction progress. The period of loan availment was 360 days from date
of initial release of the loan. Similarly, suppliers of equipment and furnishings
for the hotel were also to be paid directly by DBP.
Maceda filed a complaint for Rescission of the building contract with Damages
against the contractor Moreman, before the then Manila Court of First Instance
Branch 39.. In its decision, the CFI rescinded the building contract, suspended
the period of availment, allowed Maceda to himself take over construction, and
directed DBP to release to Maceda the sum of P1.003M, which had previously
been approved for release.
Maceda also instituted the case a quo for Specific Performance with Damages
against defendant DBP before the Makati RTC in 1984.
Macedas complaint before the Makati RTC alleged that DBP conspired with the
contractor, Moreman, by approving anomalous loan releases to the latter
despite exaggerated charges and valuation made by said contractor on the hotel
project. In effect, it was alleged that despite only a 15% accomplishment which
should have cost only P700,000.00, the contractor, thru the active connivance of
the DBP, was able to rake in a total of P3,174,358.38 or 60% of the cost of the
projected hotel building. When plaintiff Maceda himself tried to resume the
completion and construction of the hotel project, after the building contract with
Moreman was already rescinded by the CFI Manila, defendant allegedly blocked
efforts of the plaintiff by delaying the release of funds from his loan with the DBP
and imposing onerous conditions which made it difficult for plaintiff to pursue
the construction of the New Gran Hotel. It was further alleged that due to such
delays on the part of the DBP, the period of availment of the loan expired
without the plaintiffs having availed of the total approved amount of their loan.
The construction of the hotel was never finished. Finally, DBP allegedly
threatened to foreclose the mortgaged properties of the plaintiff.

The trial court promulgated its Decision in favor of Maceda.
On appeal, the appellate court rendered its Decision which affirmed the order of
the trial court.
The appellate court denied Macedas and DBPs Motions for Reconsideration for
lack of merit. Macedas Motion for Execution Pending Appeal was likewise
denied.
Issue:
Whether or not the contract entered into by the parties can be rescinded.
Held:
Maceda put in cash equity worth P6,153,398.05. Under Article 1191 of the Civil Code, the
aggrieved party has a choice between specific performance and rescission with damages in
either case. However, if specific performance becomes impractical or impossible, the court
may order rescission with damages to the injured party. After the lapse of more than 30 years,
it is now impossible to implement the loan agreement as it was written, considering the
absence of evidence as to the rising costs of construction, as well as the obvious changes in
market conditions on the viability of the operations of the hotel. The court deems it equitable
and practicable to rescind the obligation of DBP to deliver the balance of the loan proceeds to
Maceda. In exchange, DBP must pay Maceda the value of Macedas cash equity of
P6,153,398.05 by way of actual damages, plus the applicable interest rate. The present ruling
comes within the purview of Macedas and DBPs prayers for other reliefs, just or equitable
under the premises.



Armando Raquel-Santos and Annalissa Mallari vs. Court of Appeals
and Finvest Securities Co., Inc.
G.R. No. 175071
July 7, 2009
Facts:
Finvest is a stock brokerage corporation duly organized under Philippine laws and is a
member of the PSE with one membership seat pledged to the latter. Armand O. Raquel-
Santos (Raquel-Santos) was Finvests President and nominee to the PSE from February
20, 1990 to July 16, 1998. Annalissa Mallari (Mallari) was Finvests Administrative Officer
until December 31, 1998.
Respondent Finvests cause of action against petitioners was for accounting and
damages, arising from the allegedly missing stock certificates. In relation to such cause
of action, Finvest alleged in the Complaint that petitioners had sole authority and
custody of the stock certificates and that they took undue advantage of their positions
in diverting to their personal benefit the proceeds from the sale of the shares of stock.
Finvest, therefore, prayed that Raquel-Santos and Mallari be held jointly and severally
liable to account for and/or to pay for all missing stock certificates and payables listed in
the Complaint and for any other subsequent claims and the corresponding profits that
could have accrued to the corporation; and damages that the corporation may sustain
by reason of and/or in relation to such missing or unaccounted stock certificates,
payables, and any other subsequent claims.
Issue:
Whether or not rescission is the proper remedy in the case.
Held:
The right of a party to rescission under Article 1191 of the Civil Code is predicated on a breach
of faith by the other party who violates the reciprocity between them. In a contract of sale, the
seller obligates itself to transfer the ownership of and deliver a determinate thing, and the
buyer to pay therefor a price certain in money or its equivalent. In some contracts of sale, such
as the sale of real property, prior physical delivery of the thing sold or its representation is not
legally required, as the execution of the Deed of Sale effectively transfers ownership of the
property to the buyer through constructive delivery. Hence, delivery of the certificate of title
covering the real property is not necessary to transfer ownership.
In the sale of shares of stock, physical delivery of a stock certificate is one of the essential
requisites for the transfer of ownership of the stocks purchased.
For a valid transfer of stocks, the requirements are as follows: (a) there must be delivery of the
stock certificate; (b) the certificate must be endorsed by the owner or his attorney-in-fact or
other persons legally authorized to make the transfer; and (c) to be valid against third parties,
the transfer must be recorded in the books of the corporation.
Clearly, Finvests failure to deliver the stock certificates representing the shares of stock
purchased by TMEI and Garcia amounted to a substantial breach of their contract which gave
rise to a right to rescind the sale.
Mutual restitution entails the return of the benefits that each party may have received as a
result of the contract. In this case, it is the purchase price that Finvest must return. The amount
paid was sufficiently proven by the buy confirmation receipts, vouchers, and official/provisional
receipts that respondents presented in evidence. In addition, the law awards damages to the
injured party, which could be in the form of interest on the price paid, as the trial court did in
this case.












Spouses Lino Francisco & Guia Francisco vs. DEAC Construction, Inc.
and Geomar Dadula
G.R. No. 171312
February 4, 2008
Facts:
Plaintiffs-appellees Lino Francisco and Guia Francisco obtained the services of
defendant-appellant DEAC Construction, Inc. (DEAC) to construct a 3-storey
residential building with mezzanine and roof deck on their lot located at 118
Pampanga Street, Gagalangin, Tondo, Manila for a contract price of
P3,500,000.00. As agreed upon, a downpayment of P2,000,000.00 should be
paid upon signing of the contract of construction, and the remaining balance of
P1,500,000.00 was to be paid in two equal installments: the first installment of
P750,000.00 should be paid upon completion of the foundation structure and
the ground floor, which amount would be used primarily for the construction of
the second floor to the roof deck while the final amount of P750,000.00 should
be paid upon completion of the second floor up to the roof deck structure to
defray the expenses necessary for finishing and completion of the building. To
undertake the said project, DEAC engaged the services of a sub-contractor, Vigor
Construction and Development Corporation, but allegedly without the plaintiffs-
appellees knowledge and consent.

Even prior to the execution of the contract, the plaintiffs-appellees had paid the
downpayment of P2,000,000.00. The amount of P200,000.00 was again paid to
DEAC followed by the payment of P550,000.00. Plaintiff-appellant Guia
Francisco likewise paid the amount of P80,000.00 for the requested additional
works on the project.

The construction of the residential building commenced in although DEAC, upon
which the obligation pertained, had not yet obtained the necessary building
permit for the proposed construction. It was on this basis that the owner Lino
Francisco was charged with violation of Section 301, Chapter 3 (Illegal
Construction) of [P.D. No.] 1096 otherwise known as the National Building Code
of the Philippines with the Metropolitan Trial Court of Manila, Branch 12.
A Work Stoppage Order was issued against the plaintiff-appellee Lino Francisco
pursuant to the previous Notice of Violations. Having learned of such order, the
plaintiffs-appellees allegedly immediately proceeded to the Office of the Building
Official of Manila to explain that DEAC was the one responsible for such
violations, and that the deviations of the approved plan being imputed against
Lino Francisco were unilateral acts of DEAC. They also filed a complaint for Non-
Compliance of the Building Plan, Illegal Construction, abandonment and other
violations of the Building Code against DEAC with the said Office. The said
complaint was endorsed to the City Prosecutor of Manila which culminated in
the filing of a criminal case against Geomar A. Dadula and DEAC project engineer
Leoncio C. Alambra for deviation and violation of specification plan.

The plaintiffs-appellees also filed a case for Rescission of Contract and Damages
with the Regional Trial Court of Manila, Branch 28, against DEAC and its
President Geomar A. Dadula.

Issue:
Whether or not petitioner can rescind the contract.
Held:
Article 1191 of the Civil Code provides that the power to rescind obligations is implied in
reciprocal ones, in case one of the obligors should not comply with what is incumbent upon
him. The rescission referred to in this article, more appropriately referred to as resolution, is
not predicated on injury to economic interests on the part of the party plaintiff, but of breach
of faith by the defendant which is violative of the reciprocity between the parties. The right to
rescind may be waived, expressly or impliedly.
The Spouses Francisco, in their letter to respondents, complained, among others, about the
belated release of the building permit, the unauthorized corrections in the building plan, the
forgery of petitioner Guia Franciscos signature on the building plan, and the deletion of the
open space/patio in the actual construction of the project. The filing of a criminal case against
respondent Dadula and the subsequent filing of this civil case for rescission and damages within
a reasonable time after the Spouses Francisco had learned that construction of their building
commenced without the necessary building permit and discovered that there were deviations
from the building plan demonstrate the vigilance with which they guarded their rights. The
appellate courts conclusion that the Spouses Francisco should be deemed to have waived their
right to seek rescission is clearly unfounded.
Finally, given the fact that the construction in this case is already 75% complete, the trial court
was correct in ordering partial rescission only of the undelivered or unfinished portion of the
construction. Equitable considerations justify rescission of the portion of the obligation which
had not been delivered.


















Spouses Felipe and Leticia Cannu vs. Spouses Gil and Fernandina
Galang and National Home Mortgage Finance Corporation
G.R. No. 139523
May 26, 2005
Facts:
Respondents-spouses Gil and Fernandina Galang obtained a loan from Fortune Savings
& Loan Association for P173,800.00 to purchase a house and lot located at Pulang Lupa,
Las Pias, with an area of 150 square meters. To secure payment, a real estate mortgage
was constituted on the said house and lot in favor of Fortune Savings & Loan
Association. In early 1990, NHMFC purchased the mortgage loan of respondents-
spouses from Fortune Savings & Loan Association for P173,800.00.
Petitioner Leticia Cannu agreed to buy the property for P120,000.00 and to assume the
balance of the mortgage obligations with the NHMFC and with CERF Realty (the
Developer of the property).
A Deed of Sale with Assumption of Mortgage Obligation was made and entered into by
and between spouses Fernandina and Gil Galang (vendors) and spouses Leticia and
Felipe Cannu (vendees) over the house and lot in question
Petitioners immediately took possession and occupied the house and lot.
Petitioners paid the equity or second mortgage to CERF Realty.
Despite requests from Adelina R. Timbang and Fernandina Galang to pay the balance of
P45,000.00 or in the alternative to vacate the property in question, petitioners refused
to do so.
Petitioner Leticia Cannu informed Mr. Fermin T. Arzaga, Vice President, Fund
Management Group of the NHMFC, that the ownership rights over the land in the
names of respondents-spouses had been ceded and transferred to her and her husband
per Deed of Sale with Assumption of Mortgage, and that they were obligated to assume
the mortgage and pay the remaining unpaid loan balance. Petitioners formal
assumption of mortgage was not approved by the NHMFC.
Because the Cannus failed to fully comply with their obligations, respondent Fernandina
Galang, paid P233,957.64 as full payment of her remaining mortgage loan with NHMFC.
Petitioners opposed the release of the certificate of title in favor of respondents-
spouses insisting that the subject property had already been sold to them.
Consequently, the NHMFC held in abeyance the release of said TCT.
Thereupon, a Complaint for Specific Performance and Damages was filed asking, among
other things, that petitioners (plaintiffs therein) be declared the owners of the property
involved subject to reimbursements of the amount made by respondents-spouses
(defendants therein) in preterminating the mortgage loan with NHMFC.
After trial, the lower court rendered its decision in favor of respondents.
A Motion for Reconsideration was filed, but same was denied. Petitioners appealed the
decision of the RTC to the Court of Appeals. The CA affirmed the decision of the trial
court.
The motion for reconsideration filed by petitioners was denied by the CA. Hence, this
Petition for Certiorari.
Issue:
Whether or not petitioners breach of the obligation was substantial.
Held:
Rescission will not be permitted for a slight or casual breach of the contract. Rescission may be
had only for such breaches that are substantial and fundamental as to defeat the object of the
parties in making the agreement. The question of whether a breach of contract is substantial
depends upon the attending circumstances and not merely on the percentage of the amount
not paid.
In the case at bar, we find petitioners failure to pay the remaining balance of P45,000.00 to be
substantial. Even assuming arguendo that only said amount was left out of the supposed
consideration of P250,000.00, or eighteen (18%) percent thereof, this percentage is still
substantial. Taken together with the fact that the last payment made eighteen months before
the respondent Fernandina Galang paid the outstanding balance of the mortgage loan with
NHMFC, the intention of petitioners to renege on their obligation is utterly clear.
The fact that petitioners tendered a Managers Check to respondents-spouses Galang in the
amount of P278,957.00 seven months after the filing of this case is of no moment. Tender of
payment does not by itself produce legal payment, unless it is completed by consignation. Their
failure to fulfill their obligation gave the respondents-spouses Galang the right to rescission.


Generoso Villanueva and Raul Villanueva, Jr. vs. Estate of Gerardo
Gonzaga/Ma. Villa Gonzaga, in her capacity as Administratrix
G.R. No. 157318
August 9, 2006
Facts:
Petitioners Generoso Villanueva and Raul Villanueva, Jr., business entrepreneurs
engaged in the operation of transloading stations and sugar trading, and respondent
Estate of Gerardo L. Gonzaga, represented by its Judicial Administratrix, respondent Ma.
Villa J. Gonzaga, executed a MOA .
As stipulated in the agreement, petitioners introduced improvements after paying
P291,600.00 constituting sixty (60%) percent of the total purchase price of the lots.
Petitioners then requested permission from respondent Administratrix to use the
premises for the next milling season. Respondent refused on the ground that petitioners
cannot use the premises until full payment of the purchase price. Petitioners informed
respondent that their immediate use of the premises was absolutely necessary and that
any delay will cause them substantial damages. Respondent remained firm in her
refusal, and demanded that petitioners stop using the lots as a transloading station to
service the Victorias Milling Company unless they pay the full purchase price. In a letter-
reply dated April 5, 1991, petitioners assured respondent of their readiness to pay the
balance but reminded respondent of her obligation to redeem the lots from mortgage
with the Philippine National Bank (PNB). Petitioners gave respondent ten (10) days
within which to do so.
Respondent Administratrix wrote petitioners informing them that the PNB had agreed
to release the lots from mortgage. She demanded payment of the balance of the
purchase price.
In their letter-reply, petitioners demanded that respondent show the clean titles to the
lots first before they pay the balance of the purchase price. Respondent merely
reiterated the demand for payment. Petitioners stood pat on their demand.
Respondent Administratrix executed a Deed of Rescission rescinding the MOA on two
grounds: (1) petitioners failed to pay the balance of the purchase price despite notice of
the lots release from mortgage, and (2) petitioners violated the MOA by using the lots
as a transloading station without permission from the respondents.
The trial court decided the case in favor of respondents.
Petitioners filed a petition for review before the Court of Appeals. The Court of Appeals
affirmed the trial courts decision but deleted the award for moral damages on the
ground that petitioners were not guilty of bad faith in refusing to pay the balance of the
purchase price. Hence, this petition.
Issue:
Whether or not there is legal, or even a factual, ground for the rescission of the Memorandum
of Agreement.
Held:
There is no legal basis for the rescission. The remedy of rescission under Art. 1191 of the Civil
Code is predicated on a breach of faith by the other party that violates the reciprocity between
them. We have held in numerous cases that the remedy does not apply to contracts to sell.
The MOA between petitioners and respondents is a conditional contract to sell. Ownership over
the lots is not to pass to the petitioners until full payment of the purchase price. Petitioners
obligation to pay, in turn, is conditioned upon the release of the lots from mortgage with the
PNB to be secured by the respondents. Although there was no express provision regarding
reserved ownership until full payment of the purchase price, the intent of the parties in this
regard is evident from the provision that a deed of absolute sale shall be executed only when
the lots have been released from mortgage and the balance paid by petitioners. Since
ownership has not been transferred, no further legal action need have been taken by the
respondents, except an action to recover possession in case petitioners refuse to voluntarily
surrender the lots.
The records show that the lots were finally released from mortgage in July 1991. Petitioners
have always expressed readiness to pay the balance of the purchase price once that is achieved.
Hence, petitioners should be allowed to pay the balance now, if they so desire, since it is
established that respondents demand for them to pay in April 1991 was premature. However,
petitioners may not demand production by the respondents of the titles to the lots as a
condition for their payment. It was not required under the MOA. The MOA merely states that
petitioners shall pay the balance "upon approval by the PNB of the release of the lots" from
mortgage. Petitioners may not add further conditions now. Obligations arising from contracts
have the force of law between the contracting parties and should be complied with in good
faith.

Spouses Domingo and Lourdes Paguyo vs, Pierre Astorga and St.
Andrew Realty, Inc.
G.R. No. 130982
September 16, 2005
Facts:
Spouses Domingo Paguyo and Lourdes Paguyo, were the owners of a small five-storey
building known as the Paguyo Building located at Makati Avenue, corner Valdez Street,
Makati City. With one (1) unit per floor, the building has an average area of 100 square
meters per floor and is constructed on a land belonging to the Armas family.
In order for the petitioners to complete their title and ownership over the lot in
question, there was an urgent need to make complete payment to the Armases, which
at that time stood at P917,470.00 considering that petitioners had previously made
partial payments to the Armases.
Petitioner Lourdes Paguyo entered into an agreement captioned as Receipt of Earnest
Money with respondent Pierre Astorga, for the sale of the formers property consisting
of the lot which was to be purchased from the Armases, together with the
improvements thereon, particularly, the existing building known as the Paguyo Building.
However, contrary to their express representation with respect to the subject lot,
petitioners failed to comply with their obligation to acquire the lot from the Armas
family despite the full financial support of respondents. Nevertheless, the parties
maintained their business relationship under the terms and conditions of the Receipt of
Earnest Money.
Petitioners asked for and were given by respondents an additional P50,000.00 to meet
the formers urgent need for money in connection with their construction business.
Due also to the urgent necessity of obtaining money to finance their construction
business, petitioner Lourdes Paguyo, who was also the attorney-in-fact of her husband,
proposed to the respondents the separate sale of the building in question while she
continued to work on the acquisition of the lot from the Armas family, assuring the
respondents that she would succeed in doing so.
Aware of the risk of buying an improvement on the lot of a third party who appeared
ambivalent on whether to dispose their property in favor of the respondents,
respondents took a big business gamble and, relying on the assurance of petitioners
that they would eventually acquire the lot and transfer the same to respondents in
accordance with their undertaking in the Receipt of Earnest Money, respondents agreed
to petitioner Lourdes Paguyos proposal to buy the building first. The parties executed
the four documents in question namely, the Deed of Absolute Sale of the Paguyo
Building, the Mutual Undertaking, the Deed of Real Estate Mortgage, and the Deed of
Assignment of Rights and Interest. Simultaneously with the signing of the four
documents, respondents paid petitioners the additional amount of P500,000.00.
Thereafter, the respondents renamed the Paguyo Building into GINZA Bldg. and
registered the same in the name of respondent St. Andrew Realty, Inc. at the Makati
Assessors Office after paying accrued real estate taxes in the total amount of
P169,174.95. Since 1990, respondents paid the real estate taxes on subject building as
registered owners thereof. Further, respondents obtained fire insurance and applied for
the conversion of Paguyo Building into a condominium. All of these acts of ownership
exercised by respondents over the building were with the express knowledge and
consent of the petitioners.
Pursuant to their agreement contained in the aforecited documents, particularly in the
Mutual Undertaking, respondent company filed an ejectment case and obtained a
favorable decision against petitioners in the Metropolitan Trial Court (MeTC) of Makati.
Petitioners filed a Complaint for the rescission of the Receipt of Earnest Money with the
undertaking to return the sum of P763,890.50. They also sought the rescission of the
Deed of Real Estate Mortgage, the Mutual Undertaking, the Deed of Absolute Sale of
Building, and the Deed of Assignment of Rights and Interest.
After trial, the RTC ruled in favor of respondents.
On appeal, the Court of Appeals promulgated its decision affirming the decision of the
trial court. Hence, this petition.
Issue:
Whether or not petitioner has the right to rescind the contract.
Held:
Petitioners herein failed to prove any of the instances mentioned in Articles 1355 and 1470 of
the Civil Code, which would invalidate, or even affect, the Deed of Sale of the Building and the
related documents. Indeed, there is no requirement that the price be equal to the exact value
of the subject matter of sale.

In the case at bar, petitioners pray for rescission of the Deed of Sale of the building and offer to
repay the purchase price after their liquidity position would have improved and after
respondents would have refurbished the building, updated the real property taxes, and turned
the building into a profitable business venture. The Supreme Court, however, will not allow
itself to be an instrument to the dissolution of contract validly entered into. A party should not,
after its opportunity to enjoy the benefits of an agreement, be allowed to later disown the
arrangement when the terms thereof ultimately would prove to operate against its hopeful
expectations.


















Bienvenido Casino, Jr. vs. Court of Appeals and Octagon Realty
Development Corporation
G.R. No. 133803
September 16, 2005
Facts:
In the Regional Trial Court at Pasig City, respondent Octagon Realty Development
Corporation, a corporation duly organized and existing under Philippine laws, filed a
complaint for rescission of contract with damages against petitioner Bienvenido M.
Casio, Jr., owner and proprietor of the Casio Wood Parquet and Sanding Services,
relative to the parties agreement for the supply and installation by petitioner of narra
wood parquet ordered by respondent.
The trial court, upon a finding that petitioner is the one who breached the parties
agreement, rendered judgment in favor of respondent.
On petitioners appeal to the Court of Appeals, the appellate court affirmed that of the
trial court but modified the same by reducing the amount of damages awarded. A
motion for reconsideration was filed but the same was denied. Hence, this petition.
Issue:
Whether or not the contract entered into between the parties can be rescinded.
Held:
It is undisputed that under their contract, petitioner and respondent had respective obligations,
i.e., the former to supply and deliver the contracted volume of narra wood parquet materials
and install the same at respondents condominium project by May, 1990, and the latter, to pay
for said materials in accordance with the terms of payment set out under the parties
agreement. But while respondent was able to fulfill that which is incumbent upon it by making
a downpayment representing 40% of the agreed price upon the signing of the contract and
even paid the first billing of petitioner, the latter failed to comply with his contractual
commitment. For, after delivering only less than one-half of the contracted materials, petitioner
failed, by the end of the agreed period, to deliver and install the remainder despite demands
for him to do so. Doubtless, it is petitioner who breached the contract.
With the reality that petitioner has failed to comply with his prestations under his contract
with respondent, the latter is vested by law with the right to rescind the parties agreement.
In fine, respondent acted well within its rights in unilaterally terminating its contract with
petitioner and in entering into a new one with a third person in order to minimize its losses,
without prior need of resorting to judicial action.




















Fernando Carrascoso, Jr. vs. Court of Appeal, et al.
G.R. No. 123672
December 14, 2005
Facts:
By a Deed of Sale of Real Property, El Dorado, through Feliciano Leviste, sold the
property to Fernando O. Carrascoso, Jr. (Carrascoso).
Carrascoso and his wife Marlene executed a Real Estate Mortgage over the property in
favor of Home Savings Bank (HSB) to secure a loan in the amount of P1,000,000.00. Of
this amount, P290,000.00 was paid to Philippine National Bank to release the mortgage
priorly constituted on the property and P210,000.00 was paid to El Dorado pursuant to
the terms and conditions of the Deed of Sale.
The real estate mortgage in favor of HSB was amended to include an additional three
year loan of P70,000.00 as requested by the spouses Carrascoso. The Amendment of
Real Estate Mortgage was also annotated on TCT No. T-6055 as Entry No. 15486.
The 3-year period for Carrascoso to fully pay for the property passed without him having
complied therewith.
Carrascoso and the Philippine Long Distance Telephone Company (PLDT), through its
President Ramon Cojuangco, executed an Agreement to Buy and Sell whereby the
former agreed to sell 1,000 hectares of the property to the latter at a consideration of
P3,000.00 per hectare or a total of P3,000,000.00.
Lauro Leviste (Lauro), a stockholder and member of the Board of Directors of El Dorado,
through his counsel, Atty. Benjamin Aquino, called the attention of the Board to
Carrascosos failure to pay the balance of the purchase price of the property amounting
to P1,300,000.00.
Lauros desire to rescind the sale was reiterated in two other letters addressed to the
Board.
Jose P. Leviste, as President of El Dorado, later sent a letter of to Carrascoso informing
him that in view of his failure to pay the balance of the purchase price of the property,
El Dorado was seeking the rescission of the Deed of Sale of Real Property.
Lauro and El Dorado finally filed a complaint for rescission of the Deed of Sale of Real
Property between El Dorado and Carrascoso with damages before the Court of First
Instance (CFI) of Occidental Mindoro.

Lauro and El Dorado also sought the cancellation of TCT No. T-6055 in the name of
Carrascoso and the revival of TCT No. T-93 in the name of El Dorado, free from any liens
and encumbrances.
Carrascoso, as vendor and PLDT, as vendee forged a Deed of Absolute Sale over the
1,000 hectare portion of the property subject of their Agreement to Buy and Sell.
In turn, PLDT, by Deed of Absolute Sale conveyed the aforesaid 1,000 hectare portion of
the property to its subsidiary, PLDT Agricultural Corporation (PLDTAC), for a
consideration of P3,000,000.00, the amount of P2,620,000.00 of which was payable to
PLDT upon signing of said Deed, and P380,000.00 to Carrascoso upon issuance of title to
PLDTAC.
Branch 45 of the San Jose Occidental Mindoro Regional Trial Court to which the CFI has
been renamed, dismissed the complaint on the ground of prematurity.
Lauro, in the meantime, died, hence, a Motion for Substitution of Party was filed praying
that his heirs, represented by Conrad C. Leviste, be substituted as respondents. The
Motion was granted.
Issue:
Whether or not there is breach of contract on the part of Carrascoso.
Held:
A contract of sale is a reciprocal obligation. The seller obligates itself to transfer the ownership
of and deliver a determinate thing, and the buyer obligates itself to pay therefor a price certain
in money or its equivalent. The non-payment of the price by the buyer is a resolutory
condition which extinguishes the transaction that for a time existed, and discharges the
obligations created thereunder. Such failure to pay the price in the manner prescribed by the
contract of sale entitles the unpaid seller to sue for collection or to rescind the contract.
In the case at bar, El Dorado already performed its obligation through the execution of the
Deed of Sale of Real Property which effectively transferred ownership of the property to
Carrascoso. The latter, on the other hand, failed to perform his correlative obligation of paying
in full the contract price in the manner and within the period agreed upon.
The terms of the Deed are clear and unequivocal: Carrascoso was to pay the balance of the
purchase price of the property amounting to P1,300,000.00 plus interest thereon at the rate of
10% per annum within a period of three (3) years from the signing of the contract. When Jose
Leviste informed him that El Dorado was seeking rescission of the contract by letter, the period
given to him within which to fully satisfy his obligation had long lapsed.
The El Dorado Board Resolution and the Affidavit of Jose Leviste interposing no objection to
Carrascosos mortgaging of the property to any bank did not have the effect of suspending the
period to fully pay the purchase price, as expressly stipulated in the Deed, pending full
payment of any mortgage obligation of Carrascoso.
Respecting Carrascosos insistence that he was granted verbal extensions within which to pay
the balance of the purchase price of the property by El Dorados directors and officers Jose and
Angel Leviste, the Court finds the same unsubstantiated by the evidence on record.


















Goldenrod, Inc. vs. Court of Appeals, et al.
G.R. No. 126812
November 24, 1998
Facts:
Pio Barretto and Sons, Inc. (BARRETTO & SONS) owned forty-three (43) parcels of
registered land with a total area of 18,500 square meters located at Carlos Palanca St.,
Quiapo, Manila, which were mortgaged with the United Coconut Planters Bank (UCPB).
The obligation of the corporation with UCPB remained unpaid making foreclosure of the
mortgage imminent.
Goldenrod, Inc. (GOLDENROD), offered to buy the property from BARRETTO & SONS.
When the term of existence of BARRETTO & SONS expired, all its assets and liabilities
including the property located in Quiapo were transferred to respondent Pio Barretto
Realty Development, Inc. (BARRETTO REALTY). Petitioners offer to buy the property
resulted in its agreement with respondent BARRETTO REALTY that petitioner would pay
the following amounts: (a) P24.5 million representing the outstanding obligations of
BARRETTO REALTY with UCPB on 30 June 1988, the deadline set by the bank for
payment; and, (b) P20 million which was the balance of the purchase price of the
property to be paid in installments within a 3-year period with interest at 18% per
annum.
Petitioner did not pay UCPB the P24.5 million loan obligation of BARRETTO REALTY on
the deadline set for payment; instead, it asked for an extension of one (1) month to
settle the obligation, which the bank granted. Petitioner requested another extension of
sixty (60) days to pay the loan.This time the bank demurred.
Petitioner sought reconsideration of the denial by the bank of its request for extension
of sixty (60) days by asking for a shorter period of thirty (30) days. This was again
denied by UCPB.
Respondent BARRETTO REALTY sold to Asiaworld Trade Center Phils., Inc. (ASIAWORLD),
Lot 2, one of the two (2) consolidated lots, for the price of P23 million. Respondent
BARRETTO REALTY executed a deed transferring by way of dacion the property
reconsolidated as Lot 1 in favor of UCPB, which in turn sold the property to ASIAWORLD
for P24 million.
Logarta again wrote respondent Que demanding the return of the earnest money to
GOLDENROD. Petitioner through its lawyer reiterated its demand, but the same
remained unheeded by private respondents. This prompted petitioner to file a
complaint with the Regional Trial Court of Manila against private respondents for the
return of the amount of P1 million and the payment of damages including lost interests
or profits. In their answer, private respondents contended that it was the agreement
of the parties that the earnest money of P1 million would be forfeited to answer for
losses and damages that might be suffered by private respondents in case of failure by
petitioner to comply with the terms of their purchase agreement.
The trial court rendered a decision in favor of petitioner.
Dissatisfied with the decision of the trial court, private respondents appealed to the
Court of Appeals which reversed the trial court and ordered the dismissal of the
complaint. Hence, this petition.
Issue:
Whether or not the seller of real estate can keep the earnest money to answer for damages in
the event the sale fails due to the fault of the prospective buyer.
Held:
Under Art. 1482 of the Civil Code, whenever earnest money is given in a contract of sale, it shall
be considered as part of the purchase price and as proof of the perfection of the contract.
Petitioner clearly stated without any objection from private respondents that the earnest
money was intended to form part of the purchase price. It was an advance payment which
must be deducted from the total price. Hence, the parties could not have intended that the
earnest money or advance payment would be forfeited when the buyer should fail to pay the
balance of the price, especially in the absence of a clear and express agreement thereon. By
reason of its failure to make payment petitioner, through its agent, informed private
respondents that it would no longer push through with the sale. In other words, petitioner
resorted to extrajudicial rescission of its agreement with private respondents.
Article 1385 of the Civil Code provides that rescission creates the obligation to return the things
which were the object of the contract together with their fruits and interest. The vendor is
therefore obliged to return the purchase price paid to him by the buyer if the latter rescinds the
sale, or when the transaction was called off and the subject property had already been sold to a
third person, as what obtained in this case. Therefore, by virtue of the extrajudicial rescission of
the contract to sell by petitioner without opposition from private respondents who, in turn,
sold the property to other persons, private respondent BARRETTO REALTY, as the vendor, had
the obligation to return the earnest money of P1,000,000.00 plus legal interest from the date it
received notice of rescission from petitioner, i.e., 30 August 1988, up to the date of the return
or payment. It would be most inequitable if respondent BARRETTO REALTY would be allowed
to retain petitioners payment of P1,000,000.00 and at the same time appropriate the proceeds
of the second sale made to another.























Roberto Serrano vs. Court of Appeals, et al.
G.R. No. 139420
August 15, 2001
Facts:
Respondent Maersk-Filipinas Crewing, Inc., the local agent of respondent foreign
corporation A.P. Moller, deployed petitioner Serrano as a seaman to Liberian, British
and Danish ships. As petitioner was on board a ship most of the time, respondent
Maersk offered to send portions of petitioners salary to his family in the Philippines.
The amounts would be sent by money order. Petitioner agreed, he instructed
respondent Maersk to send money orders to his family. Respondent Maersk deducted
the amounts of these money orders totaling HK$4,600.00 and 1,050.00 Sterling Pounds
from petitioner's salary. Respondent Maersk, it is also alleged, deducted various
amounts from his salary for Danish Social Security System (SSS), welfare contributions,
ship club, and SSS Medicare.
It appears that petitioner's family failed to receive the money orders petitioner sent
through respondent Maersk. Upon learning this in, petitioner demanded that
respondent Maersk pay him the amounts the latter deducted from his salary.
Respondent Maersk assured him that they would look into the matter, then assigned
him again to board one of their vessels.
Petitioner wrote to respondent Maersk demanding immediate payment to him of the
total amount of the money orders deducted from his salary. Respondent A.P. Moller
replied to petitioner that they keep accounting documents only for a certain number of
years, thus data on his money claims were no longer available. Likewise, it was claimed
that it had no outstanding money orders. A.P. Moller declined petitioner's demand for
payment.
Petitioner filed a complaint for collection of the total amount of the unsent money
orders and illegal salary deductions against the respondent Maersk in the Philippine
Overseas Employment Agency (POEA). The case was transferred to the NLRC where
Labor Arbiter Arthur Amansec ruled in favor of petitioner.
Respondent Maersk appealed to the NLRC the Labor Arbiter's grant of the claim for the
amount of unsent money orders. The NLRC reversed and set side Labor Arbiter
Amansec's decision and dismissed the case on the ground of prescription.
Petitioner filed a motion for reconsideration of the NLRC decision. It was denied for lack
of merit.
Petitioner sought recourse in the Court of Appeals. The appellate court dismissed his
petition for having been filed out of time. Hence, this petition.
Issue:
Whether or not the claim of the petitioner has prescribed.
Held:
Petitioner's cause of action accrued upon respondent Maersk's definite denial of his money
claims following this Court's ruling in the similar case of Baliwag Transit , Inc. v. Ople.
It is settled jurisprudence that a cause of action has three elements, to wit, (1) a right in favor of
the plaintiff by whatever means and under whatever law it arises or is created; (2) an obligation
on the part of the named defendant to respect or not to violate such right; and (3) an act or
omission on the part of such defendant violative of the right of the plaintiff or constituting a
breach of the obligation of the defendant to the plaintiff.
The problem in the case at bar is with the third element as the first two are deemed
established.
The facts in the case at bar are similar to the Baliwag case. Petitioner repeatedly demanded
payment from respondent Maersk, respondent Maersk warded off these demands by saying
that it would look into the matter until years passed by. Serrano finally demanded in writing
payment of the unsent money orders. Then and only then was the claim categorically denied
by respondent A.P. Moller. Following the Baliwag Transit ruling, petitioners cause of action
accrued only upon respondent A.P. Moller's definite denial of his claim. Having filed his action
five (5) months thereafter, it was filed within the three-year (3) prescriptive period provided in
Article 291 of the Labor Code.







Perla Palma Gil, Vicente Hizon, Jr., and Angel Palma Gil vs. Court of
Appeals, et al.
G.R. No. 127206
September 12, 2003
Facts:
Concepcion Palma Gil, and her sister, Nieves Palma Gil, married to Angel Villarica, were
the co-owners of a parcel of commercial land with an area of 829 square meters located
in Davao City. The spouses Angel and Nieves Villarica had constructed a two-storey
commercial building on the property.
Concepcion filed a complaint against her sister Nieves with the then Court of First
Instance of Davao City, for specific performance, to compel the defendant to cede and
deliver to her an undivided portion of the said property with an area of 256.2 square
meters. After due proceedings, the court rendered judgment in favor of Concepcion,
ordering the defendant to deliver to the plaintiff an undivided portion of the said
property with an area of 256.2 square meters.
Nieves appealed to the Court of Appeals which affirmed the assailed decision. In due
course, the decision became final and executory. On motion of the plaintiff
(Concepcion), the court issued a writ of execution. Nieves, however, refused to execute
the requisite deed in favor of her sister. Concepcion executed a deed of absolute sale in
favor of Iluminada Pacetes. In the said deed, the area of Lot 59-C-1 appeared as 256
square meters although under the subdivision plan, the area of the property was only
218 square meters.
Concepcion filed a complaint for unlawful detainer against the spouses Angel and
Nieves Villarica with the Municipal Trial Court. The court rendered judgment in favor of
the plaintiff and against the defendants.
The decision became final and executory but the plaintiff did not file any motion for a
writ of execution.
The spouses Angel and Nieves Villarica filed a complaint against the sheriff and
Concepcion with the Court of First Instance of Davao City for the nullification of the
deed of transfer executed by the sheriff.
The spouses Angel and Nieves Villarica executed a real estate mortgage over the said lot
in favor of Prudential Bank as security for a loan. Concepcion died intestate and was
survived by Nieves Villarica and her nephews and nieces. Iluminada filed a motion 1160
for her substitution as party-plaintiff in lieu of the deceased Concepcion. The court
issued an order granting the motion.
Iluminada Pacetes and Agapito Pacetes executed a deed of absolute sale over the same
lots in favor of Constancio B. Maglana for P110,000.00. The spouses-vendors undertook
to secure title over the lots under the name of the vendee within ninety days.
Issue:
Whether or not petitioner can rescind the contract.
Held:
Iluminada was not yet obliged on August 8, 1977 to pay the balance of the purchase price of the
property, but as a sign of good faith, she nevertheless consigned the amount of P11,983.00,
part of the balance of the purchase price of P14,000.00, with the court in Civil Case No. 1160.
The court accepted the consignation and she was issued receipts therefor. Still, the heirs of
Concepcion Gil, including the petitioners, failed to deliver the said title to the vendee.
Iluminada was compelled to file, at her expense, a petition with the RTC docketed as
Miscellaneous Case No. 4715 for the issuance of an owners duplicate of TCT No. 7450 covering
the property sold which was granted by the court on March 22, 1978. It was only on May 9,
1978 that Iluminada managed to secure TCT No. 61514 over the property under her name.
Upon the failure of the heirs to comply with the decedents prestation, Iluminada Pacetes was
impelled to resort to legal means to protect her rights and interests.
The petitioners, as successors-in-interest of the vendor, are not the injured parties entitled to a
rescission of the deed of absolute sale. It was Concepcions heirs, including the petitioners, who
were obliged to deliver to the vendee a certificate of title over the property under the latters
name, free from all liens and encumbrances within 120 days from the execution of the deed of
absolute sale, but had failed to comply with the obligation.
The consignation by the vendee of the purchase price of the property is sufficient to defeat the
right of the petitioners to demand for a rescission of the said deed of absolute sale.
It bears stressing that when the vendee consigned part of the purchase price with the Court
and secured title over the property in her name, the heirs of Concepcion, including the
petitioners, had not yet sent any notarial demand for the rescission of the deed of absolute sale
to the vendee, or filed any action for the rescission of the said deed with the appropriate court.
Although the vendee consigned with the Court only the amount of P11,983.00, P2,017.00 short
of the purchase price of P14,000.00, it cannot be claimed that Concepcion was an unpaid seller
because under the deed of sale, she was still obligated to transfer the property in the name of
the vendee, which she failed to do so.
David Reyes vs Jose Lim
GR No. 134241
August 11, 2003

Facts:
Petitioner David Reyes filed before the trial court a complaint alleging that Reyes as
seller and Lim as buyer entered into a contract to sell a parcel of land located along F.B.
Harrison Street, Pasay City. Harrison Lumber occupied the Property as lessee with a
monthly rental of P35,000.
The complaint claimed that Reyes had informed Harrison Lumber to vacate the Property
before the end of January 1995.
On 31 May 1995, Lim stated that he was ready and willing to pay the balance of the
purchase price on or before 8 March 1995.
On 9 March 1995, Reyes offered to return the P10 million down payment to Lim
because Reyes was having problems in removing the lessee from the Property. Lim
learned that Reyes had already sold the Property to Line One Foods Corporation on 1
March 1995 for P16,782,840.
Lim requested in open court that Reyes be ordered to deposit the P10 million down
payment with the cashier of the Regional Trial Court of Paraaque. The trial court
granted this motion.
The trial court ruled that an action for rescission could prosper only if the party
demanding rescission can return whatever he may be obliged to restore should the
court grant the rescission.

Issue:
Whether or not the CA erred in finding the trial court could issue the questioned orders on
grounds of equity

Held:
The principle that no person may unjustly enrich himself at the expense of another is embodied
in Article 221 of the Civil Code. This principle applies not only to substantive rights but also to
procedural remedies. One condition for invoking this principle is that the aggrieved party has no
other action based on contract, quasi-contract, crime, quasi-delict or any other provision of law.
Courts can extend this condition to the hiatus in the Rules of Court where the aggrieved party,
during the pendency of the case, has no other recourse based on the provisional remedies of
the Rules of Court.

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

The SC affirmed the decision of the CA.











Ong Yong, et. al. vs David Tiu
GR. No. 144476 & 144629
February 1, 2002

Facts:
First Landlink Asia Development Corporation (FLADC) was then fully owned by the Tiu
Group. In order to recover from its floundering finances, the Ong Group were invited by
the Tius to invest in FLADC. By the Pre-Subscription Agreement, both parties agreed to
maintain equal shareholdings in FLADC with the Ongs investing cash while the Tius
contributing property.
Masagana Telamart, Inc. executed a Deed of Assignment over the 1,902.30 square
meter property in favor of FLADC.
The controversy between the two parties arose when the Ongs refused to credit the
number of FLADC shares in the name of Masagana Telamart, Inc.; also when they
refused to credit the number of FLADC shares in favor of the Tius; and when David S. Tiu
and Cely Y. Tiu were proscribed from assuming and performing their duties as Vice-
President and Treasurer, respectively of FLADC. These became the basis of the Tius'
unilateral rescission of the Pre-Subscription Agreement on February 23, 1996.
The SEC confirmed the rescission. The Ca affirmed the SEC decision with modifications.

Issue:
Whether or not the CA erred in ordering the liquidation of FLADC instead of merely ordering
the restitution of the parties respective investments

Held:
The Court of Appeals in its Resolution of August 17, 2000, clarified thus:
"xxx. While the Court in the case at bench ordered the rescission of the Pre-Subscription
Agreement, it did not, however, order restitution of what the parties contributed pursuant
thereto. What the Court ordered was the liquidation of FLADC in accordance with the actual
amount of investment each party made in FLADC. Restitution and liquidation are two different
things. Liquidation includes both the profits and losses each party derived within the duration
of their respective investment. Contrary therefore to Willie Ong's contention that the Ongs will
simply receive a return of their money without any fruits or interest, the decision assures them
that they (the Ong and Tiu Groups) will have a bountiful return of their respective investments
derived from the profits of the corporation."

Restoration of the parties to their relative position which they would have occupied had no
contract ever been made is not practicable nor possible because we cannot turn back the hands
of time when the mall was only "nearing completion" in 1994, when the mall was not fully
tenanted yet and they had an existing loan of P190 million with PNB with an interest of 19% per
annum. But the Masagana Citimall is now completely constructed/finished, the P190 million
loan fully paid without their having to pay enormous interest, and the Tius cannot deny that the
Ongs are partly to be credited for the success of the venture. What the Tius want the Court to
order would have been fair and just had there been no fault on their part.














Equatorial Realty Devt Inc. vs Mayfair Theater, Inc.
GR No. 106063
November 21, 1996

Facts:
Carmelo owned a parcel of land, together with two 2-storey buildings constructed
thereon. Carmelo entered into two contracts of lease with Mayfair for the latter's lease
of a portion of Carmelo's property for use by Mayfair as a motion picture theater and for
a term of 20 years.
Both contracts of lease provide that if the lessor should desire to sell the leased
presmises, the lessee shall be given 30 days exclusive option to purchase the same. In
the event that the leased premises is sold to someone other than the lessee, the lessor
is bound and obligated to stipulate in the Deed of Sale that the purchaser shall
recognize this lease and be bound by all the terms and conditions thereof.
Sometime in August 1974, Mr. Henry Pascal of Carmelo informed Mr. Henry Yang,
President of Mayfair, that Carmelo was selling the said property.
On September 18, 1974, Mayfair sent another letter to Carmelo offering to buy the
entire building if the price is reasonable. However, both Carmelo and Equatorial
questioned the authenticity of the second letter.
Four years later Carmelo sold its entire C.M. Recto Avenue land and building, which
included the leased premises housing the "Maxim" and "Miramar" theatres, to
Equatorial by virtue of a Deed of Absolute Sale.
In September 1978, Mayfair instituted the action for specific performance and
annulment of the sale of the leased premises to Equatorial.

Issue:
Whether or not the option clause in the contracts of lease is actually a right of first refusal
proviso

Held:
The SC agrees with the respondent Court of Appeals that the aforecited contractual stipulation
provides for a right of first refusal in favor of Mayfair. It is not an option clause or an option
contract. It is a contract of a right of first refusal. An option is a contract granting a privilege to
buy or sell within an agreed time and at a determined price. It is a separate and distinct
contract from that which the parties may enter into upon the consummation of the option. It
must be supported by consideration. In the instant case, the right of first refusal is an integral
part of the contracts of lease.

The consideration is built into the reciprocal obligations of the parties. Since Equatorial is a
buyer in bad faith, this finding renders the sale to it of the property in question rescissible. We
agree with respondent Appellate Court that the records bear out the fact that Equatorial was
aware of the lease contracts because its lawyers had, prior to the sale, studied the said
contracts. As such, Equatorial cannot tenably claim to be a purchaser in good faith, and,
therefore, rescission lies.














Sps. Mariano and Avelina Velarde vs Court of Appeals
GR No. 108346
July 11, 2001

Facts:
David Raymundo (private respondent) is the absolute and registered owner of a parcel
of land, together with the house and other improvements thereon.
George Raymundo is Davids father who negotiated with plaintiffs Avelina and Mariano
Velarde (petitioners) for the sale of said property, which was, however, under lease.
On August 8, 1986, a Deed of Sale with Assumption of Mortgage was executed by
defendant David Raymundo, as vendor, in favor of plaintiff Avelina Velarde, as vendee.
On January 8, 1987, defendants sent plaintiffs a notarial notice of cancellation/rescission
of the intended sale of the subject property allegedly due to the latters failure to
comply with the terms and conditions of the Deed of Sale with Assumption of Mortgage
and the Undertaking.
Consequently, petitioners filed on February 9, 1987 a Complaint against private
respondents for specific performance, nullity of cancellation, writ of possession and
damages.

Issue:
Whether or not the CA erred in holding that the rescission of the contract by private
respondent was justified

Held:
The right of rescission of a party to an obligation under Article 1191 of the Civil Code is
predicated on a breach of faith by the other party who violates the reciprocity between them.
The breach contemplated in the said provision is the obligors failure to comply with an existing
obligation. When the obligor cannot comply with what is incumbent upon it, the obligee may
seek rescission and, in the absence of any just cause for the court to determine the period of
compliance, the court shall decree the rescission.

In the present case, private respondents validly exercised their right to rescind the contract,
because of the failure of petitioners to comply with their obligation to pay the balance of the
purchase price. Indubitably, the latter violated the very essence of reciprocity in the contract of
sale, a violation that consequently gave rise to private respondents right to rescind the same in
accordance with law



















Alexander Asuncion vs Eduardo Evangelista
GR No. 133491
October 13, 1999

Facts:
Since 1970, private respondent has been operating a piggery on his landholdings under
the trade name Embassy Farms as a single proprietorship. Private respondent obtained
several loans and mortgaged several properties to use as working capital for Embassy
Farm.
On August 2, 1984, petitioner and private respondent executed a Memorandum of
Agreement. The total amount thus paid by petitioner to private respondent and
invested in Embassy Farms, Inc. as of August 1985 was P3,194,941.88.
As to the shares of stock, it was incumbent upon private respondent to endorse and
deliver them to petitioner so he could also have them transferred in his name, but
private respondent never did. He refused to honor his obligations under the
Memorandum of Agreement and even countered with a demand letter of his own.
On April 10, 1986, petitioner filed in the Regional Trial Court a complaint for rescission
of the Memorandum of Agreement with a prayer for damages.

Issue:
Whether or not the memorandum of agreement executed between Asunction and Evangelista
was in the nature of a Contract of Sale

Held:
The SC held that private respondent failed to perform his substantial obligations under the
Memorandum of Agreement. Private respondent later justified his refusal to execute any deed
of sale and deliver the certificates of stock by accusing petitioner of having failed to assume his
debts. The SC holds that private respondent's insistence that petitioner execute a formal
assumption of mortgage independent and separate from his own execution of a deed of sale is
legally untenable, considering that a recorded real estate mortgage is a lien inseparable from
the property mortgaged and until discharged, it follows the property. In his testimony, private
respondent stated that he would be committing economic suicide if he executed a deed of sale
because he would then be transferring his lands to petitioner without the latter first assuming
his loan obligations. This posturing is puerile. Even without a formal assumption of mortgage,
the mortgage follows the property whoever the possessor may be. It is an elementary principle
in civil law that a real mortgage subsists notwithstanding changes of ownership and all
subsequent purchases of the property must respect the mortgage, whether the transfer to
them be with or without the consent of the mortgagee.



















William Uy vs Court of Appeals
GR No. 120465
September 9, 1999

Facts:
Petitioners are agents authorized to sell eight parcels of land by the owners thereof. By
virtue of such authority, petitioners offered to sell the lands, located in Tuba, Benguet to
respondent National Housing Authority (NHA) to be utilized and developed as a housing
project.
On February 14, 1989, the NHA Board passed a resolution approving the acquisition of
said lands, pursuant to which the parties executed a series of Deeds of Absolute Sale
covering the subject lands.
On 22 November 1991, the NHA issued a resolution cancelling the sale over the three
parcels of land. The NHA subsequently offered the amount of P1.225 million to the
landowners as daos perjuicios.
On 9 March 1992, petitioners filed a Complaint for Damages against NHA.
The RTC rendered a decision declaring the cancellation of the contract to be justified.
Upon appeal by petitioners, the Court of Appeals reversed the decision of the trial court
and entered a new one dismissing the complaint.

Issue:
Whether or not the respondent NHA had any legal basis for rescinding the sale

Held:
Petitioners confuse the cancellation of the contract by the NHA as a rescission of the contract
under Article 1191 of the Civil Code. The right of rescission or, more accurately, resolution, of a
party to an obligation under Article 1191 is predicated on a breach of faith by the other party
that violates the reciprocity between them. The power to rescind, therefore, is given to the
injured party.

In this case, the NHA did not rescind the contract. Indeed, it did not have the right to do so for
the other parties to the contract, the vendors, did not commit any breach, much less a
substantial breach, of their obligation. Their obligation was merely to deliver the parcels of
land to the NHA, an obligation that they fulfilled. The NHA did not suffer any injury by the
performance thereof.

The cancellation, therefore, was not a rescission under Article 1191. Rather, the cancellation
was based on the negation of the cause arising from the realization that the lands, which were
the object of the sale, were not suitable for housing.

















Constancia Tamayo, et. al. vs Rosalia Abad Senora, et. al.
GR No. 176946
November 15, 2010

Facts:
Antonieto M. Seora, then 43 years old and a police chief inspector of the PNP, was
riding a motorcycle and crossing the intersection of Sucat Road towards Filipinas
Avenue, when a tricycle allegedly bumped his motorcycle from behind.
As a result, the motorcycle was pushed into the path of an Isuzu Elf Van (delivery van).
The delivery van ran over Seora, while his motorcycle was thrown a few meters away.
He was recovered underneath the delivery van and rushed to the Medical Center of
Paraaque, where he was pronounced dead on arrival.
The tricycle was driven by Amparo, who testified that it was the delivery van that
bumped Seoras motorcycle. The delivery van, on the other hand, was driven by Elmer
O. Polloso and registered in the name of Cirilo Tamayo. While trial was ongoing, his wife,
petitioner Constancia testified that it was Cirilo who hired their drivers and claimed
that, as employer, her husband exercised the due diligence of a good father of a family
in the selection, hiring, and supervision of his employees, including driver Polloso.
The RTC found Polloso guilty of negligence and held Amparo similarly guilty of
negligence. In addition, the RTC found Cirilo to be solidarily liable for Seoras death.
The RTC modified the formula in determining life expectancy, 2/3 x (80 age of victim at
the time of death). The RTC considered the retirement age of the members of the PNP,
which was 55 years old. Thus, the formula that the RTC used was 2/3 x (55 age of the
victim at the time of death).
On appeal, the CA affirmed the RTCs decision, but modified the finding on the
deceaseds net earning capacity. The CA used the formula:
Net earning capacity = life expectancy x gross annual income less
living expenses
with life expectancy computed as 3/4
2/3 x (80 - age of deceased)
and living expenses fixed at half of the victims gross income.
Thus, Seoras net earning capacity was computed to be P1,887,847.00.

Issue:
Whether or not the award for damages is proper

Held:
The CA correctly modified the RTCs computation. The RTC had misapplied the formula
generally used by the courts to determine net earning capacity, which is, to wit:

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

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

On the other hand, gross annual income requires the presentation of documentary evidence for
the purpose of proving the victims annual income. The victims heirs presented in evidence
Seoras pay slip from the PNP, showing him to have had a gross monthly salary of P12,754.00.
Meanwhile, the victims net income was correctly pegged at 50% of his gross income in the
absence of proof as regards the victims living expenses. Consequently, the Court sustains the
award of P1,887,847.00 as damages for loss of earning capacity. All other aspects of the
assailed Decision are affirmed.






Leticia Tan, et. al. vs OMC Carriers, Inc.
GR No. 190521
January 12, 2011

Facts:
Arambala was driving a truck with a trailer owned by OMC when he noticed that the
truck had suddenly lost its brakes. Both he and his companion jumped out and
abandoned the truck. Driverless, the truck rammed into the house and tailoring shop
owned by petitioner Leticia Tan and her husband Celedonio Tan, instantly killing
Celedonio who was standing at the doorway of the house at the time
The petitioners claimed that the respondents should be held liable for the actual
damages that they suffered, which include the damage to their properties, the funeral
expenses they incurred for Celedonio Tans burial, as well as the loss of his earning
capacity.
The respondents denied any liability for the collision, essentially claiming that the
damage to the petitioners was caused by a fortuitous event, since the truck skidded due
to the slippery condition of the road caused by spilled motor oil.
The RTC found OMC and Arambala jointly and severally liable to the petitioners for
damages. The CA affirmed the RTCs findings, however, the CA modified the damages
awarded to the petitioners by reducing the actual damages awarded from P355,895.00
to P72,295.00 since only the latter amount was duly supported by official receipts.

Issue:
Whether or not the CA erred in modifying the RTCs awarded damages

Held:
The petitioners do not deny that they did not submit any receipt to support their claim for
actual damages to prove the monetary value of the damage caused to the house and tailoring
shop when the truck rammed into them. Thus, no actual damages for the destruction to
petitioner Leticia Tans house and tailoring shop can be awarded. Nonetheless, absent
competent proof on the actual damages suffered, a party still has the option of claiming
temperate damages, which 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 CA was correct in disallowing the award of
actual damages for loss of earning capacity. As a rule, documentary evidence should be
presented to substantiate the claim 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.


















Victory Liner, Inc. vs Heirs of Andres Malecdan
GR No. 154278
December 27, 2002

Facts:
Andres Malecdan was a 75 year-old farmer. On July 15, 1994 while Andres was crossing
the National Highway on his way home from the farm, a Dalin Liner bus on the
southbound lane stopped to allow him and his carabao to pass.

However, as Andres was crossing the highway, a bus of petitioner Victory Liner, driven
by Ricardo C. Joson, Jr., bypassed the Dalin bus. In so doing, respondent hit the old man
and the carabao on which he was riding. As a result, Andres Malecdan was thrown off
the carabao, while the beast toppled over. The Victory Liner bus sped past the old man,
while the Dalin bus proceeded to its destination without helping him.

Subsequently, a criminal complaint for reckless imprudence resulting in homicide and
damage to property was filed against the Victory Liner bus driver Ricardo Joson, Jr.

The RTC found the driver guilty of gross negligence in the operation of his vehicle and
Victory Liner, Inc. also guilty of gross negligence in the selection and supervision of
Joson, Jr. Petitioner and its driver were held liable for damages in the amounts of:
a. P50,000.00 as death indemnity;
b. P88,339.00 for actual damages;
c. P200,000.00 for moral damages;
d. P50,000.00 as exemplary damages;
e. Thirty percent (30%) as attorneys fees of whatever amount that can be collected by
the plaintiff;
f. The costs of the suit

On appeal, the decision was affirmed by the Court of Appeals, with the modification
that the award of attorneys fees was fixed at P50,000.00.

Issue:
Whether or not the affirmation by the CA of the appealed decision of the RTC granting the
award of moral and exemplary damages and attorneys fees is in accord with law and
jurisprudence

Held:
To justify an award of actual damages, there should be proof of the actual amount of loss
incurred in connection with the death, wake or burial of the victim. We cannot take into
account receipts showing expenses incurred some time after the burial of the victim, such as
expenses relating to the 9
th
day, 40
th
day and 1
st
year death anniversaries. In this case, the trial
court awarded P88,339.00 as actual damages. While these were duly supported by receipts,
these included the amount of P5,900.00, the cost of one pig which had been butchered for the
9
th
day death anniversary of the deceased. This item cannot be allowed. We, therefore, reduce
the amount of actual damages to P82,439.00.00. The award of P200,000.00 for moral damages
should likewise be reduced. The trial court found that the wife and children of the deceased
underwent intense moral suffering as a result of the latters death. Under Art. 2206 of the
Civil Code, the spouse, legitimate children and illegitimate descendants and ascendants of the
deceased may demand moral damages for mental anguish by reason of the death of the
deceased. Under the circumstances of this case an award of P100,000.00 would be in keeping
with the purpose of the law in allowing moral damages.

On the other hand, the award of P50,000.00 for indemnity is in accordance with current rulings
of the Court.

Exemplary damages are imposed not to enrich one party or impoverish another but to serve as
a deterrent against or as a negative incentive to curb socially deleterious actions. In this case,
petitioners driver Joson, Jr. was grossly negligent in driving at such a high speed along the
national highway and overtaking another vehicle which had stopped to allow a pedestrian to
cross. Worse, after the accident, Joson, Jr. did not stop the bus to help the victim. Under the
circumstances, we believe that the trial courts award of P50,000.00 as exemplary damages is
proper. Finally, private respondents are entitled to attorneys fees




















GSIS vs Sps. Gonzalo and Matilde Labung-Deang
GR No. 135644
September 17, 2001

Facts:
The spouses Deang obtained a housing loan from the GSIS. As required by the mortgage
deed, the spouses Deang deposited the owners duplicate copy of the title with the
GSIS.
Eleven months before the maturity of the loan, the spouses Deang settled their debt
with the GSIS and requested for the release of the owners duplicate copy of the title
However, personnel of the GSIS were not able to release the owners duplicate of the
title as it could not be found. GSIS commenced the reconstitution proceedings for the
issuance of a new owners copy of the same.
The spouses Deang filed a complaint against GSIS for damages, claiming that as result of
the delay in releasing the duplicate copy of the owners title, they were unable to secure
a loan which could have been used in defraying the estimated cost of the renovation of
their residential house and which could have been invested in some profitable business
undertaking
The RTC rendered a decision ruling for the spouses Deang. The CA affirmed the assailed
judgment.

Issue:
Whether the GSIS, as a GOCC primarily performing governmental functions, is liable for a
negligent act of its employee acting within the scope of his assigned tasks

Held:
Under the facts, there was a pre-existing contract between the parties. GSIS and the spouses
Deang had a loan agreement secured by a real estate mortgage. The duty to return the owners
duplicate copy of title arose as soon as the mortgage was released. GSIS insists that it was
under no obligation to return the owners duplicate copy of the title immediately. This
insistence is not warranted. Negligence is obvious as the owners duplicate copy could not be
returned to the owners.

There is likewise no factual basis for an award of actual damages. Actual damages to be
compensable must be proven by clear evidence. A court cannot rely on speculation, conjecture
or guess work as to the fact and amount of damages, but must depend on actual proof.

However, it is also apparent that the spouses Deang suffered financial damage because of the
loss of the owners duplicate copy of the title. Temperate damages may be granted. The award
of twenty thousand pesos (P20,000.00) in temperate damages is reasonable considering that
GSIS spent for the reconstitution of the owners duplicate copy of the title.
















BPI Investment Corp. vs DG Carreon Commercial Corp.
GR No. 126524
November 29, 2001

Facts:
On November 15, 1979, D. G. Carreon Commercial Corporation placed with BPI
Investments P318,981.59 in money market placement with a maturity term of thirty two
days, or up to December 17, 1979, at a maturity value of P323,518.22. BPI Investments
issued the corresponding sales order slip for straight sale and confirmation slip.
BPI Investments claimed that roll overs were subsequently made from maturing
payments on which BPI Investments had made over payments at a total amount of
P410,937.09
BPI Investments wrote respondents Daniel Carreon and Aurora Carreon, demanding the
return of the overpayment of P410,937.09. The respondents asserted that there was no
overpayment and asked for time to look for the papers. Upon the request of BPI
Investments, the spouses Daniel and Aurora Carreon sent to BPI Investments a
proposed memorandum of agreement
On May 10, 1982, BPI Investments, without responding to the memorandum and
proposal of D. G. Carreon filed with the Court of First Instance a complaint for recovery
of a sum of money against D. G. Carreon with preliminary attachment.
The RTC dismissed the petition and the counterclaim. The CA reversed the dismissal of
the counterclaim of defendants and ordering plaintiff to pay for damages.

Issue:
Whether the Court of Appeals awarded excessive moral and exemplary damages as well as
attorneys fees to respondents

Held:
While petitioner BPI Investments may not be guilty of gross negligence, it failed to prove by
clear and convincing evidence that D. G. Carreon indeed received money in excess of what was
due them. BPI Investments did not act in a wanton, fraudulent, reckless, oppressive, or
malevolent manner, when it asked for preliminary attachment. It was just exercising a legal
option. The sheriff of the issuing court did the execution and the attachment. Hence, BPI
Investments is not to be blamed for the excessive and wrongful attachment.

As to the finding of the appellate court that the filing of the case aggravated and eventually
caused the death of two of the respondents, we agree with the petitioner that such correlation
is bereft of basis and is far fetched.

The award of moral damages and attorneys fees is also not in keeping with existing
jurisprudence. Moral damages may be awarded in a breach of contract when the defendant
acted in bad faith, or was guilty of gross negligence amounting to bad faith, or in wanton
disregard of his contractual obligation. Finally, with the elimination of award of moral
damages, so must the award of attorneys fees be deleted.

Temperate or moderate damages may be recovered when the court finds that some pecuniary
loss has been suffered but its amount cannot, from the nature of the case, be proved with
certainty. The Court deems it prudent to award reasonable temperate damages to respondents
under the circumstances










Khe Kong Cheng vs Court of Appeals
GR No. 144169
March 28, 2001

Facts:
On October 4, 1985, the Philippine Agricultural Trading Corporation shipped on board
the vessel M/V PRINCE ERIC, owned by petitioner, 3,400 bags of copra at Masbate for
delivery to Dipolog City. The said shipment of copra was covered by a marine insurance
policy issued by American Home Insurance Company (respondent Philam's assured).
M/V PRINCE ERIC, however, sank somewhere between Negros Island and Northeastern
Mindanao, resulting in the total loss of the shipment. Because of the loss, the insurer,
American Home, paid the amount of P354,000.00 (the value of the copra) to the
consignee.
Having been subrogated into the rights of the consignee, American Home instituted a
Civil Case in the RTC to recover the money paid to the consignee, based on breach of
contract of carriage
While the case was still pending petitioner executed deeds of donations of parcels of
land in favor of his children, herein co-petitioners Sandra Joy and Ray Steven.
The trial court rendered judgment against petitioner Khe Hong Cheng. When the sheriff,
accompanied by counsel of respondent Philam, went to Butuan City on January 17,
1997, to enforce the alias writ of execution, they discovered that petitioner Khe Hong
Cheng no longer had any property and that he had conveyed the subject properties to
his children.
Philam filed a complaint with the Regional Trial Court of Makati City, Branch 147, for the
rescission of the deeds of donation executed by petitioner Khe Hong Cheng in favor of
his children and for the nullification of their titles

Issue:
When did the four (4) year prescriptive period as provided for in Article 1389 of the Civil Code
for respondent Philam to file its action for rescission of the subject deeds of donation
commence to run

Held:
Article 1389 of the Civil Code simply provides that, The action to claim rescission must be
commenced within four years. Since this provision of law is silent as to when the prescriptive
period would commence, the general rule, i.e, from the moment the cause of action accrues,
therefore, applies. Article 1150 of the Civil Code is particularly instructive:
Art. 1150. The time for prescription for all kinds of actions, when there is no special provision
which ordains otherwise, shall be counted from the day they may be brought.

For an accion pauliana to accrue, the following requisites must concur:
1) That the plaintiff asking for rescission has a credit prior to the alienation, although
demandable later;
2) That the debtor has made a subsequent contract conveying a patrimonial benefit to a third
person;
3) That the creditor has no other legal remedy to satisfy his claim, but would benefit by
rescission of the conveyance to the third person;
4) That the act being impugned is fraudulent;
5) That the third person who received the property conveyed, if by onerous title, has been an
accomplice in the fraud

An accion pauliana thus presupposes the following:
1) A judgment;
2) the issuance by the trial court of a writ of execution for the satisfaction of the judgment, and
3) the failure of the sheriff to enforce and satisfy the judgment of the court.





Philippine Realty and Holdings Corp. vs Ley Construction and
Development Corp.
GR No. 165548 & 167879
June 13, 2011

Facts:
The Ley Construction and Development Corporation (LCDC) and Philippine Realty &
Holdings Corporation (PRHC), entered into four major construction projects. Engineer
Dennis Abcede was the project construction manager of PRHC.
In the course of the construction of the Tektite Building, it became evident to both
parties that LCDC would not be able to finish the project within the agreed period. LCDC
explained that the unanticipated delay in construction was due mainly to the sudden,
unexpected hike in the prices of cement and other construction materials.
Abcede asked LCDC to advance the amount necessary to complete construction. Its
president acceded, on the absolute condition that it be allowed to escalate the contract
price. The board of directors turned down the request for an escalation agreement.
Neither PRHC nor Abcede gave notice to LCDC of the alleged denial of the proposal.
Notwithstanding the absence of a signature above PRHCs name, LCDC proceeded with
the construction of the Tektite Building, expending the entire amount necessary to
complete the project. LCDC religiously submitted to PRHC monthly reports that
contained the amounts of infusion it made from the period August 1991 to December
1991. PRHC never replied to any of these monthly reports.
On 16 February 1993, PRHC suddenly denied any liability for the escalation price. In the
same letter, it claimed that LCDC had incurred 111 days of delay in the construction of
the Tektite Building.
LCDC countered that there were many times when its requests for time extension
although due to reasonable causes sanctioned by the construction agreement such as
power failures, water supply interruption, and scarcity of construction materials were
unreasonably reduced to shorter periods by PRHC.
Seeking to recover all the above-mentioned amounts, LCDC filed a Complaint with
Application for the Issuance of a Writ of Preliminary Attachment

Issue:
Whether or not LCDC is not liable for liquidated damages for delay in the construction of the
buildings for PRHC

Held:
A perusal of the construction agreements shows that the parties never agreed to make LCDC
liable even in cases of force majeure. Neither was the assumption of risk required. Thus, in the
occurrence of events that could not be foreseen, or though foreseen were inevitable, neither
party should be held responsible.

Under Article 1174 of the Civil Code, to exempt the obligor from liability for a breach of an
obligation due to an act of God or force majeure, the following must concur:
(a) the cause of the breach of the obligation must be independent of the will of the debtor; (b)
the event must be either unforseeable or unavoidable; (c) the event must be such as to render
it impossible for the debtor to fulfill his obligation in a normal manner; and (d) the debtor must
be free from any participation in, or aggravation of the injury to the creditor.

The shortage in supplies and cement may be characterized as force majeure. In the present
case, hardware stores did not have enough cement available in their supplies or stocks at the
time of the construction in the 1990s. Likewise, typhoons, power failures and interruptions of
water supply all clearly fall under force majeure. Since LCDC could not possibly continue
constructing the building under the circumstances prevailing, it cannot be held liable for any
delay that resulted from the causes aforementioned.

Further, PRHC is barred by the doctrine of promissory estoppel from denying that it agreed, and
even promised, to hold LCDC free and clear of any liquidated damages. Abcede and Santos also
promised that the latter corporation would not be held liable for liquidated damages even for a
single day of delay despite the non-approval of the requests for extension.





Megaworld Globus Asia, Inc. vs Mila Tanseco
GR no. 181206
October 19, 2009

Facts:
On July 7, 1995, petitioner Megaworld Globus Asia, Inc. and respondent Tanseco
entered into a Contract to Buy and Sell a condominium unit at a pre-selling project, The
Salcedo Park.
The contract stipulated that the construction of the project and the units purchased
shall be completed and delivered not later than October 31, 1998 with additional grace
period of 6 months within which to complete the project barring delays due to fire,
earthquakes, the elements, acts of God, war, civil disturbances, strikes or other labor
disturbances, government and economic controls making it, among others, impossible
or difficult to obtain the necessary materials, acts of third person, or any other cause or
conditions beyond the control of the seller.
A few days shy of three years later, Megaworld, by notice of turnover, informed Tanseco
that the unit was ready for inspection preparatory to delivery. Tanseco replied through
counsel that in view of Megaworlds failure to deliver the unit on time, she was
demanding the return of the total installment payment she had made, with interest at
12% per annum from April 30, 1999, the expiration of the six-month grace period.
Tanseco pointed out that none of the excepted causes of delay existed.
In its Answer, Megaworld attributed the delay to the 1997 Asian financial crisis which
was beyond its control; and argued that default had not set in, Tanseco not having made
any judicial or extrajudicial demand for delivery before receipt of the notice of turnover.

Issue:
Whether or not force majeure was present and that it would warrant the application of April
30, 1999 as an alternative date

Held:
Article 1174 of the Civil Code provides: Except in cases expressly specified by the law, or when it
is otherwise declared by stipulation, or when the nature of the obligation requires the
assumption of risk, no person shall be responsible for those events which could not be
foreseen, or which, though foreseen, were inevitable

The Court cannot generalize the 1997 Asian financial crisis to be unforeseeable and beyond the
control of a business corporation. A real estate enterprise engaged in the pre-selling of
condominium units is concededly a master in projections on commodities and currency
movements, as well as business risks. The fluctuating movement of the Philippine peso in the
foreign exchange market is an everyday occurrence, hence, not an instance of caso fortuito.
Megaworlds excuse for its delay does not thus lie.

















Roberto Sicam vs Lulu Jorge
GR No. 159617
August 8, 2007

Facts:
Lulu Jorge pawned several pieces of jewelry with Agencia de R. C. Sicam. On October 19,
1987, two armed men entered the pawnshop and took away whatever cash and jewelry
were found inside the pawnshop vault. Petitioner Sicam sent respondent Lulu a letter
informing her of the loss of her jewelry due to the robbery incident in the pawnshop.
On November 2, 1987, respondent Lulu then wrote a letter to petitioner Sicam
expressing disbelief stating that when the robbery happened, all jewelry pawned were
deposited with Far East Bank. Respondent Lulu then requested petitioner Sicam to
prepare the pawned jewelry for withdrawal but petitioner Sicam failed to return the
jewelry.
On September 28, 1988, respondent Lulu joined by her husband, Cesar Jorge, filed a
complaint against petitioner Sicam seeking indemnification for the loss of pawned
jewelry.
The RTC ruled that petitioner corporation could not be held liable for the loss of the
pawned jewelry since it had not been rebutted by respondents that the loss of the
pledged pieces of jewelry in the possession of the corporation was occasioned by armed
robbery; that robbery is a fortuitous event which exempts the victim from liability for
the loss.
The CA held that the corresponding diligence required of a pawnshop is that it should
take steps to secure and protect the pledged items and should take steps to insure itself
against the loss of articles which are entrusted to its custody as it derives earnings from
the pawnshop trade which petitioners failed to do.

Issue:
Whether or not the pawnshop is exempted from liability for the loss due to fortuitous event

Held:
The burden of proving that the loss was due to a fortuitous event rests on him who invokes it.
And, in order for a fortuitous event to exempt one from liability, it is necessary that one has
committed no negligence or misconduct that may have occasioned the loss.

Petitioner Sicam had testified that there was a security guard in their pawnshop at the time of
the robbery. He likewise testified that when he started the pawnshop business in 1983, he
thought of opening a vault with the nearby bank for the purpose of safekeeping the valuables
but was discouraged by the Central Bank since pawned articles should only be stored in a vault
inside the pawnshop. The very measures which petitioners had allegedly adopted show that to
them the possibility of robbery was not only foreseeable, but actually foreseen and anticipated.
Petitioner Sicams testimony, in effect, contradicts petitioners defense of fortuitous event.
















Florencia Huibonhua vs Court of Appeals
GR Nos. 95897 and 102604
December 14, 1999

Facts:
Huibonhoa entered into a memorandum of agreement with the Gojocco siblings
stipulating that Huibonhoa would lease from them 3 adjacent commercial lots. The
parties inked a contract of lease in which the lessee undertook to complete the
construction of a 4-storey building within 8 months from the date of the execution of
the contract of lease.
During the construction of the building, former Senator Benigno Aquino, Jr. was
assassinated. The consequent hoarding of construction materials and increase in
interest rates allegedly affected adversely the construction of the building such that
Huibonhoa failed to complete the same within the stipulated eight-month period.
Under the contract, Huibonhoa was supposed to start paying rental in March 1984 but
she failed to do so. Consequently, the Gojoccos made several verbal demands upon
Huibonhoa for the payment of rental arrearages and, for her to vacate the leased
premises.
Huibonhoa brought an action for reformation of contract. The RTC held that Huibonhoa
had not presented clear and convincing evidence to justify the reformation of the lease
contract. It considered as misplaced her contention that the Aquino assassination was
an accident within the purview of Art. 1359 of the Civil Code.

Issue:
Whether or not the assassination of former Senator Benigno Aquino, Jr should be considered a
fortuitous event

Held:
A fortuitous event is that which could not be foreseen, or which even if foreseen, was
inevitable. In the case under scrutiny, the assassination of Senator Aquino may indeed be
considered a fortuitous event. However, the said incident per se could not have caused the
delay in the construction of the building. What might have caused the delay was the resulting
escalation of prices of commodities including construction materials. Be that as it may, there is
no merit in Huibonhoas argument that the inflation borne by the Filipinos in 1983 justified the
delayed accrual of monthly rental, the reduction of its amount and the extension of the lease
by three (3) years.

Inflation is the sharp increase of money or credit or both without a corresponding increase in
business transaction. While it is of judicial notice that there has been a decline in the
purchasing power of the Philippine peso, this downward fall of the currency cannot be
considered unforeseeable considering that since the 1970s we have been experiencing
inflation. It is simply a universal trend that has not spared our country.

















Ace-Agro Development Corp. vs Court of Appeals
GR No. 119729
January 21, 1997

Facts:
Since 1979 petitioner Ace-Agro Development Corp. had been cleaning soft drink bottles
and repairing wooden shells for Cosmos, rendering its services within the company
premises.
On April 25, 1990, fire broke out in private respondents plant, destroying, among other
places, the area where petitioner did its work. As a result, petitioners work was
stopped.
On May 15, 1990, petitioner asked private respondent to allow it to resume its service,
but petitioner was advised that on account of the fire, private respondent was
terminating their contract.
Petitioner requested private respondent to reconsider its decision and allow petitioner
to resume its work in order to cushion the sudden impact of the unemployment of
many of its workers. As it received no reply from private respondent, petitioner
informed its employees of the termination of their employment.
In response, private respondent advised petitioner that the latter could resume the
repair of wooden shells under terms similar to those contained in its contract but work
had to be done outside the company premises. Petitioner refused the offer.
On January 3, 1991, petitioner brought this case against private respondent for breach
of contract and damages. The RTC found private respondent guilty of breach of contract
and ordered it to pay damages to petitioner. The appellate court found that it was
petitioner which had refused to resume work, after failing to secure an extension of its
contract.

Issue:
Whether or not the respondent was justified in unilaterally terminating the contract on account
of force majeure

Held:
The stipulation that in the event of a fortuitous event or force majeure the contract shall be
deemed suspended during the said period does not mean that the happening of any of those
events stops the running of the period the contract has been agreed upon to run. It only
relieves the parties from the fulfillment of their respective obligations during that time. If
during six of the thirty years fixed as the duration of a contract, one of the parties is prevented
by force majeure to perform his obligation during those years, he cannot after the expiration of
the thirty-year period, be compelled to perform his obligation for six more years to make up for
what he failed to perform during the said six years, because it would in effect be an extension
of the term of the contract. The contract is stipulated to run for thirty years, and the period
expires on the thirtieth year; the period of six years during which performance by one of the
parties is prevented by force majeure cannot be deducted from the period stipulated.

The Court of Appeals was right that petitioner had no basis for refusing private respondents
offer unless petitioner was allowed to carry out its work in the company premises. That
petitioner would incur additional cost for transportation was not a good reason for its refusal.
Petitioner has not shown that on August 28, 1990, when it was notified of the private
respondents offer, the latters premises had so far been restored so as to permit petitioner to
resume work there. In fact, even when petitioner was finally allowed to resume work within the
plant, it was not in the former work place but in a new one, which shows that private
respondents reason for not granting petitioners request was not just a pretext.











Pedro Dioquino vs Federico Laureano, et. al.
GR No. L-25906
May 28, 1970

Facts:
Attorney Pedro Dioquino, a practicing lawyer of Masbate, is the owner of a car. On
March 31, 1964, he went to the office of the MVO, Masbate, to register the same. On
his way to the P.C. Barracks, the car, driven by plaintiff's driver and with defendant
Federico Laureano as the sole passenger, was stoned by some 'mischievous boys' and its
windshield was broken. One of the boys was caught and taken to Atty. Dioquino.
The defendant Federico Laureano refused to file any charges against the boy and his
parents because he thought that the stone-throwing was merely accidental and that it
was due to force majeure.
Defendant Federico Laureano refused to pay the windshield himself and challenged that
the case be brought to court for judicial adjudication. The plaintiff tried to convince
Laureano just to pay the value of the windshield but Laureano refused to make any
settlement, clinging to the belief that he could not be held liable because a minor child
threw a stone accidentally on the windshield and therefore, the same was due to force
majeure.

Issue:
Whether or not the damage on Atty. Dioquinos car was caused by force majeure

Held:
Authorities of repute are in agreement, more specifically concerning an obligation arising from
contract "that some extraordinary circumstance independent of the will of the obligor, or of his
employees, is an essential element of a caso fortuito."

If it could be shown that such indeed
was the case, liability is ruled out. There is no requirement of "diligence beyond what human
care and foresight can provide."

The error committed by the lower court in holding defendant Federico Laureano liable appears
to be thus obvious. Its own findings of fact repel the motion that he should be made to respond
in damages to the plaintiff for the broken windshield. What happened was clearly unforeseen.
It was a fortuitous event resulting in a loss which must be borne by the owner of the car. An
element of reasonableness in the law would be manifestly lacking if, on the circumstances as
thus disclosed, legal responsibility could be imputed to an individual in the situation of
defendant Laureano. Art. 1174 of the Civil Code guards against the possibility of its being visited
with such a reproach. Unfortunately, the lower court was of a different mind and thus failed to
heed its command.


















Bachelor Express, Inc. vs Court of Appeals
Gr No. 85691
July 31, 1990

Facts:
The evidence shows that a passenger suddenly stabbed a PC soldier in a bus owned by
petitioner which caused commotion and panic among the passengers.
When the bus stopped, passengers Ornominio Beter and Narcisa Rautraut were found
lying down the road, the former already dead as a result of head injuries and the latter
also suffering from severe injuries which caused her death later. The passenger assailant
alighted from the bus and ran toward the bushes but was killed by the police.
Thereafter, the heirs of Ornominio Beter and Narcisa Rautraut filed a complaint for
"sum of money" against Bachelor Express, Inc. its alleged owner Samson Yasay and the
driver Rivera.
In their answer, the petitioners denied liability for the death of Ornominio Beter and
Narcisa Rautraut. They alleged that:
(a)the driver was able to transport his passengers safely to their respective places of
destination except Ornominio Beter and Narcisa Rautraut who jumped off the bus
without the knowledge and consent, much less, the fault of the driver and conductor
(b) the defendants in this case the defendant corporation had exercised due diligence in
the choice of its employees to avoid as much as possible accidents;

Issue:
Whether or not the stabbing incident constitutes a fortuitous event, thus absolving petitioner
of any liability

Held:
The running amuck of the passenger was the proximate cause of the incident as it triggered off
a commotion and panic among the passengers such that the passengers started running to the
sole exit shoving each other resulting in the falling off the bus by passengers Beter and Rautraut
causing them fatal injuries. The sudden act of the passenger who stabbed another passenger in
the bus is within the context of force majeure. However, in order that a common carrier may be
absolved from liability in case of force majeure, it is not enough that the accident was caused by
force majeure. The common carrier must still prove that it was not negligent in causing the
injuries resulting from such accident. Considering the factual findings of the Court of Appeals-
the bus driver did not immediately stop the bus at the height of the commotion; the bus was
speeding from a full stop; the victims fell from the bus door when it was opened or gave way
while the bus was still running; the conductor panicked and blew his whistle after people had
already fallen off the bus; and the bus was not properly equipped with doors in accordance
with law-it is clear that the petitioners have failed to overcome the presumption of fault and
negligence found in the law governing common carriers.

















Pedro Vasquez, et. al. vs Court of Appeals
GR No. L-42926
September 13, 1985

Facts:
When the inter-island vessel MV "Pioneer Cebu" left the Port of Manila in the early
morning of May 15, 1966 bound for Cebu, it had on board the spouses Alfonso Vasquez
and Filipinas Bagaipo and a four-year old boy, Mario Marlon Vasquez, among her
passengers.
The MV "Pioneer Cebu" encountered typhoon "Klaring" and struck a reef on the
southern part of Malapascua Island, located somewhere north of the island of Cebu and
subsequently sunk. The aforementioned passengers were unheard from since then.
When the vessel left Manila, its officers were already aware of the typhoon Klaring
building up somewhere in Mindanao. There being no typhoon signals on the route from
Manila to Cebu, and the vessel having been cleared by the Customs authorities, the MV
"Pioneer Cebu" left on its voyage to Cebu despite the typhoon.
Due to the loss of their children, petitioners sued for damages before the Court of First
Instance of Manila
Respondent defended on the plea of force majeure, and the extinction of its liability by
the actual total loss of the vessel. The RTC awarded damages to plaintiffs. The CA
reversed the RTCs judgment and absolved private respondent from liability.

Issue:
Whether or not the defense of private respondent of a fortuitous event is tenable

Held:
Under the circumstances, while, indeed, the typhoon was an inevitable occurrence, yet, having
been kept posted on the course of the typhoon by weather bulletins at intervals of six hours,
the captain and crew were well aware of the risk they were taking as they hopped from island
to island from Romblon up to Tanguingui. They held frequent conferences, and oblivious of the
utmost diligence required of very cautious persons, they decided to take a calculated risk. In so
doing, they failed to observe that extraordinary diligence required of them explicitly by law for
the safety of the passengers transported by them with due regard for an circumstances and
unnecessarily exposed the vessel and passengers to the tragic mishap. They failed to overcome
that presumption of fault or negligence that arises in cases of death or injuries to passengers.

Despite the total loss of the vessel therefore, its insurance answers for the damages that a
shipowner or agent may be held liable for by reason of the death of its passengers. The CAs
judgment was reversed by the Supreme Court.




































Alberta & Cresencio Yobido vs Court of Appeals
GR No. 113003
October 17, 1997

Facts:
Spouses Tito and Leny Tumboy and their minor children boarded a Yobido Liner bus.
Along the way, the left front tire of the bus exploded. The bus fell into a ravine around 3
feet from the road and struck a tree. The incident resulted in the death of Tito Tumboy
and physical injuries to other passengers.

A complaint for breach of contract of carriage, damages and attorneys fees was filed by
Leny and her children against Alberta Yobido, the owner of the bus, and Cresencio
Yobido, its driver.

For their part, the defendants tried to establish that the accident was due to a fortuitous
event. Abundio Salce, who was the bus conductor when the incident happened, testified
that the 42-seater bus was not full as there were only 32 passengers. He added that the
bus was running at a speed of 60 to 50 and that it was going slow because of the
zigzag road. He affirmed that the left front tire that exploded was a brand new tire
that he mounted on the bus only five 5 days before the incident.

The RTC dismissed the action for lack of merit. The CA reversed the decision of the RTC.

Issue:
Whether or not the accident can be attributed to a fortuitous event

Held:
Under the circumstances of this case, the explosion of the new tire may not be considered a
fortuitous event. There are human factors involved in the situation. The fact that the tire was
new did not imply that it was entirely free from manufacturing defects or that it was properly
mounted on the vehicle. Neither may the fact that the tire bought and used in the vehicle is of
a brand name noted for quality, resulting in the conclusion that it could not explode within five
days use. Be that as it may, it is settled that an accident caused either by defects in the
automobile or through the negligence of its driver is not a caso fortuito that would exempt the
carrier from liability for damages.

Moreover, a common carrier may not be absolved from liability in case of force majeure or
fortuitous event alone. The common carrier must still prove that it was not negligent in causing
the death or injury resulting from an accident. Having failed to discharge its duty to overthrow
the presumption of negligence with clear and convincing evidence, petitioners are hereby held
liable for damages.

The SC affirmed the decision of the CA with modifications.














Roberto Juntilla vs Clemente Fontanar
GR No. L-45637
May 31, 1985

Facts:
The plaintiff was a passenger of the public utility jeepney on the course of the trip from
Danao City to Cebu City. The jeepney was driven by defendant Berfol Camoro. It was
registered under the franchise of defendant Clemente Fontanar but was actually owned
by defendant Fernando Banzon.
When the jeepney reached Mandaue City, the right rear tire exploded causing the
vehicle to turn turtle. In the process, the plaintiff who was sitting at the front seat was
thrown out of the vehicle. Upon landing on the ground, the plaintiff momentarily lost
consciousness. When he came to his senses, he found that he had a lacerated wound on
his right palm. Aside from this, he suffered injuries on his left arm, right thigh and on his
back.
Petitioner Roberto Juntilla filed for breach of contract with damages against Clemente
Fontanar, Fernando Banzon and Berfol Camoro.
The respondents filed their answer, alleging that the accident that caused losses to the
petitioner was beyond the control of the respondents taking into account that the tire
that exploded was newly bought and was only slightly used at the time it blew up.

Issue:
Whether or not the accident in question was due to a fortuitous event

Held:
In the case at bar, there are specific acts of negligence on the part of the respondents. The
records show that the passenger jeepney turned turtle and jumped into a ditch immediately
after its right rear tire exploded. The evidence shows that the passenger jeepney was running at
a very fast speed before the accident. We agree with the observation of the petitioner that a
public utility jeep running at a regular and safe speed will not jump into a ditch when its right
rear tire blows up. There is also evidence to show that the passenger jeepney was overloaded
at the time of the accident. The petitioner stated that there were three (3) passengers in the
front seat and fourteen (14) passengers in the rear.

While it may be true that the tire that blew-up was still good because the grooves of the tire
were still visible, this fact alone does not make the explosion of the tire a fortuitous event. No
evidence was presented to show that the accident was due to adverse road conditions or that
precautions were taken by the jeepney driver to compensate for any conditions liable to cause
accidents. The sudden blowing-up, therefore, could have been caused by too much air pressure
injected into the tire coupled by the fact that the jeepney was overloaded and speeding at the
time of the accident.


















PhilAm Gen Insurance Co. vs MGG Marine Services, Inc.
GR No. 135645
March 8, 2002

Facts:
San Miguel Corporation insured several beer bottle cases with petitioner Philippine
American General Insurance Company. The cargo were loaded on board the M/V
Peatheray Patrick-G. On March 3, 1987 M/V Peatheray Patrick-G subsequently sunk off
Cawit Point, Cortes, Surigao del Sur. As a consequence thereof, the cargo belonging to
San Miguel Corporation was lost.
Thereafter, petitioner paid San Miguel Corporation the full amount of P5,836,222.80
pursuant to the terms of their insurance contract.
Petitioner as subrogee of San Miguel Corp. filed a case for collection against private
respondents to recover the amount it paid to San Miguel Corp. for the loss of the latter's
cargo.
The Board of Marine Inquiry found that the cause of the sinking of the vessel was the
existence of strong winds and enormous waves in Surigao del Sur, a fortuitous event
that could not have been for seen at the time the M/V Peatheray Patrick-G left the port
of Mandaue City.
The RTC found private respondents solidarily liable for the loss of San Miguel
Corporation's cargo. The CA reversed the RTCs decision based on the findings of the
Board.

Issue:
Whether or not the findings of the Board of Marine Inquiry, which stated that the sinking of the
vessel was due to a fortuitous event, should be appreciated in deciding the case

Held:
Although the Board of Marine Inquiry ruled only on the administrative liability of the captain
and crew of the M/V Peatheray Patrick-G, it had to conduct a thorough investigation of the
circumstances surrounding the sinking of the vessel and the loss of its cargo in order to
determine their responsibility, if any. The results of its investigation as embodied in its decision
on the administrative case clearly indicate that the loss of the cargo was due solely to the
attendance of strong winds and huge waves which caused the vessel accumulate water, tilt to
the port side and to eventually keel over. There was thus no error on the part of the Court of
Appeals in relying on the factual findings of the Board of Marine Inquiry, for such factual
findings, being supported by substantial evidence are persuasive, considering that said
administrative body is an expert in matters concerning marine casualties.

Since the presence of strong winds and enormous waves at Cortes, Surigao del Sur on March 3,
1987 was shown to be the proximate and only cause of the sinking of the M/V Peatheray
Patrick-G and the loss of the cargo belonging to San Miguel Corporation, private respondents
cannot be held liable for the said loss.
















Mindex Resourced Development vs Ephraim Morillo
GR No. 138123
March 12, 2002

Facts:
A verbal agreement was entered into between Ephraim Morillo and Mindex Resources
Corporation for the lease of the formers 6 x 6 ten-wheeler cargo truck for use in
MINDEXs mining operations.
Unknown to Morillo, the truck was burned by unidentified persons while it was parked
unattended due to mechanical trouble. Upon learning of the burning incident Morillo
sent a letter to Mr. Arni Isberg, the Finance Manager of MINDEX for the payment of the
damaged vehicle.
MINDEX responded with the counter offers to (a) pay the rental of the 6 x 6 truck in the
amount of P76,000.00, (b) repair and overhaul the truck on their own expenses and; (c)
return it to Morillo in good running condition after repair.
Morillo replied, (a) that he will relinquish to MINDEX the damaged truck; (b) that he is
amenable to receive the rental in the amount of P76,000.00; and (c) that MINDEX will
pay fifty thousand pesos (P50,000.00) monthly until the balance of P275,000.00 is fully
paid.
The RTC found petitioner responsible for the destruction or loss of the leased 6 x 6
truck. The appellate court sustained the RTCs finding.

Issue:
Whether or not the petitioner failed to overcome the presumption of negligence against it
considering that the facts show that the burning of the truck was a fortuitous event

Held:
In order for a fortuitous event to exempt one from liability, it is necessary that one has
committed no negligence or misconduct that may have occasioned the loss. A review of the
records clearly shows that petitioner failed to exercise reasonable care and caution that an
ordinarily prudent person would have used in the same situation.

As can be gleaned from the testimony of witness Roxas, who testified that the truck was left in
the place where it had engine trouble for 2 weeks, petitioner failed to employ reasonable
foresight, diligence and care that would have exempted it from liability resulting from the
burning of the truck. Negligence, as commonly understood, is that conduct that naturally or
reasonably creates undue risk or harm to others. It may be a failure to observe that degree of
care, precaution or vigilance that the circumstances justly demand; or to do any other act that
would be done by a prudent and reasonable person, who is guided by considerations that
ordinarily regulate the conduct of human affairs.


















NAPOCOR vs Philipp Brothers Oceanic, Inc.
GR No. 126204
November 20, 2001

Facts:
NAPOCOR issued invitations to bid for the supply and delivery of 120,000 metric tons of
imported coal for its Batangas Coal-Fired Thermal Power Plant. After the public bidding
was conducted, Philipp Brothers Oceanic, Inc.s (PHIBRO) bid was accepted.

On July 10, 1987, PHIBRO sent word to NAPOCOR that industrial disputes might soon
plague Australia, the shipments point of origin, which could seriously hamper PHIBROs
ability to supply the needed coal.

On August 6, 1987, PHIBRO received from NAPOCOR a confirmed and workable letter of
credit. Instead of delivering the coal on or before the thirtieth day after receipt of the
Letter of Credit, as agreed upon by the parties in the July contract, PHIBRO effected its
first shipment only on November 17, 1987.

In October 1987, NAPOCOR once more advertised for the delivery of coal to its Calaca
thermal plant. PHIBRO participated anew in this subsequent bidding. NAPOCOR
disapproved PHIBROs application for pre-qualification to bid for not meeting the
minimum requirements. Upon further inquiry, PHIBRO found that the real reason for
the disapproval was its purported failure to satisfy NAPOCORs demand for damages
due to the delay in the delivery of the first coal shipment.

This prompted PHIBRO to file an action for damages with application for injunction
against NAPOCOR. In its answer, NAPOCOR averred that the strikes in Australia could
not be invoked as reason for the delay in the delivery of coal because PHIBRO itself
admitted that as of July 28, 1987 those strikes had already ceased.

The RTC rendered a decision in favour of PHIBRO. The Court of Appeals rendered a
Decision affirming in toto the Decision of the Regional Trial Court.

Issue:
Whether or not the Court of Appeals erred in concluding that PHIBROs delay in the delivery of
imported coal was due to NAPOCORs alleged delay in opening a letter of credit and to force
majeure, and not to PHIBROs own deliberate acts and faults

Held:
The Court of Appeals is justified in sustaining the Regional Trial Courts decision exonerating
PHIBRO from any liability for damages to NAPOCOR as it was clearly established from the
evidence, testimonial and documentary, that what prevented PHIBRO from complying with its
obligation under the July 1987 contract was the industrial disputes which besieged Australia
during that time. Extant in our Civil Code is the rule that no person shall be responsible for
those events which could not be foreseeen, or which, though foreseen, were inevitable. This
means that when an obligor is unable to fulfill his obligation because of a fortuitous event or
force majeure, he cannot be held liable for damages for non-performance.

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

The law is clear and so is the contract between NAPOCOR and PHIBRO. Therefore, the SC has
no reason to rule otherwise.


William Ong Genato vs Benjamin Bayhon, et. al.
GR No. 171035
August 24, 2009

Facts:
Respondent Benjamin Bayhon obtained from the petitioner a loan amounting to PhP
1,000,000.00; that to cover the loan, he executed a Deed of Real Estate Mortgage over
the property covered by TCT No. 38052.
Respondent filed for the reconstitution of TCT No. 38052. Petitioner William Ong
Genato filed an Answer in Intervention and attached a copy of an alleged dacion en
pago covering said lot. Respondent assailed the dacion en pago as a forgery alleging that
neither he nor his wife, who had died 3 years earlier, had executed it.
With respect to the dacion en pago, the trial court held that at the time of the execution
of the REM, the wife of respondent, Amparo Mercado, was already dead. It concluded
that the said lot could not have been validly mortgaged by the respondent alone; the
deed of mortgage was not enforceable and only served as evidence of the obligation of
the respondent.
The CA held that both the dacion en pago and the real estate mortgage as being
simulated or fictitious contracts. The CA held further that while the principal obligation
is valid, the death of respondent Benjamin Bayhon extinguished it. The heirs could not
be ordered to pay the debts left by the deceased.

Issue:
Whether or not the obligation of the respondent may be transmitted to his heirs

Held:
As a general rule, obligations derived from a contract are transmissible. Article 1311, par.1 of
the Civil Code provides: Contracts take effect only between the parties, their assigns and heirs,
except in case where the rights and obligations arising from the contract are not transmissible
by their nature, or by stipulation or by provision of law. The heir is not liable beyond the value
of the property he received from the decedent.

While in our successional system the responsibility of the heirs for the debts of their decedent
cannot exceed the value of the inheritance they receive from him, the principle remains intact
that these heirs succeed not only to the rights of the deceased but also to his obligations. The
loan in this case was contracted by respondent. He died while the case was pending before the
Court of Appeals. While he may no longer be compelled to pay the loan, the debt subsists
against his estate. No property or portion of the inheritance may be transmitted to his heirs
unless the debt has first been satisfied. Notably, throughout the appellate stage of this case,
the estate has been amply represented by the heirs of the deceased.


















Union Bank of the Philippines vs Edmund Santibaez
GR No. 149926
February 23, 2005

Facts:
The First Countryside Credit Corporation (FCCC) and Efraim Santibaez entered into a
loan agreement which was intended for the payment of the purchase price of one Ford
Tractor. Efraim and his son, Edmund, executed a promissory note in favor of the FCCC.
Aside from such promissory note, they also signed a Continuing Guaranty Agreement.
Sometime in February 1981, Efraim died, leaving a holographic will. During the
pendency of the testate proceedings, the surviving heirs, Edmund and his sister
Florence, executed a Joint Agreement wherein they agreed to divide between
themselves and take possession of the 3 tractors. Each of them was to assume the
indebtedness of their late father to FCCC, corresponding to the tractor respectively
taken by them.
A Deed of Assignment with Assumption of Liabilities was executed between FCCC and
Union Savings and Mortgage Bank, wherein the FCCC assigned all its assets and liabilities
to USMB.
Demand letters for the settlement of his account were sent by petitioner Union Bank of
the Philippines to Edmund, but the latter refused to pay. Thus, the petitioner filed a
Complaint for sum of money against the heirs of Efraim Santibaez, Edmund and
Florence. Florence alleged that the loan documents did not bind her since she was not a
party thereto.

Issue:
Whether or not respondents can, in fact, be held jointly and severally liable with the principal
debtor the late Efraim Santibaez

Held:
Perusing the joint agreement, it provides that the heirs as parties thereto have agreed to
divide between themselves and take possession and use the above-described chattel and each
of them to assume the indebtedness corresponding to the chattel taken as herein after stated
which is in favor of First Countryside Credit Corp. The assumption of liability was conditioned
upon the happening of an event, that is, that each heir shall take possession and use of their
respective share under the agreement. It was made dependent on the validity of the partition,
and that they were to assume the indebtedness corresponding to the chattel that they were
each to receive. The partition being invalid as earlier discussed, the heirs in effect did not
receive any such tractor. It follows then that the assumption of liability cannot be given any
force and effect. Perusing the records of the case, nothing therein could hold private
respondent Florence S. Ariola accountable for any liability incurred by her late father. The
documentary evidence presented, particularly the promissory notes and the continuing
guaranty agreement, were executed and signed only by the late Efraim Santibaez and his son
Edmund.




















Jesus San Agustin vs Court of Appeals
GR No. 121940
December 4, 2001

Facts:
GSIS sold to a certain Macaria Vda. de Caiquep, a parcel of residential land of the GSIS
Low Cost Housing Project (GSIS-LCHP). A day after the issuance of the TCT Macaria Vda.
de Caiquep sold the subject lot to private respondent, Maximo Menez, Jr.
Sometime in 1979, for being suspected as a subversive, an Arrest, Search and Seizure
Order (ASSO) was issued against private respondent. He was detained for 2 years.
When released, another order for his re-arrest was issued so he hid in Mindanao for
until March 1984.
In December of 1990, he discovered that the subject TCT was missing. An Affidavit of
Loss was filed and a petition was filed for the issuance of owners duplicate copy of TCT
No. 436465 to replace the lost one. To show he was the owner of the contested lot, he
showed the Deed of Absolute Sale.
The trial court granted Menez petition in its decision. However, on October 13, 1992,
herein petitioner, Jesus San Agustin, claimed that this was the first time he became
aware of the case of her aunt, Macaria Vda. de Caiquep who, according to him, died
sometime in 1974. Claiming that he was the present occupant of the property and the
heir of Macaria, he filed his Motion to Reopen Reconstitution Proceedings

Issue:
Whether or not the petitioner, as heir of the original owner, is entitled to notice

Held:
Here, petitioner does not appear to have an interest in the property based on the
memorandum of encumbrances annotated at the back of the title. His claim that he is an heir
(nephew) of the original owner of the lot covered by the disputed lot and the present occupant
thereof is not annotated in the said memorandum of encumbrances. Neither was his claim
entered on the Certificate of Titles in the name of their original/former owners on file with the
Register of Deeds at the time of the filing or pendency of LRC Case No. R-4659. Clearly,
petitioner is not entitled to notice.

According to the SC, the contract of sale remains valid between the parties, unless and until
annulled in the proper suit filed by the rightful party, the GSIS. For now, the said contract of
sale is binding upon the heirs of Macaria Vda. de Caiquep, including petitioner who alleges to
be one of her heirs, in line with the rule that heirs are bound by contracts entered into by their
predecessors-in-interest. However, absent the proper action taken by the GSIS as the original
vendor referred to, the contract between petitioners predecessor-in-interest and private
respondent deserves to be upheld.


















Project Builders, Inc. vs Court of Appeals
GR No. 99433
June 19, 2001

Facts:
Industrial Finance Corporation (IFC) and defendant PBI entered into an agreement
whereby it was agreed that IFC would provide a maximum amount of P2,000,000.00
On June 15, 1976, the same parties entered into an agreement whereby it was agreed
that PBIs credit line with plaintiff be increased to P5,000,000.00. To secure compliance
with the terms and conditions of the agreement, defendants on the executed a Deed of
Real Estate Mortgage in favor of plaintiff.
When defendants allegedly defaulted in the payment of the subject account, plaintiff
foreclosed the mortgage and plaintiff was the highest bidder in the amount of
P3,500,000.00. The foreclosed property was redeemed a year later, but after application
of the redemption payment, plaintiff claims that there is still a deficiency in the amount
of P1,323,053.08, hence, this complaint.

Issue:
Whether or not the agreement forged by petitioners and private respondent is a simple loan or
a financing transaction governed by the provisions of Republic Act No. 5980.

Held:
An assignment of credit is an act of transferring, either onerously or gratuitously, the right of an
assignor to an assignee who would then be capable of proceeding against the debtor for
enforcement or satisfaction of the credit. The transfer of rights takes place upon perfection of
the contract, and ownership of the right, including all appurtenant accessory rights, is
thereupon acquired by the assignee. The assignment binds the debtor only upon acquiring
knowledge of the assignment but he is entitled, even then, to raise against the assignee the
same defenses he could set up against the assignor. Where the assignment is on account of
pure liberality on the part of the assignor, the rules on donation would likewise be pertinent;
where valuable consideration is involved, the assignment partakes of the nature of a contract of
sale or purchase.
Upon an assignment of a contract to sell, the assignee is effectively subrogated in place of the
assignor and in a position to enforce the contract to sell to the same extent as the assignor
could. An insistence of petitioners that the subject transaction should be considered a simple
loan since private respondent did not communicate with the debtors, condominium unit
buyers, to collect payment from them, is untenable. In an assignment of credit, the consent of
the debtor is not essential for its perfection, his knowledge thereof or lack of it affecting only
the efficaciousness or inefficaciousness of any payment he might make.



















Hong Kong and Shanghai Banking Corp. (HSBC) vs Sps. Broqueza
GR No. 178610
November 17, 2010

Facts:
Petitioners Gerong and Broqueza are employees of HSBC. They are also members of
respondent HSBC, Ltd. Staff Retirement Plan. Petitioner Editha Broqueza obtained a car
loan and an appliance loan. On the other hand, petitioner Gerong applied and was
granted an emergency loan. These loans are paid through automatic salary deduction.
Meanwhile in 1993, a labor dispute arose between HSBC and its employees. Majority of
HSBCs employees were terminated, among whom are petitioners Editha Broqueza and
Fe Gerong. Because of their dismissal, petitioners were not able to pay the monthly
amortizations of their respective loans. Thus, respondent HSBCL-SRP considered the
accounts of petitioners delinquent.
Demands to pay the respective obligations were made upon petitioners, but they failed
to pay. HSBCL-SRP filed civil cases against Gerong and the spouses Boqueza for recovery
and collection of sums of money.

Issue:
Whether or not the Sps. Broquezas obligation to pay HSBCL-SRP is a pure obligation

Held:
In ruling for HSBCL-SRP, the first paragraph of Art. 1179 of the Civil Code applies thus:
Every obligation whose performance does not depend upon a future or uncertain event, or
upon a past event unknown to the parties, is demandable at once.

The RTC is correct in ruling that since the Promissory Notes do not contain a period, HSBCL-SRP
has the right to demand immediate payment. The spouses Broquezas obligation to pay HSBCL-
SRP is a pure obligation. The fact that HSBCL-SRP was content with the prior monthly check-off
from Editha Broquezas salary is of no moment. Once Editha Broqueza defaulted in her
monthly payment, HSBCL-SRP made a demand to enforce a pure obligation. A definite amount
is paid to HSBCL-SRP on a specific date. Editha Broqueza authorized HSBCL-SRP to make
deductions from her payroll until her loans are fully paid. Editha Broqueza, however, defaulted
in her monthly loan payment due to her dismissal. Despite the spouses Broquezas
protestations, the payroll deduction is merely a convenient mode of payment and not the sole
source of payment for the loans. HSBCL-SRP never agreed that the loans will be paid only
through salary deductions. Neither did HSBCL-SRP agree that if Editha Broqueza ceases to be
an employee of HSBC, her obligation to pay the loans will be suspended. HSBCL-SRP can
immediately demand payment of the loans at anytime because the obligation to pay has no
period. Moreover, the spouses Broqueza have already incurred in default in paying the
monthly installments.































Development Bank of the Philippines vs Court of Appeals
262 SCRA 245

Facts:
Private respondents are original owners of a parcel of land in Ozamis City. They
mortgaged said land to DBP. When private respondents defaulted on their obligation,
petitioner foreclosed the mortgage on the land and emerged as sole bidder in the
ensuing auction sale.
On April 6, 1984, DBP & PR entered into a deed of conditional sale where DBP agreed to
convey the foreclosed property to them.
On April 6, 1990, upon completing the payment of the full repurchase price DBP, private
respondents demanded the execution of the deed of conveyance in their favor.
However, DBP denied the execution & delivery because it had become illegally
impossible in view of sec. 6 of RA 6657 (CARL) that upon effectivity of this act, any sale
lease, management contract / transfer of possession of private / lands executed by the
original land owner in violation of this act shall be null & void.

Issue:
Whether or not the execution and delivery of conveyance is legally impossible

Held:
According to Manresa, it is a rule that if the obligation depends upon a suspensive condition,
the demandability as well as the acquisition or effectivity of the rights arising from the
obligation is suspended pending the happening or fulfillment of the fact or event which
constitutes the condition. Once the event which constitutes the condition is fulfilled resulting in
the effectivity of the obligation, its effects retroact to the moment when the essential elements
which gave birth to the obligation have taken place.

Applying this precept to the case, the full payment by the appellee on April 6, 1990 retroacts to
the time the contract of conditional sale was executed on April 6, 1984. From that time, all
elements of the contract of sale were present. Consequently, the contract of sale was
perfected. As such, the said sale does not come under the coverage of R.A. 6657.

Under Art 1181, in conditional obligations, the acquisition of rights as well as the
extinguishment or loss of those already acquired depend upon the happening of the event
which constitutes the conditions. The deed of conditional sale between petitioner and private
respondent was executed on April 6 1984. Since private respondent had religiously paid the
agreed installment on the property until April 6, 1990, private respondent is entitled to the
land.


Maria Soledad Tomimbang vs Atty. Jose Tomimbang
GR No. 165116
August 4, 2009

Facts:
Petitioner and respondent are siblings. Their parents donated to petitioner an eight-
door apartment with the condition that during the parents' lifetime, they shall retain
control over the property and petitioner shall be the administrator thereof.
Petitioner failed to obtain a loan from PAG-IBIG Fund, hence, respondent offered to
extend a credit line to petitioner. Petitioner accepted respondent's offer. Renovations
on Units B to G were completed, and the work has just started on Unit A when an
altercation broke out between herein parties. Respondent and petitioner entered into a
new agreement whereby petitioner was to start making monthly payments on her loan.
In 1997, a quarrel also occurred between respondent and another sister, Maricion.
Petitioner left Unit H and could no longer be found. Renovations on Unit A were
discontinued when her whereabouts could not be located. She also stopped making
monthly payments and ignored the demand letter sent by respondent's counsel.
Respondent filed a Complaint against petitioner, demanding the latter to pay the former
the net amount of P3,989,802.25 plus interest of 12% per annum from date of default.
Petitioner contends that the loan is not yet due and demandable because the
suspensive condition the completion of the renovation of the apartment units - has
not yet been fulfilled.

Issue:
Whether or not petitioners obligation is due and demandable

Held:
The evidence on record clearly shows that after renovation of seven out of the eight apartment
units had been completed, petitioner and respondent agreed that the former shall already start
making monthly payments on the loan even if renovation on the last unit (Unit A) was still
pending. Genaro Tomimbang, the younger brother of herein parties, testified that a meeting
was held among petitioner, respondent, himself and their eldest sister Maricion, sometime
during the first or second quarter of 1997, wherein respondent demanded payment of the loan,
and petitioner agreed to pay. Indeed, petitioner began to make monthly payments from June to
October of 1997 totalling P93,500.00. In fact, petitioner even admitted in her Answer with
Counterclaim that she had "started to make payments to plaintiff [herein respondent] as the
same was in accord with her commitment to pay whenever she was able; x x x ."

Evidently, by virtue of the subsequent agreement, the parties mutually dispensed with the
condition that petitioner shall only begin paying after the completion of all renovations. There
was, in effect, a modificatory or partial novation, of petitioner's obligation.

















Felix Gonzales vs Heirs of Cruz
GR No. 131784
September 16, 1999

Facts:
Paula Ao Cruz together with the heirs of Thomas and Paula Cruz entered into a
Contract of Lease/Purchase with Felix L. Gonzales, the sole proprietor and manager of
Felgon Farms. The contract of Lease/Purchase contains the following provisions:

1.The terms of this Contract is for a period of one year upon the signing thereof. After the
period of this Contract, the LESSEE shall purchase the property on the agreeable price of One
Million Pesos
xxx xxx xxx
9.The LESSORS hereby commit themselves and shall undertake to obtain a separate and
distinct T.C.T. over the herein leased portion to the LESSEE within a reasonable period of
time which shall not in any case exceed four (4) years, after which a new Contract shall be
executed by the herein parties which shall be the same in all respects with this Contract of
Lease/Purchase insofar as the terms and conditions are concerned.

Gonzales paid the annual rental on the half-portion of the property and thereafter took
possession of the property, installing Jesus Sambrano as his caretaker
Gonzales did not, however, exercise his option to purchase the property immediately
after the expiration of the one-year lease on November 30, 1984. He remained in
possession of the property without paying the purchase price provided for in the
Contract of Lease/Purchase and without paying any further rentals thereon
A letter was sent by Ricardo Cruz to Gonzales informing him of the lessors decision to
rescind the Contract of Lease/Purchase due to a breach committed by the defendant.
Gonzales refused to vacate the property and continued possession and claimed that the
property subject of the Contract of Lease/Purchase is currently the subject of an Extra-
Judicial Partition. Title to the property remains in the name of the respondents
predecessors-in-interest, Bernardina Calixto and Severo Cruz

Issue:
Whether or not paragraph 9 of the contract is a condition precedent before the defendant is to
pay the down payment

Held:
Paragraph 9 of the contract clearly indicates that the lessors-plaintiffs shall obtain a Transfer
Certificate of Title in the name of the lessee within 4 years before a new contract is to be
entered into under the same terms and conditions as the original Contract of Lease/Purchase.
Thus, before a deed of Sale can be entered into between the plaintiffs and the defendant, the
plaintiffs have to obtain the Transfer Certificate of Title in favor of the defendant. Article 1181
of the New Civil Code states that: In conditional obligations, the acquisition of rights, as well as
the extinguishment or loss of those already acquired, shall depend upon the happening of the
event which constitutes the condition. When the obligation assumed by a party to a contract is
expressly subjected to a condition, the obligation cannot be enforced against him unless the
condition is complied with.

The Court has held that when the obligation assumed by a party to a contract is expressly
subjected to a condition, the obligation cannot be enforced against him unless the condition is
complied with. Furthermore, the obligatory force of a conditional obligation is subordinated
to the happening of a future and uncertain event, so that if that event does not take place, the
parties would stand as if the conditional obligation had never existed.

In the same vein, respondents cannot rescind the contract, because they have not caused the
transfer of the TCT to their names, which is a condition precedent to petitioners obligation.
This Court has held that there can be no rescission (or more properly, resolution) of an
obligation as yet non-existent, because the suspensive condition has not happened.





Insular Life Assurance Company vs Robert Young, et. al.
GR No. 140964 & 142267
January 16, 2002

Facts:
Respondent Robert Young, together with his associates and co-respondents acquired by
purchase Home Bankers Savings and Trust Co., now petitioner Insular Savings Bank.
On December, 1990, Benito Araneta, a stockholder of the Bank, signified his intention to
purchase 99.82% of its outstanding capital stock, subject to the condition that the
ownership of all the shares will be consolidated in Young's name
In order to carry out the intended sale to Araneta, Young bought from Jorge Go and his
group their 45% equity in the Bank. In order to pay this amount, Young obtained a
short-term loan of from International Corporate Bank to finance the purchase. However,
Araneta backed out from the intended sale and demanded the return of his
downpayment.
Through the intervention of Asian Oceanic, Young and Insular Life entered into a Credit
Agreement. Under its provisions, Insular Life extended a loan to Young in the amount of
P200,000,000.00. To secure the loan, Young, acting in his behalf and as attorney-in-fact
of the other stockholders, executed on the same day a Deed of Pledge which
represented 99.82% of the outstanding capital stock of the Bank. The next day, he also
executed a promissory note in favor of Insular Life in the same amount with an interest
rate of 26% per annum to mature 120 days from execution.
On October 21, 1991, Young signed a letter prepared by Atty. Jacinto Jimenez, counsel
of Insular Life, stating that due to business reverses, he shall not be able to pay his
obligations under the Credit Agreement between him and Insular Life and that Insular
may consider his obligations defaulted.
Insular Life instructed its counsel to foreclose the pledge constituted upon the shares.
The latter then sent Young a notice informing him of the sale of the shares in a public
auction.
Young and his associates filed with the RTC a complaint against the Bank, Insular Life
and its counsel, Atty. Jacinto Jimenez, for annulment of notarial sale, specific
performance and damages alleging that the notarial sale conducted by petitioner Atty.
Jacinto Jimenez is void as it does not comply with the requirement of notice of the
second auction sale.

Issue:
Whether or not the MOA is valid and enforceable between the parties despite respondent
Young's failure to comply with its terms and conditions

Held:
Petitioners contend that the MOA is not enforceable considering that Robert Young committed
fraud, misrepresented the warranties and failed to comply with his obligations.

The MOA is merely a contract to sell since the parties therein specifically undertook to enter
into a contract of sale if the stipulated conditions are met and the representation and
warranties given by Young prove to be true.

In Mortel vs. Kassco, Inc., the SC held:
In contracts subject to a suspensive condition, the birth or effectivity of such contracts only
takes place if and when the event constituting the condition happens or is fulfilled, and if the
suspensive condition does not take place or is not fulfilled, the parties would stand as if the
conditional obligation had never existed.

It must be emphasized that the MOA did not convey title of the shares to Insular Life. If ever
there was delivery of the said shares to Insular Life, it was because they were pledged by Young
to Insular Life under the Credit Agreement.

It would be unfair on the part of Young to demand compliance by Insular Life of its obligations
when he himself was remiss in his own. Neither can he feign ignorance of the stipulation in the
MOA since it is presumed that he read the same and was satisfied with its provisions before he
affixed his signature therein. The fact that no deed of sale was subsequently executed by the
parties confirms the conclusion that no sale transpired between them.



Direct Funders Holdings Corp. vs Judge Celso Lavia
GR No. 141851
January 16, 2002

Facts:
During the hearing for the issuance of temporary restraining order, it was made clear to
the respondent Judge that the property in question was occupied by the petitioner by
virtue of a writ of possession issued by the RTC in a petition for the issuance of writ of
possession thereof way back on October 23, 1997.
Despite the lawful order of a coordinate and co-equal court, the respondent Judge
issued the questioned orders to restore possession to private respondent Chan, alleging
an obviously grave abuse of discretion, tantamount to lack of jurisdiction
On January 21, 1998, the respondent Judge issued the questioned order granting the
issuance of a writ of preliminary injunction who subsequently denied the petitioners
motion to dismiss and supplemental motion to dismiss and the very urgent motion for
reconsideration
Petitioner filed with the Court of Appeals a petition for certiorari and prohibition
assailing the trial courts issuance of a writ of preliminary injunction. The CA
promulgated a decision dismissing the petition ruling that the trial court had jurisdiction
to issue the injunction that did not interfere with the writ of possession of a coordinate
court.

Issue:
Whether or not the CA erred in affirming the trial courts ruling issuing a writ of injunction
restraining a writ of possession in another case to place respondent back in possession of the
subject property

Held:
The conditional sale agreement was the only document that the respondent presented during
the summary hearing of the application for a temporary restraining order before the RTC. The
SC found that the conditional sale agreement is officious and ineffectual. First, it was not
consummated. Second, it was not registered and duly annotated on the Transfer Certificate of
Title (No. 12357) covering the subject property. Third, it was executed about eight (8) years
after the execution of the real estate mortgage over the subject property.

To emphasize, the mortgagee (United Savings Bank) did not give its consent to the change of
debtor. It is a fundamental axiom in the law on contracts that a person not a party to an
agreement cannot be affected thereby. Worse, not only was the conditional sale agreement
executed without the consent of the mortgagee-creditor, United Savings Bank, the same was
also a material breach of the stipulations of the real estate mortgage over the subject property.
The conditions of the conditional sale agreement were not fulfilled, hence, respondents claim
to the subject property was ineffectual.
















Fidela Vda. de Mistica vs Sps. Naguiat
GR No. 137909
December 11, 2003

Facts:
Eulalio Mistica, predecessor-in-interest of herein petitioner, is the owner of a parcel of
land. A portion thereof was leased to respondent Bernardino Naguiat sometime in 1970.
On 5 April 1979, Eulalio Mistica entered into a contract to sell with respondent
Bernardino Naguiat over a portion of the aforementioned lot containing an area of 200
square meters.
Pursuant to said agreement, Naguiat gave a downpayment of P2,000.00. He made
another partial payment of P1,000.00 on 7 February 1980. He failed to make any
payments thereafter. Eulalio Mistica died sometime in October 1986.
On 4 December 1991, petitioner filed a complaint for rescission alleging that the failure
and refusal of respondents to pay the balance of the purchase price constitutes a
violation of the contract which entitles her to rescind the same.
Respondent Naguiat alleged that sometime in October 1986, during the wake of the late
Eulalio Mistica, he offered to pay the remaining balance to petitioner but the latter
refused and hence, there is no breach or violation committed by them and no damages
could yet be incurred by the late Eulalio Mistica, his heirs or assigns pursuant to the said
document

Issue:
Whether or not there is a breach of obligation between the parties

Held:
In the present case, the failure of respondents to pay the balance of the purchase price within
ten years from the execution of the Deed did not amount to a substantial breach. In the
Kasulatan, it was stipulated that payment could be made even after ten years from the
execution of the Contract, provided the vendee paid 12 percent interest. Petitioner argues that
the period cannot be extended beyond ten years, because to do so would convert the buyers
obligation to a purely potestative obligation that would annul the contract.

This contention is untenable. The Code prohibits purely potestative, suspensive, conditional
obligations that depend on the whims of the debtor, because such obligations are usually not
meant to be fulfilled. Indeed, to allow the fulfillment of conditions to depend exclusively on
the debtors will would be to sanction illusory obligations. The Kasulatan does not allow
such thing. First, nowhere is it stated in the Deed that payment of the purchase price is
dependent upon whether respondents want to pay it or not. Second, the fact that they already
made partial payment thereof only shows that the parties intended to be bound by the
Kasulatan.

















Luz Hermosa vs Epifanio Longara
GR No. L-5267
October 27, 1953

Facts:
Epifanio M. Longara made 3 claims against the testate estate of Fernando Hermosa,
namely:
(a) P2,341.41 representing credit advances made to the intestate from 1932 to 1944,
(b) P12,924.12 made to his son Francisco Hermosa, and
(c) P3,772 made to his grandson, Fernando Hermosa, Jr. from 1945 to 1947, after the
death of the intestate, which occurred in December, 1944.
Claimant had testified without opposition that the credit advances were to be "payable
as soon as Fernando Hermosa, Sr.'s property in Spain was sold and he receive money
derived from the sale."
The Court of Appeals held that payment of the advances did not become due until the
administratrix received the sum of P20,000 from the buyer of the property. Upon
authorization of the probate court, the same was paid for subsequently. The Claim was
filed on October 2, 1948.
It is contended on the appeal that the obligation contracted by the intestate was subject
to a condition exclusively dependent upon the will of the debtor (a condicion
potestativa) and therefore null and void, in accordance with article 1115 of the old Civil
Code.

Issue:
Whether the obligation contracted by the intestate is null and void

Held:
A careful consideration of the condition upon which payment of the sums advanced was made
to depend, "as soon as he (intestate) receive funds derived from the sale of his property in
Spain," discloses the fact that the condition in question does not depend exclusively upon the
will of the debtor, but also upon other circumstances beyond his power or control. If the
condition were "if he decides to sell his house." or "if he likes to pay the sums advanced," or
any other condition of similar import implying that upon him (the debtor) alone payment would
depend, the condition would be protestativa, dependent exclusively upon his will or discretion.

It is evident, therefore, that the condition of the obligation was not a purely protestative one,
depending exclusively upon the will of the intestate, but a mixed one, depending partly upon
the will of intestate and partly upon chance, i.e., the presence of a buyer of the property for the
price and under the conditions desired by the intestate. The obligation is clearly governed by
the second sentence of article 1115 of the old Civil Code. The condition is, besides, a suspensive
condition, upon the happening of which the obligation to pay is made dependent. And upon the
happening of the condition, the debt became immediately due and demandable.














Nazario Trillana vs Quezon College, Inc.
GR No. L-5003
June 27, 1953

Facts:
Damasa Crisostomo sent a letter to the Board of trustees of the Quezon College
subscribing to 200 shares of capital stock of P100 each.
In the letter, she also wrote: Enclosed you will find (Babayaran kong lahat pagkatapos
na ako ay makapag-pahuli ng isda) pesos as my initial payment and the balance payable
in accordance with law and the rules and regulations of the Quezon College.
Damasa Crisostomo died on October 26, 1948. As no payment appears to have been
made on the subscription mentioned in the foregoing letter, the Quezon College, Inc.
presented a claim before the Court of First Instance of Bulacan in her testate
proceeding, for the collection of the sum of P20,000, representing the value of the
subscription to the capital stock.
This claim was opposed by the administrator of the estate, and the Court of First
Instance of Bulacan, after hearing issued an order dismissing the claim of the Quezon
College, Inc. on the ground that the subscription in question was neither registered in
nor authorized by the Securities and Exchange Commission.

Issue:
Whether or not Damasas obligation to Quezon College, Inc. is valid

Held:
As the application of Damasa Crisostomo is obviously at variance with the terms evidenced in
the form letter issued by the Quezon College, Inc., there was absolute necessity on the part of
the College to express its agreement to Damasa's offer in order to bind the latter.
Indeed, the need for express acceptance on the part of the Quezon College, Inc. becomes the
more imperative, in view of the proposal of Damasa Crisostomo to pay the value of the
subscription after she has harvested fish, a condition obviously dependent upon her sole will
and, therefore, facultative in nature, rendering the obligation void, under article 1115 of the old
Civil Code which provides as follows: "If the fulfillment of the condition should depend upon the
exclusive will of the debtor, the conditional obligation shall be void. If it should depend upon
chance, or upon the will of a third person, the obligation shall produce all its effects in
accordance with the provisions of this code." It cannot be argued that the condition solely is
void, because it would have served to create the obligation to pay, unlike a case wherein only
the potestative condition was held void because it referred merely to the fulfillment of an
already existing indebtedness.



















