Civil Law Review II Case Updates

Submitted to:
ATTY. LILYBETH SINDAYEN-LIBIRAN
CIVIL LAW
REVIEW II
CASE UPDATES
BIASE, SHERON
DIAZ,
CATHERINE
SILVA, ANDREA
CAMACHO, KAYCEE
DINULONG,
GARRICK
PIC-IT, CHRISTIAN
CAYADAN, DEXTER
NARCIDA,
RUTHER
WACHAYNA, GIOVANNI
Page |2
CIVIL LAW II: CASE UPDATES
Table of
Contents
OBLIGATIONS........................................................................................................................ 5
SOURCES OF OBLIGATIONS.................................................................................................... 5
METROPOLITAN BANK AND TRUST COMPANY v. ROSALES....................................................5
OBLIGATION TO GIVE............................................................................................................ 6
PNB v. SPOUSES MARAON................................................................................................ 6
DELAY.................................................................................................................................. 8
PHILIPPINE CHARTER INSURANCE CORP. v. CENTRAL COLLEGES OF THE PHILIPPINES............8
ATLANTIC ERECTORS, INC. V. CA........................................................................................ 9
PASCUA v. G & G REAL TV CORPORATION.......................................................................... 10
SPOUSES BONROSTRO v. SPOUSES LUNA........................................................................... 11
DBP v. GUARIA AGRICULTURAL AND REALTY DEV'T CORP................................................11
MAYBANK PHILIPPINES, INC. v. SPOUSES TARROSA............................................................13
NEGLIGENCE...................................................................................................................... 14
PNB v. SANTOS................................................................................................................. 14
METROPOLITAN BANK AND TRUST CO. v. CENTRO DEVT CORP...........................................15
BJDC CONSTRUCTION v. LANUZO, et al............................................................................... 16
BIGNAY EXIM PHILIPPINES, INC. v. UNION BANK OF THE PHILIPPINES................................18
DBP v. GUARIA AGRICULTURAL AND REALTY DEV'T CORP................................................19
EASTERN SHIPPING LINES INC. v. BPI/MS INSURANCE CORP................................................20
FRAUD................................................................................................................................ 20
PHILIPPINE BANKING CORPORATION v. DY........................................................................ 20
FORTUITOUS EVENT............................................................................................................ 21
METRO CONCAST STEEL CORP. v. ALLIED BANK CORP........................................................21
BERNALES v. NORTHWEST AIRLINES................................................................................. 22
USURIOUS TRANSACTION.................................................................................................... 22
ANCHOR SAVINGS BANK v. PINZMAN REALTY AND DEV'T CORP..........................................22
RGM INDUSTRIES, INC. v. UNITED PACIFIC CAPITAL CORP...................................................23
DAVID v. MISAMIS OCCIDENTAL II ELECTRIC COOPERATIVE, INC........................................24
SPS. MALLARI v. PRUDENTIAL BANK................................................................................. 24
CONDITIONAL OBLIGATION................................................................................................. 25
SPOUSES BONROSTRO v. SPOUSES LUNA........................................................................... 25
LIM, et al., v. DBP.............................................................................................................. 26
INTERNATIONAL HOTEL CORPORATION v. JOAQUIN, JR.......................................................26
RECIPROCAL OBLIGATIONS.................................................................................................. 28
F.F. CRUZ & CO., INC. v. HR CONSTRUCTION CORP...............................................................28
SBMA v. CA...................................................................................................................... 29
FIL-ESTATE PROPERTIES, INC. v. SPS. RONQUILLO...............................................................29
BIASE, CAMACHO, CAYADAN, DIAZ, DINULONG, NARCIDA, PIC-IT, SILVA, WACHAYNA
Page |3
SOLIDARY OBLIGATIONS..................................................................................................... 30
PETRON CORP. v. SPS. CUDILLA......................................................................................... 30
OBLIGATION WITH A PENAL CLAUSE.................................................................................... 31
J PLUS ASIA DEVT CORP. v. UTILITY ASSURANCE CORP.......................................................31
EXTINGUISHMENT OF OBLIGATIONS..................................................................................... 32
METRO CONCAST STEEL CORP. v. ALLIED BANK CORP........................................................32
PAYMENT/PERFORMANCE.................................................................................................... 32
SPS. DELA CRUZ v. CONCEPCION....................................................................................... 32
INTERNATIONAL HOTEL CORP. v. JOAQUIN, JR....................................................................33
DATION IN PAYMENT/DACION EN PAGO................................................................................. 34
TAN SHUY v. SPS. MAULAWIN........................................................................................... 34
SPS. SERFINO v. FEBTC, INC............................................................................................... 35
TENDER OF PAYMENT AND CONSIGNATION........................................................................... 36
SPS. CACAYORIN v. ARMED FORCES AND POLICE MUTUAL BENEFIT ASSOCIATION, INC........36
SPS. BONROSTRO v. SPS. LUNA.......................................................................................... 37
COMPENSATION.................................................................................................................. 38
INSULAR INVESTMENT AND TRUST CORP. v. CAPITAL ONE EQUITIES CORP...........................38
SORIANO v. PEOPLE......................................................................................................... 39
MONDRAGON PERSONAL SALES, INC. v. SOLA, JR...............................................................40
UNION BANK OF THE PHILIPPINES v. DBP........................................................................... 41
FIRST UNITED CONSTRUCTORS CORP v. BAYANIHAN AUTOMOTIVE CORP............................41
NOVATION........................................................................................................................... 42
ACE FOODS, INC. v. MICRO PACIFIC TECHNOLOGIES CO., LTD..............................................42
RCJ BUS LINES, INC v. MASTER TOURS AND TRAVEL CORP...................................................43
STOLT-NIELSEN TRANSPORTATION GROUP, INC. v. MEDEQUILLO, JR....................................43
UNITED PULP AND PAPER CO., INC. v. ACROPOLIS CENTRAL GUARANTY CORP.....................44
MILLA v. PEOPLE.............................................................................................................. 45
HEIRS OF FRANCO v. SPS. GONZALES................................................................................ 47
PNB v. SORIANO............................................................................................................... 48
PRA v. ROMAGO, INC........................................................................................................ 49
VECTOR SHIPPING CORP. v. AMERICAN HOME ASSURANCE CO............................................50
CONTRACTS........................................................................................................................ 51
DEFINITION/CONCEPT.......................................................................................................... 51
ACE FOODS, INC. v. MICRO PACIFIC TECHNOLOGIES CO., LTD..............................................51
HUR TIN YANG v. PEOPLE.................................................................................................. 52
CRUZ v. GRUSPE.............................................................................................................. 52
STAGES OF A CONTRACT...................................................................................................... 53
HEIRS OF IGNACIO v. HOME BANKERS SAVINGS AND TRUST CO..........................................53
ROBERN DEV'T CORP. v. PEOPLE'S LANDLESS ASSOCIATION................................................54
BASIC PRINCIPLES/CHARACTERISTICS OF A CONTRACT.........................................................55
Page |4
FREEDOM/AUTONOMY TO STIPULATE................................................................................... 55
P.L. UY REALTY CORP v. ALS MANAGEMENT AND DEVELOPMENT CORP...............................55
STAR TWO v. PAPER CITY CORP. OF THE PHILIPPINES..........................................................55
GONZALO v. TARNATE, JR................................................................................................. 56
OBLIGATORY FORCE AND COMPLIANCE IN GOOD FAITH........................................................57
CONSOLIDATED INDUSTRIAL GASES, INC. v. ALABANG MEDICAL CENTER...........................57
METROPOLITAN BANK AND TRUST CO. v. ROSALES............................................................58
MENDIOLA v. COMMERZ TRADING INT'L., INC....................................................................59
RELATIVITY/PRIVITY........................................................................................................... 59
INOCENCIO v. HOSPICIO DE SAN JOSE................................................................................ 59
SPS. MAMARIL v. THE BOY SCOUT OF THE PHILIPPINES......................................................61
VICES OF CONSENT............................................................................................................. 62
FRAUD/DECEIT.................................................................................................................... 62
FONTANA RESORT AND COUNTRY CLUB, INC. v. SPS. TAN...................................................62
SPS. VILORIA v. CONTINENTAL AIRLINES, INC.................................................................... 63
TANKEH v. DBP................................................................................................................ 64
INTIMIDATION..................................................................................................................... 67
OBJECT/SUBJECT MATTER.................................................................................................... 68
LBP v. CACAYURAN.......................................................................................................... 68
CAUSE/CONSIDERATION...................................................................................................... 68
SIMULATION OF CONTRACTS............................................................................................... 69
HEIRS OF INTAC v. CA....................................................................................................... 69
FORMARAN v. ONG.......................................................................................................... 70
SPS. VILLACERAN v. DE GUZMAN...................................................................................... 71
DE LEON v. DELA LLANA.................................................................................................. 72
FORM OF CONTRACTS......................................................................................................... 72
DAVID v. MISAMIS OCCIDENTAL II ELECTRIC COOPERATIVE, INC........................................72
INTERPRETATION OF CONTRACTS........................................................................................ 73
SPS. CABAHUG v. NPC....................................................................................................... 73
CRUZ v. GRUSPE.............................................................................................................. 73
STAR TWO (SPV-AMC), INC. v. PAPER CITY CORP. OF THE PHILIPPINES..................................74
STRONGHOLD INSURANCE COMPANY, INC. v. SPS. STROEM.................................................74
RESCISSIBLE CONTRACTS.................................................................................................... 76
ADA v. BAYLON............................................................................................................... 76
ANCHOR SAVINGS BANK v. FURIGAY................................................................................. 79
VOIDABLE CONTRACTS....................................................................................................... 81
THE ROMAN CATHOLIC CHURCH v. PANTE......................................................................... 82
METROPOLITAN FABRICS, INC v. PROSPERITY CREDIT RESOURCES INC...............................83
Page |5
VOID/INTEXISTENT CONTRACT............................................................................................ 84
LBP v. CACAYURAN.......................................................................................................... 85
BEUMER v. AMORES......................................................................................................... 85
BORROMEO v. MINA......................................................................................................... 86
MANOTOK IV v. HEIRS OF BARQUE.................................................................................... 86
DPWH v. QUIWA............................................................................................................... 87
VDA. DE CABALU, et al. v. SPS TABU................................................................................... 87
ESTOPPEL........................................................................................................................... 89
CONCEPT............................................................................................................................ 89
DY v. HON. BIBAT- PALAMOS............................................................................................. 89
ESTOPPEL BY LACHES......................................................................................................... 91
SANCHEZ v. SANCHEZ...................................................................................................... 91
CITIBANK N.A. v. TANCO-GABALDON................................................................................ 92
TAN v. ANDRADE.............................................................................................................. 93
TRUSTS............................................................................................................................... 94
CONCEPT............................................................................................................................ 94
GOYANKO, JR. v. UCPB...................................................................................................... 94
IMPLIED TRUST................................................................................................................... 95
SIME DARBY PILIPINAS, INC. v. MENDOZA......................................................................... 95
IGLESIA FILIPINA INDEPENDIENTE v. HEIRS OF TAEZA........................................................96
SPS. TRINIDAD v. IMSON................................................................................................... 98
TONG, et al. v. GO TIAT KUN, et al......................................................................................... 99
SALES............................................................................................................................... 101
ELEMENTS OF SALE........................................................................................................... 101
FORM............................................................................................................................... 102
STAGES OF A CONTRACT OF SALE....................................................................................... 106
PARTIES TO A CONTRACT OF SALE...................................................................................... 109
SALE OF A CO-OWNED PROPERTY....................................................................................... 112
PREPARATORY CONTRACTS................................................................................................ 113
EARNEST MONEY.............................................................................................................. 113
CONTRACT TO SELL........................................................................................................... 115
OBLIGATIONS OF THE SELLER............................................................................................ 124
DELIVERY......................................................................................................................... 124
DELIVERY TO A CARRIER................................................................................................... 127
DOUBLE SALES................................................................................................................. 128
PURCHASER IN GOOD FAITH............................................................................................ 135
WARRANTIES................................................................................................................... 142
REMEDIES FOR BREACH OF CONTRACT OF SALE.............................................................144
RECTO LAW: SALES OF MOVABLE ON INSTALLMENTS......................................................144
LEASE............................................................................................................................... 161
Page |6
CONCEPT.......................................................................................................................... 161
RIGHTS AND OBLIGATIONS OF THE PARTIES........................................................................ 162
RIGH................................................................................................................................. 163
IMPLIED NEW LEASE......................................................................................................... 163
LIGATIONS OF THE PARTIES................................................................................................ 164
COMPROMISE.................................................................................................................... 164
CONCEPT.......................................................................................................................... 164
RESCISSION...................................................................................................................... 166
FAILURE TO COMPLY......................................................................................................... 166
LOAN................................................................................................................................ 167
CONCEPT.......................................................................................................................... 167
PENALTY AND INTEREST RATES......................................................................................... 168
GUARANTY....................................................................................................................... 176
SURETYSHIP..................................................................................................................... 177
CONCEPT.......................................................................................................................... 177
CONTINUING SURETY AGREEMENT.................................................................................... 180
OBLIGATIONS & LIABILITY OF THE SURETY........................................................................181
EFFECT OF EXTENSION TO DEBTOR.................................................................................... 183
ISSUE:............................................................................................... 208
RULING:............................................................................................ 208
QUASI-DELICTS................................................................................................................. 227
ELEMENTS AND LIABILITY................................................................................................. 227
DELA LLNA v. BIONG, G.R. No. 182356, Dec. 4, 2013, BRION J.................................................227
RUKS KONSULT AND CONSTRUCTION v. ADWORLD SIGN AND ADVERTISING CORP., G.R. No. 204866, Jan. 21, 2015,
PERLAS-BERNABE J........................................................................................................ 228
NEGLIGENCE..................................................................................................................... 229
MAKATI SHANGRI-LA HOTEL AND RESORT v. HARPER, G.R. No. 189998, Aug. 29, 2012, BERSAMIN J.
230
PHILAM INSURANCE COMPANY INC., v. COURT OF APPEALS, G.R. No. 165413, Feb. 22, 2012, SERENO J. 231
MEDICAL NEGLIGENCE...................................................................................................... 232
CRUZ v. AGAS, Jr., G.R. No. 204095, June 15, 2015, MENDOZA J...............................................232
CERENO v. COURT OF APPEALS G.R. No. 167366, Sept. 26, 2012, PEREZ J.................................234
DOCTRINE OF LAST CLEAR CHANCE................................................................................... 235
ALLIED BANKING CORP. v. BANK OF THE PHILIPPINE ISLANDS, G.R. 188363, Feb. 27, 2013, VILLARAMA, Jr. J.
.................................................................................................................................... 235
RES IPSA LOQUITOR........................................................................................................... 236
EMERGENCY RULE............................................................................................................ 239
JOINT TORTFEASOR........................................................................................................... 239
VICARIOUS LIABILITY....................................................................................................... 240
DAMAGES......................................................................................................................... 245
REQUISITES...................................................................................................................... 245
ACTUAL............................................................................................................................ 246
Page |7
LOSS OF EARNING CAPACITY............................................................................................. 248
ATTORNEYS FEES............................................................................................................. 250
COSTS............................................................................................................................... 256
INTEREST.......................................................................................................................... 257
TEMPERATE...................................................................................................................... 259
MORAL............................................................................................................................. 260
NOMINAL.......................................................................................................................... 265
EXEMPLARY..................................................................................................................... 266
LIQUIDATED...................................................................................................................... 270
OBLIGATIONS
SOURCES OF OBLIGATION
METROPOLITAN BANK AND TRUST COMPANY v

183204, January 13, 2014, DEL CASTILLO, J.
Facts: Petitioner Metropolitan Bank and Trust Compa

corporation duly organized and existing under the
Respondent Ana Grace Rosales (Rosales) is the owner of C
Services, a travel agency. Respondent Yo Yuk To is the mo
Page |8
Respondents opened a Joint Peso Account with petitioners Pritil-Tondo Branch.

of August 4, 2004, respondents Joint Peso Account showed a balance
Respondents opened a dollar account with petitioner;
of P2,515,693.52.
discovered that the serial numbers of the dollar notes depo
amount of US$11,800.00 were the same as those withdraw
Respondent Rosales accompanied her client Liu Chiu Fang, a Taiwanese National
applying for a retirees visa from the Philippine Leisure and Retirement Authority
Respondent
Rosales,
however,
(PLRA), to petitioners branch in Escolta to open a savings
account,
as required
bydenied taking part in the f
the PLRA. Since Liu Chiu Fang could speak only inwithdrawal
Mandarin, respondent Rosales
acted as an interpreter for her.
The Office of the City Prosecutor of Manila issued a

criminal
case a forJoint
lackDollar
of probable cause. Unfaze
Respondents opened with petitioners Pritil-Tondo
Branch
reconsideration.
Account with an initial deposit of US$14,000.00.
Respondents
Petitioner issued a "Hold Out" order against respondents
accounts. filed a Complaint for Breach of Obligation a
against petitioner. Respondents alleged that they attempted
their deposits but were unable to because petitioner had p
"Hold Out" status.
Petitioner filed before the Office of the Prosecutor of Manila a criminal case for
Estafa through False Pretenses, Misrepresentation, Deceit, and Use of Falsified
Documents against respondent Rosales. Petitioner accused respondent Rosales and an
Petitioner
averredand
thatfraudulent
due to the fraudulent scheme of
unidentified woman as the ones responsible for the
unauthorized
to reimburse
Liu Chiu Fang the amount of U
withdrawal of US$75,000.00 from Liu Chiu Fangs compelled
dollar account
with petitioners
criminal complaint for Estafa against respondent Rosales.
Escolta Branch.
petitioner
breached its contract with respon
It alleged that its branch in Escolta received from theIssue:
PLRAWhether
a Withdrawal
Clearance
for the dollar account of Liu Chiu Fang; that in the afternoon of the same day,
respondent Rosales went to petitioners Escolta Branch to inform its Branch Head,
Celia A. Gutierrez, that Liu Chiu Fang was going to withdraw her dollar deposits in
Ruling: YES.
cash.
does
not apply to the instant case.
Rosales accompanied an unidentified impostor of The
Liu"Hold
Chiu Out"
Fangclause
to the
bank.
Allegedly, the impostor was able to withdraw Liu Chiu Fangs dollar deposit in the
amount of US$75,000.00.
Page |9
Petitioner claims that it did not breach its contract with

Petitioners
respondents
reliance
because
on the
it has
"Hold
a Out" clause in the App
valid reason for issuing the "Hold Out" order. Petitioner
Deposit
anchors
Account
its right
is misplaced.
to withhold
respondents deposits on the Application and Agreement for Deposit Account, which
reads:
The "Hold Out" clause applies only if there is a valid and

from any of the sources of obligation enumerated in Articl
Authority to Withhold, Sell and/or Set Off:
wit: law, contracts, quasi-contracts, delict, and quasi-del
failed to show that respondents have an obligation to it und
contract, delict, or quasi-delict. And although a criminal c
against respondent Rosales, this is not enough reason for
The Bank is hereby authorized to withhold as securityOut"
for any
andasallthe
obligations
with
order
case is still
pending and no final judgm
the Bank, all monies, properties or securities of the Depositor
now
in
or
which
may
rendered against respondent Rosales. In fact, it is signific
hereafter come into the possession or under the controlpetitioner
of the Bank,
whether
left with
issued
the "Hold
Out" order, the criminal comp
the Bank for safekeeping or otherwise, or coming into
the
hands
of
the
Bank
in
any Rosales is not liable un
Thus, considering that respondent
way, for so much thereof as will be sufficient to pay any
or all obligations
incurred
by basis for petitioner to issu
of obligation,
there was
no legal
Depositor under the Account or by reason of any other transactions between the same
parties now existing or hereafter contracted, to sell in any public or private sale any of
such properties or securities of Depositor, and to apply the proceeds to the payment of
any Depositors obligations heretofore mentioned. Petitioner is guilty of breach of contract when it unjus
respondents deposit despite demand. Having breached its
petitioner is liable for damages.
xxxx
OBLIGATION TO GIVE
JOINT ACCOUNT
PNB v. SPOUSES MARAON, G.R. No. 189316, June

xxxx
Facts: The controversy at bar involves a 152-square meter

a building leased by various tenants. The subject lot
mortgaged by Spouses Rodolfo and Emilie Montealegre
The Bank may, at any time in its discretion and withPNB
or without
as a security
noticefor
to aall
loan.
of the
Depositors, assert a lien on any balance of the Account and apply all or any part
thereof against any indebtedness, matured or unmatured, that may then be owing to
the Bank by any or all of the Depositors. It is understood that if said indebtedness is
When constitutes
Spouses Montealegre
only owing from any of the Depositors, then this provision
the consent byfailed to pay the loan,
proceedings
on the mortgaged
all of the depositors to have the Account answer for
the said indebtedness
to theproperties, including the su
held onto PNB
emerged as the highest bidder. It was
extent of the equal share of the debtor in the amount credited
the Account.
Certificate of Sale was subsequently registered.
P a g e | 10
The status of PNBs lien on the subject lot has already bee
a mortgagee in good faith whose lien shall subsist and
Before the expiration of the redemption period, Spouses
filed before the
lapsedMaraon
into finality.
RTC a complaint for Annulment of Title, Reconveyance and Damages
Spouses Montealegre, PNB. It alleged that Spouses Maraon are the true registered
owners of the subject lot.
The protection afforded to PNB as a mortgagee in good
have its mortgage lien carried over and annotated on the n
to Spouses Maraon as so adjudged by the RTC. Thereaft
PNB averred that it is a mortgagee in good faith and foreclosure
for value and
that its mortgage
proceedings
in case of non-payment of the se
lien on the property was registered thus valid and binding
against
whole world.
pursue.
Thethe
principle,
however, is not the singular rul
mortgages and foreclosures attended by fraudulent transfer
.
While the trial proceedings were ongoing, Paterio Tolete (Tolete), one of the tenants
of the building erected on the subject lot deposited hisRent,
rentalaspayments
with the
Clerkthe principal. In fact, whe
an accessory
follow
of Court.
mortgaged, the mortgage shall include all natural or civ
found thereon when the secured obligation becomes due
of the Civil Code.
Issue: Whether PNB may enforce its mortgage lien against the building found on the
subject lot and the rent it yield.
Consequently, in case of non-payment of the secured de
shall cover not only the hypothecated property but all its
as well.
Ruling: NO.
Cu Unjieng e Hijos v. Mabalacat Sugar Co. A mortg

Rule: Absent an adverse claimant or any evidence
the contrary,
central to
includes
not only the land on which it is bui
ACCESSORIES AND ACCESSIONS ACCRUINGmachinery,
OR ATTACHED
TO THE
and accessories
installed at the time the mo
MORTGAGED PROPERTY ARE INCLUDED
IN
THE
MORTGAGE
well as the buildings, machinery and accessories bel
CONTRACT AND MAY THUS ALSO BE FORECLOSED
TOGETHER
WITH thereof x x x .
installed after
the constitution
THE PRINCIPAL PROPERTY IN CASE OF NON-PAYMENT OF THE DEBT
SECURED.
Spouses Paderes v. Court of Appeals. The improve

mortgagor on the subject lot are covered by the real estate
COROLLARY, ANY EVIDENCE SUFFICIENTLY
OVERTHROWING
mortgagee
bank and thus THE
included in the foreclosure pr
PRESUMPTION THAT THE MORTGAGOR OWNS
THE
MORTGAGED
latter.
PROPERTY PRECLUDES THE APPLICATION OF ARTICLE 2127.
Castro, Jr. v. CA. Article 2127 is predicated on the presu

P a g e | 11
of accessions and accessories also belongs to the mortgagor

as the
of theof the obligation, DPCC p
To guarantee
the owner
fulfillment
principal. After all, it is an indispensable requisite of aissued
valid by
realtheestate
mortgage
that Insurance Corporation (PC
Philippine
Charter
the mortgagor be the absolute owner of the encumbered property
The Phase 2 of the project encountered numerous delays.
only by
47%the
of the
work to be
All improvements subsequently introduced or owned
mortgagor
on done
the was actually finished.
encumbered property are deemed to form part of the mortgage.
Thus,only
in a ifletter
improvements are to be considered so incorporated
so dated
ownedOctober
by the29, 2003 addressed to DPC
of theofbreach
in the
contract and its plan to claim on
mortgagor is a rule that can hardly be debated since them
a contract
security,
whether,
real or personal, needs as an indispensable element thereof the ownership by the
CCP notified DPCC and PCIC that only 51% of the pro
pledgor or mortgagor of the property pledged or mortgaged
was way behind the construction schedule, prompting it t
default against DPCC. It formally requested PCIC to remit
because
PNBs mortgagors, Spouses Montealegre, are not theCCP
truenotified
owners PCIC
of thethat
subject
lot of DPCCs inability to co
it decidedrent.
to terminate its contract with the latter and to c
much less of the building which produced the disputed
its own.
proceedings on August 16, 1991 caused by PNB could
not have, thus, included
the building found on the subject lot and the rent it yields
On August 13, 2004, CCP sent a letter to PCIC of its final
mortgagee in good faith pertains to the subject lot alone because the rule that
P13,924,351.47 as indicated in the bonds.
improvements shall follow the principal in a mortgage under Article 2127 of the
Civil Code does not apply under the premises. Accordingly,
sinceCCPs
the building
was the three bonds. Thus,
PCIC denied
claims against
not foreclosed, it remains a property of Spouses Maraon;
is not
affected by
non- the Construction Industr
requestit for
arbitration
before
redemption and is excluded from any consolidation (CIAC)
of title made
by DPCC
PNB over
against
and the
PCIC. In its complaint, CC
subject lot. Thus, PNBs claim for the rent paid by Tolete
has
no
basis.
DPCC and PCIC, jointly and severally liable, against the b
PCIC claims that DPCC was already in default as early as

the ten-day reglementary period to file a claim on the
It must be remembered that there is technically no reckoned
juridical tie
created
validfiled on September 14, 20
from
such by
datea and
mortgage contract that binds PNB to the subject lot because
mortgagor
was
not the29, 2003 which is already
notifieditsthem
only on
October
true owner. But by virtue of the mortgagee in goodany
faithclaim
principle,
lawshould
allowsbe presented in writing wi
on thethe
bonds
PNB to enforce its lien. We cannot, however, extend expiration
such principle
as toorcreate
a occurrence of the defau
of thesobond
from the
juridical tie between PNB and the improvements attached
to the
subject lot despite
whichever
is earliest.
clear and undeniable evidence showing that no such juridical tie exists.
Issue: Whether DPCC was already in default as early as S
DELAY
Ruling: NO.
Art. 1169, NCC. Those obliged to deliver or to do someth

time the obligee judicially or extrajudicially demands fr
obligation.
PHILIPPINE CHARTER INSURANCE CORP. v.their
CENTRAL
COLLEGES OF
THE PHILIPPINES, G.R. No. 180631, February 22,
2012,
The
civil law concept of delay or default commences
Facts: Central Colleges of the Philippines (CCP), an educational institution,
demands, judicially or extrajudicially, the fulfillment o
contracted the services of Dynamic Planners and Construction Corporation (DPCC)
obligee. In legal parlance, demand is the assertion of a
to be its general contractor for the construction of its five (5)-storey school building.
P a g e | 12
Hence, DPCC incurred delay from the time CCP called its attention that it had
PERALTA,
breached the contract and extrajudicially demanded the
fulfillmentJ.of its commitment
Facts:
Respondent Herbal Cove Realty Corporation and p
against the bonds.
Inc. entered into a Construction Contract whereby the
It is the obligors culpable delay, not merely the time
element,
givesthe
theentire works for the imple
accomplish
andwhich
complete
obligee the right to seek the performance of the obligation
Package involving a subdivision project.
action accrued from the time that DPCC became in culpable delay as contemplated in
the surety and performance bonds. In fact, Surety Bond
PCIC-45542,
Performance
Petitioner
further agreed
to finish and complete the wor
Bond PCIC-45541 and PCIC-46172 each specifiedrespondent
how claims
should
be made
within
a period
of one hundred eighty (180)
against it:
reckoned from the date indicated in the Notice to Proceed
Surety Bond PCIC-45542
To secure the completion of the works within the time stip

pay respondent liquidated damages equivalent to one-ten
The liability of PHILIPPINE CHARTER INSURANCE CORPORATION, under this
1%) of the contract price per calendar day of delay unti
bond will expire on October 30, 2003; Furthermore, it is hereby agreed and
acceptance of the said works by respondent to a maximum
understood that PHILIPPINE CHARTER INSURANCE CORPORATION will not be
percent (10%).
liable for any claim not presented to it in writing within FIFTEEN (15) DAYS from
the expiration of this bond, and that the Obligee hereby waives its right to claim or
Petitioner was instructed to commence construction on
file any court action against the surety after the termination of FIFTEEN (15) DAYS
requested for extension of time equivalent to the number
from the time its cause of action accrues.
of the works brought about by the belated turnover of
Performance Bond PCIC-45541[47] and PCIC-46172:Additional extension was requested due to bad weathe
during the implementation of the projects, again causing e
allowed
the Facts: under this
The liability of PHILIPPINE CHARTER INSURANCE
CORPORATION,
requested
adjustments
bond will expire on October 30, 2003; Furthermore,
it is schedule
hereby agreed
and with a reminder that liq
applied
beyond
the
extended
understood that PHILIPPINE CHARTER INSURANCE CORPORATION will not periods.
be
liable for any claim not presented to it in writing within TEN (10) DAYS from the
however,
still failed
expiration of this bond or from the occurrence ofPetitioner,
the default
or failure
of theto complete and deliver th
period.waives its right to file any
Principal, whichever is the earliest, and the Obligee hereby
claims against the Surety after termination of the period of ten (10) DAYS above
Respondent
required
petitioner
mentioned after which time this bond shall definitely
terminate
and be
deemedto submit a formal written
complete the contracted works, otherwise, the contract w
absolutely cancelled.
and respondent would take over the project. Respondent i
Thus, DPCC became in default on October 29, 2003 when
CCPmanagement
informed it inhad
writing
formers
unanimously agreed to termina
of the breach of the contract agreement and demandedcontract
the fulfillment of its obligation
against the bonds. Consequently, the November 6, 2003 letter that CCP sent to PCIC
properly complied with the notice of claim requirement
set forth infiled
the said
Respondent
withbonds.
the CIAC a Request for Arbitratio
for the payment of liquidated damages, among others.

Upon notice of default of obligor DPCC, PCICs liability, as surety, was already
attached.
Issue: Whether petitioner was in default in the performan
making petitioner liable to liquidated damages.
Ruling: YES.
ATLANTIC ERECTORS, INC. V. CA, G.R. No. 170732, October 11, 2012,
P a g e | 13
Petitioners liability for liquidated damages is not be

inconsistent
temporarilywith
halted.
respondents
takeover of the project, or termination of the contract or even the eventual completion
of the project. What is decisive of such entitlement
Sometime
is the fact
in 2000,
of delay
petitioner
in thewas able to finish the con
completion of the works. As long as the contractor fails
building
to finish
and two-storey
the workskitchen
within with dining hall, albeit be
the period agreed upon by the parties without justifiable
date.reason and after the owner
makes a demand, then liability for damages as a consequence of such default
arises.
Respondent refused to settle its outstanding obligation to p
filed a Complaint for Sum of Money with Damages.
Petitioner failed to perform the contracted works within the period as originally
Issue:
Whetherbyorpetitioner
not petitioner
agreed upon. It is likewise settled that an extension was
requested
and is entitled to the payment
the contract
price.
granted by respondent. With the modification of the of
contract
period,
petitioner was
obliged to perform the works and deliver the units only until April 7, 1997. Yet it still
Ruling: YES.
reneged on its obligation.
additional
works
Petitioner never sent notice to respondent regarding a Respondents
request for extension
of time
to and change order work
construction fairly
of theentitling
subject itproject
which were not part
finish the work despite its claim of the existence of circumstances
to
Based
on testimonial
documentary evidence gathered
an extension of the contract period. Assuming that the
reasons
for valid and
extension
that
indeed exist, still, petitioner should bear the consequences
for the delay as it
During
the
course toofbethe
construction project, defen
deprived respondent of its right to determine the length of extension
given
undertake
to it and, consequently, to adjust the period to finish
the extraseveral
work additional works and change order wor
plaintiff to prioritize the change order and additional wor
construction
of the four-storey
As no extension was validly agreed upon and in view
of the established
fact that building. The access to t
meters,
hence,
plaintiff
had to
petitioner failed to complete the works and deliver the housing units within
thestop the construction of the
the materials
stipulated period, petitioners liability for liquidated damages
arose.to pass through.
Dieparine, Jr. v. Court of Appeals. "A construction co

Petitioner failed to meet its new deadline which was April 7, 1997. It even proposed
reciprocal obligations, as it imposes upon the contractor
that it be allowed to complete the works until November 15, 1997, way beyond the
structure subject of the contract, and upon the owner th
original as well as the extended contract period.
project upon its completion.
Per the CIAC findings, as of the last certified billing, petitioners percentage
Pursuant to the aforementioned contractual obligations
accomplishment was only 62.57%.
construction of the four-storey commercial building an
dining hall. Thus, this Court finds no legal basis for respon
obligation to pay the balance of the contract price due the p
PASCUA v. G & G REAL TV CORPORATION

Heirs of Ramon Gaite v. The Plaza, Inc. Under the prin
2012, PERALTA, J.
contractor
allowed to recover
Facts: An Agreement was entered into between petitioner
andis respondent
for the the reasonable value of th
order to avoid
unjust
Quantum meruit mean
construction of a four-storey commercial building andintwo-storey
kitchen
withenrichment.
dining
and labor, payment shall be made in such amount as the pl
hall.
To deny payment for a building almost completed and alr
permit unjust
enrichment
at thetoexpense of the contractor."
During the course of the construction project, respondent
required
petitioner
undertake several additional works and change order works which were not covered
Petitioner
already
completedthe
the construction of the proj
by the original agreement. Since respondent required
petitioner
to prioritize
of injustice
to allowhad
respondent
to enjoy the fruits o
change order and additional works, the construction ofheight
the four-storey
building
to
P a g e | 14
paying the contract price.

applied to sales of real property on installment since
Maceda Law.
SPOUSES BONROSTRO v. SPOUSES LUNA, G.R. No. 172346, July 24, 2013,
DEL CASTILLO, J.
There being no breach to speak of in case of non-paymen
contract to sell, as in this case, the RTCs factual finding th
Facts: Respondent Constancia Luna (Constancia), as buyer,
a Contract
to
able toentered
pay herinto
obligation
a conclusion
arrived at in conn
Sell with Bliss Development Corporation (Bliss) involving
a
house
and
lot.
Barely
a
determination of whether the non-payment of the purchas
year after, Constancia, this time as the seller, entered
another
Sella substantial breach warran
theinto
terms
of theContract
contracttowas
with petitioner Lourdes Bonrostro (Lourdes) concerning
thesignificance.
same property.
loses
The spouses Bonrostros reliance on the
misplaced. They cannot invoke their readiness and willing
on November 24, 1993 as an excuse from being made lia
said date.
Immediately after the execution of the said second contract, the spouses Bonrostro
took possession of the property. However, except for the
Lourdes failed to pay any of the stipulated subsequent amortization payments.
The spouses Bonrostro are liable for interest on the i

date of default until fully paid.
Constancia and her husband, respondent Juan Luna (spouses Luna), filed a Complaint
for Rescission of Contract and Damages against the spouses Bonrostro
DBP v. GUARIA AGRICULTURAL AND REALTY D

160758, January 15, 2014, BERSAMIN, J.
The spouses Bonrostro averred that they were willing to pay their total balance
of P630,000.00 to the spouses Luna after they soughtFacts:
from them
a 60-day
extension
Guaria
Corporation
applied for a loan from DBP
to pay the same.
of its resort complex situated in Trapiche, Oton, Iloilo
Guaria Corporation executed a promissory note and exec
over several real properties in favor of DBP as security for
Issue: Whether spouses Bonrostro are liable to pay interest despite their willingness
to pay.
Guaria Corporation executed a chattel mortgage ove
existing at the resort complex and those yet to be acquired
loan, also to secure the performance of the obligation.
Ruling: YES.
Prior to the release of the loan, DBP required Guaria C

Rule: In a contract to sell, payment of the price is aequity
positive
suspensive condition,
of P1,470,951.00
for the construction of the buildin
failure of which is not a breach of contract warranting
rescission
under
on the resort complex. Article
1191 of the Civil Code but rather just an event that prevents the supposed seller
from being bound to convey title to the supposed buyer.
P a g e | 15
The loan was released in several instalments, and pursuant

Guaria to
Corporation
the acceleration
used clause
the
written in the mortgag
proceeds to defray the cost of additional improvementsforeclose
in the resort
the mortgages.
complex.
Guaria Corporation demanded the release of the DBP's

balanceactuations
of the loan,
werebut
legally
DBPunfounded. It is true that lo
refused. Instead, DBP directly paid some suppliers ofmortgage
Guaria constituted
Corporationonover
realthe
or personal property to prot
latter's objection. DBP found upon inspection of the case
resortofproject,
the default
its developments
of the debtor. By its nature, howeve
and improvements that Guaria Corporation had not
accessory
completed
contract
the dependent
constructionon the principal obligation
works. In a letter dated February 27, 1978, and a telegram
the mortgage
dated June
contract
9, 1978,
will depend on whether or not the
thus demanded that Guaria Corporation expedite thethe
completion
principalofobligation.
the project,While
and a creditor and a debtor
warned that it would initiate foreclosure proceedings which
shouldthey
Guaria
should
Corporation
comply with
nottheir reciprocal obligation
do so.
loan the lender should perform its obligation - the releas
before it could demand that the borrower repay the loane
Guaria Corporation would not incur in delay before
reciprocal obligation.
Unsatisfied with the non-action and objection of Guaria Corporation, DBP initiated
extrajudicial foreclosure proceedings.
Considering that it had yet to release the entire proceeds

yet make an effective demand for payment upon Guaria
Guaria Corporation sued DBP to demand specific
performance
of loan.
the latter's
obligation
under the
obligations under the loan agreement, and to stop the foreclosure of the mortgages.
Development Bank of the Philippines v. Licuanan. It wo

Issue: Whether or not on Guaria Corporation is in default.
to pay had been made and was subsequently refused
considered in default, and the lender could obtain the rig
foreclose the mortgage. Hence, Guaria Corporation
without the demand.
Ruling: NO.
Assuming that DBP could already exact from the latter it

By its failure to release the proceeds of the loan in their entirety, DBP had no right yet
agreement, the letter dated February 27, 1978 that DB
to exact on Guaria Corporation the latter's compliance with its own obligation under
regarded as a demand to render Guaria Corporation in
the loan. Indeed, if a party in a reciprocal contract like a loan does not perform
contract because DBP was only thereby requesting t
its obligation, the other party cannot be obliged to perform what is expected of it
deficiency in the value of improvements."
while the other's obligation remains unfulfilled
does not incur delay.
Under the circumstances, DBP's foreclosure of the mo

mortgaged properties at its instance were premature,
Still, DBP called upon Guaria Corporation to make good on the construction works
ineffectual.
P a g e | 16
3. When the period is the controlling motive or the

the creation of the obligation; and
4. Where demand would be useless.
MAYBANK PHILIPPINES, INC. v. SPOUSES TARROSA
Note: It is not sufficient that the law or obligation fixes
BERNABE, J.
must further state expressly that after the period lapse
Facts: Respondents-spouses Oscar and Nenita Tarrosa
(Sps.it Tarrosa)
obtained
fromto pay is unnecessary in c
Thus,
is only when
demand
then PNB-Republic Bank, now petitioner Maybank circumstances,
Philippines, Inc.or(Maybank),
a such demand is made
when required,
loan
secured
by
a
Real
Estate
Mortgage.
that
the mortgagor
can be considered in default and t
right to file an action to collect the debt or foreclose the m
After paying the said loan Sps. Tarrosa obtained another loan from Maybank in the
amount However, Sps. Tarrosa failed to settle the second
loanpresent
upon maturity.
In the
case, both the CA and the RTC reckoned
cause of action to foreclose the real estate mortgage ove

Sps. Tarrosa received a Final Demand Letter from Maybank
requiring
to settle
the maturity
of thethem
second
loan on May 11, 1984. The C
their outstanding loan. They offered to pay a lesser
amount,
which
Maybank
was unnecessary for the accrual of the cause of action in
refused. Thereafter, or on June 25, 1998, Maybank
commenced
real estate
mortgage,extrajudicial
which pertinently provides:
foreclosure proceedings.
5. In the event that the Mortgagor herein should fail or ref

Sps. Tarrosa filed a complaint for declaration of ofnullity
invalidity
the
moneyand
secured
by this of
mortgage,
or any part thereof, in
foreclosure of real estate and of public auction sale and
proceedings
and
damages
with
conditions herein set forth, or should he/it fail to per
prayer for preliminary injunction. They averred, inter
alia,
thatherein,
Maybank's
right
to such case, the Mortgage
stipulated
then and
in any
foreclose had prescribed or is barred by laches.
election to foreclose this mortgage, [x x x].
Issue: Whether Maybank's right to foreclose the real estate mortgage over the subject
property was barred by prescription.
However, this provision merely articulated Maybank's
upon Sps. Tarrosa's failure or refusal to comply wit
Ruling: NO.
which is one of the rights duly accorded to mortgagees i
way did it affect the general parameters of default, par
An action to enforce a right arising from a mortgage
should
be enforced
within
demand
under
Article 1169
of the Civil Code, considerin
ten (10) years from the time the right of action accrues,
declare: (a) that demand shall not be necessary in order
defaults in the payment of his obligation to the mortgagee
in default; OR (b) that default shall commence upon m
barred by prescription and the mortgagee willmaturity
lose his
daterights
of the under
loan. the
mortgage.
However, mere delinquency in payment does not necessarily

delay
the
Hence, the mean
CA erred
in in
construing
the above provision
legal concept.
parties had dispensed with demand as a condition sine
Maybank's right to foreclose the real estate mortgage ove
Default, requisites:
thereby, mistakenly reckoned such right from the maturity
1. The obligation must be demandable and already
liquidated
11, 1984.
2. The debtor delays performance; and
3. The creditor requires the performance judicially or extrajudicially
XPNs: Demand is not necessary
1. When there is an express stipulation to that effect;
In the absence of showing that demand is unnecessary
2. Where the law so provides;
become due and demandable, Maybank's right to foreclo
P a g e | 17
accrued only after the lapse of the period indicated inThe

its final
fiduciary
demand
nature
letter
of banking
for Sps. is affirmed in Republic A
Tarrosa to pay, i.e., after the lapse of five (5) days from
Banking
receipt
Law,
of thus:
the final demand
letter dated March 4, 1998. Consequently, both theSEC.
CA 2.
andDeclaration
the RTC committed
of Policy.The State recognizes
reversible error in declaring that Maybank's right to foreclose
providing
theanreal
environment
estate mortgage
conducive to the sustained de
had already prescribed.
economy and the fiduciary performance. In furtheranc
promote and maintain a stable and efficient banking an
globally competitive, dynamic and responsive to the
economy.
NEGLIGENCE Consolidated Bank and Trust Corporation v. Court o
relationship means that the banks obligation to observe
and performance is deemed written into every deposit a
and its depositor.
Petitioners PNB and Aguilars negligence is based on t
PNB v. SANTOS, G.R. No. 208293, December 10, 2014,
diligence required of banks when they accepted the fra
Manimbo.
Facts: Respondents are children of Angel C. Santos who
died on Petitioners
March 21, PNB and Aguilar disregarded their
release of the deposit to persons claiming to be heirs of
They discovered that their father maintained a premium
accounttowith
Angel C. savings
Santos deposit
Manimbo without having bee
Philippine National Bank (PNB), amounted to
certificate of payment of, or exception from, estate tax.
would discover that their father also had a time depositPetitioners
of 1,000,000.00
withAguilars
PNB. negligence is also clear w
PNB and
Respondents went to PNB to withdraw their fathers
LinaofB.theAguilar,
fordeposit.
the release
deposit the
to Manimbo: (a) a mere pho
Branch Manager required them to submit requirements
death certificate; (b) the falsified affidavit of self-adjudic
When respondents had already obtained the necessary
documents,
theyexecuted
tried toby Reyme L. Santos; and
attorney
purportedly
withdraw the deposit. However, Aguilar informed them
that the deposit had already
deposit.
been released to a certain Bernardito Manimbo (Manimbo)
on April
1, 1997.
Petitioner
Aguilar
was aware that there were other claim
Respondents questioned the release of the deposit amount
to Respondents
Manimbo who
had
no
deposit.
had
already
communicated with p
authority from them to withdraw their fathers deposit
and C.
who
failedaccount
to present
to Manimbo appeared.
Angel
Santos
before
PNB all the requirements for such withdrawal.
Petitioner Aguilar even gave respondents the updated pas
Issue: Whether Philippine National Bank was negligent
in releasing
the deposit
account.
Yet, petitioners
PNB to
and Aguilar did not think tw
Bernardito Manimbo.
deposit to Manimbo. They did not doubt why no origina
Ruling: YES.
submitted. They did not doubt why Reyme L. Santos wo
Similar to common carriers, banking is a business self-adjudication
that is impressed
withhe,
public
when
together with others, had prev
interest. It affects economies and plays a significant role
in businesses
anddeposit.
commerce.
of Angel
C. Santos
They also relied on the certifi
The public reposes its faith and confidence upon banks,
such thatrepresentation
even the humble
Manimbos
that the passbook was lost w
wage-earner has not hesitated to entrust his lifes savings
to the bankpresented
of his choice,
been previously
to Aguilar for updating.
knowing that they will be safe in its custody and will
eventhe
earn
some
interest PNBs
for counsel only reasoned
During
trial,
petitioner
him. This is why we have recognized the fiduciary death
naturecertificate
of the banks
functions,
was also
submitted with other documents
and attached a special standard of diligence for the exercise
of their
functions.
conclusion
than
that Angel C. Santos was already dead
Simex International (Manila), Inc. v. Court of Appeals
Aguilars reliance special power of attorney allegedly exe
expects the bank to treat his account with the utmostAguilar
fidelity,admitted
whether that
such she
account
did not contact Reyme L. S
consists only of a few hundred pesos or of millions. . .reason
. The point
is that
was that
do as
so.a business
affected with public interest and because of the nature
of its
the bank
is
Given
thefunctions,
circumstances,
diligence
of a good father
under obligation to treat the accounts of its depositors
with meticulous
required
petitionerscare,
PNBalways
and Aguilar to verify. A pruden
having in mind the fiduciary nature of their relationship.89
(Emphasis
supplied)
why Reyme L. Santos would issue an affidavit of self-ad
P a g e | 18
also claimed to be heirs of Angel C. Santos.

As these loans were not satisfied despite demand, petitio
Contrary to petitioner Aguilars reasoning, the fact enforced
that Reyme
the L.
conditions
Santos was
thereof
not and initiated foreclosure
petitioner PNBs client should have moved her to takedocuments
measures toinensure
the records
the veracity
evidencing the amendment of
of Manimbos documents and representations. This is
these
because
additional
she had
obligations.
no previous
knowledge of Reyme L. Santos his representatives, and his signature
Respondents herein filed a Complaint for the annulmen
temporary restraining order (TRO) and preliminary injun
Eng Uy, Alexander V. Go, Ramon V. Go, Maria Jacinta Go
METROPOLITAN BANK AND TRUST CO. v. CENTRO
CORP.was that since the mortgaged p
The boneDEVT
of contention
No. 180974, June 13, 2012, SERENO, J.
substantially all of the corporate assets, the amendment of
Facts: In a special meeting of the board of directors of respondent Centro
requirements of Section 40 of the Corporation Cod
Development Corporation, its president Go Eng Uy was authorized to mortgage its
requirements. Under this provision, in order for a corp
properties and assets to secure a medium-term loan.
substantially all of its properties and assets, it should be a
stockholders
representing
at least 2/3 of the outstanding
Respondent Centro, represented by Go Eng Uy, executed
a Mortgage
Trust Indenture
heldUnder
for that
Furthermore, there must be a writ
(MTI) with the Bank of the Philippines Islands (BPI).
thepurpose.
MTI, respondent
action
of and
the time
place of the meeting. Thus
Centro expressed its desire to obtain from time to
time and
loans
other and
credit
of Go
Eng Uy To
that he was authorized by th
accommodations from certain creditors for corporate representation
and other business
purposes.
stockholders
of Centro
was false.
secure these obligations from different creditors, respondent
Centro
constituted
a
continuing mortgage on all or substantially all of its properties and assets enumerated
Issue: Whether
petitioner
negligent or failed to exerci
above unto and in favor of BPI, the trustee. Should respondent
Centro
or any was
of its
affiliates fail to pay their obligations when due, the trustee shall cause the foreclosure
Ruling: YES.
of the mortgaged property.
No. 8971,
or the General Banking Law of
Meanwhile, respondent Centro, represented by Go Republic
Eng Uy, Act
approached
petitioner
roleand
of banks
in providing
environment conducive to th
Metropolitan Bank and Trust Company (Metrobank)
proposed
that the an
latter
the national
economy
and the fiduciary nature of bank
assume the role of successor-trustee of the existing MTI.
After petitioner
Metrobank
banks Centro
to haveallegedly
high standards
of integrity and performanc
agreed to the proposal, the board of directors of respondent
resolved
to constitute petitioner as successor-trustee of BPI. banking requires .banks to assume a degree of diligence
father of a family
Petitioner and respondent Centro executed the assailed MTI amending the previous
In the case
at bar, petitioner itself was negligent in the con
agreements by appointing the former as the successor-trustee
of BPI.
extended unsecured loans to the debtors. Worse, it was in s
the Co
trustee
of the MTI.
was not able to protect the inte
Respondents herein, Chongking Kehyeng, Manuel
Kehyeng
and ItQuirino
even
instrumental
in violating
Kehyeng, allegedly discovered that the properties of
respondent
Centro
had beenthe terms of the MTI, to t
thereto. Thus,
petitioner
has only itself to blame for b
mortgaged, and that the MTI that had been executed appointing
petitioner
as trustee.
recourse against petitioner under the assailed MTI.
The Kehyengs allegedly questioned the mortgage of the properties through letters
addressed to Go Eng Uy and Jacinta Go. They alleged that they were not aware of
any board or stockholders meeting when petitioner was appointed as successor-trustee
of BPI in the MTI.
BJDC CONSTRUCTION v. LANUZO, et al., G.R. No.
BERSAMIN, J.
Meanwhile, subsequent loans were obtained from petitioner
Facts:Metrobank.
Nena E. Lanuzo filed a complaint for damages a
The company was the contractor of the reblocking pro
P a g e | 19
portion of one lane of the national highway at San Agustin,

immediate
Pili, Camarines
and proximate
Sur. cause of the injury.
Nena alleged that she was the surviving spouse of the Proximate
late Balbinocause
Los Baos
is thatLanuzo
cause, which, in natural and con
who figured in the accident that transpired at the site of
bythe
anyreblocking
efficient intervening
work at about
cause, produces the injury an
6:30 p.m. Allegedly, Balbinos Honda motorcycle would
sideswiped
not have
the occurred.
road barricade
placed by the company in the right lane portion of the road, causing him to lose
control of his motorcycle and to crash on the newly Picart
cemented
v. Smith.
road, resulting
The test inbyhiswhich to determine the ex
instant death. She said that the companys failure to place
particular
illuminated
case may
warning
be stated
signsas follows: Did the defen
on the site of the project, especially during night time,negligent
was the proximate
act use that
cause
reasonable
of the
care and caution wh
death of Balbino.
person would have used in the same situation? If not, the
XXX The existence of negligence in a given case is not
The company denied Nenas allegations of negligence,
theinsisting
personal that
judgment
it hadofinstalled
the actor in the situation before h
warning signs and lights along the highway and on the
would
barricades
be reckless,
of theblameworthy,
project and or negligent in the man o
that at the time of the incident, the lights were working
prudence
and switched
and determines
on. It alleged
liability by that.
that its project was duly inspected by the Department of Public Works and Highways
(DPWH), the Office of the Mayor of Pili, and the PiliThe
Municipal
questionPolice
as to Station;
what would
and constitute the conduct of
that it was found to have satisfactorily taken measures
situation
to must
ensureof the
course
safety
be of
always determined in the l
motorists.
and in view of the facts involved in the particular case.
The company further alleged that since the start of Reasonable

the project, men
it installed
govern their
several
conduct by the circumstance
warning signs.
known to them. They are not, and are not supposed to be
Hence they can be expected to take care only when there
The company insisted that the death of Balbino was an
to accident
suggestbrought
or warn
about
ofbydanger.
his
Could a prudent m
own negligence, as confirmed by the police investigation
consideration,
report that
foresee
stated,harm
among
as a result of the course actu
others, that Balbino was not wearing any helmet the
at that
dutytime,
of theand
actor
thetoaccident
take precautions to guard again
occurred while Balbino was overtaking another motorcycle;
foresight
andofthat
harm,
the followed
police report
by the ignoring of the sugges
also stated that the road sign/barricade installed on theisroad
always
had necessary
a light. before negligence can be held to exis
Issue: Whose negligence was the proximate cause of the

Stated
death
in of
these
Balbino?
terms, the proper criterion for determining
in a given case is this: Conduct is said to be negligent w
Ruling: The negligence of the deceased.
position of the tortfeasor would have foreseen that an
was sufficiently probable to warrant his foregoing the co
Layugan v. Intermediate Appellate Court. Negligence
its consequences.
something which a reasonable man, guided by those considerations which ordinarily
regulate the conduct of human affairs, would do, or the
Thedoing
doctrine
of something
of res ipsa which
loquitura had no application here.
prudent and reasonable man would not do.
Tan v. JAM Transit, Inc. Res ipsa loquitur is a Latin phr
Judge Cooley Definition. The failure to observe for the
thing
protection
or the transaction
of the interests
speaksoffor itself. It is a maxim for
another person, that degree of care, precaution,
occurrence
and vigilance
of an injury,
which
taken
thewith the surrounding circ
circumstances justly demand, whereby such other person
inference
suffers or
injury.
raise a presumption of negligence, or ma
facie case, and present a question of fact for def
In order that a party may be held liable for damages for
explanation.
any injuryWhere
broughttheabout
thingbythat caused the injury com
the negligence of another, the claimant must proveunder
that the
the management
negligence was
of the
the defendant or his servants
P a g e | 20
ordinary course of things, would not happen if those who

Philippines
had management
(Union Bank)
or control
real property which was reg
used proper care, it affords reasonable evidence
Rosarios name. The property was foreclosed and sold
reasonable and logical explanation by defendant After the redemption period expired, the bank consolidate
was caused by the defendants want of care. This rule
a TCT
is grounded
was issuedoninthe
its name.
superior
logic of ordinary human experience, and it is on the basis of such experience or
common knowledge that negligence may be deduced from
Rosario
thefiled
mereagainst
occurrence
Alfonso
of the
and Union Bank, a case for
accident itself. Hence, the rule is applied in conjunction
claiming with
that the
Alfonso mortgaged the property witho
common knowledge.
reconveyance.
Reyes v. Sisters of Mercy Hospital. Res ipsa loquitur

Bignay
is not
ExIm
a rigid
Philippines,
or ordinary
Inc. (Bignay), through its Pr
doctrine to be perfunctorily used but a rule to be cautiously
(Siy), offered
applied,todepending
purchase the
upon
property.
the circumstances of each case.
A Deed of Absolute Sale6 was executed by and betwee
Negligence cannot be fairly ascribed to the company considering
whereby thethat
property
it has was
shown
conveyed
its
to Bignay for P4 milli
installation of the necessary warning signs and lights in the project site.
context, the fatal accident was not caused by any
Oneinstrumentality
of the terms of the
within
deed the
of sale is quoted below:
exclusive control of the company. In contrast, Balbino had the exclusive control of
how he operated and managed his motorcycle. The Section
records disclose
1. The that
VENDEE
he himself
hereby recognizes that th
did not take the necessary precautions. Balbino overtook
improvements
another motorcycle
thereon is
rider
acquired
at a through foreclosure pro
fast speed, and in the process could not avoid hittingthe
a barricade
Parcel/s of
at Land
the site,
with
causing
improvement[s] thereon in its p
him to be thrown off his motorcycle onto the newly cemented
The VENDOR
road. therefore does not make any x x x repres
respect to the Parcel/s of Land but that it will defend its ti
Moreover, by the time of the accident, the project hadwith
beenimprovement[s]
going on for more
thereon
than aagainst the claims of any
month and was already in the completion stage. Balbino, who had passed there on a
mortgaged
theworked
property
daily basis in going to and from his residence and the Bignay
school where
he then
as to Union Bank, presumab
the latter.
Decision
the civil case was rendered
the principal, was thus very familiar with the risks atfrom
the project
site.A Nor
couldinthe
became
and executory
thereby evicting Bi
Lanuzo heirs justly posit that the illumination was eventually
not adequate,
for final
it cannot
be
denied that Balbinos motorcycle was equipped with headlights that would have
Issue:
Whether
or not That
Unionthebank failed to exercise the
enabled him at dusk or night time to see the condition
of the
road ahead.
accident still occurred surely indicated that he himselfhim.
did not exercise the degree of
care expected of him as a prudent motorist.
Ruling: YES.
The cause of death of Balbino was the fatal depressed fracture at the back of his head,
Bignay
purchased
the road
property
an injury opined to be attributable to his head landing
on the
cemented
afterwithout knowledge of the
Bank
is therefore
answerable
being thrown off his motorcycle. Considering that it was
shown
that Balbino
was notfor its express undertaking
defend
its title to
wearing any protective head gear or helmet at the time
of the accident,
hethe
wasParcel/s
guilty of Land with improve
claimshead
of any
person
whatsoever.
By this warranty, U
of negligence in that respect. Had he worn the protective
gear
or helmet,
his
Bignay that it had title to the property, and by assumin
untimely death would not have occurred.
such title, it promised to do so at least in good faith and
if not to the best of its abilities.
BIGNAY EXIM PHILIPPINES, INC. v. Union

UNION
OF negligent
THE in the handling and pro
BankBANK
was grossly
PHILIPPINES, G.R. No. 171590, February 12, 2014,
Its appeal was dismissed by the CA for failure to file the
Facts: Alfonso de Leon (Alfonso) mortgaged in favor of Union Bank of the
P a g e | 21
Next, the ensuing Petition for Review on Certiorari filed with this Court was likewise
warned that it would initiate foreclosure proceedings shou
denied due to late filing and payment of legal fees
do so.
annulment of the judgment, yet again, the CA dismissed
the petition for its failure to
comply with a Supreme Court Circular. As a result, the Decision became final and
executory, and Bignay was evicted from the property
handling of the case is far from coincidental; it is decidedly glaring, and amounts to
Unsatisfied
with the non-action
bad faith. }In culpa contractual or breach of contract,
gross negligence
of a party and objection of Guaria
foreclosure
proceedings.
amounting to bad faith is a ground for the recovery of extrajudicial
damages by the
injured party.
Guaria Corporation sued DBP to demand specific p

obligations
the loan agreement, and to stop the forec
DBP v. GUARIA AGRICULTURAL AND REALTY
DEV'Tunder
CORP.
160758, January 15, 2014, BERSAMIN, J.
Facts: Guaria Corporation applied for a loan from DBP to finance the development
Issue: The
Whether
not approved.
DBP was negligent in its actuations.
of its resort complex situated in Trapiche, Oton, Iloilo.
loan orwas
Guaria Corporation executed a promissory note and executed a real estate mortgage
over several real properties in favor of DBP as security for the repayment of the loan.
Ruling: YES.
Guaria Corporation executed a chattel mortgage over the personal properties

existing at the resort complex and those yet to be acquired out of the proceeds of the
DBP's foreclosure of the mortgage and the sale of the m
loan, also to secure the performance of the obligation.
instance were premature, and, therefore, void and ineffectu
Being a banking institution, DBP owed it to Guaria C

highest
degree of
diligence,
as well as to observe the high
Prior to the release of the loan, DBP required Guaria
Corporation
to put
up a cash
performance
in all
its transactions because its business
equity of P1,470,951.00 for the construction of the buildings
and other
improvements
interest. The high standards were also necessary to ensu
on the resort complex.
banking system.
Philippine National Bank v. Pike. "The stability of ban

The loan was released in several instalments, and confidence
Guaria Corporation
usedin the
of the people
the honesty and efficiency
proceeds to defray the cost of additional improvementstoinact
thewith
resortgreat
complex.
care in applying the stipulations of it
Corporation, lest it erodes such public confidence. Yet,
exercise the highest degree of diligence by prematurely
and unwarrantedly causing the foreclosure sale of the m
Guaria Corporation demanded the release of the Guaria
balance of
the loan, not
but being
DBP yet in default.
Corporation
refused. Instead, DBP directly paid some suppliers of Guaria Corporation over the
latter's objection. DBP found upon inspection of the resort project, its developments
and improvements that Guaria Corporation had not completed the construction
works. In a letter dated February 27, 1978, and a telegram dated June 9, 1978,
LINES
thus demanded that Guaria Corporation expedite theEASTERN
completionSHIPPING
of the project,
and INC. v. BPI/MS INSUR
P a g e | 22
exercised extraordinary diligence in transporting the

193986, January 15, 2014, VILLARAMA, JR., J. responsibility for any loss or damage, therefore, they have
Facts: On three occasions, Sumitomo Corporation (Sumitomo)
shipped
MV of diligence. In this case,
they observed
suchthrough
high level
Eastern Challenger V-9-S, a vessel owned by petitioner
Eastern
Shipping Lines, Inc.
such
burden.
(petitioner), various steel sheets in coil from Yokohama, Japan for delivery in favor of
the consignee Calamba Steel Center Inc. (Calamba Steel).
were insured against all risk by Sumitomo with respondent Mitsui Sumitomo
FRAUD
Insurance Co., Ltd. (Mitsui).
In all instances, when the shipments arrived at the port of Manila and upon unloading
from the vessel, several coils were observed to be in bad condition. The cargoes were
then turned over to Asian Terminals, Inc. (ATI) for stevedoring, storage and
PHILIPPINE BANKING CORPORATION v. DY, G.R
safekeeping pending Calamba Steels withdrawal of the goods. When ATI delivered
14, 2012, PERLAS-BERNABE, J.
the cargoes to Calamba Steel, the latter rejected the damaged portion, for being unfit
Facts: Cipriana Gelgado was the registered owner of a p
for its intended purpose.
husband, respondent Jose Delgado, entered into an agree
Tan forthe
thelatters
sale ofsettling
the saidagent,
property.
Calamba Steel filed an insurance claim with Mitsui through
respondent BPI/MS Insurance Corporation (BPI/MS), and the former was paid the
After
paying
the total
sumbyofall
P147,000.00 and being the
sums of US$7,677.12, US$14,782.05 and US$7,751.15
for the
damage
suffered
the buyer
demanded the
execution of the deed, which w
three shipments or for the total amount of US$30,210.32.
Correlatively,
as insurer
of the
of the property to the responden
and subrogee of Calamba Steel, Mitsui and BPI/MS buyer
filed alearned
Complaint
forsale
Damages
Dy and its subsequent mortgage to petitioner Philipp
against petitioner and ATI.
prompting the filing of the Complaint for annulment of
performance
reconveyance with damages against
Issue: Whether or not petitioner is negligent, thus making
him liableand/or
for damages.
Philbank.
Ruling: YES.
Philbank filed its Answer asserting that it is an innocent m

notice
of the defect
in theremain
title of the Dys.
In maritime law jurisprudence, cargoes while being
unloaded,
generally
under the custody of the carrier. The goods were damaged even before they were
Issue: Whether
or not Philbank
turned over to ATI. Such damage was even compounded
by the negligent
acts ofis a mortgagee in good fait
petitioner and ATI which both mishandled the goods during the discharging
Ruling: YES.
operations. Thus, it bears stressing unto petitioner that
nature of their business and for reasons of public policy, are bound to observe
mortgage rights
over the subject properties shal
extraordinary diligence in the vigilance over thePhilbank's
goods transported
by them
settled1734
that a simulated deed of sale is null and void
Subject to certain exceptions enumerated under Article
convey any
right that could
ripen into a valid title, it ha
common carriers are responsible for the loss, destruction,
or deterioration
of the
reasons of public policy, the subsequent nullification
goods. The extraordinary responsibility of the commonfor
carrier
to annul
thecarrier
contractual right which may
goods are unconditionally placed in the possession aof,ground
and received
by the
purchaser,
mortgagee or by
other
for transportation until the same are delivered, actually
or constructively,
thetransferee who acted in go
carrier to the consignee, or to the person who has a right to receive them.
While Philbank failed to exercise greater care in conducti
the properties offered for mortgage, its omission did not p
Owing to this high degree of diligence required of them,
parties. In particular, the buyer did not pursue her cause a
general rule, are presumed to have been at fault or negligent if the goods they
the property. On the other hand, Sps. Delgado were part
transported deteriorated or got lost or destroyed. That is, unless they prove that they
P a g e | 23
favor of the Dys which was intended to mislead Philbank

despite demand.
into granting
Allied the
Bankloan
filed a complaint for collectio
application. Thus, no amount of diligence in the conduct of the ocular inspection
could have led to the discovery of the complicity between
To paythetheir
ostensible
obligation,
mortgagors
petitioners\ offered the equipme
(the Dys) and the true owners (Sps. Delgado). In fine,were
Philbank
no takers,
can hardly
the equipment
be deemedwas reduced into ferro scr
negligent under the premises since the ultimate cause
years.
of the mortgagors' (the Dys')
defective title was the simulated sale to which Sps. Delgado were privies.
Peakstar Oil Corporation (Peakstar) expressed interest i
Without diminishing the time-honored principle thatDuring
nothingtheshort
negotiations
of extraordinary
with Peakstar, petitioners claimed
diligence is required of banks whose business is impressed
Saw), a member
with public
of Allied
interest,
Banks legal department, a
Philbank's inconsequential oversight should not and
Eventually,
cannot serve
with the
as aalleged
bastionconformity of Allied Ba
for fraud and deceit.
Memorandum of Agreement (MoA) was drawn between M
Peakstar obligated itself to purchase the scrap metal
Fraud. Comprises "anything calculated to deceive, including all acts, omissions,
and concealment involving a breach of legal dutyUnfortunately,
or equitablePeakstar
duty, trust,
reneged
or on all its obligations und
confidence justly reposed, resulting in damage to another,
petitioners
or asseverated
by which anthat
undue
their failure to pay their outs
and unconscientious advantage is taken of another.Allied Bank must be considered as force majeure.
In this light, the Dys' and Sps. Delgado's deliberate simulation

Issue: Whether
of the sale
petitioners
intendedfailure
to to pay their outstandin
obtain loan proceeds from and to prejudice PhilbankBank
clearly
mustconstitutes
be considered
fraudulent
as force majeure.
conduct. As such, Sps. Delgado cannot now be allowed to deny the validity of the
mortgage executed by the Dys in favor of Philbank
Ruling:
as to NO.
hold otherwise would
effectively sanction their blatant bad faith to Philbank's detriment.
Peakstars breach of its obligations to Metro Concast arisin
Accordingly, in the interest of public policy, fair dealing,
classified
goodasfaith
a fortuitous
and justice,
eventtheunder jurisprudential formu
Court accords Philbank the rights of a mortgagee in good faith whose lien to the
securities posted must be respected and protected. In Sicam
this regard,
v. Jorge.
Philbank
Fortuitous
is entitledevents are extraordinary
to have its mortgage carried over or annotated on theavoidable.
titles of Cipriana
It is therefore,
Delgadonot
over
enough that the event should
the said properties.
anticipated, as is commonly believed but it must be one
avoid. The mere difficulty to foresee the happening is n
the same.
FORTUITOUS EVENT
Elements:
(a) The cause of the unforeseen and unexpected occurrenc

(b) The failure of the debtor to comply with obligation
human
will;
METRO CONCAST STEEL CORP. v. ALLIED BANK
CORP.
177921, December 4, 2013, PERLAS-BERNABE, J.(c) It must be impossible to foresee the event that constitu
can be Concast
foreseen,obtained
it must be
impossible to avoid;
Facts: On various dates and for different amounts, Metro
several
The occurrence
must benote
such as to render it impossib
loans from Allied Bank. These loan transactions were(d)
covered
by a promissory
obligations in a normal manner; and
and separate letters of credit/trust receipts.
(e) the obligor must be free from any participation in th
or loss.Guaranty/Comprehensive
By way of security, petitioner executed several Continuing
Surety Agreements in favor of Allied Bank. Petitioners defaulted for failure to pay
P a g e | 24
While it may be argued that Peakstars breach of the MoA was unforseenUSURIOUS
by
TRANSACTION
petitioners, the same us clearly not "impossible" to foresee or even an event which is
independent of human will." Neither has it been shown that said occurrence rendered
it impossible for petitioners to pay their loan obligations to Allied Bank and thus,
negates the formers force majeure theory altogether.
ANCHOR SAVINGS BANK v. PINZMAN REALTY A
No. 192304, August 13, 2014, VILLARAMA, JR., J.
The performance or breach of the MoA bears no relation to the performance or breach
Facts: The private respondents obtained a loan from the
of the subject loan transactions, they being separate and distinct sources of
P3,000,000 secured by a real estate mortgage over parcels
obligations. The fact of the matter is that petitioners loan obligations to Allied Bank
Mafialac executed a Promissory Note and Disclosure
remain subsisting for the basic reason that the former has not been able to prove that
petitioner in the total amount of P3,308,447.74 which
the same had already been paid or, in any way, extinguished. In this regard,
payment for three months interest.
petitioners liability must perforce stand.
A monthly 5% late payment charge, 25% attorneys

damages in case of unpaid installmentswere also impo
respondent Maalac.
BERNALES v. NORTHWEST AIRLINES, G.R. No. 182395, October 05, 2015,
Subsequently, the mortgaged properties were extrajud
BRION, J.
Facts: Under the carriage contract, NWA had the obligation
respondents
to transport
filed the
a Complaint
petitioner for the Annulment of E
from Narita International Airport to Honolulu, Hawaii,
Mortgaged
on 1 October
Properties,
2002 Auction
at 8:40 Sale, Certificate ofS ale
p.m. NWA failed to perform this duty because a petitioner,
strong typhoon
alleging
hitthat
Japan
the amount
that
demanded in the Notic
evening, forcing widespread flight cancellations. Nevertheless,
exorbitantNWA
and excessive.
attempted to fly
the petitioner to Honolulu on a later flight after the typhoon passed. This attempt
failed because NWA was prevented by the mandatoryIssue:
airportWhether
curfew. the
NWA
imposition
was onlyof usurious interest rates o
able to fulfill its obligation at 3:35 p.m. the following by
daya real estate mortgage will result in the invalidity of
sale of the mortgage.
The primary cause of NWA's delay in the fulfillment of its obligation was the
unusually strong typhoon that struck Japan that evening.
Ruling:
We take
YES.
notice that this was
Typhoon Higos, one of the most powerful typhoons to hit Japan as of that date.
Typhoon Higos resulted in the cancellation of more than
A foreclosure
200 flights.sale arising from a usurious mortgage canno
Issue: Whether the real and proximate cause of NWA's

Heirs breach
of Zoilo
of Espiritu
contract v.was
Sps.a Landrito. Castro v. Tan
fortuitous event.
foreclosure sale where the amount declared as mortga
excessive, unreasonable, and unconscionable interest char
Ruling: YES.
not given an opportunity to settle their debt, at the corre
iniquitous interest imposed, no foreclosure proceedin
Bad faith or ill motives cannot be attributed to NWA
judgment
for cancelling
ordering
Flight
a foreclosure
No. 10. sale is conditioned upo
Pushing through would have recklessly endangered amount
the lives of
of the
the unpaid
passengers
obligation
and
and the failure of th
the crew. The arrival of Typhoon Higos was an extraordinary
amount.
and unavoidable
event. Its occurrence made it impossible for NWA to bring the petitioner to
Honolulu in time for his commitments. We cannot The
holdunlawful
the respondent
interestliable
charge
forwhich
a
led to the demand for
breach of contract resulting from a fortuitous event. the Notice of Extrajudicial Sale resulted in the inv
foreclosure sale held on June 1, 1999. The private respon
pay an inflated or overstated mortgage indebtedness on ac
P a g e | 25
charges without offending the basic tenets of due process

already
and equity.
received P7,504,522.27 in penalty charges, and
respondent was a short-term credit facility.
RGM INDUSTRIES, INC. v. UNITED PACIFIC CAPITAL CORP.

