Professional Documents
Culture Documents
PEOPLE
G.R Nos. 156547-51. February 4, 2008
FACTS:
The Department of Budget and Management released the amount of Php 100
Million for the support of the local government unit of the province of Tarlac. However,
petitioner Ocampo, governor of Tarlac, loaned out more than P 56.6 million in which he
contracted with Lingkod Tarlac Foundation, Inc.. thus, it was the subject of 25 criminal
charges against the petitioner.
The Sandiganbayan convicted the petitioner of the crime of malversation of
public funds. However, the petitioner contended that the loan was private in character
since it was a loan contracted with the Taralc Foundation.
ISSUE:
Whether the amount loaned out was private in nature.
RULING:
Yes, the loan was private in nature because Art. 1953 of the New 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 the creditor an equal amount of the
same kind and quality.
The fact that the petitioner-Governor contracted the loan, the public fund changed
its nature to private character, thus it is not malversation which is the subject of this case,
instead it must be a simple collection of money suit against the petitioner in case of non
payment . therefore, the petitioner is acquitted for the crime of malversation.
Page | 1
FACTS:
In 1917, O Brien filed a collection suit against Leung Ben for the lost of the latter
in gamblings, games and banking percentage games. The amount to be collected was P
15,000.00. The respondent then filed the case for the fear that the petitioner might escape
his obligation by going abroad and thus the respondent attached the property of the
petitioner in payment of the winnings of O Brien.
ISSUE:
Whether there was a statutory obligation to pay the winnings in gambling.
RULING:
No. Although there can be a voluntary payment of money for the loser to the
winner, necessarily that in civil actions, it is not an obligatory act to pay the winnings in a
gambling because the act by nature is prohibited by law and by moral.
Thus, in this case, 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 is a duty in the nature
of debt and is properly classified into as an implied contract. It is well-settled that money
lost in gambling or lottery, if recoverable at all, can be recovered by the loser. Thus
Leung Ben can recover the property attached by the respondent.
Page | 2
FACTS:
The wife of the petitioner was to deliver a child, however, when the time of
delivery came, the parents - in- law of the wife called the physician since her husband
was not present. Thus the husband refused to pay the service fee of the physician since
the wife died during the delivery of the child. The defense of the husband was that he was
not the one who called the aid of a physician ,thus his parents shall be liable for the
services rendered by the physician.
ISSUE:
Who should pay the doctor?
RULING:
It is the husband who should pay the service of the doctor because even he was
not the one who called the doctor, it is his duty to give mutual support to his wife and
support includes medical assistance. This obligation to give is imposed by law.
Page | 3
FACTS:
Private respondent Evangelista contracted Petitioner ASJ Corporation for the
incubation and hatching of eggs and by products owned by Evangelista Spouses. The
contract includes the scheduled payments of the service of ASJ Corporation that the
amount of installment shall be paid after the delivery of the chicks. However, the ASJ
Corporation detained the chicks because Evangelista Spouses failed to pay the
installment on time.
ISSUE:
Was the detention of the alleged chicks valid and recognized under the law?
RULING:
No, because ASJ Corporation must give due to the Evangelista Spouses in paying
the installment, thus, it must not delay the delivery of the chicks. Thus, under the law,
they are obliged to pay damages with each other for the breach of the obligation.
Therefore, in a contract of service, each party must be in good faith in the
performance of their obligation, thus when the petitioner had detained the hatched eggs of
the respondents spouses, it is an implication of putting prejudice to the business of the
spouses due to the delay of paying installment to the petitioner.
Page | 4
FACTS:
Quiamco has amicably settled with Davalan, Gabutero and Generoso for the
crime of robbery and that in return, the three had surrendered to Quiamco a motorcycle
with its registration. However, Atty. Ramas has sold to Gabutero the motorcycle in
installment but when the latter did not able to pay the installment, Davalon continued the
payment but when he became insolvent, he said that the motorcycle was taken by
Quiamcos men. However, after several years, the petitioner Ramas together with
policemen took the motorcycle without the respondents permit and shouted that the
respondent Quiamco is a thief of motorcycle. Respondent then filed an action for
damages against petitioner alleging that petitioner is liable for unlawful taking of the
motorcycle and utterance of a defamatory remark and filing a baseless complaint. Also,
petitioners claim that they should not be held liable for petitioners exercise of its right as
seller-mortgagee to recover the mortgaged motorcycle preliminary to the enforcement of
its right to foreclose on the mortgage in case of default.
ISSUE:
Whether the act of the petitioner is correct.
RULING:
No. The petitioner being a lawyer must know the legal procedure for the recovery
of possession of the alleged mortgaged property in which said procedure must be
conducted through judicial action. Furthermore, the petitioner acted in malice and intent
to cause damage to the respondent when even without probable cause, he still instituted
an act against the law on mortgage.
Page | 5
FACTS:
Respondent Reyes also known as Amay Bisaya was having a coffee break at the
lobby of Hotel Nikko Manila Garden when his friend Mrs. Filart invited him to attend the
natal party of the owner of the hotel, thus respondent Reyes acceded to his friend but
when they are going to take food in the buffet table , party organizer, Ruby Lim
confronted the respondent since allegedly the latter was not invited and that the party was
for limited guests. The respondent was so embarrassed especially when he was driven
away by policemen. The trial court ruled in favor of Lim however, the Appellate Court
favored the respondent.
ISSUE:
Whether Amay Bisaya (private respondent) is entitled to payment of damages.
RULING:
No. The respondent can not recover damages from the organizer of the party since
the organizer acted in pursuance of the ordered of the celebrant that the party was for
limited guests and thus, the latter approached the respondent to leave the area. The act of
the respondent is considered as a self- inflicted injury when he, being a gate crasher has
voluntary went to a party in which he is not invited. Therefore, the act of Ruby Lim is
justified and reasonable.
Page | 6
FACTS:
The Petitioner Academy was conducting a visitation campaign in 1995 for the
encouragement of prospective enrollees to enroll at St. Marys Academy of Dipolog City.
The victim Sherwin Carpitanos was one of the high school students who was present in
the campaign . thus, Sherwin and other students was riding then in a Mitsubishi jeepney
owned by defendant Villanueva but was driven by James Daniel III, then 15 years old
and a student of the same school. As they proceed to Larayan Elementary School in
Dapitan City, the jeepney turned turtle causing the death of Sherwin.
ISSUE:
Whether the petitioner academy is liable for damages against the death of Sherwin
Carpitanos.
RULING:
No, the petitioner can not be held liable for the death of the son of the respondent
because the accident was not the proximate cause of the death of Sherwin, instead even
Daniel explained that the accident was caused by the steering wheel guide of the jeepney,
thus the petitioner has no negligence in the performance of its duties. Therefore, the
owner or registered owner of the jeepney can be held liable for the death of Sherwin due
to his negligence in maintaining the good condition of the vehicle which is necessarily
required for the contract of common carriage.
Page | 7
FACTS:
TSPI Corporation entered into a Collective Bargaining Agreement with the
corporation Union for the increase of salary for the latters members for the year 2000 to
2002 starting from January 2000. thus, the increased in salary was materialized on
January 1, 2000. However, on October 6, 2000, the Regional Tripartite Wage and
production Board raised daily minimum wage from P 223.50 to P 250.00 starting
November 1, 2000. Conformably, the wages of the 17 probationary employees were
increased to P250.00 and became regular employees therefore receiving another 10%
increase in salary. In January 2001, TSPIC implemented the new wage rates as mandated
by the CBA. As a result, the nine employees who were senior to the 17 recently
regularized employees, received less wages. On January 19, 2001, TSPICs HRD notified
the 24 employees who are private respondents, that due to an error in the automated
payroll system, they were overpaid and the overpayment would be deducted from their
salaries starting February 2001. The Union on the other hand, asserted that there was no
error and the deduction of the alleged overpayment constituted diminution of pay.
ISSUE:
Whether the alleged overpayment constitutes diminution of pay as alleged by the
Union.
RULING:
Yes, because it is considered that Collective Bargaining Agreement entered into
by unions and their employers are binding upon the parties and be acted in strict
compliance therewith. Thus, the CBA in this case is the law between the employers and
their employees.
Therefore, there was no overpayment when there was an increase of salary for the
members of the union simultaneous with the increasing of minimum wage for workers in
the National Capital Region. The CBA should be followed thus, the senior employees
who were first promoted as regular employees shall be entitled for the increase in their
salaries and the same with lower rank workers.
Page | 8
FACTS:
Petitioner Kristine Regino was a poor student enrolled at the Pangasinan College
of Science and Technology. Thus, a fund raising project pertaining to a dance party was
organized by PCST, requiring all its students to purchase two tickets in consideration as a
prerequisite for the final exam.
Regino, an underprivileged, failed to purchase the tickets because of her status as
well as that project was against her religious belief, thus, she was not allowed to take the
final examination by her two professors.
ISSUE:
Was the refusal of the university to allow Regino to take the final examination
valid?
RULING:
No, the Supreme Court declared that the act of PCST was not valid, though, it can
impose its administrative policies, necessarily, the amount of tickets or payment shall be
included or expressed in the student handbooks given to every student before the start of
the regular classes of the semester. In this case, the fund raising project was not included
in the activities to be undertaken by the university during the semester. The petitioner is
entitled for damages due to her traumatic experience on the acts of the university causing
her to stop studying sand later transfer to another school.
Page | 9
PSBA VS. CA
G.R No. February 4, 1992
FACTS:
On August 30, 1985, Carlitos Bautista was stabbed and killed inside the campus
of Philippine School of Business Administration where the accused were outsiders, while
the victim was an enrolled third year student of commerce.
Thus, the parents of Bautista sued the school for the collection of damages due to
the latters alleged negligence.
ISSUE:
Whether or not PSBA is liable for the damages against the death of Bautista
RULING:
Yes, although, the action does not fall under Ouasi delicts, there is negligence
on the part of the school in maintaining peace and order inside the premises; thus, there
was a breach contractual relation committed by PSBA since the incident occurred inside
the campus. The failure of the petitioner school in providing security measures inside the
campus implies the negligence of the same and constitute the breach of contract entered
into by the petitioner and the victim Bautista when the latter was enrolled and fall under
the supervision of the petitioner.
Page | 10
FACTS:
Cosmo entertainment entered into a contract lease with the respondent owner La
Ville Commercial Corporation for a parcel of land. The contract includes payment of the
first three months of rental; hence, the lease is good for seven years. Thus, when Cosmo
has paid the initial payment, it suffered business reverse and stopped operations over the
land, however, the respondent demanded for the payment of lease up to 1997. Thus being
insolvent Cosmo, sublease the land in favor of another party without the consent of the
owner of the land.
ISSUE:
Was the petitioner has the right to sublease the property?
RULING:
No, because it was established in the contract that the owner lessor has the right
to approve sublease of the property, thus, Cosmo violated the condition of the contract.
Thus, the ejectment of Cosmo from one lot is reasonable. 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.
Page | 11
FACTS:
Ayala Corporation contracted a deed of sale over a parcel of land owned by the
latter with Manuel Sy, with special conditions on the building construction at the area,
Thus, restrictions on the height, area and structure of the building were stipulated.
However, Sy contracted another sale of the subject property to Rosa Diana Realty,
with the approval of Ayala as well as the promise of Rosa Diana to follow such
conditions and restrictions upon building constructions.
Thus, Rosa Diana violated the contract and restrictions when it passed different
building plans to the city of Makati and to Ayala Corporation, where the former plan has
exceeded the stipulated number of storey and the prescribed land area.
ISSUE:
Whether Rosa Diana Realty must follow the deed of restriction contained in the
contract it entered with Ayala.
RULING:
Yes, because in contractual obligations the contract has the force of a law that the
same is not contrary to law or public policy, thus, it must be performed with in good
faith.
Thus, the payment of damages is an obligation of Rosa Diana Realty to Ayala
Corp. since the former violation can no longer lead to the destruction of the building
because the building was already occupied by several persons and offices.
Page | 12
FACTS:
Bricktown Development Corporation entered into a two contracts to sell in favor
Amor Tierra Development Corporation. The total price of the sell was P21,639,875.00
was stipulated to be paid by private respondent in such amounts and maturity dates, as
follows: P2,200,000.00 on 31 March 1981; P3,209,968.75 on 30 June 1981;
P4,729,906.25 on 31 December 1981; and the balance of P11,500,000.00 to be paid by
means of an assumption by private respondent of petitioner corporation's mortgage
liability to the Philippine Savings Bank or, alternately, to be made payable in cash. On
the same date, parties executed a Supplemental Agreement providing that private
respondent would additionally pay to petitioner corporation the amounts of P55,364.68,
or 21% interest on the balance of down payment for the period from 31 march to 30 June
1981, and of P390,369.37 representing interest paid by petitioner corporation to the
Philippine Savings Bank. Private respondent was only able to pay petitioner corporation
for the subject land from the installment not covered by the initial payment up to the time
the contract be nullified.
ISSUE:
Whether the act of Bricktown in filing the rescission of contract to sell valid.
RULING:
No, because necessarily a grace period must be given to the debtor in case it can
not immediately deliver nor perform the obligation. 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. Verily, in the case at bench, the 60-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.
In this case, the contract was not validly made because it is contrary to the
principle that the contract can not be reneged without the consent of the contracting
parties affected by the cancellation of contract, thus the petitioner did not give due for the
respondent for the chance of performing the obligation.
Page | 13
FACTS:
A contract of lease was entered into between herein parties, under which the
defendants, as lessors, leased real property to plaintiff for a term of 2 years, from 16
August 1989 -15 August 1991. According to the contract, plaintiff-lessee deposited with
the defendants-lessors the amount of P400,000.00 to answer for repairs and damages.
After the expiration of the contract, the plaintiff and defendants made a joint inspection
and both agreed that the cost of repairs would amount to P60,000.00 and that the amount
of P340,000.00 shall be returned by to plaintiff. However, defendants returned to
plaintiff only the amount of P200,000.00, still having a balance of P140,000.00.
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.
However, the subject property was made into a contract to sell where the
petitioner has paid the initial installment but failed to pay the remaining payments., thus
the owner of the property withhold the amount of P 924, 000.00 representing the interest
due of the unpaid installments.
ISSUE:
Whether the owner of the property subject to sell is entitled to the interest due of
unpaid installments.
RULING:
No, because paragraph 9 of the Memorandum of Agreement provides in very
clear terms that "when the owners exercise their option to forfeit the downpayment, they
shall return to the buyer any amount paid by the buyer in excess of the downpayment
with no obligation to pay interest thereon." This should include all amounts paid,
including interest. The court finds no basis in the conclusion reached by the lower courts
that "interest paid" should not be returned to the buyer.
Thus, the said interest of the unpaid installments shall be returned to the buyer
since the seller will unjustly enriched himself at the expense of the buyer if he will collect
undetermined amount.
Page | 14
FACTS:
The respondent Primetown Property Corporation entered into contract weith the
petitioner Titan-Ikeda Construction Corporation for the structural works of a 32-storey
prime tower. After the construction of the tower, respondent again awarded to the
petitioner the amount of P 130,000,000.00 for the towers architectural design and
structure. Howevere, in 1994, the respondent entered inot a contract of sale of the tower
in favor of the petitioner in a manner called full-swapping. Since the respondent had
allegedly constructed almost one third of the project as weel as selling some units to
third persons unknown to the petitioner. Integrated Inc. took over the project, thus the
petitioner is demanding for the return of its advanced payment in the amount of P2,
000,000.00 as weel as the keys of the unit.
ISSUE:
Whether the petitioner is entitled to damages.
RULING:
No, because in a contract necessarily that there is a meeting of the minds of the
parties in which this will be the binding law upon them. Thus, in a reciprocal obligation.
Both parties are obliged to perform their obligation simultaneously and in good faith. In
this case, petitioner, Titan-Ikeda can not recover damages because it was found out there
was no solutio indebiti or mistake in payment in this case since the latter is just entitled
to the actual services it rendered to the respondent and thus it is ordered to return the
condominium units to the respondent.
Page | 15
FACTS:
The petitioner Padilla Office Condominium acquired a lot from Ortigas and
Company by Tierra Development Corporation for the construction of a building. Thus,
petitioner originally took the land from Tierra Development under a deed of sale whereas
among the terms and conditions of the deed was that, any successor in interest and long
term lessee be automatically included as members of a future association in Ortigas area.
In 1982, Ortigas realty owners association was organized and thus a membership
due was established for the development and improvements of the buildings located at
the said area. However, when the respondent association will collect the membership due
of the petitioner, the latter refused and contended that it is not a member of the
association and it can not be compelled to join the association.
ISSUE:
Whether the petitioner is a member of the association.
RULIG:
Yes. The petitioner is an automatic member of the association because it was
clearly reminded and stated in the contract of sale and conditions on successor in interest
that the latter is ipso facto included in any association to be formed for the benefit and
protection of the Ortigas Center buildings, thus the time that the contract was signed
signified the compliance of the petitioner.
Furthermore, the petitioner is estopped when it claimed that there was only a
delay in payment of the due, thus it has the intention of paying and acknowledging the
dues. Moreover, the petitioner can invoke his freedom of association because it will
tantamount to unjust enrichment when it refused to pay due to the respondent even it
affords the protection and benefits given by the association.
Page | 16
FACTS:
The petitioner entered into agreement with Surigao Development Corporation for
the restoration of the latter. The original amount was P 5, 150, 000.00 of which, P2.5M
was for the restoration of the damaged buildings and land improvement, while the P3M
was for the restoration of the electrical and mechanical works. However, the petitioner
contracted the service of Gerent Builders for the improvements of Surigao Development
Corporation , thus an increased for the amount considered was made turning the original
amount to P 3, 104, 851.51. It was alleged that Gerent Builders finished the improvement
of the building but it cancelled the electrical and mechanical works and simultaneously, it
demanded the amount of P 632, 590.13 as share in the adjusted contract cost. The
petitioner refused to pay Gerent using the defense that there was a quitclaim which
removed the petitioners liability.
ISSUE:
Whether the petitioner is obliged to pay Gerent Builders.
RULING:
No. Gerent builders can not collect additional payment from the petitioner
because Quitclaims, being contracts of waiver, involve the relinquishment of rights, with
knowledge of their existence and intent to relinquish them. Quitclaims deserve full
credence and are valid and enforceable.
In this case, Gerent was already estopped to demand additional payment when it
accepted the payment of the subcontract made with it by the petitioner, in which the
acceptance implied that the petitioners obligation to Gerent is already extinguished even
for additional services rendered by the latter in the improvements because those services
are deemed contained in the subcontract.
Page | 17
FACTS:
Southern Industrial Project and Bacong Shipping Company purchased three
vessels thru the financing furnished by Bank of the Philippine Island with the vessels as
securities. To secure the payment of whatever amounts may be disbursed for the
aforesaid purpose, the vessels were mortgaged to BPI. For the operation of the vessels,
these were placed under respondent Interocean Shipping Corporation headed by
respondent Pineda. As BPI was not fulfilled with the services of Interocean, it hired
Gacet Inc for a period of six months. The contract between BPI and Gacet did not
however terminate the services of Interocean. Due to Bacong and SIPs inability to pay
the mortgage, it sold the vessels to BPI. The transfer was entered into between BPI and
SIP and Bacong through a Deed of Confirmation.
Thus , the vessels suffered damages and successfully repaired by Pineda.
However, Pineda demanded for the balance of the total amount paid by Southern
Industrial Project but the new owner Bank refused to pay the balance for the repairs
alleging that the debt was incurred during the ownership of Southern Shipping Project .
ISSUE:
Is BPI liable for the payment of debts incurred during the ownership of Southern
Shipping Project?
RULING:
Yes, Bank of the Philippine Island can be held liable to pay Pineda for the
remaining balance of the shipping company because the mere fact that the bank and the
shipping company signed the Confirmation of the Obligation, the former bank already
assumed any obligations in relations to the subject vessels. Thus, it can not escape from
the liability of paying the past debts of the company in which it gave financial support
otherwise it will result to unjust enrichment on the part of the petitioner bank to hide from
a confirmed obligation.
Page | 18
FACTS:
Private respondents Spouses Aquino pledged certain shares of stocks with
petitioner State Investments for a loan of P120, 000.00, together with the pledge was the
securing of another loan by another spouses Jose and Marcelina Aquino.
When the original spouses Aquino were willing and available to pay the loan, the
petitioner refused to accept payment and released of the shares of stocks for the reason
that the second loaner Spouses Jose and Marcelina Aquino were not yet ready to pay their
loan. Thus, the trial court ruled that the petitioner must accept the payment from Spouses
Aquino as long as they pay the loan of P 120, 000.00 and there pledged shares of stocks
be releases. However, there was confusion in the ruling of the trial court whether or not
the interest be paid.
ISSUE:
Whether the spouses Aquino be obliged to pay the interest of the loan/
RULING:
Yes. The claim of the spouses Aquino for the acceptance of their early payment
must be accepted by the petitioner, however, the spouses can escape from the liability of
paying the interest of the loan for it was stipulated that there must be a 17 % interest per
annum of the loan even there was delay or payment before its maturity. Thus, the alleged
interest is already a part of the contract and not as a penalty for it will constitute unjust
enrichment on the part of the spouses Aquino at the expense and prejudice of the
petitioner State Investments.
Page | 19
FACTS:
The accused-appellant was accused for the crime of rape against his niece. The
incident was repeated trice by the appellant. The appellant contended that he and the
victim were sweethearts but the trial court did not give weight to that theory.
The trial court found appellant guilty of the crime of four counts of qualified rape
and was sentenced to suffer the penalty of death for each count of rape, to pay
P300,000.00 as civil indemnity (P75,000.00 for each count), and P200,000.00 as moral
damages (P50,000.00 for each count). The CA however modified the findings of the RTC
declaring that appellant is guilty of four counts of simple rape and to suffer the penalty of
reclusion perpetua.
ISSUE:
Whether the award of damages was properly made.
RULING:
No, because the Supreme Court declared that the crime committed was four count
of simple rape only and not qualified rape because the special aggravating circumstances
of minority and relationship must be alleged in the information but the prosecution failed
to do so. Since it is not included, four counts of simple rape should be undertaken. The
penalty imposed then should be reclusion perpetua. The appellate court also correctly
affirmed the award by the trial court of P200,000.00 for moral damages. Moral damages
are automatically granted to rape victim. However, the award of civil indemnity is
reduced to P200,000.00 in the amount of P50,000.00 for each count of simple rape is
automatically granted.
Page | 20
FACTS:
The accused-appellants conspired to kill the victim Bermudes and carried wqith
them the victims taxicab. After several days of lost, Bermudezs corpse was discovered
inside a carton box located in a fishpond. Thus the appellants were convicted for separate
crimes of anti-carnapping and murder, thus sentenced to suffer the penalty of reclusion
perpetua. The trial court also awarded to the victims heirs, sums of P50,000.00 as
compensatory damages for the death of Christian Bermudez, P200,000.00 as burial and
other expenses incurred in connection with the death P3,307,199.60 (2/3 x [80-27] x 300
per day x 26 days x 12 months) representing the loss of earning capacity of Christian
Bermudez as taxi driver.
ISSUE:
Whether the amount of damages awarded was correct.
RULING:
The Supreme Court affirmed the award of P 50, 000.00 as civil indemnity for the
death of Bermudez without even presenting of evidence. The court also affirmed the
award of moral damages for the suffering of the victims family. However, the
compensatory or actual damages were deleted because of lack of proofs, thus in
determining the loss of income , the following must be taken into account: the number of
years for which the victim would have lived; and the rate of the loss sustained by the
heirs of the deceased.
Page | 21
FACTS:
Ganongan and his friends went to Honeymoon road at Baguio City. While they
were leaving the place, armed person stopped them, hence when Ganongan, the victim
reacted the appellant Doctolero shot him twice causing the victims death as Saint Louis
Hospital The RTC finds the accused Carlos Doctolero, Sr. guilty of the offense of
Murder and hereby sentences him to Reclusion Perpetua and to indemnify the heirs of
deceased, the sum of P50,000.00 as indemnity for his death; the sum of P227,808.80 as
actual damages for expenses incurred for hospitalization, doctors fees, funeral expenses,
vigil and burial as a result of his death, and P300,000.00 as Moral damages for the pain
and mental anguish suffered by the heirs by reason of his death.
ISSUE:
Whether the award of actual damages is correct?
RULING:
No, the award of actual damages in incorrect thus Supreme Court reduced the
award of actual damages to P112, 413.40 representing funeral expenses, which proven
during the proceedings. Expenses relating to the 9th day, 40th day and 1st year
anniversaries cannot be considered in the award of actual damages as these were incurred
after a considerable lapse of time from the burial of the victim. However, the award of
moral damages is reduced to P50, 000.00 in accordance with existing jurisprudence for
the death of the victim.
Page | 22
FACTS:
The appellant had a drink with the brother of the victim, Rebelyn, when the
appellant along with the victim who was then 12 years old to but dilis in the nearby store.
The appellant and the victim never returned but the former surrendered to the authorities
and alleged that the victim has accidentally fallen into the river. However, when the body
was found, it was discovered that the victim was raped before thrown to the river. The
trial court foud Abulencia guilty of the crime of aggravated rape with homicide and
sentenced him to suffer the penalty of death. It was also ordered that the accused
indemnify the heirs of Rebelyn Garcia, the sum of P75,000.00 damages, and another sum
of P20,000.00 for exemplary damages plus P6,425.00 as actual damages.
ISSUE:
Whether the award of damages is correctly imposed.
RULING:
No. the award of damages and penalty was incorrect, thus the Supreme Court both
modified the penalty by reducing it to reclusion perpetua and the award of civil damages.
The court awarded the amount of P 50, 000.00 as moral damages for the moral suffering
of the heirs of the raped victim. However, the award of civil indemnity was increasea
from P 75, 000.00 to p 100, 000.00 based on current jurisprudence in cases of rape with
homicide.
Page | 23
FACTS:
The victim Rogelio, a six years old son of the petitioners was killed in a vehicular
accident caused by the alleged negligenc of Cordova, the driver of a jeep who bumped
with the victims passenger seat. The parents instituted an action for collection of
damages against the accused Cordova from the crime of homicide thru reckless
imprudence. The petitioner parents reserved their right to file an independent action
based on quasi-delicts. However, the trial court decided to order the dismissal of the
complaint against defendant Cordova Ng Sun Kwan and to suspend the hearing of the
case against Domingo Pontino until after the criminal case for Homicide Through
Reckless Imprudence is finally terminated.
ISSUE:
Whether the action is based on quasi-delicts and can not stand independently from
the criminal case.
RULING:
Yes. The action was based on quasi-delicts, thus it can be based on the provisions
of the New Civil Code under Article 2176- 2194 where an action for damages from fault,
omission or negligence can prosper independently even during the proceeding in the
criminal case
The parents of the victim 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, the court has allowed the injured party in the criminal case
which resulted in the acquittal of the accused to recover damages based on quasi-delict.
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FACTS:
Batangas Electric System together with police officers, has searched the premises
of the Ice Plant building owned and managed by Opulencia. The authorities discovered
that Opulencia made illegal installment of electrical wirings and devices causing the
diminution of his electric bill. Thus, he was charge of violatin city ordinance enacted in
1974. Opulencia contended that the offense has already prescribed thus, the Batangas
City Court granted the motion to dismiss on the ground of prescription, 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. After
two weeks, another violation was again filed against Opulencia, this time for theft of
electric power under Article 308 in relation to Article 309 of the Revised Penal Code.
ISSUE:
Whether the electric company can file separate civil action for collection of
damagers against Opulencia.
RULING:
Yes, the electric company may file another civil action for the theft of electric
power by Opulencia. Although the criminal aspect was already prescribed in the first
criminal case And by bar on double jeopardy in the second case, Opulencia can not
escape his civil liability.
Thus, the Supreme Court ordered Opulencia to pay the damages in the amount he
stole from the city and or the electric company from the time he installed the electric
wirings and devices.
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FACTS:
The deceased Nicolas suggested to Fiscal Ambrocio that they will borrow the for
fiera of the accused Manantan, in order for the former to have easy access for their
planned activity. Thus, when they proceeded catching shrimps, they had drinking spree
until they decided to go to Santiago City in the evening and have another drinking spree
there. However, after they ate snacks in the city, they decided to go home. While the
Manantan was driving the carat the speed of 40 kilometer per hour, the car bumped a
coming jeepney causing the former car to swerve into the next line. Ruben Nicolas died ,
however Manantan and the Fiscal suffered injuries.
The trial court acquitted the accused of the crime of Homicide through Reckless
Imprudence. Thus, Manantan appealed for the civil liability he is going to fulfill to the
heirs of the victim. However, it was found out that the proximate cause of the death of the
victim was the negligence of Manantan and the latter was ordered to pay the heirs of the
victim in the amount of P 174, 400.00.
ISSUE:
Whether the extinguishment of the criminal liability in the case carries also the
extinguishment of the civil liability.
RULING:
No. the extinguishment of the criminal liability of Manantan does not carry the
extinguishment of his civil liability because his acquittal was based on reasonable doubt
or the failure to prove the guilt of the accused beyond reasonable doubt. However, it was
not proven that he was acquitted as if he was not present at the happening of the crime
which totally obliterates his civil liability. Thus, article 29 of the Civil Code can be
applied in case of omission or fault.
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FACTS:
Appellant Bayotas was charged with rape and was convicted for the said crime in
1991. while his appeal was pending, he died at the New Bilibid Hospital due to
respiratory attack. Thus, when the Supreme Court dismissed the criminal aspect, the
Solicitor- General expressed that the civil liability of the accused was not also extinguish
upon the death of the appellant.
ISSUE:
Whether the civil liability of the accused was extinguished upon his death.
RULING:
No, the civil liability in general of the accused was not extinguished upon the
death of the accused. However, necessarily, the civil liability in the rape case was
extinguished since it was included in the act complained of but the remedy of the victim
is to proceed to the estate of the accused through the filing of a separate independent
action for collection of damages.
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FACTS:
The taxicab owned by petitioner Barredo collided to a carratela. Thus, the
carratela fall down and overturned causing the death of the son of respondent Garcia. The
trial court convicted the driver of the taxicab. However, the respondent has reserved his
right to file independent civil action for collection of damages for the death of his son.
ISSUE:
Whether Barredo can held primary liable for the death of the son of the
respondent.
RULING:
Yes. Barredo can also be held primary and directly liable in the civil case because
it was found out that being the owner and operator of the taxicab, his negligence to
supervise and exert extraordinary diligence in the performance of his employees made
him liable together with his convicted employee. Thus, the failure to prove that there was
no negligence on the part of the owner of the taxicab made no way for the petitioner to
escape his civil liability. Therefore, the acts of the employee reflects the act of the
employer causing the latter liable in case of negligence in supervision.
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FACTS:
A Prime Mover Trailer suffered a tire blow out during the night of its travel at a
national highway. The trailer was owned by the respondent Liberty Forest. The driver
allegedly put earl warning devices but the only evidence being witnessed was a banana
trunks and candles. Since the car was placed at the right wing of the road, thus it cause
the swerving of a Nissan van owned by the petitioner when a passenger bus was coming
in between the trailer. The Nissan van owner claimed for damages against the respondent.
The trial court found that the proximate cause of the three way accident is the
negligence and carelessness of driver of the respondent . However reversed the decision
of the trial court.
ISSUE:
Whether there was negligence on the part of the respondent.
RULING:
Yes. There was negligence on the part of the respondent when the latter failed to
put and used an early warning device because it was found out that there was no early
warning device being prescribed by law that was used by the driver in order to warn
incoming vehicle. Furthermore, the proximate cause of the accident was due to the
position of the trailer where it covered a cemented part of the road, thus confused and
made trick way for other vehicles to pass by. Thus the respondent is declared liable due
to violation of road rules and regulations.
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FACTS:
The victim Evangeline Tangco was depositor of Ecology Bank. She was also a
licensed-fire arm holder, thus during the incident, she was entering the bank to renew her
time deposit and along with her was her firearm. Suddenly, the security guard of the
bank, upon knowing that the victim carries a firearm, the security guard shot the victim
causing the latters instant death. The heirs of the victim filed a criminal case against
security guard and an action against Safeguard Security for failure to observe diligence of
a goof father implied upon the act of its agent.
ISSUE:
Whether Safeguard Security can be held liable for the acts of its agent.
RULING:
Yes. The law presumes that any injury committed either by fault or omission of
an employee reflects the negligence of the employer. In quasi-delicts cases, in order to
overcome this presumption, the employer must prove that there was no negligence on his
part in the supervision of his employees.
It was declared that in the selection of employees and agents, employers are
required to examine them as to their qualifications, experience and service records. Thus,
due diligence on the supervision and operation of employees includes the formulation of
suitable rules and regulations for the guidance of employees and the issuance of proper
instructions intended for the protection of the public and persons with whom the
employer has relations through his employees. Thus, in this case, Safeguard Security
committed negligence in identifying the qualifications and ability of its agents.
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FACTS:
In 1991, a collision was made by a green Mitsubishi lancer owned by Ocfemia
against a silver Mitsubishi lancer driven by Leandro Domingo and owned by petitioner
Priscilla Domingo. The incident caused the car of Domingo bumped another two parked
vehicles. A charged was filed against Ocfemia and the owner Villanueva. Villanueva
claimed that he must not be held liable for the incident because he is no longer the owner
of the car, that it was already swapped to another car . however, the trial court ordered the
petitioner to pay the damages incurred by the silver Mitsubishi lancer car.
ISSUE:
Whether the owner Villanueva be held liable for the mishap.
RULING:
Under the Motor Vehicle law, it was declared that the registered owner of any
vehicle is primary land directly liable for any injury it incurs while it is being operated.
Thus, even the petitioner claimed that he was no longer the present owner of the car, still
the registry was under his name, thus it is presumed that he still possesses the car and that
the damages caused by the car be charge against him being the registered owner. The
primary function of Motor vehicle registration is to identify the owner so that if any
accident happens, or that any damage or injury is caused by the vehicle, responsibility
therefore can be fixed on a definite individual, the registered owner.
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FACTS:
Eliza Sunga was a passenger of a jeepney owned and operated by the petitioner
Calalas. Private respondent Sunga sat in the rear protion of the jeepney where the
conductor gave Sunga an extension seat. When the jeep stopped, Sunga gave way to a
passenger going outside the jeep. However, an Isuzu Truck driven by Verene and owned
by Salva, accidentally hit Sunga causing the latter to suffer physical injuries where the
attending physician ordered a three months of rest. Sunga filed an action for damages
against the petitioner for breach of contract of common carriage by the petitioner.
On the other hand, the petitioner Calalas filed an action against Salva, being the
owner of the truck. The lower court ruled in favor of ther petitioner, thus the truck owner
is liable for the damage to the jeep of the petitioner.
ISSUE:
Whether the petitionerr is liable.
RULING:
Yes. The petitioner is liable for the injury suffered by Sunga. Under Article 1756
of the New Civil Code, it provides that common carriers are presumed to have been at
fault or to have acted negligently unless they prove that they observed extraordinary
diligence as defined in Arts. 1733 and 1755 of the Code. This provision necessarily shifts
to the common carrier the burden of proof.
In this case, the law presumes that any injury suffered by a passenger of the jeep
is deemed to be due to the negligence of the driver. This is a case on Culpa Contractual
where there was pre-existing obligations and that the fault is incidental to the
performance of the obligation. Thus, it was clearly observed that the petitioner has
negligence in the conduct of his duty when he allowed Sunga to seat in the rear portion of
the jeep which is prone to accident.
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RODZSSEN SUPPLY CO, INC. VS. FAR EAST BANK & TRUST CO.
GR No. 109087 May 9, 2001
FACTS:
Defendant Rodzssen Supply, Inc. opened with plaintiff Far East Bank and Trust
Co. a 30-day domestic letter of credit in the amount of P190,000.00 in favor of Ekman
and Company, Inc. (Ekman) for the purchase from the latter of five units of hydraulic
loaders, to expire on February 15, 1979. Defendant refused to pay without any valid
reason. Plaintiff prays for judgment ordering defendant to pay the abovementioned
P76,000.00 plus due interest thereon, plus 25% of the amount of the award as attorneys
fees. Knowing that the two units of hydraulic loaders had been delivered to defendant
after the expiry date of subject LC; and that in view of the breach of contract, defendant
offered to return to plaintiff the two units of hydraulic loaders, presently still with the
defendant but plaintiff refused to take possession thereof.
Under the contract of sale of the five loaders between Ekman and defendant, upon
Ekmans delivery to, and acceptance by, defendant of the two remaining units of the five
loaders, defendant became liable to Ekman for the payment of said two units. However,
as defendant did not pay Ekman, the latter pressed plaintiff for the payment of said two
loaders in the amount of P76,000.00. In the honest belief that it was still under obligation
to Ekman for said amount, considering that Ekman had presented all the necessary
documents, plaintiff voluntarily paid the said amount to Ekman.
The CA rejected petitioners imputation of bad faith and negligence to respondent
bank for paying for the two hydraulic loaders, which had been delivered after the
expiration of the subject letter of credit. To absolve defendant from liability for the price
of the same," the CA explained, "is to allow it to get away with its unjust enrichment at
the expense of the plaintiff."
ISSUE:
Whether petitioner is liable to respondent.
RULING:
Petitioner claims that it accepted the late delivery of the equipment, only because
it was bound to accept it under the companys trust receipt arrangement with respondent
bank.
Granting that petitioner was bound under such arrangement to accept the late
delivery of the equipment, we note its unexplained inaction for almost four years with
regard to the status of the ownership or possession of the loaders. Bewildering was its
lack of action to validate the ownership and possession of the loaders, as well as its
stolidity over the purported failed sales transaction. Significant too is the fact that it
formalized its offer to return the two pieces of equipment only after respondents demand
for payment, which came more than three years after it accepted delivery.
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.
Petitioner Rodzssen Supply Co., Inc. is orderd to reimburse Respondent Far East
Bank and Trust Co., Inc. P76,000 plus interest thereon at the rate of 6 percent per annum
computed from April 7, 1983. After this judgment becomes final, the interest shall be 12
percent per annum.
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circumstances. Capt. Jusep, despite knowledge that the typhoon was to hit Manila in 8
hours, complacently waited for the lapse of more than 8 hours thinking that the typhoon
might change direction. Furthermore, he did not transfer as soon as the sun rose because,
according to him, it was not very cloudy and there was no weather disturbance yet.
Anent the second issue, we find petitioner vicariously liable for the negligent act
of Capt. Jusep. Under Article 2180 of the Civil Code an employer may be held solidarily
liable for the negligent act of his employee. Thus Art. 2180. The obligation imposed in Article 2176 is demandable not only for
ones own acts or omissions, but also for those of persons for whom one is responsible.
Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even though the former
are not engaged in any business or industry.
Whenever an employees negligence causes damage or injury to another, there
instantly arises a presumption juris tantum that the employer failed to exercise
diligentissimi patris families in the selection (culpa in eligiendo) or supervision (culpa in
vigilando) of its employees. To avoid liability for a quasi-delict committed by his
employee, an employer must overcome the presumption by presenting convincing proof
that he exercised the care and diligence of a good father of a family in the selection and
supervision of his employee.
There is no question that petitioner, who is the owner/operator of M/V Delsan
Express, is also the employer of Capt. Jusep who at the time of the incident acted within
the scope of his duty. The defense raised by petitioner was that it exercised due diligence
in the selection of Capt. Jusep because the latter is a licensed and competent Master
Mariner. It should be stressed, however, that the required diligence of a good father of a
family pertains not only to the selection, but also to the supervision of employees. It is
not enough that the employees chosen be competent and qualified, inasmuch as the
employer is still required to exercise due diligence in supervising its employees.
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PCIB VS. CA
GR No. 121413 January 29, 2001
FACTS:
The plaintiff Ford drew and issued its Citibank Check No. SN-04867 in the
amount of P4,746,114.41, in favor of the Commissioner of Internal Revenue as payment
of plaintiffs percentage or manufacturers sales taxes for the third quarter of 1977. The
aforesaid check was deposited with the defendant IBAA (now PCIBank) and was
subsequently cleared at the Central Bank. Upon presentment with the defendant Citibank,
the proceeds of the check was paid to IBAA as collecting or depository bank. The
proceeds of the same Citibank check of the plaintiff was never paid to or received by the
payee thereof, the Commissioner of Internal Revenue. As a consequence, upon demand
of the Bureau and/or Commissioner of Internal Revenue, the plaintiff was compelled to
make a second payment to the Bureau of Internal Revenue of its
percentage/manufacturers sales taxes for the third quarter of 1977 and that said second
payment of plaintiff in the amount of P4,746,114.41 was duly received by the Bureau of
Internal Revenue.
The Acting Commissioner of Internal Revenue addressed to the plaintiff that its
check in the amount of P4,746,114.41 was not paid to the government or its authorized
agent and instead encashed by unauthorized persons, hence, plaintiff has to pay the said
amount within fifteen days from receipt of the letter. Upon advice of the plaintiffs
lawyers, plaintiff paid to the Bureau of Internal Revenue, the amount of P4,746,114.41,
representing payment of plaintiffs percentage tax for the third quarter of 1977. Plaintiff
demanded defendant to reimburse him of the said amount paid for the second time to BIR
but the latter refused.
ISSUE:
Whether PCIB is liable to Ford Philippines the amount of several checks which
were allegedly embezzled by a syndicate group.
RULING:
Jurisprudence regarding the imputed negligence of employer in a master-servant
relationship is instructive. Since a master may be held for his servants wrongful act, the
law imputes to the master the act of the servant, and if that act is negligent or wrongful
and proximately results in injury to a third person, the negligence or wrongful conduct is
the negligence or wrongful conduct of the master, for which he is liable. The general rule
is that if the master is injured by the negligence of a third person and by the concurring
contributory negligence of his own servant or agent, the latters negligence is imputed to
his superior and will defeat the superiors action against the third person, assuming, of
course that the contributory negligence was the proximate cause of the injury of which
complaint is made.
It appears that although the employees of Ford initiated the transactions
attributable to an organized syndicate, in our view, their actions were not the proximate
cause of encashing the checks payable to the CIR. The degree of Fords negligence, if
any, could not be characterized as the proximate cause of the injury to the parties.