Visayan Sawmill Company, Inc. vs Court of Appeals
GR No. 83851
March 3, 1993

Facts:
Ang Tay (Visayan Sawmill) and Ramon Hibionada (RJH Trading) entered into a sale
involving scrap iron located at the stockyard of defendant-appellant corporation (RJH
Trading) subject to the condition that plaintiff-appellee will open a letter of credit in the
amount of P250,000.00 in favor of defendant-appellant corporation on or before May
15, 1983
Ang Tay, through his men, started to gather scrap iron at the defendant-appellant's
premises, proceeding with such endeavor until May 30 when defendants-appellants
allegedly directed Ang Tays men to desist from pursuing the work in view of an alleged
case filed against the latter by a certain Alberto Pursuelo.
On July 19, 1983, Ang Tay sent a series of telegrams stating that the case filed against
him by Pursuelo had been dismissed and demanding that RJH Trading comply with the
deed of sale, otherwise a case will be filed against them.
In reply to those telegrams, Hibionada's lawyer informed Ang Tays lawyer that RJH
Trading is unwilling to continue with the sale due to Ang Tays failure to comply with
essential pre-conditions of the contract.

Issue:
Whether or not the contract executed by the parties cancelled and terminated before the
Complaint was filed by anyone of the parties

Held:
In the agreement in question the seller bound and promised itself to sell the scrap iron upon
the fulfillment by the private respondent of his obligation to make or indorse an irrevocable
and unconditional letter of credit in payment of the purchase price.

The petitioner corporation's obligation to sell is unequivocally subject to a positive suspensive
condition, i.e., the private respondent's opening, making or indorsing of an irrevocable and
unconditional letter of credit. The former agreed to deliver the scrap iron only upon payment of
the purchase price by means of an irrevocable and unconditional letter of credit. Otherwise
stated, the contract is not one of sale where the buyer acquired ownership over the property
subject to the resolutory condition that the purchase price would be paid after delivery. Thus,
there was to be no actual sale until the opening, making or indorsing of the irrevocable and
unconditional letter of credit. Since what obtains in the case at bar is a mere promise to sell,
the failure of the private respondent to comply with the positive suspensive condition cannot
even be considered a breach casual or serious but simply an event that prevented the
obligation of petitioner corporation to convey title from acquiring binding force.




















Carmelita Leao vs Court of Appeals
GR No. 129018
November 15, 2001

Facts:
Hermogenes Fernando, as vendor and Carmelita Leao, as vendee executed a contract
to sell involving a piece of land. The contract stipulated that P10,775.00 shall be paid as
down payment for the lot, and the balance of P96,975.00 shall be paid within a period
of 10 years with a monthly amortization of P1,747.30 to begin from December 7, 1985
with interest at 18% per annum based on balances.
The contract also provided that should a period of 90 days elapse from the expiration of
the grace period without the overdue and unpaid installments having been paid with
the corresponding interests up to that date, respondent Fernando, as vendor, was
authorized to declare the contract cancelled and to dispose of the parcel of land, as if
the contract had not been entered into.
Carmelita Leao made several payments in lump sum.

Thereafter, she constructed a
house on the lot. The last payment that she made was on April 1, 1989.
On September 16, 1991, the trial court rendered a decision in an ejectment case earlier
filed by respondent Fernando ordering petitioner Leao to vacate the premises.

Issue:
Whether or not the transaction between the parties is a conditional sale

Held:
First, the contract to sell makes the sale, cession and conveyance "subject to conditions" set
forth in the contract to sell. Second, what was transferred was the possession of the property,
not ownership. Finally, the ownership of the lot was not transferred to Carmelita Leao. As the
land is covered by a torrens title, the act of registration of the deed of sale was the operative
act that could transfer ownership over the lot.

In a contract to sell real property on installments, the full payment of the purchase price is a
positive suspensive condition, the failure of which is not considered a breach, casual or serious,
but simply an event that prevented the obligation of the vendor to convey title from acquiring
any obligatory force. The transfer of ownership and title would occur after full payment of the
price. As petitioner Leao was not given then cash surrender value of the payments that she
made, there was still no actual cancellation of the contract. Consequently, petitioner Leao
may still reinstate the contract by updating the account during the grace period and before
actual cancellation. Should petitioner Leao wish to reinstate the contract, she would have to
update her accounts with respondent Fernando in accordance with the statement of account
39

which amount was P183,687.00.

















Raymundo De Leon vs Benita Ong
GR No. 170405
February 2, 2010

Facts:
Petitioner sold three parcels of land to respondent Benita Ong. As these properties were
mortgaged to Real Savings and Loan Association, Incorporated (RSLAI), petitioner and
respondent executed a notarized deed of absolute sale with assumption of mortgage
Pursuant to this deed, respondent gave petitioner P415,500 as partial payment.
Petitioner, on the other hand, handed the keys to the properties and wrote a letter
informing RSLAI of the sale and authorizing it to accept payment from respondent and
release the certificates of title
Respondent later learned that petitioner sold the same properties to one Leona Viloria
and changed the locks, rendering the keys he gave her useless. Respondent proceeded
to RSLAI to inquire about the credit investigation. However, she was informed that
petitioner had already paid the amount due and had taken back the certificates of title.
Respondent filed a complaint for specific performance, declaration of nullity of the
second sale and damages against petitioner and Viloria. Petitioner claimed that since
the transaction was subject to a condition (i.e., that RSLAI approve the assumption of
mortgage), they only entered into a contract to sell. Inasmuch as respondent did apply
for a loan from RSLAI, the condition did not arise.
The RTC ruled that it was a contract to sell while the CA held that it was a contract of
sale.

Issue:
Whether or not the obligation arose from a contract to sell

Held:
In a contract of sale, the seller conveys ownership of the property to the buyer upon the
perfection of the contract. Should the buyer default in the payment of the purchase price, the
seller may either sue for the collection thereof or have the contract judicially resolved and set
aside. On the other hand, a contract to sell is subject to a positive suspensive condition. The
buyer does not acquire ownership of the property until he fully pays the purchase price. For this
reason, if the buyer defaults in the payment thereof, the seller can only sue for damages.

In this instance, petitioner executed a notarized deed of absolute sale in favor of respondent.
Moreover, not only did petitioner turn over the keys to the properties to respondent, he also
authorized RSLAI to receive payment from respondent and release his certificates of title to her.
The totality of petitioners acts clearly indicates that he had unqualifiedly delivered and
transferred ownership of the properties to respondent. Clearly, it was a contract of sale the
parties entered into.

















Heirs of Remedios Sandejas vs Alex Lina
GR No. 141634
February 5, 2001

Facts:
Eliodoro Sandejas, Sr. was appointed by the lower court as administrator of the estate
of his wife, the late Remedios Sandejas.
An Omnibus Pleading for motion to intervene was filed by Alex Lina alleging that
Eliodoro, in his capacity as seller, bound and obligated himself, his heirs, administrators,
and assigns, to sell absolutely and in their entirety 4 parcels of land which formed part
of the estate of the late Remedios Sandejas
On January 7, 1985, the counsel for Eliodoro filed a Manifestation that the
administrator, Eliodoro Sandejas, died sometime in November 1984.
The lower court issued an Order directing that the counsel for the heirs of Teresita
Sandejas to move for the appointment of a new administrator. However, there was no
appearance of the aforenamed heirs.
Alex A. Lina filed a Motion for his appointment as a new administrator of the Intestate
Estate of Remedios R. Sandejas stating that he has not received any motion on the part
of the heirs for the appointment of a new administrator. The lower court granted the
said motion.
On August 28, 1986, the heirs filed a Motion for Reconsideration and the appointment
of another administrator Sixto Sandejas, in lieu of Alex Lina. The lower court granted the
said Motion and substituted Alex Lina with Sixto Sandejas
On November 29, 1993, Lina filed an Omnibus Motion (a) to approve the deed of
conditional sale executed between him and Eliodioro Sandejas, Sr. on June 7, 1982; (b)
to compel the heirs of Remedios Sandejas and Eliodoro Sandejas, Sr. to execute a deed
of absolute sale in favor of Lina pursuant to said conditional deed of sale to which the
administrator filed a Motion to Dismiss
The lower court granted Linas motion. The CA overturned the RTC ruling holding that
the contract between Eliodoro Sandejas Sr. and respondent was merely a contract to
sell, not a perfected contract of sale.

Issue:
Whether or not the CA erred in ordering the conveyance of the disputed 3/5 of the parcels of
land, despite the nonfulfillment of the suspensive condition (ie. court approval of the sale)

Held:
Petitioners admit that the agreement between the deceased Eliodoro Sandejas Sr. and
respondent was a contract to sell. Not exactly. In a contract to sell, the payment of the
purchase price is a positive suspensive condition. The vendors obligation to convey the title
does not become effective in case of failure to pay.

On the other hand, the agreement between Eliodoro Sr. and respondent is subject to a
suspensive condition -- the procurement of a court approval, not full payment. There was no
reservation of ownership in the agreement. In accordance with paragraph 1 of the Receipt,
petitioners were supposed to deed the disputed lots over to respondent. This they could do
upon the courts approval, even before full payment. Hence, their contract was a conditional
sale, rather than a contract to sell as determined by the CA.

When a contract is subject to a suspensive condition, its birth or effectivity can take place only
if and when the condition happens or is fulfilled.Thus, the intestate courts grant of the Motion
for Approval of the sale filed by respondent resulted in petitioners obligation to execute the
Deed of Sale of the disputed lots in his favor. The condition having been satisfied, the contract
was perfected. Henceforth, the parties were bound to fulfill what they had expressly agreed
upon.









Commissioner of Internal Revenue vs Primetown Property Group
GR No. 162155
August 28, 2007

Facts:
Gilbert Yap, vice chair of respondent Primetown Property Group, Inc., applied for the
refund or credit of income tax respondent paid in 1997.
According to Yap, because respondent suffered losses, it was not liable for income
taxes. Nevertheless, respondent paid its quarterly corporate income tax and remitted
creditable withholding tax from real estate sales to the BIR in the total amount of
P26,318,398.32. Therefore, respondent was entitled to tax refund or tax credit
Revenue officer Elizabeth Y. Santos required respondent to submit additional
documents to support its claim. Respondent complied but its claim was not acted upon.
Thus, on April 14, 2000, it filed a petition for review in the Court of Tax Appeals.
On May 13, 1999, the CTA dismissed the petition as it was filed beyond the two-year
prescriptive period for filing a judicial claim for tax refund or tax credit. The CTA found
that respondent filed its final adjusted return on April 14, 1998. Thus, its right to claim a
refund or credit commenced on that date.
On August 1, 2003, the CA reversed and set aside the decision of the CTA. It ruled that
Article 13 of the Civil Code did not distinguish between a regular year and a leap year.

Issue:
Whether or not Primetown filed its petition for review within the 2-year prescriptive period

Held:
Both Article 13 of the Civil Code and Section 31, Chapter VIII, Book I of the Administrative Code
of 1987 deal with the same subject matter the computation of legal periods. Under the Civil
Code, a year is equivalent to 365 days whether it be a regular year or a leap year. Under the
Administrative Code of 1987, however, a year is composed of 12 calendar months. Needless to
state, under the Administrative Code of 1987, the number of days is irrelevant. There obviously
exists a manifest incompatibility in the manner of computing legal periods under the Civil Code
and the Administrative Code of 1987. For this reason, we hold that Section 31, Chapter VIII,
Book I of the Administrative Code of 1987, being the more recent law, governs the computation
of legal periods. Lex posteriori derogat priori.

The SC held that respondent's petition (filed on April 14, 2000) was filed on the last day of the
24
th
calendar month from the day respondent filed its final adjusted return. Hence, it was filed
within the reglementary period.


















National Marketing Corp. (NAMARCO) vs. Tecson, et. al.
GR No. L-29131
August 27, 1969

Facts:
On November 14, 1955, the Court of First Instance of Manila rendered judgment, in the
case of Price Stabilization Corporation vs. Miguel D. Tecson and Alto Surety and
Insurance Co., Inc. ordering the defendants Tecson and Alto Surety Insurance Co., Inc. to
pay jointly and severally PRATRA the sum of P7,200.00 and for Tecson to indemnify Alto
Surety Insurance Co., Inc. on the cross-claim for all the amounts it would be made to pay
in the decision.
Copy of this decision was, on November 21, 1955, served upon the defendants in said
case. On December 21, 1965, the National Marketing Corporation, as successor to all
the properties, assets, rights, and choses in action of the Price Stabilization Corporation,
as plaintiff in that case and judgment creditor therein, filed, with the same court, a
complaint against the same defendants, for the revival of the judgment rendered in said
Case.
Defendant Miguel D. Tecson moved to dismiss said complaint, upon the ground of lack
of jurisdiction over the subject matter and prescription of action. The complaint was
then dismissed by the CFI.

Issue:
Whether or not the present action for the revival of a judgment is barred by the statute of
limitations

Held:
Plaintiff-appellant alleges that it was December 21, 1965, but appellee Tecson maintains
otherwise, because "when the laws speak of years ... it shall be understood that years are of
three hundred sixty-five days each" according to Art. 13 of our Civil Code and, 1960 and
1964 being leap years, the month of February in both had 29 days, so that ten (10) years of 365
days each, or an aggregate of 3,650 days, from December 21, 1955, expired on December 19,
1965.

Pursuant to Art. 1144(3) of our Civil Code, an action upon a judgment "must be brought within
ten years from the time the right of action accrues," which, in the language of Art. 1152 of the
same Code, "commences from the time the judgment sought to be revived has become final."
This, in turn, took place on December 21, 1955, or thirty (30) days from notice of the judgment
which was received by the defendants herein on November 21, 1955 no appeal having
been taken therefrom.

The issue is thus confined to the date on which ten (10) years from
December 21, 1955 expired.

The order appealed from was affirmed by the SC.
















Ernest Berg vs Magdalena Estate, Inc.
GR No. L-3784
October 17, 1952

Facts:
The complaint avers that plaintiff and defendant are co-owners of said property, the
former being the owner of one-third interest and the latter of the remaining two-thirds.
Defendant claims that on September 22, 1943, it sold to plaintiff one-third of the
property in litigation subject to the express condition that should either vendor or
vendee decide to sell his or its undivided share, the party selling would grant to the
other part first an irrevocable option to purchase the same at the seller's price.
Plaintiff filed a reply stating that the transaction referred to by the defendant relative to
the property in litigation is not supported by any note or memorandum subscribed by
the parties, as in fact no such note or memorandum has been made evidencing the
transaction.
The lower court found for the plaintiff holding that no agreement has been reached
between the parties relative to the purchase and sale of the property in question.

Issue:
Whether or not the enforcement of the defendants right to buy the property is not a term, but
a condition

Held:
Under article 1125 of said code, obligations, for the fulfillment of which a day certain has been
fixed, shall be demandable only when the day arrives. A day certain is understood to be that
which must necessarily arrive, even though it is not known when. In order that an obligation
may be with a term, it is, therefore, necessary that it should arrive, sooner or later; otherwise, if
its arrival is uncertain, the obligation is conditional. To constitute a term the period must end
on a day certain. Viewing in this light the clause on which defendant relies for the enforcement
of its right to buy the property, it would seem that it is not a term, but a condition. Considering
the first alternative, that is, until defendant shall have obtained a loan from the National City
Bank of New York, it is clear that the granting of such loans is not definite and cannot be held to
come within the terms "day certain" provided for in the Civil code, for it may or it may not
happen. As a matter of fact, the loan did not materialize. And if we consider that the period
given was until such time as defendant could raise money from other sources, we also find it to
be indefinite and contingent and so it is also a condition and not a term within the meaning of
the law. In any event it is apparent that the fulfillment of the condition contained in this second
alternative is made to depend upon the defendant's exclusive will, and viewed in this light, we
are of the opinion that plaintiff's obligation to sell did not arise, for, under Article 1115 of the
old Civil Code, "when the fulfillment of the condition depends upon the exclusive will of the
debtor the conditional obligation shall be void." Finding no error in the decision appealed from,
the same is hereby affirmed.


















Lirag Textile Mills, Inc. vs Court of Appeals
GR No. L-30736
April 14, 1975

Facts:
On May 11, 1960 and for sometime prior and subsequent thereto, Felix Lirag was a
member of the Board of Directors of the Philippine Chamber of Industries. That for
about two months, more or less, prior to May 11, 1960, Alcantara worked in a
temporary capacity with Lirag Textile Mills, Inc. During this same period of time, Felix
Lirag was a director and Chairman of the Board of Directors of Lirag Textile Mills, Inc
On May 9, 1960, Lirag Textile Mills, Inc. wrote a letter to Alcantara advising him that,
effective May 11, 1960, his temporary designation as Technical Assistant to the
Administrative Officer was made permanent. That as Assistant to the Administrative
Officer of the Lirag Textile Mills, Inc. plaintiff received a salary of P400.00 and allowance
of P100.00 per month.
Plaintiff's tenure of employment, per Lirag Textile Mills, Inc.'s above letter was to be 'for
an indefinite period, unless sooner terminated by reason of voluntary resignation or by
virtue of a valid cause or causes'.
On July 22, 1961, Lirag Textile Mills, Inc. wrote Alcantara a letter advising him that
because the company 'has suffered some serious reverses, both in terms of pecuniary
loss and in market opportunities,' the company was terminating his services and
effecting his separation from defendant corporation effective at the close of working
hours of August 22, 1961.
However, it was shown that Lirag Textile Mills Inc.'s original capital of P5,000,000.00
was, on May 2, 1961, increased to P15,000,000.00 per certification issued by the
Security and Exchange Commission.
The CFI found that Alcantara was dismissed without cause in violation of his contract of
employment. The CA affirmed affirmed the decision of the lower court principally its
conclusion that the trial court did not commit any error in its evaluation of the evidence
when it found that it was not true that petitioner Lirag Textile Mills suffered pecuniary
loss and in market opportunities which it used as a justification to terminate the services
of Alcantara and that Alcantara was correctly awarded back salaries, moral damages and
attorney's fees.

Issue:
Whether or not the CA erred in awarding Alcantara back salaries from the time of dismissal up
to final judgment for the dismissal without cause

Held:
A "period" has been defined "as a space of time which has an influence on obligation as a result
of a juridical act, and either suspends their demandableness or produces their extinguishment."
Obligations with a period are those whose consequences are subjected in one way or another
to the expiration of said period or term. Art. 1193 of the Civil Code, provides, among others,
that "obligations with a resolutory period take effect at once, but terminate upon arrival of the
day certain. A day certain is understood to be that which must necessarily come, although it
may not be known when". In the light of the foregoing provisions We have no doubt that the
"indefinite period" of employment expressly agreed upon by and between the parties in this
case is really a resolutory period because the employment is bound to terminate on a future
"day certain" such as the employee's resignation or employer's termination of employment
upon a valid cause or causes, like death of the employee or termination of employer's
corporate existence, although it may not be known when.

It is clear that petitioner Lirag Textile Mills, Inc. violated the contract of employment with
private respondent Alcantara when the former terminated his services without a valid cause.
The act was attended with bad faith and deceit because said petitioner made false allegations
of a supposed valid cause knowing them to be false, thus making itself liable for payment of
actual, moral and exemplary damages, plus attorneys fees to private respondent Alcantara.
Petitioner Lirag Textile Mills, Inc. cannot with impunity be allowed the absolute and unilateral
power to terminate without valid cause a contract of employment with a definite period it
voluntarily entered into merely on the basis of its whim or caprice and under the false pretense
of financial distress.

The SC affirmed the assailed decision of the CA.




Daguhoy Enterprises, Inc. vs Rita Ponce
GR No. L-6515
October 18, 1954

Facts:
On June 24, 1950, Rita Ponce, wife of Domingo, executed in favor of plaintiff
corporation a deed of mortgage over a parcel of land to secure the payment of a loan of
P5,000 granted to her by Daguhoy Enterprises, Inc., payable within six years with
interest at 12% per annum. Rita Ponce with the consent of her husband Domingo
executed another mortgage deed amending the first one, whereby the loan was
increased from P5,000 to P6,190, the terms and conditions of the mortgage remaining
the same.
Rita and Domingo presented the two mortgage deeds for registration in the office of the
register of deeds, but said register noted defects and deficiencies and advised Rita and
Domingo to cure the defects and furnish the necessary data. Instead of complying with
the suggestion, the two withdrew the two mortgage deeds and then mortgaged the
same parcel of land in favor of the Rehabilitation Finance Corporation (RFC) to secure a
loan.
Potenciano Gapol, the majority stockholder in the Daguhoy Enterprises, Inc., upon
learning that the deeds of mortgage were not registered and that they were withdrawn
from the office of the register of deeds and the land covered by the two deeds was
again mortgaged to the RFC, he filed a civil case against the Ponces.
To account for the amount of said loan, Domingo and his son Buhay filed in court a
check of the RFC in favor of Daguhoy Enterprises, Inc. and interests. After the deposit of
said check and interests, Potenciano Gapol in representation of the Daguhoy
Enterprises, Inc. petitioned the court for permission to withdraw the amounts,
presumably to apply them to the payment of the loan. Because of the opposition of
defendants therein to the withdrawal unless the mortgage by Rita was cancelled the
court denied the petition.

Issue:
Whether or not the benefit of the period by the debtor has expired

Held:
Although the original loan of P5,000.00 including the increase of P1,190 was payable within six
years from June 1950, and so did not become due and payable until 1956, the trial court held
that under article 1198 of the new Civil Code, the debtor lost the benefit of the period by
reason of her failure to give the security in the form of the two deeds of mortgage and register
them, including the defendants' act in withdrawing said two deeds from the office of the
register of deeds and then mortgaging the same property in favor of the RFC; and so the
obligation became pure and without any condition and consequently, the loan became due and
immediately demandable.

There is no question that said deposit was in favor of the Daguhoy Enterprises, Inc. and
eventually would be given to it. But did the said deposit relieve the present defendants from
the payment of interests from the time of deposit, on the theory that the deposit amounted to
a payment of the loan? The answer must be in the negative. When the plaintiff in said case
13753 petitioned the trial court for permission to withdraw the deposit, presumably to pay the
loan involved in the present action, his petition was denied by the court because of the
opposition of the defendants therein, one of whom is Domingo Ponce, co-defendant of Rita
Ponce in the present case. The result was that the present plaintiff corporation could not take
possession and dispose of said amount. In other words, the loan is not yet paid.












Victoria Planters Association, Inc. vs Victorias Milling Co., Inc.
GR No. L-6648
July 25, 1955

Facts:
At various dates, from the year 1917 to 1934, the sugar cane planters executed identical
milling contracts under which the sugar central "North Negros Sugar Co. Inc." would mill
the sugar produced by the sugar cane planters of the Manapla and Cadiz districts. The
North Negros Sugar Co., Inc. had its first milling during the 1918-1919 crop year, and the
Victorias Milling Co., had its first milling during the 1921-1922 crop year. Subsequent
millings took place every successive crop year thereafter, except the 6-year period,
comprising 4 years of the last World War II and 2 years of post-war reconstruction of
respondent's central at Victorias, Negros Occidental.
After the liberation, the North Negros Sugar Co., Inc. did not reconstruct its destroyed
central at Manapla, Negros Occidental, and in 1946, it advised the North Negros
Planters Association, Inc. that it had made arrangements with the respondent Victorias
Milling Co., Inc. for said corporation to mill the sugar cane produced by the planters of
Manapla and Cadiz holding milling contracts with it. Thus, after the war, all the sugar
cane produced by the planters of petitioner associations, in Manapla, Cadiz, as well as in
Victorias, who held milling contracts, were milled in only one central, that of the
respondent corporation at Victorias
Beginning with the year 1948, and in the following years, when North Negros Planters
Association, Inc. considered that the stipulated 30-year period of their milling contracts
executed in the year 1918 had already expired in the crop year 1947-1948, and Victorias
Planters Association, Inc. likewise considered the stipulated 30-year period of their
milling contracts, as having likewise expired and terminated in the crop year 1948-1949,
repeated representation were made with respondent corporation for negotiations
regarding the execution of new milling contracts.
Notwithstanding these repeated representations made by the petitioners with the
respondent corporation for the negotiation and execution of new milling contracts, the
respondent has refused to accede, contending that under the provisions of the milling
contract, that their contracts with the planters call for 30 years of milling not 30 years
in time. Victorias Milling Co. also stated that as there was no milling during 4 years of
the recent war and two years of reconstruction.

Issue:
Whether or not the term stipulated in the contracts is 30 milling years and not 30 calendar
years

Held:
Fortuitious event relieves the obligor from fulfilling a contractual obligation. The fact that the
contracts make reference to "first milling" does not make the period of thirty years one of thirty
milling years. The term "first milling" used in the contracts under consideration was for the
purpose of reckoning the thirty-year period stipulated therein. Even if the thirty-year period
provided for in the contracts be construed as milling years, the deduction or extension of six
years would not be justified. At most on the last year of the thirty-year period stipulated in the
contracts the delivery of sugar cane could be extended up to a time when all the amount of
sugar cane raised and harvested should have been delivered to the appellant's mill as agreed
upon.

The parties stipulated that in the event of flood, typhoon, earthquake, or other force majeure,
war, insurrection, civil commotion, organized strike, etc., the contract shall be deemed
suspended during said period, does not mean that the happening of any of those events stops
the running of the period agreed upon. It only relieves the parties from the fulfillment of their
respective obligations during that time the planters from delivering sugar cane and the
central from milling it. In order that the central, the herein appellant, may be entitled to
demand from the other parties the fulfillment of their part in the contracts, the latter must
have been able to perform it but failed or refused to do so and not when they were prevented
by force majeure such as war. To require the planters to deliver the sugar cane which they
failed to deliver during the four years of the Japanese occupation and the two years after
liberation when the mill was being rebuilt is to demand from the obligors the fulfillment of an
obligation which was impossible of performance at the time it became due.






Jespajo Realty Corporation vs Court of Appeals
GR No. 113626
September 27, 2002

Facts:
On February 1, 1985, Jespajo Realty Corporation, represented by its President, Jesus L.
Uy, entered into separate contracts of lease with Tan Te Gutierrez and Co Tong. The
terms of the contract among others are the following:
PERIOD OF LEASE- The lease period shall be effective as of February 1, 1985 and shall
continue for an indefinite period provided the lessee is up-to-date in the payment of his
monthly rentals. The LESSEE may, at his option, terminate this contract any time by
giving sixty (60) days prior written notice of termination to the LESSOR.
However, violation of any of the terms and conditions of this contract shall be a
sufficient ground for termination thereof by the LESSOR.
RENT INCREASE - For the duration of this contract, the LESSEE agrees to an automatic
20% yearly increase in the monthly rentals.

Since the effectivity of the lease agreement, the lessees religiously paid their respective
monthly rentals together with the 20% yearly increase in the monthly rentals. On
January 2, 1990, the lessor corporation sent a written notice to the lessees informing
them of the formers intention to increase the monthly rentals on the occupied
premises to P3,500.00 monthly effective February 1, 1990. The lessees through its
counsel opposed alleging that it is in contravention of the terms of the contract of lease
as agreed upon.
Due to the opposition and the failure of the lessees to pay the increased monthly rentals
in the amount of P3,500.00, the lessor through its counsel in a letter dated April 10,1990
xxx demanded that the lessees vacate the premises and pay the amount of P7,000.00
corresponding to the months of February and March, 1990.
The lessees exerted effort to pay the rentals due for the months of February and March
1990 at the monthly rate stipulated in the contract but was refused by the lessor so that
they instituted before the Metropolitan Trial Court of Manila a case for consignation.

Issue:
Whether or not the contract, which stipulated an indefinite period and shall continue for as
long as the lessee is paying the rent is considered indeterminable

Held:
Crucial in the resolution of this case is the construction of the lease agreement, particularly the
portion on the period of lease, which reads:
PERIOD OF LEASE- The lease period shall be effective as of February 1, 1985 and shall continue
for an indefinite period provided the lessee is up-to-date in the payment of his monthly rentals.
xxx
Petitioner insists that the subject contract of lease did not provide for a definite period hence it
falls under the ambit of Art. 1687 of the NCC, making the agreement effective on a month-to-
month basis since rental payments are made monthly.
The Court of Appeals opined otherwise. It reasoned that the application of Art. 1687 in this
case is misplaced because when there is a fixed period for the lease, whether the period be
definite or indefinite or when the period of the lease is expressly left to the will of the lessee,
Art. 1687 will not apply

The lease contract between petitioner and respondents is with a period subject to a resolutory
condition. The wording of the agreement is unequivocal: The lease period xxx shall continue
for an indefinite period provided the lessee is up-to-date in the payment of his monthly rentals.
The condition imposed in order that the contract shall remain effective is that the lessee is up-
to-date in his monthly payments. It is undisputed that the lessees Gutierrez and Co Tong
religiously paid their rent at the increasing rate of 20% annually. The agreement between the
lessor and the lessees are therefore still subsisting, with the original terms and conditions
agreed upon, when the petitioner unilaterally increased the rental payment to more than 20%
or P3,500.00 a month.




Pilar Borromeo et. al. vs Court of appeals
GR No. L-22962
September 28, 1972

Facts:
Before the year 1933, defendant being a friend and former classmate of plaintiff Canuto
O. Borromeo used to borrow from the latter certain amounts from time to time. On one
occasion with some pressing obligation to settle with Mr. Miller, defendant borrowed
from plaintiff a large sum of money for which he mortgaged his land and house in Cebu
City.
Mr. Miller filed civil action against the defendant and attached his properties including
those mortgaged to plaintiff. Plaintiff then pressed the defendant for settlement of his
obligation, but defendant instead offered to execute a document promising to pay his
indebtedness even after the lapse of ten years. Liquidation was made and defendant
signed a promissory note on November 29, 1933 agreeing to pay 'as soon as I have
money'.
After the execution of the document, plaintiff limited himself to verbally requesting
defendant to settle his indebtedness from time to time. Plaintiff did not file any
complaint against the defendant within ten years from the execution of the document
as there was no property registered in defendant's name. After the last war, plaintiff
made various oral demands, but defendant failed to settle his account, hence the
present complaint for collection.

Issue:
Whether or not there has been a waiver of the defense of prescription

Held:
What emerges in the light of all the principles set forth is that the first ten years after
November 29, 1933 should not be counted in determining when the action of creditor, now
represented by petitioners, could be filed. From the joint record on appeal, it is undoubted that
the complaint was filed on January 7, 1953. If the first ten-year period was to be excluded, the
creditor had until November 29, 1953 to start judicial proceedings. After deducting the first ten-
year period which expired on November 29, 1943, there was the additional period of still
another ten years. Nor could there be any legal objection to the complaint by the creditor
Borromeo of January 7, 1953 embodying not merely the fixing of the period within which the
debtor Villamor was to pay but likewise the collection of the amount that until then was not
paid. The justification became even more apparent in the latter portion of the opinion of Justice
Alex Reyes for this Court: "We may add that defendant does not claim that if a separate action
were instituted to fix the duration of the term of its obligation, it could present better proofs
than those already adduced in the present case. Such separate action would, therefore, be a
mere formality and would serve no purpose other than to delay." There is no legal obstacle
then to the action for collection filed by the creditor.


















Benito Gonzales vs Florentino de Jose
GR No. 43429
October 24, 1938

Facts:
This action was instituted by the plaintiff to recover from the defendant the amount of
two promissory notes worded as follows:
(1) "I promise to pay Mr. Benito Gonzalez the sum of four hundred three pesos and fifty-
five centavos (P403.55) as soon as possible.
(2) "I promise to pay Mr. Benito Gonzales the sum of the three hundred and seventy-
three pesos and thirty centavos (P373.30) as soon as possible.
(Sgd.) "FLORENTINO DE JOSE"
Defendant appealed from the decision of the CFI ordering him to pay the plaintiff the
sum of P547.95 within thirty days from the date of notification of said decision, plus the
costs. In his answer the defendant interposed that the complaint is uncertain inasmuch
as it does not specify when the indebtedness was incurred or when it was demandable,
and that, granting that the plaintiff has any cause of action, the same has prescribed in
accordance with law.
The trial court held that the action for recovery of the amount of the two promissory
notes has not prescribed in accordance with article 1128 of the Civil Code, which
provides:
"ART. 1128. If the obligation does not specify a term, but it is to be inferred from its
nature and circumstances that it was intended to grant the debtor time for its
performance, the period of the term shall be fixed by the court. The court shall also fix
the duration of the term when it has been left to the will of the debtor."

Issue:
Whether or not the action by the plaintiff has prescribed

Held:
It is practically admitted by the parties that the obligations arising from the two promissory
notes should be governed by said article, inasmuch as it was the intention of the plaintiff,
evidenced by the terms of the said notes, to grant the debtor a period within which to pay the
debts. The SC held that the promissory notes are governed by article 1128 because under the
terms thereof the plaintiff intended to grant the defendant a period within which to pay his
debts. As the promissory notes do not fix this period, it is for the court to fix the same. The
action to ask the court to fix the period has already prescribed in accordance with section 43 (1)
of the Code of Civil Procedure. This period of prescription is ten years, which has already
elapsed from the execution of the promissory notes until the filing of the action on June 1,
1934. The action which should be brought in accordance with article 1128 is different from the
action for the recovery of the amount of the notes, although the effects of both are the same,
being, like the civil actions, subject to the rules of prescription. The action brought by the
plaintiff having already prescribed, the defendant is absolved from the complaint.















Guillermina Baluyut vs Eulogio Poblete et. al.
GR No. 144435
February 6, 2007

Facts:
On July 20, 1981, herein petitioner, Guillermina Baluyut, loaned from the spouses
Eulogio and Salud Poblete the sum of P850,000.00. As evidence of her indebtedness,
Baluyut signed, on even date, a promissory note for the amount borrowed. Under the
promissory note, the loan shall mature in one month. To secure the payment of her
obligation, she conveyed to the Poblete spouses, by way of a real estate mortgage
contract, a house and lot she owns.
Upon maturity of the loan, Baluyut failed to pay her indebtedness. The Poblete spouses
subsequently decided to extrajudicially foreclose the real estate mortgage. The
mortgaged property was sold on auction to the Poblete spouses who were the highest
bidders.
Baluyut failed to redeem the subject property within the period required by law
prompting Eulogio Poblete to execute an Affidavit of Consolidation of Title.
Subsequently, TCT No. 43445 was issued in the name of Eulogio and the heirs of Salud.
However, Baluyut remained in possession of the subject property and refused to vacate
the same. Hence, Eulogio and the heirs of Salud filed a Petition for the issuance of a writ
of possession with the RTC.

Issue:
Whether or not no prior demand to pay is necessary for a loan to mature when there is conflict
between the date of maturity of the loan

Held:
Petitioner admits that the issue regarding the date of maturity of the loan which she incurred
from the Poblete spouses was first brought up only in her Addendum to the Motion for
Reconsideration filed before the CA. It is settled that an issue not raised during trial could not
be raised for the first time on appeal as to do so would be offensive to the basic rules of fair
play, justice, and due process. Even if petitioner had properly raised the issue regarding the real
date of maturity of the loan, it is a long-held cardinal rule that when the terms of an agreement
are reduced to writing, it is deemed to contain all the terms agreed upon and no evidence of
such terms can be admitted other than the contents of the agreement itself. In the present
case, the promissory note and the real estate mortgage are the law between petitioner and
private respondents. It is not disputed that under the Promissory Note dated July 20, 1981, the
loan shall mature in one month from date of the said Promissory Note. In the instant case,
aside from the testimony of Atty. Mendoza, no other evidence was presented to prove that the
real date of maturity of the loan is one year. In fact there was not even any allegation in the
Complaint and in the Memorandum filed by petitioner with the trial court to the effect that
there has been fraud or mistake as to the date of the loans maturity as contained in the
Promissory Note of July 20, 1981.

















Malayan Realty, Inc. vs Uy Han Yong
GR No. 163763
November 10, 2006

Facts:
In 1958, Malayan entered into a verbal lease contract with Uy Han Yong over the
property (an apartment unit known as 3013 Interior No. 90) at a monthly rental of
P262.00. The monthly rental was increased yearly starting 1989, and by 2001, the
monthly rental was P4,671.65.
On July 17, 2001, Malayan sent Uy a written notice informing him that the lease
contract would no longer be renewed or extended upon its expiration on August 31,
2001, and asking him to vacate and turn over the possession of the property within five
days from August 31, 2001, or on September 5, 2001.
Despite Uys receipt of the notice, he refused to vacate the property, prompting
Malayan to file before the MeTC of Manila a complaint for ejectment. Malayan prayed
for the court to order Uy and all other persons claiming possession under him to vacate
the property, to pay P9,000 as fair and reasonable monthly compensation for its use
from September 1, 2001 until its possession is turned over to it.

Issue:
Whether or not the court has the power to establish a longer term for the lease

Held:
In the case at bar, the lease period was not agreed upon by the parties. Rental was paid
monthly, and respondent has been occupying the premises since 1958. As earlier stated, a
written notice was served upon respondent on January 17, 2001 terminating the lease effective
August 31, 2001. As respondent was notified of the expiration of the lease, effectively his right
to stay in the premises had come to an end on August 31, 2001.The 2
nd
paragraph of Article
1687 provides, however, that in the event that the lessee has occupied the leased premises for
over a year, the courts may fix a longer term for the lease.

The power of the courts to establish a grace period is potestative or discretionary, depending
on the particular circumstances of the case. Thus, a longer term may be granted where equities
come into play, and may be denied where none appears, always with due deference to the
parties freedom to contract. Where a petitioner has been deprived of its possession over the
leased premises for so long a time, and it is shown that, indeed, the respondent was the
recipient of substantial benefits while the petitioner was unable to have the full use and
enjoyment of a considerable portion of its property, such militates against further deprivation
by fixing a period of extension.


















Kasapian ng Malayang Manggagawa sa Coca-Cola vs Court of
Appeals
GR No. 159828
April 19, 2006

Facts:
On 30 June 1998, the Collective Bargaining Agreement for the years 1995-1998
executed between petitioner union and private respondent company expired.
Petitioner submitted its demands to the company for another round of collective
bargaining negotiations. However, said negotiations came to a gridlock as the parties
failed to reach a mutually acceptable agreement with respect to certain economic and
non-economic issues.
On 19 December 1998, petitioner held the strike in private respondents Manila and
Antipolo plants.
Both parties executed a MOA providing for salary increases and other economic and
non-economic benefits. Said MOA was later incorporated to form part of the 1998-2001
CBA and was thereafter ratified by the employees of the company.
Meanwhile, a certification election was conducted on 17 August 1999 pursuant to the
order of the Department of Labor and Employment (DOLE) wherein the KASAMMA-CCO
Independent surfaced as the winning union and was then certified by the DOLE as the
sole and exclusive bargaining agent of the rank-and-file employees of private
respondents Manila and Antipolo plants for a period of five years from 1 July 1999 to 30
June 2004.
Pursuant to the provisions of the MOA, both parties identified 64 vacant regular
positions that may be occupied by the existing casual, contractual or agency employees
who have been in the company for more than one year. Fifty-eight of those whose
names were submitted for regularization passed the screening and were thereafter
extended regular employment status, while the other five failed the medical
examination and were granted six months within which to secure a clean bill of health.
On 9 December 1999, despite the pendency of petitioners complaint before the NLRC,
private respondent closed its Manila and Antipolo plants resulting in the termination of
employment of 646 employees.

Issue:
Whether or not private respondent violated the terms and conditions contained in the MOA

Held:
What is necessary in determining whether the private respondent violated the provisions of the
MOA with respect to the date of regularization of the 61 employees is an interpretation of the
pertinent provision of the MOA as agreed upon by the parties. It must be noted that both
parties admit the existence of said MOA and that they have voluntarily entered into said
agreement. Furthermore, neither of the parties deny that the 61 employees have indeed been
regularized by private respondent. Clearly, as the facts are admitted by the parties, the
appellate court does not have to inquire into the veracity of any fact in order to establish the
rights of the parties. All that the Court of Appeals must do is to interpret the provisions of the
MOA and resolve whether said regularization must be made retroactive to 1 December 1998,
which according to petitioner is provided for under the said MOA. The MOA, being a contract
freely entered into by the parties, now constitute as the law between them, and the
interpretation of its contents purely involves an evaluation of the law as applied to the facts
herein.

Moreover, at this point it must be stressed that under Article 280 of the Labor Code, any
employee who has rendered at least one year of service, whether such service is continuous or
broken, shall be considered a regular employee with respect to the activity in which he is
employed and his employment shall continue while such activity exists. Also, under the law, a
casual employee is only casual for one year, and it is the passage of time that gives him a
regular status. Hence, even without the subject MOA provision, the 61 employees must be
extended regular employment status after the lapse of one year. Even if we were to follow
private respondents contention that the date 1 December 1998 provided in the MOA is merely
a reckoning date to determine who among the non-regular employees have rendered one year
of service as of said date, all those who have been with the company for one year by said date
must automatically be considered regular employees by operation of law. Therefore, contrary
to the interpretation of the NLRC, private respondent violated the provision of the MOA when it
did not consider the regularization of the 61 employees effective 1 December 1998, and
accorded to them the full benefits of the MOA.





Zenaida Santos vs Santos et. al.
GR No. 133895
October 2, 2001

Facts:
The spouses Jesus and Rosalia Santos owned a parcel of land registered with an area of
154 square meters. On it was a four-door apartment administered by Rosalia who
rented them out. The spouses had five children, Salvador, Calixto, Alberto, Antonio and
Rosa.
Jesus and Rosalia executed a deed of sale of the properties in favor of their children
Salvador and Rosa. Rosa in turn sold her share to Salvador which resulted in the
issuance of a new TCT. Despite the transfer of the property to Salvador, Rosalia
continued to lease and receive rentals from the apartment units.
On November 1, 1979, Jesus died. Six years after, Salvador died, followed by Rosalia
who died the following month. Shortly after, petitioner Zenaida, claiming to be
Salvadors heir, demanded the rent from Antonio Hombrebueno, a tenant of Rosalia.
When the latter refused to pay, Zenaida filed an ejectment suit against him with the
MeTC which eventually decided in Zenaidas favor.
On January 5, 1989, private respondents instituted an action for reconveyance of
property with preliminary injunction against petitioner in the RTC, where they alleged
that the two deeds of sale executed on January 19, 1959 and November 20, 1973 were
simulated for lack of consideration.

Issue:
Whether or not a sale through a public instrument is tantamount to delivery of the thing sold

Held:
Petitioner in her memorandum invokes Article 1477 of the Civil Code which provides that
ownership of the thing sold is transferred to the vendee upon its actual or constructive delivery.
Article 1498, in turn, provides that when the sale is made through a public instrument, its
execution is equivalent to the delivery of the thing subject of the contract. Petitioner avers that
applying said provisions to the case, Salvador became the owner of the subject property by
virtue of the two deeds of sale executed in his favor.

Nowhere in the Civil Code, however, does it provide that execution of a deed of sale is a
conclusive presumption of delivery of possession. The Code merely said that the execution
shall be equivalent to delivery. The presumption can be rebutted by clear and convincing
evidence. Presumptive delivery can be negated by the failure of the vendee to take actual
possession of the land sold.



















Manuel Melotindos vs Melecio Tobias
GR No. 146658
October 28, 2002

Facts:
Petitioner, Atty. Manuel D. Melotindos, was the lessee of the ground floor of a house at
No. 577 Julio Nakpil Street in Malate, Manila. He had been renting the place since 1953
on a month-to-month basis from its owner, respondent Melecio Tobias, who was then
residing in Canada.
Sometime in the last quarter of 1995, owing to his sickly mother who needed constant
medical attention and filial care, respondent demanded from petitioner either to pay an
increased rate of monthly rentals or else to vacate the place so he and his mother could
use the house during her regular medical check-up in Manila. For two (2) years nothing
came out of the demand to vacate, hence, in 1997 respondent insisted upon raising the
rental fee once again.
On 1 June 1998 respondent asked petitioner to restore the premises to him for some
essential repairs of its dilapidated structure. This time he did not offer petitioner
anymore the option to pay higher rentals. The renovation of the house was
commenced but had to stop midway because petitioner refused to vacate the portion
he was occupying and worse he neglected to pay for the lease for four (4) months from
May to August 1998. Hence for the second time, or on 19 October 1998, respondent
demanded the payment of the rental arrears as well as the restoration of the house to
him.
On 3 February 1999, since petitioner was insisting on keeping possession of the house
but did not pay the rental for January 1999, although he had settled the arrears of four
(4) months, respondent was compelled to file a complaint for ejectment.

Issue:
Whether or not the order to eject petitioner from the leased premises was illegal because he
was always up to date in paying the rental fee

Held:
It bears stressing that Art. 1687 does not grant a lessee an absolute right to an extension of the
lease term but merely gives the courts the discretion to allow additional time for the lessee to
prepare for his eventual ejection. In the instant case we agree with the courts a quo that
petitioner's old age and length of his occupancy of the house alone are not just grounds for
granting the extension of lease because these circumstances by themselves do not give him the
equitable right to insist upon staying on the premises as long as he could pay the rentals. The
record plainly illustrates, for example, that he made no substantial or additional improvements
on the house which could have hampered his transfer to another residence. We also concur
with the observation of the Court of Appeals that petitioner had been effectively granted an
extension of five (5) years when respondent did not assiduously pursue the several demands
made in 1995 and 1996 for him to return possession of the leased premises until the ejectment
complaint was filed in 1999, and significantly we add that he was evicted from the premises in
accordance with the MeTC Decision only in 2002. That period of delay is more than enough.

As a lawyer, petitioner should have known better that seniority in age does not authorize us to
ride roughshod over the reputable proprietary right of respondent. Notwithstanding his
repeated references to his courageous defiance of mother time in his private practice of law, a
fact perhaps remarkable, this simple ejectment case as any other case turns upon sensible not
blind compassion where the party has to his favor the tilt of equity and law. Our chief resource
in resolving cases is legal reasoning and no amount of plea for charitable dole-outs will replace
the reckoning of the rule of law.










LL and Company Development vs Huang Chao Chun
GR No. 142378
March 7, 2002

Facts:
Petitioner alleged that respondents Huang Chao Chun and Yang Tung Fa violated their
amended lease contract over a 1,112 square meter lot it owns when they did not pay
the monthly rentals thereon in the total amount of P4,322,900.00. It also alleged that
the amended lease contract already expired on September 16, 1996 but respondents
refused to surrender possession thereof plus the improvements made thereon, and pay
the rental arrearages despite repeated demands
The amended lease contract was entered into by the parties sometime in August, 1991.
The same amended the lease contract previously entered into by the parties on August
8, 1991.
Respondents and the corporation denied petitioners allegations. The MeTC dismissed
the case. The RTC affirmed the Decision of the Metropolitan Trial Court (MeTC)
dismissing the unlawful detainer case. The RTC likewise agreed that the Contract of
Lease entered into by the parties could be extended unilaterally by the lessees for
another five years or until September 16, 2001, on the basis of justice and equity. The
Court of Appeals affirmed in toto the RTCs dismissal.

Issue:
Whether or not the non-payment of rentals is a ground to eject, in an unlawful detainer

Held:
Mere failure to pay rentals does not make possession unlawful, but when a valid demand to
vacate the premises is made by the lessor, the lessees continued withholding of possession
becomes unlawful. Well-settled is the rule that the failure of the owners/lessors to collect or
their refusal to accept the rentals is not a valid defense. Respondents justify their nonpayment
of rentals on the ground that petitioners refused to accept their payments. Article 1256 of the
Civil Code, however, provides that if the creditor to whom tender of payment has been made
refuses without just cause to accept it, the debtor shall be released from responsibility by the
consignation of the thing or sum.

Based on the foregoing, respondents should have deposited in a bank or with judicial
authorities the rent based on the previous rate. In the instant case, respondents failed to pay
the rent from October 1993 to March 1998 or for four (4) years and three (3) months. They
should remember that Article 1658 of the Civil Code provides only two instances in which the
lessee may suspend payment of rent; namely, in case the lessor fails to make the necessary
repairs or to maintain the lessee in peaceful and adequate enjoyment of the property leased.
None of these is present in the case at bar.


















Brent School, Inc. vs Ronaldo Zamora
GR No. L-48494
February 5, 1990

Facts:
The root of the controversy at bar is an employment contract in virtue of which Doroteo
R. Alegre was engaged as athletic director by Brent School, Inc. at a yearly compensation
of P20,000.00. The contract fixed a specific term for its existence, five (5) years, i.e.,
from July 18, 1971 to July 17, 1976. Subsequent subsidiary agreements reiterated the
same terms and conditions, including the expiry date, as those contained in the original
contract of July 18, 1971.
On April 20, 1976, Alegre was given a copy of the report filed by Brent School with the
Department of Labor advising of the termination of his services. The stated ground for
the termination was "completion of contract, expiration of the definite period of
employment." And a month or so later, on May 26, 1976, Alegre accepted the amount
of P3,177.71, and signed a receipt therefor containing the phrase, "in full payment of
services for the period May 16, to July 17, 1976 as full payment of contract."
At the investigation conducted by a Labor Conciliator of said report of termination of his
services, Alegre protested the announced termination of his employment. He argued
that although his contract did stipulate that the same would terminate on July 17, 1976,
since his employment had lasted for five years, he had acquired the status of a regular
employee and could not be removed except for valid cause.

Issue:
Whether or not Alegre could not be removed by his employer except for valid cause

Held:
The question immediately provoked by a reading of Article 319 is whether or not a voluntary
agreement on a fixed term or period would be valid where the employee "has been engaged to
perform activities which are usually necessary or desirable in the usual business or trade of the
employer." The definition seems a non sequitur. From the premise that the duties of an
employee entail "activities which are usually necessary or desirable in the usual business or
trade of the employer the" conclusion does not necessarily follow that the employer and
employee should be forbidden to stipulate any period of time for the performance of those
activities. There is nothing essentially contradictory between a definite period of an
employment contract and the nature of the employee's duties set down in that contract as
being "usually necessary or desirable in the usual business or trade of the employer." The
concept of the employee's duties as being "usually necessary or desirable in the usual business
or trade of the employer" is not synonymous with or identical to employment with a fixed term.
Logically, the decisive determinant in term employment should not be the activities that the
employee is called upon to perform, but the day certain agreed upon by the parties for the
commencement and termination of their employment relationship, a day certain being
understood to be "that which must necessarily come, although it may not be known when."

















Lourdes Valerio Lim vs People of the Philippines
GR No. L-34338
November 21, 1984

Facts:
The appellant is a businesswoman. On January 10, 1966, the appellant went to the
house of Maria Ayroso and proposed to sell Ayroso's tobacco. Ayroso agreed to the
proposition of the appellant to sell her tobacco consisting of 615 kilos at P1.30 a kilo.
The appellant was to receive the overprice for which she could sell the tobacco. This
agreement was made in the presence of plaintiff's sister, Salud G. Bantug.
Salvador Bantug drew the document. This was signed by the appellant and witnessed by
the complainant's sister, Salud Bantug, and the latter's maid, Genoveva Ruiz. Of the
total value of P799.50, the appellant had paid to Ayroso only P240.00, and this was paid
on three different times.
Demands for the payment of the balance of the value of the tobacco were made upon
the appellant by Ayroso, and particularly by her sister, Salud Bantug. Salud Bantug
further testified that she had gone to the house of the appellant several times, but the
appellant often eluded her; and that the "camarin" the appellant was empty.
Although the appellant denied that demands for payment were made upon her, it is a
fact that on October 19, 1966, she wrote a letter to Salud Bantug stating that she had
difficulty in collecting payments from her debtors. Pursuant to this letter, the appellant
sent a money order for P100.00 and another for P50.00; and she paid P90.00 as
evidenced by the receipt dated April 18, 1967, or a total of P240.00. As no further
amount was paid, the complainant filed a complaint against the appellant for estafa.

Issue:
Whether the receipt is a contract of agency to sell or a contract of sale of the subject tobacco

Held:
It is clear in the agreement that the proceeds of the sale of the tobacco should be turned over
to the complainant as soon as the same was sold, or, that the obligation was immediately
demandable as soon as the tobacco was disposed of. Hence, Article 1197 of the New Civil Code,
which provides that the courts may fix the duration of the obligation if it does not fix a period,
does not apply. Aside from the fact that Maria Ayroso testified that the appellant asked her to
be her agent in selling Ayroso's tobacco, the appellant herself admitted that there was an
agreement that upon the sale of the tobacco she would be given something. The appellant is a
businesswoman, and it is unbelievable that she would go to the extent of going to Ayroso's
house and take the tobacco with a jeep which she had brought if she did not intend to make a
profit out of the transaction. Certainly, if she was doing a favor to Maria Ayroso and it was
Ayroso who had requested her to sell her tobacco, it would not have been the appellant who
would have gone to the house of Ayroso, but it would have been Ayroso who would have gone
to the house of the appellant and deliver the tobacco to the appellant.



































Pacific Banking Corporation vs Court of Appeals
GR No. L-45656
May 5, 1989

Facts:
On April 15, 1955, herein private respondents Joseph and Eleanor Hart discovered an
area consisting of 480 hectares of tidewater land in Tambac Gulf of Lingayen which had
great potential for the cultivation of fish and saltmaking. They organized Insular Farms
Inc., applied for and, after eleven months, obtained a lease from the Department of
Agriculture for a period of 25 years, renewable for another 25 years.
Subsequently Joseph Hart approached businessman John Clarkin, then President of
Pepsi-Cola Bottling Co. in Manila, for financial assistance. Joseph Hart and Clarkin signed
a Memorandum of Agreement.
Due to financial difficulties, Insular Farms Inc. borrowed P 250,000.00 from Pacific
Banking Corporation sometime in July of 1956.
Unfortunately, the business floundered and while attempts were made to take in other
partners, these proved unsuccessful. Nevertheless, petitioner Pacific Banking
Corporation and its then Executive Vice President, petitioner Chester Babst, did not
demand payment for the initial July 1957 installment nor of the entire obligation, but
instead opted for more collateral in addition to the guaranty of Clarkin.
On March 7, 1958, Hart received notice that the pledged shares of stocks of Insular
Farms Inc. would be sold at public auction on March 10, 1958 at 8:00 A.M. to satisfy
Insular Farms' obligation.
The private respondents filed a complaint for reconveyance and damages with prayer
for writ of preliminary injunction before the Court of First Instance of Manila
Joseph Hart filed another case for I recovery of sum of money comprising his
investments and earnings against Insular Farms, Inc. before the Court of First Instance of
Manila

Issue:
Whether or not the petitioner bank agreed to an indefinite extension of time to pay the loan

Held:
In the case at bar, the parties to the purported agreement, Hart and Babst, were still alive, and
both testified in the trial court regarding the purported extension. that the rule which states
that there can be no valid extension of time by oral agreement unless the extension is for a
definite time, is not absolute but admits of qualifications and exceptions.

The general rule is that an agreement to extend the time of payment, in order to be valid, must
be for a definite time, although it seems that no precise date be fixed, it being sufficient that
the time can be readily determined. In case the period of extension is not precise, the
provisions of Article 1197 of the Civil Code should apply. In this case, there was an agreement
to extend the payment of the loan, including the first installment thereon which was due on or
before July 1957. The pledge executed as collateral security on February 9, 1958 no longer
contained the provision on an installment of P 50,000.00 due on or before July 1957. This can
mean no other thing than that the time of payment of the said installment of P 50,000.00 was
extended.
It is settled that bills and notes may be varied by subsequent agreement. Thus, conditions may
be introduced and arrangements made changing the terms of payment (10 CJS 758). The
agreement for extension of the parties is clearly indicated and may be inferred from the acts
and declarations of the parties, as testified to in court.

































Felipe Agoncillo vs Crisanto Javier
GR No. L-12611
August 7, 1918

Facts:
On February 27, 1904, Anastasio Alano, Jose Alano, and Florencio Alano executed in
favor of the plaintiff, Da. Marcela Mario, a document stating that:
1. We will pay to Da. Marcela Mario within one year from this date together
with interest thereon at the rate of 12 per cent per annum, the sum of P2,730.50,
Philippine currency, this being the present amount of indebtedness incurred in
favor of that lady on the 20th of April 1897, by our testator, the Rev. Anastasio C.
Cruz;
2. To secure the payment of this debt we mortgage to the said Da. Marcela
Mario the house and lot bequeathed to us by the deceased, situated in this
town, on calle Evangelista, formerly Asturias, recorded in the register of deeds on
the twenty-second of April, 1895, under number 730;
3. In case of insolvency on our part, we cede by virtue of these presents the said
house and lot to Da. Marcela Mario, transferring to her all our rights to the
ownership and possession of the lot; and if the said property upon appraisal at
the time of the maturity of this obligation should not be of sufficient value to
cover the total amount of this indebtedness, I, Anastasio Alano, also mortgage to
the said lady my four parcels of land situated in the barrio of San Isidro, to secure
the balance, if any; the title deeds of said property, as well as the title deeds of
the said house and lot are this day delivered to Sr. Vicente Ilustre, general
attorney-in-fact of Da. Marcela Mario.
No part of the interest or of the principal due upon this undertaking has been paid,
except the sum of P200 paid in the year 1908 by the late Anastasio Alano.
In 1912, Anastasio Alano died intestate. At the instance of one of his creditors,
proceedings upon the administration of his estate were had in the Court of First
Instance. The court appointed an administrator and a committee to hear claims.
At the instance of the plaintiff, Da. Marcela Mario, that she was a creditor of the
deceased and that her claim was secured by mortgage upon real estate belonging to the
said deceased, the court reopened the intestate proceeding, and appointed one Javier
to be administrator of the estate.
The plaintiffs averred that defendants have paid no part of the indebtedness therein
acknowledged, with the exception of the P200 paid on account in 1908. It is further
averred that on April 22, 1910, the debtors promised in writing that they would pay the
debt in 1911, but that they had failed to do so. The prayer of the complaint is that,
unless defendants pay the debt for the recovery of which the action was brought, they
be required to convey to plaintiffs the house and lot described in paragraph two of the
said document.

Issue:
Whether or not the title to the house and lot in question was to be transferred to the creditor
ipso facto upon the mere failure of the debtors to pay the debt at its maturity

Held:
The contract now under consideration is not susceptible of the interpretation that the title to
the house and lot in question was to be transferred to the creditor ipso facto upon the mere
failure of the debtors to pay the debt at its maturity. The obligations assumed by the debtors
were alternative, and they had the right to elect which they would perform. The conduct of the
parties shows that it was not their understanding that the right to discharge the obligation by
the payment of money was lost to the debtors by their failure to pay the debt at its maturity.
The plaintiff accepted a partial payment from Anastasio Alano in 1908, several years after the
debt matured. The prayer of the complaint is that the defendants be required to execute a
conveyance of the house and lot, after its appraisal, "unless the defendants pay the plaintiff the
debt which is the subject of this action."

It is quite clear, therefore, that under the terms of the contract, as we read it, and as the parties
themselves have interpreted it, the liability of the defendants as to the conveyance of the
house and lot is subsidiary and conditional, being dependent upon their failure to pay the debt
in money. It must follow, therefore, that if the action to recover the debt has prescribed, the
action to compel a conveyance of the house and lot is likewise barred, as the agreement to
make such conveyance was not an independent principal undertaking, but merely a subsidiary
alternative pact relating to the method by which the debt might be paid.




Ong Guan Can vs The Century Incurance Co., Ltd.
GR No. L-22738
December 2, 1934

Facts:
A building of the plaintiff was insured against fire by the defendant in the sum of
P30,000, as well as the goods and merchandise therein contained in the sum of P15,000.
The house and merchandise insured were burnt early in the morning of February 28,
1923, while the policies issued by the defendant in favor of the plaintiff were in force.
The appellant contends that under clause 14 of the conditions of the policies, it may
rebuild the house burnt, and although the house may be smaller, yet it would be
sufficient indemnity to the insured for the actual loss suffered by him. The clause cites
by the appellant is as follows:
The Company may at its option reinstate or replace the property damaged or
destroyed, or any part thereof, instead of paying the amount of the loss of
damages, or may join with any other Company or insurers in so doing, but the
Company shall not be bound to reinstate exactly or completely, but only as
circumstances permit and in reasonable sufficient manner, and in no case shall
the Company be bound to expend more in reinstatement that it would have cost
to reinstate such property as it was at the time of the occurrence of such loss or
damage, nor more than the sum insured by the Company thereon.

Issue:
Whether or not under the obligation arising from the insurance contract is an alternative one

Held:
If this clause of the policies is valid, its effect is to make the obligation of the insurance
company an alternative one, that is to say, that it may either pay the insured value of house, or
rebuild it. It must be noted that in alternative obligations, the debtor, the insurance company in
this case, must notify the creditor of his election, stating which of the two prestations he is
disposed to fulfill, in accordance with article 1133 of the Civil Code. The object of this notice is
to give the creditor opportunity to express his consent, or to impugn the election made by the
debtor, and only after said notice shall the election take legal effect when consented by the
creditor, or if impugned by the latter, when declared proper by a competent court. In the
instant case, the record shows that the appellant company did not give a formal notice of its
election to rebuild, and while the witnesses, Cedrun and Cacho, speak of the proposed
reconstruction of the house destroyed, yet the plaintiff did not give his assent to the
proposition, for the reason that the new house would be smaller and of materials of lower kind
than those employed in the construction of the house destroyed. The election alleged by the
appellant to rebuild the house burnt instead of paying the value of the insurance is improper.



















Clara Tambunting de Legards, et. al. vs Victoria Desbarats Miailhe
GR No. L-3435
April 28, 1951

Facts:
On June 3, 1944, plaintiffs filed a complaint against the original defendant William J. B.
Burke, alleging defendant's unjustified refusal to accept payment in discharge of a
mortgage indebtedness in his favor, and praying that the latter be ordered
(1) to receive the sum of P75,920.83 deposited by plaintiff Clara Tambunting de
Legarda, the mortgagor, on the same date with the clerk of this court in payment
of the mortgage indebtedness of said plaintiff to defendant herein,
(2) to execute the corresponding deed of release of mortgage, and
(3) to pay damages in the sum of P1,000.
The gist of defendant's answer , is that plaintiffs have no cause of action for the reason
that at the instance of plaintiff Clara Tambunting de Legarda an agreement was had on
May 26, 1944, where defendant condoned the interests due and to become due on the
mortgage indebtedness till the termination of the war, in consideration of the
undertaking of said plaintiff (with the consent of her husband Vicente L. Legarda, the
other plaintiff) to pay her obligation to defendant upon such termination of the war;
and that the war then had not yet terminated.

Issue:
Whether or not the said agreement was in the sense that the defendant condoned the interests
then due and which might hereafter become due on said obligation with the understanding
that plaintiff Clara Tambunting de Legarda would pay her obligation upon the termination of
the war

Held:
There is no dispute that on June 3, 1944, Clara Tambunting de Legarda deposited in court the
sum of P75,920.83 for the purpose of satisfying the full amount then due on her obligation. But
it is likewise true that the money deposited was in certified check, representing Japanese
Military notes, which notes defendant Burke refuse to receive as payment a few days before
the consignation. The offer of payment or consignation to be effective must comply with some
legal requirements. As formerly stated, in the mortgage renewal executed by plaintiffs and
defendant on March 16, 1940, defendant was given the option to demand payment of the
obligation either in Philippine currency, or in English currency. But defendant claims that on
that date he could not very well refuse to accept the worthless Japanese Military notes
tendered to him, nor insist on the payment of English currency, for he then entertained the fear
that, had he done so, he would have been reported to the Japanese authorities, taken to Fort
Santiago, and killed. It appears, therefore, that the tender of payment made by the plaintiff in
Japanese Military notes was a valid tender because it was the only currency permissible at the
time, and the same was made in accordance with the agreement because payment in Japanese
Military notes during the occupation is tantamount to payment in the Philippine currency.


































Alejandro Reyes vs Francisco Martinez
GR No. L-1724
December 11, 1905

Facts:
This is an appeal from a judgment rendered by the Court of First Instance of the city of
Manila in an action brought in that court by Alejandro Reyes against Francisco Martinez
upon a promissory note.
The decision of the inferior court was in favor of the defendant, and was based upon the
theory that said promissory note had been executed and delivered in payment of the
sum of 1,200 pesos, which sum had been lost by the defendant to the plaintiff in a game
known as "burro;" that "burro" was a game of chance, and prohibited under the laws in
force in these Islands.

Issue:
Whether or not a debt created by a game of luck or chance is enforcible

Held:
The only defense presented by the defendant in the trial of the cause in the court below was
that said promissory note had been executed and delivered in payment of a sum of money lost
in a game of chance, called "burro," and that said game was among the prohibited games under
the law. Article 1798 of the Civil Code provides that "the law does not permit any action to
claim what is won in a game of chance, luck, or hazard; but the person who loses can not
recover what he may have voluntarily paid, unless there should have been fraud, or should he
be a minor, or incapacitated to administer his property." No proof was introduced in the trial of
the cause to show that any fraud had been practiced, or that the defendant was a minor, or
was incapacitated to administer his property.

The game of "burro" is a common game among the Filipinos, and is generally regarded as a
mere parlor game, and is not a game of chance, luck, or hazard, and is therefore not prohibited
by law. Therefore a person who executes and delivers a promissory note for money lost in the
game of "burro" is liable on such contract, unless fraud had been practiced, or unless such
person is a minor or incapacitated to administer his property.










Martina Quizana vs Gaudencio Redugerio
GR No. L-6220
May 7, 1954

Facts:
The action was originally instituted in the justice of the peace court of Sta. Cruz,
Marinduque, and the same is based on an actionable document attached to the
complaint, signed by the defendants-appellants and containing the following pertinent
provisions:
Na alang-alang sa aming mahigpit na pangangailangan ay kaming magasawa
ay lumapit kay Ginang Martina Quizana, balo, at naninirahan sa Hupi, Sta. Cruz,
Marinduque, at kami ay umutang sa kanya ng halagang Limang Daan at Limang
Pung Piso (P550.00), Salaping umiiral dito sa Filipinas na aming tinanggap na
husto at walang kulang sa kanya sa condicion na ang halagang aming inutang ay
ibabalik o babayaran namin sa kanya sa katapusan ng buwan ng Enero, taong
1949.
Pinagkasunduan din naming magasawa sa sakaling hindi kami makabayad sa
taning na panahon ay aming ipifrenda o isasangla sa kanya ang isa naming
palagay na niogan sa lugar nang Cororocho, barrio ng Balogo, municipio ng
Santa Cruz, lalawigang Marinduque, Kapuluang Filipinas
The defendants-appellants admit the execution of the document, but claim, as special
defense, that since the 31st of January, 1949, they offered to pledge the land specified
in the agreement and transfer possession thereof to the plaintiff-appellee, but that the
latter refused said offer.

Issue:
Whether or not the second part of the obligation is valid and binding

Held:
This second part of the obligation in question is what is known in law as a facultative obligation,
defined in article 1206 of Civil Code of the Philippines, which provides:
ART. 1206. When only one prestation has been agreed upon, but the obligor may render
another in substitution, the obligation is called facultative.

There is nothing in the agreement which would argue against its enforcement. it is not contrary
to law or public morals or public policy, and notwithstanding the absence of any legal provision
at the time it was entered into government it, as the parties had freely and voluntarily entered
into it, there is no ground or reason why it should not be given effect. It is a new right which
should be declared effective at once, in consonance with the provisions of article 2253 of the
Civil Code of the Philippines, thus: ART. 2253. But if a right should be declared for the first time
in this Code, it shall be effective at once, even though the act or event which gives rise thereto
may have been done or may have occurred under the prior legislation, provided said new right
does not prejudice or impair any vested or acquired right, of the same origin.

Marsman vs. Philippine Geoanalytics
G.R. No. 183374
June 29, 2010

Facts:
Marsman Drysdale Land, Inc. (Marsman) and Gotesco Properties, Inc. (Gotesco) entered
into a Joint Venture Agreement (JVA) which stipulated that they undertake a
condominium building project wherein they would invest on the project on a Fifty-Fifty
(50%-50%) basis.
Marsman would contribute property in a buildable condition in the amount of Php
420,000,000.00 and Gotesco would contribute Php 50,000,000.00 as initial down
payment and the balance of Php 370,000,000.00 would be paid out as needed during
construction.
It was stipulated that all cash contributions and obligations would be borne by Gotesco.
For purposes of the venture Marsman and Gotesco hired Philippine Geonanalytics, Inc.
(PGI) to conduct a seismic study on the property prior to the construction of the
building.
Due to debris left on the property PGI failed to drill all the boreholes necessary for the
study but was still able to complete said study. Despite various demands Marsman and
Gotesco failed to pay PGI the amount of Php 284,553.50 and Php 250,800.00 as the cost
of soil exploration and seismic study.
Marsman contends that since according to the JVA, Gotesco is responsible for all cash
contributions needed for the project, thus Gotesco should solely pay for the amount
payable to PGI.
Gotesco contends that Marsman should solely pay for the amount payable to PGI for it
was their fault that PGI was unable to complete the boreholes as they failed to remove
debris on the property.
The RTC ruled that Marsman and Gotesco are jointly liable for the amount payable and
that Gotesco should reimburse Marsman the amount of Php 535,353.50.
The CA then modified the decision of the RTC removing the part of Gotesco paying
Marsman a lump sum amount and instead holding that Gotesco should pay Marsman
50% of the amount due to PGI.
Marsman now contends that the court erred in holding both them and Gotesco jointly
liable for the amount payable to PGI as the JVA between them and Gotesco stipulated
that Gotesco is responsible for all cash liabilities incurred by the project.

Issue:
Whether or not Marsman and Gotesco are jointly liable for the amount payable to PGI.

Held:
Article 1207 of the Civil code provides inter alia two or more debtors in one and the same
obligation does not imply that each one of the former has a right to demand, or that each one
of the latter is bound to render, entire compliance with the prestations and Article 1208 of
the same code provides inter alia the credit or debt shall be presumed to be divided into as
many equal shares as there are creditors or debtors, thus if no stipulation is made to make
the parties solidarily liable and no stipulation to the division of gains and losses, the law
presumes that the parties are joint. The JVA does not affect third parties as it only affects the
parties involved which are Gotesco and Marsman, as Gotesco and Marsman entered into the
contract of service with PGI jointly then they are jointly liable for any claim that PGI is entitled
to against them. Furthermore Article 1797 of the Civil Code which provides that inter alia If
only the share of each partner in the profits has been agreed upon, the share of each in
the losses shall be in the same proportion, thus as Marsman and Gotesco agreed to the 50-
50 percent share in the project the same applies to its liabilities.














Purita Alipio vs. the Court of Appeals and Romeo G. Jaring
G.R. No. 134100
September 29, 2000

Facts:
Spouses Placido and Purita Alipio and Spouses Bienvenido and Remedios Manuel were
sublessees of a 14.5 hectare fishpond leased by Romeo Jaring.
They stipulated that the rent amounting to Php 485,600.00 would be paid in two
installments of Php 300,000.00 and Php 185,600.00, with the second installment falling
due in June 30, 1989. Each of the four sublessees signed the contract.
The sublessees however failed to pay the full amount of the second installment and
were only able to pay the partial amount of Php 50,600.00. Romeo Jaring filed a case of
collection of sum of money on October 13, 1989 against the Alipio and Manuel Spouses.
Purita Alipio contends that since her husband died 10 months prior to the filing of the
suit, Romeo can no longer file the case against her as stated in Rule 3, section 20 of the
1997 Rules of Civil Procedure which provides that an action for recovery of money is
dismissed prior to its final judgment upon the debt of the defendant.
The RTC ruled in favor of Romeo and held that since Purita herself is a party in the
contract she can be held liable for the collection of money.

Issue:
Whether or not the death of Placido releases Purita from the collection of sum of money.

Held:
The contract of sublease was signed by spouses Alipio and Manuel which bind them to pay the
amount of rent to Romeo is governed by Article 161 (1) of the Civil Code which provides that;
All debts and obligations contracted by the husband for the benefit of the conjugal
partnership, and those contracted by the wife, also for the same purpose, in the cases where
she may legally bind the partnership. Thus, the death of Placido automatically extinguished the
Conjugal Partnership of the spouses Alipio. Romeo Jaring cannot hold Purita liable in her
personal capacity but can hold the estate of Placido liable for the collection of the amount.
Furthermore, the judgment of the trial court failed to specify whether the obligation to pay
Romeo the balance of the rent was to be paid jointly or solidarily by the spouses Alipio and
Manuel, Article 1207 of the Civil Code provides that an obligation is only solidary when there is
express stipulation to the same or when the law or the nature of the obligation requires
solidarity. Thus, the estate of Placido Alipio and Spouses Manuel are Jointly liable for the
amount payable to Romeo Jaring.

PH Credit Corporation vs. Court of Appeals and Carlos M. Ferrales
G.R. No. 109648
November 22, 2001

Facts:
PH Credit Corporation filed a suit for collection of sum of money against Pacific Lloyd
Corp., Carlos Farrales, Thomas H. Van Sebille and Federico C. Lim.
A judgment was rendered by the trial court holding all aforementioned liable to pay PH
Credit Corporation the amount of Php 118,814.49 at 18% interest per annumstarting
December 20, 1982 until fully paid; Surcharge of 16% per annum from December 20,
1982; Penalty Charge of 2% per month from December 20, 1982, computed on interest
and principal compounded; Attorneys fees in an amount equivalent to 25% of the total
sum due; and Costs of suit.
A writ of execution was issued and the personal properties of Carlos M. Farrales were
levied and sold at public auction where PH Credit Corp. was the highest bidder.
The judgment failed to specify in the fallo part whether the liability of the
aforementioned debtors were joint or solidary.
PH Credit Corp. contends that the body of the decision holds that the debtors are jointly
and severally liable which should render them solidarily liable.

Issue:
Whether or not the aforementioned parties are solidarily liable.

Held:
Article 1207 and 1208 of the Civil Code provides that in the absence of clear stipulation or of
the law or the nature of the obligation does not require solidary liability then the parties are
presumed to be jointly liable. The statement holding the aforementioned parties as solidarily
liable were only part od the statement of facts of the judgment rendered by the judge, thus in
the absence of any express statement in the fallo portion of the judgment holding the parties
solidarily liable, they are jointly liable. Furthermore, the sale of Carlos M. Farrales property is
deemed void for it was made to answer for the whole obligation against PH Credit Corp., when
parties are jointly liable an execution sale of their property should only be up to the extent of
their liability.



Construction Development Corporation of the Philippines vs.
Rebecca G. Estrella, et. al.
G.R. No. 147791
September 8, 2006

Facts:
Rebecca G. Estrella and her granddaughter, Rachel E. Fletcher boarded a BLTB bus
bound for pasay.
A tractor-truck of Construction Development Corporation of the Philippines (CDCP) hit
the back of the BLBT bus that Rebecca and Rachel were boarding causing them various
injuries.
Respondents then filed a complaint for damages against BLBT, CDCP, Espiridion
Payunan, Jr. and Wilfredo Datinguinoo, the latter two as drivers of the CDCP tractor-
truck and BLTB bus respectively, for their negligence in disobeying traffic laws, driving
recklessly, that CDCP and BLBT did not exercise the diligence of a good father in hiring
their employees and that Both Rachel and Rebecca are entitled to moral damages due
to physical discomfort, serious anxiety, fright and mental anguish, besmirched
reputation and wounded feelings, moral shock, and lifelong social humiliation and actual
damages.
The lower court held that all the parties impleaded by Rachel and Rebecca shall be
jointly and solidarily liable for the award of damages.
CDCP now contends that BLBT and their driver should be solely liable for damages
against Rebecca and Rachel.

Issue:
Whether or not CDCP should be held solidarily liable for the payment of damages.

Held:
As held in Fabre, Jr. v. Court of Appeals, the owner of the vehicle which collided with the
common carrier is held solidarily liable to the injured passenger of the same. The action filed is
one arising from quasi-delict, in cases of quasi-delict the Article 2180 provides that the
obligation imposed by Article 2176 is demandable for the acts or omissions of those persons for
whom one is responsible. Consequently, an action based on quasi-delict may be instituted
against the employer for an employee's act or omission. The liability for the negligent conduct
of the subordinate is direct and primary, but is subject to the defense of due diligence in the
selection and supervision of the employee.

In the instant case, the trial court found that
petitioner failed to prove that it exercised the diligence of a good father of a family in the
selection and supervision of Payunan, Jr.
Thus, the liability of CDCP and BLBT is solidary.









































Republic Glass Corporation and Gervel Inc., vs. Lawrence C. Qua
G.R. No. 144413
July 30, 2004

Facts:
Ladtek Inc. (Ladtek) acquired a loan from Metropolitan Bank and Trust Company
(Metrobank) and Private Development Corporation of the Philippines (PDCP) wherein
Republic Glass Corporation (RPC), Gervel, Inc., (Gervel), Lawrence C. Qua (Qua) were
stockholders of Ladtek and entered the contracts as sureties to Ladteks loan.
RPC, Gervel and Qua stipulated that as sureties they would reimburse each other for any
payment made by one party, regardless of amount, for their respective shares or pro
rata.
Qua pledged 1,892,360 common shares of General Milling Corporation in favor of RGC
and Gervel as security for the payment of any sum which RGC and Gervel may be held
liable under the agreements.
Ladtek defaulted on its loan obligations to Metrobank and PDCP which led to
Metrobank filing a collection case against RPC, Gervel and Qua.
During the pendency of the collection case RPC and Gervel paid Metrobank the amount
of Php 7,000,000.00.
Metrobank issued a quitclaim in favor of RPC and Gervel releasing them from any
liability from the payment of the loan.
Gervel and RPC now demand that Qua reimburse them for their payment of Php
7,000,000.00 to Metrobank as fulfillment of their stipulation to indemnify each other in
case of any payment made by one party.
RPC and Gervel gave Qua notices of foreclosure of Quas pledged shares.
Qua moved for the suspension of the Foreclosure sale, however RPC and Gervel were
able to foreclose said shares.
Qua states that, on the foreclosure sale, RPC and Gervels payment of Php 7,000,000.00
to Metrobank was for the whole obligation, thus RPC and Gervel have no right to
foreclose his share.
However, on the separate case for collection, Qua states that the payment was not for
the entire obligation.
The RTC ruled in favor of Qua but this decision was reversed by the CA, and added that
there was implied novation of the original payment plan by virtue of the indemnification
agreement.
The CA further stated that payment of the entire obligation is a sine qua non condition
before any reimbursement is made.
Issue:
1. Whether or not there was an implied novation.
2. Whether or not full payment Is needed before indemnification by the other parties to the
party who paid is needed.

Held:
1. A novation extinguishes an obligation but in its place creates a new obligation. Novation
extinguishes an obligation by (1) changing its object or principal conditions; (2) substituting the
person of the debtor; and (3) subrogating a third person in the rights of the creditor. Article
1292 of the Civil Code clearly provides that in order that an obligation may be extinguished by
another which substitutes the same, it should be declared in unequivocal terms, or that the old
and new obligations be on every point incompatible with each other. Novation may either be
extinctive or modificatory. Novation is extinctive when an old obligation is terminated by the
creation of a new obligation that takes the place of the former. Novation is merely modificatory
when the old obligation subsists to the extent it remains compatible with the amendatory
agreement. There was no novation as the agreement between the sureties was only to the
payment of reimbursement. Their agreement was that of an indemnity of liability where the
agreement becomes operative as soon as the liability of the person indemnified arises
irrespective of whether or not he has suffered actual loss. Thus, there was no change in the
prestation.

2. As stated the agreement was that of an indemnification agreement of liability, Therefore,
whether the solidary debtor has paid the creditor, the other solidary debtors should indemnify
the former once his liability becomes absolute. However, in this case, the liability of RGC, Gervel
and Qua became absolute simultaneously when Ladtek defaulted in its loan payment. As a
result, RGC, Gervel and Qua all became directly liable at the same time to Metrobank and
PDCP. Thus, RGC and Gervel cannot automatically claim for indemnity from Qua because Qua
himself is liable directly to Metrobank and PDCP. However, in solidary obligations the parties
who have paid may only recover or reimburse from the other parties overpayment of their
respective shares on the obligation. The total obligation of RGC, Gervel and Qua was in the
amount of Php 14,200,854.37, the Php 7,000,000.00 they paid was not in excess of their share
in the obligation, in fact it is less than what their shares require them to pay. Thus,
reimbursement from Qua cannot be obtained by RPC and Gervel.

Industrial Management International Development Corp. (INIMACO)
vs National Laabor Relations Commission
331 Scra 640

Facts:
Private respondents filed a complaint with the Department of Labor and Employment
against Filipinas Carbon Mining Corporation, Gerardo Sicat, Antonio Gonzales, Chin Chin
Gin, Lo Kuan Chin, and petitioner Industrial Management Development Corporation
(INIMACO), for payment of separation pay and unpaid wages.
The decision of the Labor Arbiter held that respondents Filipinas Carbon and Mining
Corp., Gerardo Sicat, Antonio Gonzales/INIMACO, Chiu Chin Gin and Lo Kuan Chin to pay
complainants Enrique Sulit, Esmeraldo Pegarido, Roberto Nemenzo and Dario Go to be
deposited with the Commissionwithin 10 days from receipt of the Decision. All other
claims were dismissed.
Since no appeal was filed within the reglementary period, the Decision of the Labor
Arbiter became final and executor. The Labor Arbiter then issued a writ of execution but
was returned unsatisfied. The Labor Arbiter then issued an Alias Writ of Execution
commanding the complainants to proceed to the premises of respondents to collect and
turn over the ordered amount. Should a failure to collect the said amount in cash be
encountered, they were authorized to cause the satisfaction of the same on the
movable or immovable property(s) of respondent not exempt from execution.
Petitioner then filed a Motion to Quash Alias Writ of Execution and set aside the
Decision alleging that the alias writ of execution altered and changed the decision by
changing the liability of therein respondents from joint to solidary. The motion was
denied by the lAbor Arbiter.
The petitioner then filed and appeal and the NLRC dismissed the appeal holding that the
Writ of Execution be given due course in all respects.
A Motion to Compel Sheriff to Accept Payment representing one sixth pro rate share of
petitioner as full and final satisfaction of judgment. The private respondents opposed
the motion and the Labor Arbiter denied the motion ruling that the amount offered by
INIMACO is to be accepted by the Sheriff as partial satisfaction of the judgment and to
proceed with the enforcement of the Alias Writ of Execution.
An appeal was again filed to the NLRC which was consequently denied ruling that
INIMACO would reopen the issue which was already resolved against it thus, not
keeping with the established rules of practice and procedure to allow the attempt of
INIMACO to delay final disposition of the case.

Issue:
Whether or not petitioners liability is solidary or not.

Held:

The court held, NO. INIMACOs liability is not solidary but merely joint and that the respondent
NLRC acted with grave abuse of discretion in upholding the Alias Writ of Execution.

A solidary or joint and several obligation is one in which each debtor is liable for the entire
obligation, and each creditor is entitled to demand the whole obligation. In a joint obligation
each obligor answers only for a part of the whole liability and to each obligee belongs only a
part of the correlative rights.

Well-entrenched is the rule that solidary obligation cannot lightly be inferred. There is a
solidary liability only when the obligation expressly so states, when the law so provides or when
the nature of the obligation so requires.

















Metro Manila Transit Coprporation vs Court of Appeals
G.R. No. 104408

Facts:
On August 28, 1979, Nenita Custodio boarded as a paying passenger a public utility
jeepney driven by defendant Agudo Calebag and owned by Victorino Lamayo. While in
transit, a collision between the said jeepney and a Metro Manila Transit Corp. (MMTC)
bus occurred. The collision impact caused Custodio to hit the front windshield of the
passenger jeepney and was thrown out therefrom, falling onto the pavement
unconscious with serious physical injuries.
A complaint for damages was filed by private respondent, a minor, against all of therein
named defendants following their refusal to pay the expenses incurred by Custodio as
result of the collision.
The trial court rendered judgment dismissing the complaint against Metro Manila
Transit Corporation and ordering Calebag, Lamayo and Godofredo C. Leonardo to pay
the NenitaCustodio jointly and severally.
Custodios motion to reconsider the portion the of the trial courts decision absolving
MMTC from liability was denied for lack of merit. An appeal was filed with the Court of
Appeals, who modified the trial courts decision by holding MMTC solidarily liable with
the other defendants.
The Court of Appeals denied subsequent motions for reconsideration of both Custodio
and MMTC.

Issue:
Whether or not MMTC is vicariously liable for damages based on quasi-delict due to Calebags
negligence

Held:
It is procedurally required for each party in a case to prove his own affirmative assertion by the
degree of evidence required by law.In civil cases, the degree of evidence required of a party in
order to support his claim is preponderance of evidence, or that evidence adduced by one party
which is more conclusive and credible than that of the other party. It is, therefore, incumbent
on the plaintiff who is claiming a right to prove his case. Corollarily, defendant must likewise
prove own allegation to buttress its claim that it is not liable.

The case at bar is clearly within the coverage of Article 2176 and 2177, in relation to Article
2180, of the Civil Code provisions on quasi-delicts as all the elements thereof are present, to
wit: (1) damages suffered by the plaintiff, (2) fault or negligence of the defendant or some
other person for whose act he must respond, and (3) the connection of cause and effect
between fault or negligence of the defendant and the damages incurred by plaintiff.It is to be
noted that petitioner was originally sued as employer of driver Leonardo under Article 2180,
the pertinent parts of which provides that:
The obligation imposed by article 2176 is demandable not only for one's own acts or omissions,
but also for those of persons for whom one is responsible. Employers shall be liable for
damages caused by their employees and household helpers acting within the scope of their
assigned tasks, even though the former are not engaged in any business or industry. The
responsibility treated of in this article shall cease when the persons herein mentioned prove
that they observed all the diligence of a good father of a family to prevent damage.
The basis of the employer's vicarious liability has been explained under this ratiocination: The
responsibility imposed by this article arises by virtue of a presumptionjuristantumof negligence
on the part of the persons made responsible under the article, derived from their failure to
exercise due care and vigilance over the acts of subordinates to prevent them from causing
damage. Negligence is imputed to them by law, unless they prove the contrary. Thus, the last
paragraph of the article says that such responsibility ceases if is proved that the persons who
might be held responsible under it exercised the diligence of a good father of a family
(diligentissimipatrisfamilias) to prevent damage. It is clear, therefore, that it is not
representation, nor interest, nor even the necessity of having somebody else answer for the
damages caused by the persons devoid of personality, but it is the non-performance of certain
duties of precaution and prudence imposed upon the persons who become responsible by civil
bond uniting the actor to them, which forms the foundation of such responsibility. Finally, we
believe that respondent court acted in the exercise of sound discretion when it affirmed the
trial court's award, without requiring the payment of interest thereon as an item of damages
just because of delay in the determination thereof, especially since private respondent did not
specifically pray therefoer in her complaint. Article 2211 of the Civil Code provides that in quasi-
delicts, interest as a part of the damages may be awarded in the discretion of the court, and not
as a matter of right. We do not perceive that there have been international dilatory maneuvers
or any special circumstances which would justify that additional award and, consequently, we
find no reason to disturb said ruling.





Baldomero Inciong, Jr. vs Court of Appeals and Philippine Bank of
Communications
G.R. No. 96405

Facts:
Petitioners liabitlity resulted from a promissory note which he signed with Rene C.
Naybe and Gregorio D. Pantanosas holding themselves jointly and severally liable to
private respondent.
The promissory note went due and was left unpaid. Private respondent sent telegrams
and letters through registered mail letter of demands for payment to Rene C. Naybe.
Since the demands were left unanswered, private respondent filed a complaint for
collection against the three obligors.
The complaint was dismissed for failure to prosecute. And as prayed for by Gregorio
Pantanosas, the lower court dismissed the case against him. In serving the summons,
the sheriff learned that defendant Rene C. Naybe had gone to Saudi Arabia, thus, only
the summons to petitioner was served.

Issue:
Whether or not petitioner should be held liable for the obligation to respondent.

Held:
Petitioner signed the promissory note as a solidary co-maker and not as a guarantor. A solidary
or joint and several obligation is one in which each debtor is liable for the entire obligation, and
each creditor is entitled to demand the whole obligation. On the other hand, Article 2047 of the
Civil Code states:
"By guaranty a person, called the guarantor, binds himself to the creditor to fulfill the obligation
of the principal debtor in case the latter should fail to do so.

Because the promissory note involved in this case expressly states that the three signatories
therein are jointly and severally liable, any one, some or all of them may be proceeded against
for the entire obligation.
Philippine Blooming Mill, Inc. vs Court of Appeals
G.R. No. 142381

FACTS:
Traders Royal Bank filed suit to compel Alfredo Ching to pay the following amounts:
P959,611.96 under Letter of Credit No. 479 AD covered by Trust Receipt No. 106
P1,191,137.13 under Letter of Credit No. 563 AD covered by Trust Receipt No. 113
P3,500,000 under the trust loan covered by a notarized Promissory Note.
Alferedo Ching was the Sevio Vice President of Philippine Blooming Mill (PBM) and in his
personal capacity signed a Deed of Suretyship binding himself as primary obligor and
not as guarantor of the loan obtained from TRB.

The TRB granted letters of credit on application of Ching in his capacity as Senior VP of
PBM. Ching later accomplished and delivered to TRB trust receipts. Under the trust
receipts, PBM had the right to sell the merchandise for cash with the obligation to turn
over the entire proceeds of the sale to TRB as payment of their indebtness.

PBM defaulted in the payment of the Trust receipts and of their trust loan. PBM and
Ching filed a petition for suspension of payments with the SEC that sought to suspend
payment of PBMs obligations and prayed that the SEC allow PBM to continue its normal
business operations free from the interference of its creditors. The SEC placed PBMs
assets, liabilities, and obligations under the rehabilitation receivership of Kalaw, Escaler
and Associates.

Ten months after the SEC placed PBM under rehabilitation receivership. TRB filed with
the trial court a complaint for collection against PBM and Ching. TRB asked the trial
court to order defendants to pay solidarily their indebtedness. The complaint was then
withdrawn by the TRB on the ground that SEC had already placed PBM under
receivership. The trial court thus dismissed the complaint.

PBM and Ching also moved for the dismissal of the complaint on the ground that the
trial court had no jurisdiction over the subject matter of the case since they assumed
the jurisdiction of the SEC over all of PBMs assets and liabilities. TRB opposed this
motion arguing that Ching is being sued in his personal capacity.

The trial court denied the motion to dismiss with respect to Ching and affirmed its
dismissal of the case with respect to PBM. TRB was holding Ching liable under the Deed
of Suretyship. As his obligation was solidary, the trial court ruled that TRB could proceed
against Ching.

Upon trial courts denial of his Motion for Reconsideration, Ching applied for a Petition
for Certiorari and Prohibition before the Court of Appeals. The appellate court granted
Chings petition and ordered the dismissal of the case since SEC assumed jurisdiction
over Ching and PBM. The TRB assailed the decision of the CA and on the higher courts
ruling upheld that TRB can sue Ching as an individual.

The trial court found Ching liable to TRB for P19,333,558.16 under the Deed of
Suretyship. On appeal, the CA affirmed the decision of the lower court with
modifications with respect to Chings liability.

Issue:
Whether or not Alfredo Ching is liable to TRB.

Held:
This Court has already resolved the issue of Chings separate liability as a surety despite the
rehabilitation proceedings before the SEC. We held in Traders Royal Bank that: Although Ching
was impleaded in SEC Case No. 2250, as a co-petitioner of PBM, the SEC could not assume
jurisdiction over his person and properties. The Securities and Exchange Commission was
empowered, as rehabilitation receiver, to take custody and control of the assets and properties
of PBM only, for the SEC has jurisdiction over corporations only [and] not over private
individuals, except stockholders in an intra-corporate dispute (Sec. 5, P.D. 902-A and Sec. 2 of
P.D. 1758). Being a nominal party in SEC Case No. 2250, Chings properties were not included in
the rehabilitation receivership that the SEC constituted to take custody of PBMs assets.
Therefore, the petitioner bank was not barred from filing a suit against Ching, as a surety for
PBM. An anomalous situation would arise if individual sureties for debtor corporations may
escape liability by simply co-filing with the corporation a petition for suspension of payments in
the SEC whose jurisdiction is limited only to corporations and their corporate assets. Ching can
be sued separately to enforce his liability as surety for PBM, as expressly provided by Article
1216 of the New Civil Code.

Ching is liable for credit obligations contracted by PBM against TRB before and after the
execution of the 21 July 1977 Deed of Suretyship. This is evident from the tenor of the deed
itself, referring to amounts PBM may now be indebted or may hereafter become indebted to
TRB. The law expressly allows a suretyship for future debts. Article 2053 of the Civil Code
provides: A guaranty may also be given as security for future debts, the amount of which is not
yet known; there can be no claim against the guarantor until the debt is liquidated. A
conditional obligation may also be secured. Ching is liable for credit obligations contracted by
PBM against TRB before and after the execution of the 21 July 1977 Deed of Suretyship. This is
evident from the tenor of the deed itself, referring to amounts PBM may now be indebted or
may hereafter become indebted to TRB. The law expressly allows a suretyship for future
debts. Article 2053 of the Civil Code provides: A guaranty may also be given as security for
future debts, the amount of which is not yet known; there can be no claim against the
guarantor until the debt is liquidated. A conditional obligation may also be secured.



















Queensland Tokyo Commodities, Inc. vs Thomas George
G.R. 172727

Facts:
Queensland Tokyo Commodities , Inc. (QTCI), a licensed broker engaged in the trading of
commodity futures entered into a Customers Agreement with Thomas George. Charlie
Collado signed the agreement in behalf of QTCI. Forming part of the agreement was the
Special Power of Attorney executed by respondent appointing Guillermo Mendoza, Jr.
as his attorney-in-fact with full authority to trade and manage his account.
QTCI was issued a Cease-and-Desist Order by the SEC. Alarmed by this, respondent
demanded QTCI to return his investment but it was not heeded. He also learned that
Mendoza and Oniler Lontoc were not licensed commodity futures salesmen.
Respondent files a complainr for Recovery of Investment with Damages with the SEC
against petitioners and the unlicensed salesmen. Only the petitioners answered the
complaint, as Mendoza and Lontoc had since vanished into thin air.
The SEC ruled in favour of the respondent ordering the petitioners to pay the former his
investment and moral damages. The petitioners filed an appeal with the Commission en
banc, but the appeal was dismissed due to non verification of the Notice of Appeal and
the Memorandum on Appeal.
Petitioners filed a petition for review with the CA under Rule 43. The CA declared the
dismissal of the petitioners appeal by the Commission en banc improper and affirmed
the decision of the SEC.

Issue:
Whether or not individual petitioners are solidarily liable for the damages and awards due to
the respondent

Held:
Petitioners allowed unlicensed individuals to engage in, solicit or accept orders in futures
contracts, and thus, transgressed the Revised Rules and Regulations on Commodity Futures
Trading. Batas Pambansa Bilang (B.P. Blg.) 178 or the Revised Securities Act explicitly provided
in Sec. 53:... (b) Every contract executed in violation of any provision of this Act, or any rule or
regulation thereunder, and every contract, including any contract for listing a security on an
exchange heretofore or hereafter made, the performance of which involves the violation of, or
the continuance of any relationship or practice in violation of, any provision of this Act, or any
rule and regulation thereunder, shall be void.

It is settled that a void contract is equivalent to nothing; it produces no civil effect. It does not
create, modify, or extinguish a juridical relation. Parties to a void agreement cannot expect the
aid of the law; the courts leave them as they are, because they are deemed in pari delicto or in
equal fault. This rule, however, is not absolute. Article 1412 of the Civil Code provides an
exception, and permits the return of that which may have been given under a void contract.
Thus: Art. 1412. If the act in which the unlawful or forbidden cause consists does not
constitute a criminal offense, the following rules shall be observed:
(1) When the fault is on the part of both contracting parties, neither may recover what he
has given by virtue of the contract, or demand the performance of the other's undertaking;
(2) When only one of the contracting parties is at fault, he cannot recover what he has
given by reason of the contract, or ask for the fulfillment of what has been promised him. The
other, who is not at fault, may demand the return of what he has given without any obligation
to comply with his promise.












Shrimp-Specialist vs. Fuji-Triumph Agri-Industrial Corporation
G.R. No. 168756

Facts:
Shrimp Specialist, through their president Eugene Lim, entered into an agreement with
Fuji-Triumph (Fuji) of distributorship, Fuji would supply Shrimp Specialist with prawn
feeds on a credit basis.
During the course of the agreement Shrimp Specialist issued a Stop Payment order for
the nine post-dated checks issued to Fuji for payment of the delivery of the feeds
alleging that the feeds were contaminated with aflatoxin.
Shrimp Specialist and Fuji then entered into a written agreement where Shrimp
Specialist, acting through Eugene Lim, would replace the nine post-dated checks in the
event that Fuji would replace the feeds that were contaminated with uncontaminated
ones.
Upon presentment of the replacement checks, all were dishonoured due to another
Stop payment order from Shrimp Specialist stating that Fuji failed to replace the feeds.
Fuji filed a case of recovery of sum of money against Shrimp specialist where the RTC
ruled in favour of Fuji finding that Shrimp Specialist did not present evidence that the
feeds delivered were in fact contaminated and that the written agreement did not
expressly state that Fuji admitted to delivering contaminated feeds and holding Shrimp
Specialist and Eugene Lim solidarily liable for the amount due.
The CA modified the decision by removing Eugene Lim from the obligation and only
holding Shrimp Specialist solely liable for the amount due.

Issues:
1) Whether or not the written agreement between Shrimp Specialist and Fuji was am
admission in Fujis part that the delivered feeds were contaminated.
2) Whether or not Eugene Lim and Shrimp Specialist should be held solidarily liable for the
obligation.

Held:
1) It is a rule that a statement is not competent as an admission where it does not,
under a reasonable construction, appear to admit or acknowledge the fact which is
sought to be proved by it. An admission or declaration to be competent must have
been expressed in definite, certain and unequivocal language; to inform in advance in
case the same checks cannot be deposited for failure to replace the defective feeds is
not expressed in definite, certain and unequivocal language that Fuji admitted to
delivering defective feeds. Furthermore, Shrimp Specialist did not in fact include Fuji in
the testing of the feeds for contamination and that receipts shown by Fuji that the feeds
were received in good condition by Shrimp Specialist contradicts their claim.

2) The general rule is that obligations incurred by the corporation, acting
through its directors, officers, and employees, are its sole liabilities.
However, solidary liability may be incurred, but only under the following
exceptional circumstances:When directors and trustees or, in
appropriate cases, the officers of a corporation: (a) vote for or assent to
patently unlawful acts of the corporation; (b) act in bad faith or with
gross negligence in directing the corporate affairs; (c) are guilty of conflict
of interest to the prejudice of the corporation, its stockholders or
members, and other persons;When a director or officer has consented to
the issuance of watered stocks or who, having knowledge thereof, did
not forthwith file with the corporate secretary his written objection
thereto; When a director, trustee or officer has contractually agreed or
stipulated to hold himself personally and solidarily liable with the
corporation; orWhen a director, trustee or officer is made, by specific
provision of law, personally liable for his corporate action.

None of these circumstances are found in these case and no evidence is
present showing that Eugene Lim and Shrimp Specialist are in fact one in
the same, the doctrine of piercing the veil is unnecessary.
Asset Builders Corporation vs. Stronghold Insurance Company, Inc.
G.R. No. 187116

Facts:
Asset Builders Corporation (ABC) entered into an agreement with Lucky Star Drilling &
Construction Company (Lucky Star) as part of the completion of its project to construct
the ACG Commercial Complex.
Lucky Star was to supply labor, materials, tools, and equipment including technical
supervision to drill one exploratory production well on the project site. The total
contract price was Php 1,150,000.00.
Lucky Star engaged respondent Stronghold to guarantee faithful compliance with
agreement with ABC which issued two bonds in favor of petitioner. The surety bond
dated May 9, 2006, covers the amount of Php 575,000.00 or the required down
payment for the drilling work. The performance bond issued on the same date covers
the sum of Php 345,000.00.
On May 20,2006, ABC paid Lucky Star Php575,000.00 as advance payment, representing
50% of the contract price. Lucky Star, thereafter, commenced the drilling work but only
managed to accomplish only 10% of the work by July 18, 2006, just a few days before
the agreed completion of 60 calendar days. Petitioner sent a demand letter to Lucky
Star on July 18, 2006 for the immediate completion of the drilling work with a threat to
cancel the agreement and forfeit the bonds should it still fail to complete said project
within the agreed period.
On August 3, 2006, ABC sent a Notice of Rescission of Contract with Demand for
Damages to Lucky Star. And on August 16, 2006, ABC sent a Notice of Claim for payment
to Stronghold to make good its obligation under its bonds. Despite these notices, ABC
did not receive any reply either from Lucky Star or Stronghold, prompting it to file its
Complaint for Rescission with Damages against both before the RTC on November 21,
2006.
On February 27, 2009, the RTC rendered the assailed decision ordering Lucky Star to pay
ABC but absolving Stronghold from liability.

Issue:
Whether or not Stronghold Insurance, Inc., as surety, can be held liable under its bonds.

Held:
Respondent, along with its principal, Lucky Star bound itself to the petitioner when it executed
in its favor surety and performance bonds. The contents of the said contracts clearly establish
that the parties entered into a surety agreement as defined under Article 2047 of the New Civil
Code.

In Article 2047, the surety undertakes to be bound solidarily with the principal obligor which
makes a surety agreement an ancillary contract as it presupposes the existence of the principal
contract. Although the contract of 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 benefit therefrom. The surety assumes
liability as a regular party to the undertaking.

Accordingly, after liability has attach to the principal, the oblige or, in this case, the petitioner,
can exercise the right to proceed against Lucky Star or respondent or both. Article 1216 of the
New Civil Code states: The creditor may proceed against any one of the solidary debtors or
some or all of them simultaneously.

In fine, respondent should be answerable to petitioner on account of Lucky Stars non-
performance of its obligation as guaranteed by the performance bond.
Finally, Article 121722 of the New Civil Code acknowledges the right of reimbursement from co-
debtor (the principal co-debtor, in case of suretyship) in favor of the one who paid (the surety).
Thus, respondent is entitled to reimbursement from Lucky Star for the amount it may be
required to pay petitioner arising from its bonds.







Eparwa Security and Janitorial Services, Inc. vs Liceo de Cagayan
University
G.R. No. 150402

Facts:
Eparwa dn LDCU, through their representatives entered into a Contract for security
services. Eparwa allocated the contracted amount of P5,000.00 per security guard per
month.
Security guards whom Eparwa assigned to LDCU files a complaint before the NLRC
against both Eparwa and LDCU for underpayment of salary, legal holiday pay, 13
th

month pay, rest day, service incentive leave, night shift differential, overtime pay and
payment for attorneys fees.
LDCU made a cross-claim and prayed that Eparwa should reimburse LDCU for any
payment to the security guards.
In its decision, the Labor Arbiter found that the security guards are entitled to wage
differentials and premium for holiday and rest day work. It held that Eparwa and LDCU
are solidarily liable pursuant to Article 109 of the Labor Code. LDCU and Eparwa, both
subsequently filed appeals before the NLRC.
The NLRC found that the security guards are entitled to wage differentials and premium
for holiday and rest day work. Although the NLRC held Eparwa and LDCU solidarily liable
for the wage differential and premium, it did not require Eparwa to reimburse LDCU fot
its payments to the security guards. Eparwa and LDCU again filed separate motions for
partial reconsideration.
The NLRC declared that although Eparwa and LDCU are solidarily liable for the monetary
award, LDCU alone is ultimately liable. LDCU then files a petition for certiorari before
the appellate court.
The appellate court granted LDCUs petition and reinstated the Labor Arbiters decision.
The appellate court also allowed LDCU to claim reimbursement from Eparwa. Eparwa
then filed a motion for reconsideration which was denied for lack of merit.

Issue:
Whether or not LDCU alone is ultimately liable for the wage differentials and premiums of the
security guards.

Held:
The wage differentials and premiums of the security guards id Eparwas and LDCUs solidary
liability and LDCUs ultimate liability. Articles 106, 107 and 109 of the Labor Code read: Art. 106.
Contractor or subcontractor. Whenever an employer enters into a contract with another
person for the performance of the formers work, the employees of the contractor and of the
latters subcontractor, if any, shall be paid in accordance with the provisions of this Code. In the
event that the contractor or subcontractor fails to pay the wages of his employees in
accordance with this Code, the employer shall be jointly and severally liable with his contractor
or subcontractor to such employees to the extent of the work performed under the contract, in
the same manner and extent that he is liable to employees directly employed by him.

The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out
of labor to protect the rights of workers established under this Code. In so prohibiting or
restricting, he may make appropriate distinctions between labor-only contracting and job
contracting as well as differentiations within these types of contracting and determine who
among the parties involved shall be considered the employer for purposes of this Code, to
prevent any violation or circumvention of any provision of this Code.

There is labor-only contracting where the person supplying workers to an employer does not
have substantial capital or investment in the form of tools, equipment, machineries, work
premises, among others, and the workers recruited and placed by such persons are performing
activities which are directly related to the principal business of the employer. In such cases, the
person or intermediary shall be considered merely as an agent of the employer who shall be
responsible to the workers in the same manner and extent as if the latter were directly
employed by him. Article 107. Indirect employer. The provisions of the immediately
preceding Article shall likewise apply to any person, partnership, association or corporation
which, not being an employer, contracts with an independent contractor for the performance
of any work, task, job or project. Article 109. Solidary liability. The provisions of existing
laws to the contrary notwithstanding, every employer or indirect employer shall be held
responsible with his contractor or subcontractor for any violation of any provision of this Code.
For purposes of determining the extent of their civil liability under this Chapter, they shall be
considered as direct employers. For the security guards, the actual source of the payment of
their wage differentials and premium for holiday and rest day work does not matter as long as
they are paid. This is the import of Eparwa and LDCUs solidary liability. Creditors, such as the
security guards, may collect from anyone of the solidary debtors. Solidary liability does not
mean that, as between themselves, two solidary debtors are liable for only half of the payment.
LDCUs ultimate liability comes into play because of the expiration of the Contract for Security
Services. There is no privity of contract between the security guards and LDCU, but LDCUs
liability to the security guards remains because of Articles 106, 107 and 109 of the Labor Code.
Eparwa is already precluded from asking LDCU for an adjustment in the contract price because
of the expiration of the contract, but Eparwas liability to the security guards remains because
of their employer-employee relationship. In lieu of an adjustment in the contract price, Eparwa
may claim reimbursement from LDCU for any payment it may make to the security guards.
However, LDCU cannot claim any reimbursement from Eparwa for any payment it may make to
the security guards.



P.T. Cerna Corporation vs Court of Appeals
G.R. No. 91622

Facts:
The subjects of this case are three personal properties, all of which are jaw crushers.
The first one is a rock crusher, purchased from Bormaheco, Inc. The other two are US
Mfg. jaw crushers, both purchased from the International Tractor Sales.
Both parties, petitioner and private respondent Scheider, claim ownership over the
three jaw crushers. Petitioner anchored its claim of ownership of the first rock crusher
on the Customers Copy of an invoice no. 43984 issued in the name of the corporation
by Bormaheco, Inc., and another invoice for the other two crushers by the International
Tractor and Equipment Sales. All of these purchases were purportedly paid through the
corporation checks duly signed by its President and Vice-President.
Private respondent Scheider claimed that the three rock crushers were actually
purchased by hm and in reality are owned by him. He presented the Sales Department
Copy of the same Invoice No. 43984 which was in his name properly countersigned by
Mr. Cevantes, the President of Bormaheco. He also presented a notarized deed of sale
of said rock crushers executed by Bormaheco in his favor and a further certification by
Mr. Cervantes stating that the purchaser and owner of the said equipment was Mr.
Peter Scheider. For the other two rock crushers, he managed to present a notarized
deed of sale executes by Mr. Virgil Lundberg in his favor. In connection with this, he
presented a delivery receipt and a certification by Mr. Lundberg attesting that he Is the
purchaser and owner of the two rock crushers.
Private respondent however, admitted that the purchase price of the crushers were [aid
for by petitioner, but only to off-set outstanding obligations of the same to him for
various spare parts sold to petitioner, prior to the dispute.

Issue:
Who, between the claimants, is the rightful owner of the three jaw crushers.

Held:
We rule in favor of private respondent Scheider.

Petitioner relies heavily on the invoices as evidence of purchase and delivery. It has been held
time and again that the issuance of a sales invoice does not prove transfer of ownership of the
thing sold to the buyer. An invoice is nothing more than a detailed statement of the nature,
quantity and cost of the thing sold and has been considered not a bill of sale.
The Deeds of Sale, being notarial documents, are evidence of the facts in clear, unequivocal
manner therein expressed. As such, they have in their favor, the presumption of regularity.
Petitioner failed miserably to overcome the binding force and effect of the deeds of sale.

In civil cases, the burden of proof rests upon the party who, as determined by the pleadings or
the nature of the case, asserts the affirmative of an issue. In this case, the burden lies on the
petitioner, who is duty bound to prove the allegations in its complaint. As this Court has held,
he who alleges a fact has the burden of proving it and a mere allegation is not evidence. A
careful evaluation of the evidence presented by petitioner reveals its insufficiency to detract
from the evidentiary force of the public instrument which appears on its face, as having been
drawn up with all the formalities prescribed by the law. This leads Us to the inescapable
conclusion that private respondent Scheider is the owner of the litigated properties.










Natividad P. Nazareno vs Court of Appeals
G.R. No. 138842

Facts:
Maximino Nazareno, Sr. and Aurea Poblete, as husband and wife, acquired properties in
Quezon City and Cavite Province, during their marriage. They had five children, namely,
Natividad, Romeo, Jose, Pacifico, and Maximino Jr.
After the death of Maximino Sr., Romeo filed an intestate case in the Court of First
Instance in Cavite. Upon the reorganization of the courts, the case was transferred to
the RTC of Naic, Cavite. Romeo was appointed administrator of his fathers estate.
In the course of the proceedings, Romeo discovered that his parents executed several
deeds of sale conveying a number of real properties in favor of his sister, Natividad.
Among the lots covered by the Deed of Sale is Lot 3-B. This lot has been occupied by
Romeo, his wife Eliza, and Maximino Jr. Unknown to Romeo, Natividad sold the lot to
Maximino Jr. for which the latter was issued TCT No. 293701 by the Register of Deeds of
Quezon City.
When Romeo found out about the ale to Maximino Jr., he and his wife locked Maximino
Jr. out of the house. The latter then brought an action for recovery of possession and
damages with prayer for writs of preliminary injunction and mandatory injunction with
the RTC. The trial court ruled in favor of Maximino Jr. The Court of Appeals affirmed the
decision of the trial court.
Romeo in turn filed, on behalf of the estate of Maximino Sr., for annulment of sale with
damages against Natividad and Maximino Jr. Romeo sought the declaration of nullity of
the sale to Natividad and Maximino Jr. on the ground that both sales were void for lack
of consideration.
Natividad and Maximino Jr., filed a third-party complaint against the spouses Romeo
and Eliza alleging that Lot 3 was included in the Deed of Absolute Sale to Natividad and
that Romeo secured for himself a new title in his name for the said lot. They therefore
sought the annulment and cancellation of the transfer to Romeo and the cancellation of
his title, the eviction of Romeo and Eliza and all persons claiming rights from Lot 3, and
the payment of damages.
The lower court rendered judgment declaring the nullity of the Deed of Sale except Lots
3, 3-B, 13 and 14 which had passed on to third persons, Natividad shall hold the rest in
trust for Jose Nazareno to whom the same had been adjucated. The defendants
counter-claim and the third-party complaint are dismissed.
Natividad and Maximino Jr. filed a motion for reconsideration. As a result, the court
modified its decision.On appeal to the Court of Appeals, the trial courts decision was
modified in the sense that titles to Lot 3 and Lot 3-B, as well as Lots 10 and 11 were
cancelled and ordered restored to the estate of Maximino Nazareno, Sr. Petitioners filed
a motion for reconsideration but the motion was denied.

Issue:
Whether or not the lots in question as the prestation are divisible or indivisible.

Held:
An obligation is indivisible when it cannot be validly performed in parts, whatever may be the
nature of the thing which is the object thereof. The indivisibility refers to the prestation and not
to the object thereof. In the present case, the Deed of Sale of January 29, 1970 supposedly
conveyed the six lots to Natividad. The obligation is clearly indivisible because the performance
of the contract cannot be done in parts, otherwise the value of what is transferred is
diminished. Petitioners are therefore mistaken in basing the indivisibility of a contract on the
number of obligors. In any case, if petitioners only point is that the estate of Maximino, Sr.
alone cannot contest the validity of the Deed of Sale because the estate of Aurea has not yet
been settled, the argument would nonetheless be without merit. The validity of the contract
can be questioned by anyone affected by it. A void contract is inexistent from the beginning.
Hence, even if the estate of Maximino, Sr. alone contests the validity of the sale, the outcome
of the suit will bind the estate of Aurea as if no sale took place at all.













Aurelio P. Alonzo vs Jaime and Perlita San Juan
G.R. No. 137549

Facts:
A complaint for recovery of possession was filed by Aurelio P. Alonzo and Teresita A.
Sison against Jaime and Perlita San Juan alleging that they are a the owners of a parcel
of land located at Lot 3, Block 11, M. Agoncillo St., Novaliches, Quezon City.
The plaintiffs discovered that the portion of the said parcel of land was occupied by the
defendants for more than a year, without their prior knowledge or consent. Defendants
were sent a demand letter in August of 1996 requiring them to vacate the property but
they refused to comply, hence, filing the Complaint. During pendency of the case, the
parties agreed to enter into a Compromise Agreement which was approved by the trial
court.
In the Compromise Agreement, it was expressly stipulated that should any two of the
installments of the purchase price be unpaid by the defendants, the said agreement
shall be considered null and void.
Alleging that the respondents failed to abide by the provisions of the Compromise
agreement by their failure to pat the amounts due thereon, plaintiffs sent a letter
demanding that the defendants vacate the premises and subsequently files an Amended
Motion for Execution.
In the Amended Motion for Execution, the plaintiffs expressly admitted that the
defendants failed to pay the installments for July 31, 1997 and August 31, 1997 on their
due dates; hence the Compromise Agreement submitted by the parties became null and
void.
The Amended Motion for Execution and subsequent Motion for Reconsideration filed by
the plaintiffs were denied since the Court has no basis to direct the issuance of a writ of
execution because the Compromise Agreement submitted by the parties have been
rendered null and void.

Issue:
Whether or not the trial courts interpretation of the Compromise agreement entered into by
the parties was correct.

Held:
A review and examination of payments made by the respondents to the plaintiffs showed that
the checks were issued by a Cirila Cruz, whose relation to the respondents was never given
clarification. These checks were accompanied by vouchers with particulars stating that each
check issued is additional partial payment to the plaintiffs by the defendants.

The law requires that the party who alleges a fact has the burden of proving it. In this case, the
burden of proof is on the respondents because they allege an affirmative defense, namely
payment. As a rule, one who pleads payment has the burden of proving it. The debtor has the
burden of showing that the obligation has been cleared by payment.
Apropos is the rule so well-settled that a receipt of payment is the best evidence of the fact of
payment. A receipt is a written and signed acknowledgement that money or goods have been
delivered, while a voucher is a documentary record of a business transaction. The references
presented to alleged check payments in the vouchers do not vest them with the character of
receipts.

Even assuming that the payments were made, it has not been shown to the fu;; satisfaction of
the Court whether the payments were made specifically to satisfy respondents obligation nor
were the circumstances under which payments were made explained, taking into consideration
the conditions of the Compromise Agreement.

An obligation may be cleared by payment. However, two requisites must concur: identity of
prestation and its integrity. The first means the very thing due must be released and the second
that the prestation be fulfilled completely. In this case the creditor must receive and
acknowledge full payment from the debtor. No acknowledgement or proof was shown to the
satisfaction of the court.

Compromise agreements are contracts, wherein the parties undertake reciprocal obligations to
resolve their differences, thus avoiding litigation, or put and end to one already commenced.
Article 1374 of the Civil Code requires that the various stipulations of a contract shall be
interpreted together, attributing to the doubtful ones that sense which may result from all of
them taken jointly.

In this case, it was an error on the part of the trial court to have interpreted the compromise
agreement in the manner it has done so. If we were to follow the argument of the trial court to
its logical conclusion, then it would mean that the parties would have to go back to the
beginning and re-litigate what they had already put to rest when they entered the compromise
agreement.

The reciprocal concessions are the very heart and life of every compromise agreement. By its
nature, it brings the parties to agree to something which neither of them may actually want,
but for the peace it will bring them without a protracted litigation. With this, the principle of
autonomy of contracts must be respected. The contract between respondent and petitioner
have the force of law between them. Respondents are thus bound to fulfill what has been
expressly stipulated therein. In the compromise agreement, it was stated clearly that in case of
failure to pay on the part of the respondents, they shall vacate and surrender possession of the
occupied land and petitioners shall be entitled to immediately obtain from the trial court a writ
of execution for the ejectment of the respondents. Once approved, the compromise agreement
can not and must not be disturbed except for vices of consent or forgery.

The orders of the trial court dated August 11, 1998 and February 17, 1999 are declared null and
void and setaside and a new one entered directing the trial court to issue the writ of execution
prayed for by the Petitioner in accordance with the compromise agreement.











Jesus T. David vs. Court of Appeals
G.R. No. 115821

Facts:
The Regional Trial Court of Manila, Branch 27 issued a writ of attachment over real
properties covered bt TCT Nos. 80718 and 10289 of private respondents. Then Presiding
Judge Ricardo Diaz, ordered private respondent Afable to pay the petitioner P66,500.00
plus interest plus P5,000.00 as attorneys fee and the cost of the suit starting from July
24, 1974 until fully paid. Such decision was amended by Judge Diaz so that the legal rate
of interest should be computed.
Respondent Afable appealed to the Court of Appeals and then the Supreme Court. The
decision of the lower court was affirmed in both instances. Judgement entries were
made and the record was remanded to Branch 27, presided at that time by respondent
Judge Edgardo P. Cruz for final execution of the Decision.
Respondent Judge issued an Alias Writ of Execution by virtue of which respondent
Sheriff Melchor P. Pea conducted a public auction. Sheriff Pea informed the petitioner
of the total amount of judgement but petitioner claimed that the judgement amount
should be higher based on compounded interest.
Although auctioned properties were sold to petitioner, Sheriff Pea did not issue the
Certificate of Sale because there was an excess in the bid price which the petitioner
failed to pay despite notice.
Petitioner filed a motion prating that respondent Judge Cruz issue an order directing
respondent Sheriff Pea to prepare and execute a Certificate of Sale in favor of the
petitioner, placing therein the amount of the judgement be the amount he bid during
the auction which he won, reasoning that compound interest should apply in this case.
This motion was denied by respondent Judge.
Upon elevation to appellate court, the Court of Appeals dismissed the petition
stipulating that there was no interest stipulated by the parties. No interest was
mentioned in the Compromise Agreement signed by private respondent and duly
accepted by petitioner.

Issue:
Whether or not appellate court erred in affirming respondent Judges order for payment of
simple interest only rather than compound interest.

Held:
The court held, NO. Article 2212 of the Civil Code contemplates the presence of stipulated or
conventional interest which has accrued when demand was judicially made. In cases where no
interest had been stipulated by the parties, no accrued conventional interest could further earn
interest upon judicial demand.

In the said case, we further held that when the judgment sought to be executed ordered the
payment of simple legal interest only and said nothing about payment of compound interest,
but the respondent judge orders payment of compound interest, then, he goes beyond the
confines of a judgment which had become final.

The Court of Appeals made the factual finding that . . . no interest was stipulated by the
parties. In the promissory note denominated as Compromise Agreement signed by the private
respondent which was duly accepted by petitioner no interest was mentioned. In his
complaint, petitioner merely prayed that defendant be ordered to pay plaintiff the sum of
P66,500.00 with interest thereon at the legal rate from the date of the filing of the complaint
until fully paid.












Republic of the Philippines vs. Thi Thu Thuy T. De Guzman
G.R. No. 175021

Facts:
Thi Thu Thuy T. De Guzman is the proprietor of Montaguz General Merchandise (MGM),
she contracted with the Philippine National Police Engineering Services (PNPES) to
deliver to the Philippine National Police (PNP) various construction equipment
amounting to P2,288,562.60 for the construction of a four-storey condominium in Camp
Crame, Quezon City.
De Guzman claims that she has not been paid by the PNP for the materials which she
has delivered.
The PNP admits that in fact the materials have been delivered, but claims that he same
has been paid through a check issued by the Landbank of the Philippines (LBP) as
evidenced by a receipt issued by De Guzman.
De Guzman claims that the receipt presented by the PNP is for Montaguz Builders (MB),
another company of hers, and not of MGM.
The receipt was signed by one Edgardo Cruz, proprietor of Highland Enterprise, another
contractor of the PNP, and that said check was in fact released to Cruz.
Cruz states that he received the check because the PNP and him had an agreement to
construct the said condominium and that the PNP and the other contractors had an
agreement that the PNP would give a 2% commission of the purchase price of materials
used for the condominium for use of their business names to remove the implication of
monopoly of contracts with Highland Enterprise.

Issue:
Whether or not the obligation to pay De Guzman by the PNP has been extinguished.

Held:
The receipt that was issued was that of MB and not MGM, thus the obligation to pay De
Guzman by virtue of MGM has not been extinguished. Also the fact that the statement
of Cruz involving the use of other business names for a 2% commission is a disturbing
fact of the spurious dealings of our own government. Cruz is not an authorized agent of
MGM nor De Guzman, and that MGM did in fact deliver the materials the PNP is
obligated to compensate her for the same. Payment made by the debtor to the person
of the creditor or to one authorized by him or by the law to receive it extinguishes the
obligation. When payment is made to the wrong party, however, the obligation is not
extinguished as to the creditor who is without fault or negligence even if the debtor
acted in utmost good faith and by mistake as to the person of the creditor or through
error induced by fraud of a third person.

In general, a payment in order to be effective to discharge an obligation, must be made
to the proper person. Thus, payment must be made to the obligee himself or to an
agent having authority, express or implied, to receive the particular payment. Payment
made to one having apparent authority to receive the money will, as a rule, be treated
as though actual authority had been given for its receipt. Likewise, if payment is made
to one who by law is authorized to act for the creditor, it will work a discharge. The
receipt of money due on a judgment by an officer authorized by law to accept it will,
therefore, satisfy the debt.

PNP failed to show any evidence to support payment to MGM. Furthermore, since the
obligation did not rise from a loan or forbearance of money the legal interest of 6% per
annum is attached to the amount due.















Jose Marques and Maxilite Technologies, Inc. vs Far East Bank and
Trust Company
G.R. No. 171379

Facts:
Maxilite Technologies, Inc. (Maxilite) is a domestic corporation engaged in the
importation and trading of equipment for energy-efficient systems. Jose N. Marques is
the president and controlling stockholder of Maxilite.
Far East Bank and Trust Co. (FEBTC) is a local bank which handles the financing and
related requirements of Marques and MAxilite. Marques and MAxilite maintained
accounts with FEBTC. FEBTC maintained Maxilites capital and operational requirements
through loans secured with properties of Marques.
Far East Bank Insurance Brokers, Inc. (FEBIBI) is a local insurance brokerage corporation
while Makati Insurance Company is a local insurance company, both are subsidiaries of
FEBTC.
Maxilite and Marques entered into a trust receipt transaction with FEBTC for the
shipment of various high-technology equipment from the United States with the
merchandise serving as collateral.
FEBIBI, upon the advice of FEBTC, facilitated the procurement and processing from
Makati Insurance Company of four separate and independent fire insurance policies
over the trust receipt merchandise. Maxilite paid the premium for theses policies
through debit arrangement. FEBTC would debit Maxilites account for premium the
payments, as reflected by statement of accounts sent to Maxilite.
On March 9, 1995, a fire gutted the Aboitiz Sea Transport Building where Maxilites
office and warehouse were located. AS a result, Maxilite suffered losses which they
claimed against the fire insurance policy with Makati Insurance Company. The latter
denied the claim due to non-payment of premium. FEBTC and FEBIBI disclaimed any
responsibility for the denial.
Maxilite and Marques sued FEBTC, FEBIBI, and Makati Insurance Company praying for
payment of damages. The defendants countered that Maxilite and Marques have no
cause of action against them and essentially denied the allegations.
The trial court ruled in favour of Maxilite and Marques ordering the defendants to pay
jointly and severally to the plaintiff the full coverage of the fire insurance policy,
damages, attorneys fees and litigation expenses. Subsequently, the counter claims
were dismissed.
The Court of Appeals affirmed the trial courts decision with modifications.

Issue:
Whether or not the premium for the insurance policy has in fact been paid.

Held:

Essentially, Maxilite and Marques invoke estoppel in claiming against FEBTC, FEBIBI, and Makati
Insurance Company the face value of the insurance policy. In their complaint, Maxilite and
Marques alleged they were led to believe and they in fact believed tha the settlement of
Maxilites trust receipt account included the payment of the insurance premium. Article 1431 of
the Civil Code defines estoppel as follows: Art. 1431. Through estoppel an admission or
representation is rendered conclusive upon the person making it, and cannot be denied or
disproved as against the person relying thereon. Meanwhile, Section 2(a), Rule 131 of the Rules
of Court provides: SEC. 2. Conclusive presumptions. The following are instances of conclusive
presumptions: (a) Whenever a party has, by his own declaration, act, or omission, intentionally
and deliberately led another to believe a particular thing is true, and to act upon such belief, he
cannot, in any litigation arising out of such declaration, act or omission, be permitted to falsify
it.