194781, June 27, 2012, REYES, J.
DAVIDcredit
v. MISAMIS
II ELECTRIC CO
Facts: Respondent granted a thirty million peso short-term
facility inOCCIDENTAL
favor of
G.R. No. notes
194785,
the petitioner. Petitioner failed to satisfy the said promissory
as July
they 11,
fell2012,
due MENDOZA, J.
Facts:
Tothereby
solve its
problem
and the loan had to be assumed in full by the respondent
which
stepped
into of power shortage affect
coverage, MOELCI expressed its intention to purchase a 1
the shoes of the individual funders.
from Virgilio S. David. For this reason, its General Man
Petitioner issued in favor of the respondent a consolidated
promissory
in David
the in the latters office in
(Engr. Rada),
went tonote
meet
principal amount of P27,852,075.98 for a term of fourteen
(14) days
maturing
on
to supply
the and
power
transformer
provided that MOEL
April 28, 1998. The stipulated interest on the consolidated
promissory
note
was
32%
resolution because the item would still have to be imported
per annum. In case of default, a penalty charge was imposed in an amount equivalent
to 8% per month of the outstanding amount due and The
unpaid
computed
from
thetransformer
date
purchase
of the
said
was to be finance
of default.
National Electrification Administration (NEA). As there w
the loan application, David was requested to deliver th
The petitioner failed to satisfy the consolidated promissory
note, thethe
principal
even without
requiredbalance
down payment.
of which as of April 28, 1998 was P27,668,167.87.
David granted the request provided that MOELCI woul

The respondent thus sent demand letters to the petitioner but the latter failed to pay
annum. MOELCI acquiesced to the condition. Subsequen
and instead asked for restructuring of the loan. The respondent declined the request
payment.
and filed a complaint for collection of sum of money against the petitioner.
Issue:
Whether
or not the interest rate imposed by David
Issue: Whether the stipulated interest is unconscionable
and must
be tempered.
be tempered.
Ruling: YES.
Ruling: YES.
Stipulated interest rates are illegal if they are unconscionable and
to TEMPER interest rates when necessary. In exercising
thisisvested
powerthat
to parties to a loan agreem
While there
no question
determine what is iniquitous and unconscionable, stipulate
the Courtonmust
considerrate
the in view of the Central
any interest
circumstances of each case. What may be iniquitous
andwhich
unconscionable
in one
1982
SUSPENDED
the Usury Law ceiling on in
case, may be just in another.
1983, it is also worth stressing that interest rates when
still be reduced to a reasonable and fair level. According
In DBP v. Court of Appeals, the interest rate imposed24%
was reduced
to 10%
per annum
per annum
stipulated
in the sales invoice should be re
based on the regular payments made by the borrower. Evidently, such fact is wanting
in the case at bar, hence, the petitioner cannot demand for a similar interest rate.
The circumstances attendant herein are similar to those in

Corp. of the Philippines v. Roblett Industrial Construction
Corp.
SPS. MALLARI
v. PRUDENTIAL BANK, G.R. No. 19
levied the legal interest rate of 12% per annum.
PERALTA, J.
Facts: Petitioner Florentino T. Mallari (Florentino)
However, pursuant to Bank of the Philippine Islands,
Inc. v. Yu
Prudential
Bank a loan in the amount of P300,000.00 as
proper to further reduce the penalty charge decreed by
the
CA
from
per monthnote,
to the loan was subject to
Note. Under the2%
promissory
1% per month or 12% per annum in view of the following factors: (1) respondent has
P a g e | 26
annum (p.a.), attorney's fees equivalent to 15% of the

partakes
total amount
of the nature
due but
ofnot
liquidated
less
damages under Art. 2
than P200.00 and, in case of default, a penalty and collection
and is separate
charges and
of 12%
distinct
p.a. offrom interest payment. A
the total amount due.
clause, it is expressly recognized by law. It is an accesso
greater liability on the part of an obligor in case of bre
Issue: Whether the 23% p.a. interest rate and theobligor
12% p.a.
would
penalty
then becharge
boundon
to pay the stipulated amoun
petitioners' P1,700,000.00 loan to which they agreed
necessityupon
of proof
is excessive
on the existence
or
and on the measure
unconscionable under the circumstances.
breach.
Ruling: NO.
Development Bank of the Philippines v. Family Food

enforcement of the penalty can be demanded by the cr
Medel v. Court of Appeals. The stipulated interest rate
performance
of 66% p.a.
is due
or to
a 5.5%
the fault
per or fraud of the debtor. T
month on a P500,000.00 loan excessive, unconscionable
rise to the
andpresumption
exorbitant, of
hence,
fault; in order to avoid the p
contrary to morals if not against the law and declared such
debtor
stipulation
has the burden
void. of proving an excuse - the failur
due to either force majeure or the acts of the creditor him
Toring v. Spouses Ganzon-Olan. The stipulated interest rates involved were 3% and
3.81% per month on a P10 million loan are excessive Here,
and reduced
petitioners
the same
defaulted
to 1%inperthe payment of their loan
month.
bank and their contract provided for the payment of 12
since there was no showing that petitioners' failure to pe
Chua v. Timan. The stipulated interest rates were 7%
dueand
to force
5% amajeure
month, or
which
to respondent
are
bank's acts, petition
equivalent to 84% and 60% p.a., respectively. The Court
theirreduced
obligation
the to
same
payto
the1%
penalty
per charge.
month or 12% p.a. The Court said that that in a plethora of cases, the stipulated
interest rates of 3% per month and higher are excessive, unconscionable and
exorbitant, hence, the stipulation was void for being contrary to morals.
CONDITIONAL OBLIGATIO
In this case, the interest rate agreed upon by the parties was only 23% p.a., or less
than 2% per month, which are much lower than those interest rates agreed upon by
the parties in the above-mentioned cases. Thus, there is no similarity of factual milieu
for the application of those cases.
SPOUSES BONROSTRO v. SPOUSES LUNA, G.R. N
DEL CASTILLO, J.
The 24% per annum interest rate, provided for in the subject mortgage contracts for a
loan of P225,000.00, may not be considered unconscionable.
Moreover, Constancia
consideringLuna (Constancia), as buy
Facts: Respondent
that the mortgage agreement was freely entered into to
by Sell
bothwith
parties,
same is the Corporation (Bliss) involv
Blissthe
Development
law between them and they are bound to comply awith
provisions
contained
year the
after,
Constancia,
this time as the seller, entered in
therein.
with petitioner Lourdes Bonrostro (Lourdes) concerning th
Jurisprudence establish that the 24% p.a. stipulated interest rate was not considered
unconscionable, thus, the 23% p.a. interest rate imposed on petitioners' loan in this
Immediately after the execution of the said second contr
case can by no means be considered excessive or unconscionable.
took possession of the property. However, except for the P
Lourdesorfailed
to pay any of the stipulated subsequent amo
The stipulated 12% p.a. penalty charge is also not excessive
unconscionable.
Ruiz v. CA. The 1% surcharge on the principal loan for every month of default is
valid. This surcharge or penalty stipulated in a loan agreement in case of default
Constancia and her husband, respondent Juan Luna (spous
P a g e | 27
as to actually prevent the spouses Bonrostro from making

for Rescission of Contract and Damages against the spouses
Bliss. Bonrostro
The spouses Bonrostro averred that they were willing to pay their total balance
al., v.
DBP, G.R.
No. 177050, July 01, 2013, DE
of P630,000.00 to the spouses Luna after they soughtLIM,
frometthem
a 60-day
extension
Facts: The Promissory Notes subject of the instant case b
to pay the same.
as early as 1972 and 1976. The only reason the mort
foreclosed in 1977 was because of the restraining orde
petitioners
madeLuna),
a partial
payment
of P902,800.00. No
Constancia and her husband, respondent Juan Luna
(spouses
filed
a
made. It
only Bonrostro.
in 1989 that petitioners tried to negot
Complaint8 for Rescission of Contract and Damages against
thewas
spouses
loan obligations. And although DBP could have foreclose
it instead
agreedamortization
to restructure
The spouses Bonrostro belied that they were not paying
the monthly
andthe loan. In fact, from 1989
for petitioners
to settle
their loans, but they
asserted that they paid Bliss, the developer of New extensions
Capitol Estates,
the amount
of
DBP to cancel
the Restructuring
P46,303. Later during trial, Lourdes testified that Constancia
instructed
Bliss not to Agreement.
accept amortization payments from anyone as evidenced by her March 4, 1993 letter
Petitioners insist that DBPs cancellation of the Restructur
to Bliss.
extinguishment of their loan obligation under the
Fulfillment
found
in case.
Article 1186 of the Civil Code.
Issue: Whether or not Art. 1186 of the Civil Code finds
application
in this
Issue: Whether or not the Principle of Constructive

Conditions is applicable in this case.
Art. 1186 inapplicable to this case. The said provision explicitly speaks of a
NO.fulfillment of the
situation where it is the obligor who voluntarilyRuling:
prevents
condition. Here, Constancia is not the obligor but the obligee. Moreover, even if this
Article
1186
the CivilofCode,
significant detail is to be ignored, the mere intention to
prevent
the of
happening
the which states that "the
fulfilled
the obligor
condition or the mere placing of ineffective obstacles
to its when
compliance,
withoutvoluntarily prevents its
Fulfillment),"
actually preventing fulfillment is not sufficient for Constructive
the application
of Art. 1186does not apply in this case,11
Ruling: NO.
Requisites:
Article 1186 enunciates the doctrine of constructive
(1) Intent to prevent fulfillment of the condition; and conditions, which applies when the following three (3) req
(2) Actual prevention of compliance.
(1) The condition is suspensive;
(2) The obligor actually prevents the fulfillment of the con
In this case, while it is undisputed that Constancia(3)
indeed
instructed
Bliss not to
He acts
voluntarily.
accept payment from anyone but her, there is nothing on record to show that Bliss
heeded the instruction of Constancia as to actually Suspensive
prevent thecondition
spouses Bonrostro
is one the happening of which giv
from making payments to Bliss. There is no showing
that
subsequent
to
theBank
said to provide a suspensive c
will be irrational for any
letter, the spouses Bonrostro attempted to make payment
refused by Agreement
Bliss.
Notetoorand
thewas
Restructuring
that will allow the d
Neither was there a witness presented to prove that from
Bliss the
indeed
gave
effect
to
the
duty to pay the loan without paying it.
instruction contained in Constancias letter. While Bliss Project Development
Officer, Mr. Ariel Cordero, testified during trial, nothing
couldpetitioners
be gathered
from
Besides,
have
no his
one to blame but themselves
testimony regarding this except for the fact that Bliss
received
the
said
letter.39
Restructuring Agreement. It isInsignificant to point out tha
view of these, the spouses Luna could not be said to have
placed an
effective obstacle
Committee
reconsidered
petitioners proposal to restruc
P a g e | 28
additional conditions. In fact, when DBPs General Santos Branch forwarded the
Restructuring Agreement to the Legal Services Department
Article 1186
ofofDBP
the Civil
in Makati,
Code refers to the constructive
petitioners were required to pay the amount of P1,300,672.75,
condition,plus
whose
a daily
application
interest of
calls for two requisites, na
P632.15 starting November 16, 1993 up to the dateobligor
of actual
to prevent
payment
theoffulfillment
the said of the condition, and (b)
amount. This, petitioners failed to do. DBP therefore
fulfillment.
had reason
Mereto intention
cancel theof the debtor to preven
Restructuring Agreement.
condition, or to place ineffective obstacles to its com
preventing the fulfillment, is insufficient.
The error lies in the CAs failure to determine IHCs inten

meeting his obligations. The minutes of IHCs special bo
INTERNATIONAL HOTEL CORPORATION v. JOAQUIN, JR.
Joaquin impressed upon the members of the Board tha
158361, April 10, 2013, BERSAMIN, J.
offering more favorable terms for IHC, to wit:
Facts: Respondent Francisco B. Joaquin, Jr. submitted a proposal to the Board of
Directors of the International Hotel Corporation (IHC) for him to render technical
xxxx
assistance in securing a foreign loan for the construction of a hotel, to be guaranteed
by the Development Bank of the Philippines (DBP).
At the meeting all the members of the Board of Director
Corporation, the President called on Mr. Francisco G.
Joaquin presented to the IHC Board of Directors the results of his negotiations with
different negotiations he had conducted relative to obtaini
potential foreign financiers. He narrowed the financiers to Roger Dunn & Company
the hotel project in keeping with the authority given to hi
and Materials Handling Corporation. He recommended that the Board of Directors
by the Board of Directors.
consider Materials Handling Corporation based on the more beneficial terms it had
offered. His recommendation was accepted.
Mr. Joaquin presently explained that he contacted several
through different brokers and after examining the differen
Negotiations with Materials Handling Corporation and, later on, with its principal,
his choice to two (2), to wit: the foreign financier recomm
Barnes International (Barnes), ensued. While the negotiations with Barnes were
the Roger Dunn & Company and the offer made b
ongoing, Joaquin and Jose Valero, the Executive Director of IHC, met with another
Corporation.
financier, the Weston International Corporation (Weston), to explore possible
financing. When Barnes failed to deliver the needed loan, IHC informed DBP that it
After explaining the advantages and disadvantages to our
would submit Weston for DBPs consideration. As a result, DBP cancelled its
offers specifically with regard to the terms and repaymen
previous guaranty.
interest requested by them, he concluded that the off
Handling Corporation is much more advantageous becaus
IHC entered into an agreement with Weston, and communicated this development to
of payment as well as the rate of interest are much mor
DBP. However, DBP denied the application for guaranty for failure to comply with
much less onerous to the corporation.
the conditions it imposed.
It was decided by the Directors that, should the nego

Due to Joaquins failure to secure the needed loan, IHC, through its President
materialize, at the same time as the offer of Materials Han
Bautista, canceled the 17,000 shares of stock previously issued to Joaquin and Suarez
funds committed by Roger Dunn may be diverted t
as payment for their services. The latter requested a reconsideration of the
Development Bank of the Philippines. With this condition
cancellation, but their request was rejected.
the advantages of the offer of Materials Handling Cor
informed the corporation that the bank confirmation of Ro
Issue: Whether the Principle of Constructive Fulfillment of Suspensive Conditions is
not been received. In view of the fact that the corporatio
applicable in this case.
securing its financing, he recommended that the corporatio
Ruling: NO.
P a g e | 29
After a brief exchange of views on the part of the Directors present and after hearing
F.F. CRUZ
& CO.,
INC.
HR CONSTRUCTION COR
the clarification and explanation made by Mr. C. M. Javier
who was
present
andv.who
March
14, 2012,
REYES,
J.
represented the Materials Handling Corporation, the
Directors
present
approved
unanimously the recommendation of Mr. Joaquin to entertain the offer of Materials
Facts: FFCCI entered into a contract with the Departm
Handling Corporation.
Highways (DPWH) for the construction of the Magsaysa
entered
into a Subcontract
with HR Constructi
Evidently, IHC only relied on the opinion of its consultant
in deciding
to transactAgreement
with
the supplywith
of materials,
labor,
Materials Handling and, later on, with Barnes. In negotiating
Barnes, IHC
hadequipment, tools and supe
a portion
oftheir
the said
project.
no intention, willful or otherwise, to prevent Joaquin of
from
meeting
undertaking.
Such absence of any intention negated the basis for the CAs reliance on Article 1186
Pursuant to the Subcontract Agreement, HRCC would su
of the Civil Code.
progress billing which the latter would then pay.
IHC is nonetheless liable to pay under the rule on constructive fulfillment of a

HRCC sent FFCCI a letter demanding the payment of its p
mixed conditional obligation
amount of P7,340,046.09, plus interests, within three d
Subsequently, HRCC completely halted the construction o
Considering that the agreement between the parties was not circumscribed by a
after taking its Christmas break.
definite period, its termination was subject to a condition the happening of a future
and uncertain event. The prevailing rule in conditional
obligations
is HRCC
that the
Issue: Whether
or not
had right to rescind the Subc
acquisition of rights, as well as the extinguishment or loss of those already
acquired, shall depend upon the happening of the
eventNO.
that constitutes the
Ruling:
condition.
The right of rescission is statutorily recognized in recipro
To secure a DBP-guaranteed foreign loan did not solely
diligence
or
is thedepend
breachon
of the
faith
by the defendant
which is violative
the sole will of the respondents because it required the
action
and
discretion
of
third
the parties. While the right to rescind reciprocal obligatio
persons an able and willing foreign financial institution
to provide
thebe
needed
such right
need not
expressly provided in the c
funds, and the DBP Board of Governors to guarantee
the
loan.
Such
third
persons
contracting parties may waive the same.
could not be legally compelled to act in a manner favorable to IHC.
had no
righton
to the
rescind
question that when the fulfillment of a condition isHRCC
dependent
partly
will the Subcontract Agreeme
theonlatter
having
waived such right. In spite of
of one of the contracting parties, or of the obligor, stoppage,
and partly
chance,
hazard
controversy
between
parties during the course of th
or the will of a third person, the obligation is mixed.
The existing
rule inthe
a mixed
HRCC
had agreed
conditional obligation is that when the condition was
not fulfilled
but to
thecontinue
obligor the performance of its o
did all in his power to comply with the obligation, Subcontract Agreement. In view of the provision of t
quoted above, HRCC is deemed to have effectively
satisfied.
extrajudicial rescission of its contract with FFCCI. Accor
of rescinding
the Subcontract
Considering that the respondents were able to secure
an agreement
with Weston,Agreement, was not justifie
stoppage.
and subsequently tried to reverse the prior cancellation
of the guaranty by DBP,
we rule that they thereby constructively fulfilled their obligation.
SBMA v. CA, G.R. No. 192885, July 4, 2012, PERALTA

RECIPROCAL OBLIGATIONS
Facts: SBMA and Subic International Hotel, Corporation
lease agreements whereby the private respondent underto
development and rehabilitation of the Subic Naval Base.
P a g e | 30
paying their monthly amortization. Respondents through

Their Lease and Development Agreement stipulated for
the payment
service
fees,payment with interest.
demanded
a full of
refund
of their
which pertain to the proportionate share of the private respondent in the costs that the
petitioner may incur in the provision of services, Issue:
maintenance
operation
of spouses may rescind the
Whetherand
or not
respondent
common facilities computed at $0.10 per square meter of the gross land area of the
leased property.
Ruling: YES.
SBMA issued private respondent a billing statement The

for Asian
accrued
service crisis
fees in
the a fortuitous event that wo
financial
is not
amount of $265,053.50. SIHC then formally requested
for the reconsideration
of theobligation; as a result of
performing
their contractual
billing for accumulated service fees alleging that thepetitioners,
services for
which the billing
respondents
are entitled to rescind the con
was supposed to be based were not actually provided by
butamortizations
by independentpaid including interest an
thepetitioner
amount of
contractors.
are likewise obligated to pay attorneys fees and the admin
Issue: Whether or not respondent-appellant is entitledThe

to service
fees.
non-performance
of petitioners obligation entitles
under Article 1191 of the New Civil Code.
Ruling: NO.
More in point is Section 23 of Presidential Decree No. 9
Respondent-appellants failure to furnish the agreed services
and impliedly which
admitted
sale of condominiums,
provides:
that it is not in the position to demand for the payment of service fees when it
approved the proposal for the waiver of future service
fees 23.
and Non-Forfeiture
advised petitionerSection
of Payments. No installment
appellee to contest the charges for accumulated service
Thereafter,
respondent- project for the lot or uni
in afees.
subdivision
or condominium
appellant moved for the amendment of the contract,
a provision
forowner
the or developer when the b
beinserting
forfeited in
favor of the
waiver of future service fees. Prior to that, the concerned
of SBMA
owner ordepartments
developer, desists
from further payment due t
issued their respective certifications that they did not extend
any
service
to
petitioneror developer to develop the subdivision or condominium
appellee.
approved plans and within the time limit for comply
buyer may, at his option, be reimbursed the total amount
Reciprocal obligations are those which arise from interests
the
but excluding delinquency interests, with interest
each party is a debtor and a creditor of the other
is dependent upon the obligation of the otherConformably with these provisions of law, respondents
simultaneously such that the performance of one
is conditioned
upon the
contract
and demand reimbursement
for the payments they
simultaneous fulfillment of the other. For one party to demand the performance of
the obligation of the other party, the former must also
own obligation.
Theperform
companyitsreneged
on its obligation to respondents th
Accordingly, petitioner, not having provided the services
that
would
require
the substantial payment of th
the condominium project despite
payment of service fees as stipulated in the Lease Development Agreement, is not
entitled to collect the same.
A real estate enterprise engaged in the pre-selling
concededly a master in projections on commodities and
business risks. The fluctuating movement of the Phili
exchange market is an everyday occurrence, and fluctua
rates happen everyday, thus, not an instance of caso fortuit
FIL-ESTATE PROPERTIES, INC. v. SPS. RONQUILLO
January 13, 2014, PEREZ, J.
Facts: Spouses Conrado and Maria Victoria Ronquillo purchased from petitioners an
SOLIDARY OBLIGATIONS
82-square meter condominium unit at Central Park Place Tower in Mandaluyong
City. Respondents executed and signed a Reservation Application Agreement wherein
they deposited P200,000.00 as reservation fee. As agreed upon, respondents paid the
full downpayment of P1,552,200.00 and had been paying the P63,363.33 monthly
amortizations.
PETRON CORP. v. SPS. CUDILLA, et al., G.R. No. 1
SERENO, J.
Upon learning that construction works had stopped,Facts:
respondents
stopped
Rubin likewise
Uy entered
into a Contract of Lease wi
P a g e | 31
property for the purpose of operating a gasoline station.

debtors or some or all of them simultaneously, pursuant t
Code. These solidary debtors are petitioner Petron, the h
Petitioner entered into a Retail Dealer Contract withDortina
Rubin Uy.
Uy and
In order
the dealer
to comply
Rubin Uy. To determine the lia
with its obligation to deliver the petroleum products
one another,
to the the
dealer,
amount
petitioner
of damages shall be divided by
contracted the hauling services of Jose Villaruz.
of each defendant.
Then, one day, an employee of the gasoline station, Supposedly,

ordered fromunder
petitioner
the hauling
variouscontract, petitioner may re
petroleum products. Petitioner then requested the services
it forofitsVillaruz
share. However,
for the delivery
because it was not able to ma
of the products to the gasoline station. He, however, used
against
a tank
him,truck
it shall
different
be liable
from
for its own share under Arti
the trucks specifically enumerated in the hauling contract
seek indemnification
executed with petitioner.
or subrogation from him under
Petitioner nevertheless allowed the transport and delivery
Petitioner
of itsmay
products
not pursue
to Estancia
its cross-claim against Rubin U
in the tank truck driven by Pepito Igdanis.
the cross-claims against them were also dismissed; more
liable for the conflagration as discussed herein.
During the unloading of the petroleum from the tank truck into the fill pipe that led to
the gasoline stations underground tank, for reasons unknown, a fire started in the fill
pipe and spread to the rubber hose connected to the tank truck. As a result, a
conflagration started and consumed the nearby properties of herein OBLIGATION
defendants,
WITH A PENAL CL
spouses Cesar J. Jovero and Erma Cudilla-Jovero.
Issue: Whether Villaruz is solidarily liable with respondents.
J PLUS ASIA DEVT CORP. v. UTILITY ASSURA

199650, June 26, 2013, VILLARAMA, JR., J.
Facts: Petitioner J Plus Asia Development Corporation
As the employer of Igdanis, Villaruz was impleaded by herein respondents in the
entered into a Construction Agreement3 whereby the la
lower court and was found to be solidarily liable with his other co-defendants. Absent
former's Condotel Building.
an appeal before this Court assailing the ruling of the lower court and the CA,
Villaruz remains to be solidarily liable with petitioner and co-defendants Rubin Uy
Payment of the balance of the contract price will be bas
and Dortina Uy. Thus, petitioner may only claim contribution from him in accordance
within 15 days from receipt of the monthly progress bil
with Article 1217 of the Civil Code, and not by virtue of its hauling contract, in the
schedule, the completion date of the project was Dece
event that respondents decide to proceed against petitioner alone for the satisfaction
submitted the required Performance Bond in the amoun
of judgment. Art. 1217 states:
payment or P8.4 million.
Ruling: YES.
Payment made by one of the solidary debtors extinguishes the obligation. If two or
A joint inspection and evaluation conducted revealed
more solidary debtors offer to pay, the creditor may choose which offer to accept.
31.39% complete and that the uncompleted portion wa
advised Mabunay of its decision to terminate the co
He who made the payment may claim from his co-debtors only the share which
tremendous delay the latter incurred. This was followed
corresponds to each, with the interest for the payment already made. If the
Performance Bond upon the respondent Petition
payment is made before the debt is due, no interest for the intervening period
Performance Bond included the liquidated dam
may be demanded.
Construction Agreement.
The share, meanwhile, of solidary debtors is contained in Art. 1208, to wit:

Issue: Whether or not the Performance Bond may b
petitioner due to the delay incurred by respondent.
If from the law, or the nature of the wording of the obligations to which the preceding
article refers the contrary does not appear, the credit of debt shall be presumed to
Ruling: YES.
be divided into as many equal shares as there are creditors or debtors,
or debts being considered distinct from one another, subject to the Rules of Court
The work schedule approved by petitioner was intended, n
governing the multiplicity of suits.
for the payment of monthly progress billings, but also for
of work by the contractor. The Construction Agreement p
Based on the ruling of the lower courts, there are four (4) persons who are liable to
shall be deemed in default if, among others, it had delaye
pay damages to respondents. The latter may proceed against any one of the solidary
P a g e | 32
the completion of the project "by more than thirty (30) calendar days based on official
work schedule duly approved by the OWNER."
Peakstar Oil Corporation (Peakstar) expressed interest i
During the negotiations with Peakstar, petitioners claimed
A stipulation for liquidated damages is attached to an obligation in
Saw), a member of Allied Banks legal department, a
performance and has a double function: (1) to provide for liquidated damages,
Eventually,
theofalleged
and (2) to strengthen the coercive force of the obligation
by thewith
threat
greaterconformity of Allied Ba
Memorandum
of Agreement
(MoA) was drawn between M
responsibility in the event of breach. The amount agreed
upon answers
for damages
Peakstar obligated
itself to As
purchase
the scrap metal
suffered by the owner due to delays in the completion
of the project.
a
precondition to such award, however, there must be proof of the fact of delay in
the performance of the obligation.
Unfortunately, Peakstar reneged on all its obligations u
argue that their loan obligations to Allied Bank had alread
The plain and unambiguous terms of the Construction Agreement authorize petitioner
Peakstars failure to perform its own obligations to Met
to confiscate the Performance Bond to answer for all kinds of damages it may suffer
MoA.
as a result of the contractors failure to complete the
building. Having elected to
terminate the contract and expel the contractor from the project site per the
Whether
the loan
Agreement, petitioner is clearly entitled to theIssue:
proceeds
of or
thenotbond
as obligations incurred by
subject committed
promissoryby
note
and various trust receipts have alre
indemnification for damages it sustained due to the breach
Mabunay.
Such stipulation allowing the confiscation of the contractors performance bond
Ruling: NO.
partakes of the nature of a penalty clause.
classify Peakstars default as a form of force m

Penalty clause. Expressly recognized by law, is Petitioners
an
have,inbeyond
their
control,
assume greater liability on the part of the obligor
case of
breach
of lost
an the funds they expected
Peakstar
(due
to
the
MoA)
which
they would, in turn,
obligation. It functions to strengthen the coercive force of obligation and to
to Allied Bank.
provide, in effect, for what could be the liquidatedobligations
damages resulting
from such
a breach. The obligor would then be bound to pay the stipulated indemnity
The
would have
no relevance to the performance o
without the necessity of proof on the existence and
onMoA
the measure
of damages
Allied
Bank.
The
MoA
is a not
sale of assets contract, while
caused by the breach. It is well-settled that so long as such stipulation does
Bank
arose
various loan transactions. Absent
contravene law, morals, or public order, it is strictlyAllied
binding
upon
thefrom
obligor
and conditions of the latter transactions have been, in any
by the terms and conditions in the MoA, said contracts s
and distinctly from each other, such that the existence, pe
would not depend on the existence, performance or breach
EXTINGUISHMENT OF OBLIGATIONS
In the foregoing respect, the issue on whether or not

conformity to the assets sale transaction between Metro
evidenced by the MoA) is actually irrelevant to the issues
METRO CONCAST STEEL CORP. v. ALLIED
BANK to
CORP.
obligations
the bank.
177921, December 4, 2013, PERLAS-BERNABE, J
Facts: On various dates and for different amounts, Metro Concast obtained several
loans from Allied Bank. These loan transactions were covered by a promissory note
and separate letters of credit/trust receipts.
PAYMENT/PERFORMANCE
By way of security, petitioner executed several Continuing Guaranty/Comprehensive

Surety Agreements in favor of Allied Bank. Petitioners defaulted for failure to pay
SPS. DELA
v. CONCEPCION, G.R. No. 17
despite demand. Allied Bank filed a complaint for collection
of sum CRUZ
of money.
PERALTA, J.
Facts: for
Petitioners
vendors)
To pay their obligation, petitioners, offered the equipment
sale, but(assince
there entered into a Contract t
vendee) involving a house and lot.
were no takers, the equipment was reduced into ferro scrap or scrap metal over the
Petitioners claim that the purchase price was not fully pai
years.
P a g e | 33
was not paid by respondent to them.
consider Materials Handling Corporation based on the m

offered. His recommendation was accepted.
Issue: Whether or not respondents obligation had already been extinguished by
payment.
Negotiations with Materials Handling Corporation and,
Barnes International (Barnes), ensued. While the nego
Ruling: YES.
ongoing, Joaquin and Jose Valero, the Executive Directo
the Weston International Corporation (Wes
In order to extinguish said obligation, payment shouldfinancier,
be
as set forth in Article 1240 of the Civil Code, to wit: financing. When Barnes failed to deliver the needed loan,
would submit Weston for DBPs consideration. As a
Cambroon v. City of Butuan. Payment made by the
debtorguaranty.
to the person of the
previous
creditor or to one authorized by him or by the law to receive it extinguishes the
obligation. When payment is made to the wrong party, however, the obligation is
IHC entered
into an agreement with Weston, and commun
not extinguished as to the creditor who is without fault
or negligence
denied or
the application for guaranty
debtor acted in utmost good faith and by mistake as DBP.
to the However,
person of DBP
the creditor
through error induced by fraud of a third person. the conditions it imposed.
Payment must be made to the obligee himself or to anDue

agenttohaving
authority,
express
Joaquins
failure
to secure the needed loan, I
or implied, to receive the particular payment. PaymentBautista,
made tocanceled
one having
the 17,000 shares of stock previously is
authority to receive the money will, as a rule, be treated as though actual authority
as payment for their services. The latter requested
had been given for its receipt. Likewise, if payment is made to one who by law is
cancellation,
but their
requestdue
was rejected.
authorized to act for the creditor, it will work a discharge.
The receipt
of money
on a judgment by an officer authorized by law to accept it will, therefore, satisfy the
Issue: Whether or not the obligation is extinguished by pa
debt.
Payment of the remaining balance of P200,000.00 wasRuling:

made toNO.
a certain Losloso, the
authorized agent of petitioners.
It is well to note that Article 1234 applies only when an
contract after
honestly
and faithfully performing
Loslosos authority to receive payment was embodiedthe
in petitioners
Letter
addressed
except an
for agent
some TECHNICAL
aspects that caus
to respondent. Furthermore, that Adoracion Loslosothereof
was indeed
of the
to the obligee.36 IHC correctly submits that the provisio
appellant spouses is borne out by thecadmissions of plaintiff-appellant
deviation that is slight, or technical and unimportant, an
purpose
the contract.
Thus, as shown in the receipt signed by petitioners
agentof and
pursuant to the
authority granted by petitioners to Losloso, payment made to the latter is deemed
Tolentino explains the character of the obligors breach
payment to petitioners.
following manner, to wit:
In order that there may be substantial performance of an o

INTERNATIONAL HOTEL CORP. v. JOAQUIN,been
JR. an attempt in good faith to perform, without a
departure therefrom. The deviation from the obligatio
10, 2013, BERSAMIN, J.
omission
or defect
must
be technical
and unimportant,
Facts: Respondent Francisco B. Joaquin, Jr. submitted
a proposal
to the
Board
of
whole or be so material that the object which the parti
Directors of the International Hotel Corporation (IHC) for him to render technical
in a particular manner is not attained. THE NONassistance in securing a foreign loan for the construction
of a hotel, toPART
be guaranteed
MATERIAL
OF A CONTRACT WI
by the Development Bank of the Philippines (DBP). PERFORMANCE
FROM
AMOUNTING
TO
COMPLIANCE.
Joaquin presented to the IHC Board of Directors the results of his negotiations with
Thetoparty
claiming
potential foreign financiers. He narrowed the financiers
Roger
Dunn &substantial
Company performance must show
goodthat
faith
perform
his contract, but has through ove
and Materials Handling Corporation. He recommended
thetoBoard
of Directors
or any excusable neglect failed to completely perfo
P a g e | 34
respects, for which the other party may be adequately indemnified by an

allowance and deduction from the contract price Tan
or by
anextended
award of
damages
Shuy
a loan
to Guillermo. In consideration t
But a party who knowingly and wilfully fails to perform
his
contract
in
any
respect,
himself to pay the loan and to sell lucad or copra to petitio
or omits to perform a material part of it, cannot be permitted, under the protection
of this rule, to compel the other party, and the trend Respondent
of the more Guillermo
recent decisions
claimedis that he paid the subject loa
to hold that the percentage of omitted or irregular performance may in and of itself
he continuously delivered and sold copra to petitioner. R
be sufficient to show that there had not been a substantial performance.
oral arrangement that the net proceeds thereof shall
payments
for the the
loan.
By reason of the inconsequential nature of the breach
or omission,
law deems
the performance as substantial, making it the obligees duty to pay
Issue: Whether
the subject
of payment is predicated on the substantial benefit derived
by the obligee
fromloan
the obligation was extinguishe
partial performance. Although compelled to pay, the obligee is nonetheless entitled
to an allowance for the sum required to remedy omissions
or defects
and to complete
Ruling:
YES. Partially.
the work agreed upon.
Pursuant to Article 1232 of the Civil Code, an obligation
Conversely, the principle of substantial performance
is inappropriate
the when there is delivery o
or performance.
Therewhen
is payment
incomplete performance constitutes a material breach of the contract. A
an obligation.
CONTRACTUAL BREACH IS MATERIAL IF IT WILL ADVERSELY AFFECT
THE NATURE OF THE OBLIGATION THAT THE OBLIGOR PROMISED TO
Article
1245 of the
Code provides for a special mod
DELIVER, THE BENEFITS THAT THE OBLIGEE
EXPECTS
TO Civil
RECEIVE
in paymentTHAT
(dacinTHE
en pago).
AFTER FULL COMPLIANCE, AND THE EXTENT
NONPERFORMANCE DEFEATED THE PURPOSES OF THE CONTRACT
Accordingly, for the principle embodied in ArticleDation
1234 to
the Property
failure of
in apply,
payment.
is alienated to the creditor
Joaquin and Suarez to comply with their commitmentmoney.
should not defeat the ultimate
purpose of the contract.
Here, the debtor delivers and transmits to the creditor the

Needless to say, finding the foreign financier that DBP would guarantee was the
thing as an accepted equivalent of the payment or perf
essence of the parties contract, so that the failure to completely satisfy such
debt. In such
cases,
1245
obligation could not be characterized as slight and unimportant
as to
haveArticle
resulted
in provides that the law on
undertaking really
partakes
in one sense of the n
Joaquin and Suarezs substantial performance that consequentially
benefitted
IHC.
creditor
buying
thing or property of the deb
Whatever benefits IHC gained from their services could
onlyisbereally
minimal,
andthe
were
even probably outweighed by whatever losses IHC
from
the delayed
is tosuffered
be charged
against
the debtors obligation.
construction of its hotel. Consequently, Article 1234 did not apply.
Dation in payment extinguishes the obligation to the exte
delivered, either as agreed upon by the parties or as may b
by agreement express or implied, or by their silenc
DATION IN PAYMENT/DACION EN PAGO
equivalent to the obligation, in which case the obligation is
The subsequent arrangement between Tan Shuy and Guil

one in the nature of dation in payment. There was p
copra to petitioner, chose not to coll
TAN SHUY v. SPS. MAULAWIN, G.R. No. 190375,Guillermo
Februarydelivered
8, 2012, SERENO,
copra deliveries, and instead applied the collectible as in
J.
loan from Tan Shuy. Hence, the net proceeds from G
amounted
to P 378,952.43.
With this partial payment, res
Facts: Petitioner Tan Shuy is engaged in the business
of buying
copra and corn.
balance
totaling P 41,047.57.
Guillermo Maulawin (Guillermo), respondent in thisthe
case,
is a farmer-businessman
engaged in the buying and selling of copra and corn.
P a g e | 35
the petitioner (the creditor) her credits "to make go

obligation; the parties agreed to relieve the responden
balance
herBRION,
account,J.and for the petitioner to
SPS. SERFINO v. FEBTC, INC., G.R. No. 171845, the
October
10, of
2012,
respondents
Facts: The present case traces its roots to the compromise
judgmentdebtors.
in a civil case for
an action for collection of sum of money instituted by the petitioner spouses Godfrey
the present
case, Domingo
the judgment debt was not ex
and Gerardina Serfino (collectively, spouses Serfino)Inagainst
the spouses
and Magdalena Cortez (collectively, spouses Cortez). designation in the compromise judgment of Magdalen
the fund from which payment shall be sourced. That t
authorizes
in case of adefault on other executabl
By way of settlement, the spouses Serfino and the
spouses recourse
Cortez executed
Cortez,
to
satisfy
the
judgment debt, further supports our
compromise agreement in which the spouses Cortez acknowledged their indebtedness
nobound
assignment
Magdalenas
to the spouses Serfino. To satisfy the debt, Magdalena
herselfof"to
pay in full credit with the GSIS tha
the
obligation.
the judgment debt out of her retirement benefits." Payment of the debt shall be made
one (1) week after Magdalena has received her retirement benefits from the
Theofcompromise
this case also did not give
Government Service Insurance System (GSIS). In case
default, thejudgment
debt mayinbe
spouses
Serfino,
executed against any of the properties of the spouses
Cortez
thatthe
is power
subjecttotoenforce Magdalenas credi
the
spouses
Serfino
are
execution, upon motion of the spouses Serfino. The RTC approved the entiretyprohibited
of the from enforcing their cl
one
(1)
week
from
Magdalenas
receipt of her retirement b
parties agreement and issued a compromise judgment based thereon.
An assignment
credit not
only entitles the assignee t
Issue: Whether the obligation was extinguished through
dation in of
payment
in the
gives him the power to enforce it as against the debtor of th
form of an assignment of credit.
Since no valid assignment of credit took place, the spou

claim ownership of the retirement benefits that were depos
"An assignment of credit is an agreement by virtue of which the owner of a credit,
known as the assignor, by a legal cause, such as sale, dation in payment, exchange or
donation, and without the consent of the debtor
accessory rights to another, known as the assignee, who acquiresTENDER
the power
OFtoPAYMENT AND CONSIG
enforce it to the same extent as the assignor could enforce it against the debtor
It may be in the form of sale, but at times it may constitute a dation in payment,
such as when a debtor, in order to obtain a release from his debt, assigns to his
creditor a credit he has against a third person SPS. CACAYORIN v. ARMED FORCES AND POLIC
assignment of credit operates as a mode of extinguishing the obligation
ASSOCIATION, INC., G.R. No. 171298, April 15, 2013
delivery and transmission of ownership of a thing (in this case, the credit due from a
Facts: Petitioner Oscar Cacayorin (Oscar) and his wife
third person) by the debtor to the creditor is accepted as the equivalent of the
Thelma, and the Rural Bank of San Teodoro (the Rural Ba
performance of the obligation.
Loan and Mortgage Agreement.
Ruling: NO.
The terms of the compromise judgment, however, did not convey an intent to equate
The Rural Bank issued a letter of guaranty informing AFP
the assignment of Magdalenas retirement benefits (the credit) as the equivalent of the
petitioners approved loan shall be released to AFPMBAI
payment of the debt due the spouses Serfino (the obligation).
transferred in petitioners name and after the registrat
assignment of credit; if at all, the compromise judgment merely identified the
parties mortgage agreement.
fund from which payment for the judgment debt would be sourced.
On the basis of the Rural Banks letter of guaranty

Only when Magdalena has received and turned over to the spouses Serfino the
petitioners favor a Deed of Absolute Sale and a new title
portion of her retirement benefits corresponding to the debt due would the debt be
with the corresponding annotation of their mortgage agree
deemed paid.
Unfortunately, the Pag-IBIG loan facility did not push th

Aquitey v. Tibong. The issue raised was whether the obligation to pay the loan was
closed and was placed under receivership by the Phi
extinguished by the execution of the deeds of assignment. The Court ruled in the
Corporation (PDIC). Meanwhile, AFPMBAI somehow wa
affirmative, given that, in the deeds involved, the respondent (the debtor) assigned to
petitioners loan documents and the TCT, while petitione
P a g e | 36
loan/consideration for the property.
Tender is the antecedent of consignation, that is, a

AFPMBAI made oral and written demands for consignation,
petitioners towhich
pay isthetheloan/
principal, and from which
consideration for the property.
consequences which the debtor desires or seeks to obtain.
extrajudicial, while consignation is necessarily judicial,
Petitioners filed a Complaint for consignation of isloan
the payment,
attempt to among
make aothers,
private settlement before proce
AFPMBAI, PDIC and the Register of Deeds of Puertoconsignation.
Princesa City.
AFPMBAI filed a Motion to Dismiss claiming that petitioners

While it may
Complaint
be truefalls
that within
petitioners claim relates to the
the jurisdiction of the Housing and Land Use Regulatory
sale of
Board
AFPMBAIs
(HLURB).
subdivision
It added lot, this is overshadowed
that since no prior valid tender of payment was made Complaint
by petitioners,
in Civil
the consignation
Case No. 3812 pleads a case for co
case was fatally defective and susceptible to dismissal.without jurisdiction to try it, as such case may only be tried
Issues:
1. Whether a valid tender of payment must be made

by BONROSTRO
petitioners.
SPS.
v. SPS. LUNA, G.R. No. 1723
2. Whether the RTC has jurisdiction over the case.
CASTILLO, J.
Ruling:
Facts: Respondent Constancia Luna (Constancia), as buye

Sell with Bliss Development Corporation (Bliss) involvin
1. NO.
year after, Constancia, this time as the seller, entered in
petitioner
Lourdes
Bonrostro (Lourdes) concerning th
Under Article 1256 of the Civil Code, the debtor shallwith
be released
from
responsibility
by the consignation of the thing or sum due,
payment:
a) when the creditor is absent or unknown, or Immediately after the execution of the said second contr
b) when he is incapacitated to receive the payment
at the
time it isofdue,
took
possession
theor
property. However, except for the P
c) when two or more persons claim the same right
to
collect,
or
when
the
to stipulated subsequent amo
Lourdes failed to pay anytitle
of the
the obligation has been lost.
A case for consignation has been made out, as it now appears that there are two
entities which petitioners must deal with in order to fully secure their title to the
andcreditor
her husband,
respondent Juan Luna (spous
property: 1) the Rural Bank (through PDIC), which isConstancia
the apparent
under the
for Rescission
of Contract
andinDamages against the spouse
July 4, 1994 Loan and Mortgage Agreement; and 2) AFPMBAI,
which
is currently
possession of the loan documents and the certificate of title, and the one making
demands upon petitioners to pay.
Clearly, the creditor is unknown, or that two or moreThe

entities
appear
to possess
the that they were willing
spouses
Bonrostro
averred
same right to collect from petitioners. Hence, the lackofofP630,000.00
prior tendertoofthe
payment
spousesbyLuna after they sought fro
the petitioners is not fatal to their consignation case. to pay the same. They assert that the same amounts to
remaining balance amounting to P630,000.00. According
2. YES.
interest should be suspended.
Consignation is necessarily judicial, as the Civil Code itself provides that
consignation shall be made by depositing the thing or things due at the disposal of
judicial authority. Elsewhere, what may be made is Issue:
a validWhether
tender of
payment,
but tender of payment.
there
was a valid
not consignation. The two, however, are to be distinguished.
Tender of payment v. consignation.
P a g e | 37
Ruling: NO.
.
Facts: Petitioner Insular Investment and Trust Corporat
Tender of payment is the manifestation by the debtor
of a desire
to comply
with or
Capital
One Equities
Corporation(COEC)
and Planters De
pay an obligation. If refused without just cause, the tender
of
payment
will
discharge
regularly engaged in the trading, sale and purchase of Phili
the debtor of the obligation to pay but only after a valid consignation of the sum due
shall have been made with the proper court.
Consignation is the deposit of the proper amount with a judicial authority in

IITC
thathas
thebeen
RTCrefused
and the CA erred in holding tha
accordance with rules prescribed by law, after the tender
of argues
payment
its claims
forcreditor
the undelivered
IITC T-Bills against the CO
or because of circumstances which render direct payment
to the
impossible
that COEC did not become a creditor of IITC because t
or inadvisable.
latter for the purchased treasury bills. Rather, it was PDB w
Tender of payment, without more, produces no effect.ofTo
the effect
payment
thehave
payment
fromofCOEC.
In addition, their obligations
and the consequent extinguishment of the obligation
to
pay,
the
law
requires
the
money. Neither are they of the same kind because the obli
companion acts of tender of payment and consignation.
of specific determinate things treasury bills with specific
interest
rates. Thus,
legal
cannot take place.
Effect of tender of payment on interest. When a tender
of payment
is made
in compensation
such a
form that the creditor could have immediately realized payment if he had accepted the
tender, followed by a prompt attempt of the debtor to deposit the means of payment in
court by way of consignation, the accrual of interest on the obligation will be
suspended from the date of such tender. But whenCOEC,
the tender
payment
not out that it has already
on theofother
hand,ispoints
accompanied by the means of payment, and the debtor
not take
immediate
IITCdidacted
as aany
principal,
and not as a conduit, in th
step to make a consignation, then interest is not suspended
from
the
time
of
such
COEC. Furthermore, it asserts that the treasury bills in qu
tender.
because the confirmations of sale and purchase do not me
with serial
numbers.toThe
were sold as indeterm
Here, the subject letter merely states Lourdes willingness
and readiness
paysecurities
but it
acknowledged by the parties in th
was not accompanied by payment. She claimed thatmonetary
she madeequivalent,
numerous as
telephone
because both
IITC and
COEC are principal credito
calls to Atty. Carbon reminding the latter to collect such,
her payment,
but, neither
said
lawyer nor Constancia came to collect the payment. After
that,
the spouses
Bonrostro
which
consist
of consumable
things or a sum of money, th
took no further steps to effect payment. They did not
resort
to
consignation
of
the
COEC may validly set-off its claims for undelivered tre
payment with the proper court despite knowledge IITCs
that under
claims.the contract, nonpayment of the installments on the agreed date would make them liable for interest
thereon.
Their claimed tender of payment did not produce any effect whatsoever because it
Whether COEC
set-off its obligation to II
was not accompanied by actual payment or followedIssue:
by consignation.
Hence,can
it did
obligation
it.
not suspend the running of interest. The spouses Bonrostro
aretotherefore
liable for
interest on the subject installments from the date of default until full payment.
Ruling: YES.
COMPENSATION
In order for compensation to be valid, the five requisites

should be present, as in the case at bench.
INSULAR INVESTMENT AND TRUST CORP. v. CAPITAL ONE EQUITIES
CORP., G.R. No. 183308, April 25, 2012, MENDOZA, J.
P a g e | 38
Facts: Evelyn Alagao (Evelyn), daughter of private comp

(Alagao),
as borrower-mortgagor,
executed a "Contract
IITC acted as a principal in the purchase of treasury
bills from
PDB and in the
Estate
Mortgage
with
Special
Power
to Sell Mortgage
subsequent sale to COEC of the COEC T-Bills. Thus, COEC and IITC are principal
Proceedings"
favor
of T-Bills,
petitioner as lender-mortgagee.
creditors of each other in relation to the sale of the COEC
T-Bills inand
IITC
respectively.
The instrument provides for a P40,000 loan secured by a
Evelyns name. Evelyn agrees to give petitioner of ever
until the full amount of the loan has been paid, starting fro
pre-trial, it was admitted by Alagao that she did not only r
The fact that IITC accepted the assignment by COECinof
Bank
Billsbutwith
an in the form of fertilizer
theCentral
contract
of loan
P51,730
aggregate face value of P20,000,000.00 as payment of part of the IITC T-Bills is
Alagao
and some
companions
evidence of IITCs willingness to accept other forms
of security
as satisfaction
of delivered 398 sacks of
prepared
a voucher
COECs obligation. It should be noted that the secondPetitioner
requisite only
requires
that the indicating that Alagao ha
P85,607
as
full
payment
for the
thing be of the same kind and quality. The COEC T-Bills and the IITC T-Bills
are 398 sacks of corn grains.
even if she only received P3,000. According to Alagao, 64
both government securities which, while having differing interest rates and dates of
as partial payment of her P40,000 loan with petitioner w
maturity, have each been assigned a certain face value
determine
their
monetary
willtocome
from the
P85,607
cash she was supposed to rece
equivalent. In fact, in the Tripartite Agreement, the COEC-IITC
Agreement
and
in
the her daughters land titl
grains delivered so she can redeem
memoranda of the parties, the parties recognized the monetary value of the treasury
Whether
or not compensation took place.
bills in question, and, in some instances, treated themIssue:
as sums
of money.
are of the same kind and are capable of being subject to compensation.
Ruling: YES.
Compensation is a mode of extinguishing to the concu

persons who in their own right are creditors and debtors o
Both debts are due and demandable because both remain
unsatisfied,isdespite
paymentof unnecessary suits and pa
compensation
the prevention
made by IITC for the IITC T-Bills and by COEC forextinction
the COEC
Moreover,
by T-Bills.
operation
of law of concurring debts.
COEC readily admits that it has an outstanding balance in favor of IITC. Conversely,
All the
compensation
IITC has been found by the lower courts to be liable,
as requisites
principal for
seller,
for the are present in the insta
delivery of the COEC T-Bills. The debts are also liquidated because their existence
First, petitioner and Alagao are debtors and creditors of ea
and amount are determined.
that petitioner and Alagao owe each other sums of mone
for the value of the corn grains delivered to her by Alaga
Alagao owes petitioner P51,730 by virtue of a loan extend
1994.
Finally, there exists no retention or controversy over the COEC T-Bills and the IITC
T-Bills.
Second, both debts consist in a sum of money. There is
debt by petitioner that it consists a sum of money. As t
Alagao from petitioner, though what was extended by
advances and fertilizers, there is no dispute that said amou
Because all the stipulations under Article 1279 are present in this case, compensation
Third,toboth
debts
due.T-Bills
Upon delivery of the 398 sacks
can take place. COEC is allowed to set-off its obligation
deliver
theare
IITC
the obligation to pay for the value thereof as buyer. As to
against IITCs obligation to deliver the COEC T-Bills.
of loan provided that it is payable in February 1996. Th
September 1994 when she delivered the 398 sacks of c
eventually became due at the time of trial of the instant
Fourth, both debts are liquidated and demandable. A de

SORIANO v. PEOPLE, G.R. No. 181692, August 14,
2013, VILLARAMA,
JR.,
amount
is known or is determinable
by inspection of th
J.
relevant documents. There is no dispute that the value
P a g e | 39
grains is P85,607. As to Alagaos debt, it is P51,730 inLegal

the form
compensation
of cash advances
takes and
place by operation of law w
fertilizers from petitioner.
present, as opposed to conventional compensation wh
parties agree to compensate their mutual obligations ev
Lastly, neither of the debts are subject of a controversyrequisites.
commenced by a third person.
There are no third-party claims with respect to Alagaos P51,730 loan. As to
petitioners P85,607 debt representing the 398 sacksAll
of corn
the requisites
grains, Alagao
for legal
claims
compensation are present in
that she is not the sole owner of all the 398 sacks. Thisrespondent
claim of Alagao,
are both
however,
principalwas
obligors and creditors of eac
never substantiated and a perusal of the information for
other
estafa
consist
shows
in athat
sumthe
of subject
money. Respondent acknowledge
corn grains are all owned by her. Moreover, the alleged
petitioner
other
the amount
owners of
have
P1,973,154.73
not
which was already
commenced any action to protect their claim over it. owing
Thus, the
to respondent
P85, 607 debt
by cannot
petitioner become due every m
be considered subject of a controversy by a third person.
liquidated and demandable, and petitioner's payments of
and demandable every month as they fall due. Finally
With the presence of all the requisites mentioned in Article
controversy
1279, legal
commenced
compensation
by third persons over eith
took effect by operation of law as provided in Article 1290
compensation
of the CivilisCode.
proper up to the concurrent amoun
respondent P125,040.01 for service fees, while re
P1,973,154.73.
As legal compensation took place in this case, there is no

for JR.
rescission since he was the first to breach their contrac
MONDRAGON PERSONAL SALES, INC. v. SOLA,
and padlocked his bodega cum office in General Santos Ci
January 21, 2013, PERALTA, J.
Facts: Petitioner Mondragon Personal Sales Inc., a company engaged in the business
of selling various consumer products through a network of sales representatives,
entered into a Contract of Services with respondent Victoriano S. Sola, Jr. Under the
said contract, respondent, as service contractor, would provide service facilities, i.e.,
UNION
OF THE
PHILIPPINES v. DBP, G.R. N
bodega cum office, to petitioner's products, sales force
and BANK
customers
in General
2014,
PERLAS-BERNABE,
J.
Santos City and as such, he was entitled to commission
or service
fee.
Foodmasters, Inc. (FI) had outstanding loan obligatio
Prior to the execution of the contract, respondents wife,
predecessor-in-interest,
Lina Sola, had an Bancom
existing Development Corporation
obligation with petitioner arising from her Franchise Distributorship Agreement with
the latter. Respondent wrote a letter addressed to FI
petitioner's
and DBP, among
Vice-President
others, entered
for
into a Deed of Cession
Finance, wherein he acknowledged and confirmed
Debt
his(dacion
wifes en
indebtedness
pago) whereby
to the former ceded in
petitioner in the amount of P1,973,154.73.
properties in consideration of the following: (a) the full a
FIs loan obligations to DBP; and (b) the direct ass
Consequently, petitioner withheld the payment of obligations
respondent's
to Bancom
service fees
in theand
amount of P17,000,000.00 (a
applied the same as partial payments to the debt which he obligated to pay.
Respondent closed and suspended operation of his
DBP,
office
as thecum
newbodega
owner of
where
the processing plant, leased
petitioner's products were stored and customers were being
property
dealt
to with.
FI (Lease Agreement) which was, in turn, obl
to be shared by DBP and Bancom.
Respondent filed a Complaint for accounting and rescission against petitioner.
DBP also entered into a separate agreement with Bancom
Issue: Whether or not legal compensation took place. whereby the former: (a) confirmed its assumption of FIs
(b) undertook to remit up to 30% of any and all rental
Ruling: YES.
(subject rentals) which would serve as payment of the assu
in monthly installments.
Petitioner's act of withholding respondent's service fees/commissions and applying
them to the latter's outstanding obligation withMeanwhile,
the former
FI isassigned
merely itsan leasehold rights under
acknowledgment of the legal compensation that occurred
Foodmasters
by Worldwide,
operation ofInc.
law(FW); while on Bancom c
between the parties.
including, among others, DBPs assumed obligations, to U
P a g e | 40
Claiming that the subject rentals have not been duly

worth
remitted
P735,000.00
despite its
andrepeated
that the respondent should also
demands, Union Bank filed, on, a collection case against
DBP. In opposition,
DBP for the repair of the dump
of P247,950.00
as their expenses
countered, among others, that the obligations it assumed
were
payable
only
out
of
the
Issue: Whether legal compensation
is permissible.
rental payments made by FI. Thus, since FI had yet to pay the same, DBPs obligation
to Union Bank had not arisen.
Ruling: YES.
Fast forward, Union Bank filed a motion to seek affirmation that legal compensation
had taken place in order to effectively offset (a) its own obligation to return the funds
it previously received from DBP as directed under the September 6, 2005 Writ of
Petitioners
had spent
the amount of P71,350.00 for the re
Execution with (b) DBPs assumed obligations under the
Assumption
Agreement.
second dump truck within the warranty period of three m
Issue: Whether or not legal compensation took place. of the two lower courts, the Court accepts their finding. V
trial court, when affirmed by the CA, are conclusive on th
Ruling: NO.
the evidence on record.11
Legal compensation could not have taken place between these debts for the apparent
reason that requisites 3 and 4 under Article 1279 of the Civil Code are not present.
Since DBPs assumed obligations to Union Bank for remittance of the lease payments
A debt
is liquidated
when
its existence and amount are
are in the Courts words in its Decision dated January
13, 2004
in G.R. No.
155838
an unliquidated
setboth
up as a counterclaim by a
"contingent on the prior payment thereof by FW to DBP,"
it cannot beclaim
said that
debts are due (requisite 3 of Article 1279 of the Civil against
Code). Also,
in the same
ruling,
the plaintiffs
claim
from the moment it is liquida
the Court observed that any deficiency that DBP had to make up (by December 29,
1998 as per the Assumption Agreement) for the full satisfaction of the assumed
obligations "cannot be determined until after the satisfaction of Foodmasters
obligation to DBP." In this regard, it cannot be concluded
debt Code
had provides that when all t
Article that
1290the
of same
the Civil
already been liquidated, and thereby became demandable
Article 1279 of the Civil Code are present, compensation
1279 of the Civil Code).
law, and extinguishes both debts to the concurrent amount
for P17
the repair
the are
dump
truck being already establi
Since the monthly installments for the payment of the
millionofdebt
to be
certainty,
legal
funded from the lease rentals, it follows that if the lease
rentals itarefollows
not paid,that
there
is compensation could ta
nothing for DBP to remit to Union Bank, and thus DBP
should notwere
be considered
in the amount of P71,350.
requirements
present. Hence,
default.
petitioners unpaid obligation of P735,000.00, leaving a b
amount petitioners still owed to respondent.
FIRST UNITED CONSTRUCTORS CORP v. BAYANIHAN AUTOMOTIVE

CORP., G.R. No. 164985, January 15, 2014, BERSAMIN, J.
NOVATION
Facts: FUCC ordered from the respondent one unit of Hino Prime Mover and one
unit of Isuzu Transit Mixer that were delivered to the petitioners. For the two
purchases, FUCC partially paid in cash, and the balance through post-dated checks.
Upon presentment of the checks for payment, the respondent learned that FUCC had
FOODS, INC.
MICRO
ordered the payment stopped. Petitioners informed ACE
the respondent
that v.
they
were PACIFIC TECHNOLO
No. 200602,
December
2013, PERLAS-BERNABE,
withholding payment of the checks due to the breakdown
of one of
the dump11,
trucks
Facts: MTCL sent a letter-proposal for the delivery a
they had earlier purchased from respondent.
installed
offices of ACE Foods.
Due to the refusal to pay, the respondent commenced an
action at
forvarious
collection.
In their answer, the petitioners prayed that the respondent return the price of the
ACE Foods accepted MTCLs proposal and accordingly i
defective dump truck worth P830,000.00 minus the amounts of their two checks
P a g e | 41
the subject products. Thereafter, MTCL delivered thereturn

said products
of the to
four
ACE
buses
Foods
"brought
as
to your garage at
reflected in an Invoice Receipt. The fine print of thesafekeeping"
invoice states,
so Master
inter alia,
Tours
that
could settle its obligation w
"title to sold property is reserved in MICROPACIFICforeclose
TECHNOLOGIES
on the buses.
CO.,
RCJLTD.
did not, however, heed the dem
until full compliance of the terms and conditions of above and payment of the price.
Master Tours wrote RCJ a letter, demanding the return
Issue: Whether there is a valid novation.
payment of the lease fee of P 600,000.00 that had remain
through counsel that it had no obligation to pay the lease
Ruling: NO.
the buses only after Master Tours shall have paid RCJ the s
Records are bereft of any showing that the said stipulation

Issue: Whether
novatedthere
the contract
is novation
of which extinguished the le
sale between the parties which already existed at the precise moment ACE Foods
accepted MTCLs proposal. To be sure, novation, in its
Ruling:
broad NO.
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
Article
of the
1292
former;
of the itCivil
is merely
Code provides that in novation,
modificatory when the old obligation subsists to the
so extent
declared
it remains
in unequivocal
compatible
terms, or that the old and
with the amendatory agreement. In either case, every
however,
point incompatible with each other." And the ob
presumed, and the ANIMUS NOVANDI, whether totally
if they
or partially,
cannot stand
must appear
together. In such a case, th
by express agreement of the parties, or by theirsupersedes
acts that or
arenovates
too clear
the first.
and
unequivocal to be mistaken.
RCJ failed to present any clear proof that it agreed with M
In the present case, it has not been shown that the
leasetitle
of the
reservation
buses andstipulation
in its place constitute RCJ as depos
appearing in the Invoice Receipt had been included orstorage
had subsequently
service to Master
modified
Tours
or for a fee. The only eviden
superseded the original agreement of the parties. The
Tours
fact letter
that the
in which
Invoiceit Receipt
demanded the return of the four b
was signed by a representative of ACE Foods does not,
RCJs
by and
garage
of itself,
for "safekeeping."
prove animus
novandi since: (a) it was not shown that the signatory was authorized by ACE Foods
(the actual party to the transaction) to novate the original
Theagreement;
letter does(b)
nottheonsignature
its face constitute an agreement.
only proves that the Invoice Receipt was received bystipulations
a representative
respecting
of ACE Foods
some warehousing arrangem
to show the fact of delivery; and (c) as matter of
concerning
judicial notice,
the buses.
invoices
But theare
idea of RCJ safekeeping th
generally issued at the consummation stage of the contract
consistent
and not
with
its their
perfection,
lease and
agreement. The lessee of a
have been even treated as documents which are not actionable
obligation per
to "return
se, although
the thing
theyleased, upon the terminat
may prove sufficient delivery.
received it." This means that RCJ must, as an incident o
safe from injury or harm while these were in its possession
Thus, absent any clear indication that the title reservation stipulation was actually
agreed upon, the Court must deem the same to be a For another, it is evident from the tenor of Master
the part of MTCL which has no effect on the nature
"safekeeping"
of the parties
was to begin
original
from the time the buses we
agreement as a contract of sale. Perforce, the obligations
There is arising
no allegation
thereto,oramong
evidence that Master Tours pu
others, ACE Foodss obligation to pay the purchasepoint,
price signifying
as well asthe
to pre-termination
accept the
of the lease agreeme
delivery of the goods,40 remain enforceable and subsisting.
to RCJs garage, this time for safekeeping.
It did not make sense for Master Tours to pre-terminate it

to RCJ, which would earn Master Tours P 600,000.00, in
RCJ storage fees for keeping those buses just the same.
RCJ BUS LINES, INC v. MASTER TOURS AND TRAVEL CORP.
177232, October 11, 2012, ABAD, J.
Facts: Master Tours and Travel Corporation (Master Tours) entered into a five-year
lease agreement RCJ Bus Lines, Incorporated (RCJ) covering four Daewoo airconditioned buses, described as "presently junked and not operational."
STOLT-NIELSEN
TRANSPORTATION
GROUP, INC
More than four years into the lease, Master Tours wrote
RCJ a letter, demanding
the
P a g e | 42
particular case. The parties impliedly extinguished the fi

enter into the second contract to placate Medequillo,
G.R. No. 177498, January 18, 2012, PEREZ, J.
dismissed
and repatriated
to Manila. The second cont
Facts: Sulpecio Madequillo filed a complaint against
the petitioners
for illegal
necessary
if the petitioners
dismissal under a first contract and for failure to deploy
under a second
contract. abided by the terms and con
employment under the first contract. The records also re
the first
contract
He was hired by Stolt-Nielsen Marine Services, Inc extinguished
as Third Assistant
Engineer
onby changing its object or
were for overseas employment aboard different vessels.
board the vessel "Stolt Aspiration"
employment aboard the MV "Stolt Aspiration" while th
working in another vessel, the MV "Stolt Pride." Petit
He joined the vessel MV "Stolt Aspiration.
accepted the terms and conditions of the second contra
thethe
firstvessel
contract
For nearly three (3) months of rendering service assertion,
and while
waswas
at a "previous valid contrac
terminated
at theand
timerepatriated
of Medequillo, Jr.s repatriation to
Batangas, he was ordered by the ships master to disembark
the vessel
dismissal had not yet been resolved with finality. Undoubt
back to Manila for no reason or explanation.
under the first contract when he negotiated with petitioners
NLRC correctly
ruled that petitioners could on
Upon his return to Manila, he immediately proceededsuch,
to thethe
petitioners
office where
he was transferred employment with another vessel second
named contract.
MV "Stolt Pride" under
the same terms and conditions of the First Contract. Yhe Second Contract was noted
The Court concurred with the finding that there wa
and approved by the POEA;
employment contract.
Despite the commencement of the Second Contract, petitioners failed to deploy him
With the finding that respondent "was still employed unde
with the vessel MV "Stolt Pride."
negotiated with petitioners on the second contract", novat
Issue: Whether there was novation that took place. conclusion.
The issue that proceeds from the fact of novation is the

deployment of respondent.
Novation is the extinguishment of an obligation by the substitution or change of the
obligation by a subsequent one which extinguishes or modifies the first, either by
changing the object or principal conditions, or, by substituting another in place of the
debtor, or by subrogating a third person in the rights of the creditor.
UNITED PULP AND PAPER CO., INC. v. ACROPOL
Requisites:
GUARANTY CORP., G.R. No. 171750, January 25, 201
Facts: Based on the terms of the Bond for Dissolution
1. There must be a previous valid obligation,
Unibox and Acropolis in favor of UPPC, Acropolis vo
2. There must be an agreement of the parties concerned to a new contract,
Unibox to be solidarily liable to answer for ANY judgmen
3. There must be the extinguishment of the old contract, and
from Unibox in its civil case for collection. Its co
4. There must be the validity of the new contract.
consideration of the dissolution of the writ of attachment o
and Ortega. The counter-bond then replaced the proper
In its ruling, the Labor Arbiter clarified that novation had set in between the first and
UPPC from Unibox and Ortega.
second contract. To quote:
Ruling: YES.
UPPC argues that the undertaking of Acropolis is to secure

xxx This office would like to make it clear that the first contract entered into by and
the RTC in its favor. It points out that because of the post
between the complainant and the respondents is deemed to have been novated by the
Acropolis and the dissolution of the writ of preliminary
execution of the second contract. In other words, respondents cannot be held liable
and Ortega, UPPC lost its security against the latter two
for the first contract but are clearly and definitely liable for the breach of the second
cites the cases of Guerrero v. Court of Appeals and Martin
contract.
position that the execution of a compromise agreement b
subsequent rendition of a judgment based on the said comp
This ruling was later affirmed by the Court of Appeals in its decision ruling that:
release the surety from its obligation nor does it novate the
Guided by the foregoing legal precepts, it is evident that novation took place in this
P a g e | 43
Issue: Whether there was novation in this case.
having been drawn against insufficient funds.
Ruling: NO.
He contends that his issuance of the checks before the

complaint against him novated his obligation to MPI, the
Luzon Steel Corporation v. Sia. Whether the judgment
anybeincipient
rendered
criminal
after trial
liability
on theand converting his obligatio
merits or upon compromise, such judgment undoubtedly may be made effective upon
the property released; and since the counterbond merely
Issue:
stands
Whether
in the
theplace
principle
of such
of novation can exculpate Mi
property, there is no reason why the judgment should not be made effective against
the counterbond regardless of the manner how the judgment
Ruling:
was
NO.
obtained.
The argument of Acropolis that its obligation under the

Mere
counter-bond
payment ofwas
an obligation
novated bybefore the institution of a c
the compromise agreement is untenable. In order on
foritsnovation
own, constitute
to extinguish
novationitsthat may prevent criminal l
obligation, Acropolis must be able to show that there is an incompatibility between
the compromise agreement and the terms of the counter-bond.
Novation is not one of the means recognized by the Pen
liability can be extinguished; hence, the role of novati
Nothing in the compromise agreement indicates, or even
prevent
hintsthe
at,rise
releasing
of criminal
Acropolis
liability or to cast doubt on th
from its obligation to pay UPPC after the latter has petition,
obtained whether
a favorable
or not
judgment.
it was such that its breach wo
Clearly, there is no incompatibility between the compromise
responsibility,
agreement
as when money
and theloaned is made to appear a
counter-bond. Neither can novation be presumed in this
disguise
case. is resorted to.
Civil Law
thesustained,
acceptance of partial payments,
Dugo v. Lopena. Novation by presumption has neverEven
beeninfavored.
To be
the
original
relation
between
it need be established that the old and new contracts are incompatible in all points, orthe complainant and the
theacts
latter
to exist, there must be proof
that the will to novate appears by express agreement ofnovation.
the partiesFor
or in
of similar
original
relationship,
and
such
intent cannot be inferred fr
import.
payments on account of what is totally due. Much les
acceptance
of counter-bond
partial satisfaction
can effect the nu
All things considered, Acropolis, as surety under the
terms of the
it
liability
that due
is fully
matured, and already in the proc
issued, should be held liable for the payment of the unpaid
balance
to UPPC.
this Court has ruled that the offended partys acceptance o
or part of the amount misapplied does not obliterate the cri
Quinto v. People. Novation is never presumed, and the

or partially,J.must appear by express agreement of
MILLA v. PEOPLE, G.R. No. 188726, January 25, totally
2012, SERENO,
that are too clear and unequivocal to be mistaken.
Facts: The accused represented himself as a real estate developer and offered to sell
to private respondent MPI a property. For this purpose, he showed a photocopy of
The extinguishment of the old obligation by the new one
Transfer Certificate of Title registered in the name of spouses Farley and Jocelyn
novation which may be effected either expressly or implie
Handog (Sps. Handog), as well as a Special Power of Attorney purportedly executed
means that the contracting parties incontrovertibly dis
by the spouses in favor of Milla.,
executing the new contract is to extinguish the old one
specific form is required for an implied novation, and al
MPI purchased the property and issued checks. After receiving the check, Milla gave
would be an incompatibility between the two contr
(1) a notarized Deed of Absolute Sale executed by Sps. Handog in favor of MPI and
contrariety, however, would be an irreconcilable incompa
(2) an original Owners Duplicate Copy of the TCT.
the new obligations; whether or not the two obligations c
having
its independent
existence.
Milla did not furnish the latter with the receipts for the
transfer
taxes and other
costs If they cannot, they are
obligation
novates
the
first.
Corollarily,
changes that bre
incurred in the transfer of the property. Upon checking with the Register of Deeds,
it
and not
was discovered that (1) the Certificate of Title givenessential
to them in
bynature
Milla could
notmerely
be accidental. The incom
any
of
the
essential
elements
of the obligation, such as its
found therein; (2) there was no transfer of the property from Sps. Handog to MPI; and
conditions
thereof;
otherwise,
(3) the TCT No. 218777 was registered in the name of a certain Matilde M. Tolentino.the change would be mer
and insufficient to extinguish the original obligation.
Accused, upon demand, issued checks in favor of MPI which were dishonored for
P a g e | 44
MALAYAN INSURANCE CO., INC. v. ALBERTO,HEIRS

G.R. No.
OF194320,
FRANCO
February
v. SPS. GONZALES, G.R. No. 15
1, 2012, VELASCO, JR., J.
BERSAMIN, J.
Facts: An accident occurred and it involved a Mitsubishi
Facts:Galant
The petitioners
with plateinsist
number
that the RTC could not validl
TLM 732.
on a promissory note that had been already novated; tha
been impliedly novated when the principal obligation of P
Malayan Insurance issued Car Insurance Policy in favor
at of
P750,000.00,
First Malayan
andLeasing
the maturity
and date had been extended
Finance Corporation (the assured), insuring the aforementioned
February 29, 1992.
Mitsubishi Galant
against third party liability, own damage and theft, among others. Having insured the
vehicle against such risks, Malayan Insurance claimedInincontrast,
its Complaint
the respondents
that it paid the
aver that the petitioners seek
damages sustained by the assured amounting to PhP 700,000.
the final and executory decision of the Court; that novation
there was no complete incompatibility between the
Maintaining that it has been subrogated to the rights memorandum
and interests of
receipt;
the assured
that Servandos
by
previous payment w
operation of law upon its payment to the latter, Malayan
total liability
Insurance
of the sent
debtors
several
based on the RTCs decision.
demand letters to respondents Rodelio Alberto (Alberto) and Enrico Alberto Reyes
(Reyes), the registered owner and the driver, respectively,
Issue:of
Was
thethere
Fuzoa Cargo
novation
Truck,
of the August 23, 1986 promis
requiring them to pay the amount it had paid to the
Veronica
assured.
Gonzales
When issued
respondents
the February 5, 1992 receipt?
refused to settle their liability, Malayan Insurance was constrained to file a complaint
for damages for gross negligence against respondents.Ruling: NO.
Issue: Whether there was a valid subrogation.
A novation arises when there is a substitution of an oblig

that extinguishes the first, either by changing the object or
Ruling: YES.
by substituting the person of the debtor, or by subrogating
of the creditor.
There was a valid subrogation in the instant case, as evidenced by the claim check
voucher and the Release of Claim and Subrogation Receipt
Requisites:
presented by it before the
trial court. Since the insurance company paid PhP 700,000 to the assured, there is a
valid subrogation in the case at bar.
1. A previous valid obligation;
2. An agreement of the parties to make a new contrac
Keppel Cebu Shipyard, Inc. v. Pioneer Insurance 3.andAnSurety
extinguishment
Corporation.
of the old contract; and
Subrogation is the substitution of one person by another4.with
A valid
reference
new contract.
to a lawful
claim or right, so that he who is substituted succeeds to the rights of the other in
relation to a debt or claim, including its remedies or Novation
securities.is not presumed. This means that the part
a situation wherein an insurer has paid a loss under an
expressly
insurance
agree
policy
to abrogate
is entitledthe
to old contract in favor of
all the rights and remedies belonging to the insured against
of the express
a third party
agreement,
with respect
the old and the new obligation
to any loss covered by the policy. It contemplates fullevery
substitution
point. Asuch
compromise
that it places
of a final judgment operates as
the party subrogated in the shoes of the creditor, andobligation
he may use
upon
allcompliance
means that with
the either of these two condi
creditor could employ to enforce payment.
The issuance of the receipt created no new obligation. In
Payment by the insurer to the insured operates as an
thereby
equitable
recognized
assignment
the to
original
the
obligation by stating
insurer of all the remedies that the insured may haveP400,000.00
against the was
third"partial
party whose
payment of loan" and by referri
negligence or wrongful act caused the loss. The right subject
of subrogation
of the case
is notindependent
imposing the interest." The loan m
upon, nor does it grow out of, any privity of contract
still the same loan involving the P500,000.00. Advertenc
payment by the insurance company of the insurance
in the claim.
promissory note indicated that the contract sti
subrogation has its roots in equity. It is designed and
to promote
extinguished,
and toasaccomplish
the petitioners claim.
justice; and is the mode that equity adopts to compel the ultimate payment of a debt
by one who, in justice, equity, and good conscience, ought
An obligation
to pay. to pay a sum of money is not novated by an
expressly recognizes the old, or
changes only the terms of payment, or
P a g e | 45
Issue:
adds other obligations not incompatible with the
old Whether
ones, or the restructuring of LISAMs loan acco
criminal liability.
the new contract merely supplements the old one.
Ruling: NO.
A new contract that is a mere reiteration, acknowledgment
or ratification of the
old contract with slight modifications or alterations as to the cause or object or
The purported
principal conditions can stand together with the former
one, andrestructuring
there can beofnothe loan agreement did not
incompatibility between them. Moreover, a creditors acceptance of payment
a written
contract stating in unequivocal terms th
after demand does not operate as a modification ofWithout
the original
contract.
the original loan agreement, thus undoubtedly eliminatin
to whether
is an incompatibility
between the F
Worth noting is that Servandos liability was joint andlook
solidary
with histhere
co-debtors.
In
and of
thethe
subsequent
restructured Omnibus Line whic
a solidary obligation, the creditor may proceed againstTRs
any one
solidary debtors
by
PNB.
or some or all of them simultaneously. The choice to determine against whom the
collection is enforced belongs to the creditor until the obligation is fully satisfied.
is no who,
incompatibility
Thus, the obligation was being enforced againstThere
Servando,
in order tobetween the Floor Stock
Omnibus
Line.had
While the restructuring was
escape liability, should have presented evidence torestructured
prove that his
obligation
effectivity
thereof
was
subject
already been cancelled by the new obligation or that another debtor hadto conditions precedent suc
other
charges,
and the submission of the titles to
assumed his place. In case of change in the personand
of the
debtor,
the substitution
conditions
must be clear and express, and made with the consent
of theprecedent
creditor imposed on the restructured Omnib
by
Soriano
who,
oddly
enough,a failed to file a Memorand
circumstances did not obtain herein, proving precisely that Servando
remained
bare assertion
thatbethe
restructuring was approved by PNB
solidary debtor against whom the entire or part of the obligation
might
enforced.
of an implied novation which extinguished Sorianos oblig
Lastly, the extension of the maturity date did notTRs.
constitute a novation of the
previous agreement. It is settled that an extension of the term or period of the
Moreover, as asserted by Soriano in her counter-affida
maturity date does not result in novation.
penalty charges on the Floor Stock Line. There is no
extinguished Sorianos obligation to "sell the [merchandi
account and to deliver the proceeds thereof to PNB
acceptance on [LISAMs] account." Soriano further agree
proceeds of the sale thereof in Trust for the payment of sa
PNB v. SORIANO, G.R. No. 164051, October 3, 2012, PEREZ, J.
its other indebtedness to PNB." Well-settled is the r
Facts: PNB admits that although it had approved LISAMs
restructuring
proposal,
obligations
to pay a sum
of money, the obligation is not
the actual restructuring of LISAMs account consisting
several recognizes
credit linesthe
wasold, changes only the term
that of
expressly
never reduced into writing. PNB argues that the stipulations
therein
such
as
the with the old ones, or
obligations not incompatible
provisions on the schedule of payment of the principal
obligation,
interests,
and novation does not extin
supplements
the old
one. Besides,
penalties, must be in writing to be valid and binding between
the
parties.
PNB
further
stands to reason therefore, that Sorianos criminal
postulates that assuming the restructuring was reduced
into writing,
LISAMthat
failed
subsists
considering
thetocivil obligations under the
comply with the conditions precedent for its effectivity,
specifically,
the
payment
of by the purported restru
by TRs were not extinguished
interest and other charges, and the submission of the titles to the real properties in
Tandang Sora, Quezon City. On the whole, PNBTranspacific
is adamant Battery
that theCorporation
events
v. Security Bank a
concerning the restructuring of LISAMs loan did not
affect
the
TR
security,
thus,
restructuring of a loan agreement secured by a TR d
Sorianos criminal liability thereunder subsists.
extinguish the criminal liability incurred thereunder. N
novation since the restructuring agreement is not incomp

On the other hand, the appellate court agreed with the
ruling of the DOJ Secretary
transactions.
that the approval of LISAMs restructuring proposal, even if not reduced into writing,
changed the status of LISAMs loan from being secured
Trust Receipts
(TRs) to recognizes the obligat
Thewith
restructuring
agreement
one of an ordinary loan, non-payment of which does not
give
rise
to
criminal
liability.
receipts when it required
"payment of all interest an
The Court of Appeals declared that there was no breach
of
trust
constitutive
of
estafa
restructuring." With respect to Michael, there was e
through misappropriation or conversion where the relationship
the parties
agreementbetween
that the amount
dueisis subject to "the joint and s
simply that of creditor and debtor, not as entruster andMiguel
entrustee.
and Mary Say and Michael Go Say." While th
Josephine do not appear on the restructuring agreement,
P a g e | 46
they have been relieved from the obligation. The oldBesides,

obligation
Section
continues
11.07toofsubsist
the PFTA makes it clear that th
subject to the modifications agreed upon by the parties.
obligations is conditioned upon the turnover of docum
hardware and software on the geographical information s
The circumstance that motivated the parties to enter into a restructuring agreement
completion and faithful performance of its respective dutie
was the failure of petitioners to account for the goods received in trust and/or deliver
the PFTA.
More
importantly,to Section 11.07 did not s
the proceeds thereof. To remedy the situation, the parties
executed
an agreement
thereafter, assume the PRAs obligations. On the contrary
restructure Transpacific's obligations.
recognizes that contracts that the PRA entered into in it
The Bank only extended the repayment term of the trust
receipts
90Thus:
days to one
liable
for thefrom
same.
year with monthly installment at 5% per annum overSection
prime rate
or
30%
per of
annum
7.01. Liability
BCDA and [PRA]. BCDA an
whichever is higher. Furthermore, the interest rates accordance
were flexible
in
that
they
herewith only to are
the extent of the obligations
subject to review every amortization due. Whether the terms appeared to be more
BCDA and [PRA] herein and any other documents or
onerous or not is immaterial. Courts are not authorized to extricate parties from the
Project,
in which from
they are
parties.
necessary consequences of their acts. The parties will
not and
be relieved
their
obligations as there was absolutely no intention by the parties to supersede or

abrogate the trust receipt transactions. The intention of the new agreement was
precisely to revive the old obligation after the original period expired and the loan
remained unpaid. Well-settled is the rule that, with respect to obligations to pay a
SHIPPING
CORP. v. AMERICAN HOME A
sum of money, the obligation is not novated by VECTOR
an instrument
that expressly
recognizes the old, changes only the terms of payment,
adds other
not
No. 159213,
Julyobligations
3, 2013, BERSAMIN,
J.
incompatible with the old ones, or the new contract
merely
supplements
the
old
Subrogation under Article 2207 of the Civil Code gives
one.
created by law. For purposes of the law on the prescriptio
limitation is ten years.
Ruling: We need to clarify, however, that we cannot adop

of the cause of action as based on the contract of affreig
Vector,
breachJ.of contract being the failure of Vec
PRA v. ROMAGO, INC., G.R. No. 174665, September
18, with
2013,the
ABAD,
seaworthy,
as to make
this action
These cases pertain to the defense of novation by virtue
of the debtors
assignment
to come under Article 1144
and
hold
that
that
the
present
action was not upon a wr
a third party of its contractual liability to the creditor.
obligation created by law. Hence, it came under Article 1
Facts: The PRA claims that its liability under its contract with Romago had been
This is because the subrogation of respondent to the righ
extinguished by novation when it assigned all its obligations
the HPMC
to
was bytovirtue
of the pursuant
express provision
of law embodied i
the provisions of the PFTA. The PRA insists that theCode,
CA erroneously
applied
to
the
to wit:
case the 2001 ruling of the Court in Public Estates Authority v. Uy
Pan
Insurance
v. CA. Article 2
the Heritage Park Project. Uy dealt only with the PRA
andMalayan
the HPMC
came intoCorporation
the
founded
on
the
well-settled
principle
of
subrogation.
picture only after the case has been filed. Here, while Romago first dealt with the
destroyed orcompany
damagedcanthrough
PRA, it eventually dealt with the HPMC before the construction
finish the fault or negligence
assured, then the insurer, upon payment to the assured,
the contracted works, evidencing novation of parties.
rights of the assured to recover from the wrongdoer to the
Issue: Whether there was novation in this case.
been obligated to pay. Payment by the insurer to the assur
Ruling: NO.
assignment to the former of all remedies which the latter
There cannot be novation in this case since the proposed
party substituted
whose negligence
parties or
didwrongful
not
act caused the loss. T
not
dependent
upon,
nor
does
it
grow
out of, any privity o
agree to the PRAs supposed assignment of its obligations under the contract for the
assignment
of claim.
It accrues
electrical and light works at Heritage Park to the HPMC.
The latter
definitely
and simply upon payment of
insurer.
clearly rejected the PRAs assignment of its liability under that contract to the HPMC.
Romago tried to follow up its claims with the HPMC,
not because
of any new
The contract
of affreightment
that Caltex and Vector enter
contract it entered into with the latter, but simply because
the
PRA
told
it
that
the
the legal obligation of Vector and Soriano to pay the dem
HPMC would henceforth assume the PRAs liability under
its contract
withitRomago.
respondent
because
concerned only the agreement fo
P a g e | 47
petroleum cargo. Respondents right of subrogation pursuant

the subject
to Article
products.
2207,
Thereafter,
supra, MTCL delivered the sa
was "not dependent upon, nor did it grow out of, any
The privity
fine print
of of
contract
the invoice
or upon
states, inter alia, that "title to
written assignment of claim but accrued simply upon MICROPACIFIC
payment of the insurance
TECHNOLOGIES
claim
CO., LTD. until fu
by the insurer."
and conditions of above and payment of the price." A
products were then installed and configured in ACE Foods
MTCLs demands against ACE Foods to pay the purchas

unheeded.
Instead
of G.R.
payingNo.
the purchase price, ACE F
ASIAN TERMINALS, INC. v. PHILAM INSURANCE
CO.,
INC.,
stating that it "has been returning the subject product
181163, July 24, 2013,
has agreed
Ruling: The Subrogation Receipt is adequate proof representative
that petitionerwho
Philam
paid theto pull out the said product
to now."
consignees claim on the damaged goods. Petitioners
ATI and Westwind failed to
offer any evidence to controvert the same.
ACE Foods lodged a Complaint praying that the latter pu
Malayan Insurance Co., Inc. v. Alberto. Paymentsubject
by theproducts
insurer since
to theMTCL
insuredbreached its "after delivery
particularly,
to: (a)
and configure the subject produc
operates as an equitable assignment to the insurer of all
the remedies
thatinstall
the insured
study
to
justify
the
purchase
may have against the third party whose negligence or wrongful act caused the loss.of the subject products; a
technicians
on of,
how
use and
The right of subrogation is not dependent upon, nor does
it grow out
anytoprivity
of maintain the subject prod
claimed
that theof
subject
products MTCL delivered are defe
contract. It accrues simply upon payment by the insurance
company
the insurance
claim. The doctrine of subrogation has its roots in equity. It is designed to promote
it had duly complied with its ob
and accomplish justice; and is the mode that equityMTCL
adopts maintained
to compel that
the ultimate
posited
that
ACE
Foods
payment of a debt by one who, in justice, equity, and good conscience, ought torefused
pay. and failed to pay the pu
products despite the latters use of the same for a period of
Issue: Whether ACE Foods should pay MTCL the purc

products.
Ruling: YES.
A contract is what the law defines it to be, taking into

elements, and not what the contracting parties call it. T
may be determined from the express terms of the written
contemporaneous and subsequent acts of the contractin
construction or interpretation of an instrument, the i
primordial and is to be pursued. The denomination or title
contract is not conclusive of the nature of its contents.
CONTRACTS
The very essence of a contract of sale is the transfer

for a price paid or promised.
A contract of sale is classified as a consensual contract, w