Citibank should have scrutinized Citibank Check before paying the amount of the
proceeds thereof to the collecting bank of the BIR. One thing is clear from the record: the
clearing stamps at the back of Citibank Check Nos. SN 10597 and 16508 do not bear any
initials. Citibank failed to notice and verify the absence of the clearing stamps. Had this
been duly examined, the switching of the worthless checks to Citibank Check Nos. 10597
and 16508 would have been discovered in time. For this reason, Citibank had indeed
failed to perform what was incumbent upon it, which is to ensure that the amount of the
checks should be paid only to its designated payee. The fact that the drawee bank did not
discover the irregularity seasonably, in our view, constitutes negligence in carrying out
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the banks duty to its depositors. The point is that as a business affected with public
interest and because of the nature of its functions, the bank is under obligation to treat the
accounts of its depositors with meticulous care, always having in mind the fiduciary
nature of their relationship.
Citibank must likewise answer for the damages incurred by Ford on Citibank
Checks because of the contractual relationship existing between the two. Citibank, as the
drawee bank breached its contractual obligation with Ford and such degree of culpability
contributed to the damage caused to the latter.
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Under the foregoing definitions, as well as the clear terms of the Charter Party
Agreement between the parties, the charterer, SMC, should be free from liability for any
loss or damage sustained during the voyage, unless it be shown that the same was due to
its fault or negligence.
The evidence does not show that SMC or its employees were amiss in their duties.
The facts indubitably establish that SMCs Radio Operator, Rogelio P. Moreno, who was
tasked to monitor every shipment of its cargo, contacted Captain Inguito as early as 7:00
a.m., one hour after the M/V Doa Roberta departed from Mandaue, and advised him to
take shelter from typhoon Ruping. This advice was reiterated at 2:00 p.m. At that point,
Moreno thought of calling Ouano?s son, Rico, but failed to find him. At 4:00 p.m.,
Moreno again advised Captain Inguito to take shelter and stressed the danger of venturing
into the open sea. The Captain insisted that he can handle the situation.
In the assailed decision, the Court of Appeals found that the proximate cause of the
sinking of the vessel was the negligence of Captain Sabiniano Inguito
SC likewise agrees with the CA that Ouano is vicariously liable for the negligent
acts of his employee, Captain Inguito. Under Articles 2176 and 2180 of the Civil Code,
owners and managers are responsible for damages caused by the negligence of a servant
or an employee, the master or employer is presumed to be negligent either in the selection
or in the supervision of that employee. This presumption may be overcome only by
satisfactorily showing that the employer exercised the care and the diligence of a good
father of a family in the selection and the supervision of its employee. 39
Ouano miserably failed to overcome the presumption of his negligence. He failed to
present proof that he exercised the due diligence of a bonus paterfamilias in the selection
and supervision of the captain of the M/V Doa Roberta. Hence, he is vicariously liable
for the loss of lives and property occasioned by the lack of care and negligence of his
employee
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FACTS:
Defendant Alberto delos Santos was the driver of defendant Rudy
Samidan of the latters vehicle, a Forward Cargo Truck. At about 12:30 in the
afternoon, he was driving said truck along the National Highway within the
vicinity of Gerona, Tarlac. The Viron Bus, driven by Wilfredo Villanueva, tried
to overtake his truck, and he swerved to the right shoulder of the highway, but as
soon as he occupied the right lane of the road, the cargo truck which he was
driving was hit by the Viron bus on its left front side, as the bus swerved to his
lane to avoid an incoming bus on its opposite direction. With the driver of another
truck dealing likewise in vegetables, Dulnuan, the two of them and the driver of
the Viron bus proceeded to report the incident to the Police Station.
Both the RTC and the CA rendered its decision in favor of the private
respondents.
ISSUE:
Whether the employer is liable to the negligence of his employee.
RULING:
As employers of the bus driver, the petitioner is, under Article 2180 of the
Civil Code, directly and primarily liable for the resulting damages. The
presumption that they are negligent flows from the negligence of their employee.
That presumption, however, is only jusris tantum, not juris et de jure. Their only
possible defense is that they exercised all the diligence of a good father of a
family to prevent the damage.
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, 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, petitioner (employer) is liable for damages.
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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.
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FACTS:
Defendant Alberto delos Santos was the driver of defendant Rudy
Samidan of the latters vehicle, a Forward Cargo Truck. At about 12:30 in the
afternoon, he was driving said truck along the National Highway within the
vicinity of Gerona, Tarlac. The Viron Bus, driven by Wilfredo Villanueva, tried
to overtake his truck, and he swerved to the right shoulder of the highway, but as
soon as he occupied the right lane of the road, the cargo truck which he was
driving was hit by the Viron bus on its left front side, as the bus swerved to his
lane to avoid an incoming bus on its opposite direction. With the driver of another
truck dealing likewise in vegetables, Dulnuan, the two of them and the driver of
the Viron bus proceeded to report the incident to the Police Station.
Both the RTC and the CA rendered its decision in favor of the private
respondents.
ISSUE:
Whether the employer is liable to the negligence of his employee.
RULING:
As employers of the bus driver, the petitioner is, under Article 2180 of the
Civil Code, directly and primarily liable for the resulting damages. The
presumption that they are negligent flows from the negligence of their employee.
That presumption, however, is only jusris tantum, not juris et de jure. Their only
possible defense is that they exercised all the diligence of a good father of a
family to prevent the damage.
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, 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, petitioner (employer) is liable for damages.
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The employer must not merely present testimonial evidence to prove that he had
observed the diligence of a good father of a family in the selection and supervision of his
employee, but he must also support such testimonial evidence with concrete or
documentary evidence. The reason for this is to obviate the biased nature of the
employers testimony or that of his witnesses.
In this case, petitioners evidence consisted entirely of testimonial evidence. He
testified that before he hired Elizalde Sablayan, he required him to submit a police
clearance in order to determine if he was ever involved in any vehicular accident. He also
required Sablayan to undergo a driving test with conducted by his mechanic, Esteban
Jaca. Petitioner claimed that he, in fact, accompanied Sablayan during the driving test and
that during the test, Sablayan was taught to read and understand traffic signs like Do Not
Enter, One Way, Left Turn, and Right Turn.
Petitioners mechanic, Esteban Jaca, on the other hand, testified that Sablayan
passed the driving test and had never figured in any vehicular accident except the one in
question. He also testified that he maintained in good condition all the trucks of petitioner
by checking the brakes, horns and tires thereof before leaving for providing hauling
services.
Petitioner, however, never presented the alleged police clearance given to him by
Sablayan, nor the results of Sablayans driving test. Petitioner also did not present records
of the regular inspections that his mechanic allegedly conducted.
In sum, the sole and proximate cause of the accident was the negligence of
petitioners driver who, as found by the lower courts, did not slow down even when he
was already approaching a busy intersection within the city proper. The passenger
jeepney had long stopped to pick up respondent and his three companions and, in fact,
respondent was already partly inside the jeepney, when petitioners driver bumped the
rear end ofrear-ended it.
Since the negligence of petitioners driver was the sole and proximate cause of the
accident, in the present case, petitioner is liable, under Article 2180 of the Civil Code, to
pay damages to respondent Begasa for the injuries sustained by latter.
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RAMOS VS. CA
GR No. 124354 December 29, 1999
FACTS:
Plaintiff Erlinda Ramos was a robust woman Except for occasional complaints of
discomfort due to pains allegedly caused by the presence of a stone in her gall bladder.
Because the discomforts somehow interfered with her normal ways, she sought
professional advice. She was advised to undergo an operation for the removal of a stone
in her gall bladder. Through the intercession of a mutual friend, Dr. Buenviaje she and
her husband Rogelio met for the first time Dr. Orlino one of the defendants in this case,
on June 10, 1985. They agreed that their date at the operating table at the DLSMC
(another defendant. Dr. Hosaka decided that she should undergo a "cholecystectomy"
operation after examining the documents (findings from the Capitol Medical Center, FEU
Hospital and DLSMC) presented to him. Rogelio E. Ramos, however, asked Dr. Hosaka
to look for a good anesthesiologist. Dr. Hosaka, in turn, assured Rogelio that he will get
a good anesthesiologist. Dr. Hosaka charged a fee of P16,000.00, which was to include
the anesthesiologist's fee and which was to be paid after the operation. A day before the
scheduled date of operation, she was admitted at one of the rooms of the DLSMC,
located along E. Rodriguez Avenue, Quezon City.
At around 7:30 A.M. of June 17, 1985 and while still in her room, she was
prepared for the operation by the hospital staff. Her sister-in-law, Herminda Cruz, who
was the Dean of the College of Nursing at the Capitol Medical Center, was also there for
moral support. Herminda was allowed to stay inside the operating room.
At around 9:30 A.M., Dr. Gutierrez reached a nearby phone to look for Dr.
Hosaka who was not yet in Dr. Gutierrez thereafter informed Herminda Cruz about the
prospect of a delay in the arrival of Dr. Hosaka. Herminda then went back to the patient
who asked, "Mindy, wala pa ba ang Doctor"? The former replied, "Huwag kang magalaala, darating na iyon. Thereafter, Herminda went out of the operating room and
informed the patient's husband, Rogelio, that the doctor was not yet around.
At about 12:15 P.M., Herminda Cruz, who was inside the operating room with the
patient, heard somebody say that "Dr. Hosaka is already here." She then saw people
inside the operating room "moving, doing this and that, preparing the patient for the
operation" As she held the hand of Erlinda Ramos, she then saw Dr. Gutierrez intubating
the hapless patient. She thereafter heard Dr. Gutierrez say, "ang hirap ma-intubate nito,
mali yata ang pagkakapasok. O lumalaki ang tiyan", because of the remarks of Dra.
Gutierrez, she focused her attention on what Dr. Gutierrez was doing. She thereafter
noticed bluish discoloration of the nailbeds of the left hand of the hapless Erlinda even as
Dr. Hosaka approached her. She then heard Dr. Hosaka issue an order for someone to
call Dr. Calderon, another anesthesiologist. After Dr. Calderon arrived at the operating
room, she saw this anesthesiologist trying to intubate the patient. The patient's nailbed
became bluish and the patient was placed in a trendelenburg position - a position where
the head of the patient is placed in a position lower than her feet which is an indication
that there is a decrease of blood supply to the patient's brain. Immediately thereafter, she
went out of the operating room, and she told Rogelio E. Ramos "that something wrong
was happening". Dr. Calderon was then able to intubate the patient.
Meanwhile, Rogelio, who was outside the operating room, saw a respiratory
machine being rushed towards the door of the operating room. He also saw several
doctors rushing towards the operating room. When informed by Herminda Cruz that
something wrong was happening, he told her (Herminda) to be back with the patient
inside the operating room.
Herminda immediately rushed back, and saw that the
patient was still in trendelenburg position. At almost 3:00 P.M. of that fateful day, she
saw the patient taken to the Intensive Care Unit (ICU). Doctors Gutierrez and Hosaka
were also asked by the hospital to explain what happened to the patient. The doctors
explained that the patient had bronchospasm. Erlinda Ramos stayed at the ICU for a
month. About four months thereafter the patient was released from the hospital.
Page | 88
ISSUE:
1. Whether the respondent doctors are negligent.
2. Whether the respondent doctors and the hospital are solidarily liable.
RULING:
Res ipsa loquitur is a Latin phrase which literally means "the thing or the
transaction speaks for itself." The phrase "res ipsa loquitur" is a maxim for the rule that
the fact of the occurrence of an injury, taken with the surrounding circumstances, may
permit an inference or raise a presumption of negligence, or make out a plaintiff's prima
facie case, and present a question of fact for defendant to meet with an explanation
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.
With regard to Dra. Gutierrez, we find her negligent in the care of Erlinda during
the anesthesia phase. As borne by the records, respondent Dra. Gutierrez failed to
properly intubate the patient.
The Court finds that she omitted to exercise reasonable care in not only intubating
the patient, but also in not repeating the administration of atropine without due regard to
the fact that the patient was inside the operating room for almost three (3) hours. For
after she committed a mistake in intubating the patient, the patient's nailbed became
bluish and the patient, thereafter, was placed in trendelenburg position, because of the
decrease of blood supply to the patient's brain. The evidence further shows that the
hapless patient suffered brain damage because of the absence of oxygen in her (patient's)
brain for approximately four to five minutes which, in turn, caused the patient to become
comatose.
On the part of Dr. Orlino Hosaka, this Court finds that he is liable for the acts of
Dr. Perfecta Gutierrez whom he had chosen to administer anesthesia on the patient as part
of his obligation to provide the patient a `good anesthesiologist', and for arriving for the
scheduled operation almost three (3) hours late.
On the part of DLSMC (the hospital), this Court finds that it is liable for the acts
of negligence of the doctors in their `practice of medicine' in the operating room.
Moreover, the hospital is liable for failing through its responsible officials, to cancel the
scheduled operation after Dr. Hosaka inexcusably failed to arrive on time.
In having held thus, this Court rejects the defense raised by defendants that they
have acted with due care and prudence in rendering medical services to plaintiff-patient.
For if the patient was properly intubated as claimed by them, the patient would not have
become comatose. And, the fact that another anesthesiologist was called to try to
intubate the patient after her (the patient's) nailbed turned bluish, belie their claim.
Furthermore, the defendants should have rescheduled the operation to a later date. This,
they should have done, if defendants acted with due care and prudence as the patient's
case was an elective, not an emergency case.
Wherefore judgment is rendered in favor of the plaintiffs and against the
defendants. Accordingly, the latter are ordered to pay, jointly and severally.
Page | 89
Dr. Marilyn 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, a 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,
were sufficient to give upon any doctor of reasonable skill the impression that the patient
had typhoid fever.
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The doctrine of apparent authority involves two factors to determine the liability
of an independent contractor-physician. First factor focuses on the hospitals
manifestations and is sometimes described as an inquiry whether the hospital acted in a
manner which would lead a responsible person to conclude that the individual who was
alleged to be negligent was an employee or agent of the hospital. The second factor
focuses on the patients reliance. It is sometimes characterized as an inquiry on whether
the plaintiff acted in reliance upon the conduct of the hospital or its agent, consistent with
ordinary care and prudence.
In this case, it has been proven that the two factors were present. The hospital
indeed made it appear that Dr. Ampil was its employee when they advertise and
displayed his name in the directory at the lobby of the said hospital and that Natividad
relied on such knowledge that Dr. Ampil was indeed an employee of the hospital.
Wherefore PSI and Dr. Ampil are liable jointly and severally.
Page | 96
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. 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.
Page | 98
Considering that the incident was not a product of a malicious intent but rather the
result of a single act of reckless driving, should be held guilty of the complex crime of
reckless imprudence resulting in multiple homicide with serious physical injuries and less
serious physical injuries.
Article 48 of the Revised Penal Code provides that when the single act constitutes
two or more grave or less grave felonies, or when an offense is a necessary means for
committing the other, the penalty for the most serious crime shall be imposed, the same
to be applied in its maximum period. Since Article 48 speaks of felonies, it is applicable
to crimes through negligence in view of the definition of felonies in Article 3 as "acts or
omissions punishable by law" committed either by means of deceit {dolo) or fault
(culpa).
WHEREFORE, accused-appellant GLENN DE LOS SANTOS guilty beyond
reasonable doubt of (1) the complex crime of reckless imprudence resulting in multiple
homicide with serious physical injuries and less serious physical injuries, and sentencing
him to suffer an indeterminate penalty of four (4) years of prision correccional, as
minimum, to ten (10) years of prision mayor, as maximum; and (2) ten (10) counts of
reckless imprudence resulting in slight physical injuries and sentencing him, for each
count, to the penalty of two (2) months of arresto mayor. Furthermore, the awards of
death indemnity for each group of heirs of the trainees killed are reduced to P50,000; and
the awards in favor of the other victims are deleted.
Page | 101
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Page | 103
CO VS. CA
GR 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. The
purchase price of $100,000.00 is payable in two payments $40,000.00 on December 4,
1984 and the balance of $60,000.00 on January 5, 1985. On January 25, 1985, although
the period of payment had already expired, plaintiff paid to the defendant Melody Co in
the United States, the sum of $30,000.00, as partial payment of the purchase price.
Defendants counsel, Atty. Leopoldo Cotaco, wrote a letter to the plaintiff dated March
15, 1985, demanding that she pay the balance of $70,000.00 and not receiving any
response thereto, said lawyer wrote another letter to plaintiff dated August 8, 1986,
informing her that she has lost her option to purchase the property subject of this case
and offered to sell her another property.
ISSUE:
Whether or not the Court of Appeals erred in ordering the COS to return the
$30,000.00 paid by Custodio pursuant to the option granted to her over the Beata
property?
RULING:
The COS main argument is that Custodio lost her option over the Beata
property and her failure to exercise said option resulted in the forfeiture of any amounts
paid by her pursuant to the August letter.
An option is a contract granting a privilege to buy or sell within an agreed time
and at a determined price.
Article 1479.
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.
However, the March 15, 1985 letter sent by the COS through their lawyer to the
Custodio reveals that the parties entered into a perfected contract of sale and not an
option contract.
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.
Page | 104
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SPS. FELIPE AND LETICIA CANNU versus SPS. GIL AND FERNANDINA
GALANG AND NATIONAL HOME MORTGAGE FINANCE CORPORATION
G.R. No. 139523
2005 May 26
FACTS:
Respondents-spouses Gil and Fernandina Galang obtained a loan from Fortune
Savings & Loan Association for P173,800.00 to purchase a house and lot located at
Pulang Lupa, Las Pias, in the names of respondents-spouses. To secure payment, a real
estate mortgage was constituted on the said house and lot in favor of Fortune Savings &
Loan Association. In early 1990, NHMFC purchased the mortgage loan of respondentsspouses from Fortune Savings & Loan Association for P173,800.00. Petitioner Leticia
Cannu agreed to buy the property for P120,000.00 and to assume the balance of the
mortgage obligations with the NHMFC and with CERF Realty (the Developer of the
property).
A Deed of Sale with Assumption of Mortgage Obligation dated 20 August 1990
was made and entered into by and between spouses Fernandina and Gil Galang (vendors)
and spouses Leticia and Felipe Cannu (vendees) over the house and lot and petitioners
immediately took possession and occupied the house and lot. However, despite requests
from Adelina R. Timbang and Fernandina Galang to pay the balance of P45,000.00 or in
the alternative to vacate the property in question, petitioners refused to do so. Because the
Cannus failed to fully comply with their obligations, respondent Fernandina Galang, on
21 May 1993, paid P233,957.64 as full payment of her remaining mortgage loan with
NHMFC.
From 1991 until the present, no other payments were made by plaintiffsappellants to defendants-appellees spouses Galang. Out of the P250,000.00 purchase
price which was supposed to be paid on the day of the execution of contract in July, 1990
plaintiffs-appellants have paid, in the span of eight (8) years, from 1990 to present, the
amount of only P75,000.00. Plaintiffs-appellants should have paid the P250,000.00 at the
time of the execution of contract in 1990. Eight (8) years have already lapsed and
plaintiffs-appellants have not yet complied with their obligation.
ISSUE:
Whether or not the action for rescission was subsidiary, and that there was a
substantial breach of the obligation.
RULING:
Rescission or, more accurately, resolution, of a party to an obligation under
Article 1191 is predicated on a breach of faith by the other party that violates the
reciprocity between them.
Art. 1191 states that the power to rescind obligations is implied in reciprocal ones,
in case one of the obligors should not comply with what is incumbent upon him. The
injured party may choose between the fulfillment and the rescission of the obligation,
with the payment of damages in either case. He may also seek rescission, even after he
has chosen fulfillment, if the latter should become impossible. The court shall decree the
rescission claimed, unless there be just cause authorizing the fixing of a period.
Rescission will not be permitted for a slight or casual breach of the contract.
Rescission may be had only for such breaches that are substantial and fundamental as to
defeat the object of the parties in making the agreement. The question of whether a
breach of contract is substantial depends upon the attending circumstances and not
merely on the percentage of the amount not paid.
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non-payment of the price is a negative resolutory condition. The effects in law are not
identical. In a contract of sale, the vendor has lost ownership of the thing sold and cannot
recover it, unless the contract of sale is rescinded and set aside. In a contract to sell,
however, the vendor remains the owner for as long as the vendee has not complied fully
with the condition of paying the purchase price. If the vendor should eject the vendee for
failure to meet the condition precedent, he is enforcing the contract and not rescinding it.
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.
Thus, the petiotion is GRANTED, an the assailed decision is REVERSED and
SET ASIDE.
Page | 111
SPOUSES DOMINGO and LOURDES PAGUYO versus Pierre Astorga and St.
Andrew Realty, Inc.
G.R. No. 130982
2005 September 16
FACTS:
Spouses Domingo Paguyo and Lourdes Paguyo, were the owners of a small fivestorey building known as the Paguyo Building located at Makati Avenue, corner Valdez
Street, Makati City. The lot on which the Paguyo Building stands was the subject of
Civil Case wherein the RTC of Makati City, Branch 57, rendered a decision on 20
January 1988 approving a Compromise Agreement made between the Armases and the
petitioners. The compromise agreement provided that in consideration of the total sum of
One Million Seven Hundred Thousand Pesos (P1,700,000.00), the Armases committed to
execute in favor of petitioners a deed of sale and/or conveyance assigning and
transferring unto said petitioners all their rights and interests over the parcel of land
containing an area of 299 square meters. 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.
On 29 November 1988, in order to raise the much needed amount, 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 above-mentioned Receipt of Earnest Money.
On 12 December 1988, 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. Thus, on 5 January 1989, 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.
On 06 October 1989, 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. The petition for preliminary injunction
is denied, and the court ordered the plaintiff spouses Domingo and Lourdes Paguyo to
pay the defendants Pierre Astorga and St. Andrew Realty, Inc. on their counterclaim. On
appeal, the Court of Appeals affirmed the decision of the trial court
ISSUE:
Did the Court of Appeals err in upholding the trial courts decision denying
petitioners complaint for rescission?
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RULING:
No. The right to rescind a contract involving reciprocal obligations is provided for
in Article 1191 of the Civil Code. Article 1191 states: The power to rescind obligations is
implied in reciprocal ones, in case one of the obligors should not comply with what is
incumbent upon him. The injured party may choose between the fulfillment and the
rescission of the obligation, with the payment of damages in either case. He may also
seek rescission, even after he has chosen fulfillment, if the latter should become
impossible. The court shall decree the rescission claimed, unless there be just cause
authorizing the fixing of a period.
Moreover, Articles 1355 and 1470 of the Civil Code state: Art. 1355. Except in
cases specified by law, lesion or inadequacy of cause shall not invalidate a contract,
unless there has been fraud, mistake or undue influence. Art. 1470. Gross inadequacy of
price does not affect a contract of sale, except as may indicate a defect in the consent, or
that the parties really intended a donation or some other act or contract.
Petitioners failed to prove any of the instances mentioned in Articles 1355 and
1470 of the Civil Code, which would invalidate, or even affect, the Deed of Sale of the
Building and the related documents. Indeed, there is no requirement that the price be
equal to the exact value of the subject matter of sale. In sum, petitioners pray for
rescission of the Deed of Sale of the building and offer to repay the purchase price after
their liquidity position would have improved and after respondents would have
refurbished the building, updated the real property taxes, and turned the building into a
profitable business venture. The court stated however that, it will not allow itself to be an
instrument to the dissolution of contract validly entered into, for a party should not, after
its opportunity to enjoy the benefits of an agreement, be allowed to later disown the
arrangement when the terms thereof ultimately would prove to operate against its hopeful
expectations.
WHEREFORE, the Decision of the Court of Appeals is AFFIRMED with
MODIFICATION.
Page | 113
ISSUE:
Whether or not the rescission of the contract by the private respondent is valid.
RULING:
Under the contract, petitioner and respondent had respective obligations, i.e., the
former to supply and deliver the contracted volume of narra wood parquet materials and
install the same at respondents condominium project by May, 1990, and the latter, to pay
for said materials in accordance with the terms of payment set out under the parties
agreement. But while respondent was able to fulfill that which is incumbent upon it by
Page | 114
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. Thus, it is petitioner who breached the
contract.
The petitioner therefore, has failed to comply with his prestations under his
contract with respondent, the latter is vested by law with the right to rescind the parties
agreement, conformably with Article 1191 of the Civil Code.
However, the right to rescind a contract for non-performance of its stipulations is
not absolute. The general rule is that rescission of a contract will not be permitted for a
slight or casual breach, but only for such substantial and fundamental violations as would
defeat the very object of the parties in making the agreement. Contrary to petitioners
asseveration, the breach he committed cannot, by any measure, be considered as slight
or casual. For petitioners failure to make complete delivery and installation way beyond
the time stipulated despite respondents demands, is doubtless a substantial and
fundamental breach, more so when viewed in the light of the large amount of money
respondent had to pay another contractor to complete petitioners unfinished work.
Likewise, contrary to petitioners claim, it cannot be said that he had no inkling
whatsoever of respondents recourse to rescission. True, the act of a party in treating a
contract as cancelled or resolved on account of infractions by the other party must be
made known to the other. In the case, however, petitioner cannot feign ignorance of
respondents intention to rescind, fully aware, as he was, of his non-compliance with
what was incumbent upon him, not to mention the several letters respondent sent to him
demanding compliance with his obligation. It is thus proper that 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.
WHEREFORE, the petition is DENIED and the assailed Decision and
Resolution of the appellate court AFFIRMED.
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FACTS:
El Dorado Plantation, Inc. (El Dorado) was the registered owner of a parcel of
land with an area of approximately 1,825 hectares covered by Transfer Certificate of Title
(TCT) No. T-93 situated in Sablayan, Occidental Mindoro.
On February 15, 1972, at a special meeting of El Dorados Board of Directors, a
Resolution was passed authorizing Feliciano Leviste, then President of El Dorado, to
negotiate the sale of the property and sign all documents and contracts bearing thereon.
El Dorado, through Feliciano Leviste, sold the property to Fernando O. Carrascoso, Jr.
Under the Deed of Sale, Carrascoso was to pay the full amount of the purchase price on
March 23, 1975.
On March 24, 1972, 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.
On May 18, 1972, 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. However, the 3-year period for Carrascoso to fully pay for the property on
March 23, 1975 passed without him having complied therewith. In the meantime, on
July 11, 1975, 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, a stockholder and member of the Board of Directors of El Dorado,
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 February 21, 1977 to Carrascoso informing him that in view
of his failure to pay the balance of the purchase price of the property, El Dorado was
seeking the rescission of the March 23, 1972 Deed of Sale of Real Property. For the
failure of Carrascoso to give his reply, Lauro and El Dorado finally filed a complaint for
rescission of the Deed of Sale. They 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.
In the meantime, Carrascoso, as vendor and PLDT, as vendee forged on April 6,
1977 a Deed of Absolute Sale over the 1,000 hectare portion of the property subject of
their July 11, 1975 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.
On July 31, 1978, PLDT and PLDTAC filed an Urgent Motion for Intervention
which was granted by the trial court. PLDT and PLDTAC thereupon filed their Answer
Page | 116
equivalent to invalidating and unmaking the juridical tie, leaving things in their status
before the celebration of the contract.
Where a contract is rescinded, it is the duty of the court to require both parties to
surrender that which they have respectively received and to place each other as far as
practicable in his original situation, the rescission has the effect of abrogating the contract
in all parts.
The April 6, 1977 and May 30, 1977 Deeds of Absolute Sale being subject to the
notice of lis pendens, and as the Court affirms the declaration by the appellate court of
the rescission of the Deed of Sale executed by El Dorado in favor of Carrascoso,
possession of the 1,000 hectare portion of the property should be turned over by PLDT
to El Dorado.
As regards the improvements introduced by PLDT on the 1,000 hectare portion
of the property, a distinction should be made between those which it built prior to the
annotation of the notice of lis pendens and those which it introduced subsequent thereto.
WHEREFORE, the petitions are DENIED.
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GOLDENROD, INC. vs. COURT OF APPEALS BARRETTO & SONS, INC., PIO
BARRETTO REALTY DEVELOPMENT, INC., and ANTHONY QUE
G.R. No. 126812
1998 Nov 24
FACTS:
Pio Barretto and Sons, Inc. (BARRETTO & SONS) owned forty-three 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).
In 1988, 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. Petitioner's offer to buy the property resulted in its
agreement with respondent BARRETTO REALTY that petitioner would pay 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 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. However, petitioner did not pay UCPB the P24.5
million loan obligation of BARRETTO REALTY on the deadline set for payment. It
asked for an extension of one month or up to 31 July 1988 to settle the obligation, which
the bank granted. Moreover, petitioner again requested another extension of sixty days to
pay the loan, but the bank demurred.
In the meantime BARRETTO REALTY was able to cause the reconsolidation of
the forty-three titles covering the property subject of the purchase into two titles covering
Lots 1 and 2. The reconsolidation of the titles was made pursuant to the request of
petitioner in its letter to private respondents on 25 May 1988. Respondent BARRETTO
REALTY allegedly incurred expenses for the reconsolidation amounting to P250,000.00.
On 30 August 1988 Alicia P. Logarta, President of Logarta Realty and
Development Corporation, which acted as agent and broker of petitioner, wrote private
respondent Anthony Que informing him on behalf of petitioner that it could not go
through with the purchase of the property due to circumstances beyond its fault ( the
denial by UCPB of its request for extension of time to pay the obligation).
On 31 August 1988 respondent BARRETTO REALTY sold to Asiaworld Trade
Center Phils., Inc., Lot 2, one of the two consolidated lots, for the price of P23 million.
On 13 October 1988 respondent BARRETTO REALTY executed a deed transferring by
way of "dacion" the property reconsolidated as Lot 1 in favor of UCPB, which in turn
sold the property to ASIAWORLD for P24 million. Sometime after the said sale, Logarta
again wrote respondent Que demanding the return of the earnest money to
GOLDENROD, but to no avail. Petitioner then filed a complaint with the RTC of Manila
against private respondents for the return of the amount of P1 million and the payment of
damages including lost interests or profits.
ISSUE:
Whether or not the petitioner's extrajudicial rescission of its agreement with
private respondents was valid.
RULING:
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
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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.
It was held in the case of University of the Philippines v. de los Angeles that the
right to rescind contracts is not absolute and is subject to scrutiny and review by the
proper court. It was held further that rescission of reciprocal contracts may be
extrajudicially rescinded unless successfully impugned in court. If the party does not
oppose the declaration of rescission of the other party, specifying the grounds therefor,
and it fails to reply or protest against it, its silence thereon suggests an admission of the
veracity and validity of the rescinding party's claim. A such, private respondents did not
interpose any objection to the rescission by petitioner of the agreement. As found by the
Court of Appeals, private respondent BARRETTO REALTY even sold Lot 2 of the
subject consolidated lots to another buyer, ASIAWORLD, one day after its President
Anthony Que received the broker's letter rescinding the sale. Subsequently, on 13
October 1988 respondent BARRETTO REALTY also conveyed ownership over Lot 1 to
UCPB which, in turn, sold the same to ASIAWORLD.
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. 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 petitioner's payment of P1,000,000.00 and at the same time
appropriate the proceeds of the second sale made to another.
Page | 120
FACTS:
Sometime in early March 1968, petitioner Loreta Serrano bought some pieces of
jewelry for P48,500.00 from Niceta Ribaya. However, when petitioner was in need of
money, she instructed her private secretary, Josefina Rocco, to pawn the jewelry. Josefina
then went to private respondent Long Life Pawnshop, Inc. ("Long Life"), pledged the
jewelry for P22,000.00 with its principal owner and General Manager, Yu An Kiong, and
then absconded with said amount and the pawn ticket. The pawnshop ticket issued to
Josefina Rocco stipulated that it was redeemable "on presentation by the bearer."
Three months later, Gloria Duque and Amalia Celeste informed Niceta Ribaya
that a pawnshop ticket issued by private respondent was being offered for sale. They told
Niceta the ticket probably covered jewelry once owned by the latter which jewelry had
been pawned by one Josefina Rocco. Suspecting that it was the same jewelry she had sold
to petitioner, Niceta informed the latter of this offer and suggested that petitioner go to
the Long Life pawnshop to check the matter out. Petitioner claims she went to private
respondent pawnshop, verified that indeed her missing jewelry was pledged there and
told Yu An Kiong not to permit anyone to redeem the jewelry because she was the lawful
owner thereof. Petitioner claims that Yu An Kiong agreed.
On 9 July 1968, petitioner went to the Manila Police Department to report the
loss, and a complaint first for qualified theft and later changed to estafa was subsequently
filed against Josefina Rocco. Thereafter, a member of the Manila Police went to the
pawnshop, showed Yu An Kiong petitioner's report and left the latter a note asking him
to hold the jewelry and notify the police in case someone should redeem the same.
However, the next day, Yu An Kiong permitted one Tomasa de Leon, exhibiting the
appropriate pawnshop ticket, to redeem the jewelry.
On 4 October 1968, petitioner filed a complaint for damages against private
respondent Long Life for failure to hold the jewelry and for allowing its redemption
without first notifying petitioner or the police. Hon. Luis B. Reyes, rendered a decision in
favor of petitioner. The decision was however reversed on appeal and the complaint
dismissed by the public respondent Court of Appeals.
ISSUE:
Whether or not the Court of Appeals committed reversible error in rendering its
Decision.
RULING:
Having been notified by petitioner and the police that jewelry pawned to it was
either stolen or involved in an embezzlement of the proceeds of the pledge, private
respondent pawnbroker became duty bound to hold the things pledged and to give notice
to petitioner and the police of any effort to redeem them. Such a duty was imposed by
Article 21 of the Civil Code. The circumstance that the pawn ticket stated that the pawn
was redeemable by the bearer, did not dissolve that duty. The pawn ticket was not a
negotiable instrument under the Negotiable Instruments Law nor a negotiable document
of title under Articles 1507 et seq. of the Civil Code. If the third person Tomasa de Leon,
who redeemed the things pledged a day after petitioner and the police had notified Long
Life, claimed to be owner thereof, the prudent recourse of the pawnbroker was to file an
interpleader suit, impleading both petitioner and Tomasa de Leon. The respondent
Page | 121
pawnbroker was, of course, entitled to demand payment of the loan extended on the
security of the pledge before surrendering the jewelry, upon the assumption that it had
given the loan in good faith and was not a "fence" for stolen articles and had not
conspired with the faithless Josefina Rocco or with Tomasa de Leon.
Respondent pawnbroker acted in reckless disregard of that duty in the instant case
and must bear the consequences, without prejudice to its right to recover damages from
Josefina Rocco. Hence, the trial court correctly held that private respondent was liable to
petitioner for actual damages which corresponded to the difference in the value of the
jewelry and the amount of the loan, or the sum of P26,500.00. Petitioner is entitled to
collect the balance of the value of the jewelry, corresponding to the amount of the loan, in
an appropriate action against Josefina Rocco. Private respondent Long Life in turn is
entitled to seek reimbursement from Josefina Rocco of the amount of the damages it must
pay to petitioner.
Wherefore, the Petition is GRANTED and the decision of the Court of Appelas
was REVERSED and SET ASIDE.
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PERLA PALMA GIL, VICENTE HIZON, JR., and ANGEL PALMA GIL vs.
HON. COURT OF APPEALS, HEIRS OF EMILIO MATULAC, CONSTANCIO
MAGLANA, AGAPITO PACETES & The REGISTER OF DEEDS OF DAVAO
CITY
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, identified as Lot No. 59-C, covered by Transfer Certificate of Title (TCT) No.
432 located in Davao City. The spouses Angel and Nieves Villarica had constructed a
two-storey commercial building on the property. On October 13, 1953, Concepcion filed
a complaint against her sister Nieves 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 on April 7, 1954 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. On April 27, 1956, the court issued an order
authorizing ex-officio Sheriff Eriberto Unson to execute the requisite deed of transfer to
the plaintiff over an undivided portion of the property with a total area of 256.2 square
meters. Instead of doing so, the sheriff had the property subdivided into four lots. The
sheriff thereafter executed a Deed of Transfer to Concepcion.
On October 24, 1956, Concepcion executed a deed of absolute sale over Lot 59-C-1
in favor of Iluminada Pacetes. In the said deed, the area of Lot 59-C-1 appeared as 256
square meters although under the subdivision plan, the area of the property was only 218
square meters.
On December 21, 1956, Iluminada Pacetes filed a motion to intervene as vendee of
the property subject of the case and a motion to dismiss the complaint which was both
granted by the court. On the basis of the deed of transfer executed by Sheriff Iriberto A.
Unson, the Register of Deeds issued TCT No. 7450 over Lot 59-C-1 and 59-C-2 on July
17, 1957 in the name of Concepcion, with a total area of 256.2 square meters. However,
the latter failed to transfer title to the property to and under the name of Iluminada
Pacetes. Consequently, the latter did not remit the balance of the purchase price of the
property to Concepcion.
In the interim, the spouses Angel and Nieves Villarica executed a real estate
mortgage over Lot 59-C-4 in favor of Prudential Bank as security for a loan. On August
4, 1959, Concepcion died intestate and was survived by Nieves Villarica and her
nephews and nieces. Iluminada filed a motion for her substitution as party-plaintiff in lieu
of the deceased Concepcion. On August 2, 1961, the court issued an order granting the
motion.
The Court rendered judgment setting aside the deed of transfer executed by the
sheriff in favor of Concepcion Palma Gil, and remanding the records to the trial court for
further proceedings. In compliance with the Decision of the Court in the other case, the
trial court conducted further proceedings and discovered that the defendant had
mortgaged Lot 59-C-4 to the Prudential Bank. Consequently, the court issued an order on
February 17, 1964, declaring that the defendant had waived the benefits of the Decision
of the Court, thus, the conveyance of the property made by Concepcion in favor of
Iluminada on October 24, 1956 must stand. Nieves filed a motion for the reconsideration
of the said order but the court denied the same in an Order dated February 29, 1964.
Nieves appealed the order to the CA which dismissed the appeal. for her failure to file a
record on appeal.
ISSUE:
Whether or not the rescission made was valid and binding upon the parties.
RULING:
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Under the last paragraph of Article 1169 of the New Civil Code, 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 in the other begins. Thus, reciprocal obligations
are to be performed simultaneously so that the performance of one is conditioned upon
the simultaneous fulfillment of the other. The right of rescission of a party to an
obligation under Article 1191 of the New Civil Code is predicated on a breach of faith by
the other party that violates the reciprocity between them.
The deed of absolute sale executed by Concepcion Gil in favor of Iluminada Pacetes
is an executory contract and not an executed contract is a settled matter. In a perfected
contract of sale of realty, the right to rescind the said contract depends upon the
fulfillment or non-fulfillment of the prescribed condition. The court ruled that the
condition pertains in reality to the compliance by one party of an undertaking the
fulfillment of which would give rise to the demandability of the reciprocal obligation
pertaining to the other party. The reciprocal obligation envisaged would normally be, in
the case of the vendee, the payment by the vendee of the agreed purchase price and in the
case of the vendor, the fulfillment of certain express warranties.
In this case, Concepcion Gil sold Lot 59-C-1 to Iluminada Pacetes for P21,600.00,
that P7,500.00, to be paid upon the signing of this instrument; and the balance of
P14,100.00, to be paid upon the delivery of the corresponding Certificate of Title.
Indeed, Concepcion Gil obliged herself to transfer title over the property to and under the
name of the vendee within 120 days from the execution of the deed.
The vendee paid the downpayment of P7,500.00. By the terms of the contract, the
obligation of the vendee to pay the balance of the purchase price ensued only upon the
issuance of the certificate of title by the Register of Deeds over the property sold to and
under the name of the vendee, and the delivery thereof by the vendor Concepcion Gil to
the latter. Concepcion failed to secure a certificate of title over the property. When she
died intestate on August 4, 1959, her obligation to deliver the said title to the vendee
devolved upon her heirs, including the petitioners. The said heirs, including the
petitioners failed to do so, despite the lapse of eighteen years since Concepcions death.
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 on October 24, 1956, 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.
Thus, the decision of the CA affirming the decision of the RTC dismissing the
complaint of the petitioners is affirmed.
Page | 124
DAVID REYES vs. JOSE LIM, CHUY CHENG KENG and HARRISON
LUMBER, INC.
408 SCRA 560
FACTS:
On 7 November 1994, 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 total consideration
for the purchase of the aforedescribed parcel of land together with the perimeter walls
found therein P28,000,000.00 pesos.
The complaint claimed that Reyes had informed Harrison Lumber to vacate the
Property before the end of January 1995. Reyes also informed Keng and Harrison
Lumber that if they failed to vacate by 8 March 1995, he would hold them liable for the
penalty of P400,000 a month as provided in the Contract to Sell. The complaint further
alleged that Lim connived with Harrison Lumber not to vacate the Property until the
P400,000 monthly penalty would have accumulated and equaled the unpaid purchase
price of P18,000,000.
On the other hand, Keng and Harrison Lumber denies that they connived with Lim to
defraud Reyes. Keng and Harrison Lumber alleged that Reyes approved their request for
an extension of time to vacate the Property due to their difficulty in finding a new
location for their business. Harrison Lumber claimed that as of March 1995, it had
already started transferring some of its merchandise to its new business location in
Malabon.
Lim alleged that he was ready and willing to pay the balance of the purchase price on
or before 8 March 1995, but Reyes kept postponing their meeting. 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 rejected Reyes offer and
proceeded to verify the status of Reyes title to the Property. Lim learned that Reyes had
already sold the Property to Line One Foods Corporation on 1 March 1995 for
P16,782,840.
ISSUE:
Whether or not Reyes has the right to obje t to the deposit of the 10 million pesos
downpayment in court.
RULING:
There is also no plausible or justifiable reason for Reyes to object to the deposit of
the P10 million down payment in court. The Contract to Sell can no longer be enforced
because Reyes himself subsequently sold the Property to Line One. Both Reyes and Lim
are seeking rescission of the Contract to Sell. Under Article 1385 of the Civil Code,
rescission creates the obligation to return the things that are the object of the contract.