In estoppel, a party creating an appearance of fact, which is false, is bound by that appearance
as against another person who acted in good faith on it. Estoppel is based on public policy, fair
dealing, good faith and justice. Its purpose is to forbid one to speak against his own act,
representations, or commitments to the injury of one who reasonably relied thereon. It springs
from equity, and is designed to aid the law in the administration of justice where without its aid
injustice might result. The Court agrees with the Court of Appeals in reducing the interest rate
from 12% to 6% as the obligation to pay does not arise from a loan or forbearance of money.
With respect to Maxilites and Marques invocation of legal compensation, we find the same
devoid of merit. Aside from their bare allegations, there is no clear and convincing evidence
that legal compensation exists in this case. In other words, Maxilite and Marques failed to
establish the essential elements of legal compensation. Therefore, Maxilites and Marques
claim of legal compensation must fail.




PRISMA Construction and Development Corporation vs Arthur F.
Menchavez
G.R. No. 160545

Facts:
Rogelio S. Pantaleon, the President and Chairman of the Board of PRISMA, obtained a
loan from the respondent in the amount of P1M with a monthly interest of P40,000.00
payable in six months. To secure the payment of the loan, Pantaleon issued a
promissory note.

As of January 4, 1997, the petitioners had already paid a total of P1,108,772.00.
However, the respondent found that the petitioner still had an outstanding balance of
P1,364,151.00, to which it applied a 4% monthly interest. Thus, the respondent filed a
complaint for the sum of money with the RTC to enforce unpaid balance, monthly
interest, attorneys fees and costs of suit.

The RTC rendered a decision ordering the petitioners to jointly and severally pay the
respondent the amount of P3,526,117.00 plus 4% monthly interest from February 11,
1999 until fully paid.

The petitioners elevated the case to the CA insisting that there was no express
stipulation on the 4% monthly interest. The CA affirmed the RTCs decision with
modifications imposing a 12% per annum interest, computed from the filing of the
complaint until finality of judgment, and thereafter 12% from finality until fully paid. The
petitioners filed a motion for reconsideration but was denied by the appellate court.

Issue:
Whether or not the 4% monthly interest on the loan applies to the payment period only or until
full payment of the loan.

Held:
The court finds the petition meritorious.
Obligations arising from contracts have the force of law between the contracting parties and
should be complied with in good faith. When the terms of a contract are clear and leave no
doubt as to the intention of the contracting parties, the literal meaning of its stipulations
governs. In such cases, courts have no authority to alter the contract by construction or to make
a new contract for the parties; a court's duty is confined to the interpretation of the contract
the parties made for themselves without regard to its wisdom or folly, as the court cannot
supply material stipulations or read into the contract words the contract does not contain. It is
only when the contract is vague and ambiguous that courts are permitted to resort to the
interpretation of its terms to determine the parties intent.

Article 1956 of the Civil Code specifically mandates that no interest shall be due unless it has
been expressly stipulated in writing. Under this provision, the payment of interest in loans or
forbearance of money is allowed only if:
(1) there was an express stipulation for the payment of interest; and
(2) the agreement for the payment of interest was reduced in writing.

The concurrence of the two conditions is required for the payment of interest at a stipulated
rate. Applying this provision, we find that the interest of P40,000.00 per month corresponds
only to the six (6)-month period of the loan, or from January 8, 1994 to June 8, 1994, as agreed
upon by the parties in the promissory note. Thereafter, the interest on the loan should be at the
legal interest rate of 12% per annum, , consistent with our ruling in Eastern Shipping Lines, Inc.
v. Court of Appeals. The court reversed and set aside the decision of the Court of Appeals and
remanded the case to the RTC for proper computation of the amount due.





Theresa Macalalag vs People of the Philippines
G.R. No. 164358

Facts:
Petitioner Theresa Macalalag obtained loans from Grace Estrella in two separate
occasions with an interest rate of 10% per month. Macalalag persistently paid the
interests. Finding the interests so burdensome, she requested Estrella for a reduction of
the same which the latter agreed.
Macalalag then executed Acknowledgment/Affirmation Receipts promising to pay
Estrella the face value of the loans within two months from the date of execution plus
6% interest per month. She further obliged herself to pay for the two loans as liquidated
damages and attorneys fees as stipulated by the parties the moment she breaches the
terms and conditions thereof.
As security for payment, Macalalag issued two checks in favour of Estrella. However,
when Estrella presented said checks to drawee bank, the same were dishonoured for
the reason that the account was already closed.
Estrella then sent notice of dishonour and demand to Macalalag, but the latter failed to
do so. Estrella then filed 2 criminal complaints against Macalalag for violation of BP 22.
Macalalag pleaded not guilty and attested that she already made payments over and
above the value of the checks.
The trial court found Macalalag guilty. The Court of Appeals also found her guilty with
modification ruling that she is liable for only 1 count of BP 22.

Issue:
Whether or not petitioner had already paid her obligations to Estrella.

Held:
It was established that Macalalag already made a total payment of P355,837.00. This amount
could be very well applied to the value of the first check which is P156,000.00. Thus, Macalalag
cannot be held liable for the violation of BP 22 in so far as the first check is concerned. The
second check however, Macalalag can still be liable for violation of BP 22 since the check
representing payment was dishonoured by the drawee bank for the reason that the account
was already closed. Hence, her obligation to Estrella is not fully paid.

Antonio Tan vs. Court of Appeals
G.R. No. 116285

Facts:
Antonio Tan secured two loans from the Cultural Center of the Philippines (CCP) in the
amount of P 4,000,000.00 and P 2,000,000.00.
After partial payments Tan defaulted resulting to the restructuring of the payment of
the balance to be paid at five equal instalments.
Tan failed to pay any instalment and thereafter restructured the loan again that is: (a)
twenty percent (20%) of the principal amount of the loan upon the respondent giving its
conformity to his proposal; and (b) the balance on the principal obligation payable in
thirty-six (36) equal monthly instalments until fully paid, and that the principal would
bear interest at 14% per annum plus 3% service charge and a penalty of 2% monthly
penalty in case of breach.
Tan still failed to pay and asked for a moratorium on his obligation due to the
considerable change in his business.
CCP filed a case of collection of sum of money against Tan where the trial court and CA
ruled in favor of CCP and ordered Tan to pay what is due to CCP and that the amount
stated in the judgment shall accrue 12% annual interest from finality until satisfaction.

Issues:
1. Whether or not the penalty of 2% interest should also accrue interest of 12% per annum.
2. Whether or not the penalty of 2% per month is frivolous or usurious.

Held:
1. There is an express stipulation in the promissory note (Exhibit A) permitting the
compounding of interest. The fifth paragraph of the said promissory note provides
that: Any interest which may be due if not paid shall be added to the total amount when
due and shall become part thereof, the whole amount to bear interest at the maximum rate
allowed by law. Therefore, any penalty interest not paid, when due, shall earn the legal
interest of twelve percent (12%) per annum, in the absence of express stipulation on the
specific rate of interest, as in the case at bar. Article 2212 of the New Civil Code provides
that Interest due shall earn legal interest from the time it is judicially demanded, although
the obligation may be silent upon this point. In the instant case, interest likewise began to
run on the penalty interest upon the filing of the complaint in court by respondent CCP on
August 29, 1984. Hence, the courts a quo did not err in ruling that the petitioner is bound
to pay the interest on the total amount of the principal, the monetary interest and the
penalty interest.

2. Since Tan has showed good faith in trying to fulfil his obligation evidenced by multiple
attempts to restructure the loan and partial payments, the court held that a reduction on
the penalty was due and found that the 2% monthly interest as a penalty usurious and
reduced it to a straight 12% per annum interest rate.

















Eastern Shipping Lines, Inc. vs Court of Appeals
G.R. No. 97412

Facts:
Two fiber drums of riboflavin were shipped from Yokohama, Japan for delivery along the
vessel SS Eastern Comet owned by Eastern Shipping Lines. This shipment was insured
by Mercantile Insurance Company, Inc.
Upon arrival of shipment in Manila, it was discharged unto the custody of Metro Port
Service, Inc., who excepted one drum, said to be in bad order of unknown damage.
Allied Brokerage Corporation received the shipment from Metro Port Service, Inc., one
drum opened and without seal. They then made deliveries of the shipment to
consignees warehouse, who excepted to one drum which contained spillages, while the
rest of the contents was adulterated/fake.
Due to the losses/damage sustained by said drum, consignee suffered losses due to the
fault and negligence of the shipping company. Claims were then presented and were
refused to be paid.
The Court of Appeals, after a careful scrutiny of evidence in record, found that the
conclusion drawn was correct. As there is sufficient evidence that the shipmen has
sustained damage while in the successive possession of appellants, and therefore are
liable as subrogee for the amount paid to the consignee.

Issue:
Whether or not the Court of Appeals showed error and grave abuse of discretion to petitioner.

Held:
The common carrier's duty to observe the requisite diligence in the shipment of goods lasts
from the time the articles are surrendered to or unconditionally placed in the possession of,
and received by, the carrier for transportation until delivered to, or until the lapse of a
reasonable time for their acceptance by, the person entitled to receive them (Arts. 1736-1738,
Civil Code). When the goods shipped either are lost or arrive in damaged condition, a
presumption arises against the carrier of its failure to observe that diligence, and there need
not be an express finding of negligence to hold it liable (Art. 1735, Civil Code). There are, of
course, exceptional cases when such presumption of fault is not observed but these cases,
enumerated in Article 1734

of the Civil Code, are exclusive, not one of which can be applied to
this case.

The decision herein sought to be executed is one rendered in an Action for Damages for injury
to persons and loss of property and does not involve any loan, much less forbearances of any
money, goods or credits. As correctly argued by the private respondents, the law applicable to
the said case is Article 2209 of the New Civil Code.


































Rodelo G. Polotan, Sr. vs Court of Appeals
G.R. No. 119379

Facts:
Petitioner Rodelo S. Polotan, Sr. Applied for membership and credit accommodations
with Diners Club in October 1985. The application form contained terms and conditions
governing the use and availment of the Diners Club card, among which is for the
cardholder to pay all charges made through the use of said card and any remaining
unpaid balance to earn 3% interest per annum plus prime rate of Security Bank and
Trust Company. Notably, in the application form, Ofricano Canlas obligated himself to
pay jointly and severally with petitioner the latters obligation to private respondent.
The petitioner incurred credit charges plus appropriate interest and service charges in
the amount of P33,819.84 as of May 8, 1987, which has become due and demandable.
Demands for payment proved futile, hence, private respondent filed a Complaint for
Collection of Sum of Money against petitioner before the lower court.
The lower court rendered judgment ordering Rodelo Polotan, Sr. And Ofricano Canlas to
pay jointly and severally the private respondent. Upon appeal, the Court of Appeals
affirmed the ruling of the lower court.

Issue:
Whether or not petitioner had an obligation to pay private respondent.

Held:
Petitioners claim that since the contract he signed with Diners Club was a contract of adhesion,
the obscure provision on interest should be resolved in his favour. A contract of adhesion is one
in which one of the contracting parties imposes a ready-made form of contract which the other
party may accept or reject, but cannot modify. One party prepares the stipulation in the
contract, while the other party merely affixes his signature or his adhesion thereto, giving no
room for negotiation and depriving the latter of the opportunity to bargain on equal footing.
These types of contracts have been declared as binding as ordinary contracts, the reason being
that the party who adheres to the contract is free to reject it entirely.



New Sampaguita Builders Construction, Inc. (NSBCI) vs Philippine
National Bank
G.R. No. 148753

Facts:
On February 11, 1989, Board Resolution No. 05 was approved by NSBCI (petitioner)
authorizing the company to apply for or secure a commercial loan with the PNB in an
aggregate amount of P8.0M, using or mortgaging the real estate properties registered in
the name of its President and Chairman of the Board Eduardo R. Dee as collateral, and
authorizing petitioner spouses to secure the loan and to sign any and all documents
which may be required by PNB, and that petitioners shall act as sureties or co-obligors
who shall be jointly and severally liable with NSBCI for the payment of any and all
obligations.
The loan was approved and was secured by a firts mortgage on the following: a) 3
parcels of residential land located at Mangaldan, Pangasinan; b) 6 parcels of residential
land situated at San Fabian, Pangasinan, and c) a residential lot and improvements
thereon located at Mangaldan, Pangasinan.
The loan was further secured by the joint and several signatures of petitioner spouses
who signed as accommodation-mortgagors since all the collaterals were owned by them
and registered in their names.
Petitioner also executed several promissory notes with different payment dates. The
first promissory note had a 19.5% interest rate, the 2
nd
and 3
rd
had a 21.5% interest rate.
Included in the promissory note is a uniform clause that permitted PNB to increase the
rate within the limits allowed by law at any time depending on whatever policy it may
adopt in the future, even without giving petitioners prior notice. Subsequently, there
was also a clause stating that if the same is not paid in 2 years after release, it shall be
converted to a medium term loan and the interest rate for such loan will apply.
NSBCI defaulted on its payments and failed to comply with obligations and promissory
notes, thus, they requested for a 90 day extension. Even with the extension, they again
defaulted and asked that the loan be restructured. The loan was paid in part and the
balance was promised to be paid later on. Due to failure of NSBCI to pay PNB again, the
latter extrajudicially foreclosed the mortgaged properties and was sold for P10M.
Respondent bank then files a complaint with the court with the prayer that NSBCI pay
the deficiency of P2M since the respondent bank claimed that the petitioners owed
them P12M
The lower court ruled that NSBCI was entitled to the debt relief package of the PNB and
ruled that respondent bank had no cause of action. Upon appeal, the CA reversed the
decision of the lower court stating that NSBCI was not entitled to loan relief thus
ordering the petitioner to pay the respondent bank the sum of money that they still
owe.

Issue:
Whether or not the loan was bloated by respondent bank.

Held:
Respondents Circular is not an outright grant of assistance or extension of payment, but a
mere offer subject to specific terms and conditions. Petitioner NSBCI failed to establish
satisfactorily that it had been seriously and directly affected by the economic slowdown in the
peripheral areas of the then US military bases. Its allegations, devoid of any verification, cannot
lead to a supportable conclusion. In fact, for short-term loans, there is still a need to conduct a
thorough review of the borrowers repayment possibilities. After the foreclosure and sale of
the mortgaged property, the Real Estate Mortgage is extinguished. Although the mortgagors,
being third persons, are not liable for any deficiency in the absence of a contrary stipulation,
the action for recovery of such amount -- being clearly sureties to the principal obligation --
may still be directed against them. However, respondent may impose only the stipulated
interest rates of 19.5 percent and 21.5 percent on the respective availments -- subject to the 12
percent legal rate revision upon automatic conversion into medium-term loans -- plus 1 percent
attorneys fees, without additional charges on penalty, insurance or any increases thereof.
Accordingly, the excessive interest rates in the Statements of Account sent to petitioners are
reduced to 19.5 percent and 21.5 percent, as stipulated in the Promissory Notes; upon loan
conversion, these rates are further reduced to the legal rate of 12 percent.

T he u n i l a t e r a l d e t e r mi n a t i o n a n d i mp os i t i o n o f i n c r e as e d r a t e s i s
violative of the principle of mutuality of contracts ordained in Article 1308 of the Ci vi l
Code. One-si ded i mposi ti ons do not have the force of l aw between the parti es,
because such i mposi ti ons are not based on the parties essential equality







Dario Nacar vs Gallery Frames and/or Felipe Bordey, Jr.
G.R. No. 189871

Facts:
Dario Nacar filed a complaint for constructive dismissal before the Arbitration Branch of
the NLRC against respondent Gallery Frames and/or Felipe Bordey, Jr. The Labor Arbiter
rendered a decision in favor of petitioner and found that he was dismissed from
employment without a valid or just cause entitling him to be awarded back wages and
separation pay.
Respondents appealed to NLRC but was dismissed for lack of merit. The NLRC sustained
the decision of the Labor Arbiter. Respondents then filed a motion for reconsideration,
but was denied.
Respondents frilled a Petition for Review on Certiorari before the Court of Appeals. The
CA issued a Resolution dismissing the petition. A Motion for Reconsideration was then
filed but likewise denied.
The respondents sought relief from the Supreme Court but the latter found no
reversible error on the part of the CA, thus denying the petition. An Entry of Judgment
was later issued certifying that the resolution became final and executor. The case was
referred back to the Labor Arbiter.
Petitioner filed a Motion for Correct Computation praying that his back wages be
computed from the date of his dismissal up to the finality of the Resolution of the
Supreme Court. The Computation and Examination Unit of the NLRC arrived at an
updated amount in the sum of P471,320.31.
A Writ of Execution was issued by the Labor Arbiter ordering the Sheriff to collect from
the respondents the recomputed amount. Respondents filed a Motion to Quash Writ of
Execution claiming that after the decision becomes final and executor, the same cannot
be altered. The Labor Arbiter denied the motion and issued an Alias Writ of Execution.
Respondents again appealed to the NLRC who granted the appeal in favor of the
respondents and ordered the recomputation of the judgment award. Upon
recomputation, the judgment award of petitioner was reassessed to be in the total sum
of P147,560.19. The Labor Arbiter then issued an Alias Writ of Execution to satisfy the
judgment award that was due to the petitioner, which the petitioner eventually
received.
Petitioner the filed a Manifestation and Motion praying for the re-computation of
monetary award to include appropriate interests. The Labor Arbiter issued an order
granting the motion, nut only up to the amount of P11,459.73 reasoning that the
decision that should be enforced was that of October 15, 1998 considering that it as the
one that became final and executory.
Petitioner appealed before the NLRC which the latter denied. He then filed a Motion for
reconsideration but was likewise denied. Petitioner then sought recourse before the CA,
who also denied the petition. The CA reasoned that since petitioner no longer appealed
the October 15, 1998 decision, a correction thereof is no longer allowed.

Issue:
Whether or not the payment of back wages should be paid with interest.

Held:
The petition is meritorious.

The decision of the Court of Appeals and the Resolution dated October 9, 2009 are reversed
and set aside. Respondents are ordered to pay petitioner: (1) backwages computed from the
time petltwner was illegally dismissed on January 24, 1997 up to May 27, 2002, when the
Resolution of this Court in G.R. No. 151332 became final and executory; (2) separation pay
computed from August 1990 up to May 27, 2002 at the rate of one month pay per year of
service; and (3) interest of twelve percent ( 12%) per annum of the total monetary awards,
computed from May 27, 2002 to June 30, 2013 and six percent (6%) per annum from July 1,
2013 until their full satisfaction.

The Labor Arbiter is hereby ORDERED to make another recomputation of the total monetary
benefits awarded and due to petitioner in accordance with this Decision.












Land Bank of the Philippines vs Alfredo Ong
G.R. No. 190755

Facts:
Spouses Johnson and Evangeline Sy secured a loan from Land Bank Legazpi City. The
loan was secured by three residential lots, five cargo trucks, and a warehouse. Under
the agreement, part of the loan would be a short-term loan and the remaining part
would be payable in seven years. The Notice of Loan Approval contained an acceleration
clause wherein any default in payment of amortizations or other charges would
accelerate the maturity of the loan.
When the spouses Sy could no longer pay for their loan, they sold three of their
mortgaged parcels of land to Angelina Gloria Ong, under a Deed of Sale with
Assumption of Mortgage. Alfredo Ong, Evangelines Father, who is also the respondent,
then went to Land Bank to inform them about the sale and assumption of mortgage.
Branch Head Atty. Edna Hingco told him and his counsel that there was nothing wrong
with the agreement but provided them with requirements for the assumption of
mortgage. When the requirements and payments were met, Atty. Hingco informed
petitioner that the certificate of land title would be transferred in his name but never
materialized.
Respondent later found out that his application for assumption of mortgage was not
approved by Land Bank. Petitioner foreclosed the mortgage of the Spouses Sy. Alfredo
Ong learned about the foreclosure when he saw the subject mortgage propertied
included in an Auction Sale. Through his other counsel, Atty. Madrilejos, talked to Land
Bank and was told that the amount he paid as principal foe the assumption of mortgage
would be returned to him.
Alfredo initiated an action for recovery of sum of money with damages against Land
Bank as the payment was not returned by Land Bank. He maintained that the
foreclosure of the mortgaged parcels of land without informing him of the denial of his
assumption of mortgage was done in bad faith.
The RTC held that the contract approving the assumption or mortgage was not
perfected as a result of the credit investigation conducted on Alfredo. It ruled that
under the principle of equity and justice, the bank should return the amount Alfredo
had paid with interest. It further held that he was entitled to attorneys fees and
litigation expenses.
On appeal, The CA affirmed the decision of the RTC. It found that Alfredo and Land
Banks active preparations for Alfredos assumption of mortgage essentially novated the
agreement.
The subsequent motion of reconsideration by Land Bank was denied by the CA for lack
of merit.

Issue:
Whether or not the CA erred in holding that Art, 1236 of the Civil Code does not apply.

Held:
The appealed decision is affirmed with modification.
Land Bank contends that Art. 1236 of the Civil Code backs their claim that Alfredo should have
sought recourse against the Spouses Sy instead of Land Bank. Art. 1236 provides: The creditor
is not bound to accept payment or performance by a third person who has no interest in the
fulfillment of the obligation, unless there is a stipulation to the contrary. Whoever pays for
another may demand from the debtor what he has paid, except that if he paid without the
knowledge or against the will of the debtor, he can recover only insofar as the payment has
been beneficial to the debtor.

We agree with Land Bank on this point as to the first part of paragraph 1 of Art. 1236. Land
Bank was not bound to accept Alfredos payment, since as far as the former was concerned, he
did not have an interest in the payment of the loan of the Spouses Sy. However, in the context
of the second part of said paragraph, Alfredo was not making payment to fulfill the obligation
of the Spouses Sy. Alfredo made a conditional payment so that the properties subject of the
Deed of Sale with Assumption of Mortgage would be titled in his name. It is clear from the
records that Land Bank required Alfredo to make payment before his assumption of mortgage
would be approved. He was informed that the certificate of title would be transferred
accordingly. He, thus, made payment not as a debtor but as a prospective mortgagor. Land
Bank also faults the CA for finding that novation applies to the instant case. It reasons that a
substitution of debtors was made without its consent; thus, it was not bound to recognize the
substitution under the rules on novation.

Novation, in its broad concept, may either be extinctive or modificatory. It is extinctive when an
old obligation is terminated by the creation of a new obligation that takes the place of the
former; it is merely modificatory when the old obligation subsists to the extent it remains
compatible with the amendatory agreement. An extinctive novation results either by changing
the object or principal conditions (objective or real), or by substituting the person of the debtor
or subrogating a third person in the rights of the creditor (subjective or personal). Under this
mode, novation would have dual functions one to extinguish an existing obligation, the other to
substitute a new one in its place requiring a conflux of four essential requisites:
(1) a previous valid obligation;
(2) an agreement of all parties concerned to a new contract;
(3) the extinguishment of the old obligation; and
(4) the birth of a valid new obligation.

In order that an obligation may be extinguished by another which substitutes the same, it is
imperative that it be so declared in unequivocal terms, or that the old and the new obligations
be on every point incompatible with each other. The test of incompatibility is whether or not
the two obligations can stand together, each one having its independent existence.
Furthermore, Art. 1293 of the Civil Code states: Novation which consists in substituting a new
debtor in the place of the original one, may be made even without the knowledge or against
the will of the latter, but not without the consent of the creditor.





















Spouses Florentino T. Mallari and Aurea V. Mallari vs Prudential
Bank (now Bank of the Philippine Islands)
G.R. No. 197861

Facts:
Florentino T. Mallari obtained from respondent Prudential Bank a loan as evidenced by
promissory note which states that the loan is subject to an interest rate of 21% per
annum, attorneys fees equivalent to 15% of the total amount due and, in case of
default, a penalty and collection charges of 12% per annum of the total amount due.
Petitioner Florentino executed a Deed of Assignment where he authorized the
respondent bank to pay his loan with his time deposit with the latter in the amount of
P300,000.00.
Petitioner spouses obtained again from respondent bank another loan of P1.7 million
stipulating that the loan will bear 23% interest per annum, attorneys fees equivalent to
15% p.a. of the total amount due, and penalty and collection charges of 12% p.a.
Petitioners executed a Deed of Real Estate Mortgage in favour of respondent bank
covering petitioners property under TCT No. T-215175 to answer for the said loan.
Petitioners failed to settle their loan obligation with respondent bank, thus prompting
the latter, through their lawyer, to send a demand letter to the petitioners for them to
pay their obligation. Respondent bank then filed with the RTC a petition for extrajudicial
foreclosure of petitioners mortgaged property for the satisfaction of the petitioners
obligation secured by such mortgage. Provincial Sheriff set auction sale on April 23,
1992.
Petitioners filed a complaint for annulment of mortgage, deeds, injunction, preliminary
injunction, temporary restraining order and damages. Petitioners asked the court to
restrain respondent bank from proceeding with the foreclosure sale.
The RTC denied the Application for a Writ of Preliminary Injunction. However, later
reversed itself and issued the restraining order. Respondent bank then filed its Motion
to Lift Restraining Order and proceeded with the extrajudicial foreclosure of the
mortgaged property. A Certificate of Sale was issued to respondent bank being the
highest bidder.
Subsequently, respondent bank files a Motion to Dismiss Complaint for failure to
prosecute action for unreasonable length of time to which petitioners filed their
Opposition. RTC denied this motion. Trial ensued and the RTC issued its Order granting
respondents demurrer to evidence stating in its disposition that there is no evidence
of bad faith.
Petitioners appealed the RTC decision to the CA which issued its assailed Decision
denying the instant appeal and affirming the Order issued by the RTC. A Motion for
Reconsideration was then filed by the petitioners which was denied by the appellate
court.

Issue:
Whether or not the Court of Appeals erred in the affirming the Order of the RTC.

Held:
The court held that the petition is denied and affirms the decision and resolution of the Court
of Appeals.

Parties are free to enter into agreements and stipulate as to the terms and conditions of their
contract, but such freedom is not absolute. Article 1306 of the Civil Code provide, The
contracting parties may establish such stipulations, clauses, terms and conditions, as they may
deem convenient, provided they are not contrary to law, morals, good customs, public order, or
public policy. Hence, if stipulations in the contract are valid, the parties are bound to comply
with them, since contract is the law between the parties.












RGM Industries vs United Pacific Capital Corporation
G.R. No. 194781

Facts:
The respondent, who is involved in the business of lending and financing, granted a
P30M short-term credit facility in favour of the petitioner. The loan amount was sourced
from individual funders on the basis of a direct-match facility for which a series of
promissory notes were issued by the petitioner for the payment of the loan.
Petitioner failed to satisfy the said promissory notes. Consequently, petitioner issued in
favour of respondent a consolidated promissory note in the principal amount for a term
of 14 days. The stipulated interest was 32& per annum. In case of default, penalty
charge was imposed in an amount equivalent to 8% per month.
The petitioner again failed to satisfy the consolidated promissory note. The respondent
then sent demand letters to the petitioner but the latter failed to pay and instead asked
for loan restructuring. The respondent declined and then filed a compliant for collection
of the sum of money.
The petitioner claimed that the agreed interest rate was fixed at 15.5% per annum and
not varying interest rates as imposed by the respondent which reached as high as 40%
per annum. The respondent argued that the increased interest rates were mutually
agreed upon and are not considered usurious
The trial court ruled in favour of the respondent. On appeal, the CA affirmed the RTCs
judgment but modified the interest rates and penalty charges imposed.

Issue:
Whether or not the imposed interest rates and penalty charges are exhorbitant.

Held:
Stipulated interest rates are illegal if they are unconscionable and courts are allowed to temper
interest rates when necessary. In exercising this vested power to determine what is iniquitous
and unconscionable, the Court must consider the circumstances of each case. What may be
iniquitous and unconscionable in one case, may be just in another.

However, pursuant to Bank of the Philippine Islands, Inc. v. Yu, we deem it proper to further
reduce the penalty charge decreed by the CA from 2% per month to 1% per month or 12% per
annum in view of the following factors: (1) respondent has already received P7,504,522.27 in
penalty charges, and (2) the loan extended to respondent was a short-term credit facility. On
the basis of the same precedent, the attorney's fees must likewise be equitably reduced
considering that: (1) the petitioner has already made partial payments; (2) the attorney's fees
are not an integral part of the cost of borrowing but a mere incident of collection; and (3) the
attorney's fees were intended as penal clause to answer for liquidated damages, hence, the
rate of 10% of the unpaid obligation is too onerous. Under the premises, attorneys fees
equivalent to one percent (1%) of the outstanding balance is reasonable.
































Philippine National Bank vs Spouses Wilfredo and Estela Encina
G.R. No. 174055

Facts:
On September 13, 1995, respondent spouses Encina obtained a P500,000.00 loan with
petitioner PNB, secured by a promissory note, a real estate mortgage, and a credit
agreement, on parcels of land located at Occidental Mindoro
The Encinas obtained an additional P200,000.00 loan with PNB embodied in a credit
agreement and promissory note, secured by the same parcels of land. The loan
obligations of the Encinas were fully paid on February 4, 1997.
Another loan was obtained by spouses Encina secured by a promissory note and a time
loan commercial credit agreement, likewise secured by the same parcels of land. PNB
subsequently granted an all purpose credit facility to respondent spouses. The spouses
availed of part of the credit facility, as evidenced by a promissory note secured by the
same parcels of land as well. The remaining amount of money left in the credit facility,
was then availed of by the spouses secured by a promissory note dated May 22, 1998.
The respondent spouses failed to pay their obligation upon its maturity. Demands from
the petitioner were left unheeded, prompting them to file for a petition for the sale of
mortgaged properties. The extra-judicial sale of the mortgaged properties was
published, a foreclosure sale was thereafter conducted with PNB as the highest bidder.
A certificate of sale was then issued in favor of PNB.
On November 15, 2001, a contract of lease was executed between the Espouses Encina
and PNB over the subject properties, pursuant to a request made by the Encinas that
they be allowed to lease the subject properties at P7,500.00 a month.
The Encina spouses sued PNB in an action for the nullification and foreclosure sale and
damages with prayer for extension and/or grace period alleging that their loan
obligations should have been restructured because they were agricultural loans, and
that no penalties should be imposed. Further, they claimed that the extra-judicial
foreclosure and sale of the mortgaged properties was null and void.
PNB filed a motion to dismiss and was granted by the lower court. On appeal, The Court
of Appeals reversed the trial courts dismissal on the finding that there was no definite
agreement as to the interest rate to imposed on the loan.

Issue:
Whether or not the interest rate imposed on the loan is proper.

Held:
Assuming the facts alleged in the complaint to be true, i.e., that the Encina spouses incurred an
agricultural loan which, under the Agricultural Modernization Act of 1997, has a long gestation
period and is not subject to imposition of penalties, the trial court may render a valid judgment.

It should be definitively ruled in this regard that the Usury Law had been rendered legally
ineffective by Resolution No. 224 dated 3 December 1982 of the Monetary Board of the Central
Bank, and later by Central Bank Circular No. 905 which took effect on 1 January 1983 and
removed the ceiling on interest rates for secured and unsecured loans regardless of maturity.
The effect of these circulars is to allow the parties to agree on any interest that may be charged
on a loan. The virtual repeal of the Usury Law is within the range of judicial notice which courts
are bound to take into account. After all, the fundamental tenet is that the law is deemed part
of the contract. Thus, the trial court was correct in ruling that the second cause of action was
without basis.

In sum, in view of the factual issues raised by PNB in its motion to dismiss, the just and fair
resolution of the present controversy demands further proceedings in the RTC with regard to
the first cause of action mentioned in the complaint. We shall refrain from taking them up in
this Decision.

The petition is partly granted. The decision of the Court of Appeals are reversed and set aside.
The case id ordered remanded to the court of origin to resolve the same.




















Restituta M. Imperial vs Alexa Jaucian
G.R. No. 149004

Facts:
Controversy Arose from a case of collection of money, filed by Alex Jaucian against
Restituta Imperial. The complaint alleges that petitioner obtained from respondent
6separate loans for which the former executed in favor of the latter 6 separate
promissory notes and issued several checks as guarantee for payment.
When said loans became overdue and unpaid, petitioners checks were dishonored,
respondent made repeated oral and written demands for payment.
RTC and CA held that the respondents clear and detailed computation of petitioners
outstanding obligation was convincing and satisfactory.

Issues:
1. Whether or not the petitioner has fully paid her obligations even before filing of the case.
2. Whether or not the charging of 28% interest per annum without any writing is legal.
3. Whether or not charging of excessive penalties is a guise of hidden interest.

Held:
1. Involves a question of fact. Such question exists when a doubt or difference arises as to the
truth or the falsehood of alleged facts; and when there is need for a calibration of the evidence,
considering mainly the credibility of witnesses and the existence and the relevancy of specific
surrounding circumstances, their relation to each other and to the whole, and the probabilities
of the situation. It is a well-entrenched rule that pure questions of fact may not be the subject
of an appeal by certiorari under Rule 45 of the Rules of Court, as this remedy is generally
confined to questions of law.

2. The records show that there was a written agreement between the parties for the payment
of interest on the subject loans at the rate of 16 percent per month. As decreed by the lower
courts, this rate must be equitably reduced for being iniquitous, unconscionable and exorbitant.
While the Usury Law ceiling on interest rates was lifted by C.B. Circular No. 905, nothing in the
said circular grants lenders carte blanche authority to raise interest rates to levels which will
either enslave their borrowers or lead to a hemorrhaging of their assets.

3. Article 1229 of the Civil Code states thus: The judge shall equitably reduce the penalty when
the principal obligation has been partly or irregularly complied with by the debtor. Even if
there has been no performance, the penalty may also be reduced by the courts if it is iniquitous
or unconscionable. Nevertheless, it appears that petitioners failure to comply fully with her
obligation was not motivated by ill will or malice. The 29 partial payments she made were a
manifestation of her good faith. Again, Article 1229 of the Civil Code specifically empowers the
judge to reduce the civil penalty equitably, when the principal obligation has been partly or
irregularly complied with. Upon this premise, we hold that the RTCs reduction of attorneys
fees -- from 25 percent to 10 percent of the total amount due and payable -- is reasonable.





























Teddy G. Pabugais vs Dave P. Sahijwani
G.R. No. 156846

Facts:
Pursuant to an Agreement and Undertaking, petitioner Teddy G. Pabugais, agreed to
sell to respondent Dave P. Sahijwani a lot located at North Forbes Park, Makati, Metro
Manila.
The sum of money amounting to P600,000.00 was paid by respondent to petitioner as
option/reservation fee and the balance will be paid within 60 days from execution of
contract, simultaneous with the delivery of the owners Transfer Certificate of Title, the
Deed of Absolute Sale, Certificate of Non-Tax Delinquency and Clearance on Payment of
Association dues. In addition, the parties agreed that failure on the part of the
respondent to pay the balance of the purchase price, the option/reservation fee will be
forfeited; while non-delivery of the necessary documents obliges him to return to the
respondent the said reservation fee with interest at 18% per annum.
Petitioner failed to deliver the required documents, thus returned the respondents
option/reservation fee by way of Far East Bank and Trust Company Check, which was
dishonoured.
What transpired after is disputed by both parties. The trial court rendered a decision
declaring the consignation was invalid for failure to prove that petitioner tendered
payment to respondent and that the latter refused to receive the same. The trial court
ordered petitioner to pay respondent the reservation fee with 18% interest per annum
plus moral damages and attorneys fees.
Petitioner appealed the decision of the lower court with the Court of Appeals. On a
Motion for Reconsideration, the court reconsidered their first decision and reversed and
set aside the trial courts decision. Entering a new one declaring that as valid as the
consignation by the plaintiff-appelant in favour of defendant-appellee the amount of
reservation plus interest and declaring as extinguished appellants observation in favour
of the appellee.

Issues:
1. Whether or not there was a valid consignation.
2. Whether or not petitioner can withdraw the amount consigned.

Held:
1. Consignation is the act of depositing the thing due with the court or judicial authorities
whenever the creditor cannot accept or refuses to accept payment and it generally requires a
prior tender of payment. In order that consignation may be effective, the debtor must show
that: (1) there was a debt due; (2) the consignation of the obligation had been made because
the creditor to whom tender of payment was made refused to accept it, or because he was
absent or incapacitated, or because several persons claimed to be entitled to receive the
amount due or because the title to the obligation has been lost; (3) previous notice of the
consignation had been given to the person interested in the performance of the obligation; (4)
the amount due was placed at the disposal of the court; and (5) after the consignation had
been made the person interested was notified thereof. Failure in any of these requirements is
enough ground to render a consignation ineffective. There being a valid tender of payment in
an amount sufficient to extinguish the obligation, the consignation is valid.

2. With regards to petitioners right to withdraw the amount consigned, reliance on Article
1260 of the Civil Code is misplaced. The said Article provides Art. 1260. Once the
consignation has been duly made, the debtor may ask the judge to order the cancellation of the
obligation. Before the creditor has accepted the consignation, or before a judicial confirmation
that the consignation has been properly made, the debtor may withdraw the thing or the sum
deposited, allowing the obligation to remain in force. The amount consigned with the trial court
can no longer be withdrawn by petitioner because respondents prayer in his answer that the
amount consigned be awarded to him is equivalent to an acceptance of the consignation, which
has the effect of extinguishing petitioners obligation.
















Antonio Lo vs Court of Appeals
G.R. No. 138677

Facts:
Two parcels of land with an office building constructed thereon was acquired by
petitioner in an auction sale from the Land Bank of the Philippines.
Private respondent was the occupant of the disputed parcels of land under a subsisting
contract of lease with Land Bank which was valid until December 31, 1995.
Upon expiration of the lease of contract, petitioner demanded that private respondent
vacate the leased premises and surrender its possession to him. Private respondent
refused on the ground that it was contesting petitioners acquisition of the parcels of
land in question.
Petitioner then files an action for ejectment before the Metropolitan Trial Court. He
asked for the imposition of the contractually stipulated penalty of P5,000.00 per day of
delay in surrendering the possession of the property to him. The trial court decided the
case in favour of the petitioner.
On appeal, the RTC of Malabon affirmed the decision of the MTC. Private respondents
subsequent motion for reconsideration of the RTC decision was denied.
Private respondent elevated the case to the Court of Appeals via a petition for review.
The CA affirmed the decision of the trial court, with modification.

Issue:
Whether or not the Court of Appeals had authority to reduce the penalty awarded by the trial
court.

Held:
The court held that, petition has no merit.

Generally, courts are not at liberty to ignore the freedom of the parties to agree on such terms
and conditions as they see fit as long as they are not contrary to law, morals, good customs,
public order or public policy. Nevertheless, courts may equitably reduce a stipulated penalty in
the contract if it is iniquitous or unconscionable, or if the principal obligation has been partly or
irregularly complied with.

This power of the courts is explicitly sanctioned by Article 1229 of the Civil Code which
provides:
Article 1229. The judge shall equitably reduce the penalty when the principal obligation has
been partly or irregularly complied with by the debtor. Even if there has been no performance,
the penalty may also be reduced by the courts if it is iniquitous or unconscionable.


































Tolomeo Ligutan vs Court of Appeals
G.R. No. 138677

Facts:
Petitioners obtained a loan from respondent Security Bank and Trust Company.
Petitioners executed a promissory note binding themselves, jointly and severally, to pay
the sum borrowed with an interest of 15.189% per annum and to pay a penalty of 5%
every month in case of default. In addition, petitioners agreed to pay 10% of the total
amount due by way of attorneys fees if the matter were endorsed to a lawyer for
collection.
Despite several demands from the bank, petitioners failed to settle the debt. A final
demand letter was sent to petitioners informing them that they had five days to make
full payment. Still, petitioners defaulted on their obligation, thus prompting the bank to
file a complaint with the RTC for the recovery of the due amount.
Instead of introducing evidence, the petitioners had the hearing of the case reset on
two consecutive occasions. In view of their absence on the third hearing date, the bank
moved, and the trial court resolved, to consider the case submitted for decision.
Two years later, petitioners filed a motion for reconsideration of the order of the trial
court declaring them as having waived their right to present evidence and prayed that
they be allowed to prove their case. The court denied the motion and issued a judgment
in favour of the bank.
Petitioners posed an appeal with the CA, questioning the rejection of the trial court of
their motions to present evidence. The appellate court affirmed the judgment of the
trial court except on the matter of the 2% service charge which was deleted pursuant to
Central Bank Circular No. 783. The decision of the trial court was modified.
Petitioners filed a motion for reconsideration presenting new evidence and contended
that the execution of a real estate mortgage had the effect of novating the contract
between them and the bank. The appellate court denied the motion and rationalized
that newly discovered evidence cannot be admitted or entertained under Section 2,
Rule 52 of the Rules of Civil Procedure.

Issue:
Whether or not the Court of Appeals erred in not holding that there was a novation of the
cause of action of private respondents complaint due to subsequent execution of real estate
mortgage

Held:
Extinctive novation requires, first, a previous valid obligation; second, the agreement of all the
parties to the new contract; third, the extinguishment of the obligation; and fourth, the validity
of the new one. In order that an obligation may be extinguished by another which substitutes
the same, it is imperative that it be so declared in unequivocal terms, or that the old and the
new obligation be on every point incompatible with each other. An obligation to pay a sum of
money is not extinctively novated by a new instrument which merely changes the terms of
payment or adding compatible covenants or where the old contract is merely supplemented by
the new one. When not expressed, incompatibility is required so as to ensure that the parties
have indeed intended such novation despite their failure to express it in categorical terms. The
incompatibility, to be sure, should take place in any of the essential elements of the obligation,
i.e.,
(1) the juridical relation or tie, such as from a mere commodatum to lease of things, or from
negotiorum gestio to agency, or from a mortgage to antichresis, or from a sale to one of loan,
(2) the object or principal conditions, such as a change of the nature of the prestation; or
(3) the subjects, such as the substitution of a debtor or the subrogation of the creditor.
Extinctive novation does not necessarily imply that the new agreement should be complete by
itself; certain terms and conditions may be carried, expressly or by implication, over to the new
obligation.



















Spouses Silvestre vs Rodrigo V. Ramos
G.R. No. 144712

Facts:
Spouses Silvestre and Celia Pascual executed in the favor of Ramos a Deed of Absolute
Sale with Right to repurchase over two parcels of land and the improvements thereon.
The Pascuals did not exercise the right to repurchase the property within the stipulated
one year period, so, Ramos prayed that the title or ownership of the parcels of land and
improvements thereon be consolidated in his favor.
As a counterclaim, the Pascuals prayed that Ramos be ordered to execute a Deed of
Cancellation, Release or Discharge of the Deed of Absolute Sale with Right to repurchase
or a Deed of Real Estate Mortgage, deliver the owners duplicate of the TCT, return the
amount they had overpaid, and pay each of them moral and exemplary damages.
The trial court found that the transaction between the parties was a loan, the payment
of which was secured by a mortgage of the properties involved. It also found that the
Pascuals had made payments with interset at 7% per annum, and has over-payed the
loan by P141,500.00. The trial court rendered judgment in favor of the Pascuals and
against Ramos.
Ramos moved for reconsideration alleging that the trial court erred in using the interst
of 7% per annum because what was in the stipulated Sinumpaang Salaysay was 7% per
month. Finding merit to this motion, the trial court issued an order modifying its
decision by deleting the award of overpayment of the loan and interest and ordered the
Pascuals to pay Ramos P511,000.00 representing the principal loan plus interest.
The Pascuals contented that the interest of 7% per month is exorbitant and
burdensome. While Ramos contends that there was nothing illegal with the interest rate
agreed upon by both parties since the ceilings of interests under the Usury Law had
been removed.

Issue:
Whether or not the 7% per month interest charge is illegal.

Held:
It is a basic principle in civil law that parties are bound by the stipulations in the contracts
voluntarily entered into by them. Parties are free to stipulate terms and conditions which they
deem convenient provided they are not contrary to law, morals, good customs, public order, or
public policy. The interest rate of 7% per month was voluntarily agreed upon by RAMOS and the
PASCUALs. There is nothing from the records and, in fact, there is no allegation showing that
petitioners were victims of fraud when they entered into the agreement with RAMOS. Neither
is there a showing that in their contractual relations with RAMOS, the PASCUALs were at a
disadvantage on account of their moral dependence, ignorance, mental weakness, tender age
or other handicap, which would entitle them to the vigilant protection of the courts as
mandated by Article 24 of the Civil Code.



































First Metro Investment Corporation vs Este del Sol Mountain
Reserve
G.R. No. 141811

Facts:
Petitioner FMIC granted respondent a loan to finance the construction and
development of the Este del Sol Mountain Reserve.

Under the terms of the Loan Agreement, the proceeds of the loan were to be releases
on staggered basis. Interest on the loan was pegged at 16% per annum based on
diminishing balance. The loan was payable in 36 equal and consecutive monthly
amortizations. In case of default, an acceleration clause was provided and the amount
due was made subject to a 20% one-time penalty on the amount due and such amount
shall bear interest at the highest rate permitted by law.

As a guarantee for payment, respondent executed a REM, individual continuing
suretyship and underwriting agreement where FMIC shall underwrite at the public
offering of common shares of respondents capital stock.

When respondent failed to pay its obligation, FMIC caused foreclosure of the REM and
was the highest bidder at the public auction. Petitioner then filed to collect for alleged
deficiency balance from respondents since they failed to collect from the sureties, plus
interest.

The trial court ruled in favour of petitioner. Respondents then appealed before the CA
which found that the fees provided for in the Undertaking and Consultancy Agreements
were present to camouflage the usurious interest charged. The CA then ordered FMIC to
reimburse what is due to respondent.

Issue:
Whether or not the interests are lawful.

Held:
The court held, NO. A loan is usurious when it is intended that additional compensation due the
loan be camouflaged by an unrelated contract for payment by the borrower for the lenders
services. Article 1957 states that contracts and stipulations, under any cloak or device, intended
to circumvent the law against usury shall be void.
































DOMEL Trading Corporation vs Court of Appeals
G.R. 84813

Facts:
Private respondent ordered from petitioner 22,000 bundles of buri midribs to be
delivered within 30 working days from the date of the opening of a letter of credit.
Private respondent again ordered 300,000 pieces of rattan poles to be delivered within
60 days from the date of opening of a letter of credit. The specifications and provisions
of both transactions, which served as their agreement, were printed in two separate
purchase orders.
In accordance to their agreement, private respondent opened two letters of credit with
Philippine National Bank in favor of DOMEL to cover its order of rattan poles and buri
midribs.
In violation of their agreement, DOMEL failed to deliver the buri midribs and rattan
poles within he stipulated period. Both parties agreed to restructure the purchase
orders of private respondent in a Memorandum of Agreement. However, no deliveries
were again made. Consequently, private respondent demanded payment of damages
from petitioner which were ignored by the latter.
NNRMC (private respondent) filed a complaint before the Regional Trial Court which
rendered a judgment in their favor and against DOMEL. On appeal, the Court of Appeals
modified the decision of the lower court.

Issue:
Whether or not the modification of the lower courts decision by the Court of Appeals is just.

Held:
While we do not agree with the Court of Appeals that the failure of NNRMC to conduct the
inspection mitigated DOMELs liability for liquidated damages, nevertheless, we agree in the
reduction of the amount of liquidated damages to only P150,000.00. The amount of P2,000.00
as penalty for every day of delay is excessive and unconscionable.

Article 1229 of the Civil Code states, thus: The judge shall equitably reduce the penalty when
the principal obligation has been partly or irregularly complied with by the debtor. Even if there
has been no performance, the penalty may also be reduced by the courts if it is iniquitous or
unconscionable.

Article 2227 of the Civil Code likewise states, thus: Liquidated damages, whether intended as
an indemnity or a penalty, shall be equitably reduced if they are iniquitous or unconscionable.
In determining whether a penalty clause is iniquitous and unconscionable, a court may very
well take into account the actual damages sustained by a creditor who was compelled to sue
the defaulting debtor, which actual damages would include the interest and penalties the
creditor may have had to pay on its own from its funding source

















Leticia Y. Medel, et. al. vs Court of Appeals
G.R. No. 131622

Facts:
Servando Franco and Leticia Medel obtained a loan from Veronica R. Gonzales who was
engaged in money lending business under the name Gonzales Credit Enterprises. A
promissory note was executed to evidence the loan, which will mature on January 7,
1986.
Servando and Leticia obtained another loan from Veronica and executed another
promissory note to evidence the loan which will mature on January 19, 1986.
Upon maturity, the borrowers failed to pay their indebtedness. However, Servando and
Leticia still obtained another loan from Veronica, which was secured by a real estate
mortgage over a property belonging to Leticia Makalintal Yaptinchay, who issued a SPA
in favor of Leticia Medel, authorizing her to execute the mortgage.
Servando and Medel failed to pay the third loan on maturity. Then, Servando and Leticia
with the latters husband, Dr. Rafael Medel, consolidated all their previous unpaid loans
and sought from Veronica another loan evidenced by a promissory note. Upon maturity,
the borrowers again failed to pay the indebtedness plus interests and penalties.
Veronica Gonzales, joined by her husband Danilo G. Gonzales, then filed a complaint
with the RTC for collection of the full amount of the loan including interests and
charges.

Issue:
Whether or not the interest rate stipulated is valid.

Held:
The court found that the petition was meritorious. The court reversed and set aside the
decision of the Court of Appeals, reviving and affirming the decision of the lower court. We
agree with petitioners that the stipulated rate of interest at 5.5% per month on the
P500,000.00 loan is excessive, iniquitous, unconscionable and exorbitant. However, we can not
consider the rate "usurious" because this Court has consistently held that Circulr No. 905 of the
Central Bank, adopted on December 22, 1982, has expressly removed the interest ceilings
prescribed by the Usury Law and that the Usury Law is now "legally inexistent".

Nevertheless, we find the interest at 5.5% per month, or 66% per annum, stipulated upon by
the parties in the promissory note iniquitous or unconscionable, and, hence, contrary to morals
("contra bonos mores"), if not against the law. The stipulation is void. The courts shall reduce
equitably liquidated damages, whether intended as an indemnity or a penalty if they are
iniquitous or unconscionable. Consequently, the Court of Appeals erred in upholding the
stipulation of the parties. Rather, we agree with the trial court that, under the circumstances,
interest at 12% per annum, and an additional 1% a month penalty charge as liquidated
damages may be more reasonable.



































Pacita F. Reformina vs The Honorable Valeriano P. Tomol
G.R. No. L-59096

Facts:

On June 7, 1972, the Court of First Instance of Cebu, rendered a judgment as follows:
Ordering defendants and third party plaintiffs Shell and Michael, Incorporated to pay
jointly and severally the following persons:
(g) Plaintiffs Pacita F. Reformina and Francisco Reformina the sum of
P131,084.00 which is the value of the boat F B Pacita Ill together with its
accessories, fishing gear and equipment minus P80,000.00 which is the value of
the insurance recovered and the amount of P10,000.00 a month as the
estimated monthly loss suffered by them as a result of the fire of May 6, 1969 up
to the time they are actually paid or already the total sum of P370,000.00 as of
June 4, 1972 with legal interest from the filing of the complaint until paid and to
pay attorney's fees of P5,000.00 with costs against defendants and third party
plaintiffs.
On appeal, the trial courts judgment was modified as follows:
Shell Refining Co. (Phils.), Inc. and Michael, Incorporated are hereby ordered to
pay ... The two (2) defendants- appellants are also directed to pay P100,000.00
with legal interests from the filing of the complaint until paid as compensatory
and moral damages and P41,000.00 compensation for the value of the lost boat
with legal interest from the filing of the complaint until fully paid to Pacita F.
Reformina and the heirs of Francisco Reformina.
The decision, having become final, was remanded to the lower court for execution.
Petitioners claim that the legal interest to be executed should be at the rate of 12% per
annum invoking in support Central Bank of the Philippines Circular No. 416. Private
respondents on the other hand, insist that legal interest be at the rate of 6% per annum
pursuant to Article 2209 of the New Civil Code in relation to Articles 2210 and 2211
thereof. The petition is devoid of merit and dismissed.

Issue:
Whether or not the legal interest should be at 6%.

Held:
In the case at bar, the decision herein sought to be executed is one rendered in an Action for
Damages for injury to persons and loss of property and does not involve any loan, much less
forbearances of any money, goods or credits. As correctly argued by the private respondents,
the law applicable to the said case is Article 2209 of the New Civil Code which reads Art.
2209. If the obligation consists in the payment of a sum of money, and the debtor incurs in
delay, the indemnity for damages, there being no stipulation to the contrary, shall be the
payment of interest agreed upon, and in the absence of stipulation, the legal interest which is
six percent per annum.








































Sonny Lo vs KJS Eco-Formwork System Phil., Inc.
G.R. No. 149420

Facts:
Petitioner ordered scaffolding equipments from respondent, paying respondent a down
payment with the balance payable in ten monthly instalments.
Respondent delivered scaffoldings to petitioner. Petitioner was able to pay first two
monthly installments. However, he encountered financial difficulties and was unable to
settle his obligation despite oral and written demands.
Petitioner and respondent executed a Deed of Assignment whereby petitioner assigned
to respondent his receivables from Jomero Realty Corporation. Respondent tried to
collect from Jomero Realty Corporation but the latter refused to honor the Deed of
Assignment claiming that the petitioner was also indebted to it.
Respondent sent a letter to petitioner demanding payment, but petitioner refused to
pay claiming that his obligation had been extinguished when the Deed of Assignment
was executed.
Respondent filed an action for recovery of the sum of money against petitioner before
the RTC of Makati. The trial court dismissed the complaint on the ground that the
assignment of credit extinguished the obligation.
Respondent appealed to the Court of Appeals. The CA rendered a decision finding merit
in the appeal, reversed the appealed Decision and enters judgment ordering Sonny Lo to
pay KJS Eco-Formwork System Phils., Inc.

Issues:
Whether or not the CA erred in holding that the Deed of Assignment was null and void.

Held:
An assignment of credit is an agreement by virtue of which the owner of a credit, known as the
assignor, by a legal cause, such as sale, dacion en pago, exchange or donation, and without the
consent of the debtor, transfers his credit and accessory rights to another, known as the
assignee, who acquires the power to enforce it to the same extent as the assignor could
enforce it against the debtor. In dacion en pago, as a special mode of payment, the debtor
offers another thing to the creditor who accepts it as equivalent of payment of an outstanding
debt. In order that there be a valid dation in payment, the following are the requisites: (1)
There must be the performance of the prestation in lieu of payment (animo solvendi) which
may consist in the delivery of a corporeal thing or a real right or a credit against the third
person; (2) There must be some difference between the prestation due and that which is given
in substitution (aliud pro alio); (3) There must be an agreement between the creditor and
debtor that the obligation is immediately extinguished by reason of the performance of a
prestation different from that due. Furthermore, we find that petitioner breached his
obligation under the Deed of Assignment. by warranting the existence of the credit, petitioner
should be deemed to have ensured the performance thereof in case the same is later found to
be inexistent. He should be held liable to pay to respondent the amount of his indebtedness



































Philippine National Bank vs Court of Appeals and Loreto Tan
G.R. No. 108630

Facts:
Loreto Tan owns a parcel of land abutting the national highway in Bacolod City.
Expropriation proceedings were instituted by the government against Tan and other
property owners. Tan filed a motion requesting issuance of an order for the release to
him of the expropriation price of P32,480.00.
Petitioner, through its Assistant Branch Manager Juan Tagamolila, issued a check for the
said amount and delivered the same to one Sonia Gonzaga without Tans knowledge,
consent or authority. She then deposited it in her account with Far East Bank and Trust
Co. (FEBTC) and later on withdrew the same.
Tan subsequently demanded payment from petitioner, but the same refused on the
grounds that they had already paid and delivered the said amount to Sonia Gonzaga on
the strength of a Special Power of Attorney allegedly executer in her favor by Tan.
Tan executed an affidavit before the petitioners lawyer stating that he had never
executed and SPA in favor of Sonia Gonzaga. Petitioner then filed an opposition that
Sonia Gonzaga presented a copy of the May 28, 1978 order and a SPA. The matter was
heard, and upon direction of the court to petitioner to produce the said SPA, the
petitioner failed to do so.
The trial court rendered judgment ordering petitioner and Tagamolila to pay the private
respondent jointly and severally the said amount with legal interest, damages and
attorneys fees. Both petitioner and Tagamolila appealed the case to the Court of
Appeals who dismissed the appeal of Tagamolila for failure to pay the docket fee and
affirmed the decision of the trial court against petitioner, with modifications.

Issue:
Whether or not the existence of the SPA need to be proved to release PNB from payment of the
amount due to Loreto Tan.

Held:
When the court ordered petitioner to pay private respondent the amount of P3 2,480.00, it had
the obligation to deliver the same to him. Under Art. 1233 of the Civil Code, a debt shall not be
understood to have been paid unless the thing or service in which the obligation consists has
been completely delivered or rendered, as the case may be.

The burden of proof of such payment lies with the debtor. In the instant case, neither the SPA
nor the check issued by petitioner was ever presented in court Section 2, Rule 130 of the Rules
of Court states that: SEC. 2. Original writing must be produced; exceptions. - There can be no
evidence of a writing the contents of which is the subject of inquiry, other than the original
writing itself, except in the following cases: (a) When the original has been lost, destroyed, or
cannot be produced in court; (b) When the original is in the possession of the party against
whom the evidence is offered, and the latter fails to produce it after reasonable notice; (c)
When the original is a record or other document in the custody of a public officer; (d) When the
original has been recorded in an existing record a certified copy of which is made evidence by
law; (e) When the original consists of numerous accounts or other documents which cannot be
examined in court without great loss of time and the fact sought to be established from them is
only the general result of the whole.

Considering that the contents of the SPA are also in issue here, the best evidence rule applies.
Hence, only the original document (which has not been presented at all) is the best evidence of
the fact as to whether or not private respondent indeed authorized Sonia Gonzaga to receive
the check from petitioner. In the absence of such document, petitioners arguments regarding
due payment must fail.








Cathay Pacific Airways, Ltd. Vs Spouses Daniel Vazquez and Maria
Luisa Madrigal Vazquez
G.R. No. 150843

Facts:
Cathay, a common carrier of passengers and goods by air, as part of its marketing
strategy accords its frequent flyers membership in its Marco Polo Club. The members
enjoy several privileges, such as priority for upgrading of booking without any extra cost
when an opportunity arises.
Respondent spouses are frequent flyers of Cathay and are Gold Card members of its
Marco Polo Club. Along with their maid and two friends, they went to Hongkong for
pleasure and Business.
On their return flight to Manila on 28 September 1996, Dr. Vazquez presented his
boarding pass to the ground stewardess and upon inserting it into an electronic
machine, saw a message that there was a seat change from Business Class to First
Class for the Vazquezes.
Ms. Chiu, the ground attendant, approached Dr. Vazquez and informed him of the
upgrade but the latter refused, reasoning that it would not look nice for their guests and
moreover, they were going to discuss business matters during the flight. Taken aback by
his refusal, Ms. Chiu consulted with her supervisor and was advised to handle the
situation and convince the Vazquezes to accept the upgrading. Eventually, Dr. Vazquez
gave in and he and Mrs. Vazquez then proceeded to the First Class Cabin.

Issue:
Whether or not Cathay breached its contract of carriage with the Vazquezes by upgrading seat
accommodation.

Held:
A contract is a meeting of minds between two persons whereby one agrees to give something
or render some service to another for a consideration. There is no contract unless the following
requisites concur: (1) consent of the contracting parties; (2) an object certain which is the
subject of the contract; and (3) the cause of the obligation which is established.

Breach of contract is defined as the failure without legal reason to comply with the terms of a
contract. In this case, we have ruled that the breach of contract of carriage, which consisted in
the involuntary upgrading of the Vazquezes seat accommodation, was not attended by fraud
or bad faith. The Court of Appeals award of moral damages has, therefore, no leg to stand on.
The deletion of the award for exemplary damages by the Court of Appeals is correct. The most
that can be adjudged in favor of the Vazquezes for Cathays breach of contract is an award for
nominal damages under Article 2221 of the Civil Code, which reads as follows: Nominal
damages 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.

































Citibank, N.A. and Investors Finance Corporation vs Modesta R.
Sabeniano
G.R. No. 156132

Facts:
Citibank is a banking corporation duly authorized to do commercial banking activities
and perfoem trust functions in the Philippines. Investors Finance Corporation, which did
business under the name and style of FNCB Finance, was an affiliate company of
petitioner Citibank, specifically handling money market placements for its clients.
Sabeniano was a client of both Citibank and FNCB Finance.
Respondent filed a complaint against petitioners claiming that she has substantial
deposits with them, the proceeds of which were supposedly transferred automatically
and directly to her account with Citibank and that allegedly petitioner refused to so
despite demands.
Petitioner alleged that respondent has several loans from Citibank and by default, it
exercised its right to set-off respondents outstanding loans with her deposits and
money. Trial court declared the said act of petitioner illegal, and null and void and
ordered the petitioner to return the amount plus interest. On the other hand, trial court
ordered respondent to pay Citibank her debt.
The Court of Appeals affirmed the trial courts decision entirely in favor of the
respondent.

Issue:
Whether or not compensation was warranted with regard to loan and deposit account.

Held:
Article 1278 states that Compensation shall take place when two persons, intheir own right,
are creditors and debtors of each other. And in order for that compensation to be proper, it is
necessary: (1) that each one of the obligors be bound principally, and that he be at the same
time a principal creditor of the other, (2) That both debts consists in a sum of money, or if the
things due are consumable, they be of the same kind, and also of the same quality if the latter
has been stated, (3) That the two debts are due, (4) That they be liquidated and demandable,
and (5) That neither of them there be any retention or controversy, commenced by third
persons and communicated in due time to the debtor.

Thus, the petition is partly granted with modification. Citibank is ordered to return to the
respondent the principal amount and was ordered to refund the remittance from respondents
Citibank-Geneva account since such remittance was declared illegal, and null and void, using
the Philippine currency or its equivalent based on the exchange rate at the time of payment.
Citibank was also ordered to pay respondent moral damages, exemplary damages and
attorneys fees. Respondent was ordered to pay petitioner the balance of her outstanding loans
and interest.

































Telengtan Brothers & Sons, INC. vs. United States Lines
G.R. No. 132284

Facts:
United States Lines (US Lines) filed a case against Telengtan seeking payment for
demurrage charges plus interest and damages for their failure to collect their goods
from the container vans of US Lines within the 10-day free period.
Telengtan contends that it did not enter into an agreement with US Lines for payment of
demurrage and that US Lines did not make any demand for the payment thereof, and
that it presented Bills of Lading B/L for the delivery of their goods wherein it was then
found out that US Lines has removed such products from the container vans and has
placed them in a warehouse without Telengtans approval.
The Trial court and the CA ruled in US Lines favor ordering Telengtan to pay the former
the demurrage charges.
Telengtan now contends that their agreement with US Lines requires the latter to
deliver the shipped goods to the formers facilities and that the latter is liable for
damages for placing said goods in a warehouse.
Telengtan also contends that the payment of demurrage shall be recomputed for
inflation based on Article 1250 of the civil code.

Issues:
1. Whether or not it is US Lines who is at fault for storing the goods at a warehouse.
2. Whether or not a recomputation of the demurrage charges and its interest shall be made in
light of inflation as Article 1250 of the civil code provides.

Held:
1. Based on the records it shows that in previous business dealings Telengtan has in fact been
paying demurrage charges to US Lines and thus is now estopped from claiming that it has no
obligation to pay the latter.
In the matter of the goods being transferred to a warehouse, said transfer was authorized by
the Bureau of Customs based on the B/L states in its Section 17 that Also if the consignee does
not take possession or delivery of the goods as soon as the goods are at the disposal of the
consignee for removal, the goods shall be at their own risk and expense, delivery shall be
considered complete and the carrier may, subject to carrier's liens, send the goods to store,
warehouse, put them on lighters or other craft, put them in possession of authorities, dump,
permit to lie where landed or otherwise dispose of them, always at the risk and expense of the
goods, and the shipper and consignee shall pay and indemnify the carrier for any loss, damage,
fine, charge or expense whatsoever suffered or incurred in so dealing with or disposing of the
goods, or by reason of the consignee's failure or delay in taking possession and delivery as
provided herein. The shipper is the consignor and the person to whom the delivery to be made
is the consignee. Thus, US Lines was justified in transferring said goods to the warehouse.

2. Article 1250 of the Civil Code states: In case an extraordinary inflation or deflation of the
currency stipulated should supervene, the value of the currency at the time of the
establishment of the obligation shall be the basis of payment, unless there is an agreement to
the contrary.Extraordinary inflation or deflation, as the case may be, exists when there is an
unusual increase or decrease in the purchasing power of the Philippine peso which is beyond
the common fluctuation in the value of said currency, and such increase or decrease could not
have been reasonably foreseen or was manifestly beyond the contemplation of the parties at
the time of the establishment of the obligation. And while the Court may take judicial notice of
the decline in the purchasing power of the Philippine currency in that span of time, such
downward trend of the peso cannot be considered as the extraordinary phenomenon
contemplated by Article 1250 of the Civil Code. Furthermore, absent an official pronouncement
or declaration by competent authorities of the existence of extraordinary inflation during a
given period, as here, the effects of extraordinary inflation, if that be the case, are not to be
applied.





















C.F. Sharp & Co., Inc. vs Northwest Airlines, Inc.
G.R. No. 133498

Facts:
Petitioner was authorized sale and dispensing of tickets of Northwest Airlines -
Japan, but subsequently failed to remit the proceeds of such sales. Failure of
remittance prompted NWA to file suit against petitioner in Tokyo and judgment
was rendered that petitioner should pay and found judgement in the favor of
respondent. Thereafter, the RTC issued a writ of execution for foreign courts
decision.
The petitioner,filed for certiorari, attesting that it has already made partial
payments to respondent. The CA lowered the payable amount and held that the
amount may be paid in local currency at rate prevailing at time of payment.

Issue:
What conversion rate will be the basis of the amount payable in local currency.

Held:
Under RA 529, satisfaction of obligations in foreign currency are void. Payments of
monetary obligations, subject to certain exceptions, shall be payed in the currency which is
the legal tender of the Philippines. But since the law doesn't provide for the rate of exchange
for the payment of foreign currency obligations incurred after its enactment,
jurisprudence held that the exchange rate should be the prevailing rate at time of
payment. Amendment of this law allows payments for obligations to be made in currency
other than Philippine currency but again failed to state what exchange rate should be used.
This being the case, the use of the exchange rate at time of payment shall be used.






Albert R. Padilla vs Spouses Floresco Paredes and Adelina Paredes
G.R. No. 124874

Facts:
Petitioner Albert R. Padilla and private respondents Floresco and Adelina Paredes
entered into a contract to sell a parcel of land. Under the contract, petitioner undertook
to secure title of the property in private respondents names. Upon signing of the
contract, the petitioner was to pay P50,000.00 downpayment, and the balance was due
within ten days from the issuance of a court order declaring issuance of a decree of
registration for the property.
The court ordered the issuance of land registration for the subject property. Private
respondents then demanded the payment of the balance of the purchase price as per
agreement but petitioner failed to pay the full purchase price even after the expiration
of the period set.
Petitioner was still unable to pay the full purchase price of the property despite demand
from counsel of private respondents. Private respondents then offered the petitioner
one-half of the property for all the payments the petitioner has made, instead of
rescinding the contract. If the proposal is not agreed upon, they would take steps to
enforce the automatic rescission of the contract.
Petitioner did not accept the proposal but instead offered to pay the balance in full for
the entire property, plus interest and attorneys fees which the respondents refused.
The lower court ruled in favor of the petitioner, saying that the breach of contract by
the petitioner was only casual and slight and did not warrant the rescission of the
contract. Acceptance of the installments made by petitioner to private respondents,
modified the contract. Acceptance of delayed payments stopped private respondents
from exercising their right of rescission.
Upon appeal, the Court of Appeals ruled that private respondents are entitled to
rescission under Article 1191 of the Civil Code, but with the obligation to return to
petitioner the payments the latter had made.

Issue:
Whether or not the private respondents are entitled to rescind their contract to sell.

Held:
Private respondents may validly cancel the contract to sell their land to petitioner. However,
the reason for this is not that private respondents have the power to rescind such contract, but
because their obligation thereunder did not arise. Article 1191 of the Civil Code, on rescission, is
inapplicable in the present case. This is apparent from the text of the article itself: "Art. 1191.
The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should
not comply with what is incumbent upon him. The injured party may choose between the
fulfillment and the rescission of the obligation, with the payment of damages in either case. He
may also seek rescission, even after he has chosen fulfillment, if the latter should become
impossible. The court shall decree the rescission claimed, unless there be just cause authorizing
the fixing of a period. This is understood to be without prejudice to the rights of third persons
who have acquired the thing, in accordance with articles 1385 and 1388 and the Mortgage
Law." Article 1191 speaks of obligations already existing, which may be rescinded in case one of
the obligors fails to comply with what is incumbent upon him. However, in the present case,
there is still no obligation to convey title of the land on the part of private respondents. There
can be no rescission of an obligation that is non-existent, considering that the suspensive
condition therefore has not yet happened.

The Court of Appeals is correct in ordering the return to petitioner of the amounts received
from him by private respondents, on the principle that no one may unjustly enrich himself at
the expense of another.












Norberto Tibajia, Jr. and Armen Tibajia vs Court of Appeals
G.R. No. 100290

Facts:
Eden Tan filed a suit for collection of a sum of money against the petitioners. The RTC
rendered its decision in favour of Eden Tan ordering the Tibajia spouses to pay her an
amount in excess of P300,000.00.
On appeal, the Court of Appeals modified the decision by reducing the award of moral
and exemplary damages. Since the decision is already final, Eden Tan filed the
corresponding motion for execution and thereafter.
The Tibajia spouses, on Deccember 14, 1990, delivered to Deputy Sheriff Eduardo
Bolima in total money the judgment in the form of a cashiers check and cash. Private
respondent refused to accept the payment and insisted that the garnished funds
deposited with the cashier of the RTC of Pasig be withdrawn to satisfy judgment
obligation.
Spouses filed a motion to lift the writ of execution on the ground that judgment debt
had already been paid. The motion was denies by the trial court on the ground that
payment in cashiers check is not legal tender and that payment was made by a third
party. On appeal, the CA dismissed the petition holding that payment by cashiers check
is not legal tender as required by Republic Act No. 529. Motion for Consideration was
subsequently denied.

Issue:
Whether or not cashiers check is legal tender.

Held:
Article 1249 of the Civil Code which provides:
Art. 1249. The payment of debts in money shall be made in the currency stipulated, and if it is
not possible to deliver such currency, then in the currency which is legal tender in the
Philippines. The delivery of promissory notes payable to order, or bills of exchange or other
mercantile documents shall produce the effect of payment only when they have been cashed,
or when through the fault of the creditor they have been impaired. In the meantime, the action
derived from the original obligation shall be held in abeyance.; Section 1 of Republic Act No.
529, as amended, which provides: Sec. 1. Every provision contained in, or made with respect to,
any obligation which purports to give the obligee the right to require payment in gold or in any
particular kind of coin or currency other than Philippine currency or in an amount of money of
the Philippines measured thereby, shall be as it is hereby declared against public policy null and
void, and of no effect, and no such provision shall be contained in, or made with respect to, any
obligation thereafter incurred. Section 63 of Republic Act No. 265, as amended (Central Bank
Act) which provides: Sec. 63. Legal character Checks representing deposit money do not
have legal tender power and their acceptance in the payment of debts, both public and private,
is at the option of the creditor: Provided, however, that a check which has been cleared and
credited to the account of the creditor shall be equivalent to a delivery to the creditor of cash in
an amount equal to the amount credited to his account.






























Development Bank of the Philippines vs Court of Appeals
G.R. No. 138703

Facts:
The Development Bank of the Philippines granted to respondents Philippine United
Foundry and Machineries Corporation and Philippine Iron Manufacturing Company, Inc.
an industrial loan in cash and DBP Progress Bonds which was evidenced by a promissory
note and secured by a mortgage executed by respondents over their present and future
properties.
DBP granted to respondents another loan in the form of a five-year revolving guarantee
which was reflected in the amended mortgage contract. According to respondents, the
loan guarantee was extended to them when they encountered difficulty in negotiating
the DBP Progress Bonds.
The outstanding accounts of the respondents were restructured in view of their failure
to pay. The outstanding principal balance of the loans and advances were consolidated
into a single account which was evidenced by a new promissory note and payable within
seven years, wit partial payments on the principal to be made beginning on the third
year plus an interest per annum payable every month.
All accrued interest and charges due were denominated as Notes Taken for Interests
and evidenced by a separate promissory note.
Respondents were still unable to comply with the terms and conditions of the new
promissory notes and requested DBP to refinance the matured obligation. The request
was granted, pursuant to which three foreign currency denominated loans sourced from
DBPs own foreign borrowings were extended to respondents on various dates. These
loans were secured by mortgages and were evidenced by promissory notes.
Respondents claim that DBP was collecting from them an unconscionable if not unlawful
or usurious obligation since they have remitted to DBP money to repay their original
debt. They also asserted that since loans were procured for the Self-Reliant Defense
Posture Program of the Armed Forces of the Philippines, the latters breach of its
commitment to purchase military armaments and equipment from respondents amount
to a failure of consideration that would justify the annulment of the mortgage on their
properties.
Regional Trial Court issued a temporary restraining order. Subsequently, a Writ of
Preliminary Injunction was issued and the court rendered decision in favor of the
respondents. Upon appeal by the DBP and PMO, the appellate court affirmed the
decision of the RTC.


Issue:
Whether or not the prestation to collect by petitioner is usurious.

Issue:
In usurious loans, the entire obligation does not become void due to an agreement for usurious
interest; the unpaid principal debt still stands and remains valid but the stipulation as to
interest is void. The debt is then considered without stipulation as to the interest. The absence
of an express stipulation as to interest rate, imposes that the legal rate of 12% per annum shall
be applied.

Determination whether the DBP applied an interest rate higher than what is prescribed cannot
be done. With the assumption that it exceeded the 12% in addition to the other penalties
imposed, should be removed for being usurious.

The petition is partly granted. The case is remanded to the trial court for determination of the
amount of respondents obligation based on the promissory notes, according to the interest
rate agreed upon on the interest rate of 12% per annum, whichever is lower.













Vitarich Corporation vs. Chona Losin
G.R. No. 181560

Facts:
ChonaLosin operates a fastfood and catering business and Vitarich Corporation is her
supplier of poultry meat.
ChonaLosin was serviced by Rodrigo Directo(Directo) and Allan Rosa (Rosa), both
salesmen and authorized collectors of Vitarich, and Arnold Baybay(Baybay), a supervisor
of said corporation.
When the three aforementioned employees of Vitarich left the company they failed to
also turn over pertinent invoices covering Losins account.
Vitarich then sent Losin demand letters covering her alleged unpaid account amounting
to P921,083.10.
Because of said demands, she checked her records and discovered that she had an
overpayment to Vitarich in the amount of P500,000.00. She relayed this fact to Vitarich
and further informed the latter that checks were issued and the same were collected by
Directo.
Losin had three checks which were dishonoured amounting to P288,463.30 either for
the reason of Drawn Against Insufficient Funds (DAIF) or a Stop Payment Order (SPO).
Vitarich then filed a collection of money suit against Losin where the Trial court ruled in
favour of Vitarich basing their decision on the fact of the three checks that were
dishonoured.
The CA however, reversed the decision and based their decision on Article 1921 of the
civil code which provides that Art. 1921. If the agency has been entrusted for the
purpose of contracting with specified persons, its revocation shall not prejudice the
latter if they were not given notice thereof, also stating that indeed Directo, Rosa, and
Baybay were agents of Vitarich in accordance with the provisions of the civil code.
Vitarich now brings the issue to the SC stating that the CA has erred in appreciating the
facts of the case by contradicting the findings and rulings of the trial court.

Issue:
Whether or not the CA erred in appreciating that facts of the case by reversing the
decision of the trial court.

Held:
The general rule is that the SC shall not disturb the factual findings of the lower courts as they
are more inclined to test the credibility of the witnesses and evidence presented, however
there are exceptions that is: (1) when the findings are grounded entirely on speculations,
surmises, or conjectures; (2) when the inference made is manifestly mistaken, absurd, or
impossible; (3) when there is a grave abuse of discretion; (4) when the judgment is based on
misappreciation of facts; (5) when the findings of fact are conflicting; (6) when in making its
findings, the same are contrary to the admissions of both appellant and appellee; (7) when the
findings are contrary to those of the trial court; (8) when the findings are conclusions without
citation of specific evidence on which they are based; (9) when the facts set forth in the petition
as well as in the petitioners main and reply briefs are not disputed by the respondent; and (10)
when the findings of fact are premised on the supposed absence of evidence and contradicted
by the evidence on record. The 7
th
exception is pertinent to this case.

The CA erred in holding that Losin is not liable to pay the amount due to Vitarich. As a general
rule, one who pleads payment has the burden of proving it. In Jimenez v. NLRC, the Court ruled
that the burden rests on the debtor to prove payment, rather than on the creditor to prove
non-payment. The debtor has the burden of showing with legal certainty that the obligation has
been discharged by payment.
True, the law requires in civil cases that the party who alleges a fact has the burden of proving
it. Section 1, Rule 131 of the Rules of Court provides that the burden of proof is the duty of a
party to prove the truth of his claim or defense, or any fact in issue by the amount of evidence
required by law. In this case, however, the burden of proof is on Losin because she alleges an
affirmative defense, namely, payment. Losin failed to discharge that burden.
After examination of the evidence presented, this Court is of the opinion that Losin failed to
present a single official receipt to prove payment. This is contrary to the well-settled rule that a
receipt, which is a written and signed acknowledgment that money and goods have been
delivered, is the best evidence of the fact of payment although not exclusive. All she presented
were copies of the list of checks allegedly issued to Vitarich through its agent Directo, a
Statement of Payments Made to Vitarich, and apparently copies of the pertinent history of her
checking account with Rizal Commercial BankingCorporation (RCBC). At best, these may only
serve as documentary records of her business dealings with Vitarich to keep track of the
payments made but these are not enough to prove payment.

Furthermore, Inasmuch as the case at bar involves an obligation not arising from a loan or
forbearance of money, but consists in the payment of a sum of money, the legal rate of interest
is 6% per annum of the amount demanded.





Metropolitan Bank and Trust Company vs Renato D. Cabilzo
G.R. No. 154469

Facts:
Metropolitan Bank and Trust Company (Metrobank) is a banking institution duly
organized and existing as such under Philippine laws. Renato D. Cabilzo is one of
Metrobanks clients who maintained a current account with Metrobank Pasong Tamo
Branch.
Cabilzo issued a post dated check dated November 24, 1994 payable to CASH in the
amount of P1,000.00 and was paid by Mr. Cabilzo to a certain Mr. Marquez as his sales
commission.The check was presented to Westmont Bank for payment. In turn, the
check was endorsed to Metrobank for appropriate clearing. After proper examination of
entries, including availability of funds and authenticity of signatures, Metrobank cleared
the check for encashment in accordance with the Philippine Clearing House Corporation
(PCHC) Rules.
On November 16, 1994, Cabilzos representative was at the Pasong Tamo Branch of
Metrobank when he was asked by a bank personnel if Cabilzo had issued a check for
P91,000.00 to which the representative replied in the negative. That same day, Cabilzo
called Metrobank to reiterate that he did not issue a check in that amount and
requested that the check in question be returned to him fore verification. Upon receipt
of the check, he discovered that the check number was issues on November 12, 1994 in
the amount of P1,000.00 and was altered to P91,000.00 and the date changed to
November 14, 1994.
Cabilzo demanded that Metrobank re0credit the amount of P91,000.00 t his account.
Metrobank refused reasoning tha the matter will be referred first to its Legal Division.
Failure or refusal of Metrobank to comply with its obligation after demand compelled
Cabilzo to file a civil action before the RTC, who rendered a decision in favor of Cabilzo.
Metrobank filed an appeal with the Court of Appeals but the latter affirmed with
modifications the ruling of the lower court. Further motions for reconsideration was
also denied by the appellate court.

Issue:
Whether or not Metrobank should be held liable for its negligence.

Held:
An alteration is said to be material if it changes the effect of the instrument. It means that an
unauthorized change in an instrument that purports to modify in any respect the obligation of a
party or an unauthorized addition of words or numbers or other change to an incomplete
instrument relating to the obligation of a party. In other words, a material alteration is one
which changes the items which are required to be stated under Section 1 of the Negotiable
Instruments Law. Section 1 of the Negotiable Instruments Law provides: Section 1. Form of
negotiable instruments. - An instrument to be negotiable must conform to the following
requirements: (a) It must be in writing and signed by the maker or drawer; (b) Must contain an
unconditional promise or order to pay a sum certain in money; (c) Must be payable on demand
or at a fixed determinable future time; (d) Must be payable to order or to bearer; and (e)
Where the instrument is addressed to a drawee, he must be named or otherwise indicated
therein with reasonable certainty.

Now, having laid the premise that the present petition is a case of material alteration, it is now
necessary for us to determine the effect of a materially altered instrument, as well as the rights
and obligations of the parties thereunder. The following provision of the Negotiable Instrument
Law will shed us some light in threshing out this issue: Section 124. Alteration of instrument;
effect of. Where a negotiable instrument is materially altered without the assent of all parties
liable thereon, it is avoided, except as against a party who has himself made, authorized, and
assented to the alteration and subsequent indorsers. But when the instrument has been
materially altered and is in the hands of a holder in due course not a party to the alteration, he
may enforce the payment thereof according to its original tenor.

In the present case, it is obvious that Metrobank was remiss in that duty and violated that
relationship. As observed by the Court of Appeals, there are material alterations on the check
that are visible to the naked eye. The decision of the Court of Appeals are affirmed with
modification.











Almeda vs Bathala Marketing
G.R. No. 150806

Facts:
In May 1997, respondent Bathala Marketing Industries, Inc. (lessee), represented by its
president Ramon H. Garcia, entered into a contract of lease with Ponciano L. Almeda
(Ponciano), as lessor, husband of petitioner Eufemia and father of petitioner Romel
Almeda. Provisions of the contract of lease include:
6th Rental rate stipulated is based on the present rate of assessment of the
property, and that in case the assessment should hereafter be increased or any
new tax, charge, or burden be imposed by authorities on the lot and building
where the premises are located, LESSEE shall pay, when the rental becomes due,
the additional rental or charge corresponding to the portion leased; provided,
however, that in the event that the present assessment or tax on the property
be reduced, LESSEE shall be entitled to reduction in the stipulated rental on
proportion to the portion leased by him.
7th - In case of supervening extraordinary inflation or devaluation of Philippine
Currency, the value of Philippine peso at the time of the establishment of the
obligation shall be the basis of payment

Petitioners later demanded payment of VAT and 73% adjusted rentals pursuant to the
foregoing provisions. Respondent refused and filed an action for declaratory relief.
Petitioners filed an action for ejectment.

Issue:
Whether the amount of rentals due the petitioners should be adjusted by reason of
extraordinary inflation or devaluation.

Held:
Petitioners insist that respondent was already in breach of the contract when the petition was
filed, thus, respondent is barred from filing an action for declaratory relief. However, after
petitioners demanded payment of adjusted rentals and in the months that followed,
respondent complied with the terms and conditions set forth in their contract of lease by
paying the rentals stipulated therein. Respondent religiously fulfilled its obligations to
petitioners even during the pendency of the present suit. There is no showing that respondent
committed an act constituting a breach of the subject contract of lease. Thus, respondent is not
barred from instituting before the trial court the petition for declaratory relief.

Petitioners further claim that the instant petition is not proper because a separate action for
rescission, ejectment and damages had been commenced before another court; thus, the
construction of the subject contractual provisions should be ventilated in the same forum.

As a rule, the petition for declaratory relief should be dismissed in view of the pendency of a
separate action for unlawful detainer. In this case, however, the trial court had not yet resolved
the rescission/ejectment case during the pendency of the declaratory relief petition. In fact, the
trial court, where the rescission case was on appeal, initiated the suspension of the proceedings
pending the resolution of the action for declaratory relief.

As to the liability of respondent for the payment of VAT, petitioners are stopped from shifting to
respondent the burden of paying the VAT.

The petitioners reliance on the sixth condition of the contract is unavailing. This provision
clearly states that respondent can only be held liable for new taxes imposed after the
effectivity of the contract of lease, that is, after May 1997, and only if they pertain to the lot and
the building where the leased premises are located. Considering that RA 7716 took effect in
1994, the VAT cannot be considered as a new tax in May 1997, as to fall within the coverage
of the sixth stipulation.

Neither can petitioners legitimately demand rental adjustment because of extraordinary
inflation or devaluation. The factual circumstances obtaining in the present case do not make
out a case of extraordinary inflation or devaluation as would justify the application of Article
1250 of the Civil Code.
Simplicio A. Palanca vs Ulyssis Guides
G.R. No. 146365

Facts:
Simplicio Palance executed a Contract to Sell a parcel of land on installment with Josefa
A. Jopson. Jopson then assigned and transferred all her rights and interests over the
property in question in favor of the respondent Ulyssis Guides.
Believing that she had fully paid her obligation, respondent verified the status of the lot
with the Register of Deeds, only to find out that the title was not in the name of the
petitioner as it was covered by the Transfer Certificate of Title in the name of a certain
Carissa T. de Leon.
A complaint was filed with the trial court and the parties were allowed to make their
cases and show evidence. But at the last scheduled hearing for the case, no one
appeared for the petitioner without any explanation of their non-appearance. The trial
court, upon motion of respondent, considered petitioner to have waived his right to
present evidence and have rested the case and declared the case submitted for
decision.
Petitioner sought reconsideration twice, but was denied both times. The trial court
rendered decision in favor of the plaintiff and against the defendant Simplicio A.
Palanca.
Petitioner claimed that the trial court erred in denying his right to present evidence in
support of his cause. In its decision, the CA held that petitioner was afforded due
process, having been given the opportunity to present and submit evidence in support
of his defense. A Subsequent Motion for Reconsideration was also denied by the CA.

Issue:
Whether or not petitioner was deprived of his right to present evidence.

Held:
Well-settled is the rule that the negligence of counsel binds the client. The Court agrees with
the trial court that notice to Atty. Cario is in fact notice to both petitioner and Atty. Novero in
the light of the recorded fact that Atty. Cario had actively participated in the presentation of
petitioners evidence during the previous proceedings. No clearer proof of notice can be had
than the signature of Atty. Cario assenting to the resetting of the case. Indeed, neither he nor
Atty. Novero can feign ignorance of the said arrangement. The most basic tenet of due process
is the right to be heard. A court denies a party due process if it renders its orders without giving
such party an opportunity to present its evidence. Thus, in the application of this principle,
what is sought to be safeguarded against is not the lack of previous notice, but the denial of the
opportunity to be heard. The question is not whether petitioner succeeded in defending his
interest, but whether he had the opportunity to present his side. Petitioner was provided
opportunities to present his case but these he utterly squandered. The questioned decision and
resolution of the Court of Appeals are affirmed with modification. Petitioner is ordered to
return the overpayment in the amount of P1,527.10 to respondent.


































PHILIPPINE COMMERCIAL INTERNATIONAL BANK (formerly
INSULAR BANK OF ASIA AND AMERICA) vs. COURT OF APPEALS
G.R. No. 121413

Facts:
Ford Philippines (Ford) maintained with Citibank a checking account
Ford then issued a check amounting to P 4,746,114.41 for its tax payments for the last
quarter of 1979.
The check was presented to Philippine Commercial International Bank (PCIB) as an
authorized collector of the Bureau of Internal Revenue.
The check was crossed check and named to The BIR.
The amount of the check however was not deposited in favour of the account of BIR
which forced Ford to write a new check of the same amount for payment of the same.
Ford then filed an action for recovery of the sum against Citibank and (PCIB).
It was later discovered that the check and amount was lost due to a syndicate formed by
employees of Ford and PCIB, two more checks, in 1978 and 1979, of Ford were lost this
way amounting to P12,163,298.10.
Citibank contends that Ford was negligent in selecting and supervising their employees
thus had contributory negligence for the loss of the amount.
PCIB contends that Fords right to file the action has prescribed for filing the action only
in 1983.
The trial court found both solidarily liable, while the CA modified the decision stating
that only PCIB is liable.

Issues:
1. Whether or not Citibank and PCIB are solidarily liable for reimbursing Ford.
2. Whether or not Fords right to recover has prescribed.

Held:
1. For the first check it was found that PCIB allowed the Ford to employee to recall such check
and replace it in turn with two of its Managers Checks which allowed the syndicate to encash
the amount even though the check was crossed checked to the name of BIR. When a check is
crossed check it is the duty of the bank to ensure that such check and its proceeds would only
be deposited to the account in which it was intended for, by allowing its substitution to two
Managers Chekcks, PCIB was solely negligent for the loss of the proceeds of the check. Thus,
PCIB is solely liable for the amount of the first check. The subsequent checks, however were
intercepted during the clearing process by the syndicate and replaced with worthless checks.
Citibank has contributed negligence as it failed to ensure that such checks were in fact cleared
and that it broke its trust with Ford for allowing the money of the same to be lost through the
syndicate. PCIB is negligent as it did not ensure that the crossed checks were deposited straight
to the account foe which it was intended, and that it was two of their employees that led to the
checks interception. Thus, Citibank and PCIB are both liable on equal shares for the amount of
the proceeds of the lost two checks.

2. In Philippine law the prescription period for written contracts is ten years. The prescription
period in these cases is counted once the check that has gone through clearing is returned to
the drawer, usually a month later in the bank statements. Since the first check was returned to
Ford on December 29, 1977 and the action was filed on 1983, barely six years have passed.
Thus, the action has not prescribed.






















Jose V. Lagon vs Hooven Comalco Industries, Inc.
G.R. No. 135657

Facts:
Jose V. Lagon, a businessman and owner of a commercial building, and HOOVEN, a
domestic corporation who manufactures and installs aluminium materials entered into
2 contracts, both named Proposal.
HOOVEN agreed to sell and install various aluminium materials in petitioners
commercial building. An advance payment was given by Lagon upon the execution of
the contracts.
Lagon alleged that HOOVEN was in breach of their contract for failure to deliver and
install some of the materials specified in the proposals, thus he was forced to buy the
undelivered materials from other sources. In addition, all material that were delivered
and installed by HOOVEN in his commercial building was paid in full.

Issue:
Whether or not all said materials specified in the contracts had been delivered and installed by
HOOVEN.

Held:
The decision of the Court of Appeals is Modified.

The quantity of materials specified in the contracts and the amounts stated in the delivery
receipts does not tally with those in the invoices covering them, when according to HOOVEN,
the invoices were based on the delivery receipts. The total value of the materials reflected in
the invoices as compared to the delivery receipts has a difference of P4,458.00.
All the delivery receipts did not appear to be signed by petitioner or his duly authorized
representative. A closer examination of the receipts clearly shows that the deliveries were
made to a certain Jose Rubin, the petitioners driver, Armando Lagon, and a bookkeeper. The
identities of these persons were never established and there is now no way of determining
whether they were authorized by the petitioner.

Thus, the petitioner Jose Lagon is ordered to pay HOOVEN Comalco Industries, Inc. the value of
the unpaid materials admittedly delivered to him. On the other hand, HOOVEN is ordered to
pay petitioner moral and actual damages, attorneys fees, and litigation costs.





































Audion Electric Co., Inc. vs National Labor Relations Commission
G.R. No. 106648

Facts:
Petitioner seeks the annulment of the resolution of the National Labor Relations
Commission in NLRC NCR-CA dated July 31, 1992, denying petitioners motion for
reconsideration.
Nicolas Madolid, respondent, claims that he was dismissed without justifiable cause and
due process and that his dismissal was done in bad faith which renders the dismissal
illegal. He claims to be entitled to reinstatement with full backwages, and moral and
exemplary damages. The NLRC ruled in favor of Nicolas Madolid.
Petitioner filed an appeal and motion for reconsideration to the National Labor
Relations Commission which were both denied.
Petitioner filed a civil action raising that the respondent commission acted with grave
abuse of discretion in rendering its decision.

Issue:
Whether or not petitioner was denied due process when all money claims of private
respondent were granted

Held:
Private respondents employment status was established by the Certificate of Employment
dated April 10, 1989 issued by petitioner which certified that private respondent is a bonafide
employee of the petitioner from June 30, 1976 up to the time the certification was issued. This
proves that private respondent was regularly and continuously employed by petitioner in
various job assignments from 1976 to 1989, a total of 13 years. The alleged gap in service cited
by the petitioner does not defeat respondents regular status as he was rehired for many more
projects without interruption and performed functions which are vital, necessary and
indispensable to the usual business of the petitioner.

Policy Instruction No. 20 of the Department of Labor is explicit that employers of project
employees are exempted from the clearance requirement but nt from the submission of
termination report. Failure of the employer to file termination reports after every project
completion with the nearest public employment office is an indication that private respondent
was not and is not a project employee. Department Order No. 19 expressly provides that the
repot of termination is one of the indications of project employment.

The rule in our jurisdiction is that findings of facts of the NLRC affirming those of the Labor
Arbiter are entitled to great weight and will not be disturbed if they are supported by
substantial evidence. We find no grave abuse of discretion committed by NLRC in finding that
private respondent was not a project employee.

BINALBAGAN VS. CA
G.R. No. 100594
March 10, 1993

Facts:
On May 11, 1967, private respondents, through Angelina P. Echaus, in her capacity as
Judicial Administrator of the intestate estate of Luis B. Puentevella, executed a Contract
to Sell and a Deed of Sale of forty-two subdivision lots within the Phib-Khik Subdivision
of the Puentevella family, conveying and transferring said lots to petitioner Binalbagan
Tech., Inc.
o In turn Binalbagan, through its president, petitioner Hermilo J. Nava, executed an
Acknowledgment of Debt with Mortgage Agreement, mortgaging said lots in
favor of the estate of Puentevella.
Upon the transfer to Binalbagan of titles to the 42 subdivision lots, said petitioner took
possession of the lots and the building and improvements thereon. Binalbagan started
operating a school on the property from 1967 when the titles and possession of the lots
were transferred to it.
It appears that there was a pending case in RTC.
o In this pending case the intestate estate of the late Luis B. Puentevella, thru
Judicial Administratrix, Angelina L. Puentevella sold said aforementioned lots to
Raul Javellana with the condition that the vendee-promisee would not transfer
his rights to said lots without the express consent of Puentevella and that in case
of the cancellation of the contract by reason of the violation of any of the terms
thereof, all payments therefor made and all improvements introduced on the
property shall pertain to the promissor and shall be considered as rentals for the
use and occupation thereof.
Javellana having failed to pay the installments for a period of five years, Civil Case No.
7435 was filed by defendant Puentevella against Raul Javellana and the Southern Negros
Colleges which was impleaded as a party defendant it being in actual possession
thereof, for the rescission of their contract to sell and the recovery of possession of the
lots and buildings with damages.

Issue:
Whether or not the petition is with merit.

Held:
In a contract of sale, the vendor is bound to transfer the ownership of and deliver, as
well as warrant, the thing which is the object of the sale (Art. 1495, Civil Code); he warrants
that the buyer shall, from the time ownership is passed, have and enjoy the legal and peaceful
possession of the thing. As afore-stated, petitioner was evicted from the subject subdivision
lots in 1974 by virtue of a court order in Civil Case No. 293 and reinstated to the possession
thereof only in 1982. During the period, therefore, from 1974 to 1982, seller private
respondent Angelina Echaus' warranty against eviction given to buyer petitioner was breached
though, admittedly, through no fault of her own. It follows that during that period, 1974 to
1982, private respondent Echaus was not in a legal position to demand compliance of the
prestation of petitioner to pay the price of said subdivision lots. In short, her right to demand
payment was suspended during that period, 1974-1982.

LORENZO SHIPPING COMPANY v. BJ MARTHEL INTERNATIONAL
G.R. No. 145483
November 19, 2004

Facts:
Petitioner Lorenzo Shipping is engaged in coastwise shipping and owns the cargo M/V
Dadiangas Express. BJ Marthel is engaged in trading, marketing an dselling various
industrial commodities.
Lorenzo Shipping ordered for the second time cylinder lines from the respondent stating
the term of payment to be 25% upon delivery, the balance payable in 5 bi-monthly
equal installments, no again stating the date of the cylinders delivery.
It was allegedly paid through postdated checks but the same was dishonored due to
insufficiency of funds. Despite due demands by the respondent, petitioner falied
contending that time was of the essence in the delivery of the cylinders and that there
was a delay since the respondent committed said items within two months after
receipt of fir order. RTC held respondents bound to the quotation with respect to the
term of payment, which was reversed by the Court of appeals ordering appellee to pay
appellant P954,000 plus interest. There was no delay since there was no demand.

Issue:
Whether or not respondent incurred delay in performing its obligation under the
contract of sale.

Held:
By accepting the cylinders when they were delivered to the warehouse, petitioner
waived the claimed delay in the delivery of said items. Supreme Court held that time was not of
the essence. There having been no failure on the part of the respondent to perform its
obligations, the power to rescind the contract is unavailing to the petitioner.
Petition is denied. Court of appeals decision is affirmed.

LUZON DEVELOPMENT BANK vs. ENRIQUEZ
G.R. No. 168646
January 12, 2011

Facts:
On July 3, 1995, De Leon (owner of Delta) and his spouse obtained a P4 million loan
from the BANK for the express purpose of developing Delta Homes I to secure the loan,
the spouses De Leon executed in favor of the BANK a real estate mortgage (REM) on
several of their properties.
REM was amended by increasing the amount of the secured loan from P4 million to P8
million. Both the REM and the amendment were annotated on TCT No. T-637183.
Sometime in 1997, DELTA executed a Contract to Sell with respondent Angeles
Catherine Enriquez (Enriquez) over the house and lot in Lot 4 with the condition that
upon full payment of the total consideration the Owner shall execute a final deed of sale
in favor of the Vendee/s.
When DELTA defaulted on its loan obligation, the BANK, instead of foreclosing the REM,
agreed to a dation in payment or a dacion en pago. Enriquez filed a complaint against
DELTA and the BANK before Office of the HLURB19 alleging that DELTA violated the
terms of its License to Sell.
The HLURB Arbiter Atty. Raymundo A. Foronda upheld the validity of the purchase price,
but ordered DELTA to accept payment of the balance of P108,013.36 from Enriquez, and
(upon such payment) to deliver to Enriquez the title to the house and lot free from liens
and encumbrances.

Issue:
Whether the dacion en pago extinguished the loan obligation, such that DELTA has no
more obligations to the BANK.

Held:
The violation of Section 18 renders the mortgage executed by DELTA void therefore the
8 million loans are unsecured. Since the Contract to sell did not transfer ownership of Lot 4 to
Enriquez, said ownership remained with DELTA. DELTA could then validly transfer such
ownership (as it did) to another person (the BANK). However, the transferee BANK is bound by
the Contract to Sell and has to respect Enriquezs rights thereunder.
BANK is also not entitled to payment of the equivalent value of the lot 4 from DELTA
when the this court ruled in favor of ENRIQUEZ over lot 4. Like in all contracts, the intention of
the parties to the dation in payment is paramount and controlling. The contractual intention
determines whether the property subject of the dation will be considered as the full equivalent
of the debt and will therefore serve as full satisfaction for the debt. "The dation in payment
extinguishes the obligation to the extent of the value of the thing delivered, either as agreed
upon by the parties or as may be proved, unless the parties by agreement, express or implied,
or by their silence, consider the thing as equivalent to the obligation, in which case the
obligation is totally extinguished."



ESTANISLAO REYES vs. SEBASTIANA MARTINEZ ET AL.,
G.R. No. 32226
December 29, 1930.

Facts:
Estanislao Reyes filed an action against the Martinez heirs in which the plaintiff seeks,
among others, to recover five parcels of land, containing approximately one thousand
coconut trees, and to obtain a declaration of ownership in his own favor as against the
defendants with respect to said parcels.
This cause of action is founded upon the contract, and the claim by the plaintiff is to
have the five parcels adjudged to him in lieu of another parcel formerly supposed to
contain one thousand trees and described in paragraph 8 of the contract between him
and certain of the Martinez heirs.
By this contract Reyes was to be given the parcel described in clause 8, but in a proviso
to said clause, the parties contracting with Reyes agreed to assure to him certain other
land containing an equivalent number of trees in case he should so elect.

Issue:

Whether or not Reyes is entitled to the recovery of ownership of the five parcels of land
subject of this case.


Held:
The prior history of the litigation shows that Reyes elected to take and hold the parcel
described in clause 8, and his right thereto has all along been recognized in the dispositions
made by the court with respect to said land. In our decision in Martinez vs. Grao (51 Phil., 287,
301), it was a basal assumption that Reyes would obtain the thousand trees referred to; and we
are of the opinion that, from various steps taken in the prior litigation, Reyes must be taken to
have elected to take that particular parcel and he is now estopped from asserting a contrary
election to take the five parcels of land described in paragraph IX of his complaint.
However, the title to the parcel of land elected by Reyes is in the heirs of Inocente
Martinez and it does not appear that they have transferred said title to Reyes. It results
therefore that Reyes now has a claim for damages against the parties signatory to the contract
of March 5, 1921, for the value of the aforesaid property. We therefore reach the conclusion
that Reyes should either have the land originally set apart for him under clauses 4 and 8 of the
contract, or, in case his right thereto should fail, he should not be required to pay the judgment
for P8,000 which was awarded to the Martinez heirs in Martinez vs. Grao (51 Phil., 287, 302).

AGRIFINA AQUINTEY vs. SPOUSES FELICIDAD AND RICO TIBONG
G.R. No. 166704
December 20, 2006

Facts:
On May 6, 1999, petitioner Agrifa filed before RTC a complaint for sum of money
and damages against respondents.
o Agrifina alleged that Felicidad secured loans from her on several
occasions at monthly interest rates of 6% to 7%.
Despite demands, spouses Tibong failed to pay their outstanding loans of
P773,000,00 exclusive of interests. However, spouses Tiong alleged that they had
executed deeds of assignment in favor of Agrifina amounting to P546,459 and
that their debtors had executed promissory notes in favor of Agrifina.
Spouses insisted that by virtue of these documents, Agrifina became the new
collector of their debts.
Agrifina was able to collect the total amount of P301,000 from Felicdads
debtors. She tried to collect the balance of Felicidad and when the latter reneged
on her promise, Agrifina filed a complaint in the office of the barangay for the
collection of P773,000.00. There was no settlement.

Issues:
Whether or not dacion en pago is present in this case.

Held:
The Court held that dacion en pago is the delivery and transmission of ownership
of a thing by the debtor to the creditor as an accepted equivalent of the performance of
the obligation. It is a special mode of payment where the debtor offers another thing to
the creditor who accepts it as equivalent of payment of an outstanding debt. The
undertaking really partakes in one sense of the nature of sale, that is, the creditor is
really buying the thing or property of the debtor, payment for which is to be charged
against the debtor's obligation. As such, the essential elements of a contract of sale,
namely, consent, object certain, and cause or consideration must be present. In its
modern concept, what actually takes place in dacion en pago is an objective novation of
the obligation where the thing offered as an accepted equivalent of the performance of
an obligation is considered as the object of the contract of sale, while the debt is
considered as the purchase price. In any case, common consent is an essential
prerequisite, be it sale or novation, to have the effect of totally extinguishing the debt or
obligation.
The requisites for dacion en pago are: (1) there must be a performance of the
prestation in lieu of payment (animo solvendi) which may consist in the delivery of a
corporeal thing or a real right or a credit against the third person; (2) there must be
some difference between the prestation due and that which is given in substitution
(aliud pro alio); and (3) there must be an agreement between the creditor and debtor
that the obligation is immediately extinguished by reason of the performance of a
prestation different from that due.
All the requisites for a valid dation in payment are present in this case. As
gleaned from the deeds, respondent Felicidad assigned to petitioner her credits "to
make good" the balance of her obligation. Felicidad testified that she executed the
deeds to enable her to make partial payments of her account, since she could not
comply with petitioner's frenetic demands to pay the account in cash. Petitioner and
respondent Felicidad agreed to relieve the latter of her obligation to pay the balance of
her account, and for petitioner to collect the same from respondent's debtors.

MAMENTA Vda. De JAYME vs. CA
G.R. No. 128669
October 4, 002

Facts:
On January 8, 1973, spouses Jayme entered into a contract of lease with George Neri,
President of Asian Cars covering one-half of Lot 2700 for 20 years.
o Under the contract, Asian Cars used the leased premises as a collateral to secure
payment of loan which Asian Cars may obtain from any bank, provided, the
proceeds of the loans shall be used solely for the construction of the building
which upon the termination of lease shall automatically become the property of
the Jayme spouses.
In October1977, Asian Cars obtained a loan of six million from Metrobank.
o The entire lot 2700 was offered as one of the several properties given as
collateral for the loan.
Due to financial difficulties, Asian Cars conveyed ownership of the building on the leased
premises to MBTC by way of dacion en pago.
Eventually, MBTC extrajudicially foreclosed the mortgage and MBTC was the highest
bidder in a public auction.
Heirs of Graciano Jayme filed an action for annulment of contract with damages and
issuance of preliminary injunction against Asian Cars.
RTC declared that the REM executed by Jayme in favor of Metrobank as valid and
binding. CA affirmed the decision declaring valid also the foreclosure of the mortgage
and the foreclosure sale.

Issue:
Whether or not the dacion en pago by Asian Cars in favor of MBTC is valid and binding
despite the stipulation in the lease contract

Held:
Court of Appeal did not err in considering MBTC as a purchase in good faith, MBTC had
no knowledge of the stipulation in the lease contract. There was no annotation on the title of
any encumbrance. Thus, the transfer of the building in favor of MBTC was properly held valid
and binding by respondent CA.
CA decision is affirmed with modification ordering that private respondent MBTC
pay petitioners rentals amounting to P602,083.33. with 6 % interest per annum until fully paid.

Caltex vs. IAC
G.R. No. 72703
November 13, 1992

Facts:
Asia Pacific Airways Inc. (private respondent), entered into an agreement with Caltex
(Philippines) Inc. (petitioner), whereby petitioner agreed to supply private respondent's
aviation fuel requirements for two (2) years, covering the period from January 1, 1978
until December 31, 1979.
As of June 30, 1980, private respondents had an outstanding obligation to petitioner in
the total amount of P4,072,682.13, representing the unpaid price of the fuel supplied.
o To settle this outstanding obligation, private respondent executed a Deed of
Assignment, wherein it assigned to petitioner its receivables or refunds of
Special Fund Import Payments from National Treasury of the Philippines to be
applied as payment of the amount of P4,072,682.13 which private respondent
owed to petitioner.
Pursuant to the Deed of Assignment, Treasury Warrant No. B04708613 in the amount of
P5,475,294.00 representing the refund to respondent of Special Fund Import Payment
on its fuel purchases was issued by the National Treasury in favor of the petitioner.
o Four days later, on February 16, 1981, private respondent, having learned that
the amount remitted to petitioner exceeded the amount covered by the Deed of
Assignment, wrote a letter to petitioner, requesting a refund in the amount of
P900,000.00 plus in favor of private respondent.
The latter, believing that it was entitled to a larger amount by way of
refund, wrote a petitioner anew, demanding the refund of the remaining
amount.
In response thereto, petitioner informed private respondent that the
amount not returned (P510,550.63) represented interest and service
charges at the rate of 18% per annum on the unpaid and overdue
account of respondent from June 1, 1980 to July 31, 1981.

Issue:
Whether or not the Deed of Assignment constituted dacion en pago.

Held:
The Deed of Assignment speaks of three (3) obligations (1) the outstanding obligation
of P4,072,682.13 as of June 30, 1980; (2) the applicable interest charges on overdue accounts;
and (3) the other avturbo fuel lifting and deliveries that assignor (private respondent) may from
time to time receive from assignee (Petitioner). Dation in payment does not necessarily mean
total extinguishment of the obligation. The obligation is totally extinguished only when the
parties, by agreement, express or implied, or by their silence, consider the thing as equivalent
to the obligation. In order to judge the intention of the contracting parties, their
contemporaneous and subsequent acts shall be principally considered (Art. 1253, Civil Code).
The foregoing subsequent acts of the parties clearly show that they did not intend the Deed of
Assignment to have the effect of totally extinguishing the obligations of private respondent
without payment of the applicable interest charges on the overdue account.









Lo vs. CA
G.R. No. 141434
September 23, 2003

Facts:
At the core of the present controversy are two parcels of land measuring a total of 2,147
square meters, with an office building constructed thereon, located at Bo. Potrero,
Malabon, Metro Manila and covered by TCT Nos. M-13166 and M-13167.
o Antonio Lo (petitioner) acquired the subject parcels of land in an auction sale on
November 9, 1995 for P20,170,000 from the Land Bank of the Philippines (Land
Bank).
o National Onion Growers Cooperative Marketing Association, Inc. (private
respondent), an agricultural cooperative, was the occupant of the disputed
parcels of land under a subsisting contract of lease with Land Bank. The lease
was valid until December 31, 1995.
Upon the expiration of the lease contract, petitioner demanded that private respondent
vacate the leased premises and surrender its possession to him. Private respondent
refused on the ground that it was, at the time, contesting petitioners acquisition of the
parcels of land in question in an action for annulment of sale, redemption and damages.
On February 23, 1996, petitioner filed an action for ejectment. He asked, inter alia, for
the imposition of the contractually stipulated penalty of P5,000 per day of delay in
surrendering the possession of the property to him.

Issue:
Whether or not the imposed penalty should be reduced for being unconscionable and
iniquitous.

Held:
The question of whether a penalty is reasonable or iniquitous is addressed to the sound
discretion of the court and depends on several factors, including, but not limited to, the
following: the type, extent and purpose of the penalty, the nature of the obligation, the mode
of breach and its consequences, the supervening realities, the standing and relationship of the
parties.
In this case, the stipulated penalty was reduced by the appellate court for being
unconscionable and iniquitous. As provided in the Contract of Lease, private respondent was
obligated to pay a monthly rent of P30,000. On the other hand, the stipulated penalty was
pegged at P5,000 for each day of delay or P150,000 per month, an amount five times the
monthly rent. This penalty was not only exorbitant but also unconscionable, taking into account
that private respondents delay in surrendering the leased premises was because of a well-
founded belief that its right of preemption to purchase the subject premises had been violated.
Considering further that private respondent was an agricultural cooperative, collectively owned
by farmers with limited resources, ordering it to pay a penalty of P150,000 per month on top of
the monthly rent of P30,000 would seriously deplete its income and drive it to bankruptcy.

ASJ Corporation vs. Evangelista
G.R. No. 158086
February 14, 2008

Facts:
Respondents, under the name and style of R.M. Sy Chicks, are engaged in the large-scale
business of buying broiler eggs, hatching them, and selling their hatchlings (chicks) and
egg by-products in Bulacan and Nueva Ecija. For the incubation and hatching of these
eggs, respondents availed of the hatchery services of ASJ Corp., a corporation duly
registered in the name of San Juan and his family.
On February 3, 1993, respondent Efren went to the hatchery to pick up the chicks and
by-products covered by Setting Report No. 108, but San Juan refused to release the
same due to respondents failure to settle accrued service fees on several setting
reports starting from Setting Report No. 90. Nevertheless, San Juan accepted from
Efren 10,245 eggs covered by Setting Report No. 113 and P15,000.00 in cash as partial
payment for the accrued service fees.
On February 10, 1993, Efren returned to the hatchery to pick up the chicks and by-
products, but San Juan again refused to release the same unless respondents fully settle
their accounts. In the afternoon of the same day, respondent Maura, with her son
Anselmo, tendered P15,000.00 to San Juan, and tried to claim the chicks and by-
products. She explained that she was unable to pay their balance because she was
hospitalized for an undisclosed ailment. San Juan accepted the P15,000.00, but insisted
on the full settlement of respondents accounts before releasing the chicks and by-
products.
Believing firmly that the total value of the eggs delivered was more than sufficient to
cover the outstanding balance, Maura promised to settle their accounts only upon
proper accounting by San Juan. San Juan disliked the idea and threatened to impound
their vehicle and detain them at the hatchery compound if they should come back
unprepared to fully settle their accounts with him.

Issue:
Whether or not there was application of payment.

Held:
Petitioners obligation to deliver the chicks and by-products corresponds to three dates:
the date of hatching, the delivery/pick-up date and the date of respondents payment. On
several setting reports, respondents made delays on their payments, but petitioners tolerated
such delay. When respondents accounts accumulated because of their successive failure to
pay on several setting reports, petitioners opted to demand the full settlement of respondents
accounts as a condition precedent to the delivery. However, respondents were unable to fully
settle their accounts.
Respondents offer to partially satisfy their accounts is not enough to extinguish their
obligation. Under Article 1248[27] of the Civil Code, the creditor cannot be compelled to accept
partial payments from the debtor, unless there is an express stipulation to that effect. More so,
respondents cannot substitute or apply as their payment the value of the chicks and by-
products they expect to derive because it is necessary that all the debts be for the same kind,
generally of a monetary character. Needless to say, there was no valid application of payment
in this case.

Paculdo vs. Regalado
G.R. No. 123855
November 20, 2000

Facts:
On December 27, 1990, Nereo J. Paculdo (petitioner) and Bonifacio C. Regalado
(respondent) entered into a contract of lease over a 16,478 square meter parcel of land
with a wet market building, located along Don Mariano Marcos Avenue, Fairview Park,
Quezon City.
o The contract was for twenty five (25) years, commencing on January 1, 1991 and
ending on December 31, 2015.
o For the first five (5) years of the contract beginning December 27, 1990, Nereo
would pay a monthly rental of P450,000.00, payable within the first five (5) days
of each month at Bonifacios office, with a 2% penalty for every month of late
payment.
Aside from the above lease, petitioner leased eleven (11) other property from
respondent, ten (10) of which were located within the Fairview compound, while the
eleventh was located along Quirino Highway, Quezon City.
Petitioner also purchased from respondent eight (8) units of heavy equipment and
vehicles in the aggregate amount of P1,020,000.00.
Petitioner made a total payment of P10,949,447.18, to respondent as of July 2, 1992.
2 letters:
o In November 19, 1991 letter, respondent proposed that petitioners security
deposit for the Quirino lot, in the amount of P643,276.48, be applied as partial
payment for his account under the subject lot as well as to real estate taxes on
the Quirino lot. Petitioner interposed no objection, as evidenced by his signature
signifying his conformity thereto.
o In an earlier letter, dated July 15, 1991, respondent informed petitioner that the
payment was to be applied not only to petitioners accounts under both the
subject land and the Quirino lot but also to heavy equipment bought by the
latter from respondent. Petitioner claimed that the amount applied as payment
for the heavy equipment was critical because it was equivalent to more than two
(2) months rental of the subject property, which was the basis for the ejectment
case in the Metropolitan Trial Court.

Issues:
1. Whether or not petitioners failure to object the earlier letter constitutes consent for
the application of payment for other debts.
2. Whether or not payment to the most onerous debt should be paid first in the
absence the declaration of the debtor to which debt should be paid first.

Held:
1. Article 1252 states that he who has various debts of the same kind in favor of
one and the same creditor, may declare at the time of making the payment, to which of them
the same must be applied. Unless the parties so stipulate, or when the application of payment
is made by the party for whose benefit the term has been constituted, application shall not be
made as to debts which are not yet due.
At the time petitioner made the payments, he made it clear to respondent that they
were to be applied to his rental obligations on the Fairview wet market property. All the
payments made, about P11, 000,000.00, were to be applied to rental and security deposit on
the Fairview wet market property.
There was no clear assent by petitioner to the change in the manner of application of
payment. The petitioners silence as regards the application of payment by respondent cannot
mean that he consented thereto. There was no meeting of the minds. Though an offer may be
made, the acceptance of such offer must be unconditional and unbounded in order that
concurrence can give rise to a perfected contract.
2. Under the law, if the debtor did not declare at the time he made the payment to
which of his debts with the creditor the payment is to be applied, the law provided the
guideline--no payment is to be made to a debt that is not yet due and the payment has to be
applied first to the debt most onerous to the debtor. In the instant case, the purchase price of
the eight (8) heavy equipment was not yet due at the time the payment was made, for there
was no date set for such payment. Neither was there a demand by the creditor to make the
obligation to pay the purchase price due and demandable. Hence, the application made by
respondent is contrary to the provisions of the law.

CBC vs. CA
G.R. No. 121158
December 5, 1996

Facts:
China Banking Corporation (China Bank) extended several loans to Native West
International Trading Corporation (Native West) and to So Ching, Native Wests
president.
Native West in turn executed promissory notes in favor of China Bank.
So Ching, with the marital consent of his wife, Cristina So, additionally executed two
mortgages over their properties.
The promissory notes matured and despite due demands by China Bank neither private
respondents Native West nor So Ching paid.
Pursuant to a provision embodied in the two mortgage contracts, China Bank filed
petitions for the extra-judicial foreclosure of the mortgaged properties, copies of which
were given to the spouses So Ching and Cristina So.
After due notice and publication, the notaries public scheduled the foreclosure sale of
the spouses real estate properties on April 13, 1993.

Issue:
Whether or not petitioners have right to foreclosure the mortgages.

Held:
Where a debt is secured by a mortgage and there is a default in payment on the part of
the mortgagor, the mortgagee has a choice of one (1) or two (2) remedies, but he cannot have
both. The mortgagee may: 1) foreclosure the mortgage; or 2) file an ordinary action to collect
the debt.
When the mortgagee chooses the foreclosure of the mortgage as a remedy, he enforces
his lien by the sale on foreclosure of the mortgaged property. The proceeds of the sale will be
applied to the satisfaction of the debt. With this remedy, he has a prior lien on the property. In
case of a deficiency, the mortgagee has the right to claim for the deficiency resulting from the
price obtained in the sale of the real property at public auction and the outstanding obligation
at the time of the foreclosure proceedings.
On the other hand, if the mortgagee resorts to an action to collect the debt, he thereby
waives his mortgage lien. He will have no more priority over the mortgaged property. If the
judgment in the action to collect is favorable to him, and it becomes final and executory, he can
enforce said judgment by execution. He can even levy execution on the same mortgaged
property, but he will not have priority over the latter and there may be other creditors who
have better lien on the properties of the mortgagor.


















Mobil vs. CA
G.R. No. 103052
May 23, 1997

Facts:
Sometime in May 1982, petitioner Mobil Oil Philippines, Inc. ("MOPI"), a firm engaged in
the marketing of petroleum products to industrial users, entered into a supply
agreement with private respondent Continental Cement Corporation ("CCC"), a cement
producer, under which the former would supply the latter's industrial fuel oil ("IFO") or
bunker fuel oil ("BFO") requirements.
MOPI extended to CCC an unsecured credit line of P2,000,000.00 against which CCC's
purchases of oil could initially be charged.
MOPI had a "hauling contract" with Century Freight Services ("CFS") whereby CFS
undertook the delivery of Mobil products to designated consignees of MOPI.
During the period starting from 12 July to 07 October 1982, MOPI made a total of sixty-
seven deliveries of BFO, each delivery consisting of 20,000 liters, to CCC's cement
factory.
o On October 8, 1982, CCC discovered that what should have been MOPI's 20,000
BFO delivery to CCC's Norzagaray plant was in fact, pure water.
o CCC at once informed MOPI of this anomaly and of its intention to meanwhile
hold in abeyance all payments due to MOPI on its previous deliveries until such
time as the parties would have ascertained that those deliveries were not
themselves adulterated.

Issue:
Whether or not MOPI should be held accountable for CFS.

Held:
The Court held that CFS was the contractor of MOPI, not CCC, and the contracted price
of the BFO that CCC paid to MOPI included hauling charges. The presumption laid down under
Article 1523 of the Civil Code that delivery to the carrier should be deemed to be delivery to the
buyer would have no application where, such as in this case, the sale itself specifically called for
delivery by the seller to the buyer at the latter's place of business.
Sps. Bonrostro vs. Sps. Luna
G.R. No. 172346
July 24, 2013

Facts:
In 1992, respondent Constancia Luna (Constancia), as buyer, entered into a Contract to
Sell with Bliss Development Corporation (Bliss) involving a house and lot.
Constancia, this time as the seller, entered into another Contract to Sell with petitioner
Lourdes Bonrostro (Lourdes) concerning the same property under the following terms
and conditions:
o The stipulated price of P1,250,000.00 shall be paid by the VENDEE to the
VENDOR in the following manner:
(a) P200,000.00 upon signing x x x [the] Contract To Sell,
(b) P300,000.00 payable on or before April 30, 1993,
(c) P330,000.00 payable on or before July 31, 1993,
(d) P417,000.00 payable to the New Capitol Estate, for 15 years at
[P6,867.12] a month,
o x x x [I]n the event the VENDEE fails to pay the second installment on time, the
VENDEE will pay starting May 1, 1993 a 2% interest on the P300,000.00 monthly.
Likewise, in the event the VENDEE fails to pay the amount of P630,000.00 on the
stipulated time, this CONTRACT TO SELL shall likewise be deemed cancelled and
rescinded and x x x 5% of the total contract price of P1,250,000.00 shall be
deemed forfeited in favor of the VENDOR. Unpaid monthly amortization shall
likewise be deducted from the initial down payment in favor of the VENDOR.
Immediately after the execution of the said second contract, the spouses Bonrostro
took possession of the property. However, except for the P200,000.00 down payment,
Lourdes failed to pay any of the stipulated subsequent amortization payments.
On November 24, 1993, Lourdes sent Atty. Carbon a letter expressing her desire to pay
the balance, but received no response from the latter.

Issue:
Whether or not there is a valid tender of payment.

Held:
The Court held that the subject letter merely states Lourdes willingness and readiness
to pay but it was not accompanied by payment. She claimed that she made numerous
telephone calls to Atty. Carbon reminding the latter to collect her payment, but, neither said
lawyer nor Constancia came to collect the payment. After that, the spouses Bonrostro took no
further steps to effect payment. They did not resort to consignation of the payment with the
proper court despite knowledge that under the contract, non-payment of the installments on
the agreed date would make them liable for interest thereon. The spouses Bonrostro
erroneously assumed that their notice to pay would excuse them from paying interest. Their
claimed tender of payment did not produce any effect whatsoever because it was not
accompanied by actual payment or followed by consignation. Hence, it did not suspend the
running of interest. The spouses Bonrostro are therefore liable for interest on the subject
installments from the date of default until full payment of the sums of P300,000.00 and
P330,000.00.


Dalton vs. FGR Reality and Development Corp.
G.R. No. 172577
January 19, 2011

Facts:
Flora R. Dayrit (Dayrit) owned a 1,811-square meter parcel of land. Petitioner Soledad
Dalton (Dalton), and Sasam, et al. leased portions of the property.
In June 1985, Dayrit sold the property to respondent FGR Realty and Development
Corporation (FGR).
In August 1985, Dayrit and FGR stopped accepting rental payments because they
wanted to terminate the lease agreements with Dalton and Sasam, et al.
In a complaint Dalton and Sasam, et al. consigned the rental payments with the RTC.
They failed to notify Dayrit and FGR about the consignation.
Dayrit and FGR withdrew the rental payments through several motions.

Issues:
1. Whether or not Dayrit and FGR expressly reserved the right to question the validity
of the consignation.
2. Whether or not all the requisites of consignation should be properly made to make it
valid.

Held:
1. In withdrawing the amounts consigned, Dayrit and FGR expressly reserved the right
to question the validity of the consignation. When the creditors acceptance of the
money consigned is conditional and with reservations, he is not deemed to have
waived the claims he reserved against his debtor. If creditor accepted with
reservation the amount consigned in court by the petitioner-debtor, the creditor is
not barred from raising his other claims. Consignation is completed at the time the
creditor accepts the same without objections, or, if he objects, at the time the court
declares that it has been validly made in accordance with law.
2. Compliance with the requisites of a valid consignation is mandatory. Failure to
comply strictly with any of the requisites will render the consignation void.
Substantial compliance is not enough. The requisites of a valid consignation:
(1) A debt due;
(2) The creditor to whom tender of payment was made refused without
just cause to accept the payment, or the creditor was absent, unknown or
incapacitated, or several persons claimed the same right to collect, or the title of
the obligation was lost;
(3) The person interested in the performance of the obligation was given
notice before consignation was made;
(4) The amount was placed at the disposal of the court; and
(5) The person interested in the performance of the obligation was given
notice after the consignation was made.

Benos vs. Lawilao
G.R. No. 172259
December 5, 2006

Facts:
On February 11, 1999, petitioner-spouses Jaime and Marina Benos ("the Benos
spouses") and respondent-spouses Gregorio and Janice Gail Lawilao ("the Lawilao
spouses") executed a Pacto de Retro Sale for P300,000.00, one half of which was to be
paid in cash to the Benos spouses and the other half to be paid to the bank to pay off
the loan of the Benos spouses which was secured by the same lot and building.
o Under the contract, the Benos spouses could redeem the property within 18
months from date of execution by returning the contract price, otherwise, the
sale would become irrevocable without necessity of a final deed to consolidate
ownership over the property in the name of the Lawilao spouses.
After paying the P150,000.00, the Lawilao spouses immediately took possession of the
property and leased out the building thereon. However, instead of paying the loan to
the bank, Janice Lawilao restructured it twice. Eventually, the loan became due and
demandable.
On August 14, 2000, a son of the Benos spouses paid the bank P159,000.00 representing
the principal and interest.
o The Lawilao spouses also went to the bank and offered to pay the loan, but the
bank refused to accept the payment. The Lawilao spouses then filed with the
Municipal Circuit Trial Court a petition for consignation against the bank and
simultaneously deposited the amount of P159,000.00. Upon the banks motion,
the court dismissed the petition for lack of cause of action.
Subsequently, the Lawilao spouses filed with the Municipal Circuit Trial Court a
complaint for consolidation of ownership. This complaint is the precursor of the instant
petition.