DEFINITION/CONCEPT
perfected by mere consent. No particular form is requ
perfection of the contract, the parties may reciproca
i.e., the vendee may compel transfer of ownership of t
the vendor may require the vendee to pay the thing sold
ACE FOODS, INC. v. MICRO PACIFIC TECHNOLOGIES CO., LTD.
No. 200602, December 11, 2013, PERLAS-BERNABE,
J.
In contrast,
a contract to sell is defined as a bilate
Facts: MTCL sent a letter-proposal for the deliveryprospective
and sale of the
products
be
seller,
whiletoexpressly
reserving the ow
installed at various offices of ACE Foods.
despite delivery thereof to the prospective buyer, b
property exclusively to the prospective buyer upon fu
ACE Foods accepted MTCLs proposal and accordingly
issued
a Purchase
for
agreed
upon,
i.e., the Order
full payment
of the purchase price
P a g e | 48
In determining the nature of a contract, courts are not b

The parties have agreed to a contract of sale and not given
to a contract
by the parties.
to sell. The
Bearing
decisive
in factor in evaluating such
mind its consensual nature, a contract of sale hadofbeen
the parties,
perfectedasatshown
the precise
not necessarily by the termino
moment ACE Foods, as evinced by its act of sending
but MTCL
by theirtheconduct,
Purchase
words,
Order,actions and deeds prior to
accepted the latters proposal to sell the subject products
after executing
in consideration
the agreement.
of the
As such, therefore,
purchase price of P646,464.00. From that point in time,
evidence
the reciprocal
may be submitted
obligationsand
of admitted to prove such in
the parties i.e., on the one hand, of MTCL to deliver the said products to ACE
Foods, and, on the other hand, of ACE Foods to pay
The the
dealing
purchase
between
price
petitioner
thereforand Metrobank was not a
within thirty (30) days from delivery already arose
one of
and
simple
consequently
loan. Petitioners
may beadmissionthat he signed
demanded.
of Supermax, which failed to pay the loan or turn over the
goods to Metrobank upon demanddoes not conclusivel
From that moment, the parties may reciprocally demand
was,performance,
indeed, a trust
subject
receipts
to thetransaction. In contrast to
provisions of the law governing the form of contracts.transaction, the parties really intended a contract of loan.
Ng v. People. Cases which are in all four corners the sam

that the fact that the entruster bank knew even before the e
agreements
that
the construction
materials covered we
HUR TIN YANG v. PEOPLE, G.R. No. 195117, August
14, 2013,
VELASCO
JR.,
entrustee for resale or for the manufacture of items to be
J.
thatofthe
transaction
was
a simple loan and not a trust receip
Facts: Metrobank extended several commercial letters
credit
(LCs) to
Supermax
Corporation. These commercial LCs were used by Supermax to pay for the delivery
of several construction materials which will be used in their construction business.
Thereafter, Metrobank required petitioner, as representative and Vice-President for
v. GRUSPE,
G.R.for
No.
Internal Affairs of Supermax, to sign twenty-four (24)CRUZ
trust receipts
as security
the191431, March 13, 2013, B
construction materials and to hold those materials or the
Facts:
proceeds
The claim
of thearose
salesfrom
in trust
an accident that occurred wh
for Metrobank to the extent of the amount stated in theoperated
trust receipts.
by plaintiff collided with the Toyota Corolla car o
car was a total wreck. Plaintiff went to respondents
When the 24 trust receipts fell due and despite the
incident,
receiptand
of executed
a demanda letter,
Joint Affidavit of Undertaking
Supermax failed to pay or deliver the goods or proceeds
damagedtocar
Metrobank.
in 20 days
Instead,
of the same model and of at
Supermax, through petitioner, requested the restructuring
alternatively
of thepay
loan.
the When
cost ofthe
car amounting with interes
intended restructuring of the loan did not materialize,
until fully
Metrobank
paid. When
sent plaintiff
another failed to comply with the
demand letter. As the demands fell on deaf ears,
filed a Metrobank,
complaint forthrough
collectionitsof sum of money.
representative, filed the instant criminal complaints against petitioner.
Plaintiff denied the allegation, claiming that respondent, a
For his defense, while admitting signing the trust receipts,
Affidavit
petitioner
of Undertaking
argued thatand
saidforced them to affix their
trust receipts were demanded by Metrobank as additional
explaining
security
and informing
for the them
loansof its contents.
extended to Supermax for the purchase of construction equipment and materials. In
support of this argument, petitioner presented as witness,
Issue: Whether
PriscilatheAlfonso,
Joint Affidavit
who of Undertaking is validl
testified that the construction materials covered by the trust receipts were delivered
way before petitioner signed the corresponding trust
Ruling:
receipts.
YES.Further, petitioner
argued that Metrobank knew all along that the construction materials subject of the
trust receipts were not intended for resale but for personal
Contracts
use ofare
Supermax
obligatory
relating
no matter
to
what their forms may
its construction business.
requisites for their validity are present. In determining
affidavit or a contract, the Court looks beyond the title o
denomination or title given by the parties in their docum
Issue: Whether or not petitioner and Metrobanknature
entered
of into
its contents.
a trust In
receipt
the construction or interpreta
transaction.
intention of the parties is primordial and is to be pur
document are clear and leave no doubt on the intention of
Ruling: NO.
literal meaning of its stipulations shall control. If the wor
the parties evident intention, the latter shall prevail over th
P a g e | 49
contract.
A simple reading of the terms of the Joint Affidavit of
Undertaking
discloses
Palattao
v. CA.readily
Contracts
that are consensual in nature,
that it contains stipulations characteristic of a contract.
They
are
embodied
in
simple
perfected upon mere meeting of the minds. Once there i
terms that both could easily de understood.
offer and the acceptance upon the subject matter, co
a contract
is produced.
Although the undertaking in the affidavit appears topayment,
be onerous
and lopsided,
this The offer must be certain
contract,
theinacceptance
mustthe
be absolute and must not qu
does not necessarily prove the alleged vitiation of consent.
They,
fact, admitted
it must
be plain, when
unequivocal,
genuineness and due execution of the Joint Affidavit and
Undertaking
they saidunconditional, and withou
that they signed the same to secure possession of their
If they
believed
thevehicle.
proposal.
A truly
qualified
acceptance, or one that i
that the vehicle had been illegally impounded, they constitutes
could have arefused
to
sign
the
counter-offer and is a rejection of the ori
Joint Affidavit of Undertaking and filed a complaint, but
they
did
not.
the release
when somethingThat
is desired
which is not exactly what is p
of their mini bus was conditioned on their signing the Joint Affidavit of Undertaking
acceptance is not sufficient to generate consent beca
does not, by itself, indicate that their consent was forced they may have given it
variation
termsfor
of the
grudgingly, but it is not indicative of a vitiated consent
thatfrom
is athe
ground
the offer annuls the offer.
The acceptance must be identical in all respects with
annulment of a contract.
produce consent or meeting of the minds. Where a part
price than the amount of the offer, such acceptance was
most considered as a counter-offer; a perfected contract
the other party had accepted this counter-offer.
Villanueva v. PNB. Unqualified acceptance, meaning.
expect the acceptance to echo every nuance of the offer, it
to those points in the offer which, under the operative fac
STAGES OF A CONTRACT
only material but motivating as well. Anything short
produces not a contract but a mere counter-offer a
particularly on the matter of the consideration of the
acceptance
be unanimous
both on the rate of the pa
HEIRS OF IGNACIO v. HOME BANKERS SAVINGS
AND must
TRUST
CO.
of an offer which agrees to the rate but varies th
No. 177783, January 23, 2013, VILLARAMA, JR., acceptance
J.
Petitioner's
of the
Facts: Petitioner Fausto Ignacio mortgaged two parcels
of landacceptance
to respondent
as respondent bank's term
repurchase
of the
foreclosed
properties was not absolute
security for the loan extended to him by said bank. When
petitioner
defaulted
in the
repurchase
price and
alsoestate
modified the terms of paymen
payment of his loan obligation, respondent bank proceeded
to foreclose
the real
unilateral
condition
for payment
mortgage. Respondent bank was the highest bidder and
the Certificate
of Sale
issued of the balance, that is,
"financial
position.
There was
to respondent bank was registered. With the failure
of petitioner
to redeem
theno evidence of any docum
conformitytitle
of respondent
bank's officers to this counter-pr
foreclosed properties within one year from such registration,
to the properties
Adelfa Properties, Inc. v. CA. The rule is that except wher
were consolidated in favor of respondent bank.
required, although
therespondent
acceptance must be affirmatively an
Despite the lapse of the redemption period and consolidation
of title in
evidenced
by some
acts orbank
conduct communicated to th
bank, petitioner offered to repurchase the properties.
While the
respondent
either
in a formal
or an
informal manner, and may be s
considered petitioner's offer to repurchase, there was no
repurchase
contract
executed.
words ofstance
the accepting
that clearly manifest a presen
The present controversy was fuelled by petitioner's
that aparty
verbal
to accept
offer to buy
or sell. Thus, acceptance m
repurchase/compromise agreement was actually reached
and the
implemented
by the
conduct, or words of a party recognizing the existence of t
parties.
assuming that
the bank
Issue: Whether a contract for the repurchase of Even
the foreclosed
properties
wasofficer or employee whom
perfected between petitioner and respondent bank. talked to had acceded to his own modified terms for the
verbal exchange did not bind respondent bank in view of
Ruling: NO.
was no evidence
that theofformer
was authorized by re
Contracts are perfected by mere consent, which is manifested
by the meeting
the
Directors
petitioner's
offer and the acceptance upon the thing and the cause
which to
are accept
to constitute
the counter-proposal to
P a g e | 50
properties at a different price and terms.

Petitioner therefore had no legal right to compel respondent bank to accept
PRINCIPLES/CHARACTERISTICS
O
the P600,000 being tendered by him as payment for theBASIC
supposed
balance of
repurchase price.
FREEDOM/AUTONOMY TO STIP
ROBERN DEV'T CORP. v. PEOPLE'S LANDLESS ASSOCIATION
173622, March 11, 2013, DEL CASTILLO, J.
Facts: Al-Amanah (Islamic bank) owned a parcel of land. Some of the members of
P.L.onUY
CORPthe
v. ALS MANAGEMENT
PELA were asked to desist from building their houses
the REALTY
lot and to vacate
CORP.,
G.R.
No.
166462,
October
24, 2012, VELASCO
same, unless they are interested to buy it.
Facts: PLU, as vendor, and ALS, as vendee, executed a D
Notably,
partiestostipulated on the eviction
The informal settlers together with other membersMortgage.
comprising
PELAthe
offered
further
that payment
in the event
purchase the lot for P300,000.00, half of which shallagreed
be paid
as down
and the informal settlers do n
would
reimburse
ALS
certain
agreed amounts.
the remaining half to be paid within one year. PELA was informed of the disapproval
of its offer to buy the land.
Issue: Whether PLU was bound by the provisions of the co
Meanwhile, Al-Amanah had accepted Roberns offer to purchase the lot. Al-Amanah
Art.in1306
of the Civil
stressed that it is Roberns responsibility to eject theRuling:
occupants
the subject
lot, ifCode guarantees the freedo
terms of their contract provided that they are not cont
any.
customs, public order, or public policy. Thus, when the p
valid,
the parties
are bound
by such terms under the princip
To convince Robern that it has no existing contract with
PELA,
Al-Amanah
furnished
the parties.
it with copies of the Head Offices rejection letter of between
PELAs bid,
the demand letters
to vacate, and the proof of consignment of PELAs P150,000.00 deposit to the RTC
Here, both parties knew for a fact that the property su
that PELA refused to withdraw.
occupied by informal settlers, whose eviction would entai
requireand
some
amount of time. They also knew th
Issue: Whether there was a perfected contract betweenwould
Al-Amanah
PELA.
would take to conclude such court actions was not within
Despite such knowledge, both parties still agreed to
Ruling: NO.
payment of the balance of the purchase price wou
informal settlers are ejected. There was never any allega
Three stages of a contract:
signing contracting
the Deed ofparties
Sale with Mortgage or that it
a) Negotiation which begins from the time the into
prospective
was
free to accept or decline such contra
indicate interest in the contract and ends at the vitiated.
moment PLU
of their
agreement;
be allowed
renege
b) Perfection or birth which takes place whencannot
the parties
agree to
upon
all on
theits agreement.
essential elements of the contract; and
Gregorio
Inc.,
Phil. Sugar Estate Developme
c) Consummation, which occurs when the parties
fulfill Araneta,
or perform
thev.terms
must
have known that they could not take the law into
agreed upon, culminating in the extinguishment
thereof.
resort to legal processes in evicting the squatters, they m
duration
the remained
suits to beinbrought
would not be under
In the case at bench, the transaction between Al-Amanah
and of
PELA
the
be determine
advance.
negotiation stage. The offer never materialized into same
a perfected
sale, forin no
oral orThe conclusion is thus fo
have intended
defer the to
performance of the obliga
documentary evidence categorically proves that Al-Amanah
expressedtoamenability
untilofthe
werePELA
duly evicted, as contended b
the offered P300,000.00 purchase price. Before the lapse
thesquatters
1-year period
had set to pay the remaining balance, Al-AmanahAraneta,
expresslyInc.
rejected its offered
purchase price, although it took the latter around seven months to inform the former
and this entitled PELA to award of damages. Al-Amanahs act of selling the lot to
another buyer is the final nail in the coffin of the negotiation with PELA. Clearly,
there is no double sale, thus, we find no reason toSTAR
disturbTWO
the consummated
sale CORP. OF THE PHILIP
v. PAPER CITY
between Al-Amanah and Robern.
March 6, 2013, PEREZ, J.
P a g e | 51
Facts: Paper City applied for and was granted loans and credit accommodations in
peso and dollar denominations by RCBC.
The MTIs did not describe the equipments and machin
Annexes "A" and "B" were referred to by the phrase "rea
RCBC, Metrobank and Union Bank (creditor banksNowith
mention
RCBCininstituted
any manner
as the
was made in the annexes
trustee bank) entered into a Mortgage Trust Indenture Notably,
(MTI) with
while
Paper
"personal"
City.
appeared in the granting claus
subsequent Deed of Amendment specifically stated that:
Paper City was able to comply with its loan obligations until the economic crisis
ensued which made it difficult for Paper City to meet
x x the
x The
terms
machineries
of its obligations
and equipment listed in Annexes "A
leading to payment defaults.
improvements listed above and located on the parcels of la
Trust Indenture and the Real Estate Mortgage.
Consequently, RCBC filed a Petition for Extrajudicial Foreclosure Under Against the
Real Estate Mortgage executed by Paper City This petition
The word
was"personal"
for the extra-judicial
was deleted in the corresponding gra
foreclosure of eight (8) parcels of land including
Amendment
all improvements
and in the First,
thereon
Second and Third Supplemen
enumerated the in the MTI.
Negotiations between the other creditor banks and Paper City ensued. During the
interim, Paper City filed with the trial court a Manifestation
with Motion
to Remove
GONZALO
v. TARNATE,
JR., G.R. No. 160600, Janua
and/or Dispose Machinery reasoning that the machineries
located
inside
the
J.
foreclosed land and building were deteriorating. It posited
that
since
the
machineries
Facts: After the DPWH had awarded the contract fo
were not included in the foreclosure of the real estateSadsadan-Maba-ay
mortgage, it is appropriate
thatthe Mountain Province-Ben
Section of
it be removed from the building and sold to a third party.
Gonzalo Construction, petitioner Domingo Gonzalo (G
respondent John Tarnate, Jr. (Tarnate) the supply of m
Issue: Whether the subsequent contracts of the parties
included in its coverage of
project.
mortgaged properties the subject machineries and equipment.
In furtherance of their agreement, Gonzalo executed a de
Ruling: YES.
he, as the contractor, was assigning to Tarnate an amoun
total collection from the DPWH for the project. This 10%
By contracts, machineries and equipments are included
in the mortgage
in favor
of Tarnates equipment tha
P233,526.13)
was the
rent for
RCBC, in the foreclosure of the mortgage and in theproject.
consequent sale on foreclosure
also in favor of petitioner.
Tarnate thereafter learned that Gonzalo had unilateral
Repeatedly, the parties stipulated that the propertiesassignment
mortgagedand
by that
Paper
to
theCity
disbursement
voucher for the 1
RCBC are various parcels of land including the buildings
and
existing
improvements
been issued in the name of Gonzalo, and the retention fee r
thereon as well as the machineries and equipments, which as stated in the granting
clause of the original mortgage, are "more particularly
described
and listed
that is toof the retention fee from G
Tarnate
demanded
the payment
say, the real and personal properties listed in Annexes A and B x x x of which the
Paper City is the lawful and registered owner."
Issues: Whether the Deed of Assignment was void.
Gateway Electronics Corp. v. Land Bank of the Philippines.

Ruling: YES.
may establish any agreement, term, and condition they may deem advisable, provided
they are not contrary to law, morals or public policy.Every contractor is prohibited from subcontracting wit
contracts constitutes one of the liberties guaranteed by
the Constitution.
person
any contract or project that he has with the D
Secretary has approved the subcontracting or assignment.
If the language used is as clear as day and readily understandable by any ordinary
reader, there is no need for construction. The case at bar
is covered
the the
rule.sole contractor of the project in q
Gonzalo,
whobywas
implementation of the project to Tarnate in violation o
The plain language and literal interpretation of theTheir
MTIs
must be was
applied.
Thetherefore, because it did n
subcontract
illegal,
petitioner, other creditor banks and Paper City intended
from
the
very
first
execution
DPWH Secretary. Necessarily, the deed of assignment w
of the indentures that the machineries and equipments
enumerated
Annexes "A"
sprung
from theinsubcontract.
and "B" are included.
P a g e | 52
Without the Sub-Contract Agreement there will be noRuling:

Deed of
NO.
Assignment to speak
of. The illegality of the Sub-Contract Agreement necessarily affects the Deed of
Assignment because the rule is that an illegal agreement
Under
cannot
the subject
give birth
contracts,
to a valid
CIGI as contractor bound it
contract. To rule otherwise is to sanction the act ofmedical
enteringoxygen
into transaction
and vacuum
thepipeline system for the fir
object of which is expressly prohibited by lawwhich
and inthereafter
turn, undertook
execute
to pay
an the contract price therefor
apparently valid contract to subterfuge the illegality.
the contract. Being reciprocal in nature, the respective obl
are dependent upon the performance of the other of its en
Under Article 1409 (1) of the Civil Code, a contract whose
claimcause,
of delay
object
or non-performance
or purpose is
can only prosper if
contrary to law is a void or inexistent contract. Asfaithfully
such, a complied
void contract
withcannot
its own obligation.
produce a valid one. To the same effect is Article 1422 of the Civil Code, which
declares that "a contract, which is the direct result ofCIGI
a previous
did not illegal
faithfully
contract,
complete
is its prestations and henc
also void and inexistent."
cannot prosper based on the following grounds: (a)
contracts, CIGI was bound to perform more prestations th
The guilt of Tarnate is not lesser than that of Gonzalo,
and for
materials;
Tarnateand
had(b)voluntarily
CIGI failed to prove by substantia
entered into the agreements with Gonzalo. Tarnate AMC
also admitted
for electrical
that hefacilities
did not as such, its failure to
participate in the bidding for the project because he knew
orientation/seminar
that he was notisauthorized
unjustified.
to contract with the DPWH.
The parties are bound by the stipulations, clauses, te
have agreed to provided that such stipulations, clauses
not contrary to law, morals, public order or public p
there is no legal proscription infringed by the terms and
between AMC and CIGI. As such, the said terms and con
the law
them and the parties are bound to fulfill w
OBLIGATORY FORCE AND COMPLIANCE
IN between
GOOD FAITH
CIGIs reciprocal obligation was not merely to supply l

project. It is unmistakable from the foregoing contractual p
to carry out a test run of the installation as well as to con
CONSOLIDATED INDUSTRIAL GASES, INC.of v.
ALABANG
AMC
employees MEDICAL
who will be involved in its operation
CENTER, G.R. No. 181983, November 13, 2013, REYES,
J.
to disregard the binding effect of the contracts it voluntaril
Facts: CIGI, as contractor and AMC, as owner, entered
into a contract
whereby the contractual commitments
renouncing
its above-mentioned
former bound itself to provide labor and materials for its
thecontracts
installation
of
a
medical
gasdefiled.
with AMC
will be
pipeline system for the first, second and third floors of the hospital which AMC duly
paid in full.
For its failure to turn over a complete project in accor
conditions of the installation contracts, CIGI cannot dem
The herein legal controversy arose after the parties entered
intoprice
another
agreement
for
contract
balance
from AMC,
which, in turn, cannot
the continuation of the centralized medical oxygen andOtherwise,
vacuum pipeline
system
in
the
AMC will be effectively forced to accept a
hospitals fourth & fifth floors. CIGI forthwith commenced
worksofwhile
contraryinstallation
to Article 1248
the Civil Code which states tha
AMC paid partially with the agreement that the balance
shall
be
paid
through
stipulation to that effect,
the creditor cannot be compel
progress billing.
prestations in which the obligation consists."
CIGI sent AMC a completion billing for the unpaid balance but was left unheeded.
CIGI sent a demand letter to AMC however, the latter still failed to pay thus
prompting CIGI to file a collection suit.
METROPOLITAN BANK AND TRUST CO. v. ROS
January 13, 2014, DEL CASTILLO, J.
AMC averred that its obligation to pay the balance of the contract price has not yet
accrued because CIGI still has not turned over a complete and functional medical
Facts: Respondent Ana Grace Rosales (Rosales) is the
oxygen and vacuum pipeline system.
Bridge Travel Services, a travel agency. Respondent Yo
Issue: Whether or not CIGIs demand for payment upon AMC is proper.
P a g e | 53
from any of the sources of obligation enumerated in Articl

to wit: law, contracts, quasi-contracts, delict, and quasi-de
respondent Rosales.
failed to show that respondents have an obligation to it und
contract, delict, or quasi-delict. And although a criminal c
against respondent Rosales, this is not enough reason for
Out" order
as the case
is still pending and no final judgm
Respondents opened a Joint Peso Account with petitioners
Pritil-Tondo
Branch.
rendered against respondent Rosales. In fact, it is signific
petitioner issued the "Hold Out" order, the criminal comp
Thus, considering that respondent Rosales is not liable un
of obligation, there was no legal basis for petitioner to i
Respondent Rosales accompanied her client Liu Chiu
Fang, a Taiwanese
Accordingly,
we agree National
with the findings of the RTC and
applying for a retirees visa from the Philippine Leisure
Authority
clauseand
doesRetirement
not apply in
the instant case.
(PLRA), to petitioners branch in Escolta to open a savings account, as required by
view of the
foregoing,Rosales
we find that petitioner is guilty o
the PLRA. Since Liu Chiu Fang could speak only inInMandarin,
respondent
unjustifiably refused to release respondents deposit
acted as an interpreter for her.
breached its contract with respondents, petitioner is liable
Respondents opened with petitioners Pritil-Tondo Branch a Joint Dollar

MENDIOLA v. COMMERZ TRADING INT'L., INC.,
Account with an initial deposit of US$14,000.00.
2013, CARPIO, J.
Facts: Petitioner, a physician by profession, entered into
be its exclusive distributor of Genicon laparoscopic instrum
Petitioner issued a "Hold Out" order against respondents

accounts.
Petitioner
entered into a Memorandum of Agreement (
facilitate the marketing and sale of Genicon laparos
Philippines. Under the MOA, respondent would be compe
the use of respondents name, office, secretary, invoices, o
x x xand
forContract
every sale
of aDamages
complete set of Genicon laparosco
Respondents filed a Complaint for Breach of Obligation
with
against petitioner. Respondents alleged that they attempted several times to withdraw
Respondent
sentaccounts
a price under
quotation to Pampanga Medica
their deposits but were unable to because petitioner had
placed their
(PMSHI), which thereafter agreed to purchase a Genicon
"Hold Out" status.
Two Million Six Hundred Thousand Pesos (P2,600,000.00
the laparoscopic instrument from Genicon, which in
equipment to the Philippines. Respondent undertook the
instrument from the Bureau of Customs and subsequen
Petitioner averred that due to the fraudulent schemePMSHI.
of respondent Rosales, it was
compelled to reimburse Liu Chiu Fang the amount of US$75,000.00
Despite petitioners repeated demands, respondent faile
criminal complaint for Estafa against respondent Rosales.
balance of P70,000.00 from the proceeds of the sale of th
Consequently, petitioner filed a collection suit against resp
Issue: Whether or not Metrobank breached its obligation.

There is no dispute that the P70,000.00 respondent withh
part of the proceeds of the sale of the Genicon laparoscopi
Ruling: YES.
however,
claimsforthat the P70,000.00 repres
Petitioners reliance on the "Hold Out" clause in the Respondent,
Application and
Agreement
VAT due from the Genicon transaction which is allege
Deposit Account is misplaced.
under paragraph V of the MOA which states: "All tax
to Genicon
transactions
The "Hold Out" clause applies only if there is a validrelated
and existing
obligation
arisingshall be the responsibility o
P a g e | 54
German passed away. Ramon did not notify HDSJ

Issue: Whether or not respondent has the right to retain
Germans
the P70,000.00
passing, Ramon collected the rentals from th
rentals to HDSJ, and the taxes on the property. HDS
Ruling: YES.
notified Ramon that HDSJ is terminating the lease contrac
A contract is the law between the parties, and its stipulations

Ramon suggested
are binding
thatonthe
them,
lease contract be renegotiat
unless the contract is contrary to law, morals, good customs,
sublesseespublic
occupying
order the
or public
parcel of land. HDSJ notified Ra
policy.
shall not be renewed because Ramon has "continually sub
to about 20 families in addition to a commercial establishm
Paragraph V of the MOA obligates petitioner to pay the
andtaxes
consent
due from
of the
thelessor.
sale ofThereafter,
the
HDSJ refused to
Genicon laparoscopic instrument. Petitioner admits that
payment
he is the
of rentals.
one "responsible in
the payment of the EVAT and not the respondent, who merely acted as the marketer"
of the Genicon laparoscopic instrument. Hence, as between
The sublessees
petitioner were
and respondent,
given written notices to vacate. HD
petitioner bears the burden for the payment of VAT. stating that it is willing to work out an amicable arrang
although the latter are not considered as legal occupants
The question now is whether respondent is authorizedBecause
under the
of this,
MOA
some
to withhold
of the sublessees
a
refused to pay rent
specific amount from the proceeds of the sale of the Genicon laparoscopic instrument
as tax due from petitioner.
Issues:
The MOA is silent on this matter. The MOA does not(1)expressly

Whetherallow
the sublease
respondent
contracts
to were invalid;
collect or withhold from petitioner any amount from the sale of the Genicon
laparoscopic instrument for taxation purposes.
(2) Whether there was tortious interference on the part of H
However, the same agreement (1) allows respondent to issue official receipts on
which VAT should have been computed and includedRuling:
in the purchase price, and (2)
obligates petitioner to pay any tax due on the sale.
(1) NO.
While by agreement of the parties petitioner bears the economic burden for paying
the VAT, the legal liability to pay the same to the BIR Lease
falls oncontracts,
respondent.
by their nature, are not personal. The
lease contracts survive the death of the parties and c
except if the contract states otherwise.
Sui Man Hui Chan v. Court of Appeals. A lease contrac

RELATIVITY/PRIVITY
in character. Thus, the rights and obligations therein are
The general rule, therefore, is that heirs are bound by con
predecessors-in-interest except when the rights and obliga
not transmissible by (1) their nature, (2) stipulation or (
INOCENCIO v. HOSPICIO DE SAN JOSE, G.R. No. 201787, September 25,
subject Contract of Lease, not only were there no st
2013, CARPIO, J.
transmission of rights, but its very terms and conditions
Facts: Hospicio de San Jose (HDSJ) leased a parcel of land to German Inocencio
transmission of the rights of the lessor and of the lessee t
(German). The lease contract was effective for a period of one year, and was renewed
successors. The contract is the law between the parties. Th
for one-year periods several times. The last written contract was executed on 31 May
excuse nonperformance of a contract, which involves a pr
1951. Section 6 of the lease contract provides:
and obligations thereunder pass to the successors or repre
Similarly, nonperformance is not excused by the death o
This contract is nontransferable unless prior consent of the lessor is obtained in
party has a property interest in the subject matter of the co
writing.
Section 6 of the lease contract provides that "this contrac

German constructed two buildings on the parcel of land which he subleased. He also
prior consent of the lessor is obtained in writing." Section
designated his son Ramon Inocencio (Ramon) to administer the said property.
vivos and not transmissions mortis causa. What Section
lessee to substitute a third party in place of the lessee w
P a g e | 55
This merely reiterates what Article 1649 of the Civil Code

causeprovides:
harm to the other. Added to this, some author
necessary that the interferers interest outweighs that of
Art. 1649. The lessee cannot assign the lease without invaded,
the consent
andofthat
thean
lessor,
individual
unlessacts under an economic int
there is a stipulation to the contrary.
merely de minimis, such that wrongful and malicious mo
acts in self- protection. Moreover, justification for protect
In any case, HDSJ also acknowledged that Ramon is its
should
month-to-month
not be madelessee.
to depend
Thus,
on a comparison of his econ
the death of German did not terminate the lease contract
matterexecuted
with thatwith
of others.
HDSJ,It but
is sufficient if the impetus of
instead continued with Ramon as the lessee.
business interest rather than in wrongful motives.
Section 6 of the lease contract requires written consent

Theof evidence
the lessor shows
before the
thatlease
HDSJ entered into agreeme
may be assigned or transferred.
sublessees for purely economic reasons (payment of ren
collect the rentals from the sublessees upon termination o
Tamio v. Tecson. Nature of an assignment of lease.
not appear that HDSJ was motivated by spite or ill will tow
assignment of lease rights on real property, there is a novation by the substitution of
the person of one of the parties the lessee. The personality of the lessee, who
dissociates from the lease, disappears; only two persons remain in the juridical
relation the lessor and the assignee who is converted
intoMAMARIL
the new lessee.
SPS.
v. THE BOY SCOUT OF THE PHIL
179382, January 14, 2013, PERLAS-BERNABE, J.
Assignment or transfer of lease, which is covered by Facts:
Article Spouses
1649 of the
Civil Code,
Benjamin
C. Mamaril and Sonia P. M
is different from a sublease arrangement, which is governed
by
Article
1650
of
jeepney operators since. Theythe
would park their six (6) pas
same Code. In a sublease, the lessee becomes in turn
a lessor
to a sublessee.
The
at the
Boy Scout
of the Philippines'
(BSP) compound for a
sublessee then becomes liable to pay rentals to the original lessee. However, the
juridical relation between the lessor and lessee is not On
dissolved.
parties
continue
May 26,The
1995
at 8 o'clock
in the evening, all these veh
to be bound by the original lease contract. Thus, in a BSP
sublease
arrangement,
there
are
compound. The following morning, one of the veh
at least three parties and two distinct juridical relations.
never recovered.
Ramon had a right to sublease the premises since theSps.

lease
contractfiled
did not
contain for damages against B
Mamaril
a complaint
any stipulation forbidding subleasing. Article 1650 of Cesario
the CivilPea
Codeand
states:
Vicente Gaddi.
Art. 1650. When in the contract of lease of things there

is denied
no express
the
BSP
any prohibition,
liability contending
that not only did Sps.
lessee may sublet the thing leased, in whole or inAIB
part,with
without
prejudice
to
his
respect to the manner by which the parked vehi
responsibility for the performance of the contract toward
lessor. ticket itself expressly stated that the "M
the the
parking
responsible for loss of vehicle or any of its accessories or
(2) NO.
claimed that Sps. Mamaril erroneously relied on the Gua
from not being parties thereto, its provisions cover on
Tortious interference; Elements:
properties, its officers, and employees.
1. Existence of a valid contract;

Issue: Whether the Gurad Service Contract contain a stip
2. Knowledge on the part of the third person of the
existence of the contract; and
Mamaril.
3. Interference of the third person without legal justification or excuse
Ruling: NO.
There were valid sublease contracts which were known to HDSJ. However, the third
element is lacking in this case.
If a contract should contain some stipulation in favor
demand its fulfillment provided he communicated his
So Ping Bun v. Court of Appeals. There was no tortious
interference
if theAintrusion
before
its revocation.
mere incidental benefit or interest
was impelled by purely economic motives. AuthoritiesThe
debate
on
whether
interference
contracting parties
must have clearly and deliberatel
may be justified where the defendant acts for the sole
purpose
of
furthering
his
third person.
own financial or economic interest. One view is that, as a general rule, justification
for interfering with the business relations of another exists
wherein
theorder
actors
motive
is person benefited by the se
Requisites
that
a third
to benefit himself. Such justification does not exist where his sole motive is to
P a g e | 56
1311, referred to as a stipulation pour autrui, may demand

FontanaitsResort
fulfillment
and Country Club, Inc. (FRCCI), worth P
promises of petitioners sales agents that petitioner FRC
1. There is a stipulation in favor of a third person;with first-class leisure facilities in Clark Field, Pampa
2. The stipulation is a part, not the whole, of the contract;
Leisure Park (FLP); that FLP would be fully developed a
3. The contracting parties clearly and deliberately
quarter
conferred
of 1998;
a favor
andtothat
the FRCCI
third class "D" shareholders
person - the favor is not merely incidental;
membership in the country club, which entitled them to us
4. The favor is unconditional and uncompensated;a two-bedroom villa for "five (5) ordinary weekdays an
5. The third person communicated his or her acceptance
year for free."
of the favor before its
revocation; and
6. The contracting parties do not represent, or are
Twonot
years
authorized,
later, respondents
by the third
filed before the SEC a Co
party.
P387,300.00 they spent to purchase FRCCI shares o
Respondents alleged that they had been deceived into buy
However, none of the foregoing elements obtains in this
of case.
petitioners fraudulent misrepresentations. Constructio
still unfinished and the policies, rules, and regulations
It is undisputed that Sps. Mamaril are not parties to
obscure.
the Guard Service Contract.
Neither did the subject agreement contain any stipulation pour autrui. And even if
there was, Sps. Mamaril did not convey any acceptance
Petitioners
thereof.
filedThus,
their Answer7
under thein which they asserted that
principle of relativity of contracts, they cannot validlyinformed
claim anyofrights
the privileges
or favor under
given to them as shareholders
the said agreement.
of stock since these were all explicitly provided in the pr
country club, the Articles of Incorporation, and the By-Law
Under the Guard Service Contract defendant-appellant sought the services of
defendant AIB Security Agency for the purpose of the
security
and protection
of its committed fraud on thei
Issue:
Whether
or not petitioners
properties, as well as that of its officers and employees,
so much so
in caseofof
the annulment
or that
rescission
their contract of sale with re
loss or of damage suffered by it as a result of any act or negligence of the guards, the
security agency would then be held responsible therefor.
There
is absolutely nothing
Ruling:
NO.
in the said contract that would indicate any obligation and/or liability on the part of
the parties therein in favor of third persons such as herein
plaintiffs-appellees.
There
are contradictory findings below as to the existen
Officer Bacalla and the SEC en banc found that ther
The subject loss was caused by the negligence of thepetitioners
security guards
in allowing
a shares to respondents, t
in selling
the FRCCI
stranger to drive out plaintiffs-appellants' vehicle despite
none.the latter's instructions that
only their authorized drivers may do so. Moreover, the agreement with respect to the
ingress and egress of Sps. Mamaril's vehicles were coordinated
only with
AIBone
andparty
its is induced by the othe
There is fraud
when
security guards, without the knowledge and consent
of
BSP.
Accordingly,
the
through and solely because of the latters insidious words
mishandling of the parked vehicles that resulted in herein
should
be "Under Article 1330, fr
formscomplained
of fraud canloss
vitiate
consent.
recovered only from the tort feasors (Pea and Gaddi)or
and
their
employer,
AIB.
causal fraud, in which, prior to or simultaneous with t
one party secures the consent of the other by using dece
consent would not have been given." "Simply stated
VICES OF CONSENT
determining cause of the contract, or must have caused th
GR: He who alleges fraud or mistake in a transaction mus

FRAUD/DECEIT as the presumption is that a person takes ordinary care
private dealings have been entered into fairly and regularl
or lack of valid consent to a contract by reason of frau
establish by full, clear and convincing evidence such s
partys consent, otherwise, the latters presumed consent to
FONTANA RESORT AND COUNTRY CLUB, INC. v. SPS. TAN
154670, January 30, 2012,
In this case, respondents have miserably failed to prove
LEONARDO-DE CASTRO, J.
fraud to induce respondents to buy FRCCI shares. It
Facts: Spouses Roy S. Tan and Susana C. Tanpetitioners
bought from
petitioner
presented
the FLPRN
and the country club in the
Development Corporation (RNDC) two class "D" toshares
of
stock
in
petitionerThere is no showing th
attract investor-members.
P a g e | 57
respondents, petitioners actually used insidious words

Viloria
orand
machinations,
return the money
without
they paid for the subject ticke
which, respondents would not have bought the FRCCI shares. Respondents appear to
be literate and of above-average means, who may Article
not be 1390,
so easily
in relation
deceived
to Article
into 1391 of the Civil Code,
parting with a substantial amount of money. Respondents
of the knowingly
contractingand
parties
willingly
was obtained through fraud,
consented to buying FRCCI shares, but were later on
voidable
disappointed
and maywith
be annulled
the actualwithin four (4) years from t
FLP facilities and club membership benefits.
the fraud. Once a contract is annulled, the parties are obl
the same Code to restore to each other the things subj
including their fruits and interest.
On the basis of the foregoing and given the allegatio

SPS. VILORIA v. CONTINENTAL AIRLINES, INC.
Fernandos consent to the subject contracts was supp
16, 2012, REYES, J.
through fraudulent
means,
it is plainly apparent that the
Facts: On April 3, 2006, the Regional Trial Court of Antipolo
City, Branch
74 (RTC)
tantamount
to seeking
for an
rendered a Decision, giving due course to the complaint
for sum
of money
andannulment of the subject c
vitiated
consent.
damages filed by petitioners Fernando Viloria (Fernando) and Lourdes Viloria
(Lourdes), collectively called Spouses Viloria, against respondent Continental
Under
1338giving
of therise
CiviltoCode, there is fraud when,
Airlines, Inc. (CAI). As culled from the records, below
areArticle
the facts
machinations
of
one
of
the
contracting parties, the other
such complaint.
contract which, without them, he would not have agreed
mustLourdes,
be the causal (dolo causante) ,
While in the United States, Fernando purchased for vitiate
himselfconsent,
and his itwife,
(dolo incidente),
inducement
to the making of the contrac
two (2) round trip airline tickets from San Diego, California
to Newark,
New Jersey
on board Continental Airlines. Fernando purchased the tickets at US$400.00 each
v. Court
from a travel agency called "Holiday Travel" and Samson
was attended
to of
byAppeals.
a certainCausal fraud is defined as
one
party
prior
to
or
simultaneous
to the contract in order
Margaret Mager (Mager).
other."
Subsequently, Fernando requested Mager to reschedule their flight to Newark to an
Also,
fraud must Airlines
be serious
earlier date. Mager informed him that flights to Newark
via Continental
wereand its existence must be
convincing
evidence
already fully booked and offered the alternative of a round
trip flight
via Frontier Air.
Since flying with Frontier Air called for a higher fare of US$526.00 per passenger
v. Hon.
Appeals, et al. Mere prepond
and would mean traveling by night, Fernando opted Sierra
to request
for a Court
refund.ofMager,
adequate.
however, denied his request as the subject tickets are non-refundable. Fernando
decided to reserve two (2) seats with Frontier Air.
The "misrepresentation constituting the fraud must be est
convincing
evidence,went
and to
notthe
merely by a preponderance
As he was having second thoughts on traveling via Frontier
Air, Fernando
serious.
The
fraud
is
serious
Greyhound Station where he saw an Amtrak station nearby. Fernando made inquiries when it is sufficient to
person into
and was told that there are seats available and he canordinarily
travel on prudent
Amtrak anytime
and error; that which cannot
cannot
be
a
ground
for
nullity.
any day he pleased. Fernando then purchased two (2) tickets for Washington, D.C.
Theconfronted
fraud alleged
by Spouses
Viloria has not been satisfac
From Amtrak, Fernando went to Holiday Travel and
Mager
with the
in
nature
to
warrant
the
annulment
of the subject contrac
Amtrak tickets, telling her that she had misled them into buying the Continental
prove
by clear
and convincing evidence tha
Airlines tickets by misrepresenting that Amtrak was failed
alreadytofully
booked.
Fernando
fraudulent.
Specifically,
Spouses
reiterated his demand for a refund but Mager was firm in her position that the subject Viloria failed to prove
available seats at Amtrak for a trip to New Jersey on Augu
tickets are non-refundable.
spoke with Mager on July 21, 1997; (b) Mager knew a
informed them otherwise.
Issue: Whether there is causal fraud employed in this purposely
case.
The only proof of Magers alleged fraud, which is Fer

Amtrak had assured him of the perennial availability
As CAI
correctly
Magers statement cannot be considered a causalwanting.
fraud that
would
justifypointed
the out and as Fernando ad
during
of three (3) weeks from th
annulment of the subject contracts that would oblige
CAItheto intervening
indemnify period
Spouses
the subject tickets to the time he talked to said Amtrak e
Ruling: NO.
P a g e | 58
may have cancelled their bookings and reservations with

incidental
Amtrak,
fraud
making
which
it possible
is referred to in Article 1344, are t
for Amtrak to accommodate them. Fraud is never lightly
in character
inferred;
and
it is
without
good faith
which the other party would
that is.
contract. Dolo causante determines or is the essential c
dolo incidente refers only to some particular or accide
effects of dolo causante are the nullity of the contract a
damages, and dolo incidente also obliges the person emp
TANKEH v. DBP, G.R. No. 171428, November 11, 2013, LEONEN, J.
Corporation
v. Mindanao
Ferroalloy Corpor
Facts: Petitioner filed several Complaints against Solidbank
respondents,
praying that
the
known as
dolo
promissory note be declared null and void and that hefraud
be absolved
from
anycausante
liabilityor causal fraud is basicall
party
prior
to
or
simultaneous
with the contract, in order t
from the mortgage of the vessel and the note in question.
other (material). Needless to say, the deceit emplo
contradistinction,
some particular
or accident of the
He alleged that respondent Ruperto V. Tankeh, together
with Vicente only
L. Arenas,
Jr.
incidental
fraud
or dolotoincidente,
or that which is no
and Jose Maria Vargas, had exercised deceit and fraud
in causing
petitioner
bind
without
which
the
other
party
would
have
entered into the
himself jointly and severally to pay respondent Development Bank of the Philippines
the amount of the mortgage loan. Although he had been made a stockholder and
Spouses
et al., alleged
v. Emergency Pawnshop Bula, I
director of the respondent corporation Sterling Shipping
Lines,Tongson,
Inc., petitioner
constituted
dolo
causante
causal fraud:
that he had never invested any amount in the corporation and that he had neverorbeen
an actual member of the board of directors. He alleged that all the money he had
1. when
the seller,
who hadthat
no intention to part with her
supposedly invested was provided by respondent Ruperto
V. Tankeh.
He claimed
believing"
that what she
signed were papers pertinen
he only attended one meeting of the board. In that meeting,
he was introduced
to two
reconstitution
of
her
burned
directors representing Development Bank of the Philippines, namely, Mr. Jesus certificate of title, not a de
whenbeen
the notified
signatureofofanother
the authorized corporate officer w
Macalinag and Mr. Gil Corpus. Other than that, he had2.never
3.
when
the
seller
was
seriously
ill, and died a week aft
meeting of the board of directors.
raising doubts on whether the seller could have rea
contentsfrom
of the
documents in
he signed or of the conseque
Petitioner further claimed that he had been excluded deliberately
participating
the affairs of the corporation and had never been compensated by Sterling Shipping
However,
Article when
1344 also
provides that if fraud is inciden
Lines, Inc. as a director and stockholder. According
to petitioner,
Sterling
of
fraud
is
not
serious
enough
so as to render the original c
Shipping Lines, Inc. was organized, respondent Ruperto V. Tankeh had promised him
that he would become part of the administration staff and oversee company
Woodhouse
v. Halili. that
While
operations. Respondent Ruperto V. Tankeh had also
promised petitioner
thethe representation that p
franchise However,
did not vitiate
consent to the contrac
latters son would be given a position in the company.
afterdefendant's
being
get
from
defendant
a
share
of
30
per cent of the net p
designated as vice president, petitioner had not been made an officer and had been
pretending that he had the exclusive franchise and p
alienated from taking part in the respondent corporation.
defendant, he obtained the consent of the latter to give him
net profits. This is the dolo incidente defined in article
Issue: Whether or not causal fraud is present in this case.
Code, because it was used to get the other party's consent
an incidental matter in the agreement.
Ruling: NO.
B. Quantum of Evidence to Prove the Existence of Frau

Parties
There are two types of fraud contemplated in the performance of contracts
Jurisprudence
has shown
that in
incidente or incidental fraud and dolo causante or fraud
serious enough
to render
a order to constitute fraud
contracts,
it
must
fulfill
two
conditions.
First, the fraud m
contract voidable.
must be fraud in obtaining the consent of the party. Second
byisclear and convincing evidence.
Geraldez v. Court of Appeals. This fraud or dolo which
time of birth or perfection of a contract may either be dolo causante or dolo
Both 1338,
dolo incidente
and dolo causante must be proven
incidente. The first, or causal fraud referred to in Article
are those deceptions
evidence.
The
only
question
is whether this fraud, when
or misrepresentations of a serious character employed by one party and without
forcontract
making a contract voidable (dolo causante), or for
which the other party would not have entered into the
incidente), or both.
A. Types of Fraud in Contracts
P a g e | 59
with his brother, he had written a letter seeking to reach a

There had been no dolo causante committed against
respondent
the petitioner
RupertbyV.Ruperto
Tankeh. V.
Tankeh.
Petitioner had the opportunity to become aware of the fac
The petitioner had given his consent to become a shareholder
of the promissory
of the company
note. He
without
even admitted that he has a law
contributing a single peso to pay for the shares of stock
had given
hoped to
would
him assist
by Ruperto
him inV.
the administration of Sterlin
Tankeh.
However, in refusing to allow petitioner to participate
Petitioner admitted that "he had never invested any amount
business,inrespondent
said corporation
Ruperto
and
V. Tankeh was liable for th
that he had never been an actual member of said
fraud.
corporation. All the money
supposedly invested by him were put up by defendant Ruperto V. Tankeh." This fact
alone should have already alerted petitioner to the gravity
Although
of the
thereobligation
was no fraud
that he
that had been undertaken to
would be undertaking as a member of the board there
of directors
was fraud
and
in the performance
attendant of the contract. The rec
circumstances that this undertaking would entail.
had been unjustly excluded from participating in the mana
corporation. This exclusion from the management in the
Article 1340 of the Civil Code recognizes the reality Lines,
of some
Inc.exaggerations
constituted fraud
in trade
incidental to the performanc
which negates fraud.
All in all, respondent Ruperto V. Tankehs bare assertion t
Given the standing and stature of the petitioner, he wastheinrecords
a position
cannot
to ascertain
discreditmore
the fact that the petitioner ha
information about the contract.
of the opportunity to actually engage in the operations o
Inc. Petitioner had a reasonable expectation that the same
Songco v. Sellner. Notwithstanding the fact that Songco's
be present
statement
forasthe
to the
duration
probable
of their working relationsh
output of his crop was disingenuous and uncandid, weundertaking
nevertheless
in think
good that
faithSellner
by respondent Ruperto V. Tanke
was bound and that he must pay the price stipulated.brother
The representation
that he would
in question
not automatically be made
can only be considered matter of opinion as the caneadministration.
was still standing in the field,
and the quantity of the sugar it would produce could not be known with certainty until
it should be harvested and milled. Undoubtedly Songco had better experience and
better information on which to form an opinion on this question than Sellner.
Nevertheless the latter could judge with his own eyes as to the character of the cane, INTIMIDATION
and it is shown that he measured the fields and ascertained that they contained 96 1/2
hectares.
It is not every false representation relating to the subject matter of a contract which
SPS. BINUA v. ONG, G.R. No. 207176, June 18, 2014, R
will render it void. It must be as to matters of fact substantially affecting the buyer's
Facts: The petitioners claim that they were compelled by d
interest, not as to matters of opinion, judgment, probability, or expectation.
they executed the mortgage contracts. According to them
the purchaser undertakes to make an investigation of his own, and the seller does
from the effect of the conviction of [petitioner] Edna, and
nothing to prevent this investigation from being as full as he chooses to make it, the
entered into said contracts." The petitioners also al
purchaser cannot afterwards allege that the seller made misrepresentations.
subsequently "rammed the two (2) mortgage contracts
properties on [petitioner Victors] throat, so to speak[,] ju
We are aware that where one party to a contract, having special or expert knowledge,
said documents," and that the respondent took advantag
takes advantage of the ignorance of another to impose upon him, the false
petitioners and was able to secure in her favor the real esta
representation may afford ground for relief, though otherwise the injured party would
be bound. But we do not think that the fact that Songco was an experienced farmer,
Issue: Whether there is intimidation in this case.
while Sellner was, as he claims, a mere novice in the business, brings this case within
that exception.
Ruling: NO.
In this case, petitioner was fully aware of the magnitude of his undertaking. Also, the
De Leon v. Court of Appeals. In order that intimidatio
records showed that petitioner had been fully aware of the effect of his signing the
render the contract invalid, the following requisites must c
promissory note. The bare assertion that he was not privy to the records cannot
counteract the fact that petitioner himself had admitted that after he had severed ties
P a g e | 60
1. That the intimidation must be the determining of

cause
public
of dominion
the contract,
and therefore,
or must beyond the commerce o
have caused the consent to be given;
2. That the threatened act be unjust or unlawful; Issue: Whether the Subject Loans are ultra vires.
3. That the threat be real and serious, there being an evident disproportion between
the evil and the resistance which all men can offer,
Ruling:
leading
YES.
to the choice of the
contract as the lesser evil; and
4. That it produces a reasonable and well-grounded
Article
fear1409(1)
from the
of the
factCivil
that Code
the provides that a contract
person from whom it comes has the necessarytomeans
law, morals,
or ability
good
to customs,
inflict thepublic order or public polic
threatened injury.
such, creates no rights or obligations or any juridical rela
the unlawful purpose behind the Subject Loans
In cases involving mortgages, a preponderance ofcommercialization
the evidence is of
essential
the Agoo
to Plaza pursuant to the Red
establish its invalidity, and in order to show fraud, duress,
considered
or undue
as ultra
influence
vires in of
theaprimary sense thus, renderi
mortgage, clear and convincing proof is necessary non-binding on the Municipality.
What the respondent did was merely inform them of petitioner Ednas conviction in
the criminal cases for estafa. It might have evoked a sense of fear or dread on the
petitioners part, but certainly there is nothing unjust, unlawful or evil in CAUSE/CONSIDERATION
the
respondent's act. The petitioners also failed to show how such information was used
by the respondent in coercing them into signing the mortgages. The petitioners must
remember that petitioner Edna's conviction was a result of a valid judicial process and
even without the respondent allegedly "ramming it into petitioner Victor's throat,"
COJUANGCO, JR. v. REPUBLIC, G.R. No. 1807
petitioner Edna's imprisonment would be a legal consequence of such conviction.
VELASCO, JR., J.
Issue: Is the acquisition of the so-called Cojuangco, Jr.
Callanta v. National Labor Relations Commission.
Cojuangco not supported by valuable consideration and, th
not being an unjust act, but rather a valid and legal act to enforce a claim, cannot at
all be considered as intimidation.
Ruling: NO.
As correctly ruled by the CA, "[i]f the judgment of conviction is the only basis of the
The presumption that a contract has sufficient consideratio
[petitioners] in saying that their consents were vitiated, such will not suffice to nullify
the bare uncorroborated and self-serving assertion of
the real estate mortgages and the subsequent foreclosure of the mortgaged properties.
consideration. To overcome the presumption of conside
No proof was adduced to show that [the respondent] used [force], duress, or threat to
consideration must be shown by preponderance of evidenc
make [petitioner] Victor execute the real estate mortgages.".
Under Article 1354 of the Civil Code, it is presumed that

lawful unless the debtor proves the contrary.
OBJECT/SUBJECT MATTER
The party who stands to profit from a declaration of the
ground of insufficiency of considerationwhich would n
asserts such nullityhas the burden of overthrowing the p
LBP v. CACAYURAN, G.R. No. 191667, April 17, 2013,

PERLAS-BERNABE,
J. operates in favor of C
The presumption
contextually
Facts: Led by respondent Eduardo Cacayuran (Cacayuran),
Republic,
residents
as plaintiff
claimed
a quo,
that which
the then had the burden to
conversion of the Agoo Plaza into a commercial center,
no sufficient
as funded
consideration
by the proceeds
for the Second Agreement.
from the First and Second Loans (Subject Loans), were "highly irregular, violative of
the law, and detrimental to public interests, and will Samanilla
result to wanton
v. Cajucom.
desecration
The presumption
of
of a valid consid
the said historical and public park."
on a simple claim of absence of consideration, especial
states that consideration was given:
Cacayuran, invoking his right as a taxpayer, filed a Complaint16 against the
Implicated Officers and Land Bank, assailing, among others, the validity of the
Subject Loans on the ground that the Plaza Lot used A
as perusal
collateralofthereof
the PCA-Cojuangco
is property
Agreement disclosed
P a g e | 61
consideration for the transaction:
time of consent bound to suffer.
The Sandiganbayan, however, pointed to the perceived

The"lack
Court
of rules
any pecuniary
that the transfer
value of the subject UCPB sha
or advantage to the government of the said option, which
valuable
could
consideration.
compensate for the
generous payment to him by PCA of valuable shares of stock, as stipulated in the
May 25, 1975 Agreement between him and the PCA."
Inadequacy of the consideration, however, does not render a contract voidSIMULATION

under
OF CONTRAC
Article 1355 of the Civil Code:
Art. 1355. Except in cases specified by law, lesion or inadequacy of cause shall not
invalidate a contract, unless there has been fraud, mistake or undue influence.
HEIRS OF INTAC v. CA, G.R. No. 173211, October 11
Facts: Respondents alleged, among others, that when Iren
Alsua-Betts v. Court of Appeals.
Intac borrowed the title of the property from him to be u
from a financing institution; that when Ireneo informed re
Inadequacy of consideration does not vitiate a contract unless it is proven which in
of Spouses Intac, they objected because the title would be
the case at bar was not, that there was fraud, mistake or undue influence. (Article
spouses and it would then appear that the couple owned
1355, New Civil Code). We do not find the stipulated price as so inadequate to shock
however, tried to appease them, telling them not to worry b
the courts conscience, considering that the price paid was much higher than the
take advantage of the situation considering that he took
assessed value of the subject properties and considering that the sales were effected
time; that during his lifetime, he informed them that the
by a father to her daughter in which case filial love must be taken into account.
equally divided among them after his death; and that r
paying the real estate taxes over said property.
A bad transaction cannot serve as basis for voiding a contract.
countered,
Vales v. Villa. Courts cannot follow one every step ofSpouses
his life Intac
and extricate
himamong
from others, that the subject pr
to them
based
a valid
deed of absolute sale and for a v
bad bargains, protect him from unwise investments,
relieve
himonfrom
one-sided
the
action
to
annul
the
deed
of absolute sale had already
contracts, or annul the effects of foolish acts. x x x Men may do foolish things, make
respondents
the subject
was only by toleran
ridiculous contracts, use miserable judgment, and lose
money by in
them
indeed,premises
all
because
they
were
not
yet
in
need
of
it at that time; an
they have in the world; but not for that alone can the law intervene and restore.
knowledge
about
the sale
thatastook place on October 25, 1
must be, in addition, a violation of law, the commission
of what
the law
knows
an
action
against
them.
an actionable wrong, before the courts are authorized to lay hold of the situation
and remedy it.
Issue: Whether the Deed of Absolute Sale by and betw
Salvacion
Fermin,
While one may posit that the PCA-Cojuangco Agreement
puts PCA
and as
the vendors,
coconut and Mario Intac and A
theofsubject
real of
property
farmers at a disadvantage, the facts do not make out involving
a clear case
violation
any was a simulated contrac
law that will necessitate the recall of said contract. Indeed, the anti-graft court has not
put forward any specific stipulation therein that isRuling:
at war YES.
with any law, or the
Constitution, for that matter. It is even clear as day that none of the parties who
If the parties
state
false cause
entered into the two agreements with petitioner Cojuangco
contested
nora sought
the in the contract to concea
contract
is
only
relatively
simulated
and the parties are
nullification of said agreements, more particularly the PCA who is always provided
agreement.counsel,
Hence,and
where
the essential requisites of a co
legal advice in said transactions by the Government corporate
a battery
simulation
refers
only
to
the content or terms of the c
of lawyers and presumably the COA auditor assigned to said agency.
absolutely binding and enforceable between the partie
interest.
While consideration is usually in the form of money
or property,
monetary. This is clear from Article 1350.
In absolute simulation, there is a colorable contract but

parties haveinnothe
intention
to be
Gabriel v. Monte de Piedad y Caja de Ahorros. A consideration,
legal sense
of bound by it. "The main c
is thatthethe
apparenttocontract is not really desir
the word, is some right, interest, benefit, or advantage simulation
conferred upon
promisor,
legal
effect
or
in
any
way
alterorthe juridical situation of t
which he is otherwise not lawfully entitled, or any detriment, prejudice, loss,
absolutely
simulated
or is
fictitious
disadvantage suffered or undertaken by the promisee other
than to
such as he
at the contract is void, and the
P a g e | 62
each other what they may have given under the contract."
Issue: Whether or not the sale is an absolutely simulated o
The questioned contract of sale was only for the purpose of lending the title of the
property to Spouses Intac to enable them to secure Ruling:
a loan. Their
YES. arrangement was
only temporary and could not give rise to a valid sale. Where there is no
consideration, the sale is null and void ab initio.
The subject Deed of Sale is indeed simulated,2 as it
consideration; (2) it was executed on August 12, 1967, les
Lequin v. Vizconde. There can be no doubt that thetime
contract
the subject
of saleland
or was
Kasulatan
donated to petitioner on June 2
lacked the essential element of consideration. It is a well-entrenched
parents of respondent
rule that
Glenda
whereOng; (3) on May 18, 1978
the deed of sale states that the purchase price has beenland
paidtobut
theinAklan
fact has
Development
never been Bank for a P23,000.00 loa
paid, the deed of sale is null and void ab initio for lack
alleged
of consideration.
sale, petitioner
Moreover,
has been in actual possession o
Art. 1471 of the Civil Code, which provides that "if the
alleged
price sale
is simulated,
was registered
the saleonisMay 25, 1991 or about tw
void," also applies to the instant case, since the price execution;
purportedly(6)
paidrespondent
as indicated
Glenda
in
Ong never introduced
the contract of sale was simulated for no payment wassubject
actuallyland;
made.
and (7) petitioners house stood on a part of
facts and circumstances which may be considered badge
Consideration and consent are essential elements in a contract
balance in
of favor
sale. Where
of petitioner.
a partys
consent to a contract of sale is vitiated or where there is lack of consideration due to a
simulated price, the contract is null and void ab initio.The sale of the land in question was purely simulated
beginning (Article 1346, New Civil Code). If the sale
More importantly, Ireneo and his family continued to Glenda
be in physical
should possession
have immediately
of the taken possession of the
subject property after the sale in 1977 and up to the present.
for taxation
They purposes,
even wentregistered
as far as the sale, paid realty taxes
leasing the same and collecting rentals. If Spouses Intac
therein
really
andpurchased
should not
thehave
subject
allowed plaintiff to mortgage
property and claimed to be its true owners, why did properly
they not militated
assert their
against
ownership
defendant Glendas submission
immediately after the alleged sale took place? Whyand
didthethey
consideration
have to assert
was paid.
their
ownership of it only after the death of Ireneo and Salvacion?
striking badges of absolute simulation is the complete
While
absence
the Deed
of any
of Absolute
attempt on
Sale was notarized, it cannot
the part of a vendee to assert his right of dominion over
the the
saleproperty.
is a true conveyance to which the parties are i
bound.
Respondent heirs failed to present evidence that Angelica, during her lifetime, paid
the realty taxes on the subject lot.
Suntay vs. Court of Appeals. Although the notarization
vests in its favor the presumption of regularity, it do
Thus, the subsequent acts of the parties belie the intent
binding
to bean
bound
instrument
by the never
deed of
intended, in the first place,
sale.
effect upon the parties thereto.
FORMARAN v. ONG, G.R. No. 186264, July 8, 2013,

SPS.
PEREZ,
VILLACERAN
J.
v. DE GUZMAN, G.R. No. 169
VILLARAMA,
JR., which
J.
Facts: Petitioner alleges that she owns the afore-described
parcel of land
was
donated to her intervivos by her uncle and aunt, spouses
Facts: Melquiades
Josephine De
Barraca
Guzman
and filed a Complaint agai
Praxedes Casidsid on June 25, 1967; that on August 12,
Milagros
1967 upon
Villaceran
the proddings
for declaration
and
of nullity of sale, re
representation of defendant (Respondent) Glenda, that
mortgage
she badly
andneeded
damages
a collateral
with preliminary injunction. The co
for a loan which she was applying from a bank to equip
to include
her dental
annulment
clinic,
of plaintiff
foreclosure and Sheriffs Certifica
made it appear that she sold one-half of the afore-described parcel of land to the
defendant Glenda; that the sale was totally without any
De Guzman
consideration
alleged
andthat
fictitious;
she is the registered owner of th
that contrary to plaintiffs agreement with defendant Glenda
secure for
a the
bigger
latterloan
to return
to finance
the
a business venture,
land, defendant Glenda filed a case for unlawful detainer
unsatisfactory
against the plaintiff.
loan record with the PNB, Milagros sugg
property be transferred to her and Jose Villaceran and they
Defendant Glenda insisted on her ownership over the as
land
they
in question
have a credit
on account
line of up
of ato P5,000,000 with the bank
Deed of Absolute Sale executed by the plaintiff in her favor.
P a g e | 63
De Guzman executed a simulated Deed of Absolute Sale7 in favor of the spouses

Villaceran.
Ruling: YES.
Issue: Whetehr the Deed of Sale dated June 19, 1996 is

Despite
a simulated
the stark
contract
fact and
thatnot
Robert
a
and Gil have failed t
true sale of the subject property.
rentals for more or less six (6) years, it was only upo
complaint that Gilbert wanted Robert and Gil ejected. In
Ruling: YES.
that Robert and Gil have failed to pay their monthly renta
exerted by Gilbert to collect the same prior to the filing of
Absolute simulation of contracts. In absolute simulation, there is a colorable contract
but it has no substance as the parties have no intention
Thetoexecution
be bound of
bythe
it. contract was just a mere formality w
characteristic of an absolute simulation is that the PCSO
apparent
for contract
one to install
is not
orreally
put up a lottery outlet.
desired or intended to produce legal effect or in any way alter the juridical situation
of the parties. As a result, an absolutely simulated or fictitious contract is void, and
the parties may recover from each other what they may have given under the contract.
Relative simulation of sale. However, if the parties state a false cause in the contract
to conceal their real agreement, the contract is only relatively simulated and the
parties are still bound by their real agreement. Hence, where the essential requisites
of a contract are present and the simulation refers only to the content or terms of
FORM OF CONTRACTS
the contract, the agreement is absolutely binding and enforceable between the parties
and their successors in interest.
The aforesaid document of sale was executed only to enable petitioners to use the
DAVID v. MISAMIS
OCCIDENTAL
II ELECTRIC
property as collateral for a bigger loan, by way of accommodating
De Guzman.
Thus,
G.R.
No.
194785,
July
11,
2012,
MENDOZA,
J.
the parties have agreed to transfer title over the property in the name of petitioners
solve its problem
who had a good credit line with the bank. The CAFacts:
found To
it inconceivable
for Deof power shortage affect
Guzman to sell the property for P75,000 as stated in coverage,
the June 19,
1996 Deed
of Saleits intention to purchase a 1
MOELCI
expressed
when petitioners were able to mortgage the propertyfrom
withVirgilio
FEBTCS.for
P1,485,000.
David. For this reason, its General Man
Another indication of the lack of intention to sell the (Engr.
property
is
when
few
months
Rada), wenta to
meet
David in the latters office in
later, on September 6, 1996, the same property, this time already registered in the
to supply the power transformer provided that MOEL
name of petitioners, was reconveyed to De Guzman allegedly for P350,000.
resolution because the item would still have to be imported
The purchase of the said transformer was to be finance

National Electrification
Administration (NEA). As there w
DE LEON v. DELA LLANA, G.R. No. 212277, February
11, 2015, PERLASthe loan application, David was requested to deliver th
BERNABE, J.
Facts: Respondent Gilbert dela Llana (Gilbert) filed an
unlawful
detainer
case against
even
without
the required
down payment.
petitioner Robert de Leon (Robert) and a certain Gil de Leon (Gil).
David granted the request provided that MOELCI woul

Gilbert averred that sometime in 1999, he, through an undated contract of lease,
annum. MOELCI acquiesced to the condition. Subsequen
leased a portion of a 541 square-meter property registered in his name, to Robert,
payment.
which the latter intended to use as a lottery outlet. The
lease contract had a term of
five (5) years. Gilbert claimed that Robert and Gil failed to pay their rental arrears to
filed
a complaint for specific performance with dam
him and refused to vacate the subject property, despiteDavid
repeated
demands.
its dismissal on the ground that there was lack of cause
contract of lease
sale, contract
to beginwas
with, or in the alternativ
In their defense, Robert and Gil posited that the aforementioned
unenforceable
under
the
Statute
of Frauds. MOELCI argu
simulated and, hence, not binding on the parties.
could not be considered a binding contract because the
document
from which consent, on its part, to the terms a
Issue: Whether or not the undated lease contract is absolutely
simulated.
P a g e | 64
David could be inferred.
The fourth paragraph of the Grant executed by Jesus Caba

Issue: Whether or not the contract is covered by the Statute
as follows:
of Frauds.
Ruling: NO.
That I hereby reserve the option to seek additional comp

based on the Supreme Court Decision in G.R. No. 60077, p
An examination of the alleged contract to sell would1991,
showwhich
that said
jurisprudence
documentiswas
designated as "NPC vs. Gutie
actually a Contract of Sale. Further, there was delivery and release.
From the foregoing reservation, it is evident that the Spous
There being delivery and release, said fact constitutes
easement
partialfeeperformance
did not bar them
which
from seeking further compe
takes the case out of the protection of the Statute of Frauds. It is elementary that the
partial execution of a contract of sale takes the transaction
The rule
out ofis the
settled
provisions
that a of
contract
the
constitutes the law be
Statute of Frauds so long as the essential requisitesbound
of consent
by its stipulations
of the contracting
which, when couched in clear an
parties, object and cause of the obligation concur and
applied
are clearly
according
established
to their to
literal
be tenor. Courts cannot su
present.
read into the contract words it does not contain or, for th
other intention that would contradict its plain import
contracts because they operate harshly or inequitably as to
them for the benefit of one party and to the detriment of th
relieve one of the parties from the terms which he voluntar
INTERPRETATION OF CONTRACTS
on him those which he did not.
SPS. CABAHUG v. NPC, G.R. No. 186069, January 30, 2013, PEREZ, J.
CRUZ v.asGRUSPE,
G.R.Grant
No. 191431, March 13, 2013, B
Facts: Jesus Cabahug executed two documents denominated
Right of Way
Thefees
claiminarose
from an
in favor of NPC. For and in consideration of the Facts:
easement
the sums
of accident that occurred wh
operated
by
plaintiff
collided
with
P112,225.50 and P21,375.00, Jesus Cabahug granted NPC a continuous easement of the Toyota Corolla car o
carappurtenances.
was a total wreck.
right of way for the latters transmissions lines and their
By said Plaintiff
grant, went to respondents
incident,
and
executed
a
Jesus Cabahug agreed not to construct any building or structure whatsoever, nor Joint
plant Affidavit of Undertaking
damaged affect
car inor20obstruct
days of the
the same model and of at
in any area within the Right of Way that will adversely
alternatively
pay
the
cost
of
car amounting with interes
transmission line of NPC, except agricultural crops, the growth of which will not
until fully paid. When plaintiff failed to comply with the
exceed three meters high.
filed a complaint for collection of sum of money.
Under paragraph 4 of the grant, however, Jesus Cabahug reserved the option to seek
Cruz
and Esperanza
contend
that the Joint Affidavit of U
additional compensation for easement fee, based on the
Supreme
Courts 18
January
can Corporation
be the basis of
obligation to pay a sum of mone
1991 Decision in G.R. No. 60077, entitled National that
Power
v. an
Spouses
consider
an
affidavit
as
different
from a contract: an affid
Misericordia Gutierrez and Ricardo Malit, et al. (Gutierrez).
attest to facts that are within his knowledge, while a cont
meeting ofofthe
minds
between the two contracting parties.
The Spouses Cabahug filed the complaint for the payment
just
compensation,
damages and attorneys fees against NPC. They alleged, among other matters, that in
Issue: Whether
not the Joint
accordance with the reservation provided under paragraph
4 of the or
aforesaid
grant,Affidavit of Undertaking is
they have demanded from NPC payment of the balance of the just compensation for
Ruling:
the subject properties. NPC averred that it already
paid YES.
the full easement fee
mandated and that the reservation in the grant referred to additional compensation for
areCabahug.
obligatory no matter what their forms may
easement fee, not the full just compensation sought byContracts
the Spouses
requisites for their validity are present. In determining
affidavit
or a compensation
contract, the Court
Issue: Whether or not spouses Cabahug may claim the
additional
for looks beyond the title
denomination or title given by the parties in their docume
Easement Fee.
nature of its contents. In the construction or interpreta
intention of the parties is primordial and is to be pur
Ruling: YES.
P a g e | 65
document are clear and leave no doubt on the intention

If of
thethe
language
contracting
usedparties,
is as clear
the as day and readily unde
literal meaning of its stipulations shall control. If the reader,
words appear
there is to
nobe
need
contrary
for construction.
to
the parties evident intention, the latter shall prevail over the former.
The plain language and literal interpretation of the M
A simple reading of the terms of the Joint Affidavit of
petitioner,
Undertaking
otherreadily
creditor
discloses
banks and Paper City intended fr
that it contains stipulations characteristic of a contract.
of the indentures
The Joint that
Affidavit
the machineries
of
and equipments e
Undertaking contained a stipulation where Cruz andand
Leonardo
"B" arepromised
included.toObviously,
replace with the continued inc
the damaged car of Gruspe, 20 days from October 25,
loan,
1999
totaling
or up hundreds
to November
of millions
15,
of pesos, Paper City
1999, of the same model and of at least the same quality.
properties
In the event
acceptable
that they
to the
cannot
creditor banks.
replace the car within the same period, they would pay the cost of Gruspes car in the
total amount of P350,000.00, with interest at 12% per month for any delayed payment
after November 15, 1999, until fully paid. These are very simple terms that both Cruz
and Leonardo could easily understand.
STAR TWO (SPV-AMC), INC. v. PAPER CITY CORP. OF THE

PHILIPPINES, G.R. No. 169211, March 6, 2013, PEREZ, J.
Facts: Paper City applied for and was granted loans and credit accommodations in
STRONGHOLD INSURANCE COMPANY, INC. v. S
peso and dollar denominations by RCBC.
204689, January 21, 2015, LEONEN, J.
Facts: Spouses Rune and Lea Stroem (Spouses Stroem
RCBC, Metrobank and Union Bank (creditor banks with RCBC instituted as the
Contractor Agreement with Asis-Leif & Company,
trustee bank) entered into a Mortgage Trust Indenture (MTI) with Paper City.
construction of a two-storey house on the lot owned by Sp
Paper City was able to comply with its loan obligations until the economic crisis
Pursuant to the agreement, Asis-Leif secured Performan
ensued which made it difficult for Paper City to meet the terms of its obligations
Insurance Company, Inc. (Stronghold). Stronghold and A
leading to payment defaults.
Cynthia Asis-Leif, bound themselves jointly and severally
the agreed amount in the event that the construction projec
Consequently, RCBC filed a Petition for Extrajudicial Foreclosure Under Against the
Real Estate Mortgage executed by Paper City This petition was for the extra-judicial
Asis-Leif failed to finish the project on time despite repeat
foreclosure of eight (8) parcels of land including all improvements thereon
Stroem.
enumerated the in the MTI.
Spouses Stroem subsequently rescinded the agreement.