Rescission is possible only when the person demanding rescission can return whatever he
may be obliged to restore. A court of equity will not rescind a contract unless there is
restitution, that is, the parties are restored to the status quo ante.
Thus, since Reyes is demanding to rescind the Contract to Sell, he cannot refuse to
deposit the P10 million down payment in court. Such deposit will ensure restitution of the
P10 million to its rightful owner. Lim, on the other hand, has nothing to refund, as he has
not received anything under the Contract to Sell.
In another case, the Court ruled the refund of amounts received under a contract is a
precondition to the rescission of the contract. the party who have asked for rescission,
must restore to the defendants whatever it has received under the contract. It will only be
just if, as a condition to rescission, the other party be required to refund to the defendants
an amount equal to the purchase price, plus the sums expended by them in improving the
land.
The principle that no person may unjustly enrich himself at the expense of another is
embodied in Article 22 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, quasidelict or any other provision of law. Courts can extend this condition to the hiatus in the
Page | 125
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.
Thus, 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.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED.
Page | 126
Page | 128
Page | 129
RULING:
A contract of sale is valid until rescinded, and ownership of the thing sold is not
acquired by mere agreement, but by tradition or delivery. In the case, it shows that
delivery was not actually effected; in fact, it was prevented by a legally effective
impediment. Not having been the owner, petitioner cannot be entitled to the civil fruits
of ownership like rentals of the thing sold. Furthermore, petitioners bad faith, as again
demonstrated by the specific factual milieu of said Decision, bars the grant of such
benefits.
In this case, it is clear that petitioner never took actual control and possession of
the property sold, in view of respondents timely objection to the sale and the continued
actual possession of the property. The objection took the form of a court action
impugning the sale which, as we know, was rescinded by a judgment rendered by this
Court in the mother case. It has been held that the execution of a contract of sale as a
form of constructive delivery is a legal fiction. It holds true only when there is no
impediment that may prevent the passing of the property from the hands of the vendor
into those of the vendee. When there is such impediment, fiction yields to reality - the
delivery has not been effected. Hence, respondents opposition to the transfer of the
property by way of sale to Equatorial was a legally sufficient impediment that effectively
prevented the passing of the property into the latters hands.
The execution of a public instrument gives rise, therefore, only to a prima facie
presumption of delivery. Such presumption is destroyed when the instrument itself
expresses or implies that delivery was not intended; or when by other means it is shown
that such delivery was not effected, because a third person was actually in possession of
the thing. In the latter case, the sale cannot be considered consummated.
2. The Decision in the mother case stated that Equatorial x x x has received
rents from Mayfair during all the years that this controversy has been litigated.
However, these statements does not concede actual delivery. The fact that Mayfair paid
rentals to Equatorial during the litigation should not be interpreted to mean either actual
delivery or ipso facto recognition of Equatorials title. The records show that Equatorial as alleged buyer of the disputed properties and as alleged successor-in-interest of
Carmelos rights as lessor - submitted two ejectment suits against Mayfair. Mayfair
eventually won them both. However, to be able to maintain physical possession of the
premises while awaiting the outcome of the mother case, it had no choice but to pay the
rentals.
Therefore, the rental payments made by Mayfair should not be construed as a
recognition of Equatorial as the new owner. They were made merely to avoid imminent
eviction. 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 the Court in the mother case,
Equatorial was never put in actual and effective control or possession of the property
because of Mayfairs timely objection.
In short, the sale to Equatorial may have been valid from inception, but it was
judicially rescinded before it could be consummated. Petitioner never acquired
ownership, not because the sale was void, as erroneously claimed by the trial court, but
because the sale was not consummated by a legally effective delivery of the property
sold.
Page | 130
The private respondents therefore 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. The petitioners expressed
their willingness to pay the balance of the purchase price one month after it became due;
however, this was not equivalent to actual payment as would constitute a faithful
compliance of their reciprocal obligation. In effect, the qualified offer to pay was a
repudiation of an existing obligation, which was legally due and demandable under the
contract of sale. Hence, private respondents were left with the legal option of seeking
rescission to protect their own interest.
The breach committed by petitioners was the nonperformance of a reciprocal
obligation, not a violation of the terms and conditions of the mortgage contract.
Therefore, the automatic rescission and forfeiture of payment clauses stipulated in the
contract does not apply. Instead, Civil Code provisions shall govern and regulate the
resolution of this controversy. Considering that the rescission of the contract is based on
Article 1191 of the Civil Code, mutual restitution is required to bring back the parties to
their original situation prior to the inception of the contract. Accordingly, the initial
payment of P800,000 and the corresponding mortgage payments in the amounts of
P27,225, P23,000 and P23,925 (totaling P874,150.00) advanced by petitioners should be
returned by private respondents, lest the latter unjustly enrich themselves at the expense
of the former.
Rescission creates the obligation to return the object of the contract. It can be
carried out only when the one who demands rescission can return whatever he may be
obliged to restore. To rescind is to declare a contract void at its inception and to put an
end to it as though it never was. It is not merely to terminate it and release the parties
from further obligations to each other, but to abrogate it from the beginning and restore
the parties to their relative positions as if no contract has been made.
Page | 132
FACTS:
On September 9, 1980, private respondent borrowed P500,000 from Paluwagan
ng Bayan Savings and Loan Association to use as working capital for Embassy Farms.
He executed a real estate mortgage on three of his properties as security for the loan. On
November 4, 1981, private respondent mortgaged 10 titles more in favor of PAIC
Savings and Mortgage Bank, formerly First Summa Savings and Mortgage Bank, as
security for a loan he obtained from it in the amount of P1,712,000. Private respondent
obtained another loan in the amount of P844,625.78 from Mercator Finance Corporation.
The loan was secured by a real estate mortgage on five 5 other landholdings of private
respondent.
Private respondents aggregate debt exposure totaled P3,056,625.78. However, he
defaulted in his loan payments. By June 1984, his aggregate debt had ballooned to almost
six million pesos.
On August 2, 1984, petitioner and private respondent executed a Memorandum of
Agreement. Upon the execution of the Memorandum, petitioner paid private respondent
one million pesos, P500,000.00 within a ninety-day period in four disbursements. The
second installment, in the like amount of three hundred thousand pesos, was supposed to
be remitted by petitioner to private respondent for the purpose of financing the operations
of the piggery pursuant to the Memorandum. Instead, petitioner agreed to pay to PAIC
Savings & Mortgage Bank.
Aside from paying the aforesaid amount of P300,000.00 to PAIC Savings &
Mortgage Bank, petitioner also paid P400,000.00 in favor of Paluwagan ng Bayan
Savings and Loan Association.
For his part, private respondent was obligated under the Memorandum of Agreement to
"execute, sign and deliver any and all documents" necessary for the transfer and
conveyance of several parcels of land he owned but mortgaged with the banks and
financial institutions and to "cede, transfer and convey in a manner absolute and
irrevocable any and all of his shares of stocks in Embassy Farms, Inc." as well as "cause
to be so transferred to petitioner or his nominee such shares of stock until they constitute
90% of the paid-in equity of said corporation". However, more than a year after the
signing of the Memorandum of Agreement, the landholdings of private respondent which
were mortgaged to Paluwagan ng Bayan Savings and Loan Association, PAIC Savings
and Mortgage Bank and Mercator Finance Corporation still remained titled in his name.
Neither did he inform said mortgagees of the transfer of his lands. 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. He accused petitioner of having failed to
restructure his loans with Paluwagan ng Bayan Savings and Loan Association, PAIC
Savings and Mortgage Bank and Mercator Finance Corporation and blamed him for the
foreclosure of his landholdings, including the piggery site of Embassy Farms, Inc.
Petitioner then filed in the RTC a complaint for rescission of the Memorandum of
Agreement with a prayer for damages. The Court declared the Memorandum of
Agreement rescinded and of no further force and effect. Both petitioner and private
respondent repaired to the Court of Appeals. The court affirmed the decision of the trial
court and ordered its immediate execution.
Page | 133
ISSUES:
1. Whether the non-compliance of one party in a reciprocal obligation amounts to
rescission of the obligation.
2. Whether or not the Court shall allow the grant of damages corresponding to the
value of the land foreclosed by private respondent's creditors upon the latter's failure to
make his loan payments.
RULING:
1. The parties' Memorandum of Agreement is a contract of sale where a price
certain is paid in exchange for a determinate thing that is sold and delivered. However, it
shows that it constitutes not a mere isolated, simple, short-term business deal calling for
the outright sale and purchase of land and shares of stocks belonging to private
respondent, but a set of chronological, reciprocal and conditional obligations that both
petitioner and private respondent must faithfully comply with to ensure the full
enforcement of all its stipulations.
Petitioner and private respondent entered into what the law regards as reciprocal
obligations. Reciprocity arises from identity of cause, and necessarily the two obligations
are created at the same time. Reciprocal obligations, therefore, are those which arise from
the same cause, and in which each party is a debtor and a creditor of the other, such that
the obligation of one is dependent upon the obligation of the other. They are to be
performed simultaneously, so that the performance of one is conditioned upon the
simultaneous fulfillment of the other.
Article 1191 of the Civil Code governs the situation where there is noncompliance by one party in case of reciprocal obligations. It provides:
"The power to rescind the 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 2388 and the Mortgage Law."
The effect of rescission is also provided in the Civil Code in Article 1385:
"Rescission creates the obligation to return the things which were the object of the
contract, together with their fruits, and the price with its interest, consequently, it can be
carried out only when he who demands rescission can return whatever he may be
obligated 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, indemnity for damages may be demanded from the persons causing the
loss."
Page | 134
Private respondent admitted in open court that petitioner paid him the initial sum
of one million pesos upon the signing of the Memorandum of Agreement as well as
various sums of money as fees for the restructuring of his loans. Thereupon, private
respondent was obligated to execute a deed of sale with assumption of mortgage, both in
compliance with the Memorandum of Agreement and to ensure the legal efficacy of
petitioner's promise to assume his loan obligations. However, private respondent failed to
perform his substantial obligations under the Memorandum of Agreement. Hence,
petitioner sought the rescission of the Memorandum of Agreement and ceased infusing
capital into the piggery business of private respondent.
2. The Court cannot allow the grant of damages corresponding to the value of the
land foreclosed by private respondent's creditors upon the latter's failure to make his loan
payments. In case of rescission, while damages may be assessed in favor of the
prejudiced party, only those kinds of damages consistent with the remedy of rescission
may be granted, keeping in mind that had the parties opted for specific performance,
other kinds of damages would have been called for which are absolutely distinct from
those kinds of damages accruing in the case of rescission.
An obligation may be resolved if one of the obligors fails to comply with that
which is incumbent upon him; and it is declared that the person prejudiced may elect
between exacting the fulfillment of the obligation (specific performance) and its
resolution, with compensation for damage and payment of interest in either case. One is
not entitled to pursue both of the inconsistent remedies. In estimating the damages to be
awarded in case of rescission, those elements of damages only can be admitted that are
compatible with the idea of rescission and in estimating the damages to be awarded in
case the lessor elects for specific performance only those elements of damages can be
admitted which are compatible with the conception of specific performance. Thus,
damages which would only be consistent with the conception of specific performance
cannot be awarded in an action where rescission is sought.
In cases of resolution or rescission, the parties are bound to restore to each the
thing which has been the subject matter of the contract, precisely as in the situation where
a decree of nullity is granted. In the common case of the resolution of a contract of sale
for failure of the purchaser to pay the stipulated price, the seller is entitled to be restored
to the possession of the thing sold, if it has already been delivered. But he cannot have
both the thing sold and the price which was agreed to be paid, for the resolution of the
contract has the effect of destroying the obligation to pay the price. Similarly, in the case
of the resolution, or rescission of a contract of lease, the lessor is entitled to be restored to
the possession of the leased premises, but he cannot have both the possession of the
leased premises for the remainder of the term and the rent which the other party had
contracted to pay. The termination of the lease has the effect of destroying the obligation
to pay rent for the future.
Page | 135
FACTS:
Petitioners William Uy and Rodel Roxas 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, Tadiangan, Benguet to respondent National Housing
Authority (NHA) to be utilized and developed as a housing project. On February 14,
1989, the NHA Board passed Resolution No. 1632 approving the acquisition of said
lands at the cost of P23.867 million, pursuant to which the parties executed a series of
Deeds of Absolute Sale covering the subject lands. Of the eight parcels of land, however,
only five were paid for by the NHA because of the report it received from the Land
Geosciences Bureau of the Department of Environment and Natural Resources (DENR)
that the remaining area is located at an active landslide area and therefore, not suitable for
development into a housing project. On 22 November 1991, the NHA issued Resolution
No. 2352 cancelling the sale over the three parcels of land. The NHA, through Resolution
No. 2394, subsequently offered the amount of P1.225 million to the landowners as danos
perjuicios.
On 9 March 1992, petitioners filed before the RTC of Quezon City a Complaint
for Damages against NHA and its General Manager Robert Balao. After trial, the RTC
rendered a decision declaring the cancellation of the contract to be justified. The trial
court nevertheless awarded damages to plaintiffs in the sum of P1.255 million, the same
amount initially offered by NHA to petitioners as damages. Upon appeal by petitioners,
the Court of Appeals reversed the decision of the trial court and entered a new one
dismissing the complaint. It held that since there was "sufficient justifiable basis" in
cancelling the sale, "it saw no reason" for the award of damages.
ISSUE:
Whether or not the CA erred in declaring that respondent NHA had any legal
basis for rescinding the sale involving the last three parcels covered by NHA Resolution
No. 1632.
RULING:
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. Article 1191 states:
The power to rescind obligations is implied in reciprocal ones, in case one of the obligors
should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the obligation,
with the payment of damages in either case. He may also seek rescission, even after he
has chosen fulfillment, if the latter should become impossible.
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.
Page | 136
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.
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. 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.
Accordingly, we hold that the NHA was justified in cancelling the contract. The
realization of the mistake as regards the quality of the land resulted in the negation of the
motive/cause thus rendering the contract inexistent.28 [Note that said contract is also
avoidable under Article 1331 of the Civil Code which states:
Art. 1331. In order that mistake may invalidate consent, it should refer to the substance of
the thing which is the object of the contract, or to those conditions which have principally
moved one or both parties to enter into the contract. x x x] Article 1318 of the Civil Code
states that:
Art. 1318. There is no contract unless the following requisites concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established.
Wherefore, the petition was DENIED.
Page | 137
FACTS:
Andres Malecdan was a 75 year-old farmer residing in Barangay Nungnungan 2,
Municipality of Cauayan, Province of Isabela. On July 15, 1994, at around 7:00 p.m.,
while Andres was crossing the National Highway on his way home from the farm, a
Dalin Liner bus on the southbound lane stopped to allow him and his carabao to pass.
However, as Andres was crossing the highway, a bus of petitioner Victory Liner, driven
by Ricardo C. Joson, Jr., bypassed the Dalin bus. In so doing, respondent hit the old man
and the carabao on which he was riding. As a result, Andres Malecdan was thrown off the
carabao, while the beast toppled over. The Victory Liner bus sped past the old man, while
the Dalin bus proceeded to its destination without helping him. Malecdan sustained a
wound on his left shoulder, from which bone fragments protruded. He was taken by
Lorena, the witness, and another person to the Cagayan District Hospital where he died a
few hours after arrival The carabao also died soon afterwards. 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.
On October 5, 1994, private respondents brought suit for damages in the Regional
Trial Court, Branch 5, Baguio City, which, in a decision rendered on July 17, 2000, 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. 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:
1. Whether or not the employer can be held solidarily liable or vicariously liable.
2. Whether or not the award of damages is valid.
RULING:
1. Article 2176 provides:
Whoever by act or omission causes damage to another, there being fault or negligence, is
obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing
contractual relation between the parties, is called a quasi-delict and is governed by the
provisions of this Chapter.
Article 2180 provides for the solidary liability of an employer for the quasi-delict
committed by an employee. The responsibility of employers for the negligence of their
employees in the performance of their duties is primary and, therefore, the injured party
may recover from the employers directly, regardless of the solvency of their employees.
The rationale for the rule on vicarious liability has been explained thus:
What has emerged as the modern justification for vicarious liability is a rule of policy, a
deliberate allocation of a risk. The losses caused by the torts of employees, which as a
practical matter are sure to occur in the conduct of the employers enterprise, are placed
upon that enterprise itself, as a required cost of doing business. They are placed upon the
employer because, having engaged in an enterprise, which will on the basis of all past
experience involve harm to others through the tort of employees, and sought to profit by
it, it is just that he, rather than the innocent injured plaintiff, should bear them; and
Page | 138
because he is better able to absorb them and to distribute them, through prices, rates or
liability insurance, to the public, and so to shift them to society, to the community at
large. Added to this is the makeweight argument that an employer who is held strictly
liable is under the greatest incentive to be careful in the selection, instruction and
supervision of his servants, and to take every precaution to see that the enterprise is
conducted safely.
Employers may be relieved of responsibility for the negligent acts of their
employees acting within the scope of their assigned task only if they can show that "they
observed all the diligence of a good father of a family to prevent damage." For this
purpose, they have the burden of proving that they have indeed exercised such diligence,
both in the selection of the employee and in the supervision of the performance of his
duties.
In the selection of prospective employees, employers are required to examine
them as to their qualifications, experience and service records. With respect to the
supervision of employees, employers must formulate standard operating procedures,
monitor their implementation and impose disciplinary measures for breaches thereof.
These facts must be shown by concrete proof, including documentary evidence.
2. 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. The
court cannot take into account receipts showing expenses incurred some time after the
burial of the victim, such as expenses relating to the 9th day, 40th day and 1st 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 9th day death anniversary of the deceased. This
item cannot be allowed. The court 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.
Art. 2231 provides that exemplary damages may be recovered in cases involving
quasi-delicts if the defendant acted with gross negligence. 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, the court believe that the trial courts award of P50,000.00 as exemplary
damages is proper.
Finally, private respondents are entitled to attorneys fees. Under Art. 2008 of the
Civil Code, attorneys fees may be recovered when, as in the instant case, exemplary
damages are awarded. In the recent case of Metro Manila Transit Corporation v. Court of
Appeals, the court held an award of P50,000.00 as attorneys fees to be reasonable.
Hence, private respondents are entitled to attorneys fees in that amount.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED, with the
MODIFICATION.
Page | 139
FACTS:
Sometime in December 1969, the spouses Deang obtained a housing loan from
the GSIS in the amount of eight thousand five hundred pesos. Under the agreement, the
loan was to mature on December 23, 1979. The loan was secured by a real estate
mortgage constituted over the spouses property covered by Transfer Certificate of Title
No. 14926-R issued by the Register of Deeds of Pampanga. As required by the mortgage
deed, the spouses Daeng deposited the owners duplicate copy of the title with the GSIS.
On January 19, 1979, eleven (11) 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 since they intended to secure a loan from a private
lender and use the land covered by it as collateral security for the loan of fifty thousand
pesos which they applied for with one Milagros Runes. However, personnel of the GSIS
were not able to release the owners duplicate of the title as it could not be found despite
diligent search. As stated earlier, the spouses as mortgagors deposited the owners
duplicate copy of the title with the GSIS located at its office in San Fernando, Pampanga.
Satisfied that the owners duplicate copy of the title was really lost, in 1979, GSIS
commenced the reconstitution proceedings with the Court of First Instance of Pampanga
for the issuance of a new owners copy of the same. On June 22, 1979, GSIS issued a
certificate of release of mortgage. After the completion of judicial proceedings, GSIS
finally secured and released the reconstituted copy of the owners duplicate of Transfer
Certificate of Title No. 14926-R to the spouses Deang.
On July 6, 1979, the spouses Deang filed with the Court of First Instance, Angeles
City 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 from
Milagros Runes, the proceeds of which could have been used in defraying the estimated
cost of the renovation of their residential house and which could have been invested in
some profitable business undertaking. The trial court rendered a decision ruling for the
spouses Deang. The trial court reasoned that the loss of the owners duplicate copy of the
title in the possession of GSIS as security for the mortgage... without justifiable cause
constitutes negligence on the part of the employee of GSIS who lost it, making GSIS
liable for damages.
On August 30, 1995, GSIS appealed the decision to the Court of Appeals. On
September 21, 1998, the Court of Appeals promulgated a decision affirming the appealed
judgment, ruling: First, since government owned and controlled corporations whose
charters provide that they can sue and be sued have a legal personality separate and
distinct from the government, GSIS is not covered by Article 2180 of the Civil Code, and
it is liable for damages caused by their employees acting within the scope of their
assigned tasks. Second, the GSIS is liable to pay a reasonable amount of damages and
attorneys fees, which the appellate court will not disturb.
ISSUE:
1. Whether 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.
2. Whether or no the award of damages is valid.
Page | 140
RULING:
1. GSIS is liable for damages. Article 2180 and Article 2176 is not applicable to
the case. However, the trial court and the Court of Appeals erred in citing it as the
applicable law. The trial court and the Court of Appeals should not have treated the
obligation of GSIS as one springing from quasi-delict. Under the facts, there was a preexisting 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. Thus, negligence is obvious as the owners
duplicate copy could not be returned to the owners. Therefore, the more applicable
provisions of the Civil Code are:
Article 1170. Those who in the performance of their obligations are guilty of fraud,
negligence, or delay and those who in any manner contravene the tenor thereof are liable
for damages.
Article 2201. In contracts and quasi-contracts, the damages for which the obligor who
acted in good faith is liable shall be those 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 xxx.
Since good faith is presumed and bad faith is a matter of fact which should be
proved, GSIS shall be treated as a party who defaulted in its obligation to return the
owners duplicate copy of the title. As an obligor in good faith, GSIS is liable for all the
natural and probable consequences of the breach of the obligation. The inability of the
spouses Deang to secure another loan and the damages they suffered thereby has its roots
in the failure of the GSIS to return the owners duplicate copy of the title.
2. In a breach of contract, moral damages are not awarded if the defendant is not
shown to have acted fraudulently or with malice or bad faith. The fact that the
complainant suffered economic hardship or worries and mental anxiety is not enough.
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 can not 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. Thus,
temperate damages may be granted.
Article 2224. Temperate or moderate damages, which are more than nominal but less
than compensatory damages, may be recovered when the court finds that some pecuniary
loss has been suffered but its amount cannot, from the nature of the case, be proved with
certainty.
The rationale behind temperate damages is precisely that from the nature of the
case, definite proof of pecuniary loss cannot be offered. When the court is convinced that
there has been such loss, the judge is empowered to calculate moderate damages, rather
than let the complainant suffer without redress from the defendants wrongful act. 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.
WHEREFORE, the petition was DENIED, and the decision of the Court of
Appeals is AFFIRMED with the MODIFICATION that award of attorneys fees is
DELETED.
Page | 141
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. On December 12,
1979, there appeared in BPI Investments ledger due D. G. Carreon an amount of
P323,518.22, which is the exact amount to mature on December 17, 1979. D. G. Carreon
did not make any money placement maturing on December 12, 1979.
On December 17, 1979, BPI Investments credited D. G. Carreon with another
P323,518.22 via roll over of P300,000.00, for a term of one hundred twenty days at 19%
interest maturing on April 15, 1980, and P23,518.22, paid out in cash. BPI Investments
paid the money placement on April 16, 1980. The money placement in the amount of
P319,000.00 that matured on April 16, 1980 was again rolled over for a term of sixty one
days at 19% interest maturing on June 16, 1980, with a maturity value of P329,443.81.
The amount was again rolled over for a term of thirty days at 18% interest maturing on
July 16, 1980, and again rolled over for another thirty days at 18% interest.
BPI Investments paid D. G. Carreon twice in interest of the amount of
P323,518.22, representing a single money market placement, the first on December 12,
1979, and the second on December 17, 1979. According to petitioner, their bookkeeper
made an error in posting 12-17 on the sales order slip for 12-12. BPI Investments
claimed that the same placement was also booked as maturing on December 12, 1979.
Aurora Carreon instructed BPI Investments to roll over the whole amount of P323,518.22
for another thirty days, or up to January 11, 1980, at 19% interest. 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. On April 21,
1982, BPI Investments wrote respondents Daniel Carreon and Aurora Carreon,
demanding the return of the overpayment of P410,937.09.
D.G. Carreon asked for compensatory damages in an amount to be proven during
the trial; spouses Daniel and Aurora Carreon asked for moral damages of P1,000,000.00
because of the humiliation, great mental anguish, sleepless nights and deterioration of
health due to the filing of the complaint and indiscriminate and wrongful attachment of
their property, especially their residential house and payment of their money market
placement of P109,283.75. Josefa Jeceil asked for moral damages of P500,000.00,
because of sleepless nights and mental anguish, and payment of her money market
placement of P73,857.57; all defendants claimed for exemplary damages and attorneys
fees of P100,000.00. However, the petition was dismissed.
Both parties appealed the above decision to the Court of Appeals. The Court of
Appeals affirmed the decision of the trial court, while the dismissal of the counterclaim
of defendants was REVERSED and SET ASIDE. The judgment is rendered as follows:
1. Ordering plaintiff BPI to pay the following amounts of damages:
Moral Damages
a)P1,000,000.00 to the late Daniel G. Carreon or his estate represented by Aurora J.
Carreon;
Page | 142
Page | 143
As to the claim for payment of the money market placement of Josefa Jeceil, the
trial court may release the deposited amount of P73,857.57 to petitioner as the
consignation was not proper or warranted.
This, the decision of the Court of Appeals was AFFIRMED with
MODIFICATION. The award of moral, compensatory and exemplary damages and
attorneys fees are deleted. BPI Investments is ordered to pay to the estate of Daniel G.
Carreon and Aurora J. Carreon the money market placement of P109,238.75, with legal
interest of twelve (12%) percent per annum from June 3, 1982, until fully paid; to pay the
estate of Josefa M. Jeceil, the money market placement in the amount of P73,857.57,
with legal interest at twelve (12%) percent per annum from maturity on July 12, 1982,
until fully paid. The petitioner may withdraw its deposit from the lower court at its peril.
BPI Investments is likewise ordered to pay temperate damages to the estate of the late
Daniel G. Carreon in the amount of P300,000.00, and to the estate of Aurora J. Carreon
in the amount of P300,000.00, and to the estate of Josefa M. Jeceil in the amount of
P150,000.00.
Page | 144
KHE HONG CHENG, alias FELIX KHE, SANDRA JOY KHE and RAY STEVEN
KHE vs. COURT OF APPEALS, HON. TEOFILO GUADIZ, RTC 147, MAKATI
CITY and PHILAM INSURANCE CO., INC.
G.R. No. 144169
2001 Mar 28
FACTS:
Petitioner Khe Hong Cheng, alias Felix Khe, is the owner of Butuan Shipping
Lines. On October 4, 1985, the Philippine Agricultural Trading Corporation shipped on
board the vessel M/V PRINCE ERIC, owned by petitioner Khe Hong Cheng, 3,400 bags
of copra at Masbate, Masbate, for delivery to Dipolog City, Zamboanga del Norte. 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 of Makati to recover the money paid to the consignee, based on breach of contract
of carriage.
While the case was still pending, petitioner Khe Hong Cheng executed deeds of
donations of parcels of land in favor of his children, herein co-petitioners Sandra Joy and
Ray Steven. The parcel of land with an area of 1,000 square meters was donated to Ray
Steven. Petitioner Khe Hong Cheng likewise donated in favor of Sandra Joy two parcels
of land located in Butuan City. The trial court rendered judgment against petitioner Khe
Hong Cheng in Civil Case No. 13357 on December 29, 1993, four years after the
donations were made and the TCTs were registered in the donees names.
After the said decision became final and executory, a writ of execution was
forthwith issued, however, it was not served. An alias writ of execution was, thereafter,
applied for and granted in October 1996. Despite earnest efforts, the sheriff found no
property under the name of Butuan Shipping Lines and/or petitioner Khe Hong Cheng to
levy or garnish for the satisfaction of the trial court's decision. 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.
Respondent Philam filed a complaint with the RTC of Makati City for the
rescission of the deeds of donation executed by petitioner Khe Hong Cheng in favor of
his children and for the nullification of their titles. Respondent Philam alleged, inter alia,
that petitioner Khe Hong Cheng executed the aforesaid deeds in fraud of his creditors,
including respondent Philam. Petitioners subsequently filed their answer to the complaint
a quo. They moved for its dismissal on the ground that the action had already prescribed.
The trial court denied the motion to dismiss. It held that respondent Philam's complaint
had not yet prescribed. On appeal by petitioners, the CA affirmed the trial court's
decision in favor of respondent Philam.
The CA declared that the action to rescind the donations had not yet prescribed.
Citing Articles 1381 and 1383 of the Civil Code, the CA basically ruled that the four year
period to institute the action for rescission began to run only in January 1997, and not
when the decision in the civil case became final and executory on December 29, 1993.
The CA reckoned the accrual of respondent Philam's cause of action on January 1997, the
time when it first learned that the judgment award could not be satisfied because the
judgment creditor, petitioner Khe Hong Cheng, had no more properties in his name.
Prior thereto, respondent Philam had not yet exhausted all legal means for the satisfaction
of the decision in its favor, as prescribed under Article 1383 of the The Court of Appeals
thus denied the petition for certiorari filed before it, and held that the trial court did not
Page | 145
commit any error in denying petitioners' motion to dismiss. Their motion for
reconsideration was likewise dismissed in the appellate court's resolution dated July 11,
2000.
ISSUE:
Whether or not the remedy of accion pauliana by the respondent is valid.
RULING:
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.
Indeed, the Court enunciated the principle that it is the legal possibility of
bringing the action which determines the starting point for the computation of the
prescriptive period for the action. Article 1383 of the Civil Code provides as follows:
Art. 1383. An action for rescission is subsidiary; it cannot be instituted except when the
party suffering damage has no other legal means to obtain reparation for the same.
It is thus apparent that an action to rescind or an accion pauliana must be of last
resort, availed of only after all other legal remedies have been exhausted and have been
proven futile. 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 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.
An accion pauliana thus presupposes the following:
1) A judgment;
Page | 146
2) the issuance by the trial court of a writ of execution for the satisfaction
of the judgment, and
3) the failure of the sheriff to enforce and satisfy the judgment of the
court.
It requires that the creditor has exhausted the property of the debtor. The date of
the decision of the trial court 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.
While it is necessary that the credit of the plaintiff in the accion pauliana must be
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.
The following successive measures must be taken by a creditor before he may
bring an action for rescission of an allegedly fraudulent sale:
(1) exhaust the properties of the debtor through levying by attachment and
execution upon all the property of the debtor, except such as are exempt from execution;
(2) exercise all the rights and actions of the debtor, save those personal to
him (accion subrogatoria); and
(3) seek rescission of the contracts executed by the debtor in fraud of their
rights (accion pauliana).
Even if respondent Philam was aware, as of December 27, 1989, that petitioner
Khe Hong Cheng had executed the deeds of donation in favor of his children, the
complaint against Butuan Shipping Lines and/or petitioner Khe Hong Cheng was still
pending before the trial court. Respondent Philam had no inkling, at the time, that the
trial court's judgment would be in its favor and further, that such judgment would not be
satisfied due to the deeds of donation executed by petitioner Khe Hong Cheng during the
pendency of the case. Had respondent Philam filed his complaint on December 27, 1989,
such complaint would have been dismissed for being premature. Not only were all other
legal remedies for the enforcement of respondent Philams claims not yet exhausted at
the time the deeds of donation were executed and registered. Respondent Philam would
also not have been able to prove then that petitioner Khe Hong Chneg had no more
property other than those covered by the subject deeds to satisfy a favorable judgment by
the trial court.
WHEREFORE, the petition is DENIED for lack of merit.
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RULING:
Fortuitous events by definition are extraordinary events not foreseeable or
avoidable. It is therefore, not enough that the event should not have been foreseen or
anticipated, as is commonly believed but it must be one impossible to foresee or to avoid.
The mere difficulty to foresee the happening is not impossibility to foresee the same.
To constitute a fortuitous event, the following elements must concur: (a) the cause
of the unforeseen and unexpected occurrence or of the failure of the debtor to comply
with obligations must be independent of human will; (b) it must be impossible to foresee
the event that constitutes the caso fortuito or, if it can be foreseen, it must be impossible
to avoid; (c) the occurrence must be such as to render it impossible for the debtor to
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fulfill obligations in a normal manner; and, (d) the obligor must be free from any
participation in the aggravation of the injury or loss.
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.
It has been held that an act of God cannot be invoked to protect a person who has
failed to take steps to forestall the possible adverse consequences of such a loss. One's
negligence may have concurred with an act of God in producing damage and injury to
another; nonetheless, showing that the immediate or proximate cause of the damage or
injury was a fortuitous event would not exempt one from liability. When the effect is
found to be partly the result of a person's participation -- whether by active intervention,
neglect or failure to act -- the whole occurrence is humanized and removed from the rules
applicable to acts of God.
Petitioner Sicam had testified that there was a security guard in their pawnshop at
the time of the robbery and 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. The testimony, in effect, contradicts petitioners
defense of fortuitous event. Moreover, petitioners failed to show that they were free from
any negligence by which the loss of the pawned jewelry may have been occasioned.
Robbery per se, just like carnapping, is not a fortuitous event. It does not
foreclose the possibility of negligence on the part of herein petitioners. The presentation
of the police report of the Paraaque Police Station on the robbery committed based on
the report of petitioners' employees is not sufficient to establish robbery. Such report also
does not prove that petitioners were not at fault. Also, the robbery in this case took place
in 1987 when robbery was already prevalent and petitioners in fact had already foreseen
it as they wanted to deposit the pawn with a nearby bank for safekeeping. Thus,
petitioners are negligent in securing their pawnshop.
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the parties on the lease contract, their true intention as to when the monthly rental would
accrue was not therein expressed due to mistake or accident. Thus, according to
Huibonhoa, the first rent would have been due only in October 1984. Moreover, the
assassination of former Senator Benigno Aquino, Jr., an unforeseen event, caused the
country's economy to turn from bad to worse and as a result, the prices of commodities
like construction materials so increased that the building worth Six Million pesos
escalated to "something like 11 to 12 million pesos." However, she averred that by reason
of mistake or accident, the lease contract failed to provide that should an unforeseen
event dramatically increase the cost of construction, the monthly rental would be reduced
and the term of the lease would be extended for such duration as may be fair and
equitable to both the lessors and the lessee.
ISSUE:
Whether or not the Court failed to consider the tragic assassination of former
Senator Benigno Aquino as a fortuitous event or force majeure which justifies the
adjustment of the terms of the contract of lease.
RULING:
The Court does not find merit in her submission that the assassination of the late
Senator Benigno Aquino, Jr. was a fortuitous event that justified a modification of the
terms of the lease contract.
In the case, 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 Huibonhoa's 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 years.
Inflation is the sharp increase of money or credit or both without a corresponding
increase in business transaction. There is inflation when there is an increase in the
volume of money and credit relative to available goods resulting in a substantial and
continuing rise in the general price level. 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 1970's we have
been experiencing inflation. It is simply a universal trend that has not spared our country.
Conformably, the Court upheld the petitioner's view in Occena v. Jabson that even a
worldwide increase in prices does not constitute a sufficient cause of action for
modification of an instrument.
It is only when an extraordinary inflation supervenes that the law affords the
parties a relief in contractual obligations. Art. 1250 of the Civil Code provides that "(i)n
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 the payment, unless there is an agreement to the contrary."
Extraordinary inflation exists when 'there is a decrease or increase in the
purchasing power of the Philippine currency which is unusual or beyond the common
fluctuation in the value of said currency, and such decrease or increase could not have
been reasonably foreseen or was manifestly beyond the contemplation of the parties at
the time of the establishment of the obligation.
No decrease in the peso value of such magnitude having occurred, Huibonhoa has
no valid ground to ask this Court to intervene and modify the lease agreement to suit her
Page | 151
Page | 152
FACTS:
Private respondent Cosmos Bottling Corp. is engaged in the manufacture of soft
drinks. Since 1979 petitioner Ace-Agro Development Corp. had been cleaning soft drink
bottles and repairing wooden shells for Cosmos, rendering its services within the
company premises in San Fernando, Pampanga. The parties entered into service contracts
which they renewed every year. On January 18, 1990, they signed a contract covering the
period January 1, 1990 to December 31, 1990. Private respondent had earlier contracted
the services of Aren Enterprises in view of the fact that petitioner could handle only from
2,000 to 2,500 cases a day and could not cope with private respondent's daily production
of 8,000 cases. Unlike petitioner, Aren Enterprises rendered service outside private
respondent's plant.
On April 25, 1990, fire broke out in private respondent's plant, destroying, among
other places, the area where petitioner did its work. As a result, petitioner's work was
stopped. 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, which had practically
burned all old soft drink bottles and wooden shells, private respondent was terminating
their contract. Petitioner expressed surprise at the termination of the contract and
requested private respondent, on June 13, 1990, to reconsider its decision and allow
petitioner to resume its work. As it received no reply from private respondent, petitioner,
on June 20, 1990, informed its employees of the termination of their employment.
In response, private respondent advised petitioner on August 28, 1990 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, claiming that to do its work outside the company's premises would make it incur
additional costs for transportation.
On January 3, 1991, petitioner brought the case against private respondent for
breach of contract and damages in the Regional Trial Court of Malabon. In its decision,
the RTC found private respondent guilty of breach of contract and ordered it to pay
damages to petitioner. Private respondent appealed to the Court of Appeals, which on
December 29, 1994, reversed the trial court's decision and dismissed petitioner's
complaint. 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 appellate court erred in ruling that respondent was justified in
unilaterally terminating the contract on account of a force majeure.
RULING:
Obligations may be extinguished by the happening of unforeseen events, under
whose influence the obligation would never have been contracted, because in such cases,
the very basis upon which the existence of the obligation is founded would be wanting.
Both parties admitted that the April 25, 1990 fire was a force majeure or unforeseen event
and that the same even burned practically all the softdrink bottles and wooden shells
which are the objects of the agreement. However, the court says that there was no cause
for terminating the contract but at most a temporary suspension of work. Thus, as a result
of the fire, the obligation of contract have not been extinguished.
Page | 153
The agreement between the appellee and the appellant is with a resolutory period,
beginning from January 1, 1990 and ending on December 31, 1990. When the fire broke
out on April 25, 1990, there resulted a suspension of the appellee's work as per
agreement. But this suspension of work due to force majeure did not merit an automatic
extension of the period of the agreement between them.
According to Tolentino, 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.
WHEREFORE, the petition is DENIED and the decision of the Court of Appeals
is AFFIRMED.
Page | 154
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Bachelor Express vs CA
GR. NO. 85691, July 31, 1990
FACTS:
On 1 August 1980, Bus 800, owned by Bachelor Express, Inc. and driven by
Cresencio Rivera, came from Davao City on its way to Cagayan de Oro City passing
Butuan City. While at Tabon-Tabon, Butuan City, the bus picked up a passenger. About
15 minutes later, a passenger at the rear portion suddenly stabbed a PC soldier 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 Ornomino Beter and Narcisa Rautraut (Ricardo Beter and
Sergia Beter are the parents of Ornominio while Teofilo Rautraut and Zotera Rautraut are
the parents of Narcisa) filed a complaint for sum of money against Bachelor Express,
its alleged owner Samson Yasay, and the driver Rivera. After due trial, the trial court
issued an order dated 8 August 1985 dismissing the complaint. The CA however reversed
the RTC decision.
ISSUES:
1. Whether or not the case at bar is within the context of force majeure.
2. Should the petitioner be absolved from liability for the death of its passengers?
RULING:
The sudden act o 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 proves that it was not negligent
in causing the injuries resulting from such accident. Considering the factual findings in
this case, it is clear that petitioner has failed to overcome the presumption of fault and
negligence found in the law governing common carriers. The argument that the
petitioners are not insurers of their passengers deserves no merit in view of the failure of
the petitioners to observe extraordinary diligence in transporting safely the passengers to
their destination as warranted by law.
Page | 156
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 all 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.
With regard to the contention that the total loss of the vessel extinguished its
liability pursuant to Article 587 of the Code of Commerce, it was held that the liability of
a shipowner is limited to the value of the vessel or to the insurance thereon. 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.
WHEREFORE, the appealed judgment is REVERSED and the judgment of the then
Court of First Instance of Manila is reinstated.
Page | 158
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. 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.
Moral damages are generally not recoverable in culpa contractual except when bad faith
had been proven. However, the same damages may be recovered when breach of contract
of carriage results in the death of a passenger, as in this case. Exemplary damages,
awarded by way of example or correction for the public good when moral damages are
awarded, may likewise be recovered in contractual obligations if the defendant acted in
wanton, fraudulent, reckless, oppressive, or malevolent manner. Because petitioners
failed to exercise the extraordinary diligence required of a common carrier, which
resulted in the death of Tito Tumboy, it is deemed to have acted recklessly. As such,
private respondents shall be entitled to exemplary damages.
WHEREFORE, the Decision of the Court of Appeals is AFFIRMED.
Page | 160
in law the agent or servant of the carrier, as far as regards the work of constructing the
appliance. According to this theory, the good repute of the manufacturer will not relieve
the carrier from liability.
The rationale of the carrier's liability is the fact that the passenger has neither
choice nor control over the carrier in the selection and use of the equipment and
appliances in use by the carrier. Having no privity whatever with the manufacturer or
vendor of the defective equipment, the passenger has no remedy against him, while the
carrier usually has. It is but logical, therefore, that the carrier, while not an insurer of the
safety of his passengers, should nevertheless be held to answer for the flaws of his
equipment if such flaws were at all discoverable.
The source of a common carrier's legal liability is the contract of carriage, and by
entering into the said contract, it binds itself to carry the passengers safely as far as
human care and foresight can provide, using the utmost diligence of a very cautious
person, with a due regard for all the circumstances. The records show that this obligation
was not met by the respondents.
WHEREFORE, the decision of the Court of First Instance of Cebu is
REVERSED and SET ASIDE, and the decision of the City Court of Cebu is
REINSTATED.
Page | 162
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Page | 165
Page | 166
FACTS:
On May 14, 1987, the National Power Corporation (NAPOCOR) issued
invitations to bid for the supply and delivery of 120,000 metric tons of imported coal for
its Batangas Coal-Fired Thermal Power Plant in Calaca, Batangas. The Philipp Brothers
Oceanic, Inc. (PHIBRO) prequalified and was allowed to participate as one of the
bidders. After the public bidding was conducted, PHIBROs bid was accepted.