Issue:
Whether or not the Lawilao spouses made a valid consignation.

Held:
The Lawilao spouses filed the petition for consignation against the bank without
notifying the Benos spouses. The petition was dismissed for lack of cause of action against the
bank. Hence, the Lawilao spouses failed to prove their offer to pay the balance of the purchase
price and consignation. In fact, even before the filing of the consignation case, the Lawilao
spouses never notified the Benos spouses of their offer to pay. Thus, as far as the Benos are
concerned, there was no full and complete payment of the contract price, which gives them the
right to rescind the contract pursuant to Articles 1191 in relation to Article 1592 of the Civil
Code.

Peoples Industrial vs. CA
G.R. No. 112733
October 24, 1997

Facts:
Private respondents Mar-ick Investment Corporation is the exclusive and registered
owner of Mar-ick Subdivision.
On May 29, 1961, private respondents entered into six (6) agreements with petitioner
Peoples Industrial and Commercial Corporation whereby it agreed to sell to petitioner
six (6) subdivision lots.
After the lapse of ten years, petitioner still had not fully paid for the six lots; It had paid
only the down payment and eight (8) installments, even after private respondents had
given petitioner a grace period of four months to pay the arrears.
As of May 1, 1980, the total amount due to private respondents under the contract was
P214,418.00.
After a series of negotiations between the parties, they agreed to enter into a new
contract to sell involving seven (7) lots, namely, Lots Nos. 2, 3, 4, 5, 6, 7 and 8. The
contract stipulates that the previous contracts involving the same lots (minus Lot No.2)
have been cancelled due to the failure of the PURCHASER to pay the stipulated
installments.
The parties agreed that the contract price would be P423,250.00 with a down payment
of P42,325.00 payable upon the signing of the contract and the balance of P380,925.00
payable in forty-eight (48) equal monthly amortization payments of P7,935.94.
The new contract bears the date of October 11, 1983 but neither of the parties signed it.
Thereafter, Tomas Siatianum issued the following checks in the total amount of
P37,642.72 to private respondent.
Private respondent received but did not encash those checks. Instead, it filed in the
Regional Trial Court a complaint for accion publicianan de posesion against petitioner
and Tomas Siatianum.

Issue:
Whether or not tender of payment alone can extinguish the obligation

Held:
Petitioner did not lift a finger towards the performance of the contract other than the
tender of down payment. There is no record that it even bothered to tender payment of the
installments or to amend the contract to reflect the true intention of the parties as regards the
number of lots to be sold. By petitioners inaction, private respondents may not be judicially
enjoined to validate a contract that the former appeared to have taken for granted. As in the
earlier agreements, petitioner ignored opportunities to resuscitate a contract to sell that was
rendered moribund and inoperative by its inaction. A contract to sell involves the performance
of an obligation, not merely the exercise of the privilege or a right. Consequently, performance
or payment may be effected not by tender of payment alone but by both tender and
consignation.

Eternal Gardens vs. CA
G.R. No. 124554
December 9, 1997

Facts:
Petitioner Eternal Gardens Memorial Park Corporation (EGMPC) and private respondent
North Philippine Union Mission of the Seventh Day Adventists (NPUM) entered into a
Land Development Agreement.
o Under the agreement, EGMPC was to develop a parcel of land owned by NPUM
into a memorial park subdivided into lots.
o EGMPC under the agreement had the obligation to remit monthly to NPUM forty
percent (40%) of its net gross collection from the development of a memorial
park on property owned by NPUM.
Later, two claimants of the parcel of land surfaced - Maysilo Estate and the heirs of a
certain Vicente Singson Encarnacion.
EGMPC thus filed an action for interpleader against Maysilo Estate and NPUM, docketed
as Civil Case No. 9556 before the Regional Trial Court.
The Singson heirs in turn filed an action for quieting of title against EGMPC and NPUM.

Issue:
Whether or not consignation is an option in case of dispute regarding the rightful owner
of the property.

Held:
EGMPC cannot suspend payment on the pretext that it did not know who among the
subject propertys claimants was the rightful owner. Consignation is a remedy under the New
Civil Code which can be applied in this case. Consignation produces the effect of payment. The
rationale for consignation is to avoid the performance of an obligation becoming more onerous
to the debtor by reason of causes not imputable to him. For its failure to consign the amounts
due, Eternal Gardens obligation to NPUM necessarily became more onerous as it became liable
for interest on the amounts it failed to remit.

Rayos vs. Reyes
G.R. No. 150913
February 20, 2003

Facts:
The three (3) parcels were formerly owned by the spouses Francisco and Asuncion Tazal
who sold them for P724.00 to respondents predecessor-in-interest, one Mamerto
Reyes, with right to repurchase within two (2) years from date thereof by paying to the
vendee the purchase price and all expenses incident to their reconveyance. After the
sale the vendee a retro took physical possession of the properties and paid the taxes
thereon.
Two (2) of the three (3) parcels were again sold by Francisco Tazal for P420.00 in favor
of petitioners predecessor-in-interest Blas Rayos without first availing of his right to
repurchase the properties.
The conventional right of redemption in favor of spouses Francisco and Asuncion Tazal
expired without the right being exercised by either the Tazal spouses or the vendee Blas
Rayos.
After the expiration of the redemption period, Francisco Tazal attempted to repurchase
the properties from Mamerto Reyes by asserting that the deed of sale with right of
repurchase was actually an equitable mortgage and offering the amount of P724.00 to
pay for the alleged debt.
o Mamerto Reyes refused the tender of payment and vigorously claimed that their
agreement was not an equitable mortgage.
Francisco Tazal filed a complaint with the Court of First Instance against Mamerto Reyes,
for the declaration of the transaction as a contract of equitable mortgage.
Francisco Tazal again sold the third parcel of land previously purchased by Mamerto
Reyes to petitioner-spouses Teofilo and Simeona Rayos for P400.00. Petitioner-spouses
bought from Blas Rayos for P400.00 the two (2) lots that Tazal had sold at the first
instance to Mamerto Reyes and thereafter to Blas Rayos.
o These contracts of sale in favor of petitioner-spouses were perfected while the
complaint for the declaration of the transaction as a contract of quitable
mortgage was pending before the trial court.
The trial court acknowledged the consignation of P724.00 in the Court of First Instance
and the payment of taxes by Mamerto Reyes on the three (3) parcels of land.

Issue:
Whether or not there was a valid consignation.

Held:
Petitioners failed, (1) to offer a valid and unconditional tender of payment; (2) to notify
respondents of the intention to deposit the amount with the court; (3), to show the acceptance
by the creditor of the amount deposited as full settlement of the obligation, or in the
alternative, a declaration by the court of the validity of the consignation. The failure of
petitioners to comply with any of these requirements rendered the consignation ineffective.

Cebu International vs. CA
G.R. No. 123031
October 12, 1999

Facts:
Petitioner Cebu International Finance Corporation (CIFC), a quasi-banking institution, is
engaged in money market operations.
On April 25, 1991, private respondent, Vicente Alegre, invested with CIFC, five hundred
thousand (P500,000.00) pesos, in cash. Petitioner issued a promissory note to mature
on May 27, 1991. The note for P516,238.67 covered private respondent's placement
plus interest at twenty and a half (20.5%) percent for thirty-two (32) days.
On May 27, 1991, CIFC issued BPI Check for P514,390.94 in favor of the private
respondent as proceeds of his matured investment plus interest.
On June 17, 1991, private respondent's wife deposited the Check with Rizal Commercial
Banking Corp. (RCBC). BPI dishonored the Check with the annotation, that the "Check
(is) Subject of an Investigation." BPI took custody of the Check pending an investigation
of several counterfeit checks drawn against CIFC's aforestated checking account. BPI
used the check to trace the perpetrators of the forgery.
Private respondent notified CIFC of the dishonored Check and demanded, on several
occasions, that he be paid in cash. CIFC refused the request, and instead instructed
private respondent to wait for its ongoing bank reconciliation with BPI.
o Private respondent, through counsel, made a formal demand for the payment of
his money market placement.
o CIFC promised to replace the Check but required an impossible condition that
the original must first be surrendered.
Private respondent Alegre filed a complaint for recovery of a sum of money against the
petitioner.

Issue:
Whether or not a check is a valid legal tender and that the creditor can be compelled to
accept the same.

Held:
In a loan transaction, the obligation to pay a sum certain in money may be paid in
money, which is the legal tender or, by the use of a check. A check is not a legal tender, and
therefore cannot constitute valid tender of payment. Since a negotiable instrument is only a
substitute for money and not money, the delivery of such an instrument does not, by itself,
operate as payment. A check, whether a manager's check or ordinary check, is not legal tender,
and an offer of a check in payment of a debt is not a valid tender of payment and may be
refused receipt by the obligee or creditor. Mere delivery of checks does not discharge the
obligation under a judgment. The obligation is not extinguished and remains suspended until
the payment by commercial document is actually realized. Tender of payment involves a
positive and unconditional act by the obligor of offering legal tender currency as payment to
the obligee for the former's obligation and demanding that the latter accept the same.

De Mesa vs. CA
G.R. No. 106467-68
October 19, 1999

Facts:
Petitioner Dolores Ligaya de Mesa owns several parcels of land in which were
mortgaged to the Development Bank of the Philippines (DBP) as security for a loan she
obtained from the bank.
Failing to pay her mortgage debt, all her mortgaged properties were foreclosed and sold
at public auction held on different days.
In a letter, petitioner de Mesa requested DBP that she be allowed to repurchase her
foreclosed properties.
Mrs. de Mesa, under a Deed of Sale with Assumption of Mortgage, sold the foreclosed
properties to private respondent OSSA House, Inc. under the condition that the latter
was to assume the payment of the mortgage debt by the repurchase of all the
properties mortgaged on installment basis, with an initial payment of P90,000.00
representing 20% of the total obligation.
o Private respondent OSSA remitted to DBP the initial payment of P90,000.00, in
addition to the amount of P10,000.00 previously paid to the petitioner.
DBP granted petitioners request to repurchase the foreclosed properties and a Deed
of Conditional Sale was executed under which DBP agreed to sell the said properties to
the petitioner for the sum of P363,408.20, P90,000.00 of which was to be paid as initial
payment and the balance in seven (7) years on a quarterly amortization plan, with a first
quarterly installment of P15,475.17.
o Private respondent OSSA paid DBP the first to eight quarterly installments in the
total amount of P137,595.31, which installment payments were applied to
petitioners obligation with DBP pursuant to the Deed of Conditional Sale.
Petitioner de Mesa notified OSSA that she was rescinding the Deed of Sale with
Assumption of Mortgage she executed in favor of the latter on the ground that OSSA
failed to comply with the terms and conditions of their agreement, particularly the
payment of installments to the Development Bank of the Philippines, the discharge and
cancellation of the mortgage on the property listed in item IV of the first whereas
clause, and the payment of the balance of more or less P45,000.00 to petitioner,
representing the difference between the purchase price of subject properties and the
actual obligation to the DBP.
OSSA offered to pay the amount of P34,363.08, which is the difference between the
purchase price of P500,000.00 and the mortgage obligation to DBP of P455,636.92, after
deducting the down payment of P10,000.00 stipulated in said Deed of Sale with
Assumption of Mortgage, but the petitioner refused to accept such payment.
o OSSA brought a Complaint for Consignation against the petitioner, and at the
same time, deposited the amount of P34,363.08 with said court.


Issue:
Whether or not OSSA tendered the right amount.

Held:
The Deed of Sale with Assumption of Mortgage, was for a consideration of P500,000.00,
from which shall be deducted de Mesass outstanding obligation, with the DBP pegged as by
the parties themselves, at P455,636.92. This amount of P455,636.92 owing DBP, is what OSSA
agreed to assume. What remained to be paid de Mesa was P44,636.08, but OSSA made an
advance payment of P10,000.00, hence the remaining amount payable to de Mesa is
P34,363.08, which OSSA tendered in cash. Thus, OSSA tendered the right amount.

Occena vs. CA
G.R. No. L-44349
October 29, 1976

Facts:
Private respondent Tropical Homes, Inc. filed a complaint for modification of the terms
and conditions of its subdivision contract with petitioners.
Respondent made the following allegations: that due to the increase in price of oil and
its derivatives and the concomitant worldwide spiraling of prices, the cost of
development has risen to levels which are unanticipated, unimagined and not within the
remotest contemplation of the parties at the time said agreement was entered into and
to such a degree that the conditions and factors which formed the original basis of said
contract have been totally changed; That further performance by the plaintiff under the
contract, will result in situation where defendants would be unjustly enriched at the
expense of the plaintiff; will cause an 583niquitous distribution of proceeds from the
sales of subdivided lots in manifest actually result in the unjust and intolerable exposure
of plaintiff to implacable losses, all such situations resulting in an unconscionable, unjust
and immoral situation contrary to and in violation of the primordial concepts of good
faith, fairness and equity which should pervade all human relations.
Under the subdivision contract, respondent guaranteed (petitioners as landowners) as
the latters fixed and sole share and participation an amount equivalent to forty (40%)
percent of all cash receipts from the sale of the subdivision lots

Issue:
Whether or not Article 1267 of the Civil Code should be applied.

Held:
Article 1267 of the Civil Code cannot be applied since respondent's complaint seeks not
release from the subdivision contract but that the court render judgment in modifying the
terms and Conditions of the Contract by fixing the proper shares that should pertain to the
herein parties out of the gross proceed, from the sales of subdivided lots of subject subdivision.
The cited article does not grant the courts this authority to remake, modify or revise the
contract or to fix the division of shares between the parties as contractually stipulated with the
force of law between the parties, so as to substitute its own terms for those covenanted by the
parties themselves. Respondent's complaint for modification of contract manifestly has no basis
in law and therefore states no cause of action. Under the particular allegations of respondent's
complaint and the circumstances therein averred, the courts cannot even in equity grant the
relief sought.

Ortigas vs Feati Bank
G.R. No. L-24670
December 14, 1979

Facts:
Plaintiff (formerly known as "Ortigas, Madrigal y Cia") is a limited partnership and
defendant Feati Bank and Trust Co., is a corporation duly organized and existing in
accordance with the laws of the Philippines. Plaintiff is engaged in real estate business,
developing and selling lots to the public.
Plaintiff, and Augusto Padilla and Natividad Angeles, entered into separate agreements
of sale on installments over two parcels of land, the said vendees transferred their rights
and interests over the aforesaid lots in favor of one Emma Chavez.
o Upon completion of payment of the purchase price, the plaintiff executed the
corresponding deeds of sale in favor of Emma Chavez. Both the agreements (of
sale on installment) and the deeds of sale contained the stipulations or
restrictions that:
1. The parcel of land subject of this deed of sale shall be used the Buyer
exclusively for residential purposes, and she shall not be entitled to take or
remove soil, stones or gravel from it or any other lots belonging to the Seller.
2. All buildings and other improvements (except the fence) which may be
constructed at any time in said lot must be, (a) of strong materials and properly
painted, (b) provided with modern sanitary installations connected either to the
public sewer or to an approved septic tank, and (c) shall not be at a distance of
less than two (2) meters from its boundary lines.
Eventually, defendant-appellee acquired Lots Nos. 5 and 6 issued in its name,
respectively and the building restrictions were also annotated therein.
o Defendant-appellee bought Lot No. 5 directly from Emma Chavez.
o Lot No. 6 was acquired from Republic Flour Mills through a "Deed of Exchange".
Defendant-appellee maintains that the area along the western part of EDSA from Shaw
Boulevard to Pasig River, has been declared a commercial and industrial zone under
Resolution No. 27.
Defendant-appellee began laying the foundation and commenced the construction of a
building on Lots Nos. 5 and 6, to be devoted to banking purposes, but which defendant-
appellee claims could also be devoted to, and used exclusively for, residential purposes.
Plaintiff-appellant demanded in writing that defendant-appellee stop the construction
of the commercial building on the said lots. The latter refused to comply with the
demand, contending that the building was being constructed in accordance with the
zoning regulations, defendant-appellee having filed building and planning permit
applications with the Municipality of Mandaluyong, and it had accordingly obtained
building and planning permits to proceed with the construction.

Issue:
Whether or not the restrictions laid by the plaintiff is still effective despite Resolution
No. 27.

Held:
Even if the subject building restrictions were assumed by the defendant-appellee as
vendee of Lots Nos. 5 and 6, in the corresponding deeds of sale, the contractual obligations so
assumed cannot prevail over Resolution No. 27, of the Municipality of Mandaluyong, which has
validly exercised its police power through the said resolution. Accordingly, the building
restrictions, which declare Lots Nos. 5 and 6 as residential, cannot be enforced.

So vs. Food Fest Land, Inc.
G.R. No. 183628 & 183670
April 7, 2010

Facts:
Food Fest Land Inc. (Food Fest) entered into a Contract of Lease with Daniel T. So (So)
over a commercial space for a period of three years (1999-2002) on which Food Fest
intended to operate a Kentucky Fried Chicken carry out branch.
Before forging the lease contract, the parties entered into a preliminary agreement
dated July 1, 1999, the pertinent portion of which stated:
The lease shall not become binding upon us unless and until the government
agencies concerned shall authorize, permit or license us to open and maintain our business at
the proposed Lease Premises. We shall promptly make an application for permits, licenses and
authority for our business and shall exercise due diligence to obtain it, provided, however, that
you shall assist us by submitting such documents and papers and comply with such other
requirements as the governmental agencies may impose. We shall give notice to you when the
permits, license and authorities have been obtained. We shall also notify you if any of the
required permits, licenses and authorities shall not be be (sic) given or granted within fifteen
days (15) from your conform (sic)hereto. In such case, the agreement may be canceled and all
rights and obligations hereunder shall cease.
While Food Fest was able to secure the necessary licenses and permits for the year
1999, it failed to commence business operations.
For the year 2000, Food Fests application for renewal of barangay business clearance
was held in abeyance until further study of [its] kitchen facilities.
As the barangay business clearance is a prerequisite to the processing of other permits,
licenses and authority by the city government, Food Fest was unable to operate.
Food Fest, by its claim, communicated its intent to terminate the lease contract to So
who, however, did not accede and instead offered to help Food Fest secure
authorization from the barangay.
o Food Fest wrote requests addressed to city officials for assistance to facilitate
renewal.
In August 2000, Food Fest, for the second time, purportedly informed So of its intent to
terminate the lease, and it in fact stopped paying rent.
So later sent a demand letter to Food Fest for the payment of rental arrearages and
reiterated his offer to help it secure clearance from the barangay.
So again demanded payment of rentals from Food Fest from September 2000 to March
2001 amounting to P123,200.00. Food Fest denied any liability, however, and started to
remove its fixtures and equipment from the premises.
On April 2, 2001, So sent Food Fest a Final Notice of Termination with demand to pay
and to vacate.

Issue:
Whether or not the principle of rebus sic stantibus should be acknowledged in this case.


Held:
Food Fest was able to secure the permits, licenses and authority to operate when the
lease contract was executed. Its failure to renew these permits, licenses and authority for the
succeeding year, does not, however, suffice to declare the lease functus officio, nor can it be
construed as an unforeseen event to warrant the application of Article 1267. Contracts, once
perfected, are binding between the contracting parties. Obligations arising therefrom have the
force of law and should be complied with in good faith. Food Fest cannot renege from the
obligations it has freely assumed when it signed the lease contract.

Magat vs. CA
G.R. No. 124221
August 4, 2000

Facts:
Sometime in 1972, Guerrero Transport Services won a bid for the operation of a fleet of
taxicabs within the Subic Naval Base, in Olongapo. As highest bidder, Guerrero was to
"provide radio-controlled taxi service within the U.S. Naval Base, Subic Bay, utilizing as
demand requires . . . 160 operational taxis consisting of four wheel, four-door, four
passenger, radio controlled, meter controlled, sedans, not more than one year . . . "
On September 22, 1972, with the advent of martial law, President Ferdinand E. Marcos
issued Letter of Instruction No. 1. The subject is SEIZURE AND CONTROL OF ALL
PRIVATELY OWNED NEWSPAPERS, MAGAZINES, RADIO AND TELEVISION FACILITIES AND
ALL OTHER MEDIA OF COMMUNICATION.
On September 25, 1972, Guerrero and Victorino D. Magat, as General Manager of
Spectrum Electronic Laboratories, a single proprietorship, executed a letter-contract for
the purchase of transceivers at a quoted price of US$77,620.59, FOB Yokohoma.
Victorino was to deliver the transceivers within 60 to 90 days after receiving notice from
Guerrero of the assigned radio frequency, "taking note of Government Regulations."
On October 4, 1972, middle man and broker Isidro Q. Aligada of Reliance Group
Engineers, Inc., wrote Victorino, informing him that a radio frequency was not yet
assigned to Guerrero and that government regulations might complicate the
importation of the transceivers.
On October 7, 1972, Aligada informed Magat of the assigned frequency number. Aligada
also advised Victorino to "proceed with the order upon receipt of letter of credit."
On March 27, 1973, Victorino, represented by his lawyer, informed Guererro that the
order with the Japanese supplier has not been canceled. Should the contract be
canceled, the Japanese firm would forfeit 30% of the deposit and charge a cancellation
fee in an amount not yet known, Guerrero to bear the loss. Further, should the contract
be canceled, Victorino would demand an additional amount equivalent to 10% of the
contract price.
Unable to get a letter of credit from the Central Bank due to the refusal of the Philippine
government to issue a permit to import the transceivers, Guerrero commenced
operation of the taxi cabs within Subic Naval Base, using radio units borrowed from the
U.S. government. Victorino thus canceled his order with his Japanese supplier.
On May 22, 1973, Victorino filed with the RTC a complaint for damages arising from
breach of contract against Guerrero.

Issue:
Whether or not there was breach of obligation.



Held:
The law provides that "[w]hen the service (required by the contract) has become so
manifestly beyond the contemplation of the parties, the obligor may also be released
therefrom, in whole or in part." Here, Guerrero's inability to secure a letter of credit and to
comply with his obligation was a direct consequence of the denial of the permit to import.
Even if we assume that there was a breach of contract, damages cannot be awarded.
There was no bad faith. Guerrero honestly relied on the representations of the Radio Control
Office and the Office of the President.

PNCC vs. CA
G.R. No. 116896
May 5, 1997

Facts:
A lease contract between petitioner and private respondents was executed on
November 18, 1985.
On 7 January 1986, petitioner obtained from the Ministry of Human Settlements a
Temporary Use Permit for the proposed rock crushing project.
o The permit was to be valid for two years unless sooner revoked by the Ministry.
On 16 January 1986, private respondents wrote petitioner requesting payment of the
first annual rental in the amount of P240,000 which was due and payable upon the
execution of the contract.
Petitioner argued that under paragraph 1 of the lease contract, payment of rental would
commence on the date of the issuance of an industrial clearance by the Ministry of
Human Settlements, and not from the date of signing of the contract.
o It then expressed its intention to terminate the contract, as it had decided to
cancel or discontinue with the rock crushing project due to financial, as well as
technical, difficulties.
Private respondents refused to accede to petitioners request for the pretermination of
the lease contract.
o They insisted on the performance of petitioners obligation and reiterated their
demand for the payment of the first annual rental.
Petitioner objected to private respondents claim and argued that it was only obligated
to pay . . . the amount of P20,000.00 as rental payments for the one-month period of
lease, counted from 07 January 1986 when the Industrial Permit was issued by the
Ministry of Human Settlements up to 07 February 1986 when the Notice of Termination
was served 6 on private respondents.
On 19 May 1986, private respondents instituted with the RTC an action against
petitioner for Specific Performance with Damages.

Issue:
Whether or not petitioner should be released from the obligatory force of the contract
of lease because the purpose of the contract did not materialize due to unforeseen events and
causes beyond its control under Article 1266 of the Civil Code and the principle of rebus sic
stantibus.

Held:
Petitioner cannot, successfully take refuge in Article 1266 of the Civil Code, since it is
applicable only to obligations "to do," and not to obligations "to give." The obligation to pay
rentals 16 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. At any rate, the unforeseen event and causes
mentioned by petitioner are not the legal or physical impossibilities contemplated in the said
article. Besides, petitioner failed to state specifically the circumstances brought about by "the
abrupt change in the political climate in the country" except the alleged prevailing uncertainties
in government policies on infrastructure projects.
Article 1267 which enunciates the doctrine of unforeseen events, is not an absolute
application of the principle of rebus sic stantibus. The parties to the contract must be presumed
to have assumed the risks of unfavorable developments. It is therefore only in absolutely
exceptional changes of circumstances that equity demands assistance for the debtor. Petitioner
PNCC entered into the contract of lease with private respondents with open eyes of the
deteriorating conditions of the country.

NATELCO vs. CA
G.R. No. 107112
February 24, 1994

Facts:
NATELCO is a telephone company rendering local and long distance services in Naga. It
entered into contract with Camarines Sur II Electric Cooperative (electric power service):
o For the use in operation of its telephone service, electric light posts of
CASURECO II.
o In return, free use of 10 telephone connections.
o Period as long as NATELCO needs electric light posts, CASURECO understands
that contract will terminate when they are forced to stop, abandon operation
and remove light posts.
CASURECO, after 10 years, filed for reformation of contract with damages, not
conforming to guidelines of National Electrification Administration (NEA) reasonable
compensation for use of posts.
o Compensation is P10/posts but consumption of telephone cables costs P2630.
o NATELCO used 319 posts without any contract at P10.00; refused to pay.
o Poor servicing- damage not less than P100,000.

Issue:
Whether or not Article 1267 is applicable.

Held:
Art. 1267. When the service has become so difficult as to be manifestly beyond the
contemplation of the parties, the obligor may also be released therefrom, in whole or in part.
Petitioners assert earnestly that Article 1267 of the New Civil Code is not applicable primarily
because the contract does not involve the rendition of service or a personal prestation and it is
not for future service with future unusual change. The Court ruled releasing the parties from
their correlative obligations under the contract.

Reyna vs. COA
G.R. No. 167219
February 8, 2011

Facts:
Petitioners Ruben Reyna (Reyna) and Lloyd Soria (Soria) are Senior Field Operations
Specialist and Loans and Credit Analyst II, respectively, of the Land Banks branch in Ipil,
Zamboanga del Sur. In December 1993 the Ipil Branch received loan applications from
four farmers cooperatives under the banks cattle financing program.
In December 1993 the Ipil Branch of Land Bank received loan applications from four
farmers cooperatives under the banks cattle financing program.
To process the applications, each cooperative accomplished a Credit Facility Proposal
(CFP), which required that they execute a Memorandum of Agreement (MOA) with their
proposed cattle supplier, Remad Livestock Corporation (Remad).
o The CFP provided that the bank may release the proceeds of the loans 60 days
prior to the delivery of the stocks.
o After approval of the loan applications, the Ipil Branch issued to Remad three
checks totaling P3,115,000.00 as advance payment for the cattle.
o Because of foot-and-mouth disease that broke out among its herds, Remad
failed to make the deliveries when they fell due.
During a post audit, the Land Bank resident auditor, Belen Oranu-Lu, disallowed the
advance payment and Notices of Disallowance.
o She pointed out that the Ipil Branch paid for the cattle in advance in violation of
the Land Bank Manual on Field Office Group (FOG) Lending Operations and
Commission on Audit (COA) rules and regulations. Notably, the disallowance
was not on account of evidence of dishonest connivance with the farmers
cooperatives and their cattle supplier.
The bank branchs resident auditor held Reyna and Soria, together with four other
employees of the Ipil Branch, personally liable for the disallowed advances.
Reyna and Soria wrote the COA Regional Office, seeking to have the auditors
disallowance of the loan advances set aside.
o They pointed out that the Bangko Sentral ng Pilipinas already approved the
write-off of the loans given to the farmers cooperatives. Rather than act on
Reyna and Sorias letter, the regional office forwarded it to the COA Head Office.

Issue:
Whether or not there was a valid condonation which extinguished the obligation.

Held:
The write-off provided by the Bangko Sentral is not a condonation of the debt and that
the obligation remains, subject to future collection if possible. But it does not follow that
Reyna, Soria, and the other employees with them should pay for the debt that they did not
contract for themselves. The Cattle Breeding and Buy-Back Marketing Agreement between
Remad and the cooperatives provides that both parties shall be liable to Land Bank of the
Philippines for whatever breach of contract entered into by the cooperative and REMAD
LIVESTOCK CORPORATION in relation to the loan with the bank. Consequently, the Land Bank
may still institute a civil suit for collection against the proper parties to recover the loss.

Trans Pacific vs. CA
G.R. No. 109172
August 19, 1994

Facts:
In 1979, petitioner applied for and was granted several financial accommodations
amounting to P1,300,000.00 by respondent Associated Bank.
o The loans were evidenced and secured by four (4) promissory notes, a real
estate mortgage covering three parcels of land and a chattel mortgage over
petitioner's stock and inventories.
Unable to settle its obligation in full, petitioner requested for, and was granted by
respondent bank, a restructuring of the remaining indebtedness which then amounted
to P1,057,500.00, as all the previous payments made were applied to penalties and
interests.
To secure the re-structured loan of P1,213,400.00, three new promissory notes were
executed by Trans-Pacific.
The mortgaged parcels of land were substituted by another mortgage covering two
other parcels of land and a chattel mortgage on petitioner's stock inventory.
o The released parcels of land were then sold and the proceeds amounting to
P1,386,614.20, according to petitioner, were turned over to the bank and
applied to Trans-Pacific's restructured loan.
Respondent bank returned the duplicate original copies of the three promissory notes
to Trans-Pacific with the word "PAID" stamped thereon.
Despite the return of the notes, or on December 12, 1985, Associated Bank demanded
from Trans-Pacific payment of the amount of P492,100.00 representing accrued
interest.
o According to the bank, the promissory notes were erroneously released.
Initially, Trans-Pacific expressed its willingness to pay the amount demanded by
respondent bank. Later, it initiated an action before the RTC for specific performance
and damages. There it prayed that the mortgage over the two parcels of land be
released and its stock inventory be lifted and that its obligation to the bank be declared
as having been fully paid.

Issue:
Whether or not petitioner paid its whole obligation to the bank evidenced by the paid
mark on the promissory notes.

Held:
The presumption created by the Art. 1271 of the Civil Code is not conclusive but merely
prima facie. If there be no evidence to the contrary, the presumption stands. Conversely, the
presumption loses its legal efficacy in the face of proof or evidence to the contrary. In the case
at bar, we find sufficient justification to overthrow the presumption of payment generated by
the delivery of the documents evidencing petitioners indebtedness.
Article 1271 of the Civil Code raises a presumption, not of payment, but of the
renunciation of the credit where more convincing evidence would be required than what
normally would be called for to prove payment. The rationale for allowing the presumption of
renunciation in the delivery of a private instrument is that, unlike that of a public instrument,
there could be just one copy of the evidence of credit. Where several originals are made out of
a private document, the intendment of the law would thus be to refer to the delivery only of
the original rather than to the original duplicate of which the debtor would normally retain a
copy. It would thus be absurd if Article 1271 were to be applied differently.

Dalupan vs. Harden
G.R. No. L-3975
November 27, 1951

Facts:
On August 26, 1948, plaintiff filed an action against the defendant for the collection of
P113,837.17, with interest thereon from the filing of the complaint, which represents
50% of the reduction plaintiff was able to secure from the Collector of Internal Revenue
in the amount of unpaid taxes claimed to be due from the defendant. Defendant
acknowledged this claim and prayed that judgment be rendered accordingly.
In the meantime, the receiver in the liquidation of the case and the wife of the
defendant, filed an answer in intervention claiming that the amount sought by the
plaintiff was exorbitant and prayed that it be reduced to 10% of the rebate.
o An amicable settlement was concluded by the plaintiff and the intervenor
whereby it was agreed that the sum of P22,767.43 be paid to the plaintiff from
the funds under the control of the receiver and the balance of P91,069.74 shall
be charged exclusively against the defendant Fred M. Harden from whatever
share he may still have in the conjugal partnership between him and Esperanza
P. de Harden after the final liquidation and partition thereof, without
pronouncement as to costs and interests.
The court rendered judgment in accordance with this stipulation.
Almost one year thereafter, plaintiff filed a motion for the issuance of a writ of
execution to satisfy the balance of P91,069.74, which was favorably acted upon. At that
time the receiver had in his possession two checks payable to Fred M. Harden
amounting to P33,574.50, representing part of the proceeds of the sale of two lots
belonging to the conjugal partnership which was ordered by the court upon the joint
petition of the spouses in order that they may have funds with which to defray their
living and other similar expenses.
At the outset, it should be stated that the amount which plaintiff is seeking to recover is
P91,069.74, as originally demanded in the complaint. This amount, is however, has
already been reduced to P42,069.74 because of certain partial payments made by the
defendant during the pendency of this case in his desire to extend aid to the plaintiff.
Plaintiff claims that they should be applied to his judgment to pay in full balance of the
claim which defendant still owes them.

Issue:
Whether or not condonation was present.

Held:
A proffer made by the plaintiff to the defendant to the effect that "in the event you lose
your case with your wife, and that after adjudication of the conjugal property what is left with
you will not be sufficient for your livelihood. I shall be pleased to write off as bad debt the
balance of your account in the sum of P42,069.74". This proffer was contained in a letter sent
by the plaintiff to the defendant on March 23, 1949, which was accepted expressly by Fred M.
Harden. Harden regarded this proffer as a binding obligation and acted accordingly. This is an
added circumstance which confirms the view of the Court that the understanding between the
plaintiff and the defendant is really to defer payment of the balance of the claim until after the
final liquidation of the conjugal partnership.

Lopez Liso vs. Tambunting
G.R. No. 9806
January 19, 1916

Facts:
These proceedings were filed by Leonides Lopez Liso (plaintiff) to recover from Manuel
Tambunting (defendant) the sum of P2,000, amount of the fees, which, according to the
complaint, are owing for professional medical services rendered by the plaintiff to a
daughter of the defendant from March 10 to July 15, 1913, which fees the defendant
refused to pay, notwithstanding the demands therefor made upon him by the plaintiff.
CFI rendered judgment ordering the defendant to pay to the plaintiff the sum of P700,
without express finding as to costs.

Issue:
Whether or not the mere possession of the receipt by the defendant is sufficient to
prove that he already paid the plaintiff.

Held:
Article 1188 of the Civil Code prescribes that the voluntary surrender, by a creditor to
his debtor, of a private instrument proving a credit, implies the renunciation of his right of
action against the debtor; and article 1189 of the same Code likewise prescribes that whenever
the private instrument which evidences the debt is in the possession of the debtor it shall be
presumed that the creditor delivered it of his own free will. Nevertheless, pursuant to Art.
1188, this presumption cannot stand, when from the evidence it appears that the evidence of
the obligation was not returned to the debtor, but was sent to him solely for the purpose of
collecting the debt, and that the creditors purpose was not to leave the instrument evidencing
the credit in the possession of the debtor, if the latter did not forthwith pay the amount
mentioned therein.

Testate Estate of Mota vs. Serra
G.R.No. 22825
February 14, 1925

Facts:
On February 1, 1919, plaintiffs and defendant entered into a contract of partnership for
the construction and exploitation of a railroad line from the "San Isidro" and "Palma"
centrals to the place known as "Nandong".
The original capital stipulated was P150,000.
It was agreed that the parties should pay this amount in equal parts and the plaintiffs
were entrusted with the administration of the partnership.
On January 29, 1920, the defendant entered into a contract of sale with Venancio
Concepcion, Phil. C. Whitaker, and Eusebio R. de Luzuriaga, whereby he sold to the
latter the estate and central known as "Palma" with its running business, as well as all
the improvements, machineries and buildings, real and personal properties, rights,
choses in action and interests, including the sugar plantation of the harvest year of 1920
to 1921, covering all the property of the vendor.
o Before the delivery to the purchasers of the hacienda thus sold, Eusebio R. de
Luzuriaga renounced all his rights under the contract of January 29, 1920, in
favor of Messrs. Venancio Concepcion and Phil. C. Whitaker.
Afterwards, on January 8, 1921, Venancio Concepcion and Phil. C. Whitaker bought from
the plaintiffs the one half of the railroad line pertaining to the latter executing therefor
the document Exhibit 5. The price of this sale was P237,722.15, excluding any amount
which the defendant might be owing to the plaintiffs.

ISSUE:

Whether or not there was confusion of the rights of the creditor and debtor

RULING:

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

Yek Tong Lim Fire vs. Yusingco
G.R. No. L-43608
July 20, 1937

Facts:
Pelagio Yusingco (defendant) authorized Yu Seguioc to administer his properties and
mortgaged the steamship to Yek Tong Lin Fire & Marine Insurance Co (petitioner) on
account of a promissory note for P45,000.
The steamship was repaired by Earnshaw Docks & Honolulu Iron Works and Vincente
Madrigal was the guarantor and was asked to pay P8,000.
Since petitioner was not able to pay Vincente Madrigal, a judicial proceeding was
instituted assigning the rights to Vicente Madrigal to sell the steamship.
Petitioner filed a 3
rd
-party claim as it was mortgaged to him, however auction was done
and petitioner won the bid.
The lower court ordered defendant Pelgio Yusingco to pay P17,000, Vincente Madrigal
to turn over the money received by him from the sheriff.

Issue:
Whether or not there was merger of rights which extinguishes the obligation.

Held:
After the steamship Yusingco had been sold by virtue of the judicial writ for the
execution of the judgment rendered in favor of Vincente Madrigal, the only right left to the
petitioner was to collect its mortgage credit from the purchaser thereof at public auction,
inasmuch as the rule is that a mortgage directly and immediately subjects the property on
which it is imposed, whoever its possessor may be, to the fulfillment of the obligation for the
security of which it was created (article 1876, Civil Code); but it so happens that it cannot take
such steps now because it was the purchaser of the steamship Yusingco at public auction, and it
was so with full knowledge that it had a mortgage credit on said vessel. Obligations are
extinguished by the merger of the rights of the creditor and debtor (articles 1156 and 11922,
Civil Code).

EGV Realty vs. CA
G.R. No. 120236
July 20, 1999

Facts:
Petitioner EGV Realty Development Corporation is the owner/developer of a seven-
storey condominium building known as Cristina Condominium.
o Cristina Condominium Corporation (CCC) holds title to all common areas of
Cristina Condominium and is in charge of managing, maintaining and
administering the condominiums common areas and providing for the buildings
security.
Respondent Unisphere International, Inc. is the owner/occupant of Unit 301 of said
condominium.
On November 28, 1981, respondent Unispheres Unit 301 was allegedly robbed of
various items valued at P6,165.00. The incident was reported to petitioner CCC.
On July 25, 1982, another robbery allegedly occurred at Unit 301 where the items carted
away were valued at P6,130.00, bringing the total value of items lost to P12,295.00. This
incident was likewise reported to petitioner CCC.
On October 5, 1982, respondent Unisphere demanded compensation and
reimbursement from petitioner CCC for the losses incurred as a result of the robbery.
On January 28, 1987, petitioners E.G.V. Realty and CCC jointly filed a petition with the
Securities and Exchange Commission (SEC) for the collection of the unpaid monthly dues
in the amount of P13,142.67 against respondent Unisphere.

Issue:
Whether or not compensation was present.

Held:
Compensation or offset under the New Civil Code takes place only when two persons or
entities in their own rights, are creditors and debtors of each other. (Art. 1278). A distinction
must be made between a debt and a mere claim. A debt is an amount actually ascertained. It is
a claim which has been formally passed upon by the courts or quasi-judicial bodies to which it
can in law be submitted and has been declared to be a debt. A claim, on the other hand, is a
debt in embryo. It is mere evidence of a debt and must pass thru the process prescribed by law
before it develops into what is properly called a debt. Absent, however, any such categorical
admission by an obligor or final adjudication, no compensation or off-set can take place. Unless
admitted by a debtor himself, the conclusion that he is in truth indebted to another cannot be
definitely and finally pronounced, no matter how convinced he may be from the examination of
the pertinent records of the validity of that conclusion the indebtedness must be one that is
admitted by the alleged debtor or pronounced by final judgment of a competent court or in this
case by the Commission. There can be no doubt that Unisphere is indebted to the Corporation
for its unpaid monthly dues in the amount of P13,142.67.

AEROSPACE CHEMICAL INDUSTRIES, INC. vs. COURT OF APPEALS
G.R. No. 108129.
September 23, 1999

Facts:
On June 27, 1986, petitioner Aerospace Industries, Inc. (Aerospace) purchased 500 MT
of sulfuric acid from private respondent Philippine Phosphate Fertilizer Corporation
(Philphos).
Initially set beginning July 1986, the agreement provided that the buyer shall pay its
purchases in equivalent Philippine currency value, five days prior to the shipment date.
o Petitioner as buyer committed to secure the means of transport to pick-up the
purchases from private respondents loadports.
o Per agreement, 100 MT of sulfuric acid should be taken from Basay, Negros
Oriental storage tank, while the remaining 400 MT should be retrieved from
Sangi, Cebu.
On August 6, 1986, private respondent sent an advisory letter to petitioner to withdraw
the sulfuric acid purchased at Basay because private respondent had been incurring
incremental expense of P2,000.00 for each day of delay in shipment.
On October 3, 1986, petitioner paid P553,280.00 for 500 MT of sulfuric acid.
On November 19, 1986, petitioner chartered M/T Sultan Kayumanggi, owned by Ace
Bulk Head Services.
o M/T Kayumanggi withdrew only 70.009 MT of sulfuric acid from Basay because
said vessel heavily tilted on its port side. Consequently, the master of the ship
stopped further loading. Thereafter, the vessel underwent repairs.
In a demand letter, private respondent asked petitioner to retrieve the remaining
sulfuric acid in Basay tanks so that said tanks could be emptied on or before December
15, 1986.
o Private respondent said that it would charge petitioner the storage and
consequential costs for the Basay tanks, including all other incremental expenses
due to loading delay, if petitioner failed to comply.
On December 18, 1986, M/T Sultan Kayumanggi docked at Sangi, Cebu, but withdrew
only 157.51 MT of sulfuric acid. The vessel tilted and further loading was aborted.
M/T Sultan Kayumanggi sank with a total of 227.51 MT of sulfuric acid on board.
Petitioner chartered another vessel, M/T Don Victor, with a capacity of approximately
500 MT.
On January 26 and March 20, 1987, Melecio Hernandez, acting for the petitioner,
addressed letters to private respondent, concerning additional orders of sulfuric acid to
replace its sunken purchases.
On January 25, 1988, petitioners counsel sent a demand letter to private respondent
for the delivery of the 272.49 MT of sulfuric acid paid by his client, or the return of the
purchase price of P307,530.00.
o Private respondent in reply, instructed petitioner to lift the remaining 30 MT of
sulfuric acid from Basay, or pay maintenance and storage expenses commencing
August 1, 1986.
On July 6, 1988, petitioner wrote another letter, insisting on picking up its purchases
consisting of 272.49 MT and an additional of 227.51 MT of sulfuric acid. According to
petitioner it had paid the chartered vessel for the full capacity of 500 MT.
By telephone, petitioner requested private respondents Shipping Manager, to get its
additional order of 227.51 MT of sulfuric acid at Isabel, Leyte.
On July 25, 1988, petitioners counsel wrote to private respondent another demand
letter for the delivery of the purchases remaining, or suffer tedious legal action his client
would commence.
On May 4, 1989, petitioner filed a complaint for specific performance and/or damages
before RTC.
o Private respondent filed its answer with counterclaim, stating that it was the
petitioner who was remiss in the performance of its obligation in arranging the
shipping requirements of its purchases and, as a consequence, should pay
damages.
The trial court held that the petitioner was absolved in its obligation to pick-up the
remaining sulfuric acid because its failure was due to force majeure. According to the
trial court, it was private respondent who committed a breach of contract when it failed
to accommodate the additional order of the petitioner, to replace those that sank in the
sea.
There was advanced payment by Aerospace as of October 3, 1986 in the amount of
P553,280.00.

Issue:
Whether or not petitioner is exempted from paying rental expenses and other damages
by arguing that expenses for the preservation of fungible goods must be assumed by the seller.

Held:
Considering, however, that petitioner made an advance payment for the unlifted
sulfuric acid in the amount of P303,483.37, it is proper to set-off this amount against the rental
expenses initially paid by private respondent. It is worth noting that the adjustment and
allowance of private respondents counterclaim or set-off in the present action, rather than by
another independent action, is encouraged by the law. Set-off in this case is proper and
reasonable. It involves deducting P272,000.00 (rentals) from P303,483.37 (advance payment),
which will leave the amount of P31,483.37 refundable to petitioner.

ERNESTO M. APODACA vs. NATIONAL LABOR RELATIONS
COMMISSION
G.R. No. 80039
April 18, 1989

Facts:
Ernesto Apodaca (petitioner) was employed in National Labor Relations Commission
(respondent corporation).
On August 28, 1985, private respondent Jose M. Mirasol persuaded petitioner to
subscribe to 1,500 shares of respondent corporation at P100.00 per share or a total of
P150,000.00. He made an initial payment of P37,500.00.
On September 1, 1975, petitioner was appointed President and General Manager of the
respondent corporation.
o He resigned on January 2, 1986.
On December 19, 1986, petitioner instituted with the NLRC a complaint against private
respondents for the payment of his unpaid wages, his cost of living allowance, the
balance of his gasoline and representation expenses and his bonus compensation for
1986.
o Private respondents admitted that there is due to petitioner the amount of
P17,060.07 but this was applied to the unpaid balance of his subscription in the
amount of P95,439.93.
o Petitioner questioned the set-off alleging that there was no call or notice for the
payment of the unpaid subscription and that, accordingly, the alleged obligation
is not enforceable.
In a decision dated April 28, 1987, the labor arbiter sustained the claim of petitioner for
P17,060.07 on the ground that the employer has no right to withhold payment of wages
already earned under Article 103 of the Labor Code.
The NLRC held that a stockholder who fails to pay his unpaid subscription on call
becomes a debtor of the corporation and that the set-off of said obligation against the
wages and others due to petitioner is not contrary to law, morals and public policy.

Issue:
Whether or not the set-off was valid.

Held:
The unpaid subscriptions are not due and payable until a call is made by the corporation
for payment. Private respondents have not presented a resolution of the board of directors of
respondent corporation calling for the payment of the unpaid subscriptions. It does not even
appear that a notice of such call has been sent to petitioner by the respondent corporation.
What the records show is that the respondent corporation deducted the amount due to
petitioner from the amount receivable from him for the unpaid subscriptions. No doubt such
set-off was without lawful basis, if not premature. As there was no notice or call for the
payment of unpaid subscriptions, the same is not yet due and payable.
The NLRC cannot validly set it off against the wages and other benefits due petitioner.
Article 113 of the Labor Code allows such a deduction from the wages of the employees by the
employer, only in three instances:
ART. 113. Wage Deduction. No employer, in his own behalf or in behalf of any person, shall make any
deduction from the wages of his employees, except:
(a) In cases where the worker is insured with his consent by the employer, and the deduction is to
recompense the employer for the amount paid by him as premium on the insurance;
(b) For union dues, in cases where the right of the worker or his union to checkoff has been recognized by
the employer or authorized in writing by the individual worker concerned; and
(c) In cases where the employer is authorized by law or regulations issued by the Secretary of Labor.


SPOUSES VICTORIANO CHUNG and DEBBIE CHUNG vs. ULANDAY
CONSTRUCTION, INC.
G.R. No. 156038
October 11, 2010

Facts:
In February 1985, the petitioners contracted with respondent Ulanday Construction, Inc.
(respondent) to construct, within a 150-day period, the concrete structural shell of the
formers two-storey residential house at the contract price of P3,291,142.00.
Subsequently, the parties agreed to exclude from the contract the roofing and flushing
work, for P321,338.00, reducing the contract price to P2,969,804.00.
On March 17, 1995, the petitioners paid the P987,342.60 down payment, with the
balance of P1,982,461.40 to be paid based on the progress billings.
As the actual construction started on March 7, 1995 and went on, the respondent
submitted 12 progress billings. While the petitioners settled the first 7 progress billings,
amounting to P1,270,641.59, payment was made beyond the 7-day period provided in
the contract. The petitioner subsequently granted the respondent a P100,000.00 cash
advance, leaving the unpaid progress billings at P445,922.13.22.
During the construction, the respondent also effected 19 change orders without the
petitioners prior written approval, amounting to P912,885.91. The petitioners, however,
paid P42,298.61 for Change Order No. 1 and partially paid P130,000.00 for Change
Order Nos. 16 and 17. Petitioner Debbie Chung acknowledged in writing that the
balance for Change Order Nos. 16 and 17 would be paid upon completion of the
contract. The outstanding balance on the change orders totaled P740,587.30.
On July 4, 1995, the respondent notified the petitioners that the delay in the payment of
progress billings delays the accomplishment of the contract work.
On March 28, 1996, the respondent demanded full payment for progress billings and
change orders.
On April 8, 1996, the respondent demanded payment of P1,310,670.56 as outstanding
balance on progress billings and change orders.
The petitioners denied liability, asserting that the respondent violated the contract
provisions by, among others, failing to finish the contract within the 150-day stipulated
period, failing to comply with the provisions on change orders, and overstating its
billings.

Issue:
Whether or not compensation was applicable in this case.

Held:
The Court ordered the set-off of the petitioners contractual liabilities totaling
P575,922.13 against the repair cost for the defective gutter, pegged at P717,524.00, leaving the
amount of P141,601.87 still due from the respondent. Support in law for this ruling for partial
legal compensation proceeds from Articles 1278, 1279, 1281, and 1283 of the Civil Code. In
short, both parties are creditors and debtors of each other, although in different amounts that
are already due and demandable.

MONDRAGON PERSONAL SALES, INC. vs. VICTORIANO S. SOLA, JR.
G.R. No. 174882
January 21, 2013

Facts:
Petitioner Mondragon Personal Sales Inc., a company engaged in the business of selling
various consumer products through a network of sales representatives, entered into a
Contract of Services with respondent Victoriano S. Sola, Jr. for a period of 3 years.
o Under the said contract, respondent, as service contractor, would provide
service facilities to petitioners products, sales force and customers in General
Santos City and as such, he was entitled to commission or service fee
The agreement then came into effect when petitioners goods were delivered to
respondents bodega and were sold by petitioners employees.
Prior to the execution of the contract, respondents wife, had an existing obligation with
petitioner arising from her Franchise Distributorship Agreement with the latter.
On January 26, 1995, respondent wrote a letter addressed to petitioners Vice-President
for Finance wherein he acknowledged and confirmed his wifes indebtedness to
petitioner in the amount of P1,973,154.73 and, together with his wife, bound himself to
pay on installment basis the said debt.
Petitioner withheld the payment of respondents service fees and applied the same as
partial payments to the debt which he obligated to pay.
On April 29, 1995, respondent closed and suspended operation of his office cum bodega
where petitioners products were stored and customers were being dealt with.
On May 24, 1995, respondent filed with the RTC a Complaint for accounting and
rescission against petitioner alleging that petitioner withheld portions of his service fees
and his whole service fees for the succeeding months, the total amount of which was
P222,202.84.

Issue:
Whether or not there was compensation under Article 1279 of the Civil Code.

Held:
The Court found petitioner's act of withholding respondent's service fees/commissions
and applying them to the latter's outstanding obligation with the former is merely an
acknowledgment of the legal compensation that occurred by operation of law between the
parties. Compensation is a mode of extinguishing to the concurrent amount the obligations of
persons who in their own right and as principals are reciprocally debtors and creditors of each
other. Legal compensation takes place by operation of law when all the requisites are present,
as opposed to conventional compensation which takes place when the parties agree to
compensate their mutual obligations even in the absence of some requisites.
All the requisites for legal compensation are present. Petitioner and respondent are
both principal obligors and creditors of each other. Their debts to each other consist in a sum of
money. Respondent acknowledged and bound himself to pay petitioner the amount of
P1,973,154.73 which was already due, while the service fees owing to respondent by petitioner
become due every month. Respondent's debt is liquidated and demandable, and petitioner's
payments of service fees are liquidated and demandable every month as they fall due. There is
no retention or controversy commenced by third persons over either of the debts. Thus,
compensation is proper up to the concurrent amount where petitioner owes respondent
P125,040.01 for service fees, while respondent owes petitioner P1,973,154.73.
As legal compensation took place in this case, there is no basis for respondent to ask for
rescission since he was the first to breach their contract when he suddenly closed and
padlocked his bodega cum office in General Santos City occupied by petitioner.

INSULAR INVESTMENT AND TRUST CORPORATION vs. CAPITAL
ONE EQUITIES CORP.
G.R. No. 183308
April 25, 2012

Facts:
Insular Investment and Trust Corporation (IITC) and Capital One Equities Corp. (COEC)
and Planters Development Bank (PDB) have been regularly engaged in trading, sale and
purchase of Philippine Treasury bills.
On various dates, IITC had purchased from COEC. IITC purchased from COEC treasury
bills worth P260,683, 392.51 and was able to deliver only P121,050,000.
On May 2, 1994, COEC purchased from IITC P186,790,000 worth of treasury bills.
On May 10, 1994, COEC demanded a letter from IITC the physical delivery of the
securities last May 2, 1994.
On its May 18, 1994 letter to PDB, IITC requested, on behalf of COEC, the delivery of IITC
treasury bills, which had been fully paid.
On May 30, 1994, COEC protested the tenor of IITCs letter to PDB and took exception to
IITCs assertion that it merely acted as a facilitator with regard to the sale of the treasury
bills.
IITC sent COEC a letter, demanding that COEC deliver to IITC the P139,833,392.00 worth
of treasury bills or return the full purchase price.
In either case, IITC also demanded that COEC to pay IITC the amount of P1,729,069.50
representing business opportunity lost due to the non-delivery of the treasury bills, and
deliver treasury bills worth P121,050,000 with the same maturity dates originally
purchased by IITC.
COEC sent a letter-reply dated June 9, 1994 to IITC in which it acknowledged its
obligation to deliver the treasury bills worth P139,833,392.00 which it sold to IITC and
formally demanded the delivery of the treasury bills worth P186,774,739.49 which it
purchased from IITC.
o COEC also demanded the payment of lost profits in the amount ofP3,253,250.00.
Considering that COEC and IITC both have claims against each other for the
delivery of treasury bills, COEC proposed that a legal set-off be effected, which
would result in IITC owing COEC the difference of P46,941,446.49.
In its June 13, 1994 letter to COEC, IITC rejected the suggestion for a legal setting-off of
obligations, alleging that it merely acted as a facilitator between PDB and COEC.
Despite repeated demands, however, PDB failed to deliver the balance of
P136,790,000.00 worth of treasury bills which IITC purchased from PDB allegedly for
COEC.
COEC was likewise unable to deliver the remaining IITC T-Bills amounting to
P119,633,392.00.
Neither PDB and COEC returned the purchase price for the duly paid treasury bills. Thus
COEC filed a complaint with the RTC which found that COEC still has obligations to pay
IITC P119,633,392.00 worth of treasury bills. However, since IITC and COEC were both
debtors and creditors of each other, the RTC off-set their debts, resulting in a difference
of P17,056,608.00 in favor of COEC.
As to PDBs liability, it ruled that PDB had the obligation to pay P136,790,000.00 to IITC.
Thus, the trial court ordered (a) IITC to pay COEC P17,056,608.00 with interest at the
rate of 6% from June 10, 1994 until full payment and (b) PDB to pay IITC
P136,790,000.00 with interest at the rate of 6% from March 21, 1995 until full payment.

Issue:
Whether or not COEC can set-off its obligation to IITC as against the latters obligation to
it.

Held:
The Court ruled that the set-off compensation is allowed. As against the contention of
IITC, COEC had proven that IITC is a principal on its sale of the treasury bills thus holding them
liable for paying such. Therefore, both IITC and COEC are principal creditors of the other over
debts which consist of consumable things or a sum of money, the RTC correctly ruled that COEC
may validly set-off its claims for undelivered treasury bills against that of IITCs claims.
The court ruled the applicable provisions of law are Articles 1278, 1279 and 1290 of the
Civil Code of the Philippines. In Article 1278 states that compensation shall take place when two
persons, in their own right, are creditors and debtors of each other. Also, in Article 1290, states
that when all the requisites mentioned in Article 1279 are present, compensation takes effect
by operation of law, and extinguishes both debts to the concurrent amount, even though the
creditors and debtors are not aware of the compensation. The requisites of a valid
compensation are present in the cases of the debts between IITC and COEC. As stated in Article
1279 of the Civil Code of the Philippines, such requisites are (1)That each one of the obligors be
bound principally, and that he be at the same time a principal creditor of the other; (2) That
both debts consist in a sum of money, or if the things due are consumable, they be of the same
kind, and also of the same quality if the latter has been stated; (3) That the two debts be due;
(4) That they be liquidated and demandable; and (5) That over neither of them there be any
retention or controversy, commenced by third persons and communicated in due time to the
debtor. Therefore, both shall be allowed to set-off their obligations with each other.
SELWYN F. LAO and EDGAR MANANSALA vs. SPECIAL PLANS, INC.
G.R. No. 164791
June 29, 2010

Facts:
Petitioners Selwyn F. Lao (Lao) and Edgar Manansala (Manansala), together with
Benjamin Jim (Jim), entered into a Contract of Lease with respondent Special Plans, Inc.
(SPI) over SPIs building for their karaoke and restaurant business known as Saporro
Restaurant.
Upon expiration of the lease contract, it was renewed for a period of eight months at a
rental rate of P23,000.00 per month.
On June 3, 1996, SPI sent a Demand Letter to the petitioners asking for full payment of
rentals in arrears.
Receiving no payment, SPI filed on July 23, 1996 a Complaint for sum of money with the
MeTC claiming that Jim and petitioners have accumulated unpaid rentals of
P118,000.00.
Petitioners filed their Verified Answer faulting SPI for making them believe that it owns
the leased property. They likewise asserted that SPI did not deliver the leased premises
in a condition fit for petitioners intended use. Thus, petitioners claimed that they were
constrained to incur expenses for necessary repairs as well as expenses for the repair of
structural defects, which SPI failed and refused to reimburse.

Issue:
Whether or not legal compensation is applicable in this case.

Held:
Petitioners failed to properly discharge their burden to show that the debts are
liquidated and demandable. Consequently, legal compensation is inapplicable.
A claim is liquidated when the amount and time of payment is fixed. If acknowledged by
the debtor, although not in writing, the claim must be treated as liquidated. When the
defendant, who has an unliquidated claim, sets it up by way of counterclaim, and a judgment is
rendered liquidating such claim, it can be compensated against the plaintiffs claim from the
moment it is liquidated by judgment.

UNITED PLANTERS SUGAR MILLING CO., INC., (UPSUMCO) vs. CA
G.R. No. 126890
April 2, 2009

Facts:
In 1974, as UPSUMCO commenced operations, it obtained a set of loans from
respondent Philippine National Bank (PNB) referred herein as the takeoff loans, were
intended to finance the construction of a sugar milling plant.
o The takeoff loans were embodied in a Credit Agreement dated November 5,
1974, which was thrice restructured through Restructuring Agreements dated 24
June and 10 December 1982, and 9 May 1984. The takeoff loans were secured a
real estate mortgage over two parcels of land where the milling plant stood and
chattel mortgages over the machineries and equipment.
o As another condition to the takeoff loans, UPSUMCO agreed to open and/or
maintain a deposit account with the (PNB) and the bank is authorized at its
option to apply to the payment of any unpaid obligations of the client any/and
all monies, securities which may be in its hands on deposit.
Between 1984 to 1987, UPSUMCO contracted another set of loans from PNB, these
ones oriented towards financing the operations of the Company referred as
operational loans, also contained setoff clauses relative to the application of
payments from UPSUMCOs bank accounts.
They were likewise secured by pledge contracts whereby UPSUMCO assigned to PNB all
its sugar produce for PNB to sell and apply the proceeds to satisfy the indebtedness
arising from the operational loans.
On 27 February 1987, through a Deed of Transfer, PNB assigned to the Government its
rights, titles and interests over UPSUMCO, among several other assets.
o The Deed of Transfer acknowledged that said assignment was being undertaken
in compliance with Presidential Proclamation No. 50. The Government
subsequently transferred these rights, titles and interests over UPSUMCO to
the respondent Asset and Privatization Trust (APT).
Thereafter, it is alleged that APT and UPSUMCO entered into talks concerning the
disposal of UPSUMCOs mortgaged assets. The Decision stated that the parties then
agreed to an uncontested or friendly foreclosure of these mortgaged assets, in
exchange for UPSUMCOs waiver of its right of redemption.
o A Petition for Extrajudicial Foreclosure Sale dated 28 July 1987 was filed with the
Ex-Officio Regional Sheriff with PNB identified therein as Mortgagee and APT
as Assignee and Transferee of PNBs rights, titles and interests.
o PNB and APT manifested in the petition their intent to foreclose on the real
estate and chattel mortgages which notably were executed to secure the take-
off loans.
o The foreclosure sale was conducted on 27 August 1987, whereby APT purchased
the auctioned properties for P450 Million.
7 days after the foreclosure sale, UPSUMCO executed a Deed of Assignment wherein it
assigned to APT its right to redeem the foreclosed properties, in exchange for or in
consideration of APT condoning any deficiency amount it may be entitled to recover
from the Corporation under the Credit Agreement dated November 5, 1974, and the
Restructuring Agreements dated June 24 and December 10, 1982, and May 9, 1984,
respectively, executed between (UPSUMCO) and PNB On even date, the Board of
Directors of UPSUMCO agreed to a Board Resolution authorizing Joaquin Montenegro,
its President, to enter into the said Deed of Assignment.
Notwithstanding this Deed of Assignment, UPSUMCO later filed a complaint for sum of
money and damages against PNB and APT before the RTC. It was alleged therein that
PNB and APT had illegally appropriated funds belonging to UPSUMCO, through the
following means: (1) withdrawals made from the bank accounts opened by UPSUMCO
beginning 27 August 1987 until 12 February 1990; (2) the application of the proceeds
from the sale of the sugar of UPSUMCO beginning 27 August 1987 until 4 December
1987; (3) the payment from of the funds of UPSUMCO with PNB for the operating
expenses of the sugar mill after 3 September 1987, allegedly upon the instruction of APT
with the consent of PNB.

Issue:
Whether or not a valid legal compensation or conventional compensation was present
in this case.

Held:
Under Article 1279 (1), it is necessary for compensation that the obligors be bound
principally, and that he be at the same time a principal creditor of the other. There is,
concededly, no mutual creditor-debtor relation between APT and UPSUMCO. However, we
recognize the concept of conventional compensation, defined as occurring when the parties
agree to compensate their mutual obligations even if some requisite is lacking, such as that
provided in Article 1282. It is intended to eliminate or overcome obstacles which prevent ipso
jure extinguishment of their obligations.
Legal compensation takes place by operation of law when all the requisites are present,
as opposed to conventional compensation which takes place when the parties agree to
compensate their mutual obligations even in the absence of some requisites. The only
requisites of conventional compensation are (1) that each of the parties can dispose of the
credit he seeks to compensate, and (2) that they agree to the mutual extinguishment of their
credits.

SILAHIS MARKETING CORPORATION vs. IAC
G.R. No. L-74027
December 7, 1989

Facts:
Gregorio de Leon (De Leon) doing business under the name and style of Mark Industrial
Sales sold and delivered to Silahis Marketing Corporation (Silahis for short) various items
of merchandise covered by several invoices in the aggregate amount of P 22,213.75
payable within 30 days from date of the covering invoices.
Allegedly due to Silahis failure to pay its account upon maturity despite repeated
demands, de Leon filed before the CFI a complaint for the collection of the said accounts
including accrued interest thereon in the amount of P661.03 and attorneys fees of P
5,000.00 plus costs of litigation.
The answer admitted the allegations of the complaint insofar as the invoices were
concerned but presented as affirmative defenses; (a) a debit memo for P22,200.00 as
unrealized profit for a supposed commission that Silahis should have received from de
Leon for the sale of sprockets in the amount of P111,000.00 made directly to Dole
Philippines, Incorporated by the latter sometime in August 1975 without coursing the
same through the former allegedly in violation of the usual practice concerning sale of
merchandise to Dole Philippines, Inc.; and (b) Silahis claim that it is entitled to return
the stainless steel screen which was found defective by its client, Borden International,
and to have the corresponding amount cancelled from its account with de Leon.
In a decision dated August 25, 1978, 1 the lower court confirmed the liability of Silahis
for the claim of de Leon but at the same time ordered that it be partially offset by
Silahis counterclaim as contained in the debit memo for unrealized profit and
commission.

Issue:
Whether or not compensation is present in this case.

Held:
There was nothing contained in the debit memo to show that private respondent
obligated himself to set-off or compensate petitioner's outstanding accounts with the alleged
unrealized commission from the assailed sale of sprockets in the amount of P 111,000.00 to
Dole Philippines, Inc.
It must be remembered that compensation takes place when two persons, in their own
right, are creditors and debtors to each other. Article 1279 of the Civil Code provides that: "In
order that compensation may be proper, it is necessary: [1] that each one of the obligors be
bound principally, and that he be at the same time a principal creditor of the other; [2] that
both debts consist in a sum of money, or if the things due are consumable, they be of the same
kind, and also of the same quality if the latter has been stated; [3] that the two debts be due;
[4] that they be liquidated and demandable; [5] that over neither of them there be any
retention or controversy, commenced by third persons and communicated in due time to the
debtor.
When all the requisites mentioned in Art. 1279 of the Civil Code are present,
compensation takes effect by operation of law, even without the consent or knowledge of the
creditors and debtors. Article 1279 requires, among others, that in order that legal
compensation shall take place, "the two debts be due" and "they be liquidated and
demandable." Compensation is not proper where the claim of the person asserting the set-off
against the other is not clear nor liquidated; compensation cannot extend to unliquidated,
disputed claim existing from breach of contract.

ENGRACIO FRANCIA vs. IAC
G.R. No. L-67649
June 28, 1988

Facts:
Engracio Francia is the registered owner of a residential lot and a two-story house built
upon it.
On October 15, 1977, a 125 square meter portion of Francias property was
expropriated by the Republic of the Philippines for the sum of P4,116.00 representing
the estimated amount equivalent to the assessed value of the aforesaid portion.
Since 1963 up to 1977 inclusive, Francia failed to pay his real estate taxes.
o On December 5, 1977, his property was sold at public auction by the City
Treasurer of Pasay City pursuant to Section 73 of Presidential Decree No. 464
known as the Real Property Tax Code in order to satisfy a tax delinquency of
P2,400.00.
Ho Fernandez was the highest bidder for the property.
Francia was not present during the auction.
On March 3, 1979, Francia received a notice of hearing filed by Ho Fernandez, seeking
the cancellation of TCT No. 4739 (37795) and the issuance in his name of a new
certificate of title.
Upon verification through his lawyer, Francia discovered that a Final Bill of Sale had
been issued in favor of Ho Fernandez by the City Treasurer on December 11, 1978.
The auction sale and the final bill of sale were both annotated at the back of TCT No.
4739 (37795) by the Register of Deeds.
On March 20, 1979, Francia filed a complaint to annul the auction sale.

Issue:
Whether or not Francias tax delinquency of P2,400.00 has been extinguished by legal
compensation.

Held:
By legal compensation, obligations of persons, who in their own right are reciprocally
debtors and creditors of each other, are extinguished (Art. 1278, Civil Code). The Court ruled
that there can be no off-setting of taxes against the claims that the taxpayer may have against
the government. A person cannot refuse to pay a tax on the ground that the government owes
him an amount equal to or greater than the tax being collected. The collection of a tax cannot
await the results of a lawsuit against the government. A taxpayer cannot refuse to pay his tax
when called upon by the collector because he has a claim against the governmental body not
included in the tax levy.

HERMENEGILDO M. TRINIDAD vs. ESTRELLA ACAPULCO
G.R. No. 147477
June 27, 2006

Facts:
On May 6, 1991, respondent Estrella Acapulco filed a Complaint before the RTC seeking
the nullification of a sale she made in favor of petitioner Hermenegildo M. Trinidad.
o She alleged: Sometime in February 1991, a certain Primitivo Caete requested
her to sell a Mercedes Benz for P580,000.00.
o Caete also said that if respondent herself will buy the car, Caete was willing to
sell it for P500,000.00.
o Petitioner borrowed the car from respondent for two days but instead of
returning the car as promised, petitioner told respondent to buy the car from
Caete for P500,000.00 and that petitioner would pay respondent after
petitioner returns from Davao.
o Following petitioners instructions, respondent requested Caete to execute a
deed of sale covering the car in respondents favor for P500,000.00 for which
respondent issued three checks in favor of Caete.
o Respondent thereafter executed a deed of sale in favor of petitioner even
though petitioner did not pay her any consideration for the sale.
o When petitioner returned from Davao, he refused to pay respondent the
amount of P500,000.00 saying that said amount would just be deducted from
whatever outstanding obligation respondent had with petitioner.
o Due to petitioners failure to pay respondent, the checks that respondent issued
in favor of Caete bounced, thus criminal charges were filed against her.

Issue:
Whether or not the purchase price of the car had been automatically offset by
respondents own monetary obligation of P566,000.00.

Held:
Compensation takes effect by operation of law even without the consent or knowledge
of the parties concerned when all the requisites mentioned in Article 1279 of the Civil Code are
present. This is in consonance with Article 1290 of the Civil Code which provides that:
Article 1290. When all the requisites mentioned in article 1279 are present,
compensation takes effect by operation of law, and extinguishes both debts to the
concurrent amount, even though the creditors and debtors are not aware of the
compensation.
Since it takes place ipso jure, when used as a defense, it retroacts to the date when all
its requisites are fulfilled.
The claim of respondent that there could be no legal compensation in this case as one of
the obligations consists of delivery of a car and not a sum of money must also fail. Respondent
sold the car to petitioner on March 4, 1991 for P500,000.00 while she filed her complaint for
nullification of the sale only on May 6, 1991. As legal compensation takes place ipso jure, and
retroacts to the date when its requisites are fulfilled, legal compensation has already taken
place at the time of the sale. At such time, petitioner owed respondent the sum of P500,000.00
which is the price of the vehicle.
Consequently, by operation of law, the P500,000.00 which petitioner owed respondent
is off-set against the P566,000.00 owed by respondent to petitioner, leaving a balance of
P66,000.00, which respondent should pay with 12% interest per annum from date of judicial or
extrajudicial deed. Since there was no extrajudicial deed in this case, the interest shall be
resolved from the date petitioner filed its Supplemental Motion for Reconsideration invoking
for the first time legal compensation, that is, May 20, 1992.


HEIRS OF SERVANDO FRANCO vs. SPOUSES VERONICA AND
DANILO GONZALES
G.R. No. 159709
June 27, 2012

Facts:
On November 7, 1985, Servando Franco and Leticia Medel obtained a loan from
Veronica R. Gonzales, who was engaged in the money lending business under the name
Gonzales Credit Enterprises, in the amount of P50,000.00, payable in two months.
Veronica gave only the amount of P47,000.00, to the borrowers, as she retained
P3,000.00, as advance interest for one month at 6% per month. Servado and Leticia
executed a promissory note for P50,000.00, to evidence the loan, payable on January 7,
1986.
On November 19, 1985, Servando and Leticia obtained from Veronica another loan in
the amount of P90,000.00, payable in two months, at 6% interest per month. They
executed a promissory note to evidence the loan, maturing on January 19, 1986. They
received only P84,000.00, out of the proceeds of the loan.
On June 11, 1986, Servando and Leticia secured from Veronica still another loan in the
amount of P300,000.00, maturing in one month, secured by a real estate mortgage over
a property belonging to Leticia Makalintal Yaptinchay, who issued a special power of
attorney in favor of Leticia Medel, authorizing her to execute the mortgage. Servando
and Leticia executed a promissory note in favor of Veronica to pay the sum of
P300,000.00, after a month, or on July 11, 1986. However, only the sum of P275,000.00,
was given to them out of the proceeds of the loan.
On July 23, 1986, Servando and Leticia with the latters husband, consolidated all their
previous unpaid loans totaling P440,000.00, and sought from Veronica another loan in
the amount of P60,000.00, bringing their indebtedness to a total of P500,000.00,
payable on August 23, 1986. They executed a promissory note.
On maturity of the loan, the borrowers failed to pay the indebtedness of P500,000.00,
plus interests and penalties, evidenced by the above-quoted promissory note.
Veronica R. Gonzales, joined by her husband filed with the RTC a complaint for
collection of the full amount of the loan including interests and other charges.

Issue:
Whether or not a novation of the August 23, 1986 promissory note when respondent
Veronica Gonzales issued the February 5, 1992 receipt was present.

Held:
The Court held that novation did not transpire because no irreconcilable incompatibility
existed between the promissory note and the receipt. A novation arises when there is a
substitution of an obligation by a subsequent one that extinguishes the first, either by changing
the object or the principal conditions, or by substituting the person of the debtor, or by
subrogating a third person in the rights of the creditor.
For a valid novation to take place, there must be, therefore: (a) a previous valid
obligation; (b) an agreement of the parties to make a new contract; (c) an extinguishment of
the old contract; and (d) a valid new contract. In short, the new obligation extinguishes the
prior agreement only when the substitution is unequivocally declared, or the old and the new
obligations are incompatible on every point. A compromise of a final judgment operates as a
novation of the judgment obligation upon compliance with either of these two conditions.
Novation is not presumed. This means that the parties to a contract should expressly
agree to abrogate the old contract in favor of a new one. In the absence of the express
agreement, the old and the new obligations must be incompatible on every point.
There is incompatibility when the two obligations cannot stand together, each one
having its independent existence. If the two obligations cannot stand together, the latter
obligation novates the first. Changes that breed incompatibility must be essential in nature and
not merely accidental. The incompatibility must affect any of the essential elements of the
obligation, such as its object, cause or principal conditions thereof; otherwise, the change is
merely modificatory in nature and insufficient to extinguish the original obligation.
In light of the foregoing, the issuance of the receipt created no new obligation. Instead,
the respondents only thereby recognized the original obligation by stating in the receipt that
the P400,000.00 was partial payment of loan and by referring to the promissory note subject
of the case in imposing the interest. The loan mentioned in the receipt was still the same loan
involving the P500,000.00 extended to Servando. Advertence to the interest stipulated in the
promissory note indicated that the contract still subsisted, not replaced and extinguished, as
the petitioners claim.

CAROLINA HERNANDEZ-NIEVERA vs. WILFREDO HERNANDEZ
G.R. No. 171165
February 14, 2011

Facts:
Project Movers Realty & Development Corporation (PMRDC), one of the respondents
herein, is a duly organized domestic corporation engaged in real estate development.
o In 1995, it entered through its president, respondent Mario Villamor, into
various agreements with co-respondents Home Insurance & Guaranty
Corporation (HIGC) and Land Bank of the Philippines (LBP), in connection with
the construction of the Isabel Homes housing project and of the Monumento
Plaza commercial and recreation complex.
o In its Asset Pool Formation Agreement, PMRDC conveyed to HIGC the
constituent assets of the two projects, whereas LBP agreed to act as trustee of
the resulting Asset Pool for a consideration. The execution of the projects would
be funded largely through securitization whereby LBP would act as the nominal
issuer of such certificates with the Asset Pool itself acting as the real issuer.
HIGC, in turn, would provide guaranty coverage to these participation
certificates in accordance with its Contract of Guaranty with PMRDC and LBP.
On November 13, 1997, PMRDC entered into a Memorandum of Agreement (MOA)
whereby it was given the option to buy pieces of land owned by petitioners Carolina
Hernandez-Nievera, Margarita H. Malvar and Demetrio P. Hernandez, Jr.
o Demetrio, under authority of a Special Power of Attorney to Sell or Mortgage,
signed the MOA also in behalf of Carolina and Margarita.
As an implementation of the MOA, the lands within Area I were then mortgaged to Solid
Bank for which petitioners received consideration from PMRDC.
PMRDC entered with LBP and Demetrio the latter purportedly acting under authority
of the same special power of attorney as in the MOA into a Deed of Assignment and
Conveyance (DAC) whereby the lands within Area II were transferred and assigned to
the Asset Pool in exchange for a number of shares of stock which supposedly had
already been issued in the name and in favor of Demetrio.
o These pieces of land are the subject of the present controversy as far as they are
affected by the explicit provision in the DAC which dispensed with the stipulated
obligation of PMRDC in the MOA to pay option money should it opt to buy the
properties.
PMRDC admittedly did not avail of its option to purchase the lands in Area II in the
twelve months that passed after the execution of the MOA.
On January 8, 1999, petitioners demanded the return of the corresponding TCTs.
o In its January 21, 1999 letter to Demetrio, however, PMRDC, through Villamor,
stated that the TCTs could no longer be delivered back to petitioners as the
covered properties had already been conveyed and assigned to the Asset Pool
pursuant to the DAC. Petitioners disowned Demetrios signature in the DAC and
labeled it a mere forgery.
o They explained that Demetrio could not have entered into the said agreement as
his power of attorney was limited only to selling or mortgaging the properties
and not conveying the same to the Asset Pool. Boldly, they asserted that the
fraudulent execution of the DAC was made possible through the connivance of
all the respondents.
Petitioners instituted an action before the RTC for the rescission of the MOA, as well as
for the declaration of nullity of the DAC. They prayed for the issuance of a writ of
preliminary injunction and for the payment of damages.

Issue:
Whether or not there was novation

Held:
The powers conferred on Demetrio were exclusive only to selling and mortgaging the
properties. However, the power conferred on Demetrio to sell for such price or amount is
broad enough to cover the exchange contemplated in the DAC between the properties and the
corresponding corporate shares in PMRDC, with the latter replacing the cash equivalent of the
option money initially agreed to be paid by PMRDC under the MOA. Suffice it to say that
price is understood to mean the cost at which something is obtained, or something which
one ordinarily accepts voluntarily in exchange for something else, or the consideration given for
the purchase of a thing.
Thus, it becomes clear that Demetrios special power of attorney to sell is sufficient to
enable him to make a binding commitment under the DAC in behalf of Carolina and Margarita.
In particular, it does include the authority to extinguish PMRDCs obligation under the MOA to
deliver option money and agree to a more flexible term by agreeing instead to receive shares of
stock in lieu thereof and in consideration of the assignment and conveyance of the properties
to the Asset Pool.
In California Bus Lines, Inc. v. State Investment House, Inc., the Court held that:
There are two ways which could indicate, in fine, the presence of novation and thereby
produce the effect of extinguishing an obligation by another which substitutes the same. The
first is when novation has been explicitly stated and declared in unequivocal terms. The second
is when the old and the new obligations are incompatible on every point. The test of
incompatibility is whether the two obligations can stand together, each one having its
independent existence. If they cannot, they are incompatible, and the latter obligation novates
the first. Corollarily, changes that breed incompatibility must be essential in nature and not
merely accidental. The incompatibility must take place in any of the essential elements of the
obligation such as its object, cause or principal conditions thereof; otherwise, the change would
be merely modificatory in nature and insufficient to extinguish the original obligation.

ST. JAMES COLLEGE OF PARAAQUE vs. EQUITABLE PCI BANK
G.R. No. 179441
August 9, 2010

Facts:
Petitioners-spouses Jaime and Myrna Torres owned and operated St. James
College of Paraaque (St. James College), a sole proprietorship educational
institution.
In 1995, the Philippine Commercial and International Bank (PCIB) granted the
Torres spouses and/or St. James College a credit line facility of up to
P25,000,000. This accommodation or any of its extension or renewal was
secured by a real estate mortgage (REM) over a parcel of land in the name of St.
James College
PCIB eventually merged with Equitable Bank with the surviving bank known as
Equitable PCI Bank (EPCIB) (now Banco de Oro). The credit line underwent
several annual renewals, the last being effected in 2001. As petitioners had
defaulted in the payment of the loan obtained from the secured credit
accommodation, their total unpaid loan obligation, as of September 2001, stood
at P18,300,000.
In a bid to settle its loan availment, petitioners first proposed to EPCIB that they
be allowed to pay their account in equal quarterly installments for five years.
EPCIB informed petitioners that it is denying their request for the reinstatement
of their credit line, but proposed a restructuring package with a soft payment
scheme for the outstanding loan balance of P18,300,000.
o Under the counter-proposal, the bank would book the accumulated past
due loans to current status and charge interest at a fixed rate of 13.375%
per annum, payable in either of the ensuing modes and level, at
petitioners options: payment of the P18,300,000 principal either at a
monthly rate of P508,333.33; or equal annual amortizations of
P6,100,000 payable every May.
Petitioner Jaime Torres chose and agreed to the second option.
Petitioners failed to pay the stipulated annual amortization of P6,100,000 agreed
upon.
o Whereupon, EPCIB addressed to petitioners a demand letter requiring
them to settle their obligation.
o On June 23, 2003, petitioners tendered, and EPCIB accepted, a partial
payment of P2,521,609.62,
o In the covering letter, which came with the tender, petitioners promised
to make another payment in October 2003 and that the account would
be made current in June 2004. They manifested, however, that St. James
College is not subject to the 10% value-added tax (VAT) which EPCIB
assessed against the school in its June 15, 2003 statement of account.
Petitioners accordingly requested the deletion of the VAT portion.
On September 15, 2003, petitioners requested that the bank allow a partial
payment of the May 2003 amortization balance of P5,100,000. EPCIB responded
denying petitioners request, but nonetheless proposed a new repayment
scheme to which petitioners were not amenable.
Petitioners made a second check remittance, this time in the amount of
P921,535.42, the P500,000 portion of which represented payment of the
principal and P421,535.42 for interest due on October 15, 2003.
On November 6, 2003, petitioners issued a Stop Payment Order for their
P921,535.42 check.
Jaime, adverting to EPCIBs November 5, 2003 letter, told the bank, You cannot
just unilaterally decide/announce that you did not approve our proposal/request
for restructuring of our loan after receiving our payment, which was based on
said proposal/request.
On November 10, 2003, EPCIB, through counsel, demanded full settlement of
petitioners loan obligation in the total amount of P24,719,461.48.
On November 27, 2003, EPCIB filed before the Office of the Clerk of Court and
Ex-Officio Sheriff of the RTC its Petition for Sale to extra-judicially foreclose the
mortgaged property.
On December 8, 2003, in the RTC, petitioners instituted against EPCIB a
complaint for Declaratory Relief, Injunction and Damages, with application for a
temporary restraining order (TRO) and/or writ of preliminary injunction.

Issue:
Whether or not there was novation of the contract.

Held:
The Court held that there was no novation in the contract.
Novation may be extinctive or modificatory. It is extinctive when an old
obligation is terminated by the creation of a new one that takes the place of the former;
it is merely modificatory when the old obligation subsists to the extent that it remains
compatible with the amendatory agreement.
Novation may either be express, when the new obligation declares in
unequivocal terms that the old obligation is extinguished, or implied, when the new
obligation is on every point incompatible with the old one. The test of incompatibility
lies on whether the two obligations can stand together, each one with its own
independent existence.
Contrary to what petitioners would want the Court to believe, there is clearly no
incompatibility between EPCIBs receipt of the partial payments of the principal
amounts and what was due in May 2003. As it were, EPCIB accepted the partial
payments remitted, but demanded, at the same time, the full payment of what was
otherwise due in May 2003, as the parties agreed upon. As the CA observed correctly,
precisely EPCIB was demanding the full payment of the PhP 5,100,000 principal due in
May 2003 which had not yet been settled.
Novation is never presumed. Consequently, that which arises from a purported
modification in the terms and conditions of the obligation must be clear and express. On
petitioners thus rests the onus of showing clearly and unequivocally that novation has
indeed taken place. To us, petitioners have not discharged the burden. Moreover, we
fail to see the presence of the concurring requisites for a novation of contract, as
enumerated above. Indeed, petitioners have not shown an express modification of the
terms of payment of the obligation.
It has often been said that the minds that agree to contract can agree to novate.
And the agreement or consent to novate may well be inferred from the acts of a
creditor, since volition may as well be expressed by deeds as by words. In the instant
case, however, the acts of EPCIB before, simultaneously to, and after its acceptance of
payments from petitioners argue against the idea of its having acceded or acquiesced to
petitioners request for a change of the terms of payments of the secured loan. Far from
it. Thus, a novation through an alleged implied consent by EPCIB, as proffered and
argued by petitioners, cannot be given imprimatur by the Court.

MARIA SOLEDAD TOMIMBANG vs. ATTY. JOSE TOMIMBANG
G.R. No. 165116
August 4, 2009

Facts:
Petitioner and respondent are siblings. Their parents donated to petitioner an eight-
door apartment with the condition that during the parents' lifetime, they shall retain
control over the property and petitioner shall be the administrator thereof.
Petitioner failed to obtain a loan from PAG-IBIG Fund, hence, respondent offered to
extend a credit line to petitioner. Petitioner accepted respondent's offer. Renovations
on Units B to G were completed, and the work has just started on Unit A when an
altercation broke out between herein parties. Respondent and petitioner entered into a
new agreement whereby petitioner was to start making monthly payments on her loan.
In 1997, a quarrel also occurred between respondent and another sister, Maricion.
Petitioner left Unit H and could no longer be found. Renovations on Unit A were
discontinued when her whereabouts could not be located. She also stopped making
monthly payments and ignored the demand letter sent by respondent's counsel.
Respondent filed a Complaint against petitioner, demanding the latter to pay the former
the net amount of P3,989,802.25 plus interest of 12% per annum from date of default.
Petitioner contends that the loan is not yet due and demandable because the
suspensive condition the completion of the renovation of the apartment units - has
not yet been fulfilled.

Issue:
Whether or not there was novation in the contract.

Held:
By virtue of the subsequent agreement, the parties mutually dispensed with the
condition that petitioner shall only begin paying after the completion of all renovations.
There was, in effect, a modificatory or partial novation, of petitioner's obligation.
An extinctive novation would thus have the twin effects of, first, extinguishing an
existing obligation and, second, creating a new one in its stead. This kind of novation
presupposes a confluence of four essential requisites: (1) a previous valid obligation; (2)
an agreement of all parties concerned to a new contract; (3) the extinguishment of the
old obligation; and (4) the birth of a new valid obligation. Novation is merely
modificatory where the change brought about by any subsequent agreement is merely
incidental to the main obligation; in this instance, the new agreement will not have the
effect of extinguishing the first but would merely supplement it or supplant some but
not all of its provisions.
Extinctive novation is applicable in this case. In partial novation, only the terms
and conditions of the obligation are altered, thus, the main obligation is not changed
and it remains in force.

MINDANAO SAVINGS AND LOAN ASSOCIATION, INC. vs. EDWARD
WILLKOM
G.R. No. 178618
October 11, 2010

Facts:
The First Iligan Savings and Loan Association, Inc. (FISLAI) and the Davao Savings
and Loan Association, Inc. (DSLAI) are entities duly registered with the Securities
and Exchange Commission (SEC) primarily engaged in the business of granting
loans and receiving deposits from the general public, and treated as banks.
FISLAI and DSLAI entered into a merger, with DSLAI as the surviving corporation.
The articles of merger were not registered with the SEC due to incomplete
documentation.
On August 12, 1985, DSLAI changed its corporate name to MSLAI.
On May 26, 1986, the Board of Directors of FISLAI passed and approved Board
Resolution No. 86-002, assigning its assets in favor of DSLAI which in turn
assumed the formers liabilities.
The Monetary Board of the Central Bank of the Philippines ordered its closure
and placed it under receivership per Monetary Board Resolution No. 922 due to
failure.
o The Monetary Board found that MSLAIs financial condition was one of
insolvency, and for it to continue in business would involve probable loss
to its depositors and creditors. On May 24, 1991, the Monetary Board
ordered the liquidation of MSLAI, with PDIC as its liquidator.
Prior to the closure of MSLAI, Uy filed with the RTC an action for collection of
sum of money against FISLAI.
o On October 19, 1989, the RTC issued a summary decision in favor of Uy,
directing defendants therein (which included FISLAI) to pay the former
the sum of P136,801.70, plus interest until full payment, 25% as
attorneys fees, and the costs of suit. The decision was modified by the
CA by further ordering the third-party defendant therein to reimburse
the payments that would be made by the defendants. The decision
became final and executory on February 21, 1992. A writ of execution
was thereafter issued.[10]
During the public auction on May 17, 1993, Willkom was the highest bidder.
On September 20, 1994, Willkom sold one of the subject parcels of land to Go.
On June 14, 1995, MSLAI, represented by PDIC, filed before the RTC a complaint
for Annulment of Sheriffs Sale, Cancellation of Title and Reconveyance of
Properties against respondents.

Issue:
Whether or not novation by substitution of the debtor exists in this case.


Held:
According to the Court, petitioner cannot anchor its right to annul the execution
sale on the principle of novation. While it is true that DSLAI (now MSLAI) assumed all the
liabilities of FISLAI, such assumption did not result in novation as would release the
latter from liability, thereby exempting its properties from execution.
It is a rule that novation by substitution of debtor must always be made with the
consent of the creditor. In this case, there was no showing that Uy, the creditor, gave
her consent to the agreement that DSLAI (now MSLAI) would assume the liabilities of
FISLAI. Such agreement cannot prejudice Uy. Thus, the assets that FISLAI transferred to
DSLAI remained subject to execution to satisfy the judgment claim of Uy against FISLAI.
The subsequent sale of the properties by Uy to Willkom, and of one of the properties by
Willkom to Go, cannot, therefore, be questioned by MSLAI.
The consent of the creditor to a novation by change of debtor is as indispensable
as the creditors consent in conventional subrogation in order that a novation shall
legally take place. Since novation implies a waiver of the right which the creditor had
before the novation, such waiver must be express.


AGRIFINA AQUINTEY vs. SPOUSES FELICIDAD AND RICO TIBONG
G.R. No. 166704
December 20, 2006

Facts:
On May 6, 1999, petitioner Agrifa filed before RTC a complaint for sum of money
and damages against respondents.
o Agrifina alleged that Felicidad secured loans from her on several
occasions at monthly interest rates of 6% to 7%.
Despite demands, spouses Tibong failed to pay their outstanding loans of
P773,000,00 exclusive of interests. However, spouses Tiong alleged that they had
executed deeds of assignment in favor of Agrifina amounting to P546,459 and
that their debtors had executed promissory notes in favor of Agrifina.
Spouses insisted that by virtue of these documents, Agrifina became the new
collector of their debts.
Agrifina was able to collect the total amount of P301,000 from Felicdads
debtors. She tried to collect the balance of Felicidad and when the latter reneged
on her promise, Agrifina filed a complaint in the office of the barangay for the
collection of P773,000.00. There was no settlement.

Issues:
Whether or not the dead of assignment extinguished the obligation.

Held:
Novation which consists in substituting a new debtor (delegado) in the place of
the original one (delegante) may be made even without the knowledge or against the
will of the latter but not without the consent of the creditor. Substitution of the person
of the debtor may be effected by delegacion, meaning, the debtor offers, and the
creditor (delegatario), accepts a third person who consents to the substitution and
assumes the obligation. Thus, the consent of those three persons is necessary. In this
kind of novation, it is not enough to extend the juridical relation to a third person; it is
necessary that the old debtor be released from the obligation, and the third person or
new debtor take his place in the relation. Without such release, there is no novation;
the third person who has assumed the obligation of the debtor merely becomes a co-
debtor or a surety. If there is no agreement as to solidarity, the first and the new debtor
are considered obligated jointly.
The theory of novation is that the new debtor contracts with the old debtor that
he will pay the debt, and also to the same effect with the creditor, while the latter
agrees to accept the new debtor for the old. Moreover, the agreement must be based
on the consideration of the creditor's agreement to look to the new debtor instead of
the old.
CA correctly found that respondents' obligation to pay the balance of their
account with petitioner was extinguished, pro tanto, by the deeds of assignment of
credit executed by respondent Felicidad in favor of petitioner.
















ASIAN TERMINALS, INC. vs. PHILAM INSURANCE CO., INC.
G.R. No. 181163
July 24, 2013

Facts:
***consolidate with previous facts

Issue:
Whether or not subrogation to the rights of the creditor was valid in this case.

Held:
The Court held that payment by the insurer to the insured operates as an
equitable assignment to the insurer of all the remedies that the insured may have
against the third party whose negligence or wrongful act caused the loss. The right of
subrogation is not dependent upon, nor does it grow out of, any privity of contract. It
accrues simply upon payment by the insurance company of the insurance claim. The
doctrine of subrogation has its roots in equity. It is designed to promote and accomplish
justice; and is the mode that equity adopts to compel the ultimate payment of a debt by
one who, in justice, equity, and good conscience, ought to pay.

LOADMASTERS CUSTOMS SERVICES, INC. vs. GLODEL BROKERAGE
CORPORATION
G.R. No. 179446
January 10, 2011

Facts:
On August 28, 2001, R&B Insurance issued Marine Policy No. MN-00105/2001 in
favor of Columbia to insure the shipment of 132 bundles of electric copper
cathodes against All Risks.
Columbia engaged the services of Glodel for the release and withdrawal of the
cargoes from the pier and the subsequent delivery to its warehouses/plants.
Glodel, in turn, engaged the services of Loadmasters for the use of its delivery
trucks to transport the cargoes to Columbias warehouses/plants in Bulacan and
Valenzuela City.
The goods were loaded on board twelve (12) trucks owned by Loadmasters,
driven by its employed drivers and accompanied by its employed truck helpers.
o Six (6) truckloads of copper cathodes were to be delivered to Balagtas,
Bulacan, while the other six (6) truckloads were destined for Lawang
Bato, Valenzuela City.
o The cargoes in six truckloads for Lawang Bato were duly delivered in
Columbias warehouses there.
o One (1) truck, loaded with 11 bundles or 232 pieces of copper cathodes,
failed to deliver its cargo.
The said truck was recovered but without the copper cathodes.
Because of this incident, Columbia filed with R&B Insurance a claim for insurance
indemnity in the amount of P1,903,335.39.
o R&B Insurance paid Columbia the amount of P1,896,789.62 as insurance
indemnity.
R&B Insurance, thereafter, filed a complaint for damages against both
Loadmasters and Glodel before the RTC seeking reimbursement of the amount it
had paid to Columbia for the loss of the subject cargo. It claimed that it had
been subrogated to the right of the consignee to recover from the party/parties
who may be held legally liable for the loss.

Issue:
Whether or not R&B Insurance has the right to seek reimbursement from either
or both Loadmasters or Glodel as subrogee of the rights and interest of the consignee.

Held:
Subrogation is the substitution of one person in the place of another with
reference to a lawful claim or right, so that he who is substituted succeeds to the rights
of the other in relation to a debt or claim, including its remedies or securities. R&B
Insurance is subrogated to the rights of the insured to the extent of the amount it paid
the consignee under the marine insurance, as provided under Article 2207 of the Civil
Code.
As subrogee of the rights and interest of the consignee, R&B Insurance has the
right to seek reimbursement from either Loadmasters or Glodel or both for breach of
contract and/or tort.

METROPOLITAN BANK AND TRUST COMPANY vs. RURAL BANK OF
GERONA, INC.
G.R. No. 159097
July 5, 2010

Facts:
In the 1970s, the Central Bank and the Rural Bank of Gerona, Inc. entered into an
agreement providing that RBG shall facilitate the loan applications of farmers-
borrowers under the Central Bank-International Bank for Reconstruction and
Developments (IBRDs) 4th Rural Credit Project.
o The agreement required RBG to open a separate bank account where the
IBRD loan proceeds shall be deposited. RBG accordingly opened a special
savings account with Metrobanks Tarlac Branch.
As the depository bank of RBG, Metrobank was designated to
receive the credit advice released by the Central Bank
representing the proceeds of the IBRD loan of the farmers-
borrowers; Metrobank, in turn, credited the proceeds to RBGs
special savings account for the latters release to the farmers-
borrowers.
Cental banked released credit advice 3 times. During the last credit advice, RBG
only withdrew P75,375.00 out of the P220,000.
On November 3, 1978, the Central Bank issued debit advices reversing all the
approved IBRD loans. The Central Bank implemented the reversal by debiting
from Metrobanks demand deposit account the amount corresponding to all
three IBRD loans.
Metrobank claimed that the amounts debited from RBG were insufficient to
cover all the credit advices that were reversed by the Central Bank.
o Metrobank demanded payment from RBG which could make partial
payments.
As of October 17, 1979, Metrobank claimed that RBG had an outstanding
balance of P334,220.00. To collect this amount, it filed a complaint for collection
of sum of money against RBG before the RTC. RTC ruled in favor of Metrobank
saying that legal subrogation had occurred.

Issue:
Whether or not legal subrogation occurred as found by the RTC.

Held:
After Metrobank received the Central Banks debit advices in November 1978, it
(Metrobank) accordingly debited the amounts it could from RBGs special savings
account without any objection from RBG. That RBGs tacit approval came after payment
had been made does not completely negate the legal subrogation that had taken place.
Article 1303 of the Civil Code states that subrogation transfers to the person
subrogated the credit with all the rights thereto appertaining, either against the debtor
or against third persons. As the entity against which the collection was enforced,
Metrobank was subrogated to the rights of Central Bank and has a cause of action to
recover from RBG the amounts it paid to the Central Bank, plus 14% per annum interest.

SWAGMAN HOTELS AND TRAVEL, INC. vs. CA
G.R. No. 161135
April 8, 2005

Facts:
Sometime in 1996 and 1997, petitioner Swagman Hotels and Travel, Inc.
obtained from private respondent Neal B. Christian loans evidenced by three
promissory notes
o Each of the promissory notes is in the amount of US$50,000 payable after
three years from its date with an interest of 15% per annum payable
every three months.
o Christian informed the petitioner corporation that he was terminating
the loans and demanded from the latter payment in the total amount of
US$150,000 plus unpaid interests in the total amount of US$13,500.
On 2 February 1999, private respondent Christian filed with the RTC a complaint
for a sum of money and damages against the petitioner corporation, Hegerty,
and Atty. Infante.
The petitioner corporation, together with its president and vice-president, filed
an Answer raising as defenses lack of cause of action and novation of the
principal obligations.
o According to them, Christian had no cause of action because the three
promissory notes were not yet due and demandable.

Issue:
Whether or not a valid novation was present in this case.

Held:
Under Article 1253 of the Civil Code, if the debt produces interest, payment of
the principal shall not be deemed to have been made until the interest has been
covered. In this case, the private respondent would not have signed the receipts
describing the payments made by the petitioner as capital repayment if the obligation
to pay the interest was still subsisting. The receipts, as well as private respondents
summary of payments, lend credence to petitioners claim that the payments were for
the principal loans and that the interests on the three consolidated loans were waived
by the private respondent during the undisputed renegotiation of the loans on account
of the business reverses suffered by the petitioner at the time.
There was therefore a novation of the terms of the three promissory notes in
that the interest was waived and the principal was payable in monthly installments of
US$750. Alterations of the terms and conditions of the obligation would generally result
only in modificatory novation unless such terms and conditions are considered to be the
essence of the obligation itself. The resulting novation in this case was, therefore, of the
modificatory type, not the extinctive type, since the obligation to pay a sum of money
remains in force.
Thus, since the petitioner did not renege on its obligation to pay the monthly
installments conformably with their new agreement and even continued paying during
the pendency of the case, the private respondent had no cause of action to file the
complaint. It is only upon petitioners default in the payment of the monthly
amortizations that a cause of action would arise and give the private respondent a right
to maintain an action against the petitioner.

AZOLLA FARMS and FRANCISCO R. YUSECO vs. CA
G. R. No. 138085
November 11, 2004

Facts:
Petitioner Francis R. Yuseco, Jr., is the Chairman, President and Chief Operating
Officer of petitioner Azolla Farms International Philippines.
In 1982, Azolla Farms undertook to participate in the National Azolla Production
Program wherein it will purchase all the Azolla produced by the Azolla
beneficiaries in the amount not exceeding the peso value of all the inputs
provided to them.
o To finance its participation, petitioners applied for a loan with Credit
Manila, Inc., which the latter endorsed to its sister company, respondent
Savings Bank of Manila (Savings Bank).
o The Board of Directors of Azolla Farms passed a board resolution
authorizing Yuseco to borrow from Savings Bank in an amount not
exceeding P2,200,000.00.
The loan having been approved, Yuseco executed a promissory note promising
to pay Savings Bank the sum of P1,400,000.00.
o The net proceeds of P1,225,443.31 was released to FNCB Finance.
o FNCB Finance released the mortgage, and in turn, the property was
mortgaged to Savings Bank as collateral for the loan.
o Yuseco then executed two other promissory notes for the amount of
P300,000.00 each.
The Azolla Farms project collapsed.
o Petitioners Yuseco and Azolla Farms filed with the RTC a complaint for
damages. Their complaint alleges that Savings Bank unjustifiably refused
to promptly release the remaining P300,000.00 which impaired the
timetable of the project and inevitably affected the viability of the project
resulting in its collapse, and resulted in their failure to pay off the loan.
o Respondent Savings Bank filed its Answer denying the allegations in the
complaint. It contends that there was evidence that Yuseco was using
the loan proceeds for expenses totally unrelated to the project and they
decided to withhold the remaining amount until Yuseco gave the
assurance that the diversion of the funds will be stopped.

Issue:
Whether or not a valid novation occurred rendering the promissory notes and
real estate mortgage invalid and not binding.

Held:
Novation is the extinguishment of an obligation by the substitution or change of
the obligation by a subsequent one which extinguishes or modifies the first, either by
changing the object or principal conditions, or, by substituting another in place of the
debtor, or by subrogating a third person in the rights of the creditor.
All the requisites of novation are not present. There is no new obligation that
supposedly novated the promissory notes or the real estate mortgage, or a pre-existing
obligation that was novated by the promissory notes and the real estate mortgage. In
fact, there is only one agreement between the parties in this case, i.e., petitioners
P2,000,000.00 loan with respondent, as evidenced by the 3 promissory notes and the
real estate mortgage.
It cannot be said that the loan application of plaintiffs or their initial
representations with Credit Manilas Michael de Guzman was already in itself a binding
original contract that was later novated by defendant. Plaintiff Yuseco cannot pretend
to have been unaware of banking procedures that normally recognize a loan
application as just that, a mere application. Only upon the banks approval of the loan
application in the amount and under such terms it deems viable and acceptable, that a
binding and effective loan agreement comes into existence. Without any such first or
original loan agreement as approved in the amount and under specified terms by the
bank, there can be nothing whatsoever that can be subsequently novated.

CALIFORNIA BUS LINES, INC. vs. STATE INVESTMENT HOUSE, INC.
G.R. No. 147950
December 11, 2003

Facts:
In 1979, Delta Motors CorporationM.A.N. Division (Delta) applied for financial
assistance from respondent State Investment House, Inc. (SIHI), a domestic
corporation engaged in the business of quasi-banking for P25,000,000.00 in
three separate credit agreements. Delta eventually became indebted to SIHI in
the amount of P24,010,269.32.
From April 1979 to May 1980, petitioner California Bus Lines, Inc. (CBLI),
purchased on installment basis 35 units of M.A.N. Diesel Buses and two (2) units
of M.A.N. Diesel Conversion Engines from Delta. To secure the payment of the
purchase price of the 35 buses, CBLI and its president, Mr. Dionisio O. Llamas,
executed sixteen (16) promissory notes in favor of Delta.
o In each promissory note, CBLI promised to pay Delta or order, P2,314,000
payable in 60 monthly installments with interest at 14% per annum.
o In addition to the notes, CBLI executed chattel mortgages over the 35
buses in Deltas favor.
When CBLI defaulted on all payments due, it entered into a restructuring
agreement on October 7, 1981 with Delta to cover its overdue obligations under
the promissory notes.
o The restructuring agreement provided for a new schedule of payments
of CBLIs past due installments, extending the period to pay, and
stipulating daily remittance instead of the previously agreed monthly
remittance of payments.
In case of default, Delta would have the authority to take over the
management and operations of CBLI until CBLI and/or its
president remitted and/or updated CBLIs past due account. CBLI
and Delta also increased the interest rate to 16% p.a. and added a
documentation fee of 2% p.a. and a 4% p.a. restructuring fee.
Delta executed a Continuing Deed of Assignment of Receivables in favor of SIHI
as security for the payment of its obligations to SIHI per the credit agreements.
CBLI continued having trouble meeting its obligations to Delta. This prompted
Delta to threaten CBLI with the enforcement of the management takeover
clause. To pre-empt the take-over, CBLI filed a complaint for injunction.
On September 15, 1983, pursuant to the Memorandum of Agreement, Delta
executed a Deed of Sale assigning to SIHI five (5) of the sixteen (16) promissory
notes from California Bus Lines, Inc. At the time of assignment, these five
promissory notes had a total value of P16,152,819.80 inclusive of interest at 14%
per annum.
SIHI subsequently sent a demand letter to CBLI requiring CBLI to remit the
payments due on the five promissory notes directly to it. CBLI replied informing
SIHI of Civil Case No. 0023-P and of the fact that Delta had taken over its
management and operations.
When SIHI was unable to take possession of the buses, SIHI filed a petition for
recovery of possession with prayer for issuance of a writ of replevin before the
RTC.
Thereafter, Delta and CBLI entered into a compromise agreement. CBLI agreed
that Delta would exercise its right to extrajudicially foreclose on the chattel
mortgages over the 35 bus units.
o CBLI refused to pay SIHI the value of the five promissory notes,
contending that the compromise agreement was in full settlement of all
its obligations to Delta including its obligations under the promissory
notes.
SIHI filed a complaint against CBLI in the RTC to collect on the five (5) promissory
notes with interest at 14% p.a. SIHI also prayed for the issuance of a writ of
preliminary attachment against the properties of CBLI.

Issue:
Whether the Restructuring Agreement dated October 7, 1981, between
petitioner CBLI and Delta Motors, Corp. novated the five promissory notes Delta
Motors, Corp. assigned to respondent SIHI.

Held:
There was no novation in this case. The restructuring agreement between Delta
and CBLI executed on October 7, 1981, shows that the parties did not expressly stipulate
that the restructuring agreement novated the promissory notes. Absent an unequivocal
declaration of extinguishment of the pre-existing obligation, only a showing of complete
incompatibility between the old and the new obligation would sustain a finding of
novation by implication. However, in reviewing its terms yields no incompatibility
between the promissory notes and the restructuring agreement.
The restructuring agreement, instead of containing provisions absolutely
incompatible with the obligations of the judgment, expressly ratifies previous
obligations and contains provisions for satisfying them. There was no change in the
object of the prior obligations. The restructuring agreement merely provided for a new
schedule of payments and additional security giving Delta authority to take over the
management and operations of CBLI in case CBLI fails to pay installments equivalent to
60 days. Where the parties to the new obligation expressly recognize the continuing
existence and validity of the old one, there can be no novation. Moreover, the Court has
ruled that an agreement subsequently executed between a seller and a buyer that
provided for a different schedule and manner of payment, to restructure the mode of
payments by the buyer so that it could settle its outstanding obligation in spite of its
delinquency in payment, is not tantamount to novation.

GLORIA OCAMPO-PAULE vs. CA
G.R. No. 145872
February 4, 2002

Facts:
Petitioner received from private complainant Felicitas M. Calilung several pieces
of jewelry with a total value of P163,167.95.
o The agreement between private complainant and petitioner was that the
latter would sell the same and thereafter turn over and account for the
proceeds of the sale, or otherwise return to private complainant the
unsold pieces of jewelry within two months from receipt thereof.
Petitioner failed to turn over the proceeds of the sale or to return the unsold
pieces of jewelry upon receipt of demand letter.
During the barangay conciliation proceedings, petitioner acknowledge having
received from private complainant several pieces of jewelry worth P163,167.95.
o Both parties eventually executed an agreement entitled Kasunduan sa
Bayaran, whereby petitioner promised to pay private complainant
P3,000.00 every month to answer for the jewelry which she received
from the latter.
o When petitioner failed to comply with the terms of the Kasunduan sa
Bayaran, private complainant sent her another demand letter but she still
failed to comply with her obligation.
Private complainant then filed a criminal complaint against petitioner in the
Office of the Provincial Prosecutor. Consequently, an information charging
petitioner with estafa was filed in the RTC
Petitioner contends, among others, that the Kasunduan executed by her and
private complainant, which stipulate that she was to pay for the pieces of
jewelry received by her in monthly installments of P3,000.00 resulted in the
novation of her obligation and extinguished her criminal liability.

Issue:
Whether or not the Kasunduan executed by her and private complainant
resulted in the novation of her obligation and extinguished her criminal liability.

Held:
The execution of the Kasunduan sa Bayaran does not constitute a novation of
the original agreement between petitioner and private complainant. Said Kasunduan
did not change the object or principal conditions of the contract between them. The
change in manner of payment of petitioners obligation did not render the Kasunduan
incompatible with the original agreement, and hence, did not extinguish petitioners
liability to remit the proceeds of the sale of the jewelry or to return the same to private
complainant.
An obligation to pay a sum of money is not novated, in a new instrument
wherein the old is ratified, by changing only the terms of payment and adding other
obligations not incompatible with the old one, or wherein the old contract is merely
supplemented by the new one.
In any case, novation is not one of the grounds prescribed by the Revised Penal
Code for the extinguishment of criminal liability.

SPOUSES ARSENIO R. REYES and NIEVES S. REYES vs. CA
G.R. No. 147758
June 26, 2002

Facts:
Petitioner-spouses borrowed from private respondent P600,000.00 with interest
at five percent (5%) per month, which 656otaled P1,726,250.00 at the time of
filing of the Complaint.
Petitioners also turned over to private respondent their Nissan pickup truck
worth P400,000.00 in partial payment of the loan, and petitioner Arsenio
executed a deed of absolute sale over the vehicle in favor of respondent.
Petitioners failed to make any further payments despite written demand for
payment.
In their Answer, petitioners admitted their loan from respondent but averred
that there was a novation so that the amount loaned was actually converted into
respondents contribution to a partnership formed between them.
o According to petitioner Nieves, sometime in 1989 respondent Pablo went
to their house and proposed to petitioner Arsenio the formation of a
partnership to develop the property petitioners planned to buy. He
agreed and they executed their Articles of Partnership of Feliz Casa Realty
Development, Ltd. Each partner was to contribute a capital of
P2,000,000.00. Arsenios contribution was his P1,000,000.00 investment
with the owner of the real property to be purchased.
Respondent Pablo contributed only P500,000.00.

Issue:
Whether or not the amount loaned was converted into private respondents
contribution to the partnership which novated the previous contract.

Held:
In the case at bar, the third requisite that there must be the extinguishment of
the old contract is not present. The parties did agree that the amount loaned would be
converted into respondent's contribution to the partnership, but this conversion did not
extinguish the loan obligation. The date when the acknowledgment receipt/promissory
note was made negates the claim that the loan agreement was extinguished through
novation since the note was made while the partnership was in existence.
Significantly, novation is never presumed. It must appear by express agreement
of the parties, or by their acts that are too clear and unequivocal to be mistaken for
anything else. An obligation to pay a sum of money is not novated in a new instrument
wherein the old is ratified by changing only the terms of payment and adding other
obligations not incompatible with the old one, or wherein the old contract is merely
supplemented by the new one.

SPOUSES FLORANTE and LAARNI BAUTISTA vs. PILAR
DEVELOPMENT CORPORATION
G.R. No. 135046
August 17, 1999

Facts:
In 1978, petitioner spouses Florante and Laarni Bautista purchased a house and
lot.
To partially finance the purchase, they obtained from the Apex Mortgage & Loan
Corporation (Apex) a loan in the amount of P100,180.00.
o They executed a promissory note obligating themselves, jointly and
severally, to pay the "principal sum of P100,180.00 with interest rate of
12% and service charge of 3%" for a period of 240 months, or twenty
years, from date, in monthly installments of P1,378.83. Late payments
were to be charged a penalty of one and one-half per cent (1 1/2%) of
the amount due.
Petitioners authorized Apex to "increase the rate of interest
and/or service charges" without notice to them in the event that a
law, Presidential Decree or any Central Bank regulation should be
enacted increasing the lawful rate of interest and service charges
on the loan.
Payment of the promissory note was secured by a second
mortgage on the house and lot purchased by petitioners.
Petitioner spouses failed to pay several installments. They executed another
promissory note in favor of Apex.
o It was in the amount of P142,326.43 at the increased interest rate of
twenty-one per cent (21%) per annum with no provision for service
charge but with penalty charge of 1 1/2% for late payments.
o Payment was to be made for a period of 196 months or 16.33 years in
monthly installments of P2,576.68, inclusive of principal and interest.
o Petitioner spouses also authorized Apex to "increase/decrease the rate of
interest and/or service charges" on the note in the event any law or
Central Bank regulation shall be passed increasing or decreasing the
same.
In November 1983, petitioner spouses again failed to pay the installments. Apex
assigned the second promissory note to respondent Pilar Development
Corporation without notice to petitioners.

Issue:
Whether or not the 2
nd
promissory note novated the contract stipulated in the
1
st
promissory note.

Held:
All four requisites of novation have been complied with. The first promissory
note was a valid and subsisting contract when petitioner spouses and Apex executed the
second promissory note. The second promissory note absorbed the unpaid principal and
interest of P142,326.43 in the first note which amount became the principal debt
therein, payable at a higher interest rate of 21% per annum. Thus, the terms of the
second promissory note provided for a higher principal, a higher interest rate, and a
higher monthly amortization, all to be paid within a shorter period of 16.33 years.
These changes are substantial and constitute the principal conditions of the obligation.
Both parties voluntarily accepted the terms of the second note; and also in the same
note, they unequivocally stipulated to extinguish the first note. Clearly, there was
animus novandi, an express intention to novate. The first promissory note was cancelled
and replaced by the second note. This second note became the new contract governing
the parties' obligations.

EVADEL REALTY and DEVELOPMENT CORPORATION vs. SPOUSES
ANTERO AND VIRGINIA SORIANO
G.R. No. 144291
April 20, 2001

Facts:
Spouses Antero and Virginia Soriano, as sellers, entered into a Contract to Sell with
Evadel Realty and Development Corporation, as buyer, over a parcel of land which was
part of a huge tract of land known as the Imus Estate.
Respondent spouses discovered that the area fenced off by petitioner exceeded the
area subject of the contract to sell by 2,450 square meters.
The area encroached upon was later on segregated from the mother title and issued a
new transfer certificate of title in the name of respondent spouses.
Respondent spouses successively sent demand letters to petitioner to vacate the
encroached area. Petitioner admitted receiving the demand letters but refused to
vacate the said area.
A complaint for accion reinvindicatoria was filed by respondent spouses against
petitioner with the RTC.
o In its Answer, petitioner argued, among others, that there was a novation of
contract because of the encroachment made by the national road on the
property subject of the contract by 1,647 square meters.

Issue:
Whether or not there was novation of contract because there was a second
agreement between the parties due to the encroachment made by the national road on the
property subject of the contract by 1,647 square meters

Held:
There was no express novation because the second agreement was not even put in
writing. Neither was there implied novation since it was not shown that the two agreements
were materially and substantially incompatible with each other.
Since the alleged agreement between the plaintiffs [herein respondents] and defendant
is not in writing and the alleged agreement pertains to the novation of the conditions of the
contract to sell of the parcel of land subject of the instant litigation, ipso facto, novation is not
applicable in this case since, as stated above, novation must be clearly proven by the proponent
thereof and the defendant in this case is clearly barred by the Statute of Frauds from proving its
claim.



















FRANCISCO L. ROSARIO, JR. vs. LELLANI DE GUZMAN
G.R. No. 191247
July 10, 2013

Facts
In August 1990, Spouses Pedro and Rosita de Guzman engaged the legal services of Atty.
Francisco L. Rosario, Jr. as defense counsel in the complaint filed against them by one
Loreta A. Chong (Chong) for annulment of contract and recovery of possession with
damages involving a parcel of land.
Petitioners legal services commenced from the RTC and ended up in this Court. Spouses
de Guzman, represented by petitioner, won their case at all levels. While the case was
pending before this Court, Spouses de Guzman died in a vehicular accident.
o They were substituted by their children, namely: Rosella de Guzman-Bautista,
Lellani de Guzman, Arleen de Guzman, and Philip Ryan de Guzman
(respondents).
On September 8, 2009, petitioner filed the Motion to Determine Attorneys Fees before
the RTC. He alleged, among others, that he had a verbal agreement with the deceased
Spouses de Guzman that he would get 25% of the market value of the subject land if the
complaint filed against them by Chong would be dismissed. Despite the fact that he had
successfully represented them, respondents refused his written demand for payment of
the contracted attorneys fees. Petitioner insisted that he was entitled to an amount
equivalent to 25% percent of the value of the subject land on the basis of quantum
meruit.
On November 23, 2009, the RTC rendered the assailed order denying petitioners
motion on the ground that it was filed out of time. The RTC stated that the said motion
was filed after the judgment rendered in the subject case, as affirmed by this Court, had
long become final and executory on October 31, 2007. The RTC wrote that considering
that the motion was filed too late, it had already lost jurisdiction over the case because
a final decision could not be amended or corrected except for clerical errors or mistakes.
There would be a variance of the judgment rendered if his claim for attorneys fees
would still be included.

Issue:
Whether or not petitioners cause of action had already been prescribed.

Held:
The records show that the August 8, 1994 RTC decision became final and executory on
October 31, 2007. There is no dispute that petitioner filed his Motion to Determine Attorneys
Fees on September 8, 2009, which was only about one (1) year and eleven (11) months from
the finality of the RTC decision. Because petitioner claims to have had an oral contract of
attorneys fees with the deceased spouses, Article 1145 of the Civil Code allows him a period of
six (6) years within which to file an action to recover professional fees for services rendered.
Respondents never asserted or provided any evidence that Spouses de Guzman refused
petitioners legal representation. For this reason, petitioners cause of action began to run only
from the time the respondents refused to pay him his attorneys fees.

VECTOR SHIPPING CORPORATION vs. AMERICAN HOME
ASSURANCE COMPANY
G.R. No. 159213
July 3, 2013

Facts:
Vector was the operator of the motor tanker M/T Vector, while Soriano was the
registered owner of the M/T Vector. Respondent is a domestic insurance corporation.
On September 30, 1987, Caltex entered into a contract of Affreightment with Vector for
the transport of Caltexs petroleum cargo through the M/T Vector. Caltex insured the
petroleum cargo with respondent for P7,455,421.08
In the evening of December 20, 1987, the M/T Vector and the M/V Doa Paz, the latter
a vessel owned and operated by Sulpicio Lines, Inc., collided in the open sea. The
collision led to the sinking of both vessels. The entire petroleum cargo of Caltex on
board the M/T Vector perished.
On July 12, 1988, respondent indemnified Caltex for the loss of the petroleum cargo in
the full amount of P7,455,421.08.
On March 5, 1992, respondent filed a complaint against Vector, Soriano, and Sulpicio
Lines, Inc. to recover the full amount of P7,455,421.08 it paid to Caltex.
On December 10, 1997, the RTC issued a resolution dismissing the case stating that the
action is upon a quasi-delict and as such must be commenced within four 4 years from
the day they may be brought. [Art. 1145 in relation to Art. 1150, Civil Code] From the
day [the action] may be brought means from the day the quasi-delict occurred. The
tort complained of in this case occurred on 20 December 1987. The action arising
therefrom would under the law prescribe, unless interrupted, on 20 December 1991.
When the case was filed against defendants Vector Shipping and Francisco Soriano on 5
March 1992, the action not having been interrupted, had already prescribed.
Under the same situation, the cross-claim of Sulpicio Lines against Vector Shipping and
Francisco Soriano filed on 25 June 1992 had likewise prescribed.

Issue:
Whether or not the cause of action of respondent was already barred by prescription for
bringing it only on March 5, 1992.

Held:
The court found and hold that that the present action was not upon a written contract,
but upon an obligation created by law. Hence, it came under Article 1144 (2) of the Civil Code in
which the action must be brought within 10 years from the time the cause of action acrues. This
is because the subrogation of respondent to the rights of Caltex as the insured was by virtue of
the express provision of law embodied in Article 2207 of the Civil Code. Thus, the action of the
respondent has not yet prescribed.

ERNESTO VILLEZA vs. GERMAN MANAGEMENT AND SERVICES
G.R. No. 182937
August 08, 2010

Facts:
Present petition arose from an earlier Supreme Court ruling in German Management v.
Court of Appeals which has already become final and executory. The decision, however,
remains unenforced due to the prevailing party's own inaction.
German Management v. Court of Appeals stemmed from a forcible entry case instituted
by petitioner Ernesto Villeza against respondent German Management, the authorized
developer of the landowners, befofe the MeTC. The Decision of the SC favoring the
petitioner became final and executory on October 5, 1989.
On May 27, 1991, the petitioner filed a Motion for Issuance of Writ of Execution with
the MeTC.
On February 27, 1992, he filed a Motion to Defer Resolution thereon because "he was
permanently assigned in Iloilo and it would take quite sometime before he could come
back."
On February 28, 1992, the MeTC issued an order holding in abeyance the resolution of
his motion to issue writ of execution until his return.
o Three years later, as there was no further movement, the said court issued an
order dated January 9, 1995 denying petitioner's pending Motion for Issuance of
Writ of Execution for lack of interest.
More than 3 years had passed before petitioner filed a Motion for Reconsideration
dated May 29, 1998 alleging that he had retired from his job in Iloilo City and was still
interested in the issuance of the writ. On October 8, 1998, the MeTC issued a writ of
execution.
As the sheriff was implementing the writ, an Opposition with Motion to Quash Writ of
Execution was filed by German Management and Services, Inc.
o Considering the provision of Section 6, Rule 39 of the 1997 Rules of Civil
Procedure, after the lapse of five years from the date of entry, judgment may no
longer be enforced by way of motion but by independent action.
On October 3, 2000, Villeza filed with the MeTC a Complaint for Revival of Judgment of
the Decision of the Supreme Court dated September 14, 1989.
o Respondent German Management moved to dismiss the complaint. It alleged
that it had been more than 10 years from the time the right of action accrued,
that is, from October 5, 1989, the date of the finality of the Court's decision to
October 3, 2000, the date of the filing of the complaint for its revival.
o It further argued that, pursuant to Section 6, Rule 39 of the Rules of Court in
relation to Article 1144 of the Civil Code, the complaint is now barred by the
statute of limitations.

Issue:
Whether or not petitioners cause of action had already beed prescribed.

Held:
An action for revival of judgment is governed by Article 1144 (3), Article 1152 of the Civil
Code and Section 6, Rule 39 of the Rules of Court.
Once a judgment becomes final and executory, the prevailing party can have it executed
as a matter of right by mere motion within five years from the date of entry of judgment. If the
prevailing party fails to have the decision enforced by a motion after the lapse of five years, the
said judgment is reduced to a right of action which must be enforced by the institution of a
complaint in a regular court within ten years from the time the judgment becomes final.
When petitioner Villeza filed the complaint for revival of judgment on October 3, 2000,
it had already been 11 years from the finality of the judgment he sought to revive. Clearly, the
statute of limitations had set in.

INSURANCE OF THE PHILIPPINE ISLANDS CORPORATION vs.
SPOUSES VIDAL S. GREGORIO and JULITA GREGORIO
G.R. No. 174104
February 14, 2011

Facts:
Spouses Vidal Gregorio and Julita Gregorio obtained a loan from the Insurance of the
Philippine Islands Corporation (formerly known as Pyramid Insurance Co., Inc.) 3 times.
All of the loans were secured with corresponding Real Estate Mortgages.
Respondents failed to pay their loans, as a result of which the mortgaged properties
were extrajudicially foreclosed.
o The extrajudicial foreclosure sale was conducted on December 11, 1969 where
petitioner was the highest bidder. Since respondents failed to redeem the
property, petitioner consolidated its ownership over the properties.
On February 20, 1996, petitioner filed a Complaint for damages against respondents
alleging that in 1995, when it was in the process of gathering documents for the
purpose of filing an application for the registration and confirmation of its title over the
foreclosed properties, it discovered that the said lots were already registered in the
names of third persons and transfer certificates of title (TCT) were issued to them.

Issue
Whether or not petitioners cause of action in the complaint for damages on February
20, 1996 had already been prescribed.

Held
Petitioner filed an action for damages on the ground of fraud committed against it by
respondents. Under the provisions of Article 1146 of the Civil Code, actions upon an injury to
the rights of the plaintiff or upon a quasi-delict must be instituted within four years from the
time the cause of action accrued.
Petitioner's cause of action accrued at the time it discovered the alleged fraud
committed by respondents. It is at this point that the four-year prescriptive period should be
counted. However, the Court does not agree with the CA in its ruling that the discovery of the
fraud should be reckoned from the time of registration of the titles covering the subject
properties.
The Court notes that what has been given by respondents to petitioner as evidence of
their ownership of the subject properties at the time that they mortgaged the same are not
certificates of title but tax declarations, in the guise that the said properties are unregistered.
On the basis of the tax declarations alone and by reason of respondent's misrepresentations,
petitioner could not have been reasonably expected to acquire knowledge of the fact that the
said properties were already titled. As a consequence, petitioner may not be charged with any
knowledge of any subsequent entry of an encumbrance which may have been annotated on the
said titles, much less any change of ownership of the properties covered thereby. As such, the
Court agrees with petitioner that the reckoning period for prescription of petitioner's action
should be from the time of actual discovery of the fraud in 1995. Hence, petitioner's suit for
damages, filed on February 20, 1996, is well within the four-year prescriptive period.