Negotiations between the other creditor banks and Paper City ensued. During the
interim, Paper City filed with the trial court a Manifestation with Motion to Remove
Stronghold sent a letter to Asis-Leif requesting that the co
and/or Dispose Machinery reasoning that the machineries located inside the
with the Spouses Stroem. No response was received from
foreclosed land and building were deteriorating. It posited that since the machineries
were not included in the foreclosure of the real estate mortgage, it is appropriate that
The Spouses Stroem filed a Complaint for breach of cont
it be removed from the building and sold to a third party.
with a claim for damages against Asis-Leif, Ms. Cynthia
Only Stronghold was served summons.
Issue: Whether the subsequent contracts of the parties included in its coverage of
mortgaged properties the subject machineries and equipment.
Stronghold argues that the trial court cannot acquire jurisd
of the arbitration clause in the agreement and considering
Ruling: YES.
Respondent argue that the Owners-Contractor Agreemen

Repeatedly, the parties stipulated that the properties mortgaged by Paper City to
from the Bond. The parties to the Agreement are ALB/
RCBC are various parcels of land including the buildings and existing improvements
Stroem, while the parties to the Bond are Spouses Stro
thereon as well as the machineries and equipments.
considerations for the two contracts are likewise distinct.
in the Agreement is binding only on the parties thereto,
P a g e | 66
Leif and Spouses Stroem.
a party to the construction agreement, petitioner cann

clause. Petitioner, thus, cannot invoke the jurisdiction of
Issue: Whether it is only respondent and Asis-Leif that may invoke the arbitration
clause
in
the
contract.
Ruling: YES.
RESCISSIBLE CONTRACTS
In enforcing a surety contract, the complementary-contracts-construed-together

doctrine finds application. According to this principle, an accessory contract must be
read in its entirety and together with the principal agreement.
ADA v. BAYLON, G.R. No. 182435, August 13, 2012, V
Facts: stipulations
At the timeofofa their
death, Spouses Florentino an
Article 1374 of the Civil Code provides that: The various
contract
survived
by
their
legitimate
children, namely, Rita Bayl
shall be interpreted together, attributing to the doubtful ones that sense which may
(Victoria),
Dolores
Baylon
(Dolores), Panfila Gomez
result from all of them taken jointly.
(Ramon) and herein petitioner Lilia B. Ada (Lilia).
Prudential Guarantee and Assurance Inc. v. Anscor Land, Inc

Thethe
petitioners
filed withacceded
the RTC a Complaint for partitio
complementary-contracts-construed-together doctrine,
surety willingly
against
Florante,
Rita
and
Panfila. They alleged that a
to the terms of the construction contract despite the silence of the performance bond
Baylon, they claimed that Rita took possession of the
as to arbitration.
appropriated for herself the income from the same. Using
saidregard
parcels
of land, RitaOnallegedly
purchased the subjec
In the case at bar, the performance bond was silent with
to arbitration.
the
47096
and
half
of
Lot
No.
4706.
other hand, the construction contract was clear as to arbitration in the event of
disputes. Applying the said doctrine, we rule that

During thetopendency
the case, Rita, through a Deed o
contract in this case could only be construed as acquiescence
the main of
contract
No.
4709
and
half
of
Lot
4706 to Florante. The petiti
The construction contract breathes life into the performance bond. We are not No.
ready
Pleading
that
the ofsaid
to assume that the performance bond contains reservations
withpraying
regard to
some
the donation in favor of the
accordance
with
Article
1381(4)
terms and conditions in the construction contract where in fact it is silent. On the of the Civil Code.
other hand, it is more reasonable to assume that the party who issued the performance
Issue:
Whether
inter vivos of Lot No. 4709 a
bond carefully and meticulously studied the construction
contract
thattheit donation
guaranteed,
favor
Florante may
be in
rescinded
pursuant to Article 13
and if it had reservations, it would have and should
haveof mentioned
them
the
the
ground
that
the
same
was
made
during the pendency
surety contract.
with the RTC.
This ruling in Prudential cannot be applied to the present case. Several factors
Ruling: YES.
militate against petitioners claim.
What
rescission.InRescission
The contractual stipulations in this case and in Prudential
areisdifferent.
Prudential,is a remedy granted by law
andperformance
even to thirdbond
persons,
the construction contract expressly incorporated the
into to
thesecure the reparation of d
a
contract,
even
if
it
should
be valid, by means of the re
contract. In the present case, Article 7 of the Owners-Contractor Agreement merely
condition
at the moment
stated that a performance bond shall be issued in favor
of respondents,
in whichprior
case to the celebration of said
make
ineffective
a
contract,
petitioner and Asis-Leif Builders and/or Ms. Ma. Cynthia Asis-Leif shall payvalidly entered into and
normal
of external causes resulting
P4,500,000.00 in the event that Asis-Leif fails to perform
its conditions,
duty under by
the reason
Ownersone
of
the
contracting
parties
or
Contractor Agreement. Consequently, the performance bond merely referenced the their creditors.
contract entered into by respondents and Asis-Leif, which pertained to Asis-Leifs
Contracts
whichand
arelandscaping
rescissible are valid contracts having
duty to construct a two-storey residence building with
attic, pool,
of
a
contract,
but
by
reason
of injury or damage caused to
over respondents property.
or to third persons are considered defective and, thus, may
To be clear, it is in the Owners-Contractor Agreement that the arbitration clause is

of rescissible
found. The construction agreement was signed Kinds
only by
respondentscontracts,
and the according to the reason
rescission:
contractor, Asis-Leif, as represented by Ms. Ma. Cynthia Asis-Leif.
1. Those
areNot
rescissible
contracts take effect only between the parties, their assigns
andwhich
heirs.
being because of lesion or prej
P a g e | 67
2. Those which are rescissible on account of fraud or

contract.
bad faith;
Nevertheless,
and
such contract, though considered
3. Those which, by special provisions of law, are susceptible
the instance
to rescission.
of the other litigants pursuant to Article 138
Contracts which are rescissible due to fraud or bad

The faith
RTC aptly
include
ordered
thosethe
which
rescission of the donation inter
involve things under litigation, if they have been half
entered
of Lot
intoNo.
by4706
the defendant
in favor of Florante. The petitioners
without the knowledge and approval of the litigants
the presence
or of competent
of the requisites
judicial for the rescission of a c
authority.
1381(4) of the Civil Code. It is undisputed that, at the t
conveyed by Rita, Lot No. 4709 and half of Lot No. 470
Requisites:
that were the subject of the partition case then pending
1. The defendant, during the pendency of the case,
undisputed
enters into
thata Rita,
contract
thenwhich
one of the defendants in the p
refers to the thing subject of litigation;
did not inform nor sought the approval from the petitioner
2. The said contract was entered into without the to
knowledge
the donation
andinter
approval
vivosof
of the
the said parcels of land to Flo
litigants or of a competent judicial authority.
Although the gratuitous conveyance of the said parcels o
Note: As long as the foregoing requisites concur, was valid, the donation inter vivos of the same bein
THE COURT TO ORDER THE RESCISSION OFownership,
THE SAIDRitas
CONTRACT.
failure to inform and seek the approv
RTC regarding the conveyance gave the petitioners the rig
Rationale. Article 1381(4) seeks to remedy the presence
rescinded
of pursuant
bad faithtoamong
Article the
1381(4) of the Civil Code.
parties to a case and/or any fraudulent act which they may commit with respect to the
thing subject of litigation.
Judicial determination as to the ownership of the thing s
precondition to rescission. It bears stressing that the right
When a thing is the subject of a judicial controversy,a contract under Article 1381(4) of the Civil Code is not
by whatever disposition the court shall render. The determination
parties to the case
of the
are ownership
therefore of the thing subject of
expected, in deference to the courts exercise of jurisdiction
purposeover
of Article
the case,
1381(4) of the Civil Code is to secure th
from doing acts which would dissipate or debase theimpending
thing subject
judgment
of theby
litigation
a court with respect to the thing s
or otherwise render the impending decision therein ineffectual.
to protect the binding effect of a courts impending adju
subject of litigation regardless of which among the conte
There is, then, a restriction on the disposition by thesubsequently
parties of thebething
upheld.
that isAccordingly,
the
a definitive ju
subject of the litigation. Article 1381(4) of the Civil respect
Code requires
to the thing
that any
subject
contract
of litigation is not a conditio
entered into by a defendant in a case which refers to things
rescissory
underaction
litigation
contemplated
should be under Article 1381(4) o
with the knowledge and approval of the litigants or of instituted.
a competent judicial authority.
Further, any disposition of the thing subject of litigation or any act
render inutile the courts impending disposition in such case, sans the knowledge
and approval of the litigants or of the court, is UNMISTAKABLY AND
IRREFUTABLY INDICATIVE OF BAD FAITH
of the court to lay down the respective rights of the parties in a case relative to the
thing subject of litigation and bind them to such determination.
It should be stressed, though, that the defendant in such a case is not absolutely
proscribed from entering into a contract which refer to things under litigation. If, for
SPS. VILORIA
v. CONTINENTAL
AIRLINES, INC.,
instance, a defendant enters into a contract which conveys
the thing under
litigation
16,
2012,
REYES,
J.
during the pendency of the case, the conveyance would be valid, there being no
the subject
United of
States, Fernando purchased
definite disposition yet coming from the court with Facts:
respectWhile
to the in
thing
Lourdes,
two
(2)
round
trip
airline
tickets from San Die
litigation. After all, notwithstanding that the subject thereof is a thing under
Jersey on board Continental Airlines. Fernando
litigation, such conveyance is but merely an exerciseNew
of ownership.
US$400.00 each from a travel agency called "Holiday Tra
a certain
Margaret
Mager (Mager).
This is true even if the defendant effected the conveyance
without
the knowledge
and
approval of the litigants or of a competent judicial authority.
Fernandoof
went
Continentals
knowledge or approval would not precipitate the invalidity
an to
otherwise
valid ticketing office at Ayala A
P a g e | 68
the subject tickets replaced by a single round trip ticket to Los Angeles, California
under his name. Therein, Fernando was informed While
that Lourdes
CAIs refusal
tickettowas
allow
nonFernando to use the value of
transferable, thus, cannot be used for the purchase of afor
ticket
the purchase
in his favor.
of aHe
new
wasticket
also is unjustified as the non-t
informed that a round trip ticket to Los Angeles was tickets
US$1,867.40
was notsoclearly
he would
stipulated,
have it cannot, however be c
to pay what will not be covered by the value of his San
endorsability
Diego to Newark
of the round
subject
triptickets is not an essentia
ticket.
contracts and CAIs failure to comply is not essentia
undertaking to issue new tickets upon Spouses Viloria
In its defense, according to CAI, one of the conditions
tickets.
attached to their contract of
carriage is the non-transferability and non-refundability of the subject tickets.
This Court takes note of CAIs willingness to perform its
Issue: Whether the Spouses Viloria have the right this
to rescind
is to apply
the contract
the price
on of
thethe ticket in Fernandos
ground of CAIs supposed breach of its undertaking
round
to trip
issueticket
new between
tickets upon
Manila and Los Angeles. C
surrender of the subject tickets.
accept the ticket in Lourdes name as full or partial paym
the purchase of any ticket, albeit under her name and for
Ruling: NO.
words, CAIs willingness to comply with its undertak
1998 cannot be doubted, albeit tainted with its e
Spouses Viloria likewise asked for a refund based on
Lourdes
CAIs supposed
ticket is non-transferable.
bad faith in
reneging on its undertaking to replace the subject tickets with a round trip ticket from
Manila to Los Angeles.
The conflict as to the endorsability of the subject ticket
matter, which does not preclude CAI from fixing the p
Spouses Viloria are actually asking for a rescission ofbetween
the subject
Manila
contracts
and Los Angeles in an amount it deems
contractual breach.
provide Spouses Viloria an excuse not to pay such price, a
coming from the value of the subject tickets.
Resolution, the action referred to in Article 1191, is based on the defendants breach
of faith, a violation of the reciprocity between the parties.
It is important to note also that both parties were equally
them can seek judicial redress for the cancellation or
Solar Harvest, Inc. v. Davao Corrugated Cartoncontracts
Corporation.
and they are therefore bound to their respective
reimbursement in view of the other partys failure the
to comply
1st sentence
with of
hisArticle
obligations
1192 provides:
under the contract is one for rescission or resolution.
Art. 1192. In case both parties have committed a breach of
Annulment under Article 1390 v. Rescission under Article
of the1191,
first as
infractor
remedies.
shall be equitably tempered by t
determined which of the parties first violated the contract
extinguished, and each shall bear his own damages.
Annulment
One of the essential elements to a The defect is in the consummation stage
Therefore,
liabilityare
forindamages for its refusal to ac
formation of a contract, which is of the contract
whenCAIs
the parties
purchase
Fernandos round
consent, is absent.
the process
of of performing
their trip ticket is offset by Sp
their
refusal
to
pay
the
amount,
which is not covered by th
respective obligations.
the contract between them remains, hence, CAI is duty bo
The defect is already present at the time
a destination chosen by Spouses Viloria upon their surrend
of the negotiation and perfection stages
Spouses Viloria are obliged to pay whatever amount is not
of the contract
subject tickets.
By pursuing the remedy of rescission under Article 1191, the Vilorias had impliedly
Central
Philippines
admitted the validity of the subject contracts, forfeiting
theirBank
right of
to the
demand
their v. Court of Appeals.
default
the performance
of their respective reciprocal
annulment. A party cannot rely on the contract and
claimin rights
or obligations
under it and at the same time impugn its existence orSavings
validity Bank failed to comply with its obligation to f
Sulpicio M. Tolentino failed to comply with his obligation
within
3 years
as stipulated,
GR: Rescission of a contract will not be permitted for
a slight
or casual
breach, they are both liable for damag
only for such substantial and fundamental violations as would defeat the very
object of the parties in making the agreement.
P a g e | 69
ANCHOR SAVINGS BANK v. FURIGAY, et al., G.R.

4. That
No.act
191178,
being impugned
March 13,is fraudulent; and
2013, MENDOZA, J.
5. That the third person who received the property co
has been
accomplice
in the fraud.
Facts: ASB filed a verified complaint for sum of money
andandamages
with
application for replevin against Ciudad Transport Services, Inc. (CTS), its president,
ASB, without
availing
the first and second remedi
respondent Henry H. Furigay; his wife, respondent Gelinda
C. Furigay;
and aof"John
properties
of
CTS,
Henry
H.
Furigay and Genilda C. Fu
Doe."
rights and actions, simply undertook the third measur
annulment
the donation.
The RTC rendered its Decision in favor of ASB. While
the CivilofCase
was pending,
respondent spouses donated their registered properties to their minor children,
respondents Hegem G. Furigay and Herriette C. Furigay.
Khe Hong Cheng vs. Court of Appeals.
Facts: Philam filed an action for collection against Khe
Claiming that the donation of these properties was made
fraud
creditors,
ASB
caseinwas
stillof
pending,
or on
December 20, 1989, Khe Ho
filed a Complaint for Rescission of Deed of Donation, of
Title
and Damages
againstof
theland in favor of his childr
donations
over parcels
respondent spouses and their children.
1989, said deeds were registered. Thereafter, new titles w
Khe Hong Chengs children. Then, the decision became
Issue: Whether ASB has a cause of action against respondents.
upon enforcement of writ of execution, Philam found ou
longer had any property in his name. Thus, on February
Ruling: NO.
action for rescission of the deeds of donation against Khe
such was made in fraud of creditors. However, Khe Ho
ASBs filing of the action for rescission is premature. dismissal of the action averring that it has already pres
prescriptive period for filing an action for rescission purs
Rescission, nature as a remedy. The remedy of rescission
subsidiary
in nature;
Civil is
Code
commenced
to runit from the time the deeds o
cannot be instituted except when the party suffering damage
has no other
on December
27, legal
1989.means
Khe Hong Cheng averred tha
to obtain reparation for the same.
constructive notice and since the complaint was filed only
more than four (4) years after said registration, the acti
Article 1177 of the New Civil Code provides:
prescription.
The creditors, after having pursued the property in possession

of the debtor
to satisfy
Issue: Whether
Philams
right to file an action for resciss
their claims, may exercise all the rights and bring all the
actions
the latter
for the
donation
hasofalready
prescribed.
same purpose, save those which are inherent in his person; they may also impugn the
actions which the debtor may have done to defraud them.
(Emphasis
Ruling:
NO. added)
Following the subsidiary nature of the remedy of rescission,

a creditor
would
have a period commences to ru
Rule: The
four-year
prescriptive
cause of action to bring an action for rescission, if itthe
is registration
alleged thatofthe
thefollowing
deed sought to be rescinded nor fr
successive measures have already been taken:
rendered its decision BUT FROM THE DAY IT HAS B
1. Exhaust the properties of the debtor through THERE
levying ARE NO OTHER LEGAL REMEDIES BY W
execution upon all the property of the debtor, except
as are exempt
by law
CANsuch
SATISFY
HIS CLAIMS.
from execution;
2. Exercise all the rights and actions of the debtor,Since this provision of law is silent as to when the p
(accion subrogatoria); and
commence, the general rule, i.e, from the moment the
3. Seek rescission of the contracts executed by the therefore,
debtor in applies.
fraud of their rights
(accion pauliana).
An action to rescind or an accion pauliana must be of l
Accion pauliana, requisite:
after all other legal remedies have been exhausted and ha
1. That the plaintiff asking for rescission, has credit prior to the alienation,
although demandable later;
An accion pauliana accrues only when the creditor disco
2. That the debtor has made a subsequent contract
legal remedy for the satisfaction of his claim against
benefit to a third person;
accion pauliana. The accion pauliana is an action of a l
3. That the creditor has no other legal remedy tothe
satisfy
his still
claim,
would at law for the enforcemen
creditor
hasbut
a remedy
benefit by rescission of the conveyance to the third person;
P a g e | 70
debtor, the creditor will not have any cause of action

on February
against 25,
the 1997,
creditor
barely
for a month from its discovery
rescission of the contracts entered into by and between
Cheng
thehad
debtor
no other
and property
another to satisfy the judgment aw
person or persons.
for rescission of the subject deeds clearly had not yet pres
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.
VOIDABLE CONTRACTS
creditor has exhausted the property of the debtor.
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.
v. CONTINENTAL
AIRLINES, INC.,
Petitioners argument that the Civil Code must SPS.
yieldVILORIA
to the Mortgage
and
16,this
2012,
REYES,
J. specific
Registration Laws is misplaced, for in no way does
imply
that the
Facts:
While
in
the
United
provisions of the former may be all together ignored. To count the four
yearStates, Fernando purchased
Lourdes,
twofrom
(2) round
tripofairline tickets from San Die
prescriptive period to rescind an allegedly fraudulent
contract
the date
New
Jersey
on
board
Airlines. Fernando
registration of the conveyance with the Register of Deeds, as alleged byContinental
the
US$400.00
travel agency called "Holiday Tra
petitioners, WOULD RUN COUNTER TO ARTICLE
1383 each
OF from
THE aCIVIL
a
certain
Margaret
Mager
(Mager).
CODE AS WELL AS SETTLED JURISPRUDENCE. IT WOULD LIKEWISE
VIOLATE THE THIRD REQUISITE TO FILE AN ACTION FOR
FernandoCONVEYANCE
went to Continentals
RESCISSION OF AN ALLEGEDLY FRAUDULENT
OF ticketing office at Ayala A
the
subject
tickets
replaced
by a single round trip ticket
PROPERTY, I.E., THE CREDITOR HAS NO OTHER LEGAL REMEDY TO
under his name. Therein, Fernando was informed that
SATISFY HIS CLAIM.
transferable, thus, cannot be used for the purchase of a tick
An accion pauliana thus presupposes the following:informed that a round trip ticket to Los Angeles was US$
to pay what will not be covered by the value of his San D
1. A judgment;
ticket.for the satisfaction of the
2. The issuance by the trial court of a writ of execution
judgment, and
Theresafter,
Viloria decided to exercise their righ
3. The failure of the sheriff to enforce and satisfy the
judgmentSpouses
of the court.
for the purchase of new ones.
Even if respondent Philam was aware, as of December 27, 1989, that petitioner
Issue:
Whether
spouses
Viloria
Khe Hong Cheng had executed the deeds of donation
in favor
of his
children,
the are deemed to have ratified
complaint against Butuan Shipping Lines and/or petitioner Khe Hong Cheng was
Ruling:
YES.
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
Assuming
that Magers
representation
is causal fraud, the
judgment would not be satisfied due to the deeds
of donation
executed
by
impliedly
ratified
when
Spouses
Viloria
decided to exer
petitioner Khe Hong Cheng during the pendency of the case.
subjectON
tickets
for the purchase
RESPONDENT PHILAM FILED HIS COMPLAINT
DECEMBER
27, of new ones.
1989, SUCH COMPLAINT WOULD HAVE BEEN DISMISSED FOR BEING
Article
1392 of theFOR
Civil Code, "ratification exting
PREMATURE. NOT ONLY WERE ALL OTHERUnder
LEGAL
REMEDIES
voidable CLAIMS
contract. NOT YET
THE ENFORCEMENT OF RESPONDENT PHILAM'S
EXHAUSTED AT THE TIME THE DEEDS OF DONATION WERE
Ratification
maynot
be have
effected
expressly or tacitly. It is und
EXECUTED AND REGISTERED. Respondent Philam
would also
been
ratification
if,
with
knowledge
able to prove then that petitioner Khe Hong Cheng had no more property other than of the reason which render
such reason
havingby
ceased,
the person who has a right to
those covered by the subject deeds to satisfy a favorable
judgment
the trial
act
which
necessarily
implies
an intention to waive his righ
court.
Implied
ratification
may take diverse forms, such as by s
Since respondent Philam filed its complaint for accion
pauliana
against petitioners
acts showing approval or adoption of the contract; or by a
P a g e | 71
benefits flowing therefrom
purpose than as a mere passageway; it is unthinkable to

strip of land could be mistaken as anyones residence. In
in possession of the adjacent lot, but they never asserted
meter lot when the 1994 sale was made in their favor;
THE ROMAN CATHOLIC CHURCH v. PANTEconstructed the concrete fence blocking the passageway.
2012, BRION, J.
It is
unlikely
that aPante
could successfully misrepres
Facts: The Church, represented by the Archbishop of
Caceres,
owned
32-square
occupant
of
the
lot;
this
was
a fact that the Church (which
meter lot that measured 2x16 meters located in Barangay Dinaga, Canaman,
same
barangay
lotofwas located) could easily
Camarines Sur. The Church contracted with respondent
Regino
Pantewhere
for thethesale
ocular
inspection
of
its
own
property. The surroundi
the lot on the belief that the latter was an actual occupant of the lot.
indicate that the Church was aware that Pante was u
The Church sought the annulment of its contract withpassageway.
Pante. The Church alleged that
its consent to the contract was obtained by fraud when Pante, in bad faith,
above
viewtoishim,
supported
misrepresented that he had been an actual occupant The
of the
lot sold
when by
in the sketch plan, attached
Church and
Pante,
whichtoclearly labeled the 2x16-m
truth, he was merely using the 32-square meter lot as the
a passageway
from
his house
WAY";
below
these
words
was written the name of "Mr. R
the town proper. It contended that it was its policy to sell its lots only to actual
cross-examination
where
the
sketch plan came from, Pant
occupants.
the Archbishops Palace; neither the Church nor the spou
statement.
Issue: Whether sale of the lot to Pante is voidable under
Article 1390 of the Civil
Code.
The records further reveal that the sales of the Churchs lo
of conferences with the occupants of the lots. The then pa
Ruling: NO.
Marcaida, was apparently aware that Pante was not
nonetheless,
he allowed
theand
sale of the lot to Pante, sub
There is no misrepresentation that existed vitiating
the sellers
consent
Archdioceses
Oeconomous.
Relying on Fr. Marcaidas re
invalidating the contract.
nothing objectionable, Fr. Ragay (the Archdioceses Oeco
Pante.to vitiate consent, two
For mistake as to the qualification of one of the to
parties
requisites must concur:
could
beentoa the
deliberate, willful, or fraudul
1. The mistake must be either with regard to theThere
identity
or not
withhave
regard
that
misled
the
Church
into
giving
its consent to the sale of
qualification of one of the contracting parties; and
Thatprincipal
Pante was
not an actual
2. The identity or qualification must have been the
consideration
foroccupant of the lot he pur
Church
either
ignored
or
waived
as a requirement. In any
the celebration of the contract.
means led to believe or do so by Pantes act; there ha
Churchs
consent
themistaken
sale of the lot to Pante.
The Church contends that its consent to sell the lot
was given
on tothe
impression arising from Pantes fraudulent misrepresentation that he had been the
perspective,
anytofinding of bad faith, if on
actual occupant of the lot. Willful misrepresentation From
existedanother
because
of its policy
imputed
to
the
Church.
Without
sell its lands only to their actual occupants or residents. Thus, it considers the buyers securing a court ruling on
with Pante, the
Churchtosold
the subject property to the sp
actual occupancy or residence over the subject lot a qualification
necessary
induce
the
Civil
Code
declares
that
voidable contracts are bind
it to sell the lot.
proper court action. From the time the sale to Pante was m
subject or
property
to the
Contrary to the Churchs contention, the actual occupancy
residency
ofspouses
a buyerRubi, the Church made no
with Pante;
not even
return the down payment he p
over the land does not appear to be a necessary qualification
that it
thedid
Church
requires
in
selling
the
lot
to
Rubi
without
before it could sell its land. Had this been indeed its policy, then neither Pante nor the annulling its contract w
for damages.
spouses Rubi would qualify as buyers of the 32-square
meter lot, as none of them
actually occupied or resided on the lot. We note in this regard that the lot was only a
In the
absence
of any
vitiation
2x16-meter strip of rural land used as a passageway
from
Pantes
house
to theof consent, the contract bet
stands valid and existing. Any delay by Pante in paying the
municipal road.
the contract, since (as correctly observed by the CA) it w
theit contract
did no
notother
provide a stipulation that the
Well-taken is Pantes argument that, given the size ofterms,
the lot,
could serve
until full payment of the price.21 The right to repurchase
P a g e | 72
Pante fails to pay within the grace period provided22 would have been unnecessary
had ownership not already passed to Pante.
VOID/INTEXISTENT CONTRA
METROPOLITAN FABRICS, INC v. PROSPERITY CREDIT RESOURCES

INC., G.R. No. 154390, March 17, 2014, BERSAMIN,
J.
GONZALO
v. TARNATE, JR., G.R. No. 160600, Janua
Facts: Metropolitan Fabrics, Inc.,, a family corporation,
owned
a 5.8 hectare
J.
industrial compound. Pursuant to a P2 million, 10year
14% the
per DPWH
annum had
loan awarded the contract fo
Facts: After
agreement with Manphil Investment Corporation Sadsadan-Maba-ay
(Manphil), the said
lot
wasthe Mountain Province-Ben
Section of
subdivided into 11 lots, with Manphil retaining four Gonzalo
lots as mortgage
security.
The
Construction,
petitioner
Domingo Gonzalo (G
other seven lots were released to MFI.
respondent John Tarnate, Jr. (Tarnate) the supply of m
project.
MFI sought from PCRI a loan. PCRI, also a familyowned corporation, was
represented by Domingo Ang its president, and his In
sonfurtherance
Caleb, vicepresident.
The Gonzalo executed a de
of their agreement,
parties knew each other because they belonged to the
same
family
association,
the
he, as the contractor, was assigning
to Tarnate an amoun
Lioc Kui Tong Fraternity.
total collection from the DPWH for the project. This 10%
P233,526.13) was the rent for Tarnates equipment tha
Caleb recommended the approval of the P3.44 million
with an interest ranging from
project.
24% to 26% per annum and a term of between five and ten year.
Tarnate thereafter learned that Gonzalo had unilateral
Plaintiffs argued that the 35% interest rate imposedassignment
by PCRI was
exorbitant
and
and that
the disbursement
voucher for the 1
without their consent.
been issued in the name of Gonzalo, and the retention fee r
Issue: Whether the mortgage entered into by the parties

is voidable.
Tarnate
demanded the payment of the retention fee from G
Ruling: NO.
Issue: Whether Tarnate may recover from Gonzalo.
Several documents clearly tended to prove the voluntary

free consent of the
Ruling:and
YES.
appellees to the mortgage.
Gonzalo, who was the sole contractor of the project in q
It was simply incredible that appellants and appellees
would enter into
a mortgage
implementation
of the
project to Tarnate in violation o
contract for P3.5 million where the material terms were
indefinite
and
left
to the
sole therefore, because it did
Their subcontract was
illegal,
discretion of the lender, all protestations of trust andthe
the DPWH
socalledSecretary.
Chinese way
of
Necessarily,
the deed of assi
doing business notwithstanding. It was incredible because
that theit appellees,
longtime
sprung from the subcontract.
businessmen, would sign a promissory note and a real estate mortgage contract in
blank. It was incredible that MFI would issue 24 The
blankillegality
checks for
of the
the monthly
Sub-Contract Agreement necess
amortizations, and this without even knowing that theAssignment
interest ratebecause
appliedthe
was
35%
rule
is that an illegal agreement
per annum. One needs only note that the signing of
the
loan
documents
and
the
contract.
release of the loan were done on the same day, which then strongly connotes
simultaneous consensual and reciprocal acts where Under
both parties
Articlewere
1409present.
(1) of theThe
Civil Code, a contract whose
MOA for the accessory loan for P199,072.255 made on
December
06,
1984
payortheinexistent contract. As suc
contrary to law is a to
void
real estate taxes and registration fees clearly carried an
interesta rate
of one.
35%,To
notthe
24%
produce
valid
same effect is Article 1422
as claimed by appellees. The delay in the executiondeclares
of the mortgage
contract
was is the direct result of a p
that "a contract, which
because the real estate taxes had yet to be paid.
also void and inexistent."
It was incredible too that MFI would have entrusted According

all seven titles
to PCRI1412
and (1)
yet of the Civil Code, the
to Article
also borrowed P199,072.255 for registration fee of thecontract
deed ofcannot
mortgage
for
all
seven
recover from one another and are not enti
titles if they did not know that these seven titles were covered
theare
mortgage.
because by
they
in pari delicto or in equal fault. The doc
P a g e | 73
universal doctrine that holds that no action arises,municipalitys

in equity or at
power
law,isfrom
considered
an
as an ultra vires act su
illegal contract; no suit can be maintained for itsvalidation.
specific performance, or to
recover the property agreed to be sold or delivered, or the money agreed to be paid,
or damages for its violation; and where the parties
The subject
are inloans
paribelong
delicto,
to the
nofirst class of ultra vires act
affirmative relief of any kind will be given to one against the other.
The said loans were executed by the Municipality for t
Nonetheless, the application of the doctrine of in pariconversion
delicto is not
of always
the Agoo
rigid. An
Plaza into a commercial
accepted exception arises when its application contravenes
Redevelopment
well-established
Plan. However,
public the conversion of the
policy.
Municipalitys jurisdiction considering the propertys na
and thereby, forming part of the public dominion. Ac
Public policy, definition. That principle of the law object
which of
holds
appropriation
that no subject
eitherorby the State or by private
citizen can lawfully do that which has a tendency to
subject
be injurious
of lease to
or the
any public
other contractual
or
undertaking.
against the public good."
In this relation, Article 1409(1) of the Civil Code prov
The prevention of unjust enrichment is a recognized public
purpose
policy
is contrary
of the State.
to law, morals, good customs, publi
considered void and as such, creates no rights or obligation
There is no question that Tarnate provided the equipment,
Consequently,
labor and given
materials
the unlawful
for the purpose behind the Sub
project in compliance with his obligations under the
thesubcontract
commercialization
and the of
deed
the of
Agoo Plaza pursuant to the
assignment; and that it was Gonzalo as the contractorare
who
considered
received as
theultra
payment
vires for
in the primary sense thus, r
his contract with the DPWH as well as the 10% retention
effect,fee
non-binding
that shouldonhave
the Municipality.
been
paid to Tarnate pursuant to the deed of assignment.
Considering that Gonzalo refused despite demands to deliver to Tarnate the

stipulated 10% retention fee that would have compensated
the latter
for the use G.R.
of
BEUMER
v. AMORES,
No. 195670, Decem
his equipment in the project, Gonzalo would be unjustly
enriched
at
the
expense
of
BERNABE, J.
Tarnate if the latter was to be barred from recovering
because aofDutch
the rigid
Facts: Petitioner,
National, and respondent, a F
application of the doctrine of in pari delicto. The prevention
of
unjust
enrichment
several years, their marriage was nullified.
called for the exception to apply in Tarnates favor.
Consequently, petitioner filed a Petition for Dissolution of
During trial, petitioner testified that while Lots 1, 2142, 58

LBP v. CACAYURAN, G.R. No. 191667, April 17, 2013,
PERLAS-BERNABE,
the name
of respondent, theseJ.properties were acquired w
Facts: Led by respondent Eduardo Cacayuran (Cacayuran),
from the
residents
Dutch claimed
government
that the
as his disability benefit sinc
conversion of the Agoo Plaza into a commercial center,
sufficient
as funded
income
bytothe
payproceeds
for their acquisition.
from the First and Second Loans (Subject Loans), were "highly irregular, violative of
the law, and detrimental to public interests, and will Issue:
result to
Whether
wantonpetitioner
desecration
is entitled
of
to reimbursement of
the said historical and public park."
parcels of land.
Cacayuran, invoking his right as a taxpayer, filed

Ruling:
a Complaint16
NO.
against the
Implicated Officers and Land Bank, assailing, among others, the validity of the
Subject Loans on the ground that the Plaza Lot used In
as Re:
collateral
Petition
thereof
For Separation
is property of Property-Elena Buena
of public dominion and therefore, beyond the commerce
Muller.
of man.
The Supreme Court had already denied a claim
value of purchased parcels of Philippine land instituted by
Issue: Whether the contracts subject matter of the caseagainst
are void.
his former Filipina spouse, Elena Buenaventura M
Muller cannot seek reimbursement on the ground of equi
Ruling: YES.
willingly and knowingly bought the property despite the
ownership of Philippine land enshrined under Section 7
An act which is outside of the municipalitys jurisdiction
Philippine
is considered
Constitution.
as a void ultra
vires act, while an act attended only by an irregularity but remains within the
P a g e | 74
In this case, the Court cannot, even on the grounds ofOctober

equity, grant
21, 1972
reimbursement
except only to
in favor of the actual tenant
petitioner given that he acquired no right whatsoever over the subject properties by
virtue of its unconstitutional purchase.
Records reveal that the subject landholding fell under t
October 21, 1972 and as such, could have been subseque
A contract that violates the Constitution and the law isthereof,
null and
i.e.,void,
the respondent.
vests no rights,
Notably, the status of respond
creates no obligations and produces no legal effect dispute
at all. Corollary
considering
thereto,
petitioners
underadmission of such fact. Lik
Article 1412 of the Civil Code, petitioner cannot have
petitioner
the subject
is tied
properties
down deeded
to his initial theory that his cla
to him or allow him to recover the money he had spent
subject
forproperty
the purchase
was based
thereof.
on the 1982 deed of sale. The
The law will not aid either party to an illegal contract
property
or agreement;
in 1982 toitthe
leaves
petitioner
the who is evidently not th
parties where it finds them.
same, the said transaction is null and void for being cont
Neither can the Court grant petitioners claim for reimbursement

In consequence,onpetitioner
the basis cannot
of
assert any right ove
unjust enrichment.
such as his present claim for landholding exemption, bec
a null and void source. A void contract is equivalent to no
Frenzel v. Catito., I a case also involving aeffect;
foreigner
and itseeking
does not
monetary
create, modify or extinguish a
reimbursement for money spent on purchase of Philippine
notwithstanding
land, thetheprovision
erroneousonidentification of the subject
unjust enrichment does not apply if the action is proscribed
as owned
by the
byConstitution.
Cipriano Borromeo, the fact remains that pet
petition for landholding exemption since the sale of th
Garcia in 1982 is null and void.
MANOTOK IV v. HEIRS OF BARQUE, G.R. Nos. 16

2012, VILLARAMA, JR., J.
Facts: At bar are the motions for reconsideration separat
Barques and Manahans of the Courts Decision declaring t
and void as they failed to strictly comlply with the requirem
BORROMEO v. MINA, G.R. No. 193747, June 5, 2013, PERLAS-BERNABE, J.
Facts: Subject of this case is a 1.1057 hectare parcel of agriculture land, covered by a
Issue: Whether the same of the friar lands in this case is va
TCT registered in the name of respondent (subject property). Respondents title over
the said property is based on Emancipation Patent No. 393178 issued by the
Ruling: NO.
Department of Agrarian Reform (DAR) on May 2, 1990.
Alonso v. Cebu Country Club, Inc. "Approval by the S

Petitioner filed a Petition dated June 9, 20036 before the Provincial Agrarian Reform
Commerce of the sale of friar lands is indispensable
Office (PARO) of Isabela, seeking that: (a) his landholding over the subject property
absence of such approval made the sale null and void ab in
(subject landholding) be exempted from the coverage of the governments OLT
program under Presidential Decree No. 27 dated October 21, 19727 (PD 27); and (b)
In that case, the majority declared that no valid titles can b
respondents emancipation patent over the subject property be consequently revoked
sale or assignment made in favor of petitioners father due
and cancelled.
of the Director of Lands and the Secretary of the Interio
Secretary of Natural Resources in the Sale Certificate
To this end, petitioner alleged that he purchased the aforesaid property from its
Certificate. Applying the Alonso ruling to these cases, we
previous owner, one Serafin M. Garcia (Garcia), as evidenced by a deed of sale
over the subject friar land can be recognized in favor o
notarized on February 19, 1982 (1982 deed of sale). For various reasons, however, he
assignment documents in the absence of the certificate
was not able to effect the transfer of title in his name.
Director of Lands and approved by the Secretary of
Resources.
Issue: Whether the sale between petitioner and Garcia is null and void.
Ruling: YES.
In the light of the foregoing, the claim of the Barques w

were unable to produce an authentic and genuine sale certi
PD 27 prohibits the transfer of ownership over tenanted rice and/or corn lands after
P a g e | 75
The Manahans propounded the same theory that contracts

Accordingly,
of saleinover
the friar
interest
lands
of substantial justice, the
without the approval of the Secretary of Natural Resources
compensation
mayhas
be been
subsequently
and was hereby directed.
ratified, but pointed out that unlike the Manotoks Deed of Conveyance No. 29204
(1932), their Deed of Conveyance No. V-2000-22 (2000) was issued and approved by
the Director of Lands upon prior authority granted by the Secretary.
VDA. DE CABALU, et al. v. SPS TABU, G.R. No. 188
In their Consolidated Memorandum dated December
19, 2010,
MENDOZA,
J. the Manahans
reiterated their earlier argument that the LMB Director
himself
had
the authority
Facts: The property
subject oftothe controversy is a 9,000
approve contracts of sale and deeds of conveyance over
friar lands
the basis
Mariwalo,
Tarlac,onwhich
was aofportion of a property regist
General Memorandum Order No. 1 issued in 1977Faustina
by thenMaslum
Secretary
of
Natural
(Faustina) under Transfer Certificate of T
Resources Jose J. Leido, Jr. delegating such functiona to
the
Director
of
Lands.
This
total area of 140,211
square
meters.
delegated power can also be gleaned from Sec. 15, Chapter 1, Title XIV of the
Administrative Code of 1987 which provides thatOntheDecember
Director 8,of1941,
LandsFaustina
shall died without any childr
"perform such other functions as may be provided
by
law
or
assigned
by
the
will, dated July 27, 1939, assigning
and distributing her p
Secretary." Moreover, former President Corazon C. Aquino
issued
Executive
Order
nieces. The said holographic will, however, was not prob
No. 131 dated January 20, 1987 reorganizing the LMB
providing
that theLaxamana
LMB
the and
father
of Domingo
(Domingo), Benjami
Director shall, among others, perform other functions
as
may
be
assigned
by
the
1960. On March 5, 1975, Domingo
allegedly executed a
Minister of Natural Resources.
Parcel of Land disposing of his 9,000 square meter sha
Cabalu.
The argument that the Director of Lands had delegated authority to approve contracts
of sale and deeds of conveyances over friar lands ignores
the consistent
of this
On August
1, 1994,ruling
to give
effect to the holographic wil
Court in controversies involving friar lands.
heirs of Faustina executed a Deed of Extra-Judicial Suc
said deed imparted 9,000 square meters of the land cove
As to the applicability of Art. 1317 of the Civil Code,
the Court
maintained
that
Domingo.
Thereafter,
on December
14, 1995, Domingo s
contracts of sale lacking the approval of the Secretarythe
fall9,000
undersquare
the class
of
void
and
meters to his
nephew, Eleazar Tabamo. T
inexistent contracts enumerated in Art. 1409 which cannot
be Sale
ratified.
Deed of
of aSection
Portion18ofofLand. On May 7, 1996, t
Act No. 1120 mandated the approval by the Secretary
for aofsale
of friar land
meters
Domingos
sharetoinbe
the partition was registered
valid.
No. 281353.
On August 4, 1996, Domingo passed away.
DPWH v. QUIWA, G.R. No. 183444, February 8, 2012,

SERENO,
J.
On October
8, 1996,
two months after his death, Domin
Facts: After the Mt. Pinatubo tragedy in 1991, DPWH
Deed of engaged
Absolutea Sale
number
of TCT
of No. 281353 in favor o
contractors, including the respondents, for the urgent
(Tabu).
rehabilitation
The resultant
of the affected
transfer of title was registere
river systems.
Subsequently, Tabu and his wife, Dolores Laxama
subdivided the said lot into two which resulted into TCT N
The contractors have completed their assigned rehabilitation works. But DPWH
refused to pay the contractors for the reason that theOncontracts
Januarywere
15, invalid
1999, respondent
due to
Dolores Laxamana-T
non-compliance with legal requirements. As such, respondents
Tubilan-Laxamana,
filed an action
TeresitaforLaxamana,
a
Erlita Laxamana,
sum of money against DPWH.
heirs of Domingo, filed an unlawful detainer action again
Abus, Roger Talavera, Jesus Villar, Marcos Perez, Arth
Issue: Whether respondents may recover upon a void claiming
contract. rights under them. The heirs claimed that th
allowed to occupy the subject lot by their late father, Do
Ruling: YES.
vacate the property, they refused to do so. The case was r
heirs and a writ of execution was subsequently issued.
Payment for services done on account of the government, but based on a void
contract, cannot be avoided. The government is unjustified
On February
in denying
4, 2002,
what
petitioners
it owes Milagros de Belen Vda. D
to contractors and in leaving them uncompensated after
Spouses
it has
Angela
benefitted
Cabalufrom
and the
Rodolfo Talavera, and Patrici
already completed work. Jurisprudence recognizes the
case
principle
for Declaration
of quantum
of Nullity
meruit.of Deed of Absolute Sale,
P a g e | 76
Transfer Certificate of Title Nos. 291338 and Under

291339,
Article
Quieting
1347 of of
the Title,
Civil Code, "No contract may
Reconveyance, Application for Restraining Order, Injunction
inheritanceand
except
Damages
in cases(Civil
expressly authorized by law." P
Case No. 9290) against respondent spouses before the
characterizes
Regional Trial
a contract
Court, Branch
entered into upon future inherita
63, Tarlac City (RTC).
Requisites:
In their complaint, petitioners claimed that they were the1.lawful
The succession
owners of the
has subject
not yet been opened;
property because it was sold to their father, Laureano Cabalu,
2. Thebyobject
Domingo,
of thethrough
contractaforms part of the inheritanc
Deed of Absolute Sale, dated March 5, 1975. Hence, 3.
being
Thethe
promissor
rightful has,
owners
withby
respect to the object, an exp
way of succession, they could not be ejected from the subject
purely
property.
hereditary in nature.
In their Answer, respondent spouses countered that the

In this
deedcase,
of sale
at the
from
time
which
the deed
the was executed, Faustinas
petitioners anchored their right over the 9,000 square
themeter
objectproperty
of the contract,
was null the
and9,000 square meter proper
void because in 1975, Domingo was not yet the owner
inheritance
of the property,
of his father
as the same
from the estate of Faustina;
was still registered in the name of Faustina. Domingo
inchoate
became
hereditary
the owner
right therein.
of the
property only on August 1, 1994, by virtue of the Deed of Extra-Judicial Succession
with Partition executed by the forced heirs of Faustina.
Domingos
In addition,
status
theyasaverred
an heirthat
of Faustina by right of repre
Domingo was of unsound mind having been confined
the in
RTC
a mental
should institution
have maintained
for a the validity of TCT No.
time.
square meter subject property. As correctly concluded by
inheritance of Domingo from Faustina.
Issues:
(2) YES.
(1) Whether the Deed of Sale of Undivided Parcel of Land covering the 9,000 square
meter property executed by Domingo in favor of Laureano
Regarding
Cabalu
theondeed
March
of sale
5, 1975,
covering the remaining 4,500 s
is valid.
property executed in favor of Renato Tabu, it is evid
document itself, the Deed of Absolute Sale, dated October
(2) Whether the Deed of Sale, dated October 8, 1996, it
covering
was executed
the 4,500
on August
square meter
4, 1996 more than two months
portion of the 9,000 square meter property, executed Contracting
by Domingoparties
in favormust
of Renato
be juristic entities at the time o
Tabu, is null and void.
contract. Stated otherwise, to form a valid and legal agr
there be a party capable of contracting and a party capabl
Ruling:
Hence, if any one party to a supposed contract was alre
execution, such contract is undoubtedly simulated and
(1) NO.
and void by reason of its having been made after th
appears as one of the contracting parties therein. The de
The March 5, 1975 Deed of Sale of Undivided Parcelcontractual
of Land executed
capacity.
by Domingo
in favor of Laureano Cabalu was a fictitious and simulated document. There are
discrepancies in the signature of the notary public, hisThe
PTRcontract
and the being
document
null number
and void, the sale to Renato Tab
on the lower-most portion of the document, as welland
as the
transmitted
said deed
noofrights
sale whatsoever.
being
Consequently, TCT
found only after the plaintiffs-appellants were ejected
byby
virtue
the defendants-appellants.
of the October 8, 1996 Deed of Sale, as well a
They were allegedly not aware that the said property Nos.
was bought
291338by
and
their
291339,
father,both
and registered in the name o
they never questioned the other half of the property notDolores
occupied
Laxamana,
by them are likewise void.
Even on the assumption that the March 5, 1975 deed was not simulated, still the sale
cannot be deemed valid because, at that time, Domingo was not yet the owner of the
property. The original and registered owner of the subject property was Faustina, who
during her lifetime had executed a will. In the said will, the name of Benjamin, father
of Domingo, appeared as one of the heirs. Thus, even if Benjamin died sometime in
1960, Domingo in 1975 could not yet validly dispose of the whole or even a portion
thereof for the reason that he was not the sole heir of Benjamin, as his mother only
died sometime in 1980.
ESTOPPEL
P a g e | 77
CONCEPT
This Court is not unaware of the doctrine of immutabi

judgment becomes final and executory, it is made im
meaning it can no longer be modified in any respect
rendered it or even by this Court.
DY v. HON. BIBAT- PALAMOS, G.R. No. 196200, September 11, 2013,
As with every rule, however, this admits of certain excep
MENDOZA, J.
renders
the in
execution
of a judgment impossible or
Facts: The present controversy finds its roots in the event
Courts
decision
Orix Metro
can
petition
the
court
to
modify
Leasing and Finance Corporation v. M/V "Pilar-I" and Spouses Ernesto Dy and the judgment to harmon
facts. A supervening event is a fact which transpires or
Lourdes Dy involving the same parties.
develops after a judgment has become final and executo
which the
werewere
unaware
Petitioner Ernesto Dy (petitioner) and his wife, Lourdes
Dy parties
(Lourdes),
the of prior to or during tria
in
existence
at
that
time.
proprietors of Limchia Enterprises which was engaged in the shipping business.
Limchia Enterprises, with Lourdes as co-maker, obtained a loan from Orix Metro
Initsthis
case, theofsinking
of M/V Pilar-I can be consid
Leasing and Finance Corporation (respondent) to fund
acquisition
M/V Pilar-I,
Petitioner,
who didexecuted
not have
a cargo vessel. As additional security for the loan, Limchia
Enterprises
the possession of the ship,
destruction
when
Colorado
filed
its Manifestation, dated J
Deed of Chattel Mortgage over M/V Pilar-I
September 11, 2009 Decision of this Court in Orix M
Corporation
v. pirates,
M/V "Pilar-I"
Due to financial losses suffered when M/V Pilar-I was
attacked by
Spousesand Spouses Ernesto Dy
finality
on
January
19,
Dy failed to make the scheduled payments as required in their promissory note.2010. During the course of the p
CA and this Court, petitioner could not have known of the
because itForeclosure
was in the possession
of Colorado.
Respondent filed the Complaint and Petition forvessel
Extrajudicial
of
Preferred Ship Mortgage. Following the filing of an affidavit of merit and the posting
could
be argued
that petitioner
of bond by respondent, the RTC ordered the seizure ofItM/V
Pilar-I
and turned
over its and his lawyer should ha
for the return of the vessel in its former condition at
possession to respondent.
possession of the same during the proceedings in the ea
modification
the had
Courts
is warranted by the
The RTC rendered a decision in favor of Spouses Dy,
ruling thatofthey
not decision
yet
the severe damage
to the
defaulted on their loan because respondent agreed that
to ais,restructured
schedule
of vessel subject of the case
this
information
to
the
courts
by
payment. There being no default, the foreclosure of the chattel mortgage on M/V the party in possession of
Pilar-I was premature. The RTC ordered that the vessel be returned to Spouses Dy.
entitled to the return of M/V PilarThis was affirmed by the Court of Appeals (CA). OnHence,
appeal,petitioner
the Courtispromulgated
respondent
took possession of it. Considering, how
its Decision, dated September 11, 2009, upholding thewhich
findings
of the CA.
possible, then respondent should pay petitioner the value o
Consequently, on August 17, 2010, petitioner filed a motion for execution of
having
been deprived
judgment with the RTC. In the intervening After
period,
Colorado
filed ofitshis vessel for almost two d
his own,
it would
be thePilar-I,
height of injustice to permit th
Manifestation/Motion, dated July 29, 2010, informing
the RTC
that M/V
petitioner
in
pieces,
especially
which was in its possession, had sustained severe damage and deterioration and had after a judgment by this
respondent
to restore
sunk in its shipyard because of its exposure to the elements.
For this
reason, possession
it sought of the vessel to petitio
withsell
nothing
but aand
hollow and illusory victory f
permission from the court to cut the sunken vesselpetitioner
into pieces,
its parts
in
his
favor
and
declared
that
respondent wrongfully took
deposit the proceeds in escrow. In his Comment/Objection, petitioner insisted that he
could
enjoy the that
beneficial
use of his extremely
had the right to require that the vessel be returned to him
in no
thelonger
same condition
it
no
longer
seaworthy
and
has
no
other
commercial value bu
had been at the time it was wrongfully seized by respondent or, should it no longer be
scrap.
possible, that another vessel of the same tonnage, length
and beam similar to that of
M/V Pilar-I be delivered.
Issue: Whether or not petitioner is estopped from asking for the return of the vessel in
ESTOPPEL BY LACHES
the condition it had at the time it was seized?
Ruling: NO.
P a g e | 78
SANCHEZ v. SANCHEZ, G.R. No. 187661, December

Facts:
4, 2013,
TherePEREZ,
was a Deed
J. of Absolute Sale which expre
parcel of land registered in the name of Andrew has bee
Modesto through a sale. Andrew assailed the said docume
falsehood and fraudulent misrepresentations.
While Andrew admitted that he sent the said pre-signed

response to the latters offer to buy his abovementioned pr
that the said transaction did not push through because
financial means to purchase the property at that time.
He alleged that he tried to retrieve the said deed from Mod

return it despite several reminders.
This alleged liberality of Andrew was later extended to

Juanita H. Yap (Yap). Modesto, through Yap, allegedly of
property, but Andrew already refused to part with his lo
that his certificate of title was missing.
Thus, he filed an Affidavit of Loss with the Regis

Subsequently, he learned that a Petition for Reconstitutio
filed by Modesto on the basis of the said deed of sale, whi
been notarized in 1981.
Thus, Andrew filed a case below to seek for the annulm

During the pendency of the case, Andrews certificate o
new one in the name of Modesto was issued. Hence, the a
to include Cancellation Of New Title And Reconveyance O
By way of affirmative and special defences, Modesto alle

prescription, and laches.
Issue: Whether or not the lower court erred in dismissing
grounds of prescription and laches.
Ruling: YES.
It is apparent from the records that the RTC did not co

evidence proving that Andrew was guilty of prescription o
blown trial. The case was simply dismissed on the basis of
the parties.
The affirmative defense of prescription does not automati

of a complaint under Rule 16 of the Rules of Civil P
prescription can effectively be used in a motion to dismis
on its face shows that indeed the action has already
prescription is one involving evidentiary matters requirin
merits, it cannot be determined in a motion to dismiss.
Contrary to Modestos contention, it is not apparent fr

action had already prescribed.
P a g e | 79
met with petitioner Lim, who "induced" them into signin

for the purchase of USD 2,000,000.00 worth of Ceres II F
Upon closer inspection of the complaint, it would seem
In that
September
there areofseveral
the same
possible
year, they met again with L
scenarios that may have occurred given the limited
proposal,
set of this
facts.
time
Theforstatement
the purchase of USD 500,000.00
"transaction did not push through since defendant
Ltd.didSenior
not Subordinated
have the financial
Income Notes. In a January 20
herewithal to purchase the subject property" creates confusion
Citigroup,and
the allows
respondents
for several
learned that their investments d
different interpretations.
was totally wiped out. Upon verification with the SEC, th
Finance Ltd. Notes and the Aeries Finance II Ltd. Note
On one side, it can be argued that said contract is void
securities.
and consequently,
They also the
learned
rightthat
to Ceres II Finance Ltd., Ae
challenge such contract is imprescriptible.
petitioners, among others, are not duly-registered security
agents.
Montecillo v. Reynes. Where the deed of sale states that the purchase price has been
paid but in fact has never been paid, the deed of sale isThe
nullSEC-EPD
and void ab
terminated
initio forits
lack
investigation on the ground
of consideration.
has already prescribed.
Such ruling of the Court would mean that when theIssues:

deed of sale declares that the
price has been paid, when in fact it has never been paid, that would be considered as a
"badge of simulation" and would render the contract void
(1) Whether
and consequently,
the criminal action against petitioners is barre
to challenge the same is imprescriptible.
(2) Whether the administrative action against petitioners is
On the other hand, a different analysis of the statement "transaction did not push
through since defendant did not have the financialRuling:
wherewithal to purchase the
subject property" may yield another interpretation. One can also deduce that what
actually transpired was a simple non-payment of purchase
(1) NO. price, which will not
invalidate a contract and could only give rise to other legal remedies such as
rescission or specific performance. In this scenario, The intent is to encompass in Section 62 (Securitie
therefore subject to prescription.
prescriptive periods only of the civil liability in cases of vi
Furthermore, well settled is the rule that the elements

Givenof the
laches
absence
must of
be aproven
prescriptive period for the en
positively. Laches is evidentiary in nature, a fact thatliability
cannot in
beviolations
established
of by
themere
SRC, Act No. 3326 now comes
allegations in the pleadings and cannot be resolved in a motion to dismiss. At this
stage therefore, the dismissal of the complaint on thePanaguiton,
ground of laches
Jr. v.isDepartment
premature. of Justice. Act No. 332
Those issues must be resolved at the trial of the case
offenses
on theunder
merits,
special
wherein
laws both
which do not provide their ow
parties will be given ample opportunity to prove their respective claims and defenses.
Under Section 73 of the SRC, violation of its provisions
is punishable with imprisonment of not less than seven
twenty-one (21) years. Applying Section 1 of Act No.3326
violations
of the SRC
shall, therefore,
prescribe in twelve (
CITIBANK N.A. v. TANCO-GABALDON, et al., G.R.
No. 198444,
September
4,
2013, REYES, J.
Hand(Gabaldon),
in hand withArsenio
SectionTanco
1, Section 2 of Act No. 3326 st
Facts: On September 21, 2007, Ester H. Tanco-Gabaldon
begin
to
run
from
the
day
of the commission of the viol
(Tanco) and the Heirs of Ku Tiong Lam (Lam) (respondents) filed with the Securities
same be
not known(SEC-EPD)
at the time, from the discovery the
and Exchange Commissions Enforcement and Prosecution
Department1
judicial
proceedings
for
its investigation and punishment."
a complaint for violation of the Revised Securities Act (RSA) and the Securities
Regulation Code (SRC) against petitioners Citibank N.A. (Citibank) and its officials,
Republic
v. Cojuangco,
Section 2 provides two rules
Citigroup Private Bank (Citigroup) and its officials,
and petitioner
CarolJr.Lim
prescriptive
period
shall
begin
to run: first, from the day
(Lim),who is Citigroups Vice-President and Director.
violation of the law, if such commission is known; and se
not then
known,
and were
the institution
of judicial proceedin
In their Complaint, the respondents alleged that Gabaldon,
Tanco
and Lam
joint
accountholders of petitioner Citigroup. Sometime inpunishment.
March 2000, the respondents
P a g e | 80
The respondents alleged in their complaint that the Thereafter,

transactionsRosario
occurred
sold
between
the same to Bobby and her
September 2000, when they purchased the Subscription
(Proceso,
Agreement
Jr.), for
forP100,000.00
the purchaseas evidenced by a Deed o
of USD 2,000,000.00 worth of Ceres II Finance Ltd.
29,Income
1983 (subject
Notes, deed
and July
of sale).
31, On July 26, 1983, Proce
2003, when their Ceres II Finance Ltd. account was totally
Assignment,
wiped out.
ceding
Nevertheless,
unto Bobby
it his rights and interests ov
was only sometime in November 2004 that the respondents
consideration
discovered
of P50,000.00.
that the
The Deed of Assignment wa
securities they purchased were actually worthless.
Henry Andrade (Henry), one of Rosarios sons,
Notwithstanding the aforementioned Deed of Assignment,
Thereafter, the respondents filed on October 23, 2005towith
Buythe
the Prosecutors
subject properties
Officeinafavor of Proceso, Jr., givin
complaint for violation of the RSA and SRC. In Resolution
evening ofdated
July July
31, 1984
18, 2007,
to purchase the same for the s
however, the prosecutors office referred the complaint
Proceso,
to the
Jr. failed
SEC. Finally,
to do so,theBobby consolidated his o
respondents filed the complaint with the SEC on September
properties,
21,and
2007.
the Based
TCTs therefor
on the were issued in his name.
foregoing antecedents, only seven (7) years lapsed since the respondents invested
their funds with the petitioners, and three (3) years since
On October
the respondents
7, 1997, Rosarios
discoverychildren, namely, Grace, P
of the alleged offenses, that the complaint was correctly
Glory, Miriam
filed with
Rose,
the Joseph
SEC for
(all surnamed Andrade), Jas
investigation. Hence, the respondents complaint was
Santiago
filed well
(Andrades),
within the
filed
twelve
a complaint for reconveyance
(12)-year prescriptive period provided by Section 1 ofconveyance
Act No. 3326.
and damages against Bobby before the RTC
alleged that the transaction between Rosario and Bobby (s
(2) NO.
one of sale but was actually an equitable mortgage which
Rosarios indebtedness with Bobby. They also claim
Laches is the failure or neglect for an unreasonable and
properties
unexplained
werelength
inherited
of time
by them
to from their father, Proc
do that which, by exercising due diligence, could or Sr.),
should
the have
subject
been
properties
done earlier,
were conjugal in nature, and th
thus, giving rise to a presumption that the party dispose
entitled of
totheir
assert
respective
it eithershares
has therein. In this light, they
abandoned or declined to assert it.
as co-owners of the subject properties together with Bob
the TCTs in his name.
Section 54 of the SRC provides for the administrative sanctions to be imposed against
persons or entities violating the Code, its rules or SEC
Bobby
orders.
interposed
The SRC
the omitted
defensestoof prescription and laches a
provide for the period until when complaints for administrative liability under the law
should be initiated.
Issue: Whether laches had already set in, thereby prec
pursuing their claim.
Laches is a recourse inequity, which is, applied only in the absence of statutory law
And though laches applies even to imprescriptible Ruling:
actions,YES.
its elements must be
proved positively.
Records disclose that the Andrades took 14 years before
Immediately after the respondents discovered in 2004reconveyance
that the securities
in 1997.
they invested
The argument that they did no
in were actually worthless, they filed on October 23,transaction
2005 a complaint
is clearly
forbelied
violation
by the facts on record. It is u
of the RSA and SRC with the Mandaluyong City Prosecutor's
was a co-vendee
Office.
in the
It took
subject
thedeed of sale, while Henry w
prosecutor three (3) years to resolve the complaint and
to the
referDeed
the case
of Assignment
to the SEC,and
in Option to Buy both date
conformity with the Court's pronouncement in Baviera
Rosarios
that all
sons,
complaints
Proceso, for
Jr. and
any Andrew, did not question
violation of the SRC and its implementing rules and regulations
deed of saleshould
made by
be their
filed mother
with to Bobby. These incide
the SEC. Clearly, the filing of the complaint with theconclusion
SEC on September
that they 21,
were
2007
well-aware
is
of the subject transa
not barred by laches as the respondents' judicious actions
theirreveal
claimotherwise.
14 years after the sale was executed.
TAN v. ANDRADE, G.R. No. 171904, August 7, 2013, PERLAS-BERNABE, J.

Facts: Rosario Vda. De Andrade (Rosario) was the registered owner of the subject
properties which she mortgaged to and subsequently foreclosed by one Simon Diu
(Simon). When the redemption period was about to expire, Rosario sought the
assistance of Bobby Tan (Bobby) who agreed to redeem the subject properties.
TRUSTS
P a g e | 81
CONCEPT
capable of other interpretations.
Rizal Surety & Insurance Co. v. CA. The elements to

competent trustor and trustee, an ascertainable trust re
beneficiaries.
of the
GOYANKO, JR. v. UCPB, G.R. No. 179096, February
06, 2013, Each
BRION,
J. above elements is required to be
of
them
is
missing,
it
is
to the trusts. Furthermore, t
Facts: The late Joseph Goyanko, Sr. (Goyanko) invested Two Million fatal
Pesos
complete
disposition family
of the trust
(P2,000,000.00) with Philippine Asia Lending Investors,
Inc. Petitioners
and property, notwithstandin
beneficiary
will
take
place
in
his the deceaseds illegitimate family presented conflicting claims to PALII for thethe future. It is essential, t
active
one to prevent
trustPALII
from being executed into a lega
release of the investment. Pending the investigation of
the conflicting
claims,
that
is
not
in
contravention
of some prohibition of statu
deposited the proceeds of the investment with UCPB under the name "Phil Asia: ITF
There must also be some power of administration other tha
(In Trust For) The Heirs of Joseph Goyanko, Sr." (ACCOUNT).
contract although the contract is for a third party beneficia
essential,
and these
must be
stated with reasonable certain
UCPB allowed PALII to withdraw One Million Five
Hundred
Thousand
Pesos
may
administer,
and
that
the
court,
(P1,500,000.00) from the Account, leaving a balance of only P9,318.76. When UCPB if called upon so to do,
refused the demand to restore the amount withdrawn plus legal interest, the petitioner
In this case, no express trust was created. First, a compete
filed a complaint before the RTC.
exist. Second, UCPB, as trustee of the ACCOUNT, was
duty totrust
dealwas
with
or given
any power of administration
The petitioner argues in his petition that: first, an express
created,.
Citing
undertook
the
duty
to
hold
the
jurisprudence, the petitioner emphasizes that from the established definition of a trust,title to the ACCOUNT for
Third,
trustor,
did not have the right to the
PALII is clearly the trustor as it created the trust; UCPB
is thePALII,
trusteeasasthe
it is
the party
ACCOUNT.
Finally,
the
terms
in whom confidence is reposed as regards the property for the benefit of another; andby which UCPB is to adm
notforshown
reasonable
certainty. While a trusts
the HEIRS are the beneficiaries as they are the persons
whosewith
benefit
the trust is
particularly
identified
for
a
trust
created. Also, quoting Development Bank of the Philippines v. Commission on to exist, the intention to c
firmly
along with the other elements l
Audit,12 the petitioner argues that the naming of the first
cestuibeque
trustestablished,
is not necessary
express
trust
exists.
as it suffices that they are adequately certain or identifiable.
as a mere
Second, it argues that UCPB was negligent and UCPBs
in bad participation
faith in allowing
the depositary of the proceed
been
PALIIs
intention
to
create
a trust in favor of th
withdrawal and in failing to inquire into the nature of the ACCOUNT. The petitioner
any right
claim over the proceeds in UCPB
maintains that the surrounding facts, the testimony ofrelinquished
UCPBs witness,
andorUCPBs
own records showed that: (1) UCPB was aware of the trust relation between PALII
words "ITF HEIRS" may have created the imp
and the HEIRS; and (2) PALII held the ACCOUNT inWhile
a trustthe
capacity.
was created, a closer scrutiny reveals that it is an ordinary
"ITF" withdrawn
was merelybecause
used toa trust
distinguish the ACCOUNT fr
Issue: Whether UCPB should be held liable for the amount
with
UCPB.
agreement existed between PALII and UCPB, in favor of the HEIRS, when PALII
opened the ACCOUNT with UCPB.
UCPB did not become a trustee by the mere opening of t
1980 of the Civil Code, a creditor-debtor relationship exis
Ruling: NO.
depositor.41 The savings deposit agreement is between the
receiving the deposit, the bank impliedly agrees to pay up
Trust, Nature and Concept.
the depositors order.
A trust, either express or implied, is the fiduciary relationship between one person
Since
the records
petitioners
own admission show
having an equitable ownership of property and another
person
owningand
the the
legal
title
opened
by
PALII,
UCPBs
receipt
of
the deposit signified
to such property, the equitable ownership of the former entitling him to the
upon
its demand
and only upon its order. Thus, when
performance of certain duties and the exercise of certain
powers
by the latter.
withdraw from the ACCOUNT, it was merely performin
their
savings
agreement.
No negligence or b
Express or direct trusts are created by the direct andunder
positive
acts
of the deposit
trustor or
of
thisThis
action.
As far
as UCPB was concerned, P
the parties. No written words are required to create anUCPB
expressfor
trust.
is clear
from
and
not
the
HEIRS.
Article 1444 of the Civil Code, but, the creation of an express trust must be firmly
shown; it cannot be assumed from loose and vague declarations or circumstances
P a g e | 82
IMPLIED TRUST Mendoza, Sime Darbys former sales manager, under a tr

was clearly proved when in the application form17 dated 1
the purchase of the club share, Sime Darby placed its nam
share and Mendoza as the assignee of the club share. A
SIME DARBY PILIPINAS, INC. v. MENDOZAapplication for membership, Sime Darby sent a letter18
addressed to ACC confirming that "Mendoza, as Sime
2013, CARPIO, J.
entitled
to club
membership
of the Company."
Facts: Petitioner Sime Darby Pilipinas, Inc. (Sime
Darby)
employed
Jesus benefit
B.
Mendoza (Mendoza) as sales manager.
Even during the trial, at Mendozas cross-examination
signature
overClub
the printed
Sime Darby bought a Class "A" club share in Alabang
Country
(ACC) words
from "name of assignee" as his
histhe
Reply-Affidavit,
he did
Margarita de Araneta. The share, however, was placedwith
under
name of Mendoza
in not refute Sime Darbys o
as
well
as
Sime
Darbys
payment
trust for Sime Darby since the By-Laws of ACC state that only natural persons may of the monthly billings f
purchased.19 Further, Mendoza admitted signing the clu
own a club share.
of rights,
in blank, and turning it over to
From the time of purchase, Sime Darby paid forassignment
the monthly
dues both
and other
circumstances show that there existed a trust relationship b
assessments on the club share.
the share
was of
bought
by Sime Darby and placed un
Mendoza retired. Nine years later, Sime Darby foundWhile
an interested
buyer
the club
title is Sime
only limited
to the
usufruct, or the use and enjoy
share. Before the sale could push through, the brokerhis
required
Darby to
secure
and
privileges
while
employed
an authorization to sell from Mendoza since the club share was still registered inwith the company.
Mendozas name. However, Mendoza refused to sign the required authority to sell or
Thomson
v. Court
of Appeals. A trust arises in favor of
special power of attorney unless Sime Darby paid him
the amount
of P300,000.00
price of As
a property
name
claiming that this represented his unpaid separation benefits.
a result, in
thethe
sale
did of another, because of th
pays
for
a
thing
intends
a
beneficial
interest for himself.
not push through and Sime Darby was compelled to return the payment to the
prospective buyer.
While Sime Darby paid for the purchase price of the club
thepreliminary
legal title. injunction
Thus, a resulting
Sime Darby filed a complaint for damages with writ of
against trust is presumed as a mat
shifts to the transferee to show otherwise.
Mendoza with the Regional Trial Court (RTC).
Issue: Whether Sime Darby is entitled to damages and injunctive relief against
Mendoza, its former employee.
IGLESIA FILIPINA INDEPENDIENTE v. HEIRS
179597, February 3, 2014, PERALTA, J.
Ruling: YES.
Facts: The plaintiff-appellee Iglesia Filipina Independiente
Medina v. Greenfield Development Corp. The purpose
subject
of a preliminary
properties. injunction is
to prevent threatened or continuous irremediable injury to some of the parties before
their claims can be thoroughly studied and adjudicated.
Rev.
ItsMacario
sole aimGa,
is toinpreserve
his capacity
the as the Supreme Bishop o
status quo until the merits of the case can be heard fully.
portions
Thus,
of the
to property
be entitled
to to
thean
defendant Bernardino Taeza
injunctive writ, Sime Darby has the burden of establishing the following requisites:
The Securities and Exchange Commission issued an ord
1. a right in esse or a clear and unmistakable right to
issue
be protected;
of the IFI against Rev. Macario Ga.
2. a violation of that right;
3. that there is an urgent and permanent act and urgent
Meanwhile,
necessity
the defendant
for the writ
Bernardino
to
Taeza registered t
prevent serious damage.
Consequently, Transfer Certificate of Title Nos. T-77995 a
his name.
In the present case, petitioner Sime Darby has sufficiently established its right over
the subject club share. Sime Darby presented evidence
A that
complaint
it acquired
for annulment
the Class "A"
of sale was filed by the plain
club share of ACC in 1987 through a Deed of Sale.through
Being Supreme
a corporation
Bishop
which
MostisRev. Tito Pasco, against the
expressly disallowed by ACCs By-Laws to acquire and register the club share under
its name, Sime Darby had the share registered under
Petitioner
the maintains
name of respondent
that there was no consent to the co
P a g e | 83
Bishop Rev. Ga had no authority to give such consent. In the alternative, petitioner
contends that if the contract is not declared null andResulting
void, it should
trustsnevertheless
are based onbethe equitable doctrine that
found unenforceable, as the approval and conformity
notoflegal
the title
otherdetermines
entities in the
their
equitable title or interest an
church was not obtained, as required by their Canons. have been contemplated by the parties. They arise from the
the consideration involved in a transaction whereby on
Issue: Whether petioners complaint was filed within invested
the prescriptive
with legal
period.
title but is obligated in equity to hold h
of another.
Ruling: YES.
Constructive trusts are created by the construction of eq
Under petitioner's Canons, any sale of real property demands
requires not
of justice
just theand
consent
prevent
of unjust enrichment. They
the Supreme Bishop but also the concurrence of the against
laymen's
one
committee,
who, by fraud,
the parish
duress or abuse of confidence
priest, and the Diocesan Bishop, as sanctioned by the Supreme
right to property
Council.which he ought not, in equity and good co
The laymen's committee indeed made its objection toUnlike

the saleinknown
expresstotrusts
the Supreme
and resulting implied trusts wher
Bishop. Thus, when the Supreme Bishop executed thebycontract
prescription
of saleany
of petitioner's
property entrusted to him unless h
lot despite the opposition made by the laymen's committee,
constructive
he acted
implied
beyond
trusts,histhe trustee may acquir
powers.
prescription even if he does not repudiate the relations
upon the beneficiary to bring an action for reconveyanc
This case clearly falls under the category of unenforceable
the same.contracts mentioned in
Article 1403, paragraph (1) of the Civil Code,
An action for reconveyance based on an implied or co
Note: Cases where contracts are unenforceable
created by law) prescribes in ten years from the issuance
1. A person signs a deed of extrajudicial partition in
property.
behalf of co-heirs without the
latter's authority;
2. A mother as judicial guardian of her minor The
children,
presentexecutes
action was
a deed
filed of
on January 19, 1990, while
extrajudicial partition wherein she favors one child
titlebyover
giving
thehimsubject
more than
lots his
were issued to responden
share of the estate to the prejudice of her other children;
Bernardino Taeza, only on February 7, 1990.
3. A person, holding a special power of attorney, sells a property of his principal
that is not included in said special power of attorney.
Clearly, therefore, petitioner's complaint was filed well wi
stated above, and it is only just that the subject property
In the present case, however, respondents' predecessor-in-interest,
owner.
Bernardino Taeza,
had already obtained a transfer certificate of title in his name over the property in
question. Since the person supposedly transferring ownership was not authorized to
do so, the property had evidently been acquired by mistake.
SPS. TRINIDAD v. IMSON, G.R. No. 197728, Septem
Article 1456 of the Civil Code. If property is acquired
J. through mistake or fraud, the
person obtaining it is, by force of law, considered a trustee
an implied claimed
trust for that
the she, indeed, entered into
Facts:ofRespondent
benefit of the person from whom the property comes. original owners of the disputed condominium unit which
1, 2002 and would end on March 1, 2003. Sometime in
Constructive trust, Nature. A constructive trust, unlike
an express
does not
purchase
the unit.trust,
However,
since she was then undergoin
emanate from, or generate a fiduciary relation. While in
an
express
trust,
a
beneficiary
previous marriage and thinking that her purchase of th
and a trustee are linked by confidential or fiduciary relations,
inproperty
a constructive
trust, already agreed upon, sh
disrupt the
arrangements
there is neither a promise nor any fiduciary relationthe
to condominium
speak of and unit
the so-called
registered yet in her name; instea
trustee neither accepts any trust nor intends holding the
property
for
the
beneficiary.
Trinidad, who was her confidante, to purchase the unit an
with the understanding that the said property would actuall
Implied trusts are those which, without being expressed, are deducible from the
nature of the transaction as matters of intent or which
are superinduced
the
Armando
agreed withoutonobjection,
which led to the
transaction by operation of law as matters of equity, Assignment
independently
of
the
particular
and Transfer of Rights in his name. Payments
intention of the parties. In turn, implied trusts are made
either by
resulting
or constructive
respondent
through cash and checks paid to
trusts. These two are differentiated from each other as follows:
P a g e | 84
acknowledged said payments. Aside from paying the consideration,

purchase price,and
respondent
not legalalso
title, determines the equitab
paid the real property taxes due on the condominiumpresumed
unit as well
always
as thetoassociation
have been contemplated by the pa
dues, water bills, common area real estate tax, building
nature
insurance
or circumstances
and other charges
of the consideration involved in
billed by the developer.
person thereby becomes invested with legal title but is ob
legal title for the benefit of another.
Having full trust in Armando, coupled with her hectic schedule, respondent did not
bother to transfer ownership of the subject unit in herIntention
name. Since
- although
April 2002
only presumed,
up to
implied or supposed
the time of filing her Answer, respondent has been inthe
open
transaction
and public
or possession
from the facts
of and circumstances acco
the subject property. In 2007, while respondent wasparticularly
out of the the
country,
sourceArmando,
of the consideration - is always an
without respondent's knowledge, annotated his claim and
on the
may
condominium
be inferred from
certificate
the acts or conduct of the par
of title. He also executed a Deed of Absolute Sale in his
expression
favor onofJuly
conduct.
13, 2007. As a
result, respondent was surprised to receive a copy of petitioners' demand letter and
complaint.
The parole evidence presented by respondent sufficiently
was created in her favor.
Issue: Whether respondent is the true owner of the subject property and that the true
intention of the parties is for Armando to hold the Finally,
condominium
a trust,unit
which
in derives
behalf of
its strength from the confide
respondent until the property could be placed in the latter's
does name.
not lose that character simply because of what ap
Applying this principle to the present case, petitioner A
Ruling: YES.
repudiate the trust by simply relying on the questioned
Transfer of Rights and the Deed of Absolute Sale.
Article 1436 of the Civil Code provides that a lessee or bailee is estopped from
asserting title to the thing leased or received, as against the lessor or bailor.
What a tenant is estopped from denying is the title ofTONG,

his landlord
ofKUN,
the et al., G.R. No. 196023
et al. at
v. the
GOtime
TIAT
commencement of the landlord-tenant relation. If the
title
asserted
is
one
that
is
J.
alleged to have been acquired subsequent to the commencement
of
that
relation,
Facts: The petitioners are nine of the ten children of Spou
the presumption will not apply. Hence, the tenant may
that(Spouses
the landlord's
title
andshow
Sy Un
Juan Tong).
has expired or been conveyed to another or himself; and he is not estopped to deny
a claim for rent, if he has been ousted or evicted by title
paramount.
Completing
the ten children of Spouses Juan Tong is the d
(Luis, Sr.) whose surviving heirs are: his spouse Go Tia
In the present case, what respondent is claiming is her
titleMary,
to the
subject
property
Leon,
Lilia,
Tomas,
Luis, Jr., and Jaime, who bein
which she acquired subsequent to the commencementbyofhis
thewife,
landlord-tenant
Roma Cokeerelation
Juan Tong (respondents).
between her and the former owners of the questioned condominium unit. Thus, the
presumption under Section 2 (b), Rule 131 of the Rules
Courthad
doesa not
apply with
and all his children to inform
JuanofTong
meeting
respondent is not estopped from asserting title over thepurchase
disputedLot
property.
998 to be used for the familys lumber b
Lumber". However, since he was a Chinese citizen a
As to whether or not an implied trust was created acquiring
in respondent's
favor,
the title
firstto the property will be re
the said
lot, the
sentence of Article 1448 of the Civil Code provideseldest
that "there
is anSr.,
implied
son, Luis,
who attrust
that time was already of age
when property is sold and the legal estate is granted tocitizen
one party
but
the
price
is paid
among his children.
On May 11, Juan Tong bough
by another for the purpose of having the beneficial interest
of the property."
Jose Ascencio.
Accordingly, on May 16, 1957, TCT No
Register of Deeds in the name of Luis, Sr.
This is sometimes referred to as a PURCHASE MONEY RESULTING TRUST
Sy Un and Juan Tong both died intestate.
Elements:
1. An actual payment of money, property or services,
or an
constituting
Luis,
Sr. equivalent,
died and the
respondents, being his surviving hei
valuable consideration; and
Lot 998 by succession, alleging that no trust agreement
2. Such consideration must be furnished by the alleged
beneficiary
of a resulting
who bought
Lot 998.
trust.
Respondents executed a Deed of Extra-Judicial Settlem
The principle of a resulting trust is based on the equitable doctrine that valuable
P a g e | 85
adjudicating unto themselves Lot 998 and claiming that

was the
to facilitate
said lot is
thethe
purchase
conjugal
of the said property to be u
property of Luis, Sr., and his wife, which the Juvenilebusiness
and Domestic
since Luis,
Relations
Sr. isCourt
the only Filipino Citizen in th
of Iloilo City approved. The said deed was registered causing
time. Asthe
thecancellation
registered owner
of TCTof Lot 998, it is only natur
No. 10346 and the issuance of TCT No. T-60231 in thethe
name
corresponding
of the respondents.
tax payment receipts be in the name
payment thereof.
Subsequently, the respondents agreed to subdivide Lot 998.
There is, in tis case, a purchase money resulting trust. Lu
After Lot 998 was subdivided, Luis, Jr. sold Lot 998-B
of Juan
to Fine
TongRock
and Development
the petitioners in relation to the subjec
Corporation (FRDC), which in turn sold the sameTong
to Visayas
who provided
Goodwill
the money
Credit for the purchase of Lot
Corporation (VGCC). It was only after the petitionerstransfer
received
certificate
a letter of
from
titleVGCC,
was placed in the name of Luis,
that they discovered about the breach of the trust agreement committed by the
respondents.
The principle that a trustee who puts a certificate of regi
repudiate the trust by relying on the registration is one of
To protect their rights, the petitioners filed an action upon
for Annulment
a title. A trust,
of Sales,
which
Titles,
derives its strength from the
Reconveyance and Damages of Lot 998-B against Luis,
another
Jr., especially
FRDC andbetween
VGCC. families,
On
does not lose that c
March 6, 1997, The trial court ruled in favor of the
what
petitioners
appears inwhich
a legalwere
document.
later
affirmed by the CA6 and this Court7 on appeal. Consequently, Lot 998-B was
reconveyed to the petitioners and TCT No. T-14839Contrary
was issued
to the
under
claim
their
of the
names
respondents, it is not error f
including the late Luis, Sr.
parol evidence, i.e., the oral testimonies of witnesses Si
Juan Tong, to arrive at the conclusion that an implied res
Then, Go Tiat Kun executed a Deed of Sale of Undivided
crucial
Interest
is the intention
over Lot to
998-A
create
ina trust.
favor of her children, Leon, Mary, Lilia, Tomas, and the late Jaime, resulting in the
issuance of TCT No. T-134082 over Lot 998-A.
Lastly, the respondents assertion that the petitioners actio
laches and estoppel is erroneous.
Hence, on August 2, 2005, the petitioners filed the instant case for Nullification of
Titles, and Deeds of Extra-judicial Settlement and Sale
Rule:and
Implied
Damages
resulting
claiming
trusts as
do not prescribe except whe
owners of Lot 998-A.
trust. Further, the action to reconvey does not prescribe so
in the name of the trustee.To allow prescription would b
Issue: Whether there was an intention to create a trusttrustee
between
to the
acquire
parties.
title against his principal and true owner.
Ruling: YES.
The title of Lot 998 was still registered in the name

predeceased Juan Tong. Considering that the implied
Although Lot 998 was titled in the name of Luis, Sr.,through
the circumstances
such death,surrounding
Lot 998 cannot be included in his es
the acquisition of the subject property eloquently speak
hisofundivided
the intent share
that the
thereof
equitable
is concerned.
or beneficial ownership of the property should belong to the Juan Tong family.
It is well-settled that title to property does not vest owne
First, Juan Tong had the financial means to purchase
thatthesuch
property
property
for P55,000.00.
has been registered. And, the fact
Second, the possession of Lot 998 had always been with
possession
the petitioners.
of all the tax receipts and tax declarations of L
the time it was registered in the name of Luis, Sr.
their
in claim
1957,ofLot
ownership
998 remained
over Lot 998-A. Although these t
undivided and untouched by the respondents. Fourth,payments of property are not conclusive evidence of ow
up to the time of his fathers death, (1) Lot 998 is in the
arepossession
good indicia
of the
of possession
petitioners,in the concept of owner, f
(2) they resided in the tenement in the front part of Juan
would
Tongs
be paying
compound,
taxes for
(3) aLuis
property that is not in his ac
Sr. never sent any letter or communication to the petitioners
possession.
claiming
Such realty
ownership
tax payments
of
constitute proof tha
Lot 998, and (4) he and his mother have a residence attitle
Ledesco
over the
Village,
property.
La Paz,
Therefore,
Iloilo the action for reconvey
City while his brother and sisters also have their own
formsresidences.
part of Lot 998, is imprescriptible and the petition
property taxes on Lot 998 were paid not by Luis Sr. but
claiming
by hisownership
father Juanthereof.
Tong and
the Juan Tong Lumber, Inc., from 1966 up to early 2008.
Moreso, when the petitioners received a letter from VGCC
In view of the mutual trust and confidence existingbreach
between
of the
saidtrust
parties
agreement
who arecommitted by the heirs of
family members, the only reason why Lot 998 was registered
institutedinantheaction
nametoofprotect
Luis, Sr.
their rights, as well as upon l
P a g e | 86
Tiat Kun executed a Deed of Sale of Undivided Interest over Lot 998-A in favor of
her children. Clearly, no delay may be attributed to them.
In 1994, the petitioner renewed Nenas option to buy t
petitioner conducted a series of negotiations with res
Note: The doctrine of laches is not strictly applied between near relatives, and the
introduced himself as representing the other heirs. After
fact that the parties are connected by ties of blood or marriage tends to excuse an
Altamiranos through Alejandro entered into an oral co
otherwise unreasonable delay.
petitioner over the subject property.
In January 1995, in view of the said oral contract of sale, th

payments to the Altamiranos which Alejandro duly rece
these partial payments. Petitioner offered in many instan
balance of the agreed purchase price of the subject propert
Hundred Forty Thousand Pesos (P340,000.00), but Alejan
SALES
petitioner. Because of this, the petitioner demanded from
Alejandro, the execution of a Deed of Absolute Sale i
payment of the agreed price.
ELEMENTS OF SALE
Petitioner filed a complaint for Specific Performance with