NAPOCORs acceptance was conveyed in a letter dated July 8, 1987, which was
received by PHIBRO on July 15, 1987.
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. From July 23 to July 31, 1987,
PHIBRO again apprised NAPOCOR of the situation in Australia, particularly informing
the latter that the ship owners therein are not willing to load cargo unless a strike-free
clause is incorporated in the charter party or the contract of carriage. In order to hasten
the transfer of coal, PHIBRO proposed to NAPOCOR that they equally share the burden
of a strike-free clause. NAPOCOR refused.
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. Consequently, in October 1987,
NAPOCOR once more advertised for the delivery of coal to its Calaca thermal plant.
PHIBRO participated anew in this subsequent bidding. On November 24, 1987,
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.
PHIBRO then filed an action for damages with application for injunction against
NAPOCOR with the Regional Trial Court of Makati City alleging that NAPOCORs act
of disqualifying it in the October 1987 bidding and in all subsequent biddings was tainted
with malice and bad faith. On he other hand, 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
trial court rendered a decision in favor of PHIBRO. On appeal, the Court of Appeals
rendered a Decision affirming in toto the Decision of the Regional Trial Court stating that
strikes are included in the definition of force majeure in Section XVII of the Bidding
Terms and Specifications, so Phibro is not liable for any delay caused thereby. Phibro
was informed of the acceptance of its bid on July 8, 1987. Delivery of coal was to be
effected thirty (30) days from Napocors opening of a confirmed and workable letter of
credit. Napocor was only able to do so on August 6, 1987.
ISSUE:
Whether or not the Court of Appeals gravely and seriously erred in concluding
and so holding 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
Page | 167
RULING:
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.
Fortuitous events may be produced by two general causes: (1) by Nature, such as
earthquakes, storms, floods, epidemics, fires, etc., and (2) by the act of man, such as an
armed invasion, attack by bandits, governmental prohibitions, robbery, etc.
The term generally applies, broadly speaking, to natural accidents. In order that
acts of man such as a strike, may constitute fortuitous event, it is necessary that they have
the force of an imposition which the debtor could not have resisted. Hence, by law and by
stipulation of the parties, the strikes which took place in Australia from the first week of
July to the third week of September, 1987, exempted Phibro from the effects of delay of
the delivery of the shipment of coal.
In addition, 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 court have no reason to rule otherwise. Significantly, one characteristic of
a fortuitous event, in a legal sense, and consequently in relations to contracts, is that the
concurrence must be such as to render it impossible for the debtor to fulfill his obligation
in a normal manner. Faced with the above circumstance, NAPOCOR is justified in
assuming that, may be, there was really no fortuitous event or force majeure which could
render it impossible for PHIBRO to effect the delivery of coal.
Page | 168
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The court then agrees with the appellate court that the provisions stated in the will
is an all-encompassing provision embracing all the properties left by the decedent which
might have escaped his mind at that time he was making his will, and other properties he
may acquire thereafter. This being so, any partition involving the said tractors among the
heirs is not valid. The joint agreement executed by Edmund and Florence, partitioning the
tractors among themselves, is invalid, specially so since at the time of its execution, there
was already a pending proceeding for the probate of their late fathers holographic will
covering the said tractors.
2. The heirs assumption of the indebtedness is not binding. The assumption of
liability was conditioned upon the happening of an event, that is, that each heir shall take
possession and use of their respective share under the agreement. It was made dependent
on the validity of the partition, and that they were to assume the indebtedness
corresponding to the chattel that they were each to receive. The partition being invalid,
the heirs in effect did not receive any such tractor. It follows then that the assumption of
liability cannot be given any force and effect.
3. Florence S. Ariola could not be held accountable for any liability incurred by
her late father. The documentary evidence presented, particularly the promissory notes
and the continuing guaranty agreement, were executed and signed only by the late Efraim
Santibaez and his son Edmund. As the petitioner failed to file its money claim with the
probate court, at most, it may only go after Edmund as co-maker of the decedent under
the said promissory notes and continuing guaranty, of course, subject to any defenses
Edmund may have as against the petitioner. However, the court had not acquired
jurisdiction over the person of Edmund. Also, the petitioner had not sufficiently shown
that it is the successor-in-interest of the Union Savings and Mortgage Bank to which the
FCCC assigned its assets and liabilities.
Wherefore, the petition is DENIED, the Court of Appeals Decision is
AFFIRMED.
Page | 170
JESUS SAN AGUSTIN vs. COURT OF APPEALS and MAXIMO MENEZ JR.
G.R. No. 121940
2001 Dec 4
FACTS:
On February 11, 1974, the Government Service Insurance System (GSIS) sold to
a certain Macaria Vda. de Caiquep, a parcel of residential land of the Government
Service and Insurance System Low Cost Housing Project (GSIS-LCHP). The sale is
evidenced by a Deed of Absolute Sale. On February 19, 1974, the Register of Deeds of
Rizal issued in the name of Macaria Vda. de Caiquep, Transfer Certificate of Title (TCT).
A day after the issuance of TCT, Vda. de Caiquep sold the subject lot to private
respondent, Maximo Menez, Jr., as evidenced by a Deed of Absolute Sale. However, the
deed was notarized but was not registered immediately upon its execution in 1974
because GSIS prohibited him from registering the same in view of the five-year
prohibition to sell during the period ending in 1979.
Sometime in 1979, for being suspected as a subversive, an Arrest, Search and
Seizure Order (ASSO) was issued against private respondent. Military men ransacked his
house in Cainta, Rizal. Upon learning that he was wanted by the military, he voluntarily
surrendered and was detained for two years. When released, another order for his rearrest was issued so he hid in Mindanao for another four years or until March 1984. In
December of 1990, he discovered that the subject TCT was missing. He consulted a
lawyer but the latter did not act immediately on the matter. Upon consulting a new
counsel, an Affidavit of Loss was filed with the Register of Deeds of Pasig and a certified
copy of the TCT was issued.
Private respondent sent notices and searched the registered owner. However, their
search proved futile. On July 8, 1992, private respondent filed a petition for the issuance
of owners duplicate copy of TCT No. 436465 to replace the lost one. The trial court
granted his petition.
On October 13, 1992, petitioner, Jesus San Agustin, received a copy of the
abovecited decision. He claimed this was the first time he became aware of the case of
her aunt, Macaria Vda. de Caiquep who, according to him, died sometime in 1974.
Claiming that he was the present occupant of the property and the heir of Macaria, he
filed his Motion to Reopen Reconstitution Proceedings, however, RTC issued an order
denying said motion.
ISSUE:
Whether the petitioner have an interest in the property.
RULING:
The petitioner does not appear to have an interest in the property based on the
memorandum of encumbrances annotated at the back of the title. His claim that he is an
heir (nephew) of the original owner of the lot covered by the disputed lot and the present
occupant thereof is not annotated in the said memorandum of encumbrances. Neither was
his claim entered on the Certificate of Titles in the name of their original/former owners
on file with the Register of Deeds. Also, private respondent's compliance of the RTCs
order of publication of the petition in a newspaper of general circulation is sufficient
notice of the petition to the public at large.
On the other hand, GSIS has not filed any action for the annulment, nor for the
forfeiture of the lot in question. Thus, the contract of sale remains valid between the
parties, unless and until annulled in the proper suit filed by the rightful party, the GSIS.
Page | 171
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.
Moreover, in the social justice policy of R.A. 8291 otherwise known as
Government Service Insurance Act of 1997 in granting housing assistance to the
less-privileged GSIS members and their dependents payable at an affordable payment
scheme. This is the same policy which the 5-year restrictive clause in the contract seeks
to implement by stating in the encumbrance itself annotated at the back of TCT No.
436465 that, The purpose of the sale is to aid the vendee in acquiring a lot for
himself/themselves and not to provide him/them with a means for speculation or profit by
a future assignment of his/their right herein acquired or the resale of the lot through rent,
lease or subletting to others of the lot and subject of this deed, xxx within five (5) years
from the date final and absolute ownership thereof becomes vested in the vendee, except
in cases of hereditary succession or resale in favor of the vendor. 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. For it is
protected by the Constitution under Section 10, Article III, of the Bill of Rights stating
that, No law impairing the obligation of contracts shall be passed. Thus, that provision
of the Constitution duly calls for compliance.
Page | 172
FACTS:
On August 21, 1975, plaintiff and defendant PBI entered into an agreement
whereby it was agreed that plaintiff would provide a maximum amount of P2,000,000.00
against which said defendant would discount and assign to plaintiff on a with recourse
non-collection basis its accounts receivable under the contracts to sell specified in said
agreement. And on June 15, 1976, the same parties entered into an agreement whereby it
was agreed that PBIs credit line with plaintiff be increased to P5,000,000.00. It was
stipulated that the credit line of P5,000,000.00 granted includes the amount already
assigned/discounted. The discounts were on different date accounts receivables with
different maturity dates from different condominium-unit buyers. And each time a certain
account receivable was discounted, the covering Contract to Sell was assigned by
defendant to plaintiff.
The total amount of receivables discounted by defendant PBI is P7,986,815.38
and consists of twenty accounts. Of such receivables amounting to P7,986,815.38
plaintiff released to defendant PBI the amount of P4,549,132.72 and the difference of
P3,437,682.66 represents the discounting fee or finance fee. To secure compliance,
defendants executed a Deed of Real Estate Mortgage in favor of plaintiff. When
defendants allegedly defaulted in the payment of the subject account, plaintiff foreclosed
the mortgage and plaintiff was the highest bidder in the amount of P3,500,000.00.
The foreclosed property was redeemed a year later, but after application of the
redemption payment, plaintiff claims that there is still a deficiency in the amount of
P1,323,053.08. The trial court dismissed the complaint. The Court of Appeals however
overturned the judgment of the trial court.
ISSUE:
Whether or not the assignment of credit is valid.
RULING:
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. 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.
Page | 173
Consent is not necessary in order that assignment may fully produce legal effects.
Hence, the duty to pay does not depend on the consent of the debtor. Otherwise, all
creditors would be prevented from assigning their credits because of the possibility of the
debtors refusal to give consent. What the law requires in an assignment of credit is not
the consent of the debtor but merely notice to him. A creditor may, therefore, validly
assign his credit and its accessories without the debtors consent. The purpose of the
notice is only to inform the debtor that from the date of the assignment, payment should
be made to the assignee and not to the original creditor.
In the case, the assignment, was "with recourse", and default in the payment of
installments had been duly established when petitioner corporation foreclosed on the
mortgaged parcels of land. The resort to foreclosure of the mortgaged properties did not
preclude private respondent from collecting interest from the assigned Contracts To Sell
from the time of foreclosure to the redemption of the foreclosed property. The imposition
of interest was a mere enforcement or exercise of the right to the ownership of the credit
or receivables which the parties stipulated in the 1976 financing agreement.
WHEREFORE, the petition is DENIED, the decision of the Court of Appeals
reversing the decision of the trial court is AFFIRMED.
Page | 174
DBP VS CA
GR No. 118180
September 20, 1996
FACTS:
Private respondents were the original owners of a parcel of agricultural land
covered by TCT No. T-1432, situated in Barrio Capucao, Ozamis City, with an area of
113,695 square meters, more or less. On May 30, 1977, they mortgaged said land to
petitioner DBP. They defaulted on their obligation and petitioner acquired the land by
being the sole bidder in the ensuing auction. On April 6, 1984, petitioner entered into a
conditional contract with private respondents where private respondents would sell the
land for (P73,700.00), with a down payment of P8,900.00 and the balance of P64,800
shall be payable in six (6) years on equal quarterly amortization plan at 18% interest per
annum. The first quarterly amortization of P4,470.36 shall be payable three months from
the date of the execution of the documents and all subsequent amortization shall be due
and payable every quarter thereafter. Upon completion of payment, petitioners refused to
turn over the deed of sale citing legal impossibility from the implementation of Sec. 6 of
Rep. Act 6657 (the Comprehensive Agrarian Reform Law or CARL) approved 10 June
1988, and Sec. 1 of E.O. 407 issued 10 June 1990. Private respondents filed a case in
court and were favored by the RTC and the CA.
ISSUE:
When does the acquisition of these rights take place?
RULING:
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.
More specifically, petitioner cannot invoke the last paragraph of Sec. 6 of Rep.
Act 6657 to set aside its obligations already existing prior to its enactment. In the first
place, said last paragraph clearly deals with "any sale, lease, management contract or
transfer or possession of private lands executed by the original land owner." The original
owner in this case is not the petitioner but the private respondents. Petitioner acquired
the land through foreclosure proceedings but agreed thereafter to reconvey it to private
respondents, albeit conditionally.
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HERMOSA VS LONGARA
GR No. L-5267, October 27, 1953
FACTS:
This is an appeal by way of certiorari against a decision of the Court of Appeals,
fourth division, approving certain claims presented by Epifanio M. Longara against the
testate estate of Fernando Hermosa, Sr. The claims are of three kinds, namely, P2,341.41
representing credit advances made to the intestate from 1932 to 1944, P12,924.12 made
to his son Francisco Hermosa, and P3,772 made to his grandson, Fernando Hermosa, Jr.
from 1945 to 1947, after the death of the intestate, which occurred in December, 1944.
The claimant presented evidence and the Court of Appeals found, in accordance
therewith, that the intestate had asked for the said credit advances for himself and for the
members of his family "on condition that their payment should be made by Fernando
Hermosa, Sr. as soon as he receive funds derived from the sale of his property in Spain."
Claimant had testified without opposition that the credit advances were to be "payable as
soon as Fernando Hermosa, Sr.'s property in Spain was sold and he receive money
derived from the sale." The Court of Appeals held that payment of the advances did not
become due until the administratrix received the sum of P20,000 from the buyer of the
property. Upon authorization of the probate court in October, 1947, and the same was
paid for subsequently. The Claim was filed on October 2, 1948.
ISSUE:
Does said condition a potestative condition and thusly void and unenforceable?
RULING:
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. Cirumstances show that the intestate had already decided to sell his
house lest he meant to fool his creditors. But in addition of the sale to him (the intestatevendor), there were still other conditions that had no concur to effect the sale, mainly that
of the presence of a buyer, ready, able and willing to purchase the property under the
conditions demanded by the intestate. It is evident, therefore, that the condition of the
obligation was not a purely protestative one, depending exclusively upon the will of the
intestate, but a mixed one, depending partly upon the will of intestate and partly upon
chance. The Supreme Court upheld the ruling of the lower courts.
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VISAYAN SAWMILL VS CA
219 SCRA 378
March 3, 1993
FACTS:
The antecedent facts, summarized by the public respondent are as follows:
On May 1, 1983, herein plaintiff-appellee and defendants appellants entered into a
sale involving scrap iron, subject to the condition that plaintiff appellee will open a letter
of credit in the amount of P250,00.00 in favor of defendant-appellant corporation on or
before May 15, 1983. On May 24, 1983, plaintiff-appellee informed defendans-appellants
by telegram that the letter of credit was opened May 12, 1983 at the BPI main office in
Ayala, but that transmittal was delayed. On May 26, 1983, defendants-appellants
received a letter advice from the Dumaguete City Branch of BPI dated May 26, 1983,
that a domestic letter of credit had been opened in favor of Visayan Sawmill Company.
On July 19, 1983 plaintiffs then demanded that defendants comply with the deed
of sale. On July 20, 1983 defendant corporation informed plaintiffs lawyer that it is
unwilling to continue with the sale due to plaintiffs failure to comply with the essential
preconditions of the contract.
Private respondent prayed for judgment ordering the petitioner corporation to
comply with the contract by delivering to him the scrap iron subject thereof.
ISSUE:
Did petitioner corporation violate the terms and conditions of the contract?
RULING:
The petitioner corporations obligation to sell is unequivocally subject to a
positive suspensive condition. The failure of the private respondent to comply with the
positive suspensive condition cannot even be considered a breach casual or serious
but simply an event that prevented the obligation of petitioner corporation to convey title
from acquiring binding force.
The letter of credit in favor of petitioner was indisputably not in accordance with
the stipulation in the contract signed by the parties on at three counts: (1) it was not
opened, made or indorsed by the private respondent, but by a corporation which is not a
party to the contract; (2) it was not opened with the bank agreed upon and; (3) it is not
irrevocable and unconditional, for it is without recourse, it is set to expire on a specific
date and it stipulates certain conditions with respect to shipment.
Consequently, the obligation of petitioner to sell did not arise; it therefore cannot
be compelled by specific performance to comply with its prestation.
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CIR VS PRIMETOWN
GR No. 162155.
August 28, 2007
FACTS:
On March 11, 1999, Gilbert Yap, vice chair of respondent Primetown Property
Group, Inc., applied for the refund or credit of income tax respondent paid in 1997.
According to Yap, because respondent suffered losses, it was not liable for income taxes.
Nevertheless, respondent paid its quarterly corporate income tax and remitted creditable
withholding tax from real estate sales to the BIR in the total amount of P26,318,398.32.
Therefore, respondent was entitled to tax refund or tax credit.
On May 13, 1999, revenue officer Elizabeth Y. Santos required respondent to
submit additional documents to support its claim. Respondent complied but its claim was
not acted upon. Thus, on April 14, 2000, it filed a petition for review in the Court of Tax
Appeals (CTA). On December 15, 2000, the CTA dismissed the petition as it was filed
beyond the two-year prescriptive period for filing a judicial claim for tax refund or tax
credit. Respondents now assail that decision for dismissal of the CTA.
ISSUE:
What is the expiration period for the filing of the action?
RULING:
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.
Following this formula, respondents petition (filed on April 14, 2000) was filed
on the last day of the 24th calendar month from the day respondent filed its final adjusted
return. Hence, it was filed within the reglementary period.
Page | 185
NAMARCO vs Tecson
GR No. L-29131.
August 27, 1969
FACTS:
On a previous court case, the CFI rendered judgment:
(a) Ordering the defendants Miguel D. Tecson and Alto Surety Insurance Co.,
Inc. to pay jointly and severally plaintiff PRATRA the sum of P7,200.00 plus 7% interest
from May 25, 1960 until the amount is fully paid, plus P500.00 for attorney's fees, and
plus costs;
(b) ordering defendant Miguel D. Tecson to indemnify his co-defendant Alto
Surety & Insurance Co., Inc. on the cross-claim for all the amounts it would be made to
pay in this decision, in case defendant Alto Surety & Insurance Co., Inc. pay the amount
adjudged to plaintiff in this decision. From the date of such payment defendant Miguel D.
Tecson would pay the Alto Surety & Insurance Co., Inc., interest at 12% per annum until
Miguel D. Tecson has fully reimbursed plaintiff of the said amount.
Defendant Miguel Tecson seeks the dismissal of the complaint on the ground of
lack of jurisdiction and prescription. This case was filed exactly on December 21, 1965
but more than ten years have passed a year is a period of 365 days (Art. 13, CCP).
Plaintiff forgot that 1960, 1964 were both leap years so that when this present case was
filed it was filed two days too late.
ISSUE:
Should the complaint be dismissed on the grounds of prescription?
RULING:
In the language of this Court, in People vs. Del Rosario, with the approval of the
Civil Code of the Philippines (Republic Act 386) ... we have reverted to the provisions of
the Spanish Civil Code in accordance with which a month is to be considered as the
regular 30-day month ... and not the solar or civil month," with the particularity that,
whereas the Spanish Code merely mentioned "months, days or nights," ours has added
thereto the term "years" and explicitly ordains that "it shall be understood that years are
of three hundred sixty-five days."
The decision was affirmed.
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JESPAJO VS CA
GR No. 113626
September 27, 2002
FACTS:
On February 1, 1985, said corporation, represented by its President, Jesus L. Uy,
entered into separate contracts of lease with Tan Te Gutierrez and Co Tong. Pursuant to
the contract, Tan Te occupied room No. 217 of the subject building at a monthly rent of
P847.00 while Co Teng occupied the Penthouse at a monthly rent of P910.00. 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.
The private respondents religiously paid the monthly rental fees. 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 private respondents refused payment. An ejectment case
was filed against them in court.
ISSUE:
Is the stipulation a potestative period and hence void?
RULING:
The lease contract between petitioner and respondents is with a period subject to a
resolutory condition. The wording of the agreement is unequivocal. 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.
The petitioner is estopped from backing out of their representations in the contract
with respondent, that is, they may not renege on their own acts and representations, to the
prejudice of the respondents who relied on them.
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BORROMEO VS CA
GR No. L-22962.
September 28, 1972
FACTS:
Respondent Jose A Villamor was a distributor of lumber belonging to Mr. Miller
who was the agent of the Insular Lumber Company in Ceb City. Defendant usually
borrowed from his friend and former classmate-petitioner Canuto O. Borromeo several
amounts of money. On one occasion, with some pressing obligation to Mr. Miller,
defendant borrowed a large sum of money from Borromeo for which he mortgaged his
land and house in Cebu City. Mr. Miller filed a civil action against the defendant and
attached his properties including those mortgaged to plaintiff, inasmuch as the deed of
mortgage in favor of plaintiff could not be registered as it was not properly drawn up.
Plaintiff then pressed for settlement of his obligation, but defendant instead offered to
execute a document of future payment. Liquidation was made and defendant was found
to have owed plaintiff the sum of PhP7220.00, for which defendant signed a promissory
therefor on November 29, 1933 with interest at the rate of 12% per annum, agreeing to
pay as soon as I have money. The note further stipulates that the defendant would waive
the right of prescription as prescribed in the Civil Code of Procedure. Plaintiff did not
collect within the 1st ten years since defendant did not have any property attached to his
name. However after the second World War, plaintiff then pressed on his demands. The
RTC granted his motion but the CA reversed the ruling claiming that said period was
contrary to law?
ISSUE:
Is said period stipulated in the contract valid?
RULING:
The CA erred in its decision. It should be noted that the wordings in said contracts
should not instantly nullify the intent of the parties. The intent of the parties is clear that
an extension of time be granted to respondent for payment of his debts.
In effect, the first 10 years should not be considered in the prescription of the
contract and that the next ten years is granted from which the counting of the period
should begin.
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GONZALES VS JOSE
GR No. 43429.
October 24, 1938
FACTS:
The plaintiff Benito Gonzales filed an action to recover from the defendant the
total amount of Php547.95 from two promissory notes dated June 22, 1922 and
September 13, 1922. The CFI granted his petition. The defendant now assails that
decision claiming that the complaint was uncertain inasmuch as the notes did not specify
when the indebtedness was incurred or when it was demandable, and that, granting that
plaintiff has any cause of action, the same has prescribed in accordance with law.
ISSUE:
Does plaintiff have a cause of action?
RULING:
Article 1128 of the Civil Code stipulates that if the obligation does not specify a
term, but it is 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 two 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. However, the action to ask the court to fix a period has already prescribed. The
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.
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BALUYUT VS POBLETE
GR No. 144435.
February 6, 2007
FACTS:
On July 20, 1981, Guillermina Baluyut, mortgaged her house to secure a loan in
the amount of PhP850,000.00 from the spouses Eulogio and Salud Poblete. The load was
set to mature in one month. After a month had passed, she was unable to pay her
indebtedness which led the spouses to extrajudicially foreclose the mortgage. The
property was then sold on Auction to the Poblete spouses who asked Baluyut to vacate
the premises. Baluyut instead filed an action for annulment of mortgage. His claim was
rejected by the RTC and the CA. Petitioner claims that based on the testimony of Atty.
Edwina Mendoza that the maturity of the loan which she incurred is only for one year.
ISSUE:
Is petitioners contention tenable?
RULING:
Evidence of a prior or contemporaneous verbal agreement is generally not
admissible to vary, contradict or defeat the operation of a valid contract. In the instant
case, aside from the testimony of Atty. Mendoza, no other evidence was presented to
prove that the real date of maturity is one year.
The terms that were thusly reduced to writing is deemed to contain all the terms
agreed upon and no evidence of such terms can be admitted other than the contents of the
agreement itself. The promissory note is the law between petitioner and private
respondents and it clearly states that the loan shall mature in one month from date of the
said Promissory Note.
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MALAYAN REALTY VS UY
GR No. 163763.
November 10, 2006
FACTS:
Malayan Realty, Inc. (Malayan), is the owner of an apartment unit known as 3013
Interior No. 90 (the property), located at Nagtahan Street, Sampaloc, Manila. In 1958,
Malayan entered into a verbal lease contract with Uy Han Yong (Uy) over the property at
a monthly rental of P262.00. The monthly rental was increased yearly starting 1989, and
by 2001, the monthly rental was P4,671.65.
On July 17, 2001, Malayan sent Uy a written notice informing him that the lease
contract would no longer be renewed or extended upon its expiration on August 31, 2001,
and asking him to vacate and turn over the possession of the property within five days
from August 31, 2001, or on September 5, 2001. Despite Uys receipt of the notice on
June 18, 2001, he refused to vacate the property, prompting Malayan to file before the
Metropolitan Trial Court (MeTC) of Manila a complaint for ejectment, docketed as Civil
Case No. 171256, and was raffled to Branch 3 thereof. The Court ruled in favor of Uy
and granted an extension period of five years.
ISSUE:
Is respondent Uy entitled to a grant of extension by the Court?
RULING:
The 2nd paragraph of Article 1687 provides that in the event that the lessee has
occupied the leased premises for over a year, the courts may fix a longer term for the
lease.
The power of the courts to establish a grace period is potestative or discretionary,
depending on the particular circumstances of the case. Thus, a longer term may be
granted where equities come into play, and may be denied where none appears, always
with due deference to the parties freedom to contract.
In the present case, respondent has remained in possession of the property from the
time the complaint for ejectment was filed on September 18, 2001 up to the present time.
Effectively, respondents lease has been extended for more than five years, which time is,
under the circumstances, deemed sufficient as an extension and for him to find another
place to stay.
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SANTOS VS SANTOS
GR No. 153004.
November 5, 2004
FACTS:
Ernesto V. Santos and Santos Ventura Hocorma Foundation, Inc. (SVHFI) were
the plaintiff and defendant, respectively, in several civil cases. On October 26, 1990, the
parties executed a Compromise Agreement which amicably ended all their pending
litigations. As stipulated, defendant foundation shall pay Plaintiff Santos P14.5 Million in
the following manner: a) P1.5 Million immediately upon the execution of the agreement;
b) The balance of P13 Million shall be paid at the discretion of the Foundation, within a
period of not more than two (2) years from the execution of the agreement. Plaintiff
Santos shall also cause the dismissal of civil cases pending upon the execution of the
agreement.
As a result of the Compromise Agreement, the civil cases were dropped.
However, petitioner SVHFI sold to Development Exchange Livelihood two real
properties, which were previously subjects of lis pendens. Respondent then issued a
demand letter for the collection of payment. With no response from petitioner, filed for
the issuance of a writ of execution for which the properties of petitioner were then
auctioned off for payment of the debt. On June 2, 1995, respondent filed a complaint for
declaratory relief and damages alleging that he was also entitled to interest for delayed
payment.
ISSUE:
Are the respondents entitled to legal interest?
RULING:
The general rule is that a compromise has upon the parties the effect and authority
of res judicata, with respect to the matter definitely started therein, or in which by
implication from its terms should be deemed to have been included therein. This holds
true even if the agreement has not been judicially approved. In the case at bar, the
obligation was already due and demandable after he lapse of the two-year period from the
execution of the contract.
Verily, the petitioner is liable for damages for the delay in the performance of its
obligation (Article 1170 of the New Civil Code). When the debtor knows the amount and
period when he is to pay, interest as damages is generally allowed as a matter of right. In
the absence of agreement, the legal rate of interest shall prevail. The legal interest for a
loan as forebearance of money is 12% per annum to be computed from default. Thus
respondent was entitled to legal interest.
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METOLINDOS VS TOBIAS
GR No. 146658.
October 28, 2002
FACTS:
Eighty-seven-year old petitioner, Atty. Manuel D. Melotindos, was the lessee of
the ground floor of a house at 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. On June 1, 1998, respondent asked petitioner to restore
the premises to him for essential repairs to accommodate housing for his mother during
her regular medical check-ups in Manila. Petitioner however refused to vacate the
premises and worse, he neglected payment of his monthly dues. Petitioner then filed a
complaint for ejectment in Court. The courts ruled in favor of defendant. Petitioner filed a
motion for review but was denied on grounds of late filing. Petitioner then filed the
instant petition for review asservating that the order to eject him from the leased premises
was illegal because he was always up to date in paying the rental fee; that it was the
obligation of the Trial Court to extend his lease by five (5) more years citing Article 1687
of the Civil Code.
ISSUE:
Is the order of ejectment illegal?
RULING:
The Decision of the Court of Appeals was already final and executor. Petitioner
received the CA decision on October 9, 2000 as shown by the registry return receipt and
that he filed his motion for reconsideration thereof only on October 30, 2000. The motion
was obviously filed beyond the fifteen day reglementary period.
The evidence on record confirm petitioners default in paying the rental fees for
more than three months in 1999 and 1998 prior to the filing of the ejectment complaint.
In addition, there is sufficient basis to conclude that respondent desperately needed the
property in good faith for his own family and for the repair of the house therein. These
facts represent legal grounds for ejectment.
Lastly, Article 1687 does not grant a lessee 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. The petitioner had effectively been granted an
extension of five 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 in 1999.
He was also only evicted from the premises in accordance with the MeTC decision only
in 2002.
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LIM VS PEOPLE
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, Exh. A, dated January 10, 1966. Following the transaction
respondent or rather Salud tried to follow up on the payment and forwarded a demand
letter.
Pursuant to this letter, the appellant sent a money order for P100.00 on October
24, 1967, Exh. 4, and another for P50.00 on March 8, 1967; and she paid P90.00 on April
18, 1967 as evidenced by the receipt Exh. 2, 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. Both the RTC and CA convicted petitioner.
ISSUE:
Does the obligation solely depend on the will of the debtor, thus leaving only the
courts to impose a period?
RULING:
It is clear in the agreement, Exhibit "A", 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.
Page | 201
PACIFIC BANKING VS CA
GR No. L-45656.
May 5, 1989
FACTS:
Hart and Clarkins are the major stockholders of Insular Farms. On July 31, 1956
Insular Farms, owned by respondents, Inc. executed a Promissory Note of P 250,000.00
to the bank payable in five equal annual installments, the first installment payable on or
before July 1957. Said note provided that upon default in the payment of any installment
when due, all other installments shall become due and payable. The loan was intended to
support Insular Farms.
Unfortunately, business continued to decline. Hart agreed to Clarkin's proposal
that all Insular Farms shares of stocks be pledged to petitioner bank in lieu of additional
collateral and to insure an extension of the period to pay the July 1957 installment. Said
pledge was executed on February 19, 1958. Barely two weeks after the pledge the bank
demanded judicial foreclosure of the stock and the lots. The RTC granted the motion but
was reversed by the CA.
ISSUE:
Did petitioner bank infringe on the terms and conditions of the pledge?
RULING:
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.
In addition, there is ample evidence to support bad faith on the part of petitioner.
No sufficient investigation was conducted after the execution of the pledge regarding the
ability of Insular Farms to pay its loan. Also the dates of demand and filing of the case
for foreclosure seem to cast doubt on the intent of petitioner to offer the pledge to help
respondents.
In the light of the above discussion and the finding that the foreclosure sale was
premature and done in bad faith, petitioners are liable for damages arising from a quasidelict. The Supreme Court upheld the decision of the CA.
Page | 202
AGONCILLO VS JAVIER
GR No. 12611.
August 7, 1918
FACTS:
On February 27, 1904, Anastacio Alano, Jose Alano, and Florencio Alano,
executed in favor of the plaintiff, Da. Marcela Mario a document whereby: (1) The
Alanos would render unto her within one year from the date of the document, with
interest at 12% per annum, the sum of Php2,730.50; (2) They would mortgage a house
and lot inherited by them from the deceased, one Evangelista, to secure payment and; (3)
In case of insolvency on their part, they would cede said house and lot to Dr. Marcela
Mario. In case its value is insufficient to cover the total amount of indebtedness,
Anastacio Alano would also mortgage to said lady his four parcels of land to secure the
balance, if any.
In 1912, Anastacio Alano died intestate, and notices were drawn in boards and
newspapers for creditors to make their claims. No claims were presented to the
committee and the intestate proceeding was terminated by order dated November 8, 1915.
On April 27, 1916, petitioner stated that she was a creditor and the intestate proceedings
were reopened. The Court appointed one Javier to be administrator of the estate. Claims
for the house and lot were made as petitioner avers that defendants paid no part of the
indebtedness acknowledged therein, with the exception of the PhP200.00 paid on account
by Anastacio in 1908.
ISSUE:
Does petitioner have a right to the house and lot?
RULING:
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 to pay the debt at its maturity. The obligation assumed by the
debtors was alternative, and they had the right to elect which obligation they could
perform. The conduct of the parties involved shows that it was not their understanding
that the right to discharge the obligation by the payment of money was lost to debtors by
their failure to pay the debt at its maturity. The alternative indivisible obligation also
arises from the fulfillment of the suspensive condition before it can be availed of.
It is unfortunate, but the petition was judged to have lacked merit.
Page | 203
Page | 204
LEGARDA VS 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 defendants unjustified refusal to accept payment in
discharge of a mortgage indebtedness in his favor, and praying that the latter be order (1)
to receive the sum of P75,920.83; (2) to execute the corresponding deed of release of
mortgage, and; (3) to pay damages in the sum of P1,000. The Court then decided in favor
of plaintiff Legarda. After the war and the subsequent defeat of the Japanese occupants,
defendant filed a case in court claiming that plaintiff Clara de Legarda violated her
agreement with defendant, by forcing to deposit worthless Japanese military notes when
they originally agreed that the interest was to be condoned until after the occupation and
that payment was rendered either in Philippine or English currency. Defendant was later
substituted upon death by his heir Miailhe and the Courts judged in defendants favor.
Plaintiff now assails said decision.
ISSUE:
Is the tender of payment by plaintiff valid?
RULING:
On February 17, 1943, the only currency available was the Philippine currency, or
the Japanese Military notes, because all other currencies, including the English, were
outlawed by a proclamation issued by the Japanese Imperial Commander on January 3,
1942. The right to election ceased to exist on the date of plaintiffs payment because it
had become legally impossible. And this is so because in alternative obligations there is
no right to choose undertakings that are impossible or illegal. In other words, the
obligation on the part of the debtor to pay the mortgage indebtedness has since then
ceased to be alternative. It appears therefore, that the tender of payment in Japanese
Military notes was a valid tender because it was the only currency permissible at the time
and its payment was tantamount to payment in Philippine currency.
However, payment with the clerk of court did not have any legal effect because it
was made in certified check, and a check does not meet the requirements of legal tender.
Therefore, her consignation did not have the effect of relieving her from her obligation of
the defendant.
Page | 205
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.
RULING:
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).
Page | 206
QUIZANA VS REDUGORIO
GR No. L-6620.
May 7, 1954
FACTS:
This is an appeal to this Court from a decision rendered by the Court of First
Instance of Marinduque, wherein the defendants-appellants are ordered to pay the
plaintiff-appellee the sum of P550, with interest from the time of the filing of the
complaint, and from an order of the same court denying a motion of the defendantsappellants for the reconsideration of the judgment on the ground that they were deprived
of their day in court.
ISSUE:
What is the nature and effect of the actionable document mentioned above?
RULING:
The decisive question at issue, therefore, is whether the second part of the written
obligation, in which the obligors agreed and promised to deliver a mortgage over the
parcel of land described therein, upon their failure to pay the debt on a date specified in
the proceeding paragraph, is valid and binding and effective upon the plaintiff-appellee,
the creditor. 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.
Page | 207
FACTS:
Respondent Romeo Jaring was the lessee of a 14.5 hectare fishpond in Barito,
Mabuco, Hermosa, Bataan, for a period of five years ending on September 12, 1990. On
June 19, 1987, he subleased the fishpond, for the remaining period of his lease, to the
spouses Placido and Purita Alipio and the spouses Bienvenido and Remedios Manuel.
The stipulated amount of rent was P485,600.00, payable in two installments of
P300,000.00 and P185,600.00, with the second installment falling due on June 30, 1989.
Each of the four sublessees signed the contract.
The first installment was duly paid, but of the second installment, the sublessees
only satisfied a portion thereof, leaving an unpaid balance of P50,600.00. Despite due
demand, the sublessees failed to comply with their obligation, so that, on October 13,
1989, private respondent sued the Alipio and Manuel spouses for the collection of the
said amount before the Regional Trial Court. In the alternative, he prayed for the
rescission of the sublease contract should the defendants fail to pay the balance.
Petitioner Purita Alipio moved to dismiss the case because her husband had
passed away. And that any action for recovery of money, debt or interest thereon, shall
be dismissed when the defendant dies before final judgment.The trial court denied
petitioner's motion and held that the obligation is solidary. On appeal, the Court of
Appeals affirmed the decision.
ISSUE:
Whether a creditor can sue the surviving spouse for the collection of a debt which
is owed by the conjugal partnership of gains, or whether such claim must be filed in
proceedings for the settlement of the estate of the decedent.
RULING:
The Court held that the respondent cannot sue the surviving spouse of a decedent in an
ordinary proceeding for the collection of a sum of money chargeable against the conjugal
partnership. Because when the husband died, their conjugal partnership was
automatically dissolved and debts chargeable against it is to be paid in the settlement of
estate proceedings.
Moreover, respondent does not cite any provision of law which provides that
when there are two or more lessees, or in this case, sublessees, the latter's obligation to
pay the rent is solidary.Thus, the liability of the sublessees is merely joint. Since the
obligation of the Manuel and Alipio spouses is chargeable against their respective
conjugal partnerships, the unpaid balance of P50,600.00 should be divided into two so
that each couple is liable to pay the amount of P25,300.00. Hence, the petition is granted.
Page | 208
PH CREDIT CORP VS CA
GR No. 109648.
November 22, 2001
FACTS:
PH Credit Corp., filed a case against Pacific Lloyd Corp., Carlos Farrales,
Thomas H. Van Sebille and Federico C. Lim, for [a] sum of money. The case was
docketed as Civil Case No. 83-17751 before the Regional Trial Court, Branch 51,
Manila. After service of summons upon the defendants, they failed to file their answer
within the reglementary period, hence they were declared in default. PH Credit Corp.,
was then allowed to present its evidence ex-parte. The RTC judged in favor of PH Credit
Corp.
On July 27, 1990, a motion for the issuance of a writ of possession was filed and
on October 12, 1990, the same was granted. The writ of possession itself was issued on
October 26, 1990. Said order and writ of possession are now the subject of this petition.
Petitioner claims that Respondent Judge erred in applying the presumption of a joint
obligation in the face of the conclusion of fact and law contained in the decision showing
that the obligation is solidary.
ISSUE:
Is the petitioners contention tenable?
RULING:
The Rules of Court requires that all available objections to a judgment or
proceeding must be set up in an Omnibus Motion assailing it; otherwise, they are deemed
waived. In the case at bar, the objection of private respondent to his solidary liability
became available to him, only after his real property was sold at public auction. At the
time his personal properties were levied and sold, it was not evident to him that he was
being held solely liable for the monetary judgment rendered against him and his corespondents. That was why his objections then did not include those he asserted when his
solidary liability became evident.
In the dispositive portion of the January 31, 1984 Decision of the trial court, the
word solidary neither appears nor can it be inferred therefrom. The fallo merely stated
that the following respondents were liable: Pacific Lloyd Corporation, Thomas H. Van
Sebille, Carlos M. Farrales and Federico C. Lim. Under the circumstances, the liability is
joint, as provided by the Civil Code.
We should stress that respondents obligation is based on the judgment rendered
by the trial court. The dispositive portion or the fallo is its decisive resolution and is thus
the subject of execution. The other parts of the decision may be resorted to in order to
determine the ratio decidendi for the disposition. Where there is a conflict between the
dispositive part and the opinion of the court contained in the text or body of the decision,
the former must prevail over the latter on the theory that the dispositive portion is the
final order, while the opinion is merely a statement ordering nothing. Hence the
execution must conform with that which is ordained or decreed in the dispositive portion
of the decision.
Page | 209
CDCP VS ESTRELLA
GR No. 147791.
September 8, 2006
FACTS:
On December 29, 1978, respondents Rebecca G. Estrella and her granddaughter,
Rachel E. Fletcher, boarded in San Pablo City, a BLTB bus bound for Pasay City.
However, they never reached their destination because their bus was rammed from
behind by a tractor-truck of CDCP in the South Expressway. The strong impact pushed
forward their seats and pinned their knees to the seats in front of them. They regained
consciousness only when rescuers created a hole in the bus and extricated their legs from
under the seats. They suffered physical injuries as a result. Thereafter, respondents filed a
Complaint for damages against CDCP, BLTB, Espiridion Payunan, Jr. and Wilfredo
Datinguinoo before the Regional Trial Court of Manila, Branch 13.
ISSUE:
Are the accused jointly or solidarily liable?
RULING:
The case filed by respondents against petitioner is an action for culpa
aquiliana or quasi-delict under Article 2176 of the Civil Code. 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.
It is well-settled in Fabre, Jr. v. Court of Appeals, that the owner of the
other vehicle which collided with a common carrier is solidarily liable to the injured
passenger of the same. The Peitition was thusly DENIED.
Page | 210
FACTS:
Petitioners and respondent were stockholders of Ladtek, Inc., which obtained
loans from Metrobank and PDCP where they stood as sureties. Among themselves they
executed Agreements for Contribution, Indemnity and Pledge of shares of Stocks, stating
that in case of default in the payment of loans, the parties would reimburse each other the
proportionate share of any sum that any might pay to creditors. Ladtek defaulted on its
loan obligations, hence Metrobank filed a collection case. During the pendency thereof,
RGC and Gervel paid Metrobank where a waiver and quitclaim in favor of the two was
executed. Upon Quas refusal to reimburse, RGC and Gervel foreclosed the pledged
shares of stocks owned by Qua at a public auction. On appeal, the CA issued the assailed
decision and held that there was an implied novation of the agreement and that the
payment did not extinguish the entire obligation and did not benefit Qua. Hence, the
petition, where the petitioners claim the following: (1) Qua is estopped from claiming
that the payment made was not for the entire obligation, due to his judicial admissions;
(2) payment of the entire obligation is a condition sine qua non for the demand of
reimbursement under the indemnity agreements; and (3) there is no novation in the
instant case.