ROMEO D. MARIANO vs. PETRON CORPORATION
G.R. No. 169438
January 21, 2010

Facts:
On 5 November 1968 Pacita V. Aure, Nicomedes Aure Bundac, and Zeny Abundo (Aure
Group), owners of a parcel of land, leased the Property to ESSO Standard Eastern, Inc.
o The lease period is 90 years and the rent is payable monthly for the first 10
years, and annually for the remaining period.
o The lease contract contained an assignment veto clause barring the parties from
assigning the lease without prior consent of the other. Excluded from the
prohibition were certain corporations to whom ESSO Eastern may unilaterally
assign its leasehold right.
On 23 December 1977, ESSO Eastern sold ESSO Philippines to the Philippine National Oil
Corporation (PNOC). Apparently, the Aure Group was not informed of the sale. ESSO
Philippines, whose corporate name was successively changed to Petrophil Corporation
then to Petron Corporation (Petron), took possession of the Property.
On 18 November 1993, petitioner Romeo D. Mariano bought the Property from the
Aure Group and obtained title to the Property issued in his name bearing an annotation
of ESSO Easterns lease.
On 17 December 1998, petitioner sent to Petron a notice to vacate the Property.
o Petitioner informed Petron that PD 471 reduced the Contracts duration from 90
to 25 years, ending on 13 November 1993.
o Despite receiving the notice to vacate on 21 December 1998, Petron remained
on the Property.
On 18 March 1999, petitioner sued Petron in the RTC to rescind the Contract and
recover possession of the Property. Aside from invoking PD 471, petitioner alternatively
theorized that the Contract was terminated on 23 December 1977 when ESSO Eastern
sold ESSO Philippines to PNOC, thus assigning to PNOC its lease on the Property, without
seeking the Aure Groups prior consent.
o Petron countered that the Contract was not breached because PNOC merely
acquired ESSO Easterns shares in ESSO Philippines, a separate corporate entity.
Alternatively, Petron argued that petitioners suit, filed on 18 March 1999, was
barred by prescription under Article 1389 and Article 1146(1) of the Civil Code as
petitioner should have sought rescission within four years from PNOCs purchase
of ESSO Philippines on 23 December 1977 or before 23 December 1981.

Issue:
Whether or not petitioners cause of action was barred by prescription.

Held:
Petitioners waiver of Petrons contractual breach was compounded by his long inaction
to seek judicial redress. Petitioner filed his complaint nearly 22 years after PNOC acquired the
leasehold rights to the Property and almost six years after petitioner bought the Property from
the Aure Group. The more than two decades lapse puts this case well within the territory of the
10 year prescriptive bar to suits based upon a written contract under Article 1144 (1) of the Civil
Code.

SPOUSES PATRICIO and MYRNA BERNALES vs. HEIRS OF JULIAN
SAMBAAN
G.R. No. 163271
January 15, 2010

Facts:
Julian Sambaan Julian was the registered owner of a property certain property.
The respondents herein and the petitioner Myrna Bernales are the children of Julian and
Guillerma. Myrna, who is the eldest of the siblings, is the present owner and possessor
of the property in question.
In 1975, Julian was ambushed and was hospitalized due to a gunshot wound.
On April 11, 1975, Julian allegedly requested his children to gather so that he could
make his last two wishes.
o Julians first wish was for the children to redeem the subject property which was
mortgaged to Myrna and her husband Patricio Bernales (Patricio),
o His second wish was for his remains not to be brought to the house of Myrna at
Nazareth, Cagayan de Oro City.
In 1982, respondent Absalon Sambaan, one of Julians children, offered to redeem the
property but the petitioners refused because they were allegedly using the property as
tethering place for their cattle.
In January 1991, respondents received information that the property was already
transferred to petitioners name. Whereupon, they secured a copy of the Deed of
Absolute Sale dated December 7, 1970 which bore the signatures of their parents and
had it examined by NBI.
o The result of the examination revealed that the signatures of their parents, Julian
and Guillerma, were forged.

Issue:
Whether or not respondents cause of action had already been prescribed.

Held:
The supposed vendor's signature having been proved to be a forgery, the instrument is
totally void or inexistent as "absolutely simulated or fictitious" under Article 1409 of the Civil
Code. According to Article 1410, "the action or defense for the declaration of the inexistence of
a contract does not prescribe". The inexistence of a contract is permanent and incurable which
cannot be cured either by ratification or by prescription. Thus, Prescription did not bar
respondents action to recover ownership of the subject property.

B & I REALTY CO., INC., petitioner, vs. TEODORO CASPE
G.R. No. 146972
January 29, 2008

Facts:
Consorcia L. Venegas was the owner of a certain parcel of land.
o She delivered said title to, and executed a simulated deed of sale in favor of,
Datuin for purposes of obtaining a loan with the Rizal Commercial Banking
Corporation (RCBC).
o Datuin claimed that he had connections with the management of RCBC and
offered his assistance to Venegas in obtaining a loan from the bank. He issued a
receipt to the Venegases, acknowledging that the lot was to be used as a
collateral for bank financing and that the deed of sale was executed only as a
device to obtain the loan.
Datuin prepared a deed of absolute sale and, through forgery, made it appear that the
spouses Venegas executed the document in his favor. He was then able to have the TCT
transferred to his name. Consequently, TCT No. 247434 was cancelled and a new title,
TCT No. 377734, was issued to him by the register of deeds. Thereafter, he obtained a
loan from petitioner in the amount of P75,000 using the title of the property as
collateral for the loan. The mortgage was annotated at the back of the title.
Venegas learned of Datuin's fraudulent scheme when she sold the lot (subject of the
mortgage) to herein respondents for P160,000 in a deed of conditional sale. She, along
with her husband, instituted a complaint against Datuin in the then CFI for recovery of
property and nullification of TCT No. 377734, with damages. However, when the case
was called for pre-trial, the Venegases' counsel failed to appear and the complaint was
eventually dismissed without prejudice.
Thereafter, Venegas and her husband, respondents and Datuin entered into a
compromise agreement whereby the Venegases agreed to sell and transfer the property
to respondents with the condition that respondents would assume and settle Datuin's
mortgage debt to petitioner. The amount corresponding to the unpaid mortgage would
be deducted from the consideration.
As provided for in the agreement, Datuin executed a deed of absolute sale over the
property covered by TCT No. 377734 in favor of respondents.
On February 12, 1976, the respondents started paying their assumed mortgage
obligation to petitioner.
On August 27, 1980, Venegas brought a new action before the CFI for annulment of the
transfer of the property to Datuin and the declaration of nullity of all transactions
involving and annotated on TCT No. 377734, including the mortgage executed in favor
of petitioner, as well as the cancellation of the conditional deed of sale to respondents.

Issue
Whether or not the computation of the prescriptive period of the cause of action in this
case starts from the date when the cause of action accrues.

Held:
Although the deed of real estate mortgage and the promissory note executed by Datuin
expressly declared that the date of maturity of the loan was May 14, 1974 or one year after the
real estate mortgage was entered into between Datuin and petitioner, the same could not be
the reckoning point for purposes of counting the prescriptive period of the mortgage. This is
because Datuin and respondents executed a deed of absolute sale on October 30, 1975
whereby the latter acknowledged and assumed the mortgage obligation of the former in favor
of petitioner. Under Article 1155 of the Civil Code, the written acknowledgment and
assumption of the mortgage obligation by respondents had the effect of interrupting the
prescriptive period of the mortgage action.
A perusal of the evidence for the petitioner, as may be gleaned from the statement of
account of respondents prepared by petitioner itself, revealed that respondents made
payments to the former beginning February 12, 1976 up to January 14, 1980. No other
payments were made thereafter.
The Court have held in a number of cases that the computation of the prescriptive
period of any cause of action (the same as prescription of actions) starts from the date when
the cause of action accrues. Here, petitioner's cause of action accrued from the time
respondents stopped paying the mortgage debt they assumed from Datuin, in accordance with
Article 1151 of the Civil Code:
Art. 1151. The time for the prescription of actions which have for their object the
enforcement of obligations to pay principal with interest or annuity runs from the last payment
of the annuity or of the interest.
It was then that respondents committed a breach of duty to pay their remaining
obligation to the former. Thus, the ten-year prescriptive period should be reckoned from
January 14, 1980. Petitioner had until January 14, 1990 to file suit so that, when it sued on
August 27, 1993, the action had already prescribed.

Felicisima Mesina vs. Atty. Honorio Valisno Garcia
509 SCRA 431
November 27, 2009
Facts:
Atty. Honorio Valisno Garcia and Felicisima Mesina, during their lifetime, entered into a
Contract to Sell over a lot consisting of 235 square meters, situated at Diversion Road,
Sangitan, Cabanatuan City, covered and embraced by TCT No. T-31643 in the name of
Felicisima Mesina which title was cancelled and TCT No. T-78881 was issued in the
name of Atty. Honorio Valisno Garcia.
The Contract to sell provides that the cost of the lot is P70.00 per square meter for
a total amount of P16, 450.00; payable within a period not to exceed seven (7) years at
an interest rate of 12% per annum, in successive monthly installments of P260.85 per
month, starting May 1977. Thereafter, the succeeding monthly installments are to be
paid within the first week of every month, at the residence of the vendor at Quezon
City, with all unpaid monthly installments earning an interest of one percent (1%) per
month.
The Contract also stipulated, among others, that: Should the spouses Garcia fail to pay
five (5) successive monthly installments, Felicisima Mesina shall have a right to rescind
the Contract to Sell. All paid installments to be recomputed as rental for usage of lot
shall be at the rate of P100.00 a month and that Felicisima Mesina shall have the further
option to return the down payment and whatever balance spouses Garcia paid, thereby
rescinding the Contract to Sell. Upon rescission of the Contract to sell, spouses Garcia
agree to remove all the improvements built on the lot within three (3) months from
rescission of this contract, spouses Garcia shouldering all expenses of said removal.
Instituting this case at bar, respondent asserts that despite the full payment made on
February 7, 1984 for the consideration of the subject lot, petitioners refused to issue the
necessary Deed of Sale to effect the transfer of the property to her

Issue:
Whether respondents cause of action had already prescribed

Held:
The right of action of the respondent accrued on the date that the full and final payment of the
contract price was made. Accordingly, as the full payment of the purchase price on the subject
Contract to Sell had been effected on 7 February 1984 thus, respondent had from said date
until February 7, 1994 within which to bring an action to enforce the written contract, the
Contract to Sell. It was then the contention of the petitioners that when the respondent
instituted her Complaint for Specific Performance with Damages on 20 January 1997, the same
had already been barred by prescription. The contention of the petitioners is untenable.
Article 1155 of the Civil Code is explicit that the prescriptive period is interrupted when an
action has been filed in court; when there is a written extrajudicial demand made by the
creditors; and when there is any written acknowledgment of the debt by the debtor. Hence the
action has not yet prescribed.

























Heirs of Gaudiane vs. Court of Appeals
G.R NO. 119879
March 11,2004

Facts
On November 4, 1927, Felix executed a document entitled Escritura de Compra-
Venta (Escritura) whereby he sold to his sister Juana his one-half share in Lot No. 4156
covered by Transfer Certificate of Title No. 3317-A.
What muddled the otherwise clear contract of sale was a statement in the Escritura that
Lot No. 4156 was declared under Tax Declaration No. 18321. However, said tax
declaration was for another parcel of land, Lot 4389 and not Lot 4156.
Petitioners predecessors-in-interest, Geronimo and Ines Iso (the Isos), believed that the
sale by Felix to their mother Juana in 1927 included not only Lot4156 but also Lot 4389.
In 1974, they filed a pleading in the trial court seeking to direct the Register of Deeds of
Dumaguete City to cancel OCT 2986-A covering Lot 4389 and to issue a new title in favor
of the Isos. This was later withdrawn after respondents predecessors-in-interest,
Procopio Gaudiane and Segundo Gaudiane, opposed it on the ground that the Isos
falsified their copy of the Escritura by erasing Lot 4156 and intercalating in its place
Lot 4389.
Petitioners predecessors-in-interest, Geronimo and Ines Iso (the Isos), believed that the
sale by Felix to their mother Juana in 1927 included not only Lot4156 but also Lot 4389.
In 1974, they filed a pleading in the trial court seeking to direct the Register of Deeds of
Dumaguete City to cancel OCT 2986-A covering Lot 4389 and to issue a new title in favor
of the Isos. This was later withdrawn after respondents predecessors-in-interest,
Procopio Gaudiane and Segundo Gaudiane, opposed it on the ground that the Isos
falsified their copy of the Escritura by erasing Lot 4156 and intercalating in its place
Lot 4389.
The Isos again tried their luck to acquire title in their name by filing in 1975 a case for
quieting of title of Lot 4389 but the same was dismissed without prejudice.
The Isos later filed another action for quieting of title, docketed as Civil Case No. 6817,
but it was again dismissed
Issue
Whether the respondents lost by prescription their right to their share in the lot
Held
Petitioners argue that they acquired Felix share in the lot in question through prescription and
laches. As a general rule, ownership over titled property cannot be lost through
prescription.
[12]
Petitioners, however, invoke our ruling in Tambot vs. Court of Appeals
[13]
which
held that titled property may be acquired through prescription by a person who possessed the
same for 36 years without any objection from the registered owner who was obviously guilty of
laches.
Petitioners claim is already rendered moot by our ruling barring petitioners from raising the
defense of exclusive ownership due to res judicata. Even assuming arguendo that petitioners
are not so barred, their contention is erroneous. A title, once registered, could not be defeated
even by adverse, open and notorious possession. Laches did not also set in because, when
petitioners repudiated the respondents share in the second case for quieting of title, the latter
immediately opposed the move. They were therefore never negligent in pursuing their rights.




















Menandro Laureano vs CA
Gr No. 114776
February 2, 2002

Facts
Sometime in 1978, Laureano was employed on a contractual basis for two years as
an expatriate B-707 Captain by defendant company Singapore Airlines.
His first term was then extended for two years. However, defendant was hit by a
recession and initiated a cost cutting measure.
Plaintiff was advised to take advance leave. Realizing that the recession would not
be for a short time, Singapore airlines decided to terminate its excess personnel
including plaintiff.
Laureano instituted a case and claim for damages due to illegal termination of
contract of services before the court a quo
Singapore airlines filed a motion to dismiss alleging iner alia tahat the court has no
jurisdiction over the subject matter of the case and that Philiipine courts have no
jurisdiction over the case. The defendant postulated that Singapore laws should
apply
Issue
Whether or not the contract in question prescribes in ten years under Article 1144 of the New
Civil Code or in four years under Article 1146 of the same Code

Held
In illegal dismissal, it is settled, that the ten-year prescriptive period fixed in Article 1144 of the
Civil Code may not be invoked by petitioners, for the Civil Code is a law of general application,
while the prescriptive period fixed in Article 292 of the Labor Code [now Article 291] is a
SPECIAL LAW applicable to claims arising from employee-employer relations.






Banco Filipino Savings vs Court of Appeals
GR No. 129227
May 30, 2000
Facts
Elsa Arcilla and her husband, Calvin Arcilla, the Appellees in the present recourse,
secured, on three (3) occasions, loans from the Banco Filipino Savings and Mortgage
Bank, the Appellant in the present recourse, in the total amount of P107,946.00 as
evidenced by "Promissory Note
To secure the payment of said loans, the Appellees executed "Real Estate Mortgages" in
favor of the Appellants over their parcels of land
Under said deeds, the Appellant may increase the rate of interest, on said loans, within
the limits allowed by law, as Appellants Board of Directors may prescribe for its
borrowers.
In the meantime, the Skyline Builders, Inc., through its President, Appellee Calvin Arcilla,
secured loans from the Bank of the Philippine Islands in the total amount of
P450,000.00. To insure payment of the aforesaid loan, the FGU Insurance Corporation,
issued PG Bond No. 1003 for the amount of P225,000.00 in favor of the Bank of the
Philippine Islands. Skyline Buildings, Inc., and the Appellees executed an "Agreement of
Counter-Guaranty with Mortgage" in favor of the FGU Insurance Corporation covering
the aforesaid parcels of land to assure payment
The Appellees failed to pay their monthly amortizations to Appellant. The latter
forthwith filed, on April 3, 1979, a petition, with the Provincial Sheriff, for the
extrajudicial foreclosure of Appellees "Real Esate Mortgage" in favor of the Appellant
for the amount of P342,798.00 inclusive of the 17% per annum which purportedly was
the totality of Appellees account with the Appellant on their loans.
The Appellant was the purchaser of the property at public auction for the aforesaid
amount of P324,798.00. On May 25, 1979, the Sheriff executed a "Certificate of Sale"
over the aforesaid properties
On September 2, 1985, the Appellees filed a complaint in the Court a quo for the
"Annulment of the Loan Contracts, Foreclose Sale with Prohibition and Injunction, Etc."
The Appellees averred that the loan contracts and mortgages between the Appellees
and the Appellant were null and void
Issue
Whether or not the filing of the complaint for annulment of the contracts was already barred
by prescription
Held
Petitioners claim that the action of the private respondents have prescribed is bereft of merit.
Under Article 1150 of the Civil Code, the time for prescription of all kinds of action where there
is no special provision which ordains otherwise shall be counted from the day they may be
brought. Thus the period of prescription of any cause of action is reckoned only from the date
of the cause of action accrued. The period should not be made to retroact to the date of the
execution of the contract, but from the date they received the statement of account showing
the increased rate of interest, for it was only from the moment that they discovered the
petitioners unilateral increase thereof.
























MARIA VDA. DE DELGADO vs. COURT OF APPEALS
GR No. 125728
August 28, 2001
Facts
Delgado was the absolute owner of a parcel of land with an area of 692,549 square
meters, situated in the Municipality of Catarman, Samar. On October 5, 1936, said
Carlos Delgado granted and conveyed, by way of donation or gift with quitclaim, all his
rights, title, interest, claim and demand over a portion of said land consisting of 165,000
square meters in favor of the Commonwealth of the Philippines or its successors.
Acceptance
3
was made by then President Manuel L. Quezon in his capacity as
Commander-in-Chief of the Philippine Army
The condition of the donation was the land shall be for the exclusive benefit of the
Commonwealth of the Philippines to be used as military reservation for training cadres
or for such other uses of the Philippine Army as the Commander-in-Chief or Chief of
Staff thereof may determine, provided that when the Commonwealth of the Philippines
no longer needs this parcel of land for any military purposes, then said land shall
automatically revert to the donor or its heirs or assigns.
The said parcel of land then covered by the Torrens System of the Philippines and was
registered in the name of Commonwealth of the Philippines for a period of 40 years. The
land was registered under TCT 0-2539-160 in favor of the Commonwealth however
without any annotation.
Upon declaration of independence on July 4, 1946, the Commonwealth of the
Philippines passed out of existence. It was replaced by the existing Republic of the
Philippines, which took over the subject land and turned portions of it over to the then
Civil Aeronautics Administration (CAA), later renamed Bureau of Air Transportation
Office (ATO)
The said agency utilizes the said land a domestic airport.
Jose Delgado filed a petition for reconveyance for a violation of the condition. The RTC
ruled in favor of the plaintiff Delgado. But the CA reversed the said decision because of
prescription. The petitioner filed only before 24 years o discovery which the law only
requires 10 years of filing.
Issue
Whether or not the petitioners action for reconveyance is already barred by prescription.
Held
Under Article 1144 of the Civil Code on Prescription based on written contracts, the filing of
action for reconveyance is within 10 years from the time the condition in the Deed of Donation
was violated. The petitioner herein filed only 24 years in the first action and 43 years in the
second filing of the 2nd action.

The action for reconveyance on the alleged excess of 33, 607 square meter mistakenly included
in the title was also prescribed Article 1456 of the Civil Code states, if property is acquired
through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an
implied trust for the benefits of the person from whom the property comes, if within 10 years
such action for reconveyance has not been executed.























Josefa Maestrado vs. CA
GR No. 133345
March 9, 2000
Facts
These consolidated cases involve the status of Lot No. 5872 and the rights of the
contending parties thereto. The said lot which has an area of 57.601 square meters,
however, is still registered in the name of the deceased spouses Ramon and Rosario
Chaves. The spouses Ramon and Rosario died intestate in 1943 and 1944,
respectively. They were survived by the following heirs, namely: Carmen Chaves-
Abaya, Josefa Chaves-Maestrado, Angel Chaves, Amparo Chaves-Roa, Concepcion
Chaves-Sanvictores and Salvador Chaves.
To settle the estate of the said deceased spouses, Angel Chaves initiated intestate
proceedings and was appointed administrator of said estates in the process.
. An inventory of the estates was made and thereafter, the heirs agreed on a project
partition.
Significantly, Lot No.5872 was not included in a number of documents. Parties
offered different explanations as to the omission of said lot in the documents.
Petitioners maintain the existence of an oral partition agreement entered into by all
heirs after the death of their parents.
To set things right, petitioners then prepared a quitclaim to confirm the alleged oral
agreement. Respondents dispute voluntariness of their consent to the quitclaims.
The trial court considered Lot No. 5872 as still a common property and therefore
must be divided into six parts, there being six heirs.
Petitioners appealed to the Court of Appeals which sustained the decision of the
trial court.
Issue
Whether or not the action for quieting of title had already prescribed.
Ruling
The Supreme Court ruled that an action for quieting of title is imprescriptible especially if the
plaintiff is in possession of the property being litigated. One who is in actual possession of a
land, claiming to be the owner thereof may wait until his possession is disturbed or his title is
attacked before making steps to vindicate his right because his undisturbed possession gives
him a continuing right to seek the aid of the courts to ascertain the nature of the adverse claim
and its effect on his title. Moreover, the Court held that laches is inapplicable in this case. This is
because, as mentioned earlier, petitioners possession of the subject lot has rendered their
right to bring an action for quieting of title imprescriptible.
F.A.T. KEE COMPUTER SYSTEMS vs. ONLINE NETWORKS
INTERNATIONAL
GR NO. 171238
FEBRUARY 2, 2011

Facts
Petitioner F.A.T. Kee Computer Systems, Inc. (FAT KEE) is a domestic corporation
engaged in the business of selling computer equipment and conducting maintenance
services for the units it sold.
ONLINE is also a domestic corporation principally engaged in the business of selling
computer units, parts and software.
ONLINE filed a Complaint
[4]
for Sum of Money against FAT KEE
ONLINE alleged that sometime in November 1997, it sold computer printers to FAT KEE
for which the latter agreed to pay the purchase price ofUS$136,149.43.
The agreement was evidenced by Invoice receipts containing a stipulation that interest
at 28% per annum is to be charged on all accounts overdue and an additional sum
equal to 25% of the amount will be charged by vendor for attorneys fees plus cost of
collection in case of suit
It was further asserted in the Complaint that thereafter, FAT KEE, through its President
Frederick Huang, Jr., offered to pay its US dollar obligations in Philippine pesos using the
exchange rate of P40:US$1. ONLINE claimed to have duly accepted the offer.
FAT KEE then made several payments amounting to P2,502,033.06 between the periods
of March and May 1998. As of May 12, 1998, the balance of FAT KEE purportedly
amounted to P2,943,944.14. As the obligations of FAT KEE matured in December 1997,
ONLINE applied the 28% interest on the unpaid amount. However, in view of the good
business relationship of the parties, ONLINE allegedly applied the interest on the
balance for a period of three months only. Thus, the total amount due, plus interest,
was P3,012,636.17. FAT KEE subsequently made additional payments in the amount
of P2,256,541.12. A balance of P756,095.05, thus, remained according to ONLINEs
computations. Despite repeated demands, FAT KEE failed to pay its obligations to
ONLINE without any valid reason
FAT KEE duly answered the complaint alleging, inter alia, that it did not reach an
agreement with ONLINE for the payment of its obligations in US dollars. FAT KEE
claimed that the invoice receipts of the computer printers, which quoted the purchase
price in US dollars, were unilaterally prepared by ONLINE. While FAT KEE admitted that
it offered to pay its obligations in Philippine pesos, it averred that the amount owing to
ONLINE was only P5,067,925.34
Issue
Whether or not estoppel may be invoked against ONLINE as FAT KEE did not act or rely on the
representations in the SOA
Held
Estoppel, an equitable principle rooted in natural justice, prevents persons from going
back on their own acts and representations, to the prejudice of others who have relied
on them. The principle is codified in Article 1431 of the Civil Code, which provides:
Through estoppel, an admission or representation is rendered conclusive upon
the person making it and cannot be denied or disproved as against the person
relying thereon.

Estoppel can also be found in Rule 131, Section 2 (a) of the Rules of Court, viz:

Sec. 2. Conclusive presumptions. The following are instances of conclusive
presumptions:

(a) Whenever a party has by his own declaration, act or omission,
intentionally and deliberately led another to believe a particular thing true, and
to act upon such belief, he cannot, in any litigation arising out of such
declaration, act or omission be permitted to falsify it.

The elements of estoppel are: first, the actor who usually must have knowledge, notice
or suspicion of the true facts, communicates something to another in a misleading way,
either by words, conduct or silence; second, the other in fact relies, and relies
reasonably or justifiably, upon that communication;third, the other would be harmed
materially if the actor is later permitted to assert any claim inconsistent with his earlier
conduct; and fourth, the actor knows, expects or foresees that the other would act upon
the information given or that a reasonable person in the actor's position would expect
or foresee such action.
FAT KEE cannot invoke estoppel against ONLINE for the latters issuance of the SOA on
December 9, 1997. The Court agrees with the Court of Appeals ruling that any
misconception on the part of FAT KEE engendered by the issuance of the SOA should
have already been rectified when the parties subsequently met on January 15, 1998.


Tanay Recreation vs Catalina Fausto
G.R. No. 140182
April 12, 2005
Facts
Petitioner Tanay Recreation Center and Development Corp. (TRCDC) is the lessee of a
3,090-square meter property owned by Catalina Matienzo Fausto. On this property
stands the Tanay Coliseum Cockpit operated by petitioner. The lease contract provided
for a 20-year term, subject to renewal within sixty days prior to its expiration. The
contract also provided that should Fausto decide to sell the property, petitioner shall
have the priority right to purchase the same.
Petitioner wrote Fausto informing her of its intention to renew the lease.
[3]
However, it
was Faustos daughter, respondent Anunciacion F. Pacunayen, who replied, asking that
petitioner remove the improvements built thereon, as she is now the absolute owner of
the property.
Despite efforts, the matter was not resolved. Hence, on September 4, 1991, petitioner
filed an Amended Complaint for Annulment of Deed of Sale, Specific Performance with
Damages, and Injunction.
In her Answer, respondent claimed that petitioner is estopped from assailing the validity
of the deed of sale as the latter acknowledged her ownership when it merely asked for a
renewal of the lease. According to respondent, when they met to discuss the matter,
petitioner did not demand for the exercise of its option to purchase the property, and it
even asked for grace period to vacate the premises.
Issue
What are the elements of estoppel?
Held
The essential elements of estoppel are: (1) conduct of a party amounting to false
representation or concealment of material facts or at least calculated to convey the impression
that the facts are otherwise than, and inconsistent with, those which the party subsequently
attempts to assert; (2) intent, or at least expectation, that this conduct shall be acted upon by,
or at least influence, the other party; and (3) knowledge, actual or constructive, of the real
facts.




Danilo Mendoza vs CA
GR No. 116710
June 25, 2001
Facts
Petitioner Danilo D. Mendoza is engaged in the domestic and international trading of
raw materials and chemicals. He operates under the business name Atlantic Exchange
Philippines (Atlantic). Sometime in 1978 he was granted by respondent Philippine
National Bank (PNB) a P500,000.00 credit line and a P1,000,000.00 Letter of
Credit/Trust Receipt (LC/TR) line.
As security for the credit petitioner mortgaged to respondent PNB the following: 1) 3
parcels of land with improvements 2) his house and lot in Quezon City; and 3) several
pieces of machinery and equipment in his Pasig coco-chemical plant.
The REM for an escalation clause that rate of interest be charged on the obligation
secured shall be subject to an increase of 12% per annum until paid.
Then, PNB advised Mendoza that the bank raised its interest rate
Two promissory notes were signed by Mendoza and his wife. They aver that respondent
allegedly inserted in the first promissory note an interest rate of 21% instead of 18%
covering the principal amount and on the second promissory note the interest of 18%
instead of 12% representing accrued interest.
On March 9, 1981, Branch Manager Fil S. Carreon Jr wrote a letter to respondent PNB
requesting for the restructuring of his past due accounts into a five-year term loan and
for an additional LC/TR line of P2,000,000.00.
In a letter dated July 2, 1982, petitioner offered the following revised proposals to
respondent bank: 1) the restructuring of past due accounts including interests and
penalties into a 5-year term loan, payable semi-annually with one year grace period on
the principal; 2) payment of P400,000.00 upon the approval of the proposal; 3)
reduction of penalty from 3% to 1%; 4) capitalization of the interest component with
interest rate at 16% per annum; 5) establishment of a P1,000,000.00 LC/TR line against
the mortgaged properties; 6) assignment of all his export proceeds to respondent bank
to guarantee payment of his loans.
According to petitioner, respondent PNB approved his proposal. He further claimed
that he and his wife were asked to sign two (2) blank promissory note forms. According
to petitioner, they were made to believe that the blank promissory notes were to be
filled out by respondent PNB to conform with the 5-year restructuring plan allegedly
agreed upon
Issue
Whether or not Estoppel will lie against the petitioner regarding the increase in the stipulated
interest on the subject Promissory Notes.
Held
An estoppel may arise from the making of a promise, even though without consideration, if it
was intended that the promise should be relied upon and in fact it was relied upon, and if a
refusal to enforce it would be virtually to sanction the perpetration of fraud or would result in
other injustice. In this respect, the reliance by the promisee is generally evidenced by action or
forbearance on his part, and the idea has been expressed that such action or forbearance
would reasonably have been expected by the promissor.
The doctrine of promissory estoppel is an exception to the general rule that a promise of future
conduct does not constitute an estoppel. In some jurisdictions, in order to make out a claim of
promissory estoppel, a party bears the burden of establishing the following elements: (1) a
promise reasonably expected to induce action or forebearance; (2) such promise did in fact
induce such action or forebearance, and (3) the party suffered detriment as a result.
A cause of action for promissory estoppel does not lie where an alleged oral promise was
conditional, so that reliance upon it was not reasonable.
[21]
It does not operate to create
liability where it does not otherwise exist. Estoppel will not lie against the petitioner regarding
the increase in the stipulated interest on the subject Promissory Notes Nos. 127/82 and 128/82
inasmuch as he was not even informed beforehand by respondent bank of the change in the
stipulated interest rates.














Jefferson Lim vs. Queensland Tokyo
GR No. 136031
January 4, 2002
Facts
Sometime in 1992, Benjamin Shia, a market analyst and trader of Queensland, was
introduced to petitioner Jefferson Lim by Marissa Bontia,
[3]
one of his
employees. Marissas father was a former employee of Lims father. Shia suggested that
Lim invest in the Foreign Exchange Market, trading U.S. dollar against the Japanese yen,
British pound, Deutsche Mark and Swiss Franc.
Before investing, Lim requested Shia for proof that the foreign exchange was really
lucrative. They conducted mock tradings without money involved. As the mock trading
showed profitability, Lim decided to invest with a marginal deposit of US$5,000 in
managers check. It was made to apply to any authorized future transactions, and
answered for any trading account against which the deposit was made, for any loss of
whatever nature, and for all obligations, which the investor would incur with the broker.
Petitioner Lim was then allowed to trade with respondent company which was coursed
through Shia by virtue of the blank order forms.
During the first day of trading or on October 22, 1992, Lim made a net profit
of P6,845.57. He agreed to continue trading. During the second day of trading or
on October 23, 1992, they lost P44,465.
Meanwhile, on October 22, 1992, respondent learned that it would take seventeen (17)
days to clear the managers check given by petitioner. Hence, onOctober 23, 1992, at
about 11:00 A.M., upon managements request, Shia returned the check to petitioner
who informed Shia that petitioner would rather replace the managers check with a
travelers check.
Later, the travelers check was deposited with Citibank.
Shia informed petitioner that they incurred a floating loss of P44,695. Citibank informed
respondent that the travelers check could not be cleared unless it was duly signed by
Lim, the original purchaser of the travelers check. A Miss Arajo, from the accounting
staff of Queensland, returned the check to Lim for his signature. He demanded for a
liquidation of his account and said he would get back what was left of his investment.
Respondent asked Shia to talk to petitioner for a settlement of his account but
petitioner refused to talk with Shia. Shia made follow-ups for more than a week
beginning October 27, 1992. Because petitioner disregarded this request, respondent
was compelled to engage the services of a lawyer, who sent a demand letter to
petitioner. This letter went unheeded. Thus, respondent filed a complaint against
petitioner.
Issue
Whether or not petitioner is estopped from questioning the validity of the Customers
Agreement that he signed.
Held
The essential elements of estoppel are: (1) conduct of a party amounting to false
representation or concealment of material facts or at least calculated to convey the impression
that the facts are otherwise than, and inconsistent with, those which the party subsequently
attempts to assert; (2) intent, or at least expectation, that this conduct shall be acted upon by,
or at least influence, the other party; and (3) knowledge, actual or constructive, of the real
facts.
Here, it is uncontested that petitioner had in fact signed the Customers Agreement in the
morning of October 22, 1992, knowing fully well the nature of the contract he was entering
into. The Customers Agreement was duly notarized and as a public document it is evidence of
the fact, which gave rise to its execution and of the date of the latter. Next, petitioner paid his
investment deposit to respondent in the form of a managers check in the amount of US$5,000
as evidenced by PCI Bank Managers Check No. 69007, dated October 22, 1992. All these
are indicia that petitioner treated the Customers Agreement as a valid and binding contract.
More significantly, petitioner already availed himself of the benefits of the Customers
Agreement whose validity he now impugns. As found by the CA, even before petitioners initial
marginal deposit (in the form of the PCI managers check dated October 22, 1992) was
converted into cash, he already started trading on October 22, 1992, thereby making a net
profit of P6,845.57. On October 23, he continued availing of said agreement, although this time
he incurred a floating loss of P44,645. While he claimed he had not authorized respondent to
trade on those dates, this claim is belied by his signature affixed in the order forms.
Clearly, by his own acts, petitioner is estopped from impugning the validity of the Customers
Agreement. For a party to a contract cannot deny the validity thereof after enjoying its benefits
without outrage to ones sense of justice and fairness.









Placewell International vs. Ireneo Camote
G.R. NO. 169973
JUNE 26, 2006
Facts
Placewell International Services Corporation (PISC) deployed respondent Ireneo B.
Camote to work as building carpenter for SAAD Trading and Contracting Co. (SAAD) at
the Kingdom of Saudi Arabia (KSA) for a contract duration of two years, with a
corresponding salary of US$370.00 per month.
At the job site, respondent was allegedly found incompetent by his foreign employer;
thus the latter decided to terminate his services. However, respondent pleaded for his
retention and consented to accept a lower salary of SR 800.00 per month. Thus, SAAD
retained respondent until his return to the Philippines two years after.
Respondent filed a sworn Complaint
4
for monetary claims against petitioner alleging he
and his fellow Filipino workers were required to sign another employment contract
written in Arabic, that for the entire duration of the new contract, he received only SR
590.00 per month; that he was not given his overtime pay despite rendering nine hours
of work everyday.
Issue
Whether or not respondent is guilty of laches.
Held
Petitioners contention that respondent is guilty of laches is without basis. Laches has been
defined as the failure of or neglect for an unreasonable and unexplained length of time to do
that which by exercising due diligence, could or should have been done earlier, or to assert a
right within reasonable time, warranting a presumption that the party entitled thereto has
either abandoned it or declined to assert it. Thus, the doctrine of laches presumes that the
party guilty of negligence had the opportunity to do what should have been done, but failed to
do so. Conversely, if the said party did not have the occasion to assert the right, then, he can
not be adjudged guilty of laches. Laches is not concerned with the mere lapse of time, rather,
the party must have been afforded an opportunity to pursue his claim in order that the delay
may sufficiently constitute laches.
The doctrine of laches is based upon grounds of public policy which requires, for the peace of
society, the discouragement of stale claims, and is principally a question of the inequity or
unfairness of permitting a right or claim to be enforced or asserted. There is no absolute rule as
to what constitutes laches; each case is to be determined according to its particular
circumstances. The question of laches is addressed to the sound discretion of the court, and
since it is an equitable doctrine, its application is controlled by equitable considerations. It
cannot be worked to defeat justice or to perpetrate fraud and injustice.
In the instant case, respondent filed his claim within the three-year prescriptive period for the
filing of money claims set forth in Article 291 of the Labor Code from the time the cause of
action accrued. Thus, we find that the doctrine of laches finds no application in this case.


Heirs of Ragua vs. CA
GR No. 88521-22
January 31. 2000
Facts
Eulalio Ragua, claiming to be the registered owner, together with co-owners Anatalio B.
Acua, Catalina Dalawantan, and other co-owners, filed a petition for reconstitution of
(OCT) No. 632 of the Registry of Deeds of Rizal, covering a parcel of land with an area of
4,399,322 square meters.
On September 9, 1964, J. M. Tuason & Co., Inc. (Tuason) filed an opposition to the
petition alleging that OCT No. 632 was fictitious and the land was covered by TCT No.
1356 in the name of Peoples Homesite and Housing Corporation (PHHC).
The People Homesite and Housing Corporation (PHHC), later succeeded by the National
Housing Authority (NHA), filed with the same trial court its opposition to Raguas
petition for reconstitution of OCT No. 632. PHHC averred that Raguas petition did not
comply with the requirements of the law on judicial reconstitution. PHHC likewise
contended that OCT No. 632 in the name of Eulalio Ragua was fictitious, and that the
property was covered by TCT No. 1356 in the name of PHHC.
Petitioner Eulalio Ragua filed with another court another petition for reconstitution of
OCT No. 632, G. L. R. O. No. 7984.
In sum, the petition for reconstitution filed by Eulalio Ragua was opposed by several
parties, to wit: the Tuasons, the National Housing Authority (formerly PHHC),
Department of National Defense, Department of Agriculture and Natural Resources,
Parks and Wildlife, Philippine American Life Insurance Company, et. al., among other
parties, which claimed to have purchased portions of the Diliman Estate from the
Tuasons.
Rtc ruled in favor of the raguas. In due time, oppositors, including the Republic, filed
with the trial court a motion for reconsideration of the decision. The Republic appealed
the trial courts decision to the Court of Appeals. The Court of Appeals held that the trial
court had no jurisdiction over the petition for reconstitution for failure to comply with
the jurisdictional requirements of publication and posting of notices.
on March 24, 1980, the Court of First Instance of Rizal, Quezon City rendered decision in
favor of Ragua, ordering the Register of Deeds, Quezon City, to reconstitute OCT 632 in
the name of Ragua.
On October 28, 1980, petitioners filed with the Court of First Instance, Quezon City a
motion for execution of the judgment rendered by it, contending that the judgment had
become final after the Register of Deeds and Land Registration Commission failed to file
an appeal within the prescribed period. On January 5, 1981, the trial court denied the
motion for execution and approved the record on appeal filed by the Republic of the
Philippines.
In the course of this controversy, portions of the contested property had been the
subject of sales to different persons, some of whom moved to intervene in the cases, or
t
On October 7, 1997, the surviving heirs of Eulalio Ragua, assisted by judicial
administratrix Norma G. Aquino, filed with this Court a manifestation offering to
execute deeds of donations in favor of the government and its instrumentalities, of all
portions of the real property actually occupied by offices performing governmental
functions, including roads and parking areas
Issue
Whether or not petitioners were guilty of laches since it took them 19 years to file a petition for
reconstitution
Ruling
Petitioners filed the petition for reconstitution of OCT 632 nineteen (19) years after the title
was allegedly lost or destroyed. We thus consider petitioners guilty of laches. Laches is
negligence or omission to assert a right within a reasonable time, warranting the presumption
that the party entitled to assert it either has abandoned or declined to assert it.










Metropolitan Bank vs Court of Appeals
GR No. 88866
February 18, 1991
Facts
The Metropolitan Bank and Trust Co. is a commercial bank with branches throughout
the Philippines and even abroad. Golden Savings and Loan Association was, at the time
these events happened, operating in Calapan, Mindoro, with the other private
respondents as its principal officers.
Eduardo Gomez opened an account with Golden Savings and deposited over a period of
two months 38 treasury warrants with a total value of P1,755,228.37. They were all
drawn by the Philippine Fish Marketing Authority and purportedly signed by its General
Manager and countersigned by its Auditor.
On various dates between June 25 and July 16, 1979, all these warrants were
subsequently indorsed by Gloria Castillo as Cashier of Golden Savings and deposited to
its Savings Account No. 2498 in the Metrobank branch in Calapan, Mindoro. They were
then sent for clearing which forwarded them to the Bureau of Treasury for special
clearing.
Accordingly, Gomez was meanwhile not allowed to withdraw from his account.
Metrobank informed Golden Savings that 32 of the warrants had been dishonored by
the Bureau of Treasury on July 19, 1979, and demanded the refund by Golden Savings of
the amount it had previously withdrawn, to make up the deficit in its account.
Issue
Whether or not Metrobank was negligence.
Held
Metrobank was indeed negligent in giving Golden Savings the impression that the treasury
warrants had been cleared and that, consequently, it was safe to allow Gomez to withdraw the
proceeds thereof from his account with it. Without such assurance, Golden Savings would not
have allowed the withdrawals; with such assurance, there was no reason not to allow the
withdrawal. Indeed, Golden Savings might even have incurred liability for its refusal to return
the money that to all appearances belonged to the depositor, who could therefore withdraw it
any time and for any reason he saw fit.
Metrobank exhibited extraordinary carelessness. The amount involved was not trifling more
than one and a half million pesos (and this was 1979). There was no reason why it should not
have waited until the treasury warrants had been cleared; it would not have lost a single
centavo by waiting. Yet, despite the lack of such clearance and notwithstanding that it had
not received a single centavo from the proceeds of the treasury warrants, as it now repeatedly
stresses it allowed Golden Savings to withdraw not once, not twice, but thrice from
the uncleared treasury warrants.



















Spouses Manuel vs. CA
GR No. 153652
February 1, 2001
Facts
Salome, Consorcia, Alfredo, Maria, Rosalia, Jose, Quirico and Julita, all surnamed
Bornales, were the original co-owners of Lot 162 of the Cadastral Survey of Pontevedra,
Capiz under Original Certificate of Title No. 18047.
Salome sold part of her 4/16 share in Lot 162 for P200.00 to Soledad Daynolo. In the
Deed of Absolute Sale signed by Salome and two other co-owners, Consorcia and
Alfredo, the portion of Lot 162 sold to Soledad
Thereafter, Soledad Daynolo immediately took possession of the land described above
and built a house thereon. A few years later, Soledad and her husband, Simplicio
Distajo, mortgaged the subject portion of Lot 162 as security for a P400.00 debt to Jose
Regalado, Sr.
Simplicio Distajo, heir of Soledad Daynolo who had since died, paid the mortgage debt
and redeemed the mortgaged portion of Lot 162 from Jose Regalado, Sr. The heirs sold
the redeemed portion of Lot 162 for P1,500.00 to herein petitioners, the spouses
Manuel Del Campo and Salvacion Quiachon.1wphi1.n
Meanwhile, Jose Regalado, Sr. caused the reconstitution of Original Certificate of Title
No. 18047. The reconstituted OCT No. RO-4541 initially reflected the shares of the
original co-owners in Lot 162. However, title was transferred later to Jose Regalado, Sr.
who subdivided the entire property into smaller lots, each covered by a respective title
in his name.
Petitioners Manuel and Salvacion del Campo brought this complaint for "repartition,
resurvey and reconveyance" against the heirs of the now deceased Jose Regalado, Sr.
Petitioners claimed that they owned an area of 1,544 square meters located within Lot
162-C-6 which was erroneously included in TCT No. 14566 in the name of Regalado.
Petitioners alleged that they occupied the disputed area as residential dwelling ever
since they purchased the property from the Distajos
Issue
Whether or not Regalado is estopped from denying the right and title to the spouses Manuel.
Held
Respondents are estopped from asserting that they own the subject land in view of the Deed of
Mortgage and Discharge of Mortgage executed between Regalado and petitioners
predecessor-in-interest. As petitioners correctly contend, respondents are barred from making
this assertion under the equitable principle of estoppel by deed, whereby a party to a deed and
his privies are precluded from asserting as against the other and his privies any right or title in
derogation of the deed, or from denying the truth of any material fact asserted in it. A perusal
of the documents evidencing the mortgage would readily reveal that Soledad, as mortgagor,
had declared herself absolute owner of the piece of land now being litigated. This declaration of
fact was accepted by Regalado as mortgagee and accordingly, his heirs cannot now be
permitted to deny it.






















Miguel Cuenco vs. Concepcion cuenco
GR No. 149884
October 13, 2004
Facts
On September 19, 1970, the respondent filed the initiatory complaint herein for
specific performance against her uncle, Miguel Cuenco which averred, inter alia that
her father, the late Don Mariano Jesus Cuenco and said petitioner formed the
Cuenco and Cuenco Law Offices
That on or around August 4, 1931, the Cuenco and Cuenco Law Offices served as
lawyers in 2 cases entitled Valeriano Solon versus Zoilo Solon and Valeriano Solon
versus Apolonia Solon involving a dispute among relatives over ownership of lot 903
of the Banilad Estate
That at the time of distribution of said three (3) lots, w in Manila, and so he
entrusted his share (Lot 903-A) to his brother law partner (petitioner); that on
September 10, 1938, petitioner was able to obtain in his own name a title for Lot
903-A
On June 3, 1966, the petitioner wrote a letter petitioning the Register of Deeds of
Cebu to transfer Lot 903-A-6 to his name on the ground that Lot 903-A-6 is a portion
of Lot 903-A
That on April 6, 1967, respondent requested the Register of Deeds to annotate an
affidavit of adverse claim against the [petitioners] TCT RT-6999 (T-21108) which
covers Lot 903-A
Issue:
Whether or not the Court of Appeals erred in not finding that even where implied trust is
admitted to exist the respondents action for relief is barred by laches and prescription.
Held
Laches is negligence or omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to it has either abandoned or declined to assert it. In the
present case, respondent has persistently asserted her right to Lot 903-A-6 against petitioner.
Concepcion was in possession as owner of the property from 1949 to 1969. When Miguel took
steps to have it separately titled in his name, despite the fact that she had the owners
duplicate copy of TCT No. RT-6999 -- the title covering the entire Lot 903-A -- she had her
adverse claim annotated on the title in 1967. When petitioner ousted her from her possession
of the lot by tearing down her wire fence in 1969, she commenced the present action on
September 19, 1970, to protect and assert her rights to the property. We find that she cannot
be held guilty of laches, as she did not sleep on her rights.

Spouses Hanopol vs SM
GR No. 137774
October 4, 2002
Facts:
Shoemart, Inc. is a corporation duly organized and existing under the laws of the
Philippines engaged in the operation of department stores. On December 4, 1985,
Shoemart, through its Executive Vice-President, Senen T. Mendiola, and spouses Manuel
R. Hanopol and Beatriz T. Hanopol executed a Contract of Purchase on Credit.
Under the terms of the contract, Shoemart extended credit accommodations, in the
amount of P300,000.00 for purchases on credit made by holders of SM Credit Card
issued by spouses Hanopol for one year, renewable yearly thereafter. Spouses Hanopol
were given a five percent (5%) discount on all purchases made by their cardholders,
deductible from the semi-monthly payments to be made to Shoemart by spouses
Hanopol.
For failure of spouses Hanopol to pay the principal amount of P124,571.89 as of October
6, 1987, Shoemart instituted extrajudicial foreclosure proceedings against the
mortgaged properties.
Spouses Hanopol alleged that Shoemart breached the contract when the latter failed to
furnish them with the requisite documents by which the formers liability shall be
determined, namely: charge invoices, purchase booklets and purchase journal, as
provided in their contract; that without the requisite documents, spouses Hanopol had
no way of knowing that, in fact, they had already paid, even overpaid, whatever they
owed to Shoemart; that despite said breach, Shoemart even had the audacity to apply
for extrajudicial foreclosure with the Sheriff.
Issue:
Whether or not Shoemart acted with manifest bad faith in pursuing with the foreclosure and
auction sale of the property of spouses Hanopol should be held liable for damages.
Ruling:
All the three (3) elements for litis pendentia as a ground for dismissal of an action are present,
namely: (a) identity of parties, or at least such parties who represent the same interest in both
actions; (b) identity of rights asserted and relief prayed for, the relief being founded on the
same facts; and (c) the identity, with respect to the two (2) preceding particulars in the two (2)
cases, in such that any judgment that may be rendered in the pending case, regardless of which
party is successful, would amount to res judicata in the other.
In the case at bench, the parties are the same; the relief sought in the case before the Court of
Appeals and the trial court are the same, that is, to permanently enjoin the foreclosure of the
real estate mortgage executed by spouses Hanopol in favor of Shoemart; and, both are
premised on the same facts. The judgment of the Court of Appeals would constitute a bar to
the suit before the trial court.


























Terminal Facilities vs. PPA
February 27, 2002
378 SCRA 82
Facts:
TEFASCO is a domestic corporation organized and existing under the laws of the
Philippines with principal place of business at Barrio Ilang, Davao City. It is engaged in
the business of providing port and terminal facilities as well as arrastre, stevedoring and
other port-related services at its own private port at Barrio Ilang.
TEFASCO submitted to PPA a proposal for the construction of a specialized terminal
complex with port facilities and a provision for port services in Davao City. To ease the
acute congestion in the government ports at Sasa and Sta. Ana, Davao City, PPA
welcomed the proposal and organized an inter-agency committee to study the plan. The
committee recommended approval.
The PPA Board of Directors passed Resolution No. 7 accepting and approving TEFASCO's
project proposal.
Long after TEFASCO broke round with massive infrastructure work, the PPA Board
passed on October 1, 1976 Resolution No. 50 under which TEFASCO, without asking for
one, was compelled to submit an application for construction permit which imposed
additional conditions. Two (2) years after the completion of the port facilities and the
commencement of TEFASCO's port operations, or on June 10, 1978, PPA again issued to
TEFASCO another permit, it appeared for the first time the contentious provisions for
ten percent (10%) government share out of arrastre and stevedoring gross income and
one hundred percent (100%) wharfage and berthing charges.
TEFASCO and PPA executed a Memorandum of Agreement (MOA) providing among
others for (a) acknowledgment of TEFASCO's arrears in government share at
P3,807,563.75 payable monthly, with default penalized by automatic withdrawal of its
commercial private port permit and permit to operate cargo handling services; (b)
reduction of government share from ten percent (10%) to six percent (6%) on all cargo
handling and related revenue (or arrastre and stevedoring gross income); (c) opening of
its pier facilities to all commercial and third-party cargoes and vessels for a period
coterminous with its foreshore lease contract with the National Government; and, (d)
tenure of five (5) years extendible by five (5) more years for TEFASCO's permit to
operate cargo handling in its private port facilities. In return PPA promised to issue the
necessary permits for TEFASCO's port activities. TEFASCO complied with the MOA and
paid the accrued and current government share.
On August 30, 1988 TEFASCO sued PPA and PPA Port Manager, and Port Officer in
Davao City for refund of government share it had paid and for damages as a result of
alleged illegal exaction from its clients of one hundred percent (100%) berthing and
wharfage fees. The complaint also sought to nullify the February 10, 1984 MOA and all
other PPA issuances modifying the terms and conditions of the April 21, 1976 Resolution
No. 7 above-mentioned.
Issue:
Whether or not the collection by PPA of one hundred percent (100%) wharfage fees and
berthing charges; (c) the propriety of the award of fifty percent (50%) wharfage fees and thirty
percent (30%) berthing charges as actual damages in favor of TEFASCO for the period from
1977 to 1991 is valid.
Held:
The imposition by PPA of ten percent (10%), later reduced to six percent (6%), government
share out of arrastre and stevedoring gross income of TEFASCO is void. This exaction was never
mentioned in the contract, much less is it a binding prestation, between TEFASCO and PPA.
What was clearly stated in the terms and conditions appended to PPA Resolution No. 7 was for
TEFASCO to pay and/or secure from the proper authorities "all fees and/or permits pertinent to
the construction and operation of the proposed project." The government share demanded and
collected from the gross income of TEFASCO from its arrastre and stevedoring activities in
TEFASCO's wholly owned port is certainly not a fee or in any event a proper condition in a
regulatory permit. Rather it is an onerous "contractual stipulation" which finds no root or basis
or reference even in the contract aforementioned.











Mendoza vs. Court of Appeals
G.R. No. 81909
June 25, 2001
Facts:
Petitioner Danilo D. Mendoza is engaged in the domestic and international trading of
raw materials and chemicals. He operates under the business name Atlantic Exchange
Philippines (Atlantic), a single proprietorship registered with the Department of Trade
and Industry (DTI).
Sometime in 1978 he was granted by respondent Philippine National Bank (PNB) a Five
Hundred Thousand Pesos (P500,000.00) credit line and a One Million Pesos
(P1,000,000.00) Letter of Credit/Trust Receipt (LC/TR) line.
As security for the credit accommodations and for those which may thereinafter be
granted, petitioner mortgaged to respondent PNB three parcels of land with
improvements in F. Pasco Avenue, Santolan, Pasig and his house and lot in Quezon City;
and several pieces of machinery and equipment in his Pasig coco-chemical plant.
Petitioner executed in favor of respondent PNB 3 promissory notes covering the
P500,000.00 credit line, one dated March 8, 1979 for P310,000.00; another dated
March 30, 1979 for P40,000.00; and the last dated September 27, 1979 for
P150,000.00.
In a letter dated January 3, 1980 and signed by Branch Manager Fil S. Carreon Jr.,
respondent PNB advised petitioner Mendoza that effective December 1, 1979, the bank
raised its interest rates to 14% per annum, in line with Central Bank's Monetary Board
Resolution.
On March 9, 1981, he wrote a letter to respondent PNB requesting for the restructuring
of his past due accounts into a five-year term loan and for an additional LC/TR line of
P2,000,000.00. According to the letter, because of the shut-down of his end-user
companies and the huge amount spent for the expansion of his business, petitioner
failed to pay to respondent bank his LC/TR accounts as they became due and
demandable.
Ceferino D. Cura, Branch Manager of PNB Mandaluyong replied on behalf of the
respondent bank and required petitioner to submit Audited Financial Statements for
1979 and 1980; projected cash flow (cash in - cash out) for 5 years detailed yearly; and
List of additional machinery, equipment, and proof of ownership thereof before the
bank would act on his request. Cura also suggested that petitioner reduce his total loan
obligations to P3,000,000.00.
On September 25, 1981, petitioner sent another letter addressed to PNB Vice-President
Jose Salvador, regarding his request for restructuring of his loans. He offered
respondent PNB the following proposals: the disposal of some of the mortgaged
properties, more particularly, his house and lot and a vacant lot in order to pay the
overdue trust receipts; the capitalization and conversion of the balance into a 5-year
term loan payable semi-annually or on annual installments; a new Two Million Pesos
(P2,000,000.00) LC/TR line in order to enable Atlantic Exchange Philippines to operate
at full capacity; assignment of all his receivables to PNB from all domestic and export
sales generated by the LC/TR line; and maintenance of the existing P500,000.00 credit
line.
The petitioner testified that respondent PNB Mandaluyong Branch found his proposal
favorable and recommended the implementation of the agreement. However,
Fernando Maramag, PNB Executive Vice-President, disapproved the proposed release
of the mortgaged properties and reduced the proposed new LC/TR line to One Million
Pesos (P1,000,000.00). Petitioner claimed he was forced to agree to these changes and
that he was required to submit a new formal proposal and to sign two (2) blank
promissory notes.
In a letter dated July 2, 1982, petitioner offered the following revised proposals to
respondent bank: the restructuring of past due accounts including interests and
penalties into a 5-year term loan, payable semi-annually with one year grace period on
the principal; payment of P400,000.00 upon the approval of the proposal; reduction of
penalty from 3% to 1%; capitalization of the interest component with interest rate at
16% per annum; establishment of P1,000,000.00 LC/TR line against the mortgaged
properties.
Petitioner failed to pay the subject two (2) Promissory Notes Nos. 127/82 and 128/82
as they fell due. Respondent PNB extra-judicially foreclosed the real and chattel
mortgages, and the mortgaged properties were sold at public auction to respondent
PNB, as highest bidder, for a total of P3,798,719.50.
The petitioner filed a complaint for specific performance, nullification of the extra-
judicial foreclosure and damages against respondents PNB. He alleged that the
Extrajudicial Foreclosure Sale of the mortgaged properties was null and void since his
loans were restructured to a five-year term loan; hence, it was not yet due and
demandable.
ISSUE:
Whether or not the doctrine of promissory estoppel is applicable in this case.
Held:
No. There is no evidence of a promise from respondent PNB, admittedly a banking corporation,
that it had accepted the proposals of the petitioner to have a five-year restructuring of his
overdue loan obligations. On the basis of the evidence adduced, appellee's (Mendoza)
communications were mere proposals while the bank's responses were not categorical that the
appellee's request had been favorably accepted by the bank.
Nowhere in the communication letters of the parties that there is a categorical statement of
the respondent PNB that it had approved the petitioners proposed five-year restructuring plan.
Only an absolute and unqualified acceptance of a definite offer manifests the consent
necessary to perfect a contract. If anything, those correspondences only prove that the parties
had not gone beyond the preparation stage, which is the period from the start of the
negotiations until the moment just before the agreement of the parties.
The doctrine of promissory estoppel is an exception to the general rule that a promise of future
conduct does not constitute an estoppel. In some jurisdictions, in order to make out a claim of
promissory estoppel, a party bears the burden of establishing the following elements: (1) a
promise reasonably expected to induce action or forebearance; (2) such promise did in fact
induce such action or forebearance, and (3) the party suffered detriment as a result.
It is clear from the forgoing that the doctrine of promissory estoppel presupposes the existence
of a promise on the part of one against whom estoppel is claimed. The promise must be plain
and unambiguous and sufficiently specific so that the Judiciary can understand the obligation
assumed and enforce the promise according to its terms. For petitioner to claim that
respondent PNB is estopped to deny the five-year restructuring plan, he must first prove that
respondent PNB had promised to approve the plan in exchange for the submission of the
proposal. As discussed earlier, no such promise was proven, therefore, the doctrine does not
apply to the case at bar. A cause of action for promissory estoppel does not lie where an
alleged oral promise was conditional, so that reliance upon it was not reasonable. It does not
operate to create liability where it does not otherwise exist.










Roblett Industrial Construction vs. CA
266 SCRA 71
January 2, 1997
FACTS:
Respondent Contractors Equipment Corporation (CEC) instituted an action for a sum of
money against petitioner Roblett Industrial Construction Corporation (RICC) before the
Regional Trial Court of Makati alleging that in 1985 it leased to the latter various
construction equipment which it used in its projects. RICC incurred unpaid accounts
amounting to P342,909.38.
RICC through Candelario S. Aller Jr. entered into an Agreement with CEC where it
confirmed petitioner's account. As an off-setting arrangement respondent received
from petitioner construction materials worth P115,000.00 thus reducing petitioner's
balance to P227,909.38.
A day before the execution of their Agreement, or on 18 December 1985, RICC paid CEC
P10,000.00 in postdated checks which when deposited were dishonored. As a
consequence the latter debited the amount to petitioner's account of P227,909.38 thus
increasing its balance to P237,909.38.
On 24 July 1986 Mariano R. Manaligod, Jr., General Manager of CEC, sent a letter of
demand to petitioner through its Vice President for Finance regarding the latter's
overdue account of P237,909.38 and sought settlement thereof on or before 31 July
1986. In reply, petitioner requested 30 days to have enough time to look for funds to
substantially settle its account.
Traversing the allegations of respondent, Candelario S. Aller Jr. declared that he signed
the Agreement with the real intention of having proof of payment. In fact Baltazar
Banlot, Vice President for Finance of petitioner, claimed that after deliberation and
audit it appeared that petitioner overpaid respondent by P12,000.00 on the basis of the
latter's Equipment Daily Time Reports for 2 May to 14 June 1985 which reflected a total
obligation of only P103,000.00. He claimed however that the Agreement was not
approved by the Board and that he did not authorize Aller Jr. to sign thereon.
On rebuttal, Manaligod Jr. declared that petitioner had received a statement of account
covering the period from 28 March to 12 July 1985 in the amount of P376,350.18 which
it never questioned. From this amount P3,440.80, based on respondent's account with
petitioner and P30,000.00, representing payments made by the latter, were deducted
thus leaving a balance of P342,909.38 as mentioned in the Agreement. On 19 December
1990 the trial court rendered judgment ordering petitioner to pay respondent
ISSUE:
Whether or not the agreement between the parties is binding upon them.
HELD:
Yes. It must be emphasized that the same agreement was used by plaintiff as the basis for
claiming defendant's obligation of P237,909.38 and also used by defendant as the same basis
for its alleged payment in full of its obligation to plaintiff. But while plaintiff treats the entire
agreement as valid, defendant wants the court to treat that portion which treats of the
offsetting of P115,000.00 as valid, whereas it considers the other terms and conditions as
"onerous, illegal and want of prior consent and Board approval." This Court cannot agree to
defendant's contention. It must be stressed that defendant's answer was not made under oath,
and therefore, the genuineness and due execution of the agreement which was the basis for
plaintiff's claim is deemed admitted (Section 8, Rule 8, Rules of Court). Such admission, under
the principle of estoppel, is rendered conclusive upon defendant and cannot be denied or
disproved as against plaintiff (Art. 1431, Civil Code). Either the agreement is valid or void. It
must be treated as a whole and not to be divided into parts and consider only those provisions
which favor one party (in this case the defendant). Contracts must bind both contracting
parties, its validity or compliance cannot be left to the will of one of them (Art. 1308, New Civil
Code).

















Sime Darby Inc. vs. Good Year Philippines
G.R. No. 182148
June 08, 2011
FACTS:
Macgraphics owned several billboards across Metro Manila and other surrounding
municipalities, one of which was a 35' x 70' neon billboard located at the Magallanes
Interchange in Makati City. The Magallanes billboard was leased by Macgraphics to Sime
Darby in April 1994 at a monthly rental of P120,000.00. The lease had a term of four
years and was set to expire on March 30, 1998. Upon signing of the contract, Sime
Darby paid Macgraphics a total of P1.2 million representing the ten-month deposit,
which the latter would apply to the last ten months of the lease. Thereafter,
Macgraphics configured the Magallanes billboard to feature Sime Darby's name and
logo.
On April 22, 1996, Sime Darby executed a Memorandum of Agreement (MOA) with
Goodyear, whereby it agreed to sell its tire manufacturing plants and other assets to the
latter for a total of P1.5 billion.
On May 9, 1996, Sime Darby and Goodyear executed a deed entitled "Deed of
Assignment in connection with Microwave Communication Facility and in connection
with Billboard Advertising in Makati City and Pulilan, Bulacan" (Deed of Assignment),
through which Sime Darby assigned, among others, its leasehold rights, and deposits
made to Macgraphics pursuant to its lease contract over the Magallanes billboard.
Sime Darby then notified Macgraphics of the assignment of the Magallanes billboard in
favor of Goodyear through a letter-notice dated May 3, 1996.
After submitting a new design for the Magallanes billboard to feature its name and logo,
Goodyear requested that Macgraphics submit its proposed quotation for the production
costs of the new design. In a letter dated June 21, 1996 Macgraphics informed Goodyear
that the monthly rental of the Magallanes billboard is P250,000.00 and explained that
the increase in rental was in consideration of the provisions and technical aspects of the
submitted design.
Goodyear replied on July 8, 1996 stating it could not accept Macgraphics' offer to
integrate the cost of changing the design to the monthly rental. It then requested that
Macgraphics send its quotation for the simple background repainting and re-lettering of
the neon tubing for the Magallanes billboard.
Macgraphics then sent a letter to Sime Darby, dated July 11, 1996, informing the latter
that it could not give its consent to the assignment of lease to Goodyear. Macgraphics
explained that the transfer of Sime Darby's leasehold rights to Goodyear would
necessitate drastic changes to the design and the structure of the neon display of the
Magallanes billboard and would entail the commitment of manpower and resources
that it did not foresee at the inception of the lease.
As Sime Darby refused to accede to Goodyear's demand for partial rescission, the latter
commenced Civil Case No. 97-561 with the RTC.
ISSUE:
Whether or not laches may be applied.
RULING:
No. Laches is the failure or neglect, for an unreasonable and unexplained length of time, to do
that which, by exercising due diligence, could or should have been done earlier; it is negligence
or omission to assert a right within a reasonable time, warranting the presumption that the
party entitled to assert it either has abandoned or declined to assert it. There is no absolute
rule as to what constitutes laches or staleness of demand; each case is to be determined
according to its particular circumstances, with the question of laches addressed to the sound
discretion of the court. Because laches is an equitable doctrine, its application is controlled by
equitable considerations and should not be used to defeat justice or to perpetuate fraud or
injustice.
From the records, it appears that Macgraphics first learned of the assignment when Sime Darby
sent its letter-notice dated May 3, 1996. From the letters sent by Macgraphics to Goodyear, it
is apparent that Macgraphics had to study and determine both the legal and practical
implications of entertaining Goodyear as a client. After review, Macgraphics found that
consenting to the assignment would entail the commitment of manpower and resources that it
did not foresee at the inception of the lease. It thereafter communicated its non-conformity to
the assignment. To the mind of the Court, there was never a delay.
In sum, it is clear that by its failure to secure the consent of Macgraphics to the assignment of
lease, Sime Darby failed to perform what was incumbent upon it under the Deed of
Assignment. The rescission of the Deed of Assignment pursuant to Article 1191 of the New Civil
Code is, thus, justified.









Kings Properties Corporation vs. Galido
G.R. No. 170023
November 27, 2009
FACTS:

The heirs of Domingo Eniceo, namely Rufina Eniceo and Maria Eniceo, were awarded
with Homestead Patent No. 112947 consisting of four parcels of land located in San
Isidro, Antipolo, Rizal (Antipolo property).
The Antipolo property was registered under Original Certificate of Title (OCT) No. 535.
The issuance of the homestead patent was subject to the following conditions:
To have and to hold the said tract of land, with the appurtenances thereunto of right belonging
unto the said Heirs of Domingo Eniceo and to his heir or heirs and assigns forever, subject to
the provisions of sections 118, 121, 122 and 124 of Commonwealth Act No. 141, as amended,
which provide that except in favor of the Government or any of its branches, units or
institutions, the land hereby acquired shall be inalienable and shall not be subject to
incumbrance for a period of five (5) years next following the date of this patent, and shall not
be liable for the satisfaction of any debt contracted prior to the expiration of that period; that it
shall not be alienated, transferred or conveyed after five (5) years and before twenty-five (25)
years next following the issuance of title, without the approval of the Secretary of Agriculture
and Natural Resources; that it shall not be incumbered, alienated, or transferred to any person,
corporation, association, or partnership not qualified to acquire public lands under the said Act
and its amendments.
On 10 September 1973, a deed of sale covering the Antipolo property was executed
between Rufina Eniceo and Maria Eniceo as vendors and respondent as vendee. Rufina
Eniceo and Maria Eniceo sold the Antipolo property to respondent for P250,000. A
certain Carmen Aldana delivered the owners duplicate copy of OCT No. 535 to
respondent.
Petitioner alleges that when Maria Eniceo died in June 1975, Rufina Eniceo and the heirs
of Maria Eniceo (Eniceo heirs) who continued to occupy the Antipolo property as
owners, thought that the owners duplicate copy of OCT No. 535 was lost.
On 5 April 1988, the Eniceo heirs registered with the Registry of Deeds of Marikina City
(Registry of Deeds) a Notice of Loss dated 2 April 1988 of the owners copy of OCT No.
535. The Eniceo heirs also filed a petition for the issuance of a new owners duplicate
copy of OCT No. 535 with Branch 72 of the Regional Trial Court (RTC) of Antipolo, Rizal.
The case was docketed as LRC Case No. 584-A.
On 31 January 1989, the RTC rendered a decision finding that the certified true copy of
OCT No. 535 contained no annotation in favor of any person, corporation or entity. The
RTC ordered the Registry of Deeds to issue a second owners copy of OCT No. 535 in
favor of the Eniceo heirs and declared the original owners copy of OCT NO. 535
cancelled and considered of no further value.
Petitioner states that as early as 1991, respondent knew of the RTC decision in LRC Case
No. 584-A because respondent filed a criminal case against Rufina Eniceo and Leonila
Bolinas (Bolinas) for giving false testimony upon a material fact during the trial of LRC
Case No. 584-A.[14]
Petitioner alleges that sometime in February 1995, Bolinas came to the office of Alberto
Tronio Jr. (Tronio), petitioners general manager, and offered to sell the Antipolo
property. During an on-site inspection, Tronio saw a house and ascertained that the
occupants were Bolinas relatives. Tronio also went to the Registry of Deeds to verify the
records on file. Tronio ascertained that OCT No. 535 was clean and had no lien and
encumbrances. After the necessary verification, petitioner decided to buy the Antipolo
property.
On 20 March 1995, the Eniceo heirs executed a deed of absolute sale in favor of
petitioner covering lots 3 and 4 of the Antipolo property for P500,000.
On 5 April 1995, the Eniceo heirs executed another deed of sale in favor of petitioner
covering lots 1 and 5 of the Antipolo property for P1,000,000. TCT No. 278588 was
issued in the name of petitioner and TCT No. 277120 was cancelled.[20]
On 16 January 1996, respondent filed a civil complaint with the trial court against the
Eniceo heirs and petitioner. Respondent prayed for the cancellation of the certificates of
title issued in favor of petitioner, and the registration of the deed of sale and issuance
of a new transfer certificate of title in favor of respondent.
ISSUE:
Whether or not laches may be applied.
RULING:
No. The essence of laches is the failure or neglect, for an unreasonable and unexplained length
of time, to do that which, through due diligence, could have been done earlier, thus giving rise
to a presumption that the party entitled to assert it had either abandoned or declined to assert
it.
Respondent discovered in 1991 that a new owners copy of OCT No. 535 was issued to the
Eniceo heirs. Respondent filed a criminal case against the Eniceo heirs for false testimony.
When respondent learned that the Eniceo heirs were planning to sell the Antipolo property,
respondent caused the annotation of an adverse claim. On 16 January 1996, when respondent
learned that OCT No. 535 was cancelled and new TCTs were issued, respondent filed a civil
complaint with the trial court against the Eniceo heirs and petitioner. Respondents actions
negate petitioners argument that respondent is guilty of laches.

True, unrecorded sales of land brought under Presidential Decree No. 1529 or the Property
Registration Decree (PD 1529) are effective between and binding only upon the immediate
parties. The registration required in Section 51 of PD 1529 is intended to protect innocent third
persons, that is, persons who, without knowledge of the sale and in good faith, acquire rights to
the property. Petitioner, however, is not an innocent purchaser for value.
























Metrobank vs. Cabilzo
510 SCRA 259
December 6, 2006
Facts:

On 12 November 1994, Cabilzo issued a Metrobank Check No. 985988, payable to
CASH and postdated on 24 November 1994 for One Thousand Pesos (P1, 000.00). The
check was drawn against Cabilzos Account with Metrobank Pasong Tamo Branch under
Current Account No. 618044873-3 and was paid by Cabilzo to a certain Mr. Marquez, as
his sales commission. Subsequently, the check was presented to Westmont Bank for
payment. Westmont Bank, in turn, endorsed the check to Metrobank for appropriate
clearing. After the entries thereon were examined, including the availability of funds
and the authenticity of the signature of the drawer, Metrobank cleared the check for
encashment in accordance with the Philippine Clearing House Corporation (PCHC) Rules.
On 16 November 1994, Cabilzos representative was at Metrobank Pasong Tamo Branch
to make some transaction when he was asked by bank personnel if Cabilzo had issued a
check in the amount of P91, 000.00 to which the former replied in the negative. On the
afternoon of the same date, Cabilzo himself called Metrobank to reiterate that he did
not issue a check in the amount of P91, 000.00 and requested that the questioned check
be returned to him for verification, to which Metrobank complied. Upon receipt of the
check, Cabilzo discovered that Metrobank Check No. 985988 which he issued on 12
November 1994 in the amount of P1, 000.00 was altered to P91, 000.00 and the date 24
November 1994 was changed to 14 November 1994.Hence, Cabilzo demanded that
Metrobank re-credit the amount of P91, 000.00 to his account. Metrobank, however,
refused reasoning that it has to refer the matter first to its Legal Division for appropriate
action. Repeated verbal demands followed but Metrobank still failed to re-credit the
amount of P91, 000.00 to Cabilzos account
On 30 June 1995, Cabilzo, thru counsel, finally sent a letter-demand to Metrobank for
the payment of P90, 000.00, after deducting the original value of the check in the
amount of P1, 000.00. Such written demand notwithstanding, Metrobank still failed or
refused to comply with its obligation. Consequently, Cabilzo instituted a civil action for
damages against Metrobank before the RTC of Manila, Branch 13. In his Complaint
docketed as Civil Case No. 95-75651, Renato D. Cabilzo v. Metropolitan Bank and Trust
Company, Cabilzo prayed that in addition to his claim for reimbursement, actual and
moral damages plus costs of the suit be awarded in his favor.

Issue:
Whether equitable estoppel may be appreciated in favor of petitioner.

Held:
The degree of diligence required of a reasonable man in the exercise of his tasks and the
performance of his duties has been faithfully complied with by Cabilzo. In fact, he was wary
enough that he filled with asterisks the spaces between and after the amounts, not only those
stated in words, but also those in numerical figures, in order to prevent any fraudulent
insertion, but unfortunately, the check was still successfully altered, indorsed by the collecting
bank, and cleared by the drawee bank, and encashed by the perpetrator of the fraud, to the
damage and prejudice of Cabilzo.
Metrobank cannot lightly impute that Cabilzo was negligent and is therefore prevented from
asserting his rights under the doctrine of equitable estoppel when the facts on record are bare
of evidence to support such conclusion. The doctrine of equitable estoppel states that when
one of the two innocent persons, each guiltless of any intentional or moral wrong, must suffer a
loss, it must be borne by the one whose erroneous conduct, either by omission or commission,
was the cause of injury. Metrobanks reliance on this dictum is misplaced. For one,
Metrobanks representation that it is an innocent party is flimsy and evidently, misleading. At
the same time, Metrobank cannot asseverate that Cabilzo was negligent and this negligence
was the proximate cause of the loss in the absence of even a scintilla proof to buttress such
claim. Negligence is not presumed but must be proven by the one who alleges it, which
petitioner failed to.













Mesina vs. Garcia
509 SCRA 431
November 27, 2009
Facts:
Atty. Honorio Valisno Garcia and Felicisima Mesina, during their lifetime, entered into a
Contract to Sell over a lot consisting of 235 square meters, situated at Diversion Road,
Sangitan, Cabanatuan City, covered and embraced by TCT No. T-31643 in the name of
Felicisima Mesina which title was cancelled and TCT No. T-78881 was issued in the
name of Atty. Honorio Valisno Garcia.
The Contract to sell provides that the cost of the lot is P70.00 per square meter for
a total amount of P16, 450.00; payable within a period not to exceed seven (7) years at
an interest rate of 12% per annum, in successive monthly installments of P260.85 per
month, starting May 1977. Thereafter, the succeeding monthly installments are to be
paid within the first week of every month, at the residence of the vendor at Quezon
City, with all unpaid monthly installments earning an interest of one percent (1%) per
month.
The Contract also stipulated, among others, that: Should the spouses Garcia fail to pay
five (5) successive monthly installments, Felicisima Mesina shall have a right to rescind
the Contract to Sell. All paid installments to be recomputed as rental for usage of lot
shall be at the rate of P100.00 a month and that Felicisima Mesina shall have the further
option to return the down payment and whatever balance spouses Garcia paid, thereby
rescinding the Contract to Sell. Upon rescission of the Contract to sell, spouses Garcia
agree to remove all the improvements built on the lot within three (3) months from
rescission of this contract, spouses Garcia shouldering all expenses of said removal.
Instituting this case at bar, respondent asserts that despite the full payment made on
February 7, 1984 for the consideration of the subject lot, petitioners refused to issue the
necessary Deed of Sale to effect the transfer of the property to her.

Issues:
Whether petitioners are in estoppel
Held:
This Court, upon reviewing the records of the case at bar, finds no reason to overturn the
findings of the appellate court that, indeed, petitioners are estopped from avowing that they
never had knowledge as to the acceptance of the delayed payments made by the respondent,
and that they never induced respondent to believe that she had validly effected full payment.
Evidence on record show that petitioners can no longer deny having accepted the late
payments made by the respondent because in a letter dated April 10, 1986 sent to petitioner
Simeon Mesina by Engineer Danilo Angeles, who is the husband of petitioners authorized
collection agent Angelina Angeles, he told petitioner Simeon Mesina that the title and the Deed
of Sale were both ready for their signature, and respondent was willing and ready to pay for the
excess area. Hence, if petitioners did not accept the late payments of the respondent, and if
they did not consider such as full payment of the purchase price on the subject property as they
claimed it to be, the title as well as the Deed of Sale could not have been prepared for their
signature. In the same way, respondent could not have sent a demand letter to ask for the
execution of those documents had they not been induced to believe that the late payments
were validly accepted and that the purchase price had already been paid in full. There were
statements, which were made under oath, which made it crystal clear that the late payments
were accepted by the petitioners, and that the payments corresponded to the purchase value
of the subject property; therefore, petitioners cannot deny the fact that the full payment of the
purchase value of the lot in question had in fact been made by the respondent.




















Pahamatong vs PNB
G.R. No. 156403
March 21, 2005
Facts:
On July 1, 1972, Melitona Pahamotang died. She was survived by her husband Agustin
Pahamotang, and their eight (8) children, namely: Ana, Genoveva, Isabelita, Corazon,
Susana, Concepcion and herein petitioners Josephine and Eleonor, all surnamed
Pahamotang. On September 15, 1972, Agustin filed with the then Court of First Instance
of Davao City a petition for issuance of letters administration over the estate of his
deceased wife. In his petition, Agustin identified petitioners Josephine and Eleonor as
among the heirs of his deceased spouse.
On December 7, 1972, the court issued an order granting Agustins petition.
Agustin then executed several mortgages and later sold the properties with the PNB and
Arguna respectively. The heirs later questioned the validity of the transactions
prejudicial to them. The trial court declared the real estate mortgage and the sale void
but both were valid with respect to the other parties. The decision was reversed by the
Court of Appeals; to the appellate court, petitioners committed a fatal error of
mounting a collateral attack on the foregoing orders instead of initiating a direct action
to annul them.
Issue:
Whether or not the Court of Appeals is right in appreciating laches against petitioners
Ruling:
In the present case, the appellate court erred in appreciating laches against petitioners. The
element of delay in questioning the subject orders of the intestate court is sorely lacking.
Petitioners were unaware of the plan of Agustin to mortgage and sell the estate properties.
There is no indication that mortgagor PNB and vendee Arguna had notified petitioners of the
contracts they had executed with Agustin. Although petitioners finally obtained knowledge
of the subject petitions filed by their father, and eventually challenged the July 18, 1973,
October 19, 1974, February 25, 1980 and January 7, 1981 orders of the intestate court, it is
not clear from the challenged decision of the appellate court when they (petitioners) actually
learned of the existence of said orders of the intestate court. Absent any indication of the
point in time when petitioners acquired knowledge of those orders, their alleged delay in
impugning the validity thereof certainly cannot be established. And the Court of Appeals cannot
simply impute laches against them.



Shoppers Paradise Corporation vs. Efren Roques
G.R. No. 148775
January 13, 2004
Facts:
Shopper's Paradise Realty & Development Corporation, represented by its president,
Veredigno Atienza, entered into a twenty-five year lease with Dr. Felipe C. Roque, over a
parcel of land. Petitioner issued to Dr. Roque a check for P250,000.00 by way of
"reservation payment." Simultaneously, petitioner and Dr. Roque likewise entered into a
memorandum of agreement for the construction, development and operation of a
commercial building complex on the property. Conformably with the agreement,
petitioner issued a check for another P250,000.00 "downpayment" to Dr. Roque.
The annotations, however, were never made because of the untimely demise of Dr.
Felipe C. Roque. The death of Dr. Roque on 10 February 1994 constrained petitioner to
deal with respondent Efren P. Roque, one of the surviving children of the late Dr. Roque,
but the negotiations broke down due to some disagreements.
In a letter, dated 3 November 1994, respondent advised petitioner "to desist from any
attempt to enforce the aforementioned contract of lease and memorandum of
agreement". On 15 February 1995, respondent filed a case for annulment of the
contract of lease and the memorandum of agreement, with a prayer for the issuance of
a preliminary injunction.
Efren P. Roque alleged that he had long been the absolute owner of the subject
property by virtue of a deed of donation inter vivos executed in his favor by his parents,
Dr. Felipe Roque and Elisa Roque, on 26 December 1978, and that the late Dr. Felipe
Roque had no authority to enter into the assailed agreements with petitioner. The
donation was made in a public instrument duly acknowledged by the donor-spouses
before a notary public and duly accepted on the same day by respondent before the
notary public in the same instrument of donation.
The title to the property, however, remained in the name of Dr. Felipe C. Roque, and it
was only transferred to and in the name of respondent sixteen years later, or on 11 May
1994, while he resided in the United States of America, delegated to his father the mere
administration of the property. Respondent came to know of the assailed contracts with
petitioner only after retiring to the Philippines upon the death of his father.
On 9 August 1996, the trial court dismissed the complaint of respondent; it explained:
Ordinarily, a deed of donation need not be registered in order to be valid between the parties.
Registration, however, is important in binding third persons. Thus, when Felipe Roque entered
into a lease contract with defendant corporation, plaintiff Efren Roque (could) no longer assert
the unregistered deed of donation and say that his father, Felipe, was no longer the owner of
the subject property at the time the lease on the subject property was agreed upon. "The
registration of the Deed of Donation after the execution of the lease contract did not affect the
latter unless he had knowledge thereof at the time of the registration which plaintiff had not
been able to establish. Plaintiff knew very well of the existence of the lease. He, in fact, met
with the officers of the defendant corporation at least once before he caused the registration of
the deed of donation in his favor and although the lease itself was not registered, it remains
valid considering that no third person is involved. Plaintiff cannot be the third person because
he is the successor-in-interest of his father, Felipe Roque, the lessor, and it is a rule that
contracts take effect not only between the parties themselves but also between their assigns
and heirs (Article 1311, Civil Code) and therefore, the lease contract together with the
memorandum of agreement would be conclusive on plaintiff Efren Roque. He is bound by the
contract even if he did not participate therein. Moreover, the agreements have been perfected
and partially executed by the receipt of his father of the downpayment and deposit totaling to
P500,000.00." The trial court ordered respondent to surrender TCT No. 109754 to the Register
of Deeds of Quezon City for the annotation of the questioned Contract of Lease and
Memorandum of Agreement.
On appeal, the Court of Appeals reversed the decision of the trial court and held to be invalid
the Contract of Lease and Memorandum of Agreement. While it shared the view expressed by
the trial court that a deed of donation would have to be registered in order to bind third
persons, the appellate court, however, concluded that petitioner was not a lessee in good faith
having had prior knowledge of the donation in favor of respondent, and that such actual
knowledge had the effect of registration insofar as petitioner was concerned. The appellate
court based its findings largely on the testimony of Veredigno Atienza during cross-
examination.
Issue:
Whether or not the respondent is barred by laches and estoppel from denying the contracts.
Ruling:
The Court cannot accept petitioner's argument that respondent is guilty of laches. Laches, in its
real sense, is the failure or neglect, for an unreasonable and unexplained length of time, to do
that which, by exercising due diligence, could or should have been done earlier; it is negligence
or omission to assert a right within a reasonable time, warranting a presumption that the party
entitled to assert it either has abandoned or declined to assert it. Respondent learned of the
contracts only in February 1994 after the death of his father, and in the same year, during
November, he assailed the validity of the agreements. Hardly, could respondent then be said to
have neglected to assert his case for an unreasonable length of time.
Neither is respondent estopped from repudiating the contracts. The essential elements of
estoppel in pais, in relation to the party sought to be estopped, are: 1) a clear conduct
amounting to false representation or concealment of material facts or, at least, calculated to
convey the impression that the facts are otherwise than, and inconsistent with, those which the
party subsequently attempts to assert; 2) an intent or, at least, an expectation, that this
conduct shall influence, or be acted upon by, the other party; and 3) the knowledge, actual or
constructive, by him of the real facts. With respect to the party claiming the estoppel, the
conditions he must satisfy are: 1) lack of knowledge or of the means of knowledge of the truth
as to the facts in question; 2) reliance, in good faith, upon the conduct or statements of the
party to be estopped; and 3) action or inaction based thereon of such character as to change
his position or status calculated to cause him injury or prejudice. It has not been shown that
respondent intended to conceal the actual facts concerning the property; more importantly,
petitioner has been shown not to be totally unaware of the real ownership of the subject
property. Altogether, there is no cogent reason to reverse the Court of Appeals in its assailed
decision.






















Meatmaster vs Lelis Integrated
452 SCRA 626
February 28, 2005
Facts
Meatmasters International Corporation engaged the services of respondent Lelis
Integrated Development Corporation to undertake the construction of a slaughterhouse
and meat cutting and packing plant.
The Construction Agreement provided that the construction of petitioners
slaughterhouse should be completed by March 10, 1994.
Respondent failed to finish the construction of the said facility within the stipulated
period, hence, petitioner filed a complaint for rescission of contract and damages on
August 9, 1996 before the Regional Trial Court.
The trial court rendered decision RESCINDING the Construction Agreement between
plaintiff Meatmaster Intl. Corp. and defendant Lelis Integrated Devt. Corp. with both
parties shouldering their own respective damage.
A motion for reconsideration was filed by respondent on December 22, 1998, but the
same was denied. Respondent filed its notice of appeal on March 29, 1999.
In a motion to dismiss filed before the appellate court, the petitioner alleged that
respondents appeal suffers from jurisdictional infirmity because of late payment of
docket fees.
CA set aside the decision of the trial court and directed petitioner to pay respondent the
amount of P1,863,081.53. Petitioners motion for reconsideration was denied Hence,
the instant petition.
Issue:
Whether or not petitioner is estopped from raising the issue of the late payment of the docket
fee
Ruling:
Respondents contention that the petitioner is now estopped from raising the issue of late
payment of the docket fee because of his failure to assail promptly the trial courts order
approving the notice of appeal and accepting the appeal fee, is untenable. Estoppel by laches
arises from the negligence or omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to assert it either has abandoned or declined to assert it. In
the case at bar, petitioner raised at the first instance the non-payment of the docket fee in its
motion for reconsideration before the trial court. Petitioner reiterated its objection in the
motion to dismiss before the appellate court and finally, in the instant petition. Plainly,
petitioner cannot be faulted for being remiss in asserting its rights considering that it vigorously
registered a persistent and consistent objection to the Court of Appeals assumption of
jurisdiction at all stages of the proceedings.


Larena vs. Mapili
408 SCRA 484
August 7, 2003
Facts:
Hipolito Mapili owned a parcel of unregistered land declared for taxation purposes in his
name. The property had descended by succession from Hipolito to his only son Magno
and on to the latters own widow and children. These heirs, the herein respondents,
took possession of the property up to the outbreak of World War II when they
evacuated to the hinterlands.
On the other hand, petitioner Aquilina Larena took possession of the property in
the1970s alleging that she had purchased it from her aunt Filomena Larena on February
17, 1968.
Filomena Larena in turn claimed to have bought it from Hipolito on October 28, 1949, as
evidence by the Affidavit of Transfer of Real Property executed on the same date.
The Regional Trial Court, however, declared the said affidavit as spurious because
Hipolito was already dead when the alleged transfer was made to Filomena Larena.
On appeal, the Court of Appeals declared that respondents had never lost their right to
the land in question, as they were the heirs to whom the property had descended upon
the death of the original claimant and possessor.
Issue:
Whether or not Filomena Larena acquired the subject property by means of sale, prescription,
and/or laches.
RULING:
No, Filomena did not acquire said property by means of sale, prescription and/or laches. First,
the tax declarations are not a conclusive evidence of ownership, but a proof that the holder has
a claim of title over the property. It is good indicia of possession in the concept of owner. It may
strengthen Aquilinas bona fide claim of acquisition of ownership. However, petitioners failed
to present the evidence needed to tack the date of possession on the property in question.
Second, acquisitive prescription is a mode of acquiring ownership by a possessor through the
requisite lapse of time. Since the claims of purchase were unsubstantiated, petitioners acts of
possessory character have been merely tolerated by the owner. Hence, it did not constitute
possession. Moreover, there is lack of just title on the part of Aquilina and therefore, ordinary
acquisitive prescription of ten (10) years as provided under Article 1134 of the Civil Code cannot
be applied. Under Article 1137 of the Civil Code, the lapse of time required for extra-ordinary
acquisitive prescription is thirty (30) years, and records show that the lapse of time was only
twenty-seven (27) yearsa period that was short of three (3) years, when the complaint was
filed.
Finally, laches is a failure or neglect for an unreasonable and unexplained length of time to do
that which could or should have been done earlier through the exercise of due diligence. The
filing by respondents of the complaint in 1977 completely negates the decision that the latter
were negligent in asserting their claim.


























Santos vs Santos
366 SCRA 395
January 4, 1995
Facts:
Petitioner Zenaida M. Santos is the widow of Salvador Santos, a brother of private
respondents Calixto, Alberto, Antonio, all surnamed Santos and Rosa Santos-Carreon.
The spouses Jesus and Rosalia were the parents of the respondents and the husband of
the petitioner. The spouses owned a parcel of registered land with a four-door
apartment administered by Rosalia who rented them out.
On January 19, 1959, the spouses executed a deed of sale of the properties in favor of
their children Salvador and Rosa. Rosa in turn sold her share to Salvador on November
20, 1973, which resulted in the issuance of new TCT.
Despite the transfer of the property to Salvador, Rosalia continued to lease and receive
rentals from the apartment units.
On January 9, 1985, Salvador died, followed by Rosalia who died the following month.
Shortly after, petitioner Zenaida, claiming to be Salvadors heir, demanded the rent from
Antonio Hombrebueno, a tenant of Rosalia. When the latter refused to pay, Zenaida
filed an ejectment suit against him with the Metropolitan Trial Court of Manila, which
eventually decided in Zenaidas favor.
Private respondent instituted an action for reconveyance of property with preliminary
injunction against petitioner in the Regional Trial Court of Manila, where they alleged
that the two deeds of sale were simulated for lack of consideration.
The petitioner on the other hand denied the material allegations in the complaint and
further alleged that the respondents right to reconveyance was already barred by
prescription and laches considering the fact that from the date of sale from Rosa to
Salvador up to his death, more or less twelve (12) years had lapsed, and from his death
up to the filing of the case for reconveyance, four (4) years has elapsed. In other words,
it took respondents about sixteen (16) years to file the case.
Moreover, petitioner argues that an action to annul a contract for lack of consideration
prescribes in ten (10) years and even assuming that the cause of action has not
prescribed, respondents are guilty of laches for their inaction for a long period of time.
The trial court decided in favor of private respondents in as much as the deeds of sale
were fictitious, the action to assail the same does not prescribe.
Upon appeal, the Court of Appeals affirmed the trial courts decision. It held that the
subject deeds of sale did not confer upon Salvador the ownership over the subject
property, because even after the sale, the original vendors remained in dominion,
control, and possession thereof.
Isue:
Whether or not the cause of action of the respondents had prescribed and/or barred by laches.
RULING:
No, the cause of action by the respondents had not prescribed nor is it barred by laches.
First, the right to file an action for the reconveyance of the subject property to the estate of
Rosalia has not prescribed since deeds of sale were simulated and fictitious. The complaint
amounts to a declaration of nullity of a void contract, which is imprescriptible. Hence,
respondents cause of action has not prescribed.
Second, neither is their action barred by laches. The elements of laches are: 1) conduct on the
part of the defendant, or of one under whom he claims, giving rise to the situation of which the
complainant seeks a remedy; 2) delay in asserting the complainants rights, the complainant
having knowledge or notice of the defendants conduct as having been afforded an opportunity
to institute a suit; 3) lack of knowledge or notice on the part of the defendant that the
complainant would assert the right in which he bases his suit; and 4) injury or prejudice to the
defendant in the event relief is accorded to the complainant, or the suit is not held barred.
These elements must all be proved positively. The lapse of four (4) years is not an unreasonable
delay sufficient to bar respondents action. Moreover, the fourth (4
th
) element is lacking in this
case. The concept of laches is not concerned with the lapse of time but only with the effect of
unreasonable lapse. The alleged sixteen (16) years of respondents inaction has no adverse
effect on the petitioner to make respondents guilty of laches.













Villanueva-Mijares vs CA
G.R. No. 108192
April 12, 2000
Facts:
Felipe Villanueva left a 15,336-square-meter parcel of land in Kalibo, Capiz to his eight
children: Simplicio, Benito, Leon, Eustaquio, Camila, Fausta and Pedro.
In 1952, Pedro declared under his name 1/6 portion of the property. He held the
remaining properties in trust for his co-heirs who demanded the subdivision of the
property but to no avail.
After Leons death in 1972, private respondents discovered that the shares of Simplicio,
Nicolasa, Fausta and Maria Baltazar had been purchased by Leon through a deed of sale
dated August 25, 1946 but registered only in 1971. Leon also sold and partitioned the
property in favor of petitioners, his children, who thereafter secured separate and
independent titles over their respective pro- indiviso shares.
Private respondents, who are also descendants of Felipe, filed an action for partition
with annulment of documents and/or reconveyance and damages against petitioners.
They contended that Leon fraudulently obtained the sale in his favor through
machinations and false pretenses. The RTC declared that private respondents action
had been barred by res judicata and that petitioners are the legal owners of the
property in question in accordance with the individual titles issued to them.
Issue:
Whether or not laches apply against the minors property that was held in trust.
Ruling:
No. At the time of the signing of the Deed of Sale of August 26,1948, private respondents
Procerfina, Prosperedad, Ramon and Rosa were minors. They could not be faulted for their
failure to file a case to recover their inheritance from their uncle Leon, since up to the age of
majority, they believed and considered Leon their co-heir administrator. It was only in 1975,
not in 1948, that they became aware of the actionable betrayal by their uncle. Upon learning of
their uncles actions, they filed for recovery. They did not sleep on their rights, contrary to
petitioners assertion.
Furthermore, when Felipe Villanueva died, an implied trust was created by operation of law
between Felipes children and Leon, their uncle, as far as the 1/6 share of Felipe. Leons
fraudulent titling of Felipes 1/6 share was a betrayal of that implied trust.
Garcia vs. Villar
G.R. No. 158891
June 27, 2012
Facts:
Lourdes V. Galas (Galas) was the original owner of a piece of property (subject property)
located at Malindang St., Quezon City, covered by Transfer Certificate of Title (TCT) No.
RT-67970(253279)
On July 6, 1993, Galas, with her daughter, Ophelia G. Pingol (Pingol), as co-maker,
mortgaged the subject property to Yolanda Valdez Villar (Villar) as security for a loan in
the amount of Two Million Two Hundred Thousand Pesos (P2,200,000.00)
On October 10, 1994, Galas, again with Pingol as her co-maker, mortgaged the same
subject property to Pablo P. Garcia (Garcia) to secure her loan of One Million Eight
Hundred Thousand Pesos (P1,800,000.00)
On November 21, 1996, Galas sold the subject property to Villar for One Million Five
Hundred Thousand Pesos (P1,500,000.00), and declared in the Deed of Sale
[9]
that such
property was free and clear of all liens and encumbrances of any kind whatsoever.
Issue:
Whether or not the second mortgage to Garcia was valid
Held:
At the onset, this Court would like to address the validity of the second mortgage to Garcia and
the sale of the subject property to Villar. We agree with the Court of Appeals that both are valid
under the terms and conditions of the Deed of Real Estate Mortgage executed by Galas and
Villar.

While it is true that the annotation of the first mortgage to Villar on Galass TCT contained a
restriction on further encumbrances without the mortgagees prior consent, this restriction was
nowhere to be found in the Deed of Real Estate Mortgage. As this Deed became the basis for
the annotation on Galass title, its terms and conditions take precedence over the standard,
stamped annotation placed on her title. If it were the intention of the parties to impose such
restriction, they would have and should have stipulated such in the Deed of Real Estate
Mortgage itself.

Neither did this Deed proscribe the sale or alienation of the subject property during the life of
the mortgages. Garcias insistence that Villar should have judicially or extrajudicially foreclosed
the mortgage to satisfy Galass debt is misplaced. The Deed of Real Estate Mortgage merely
provided for the options Villar may undertake in case Galas or Pingol fail to pay their
loan. Nowhere was it stated in the Deed that Galas could not opt to sell the subject property to
Villar, or to any other person. Such stipulation would have been void anyway, as it is not
allowed under Article 2130 of the Civil Code, to wit:
Art. 2130. A stipulation forbidding the owner from alienating the immovable
mortgaged shall be void.






















Spouses Edralin vs Philippine Veterans Bank
G.R. No. 168523
March 09, 2011
Facts:
Veterans Bank granted petitioner spouses Fernando and Angelina Edralin (Edralins) a
loan in the amount of P270,000.00. As security thereof, petitioners executed a Real
Estate Mortgage in favor of Veterans Bank over a real property situated in the
Municipality of Paraaque and registered in the name of petitioner Fernando Edralin.
The Edralins failed to pay their obligation to Veterans Bank. Thus, on June 28, 1983,
Veterans Bank filed a Petition for Extrajudicial Foreclosure of the REM with the Office of
the Clerk of Court and Ex-Officio Sheriff of Rizal.
In due course, the foreclosure sale was held on September 8, 1983, in which the Ex-
Officio Sheriff of Rizal sold the mortgaged property at public auction. Veterans Bank
emerged as the highest bidder at the said foreclosure sale and was issued the
corresponding Certificate of Sale.
Upon the Edralins' failure to redeem the property during the one-year period provided
under Act No. 3135, Veterans Bank acquired absolute ownership of the subject
property.
Veterans Bank caused the consolidation of ownership of the subject property in its
name on January 19, 1994. The Register of Deeds of Paraaque, Metro Manila cancelled
TCT No. 204889 under the name of Fernando Edralin and replaced it with a new transfer
certificate of title, TCT No. 78332 in the name of Veterans Bank on February 3, 1994.
Despite the foregoing, the Edralins failed to vacate and surrender possession of the
subject property to Veterans Bank. Thus, on May 24, 1996, Veterans Bank filed an Ex-
Parte Petition for the Issuance of a Writ of Possession, docketed as Land Registration
Case (LRC) No. 06-060 before Branch 274 of the Regional Trial Court (RTC) of Paraaque
City. The same, however, was dismissed for Veterans Bank's failure to prosecute.

Issue:
What is pactum commissorium and is it applicable in this case?

Held:
Pactum commissorium is "a stipulation empowering the creditor to appropriate the thing given
as guaranty for the fulfillment of the obligation in the event the obligor fails to live up to his
undertakings, without further formality, such as foreclosure proceedings, and a public sale."
"The elements of pactum commissorium, which enable the mortgagee to acquire ownership of
the mortgaged property without the need of any foreclosure proceedings, are: (1) there should
be a property mortgaged by way of security for the payment of the principal obligation, and (2)
there should be a stipulation for automatic appropriation by the creditor of the thing
mortgaged in case of non-payment of the principal obligation within the stipulated period."
The second element is missing to characterize the Deed of Sale as a form of pactum
commissorium. Veterans Bank did not, upon the petitioners' default, automatically acquire or
appropriate the mortgaged property for itself. On the contrary, the Veterans Bank resorted to
extrajudicial foreclosure and was issued a Certificate of Sale by the sheriff as proof of its
purchase of the subject property during the foreclosure sale. That Veterans Bank went through
all the stages of extrajudicial foreclosure indicates that there was no pactum commissorium






















University Physicians Services vs. Marian Clinics
Gr No. 152303
September 1, 2010

Facts
On May 31, 1973, Marian Clinics, Inc. (MCI) and University Physicians Services,
Incorporated (UPSI) entered into a Lease Agreement whereby the former leased to the
latter the Marian General Hospital (MGH) and four schools for a period of ten (10) years,
from June 1, 1973 to May 31, 1983. The land, buildings, facilities, fixtures and
equipment appurtenant thereto, including the Soledad Building, were included in the
lease, for which a monthly rental of P70,000 was agreed upon.
UPSI filed a complaint for specific performance against MCI, alleging that (1) MCI failed
to deliver Certificates of Occupancy on certain buildings, and (2) there were some
defective electrical installations that caused the issuance of a Condemned Installation
Notice by the Office of the City Electrician of the City of Manila.
PSI sent a letter to MCI, informing it of the filing of the complaint and the suspension of
payment of the monthly rentals until the resolution of the case
During the pendency of these cases, on September 1, 1980, MCI ceded to the
Development Bank of the Philippines (DBP) some of the leased buildings, including
certain facilities, furniture, fixtures and equipment found therein, in full settlement of
MCIs debt to DBP.

Issue
What is the principle of the parties freedom of contract?
Held
Under the principle of the parties freedom of contract, the contracting parties may establish
such stipulations, clauses, terms and conditions as they may deem convenient, provided they
are not contrary to law, morals, good customs, public order, or public policy. Obligations arising
from contracts have the force of law between the parties. The provisions in the lease contract
that:

(1) All pillows, linen, sheets, mattresses, rubber sheets, x x x and such other similar
breakable, losable or deteriorating items x x x shall upon termination of this Agreement,
be replaced by the LESSEE in the same quantity as turned over herewith by the LESSORS;
and

(2) All medical equipment also, if deteriorated upon termination hereof, shall be
replaced in the same quantity and quality in which they were received by the LESSEE. x x
x.


clearly show the parties binding covenant that, upon the termination of the lease, certain types
of movable properties subject of the lease will not simply be returned but replaced in the same
quantity and/or quality in case of loss or deterioration.






















MARTIN vs DBS BANK Philippines, INC.
G.R. No. 174632
June 16, 2010
FACTS:
Felicidad T. Martin, Melissa M. Isidro, Grace M. David, Caroline M. Garcia, Victoria M.
Roldan, and Benjamin T. Martin, Jr. (the Martins), as lessors, entered into a lease
contract with the DBS Bank Philippines, Inc. (DBS), formerly known as Bank of Southeast
Asia and now merged with Bank of the Philippine Islands, as lessee, covering a
commercial warehouse and lots that DBS was to use for office, warehouse, and parking
yard for repossessed vehicles.
The lease was for five years, from March 1, 1997 to March 1, 2002, at a monthly rent of
P300,000.00 for the first year, P330,000.00 for the second year, P363,000.00 for the
third year, P399,300.00 for the fourth year, and P439,230.00 for the final year, all net of
withholding taxes. DBS paid a deposit of P1,200,000.00 and advance rentals of
P600,000.00.
On May 25 and August 13, 1997 heavy rains flooded the leased property and submerged
into water the DBS offices there along with its 326 repossessed vehicles. As a result, on
February 11, 1998 DBS wrote the Martins demanding that they take appropriate steps
to make the leased premises suitable as a parking yard for its vehicles.
DBS suggested the improvement of the drainage system or the raising of the propertys
ground level. In response, the Martins filled the propertys grounds with soil and rocks.
In June 1998, DBS vacated the property but continued paying the monthly rents. On
September 11, 1998, however, it made a final demand on the Martins to restore the
leased premises to tenantable condition on or before September 30, 1998, otherwise, it
would rescind the lease contract.
On September 24, 1998 the Martins contracted the services of Altitude Systems &
Technologies Co. for the reconstruction of the perimeter fence on the property.
On October 13, 1998 DBS demanded the rescission of the lease contract and the return
of its deposit. At that point, DBS had already paid the monthly rents from March 1997
to September 1998. The Martins refused, however, to comply with DBS demand.
On July 7, 1999 DBS filed a complaint against the Martins for rescission of the contract
of lease with damages before the Regional Trial Court (RTC) of Makati City, Branch 141,
in Civil Case 99-1266. Claiming that the leased premises had become untenable, DBS
demanded rescission of the lease contract as well as the return of its deposit of
P1,200,000.00.
On November 12, 2001 the Makati City RTC rendered a decision, dismissing the
complaint against the Martins. On appeal to the Court of Appeals (CA) in CA-G.R. CV
76210, the latter court rendered judgment dated April 26, 2006, reversing and setting
aside the RTC decision.

ISSUE:

Whether or not the CA erred in holding that the Martins allowed the leased premises to remain
untenantable after the floods, justifying DBS rescission of the lease agreement between them.

Held:
Unless the terms of a contract are against the law, morals, good customs, and public policy,
such contract is law between the parties and its terms bind them. Here, paragraph VIII of the
lease contract between DBS and the Martins permitted rescission by either party should the
leased property become untenable because of natural causes. Thus:
In case of damage to the leased premises or any portion thereof by reason of fault or
negligence attributable to the LESSEE, its agents, employees, customers, or guests, the LESSEE
shall be responsible for undertaking such repair or reconstruction. In case of damage due to
fire, earthquake, lightning, typhoon, flood, or other natural causes, without fault or negligence
attributable to the LESSEE, its agents, employees, customers or guests, the LESSOR shall be
responsible for undertaking such repair or reconstruction. In the latter case, if the leased
premises become untenable, either party may demand for the rescission of this contract and in
such case, the deposit referred to in paragraph III shall be returned to the LESSEE immediately.
The Martins point out that paragraph X of the contract forbade the pre-termination of the
lease. But, as the Court held in Manila International Airport Authority v. Gingoyon,[20] the
various stipulations in a contract must be read together and given effect as their meanings
warrant. Here, paragraph X, which barred pre-termination of the lease agreement, cannot be
read in isolation. Paragraph VIII gave DBS and the Martins the right to rescind the agreement in
the event the property becomes untenable due to natural causes, including floods, unless
proper repairs and rehabilitation are carried out.








Heirs of Zabala vs. CA
G.R. No. 189602
May 6, 2010
Facts:
Vicente T. Manuel filed a Complaintfor ejectment with damages against Alfredo Zabala
before the Municipal Trial Court in Cities (MTCC) of Balanga, Bataan. Respondent
alleged that he was in actual and peaceful possession of a fishpond (Lot No. 1483)
located in Ibayo, Balanga City.
On October 15, 2001, Zabala allegedly entered the fishpond without authority, and
dumped soil into the fishpond without an Environment Compliance Certificate. Zabala
continued such action until the time of the filing of the Complaint, killing the crabs and
the bangus that respondent was raising in the fishpond. Thus, respondent asked that
Zabala be restrained from touching and destroying the fishpond; that Zabala be ejected
therefrom permanently; and for actual and moral damages and attorneys fees.
Zabala promptly moved for the dismissal of the Complaint for non-compliance with the
requirement under the Local Government Code to bring the matter first to barangay
conciliation before filing an action in court.
The MTCC, in an Order dated May 27, 2003, granted Zabalas motion and dismissed the
Complaint, holding that respondent indeed violated the requirement of barangay
conciliation. Respondent then appealed the ruling to the Balanga, Bataan Regional Trial
Court which reversed the MTCCs. On December 19, 2008, the CA promulgated a
Decision upholding the RTCs reversal of the MTCCs Order
Issue:
Whether or not a compromise agreement may validly terminate the case
Held:
Yes. Under Article 2028 of the Civil Code, a compromise agreement is a contract whereby the
parties, by making reciprocal concessions, avoid litigation or put an end to one already
commenced. Compromise is a form of amicable settlement that is not only allowed, but also
encouraged in civil cases.
Contracting parties may establish such stipulations, clauses, terms, and conditions as they deem
convenient, provided that these are not contrary to law, morals, good customs, public order, or
public policy.
Thus, finding the above Compromise Agreement to have been validly executed and not
contrary to law, morals, good customs, public order, or public policy, the Court approved the
same. The case is now deemed terminated.


DUNCAN ASSOCIATION OF DETAILMAN PTGW vs.
GLAXOWELLCOM PHILIPPINES
G.R. No. 162994
September 17, 2004
Facts:
Petitioner Pedro A. Tecson (Tecson) was hired by respondent Glaxo Wellcome
Philippines, Inc. (Glaxo) as medical representative on October 24, 1995, after Tecson
had undergone training and orientation.
Tecson signed a contract of employment which stipulates, among others, that he agrees
to study and abide by existing company rules; to disclose to management any existing or
future relationship by consanguinity or affinity with co-employees or employees of
competing drug companies and should management find that such relationship poses a
possible conflict of interest, to resign from the company.
The Employee Code of Conduct of Glaxo similarly provides that an employee is expected
to inform management of any existing or future relationship by consanguinity or affinity
with co-employees or employees of competing drug companies. If management
perceives a conflict of interest or a potential conflict between such relationship and the
employees employment with the company, the management and the employee will
explore the possibility of a transfer to another department in a non-counterchecking
position or preparation for employment outside the company after six months.
Tecson was initially assigned to market Glaxos products in the Camarines Sur-
Camarines Norte sales area. Subsequently, Tecson entered into a romantic relationship
with Bettsy, an employee of Astra Pharmaceuticals (Astra), a competitor of Glaxo.
Bettsy was Astras Branch Coordinator in Albay. She supervised the district managers
and medical representatives of her company and prepared marketing strategies for
Astra in that area.
Even before they got married, Tecson received several reminders from his District
Manager regarding the conflict of interest which his relationship with Bettsy might
engender. Still, Tec son married Bettsy in September 1998. Tecson was later reassigned
at Butuan-Surigao-Agusan area to prevent conflict of interest but he refused and argued
that he was constructively dismissed.
Issue:
Whether or not the prohibition to marry clause of the contract is valid
Held:
Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing strategies and
other confidential programs and information from competitors, especially so that it and Astra
are rival companies in the highly competitive pharmaceutical industry. The prohibition against
personal or marital relationships with employees of competitor companies upon Glaxos
employees is reasonable under the circumstances because relationships of that nature might
compromise the interests of the company. In laying down the assailed company policy, Glaxo
only aims to protect its interests against the possibility that a competitor company will gain
access to its secrets and procedures.
Glaxo possesses the right to protect its economic interests cannot be denied. No less than the
Constitution recognizes the right of enterprises to adopt and enforce such a policy to protect its
right to reasonable returns on investments and to expansion and growth. Indeed, while our
laws endeavor to give life to the constitutional policy on social justice and the protection of
labor, it does not mean that every labor dispute will be decided in favor of the workers. The
law also recognizes that management has rights which are also entitled to respect and
enforcement in the interest of fair play.
In this case, there were notices and advises given to the petitioner regarding his romantic
relationship to his marriage regarding the conflict of interest.

















Star Paper vs. Simbol
487 SCRA 228
April 12, 2006
Facts:
Under the policy of Star Paper employees are governed by the following contract:

1. New applicants will not be allowed to be hired if in case he/she has a relative, up to the 3rd
degree of relationship, already employed by the company.

2. In case of two of the employees (singles, one male and another female) developed a friendly
relationship during the course of their employment and then decided to get married, one of
them should resign to preserve the policy stated above.

Respondents Comia and Simbol both got married to their fellow employees. Estrella on
the other hand had a relationship with a co-employee resulting to her pregnancy on the
belief that such was separated.
The respondents allege that they were forced to resign as a result of the
implementation of the said assailed company policy.
The Labor Arbiter and the NLRC ruled in favor of petitioner. The decision was appealed
to the Court of Appeals which reversed the decision.

Issue:
Whether the prohibition to marry in the contract of employment is valid
Held:
It is significant to note that in the case at bar, respondents were hired after they were found fit
for the job, but were asked to resign when they married a co-employee. Petitioners failed to
show how the marriage of Simbol, then a Sheeting Machine Operator, to Alma Dayrit, then an
employee of the Repacking Section, could be detrimental to its business operations. Neither did
petitioners explain how this detriment will happen in the case of Wilfreda Comia, then a
Production Helper in the Selecting Department, who married Howard Comia, then a helper in
the cutter-machine. The policy is premised on the mere fear that employees married to each
other will be less efficient. If we uphold the questioned rule without valid justification, the
employer can create policies based on an unproven presumption of a perceived danger at the
expense of an employees right to security of tenure.
Petitioners contend that their policy will apply only when one employee marries a co-
employee, but they are free to marry persons other than co-employees. The questioned policy
may not facially violate Article 136 of the Labor Code but it creates a disproportionate effect
and under the disparate impact theory, the only way it could pass judicial scrutiny is a showing
that it is reasonable despite the discriminatory, albeit disproportionate, effect. The failure of
petitioners to prove a legitimate business concern in imposing the questioned policy cannot
prejudice the employees right to be free from arbitrary discrimination based upon stereotypes
of married persons working together in one company.
Lastly, the absence of a statute expressly prohibiting marital discrimination in our jurisdiction
cannot benefit the petitioners. The protection given to labor in our jurisdiction is vast and
extensive that we cannot prudently draw inferences from the legislatures silence that married
persons are not protected under our Constitution and declare valid a policy based on a
prejudice or stereotype. Thus, for failure of petitioners to present undisputed proof of a
reasonable business necessity, we rule that the questioned policy is an invalid exercise of
management prerogative. Corollary, the issue as to whether respondents Simbol and Comia
resigned voluntarily has become moot and academic.
In the case of Estrella, the petitioner failed to adduce proof to justify her dismissal. Hence, the
Court ruled that it was illegal.
















Tiu vs. Platinum Plans Philippines
G.R. No. 163512
February 28, 2007
Facts:
Platinum Plans Philippines, Inc. is a domestic corporation engaged in the pre-need
industry. From 1987 to 1989, petitioner Daisy B. Tiu was its Division Marketing Director.
On January 1, 1993, respondent re-hired petitioner as Senior Assistant Vice-President
and Territorial Operations Head in charge of its Hong Kong and Asean operations. The
parties executed a contract of employment valid for five years.
On September 16, 1995, petitioner stopped reporting for work. In November 1995, she
became the Vice-President for Sales of Professional Pension Plans, Inc., a corporation
engaged also in the pre-need industry.
Consequently, respondent sued petitioner for damages before the RTC of Pasig City,
Branch 261. Respondent alleged, among others, that petitioners employment with
Professional Pension Plans, Inc. violated the non-involvement clause in her contract of
employment.
In upholding the validity of the non-involvement clause, the trial court ruled that a
contract in restraint of trade is valid provided that there is a limitation upon either time
or place. In the case of the pre-need industry, the trial court found the two-year
restriction to be valid and reasonable.
On appeal, the Court of Appeals affirmed the trial courts ruling. It reasoned that
petitioner entered into the contract on her own will and volition. Thus, she bind herself
to fulfill not only what was expressly stipulated in the contract, but also all its
consequences that were not against good faith, usage, and law.
The appellate court also ruled that the stipulation prohibiting non-employment for two
years was valid and enforceable considering the nature of respondents business.

Issue:
Whether or not the non-involvement clause is valid.
HELD:
In this case, the non-involvement clause has a time limit: two years from the time petitioners
employment with respondent ends. It is also limited as to trade, since it only prohibits
petitioner from engaging in any pre-need business akin to respondents. More significantly,
since petitioner was the Senior Assistant Vice-President and Territorial Operations Head in
charge of respondents Hongkong and Asean operations, she had been privy to confidential and
highly sensitive marketing strategies of respondents business. To allow her to engage in a rival
business soon after she leaves would make respondents trade secrets vulnerable especially in a
highly competitive marketing environment. In sum, The Court finds the non-involvement
clause not contrary to public welfare and not greater than is necessary to afford a fair and
reasonable protection to respondent. Hence, the restraint is valid and such stipulation prevails.


Avon Cosmetics vs Luna
511 SCRA 376
December 20, 2006
FACTS:
According to Luna, she began working for Beautifont, Inc. in 1972, first as a franchise
dealer and then a year later, as a Supervisor.
Sometime in 1978, Avon Cosmetics, Inc. (Avon), herein petitioner, acquired and took
over the management and operations of Beautifont, Inc. Nonetheless, respondent Luna
continued working for said successor company.
Aside from her work as a supervisor, respondent Luna also acted as a make-up artist of
petitioner Avons Theatrical Promotions Group, for which she received a per diem for
each theatrical performance.
The contract states that:
The Company agrees:
1) To allow the Supervisor to purchase at wholesale the products of the Company.
The Supervisor agrees:
1) To purchase products from the Company exclusively for resale and to be responsible for
obtaining all permits and licenses required to sell the products on retail.
The Company and the Supervisor mutually agree:
1) That this agreement in no way makes the Supervisor an employee or agent of the
Company, therefore, the Supervisor has no authority to bind the Company in any contracts with
other parties.
2) That the Supervisor is an independent retailer/dealer insofar as the Company is
concerned, and shall have the sole discretion to determine where and how products purchased
from the Company will be sold. However, the Supervisor shall not sell such products to stores,
supermarkets or to any entity or person who sells things at a fixed place of business.
3) That this agreement supersedes any agreement/s between the Company and the
Supervisor.
4) That the Supervisor shall sell or offer to sell, display or promote only and exclusively
products sold by the Company.
5) Either party may terminate this agreement at will, with or without cause, at any time
upon notice to the other.
Later, respondent Luna entered into the sales force of Sandre Philippines that caused
her termination for the alleged violation of the terms of the contract.
The trial court ruled in favor of Luna that the contract was contrary to public policy thus
the dismissal was not proper. The Court of Appeals affirmed the decision, hence this
petition.
Issues:
Whether the Supervisors Agreement was invalid for being contrary to public policy
Whether there was subversion of the autonomy of contracts by the lower courts
Held:
Agreements in violation of orden pblico must be considered as those which conflict with law,
whether properly, strictly and wholly a public law (derecho) or whether a law of the person, but
law which in certain respects affects the interest of society. Plainly put, public policy is that
principle of the law which holds that no subject or citizen can lawfully do that which has a
tendency to be injurious to the public or against the public good. As applied to contracts, in the
absence of express legislation or constitutional prohibition, a court, in order to declare a
contract void as against public policy, must find that the contract as to the consideration or
thing to be done, has a tendency to injure the public, is against the public good, or contravenes
some established interests of society, or is inconsistent with sound policy and good morals, or
tends clearly to undermine the security of individual rights, whether of personal liability or of
private property.
From another perspective, the main objection to exclusive dealing is its tendency to foreclose
existing competitors or new entrants from competition in the covered portion of the relevant
market during the term of the agreement. Only those arrangements whose probable effect is to
foreclose competition in a substantial share of the line of commerce affected can be considered
as void for being against public policy. The foreclosure effect, if any, depends on the market
share involved. The relevant market for this purpose includes the full range of selling
opportunities reasonably open to rivals, namely, all the product and geographic sales they may
readily compete for, using easily convertible plants and marketing organizations.
Applying the preceding principles to the case at bar, there is nothing invalid or contrary to
public policy either in the objectives sought to be attained by paragraph 5, i.e., the exclusivity
clause, in prohibiting respondent Luna, and all other Avon supervisors, from selling products
other than those manufactured by petitioner Avon.
Having held that the exclusivity clause as embodied in paragraph 5 of the Supervisors
Agreement is valid and not against public policy, we now pass to a consideration of respondent
Lunas objections to the validity of her termination as provided for under paragraph 6 of the
Supervisors Agreement giving petitioner Avon the right to terminate or cancel such contract.
The paragraph 6 or the termination clause therein expressly provides that:
The Company and the Supervisor mutually agree:
6) Either party may terminate this agreement at will, with or without cause, at any time
upon notice to the other.
n the case at bar, the termination clause of the Supervisors Agreement clearly provides for two
ways of terminating and/or canceling the contract. One mode does not exclude the other. The
contract provided that it can be terminated or cancelled for cause, it also stated that it can be
terminated without cause, both at any time and after written notice. Thus, whether or not the
termination or cancellation of the Supervisors Agreement was for cause, is immaterial. The
only requirement is that of notice to the other party. When petitioner Avon chose to terminate
the contract, for cause, respondent Luna was duly notified thereof.
Worth stressing is that the right to unilaterally terminate or cancel the Supervisors Agreement
with or without cause is equally available to respondent Luna, subject to the same notice
requirement. Obviously, no advantage is taken against each other by the contracting parties.























Del Castillo vs. Richmond
45 PHIL. REPORTS 679
February 9, 1924
Facts:
The plaintiff alleges that the provisions and conditions contained in the third paragraph
of their contract constitute an illegal and unreasonable restriction upon his liberty to
contract, contrary to public policy, and are unnecessary in order to constitute a just and
reasonable protection to the defendant; and asked that the same be declared null and
void and of no effect.
In his defense he alleges that during the time the plaintiff was in the defendant's employ
he obtained knowledge of his trade and professional secrets and came to know and
became acquainted and established friendly relations with his customers so that to now
annul the contract and permit plaintiff to establish a competing drugstore in the town of
Legaspi, as plaintiff has announced his intention to do, would be extremely prejudicial to
defendant's interest."
The defendant further, alleges that this action not having been brought within four
years from the time the contract referred to in the complaint was executed, the same
has prescribed.

Issue:
Whether the contract is valid and the autonomy of contracts be upheld
Held:
Considering the nature of the business in which the defendant is engaged, in relation with the
limitation placed upon the plaintiff both as to time and place, The Court is of the opinion, and
so decide, that such limitation is legal and reasonable and not contrary to public policy,
otherwise, the autonomy of the contract will be subverted.







ARWOOD INDUSTRIES, INC. vs. DM CONSUNJI, INC.
394 SCRA 11
December 11, 2002
Facts:
Petitioner and respondent, as owner and contractor, respectively, entered into a civil,
structural and architectural works Agreement dated February 6, 1989 for the
construction of petitioners Westwood condominium at No. 23 Eisenhower St.,
Greenhills, San Juan, Metro Manila.
The contract price for the condominium project aggregated P20, 800,000.00.
Despite the completion of the condominium project, the amount of P962, 434.78
remain unpaid by petitioner. Repeated demands by respondent for petitioner to pay
went unheeded.
Thus on August 13, 1993, respondent as plaintiff in a civil case filed its complaint for the
recovery of the balance of the contract price and for damages against petitioner.
Respondent specifically prayed for the payment of the: (a) amount of P962, 434.78 with
interest of 2% per month or a fraction thereof, from November 1990 up to the time of
payment; (b) the amount of P250,000 as Attorneys fees and litigation expenses; (c)
amount of P150,000.00 as exemplary damages; and (d)cost of suit.
On appeal, the Court of Appeals affirmed the lower courts decision with modification
Issue:
Whether or not the imposition of two percent interest on the amount adjudged is proper.
RULING:
Yes. It must be noted that the agreement provided the contractor, respondent in this case, two
(2) options in case of delay in monthly payments, to wit: a) suspend works on the project until
payment is remitted by the owner or continue the work but the owner shall be required to pay
interest at a rate of two (2) percent per month or a fraction thereof. Evidently, respondent
chose the latter option, as the condominium project was in fact already completed. Since the
agreement stands as the law between the parties, the court cannot ignore the existence of such
provision providing for a penalty for every months delay.



Sps. Tecklo v Rural Bank of Pamplona
G.R. No. 171201
June 18, 2010
Facts
Spouses Roberto and Maria Antonette Co obtained from respondent Rural Bank of
Pamplona, Inc. a P100,000.00 loan
[5]
due in three months or on 20 April 1994. The loan
was secured by a real estate mortgage
One of the stipulations in the mortgage contract was that the mortgaged property
would also answer for the future loans of the mortgagor. Pursuant to this provision,
spouses Co obtained on 4 March 1994 a second loan from respondent bank in the
amount of P150,000.00 due in three months or on 2 June 1994
spouses Benedict and Maricel Dy Tecklo, meanwhile instituted an action for collection of
sum of money against spouses Co. In the said case, petitioners obtained a writ of
attachment on the mortgaged property of spouses Co. The notice of attachment was
annotated on the TCT of the mortgaged property
When the two loans remained unpaid after becoming due and demandable,
respondent bank instituted extrajudicial foreclosure proceedings.
Petitioners then exercised the right of redemption as successors-in-interest of the
judgment debtor. Stepping into the shoes of spouses Co, petitioners tendered on 9
August 1995 the amount of P155,769.50
espondent bank objected to the non-inclusion of the second loan. It also claimed that
the applicable interest rate should be the rate fixed in the mortgage, which was 24% per
annum plus 3% service charge per annum and 18% penalty per annum.
Issue
Whether the redemption amount includes the second loan in the amount of P150,000.00 even
if it was not included in respondent banks application for extrajudicial foreclosure.
Held
For its failure to include the second loan in its application for extrajudicial foreclosure as well as
in its bid at the public auction sale, respondent bank is deemed to have waived its lien on the
mortgaged property with respect to the second loan. Of course, respondent bank may still
collect the unpaid second loan, and the interest thereon, in an ordinary collection suit before
the right to collect prescribes.

After the foreclosure of the mortgaged property, the mortgage is extinguished and the
purchaser at auction sale acquires the property free from such mortgage. Any deficiency
amount after foreclosure cannot constitute a continuing lien on the foreclosed property, but
must be collected by the mortgagee-creditor in an ordinary action for collection. In this case,
the second loan from the same mortgage deed is in the nature of a deficiency amount after
foreclosure.