RECIO v. HEIRS OF ALTAMIRANO, G.R. No. 182349,
Julypetitioner
24, 2013,also caused to annotate on the TCT N
1997, the
REYES, J.
Lis Pendens.
Facts: In the 1950s, Nena (Nena), the mother of Reman Recio (petitioner), leased
from the respondents Alejandro, Adelaida, Catalina,
Alfredo,
Francisco,
all of summons to the Alt
Pending
the return
of service
surnamed Altamirano, Violeta Altamirano Olfato, anddiscovered
Loreto Altamirano
Vda. Deproperty has been subseque
that the subject
Maralit (the Altamiranos) a parcel of land with improvements,
situated
at No. Lajarca
39 10 (Spouses Lajarca). Petiti
Lauro and
Marcelina
de Julio Street (now Esteban Mayo Street), Lipa City,Complaint
Batangas. impleading
The said land
thehas
Spouses Lajarca and adding
an area of more or less eighty-nine square meters annulment
and fifty of
square
decimeters
the sale
between the Altamiranos and the Spo
(89.50 sq m), and is found at the northern portion of two (2) parcels of land
covered by Transfer Certificate of Title (TCT) Nos. 66009 and 66010 of the
Registry of Deeds of Lipa City. The Altamiranos inherited the subject land from
Whether
there was a valid oral contract of sale
their deceased parents, the spouses Aguedo AltamiranoIssue:
and Maria
Valduvia.
Alejandro.
Petitioner claimed that in 1988, the Altamiranos offered to sell the subject property
to Nena for Five Hundred Thousand Pesos (P500,000.00). The latter accepted such
offer, which prompted the Altamiranos to waive the rentals for the subject property.
Ruling:
However, the sale did not materialize at that time
due YES.
to the fault of the
Altamiranos. Nonetheless, Nena continued to occupy and use the property with the
consent of the Altamiranos.
A valid contract of sale requires: (a) a meeting of minds

Meanwhile, the Altamiranos consolidated the two (2) parcels of land covered by
ownership of the thing sold in exchange for a price; (b) t
TCT Nos. 66009 and 66010. They were eventually subdivided into three (3) parcels
must be a possible thing; and (c) the price certain in money
of land which were then denominated as Lots 1, 2, and 3 of the ConsolidationIn the instant case, all these elements are present. The
Subdivision Plan PCS-04-00367. Subsequently, TCT No. T-102563 of the Registry
Altamiranos were the ones who offered to sell the pr
of Deeds of Lipa City was issued to cover the subject property. The petitioner and
transaction did not push through due to the fault of the res
his family remained in peaceful possession of Lot No. 3.
petitioner renewed Nenas option to purchase the propert
P a g e | 87
the representative of the Altamiranos verbally agreed.

court.The determinate subject
matter is Lot No. 3, which is covered under TCT No. T-102563 and located at No.
39 10 de Julio Street (now Esteban Mayo Street), Lipa
On June
City, 14,
Batangas.
1996, petitioner
The pricefiled with the RTC an action
agreed for the sale of the property was Five annulment
Hundred ofThousand
sale and certificate
Pesos
of title, damages, with p
(P500,000.00). It cannot be denied that the oral contract
temporary
of restraining
sale entered
order.
into
between the petitioner and Alejandro was valid.
Respondent Rose Marie Miranda-Guanio declared that b

mother, respondent Beatriz Miranda, was a resident of Da
Davao City in 1942 and resided in Manila, and she went to
only.
mother
owned J.the property in question. When
ZAMORA v. ZAMORA, G.R. No. 162930, December
5, Her
2012,
PERALTA,
Davao
City,ofshe
not appoint
Facts: Respondent Beatriz Miranda was the registered
owner
thedid
property
in anyone to administer or t
(Rose
disputed
the claim of petitioner that the
question, which is a parcel of land, with an area ofShe
more
or Marie)
less 5,090
square
1972.
Sheofalleged
that onofJune 26, 1972, she gave birth
meters, covered by Transfer Certificate of Title (TCT)inNo.
1594
the Register
she and
her mother,
Beatriz, took care of her child. She d
Deeds for the City of Davao. The said parcel of land
is located
at Carmelite,
on the receipt dated October 23, 19729 was not the signatu
Bajada, Davao City.
FORM
Issue: through
Can the an
receipt
dated October 23, 1972 evidenci
According to petitioner, her father-in-law, Alberto Zamora,
encargado,
being
a private document,
be a basis of petitioner's claim o
Eduardo Cecilio, was in possession of the property
in question.
In 1952, she
(petitioner) was designated by Alberto Zamora as his assistant on land matters. The
NO.
property in question was turned over to her and sheRuling:
was introduced
to Eduardo
Cecilio. After the year 1952, Alberto Zamora told her that the property in question
Article 1358 of the Civil Code provides that acts and contr
was owned by respondent Beatriz Miranda whose family was permanently residing
object the transmission of real rights over immovable pro
in Manila.
property must appear in a public document. If the law requ
special form, the contracting parties may compel each ot
Petitioner allegedly contacted respondent Beatriz Miranda, and petitioner was
once the contract has been perfected.
given a calling card and was told to see her (Beatriz). In October 1972, petitioner
In Fule v. Court of Appeals, the Court held that Article
claimed that she went to the residence of respondent Beatriz Miranda in Quezon
which requires the embodiment of certain contracts in a p
City. While there, they talked about the property in question and respondent Beatriz
for convenience, and registration of the instrument only
Miranda drew a sketch depicting the location of the property. Thereafter, petitioner
parties. Formal requirements are, therefore, for the benef
alleged that respondent Beatriz Miranda sold to her the said property for the sum of
compliance therewith does not adversely affect the validi
P50,000.00. An acknowledgment3 of the receipt of the amount of P50,000.00 was
contractual rights and obligations of the parties thereunder
prepared, and respondent Beatriz Miranda allegedly signed the same
However, in this case, the trial court dismissed petitioner's

Petitioner further claimed that after 1972, she rented out portions of the property in
that the receipt dated October 23, 1972 (Exhibit "B") is a
question. Eduardo Cecilio allegedly continued to be her encargado as there were
which cannot be made the basis of petitioners claim
squatters on the property. In January 1996, the tenants reported to her that there
property as Mr. Arcadio Ramos, an NBI handwriting ex
were two men who went to the property in question. On the first week of February
signature appearing on the said receipt is not the signatu
1996, she (petitioner) met Atty. Cabebe and Mr. Joe Ang. She informed them that
Miranda.
she was the owner of the property in question as she bought it in 1972. After
sometime, she (petitioner) learned that the occupants of the property in question
were being harassed and were told to vacate. She (petitioner) went to Manila and
confronted respondent Beatriz Miranda, and told her that she would file a case in
P a g e | 88
ascertain the identity of the person with whom he is dea

legal authority to convey the property
The strength of the buyers inquiry on the sellers capacity
on the
proof of capacity
of the seller. If the proof
HEIRS OF SARILI v. LAGROSA G.R. No. 193517,depends
PERLAS=
BERNABE,
J.
special
power
attorney
Facts: Respondent allege that he is the owner of a certain
parcel
of of
land
situatedduly
in notarized, mere inspection
document
already
constitutes
Caloocan City and has been religiously paying the real
estate taxes
therefor
since sufficient inquiry. If no
attorney
is provided
or there
its acquisition on November 29, 1974. He claimed
that he
is a resident
of is one but there appears to
acknowledgment,
mere inspection
of the document will
California, USA, and that during his vacation in the Philippines,
he discovered
that
show that
hisRD
investigation
went beyond the document an
a new certificate of title to the subject property was issued
by the
in the name
its execution.
of Victorino married to Isabel Amparo (Isabel0 by of
virtue
of a falsified Deed of
In
the
present
undisputed that Sps. Sarili purch
Absolute Sale dated February 16, 1978 (February 16, 1978 case,
deed itofis sale)
purportedly executed by him and his wife, Amelia. from Ramos on the strength of the latters ostensible au
subject SPA. The said document, however, readily indic
acknowledgment
sincehaving
the respondents community tax c
Sps. Sarili maintained that they are innocent purchasers
for value,
was not
indicated
Under the governing rule on n
purchased the subject property from Ramon B. Rodriguez
(Ramon),
whothereon.
possessed
at SPA)
that time,38
i.e., Section
163(a) of Republic Act No. 7
and presented a Special Power of Attorney12 (subject
to sell/dispose
of the
the "Local
Code of 1991," when an in
same, and, in such capacity, executed a Deed of Absolute
Sale13 Government
dated November
community
acknowledges
20, 1992 (November 20, 1992 deed of sale) conveying
the said tax
property
in their any document before a not
duty
administering
favor. In this relation, they denied any participation
in of
the the
preparation
of the officer to require such in
certificate.39
February 16, 1978 deed of sale, which may have community
been merelytaxdevised
by theDespite this irregularity, how
show
that
they
conducted
an investigation beyond the s
"fixer" they hired to facilitate the issuance of the title in their names.
circumstances of its execution as required by prevailing ju
SariliLabios
cannotMojica
be considered
as innocent purchasers for valu
Respondent, represented by his attorney-in-fact Lourdes
(Lourdes)
defective
notarization
of the subject SPA also mean
via a special power of attorney dated November 25,The
19997
(November
25, 1999
should be
as Caloocan
a private document and thus examined
SPA), filed a complaint against Sps. Sarili and the Register
of treated
Deeds of
Section 20, Rule 132 of the Rules of Court which provide
City (RD) before the RTC.
document
offered
Issue: Was there a valid conveyance of the subject property
to Sps.
Sarili?as authentic is received in evidence
authenticity must be proved either: (a) by anyone who saw
or written; or (b) by evidence of the genuineness of the sig
Ruling: NO.
the maker x x x." Settled is the rule that a defective n
The general rule is that every person dealing with registered
safelycharacter
rely
documentland
of may
its public
and reduce it to a pri
on the correctness of the certificate of title issued therefor
and the
law will
in validity
no
evidentiary
standard
of its
shall be based on prepo
way oblige him to go beyond the certificate to determine
condition
the
The due the
execution
and of
authenticity
of the subject SPA ar
property. Where there is nothing in the certificate of determining
title to indicate
any cloud
the validity
of or
the sale entered into by Victor
vice in the ownership of the property, or any encumbrance
the purchaser
latter thereon,
only claims
to be the isagent of the purported seller
not required to explore further than what the Torrens Title
its Civil
face indicates
in
1874upon
of the
Code provides
that "[w]hen a sale of
quest for any hidden defects or inchoate right that interest
may subsequently
defeat his
therein is through
an agent, the authority of the l
right thereto.
otherwise, the sale shall be void." In other words, if the su
However, a higher degree of prudence is required to
from
buys from
a
be one
dulywho
executed
and authentic,
then it cannot be
person who is not the registered owner, although the requirement
land object of
thebeen
transaction
had
complied with; hence, the sale woul
is registered. In such a case, the buyer is expected to examine not only the
Since for
Sps.him
Sarilis
claim over
certificate of title but all factual circumstances necessary
to determine
if the subject property is bas
valid title
transferred
to them (and, in turn, to
there are any flaws in the title of the transferor. Thenobuyer
also had
has been
the duty
to
P a g e | 89
Ruling: NO.
the instrument presented is forged, even if accompanied by the owners duplicate
certificate of title, the registered owner does not thereby
lose
his contract
title, andofneither
There
is no
agency between Joy Training and
does the assignee in the forged deed acquire any right sell
or title
the property.
the to
parcel
of land with its improvements.
Article 1868 of the Civil Code defines a contract of agenc

person "binds
to render some service or to do som
YOSHIZAKI, v. JOY TRAINING CENTER OF AURORA,
INC.,himself
G.R. No.
or on behalf of another, with the consent or authority o
174978, uly 31, 2013, BRION, J.
express,
or implied
the acts of the principal, from his
Facts: Respondent was the registered owner of a parcel
of land
and thefrom
building
his failureBuhangin,
to repudiate
the agency, knowing that anothe
thereon located in San Luis Extension Purok No. 1,orBarangay
Baler,
behalf without authority.
Aurora.
On November 10, 1998, the spouses Johnson sold the real properties, a Wrangler
a general
rule,and
a contract
jeep, and other personal properties in favor of theAsspouses
Sally
Yoshio of agency may be oral. How
lawofrequires
specific form. Specifically, Articl
Yoshizaki. On the same date, a Deed of Absolute Salewhen
and athe
Deed
Sale of aMotor
providesThe
thatspouses
the contract
of agency must be written for th
Vehicle were executed in favor of the spouses Yoshizaki.
Johnson
piece
were members of Joy Trainings board of trustees at the
timeofofland
sale.or any interest therein. Otherwise, the sale
Article
1878
of the
Joy Training, represented by its Acting Chairpersonprovision,
Reuben V.
Rubio,
filed
an Civil Code, states that speci
necessary
to the
convey
real rights
action for the Cancellation of Sales and Damages with
prayer for
issuance
of a over immovable properties
Temporary Restraining Order and/or Writ of Preliminary Injunction against the
The special power of attorney mandated by law mus
spouses Yoshizaki and the spouses Johnson.
a sale orwithout
that includes
Joy Training claims that the spouses Johnson soldmentions
its properties
the a sale as a necessary ing
act. The
declared
in Cosmic Lumber Corporation v
requisite authority from the board of directors. It assailed
theCourt
validity
of a board
of attorney
resolution dated September 1, 1998 which purportedlyspecial
grantedpower
the spouses
Johnsonmust express the powers of
language
for the principal to confer the rig
the authority to sell its real properties. It averred that unmistakable
only a minority
of the board,
real estate.authorized
When there
any reasonable doubt that the la
composed of the spouses Johnson and Alexander Abadayan,
theissale
suchofpower,
no such provides
construction shall be given the docum
through the resolution. It highlighted that the Articles
Incorporation
law in requiring
a special
that the board of trustees consists of seven members, namely:
the spouses
Johnson,power of attorney in the d
property
is Abelardo
to protectAquino.
the interest of an unsuspecting own
Reuben, Carmencita Isip, Dominador Isip, Miraflor Bolante,
and
by the unwarranted act of another and to caution the buye
specific
authorization
Spouses Yoshikazi claimed that Joy Training authorized
the spouses
Johnsonoftothe
sellputative agent.
the parcel of land. They asserted that a majority of the board of trustees approved
TCT of
No.theT-25334
merely
states that Joy Training is rep
the resolution. They maintained that the actual members
board of
trustees
Johnson.
The title
does notand
explicitly confer to the spouses
consist of five members, namely: the spouses Johnson,
Reuben,
Alexander,
sell the parcel
and the building thereon. Moreover,
Abelardo. Moreover, Connie Dayot, the corporate secretary,
issuedofa land
certification
RICHARD
A. JOHNSON
authorizing the spouses Johnson to act on Joy Trainings
behalf. Furthermore,
theyand LINDA S. JOHNSON"
Johnson
highlighted that the Wrangler jeep and other personalspouses
properties
were represented
registered inJoy Training in land registrat
The resolution which purportedly grants the spouses Joh
the name of the spouses Johnson.
attorney is negated by the phrase "land and building owne
and Linda J. Johnson."42 Even if we disregard such phras
given scant consideration. We adhere to the CAs pos
Issue: Whether or not there was a valid contract of
sale of thethereal
properties
determining
board
of trustees composition is the truste
between Joy Training and the spouses Yoshizaki.
of incorporation and not the actual members of the board.
Section 2543 of the Corporation Code expressly provide
P a g e | 90
number of trustees as fixed in the articles of incorporation

the remaining
shall constitute
half atoquorum
be paid within one year. This w
for the transaction of corporate business.
Amanah reiterated its demand that they vacate the lot.
Moreover, the certification is a mere general power ofPELA

attorney
replied
which
that
comprises
it had already
all
reached an agreement w
of Joy Trainings business.44 Article 1877 of the CiviltheCode
sale clearly
of the subject
states that
lot based
"an on their offered price.
agency couched in general terms comprises only acts of administration, even if the
principal should state that he withholds no power orMeanwhile,
that the agent
acting
may on
execute
Roberns undated written offe
such acts as he may consider appropriate, or evenRecommendation
though the agency
Sheetshould
addressed to its Board Operation
authorize a general and unlimited management."
therein that Robern is interested to buy the lot for P400,0
deposited 20% of the offered purchase price; that it is b
The contract of sale is unenforceable
basis; and, that it is willing to shoulder the relocation
therein. The Head Office accepted Roberns offer.
Necessarily, the absence of a contract of agency renders the contract of sale
unenforceable; Joy Training effectively did not enterEight
into adays
valid
later,
contract
Robern
of was
sale informed of the acceptance.
with the spouses Yoshizaki. Sally cannot also claim that
it is she
Roberns
was aresponsibility
buyer in goodto eject the occupants in the s
faith. She misapprehended the rule that persons dealing
as with
the payment
a registered
of the
land
remaining
have amount within 15 days; o
the legal right to rely on the face of the title and to
deposit
dispense
shallwith
be forfeited.
the need to
inquire further, except when the party concerned has actual knowledge of facts and
circumstances that would impel a reasonably cautious In
man
a letter
to make
dated
such
January
inquiry.
13, 1994, Robern expressed to A
Persons dealing with an agent must ascertain not only
onthe
thefact
status
of of
agency,
the subject
but also
lot.
the nature and extent of the agents authority. A third person with whom the agent
wishes to contract on behalf of the principal may require
To convince
the presentation
Robern that
of the
it has no existing contract w
power of attorney, or the instructions as regards the agency.
furnished
Theitbasis
withfor
copies
agency
of isthe Head Offices rejection l
representation and a person dealing with an agent isdemand
put upon
letters
inquiry
to vacate,
and must
and the proof of consignment
discover on his own peril the authority of the agent.deposit
Thus, Sally
to thebought
Regional
the Trial
real Court (RTC) of Davao Ci
properties at her own risk; she bears the risk of injury withdraw.19
occasioned byThereafter,
her transaction
on February 2, 1994, it informed
with the spouses Johnson.
latter fail to pay the balance by February 9, 1994, its P8
forfeited and the lot shall be up for sale to other prospectiv
STAGES OF A CONTRACT OF SALE

Robern paid the balance of the purchase price and a Dee
was executed. TCT No. T-21298325 was issued in Robe
day.
ROBERN DEVELOPMENT CORPORATION v. PEOPLES
LANDLESS
G.R. No. 173622, March 11, 2013 DEL CASTILLO, J.
week later,
PELA consigned
Facts: Al-Amanah owned a 2000-square meter lot A
located
in Magtu-od,
Davao P150,000.00 in the RTC of
a suit
forsome
Annulment
and Cancellation of Void Deed of Sa
City. Its Davao Branch, thru its officer-in-charge Dalig,
asked
of the members
as early
March 1993 it has a perfected c
of PELA6 to desist from building their houses on theinsisted
lot andthat
to vacate
theassame,
However,
in antheir
apparent act of bad faith and in
unless they are interested to buy it. The informal Amanah.
settlers thus
expressed
Amanah
proceeded
withdown
the sale of the lot despite the prio
interest to buy the lot at P100.00 per square meter, which
Al-Amanah
turned
for being far below its asking price. Consequently, Al-Amanah reiterated its
Issue: Whether there was a perfected contract of sale
demand to the informal settlers to vacate the lot.
Amanah.
The informal settlers together with other members comprising PELA offered to
Ruling:
NO.
purchase the lot for P300,000.00, half of which shall be
paid as
down payment and
P a g e | 91
A contract of sale is perfected at the moment there is Contracts

a meeting undergo
of mindsthree
uponstages:
the
"a) negotiation which b
thing which is the object of the contract and upon theprospective
price. Thus,contracting
for a contract
parties
of indicate interest in the c
sale to be valid, all of the following essential elementsmoment
must concur:
of their"a)
agreement
consent or
[; b) perfection or birth, x x x
meeting of the minds; b) determinate subject matter; and
the parties
c) priceagree
certainupon
in money
all the essential elements of the
or its equivalent."
consummation, which occurs when the parties fulfill or p
upon, culminating in the extinguishment thereof."
In the case at bench, there is no controversy anent the determinate subject matter,
i.e., the 2,000-square meter lot. This leaves us to resolve
In the case
whether
at bench,
therethe
wastransaction
a
between Al-Amanah
concurrence of the remaining elements.
the negotiation stage. The offer never materialized into a p
or documentary evidence categorically proves that
As for the price, fixing it can never be left to the amenability
decision of to
only
the one
offered
of the
P300,000.00 purchase price. B
contracting parties. "But a price fixed by one of the contracting
year periodparties,
PELAifhad
accepted
set to pay the remaining balanc
by the other, gives rise to a perfected sale."
rejected its offered purchase price, although it took the la
to inform the former and this entitled PELA to award of d
As regards consent, "when there is merely an offer byof
one
selling
party the
without
lot toacceptance
another buyer is the final nail in the
of the other, there is no contract." The decision to accept
with aPELA.
bidders
Clearly,
proposal
there
must
is no double sale, thus, we find
be communicated to the bidder. However, a binding contract
consummated
may exist
salebetween
betweenthe
Al-Amanah and Robern.
parties whose minds have met, although they did not affix their signatures to any
written document, as acceptance may be expressed or implied. It "can be inferred
HEIRS OF FAUSTO C. IGNACIO v. HOME BANKER
from the contemporaneous and subsequent acts of the contracting parties." Thus,
TRUST COMPANY et al. G.R. No. 177783 , January 23
we held:
JR., J.
Facts: In August 1981, petitioner Fausto C. Ignacio mortg
x x x The rule is that except where a formal acceptance is so required, although the
to Home Savings Bank and Trust Company, the predeces
acceptance must be affirmatively and clearly made and must be evidenced by some
Bankers Savings and Trust Company, as security for
acts or conduct communicated to the offeror, it may be made either in a formal or
extended to him by said bank.
an informal manner, and may be shown by acts, conduct, or words of the accepting
party that clearly manifest a present intention or determination to accept the offer to
Petitioner defaulted in the payment of his loan obligation
buy or sell. Thus, acceptance may be shown by the acts, conduct, or words of a
proceeded to foreclose the real estate mortgage to which
party recognizing the existence of the contract of sale.
The Certificate of Sale issued to respondent bank was reg
of Deeds of Calamba, Laguna. With the failure of p
There is no perfected contract of sale between PELA and Al-Amanah for want of
foreclosed properties within one year from such registrati
consent and agreement on the price.
were consolidated in favor of respondent bank.
Neither can the note written by the bank that "subject offer has been
Petitioner offered to repurchase the properties. Whil
acknowledged/received but processing to take effect upon putting up of the partial
considered petitioner's offer to repurchase, there was
amount of P150,000.00 on or before April 15, 1993" be construed as acceptance of
executed. The present controversy was fuelled by petitio
PELAs offer to buy. Taken at face value, the annotation simply means that the bank
repurchase/compromise agreement was actually reached
merely acknowledged receipt of PELAs letter-offer. Furthermore, by processing,
parties. Meanwhile, the bank made dispositions of the fore
Al-Amanah only meant that it will act on the offer, i.e., it still has to evaluate
whether PELAs offer is acceptable. Until and unless Al-Amanah accepts, there is
In a letter addressed to respondent, petitioner expressed h
as yet no perfected contract of sale. Notably here, the bank never signified its
amount of P600,000.00 in full, as balance of the repurch
approval or acceptance of the offer.
respondent bank to release to him the remaining parcels o
P a g e | 92
however, turned down his request. This prompted petitioner

counter-offer
to causeand
theisannotation
a rejection of the original offer. Conse
of an adverse claim on the said titles on September 18,is1989.
desired which is not exactly what is proposed in the offe
sufficient to generate consent because any modification or
Prior to the annotation of the adverse claim, on August
of the 24,
offer1989,
annulsthe
theproperty
offer.
covered by TCT No. 154658 was sold by respondent bank to respondent spouses
Phillip and Thelma Rodriguez, without informing the
Thepetitioner.
acceptance
Onmust
October
be identical
6,
in all respects with th
1989, again without petitioner's knowledge, respondent
produce
bank
consent
sold the
or meeting
propertyof the minds. Where a party
covered by TCT No T-111058 to respondents Phillip
priceand
thanThelma
the amount
Rodriguez,
of the offer, such acceptance was q
Catherine M. Zuiga, Reynold M. Zuiga and Jeannette
most
M. considered
Zuiga. as a counter-offer; a perfected contract w
the other party had accepted this counter-offer.
Petitioner filed an action for specific performance and damages in the RTC against
the respondent bank. As principal relief, petitioner sought
Petitioner's
in his original
acceptance
complaint
of the respondent bank's terms
the reconveyance of the subject properties after repurchase
his payment
of the
of foreclosed
P600,000.properties was not absolute.
Respondent bank filed its Answer denying the allegations
repurchase of
price
petitioner
and also and
modified the terms of payment
asserting that it was merely exercising its right as owner
unilateral
of thecondition
subject properties
for payment of the balance (P600,00
when the same were sold to third parties.
petitioner's "financial position." The CA thus considered
by petitioner as a counter-proposal which must be accep
Issue: Whether a contract for the repurchase of the
However,
foreclosed
there
properties
was no was
evidence of any document o
perfected between petitioner and respondent bank. conformity of respondent bank's officers to this counter-pr
Ruling: NO.
PARTIES TO A CONTRACT OF S
Contracts are perfected by mere consent, which is manifested by the meeting of the
offer and the acceptance upon the thing and the cause
whichOF
areMANUEL
to constitute
HEIRS
UYthe
EK LIONG v. CASTILLO, G
contract. The requisite acceptance of the offer is expressed
in
Article
1319
of
the
2013, PEREZ, J.
Civil Code which states:
Facts: Alongside her husband, Felipe Castillo, responden
was the owner of four parcels of land. With the dea
ART. 1319. Consent is manifested by the meeting ofextrajudicial
the offer andpartition
the acceptance
over his estate was executed by his
upon the thing and the cause which are to constitute the
The offer
be purchased by Mauricias n
forcontract.
the payment
of amust
tractor
certain and the acceptance absolute. A qualified acceptance
constitutes aInc.,
counterfrom Bormaheco,
it appears, however, that the
offer.
subsequently sold at a public auction where Insuran
Philippines (ICP) tendered the highest bid. Having co
In Palattao v. Court of Appeals, the Court held that if
the acceptance
the offer
likewise
sold saidofparcels
in favor of Philippine Machin
was not absolute, such acceptance is insufficient to Co.,
generate
consent that
wouldin turn, caused the same to be
Inc. (PMPMCI)
which,
perfect a contract.
Respondents and Buenaflor filed a civil case for the
Contracts that are consensual in nature, like a contract
of sale, are
upon and/or proceedings involv
annulment
of perfected
the transactions
mere meeting of the minds. Once there is concurrence
between the
and theentered into an Agreement w
Respondents
andoffer
Buenaflor
acceptance upon the subject matter, consideration, andlegal
termsservices
of payment,
a contract
of Atty.
Edmundo Zepeda and the assistance
is produced. The offer must be certain. To convert who,
the offer
into a contract,
as financier,
agreed tothe
underwrite the litigation expe
acceptance must be absolute and must not qualify theIn
terms
of the offer;
must be in the notarized Agreemen
exchange,
it wasit stipulated
plain, unequivocal, unconditional, and without variance
of any
sort in
from
theCase No. 8085, Atty. Zeped
favorable
decision
Civil
proposal. A qualified acceptance, or one that involvesentitled
a new proposal,
constitutes
to "a share
of fortya (40%) percent of all the
P a g e | 93
benefits, gratuities or damages" which may be adjudicated

of action
in favor
in respect
of respondents.
to said contract and title would be
separate action. As Atty. Zepedas whereabouts were then
On the same date, respondents and Buenaflor entered
ruled that,
into far
another
from contributing
notarized to the expeditious settlem
agreement denominated as a Kasunduan wherebyof they
respondents
agreed tomotion
sell their
to file a third-party complaint
remaining sixty (60%) percent share in the subject parcels
proceedings
in favor
in the
of Manuel
case. for
the sum of P180,000.00.
Issue: Whether the Agreement and the Kasunduan was
With his death on 19 August 1989, Manuel was survived
contrary
by to
petitioners,
law and public
Heirs policy.
of
Manuel Uy Ek Liong, who were later represented in the negotiations regarding the
subject parcels and in this suit by petitioner BelenLim Vda. de Uy. The record also
shows that the proceedings in Civil Case No. 8085Ruling:
culminated
NO. in this Courts
rendition of a 13 September 1990 Decision in G.R. No. 895619 in favor of
respondents and Buenaflor. Subsequent to the finality
It is
of generally
the Courts
accepted
Decision,
that itno man shall be affected by
appears that the subject parcels were subdivided in accordance
he is a stranger,
with thethe
Agreement,
rule is settled that a court must first a
with sixty (60%) percent thereof consisting of 31,983
party square
either meters
through equally
valid service of summons or volun
apportioned among and registered in the names oflatter
respondents
to be bound
andbyBuenaflo.
a court decision. The fact that Atty.
Consisting of 21,324 square meters, the remaining forty
impleaded
(40%) percent
in thewas,
suit in
and
turn,
given a chance to present his
registered in the names of petitioners and Atty. Zepedabefore
under the
TCT
RTC
No.should
T-72026.
have dissuaded the CA from invalid
holding that attorneys fees should, instead, be compute
Supposedly acting on the advice of Atty. Zepeda, respondents
basis. Admittedly,
wrote petitioners
Article 1491
a
(5) of the Civil Code
letter dated 22 March 1993, essentially informing petitioners
acquiring
that
byrespondents
purchase orwere
assignment the property or right
willing to sell their sixty (60%) percent share in object
the subject
of the parcels
litigation
for inthewhich they intervene by vi
consideration of P500.00 per square meter. Insisting on
However,
the price the
agreed
prohibition
upon in the
applies only during the pen
Kasunduan, however, petitioners sent a letter dated
generally
19 Maydoes
1993,
notrequesting
cover contracts for contingent fees w
respondents to execute within 15 days from notice theeffect
necessary
only after
Deedthe
of finality
Absoluteof a favorable judgment.
Sale over their 60% share as aforesaid, excluding the 1,750-square meter portion
specified in their agreement with Manuel. Informed that
Although
petitioners
executed
were on
ready
thetosame day, it cannot likewi
pay the remaining P179,000.00 balance of the agreed Agreement
price, respondents
and thewrote
Kasunduan
a 28 are independent contracts,
May 1993 reply, reminding the former of their purported
causes
refusal
different
of earlier
fromoffers
that oftothe other. Defined as a meeti
sell the shares of Leovina and of Buenaflor who two
had,persons
in the whereby
meantime,
onedied.
binds himself, with respect to th
Respondents called petitioners attention to the fact, among
or to render
others,some
that service,48
their right a contract requires the conc
to ask for an additional consideration for the salerequisites:
was recognized
(a) consent
under
of the contracting parties; (b) ob
Kasunduan.
subject matter of the contract; and, (c) cause of t
established.49 Executed in exchange for the legal services
Petitioners filed a complaint for specific performance
financial
and damages
assistance
against
to be
the extended by Manuel, the
respondents and respondent Heirs of Buenaflor, as then
respondents
represented
transfer
by Menardo
of 40% of the avails of the suit, in
Umali. Faulting respondents with unjustified refusal
judgment
to comply
in Civil Case
with No.
their
8085. While concededly subje
obligation under the Kasunduan, petitioners prayed that
condition,
the former
the Kasunduan
be orderedwas,
to in contrast, concluded by r
execute the necessary Deed of Absolute Sale overalone,
their for
shares
the purpose
in the subject
of selling in favor of the latter 6
parcels.
subject parcels for the agreed price of P180,000.00.
The record shows that the RTC, in its order dated 18 July 1997, disallowed the
THE CONJUGAL PARTNERSHIP OF THE SPOUSES
filing of a third-party complaint against Atty. Zepeda on the ground that the causes
CADAVEDO AND BENITA ARCOY-CADAVEDO v. L
P a g e | 94
173188, January 15, 2014, BRION, J.

Ruling: NO.
Facts: The spouses Cadavedo filed an action before the RTC against the spouses
Ames for sum of money and/or voiding of contract of
saleLacayas
of homestead
after the
Atty.
acquisition
of the one-half portion contr
latter failed to pay the balance of the purchase price with
Atty.
Lacaya
as counsel.
of the
Civil
Code.
Atty. Lacaya amended the complaint to assert the Article

nullity1491
of the
and
theCode forbids lawyers from a
(5) sale
of the
Civil
issuance of TCT No. T-4792 in the names of the spouses
Ames as gross
violation
of has been the subject of litig
assignment,
the property
that
the public land law. The amended complaint stated that
the spouses
hiredprofession. The same proscr
taken
part by Cadavedo
virtue of their
Atty. Lacaya on a contingency fee basis, with the agreement
if they
become
the
Rule 10that
of the
Canons
of Professional
Ethics.
prevailing parties in the case at bar, they will pay the sum of P2,000.00 for
attorneys fees.
A thing is in litigation if there is a contest or litigation ov
is subject of the judicial action. Following this definition
The RTC upheld the sale of the subject lot to the lot
spouses
Ames.
spouses
was still
in The
litigation
when Atty. Lacaya acquired
Cadavedo, thru Atty. Lacaya, appealed the case to theportion.
CA. While
the
appeal
before
We note in this regard the following established f
the CA in Civil Case No. 1721was pending, the spouses
Ames
the subject
1981, Atty.sold
Lacaya
filed a lot
motion for the issuance of a w
to their children. The lot was thereafter mortgaged with
the
Development
Bank
of
Case No. 1721; (2) on September
23, 1981, the spouses A
the Philippines. The CA reversed the decision of the RTC
and
declaring
the
deed
of
3352 against the spouses Cadavedo; (3)on October 16, 19
sale, transfer of rights, claims and interest to the spouses
andissuance
void abof a writ of execution in Civ
motionAmes
filed null
for the
initio. The case eventually reached this Court via the
spouses
Ames petition
for
spouses
Cadavedo
took possession
of the subject lot on O
review on certiorari which this Court dismissed for lack
of
merit.
after, the subject lot was surveyed and subdivided into two
Lacaya took possession of one of the subdivided portio
1982, Vicente and Atty. Lacaya executed the compromise a
Meanwhile, the spouses Ames defaulted in their obligation with the DBP. Atty.
Lacaya immediately informed the spouses CadavedoFrom
of thethese
foreclosure
salewhether
and
timelines,
by virtue of the alleg
filed an Affidavit of Third Party Claim with the Office
of the Provincial
Sheriff onsubsequently entered into, A
agreement
or an agreement
September 14, 1981.
disputed one-half portion (which was after October 24, 19
3352 and the motion for the issuance of a writ of executio
With the finality of the Judgment, Atty. Lacaya filed awere
motion
for thepending
issuance before
of a
already
the lower courts. Sim
writ of execution. RTC granted the motion and Sps. agreement,
Cadavero were
placedthe
in the
including
subsequent judicial approval,
possession of the lot. Atty. Lacay asked for tha half ofpendency
the lot asofattorney's
fees.
Civil Case
No.He3352. In all of these, the rela
caused the subdidvsion of the lot into two portions and
selected
morebetween
valuableAtty. Lacaya and the spouses
a client
stillthe
existed
and productive half for himself.
SALE
Vicente entered the portions assigned to the respondent and ejected them. This
ledOF A CO-OWNED PROPE
the two parties to enter into an amicable settlement approved by the MTC. Atty.
Lacaya obtained 10.5383 hectares pursuant to the agreement.
RECIO v. HEIRS OF ALTAMIRANO, G.R. No. 182349
REYES, J.
Sps. Cadavedo filed a civil case against Atty. Lacaya Facts:
assailing
In the
the MTC1950s,approved
Nena (Nena), the mother of Reman
compromise agreement.
from the respondents Alejandro, Adelaida, Catalina,
surnamed Altamirano, Violeta Altamirano Olfato, and Lo
Issue: Whether Atty. Lacaya can validly claim the subject
land
contingency afee
Maralit
(theasAltamiranos)
parcel of land with improveme
for his services.
de Julio Street (now Esteban Mayo Street), Lipa City, Bat
an area of more or less eighty-nine square meters and
P a g e | 95
(89.50 sq m), and is found at the northern portion of two (2) parcels of land
covered by Transfer Certificate of Title (TCT) Nos.
Issue:
66009
Whether
and 66010
or not of
the the
contract of sale between Aleja
Registry of Deeds of Lipa City. The Altamiranos inherited
valid. the subject land from
their deceased parents, the spouses Aguedo Altamirano and Maria Valduvia.
Ruling: YES.
Petitioner claimed that in 1988, the Altamiranos offered
Articles
to sell1874
the subject
and 1878
property
of the Civil Code explicitly provid
to Nena for Five Hundred Thousand Pesos (P500,000.00).
Art. 1874.
The latter
Whenaccepted
a sale ofsuch
a piece of land or any interest th
offer, which prompted the Altamiranos to waive the rentals
the authority
for the subject
of the latter
property.
shall be in writing; otherwise, the
However, the sale did not materialize at that time
Art.due
1878.
toSpecial
the fault
powers
of the
of attorney are necessary in the
Altamiranos. Nonetheless, Nena continued to occupy xand
x xuse
x the property with the
consent of the Altamiranos.
(5) To enter into any contract by which the ownersh
transmitted or acquired either gratuitously or for a valuable
Meanwhile, the Altamiranos consolidated the two (2)While
parcels
thisofmay
landbecovered
true, itby
does not negate the fact that
TCT Nos. 66009 and 66010. They were eventually subdivided
any SPA.
into
It three
was (3)
a finding
parcels that need not be disturbed
of land which were then denominated as Lots 1, 2, authority
and 3 offrom
the Consolidationhis co-owners to sell the subject property.
Subdivision Plan PCS-04-00367. Subsequently, TCT In
No.Woodchild
T-102563 Holdings,
of the Registry
Inc. v. Roxas Electric and Const
of Deeds of Lipa City was issued to cover the subjectthe
property.
Court The
stated
petitioner
that "persons
and
dealing with an assum
his family remained in peaceful possession of Lot No.assumed
3.
agency be a general or special one, are bound at
hold the principal liable, to ascertain not only the fact of a
In 1994, the petitioner renewed Nenas option to buy
andthe
extent
subject
of authority,
property.and
Thein case either is controverted
petitioner conducted a series of negotiations withupon
respondent
them to establish
Alejandroit."29
whoIn other words, when the pet
introduced himself as representing the other heirs. After
words
theofsaid
respondent
negotiations,
Alejandro
the without securing a copy o
Altamiranos through Alejandro entered into an oral
latter,
contract
the petitioner
of sale with
is bound
the by the risk accompanying
petitioner over the subject property.
assurance of Alejandro.
Indeed, the petitioner can only apply the principle of appar
In January 1995, in view of the said oral contract of sale,
to prove
the petitioner
the acts made
of the partial
Altamiranos which justify his beli
payments to the Altamiranos which Alejandro dulythat
received
the Altamiranos
and acknowledged
had such knowledge thereof; and if t
these partial payments. Petitioner offered in many instances
those acts
to and
payconduct,
the remaining
consistent with ordinary care and p
balance of the agreed purchase price of the subject property
The instant
in the amount
case shows
of Three
no evidence on record of s
Hundred Forty Thousand Pesos (P340,000.00), but Alejandro
Altamiranos
kept made
on avoiding
beforethetile sale of the subject pro
petitioner. Because of this, the petitioner demanded from
indicating
the Altamiranos,
that they fully
through
knew of the representation of
Alejandro, the execution of a Deed of Absolute Sale
petitioner
in exchange
relied upon
for the
were
fullacts that happened after the
payment of the agreed price.
consent of Alejandro's co-owners, the Court holds that th
Altamiranos and the petitioner is null and void.
Petitioner filed a complaint for Specific Performance The
with sale
Damages.
between
Onthe
March
petitioner
14, and Alejandro is valid ins
1997, the petitioner also caused to annotate on the TCT
of respondent
No. T-102563
Alejandro
a Noticeis ofconcerned. Being a co-owne
Lis Pendens.
and legally dispose of his share even without the cons
heirs. Since the balance of the full price has not yet bee
Pending the return of service of summons to theshall
Altamiranos,
represent the
as payment
petitioner
to his aliquot share. This then
discovered that the subject property has been subsequently
of the Altamiranos
sold to respondents
to the Spouses Lajarca valid only in
Lauro and Marcelina Lajarca (Spouses Lajarca). Petitioner
concerned,filed
exclusive
an Amended
of the aliquot part of Alejandro.
Complaint impleading the Spouses Lajarca and adding as a cause of action the
annulment of the sale between the Altamiranos and the Spouses Lajarca.
P a g e | 96
PREPARATORY CONTRACTS
instead, they were coursed through an ordinary receiving
petitioner, who thus received the same and therefor issue
Receipt. The check was eventually deposited with and cre
EARNEST MONEY
account.
Thereafter, respondent
through counsel demanded in writin
FIRST OPTIMA REALTY CORPORATION v. SECURITRON
SECURITY
withDEL
the sale
of the property.
Petitioner wrote a reply sayi
SERVICES, INC., G.R. No. 199648, January 28, 2015
CASTILLO,
J.
to buy thecorporation
subject property.
Facts: Petitioner First Optima Realty Corporationtheis offer
a domestic
engaged in the real estate business. It is the registered owner of a 256-square meter
Whether theSecuritron
money delivered by respondent was
parcel of land with improvements located in Pasay Issue:
City. Respondent
providing
a perfected
Security Services, Inc., on the other hand, is a domestic
corporation
withcontract
offices of sale.
located beside the subject property.
NO.
Looking to expand its business and add to its existing Ruling:
offices, respondent
through
its General Manager, Antonio Eleazar (Eleazar) sent a December 9, 2004 Letter
When thereCarolina
is merely
offer by one party without accep
addressed to petitioner through its Executive Vice-President,
T.an
Young
is no
contract.
(Young) communications ensued between Eleazar and
Youngs
secretary; Eleazar
likewise personally negotiated with a certain Maria Remoso (Remoso), who was an
The stages
of a contract
of sale are: (1) negotiation, st
employee of petitioner. At this point, Eleazar was unable
to personally
negotiate
prospective contracting parties indicate interest in the
with Young or the petitioners board of directors.
contractoffice
is perfected;
which takes place upo
Sometime thereafter, Eleazar personally went to petitioners
offering(2)
to perfection,
pay
essential
elements
of
the
sale;
and
(3)
consummation, whi
for the subject property in cash, which he already brought with him. However,
respective undertakings under
Young declined to accept payment, saying that she stillparties
neededperform
to secure their
her sisters
culminating
in theapproval
extinguishment
of the contract.
advice on the matter. She likewise informed Eleazar
that prior
of
petitioners Board of Directors was required for the transaction, to which remark
Inapproval.
the present case, the parties never got past the negotiati
Eleazar replied that respondent shall instead await such
the for
parties
had agreed
Respondent sent a Letter accompanied a PNB checkthat
issued
P100,000.00
and on any final arrangement
elements of a contract of sale, namely, (1) consent or the
made payable to petitioner. The letter states thus:
the parties; (2) object or subject matter of the con
consideration of the sale.34
Gentlemen:
Respondents
sending of the February 4, 2
As agreed upon, we are making a deposit of ONE
HUNDREDsubsequent
THOUSAND
petitioner
awaiting
PESOS (Php 100,000.00) as earnest money for your
property without
at the corner
of the approval of petitioner
or without
Layug St., & Lim-An St., Pasay City as per TCT No.Youngs
125318decision,
with an area
of 256making a new offer constit
original
offer which
was already rejected previously; t
sq. m. at 6,000.00/ sq. m. for a total of ONE MILLIONitsFIVE
HUNDRED
THIRTY
no obligation to reply to the February 4, 2005 letter. It wou
SIX THOUSAND PESOS (Php 1,536,000.00).
party to reject the very same offer each and every time
of sale
could simply arise from the f
Full payment upon clearing of the tenants at saidperfected
property contract
and signing
of the
offer made for the hundredth time. Thus, said letter c
Deed of Sale.
evidence of a perfected sale, which does not exist in th
obligation on the part of the petitioner to sell its property
(signed)
The letter made no new offer replacing the first which was
ANTONIO S. ELEAZAR
Sincetothere
is noorperfected
sale between the parties, resp
Respondent did not deliver the letter and check directly
Young
her office;
P a g e | 97
to make payment through the check; nor did it possess

HLURB
the right
ruled
to deliver
in favorearnest
of Dee and directed the petitioner
money to petitioner in order to bind the latter to a sale.
mortgage
As contemplated
over the lot
under
andArt.
ordered that PEPI and AFB- RS
1482 of the Civil Code, "there must first be a perfected
the contract
lot in theofname
sale of
before
Dee, we
free from all liens and encumbr
can speak of earnest money." "Where the parties merely exchanged offers and
counter-offers, no contract is perfected since they didThe
not said
yet give
decision
their was
consent
affrimed
to
by its Board of Commi
such offers. Earnest money applies to a perfected sale."
hence, the petitioner filed a petition for review with the C
affirmed the decision of the OP.
In a potential sale transaction, the prior payment of earnest money even before the
property owner can agree to sell his property is irregular,
Issue: and
Whether
cannot
petitioner
be usedmay
to be compelled to release the
bind the owner to the obligations of a seller under an otherwise perfected
contract of sale; to cite a well-worn clich, the carriage
Ruling:
cannotYES.
be placed before the
horse. The property owner-prospective seller may not be legally obliged to enter
into a sale with a prospective buyer through the
Petitioner
lattersis not
employment
obliged to perform
of
any of the undertaking
questionable practices which prevent the owner fromAFP-RSBS
freely giving
in its
histransactions
consent to with Dee because it is not a
the transaction; this constitutes a palpable transgression
principle
of the of
prospective
relativity sellers
of contracts is that contracts can o
rights of ownership over his property, an anomaly which
entered
theinto
Court
it, and
willcannot
certainly
favor or prejudice a third perso
not condone. An agreement where the prior free consent
such contract
of one and
partyhas
thereto
acted with
is knowledge thereof.
withheld or suppressed will be struck down, and the Court shall always endeavor to
protect a property owners rights against devious practices
The petitioner
that put his
is not
property
being in
tasked to undertake the obliga
danger of being lost or unduly disposed without his prior
RSBS.
knowledge
There are
or consent.
two phases involved in the transactio
PEPI and Dee the first phase is the contract to sell, w
the second phase, the absolute sale, after Dees full pa
CONTRACT TO SELL
price. In a contract of sale, the parties obligations are pl
obliges the vendor to transfer the ownership of and to de
object
of sale.
other hand, the principal obligation
PHILIPPINE NATIONAL BANK v. TERESITA TAN
DEE,
G.R.On
No.the
182128,
full purchase price at the agreed time. Based on the final
February 19, 2014, REYES, J.
them,
obligation
of (PEPI)
PEPI, as owners and vendors of Lo
Facts: Respondent Dee bought from respondent Prime
Eastthe
Properties
Inc.
East Executive
is to transfer the ownership of and
on an installment basis a residential lot located in Binangonan,
Rizal. Homes,
Subsequently,
21-A to Dee,
who, in 1996
turn, shall
PEPI assigned its rights over a 213,093-sq m property
on August
to pay, and has in fact paid,
the property.
There is Benefits
nothing in the decision of the HLUR
respondent Armed Forces of the Philippines-Retirement
and Separation
and
the CA,bywhich
System, Inc. (AFP-RSBS), which included the property
purchased
Dee. shows that the petitioner is being
obligation of any of the respondents. There is also nothing
petitioners claim that the mortgage
Thereafter, PEPI obtained a P205,000,000.00 loanwhich
from validates
petitionerthePhilippine
of cancellation/release
National Bank secured by a mortgage over severalorder
properties,
including Deesof the mortgage is simply a c
payment
of the
purchase
price, as mandated by Section 25
property. The mortgage was cleared by the Housing
and Land
Use
Regulatory
Board (HLURB) on September 18, 1996.
ACE FOODS, INC., v. MICRO PACIFIC TECHNOLO

After Dees full payment of the purchase price, a deed of sale was executed by
No. 200602, December 11, 2013 PERLAS-BERNABE, J
respondents PEPI and AFP-RSBS on July 1998 in Dees favor. Consequently, Dee
Facts: ACE Foods is a domestic corporation engaged in th
sought from the petitioner the delivery of the owners duplicate title over the
of consumer goods in wholesale and retail bases, while M
property, to no avail. Thus, she filed with the HLURB a complaint for specific
the supply of computer hardware and equipment.
performance to compel delivery by the petitioner, PEPI and AFP-RSBS.
On September 26, 2001, MTCL sent a letter-proposal for

P a g e | 98
the subject products to be installed at various officesprospective

of ACE Foods.
seller,ACE
whileFoods
expressly reserving the ownershi
accepted MTCLs proposal and accordingly issued a Purchase
delivery Order
thereof
fortothethe
subject
prospective buyer, binds hims
products amounting to P646,464.00. Thereafter, or exclusively
on March to
4, the
2002,
prospective
MTCL buyer upon fulfillment o
delivered the said products to ACE Foods.. The fine print
upon,
of i.e.,
the invoice
the fullstates,
payment
interof the purchase price. A cont
alia, that "[t]itle to sold property is reserved
be considered
in MICROPACIFIC
as a conditional contract of sale where
TECHNOLOGIES CO., LTD. until full compliance ofreserve
the terms
title and
to the
conditions
propertyof
subject of the sale until the fu
above and payment of the price" (title reservation stipulation).
condition, because
After delivery,
in a conditional
the
contract of sale, the fi
subject products were then installed and configuredpresent,
in ACE
although
Foodssit is
premises.
conditioned upon the happening of
MTCLs demands against ACE Foods to pay the purchase
may price,
or mayhowever,
not occur.
remained
unheeded. Instead of paying the purchase price, ACE Foods sent MTCL a Letter
dated September 19, 2002, stating that it "has been returning
In this case,
the subject
the parties
products
have
to agreed to a contract of sale
MTCL thru its sales representative Mr. Mark Anteolasell.
who
Bearing
has agreed
in mind
to pull
its consensual
out
nature, a contract of s
the said products but had failed to do so up to now." the precise moment ACE Foods, as evinced by its ac
Purchase Order, accepted the latters proposal to sell
ACE Foods lodged a Complaint against MTCL before
consideration
the RTC, praying
of the purchase
that the price of P646,464.00. From
latter pull out from its premises the subject products
reciprocal
since MTCL
obligations
breached
of theitsparties i.e., on the one hand
"after delivery services" obligations to it, particularly,said
to: products
(a) installtoand
ACE
configure
Foods, and, on the other hand, of
the subject products; (b) submit a cost benefit study purchase
to justify price
the purchase
therefor of
within
the thirty (30) days from deliv
subject products; and (c) train ACE Foodss technicians
consequently
on how to use
may
and
bemaintain
demanded. Article 1475 of the Civil
the subject products.
Art. 1475. The contract of sale is perfected at the mome
Issue: Whether ACE Foods should pay MTCL the purchase
minds upon
price
thefor
thing
thewhich
subjectis the object of the contract an
products.
From that moment, the parties may reciprocally demand
Ruling: YES.
the provisions of the law governing the form of contracts.
The very essence of a contract of sale is the transfer of ownership in exchange for a
OPTIMUM DEVELOPMENT BANK v. SPOUSES BE
price paid or promised. This may be gleaned from Article 1458 of the Civil Code
JOVELLANOS and LOURDES R. JOVELLANOS, G.
which defines a contract of sale as follows:
December 4, 2013, PERLAS-BERNABE, J.
Facts: On April 26, 2005, Sps. Jovellanos entered into
Art. 1458. By the contract of sale one of the contracting parties obligates himself to
Palmera Homes, Inc. (Palmera Homes) for the purchase o
transfer the ownership and to deliver a determinate thing, and the other to pay
lot situated in Block 3, Lot 14, Villa Alegria Subdivision,
therefor a price certain in money or its equivalent.
consideration of P1,015,000.00. Pursuant to the contra
possession of the subject property upon a down p
A contract of sale may be absolute or conditional.
undertaking to pay the remaining balance of the contrac
installments of P13,107.00 for a period of 10 years starting
Corollary thereto, a contract of sale is classified as a consensual contract, which
means that the sale is perfected by mere consent.
On August 22, 2006, Palmera Homes assigned all its right
for its validity. Upon perfection of the contract, the parties may reciprocally
Contract to Sell in favor of petitioner Optimum Develo
demand performance, i.e., the vendee may compel transfer of ownership of the
through a Deed of Assignment of even date.
object of the sale, and the vendor may require the vendee to pay the thing sold.
On April 10, 2006, Optimum issued a Notice of Delinqu
Contract to Sell for Sps. Jovellanoss failure to pay th
In contrast, a contract to sell is defined as a bilateral contract whereby the
despite several written and verbal notices.
P a g e | 99
the MeTC held that Sps. Jovellanoss non-payment of t

In a final Demand Letter dated May 25, 2006,11 Optimum
rendered
required
the Contract
Sps. Jovellanos
to Sell without force and effect, th
to vacate and deliver possession of the subject property
their right
withintoseven
possess
(7) days
the property subject of said
which, however, remained unheeded. Hence, Optimum
disposition
filed, aptly
on November
squares with
3, existing jurisprudence. As th
2006, a complaint for unlawful detainer before the MeTC.
the Union Bank case, the sellers cancellation of the co
extinguished the buyers right of possession over the prop
The MeTC ordered Sps. Jovellanos to vacate theof subject
the terminated
property
agreement.
and pay
Optimum reasonable compensation in the amount of P5,000.00 for its use and
occupation until possession has been surrendered. ItVerily,
held that
in aSps.
contract
Jovellanoss
to sell, the prospective seller bi
possession of the said property was by virtue of aproperty
Contract subject
to Sell of
which
the agreement
had
exclusively to the
already been cancelled for non-payment of the stipulated
fulfillment
monthly
of theinstallment
condition agreed upon which is th
payments. As such, their "rights of possession over thepurchase
subject property
price butnecessarily
reserving to himself the ownership
terminated or expired and hence, their continued possession
despite delivery
thereof thereof
constitute[d]
to the prospective buyer.
unlawful detainer."
The full payment of the purchase price in a contract
Dissatisfied, Sps. Jovellanos appealed to the RTC, claiming
condition,
that
thethe
non-fulfillment
case did not of which prevents the prosp
merely involve the issue of physical possession but rather,
to convey
questions
title from
arising
becoming
from effective, as in this case.
their rights under a contract to sell which is a matter that is incapable of pecuniary
estimation and, therefore, within the jurisdiction of the RTC.
MANUEL UY & SONS, INC., v. VALBUECO, INCOR
179594, September 11, 2013, PERALTA, J.
The RTC affirmed the MeTC judgment.The CA reversed the RTC decision and
Facts: Petitioner Manuel Uy & Sons, Inc. is the registered
held that the controversy does not involve the issue of possession but also the
located in Teresa, Rizal covered by Transfer Certificate o
validity of the cancellation of the Contract to Sell and the determination of the
covering an area of about 6,119 square meters; TCT No.59
rights of the parties. Thus, it said that the subject matter is one incapable of
about 6,838 square meters; TCT No. 59446,covering a
pecuniary estimation and thus, within the jurisdiction of the RTC.
square meters; and TCT No. 59444,covering an area of abo
Issue: Whether the case is one for unlawful detainer, which falls within the
On November 29, 1973, two Conditional Deeds of
exclusive original jurisdiction of the municipal trial courts, and not a case incapable
petitioner, as vendor, in favor of respondent Valbueco,
of pecuniary estimation cognizable solely by the regional trial courts.
Respondent was able to pay petitioner the amount of
payment for the two properties corresponding to the initi
Ruling: YES.
installments of the said properties.
The authority granted to the MeTC to preliminarily resolve the issue of ownership
to determine the issue of possession ultimately allows it to interpret and enforce the
At the same time, petitioner complied with its obligatio
contract or agreement between the plaintiff and the defendant. To deny the MeTC
deeds of sale, as follows: (1) the mortgage for TCT No
jurisdiction over a complaint merely because the issue of possession requires the
May 18, 1984, while the mortgages for TCT Nos. 59445
interpretation of a contract will effectively rule out unlawful detainer as a remedy.
on July 19, 1974; (2) the unlawful occupants of the lot
59444, 59534, 59445 and 59446 surrendered their posses
In the case at bar, the unlawful detainer suit filed by Optimum against Sps.
lots in consideration of the amount of P6,000.00 in a doc
Jovellanos for illegally withholding possession of the subject property is similarly
19, 1973, and they agreed to demolish their shanties on
premised upon the cancellation or termination of the Contract to Sell between
1973; and (3) the mortgage with Philippine Trust Com
them. Indeed, it was well within the jurisdiction of the MeTC to consider the terms
59444 was discharged10 in 1984.
of the parties agreement in order to ultimately determine the factual bases of
Optimums possessory claims over the subject property. Proceeding accordingly,
However, respondent suspended further payment as it w
P a g e | 100
manner petitioner complied with its obligations under The

the conditional
Court of Appeals
deeds of
correctly
sale. held that R.A. No. 6552,
Consequently, on March 17, 1978, petitioner sent respondent
Realty Installment
a letter Buyer
informing
Act, applies to the subject contra
respondent of its intention to rescind the conditionalrecognizes
deeds of sale
in conditional
and attaching
sales of all kinds of real estate
therewith the original copy of the respective notarial rescission.
residential) the right of the seller to cancel the contract
Respondent filed a Complaint for specific performance
installment
and by
damages
the buyer,
against
which is simply an event that p
petitioner with the RTC of Antipolo City. However, on
theJanuary
vendor 15,
to convey
1996, the
titlecase
from acquiring binding force.
was dismissed without prejudice for lack of interest, as respondent's counsel failed
to attend the pre-trial conference.
SPOUSES NAMEAL and LOURDES BONROSTRO v
CONSTANCIA LUNA, G.R. No. 172346, July 24, 2013

Five years later, respondent again filed with the RTC
a Complaint
forConstancia
specific Luna, as buyer, entered in
In 1992,
respondent
performance and damages, seeking to compel petitioner
to accept
the balance
of the (Bliss) involving a house
Bliss
Development
Corporation
purchase price for the two conditional deeds of19,sale
and
execute
the Estates in Diliman, Quezon
Block
26 to
of New
Capitol
corresponding deeds of absolute sale. The RTC Constancia,
dismissed the
thiscomplaint
time as the seller, entered into anothe
petitioner had exercised its right to rescind the contracts.
petitioner Lourdes Bonrostro (Lourdes) concerning the sam
The CA on appeal, reversed and set aside the Decision

of theafter
trialthecourt.
It of the said second contra
Immediately
execution
reinstated the complaint of respondent, and directed petitioner
to execute
of
took possession
of deeds
the property.
However, except for
absolute sale in favor of respondent after payment ofpayment,
the balance
of
the
purchase
Lourdes failed to pay any of the stipulated
price of the subject lots. The Court of Appeals held that
the two conditional deeds
payments.
of sale in this case are contracts to sell. It stated that the law applicable to the said
contracts to sell on installments is R.A. No. 6552, specifically
Section
Constancia
and her4thereof,
husband,asrespondent Juan Luna (spous
respondent paid less than two years in installments.RTC
It held
that uponfor
repeated
a Complaint
Rescission of Contract and Dama
defaults in payment by respondent, petitioner had Bonrostro
the right to
cancel
the
praying for thesaid
rescission of the contract, deliv
contracts, but subject to the proper receipt of respondent
of
the
notice
ofthe latter of their unpaid obli
subject property, payment by
cancellation or the demand for the rescission of the contracts by notarial act.
RTC rendered its Decision focusing on the sole issue

Issue: Whether the two conditional deeds of sale are contracts
to sell.
Bonrostros
delay in their payment of the installments
breach of their obligation under the contract warranting re
Ruling: YES.
that the delay could not be considered a substantial breach
(1) requested for an extension within which to pay; (2) w
The two conditional deeds of sale entered into by the parties
contracts
to sell,
as of October 1993 and even w
pay as are
early
as the last
week
they both contained a stipulation that ownership of the
shall not
thisproperties
on November
24, pass
1993;to(3) gave Constancia a down
the vendee until after full payment of the purchase price.
a conditional
sale,toasBliss.
in
and,In(4)
made payment
a contract to sell, ownership remains with the vendor and does not pass to the
vendee until full payment of the purchase price. The The
full CA
payment
of thethat
purchase
concluded
since the contract entered into by a
price partakes of a suspensive condition, and non-fulfillment
of
the
condition
a Contract to Sell, rescission is not the proper remedy
prevents the obligation to sell from arising. To differentiate,
a deed
of sale aiscontract to sell a real propert
contract being
specifically
absolute when there is no stipulation in the contract
that titlebytoRepublic
the property
is governed
Act No. 6552 or the Maceda Law
remains with the seller until full payment of the purchase price.
The CA concluded that there being no cancellation effecte

Ramos v. Heruela held that Articles 1191 and 1592 of procedure
the Civil Code
are applicable
prescribed
by law, the contract remains valid
to contracts of sale, while R.A. No. 6552 applies to contracts
to
sell.
modified the RTC decision with respect to the interest.
P a g e | 101
Issue: Whether the CA correctly modified the RTC

willingness
Decisiontowith
pay their
respect
obligation
to
on November 24, 1993
interests.
made liable for interest beyond the said date.
Ruling: YES.
The spouses Bonrostro are liable for interest on the instal

of default until fully paid.
Effects of non- payment in a Contract to Sell
ALI AKANG v. MUNICIPALITY OF ISULAN, SULTA

As may be recalled, the RTC under paragraphs 2 and 3 of the dispositive portion of
PROVINCE, G.R. No. 186014, June 26, 2013, REYES,
its Decision ordered the spouses Bonrostro to pay the spouses Luna the sums of
Facts: Ali Akang is a member of the national and cultural
P300,000.00 plus interest of 2% per month from April 1993 to November 1993 and
the Maguindanaon tribe of Isulan, Province of Sultan Ku
P330,000.00 plus interest of 2% per month from July 1993 to November 1993,
owner of Lot 5-B-2-B-14-F (LRC) Psd 1100183 located
respectively. The CA modified these by reckoning the payment of the 2% interest
Sultan Kudarat.
on the P300,000.00 from May 1, 1993 until fully paid and by imposing interest at
the legal rate on the P330,000.00 reckoned from August 1, 1993 until fully paid.
In 1962, a two-hectare portion of the property was sold
Municipality of Isulan, Province of Sultan Kudarat thr
The spouses Bonrostros reliance on the RTCs factual finding that Lourdes was
Datu Ampatuan under a Deed of Sale executed on July 18,
willing and ready to pay on November 24, 1993 is misplaced.
"That for and in consideration of the sum of THRE

As mentioned, the RTC in resolving the Complaint focused on the sole issue of
([P]3,000.00), Philippine Currency, value to be paid an
whether the failure of spouses Bonrostro to pay the installments of P300,000.00 on
which receipt of which shall be acknowledged by me to m
April 30, 1993 and P330,000.00 on July 31, 1993 is a substantial breach of their
MUNICIPAL GOVERNMENT OF ISULAN, represented
obligation under the contract as to warrant the rescission of the same.
Datu Sama Ampatuan, hereinafter referred to as the V
transfer, cede, convey and assign as by these presents d
The RTC arrived at the above-quoted conclusion based on its mistaken premise
ceded, conveyed and assigned, an area of TWO (2) hectare
that rescission is applicable to the case. Hence, its determination of whether there
favor of the MUNICIPAL GOVERNMENT OF ISULAN
was substantial breach. As may be recalled, however, the CA, in its assailed
and administrators to have and to hold forevery (sic) and
Decision, found the contract between the parties as a contract to sell, specifically
shall be utilized purposely and exclusively as a GOVERN
of a real property on installment basis, and as such categorically declared
x x."
rescission to be not the proper remedy. This is considering that in a contract to
sell, payment of the price is a positive suspensive condition, failure of which is
The respondent immediately took possession of th
not a breach of contract warranting rescission under Article 1191 of the Civil
construction of the municipal building.
Code but rather just an event that prevents the supposed seller from being bound
Thirty-nine (39) years later or on October 26, 2001, the pe
to convey title to the supposed buyer. Also, and as correctly ruled by the CA,
wife, Patao Talipasan, filed a civil action for Recovery
Article 1191 cannot be applied to sales of real property on installment since they
Property and/or Quieting of Title thereon and Damages
are governed by the Maceda Law.
represented by its Municipal Mayor, et al.
There being no breach to speak of in case of non-payment of the purchase price in

Petitioner alleged that the agreement was one to sell, whic
a contract to sell, as in this case, the RTCs factual finding that Lourdes was willing
as the purchase price was not paid.
and able to pay her obligation a conclusion arrived at in connection with the said
courts determination of whether the non-payment of the purchase price in
RTC rendered judgment in favor of the petitioner. The RT
accordance with the terms of the contract was a substantial breach warranting
Sale as a contract to sell, based on the wording of the c
rescission therefore loses significance. The spouses Bonrostros reliance on the
showed that the consideration was still to be paid and deliv
said factual finding is thus misplaced. They cannot invoke their readiness and
a characteristic of a contract to sell.
P a g e | 102
sell. Had the intention of the petitioner been otherw

The CA also ruled that the Deed of Sale is not a immediately
mere contractsought
to selljudicial
but a recourse to prevent furth
perfected contract of sale. There was no express reservation
municipal
of ownership
building;ofortitle
(2)bytaken legal action to contes
the petitioner and the fact that there was yet no payment
petitioner
at the time
did not
of the
optsale
to undertake
does
any of such recourses.
not affect the validity or prevent the perfection of the sale.
Issue: Whether the Deed of Sale dated July 18, 1962 is a valid and perfected
GOTESCO PROPERTIES, INC., v. SPOUSES EUGEN
contract of sale.
FAJARDO, G.R. No. 201167, February 27, 2013, PERL
Facts: Respondent-spouses Fajardo entered into a Contra
Ruling: YES.
corporation Gotesco Properties, Inc. (GPI) for the purcha
lot identified as Lot No. 13. The subject lot is a portion o
A contract of sale is defined under Article 1458 of the Civil Code:
Transfer Certificate of Title (TCT) No. 2442205 (mother ti
By the contract of sale, one of the contracting parties obligates himself to transfer
the ownership of and to deliver a determinate thing, and the other to pay therefore a
Under the contract, Sps. Fajardo undertook to pay
price certain in money or its equivalent.
P126,000.00 within a 10-year period, including interest a
(9%) per annum. GPI, on the other hand, agreed to exe
The elements of a contract of sale are: (a) consent or meeting of the minds, that is,
(deed) in favor of Sps. Fajardo upon full payment of the
consent to transfer ownership in exchange for the price; (b) determinate subject
However, despite its full payment of the purchase price o
matter; and (c) price certain in money or its equivalent.
subsequent demands, GPI failed to execute the deed and
physical possession of the subject lot.
A contract to sell, on the other hand, is defined by Article 1479 of the Civil Code:
Sps. Fajardo filed before the Housing and Land Use Reg
A bilateral contract whereby the prospective seller, while expressly reserving the
National Capital Region Field Office (HLURBENCRFO)
ownership of the subject property despite delivery thereof to the prospective buyer,
performance or rescission of contract with damages again
binds himself to sell the said property exclusively to the prospective buyer upon
of its Board of Directors.
fulfillment of the condition agreed upon, that is, full payment of the purchase price.
Sps. Fajardo averred that GPI violated Section 209 of

In a contract of sale, the title to the property passes to the buyer upon the delivery
95710 (PD 957) due to its failure to construct and
of the thing sold, whereas in a contract to sell, the ownership is, by agreement,
improvements, infrastructures and other forms of devel
retained by the seller and is not to pass to the vendee until full payment of the
supply and lighting facilities for the subdivision project. T
purchase price.
failed to provide boundary marks for each lot and that the
subject lot had no technical description and was even lev
The Deed of Sale executed by the petitioner and the respondent is a perfected
Sentral ng Pilipinas (BSP) without their knowledge. They
contract of sale, all its elements being present. There was mutual agreement
ordered to execute the deed, to deliver the corresponding
between them to enter into the sale, as shown by their free and voluntary signing of
physical possession of the subject lot within a reasonabl
the contract. There was also an absolute transfer of ownership of the property by
Evergreen Executive Village; or in the alternative, to c
the petitioner to the respondent as shown in the stipulation: "x x x I petitioner
contract and refund the total payments made plus legal
hereby sell, transfer, cede, convey and assign as by these presents do have sold,
2000.
transferred, ceded, conveyed and assigned, x x x."36 There was also a determine
subject matter, that is, the two-hectare parcel of land as described in the Deed of
For their part, petitioners maintained that at the time
Sale. Lastly, the price or consideration is at Three Thousand Pesos (P3,000.00),
contract, Sps. Fajardo were actually aware that GPI's c
which was to be paid after the execution of the contract. The fact that no express
technical description inscribed on it. Nonetheless, the tit
reservation of ownership or title to the property can be found in the Deed of Sale
free from any liens or encumbrances.1 Petitioners claimed
bolsters the absence of such intent, and the contract, therefore, could not be one to
the title to Sps. Fajardo was beyond their control.
P a g e | 103
full payment of the contract price plus interests as ear

The HLURB-ENCRFO issued a Decision in favor of
while
Sps.Sps.
Fajardo,
Fajardo
holding
remained
that prejudiced by the persist
GPIs obligation to execute the corresponding deedsubject
and tolot
deliver
despite
thefull
transfer
payment. As a necessary conse
certificate of title and possession of the subject lot arose
propriety
and thus
of became
the rescission
due andas earlier discussed, Sps. F
demandable at the time Sps. Fajardo had fully paidrecover
the purchase
the price
price
of the
forproperty
the
pegged at its prevailin
subject lot. Consequently, GPIs failure to meet the said obligation constituted a
substantial breach of the contract which perforce warranted its rescission.
VIRGILIO S. DAVID v. MISAMIS OCCIDENTAL II E
COOPERATIVE, INC., G.R. No. 194785, July 11, 2012
The decision was affirmed by the HLURB Board of Commissioners, Office of the
Facts: Petitioner was the owner or proprietor of VSD E
President and the CA.
engaged in the business of supplying electrical hardware in
rural electric cooperatives like respondent Misamis
Issue: Whether the Sps. Fajardo has a right to rescind the contract.
Cooperative, Inc. (MOELCI), with principal office located
Ruling: YES.
To solve its problem of power shortage affecting some a

MOELCI expressed its intention to purchase a 10 MVA
In a contract to sell, the seller's obligation to deliver the corresponding certificates
David. For this reason, its General Manager, Engr. Rada, w
of title is simultaneous and reciprocal to the buyer's full payment of the purchase
latters office in Quezon City. David agreed to supply
price. In this relation, Section 25 of PD 957, which regulates the subject
provided that MOELCI would secure a board resolution
transaction, imposes on the subdivision owner or developer the obligation to cause
still have to be imported.
the transfer of the corresponding certificate of title to the buyer upon full payment.
On June 8, 1992, Engr. Rada and Director Jimenez,

The long delay in the performance of GPI's obligation from date of demand on
procurement, returned to Manila and presented to Da
September 16, 2002 was unreasonable and unjustified. It cannot therefore be
resolution which authorized the purchase of one 10 MV
denied that GPI substantially breached its contract to sell with Sps. Fajardo which
turn, David presented his proposal for the acquisition o
thereby accords the latter the right to rescind the same pursuant to Article 1191 of
proposal was the same proposal that he would usually give
the Code.
After the reading of the proposal and the discussion of te
then secretary and bookkeeper, Ellen M. Wong, to type t
Mutual restitution is required in cases involving rescission under Article 1191. This
and Jimenez at the end of the proposal. Both signed the d
means bringing the parties back to their original status prior to the inception of the
"conforme." The board resolution was thereafter attached t
contract. Article 1385 of the Civil Code provides, thus:
As stated in the proposal, the subject transformer, t