ISSUES:
(1) Whether payment of the entire obligation is an essential condition for
reimbursement; and (2) Whether there was no novation.
RULING:
The petition is denied. Although the Agreement does not state that payment of
the entire obligation is an essential condition for reimbursement, RGC and Gervel cannot
automatically claim for indemnity from Qua because Qua himself is liable directly to
Metrobank and PDCP. The elements of novation are not established in the instant case.
Contrary to RGC and Gervels claim, payment of any amount will not automatically
result in reimbursement. If a solidary debtor pays the obligation in part, he can recover
reimbursement from the co-debtors only in so far as his payment exceeded his share in
the obligation. This is precisely because if a solidary debtor pays an amount equal to his
proportionate share in the obligation, then he in effects pays only what is due from him.
If the debtor pays less than his share in the obligation, he cannot demand reimbursement
because his payment is less than his actual debt.
Page | 211
Page | 212
RULING:
With the allegation and subsequent proof of negligence against the defendant
driver and of an employer-employee relation between him and his co-defendant MMTC
in this instance, the case is undoubtedly based on a quasi-delict under Article 2180.
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. For
failure to rebut such legal presumption of negligence in the selection and supervision of
employees, the employer is likewise responsible for damages, the basis of the liability
being the relationship of pater familias or on the employer's own negligence.
Hence, the court consistently held that where the injury is due to the concurrent
negligence of the drivers of the colliding vehicles, the drivers and owners of the said
vehicles shall be primarily, directly and solidarily liable for damages and it is immaterial
that one action is based on quasi-delict and the other on culpa contractual, as the
solidarity of the obligation is justified by the very nature thereof. Hence, decision of
respondent Court of Appeals is affirmed.
Page | 213
Page | 214
Page | 215
FACTS:
On 1 December 1997, Eparwa and LDCU, entered into a Contract for Security
Services. On 21 December 1998, 11 security guards (security guards) whom Eparwa
assigned to LDCU from 1 December 1997 to 30 November 1998, filed a complaint
before the NLRC Regional Arbitration Branch No. 10 in Cagayan de Oro City. The
complaint was filed against both Eparwa and LDCU for underpayment of salary, legal
holiday pay, 13th month pay, rest day, service incentive leave, night shift differential,
overtime pay, and payment for attorneys fees.
The Labor Arbiter found that the security guards are entitled to wage differentials
and premium for holiday and rest day work. The Labor Arbiter held Eparwa and LDCU
solidarily liable pursuant to Article 109 of the Labor Code. LDCU filed an appeal before
the NLRC. LDCU agreed with the Labor Arbiters decision on the security guards
entitlement to salary differential but challenged the propriety of the amount of the award.
LDCU alleged that security guards not similarly situated were granted uniform monetary
awards and that the decision did not include the basis of the computation of the amount of
the award.
Eparwa also filed an appeal before the NLRC. For its part, Eparwa questioned its
liability for the security guards claims and the awarded cross-claim amounts. The NLRC
found that the security guards are entitled to wage differentials and premium for holiday
and rest day work. Although the NLRC held Eparwa and LDCU solidarily liable for the
wage differentials and premium for holiday and rest day work, the NLRC did not require
Eparwa to reimburse LDCU for its payments to the security guards. Eparwa and LDCU
again filed separate motions for partial reconsideration. In its Resolution NLRC declared
that although Eparwa and LDCU are solidarily liable to the security guards for the
monetary award, LDCU alone is ultimately liable.
LDCU filed a petition for certiorari before the appellate court assailing the NLRCs
decision. The appellate court granted LDCUs petition and reinstated the Labor Arbiters
decision. The appellate court also allowed LDCU to claim reimbursement from Eparwa.
The appellate court denied Eparwas motion for reconsideration.Hence, this
petition.
ISSUE:
Is LDCU alone ultimately liable to the security guards for the wage differentials
and premium for holiday and rest day pay?
RULING:
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.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.
This joint and several liability of the contractor and the principal is mandated by
the Labor Code to assure compliance of the provisions therein including the statutory
Page | 216
minimum wage [Article 99, Labor Code]. The contractor is made liable by virtue of his
status as direct employer. The principal, on the other hand, is made the indirect employer
of the contractors employees for purposes of paying the employees their wages should
the contractor be unable to pay them. This joint and several liability facilitates, if not
guarantees, payment of the workers performance of any work, task, job or project, thus
giving the workers ample protection as mandated by the 1987 Constitution. 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. Hence, the petition is granted.
Page | 217
FACTS:
On February 6, 1962, petitioner borrowed from the plaintiff-respondent, the sum
of ten thousand (P10,000.00) pesos as evidenced by a promissory note executed and
signed by Pedro Tanjuatco and Carlos Dimayuga. The indebtedness was to be paid on
May 7, 1962 with interest at the rate of ten percent (10%) per annum in case of nonpayment at maturity as evidenced by and in accordance with the terms and conditions of
the promissory note executed jointly and severally by defendants.
In the aforementioned promissory note, Carlos Dimayuga bound himself to pay
jointly and severally with Pedro Tanjuatco interest at the rate of 10% per annum on the
said amount of P10,000.00 until fully paid. Moreover, both undertook to "jointly and
severally authorize the respondent Philippine Commercial and Industrial Bank, at its
option to apply to the payment of this note any and all funds, securities or other real or
personal property of value which hands (sic) on deposit or otherwise belonging to anyone
or all of us. Upon the default of the promissors to pay, a complaint was filed on July 11,
1969 by the PCIB for some of money.
Defendant Carlos Dimayuga, however, had remitted to the plaintiff -respondent
the amount totalling P4,000.00 by way of partial payments made from August 1, 1969 to
May 7, 1970 as evidenced by corresponding receipts thereto. These payments were
nevertheless applied to past interests, charges and partly on the principal. On May 28,
1974, the trial court rendered a decision holding defendants jointly and severally liable to
pay the plaintiff the sum of P9,139.60 with interest at 10% per annum until fully paid
plus P913.96 as attorneys' fees.
On July 11, 1974, petitioner filed a motion alleging that since Pedro Tanjuatco
died on December 23, 1973, the money claim of the respondents should be dismissed and
prosecuted against the estate of the late Pedro Tanjuatco. On June 22, 1974, the trial court
denied the motion for lack of merit.Not satisfied, the petitioner appealed to the
respondent court. The Court of Appeals dismissed the appeal. Hence, this petition.
ISSUE:
Whether the position of the petitioner that Pedro Tanjuatco having died on
December 23, 1973, the money claim of PCIB should be dismissed and prosecuted
against the estate of the late Tanjuatco.
RULING:
From the evidence presented, there can be no dispute that Carlos Dimayuga
bound himself jointly and severally with Pedro C. Tanjuatco, now deceased, to pay the
obligation with PCIB in the amount of P10,000.00 plus 10% interest per annum. In
addition, as above stated, in case of non-payment, they undertook among others to jointly
and severally authorize respondent bank, at its option to apply to the payment of this
note, any and all funds, securities, real or personal properties, etc. belonging to anyone or
all of them. Otherwise stated, the promissory note in question provides in unmistakable
language that the obligation of petitioner Dimayuga is joint and several with Pedro C.
Tanjuatco.
It is well settled under the law and jurisprudence that when the obligation is
solidary, the creditor may bring his action in toto against the debtors obligated in
solidum. As expressly allowed by Article 1216 of the Civil Code, the creditor may
proceed against any one of the solidary debtors or some or all of them simultaneously.
"Hence, there is nothing improper in the creditor's filing of an action against the surviving
solidary debtors alone, instead of instituting a proceeding for the settlement of the estate
of the deceased debtor wherein his claim could be filed." The notice is undoubtedly left
to the solidary creditor to determine against whom he will enforce collection. Thus, the
appeal interposed by petitioner-appellant is dismissed for lack of merit and the decision
of the Court of First Instance is Affirmed in toto.
Page | 218
CERNA VS CA
GR No. L-48359.
March 30, 1993
FACTS:
On or about October 16, 1972, Celerino Delgado (Delgado) and Conrad Leviste
(Leviste) entered into a loan agreement which was evidenced by a promissory note
worded as follows:
FOR VALUE RECEIVED, I, CELERINO DELGADO, with postal
address at 98 K-11 St., Kamias Rd., Quezon City, promise to pay to the
order of CONRAD C. LEVISTE, NINETY (90) DAYS after date, at his
office at 215 Buendia Ave., Makati, Rizal, the total sum of SEVENTEEN
THOUSAND FIVE HUNDRED (P17,500.00) PESOS, Philippine
Currency, without necessity of demand, with interest at the rate of
TWELVE (12%) PERCENT per annum
On the same date, Delgado executed a chattel mortgage over a Willy's jeep owned
by him. And acting as the attorney-in-fact of herein petitioner, Manolo P. Cerna
(petitioner), he also mortgaged a "Taunus" car owned by the latter. The period lapsed
without Delgado paying the loan. This prompted Leviste to file a collection suit docketed
as Civil Case No. 17507 with the Court of First Instance of Rizal, Branch XXII against
Delgado and petitioner as solidary debtors. The Court of Appeals held that petitioner and
Delgado were solidary debtors.
ISSUE:
Are petitioner and Delgado solidary debtors?
RULING:
Only Delgado signed the promissory note and accordingly, he was the only one
bound by the contract of loan. Nowhere did it appear in the promissory note that
petitioner was a co-debtor. The law is clear that "(c)ontracts take effect only between the
parties. But by some stretch of the imagination, petitioner was held solidarily liable for
the debt allegedly because he was a co-mortgagor of the principal debtor, Delgado. This
ignores the basic precept that "(t)here is a solidary liability only when the obligation
expressly so states, or when the law or the nature of the obligation requires solidarity."
We have already stated that the contract of loan, as evidenced by the promissory note,
was signed by Delgado only. Petitioner had no part in the said contract. Thus, nowhere
could it be seen from the agreement that petitioner was solidarily bound with Delgado for
the payment of the loan.
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DAVID VS CA
GR No. 115821.
October 13, 1999
FACTS:
The Regional Trial Court of Manila, Branch 27, with Judge Ricardo Diaz, then
presiding, issued a writ of attachment over real properties covered by TCT Nos. 80718
and 10289 of private respondents. In his Decision dated October 31, 1979, Judge Diaz
ordered private respondent Afable to pay petitioner P66,500.00 plus interest from July
24, 1974, until fully paid, plus P5,000.00 as attorney's fees, and to pay the costs of suit.
On June 20, 1980, however, Judge Diaz issued an Order amending said Decision,
so that the legal rate of interest should be computed from January 4, 1966, instead of
from July 24, 1974. The amended Decision in the decretal portion reads:
WHEREFORE, judgment is hereby rendered against the defendant,
Valentin Afable Jr., ordering him to pay to the plaintiff the sum of
P66,500.00 plus the legal rate of interest thereon from January 4, 1966 up
to the time the same is fully paid plus the amount of P5,000.00 as and for
attorney's fees and to pay the costs of the suit." ordering the private
respondent Afable to pay the petitioner the sum of P66,500.00 plus the
legal rate of interest thereon from July 24, 1974, plus the amount of
P5,000.00 as attorney's fees and to pay the costs of suit.
The CA affirmed the judgment. The affirmation now comes to review before the
SC.
ISSUE:
Should the payment of interest be simple or compound?
RULING:
As therein held, Article 2212 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, as in the case of Philippine American
Accident Insurance, no accrued conventional interest could further earn interest upon
judicial demand.
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.
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FACTS:
On May 14, 1978 and July 6, 1978, petitioner Tan obtained two (2) loans each in
the principal amount of Two Million Pesos (P2,000,000.00), or in the total principal
amount of Four Million Pesos (P4,000,000.00) from respondent Cultural Center of the
Philippines(CCP) evidenced by two (2) promissory notes with maturity dates on May 14,
1979 and July 6, 1979, respectively. Petitioner defaulted but after a few partial payments
he had the loans restructured by respondent CCP, and petitioner accordingly executed a
promissory note on August 31, 1979 in the amount of Three Million Four Hundred
Eleven Thousand Four Hundred Twenty-One Pesos and Thirty-Two Centavos
(P3,411,421.32) payable in five (5) installments. Petitioner Tan failed to pay any
installment on the said restructured loan. The last installment falling due on December
31, 1980. In a letter dated January 26, 1982, petitioner requested and proposed to
respondent CCP a mode of paying the restructured loan payable in thirty-six (36) equal
monthly installments until fully paid. On October 20, 1983, petitioner again sent a letter
to respondent CCP requesting for a moratorium on his loan obligation until the following
year allegedly due to a substantial deduction in the volume of his business and on account
of the peso devaluation. No favorable response was made to said letters. Instead,
respondent CCP, through counsel, wrote a letter dated May 30, 1984 to the petitioner
demanding full payment, within ten (10) days from receipt of said letter, of the
petitioner`s restructured loan which as of April 30, 1984 amounted to Six Million EightyEight Thousand Seven Hundred Thirty-Five Pesos and Three Centavos (P6,088,735.03).
On August 29, 1984, respondent CCP filed in the RTC of Manila a complaint for
collection of a sum of money, against the petitioner after the latter failed to settle his said
restructured loan obligation. The petitioner interposed the defense that he merely
accommodated a friend, Wilson Lucmen, who allegedly asked for his help to obtain a
loan from respondent CCP. Petitioner claimed that he has not been able to locate Wilson
Lucmen. While the case was pending in the trial court, the petitioner filed a Manifestation
wherein he proposed to settle his indebtedness to respondent CCP by proposing to make a
down payment of One Hundred Forty Thousand Pesos (P140,000.00) and to issue twelve
(12) checks every beginning of the year to cover installment payments for one year, and
every year thereafter until the balance is fully paid. However, respondent CCP did not
agree to the petitioner`s proposals and so the trial of the case ensued.
The trial court rendered a decision in favor of Defendant-respondent CCP. The
appellate court denied the petitioner`s motion for reconsideration of the said decision.
I
ISSUE:
Whether there are contractual and legal bases for the imposition of the penalty,
interest on the penalty and attorney`s fees.
HELD:
The Court found no merit in the petitioner`s contention. Article 1226 of the New
Civil Code provides that: In obligations with a penal clause, the penalty shall substitute
the indemnity for damages and the payment of interests in case of non-compliance, if
there is no stipulation to the contrary. Nevertheless, damages shall be paid if the obligor
refuses to pay the penalty or is guilty of fraud in the fulfillment of the obligation. The
penalty may be enforced only when it is demandable in accordance with the provisions of
this Code.
In the case at bar, the promissory note expressly provides for the imposition of
both interest and penalties in case of default on the part of the petitioner in the payment
of the subject restructured loan. 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 the interest agreed upon, and in the
absence of stipulation, the legal interest, which is six per cent per annum.
Page | 224
The penalty charge of two percent (2%) per month in the case at bar began to
accrue from the time of default by the petitioner. There is no doubt that the petitioner is
liable for both the stipulated monetary interest and the stipulated penalty charge. Without
prejudice to the provisions of Article 2212, interest due and unpaid shall not earn interest.
However, the contracting parties may by stipulation capitalize the interest due and
unpaid, which as added principal, shall earn new interest.
Inasmuch as the said stipulation on the compounding of interest has the force of
law between the parties and does not appear to be inequitable or unjust, the said written
stipulation should be respected.
On the issue of attorney`s fees, the appellate court ruled correctly and justly in
reducing the trial court?s award of twenty-five percent (25%) attorney?s fees to five
percent (5%) of the total amount due.
Hence, the assailed Decision of the Court of Appeals is hereby affirmed with
modification in that the penalty charge of two percent (2%) per month on the total
amount due, compounded monthly, is hereby reduced to a straight twelve percent (12%)
per annum starting from August 28, 1986.
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FACTS:
On December 4, 1981, two fiber drums of riboflavin were shipped from
Yokohama, Japan for delivery vessel `SS EASTERN COMET' owned by defendant
Eastern Shipping Lines under Bill of Lading No. YMA-8 (The shipment was insured
under plaintiff's Marine Insurance Policy No. 81/01177 for P36,382,466.38.
Upon arrival of the shipment in Manila on December 12, 1981, it was discharged
unto the custody of defendant Metro Port Services, Inc. The latter excepted to one drum,
said to be in bad order, which damage was unknown to plaintiff. On January 7, 1982
defendant Allied Brokerage Corporation received the shipment from defendant Metro
Port Service, Inc., one drum opened and without. On January 8 and 14, 1982, defendant
Allied Brokerage Corporation made deliveries of the shipment to the consignees'
warehouse. The latter excepted to one drum which contained spillages, while the rest of
the contents was adulterated/fake Plaintiff contended that due to the losses/damage
sustained by said drum, the consignee suffered losses totaling P19,032.95, due to the fault
and negligence of defendants. Claims were presented against defendants who failed and
refused to pay the same "As a consequence of the losses sustained, plaintiff was
compelled to pay the consignee P19,032.95 under the aforestated marine insurance
policy, so that it became subrogated to all the rights of action of said consignee against
defendants.
ISSUE:
a.)Whether the payment of legal interest on an award for loss or damage is to be
computed from the time the complaint is filed or form the date the decision appealed
from is rendered; and b)Whether the applicable rate of interest is twelve percent or six
percent.
HELD:
When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts,
delicts or quasi-delicts is breached, the contravenor can be held liable for damages. With
regard particularly to an award of interest in the concept of actual and compensatory
damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money,
i.e., a loan or forbearance of money, the interest due should be that which may have been
stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the
time it is judicially demanded. In the absence of stipulation, the rate of interest shall be
12% per annum to be computed from default, i.e., from judicial or extrajudicial demand
under and subject to the provisions of Article 1169 23 of the Civil Code.
2. When a obligation, not constituting a loan or forbearance of money, is breached, an
interest on the amount of damages awarded may be imposed at the discretion of the court
at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated
claims or damages except when or until the demand can be established with reasonable
certainty. Accordingly, where the demand is established with reasonable certainty, the
interest shall begin to run from the time the claim is made judicially or extrajudicially
(Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at
the time the demand is made, the interest shall begin to run only from the date of the
judgment of the court is made (at which time the quantification of damages may be
deemed to have been reasonably ascertained).
3. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph
2, above, shall be 12% per annum from such finality until its satisfaction, this interim
period being deemed to be by then an equivalent to a forbearance of credit.
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POLOTAN VS CA
GR No. 119379.
September 25, 1998
FACTS:
Private respondent Security Diners International Corporation (Diners Club), a
credit card company, extends credit accomodations to its cardholders for the purchase of
goods and other services from member establishments. Said goods and services are
reimbursed later on by cardholders upon proper billing. Petitioner Rodelo G. Polotan, Sr.
applied for membership and credit accmodations with Diners Club in October 1985. The
application form contained terms and conditions governing the use and availment of the
Diners Club card, among which is for the cardholder to pay all charges made through the
use of said card within the period indicated in the statement of account and any remaining
unpaid balance to earn 3% interest per annum plus prime rate of Security Bank & Trust
Company. Notably, in the application form submitted by petitioner, Ofricano Canlas
obligated himself to pay jointly and severally with petitioner the latters obligation to
private respondent.
Upon acceptance of his application, petitioner was issued Diners Club card No.
3651-212766-3005. As of May 8, 1987, petitioner incurred credit charges plus
appropriate interest and service charges in the aggregate amount of P33,819.84 which had
become due and demandable. Demands for payment made against petitioner proved
futile. Hence, private respondent filed a Complaint for Collection of Sum of Money
against petitioner before the lower court.
ISSUE:
Is petitioner liable for payment of credit charges plus interest and service charges?
RULING:
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. Nevertheless, 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.
In this case, petitioner, in effect, claims that the subject contract is one-sided in
that the contract allows for the escalation of interests, but does not provide for a
downward adjustment of the same in violation of Central Bank Circular 905. Admittedly,
the second paragraph of the questioned proviso which provides that the Cardholder
hereby authorizes Security Diners to correspondingly increase the rate of such interest in
the event of changes in prevailing market rates x x x is an escalation clause. However, it
cannot be said to be dependent solely on the will of private respondent as it is also
dependent on the prevailing market rates.
Escalation clauses are not basically wrong or legally objectionable as long as they are not
solely potestative but based on reasonable and valid grounds. Obviously, the
fluctuation in the market rates is beyond the control of private respondent.
Page | 228
FACTS:
On February 11, 1989, Board Resolution No. 05, Series of 1989 was approved by
Petitioner NSBCI authorizing the company to x x x apply for or secure a commercial loan
with the PNB in an aggregate amount of P8.0M, under such terms agreed by the Bank
and the NSBCI, using or mortgaging the real estate properties registered in the name of
its President and Chairman of the Board Petitioner Eduardo R. Dee as collateral; and
authorizing petitioner-spouses to secure the loan and to sign any and all documents which
may be required by Respondent PNB, and that petitioner-spouses shall act as sureties or
co-obligors who shall be jointly and severally liable with Petitioner NSBCI for the
payment of any [and all] obligations.
On August 15, 1989, Resolution No. 77 was approved by granting the request of
Respondent PNB thru its Board NSBCI for an P8 Million loan broken down into a
revolving credit line of P7.7M and an unadvised line of P0.3M for additional operating
and working capital to mobilize its various construction projects.
The loan of Petitioner NSBCI was secured by a first mortgage on the following:
a) three (3) parcels of residential land located at Mangaldan, Pangasinan; b) six (6)
parcels of residential land situated at San Fabian, Pangasinan; and c) a residential lot and
improvements thereon located at Mangaldan. The loan was further secured by the joint
and several signatures of Petitioners Eduardo Dee and Arcelita Marquez Dee, who signed
as accommodation-mortgagors since all the collaterals were owned by them and
registered in their names. Moreover Petitioner NSBCI executed three promissory notes.
In addition, petitioner corporation also signed the Credit Agreement dated August 31,
1989 relating to the revolving credit line of P7.7 Million x x x and the Credit
Agreement dated September 5, 1989 to support the unadvised line of P300,000.00.
On August 31, 1989, petitioner-spouses executed a Joint and Solidary
Agreement (JSA) in favor of Respondent PNB unconditionally and irrevocably binding
themselves to be jointly and severally liable with the borrower for the payment of all
sums due and payable to the Bank under the Credit Document. Later on, Petitioner
NSBCI failed to comply with its obligations under the promissory notes.
On June 18, 1991, Petitioner Eduardo R. Dee on behalf of Petitioner NSBCI sent
a letter to the Branch Manager of the PNB Dagupan Branch requesting for a 90-day
extension for the payment of interests and restructuring of its loan for another term.
Subsequently, NSBCI tendered payment to Respondent PNB of three (3) checks
aggregating P1,000,000.00.
In a meeting held on August 12, 1991, Respondent PNBs representative, Mr.
Rolly Cruzabra, was informed by [Petitioner] Eduardo Dee of his intention to remit to
Respondent PNB post-dated checks covering interests, penalties and part of the loan
principals of his due account.
On August 22, 1991, Respondent banks Crispin Carcamo wrote Petitioner
Eduardo Dee, informing him that Petitioner NSBCIs proposal was acceptable, provided
the total payment should be P4,128,968.29 that would cover the amount of P1,019,231.33
as principal, P3,056,058.03 as interests and penalties, and P53,678.93 for insurance[,]
with the issuance of post-dated checks to be dated not later than November 29, 1991.
On September 6, 1991, Petitioner Eduardo Dee wrote the PNB Branch Manager
reiterating his proposals for the settlement of Petitioner NSBCIs past due loan account
amounting to P7,019,231.33. Petitioner Eduardo Dee later tendered four (4) post-dated
Interbank checks aggregating P1,111,306.67 in favor of Respondent PNB
Upon presentment, however, x x x check nos. 03500087 and 03500088 dated
September 29 and October 29, 1991 were dishonored by the drawee bank and returned
due to a stop payment order from petitioners.
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On November 12, 1991, PNBs Mr. Carcamo wrote Petitioner Eduardo Dee
informing him that unless the dishonored checks were made good, said PNB branch
shall recall its recommendation to the Head Office for the restructuring of the loan
account and refer the matter to its legal counsel for legal action. Petitioners did not heed
respondents warning and as a result, the PNB Dagupan Branch sent demand letters to
Petitioner NSBCI at its office address at 1611 ERDC Building, E. Rodriguez Sr. Avenue,
Quezon City, asking it to settle its past due loan account.
Petitioners nevertheless failed to pay their loan obligations within the time frame
given them and as a result, Respondent PNB filed with the Provincial Sheriff of
Pangasinan at Lingayen a Petition for Sale
The sheriff foreclosed the real estate mortgage and sold at public auction the
mortgaged properties of petitioner-spouses, with Respondent PNB being declared the
highest bidder for the amount of P10,334,000.00.
Copies of the Sheriffs Certificate of Sale were sent by registered mail to
petitioner corporations address petitioner-spouses address.
On April 6, 1992, the PNB Dagupan Branch Manager sent a letter to petitioners at
their address informing them that the properties securing their loan account had been sold
at public auction, that the Sheriffs Certificate of Sale had been registered with the
Registry of Deeds of Pangasinan and that a period of one (1) year therefrom was granted
to them within which to redeem their properties.
Petitioners failed to redeem their properties within the one-year redemption period
and so Respondent PNB executed a Deed of Absolute Sale consolidating title to the
properties in its name.
Respondent PNB informed Petitioner NSBCI that the proceeds of the sale
conducted on February 26, 1992 were not sufficient to cover its total claim amounting to
P12,506,476.43 and thus demanded from the latter the deficiency of P2,172,476.43 plus
interest and other charges until the amount was fully paid.
Petitioners refused to pay the above deficiency claim which compelled
Respondent PNB to institute the instant Complaint for the collection of its deficiency
claim.
ISSUE:
Whether or not the escalation clause is valid and whether or not it is violative of
the principle of mutuality of contracts.
RULING:
In each drawdown, the Promissory Notes specified the interest rate to be charged:
19.5 percent in the first, and 21.5 percent in the second and again in the third. However,
a uniform clause therein permitted respondent to increase the rate within the limits
allowed by law at any time depending on whatever policy it may adopt in the future x x
x, without even giving prior notice to petitioners. The Court holds that petitioners
accessory duty to pay interest did not give respondent unrestrained freedom to charge any
rate other than that which was agreed upon. No interest shall be due, unless expressly
stipulated in writing. It would be the zenith of farcicality to specify and agree upon rates
that could be subsequently upgraded at whim by only one party to the agreement.
The unilateral determination and imposition of increased rates is violative of
the principle of mutuality of contracts ordained in Article 1308 of the Civil Code. Onesided impositions do not have the force of law between the parties, because such
impositions are not based on the parties essential equality.
Although escalation clauses are valid in maintaining fiscal stability and retaining
the value of money on long-term contracts, giving respondent an unbridled right to adjust
the interest independently and upwardly would completely take away from petitioners the
right to assent to an important modification in their agreement and would also negate
the element of mutuality in their contracts. The clause cited earlier made the fulfillment
Page | 230
of the contracts dependent exclusively upon the uncontrolled will of respondent and
was therefore void. Besides, the pro forma promissory notes have the character of a
contract dadhsion, where the parties do not bargain on equal footing, the weaker
partys the debtors participation being reduced to the alternative to take it or leave it.
Page | 231
PNB VS ENCINA
GR 174055. February 12, 2008
FACTS:
The Philippine National Bank (PNB) assails the Decision of the Court of Appeals
dated 15 May 2005, rendered in CA-G.R. CV No. 79094 which, among others, declared
null and void the interest rate imposed by PNB on the loan obtained from it by
respondents and the consequent extrajudicial foreclosure of the properties offered as
security for the loan.
Respondents Encina spouses acquired several loans from PNB from which it
failed to pay within due time. Encina avers that there ought to be longer gestation periods
on its part being engaged in a business of agricultural character.
ISSUE:
Was there a violation of the Usury Law?
RULING:
As borne by the records, the Encina spouses never challenged the validity of their
loan and the accessory contracts with PNB on the ground that they violated the principle
of mutuality of contracts in view of the provision therein that the interest rate shall be set
by management. Their only contention concerning the interest rate was that the charges
imposed by the bank violated the Usury Law. This was the essence of the second cause of
action alleged in the complaint.
It should be definitively ruled in this regard that the Usury Law had been rendered
legally ineffective by Resolution No. 224 dated 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.
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morals, public order or public policy, it is binding upon the obligor. It is the litigant, not
the counsel, who is the judgment creditor entitled to enforce the judgment by execution.
Nevertheless, it appears that petitioners failure to comply fully with her
obligation was not motivated by ill will or malice. The twenty-nine partial payments she
made were a manifestation of her good faith. Again, Article 1229 of the Civil Code
specifically empowers the judge to reduce the civil penalty equitably, when the principal
obligation has been partly or irregularly complied with. Upon this 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.
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No. First, Central Bank Circular No. 905 did not repeal nor in any way amend the
Usury Law but simply suspended the latters effectivity. Thus, retroactive application of
a Central Bank Circular cannot, and should not, be presumed. Second, several facts and
circumstances taken altogether show that the Underwriting and Consultancy Agreements
were simply cloaks or devices to cover an illegal scheme employed by petitioner FMIC to
conceal and collect excessively usurious interest. The Underwriting and Consultancy
Agreements which were executed and delivered contemporaneously with the Loan
Agreement on January 31, 1978 were exacted by petitioner FMIC as essential conditions
for the grant of the loan. An apparently lawful loan is usurious when it is intended that
additional compensation for the loan be disguised by an ostensibly unrelated contract
providing for payment by
the borrower for the lenders services which are of little value or which are not in fact to
be rendered, such as in the instant case. In this connection, Article 1957 of the New Civil
Code clearly provides that: Art. 1957. Contracts and stipulations, under any cloak or
device whatever, intended to circumvent the laws against usury shall be void. The
borrower may recover in accordance with the laws on usury. In usurious loans, the
entire obligation does not become void because of an agreement for usurious interest; the
unpaid principal debt still stands and remains valid but the stipulation as to the usurious
interest is void, consequently, the debt is to be considered without stipulation as to the
interest.
Thus, the Court agrees with the factual findings and conclusion of the appellate
court, wherein it held that the stipulated penalties, liquidated damages and attorneys
fees, excessive, iniquitous and unconscionable. Accordingly, the 20% penalty on the
amount due and 10% of the proceeds of the foreclosure sale as attorneys fees would
suffice to compensate the appellee, especially so because there is no clear showing that
the appellee hired the services of counsel to effect the foreclosure; it engaged counsel
only when it was seeking the recovery of the alleged deficiency.
Attorneys fees as provided in penal clauses are in the nature of liquidated
damages. So long as such stipulation does not contravene any law, morals, or public
order, it is binding upon the parties. Nonetheless, courts are empowered to reduce the
amount of attorneys fees if the same is iniquitous or unconscionable.[46] Articles
1229 and 2227 of the New Civil Code provide that: Art. 1229. The judge shall equitably
reduce the penalty when the principal obligation has been partly or irregularly complied
with by the debtor. Even if there has been no performance, the penalty may also be
reduced by the courts if it is iniquitous or unconscionable. Art. 2227. Liquidated
damages, whether intended as an indemnity or a penalty, shall be equitably reduced if
they are iniquitous or unconscionable.
In the case at bar, the amount of Three Million One Hundred Eighty-Eight
Thousand Six Hundred Thirty Pesos and Seventy-Five Centavos (P3,188,630.75) for the
stipulated attorneys fees equivalent to twenty-five (25%) percent of the alleged amount
due, as of the date of the auction sale on June 23, 1980, is manifestly exorbitant and
unconscionable. Accordingly, we agree with the appellate court that a reduction of the
attorneys fees to ten (10%) percent is appropriate and reasonable under the facts and
circumstances of this case.
Page | 239
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. In this
case, NNRMC was only able to prove that it incurred the amounts of P5,995.83 as
opening charges on the two Letters of Credit and an additional P1,911.85 as amendment
charges on the same Letters of Credit. Other than that, NNRMC failed to prove it had
suffered actual damages resulting from the nondelivery of the specified buri midribs and
rattan poles. In fact, what it allegedly suffered are what it calls Foregone Interest
Income and Foregone Profit from the two Letters of Credit. Such could not be
considered as actual damages.
Page | 241
MEDEL VS CA
G.R. No. 131622 November 27, 1998
FACTS:
The Medel spouses obtained several loans of which they were unable to pay in full. On
July 23, 1986, Servando and Leticia with the latter's husband, Dr. Rafael Medel,
consolidated all their previous unpaid loans totaling P440,000.00, and sought from
Veronica another loan in the amount of P60,000.00, bringing their indebtedness to a total
of P500,000.00, payable on August 23, 1986. They executed a promissory note indicating
payment for the balance.
On maturity of the loan, the borrowers failed to pay the indebtedness of
P500,000.00, plus interests and penalties, evidenced by the above-quoted promissory
note. On February 20, 1990, Veronica R. Gonzales, joined by her husband Danilo G.
Gonzales, filed with the Regional Trial Court of Bulacan, Branch 16, at Malolos,
Bulacan, a complaint for collection of the full amount of the loan including interests and
other charges.
ISSUE:
What is the interest that must be collected on the instant case?
RULING:
Basically, the issue revolves on the validity of the interest rate stipulated upon.
Thus, the question presented is whether or not the stipulated rate of interest at 5.5% per
month on the loan in the sum of P500,000.00, that plaintiffs extended to the defendants is
usurious. In other words, is the Usury Law still effective, or has it been repealed by
Central Bank Circular No. 905, adopted on December 22, 1982, pursuant to its powers
under P.D. No. 116, as amended by P.D. No. 1684?
We agree with petitioners that the stipulated rate of interest at 5.5% per month on
the P500,000.00 loan is excessive, iniquitous, unconscionable and exorbitant. However,
we can not consider the rate "usurious" because this Court has consistently held that
Circular No. 905 of the Central Bank, adopted on December 22, 1982, has expressly
removed the interest ceilings prescribed by the Usury Law and that the Usury Law is now
"legally inexistent".
Nevertheless, we find the interest at 5.5% per month, or 66% per annum,
stipulated upon by the parties in the promissory note iniquitous or unconscionable, and,
hence, contrary to morals ("contra bonos mores"), if not against the law. 20 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.
Page | 242
FACTS:
An action for Recovery of Damages for Injury to Person and Loss of
Property was filed. RTC rendered judgment in favor of the plaintiffs and against the
defendants, ordering the latter to pay jointly and severally the former. On appeal, the
decision was modified. In the computation of the legal interest decreed sought to be
executed, petitioners claimed that it should be at 12% per annum invoking Central bank
Circular. The respondents, however, insist that said legal interest should be at the rate of
6% per annum pursuant to Article 2209 of the New Civil code
ISSUE:
How much by way of legal interest, should a judgment debtor pay the judgment
creditor?
RULING:
The judgment spoken of and referred to are judgments in litigations
involving loans or forbearances of any money, goods or credits. Any other kind of
monetary judgment does not fall within the coverage of the said law for it is not within
the ambit of authority granted to the Central Bank. The Monetary Board may not tread on
forbidden grounds. To make Central Bank Circular No. 416 applicable to any case other
than those specifically provided for by the Usury Law will make the same of doubtful
constitutionality since the Monetary Board will be exercising legislative functions which
are beyond the intendment of PD No. 116.
The petition is without merit, the same is dismissed with costs against
petitioners.
Page | 243
FACTS:
KJS is engaged in the sale of steel scaffoldings while Lo is a building
contractor. On February 22, 1990, petitioner ordered scaffolding equipments from
respondent worth P540,425.80. He paid a downpayment in the amount of P150,000. The
balance was made payable in 10 monthly installments. Respondent delivered the
equipments. Petitioner was able to pay the first two monthly installments. His business
suffered financial difficulties and he was unable to settle his obligations despite demands.
On October 11, 1990, the parties executed a Deed of Assignment whereby petitioner
assigned to respondent his receivables from Jonero Realty. However, Jonero refused to
honor the Dees of Assign,nt because it claimed that petitioner was indebted to it.
Petitioner refused to pay claiming that that his obligation had been extinguished when
they executed the deed of assign,ent. RTC dismissed the complaint on the ground that the
assignment of credit extinguished the obligation. Court of appeals reversed the decision
and ordered Lo to pay the plaintiff KJS with legal interests of 6% per annum until fully
paid.
ISSUE:
Whether or not the Deed of Assignment extinguished the obligation
RULING:
An assignment of credit, by virtue of which the owner of the credit, the assignor,
by a legal cause, such as sale, dacion en pago, exchange or donation and without the
consent of the debtor transfers his credit and accessory rights to another, the assignee,
who acquires the power to enforce it against the debtor. Petitioner, as assignor, is bound
to warrant the existence and legality of the credit at the tim of the sale or assignment.
When Jonero claimed that it was no longer indebted to petitioner since the latter had also
as unpaid obligation to it, it essentially meant that its obligation to the petitioner has been
extinguished by compensation. Petitioner was found in breach of his obligation under the
Deed of assignment. Court of Appeals decision is affirmed.
Page | 244
Page | 245
FACTS:
Cathay is a common carrier engaged in transporting passenger and goods by air.
Spouses Vazquez are Gold Card Members of its Marc Polo Club. The Spouses, with two
friends and a maid went to HongKong for business. Spouses have the Business class
boarding passes and economy class for the maid. When boarding, the ground stewardess
declared a seat change from Business class to First Class for the Vazquez. The Spouses
refused but after insistence by the stewardess, the spouses gave in. When the arrived in
Manila, spouses demanded to be indemnified in the amount of one million for the
humiliation and embarrassment caused by the employee. RTC ruled for the Vazquez
ordering Cathay Airways to pay the spouses, stating further that there was a breach of
contract not because of overbooking but because the latter pushed through with the
upgrading despite objections of the spouses.
ISSUE:
Is an involuntary upgrading of an airlines accommodation at no extra costs cause
a breach of contract of carriage?
RULING:
The Vazquezes are aware of the privileges, but such privileges may be waived.
Spouses should have been consulted first. It should not have been imposed on them over
their vehement objection. By insisting of the upgrade, Pacific Airways breached its
contract of carriage with the Vazquezes. Nominal damages are adjudicated in order that
the right of the plaintiff, which have been violated may be vindicated or recognized and
not for indemnifying the plaintiff for any loss suffered by him.
Petition is partly granted. Court of Appeals decision is modified. Moral damages
deleted, nominal damages reduced to P5,000.
Page | 246
CITIBANK v.SABENIANO
G.R.No. 156132, October 16, 2006
FACTS:
Petitioner Citibank is a banking corporation duly authorized under the
laws of the USA to do commercial banking activities n the Philippines. Sabeniano
was a client of both Petitioners Citibank and FNCB Finance. Respondent filed a
complaint against petitioners claiming to have substantial deposits, the proceeds
of which were supposedly deposited automatically and directly to respondents
account with the petitioner Citibank and that allegedly petitioner refused to
despite repeated demands. Petitioner alleged that respondent obtained several
loans from the former and in default, Citibank exercised its right to set-off
respondents outstanding loans with her deposits and money. RTC declared the
act illegal, null and void and ordered the petitioner to refund the amount plus
interest, ordering Sabeniano, on the other hand to pay Citibank her indebtedness.
CA affirmed the decision entirely in favor of the respondent.
ISSUE:
Whether petitioner may exercise its right to set-off respondents loans with her
deposits and money in Citibank-Geneva
RULING:
Petition is partly granted with modification.
1. Citibank is ordered to return to respondent the principal amount of
P318,897.34 and P203,150.00 plus 14.5% per annum
2. The remittance of US $149,632.99 from respondents Citibank-Geneva
account is declared illegal, null and void, thus Citibank is ordered to refund
said amount in Philippine currency or its equivalent using exchange rate at the
time of payment.
3. Citibank to pay respondent moral damages of P300,000, exemplary damages
for P250,000, attorneys fees of P200,000.
4. Respondent to pay petitioner the balance of her outstanding loans of
P1,069,847.40 inclusive off interest.
Page | 247
FACTS:
Petitioner is a domestic corporation while US Lines is a foreign corporation
engaged in overseas shipping. It was made applicable that consignees who fail to take
delivery of their containerized cargo within the 10-day free period are liable to pay
demurrage charges. On June 22, 1981, US Lines filed a suit against petitioner seeking
payment of demurrage charges plus interest and damages. Petitioner incurred P94,000
which the latter refused to pay despite repeated demands. Petitioner disclaims liability
alleging that it has never entered into a contract nor signed an agreement to be bound by
it. RTC ruled that petitioner is liable to respondent and all be computed as of the date of
payment in accordance with Article 1250 of the Civil Code. CA affirmed the decision.
ISSUE:
Whether the re-computation of the judgment award in accordance with Article
1250 of the Civil Code proper
RULING:
The Supreme Court found as erroneous the trial courts decision as affirmed y the
Court of Appeals. The Court holds that there has been an extraordinary inflation within
the meaning of Article 1250 of the Civil Code. There is no reason for ordering the
payment of an obligation in an amount different from what has been agreed upon because
of the purported supervention of an extraordinary inflation.
The assailed decision is affirmed with modification that the order for recomputation as of the date of payment in accordance with the provisions of Article 1250
of New Civil Code is deleted.
Page | 248
FACTS:
On May 9, 1974, respondent entered into an International Passengers
Sales Agency Agreement with petitioner, authorizing the latter to sell its air
transport tickets. Petitioner failed to remit the proceeds of the ticket sales, for
which reason, respondent filed a Collection suit against petitioner before the
Tokyo District Court, which ordered petitioner to pay respondent 82,158,195 Yen
and damages for the delay at the rate of 6% per annum fro August 28,1980 up to
and until payment is completed. Unable to execute the decision in Japan,
respondent filed a case with the RTC.