In order to effect redemption, the judgment debtor or his successor -in-interest need only pay
the purchaser at the public auction sale the redemption amount composed of (1) the price
which the purchaser at the public auction sale paid for the property and (2) the amount of any
assessment or taxes which the purchaser may have paid on the property after the purchase,
plus the applicable interest. Respondent banks demand that the second loan be added to the
actual amount paid for the property at the public auction sale finds no basis in law or
jurisprudence.













Banate vs. Philippine Countryside
GR No. 163825
July 13, 2010
Facts
Spouses Rosendo Maglasang and Patrocinia Monilar (spouses Maglasang) obtained a
loan (subject loan) from PCRB for P1,070,000.00. The subject loan was evidenced by a
promissory note and was payable on January 18, 1998. To secure the payment of the
subject loan, the spouses Maglasang executed, in favor of PCRB a real estate mortgage
over their property
Sometime in November 1997 (before the subject loan became due), the spouses
Maglasang and the spouses Cortel asked PCRBs permission to sell the subject
properties. They likewise requested that the subject properties be released from the
mortgage since the two other loans were adequately secured by the other mortgages.
The spouses Maglasang and the spouses Cortel thereafter sold to petitioner Violeta
Banate the subject properties for P1,750,000.00. The spouses Magsalang and the
spouses Cortel used the amount to pay the subject loan with PCRB. After settling the
subject loan, PCRB gave the owners duplicate certificate of title of Lot 12868-H-3-C to
Banate, who was able to secure a new title in her name.
Accordingly, PCRB claimed that full payment of the three loans, obtained by the spouses
Maglasang, was necessary before any of the mortgages could be released; the
settlement of the subject loan merely constituted partial payment of the total
obligation. Thus, the payment does not authorize the release of the subject properties
from the mortgage lien.
PCRB considered Banate as a buyer in bad faith as she was fully aware of the existing
mortgage in its favor when she purchased the subject properties from the spouses
Maglasang and the spouses Cortel
Issue
Whether the purported agreement between the petitioners and Mondigo novated the
mortgage contract over the subject properties and is thus binding upon PCRB.
Held
As a general rule, a mortgage liability is usually limited to the amount mentioned in the
contract. However, the amounts named as consideration in a contract of mortgage do not limit
the amount for which the mortgage may stand as security if, from the four corners of the
instrument, the intent to secure future and other indebtedness can be gathered. This
stipulation is valid and binding between the parties and is known as the "blanket mortgage
clause"
In the present case, the mortgage contract indisputably provides that the subject properties
serve as security, not only for the payment of the subject loan, but also for "such other loans or
advances already obtained, or still to be obtained." The cross-collateral stipulation in the
mortgage contract between the parties is thus simply a variety of a dragnet clause. After
agreeing to such stipulation, the petitioners cannot insist that the subject properties be
released from mortgage since the security covers not only the subject loan but the two other
loans as well.
























Pascual vs. Ramos
384 SCRA 105
July 4, 2002
Facts:
Ramos alleged that on 3 June 1987, for and in consideration of P150,000, the Spouses
Pascual executed in his favor a Deed of Absolute Sale with Right to Repurchase over two
parcels of land and the improvements thereon located in Bambang, Bulacan, Bulacan.
This document was annotated at the back of the title. The Pascuals did not exercise
their right to repurchase the property within the stipulated one-year period; hence,
Ramos prayed that the title or ownership over the subject parcels of land and
improvements thereon be consolidated in his favor.
In their Answer, the Pascuals admitted having signed the Deed of Absolute Sale with
Right to Repurchase for a consideration of P150, 000 but averred that what the parties
had actually agreed upon and entered into was a real estate mortgage.
They further alleged that there was no agreement limiting the period within which to
exercise the right to repurchase and that they had even overpaid Ramos. The trial court
found that the transaction between the parties was actually a loan in the amount of
P150,000, the payment of which was secured by a mortgage of the property covered by
TCT No. 305626.
It also found that the Pascuals had made payments in the total sum of P344,000, and
that with interest at 7% per annum, they had overpaid the loan by P141,500.
Accordingly, in its Decision of 15 March 1995 the trial court ruled in favor of the
defendants. The Pascuals interposed the following defenses: (a) the trial court had no
jurisdiction over the subject or nature of the petition; (b) Ramos had no legal capacity to
sue; (c) the cause of action, if any, was barred by the statute of limitations; (d) the
petition stated no cause of action; (e) the claim or demand set forth in Ramoss pleading
had been paid, waived, abandoned, or otherwise extinguished; and (f) Ramos has not
complied with the required confrontation and conciliation before the barangay.
The Court of Appeals affirmed in toto the trial courts Orders of 5 June 1995 and 7
September 1995.
Issue:
Whether or not the Pascuals could validly neglect the interest rate of 7% per month.
Ruling:
After the trial court sustained petitioners claim that their agreement with RAMOS was actually
a loan with real estate mortgage, the Pascuals should not be allowed to turn their back on the
stipulation in that agreement to pay interest at the rate of 7% per month. The Pascuals should
accept not only the favorable aspect of the courts declaration that the document is actually an
equitable mortgage but also the necessary consequence of such declaration, that is, that
interest on the loan as stipulated by the parties in that same document should be paid.
Besides, when Ramos moved for a reconsideration of the 15 March 1995 Decision of the trial
court pointing out that the interest rate to be used should be 7% per month, the Pascuals never
lifted a finger to oppose the claim. Admittedly, in their Motion for Reconsideration of the
Order of 5 June 1995, the Pascuals argued that the interest rate, whether it be 5% or 7%, is
exorbitant, unconscionable, unreasonable, usurious and inequitable. However, in their
Appellants Brief, the only argument raised by the Pascuals was that Ramoss petition did not
contain a prayer for general relief and, hence, the trial court had no basis for ordering them to
pay Ramos P511,000 representing the principal and unpaid interest. It was only in their motion
for the reconsideration of the decision of the Court of Appeals that the Pascuals made an issue
of the interest rate and prayed for its reduction to 12% per annum.
It is a basic principle in civil law that parties are bound by the stipulations in the contracts
voluntarily entered into by them. Parties are free to stipulate terms and conditions which they
deem convenient provided they are not contrary to law, morals, good customs, public order, or
public policy.
The interest rate of 7% per month was voluntarily agreed upon by Ramos and the Pascuals.
There is nothing from the records and, in fact, there is no allegation showing that petitioners
were victims of fraud when they entered into the agreement with Ramos. Neither is there a
showing that in their contractual relations with Ramos, the Pascuals were at a disadvantage on
account of their moral dependence, ignorance, mental weakness, tender age or other handicap,
which would entitle them to the vigilant protection of the courts as mandated by Article 24 of
the Civil Code.








Chua Tee Dee vs. Ca
Gr No. 135721
May 27, 2004
Facts
Agricom and Dee entered into a 15-year lease contract over the rubber plantation of
Agricom.
Alba met with the employees of the rubber plantation
6
and updated them on the
impending termination of their employment due to the companys contract of lease
with Chua Tee Dee. The employees were told that they would be given separation pay
The severed employees filed a complaint for illegal dismissal and unfair labor practice
against Agricom, Amado Dee and Pioneer, docketed as NLRC Case No. 1815-LR-XI-85.
The labor arbiter rendered his decision on August 22, 1986, holding that the termination
of the complainants employment was illegal. The respondents were ordered to pay its
employees separation pay and backwages, but the complaint for unfair labor practice
was dismissed for lack of merit
Because Pioneer was dragged into labor disputes not of its own making, it wrote
Agricom, through its counsel, on October 20, 1987 suggesting a conference to settle the
labor case, otherwise, it would consider the contract of lease as rescinded.
As Pioneer was unable to pay its monthly rentals, Agricom filed, on September 4, 1990,
a civil complaint for sum of money, damages and attorneys fees against Chua Tee Dee
While the case was pending, Dee extended a personal loan to Lilian Carreido. When
judgment was rendered, the complaint was dismissed and the lease contract terminate.
The court held that it was Agricom;s duty as a lessor to maintain the lessee in peaceful
possession and enjoyment of the premises
Issue
Whether or not the suspension of the payment of rentals is justified by the fact that the private
respondent Agricom breached its lease contract
Held
In the case at bar, petitioner Chua Tee Dee is the lessee of the private respondent Agricom. As
lessor, the Agricom had the duty to maintain the petitioner in the peaceful and adequate
enjoyment of the leased premises. Such duty was made as part of the contract of lease entered
into by the parties. Even if it had not been so, the lessor is still duty-bound under Art. 1654 of
the Civil Code, thus:
Art. 1654. The lessor is obliged:
(1) To deliver the thing which is the object of the contract in such a condition as to render it fit
for the use intended;
(2) To make on the same during the lease all the necessary repairs in order to keep it suitable
for the use to which it has been devoted, unless there is a stipulation to the contrary:
(3) To maintain the lessee in the peaceful and adequate enjoyment of the lease for the entire
duration of the contract.
The duty "to maintain the lessee in the peaceful and adequate enjoyment of the lease for the
duration of the contract" mentioned in no. 3 of the article is merely a warranty that the lessee
shall not be disturbed in his legal, and not physical, possession. Thus, in the case of Goldstein v.
Roces,
58
the Court ruled in favor of the lessor and denied the lessee's claim for damages which
resulted from the opening of holes in the roof, as the lessor had allowed another lessee to
construct another floor to the leased building. The Court had the occasion to state:
Article 1554 provides that the lessor is obliged to maintain the lessee in the peaceful enjoyment
of the lease during all the time covered by the contract.
In sum, then, the petitioner failed to prove that the private respondent breached any of the
provisions of the contract of lease. Thus, the petitioner had no valid reason to suspend the
payment of rentals under Art. 1658.










G.C Garments vs. Miranda
495 SCRA 484
July 20, 2006
Facts
Angelito Miranda, the son of Angel Miranda, established the Executive Machineries and
Equipment Corporation (EMECO), a domestic corporation engaged primarily in the
manufacture and fabrication of rubber rollers. Angelito owned 80% of the stocks of the
corporation, while his wife Florenda owned 10%.
Angel entered into a verbal contract of lease over the Property with EMECO, and
allowed it to build a factory thereon. The agreement was on a month-to-month basis, at
the rate of P8,000 per month. EMECO constructed its factory on the property. At the
outset, EMECO paid the monthly rentals. However, after Angelito died on June 21, 1988,
EMECO failed to pay the rentals but still continued possessing the leased premises.
On November 19, 1989, the factory of EMECO was totally razed by fire. In a letter to
EMECO dated June 3, 1991, Angel demanded the payment of accrued rentals in the
amount of P280,000.00 as of May 1991. EMECO was also informed that the oral
contract of lease would be terminated effective June 30, 1991. However, EMECO failed
to pay the accrued rentals and to vacate the property.
It vacated the leased premises, but the accrued rentals remained unpaid.
Florenda arrived at the office of petitioner and offered to sublease the property to
Wilson Kho, the Officer-in Charge of the corporation. Florenda showed Kho a purported
copy of a contract of lease
[4]
over the said property allegedly executed by Angel in favor
of EMECO. After visiting and viewing the property, Kho agreed to rent the area upon the
condition that its true and registered owner would personally sign the lease contract in
his presence. When Florenda failed to present Angel for said purpose, Kho turned down
her proposal. Later, Kho was able to locate Angel at Noveleta, Cavite and offered, in
behalf of petitioner, to lease the property, as to which Angel agreed.
Issue
Whether or not Angel is liable for damages for failing to maintain the lessee in the peaceful and
adequate enjoyment of the lease for the entire duration of the contract
Held
A lessor is obliged to maintain petitioners peaceful and adequate enjoyment of the premises
for the entire duration of the lease. In case of noncompliance with these obligations, the lessee
may ask for the rescission of the lease contract and indemnification for damages or only the
latter, allowing the contract to remain in force
The duty of the lessor to maintain the lessee in the peaceful and adequate enjoyment of the
leased property for the entire duration of the contract is merely a warranty that the lessee shall
not be disturbed in having legal and not physical possession of the property.
[36]


In this case, the trespass perpetrated by respondent Florenda Miranda and her confederates
was merely trespass in fact. They forcibly entered the property and caused damage to the
equipment and building of petitioner, because the latter refused to enter into a contract of
lease with EMECO over the property upon respondent Florenda Mirandas failure to present
respondent Angel Miranda to sign the contract of lease. It turned out that respondent Florenda
Miranda attempted to hoodwink petitioner and forged respondent Angel Mirandas signature
on the contract of lease she showed to petitioner. It appears that respondent Florenda Miranda
tried to coerce the petitioner into executing a contract of lease with EMECO over the property,
only to be rebuffed by the petitioner.













Barcero vs Capitol Development
GR No 154765
March 29, 2007
Facts
Capitol Development Corporation (respondent) leased its commercial building and lot located at 1194
EDSA, Quezon City to R.C. Nicolas Merchandising, Inc., (R.C. Nicolas) for a 10-year period or until January
31, 1993 with the option for the latter to make additional improvements in the property to suit its
business and to sublease portions thereof to third parties.
R.C. Nicolas converted the space into a bowling and billiards center and subleased separate portions
thereof to Midland Commercial Corporation, Jerry Yu, Romeo Tolentino, Julio Acuin, Nicanor Bas, and
Pedro T. Bercero (petitioner). Petitioners sublease contract with R.C. Nicolas was for a three-year period
For failure to pay rent, respondent filed an ejectment case against R.C. Nicolas
During the pendency of Civil Case No. 52933, several sub-lessees including petitioner, entered into a
compromise settlement with respondent.
In the compromise settlement, the sub-lessees recognized respondent as the lawful and absolute owner
of the property and that the contract between respondent and R.C.
Nicolas had been lawfully terminated because of the latters non-payment of rent; and that the sub-
lessees voluntarily surrendered possession of the premises to respondent; that the sub-lessees directly
executed lease contracts with respondent considering the termination of leasehold rights of R.C. Nicolas.
On October 21, 1988, respondent and petitioner, as well as several other sub-lessees of R.C. Nicolas, filed
a Joint Manifestation and Motion in Civil Case No. 52933, manifesting to the MeTC-Branch 41 that they
entered into a compromise settlement and moved that the names of the sub-lessees as parties-
defendants be dropped and excluded
Nicolas filed a complaint for ejectment and collection of unpaid rentals against petitioner
Issue
Whether the the lease contract between petitioner and respondent is void
Held
In the present case, the lease contract between petitioner and respondent is void for having an inexistent cause -
respondent did not have the right to lease the property to petitioner considering that its lease contract with R.C.
Nicolas was still valid and subsisting, albeit pending litigation. Having granted to R.C. Nicolas the right to use and
enjoy its property from 1983 to 1993, respondent could not grant that same right to petitioner in 1988. When
petitioner entered into a lease contract with respondent, the latter was still obliged to maintain R.C. Nicolass
peaceful and adequate possession and enjoyment of its lease for the 10-year duration of the contract.
Respondents unilateral rescission of its lease contract with R.C. Nicolas, without waiting for the final outcome of
the ejectment case it filed against the latter, is unlawful. A lease is a reciprocal contract and its continuance,
effectivity or fulfillment cannot be made to depend exclusively upon the free and uncontrolled choice of just one
party to a lease contract.
32
Thus, the lease contract entered into between petitioner and respondent, during the
pendency of the lease contract with R.C. Nicolas, is void.
Maxima Hemedes vs. CA
G.R. No. 108472
October 8, 1999
Facts:
The instant controversy involves a question of ownership over an unregistered parcel of
land. It was originally owned by the late Jose Hemedes, father of Maxima Hemedes and
Enrique D. Hemedes.
On March 22, 1947 Jose Hemedes executed a document entitled Donation Inter Vivos
With Resolutory Conditions whereby he conveyed ownership over the subject land,
together with all its improvements, in favor of his third wife, Justa Kausapin.
Maxima Hemedes, through her counsel, filed an application for registration and
confirmation of title over the subject unregistered land. Subsequently, an Original
Certificate of Title (OCT) was issued in the name of Maxima Hemedes married to Raul
Rodriguez by the Registry of Deeds of Laguna on June 8, 1962, with the annotation that
Justa Kausapin shall have the usufructuary rights over the parcel of land herein
described during her lifetime or widowhood.
Enrique D. Hemedes sold the property to Dominium Realty and Construction
Corporation (Dominium). On April 10, 1981, Justa Kausapin executed an affidavit
affirming the conveyance of the subject property in favor of Enrique D. Hemedes as
embodied in the Kasunduan dated May 27, 1971, and at the same time denying the
conveyance made to Maxima Hemedes.
Dominium and Enrique D. Hemedes filed a complaint for the annulment of the TCT
issued in favor of R & b Insurance and/or the reconveyance to Dominium of the subject
property. Specifically, the complaint alleged that Dominium was the absolute owner of
the subject property by virtue of the February 28, 1979 deed of sale executed by
Enrique D. Hemedes, who in turn obtained ownership of the land from Justa Kausapin,
as evidenced by the Kasunduan dated May 27, 1971.
The Plaintiffs asserted that Justa Kausapin never transferred the land to Maxima
Hemedes and that Enrique D. Hemedes had no knowledge of the registration
proceedings initiated by Maxima Hemedes.
The trial court rendered judgment in favor of plaintiffs Dominium and Enrique D.
Hemedes. Both R & B Insurance and Maxima Hemedes appealed from the trial courts
decision. The Court of Appeals affirmed the assailed decision in toto. Hence, this
petition.

Issue:
Which of the two conveyances by Justa Kausapin, the first in favor of Maxima Hemedes and the
second in favor of Enrique D. Hemedes, effectively transferred ownership over the subject
land?

Ruling:
Public respondents finding that the Deed of Conveyance of Unregistered Real Property By
Reversion executed by Justa Kausapin in favor of Maxima Hemedes is spurious and not
supported by the factual findings in this case. It is grounded upon the mere denial of the same
by Justa Kausapin.
A party to a contract cannot just evade compliance with his contractual obligations by the
simple expedient of denying the execution of such contract. If, after a perfect and binding
contract has been executed between the parties, it occurs to one of them to allege some defect
therein as a reason for annulling it, the alleged defect must be conclusively proven, since the
validity and fulfillment of contracts cannot be left to the will of one of the contracting parties.
In upholding the deed of conveyance in favor of Maxima Hemedes, the Court must
concomitantly rule that Enrique D. Hemedes and his transferee, Dominium, did not acquire any
rights over the subject property.
Thus, the donation in favor of Enrique D. Hemedes is null and void for the purported object
thereof did not exist at the time of the transfer, having already been transferred to his sister.
Similarly, the sale of the subject property by Enrique D. Hemedes to Dominium is also a nullity
for the latter cannot acquire more rights than its predecessor-in-interest and is definitely not an
innocent purchaser for value since Enrique D. Hemedes did not present any certificate of title
upon which it relied.











PUP vs. Golden Horizon
G.R. No. 183612
March 15, 2010
Facts:
Petitioner National Development Company (NDC) is a government- owned and
controlled corporation, created under Commonwealth Act No. 182, as amended by
Com. Act No. 311 and Presidential Decree (P.D.) No. 668. Petitioner Polytechnic
University of the Philippines (PUP) is a public, non-sectarian, non-profit educational
institution created in 1978 by virtue of P.D. No. 1341.
In the early sixties, NDC had in its disposal a ten (10)-hectare property located along
Pureza St., Sta. Mesa, Manila. The estate was popularly known as the NDC Compound
and covered by Transfer Certificate of Title Nos. 92885, 110301 and 145470.
NDC entered into a Contract of Lease (C-33-77) with Golden Horizon Realty Corporation
(GHRC) over a portion of the property, with an area of 2,407 square meters for a period
of ten (10) years, renewable for another ten (10) years with mutual consent of the
parties.3
A second Contract of Lease (C-12-78) was executed between NDC and GHRC covering
3,222.80 square meters, also renewable upon mutual consent after the expiration of the
ten (10)-year lease period. In addition, GHRC as lessee was granted the "option to
purchase the area leased, the price to be negotiated and determined at the time the
option to purchase is exercised."
Under the lease agreements, GHRC was obliged to construct at its own expense
buildings of strong material at no less than the stipulated cost, and other improvements
that shall automatically belong to the NDC as lessor upon the expiration of the lease
period.
Accordingly, GHRC introduced permanent improvements and structures as required by
the terms of the contract. After the completion of the industrial complex project, for
which GHRC spent P5 million, it was leased to various manufacturers, industrialists and
other businessmen thereby generating hundreds of jobs.5
On June 13, 1988, before the expiration of the ten (10)-year period under the second
lease contract, GHRC wrote a letter to NDC indicating its exercise of the option to renew
the lease for another ten (10) years.
As no response was received from NDC, GHRC sent another letter on August 12, 1988,
reiterating its desire to renew the contract and also requesting for priority to negotiate
for its purchase should NDC opt to sell the leased premises.6 NDC still did not reply but
continued to accept rental payments from GHRC and allowed the latter to remain in
possession of the property.
Sometime after September 1988, GHRC discovered that NDC had decided to secretly
dispose the property to a third party. On October 21, 1988, GHRC filed in the RTC a
complaint for specific performance, damages with preliminary injunction and temporary
restraining order.7
In the meantime, then President Corazon C. Aquino issued Memorandum Order No. 214
dated January 6, 1989, ordering the transfer of the whole NDC Compound to the
National Government, which in turn would convey the said property in favor of PUP at
acquisition cost.
The memorandum order cited the serious need of PUP, considered the "Poor Mans
University," to expand its campus, which adjoins the NDC Compound, to accommodate
its growing student population, and the willingness of PUP to buy and of NDC to sell its
property. The order of conveyance of the 10.31-hectare property would automatically
result in the cancellation of NDCs total obligation in favor of the National Government
in the amount of P57,193,201.64.8
RTC issued a writ of preliminary injunction enjoining NDC and its attorneys,
representatives, agents and any other persons assisting it from proceeding with the sale
and disposition of the leased premises.
NDC and PUP separately appealed the decision to the CA.19 By Decision of June 25,
2008, the CA affirmed in toto the decision of the RTC.

Issue:
Whether or not the right of refusal is applicable
HELD:
When a lease contract contains a right of first refusal, the lessor has the legal duty to the lessee
not to sell the leased property to anyone at any price until after the lessor has made an offer to
sell the property to the lessee and the lessee has failed to accept it. Only after the lessee has
failed to exercise his right of first priority could the lessor sell the property to other buyers
under the same terms and conditions offered to the lessee, or under terms and conditions
more favorable to the lessor.
Records showed that during the hearing on the application for a writ of preliminary injunction,
respondent adduced in evidence a letter of Antonio A. Henson dated 15 July 1988 addressed to
Mr. Jake C. Lagonera, Director and Special Assistant to Executive Secretary Catalino Macaraeg,
reviewing a proposed memorandum order submitted to President Corazon C. Aquino
transferring the whole NDC Compound, including the premises leased by respondent, in favor
of petitioner PUP. This letter was offered in evidence by respondent to prove the existence of
documents as of that date and even prior to the expiration of the second lease contract or the
lapse of the ten (10)-year period counted from the effectivity of the rental payment -- that is,
one hundred and fifty (150) days from the signing of the contract (May 4, 1978), as provided in
Art. I, paragraph (b) of C-12-78, or on October 1, 1988.
Respondent thus timely exercised its option to purchase on August 12, 1988. However,
considering that NDC had been negotiating through the National Government for the sale of
the property in favor of PUP as early as July 15, 1988 without first offering to sell it to
respondent and even when respondent communicated its desire to exercise the option to
purchase granted to it under the lease contract, it is clear that NDC violated respondents right
of first refusal. Under the premises, the matter of the right of refusal not having been carried
over to the impliedly renewed month-to-month lease after the expiration of the second lease
contract on October 21, 1988 becomes irrelevant since at the time of the negotiations of the
sale to a third party, petitioner PUP, respondents right of first refusal was still subsisting.






















Joselito and Dominga Villegas vs. CA
G.R. No. 129977
February 1, 2001
Facts:
Before September 6, 1973, Lot B-3-A, with an area of 4 hectares was registered under
TCT No. 68641 in the names of Ciriaco D. Andres and Henson Caigas. This land was also
declared for real estate taxation under Tax Declaration No. C2-4442.
On September 6, 1973, Andres and Caigas, with the consent of their respective spouses,
Anita Barrientos and Consolacion Tobias, sold the land to Fortune Tobacco Corporation
for P60,000.00. Simultaneously, they executed a joint affidavit declaring that they had
no tenants on said lot.
On the same date, the sale was registered in the Office of the Register of Deeds of
Isabela. TCT No. 68641 was cancelled and TCT No. T-68737 was issued in Fortunes
name. On August 6, 1976, Andres and Caigas executed a Deed of Reconveyance of the
same lot in favor of Filomena Domingo, the mother of Joselito Villegas, defendant in the
case before the trial court.
Although no title was mentioned in this deed, Domingo succeeded in registering this
document in the Office of the Register of Deeds on August 6, 1976, causing the latter to
issue TCT No. T-91864 in her name. It appears in this title that the same was a transfer
from TCT No. T-68641.
On April 13, 1981, Domingo declared the lot for real estate taxation under Tax
Declaration No. 10-5633. On December 4, 1976, the Office of the Register of Deeds of
Isabela was burned together with all titles in the office.
On December 17, 1976, the original of TCT No. T-91864 was administratively
reconstituted by the Register of Deeds. On June 2, 1979, a Deed of Absolute Sale of a
portion of 20,000 square meters of Lot B-3-A was executed by Filomena Domingo in
favor of Villegas for a consideration of P1,000.00. This document was registered on June
3, 1981 and as a result TCT No. T-131807 was issued by the Register of Deeds to Villegas.
On the same date, the technical description of Lot B-3-A-2 was registered and TCT No. T-
131808 was issued in the name of Domingo. On January 22, 1991, this document was
registered and TCT No. 154962 was issued to the defendant, Joselito Villegas.
On April 10, 1991, the trial court upon a petition filed by Fortune ordered the
reconstitution of the original of TCT No. T-68737. After trial on the merits, the trial court
rendered its assailed decision in favor of Fortune Tobacco, declaring it to be entitled to
the property. Petitioners thus appealed this decision to the Court of Appeals, which
affirmed the trial courts decision.

Issue:
Whether or not Tobacco is the real owner of the property.

Ruling:
Even if Fortune had validly acquired the subject property, it would still be barred from asserting
title because of laches. The failure or neglect, for an unreasonable length of time to do that
which by exercising due diligence could or should have been done earlier constitutes laches. It
is negligence or omission to assert a right within a reasonable time, warranting a presumption
that the party entitled to assert it has either abandoned it or declined to assert it. While it is by
express provision of law that no title to registered land in derogation of that of the registered
owner shall be acquired by prescription or adverse possession, it is likewise an enshrined rule
that even a registered owner may be barred from recovering possession of property by virtue
of laches.


















EQUATORIAL REALTY DEVELOPMENT, INC. & CARMELO &
BAUERMANN, INC vs. MAYFAIR THEATER, INC
G.R. No. 106063
November 21, 2006
Facts:
Carmelo owned a parcel of land, together with two 2-storey buildings constructed
thereon. On June 1, 1967 Carmelo entered into a contract of lease with Mayfair for the
latters lease of a portion of Carmelos property.
Two years later, on March 31, 1969, Mayfair entered into a second contract of lease
with Carmelo for the lease of another portion of Carmelos property.
Both contracts of lease provide identically worded paragraph 8, which reads:

That if the LESSOR should desire to sell the leased premises, the LESSEE shall be given 30-days
exclusive option to purchase the same.
However, that the leased premises is sold to someone other than the LESSEE, the LESSOR is
bound and obligated, as it hereby binds and obligates itself, to stipulate in the Deed of Sale
thereof that the purchaser shall recognize this lease and be bound by all the terms and
conditions thereof.

Mr. Henry Pascal of Carmelo informed Mr. Henry Yang, President of Mayfair, through a
telephone conversation that Carmelo was desirous of selling the entire Claro M. Recto
property. Mr. Pascal told Mr. Yang that a certain Jose Araneta was offering to buy the
whole property for US Dollars 1,200,000, and Mr. Pascal asked Mr. Yang if the latter was
willing to buy the property for Six to Seven Million Pesos.

On September 18, 1974, Mayfair sent another letter to Carmelo purporting to express
interest in acquiring not only the leased premises but the entire building and other
improvements if the price is reasonable. However, both Carmelo and Equatorial
questioned the authenticity of the letter.

Four years later, on July 30, 1978, Carmelo sold its entire C.M. Recto Avenue land and
building, which included the leased premises housing the Maxim and Miramar
theatres, to Equatorial by virtue of a Deed of Absolute Sale, for the total sum of
P11,300,000.00.

In September 1978, Mayfair instituted the action a quo for specific performance and
annulment of the sale of the leased premises to Equatorial. It dismissed the complaint
with costs against the plaintiff. The Court of Appeals reversed the decision of the trial
court.
Issue:
Whether or not Mayfair has the right of first refusal.
Held:
The Court agrees with the Court of Appeals that the aforecited contractual stipulation provides
for a right of first refusal in favor of Mayfair. It is not an option clause or an option contract. It is
a contract of a right of first refusal.

As early as 1916, in the case of Beaumont vs. Prieto, unequivocal was our characterization of an
option contract as one necessarily involving the choice granted to another for a distinct and
separate consideration as to whether or not to purchase a determinate thing at a
predetermined fixed price.

Further, what Carmelo and Mayfair agreed to, by executing the two lease contracts, was that
Mayfair will have the right of first refusal in the event Carmelo sells the leased premises. It is
undisputed that Carmelo did recognize this right of Mayfair, for it informed the latter of its
intention to sell the said property in 1974. There was an exchange of letters evidencing the
offer and counter-offers made by both parties. Carmelo, however, did not pursue the exercise
to its logical end. While it initially recognized Mayfairs right of first refusal, Carmelo violated
such right when without affording its negotiations with Mayfair the full process to ripen to at
least an interface of a definite offer and a possible corresponding acceptance within the 30-
day exclusive option time granted Mayfair, Carmelo abandoned negotiations, kept a low
profile for some time, and then sold, without prior notice to Mayfair, the entire Claro M. Recto
property to Equatorial.

Since Equatorial is a buyer in bad faith, this finding renders the sale to it of the property in
question rescissible. We agree with respondent Appellate Court that the records bear out the
fact that Equatorial was aware of the lease contracts because its lawyers had, prior to the sale,
studied the said contracts. As such, Equatorial cannot tenably claim to be a purchaser in good
faith, and, therefore, rescission lies.



PUP V CA
G.R. No. 143590.
November 14, 2001

Facts:
In the early sixties, petitioner National Development Corporation (NDC), had in its
disposal a ten-hectare property located along Pureza St., Sta. Mesa, Manila. The estate
was popularly known as the NDC compound and covered by Transfer Certificates of Title
Nos. 92885, 110301 and 145470.
Private respondent Firestone Ceramics Inc. manifested its desire to lease a portion of
the property for its ceramic manufacturing business.
NDC and FIRESTONE entered into a contract of lease denominated as Contract No. C-30-
65 covering a portion of the property measured at 2.90118 hectares for use as a
manufacturing plant for a term of ten years, renewable for another ten years under the
same terms and conditions.
In consequence of the agreement, FIRESTONE constructed on the leased premises
several warehouses and other improvements needed for the fabrication of ceramic
products.
Three and a half years later, FIRESTONE entered into a second contract of lease with
NDC over the latter's four-unit pre-fabricated reparation steel warehouse stored in
Daliao, Davao. FIRESTONE agreed to ship the warehouse to Manila for eventual
assembly within the NDC compound. The second contract, denominated as Contract No.
C-26-68, was for similar use as a ceramic manufacturing plant and was agreed expressly
to be "co-extensive with the lease of LESSEE with LESSOR on the 2.60 hectare-lot.
The parties signed a similar contract concerning a six-unit pre-fabricated steel
warehouse which, as agreed upon by the parties, would expire on 2 December 1978.
Prior to the expiration of the aforementioned contract, FIRESTONE wrote NDC
requesting for an extension of their lease agreement. Consequently, the Board of
Directors of NDC adopted the Resolution extending the term of the lease, subject to
several conditions among which was that in the event NDC "with the approval of higher
authorities, decide to dispose and sell these properties including the lot, priority should
be given to the LESSEE".
In pursuance of the resolution, the parties entered into a new agreement for a ten-year
lease of the property, renewable for another ten years, expressly granting FIRESTONE
the first option to purchase the leased premises in the event that it decided "to dispose
and sell these properties including the lot.
The parties' lessor-lessee relationship went smoothly until early 1988 when FIRESTONE,
cognizant of the impending expiration of their lease agreement with NDC, informed the
latter through several letters and telephone calls that it was renewing its lease over the
property. While its letter of 17 March 1988 was answered by Antonio A. Henson,
General Manager of NDC, who promised immediate action on the matter, the rest of its
communications remained unacknowledged.
FIRESTONE's predicament worsened when rumors of NDC's supposed plans to dispose
of the subject property in favor of petitioner Polytechnic University of the Philippines
came to its knowledge.
Forthwith, FIRESTONE served notice on NDC conveying its desire to purchase the
property in the exercise of its contractual right of first refusal. Apprehensive that its
interest in the property would be disregarded, FIRESTONE instituted an action for
specific performance to compel NDC to sell the leased property in its favor.
Following the denial of its petition, FIRESTONE amended its complaint to include PUP
and Executive Secretary Catalino Macaraeg, Jr., as party-defendants, and sought the
annulment of Memorandum Order No. 214.
After trial, judgment was rendered declaring the contracts of lease executed between
FIRESTONE and NDC covering the 2.60-hectare property and the warehouses
constructed thereon valid and existing until 2 June 1999.
The Court of Appeals affirmed the decision of the trial court ordering the sale of the
property in favor of FIRESTONE.

Issue:
Whether or not the Court of Appeals decided a question of substance in a way definitely not in
accord with law or jurisprudence.

Held:
The courts a quo did not hypothesize, much less conjure, the sale of the disputed property by
NDC in favor of petitioner PUP. Aside from the fact that the intention of NDC and PUP to enter
into a contract of sale was clearly expressed in the Memorandum Order No. 214, a close perusal
of the circumstances of this case strengthens the theory that the conveyance of the property
from NDC to PUP was one of absolute sale, for a valuable consideration, and not a mere paper
transfer as argued by petitioners.
A contract of sale, as defined in the Civil Code, is a contract where one of the parties obligates
himself to transfer the ownership of and to deliver a determinate thing to the other or others
who shall pay therefore a sum certain in money or its equivalent. It is therefore a general
requisite for the existence of a valid and enforceable contract of sale that it be mutually
obligatory, i.e., there should be a concurrence of the promise of the vendor to sell a
determinate thing and the promise of the vendee to receive and pay for the property so
delivered and transferred. The Civil Code provision is, in effect, a "catch-all" provision which
effectively brings within its grasp a whole gamut of transfers whereby ownership of a thing is
ceded for a consideration.
Contrary to what petitioners PUP and NDC propose, there is not just one party involved in the
questioned transaction. Petitioners NDC and PUP have their respective charters and therefore
each possesses a separate and distinct individual personality.
























Sps. Litonjua vs. L & R Corporation
G.R. No. 130722.
December 9, 1999

Facts:
This stems from loans obtained by the spouses Litonjua from L&R Corporation in the
aggregate sum of P400,000.00; P200,000.00 of which was obtained on August 6, 1974
and the remaining P200,000.00 obtained on March 27, 1978.
The loans were secured by a mortgageconstituted by the spouses upon their two parcels
of land and the improvements thereon The mortgage was duly registered with the
Register of Deeds.
Spouses Litonjua sold to Philippine White House Auto Supply, Inc. (PWHAS) the parcels
of land they had previously mortgaged to L & R Corporation for the sum of P430,000.00.
Meanwhile, with the spouses Litonjua having defaulted in the payment of their loans, L
& R Corporation initiated extrajudicial foreclosure proceedings with the Ex-Oficio Sheriff
of Quezon City. The mortgaged properties were sold at public auction to L & R
Corporation as the only bidder for the amount of P221,624.58.
The Deputy Sheriff informed L & R Corporation of the payment by PWHAS of the full
redemption price and advised it that it can claim the payment upon surrender of its
owners duplicate certificates of title.
The spouses Litonjua presented for registration the Certificate of Redemption issued in
their favor to the Register of Deeds of Quezon City. The Certificate also informed L & R
Corporation of the fact of redemption and directed the latter to surrender the owners
duplicate certificates of title within five days.
On April 22, 1981, L & R Corporation wrote a letter to the Sheriff, copy furnished to the
Register of Deeds, stating: (1) that the sale of the mortgaged properties to PWHAS was
without its consent, in contravention of paragraphs 8 and 9 of their Deed of Real Estate
Mortgage; and (2) that it was not the spouses Litonjua, but PWHAS, who was seeking to
redeem the foreclosed properties, when under Articles 1236 and 1237 of the New Civil
Code, the latter had no legal personality or capacity to redeem the same.
On the other hand, the spouses Litonjua asked the Register of Deeds to annotate their
Certificate of Redemption as an adverse claim on the titles of the subject properties on
account of the refusal of L & R Corporation to surrender the owners duplicate copies of
the titles to the subject properties. With the refusal of the Register of Deeds to annotate
their Certificate of Redemption, the Litonjua spouses filed a Petition on July 17, 1981
against L & R Corporation for the surrender of the owners duplicate of Transfer
Certificates of Title No. 197232 and 197233 before the then CFI.
While the said case was pending, L & R Corporation executed an Affidavit of
Consolidation of Ownership. The Register of Deeds cancelled Transfer Certificates of
Title No. 197232 and 197233 and in lieu thereof, issued Transfer Certificates of Title No.
280054 and 28055in favor of L & R Corporation, free of any lien or encumbrance. A
complaint for Quieting of Title, Annulment of Title and Damages with preliminary
injunction was filed by the spouses Litonjua and PWHAS against herein respondents
before the then CFI.

Issue
Whether or not the Court of Appeals erred in its decision.

Held
In the case at bar, PWHAS cannot claim ignorance of the right of first refusal granted to L & R
Corporation over the subject properties since the Deed of Real Estate Mortgage containing such
a provision was duly registered with the Register of Deeds. As such, PWHAS is presumed to
have been notified thereof by registration, which equates to notice to the whole world. Thus,
the Decision appealed from was AFFIRMED with the following MODIFICATIONS.















Josefa VS. Zhandong Trading Corporation
417 SCRA 269
DECEMBER 8, 2003
Facts:
Respondent Zhandong delivered to petitioner Josefa, who was introduced to it as a
client by Mr. Tan, the total volume of 313 crates of boards valued at P4,558,100.00
payable within 60 days from delivery.
Instead of paying respondent, petitioner remitted his payments to Tan who in turn
delivered various checks to respondent, who accepted them upon Tans assurance that
said checks came from petitioner.
When a number of the checks bounced, Tan issued his own checks and those of his
mother, but Tan later stopped payments. Respondent demanded payment from Tan
and petitioner but was ignored; hence he filed the instant complaint.
In his answer petitioner averred, that he had already paid all his obligations to
respondent through Tan.
Furthermore, he claimed he is not privy to the agreements between Tan and
respondent, and hence, in case his payments were not remitted to respondent, then it
was not his (petitioner) fault and that respondent should bear the consequences.
Issue:
Whether or not petitioner is liable for payment of the boards to respondent when he did not
negotiate the transaction with it, rather through Tan as intermediary.

Held:
No. The transaction was negotiated between Tan and petitioner who only received the goods
delivered by respondent. Petitioner was not privy to the arrangement between Tan and
respondent. Petitioner has fully paid for the goods to Tan with whom he had arranged the
transaction.

Contracts take effect only between the parties, their successors in interest, heirs, and assigns.
When there is no privity of contract, there is likewise no obligation or liability and thus, no
cause of action arises. Petitioner, being not privy to the transaction between Tan and
respondent, should not be made liable for the failure of Tan to deliver the payment to
respondent. Therefore, respondent should recover the payment from Tan.



Saludo vs. Security Bank
G.R. No. 184041
October 13, 2010
Facts:
On 30 May 1996, Booklight was extended an omnibus line credit facility by SBC in the
amount of P10,000,000.00. Said loan was covered by a Credit Agreement and a
Continuing Suretyship with petitioner as surety, both documents dated 1 August 1996,
to secure full payment and performance of the obligations arising from the credit
accommodation.
Booklight avail of the approved credit facility from 1996 to 1997 and faithfully complied
with the terms of the loan.
On 30 October 1997, SBC approved the renewal of credit facility of Booklight in the
amount of P10,000,000.00 under the prevailing security lending rate. From August 3 to
14, 1998, Booklight executed nine promissory notes in favor of SBC in the aggregate
amount of P9,652,725.00.
For failure to settle the loans upon maturity, demands were made on Booklight and
petitioner for the payment of the obligation but the duo failed to pay. As of 15 May
2000, the obligation of Booklight stood at P10,487,875.41, inclusive of interest past due
and penalty.
On 16 June 2000, SBC filed against Booklight and herein petitioner an action for
collection of sum of money with the RTC. After trial, the RTC ruled that petitioner is
jointly and solidarily liable with Booklight under the Continuing Suretyship Agreement.
The Court of Appeals affirmed in toto the ruling of the RTC.
ISSUE:
Whether or not petitioner should be held solidarily liable for the second credit facility extended
to Booklight

HELD:
Yes. The lameness of petitioners stand is pointed up by his attempt to escape from liability by
labelling the Continuing Suretyship as a contract of adhesion.

A contract of adhesion is defined as one in which one of the parties imposes a ready-made form
of contract, which the other party may accept or reject, but which the latter cannot modify.
One party prepares the stipulation in the contract, while the other party merely affixes his
signature or his adhesion thereto, giving no room for negotiation and depriving the latter of
the opportunity to bargain on equal footing.
A contract of adhesion presupposes that the party adhering to the contract is a weaker party.
That cannot be said of petitioner. He is a lawyer. He is deemed knowledgeable of the legal
implications of the contract that he is signing.
It must be borne in mind, however, that contracts of adhesion are not invalid per se. Contracts
of adhesion, where one party imposes a ready-made form of contract on the other, are not
entirely prohibited. The one who adheres to the contract is, in reality, free to reject it entirely;
if he adheres, he gives his consent.























PCI VS NG Sheung Ngor
A.M. No. P-05-1973.
March 18, 2005
Facts
Complainant EPCIB is the defendant in Civil Case No. CEB-26983 before the Regional
Trial Court (RTC), Branch 16, Cebu City, entitled, Ng Sheung Ngor, doing business under
the name and style Ken Marketing, Ken Appliance Division, Inc. and Benjamin Go,
Plaintiffs, vs. Equitable PCI Bank, Aimee Yu and Ben Apas, Defendants for Annulment
and/or Reformation of Documents and Contracts.
Respondents Antonio A. Bellones and Generoso B. Regalado are the sheriffs in Branches
9 and 16, respectively, of the RTC of Cebu City.
For garnishing accounts maintained by Equitable PCI Bank, Inc. (EPCIB) at Citibank, N.A.,
and Hongkong and Shanghai Bank Corporation (HSBC), allegedly in violation of Section
9(b) of Rule 39 of the Rules of Court, a complaint for grave abuse of authority was filed
by Atty. Paulino L. Yusi against Sheriffs Antonio A. Bellones and Generoso B. Regalado.
There was an offer of other real property by petitioner.
ISSUE:
Did respondents violate the Rules of Court?
Held:
By serving notices of garnishment on Citibank, N.A., HSBC and PNB, Sheriff Regalado violated
EPCIBs right to choose which property may be levied upon to be sold at auction for the
satisfaction of the judgment debt. Thus, it is clear that when EPCIB offered its real properties, it
exercised its option because it cannot immediately pay the full amount stated in the writ of
execution and all lawful fees in cash, certified bank check or any other mode of payment
acceptable to the judgment obligee.
In the case at bar, EPCIB cannot immediately pay by way of Managers Check so it exercised its
option to choose and offered its real properties. With the exercise of the option, Sheriff
Regalado should have ceased serving notices of garnishment and discontinued their
implementation. This is not true in the instant case. Sheriff Regalado was adamant in his
posture even if real properties have been offered which were sufficient to satisfy the judgment
debt.




Teresita Dio vs. St. Ferdinand Memorial Park
G.R. No. 169578
November 30, 2006
Facts:
On December 11, 1973, Teresita Dio agreed to buy, on installment basis, a memorial lot
from the St. Ferdinand Memorial Park, Inc. (SFMPI) in Lucena City.
The purchase was evidenced by a Pre-Need Purchase Agreement. She obliged herself to
abide by all such rules and regulations governing the SFMPI dated May 25, 1972. SFMPI
issued a Deed of Sale and Certificate of Perpetual.
The ownership of Dio over the property was made subject to the rules and regulations
of SFMPI, as well as the government, including all amendments, additions and
modifications that may later be adopted. According to the Rules (Rule 69) Mausoleum
building and memorials should be constructed by the Park Personnel. Lot Owners
cannot contract other contractors for the construction of the said buildings and
memorial, however, the lot owner is free to give their own design for the mausoleum to
be constructed, as long as it is in accordance with the park standards. The construction
shall be under the close supervision of the Park Superintendent.
The mortal remains of Dios husband, father and daughter were interred in the lot at her
own expense, without the knowledge and intervention of SFMPI..
In October 1986, Dio informed SFMPI, through its president and controlling stockholder,
Mildred F. Tantoco, that she was planning to build a mausoleum on her lot and sought
the approval thereof.
Dio showed to Tantoco the plans and project specifications accomplished by her private
contractor at an estimated cost of P60,000.00.
The plans and specifications were approved, but Tantoco insisted that the mausoleum
be built by it or its agents at a minimum cost of P100,000.00 as provided in Rule 69 of
the Rules and Regulations the SFMPI issued on May 25, 1972.
The total amount excluded certain specific designs in the approved plan which if
included would cost Dio much more. Dio, through counsel, demanded that she be
allowed to construct the mausoleum within 10 days, otherwise, she would be impelled
to file the necessary action/s against SFMPI and Tantoco. Dio filed a Complaint for
Injunction with Damages against SFMPI and Tantoco before the RTC.
She averred that she was not aware of Rule 69 of the SFMPI Rules and Regulations; the
amount of P100,000.00 as construction cost of the mausoleum was unconscionable and
oppressive. She prayed that, after trial, judgment be rendered in her favor, granting a
final injunction perpetually restraining defendants from enforcing the invalid Rule 69 of
SFMPIs Rules for Memorial Work in the Mausoleum of the Park or from refusing or
preventing the construction of any improvement upon her property in the park. The
court issued a cease and desist order against defendants.
The trial court rendered judgment in favor of defendants. On appeal, the CA affirmed
the decision of the trial court.

Issue:
Whether or not petitioner had knowledge of Rule 69 of SFMPI Rules and Regulations for
memorial works in the mausoleum areas of the park when the Pre-Need Purchase Agreement
and the Deed of Sale was executed and whether the said rule is valid and binding upon
petitioner.

Ruling:
Plaintiffs allegation that she was not aware of the said Rules and Regulations lacks credence.
Admittedly, in her Complaint and during the trial, plaintiff testified that she informed the
defendants of her intention to construct a mausoleum. Even counsel for the plaintiff, who is the
son of the plaintiff, informed the Court during the trial in this case that her mother, the plaintiff
herein, informed the defendants of her plan to construct and erect a mausoleum. This act of
the plaintiff clearly shows that she was fully aware of the said rules and regulations otherwise
she should not consult, inform and seek permission from the defendants of her intention to
build a mausoleum if she is not barred by the rules and regulations to do the same. When she
signed the contract with the defendants, she was estopped to question and attack the legality
of said contract later on.
Further, a contract of adhesion, wherein one party imposes a readymade form of contract on
the other, is not strictly against the law. A contract of adhesion is as binding as ordinary
contracts, the reason being that the party who adheres to the contract is free to reject it
entirely. Contrary to petitioners contention, not every contract of adhesion is an invalid
agreement.








PILITEL vs. Delfino Tecson
G.R. No. 156966.
May 7, 2004
Facts:
On various dates in 1996, Delfino C. Tecson applied for 6 cellular phone subscriptions
with petitioner Pilipino Telephone Corporation (PILTEL), a company engaged in the
telecommunications business, which applications were each approved and covered,
respectively, by six mobiline service agreements.
On 05 April 2001, respondent filed with the Regional Trial Court a complaint against
petitioner for a Sum of Money and Damages. Petitioner moved for the dismissal of the
complaint on the ground of improper venue, citing a common provision in the mobiline
service agreements to the effect that - Venue of all suits arising from this Agreement or
any other suit directly or indirectly arising from the relationship between PILTEL and
subscriber shall be in the proper courts of Makati, Metro Manila. Subscriber hereby
expressly waives any other venues.
The Regional Trial Court of Iligan City, Lanao del Norte, denied petitioners motion to
dismiss and required it to file an answer within 15 days from receipt thereof.
Petitioner filed a petition for certiorari before the Court of Appeals. The Court of
Appeals saw no merit in the petition and affirmed the assailed orders of the trial court.

Issue:
Whether or not the contract in this case is one of a contract of adhesion
Ruling:
The contract herein involved is a contract of adhesion. But such an agreement is not per se
inefficacious. The rule instead is that, should there be ambiguities in a contract of adhesion,
such ambiguities are to be construed against the party that prepared it. If, however, the
stipulations are not obscure, but are clear and leave no doubt on the intention of the parties,
the literal meaning of its stipulations must be held controlling. A contract of adhesion is just as
binding as ordinary contracts. It is true that this Court has, on occasion, struck down such
contracts as being assailable when the weaker party is left with no choice by the dominant
bargaining party and is thus completely deprived of an opportunity to bargain effectively.
Nevertheless, contracts of adhesion are not prohibited even as the courts remain careful in
scrutinizing the factual circumstances underlying each case to determine the respective claims
of contending parties on their efficacy. In the case at bar, respondent secured 6 subscription
contracts for cellular phones on various dates. It would be difficult to assume that, during each
of those times, respondent had no sufficient opportunity to read and go over the terms and
conditions embodied in the agreements. Respondent continued, in fact, to acquire in the
pursuit of his business subsequent subscriptions and remained a subscriber of petitioner for
quite sometime.
PAL vs. CA
G.R. No. 119706
March 14, 1996
Facts:
On January 27, 1990, plaintiff Gilda C. Mejia shipped thru defendant, Philippine Airlines,
one (1) unit microwave oven under PAL Air Waybill No. 0-79-1013008-3, with a gross
weight of 33 kilograms from San Francisco, U.S.A. to Manila, Philippines.
Upon arrival, however, of said article in Manila, Philippines, plaintiff discovered that its
front glass door was broken and the damage rendered it unserviceable.
Demands both oral and written were made by plaintiff against the defendant for the
reimbursement of the value of the damaged microwave oven, and transportation
charges paid by plaintiff to defendant company.
But these demands fell on deaf ears. This is because, according to petitioner, was filed
out of time under paragraph 12, a (1) of the Air Waybill which provides: "(a) the person
entitled to delivery must make a complaint to the carrier in writing in case: (1) of visible
damage to the goods, immediately after discovery of the damage and at the latest
within 14 days from the receipt of the goods.
On September 25, 1990, Gilda C. Mejia filed an action for damages against the
petitioner in the lower court. The latter rendered a decision rendering PAL liable to pay,
actual, moral and exemplary damages as well as attorneys fees.
On appeal, the Court of Appeals similarly ruled in favor of private respondent by
affirming in full the trial court's judgment, with costs against petitioner.

Issue:
Whether or not the air waybill is a contract of adhesion and its provisions should be strictly
construed against herein petitioner.

Held:
The Air Waybill is a contract of adhesion considering that all the provisions thereof are
prepared and drafted only by the carrier. The only participation left of the other party is to affix
his signature thereto. In the earlier case of Angeles v. Calasanz, the Supreme Court ruled that
the terms of a contract of adhesion must be interpreted against the party who drafted the
same.



ERMITAO VS. COURT OF APPEALS
306 SCRA 218
April 21, 2009

Facts:
Petitioner Luis Ermitao applied for a credit card from private respondent BPI Express
Card Corp. (BECC) on October 8, 1986 with his wife, Manuelita, as extension card holder.
The spouses were given credit limit of P10, 000.00. They often exceeded this credit limit
without protest from BCC.
On August 9, 1989, Manuelitas bag was snatched from her as she was shopping at the
greenbelt mall in Makati. Among the items inside the bag was her BECC credit card.
That same night she informed, by telephone, BECC of the loss. The call was received by
BECC offices through a certain Gina Banzon. This was followed by a letter dated August
30, 1989. She also surrendered Luis credit card and requested for replacement cards.
In her letter, Manuelita stated that she shall not be responsible for any and all charges
incurred [through the use of the lost card] after August 29, 1989.
However, when Luis received his monthly billing statement from BECC dated September
20, 1989, the charges included amounts for purchases were made, one amounting to
P2,350.05 and the other, P607.50. Manuelita received a billing statement dated October
20,1989 which required her to immediately pay the total amount of P3,197.70 covering
the same (unauthorized) purchases.
Manuelita wrote again BECC disclaiming responsibility for those charges, which were
made after she had served BECC with notice of loss of her card.
However, BECC, in a letter dated July 13, 1990, pointed to Luis the stipulation in their
contract. However, Luis stressed that the contract BECC was referring to was a contract
of adhesion and warned that if BECC insisted on charging him and his wife for the
unauthorized purchases, they will sue BECC continued to bill the spouses for said
purchases.

Issue:
Whether or not petitioners have no chance to contest the stipulations appearing in the credit
card application that was drafted entirely by private respondent, thus, a clear contract of
adhesion.

Held:
The contract between the parties in this case is indeed a contract of adhesion, so-called
because its terms are prepared by only one party while the other party merely affixes his
signature signifying his adhesion thereto. Such contracts are not void in themselves. They are
as binding as ordinary contracts. Parties who enter in to such contracts are free to reject the
stipulations entirely.
In this case, the cardholder, Manuelita, has complied with what was required of her under the
contract with BECC, She immediately notified BECC of loss of her card on the same day it was
lost and, the following day, she sent a written notice of the loss to BECC.
Clearly, what happened in this case was that BECC failed to notify promptly the establishment
in which the unauthorized purchases were made with the use of Manuelitas lost card.




















Uniwide vs Titan-Ikeda
G.R. No. 126619
December 20, 2006

Facts:
The case originated from an action for a sum of money filed by Titan-Ikeda Construction
and Development Corporation (Titan) against Uniwide Sales Realty and Resources
Corporation (Uniwide) arising fromUniwides non-payment of certain claims billed by
Titan after completion of three projects covered by agreements they entered into with
each other.
The agreements between Titan and Uniwide are briefly described below.
PROJECT 1. The first agreement was a written Construction Contract entered into by Titan
and Uniwide sometime in May 1991 whereby Titan undertook to construct Uniwides
Warehouse Club and Administration Building in Libis, Quezon City for a fee of P120,936,591.50,
payable in monthly progress billings to be certified to by Uniwides representative. The parties
stipulated that the building shall be completed not later than 30 November 1991. As found by
the CIAC, the building was eventually finished on 15 February 1992 and turned over to Uniwide.

PROJECT 2. Sometime in July 1992, Titan and Uniwide entered into the second agreement
whereby the former agreed to construct an additional floor and to renovate the latters
warehouse located at the EDSA Central Market Area in Mandaluyong City. There was no written
contract executed between the parties for this project. Construction was allegedly to be on the
basis of drawings and specifications provided by Uniwides structural engineers. The parties
proceeded on the basis of a cost estimate of P21,301,075.77 inclusive of Titans 20% mark-up.
Titan conceded in its complaint to having received P15,000,000.00 of this amount. This project
was completed in the latter part of October 1992 and turned over to Uniwide.

PROJECT 3. The parties executed the third agreement in May 1992. In a written Construction
Contract, Titan undertook to construct the Uniwide Sales Department Store Building in
Kalookan City for the price of P118,000,000.00 payable in progress billings to be certified to by
Uniwides representative. It was stipulated that the project shall be completed not later than 28
February 1993. The project was completed and turned over to Uniwide in June 1993.

Uniwide asserted in its petition that: (a) it overpaid Titan for unauthorized additional
works in Project 1 and Project 3; (b) it is not liable to pay the Value-Added Tax for
Project 1; (c) it is entitled to liquidated damages for the delay incurred in constructing
Project 1 and Project 3; and (d) it should not have been found liable for deficiencies in
the defectively constructed Project 2.

Issue
What are the mutual liabilities of the parties with each other?

Held
On Project 1 Libis: Uniwide is absolved of any liability for the claims made by Titan on this
Project.

Project 2 Edsa Central:Uniwide is absolved of any liability for VAT payment on this project,
the same being for the account of Titan. On the other hand, Titan is absolved of any liability on
the counterclaim for defective construction of this project. Uniwide is held liable for the unpaid
balance in the amount of P6,301,075.77 which is ordered to be paid to the Titan with 12%
interest per annum commencing from 19 December 1992 until the date of payment.

On Project 3 Kalookan: Uniwide is held liable for the unpaid balance in the amount of
P5,158,364.63 which is ordered to be paid to Titan with 12% interest per annum commencing
from 08 September 1993 until the date of payment. Uniwide is held liable to pay in full the VAT
on this project, in such amount as may be computed by the Bureau of Internal Revenue to be
paid directly thereto. The BIR is hereby notified that Uniwide Sales Realty and Resources
Corporation has assumed responsibility and is held liable for VAT payment on this project. This
accordingly exempts Claimant Titan-Ikeda Construction and Development Corporation from this
obligation.













Heirs of Augusto Salas, Jr. vs. Laperal
G.R. NO. 135362.
December 13, 1999

Facts:
Salas, Jr. was the registered owner of a vast tract of land in Lipa City, Batangas spanning
1,484,354 square meters. On May 15, 1987, he entered into an Owner-Contractor
Agreement with respondent Laperal Realty Corporation to render and provide complete
(horizontal) construction services on his land.
Salas, Jr. executed a Special Power of Attorney in favor of respondent Laperal Realty to
exercise general control, supervision and management of the sale of his land, for cash or
on installment basis. On June 10, 1989, Salas, Jr. left his home in the morning for a
business trip to Nueva Ecija. He never returned.
On August 6, 1996, Teresita Diaz Salas filed with the Regional Trial Court a verified
petition for the declaration of presumptive death of her husband, Salas, Jr., who had
then been missing for more than seven (7) years. It was granted on December 12, 1996.
Meantime, respondent Laperal Realty subdivided the land of Salas, Jr. and sold
subdivided portions thereof to respondents Rockway Real Estate Corporation and South
Ridge Village, Inc. on February 22, 1990; to respondent spouses Abrajano and Lava and
Oscar Dacillo on June 27, 1991; and to respondents Eduardo Vacuna, Florante de la Cruz
and Jesus Vicente Capalan on June 4, 1996.
On February 3, 1998, petitioners as heirs of Salas, Jr. filed in the Regional Trial Court a
Complaint for declaration of nullity of sale, reconveyance, cancellation of contract,
accounting and damages against herein respondents. Laperal Realty filed a Motion to
Dismisson the ground that petitioners failed to submit their grievance to arbitration as
required under Article VI of the Agreement. Spouses Abrajano and Lava and respondent
Dacillo filed a Joint Answer with Counterclaim and Crossclaim praying for dismissal of
petitioners Complaint for the same reason.
The trial court issued an Order dismissing petitioners Complaint for non-compliance
with the arbitration clause.

Issue:

Whether or not the trial court erred in dismissing the complaint.

Held:
A submission to arbitration is a contract. As such, the Agreement, containing the stipulation on
arbitration, binds the parties thereto, as well as their assigns and heirs.But only they.
Petitioners, as heirs of Salas, Jr., and respondent Laperal Realty are certainly bound by the
Agreement. If respondent Laperal Realty, had assigned its rights under the Agreement to a third
party, making the former, the assignor, and the latter, the assignee, such assignee would also
be bound by the arbitration provision since assignment involves such transfer of rights as to
vest in the assignee the power to enforce them to the same extent as the assignor could have
enforced them against the debtoror in this case, against the heirs of the original party to the
Agreement. However, respondents Rockway Real Estate Corporation, South Ridge Village, Inc.,
Maharami Development Corporation, spouses Abrajano, spouses Lava, Oscar Dacillo, Eduardo
Vacuna, Florante de la Cruz and Jesus Vicente Capellan are not assignees of the rights of
respondent Laperal Realty under the Agreement to develop Salas, Jr.s land and sell the same.
They are, rather, buyers of the land that respondent Laperal Realty was given the authority to
develop and sell under the Agreement. As such, they are not assigns contemplated in Art.
1311 of the New Civil Code which provides that contracts take effect only between the parties,
their assigns and heirs.
Laperal Realty, as a contracting party to the Agreement, has the right to compel petitioners to
first arbitrate before seeking judicial relief. However, to split the proceedings into arbitration
for respondent Laperal Realty and trial for the respondent lot buyers, or to hold trial in
abeyance pending arbitration between petitioners and respondent Laperal Realty, would in
effect result in multiplicity of suits, duplicitous procedure and unnecessary delay. On the other
hand, it would be in the interest of justice if the trial court hears the complaint against all
herein respondents and adjudicates petitioners rights as against theirs in a single and complete
proceeding.
Hence, the trial courts decision was nullified and set aside. Said court was ordered to proceed
with the hearing.


BIENVENIDO R. MEDRANO and IBAAN RURAL BANK vs. COURT OF
APPEALS, PACITA G. BORBON, JOSEFINA E. ANTONIO and ESTELA
A. FLOR
G.R. No. 150678
February 18, 2005

Facts:

When the 17-hectare mango plantation priced at P2,200,000.00 was foreclosed
by the bank, petitioner asked his cousin-in-law Estela Flor to look for a buyer.
Mr. Dominador Lee, through Pacita Borbon, and through Flors recommendation,
was able to buy the mango plantation.
A Letter of Authority was executed between Medrano and the respondents
expressly stating that respondents shall be given 5% of the total purchase price
of the land as commission if they could help in looking for a buyer.
Despite payment of the purchase price and execution of the Deed of Sale
however, the respondents remained unpaid and were not given the commission
they were told of.
Judgment was rendered by the trial court in favor of the respondents, and
petitioners were ordered to pay, jointly and severally, the 5% brokers
commission to them.
On appeal to the Court of Appeals, petitioners reiterate that the Letter of
Authority was not binding and enforceable because Medrano, who signed the
same, was not the owner of the party.
They likewise allege that respondents have no right to be granted commission
because they did not perform any act to consummate the sale.
Still, the CA affirmed the ruling of the trial court.
For petitioners, the respondents did not actually perform any acts of
negotiation as required in the letter.

Issue:

Whether or not respondents are entitled to brokers commission of 5%

Held:

Yes. The role of the respondents in the transaction is undisputed. Whether or not they
participated in the negotiations of the sale is of no moment. Armed with authority to procure a
purchaser and with a license to act as broker, we see no reason why the respondents cannot
recover compensation for their efforts when, in fact, they are procuring cause of the sale. In the
absence of fraud, irregularity or illegality in its execution, such letter-authority serves as a
contract, and is considered as the law between the parties. As such, Medrano cannot renege on
the promise to pay commission on the flimsy excuse that he is not the registered owner of the
property.















MANUEL B. TAN, GREGG M. TECSON and ALEXANDER SALDAA vs.
EDUARDO R. GULLAS and NORMA S. GULLAS
G.R. No. 143978
December 3, 2002

Facts:
Private respondents, Spouses Eduardo R. Gullas and Norma S. Gullas executed a
special power of attorney authorizing petitioners Manuel Tan, a licensed real estate
broker, and his associates Gregg Tecson and Alexander Saldaa, to negotiate for the
sale of their parcels of land at Five Hundred Fifty Pesos (P550.00) per square meter,
at a commission of 3% of the gross price.
The power of attorney was non-exclusive and effective for one month.
The property was sold to the Sisters of Mary of Banneaux, Inc. at the rate of P220.00
per square meter through the assistance of Eufemia Caete who was granted a
special power of attorney in to sell, transfer and convey the land.
Petitioners filed a complaint for recovery of broker's fee against the private
respondents when the latter refused to give them their commission, alleging that
another group of agents are responsible for the sale of the land.
Petitioners argue that they are the efficient procuring cause in bringing about the
sale of the property.
Private respondents however claim that it was another broker, Roberto Pacana who
introduced the Sisters of Mary ahead of petitioners.
The lower court ruled in favor of herein petitioners and ordered the respondents in
this case to pay the former P624,684.00 as brokers fee with legal interest at the rate
of 6% per annum from the date of filing of the complaint.
On appeal of both parties to the CA, the lower courts decision was reversed and set
aside, and another judgment was rendered dismissing the complaint.

Issue:

Whether or not petitioners are entitled to brokers fees

Held:

Yes. Private respondents failed to prove their contention that Pacana began
negotiations with private respondents way ahead of petitioners. The only piece of evidence
that the private respondents were able to present is an undated and unnotarized Special Power
of Attorney in favor of Pacana. Petitioners, on the other hand, were given the written authority
to sell by the private respondents.

In the case of Alfred Hahn v. Court of Appeals and Bayerische Motoren Werke
Aktiengesellschaft (BMW) we ruled that, An agent receives a commission upon the successful
conclusion of a sale. On the other hand, a broker earns his pay merely by bringing the buyer and
the seller together, even if no sale is eventually made. Clearly, therefore, petitioners, as
brokers, should be entitled to the commission whether or not the sale of the property subject
matter of the contract was concluded through their efforts.

Concerning the rate of commission, equity considerations dictate that petitioners
commission must be based on the actual price for which the land was sold (P200.00 per square
meter), and not the price at which the land was offered for sale (P530.00 per square meter). To
rule otherwise would constitute unjust enrichment on the part of petitioners as brokers.









JESUS M. GOZUN vs. JOSE TEOFILO T. MERCADO a.k.a. DON PEPITO
MERCADO
G.R. No. 167812
December 19, 2006

Facts:

When respondent vied for the gubernatorial post in Pampanga during the 1995
local elections, he requested petitioner, who was the owner of JMG Publishing
House to submit to him draft samples and price quotation of campaign
materials.
Petitioner claimed that he was told by respondents wife that respondent
already approved the price quotation so he immediately started printing and
making the campaign materials.
Due to the urgency and limited time to do the job, petitioner availed of the
services and facilities of Metro Angeles Printing and of St. Joseph Printing Press,
owned by his daughter and mother, respectively.
Meanwhile, respondents sister-in-law, Lilian Soriano obtained from petitioner
cash advance of P253,000 allegedly for the allowances of poll watchers and for
related expenses.
Petitioner later sent to respondent a Statement of Account in the total amount
of P2,177,906 itemized as follows: P640,310 for JMG Publishing House; P837,696
for Metro Angeles Printing; P446,900 for St. Joseph Printing Press; and P253,000,
the "cash advance" obtained by respondents sister-in-law.
Only P1,000,000 has been paid by respondents wife, but respondent failed to
settle the balance.
Petitioner filed a complaint against respondent to collect the remaining amount
of P1,177,906 plus "inflationary adjustment" and attorneys fees.
Respondent claimed that he never entered into a contract with petitioner for the
printing of campaign materials and that those delivered to him were donations
from various sources.
The CA held that other than petitioners testimony, there was no evidence to
support his claim that Lilian was authorized by respondent to borrow money on
his behalf.
It noted that the acknowledgment receipt signed by Lilian did not specify in what
capacity she received the money; thus, applying Article 1317 of the Civil Code, it
held that petitioners claim for P253,000 is unenforceable.

Issue:

Whether or not petitioner can enforce claims for the P253,000 against respondent

Held:

No. The receipt issued by petitioner presented by plaintiff-appellee to support his claim
unfortunately only indicates the Two Hundred Fifty Three Thousand Pesos (P253,0000.00) was
received by one Lilian R. Soriano on 31 March 1995, but without specifying for what reason the
said amount was delivered and in what capacity did Lilian R. Soriano received the money.
Nowhere in the note can it be inferred that defendant-appellant was connected with the said
transaction.

Under Article 1317 of the New Civil Code, a person cannot be bound by contracts he did
not authorize to be entered into his behalf. It bears noting that Lilian signed in the receipt in her
name alone, without indicating therein that she was acting for and in behalf of respondent. She
thus bound herself in her personal capacity and not as an agent of respondent or anyone for
that matter.

The trial courts decision is modified in that the amount payable by respondent to
petitioner is reduced to P924,906.



















STA. LUCIA REALTY & DEVELOPMENT, INC. vs. SPOUSES
FRANCISCO & EMELIA BUENAVENTURA
G.R. No. 177113
October 2, 2009

Facts:

Petitioner originally sold the subject lot to Loida Gonzales Alfonso, and the latter
subsequently sold the same to herein respondents.
They filed a complaint for Specific Performance, Damages and Attorneys Fees
before the Housing and Land Use Regulatory Board (HLURB) against petitioner,
upon learning that their lot has been subdivided and occupied by two other
persons; and that like respondents, the two occupants were also issued a
construction permit by petitioner.
Petitioner averred, among others, that the lot was owned by its joint-venture
partner ACL Development Corporation; and that it was RCD Realty Corporation
which caused the subdivision of the lot and constructed separate residential
buildings thereon.
Petitioner thus filed a third-party complaint against ACL and RCD so that they
may be held jointly and severally liable in case the judgment would be decided
against them.
The HLURB Arbiter ruled in favor of the spouses, holding in part that it was
petitioners neglect that ultimately led to the instant dispute.

Issue:

Whether or not petitioner has privity of contract with respondents

Held:

Yes. As assignees or successors-in-interest of Alfonso to Lot 3, Block 4, Phase II in
petitioners subdivision project, respondents succeed to what rights the former had; and what
is valid and binding against Alfonso is also valid and binding as against them. In effect,
respondents stepped into the shoes of Alfonso and such transfer of rights also vests upon them
the power to claim ownership and the authority to demand to build a residential house on the
lot to the same extent as Alfonso could have enforced them against petitioner.

Article 1311 of the New Civil Code states that, contracts take effect only between the
parties, their assigns and heirs, except in case where the rights and obligations arising from the
contract are not transmissible by their nature, or by stipulation or by provision of law. In this
case, the rights and obligations between petitioner and Alfonso are transmissible. There was no
mention of a contractual stipulation or provision of law that makes the rights and obligations
under the original sales contract for Lot 3, Block 4, Phase II intransmissible. Hence, Alfonso can
transfer her ownership over the said lot to respondents and petitioner is bound to honor its
corresponding obligations to the transferee or new lot owner in its subdivision project.







































JOSEPH CHAN, WILSON CHAN and LILY CHAN vs. BONIFACIO S.
MACEDA, JR.
G.R. No. 142591
April 30, 2003

Facts:

Respondent Bonifacio S. Maceda, Jr. obtained a P7.3 million loan from the
Development Bank of the Philippines for the construction of his New Gran Hotel
Project in Tacloban City.
Respondent consequently entered into a building construction contract with
Moreman Builders Co., Inc.
Moreman deposited the construction materials bought by respondent in the
warehouse of herein petitioners Wilson and Lily Chan free of charge.
The building construction contract was rescinded by the court due to Moremans
inability to finish.
Meanwhile, during the pendency of the case, respondent ordered petitioners to
return to him the construction materials deposited by Moreman in their
warehouse.
Upon being told by petitioners that Moreman withdrew the construction
materials in 1977, respondent filed a complaint for damages with an application
for a writ of preliminary attachment against petitioners.
The trial court rendered its decision in favor of respondent, ordering the award
of actual, moral and exemplary damages, and attorneys fees.

Issue:

Whether or not respondent has the right to demand the return of the construction
materials, and to demand damages

Held:

No. Considering that respondent failed to prove (1) the existence of any contract of
deposit between him and petitioners, nor between the latter and Moreman in his favor, and (2)
that there were construction materials in petitioners warehouse at the time of respondents
demand to return the same, we hold that petitioners have no corresponding obligation or
liability to respondent with respect to those construction materials. Hence, respondent likewise
has no right whatsoever to claim for damages.

Under Article 1311 of the Civil Code, contracts are binding upon the parties (and their
assigns and heirs) who execute them. When there is no privity of contract, there is likewise no
obligation or liability to speak about and thus no cause of action arises. Specifically, in an action
against the depositary, the burden is on the plaintiff to prove the bailment or deposit and the
performance of conditions precedent to the right of action. A depositary is obliged to return the
thing to the depositor, or to his heirs or successors, or to the person who may have been
designated in the contract. Every cause of action ex-contractu must be founded upon a
contract, oral or written, express or implied.




































TIMOTEO BALUYOT, JAIME BENITO, BENIGNO EUGENIO, ROLANDO
GONZALES, FORTUNATO FULGENCIO and CRUZ-NA-LIGAS
HOMESITE ASSOCIATION, INC. vs. THE HONORABLE COURT OF
APPEALS, THE QUEZON CITY GOVERNMENT and UNIVERSITY OF
THE PHILIPPINES
G.R. No. 122947
July 22, 1999

Facts:

Petitioners are residents of Barangay Cruz-na-Ligas, Diliman, Quezon City which
land was the subject of a land registration case praying that the same land shall
be excluded from the technical description in the Certificate of Title of the
University of the Philippines.
To settle the case, UP made an assurance that an area of 15.8379 hectares of the
land to be donated in favor of Quezon City Government shall be subdivided and
distributed for the benefits of the petitioners.
A Deed of Conditional Donation was executed but UP President Jose Abueva
failed to deliver the Certificate of Title covering the property to enable the
Quezon City Government to register the Deed.
Upon expiration of the eighteen months period for alleged non-compliance of
the Quezon City Government with the terms and conditions, Mr. Abueva
revoked the Deed of Donation by issuing Administrative Order No. 21.
The petitioners filed an action for specific performance with preliminary
injunction against the UP and the Quezon City Government.
The Court of Appeals ordered for the dismissal of the case.

Issue:

Whether or not petitioners have a cause of action

Held:

Yes. We find all the elements of a cause of action contained in the amended complaint
of petitioners. While, admittedly, petitioners were not parties to the deed of donation, they
anchor their right to seek its enforcement upon their allegation that they are intended
beneficiaries of the donation to the Quezon City government.

The following requisites must be present in order to have a stipulation pour atrui under
Article 1311, paragraph two, of the Civil Code: (1) there must be a stipulation in favor of a third
person; (2) the stipulation must be a part, not the whole of the contract; (3) the contracting
parties must have clearly and deliberately conferred a favor upon a third person, not a mere
incidental benefit or interest; (4) the third person must have communicated his acceptance to
the obligor before its revocation; and (5) neither of the contracting parties bears the legal
representation or authorization of the third party.

The allegations in the following paragraphs of the amended complaint are sufficient to
bring petitioners action within the purview of the aforementioned provision: 1. Paragraph 17,
that the deed of donation contains a stipulation that the Quezon City government, as donee, is
required to transfer to qualified residents of Cruz-na-Ligas, by way of donations, the lots
occupied by them; 2. The same paragraph, that this stipulation is part of conditions and
obligations imposed by UP, as donor, upon the Quezon City government, as donee; 3.
Paragraphs 15 and 16, that the intent of the parties to the deed of donation was to confer a
favor upon petitioners by transferring to the latter the lots occupied by them; 4. Paragraph 19,
that conferences were held between the parties to convince UP to surrender the certificates of
title to the city government, implying that the donation had been accepted by petitioners by
demanding fulfillment thereof[16] and that private respondents were aware of such
acceptance; and 5. All the allegations considered together from which it can be fairly inferred
that neither of private respondents acted in representation of the other; each of the private
respondents had its own obligations, in view of conferring a favor upon petitioners.

The case is ordered remanded to the trial court for further proceedings.



















SPOUSES ADELINA S. CUYCO and FELICIANO U. CUYCO vs. SPOUSES
RENATO CUYCO and FILIPINA CUYCO
G.R. No. 168736
April 19, 2006

Facts:

Petitioners obtained an initial loan of P1.5M from respondents, payable within 1
year at 18% interest per annum, and secured by a Real Estate Mortgage over a
parcel of land with improvements; and a subsequent loan in the aggregate
amount of P1.2M on different dates.
Only P291,700 of the debt was paid, thus prompting respondents to file a
complaint for foreclosure of mortgage.
The RTC rendered judgment in favor of respondents, holding that all the
additional loans were secured by the real estate mortgage, stating in part that It
is extremely difficult for the court to perceive that the plaintiffs required the
defendants to execute a mortgage on the first loan and thereafter fail to do so
on the succeeding loans. Such contrary behavior is unlikely.
The Court of Appeals modified the RTC Decision, holding that only three of the
loans are secured by the mortgage, i.e., the P1,500,000.00 loan obtained on 25
November 1991; the P150,000.00 loan obtained on 01 July 1992; and the
P500,000.00 loan obtained on 05 September 1992.

Issue:

Whether or not the mortgage secures all the loans obtained

Held:

No. As a general rule, a mortgage liability is usually limited to the amount mentioned in
the contract. While a real estate mortgage may exceptionally secure future loans or
advancements, these future debts must be sufficiently described in the mortgage contract. An
obligation is not secured by a mortgage unless it comes fairly within the terms of the mortgage
contract.

It is clear from a perusal of the real estate mortgage between the parties that there is
no stipulation that the mortgaged realty shall also secure future loans and advancements. Thus,
what applies is the general rule above stated. Even if the parties intended the additional loans
of P150,000.00 obtained on May 30, 1992, P150,000.00 obtained on July 1, 1992, and
P500,00.00 obtained on September 5, 1992 to be secured by the same real estate mortgage, as
shown in the acknowledgement receipts, it is not sufficient in law to bind the realty for it was
not made substantially in the form prescribed by law.

Besides, by express provisions of Section 127 of Act No. 496, a mortgage affecting land,
whether registered under said Act or not registered at all, is not deemed to be sufficient in law
nor may it be effective to encumber or bind the land unless made substantially in the form
therein prescribed. It is required, among other things, that the document be signed by the
mortgagor executing the same, in the presence of two witnesses, and acknowledged as his free
act and deed before a notary public. A mortgage constituted by means of a private document
obviously does not comply with such legal requirements.

What the parties could have done in order to bind the realty for the additional loans
was to execute a new real estate mortgage or to amend the old mortgage conformably with the
form prescribed by the law. Failing to do so, the realty cannot be bound by such additional
loans, which may be recovered by the respondents in an ordinary action for collection of sums
of money.




























ALLAN C. GO, doing business under the name and style, ACG
Express Liner vs. MORTIMER F. CORDERO
G.R. No. 164703
May 4, 2010

Facts:

Mortimer F. Cordero, Vice-President of Pamana Marketing Corporation
(Pamana), ventured into the business of marketing inter-island passenger
vessels.
Tony Robinson, an Australian national based in Brisbane, Australia, who is the
Managing Director of Aluminum Fast Ferries Australia (AFFA), appointed Cordero
as the exclusive distributor of AFFA catamaran and other fast ferry vessels in the
Philippines.
After negotiations with Felipe Landicho and Vincent Tecson, lawyers of Allan C.
Go who is the owner/operator of ACG Express Liner of Cebu City, a single
proprietorship, Cordero was able to close a deal for the purchase of two (2)
SEACAT 25 as evidenced by the Memorandum of Agreement dated August 7,
1997.
Per agreement between Robinson and Cordero, the latter shall receive
commissions 22.43% of the purchase price, from the sale of each vessel.
However, Cordero later discovered that Go was dealing directly with Robinson in
canvassing for a second catamaran engine.
Cordero instituted Civil Case No. 98-35332 seeking to hold Robinson, Go, Tecson
and Landicho liable jointly and solidarily for conniving and conspiring together in
violating his exclusive distributorship in bad faith and wanton disregard of his
rights, thus depriving him of his due commissions from the sale of the vessels
and causing him actual, moral and exemplary damages and attorneys fees.
The trial court ruled in favor of herein respondent and held Go, Robinson,
Landicho and Tecson jointly and solidary liable.
The CA sustained the trial court in ruling that Cordero is entitled to damages for
the breach of his exclusive distributorship agreement with AFFA.

Issue:
Whether or not petitioner and his lawyers can be held liable for Corderos unpaid
commissions, considering that the same is the sole obligation of AFFA
Held:
Yes. The act of Go, Landicho and Tecson in inducing Robinson and AFFA to enter into
another contract directly with ACG Express Liner to obtain a lower price for the second vessel
resulted in AFFAs breach of its contractual obligation to pay in full the commission due to
Cordero and unceremonious termination of Corderos appointment as exclusive distributor.
Following our pronouncement in Gilchrist v. Cuddy (supra), such act may not be deemed
malicious if impelled by a proper business interest rather than in wrongful motives. The
attendant circumstances, however, demonstrated that respondents transgressed the bounds of
permissible financial interest to benefit themselves at the expense of Cordero.

Respondents furtively went directly to Robinson after Cordero had worked hard to close
the deal for them to purchase from AFFA two (2) SEACAT 25, closely monitored the progress of
building the first vessel sold, attended to their concerns and spent no measly sum for the trip to
Australia with Go, Landicho and Gos family members. But what is appalling is the fact that even
as Go, Landicho and Tecson secretly negotiated with Robinson for the purchase of a second
vessel, Landicho and Tecson continued to demand and receive from Cordero their
commission or cut from Corderos earned commission from the sale of the first SEACAT 25.

Go, Robinson, Tecson and Landicho clearly connived not only in ensuring that Cordero
would have no participation in the contract for sale of the second SEACAT 25, but also that
Cordero would not be paid the balance of his commission from the sale of the first SEACAT 25.
This, despite their knowledge that it was commission already earned by and due to Cordero.
Thus, the trial and appellate courts correctly ruled that the actuations of Go, Robinson, Tecson
and Landicho were without legal justification and intended solely to prejudice Cordero.

While it is true that a third person cannot possibly be sued for breach of contract
because only parties can breach contractual provisions, a contracting party may sue a third
person not for breach but for inducing another to commit such breach. Article 1314 of the Civil
Code provides that Any third person who induces another to violate his contract shall be liable
for damages to the other contracting party. The elements of tort interference are: (1)
existence of a valid contract; (2) knowledge on the part of the third person of the existence of a
contract; and (3) interference of the third person is without legal justification. All such elements
are present in this case.
HERMINIO TAYAG vs. AMANCIA LACSON, ROSENDO LACSON,
ANTONIO LACSON, JUAN LACSON, TEODISIA LACSON-ESPINOSA
and THE COURT OF APPEALS
G.R. No. 134971
March 25, 2004

Facts:

Respondents were the original owners of three parcels of land located in
Mabalacat, Pampanga.
A group of original farmers or direct tillers of landholdings over the lands owned
by the Lacsons individually executed in favor of the petitioner separate Deeds of
Assignment, assigning to petitioner their respective rights as tenants/tillers of
the landholdings possessed and tilled by them for and in consideration of P50.00
per square meter; further granting petitioner the exclusive right to buy the
property if and when the respondents, with the concurrence of the defendants-
tenants, agreed to sell the property.
Convinced that they were deceived by petitioner into signing the Deeds of
Assignment, the defendants-tenants decided to sell their rights and interests
over the landholdings to the respondents.
Petitioner was prompted to file a complaint for the court to fix a period within
which to pay the agreed purchase price of P50.00 per square meter.
The trial court held that petitioner was entitled to injunctive relief; but the CA
ruled otherwise, enjoining the trial court from proceeding with the case.
Petitioner avers, among others, that respondents induced the defendants-
tenants to violate the deeds of assignment, contrary to Article 1314 of the New
Civil Code.

Issue:
Whether or not the respondents are liable to pay petitioner damages based on Article
1314 of the New Civil Code/ Whether or not there is tort interference in this case
Held:
No. In So Ping Bun v. Court of Appeals, we held that for the said law to apply, the
pleader is burdened to prove the following: (1) the existence of a valid contract; (2) knowledge
by the third person of the existence of the contract; and (3) interference by the third person in
the contractual relation without legal justification. Where there was no malice in the
interference of a contract, and the impulse behind ones conduct lies in a proper business
interest rather than in wrongful motives, a party cannot be a malicious interferer. Where the
alleged interferer is financially interested, and such interest motivates his conduct, it cannot be
said that he is an officious or malicious intermeddler.

In fine, one who is not a party to a contract and who interferes thereon is not
necessarily an officious or malicious intermeddler. Also, the defendants-tenants did not allege
therein that the respondents induced them to breach their contracts with the petitioner. The
petitioner himself admitted when he testified that his claim that the respondents induced the
defendants-assignees to violate contracts with him was based merely on what he heard.

Even if the respondents received an offer from the defendants-tenants to assign and
transfer their rights and interests on the landholding, the respondents cannot be enjoined from
entertaining the said offer, or even negotiating with the defendants-tenants. The respondents
could not even be expected to warn the defendants-tenants for executing the said deeds in
violation of P.D. No. 27 and Rep. Act No. 6657. Under Section 22 of the latter law, beneficiaries
under P.D. No. 27 who have culpably sold, disposed of, or abandoned their land, are
disqualified from becoming beneficiaries.











SO PING BUN vs. COURT OF APPEALS, TEK HUA ENTERPRISING
CORP. and MANUEL C. TIONG
G.R. No. 120554
September 21, 1999

Facts:
Tek Hua Trading Co. was the original lessee of Dee C. Chuan & Sons, Inc. (DCCSI)
in the latters property in Binondo; but petitioner So Ping Bun occupied the
warehouse for his own textile business.
Members of the dissolved Tek Hua Trading Co. formed Tek Hua Enterprising
Corp. and asked So Ping Bun to vacate the property.
The trial court nullified the four contracts of lease between DCCSI and petitioner.
The Court of Appeals upheld the decision of the trial court, finding, among
others, that petitioner is guilty of tortuous interference of the contract.

Issue:

Whether or not the CA is correct in holding that petitioner is a tortuous interference

Held:
Yes. The elements of tort interference are: (1) existence of a valid contract; (2)
knowledge on the part of the third person of the existence of contract; and (3) interference of
the third person is without legal justification or excuse. In the case before us, petitioners
Trendsetter Marketing asked DCCSI to execute lease contracts in its favor, and as a result
petitioner deprived respondent corporation of the latters property right. Clearly, and as
correctly viewed by the appellate court, the three elements of tort interference above-
mentioned are present in the instant case.



INTERNATIONAL FREEPORT TRADERS, INC. vs. DANZAS
INTERCONTINENTAL, INC.
G.R. No. 181833
January 26, 2011

Facts:

Petitioner IFTI ordered a shipment of Toblerone chocolates and assorted confectioneries
from Jacobs Suchard Tobler Ltd. Of Switzerland.
Respondent is the agent of Danmar Lines of Switzerland who handled the shipment of
the confectioneries by processing the release of the goods from the port and making
sure that it will be delivered to Clark.
Before the goods could be delivered, respondent asked IFTI to 1) surrender the original
bills of lading to secure the release of the goods, and 2) submit a bank guarantee
inasmuch as the shipment was consigned to China Banking Corporation to assure
Danzas that it will be compensated for freight and other charges.
Respondent acceded to these demands.
Respondent agreed to charge IFTI only the electric charges and storage fees totaling
P56,000 but it later demanded payment of P181,809.45 for its services.
The MeTC rendered judgment in favor of Danzas and ordered payment of the amount
demanded.
Petitioner asserts that it cannot be held liable to pay because it was not privy to the
hiring of Danzas.
The Court of Appeals held that the bank guarantee procured by IFTI in favor of
respondent contained all the requisites of a perfected contract.

Issue:
Whether or not a contract of lease of service exists between IFTI and Danzas
Held:
Yes. By acceding to all the documentary requirements that Danzas imposed on it, IFTI
voluntarily accepted its services. The bank guarantee IFTI gave Danzas assured the latter that it
would eventually be paid all freight and other charges arising from the release and delivery of
the goods to it. Another indication that IFTI recognized its contract with Danzas is when IFTI
requested Danzas to have the goods released pending payment of whatever expenses the latter
would incur in obtaining the release and delivery of the goods at Clark.

Generally, contracts undergo three distinct stages: (1) preparation or negotiation; (2)
perfection; and (3) consummation. Negotiation begins from the time the prospective
contracting parties manifest their interest in the contract and ends at the moment of
agreement of the parties. The perfection or birth of the contract takes place when the parties
agree upon the essential elements of the contract. The last stage is the consummation of the
contract where the parties fulfill or perform the terms they agreed on, culminating in its
extinguishment. Here, there is no other conclusion than that the parties entered into a contract
of lease of service for the clearing and delivery of the imported goods.















ROCKLAND CONSTRUCTION COMPANY, INC. vs. MID-PASIG LAND
DEVELOPMENT CORPORATION
G.R. No. 164587
February 4, 2008

Facts:

Petitioner offered to lease from respondents 3.1-hectare property.
After addressing the offer to the Presidential Commission on Good Governance (PCGG)
who has control over the property, petitioner sent Metropolitan Bank and Trust
Company check for P1 million as a sign of its good faith and readiness to enter into the
lease agreement under the certain terms and conditions stipulated in the letter.
Petitioner presumed that respondent received its letter; however Mid-Pasig denied that
it received the check, neither did it accept petitioners offer to lease the property.
The trial court ordered that a written lease of contract be executed in favor of Rockland.
On appeal however, the Court of Appeals reversed and set aside the trial courts
decision, holding in sum that there was no contract of lease perfected between the
parties.

Issue:
Whether or not there was a perfected contract of lease
Held:
No. To produce a contract, the offer must be certain and the acceptance absolute. In
this case, Mid-Pasig was not aware that Rockland deposited the P1 million check in its account.
It only learned of Rocklands check when it received Rocklands February 2, 2001 letter. Mid-
Pasig, upon investigation, also learned that the check was deposited at the Philippine National
Bank (PNB) San Juan Branch, instead of PNB Ortigas Branch where Mid-Pasig maintains its
account. Immediately, Mid-Pasig wrote Rockland on February 6, 2001 rejecting the offer, and
proposed that Rockland apply the P1 million to its other existing lease instead. These
circumstances clearly show that there was no concurrence of Rocklands offer and Mid-Pasigs
acceptance. Furthermore, as noted by the Court of Appeals, if indeed Rockland believed that
Mid-Pasig impliedly accepted the offer, then it should have taken possession of the property
and paid the monthly rentals. But it did not. For estoppel to apply, the action giving rise thereto
must be unequivocal and intentional because, if misapplied, estoppel may become a tool of
injustice.
A contract has three distinct stages: preparation, perfection, and consummation.
Preparation or negotiation begins when the prospective contracting parties manifest their
interest in the contract and ends at the moment of their agreement. Perfection or birth of the
contract occurs when they agree upon the essential elements thereof. Consummation, the last
stage, occurs when the parties fulfill or perform the terms agreed upon in the contract,
culminating in the extinguishment thereof.

















METROPOLITAN MANILA DEVELOPMENT AUTHORITY vs. JANCOM
ENVIRONMENTAL CORPORATION and JANCOM INTERNATIONAL
DEVELOPMENT PROJECTS PTY. LIMITED OF AUSTRALIA
G.R. No. 147465
January 30, 2002

Facts:

The Executive Committee (EXECOM) created by virtue of Presidential Memorandum
Order No. 202 was tasked to oversee the build-operate-transfer (BOT) implementation
of solid waste management projects.
Petitioner JANCOM, as the highest bidder, was awarded the San Mateo Waste-to-Energy
project.
The BOT contract between petitioner and the Philippine government was excited but
was however not signed due to the change in administration.
The composition of the EXECOM was likewise changed.
The San Mateo landfill was closed.
Subsequently, the Greater Manila Solid Waste Management Committee adopted a
resolution not to pursue the BOT contract with JANCOM.
Petitioner assails the decision of the Court of Appeals, contending that there is no valid
and binding contract between the Republic of the Philippines and respondents because:
a) the BOT contract does not bear the signature of the President of the Philippines; b)
the conditions precedent specified in the contract were not complied with; and that c)
there was no valid notice of award.

Issue:
Whether or not there is a valid and binding contract between the parties

Held:

Yes. Under Article 1305 of the Civil Code, [a] contract is a meeting of minds between
two persons whereby one binds himself, with respect to the other, to give something or to
render some service. A contract undergoes three distinct stages preparation or negotiation,
its perfection, and finally, its consummation. In the case at bar, the signing and execution of the
contract by the parties clearly show that, as between the parties, there was a concurrence of
offer and acceptance with respect to the material details of the contract, thereby giving rise to
the perfection of the contract. The execution and signing of the contract is not disputed by the
parties.

Admittedly, the notice of award has not complied with the requirements set forth in the
Implementing Rules and Regulations of Republic Act No. 6957, otherwise known as the BOT
Law. However, the defect was cured by the subsequent execution of the contract entered into
and signed by authorized representatives of the parties. Moreover, the contract itself provides
that the signature of the President is necessary only for its effectivity (not perfection), pursuant
to Article 19 of the contract. As to the contention that there is no perfected contract due to
JANCOMs failure to comply with several conditions precedent, the same is, likewise,
unmeritorious. The two-month period within which JANCOM should comply with the conditions
has not yet started to run. It cannot thus be said that JANCOM has already failed to comply with
the conditions precedent mandated by the contract.











ROCKLAND CONSTRUCTION COMPANY, INC. vs. MID-PASIG LAND
DEVELOPMENT CORPORATION
G.R. No. 164587
February 4, 2008

Facts:

Petitioner offered to lease from respondents 3.1-hectare property.
After addressing the offer to the Presidential Commission on Good Governance (PCGG)
who has control over the property, petitioner sent Metropolitan Bank and Trust
Company check for P1 million as a sign of its good faith and readiness to enter into the
lease agreement under the certain terms and conditions stipulated in the letter.
Petitioner presumed that respondent received its letter; however Mid-Pasig denied that
it received the check, neither did it accept petitioners offer to lease the property.
The trial court ordered that a written lease of contract be executed in favor of Rockland.
On appeal however, the Court of Appeals reversed and set aside the trial courts
decision, holding in sum that there was no contract of lease perfected between the
parties.

Issue:
Whether or not there was a perfected contract of lease
Held:
No. To produce a contract, the offer must be certain and the acceptance absolute. In
this case, Mid-Pasig was not aware that Rockland deposited the P1 million check in its account.
It only learned of Rocklands check when it received Rocklands February 2, 2001 letter. Mid-
Pasig, upon investigation, also learned that the check was deposited at the Philippine National
Bank (PNB) San Juan Branch, instead of PNB Ortigas Branch where Mid-Pasig maintains its
account. Immediately, Mid-Pasig wrote Rockland on February 6, 2001 rejecting the offer, and
proposed that Rockland apply the P1 million to its other existing lease instead. These
circumstances clearly show that there was no concurrence of Rocklands offer and Mid-Pasigs
acceptance. Furthermore, as noted by the Court of Appeals, if indeed Rockland believed that
Mid-Pasig impliedly accepted the offer, then it should have taken possession of the property
and paid the monthly rentals. But it did not. For estoppel to apply, the action giving rise thereto
must be unequivocal and intentional because, if misapplied, estoppel may become a tool of
injustice.





















MANILA METAL CONTAINER CORPORATION vs. PHILIPPINE
NATIONAL BANK
G.R. No. 166862
December 20, 2006

Facts:

Petitioner obtained several loans from respondent bank, the first he secured through a
real estate mortgage of his lot in Mandaluyong.
Due to petitioners failure to pay, respondent filed a petition to foreclose the mortgage.
The property was sold at public auction, with respondent bank being the highest
bidder.
Petitioner failed to redeem the land within the required period.
Respondent rejected petitioners offers of repurchasing the land.
Petitioner thus filed a complaint against respondent PNB for Annulment of Mortgage
and Mortgage Foreclosure, Delivery of Title, or Specific Performance with Damages.
Respondent claimed that no contract of sale was perfected between it and petitioner
after the period to redeem the property had expired.
The trial court found that there was no perfected contract; hence it ordered that
respondent return the deposit that petitioner made for the sale of the property.
The CA affirmed the ruling of the court , likewise holding that there was no contract
because there was no meeting of the minds between the parties.

Issue:
Whether or not there is a perfected contract for petitioner to repurchase the property
from respondent

Held:
No. A contract of sale is consensual in nature and is perfected upon mere meeting of
the minds. When there is merely an offer by one party without acceptance of the other, there is
no contract. When the contract of sale is not perfected, it cannot, as an independent source of
obligation, serve as a binding juridical relation between the parties. The acceptance must be
identical in all respects with that of the offer so as to produce consent or meeting of the minds.
Unless and until the respondent accepted the offer on these terms, no perfected contract of
sale would arise. Absent proof of the concurrence of all the essential elements of a contract of
sale, the giving of earnest money cannot establish the existence of a perfected contract of sale.







































RIDO MONTECILLO vs. IGNACIA REYNES and SPOUSES
REDEMPTOR and ELISA ABUCAY
G.R. No. 138018
July 26, 2002

Facts:

Respondent Reynes signed a Deed of Sale of the lot situated in Mabolo in favor of
Montecillo.
Montecillo promised to pay the agreed P47,000.00 purchase price within one month
from the signing of the Deed of Sale.
Due to non-payment after the lapse of the one-month period, Reynes asked for the
return of the Deed of Sale, and later caused the revocation of the Deed due to
respondents refusal to return the same.
The entire lot was later transferred in the name of the respondent spouses.
Still, respondents learned that the Register of Deeds in Cebu City issued a certificate of
title in Montecillos name.
Respondents argue that the Deed of Sale should be declared null and void due to lack of
mutual consent; Montecillo countered, saying that the consideration for the lot was
paid to Cebu Ice and Cold Storage Corporation.
The trial court and the Court of Appeals were unanimous in holding that the Deed of
Sale was void ab initio for lack of consideration.

Issue:
Whether or not the Deed of Sale was indeed void
Held:
Yes. Montecillos Deed of Sale is null and void ab initio not only for lack of
consideration, but also for lack of consent.

On its face, Montecillos Deed of Absolute Sale appears supported by a valuable
consideration. However, based on the evidence presented by both Reynes and Montecillo, the
trial court found that Montecillo never paid to Reynes, and Reynes never received from
Montecillo, the P47,000.00 purchase price. There was indisputably a total absence of
consideration contrary to what is stated in Montecillos Deed of Sale. A contract of sale is void
and produces no effect whatsoever where the price, which appears thereon as paid, has in fact
never been paid by the purchaser to the vendor.

In a contract of sale, the parties must agree not only on the price, but also on the
manner of payment of the price. An agreement on the price but a disagreement on the manner
of its payment will not result in consent, thus preventing the existence of a valid contract for
lack of consent. This lack of consent is separate and distinct from lack of consideration where
the contract states that the price has been paid when in fact it has never been paid. Reynes
expected Montecillo to pay him directly the P47,000.00 purchase price within one month after
the signing of the Deed of Sale. On the other hand, Montecillo thought that his agreement with
Reynes required him to pay the P47,000.00 purchase price to Cebu Ice Storage to settle Jayags
mortgage debt. Montecillo also acknowledged a balance of P10,000.00 in favor of Reynes
although this amount is not stated in Montecillos Deed of Sale. Thus, there was no consent, or
meeting of the minds, between Reynes and Montecillo on the manner of payment. This
prevented the existence of a valid contract because of lack of consent.


JASMIN SOLER vs. COURT OF APPEALS, COMMERCIAL BANK OF
MANILA, and NIDA LOPEZ
G.R. No. 12389
May 21, 2001

Facts:

Jasmin Soler, a well-known licensed professional interior designer, talked to Commercial
Bank (COMBANK) Manager Nida Lopez regarding the latters plans of having the bank
renovated.
Despite short notice, Lopez assured her that she would be compensated for her services
so she acceded to the request.
They had a meeting, discussing what parts of the bank were to be renovated; again,
Lopez assured her that the bank would pay her fees.
Petitioner even requested for the blue print of the bank so that the proper design, plans
and specifications could be given to Ms. Lopez in time for the board meeting in
December 1986.
Petitioner likewise paid the engineers and architects who helped Soler.
When Soler demanded payment for her services, petitioner ignored and even said that
she was not entitled to it because her designs did not conform to the banks policy of
having a standard design, and that there was no agreement between her and the bank.
In petitioners complaint against COMBANK and Ms. Lopez for collection of professional
fees and damages, the trial court rendered judgment in her favor.
The Court of Appeals reversed the judgment of the trial court, holding that the bank
never gave its consent to the contract because it was under privatization.

Issue:
Whether or not there was a perfected contract between petitioner and respondents
Held:
Yes. In the case at bar, there was a perfected oral contract. When Ms. Lopez and
petitioner met in November 1986, and discussed the details of the work, the first stage of the
contract commenced. When they agreed to the payment of the ten thousand pesos
(P10,000.00) as professional fees of petitioner and that she should give the designs before the
December 1986 board meeting of the bank, the second stage of the contract proceeded, and
when finally petitioner gave the designs to Ms. Lopez, the contract was consummated.
Petitioner believed that once she submitted the designs she would be paid her
professional fees. Ms. Lopez assured petitioner that she would be paid.
Also, petitioner may be paid on the basis of quantum meruit. We note that the designs
petitioner submitted to Ms. Lopez were not returned. Ms. Lopez, an officer of the bank as
branch manager used such designs for presentation to the board of the bank.











YOLANDA PALATTAO vs. THE COURT OF APPEALS, HON. ANTONIO
J. FINEZA, as Presiding Judge of the Regional Trial Court of Caloocan
City, Branch 131 and MARCELO CO
G.R. No. 131726
May 7, 2002

Facts:
Petitioner Palattao leased to private respondent a house and a lot registered in her
name, for the duration of three years.
During the last year of the contract, the parties began negotiations for the sale of the
leased premises to private respondent.
Petitioner gave private respondent on or before November 24, 1993, within which to
pay the 50% downpayment in cash or managers check; failure to do so on the
stipulated period will enable petitioner to freely sell her property to others.
Petitioner likewise notified private respondent that she is no longer renewing the lease
agreement upon its expiration.
Respondent did not accept the terms proposed by petitioner; instead he manifested his
intention to renew the lease contract.
Petitioner refused and demanded respondent to vacate the premises.
Due to respondents refusal, petitioner filed an ejectment case against him.
Private respondent alleged that he refused to vacate the leased premises because there
was a perfected contract of sale of the leased property between him and petitioner.

Issue:
Whether or not there was a perfected contract of sale between Palattao and Co
Held:
No. While it is true that private respondent informed petitioner that he is accepting the
latters offer to sell the leased property, it appears that they did not reach an agreement as to
the extent of the lot subject of the proposed sale. Private respondent did not give his consent
to buy only 413.28 square meters of the leased lot, as he desired to purchase the whole 490
square-meter-leased premises which, however, was not what was exactly proposed in
petitioners offer. Clearly, therefore, private respondents acceptance of petitioners offer was
not absolute, and will consequently not generate consent that would perfect a contract. Also,
even assuming that the parties reached an agreement as to the size of the lot subject of the
sale, the records show that there was subsequently a mutual withdrawal from the contract.

Contracts that are consensual in nature, like a contract of sale, are perfected upon mere
meeting of the minds. Once there is concurrence between the offer and the acceptance upon
the subject matter, consideration, and terms of payment, a contract is produced. The offer
must be certain. To convert the offer into a contract, the acceptance must be absolute and
must not qualify the terms of the offer; it must be plain, unequivocal, unconditional, and
without variance of any sort from the proposal.

In the case at bar, the continued occupation by private respondent of the leased
premises is conditioned upon his right to acquire ownership over said property. Considering
that the lease contract was not renewed after its expiration on December 31, 1991, private
respondent has no more right to continue occupying the leased premises. Consequently, his
ejectment therefrom must be sustained.



ABS-CBN BROADCASTING CORPORATION vs. HONORABLE COURT
OF APPEALS, REPUBLIC BROADCASTING CORP., VIVA
PRODUCTIONS, INC., and VICENTE DEL ROSARIO
G.R. No. 128690
January 21, 1999

Facts:

ABS-CBN and VIVA executed a Film Exhibition Agreement whereby the latter gave the
former an exclusive right to exhibit 24 VIVA Films for TV telecast.
Later, VIVA, through respondent Vincent del Rosario, offered ABS-CBN a list of 3 film
packages (36 titles) from which the latter may exercise its right of first refusal under
their agreement.
Then Del Rosario offered ABS-CBN airing rights over a package of 104 movies for P60
million, but according to Lopez, what they agreed upon was ABS-CBNs exclusive film
rights to 14 films for P36 million.
Del Rosario insisted that the discussion was on VIVAs offer of 104 films for P60 million,
to which ABS-CBN later made a counterproposal but rejected by VIVAs Board of
Directors.
Due to this disagreement, VIVA granted RBS the exclusive right to air the 104 VIVA films,
including the 14 films supposedly granted to ABS-CBN.
ABS-CBN then filed a complaint for specific performance with prayer for injunction.
The RTC rendered a decision in favor of RBS and VIVA, ordering ABS-CBN to pay RBS the
amount it paid for the print advertisement and premium on the counterbond, moral
damages, exemplary damages and attorneys fee. ABS-CBN appealed to the Court of
Appeals.
The Court of Appeals affirmed the RTC decision and sustained the monetary awards,
VIVAs and Del Rosarios appeals were denied.

Issue:
Whether or not there was a perfected contract between VIVA and ABS-CBN
Held:
No. When any of the elements of the contract is modified upon acceptance, such
alteration amounts to a counter-offer. In the case at bar, ABS-CBN made no unqualified
acceptance of VIVAs offer hence, they underwent period of bargaining. ABS-CBN then
formalized its counter-proposals or counter-offer in a draft contract. VIVA through its Board of
Directors, rejected such counter-offer. Even if it be conceded arguendo that Del Rosario had
accepted the counter-offer, the acceptance did not bind VIVA, as there was no proof
whatsoever that Del Rosario had the specific authority to do so.

Contracts that are consensual in nature are perfected upon mere meeting of the minds.
Once there is concurrence between the offer and the acceptance upon the subject matter,
consideration, and terms of payment a contract is produced. The offer must be certain. To
convert the offer into a contract, the acceptance must be absolute and must not qualify the
terms of the offer; it must be plain, unequivocal, unconditional, and without variance of any
sort from the proposal. A qualified acceptance, or one that involves a new proposal, constitutes
a counter-offer and is a rejection of the original offer. Consequently, when something is desired
which is not exactly what is proposed in the offer, such acceptance is not sufficient to generate
consent because any modification or variation from the terms of the offer annuls the offer.












LOURDES ONG LIMSON vs. COURT OF APPEALS, SPOUSES LORENZO
DE VERA and ASUNCION SANTOS-DE VERA, TOMAS CUENCA, JR.,
and SUNVAR REALTY DEVELOPMENT CORPORATION
G.R. No. 135929
April 20, 2001

Facts:

Respondent spouses Lorenzo de Vera and Asuncion Santos-de Vera, through their agent
Marcosa Sanchez, offered to sell to petitioner a parcel of land consisting of 48,260
square meters, more or less.
No transaction was formalized because the spouses de Vera and the Ramoses
(mortgagees) failed to attend the meeting.
Petitioner allegedly gave respondent Lorenzo three checks for the settlement of the
back taxes and quitclaims on the property but was surprised to know later that the
property was the subject of the negotiation sale to respondent SUNVAR.
Petitioner maintained that SUNVAR was in bad faith as it knew of her "contract" to
purchase the subject property from respondent spouses.
Respondents countered by saying that they did not know nor were informed of
petitioners interest or claim over the property and that there was no perfected contract
to sell between them.
The RTC annulled and rescinded the Deed of Absolute Sale executed in favor of SUNVAR.
The CA completely reversed the ruling of the trial court.

Issue:
Whether or not there was a perfected contract to sell between petitioner and
respondents
Held:
No. A scrutiny of the facts as well as the evidence of the parties overwhelmingly leads to
the conclusion that the agreement between the parties was a contract of option and not a
contract to sell. The agreement between respondent spouses and petitioner was an "option
contract" or what is sometimes called an "unaccepted offer." During the option period the
agreement was not converted into a bilateral promise to sell and to buy where both
respondent spouses and petitioner were then reciprocally bound to comply with their
respective undertakings as petitioner did not timely, affirmatively and clearly accept the offer
of respondent spouses.
The rule is that except where a formal acceptance is not required, although the
acceptance must be affirmatively and clearly made and evidenced by some acts or conduct
communicated to the offeror, it may be made either in a formal or an informal manner, and
may be shown by acts, conduct or words by the accepting party that clearly manifest a present
intention or determination to accept the offer to buy or sell. But there is nothing in the acts,
conduct or words of petitioner that clearly manifest a present intention or determination to
accept the offer to buy the property of respondent spouses within the 10-day option period.
Certainly, there was no concurrence of private respondent spouses offer and petitioners
acceptance thereof within the option period.















REYNALDO VILLANUEVA vs. PHILIPPINE NATIONAL BANK (PNB)
G.R. No.154493
December 6, 2006

Facts:

The Special Assets Management Department (SAMD) of the Philippine National Bank
(PNB) issued an advertisement for the sale thru bidding of certain PNB properties in
Calumpang, General Santos City, subject to the following conditions: 1) that cash bids be
submitted not later than April 27, 1989; 2) that said bids be accompanied by a 10%
deposit in managers or cashiers check; and 3) that all acceptable bids be subject to
approval by PNB authorities.
PNB agreed to petitioners offer of purchasing Lot Nos. 17 and 19 but the same was later
deferred upon orders of the PNB Board to conduct another appraisal and public bidding
of Lot No. 19.
Villanueva thus filed with the RTC a complaint for specific performance and damages.
The RTC anchored its judgment on the finding that there existed a perfected contract of
sale between PNB and Villanueva.
The RTC also pointed out that Villanuevas downpayment was actually in the nature of
earnest money acceptance of which by PNB signified that there was already a sale.
The CA reversed the ruling of the trial court, and held that there was no perfected
contract of sale because the July 6, 1990 letter of Guevara constituted a qualified
acceptance of the June 28, 1990 offer of Villanueva, and to which Villanueva replied on
July 11, 1990 with a modified offer.

Issue:
Whether or not there was a perfected contract of sale between Villanueva and PNB
Held:
No. Contracts of sale are perfected by mutual consent whereby the seller obligates
himself, for a price certain, to deliver and transfer ownership of a specified thing or right to the
buyer over which the latter agrees. Mutual consent being a state of mind, its existence may
only be inferred from the confluence of two acts of the parties: an offer certain as to the object
of the contract and its consideration, and an acceptance of the offer which is absolute in that it
refers to the exact object and consideration embodied in said offer. While it is impossible to
expect the acceptance to echo every nuance of the offer, it is imperative that it assents to those
points in the offer which, under the operative facts of each contract, are not only material but
motivating as well. Anything short of that level of mutuality produces not a contract but a mere
counter-offer awaiting acceptance. More particularly on the matter of the consideration of the
contract, the offer and its acceptance must be unanimous both on the rate of the payment and
on its term.

An acceptance of an offer which agrees to the rate but varies the term is ineffective.
Respondents reply that only Lot No. 19 is available and that the price therefor is now
P2,883,300.00 was certainly not an acceptance of the June 28, 1990 offer but a mere counter-
offer.

Moreover, petitioners conformity to the quoted price not as an acceptance of the
counter-offer but a further counter-offer for, while petitioner accepted the P2,883,300.00 price
for Lot No. 19, he qualified his acceptance by proposing a two-year payment term. Acceptance
of petitioners payments did not amount to an implied acceptance of his last counter-offer. To
begin with, PNB-General Santos Branch, which accepted petitioners P380,000.00 payment, and
PNB-SAMD, which accepted his P200,000.00 payment, had no authority to bind respondent to a
contract of sale with petitioner.










CORAZON CATALAN, et. al. vs. JOSE BASA, et.al.
G.R. No. 159567
July 31, 2007

Facts:
A document was executed, titled Absolute Deed of Donation, wherein Feliciano
allegedly donated to his sister Mercedes Catalan one-half of the real property he owns
in Pangasinan.
Peoples Bank and Trust Company, now BPI, was appointed as Felicianos guardian after
the after was declared incompetent.
Mercedes later sold the property in issue in favor of her children Delia and Jesus Basa.
BPI, acting as Felicianos guardian, filed a case for Declaration of Nullity of Documents,
Recovery of Possession and Ownership, as well as damages against the herein
respondents, alleging that the Deed of Absolute Donation to Mercedes was void ab
initio, as Feliciano was not of sound mind and was therefore incapable of giving valid
consent.
BPI likewise claimed that if the Deed of Absolute Donation was void ab initio, the
subsequent Deed of Absolute Sale to Delia and Jesus Basa should likewise be nullified,
for Mercedes Catalan had no right to sell the property to anyone
The trial court upheld the validity of the deed of donation because the presumption of
sanity was not overcome. The appellate court affirmed the decision of the trial court.
Petitioners maintain that Feliciano had been suffering from a mental condition
(schizoprenia) since 1948 which incapacitated him from entering into any contract
thereafter.

Issue:
Whether or not the deed of donation and the subsequent deed of absolute sale are
valid
Held:
No. A thorough perusal of the records of the case at bar indubitably shows that the
evidence presented by the petitioners was insufficient to overcome the presumption that
Feliciano was competent when he donated the property in question to Mercedes.

A donation is an act of liberality whereby a person disposes gratuitously a thing or right in
favor of another, who accepts it. Like any other contract, an agreement of the parties is
essential. Consent in contracts presupposes the following requisites: (1) it should be intelligent
or with an exact notion of the matter to which it refers; (2) it should be free; and (3) it should
be spontaneous. The parties' intention must be clear and the attendance of a vice of consent,
like any contract, renders the donation voidable. The burden of proving incapacity rests upon
the person who alleges it; if no sufficient proof to this effect is presented, capacity will be
presumed.

A person suffering from schizophrenia does not necessarily lose his competence to
intelligently dispose his property. By merely alleging the existence of schizophrenia, petitioners
failed to show substantial proof that at the date of the donation, June 16, 1951, Feliciano
Catalan had lost total control of his mental faculties. Competency and freedom from undue
influence, shown to have existed in the other acts done or contracts executed, are presumed to
continue until the contrary is shown.













EUGENIO DOMINGO, CRISPIN MANGABAT and SAMUEL
CAPALUNGAN vs. HON. COURT OF APPEALS, FELIPE C. RIGONAN
and CONCEPCION R. RIGONAN
G.R. No. 127540
October 17, 2001

Facts:
Paulina Rigonan owned three (3) parcels of land, with a house and warehouse in
one parcel, which she allegedly sold to spouses Felipe and Concepcion Rigonan, all
for P 870.00.
The spouses claim to be her closest relatives, alleging further that Paula is their
father's cousin. Petitioners Eugenio Domingo, Crispin Mangabat and Samuel
Capalungan then took possession over the properties and refused to vacate the
same, contradicting the spouses' allegations and claiming that they are the closest
kins of Paulina: Eugenio is her nephew because his father and Paulina are cousins.
Petitioners also aver that the deed of absolute sale was spurious because Paulina
did not sell her property to anyone; and that they have inherited the property when
Paulina died.
The trial court gave its decision in favor of the respondents (petitioners in the
instant case).
On appeal, the Court of Appeals reversed the trial court's ruling rendering Felipe
and Concepcion as the rightful owners of the property.

Issue:
Whether or not the Deed of Absolute Sale is valid

Held:
No. Paulina has been proven to be undeniably incapacitated making her incompetent to
enter into a contract. It was shown that Paulina was already of advanced age and senile at the
time the contract was executed. Such age and infirmities have impaired her mental faculties,
making her unable to function properly and intelligently. This is justified by the testimony of
one of the witnesses that Paulina played with her waste and urinated in bed. There was even
no receipt shown that the fictitious and shockingly inadequate P870 paid for the property was
given to Paulina. These circumstances, among others, led the Court to render judgment in favor
of the petitioners.



















MARIO J. MENDEZONA and TERESITA M. MENDEZONA, et. al. vs.
JULIO H. OZAMIZ, et.al.
G.R. No. 143370
February 6, 2002

Facts:

The petitioners initiated the suit to remove a cloud on their respective titles caused by
the inscription of a notice of lis pendens, which came about due to the proceeding for
guardianship over the person and properties of Carmen Ozamiz initiated by the
respondents.
The petitioners ultimately traced their titles of ownership over their respective
properties from a notarized Deed of Absolute Sale executed in their favor by Carmen
Ozamiz.
Respondents however allege that the sale is void because Carmen Ozamiz, then 86 years
old, was no longer of sound mind to enter into any contract.
The respondents opposed the petitioners claim of ownership of the Lahug property and
alleged that the titles issued in the petitioners names are defective and illegal, and the
ownership of the said property was acquired in bad faith and without value inasmuch as
the consideration for the sale is grossly inadequate and unconscionable.
The trial court upheld the validity of the deed.
The CA ruled against herein petitioners, holding that the deed was a simulated contract
reasoning, among others, that at the time of the execution of the contract the mental
faculties of Carmen Ozamiz were already seriously impaired.

Issue:

Whether or not the notarized Deed of Absolute Sale was a simulated contract because
Carmen Ozamizs mental faculties were seriously impaired when she executed the same
Held:

No. Respondents failed to discharge the burden of proving their allegations attacking
the validity and due execution of the Deed of absolute Sale; hence, the presumption in favor of
the said deed stands. The respondents core witnesses all made sweeping statements which
failed to show the true state of mind of Carmen Ozamiz at the time of the execution of the
disputed document. The testimonies of the respondents witnesses on the mental capacity of
Carmen Ozamiz are far from being clear and convincing, to say the least.

It has been held that a person is not incapacitated to contract merely because of
advanced years or by reason of physical infirmities. Only when such age or infirmities impair her
mental faculties to such extent as to prevent her from properly, intelligently, and fairly
protecting her property rights, is she considered incapacitated. The respondents utterly failed
to show adequate proof that at the time of the sale on April 28, 1989 Carmen Ozamiz had
allegedly lost control of her mental faculties. A person is presumed to be of sound mind at any
particular time and the condition is presumed to continue to exist, in the absence of proof to
the contrary. Competency and freedom from undue influence, shown to have existed in the
other acts done or contracts executed, are presumed to continue until the contrary is shown.













MARIANO T. LIM, et. al. vs. COURT OF APPEALS, LORENZO O. TAN
and HERMOGENES O. TAN
G.R. No. L-55201
February 3, 1994

Facts:

The case involves the partition of the properties of the deceased spouses Tan Quico and
Josefa Oraa who both died intestate and left some ninety six (96) hectares of land
located in the municipality of Guinobatan and Camalig Albay.
The late spouses were survived by four (4) children: Cresencia, Lorenzo, Hermogenes
and Elias.
Petitioners are the widower and children of Cresencia, demanding their partition from
Lorenzo who has remained as the administrator of the land in dispute.
Cresencia only reached the second grade of elementary school. She could not read or
write in English. On the other hand, Lorenzo is a lawyer and a CPA.
The trial court decided in favor of petitioners, rejecting the alleged oral partition of the
property and declaring as void the "Deed of Confirmation of Extra Judicial Settlement of
the Estate of Tan Quico and Josefa Oraa and Sale on the ground that it was not
understood by the late Cresencia when she signed it.
The Court of Appeals ruled otherwise, holding that there was evidence to establish that
the subject properties had been previously partitioned.
It ruled that respondent Lorenzo was not shown to have exercised any undue influence
over the late Crescencia when she signed the said Deed of Confirmation, etc.

Issue:

Whether or not the Deed of Confirmation is valid

Held:

No. We take our mandate from Article 1332 of the Civil Code which provides: "When
one of the parties is unable to read, or if the contract is in language not understood by him, and
mistake or fraud is alleged, the person enforcing the contract must show that the terms thereof
have been fully explained to the former." this substantive law came into being due to the
finding of the Code Commission that there is still a fairly large number of illiterates in this
country, and documents are usually drawn up in English or Spanish. It is also in accord with our
state policy of promoting social justice.

In the petition at bench, the questioned Deed is written in English, a language not
understood by the late Crescencia, an illiterate. It was prepared by the respondent Lorenzo, a
lawyer and CPA. For reasons difficult to divine, respondent Lorenzo did not cause the
notarization of the deed. Petitioners alleged that the Deed was signed by the late Crescencia
due to mistake, fraud or undue influence. They postulated that respondent Lorenzo took
advantage of the late Crescencia's trust and confidence. Considering these circumstances, the
burden was on private respondents to prove that the content of the Deed was explained to the
illiterate Crescencia before she signed it. In this regard, the evidence adduced by the
respondents failed to discharge their burden.


































CORAZON G. RUIZ vs. COURT OF APPEALS and CONSUELO TORRES
G.R. No. 146942
April 22, 2003

Facts:

Petitioner Corazon G. Ruiz is engaged in the business of buying and selling jewelry.
She obtained loans from private respondent Consuelo Torres on different occasions.
Prior to their maturity, the loans were consolidated under one (1) promissory note.
The consolidated loan of P750,000.00 was secured by a real estate mortgage on a 240-
square meter lot in New Haven Village, Novaliches, Quezon City, registered in the name
of petitioner.
Thereafter, petitioner obtained three (3) more loans from private respondent,
evidenced by three promissory notes, and secured by P571,000.00 worth of jewelry
pledged by petitioner to private respondent.
When petitioner failed to pay, private respondent sought the extra-judicial foreclosure
of the aforementioned real estate mortgage.
In its Decision, the Clerk of Court and Ex-Officio SheriffIt held that the real estate
mortgage is unenforceable because of the lack of the participation and signature of
petitioners husband. It noted that although the subject real estate mortgage stated
that petitioner was attorney-in-fact for herself and her husband, the Special Power of
Attorney was never presented in court during the trial.
The trial court further held that the promissory note in question is a unilateral contract
of adhesion drafted by private respondent. It struck down the contract as repugnant to
public policy because it was imposed by a dominant bargaining party (private
respondent) on a weaker party (petitioner).
The appellate court set aside the decision of the trial court and ruled that the real estate
mortgage is valid despite the non-participation of petitioners husband in its execution
because the land on which it was constituted is paraphernal property of petitioner-wife.
Consequently, she may encumber the lot without the consent of her husband.

Issue:
Whether or not the Court of Appeals gravely erred in ruling that the promissory note is
not a contract of adhesion despite the clear showing that the same is a ready-made contract
prepared by (the) respondent and did not reflect their true intentions as it weighed heavily in
favor of respondent and against petitioner
Held:

No. In the case at bar, the promissory note in question did not contain any fine print
provision which could not have been examined by the petitioner. Petitioner had all the time to
go over and study the stipulations embodied in the promissory note. Aside from the March 22,
1995 promissory note for P750,000.00, three other promissory notes of different dates and
amounts were executed by petitioner in favor of private respondent. These promissory notes
contain similar terms and conditions, with a little variance in the terms of interests and
surcharges. The fact that petitioner and private respondent had entered into not only one but
several loan transactions shows that petitioner was not in any way compelled to accept the
terms allegedly imposed by private respondent. Moreover, petitioner, in her complaint dated
October 7, 1996 filed with the trial court, never claimed that she was forced to sign the subject
note.

To be required is certainly different from being compelled. She could have rejected the
conditions made by private respondent. As an experienced business-woman, she ought to
understand all the conditions set forth in the subject promissory note. As held by this Court in
Lee, et al. vs. Court of Appeals, et al., it is presumed that a person takes ordinary care of his
concerns. Hence, the natural presumption is that one does not sign a document without first
informing himself of its contents and consequences. This presumption acquires greater force in
the case at bar where not only one but several documents were executed at different times by
petitioner in favor of private respondent.




















EPIFANIA DELA CRUZ, substituted by LAUREANA V. ALBERTO vs.
SPS. EDUARDO C. SISON and EUFEMIA S. SISON
G.R. No. 163770
February 17, 2005

Facts:

Before her death, Epifania instituted the instant case upon discovering that her rice land
in Salomague Sur, Bugallon, Pangasinan, has been transferred and registered in the
name of her nephew, Eduardo C. Sison, without her knowledge and consent.
She alleged that Eduardo tricked her into signing the Deed of Sale, by inserting the deed
among the documents she signed pertaining to the transfer of her residential land,
house and camarin, in favor of Demetrio, her foster child and the brother of Eduardo.
Respondents asserted that they have been in open, continuous, and peaceful possession
of the land since November 24, 1989; in fact, they have been receiving the fruits and
produce of the land since they purchased the same from Epifania.
The trial court declared the deed invalid, finding that Eduardo deceived Epifania into
signing the assailed deed.
The Court of Appeals reversed and declared that Epifanias allegation of trickery and
fraud in the execution of the questioned deed of sale, was bare and unsupported.

Issue:

Whether or not the deed of sale is valid

Held:

Yes. There being no evidence adduced to support her bare allegations, thus, Epifania
failed to satisfactorily establish her inability to read and understand the English language. It is
well settled that a party who alleges a fact has the burden of proving it. Consequently, the
provisions of Art. 1332 of the Civil Code, which states that: When one of the parties is unable
to read, or if the contract is in a language not understood by him, and mistake or fraud is
alleged, the person enforcing the contract must show that the terms thereof have been fully
explained to the former, does not apply.

In addition, the questioned deed of sale was duly notarized. Hence, we apply the rule
that documents acknowledged before notaries public are public documents which are
admissible in evidence without necessity of preliminary proof as to their authenticity and due
execution. They have in their favor the presumption of regularity, and to contradict the same,
there must be evidence that is clear, convincing and more than merely preponderant. The
burden of proof to overcome the presumption of due execution of a notarial document lies on
the one contesting the same. Petitioner failed to discharge this burden.