ART. 1385. Rescission creates the obligation to return the things which were the
accessories, was valued at P5,200,000.00. It was also stipu
object of the contract, together with their fruits, and the price with its interest;
the purchase price should be paid as downpayment and the
consequently, it can be carried out only when he who demands rescission can return
paid upon delivery. Freight handling, insurance, custom
whatever he may be obligated to restore.
expenses were for the account of the buyer.
Neither shall rescission take place when the things which are the object of the
The Board Resolution, on the other hand, stated that t
contract are legally in the possession of third persons who did not act in bad faith.
transformer was to be financed through a loan from the
Administration (NEA). As there was no immediate action
In this case, indemnity for damages may be demanded from the person causing the
Engr. Rada returned to Manila in early December 1992
loss.
deliver the transformer to them even without the requir
granted the request provided that MOELCI would pay int
It cannot be denied that only GPI benefited from the contract, having received
Engr. Rada acquiesced to the condition. On December 1
P a g e | 104
shipped to Ozamiz City via William Lines. In the Bill

happening
of Lading,
of an
a sales
event,
invoice
such as, in most cases, the full p
was included which stated the agreed interest rate of 24%
price.
perWhat
annum.
the seller agrees or obliges himself to do is to
the subject property when the entire amount of the purch
When nothing was heard from MOELCI for sometimehim.
after
Inthe
other
shipment,
words, the
Medina,
full payment of the purchase price
Davids Marketing Manager, went to Ozamiz Citycondition,
to check the
on non-fulfillment
the shipment. of which prevents the oblig
Medina was able to confer with Engr. Rada who told and,
him that
thus,the
ownership
loan wasisnot
retained
yet by the prospective seller
released and asked if it was possible to withdraw the shipped
by the prospective
items. Medina
buyer.
agreed.
When no payment was made after several months, Medina

In a contract
was constrained
of sale, ontothe
send
other hand, the title to the prop
a demand letter, dated September 15, 1993, which MOELCI
upon the duly
delivery
received.
of the Engr.
thing sold. Unlike in a contract to
Rada replied in writing that the goods were still in theconsent
warehouse
is present,
of William
although
Lines.it is conditioned upon the ha
He later found out that the goods had already been released
event which
to MOELCI
may orevidenced
may not occur. If the suspensive con
by the shipping companys copy of the Bill of perfection
Lading which
of thewas
contract
stamped
of sale is completely abated. Ho
"Released," and with the notation that the arrastrecondition
charges isinfulfilled,
the amount
the contract
of
of sale is thereby perfec
P5,095.60 had been paid. This was supported by a already
receipt been
of payment
previous
with
delivery
the of the property subject o
corresponding cargo delivery receipt issued by theownership
Integratedthereto
Port Services
automatically
of transfers to the buyer by
Ozamiz, Inc.
any further act having to be performed by the seller. The
Subsequently, demand letters were sent to MOELCI demanding
over the property
the payment
and cannot
of the recover it until and unless th
whole amount plus the balance of previous purchasesrescinded.
of other electrical hardware.
Aside from the formal demand letters, David added that several statements of
accounts were regularly sent through the mails by the
An company
examination
and these
of thewere
alleged contract to sell, "E
never disputed by MOELCI.
unconventional form, would show that said document,
therein and with the attendant circumstances surroun
On February 17, 1994, David filed a complaint for
Contract
specificofperformance
Sale. The rule
with
is that it is not the title of the
damages with the RTC. In response, MOECLI moved
termsfor
or its
stipulations
dismissalthat
on determine
the
the kind of contract en
ground that there was lack of cause of action as there
First,
wasthere
no contract
was meeting
of sale,oftominds as to the transfer of o
begin with, or in the alternative, the said contract was
matter.
unenforceable
The letterunder
(Exhibit
the A), though appearing
Statute of Frauds.
quotation/proposal, was not what it seemed. It contained
that, by the fact that Jimenez, Chairman of the Committ
Issue: Whether there was a perfected contract of sale. Engr. Rada, General Manager of MOELCI, had signed the
"CONFORME," they, in effect, agreed with the terms and
Ruling: YES.
to the purchase of the subject 10 MVA Power Transforme
David, if their purpose was merely to acknowledge the rec
would not have signed their name under the word "CONFO
The elements of a contract of sale are, to wit: a) Consent or meeting of the minds,
that is, consent to transfer ownership in exchange for
Next,
the armed
price; with
b) Determinate
the said resolution, top officials of M
subject matter; and c) Price certain in money or its equivalent.
office in Quezon
It is theCity
absence
threeof
times to discuss the terms of t
the first element which distinguishes a contract of sale
the from
loan that
thatofMOELCI
a contract was
to relying upon to finance
sell.
forthcoming, MOELCI, through Engr. Rada, convinced D
50% downpayment and deliver the unit so that it could
In a contract to sell, the prospective seller explicitly reserves
power shortage
the transfer
predicament,
of title to to which David acceded wh
the prospective buyer, meaning, the prospective seller
through
doesthe
notcarrier
as yetWilliam
agree or
Lines, as evidenced by a bill o
consent to transfer ownership of the property subject of the contract to sell until the
P a g e | 105
Second, the document specified a determinate subject

P150,000.00.
matter which was one (1)
Unit of 10 MVA Power Transformer with corresponding KV Line Accessories. And
third, the document stated categorically the price certain
After the
in respondents
money which
andwas
Catalina refused the petitioner
P5,200,000.00 for one (1) unit of 10 MVA Power Transformer
land, the petitioners
and P2,169,500.00
filed on October 20, 1994 a complain
for the KV Line Accessories.
recovery of possession against the respondents.
In sum, since there was a meeting of the minds, there

The
was
RTC
consent
declared
on the
thepart
petitioners
of
as the legal and abso
David to transfer ownership of the power transformerfinding
to MOELCI
that the
in exchange
petitionersforwere purchasers in good fait
the price, thereby complying with the first element. Thus,
Sr.sthe
execution
said document
of the July
cannot
21, 1994 notarized deed of sale
just be considered a contract to sell but rather a perfected
resulted
contract
in the
of constructive
sale.
delivery of the land.
On appeal, the CA found that the petitioners action to qu

OBLIGATIONS OF THE SELLER
because the petitioners failed to prove their legal or equ
noted that there was no real transfer of ownership si
Villamor, Sr. nor the petitioners were placed in actual poss
DELIVERY
land after the execution of the deeds of sale.
SPOUSES SANTIAGO v. VILLAMOR, G.R. No. 168499,

November
2012,Villamor, Sr.s execution of th
Issue: Whether
the 26,
spouses
BRION, J
sale in the petitioners favor was equivalent to delivery o
Facts: In January 1982, the spouses Villamor, parents of respondents, mortgaged
1498 of the Civil Code.
their 4.5-hectare coconut land in Sta. Rosa, San Jacinto, Masbate, known as Lot
No. 1814, to the Rural Bank of San Jacinto (Masbate), Inc. as security for a
Ruling: NO.
P10,000.00 loan.
Execution of the deed of sale only a prima facie presumpti

For non-payment of the loan, the San Jacinto Bank extrajudicially foreclosed the
mortgage, and, as the highest bidder at the public auction, bought the land. When
Article 1477 of the Civil Code recognizes that the "own
the spouses Villamor, Sr. failed to redeem the property within the prescribed period,
shall be transferred to the vendee upon the actual or const
the San Jacinto Bank obtained a final deed of sale in its favor sometime in 1991.
Related to this article is Article 1497 which provides tha
understood as delivered, when it is placed in the contro
The San Jacinto Bank then offered the land for sale to any interested buyer.
vendee."
Since the respondents had been in possession and cultivation of the land, they
With respect to incorporeal property, Article 1498 of the C
decided to acquire the land from the San Jacinto Bank. The San Jacinto Bank
general rule: the execution of a public instrument "sh
agreed with the respondents and Catalina to a P65,000.00 sale, payable in
delivery of the thing which is the object of the contra
installments. The respondents and Catalina made four (4) installment payments.
contrary does not appear or cannot clearly be inferred."
of a public instrument gives rise only to a prima facie p
When the San Jacinto Bank refused to issue a deed of conveyance in their favor
which is negated by the failure of the vendee to take actu
despite full payment, the respondents and Catalina filed a complaint against the San
sold. "A person who does not have actual possession o
Jacinto with the RTC on October 11, 1994. The complaint was for specific
transfer constructive possession by the execution an
performance with damages.
instrument."
Prior to the filing of the respondents and Catalinas complaint for specific
In this case, no constructive delivery of the land transpire
performance, the San Jacinto Bank issued a deed of sale in favor of Domingo, Sr.
the deed of sale since it was not the spouses Villamor, Sr.
On July 21, 1994, the spouses Villamor, Sr. sold the land to the petitioners for
P a g e | 106
had actual possession of the land. The presumptionESTELITA

of constructive
VILLAMAR
delivery v.isBALBINO MANGAOIL, G
inapplicable and must yield to the reality that the petitioners
11, 2012 REYES,
were notJ.placed in
Facts: Villamar is the registered owner of a 3.6080 hecta
possession and control of the land.
Francisco, Manuel, Isabela. On March 30, 1998, she en
with Mangaoil for the purchase and sale of said parcel of l
The parties executed a Deed of Absolute Sale whereby
subject parcel of land to Mangaoil for and in consideration
In a letter dated September 18, 1998, Mangaoil inform

backing out from the sale agreed because the area is
incumbrances as there are tenants who are not willing to
giving them back the amount that they mortgaged the land
Mangaoil demanded refund of his [P]185,000.00 down p

demand in another letter dated April 29, 1999, the same,
Respondent filed before the RTC a complaint for rescissio
petitioner.
The RTC and the CA both found that the petitioner fa

obligations to deliver to the respondent both the possessio
and the certificate of title covering the same due to the
occupation of Parangan and Lacaden.
Issue: Whether or not the failure of the petitioner to deliv

the physical possession of the subject property and the ce
the same amount to a substantial breach of the former's
constituting a valid cause to rescind the agreement and de
the parties.
Ruling: YES.
Although Articles 1458, 1495 and 1498 of the NCC and c

require the seller to deliver to the buyer the physical po
subject of a contract of sale and the certificate of title
agreement entered into by the petitioner and the respon
However, the terms of the agreement cannot be conside
morals, good customs, public order, or public policy, hence
Article 1458 of the NCC obliges the seller to transfer

deliver a determinate thing to the buyer, who shall in t
certain in money or its equivalent. In addition thereto, A
binds the seller to warrant the thing which is the object
hand, Article 1498 of the same code provides that when th
P a g e | 107
public instrument, the execution thereof shall be equivalent

case of toChua
the delivery
do not of
impose
the upon the petitioner the
thing which is the object of the contract, if from thedeliver
deed, the
to the
contrary
respondent
does not
the certificate of title covering
appear or cannot clearly be inferred.
cause the transfer in the latter's name of the said title,
otherwise is not prohibited by law and cannot be regarde
good customs, public order or public policy. Item no. 3 o
In the case of Chua v. Court of Appeals, which was cited
by thebyparties
the petitioner,
expresslyitstates
was that "transfer [shall] be imm
ruled that "when the deed of absolute sale is signed the
by latter
the parties
can apply
and notarized,
for a loan from any lending institution
then delivery of the real property is deemed made bycertificate
the seller of
to title
the as
buyer."
collateral
The therefore."
transfer of the certificate of title in the name of the buyer is not necessary to confer
ownership upon him.
Item no. 3 is literal enough to mean that there should be
TCT for how else can the respondent use it as a collateral t
In this case, item nos. 2 and 3 of the agreement entered
remains
into by
in the
the petitioners
petitioner and
possession. In this regard, petit
the respondent explicitly provide:
she delivered the TCT covering the subject property to the
2. ONE HUNDRED EIGHTY FIVE THOUSAND (P185,000.00)

Article 1498 ofPESOS
the NCC
of generally
the
considers the executio
total price was already received on March 27, 1998 foraspayment
constructive
of thedelivery
loan secured
by the seller to the buyer of th
by the certificate of title covering the land in favor ofcontract
the Rural
of Bank
sale. ofThe
Cauayan,
case at bar, however, falls amon
San Manuel Branch, San Manuel, Isabela, in orderforegoing
that the rule
certificate
since a of
mere
titlepresumptive and not conclus
thereof be withdrawn and released from the said bank,
theand
respondent
the rest shall
failedbetofor
take
thematerial possession of the sub
payment of the mortgages in favor of Romeo Lacaden and Florante Parangan;
As a general rule, the execution of a public instrument a
3. After the release of the certificate of title covering the
delivery
land subject-matter
of the thing subject
of this of a contract of sale. Ho
agreement, the necessary deed of absolute sale in favor
among
of which
the PARTY
is when
OFmere
THEpresumptive and not conclus
SECOND PART shall be executed and the transfer becases
immediately
where the
effected
buyersofails
thatto take material possession
the latter can apply for a loan from any lending institution
personusing
whothe
does
corresponding
not have actual possession of the th
certificate of title as collateral therefor, and the proceeds
constructive
of the loan,
possession
whatever
by the
be execution and delivery of a
the amount, be given to the PARTY OF THE FIRST PART;
DELIVERY TO A CARRIER
As can be gleaned from the agreement of the contending parties, the respondent
initially paid the petitioner P185,000.00 for the latter to pay the loan obtained from
the Rural Bank of Cauayan and to cause the release
from the said
bank of
the
VIRGILIO
S. DAVID
v. MISAMIS
OCCIDENTAL II E
certificate of title covering the subject property. TheCOOPERATIVE,
rest of the amountINC.,
shallG.R.
be No. 194785, July 11, 2012
used to pay the mortgages over the subject property which
executed in
favor
Facts:was
: Petitioner
was
the of
owner or proprietor of VSD E
Lacaden and Parangan. After the release of the TCT,
a deed
of business
sale shall
be
engaged
in the
of supplying
electrical hardware in
executed and transfer shall be immediately effected rural
so thatelectric
the titlecooperatives
covering the like respondent Misamis
subject property can be used as a collateral for a loan Cooperative,
the respondent
will
apply for, with principal office located
Inc.
(MOELCI),
the proceeds of which shall be given to the petitioner.
To solve its problem of power shortage affecting some a
Under Article 1306 of the NCC, the contracting MOELCI
parties may
establish
such
expressed
its intention
to purchase a 10 MVA
stipulations, clauses, terms and conditions as they may
deemFor
convenient,
provided
David.
this reason,
its General Manager, Engr. Rada, w
they are not contrary to law, morals, good customs, public
order
or public
policy. City. David agreed to supply
latters
office
in Quezon
provided that MOELCI would secure a board resolution
While Articles 1458 and 1495 of the NCC and thestill
doctrine
in the
have toenunciated
be imported.
P a g e | 108
Aside from the formal demand letters, David added th

On June 8, 1992, Engr. Rada and Director Jimenez,
accounts
whowere
was regularly
in-chargesent
of through the mails by the c
procurement, returned to Manila and presented tonever
Daviddisputed
the requested
by MOELCI.
board
resolution which authorized the purchase of one 10 MVA power transformer. In
turn, David presented his proposal for the acquisition
On of
February
said transformer.
17, 1994, This
David filed a complaint for sp
proposal was the same proposal that he would usually damages
give to hiswith
clients.
the RTC. In response, MOECLI moved
After the reading of the proposal and the discussion of
ground
terms,that
David
there
instructed
was lackhis
of cause of action as there wa
then secretary and bookkeeper, Ellen M. Wong, to type
begin
thewith,
names
or of
in Engr.
the alternative,
Rada
the said contract was
and Jimenez at the end of the proposal. Both signed the
Statute
document
of Frauds.
under the word
"conforme." The board resolution was thereafter attached to the proposal.
Issue: Whether there was a valid delivery.
As stated in the proposal, the subject transformer, together with the basic
accessories, was valued at P5,200,000.00. It was also Ruling:
stipulated
YES.
therein that 50% of
the purchase price should be paid as downpayment and the remaining balance to be
paid upon delivery. Freight handling, insurance, customs
Article duties,
1523 ofand
the Civil
incidental
Code provides:
expenses were for the account of the buyer.
Where, in pursuance of a contract of sale, the seller is a
The Board Resolution, on the other hand, stated that
sendthe
thepurchase
goods to of
thethe
buyer
saiddelivery of the goods to a ca
transformer was to be financed through a loan fromthe
thebuyer
National
or not,
Electrification
for the purpose of transmission to the
Administration (NEA). As there was no immediate action
delivery
on of
thethe
loan
goods
application,
to the buyer, except in the cases prov
Engr. Rada returned to Manila in early December 1992
first, second
and requested
and thirdDavid
paragraphs,
to
or unless a contrary inte
deliver the transformer to them even without the required downpayment. David
granted the request provided that MOELCI would pay
Thus,
interest
the delivery
at 24% per
made
annum.
by David to William Lines, Inc.,
Engr. Rada acquiesced to the condition. On December
of Lading,
17, 1992,
wasthe
deemed
goods towere
be a delivery to MOELCI. Davi
shipped to Ozamiz City via William Lines. In the Bill
theofpower
Lading,
transformer
a sales invoice
to the buyer pursuant to their agre
was included which stated the agreed interest rate of 24%
the item
per annum.
through the carrier, it amounted to a delivery to M
When nothing was heard from MOELCI for sometime after the shipment, Medina,
DOUBLE SALES
Davids Marketing Manager, went to Ozamiz City to check on the shipment.
Medina was able to confer with Engr. Rada who told him that the loan was not yet
released and asked if it was possible to withdraw the shipped
items. Medina
agreed.
SPS. VALLIDO
v. SPS.
PONO, G.R. No. 200173, April
J.
When no payment was made after several months, Medina
constrained
to was
sendthe registered owner of a pa
Facts:was
Martino
Dandan
a demand letter, dated September 15, 1993, which MOELCI
duly
Engr. square meters, granted und
Leyte, with
anreceived.
area of 28,214
Rada replied in writing that the goods were still in theV-21513
warehouse
William Lines.
on of
November
11, 1953 and covered by Original C
He later found out that the goods had already been released
to MOELCI evidenced
No. P-429.
by the shipping companys copy of the Bill of Lading which was stamped
"Released," and with the notation that the arrastreOncharges
amount
of who was at that time living i
Januaryin4, the
1960,
Martino,
P5,095.60 had been paid. This was supported by a portion
receipt of
of the
payment
the equivalent to 18,214 squ
subjectwith
property
corresponding cargo delivery receipt issued by thePurificacion
Integrated Port
Services
of
Cerna.
Upon execution
of the Deed of Abs
Ozamiz, Inc.
Purificacion the owners copy of OCT No. P-429. The tr
Subsequently, demand letters were sent to MOELCI demanding
recorded inthe
thepayment
Registryof
ofthe
Deeds.
whole amount plus the balance of previous purchases of other electrical hardware.
P a g e | 109
On May 4, 1973, Purificacion sold her 18,214 square meter portion of the subject
property to respondent Marianito Pono (Marianito) and
Thealso
non-registration
delivered OCTof
No.the
P- deed of sale between Mar
429 to him. Marianito registered the portion he bought
immaterial
for taxation
as itpurposes,
is bindingpaid
on the petitioners who are priv
its taxes, took possession, and allowed his son respondent
between
Elmer
petitioner
Pono (Elmer)
Esmeraldo
and and Martino, the petition
daughter-in-law, Juliet Pono (Juliet), to construct a charged
house thereon.
with constructive
The transfer,knowledge of prior dispos
however, was also not recorded in the Registry of Deeds.
affecting the subject property. The second buyer who h
knowledge of the prior sale cannot be a registrant in good
Meanwhile, Martino left Kananga, Leyte, and went to San Rafael III, Noveleta,
Cavite, and re-settled there. On June 14, 1990, he sold
Moreover,
the whole
although
subjectitproperty
is a recognized principle that a perso
to his grandson, petitioner Esmeraldo Vallido (Esmeraldo),
land need also
not go
a beyond
resident itsofcertificate of title, it is also
Noveleta, Cavite. Considering that Martino had delivered
where there
OCT
are No.
circumstances
P-429 to which would put a party on
Purificacion in 1960, he no longer had any certificate
investigate
of title orto inspect
hand over
the to
property being sold to him,
Esmeraldo.
occupants/tenants thereon, it is expected from the purcha
land to inquire first into the status or nature of possession
On May 7, 1997, Martino filed a petition seeking for the
the issuance
commonof
practice
a new in
owners
the real estate industry, an ocular i
duplicate copy of OCT No. P-429, which he claimedinvolved
was lost.
is aHe
safeguard
stated that
thathe
a cautious and prudent purcha
could not recall having delivered the said owners duplicate
he find out
copy
thattothe
anybody
land hetointends to buy is occupied by
secure payment or performance of any legal obligation.
the seller
On June
who, 8,
as 1998,
in thisthecase, is not in actual posse
petition was granted by the RTC. Esmeraldo registered
incumbent
the deed
uponof the
salepurchaser
in the to verify the extent of th
Registry of Deeds and Transfer Certificate of Titlerights.
(TCT) No. TP-13294 was
thereafter issued in the name of the petitioners.
The failure of a prospective buyer to take such precauti
Issue: Whether the petitioners are buyers and registrants
negligence
in good faith.
on his part and would preclude him from c
rights of a "purchaser in good faith." It has been held th
Ruling: NO.
later sale must be done in good faith to entitle the r
ownership over the vendee in an earlier sale."
In this case, there is a double sale and that the respondents are the first buyers while
the petitioners are the second buyers. The burden ofThere
proving
aregood
several
faithindicia
lies with
that should have placed the p
the second buyer which is not discharged by simply
prompted
invoking
them the
to investigate
ordinary or inspect the property be
presumption of good faith.
Martino, as seller, did not have possession of the subject
the sale on July 4, 1990, Martino did not have the owne
The petitioners are NOT buyers in good faith as they
title. failed
Third,tothere
discharge
were existing
their permanent improvements
burden of proof.
respondents were in actual possession of the land. Thes
glaring to be overlooked and should have prompted the p
Notably, it is admitted that Martino is the grandfather
buyers,
of Esmeraldo.
to investigate
As an
or inspect
heir, the land. Where the vend
petitioner Esmeraldo cannot be considered as a third the
party
property,
to the prior
the prospective
transactionvendees are obligated to inv
between Martino and Purificacion. In Pilapil v. Court of
in possession.
Appeals, it was written:
SPOUSES SABITSANA v. MUERTEGUI, G.R. No. 18

The purpose of the registration is to give notice to third persons. And, privies are
DEL CASTILLO, J.
not third persons. The vendor's heirs are his privies. Against them, failure to
Facts: On September 2, 1981, Alberto Garcia executed an
register will not vitiate or annul the vendee's right of ownership conferred by such
in favor of respondent Juanito Muertegui over a 7,500
unregistered deed of sale.
unregistered land (the lot) located in Dalutan Island, T
P a g e | 110
Leyte del Norte covered by Tax Declaration (TD) The

No. CA
1996
affirmed
issued the
in RTC
1985decision.
in
Garcias name.
In the present petition, petitioners insist that the lot, be
Juanitos father and brother took actual possession ofbeyond
the lotthe
andcoverage
planted of
thereon
Article 1544 of the Civil Code, an
coconut and ipil-ipil trees. They also paid the real property
of Presidential
taxes on Decree
the lot for
(PD)
theNo. 1529 should apply. This
years 1980 up to 1998.
of Sale in favor of Juanito is valid only as between him
pursuant to Section 113 of PD 1529;27 it cannot affect
On October 17, 1991, Garcia sold the lot to the Muertegui
parties
family
thereto.
lawyer, petitioner
Atty. Clemencio C. Sabitsana, Jr. (Atty. Sabitsana), through a notarized deed of
absolute sale. The sale was registered with the Register
Issue:
ofWhether
Deeds on
Article
February
15446,of the Civil Code applies in th
1992. TD No. 1996 was cancelled and a new one, TD land.
No. 5327, was issued in Atty.
Sabitsanas name. Although Domingo Jr. and Sr. paid the real estate taxes, Atty.
Sabitsana also paid real property taxes in 1992, 1993,
Ruling:
andNO.
1999. In 1996, he
introduced concrete improvements on the property, which shortly thereafter were
destroyed by a typhoon.
Article 1544 of the Civil Code does not apply to sales invo
When Domingo Sr. passed away, his heirs applied forAct

registration
No. 3344and
applies
coverage
to sale
ofof unregistered lands.
the lot under the Public Land Act or Commonwealth Act No. 141. Atty. Sabitsana,
in a letter addressed to the Department of Environment
Whatand
applies
Natural
in this
Resources
case is Act No. 3344, as amended
CENRO/PENRO office in Naval, Biliran, opposed thesystem
application,
of recording
claimingofthat
transactions
he
over unregistered re
was the true owner of the lot. He asked that the application
expressly
for registration
declares thatbeany
held
registration made shall be wit
in abeyance until the issue of conflicting ownership has
party
beenwith
resolved.
a better right.
On April 11, 2000, Juanito, through his attorney-in-fact

TheDomingo
questionJr.,tofiled
be aresolved
civil
therefore is: who be
case for quieting of title and preliminary injunction, against
respondent
hereinhas
petitioners
a betterAtty.
right to the disputed lot?
Sabitsana and his wife, Rosario, claiming that they bought the lot in bad faith and
are exercising acts of possession and ownership over
Respondent
the same,has
which
a better
actsright
thusto the lot.
constitute a cloud over his title.
The sale to respondent Juanito was executed on Sep
Petitioners asserted mainly that the sale to Juanito unnotarized
is null and deed
void of
absent
sale, the
while the sale to petitioners w
marital consent of Garcias wife, Soledad Corto (Soledad);
document
thatonly
theyonacquired
Octoberthe
17, 1991, or ten years thereafte
property in good faith and for value; and that the
the first
Complaint
buyer has
is abarred
better right
by to the lot, while the subseq
prescription and laches. They likewise insisted that thenull
Regional
and void,
Trial
because
Court when
(RTC)it was made, the seller Garcia
of Naval, Biliran did not have jurisdiction over the case,
of the
which
lot. Nemo
involved
dat title
quodtonon
or habet.
interest in a parcel of land the assessed value of which is merely P1,230.00.
The fact that the sale to Juanito was not notarized does no
The trial court held that petitioners are not buyers insale
goodbetween
faith. Applying
him andArticle
Garcia remains valid nonethele
1544 of the Civil Code, the trial court declared that requirement
even though of
petitioners
a public were
document under the Civil Code,
first to register their sale, the same was not done and
in good
not for
faith.
validity
And or
because
enforceability. And because it rem
petitioners registration was not in good faith, preference
Juanitoshould
and Garcia,
be given
the latter
to theno longer had the right to sell
sale in favor of Juanito, as he was the first to take possession
his ownership
of the
thereof
lot in
hadgood
ceased.
faith, and the sale to petitioners must be declared null and void for it casts a cloud
upon the Muertegui title.
Nor can petitioners registration of their purchase have
P a g e | 111
rights. The mere registration of a sale in ones favor does not give him any right
over the land if the vendor was no longer the owner of
Issue:
the land,
(1) Whether
having previously
the first sale executed by Luis in favor
sold the same to another even if the earlier sale wasmarriage
unrecorded.
was Neither
void. could it
validate the purchase thereof by petitioners, which is null (2)
andWhether
void. Registration
Meridian realty is a buyer in bad faith.
does not vest title; it is merely the evidence of such title. Our land registration laws
do not give the holder any better title than what he actually
Ruling:(1)
has. YES.
The First Deed of Sale Was Valid.

ROSAROSO v. SORIA, G.R. No. 194846, June 19, 2013, MENDOZA, J.
Facts: Spouses Rosaroso acquired several real properties in Daan Bantayan, Cebu
The fact that the first deed of sale was executed, conveying
City, including the subject properties. The couple had nine (9) children.
favor of petitioners, was never contested by the respond
that the said sale was simulated because the purported s
On January 16, 1995, a complaint for Declaration of Nullity of Documents with
valid consideration.
Damages was filed by Luis, as one of the plaintiffs, against his daughter, Lucila;
Lucilas daughter, Laila S. Solutan (Laila); and Meridian Realty Corporation
Under Section 3, Rule 131 of the Rules of Court, the
(Meridian). Due to Luis untimely death, however, an amended complaint was filed
presumptions: (1) private transactions have been fair and
on January 6, 1996, with the spouse of Laila, Ham Solutan (Ham); and Luis
course of business has been followed; and (3) there was su
second wife, Lourdes, included as defendants.
a contract. These presumptions operate against an a
introduced proof to rebut them. They create the necessity
In the Amended Complaint, it was alleged by petitioners that Luis, with the full
rebut the prima facie case they created, and which, if no
knowledge and consent of his second wife, Lourdes, executed the Deed of Absolute
presented and offered, will prevail. The burden of proof re
Sale (First Sale) covering the properties with Transfer Certificate of Title (TCT)
the presumption, the one who has that burden is relieved
No. 31852 (Lot No. 8); TCT. No. 11155 (Lot 19); TCT No. 10885 (Lot No. 22);
introducing evidence in support of the averment, because t
TCT No. 10886 (Lot No. 23); and Lot Nos. 5665 and 7967, all located at
the place of evidence unless rebutted.
Daanbantayan, Cebu, in their favor.
In this case, the respondents failed to trounce the said p

They also alleged that, despite the fact that the said properties had already been
their bare allegation that the sale was made without a con
sold to them, respondent Laila, in conspiracy with her mother, Lucila, obtained the
supply clear and convincing evidence to back up this claim
Special Power of Attorney (SPA), dated April 3, 1993, from Luis (First SPA); that
Luis was then sick, infirm, blind, and of unsound mind; that Lucila and Laila
(2) YES.
accomplished this by affixing Luis thumb mark on the SPA which purportedly
authorized Laila to sell and convey, among others, Lot Nos. 8, 22 and 23, which
Meridian is not a buyer in good faith.
had already been sold to them; and that on the strength of another SPA7 by Luis,
dated July 21, 1993 (Second SPA), respondents Laila and Ham mortgaged Lot No.
In case of double sale, Article 1544 of the Civil Code prov
19 to Vital Lending Investors, Inc. for and in consideration of the amount of
P150,000.00 with the concurrence of Lourdes.
ART. 1544. If the same thing should have been sold t
ownership shall be transferred to the person who may hav
Petitioners further averred that a second sale took place on August 23, 1994, when
in good faith, if it should be movable property.
the respondents made Luis sign the Deed of Absolute Sale conveying to Meridian
Should it be immovable property, the ownership shal
three (3) parcels of residential land for P960,500.00 (Second Sale); that Meridian
acquiring it who in good faith first recorded it in the Regis
was in bad faith when it did not make any inquiry as to who were the occupants
Should there be no inscription, the ownership shall perta
and owners of said lots; and that if Meridian had only investigated, it would have
good faith was first in possession; and, in the absence th
been informed as to the true status of the subject properties and would have
presents the oldest title, provided there is good faith.
desisted in pursuing their acquisition.
P a g e | 112
first taken possession of the property in good faith shall be

Otherwise stated, ownership of an immovable property which is the subject of a
double sale shall be transferred: (1) to the person acquiring
In the case
it who
at bench,
in goodthe
faithfact that the subject propert
first recorded it in the Registry of Property; (2) in default
possession
thereof,
of persons
to the other
personthan Luis was never disputed
who in good faith was first in possession; and (3) in and
default
witness
thereof,
for Meridian,
to the person
even testified as follows:
who presents the oldest title, provided there is good xfaith.
x x; The
that requirement
she together of
with
thethe two agents, defendant La
law then is two-fold: acquisition in good faith and registration
Lua, the president
in good faith.
of Meridian
Good Realty Corporation, went i
faith must concur with the registration. If it would be
lots;
shown
that the
thatagents
a buyer
brought
was inwith them the three titles of t
bad faith, the alleged registration they have made amounted
brought
to with
no registration
her a special
at all.
power of attorney executed by
favor but she went instead directly to Luis Rosaroso to b
The principle of primus tempore, potior jure (first in pointed
time, stronger
to theminand
right)
shegains
saw that there were houses on it
greater significance in case of a double sale of immovable
interest
property.
of the When
housesthe
because
thing her interest was on the lots
sold twice is an immovable, the one who acquires that
it and
the first
houses
records
belonged
it intothe
him; that he owns the property
Registry of Property, both made in good faith, shall be
same
deemed
because
theheowner.
is veryVerily,
sickly and he wanted to buy med
the act of registration must be coupled with good faith
someone
that is,tothe
check
registrant
the records
must of the lots in the Register o
have no knowledge of the defect or lack of title of his titles
vendorwas
or must
mortgaged
not haveand
been
she told them to redeem th
aware of facts which should have put him upon suchcorporation
inquiry andwill
investigation
buy the property;
as
that the registered ow
might be necessary to acquaint him with the defects inRosaroso;
the title ofthat
his vendor.)
in more or less three months, the encumb
she told the prospective sellers to prepare the deed of
When a piece of land is in the actual possession of persons
encumbrances
other than
or liens
the in
seller,
the title; that when the deed of ab
the buyer must be wary and should investigate the rights
it was of
signed
thosebyinthe
possession.
vendor Luis Rosaroso in their house in
Without making such inquiry, one cannot claim that he is a buyer in good faith.
When a man proposes to buy or deal with realty, his
From
dutytheisabove
to read
testimony,
the public
it is clear that Meridian, thro
manuscript, that is, to look and see who is there uponthe
it and
subject
whatproperties
his rightswere
are. A
in possession of persons othe
want of caution and diligence, which an honest man
of investigating
of ordinary the
prudence
rights is
and interests of the persons
accustomed to exercise in making purchases, is in contemplation
however, it chose
of law,toa want
just believe
of
that Luis still owned
good faith.
Realty failed to exercise the due diligence required b
acquiring a piece of land in the possession of person or
Spouses Sarmiento v. Court of Appeals: Verily,seller.
every person dealing with
registered land may safely rely on the correctness of the certificate of title issued
therefor and the law will in no way oblige him to go behind the certificate to
SPOUSES SANTIAGO v. VILLAMOR, G.R. No. 1684
determine the condition of the property. Thus, the general rule is that a purchaser
BRION, J
may be considered a purchaser in good faith when he has examined the latest
Facts: In January 1982, the spouses Villamor, parents of
certificate of title. An exception to this rule is when there exist important facts that
their 4.5-hectare coconut land in Sta. Rosa, San Jacinto,
would create suspicion in an otherwise reasonable man to go beyond the present
No. 1814, to the Rural Bank of San Jacinto (Masbate
title and to investigate those that preceded it. Thus, it has been said that a person
P10,000.00 loan.
who deliberately ignores a significant fact which would create suspicion in an
otherwise reasonable man is not an innocent purchaser for value
For non-payment of the loan, the San Jacinto Bank extra
mortgage, and, as the highest bidder at the public auction
In another case, it was held that if a vendee in a double sale registers the sale after
the spouses Villamor, Sr. failed to redeem the property wit
he has acquired knowledge of a previous sale, the registration constitutes a
the San Jacinto Bank obtained a final deed of sale in its fav
registration in bad faith and does not confer upon him any right. If the registration
is done in bad faith, it is as if there is no registration at all, and the buyer who has
The San Jacinto Bank then offered the land for sale to any
P a g e | 113
Since the respondents had been in possession and cultivation of the land, they
THE ROMAN
decided to acquire the land from the San Jacinto Bank.
The San CATHOLIC
Jacinto Bank CHURCH v. PANTE, G.R
2012, BRION,
J. payable in
agreed with the respondents and Catalina to a P65,000.00
sale,
Facts: The Church, represented by the Archbishop of Cac
installments. The respondents and Catalina made four (4) installment payments.
meter lot that measured 2x16 meters located in Bara
Camarines Sur. On September 25, 1992, the Church co
When the San Jacinto Bank refused to issue a deed of conveyance in their favor
Regino Pante for the sale of the lot thru a Contract to Sell
despite full payment, the respondents and Catalina filed a complaint against the San
that the latter was an actual occupant of the lot. The con
Jacinto with the RTC on October 11, 1994. The complaint was for specific
the purchase price at P11,200.00, with the initial P1,1
performance with damages.
payment, and the remaining balance payable in three yea
1995.
Prior to the filing of the specific performance case, the San Jacinto Bank issued a
deed of sale in favor of Domingo, Sr. On July 21, 1994, the spouses Villamor, Sr.
On June 28, 1994, the Church sold in favor of the spouses
sold the land to the petitioners for P150,000.00.
lot that included the lot previously sold to Pante. The spo
ownership by erecting a concrete fence over the lot so
Sps. Santiago demanded that the Villamor children vacate the property but the
blocking Pante and his familys access from their family
latter refused, claiming that they are the lawful owners of the land since they
road. As no settlement could be reached between the part
acquired the same from San Jacinto Bank.
the RTC an action to annul the sale between the Churc
insofar as it included the lot previously sold to him.
Issue: Whether petitioners are purchasers in good faith.
The Church filed its answer with a counterclaim, seeki

contract with Pante. The Church alleged that its cons
obtained by fraud when Pante, in bad faith, misrepresen
The petitioners are not purchasers in good faith.
actual occupant of the lot sold to him, when in truth, he w
square meter lot as a passageway from his house to the to
"A purchaser in good faith is one who buys property without notice that some other
that it was its policy to sell its lots only to actual occupant
person has a right to or interest in such property and pays its fair price before he
and their predecessors-in-interest have long been occupyi
has notice of the adverse claims and interest of another person in the same
lot that included the 32-square meter lot sold to Pante, the
property." However, where the land sold is in the possession of a person other
spouses Rubi were the rightful buyers.
than the vendor, the purchaser must be wary and must investigate the rights of
the actual possessor; without such inquiry, the buyer cannot be said to be in good
Issue: Whether Pante was first in possession of the subject
faith and cannot have any right over the property.
Ruling: NO
Ruling: YES.
In this case, the spouses Villamor, Sr. were not in possession of the land. The
petitioners, as prospective vendees, carried the burden of investigating the rights of
The rule on double sales
the respondents and respondent John who were then in actual possession of the
land. The petitioners cannot take refuge behind the allegation that, by custom and
The sale of the lot to Pante and later to the spouses Ru
tradition in San Jacinto, Masbate, the children use their parents' property, since they
sale that called for the application of the rules in Article 1
offered no proof supporting their bare allegation. The burden of proving the status
of a purchaser in good faith lies upon the party asserting that status and cannot be
Article 1544. If the same thing should have been sold
discharged by reliance on the legal presumption of good faith. The petitioners
ownership shall be transferred to the person who may ha
failed to discharge this burden.
thereof in good faith, if it should be movable property.
P a g e | 114
Should it be immovable property, the ownership Liquidation

shall belong
of Property.
to the person
acquiring it who in good faith first recorded it in the Registry of Property.
Shirley learned that Rogelio had the intention of selling t
Should there be no inscription, the ownership shall then
pertain
advised
to thethe
person
interested
who buyers
in
-Josefina V. Nobleza (p
good faith was first in the possession; and, in the absence
of the cases
thereof,
thattoshethehad
person
filed against Rogelio and caution
who presents the oldest title, provided there is good faith.
subject
[Emphasis
propertyours.]
until the cases are closed and terminated
the subject property to petitioner without Shirley's consent
As neither Pante nor the spouses Rubi registered the sale in their favor, the question
now is who, between the two, was first in possession
Petitioner
of theclaims
property
thatinshe
good
is a buyer in good faith of the
faith.1wphi1
titled under the name of the seller Rogelio A. Nuega. Petit
that since she has examined the TCT over the subject prop
Jurisprudence has interpreted possession in Article 1544
to have
of thebeen
Civilregistered
Code to mean
under the name of seller Rogelio
both actual physical delivery and constructive delivery.
purchaser for value and "she is not required to go beyo
delivery, the facts show that Pante was the first to acquire
verifying
possession
the status
of of
thethe
lot.subject property at the time of th
and at the date of the sale."
Actual delivery of a thing sold occurs when it is placed under the control and
possession of the vendee. Pante claimed that he had been using the lot as a
passageway, with the Churchs permission, since 1963.
Issue:
AfterWhether
purchasing
or not
thepetitioner
lot in is not a buyer in good fait
1992, he continued using it as a passageway until he was prevented by the spouses
Rubis concrete fence over the lot in 1994. Pantes use
Ruling:
of theNO.
lot as a passageway
after the 1992 sale in his favor was a clear assertion of his right of ownership that
preceded the spouses Rubis claim of ownership.
An innocent purchaser for value is one who buys the pr
notice that some other person has a right or interest in
Pante also stated that he had placed electric connections
fulland
andwater
fair price
pipes isonpaid
the lot,
by the buyer at the time of the
even before he purchased it in 1992, and the existence
of any
of notice
these connections
of claims orand
interest of some other person in
pipes was known to the spouses Rubi. Thus, any assertion of possession over the
lot by the spouses Rubi (e.g., the construction of Ita concrete
is the party
fence)
whowould
claimsbeto be an innocent purchas
considered as made in bad faith because works had
burden
already
of existed
provingonsuch
the assertion,
lot
and it is not enoug
indicating possession by another. "[A] buyer of real presumption
property in the
of possession
good faith. of
persons other than the seller must be wary and should investigate the rights of those
in possession. Without such inquiry, the buyer can hardly
To successfully
be regardedinvoke
as a buyer
and in
be considered as a buyer in go
good faith and cannot have any right over the property."
that first and foremost, the "buyer in good faith" must hav
diligence in the exercise of his/her rights. It presup
everything that an ordinary person would do for the
his/her rights and interests against prejudicial or injuri
PURCHASER IN GOOD FAITH
in such a situation. The prudence required of a buyer in
person with training in law, but rather that of an avera
circumstances
without
to the calibration
NOBLEZA v. NUEGA, G.R. No. 193038, March 11,and
2015,
VILLARAMA,
JR., resorting
J.
which
his(Rogelio).
knowledge is nil.'"
Respondent Shirley B. Nuega (Shirley) was married evidence
to RogelioofA.
Nuega
They lived in the parcel of land bought by the money of Shirley when they were not
buyer
in good
doeshome
his homework and verifies that
yet married. While overseas, she received informationAthat
Rogelio
hadfaith
brought
the title,
another woman, Monica Escobar, into the family such
home.asShirley
filedthe
twoparties,
cases the mode of transfer a
deed/contract
sale, to name
a few.
against Rogelio: one for Concubinage and another
for LegalofSeparation
and
P a g e | 115
convince us to affirm the ruling of both the appellate an

To be more specific, such prudence can be shown bypetitioner
making anis ocular
not a buyer
inspection
in good
of faith.
the property, checking the title/ownership with the proper Register of Deeds alongside
the payment of taxes therefor, or inquiring into the minutiae
First, petitioner's
such as the parameters
sister HildaorBautista, at the time of t
lot area, the type of ownership, and the capacity of
Rogelio
the seller
and Shirley's
to dispose
house
of -the
the subject property. Had pe
property, which capacity necessarily includes an inquiry
as a buyer,
into the
shecivil
could
status
haveof
easily
the checked if Rogelio had th
seller to ensure that if married, marital consent is secured
subject
whenproperty.
necessary.
Had petitioner been more vigilant, she
such facility - considering that her sister lived in the same
A buyer cannot claim to be an innocent purchaser forisvalue
located
by merely
- if there
relying
wasonany
theperson other than Roge
TCT of the seller while ignoring all the other surrounding
interest
circumstances
in the subject
relevant
property.
to
the sale.
To be sure, respondent even testified that she had w
Spouses Raymundo v. Spouses Bandong. In the present
LadislaoDiwa
case, we are
Village
not convinced
- including petitioner's sister - not
by the petitioners' incessant assertion that Jocelyn is an
Rogelio
innocent
relative
purchaser
to thefor
purchase
value. of the subject property b
To begin with, she is a grandniece of Eulalia and resides
filed in
against
the same
Rogelio.
locality where
the latter lives and conducts her principal business. It is therefore impossible for her
not to acquire knowledge of her grand aunt's business
In the practice
Deed of of
Absolute
requiring
Saleher
dated December 29, 1992, th
biyaheros to surrender the titles to their properties seller
and towas
sign
notthe
stated,
corresponding
while petitioner as buyer was indicate
deeds of sale over said properties in her favor, as security. This alone should have put
Jocelyn on guard for any possible abuses that Eulalia may commit with the titles and
the deeds of sale in her possession.
HOMEOWNERS SAVINGS AND LOAN BANK v. DE
189477, February 26, 2014, PEREZ, J.
Arrofo v. Quio. In the present case, the records show
that Arrofo
to act
as athe registered owners of a
Felonia
and Defailed
Guzman
were
prudent buyer. True, she asked her daughter to verifybedroom
from thehouse.
Register
of Deeds
if
They
mortgaged
the property to Del
the title to the Property is free from encumbrances. However,
Arrofo
admitted
that
the
However, instead of a real estate mortgage, the parties ex
Property is within the neighborhood and that she conducted
of
Sale withananocular
Optioninspection
to Repurchase.
They filed an action fo
the Property. She saw the house constructed on the Property.
Yet,
Arrofo
did
not
even
In spite of the pendency of the Reformation case, Delgado
bother to inquire about the occupants of the house. Arrofo
also admitted
that at
RTC ordered
the issuance
of the
a new title under Delgados
time of the sale, Myrna was occupying a room in her
house
as
her
lessee.
The
fact
the subject property to Homeowners Savings and Loan Ba
that Myrna was renting a room from Arrofo yet selling
a land with
house should
registered
title. a HSLB
foreclosed the subject proper
have put Arrofo on her guard. She knew that Myrnaownership
was not occupying
the
house.
in its favor, causing the issuance of a new title
Hence, someone else must have been occupying the house.
Guzman instituted the instant complaint for Nullity of
Sale, Annulment of Titles of Delgado and HSLB, and
Thus, Arrofo should have inquired who occupied the
house, and
a lessee, of
who
Possession
and ifOwnership
the subject property in their
received the rentals from such lessee. Such inquiry would have led Arrofo to discover
that the lessee was paying rentals to Quino, not to Renato
andasserted
Myrna, that
whoitclaimed
to
HSLB
was a mortgagee
in good faith bec
own the Property.
Delgado and HSLB was annotated on the title.
An analogous situation obtains in the case at bar.
Issue: Whether or not HSLB was a mortgagee in good fait
The TCT of the subject property states that its sole owner
is theHSLB
seller Rogelio
himself
Ruling:
was initially
a mortgagee in good faith.
who was therein also described as "single". However, as in the cases of Spouses
Raymundo and Arrofo, there are circumstances critical
case at v.
barSan
which
Banktoof the
Commerce
Pablo. There is, however, a s
P a g e | 116
fact that the mortgagor is not the owner of the mortgaged

Indeed, property,
at the timehisHSLB
title being
bought the subject property, HS
fraudulent, the mortgage contract and any foreclosure
of the
sale annotated
arising there
Notice
from ofareLis Pendens. Instead of
given effect by reason of public policy. This is the continued with the purchase knowing the legal repercuss
good faith" based on the rule that all persons dealing
entails.
with property
HSLB took
covered
upon by
itself
the the risk that the Notice of
Torrens Certificates of Title, as buyers or mortgagees,notice
are not
of required
lispendens
to was
go beyond
annotated on 14 September 199
what appears on the face of the title. The public interest
sale,inwhere
upholding
the appellant
indefeasibility
was declared as the highest bidd
of a certificate of title, as evidence of lawful ownership
1997. There
of the
is no
land
doubt
or of
thatany
at the time appellant purcha
encumbrance thereon, protects a buyer or mortgagee was
who,aware
in good
of the
faith,
pending
relied upon
litigation concerning the same
what appears on the face of the certificate of title.
issued in its favor was subject to the outcome of said litiga
When the property was mortgaged to HSLB, the registered

Rehabilitation
ownerFinance
of the subject
Corp. v. Morales. While the n
property was Delgado who had in her name TCT No.affect
44848.
petitioners
Thus, HSLB
rightcannot
as mortgagee,
be
because the same w
faulted in relying on the face of Delgados title. Thetherecords
mortgage,
indicate
yet the
that said
Delgado
notice affects its right as pu
was at the time of the mortgage in possession lispendens
of the subject
simply
property
means that
and a certain property is in
Delgados title did not contain any annotation serves
that would
as a notice
arouse
to the
HSLBs
whole world that one who bu
suspicion.
own risk.
But of whether or not HSLB is a purchaser in good faith. And, HSLB is not such a
SPS. BAUTISTA v. SPS. JALANDONI, G.R. No. 17146
purchaser.
MENDOZA, J.
Spouses Jalandoni were the registered owners of two (2) p
HSLB utterly failed to take the necessary precautions. At the time the subject
for a loan with a commercial bank and, as a security thereo
property was mortgaged, there was yet no annotated Notice of Lis Pendens. However,
a real estate mortgage over their two lots. After a routine
at the time HSLB purchased the subject property, the Notice of Lis Pendens was
discovered that their titles over the two lots had been can
already annotated on the title.
issued in the names of Spouses Baustista. Upon further in
that the bases for the cancellation of their titles were t
Lis pendens is a Latin term which literally means, "a pending suit or a pending
purportedly executed and signed by them in favor of Sp
litigation," a notice of lispendens is an announcement to the whole world that a real
filed a complaint for cancellation of titles and damages cla
property is in litigation, serving as a warning that anyone who acquires an interest
the subject lots and denied having executed the deeds of ab
over the property does so at his/her own risk, or that he/she gambles on the result of
Spouses Bautista alleged that Nasino informed Eliseo that
the litigation over the property. It is a warning to prospective buyers to take
prepared and signed by Spouses Jalandoni; that he also co
precautions and investigate the pending litigation.
MCC averred that they found no indication of any defe
Bautista; that it exercised due diligence and prudence in
The purpose of a notice of lispendens is to protect the rights of the registrant while
and conducted the proper investigation and inspection of
the case is pending resolution or decision. With the notice of lispendens duly
and that its mortgage lien could not be prejudiced by the a
recorded and remaining uncancelled, the registrant could rest secure that he/she
by Spouses Jalandoni.
will not lose the property or any part thereof during litigation.
Issue: Whether or not Spouses Bautista are purchasers in g

The doctrine of lispendens is founded upon reason of public policy and necessity, the
purpose of which is to keep the subject matter of the litigation within the Courts
Ruling: Spouses Bautista cannot be deemed purchasers
jurisdiction until the judgment or the decree have been entered;
several circumstances that should have placed them on g
successive alienations pending the litigation, its judgment or decree shall be
conduct an investigation that went beyond the face of t
rendered abortive and impossible of execution.
Their failure to take the necessary steps to determine the s
the extent of Nasino's authority puts them into bad light.
P a g e | 117
property to herein petitioner Santiago V. Soquillo (S

Eliseo Bautista admitted not having met the plaintiffs
complaint
except when
for illegal
the instant
detainer
case
against Villaflores and his w
was filed in court.
were ejected from the disputed property.
The foregoing fact alone would have prompted suspicion

Tortola discovered
over the Villaflores
transactionejectment from the disput
considering that the same involves a valuable consideration.
complaint against
In addition,
Coloso, the
theHeirs of Coloso, Jr., Soqu
following circumstances would have placed Bautista
title/sale/judgment
on guard and should
with prayers
have for the issuance of injun
behooved himself to inquire further considering: (1)
damages.
the non-presentation of the
owner's duplicate certificate, where only photocopies of the certificates of title were
presented to defendant Bautista; (2) the price at which
Issue:
theWhether
subject or
lotsnot
were
Soquillo
beingwas a purchaser in good fa
sold; and (2) the continued failure and/or refusal of the supposed sellers to meet and
communicate with him.
RTC Ruling:
Spouses Bautistas claim of good faith is negated by It

their
canfailure
be established
to verifythat
the Tortola
extent acquired a right over the
and nature of Nasinos authority. They should not have
a Deed
merely
of Definite
relied on
Sale
herdated
verbal
March 29, 1966, which was
representation that she was selling the subject lots on
2002.
behalf
Tortola
of Spouses
occupied
Jalandoni.
the said property and construc
Moreover, Eliseos claim that he did not require Nasino
thereon
to give
until him
he left
a copy
for Maramag,
of the Bukidnon sometime in
special power of attorney because he trusted her is unacceptable.
occupation of the said property to Spouses Villaflo
rule that persons dealing with an assumed agency are
continuously
bound at their
until 2002.
peril, if they
would hold the principal liable, to ascertain not only the fact of agency but also the
nature and extent of authority, and in case either The
is controverted,
ownership and
the possession
burden of of the land was admitted
proof is upon them to establish it. As stated, Spousesherein
Bautista's
defendants
failure to
Heirs
observe
of Coloso,
the
Jr. in their letters to T
required degree of caution in ascertaining the genuineness
Soquillo,and
admitted
extentthe
of actual
Nasino's
occupation of the land by Sp
authority is tantamount to bad faith that precludes them
of his
from
filing
claiming
a civilthe
action
rights
against
of a them in court.
purchaser in good faith.
Under the law, if the property has not yet passed to an in
an action for reconveyance is still available. Defendant So
SOQUILLO v. TORTOLA, G.R. No. 192450, July 23, 2012, REYES, J.
as an innocent purchaser for value or that he acquired th
Lorenzo Coloso, Jr. sold to Ramon Jamis a parcel of land situated in Alubijid,
mistake and fraud.
Misamis OrientaL. Jamis thereafter sold the disputed property to herein respondent
Tortola. He took possession of the disputed property, planted it with fruit-bearing
CA Ruling:
trees, and built a residential lot thereon. He also paid the realty taxes due. However,
the receipts for the payments still stated Coloso, Jr.s name, with the exception of Tax
Soquillo cannot be considered a purchaser in good fa
Declaration Nos. 942443, indicating "Lorenzo Coloso, Jr. c/o Mr. Tortola" and
defendant Arthur Coloso as Attorney-in-fact of the heirs o
026083, bearing the name of "Jorge Tortola". Tortola and his family moved to
not have the right to sell the disputed land to the former.
Bukidnon. He left Godofredo Villaflores as his agent and caretaker of the disputed
property.
Defendant Arthur Coloso had prior knowledge that the
occupied by Mr. Villaflores, as agent of Tortola. Howeve
Tortola received from Atty. Rene Artemio Pacana informing the former that Arthur
defendant Arthur Coloso as representative of the heirs o
Coloso wanted to recover the disputed property. A survey of the disputed property
filed an Application for Free Patent, and falsely declared
was conducted. The land investigator reported that the heirs of Coloso, Jr. were in
and cultivated the disputed land since 1985. By reason of
possession and were cultivating the disputed property, hence, he recommended to the
declarations, the defendants were issued an Original Certif
CENRO the issuance of a free patent in their favor. Coloso and the other heirs of
Coloso, Jr. executed a notarized deed of absolute sale conveying the disputed
P a g e | 118
Such false declarations in the Application, however,

the extrajudicial
constituted concealment
foreclosure sale
of of the subject property in
material facts, which amounted to fraud. This, therefore,
fully pay
inevitably
the sweepstakes
resulted toshe
thepurchased. A public auctio
cancellation of title.
was the highest bidder. A certificate of sale was correspond
Consequently, contrary to Soquillos contention, theThe

principle
certified
of true
indefeasibility
copy of TCT
of that New Dagupan obta
title cannot be invoked in this case. Public policy demands
Deeds that
reflected
one who
PCSOs
obtains
mortgage
title
lien. New Dagupan, c
to a public land through fraud should not be allowed tothat
benefit
it wastherefrom.
informed of the subject mortgage, sent a letter t
of its complaint against Peralta and its claim over the subj
Furthermore, defendant-appellant Santiago Soquillo
that cannot
PCSO intervene
be considered
and participate
as
in the case. PCSO al
purchaser in good faith and for value. The fact that defendants
was a buyer
Heirs
in bad
of Lorenzo
faith. Boy
Coloso, Jr. were not in possession of the disputed land should have impelled him to
go beyond the title, as is in harmony with the Supreme
Issue:Courts
Whether
pronouncement
or not New Dagupan
in
was a buyer in bad fa
Eagle Realty Corporation vs. Republic of the Philippines, et al., which reads:
Ruling: No.
Besides, defendants, Heirs of Lorenzo Coloso, Jr., had not transferred any rights over
the disputed land to Soquillo, because the former were
It not
wasowners
only onofMay
the same
20, 1992
at thethat PCSO registered its m
time they sold the land to Soquillo. x xx No one can give
Newwhat
Dagupan
he does
had
notalready
have. purchased the subject property
sale. In fact, PCSOs mortgage lien was yet to be registere
SC Ruling:
filed its adverse claim on October 1, 1991 and its compl
surrender of the owners duplicate of TCT No. 52135 on F
Soquillo was not a purchaser in good faith. He and the heirs of Coloso, Jr. who were
his predecessors-in-interest, knew about the sale made
It was
to Tortola
only during
and thethe
possession
pendency of Civil Case No. D-10
of the disputed property by Villaflores. Besides, Tortola
that
registered
New Dagupan
the sale,
was
albeit
informed
with of PCSOs mortgage lien
much delay, in 2002. As of the time Tortola's complaint
was
was
already
filed, charged
no registration
with knowledge
was
of New Dagupans a
effected by Soquillo.
the annotation of the subject mortgage. PCSOs attempt
facts is palpable. However, they are patent from the rec
gainsaying that New Dagupan is a purchaser in good fai
PCSO v. NEW DAGUPAN METRO GAS CORPORATION, G.R. No. 173171,
bound by PCSOs mortgage lien.
July 11, 2012, REYES, J.
Purita E. Peralta is the registered owner of a parcel of land located at Dagupan City. A
PCSO did not present evidence, showing that New Dagu
real estate mortgage was constituted over such property in favor of PCSO to secure
mortgage despite its being unregistered at the time the su
the payment of the sweepstakes tickets. Peralta sold, under a conditional sale, the
Peralta, in the compromise agreement, even admitted tha
subject property to New Dagupan. New Dagupan obliged to pay Peralta upon the
Dagupan of the subject mortgage.PCSOs only basis
execution of the corresponding deed and the balance by monthly instalments. Peralta
Dagupan was a buyer in bad faith was the latters relia
showed to New Dagupan a photocopy of TCT which bore no liens and encumbrances,
of TCT No. 52135. However, apart from the fact th
and undertook to deliver the owners duplicate within three (3) months from the
annotation of a lien or encumbrance, PCSO failed to refute
execution of the contract. New Dagupan withheld payment of the last instalment in
his verification of TCT No. 52135 with the Register o
view of Peraltas failure to deliver the owners duplicate of TCT and to execute a
confirmed Peraltas claim of a clean title.
deed of absolute sale in its favor.
Since PCSO had notice of New Dagupans adverse claim

In view of Peraltas continued failure to deliver a deed of absolute sale and the
its mortgage lien, it is bound thereby and thus legally
owners duplicate of the title, New Dagupan filed a complaint for specific
proceedings on the validity of such adverse claim. It is
performance against her. During the pendency of New Dagupans complaint against
PCSOs foreclosure of the subject mortgage and purchas
Peralta, PCSO caused the registration of the mortgage. PCSO filed an application for
P a g e | 119
the auction sale took place prior to New Dagupans acquisition

based on aofperfected
title as decreed
contractinof sale or any voluntary i
the Decision dated January 21, 1994 of RTC Branch registered
43. The effects
ownerofofa the
foreclosure
land, the procedure that should be
sale retroact to the date the mortgage was registered.
under
Hence,
Section
while
51 PCSO
in relation
maytobeSection 52 of P.D. No. 152
deemed to have acquired title over the subject property
duplicate
on Maycertificate
20, 1992, such
must title
be presented
is
to the Register of D
rendered inferior by New Dagupans adverse claim,
the the
corresponding
validity ofmemorandum
which was thereon and in the entry
confirmed per the Decision dated January 21, 1994 of the
RTCowner
Branch
refuses
43. or fails to surrender the duplicate certi
statement setting forth an adverse claim may be filed w
Otherwise, if PCSOs mortgage lien is allowed to prevail
Otherwise,
by the mere
the adverse
expediency
claimoffiled will not have the eff
registration over an adverse claim that was registeredright
aheadorofinterest
time, theonobject
the disputed
of an
property that could
adverse claim to apprise third persons that any transaction
have been
regarding
subsequently
the disputed
acquired by third persons.
property is subject to the outcome of the dispute would be rendered naught. A
different conclusion would remove the primary motivation
What transpired
for the public
in Gabin
to rely
is similar
on
to that in Leviste. In G
and respect the Torrens system of registration. Such on
would
the property
be inconsistent
is a deedwith
of absolute
the
sale. In Leviste, what
well-settled, even axiomatic, rule that a person dealing
sell.
with
Both
registered
are voluntary
property
instruments
need
that should have bee
not go beyond the title and is not required to explore
withoutside
Sections
the51
four
and(4)
52 corners
of P.D. No. 1529 as there was no
thereof in search for any hidden defect or inchoatepresent
right that
the owners
may turnduplicate
out to be
of title.
superior.
It is patent that the contrary appears in this case. Indeed,
Contra:
the subject property is based on a conditional sale, whi
instrument. However, New Dagupans use of the adverse
Garbin v. CA.The Court decided the controversy between
far froma being
buyer incongruent
with an earlier
in view of the undisputed
registered adverse claim and a subsequent buyer, whoowner)
is charged
failedwith
to surrender
notice ofthe
such
owners duplicate of TCT N
adverse claim at the time of the registration of her title, in favor of the latter. The
adverse claim cannot prevail against the rights of theMoreover,
later buyerwhile
notwithstanding
the validity of
its the adverse claim in Gabin
prior registration.
was no separate proceeding instituted that would determ
execution of the deed of sale upon which it is founded, t
It is undisputed that the adverse claim of private respondents
this case.
wasThe
registered
existence
pursuant
and due execution of the con
to Sec. 110 of Act No. 496, the same having been accomplished
absolute and complete
by the filing
cession
of aof her title over the subjec
sworn statement with the Register of Deeds of the province
are undisputed.
where the
These
property
are matters
was covered by the Decision
located. However, what was registered was merely RTC
the adverse
Branch claim
43, which
and had
not long
the become final and executo
Deed of Sale, which supposedly conveyed the northern half portion of the subject
property. Therefore, there is still need to resolve the validity of the adverse claim in
WARRANTIES
separate proceedings, as there is an absence of registration of the actual
conveyance of the portion of land herein claimed by private respondents.
BIGNA Y EX-IM PHILIPPINES, INC. v. UNION BAN
From the provisions of the law, it is clear that mere registration
of anG.R.
adverse
PHILIPPINES,
No.claim
171590, February 12, 2014, D
does not make such claim valid, nor is it permanent Alfonso
in character.
More
importantly,
de Leon
mortgaged
in favor of Union Bank of the
such registration does not confer instant title situated
of ownership
judicial
at Loyolasince
Heights,
Quezon City, which was reg
determination on the issue of the ownership is still necessary.45
omitted)
Rosarios (Citation
name. The
property was foreclosed and sold
After the redemption period expired, the bank consolidate
L.P. Leviste& Co. v. Noblejas. The availability of the
special
remedy
an adverse
TCT
362405
was of
issued
in its name in 1987. In 1988, Ro
claim is subject to the absence of any other statutory and
provision
the registration
of
UnionforBank,
for annulment
of the 1984 mortga
the claimants alleged right or interest in the property. mortgaged
That if the claimants
interest
is her consent, and for rec
the property
without
P a g e | 120
Philippines, Inc. (Bignay), through its President, Milagros

sufficient
Ongprudence,
Siy (Siy), ifoffered
not to to
the best of its abilities.
purchase the property. The written offer stated, among others, that
The record reveals, however, that Union Bank was grossl
The property is the subject of a pending litigation and
between
prosecution
RosarioofdeCivil
LeonCase
and No. Q-52702. Its appeal
Union Bank for nullification of the foreclosure before
Decision
the Regional
in saidTrial
case Court
was dismissed
of
by the CA for fa
Quezon City. Should this offer be approved by yourappellants
management,
brief.
we Next,
suggest
thethat
ensuing Petition for Review o
instead of the usual conditional sale, a deed of absolute
Court
salewas
be executed
likewise to
denied
document
due to late filing and paymen
the transaction in our favor subject to a mortgage in bank
favorsought
of the bank
the annulment
to secure the
of the December 12, 1991 ju
balance.
dismissed the petition for its failure to comply with Sup
28-91. As a result, the December 12, 1991 Decision becam
Bignay was evicted from the property. Such negligence in
On 1989, a Deed of Absolute Sale was executed byfar
and
from
between
coincidental;
Union Bank
it is decidedly
and
glaring, and amounts
Bignay whereby the property was conveyed to Bignay for P4 million. The deed of
sale was executed by the parties through Bignays SiyEviction
and Union
shallBanks
take place
Senior
whenever
Vice by a final judgment ba
President Anthony Robles (Robles). One of the terms
sale
of or
theandeed
act of
imputable
sale is quoted
to the vendor, the vendee is dep
below:
part of the thing purchased.
Section 1. The VENDEE hereby recognizes thatIn the

caseParcel/s
eviction of
occurs,
Landthewith
vendee shall have the right
improvements thereon is acquired through foreclosureamong
proceedings
others:and agrees to buy
the Parcel/s of Land with improvement[s] thereon in its1.present
the return
state and
of the
condition.
value which the thing sold had
The VENDOR therefore does not make any x x x representations
be it greater
or warranty
or less than
with
the price of the sale;
respect to the Parcel/s of Land but that it will defend its2.title
thetoexpenses
the Parcel/s
of theofcontract,
Land if the vendee has paid
with improvement[s] thereon against the claims of any person
3. thewhomsoever
damages and interests, and
4. ornamental expenses, IF the sale was made in bad f
On December 27, 1989, Bignay mortgaged the property to Union Bank, presumably
to secure a loan obtained from the latter. On December 12, 1991, a Decision was
FIRST UNITED CONSTRUCTORS CORP. v. BAYAN
rendered in Civil Case No. Q-52702, decreeing that defendant Alfonso de Leon, Jr.
CORP., G.R. No. 164985, January 15, 2014, BERSAMI
had alone executed the mortgage on their conjugal upon a forged signature of his wife
Petitioner First United Constructors Corporation (FUCC
plaintiff Rosario T. de Leon. The Court hereby declares NULL and VOID the
Construction Corporation (Blue Star) were associate
pertinent documents as to the sale. Bignay was evicted from the property; by then, it
financial resources, equipment and technical personnel o
had demolished the existing structure on the lot and begun construction of a new
parties established a good business relationship, with
building.
service and repair work to the units purchased by the petiti
FUCC ordered from the respondent one unit of Hino Prime
Issue: Whether or not Union Bank is liable for its express warranty
delivered on the same date. FUCC again ordered from
Isuzu Transit Mixer that was also delivered to the petition
Ruling: Yes.
FUCC partially paid in cash, and the balance through postUpon presentment of the checks for payment, the respond
Bignay purchased the property without knowledge of the pending Civil Case No. Qordered the payment stopped. The respondent immed
52702. Union Bank is therefore answerable for its express undertaking under the deed
settlement of their obligation from the petitioners, but
of sale to "defend its title to the Parcel/s of Land with improvement thereon
petitioners informed the respondent that they were withhol
against the claims of any person whatsoever
due to the breakdown of one of the dump trucks they h
represented to Bignaythat it had title to the property, and by assuming the
respondent, specifically the second dump truck. It was the
obligation to defend such title, it promised to do so at least in good faith and with
that the petitioners were not legally justified in withhold
P a g e | 121
balance of the purchase price of the Hino Prime Mover

price
and
ofthe
theIsuzu
sameTransit
item orMixer
unit sold and not to a differen
due the alleged defects in second dump truck because
sale.
theThis
purchase
is more
of the
logical
twointerpretation
units
of the said article
was an entirely different transaction from the sale of breach
the dump
of trucks,
warranty
thewith
warranties
respect to a particular item sold
for which having long expired.
therefore, the buyers remedy should relate to the same tra
Issue: Whether or not Recoupment is a proper remedyDefendants-appellants act of ordering the payment on th
mixer stopped was improper considering that the said sa
Ruling: No.
from that of the dump trucks earlier purchased by defendan
Petitioners could not validly resort to recoupment against

Therespondent.
claim of defendants-appellants for breach of warranty
the repair and spare parts of dump truck no. 2 is therefo
Recoupment (reconvencion) is the act of rebating recoupment
or recoupingsince
a part
it does
of a not
claim
arise out of the contract or
upon which one is sued by means of a legal or equitable
claim of right
plaintiff-appellee
resulting from
for unpaid
a
balances on the last
counterclaim arising out of the same transaction. It prime
is themover
settingand
upthe
of transit
a demand
mixer.
arising from the same transaction as the plaintiffs claim, to abate or reduce that
claim.
The CA was correct. It was improper for petitioners to s
expenses and other spare parts of the dump truck against
The legal basis for recoupment by the buyer is the first
theparagraph
price of
of Article
the prime
1599 ofmover and the transit
the Civil Code, viz:
respondent.Recoupment must arise out of the contract o
the plaintiffs claim is founded.To be entitled to recoup
Article 1599. Where there is a breach of warranty by
must
thearise
sellerfrom the same transaction, i.e., the purchas
his election:
the transit mixer and not to a previous contract invo
dump truck. That there was a series of purchases made
1. Accept or keep the goods and set up against theconsidered
seller, the as
breach
a single
of transaction,
warranty for the records show tha
by way of recoupment in diminution or extinction
six of
dump
the price
trucks was a separate and distinct transaction fro
2. Accept or keep the goods and maintain an action
ofagainst
the Hino
the seller
Prime
for Mover
damagesand the Isuzu Transit M
for the breach of warranty;
breakdown of one of the dump trucks did not grant
3. Refuse to accept the goods, and maintain anstop
action
and against
withholdthe
payment
seller for
of their remaining balance
damages for the breach of warranty;
4. Rescind the contract of sale and refuse to receive the goods or if the goods have
REMEDIES FOR BREACH OF CONTRA
already been received, return them or offer to return them to the seller and
recover the price or any part thereof which has been paid.
RECTO LAW: SALES OF MOVABLE ON IN
When the buyer has claimed and been granted a remedy in anyone of these ways,
other remedy can thereafter be granted, without prejudice to the provisions of the
LOCSIN II v. MEKENI FOOD CORPORATION, G.R
second paragraph of article 1191.
09, 2013, DEL CASTILLO, J.
In its decision, the CA applied the first paragraph of Article 1599 of the Civil Code to
Mekeni Food Corporation a Philippine company enga
this case, explaining thusly:
and meat processing offered petitioner Antonio Locsin
Sales Manager to oversee Mekenis National Capital
Paragraph (1) of Article 1599 of the Civil Code which provides for the remedy of
Service and South Luzon operations. In addition to a
recoupment in diminution or extinction of price in case of breach of warranty by the
package, Mekeni offered petitioner a car plan, under whic
seller should therefore be interpreted as referring to the
vehicle is to be paid by the company and the other
P a g e | 122
petitioners salary. To be able to effectively coverpaid

hisfor
appointed
it. There sales
are also
territory,
stipulations in car plan agreeme
Mekeni furnished petitioner with a used Honda Civic
the employment
car valued atofP280,000.00,
the employee concerned be terminated
which used to be the service vehicle of petitioners immediate
fully paid, supervisor.
the vehicle Petitioner
will be taken by the employer and a
paid for his 50% share through salary deductions of P5,000.00
considered
each
rentals
month.
per agreement.
Antonio Locsin II resigned from his post at MekeniItFood

was made
Corporation.
clear inBy
thethen,
above
a pronouncement that inst
total of P112,500.00 had been deducted from his monthly
plan may
salary
beand
treated
applied
as rentals
as partonly when there is an exp
of the employees share in the car plan. Mekeni supposedly
plan agreement
put intoansuch
equivalent
effect. It was therefore patent err
amount as its share under the car plan.
assume that, even in the absence of express stipulation, p
car plan may be considered as rentals which need not be re
In his resignation letter, petitioner made an offer to purchase his service vehicle by
paying the outstanding balance thereon. The parties negotiated,
Indeed, the
butCourt
could not
cannot
agreeallow
on that payments made o
the terms of the proposed purchase. Petitioner thus returned
forfeited
theby
vehicle
Mekeni
to Mekeni.
and treated simply as rentals for petit
service vehicle. Nor may they be retained by it as purp
Issue: Whether petitioner is entitled to a refund of allwould
the amounts
have this
applied
Courttobelieve.
the cost
of the service vehicle under the car plan.
In the first place, there is precisely no stipulation to such
Ruling: NO.
Secondly, it may not be said that the car plan arrangemen
benefit that the petitioner enjoyed; on the contrary, it w
Petitioner may refund only
Mekenis business operations, which benefited it to the
service vehicle, petitioner would have been unable to ra
The Mekeni car plan offered to petitioner was subject
territory
to no other
assigned
termtoorhim,
condition
and sales or marketing of Meken
than that Mekeni shall cover one-half of its value, andbeen
petitioner
bookedshall
or made
in turn
fastpay
enough
the to move Mekenis inven
other half through deductions from his monthly salary.
Any benefit or privilege enjoyed by petitioner from usin
There is no evidence to suggest that if petitioner failed
merely
to completely
incidentalcover
and insignificant,
one-half
because for the most
of the cost of the vehicle, then all the deductions fromMekenis
his salarycontrol
going to
and
thesupervision.
cost of
Free and complete
the vehicle will be treated as rentals for his use thereof
petitioner
while working
only after
withthe
Mekeni,
vehicles cost is covered or pa
and shall not be refunded.
vehicle remains at the beck and call of Mekeni. Given the
to cover to be able to perform his work effectively and
The CAs reliance on Elisco Tool Manufacturing Corporation
employer, v.theCourt
service
of Appeals
vehicle was an absolute necessity,
without basis, and its conclusions arrived at in the questioned
would suffer
decision
adversely.
are manifestly
Thus, it is clear that while petitio
mistaken.
the vehicles value, Mekeni was reaping the full benefits fr
What was said in Elisco Tool
Mekeni may not enrich itself by charging petitioner for the

otherwise absolutely necessary to the full and effective p
First. Petitioner does not deny that private respondent
may
Rolando
not, under
Lantan
the acquired
claim thatthe
petitioners payments consti
vehicle in question under a car plan for executives
company
of the
vehicle,
Elizalde
refuse
group
to refund
of
what petitioner had pa
companies. Under a typical car plan, the company advances
car plan the
didpurchase
not carryprice
suchof aa condition; the subject ve
car to be paid back by the employee through monthly substantially,
deductions from
if not
hisfully,
salary.
depreciated;
The
the car plan arrange
company retains ownership of the motor vehicle until the
it shall
mosthave
part;been
and fully
any personal
paid for. benefit obtained by petitio
However, retention of registration of the car in the companys
was merely
name
incidental.
is only a form of
a lien on the vehicle in the event that the employee would abscond before he has fully
P a g e | 123
Conversely, petitioner cannot recover the monetary value of Mekenis counterpart

contribution to the cost of the vehicle; that is not property
However,
or money
the transferee
that belongs
BANK
to is bound by the Contrac
him, nor was it intended to be given to him in lieu of
Enriquezs
the car plan.
rights
In thereunder.
other words,This is because the Con
Mekenis share of the vehicles cost was not partsubdivision
of petitioners
lot, is compensation
covered and protected by PD 957.
package. To start with, the vehicle is an asset that belonged to Mekeni. Just as Mekeni
is unjustly enriched by failing to refund petitioners xpayments,
x x Under
so these
shouldcircumstances,
petitioner
the BANK knew or
not be awarded the value of Mekenis counterpart contribution
possibilitytoand
the risk
car plan,
that as
thethis
assigned properties were a
would unjustly enrich him at Mekenis expense.
contracts to sell in favor of subdivision lot buyers. As
another case involving a bank regarding a subdivision lot
a contract to sell with a third party:
SALES OF SUBDIVISION LOTS AND CONDOMINIUM UNITS (SEC. 23
AND 24, P.D. 957)
"[The Bank] should have considered that it was dealing w
real estate development project. A reasonable person
institution
x x, should19,
have been aware that, to finance t
PHILIPPINE NATIONAL BANK vs. DEE, G.R. No.
182128,x February
those obtained from the loan could have been used to
2014, REYES, J.
Hence,
there
was a need to verify whether an
Teresita Tan Dee bought from Prime East Propertiespartially.
Inc. (PEPI)
on an
installment
intendeditstorights
be theover
subject
basis a residential lot located in Binangonan, Rizal. already
PEPI assigned
a of any other contract in
buyers. In
granting
the loan,
[the Bank] should not have
213,093-sq m property on August 1996 to respondent
Armed
Forces
of the
clean Inc.
title,(AFP-RSBS),
considering the
presence of circumstances
Philippines-Retirement and Separation Benefits System,
which
thorough
of the existence of buyers x x x. Wa
included the property purchased by Dee. PEPI obtained
a investigation
loan from Philippine
the
[Bank]
cannot
be
deemed
to be an innocent mortgage
National Bank secured by a mortgage over several properties, including Dees
More
so in of
this
case
the contract to sell has alread
property. After Dees full payment of the purchase price,
a deed
sale
waswhere
executed
sale.Consequently, Dee
by respondents PEPI and AFP-RSBS on July 1998 in absolute
Dees favor.
sought from the petitioner the delivery of the owners duplicate title over the property,
The execution
of thedelivery
dation in
to no avail. Thus, she filed a complaint for specific performance
to compel
of payment effectively extin
loanamong
obligation
TCT No. 619608 by the petitioner, PEPI and AFP-RSBS,
others.to the petitioner insofar as it covers
purchased by Dee. This negates the petitioners claim that
before
it can PD
cancel
Issue: Whether or not PNB is bound to honor the sale property
of PEPI to
Dee under
957or release the mortgage. As i
already stepped into the shoes of PEPI and there is no mo
to refuse the cancellation or release of the mortgage, for
Ruling: YES.
Luzon Development Bank, in accepting the assigned pr
obligation,
"[the bank]
has assumed
the risk that some of
Despite the apparent validity of the mortgage between
the petitioner
and PEPI,
the
covered
by contracts
sellDee.
which must be honored under
former is still bound to respect the transactions between
respondents
PEPItoand
the petitioner
has were
against
PEPI
The petitioner was well aware that the properties mortgaged
by PEPI
also
the and AFP-RSBS, monetar
prejudice the rights and interests of Dee over the property,
subject of existing contracts to sell with other buyers.
paid
for. claim any superior
petitioner is protected by Act No. 3135, as amended,
it cannot
right as against the installment buyers. This is because the contract between the
As between
smallenacted
lot buyers and the gigantic finan
respondents is protected by P.D. No. 957, a social
justice these
measure
developers deal with, it is obvious that the lawas an ins
primarily to protect innocent lot buyers.
must favor the weak.
Thus, in Luzon Development Bank v. Enriquez, the Court reiterated the rule that a
bank dealing with a property that is already subject of a contract to sell and is
FIL-ESTATE PROPERTIES, INC. VS. SPOUSES RON
protected by the provisions of P.D. No. 957, is bound by the contract to sell.
185798, JANUARY 13, 2014, PEREZ, J.
P a g e | 124
Fil-Estate Properties, Inc. is the owner and developer owner

of the Central
or developer,
Park Place
desists
Tower
from further payment due to
while co-petitioner Fil-Estate Network, Inc. is itsdeveloper
authorized
to marketing
develop theagent.
subdivision or condominium
Spouses Conrado and Maria Victoria Ronquillo purchased
approved
from
plans
petitioners
and within
an the
82- time limit for complying
square meter condominium unit for a pre-selling contract
may,price
at his
P5,174,000.00.
option, be reimbursed
On 29
the total amount pa
August 1997, respondents executed and signed a Reservation
interests Application
but excluding
Agreement
delinquency interests, with interes
wherein they deposited P200,000.00 as reservation fee.
(Emphasis
As agreed
supplied).
upon, respondents
paid the full downpayment of P1,552,200.00 and had been paying the P63,363.33
monthly amortizations until September 1998.
Conformably with these provisions of law, respondents
contract and demand reimbursement for the payments they
Upon learning that construction works had stopped, respondents likewise stopped
paying their monthly amortization. Claiming to have paid a total of P2,198,949.96 to
RA NO. 6552, MACEDA LAW OR THE REALTY IN
petitioners, respondents through two (2) successive letters, demanded a full refund of
PROTECTION ACT
their payment with interest. When their demands went unheeded, respondents were
constrained to file a Complaint for Refund and Damages.
GATCHALIAN REALTY, INC., VS. EVELYN M. ANG
Petitioners insist that the complaint states no cause of
action because
allegedly
NOVEMBER
27,they
2013,
CARPIO, J.
have not committed any act of misrepresentation amounting
bad faith which
could
Angelestopurchased
a house
and lot from GRI valued at 7
entitle respondents to a refund. Petitioners claim thatrespectively,
there was a with
mere twenty-four
delay in the percent (24%) interest p
completion of the project and that they only resorted to
"suspension
and areformatting
installment
within
period of ten years. The house and l
as a testament to their commitment to their buyers." Petitioners
attribute
delay to to sell executed between
Nonetheless,
under the contracts
the 1997 Asian financial crisis that befell the real estate
industry.
ownership of the property until full payment of the purch
[Angeles] failed to satisfy her monthly installments with
Issue: Whether or not respondents are entitled to rescind
and(35)
demand
able tothe
paycontract
thirty-five
installments for Contract to Se
reimbursement for the payments they had made to petitioners.
(48) installments for Contract to Sell No. 2272.
Ruling: Yes.
After giving a total of fifty-one (51) months grace perio

consideration of the continued disregard of the demand
Indeed, the non-performance of petitioners obligation
entitles
respondents
served with
a notice
of notarialtorescission dated 11 Septem
rescission under Article 1191 of the New Civil Code which
whichstates:
she allegedly received on 19 September 2003 as ev
receipt.
Article 1191. The power to rescind obligations is implied in reciprocal ones, in case
one of the obligors should not comply with what is incumbent
upon him.
Consequently
[Angeles] was furnished by [GRI] with
September 2003 demanding her to pay the amount of Php
The injured party may choose between the fulfillment
and the
rescission
reasonable
rentals
for herof
usethe
and occupation of the house
obligation, with payment of damages in either case.and
Hetomay
alsothe
seek
rescission,
vacate
same.
She was informed in said letter t
even after he has chosen fulfillment, if the latter should
become impossible.
refundable
amount that she is entitled to has already
reasonable value for the use of the properties or the reas
More in point is Section 23 of Presidential Decree No.
957,such
the period
rule governing
during
that she the
was not able to pay the inst
sale of condominiums, which provides:
required to settle this within fifteen (15) days from rec
continued failure to satisfy her obligations with [GRI] an
Section 23. Non-Forfeiture of Payments. No installment
payment
made
by filed
a buyer
in
house
and lot,
[GRI]
a complaint
for unlawful detaine
a subdivision or condominium project for the lot or unit he contracted to buy shall be
forfeited in favor of the owner or developer when theIssue:
buyer,
after due
notice
to the
Whether
or not
GRIs
Cancellation of the Contracts
P a g e | 125
Both the RTC and the CA found that GRI gave Angeles a
Ruling: No.
of 51 months. This extension went beyond what was pro
their contracts.
Republic Act No. 6552, also known as the Maceda Law, or the Realty Installment
Buyer Protection Act, has the declared public policy
Receipt
of "protecting
of the Notice
buyers
of of
Notarial
real Rescission
estate on installment payments against onerous and oppressive conditions." Section 3
of R.A. 6552 provides for the rights of a buyer whoThe
hasregistry
paid at return
least two
of the
years
registered
of
mail is prima facie p
installments but defaults in the payment of succeedingtherein.23
installments.
Angeles
Section
failed
3 reads:
to present contrary evidence to r
competent and proper evidence. To establish its claim
Section 3. In all transactions or contracts involvingrescission
the sale upon
or financing
Angeles,ofGRI
realpresented the affidavit of i
estate on installment payments, including residentialGumahad,24
condominium
theapartments
registry receipt
but from the Greenhills Pos
excluding industrial lots, commercial buildings and sales
returntoreceipt.26
tenants under
We affirm
Republic
the CAs ruling that GRI was a
Act Numbered Thirty-eight hundred forty-four, asthatamended
it servedby Angeles
RepublictheActnotarial rescission sent th
Numbered Sixty-three hundred eighty-nine, where the
accordance
buyer haswith
paid
theatrequirements
least two of R.A. 6552.
years of installments, the buyer is entitled to the following rights in case he defaults
in the payment of succeeding installments:
Amount of the Cash Surrender Value
(a) To pay, without additional interest, the unpaid installments