RTC issued writ of execution ordering defendant to pay plaintiff
83,158,195 Yen at the exchange rate on the date of foreign judgment plus 6%
interest. On appeal, petitioner contended that it had already paid partial payments
hence, was not liable to pay additional 6% interest imposed in the foreign
judgment.
ISSUE:
Whether or not the petitioner is liable to pay additional 6% per annum for
the delay
RULING:
The petition is denied. CA decision is affirmed with modification.
Petitioner is directed to pay respondent 61,734 Yen plus damages for the delay at
6% per annum from August 28,1980 until payment is completed, with interest at
the rate of 12% per annum counted from the date of filing until fully satisfied.
Petitioners liability may be paid in Philippine currency computed at the exchange
rate prevailing at the time of payment.
Page | 249
FACTS:
On October 20, 1988, petitioner Padilla and private respondent entered
into a contract to sell involving a parcel of land. The was untitled but private
respondent was paying taxes thereon. Under the contract, petitioner undertook to
secure title to the property in private respondents names of the P312,840
purchase prize, petitioner was to pay downpayment of P50,000 upon signing and
the balance was to be paid within 10 days from the issuance of the court order
directing issuance of the decree of registration. For failure to pay some of the
amount, respondent offered to sell to petitioner one-half of the property for all the
payment, lest respondent rescinds the contract. Petitioner refused and instituted
action for specific performance alleging that they have substantially complied
with the obligation. RTC ruled for the petitioners stating a casual or slight breach
that did not warrant rescission. CA reversed the decision and confirmed the
respondents rescission.
ISSUE:
Whether or not the private respondents are entitled to rescind the contract
to sell the land to petitioner
RULING:
The Supreme Court sustained the ruling of CA that private respondent
may validly rescind the contract to sell, however, the reason for this is not that
respondents have the power to rescind but because their obligation thereunder did
not arise. The CA is correct in ordering the return to petitioner of the amounts
received from him by private respondents, on the precept that no one shall be
unjustly enriched himself at the expense of another.
Page | 250
RULING:
The ruling applies the statutory provisions which lay down the rule that a check is
not legal tender and that a creditor may validly refuse payment by check, whether it be a
managers check, cashiers or personal check. The decision of the court of Appeals is
affirmed.
Page | 251
Page | 252
METROBANK v. CABLZO
G.R. No. 154469
December 6, 2006
FACTS:
Respondent Cabilzo was one of the Metrobanks client who maintained a current
account. On November 12, 199, Cabilzo issued a Metrobank check payable to cash in the
amount of P1,000 and was paid to a certain Mr. Marquez. The check was oresented to
Westmont Bank or payment and in turn indorsed to etrobank for appropriate clearing. It
was discovered that the amount withdrawn wa P91,000, thus, the check was altered.
Cabilzo re-credit the amount of P91,000 to his account but Metrobank refused to comply
despite demands. RTC ordered Metrobank to pay the sum of P90,000 to Cabilzo. Court
of Appeals affirmed the decision with modification.
ISSUE:
Whether holding Metrobank, as drawee bank, liable for the alternations on the
subject check bearing the authentic signature of the drawer thereof
RULING:
The degree of diligence in the exercise of his tasks and the performance of his
duties have been faithfully complied with by Cabilzo. It is obvious that Metrobank was
remiss in the duty and violated that fiduciary relationship with its clients as it appeared
that there are material alterations on the check that are visble to the naked eye but the
bank failed to detect such.
Petition is denied. Court of Appeals decision is affirmed with modification that
exemplary damages in the amount of P50,000 be awarded.
Page | 253
FACTS:
In May 1997, Bathala Marketng, renewed its Contract of Lease with
Ponciano Almeda. Under the contract, Ponciano agreed to lease a porton of Almeda
Compound for a monthly rental of P1,107,348.69 for four years. On January 26, 1998,
petitioner informed respondent that its monthly rental be increased by 73% pursuant to
the condition No. 7 of the contract and Article 1250. Respondent refused the demand and
insisted that there was no extraordinary inflation to warrant such application. Respondent
refused to pay the VAT and adjusted rentals as demanded by the petitioners but
continually paid the stipulated amount. RTC ruled in favor of the respondent and
declared that plaintiff is not liable for the payment of VAT and the adjustment rental,
there being no extraordinary inflation or devaluation. CA affirmed
the
decision
deleting the amounts representing 10% VAT and rental adjustment.
ISSUE:
Whether the amount of rentals due the petitioners should be adjusted by reason of
extraordinary inflation or devaluation
RULING:
Petitioners are stopped from shifting to respondent the burden of paying the VAT.
6th Condition states that respondent can only be held liable for new taxes imposed after
the effectivity of the contract of lease, after 1977, VAT cannot be considered a new tax.
Neither can petitioners legitimately demand rental adjustment because of extraordinary
inflation or devaluation. Absent an official pronouncement or declaration by competent
authorities of its existence, its effects are not to be applied.
Petition is denied. CA decision is affirmed.
Page | 254
Page | 255
Page | 256
Page | 257
FACTS:
Petitioner is the owner of a commercial building while respondent is a domestic
corporation known to be the biggest manufacturer and installer of aluminum materials in
the country. Parties entered into 2 contracts whereby for a total consideration of
P104,870. Hooven agreed to sell and install various aluminum materials in Lagons
building. Upon execution of contracts, Lagon paid Hooven P48,000 in advance. On
February 24, 1987, Hooven commenced an action for sum of money. It was alleged that
materials were delvered and installed but P69,329 remained unpaid even after the
completion of the project and despite repeated demands. RTC held partly on the basis of
the ocular inspection finding that the total actual deliveries cost P87,140 deducting
therefrom P48,000. CA set aside the decision and held in favor of Hooven.
ISSUE:
Whether all the materials specified in the contracts had been delivered and
installed by respondent in petitioners commercial building
RULING:
Essentially, respondent has the burden of establishing its affirmative allegations
of complete delivery and installation of the materials and petitioners failure to pay
therefor. The evidence on its discharge is grossly anemic. The CA decision is modified.
Lagon is ordered to pay respondent P6,377.66 representing the value unpaid. On the other
hand, respondent is ordered to pay petitioner P50,000 as moral damages, P30,000
attorneys fees and P46,554.50 as actual damages.
Page | 258
FACTS:
Private respondent , Eastern and Lim, an officer and stock holder of
Eastern held at least one joint bank account with the CBTC, the predecessor-in
interest of the petitioner BPI. In March 1975, checking account with Lim in the
amount of P120,000 was opened by Velasco with funds withdrawn fro the
account of Eastern and Lim. Velasco died and at the time of his death, the
outstanding balance of the account stood at P662,522.87. Thereafter, Easrtern
obtained a loan of P73,000 fro CBTC in addition, Eastern and Lim and CBTC
signed another document entitled Holdout agreement.
In the settlement proceeding of Velascos estate, the whole balance of
P331,261.44 in the joint account of Velasco and Lim was claimed as part of
Velascos estate. The interstate court granted the urgent motion of heirs of
Velasco to withdraw the deposit and authorize them to divide among themselves
the amount. BPI filed a complaint against Lin and Eastern demanding payment of
promissory not for P73,000. RTC ruled that the promissory note is subject to the
holdout agreement. CA affirmed the division.
ISSUE:
Whether BPI is still liable to the private respondent on the account subject
to the holdout agreement after it is withdrawn by the heirs of
Velasco
RULING:
The account was proved to belong to Eastern even if it was in the names
of Lim and Velasco. As the real creditor of the bank, Eastern has the right to
withdraw it or demand payment thereof. BPI can not be relieved of its duty to pay
Eastern simply because it already allowed the heirs of Velasco to withdraw the
whole balance of the account. Payment made by the debtor to the wrong party
does not extinguish the obligation as to the creditor who is without fault or
negligence.
Page | 259
RULING:
Private respondents employment status was established by the
certification of employment issued by the petitioner. The rule is that findings of
facts of the NLRC affirming those of the Labor Arbiter are entitled to a great
weight and will not be disturbed if they were supported by substantial evidence.
There was no grave abuse of discretion committed by NLRC in finding that
respondent was not a project employee. Decision of NLRC is affirmed with
modification deleting the awards of damages and attorneys fees.
Page | 260
Page | 261
FACTS:
Petitioner Lorenzo Shipping is engaged in coastwise shipping and
owns the cargo M/V Dadiangas Express. BJ Marthel is engaged in trading,
marketing an dselling various industrial commodities. Lorenzo Shipping ordered
for the second time cylinder lines from the respondent stating the term of
payment to be 25% upon delivery, the balance payable in 5 bi-monthly equal
installments, no again stating the date of the cylinders delivery. It was allegedly
paid through post dated checks but the same was dishonored due to insufficiency
of funds. Despite due demands by the respondent, petitioner falied contending
that time was of the essence in the delivery of the cylinders and that there was a
delay since the respondent committed said items within two months after receipt
of fir order. 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
RULING:
By accepting the cylinders when they were delivered to the warehouse,
petitioner waived the claimed delay in the delivery of said items. Supreme Court
geld 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.
Page | 262
FACTS:
On July 24,1997, petitioner obtained a loan fro the respondent in the
amount of P3,925,000 evidenced by a promissory note and secured by two deeds
of chattel mortgage covering two dump trucks and a bull dozer . Petitioner
defaulted entire obligation became due and demandable. A deed of assignment
was drafted by the respondent on October 6, 2000 and March 8, 2001
respectively. Petitioners completed the delivery of heavy equipment mentioned in
the deed of assignment to respondent which accepted the same without protest or
objection. Respondent manifested to admit an amended complaint for the seizure
and delivery of two more heavy equipment which are covered under the second
deed of the chattel mortgage. RTC ruled that the deed of assignment and the
petitioners delivery of the heavy equipment effectively extinguished the
petitioners obligation and respondent as stopped. CA reversed the decision
ordering the petitioner the outstanding debt of P4,275,919.69 plus interests.
ISSUE:
Did the Deed of Assignment operate to extinguish petitioners debt to the
respondent such that the replevin suit could no longer prosper?
RULING:
The deed of assignment was a perfected agreement which extinguished
petitioners total outstanding obligation to the respondent. The nature of the
assignment was a dacion en pago whereby property is alienated to the creditor in
the satisfaction of a debt in money. Since the agreement was consummated by the
delivery of the last unit of heavy equipment under the deed, petitioners are
deemed to have been released from all their obligations from the respondents.
Page | 263
Page | 264
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.
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. 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. XXX 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
RULING:
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.
Page | 265
FACTS:
On January 12, 1975, Asia Pacific entered into an agreement with Caltex
whereby petitioner agreed to supply private respondents aviation fuel for 2 years.
As of June 30, 1980, asia Pacific had an outstanding obligation n the total amount
of P 4,072,682.13. Caltex executed a Ded of Assignment wherein it assigned to
petitioner its receivables from the National treasury of the Philippines. Pursuant to
the Deed of assignment, National Treasury warrant the amount of P5,475,294
representing the refund. Caltex refused to return the excess amount of
P510,550.63 because it represented the interest and service charges and the rate of
18% per annum on the unpaid and overdue account of respondent. RTC dismissed
the case. IAC reversed the decision and ordered petitioner to return the amount of
P510,550.63 to private respondent.
ISSUE:
Whether or not the Deed of Assignment entered into by the parties
constituted dacion en pago, such that the obligation is totally
extinguished, hence, no interest and service charges could anymore
be imposed
RULING:
The Deed of Assignment executed by the parties is not a dation in
payment in payment and did not totally extinguish respondents obligation. It is
clear that in this case, dation in payment does not necessarily mean total
extinguishment of the obligation. The obligation is totally extinguished only when
the parties, by agreement, express or implied, or by their silence, consider the
thing a equivalent to the obligation.
Decision of Intermediate Appellate Court is set aside.
Page | 266
FACTS:
KJS is engaged in the sale of steel scaffoldings while Lo is a building
contractor. On February 22, 1990, petitioner ordered scaffolding equipments from
respondent worth P540,425.80. He paid a downpayment in the amount of P150,000. The
balance was made payable in 10 monthly installments. Respondent delivered the
equipments. Petitioner was able to pay the first two monthly installments. His business
suffered financial difficulties and he was unable to settle his obligations despite demands.
On October 11, 1990, the parties executed a Deed of Assignment whereby petitioner
assigned to respondent his receivables from Jonero Realty. However, Jonero refused to
honor the Dees of Assign,nt because it claimed that petitioner was indebted to it.
Petitioner refused to pay claiming that that his obligation had been extinguished when
they executed the deed of assign,ent. RTC dismissed the complaint on the ground that the
assignment of credit extinguished the obligation. Court of appeals reversed the decision
and ordered Lo to pay the plaintiff KJS with legal interests of 6% per annum until fully
paid.
ISSUE:
Whether or not the Deed of Assignment extinguished the obligation
RULING:
An assignment of credit, by virtue of which the owner of the credit, the
assignor, by a legal cause, such as sale, dacion en pago, exchange or donation and
without the consent of the debtor transfers his credit and accessory rights to another, the
assignee, who acquires the power to enforce it against the debtor. Petitioner, as assignor,
is bound to warrant the existence and legality of the credit at the tim of the sale or
assignment. When Jonero claimed that it was no longer indebted to petitioner since the
latter had also as unpaid obligation to it, it essentially meant that its obligation to the
petitioner has been extinguished by compensation. Petitioner was found in breach of his
obligation under the Deed of assignment. Court of Appeals decision is affirmed.
Page | 267
FACTS:
Respondents are engaged in the large-scale business of buying broiler
eggs, hatching and selling them and egg by-products. For incubation and hatchings,
respondents availed of the hatching services of ASJ Corp. They agreed o service fees of
80 centavos per egg. Service fees were paid upon release. Fro consecutive times the
respondents failed to pay the fee until such time that ASJ retained the chicks demanding
full payment from the respondent. ASJ received P15,000 for partial payment but the
chicks were still not released. RTC ruling, which was affirmed by the Court of Appeals
holding that ASJ Corp and Antonio San Juan be solidarily liable to the respondents.
ISSUE:
Was petitioners retention of the chicks and by-products, on account of
respondents failure to pay the corresponding fees unjustified?
RULING:
Respondents offer to partially satisfy their accounts is not enough to
extinguish their obligation. 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 paid for the same kind. The petition is partly granted. The Court of Appeals
decision is modified.
Page | 268
FACTS:
On December 27, 1990, petitioner Paculdo and respondent Regalado
entered into a contract of lease over a parcel of land for 25 years. For the first 5
years, Paculdo would pay monthly rental of P450,000 payable within 5 days of
each month, with 2% penalty for very month of delay. Aside from the above
lease, petitioner leased 11 other property from respondent. Petitioner failed to
pay. Without the knowledge of petitioner, respondent ortgaged the land subject of
the lease contract including the improvements to Monte de Piedad. On August 12,
1995, and on subsequent dates thereafter, respondent refused to accepr
petitioners daily rental payments. Petitioner filed an action for injunction to
enjoin respondent from disturbing his possession while respondent filed a
complaint for ejectment attaching the demand letters. MTC held in favor of the
plaintiff which was affired by the RTC. CA found that the petitioner impliedly
consented to respondents application of payment to his obligations, thus,
dismissed the petition for lack of merit.
ISSUE:
Whether petitioner was truly in arrears in the payment of rentals on
the subject property at the time of the filing of the complaint of
ejectment
RULING:
The lease over the Fairview wet market property is the most onerous
among all the obligations of petitioner to respondent. It was established that the
wet market is a going concern and that petitioner has invested about P35,000,000
in form of improvements, over the property. Hence, petitioner would stand to lose
more if the lease would not proceed. CA decision was based
on a
misapprehension of the facts and the law on the application of payment. Hence,
the ejectment case must be dismissed. CA decision is set aside.
Page | 269
Page | 270
Page | 271
FACTS:
On February 11,1999, petitioner-spouses Benos and respondent
Lawilao executed a Pacto de Retro Sale where Benos sold their lot and the
building erected thereon for P300,000, one-half of which to be paid in cash to the
Benos and the other half to be paid to the bank to pay off the loans of the Benos
which was secured by the same lot and building. Under the contract, Benos could
redeem the property within 18 months from the date of execution by returning the
contract price, otherwise, the sale would become irrevocable. After paying the
P150,000, Lawilao took possession of the property, restructured it twicw,
eventually the loan become due and demandable. On August 14, 2000, a son of
Benos and Lawilao paid the bankl but the bank refused. Lawilao filed for
consignation against the bank and deposited the amount of P159,000.00. RTC
declared Lawilao of the ownership of the subject property, which was affirmed by
the Court of Appeals.
ISSUE:
Whether or not the contract of Pacto de Retro Sale be rescinded by
the petitioner
RULING:
In the instant case, records show that Lawilao filed the petition for
consignation against the bank in Civil Case without notifying the Benos. Hence,
Lawilao failed to prove their offer to pay the balance, even before the filing of the
consignation case. Lawilao never notified the Benos. Thus, as far as the Benos
are concerned, there was no full and complete payment of the contract price
which gives them the right to rescind.
Petition is granted. Court of Appeals decision is reversed and set
aside, that the Pacto de Retro Sale is rescinded and petitioner are ordered to return
the amount of P150,000 to respondents.
Page | 272
ISSUE:
Whether or not there was a perfected and enforceable contracts of
sale on October 11,1983 which modified the earlier contracts to
sell which had not been validly rescinded
RULING:
It is apropos to stress that the agreements are contracts to sell and not
contract of sale, hence, rescission either by judicial action or notarial act is not
applicable. Private respondents act of cancelling the contract to sell was not done
arbitrarily. Because the contracts to sell had long been cancelled when private
respondent fled the accion publiciana de possession, there was no more
installment buyer and seller relationship to speak of. It had been reduced to a
mere case of an owner claiming possession of its property that had long been
illegally withheld from it by another.
Page | 273
FACTS:
Petitioner Eternal Gardens and private NPUM entered into a Land
Development Agreement. Under the agreement, EG was to develop a parcel of
land owned by NPUM into a memorial park. The P1.5 million initial installment
mentioned in the Deed of Absolute Sale, shall be deducted out of the proceeds
from the First Partys 40% at the end of the 5th year. Subsequent payment should
be changed against what is due to the first Party under the Land Development
agreement. Later, 2 claimants of the land surfaced but were dismissed. The case
was remanded to the CA for proper determination and dispositions. CA required
EG to produce documents necessary for accounting but failed to do so, hence, the
right is waived. CA directed EG to pay private respondent the amounts of
P167,065,195.00 as principal and P167,235,451.00 interest.
ISSUE:
Whether or not the petitioner is liable for interest despite the land dispute
RULING:
Even during the pendency of the land dispute cases, EG was required to
deposit the accruing interests with a reputable commercial bank to avoid
possible wastage of funds when the case was given due course. Yet, EG hedged
in depository the amounts due and made obvious attempts to stay payment by
filing sundry motions and pleadings. CA correctly held EG liable for interest of
12%. It is tantamount to a forbearance of money.
Page | 274
RAYOS V REYES
G.R.No. 150193 February 20, 2003
FACTS:
Three parcels were formerly owned by the spouses Francisco and Asuncion Tazal
who on 1 September 1957 sold them for P724.00 to respondents predecessor-in-interest,
one Mamerto Reyes, with right to repurchase within two (2) years from date thereof by
paying to the vendee the purchase price and all expenses incident to their reconveyance.
After the sale the vendee a retro took physical possession of the properties and paid the
taxes thereon.
The otherwise inconsequential sale became controversial when two (2) of the
three (3) parcels were again sold on 24 December 1958 by Francisco Tazal for P420.00 in
favor of petitioners predecessor-in-interest Blas Rayos without first availing of his right
to repurchase the properties.
ISSUE:
Was there a valid consignation and tender of payment made in the instant case?
RULING:
In order that consignation may be effective the debtor must show that (a) there
was a debt due; (b) the consignation of the obligation had been made because the creditor
to whom a valid tender of payment was made refused to accept it; (c) previous notice of
the consignation had been given to the person interested in the performance of the
obligation; (d) the amount due was placed at the disposal of the court; and, (e) after the
consignation had been made the person interested was notified thereof.
In the instant case, petitioners failed, first, to offer a valid and unconditional
tender of payment; second, to notify respondents of the intention to deposit the amount
with the court; and third, to show the acceptance by the creditor of the amount deposited
as full settlement of the obligation, or in the alternative, a declaration by the court of the
validity of the consignation. The failure of petitioners to comply with any of these
requirements rendered the consignation ineffective.
Consignation and tender of payment must not be encumbered by conditions if
they are to produce the intended result of fulfilling the obligation. In the instant case, the
tender of payment of P724.00 was conditional and void as it was predicated upon the
argument of Francisco Tazal that he was paying a debt which he could do at any time
allegedly because the 1 September 1957 transaction was a contract of equitable mortgage
and not a deed of sale with right to repurchase
Page | 275
CEBU INTERNATIONAL V CA
G.R.No. 123031 October 12, 1999
FACTS:
On April 25, 1991, private respondent, Vicente Alegre, invested with CIFC,
P500,000.00 pesos, in cash. Petitioner issued a promissory note to mature on May 27,
1991. The note for P516,238.67 covered private respondent's placement plus interest at
twenty and a half percent for thirty-two days. On May 27, 1991, CIFC issued BPI Check
No. 513397 P514,390.94 in favor of the private respondent as proceeds of his matured
investment plus interest. The CHECK was drawn from petitioner's current account
number 0011-0803-59, maintained with BPI, main branch at Makati City. On June 17,
1991, private respondent's wife deposited the CHECK with RCBC, in Puerto Princesa,
Palawan. BPI dishonored the CHECK with the annotation, that the "Check (is) Subject of
an Investigation." BPI took custody of the CHECK pending an investigation of several
counterfeit checks drawn against CIFC's aforestated checking account. BPI used the
check to trace the perpetrators of the forgery. Immediately, private respondent notified
CIFC of the dishonored CHECK and demanded, on several occasions, that he be paid in
cash. CIFC refused the request, and instead instructed private respondent to wait for its
ongoing bank reconciliation with BPI.
ISSUE:
Whether or not there was valid tender of payment in the instant case?
RULING:
A check is not a legal tender, and therefore cannot constitute valid tender of
payment. "Since a negotiable instrument is only a substitute for money and not money,
the delivery of such an instrument does not, by itself, operate as payment. A check,
whether a manager's check or ordinary check, is not legal tender, and an offer of a check
in payment of a debt is not a valid tender of payment and may be refused receipt by the
obligee or creditor. Mere delivery of checks does not discharge the obligation under a
judgment. The obligation is not extinguished and remains suspended until the payment by
commercial document is actually realized
The delivery of promissory notes payable to order, or bills of exchange or other
mercantile documents shall produce the effect of payment only when they have been
cashed, or when through the fault of the creditor they have been impaired.
Page | 276
DE MESA V CA
G.R.No. 106467-68 October 19,1999
FACTS:
Petitioner Dolores Ligaya de Mesa owns several parcels of land in Makati, Pasay
City, Cavite, and General Santos City3 I. Two (2) parcels of land situated in Makati,
Metro Manila, with TCT no. (232345) S-60337 containing an area of 188 square meters
and TCT No. (232344) S-50336 containing an area of 236 square meters.
Two parcels of land situated in Makan, General Santos City, with TCT No. T-11067
containing an area of 837 square meters. which were mortgaged to the Development
Bank of the Philippines (DBP) as security for a loan she obtained from the bank. Failing
to pay her mortgage debt, all her mortgaged properties were foreclosed and sold at public
auction held on different days. On April 30, 1977, the Makar property was sold and the
corresponding certificate of sale inscribed on March 10, 1978. On August 25, 1977, the
Naic, Cavite property was sold and the certificate of sale registered on the same day. On
August 30, 1977, the two (2) parcels of land in Makati were sold at public auction and the
certificate of sale was inscribed on November 25, 1977. And on January 12, 1978, the
three (3) parcels of land in Pasay City were also sold and the certificate of sale was
recorded on the same date. In all the said auction sales, DBP was the winning bidder.
ISSUE:
Whether or not the Court can supplant its own reading of an ambiguous contract
for the actual intention of the contracting parties as testified to in open court and under
oath.
RULING:
Art. 1370. If the terms of a contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of its stipulation shall control.
When the words of a contract are plain and readily understood, there is no room
for construction. As the agreement of the parties are reduced to writing, such agreement
is considered as containing all its terms and there can be, between the parties and their
successors-in-interest, no evidence of the terms of the written agreement other than the
contents of the writing.
In the case under consideration, the terms of the "Deed of Sale with Assumption of
Mortgage Debt" are clear and leave no doubt as to what were sold thereunder.
The contract under scrutiny is so explicit and unambiguous that it does not justify
any attempt to read into it any supposed intention of the parties, as the said contract is to
be understood literally, just as they appear on its face.
Page | 277
OCCENA V CA
G.R.No. 44349 October 29, 1976
FACTS
On February 25, 1975 private respondent Tropical Homes, Inc. filed a complaint
for modification of the terms and conditions of its subdivision contract with petitioners
(landowners of a 55,330 square meter parcel of land in Davao City), making the
following allegations:
"That due to the increase in price of oil and its derivatives and the concomitant
worldwide spiralling of prices, which are not within the control of plaintiff, of all
commodities including basis raw materials required for such development work, 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, Annex 'A', have been totally changed;
"That further performance by the plaintiff under the contract, Annex 'A', will
result in situation where defendants would be unjustly enriched at the expense of the
plaintiff; will cause an inequitous distribution of proceeds from the sales of subdivided
lots in manifest contravention of the original essence of the agreement; and will actually
result in the unjust and intolerable exposure of plaintiff to implacable losses.
ISSUE
Whether or not provisions of art 1267 of the new civil code is applicable in the
case at a bar?
RULING
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."
Respondent's complaint seeks not release from the subdivision contract but that
the court "render judgment modifying the terms and conditions of the contract . . . by
fixing the proper shares that should pertain to the herein parties out of the gross proceeds
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 complaints 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.
Page | 278
Page | 279
MAGAT V CA
G.R.No. 124221 August 4, 2000
FACTS
Private respondent Santiago A. Guerrero (hereinafter referred to as "Guerrero")
was President and Chairman of[4] "Guerrero Transport Services", a single proprietorship.
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. SEIZURE AND CONTROL OF ALL PRIVATELY
OWNED NEWSPAPERS, MAGAZINES, RADIO AND TELEVISION FACILITIES
AND ALL OTHERMEDIA OF COMMUNICATION.
ISSUE
Whether the contract between Victorino and Guerrero for the purchase of radio
transceivers was void.
RULING
The contract was not void ab initio. Nowhere in the LOI and Admin. Circular is
there an express ban on the importation of transceivers.
The LOI and Administrative Circular did not render "radios and transceivers"
illegal per se. The Administrative Circular merely ordered the Radio Control Office to
suspend the "acceptance and processing .... of applications... for permits to possess, own,
transfer, purchase and sell radio transmitters and transceivers..."[41] Therefore,
possession and importation of the radio transmitters and transceivers was legal provided
one had the necessary license for it.[42] Transceivers were not prohibited but merely
regulated goods. The LOI and Administrative Circular did not render the transceivers
outside the commerce of man. They were valid objects of the contract.
Page | 280
PNCC V CA
G.R.No. 118696 May 5, 1997
FACTS
On 7 January 1986, petitioner obtained from the Ministry of Human Settlements a
Temporary Use Permit 2 for the proposed rock crushing project. 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.
They also assured the latter that they had already stopped considering the
proposals of other aggregates plants to lease the property because of the existing contract
with petitioner. In its reply-letter, 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. 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 petitioner's request for
the pretermination of the lease contract. They insisted on the performance of petitioner's
obligation and reiterated their demand for the payment of the first annual rental.
ISSUE
Whether provisions of Article 1266 and the principle of rebus sic stantibus is
applicable in the case at bar?
RULING
Article 1266 of the Civil Code, which reads: "The debtor in obligations to do shall
also be released when the prestation becomes legally or physically impossible without the
fault of the obligor." Petitioner cannot, however, successfully take refuge in the said
article, since it is applicable only to obligations "to do," and not to obligations "to give."
An obligation "to do" includes all kinds of work or service; while an obligation "to give"
is a prestation which consists in the delivery of a movable or an immovable thing in order
to create a real right, or for the use of the recipient, or for its simple possession, or in
order to return it to its owner.
The obligation to pay rentals or deliver the thing in a contract oflease 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. The principle of rebus sic stantibus neither fits in with the facts
of the case. Under this theory, the parties stipulate in the light of certain prevailing
conditions, and once these conditions cease to exist, the contract also ceases to exist.
Page | 281
NATELCO V CA
G.R.No. 107112 February 24, 1994
FACTS
Petitioner Naga Telephone Co., Inc. (NATELCO) is a telephone company
rendering local as well as long distance service in Naga City while private respondent
Camarines Sur II Electric Cooperative, Inc. (CASURECO II) is a private corporation
established for the purpose of operating an electric power service in the same city. On
November 1, 1977, the parties entered into a contract (Exh. "A") for the use by
petitioners in the operation of its telephone service the electric light posts of private
respondent in Naga City. In consideration therefor, petitioners agreed to install, free of
charge, ten (10) telephone connections for the use by private respondent
After the contract had been enforced for over ten (10) years, private respondent
filed on January 2, 1989 with the Regional Trial Court of Naga City (Br. 28) C.C. No. 891642 against petitioners for reformation of the contract with damages, on the ground that
it is too one-sided in favor of petitioners; that it is not in conformity with the guidelines
of the National Electrification Administration (NEA) which direct that the reasonable
compensation for the use of the posts is P10.00 per post, per month; that after eleven (11)
years of petitioners' use of the posts, the telephone cables strung by them thereon have
become much heavier with the increase in the volume of their subscribers, worsened by
the fact that their linemen bore holes through the posts at which points those posts were
broken during typhoons.
ISUUE
Whether respondent court erred in making a contract for the parties by invoking
Article 1267 of the New Civil Code.
RULING
Article 1267 speaks of "service" which has become so difficult. Taking into
consideration the rationale behind this provision, 9 the term "service" should be
understood as referring to the "performance" of the obligation. In the present case, the
obligation of private respondent consists in allowing petitioners to use its posts in Naga
City, which is the service contemplated in said article. Furthermore, a bare reading of this
article reveals that it is not a requirement thereunder that the contract be for future service
with future unusual change. According to Senator Arturo M. Tolentino, 10 Article 1267
states in our law the doctrine of unforseen events. This is said to be based on the
discredited theory of rebus sic stantibus in public international law; under this theory, the
parties stipulate in the light of certain prevailing conditions, and once these conditions
cease to exist the contract also ceases to exist. Considering practical needs and the
demands of equity and good faith, the disappearance of the basis of a contract gives rise
to a right to relief in favor of the party prejudiced.
Page | 282
TRANS PACIFIC V CA
G.R.No. 109172 August 19, 1994
FACTS
Sometime in 1979, petitioner applied for and was granted several financial
accommodations amounting to P1,300,000.00 by respondent Associated Bank. The loans
were evidence and secured by four (4) promissory notes, a real estate mortgage covering
three parcels of land and a chattel mortgage over petitioner's stock and inventories.
Unable to settle its obligation in full, petitioner requested for, and was granted by
respondent bank, a restructuring of the remaining indebtedness which then amounted to
P1,057,500.00, as all the previous payments made were applied to penalties and interests.
The mortgaged parcels of land were substituted by another mortgage covering
two other parcels of land and a chattel mortgage on petitioner's stock inventory. The
released parcels of land were then sold and the proceeds amounting to P1,386,614.20,
according to petitioner, were turned over to the bank and applied to Trans-Pacific's
restructured loan. Subsequently, respondent bank returned the duplicate original copies of
the three promissory notes to Trans-Pacific with the word "PAID" stamped thereon.
Despite the return of the notes, or on December 12, 1985, Associated Bank demanded
from Trans-Pacific payment of the amount of P492,100.00 representing accrued interest
on PN No. TL-9077-82. According to the bank, the promissory notes were erroneously
released.
ISSUE
Whether or not petitioner has indeed paid in full its obligation to respondent bank.
RULING
Art. 1271.
The delivery of a private document evidencing a credit, made
voluntarily by the creditor to the debtor, implies the renunciation of the action which the
former had against the latter."
The surrender and return to plaintiffs of the promissory notes evidencing the
consolidated obligation as restructured, produces a legal presumption that Associated had
thereby renounced its actionable claim against plaintiffs (Art. 1271, NCC). The
presumption is fortified by a showing that said promissory notes all bear the stamp
"PAID", and has not been otherwise overcome. Upon a clear perception that Associated's
record keeping has been less than exemplary . . . , a proffer of bank copies of the
promissory notes without the "PAID" stamps thereon does not impress the Court as
sufficient to overcome presumed remission of the obligation vis-a-vis the return of said
promissory notes. Indeed, applicable law is supportive of a finding that in interest bearing
obligations-as is the case here, payment of principal (sic) shall not be deemed to have
been made until the interests have been covered (Art. 1253, NCC). Conversely,
competent showing that the principal has been paid, militates against postured entitlement
to unpaid interests.
Page | 283
DALUPAN V 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 per cent of the reduction plaintiff was able to secure from the Collector of
Internal Revenue in the amount of unpaid taxes claimed to be due from the defendant.
Defendant acknowledged this claim and prayed that judgment be rendered accordingly.
In the meantime, the receiver in the liquidation case No. R-59634 and the wife of the
defendant, Esperanza P. de Harden, filed an answer in intervention claiming that the
amount sought by the plaintiff was exorbitant and prayed that it be reduced to 10 per cent
of the rebate. By reason of the acquiescence of the defendant to the claim on one hand,
and the opposition of the receiver and of the wife on the other, an amicable settlement
was concluded by the plaintiff and the intervenor whereby it was agreed that the sum of
P22,767.43 be paid to the plaintiff from the funds under the control of the receiver "and
the balance of P91,069.74 shall be charged exclusively against the defendant Fred M.
Harden from whatever share he may still have in the conjugal partnership between him
and Esperanza P. de Harden.
ISSUE
Whether or not the writ of execution asked for by the plaintiff on the two checks
is premature.
RULING
Examining the terms the court finds that the stipulation limits the right of the
plaintiff to ask for the execution of the judgment to whatever share Fred M. Harden may
still have in the conjugal partnership between him and his wife after the final liquidation
and partition thereof. The execution of the judgment is premised upon a condition
precedent, which is the final liquidation and partition of the conjugal partnership. Note
that the condition does not refer to the liquidation of a particular property of the
partnership. It refers to the over-all and final liquidation of the partnership. Such being
the stipulation of the parties which was sanctioned and embodied by the Court in its
decision, it is clear that the writ of execution asked for by the plaintiff on the two checks
is premature.
Page | 284
LOPEZ V TAMBUNTING
G.R.No. 9806 January 19, 1916
FACTS
These proceedings were brought to recover from the defendant the sum of P2,000,
amount of the fees, which, according to the complaint, are owing for professional medical
services rendered by the plaintiff to a daughter of the defendant from March 10 to July
15, 1913, which fees the defendant refused to pay, notwithstanding the demands therefor
made upon him by the plaintiff.
The defendant denied the allegations of the complaint, and furthermore alleged
that the obligation which the plaintiff endeavored to compel him to fulfill was already
extinguished.
ISSUE
Whether or not implied condonation can be legally pressumed in the instant case?
RULING
It is true that number 8 of section 334 of the Code of Civil Procedure provides as
a legal presumption "that an obligation delivered up to the debtor has been paid." Article
1188 of the Civil Code also provides that the voluntary surrender by a creditor to his
debtor, of a private instrument proving a credit, implies the renunciation of the right of
action against the debtor; and article 1189 prescribes that whenever the private instrument
which evidences the debt is in the possession of the debtor, it will be presumed that the
creditor delivered it of his own free will, unless the contrary is proven.
But the legal presumption established by the foregoing provisions of law cannot
stand if sufficient proof is adduced against it. In the case at bar the trial court correctly
held that there was sufficient evidence to the contrary, in view of the preponderance
thereof in favor of the plaintiff and of the circumstances connected with the defendant's
possession of said receipt Exhibit 1. Furthermore, in order that such a presumption may
be taken into account, it is necessary, as stated in the laws cited, that the evidence of the
obligation be delivered up to the debtor and that the delivery of the instrument proving
the credit be made voluntarily by the creditor to the debtor. In the present case, it cannot
be said that these circumstances concurred, inasmuch as when the plaintiff sent the
receipt to the defendant for the purpose of collecting his fee, it was not his intention that
that document should remain in the possession of the defendant if the latter did not
forthwith pay the amount specified therein.
Page | 285
Page | 286
Page | 287
E.G.V. REALTY V CA
G.R.No. 120236 July 20, 1999
FACTS
Petitioner E.G.V. Realty Development Corporation is the owner/developer of a
seven-storey condominium building known as Cristina Condominium. Cristina
Condominium Corporation holds title to all common areas of Cristina Condominium and
is in charge of managing, maintaining and administering the condominiums common
areas and providing for the buildings security. Respondent Unisphere International, Inc.
(hereinafter referred to as Unisphere) is the owner/occupant of Unit 301 of said
condominium. On November 28, 1981, respondent Unispheres Unit 301 was allegedly
robbed of various items valued at P6,165.00. The incident was reported to petitioner
CCC. On July 25, 1982, another robbery allegedly occurred at Unit 301 where the items
carted away were valued at P6,130.00, bringing the total value of items lost to
P12,295.00. This incident was likewise reported to petitioner CCC. On October 5, 1982,
respondent Unisphere demanded compensation and reimbursement from petitioner CCC
for the losses incurred as a result of the robbery. On January 28, 1987, petitioners E.G.V.
Realty and CCC jointly filed a petition with the Securities and Exchange Commission
(SEC) for the collection of the unpaid monthly dues in the amount of P13,142.67 against
respondent Unisphere.
ISSUE
Whether or not set-off or compensation has taken place in the instant case.
RULING
Compensation or offset under the New Civil Code takes place only when two
persons or entities in their own rights, are creditors and debtors of each other. (Art. 1278).
A distinction must be made between a debt and a mere claim. A debt is an amount
actually ascertained. It is a claim which has been formally passed upon by the courts or
quasi-judicial bodies to which it can in law be submitted and has been declared to be a
debt. A claim, on the other hand, is a debt in embryo. It is mere evidence of a debt and
must pass thru the process prescribed by law before it develops into what is properly
called a debt. Absent, however, any such categorical admission by an obligor or final
adjudication, no compensation or off-set can take place. Unless admitted by a debtor
himself, the conclusion that he is in truth indebted to another cannot be definitely and
finally pronounced, no matter how convinced he may be from the examination of the
pertinent records of the validity of that conclusion the indebtedness must be one that is
admitted by the alleged debtor or pronounced by final judgment of a competent court or
in this case by the Commission.
There can be no doubt that Unisphere is indebted to the Corporation for its unpaid
monthly dues in the amount of P13,142.67. This is admitted.
Page | 288
AEROSPACE CHEMICAL V CA
g.r.no. 108129 september 23, 1999
FACTS
On June 27, 1986, petitioner Aerospace Industries, Inc. (Aerospace) purchased
five hundred (500) metric tons of sulfuric acid from private respondent Philippine
Phosphate Fertilizer Corporation (Philphos). Initially set beginning July 1986, the
agreement provided that the buyer shall pay its purchases in equivalent Philippine
currency value, five days prior to the shipment date. Petitioner as buyer committed to
secure the means of transport to pick-up the purchases from private respondent's
loadports. Per agreement, one hundred metric tons (100 MT) of sulfuric acid should be
taken from Basay, Negros Oriental storage tank, while the remaining four hundred metric
tons (400 MT) should be retrieved from Sangi, Cebu. On December 18, 1986, M/T Sultan
Kayumanggi docked at Sangi, Cebu, but withdrew only 157.51 MT of sulfuric acid.
Again, the vessel tilted. Further loading was aborted. Two survey reports conducted by
the Societe Generale de Surveillance (SGS) Far East Limited, dated December 17, 1986
and January 2, 1987, attested to these occurrences. Later, on a date not specified in the
record, M/T Sultan Kayumanggi sank with a total of 227.51 MT of sulfuric acid on
board. Petitioner chartered another vessel, M/T Don Victor, with a capacity of
approximately 500 MT.6 [TSN, September 1, 1989, pp. 28-29.] On January 26 and
March 20, 1987, Melecio Hernandez, acting for the petitioner, addressed letters to private
respondent, concerning additional orders of sulfuric acid to replace its sunken purchases.
ISSUE
Should expenses for the storage and preservation of the purchased fungible goods,
namely sulfuric acid, be on seller's account pursuant to Article 1504 of the Civil Code?
RULING
Petitioner tries to exempt itself from paying rental expenses and other damages by
arguing that expenses for the preservation of fungible goods must be assumed by the
seller. Rental expenses of storing sulfuric acid should be at private respondent's account
until ownership is transferred, according to petitioner. However, the general rule that
before delivery, the risk of loss is borne by the seller who is still the owner, is not
applicable in this case because petitioner had incurred delay in the performance of its
obligation. Article 1504 of the Civil Code clearly states: "Unless otherwise agreed, the
goods remain at the seller's risk until the ownership therein is transferred to the buyer, but
when the ownership therein is transferred to the buyer the goods are at the buyer's risk
whether actual delivery has been made or not, except that: (2) Where actual delivery has
been delayed through the fault of either the buyer or seller the goods are at the risk of the
party at fault."
On this score, we quote with approval the findings of the appellate court, thus:
The defendant [herein private respondent] was not remiss in reminding the plaintiff that it
would have to bear the said expenses for failure to lift the commodity for an unreasonable
length of time.But even assuming that the plaintiff did not consent to be so bound, the
provisions of Civil Code come in to make it liable for the damages sought by the
defendant.
Page | 289
APODACA V NLRC
G.R.No. 80039 April1 8, 1989
FACTS
Petitioner was employed in respondent corporation. On August 28, 1985,
respondent Jose M. Mirasol persuaded petitioner to subscribe to P1,500 shares of
respondent corporation it P100.00 per share or a total of P150,000.00. He made an initial
payment of P37,500.00. On September 1, 1975, petitioner was appointed President and
General Manager of the respondent corporation. However, on January 2, 1986, he
resigned.