RURAL BANK OF STA. MARIA, PANGASINAN vs. THE HONORABLE
COURT OF APPEALS, ROSARIO R. RAYANDAYAN, CARMEN
R.ARCEO
G.R. No. 110672
September 14, 1999

Facts:

Manuel Behis mortgaged a parcel of land in favor of the Rural Bank of Sta. Maria,
Pangasinan but after being delinquent in paying his debts, he sold the land to plaintiffs
Rosario Rayandayan and Carmen Arceo in a Deed of Absolute Sale with Assumption of
Mortgage.
On the same date, they executed another agreement whereby the plaintiffs were
indebted to Manuel in the amount of P2,400,000.00, which was the real consideration
of the sale.
After Manuel Behis died, the bank consented to the substitution of Rayandayan and
Arceo as mortgage debtors in place of Behis in a Memorandum of Agreement with
restructured and liberalized terms for the payment of the mortgage debt.
However, when the bank came to know the real consideration of the agreement, it
transacted the Behis mortgage with Halsema, Inc.. and considered the contract it had
with Behis, cancelled.
In petitioners action for specific performance, the lower court declared that the Deed
of Sale with Assumption of Mortgage and the Agreement between the bank and
plaintiffs was valid until annulled or cancelled, but plaintiffs were liable to pay the bank
damages as litigation expenses because of plaintiffs bad faith in deceiving the bank to
enter into the Memorandum of Agreement by concealing the real purchase price of the
land sold to them by Manuel Behis.
The Court of Appeals affirmed the validity of the Memorandum of Agreement between
the parties, but reversed the finding that there was bad faith on the part of the plaintiffs
when the bank entered into the Memorandum of Agreement.

Issue:

Whether or not respondents acted in bad faith in concealing the consideration of the
sale from Rural Bank

Held:

No. pursuant to Article 1339 0f the Civil Code,[16] silence or concealment, by itself, does
not constitute fraud, unless there is a special duty to disclose certain facts, or unless according
to good faith and the usages of commerce the communication should be made. Verily, private
respondents Rayandayan and Arceo had no duty, and therefore did not act in bad faith, in
failing to disclose the real consideration of the sale between them and Manuel Behis.

Consequently, not all elements of fraud vitiating consent for purposes of annulling a
contract concur, to wit: (a) It was employed by a contracting party upon the other; (b) It
induced the other party to enter into the contract; (c) It was serious; and; (d) It resulted in
damages and injury to the party seeking annulment. Petitioner bank has not sufficiently shown
that it was induced to enter into the agreement by the non-disclosure of the purchase price,
and that the same resulted in damages to the bank. Indeed, the general rule is that whosoever
alleges fraud or mistake in any transaction must substantiate his allegation, since it is presumed
that a person takes ordinary care for his concerns and that private transactions have been fair
and regular. Petitioner bank's allegation of fraud and deceit have not been established
sufficiently and competently to rebut the presumption of regularity and due execution of the
agreement.



























DOMINGO CARABEO vs. SPOUSES NORBERTO and SUSAN DINGCO
G.R. No. 190823
April 4, 2011

Facts:

Petitioner entered into a contract with respondents whereby petitioner agreed to sell
his rights over a 648 square meter parcel of unregistered land.
When respondents were about to pay the balance, petitioner told them to keep It first
because there was an ongoing problem over the land.
Upon finding that the alleged problem was over, respondents offered to pay the
balance; however, petitioner refused.
Respondents thus filed an action for specific performance.
Petitioners son, Antonio Carabeo filed the present petition for review, faulting the
decision of the Court of Appeals in ruling in respondents favor.

Issue:

Whether or not petitioners death rendered respondents complaint against him
dismissible

Held:

Yes. In the present case, respondents are pursuing a property right arising from the
kasunduan, whereas petitioner is invoking nullity of the kasunduan to protect his proprietary
interest. Assuming arguendo, however, that the kasunduan is deemed void, there is a corollary
obligation of petitioner to return the money paid by respondents, and since the action involves
property rights, it survives.













FRANCISCO I. CHAVEZ vs. PUBLIC ESTATES AUTHORITY and AMARI
COASTAL BAY DEVELOPMENT CORPORATION
G. R. No. 133250
May 6, 2003

Facts:

In 1973, the Comissioner on Public Highways entered into a contract to reclaim areas of
Manila Bay with the Construction and Development Corportion of the Philippines
(CDCP).
PEA (Public Estates Authority) was created by President Marcos under P.D. 1084, tasked
with developing and leasing reclaimed lands.
These reclaimed lands were transferred to the care of PEA under P.D. 1085 as part of
the Manila Cavite Road and Reclamation Project (MCRRP).
CDCP and PEA entered into an agreement that all future projects under the MCRRP
would be funded and owned by PEA.
In 1988, President Aquino issued Special Patent No. 3517 transferring lands to PEA,
followed by the transfer of three Titles (7309, 7311 and 7312) by the Register of Deeds
of Paranaque to PEA covering the three reclaimed islands known as the Freedom
Islands.
Subsequently, PEA entered into a joint venture agreement (JVA) with AMARI, a Thai-
Philippine corporation to develop the Freedom Islands.
Along with another 250 hectares, PEA and AMARI entered the JVA which would later
transfer said lands to AMARI.
This caused a stir especially when Sen. Maceda assailed the agreement, claiming that
such lands were part of public domain (famously known as the mother of all scams).
Peitioner Frank J. Chavez filed case as a taxpayer praying for mandamus, a writ of
preliminary injunction and a TRO against the sale of reclaimed lands by PEA to AMARI
and from implementing the JVA.
Following these, under President Estradas admin, PEA and AMARI entered into an
Amended JVA and Mr. Chaves claim that the contract is null and void.

Issue:

Whether or not the transfer of the lands to Amari is valid

Held:

No. To allow vast areas of reclaimed lands of the public domain to be transferred to PEA
as private lands will sanction a gross violation of the constitutional ban on private corporations
from acquiring any kind of alienable land of the public domain.

The Supreme Court affirmed that the 157.84 hectares of reclaimed lands comprising the
Freedom Islands, now covered by certificates of title in the name of PEA, are alienable lands of
the public domain. The 592.15 hectares of submerged areas of Manila Bay remain inalienable
natural resources of the public domain. Since the Amended JVA seeks to transfer to AMARI, a
private corporation, ownership of 77.34 hectares of the Freedom Islands, such transfer is void
for being contrary to Section 3, Article XII of the 1987 Constitution which prohibits private
corporations from acquiring any kind of alienable land of the public domain. Furthermore, since
the Amended JVA also seeks to transfer to AMARI ownership of 290.156 hectares of still
submerged areas of Manila Bay, such transfer is void for being contrary to Section 2, Article XII
of the 1987 Constitution which prohibits the alienation of natural resources other than
agricultural lands of the public domain.

































DOMINGO CARABEO vs. SPOUSES NORBERTO and SUSAN DINGCO
G.R. No. 190823
April 4, 2011

Facts:

Petitioner entered into a contract with respondents whereby petitioner agreed to sell
his rights over a 648 square meter parcel of unregistered land.
When respondents were about to pay the balance, petitioner told them to keep It first
because there was an ongoing problem over the land.
Upon finding that the alleged problem was over, respondents offered to pay the
balance; however, petitioner refused.
Respondents thus filed an action for specific performance.
Petitioners son, Antonio Carabeo filed the present petition for review, faulting the
decision of the Court of Appeals in ruling in respondents favor.

Issue:

Whether or not an object certain is the subject of the contract

Held:

Yes. That the kasunduan did not specify the technical boundaries of the property did not
render the sale a nullity. The requirement that a sale must have for its object a determinate
thing is satisfied as long as, at the time the contract is entered into, the object of the sale is
capable of being made determinate without the necessity of a new or further agreement
between the parties. As the above-quoted portion of the kasunduan shows, there is no doubt
that the object of the sale is determinate.













PIO SIAN MELLIZA vs. CITY OF ILOILO, UNIVERSITY OF THE
PHILIPPINES and THE COURT APPEALS
G.R. No. L-24732
April 30, 1968

Facts:

Juliana Melliza owned three parcels of land registered in her name.
In 1931, she donated to the then Municipality of Iloilo, 9,000 square meters of Lot 1214,
to serve as site for the municipal hall.
The donation was however revoked by the parties because the area was deemed
insufficient for the Arellano Plan of development by the municipality.
Nonetheless, Juliana made an instrument without any caption, selling some of the lots
to the Municipality.
Juliana sold her remaining interest in Lot 1214 to Remedios San Villanueva, who also
later transferred her rights to the said land to Pio Sian Melliza.
The City of Iloilo, which succeeded to the Municipality of Iloilo, donated the city hall site
together with the building thereon to the University of the Philippines.
UP enclosed the site donated with a wire fence, prompting petitioner to demand
payment or recovery of a portion of the lot (Lot 1214-B).
Since no recovery was made due to the citys lack of funds, petitioner brought the issue
to the court.
The parties claim their ownership to the portion of the lot.

Issue:

Whether or not the Lot 1214-B is included in the lots donated to the City of Iloilo

Held:

Yes. The requirement of the law that a sale must have for its object a determinate thing,
is fulfilled as long as, at the time the contract is entered into, the object of the sale is capable of
being made determinate without the necessity of a new or further agreement between the
parties (Art. 1273, old Civil Code; Art. 1460, New Civil Code). The specific mention of some of
the lots plus the statement that the lots object of the sale are the ones needed for city hall site,
avenues and parks, according to the Arellano plan, sufficiently provides a basis, as of the time
of the execution of the contract, for rendering determinate said lots without the need of a new
and further agreement of the parties.

It should be stressed, also, that the sale to Remedios Sian Villanueva from which Pio
Sian Melliza derived title did not specifically designate Lot 1214-B, but only such portions of
Lot 1214 as were not included in the previous sale to Iloilo municipality thus, if said Lot 1214-B
had been included in the prior conveyance to Iloilo municipality, then it was excluded from the
sale to Remedios Sian Villanueva and, later, to Pio Sian Melliza.









































MANUEL CATINDIG, represented by his legal representative
EMILIANO CATINDIG-RODRIGO vs. AURORA IRENE VDA. DE
MENESES
G.R. No. 165851
February 2, 2011

Facts:

Respondent is the surviving spouse of the registered owner of the Masusuwi Fishpond,
alleging that in 1975, petitioner Catindig, the first cousin of her husband, deprived her of
the possession of the Masusuwi Fishpond, through fraud, undue influence and
intimidation, and unlawfully leased the same to Silvino Roxas, Sr.
Petitioner Catindig maintains that he bought the fishpond from respondent and her
children.
The trial court granted respondents suit to recover the property and demand of
payment of unearned income, damages, attorneys fees, and costs of litigation, due to
the finding that the Deed of Absolute Sale executed between respondent and petitioner
was simulated and fictitious and has no consideration.
The court a quo was convinced that the Deed of Absolute Sale lacked consideration,
because respondent and her children never received the stipulated purchase price for
the Masusuwi Fishpond which was pegged at PhP150,000.00.

Issue:

Whether or not the Deed of Absolute Sale had no consideration

Held:

Yes. Since the title to the disputed property was still in the name of Rosendo Meneses,
Sr., and the owners duplicate copy of the title is still in the possession of respondent, what can
be inferred is the fact that the consideration of P150,000.00 as so stated in the document
allegedly paid was never actually given. If petitioner Catindig was really a legitimate buyer of
the property who paid the consideration with good money, he should have registered the
document of sale or had it annotated at the back of the title, or better still, he should have had
the name of Rosendo cancelled so that a new title can be issued in his name.

It is a well-entrenched rule that 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 null and void ab initio for lack
of consideration. Moreover, Article 1471 of the Civil Code, provides that if the price is
simulated, the sale is void, which applies to the instant case, since the price purportedly paid
as indicated in the contract of sale was simulated for no payment was actually made.

ANTHONY ORDUA, DENNIS ORDUA, and ANTONITA ORDUA vs.
EDUARDO J. FUENTEBELLA, MARCOS S. CID, BENJAMIN F. CID,
BERNARD G. BANTA, and ARMANDO GABRIEL, JR.
G.R. No. 176841
June 29, 2010

Facts:

Gabriel Sr. sold the subject lot to petitioner Antonita, with the purchase price payable by
installments, but no formal deed was executed to document the sale.
Antonita and her sons, Dennis and Anthony occupied the subject lot and even
constructed their house thereon while constantly paying for the lot.
Gabriel Jr. later sold the property to Bernard Banta due to the formers failure to pay his
loan to the latter. A Deed of Sale was later executed in his favor.
Bernard in turn sold the lot to the Cids; then the Cids sold the lot to Eduardo
Fuentebella.
Antonita later discovered that the signature of Gabriel Jrs estranged wife, Teresita in
the deed of sale was a forgery.
Petitioners filed a complaint for Annulment of Title, Reconveyance with Damages but
both the trial court and the Court of Appeals dismissed such complaint.

Issue:

Whether or not the verbal sale contract between Gabriel Sr. and Antonita had adequate
consideration

Held:

Yes. The trial courts posture, with which the CA effectively concurred, is patently
flawed. For starters, they equated incomplete payment of the purchase price with inadequacy
of price or what passes as lesion, when both are different civil law concepts with differing legal
consequences, the first being a ground to rescind an otherwise valid and enforceable contract.
Perceived inadequacy of price, on the other hand, is not a sufficient ground for setting aside a
sale freely entered into, save perhaps when the inadequacy is shocking to the conscience.

What is abundantly clear is that what Antonita agreed to pay Gabriel, Sr., albeit in
installment, was very much more than what his son, for the same lot, received from his buyer
and the latters buyer later. The Court, therefore, cannot see its way clear as to how the RTC
arrived at its simplistic conclusion about the transaction between Gabriel Sr. and Antonita being
without adequate consideration.
CARMELA BROBIO MANGAHAS vs. EUFROCINA A. BROBIO
G.R. No. 183852
October 20, 2010

Facts:

Pacifico S. Brobio died intestate, leaving three parcels of land to his wife, herein
respondent, and four legitimate and three illegitimate children, petitioner being one of
the latter.
In consideration of their love and affection for the respondent and the sum of P150,000,
petitioner and Pacificos other children waived their right over the parcels of land in
favor of respondent.
Petitioner particularly asserted that she agreed to waive her rights over the property
due to respondents promise that she would give petitioner an additional amount.
Respondent refused to pay the additional amount, until time came when she asked
petitioner to countersign a copy of the Deed. Petitioner agreed to sign only if
respondent would later pay her P600,000 as bargained price for the additional amount
promised.
Respondent executed a promissory note to that effect but payment was never made,
insisting that she no longer had any money.
Petitioner thus filed a complaint for specific performance with damages, to which the
trial court granted in her favor.
The CA reversed the decision and dismissed the complaint.

Issue:

Whether or not the promissory note was not supported by any consideration

Held:

No. Respondent failed to prove that the promissory note was not supported by any
consideration. From her testimony and her assertions in the pleadings, it is clear that the
promissory note was issued for a cause or consideration, which, at the very least, was
petitioners signature on the document

A contract is presumed to be supported by cause or consideration.The presumption that
a contract has sufficient consideration cannot be overthrown by a mere assertion that it has no
consideration. To overcome the presumption, the alleged lack of consideration must be shown
by preponderance of evidence. The burden to prove lack of consideration rests upon whoever
alleges it, which, in the present case, is respondent.

It may very well be argued that if such was the consideration, it was inadequate.
Nonetheless, even if the consideration is inadequate, the contract would not be invalidated,
unless there has been fraud, mistake, or undue influence. However, none of these grounds
have been proven in this case.

GOLDEN APPLE REALTY AND DEVELOPMENT CORPORATION and
ROSVIBON REALTY CORPORATION vs. SIERRA GRANDE REALTY
CORPORATION, MANPHIL INVESTMENT CORPORATION, RENAN V.
SANTOS and PATRICIO MAMARIL
G.R. No. 119857
July 28, 2010

Facts:

To secure a loan from Manphil Investment Corporation, Hayari Trading Corporation,
Valiant Realty and Development Corporation, represented by its General Manager
Bernardino Villanueva, and Sierra Grande Realty Corporation, represented by Terry
Villanueva Yu, executed a Third Party Real Estate Mortgage in favor of Manphil over a
parcel of land, otherwise known as the Roberts property.
Eventually, Villanueva executed a contract to sell the Roberts property with Golden
Apple Realty and Development, Inc., majority of its stocks are owned by Elmer Tan, a
first cousin of the Villanueva brothers and sisters, and Rosvibon Realty Corporation.
Sierra Grande, through Bernardino Villanueva, finally executed a Deed of Sale to Golden
Apple, and another to Rosvibon.
Meanwhile, Sierra Grande's Board, on August 29, 1985, passed a resolution revoking the
authority of Bernardo Villanueva to sell the Roberts property.
Consequently, the Deeds of Absolute Sale between Golden Apple and Rosvibon, as
vendees, and Sierra Grande, as vendor, were invalidated on the primordial premise
that badges of fraud attended their execution.
The Court of Appeals reversed the ruling of the trial court which rendered judgment in
favor of herein petitioners, alleging, among others, that the contracts are invalid for
insufficiency of consideration.

Issue:

Whether or not the court erred in invalidating the contract for insufficiency of
consideration

Held:

No. In claiming that the said price of the property is not inadequate, petitioners stated
that the payment of Elmer Tan to pre-terminate Hayari's obligation as part of the consideration
paid for the property should be included. However, as correctly argued by respondent Sierra
Grande, the amortizations paid by Elmer Tan to Manphil was for a loan incurred by Hayari and
not by respondent Sierra Grande; thus, any payment of the amortizations on the loan of Hayari
cannot be considered as part of the consideration for the sale of the land owned by respondent
Sierra Grande. It is then safe to declare that respondent Sierra Grande did not benefit from the
loan or from its pre-termination. Moreover, the records are bereft of any evidence to support
the claim of petitioners that the sum of money paid by Elmer Tan, on behalf of Hayari, was part
of the consideration for the same property. What only appears is that the only consideration
paid for the sale of the Roberts property was the sum contained in the Contract to Sell, which,
considering the size and location of the property, is inadequate. What prompted Elmer Tan to
pay the total amount of P3,134,921.00 cannot be gleaned from the records, except that it was
for the loan incurred by Hayari, which is an independent juridical entity, separate and distinct
from Sierra Grande. Hence, the CA did not commit any error in declaring that there was an
insufficiency of consideration or price as the same is shown on the very face of the Contract to
Sell.

ASKAY vs. FERNANDO A. COSALAN
G.R. No. 21943
September 15, 1924

Facts:

Plaintiff-appellant Askay, an illiterate Igorot, between 70 and 80 years of age, sold his
claim over Pet Kel Mineral to his nephew by marriage, Cosalan.
Nine years later, Askay instituted action to secure possession of the mineral claim and to
obtain damages from the defendant-appellee.
Judgment was rendered dismissing the complaint.
Askay assigns to errors, the first is whether Judge George R. Harvey had jurisdiction to
try the case; and the second is whether the plaintiff has established his cause of action
by a preponderance of the evidence.

Issue:

Whether or not plaintiff has established his cause of action

Held:

No. One facts exists in plaintiff's favor, and this is the age and ignorance of the plaintiff
who could be easily duped by the defendant, a man of greater intelligence. Another fact is the
inadequacy of the consideration for the transfer which, according to the conveyance, consisted
of P1 and other valuable consideration, and which, according to the oral testimony, in reality
consisted of P107 in cash, a bill fold, one sheet, one cow, and two carabaos.

Gross inadequacy naturally suggests fraud and is some evidence thereof, so that it may
be sufficient to show it when taken in connection with other circumstances, such as ignorance
or the fact that one of the parties has an advantage over the other. But the fact that the bargain
was a hard one, coupled with mere inadequacy of price when both parties are in a position to
form an independent judgment concerning the transaction, is not a sufficient ground for the
cancellation of a contract.









HEIRS OF THE LATE SPOUSES AURELIO AND ESPERANZA BALITE;
Namely, ANTONIO T. BALITE, FLOR T. BALITE-ZAMAR, VISITACION
T. BALITE-DIFUNTORUM, PEDRO T. BALITE, PABLO T. BALITE,
GASPAR T. BALITE, CRISTETA T. BALITE and AURELIO T. BALITE
JR., All Represented by GASPAR T. BALITE vs. RODRIGO N. LIM
G.R. No. 152168
December 10, 2004

Facts:

Due to her illness and dire need of money for her hospital expenses, Esperanza Balite,
through one of her daughters, offered respondent Rodrigo Lim her undivided share in
the parcels of land that she and her husband own.
Esparanza and Rodrigo agreed that, under the Deed of Absolute Sale, they would make
it appear that the purchase price is P150,000, although the actual price agreed upon by
them is P1M.
Two of Esperanzas children learned of the transaction and expressed their
disagreement to the sale of the property.
Later, Rodrigo secured a P2M loan from the Rizal Commercial Banking Corporation and
executed a real estate mortgage over the property as security for the loan.
Both the trial court and the Court of Appeals upheld the validity of the sale, even
without the lack of consent of the co-owners.
Petitioners claim, among others, that the sale was void allegedly because the actual
purchase price of the property was not stated in the Deed of Absolute Sale, intended for
the unlawful purpose of avoiding payment of higher taxes.

Issue:

Whether or not the sale is void because of the undervalued consideration of the
property

Held:

No. We have before us an example of a simulated contract. Article 1345 of the Civil
Code provides that the simulation of a contract may either be absolute or relative. In absolute
simulation, there is a colorable contract but without any substance, because the parties have
no intention to be bound by it. An absolutely simulated contract is void, and the parties may
recover from each other what they may have given under the contract. On the other hand, if
the parties state a false cause in the contract to conceal their real agreement, such a contract is
relatively simulated. Here, the parties real agreement binds them.

In the present case, the parties intended to be bound by the Contract, even if it did not
reflect the actual purchase price of the property. That the parties intended the agreement to
produce legal effect is revealed by the letter of Esperanza Balite to respondent dated October
23, 1996 and petitioners admission that there was a partial payment of P320,000 made on the
basis of the Deed of Absolute Sale. There was an intention to transfer the ownership of over
10,000 square meters of the property. Clear from the letter is the fact that the objections of her
children prompted Esperanza to unilaterally withdraw from the transaction.

Since the Deed of Absolute Sale was merely relatively simulated, it remains valid and
enforceable. All the essential requisites prescribed by law for the validity and perfection of
contracts are present. However, the parties shall be bound by their real agreement for a
consideration of P1,000,000 as reflected in their Joint Affidavit. The juridical nature of the
Contract remained the same. What was concealed was merely the actual price. Where the
essential requisites are present and the simulation refers only to the content or terms of the
contract, the agreement is absolutely binding and enforceable between the parties and their
successors in interest.













RAFAEL G. SUNTAY, substituted by his heirs, namely: ROSARIO,
RAFAEL, JR., APOLINARIO, RAYMUND, MARIA VICTORIA, MARIA
ROSARIO and MARIA LOURDES, all surnamed SUNTAY vs. THE HON.
COURT OF APPEALS and FEDERICO C. SUNTAY
G.R. No. 114950
December 19, 1995

Facts:

Federico Suntay, a rice miller, applied as a miller-contractor of the then National Rice
and Corn Corporation (NARIC) but was disapproved due to his several unpaid loans.
Federico then allowed his counsel and nephew, Rafael Suntay to do the application for
him.
In view thereof, Federico, for and in consideration of P20,000 conveyed to Rafael the
parcel of land he owns with all its existing structures.
A counter sale was later executed, causing the parcel of land to be sold back to
Federico; but it was neither dated nor notarized.
Consequently, the Certificate of Title in favor of Federico was cancelled, and the TCT
was issued in the name of Rafael.
Significantly, notwithstanding the fact that Rafael became the titled owner of said land
and rice mill, he never made any attempt to take possession thereof at any time, while
Federico continued to exercise rights of absolute ownership over the property.
Represented by a new counsel, Federico requested that Rafael deliver his copy of the
TCT so that Federico can proceed with executing the counter sale.
Rafael refused, holding that the second deed of sale was insufficient to transfer real
rights because it was not notarized.
After a thirteen-year trial, judgment was rendered, holding that the deed of sale was not
simulated, and was in fact valid.

Issue:

Whether or not the deed of sale executed in favor of Rafael is valid

Held:

No. The deed of sale executed by Federico in favor of his now deceased nephew, Rafael,
is absolutely simulated and fictitious and, hence, null and void, said parties having entered into
a sale transaction to which they did not intend to be legally bound. As no property was validly
conveyed under the deed, the second deed of sale executed by the late Rafael in favor of his
uncle, should be considered ineffective and unavailing.

The failure of the late Rafael to take exclusive possession of the property allegedly sold
to him is a clear badge of fraud. The fact that, notwithstanding the title transfer, Federico
remained in actual possession, cultivation and occupation of the disputed lot from the time the
deed of sale was executed until the present, is a circumstance which is unmistakably added
proof of the fictitiousness of the said transfer, the same being contrary to the principle of
ownership.
































WILLIAM UY and RODEL ROXAS vs. COURT OF APPEALS, HON.
ROBERT BALAO and NATIONAL HOUSING AUTHORITY
G.R. No. 120465
September 9, 1999

Facts:

Petitioners, being the agents authorized to sell 8 parcels of land by the owners thereof,
offered the same to the National Housing Authority for the latters house development
project.
NHA paid for 5 of the 8 parcels, asserting that the remaining area is located at an active
landslide area which is therefore not suitable for the house development project.
For cancelling the sale over the three parcels of land, NHA offered the amount of P1.225
million to the landowners as daos perjuicios.
Petitioners filed a complaint for damages against NHA and its General Manager, Robert
Balao.
The RTC declared the cancellation of the contract as valid.
The Court of Appeals dismissed the case.

Issue:

Whether or not the cancellation over the three parcels of land amounted to the
rescission of the contract

Held:

No. The cancellation was not a rescission under Article 1191. Rather, the cancellation
was based on the negation of the cause arising from the realization that the lands, which were
the object of the sale, were not suitable for housing.

Cause is the essential reason which moves the contracting parties to enter into it. In
other words, the cause is the immediate, direct and proximate reason which justifies the
creation of an obligation through the will of the contracting parties. Cause, which is the
essential reason for the contract, should be distinguished from motive, which is the particular
reason of a contracting party which does not affect the other party. For example, in a contract
of sale of a piece of land, such as in this case, the cause of the vendor (petitioners principals) in
entering into the contract is to obtain the price. For the vendee, NHA, it is the acquisition of the
land. The motive of the NHA, on the other hand, is to use said lands for housing. This is
apparent from the portion of the Deeds of Absolute Sale.

Ordinarily, a partys motives for entering into the contract do not affect the contract.
However, when the motive predetermines the cause, the motive may be regarded as the cause.
In this case, it is clear, and petitioners do not dispute, that NHA would not have entered into
the contract were the lands not suitable for housing. In other words, the quality of the land was
an implied condition for the NHA to enter into the contract. On the part of the NHA, therefore,
the motive was the cause for its being a party to the sale.




























PENTACAPITAL INVESTMENT CORPORATION vs. MAKILITO B.
MAHINAY
G.R. No. 171736
July 5, 2010

Facts:

Respondent was the counsel of Ciudad Real Development, Inc. (CRDI).
Pentacapital Realty Corporation offered to buy parcels of land known as the Molino
Properties, owned by CRDI.
CRDI allegedly instructed Pentacapital to pay the formers creditors, including
respondent.
Respondent, Pentacapital Realty and CRDI allegedly agreed that respondent had a
charging lien equivalent to 20% of the total consideration of the sale in the amount
ofP10,277,040.00.
Respondent instituted an action for specific performance against Pentacapital Realty,
praying for the payment of his commission on the sale of the Molino Properties.
Petitioner filed a complaint for sum of money against respondent based on two
separate loans obtained by the latter, evidenced by two promissory notes.
The trial court and the Court of Appeals found that respondent was able to prove by
preponderance of evidence that it was the intent of Pentacapital and CRDI to give him
his commission.

Issue:

Whether or not respondent should be made liable despite his allegation that the
promissory notes lacked consideration as he did not receive the proceeds of the loan

Held:

Yes. In the present case, as proof of his claim of lack of consideration, respondent
denied under oath that he owed petitioner a single centavo. He added that he did not apply for
a loan and that when he signed the promissory notes, they were all blank forms and all the
blank spaces were to be filled up only if the sale transaction over the subject properties would
not push through because of a possible adverse decision in the civil cases involving them (the
properties). He thus posits that since the sale pushed through, the promissory notes did not
become effective. Contrary to the conclusions of the RTC and the CA, we find such proof
insufficient to overcome the presumption of consideration. The presumption that a contract
has sufficient consideration cannot be overthrown by the bare, uncorroborated and self-serving
assertion of respondent that it has no consideration. The alleged lack of consideration must be
shown by preponderance of evidence.

Nowhere in the notes was it stated that they were subject to a condition. As correctly
observed by petitioner, respondent is not only a lawyer but a law professor as well. He is,
therefore, legally presumed not only to exercise vigilance over his concerns but, more
importantly, to know the legal and binding effects of promissory notes and the intricacies
involving the execution of negotiable instruments including the need to execute an agreement
to document extraneous collateral conditions and/or agreements, if truly there were such. This
militates against respondents claim that there was indeed such an agreement. Thus, the
promissory notes should be accepted as they appear on their face.



































HEIRS OF RAMON C. GAITE, CYNTHIA GOROSTIZA GAITE and
RHOGEN BUILDERS vs. THE PLAZA, INC. and FGU INSURANCE
CORPORATION
G.R. No. 177685
January 26, 2011

Facts:

The Plaza, Inc. (The Plaza), through its President, Jose C. Reyes, entered into a contract
with Rhogen Builders (Rhogen), represented by Ramon C. Gaite, for the construction of
a restaurant building.
Sometime later, the engineer of the project ordered Gaite to cease and desist from
continuing with the construction of the building for violation of Sections 301 and 302 of
the National Building Code.
Gaite decided to suspend all construction works until Reyes and the Project Manager
cooperate to resolve the issue.
The Plaza then notified Gaite that it could no longer credit any payment to Rhogen for
the work it had completed because the evaluation of the extent, condition, and cost of
work done revealed that in addition to the violations committed during the construction
of the building, the structure was not in accordance with plans approved by the
government and accepted by Ayala.
Hence, The Plaza demanded the reimbursement of the down payment, the cost of
uprooting or removal of the defective structures, the value of owner-furnished
materials, and payment of liquidated damages through a civil case for breach of
contract, sum of money and damages against petitioners.
Having failed to complete the project within the stipulated period and comply with its
obligations, Rhogen was thus declared guilty of breaching the Construction Contract and
is liable for damages under Articles 1170 and 1167 of the Civil Code.
The CA sustained the RTC decision, holding in the main that Rhogen cannot blame The
Plaza for failing to perform its part on the contractual obligation because it obliged itself
to comply with all the laws, city and municipal ordinances and all government
regulations insofar as they are binding upon or affect the parties [to the contract], the
work or those engaged thereon.

Issue:

Whether or not Rhogens down payment should be returned on the basis of quantum
meruit

Held:

No. Under the principle of quantum meruit, a contractor is allowed to recover the
reasonable value of the thing or services rendered despite the lack of a written contract, in
order to avoid unjust enrichment. Quantum meruit means that in an action for work and labor,
payment shall be made in such amount as the plaintiff reasonably deserves. To deny payment
for a building almost completed and already occupied would be to permit unjust enrichment at
the expense of the contractor.

In this case, however, Rhogen failed to finish even a substantial portion of the works
due to the stoppage order issued just two months from the start of construction. Despite the
down payment received from The Plaza, Rhogen, upon evaluation of the Project Manager, was
able to complete a meager percentage much lower than that claimed by it under the first
progress billing between July and September 1980. Moreover, after it relinquished the project
in January 1981, the site inspection appraisal showed that Rhogen has executed the works not
in accordance with the approved plans or failed to seek prior approval of the Municipal
Engineer. Article 1167 of the Civil Code is explicit on this point that if a person obliged to do
something fails to do it, the same shall be executed at his cost.

In addition, Article 122 of the Articles of General Conditions provides that the contractor
shall not be entitled to receive further payment until the work is finished. As the works
completed by Rhogen were not in accordance with approved plans, it should have been
executed at its cost had it not relinquished the project in January 1981. The CA thus did not err
in sustaining the trial courts order for the return of the down payment given by The Plaza to
Rhogen.





















HICOBLINO M. CATLY (Deceased), Substituted by his wife, LOURDES
A. CATLY vs. WILLIAM NAVARRO, ISAGANI NAVARRO, BELEN
DOLLETON, FLORENTINO ARCIAGA, BARTOLOME PATUGA,
DIONISIO IGNACIO, BERNARDINO ARGANA, AND ERLINDA
ARGANA-DELA CRUZ, and AYALA LAND, INC.
G.R. No. 167239
May 5, 2010

Facts:

Respondents Navarro, et.al through petitioner lawyer, filed a complaint for annulment
of Transfer Certificate of Title and recovery of possession with damages against Las
Pias Ventures, Inc., now Ayala Land, Inc.
Respondents alleged that after conducting a relocation survey, a portion of their land
was included in a parcel of land owned by Ayala Land, the same land which originated
from Original Certificate of Title No. 1421 ordered null and void by the RTC in a partial
judgment.
The respondents and Ayala later executed a Memorandum of Agreement, assisted by
petitioner, to waive, renounce and cede in favor of Ayala any and all rights of exclusive
ownership over the subject properties.
Petitioner claims that he was not consulted when the respondents signed the MOA. He
claims that, should there be an amicable settlement of the case, his attorneys fees
should still be paid in full to fully compensate him in representing herein respondents
and their heirs.
Conformably, the respondents, Ayala, and petitioner executed an Amendatory
Agreement incorporating the provision that petitioner would be paid P20M or P30M as
attorneys fees.
The trial court issued a separate judgment granting the payment of P20M as attorneys
fees, for which petitioner filed an ex-parte Writ of Execution of Judgment.
The respondents opposed the same, contending that the amount is unconscionable and
excessive.
The trial court ruled that it can only execute payment for the amount of P1M and not
the entire P20M because the compromise agreement and MOA was not of his own
efforts, and that he did not represent the heirs of his clients in the case.

Issue:

Whether or not petitioner is entitled to the P30M attorneys fees as agreed upon in
their MOA and amendatory agreement

Held:

Verily, the determination of the amount of reasonable attorneys fees requires the
presentation of evidence and a full-blown trial. Hence this case is ordered remanded to the trial
court to determine the amount of attorneys fees, on quantum meruit basis, for which
petitioner is entitled to.

The principle of quantum meruit (as much as he deserves) may be a basis for
determining the reasonable amount of attorneys fees. Quantum meruit is a device to prevent
undue enrichment based on the equitable postulate that it is unjust for a person to retain
benefit without paying for it. It is applicable even if there was a formal written contract for
attorneys fees as long as the agreed fee was found by the court to be unconscionable. In fixing
a reasonable compensation for the services rendered by a lawyer on the basis of quantum
meruit, factors such as the time spent, and extent of services rendered; novelty and difficulty of
the questions involved; importance of the subject matter; skill demanded; probability of losing
other employment as a result of acceptance of the proferred case; customary charges for
similar services; amount involved in the controversy and the benefits resulting to the client;
certainty of compensation; character of employment; and professional standing of the lawyer,
may be considered. Indubitably entwined with a lawyers duty to charge only reasonable fee is
the power of the Court to reduce the amount of attorneys fees if the same is excessive and
unconscionable in relation to Sec. 24, Rule 138 of the Rules. Attorneys fees are unconscionable
if they affront ones sense of justice, decency or unreasonableness.












CONCHITA LIGUEZ vs. THE HONORABLE COURT OF APPEALS,
MARIA NGO VDA. DE LOPEZ, ET AL.
G.R. No. L-11240
December 18, 1957

Facts:

During his lifetime, Salvador P. Lopez donated a parcel of land in favor of herein
petitioner.
The deed of donation was found to have been made in view of the desire of Lopez to
have sexual relations with Conchita who was at that time, only 16 years of age.
Lopez remarked that Conchitas parents told him that they would not allow him to live
with Conchita unless he donates the land.
The CA affirmed that the property belonged to the conjugal partnership of Lopez and his
wife, Maria Ngo.
Petitioner-appelant filed a complaint against the widow and heirs of the late Salvador P.
Lopez to recover a parcel of land, interposing that the donation was null and void for
having an illicit causa or consideration.
The CA held that the deed was inoperative.
Appellant argues that the CA erred in declaring the deed as inoperative, considering
that, under the law (Art. 1274 of the Civil Code of 1889), "in contracts of pure
beneficence the consideration is the liberality of the donor", and that liberality per se
can never be illegal, since it is neither against law or morals or public policy.

Issue:

Whether or not the deed is valid

Held:

The Court of Appeals correctly held that Lopez could not donate the entirety of the
property in litigation, to the prejudice of his wife Maria Ngo, because said property was
conjugal in character and the right of the husband to donate community property is strictly
limited by law. However, donation made by the husband in contravention of law is not void in
its entirety, but only in so far as it prejudices the interest of the wife. In this regard, as Manresa
points out the law asks no distinction between gratuitous transfers and conveyances for a
consideration. Once again, only the court of origin has the requisite date to determine whether
the donation is inofficious or not

Appellant Conchita Liguez declared entitled to so much of the donated property as may
be found, upon proper liquidation, not to prejudice the share of the widow Maria Ngo in the
conjugal partnership with Salvador P. Lopez or the legitimes of the forced heirs of the latter.
The records are ordered remanded to the court of origin for further proceedings in accordance
with this opinion.



PHILIPPINE BANKING CORPORATION, representing the estate of
JUSTINA SANTOS Y CANON FAUSTINO, deceased vs. LUI SHE in her
own behalf and as administratrix of the intestate estate of Wong
Heng, deceased
G.R. No. L-17587
September 12, 1967

Facts:

In grateful acknowledgment of the personal services of the lessee Wong Heng to her,
Justina Santos executed a contract of lease in his favor.
Justina later gave Wong the option to buy the leased premises conditioned on his
obtaining Philippine citizenship.
Wong Heng was not able to obtain Philippine citizenship.
In the two wills executed, Justina told her legatees to respect the contracts she entered
into with Wong; however, she later ordered her executor to secure the annulment of
the contracts, which she allegedly made due to machinations and inducements
practiced by Wong.
The trial court declared that the assailed documents were null and void, except the
lease contract.
When both parties died, Wong was substituted by his wife, Lui She, and Justina was
substituted by the Philippine Banking Corporation because she had no other relative.

Issue:

(1) Whether or not the contracts have been entered into with the use of undue
influence, fraud and misrepresentation

(2) Whether or not the contracts are valid

Held:

(1) No. Wong might indeed have supplied the data which Atty. Yumol embodied in
the lease contract, but to say this is not to detract from the binding force of the contract. For
the contract was fully explained to Justina Santos by her own lawyer. One incident, related by
the same witness, makes clear that she voluntarily consented to the lease contract. This witness
said that the original term fixed for the lease was 99 years but that as he doubted the validity of
a lease to an alien for that length of time, he tried to persuade her to enter instead into a lease
on a month-to-month basis. She was, however, firm and unyielding. Instead of heeding the
advice of the lawyer, she ordered him, "Just follow Mr. Wong Heng."

Indeed, the charge of undue influence in this case rests on a mere inference drawn from
the fact that Justina Santos could not read (as she was blind) and did not understand the
English language in which the contract is written, but that inference has been overcome by her
own evidence. Nor is there merit in the claim that her consent to the lease contract, as well as
to the rest of the contracts in question, was given out of a mistaken sense of gratitude to Wong
who, she was made to believe, had saved her and her sister from a fire that destroyed their
house during the liberation of Manila.

(2) No. Taken singly, the contracts show nothing that is necessarily illegal, but
considered collectively, they reveal an insidious pattern to subvert by indirection what the
Constitution prohibits the transfer of lands to an alien. The illicit purpose then becomes the
illegal causa, rendering the contracts void. The land subject-matter of the contracts is ordered
returned to the estate of Justina Santos as represented by the Philippine Banking Corporation.






























SONIA F. LONDRES, ARMANDO V. FUENTES, CHI-CHITA FUENTES
QUINTIA, ROBERTO V. FUENTES, LEOPOLDO V. FUENTES, OSCAR V.
FUENTES and MARILOU FUENTES ESPLANA vs. THE COURT OF
APPEALS, THE DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS,
THE DEPARTMENT OF TRANSPORTATION AND
COMMUNICATIONS, ELENA ALOVERA SANTOS and CONSOLACION
ALIVIO ALOVERA
G.R. No. 136427
December 17, 2002

Facts:

Paulina Arcenas originally owned Lots 1320 and 1333. After death, ownership passed to
her daughter, Filomena Vidal.
Petitioners in this case are the surviving children of Filomena, now claiming ownership
over the two lots.
Private respondents Consolacion Alovera and her daughter Elena Santos are claiming
just compensation from respondents.
Private respondents doubt the validity of the Absolute Sale because it was tampered, so
that the second parcel of lot sold, Lot 2034 would read as Lot 1333, whereas the
unaltered copy kept by the Records Management and Archives Office shows that the
objects of the sale were Lots 1320 and 2034.
Both the trial court and the Court of Appeals upheld the validity of the contracts.

Issue:

Whether or not the Absolute Sale was valid

Held:

Yes. The Court held that when one sells or buys real property, one sells or buys the
property as he sees it, in its actual setting and by its physical metes and bounds, and not by the
mere lot number assigned to it in the certificate of title. As long as the true intentions of the
parties are evident, the mistake will not vitiate the consent of the parties, or affect the validity
and binding effect of the contract between them. In this case, the evidence shows that the
designation of the second parcel of land sold as Lot 2034 was merely an oversight or a
typographical error. The intention of the parties to the Absolute Sale became unmistakably
clear when private respondents, as vendees, took possession of Lots 1320 and 1333 in the
concept of owners without the objection of Filomena, the vendor. Proof of the conveyance of
ownership is the fact that from the time of the sale, or after more than 30 years, private
respondents have been in possession of Lots 1320 and 1333. Petitioners on the other hand
have never been in possession of the two lots.

We disagree on petitioners argument that the notarized and archived copy should
prevail. A contract of sale is perfected at the moment there is a meeting of the minds upon the
thing which is the object of the contract and upon the price. Being consensual, a contract of
sale has the force of law between the contracting parties and they are expected to abide in
good faith with their respective contractual commitments. Article 1358 of the Civil Code, which
requires certain contracts to be embodied in a public instrument, is only for convenience, and
registration of the instrument is needed only to adversely affect third parties. Formal
requirements are, therefore, for the purpose of binding or informing third parties. Non-
compliance with formal requirements does not adversely affect the validity of the contract or
the contractual rights and obligations of the parties.

SPS. ANTONIO & LETICIA VEGA vs. SOCIAL SECURITY SYSTEM (SSS)
& PILAR DEVELOPMENT CORPORATION
G.R. No. 181672
September 20, 2010

Facts:

Magdalena Reyes asked petitioner spouses Antonio and Leticia Vega to assume her
housing loan from SSS, with her land as security, since she wanted to emigrate.
Upon learning that SSS did not approve of members transferring their mortgaged homes
but they can make a private agreement with Reyes provided they pay the monthly
amortizations on time, the Vegas agreed for Reyes to execute in their favor a deed of
assignment of real property with assumption of mortgage.
Since Reyes did not readily execute the deed of assignment, it was her sister Ofilada
who executed the same in favor of the Vegas.
Ofilada kept the original and gave the Vegas two copies one of which they gave to the
Home Development Mortgage Fund.
Unfortunately, a storm in 1984 resulted in a flood that destroyed the copy left with
them.
Due to the outstanding debt of Reyes to respondent Pilar Development Corporation
(PDC), a writ of execution concerning the property was issued by the court.
Consequently, SSS released the mortgage to PDC and the Vegas were evicted from the
property.
The Court of Appeals reversed the ruling of the trial court in granting the Vegas action
for consignation, damages and injunction with application for preliminary injunction and
temporary restraining order against the SSS, the PDC, the sheriff, and the Register of
Deeds, because the Vegas were unable to produce the deed of assignment of the
property in their favor and that such assignment was not valid as to PDC.

Issue:

Whether or not the Vegas presented adequate proof of Reyes sale of the subject
property to them

Held:

Yes. The rule requiring the presentation of the original of that deed of assignment is not
absolute. Secondary evidence of the contents of the original can be adduced, as in this case,
when the original has been lost without bad faith on the part of the party offering it.

Here, not only did the Vegas prove the loss of the deed of assignment in their favor and
what the same contained, they offered strong corroboration of the fact of Reyes sale of the
property to them. They took possession of the house and lot after they bought it. Indeed, they
lived on it and held it in the concept of an owner for 13 years before PDC came into the picture.
They also paid all the amortizations to the SSS with Antonio Vegas personal check, even those
that Reyes promised to settle but did not. And when the SSS wanted to foreclose the property,
the Vegas sent a managers check to it for the balance of the loan. Neither Reyes nor any of her
relatives came forward to claim the property. The Vegas amply proved the sale to them.





































CLARA M. BALATBAT vs. COURT OF APPEALS and Spouses JOSE
REPUYAN and AURORA REPUYAN
G.R. No. 109410
August 28, 1996

Facts:

Aurelio Roque sold his 6/10 share of the lot acquired by him and his wife Maria Mesina
during their conjugal union, to the spouses Aurora Tuazon-Repuyan and Jose Repuyan
as evidenced by a Deed of Absolute Sale.
Aurora Repuyan later caused the annotation of her affidavit of adverse claim on the
Transfer Certificate of Title of said lot.
Aurelio Roque filed a complaint for Rescission of Contract against the spouses,
grounded on the latters failure to pay the balance of the purchase price, but it was
dismissed by the court.
Later, a deed of absolute sale was executed between Aurelio, Corazon, Feliciano, Severa
and Osmundo, all surnamed Roque, and Clara Balatbat.
A writ of possession was thereafter granted by the trial court in Clara Balatbats favor.
Petitioner filed the instant complaint for the delivery of the owners duplicate copy
against private respondents.

Issue:

Whether or not the sale in favor of the spouses is merely executory for the reason that
there was no delivery of the subject property and that consideration/price was not fully paid

Held:

No. We find the sale as consummated, hence, valid and enforceable. Article 1498 of the
Civil Code provides that - when the sale is made through a public instrument, the execution
thereof shall be equivalent to the delivery of the thing which is the object of the contract, if
from the deed the contrary does not appear or cannot be inferred. The execution of the public
instrument, without actual delivery of the thing, transfers the ownership from the vendor to
the vendee, who may thereafter exercise the rights of an owner over the same. In the instant
case, vendor Roque delivered the owners certificate of title to herein private respondent. It is
not necessary that vendee be physically present at every square inch of the land bought by him,
possession of the public instrument of the land is sufficient to accord him the rights of
ownership. Thus, delivery of a parcel of land may be done by placing the vendee in control and
possession of the land (real) or by embodying the sale in a public instrument (constructive). The
provision of Article 1358 on the necessity of a public document is only for convenience, not for
validity or enforceability. It is not a requirement for the validity of a contract of sale of a parcel
of land that this be embodied in a public instrument.
UNIVERSAL ROBINA SUGAR MILLING CORPORATION vs. HEIRS OF
ANGEL TEVES
G. R. No. 128574
September 18, 2002

Facts:

Andres Abantos heirs adjudicated unto themselves the two lots owned by the former
and sold the (a) unregistered lot to the United Planters Sugar Milling Company, Inc.
(UPSUMCO), and the (b) registered lot to Angel M. Teves.
The sale was not registered.
Teves verbally allowed UPSUMCO to use the lot free of charge, subject to the condition
that UPSUMCO shall shoulder the payment of real property taxes and that its
occupation shall be coterminous with its corporate existence.
UPSUMCO built a guesthouse and pier facilities on the property.
The Philippine National Bank (PNB) acquired UPSUMCOs properties and transferred the
same to the Asset Privatization Trust (APT), which sold it to the Universal Robina Sugar
Milling Corporation (URSUMCO).
URSUMCO then took possession of UPSUMCOs properties, including that of Teves.
URSUMCO refused to turn over the possession of the property to Teves, claiming that it
acquired the right to occupy the property from UPSUMCO which purchased it from
Andres Abanto, and that it was UPSUMCO which has been paying the corresponding
realty taxes.
Teves, substituted by his heirs, are claiming recovery of possession of the lot.
The RTC rendered judgment finding that URSUMCO has no personality to question the
validity of the sale of the property, on the ground, among others that Teves failure to
have the sale registered with the Registry of Deeds would not vitiate his right of
ownership, unless a third party has acquired the land in good faith and for value and has
registered the subsequent deed.
The Court of Appeals affirmed, likewise holding that Teves failure to cause the
registration of the sale is not fatal because it is perfected by mere consent of the
parties.

Issue:

Whether or not Teves legally acquired ownership over the lot

Held:

Yes. That the contract of sale was not registered does not affect its validity. Being
consensual in nature, it is binding between the parties, the Abanto heirs and Teves. Article 1358
of the New Civil Code, which requires the embodiment of certain contracts in a public
instrument, is only for convenience, and the registration of the instrument would merely affect
third persons. Formalities intended for greater efficacy or convenience or to bind third persons,
if not done, would not adversely affect the validity or enforceability of the contract between
the contracting parties themselves. Thus, by virtue of the valid sale, Angel Teves stepped into
the shoes of the heirs of Andres Abanto and acquired all their rights to the property.

RITA SARMING, et.al. vs. CRESENCIO DY, et.al.
G.R. No. 133643
June 6, 2002

Facts:

Petitioners are the successors-in-interest of original defendant Silveria Flores, while
respondents Cresencio Dy and Ludivina Dy-Chan are the successors-in-interest of the
original plaintiff Alejandra Delfino, the buyer of one of the lots subject of this case.
Lot 4163 which was solely registered in the name of Silveria Flores was later sub-divided
between her and her brother Jose.
The grandchildren of Jose and now the owners of his one-half share of Lot 4163, sold
such share to Alejandra Delfino.
TCT No. 578 allegedly covering Lot 4163 was issued in the names of Silveria Flores and
Alejandra Delfino, with one-half share each.
Upon finding that the what was designated in the deed, Lot 5734, was the wrong lot,
and that the Original Certificate of Title (OCT) covering Lot 4163 was still on file.
Alejandra Delfino paid the necessary fees so that the title to Lot 4163 could be released
to Silveria Flores, who promised to turn it over for the reformation of the deed of sale.
However, despite repeated demands, Silveria did not do so.
Silveria claims that she is the rightful and sole owner of Lot 4163 as shown by the OCT;
and consequently, respondents had no right to sell the lot.
The trial court ruled against Silverias successors-in-interest, and ordered the
reformation of the contract.
In affirming the decision of the trial court, the Court of Appeals agreed that the real
intention of the parties was for the sale of Lot 4163 which Alejandra Delfino had been
occupying, and the designation of Lot 5734 in the deed was a mistake in the preparation
of the document.

Issue:

Whether or not reformation of the subject deed is proper by reason of mistake in
designating the correct lot number

Held:

Yes. An action for reformation of instrument under this provision of law may prosper
only upon the concurrence of the following requisites: (1) there must have been a meeting of
the minds of the parties to the contact; (2) the instrument does not express the true intention
of the parties; and (3) the failure of the instrument to express the true intention of the parties
is due to mistake, fraud, inequitable conduct or accident.

All of these requisites, in our view, are present in this case. There was a meeting of the
minds between the parties to the contract but the deed did not express the true intention of
the parties due to mistake in the designation of the lot subject of the deed. There is no dispute
as to the intention of the parties to sell the land to Alejandra Delfino but there was a mistake as
to the designation of the lot intended to be sold as stated in the Settlement of Estate and Sale.
The totality of the evidence clearly indicates that what was intended to be sold to Alejandra
Delfino was Lot 4163 and not Lot 5734. As found by both courts below, there are enough bases
to support such conclusion.

CEBU CONTRACTORS CONSORTIUM CO. vs. COURT OF APPEALS and
MAKATI LEASING & FINANCE CORPORATION
G.R. No. 107199
July 22, 2003

Facts:

A lease agreement relating to various equipment was entered into between Makati
Leasing & Finance Corporation (MLFC), as lessor, and Cebu Contractors Consortium CO.
(CCCC), as lessee.
To secure the lease rentals, a chattel mortgage, and a subsequent amendment thereto,
were executed in favor of MLFC over other various equipment owned by CCCC.
When CCCC began defaulting on the lease rentals and ignoring MLFCs demand letters,
the latter filed a complaint for the payment of the rentals due and prayed that a writ of
replevin be issued in order to obtain possession of the equipment leased and to
foreclose on the equipment mortgaged.
CCCC alleges that MLFC induced it to adopt and apply a sale and lease back scheme
instead of a customary loan secured by a security.
CCCCs position is that it is no longer indebted to MLFC because the total amounts
collected by the latter from the Ministry of Public Highways, by virtue of the deed of
assignment, and from the proceeds of the foreclosed chattels were more than enough
to cover CCCCs liabilities.
The trial court and the Court of Appeals upheld the lease agreement and found CCCC
liable to pay MLFC.
CCCC argues that the sale and lease back scheme is nothing more than an equitable
mortgage and, consequently, asks for its reformation.

Issue:

Whether or not the reformation of the sale and lease back scheme is proper

Held:

Yes. MLFC admits that the transaction with CCCC involved the purchase of already-
owned equipment. Consequently, there can be no doubt that the transaction between the
parties is not one of financial leasing, as defined by law, but simply a loan secured by a chattel
mortgage over CCCCs equipment. When the true intention of the parties to a contract is not
expressed in the instrument purporting to embody their agreement by reason of mistake,
fraud, inequitable conduct or accident, the remedy of the aggrieved party is to ask for
reformation of the instrument under Articles 1359 and 1362 of the Civil Code, to the end that
their true agreement may be expressed therein. Under Article 1144 of the Civil Code, the
prescriptive period for actions based upon a written contract and for reformation of an
instrument is ten years. The right of action for reformation accrued from the date of execution
of the contract of lease in 1976. This was properly exercised by CCCC when it filed its answer
with counterclaim to MLFCs complaint in 1978 and asked for the reformation of the lease
contract.

ADR SHIPPING SERVICES, INC. vs. MARCELINO GALLARDO and THE
HONORABLE COURT OF APPEALS
G.R. No. 134873
September 17, 2002

Facts:

Marcelino Gallardo, a timber concessionaire and log dealer doing business under the
name Mar Gallardo Trading, entered into a charter agreement with ADR Shipping
Services, Inc., through its president Abraham Rodriguez, for the use of the MV Pacific
Breeze to transport 60,000 cubic meters of logs to Kaoshung, Taiwan.
Under the charter agreement, the boat should be ready to load by February 5, 1988. MV
Pacific Breeze failed to arrive on time.
Consequently, Gallardo informed ADR that the charter contract is cancelled and that the
P242,000 advanced as payment to ADR is withdrawn.
ADR refused to return the advanced payment, thus prompting Gallardo to file a case for
sum of money and damages.
The trial court ruled in Gallardos favor, ordering ADR to pay P242,000 plus 6% interest
per annum, attorneys fees and costs of suit.
Petitioner assails the affirmation of the decision made by the Court of Appeals, asserting
that under the terms of the Charter Party for MV Pacific Breeze, Gallardo as the
charterer had the option to cancel the Charter Party only when the vessel failed to
arrive or was not ready to load after February 16, 1988.
Petitioner argues that the date 5 February 1988, written in Box No. 9 of the charter
party, merely indicates a reference commencing date from which the chartered vessel
is expected and ready to load, and not the exact date when the vessel has to arrive as
indicated in paragraph 10 of the charter party.
Private respondent, on the other hand, contends that the charter party, in Box No. 9
thereof, has unequivocally fixed February 5, 1998 as the date when MV Pacific Breeze is
expected ready to load.

Issue:

Whether or not Gallardo is entitled to the refund

Held:

Yes. Paragraph 10 of the Gencon Charter Party, in our view, contains a typographical
error where Box 19 was erroneously written instead of Box 9. But more importantly,
paragraph 10 presents an ambiguity. Ambiguities in a contract are interpreted strictly, albeit
not unreasonably, against the drafter thereof when justified in light of the operative facts and
surrounding circumstances. In this case, such ambiguity must be construed strictly against ADR,
the party that drafted and caused the inclusion of the subject clause. Also, more decisive is the
stipulation in Box No. 9 of the Charter Party which explicitly states that February 5, 1988 is the
date when the vessel is expected ready to load. February 16, 1988 is merely the cancelling
date as specified in Box 19 of the said contract. That February 5, 1988 is the intended date
when the ship is expected ready to load, is buttressed by the provision of paragraph 1 of the
Gencon Charter.

Considering that the subject contract contains the express provision that February 5,
1988 is the date when the vessel is expected ready to load, that provision leaves the parties
with no other recourse but to apply the literal meaning of such stipulation. The cardinal rule is
that where the terms of the contract are clear, leaving no doubt as to the intention of the
contracting parties, the literal meaning of its stipulations is controlling.

VALENTIN MOVIDO, substituted by MARGINITO MOVIDO vs. LUIS
REYES PASTOR
G.R. No. 172279
February 11, 2010

Facts:

Respondent Luis Pastor alleged that he and petitioner executed a kasunduan sa bilihan
ng lupa where the latter agreed to sell a parcel of land.
Respondent also alleged that another kasunduan was later executed supplementing the
kasunduan sa bilihan ng lupa, which provided that, if a Napocor power line traversed
the subject lot, the purchase price would be lowered to P200/sq. m. and that beyond
the distance of 15 meters on both sides from the center of the power line while the
portion within a distance of 15 meters on both sides from the center of the power line
would not be paid.
Respondent further claimed that he was willing and ready to pay the balance of the
purchase price but due to petitioners refusal to have the property surveyed despite
incessant demands, his unpaid balance could not be determined with certainty.
Luis Reyes Pastor filed a complaint for specific performance, praying that petitioner
Valentin Movido be compelled to cause the survey of a parcel of land subject of their
contract to sell.
The trial court ruled in favor of herein petitioner and held that the kasunduan preceded
the kasunduan sa bilihan ng lupa.
On appeal, the Court of Appeals reversed the RTC and held that the kasunduan sa
bilihan ng lupa was the first document executed by the parties, not the kasunduan.

Issue:

Whether the kasunduan is controlling and not the kasunduan sa bilihan ng lupa

Held:

Neither. The kasunduan sa bilihan ng lupa and the kasunduan should both be given
effect rather than be declared conflicting, if there is a way of reconciling them. Petitioner and
respondent would not have entered into either of the agreements if they did not intend to be
bound or governed by them. Indeed, taken together, the two agreements actually constitute a
single contract pertaining to the sale of a land to respondent by petitioner. Their stipulations
must therefore be interpreted together, attributing to the doubtful ones that sense that may
result from all of them taken jointly. Their proper construction must be one that gives effect to
all.

In this connection, the kasunduan sa bilihan ng lupa contains the general terms and
conditions of the agreement of the parties. On the other hand, the kasunduan refers to a
particular or specific matter, i.e., that portion of the land that is traversed by a Napocor power
line. As the kasunduan pertains to a special area of the agreement, it constitutes an exception
to the general provisions of the kasunduan sa bilihan ng lupa, particularly on the purchase price
for that portion. Specialibus derogat generalibus.

Under both the kasunduan sa bilihan ng lupa and the kasunduan, petitioner undertook
to cause the survey of the property in order to determine the portion excluded from the sale,
as well as the portion traversed by the Napocor power line. Despite repeated demands by
respondent, however, petitioner failed to perform his obligation. Thus, considering that there
was a breach on the part of petitioner (and no material breach on the part of respondent), he
cannot properly invoke his right to rescind the contract.

TSPIC CORPORATION vs. TSPIC EMPLOYEES UNION (FFW),
representing MARIA FE FLORES, et.al.
G.R. No. 163419
February 13, 2008

Facts:

TSPIC and the Union entered into a Collective Bargaining Agreement (CBA) for the years
2000 to 2004 which included a provision on yearly salary increases starting January 2000
until January 2002.
Consequently, on January 1, 2000, all the regular rank-and-file employees of TSPIC
received a 10% increase in their salary.
The CBA also provided that employees who acquire regular employment status within
the year but after the effectivity of a particular salary increase shall receive a
proportionate part of the increase upon attainment of their regular status.
Then on October 6, 2000, the Regional Tripartite Wage and Productivity Board, National
Capital Region, issued Wage Order No. NCR-08 (WO No. 8) which raised the daily
minimum wage from PhP 223.50 to PhP 250 effective November 1, 2000.
Conformably, the wages of 17 probationary employees were increased to Php 250.00
effective November 1, 2000.
Then the 17 probationary employees attained regular employment and received 25% of
10% of their salaries as granted under the provision on regularization increase.
In January 2001, TSPIC implemented the new wage rates as mandated by the CBA
causing the nine employees, who were senior to the 17 recently-regularized employees,
to receive less wages.
Then after such salary increase, 24 of the employees were told that due to an error in
the automated payroll system, they were overpaid and the overpayment would be
deducted from their salaries in a staggered basis.
The Union asserted that there was no overpayment and that deduction would mean
diminution of pay.

Issue:

Whether or not the deduction of the alleged overpayment constitutes diminution in
violation of the Labor Code

Held:

No. If the terms of a contract, as in a CBA, are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of their stipulations shall control. As a
general rule, in the interpretation of a contract, the intention of the parties is to be pursued.
Littera necat spiritus vivificat. An instrument must be interpreted according to the intention of
the parties. It is the duty of the courts to place a practical and realistic construction upon it,
giving due consideration to the context in which it is negotiated and the purpose which it is
intended to serve. Absurd and illogical interpretations should also be avoided. Considering that
the parties have unequivocally agreed to substitute the benefits granted under the CBA with
those granted under wage orders, the agreement must prevail and be given full effect.

It is a familiar rule in interpretation of contracts that conflicting provisions should be
harmonized to give effect to all. Likewise, when general and specific provisions are inconsistent,
the specific provision shall be paramount to and govern the general provision. Thus, it may be
reasonably concluded that TSPIC granted the salary increases under the condition that any
wage order that may be subsequently issued shall be credited against the previously granted
increase. The intention of the parties is clear: As long as an employee is qualified to receive the
12% increase in salary, the employee shall be granted the increase; and as long as an employee
is granted the 12% increase, the amount shall be credited against any wage order issued after
WO No. 7.

Respondents should not be allowed to receive benefits from the CBA while avoiding the
counterpart crediting provision. They have received their regularization increases under Art. X,
Sec. 2 of the CBA and the yearly increase for the year 2001. They should not then be allowed to
avoid the crediting provision which is an accompanying condition.

SPS. RAFAEL P. ESTANISLAO AND ZENAIDA ESTANISLAO vs. EAST
WEST BANKING
CORPORATION
G.R. No. 178537
February 11, 2008

Facts:

Petitioners obtained a loan from the respondent in the amount of evidenced by a
promissory note and secured by two deeds of chattel mortgage: one covering two dump
trucks and a bulldozer, and another covering a bulldozer and a wheel loader.
When petitioners defaulted in their amortizations, respondent bank filed a suit for
replevin with damages, praying that the equipment covered by the first deed of chattel
mortgage be seized and delivered to it.
During the suspension of the proceedings, a deed of assignment was executed between
the parties. Petitioners affixed their signatures on the deed of assignment. However, for
some unknown reason, respondent banks duly authorized representative failed to sign
the deed.
Petitioners completed the delivery of the heavy equipment covered in the first chattel
mortgage.
Later, respondent demanded delivery of the two other heavy equipment covered by the
second chattel mortgage that its representative failed to include in the deed of
assignment.
Petitioners claim that their total loan obligation has been extinguished upon the delivery
of the heavy equipment (2 dump trucks; 1 bulldozer).

Issue:

Whether or not the deed of assignment which expressly provides that the transfer and
conveyance to respondent of the three units of heavy equipment, and its acceptance thereof,
shall be in full payment of the petitioners total outstanding obligation to the latter operate
to extinguish petitioners debt to respondent, such that the replevin suit could no longer
prosper

Held:

Yes. The deed of assignment was a perfected agreement which extinguished petitioners
total outstanding obligation to the respondent. The deed explicitly provides that the assignor
(petitioners), in full payment of its obligation in the amount of P7,305,459.52, shall deliver
the three units of heavy equipment to the assignee (respondent), which accepts the
assignment in full payment of the above-mentioned debt. This could only mean that should
petitioners complete the delivery of the three units of heavy equipment covered by the deed,
respondents credit would have been satisfied in full, and petitioners aggregate indebtedness
of P7,305,459.52 would then be considered to have been paid in full as well.

The legal presumption is always on the validity of contracts. In order to judge the
intention of the contracting parties, their contemporaneous and subsequent acts shall be
principally considered. When respondent accepted delivery of all three units of heavy
equipment under the deed of assignment, there could be no doubt that it intended to be bound
under the agreement.

AGRIFINA AQUINTEY vs. SPOUSES FELICIDAD AND RICO TIBONG
G.R. No. 166704
December 20, 2006

Facts:

Agrifina alleged that Felicidad had secured loans from her on several occasions, totaling
P773,000 but the spouses failed to pay despite repeated demands.
The spouses, for their part, admitted that they had secured loans from Agrifina but they
assert that the proceeds of the loan were re-lent to other borrowers at higher interest
rates.
They likewise alleged that they had executed deeds of assignment in favor of petitioner,
and that their debtors had executed promissory notes in Agrifinas favor.
It is now the spouses contention that re-lending the loan resulted in a novation of the
original obligation to Agrifina; as such, she became the new collector of the debtors, and
the spouses obligation to pay the balance has been extinguished.
The trial court ruled that the deeds of assignment and promissory notes did not contain
any express agreement to novate and extinguish Felicidads obligation.
The CA affirmed with modification the decision of the RTC and stated that, the secured
loans amount to P637,000, and not P773,000.

Issue:
Whether or not respondents obligation is extinguished through the assignment of credit

Held:
No. Case law is that, an assignment will, ordinarily, be interpreted or construed in
accordance with the rules of construction governing contracts generally, the primary object
being always to ascertain and carry out the intention of the parties. This intention is to be
derived from a consideration of the whole instrument, all parts of which should be given effect,
and is to be sought in the words and language employed. Indeed, the Court must not go beyond
the rational scope of the words used in construing an assignment, words should be construed
according to their ordinary meaning, unless something in the assignment indicates that they are
being used in a special sense. So, if the words are free from ambiguity and expressed plainly the
purpose of the instrument, there is no occasion for interpretation; but where necessary, words
must be interpreted in the light of the particular subject matter. And surrounding
circumstances may be considered in order to understand more perfectly the intention of the
parties. Thus, the object to be accomplished through the assignment, and the relations and
conduct of the parties may be considered in construing the document.

Although it has been said that an ambiguous or uncertain assignment should be
construed most strictly against the assignor, the general rule is that any ambiguity or
uncertainty in the meaning of an assignment will be resolved against the party who prepared it;
hence, if the assignment was prepared by the assignee, it will be construed most strictly against
him or her. One who chooses the words by which a right is given ought to be held to the strict
interpretation of them, rather than the other who only accepts them. Considering all the
foregoing, we find that respondents still have a balance on their account to petitioner in the
principal amount of P33,841.00.

ADORACION E. CRUZ, THELMA DEBBIE E. CRUZ, GERRY E. CRUZ
and NERISSA CRUZ-TAMAYO vs. THE HONORABLE COURT OF
APPEALS, SUMMIT FINANCING CORP., VICTOR S. STA. ANA,
MAXIMO C. CONTRERAS, RAMON G. MANALASTAS, and VICENTE
TORRES
G.R. No. 122904
April 15, 2005

Facts:

Petitioner Adoracion Cruz is the mother of her co=petitioners, as well as Arnel Cruz, who
was one of the defendants.
After executing a Deed of Partial Partition, petitioners and Arnel Ctuz agreed in writing,
and through a Memorandum of Agreement (MOA) to share equally in the proceeds of
the sale of the properties although they had been subdivided and individually titled.
Subsequently, petitioners learned that Arnel obtained a loan from Summit, secured by a
real estate mortgage on the parcel of land adjudicated to Cruz.
The loan remained unpaid, causing Summit to institute extrajudicial proceedings where
it was also the highest bidder.
The subject lot was registered in the name of Summit.
Petitioners assert that they remained as co-owners of the property, pursuant to the
MOA.
The Court of Appeals upheld the validity of the mortgage of the subject property
although it provides that the parties thereto are entitled to share in the proceeds of the
sale.

Issue:
Whether or not the mortgaged property is the exclusive property of Arnel Cruz
Held:

Yes. From a reading of the provisions of the Deed of Partial Partition, no other meaning
can be gathered other than that petitioners and Arnel Cruz had put an end to the co-ownership.
There is nothing from the words of said deed which expressly or impliedly stated that
petitioners and Arnel Cruz intended to remain as co-owners with respect to the disputed
property or to any of the properties for that matter. It is well-settled in both law and
jurisprudence, that contracts are the law between the contracting parties and should be
fulfilled, if their terms are clear and leave no room for doubt as to the intention of the
contracting parties.

As correctly held by the Court of Appeals, the parties only bound themselves to share in
the proceeds of the sale of the properties. The agreement does not direct reconveyance of the
properties to reinstate the common ownership of the parties.

Moreover, to ascertain the intent of the parties in a contractual relationship, it is
imperative that the various stipulations provided for in the contracts be construed together,
consistent with the parties contemporaneous and subsequent acts as regards the execution of
the contract. Subsequent to the execution of the Deed of Partition and Memorandum of
Agreement, the properties were titled individually in the names of the co-owners to which they
were respectively adjudicated, to the exclusion of the other co-owners. Petitioners Adoracion
Cruz and Thelma Cruz separately sold the properties distributed to them as absolute owners
thereof. Being clear manifestations of sole and exclusive dominion over the properties affected,
the acts signify total incongruence with the state of co-ownership claimed by petitioners. Thus,
this Court holds that the real estate mortgage on the disputed property is valid and does not
contravene the agreement of the parties.








NAPOLEON H. GONZALES vs. HONORABLE COURT OF APPEALS AND
SPOUSES GABRIEL AND LUZVIMINDA CABALLERO
G.R. No. 122611
March 8, 2001

Facts:

Private respondents obtained a loan from the Cavite Development Bank and secured
the same by mortgaging the lots that they own.
To pay the loan, they offered Lot 1 for sale and advertised the offer in the Bulletin
Today.
Petitioner Gonzales offered to buy the lot at a bargained price.
Respondents signed the deed of sale covering only Lot 1 but refused to deliver its title
until petitioner paid the remaining balance.
This prompted petitioner to file a complaint for specific performance and damages,
asking for the deeds of sale of the two lots and delivery of the titles to him.
The RTC ordered the spouses to deliver the TCT of Lot 1 upon payment by petitioner;
the Court of Appeals affirmed the ruling of the RTC.

Issue:
Whether or not the contract of sale between the parties involved Lots 1 and 2 as
claimed by petitioner
Held:
No. On the basis of documentary evidence on record, we agree with the trial and
appellate courts that the weight of evidence presented during trial favor private respondents
claim that what was agreed upon by the parties was the sale of only Lot 1 covered by TCT
247309. As the courts a quo observed, even if it were true that two lots were mortgaged and
were about to be foreclosed, the ads private respondents placed in the Bulletin Today offered
only Lot 1 and was strong indication that they did not intend to sell Lot 2.
As the trial court observed, it was incomprehensible why the spouses would part with
two lots, one with a 2-storey house, and both situated at a prime commercial district for less
than the price of one lot. The reasons and the surrounding circumstances behind a contracts
execution are of paramount importance to place the interpreter in the situation occupied by
the parties concerned at the time the writing was executed.
JUANA ALMIRA, RENATO GARCIA, ROGELIO GARCIA, RODOLFO
GARCIA, ROSITA GARCIA, RHODORA GARCIA, ROSALINDA GARCIA,
ROLANDO GARCIA and RAFAEL GARCIA Represented in this suit by
EDGARDO ALVAREZ vs. COURT OF APPEALS AND FEDERICO
BRIONES
G.R. No. 115966
March 20, 2003

Facts:

Petitioners are the wife and the children of the late Julio Garcia who inherited from his
mother Maria Libudbud, Lot 1462.
Lot 1462 was co-owned and registered in the names of the three other persons with
their corresponding shares.
There was no separate title in the name of Julio Garcia but there were tax declarations
in his name to the extent of his grandfathers share, covering an area of 21,460 square
meters.
Petitioners and respondent Briones then entered into a Kasunduan ng Pagbibilihan over
the 21,460 square meters portion.
Petitioners allegedly informed respondent that the TCT was in the possession of their
cousin but still, respondent willingly entered into the Kasunduan.
When petitioners failed to deliver the TCT to respondent, the latter stopped paying.
Consequently, petitioners filed a complaint asking for the rescission of the Kasunduan
and the return of the parcel of land.
Petitioners allege that the kaukulang titulo ng lupang nabanggit in the Kasunduan refers
to TCT No. RT 1076 and not a separate title in the name of Julio Garcia. Respondent
avers otherwise.

Issue:
Whether or not payment of the balance of the purchase price is conditioned upon
delivery of a separate title in the name of Julio Garcia
Held:
No. The Kasunduan itself in its opening paragraph refers to the subject property being
sold as buong lawak na 21,640 metrong parisukat, x x x at sa kasalukuyan may nabibinbing
kahilingan sa hukuman upang magkaroon ng sariling titulo; x x x. The next paragraph of the
Kasunduan, therefore, which speaks of ang kaukulang titulo sa lupang nabanggit, clearly
refers to the separate title being applied for, even without resort to extraneous evidence.

Article 1377 of the Civil Code, which states that the interpretation of obscure words or
stipulations in a contract shall not favor the party who caused the obscurity does not apply in
this case where the evident intention of the parties can be readily discerned by their
subsequent and contemporaneous acts.

It is basic in the interpretation and construction of contracts that the literal meaning of
the stipulations shall control if the terms of the contract are clear and leave no doubt on the
intention of the contracting parties. However, if the terms of the agreement are ambiguous,
resort is made to contract interpretation which is the determination of the meaning attached to
written or spoken words that make the contract.[10] To ascertain the true intention of the
parties, their subsequent or contemporaneous actions must be principally considered.

The tenor of the correspondence between petitioners and respondent shows that the
parties intended that a separate title to the property in the name of Julio Garcia shall be
delivered to respondent as a condition for the latters payment of the balance of the purchase
price.

PHILIPPINE BANK OF COMMUNICATIONS vs. ELENA LIM, RAMON
CALDERON, and TRI-ORO INTERNATIONAL TRADING &
MANUFACTURING CORPORATION
G.R. No. 158138
April 12, 2005

Facts:

Petitioner Philippine Bank of Communications (Philbank) alleged that respondents
obtained a loan from it and executed a continuing surety agreement.
The loan was evidenced by a Promissory Note.
It was expressly stipulated in the surety agreement that the venue for any legal action
that may arise out of the promissory note shall be Makati City, to the exclusion of all
other courts.
Petitioner filed a suit for collection of the unpaid balance before the RTC of Manila.
Respondents moved to dismiss the complaint on the ground of improper venue but the
trial court denied said motion, holding that the venue was merely permissive.
The CA held that the parties Surety Agreement, though silent as to venue, was an
accessory contract that should have been interpreted in consonance with the
Promissory Note.

Issue:

Whether or not the stipulation on venue does not apply to the surety agreement

Held:

No. In enforcing a surety contract, the complementary-contracts-construed-together
doctrine finds application. According to this principle, an accessory contract must be read in its
entirety and together with the principal agreement. This principle is used in construing
contractual stipulations in order to arrive at their true meaning; certain stipulations cannot be
segregated and then made to control. This no-segregation principle is based on Article 1374 of
the Civil Code, which states that: The various stipulations of a contract shall be interpreted
together, attributing to the doubtful ones that sense which may result from all of them taken
jointly.

The circumstances that related to the issuance of the PN and the SA are so intertwined
that neither one could be separated from the other. It makes no sense to argue that the parties
to the SA were not bound by the stipulations in the PN. By inserting the provision that Makati
City would be the venue for any legal action [that] may arise out of [the] Promissory Note,
petitioner also restricted the venue of actions against the sureties. The legal action against the
sureties arose not only from the SA, but also from the PN.
SPOUSES EFREN N. RIGOR and ZOSIMA D. RIGOR, for themselves
and as owners of CHIARA CONSTRUCTION vs. CONSOLIDATED ORIX
LEASING and FINANCE CORPORATION
G.R. No. 136423
August 20, 2002

Facts:

Petitioners obtained a loan from private respondent Consolidated Orix Leasing and
Finance Corporation, secured by a deed of chattel mortgage over two dump trucks.
The petitioners also executed a promissory note, with the express provision that x x x
all legal actions arising out of this note or in connection with the chattels subject hereof
shall only be brought in or submitted to the proper court in Makati City, Philippines.
Petitioners failed to pay several installments despite demand from private respondent,
prompting the latter to seek foreclosure of the chattel mortgage before the RTC of
Dagupan City.
Petitioners moved to dismiss the complaint on the ground of improper venue.
Private respondent opposed the motion to dismiss and argued that venue was properly
laid in Dagupan City where it has a branch office based on a provision in the deed of
chattel mortgage which states that, x x x in case of litigation arising out of the
transaction that gave rise to this contract, complete jurisdiction is given the proper court
of the city of Makati or any proper court within the province of Rizal, or any court in the
city, or province where the holder/mortgagee has a branch office, waiving for this
purpose any proper venue.

Issue:

Whether or not venue was properly laid under the provisions of the chattel mortgage
contract in the light of Article 1374 of the Civil Code

Held:

Yes. Applying the complementary contracts construed together doctrine laid down
under Article 1374 of the Civil Code, which states that The various stipulations of a contract
shall be interpreted together, attributing to the doubtful ones that sense which may result from
all of them taken jointly., we cannot sustain petitioners contentions. The promissory note and
the deed of chattel mortgage must be construed together. Private respondent explained that
its older standard promissory notes confined venue in Makati City where it had its main office.
After it opened a branch office in Dagupan City, private respondent made corrections in the
deed of chattel mortgage, but due to oversight, failed to make the corresponding corrections in
the promissory notes. Petitioners affixed their signatures in both contracts. The chattel
mortgage constituted over the two dump trucks is an accessory contract to the loan obligation
as embodied in the promissory note. The chattel mortgage cannot exist as an independent
contract since its consideration is the same as that of the principal contract.

RODOLFO P. VELASQUEZ vs. COURT OF APPEALS, and PHILIPPINE
COMMERCIAL INTERNATIONAL BANK, INC.
G.R. No. 124049
June 30, 1999

Facts:

Rodolfo Velasquez, as an officer and stockholder of Pick-up Fresh Farms (PUFFI)
obtained a loan from private respondent Philippine Commercial International Bank
(PCIB).
As security for the loan, petitioner and two others executed a deed of suretyship in
favor of PCIB.
When PUFFI defaulted in payment, PCIB foreclosed the chattel mortgage.
PCIB then filed an action to recover the remaining balance of the entire obligation
including interests, penalties and other charges.
The trial court rendered a summary judgment in favor of PCIB holding petitioner and
Canilao solidarily liable.
Petitioner insists, among others, the denial of personal liability on his part in the deed of
suretyship since he signed thereon as an officer of ARII is a triable issue of fact.
Petitioner further avers that any ambiguity in the contract should be decided against
PCIB under the contract of adhesion doctrine.

Issue:

Whether or not the summary judgment should be lifted

Held:

No. A mere perusal of the deed of suretyship readily shows petitioners personal liability
under the loan contract, hence, proper for summary judgment. Moreover, the appropriate
doctrine in this case is that of the complementary contracts construed together doctrine
which we enunciated in National Power Corporation v. CA The surety bond must be read in
its entirely and together with the contract between the NPC and the contractors. The provisions
must be construed together to arrive at their true meaning. Certain stipulations cannot be
segregated and then made to control. That the complementary contracts construed together
doctrine applies in this case finds support in the principle that the surety contract is merely an
accessory contract and must be interpreted with its principal contract, which in this case was
the loan agreement.

This doctrine closely adheres to the spirit of Art. 1374 of the Civil Code which states that
Art. 1374. The various stipulations of a contract shall be interpreted together, attributing to
the doubtful ones that sense which may result from all of them taken jointly.


HEIRS OF SOFIA QUIRONG, Represented by ROMEO P. QUIRONG vs.
DEVELOPMENT BANK OF THE PHILIPPINES
G.R. No. 173441
December 3, 2009

Facts:

To enable Rosa Dalope-Function and her husband Antonio Funcion (the Funcions) get a
loan from respondent Development Bank of the Philippines (DBP), Felisa Dalope (Rosas
mother) sold the lot to the Funcions.
With the deed of sale in their favor and the tax declaration transferred in their names,
the Funcions mortgaged the lot with the DBP.
After the Funcions failed to pay their loan, the DBP foreclosed the mortgage on the lot
and consolidated ownership in its name.
Four years later, the DBP conditionally sold the lot to Sofia Quirong, the latter waiving
any warranty against eviction.
The contract also provided that the DBP did not guarantee possession of the property
and that it would not be liable for any lien or encumbrance on the same.
Felisa and her eight children (the Dalopes), filed an action for partition and declaration
of nullity of documents with damages against the DBP and the Funcions.
Notwithstanding the suit, the DBP executed a deed of absolute sale of the subject lot in
Sofia Quirongs favor, carrying substantially the same waiver of warranty against
eviction and of any adverse lien or encumbrance.
The RTC rendered a decision, declaring the DBPs sale to Sofia Quirong valid only with
respect to the shares of Felisa and Rosa Funcion in the property. It declared Felisas sale
to the Funcions, the latters mortgage to the DBP, and the latters sale to Sofia Quirong
void insofar as they prejudiced the shares of the eight other children of Emilio and Felisa
who were each entitled to a tenth share in the subject lot.
The RTC rendered a decision, rescinding the sale between Sofia Quirong and the DBP.
On appeal, the CA dismissed the heirs action on the ground of prescription.

Issue:
Whether or not the heirs of Quirong were entitled to the rescission of the DBPs sale of
the subject lot to the late Sofia Quirong as a consequence of her heirs having been evicted from
it
Held:
Yes. However, since it accrued on January 28, 1993 when the decision in Civil Case D-
7159 became final and executory and ousted the heirs from a substantial portion of the lot, the
latter had only until January 28, 1997 within which to file their action for rescission. Given that
they filed their action on June 10, 1998, they did so beyond the four-year period. Their action
for rescission, which is based on a subsequent economic loss suffered by the buyer, was
precisely the action that the Quirong heirs took against the DBP. Consequently, it prescribed as
Article 1389 provides in four years from the time the action accrued.

Rescission is a subsidiary action based on injury to the plaintiffs economic interests as
described in Articles 1380 and 1381. Resolution, the action referred to in Article 1191, on the
other hand, is based on the defendants breach of faith, a violation of the reciprocity between
the parties. As an action based on the binding force of a written contract, therefore, rescission
(resolution) under Article 1191 prescribes in 10 years. Ten years is the period of prescription of
actions based on a written contract under Article 1144.

SAMUEL U. LEE and PAULINE LEE and ASIATRUST DEVELOPMENT
BANK, INC. vs. BANGKOK BANK PUBLIC COMPANY, LIMITED
G.R. No. 173349
February 9, 2011

Facts:

Midas Diversified Export Corporation (MDEC) and Manila Home Textile, Inc. (MHI)
entered into two separate Credit Line Agreements (CLAs) with Respondent Bangkok
Bank Public Company, Limited (Bangkok Bank).
Both corporations have interlocking directors and management led by the Lee family;
and engaged in the manufacturing and export of garments, ladies bags and apparel.
The Lee family executed guarantees in favor of Bangkok Bank, one for the CLA for MDEC
and another for the CLA of MHI.
Under the guarantees, the Lee family irrevocably and unconditionally guaranteed, as
principal debtors, the payment of any and all indebtedness of MDEC and MHI with
Bangkok Bank.
In time, the advances, which MDEC and MHI had taken out from the CLAs, amounted to
three million dollars.
MDEC was likewise granted a loan facility by Asiatrust Development Bank, Inc.
(Asiatrust).
Samuel bought several parcels of land in Cupang, Antipolo, (subjectproperties in this
case) and later entered into a joint venture with Louisville Realty and Development
Corporation to develop the properties into a residential subdivision, called Louisville
Subdivision.
Throughout 1997, MDEC availed itself of the omnibus credit line granted by Asiatrust on
three occasions.
When MDEC had defaulted in the payment of its loan, Asiatrust initiated negotiations
with MDEC and required the Lee family to provide additional collateral that would
secure the loan.
The negotiation was concluded when Asiatrust had agreed to Samuels proposition that
he would mortgage the subject Antipolo properties to secure the loan, and therefore
execute a REM over the properties.
While the titles of the Antipolo properties had been delivered by Samuel to Asiatrust
and the REM had been executed in January 1998, spouses Samuel and Pauline Lee
(spouses Lee) were requested to sign a new deed of mortgage on February 23, 1998,
and, thus, it was only on that date that the said mortgage was actually notarized,
registered, and annotated at the back of the titles.
Bangkok Bank instituted an action before the RTC, Branch 141 in Makati City to recover
the loans extended to MDEC and MHI under the guarantees.
With MDEC still unable to make payments on its defaulting loans with Asiatrust, the
latter foreclosed the subject mortgaged Antipolo properties.
The sale was registered on April 21, 1998. Believing the REM and the foreclosure sale to
be fraudulent, Bangkok Bank did not redeem the subject properties.
Bangkok Bank filed the instant case for the rescission of the REM over the subject
properties, annulment of the foreclosure sale, cancellation of the new TCTs issued in
favor of Asiatrust, and damages.
In its action, Bangkok Bank alleged, among others, that the presumption of fraud under
Article 1387 of the Civil Code applies, considering that a writ of preliminary attachment
was issued in January 1998 in favor of SBC against Samuel.
The RTC explained that a mortgage contract is an onerous undertaking to secure
payment of an obligation and cannot be considered as a gratuitous alienation; thus, Art.
1387 of the Civil Code does not apply
The CA held that fraud was perpetrated through the REM executed and registered on
February 23, 1998 pursuant to the presumption in the second paragraph of Art. 1387 of
the Civil Code, which provides that alienations by onerous title are also presumed
fraudulent when made by persons against whom x x x some writ of attachment has
been issued.

Issue:
Whether or not Bangkok Bank can maintain an action to rescind the REM on the subject
Antipolo properties despite its failure to exhaust all legal remedies to satisfy its claim

Held:
No. the REM cannot be rescinded and shall, therefore, stand, as Asiatrustthe third
party, in favor of which the REM was executed, and which subsequently foreclosed the subject
propertiesacted in good faith and without any badge of fraud. As a general rule, whether the
person, against whom a judgment was made or some writ of attachment was issued, acted with
or without fraud, so long as the third person who is in legal possession of the property in
question did not act with fraud and in bad faith, an action for rescission cannot prosper. Art.
1385 of the Civil Code explicitly states this, thus: Rescission creates the obligation to return the
things which were the object of the contract, together with their fruits, and the price with its
interest; consequently, it can be carried out only when he who demands rescission can return
whatever he may be obliged to restore. Neither shall rescission take place when the things
which are the object of the contract are legally in the possession of third persons who did not
act in bad faith.

In this case, it is clearly established that there was a bona fide transaction between the
spouses Lee and Asiatrust that necessitated the negotiations resulting from the formers
default in the payment of its obligations; and which brought about the execution of the REM to
secure their pre-existing obligations. The requisite (1) good faith on the part of the third person
and (2) fraud, necessary for an action to rescind under Art. 1381 of the Civil Code, were not
complied with. Moreover, as between Asiatrust and Bangkok Bank, the former has a better
right over the subject Antipolo properties, it being the first to annotate its lien on the titles of
the properties.

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

Facts:

Carmelo & Bauermann, Inc. (Camelo ) used to own a parcel of land with two 2-storey
buildings constructed thereon, located at Claro M. Recto Avenue, Manila, which it
leased to Mayfair Theater Inc. (Mayfair) for a period of 20 years.
The Contract of Lease contained a provision granting Mayfair a right of first refusal to
purchase the subject properties. However, on July 30, 1978 within the 20-year-lease
term the subject properties were sold by Carmelo to Equatorial Realty Development,
Inc. (Equatorial) for the total sum of P11,300,000, without first offering to Mayfair.
Mayfair filed a Complaint before the RTC of Manila for (a) the annulment of the Deed of
Absolute Sale between Carmelo and Equatorial, (b) specific performance, and (c)
damages.
The lower court rendered a Decision in favor of Carmelo and Equatorial but the CA
reversed such decision rescinding the sale and ordered to allow Mayfair Theater, Inc. to
buy the aforesaid lots for P11,300,000.00.
Mayfair bought the property.
However, Equatorial filed an action for the collection of a sum of money against
Mayfair, claiming payment of rentals or reasonable compensation for Mayfairs use of
the subject premises after its lease contracts had expired.
Equatorial alleged that representing itself as the owner of the subject premises by
reason of the Contract of Sale; it claimed rentals arising from Mayfairs occupation
thereof.
The trial court dismissed the Complaint holding that the rescission of the Deed of
Absolute Sale did not confer on Equatorial any vested or residual proprietary rights.

Issue:

Whether or not the right to the fruits belonged to, and remained enforceable by,
Equatorial despite the judgment rescinding the sale

Held:

No. Article 1385 of the Civil Code provides, [r]escission creates the obligation to return
the things which were the object of the contract, together with their fruits, and the price with
its interest; x x x. Not only the land and building sold, but also the rental payments paid, if any,
had to be returned by the buyer.

At bottom, it may be conceded that, theoretically, a rescissible contract is valid until
rescinded. However, this general principle is not decisive to the issue of whether Equatorial
ever acquired the right to collect rentals. What is decisive is the civil law rule that ownership is
acquired, not by mere agreement, but by tradition or delivery. Under the factual environment
of this controversy as found by this Court in the mother case, Equatorial was never put in actual
and effective control or possession of the property because of Mayfairs timely objection.

MARIA ANTONIA SIGUAN vs. ROSA LIM, LINDE LIM, INGRID LIM
and NEIL LIM
G.R. No. 134685
November 19, 1999

Facts:

Lim issued two Metrobank checks in the sums of P300,000 and P241,668, respectively,
payable to cash.
Upon presentment by petitioner with the drawee bank, the checks were dishonored for
the reason account closed.
Petitioner filed a criminal case for violation of Batas Pambansa Blg. 22 against Lim; Lim
was convicted as charged.
Meanwhile, before the criminal case, a Deed of Donation conveying parcels of land was
purportedly executed by Limin favor of her children, Linde, Ingrid and Neil, which was
registered with the Office of the Register of Deeds of Cebu City.
Petitioner filed an accion pauliana against LIM and her children before Branch 18 of the
RTC of Cebu City to rescind the questioned Deed of Donation and to declare as null and
void the new transfer certificates of title issued for the lots covered by the questioned
Deed.
Petitioner claimed therein that sometime in July 1991, LIM, through a Deed of Donation,
fraudulently transferred all her real property to her children in bad faith and in fraud of
creditors, including her; that LIM conspired and confederated with her children in
antedating the questioned Deed of Donation, to petitioners and other creditors
prejudice; and that LIM, at the time of the fraudulent conveyance, left no sufficient
properties to pay her obligations.
Lim maintained that the Deed of Donation was not antedated but was made in good
faith at a time when she had sufficient property.
The trial court ordered the rescission of the questioned deed of donation; (2) declared
null and void the transfer certificates of title issued in the names of private respondents
Linde, Ingrid and Neil Lim; (3) ordered the Register of Deeds of Cebu City to cancel said
titles and to reinstate the previous titles in the name of Rosa Lim; and (4) directed the
LIMs to pay the petitioner, jointly and severally.
The Court of Appeals reversed the ruling of the trial court and dismissed the complaint
because the two requisites of accion pauliana were absent.

Issue:

Whether or not the questioned Deed of Donation was made in fraud of petitioner and,
therefore, rescissible

Held:
No. The general rule is that rescission requires the existence of creditors at the time of
the alleged fraudulent alienation, and this must be proved as one of the bases of the judicial
pronouncement setting aside the contract. Without any prior existing debt, there can neither
be injury nor fraud. While it is necessary that the credit of the plaintiff in the accion pauliana
must exist prior to the fraudulent alienation, the date of the judgment enforcing it is
immaterial. Even if the judgment be subsequent to the alienation, it is merely declaratory, with
retroactive effect to the date when the credit was constituted.

In the instant case, the alleged debt of LIM in favor of petitioner was incurred in August
1990, while the deed of donation was purportedly executed on 10 August 1989. We are not
convinced with the allegation of the petitioner that the questioned deed was antedated to
make it appear that it was made prior to petitioners credit. Notably, that deed is a public
document, it having been acknowledged before a notary public. As such, it is evidence of the
fact which gave rise to its execution and of its date, pursuant to Section 23, Rule 132 of the
Rules of Court.

Under Article 1381 of the Civil Code, contracts entered into in fraud of creditors may be
rescinded only when the creditors cannot in any manner collect the claims due them. Also,
Article 1383 of the same Code provides that the action for rescission is but a subsidiary remedy
which cannot be instituted except when the party suffering damage has no other legal means
to obtain reparation for the same. The term subsidiary remedy has been defined as the
exhaustion of all remedies by the prejudiced creditor to collect claims due him before rescission
is resorted to. It is, therefore, essential that the party asking for rescission prove that he has
exhausted all other legal means to obtain satisfaction of his claim. Petitioner neither alleged
nor proved that she did so. On this score, her action for the rescission of the questioned deed is
not maintainable even if the fraud charged actually did exist.

For presumption of fraud laid down in article1987, first paragraph, and Article 759, of
the Civil Code to apply, it must be established that the donor did not leave adequate properties
which creditors might have recourse for the collection of their credits existing before the
execution of the donation. As earlier discussed, petitioners alleged credit existed only a year
after the deed of donation was executed. She cannot, therefore, be said to have been
prejudiced or defrauded by such alienation.

KHE HONG v. COURT OF APPEALS
G.R. No. 144169
March 28, 200

Facts:
Petitioner Khe Hong Chang is the owner of the vessel which said vessel shipped 3,400
bags of copra at Masbate owned by the Philippine Agricultural Trading Corporation. The
shipment of copra was covered by an insurance issued by American Home Insurance
Company.
The vessel sank while at sea which resulted to the loss of bags of copra. The insurer paid
the amount of Php 345,000.00 to the consignee.
The American Home filed a case for the recovery of the money paid to the consignee,
based on breach of contract of carriage.
During the pendency of the case, petitioner executed deed of donation in favor of his
children Sandra and Ray.
The trial court rendered its decision in favor of the plaintiff however when the Sheriff
executed the writ of executuin they found out that petitioner no longer had any
property and that he conveyed the subject propertiues to his children.
Respondent Philam filed a complaint for the rescission of the deeds of donation
executed by petitioner Khe Hong Cheng in favor of his children and for the nullification
of their titles. It alleged, inter alia, that petitioner Khe Hong Cheng executed the
aforesaid deeds in fraud of his creditors, including respondent Philam.
The RTC rendered its decision in favoir of Philam. The Ca affirmed the decision of RTC.

ISSUE: When does accion pauliano accrue?

Held:
An accion pauliana accrues only when the creditor discovers that he has no other legal remedy
for the satisfaction of his claim against the debtor other than an accion pauliana. The accion
pauliana is an action of a last resort. For as long as the creditor still has a remedy at law for the
enforcement of his claim against the debtor, the creditor will not have any cause of action
against the creditor for rescission of the contracts entered into by and between the debtor and
another person or persons. Indeed, an accion pauliana presupposes a judgment and the
issuance by the trial court of a writ of execution for the satisfaction of the judgment and the
failure of the Sheriff to enforce and satisfy the judgment of the court. It presupposes that the
creditor has exhausted the property of the debtor. The date of the decision of the trial court
against the debtor is immaterial. What is important is that the credit of the plaintiff antedates
that of the fraudulent alienation by the debtor of his property. After all, the decision of the trial
court against the debtor will retroact to the time when the debtor became indebted to the
creditor.

WHEREFORE, premises considered, the petition is hereby DENIED for lack of merit.

















SUNTAY v. COURT OF APPEALS
G.R. No. 114950
December 19, 1995

Facts:

Federico Suntay was the registered owner of a parcel of land in dispute. He applied as a
miller contractor of the National Rice and Corn Corporation (NARIC) but the same was
disapproved by NARIC because he was tied up with several unpaid loans.
For purposes of circumvention, he asked his nephew-lawyer, Rafael to prepare an
absolute deed of sale of the said land in dispute in consideration of Php 20,000.00 in
favor of Rafael.
Less that 3 months after his conveyance, the same parcel of land was sold back to
Federico for the same consideration. However on the second sale there was irregularity
because it appears that said land was not sold but was mortgaged in favor of the
Hagonoy Rural Bank. Moreover, after the execution of the deed, Federico remained in
possession of the property sold.
Federico requested Rafael to deliver his copy of TCT no. T-36714 so that Federico could
have the counter deed of sale in his favor registered on his name but Rafael refuses.
Federico filed a complaint for reconveyance and damages against Rafael.
The trial court rendered its decision that Rafael is the owner of the property in dispute
but not to the extent of ordering Federico to pay back rentals for the use of the propert.
The CA rendered its decision in favor of Federico.

ISSUE:
Whether or not said second deed of absolute sale is null and void.

Held:
The cumulative effect of the evidence on record as chronicled aforesaid identified badges of
simulation proving that the sale by Federico to his deceased nephew of his land and rice mill,
was not intended to have any legal effect between them. Though the notarization of the deed
of sale in question vests in its favor the presumption of regularity, it is not the intention nor the
function of the notary public to validate and make binding an instrument never, in the first
place, intended to have any binding legal effect upon the parties thereto. The intention of the
parties still and always is the primary consideration in determining the true nature of a
contract.

The SC hold that the deed of sale executed by Federico in favor of his now deceased nephew,
Rafael, is absolutely simulated and fictitious and, hence, null and void, said parties having
entered into a sale transaction to which they did not intend to be legally bound. As no property
was validly conveyed under the deed, the second deed of sale executed by the late Rafael in
favor of his uncle, should be considered ineffective and unavailing.
















MANGAHAS v. BROBIO
G.R. No. 183852
October 20, 2010

Facts:
On January 10, 2002, Pacifico S. Brobio died intestate, leaving three parcels of land. He
was survived by his wife, respondent Eufrocina A. Brobio, and four legitimate and three
illegitimate children; petitioner Carmela Brobio Mangahas is one of the illegitimate
children.
On May 12, 2002, the heirs of the deceased executed a Deed of Extrajudicial Settlement
of Estate of the Late Pacifico Brobio with Waiver.
In the Deed, petitioner and Pacificos other children, in consideration of their love and
affection for respondent and the sum of P150,000.00, waived and ceded their
respective shares over the three parcels of land in favor of respondent.
According to petitioner, respondent promised to give her an additional amount for her
share in her fathers estate. Thus, after the signing of the Deed, petitioner demanded
from respondent the promised additional amount, but respondent refused to pay,
claiming that she had no more money.
A year later, while processing her tax obligations with the Bureau of Internal Revenue
(BIR), respondent was required to submit an original copy of the Deed. Left with no
more original copy of the Deed, respondent summoned petitioner to her office on May
31, 2003 and asked her to countersign a copy of the Deed. Petitioner refused to
countersign the document, demanding that respondent first give her the additional
amount that she promised.
Considering the value of the three parcels of land (which she claimed to be worth
P20M), petitioner asked for P1M, but respondent begged her to lower the amount.
Petitioner agreed to lower it to P600,000.00. Because respondent did not have the
money at that time and petitioner refused to countersign the Deed without any
assurance that the amount would be paid, respondent executed a promissory note.
Petitioner agreed to sign the Deed when respondent signed the promissory note.
When the promissory note fell due, respondent failed and refused to pay despite
demand. Petitioner made several more demands upon respondent but the latter kept
on insisting that she had no money.
On January 28, 2004, petitioner filed a Complaint for Specific Performance with
damagesaw against respondent.
The Regional Trial Court (RTC) rendered a decision in favor of petitioner. The CA
reversed the RTC decision and dismissed the complaint. Hence, this petition.

Issue:
The Honorable Court of Appeals erred in the appreciation of the facts of this case when it found
that intimidation attended the execution of the promissory note subject of this case.

Held:
The Supreme Court ruled that contracts are voidable where consent thereto is given through
mistake, violence, intimidation, undue influence, or fraud. In determining whether consent is
vitiated by any of these circumstances, courts are given a wide latitude in weighing the facts or
circumstances in a given case and in deciding in favor of what they believe actually occurred,
considering the age, physical infirmity, intelligence, relationship, and conduct of the parties at
the time of the execution of the contract and subsequent thereto, irrespective of whether the
contract is in a public or private writing. It is alleged that mistake, violence, fraud, or
intimidation attended the execution of the promissory note. Still, respondent insists that she
was "forced" into signing the promissory note because petitioner would not sign the document
required by the BIR. The fact that respondent may have felt compelled, under the
circumstances, to execute the promissory note will not negate the voluntariness of the act. As
rightly observed by the trial court, the execution of the promissory note in the amount of
P600,000.00 was, in fact, the product of a negotiation between the parties. Respondent herself
testified that she bargained with petitioner to lower the amount. The remedy suggested by the
CA is not the proper one under the circumstances. An action for partition implies that the
property is still owned in common.

Considering that the heirs had already executed a deed of
extrajudicial settlement and waived their shares in favor of respondent, the properties are no
longer under a state of co-ownership; there is nothing more to be partitioned, as ownership
had already been merged in one person.

Wherefore, the decision of the CA is reversed and set aside and the decision of the RTC is
reinstated.




HERNANDEZ v. HERNANDEZ
G.R. No. 158576
March 09, 2011

Facts:
This case involves the controversy between the parties which began when the Republic
of the Philippines, through the Department of Public Works and Highways (DPWH),
offered to purchase a portion of a parcel of land with an area of 80,133 square meters,
covered by the Registry of Deeds for Tanauan, Batangas, located at San Rafael, Sto.
Tomas, Batangas, for use in the expansion of the South Luzon Expressway.
The land is pro-indiviso owned by Cornelia M. Hernandez petitioner herein, Atty. Jose M.
Hernandez, deceased father of respondent Cecilio F. Hernandez represented by
Paciencia Hernandez and Mena Hernandez, also deceased and represented by her heirs.
The initial purchase price that was offered by the government was allegedly at Thirty-
Five pesos (P35.00) per square meter for 14,643 square meters of the aforementioned
land. The Hernandez family rejected the offer.
After a series of negotiations with the DPWH, the last offer stood at Seventy Pesos
(P70.00) per square meter. They still did not accept the offer and the government was
forced to file an expropriation case.
On 9 August 1993, an expropriation case was filed by the Republic of the Philippines,
through the DPWH, before the Regional Trial Court, Tanauan, Batangas.
During the course of the expropriation proceedings, an Order dated 13 September 1996
was issued by the RTC Branch 83, informing the parties of the appointment of
commissioners to help determine the just compensation.
On 18 October 1996, Cornelia, and her other co-owners who were also signatories of
the 11 November 1993 letter, executed an irrevocable Special Power of Attorney (SPA)
appointing Cecilio Hernandez as their "true and lawful attorney" with respect to the
expropriation of the subject property.
The SPA stated that the authority shall be irrevocable and continue to be binding all
throughout the negotiation. It further stated that the authority shall bind all successors
and assigns in regard to any negotiation with the government until its consummation
and binding transfer of a portion to be sold to that entity with Cecilio as the sole
signatory in regard to the rights and interests of the signatories therein. There was no
mention of the compensation scheme for Cecilio, the attorney-in-fact.
Cecilio, despite the service of summons and copy of the complaint failed to file an
answer. The trial court explained further that Cecilio was present in the address
supplied by the petitioner but refused to receive the copy.
The trial court even gave Cecilio ten (10) more days, from his refusal to accept the
summons, to file his answer. Upon the motion of the petitioner, respondent Cecilio was
declared in default.
The RTC denied the motion and nullified the quitclaim in favor of Cecilio. Cecilio
appealed the Decision of the trial court. The appellate court, in its Decision dated 29
May 2003 reversed and set aside the ruling of the trial court. Hence, this petition.

Issue:
Whether or not the CA erred in holding the validity of the receipt and quitclaim document
contrary to law and jurisprudence.

Held:
The supreme court ruled that a contract where consent is given through mistake, violence,
intimidation, undue influence, or fraud is voidable. In determining whether consent is vitiated
by any of the circumstances mentioned, courts are given a wide latitude in weighing the facts or
circumstances in a given case and in deciding in their favor what they believe to have actually
occurred, considering the age, physical infirmity, intelligence, relationship, and the conduct of
the parties at the time of the making of the contract and subsequent thereto, irrespective of
whether the contract is in public or private writing. And, in order that mistake may invalidate
consent, it should refer to the substance of the thing which is the object of the contract, or
those conditions which have principally moved one or both parties to enter the contract.

It was the rejection likewise of the last offer that led to the filing of the expropriation case on 9
August 1993. Clear as day, the conditions that moved the parties to the contract were the base
price at P70.00 per square meter, the increase of which would be compensated by 20% of
whatever may be added to the base price; and the ceiling price of P300.00 per square meter,
which was considerably high reckoned from the base at P70.00, which would therefore, allow
Cecilio to get all that which would be in excess of the elevated ceiling. The ceiling was, from the
base, extraordinarily high, justifying the extraordinary grant to Cornelio of all that would exceed
the ceiling.

In view of this case, the decision of the CA is reversed and set aside. The decision of the RTC is
reinstated with modification.

FUENTES v ROCA
G.R. NO. 178902
21 APRIL 2010

Facts:
On October 11, 1982, Sabrina Taroza sold to her own son Tarciano T. Roca her titled of 358
sq.m lot located at canelar, zamboanga under a deed of absolute sale.
Six years later, Tarciano T. Roca offered to the spouses Fuentes the same titlle of land bought to
her mother with stipulations that Fuentes should pay a downpayment of Php 60,000.00 for the
trnasfer of lot to them and within 6 months Tarciano would have to vacate the lot of structures,
occupants and secure the consent of his estranged wife upon compliance, Fuentes spouses
must have to pay Tarciano the amount of 140,000.00 php.
On January 11, 1989 a document of absolute sale as issued to the Fuentes.
One year after, Tarciano T. Roca died, which was followed by his wife 9 months after the
children of Roca filed for an action of annulment of sale and reconveynace of the land against
the Fuentes on the ground that Tarciano's wife didn't gave her consent upon her husband and
that fraud and forgery.
Spouses Fuentes denied such allegations and claim that the forgery case is personal to Rosario
the wife of Tarciano and she alone could claim it besaides the 4-year prescriptive period for
nullifying the sale on the ground of fraud had already elapsed.
The RTC ruled in favor of the Fuentes, however the Court of Appelas reversed the decision of
the RTC.

Issue:
1. Whether or not Rosario's signature was forged.
2. Whether or not, Roca's action for declaration nullity of that sale to the spouses Fuentes had
already prescribed.

Held:
1. Yes, the Supreme Court agrees with CA's observation that Rosario's signature strokes on the
affidavit apperas heavy, deliberate and forced. Her specimen signature on the other hand are,
consitently of a lighter stroke and more fluid. The way the letter "R" and "S" were written is also
remarkably different. The variance is obvious even to the untrained eye.

2. For the second issue, the SC held its decision based on Art. 173 which provides that inorder
that the wife may bring an action for annulment of sale on the ground of lack os spousal
consent during the marriage within 10 years from the transaction. Consequently, the action
that the Rocas, her heirs, brought in 1997 fell within ten years of the January 11, 1989 sale.
Therefore it did not yet prescribe. Even if the claim of the spouses for prescription was based
on fraud and forgery and that the prescriptive period to be applied is 4 years, the answer is still
No, because the sale was void from the beginning and thus the land remained the property of
Tarciano and Rosario despite that sale. When the two died, they passed on the ownership to
their heirs, namely the Rocas, and as lawful owners thaey had the right to exclude any person
from its enjoyment and disposal (Art 429 of the Civil Code). In fairness to the Fuentes, the SC
held that they should be entitled among other things, to be recovered from the Tarciano's heirs
the amount of 200, 000.00php with legal interest until fully paid chargeable against his estate.
They are also to be entitled to a reimbursement with the improvements they inroduced with a
right of retention until reimbursement is made (Art. 448).










ASSOCIATED BANK v. MONTANO ET.AL.
G.R.NO. 166383
16 OCTOBER, 2009

Facts:
In 1964 spouse Monatano owned 3 parcels of land situated in Tanza, Cavite hich was
utilized as an integrated farm and a stud farm used for raising horses.
Respondent Monatano went on self exile in USA to avoid the harrasment of Pres.
Marcos during the Martial Law regime, upon which they transfered said properties to
Tres Cruces Agro- Industrial Corporation(TCAIC) in exchange for shares of stocks in the
company with a 98% control over TCAIC.
After a year, the TCAIC sold the properties to Inetrenational Country Club Incorporation
(ICCI) for 6,000,000.09 php, thus the title of properties were now transfered to the ICCI.
The ICCI then mortgaged the parcels of land to the Citizens bank and Trust corporation
now Associated Bank for an amount of 2,000,000.00 php. The mortgaged become
mature but remain unpaid thereby promting the Associated Bank to forclosed the
mortgaged and put in in a public auction. Associated Bank as the higgest bidder then
buy the property with an amount of 5,7000,000.00 php.
Meanwhile, the Montano returned to the country and after discovering the transfer of
the properties the Montano immediately took physical possession of the same and
began cultivating it. They also filed for a petition of reconveyance and pray for the
declaration of nullity upon transfer of CTC.
On the other hand, the associated bank filed its Motion for Preliminary Hearing on the
affirmative defense and motion to dismiss for the complaint stated no cause of action,
and that the case was already barred by the statute of limitations.

Issue:
1. Whether or not motion to dismiss is on its propriety.
2. Whether or not the complaint for reconveynace should be dismissed.

HELD:
1. The SC held that the rule is based on practicality, as when the issues involved in a particular
case can be disposed of in a preliminary hearing and if there is no motion to dismiss was filed
then the pleading gorund as affirmative defenses can be heard in a preliminary hearing as that
of the motion to dismiss. Respondent on the other hand fails to oppose the motion to dismiss
despite having been given the opportunity to do so, any right to contest the same was already
waived by them.

2. It is true that the action for reconveyance of property resulting from fraud may be barred by
the statute of limitations which requires that the action shall be filed within 4 years from
discovery of fraud, but be it noted that the basis of reconveyance by the respondent is threat,
duress and intimidation. As provided in Art. 1391 of the civil code an action for annulment for it
shall be brought within four years, thus when Marcos ouster from power on February 21, 1986
and since the respondents filed its complaint for reconveynace on September 15, 1989 the four
years prescriptive period was not prescribed. The SC denied for the dismissal of reconveyance
and remitted the case to the RTC for trial with cost against the petitioner.













WILLIAM ALAIN MIAILHE v. COURT OF APPEALS
G.R. No. 108991
March 20, 2001

Facts:
Petitioner, William Alain Miailhe, on his own behalf and on behalf of Victoria Desbarats-
Miailhe, Monique Miailhe-Sichere and Elaine Miailhe-Lencquesaing filed a Complaint for
Annulment of Sale, Reconveyance and Damages against [Respondent] Republic of the
Philippines and defendant Development Bank of the Philippines.
The petitioner alleged that DBP forged, threatened and intimidated petitioner to sell the
property to DBP for the grossly low price. The RTC and CA rendered their decision in
favor of DBP and that the action is already prescribed.

ISSUE:
Whether or not extrajudicial demands did not interrupt prescription.

Held:
In the present case, there is as yet no obligation in existence. Respondent has no obligation to
reconvey the subject lots because of the existing Contract of Sale. Although allegedly voidable,
it is binding unless annulled by a proper action in court.12 Not being a determinate conduct
that can be extrajudically demanded, it cannot be considered as an obligation either. Since
Article 1390 of the Civil Code states that voidable "contracts are binding, unless they are
annulled by a proper action in court," it is clear that the defendants were not obligated to
accede to any extrajudicial demand to annul the Contract of Sale.13




FIRST PHILIPPINE HOLDINGS CORPORATION v. TRANS MIDDLE
EAST EQUITIES INC.
G.R. NO. 179505
04 DECEMBER 2009

Facts:
FHPC is formerly known as Meralco Securities Corporation incorporated.
On 30 June 1961 by Filipino Entreprenuers led by Eugenio Lopez Sr. sold its 6,299,179.00
php shares of common stock in Philippine Commercial International Bank (PCIB), now
Equitable PCIB to TMEE.
Such shares according to the FHPC were obtained by the TMEE through fraud, acts
contrary to Law, Morals, Good Customs and Public Policy and such acquisition is either
voidable, void or un forceable.
FHPC filed then its motion for leave to intervene and admit complaint in intervention
and was granted by the court.
On the otehr hand, TMEE filed its motion to dismiss the complaint-in-intervention by
the FHPC on the ground that the action of FHPC has already prescribed under Article
1391 of the Civil Code. Since the action was filed only on 28 December 1988 and the sale
was 24 May 1984 the action was laready 7 months late from the date of prescription.

Issue:
Whether or not the sale of property is void and the prescriptive period had elapsed.

Held:
The SC found that the sale is not void for a suit for the annulment of voidbale contract on
account of fraud shall be filed within four years from the discovery of the same, here, from the
time the questioned sale transaction on May 24, 1984 took place, FHPC didn't deny that it had
actual knowledge of the same. Simply, petitioner was fully aware of the sale of the PCIB shares
to TMEE and espite full knowledge petitioners did not question the said sale from its inception
and sometime thereafter. It was only four years and seven months had elapsed following the
knowledge or discovery of the alleged fraudulent sale that the petitioner assailed the same, by
then it was too late for the petitioners to beset same transaction, since the prescriptive period
had already come into play.

The SC therefore denied the instant petition and affirmed the resolution of the SB with cost
against the petitioner.



















SANCHEZ v. MAPALAD
541 SCRA 397

Facts:
Respondent Mapalad was the registered owner of four (4) parcels of land located along
Roxas Boulevard, Baclaran, Paraaque.
The PCGG issued writs of sequestration for Mapalad and all its properties.
Josef, Vice president/treasurer and General Manager of Mapalad discovered that the 4
TCTs were missing, however the four missing tcts turned out to be in possession of
Nordelak Development Corporation.
Nordelak came into possession of the 4 TCTs by deed of sale purportedly executed by
Miguel Magsaysay in his capacity as President and Board Chairman of Mapalad.
Mapalad filed an action for annulment of deed of sale and reconveyance of title with
damages against Nordelak.
RTC ruled in favour of Nordelak. The Ca reversed the decision of RTC.

ISSUE:
Whether or not there was a valid sale between Mapalad and Nordelak.

Held:
In the present case, consent was purportedly given by Miguel Magsaysay, the person who
signed for and in behalf of Mapalad in the deed of absolute sale dated November 2, 1989.
However, as he categorically stated on the witness stand during trial, he was no longer
connected with Mapalad on the said date because he already divested all his interests in said
corporation as early as 1982. Even assuming, for the sake of argument, that the signatures
purporting to be his were genuine, it would still be voidable for lack of authority resulting in his
incapacity to give consent for and in behalf of the corporation.

Lack of consideration makes a contract of sale fictitious. A fictitious sale is void ab initio.
The alleged deed of absolute sale dated November 2, 1989 notwithstanding, the contract of
sale between Mapalad and Nordelak is not only voidable on account of lack of valid consent on
the part of the purported seller, but also void ab initio for being fictitious on account of lack of
consideration.

WHEREFORE, the petition is hereby DENIED and the appealed Court of Appeals decision
AFFIRMED in toto.



















OESMER v. PARAISO DEVELOPMENT CORPORATION
G.R. No. 157493
February 5, 2007

Facts:
Petitioner Ernesto to meet with a certain Sotero Lee, President of respondent Paraiso
Development Corporation, at Otani Hotel in Manila. The said meeting was for the
purpose of brokering the sale of petitioners properties to respondent corporation.
A Contract to Sell was drafted. A check in the amount of P100,000.00, payable to
Ernesto, was given as option money.
Sometime thereafter, Rizalino, Leonora, Bibiano, Jr., and Librado also signed the said
Contract to Sell. However, two of the brothers, Adolfo and Jesus, did not sign the
document.
Petitioners informed respondent corporation about their intention to rescind the
Contract to Sell and to return the amount of Php 100,000.00.
Respondent did not respond to the aforesaid letter. Petitioners, therefore, filed a
complaint for Declaration of Nullity or for Annulment of Option Agreement or Contract
to Sell with damages.
The RTC rendered its decision in favor to respondent. CA affirmed the decision of RTC
with modification.

ISSUE:
Whether ot not Contract to Sell is void considering that on of the heirs did not sign it as to
indicate its consent to be bound by its terms.

Held:
It is well-settled that contracts are perfected by mere consent, upon the acceptance by the
offeree of the offer made by the offeror. From that moment, the parties are bound not only to
the fulfillment of what has been expressly stipulated but also to all the consequences which,
according to their nature, may be in keeping with good faith, usage and law. To produce a
contract, the acceptance must not qualify the terms of the offer. However, the acceptance may
be express or implied. For a contract to arise, the acceptance must be made known to the
offeror. Accordingly, the acceptance can be withdrawn or revoked before it is made known to
the offeror.

In the case at bar, the Contract to Sell was perfected when the petitioners consented to the sale
to the respondent of their shares in the subject parcels of land by affixing their signatures on
the said contract. Such signatures show their acceptance of what has been stipulated in the
Contract to Sell and such acceptance was made known to respondent corporation when the
duplicate copy of the Contract to Sell was returned to the latter bearing petitioners signatures.

















PERPETUA VDA. DE APE v. COURT OF APPEALS
G.R. No. 133638
April 15, 2005

Facts:
Generosa Cawit de Lumayno (private respondent herein), joined by her husband,
Braulio, instituted a case for "Specific Performance of a Deed of Sale with Damages"
against Fortunato and his wife Perpetua (petitioner herein).
She supposedly demanded that Fortunato execute the corresponding deed of sale and
to receive the balance of the consideration. However, Fortunato unjustifiably refused to
heed her demands.
Private respondent, therefore, prayed that Fortunato be ordered to execute and deliver
to her "a sufficient and registrable deed of sale involving his one-eleventh (1/11) share
or participation in Lot No. 2319 of the Escalante Cadastre.
Private respondent testified that Fortunato went to her store at the time when their
lease contract was about to expire. He allegedly demanded the rental payment for his
land but as she was no longer interested in renewing their lease agreement, they agreed
instead to enter into a contract of sale which Fortunato acceded to provided private
respondent bought his portion of Lot No. 2319 for P5,000.00.
Thereafter, she asked her son-in-law Flores to prepare the aforementioned receipt.

ISSUE:
Whether or not the receipt signed by Fortunato proves the existence of a contrct of sale
between him and private respondent.

Held:
Under Article 1332 of the Civil Code which provides that "[w]hen one of the parties is unable to
read, or if the contract is in a language not understood by him, and mistake or fraud is alleged,
the person enforcing the contract must show that the terms thereof have been fully explained
to the former."

As can be gleaned from Flores's testimony, while he was very much aware of Fortunato's
inability to read and write in the English language, he did not bother to fully explain to the latter
the substance of the receipt (Exhibit "G"). He even dismissed the idea of asking somebody else
to assist Fortunato considering that a measly sum of thirty pesos was involved. Evidently, it did
not occur to Flores that the document he himself prepared pertains to the transfer altogether
of Fortunato's property to his mother-in-law. It is precisely in situations such as this when the
wisdom of Article 1332 of the Civil Code readily becomes apparent which is "to protect a party
to a contract disadvantaged by illiteracy, ignorance, mental weakness or some other handicap
















JULIAN FRANCISCO v. PASTOR HERRERA
G.R. No. 139982
November 21, 2002

Facts:
Petitioner bought 2 parcels of land from Eligio Herrera Sr.
The children of Eligio, Sr. conteneded that the contract price for the two parcels of land
was grossly inadequate so they tried to negotiate with petitioner. However petitioner
refused.
The children of Herrera filed a complaint for annulment of sale.
The RTC rendered its decision in favor of the children that Ca affirmed the decision of
RTC.

ISSUE:
Whether or not said contract is void.

Held:
In the present case, it was established that the vendor Eligio, Sr. entered into an agreement
with petitioner, but that the formers capacity to consent was vitiated by senile dementia.
Hence, we must rule that the assailed contracts are not void or inexistent per se; rather, these
are contracts that are valid and binding unless annulled through a proper action filed in court
seasonably.

An annullable contract may be rendered perfectly valid by ratification, which can be express or
implied. Implied ratification may take the form of accepting and retaining the benefits of a
contract. As found by the trial court and the Court of Appeals, upon learning of the sale,
respondent negotiated for the increase of the purchase price while receiving the installment
payments. It was only when respondent failed to convince petitioner to increase the price that
the former instituted the complaint for reconveyance of the properties. Clearly, respondent
was agreeable to the contracts, only he wanted to get more. Further, there is no showing that
respondent returned the payments or made an offer to do so. This bolsters the view that
indeed there was ratification. One cannot negotiate for an increase in the price in one breath
and in the same breath contend that the contract of sale is void.



















ROSARIO L. DE BRAGANZA v. FERNANDO F. DE VILLA ABRILLE
G.R. No. L-12471
April 13, 1959

Facts:
Rosario L. de Braganza and her sons Rodolfo and Guillermo petition for review of the
Court of Appeal's decision whereby they were required solidarily to pay Fernando F. de
Villa Abrille the sum of P10,000 plus 2 % interest from October 30, 1944.
Because payment had not been made, Villa Abrille sued them in March 1949.
The RTC and CA rendered its decision in favor of Abrile despite the fact tht Guillermo
and Rodolfo are minors.

ISSUE:
Whether or not Guillermo and Rodolfo can be held liable to pay the loan.

Held:
The SC held that being minors, Rodolfo and Guillermo could not be legally bound by their
obligation.These minors may not be entirely absolved from monetary responsibility. In
accordance with the provisions of Civil Code, even if their written contact is unenforceable
because of non-age, they shall make restitution to the extent that they have profited by the
money they received. (Art. 1340) There is testimony that the funds delivered to them by Villa
Abrille were used for their support during the Japanese occupation. Such being the case, it is
but fair to hold that they had profited to the extent of the value of such money, which value has
been authoritatively established in the so-called Ballantine Schedule: in October 1944, P40.00
Japanese notes were equivalent to P1 of current Philippine money.




MIGUEL KATIPUNAN v. BRAULIO KATIPUNAN, JR.
G.R. No. 132415
January 30, 2002

Facts:
Respondent Braulio Katipunan, Jr. is the owner of a 203 square meter lot and a five-door
apartment constructed thereon located at 385-F Matienza St., San Miguel, Manila.
Petitioner Miguel Katipunan, entered into a Deed of Absolute Sale with brothers
Edgardo Balguma and Leopoldo Balguma, Jr. (co-petitioners), represented by their
father Atty. Leopoldo Balguma, Sr., involving the subject property for a consideration of
P187,000.00.
Respondent filed a complaint for annulment of the Deed of Absolute Sale. He contended
that the said contract was obtained through insidious words and machinations.
The TRC dismissed the complaint. The CA reversed the decision of RTC.

ISSUE:
Whether or not CA ered when it overturned the factual findings of the trial court which are
amply supported by the evidence on record.

Held:
The circumstances surrounding the execution of the contract manifest a vitiated consent on the
part of respondent. Undue influence was exerted upon him by his brother Miguel and Inocencio
Valdez (petitioners) and Atty. Balguma. It was his brother Miguel who negotiated with Atty.
Balguma. However, they did not explain to him the nature and contents of the document.
Worse, they deprived him of a reasonable freedom of choice. It bears stressing that he reached
only grade three. Thus, it was impossible for him to understand the contents of the contract
written in English and embellished in legal jargon.

A contract where one of the parties is incapable of giving consent or where consent is vitiated
by mistake, fraud, or intimidation is not void ab initio but only voidable and is binding upon the
parties unless annulled by proper Court action. Since the Deed of Absolute Sale between
respondent and the Balguma brothers is voidable and hereby annulled, then the restitution of
the property and its fruits to respondent is just and proper. Petitioners should turn over to
respondent all the amounts they received starting January, 1986 up to the time the property
shall have been returned to the latter.



















NILO R. JUMALON v.COURT OF APPEALS
G.R. No. 127767
January 30, 2002

Facts:
Complainant De Leon and herein petitioner, Nilo R. Jumalon, executed a conditional
sales agreement whereby the former purchased from the latter a house and lot.
Jumalon executed in favor of De Leon a Deed of Absolute Sale.
De Leon learned regarding the danger posed by the wires over the property.
Also, De Leon was informed by HLURB Enforcement Center, that construction of houses
and buildings of whatever nature is strictly prohibited within the right-of way of the
transmission line.
De Leon filed a case for declaration of nullity or annulment of sale of real property
which was subsequently dismissed.
De Leon then, filed a complaint before the HLURB seeking the rescission of the
conditional sales agreement and the Absolute Deed of Sale.
HLURB arbiter rendered judgement in favor of De Leon. The Board of Commissioners of
HLURB affirmed the decision of arbiter.
The CA affirmed the appealed decision.