For paying due
morewithin
than the
two total
years of installments on the l
grace period earned by him which is hereby fixed atreceive
the rate
cash
ofsurrender value of her payments on the lot eq
period for every one year of installment payments made:
the total
Provided,
payments
That
made.
thisThis
rightright is provided by Section
shall be exercised by the buyer only once in every fiveasyears
paragraph
of the life
6(b)ofofthe
thecontract
contract. Out of the contract price
and its extensions, if any.
GRI a total of P364,188.96 consisting of P135,000 as dow
as installments and penalties.27 The cash surrender valu
(b) If the contract is cancelled, the seller shall the lot amounted to P182,094.48.28
surrender value of the payments on the property equivalent to fifty per cent of the
total payments made, and, after five years of installments,
For the
an same
additional
reasons,
fiveAngeles
per centwas also entitled to receive
every year but not to exceed ninety per cent of the total
payments
payments
on the
made:
houseProvided,
equivalent to fifty per cent of the t
That the actual cancellation of the contract shall take
the place
contract
after
price
thirty
of P750,000,
days fromAngeles paid GRI a total o
receipt by the buyer of the notice of cancellation or the
P165,000
demandasfordownpayment
rescission and P619,107.84 as installm
contract by a notarial act and upon full payment of the
cashcash
surrender
surrender
valuevalue
of Angeles
to the payments on the house am
buyer.
Actual Cancellation of the Contracts
Down payments, deposits or options on the contract shall be included in the
computation of the total number of installment payments
There
made.
was no actual cancellation of the contracts because
refund the cash surrender value to Angeles.
The sixth paragraph of the contracts between Angeles and GRI similarly provided the
provisions of the law.
Cancellation of the contracts for the house and lot wa
notarial rescission dated 11 September 2003.31 The regist
We examine GRIs compliance with the requirements Angeles
of R.A. 6552,
received
as itthis
insists
notice
thaton
it 19 September 2003.32 G
extended to Angeles considerations that are beyond what
the the
properties,
law provides.
where GRI offset Angeles accrued renta
surrender value, was contained in another letter dated 2
Grace Period
registry return receipts show that Angeles received th
2003.34 GRI filed a complaint for unlawful detainer again
P a g e | 126
2003, 61 days after the date of its notice of notarial rescission,

P583,498.20
andat46
monthly
days after
amortizations
the
of P8,140.97 paya
date of its demand for rentals. For her part, Angeles sent
interest
GRIper
postal
annum
money
based
orders
on in
the balance and an addition
the total amount of P120,000.
month of delay on the monthly installment due. Flora opte
began making a periodical payments from 1992 to 199
However, it was error for the MeTC to apply Article 1279
P375,295.49.
as there was nothing in the
contracts which provided for the amount of rentals in case the buyer defaults in her
installment payments.
In April, August, and October 1996, Moldex sent Flora
update her account. Upon inquiry, however, Flora was sh
This Court has been consistent in ruling that a valid and
Julyeffective
1996, shecancellation
owed Moldex
under
P247,969.10. In November 1
R.A. 6552 must comply with the mandatory twin requirements
to P491,265.91.
of a notarized
Moldex thus
notice
suggested to Flora to execute
of cancellation and a refund of the cash surrender value.
the sale of the subject lot to a new buyer and a written re
can get half of all payments she made. However, Flora ne
In Olympia Housing, Inc. v. Panasiatic Travel Corp.,
for refund. As of April 1997, Moldex computed F
of rescission must be accompanied by the refund of theP576,569.89.
cash surrender
It then
value.sent Flora a Notarized Notice of C
Application and/or Contract to Sell. Flora, on the other han
x x x The actual cancellation of the contract can onlyand
be Land
deemed
UsetoRegulatory
take place Board
upon (HLURB) Regional Field
the expiry of a 30-day period following the receiptthe
by annulment
the buyer of
of the
the notice
contractof to sell, recovery of all he
cancellation or demand for rescission by a notarial act
damages,
and the
andfull
thepayment
cancellation
of theof Moldexs license to sell.
cash surrender value.
Aside from imputing bad faith on the part of Moldex in b
In Pagtalunan v. Dela Cruz Vda. De Manzano Flora alleged that the contract to sell between her and
cancellation of the Contract to Sell in the absence ofinception.
a refund of
According
the cashtosurrender
Flora, Moldex violated Section 5
value. We stated that:
No. 957 when it sold the subject lot to her on April 11, 19
license to sell on September 8, 1992. Flora likewise cla
x x x Sec. 3 (b) of R.A. No. 6552 requires refund of the
Section
cash 17
surrender
of the same
value law
of the
because it failed to register
payments on the property to the buyer before cancellation
Registry ofofDeeds.
the contract. The
provision does not provide a different requirement for contracts to sell which allow
possession of the property by the buyer upon executionISSUE:
of the contract
Whether like
or not
thethe
instant
contract to sell is void
case. Hence, petitioner cannot insist on compliance with
Whether
the requirement
or not Flora by
is entitled to cash surrender v
assuming that the cash surrender value payable to the buyer had been applied to
rentals of the property after respondent failed to pay the
RULING:
installments due. (Emphasis
supplied)
No. The intrinsic validity of the contract to sell is not a
In view of the absence of a valid cancellation, the Contract
violation
to of
Sell
Section
between
5 ofGRI
PD and
957.
Angeles remains valid and subsisting.
In Spouses Co Chien v. Sta. Lucia Realty and Developm
Court has already ruled that the lack of a certificate of r
sell on the part of a subdivision developer does not re
invalidation of the contract to sell it entered into with a
MOLDEX REALTY, INC., vs. FLORA A. SABERON, G.R. No.176289, April 8,
remains valid and subsisting. In said case, the Court
2013, DEL CASTILLO, J.
contract to sell notwithstanding violations by the develop
Flora A. Saberon (Flora) asked Moldex, the developer, to reserve the lot for her as
957. We held that nothing in PD 957 provides for the n
shown by a Reservation Application for a condominium unit. While the cash purchase
entered into in cases of violation of any of its provisions s
price for the land is P396,000.00, the price if payment is made on installment basis is
P a g e | 127
to sell. Thus:
house and Lots 17 and 196, for the price of P368,00

respondent Arsenio demolished the original house and con
A review of the relevant provisions of P.D. 957 reveals
allegedly
that valued at P3.5 million, more or less. Arsenio di
the selling of subdivision lots and condominium units
respondent
without Angeles,
prior issuance
to pay of
fora the monthly amortization
Certificate of Registration and License to Sell petitioner
by the HLURB,
sent respondent-spouses
it does not
a notarized Not
provide that the absence thereof will automaticallyCancellation
render a contract,
of Contract
otherwise
to Sell due to the latters fa
validly entered, void. The penalty imposed by theamortizations.
decree is theIngeneral
December
penalty
2003, petitioner filed before
provided for the violation of any of its provisions. It isTrial
well-settled
Court in in
Cities
this of
jurisdiction
Cagayan de Oro City, an action for
that the clear language of the law shall prevail. This principle particularly enjoins
strict compliance with provisions of law which are penal
Issue:
in nature,
Whether
or when
petitioner
a penalty
is obliged to refund to respond
is provided for the violation thereof. With regard to P.D.
installments
957, nothing
paidtherein provides
for the nullification of a contract to sell in the event that the seller, at the time the
contract was entered into, did not possess a certificate
Ruling:
of registration
Yes.
and license to
sell. Absent any specific sanction pertaining to the violation of the questioned
provisions (Secs. 4 and 5), the general penalties provided
Respondent-spouses
in the law shall be
areapplied.
entitled to the cash surrender va
The general penalties for the violation of any provisions
property.
in P.D. 957 are provided for
in Sections 38 and 39. As can clearly be seen in the aforequoted
We agree with
provisions,
petitioner
thethat
same
the Maceda Law, which gov
do not include the nullification of contracts that are otherwise
installment,
validly
should
entered.
be applied.
Sections 3, 4, and 5 of the Maceda Law provide for the rig
The contract to sell entered into between Flora and Moldex
wit: remains valid despite the
lack of license to sell on the part of the latter at the time the contract was entered into.
.
Section 3. In all transactions or contracts involving the
Yes. Respondent is nevertheless entitled to a 50% refund
estate
under
on the
installment
Maceda Law.
payments, including residential con
excluding industrial lots, commercial buildings and sales
Under the Maceda Law, the defaulting buyer who Act
has paid
Numbered
at leastThirty-eight
two years ofhundred forty-four, as am
installments has the right of either to avail of the grace
Numbered
periodSixty-three
to pay or, hundred
the cash eighty-nine, where the bu
surrender value of the payments made.
years of installments, the buyer is entitled to the following
It is on record that Flora had already paid more than in
two
theyears
payment
of installments
of succeeding
(from
installments:
March 11, 1992 to July 19, 199632) in the aggregate amount of P375,295.49. Her last
payment was made on July 19, 1996. It is also shown(a)
that
ToFlora
pay, has
without
defaulted
additional
in herinterest, the unpaid install
succeeding payments. Thereafter, Moldex sent noticesgrace
to Flora
period
to update
earnedher
byaccount
him which is hereby fixed at th
but to no avail. She could thus no longer avail of the period
option provided
for every in
one
Section
year of
3(a)
installment payments made
of the Maceda Law which is to pay her unpaid installments
shall bewithin
exercised
the by
grace
the period.
buyer only once in every five yea
Besides, Moldex already sent Flora a Notarized Noticeand
of Cancellation
its extensions,ofifReservation
any.
Application and/or Contract to Sell. Hence, the only option available is Section 3(b)
whereby the seller, in this case, Moldex shall refund
(b)toIf the
the buyer,
contract
Flora,
is canceled,
the cashthe seller shall refund to th
surrender value of the payments on the property equivalent
value of thetopayments
50% of on
thethetotal
property equivalent to fifty pe
payments made, or P187,647.75.
made, and, after five years of installments, an additional f
not to exceed ninety per cent of the total payments made:
cancellation of the contract shall take place after thirty
COMMUNITIES CAGAYAN, INC, vs. SPOUSES ARSENIO, G.R. No. 176791,
buyer of the notice of cancellation or the demand for resc
November 14, 2012, DEL CASTILLO, J.:
notarial act and upon full payment of the cash surrender v
Spouses Arsenio and Angeles Nanol entered into a Contract to Sell with petitioner
Communities Cagayan, Inc., whereby the latter agreed to sell to respondent-spouses a
P a g e | 128
Down payments, deposits or options on the contract

stipulated
shall inbesaid
included
contract
in that,
the in case respondent fails
computation of the total number of installment payments
reimbursement
made.
payments, he shall be given a 3-month gr
remit his arrears, otherwise, the contract shall be automat
Section 4. In case where less than two years of installments
and respondent
were paid, shall
the seller
voluntarily
shall vacate the premises w
give the buyer a grace period of not less than sixty days
judicial
from action.
the date the installment
became due.
Subsequently, respondent failed to pay twenty-five (25
If the buyer fails to pay the installments due at the expiration
payments
of covering
the gracethe
period,
periodtheAugust 1999 to August 200
seller may cancel the contract after thirty days from receipt
petitioner
by the
cancelled
buyer ofthe
thecontract
notice and treated all his reimbu
of cancellation or the demand for rescission of the contract
payments
by a for
notarial
his occupancy
act.
of the house and lot. On Augu
respondent a notice of final demand6 requiring him to fu
Section 5. Under Sections 3 and 4, the buyer shall have
30-day
the right
gracetoperiod.
sell hisThereafter,
rights or on October 18, 2001, hi
assign the same to another person or to reinstate vacate
the contract
the premises.
by updating
For failure
the of respondent to heed sai
account during the grace period and before actual cancellation
complaint before
of thethe
contract.
barangay
Thelupon and, eventually, a cas
deed of sale or assignment shall be done by notarial act.
Issue: Whether or not there was a valid cancellation of the
In this connection, we deem it necessary to point out that, under the Maceda Law, the
actual cancellation of a contract to sell takes place Ruling:
after 30No.
days from receipt by
the buyer of the notarized notice of cancellation, and upon full payment of the
cash surrender value to the buyer. In other words, SEC.
before3.aIncontract
all transactions
to sell can
or contracts
be
involving the sale o
validly and effectively cancelled, the seller has (1) installment
to send a notarized
payments, notice
including
of residential condominium
cancellation to the buyer and (2) to refund the cash
industrial
surrender
lots,value.
commercial buildings and sales to ten
unless the seller complies with these twin mandatory requirements,
Numbered Thirty-eight
the contracthundred
to sell forty-four, as amended b
between the parties remains valid and subsisting. Thus,
Sixty-three
the buyer
hundred
has the
eighty-nine,
right to where the buyer has p
continue occupying the property subject of the contractinstallments,
to sell, and may
the buyer
"still reinstate
is entitled to the following rights
the contract by updating the account during the grace
payment
periodofand
succeeding
before the
installments:
actual
cancellation" of the contract.
xxx
Since respondent-spouses paid at least two years of installment, they are entitled to
receive the cash surrender value of the payments they (b)
hadIfmade
the contract
which, under
is canceled,
Sectionthe seller shall refund to th
3(b) of the Maceda Law, is equivalent to 50% of the total
value
payments
of the made.
payments on the property equivalent to
payments made, and, after five years of installments, an ad
year but not to exceed ninety per cent of the total paymen
ASSOCIATED MARINE OFFICERS AND SEAMEN'S UNION OF THE
actual cancellation of the contract shall take place after thi
PHILIPPINES VS. NORIEL DECENA, G.R. NO. 178584, OCTOBER 8, 2012,
buyer of the notice of cancellation or the demand for resc
PERLAS-BERNABE, J.
notarial act and upon full payment of the cash surrender va
PTGWO-ITF (petitioner) is a duly registered labor organization engaged in an onsupplied)
going Shelter Program, which offers residential lots and fully-furnished houses to its
members-seafarers under a reimbursement scheme requiring no down payment and
As we emphasized in Pagtalunan, "R.A. No. 6552, othe
no interest on the principal sum advanced for the acquisition and development of the
Installment Buyer Protection Act, recognizes in condition
land and the construction of the house. On April 27, 1995, petitioner entered into a
estate (industrial, commercial, residential) the right of the
contract under the Shelter Program with one of its members, Noriel Decena
upon non-payment of an installment by the buyer, whic
(respondent), allowing the latter to take possession of a house and lot with the
prevents the obligation of the vendor to convey title from
obligation to reimburse petitioner the cost in 180 equal monthly payments. It was
P a g e | 129
While we agreed that the cancellation of a contract to sell may be done outside of
court, however, "the cancellation by the seller must beIninthis
accordance
case, it iswith
an admitted
Sec. 3(b)fact
of that PDB failed to give C
R.A. No. 6552, which requires a notarial act of rescission
of theand
cash
thesurrender
refund tovalue.
the buyer
In its complaint, PDB admitte
of the full payment of the cash surrender value of thecash
payments
surrender
on the
value
property."
of the subject property as required
the present case, as aptly pointed out by the appellate
Chandumal
court, petitioner
was "unavailable"
failed tofor such purpose. Thus, it
prove that the Shelter Contract Award had been itcancelled
be ordered
in toaccordance
"deposit with
with
a banking institution in the
R.A. No. 6552, which would have been the basis for
ofthe
Defendants
illegality (sic),
of respondent's
the amount of Ten Thousand Pesos
possession of the subject premises. Hence, theCurrency,
action for
representing
ejectment
themust
cash surrender value of the su
necessarily fail.
allegation that Chandumal made herself unavailable for p
the twin requirements for a valid and effective cancellatio
of cancellation or demand for rescission by a notarial act
cash surrender value, is mandatory. Consequently, there w
PLANTERS DEVELOPMENT BANK, vs. JULIE CHANDUMAL, G.R. No.
contract to sell by notarial act undertaken by PDB and the
195619, September 5, 2012, REYES, J.:
judicial confirmation over the same.
The property subject of the contract is located in Talon Dos, Las Pias City. On
February 12, 1993, BF Homes sold to PDB all its rights, participations and interests
over the contract. Chandumal paid her monthly amortizations from December 1990
EQUITABLE MORTGAGE
until May 1994 when she began to default in her payments. In a Notice of
Delinquency and Rescission of Contract with Demand to Vacate4 dated July 14,
1998, PDB gave Chandumal a period of thirty (30) days from receipt within which to
settle her installment arrearages together with all itsLOMISES
increments;ALUDOS,
otherwise,vs.allJOHNNY
her
M. SUERTE, G.R.
rights under the contract shall be deemed extinguished
and
terminated
and
the
BRION, J.:
contract declared as rescinded. Despite demand, Chandumal
failedfrom
to settle
her City Government the r
Lomises still
acquired
the Baguio
obligation.
the Hangar Market in Baguio City. Lomises entered
An action for judicial confirmation of notarial rescission
and delivery
respondent
JohnnyofM.possession
Suerte for the transfer of all improv
was filed by PDB against Chandumal. PDB alleged that
despite
demand,
Chandumal
two market stalls (Stall Nos. 9 and 10) for the amount of P
failed and/or refused to pay the amortizations as they
fell payment
due; hence,
it caused theto Lomises, who acknowle
down
of P45,000.00
rescission of the contract by means of notarial act, as provided
in Republic Act (R.A.)
in a document.
No. 6552. According to PDB, it tried to deliver the cash surrender value of the subject
property, as required under R.A. No. 6552, in the amount
of Pbacked
10,000.00;
Lomises
out ofhowever,
the agreement and returned the
the defendant was unavailable for such purpose.
Jaime Suerte, the mother and the father of Johnny, resp
P68,000.00 down payment was embodied in a handwritte

Issue: Whether or not there was a valid cancellation of1985.
the contract.
Johnny protested the return of his money, and insis
enforcement of his agreement with Lomises. When Lomis
Ruling: No.
Johnny filed a complaint against Lomises before the Re
Branch 7, Baguio City, for specific performance with dama
R.A. No. 6552 recognizes the right of the seller to cancel the contract but any such
cancellation must be done in conformity with the requirements
therein prescribed.
Lomises insists
that the agreement was merely one
addition to the notarial act of rescission, the sellerimprovements
is required to
to the
andrefund
leasehold
rights. Johnny, through his r
buyer the cash surrender value of the payments(Johnnys
on the property.
mother), opposed Lomises claim. The receipt
cancellation of the contract can only be deemed toclearly
take place
upon
expiryofofsale of the market stalls an
referred
to the
a contract
a thirty (30)-day period following the receipt byLomises
the buyer
of the notice of
alleges.
cancellation or demand for rescission by a notarial act and the full payment of the
cash surrender value.
Issue: Whether or not the transaction involves a contract o
P a g e | 130
Whether separately or taken together, these circumst

Ruling: No. The agreement between Johnny and Lomises
conclusion
as a sale
thatofthe
improvements
parties only intended to enter into a
and assignment of leasehold rights.
That Johnny was a mere student when the agreement was
An equitable mortgage, as contemplated in Article 1602,
thatinhe
relation
had nowith
financial
Article capacity
1604, to pay the purchase p
of the Civil Code, has been defined as one which although
transaction
lacking
was
in some
indeedformality,
a loan and the P20,000.00 intere
or form or words, or other requisites demanded by a Lomises,
statute, nevertheless
the return of
reveals
the full
theamount of P68,000.00 by L
intention of the parties to charge real property as security
his mother,
for a debt,
Domes)
there
would
beingnot
nomake sense. That Lomises
impossibility nor anything contrary to law in this intent."
marketArticle
stalls even
1602 after
of thetheCivil
execution of his agreement
Code lists down the circumstances that may indicateindication
that a contract
that theis true
an equitable
transaction between them was one
mortgage:
complete his payment and, until Lomises decided to foreg
four more months to pay; until then, Lomises retained ow
Art. 1602. The contract shall be presumed to be an equitable
the market
mortgage,
stalls. in any of the
following cases:
Hence, the CA was correct in characterizing the agree
(1) When the price of a sale with right to repurchase isLomises
unusually
as inadequate;
a sale of improvements and assignment of leas
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right to SPOUSES

repurchaseLEHNER
another instrument
and LUDY MARTIRES, vs. MEN
extending the period of redemption or granting a new 174240
period isMarch
executed;
20, 2013, PERALTA, J.:
Subject of the instant controversy are twenty-four memor
(4) When the purchaser retains for himself a part of the
purchase
price;Park in Novaliches, Quezon City. The Re
Cross
Memorial
mother, Florencia R. Calagos, own the disputed prope
(5) When the vendor binds himself to pay the taxes on evidenced
the thing sold;
by a Deed of Sale and Certificate of Perpetual C
from petitioner spouses the amount of P150,000.00. The
(6) In any other case where it may be fairly inferred
that mortgage
the real intention
the
estate
over the of
abovementioned
property. Resp
parties is that the transaction shall secure the payment
of
a
debt
or
the
performance
monthly interest of 8% and an additional 10% monthly
of any other obligation.
Respondent failed to fully settle her obligation. Subseque
the mortgage, ownership of the subject lots were tra
In any of the foregoing cases, any money, fruits, or other
benefit to
received
by the
petitioners
viabe
a Deed
of Transfer.
vendee as rent or otherwise shall be considered as interest
whichfiled
shallwith
be subject
to
Responent
the Regional
Trial Court (RTC) of
the usury laws. [Emphases ours.]
against petitioners, Manila Memorial Park Inc., the comp
Cross Memorial Park, and the Register of Deeds of Qu
Based on Lomises allegations in his pleadings, we consider
three
circumstances
to
annulment
of the
contract of mortgage
between her and pe
determine whether his claim is well-supported. First,
mere college
theJohnny
interest was
rates aimposed
are unjust and exorbitant.
student dependent on his parents for support when the agreement was executed, and it
was Johnnys mother, Domes, who was the party actually
in nature
acquiring
theagreement entered into by
Issue:interested
What is the
of the
market stalls. Second, Lomises received only P48,000.00 of the P68,000.00 that
Johnny claimed he gave as down payment; Lomises
said Mortgage.
that the P20,000.00
Equitable
represented interests on the loan. Third, Lomises retained possession of the market
stalls even after the execution of the agreement.
An equitable mortgage has been defined as one which,
formality, or form or words, or other requisites
P a g e | 131
nevertheless reveals the intention of the partiesmortgage

to charge
contract
real property
which provides
as
for petitioners' autom
security for a debt, there being no impossibility nor
subject
anything
mortgaged
contrary
property
to lawininthe event that respondent
this intent.
the subsequent acts of the parties and the circumstances s
to no other conclusion than that petitioners were empowe
One of the circumstances provided for under Article 1602
the disputed
of the Civil
property
Code,
without
whereneed
a of any foreclosure.
contract shall be presumed to be an equitable mortgage, is "where it may be fairly
inferred that the real intention of the parties is that the transaction shall secure the
CONVENTIONAL REDEMPTI
payment of a debt or the performance of any other obligation." In the instant case, it
has been established that the intent of both petitioners and respondent is that the
subject property shall serve as security for the latter's
obligationR.toDAVID
the former.
As
ROBERTO
vs. EDUARDO
C. DAVID, G.R.
correctly pointed out by the CA, the circumstances surrounding
the execution
2014, BERSAMIN,
J.: of the
disputed Deed of Transfer would show that the said
documentEduardo
was executed
Respondent
C. Davidto(Eduardo) initiated this re
circumvent the terms of the original agreement and
deprive(Roberto),
respondent
hercousin and former busine
R. David
hisoffirst
mortgaged property without the requisite foreclosure.possession
These circumstances
of one unit ofinclude:
International CO 9670 Truck Tra
(1) the alleged agreement between the parties that the ownership of the subject
property be simply assigned to petitioners instead ofEduardo
foreclosure
of the
contract
of C. David sold their inherit
and his
brother
Edwin
mortgage which was earlier entered into by them; deed
(2) the
Deedwith
of Transfer
wasof mortgage embodied the
of sale
assumption
executed by reason of the loan extended by petitioners
to respondent,
amount of for the sale was P6,000,0
stipulating
that thethe
consideration
the latter's outstanding obligation being the same as the
of the
consideration
wasamount
to be paid
to Eduardo
and Edwin, and the remaining
for the assignment of ownership over the subject property;
(3) the inadequacy
the
Development
Bank of the of
Philippines
to settle the outstand
consideration; and (4) the claim of respondent that
she
had
no
intention
of
mortgage on such properties. The parties further agreed t
transferring ownership of the subject property to petitioners.
the right to repurchase the properties within a period
execution of the deed of sale based on the purchase pri
With respect to the foregoing discussions, it bears interest
to pointper
outannum.
that inRoberto and Edwin executed a memo
Rongavilla, a case which involves a factual background
similar to
the present
case,
the Spouses
Marquez
and Soledad
Go by which they agr
this Court arrived at the same ruling. In the said case,lot
thistoCourt
ruledfor
in afavor
of the
the latter
consideration
of P10,000,000.00. Th
respondent holding that the supposed sale of the property
was,
in payment
fact, an equitable
order to
save
of high and multiple taxes conside
mortgage as the real intention of the respondent was matter
to provide
security
the loan with DBP, Baguio City, an
of this
sale isfor
mortgaged
and not to transfer ownership over the property.
will execute the necessary Deed of Absolute Sale in favor
of [Roberto]." The Spouses Go then deposited the am
Since the original transaction between the parties was
a mortgage,
the subsequent
Robertos
account.
assignment of ownership of the subject lots to petitioners without the benefit of
foreclosure proceedings, partakes of the nature ofAfter
a pactum
commissorium,
as Roberto gave Eduardo P
the execution
of the MOA,
provided for under Article 2088 of the Civil Code. to him one of the truck tractors and trailers subject of
demanded for the return of the other truck tractor and tra
Pactum commissorium is a stipulation empowering
thethe
creditor
toThus,
appropriate
heed
demand.
Eduardo initiated this replevin su
the thing given as guaranty for the fulfillment of the
in the event
the to repurchase under the de
thatobligation
he was exercising
the right
obligor fails to live up to his undertakings, without
further
formality,
such
as other motor vehicle and
entitled
to the
possession
of the
foreclosure proceedings, and a public sale.32
Eduardo could repurchase the properties in question; and
extinguished their deed of sale by novation.
In the instant case, evidence points to the fact that the sale of the subject property, as
proven by the disputed Deed of Transfer, was simulated to cover up the automatic
transfer of ownership in petitioners' favor. While there
no stipulation
in theto repurchase was effective
Issue:was
Whether
or not the right
P a g e | 132
SPOUSES ROMAN A. PASCUAL vs. SPOUSES ANTO

Ruling: Yes. In a sale with right to repurchase, title G.R.
and ownership
No. 186269,
ofFebruary
the property
15, 2012, REYES, J.:
death ofcondition
the Spouses
sold are immediately vested in the vendee, subject Upon
to thethe
resolutory
of Melchor, their share in
repurchase by the vendor within the stipulated period. inherited by their daughter Lorenza Melchor Ballestero
Lorenza and her husband Antonio Ballesteros (responde
theCivil
subject
property.
A sale with right to repurchase is governed by ArticleAngela
1601 ofinthe
Code,
which Margarita, then already w
children,
soldwhen
their the
sharevendor
in the subject property to Spou
provides that: "Conventional redemption shall take
place
Subsequently,
Spouses
reserves the right to repurchase the thing sold, with
the obligation
to Pascual
comply and Francisco caused the
new one which
was then
issued
their names together with Ange
with the provisions of Article 1616 and other stipulations
may
haveinbeen
agreed upon." Conformably with Article 1616,14 the seller given the right to
respondents,
repurchase may exercise his right of redemption Consequently,
by paying thethe
buyer:
(a) the claiming that they did not
said salepayments
in favor of
Spouses Pascual and Francis
price of the sale, (b) the expenses of the contract, of
(c)the
legitimate
made
(RTC)made
of Laoag
by reason of the sale, and (d) the necessary and Trial
usefulCourt
expenses
on theCity a Complaint for leg
petitioners. The respondents claimed that they are entitle
thing sold.
the subject property sold to Spouses Pascual and Francis
same. For
their part,
petitioners claimed that there wa
The deed of sale entered into by Eduardo and Roberto
contained
the the
following
subject property considering that the shares of the register
stipulation on the right to repurchase, to wit:
particularized, specified and subdivided and, hence, the r
redeem
the portion
of the subject
x x x the Vendors are given the right to repurchase
the aforesaid
described
real property that was sold to
property, together with the improvements thereon, and the two (2) motor vehicles,
Issue:
Whether
the respondents
together with their respective trailers from the Vendee
within
a period
of three (3) could exercise their right o
years from the execution of this document on the purchase price agreed upon by the
Ruling:
Yes. in the amount of
parties after considering the amount previously paid to
the Vendors
TWO MILLION PESOS (P2,000,000.00), Philippine Currency, with an interest of
period given
to the
twelve percent (12%) per annum and the amount paidThe
with30-day
the Development
Bank
of respondents within whic
redemption
has not commenced in view of the absence
the Philippines with an interest of twelve percent (12%)
per annum.15
despite the respondents actual knowledge of the sale to
notice ishad
stillcomplied
mandatory
andtheindispensable for purpose
The CA and the RTC both found and held that Eduardo
with
the by
30-day
period
conditions stipulated in the deed of sale and prescribed
Article
1616within
of the which
Civil to exercise the right of r
Code.
Article 1623 of the Civil Code succinctly provides that:
In Metropolitan Bank and Trust Company v. Tan
1623.
The
of legal pre-emption or redempt
redemption within the period allowed by law is not a Article
matter of
intent
butright
of payment
except
within
thirtythe
days
fromofthe notice in writing by the
or valid tender of the full redemption price within the
period.
Verily,
tender
the vendor,the
as the
case may
payment is the sellers manifestation of his desire to repurchase
property
withbe.
theThe deed of sale shall not
offer of immediate performance. As we stated in of Property, unless accompanied by an affidavit of the
writtenofnotice
thereof
to all possible redemptioners.
sincere tender of payment is sufficient to show the exercise
the right
to repurchase.
Here, Eduardo paid the repurchase price to Roberto by depositing the proceeds of the
The right
of redemption
of co-owners excludes that of ad
sale of the Baguio City lot in the latters account. Such
payment
was an effective
supplied)
exercise of the right to repurchase.
The indispensability of the "written notice requirement" f

LEGAL PRE-EMPTION
of the right of redemption was explained by this Court in B
P a g e | 133
G.R. No. 171845, October 10, 2012, BRION, J.:

way shows
of settlement,
Serfino and the s
Nothing in the records and pleadings submitted by theByparties
that therethe
wasspouses
a
compromise
in which the spouses Co
written notice sent to the respondents. Without a written
notice, theagreement,
period of thirty
indebtedness
thenot
spouses
days within which the right of legal pre-emption may be
exercised, to
does
start. Serfino. To satisfy the debt, M
pay in full the judgment debt out of her retirement benefit
bediscussed
made onein(1)theweek
has received her r
The indispensability of a written notice had long been
earlyafter
caseMagdalena
of
Government
Conejero v. Court of Appeals, penned by Justice J.B.L.
Reyes: Service Insurance System (GSIS). In case o
executed against any of the properties of the spouses
motion
of theis spouses Serfino. RTC ap
With regard to the written notice, we agree with execution,
petitioners upon
that such
notice
and issued
a compromise judgment.
indispensable, and that, in view of the terms in whichparties
Articleagreement
of the Philippine
Civil
No
payment
was
made
as
promised.
Instead, Godfrey d
Code is couched, mere knowledge of the sale, acquired in some other manner by the
her obviously
retirement exacted
benefits in the savings account of
redemptioner, does not satisfy the statute. The writtendeposited
notice was
Cortez,
by the Code to remove all uncertainty as to the sale, its
termswith
andthe
its respondent,
validity, andFar
to East Bank and Trust Com
Spouses
Serfino
instituted
against the spouses Cortez, Gra
quiet any doubts that the alienation is not definitive. The
statute
not having
provided
Cortez,
andexclusive.
FEBTC for the recovery of money on de
for any alternative, the method of notification prescribed
remains
damages, with a prayer for preliminary attachment.
This is the same ruling in Verdad v. Court of Appeals
During the pendency of the case, spouses Cortez manife
over
theestablished
balance of the deposit
The written notice of sale is mandatory. This Court has
long
rule thatin FEBTC to the spouses S
their obligation
undertothe
compromise judgment. The RTC
notwithstanding actual knowledge of a co-owner, the latter
is still entitled
a written
1997, authorizing
notice from the selling co-owner in order to remove 30,
all uncertainties
aboutFEBTC
the sale,to turn over the balance of
Serfino.
its terms and conditions, as well as its efficacy and status.
Whether or not Serfino owns the deposit

Lately, in Gosiengfiao Guillen v. The Court ofIssue:
Appeals
emphasized the mandatory character of a written notice in legal redemption:
Ruling: No. We find no basis to support the spouses Serf
the deposit.
From these premises, we ruled that "[P]etitioner-heirs
have not lost their right to
redeem, for in the absence of a written notification of the sale by the vendors, the 30of credit
is an agreement by virtue
day period has not even begun to run." These premises"An
andassignment
conclusion leave
no doubt
credit, known
as the
about the thrust of Mariano: The right of the petitioner-heirs
to exercise
theirassignor,
right of by a legal cause, such a
exchange
or donation,
andeven
without the consent of the d
legal redemption exists, and the running of the period
for its exercise
has not
and accessory
rights
to another, known as the assignee
been triggered because they have not been notified in writing
of the fact
of sale.
to enforce it to the same extent as the assignor cou
debtor.
It maynotice
be inofthe
Here, it is undisputed that the respondents did not receive
a written
theform
sale of sale, but at times it
payment,
such
as when
a debtor,
in favor of the petitioners. Accordingly, the 30-day period
stated
under
Article
1623 in order to obtain a relea
creditor a credit
has against
a third person." As
of the Civil Code within which to exercise their right his
of redemption
has nothebegun
to
of credit the
operates
as a mode of extinguishing
run. Consequently, the respondents may still redeem assignment
from the petitioners
portion
and
transmission
of
ownership
of a thing (in this case, t
of the subject property that was sold to the latter.
person) by the debtor to the creditor is accepted as the equ
of the obligation.
ASSIGNMENT
The terms of the compromise judgment, however, did not

the assignment
of Magdalenas
retirement benefits (the cre
SPOUSES SERFINO vs. FAR EAST BANK AND TRUST
COMPANY,
INC.,
P a g e | 134
payment of the debt due the spouses Serfino (the obligation). There was actually no
assignment of credit; if at all, the compromise judgment
Ruling:
merely
No. identified the fund
from which payment for the judgment debt would be sourced.
.
Case law states that when a person assigns his credit to a
deemed subrogated to the rights as well as to the obligatio
In Aquitey v. Tibong, the issue raised was whether the
ofobligation
the Deedtoofpay
Assignment,
the loan was
the assignee is deemed su
extinguished by the execution of the deeds of assignment.
obligations
The ofCourt
the assignor
ruled in and
the is bound by exactly the
affirmative, given that, in the deeds involved, the respondent
which bound
(the debtor)
the assignor.
assigned
Accordingly,
to
an assignee canno
the petitioner (the creditor) her credits "to make good"
those
the balance
pertaining
of her
to the
obligation;
assignor. The general rule is th
the parties agreed to relieve the respondent of her obligation
negotiable
to pay
chose
the balance
in actionofacquires
her
no greater right than
account, and for the petitioner to collect the same from
assignor
the respondents
and simplydebtors.
stands into the shoes of the latter.
Court concluded that the respondents obligation to pay
Applying
the balance
the stipulation
of her accounts
in their contract, the Court fin
with the petitioner was extinguished, pro tanto, by the
Trade
deeds
Contractor,
of assignment
cannot
of credit
assign or transfer any of its righ
executed by the respondent in favor of the petitioner. under the Trade Contract without the written consent of F
their Contract.
In the present case, the judgment debt was not
Fong,
extinguished
as mere assignee
by the of
mere
MS Maxcos rights under
designation in the compromise judgment of Magdalenas
previously
retirement
entered with
benefits
FBDC
as is equally bound by the c
the fund from which payment shall be sourced. That
validly
the compromise
enforce the same
agreement
without FBDCs consent.
authorizes recourse in case of default on other executable properties of the
spouses Cortez, to satisfy the judgment debt, further
Without
supports
any proof
ourshowing
conclusion
that FBDC had consented to th
that there was no assignment of Magdalenas credit
validly
withdemand
the GSIS
FBDC
that the
would
delivery of the sum of m
have extinguished the obligation.
assigned to him by MS Maxco as a portion of its retentio
however, does not preclude Fong from any recourse he ma
After all, an assignment of credit for a consideration and
considered as a sale of personal property.
FORT BONIFACIO DEVELOPMENT CORPORATION vs. FONG, GR No.
209370, March 25, 2015, PERLAS-BERNABE, J.
Fort Bonifacio Development Corporation is engaged in the
real estate
development
RIGHT
OF REPURCHASE
ON ASSIGNMENT O
business. It entered into a Trade Contract with Ms Maxco Company, Inc. for the LITIGATION
execution of the structural and partial architectural works of one of its condominium
projects in Taguig City. Records show that FBDC had the right to withhold five
SITUS
DEVELOPMENT
CORPORATION, vs. ASIAT
percent (5%) of the contract price as retention money.
When
MS Maxco incurred
180036,
Julytook
25, over
2012,and
SERENO,
delays and failed to comply with the terms of the Contract,
FBDC
hired J.
Tony Chua started a printing business and put up Colo
other contractors to complete the construction. Unfortunately, corrective work has to
(COLOR). Chua Family ventured into real estate develop
be done on the structures made by MS Maxco. Pursuant to the contract, FBDC
Situs Development Corporation (SITUS) in order to build
deducted the said amount from the retention money of Ms Maxco. The contract
known as Metrolane Complex (COMPLEX). To financ
likewise provided that MS Maxco is prohibited from assigning any of its rights under
COMPLEX, SITUS, COLOR and Tony Chua and his wi
the said contract without FBDCs consent.
several loans from (1) ALLIED (2) ASIATRUST
Sometime in April 2005, FBDC received a letter from Fong that MS Maxco assigned
Corporation. The COMPLEX was built on said four
its receivables to Fong. FBDC replied that the amount is not due and demandable and
registered in the names of Tony Chua and his wife, Sio
was subject of garnishment. Despite Fongs requests, FBDC refused to deliver the
1996, the Chua Family expanded into retail merchand
amount assigned to Fong.
Supermarket, Inc. (DAILY). All three (3) corporations hav
are all housed in the COMPLEX. The Chua Family also
Issue: Whether or not Fong has the right over the retention money
P a g e | 135
while the other units are being leased to tenants. SITUS, COLOR and DAILY
obtained additional loans from ALLIED, ASIATRUST
(d)and
theMETROBANK
assignee must have
and their
demanded payment from th
real estate mortgages were updated and/or amended. Spouses Chua likewise executed
five (5) Continuing Guarantee/Comprehensive Surety
(e) the
in debtor
favor must
of ALLIED
reimburse
to the assignee for the pr
guarantee the payment of the loans of SITUS and DAILY.
judicial costs incurred by the latter and the interest on
which the same was paid; and
SITUS, COLOR, DAILY and the spouses Chua failed to pay their obligations as they
fell due, despite demands. ALLIED and METROBANK
(f) the filed
reimbursement
an application
must
for be done within 30 da
extrajudicial foreclosure of the mortgage on theassignees
property demand.
of spouses Chua.
ASIATRUST sent a demand letter to DAILY and COLOR for the payment of their
outstanding obligations.
In this case, the credit owed by petitioner corporations to M
extinguished when the bank foreclosed upon the parcel of
SITUS, DAILY and COLOR, herein petitioners, filedspouses
a petition
Chua
for as
thesecurity
declaration
for petitioners
of
debts, in full satis
state of suspension of payments with approval ofhad
proposed
extended.
rehabilitation
Therefore, plan.
during the pendency of the
Petitioners alleged that due to the 1997 Asian financial
transferred
crisis, peso
by Metrobank
devaluationtoand
Cameron was ownership ov
high interest rate, their loan obligations ballooned and
subject
they foresee
only to their
the right
inability
of redemption
to
by the proper part
meet their obligations as they fall due.
from the date of registration of the Certificate of Sale.
The court a quo appointed Mr. Antonio B. Garcia as the Rehabilitation Receiver.
LEASE
From the original rehabilitation proposal which simply involved a condoning and
restructuring of the loan obligations, the petitioners came out with an amended
rehabilitation plan that calls for, among others, a concentration into the business of
commercial leasing coupled with the consolidation of the debts of Daily and Color
CONCEPT
with that of Situs; a conversion of debt to equity in proportionate terms; a reduction
of the principal stockholders control of Situs Development; a proportionate share in
the monthly rental income of Situs by creditors/new owners. The creditor banks have
consistently opposed the rehabilitation plans submittedSY
by v.
theANDOKS
petitioners.LITSON CORPORATION, G.R. N
2012, PEREZ, J.
Facts:
On 5 July 2005,
Sy and Andoks entered into a 5-y
Issue: Whether or not petitioners can redeem the credit
by reimbursing
the transferee
the parcel of land owned by Sy. Monthly rental was fixed
of Metrobank
taxes, for the first 2 years and P66,000.00 for the third, fou
every
beginning
Ruling: No. Petitioners cannot redeem the credit escalation
transferred
by year
Metrobank
to on the fourth year.
Andoks alleged that while in the process of applying for
Cameron by reimbursing the transferee.
improvements to be constructed on Sys land, it was disco
Manila
Electric Company
(MERALCO) bill amounting
For the debtor to be entitled to extinguish his credit
by reimbursing
the assignee
presented a system generated statement from MER
under Art. 1634, the following requisites must concur:
complained that construction for the improvement it inten
could not proceed because another tenant, Mediapool,
(a) there must be a credit or other incorporeal right;
construction of a billboard structure also within the leased
In its letter dated 25 August 2005, Andoks first informe
(b) the credit or other incorporeal right must be in litigation;
construction of the billboard structure on a portion of its l
tenorpending
were sent to Sy but the demands f
(c) the credit or other incorporeal right must beletters
sold of
to the
an same
assignee
Issue: Whether or not Andok's has right to rescind the leas
litigation;
P a g e | 136
Ruling: YES.
from
to month
is A
considered
to be one with a defin
The Court held that rescission is statutorily recognized
in amonth
contract
of lease.
lease
theagreement,
end of eachthe
month
upon
a demand to vacate by the le
contract is a reciprocal contract. By signing the lease
lessor
grants
a notice
to theforpetitioner on August 5, 19
possession over his/her property to the lessee for a sent
period
of timetoinvacate
exchange
was aborted, and the contract is deemed to have expired a
rental payment.
notice to
vacate
constitutes
The aggrieved party is given the option to the aggrieved
party
to ask
for: (1) an
theexpress act on the part of
consentsfortodamages;
the continued
by the lessee of its p
rescission of the contract; (2) rescission and indemnification
or (3)occupation
only
lessees
right to continue in possession ceases and her
indemnification for damages, allowing the contract to the
remain
in force.
detainer.
While Andoks had complied with all its obligations as a lessee, the lessor failed to
render the premises fit for the use intended and to maintain the lessee in the peaceful
and adequate enjoyment of the lease.
RIGHTS AND OBLIGATIONS OF THE
Sys disregard of Andoks repeated demands for the billboard lessee to finish the
construction is a violation of her obligation to maintain the lessee in peaceful and
adequate enjoyment of the lease. The delay in the construction
caused
MANILAhad obviously
INTERNATIONAL
AIRPORT
v.
disruption in respondents business as it could not
immediately
commence
its
INTERNATIONAL, INC., G.R. No. 180168, February
business operations despite prompt payment of rent. Facts: In September 1990, petitioner MIAA entered int
SAMELO v. MANOTOK SERVICES, INC., G.R.herein
No. 170509,
June
27, wherein
2009, MIAA allowed AFIC
respondent
AFIC,
BRION, J.
land as well as facilities within the Ninoy Aquino Intern
Facts: Manotok Services, Inc. (respondent) alleged for
thatthe
it islatter's
the administrator
a
aircraft repairofstation
and chartering opera
parcel of land in Tondo, Manila. On January 31, 1997,
the
respondent
entered
into
a
one (1) year, beginning September 1, 1990 until August
contract with the petitioner for the lease of a portion
land. The lease
rentalofofsubject
P6,580.00.
contract was for a period of one (1) year, with a monthly
rental of1990,
P3,960.00.
In December
MIAAAfter
issued Administrative Order N
the expiration of the lease contract on December 31,revised
1997, the
petitioner
continued
the rates of dues, charges, fees or assessments fo
occupying the subject premises without paying the rent.
facilities and services within the airport complex. The
On August 5, 1998, the respondent, thru its Presidentmade
Rosaeffective
Manotok,
a letter 1,to1990. As a consequence, th
onsent
December
the petitioner demanding that she vacate the subject premises
pay compensation
AFIC wasand
increased
to P15,996.50. Nonetheless, MIAA d
for its use and occupancy.5 The petitioner, however, refused
to
heed
these
demands.
the new rental fee. Thus, it continued to pay the original fe
On November 18, 1998, the respondent filed a complaint
unlawfulofdetainer
After thefor
expiration
the contract, AFIC continued to
against the petitioner
premises giving rise to an implied lease contract on a m
Issue: Whether or not there was an implied new lease paying
between
Samelo.
theManotok
original and
rental
fee without protest on the part of
Ruling: YES.
Three years after the expiration of the original contract
The respondent did not give the petitioner a notice toAFIC,
vacate
upon the
expiration
of dated October 6, 1994, t
through
a billing
statement
the lease contract in December 1997 (the notice to vacate
was sentpremises
only on August
5,
the subject
was increased
to P15,966.50 begi
1998), and the latter continued enjoying the subject premises
for
more
than
15
days,
which is the date immediately following the expiration
without objection from the respondent. By the inaction
of MIAA
the respondent
as lessor,
lease.
sought recovery
of the difference between th
there can be no inference that it intended to discontinue
the
lease
contract.19
An
the original rental fee amounting to a total of P347,300.50
implied new lease was therefore created pursuant to Article
1670
of the Civil
Code. 1, 1991 and September 31,
months
between
September
Art. 1687 also provides that if the period for the 1994,
lease AFIC
has not
been
it isrental fee. However, it refu
paid
the fixed,
increased
understood to be from year to year, if the rent agreedP347,300.50
upon is annual;
from
to
sought
to month
be recovered
by MIAA.
month, if it is monthly; from week to week, if the rentISSUE:
is weekly;
and
from
day
to
day,
Whether or not MIAA may collect the additional
if the rent is to be paid daily.
1, 1991 to September 30, 1994
NO. The Court held that based on the provisions of the

Since the rent was paid on a monthly basis, the period of lease is considered to be
of the parties is to subject such amendment of terms of co
from month to month, in accordance with Article 1687 of the Civil Code. "A lease
P a g e | 137
both petitioner and respondent. In the instant case, there is no showing that
Thus, after
the expirationof
of the contract of lease, the imp
respondent gave his acquiescence to the said amendment
or modification
only been in a monthly basis. In this regard, the Court fou
contract.
only of
on the
Juneincreased
20, 2003,rental
or three
The situation is different with respect to the payments
fee(3) years after the last paym
the complaint
made by respondent beginning October 1994 becausethat
by Zosima
then thefiled
amendment
to the for unlawful detainer aga
help that to
Zosima
failed The
to adduce
contract was made in writing through a bill sent by petitioner
respondent.
fact any additional evidence
by Aprilthat
2000,
office building
that respondent subsequently settled the said bill proves
he no
acceded
to the stood to be leased beca
pave way
forquestioned
the construction
increase in rental fee. The same may not be said withtorespect
to the
rental of the LRT Line II Projec
fees sought to be recovered by petitioner between September 1991 and September
1994 because no bill was made and forwarded to respondent on the basis of which it
could have given or withheld its conformity thereto.
Thus,
no implied
was constituted
in this case.
The Court further cites Art. 1235 of the Civil Code
clearly
states lease
that when
the
obligee accepts the performance knowing its incompleteness or irregularity and
SAMELO v. MANOTOK SERVICES, INC., G.R. No
without expressing any protest or objection, the obligation is deemed fully complied
BRION, J.
with. For failing to make any protest or objection, petitioner
already Services,
estopped from
Facts: is
Manotok
Inc. (respondent) alleged that
seeking recovery of the amount claimed.
parcel of land in Tondo, Manila. On January 31, 1997, th
contract with the petitioner for the lease of a portion

contract was for a period of one (1) year, with a monthly
IMPLIED NEW LEASE
the expiration of the lease contract on December 31, 199
occupying the subject premises without paying the rent.
ZOSIMA INC. v. SALIMBAGAT G.R. No. 174376, September 12, 2012,
On August 5, 1998, the respondent, thru its President Ros
BRION, J.
petitionerowner
demanding
she vacate the subject prem
Facts: Zosima, a domestic corporation, has been thetheregistered
of an that
office
its useentered
and occupancy.5
The petitioner, however, refuse
building situated in Manila. Sometime in April 1993,for
Zosima
into a contract
On November
1998, basis
the respondent filed a compl
with Salimbagat for the lease of the office building. The
lease was on18,a yearly
againsttothe
with the initial monthly rate of P 8,000.00 that is subject
anpetitioner
annual increase. In
Issue:
Whether
there was
1999, the monthly rental fee reached P 14,621.00. In March 2000, or
nonot
monthly
fee an implied new lease betw
Ruling:
YES.
was paid because the contract of lease was allegedly not
renewed.
respondent
give the
On June 20, 2003, Zosima, through counsel, sentThe
a formal
letterdid
of not
demand
to petitioner a notice to va
the lease
in December
Salimbagat, requiring her to pay her arrears within fifteen
(15)contract
days from
receipt of1997 (the notice to vacate
1998),
and
the
latter
continued
the demand letter and to vacate the property. Despite the receipt of the demand letter,enjoying the subject prem
without
objection
from the respondent. By the inaction o
Salimbagat refused to vacate the property and to pay her
alleged
rental obligations.
there
canbetween
be no inference
Issue: Whether or not there was an implied new
lease
Zosima that
and it intended to discontinu
implied new lease was therefore created pursuant to Article
Salimbagat.
Art. 1687 also provides that if the period for the leas
Ruling: NONE.
understood
be from
year to
The Corut ruled against Zosimas contention that although
thetolease
contract
hadyear, if the rent agreed upo
if it is monthly;
from week
already expired, the principle of implied new lease ormonth,
tacita reconduccion
existed
by to week, if the rent is w
if the
rent2003.
is to be
daily.new
operation of law between the periods of April 2000 and
June
Anpaid
implied
RIGH
lease will set in if it is shown that: (a) the term of the original contract of lease has
Since the rent was paid on a monthly basis, the period o
expired; (b) the lessor has not given the lessee a notice to vacate; and (c) the lessee
from month to month, in accordance with Article 1687 o
continued enjoying the thing leased for 15 days with the acquiescence of the lessor.
from month to month is considered to be one with a defin
This acquiescence may be inferred from the failure of the lessor to serve notice to
the end of each month upon a demand to vacate by the le
vacate upon the lessee.
sent a notice to vacate to the petitioner on August 5, 19
P a g e | 138
was aborted, and the contract is deemed to have expired

judgment.
at the end
Theofvalidity
that month.
of a compromise
"A
is dependent up
notice to vacate constitutes an express act on the partrequisites
of the lessor
and principles
that it no of
longer
contracts dictated by law. Als
consents to the continued occupation by the lessee of of
its aproperty."
compromise
Aftermust
suchnot
notice,
be contrary to law, morals, g
the lessees right to continue in possession ceases andand
herpublic
possession
order.becomes one of
detainer.
ARTHUR F. MENCHAVEZ v. BERMUDEZ, G.R. No.
LIGATIONS OF THE PARTIES
VELASCO JR., J.
COMPROMISE Facts: Petitioner Arthur F. Menchavez and respondent M
on November 17, 1993 into a loan agreement, covering t
CONCEPT
with interest fixed at 5% per month.
She then issued Prudential Bank Check No. 031994, to
LAND BANK OF THE PHILIPPINESv. HEIRS
OFinSORIANO,
G.R. but
No.with a request that petition
1993,
favor of petitioner,
178312, January 30, 2013, PEREZ, J.
payment on its maturity date.
Facts: The respondents are the children of the late Spouses
Jorja
Rigor-Soriano
Petitioner
alleged
entering and
into a verbal compromise a
Magin Soriano, the owners of the two parcels land. regarding the delay in payment and the accumulated inte
The properties became subject to Operation Land Transfer
(OLT) would
and were
valued
respondent
deliver
11by
postdated Prudential Bank
the Land Bank and the Department of Agrarian Reform
(DAR)
at
P10,000.00/hectare.
presented for payment, eight (8) of these checks were
Contending, however, that such valuation was too
low against
compared
to existing
"Drawn
Insufficient
Funds."
valuations of agricultural lands, the respondents commenced
this
action
for
just filed against respondent M
Nine criminal informations were
compensation, claiming that the properties were irrigated
landsargues
that usually
Petitioner
that theyielded
compromise agreement created
150 cavans per hectare per season at a minimum of two
seasons
per
year.
They
asked
distinct from the original loan, for which respondent is now
that a final valuation of the properties be pegged
atP1,800,000.00,
based
on Petitioner tenable?
Issue:
Was the argument
of the
Administrative Order No. 61, Series of 1992 and Republic
ActNO.
No. 6657. Land Bank
Ruling:
disagreed.
By stating that the compromise agreement and the or
On December 4, 2012, Land Bank submitted a Manifestation,
informing
Court would now attempt to ex
separate and
distinct, the
petitioner
that the parties had filed by registered mail their goes
Jointagainst
Motionthetovery
Approve
theof the parties entering into
purpose
Attached Agreement, submitting therewith their Agreement
November
which wasdated
to extinguish
the29,
obligation under the loan. P
2012.
enforcement of both the compromise agreement and paym
Issue: Whether or not there was a valid compromise? event that the compromise agreement remains unfulfilled.
party fails or refuses to abide by a compromise agreement
Ruling: YES.
enforce the compromise or regard it as rescinded and insis
It cannot, thus, be argued that there are two separate valid
be fulfilled by respondent under both the compromise agre
transaction.
There is no question that the foregoing Agreement was
a compromise that the parties
To
allowsettling
petitioner
recoverinunder the terms of the com
freely and voluntarily entered into for the purpose of finally
theirtodispute
further seek
of the original loan transactio
this case. Under Article 2028 of the Civil Code, a compromise
is aenforcement
contract whereby
agreement was entered into
the parties, by making reciprocal concessions, avoid aenrichment.
litigation orThe
putcompromise
an end to one
obligation
under
theobjective
loan transaction,
not to create two
already commenced. Accordingly, a compromise is either
judicial,
if the
is
respondent.
There is
to put an end to a pending litigation, or extrajudicial,
if the objective
is unjust
to avoid a
CIVIL
LAW
REVIEW
2 CASEa DIGESTS
litigation. As a contract, a compromise is perfected by mutual consent. However,
| P a gthe
e parties upon its
judicial compromise, while immediately binding 359
between
ANG,
BAY-AN,
execution, is not executory until it is approved by
the BANIQUED,
court and reduced
to aBIDES, CAPUYAN, PERA
enrichment under Article 22 of the Civil Code when
P a g e | 139
benefited; and (2) such benefit is derived at the expense

1. the
of property
or with will
damages
be puttoup for sale and the proceed
2. the
propertytowill
be appraised
by an independent a
another. Since respondent only entered into the compromise
agreement
commit
to
the
report
of
which
shall
be
binding
upon the heirs;
payment of the original loan, petitioner cannot separate the two and seek payment of
3. the appraised value shall be divided into four a
both, especially as he has already recovered the amount of the original loan.
advanced by Antonio;
4. the amount of P528,623.00 (the collected rent)
RESCISSION
distributed by Antonio on March 12, 2003; upon
Francisco, Nestor will leave the premises within 45
5. the parties requested the RTC to render a judgment
CRISANTA ALCARAZ MIGUEL v. JERRY D. MONTANEZ, G.R. No. 191336,
January 25, 2012, REYES, J.
The RTC approved the compromise on April 10, 2003. Ne
Facts:On February 1, 2001, respondent Jerry Montanez
(Montanez)
secured
a loan,
a writ
of execution.
During
the hearing on the motion, th
from the petitioner.
rents into three since Nestor lives in the premises. A
Nestorsfiled
share.
When Cuervo
Due to the respondents failure to pay the loan, the petitioner
a complaint
againstAppraiser finished its app
the San
valuation,
hence he moved for re-appraisal b
the respondent before the Lupong Tagapamayapa of accept
Barangay
Jose, Rodriguez,
Because
of
the
disagreement
among the parties, Nora mov
Rizal. The parties entered into a Kasunduang Pag-aayos wherein the respondent
the property instead of having it sold. The RTC grante
agreed to pay his loan in installments in the amount of Two Thousand Pesos
partition; hence Nestor filed an appeal of the RTC judgm
(P2,000.00) per month, and in the event the house and
lot given
as collateral
sold,
physical
partition
after aisjudgment
on compromise had b
the respondent would settle the balance of the loan inAppeals,
full. However,
the
respondent
however, dismissed the appeal, claiming that t
still failed to pay, and on December 13, 2004, the Lupong
Tagapamayapa
issued in
a this case since the p
judgments
does not apply
disagreements rendered its execution unjust and meaningle
certification to file action in court in favor of the petitioner.
Issue: Did the CA err in insisting the enforcement of the kasunduan?
Nestor appealed to the Supreme Court when his motio
Ruling: YES.
denied, alleging deprivation of due process since had h
In the instant case, the respondent did not comply with
the terms
conditions
of he would have proved e
evidence
in a and
full-blown
trial,
the Kasunduang Pag-aayos. Such non-compliance may
be construed
as repudiation
property;
moreover,
a judgment on compromise had a
because it denotes that the respondent did not intend toattained
be bound
by the terms thereof,
finality.
thereby negating the very purpose for which it was executed. Perforce, the petitioner
Whether
parties are
bound by the compromise a
has the option either to enforce the Kasunduang Issue:
Pag-aayos,
or the
to regard
it as
rescinded and insist upon his original demand, in accordance with the provision of
Ruling: YES
Article 2041 of the Civil Code. Having instituted an action for collection of sum of
money, the petitioner obviously chose to rescind the Kasunduang
Pag-aayos.
The law affords
complying parties with remedies in cas
agreement fails to abide by its terms. A party may file

FAILURE TO COMPLY
judgment. Since a judgment on compromise agreement is
the case, proper remedies against ordinary judgments may
on a compromise agreement.
NESTOR T. GADRINAB v. NORA T. SALAMANCA, ET. AL., G.R. No. 194560,
June 11, 2014, LEONEN, J.
Respondent Salamanca knew that the only reason fo
Facts: Nora, Antonio, Elena, Arsenia and Adoracion
are the heirs
of Nicolas
and
agreement
was the
non-compliance
with the agreements
Aurelia Talao, who both died intestate. They inherited
a lotParticularly,
in Sta. Ana,itwhich
they
heirs.
was stipulated
that petitioners remo
divided among themselves through an extrajudicial conditioned
settlement. Arsenia
waived of
heran amount equivalent to h
upon payment
share in favor of her siblings. Nora then filed an action
for partition
refused
to abide of
bythe
hisproperty
own undertaking to shoulder resp
against her siblings. Adoracion, deceased, was represented
her sons,
and the appraisal of the
He alsobyrefused
to Nestor
acknowledge
Francisco. All the parties claimed their shares in the property
as well
as in theThis
shares
compromise
agreement.
refusal caused the failure of t
in the rent from one of the duplex collected by Jose, the late Elenas husband.
Instead of availing herself of the proper remedies so
At the mediation, the parties agreed to the following conditions:
enforced and the partition could be effected, respondent
again for the partition of the property and set aside a v
P a g e | 140
compromise. This court cannot allow such motion toThat

prosper
is true
without
herein.going
Although
against
this case was commenced i
law and established jurisprudence on judgments.
trial court was rendered only in 1997, or more than 15 yea
CA and then to this Court, the petitioners chose to prolon
case; hence, they cannot complain, but must bear the co
LOAN
application of the pertinent law and jurisprudence, no m
them.
CONCEPT
PENALTY AND INTEREST RA
SPOUSES DELA CRUZ v. PLANTERS PRODUCTS, INC., G.R. No. 158649,

PHILIPPINE NATIONAL BANK v. MANALO, G. R.
February 18, 2013, BERSAMIN, J.
2014, BERSAMIN,
J.
Facts: On March 23, 1978, Gloria Dela Cruz applied
for and was granted
by
Facts:
Spouses
Manalo and Rosalind
respondent Planters Products, Inc. (PPI) a regular credit
line Respondent
of P200,000.00
for a Enrique
60applied
for
an
All-Purpose
Credit
Facility in the amou
day term, with trust receipts as collaterals. Quirino and Gloria submitted a list of their
PhilippineinNational
Bank Credit
(PNB) to finance the constructio
assets in support of her credit application for participation
the Special
granted
their
application,
they
executed a Real Estate Mor
Scheme (SCS) of PPI. On August 28, 1978, Gloria signed in the presence of the PPI
in favor
of PNBlabelled
over their
as security for the loan. The
distribution officer/assistant sales representative two
documents
"Trust
and
increased
several
times
over
Receipt/Special Credit Scheme," indicating the invoice number, quantity, value, and the years.
names of the agricultural inputs (i.e., fertilizer or agricultural chemicals) she received
On September 20, 1996, the credit facility was again renew
"upon the trust" of PPI.
consequence, the parties executed a Supplement to an A
Estate
The credit
agreement executed succinc
In addition, Glorias obligation included the following
termsMortgage.
and conditions,
to wit:
would
be
subjected
to
interest
All obligations of the undersigned under this Trust Receipt shall bear interest at theat a rate "determined by th
applicable
rate of twelve per cent (12%) per annum plus twoplus
percent
(2%) spread,
service prevailing
charges, at the current month."
reckoned from the date Dealer delivers to farmer-participants the fertilizer and
Issue:
agchem products. Where I/We have not delivered within
60 days, interest and service
charges shall become effective on the 61st day.
1. Is the stipulation valid?
2. Are the
by paying the
Should it become necessary for PPI to avail of the services
of spouses,
an attorney-at-law
to interest, estopped from q
initiate legal steps to enforce any or all of its rights under this contract, we jointly and
NO for both.
severally, shall pay to PPI for and as attorneys fees Ruling:
a sum equivalent
to twenty per
cent (20%) per annum of the total amount involved, principal and interest, then
Both (P500.00),
issues are exclusive
to be answered
unpaid, but in no case less than FIVE HUNDRED PESOS
of all in the negative. The un
imposition
of
the
increased
rates is violative of the princip
costs or fees allowed by law.
under Article 1308 of the Civil Code, which provides that
contracting parties; its validity or compliance cannot be
Issue: Is the interest iniquitous in this case?
them. A perusal of the Promissory Note will readily
decrease of interest rates hinges solely on the discretion
Ruling: NO.
require the conformity of the maker before a new interest
contract
which to
appears
to is
benot
heavily weighted in favor of
That the legal interest due is now almost equivalent to
the principal
be paid
lead
to
an
unconscionable
result,
thus partaking of th
per se an inequitable or unconscionable situation, considering the length of time the
is void.
Any stipulation
interest has remained unpaid almost twelve long adhesion,
years. From
the perspective
of regarding the validity or
left
solely
to
the
will
of
one
of the parties is likewise in
interest income, twelve years would have been sufficient for the petitioners to double
the increases
had effected
on the interest rates
the principal, even if invested conservatively, had justify
they been
promptlyit paid
the
Spouses
Manalo
had
paid
the
interests
without protest,
principal of the just compensation due them. Moreover, the interest, however
several times.because
The Court
ruled that the CA, citing Philipp
enormous it may be, cannot be inequitable and unconscionable
it resulted
of
Appeals,
rightly
concluded
directly from the application of law and jurisprudence standards that have taken intothat "a borrower is not e
increase
the interest made by the lender sin
account fairness and equity in setting the interest ratesunilateral
due for the
use orin
forbearance
proposal
to
change
a
contract,
to which he is a party, is o
of money.
and said partys silence cannot be construed as an acceptan
P a g e | 141
FIL-ESTATE PROPERTIES, INC. v. SPS RONQUILLO, G.R. No. 185798,