On December 19, 1986, petitioner instituted with the NLRC a complaint against private
respondents for the payment of his unpaid wages, his cost of living allowance, the
balance of his gasoline and representation expenses and his bonus compensation for
1986. Petitioner and private respondents submitted their position papers to the labor
arbiter. Private respondents admitted that there is due to petitioner the amount of
P17,060.07 but this was applied to the unpaid balance of his subscript in the amount of
P95,439.93. Petitioner questioned the set-off alleging that there was no call or notice for
the payment of unpaid subscription and that, accordingly, the alleged obligation is not
enforceable.
ISSUE
Does the National Labor Relations Commission (NLRC) have jurisdiction to
resolve a claim for non-payment of stock subscriptions to a corporation? Assuming that it
has, can an obligation arising therefrom be offset against a money claim of an employee
against the employer?
RULING
Firstly, the NLRC has no jurisdiction to determine such intra-corporate dispute
between the stockholder and the corporation as in the matter of unpaid subscriptions. This
controversy is within the exclusive jurisdiction of the Securities and Exchange
Commission.
Secondly, assuming arguendo that the NLRC may exercise jurisdiction over the
said subject matter under the circumstances of this case, the unpaid subscriptions are not
due and payable until a call is made by the corporation for payment. Private respondents
have not presented a resolution of the board of directors of respondent corporation calling
for the payment of the unpaid subscriptions. It does not even appear that a notice of such
call has been sent to petitioner by the respondent corporation.
Page | 290
Page | 291
SILAHIS V IAC
G.R.No. 74027 December 7, 1989
FACTS
Petitioner Silahis Marketing Corporation seeks in this petition for review on
certiorari a reversal of the decision of the then Intermediate Appellate Court (IAC) in
AC-G.R. CV No. 67162 entitled "De Leon, etc. v. Silahis Marketing Corporation",
disallowing petitioner's counterclaim for commission to partially offset the claim against
it of private respondent Gregorio de Leon for the purchase price of certain merchandise.
A review of the record shows that on various dates in October, November and December,
1975, Gregorio de Leon doing business under the name and style of Mark Industrial Sales
sold and delivered to Silahis Marketing Corporation various items of merchandise
covered by several invoices in the aggregate amount of P22,213.75 payable within thirty
(30) days from date of the covering invoices.Allegedly due to Silahis' failure to pay its
account upon maturity despite repeated demands, de Leon filed before the then Court of
First Instance of Manila a complaint for the collection of the said accounts including
accrued interest thereon in the amount of P661.03 and attorney's fees of P5,000.00 plus
costs of litigation.
ISSUE
Whether or not private respondent is liable to the petitioner for the commission or
margin for the direct sale which the former concluded and consummated with Dole
Philippines, Incorporated without coursing the same through herein petitioner.
RULING
It must be remembered that compensation takes place when two persons, in their
own right, are creditors and debtors to each other. Article 1279 of the Civil Code
provides that: "In order that compensation may be proper, it is necessary: [1] that each
one of the obligors be bound principally, and that he be at the same time a principal
creditor of the other; [2] that both debts consist in a sum of money, or if the things due
are consumable, they be of the same kind, and also of the same quality if the latter has
been stated; [3] that the two debts be due; [4] that they be liquidated and demandable; [5]
that over neither of them there be any retention or controversy, commenced by third
persons and communicated in due time to the debtor."
When all the requisites mentioned in Art. 1279 of the Civil Code are present,
compensation takes effect by operation of law, even without the consent or knowledge of
the creditors and debtors. 5 Article 1279 requires, among others, that in order that legal
compensation shall take place, "the two debts be due" and "they be liquidated and
demandable." Compensation is not proper where the claim of the person asserting the setoff against the other is not clear nor liquidated; compensation cannot extend to
unliquidated, disputed claim existing from breach of contract. Undoubtedly, petitioner
admits the validity of its outstanding accounts with private respondent in the amount of
P22,213.75 as contained in its answer. But whether private respondent is liable to pay the
petitioner a 20% margin or commission on the subject sale to Dole Philippines, Inc. is
vigorously disputed. This circumstance prevents legal compensation from taking place.
Page | 292
FRANCIA V CA
G.R.No. 67649 June 28, 1998
FACTS
Engracio Francia is the registered owner of a residential lot and a two-story house
built upon it situated at Barrio San Isidro, now District of Sta. Clara, Pasay City, Metro
Manila. On October 15, 1977, a 125 square meter portion of Francia's property was
expropriated by the Republic of the Philippines for the sum of P4,116.00 representing the
estimated amount equivalent to the assessed value of the aforesaid portion.Since 1963 up
to 1977 inclusive, Francia failed to pay his real estate taxes. Thus, on December 5, 1977,
his property was sold at public auction by the City Treasurer of Pasay City pursuant to
Section 73 of Presidential Decree No. 464 known as the Real Property Tax Code in order
to satisfy a tax delinquency of P2,400.00. Ho Fernandez was the highest bidder for the
property. Francia was not present during the auction sale since he was in Iligan City at
that time helping his uncle ship bananas. On March 3, 1979, Francia received a notice of
hearing of LRC Case No. 1593-P "In re: Petition for Entry of New Certificate of Title"
filed by Ho Fernandez, seeking the cancellation of TCT No. 4739 (37795) and the
issuance in his name of a new certificate of title. On March 20, 1979, Francia filed a
complaint to annul the auction sale. He later amended his complaint on January 24, 1980.
ISSUE
Whether or not francias tax delinquency of P2,400.00 has been extinguished by
legal compensation.
RULING
There is no legal basis for the contention. By legal compensation, obligations of
persons, who in their own right are reciprocally debtors and creditors of each other, are
extinguished (Art. 1278, Civil Code). The circumstances of the case do not satisfy the
requirements provided by Article 1279, to wit:
"(1) that each one of the obligors be bound principally and that he be at the same time a
principal creditor of the other;
We have consistently ruled that there can be no off-setting of taxes against the claims that
the taxpayer may have against the government. A person cannot refuse to pay a tax on the
ground that the government owes him an amount equal to or greater than the tax being
collected. The collection of a tax cannot await the results of a lawsuit against the
government.
A claim for taxes is not such a debt, demand, contract or judgment as is allowed
to be set-off under the statutes of set-off, which are construed uniformly, in the light of
public policy, to exclude the remedy in an action or any indebtedness of the state or
municipality to one who is liable to the state or municipality for taxes. Neither are they a
proper subject of recoupment since they do not arise out of the contract or transaction
sued on. "The general rule based on grounds of public policy is well-settled that no setoff admissible against demands for taxes levied for general or local governmental
purposes. The reason on which the general rule is based, is that taxes are not in the nature
of contracts between the party and party but grow out of duty to, and are the positive acts
of the government to the making and enforcing of which, the personal consent of
individual taxpayers is not required
Page | 293
TRINIDAD V 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. She alleged: Sometime in February 1991, a certain Primitivo Caete requested
her to sell a Mercedes Benz for P580,000.00. Caete also said that if respondent herself
will buy the car, Caete was willing to sell it for P500,000.00. Petitioner borrowed the
car from respondent for two days but instead of returning the car as promised, petitioner
told respondent to buy the car from Caete for P500,000.00 and that petitioner would pay
respondent after petitioner returns from Davao. Following petitioners instructions,
respondent requested Caete to execute a deed of sale covering the car in respondents
favor for P500,000.00 for which respondent issued three checks in favor of Caete.
Respondent thereafter executed a deed of sale in favor of petitioner even though
petitioner did not pay her any consideration for the sale. When petitioner returned from
Davao, he refused to pay respondent the amount of P500,000.00 saying that said amount
would just be deducted from whatever outstanding obligation respondent had with
petitioner. Due to petitioners failure to pay respondent, the checks that respondent
issued in favor of Caete bounced, thus criminal charges were filed against her.[3]
Respondent then prayed that the deed of sale between her and petitioner be declared null
and void; that the car be returned to her; and that petitioner be ordered to pay damages.
ISSUE
Whether or not petitioners claim for legal compensation was already too late
RULING
The court ruled in favor of the petitioner. Compensation takes effect by operation
of law even without the consent or knowledge of the parties concerned when all the
requisites mentioned in Article 1279 of the Civil Code are present.[26] 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,[27] when used as a defense, it retroacts to the date when all its requisites are
fulfilled.
Petitioners stance is that legal compensation has taken place and operates even
against the will of the parties because: (a) respondent and petitioner were personally both
creditor and debtor of each other; (b) the monetary obligation of respondent was
P566,000.00 and that of the petitioner was P500,000.00 showing that both indebtedness
were monetary obligations the amount of which were also both known and liquidated; (c)
both monetary obligations had become due and demandablepetitioners obligation as
shown in the deed of sale and respondents indebtedness as shown in the dishonored
checks; and (d) neither of the debts or obligations are subject of a controversy
commenced by a third person.
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AQUINTEY V. TIBONG
G.R. No. 166704 December 20, 2006
FACTS
On May 6, 1999, petitioner Agrifina Aquintey filed before the RTC of Baguio
City, a complaint for sum of money and damages against the respondents, spouses
Felicidad and Rico Tibong. Agrifina alleged that Felicidad had secured loans from her on
several occasions, at monthly interest rates of 6% to 7%. Despite demands, the spouses
Tibong failed to pay their outstanding loan, amounting to P773,000.00 exclusive of
interests.
In their Answer with Counterclaim, spouses Tibong admitted that they had
secured loans from Agrifina. The proceeds of the loan were then re-lent to other
borrowers at higher interest rates. They, likewise, alleged that they had executed deeds of
assignment in favor of Agrifina, and that their debtors had executed promissory notes in
Agrifinas favor. According to the spouses Tibong, this resulted in a novation of the
original obligation to Agrifina. They insisted that by virtue of these documents, Agrifina
became the new collector of their debtors; and the obligation to pay the balance of their
loans had been extinguished.
ISSUE
Whether or not there is valid novation in the instant case?
RULING
Novation which consists in substituting a new debtor in the place of the original
one may be made even without the knowledge or against the will of the latter but not
without the consent of the creditor. Substitution of the person of the debtor may be
effected by delegacion, meaning, the debtor offers, and the creditor, accepts a third
person who consents to the substitution and assumes the obligation. Thus, the consent of
those three persons is necessary. In this kind of novation, it is not enough to extend the
juridical relation to a third person; it is necessary that the old debtor be released from the
obligation, and the third person or new debtor take his place in the relation. Without such
release, there is no novation; the third person who has assumed the obligation of the
debtor merely becomes a co-debtor or a surety. If there is no agreement as to solidarity,
the first and the new debtor are considered obligated jointly.
In the case at bar, the court found that respondents obligation to pay the balance
of their account with petitioner was extinguished, pro tanto, by the deeds of assignment
of credit executed by respondent Felicidad in favor of petitioner. As gleaned from the
deeds executed by respondent Felicidad relative to the accounts of her other debtors,
petitioner was authorized to collect the amounts of P6,000.00 from Cabang, and
P63,600.00 from Cirilo. They obliged themselves to pay petitioner. Respondent
Felicidad, likewise,unequivocably declared that Cabang and Cirilo no longer had any
obligation to her.
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SWAGMAN V CA
G.R.No. 161135 April 8, 2005
FACTS
Sometime in 1996 and 1997, petitioner Swagman Hotels and Travel, Inc., through Atty.
Leonor L. Infante and Rodney David Hegerty, its president and vice-president,
respectively, obtained from private respondent Neal B. Christian loans evidenced by
three promissory notes dated 7 August 1996, 14 March 1997, and 14 July 1997. Each of
the promissory notes is in the amount of US$50,000 payable after three years from its
date with an interest of 15% per annum payable every three months. In a letter dated 16
December 1998, Christian informed the petitioner corporation that he was terminating the
loans and demanded from the latter payment in the total amount of US$150,000 plus
unpaid interests in the total amount of US$13,500. On 2 February 1999, private
respondent Christian filed with the Regional Trial Court of Baguio City, Branch 59, a
complaint for a sum of money and damages against the petitioner corporation, Hegerty,
and Atty. Infante. The petitioner corporation, together with its president and vicepresident, filed an Answer raising as defenses lack of cause of action and novation of the
principal obligations. According to them, Christian had no cause of action because the
three promissory notes were not yet due and demandable.
ISSUE
Where there is a valid novation, may the original terms of contract which has been
novated still prevail?
HELD
The receipts, as well as private respondents summary of payments, lend credence to
petitioners claim that the payments were for the principal loans and that the interests on
the three consolidated loans were waived by the private respondent during the undisputed
renegotiation of the loans on account of the business reverses suffered by the petitioner at
the time.
There was therefore a novation of the terms of the three promissory notes in that the
interest was waived and the principal was payable in monthly installments of US$750.
Alterations of the terms and conditions of the obligation would generally result only in
modificatory novation unless such terms and conditions are considered to be the essence
of the obligation itself.[25] The resulting novation in this case was, therefore, of the
modificatory type, not the extinctive type, since the obligation to pay a sum of money
remains in force.
Thus, since the petitioner did not renege on its obligation to pay the monthly installments
conformably with their new agreement and even continued paying during the pendency
of the case, the private respondent had no cause of action to file the complaint. It is only
upon petitioners default in the payment of the monthly amortizations that a cause of
action would arise and give the private respondent a right to maintain an action against
the petitioner.
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AZOLLA FARMS V 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. The project also involves the then
Ministry of Agriculture, the Kilusang Kabuhayan at Kaunlaran, and the Kiwanis. To
finance its participation, petitioners applied for a loan with Credit Manila, Inc., which the
latter endorsed to its sister company, respondent Savings Bank of Manila (Savings Bank).
The Board of Directors of Azolla Farms, meanwhile, passed a board resolution on August
31, 1982, authorizing Yuseco to borrow from Savings Bank in an amount not exceeding
P2,200,000.00.
The loan having been approved, Yuseco executed a promissory note on
September 13, 1982, promising to pay Savings Bank the sum of P1,400,000.00 on or
before September 13, 1983. the Azolla Farms project collapsed. Blaming Savings Bank,
petitioners Yuseco and Azolla Farms filed on October 3, 1983 with the Regional Trial
Court of Manila (Branch 25), a complaint for damages. In essence, their complaint
alleges that Savings Bank unjustifiably refused to promptly release the remaining
P300,000.00 which impaired the timetable of the project and inevitably affected the
viability of the project resulting in its collapse, and resulted in their failure to pay off the
loan. Thus, petitioners pray for P1,000,000.00 as actual damages, among others.
ISSUE
Whether the trial court erred in admitting petitioners amended complaint
RULING
SEC. 5. Amendment to conform to or authorize presentation of evidence .When
issues not raised by the pleadings are tried by express or implied consent of the parties,
they shall be treated in all respects, as if they had been raised in the pleadings. Such
amendment of the pleadings as may be necessary to cause them to conform to the
evidence and to raise these issues may be made upon motion of any party at any time,
even after judgment; but failure so to amend does not affect the result of the trial of these
issues. If evidence is objected to at the trial on the ground that it is not within the issues
made by the pleadings, the court may allow the pleadings to be amended and shall do so
freely when the presentation of the merits of the action will be subserved thereby and the
objecting party fails to satisfy the court that the admission of such evidence would
prejudice him in maintaining his action or defense upon the merits.
As can be gleaned from the records, it was petitioners belief that respondents
evidence justified the amendment of their complaint. The trial court agreed thereto and
admitted the amended complaint. On this score, it should be noted that courts are given
the discretion to allow amendments of pleadings to conform to the evidence presented
during the trial.
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OCAMPO-PAULE V CA
G.R.No. 145872 February 4, 2002
FACTS
During the period August, 1991 to April, 1993, petitioner received from private
complainant Felicitas M. Calilung several pieces of jewelry with a total value of One
hundred Sixty Three Thousand One hundred Sixty Seven Pesos and Ninety Five
Centavos (P163,167.95). The agreement between private complainant and petitioner was
that the latter would sell the same and thereafter turn over and account for the proceeds of
the sale, or otherwise return to private complainant the unsold pieces of jewelry within
two months from receipt thereof. Since private complainant and petitioner are relatives,
the former no longer required petitioner to issue a receipt acknowledging her receipt of
the jewelry.When petitioner failed to remit the proceeds of the sale of the jewelry or to
return the unsold pieces to private complainant, the latter sent petitioner a demand letter.
Notwithstanding receipt of the demand letter, petitioner failed to turn over the proceeds
of the sale or to return the unsold pieces of jewelry. Private complainant was constrained
to refer the matter to the barangay captain of Sta. Monica, Lubao, Pampanga.
ISSUE
Whether or not there was a novation of petitioners criminal liability when she
and private complainant executed the Kasunduan sa Bayaran.
RULING
It is well-settled that the following requisites must be present for novation to take
place: (1) a previous valid obligation; (2) agreement of all the parties to the new contract;
(3) extinguishment of the old contract; and (4) validity of the new one.
Novation, in its broad concept, may either be extinctive or modificatory. It is extinctive
when an old obligation is terminated by the creation of a new obligation that takes the
place of the former; it is merely modificatory when the old obligation subsists to the
extent it remains compatible with the amendatory agreement.
The execution of the Kasunduan sa Bayaran does not constitute a novation of the
original agreement between petitioner and private complainant. Said Kasunduan did not
change the object or principal conditions of the contract between them. The change in
manner of payment of petitioners obligation did not render the Kasunduan incompatible
with the original agreement, and hence, did not extinguish petitioners 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.
Page | 299
REYES V CA
g.r.no. 147758 june 26, 2002
FACTS
This petition arose from a civil case for collection of a sum of money with
preliminary attachment filed by respondent Pablo V. Reyes against his first cousin
petitioner Arsenio R. Reyes and spouse Nieves S. Reyes. According to private
respondent, petitioner-spouses borrowed from him P600,000.00 with interest at five
percent (5%) per month, which totalled P1,726,250.00 at the time of filing of the
Complaint. The loan was to be used supposedly to buy a lot in Paraaque. It was
evidenced by an acknowledgment receipt dated 15 July 1990 signed by the petitionerspouses Arsenio R. Reyes and Nieves S. Reyes and witness Romeo Rueda.
In their Answer petitioners admitted their loan from respondent but averred that there was
a novation so that the amount loaned was actually converted into respondent's
contribution to a partnership formed between them on 23 March 1990.
ISSUE
Whether or not there was novation in the instant case?
RULING
For novation to take place, the following requisites must concur: (a) there must be
a previous valid obligation; (b) there must be an agreement of the parties concerned to a
new contract; (c) there must be the extinguishment of the old contract; and, (d) there must
be the validity of the new contract.
In the case at bar, the third requisite is not present. The parties did agree that the
amount loaned would be converted into respondent's contribution to the partnership, but
this conversion did not extinguish the loan obligation. The date when the
acknowledgment receipt/promissory note was made negates the claim that the loan
agreement was extinguished through novation since the note was made while the
partnership was in existence.
Significantly, novation is never presumed. It must appear by express agreement of
the parties, or by their acts that are too clear and unequivocal to be mistaken for anything
else. An obligation to pay a sum of money is not novated in a new instrument wherein the
old is ratified by changing only the terms of payment and adding other obligations not
incompatible with the old one, or wherein the old contract is merely supplemented by the
new one.
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MESINA V. GARCIA
G.R. No. 168035 November 30, 2006
FACTS
Atty. Honorio Valisno Garcia and Felicisima Mesina, during their lifetime,
enstered into a Contract to Sell over a lot consisting of 235 square meters, situated at
Diversion Road, Sangitan, Cabanatuan City, covered and embraced by TCT No. T31643 in the name of Felicisima Mesina which title was eventually cancelled and TCT
No. T-78881 was issued in the name of herein petitioners. The Contract to Sell provides
that the cost of the lot is P70.00 per square meter for a total amount of P16,450.00;
payable within a period not to exceed 7 years at an interest rate of 12% per annum, in
successive monthly installments of P260.85 per month, starting May 1977. Thereafter,
the succeeding monthly installments are to be paid within the first week of every month,
at the residence of the vendor at Quezon City, with all unpaid monthly installments
earning an interest of 1% per month. Instituting this case at bar, respondent asserts that
despite the full
payment made on 7 February 1984 for the consideration of the
subject lot, petitioners refused to issue the necessary Deed of Sale to effect the transfer of
the property to her.
ISSUE
Whether or not respondents cause of action had already prescribed?
RULING
Article 1155 of the Civil Code is explicit that the prescriptive period is interrupted
when an action has been filed in court; when there is a written extrajudicial demand made
by the creditors; and when there is any written acknowledgment of the debt by the
debtor.
The records reveal that starting 19 April 1986 until 2 January 1997 respondent
continuously demanded from the petitioners the execution of the said Deed of Absolute
Sale but the latter conjured many reasons and excuses not to execute the same.
Respondent even filed a Complaint before the Housing and Land Use Regulatory Board
way back in June, 1986, to enforce her rights and to compel the mother of herein
petitioners, who was still alive at that time, to execute the necessary Deed of Absolute
Sale for the transfer of title in her name. On 2 January 1997, respondent, through her
counsel, sent a final demand letter to the petitioners for the execution of the Deed of
Absolute Sale, but still to no avail. Consequently, because of utter frustration of the
respondent, she finally lodged a formal Complaint for Specific Performance with
Damages before the trial court on 20 January 1997.
Hence, from the series of written extrajudicial demands made by respondent to
have the execution of the Deed of Absolute Sale in her favor, the prescriptive period of
10 years has been interrupted. Therefore, it cannot be said that the cause of action of the
respondent has already been prescribed.
Page | 304
HEIRS OF GAUDIANE V CA
G.R.No. 119879 March 11, 2004
FACTS
The lot in controversy is Lot 4389 located at Dumaguete City and covered by
Original Certificate of Title No. 2986-A (OCT 2986-A) in the names of co-owners Felix
and Juana Gaudiane. Felix died in 1943 while his sister Juana died in 1939. Herein
respondents are the descendants of Felix while petitioners are the descendants of Juana.
On November 4, 1927, Felix executed a document entitled Escritura de Compra-Venta
(Escritura, for brevity) whereby he sold to his sister Juana his one-half share in Lot No.
4156 covered by Transfer Certificate of Title No. 3317-A.
Petitioners predecessors-in-interest, Geronimo and Ines Iso (the Isos), believed
that the sale by Felix to their mother Juana in 1927 included not only Lot 4156 but also
Lot 4389. In 1974, they filed a pleading in the trial court seeking to direct the Register of
Deeds of Dumaguete City to cancel OCT 2986-A covering Lot 4389 and to issue a new
title in favor of the Isos. This was later withdrawn after respondents predecessors-ininterest, Procopio Gaudiane and Segundo Gaudiane, opposed it on the ground that the
Isos falsified their copy of the Escritura by erasing Lot 4156 and intercalating in its
place Lot 4389.
ISSUE
Whether the court gravely erred in not giving due course to the claim of
petitioners and legal effect of prescription and laches adverted by defendants-appellants
in their answer and affirmative defenses proven during the hearing by documentary and
testimonial evidence.
RULING
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. As correctly observed by
the appellate court.
As explained earlier, only Lot No. 4156 was sold. It was through this
misrepresentation that appellees predecessor-in-interest succeeded in withholding
possession of appellees share in Lot No. 4389. Appellees cannot, by their own fraudulent
act, benefit therefrom by alleging prescription and laches.
Page | 305
LAUREANO V CA
G.R.No. 114776 February 2, 2000
FACTS;
Petitioner was employed in the singapore airlines limited as the pilot captain of B707. Sometime in 1982, defendant, hit by a recession, initiated cost-cutting measures.
Seventeen expatriate captains in the Airbus fleet were found in excess of the defendant's
requirement. Consequently, defendant informed its expatriate pilots including plaintiff of
the situation and advised them to take advance leaves. Realizing that the recession would
not be for a short time, defendant decided to terminate its excess personnel. It did not,
however, immediately terminate it's A-300 pilots. It reviewed their qualifications for
possible promotion to the B-747 fleet. Among the 17 excess Airbus pilots reviewed,
twelve were found qualified. Unfortunately, plaintiff was not one of the twelve.
Aggrieved, plaintiff on June 29, 1983, instituted a case for illegal dismissal before the
Labor Arbiter. Defendant moved to dismiss on jurisdictional grounds. Before said motion
was resolved, the complaint was withdrawn.
ISSUE ;
What is the prescriptive period for money claims arising from employer-employee
relationship?
RULING;
Article 291. Money claims. - All money claims arising from employee-employer
relations accruing during the effectivity of this Code shall be filed within three (3) years
from the time the cause of action accrued; otherwise they shall be forever barred.
It should be noted further that Article 291 of the Labor Code is a special law
applicable to money claims arising from employer-employee relations; thus, it
necessarily prevails over Article 1144 of the Civil Code, a general law. Basic is the rule
in statutory construction that 'where two statutes are of equal theoretical application to a
particular case, the one designed therefore should prevail.'
In the instant case, the action for damages due to illegal termination was filed by
plaintiff-appellee only on January 8, 1987 or more than four (4) years after the effectivity
date of his dismissal on November 1, 1982. Clearly, plaintiff-appellee's action has already
prescribed.
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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.
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PPA appealed the decision of the trial court to the Court of Appeals. The appellate
court in its original decision recognized the validity of the impositions and reversed in
toto the decision of the trial court. TEFASCO moved for reconsideration which the Court
of Appeals found partly meritorious. Thus the Court of Appeals in its Amended Decision
partially affirmed the RTC decision only in the sense that PPA was directed to pay
TEFASCO (1) the amounts of Fifteen Million Eight Hundred Ten Thousand Thirty-Two
Pesos and Seven Centavos (P15,810,032.07) representing fifty percent (50%) wharfage
fees and Three Million Nine Hundred Sixty-One Thousand Nine Hundred Sixty-Four
Pesos and Six Centavos (P3,961,964.06) representing thirty percent (30%) berthing fees
which TEFASCO could have earned as private port usage fee from 1977 to 1991. The
Court of Appeals held that the one hundred percent (100%) berthing and wharfage fees
were unenforceable because they had not been approved by the President under P.D. No.
857, and discriminatory since much lower rates were charged in other private ports as
shown by PPA issuances effective 1995 to 1997. Both PPA and TEFASCO were
unsatisfied with this disposition hence these petitions.
ISSUE:
Whether or not the collection by PPA of one hundred percent (100%) wharfage
fees and berthing charges; (c) the propriety of the award of fifty percent (50%) wharfage
fees and thirty percent (30%) berthing charges as actual damages in favor of TEFASCO
for the period from 1977 to 1991 is valid.
RULING:
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.
Page | 323
sales generated by the LC/TR line; and 5) maintenance of the existing Five Hundred
Thousand Pesos (P500,000.00) credit line.
The petitioner testified that respondent PNB Mandaluyong Branch found his
proposal favorable and recommended the implementation of the agreement. However,
Fernando Maramag, PNB Executive Vice-President, disapproved the proposed release of
the mortgaged properties and reduced the proposed new LC/TR line to One Million Pesos
(P1,000,000.00). Petitioner claimed he was forced to agree to these changes and that he
was required to submit a new formal proposal and to sign two (2) blank promissory notes.
In a letter dated July 2, 1982, petitioner offered the following revised proposals to
respondent bank: 1) the restructuring of past due accounts including interests and
penalties into a 5-year term loan, payable semi-annually with one year grace period on
the principal; 2) payment of Four Hundred Thousand Pesos (P400,000.00) upon the
approval of the proposal; 3) reduction of penalty from 3% to 1%; 4) capitalization of the
interest component with interest rate at 16% per annum; 5) establishment of a One
Million Pesos (P1,000,000.00) LC/TR line against the mortgaged properties; 6)
assignment of all his export proceeds to respondent bank to guarantee payment of his
Petitioner failed to pay the subject two (2) Promissory Notes Nos. 127/82 and
128/82 as they fell due. Respondent PNB extra-judicially foreclosed the real and chattel
mortgages, and the mortgaged properties were sold at public auction to respondent PNB,
as highest bidder, for a total of Three Million Seven Hundred Ninety Eight Thousand
Seven Hundred Nineteen Pesos and Fifty Centavos (P3,798,719.50).
The petitioner filed a complaint for specific performance, nullification of the
extra-judicial foreclosure and damages against respondents PNB. He alleged that the
Extrajudicial Foreclosure Sale of the mortgaged properties was null and void since his
loans were restructured to a five-year term loan; hence, it was not yet due and
demandable. On March 16, 1992, the trial court rendered judgment in favor of the
petitioner and ordered the nullification of the extrajudicial foreclosure of the real estate
mortgage, the Sheriffs sale of the mortgaged real properties by virtue of consolidation
thereof and the cancellation of the new titles issued to PNB; that PNB vacate the subject
premises in Pasig and turn the same over to the petitioner; and also the nullification of the
extrajudicial foreclosure and sheriff's sale of the mortgaged chattels, and that the chattels
be returned to petitioner Mendoza if they were removed from his Pasig premises or be
paid for if they were lost or rendered unserviceable.
The trial court decided for the petitioner. Upon appeal, the Court of Appeals
reversed the decision of the trial court and dismissed the complaint.
ISSUE:
Whether or not respondent promised to be bound by the proposal of the petitioner
for a five-year restructuring of his overdue loan.
RULING:
No. Respondent Court of Appeals held that there is no evidence of a promise from
respondent PNB, admittedly a banking corporation, that it had accepted the proposals of
the petitioner to have a five-year restructuring of his overdue loan obligations. It found
and held, on the basis of the evidence adduced, that "appellee's (Mendoza)
communications were mere proposals while the bank's responses were not categorical
that the appellee's request had been favorably accepted by the bank."
Nowhere in those letters presented by the petitioner is there a categorical
statement that respondent PNB had approved the petitioners proposed five-year
Page | 325
restructuring plan. It is stretching the imagination to construe them as evidence that his
proposed five-year restructuring plan has been approved by the respondent PNB which is
admittedly a banking corporation. Only an absolute and unqualified acceptance of a
definite offer manifests the consent necessary to perfect a contract. If anything, those
correspondences only prove that the parties had not gone beyond the preparation stage,
which is the period from the start of the negotiations until the moment just before the
agreement of the parties.
The doctrine of promissory estoppel is an exception to the general rule that a
promise of future conduct does not constitute an estoppel. In some jurisdictions, in order
to make out a claim of promissory estoppel, a party bears the burden of establishing the
following elements: (1) a promise reasonably expected to induce action or forebearance;
(2) such promise did in fact induce such action or forebearance, and (3) the party suffered
detriment as a result.
It is clear from the forgoing that the doctrine of promissory estoppel presupposes
the existence of a promise on the part of one against whom estoppel is claimed. The
promise must be plain and unambiguous and sufficiently specific so that the Judiciary can
understand the obligation assumed and enforce the promise according to its terms. For
petitioner to claim that respondent PNB is estopped to deny the five-year restructuring
plan, he must first prove that respondent PNB had promised to approve the plan in
exchange for the submission of the proposal. As discussed earlier, no such promise was
proven, therefore, the doctrine does not apply to the case at bar. A cause of action for
promissory estoppel does not lie where an alleged oral promise was conditional, so that
reliance upon it was not reasonable. It does not operate to create liability where it does
not otherwise exist.
Page | 326
ISSUE:
Whether or not the agreement between the parties is binding upon them.
RULING:
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
Page | 327
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).
Page | 328
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.
Page | 329
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.
Page | 330
Page | 331
With respect to the issue on estoppel, 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.
Page | 332
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 totally unaware of the plan of Agustin to mortgage and
sell the estate properties. There is no indication that mortgagor PNB and vendee Arguna
had notified petitioners of the contracts they had executed with Agustin. Although
petitioners finally obtained knowledge of the subject petitions filed by their father,
and eventually challenged the July 18, 1973, October 19, 1974, February 25, 1980 and
January 7, 1981 orders of the intestate court, it is not clear from the challenged
decision of the appellate court when they (petitioners) actually learned of the existence
of said orders of the intestate court. Absent any indication of the point in time when
petitioners acquired knowledge of those orders, their alleged delay in impugning the
validity thereof certainly cannot be established. And the Court of Appeals cannot simply
impute laches against them.
Page | 333
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. 12 It has not been shown that respondent intended to conceal the
actual facts concerning the property; more importantly, petitioner has been shown not to
be totally unaware of the real ownership of the subject property. Altogether, there is no
cogent reason to reverse the Court of Appeals in its assailed decision.
Page | 335
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 nonpayment 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.
Page | 337
Page | 338
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.
Page | 339
Page | 341
Page | 342
Page | 343
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. Thereafter, 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 the Court of Appeals erred in ruling that Glaxos policy against its
employees marrying employees from competitor companies 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.
That 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.
Page | 344
In this case, there were notices and advises given to the petitioner regarding his
romantic relationship to his marriage regarding the conflict of interest.
Hence the petition was denied.
Page | 345
Page | 347
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.
Page | 348
FACTS:
The present petition stemmed from a complaint[3] dated 1 December 1988, filed
by herein respondent Luna alleging, inter alia that she began working for Beautifont, Inc.
in 1972, first as a franchise dealer and then a year later, as a Supervisor. Sometime in
1978, Avon Cosmetics, Inc. (Avon), herein petitioner, acquired and took over the
management and operations of Beautifont, Inc. Nonetheless, respondent Luna continued
working for said successor company. Aside from her work as a supervisor, respondent
Luna also acted as a make-up artist of petitioner Avons Theatrical Promotions Group,
for which she received a per diem for each theatrical performance.
The contract was that:
The Company agrees:
1)
1)
That this agreement in no way makes the Supervisor an employee or agent of the
Company, therefore, the Supervisor has no authority to bind the Company in any
contracts with other parties.
2)
That the Supervisor is an independent retailer/dealer insofar as the Company is
concerned, and shall have the sole discretion to determine where and how products
purchased from the Company will be sold. However, the Supervisor shall not sell such
products to stores, supermarkets or to any entity or person who sells things at a fixed
place of business.
3)
That this agreement supersedes any agreement/s between the Company and the
Supervisor.
4)
That the Supervisor shall sell or offer to sell, display or promote only and
exclusively products sold by the Company.
5)
Either party may terminate this agreement at will, with or without cause, at any
time upon notice to the other.
Later, respondent Luna entered into the sales force of Sandre Philippines which
caused her termination for the alleged violation of the terms of the contract. The trial
court ruled in favor of Luna that the contract was contrary to public policy thus the
dismissal was not proper. The Court of Appeals affirmed the decision, hence this petition.
ISSUE:
Whether the Court of Appeals erred in ruling that the Supervisors Agreement
was invalid for being contrary to public policy
Page | 349
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.
In the case at bar, the termination clause of the Supervisors Agreement clearly
provides for two ways of terminating and/or canceling the contract. One mode does not
exclude the other. The contract provided that it can be terminated or cancelled for cause,
it also stated that it can be terminated without cause, both at any time and after written
notice. Thus, whether or not the termination or cancellation of the Supervisors
Agreement was for cause, is immaterial. The only requirement is that of notice to the
other party. When petitioner Avon chose to terminate the contract, for cause, respondent
Luna was duly notified thereof.
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.
Hence, the petition was granted.
Page | 350
Page | 351
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.
Page | 352
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.
Page | 354
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
Page | 355
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.
Justa Kausapin sought to transfer to her stepson exactly what she had earlier
transferred to Maxima Hemedes the ownership of the subject property pursuant to the
first condition stipulated in the deed of donation executed by her husband. Thus, the
donation in favor of Enrique D. Hemedes is null and void for the purported object thereof
did not exist at the time of the transfer, having already been transferred to his sister.
Similarly, the sale of the subject property by Enrique D. Hemedes to Dominium is
also a nullity for the latter cannot acquire more rights than its predecessor-in-interest and
is definitely not an innocent purchaser for value since Enrique D. Hemedes did not
present any certificate of title upon which it relied.
The Court upheld petitioner R & B Insurances assertion of ownership over the
property in dispute, as evidenced by TCT No. 41985, subject to the usufructuary rights of
Justa Kausapin, which encumbrance has been properly annotated upon the said certificate
of title.
Page | 356
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.
Hence, petition was GRANTED and the Decision of the Court of Appeals was
REVERSED.
Page | 357
RULING:
Whether or not the decision of the Court of Appeals decision was correct.
Page | 358
RULING:
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.
Hence, the petition was denied.
Page | 359
Page | 360
ISSUE:
Whether or not the Court of Appeals decided a question of substance in a way
definitely not in accord with law or jurisprudence.
RULING:
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 "catchall" 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.
Hence, the petition was denied.
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Page | 364
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.
Thus, the petition was denied.
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Page | 369
ISSUE:
Whether or not the decision rendered is correct.
RULING:
The petition is DENIED and the Decision of the Court of Appeals was
AFFIRMED.
Page | 371
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 OwnerContractor Agreement with respondent Laperal Realty Corporation to render and provide
complete (horizontal) construction services on his land. On September 23, 1988, Salas,
Jr. executed a Special Power of Attorney in favor of respondent Laperal Realty to
exercise general control, supervision and management of the sale of his land, for cash or
on installment basis. On June 10, 1989, Salas, Jr. left his home in the morning for a
business trip to Nueva Ecija. He never returned.On August 6, 1996, Teresita Diaz Salas
filed with the Regional Trial Court 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 Dismiss on 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 noncompliance with the arbitration clause.
ISSUE:
Whether or not the trial court erred in dismissing the complaint.
RULING:
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 debtor or 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
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The Court of Appeals reversed and set aside the lower courts decision and
rendered another judgment dismissing the complaint.
ISSUE:
Whether or not the Court of Appeals erred in dismissing the complaint.
RULING:
It is readily apparent that private respondents are trying to evade payment of the
commission which rightfully belongs to petitioners as brokers with respect to the sale.
There was no dispute as to the role that petitioners played in the transaction. At the very
least, petitioners set the sale in motion. They were not able to participate in its
consummation only because they were prevented from doing so by the acts of the private
respondents. In the case of Alfred Hahn v. Court of Appeals and Bayerische Motoren
Werke Aktiengesellschaft (BMW) the SC 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.
Hence, the trial courts decision is reinstated.
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Page | 379
ownership so that the defendant Quezon City Government can legally and fully comply
with their obligations under the said deed of donation;that upon expiration of the period
of eighteen (18) months, for alleged non-compliance of the defendant Quezon City
Government with terms and conditions quoted in par. 16 hereof, defendant UP thru its
President, Mr. Jose Abueva, unilaterally, capriciously, whimsically and unlawfully issued
that Administrative Order No. 21 declaring the deed of donation revoked and the donated
property be reverted to defendant UP.
The petitioners, then, prayed that a writ of preliminary injunction or at least a
temporary restraining order be issued, ordering defendant UP to observe status quo;
thereafter, after due notice and hearing, a writ of preliminary injunction be issued; (a) to
restrain defendant UP or to their representative from ejecting the plaintiffs from and
demolishing their improvements on the riceland or farmland situated at Sitio Libis; (b) to
order defendant UP to refrain from executing another deed of donation in favor another
person or entity and in favor of non-bonafide residents of Barrio Cruz-na-Ligas different
from the Deed of Donation, and after trial on the merits, judgment be rendered:declaring
the Deed of Donation as valid and subsisting and ordering the defendant UP to abide by
the terms and conditions thereof.
The Court of Appeals reversed the decision of the trial court.
ISSUE:
Whether or not defendant UP could execute another deed of donation in favor of
third person.
RULING:
The Court found 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. Art. 1311,
second paragraph, of the Civil Code provides:
If a contract should contain some stipulation in favor of a third person, he may demand
its fulfillment provided he communicated his acceptance to the obligor before its
revocation. A mere incidental benefit or interest of a person is not sufficient. The
contracting parties must have clearly and deliberately conferred a favor upon a third
person.
Under this provision of the Civil Code, the following requisites must be present in
order to have a stipulation pour autrui:(1) there must be a stipulation in favor of a third
person; (2) the stipulation must be a part, not the whole of the contract;(3) the contracting
parties must have clearly and deliberately conferred a favor upon a third person, not a
mere incidental benefit or interest; (4) the third person must have communicated his
acceptance to the 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 second paragraph of Art.
1311 on stipulations pour autrui:
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;
Page | 381
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 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 amended complaint further alleges that respondent UP has an obligation to
transfer the subject parcel of land to the city government so that the latter can in turn
comply with its obligations to make improvements on the land and thereafter transfer the
same to petitioners but that, in breach of this obligation, UP failed to deliver the title to
the land to the city government and then revoked the deed of donation after the latter
failed to fulfill its obligations within the time allowed in the contract. For the purpose of
determining the sufficiency of petitioners cause of action, these allegations of the
amended complaint must be deemed to be hypothetically true. So assuming the truth of
the allegations, we hold that petitioners have a cause of action against UP.
The decision of the Court of Appeals is reversed and the case is remanded to the
RTC of Quezon City for trial on the merits.
Page | 382
from the date of the filing of the complaint on September 10, 1997 until finality of the
Courts Decision. Such interest is not due to stipulation but due to the mandate of the law
as embodied in Article 2212 of the Civil Code. From such date of finality, the total
amount due shall earn interest of 12% per annum until satisfied
Certainly, the computed interest from the filing of the complaint on September 10,
1997 would no longer be true upon the finality of this Courts decision. In accordance
with the rules laid down in Eastern Shipping Lines, Inc. v. Court of Appeals, the SC
derived the following formula for the RTCs guidance:
TOTAL AMOUNT DUE = [principal + interest + interest on interest] - partial
payments made
Interest = principal x 18 % per annum x no. of years from due date until finality
of judgment
Interest on interest = Interest computed as of the filing of the complaint
(September 10, 1997) x 12% x no. of years until finality of judgment
Total amount due as of the date of finality of judgment will earn an interest of
12% per annum until fully paid.
Hence, the SC affirmed the CA decision with modifications. It ordered petitioners
to pay the respondents (1) the total amount due, as computed by the RTC in accordance
with the formula specified above, (2) the legal interest of 12% per annum on the total
amount due from such finality until fully paid, (3) the reasonable amount of P25,000.00
as attorneys fees, and (4) the costs of suit, within a period of not less than 90 days nor
more than 120 days from the entry of judgment, and in case of default of such payment
the property shall be sold at public auction to satisfy the judgment.