ISSUE:
Whether the Court of Appeals erred in affirming the decision of Executive Secretary Ruben D.
Torres and the HLURB declaring the rescission of the contract of sale of a house and lot
between the petitioner and private respondent

Held:
The SC agrees with the Court of Appeals that respondent de Leon was entitled to annul the
sale. There was fraud in the sale of the subject house. It is not safely habitable. It is built in a
subdivision area where there is an existing 30-meter right of way of the Manila Electric
Company (Meralco) with high-tension wires over the property, posing a danger to life and
property. The construction of houses underneath the high tension wires is prohibited as
hazardous to life and property because the line carries 115,000 volts of electricity, generates
tremendous static electricity and produces electric sparks whenever it rained.
CABALES, ET. AL vs COURT OF APPEALS
August 31, 2007

FACTS:
Saturnina and her children Bonifacio, Albino, Francisco, Leonara, Alberto and petitioner
Rito inherited a parcel of land.
They sold such property to Dr. Cayetano Corrompido with a right to repurchase within 8
years.
Alberto secured a note from Dr. Corrompido in the amount of Php 300.00.
Alberto died leaving a wife and son, petitioner Nelson.
Within the 8-year redemption period, Bonifacio and Albino tendered their payment to
Dr. Corrompido. But Dr. Corrompido only released the document of sale with pacto de
retro after Saturnina paid the share of her deceased son, Alberto, plus the note.
Saturnina and her children executed an affidavit to the effect that petitioner Nelson
would only receive the amount of Php 176.34 from respondents-spouses when he
reaches the age if 21 considering that Saturnina paid Dr. Corrompido Php 966.66 for the
obligation of petitioner Nelsons late father Alberto.

ISSUE:
Whether or not the slae entered into is valid and binding.

Held:
The legal guardian only has the plenary power of administration of the minors property. It does
not include the power to alienation which needs judicial authority. Thus when Saturnina, as
legal guardian of petitioner Rito, sold the latters pro indiviso share in subject land, she did not
have the legal authority to do so. The contarct of sale as to the pro indiviso share of Petitioner
Rito was unenforceable. However when he acknowledged receipt of the proceeds of the sale on
July24, 1986, petitioner Rito effectively ratified it. This act of ratification rendered the sale valid
and binding as to him.


ANUNCIACION VDA. DE OUANO v. REPUBLIC OF THE PHILIPPINES
G.R. NO. 168770
9 FEBRUARY 2011

Facts:
In 1949, the National Airport Corporation (NAC), MCIAAs predecessor agency pursued a
program to expand the Lahug Airport in Cebu City.
As an assurance from the government, there is a promise of reconveyance or
repurchase of said property so long as Lahug ceases its operation or transfer its
operation to Mactan Cebu Airport.
Some owners refused to sell, and that the Civil Aeronautics Administration filed a
complaint for the expropriation of said properties for the expansion of the Lahug
Airport.
The trial court then declared said properties to be used upon the expansion of said
projects and order for just compensation to the land owners, at the same time directed
the latter to transfer certificate or ownership or title in the name of the plaintiff.
At the end of 1991, Lahug Airport completely ceased its operation while the Mactan-
Cebu airport opened to accommodate incoming and outgoing commercial flights.
This then prompted the land owners to demand for the reconveynace of said properties
being expropriated by the trial court under the power of eminent domain. Hence these
two consolidated cases arise.
In G.R. No. 168812 MCIAA is hereby ordered by court to reconvey said properties to the
land owners plus attorneys fee and cost of suit, while in G.R. No. 168770, the RTC ruled
in favor of the petitioners Oaunos and against the MCIAA for the reconveynace of their
properties but was appealed by the latter and the earlier decision was reversed, the
case went up to the CA but the CA affirmed the reversed decision of the RTC.

Issue:
Whether or not the testimonials of the petitioners proving the promises, assurances and
representations by the airport officials and lawyers are inadmissible under the Statue of Frauds.

Held:
The SC ruled that since the respondent didnt object during trial to the admissibility of
petitioners testimonial evidenc under the Statute of Frauds, it means then that they have
waived their objection and are now barred from raising the same. In any event, the Statute of
Frauds is not applicable herein. Consequently, petitioners pieces of evidence are admissible
and should be duly given weight and credence, since the records tend to support that the
MCIAA did not as the Ouanos and Inocians posit, object the introduction of parole evidence to
prove its commitment to allow the fromer landowners to repurchase their properties upon the
occurrence of certain events.


















SHOEMAKER v. LA TONDENA
68 Phil 24

Facts:
Defendant company, La tondena, Inc. entered into a written contract of lease of services
with plaintiff Harry Ives Shoemaker for a period of 5 years, with a compensation
consisting of 8% of the net earnings of defendant that during each year that the contract
was in force, plaintiff would receive monthly during the period of the contract of the
sum of Php 1,500.00 or Php 18,000.00 per annum as minimum compensation if 8% of
the net earnings of the aforementioned alleged business would not reach the amount.
The defendant company alleged that there were changes in the contract in which both
the parties agreed upon.
Plaintiff filed a complaint against defendant company.
The defendant interposed a demurrer based on the ground that the facts therein
alleged do not constitute a cause of action, since it is not averred that the alleged
mutual agreement modifying the contract of lease of services, has been put in writing,
whereas it states that its terms and conditions may only be modified upon the written
consent of both parties.

ISSUE:
Whether or not the ocurt a quo ered in sustaining the demurrer interposed by the defendant
company to the second amended complaint filed by plaintiff, on the ground that the facts
alleged therein do not constitute a couse of action.

Held:
When in an oral contract which by its terms, is not to be performed within 1 year from the
execution thereof, one of the contracting parties has complied within the year with the
obligations imposed on him said contract, the other party cannot avoid the fulfillment of what
is incumbent on him under the same contract by invoking the statute of frauds because the
latter aims to prevent and not to protect fraud.

PNB v. PHILIPPINE VEGETABLE OIL COMPANY
49 Phil 897

Facts:

This appeal involves the legal right of the PNB to obtain a judgement against Vegetable
Oil Co., Inc., for Php 15,812,454 and to foreclose a mortgage on the property of the
PVOC for Php 17,000,000.00 and the legal right of the Phil C. Whitaker as intervenor to
obtain a judgement declaring the mortgage which the PNB seeks to foreclose to be
without force and effect, requiring an accouting from the PNB of the sales of the
property and assets of the Vegetable Co. and ordering the PVOC and the PNB to pay him
the sum of Php 4,424,418.37.
In 1920, the Vegetable Oil Company, found itself in financial straits. It was in debt to the
extent of approximately Php 30,000,000.00.
The PNB was the largest creditor. The VOC owed the bank Php 17,000,000.00. The PNB
was securedly principally by a real and chattel mortgage in favor of the bank on its
vessels Tankerville and H.S. Everett to guarantee the payment of sums not exceed Php
4,000,000.00

ISSUE:
Whether or not the plaintiff had failed to comply with the contract, that it was alleged to have
celebrated with the defendant and the intervenor, that it would furnish funds to the defendant
so that it could continue operating its factory.

Held:
In the present instance, it is found that the Board of Directors of the PNB had not consented to
an agreement for practically unlimited backing of the V corporation and had not ratified any
promise to trhat effect made by its general manager.

All the evidence, documentary and oral, pertinent to the issue considered and found to disclose
no binding promise, tacit, or express made by the PNB to continue indefinitely the operation of
the V corporation. Accordingly, intervenor Whitaker is not entitled to recover damages from
the bank.





















ANUNCIACION VDA. DE OUANO v. REPUBLIC OF THE PHILIPPINES
G.R. NO. 168770
9 FEBRUARY 2011

Facts:
In 1949, the National Airport Corporation (NAC), MCIAAs predecessor agency pursued a
program to expand the Lahug Airport in Cebu City.
As an assurance from the government, there is a promise of reconveyance or
repurchase of said property so long as Lahug ceases its operation or transfer its
operation to Mactan Cebu Airport. Some owners refused to sell, and that the Civil
Aeronautics Administration filed a complaint for the expropriation of said properties for
the expansion of the Lahug Airport.
The trial court then declared said properties to be used upon the expansion of said
projects and order for just compensation to the land owners, at the same time directed
the latter to transfer certificate or ownership or title in the name of the plaintiff.
At the end of 1991, Lahug Airport completely ceased its operation while the Mactan-
Cebu airport opened to accommodate incoming and outgoing commercial flights. This
then prompted the land owners to demand for the reconveynace of said properties
being expropriated by the trial court under the power of eminent domain. Hence these
two consolidated cases arise.
In G.R. No. 168812 MCIAA is hereby ordered by court to reconvey said properties to the
land owners plus attorneys fee and cost of suit, while in G.R. No. 168770, the RTC ruled
in favor of the petitioners Oaunos and against the MCIAA for the reconveynace of their
properties but was appealed by the latter and the earlier decision was reversed, the
case went up to the CA but the CA affirmed the reversed decision of the RTC.

Issue:
Whether or not the testimonials of the petitioners proving the promises, assurances and
representations by the airport officials and lawyers are inadmissible under the Statue of Frauds.

Held:
The SC ruled that since the respondent didnt object during trial to the admissibility of
petitioners testimonial evidenc under the Statute of Frauds, it means then that they have
waived their objection and are now barred from raising the same. In any event, the Statute of
Frauds is not applicable herein. Consequently, petitioners pieces of evidence are admissible
and should be duly given weight and credence, since the records tend to support that the
MCIAA did not as the Ouanos and Inocians posit, object the introduction of parole evidence to
prove its commitment to allow the fromer landowners to repurchase their properties upon the
occurrence of certain events.



















MUNICIPALITY OF HAGONOY v. DUMDUM
G.R. NO. 168289
22 MARCH 2010

Facts:
Private respondent, Emily Rose Go Ko Lim Chao, who is engaged in buy and sell business
of surplus business, equipment machineries, spare parts and related supplies filed a
complaint for collection of sum of money, including damages against the petitioners,
Municipality of Hagonoy, Bulacan and its former chief executive, Mayor Felix V. Ople in
his official and personal capacity.
The private respondent claimed that because of Oples earnest representation that
funds had already been allowed for the project, she agreed to deliver from her personal
principal business in Cebu City twenty-one motor vehicles whose valued totaled to
5,820,000.00 php but the petitioners here instead filed a motion to dismiss on the
ground that the claim on which the action had been brought was unenforceable under
the statute of frauds, pointing out that there was no written contract or document that
would evince the supposed agreement they entered into with the respondent.
The petitioners also filed for Motion to Dissolve and /or Discharge the Writ of
Preliminary Attachment already issued by the court invoking immunity of the State from
suit, unenforceability of contract, and failure to substantiate the allegation of fraud. But
the trial court denied all the petitions of the petitioners; hence the petitioners brought
this case to CA believing that the trial court committed grave abuse of discretion upon
issuing two orders .

Issue:
1. Whether or not complaint is unenforceable under the Statutes of Fraud.
2. Whether or not there is valid reason to deny petitioners motion to dismiss the Writ of
Preliminary Attachment.

Held:
1. The SC held that Statute of frauds is descriptive of statutes that require certain classes of
contracts to be in writing, and that do not deprive the parties of the right to contract with
respect to the matters therein involved, but merely regulate the formalities of the contract
necessary to render its enforceability. In other words, the Statute of fraud only lays down the
method by which the enumerated contracts maybe proved. It does not also declare any
contract invalid because they are not reduced into writing inasmuch as, by law, contracts are
obligatory in whatever form they may have been entered into provided that all their essential
requisites for validity are present. Thus the claim of the respondent is well-substantiated.

2. For the second issue, the Sc held that the Writ of Preliminary Attachment should be
dismissed because it writ of attachment in this case would only prove to be useless and
unnecessary under the premises since the property of the Municipality may not, in the event
that respondents claim is validated unless there has been a valid appropriation provided by
law.

The petition is hereby granted in part, but affirmed the decision of CA in CA-G.R. NO. 81888 is
affirmed as it was held by the Regional Trial Court.












TAN v. VILLAPAZ
475 SCRA 720
November 22, 2005

Facts:
Respondent Carmelito Villapaz issued a Philippine Bank of Communications (PBCom)
crossed check in the amount of P250,000.00, payable to the order of petitioner Tony
Tan.
The Malita, Davao del Sur Police issued an invitation-request to petitioner Antonio Tan
inviting him to appear before the Deputy Chief of Police Office on June 27, 1994 at 9:00
oclock in the morning in connection with the request of [herein respondent] Carmelito
Villapaz, for conference of vital importance.
The invitation-request was received by petitioner Antonio Tan on June 22, 1994 but on
the advice of his lawyer, he did not show up at the Malita, Davao del Sur Police Office.
Respondent filed a Complaint for sum of money against petitioners-spouses, alleging
that his issuance of the February 6, 1992 PBCom crossed check which loan was to be
settled interest-free in six (6) months; on the maturity date of the loan or on August 6,
1992, petitioner Antonio Tan failed to settle the same, and despite repeated demands,
petitioners never did.
Petitioners alleged that they never received from respondent any demand for payment,
be it verbal or written, respecting the alleged loan; since the alleged loan was one with a
period payable in six months, it should have been expressly stipulated upon in writing
by the parties but it was not.

ISSUE:
Whether or not Honorable Court of Appeals erred in concluding that the transaction in dispute
was a contract of loan and not a mere matter of check encashment as found by the trial court.

Held:
At all events, a check, the entries of which are no doubt in writing, could prove a loan
transaction.

That petitioner Antonio Tan had, on February 6, 1992, an outstanding balance of more than
P950,000.00 in his account at PBCom Monteverde branch where he was later to deposit
respondents check did not rule out petitioners securing a loan. It is pure naivete to believe
that if a businessman has such an outstanding balance in his bank account, he would have no
need to borrow a lesser amount.

In fine, as petitioners side of the case is incredible as it is inconsistent with the principles by
which men similarly situated are governed, whereas respondents claim that the proceeds of
the check, which were admittedly received by petitioners, represented a loan extended to
petitioner Antonio Tan is credible, the preponderance of evidence inclines on respondent.
















SPOUSES DAVID v. TIONGSON
G.R. No. 108169
August 25, 1999

Facts:
Three sets of plaintiffs, namely spouses Ventura, spouses David and Vda. De Basco, filed
a complaint for specific performance with damges, against private respondents spouses
Tiongson, alleging that the latter sold to them lots located in Pampanga.
The parties expressly agreed that in case of payment has been fully paid respondents
would execute an individual deed of absolute sale in plaintiffs flavor.
The respondents demanded the executuion of a deed of sale and issuance of certificate
of titile but the respondents refused to issue the same.
The trial court rendered its decision in favor of the respondents. However the CA ruled
that contract of sale was not been perfrected between spouses David and/or Vda. De
Basco and respondents. As with regard to the spouses Ventura, the CA affirmed the RTC.

ISSUE:
Whether or not contract of sale has not been perfected but petitioners and respondents.

Held:
The SC ruled that there was a perfected contact. However, the statute of frauds is inapplicable.
The rule is settled that the statute of frauds applies only to executor and not to completed,
executed or partially executed contract. In the case of spouses David, the payment made
rendered the sales contract beyong the ambit of the statutre of frauds/

The CA erred in concluding that there was no perfected contract of sale. However, in view of
the stipulation of the parties that the deed of sale and corresponding certificate of title would
be issued after full payment, then, they ad entered into a contract to sell and not a contract of
sale.

GENARO CORDIAL v. DAVID MIRANDA
December 14, 2000

Facts:
David Miranda, a businessman from Angeles City, was engaged in rattan business.
Gener Buelva was the supplier of David but the former met an accident and died.
Genero Cordial and Miranda met through Buelvas widow, Cecilla. They agreed that
Cordial will be his supplier of rattan poles.
Cordial shipped rattan poles as to the agreed number of pieces and sizes however
Miranda refused to pay the cost of the rattan poles delivered.
Miranda alleged that there exist no privity of contract between Miranda and Cordial.
Cordial filed a complaint againt Miranda.
The RTC rendered its decision in favor of the petitioner. The CA reversed the decision of
the RTC.

ISSUE:
Whether or not Statute of Frauds applies in this case.

Held:
The CA and respondent Miranda stress the absence of a written memorandum of the alleged
contract between the parties. Respondent implicity agrues that the alleged contract is
unenforceable under the Statute of Frauds however, the statute of frauds applies only to
executor and not to completed, executed, or partially executed contracts. Thus, were one party
has performed ones obligation, oral evidence will be admitted to prove the agreement. In the
present case, it has already been established that petitioner had delivered the rattan poles to
respondent. The contract was partially executed, the Statute of Frauds does not apply.




VILLANUEVA-MIJARES v. THE COURT OF APPEALS
G.R. No. 1089
21 April 12, 2000


Facts:
During the lifetime, Felipe, owned real property, a parcel of land situated at Estancia,
Kalibo, Capiz.
Upong Felipes death, ownership of the land was passed on to his children. Pedro, on of
the children, got his share.
The remaining undivided portion of the land was held in trust by leon. His co-heirs made
several seasonable and lawful demands upon him to subdivide the partition the
property, but no subdivision took place.
After the death of Leon, private respondents discovered that the shares of four of the
heirs of Felipe was purchased by Leon as evidenced by Deed of Sale.

ISSUE:
Whether or not the appellate court erred in declaring the Deed of Sale unenforceable against
the private respondent fro being unauthorized contract.

Held:
The court has ruled that the nullity of the unenforceable contract is of a permanent nature and
it will exist as long the unenforceable contract is not duly ratifired. The mere lapse of time
cannot igve efficacy to such a contract. The defect is such that it cannot be cured except by the
subsequent ratification of the unenforceable contract by the person in whose name the
contract was executed. In the instant case, there is no showing of any express or implied
ratification of the assailed Deed of Sale by the private respondents Procerfina, Ramon,.
Prosperidad, and Rosa. Thus, the said Deed of Sale must remain unenforceable as to them.


ROSENCOR v. INQUING
G.R. No. 140479
March 8, 2000

Facts:
Plaintiffs and plaintiffs-intervenors averred that they are the lessess since 1971 of a two-
story residential apartment and owned by spouses Faustino and Cresencia Tiangco.
The lease was nocovered by any contract. The lesses were renting the premises then for
Php 150.00 a month and were allegedly verbally granted by the lessors the pre-emptive
right to purchase the property if ever they decide to sell the same.
Upon the death of the spouses Tiangco, the management of the property was
adjudicated to their heirs who were represented by Eufrocina deLeon.
The lessees received a letter from de Leon advising them that the heirs of the late
spouses have already sold the property to Resencor.
The lessees filed an action f\before th RTC praying for the following: a) rescission of the
Deed of Absolute Sale between de Leon and Rocencor, b) the defendants
Rosencor/Rene Joaquin be ordered to reconvey the property to de Leon, c) de Leon be
ordered to reimburse the plaintiffs for the repair of the property or apply the said
amount as part of the purchase of the property.
The RTC dismissed the complaint while the Ca reversed the decision of the RTC.

ISSUE:
Whether or not a right of first refusal is indeed covered by the provisions of the NCC on the
Statute of Frauds.

Held:
A right of first refusal is not among those listed as unenforceable under the statute of frauds.
Furthermore, the application of Article 1403, par. 2(e) of the NCC, presupposes the existence of
a perfected, albeit unwritten, contract of sale. A right of first refusal, such as the one involved in
the instant case, is not by any means a perfected contract of sale of real property. At best, it is a
contractual grant, not of the sale of the real property involed byt of the right of first refusal
over the property sought to be sold.

It is thus evident that the statute of frauds does not contemplate cases involving a right of right
of first refusal. As such, a right of first refusal need not be written to be enforceable and may be
proven by oral evidence.


















FIRME v.BUKAL
G.R. No. 146608
October 23, 2003


Facts:
Petitioner Spouses Firme are the registered owner of a parcel of land located on Dahlia
Avenue, Fairview Park, Quezon City.
Bukal Enterprises filed a complaint for specific performance and damges with the trial
court, aleeging that the Spouses Firme reneged on their agreement to sell the property.
The complaint asked the trial court to order the Spouses Firme to execute the deed of
sale and to delover the title of the property to Bukal Enterpises upon payment of the
agreed purchase price.
The RTC rendered its decision against Bukal. The CA reversed and set aside the decision
of the RTC.

ISSUE:
Whether or not Statute of Frauds is applicable.

Held:
The CA held that partial performance of the contract of sale takes the oral contract out of the
scope of Statute of Frauds. This conclusion arose from the appellate courts erronoues finding
that there was a perfected contract of sale. The recors shoe that there was no perfected
contract of sale. There is therefore no basis for the application of the Stature of Frauds. The
application of the Statute of Frauds presupposes the existence of a perfected contract.



HEIRS OF M. DORONIO v. HEIR OF F. DORONIO
541 SCRA 479

Facts:
Petitioners are the heirs of Maralino Doronio, while respondents are the heirs of
Fortunato Doronio.
The property in dispute is one of a private deed of donation propter nuptias who was
executed by Spouses Simeon Doronio and Cornelia Gante in facor of Maralino Doronio
and his wife Veronica Pico.
The heirs of Fortuanto Doronio contended that only the half of the property was
actually incorporated in the deed of donation because it stated that Fortunato is the
owner of the adjacent property.
Eager to obtain the entire property, the heirs of Marcelino filed a petition For the
Registration of a Private Deed of Donation. The RTC granted the petition.
The heirs of Fortunato files a pleading in the form of petition. In the petition, they
prayed that an order be issued declaring null and void the registration of the private
deed of donation.
The RTC ruled in favor of the heirs of Marcelino. The CA reversed the decision of RTC.

ISSUE:
Whether or not the donation propter nuptias is valid.

Held:
Article 633 of the OCC provides that figts of real property , in order to be valid, must appear in a
public document. It is settled that a donation of real estate propter nuptias is void unless made
by public instrument.

In the instant case, the donation propter nuptias did not become valid. Neither did it create any
right because it was not made in a public instrument. Hence, it conveyed no title to the land in
question to petitioners predecessors.

GURREA v SUPLICO
G.R. No. 144320
April 26, 2006


Facts:
Ricardo Gurrea, represented by and through his counsel Atty. Enrique Suplico (the
defendant), filed an Opposition in Special Proc. No. 7185. Inconsideration of said
representation, Ricardo Gurrea agreed to pay Atty. Suplico "a contingent fee of twenty
(20%) of whatever is due me, either realor personal property" (Exhibit "5").
During the pendency of the proceedings and upon the oral instructions of
Ricardo Gurrea, Atty. Supliconegotiated with the other heirs of Adelina Gurrea
regarding the transfer of the piso (apartment building) in Spain to Ricardo Gurreas
daughter, JulietGurrea de Melendres.
Ricardo Gurrea further instructed Atty. Suplico not to enter into any settlement with the
heirs unless the piso is transferred tohis daughter.
Finally, the transfer of the piso worth P64,000.00 was executed and the heirs arrived at
an amicable settlement regarding the estate of Adelina Gurrea. Hence, Ricardo Gurrea
withdrew his Opposition and the heirs then drew up a project of partition which was
eventually approved bythe probate court.
As payment of his attorneys fees, Ricardo Gurrea offered the San Juan lot to Atty.
Suplico who was initially hesitant to accept the same as the property is occupied by
squatters. However, in order not to antagonize his client, Atty. Suplico agreed to Ricardo
Gurreas proposal with the further understanding that he will receive an additional
commission of 5% if he sells the Baguio property.
Thereafter, the deed of Transfer of Rights andInterest was drafted. The said deed was
presented to Ricardo Gurrea for his signature.. On August 20, 1975, the deed was finally
signed by RicardoGurrea at the office of Atty. Pama, in the presence of the latter, Atty.
Suplico, Victor Tupas and another person, the last two acting as witnesses.Later, on
October 7, 1980, Atty. Suplico registered the deed and obtained a title/TCT to the San
Juan property under his name.
Ricardo Gurrea diedon October 22, 1980. After his death, his heirs instituted Special Pro.
No. 2722 for the settlement of Ricardo Gurreas estate. In the said proceedings,Atty.
Suplico filed several claims for unpaid attorneys fees (no claim was filed relative to
Special Proc. No. 7185); however, all were dismissed withfinality (Exhibits "I" and "J").
Also in the same case, the estates administrator, Carlos Gurrea, filed an Inventory of
Properties left by the decedent,which did not initially include the property subject of
this case. The said lot was included only subsequently in the Amended Inventory (Exhibit
"G").

ISSUE:
Whether or not petitioners are entitled to the cancellation of respondent attorneys title over
the subject property and the reconveyance thereof to the herein petitioners or to be the estate
of the Late Ricardo.

Held:

Having been established that the subject property was still the object of litigation at the time
the subject deed of Transfer of Rights and Interest was executed, the assignment of rights and
interest over the subject property in favor of respondent is null and void for being violative of
the provisions of Article 1491 of the Civil Code which expressly prohibits lawyers from acquiring
property or rights which may be the object of any litigation in which they may take part by
virtue of their profession.
It follows that respondents title over the subject property should be cancelled and the
property reconveyed to the estate of Ricardo, the same to be distributed to the latter?s heirs.
This is without prejudice, however, to respondent?s right to claim his attorney?s fees from the
estate of Ricardo, it being undisputed that he rendered legal services for the latter.








FRENZEL v. CATITO
G.R. No. 143958
July 11, 2003


FACTS:
Petitioner Alfred Fritz Frenzel is an Australian citizen of German descent. He arrived in
the Philippines and engaged in businesses. After two years, he married Teresita Santos, a
Filipino citizen. In 1981, Alfred and Teresita separated from bed and board without
obtaining a divorce.
Sometime in 1983 he arrived in Sydney and met Ederlina Catito, a Filipina and a native of
Bajada, Davao City. Unknown to Alfred, she was married to Klaus Muller when she was
in Germany.
Alfred was so enamored with Ederlina that he persuaded her to stop working, move to
the Philippines and get married.
They bought several properties in Manila and Davao using the money of Alfred. He also
sold all his properties in Australia before moving in the country. They also opened an
HSBC Savings Account in Hong Kong in the name of Ederlina.
Ederlina went to Germany to file a divorce however Ederlina had not been able to secure
a divorce from Klaus. The latter could charge her for bigamy and could even involve
Alfred, who himself was still married.
Alfred and Ederlinas relationship started deteriorating. They lived separately.
Alfred filed a Complaint dated October 28, 1985, against Ederlina, with the Regional Trial
Court of Quezon City, for recovery of real and personal properties located in Quezon City
and Manila. Alfred alleged, inter alia, that Ederlina, without his knowledge and consent,
managed to transfer funds from their joint account in HSBC Hong Kong, to her own
account with the same bank.
In the meantime, on November 7, 1985, Alfred also filed a complaint against Ederlina
with the Regional Trial Court, Davao City, for specific performance, declaration of
ownership of real and personal properties, sum of money, and damages.
Quezon City Trial Court decided in favor of Alfred but the Davao Trial Court is in favor of
Ederlina. The trial court ruled that based on documentary evidence, the purchaser of the
three parcels of land subject of the complaint was Ederlina. The court further stated
that even if Alfred was the buyer of the properties, he had no cause of action against
Ederlina for the recovery of the same because as an alien, he was disqualified from
acquiring and owning lands in the Philippines. The sale of the three parcels of land to
the petitioner was null and void ab initio. Applying the pari delicto doctrine, the
petitioner was precluded from recovering the properties from the respondent.
CA affirmed the decision of Davao City Court.

ISSUE:
Whether or not acquisition of a parcel of land is valid.

Held:
The sales of three parcels of land in favor of the petitioner who is a foreigner is illegal per se.
The transactions are void ab initio because they were entered into in violation of the
Constitution. Thus, to allow the petitioner to recover the properties or the money used in the
purchase of the parcels of land would be subversive of public policy.

An action for recovery of what has been paid without just cause has been designated as an
accion in rem verso. This provision does not apply if, as in this case, the action is proscribed by
the Constitution or by the application of the pari delicto doctrine. It may be unfair and unjust
to bar the petitioner from filing an accion in rem verso over the subject properties, or from
recovering the money he paid for the said properties, but, as Lord Mansfield stated in the early
case of Holman vs. Johnson: "The objection that a contract is immoral or illegal as between the
plaintiff and the defendant, sounds at all times very ill in the mouth of the defendant. It is not
for his sake, however, that the objection is ever allowed; but it is founded in general principles
of policy, which the defendant has the advantage of, contrary to the real justice, as between
him and the plaintiff."







LA BUGAAL-BLAAN v. RAMOS
December 1, 2004

Facts:
The Petition for Prohibition and Mandamus before the Court challenges the
constitutionality of (1) Republic Act 7942 (The Philippine Mining Act of 1995); (2) its
Implementing Rules and Regulations (DENR Administrative Order [DAO] 96-40); and (3)
the Financial and Technical Assistance Agreement (FTAA) dated 30 March 1995,
executed by the government with Western Mining Corporation (Philippines), Inc.
(WMCP).
On 27 January 2004, the Court en banc promulgated its Decision, granting the Petition
and declaring the unconstitutionality of certain provisions of RA 7942, DAO 96-40, as
well as of the entire FTAA executed between the government and WMCP, mainly on the
finding that FTAAs are service contracts prohibited by the 1987 Constitution.
The Decision struck down the subject FTAA for being similar to service contracts,[9]
which, though permitted under the 1973 Constitution, were subsequently denounced
for being antithetical to the principle of sovereignty over our natural resources, because
they allowed foreign control over the exploitation of our natural resources, to the
prejudice of the Filipino nation.
The Decision quoted several legal scholars and authors who had criticized service
contracts for, inter alia, vesting in the foreign contractor exclusive management and
control of the enterprise, including operation of the field in the event petroleum was
discovered; control of production, expansion and development; nearly unfettered
control over the disposition and sale of the products discovered/extracted; effective
ownership of the natural resource at the point of extraction; and beneficial ownership
of our economic resources.
According to the Decision, the 1987 Constitution (Section 2 of Article XII) effectively
banned such service contracts. Subsequently, Victor O. Ramos (Secretary, Department
of Environment and Natural Resources [DENR]), Horacio Ramos (Director, Mines and
Geosciences Bureau [MGB-DENR]), Ruben Torres (Executive Secretary), and the WMC
(Philippines) Inc. filed separate Motions for Reconsideration.


ISSUE:
Whether or nor it is a void contract.

Held:
Section 7.9 of the WMCP FTAA has effectively given away the State's share without anything in
exchange. Moreover, it constitutes unjust enrichment on the part of the local and foreign
stockholders in WMCP, because by the mere act of divestment, the local and foreign
stockholders get a windfall, as their share in the net mining revenues of WMCP is automatically
increased, without having to pay anything for it.Being grossly disadvantageous to government
and detrimental to the Filipino people, as well as violative of public policy, Section 7.9 must
therefore be stricken off as invalid.

Section 7.8(e) of the WMCP FTAA likewise is invalid, since by allowing the sums spent by
government for the benefit of the contractor to be deductible from the State's share in net
mining revenues, it results in benefiting the contractor twice over. This constitutes unjust
enrichment on the part of the contractor, at the expense of government. For being grossly
disadvantageous and prejudicial to government and contrary to public policy, Section 7.8(e)
must also be declared without effect. It may likewise be stricken off without affecting the rest
of the FTAA.











AGAN v. PIATCO
January 21, 2004


Facts:
Asias Emerging Dragon Corp. (AEDC) submitted an unsolicited proposal to the
Philippine Government through the Department of Transportation and Communication
(DOTC) and Manila International Airport Authority (MIAA) for the construction and
development of the NAIA IPT III under a build-operate-and-transfer arrangement
pursuant to R.A. No. 6957, as amended by R.A. No. 7718 (BOT Law).
The DOTC issued the notice of award for the NAIA IPT III project to the Paircargo
Consortium, which later organized into herein respondent PIATCO.
Various petitions were filed before this Court to annul the 1997 Concession Agreement,
the ARCA and the Supplements and to prohibit the public respondents DOTC and MIAA
from implementing them.
In a decision dated May 5, 2003, this Court granted the said petitions and declared the
1997 Concession Agreement, the ARCA and the Supplements null and void. Respondent
PIATCO, respondent-Congressmen and respondents-intervenors now seek the reversal
of the May 5, 2003 decision and pray that the petitions be dismissed.

ISSUE:
Whether or not the contract is valid.

Held:
Section 19, Article XII of the 1987 Constitution mandates that the State prohibit or regulate
monopolies when public interest so requires. Monopolies are not per se prohibited. Given its
susceptibility to abuse, however, the State has the bounden duty to regulate monopolies to
protect public interest. Such regulation may be called for, especially in sensitive areas such as
the operation of the countrys premier international airport, considering the public interest at
stake.

By virtue of the PIATCO contracts, NAIA IPT III would be the only international passenger airport
operating in the Island of Luzon, with the exception of those already operating in Subic Bay
Freeport Special Economic Zone ("SBFSEZ"), Clark Special Economic Zone ("CSEZ") and in Laoag
City. Undeniably, the contracts would create a monopoly in the operation of an international
commercial passenger airport at the NAIA in favor of PIATCO.


















COMMISSION ON ELECTIONS v. JUDGE MA. LUISA QUIJANO-
PADILLA
389 SCRA 353


Facts:
The Philippine Congress passed Republic Act No. 8189, otherwise known as the "Voter's
Registration Act of 1996," providing for the modernization and computerization of the
voters' registration list and the appropriate of funds therefor "in order to establish a
clean, complete, permanent and updated list of voters."
The COMELEC issued invitations to pre-qualify and bid for the supply and installations of
information technology equipment and ancillary services for its VRIS Project.
Private respondent Photokina Marketing Corporation (PHOTOKINA) won the bid
however the budget appropriated by the Congress for the COMELECs modernization
project was only 1B which was not sufficient to PHOTOKINA bid in the amount of
6.588B.
Senator Edgardo J. Angara directed the creation of a technical working group to assist
the COMELEC in evaluating all programs for the modernization of the COMELEC which
will also consider the PHOTOKINA contract as an alternative program and various
competing programs for the purpose.
PHOTOKINA filed a petition for mandamus, prohibition and damages (with prayer for
temporary restraining order, preliminary prohibitory injunction and preliminary
mandatory injunction) against the COMELEC and all its Commissioners.
Judge Luisa Quijano-Padilla rendered her decision in favor of PHOTOKINA.

ISSUE:
May a successful bidder compel a government agency to formalize a contract with it
notwithstanding that its bid exceeds the amount appropriated by Congress for the project?

Held:
The SC cannot accede to PHOTOKINA's contention that there is already a perfected contract.
While we held in Metropolitan Manila Development Authority vs. Jancom Environmental
Corporation[50] that "the effect of an unqualified acceptance of the offer or proposal of the
bidder is to perfect a contract, upon notice of the award to the bidder," however, such
statement would be inconsequential in a government where the acceptance referred to is yet
to meet certain conditions.

To hold otherwise is to allow a public officer to execute a binding contract that would obligate
the government in an amount in excess of the appropriations for the purpose for which the
contract was attempted to be made.

In the case at bar, there seems to be an oversight of the legal requirements as early as the
bidding stage. The first step of a Bids and Awards Committee (BAC) is to determine whether
the bids comply with the requirements. The BAC shall rate a bid "passed" only if it complies
with all the requirements and the submitted price does not exceed the approved budget for the
contract.
The SC ruled that PHOTOKINA, though the winning bidder, cannot compel the COMELEC to
formalize the contract. Since PHOTOKINAs bid is beyond the amount appropriated by Congress
for the VRIS Project, the proposed contract is not binding upon the COMELEC and is considered
void; and that in issuing the questioned preliminary writs of mandatory and prohibitory
injunction and in not dismissing Special Civil Action No. Q-01-45405, respondent judge acted
with grave abuse of discretion. Petitioners cannot be compelled by a writ of mandamus to
discharge a duty that involves the exercise of judgment and discretion, especially where
disbursement of public funds is concerned.








SENATOR ROBERT S. JAWORSKI v. PAGCOR
G.R. No. 144463
January 14, 2004


Facts:
PAGCORs board of directors approved an instrument denominated as "Grant of
Authority and Agreement for the Operation of Sports Betting and Internet Gaming",
which granted SAGE the authority to operate and maintain Sports Betting station in
PAGCOR's casino locations, and Internet Gaming facilities to service local and
international bettors, provided that to the satisfaction of PAGCOR, appropriate
safeguards and procedures are established to ensure the integrity and fairness of the
games.
Petitioner, in his capacity as member of the Senate and Chairman of the Senate
Committee on Games, Amusement and Sports, files the instant petition, praying that
the grant of authority by PAGCOR in favor of SAGE be nullified.

ISSUE:
Whether not not respondent PAGCORs legislative franchise includes to operate Internet
gambling.

Held:
While PAGCOR is allowed under its charter to enter into operator?s and/or management
contracts, it is not allowed under the same charter to relinquish or share its franchise, much
less grant a veritable franchise to another entity such as SAGE. PAGCOR can not delegate its
power in view of the legal principle of delegata potestas delegare non potest, inasmuch as
there is nothing in the charter to show that it has been expressly authorized to do so. In Lim v.
Pacquing,10 the Court clarified that "since ADC has no franchise from Congress to operate the
jai-alai, it may not so operate even if it has a license or permit from the City Mayor to operate
the jai-alai in the City of Manila." By the same token, SAGE has to obtain a separate legislative
franchise and not "ride on" PAGCOR?s franchise if it were to legally operate on-line Internet
gambling.
OESMER v . PARAISO DEVELOPMENT CORPORATION
G.R. No. 157493
February 5, 2007

Facts:
Petitioner Ernesto to meet with a certain Sotero Lee, President of respondent Paraiso
Development Corporation, at Otani Hotel in Manila. The said meeting was for the
purpose of brokering the sale of petitioners properties to respondent corporation.
A Contract to Sell was drafted. A check in the amount of P100,000.00, payable to
Ernesto, was given as option money.
Sometime thereafter, Rizalino, Leonora, Bibiano, Jr., and Librado also signed the said
Contract to Sell. However, two of the brothers, Adolfo and Jesus, did not sign the
document.
However petitioners informed respondent corporation about their intention to rescind
the Contract to Sell and to return the amount of Php 100,000.00.
Respondent did not respond to the aforesaid letter. Petitioners, therefore, filed a
complaint for Declaration of Nullity or for Annulment of Option Agreement or Contract
to Sell with damages.
The RTC rendered its decision in favor to respondent. CA affirmed the decision of RTC
with modification.

ISSUE:
Whether ot not Contract to Sell is void considering that on of the heirs did not sign it as to
indicate its consent to be bound by its terms.

Held:
It is well-settled that contracts are perfected by mere consent, upon the acceptance by the
offeree of the offer made by the offeror. From that moment, the parties are bound not only to
the fulfillment of what has been expressly stipulated but also to all the consequences which,
according to their nature, may be in keeping with good faith, usage and law. To produce a
contract, the acceptance must not qualify the terms of the offer. However, the acceptance may
be express or implied. For a contract to arise, the acceptance must be made known to the
offeror. Accordingly, the acceptance can be withdrawn or revoked before it is made known to
the offeror.

In the case at bar, the Contract to Sell was perfected when the petitioners consented to the sale
to the respondent of their shares in the subject parcels of land by affixing their signatures on
the said contract. Such signatures show their acceptance of what has been stipulated in the
Contract to Sell and such acceptance was made known to respondent corporation when the
duplicate copy of the Contract to Sell was returned to the latter bearing petitioners signatures.










HEIRS OF BALITE v. RODRIGO N. LIM
G.R. No. 152168
December 10, 2004


Facts:
The spouses Aurelio and Esperanza Balite were the owners of a parcel of land. When the
spuoses died intestate, and their children, the petitioners, inherited the subject
property and became co-owners thereof, with Esperanza inheriting an undivided share
of 9,751 square meters.
Esperanza became ill and in need of money for her hospital expenses. She, through her
daughter, Cristeta, offered to sell to Rodrigo Lim, her undivided share for the price of
P1M.
Esperanza and Rodrigo agreed that, under the "Deed of Absolute Sale", to be executed
by Esperanza over the property, it will be made to appear that the purchase price of the
property would beP150K, although the actual price was P1,000,000.00.
Esperanza executed a "Deed of Absolute Sale" in favor of Lim over a portion of the
property, with an area of 10,000 square meters, for the price of P150K.
They also executed a "Joint Affidavit" under which they declared that the real price of
the property was P1,000,000.00, payable to Esperanza, by installments.
The other children learned of the sale, and, they wrote a letter to the Register of Deeds,
saying that they were not informed of the sale nor did they give their consent thereto.

ISSUE:
1. When the other children knew about it, Esperanza signed a letter addressed to Rodrigo
informing the latter that her children did not agree to the sale of the property to him and that
she was withdrawing all her commitments until the validity of the sale is finally resolved.

2. Whether or not Deed of Absolute Sale is null and void.

Held:
In the present case, the parties intended to be bound by the Contract, even if it did not reflect
the actual purchase price of the property. That the parties intended the agreement to produce
legal effect is revealed by the letter of Esperanza Balite to respondent dated October 23, 1996
and petitioners? admission that there was a partial payment of P320,000 made on the basis of
the Deed of Absolute Sale. There was an intention to transfer the ownership of over 10,000
square meters of the property . Clear from the letter is the fact that the objections of her
children prompted Esperanza to unilaterally withdraw from the transaction.

Since the Deed of Absolute Sale was merely relatively simulated, it remains valid and
enforceable. All the essential requisites prescribed by law for the validity and perfection of
contracts are present. However, the parties shall be bound by their real agreement for a
consideration of P1,000,000 as reflected in their Joint Affidavit. The juridical nature of the
Contract remained the same. What was concealed was merely the actual price. Where the
essential requisites are present and the simulation refers only to the content or terms of the
contract, the agreement is absolutely binding and enforceable between the parties and their
successors in interest.


PINEDA v. COURT OF APPEALS
G.R. No. 127094
February 6, 2002


Facts:
Appellees Nelson Baez and Mercedes Baez and the appellees and Alejandria Pineda,
together with the latters spouse Alfredo Caldona, executed an Agreement to Exchange
Real PropertiesIn the agreement, the parties agreed to: 1) exchange their respective
properties; 2) Pineda to pay an earnest money in the total amount of $12,000.00 on or
before the first week of February 1983; and 3) to consummate the exchange of
properties not later than June 1983.
It appears that the parties undertook to clear the mortgages over their respective
properties.
At the time of the execution of the exchange agreement, the White Plains property was
mortgaged with the Government Service Insurance System (GSIS) while the California
property had a total mortgage obligation of $84,000.00.
In the meantime, the appellees were allowed to occupy or lease to a tenant Pineda's
California property and Pineda was authorized to occupy appellees' White Plains
property.
Unknown to the appellees, Alejandria Pineda and the appellants Adeodato C. Duque, Jr.
and Evangeline Mary Jane Duque executed an Agreement to Sell over the White Plains
property whereby Pineda sold the property to the appellants for the amount of
P1,600,000.00
A series of communications ensued between the representatives of the appellees and
Ms. Pineda with regards to the status of the exchange agreement which resulted in its
rescission for failure of Pineda to clear her mortgage obligation of the California
property.
Negotiations for the purchase of the property were held between the appellants and
the appellees but the same failed which resulted in the appellees demanding for the
appellants to vacate the property.

ISSUE:
Whether petitioners validly acquired the subject property.

Held:
The Civil Code provides that in a sale of a parcel of land or any interest therein made through an
agent, a special power of attorney is essential.This authority must be in writing, otherwise the
sale shall be void. In his testimony, petitioner Adeodato Duque confirmed that at the time he
"purchased" respondents property from Pineda, the latter had no Special Power of Authority
to sell the property.
A special power of attorney is necessary to enter into any contract by which the ownership of
an immovable is transmitted or acquired for a valuable consideration. Without an authority in
writing, petitioner Pineda could not validly sell the subject property to petitioners Duque.
Hence, any "sale" in favor of petitioners Duque is void.





CRUZ vs. BANCOM FINANCE CORPORATION
397 SCRA 490

Facts:
Brothers Rev. Fr. Edilberto Cruz and Simplicio Cruz, plaintiffs herein, were the registered
owners of a parcel of agricultural land together with improvements located in Bulacan.
Sometime in May 1978, defendant Norma Sulit, after being introduced by Candelaria
Sanchez to Fr. Cruz, offered to purchase the land. Plaintiffs asking price for the land
was P700,000.00, but Norma only had P25,000.00 which Fr. Cruz accepted as earnest
money with the agreement that titles would be transferred to Norma upon payment of
the balance of P675,000.00.
Norma succeeded in having the plaintiffs execute a document of sale of the land in favor
of Candelaria who would then obtain a bank loan in her name using the plaintiffs land
as collateral.
On account of Normas failure to pay the amount stipulated in the Special Agreement
and her subsequent disappearance from her usual address, plaintiffs were prompted to
file the herein complaint for the reconveyance of the land.

ISSUE:
Whether or not the Deeds of Sale and Mortgage are valid.

Held:
Clearly, the Deeds of Sale were executed merely to facilitate the use of the property as
collateral to secure a loan from a bank. Being merely a subterfuge, these agreements could not
have been the source of any consideration for the supposed sales. Indeed, the execution of the
two documents on the same day sustains the position of petitioners that the Contracts of Sale
were absolutely simulated, and that they received no consideration therefor.

The failure of Sulit to take possession of the property purportedly sold to her was a clear badge
of simulation that rendered the whole transaction void and without force and effect, pursuant
to Article 1409of the Civil Code. The fact that she was able to secure a Certificate of Title to the
subject property in her name did not vest her with ownership over it. A simulated deed of sale
has no legal effect; consequently any transfer certificate of title (TCT) issued in consequence
thereof should be cancelled. A simulated contract is not a recognized mode of acquiring
ownership.


















CUATON v. REBECCA SALUD
G.R. No. 15838
January 27, 2004


Facts:
Respondent Rebecca Salud, joined by her husband Rolando Salud, instituted a suit for
foreclosure of real estate mortgage with damages against petitioner Mansueto Cuaton
and his mother, Conchita Cuaton.
The trial court rendered a decision declaring the mortgage constituted on October 31,
1991 as void, because it was executed by Mansueto Cuaton in favor of Rebecca Salud
without expressly stating that he was merely acting as a representative of Conchita
Cuaton, in whose name the mortgaged lot was titled.
The Court of Appeals rendered the assailed decision affirming the judgment of the trial
court.

ISSUE:
Whether the 8% and 10% monthly interest rates imposed on the one-million-peso loan
obligation of petitioner to respondent Rebecca Salud are valid.

Held:
Stipulations authorizing iniquitous or unconscionable interests are contrary to morals (contra
bonos mores), if not against the law. Under Article 1409 of the Civil Code, these contracts are
inexistent and void from the beginning. They cannot be ratified nor the right to set up their
illegality as a defense be waived.

Moreover, the contention regarding the excessive interest rates cannot be considered as an
issue presented for the first time on appeal. The records show that petitioner raised the validity
of the 10% monthly interest in his answer filed with the trial court. To deprive him of his right
to assail the imposition of excessive interests would be to sacrifice justice to technicality.
Furthermore, an appellate court is clothed with ample authority to review rulings even if they
are not assigned as errors. This is especially so if the court finds that their consideration is
necessary in arriving at a just decision of the case before it. We have consistently held that an
unassigned error closely related to an error properly assigned, or upon which a determination
of the question raised by the error properly assigned is dependent, will be considered by the
appellate court notwithstanding the failure to assign it as an error. Since respondents pointed
out the matter of interest in their Appellants Brief before the Court of Appeals, the fairness of
the imposition thereof was opened to further evaluation. The Court therefore is empowered to
review the same.















INFOTECH v. COMELEC
January 13, 2004

Facts:
Before us is a Petition4 under Rule 65 of the Rules of Court, seeking (1) to declare null
and void Resolution No. 6074 of the Commission on Elections (Comelec), which awarded
"Phase II of the Modernization Project of the Commission to Mega Pacific Consortium
(MPC);" (2) to enjoin the implementation of any further contract that may have been
entered into by Comelec "either with Mega Pacific Consortium and/or Mega Pacific
eSolutions, Inc. (MPEI);" and (3) to compel Comelec to conduct a re-bidding of the
project. Congress passed Republic Act 8046,5 which authorized Comelec to conduct a
nationwide demonstration of a computerized election system and allowed the poll body
to pilot-test the system in the March 1996 elections in the Autonomous Region in
Muslim Mindanao (ARMM).
On December 22, 1997, Congress enacted Republic Act 84366 authorizing Comelec to
use an automated election system (AES) for the process of voting, counting votes and
canvassing/consolidating the results of the national and local elections.
It also mandated the poll body to acquire automated counting machines (ACMs),
computer equipment, devices and materials; and to adopt new electoral forms and
printing materials.

ISSUE:
Whether the Commission on Elections, the agency vested with the exclusive constitutional
mandate to oversee elections, gravely abused its discretion when, in the exercise of its
administrative functions, it awarded to MPC the contract for the second phase of the
comprehensive Automated Election System.

Held:
In the case of a consortium or joint venture desirous of participating in the bidding, it goes
without saying that the Eligibility Envelope would necessarily have to include a copy of the joint
venture agreement, the consortium agreement or memorandum of agreement -- or a business
plan or some other instrument of similar import -- establishing the due existence, composition
and scope of such aggrupation. Otherwise, how would Comelec know who it was dealing with,
and whether these parties are qualified and capable of delivering the products and services
being offered for bidding.

In the instant case, no such instrument was submitted to Comelec during the bidding process.
This fact can be conclusively ascertained by scrutinizing the two-inch thick "Eligibility
Requirements" file submitted by Comelec last October 9, 2003, in partial compliance with this
Court?s instructions given during the Oral Argument. This file purports to replicate the eligibility
documents originally submitted to Comelec by MPEI allegedly on behalf of MPC, in connection
with the bidding conducted in March 2003. Included in the file are the incorporation papers and
financial statements of the members of the supposed consortium and certain certificates,
licenses and permits issued to them.
However, there is no sign whatsoever of any joint venture agreement, consortium agreement,
memorandum of agreement, or business plan executed among the members of the purported
consortium.

Comelec had no basis at all for determining that the alleged consortium really existed and was
eligible and qualified, that the arrangements among the members were satisfactory and
sufficient to ensure delivery on the Contract and to protect the government interest.
Hence, had the proponent MPEI been evaluated based solely on its own experience, financial
and operational track record or lack thereof, it would surely not have qualified and would have
been immediately considered ineligible to bid, as respondents readily admit.
At any rate, it is clear that Comelec gravely abused its discretion in arbitrarily failing to observe
its own rules, policies and guidelines with respect to the bidding process, thereby negating a
fair, honest and competitive bidding.






PABUGAIS v. SAHIJWANI
G.R. No. 156846
February 23, 2004


FACTS:
Pursuant to an Agreement And Undertaking on December 3, 1993, petitioner Teddy G.
Pabugais, in consideration of the amount of P15,487,500.00, agreed to sell to
respondent Dave P. Sahijwani a lot containing 1,239 square meters located at Jacaranda
Street, North Forbes Park, Makati, Metro Manila.
Respondent paid petitioner the amount of P600,000.00 as option/reservation fee and
the balance of P14,887,500.00 to be paid within 60 days from the execution of the
contract, simultaneous with delivery of the owners duplicate Transfer Certificate of
Title in respondents name the Deed of Absolute Sale; the Certificate of Non-Tax
Delinquency on real estate taxes and Clearance on Payment of Association Dues.
The parties further agreed that failure on the part of respondent to pay the balance of
the purchase price entitles petitioner to forfeit the P600,000.00 option/reservation fee;
while non-delivery by the latter of the necessary documents obliges him to return to
respondent the said option/reservation fee with interest at 18% per annum.
Petitioner failed to deliver the required documents. In compliance with their
agreement, he returned to respondent the latters P600,000.00 option/reservation fee
by way of Far East Bank & Trust Company Check, which was, however, dishonored.
Petitioner claimed that he twice tendered to respondent, through his counsel, the
amount of P672,900.00 (representing the P600,000.00 option/reservation fee plus 18%
interest per annum computed from December 3, 1993 to August 3, 1994) in the form of
Far East Bank & Trust Company Managers Check No. 088498, dated August 3, 1994, but
said counsel refused to accept the same.
On August 11, 1994, petitioner wrote a letter to respondent saying that he is consigning
the amount tendered with the Regional Trial Court of Makati City. On August 15, 1994,
petitioner filed a complaint for consignation.
Respondents counsel, on the other hand, admitted that his office received petitioners
letter dated August 5, 1994, but claimed that no check was appended thereto. He
averred that there was no valid tender of payment because no check was tendered and
the computation of the amount to be tendered was insufficient, because petitioner
verbally promised to pay 3% monthly interest and 25% attorneys fees as penalty for
default, in addition to the interest of 18% per annum on the P600,000.00
option/reservation fee.
On November 29, 1996, the trial court rendered a decision declaring the consignation
invalid for failure to prove that petitioner tendered payment to respondent and that the
latter refused to receive the same. Petitioner appealed the decision to the Court of
Appeals. Petitioners motion to withdraw the amount consigned was denied by the
Court of Appeals and the decision of the trial court was affirmed.
On a motion for reconsideration, the Court of Appeals declared the consignation as valid
in an Amended Decision dated January 16, 2003. It held that the validity of the
consignation had the effect of extinguishing petitioners obligation to return the
option/reservation fee to respondent. Hence, petitioner can no longer withdraw the
same.
Unfazed, petitioner filed the instant petition for review contending that he can
withdraw the amount deposited with the trial court as a matter of right because at the
time he moved for the withdrawal thereof, the Court of Appeals has yet to rule on the
consignations validity and the respondent had not yet accepted the same.

Issue:
Whether or not assigning the amount of P672, 900.00 to Atty. De Guzman is prohibited.

Held:
The amount consigned with the trial court can no longer be withdrawn by petitioner because
respondents prayer in his answer that the amount consigned be awarded to him is equivalent
to an acceptance of the consignation, which has the effect of extinguishing petitioners
obligation.

Moreover, petitioner failed to manifest his intention to comply with the Agreement And
Undertaking by delivering the necessary documents and the lot subject of the sale to
respondent in exchange for the amount deposited. Withdrawal of the money consigned would
enrich petitioner and unjustly prejudice respondent.

The withdrawal of the amount deposited in order to pay attorneys fees to petitioners counsel,
Atty. De Guzman, Jr., violates Article 1491 of the Civil Code which forbids lawyers from
acquiring by assignment, property and rights which are the object of any litigation in which they
may take part by virtue of their profession. Furthermore, Rule 10 of the Canons of Professional
Ethics provides that the lawyer should not purchase any interest in the subject matter of the
litigation which he is conducting. The assailed transaction falls within the prohibition because
the Deed assigning the amount of P672,900.00 to Atty. De Guzman, Jr., as part of his attorneys
fees was executed during the pendency of this case with the Court of Appeals. In his Motion to
Intervene, Atty. De Guzman, Jr., not only asserted ownership over said amount, but likewise
prayed that the same be released to him. That petitioner knowingly and voluntarily assigned
the subject amount to his counsel did not remove their agreement within the ambit of the
prohibitory provisions. To grant the withdrawal would be to sanction a void contract.

The instant petition for review was DENIED.

















LIGUEZ v. COURT OF APPEALS
102 PHIL 577

FACTS:
Petitioner filed a complaint for the recovery of parcel of land against the widow and
heirs of Salvador Lopez. Petitioner averred that he is the owner of the aforementioned
parcel of land pursuant to a Deed of Donation executed in her favor by the late owner,
Salvador Lopez.
The defense interposed that the donation was null and void for having illicit cause or
consideration which was the petitioners entering into a marital relations with Salvador,
a married man, and that the property had been adjudicated to the appellees as heirs of
Salvador Lopez by the Court of First Instance.
Meanwhile, the Court of Appeals found that the Deed of Donation was prepared by a
Justice of Peace and was ratified and signed when petitioner Liquez was still a minor, 16
years of age.
It was the ascertainment of the Court of Appeals that the donated land belonged to the
conjugal partnership of Salvador and his wife and that the Deed of Donation was never
recorded.
Hence, the Court of Appeals held that the Deed of Donation was inoperative and null
and void because the donation was tainted with illegal cause or consideration.

Issue:
Whether or not the Deed of Donation is void for having illicit cause or consideration.

Held:
Under Article 1279 of the Civil Code of 1989, which was the governing law during the execution
of the Deed of Donation, the liberality of the donor is deemed cover only in those contracts
that are pure beneficence. In these contracts, the idea of self interest is totally absent in the
part of the transferee. Here, the facts as found demonstrated that in making the donation,
Salvador Lopez was not moved exclusively by the desire to benefit the petitioner but also to
secure her cohabiting with him. Petitioner seeks to differentiate between the liberality of Lopez
as cause and his desire as a motive. However, motive may be regarded as cause when it
predetermined the purpose of the contract. The Court of Appeals rejected the claim of
petitioner on the ground on the rule on pari delicto embodied in Article 1912 of the Civil Code.
However, this rule cannot be applied in the case because it cannot be said that both parties had
equal guilt where petitioner was a mere minor when the donation was made and that it was
not shown that she was fully aware of the terms of the said donation.





























PHILIPPINE BANKING CORPORATION v. LUI SHE
21 SCRA 52

Facts:
Justina who inherited parcels of land in Manila executed a contract of lease in favor of
Wong, covering a portion already leased to him and another portion of the
property.
The lease was for 50 years, although the lessee was give the right to withdraw at
anytime from the agreement with a stipulated monthly rental. She executed another
contract giving Wong the option to buy the leased premises for P120,000 payable
within 10 years at monthly installment of P1,000.
The option was conditioned on his obtaining Philippine citizenship, which was then
pending. His application for naturalization was withdrawn when it was discovered that
he was a resident of Rizal. She executed two other contracts one extending the term to
99 years and the term fixing the term of the option of 50 years.
In the two wills, she bade her legatees to respect the contract she had entered into with
Wong, but it appears to have a change of heart in a codicil. Claiming that the various
contracts were made because of her machinations and inducements practiced by him,
she now directed her executor to secure the annulment of the contracts.
The complaint alleged that Wong obtained the contracts through fraud. Wong denied
having taken advantage of her trust in order to secure the execution of the
contracts on question. He insisted that the various contracts were freely and voluntarily
entered into by the parties. The lower court declared all the contracts null and void with
the exception of the first, which is the contract of lease.

Issue:
Whether or not the contracts entered into by the parties are void.

Held:
The contract is void. The Court held the lease and the rest of the contracts were obtained with
the consent of Justina freely given and voluntarily, hence the claim that the consent was vitiated
due to fraud or machination is bereft of merit. However the contacts are not necessarily valid
because the Constitution provides that aliens are not allowed to own lands in the Philippines.
The illicit purpose then becomes the illegal causa, rendering the contracts void.

It does not follow from what has been said that because the parties are in pari delicto they will
be left where they are, without relief. For one thing, the original parties who were guilty of
violation of fundamental charter have died and have since substituted by their administrators to
whom it would e unjust to impute their guilt. For another thing, Article 1416 of the Civil Code
provides an exception to the pari de licto, that when the agreement is not illegal per se but is
merely prohibited, and the prohibition of the law is designed for the protection of the plaintiff,
he may recover what he has paid or delivered.
VIGILAR v. AQUINO
G.R. No. 180388
January 18, 2011

Facts:
On 19 June 1992, petitioner Angelito M. Twao, then Officer-in-Charge (OIC)-District
Engineer of the Department of Public Works and Highways (DPWH) 2nd Engineering
District of Pampanga sent an Invitation to Bid to respondent Arnulfo D. Aquino, the
owner of A.D. Aquino Construction and Supplies.
The bidding was for the construction of a dike, the project was awarded to respondent,
and a "Contract of Agreement" was thereafter executed between him and concerned
petitioners for the amount of PhP1,873,790.69, to cover the project cost.
By 9 July 1992, the project was duly completed by respondent, who was then issued a
Certificate of Project Completion dated 16 July 1992. Respondent Aquino, however,
claimed that PhP1,262,696.20 was still due him, but petitioners refused to pay the
amount. He thus filed a Complaint for the collection of sum of money with damages
before the Regional Trial Court of Guagua, Pampanga.
Petitioners avers that the complaint was a suit against the state; that respondent failed
to exhaust administrative remedies; and that the "Contract of Agreement" covering the
project was void for violating Presidential Decree No. 1445, absent the proper
appropriation and the Certificate of Availability of Funds.
On 28 November 2003, the lower court ruled in favor of respondent. On appeal, the CA
reversed and set aside the decision of the lower court ,disposing that the "CONTRACT
AGREEMENT" entered into between the plaintiff-appellees construction company,
which he represented, and the government, through the Department of Public Works
and Highway (DPWH) Pampanga 2nd Engineering District, is declared null and void ab
initio.

Issue:
Whether or not the contract agreement is valid, thus making respondent liable.

Held:
Specifically, C.V. Canchela & Associates is similar to the case at bar, in that the contracts
involved in both cases failed to comply with the relevant provisions of Presidential Decree No.
1445 and the Revised Administrative Code of 1987. Nevertheless, "the illegality of the subject
Agreements proceeds, it bears emphasis, from an express declaration or prohibition by law, not
from any intrinsic illegality. As such, the Agreements are not illegal per se, and the party
claiming there under may recover what had been paid or delivered. The government project
involved in this case, the construction of a dike, was completed way back on 9 July 1992. For
almost two decades, the public and the government benefitted from the work done by
respondent. Petitioners cannot escape the obligation to compensate respondent for services
rendered and work done by invoking the states immunity from suit. This Court has long
established that the doctrine of governmental immunity from suit cannot serve as an
instrument for perpetrating an injustice to a citizen. Justice and equity sternly demand that the
State's cloak of invincibility against suit be shred in this particular instance, and that petitioners-
contractors be duly compensated on the basis of quantum meruit for construction done
on the public works housing project.















EPG CONSTRUCTION v. VIGILAR
GR No. 131544.
March 16, 2001

Facts:
In 1983, the Ministry of Human Settlement entered into a Memorandum of Agreement
(MOA) with the Ministry of Public Works and Highways, where the latter undertook to
develop a housing project by the ministry and on the site construct thereon 145 housing
units.
By virtue of the MOA, the Ministry of Public Works and Highways forged individual
contracts with herein petitioners EPG Construction Co., Ciper Electrical and Engineering,
Septa Construction Co., Phil. Plumbing Co., Home Construction Inc., World Builders Inc.,
Glass World Inc., Performance Builders Development Co. and De Leon Araneta
Construction Co., for the construction of the housing units.
Under the contracts, the scope of construction and funding therefor covered only
around 2/3 of each housing unit.
After complying with the terms of said contracts, and by reason of the verbal request
and assurance of then DPWH Undersecretary Aber Canlas that additional funds would
be available and forthcoming, petitioners agreed to undertake and perform additional
constructions for the completion of the housing units, despite the absence of
appropriations and written contracts to cover subsequent expenses for the additional
constructions.
Petitioners received payment for what was originally stipulated. However, petitioners
demanded payment for the unpaid balance of P5,918,315.63 constituting payment for
the additional constructions which petitioners argued formed an implied contract.
They claimed that payment should be based on the principle of quantum meruit. DPWH
Secretary Gregorio Vigilar denied the subject money claims prompting herein
petitioners to file before the Regional Trial Court of Quezon City, Branch 226, a Petition
for Mandamus praying for payment.

Issue:
Are petitioners entitled to payment?

Held:
Although the Court agreed with respondents postulation that the implied contracts, which
covered the additional constructions, are void, in view of violation of applicable laws, auditing
rules and lack of legal requirements, it nonetheless find the instant petition laden with merit
and uphold, in the interest of substantial justice, petitioners-contractors right to be
compensated for the "additional constructions" on the public works housing project, applying
the principle of quantum meruit.

To begin with, petitioners-contractors assented and agreed to undertake additional
constructions for the completion of the housing units, believing in good faith and in the interest
of the government and, in effect, the public in general, that appropriations to cover the
additional constructions and completion of the public works housing project would be available
and forthcoming. On this particular score, the records reveal that the verbal request and
assurance of then DPWH Undersecretary Canlas led petitioners-contractors to undertake the
completion of the government housing project, despite the absence of covering appropriations,
written contracts, and certification of availability of funds, as mandated by law and pertinent
auditing rules and issuances. To put it differently, the implied contracts, declared void in this
case, covered only the completion and final phase of construction of the housing units, which
structures, concededly, were already existing, albeit not yet finished in their entirety at the time
the implied contracts were entered into between the government and the contractors.











GO CHAN v YOUNG
GR No. 131889
March 12, 2001

Facts:
Felix Gochan Sr.s daughter, Alice, mother of [herein respondents], inherited 50 shares
of stock in Gochan Realty from the former.
Alice died in 1955, leaving the 50 shares to her husband, John Young, Sr. When their all
their children reached the age of majority, John, Sr. requested Gochan Realty to
partition the shares of his late wife by issuing the shares of stock to [herein
respondents] and cancelling it in his name.
Respondent corporation refused. On 1990, John, Sr. died, leaving the shares to the
[respondents]. On February 8, 1994, [respondents] Cecilia Gochan Uy and Miguel Uy
filed a complaint with the SEC for issuance of shares of stock to he rightful owners,
nullification of shares of stock, reconveyance of property impressed with rust,
accounting, removal of officers and directors and damages against petitioners.
Petitioners then assert that respondents were not the real parties in interest and had no
capacity to sue, and respondents causes of action had already been barred by the
Statute of limitations.

Issue:
Do respondents have legal standing to push through with their complaint?

Held:
On November 21, 1979, respondents Felix Gochan & Sons Realty Corporation did not have
unrestricted earnings in its books to cover the purchase price of the 208 shares of stock it was
then buying from complainant Cecilia Gochan Uy, thereby rendering said purchase null and
void ab initio for being violative of the trust fund doctrine and contrary to law, morals, good
customs, public order, and public policy.

Thus, Cecilia remains a stockholder of the corporation in view of the nullity of the Contract of
Sale. Necessarily, petitioners contention that the action has prescribed cannot be sustained.
Prescription cannot be invoked as a ground if the contract is alleged to be void ab initio. It is
axiomatic that the action or defense for the declaration of nullity of a contract does not
prescribe.

In Section 2 of Rule 87, while permitting an executor or administrator to represent or to bring
suits on behalf of the deceased, do not prohibit the heirs from representing the deceased. The
heirs can thusly represent Young in the present case.

Given the circumstances, the claim of petitioners was then dismissed and the case remanded to
the RTC for trial.














FRANCISCO v. HERRERA
GR No. 139982
November 21, 2002

Facts:
Eligio Herrera, Sr., father of the respondent, was the owner of two parcels of land. At
two incidents on 1991, petitioner bought the two parcels of land for Php1,000,000.00
and PhP750,000.00.
Contending that the purchase price was inadequate, the children of Eligio, Sr., namely,
Josefina Cavettany, Eligio Herrera, Jr., and respondent Pastor Herrera tried to negotiate
for an increase of the purchase price.
When petitioner refused respondents then filed a complaint for annulment of sale on
the ground that at the time of sale, Eligio Sr., was already afflicted with senile dementia,
characterized by deteriorating mental and physical condition including loss of memory.
Both the RTC and CA decided in favor of respondent.

Issue:
Is the disputed contract void and therefore unenforceable?

Held:
In the present case, it was established that the vendor Eligio, Sr., entered into an agreement
with petitioner, but that the formers capacity to consent was vitiated by senile dementia.
Hence, the assailed contracts are not void or inexistent per se; rather, these are contracts that
are valid and binding unless annulled through a proper action filed in court seasonably.

An annullable contract may be rendered perfectly valid by ratification which can be express or
implied. Implied ratification may take the form of accepting and retaining the benefit of a
contract. This is what happened in this case. Respondent negotiated for the increase of the
purchase price while receiving the installment payments.

One cannot negotiate for an increase in the price in one breath and in the same breath contend
that the contract of sale is void.





















MENDEZONA v. OZAMIZ
GR No. 39752
February 6, 2002


Facts:
Respondents (Montalvan and Ozamiz) were granted by the court with the guardianship
of properties over the person of Carmen Ozamiz.
As guardians, they filed the inventories and accounts of Carmen Ozamizs properties,
cash, shares of stocks, vehicles and fixed assets, including a property known as the
Lahug property.
The said property is the same property covered by the Deed of Absolute Sale executed
by Carmen Ozamiz in favor of the petitioners (Mendezona).
Respondents opposed the petitioners claim of ownership of the Lahug property and
alleged that the titles issued were defective and illegal.
Further, they alleged that at the time of the sale Carmen was already ailing and not in
full possession of her mental faculties, she was then incapacitated to enter into a
contract.

Issue:
Whether the property in question was sold to the petitioners.

Held:
It is significant to note that the Deed of Absolute Sale dated April 28, 1989 is a notarized
document duly acknowledge before a notary public. As such, it has in its favor the presumption
of regularity, and it carries the evidentiary weight conferred upon it with respect to its due
execution.

It has been held that a person is not incapacitated to contract merely because of advanced
years or by reason of physical infirmities. The respondents utterly failed to show adequate
proof hat at the time of the sale Carmen lost her control of mental facilities. They want to
impugn one document, the Lahug property, however, there are nine other important
documents that were signed by Carmen either before or after April 28, 1989.

Thus, the said property in question was duly proven to be sold by Carmen Ozamiz to the
petitioners Mendezona.


















MANZANILLA v. CA
GR No. L-75342
March 15, 1990


Facts:
Spouses Manzanilla sold on installment an undivided one-half portion of their
residential house and lot.
At the time of the sale, the said property was mortgaged to the Government Service
Insurance System (GSIS), which fact was known to the vendees, spouses Magdaleno and
Justina Campo.
The Campo spouses took possession of the premises upon payment of the first
installment. Some payments were made to petitioners while some were made directly
to GSIS.
The GSIS filed its application to foreclose the mortgage on the property for failure of the
Manzanilla spouses to pay their monthly amortizations.
The property was sold at public auction where GSIS was the highest bidder.
Two months before the expiration of the period to redeem, the Manzanilla spouses
executed a Deed of Absolute Sale of the undivided one half portion of their property in
favor of the Campo spouses.
Upon the expiration of the period to redeem without the Manzanilla spouses exercising
their right of redemption, title to the property was consolidated in favor of the GSIS and
a new title issued in its name.
The Manzanilla spouses succeeded in re-acquiring the property from the GSIS. An
Absolute Deed of Sale was executed by GSIS in favor of the Manzanilla spouses and a
new certificate of title was issued to them.
The Manzanilla spouses mortgaged the property to the Bian Rural Bank. Petitioner Ines
Carpio purchased the property from the Manzanilla spouses and agreed to assume the
mortgage in favor of Bian Rural Bank.
Private respondent Justina Campo registered her adverse claim over the said portion of
land with the Register of Deeds of Quezon City. On the other hand, petitioner Ines
Carpio filed an ejectment case against private respondent Justina.
Private respondent Justina Campo filed a case for quieting of title against the Manzanilla
spouses and Ines Carpio praying for the issuance to her of a certificate of title over the
undivided one-half portion of the property in question.

Issue:
Whether petitioners Manzanillas are under any legal duty to reconvey the undivided one-half
portion of the property to private respondent Justina Campo.

Held:
In view of the failure of either the Manzanilla spouses or the Campo spouses to redeem the
property from GSIS, title to the property was consolidated in the name of GSIS. The new title
cancelled the old title in the name of the Manzanilla spouses. GSIS at this point had a clean title
free from any lien in favor of any person including that of the Campo spouses.
Art. 1456. If property is acquired through mistake or fraud, the person
obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the
person from whom the property comes. There was no mistake or fraud on the part of
petitioners when the subject property was re-acquired from the GSIS. The fact that they
previously sold one-half portion thereof has no more significance in this re-acquisition. Private
respondent's right over the one-half portion was obliterated when absolute ownership and title
passed on to the GSIS after the foreclosure sale. The property as held by GSIS had a clean title.
The property that was passed on to petitioners retained that quality of title. As regards the
rights of private respondent Ines Carpio, she is a buyer in good faith and for value. There was
no showing that at the time of the sale to her of the subject property, she knew of any lien on
the property except the mortgage in favor of the Bian Rural Bank. No other lien was annotated
on the certificate of title. She is also not required by law to go beyond what appears on the face
of the title. When there is nothing on the certificate of title to indicate any cloud or vice in the
ownership of the property or any encumbrances thereon, the purchaser is not to explore
further than what the Torrens Title upon its face indicates in quest for any hidden defect or
inchoate right thereof. Thus Quieting of title is dismissed.







RURAL BANK OF PARAQUE v. REMOLADO
GR No. L-62051
March 18, 1985

Facts:
This case is about the repurchase of mortgage property after the period of redemption
and had expired.
Isidra Remolado, 64, a widow, and resident of Makati, Rizal, owned a lot with an area of
308 square meters, with a bungalow thereon, which was leased to Beatriz Cabagnot.
On April 17, 1971 she mortgaged it again to petitioner. She eventually secured loans
totalling P18,000 (Exh. At D). The loans become overdue.
The bank foreclosed the mortagage on July 21, 1972 and bought the property at the
foreclosure sale for P22,192.70. The one-year period of redemption was to expire on
August 21, 1973.
On August 9, 1973 or 14 days before the expiration of the one-year redemption period,
the bank gave her a statement showing that she should pay P25,491.96 for the
redemption of the property on August 23. No redemption was made on that date.
On September 3, 1973 the bank consolidated its ownership over the property.
Remolado's title was cancelled. Remolado was offered a period until October 31, 1973
from which she could repurchase the lot. She only exercised that option on November 5.
Remolado then filed an action for reconveyance which the lower courts granted her.

Issue:
Is Remolado entitled to reconveyance?

Held:
There was no binding agreement for its repurchase. Even on the assumption that the bank
should be bound by its commitment to allow repurchase on or before October 31, 1973, still
Remolado had no cause of action because she did not repurchase the property on that date.

Justice is done according to law. As a rule, equity follows the law. There may be a moral
obligation, often regarded as an equitable consideration (meaning compassion), but if there is
no enforceable legal duty, the action must fail although the disadvantaged party deserves
commiseration or sympathy.

In the instant case, the bank acted within its legal rights when it refused to give Remolado any
extension to repurchase after October 31, 1973. It had given her about two years to liquidate
her obligation. She failed to do so. The decision of the CA affirming the decision of the RTC was
reversed.

















COJUANGCO v. REPUBLIC
GR No. 166859
April 12, 2011

Facts:
Jacobo Ringor and his wife Gavina sired two children, Juan and and Catalina. Catalina
pre-deceased her father, thereby leaving Juan as the lone heir of 3 lots owned by
Jacobo. Juan married Gavina and sired 7 children with her. One of the children was Jose
(the father and predecessors-in-interest of herein petitioners).
Jacobo applied for the registration of his lands under the Torrens system. He filed three
land registration cases alone, with his son Juan, or his grandson Jose, applying jointly
with him.
Subsequently, in a Compraventa dated November 3, 1928, Jacobo allegedly sold and
transferred to Jose his one-half undivided interest in Parcel 1 covered by OCT No. 25885.
Jacobo's thumbmark appeared on the Compraventa.
During trial, witnesses attested that even after the decisions in the three land
registration cases and the Compraventas, Jacobo remained in possession of the lands
and continued administering them as he did prior to their registration.
According to witness Julio Monsis, Jacobo did not partition the lands since the latter said
that he still needed them.
When Jacobo died on June 7, 1935, the lands under the three land registration
applications, including those which petitioners sought to partition in their counterclaim
before the trial court, remained undivided.
Jose continued to function as administrator over said land and promised to divide it
equally/ When he died sometime on 1971, Respondents demanded from Jose's children,
herein petitioners, the partition and delivery of their share in the estate left by Jacobo
and under Jose's administration.
The petitioners refused and attempts at amicable settlement failed. On March 27, 1973,
respondents filed a Complaint for partition and reconveyance

Issue:
Is the exercise by Juan and Jose in the form of trust?

Held:
Express trusts, sometimes referred to as direct trusts, are intentionally created by the direct
and positive acts of the settlor or the trustor by some writing, deed, or will, or oral declaration.
Contrary to the claim of petitioners, oral testimony is allowed to prove that a trust exists. It is
not error for the court to rely on parol evidence, - - i.e., the oral testimonies of witnesses
Emeteria Ringor, Julio Monsis and Teofilo Abalos - - which the appellate court also relied on to
arrive at the conclusion that an express trust exists.

Contrary to the claim of petitioners, oral testimony is allowed to prove that a trust exists. It is
not error for the court to rely on parol evidence, - - i.e., the oral testimonies of witnesses
Emeteria Ringor, Julio Monsis and Teofilo Abalos - - which the appellate court also relied on to
arrive at the conclusion that an express trust exists.

A trustee who obtains a Torrens title over a property held in trust for him by another cannot
repudiate the trust by relying on the registration. A Torrens Certificate of Title in Jose's name
did not vest ownership of the land upon him. The Torrens system does not create or vest title. It
only confirms and records title already existing and vested. The SC upheld the decision of the
lower courts in favoring the respondents claims.











RINGOR v. RINGOR
GR No. 147863
August 13, 2004

Facts:
Jacobo Ringor and his wife Gavina sired two children, Juan and and Catalina. Catalina
pre-deceased her father, thereby leaving Juan as the lone heir of 3 lots owned by
Jacobo.
Juan married Gavina and sired 7 children with her. One of the children was Jose (the
father and predecessors-in-interest of herein petitioners).
Jacobo applied for the registration of his lands under the Torrens system. He filed three
land registration cases alone, with his son Juan, or his grandson Jose, applying jointly
with him.
Subsequently, in a Compraventa dated November 3, 1928, Jacobo allegedly sold and
transferred to Jose his one-half undivided interest in Parcel 1 covered by OCT No. 25885.
Jacobo's thumbmark appeared on the Compraventa.
During trial, witnesses attested that even after the decisions in the three land
registration cases and the Compraventas, Jacobo remained in possession of the lands
and continued administering them as he did prior to their registration.
According to witness Julio Monsis, Jacobo did not partition the lands since the latter said
that he still needed them. When Jacobo died on June 7, 1935, the lands under the three
land registration applications, including those which petitioners sought to partition in
their counterclaim before the trial court, remained undivided.
Jose continued to function as administrator over said land and promised to divide it
equally/ When he died sometime on 1971, Respondents demanded from Jose's children,
herein petitioners, the partition and delivery of their share in the estate left by Jacobo
and under Jose's administration. The petitioners refused and attempts at amicable
settlement failed. On March 27, 1973, respondents filed a Complaint for partition and
reconveyance

Issue:
Is the exercise by Juan and Jose in the form of trust?

Held:
Express trusts, sometimes referred to as direct trusts, are intentionally created by the direct
and positive acts of the settlor or the trustor by some writing, deed, or will, or oral declaration.
Contrary to the claim of petitioners, oral testimony is allowed to prove that a trust exists. It is
not error for the court to rely on parol evidence, - - i.e., the oral testimonies of witnesses
Emeteria Ringor, Julio Monsis and Teofilo Abalos - - which the appellate court also relied on to
arrive at the conclusion that an express trust exists. Contrary to the claim of petitioners, oral
testimony is allowed to prove that a trust exists. It is not error for the court to rely on parol
evidence, - - i.e., the oral testimonies of witnesses Emeteria Ringor, Julio Monsis and Teofilo
Abalos - - which the appellate court also relied on to arrive at the conclusion that an express
trust exists. A trustee who obtains a Torrens title over a property held in trust for him by
another cannot repudiate the trust by relying on the registration. A Torrens Certificate of Title
in Jose's name did not vest ownership of the land upon him. The Torrens system does not
create or vest title. It only confirms and records title already existing and vested. The SC upheld
the decision of the lower courts in favoring the respondents claims.















SALVADOR v. CA
313 PHIL 369(1995)

Facts:
On November 9, 1991, at around 11:00 oclock in the evening, along the MacArthur
Highway in Valenzuela, Metro Manila, the Suzuki Supercarry Mini-van driven by private
respondent Sameul King Sagaral III collided with a passenger bus onwed and operated
by petitioner Five Star Bus Co. and driven by co-petitioner Ignacio Torres.
Private respondent Sagaral filed a civil action for damges against petitioner.
To simplify the proceedings due to the various motions filed by petitioners, Judge
Bautista cancelled the 8 August 1996 hearing and reset it to 20 August 1996. He also set
for hearing petitioners motion for reconsideration on 20 August 1996.
The hearing set for 20 August 1996 was cancelled and the trial court on that day issued
instead its order denying petitioners motion for reconsideration of its order dated 16
July 1996 which considered the case submitted for resolution. They applead to CA but
the same was dismissed.

Issue:
Whether or not appellate court erred in affirming the order of the trial court.

Held:
A review of the records shows that the trial court had scheduled a total six hearing dates for the
prosecution of evidence. From those repeated resetting, it can be gleaned that the delay in the
proceedings was largely, if not mainly, due to petitioners. Thus there could be no grave abuse
of discretion when the trial court finally ordered petitioners right to present evidence as
waived to put an end to their footdragging. Indeed, it is never too often to say that justice
delayed is justice denied.


SPOUSES RICARDO AND MILAGROS HUANG v. COURT OF APPEALS
G.R. No. 108525
September 13, 1994

Facts:
Respondent Dolores Sandoval purchased Lot 21 and registered it in her name
Dasmarias Village, Makati. She also purchased the adjacent lot, Lot 20, but heading the
advice of Milagros, the deed of sale was placed in the name of Ricardo and Registered in
his name under TCT No. 204783.
Thereafter, Dolores constructed a residential house onLot 21. Ricardo also requested
her permission to construct a small residential house on Lot 20 to which she agreed
inasmuch as she was then the one paying for apartment rentals of the Huang spouses.
She also allowed Ricardo to mortgage Lot 20 to the Social Security System to secure the
payment of his loan of P19,200.00 to be spent in putting up the house. However, she
actualy financed the construction of the house, the swimming pool and the fence
thereon on the understanding that the Huang spouses would merely hold title in trust
for her beneficial interest.
To protect her rights and interests as the lawful owner of Lot 20 and its improvements,
Dolores requested the Huangs to execute in her favor a deed of absolute sale with
assumption of mortgage over the property. The letter obliged.
The Huang spouses leased the house to Deltron-Sprague Electronics Corporation for its
various executives as official quarters without first securing the permission of Dolores.
Dolores tolerated the lease of the property as she did not need it at that time. But, after
sometime, the lessees started prohibiting the Sandoval family from using the swimming
pool and the Huangs then began challenging the Sandovals' ownership of the property.
Ricardo and Milagros Huang filed a complaint against the spouses Dolores and Aniceto
Sandoval seeking the nullity of the deed of sale with assumption of mortgage and/or
quieting of title to Lot 20. They alleged that the Sandovals made them sign blank papers
which turned out to be a deed of sale with assumption of mortgage over Lot 20.

Issue:
Whether or not the Court of Appeals erred in stating that there was an implied trust between
them and Dolores is not supported by evidence. The exhaustive decision of the trial court based
as it is on a painstaking review of the entire records deserves our affirmance. Indeed, we find
no reason to disturb the factual conclusions therein.

Held:
Trust is a fiduciary relationship with respect to property which involves the existence of
equitable duties imposed upon the holder of the title to the property to deal with it for the
benefit of another. A person who establishes a trust is called the trustor; one in whom
confidence is reposed as regards property for the benefit of another person is known as the
trustee; and the person for whose benefit the trust has been created is referred to as the
beneficiary or cestui que trust.

In the present case, Dolores provided the money for the purchase of Lot 20 but the
corresponding deed of sale and transfer certificate of title were placed in the name of Ricardo
Huang because she was advised that the subdivision owner prohibited the acquisition of two (2)
lots by a single individual. Guided by the foregoing definitions, we are in conformity with the
common finding of the trial court and respondent court that a resulting trust was created.
Ricardo became the trustee of Lot 20 and its improvements for the benefit of Dolores as owner.
The pertinent law is Art. 1448 of the New Civil Code which provides that there is an implied
trust when property is sold and the legal estate is granted to one party but the price is paid by
another for the purpose of having the beneficial interest for the property. A resulting trust
arises because of the presumption that he who pays for a thing intends a beneficial interest
therein for himself. Wherefor the petition is denied.










VDA. DE ESCONDE v. COURT OF APPEALS
G.R. No. 103635
February 1, 1996

Facts:
Petitioner Catalina Vda. De Esconde received two transfer of certificates of land from
the partition of the estate of the brother of her deceased husband.
The partition was made in 1947, thus, due to the minority of her children of the
petitioner except Constancia, she divided the land, where the second title containing
CTC 1700 (547 SQ.M) was given exclusively to Pedro Esconde while the first lot
containing CTC 1208 (20, 285 SQ.M) was given to the co petitioners Benjamin, Elenita,
and Constancia.
However, when lot 1700 was given to Pedro Esconde, his brother Benjamin, has
introduced improvements on a portion of the said lot owned by Pedro but the latter has
constructed fences over the property.
Benjamin noticed that the lot was named only to his brother Pedro but the former
believed that all of them as children of Catalina have the share to the lot. The action for
reconveyance of the land was made on June 29, 1987 more than 30 years after the
partition.

Issue:
Whether the reconveyance of the land has already prescribed.


Held:
Yes. The action over immovable properties prescribes in thirty (30) years if the property was
held by trust in bad faith. Thus, in this case, the action prescribed in 1977, thirty (30) years after
the partition. The action was already because there was a document of partition stating the
transfer of the certificate of title to Pedro Esconde, in which, the property was not given in trust
to Pedro but as the exclusive owner of the lot. However, he shall indemnify his brother
Benjamin for the improvement the latter has introduced to the land.
TALA REALTY SERVICES CORPORATION vs. BANCO FILIPINO
SAVINGS AND MORTGAGE BANK
G.R. No. 137533
November 22, 2002

Facts:
Petitioner Tala Realty Services Corporation alleges that it is the absolute owner of nine
parcels of land and their improvements by virtue of separate Deeds of Absolute Sale
executed between Tala and the respondent Banco Filipino Savings and Mortgage Bank
on August 25, 1981.
The Bulacan property is the subject matter of the case. Thereafter, Tala and the Bank
entered into separate lease contracts over the nine properties.
The contracts had the same form and terms, except for the description of the property
and the amount of the monthly rentals. The contracts provided for twenty-year lease
periods renewable for another twenty years at the option of the Bank. The monthly
rental for the Bulacan property was P9,800.00.
Later that same day, the parties revised the nine lease contracts. The terms of the lease
were shortened to eleven years renewable for a period of nine years at the option of
the lessee under terms and conditions mutually agreeable to both parties, but the
monthly rental for the Bulacan property remained P9,800.00.
Almost eleven years after the execution of the nine lease contracts, Talas director,
Elizabeth H. Palma, wrote to the Bank reminding the latter that the contracts were
about to expire on August 31, 1992, and that the Bank had earlier signified its interest to
renew the lease contracts.
Meantime, Tala would lease the properties to the Bank on a month-to-month basis until
the agreement was finalized. On January 20, 1993, the Bank requested Tala to send its
representative to the Banks office to negotiate the renewal of the lease.
Talas director, Elizabeth Palma, negotiated the renewal and submitted a proposal for
increased rental. Tala reiterated the increased rental which was agreed upon in the
previous negotiation. Thus, the new monthly rental rate for the Bulacan property was
P31,800.00.
However, for several months from the time of negotiation, the Bank failed to take action
on Talas proposed terms for the renewal of the lease contract.
Tala also informed the Bank that since it had been ten months since the expiration of
the lease contracts in August 1992 and the Bank had not taken any definite action to
renew the contracts despite being furnished copies of the same in December 1992, Tala
declared itself free to lease, dispose, sell and/or in any way alienate the bank branch
sites subject of the lease agreement.
However, the Bank clarified that it is the one which had the option to renew the lease
and that it had communicated to Tala it was exercising its option to do so.
From the time the lease contract over the Bulacan property expired in August 1992 until
March 1994, the Bank continued to occupy the subject Bulacan property. It paid Tala
monthly rentals at the old rate of P9,800.00 from September 1, 1992 until March 1994,
but refused to pay the P22,000.00 difference between the old monthly rate and the new
rate of P31,800.00. Beginning April 1994 until the filing of the, the Bank did not pay any
rent at all. Nor did it pay the goodwill money and deposit Tala required for the renewal
of the lease.
On April 14, 1994, Tala wrote to the Bank demanding payment of the latters
outstanding obligations over the Bulacan property, consisting of unpaid rental
adjustment, deposit, and goodwill money.
It also informed the Bank that at the end of the month, the month-to-month lease
would no longer be renewed, thus, it should vacate the premises by that time,
otherwise, petitioner would resort to legal action. Still, the Bank refused to pay its
outstanding obligations, prompting Talas lawyer to demand the latter to vacate the
premises and to pay its outstanding obligation within five days from receipt of the
letter, otherwise a legal action would be filed against it. The Bank still did not comply
with Talas demands, the latter filed complaints for ejectment and/or unlawful detainer.
The Banks liquidator, on he other hand asserts that the amended 11-year lease
contracts of August 25, 1981 provided for the payment of security deposits and not
advance rentals so that said payment could not be used to cover unpaid rentals during
the period that the Bank was closed and under receivership and liquidation.
According to Talas lawyer, the only time that said security deposits may be applied to
unpaid rents is when the rentals for the last year of the lease contracts were not paid,
but the lease contracts were still due to expire in 1992. The Bank, therefore, could not
apply the security deposits to the payment of rentals and thus had to pay its accrued
rentals.
The MTC ruled in favor of the Bank. Based from the evidences, defendant has a better
right of possession over the subject property on the basis of a Contract of Lease. It
cannot be said that the defendant failed to comply with the terms and conditions of the
said Contract of Lease because payment was made to the plaintiff on December 18,
1981 P487,500.00 as advance rentals, to be applied to the rentals due from the eleventh
through the twentieth years of the lease or from 1992 through the year 2001.
Thus, the RTC dismissed petitioners appeal of the decision of the MTC for lack of merit.
On appeal to the Court of Appeals, the decision of the RTC of Malolos was affirmed.

Issue:
Whether or not the implied trust created under the obligation was valid.

Held:
Talas right to lease the property to the Bank proceeds from its (Talas) claim of ownership of
the property based on a contract of sale executed between it and the Bank on August 25, 1981.
The Bank, however, disputes Talas ownership in fee simple as stated in its 20-year lease
contract with Tala as it (the Bank) alleges that there is an implied trust relationship between the
Bank as trustor and beneficiary and Tala as trustee. Pursuant to this implied trust, the Bank in
April 1994 demanded Tala to perform its obligation as trustee and return the disputed property
to the Bank as trustor and beneficiary. The Bank is of the view, therefore, that since it had
already sought enforcement of the implied trust and reconveyance of the subject property, the
Bank had the right to its possession and Tala did not have a right to eject it from the property.

The Bank alleged that the sale and twenty-year lease of the disputed property were part of a
larger implied trust warehousing agreement. Concomitant with the Courts factual finding
that the 20-year contract governs the relations between the parties, the court finds the Banks
allegation of circumstances surrounding its execution worthy of credence; the Bank and Tala
entered into contracts of sale and lease back of the disputed property and created an implied
trust warehousing agreement for the reconveyance of the property. However, the implied
trust is inexistent and void for being contrary to law.

The Bank claims to be both the trustor and beneficiary while Tala is the trustee. It alleges the
existence of an implied trust between it and Tala, relies on Articles 1448 and 1453 of the New
Civil Code. However, an implied trust could not have been formed between the Bank and Tala
as the Court has held that where the purchase is made in violation of an existing statute and in
evasion of its express provision, no trust can result in favor of the party who is guilty of the
fraud.

The Bank cannot use the defense of nor seek enforcement of its alleged implied trust with Tala
since its purpose was contrary to law. As admitted by the Bank, it warehoused its branch site
holdings to Tala to enable it to pursue its expansion program and purchase new branch sites
including its main branch in Makati, and at the same time avoid the real property holdings limit
under Sections 25(a) and 34 of the General Banking Act which it had already reached. The Bank
stated in its Memorandum that the (n)ew branch sites which the Respondent (Bank) will be
disqualified from buying, by reason of the aforecited limitations under existing banking laws
and regulations, will be acquired for it by the Petitioner (Tala) which will forthwith lease them
to the Respondent (Bank). The Bank also admitted that the agreement that the branch sites
will be returned to the bank anytime at its pleasure at the same transfer price was differently
stated in the lease contracts as a first preference to buy because the Bank was apprehensive
that the agreement to return property, if spelled out as-is in the documents, might provide
basis for the Central Bank to question the sale and simultaneous lease back of the branch sites
as simulated and accordingly, derail the expansion program of the Respondent.

Clearly, the Bank was well aware of the limitations on its real estate holdings under the General
Banking Act and that its warehousing agreement with Tala was a scheme to circumvent the
limitation. Thus, the Bank opted not to put the agreement in writing and call a spade a spade,
but instead phrased its right to reconveyance of the subject property at any time as a first
preference to buy at the same transfer price. This arrangement which the Bank claims to be
an implied trust is contrary to law. Thus, while the sale and lease of the subject property
genuine and binding upon the parties, the implied trust cannot be enforced even assuming the
parties intended to create it. The Bank cannot thus demand reconveyance of the property
based on its alleged implied trust relationship with Tala.

WHEREFORE, the petition is dismissed.












HEIRS OF MEDINA v. COURT OF APPEALS
G.R. No. L-26107
1981 November 27

Facts:
On March 6, 1957, petitioners filed the complaint in the trial court seeking to recover
from respondents a parcel of land situated in the sitio of Oac, municipality of Milagros,
province of Masbate, containing an area of 321.1156 hectares and praying that
respondents be ordered to deliver to them possession and ownership thereof with
accounting, damages and costs and litigation expenses.
Complaint alleged that petitioner Margarita Medina as plaintiff inherited with her sister
Ana Medina the said parcel of land from their father Pedro Medina.
Upon their father's death, she and her sister Ana Medina being then minors were placed
under the care and custody of the spouses Sotero Medina and Restituta Zurbito, as
guardians of their persons and property.
The land in dispute was placed under the management of Sotero Medina as
administrator thereof, and upon Sotero's death, under the management of his widow,
Restituta Zurbito. Complainant later discovered that the land in question was
surreptitiously declared for taxation purposes in the name of Andres Navarro, Jr.,
grandson of Restituta Zurbito, however, respondents as defendants had without color of
title denied petitioners' ownership and instead had claimed ownership thereof since the
year 1948 and exercised acts of possession and ownership thereon to the exclusion of
petitioners.
Petitioners demanded the respondents to vacate the premises and deliver possession
and ownership thereof, but the latter failed and refused to do so.
On the other hand, respondent Andres Navarro, Jr. had excavated soil from the land in
question and sold the same to the Provincial Government of Masbate without the
knowledge and consent of petitioners and appropriated the proceeds thereof to his
personal benefit to the damage and prejudice of the plaintiff. Respondent Restituta
Zurbito Vda. de Medina never rendered an accounting of the income of the property in
question in spite of their repeated demands and instead appropriated all the income
therefrom to her personal use and benefit. However, the other party states otherwise.
In its decision, the court declared petitioner Margarita Medina with her co-heirs as the
lawful owners of the land in question and ordered respondents to deliver unto them the
"titulo real No. 349581" and to restore to them the actual possession thereof; and also
ordered them to pay them certain amounts representing the produce of the land.
Upon appeal, respondent Court of Appeals reversed the trial court's decision sustaining
respondents' defenses of prescription of action and acquisitive prescription, ordered the
dismissal of the complaint.

Issues:
1. Whether or not petitioners' action for recovery thereof has been barred by prescription.
2. Whether or not an express trust over the property in litigation has been constituted by
petitioners' father Pedro Medina, upon his brother Sotero and Sotero's wife Restituta Zurbito
for the benefit of his children, petitioner Margarita Medina and her deceased sister Ana Medina
and the latter's heirs.

Held:
1. Petitioners' cause of action had prescribed upon the lapse of the ten-year period of
acquisitive prescription provided by the then applicable statute for unregistered lands such as
the land herein involved.

As found by the Court of Appeals, the land was sold to Sotero Medina on June 29, 1924 from
which date Sotero and his wife took open, public, continuous and adverse possession of the
land in the concept of owner. In 1957 when the present action was filed, thirty-three years,
much more than the 10-year statutory period for acquisitive prescription, had already elapsed.

The appellate court further held that petitioners' action to recover was likewise time-barred,
pointing out that "the ten-year period under the statute of limitation within which plaintiffs
could file an action for recovery of real property commenced to run in 1933 when plaintiff
Margarita Medina was informed that the land in dispute belonged to her father Pedro Medina,
for in that year she could have brought an action for reconveyance. The period of prescription
commences to run from the day the action may be brought (Article 1150, Civil Code of the
Philippines), and in an action based on fraud, as is the basis of the present action, the period of
prescription begins from the discovery of the fraud the reasons a party might have had for not
immediately taking judicial action is immaterial and does not stop the running of the period.

2. A property held in trust cannot be acquired by prescription. Section 38 of Act 190 provides
that the law of prescription does not apply `in the case of continuing and subsisting trust.'
However,if the prescriptibility of an action for reconveyance is based on constructive trust,
prescription may supervene in an implied trust.

Therefore, the appellate court correctly held that the facts and evidence of record do not
support petitioners' claim of the creation of an express trust and imprescriptibility of their
claim. Although no particular words are required for the creation of an express trust, a clear
intention to create a trust must be shown, and the proof of fiduciary relationship must be clear
and convincing.

In the case, if an express trust had been constituted upon the occupancy of the property by
respondents in favor of the petitioners, prescription of action would not lie, the basis of the rule
being that the possession of the trustee is not adverse to the beneficiary. But if there were
merely a constructive or implied trust, the action to recover may be barred by prescription of
action or by acquisitive prescription by virtue of respondents' continuous and adverse
possession of the property in the concept of owner-buyer for thirty-three years.

Express trusts are those intentionally created by the direct and positive act of the trustor, by
some writing, deed or will, or oral declaration. The creation of an express trust must be
manifested with reasonable certainty and cannot be inferred from loose and vague declarations
or from ambiguous circumstances susceptible of other interpretations. Nowhere in the record
is there any evidence, and the plaintiffs do not even raise the pretention, that the original
owner of the property Pedro Medina, father of plaintiff Margarita Medina, appointed,
designated or constituted Sotero Medina (the husband of defendant Restituta Zurbito Medina)
as the trustee of the land in dispute. Thus, it is concluded that there was realy no express trust.

The circumstances presented by the respondents do not make out the creation of an express
trust. Respondents' possession of the Spanish title issued in the late Pedro Medina's name may
just be the consequence of the sale of the land by Narciso (to whom it had been adjudicated in
the partition) to the spouses Sotero Medina and Restituta Zurbito on June 29, 1924 and is by no
means an evidence of an express trust created for the benefit of petitioners. Spanish titles are
defeasible, and although evidences of ownership may be lost through prescription. Neither is
the deed of partition (which apparently excluded Pedro Medina) entered into earlier any
indication of an express creation of a trust. In fact, the documents are adverse to petitioners'
cause, and are evidences of transfer of ownership of the land from one owner/owners to
another or others and they in fact negate the creation or existence of an express trust.

Neither does the testimony of Sotero's widow, Restituta Zurbito, to the effect that her husband
and then later she herself "administered" the land support petitioners' claim of an express
trust. There is no showing that the term "administration" as used by said respondent in her
testimony is by reason of an appointment as such on behalf of another owner or beneficiary,
such as to support the existence of an express trust. On the contrary, it appears clear from the
context of her testimony that her use of the term "administer" was in the concept of an owner-
buyer "administering" and managing his/her property.

Thus, the appealed decision is affirmed.
















FILIPINAS PORT SERVICES vs. GO
G.R. No. 161886
March 16, 2007

Facts:
The case is actually an intra-corporate dispute involving Filport, a domestic corporation
engaged in stevedoring services with principal office in Davao City. It was initially
instituted with the Securities and Exchange Commission (SEC) where the case
hibernated and remained unresolved for several years until it was overtaken by the
enactment into law, on 19 July 2000, of Republic Act (R.A.) No. 8799, otherwise known
as the Securities Regulation Code.
From the SEC and consistent with R.A. No. 8799, the case was transferred to the RTC of
Manila, Branch 14, sitting as a corporate court. Subsequently, upon respondents
motion, the case eventually landed at the RTC of Davao City where it was docketed as
Civil Case No. 28,552-2001.
RTC-Davao City, Branch 10, ruled in favor of the petitioners prompting respondents to
go to the CA in CA-G.R. CV No. 73827.
In the same petition, docketed as SEC Case No. 06-93-4491, Cruz alleged that despite
demands made upon the respondent members of the board of directors to desist from
creating the positions in question and to account for the amounts incurred in creating
the same, the demands were unheeded. Cruz thus prayed that the respondent
members of the board of directors be made to pay Filport, jointly and severally, the
sums of money variedly representing the damages incurred as a result of the creation of
the offices/positions complained of and the aggregate amount of the questioned
increased salaries.
In the same Answer, respondents further averred that Cruz and his co-petitioner
Minterbro, while admittedly stockholders of Filport, have no authority nor standing to
bring the so-called derivative suit for and in behalf of the corporation; that
respondent Mary Jean D. Co has already ceased to be a corporate director and so with
Fortunato V. de Castro, one of those holding an assailed position; and that no demand
to cease and desist from further committing the acts complained of was made upon the
board. By way of affirmative defenses, respondents asserted that (1) the petition is not
duly verified by petitioner Filport which is the real party-in-interest; (2) Filport, as
represented by Cruz and Minterbro, failed to exhaust remedies for redress within the
corporation before bringing the suit; and (3) the petition does not show that the
stockholders bringing the suit are joined as nominal parties.
o In support of their counterclaim, respondents averred that Cruz filed the alleged
derivative suit in bad faith and purely for harassment purposes on account of his
non-reelection to the board in the 1991 general stockholders meeting.

Issue:
Whether the CA erred in holding that Filports Board of Directors acted within its powers in
creating the executive committee and the positions of AVPs for Corporate Planning, Operations,
Finance and Administration, and those of the Special Assistants to the President and the Board
Chairman, each with corresponding remuneration, and in increasing the salaries of the
positions of Board Chairman, Vice-President, Treasurer and Assistant General Manager


Held:
In the present case, the boards creation of the positions of Assistant Vice Presidents for
Corporate Planning, Operations, Finance and Administration, and those of the Special Assistants
to the President and the Board Chairman, was in accordance with the regular business
operations of Filport as it is authorized to do so by the corporations by-laws, pursuant to the
Corporation Code.

The election of officers of a corporation is provided for under Section 25 of the Code which
reads:
Sec. 25. Corporate officers, quorum. Immediately after their election, the directors of a
corporation must formally organize by the election of a president, who shall be a director, a
treasurer who may or may not be a director, a secretary who shall be a resident and citizen of
the Philippines and such other officers as may be provided for in the by-laws.

As a matter of fact, it was during the term of appellee Cruz, as president and director, that the
executive committee was created. What is more, it was appellee himself who moved for the
creation of the positions of assistant vice presidents for operations, for finance, and for
administration. He should not be heard to complain thereafter for similar corporate acts.

The increase in the salaries of the board chairman, president, treasurer, and assistant general
manager are indeed reasonable enough in view of the responsibilities assigned to them, and
the special knowledge required, to be able to effectively discharge their respective functions
and duties.

By claiming that Filport suffered damages because the directors appointed to the assailed
positions are not doing anything to deserve their compensation, petitioners are saddled with
the burden of proving that salaries were actually paid. Since the trial court, in effect, found that
the petitioners successfully proved payment of the salaries when it directed the
reimbursements of the same, respondents necessarily have to raise the issue on appeal. And
the CA rightly resolved the issue when it found that no evidence of actual payment of the
salaries in question was actually adduced.















MENDIZABEL v. APAO
G.R. No. 143185
February 20, 2006

Facts:
On 21 March 1955, Fernando Apao (Fernando) purchased from spouses Alejandro and
Teofila Magbanua (vendors) a parcel of land with an area of 61,616 square meters
(property) situated in Malangas, Zamboanga del Sur.
Fernando bought the property for P400. The vendors executed a deed of sale which
stated inter alia that they could purchase back the property within six months for P400,
failing which, the sale would become absolute.
The vendors failed to repurchase the property. Fernando thus took possession of the
same.
On 1 April 1958, Fernando had the property surveyed by Engr. Ernesto Nuval together
with the piece of land adjacent to it, which he had previously purchased from one
Leopoldo Carloto.
The Bureau of Lands approved the survey on 2 July 1959 resulting in the issuance of
Survey Plan Psu-173083 covering both lots. Upon receipt of the approved survey plan,
Fernando immediately filed an application with the Bureau of Lands for a free patent
over the entirety of Psu-173083. His application was docketed as F.P.A. No. 18-1481.
After the survey of Fernandos land, the Survey Party of the Bureau of Lands surveyed
the same area. This latter survey resulted in a subdivision of the land into two separate
and distinct lots identified as Lot Nos. 407 and 1080.
Fernando learned that Ignacio Mendizabel (Ignacio) had filed prior to the Bureau of
Lands survey a homestead application over Lot No. 1080. Fernando became the
claimant-protestant in Ignacios application, docketed as H.A. No. 18-8905 (E-18-8521).
On 11 May 1962, the Bureau of Lands Regional Office in Zamboanga City rendered a
decision awarding Lot No. 1080 to Ignacio.

Issue:
Whether there is implied trust exists in this case

Held:
The act of petitioners in misrepresenting that they were in actual possession and occupation of
the property, obtaining patents and original certificates of title in their names] created an
implied trust in favor of the actual possessors of the property. The Civil Code provides:

ART. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force
of law, considered a trustee of an implied trust for the benefit of the person from whom the
property comes.

In other words, if the registration of the land is fraudulent, the person in whose name the land
is registered holds it as a mere trustee, and the real owner is entitled to file an action for
reconveyance of the property.

Petitioners would nonetheless insist that respondents failed to present any proof of fiduciary
relation between them and respondents and breach of such trust by petitioners. A deeper
analysis of Article 1456 reveals that it is not a trust in the technical sense for in a typical trust,
confidence is reposed in one person who is named a trustee for the benefit of another who is
called the cestui que trust, respecting property which is held by the trustee for the benefit of
the cestui que trust. A constructive trust, unlike an express trust, does not emanate from, or
generate a fiduciary relation. While in an express trust, a beneficiary and a trustee are linked
by confidential or fiduciary relations, in a constructive trust, there is neither a promise nor any
fiduciary relation to speak of and the so-called trustee neither accepts any trust nor intends
holding the property for the beneficiary. Implied trusts are those which, without being
expressed, are deducible from the nature of the transaction as matters of intent or which are
super induced on the transaction by operation of law as matters of equity, independently of the
particular intention of the parties. In turn, implied trusts are either resulting or constructive
trusts. Constructive trusts are created by the construction of equity in order to satisfy the
demands of justice and prevent unjust enrichment. They arise contrary to intention against one
who, by fraud, duress or abuse of confidence, obtains or holds the legal right to property which
he ought not, in equity and good conscience, to hold.

The records show that respondents bought the property from spouses Alejandro and Teofila
Magbanua on 21 March 1955 as evidenced by a deed of sale. Fernando testified that he was in
actual, open, peaceful, and continuous possession of the property at the time he filed his
application for a free patent and was then enjoying its fruits. These facts were corroborated by
the testimonies of Braanula and Lizardo, residents of Barangay Mabini, Malangas, Zamboanga
del Sur. Petitioners, however, assert that the deed of sale, although Annex A of respondents
complaint, should not be given weight for it was not offered in evidence.

Petitioners assertion has no merit. All documents attached to a complaint, the due execution
and genuineness of which are not denied under oath by the defendant, must be considered as
part of the complaint without need of introducing evidence. In petitioners answer, there was
no denial under oath of the due execution and genuineness of the deed of sale. Thus, the deed
of sale is not only incorporated into respondents complaint, it is also deemed admitted by
petitioners. This has the effect of relieving respondents from the duty of expressly presenting
such document as evidence. The court, for the proper resolution of the case, may and should
consider without the introduction of evidence the facts admitted by the parties
















VDA. DE GUALBERTO v. GO
G.R. No. 139843
July 21, 2005

Facts:
Petitioners are the heirs of the late Generoso Gualberto, former registered owner of a
parcel of land situated at Redor Street, Barangay Redor, Siniloan, Laguna under Transfer
Certificate of Title (TCT) No. 9203, containing an area of 169.59 square meters, more or
less, and declared for taxation purposes under Tax Declaration No. 4869.
Sometime in 1965, the subject parcel of land was sold by Generoso Gualberto and his
wife, herein petitioner Consuelo Natividad Vda. De Gulaberto (Consuelo, for brevity), to
respondents father Go S. Kiang for P9, 000.00, as evidenced by a deed entitled
Kasulatan ng Bilihang Tuluyan dated January 15, 1965 (Kasulatan, for brevity), which
deed appears to have been duly notarized by then Municipal Judge Pascual L. Serrano of
the Municipal Court of Siniloan, Laguna and recorded in his registry as Doc. No. 9, Page
No. 12, Book No.12, Series of 1965.
On April 1, 1973, petitioner Consuelo executed an Affidavit attesting to the fact that the
aforementioned parcel of land had truly been sold by her and her husband Generoso to
the spouses Go S. Kiang and Rosa Javier Go, as borne by the said Kasulatan.
Evidently, the affidavit was executed for purposes of securing a new tax declaration in
the name of the spouses Go.
In December, 1973, in a case for Unlawful Detainer filed by a certain Demetria Garcia
against herein petitioners, the latter alleged that therein plaintiff Garcia is not a real
party in interest and therefore has no legal capacity and cause of action to sue the
defendants; that the real parties in interest of the parcel of commercial land and the
residential apartment in question are Generoso Gualberto and Go S. Kiang respectively
as shown by TCT No. 9203 issued by the Register of Deeds of Laguna.
In a Forcible Entry case filed by respondents against petitioners before the Municipal
Circuit Trial Court of Siniloan-Famy, Siniloan, Laguna docketed as Civil Case No. 336, a
decision was rendered in favor of respondents, which decision was affirmed in toto by
the RTC of Siniloan, Laguna.
When elevated to the Court of Appeals, that same decision was affirmed by the latter
court, saying that the Court finds that the judgment of the court a quo affirming the
previous judgment of the municipal court is supported by sufficient and satisfactory
evidence and there is no reason for the Court to hold otherwise.

Issue:
Whether an action for reconveyance of property based on nullity of title prescribes

Held:
Petitioners insist that their action for reconveyance is imprescriptible.
An action for reconveyance of real property based on implied or constructive trust is not barred
by the aforementioned 10-year prescriptive period only if the plaintiff is in actual, continuous
and peaceful possession of the property involved. Generally, an action for reconveyance based
on an implied or constructive trust, such as the instant case, prescribes in 10 years from the
date of issuance of decree of registration. However, this rule does not apply when the plaintiff
is in actual possession of the land. Thus, it has been held:

An action for reconveyance of a parcel of land based on implied or constructive trust prescribes
in ten years, the point of reference being the date of registration of the deed or the date of the
issuance of the certificate of title over the property, but this rule applies only when the plaintiff
or the person enforcing the trust is not in possession of the property, since if a person claiming
to be the owner thereof is in actual possession of the property, as the defendants are in the
instant case, the right to seek reconveyance, which in effect seeks to quiet title to the property,
does not prescribe. The reason for this is that one who is in actual possession of a piece of land
claiming to be the owner thereof may wait until his possession is disturbed or his title is
attacked before taking steps to vindicate his right, the reason for the rule being, that his
undisturbed possession gives him a continuing right to seek the aid of a court of equity to
ascertain and determine the nature of the adverse claim of a third party and its effect on his
own title, which right can be claimed only by one who is in possession.

Here, it was never established that petitioners remained in actual possession of the property
after their fathers sale thereof to Go S. Kiang in 1965 and up to the filing of their complaint in
this case on August 10, 1995. On the contrary, the trial courts factual conclusion is that
respondents had actual possession of the subject property ever since. The action for
reconveyance in the instant case is, therefore, not in the nature of an action for quieting of
title, and is not imprescriptible.


HEIRS OF YAP v. Court of Appeals
G.R.No. 133047
August 17, 1999

Facts:
Ramon Yap purchased a parcel of land situated at 123 Batanes Street, Galas, Quezon
City, covered by Transfer Certificate of Title No. 82001/T-414, from the spouses Carlos
and Josefina Nery.
The lot was thereupon registered in the name of Ramon Yap under Transfer Certificate
of Title No. 102132; forthwith, he also declared the property in his name for tax
purposes and paid the real estate taxes due thereon from 1966 to 1992.
In 1967, Ramon Yap constructed a two storey 3-door apartment building for the use of
the Yap family. One-fifth (1/5) of the cost of the construction was defrayed by Ramon
Yap while the rest was shouldered by Chua Mia, the mother of Lorenzo, Benjamin and
Ramon.
Upon its completion, the improvement was declared for real estate tax purposes in the
name of Lorenzo Yap in deference to the wishes of the old woman.
The controversy started when herein petitioners, by a letter of 08 June 1992, advised
respondents of the formers claim of ownership over the property and demanded that
respondents execute the proper deed necessary to transfer the title to them.
At about the same time, petitioners filed a case for ejectment against one of the
bonafide tenants of the property.

Issue:
Whether or not there was implied trust in the instant case?

Held:
The court found there was none. The Court of Appeals, sustaining the court a quo, has found
the evidence submitted by petitioners to be utterly wanting, consisting mainly of the self-
serving testimony of Sally Yap. She herself admitted that the business establishment of her
husband Lorenzo was razed by fire in 1964 that would somehow place to doubt the claim that
he indeed had the means to purchase the subject land about two years later from the Nery
spouses. Upon the other hand, Ramon Yap was by then an accountant with apparent means to
buy the property himself. At all events, findings of fact by the Court of Appeals, particularly
when consistent with those made by the trial court, should deserve utmost regard when not
devoid of evidentiary support. No cogent reason had been shown by petitioners for the Court
to now hold otherwise.

One basic distinction between an implied trust and an express trust is that while the former
may be established by parol evidence, the latter cannot. Even then, in order to establish an
implied trust in real property by parol evidence, the proof should be as fully convincing as if the
acts giving rise to the trust obligation are proven by an authentic document. An implied trust, in
fine, cannot be established upon vague and inconclusive proof.
















HEIRS OF KIONOSALA v. DACUT
G.R.No. 147379
February 27, 2002

Facts:
On 19 December 1995 private respondents filed a complaint for declaration of nullity of
titles, reconveyance and damages against petitioners.
This complaint involved 2 parcels of land known as Lot No. 1017 and Lot No. 1015 with
areas of 117,744 square meters and 69,974 square meters respectively, located in
Pongol, Libona, Bukidnon.
On 7 September 1990 Lot No. 1017 was granted a free patent to petitioners Heirs of
Ambrocio Kionisala under Free Patent No. 603393, and on 13 November 1991 Lot 1015
was bestowed upon Isabel Kionisala, one of the impleaded heirs of Ambrocio Kionisala
under Free Patent No. 101311-91-904.
Thereafter, on 19 November 1990 Lot 1017 was registered under the Torrens system
and was issued Original Certificate of Title No. P-19819 in petitioners name, while on 5
December 1991 Lot No. 1015 was registered in the name of Isabel Kionisala under
Original Certificate of Title No. P-20229.
In support of their causes of action for declaration of nullity of titles and reconveyance,
private respondents claimed absolute ownership of Lot 1015 and 1017 even prior to the
issuance of the corresponding free patents and certificates of title.

Issue:
Whether or not the action for reconveyance based on an implied trust of the lots has
prescribed?

Held:
The action for reconveyance based on implied trust prescribes only after ten (10) years from
1990 and 1991 when the free patents and the certificates of title over Lot 1017 and Lot 1015,
respectively, were registered. Obviously the action had not prescribed when private
respondents filed their complaint against petitioners on 19 December 1995.

At any rate, the action for reconveyance in the case at bar is also significantly deemed to be an
action to quiet title for purposes of determining the prescriptive period on account of private
respondents allegations of actual possession of the disputed lots.

In such a case, the cause of action is truly imprescriptible.



















RAMOS v. RAMOS
G.R. No. L-19872
December 3, 1974

Facts:
The spouses Martin Ramos and Candida Tanate died on October 4, 1906 and October
26, 1888, respectively.
On December 10, 1906 a special proceeding was instituted in the Court of First Instance
of Negros Occidental for the settlement of the intestate estate of the said spouses.
Rafael O. Ramos, a brother of Martin, was appointed administrator.
The estate was administered for more than six years. A project of partition dated April
25, 1913 was submitted. It was signed by the three legitimate children, Jose, Agustin
and Granada; by the two natural children, Atanacia and Timoteo, and by Timoteo Zayco
in representation of the other five natural children who were minors. It was sworn to
before the justice of the peace.
Plaintiffs, however, did not know of any proceedings. They never received any sum of
money in cash the alleged insignificant sum of P1,785.35 each from said alleged
guardian as their supposed share in the estate of their father under any alleged project
of partition.

Issue:
Whether or not a trustee can acquire by prescription the ownership of property entrusted to
him?

Held:
There is a rule that a trustee cannot acquire by prescription the ownership of property
entrusted to him, or that an action to compel a trustee to convey property registered in his
name in trust for the benefit of the cestui qui trust does not prescribed or that the defense of
prescription cannot be set up in an action to recover property held by a person in trust for the
benefit of anothe, or that property held in trust can be recovered by the beneficiary regardless
of the lapse of time.

That rule applies squarely to express trusts. The basis of the rule is that the possession of a
trustee is not adverse. Not being adverse, he does not acquire by prescription the property held
in trust. Thus, section 38 of Act 190 provides that the law of prescription does not apply in the
case of a continuing and subsisting trust.




















THE INTESTATE ESTATE OF TY vs. COURT OF APPEALS
G.R. No. 112872
APRIL 19, 2001

Facts:
Petitioner Sylvia S. Ty was married to Alexander T. Ty. Alexander died of leukemia on
May 19, 1988 and was survived by his wife, petitioner Sylvia, and only child, Krizia
Katrina.
In the settlement of his estate, petitioner was appointed administratrix of her late
husbands intestate estate. On November 4, 1992, petitioner filed a motion for leave to
sell or mortgage estate property in order to generate funds for the payment of
deficiency estate taxes in the sum of P4,714,560.00. Private respondent, the father of
the deceased filed two complaints for the recovery of said property.
He prayed for the recovery of the pieces of property that were placed in the name of
deceased Alexander by private respondent, the same property being sought to be sold
out, mortgaged, or disposed of by petitioner.
Private respondent claimed in both cases that even if said property were placed in the
name of deceased Alexander, they were acquired through private respondents money,
without any cause or consideration from deceased Alexander.

Issue:
Is the petitioner correct in her contention that there was an express trust between the
deceased and private respondent?

Held:
Petitioner is in error when she contends that an express trust was created by private
respondent when he transferred the property to his son. Express trust is those that are created
by the direct and positive acts of the parties, by some writing or deed or will or by words
evidencing an intention to create a trust. On the other hand, implied trusts are those which,
without being expressed, are deducible from the nature of the transaction by operation of law
as matters of equity, independently of the particular intention of the parties. Thus, if the
intention to establish a trust is clear, the trust is express; if the intent to establish a trust is to be
taken from circumstances or other matters indicative of such intent, then the trust is implied.

In the cases at hand, private respondent contends that the pieces of property were transferred
in the name of the deceased Alexander for the purpose of taking care of the property for him
and his siblings. Such transfer having been effected without cause of consideration, a resulting
trust was created. A resulting trust arises in favor of one who pays the purchase money of an
estate and places the title in the name of another, because of the presumption that he who
pays for a thing intends a beneficial interest therein for himself. The trust is said to result in law
from the acts of the parties. Such a trust is implied in fact. Petitioners assertion that private
respondents action is barred by the statute of limitations is erroneous. The statue of
limitations cannot apply in this case. Resulting trusts generally do not prescribe except when the
trustee repudiates the trust.
















VDA. DE RETUERTO v. BARZ
G.R. No. 148180
DECEMBER 19, 2001

Facts:
When Spouses Esteban Perez and Lorenza Sanchez died intestate, their rights over the
property were inherited by their daughter, Juana Perez, married to Numeriano Barz,
who then declared the properly, for taxation purposes, under her name but with an
area of only 13,160 square meters, more or less.
On April 16, 1929, Juana Perez, widow Barz, executed a deed confirming her execution
of a "Deed of Absolute Sale," in favor of Panfilo Retuerto, married to Catalina Ceniza,
over a portion of the "Hacienda de Mandaue.
However, on April 26, 1935, Panfilo Retuerto purchased the aforementioned parcel of
land, this time, from the Archbishop of Cebu. In the meantime, the San Carlos Seminary
in Cebu filed a Petition with the Regional Trial Court for the issuance of titles over
several parcels of land in "Hacienda de Mandaue," including Lot No. 896-A, earlier
purchased by Panfilo Retuerto from Juana Perez and from the Archbishop of Cebu. No
such Decree was issued as directed by the Court because the Second World War ensued
in the Pacific.
However, Panfilo Retuerto failed to secure the appropriate decree after the war.

Issue:
Who has a right of ownership over the subject lot?

Held:
Constructive trusts are created in equity to prevent unjust enrichment, arising against one who,
by fraud, duress or abuse of confidence, obtains or holds the legal right to property which he
ought not, in equity and good conscience, to hold. Petitioners failed to substantiate their
allegation that their predecessor-in-interest had acquired any legal right to the property subject
of the present controversy. Nor had they adduced any evidence to show that the certificate of
title of Pedro Barz was obtained through fraud.

Even assuming arguendo that Pedro Barz acquired title to the property through mistake or
fraud, petitioners are nonetheless barred from filing their claim of ownership. An action for
reconveyance based on an implied or constructive trust prescribes within ten years from the
time of its creation or upon the alleged fraudulent registration of the property. Since
registration of real property is considered a constructive notice to all persons, then the ten-year
prescriptive period is reckoned from the time of such registering, filing or entering. Thus,
petitioners should have filed an action for reconveyance within ten years from the issuance of
OCT No. 521 in November 16, 1968. This, they failed to do so. In the 1966 decision of the Land
Registration Court in LRC No. 529, it was found that Pedro Barz, private respondents'
predecessor-in-interest, was the lawful owner of the subject property as he and his
predecessors-in-interest had been in peaceful, continuous and open possession thereof in the
concept of owner since 1915.
















CHIA LIONG TAN v. COURT OF APPEALS
G.R. No. 106251
November 11, 1993


Facts:
Petitioner claims to be the registered owner of the motor vehicle, Elf van which was
purchased by his brother Tan Ban Yong, the private respondent.
The petitioner principally relies on the fact that the vehicle is registered in his name.
He testified that the said vehicle was purchased, that he sent his brother to pay for it
and the receipt of payment was placed in petitioners name because it was his money
that was used to pay for the vehicle, that he allowed his brother to use it and that his
brother refused to return the same.
RTC, as affirmed by the CA ruled that ownership belongs to the private respondent as
the testimonies of Tan Pit Sin, the one whom he borrowed money fro for the sad
purchase and the employee of the Isuzu motors were given weight.

Issue:
Whether or not the petitioner has ownership of the property n question


Held:
A certificate of registration of a motor vehicle in ones name indeed creates a strong
presumption of ownership. The person in whose favor it, has been issued is virtually the owner
thereof unless proved otherwise. Such presumption is rebuttable by competent proof.

It was undeniable that an implied trust was created when the certificate of registration of the
vehicle was placed in the petitioners name although the price thereof was paid by private
respondent. A trust, which drives its strength from the confidence one reposes on another
especially between brothers, does not lose that character simply because of what appears is a
legal document.
Petition is denied.




















EILIA OLACO v. CO CHO CHIT
G.R. No. 58010
March 31, 1993

Facts:
On May 17, 1060, private respondent-spouses Valentin Co Cho Chit and O Lay Kia
learned fro the newspaper that O laco sold the Oroquieta property to the Roman
Catholic archbishop for P230,000.
Respondent-spouses sued petitioners to recover the purchase price, asserting that
petitioner knes that they were the real vendees and that the legal title thereto was
merely placed in her name.
They contend that O laco breached the trust when she sold the land.
While petitioners assert that she merely left the certificate of title covering the property
with private respondent for safekeeping.


Issue:
Whether a resulting trust between the parties in the acquisition of the property has prescribed

Held:
It has been established that a resulting trust between the parties occurred. Although the
property was bought by the respondent-spouses, the legal title was placed n the name of O
laco. The transfer of the Torrens title in her name was only in consonance with the deed of sale
n her favor. The second requisite is absent., hence prescription did not begin to run until the
sale of the subject property which was clearly an act of repudiation.

But immediately after O laco sold the property which is a disavowal of the resulting trust,
respondent-spouses instituted the present suit for breach of trust. Correspondingly, laches
cannot lie against them.

Costs against petitioners.