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RULING:
1.
A close review of the events in this case, in the light of the parties
evidence, shows that there was no perfected contract of lease between the parties. MidPasig 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. MidPasig, upon investigation, also learned that the check was deposited at the Philippine
National Bank San Juan Branch, instead of PNB Ortigas Branch where Mid-Pasig
maintains its account. Immediately, Mid-Pasig wrote Rockland on February 6, 2001
rejecting the offer, and proposed that Rockland apply the P1 million to its other existing
lease instead. These circumstances clearly show that there was no concurrence of
Rocklands offer and Mid-Pasigs acceptance.
2.
Mid-Pasig is also not in estoppel in pais. The doctrine of estoppel is based
on the grounds of public policy, fair dealing, good faith and justice, and its purpose is to
forbid one to speak against his own act, representations, or commitments to the injury of
one to whom they were directed and who reasonably relied thereon. Since estoppel is
based on equity and justice, it is essential that before a person can be barred from
asserting a fact contrary to his act or conduct, it must be shown that such act or conduct
has been intended and would unjustly cause harm to those who are misled if the principle
were not applied against him.
Hence, the petition was denied.
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In fact, in asserting that there is no valid and binding contract between the parties,
MMDA can only allege that there was no valid notice of award; that the contract does not
bear the signature of the President of the Philippines; and that the conditions precedent
specified in the contract were not complied with.
In asserting that the notice of award to JANCOM is not a proper notice of award,
MMDA points to the Implementing Rules and Regulations of Republic Act No. 6957,
otherwise known as the BOT Law, which require that i) prior to the notice of award, an
Investment Coordinating Committee clearance must first be obtained; and ii) the notice of
award indicate the time within which the awardee shall submit the prescribed
performance security, proof of commitment of equity contributions and indications of
financing resources.
Admittedly, the notice of award has not complied with these requirements.
However, the defect was cured by the subsequent execution of the contract entered into
and signed by authorized representatives of the parties; hence, it may not be gainsaid that
there is a perfected contract existing between the parties giving to them certain rights and
obligations (conditions precedents) in accordance with the terms and conditions thereof.
We borrow the words of the Court of Appeals:
Petitioners belabor the point that there was no valid notice of award as to
constitute acceptance of private respondents offer. They maintain that former MMDA
Chairman Oretas letter to JANCOM EC dated February 27, 1997 cannot be considered
as a valid notice of award as it does not comply with the rules implementing Rep. Act
No. 6957, as amended. The argument is untenable.
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RULING:
3.
A close review of the events in this case, in the light of the parties
evidence, shows that there was no perfected contract of lease between the parties. MidPasig 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. MidPasig, upon investigation, also learned that the check was deposited at the Philippine
National Bank San Juan Branch, instead of PNB Ortigas Branch where Mid-Pasig
maintains its account. Immediately, Mid-Pasig wrote Rockland on February 6, 2001
rejecting the offer, and proposed that Rockland apply the P1 million to its other existing
lease instead. These circumstances clearly show that there was no concurrence of
Rocklands offer and Mid-Pasigs acceptance.
4.
Mid-Pasig is also not in estoppel in pais. The doctrine of estoppel is based
on the grounds of public policy, fair dealing, good faith and justice, and its purpose is to
forbid one to speak against his own act, representations, or commitments to the injury of
one to whom they were directed and who reasonably relied thereon. Since estoppel is
based on equity and justice, it is essential that before a person can be barred from
asserting a fact contrary to his act or conduct, it must be shown that such act or conduct
has been intended and would unjustly cause harm to those who are misled if the principle
were not applied against him.
Hence, the petition was denied.
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On June 4, 1985, respondent PNB informed petitioner that the PNB Board of
Directors had accepted petitioner's offer to purchase the property, but for P1,931,389.53
in cash less the P725,000.00 already deposited with it. Petitioner did not respond, so PNB
requested petitioner in a letter dated June 30, 1988 to submit an amended offer to
repurchase. Petitioner rejected respondent's proposal in a letter dated July 14, 1988. It
maintained that respondent PNB had agreed to sell the property for P1,574,560.47, and
that since its P725,000.00 downpayment had been accepted, respondent PNB was
proscribed from increasing the purchase price of the property. Petitioner averred that it
had a net balance payable in the amount of P643,452.34. Respondent PNB, however,
rejected petitioner's offer to pay the balance of P643,452.34 in a letter dated August 1,
1989.
Petitioner filed a complaint against respondent PNB for "Annulment of Mortgage
and Mortgage Foreclosure, Delivery of Title, or Specific Performance with Damages.
Respondent PNB averred, as a special and affirmative defense, that it had acquired
ownership over the property after the period to redeem had elapsed. It claimed that no
contract of sale was perfected between it and petitioner after the period to redeem the
property had expired. The trial court rendered judgment dismissing the amended
complaint and respondent PNB's counterclaim. It ordered respondent PNB to refund the
P725,000.00 deposit petitioner had made. The trial court ruled that there was no perfected
contract of sale between the parties; hence, petitioner had no cause of action for specific
performance against respondent. The Court of Appeals affirmed the RTCs decision.
ISSUE:
Whether or not petitioner and respondent PNB had entered into a perfected
contract for petitioner to repurchase the property from respondent.
RULING:
The ruling of the appellate court that there was no perfected contract of sale
between the parties is correct.
It appears that although respondent requested petitioner to conform to its amended
counter-offer, petitioner refused and instead requested respondent to reconsider its
amended counter-offer. Petitioner's request was ultimately rejected and respondent
offered to refund its P725,000.00 deposit. In sum, then, there was no perfected contract of
sale between petitioner and respondent over the subject property.
Page | 395
ISSUE:
Whether or not there was a valid consent in the case at bar to have a valid contract.
RULING:
One of the three essential requisites of a valid contract is consent of the parties on
the object and cause of the contract. In a contract of sale, the parities must agree not only
on the price, but also on the manner of payment of the price. An agreement on the price
but a disagreement on the manner of its payment will not result in consent, thus
preventing the existence of a valid contract for a lack of consent. This lack of consent is
separate and distinct for lack of consideration where the contract states that the price has
been paid when in fact it has never been paid.
Reynes expected Montecillo to pay him directly the P47, 000.00 purchase price
within one month after the signing of the Deed of Sale. On the other hand, Montecillo
thought that his agreement with Reynes required him to pay the P47,000.00-purchase
price to Cebu Ice Storage to settle Jayags mortgage debt. Montecillo also acknowledged
a balance of P10, 000.00 in favor of Reynes although this amount is not stated in
Montecillos Deed of Sale. Thus, there was no consent or meeting of the minds, between
Reynes and Montecillo on the manner of payment. This prevented the existence of a valid
contract because of lack of consent.
In summary, Montecillos Deed of Sale is null and void ab initio not only for lack
of consideration, but also for lack of consent. The cancellation of TCT No. 90805 in the
name of Montecillo is in order as there was no valid contract transferring ownership of
the Mabolo Lot from Reynes to Montecillo.
Page | 397
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RULING:
A contract is a meeting of the minds between two persons whereby one binds
himself to give something or to render some service to bind himself to give something to
render some service to another for consideration. There is no contract unless the
following requisites concur: 1. Consent of the contracting parties; 2. Object certain which
is the subject matter of the contract; and 3. Cause of the obligation which is established.
In the case at bar, there was a perfected oral contract. When Ms. Lopez and
petitioner met in November 1986, and discussed the details of the work, the first stage of
the contract commenced. When they agreed to the payment of the P10,000.00 as
professional fees of petitioner and that she should give the designs before the December
1986 board meeting of the bank, the second stage of the contract proceeded, and when
finally petitioner gave the designs to Ms. Lopez, the contract was consummated.
Petitioner believed that once she submitted the designs she would be paid her
professional fees. Ms. Lopez assured petitioner that she would be paid.
It is familiar doctrine that if a corporation knowingly permits one of its officers,
or any other agent, to act within the scope of an apparent authority, it holds him out to the
public as possessing the power to do those acts; and thus, the corporation will, as against
anyone who has in good faith dealt with it through such agent, be estopped from denying
the agents authority.
Also, petitioner may be paid on the basis of quantum meruit. "It is essential for
the proper operation of the principle that there is an acceptance of the benefits by one
sought to be charged for the services rendered under circumstances as reasonably to
notify him that the lawyer performing the task was expecting to be paid compensation
therefor. The doctrine of quantum meruit is a device to prevent undue enrichment based
on the equitable postulate that it is unjust for a person to retain benefit without paying for
it."
The designs petitioner submitted to Ms. Lopez were not returned. Ms. Lopez, an
officer of the bank as branch manager used such designs for presentation to the board of
the bank. Thus, the designs were in fact useful to Ms. Lopez for she did not appear to the
board without any designs at the time of the deadline set by the board.
Decision reversed and set aside. Decision of the trial court affirmed.
Page | 399
contended that the filing of the ejectment case violated their agreement to maintain the
status quo.
ISSUE:
Whether or not there was a valid consent in the case at bar.
RULING:
There was no valid consent in the case at bar.
Contracts that are consensual in nature, like a contract of sale, are perfected upon
mere meeting of the minds. Once there is concurrence between the offer and the
acceptance upon the subject matter, consideration, and terns of payment, a contract is
produced. The offer must be certain. To convert the offer into a contract, the acceptance
must be absolute and must not qualify the terms of the offer; it must be plain,
unequivocal, unconditional, and without variance of any sort from the proposal. A
qualified acceptance, or one that involves a new proposal, constitutes a counter-offer and
is a rejection of the original offer. Consequently, when something is desired which is not
exactly is proposed in the offer, such acceptance is not sufficient to generate consent
because any modification or variation from the terms of the offer annuals the offer.
In the case at bar, while it is true that private respondent informed petitioner that
he is accepting the latters offer to sell the leased property, it appears that they did not
reach an agreement as to the extent of the lot subject of the proposed sale.
Letters reveal that private respondent did not give his consent to buy only 413.28
square meters of the leased lot, as he desired to purchase the whole 490 square-meterleased 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.
Page | 401
RULING:
A contract is a meeting of minds between two persons whereby one binds himself
to give something or render some service to another [Art. 1305, Civil Code.] for a
consideration. There is no contract unless the following requisites concur:
(1)
consent of the contracting parties;
(2)
object certain which is the subject of the contract; and
(3)
cause of the obligation, which is established. [Art. 1318, Civil Code.]
A contract undergoes three stages:
(a)
preparation, conception, or generation, which is the period of negotiation
and bargaining rending at the moment of agreement of the parties;
(b)
perfection or birth of the contract, which is the moment when the parties
come to agree on the terms of the contract; and
(c)
consummation or death, which is the fulfillment or performance of the
terms agreed upon in the contract.
In the present case, when Mr. Del Rosario of Viva met Mr. Lopez of ABS-CBN
on 2 April 1992 to discuss the package of films, said package of 104 VIVA films was
VIVAs offer to ABS-CBN to enter into a new Film Exhibition Agreement. But ABSCBN, sent through Ms. Concio, counter-proposal in the form a draft contract proposing
exhibition of 53 films for a consideration of P35 million. This counter-proposal could be
nothing less than the counter-offer of Mr. Lopez during his conference with Del Rosario
at Tamarind Grill Restaurant. Clearly, there was no acceptance of VIVAs offer, for it
was met by a counter-offer which substantially varied the terms of the offer.
Furthermore, ABS-CBN made no acceptance of VIVAs offer hence, they
underwent period of bargaining. ABS-CBN then formalized its counter-proposals or
counter-offer in a draft contract. VIVA through its Board of Directors, rejected such
counter-offer. Even if it be conceded arguendo that Del Rosario had accepted the counteroffer, the acceptance did not bind VIVA, as there was no proof whatsoever that Del
Rosario had the specific authority to do so.
The instant petition was GRANTED.
Page | 403
FACTS:
In July 1978, respondent spouses Lorenzo de Vera and Asuncion Santos-de Vera,
through their agent Marcosa Sanchez, offered to sell to petitioner Lourdes Ong Limson a
parcel of land. The respondent spouses were the owners of the subject property.
On July 31, 1978, she agreed to but the property at the price of P34. 00 per square
meter and gave P20, 000.00 as earnest money. The respondent spouses signed a
receipt thereafter and gave her a 10-day option period to purchase the property.
Respondent spouses informed petitioner that the subject property was mortgaged to
Emilio Ramos and Isidro Ramos. Petitioner was asked to pay the balance of the purchase
price to enable the respondent spouses to settle their obligation with the Ramoses.
Petitioner agreed to meet respondent spouses and the Ramoses on August 5, 1978, to
consummate the transaction; however, the respondent spouses and the Ramoses did not
appear, same with their second meeting.
On August 23, 1978, petitioner allegedly gave respondent spouses three checks
for the settlement the back taxes of property. On September 5, 1978, the agent of the
respondent spouses informed petitioner that the property was the subject of a negotiation
for the sale to respondent Sunvar Realty Development Corporation.
Petitioner alleged that it was only on September 15, 1978, that TCT No. S-72946
covering the property was issued to respondent spouses. On the same day, petitioner
filed and Affidavit of Adverse Claim with the Office of the Registry of Deeds of Makati,
Metro Manila. The Deed of Sale between respondent spouses and respondent Sunvar was
executed on September 15, 1978 and TCT No. S-72377 was issued in favor of Sunvar on
September 26, 1978 with the Adverse Claim of petitioner annotated thereon.
Respondent spouses and Sunvar filed their Answers and Answers to Cross-Claim,
respectively. On appeal, the Court of Appeals completely reversed the decision of the
trial court and ordered the Register of Deeds of Makati City to lift the Adverse Claim and
ordered petitioner to pay respondent Sunvar and respondent spouses exemplary and
nominal damages and attorneys fees. Hence, this petition.
ISSUE:
Whether or not the agreement between petitioner and respondent spouses was a
mere option or a contract to sell.
RULING:
The Supreme Court held that the agreement between the parties was a contract of
option and not a contract to sell. An option is continuing offer or contract by which the
owner stipulates with another that the latter shall have the right to buy the property at a
fixed price within a time certain, or under, or in compliance with, certain terms and
conditions, or which gives the owner of the property the right to sell or demand a sale. It
is also sometimes called an unaccepted offer. An option is not of itself a purchase, but
merely secures the privilege to buy. It is not a sale of property but a sale of the right to
purchase. Its distinguishing characteristic is that it imposes no binding obligation on the
person holding the option, aside from the consideration for the offer.
Page | 404
FACTS:
The Special Assets Management Department (SAMD) of PNB issued an
advertisement for the sale thru bidding of certain PNB properties including Lot No. 17,
covered by TCT No. T-15042, with an advertised floor price of P1,409,000.00, and Lot
No. 19, covered by TCT No. T-15036, with an advertised floor price of P2,268,000.00.
Bidding was 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.
In a June 28, 1990 letter to the Manager, Reynaldo Villanueva offered to purchase
Lot Nos. 17 and 19 for P3,677,000.00. He also manifested that he was depositing
P400,000.00 to show his good faith but with the understanding that said amount may be
treated as part of the payment of the purchase price only when his offer is accepted by
PNB. At the bottom of said letter there appears an unsigned marginal note stating that
P400,000.00 was deposited into Villanuevas account (Savings Account No. 43612) with
PNB-General Santos Branch.
Guevara, the vice-president informed Villanueva that only Lot No. 19 is available
and that the asking price therefor is P2,883,300.00. PNB also stated that if quoted price is
acceptable to Villanueva, then the latter must submit a revised offer to purchase. And
Sale shall be subject to its Board of Directors approval and to other terms and
conditions imposed by the Bank on sale of acquired assets.
Instead of submitting a revised offer, Villanueva merely inserted at the bottom of
Guevaras letter a July 11, 1990 marginal note, which reads:
C O N F O R M E:
PRICE OF P2,883,300.00 (downpayment of P600,000.00 and the balance
payable in two (2) years at quarterly amortizations.)
Villanueva paid P200,000.00 to PNB which issued O.R. No. 16997 to
acknowledge receipt of the partial payment deposit on offer to purchase. On the dorsal
portion of Official Receipt No. 16997, Villanueva signed a typewritten note, stating:
This is a deposit made to show the sincerity of my purchase offer with the
understanding that it shall be returned without interest if my offer is not favorably
considered or be forfeited if my offer is approved but I fail/refuse to push through the
purchase.
Also, on July 24, 1990, P380,000.00 was debited from Villanuevas Savings
Account No. 43612 and credited to SAMD.
On October 11, 1990, however, Guevara wrote Villanueva that upon orders of the
PNB Board of Directors to conduct another appraisal and public bidding of Lot No. 19,
SAMD is deferring negotiations with him over said property and returning his deposit of
P580,000.00. Undaunted, Villanueva attempted to deliver postdated checks covering the
balance of the purchase price but PNB refused the same.
Hence, Villanueva filed with the RTC a Complaint for specific performance and
damages against PNB. The RTC rendered judgment in favor of the plaintiff and against
the defendant directing it to execute a deed of sale in favor of the plaintiff over Lot 19
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comprising after payment of the balance in cash in the amount of P2,303,300.00 and to
pay the plaintiff P1,000,000.00 as moral damages; P500,000.00 as attorneys fees, plus
litigation expenses and costs of the suit.
PNB appealed to the CA which reversed and set aside the RTC decision.
ISSUE:
Whether or not a perfected contract of sale exists between petitioner and
respondent PNB.
RULING:
The Court sustained the CA. The CA held that the case at bench, consent, in
respect to the price and manner of its payment, is lacking. The record shows that
appellant, thru Guevaras July 6, 1990 letter, made a qualified acceptance of appellees
letter-offer dated June 28, 1990 by imposing an asking price of P2,883,300.00 in cash for
Lot 19. The letter dated July 6, 1990 constituted a counter-offer (Art. 1319, Civil Code),
to which appellee made a new proposal, i.e., to pay the amount of P2,883,300.00 in
staggered amounts, that is, P600,000.00 as downpayment and the balance within two
years in quarterly amortizations.
A qualified acceptance, or one that involves a new proposal, constitutes a counteroffer and a rejection of the original offer (Art. 1319, id.). 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. Appellees new proposal, which constitutes a counter-offer, was
not accepted by appellant, its board having decided to have Lot 19 reappraised and sold
thru public bidding.
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ISSUE:
Whether said decision of the lower courts is correct.
RULING:
Petitioners questioned Felicianos capacity at the time he donated the property,
yet did not see fit to question his mental competence when he entered into a contract of
marriage with Corazon Cerezo or when he executed deeds of donation of his other
properties in their favor. The presumption that Feliciano remained competent to execute
contracts, despite his illness, is bolstered by the existence of these other contracts.
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.
Needless to state, since the donation was valid, Mercedes had the right to sell the
property to whomever she chose. Not a shred of evidence has been presented to prove the
claim that Mercedes sale of the property to her children was tainted with fraud or
falsehood. It is of little bearing that the Deed of Sale was registered only after the death
of Mercedes. What is material is that the sale of the property to Delia and Jesus Basa was
legal and binding at the time of its execution. Thus, the property in question belongs to
Delia and Jesus Basa.
petitioners raised the issue of prescription and laches for the first time on appeal
before this Court. It is sufficient for this Court to note that even if the present appeal had
prospered, the Deed of Donation was still a voidable, not a void, contract. As such, it
remained binding as it was not annulled in a proper action in court within four years.
IN VIEW WHEREOF, there being no merit in the arguments of the petitioners,
the petition is DENIED. The CA decision was affirmed in toto.
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or concealment of the real purchase price could have induced the bank into giving its
consent to the agreement; or that the bank would not have otherwise given its consent had
it known of the real purchase price.
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ASKAY V. COSALAN
46 PHIL 179 September 15, 1924
FACTS:
Petitioner Askay is an illiterate Igorrote, aging between 70 and 80, who at various
times has been the owner of mining property. While defendant Fernando A. Cosalan, the
nephew by marriage of Askay, and municipal president, who likewise has been interested
along with his uncle in mining enterprises. Askay obtained title to the Pet Kel Mineral
Claim located in Tublay, Benguet then Askay sold this to Cosalan. Nine years later
Askay instituted action in the Court of First Instance to have the sale of the Pet Kel
Mineral Claim declared null, to secure possession of the mineral claim, and to obtain
damages from the defendant in the amount of P10,500. Following the presentation of
various pleadings including the answer of the defendant, and following trial before Judge
of First Instance, judgment was rendered dismissing the complaint and absolving the
defendant from the same, with costs against the plaintiff. On being informed of the
judgment of the trial court, plaintiff attacked the decision on two grounds: First,
jurisdictional, and the second, formal. Both motions were denied and an appeal was
perfected.
ISSUE:
Whether or not the plaintiff has established his cause of action by a
preponderance of the evidence.
RULING:
Plaintiff contends that the sale of the Pet Kel Mineral Claim was accomplished
through fraud and deceit on the part of the defendant. Plaintiff may be right but in our
judgment he has failed to establish his claim. Fraud must be both alleged and proved.
One fact exists in plaintiffs favor, and this is the age and ignorance of the plaintiff who
could be easily by the defendant, a man of greater intelligence. Another fact is the
inadequacy of the consideration for the transfer which, according to the conveyance,
consisted of P1 and other valuable consideration, and which, according to the oral
testimony, in reality consisted of P107 in cash, a bill-fold, one sheet, one cow, and two
carabaos. Gross inadequacy naturally suggest fraud is some evidence thereof, so that it
may be sufficient to show it when taken in connection with other circumstances, such as
ignorance or the fact that one of the parties has an advantage over the other. But the fact
that the bargain was a hard one, coupled with mere inadequacy of price when both parties
are in a position to form an independent judgment concerning the transaction, is not a
sufficient ground for the cancellation of a contract.
The Court concludes, therefore, that the complaint was properly dismissed. As a
result, judgment is affirmed
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relatively simulated. Here, the parties real agreement binds them. In the present case, the
parties intended to be bound by the Contract, even if it did not reflect the actual purchase
price of the property. The letter of Esperanza to respondent and petitioners admission
that there was partial payment made on the basis of the Absolute Sale reveals that the
parties intended the agreement to produce legal effect.
Since the Deed of Absolute Sale was merely relatively simulated, it remains valid and
enforceable. All the essential requisites prescribed by law for the validity and perfection
of contracts is present. However, the parties shall be bound by their real agreement for a
consideration of P1,000,000 as reflected by their Joint Affidavit..
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UY V. COURT OF APPEALS
G.R. No. 120465, September 9, 1999
FACTS:
Being agents and authorized to sell eight (8) parcels of land by the owners
thereof, petitioners William Uy and Rodel Roxas, by virtue of such authority, offered to
sell the lands, to respondent National Housing Authority (NHA) to be utilized and
developed as a housing project. NHA approved the acquisition of the said parcels of land
with an area of 31.8231 hectares at the cost of P23.867 million, pursuant to which the
parties executed a series of Deeds of Absolute Sale covering the subject lands. NHA
eventually cancelled the sale over three (3) parcels of land of the eight parcels of lands
because of the report it received from the Land Geosciences Bureau of the Department of
Environment and Natural Resources that the remaining area is located at an active
landslide area and therefore, not suitable for development into a housing project.
Petitioners then filed a complaint for damages but the trial court rendered the
cancellation of contract to be justified and awarded P1.255 million as damages in favor of
petitioners. Upon appeal by petitioners, the Court of Appeals reversed the decision and
entered a new one dismissing the complaint including the award of damages.
ISSUE:
1.) Whether or not the contention of petitioner is correct.
2.) Whether or not a partys entry into a contract affects the validity of the
contract.
RULING:
1.) The Petitioners are not correct. They confuse the cancellation of the contract
by the NHA as a rescission of the contract under Article 1191 of the Civil Code. The
right to rescission is predicated on a breach of faith by the other party that violates the
reciprocity between them. The power to rescind is given to the injured party. In this
case, the NHA did not rescind the contract. Indeed, it did not have the right to do so for
the other parties to the contract, the vendors did not commit any breach, much less a
substantial breach, of their obligation. The NHA did not suffer any injury. The
cancellation was not therefore a rescission under Article 1191. Rather, it was based on
the negation of the cause arising from the realization that the lands, which were the
objects of the sale, were not suitable for housing.
2.) The general rule is that a partys motives for entering into a contract do not
affect the contract. However, when the motive predetermines the cause, the motive may
be regarded as the cause. As held in Liguez v. CA, It is well to note, however, that
Manresa himself, while maintaining the distinction and upholding the inoperativess of the
motives of the parties to determine the validity of the contract, expressly excepts from the
rule those contracts that are conditioned upon the attainment of the motives of either
party.
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RULING:
Decision affirmed with the modification that the cross-claim against public
respondents is dismissed.
Among others, petitioners harp on the fact that the notarized and registered copy
of the Absolute Sale should have, been correspondingly corrected. Petitioners believe that
the notarized and archived copy should prevail. We disagree. 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. Noncompliance with formal requirements does not adversely affect the validity of the
contract or the contractual rights and obligations of the parties.
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SARMING VS. DY
383 SCRA 131, JUNE 6, 2002
FACTS:
A controversy arose regarding the sale of Lot 4163 which was half-owned by the
original defendant, Silveria Flores, although it was solely registered under her name. The
other half was originally owned by Silverias brother, Jose. On January 1956, the heirs of
Jose entered into a contract with plaintiff Alejandra Delfino, for the sale of their one-half
share of Lot 4163 after offering the same to their co-owner, Silveria, who declined for
lack of money. Silveria did not object to the sale of said portion to Alejandra.
Atty. Deogracias Pinili, Alejandras lawyer then prepared the document of sale.
In the preparation of the document however, OCT no. 4918-A, covering Lot 5734, and
not the correct title covering Lot 4163 was the one delivered to Pinili.
Unaware of the mistake committed, Alejandra immediately took possession of
Lot 4163 and introduced improvements on the said lot.
Two years later, when Alejandra Delfino purchased the adjoinin portion of the lot
she had been occupying, she discovered that what was designated in the deed, Lot 5734,
was the wrong lot. Thus, Alejandra and the vendors filed for the feformation of the Deed
of Sale.
ISSUE:
Whether or not reformation is proper in this case.
RULING:
The Court ruled that reformation is proper in the case at bar. Reformation is that
remedy in equity by means of which a written instrument is made or construed so as to
express or inform to the real intention of the parties.
An action for reformation of instrument under this provision of law may prosper
only upon the concurrence of the following requisites:
(1) there must have been a meeting of the minds of the parties to the
contract;
(2) the instrument does not express the true intention of the parties; and
(3) the failure of the instrument to express the true intention of the parties
is due to mistake, fraud, inequitable conduct or accident.
All of these requisites are present in this case. There was a meeting of the minds
between the parties to the contract but the deed did not express the true intention ot the
parties due to 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.
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AQUINTEY V.TIBONG
G.R. No. 166704, December 20, 2006
FACTS:
Agrifina Aquintey filed a complaint for sum of money and damages against the
respondents, spouses Felicidad and Rico Tibong. Agrifina alleged that Felicidad had
secured loans from her on several occasions, at monthly interest rates. Despite demands,
the spouses Tibong failed to pay their outstanding loan exclusive of interests. Spouses
Tibong admitted that they had secured loans from Agrifina. The proceeds of the loan
were then re-lent to other borrowers at higher interest rates. They, likewise, alleged that
they had executed deeds of assignment in favor of Agrifina, and that their debtors had
executed promissory notes in Agrifina's favor. According to the spouses Tibong, this
resulted in a novation of the original obligation to Agrifina. They insisted that by virtue
of these documents, Agrifina became the new collector of their debtors; and the
obligation to pay the balance of their loans had been extinguished.
ISSUE:
Whether or not consent is necessary in novation.
RULING:
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 takes 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.
Therefore, the Court agrees with the appellate courts decision 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.
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assigned to him in the Deed of Partial Partition, including the property subject of this
case. As the absolute owner thereof then, Arnel Cruz had the right to enjoy and dispose
of the property, as well as the right to constitute a real estate mortgage over the same
without securing the consent of the petitioners.
On the other hand, there is absolutely nothing in the Memorandum of Agreement
which diminishes the right of Arnel Cruz to alienate or encumber the properties allotted
to him in the deed of partition.
As correctly held by the Court of Appeals, the parties only bound themselves to
share in the proceeds of the sale of the properties. The agreement does not direct
reconveyance of the properties to reinstate the common ownership of the properties.
Moreover, to ascertain the intent of the parties in a contractual relationship, it is
imperative that the various stipulations provided for in the contracts be construed
together, consistent with the parties contemporaneous and subsequent acts as regards the
execution of the contract. Subsequent to the execution of the Deed of Partition and
Memorandum of Agreement, the properties were titled individually in the names of the
co-owners to which they were respectively adjudicated, to the exclusion of the other coowners. Petitioners Adoracion Cruz and Thelma Cruz separately sold the properties
distributed to them as absolute owners thereof. Being clear manifestations of sole and
exclusive dominion over the properties affected, the acts signify total incongruence with
the state of co-ownership claimed by the petitioners.
The real estate mortgage on the disputed property is valid and does not contravene
the agreement of the parties.
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Article 1386 of the Civil Code provides rescission, which creates the obligation to
return the things, which were the object of the contract, together with their fruits, and the
price with its interest, but also the rentals paid, if any, had to be returned by the buyer.
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SIGUAN V. 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." Demands to make good the
checks proved futile. As a consequence, a criminal case for violation of Batas Pambansa
were filed by petitioner against Lim.
The court a quo convicted Lim as charged. The case is pending before this Court
for review and docketed as G.R. No. 134685. It also appears that on 31 July 1990, Lim
was convicted of estafa by the RTC of Quezon City in Criminal Case No. Q-89-22162
filed by a certain Victoria Suarez. This decision was affirmed by the Court of Appeals.
On appeal, however, the Supreme Court, in a decision promulgated on 7 April 1997,
acquitted Lim but held her civilly liable in the amount of P169,000, as actual damages,
plus legal interest.
Meanwhile, on 2 July 1991, a Deed of Donation conveying parcels of land and
purportedly executed by Lim on 10 August 1989 in favor of her children, Linde, Ingrid
and Neil, was registered with the Office of the Register of Deeds of Cebu City. New
transfer certificates of title were thereafter issued in the names of the donees.
On 23 June 1993, 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. The complaint was docketed as Civil Case No. CEB14181. 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 petitioner's and other creditors'
prejudice; and that Lim, at the time of the fraudulent conveyance, left no sufficient
properties to pay her obligations.
On the other hand, Lim denied any liability to petitioner. She claimed that her
convictions in Criminal Cases Nos. 22127-28 were erroneous, which was the reason why
she appealed said decision to the Court of Appeals. As regards the questioned Deed of
Donation, she maintained that it was not antedated but was made in good faith at a time
when she had sufficient property. Finally, she alleged that the Deed of Donation was
registered only on 2 July 1991 because she was seriously ill.
In its decision of 31 December 1994 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 sum of P10,000 as moral damages; P10,000 as attorney's fees; and P5,000
as expenses of litigation.
On appeal, the Court of Appeals, in a promulgated on 20 February 1998, reversed
the decision of the trial court and dismissed petitioner's accion pauliana. It held that two
of the requisites for filing an accion pauliana were absent, namely, (1) there must be a
credit existing prior to the celebration of the contract; and (2) there must be a fraud, or at
least the intent to commit fraud, to the prejudice of the creditor seeking the rescission.
According to the Court of Appeals, the Deed of Donation, which was executed
and acknowledged before a notary public, appears on its face to have been executed on
10 August 1989. Under Section 23 of Rule 132 of the Rules of Court, the questioned
Deed, being a public document, is evidence of the fact which gave rise to its execution
and of the date thereof. No antedating of the Deed of Donation was made, there being no
convincing evidence on record to indicate that the notary public and the parties did
antedate it.
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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." The fourth requisite for an
accion pauliana to prosper is not present either.
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KHE HONG CHENG, alias FELIX KHE, SANDRA JOY KHE and RAY STEVEN
KHE, petitioners,
vs.COURT OF APPEALS, HON. TEOFILO GUADIZ, RTC 147, MAKATI CITY
and PHILAM INSURANCE CO., INC., respondents.
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 deciusion 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. Respondent Philam 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 accrues?
RULING:
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.
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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.
RUKING:
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 socalled Ballantine Schedule: in October 1944, P40.00 Japanese notes were equivalent to
P1 of current Philippine money.
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TAN vs 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.
RUKING:
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.
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VI,LLANUEVA-MIJARES petitioners,
vs.THE COURT OF APPEALS, respondents.
G.R. No. 108921 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.
RUKING:
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.
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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.
RUKING:
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.
Page | 469
Page | 470
FACTS:
The petition arose from a complaint for anuulment of tilte with prayer for
preliminary injunction filed with the court of First Instance by Rosalina Gurrea in her
capacity as attorney-in-fact of the heirs of Ricardo Gurrea. The complaint was filed
against Atty. Enrique Suplico.
Atty. Suplico alleged that the property in dispurte was for the payment of his
services rendered to the late Ricardo Gurrrea which the offered to him as payment.
ISSUE:
Whether or not petitioners are entitled to the cancellation of respondent
attorneys title over the subject property and the reconveyance thereof to the herein
petitioners or to be the estate of the Late Ricardo.
RUKING:
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.
Page | 471
FACTS:
Alfred Frenzel and Ederlina Catito had an amorous relationship which started in
Kings Cross, a night spot in Sydney.
During their relationship Alfred bought properties in the Philippines in the name
of Ederlina. Their relationship started to deteriorate when the husband of Ederlina
threatened Ederlina that he would file a bigamy case against her for having an illicit affair
with Alfred, who was also married.
Alfred filed a complaint against Ederlina for specific performance, declaration of
real and personal properties, sum of money and damages.
ISSUE:
Whether or not acquisition of a parcel of land is valid.
RUKING:
The sales of three parcels of land in favor of the petitioner who is a foreigner is illegal per
se. The transactions are void ab initio because they were entered into in violation of the
Constitution. Thus, to allow the petitioner to recover the properties or the money used in
the purchase of the parcels of land would be subversive of public policy.
An action for recovery of what has been paid without just cause has been designated as
an accion in rem verso. This provision does not apply if, as in this case, the action is
proscribed by the Constitution or by the application of the pari delicto doctrine. 68 It may
be unfair and unjust to bar the petitioner from filing an accion in rem verso over the
subject properties, or from recovering the money he paid for the said properties, but, as
Lord Mansfield stated in the early case of Holman vs. Johnson:69 "The objection that a
contract is immoral or illegal as between the plaintiff and the defendant, sounds at all
times very ill in the mouth of the defendant. It is not for his sake, however, that the
objection is ever allowed; but it is founded in general principles of policy, which the
defendant has the advantage of, contrary to the real justice, as between him and the
plaintiff."
Page | 472
LA BUGAAL-BLAAN vs RAMOS
December 1, 2004
FACTS:
The Petition for Prohibition and Mandamus before the Court challenges the
constitutionality of (1) Republic Act No. [RA] 7942 (The Philippine Mining Act of
1995); (2) its Implementing Rules and Regulations (DENR Administrative Order No.
[DAO] 96-40); and (3) the FTAA dated March 30, 1995, executed by the government
with Western Mining Corporation (Philippines), Inc. (WMCP).
On January 27, 2004, the Court en banc promulgated its Decision granting the Petition
and declaring the unconstitutionality of certain provisions of RA 7942, DAO 96-40, as
well as of the entire FTAA executed between the government and WMCP, mainly on the
finding that FTAAs are service contracts prohibited by the 1987 Constitution.
ISSUE:
Whether or nor it is a void contract.
RUKING:
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.
Page | 473
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.
RUKING:
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.
Page | 474
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?
RUKING:
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 Corporation1[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.
Page | 475
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.
RUKING:
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.
Page | 476
Page | 477
FACTS:
The spouses Aurelio and Esperanza Balite the owners of the disputed land,
located at Nothern Samar.
Aurelio died intestate, Esperanza and their children became co-owners of the said
property. The said property remained undivided.
Esperanza became ill and decided to sell the property without informing the other
children of the said sale to Rodrigo Lim, only Antonio and Cristeta knew of the said sale.
ISSUE:
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.
Whether or not Deed of Absolute Sale is null and void.
RUKING:
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.
Page | 478
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.
RUKING:
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.
Page | 479
Page | 480
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.
RUKING:
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.
Page | 481
Page | 482
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.
Page | 483
Page | 484
ISSUE:
Whether or not assigning the amount of P672, 900.00 to Atty. De Guzman is
prohibited.
RULING:
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.
Page | 485
Page | 486
Page | 487
GOCHAN VS 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?
RULING:
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.
Page | 488
FRANCISCO VS 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?
RULING:
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.
Page | 489
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 sad
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.
RULING:
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.
Page | 490
MANZANILLA VS. 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.
RULING:
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 onehalf 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,
Page | 491
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.
Page | 492
Page | 493
RINGOR VS 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?
RULING:
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.
Page | 494
SALVADOR VS. 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.
Page | 495
Page | 496
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.
RULING:
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.
Page | 497
FACTS:
Petitioners Jovita Yap- Ancog and Gregorio Yap, Jr. sought for the invalidation
of the extrajudicial settlement made by their mother for the land the petitioner Jovita was
residing. Her mother set the land as a security for a loan. This action was made when
their mother planned to sell the property which was still a part of the conjugal property of
their parents.
However, Rosario Diez, their mother, contended that petitioners have waived
their rights over the lot because petitioner Jovita accepted the fact that she was renting the
lot in favor of her mother. However, Gregorio Yap, Jr. was still minor when the
extrajudicial settlement was made.
ISSUE:
Whether petitioners are entitled to the subject lot.
RULING:
With respect to petitioner Jovita Yap Ancog, she is not entitled to the lot because
she already waived her right of possession over the property when she rented the lot and
thus, secured the lot for a loan to the Development Bank of the Philippines. Furthermore,
she can not alleged that the settlement was void because she was a graduate of law and
she knew the proper procedure for the ownership of the lot.
However, Gregorio Yap, Jr. was not affected by laches and prescription of
claiming his rights over the partition of the lot because he was a minor during the creation
of the extrajudicial settlement.
Page | 498
Trusts are either express or implied. Express trusts are created by the intention of
the trustor or of the parties, while implied trusts come into being by operation of law,
either through implication of an intention to create a trust as a matter of law or through
the imposition of the trust irrespective of, and even contrary to, any such intention.
In turn, implied trusts are either resulting or constructive trusts. Resulting trusts
are based on the equitable doctrine that valuable consideration and not legal title
determines the equitable title or interest and are presumed always to have been
contemplated by the parties. They arise from the nature or circumstances of the
consideration involved in a transaction whereby one person thereby becomes invested
with legal title but is obligated in equity to hold his legal title for the benefit of another.
On the other hand, constructive trusts are created by the construction of equity in order to
satisfy the demands of justice and prevent unjust enrichment. They arise contrary to
intention against one who, by fraud, duress or abuse of confidence, obtains or holds the
legal right to property which he ought not, in equity and good conscience, to hold.
Based on Art. 1448 of the New Civil Code, there is an implied trust when
property is sold, and the legal estate is granted to one party but the price is paid by
another for the purpose of having the beneficial interest of the property. The former is the
trustee, while the latter is the beneficiary. However, if the person to whom the title is
conveyed is a child, legitimate or illegitimate, of the one paying the price of the sale, no
trust is implied by law, it being disputably presumed that there is a gift in favor of the
child.
There are recognized exceptions to the establishment of an implied resulting trust.
The first is stated in the last part of Article 1448 itself. Another exception is that in which
an actual contrary intention is proved. Also 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.
As a rule, the burden of proving the existence of a trust is on the party asserting its
existence, and such proof must be clear and satisfactorily show the existence of the trust
and its elements. While implied trusts may be proved by oral evidence, the evidence must
be trustworthy and received by the courts with extreme caution, and should not be made
to rest on loose, equivocal or indefinite declarations. Trustworthy evidence is required
because oral evidence can easily be fabricated.
In the case, petitioners' theory is that Rosendo Avelino owned the money for the
purchase of the property and he requested Celso, his son, to buy the property allegedly in
trust for the former. The fact remains, however, that title to the property was conveyed to
Celso. Accordingly, the situation is governed by or falls within the exception under the
third sentence of Article 1448. The preponderance of evidence, as found by the trial court
and affirmed by the Court of Appeals, established positive acts of Celso Avelino
indicating, without doubt, that he considered the property he purchased from the
Mendiolas as his exclusive property. He had its tax declaration transferred in his name,
caused the property surveyed for him by the Bureau of Lands, and faithfully paid the
realty taxes. Finally, he sold the property to private respondents.
2. The petitioners did not discharged their burden to prove the existence of an
implied trust. Priscila's justification for her and her sisters' failure to assert co-ownership
of the property based on the theory of implied trust is not tenable. Celso Avelino did not
have actual possession of the property because he "was away from Calbayog
continuously for more than 30 years until he died on October 31, 1987, and the the tax
declarations of the property were in Celso's name and the latter paid the realty taxes
thereon, there existed no valid and cogent reason why Priscila and her sisters did not do
anything to have their respective shares in the property conveyed to them after the death
Page | 500
of Rosendo Avelino in 1980. Neither is there any evidence that during his lifetime,
Rosendo demanded from Celso that the latter convey the land to the former, which
Rosendo could have done after Juana's death on 31 May 1965. The omission was mute
and eloquent proof of Rosendo's recognition that Celso was the real buyer of the property
in 1948 and the absolute and exclusive owner thereof.
Page | 501
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.
RULING:
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
Page | 503
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.
Page | 504
Page | 505
RULING:
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 ownerbuyer 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
Page | 506
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.
Page | 507
Page | 509
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,
Page | 510
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
Page | 511
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.
Page | 513
HEIRS OF YAP V CA
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?
RULING
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.
Page | 514
Page | 515
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?
RULING
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.
Page | 516
Page | 517
Page | 518
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
RULING:
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.
Page | 519
ISSUE:
Whether a resulting trust between the parties in the acquisition of the property has
prescribed
RULING:
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.
Page | 520