January 13, 2014, PEREZ, J.
On appeal, CA ruled that in favor on the respondent. Duri
at theRonquillo
Supreme Court,
the Monetary
Board issued Resolut
Facts: Respondent Spouses Conrado and Maria Victoria
purchased
from
2013, stating
that in theCity.
absence of express stipulation betw
petitioners a condominium unit at Central Park Place Tower
in Mandaluyong
interest in loan or forbearance of any money, goods or cre
shalllikewise
be 6% per
annum. Said Resolution is emb
Upon learning that construction works had stopped,judgments
respondents
stopped
Circular
No. 799, Series
paying their monthly amortization. Claiming to have Pilipinas
paid a total
of P2,198,949.96
to of2013, which took eff
the
12%
annual
interest
mentioned
above shall apply o
petitioners, respondents through two (2) successive letters, demanded a full refund of
Thereafter,
or starting
July were
1, 2013, the applicable rate of i
their payment with interest. When their demands went
unheeded,
respondents
amountbefore
and undocumented
withdrawals shall be 6%
constrained to file a Complaint for Refund and Damages
the Housing and
annually, until fully paid.
Land Use Regulatory Board (HLURB)
What
the effect
of the Bangko Sentral ng Pilipi
On 13 June 2002, the HLURB, through Arbiter Atty.Issue:
Joselito
F. is
Melchor,
rendered
case?
judgment ordering petitioners to jointly and severally present
pay respondents,
among others,
The amount of TWO MILLION ONE HUNDRED NINETY-EIGHT THOUSAND
The Supreme
affirmed the decision of the C
NINE HUNDRED FORTY NINE PESOS & 96/100Ruling:
(P2,198,949.96)
withCourt
interest
the
interest
of
12%
per
annum
thereon at twelve percent (12%) per annum to be computed from the time of the compounded annually,
shall commence to run on May 31, 200
complainants demand for refund on October 08, 1998P1,471,416.52
until fully paid
interest shall apply to the undocumented withdraw
P60,663,488.11 and US 3,210,222.85 starting December
Issue: Should the ruling be sustained?
2013, however, the applicable rate of interest on all am
interest at the rate of 6%.
Ruling: YES but with modification as to the interest.
FIRST UNITED CONSTRUCTORS CORPORAT
The fallo of the case reads as The appealed Decision
CONSTRUCTION
is AFFIRMED with
CORPORATION
the
v. BAYAN
MODIFICATION that the legal interest to be paid is
CORPORATION,
SIX PERCENT (6%)
G.R. on
No.the
164985, January 15, 2014,
amount due computed from the time of respondents' demand
for refund
on 8 October
Facts: Due
to the refusal
of the petitioner to settle its obl
1998
commenced this action for collection on April 29, 199
unpaid balance in the amount of P735,000.00 represented b
The resulting modification of the award of legal interest is in line with the Courts
earlier ruling in Nacar v. Gallery Frames, embodyingInthe
amendment
introduced
their
answer, the
petitionersbyaverred that they had stopp
the Bangko Sentral ng Pilipinas Monetary Board in BSP-MB
Circular
No. 799 which
checks worth
P735,000.00
because of the respondents r
pegged the interest rate at 6% regardless of the sourcedump
of obligation.
truck; and that they had informed the respondent of
LAND BANK OF THE PHILIPPINES v. EMMANUEL
the respondent
OATE,
had refused
G.R. No.
to comply with its warranty,
192371, January 15, 2014, DEL CASTILLO, J.
expenses for the repair and spare parts. They prayed tha
pricewith
of the
defective
dumptrust
truck worth P830,000.00 min
Facts: Oate opened and maintained seven trust accounts
Land
Bank. Each
checks
worth (IMA)
P735,000.00,
with 12% per annum inte
account was covered by an Investment Management
Account
with Full
May 1993were
until the same is fully paid;
Discretionand has a corresponding passbook where P90,000.00
deposits andfrom
withdrawals
also reimburse them the sum of P247,950.00 as their exp
recorded.
dump truck, with 12% per annum interest from Decem
demand,
until fully
paid; and
In a letter dated October 8, 1981, however, Land Bank
demanded
from Oate
the that the respondent pa
determined
to
be
just
and
reasonable
but not less than P5
return ofP4 million it claimed to have been inadvertently deposited to Trust Account
of P50,000
No. 01-125 as his additional funds but actually represents
the plus
totalP1,000.00
amount ofper
thecourt appearance and other
checks issued to Land Bank by its corporate borrowers as payment for their preIssue:
What legal
be applied?
terminated loans. Oate refused. To settle the matter,
a meeting
was rate
held,should
but the
parties failed to reach an agreement. Since then, the issue of "miscrediting" remained
Ruling:applied
The legal
rate to be imposed from Februa
unsettled. Then on June 21, 1991, Land Bank unilaterally
theinterest
outstanding
extrajudicial
demand
respondent,
should be 6% per an
balance in all of Oates trust accounts against his resulting
indebtedness
byby
reason
of
stipulation
in accordance
with Article 2209
the "miscrediting" of funds. Although it exhausted the
funds in inallwriting
of Oates
trust
provides: Article
2209. If the obligation consists in the pa
accounts, Land Bank was able to debit the amount of P1,528,583.48
only.
P a g e | 142
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
Issue:
upon,
Wasand
the in
stipulation
the absence
of parties
of
as to the interest valid
stipulation, the legal interest, which is six per cent per annum.
DR. ENCARNACION
LUMANTAS,
M.D.Ruling:
v. NO.
HANZ CALAPIZ
REPRESENTED BY HIS PARENTS, HILARIO CAPIZ JR. AND HERLITA
Stipulated interest
should be reduced for being iniquitou
CALAPIZ, G.R. No. 163753, January 15, 2014, BERSAMIN,
J.
not unmindful
the fact that parties to a loan co
Facts:On January 16, 1995, Spouses Hilario Calapiz,Court
Jr. andis Herlita
Calapiz of
brought
stipulate
on
any
interest
rate
in view of the Central Bank
their 8year-old son, Hanz Calapiz (Hanz), to the Misamis Occidental Provincial
which Hanz
suspended
the Usury
Hospital, Oroquieta City, for an emergency appendectomy.
was attended
to Law
by ceiling on interest effec
however,
worth
stressing
that
the petitioner, who suggested to the parents that Hanz also undergo circumcision at nointerest rates whenever un
declaredthe
illegal.
Thereperformed
is nothing in said circular which g
added cost to spare him the pain. With the parents consent,
petitioner
authority to raise
rates to levels which will either
the coronal type of circumcision on Hanz after his appendectomy.
On interest
the following
lead toblisters.
a hemorrhaging
of their
day, Hanz complained of pain in his penis, which exhibited
His testicles
wereassets. In Menchavez v. Be
per month,
which
summed up would reach 60%
swollen. The parents noticed that the child urinated 5%
abnormally
after
the when
petitioner
for being
excessive, as
iniquitous,
forcibly removed the catheter, but the petitioner dismissed
the abnormality
normal. unconscionable and exo
law. over his parents
On January 30, 1995, Hanz was discharged from and
the the
hospital
protestations, and was directed to continue taking antibiotics.
Accordingly, in this case, the Court considers the compoun
month as
iniquitous
and abscess
unconscionable and void and ine
On February 8, 1995, Hanz was confined in a hospital
because
of the
The
debt is that
to the
be ulceration
considered without the stipulatio
formation between the base and the shaft of his penis.
Presuming
unconscionable
interest
In line with the ruling in t
was brought about by Hanzs appendicitis, the petitioner
referred him
to Dr.rate.
Henry
Frames,
theThus,
legal Hanz
interest of 6% per annum mus
Go, an urologist, who diagnosed the boy to have aGallery
damaged
urethra.
underwent cystostomy, and thereafter was operatedexcessive
on threeinterest
times stipulated
to repair in
histhe agreement.
SC
MEGAWORLD
CONSTRUCTION
AN
damaged urethra.
CORPORATION v. ENGR. LUIS PARADA, G.R. N
2013,
REYES, J.
Issue: How should interest for the award of damages be
computed?
Facts: S.C. Megaworld Construction and Developmen
Ruling: Interest of 6% per annum should be imposed bought
on the award
electrical
as a sincere
lightingmeans
materials from Gentile Indus
of adjusting the value of the award to a level that is not
owned
only by
reasonable
EngineerbutLuis
just and
U. Parada (respondent), for
commensurate. Unless we make the adjustment in
Canlubang,
the permissible
Laguna. manner by
prescribing legal interest on the award, his sufferings would be unduly compounded,
ruled the court. For that purpose, the reckoning of interest
The petitioner
should be was
fromunable
the filing
to pay
of for the above purchase on
the criminal information on April 17, 1997, the making
itsoffailure
the judicial
to collect
demand
under
foritsthesub-contract with the Envi
liability of the petitioner.
(Enviro Kleen). It was however able to persuade Enviro
above
butDecember
after paying the respondent P250
FLORPINA BENAVIDEZ v. NESTOR SALVADOR,
G.R.purchase,
No. 173331,
Enviro Kleen stopped making further payments, leaving
11, 2013, MENDOZA, J.
P816,627.00.
Facts: Sometime in February 1998, petitioner Florpina
Benavidez (Benavidez)
approached and asked respondent Nestor Salvador (Salvador) for a loan that she
The
respondent
demandedbyinterest
would use to repurchase her property in Tanay, Rizal
which
was foreclosed
the of two percent (2%) per
the purchase
price of P816,627.00,
Farmers Savings and Loan Bank, Inc. (Farmers Savings).
After inspecting
the said from judicial demand u
property, Salvador agreed to lend the money subject to certain conditions.
Issue: What legal rate should apply?
To secure the loan, Benavidez was required to execute a real estate mortgage, a
Ruling:
peraannum.
promissory note and a deed of sale. She was also required
to 6%
submit
special power
of attorney (SPA) executed and signed by Benavidezs daughter, Florence B. Baning
importantsale
consideration
(Baning), whom she named as the vendee in the The
deedmore
of absolute
of the in the case is the fact
the trial
courts todecision
repurchased property. In the SPA, Baning would authorize
her mother
obtain athat
loanthe parties had in fact sti
due to to
theSalvador.
respondent.
and to constitute the said property as security of heramount
indebtedness
TheEven granting that there wa
parties stipulated on 5% monthly compounded interest.is no finding by the trial court that the parties stipulated t
P a g e | 143
the petitioner would be subject to two percent (2%) monthly interest. The most that
the decision discloses is that the respondent demanded
Ruling:
a monthly
In theinterest
absenceofof2%
anon
express stipulation as to the
the amount outstanding.
govern the parties, the rate of legal interest for loans or
The rate of interest for the loan or forbearance of any
goods
money,
or credits
goodsand
or credits
the rateand
allowed in judgments shall n
the rate allowed in judgments, in the absence of an express
(12%)contract
per annum
as to- as
such
reflected
rate ofin the case of Eastern Ship
interest, shall be six percent (6%) per annum. BSP X305.1
CIRCULAR
of theNO.
Manual
799 Series
of Regulations
of
for Banks and Sect
2013 abandoning the guidelines laid down in the landmark
4303P.1case
of the
of Eastern
Manual Shipping
of Regulations for Non-Bank Fina
Lines v. Court of Appeals
amendment by BSP-MB Circular No. 799 - but will no
annum effective
July 1, 2013.
It should be noted, nonethel
VIRGINIA M. VENZON v. RURAL BANK OF BUENAVISTA
(AGUSAN
DEL
only be applied
NORTE), G.R. No. 178031, August 28, 2013, DEL CASTILLO,
J. prospectively and not retroactively. Conse
perGeorge
annumF.legal
interest
Facts: Petitioner alleged that in 1983 she and her late(12%)
spouse,
Venzon,
Sr., shall apply only until Ju
2013 the on
newtheir
ratehouse
of six
(6%) per annum shal
obtained a P5,000.00 loan from respondent against a mortgage
andpercent
lot
interest when applicable.
in Libertad, Butuan City; that she was able to payP2,300.00,
thus leaving an
AL. v. to
DEVELOPMENT BANK
outstanding balance of only P2,370.00; that sometimeCARLOS
in March LIM,
1987, ET.
she offered
G.R.
No. 177050,
2013, DEL CASTILLO, J.
pay the said balance in full, but the latter refused to
accept
payment,July
and1,instead
shoved petitioner away from the bank premises; that
Facts:
in March
On November
1987, respondent
24, 1969, petitioners Carlos, Co
foreclosed on the mortgage, and the property was sold
surnamed
at auction
Lim,forobtained
P6,472.76
a to
loan ofP40,000.00 (Lim A
respondent, being the highest bidder; that the foreclosure
Development
proceedings
Bankare
of the
nullPhilippines
and
(DBP) to finance t
void for lack of notice and publication of the sale, lack
Onofthe
sheriffs
same day,
final they
deedexecuted
of sale a Promissory Note und
and notice of redemption period; and that she paid respondent
amortization
P6,000.00
with anoninterest
October
rate of 9% per annum and
9, 1995, as evidenced by respondents Official Receiptannum.
No. 410848 issued on October
9, 1995.
On December 30, 1970, petitioners Carlos, Consolacion,
Issue: What is the right of the petitioner arising from this
surnamed
case? Lim; Shirley Leodadia Dizon, Arleen Lim Fer
Trinidad D. Chua obtained another loan from DBP in t
Ruling: The Court ruled that the respondent failed (Diamond
to refute petitioners
L Ranch Account).
claim ofThey also executed a Prom
having paid the amount of P6,000.00. Since respondent
pay
was
thenot
loan
entitled
annually
to receive
from August
the
22, 1973 until Augus
said amount, as it is deemed fully paid from the foreclosure
rate of 12%
of petitioners
per annumproperty
and a penalty charge of 1/3%
since its bid price at the auction sale covered all that
amortization
petitioner owed it by way of
principal, interest, attorneys fees and charges, it must return the same to petitioner.
"If something is received when there is no right toIssue:
demand
When
it, and
can penalties
it was unduly
and interest be imposed?
delivered through mistake, the obligation to return it arises." Moreover, pursuant to
Circular No. 799, series of 2013 of the Bangko SentralRuling:
ng Pilipinas
Penalties
which
andtook
interest
effectrates should be imposed on
July 1, 2013, the amount of P6,000.00 shall earn interest
writing.
at the rate of 6% per annum
computed from the filing of the Petition in Civil As
Caseto No.
the 5535
imposition
up to of
its additional
full
interest and penal
satisfaction.
Promissory Notes, this should not be allowed. Article
states that JR.,
"no interest
DARIO NACAR v. GALLERY FRAMES AND/ORspecifically
FELIPE BORDEY
G.R. shall be due unless it ha
in writing." Thus, the payment of interest and penalties in
No. 189871, August 13, 2013 BERSAMIN, J.
parties agreed
to it andbefore
reduced
Facts: Petitioner Dario Nacar filed a complaint for constructive
dismissal
thetheir agreement in writing.
FLRENTINO
T. against
MALLARI AND AURA MAL
Arbitration Branch of the National Labor RelationsSPS.
Commission
(NLRC)
BANK
respondents Gallery Frames (GF) and/or Felipe Bordey,
Jr. (now BANK OF THE PHILIPPINE ISLANDS)
2013, PERALTA,
J.
On October 15, 1998, the Labor Arbiter rendered a Decision
in favor of petitioner
and
found that he was dismissed from employment without
Facts:
a valid
On December
or just cause.
11, 1984,
Thus, petitioner Florentino T. M
petitioner was awarded backwages and separation payfrom
in lieurespondent
of reinstatement.
Prudential Bank-Tarlac Branch (respon
amount of P300,000.00 as evidenced by Promissory N
In the Supreme Court, petitioner posits that he is also
Under
entitled
the promissory
to the payment
note, theofloan was subject to an inte
interest from the finality of the decision until full payment
(p.a.),byattorney's
the respondents.
fees equivalent to 15% of the total am
P200.00 and, in case of default, a penalty and collection
Issue: How should the interest be computed?
total amount due. The loan had a maturity date of January
P a g e | 144
up to February 17, 1985.
Ruling: NO.
On December 22, 1989, petitioners spouses Florentino and Aurea Mallari
(petitioners) obtained again from respondent bank another
That theloan
legalofinterest
P1.7 million
due is now
as almost equivalent to the
evidenced by PN No. BDS 606-89 with a maturity per
dateseofanMarch
inequitable
22, 1990.
or unconscionable
They
situation, conside
stipulated that the loan will bear 23% interest p.a., attorney's
interest has
feesremained
equivalentunpaid
to 15% almost twelve long year
p.a. of the total amount due, but not less than P200.00,
interest
andincome,
penaltytwelve
and collection
years would have been sufficient f
charges of 12% per annum.
the principal, even if invested conservatively, had the
principal of the just compensation due them. Moreov
Issue: Whether or not the interest rate is unconscionable?
enormous it may be, cannot be inequitable and unconsc
directly from the application of law and jurisprudence sta
Ruling: NO.
account fairness and equity in setting the interest rates due
of money.
Clearly, jurisprudence establish that the 24% p.a. stipulated interest rate was not
considered unconscionable, thus, the 23% p.a. interest
imposed
on Although
petitioners'
Thatrate
is true
herein.
this case was commenced i
loan in this case can by no means be considered excessive
or was
unconscionable.
trial court
rendered onlyThe
in 1997, or more than 15 yea
Court also do not find the stipulated 12% p.a. CA
penalty
charge
and then
to thisexcessive
Court, theorpetitioners chose to prolon
unconscionable. Petitioners defaulted in the paymentcase;
of their
loan
with
hence,
theyobligation
cannot complain,
but must bear the co
respondent bank and their contract provided for theapplication
payment ofof 12%
p.a. penalty
the pertinent
law and jurisprudence, no m
charge, and since there was no showing that petitioners'
them. failure to perform their
obligation was due to force majeure or to respondentRGM
bank'sINDUSTRIES,
acts, petitionersINC.
cannot
v. UNITED PACIFIC CA
now back out on their obligation to pay the penaltyG.charge.
A
contract
is
the
law
R. No. 194781, June 27, 2012, REYES, J.
between the parties and they are bound by the stipulations
therein.
Facts:
The respondent is a domestic corporation engaged
SPOUSES DELA CRUZ v. PLANTERS PRODUCTS,
INC.,
G.R.
158649,
and financing.
On No.
March
3, 1997, it granted a thirty mil
February 18, 2013, BERSAMIN, J.
facility in favor of the petitioner. The loan amount wa
Facts: On March 23, 1978, Gloria Dela Cruz applied
was granted
by match facility for which a
fundersforonand
the basis
of a direct
respondent Planters Products, Inc. (PPI) a regular credit
lineissued
of P200,000.00
for a 60were
by the petitioner
for the payment of the loan.
day term, with trust receipts as collaterals. Quirino and Gloria submitted a list of their
assets in support of her credit application for participation
in thefailed
Special
Creditthe said promissory notes a
The petitioner
to satisfy
Scheme (SCS) of PPI. On August 28, 1978, Gloria signed
in
the
presence
of
the
had to be assumed in full byPPI
the respondent which thereb
distribution officer/assistant sales representative two
documentsfunders.
labelledConsequently,
"Trust
the individual
on April 4, 1998, th
Receipt/Special Credit Scheme," indicating the invoice
quantity,avalue,
and
of number,
the respondent
consolidated
promissory note in
names of the agricultural inputs (i.e., fertilizer or agricultural
chemicals)
received
P27,852,075.98
for she
a term
of fourteen (14) days and matu
"upon the trust" of PPI.
stipulated interest on the consolidated promissory note w
of default, a penalty charge was imposed in an amount equ
In addition, Glorias obligation included the following
and conditions,
to wit:
theterms
outstanding
amount due
and unpaid computed from the
All obligations of the undersigned under this Trust Receipt shall bear interest at the
rate of twelve per cent (12%) per annum plus twoIssue:
percent
(2%)
service
Is the
interest
ratecharges,
reasonable?
reckoned from the date Dealer delivers to farmer-participants the fertilizer and
agchem products. Where I/We have not delivered within
60 days,
Ruling:
NO.interest and service
charges shall become effective on the 61st day.
Pursuant to Bank of the Philippine Islands, Inc. v. Yu, th
Should it become necessary for PPI to avail of the services
of an attorney-at-law
to decreed by the CA from
further reduce
the penalty charge
initiate legal steps to enforce any or all of its rights under
thisorcontract,
jointly
month
12% perwe
annum
in and
view of the following factors:
severally, shall pay to PPI for and as attorneys fees received
a sum equivalent
to twenty
per charges, and (2) the lo
P7,504,522.27
in penalty
cent (20%) per annum of the total amount involved,
andcredit
interest,
then
wasprincipal
a short-term
facility.
unpaid, but in no case less than FIVE HUNDRED PESOS (P500.00), exclusive of all
costs or fees allowed by law.
On the basis of the same precedent, the attorney's fees
reduced considering that: (1) the petitioner has already ma
Issue: Is the interest iniquitous in this case?
P a g e | 145
attorney's fees are not an integral part of the cost of borrowing but a with
merethe
incident
provisions
of
of this Act are hereb
collection; and (3) the attorney's fees were intended as penal clause
Presidential
to answerDecree
for No. 1792 is likewise re
liquidated damages, hence, the rate of 10% of the unpaid obligation is too onerous.
Under the premises, attorneys fees equivalent to one percent (1%) of the outstanding
balance is reasonable.
Issue:
ADVOCATES FOR TRUTH IN LENDING, INC. v. BANGKO SENTRAL
1. Whether
under REYES,
R.A. No.J.7653, the new BSP-MB m
MONETARY BOARD, ET. AL., G.R. No. 192986, January
15, 2013,
Circular No. 905
Facts: Petitioner Advocates for Truth in Lending, 2. Whether the BSP-MB had the authority to enforce CB C
stock corporation organized toengage in pro bono concerns and activities relating to
Ruling:
money lending issues. Petitioners seeking to declare
that the Bangko Sentral ng
Pilipinas Monetary Board (BSP-MB),replacing the Central Bank Monetary Board
1. YES
(CB-MB) by virtue of Republic Act (R.A.) No. 7653,
has no authority to continue
enforcing Central Bank Circular No. 905, issued by the CB-MB in 1982, which
"suspended" Act No. 2655, or the Usury Law of 1916.CB-MB merely suspended the effectivity of the Usury
Circular No. 905. In Medel v. CA, it was said that the
amend the Usury Law but simply suspended its effectiv
History of central banks power to fix max interest rates:
repeal a law; that by virtue of CB the Usury Law has bee
has1948,
been empowered
legally non-existent in our jurisdictio
1. R.A. No. 265, which created the Central Bankthe
onUsury
June 15,
as lender
borrow
may agree upon.
the CB-MB to set the maximum interest rates charged
which banks
mayand
charge
for all
types of loans and other credit operations.
The circular upheld the parties freedom of contract to
Art. 1306
under which the contracting p
2. The Usury Law was amended by P.D.1684,interest
giving citing
the CB-MB
authority
stipulations, clauses terms and conditions as they may deem
to prescribe different maximum rates of interest
notmoney,
contrarygoods
to law,
loan or renewal thereof or the forbearance ofareany
ormorals,
credits,good customs, public order
provided that the changes are effected gradually and announced in advance.
2. YES
3. In its Resolution No. 2224 dated December 3, 1982,
authority
to enforce CB Circular No. 905. R
Circular No. 905, Series of 1982, effective on BSP-MB
January 1,has
1983.
It
while
Section
1-a
of
the
Usury
ceilings on interest rates on loans or forbearance of any money, goods
or Law, empowers the Mon
matter, to prescribe the maximum rate or rates of interes
credits:
thereof or the forbearance of any money, good or credits.
Sec. 1. The rate of interest, including commissions,
premiums, fees and other charges, The
on Usury
a loanLaw
or is broader in scope than RA 265, now
supplemented
the former as it provided regulation for
forbearance of any money, goods, or credits,
regardless
institutions.
RA 7653 was not unequivocally repe
of maturity and whether secured or financial
unsecured,
that
may be charged or collected by any person, whether
CBtoCircular
905 is essentially based on Section 1-a of the
natural or juridical, shall not be subject
any ceiling
Law
being
broader
in scope than the law that created
prescribed under or pursuant to the Usury Law, as
deemed repealed when the law replacing CB with the B
amended.
despite the non-reenactment in the BSP Law of a provisio
petitioners
purports to be the basis of Circular 905.
4. R.A. No. 7653 establishing the BSP replaced the
CB:
The power
of the
Sec. 135. Repealing Clause. Except
as may
be BSP Monetary Board to determine inter
Usury
provided for in Sections 46 and 132
of Law
this which
Act, was further specified by Circular 905.
Republic Act No. 265, as amended, the provisions of
Granting
that the CB had power to "suspend" the Usury
any other law, special charters, rule
or regulation
not
retain
this as
power of its predecessor, in view of Sect
issued pursuant to said Republic Act No. 265,
expressly repealed R.A. No. 265. The petitioners p
amended, or parts thereof, which maywhich
be inconsistent
did not reenact a provision similar to Section 109 of R.A. N
P a g e | 146
A closer perusal shows that Section 109 of R.A. No. 265

On covered
the strength
only loans
of theextended
three documents, PPI delivered
by banks, whereas under Section 1-a of the Usury Law,
Layson.
as amended,
PPI presented
the BSP-MB
the documents of the financed
may prescribe the maximum rate or rates of interest for
collection.
all loansBut
or renewals
the bank denied
thereof the claim on the ground th
or the forbearance of any money, goods or credits, including
transactions
those
norforthe
loans
execution
of low of the documents which
priority such as consumer loans, as well as such loans
banking
made by
transactions.
pawnshops,UCPB
financeclaimed that branch ma
companies and similar credit institutions. It even authorizes
authority
theinBSP-MB
guaranteeing
to prescribe
payment of Laysons purchases
different maximum rate or rates for different types ofUCPB,
borrowings,
were including
illegal and
deposits
void since banking laws pr
and deposit substitutes, or loans of financial intermediaries.
guaranteeing loans of bank clients. Consequently, in Ap
UCPB, and Grey for breach of contract with damages.
Act No. 2655, an earlier law, is much broader in scope, whereas R.A. No. 265, now
R.A. No. 7653, merely supplemented it as it concerns
Issue:loans
Whether
by banks
or not and
UCPB
other
is bound by an undertaking b
financial institutions. Had R.A. No. 7653 been intended
behalf
to repeal
in connivance
Section with
1-a of
a client
Act
No. 2655, it would have so stated in unequivocal terms.
Ruling: NO.
Moreover, the rule is settled that repeals by implication are not favored, because laws
are presumed to be passed with deliberation and full True,
knowledge
a corporation
of all laws
like existing
UCPB is liable to innocent third p
pertaining to the subject. An implied repeal is predicated
permits
upon
its officer,
the condition
or any other
that a agent, to perform acts wit
substantial conflict or repugnancy is found between the
or apparent
new and authority,
prior laws.holding
Thus, inhim out to the public as po
the absence of an express repeal, a subsequent law cannot
acts. be
However,
construed
in as
thisrepealing
case, when
a Grey executed the guar
prior law unless an irreconcilable inconsistency and repugnancy
representation
exists
of in
UCPB.
the terms
He signed
of
it under his own name
the new and old laws. We find no such conflict between
its branch
the provisions
manager. of Act 2655
and R.A. No. 7653.
Besides, by its tenor, the undertaking was a guarantee. B
regulated
transactions under
the law. They are undertakin
Note: In Castro v. Tan, the Court held that the imposition
of unconscionable
interest
issued
by banks
or an
by iniquitous
their branch managers at the dorsal s
is immoral and unjust. It is tantamount to a repugnant
spoliation
and
as if They
an afterthought.
A bank guarantee is a contract
deprivation of property repulsive to the common sensenote
of man.
are struck down
may be entered
only under
for being contrary to morals, if not against the law, therefore
deemed into
inexistent
and authority granted by it
authority
does not
appear
on any document. Indeed, PPI ha
void ab initio. However this nullity does not affect
the lenders
right
to neither
manager
Grey to issue one without such authorization.
recover the principal of the loan nor affect the other terms
thereof.
The petition was granted.

FIDELIZA J. AGLIBOT v. INGERSOL L. SAN
DecemberPRODUCTS,
5, 2012, REYES,
J.
UNITED COCNUT PLANTERS BANK v. PLANTERS
INC.,
Facts: Respondent Engr. Santia loaned the amount of 2
G.R. No. 179015, June 13, 2012, ABAD, J.
Lending
Capital
Corporation
Facts: Respondent PPI, a fertilizer manufacturer, entered
into&an
arrangement
with (PLCC), through its mana
loan
was
evidenced
by
a
promissory
note. Allegedly as g
respondent Janet Layson for the delivery of fertilizers to her, payable from the
proceeds of the loan that petitioner UCPB extended tothe
her.note, Aglibot issued and delivered to Santia eleven (11
drawn from her own account maintained at Metrobank.
payment,
they
were dishonored by the bank for
Layson executed a document called "pagares," writtenchecks
on thefor
dorsal
side of
a UCPB
insufficient
funds
or
closed
account. Santia thus demande
promissory note. The pagares stated that Layson had an approved loan with UCPBof the face
value
Iloilo Branch for P200,000.00. The second portion Aglibot
of the pagares,
signed
by of
thatthe checks, but neither of
Consequently,
elven
(11)
information
for violation of B.
branchs manager respondent Gregory Grey, stated that the "assignment has been duly
MTCC.
accepted and payment duly guaranteed within 60
days from PPIs Invoice."
MTCC
acquittedby
Aglibot.
On appeal, the RTC rendered a
Subsequently, Layson executed a third document "Letter Guarantee
the Dealer,"
and
dismissing
the
civil
aspect of the case on the gro
stating that she binds herself to pay PPI the face value of the pagares in case UCPB
precedent
exhausting all means to collect from
did not pay the same at maturity. But contrary to hercondition
undertakings,
on theoffollowing
day, Layson withdrew with branch manager Greys connivance the P200,000.00 loan
On appeal, The Court of Appeals ruled that the RTC erred
that UCPB granted her.
aspect of the case. Hence, the CA ruled that Aglibot is pers
GUARANTY
P a g e | 147
Facts: Respondents Asia Paces Corporation (ASPA

Thus, Aglibot filed this petition for certiorari. She Corporation
argued that (PICO)
she wasentered
merely
into
a a sub-contracting agreem
guarantor of the obligation and therefore, entitled totransmission
the benefit of
line
excussion
in the country
underof Libya. To finance its wo
Article 2058 of the Civil Code. She further posited that
ASPAC
she is not
obtained
personally
loans liable
from on
foreign banks Banque Indos
the checks since she merely contracted the loan in behalf
Kong)
of PLCC.
Limited (PCI Capital) which, upon the latters reque
Letters of Guarantee issued by petitioner Trade and
Issues: Whether or not petitioner is entitled to the benefit
Corporation
of excussion
of the Philippines (TIDCORP).
Ruling: NO
As a condition precedent to the issuance by TIDCORP o

ASPAC, PICO, and ASPACs President, respondent
It is settled that the liability of the guarantor is only subsidiary,
(Balderrama)
andhad
all the
to execute
properties
several Deeds of Undertak
of the principal debtor, the PLCC in this case, mustjointly
first be
andexhausted
severally pay
before
TIDCORP
the
for whatever damage
guarantor may be held answerable for the debt. Thus,
underthethecreditor
aforementioned
may hold letters.
the
In the same light, AS
guarantor liable only after judgment has been obtained
entered
against
intothesurety
principal
agreements
debtor (Surety Bonds) with P
and the latter is unable to pay, for obviously the exhaustion
Pacificof and
the principals
Fortune (bonding
property companies), as sureties
the benefit of which the guarantor claims cannot even
solidarily
begin liable
to taketo place
TIDCORP,
before as creditor, for whatever
judgment has been obtained. This rule is contained inlatter
Article
may
2062
incur
of the
under
Civil
theCode,
Letters of Guarantee. ASPAC
which provides that the action brought by the creditor loan
mustobligations
be filed against
to Banque
the debtor
Indosuez and PCI Capital, p
alone, except in some instances mentioned in Articlepayment
2059 when
from
theTIDCORP
action mayunder
be
the Letters of Guara
brought against both the guarantor and principal debtor.
demanded payment from the bonding companies under the
the moratorium
request issued by the
The Court must, however, reject Aglibots claim Taking
as a into
mereaccount
guarantor
of the
the (2)
Philippines,
TIDCORP and its various cred
indebtedness of PLCC for want of proof, in view ofRepublic
Article of
1403
of the Civil
Indosuez
and
PCI
Capital,
forged
Code, embodying the Statute of Frauds. Under the Statute of Frauds, concerning a a Restructuring Agreem
of the
Letters of
of another,
Guarantee. The bonding compan
guaranty agreement, which is a promise to answer fordates
the debt
or default
Restructuring
Agreement
and, hence, did not give thei
the law clearly requires that it, or some note or memorandum
thereof,
be in writing.
granted
by Banque
Otherwise it would be unenforceable unless ratified, extensions
although under
Article
1358, aIndosuez and PCI Capital,
TIDCORP.
Nevertheless,
following
new payment schedu
contract of guaranty does not have to appear in a public
document.
Contracts
are
obligations
under
the Letters
generally obligatory in whatever form they may haveits
been
entered into,
provided
all of Guarantee to both
Capital.
TIDCORP
latersimply
filed a collection case against
the essential requisites for their validity are present, and
the Statute
of Frauds
Balderrama
on1403
account
their
provides the method by which the contracts enumerated
in Article
(2) of
may
be obligations under the dee
the bonding
on account
proved, but it does not declare them invalid just because
they companies
are not reduced
to of their obligations und
writing. Thus the form required under the Statute is for convenience and evidentiary
Issue: Whether or not the liabilities of the bonding compa
purposes only.
Surety Bonds have been extinguished by their lack o
granted
by Banque
On the other hand, Article 2055 of the Civil Code alsoextensions
provides that
a guaranty
is not Indosuez and PCI Capit
Restructuring
Agreement
presumed, but must be express, and cannot extend to
more than what
is stipulated
therein. This is the obvious rationale why a contract of guaranty is unenforceable
unless made in writing or evidenced by some writing. Ruling: NO.
Although the contract of a surety is in essence secondar

obligation, his liability to the creditor is direct, primary
SURETYSHIP liable for the debt and duty of another although he poss
interest over the obligations nor does he receive an
fundamental reason therefor is that a contract of surety
CONCEPT
surety as a solidary debtor. Thus, it is not necessary that th
to pay before
the surety
be made liable; it is enough
TRADE AND INVESTMENT DEVELOPMENT
CORP
OF could
THE
is
made
by
the
creditor
for
the
suretys liability to attach.
PHILIPPINES v. ASIA PACES CORPORATION, G.R. No. 187403, February
12, 2014, PERLAS-BERNABE, J.
Comparing a suretys obligations with that of a guaranto
Petition is denied.
P a g e | 148
Palmares v. CA, illumined that a surety is responsibleliability

for the of
debts
Aegean.
payment at once
if the principal debtor makes default, whereas a guarantor pays only if the principal
debtor is unable to pay. Despite this distinction, the Court
Issue:inWhether
Cochingyan,
or notJr.petitioner
v. R&B is a solidary debtor
Surety & Insurance Co., Inc., and later in the case of Security Bank, held that Article
2079 of the Civil Code, which pertinently provides that
Ruling:
"[a]n extension
YES.
granted to the
debtor by the creditor without the consent of the guarantor extinguishes the guaranty,"
equally applies to both contracts of guaranty and suretyship.
A contract of suretyship is defined as "an agreement w
surety, guarantees the performance by another party, called
Applying these principles, the Court finds that the payment
an obligation
extensions
or undertaking
granted by
in favor of a third party, cal
Banque Indosuez and PCI Capital to TIDCORP under
official
the Restructuring
recognizances,
Agreement
stipulations, bonds or undertakings
did not have the effect of extinguishing the bonding
virtuecompanies
of and under
obligations
the provisions
to of Act No. 536, as am
TIDCORP under the Surety Bonds, notwithstanding the
suretys
fact that
liability
said extensions
is joint were
and several, limited to the
made without their consent. This is because Article 2079
determined
of the Civil
strictly
Code
byrefers
the terms
to a of contract of suretyship
payment extension granted by the creditor to the principal
contract
debtor
between
withoutthe
theobligor
consent and the obligee. It bear
of the guarantor or surety. In this case, the Surety although
Bonds arethesuretyship
contract ofcontracts
suretyship is secondary to the pri
which secure the debt of ASPAC, the principal liability
debtor,tounder
the obligee
the Deeds
is nevertheless
of
direct, primary, and a
Undertaking to pay TIDCORP, the creditor, the damages
The petition
and liabilities
was granted.
it may incur
under the Letters of Guarantee, within the bounds ofLIVING
the bonds
coverage
@respective
SENSE, INC.
v. MALAYAN INSURANCE
periods and amounts. No payment extension was, however,
granted
by TIDCORP
in PERLAS-BERNABE,
No. 193753,
September
26, 2012,
favor of ASPAC in this regard; hence, Article 2079 of
the Civil
Code should
Facts:
In connection
withnot
thebeFOC Network Project of G
applied with respect to the bonding companies liabilities
to TIDCORP
under
the
petitioner
entered into
a Sub-Contract
Agreement wit
Surety Bonds.
Petitioner required DMI to give a bond, in the event tha
obligations under the Agreement. Thus, DMI secured sur
The payment extensions granted by Banque Indosuez
PCI Capital
pertain
to
fromand
respondent
Malayan
Insurance
Company, Inc. (resp
TIDCORPs own debt under the Letters of Guarantee
wherein
(TIDCORP)
respondent
boundit itself
jointly and severally liable with DM
irrevocably and unconditionally guaranteed full During
payment
ASPACs
loan and restoration works,
the of
course
of excavation
obligations to the banks in the event of its (ASPAC)
default.
other words,
the issued a work-stoppage
Works
and In
Highways
(DPWH)
Letters of Guarantee secured ASPACs loan agreements
to
the
banks.
Under
this
finding the latters work unsatisfactory. Notwithstanding
arrangement, TIDCORP therefore acted as a guarantor,
with
ASPAC
principal
DMI
still
failed as
to the
adopt
corrective measures, prompting
debtor, and the banks as creditors.
Agreement and seek indemnification from respondent. H
petitioners claim on the ground that the liability of its prin
ascertained before its own liability as a surety attaches. O
THE MANILA INSURANCE COMPANY, INC. v.asserted
AMURAO,
G.R. No. 179628,
that respondent
is a surety who is directly and pr
January 16, 2013, DEL CASTILLO, J.
petitioner, and that the bond is "callable on demand"
Facts: Respondent spouses Amurao entered into a Construction
perform its obligations
Contract Agreement
under the Agreement.
(CCA) with Aegean Construction and Development Corporation (Aegean) for the
construction of a commercial building. To guarantee Issue:
its fullWhether
and faithful
or not
compliance
DMI is an indispensable party to the
with the terms and conditions of the CCA, Aegean posted performance bonds secured
by petitioner The Manila Insurance Company, Inc.
Ruling:
and Intra
NO. Strata Assurance
Corporation (Intra Strata). When Aegean failed to complete the project, respondent
spouses filed before the RTC a complaint against petitioner
When DMI
and secured
Intra Sata
thetosurety
collect
and performance bonds from
on the performance bonds they issued.
with petitioners requirement, respondent bound itself "
DMI for the damages and actual loss that petitioner may
The case went up all the way to the Supreme Court where
perform
petitioner
its obligations
argued thatunder
while the Agreement. The ter
a surety is bound solidarily with the obligor, this doesexpresses
not makeathe
solidary
surety obligation
a solidary granting petitioner, as cr
co-debtor. A surety or guarantor is liable only if the against
debtor is
its himself
debtors,liable.
i.e., respondent
In this or DMI.
case, since respondent-spouses and Aegean agreed to submit any dispute for
arbitration before the CIAC, it is imperative that the
Thedispute
naturebetween
of the respondentsolidary obligation under the suret
spouses and Aegean must first be referred to arbitration
indispensable
in orderparty.
to establish
An indispensable
the
party is a party-in
P a g e | 149
final determination can be had of an action, and who

obligation
shall beorjoined
undertaking
mandatorily
in favor of another party, called
either as plaintiffs or defendants. The presence of indispensable
contract ofparties
a surety
is necessary
is secondary
to
only to a valid princ
vest the court with jurisdiction, thus, without their presence
becomestoliable
a suitfor
or proceeding,
the debt or duty of another although
the judgment of a court cannot attain real finality. The
personal
absence
interest
of anover
indispensable
the obligations nor does it receive
party renders all subsequent actions of the court null and
suretys
void for
obligation
want ofisauthority
not an original
to
and direct one for t
act, not only as to the absent parties but even as to those
act,present.
but merely accessory or collateral to the obligation c
In this case, DMI is not an indispensable party Nevertheless,
because petitioner
although
can
theclaim
contract of a surety is in essenc
indemnity directly from respondent, having made itself
principal
jointly
obligation,
and severally
his liability
liable to the creditor or promise
with DMI for the obligation under the bonds. Therefore,
be the
direct,
failure
primary
to implead
and absolute;
DMI is in other words, he is direc
not a ground to dismiss the case, even if the same wasthe
without
principal.
prejudice.
The Orders of the RTC were set aside.

Corollary, when PDSC communicated to FCC that it wa
PCICs liability,
as surety, arose. The claim of PDSC again
PHILIPPINE CHARTER INSURANCE CORPORATION
v. PETROLEUM
failure
of FCCApril
to perform
its obligation under the building
DISTRIBUTORS & SEVICE CORP., G.R. No.
180898,
18, 2012,
arises upon the solidary binding of a person deemed th
MENDOZA, J.
debtorwith
for Francia
the purpose
of fulfilling an obligation. A sure
Facts: Respondent PDSC entered into a building contract
Construction
being
the
same
party
as
thewas
debtor in relation to whateve
Corporation (FCC) for the construction of the Park N Fly Building. The contract
obligation
the FCC
latter,failed
and to
their liabilities are interwo
to be performed in two phases and contained a stipulation
that inofcase
Therefore,
as
surety,
PCIC
becomes
liable for the debt o
finish the project within the stipulated periods, it shall be liable for liquidated
possesses
no direct
or personal
damages. To ensure compliance with its obligations, FCCs
individual
officers
signed interest over the obligatio
receive
anyFCC
benefit
an Undertaking of Surety holding themselves personally
liable.
alsotherefrom.
procured a
performance bond from petitioner PCIC. Eventually, FCC failed to finish the project
petition was
within the agreed completion period. PDSC thenThe
terminated
thedenied.
contract and
proceeded to claim against petitioner under the bond.
CONTINUING SURETY AGREEM
PCIC averred that as a surety, it was not liable as a principal obligor; that its liability
under the bond was conditional and subsidiary and that
it could beLIM
made
liable only BANK CORPORATIO
MARIANO
v. SECURITY
upon FCCs default of its obligation in the Building Contract
up2014,
to thePERALTA,
extent of the
March 12,
J.
terms and conditions of the bond. PCIC argues that in Facts:
case ofPetitioner
a breach of
contract,a the
executed
Continuing Suretyship in fav
performance bond is answerable only for actual or compensatory,
not for
liquidated
"any and all types
of credit
accommodation that may be g
damages.
and hereinafter" in favor of Raul Arroyo for the amount
covered by a Credit Agreement/Promissory Note. Said pro
Issue: Whether or not PCIC is liable for liquidated damages
under
the performance
interest on
the loan
shall be 19% per annum, compounde
bond
days from the date thereof, and if the note is not fully pa
penalty of 2% per month of the total outstanding prin
Ruling: YES.
unpaid, shall be imposed.
The building contract clearly provides a stipulation for the payment of liquidated
damages in case of delay in the construction of the The
project.
On Arroyo,
the otherdefaulted
hand, the
debtor,
on his loan obligation. Ther
language of the performance bond issued by PCIC guaranteed
the full
and faithful
Notice of Final
Demand,
informing him of his liability t
compliance by FCC of its obligations under the building
theand penalty fees. For fail
Arroyo, contract,
including including
the interests
payment of liquidated damages in case of breach of with
obligation.
In
fact,
the
primary
said demand, respondent filed a complaint for co
purpose for the acquisition of the performance bond against
was to guarantee
to PDSC
him and the
Arroyothat
spouses. Since the Arroyo
the project would proceed in accordance with the terms
and
conditions
of
the
contract
located, summons was not served on them; hence,
and to ensure the payment of a sum of money in caseparticipated
the contractor
would
fail in the
in the
case.
full performance of the contract. This guaranty made by PCIC gave PDSC the right to
proceed against it (PCIC) following FCCs non-compliance
its obligation.
Issue:with
Whether
or not petitioner is liable for the principa
months after the execution of the Continuing Suretyship.
A contract of suretyship is an agreement whereby
a party,
Ruling:
YES.called the surety,
guarantees the performance by another party, called the principal or obligor, of an
P a g e | 150
In the case of Totanes v. China Banking Corporation, DPCC

the Court
became
discussed
in default
the essence
on October 29, 2003 when CCP i
of a continuing surety as follows: A bank or financing
breach
company
of the which
contract
anticipates
agreement and demanded the fu
entering into a series of credit transactions with aagainst
particular
the bonds.
company,
Consequently,
normally the November 6, 2003 l
requires the projected principal debtor to execute a continuing
properly surety
complied
agreement
with the
along
notice of claim requirement
with its sureties. By executing such an agreement, Upon
the principal
notice of
places
default
itself
of in
obligor
a
DPCC, PCICs liabil
position to enter into the projected series of transactions
attached.
with its
A creditor;
surety under
withArticle
such 2047 of the New Civil
suretyship agreement, there would be no need to execute
witha the
separate
principal
surety
debtor
contract
to assure
or the fulfillment of the ob
bond for each financing or credit accommodation extended
Builders
to the
Corporation
principal debtor.
v. Stronghold Insurance Company,
agreement works: As provided in Article 2047, the sure
The terms of the Continuing Suretyship executed by solidarily
petitioner with
statesthethat
principal
petitioner,
obligor. That undertaking ma
as surety, shall, without need for any notice, demand
ancillary
or any
contract
other asact
it presupposes
or deed, the existence of a prin
immediately become liable and shall pay "all credit accommodations
contract of a surety
extended
is in by
essence
the secondary only to a val
Bank to the Debtor,x x x. Such stipulations are valid surety
and legal
becomes
and constitute
liable forthe
thelaw
debt or duty of another althou
between the parties, as Article 2053 of the Civil Code personal
provides interest
that "[a]over
guaranty
the obligations
may
nor does it receive a
also be given as security for future debts, the amountbe
of stressed
which isthat
not notwithstanding
yet known; x x the fact that the surety c
x." Thus, petitioner is unequivocally bound by principal
the termsobligation,
of the Continuing
the surety assumes liability as
Suretyship. There can be no cavil then that petitioner undertaking.
is liable for the principal of the
loan, together with the interest and penalties due thereon, even if said loan was
obtained by the principal debtor even after the date Stronghold
of executionInsurance
of the Continuing
Company, Inc. v. Republic-Asahi Gl
Suretyship.
the ruling in Garcia v. Court of Appeals, expounds on
liability: x x x. The suretys obligation is not an origi
The petition was partly granted.
performance of his own act, but merely accessory or c
contracted by the principal. Nevertheless, although the
secondary only to a valid principal obligation, hi
OBLIGATIONS & LIABILITY OF essence
THE SURETY
promisee of the principal is said to be direct, primary and a
is directly
and equally
bound with the principal. Suretysh
PHILIPPINE CHARTER INSURANCE BANK
CORP.
v. CENTRAL
types of relationship
the AND
principal relationship between
COLLEGES OF THE PHILIPPINES AND DYNAMIC
PLANNERS
and
the
accessory
surety
relationship
between the princi
CONSTRUCTION CORP., G.R. No. 180631-33, February 22, 2012,
arrangement, the obligee accepts the suretys solidary
MENDOZA, J.
obligor the
doesservices
not pay.ofSuch
acceptance, however, does not
Facts: Central Colleges of the Philippines (CCP) contracted
Dynamic
theitsobligees
with
Planners and Construction Corporation (DPCC) to be
general relationship
contractor for
thethe principal obligor. Neith
an
active
party
to
the
principal
construction of its school building. To guarantee the fulfillment of the obligation, obligee-obligor relation
not give
the surety
the right to intervene in the prin
DPCC posted three bonds all issued by the Philippinedoes
Charter
Insurance
Corporation
role
arises
only
upon
the
obligors
(PCIC) and all of which are callable on demand and set to expire on October 30, default, at which time, i
the obligee
as a solidary obligor.
2003. Phase 1 of the project was completed withoutbyissue.
Phase for
2 ofpayment
the project,
however, encountered numerous delays.
Having acted as a surety, PCIC is duty bound to perform w
and performance
bonds,
In a letter dated October 29, 2003 addressed to DPCCsurety
and PCIC,
CCP informed
themall of which are callable on
principals
default.
of the breach in the contract and its plan to claim on the construction bonds. On
November 6, 2003, CCP notified DPCC and PCIC that only 51% of the project was
The petition
was partly
completed, which was way behind the construction schedule,
prompting
it togranted.
declare
LEPANTO-TAISHO
INSURANCE CORP. CHE
the occurrence of default against DPCC. It formallyFIRST
requested
PCIC to remit the
INC.,
G.R.
No.
177839,
January
proceeds of the bonds. Since negotiations with DPCC reached a dead end, CCP sent a 18, 2012, VILLARAM
Facts:was
Fumitechniks
had
applied for and was issued Sur
letter to PCIC of its final demand against the bonds, which
denied by the
latter.
stated in the attached rider, the bond was in compliance w
Issue: Whether or not PCIC is liable to pay the bonds grant of a credit line with the respondent "to guarantee pay
of fuel products withdrawn within the stipulated time in
and conditions of the agreement."
Ruling: YES.
P a g e | 151
Eventually, Fumitechniks defaulted on its obligation.where

Respondent
the bond
notified
expressly
petitioner
guarantees the payment of
of Fumitechniks unpaid purchases. Upon request withdrawn
of petitioner,
by Fumitechniks
respondent sent
in accordance with the term
copies of invoices showing deliveries of fuel agreement.
and petroleum
The bond
products
specifically
to makes reference to a w
Fumitechniks. Simultaneously, petitioner demandedthat
Fumitechniks
if the terms of
to asubmit
contractthe
are clear and leave no doub
following:
contracting parties, the literal meaning of its stipulation
(1) its comment on respondents request;
being an onerous undertaking, a surety agreement is str
(2) copy of the agreement secured by the Bond, together
creditor,
withand
copies
everyofdoubt
documents
is resolved in favor of the solida
such as delivery receipts; and (3) information on the particulars.
the bond, respondent as creditor must be held bound by th
that the terms and conditions of its distributorship contract
Fumitechniks responded that it cannot submit the requested
the very
agreement
least communicated
since no such
in writing to the surety. Su
agreement was executed between Fumitechniks and creditor
respondent.
(respondent)
Fumitechniks
impacts
also
not on the validity or legalit
enclosed a copy of another surety bond issuedonbytheCICI
creditors
General
right to
Insurance
demand performance.
Corporation in favor of respondent to secure the obligation of Fumitechniks and/or
Prime Asia Sales and Services, Inc. Consequently, petitioner
The petition
advised
was partly
respondent
granted.
of
the non-existence of the principal agreement as confirmed by Fumitechniks.
Petitioner explained that being an accessory contract, the bond cannot existEFFECT
without aOF EXTENSION TO DE
principal agreement as it is essential that the copy of the basic contract be submitted
to the proposed surety for the appreciation of the TRADE
extent ofAND
the INVESTMENT
obligation to be DEVELOPMENT COR
covered by the bond applied for. Thus, respondent
formally
from CORPORATION, G.R
PHILIPPINESdemanded
v. ASIA PACES
petitioner the payment of its claim under the surety
bond.PERLAS-BERNABE,
However, petitioner J.
12, 2014,
reiterated its position that without the basic contract subject
of
the
bond, it cannot
Facts: Respondents
Asia act
Paces Corporation (ASPA
on respondents claim.
Corporation (PICO) entered into a sub-contracting agreem
transmission line in the country of Libya. To finance its wo
Issue: Whether or not a surety is liable to the creditor
in the
absenceloans
of afrom
written
ASPAC
obtained
foreign banks Banque Indos
contract with the principal
Kong) Limited (PCI Capital) which, upon the latters reque
Letters of Guarantee issued by petitioner Trade and
Ruling: NO.
Corporation of the Philippines (TIDCORP).
The extent of a suretys liability is determined by As

the alanguage
the suretyship
conditionofprecedent
to the issuance by TIDCORP o
contract or bond itself. It cannot be extended by implication,
beyond
the
terms
of
the President, respondent
ASPAC, PICO, and ASPACs
contract. Thus, to determine whether petitioner is (Balderrama)
liable to respondent
under the
had to execute
several Deeds of Undertak
surety bond, it becomes necessary to examine the jointly
terms of
the
contract
itself.
A
and severally pay TIDCORP for whatever damage
reading of Surety Bond shows that it secures the payment
on creditletters.
by
under of
thepurchases
aforementioned
In the same light, AS
Fumitechniks in accordance with the terms and conditions
of
the
"agreement"
it
entered into surety agreements (Surety Bonds) with P
entered into with respondent. The word "agreement"
has Fortune
reference(bonding
to the companies), as sureties
Pacific and
distributorship agreement, the principal contract and
by
implication
included
the as creditor, for whatever
solidarily liable to TIDCORP,
credit agreement mentioned in the rider. However, itlatter
turned
out
that
respondent
has
may incur under the Letters of Guarantee. ASPAC
executed written agreements only with its direct customers
but not distributors
loan obligations
to Banque like
Indosuez and PCI Capital, p
Fumitechniks and it also never relayed the terms and payment
conditionsfrom
of itsTIDCORP
distributorship
under the Letters of Guara
agreement to the petitioner after the delivery of thedemanded
bond. Thepayment
law is from
clear the
thatbonding
a
companies under the
surety contract should be read and interpreted together with the contract entered into
between the creditor and the principal. Section 176 ofTaking
the Insurance
Codethe
states
that
into account
moratorium
request issued by the
The liability of the surety or sureties shall be joint and
several
with
the
obligor
and
Republic of the Philippines, TIDCORP and its various cred
shall be limited to the amount of the bond. It is determined
strictly
theCapital,
terms offorged
the a Restructuring Agreem
Indosuez
andby
PCI
contract of suretyship in relation to the principal contract
obligor
the
datesbetween
of the the
Letters
of and
Guarantee.
The bonding compan
obligee.
Restructuring Agreement and, hence, did not give thei
extensions granted by Banque Indosuez and PCI Capital,
A surety contract is merely a collateral one, its basis
is the principal
contract
or
TIDCORP.
Nevertheless,
following
new payment schedu
undertaking which it secures. Necessarily, the stipulations
in such principal
its obligations
under agreement
the Letters of Guarantee to both
must at least be communicated or made known to the surety particularly in this case
P a g e | 152
Capital. TIDCORP later filed a collection case against

debtor,: and
(a) ASPAC,
the banksPICO,
as creditors.
and
Balderrama on account of their obligations under the deeds of undertaking; and (b)
the bonding companies on account of their obligationsThe
under
petition
the Surety
was granted.
Bonds.
Issue: Whether or not the liabilities of the bonding companies to TIDCORP under the
Surety Bonds have been extinguished by their lack of consent to the payment
extensions granted by Banque Indosuez and PCI Capital to TIDCORP under the
Restructuring Agreement
MORTGAG
CONCEPT, NATURE A
Ruling: NO.
DBP
v. Guaria Agricultural and Re
Although the contract of a surety is in essence secondary only to a valid
principal
G.R. No. 160758, Jan
obligation, his liability to the creditor is direct, primary and absolute; he becomes
liable for the debt and duty of another although he FACTS:
possesses no direct or personal
interest over the obligations nor does he receiveGuarina
any benefit
therefrom.
Corporation
appliedThe
for a loan from DBP to fina
fundamental reason therefor is that a contract of suretyship
effectively
binds
the
Iloilo, which was later granted. Guarina Corporation exec
surety as a solidary debtor. Thus, it is not necessary that
the original
debtorTofirst
failed
November
3, 1988.
secure
its loan obligation, Guarina
to pay before the surety could be made liable; it is enough
a demand
payment
estatethat
mortgage
overforseveral
real properties, and a chattel
is made by the creditor for the suretys liability to attach.
at the resort complex and those yet to be acquired out of th
in several instalments, and Guaria Corporation used th
Comparing a suretys obligations with that of a guarantor,
the Court,
casecomplex.
of
improvements
in in
thethe
resort
In all, the amount
Palmares v. CA, illumined that a surety is responsibleDBP
for the
debts P148,102.98
payment at once
withheld
as interest. Guaria Corporati
if the principal debtor makes default, whereas a guarantor
paysDBP
onlyrefused.
if the principal
loan, but
Instead, DBP directly paid som
debtor is unable to pay. Despite this distinction, the Court
in objection.
Cochingyan,
Jr.found
v. R&B
latter's
DBP
upon inspection of the resor
Surety & Insurance Co., Inc., and later in the case of that
Security
Bank,
held
that
Article
Guaria Corporation had not completed the construc
2079 of the Civil Code, which pertinently provides that
"[a]n extension
granted
the
Corporation
expedite
the tocompletion
of the project, an
debtor by the creditor without the consent of the guarantor
extinguishes
the
guaranty,"
proceedings should Guaria Corporation not do so. Uns
equally applies to both contracts of guaranty and suretyship.
Guaria Corporation, DBP initiated extrajudicial foreclos
was sent to Guaria Corporation.
Applying these principles, the Court finds that the payment extensions granted by
Banque Indosuez and PCI Capital to TIDCORP under
the Restructuring
Guaria
CorporationAgreement
sued DBP in the RTC to demand sp
did not have the effect of extinguishing the bonding
companies
obligations
under the loan agreement, andtoto stop the foreclosure of
TIDCORP under the Surety Bonds, notwithstanding the
fact thatofsaid
dismissal
theextensions
complaint,were
stating that the mortgaged pr
made without their consent. This is because Article 2079
of
the
Civil
Code
refers
to
a
obligation of Guaria Corporation
at a public auction. D
payment extension granted by the creditor to the principal
debtortowithout
consent of the foreclosure proc
complaint
seek thethenullification
of the guarantor or surety. In this case, the Surety of
Bonds
sale. are suretyship contracts
which secure the debt of ASPAC, the principal debtor, under the Deeds of
Undertaking to pay TIDCORP, the creditor, the damages
andWhether
liabilitiesoritnot
may
ISSUE:
theincur
foreclosure made by DBP was
under the Letters of Guarantee, within the bounds of the bonds respective coverage
periods and amounts. No payment extension was, however,
granted by TIDCORP in
RULING:
favor of ASPAC in this regard; hence, Article 2079 of
the
Civil
Code should
not DBP
be and Guaria Corporatio
NO. The agreement
between
applied with respect to the bonding companies liabilities
to TIDCORP
under
the where one party is the cre
as it arises
from the same
cause
Surety Bonds.
of one party in a reciprocal obligation is dependent upon th
should ideally be simultaneous. This means that in a lo
The payment extensions granted by Banque Indosuez
and and
PCIthe
Capital
amount
debtorpertain
repays to
it when it becomes due and d
TIDCORPs own debt under the Letters of Guarantee wherein it (TIDCORP)
irrevocably and unconditionally guaranteed full Inpayment
this case,ofby ASPACs
its failure toloan
release the proceeds of the l
obligations to the banks in the event of its (ASPAC)
default.
In
other
words, the
exact on Guaria Corporation
the latter's compliance with
Letters of Guarantee secured ASPACs loan agreements
banks. Under
thislike a loan does not perfo
party to
in athereciprocal
contract
arrangement, TIDCORP therefore acted as a guarantor, with ASPAC as the principal
P a g e | 153
obliged to perform what is expected of it while the other's

This obligation
is the precise
remains
consequence
unfulfilled.
of the
In other
final and
words,
executory
the latter party does not incur delay. Still, DBP calledtheupon
RTCGuaria
on JuneCorporation
3, 2006 whereby
to makethe
good
titleontothe
the subjec
construction works pursuant to the acceleration clausethereon
writtenconsisting
in the mortgage
of Emilies
contract
fraudulently
or else itobtained
would title w
foreclose the mortgages.
The protection afforded to PNB as a mortgagee in good fa
DBP's actuations were legally unfounded. While it iscarried
true that
overloans
and annotated
are often secured
on the new
by acertificate
mortgageof title i
constituted on real or personal property to protect the
thecreditor's
RTC. Thereafter,
interest into case
enforce
of the
such
default
lien thru
of the
foreclosur
debtor, it remains an accessory contract dependent onsecured
the principal
debt, as
obligation,
PNB didsuch
so pursue.
that enforcement
The principle,
of howe
the mortgage contract will depend on whether or estate
not there
mortgages
has been
anda foreclosures
violation of attended
the principal
by fraudule
obligation. While a creditor and a debtor could regulate
accessory
the orderfollow
in which
thethey
principal.
should In
comply
fact, when
with their
the princip
reciprocal obligations, it is presupposed that in a loan
include
the lender
all natural
should
or civil
perform
fruitsitsand
obligation
improvements
- the found
release of the full loan amount - before it could demand
due that
as provided
the borrower
in Article
repay2127
the loaned
of the amount.
Civil Code.
In Howe
other words, Guaria Corporation would not incur inCastro,
delay before
Jr. v. CA
DBPthe
fully
Court
performed
explained
its reciprocal
that Article 2127
obligation.
ownership of accessions and accessories also belongs to
After all, it is an indispensable requisite of a valid rea
Considering that it had yet to release the entire proceeds
absoluteofowner
the loan,
of the
DBPencumbered
could not yet
property.
make an
Otherwise
effective demand for payment upon Guaria Corporation
evidence
to toperform
the contrary,
its obligation
all accessories
under and
the accessions
loan.
ac
According to Development Bank of the Philippines v.are
Licuanan,
included
it would
in theonly
mortgage
be when
contract
a demand
andtomay
pay thus al
had been made and was subsequently refused that a property
borrowerincould
case of
be non-payment
considered inofdefault,
the debt
and
secured.
the Cor
lender could obtain the right to collect the debt the
or presumption
to foreclose that
the the
mortgage.
mortgagor
Hence,
owns Guaria
the mortgaged
Corporation would not be in default without the demand.
2127.
Under
Otherwise
the circumstances,
stated, the provision
DBP's foreclosure
is irrelevant
of and i
the mortgage and the sale of the mortgaged properties
foreclosures
at its instance
if the were
mortgagor
premature,
is laterand,
on found
therefore,
or declared
void and ineffectual.
the instant case.
The petition was denied.
It is beyond question that PNBs mortgagors, Spouses

subject lot much less of the building which produced th
caused by PNB could not have, thus, included the building
PNB v. Maraon
PNBs lien as a mortgagee in good faith pertains to
improvements
G.R. 189316, July
1, 2013 shall follow the principal in a mortgage u
apply
under the premises. Accordingly, since the building
FACTS:
it is noterected
affected
by anon-redemption
an
Respondent spouses Maranon, are the owners of aSpouses
piece ofMaraon;
real property,
with
building
made
by
PNB
over
the
subject
lot.
Thus,
PNBs
claim
for
t
occupied by various tenants. Said subject property was among the properties mortgaged by spouses
Montealegre to PNB as a security for a loan. The spouses Montealegre, through a falsified Deed of Sale,
The petition
waspurportedly
denied.
acquired title to the property and used the propertys title
which was
registered in the name
of Emelie Montealegre. However, due to failure to pay the loan, said property was foreclosed by PNB,
and upon auction, was thereafter acquired by the same bank, PNB.
Star Two (SPV-AMC) Inc. v. Paper City C
No. 169211, Mar
Respondent spouses Maranon filed before the RTC a complaint for Annulment of Title, G.R.
Reconveyance
and Damages against spouses Montealegre. Judgment
FACTS:
of RTC was rendered in favour of spouses
Maranon, and also stipulated that the Real Estate Mortgage
lienapplied
of PNBforshall
be respected.
Respondent
and stay
was and
granted
several loans and
Such decision prompted PNB to also seek for entitlement
to Corporation
the fruits of (RCBC),
the property
suchby
as 4rentals
Banking
secured
Deeds of Con
paid by the tenants.
and equipment found inside its paper plants. Subsequently
Deed of Continuing Chattel Mortgage over the merch
ISSUE: Whether or not PNB is entitled to the fruits ofmortgages.
the disputedThen,
property.
RCBC, Metrobank and Union Bank
Mortgage Trust Indenture (MTI) with Paper City, where
RULING:
by 5 Deeds of Real Estate Mortgage over several real and
NO. Rent is a civil fruit that belongs to the owner of the
property
producing
it by the
rightcontribution
of accession.
later
amended
to increase
ofThe
the RCBC
rightful recipient of the disputed rent in this case should
thus be the
of still
the subject
the of
time
Amendment
to owner
MTI but
includedlotasatpart
the mortg
the rent accrued. It is beyond question that Spouses Maraon
never
lost
ownership
over
the
subject
lot.
various machineries and equipment located in and bolted
P a g e | 154
Paper City. A Second Supplemental Indenture to the MTI

accessories
was later
installed
executed
at the
to increase
time the the
mortgage,
amount as
of well as
the loan secured against the existing properties composed
belonging
of land,
to the
building,
mortgagor,
machineries
installedand
after
equipment
the constitution
and inventories. Finally, a Third Supplemental Indenture to the MTI was executed also to increase the
existing loan obligation with an additional securityFurther,
composed
the real
of estate
a newly
mortgage
constructed
over the
two-storey
machineries an
building and other improvements, machineries and equipment
classification
located
of insuch
the existing
properties
plant
by site.
the Civil Code of t
Article 415 thereof.
Paper City was initially able to comply with its loan obligations. But due to the economic crisis, it
became difficult for Paper City to meet its obligations The
leading
petition
to payment
was granted.
defaults. Consequently, RCBC
filed a Petition for Extrajudicial Foreclosure involving the eight (8) parcels of land including all
improvements thereon included in the MTI. Later, a Certificate of Sale was executed certifying that the
ACCOMMODATION
M
eight (8) parcels of land with improvements thereon were sold in favor of the creditor
banks as the
highest bidders. Paper City filed a complaint to nullify the extra-judicial sale of the properties for lack of
prior notice and with allegation of bad faith on the part of the creditor banks. In the meantime, Paper
City and Union Bank entered into a Compromise Agreement which was later approved by the trialRamos
court, v. Obis
G.R.
No.
193804,
where they agreed to limit the share of Union bank in the proceeds of the foreclosure. On the other hand, Febru
the negotiations between the other creditor banks andFACTS:
Paper City remained pending. During the interim,
Paper City filed with the trial court a Manifestation with
Motion
to Remove
and/orexecuted
Dispose aMachinery
Spouses
Ramos
(petitioners)
Real Estate Mor
reasoning that the machineries located inside the foreclosed
andCompany
building (FEBTC)-Fairview
were deteriorating. Branch,
It
Bank andland
Trust
posited that since the machineries were not included notarized
in the foreclosure
of
the
real
estate
mortgage,
it
is
REM secured credit accomodations extended to
appropriate that it be removed from the building and sold
to a third
party. was registered and annotated on the
Ramos.
The REM
FEBTC that Obispo, to whom they entrusted their proper
The RTC initially denied the motion but granted the same
for reconsideration
of Paperacity
loan on
in motion
their behalf,
had instead secured
loanonforP1,15
the ground that the disputed machineries and equipments
are payment
chattels by petitioners
agreement of
of P250,000.00.
the parties Petiti
despite full
through their inclusion in the four (4) Deeds of Chattelthem
Mortgage.
with documents and papers pertinent to the mortga
petitioners filed a complaint for annulment of REM with d
Before the CA, RCBC argued that Paper City gave its conformity to consider the subject machineries
and equipment as real properties, which was however
denied tobythepaper
City. The
affirmed
the REM f
According
petitioners,
theyCA
signed
the blank
decision of the RTC.
with FEBTC, and that they subsequently received the loan
full through Obispo. With their loan fully settled, they d
ISSUE: Whether the subject machineries and equipment
weretovalidly
of the
refused
talk or included
see them,inasthe
he foreclosure
is now hiding
from them
real estate mortgage
of Quezon City, petitioners said they were surprised to le
for P1,159,096.00. Petitioners thus prayed that the REM b
RULING:
ordered to deliver to them all documents pertaining to
YES. Under the MTI, the petitioner, other creditor banks
andand
Paper
City intended
fromtothe
first damage
FEBTC
Obispo
be ordered
payvery
moral
execution of the indentures that the machineries and
equipment
are included.
lawFEBTC
and averr
Compulsory
Counterclaim
andMoreover,
Cross-claim,
jurisprudence provide and guide that even if not expressly
stated, as
thepartial
mortgage
extends
to loans
the obtai
over theirsoproperty
security
for the
improvements. Article 2127 of the Civil Code provides
in
part
that
the
mortgage
extends
to
the
natural
ofP2,500,000.00. Since the obligation secured by the RE
accessions, to the improvements, growing fruits, andshould
the rents
or income
nottoyetrelease
received
the on the
not be
compelled
the when
mortgage
obligation becomes due x x x.
Obispo was declared in default for failure to file any
summons which he personally received.
In the early case of Bischoff v. Pomar and Cia. General de Tabacos, the Court ruled that even if the
machinery in question was not included in the mortgage
Article
of the
Mortgage
Law
Theexpressly,
RTC declared
the111
REM
voidold
and
ordered FEBTC
to c
provides that chattels permanently located in a building,
ornamental,
or for the
servicetoofthe CA
theeither
sameuseful
to theorpetitioners.
FEBTC
appealed
some industry even though they were placed there after
the creation
the mortgage
shall be
dismissed
the ofcomplaint,
holding
thatconsidered
petitioners were
as mortgaged with the estate, provided they belong to mortgagors
the owner ofunder
said estate.
the case
of Civil
Cu Unjieng
ArticleIn2085
of the
Code and tha
e Hijos v. Mabalacat Sugar Co., the Court also ruled their
that the
subject
machineries
were
integral
parts
of
allegations.
said sugar central hence included following the principle of law that the accessory follows the principal.
Further, in the case of Manahan v. Hon. Cruz, this Court
upheld
the inclusion
the subject
ISSUE:
Whether
or not theof
petitioners
are building
accommodation
built on the parcel of land mortgaged to the bank. In Spouses Paderes v. Court of Appeals, the Court
reiterated once more the Cu Unjieng e Hijos RULING:
P a g e | 155
RULING:
additional security to accommodate the request of TFRC.
YES. The validity of an accommodation mortgage security
is allowed
for under
the increase
Article in2085
the loan
of the
of Civil
TFRC,
Code
it bound it
which provides that "[t]hird persons who are not parties
whotoare
thenot
principal
partiesobligation
to the principal
may secure
obligation
the latter
may secure
by pledging or mortgaging their own property." An accommodation
property. The fact that the loans were solely for the benef
a recipient of the loan, otherwise that would be contrary
with respect
to his designation
to respondents
as such.
property
It is not
as long
always
as valid
necessary that the accommodation mortgagor be apprised
executed
beforehand
the real estate
of the mortgage
entire amount
over its
of properties,
the loan such
nor should it first be determined before the executionthe
of principal
the Special
obligation
Power of
notwithstanding
Attorney in favor
the of
factthe
that respo
debtor. This is especially true when the words used bythe
thedebt
parties
of TFRC.
indicate that the mortgage serves as a
continuing security for credit obtained as well as future loan availments.
Here, petitioners as owners, signed the REM as mortgagors and there is no evidence adduced that
suggests fraud or irregularity in its execution. Petitioners are not contracting parties whom the law
Philippine
Charity
Sweepstakes
considers ignorant or disadvantaged but former overseas workers
with sufficient
education
as to beOffice
well- v. New
aware of the consequences of their personal decisions, consistent with the legal presumption
a
G.R. No.that
173171,
Jul
person takes ordinary care of his concerns. Considering
this and the fact that there was a dearth of
FACTS:
evidence to back up petitioners story, it can be reasonably
from the (REM)
facts onwas
record
that it was
A realinferred
estate mortgage
constituted
over a pa
more probable that petitioners allowed Obispo to use their
property
as
additional
collateral
so
to avail of the
favor of petitioner PCSO, to secure theaspayment
of his existing credit line with FEBTC instead of petitioners
directly
applyingPatricia
for a separate
loan.
provincial
distributors,
Galang.
Later, Peralta sold
respondent New Dagupan, the conveyance to be absolut
The petition was denied.
New Dagupan obliged to pay the downpayment upon the
balance by monthly instalments. Peralta showed to New
no liens and encumbrances, and undertook to deliver the o
China Banking Corporation v. QBRO
Fishing of
Enterprises,
the execution
the contract.Inc.
Due to the failure of Peralta t
G.R. No. 184556, February
22,
2012
to execute a deed of absolute sale in its favor, New Dagu
FACTS:
Further, New Dagupan executed an affidavit of adverse cl
Trans-Filipinas Realty Corporation (TFRC) obtainedview
a loan
from petitioner
secured
real estate
of Peraltas
continued
failurebytoadeliver
a deed of a
mortgage (REM) over two parcels of land. The Board
of
Directors
of
respondent
issued
a
resolution
title, New Dagupan filed a complaint for specific perfor
authorizing the mortgage of its properties to secure "the
obligations
incurred
or which
maythe
thereafter
be of the
pendency
of said
case, PCSO
caused
registration
incurred by [TFRC] with [petitioner] irrespective ofLater,
the amount
including
any
renewals,
extensions
PCSO filed an application for the extrajudicial fore
and/or roll-overs thereof." Consequently, respondent executed
REM over
9 parcels
land as collateral
Galangsafailure
to fully
pay theofsweepstakes
she purchase
for TRFCs additional loan. Said mortgage was annotated
in
the
corresponding
titles.
TFRC,
however,
15, 1993 where PCSO was the highest bidder. A certificate
defaulted on the payment of its obligation and failed to
settle its account
despite
received
Meanwhile,
a certified
truehaving
copy of
the titleseveral
which New D
demand letters from petitioner. Thus, petitioner filed reflected
a petitionPCSOs
for extrajudicial
foreclosure
of
the
mortgage lien. Claiming thatreal
it was on
properties respondent and TFRC had mortgaged. During
publicnotified
auction,PCSO
petitioner
as against
the
New the
Dagupan
of itsemerged
complaint
Per
highest bidder and was issued a Certificate of Sale. the meantime, the RTC Branch 43 rendered a Decision, a
Peralta and New Dagupan. After said decision became fi
Respondent filed a Complaint with the RTC to annuldemanded
the real estate
mortgage,
foreclosure
proceedings
Peraltas
delivery
of the owners
duplicate title
and auction sale, alleging that petitioner unlawfully from
treated
the
TFRC
and
respondents
separate
PCSO, who in response, stated that it hadloan
already fo
accounts, which were secured by two different and
realname
estate
mortgages,
as afor
single,
and separate
it has in its
a certificate
of sale
being the hi
inseparable account. In its Answer, petitioner deniedDagupan
that there
were
twothe
separate
accounts
andPCSO fo
filed
with
RTC aloan
petition
against
maintained that the REM over respondents properties
was executed
serve as additional security to
owners
duplicatetothereof.
accommodate TFRCs request for an increase in its loan line. There being only one loan, petitioner
asserted that the filing of a petition for extrajudicial foreclosure
was between
proper. New Dagupan and PCSO has a bett
ISSUE: Who
ISSUE: Whether or not the petition for extrajudicial RULING:

foreclosure is valid with respect to the mortgaged
properties of respondent
NEW DAGUPAN. As a general rule, a mortgage liability
the contract. However, the amounts named as considerati
RULING:
amount for which the mortgage may stand as security if
YES. The real estate mortgage executed by respondent
in favor
of petitioner
was other
intended
to serve ascan be
intent
to secure
future and
indebtedness
P a g e | 156
mortgage may exceptionally secure future loans aornew title was issued in the name of Villar. Both Villars
specifically described in the mortgage contract. An obligation
annotated atis the
notback
secured
of Villars
by a mortgage
new title. unless it
comes fairly within the terms of the mortgage contract.
Garcia filed a Petition for Mandamus with Damages aga
The stipulation extending the coverage of a mortgage
amended
to advances
his petition
or loans
to aother
Complaint
than those
for Foreclosure
already
of
obtained or specified in the contract is valid and has been
alleged
commonly
that when
referred
Villartopurchased
as a "blanket
the mortgage"
subject property, s
or "dragnet" clause. In Prudential Bank v. Alviar, this Court
knowingly
elucidated
and willfully
on the nature
disregarded
and purpose
the provisions
of such on law
a clause as follows: A "blanket mortgage clause,"mortgaged
also known
property.
as a "dragnet
Garcia further
clause"claimed
in American
that when Vil
jurisprudence, is one which is specifically phrased torelieved
subsumeofallher
debts
contractual
of past orobligation
future origins.
and the
Such
characters
clauses are "carefully scrutinized and strictly construed."
person
x x of
x.Villar.
A mortgage
Therefore,
that provides
Garcia argued,
for a dragnet
he, as the se
clause is in the nature of a continuing guaranty and constitutes
original status
an exception
as first mortgagee,
to the rule which
than anisaction
the creditor
to
with
foreclose a mortgage must be limited to the amount mentioned
that he hadindemanded
the mortgage
payment
contract.
from Its
Villar,
validity
whose
is refusal
anchored on Article 2053 of the Civil Code and is notaction
limitedintocourt.
a single
On transaction,
the other hand,
but contemplates
Villar claimeda that the
future course of dealing, covering a series of transactions,
was without
generally
her consent
for an and
indefinite
knowledge.
time Villar
or until
alleged t
revoked. It is prospective in its operation and is generally
when she
intended
had the
to Deed
provide
of Sale
security
registered.
with respect to
future transactions within certain limits, and contemplates a succession of liabilities, for which, as they
accrue, the guarantor becomes liable. In other words,
ISSUE:
a continuing
Whether or
guaranty
not the is
second
one that
mortgage
coversof all
the proper
transactions, including those arising in the future, which
to Villar
are within
were valid.
the description or contemplation of
the contract of guaranty, until the expiration or termination thereof.
RULING:
In this case, PCSO claims the subject mortgage is a continuing
YES. Bothguaranty.
are validAccording
under thetoterms
PCSO,
andthe
conditions
intent of th
was to secure Galangs ticket purchases other than those
Galas
outstanding
and Villar.atMoreover,
the time ofthetheclaim
execution
of Garcia
of the
that the s
Deed of Undertaking with First Real Estate Mortgagetheonmortgagors
March 8, 1989
attorney-in-fact,
such that it to
cansell
foreclose
the property
the in cas
subject mortgage for Galangs non-payment of her ticket
violation
purchases
of theinprohibition
1992. PCSO
on pactum
does notcommissorium,
deny and
as
even admits that Galang had already settled the amount
whichofprovides
P450,000.00.
that: The
However,
creditorPCSO
cannotrefuses
appropriate
to the
concede that the subject mortgage had already been discharged,
dispose of them.
claiming
Anythat
stipulation
Galang to
had
theunpaid
contrary
ticket
is null and
purchases in 1992 and these are likewise secured. Contrary thereto, the Court found that there is nothing
in the Deed of Undertaking with First Real Estate Mortgage
The following
that would
are the
indicate
elements
thatofit pactum
is a continuing
commissorium:
security or that there is an intent to secure Galangsway
future
of debts.
security
Therefore,
for the payment
PCSO cannot
of the claim
principal
that obligati
Galangs ticket purchases in 1992 are also secured. From
automatic
the time
appropriation
the amount by
of the
P450,000.00
creditor ofwas
thefully
thing mortg
settled, the subject mortgage had already been cancelled
obligation
such that
within
Galangs
the stipulated
subsequent
period.
ticket purchases
are unsecured. Simply put, PCSO had nothing to register, much less, foreclose. Consequently, PCSOs
registration of its non-existent mortgage lien and subsequent
Villars purchase
foreclosure
of theofsubject
a mortgage
property
thatdid
was
notnoviolate th
longer extant cannot defeat New Dagupans title over power
the subject
of attorney
property.provision did not provide that the
automatically pass to Villar upon Galass failure to pay th
The petition was dismissed.
appointment of Villar as attorney-in-fact, with authority
property, and to apply the proceeds to the payment of the
contracts, and is in conformity with Article 2087 of the
PACTUM COMMISSORIUM
essence of these contracts that when the principal oblig
pledge or mortgage consists may be alienated for the
eventually sell the subject property to Villar for an additio
Garcia v. of
Villar
her rights as the owner of the subject property. The subj
G.R. No. 158891,of
June
27, 2012
another
and separate contract, which is the Deed of Sal
FACTS:
subject property to Villar was automatic upon Galas failu
simulated
to cover
up of
such
automatic
transfer.
Lourdes Galas, with her daughter, Pingol, as co-maker,
mortgaged
a piece
property
owned
by her to
Yolanda Villar as security for a loan. Galas, again with Pingol as her co-maker, mortgaged the same
The Court
affirmed
the decision
of the CA. title.
property to Pablo Garcia to secure a loan. Both mortgages
were
annotated
on the corresponding
Later, Glas sold the property to Villar and declared in the Deed of Sale that the property was "free and
clear of all liens and encumbrances of any kind whatsoever." The sale was registered and, consequently,
REQUISITES FOR V
P a g e | 157
title. The records indicate that Delgado was at the time

property and Delgados title did not contain any annotation
Homeowners Savings and Loan Bank
v. Asuncionhad
Felonia,
as a mortgagee,
a rightet.al.
to rely in good faith on Delga
G.R. No. 189477, February 26, 2014
might arouse suspicion, HSLB had no obligation to undert
FACTS:
Felonia and De Guzman were the registered owners of a parcel of land. Felonia and De Guzman then
mortgaged the property to Delgado to secure the loan in the amount ofPhilippine
P1,655,000.00.
However,
instead
National
Bank v.
Spouses Ale
of a real estate mortgage, the parties executed a Deed of Absolute Sale with an OptionG.R.
to Repurchase.
A Septem
No. 194014,
year later, Felonia and De Guzman filed an action forFACTS:
Reformation of Contract. Inspite of the pendency
of the Reformation case in which she was the defendant, Delgado filed a petition for the issuance of a
Spouses Reblando obtained a P100,000.00 loan from Ph
new title under Delgados name. After the new title was issued and the title registered in the names of
payment of the loan, the Reblandos executed a real estate m
Felonia and De Guzman, was canceled, Delgado mortgaged the subject property to Homeowners
they owned. A few years later, the parties agreed to up the
Savings and Loan Bank (HSLB) using her newly registered title. HSLB then caused the annotation of
They then executed an "Amendment to Real Estate M
the mortgage.
accommodation. Barely two weeks after, the parties again
312,000 and executed for the purpose a second "Amen
ISSUE: Whether or not HSLB was a purchaser in good faith.
defaulting in the payment of their loan obligation, prom
foreclosure of the mortgage. The Reblandos received a
RULING:
foreclosure sale, the PNB, as lone bidder, was awarded th
NO. A purchaser in good faith is defined as one who buys a property without notice that some other
issued a Certificate of Extra-Judicial Sale covering b
person has a right to, or interest in, the property and pays full and fair price at the time of purchase or
redemption period without the Reblandos redeeming the
before he has notice of the claim or interest of other persons in the property. Although it is a recognized
over the subject parcels of land.
principle that a person dealing on a registered land need not go beyond its certificate of title, it is also a
firmly settled rule that where there are circumstances which would put a party on guard and prompt him
After PNB was issued a he Reblandos filed a complaint b
to investigate or inspect the property being sold to him.
the declaration of nullity of the mortgage over Lot No. 1
Reblandos executed the "Amendment to Real Estate Mortg
In the case at bar, HSLB utterly failed to take the necessary precautions. At the time the subject property
validly created a mortgage over Lot No. 10, not being the o
was mortgaged, there was yet no annotated Notice of Lis Pendens. However, at the time HSLB
purchased the subject property, the Notice of Lis Pendens was already annotated on the title. Indeed, at
ISSUE: Whether or not the mortgage constituted over Lot
the time HSLB bought the subject property, HSLB had actual knowledge of the annotated Notice of Lis
Pendens. Instead of heeding the same, HSLB continued with the purchase knowing the legal
RULING:
repercussions a notice of lis pendens entails. HSLB took upon itself the risk that the Notice of Lis
YES. The evidence on record revealed that, at the time t
Pendens leads to.
Alejandro was the declared owner of Lot No. 10. His own
prior to the constitution of the mortgage over Lot No. 10.
PLEASE TAKE NOTE: DOCTRINE OF THE MORTGAGEE IN GOOD FAITH
Article 2085 of the Civil Code provides that a mortgage
HSLB was initially a mortgagee in good faith. However, the rights of the parties to the present case are
requisites:
defined not by the determination of whether or not HSLB is a mortgagee in good faith, but of whether or
not HSLB is a purchaser in good faith.
(a) that it be constituted to secure the fulfilment of a princi
(b) that the mortgagor be the absolute owner of the thing m
HSLB was initially a mortgagee in good faith. There is, however, a situation where, despite the fact that
(c) that the persons constituting the mortgage have free di
the mortgagor is not the owner of the mortgaged property, his title being fraudulent, the mortgage
free disposal, that they be legally authorized for the purpos
contract and any foreclosure sale arising there from are given effect
The presence of the second requisiteabsolute ownership
the doctrine of "the mortgagee in good faith" based on the rule that all persons dealing with property
this case.
covered by the Torrens Certificates of Title, as buyers or mortgagees, are not required to go beyond what
appears on the face of the title. The public interest in upholding indefeasibility of a certificate of title, as
The Tax Declaration ought to be the superior evidenc
evidence of lawful ownership of the land or of any encumbrance thereon, protects a buyer or mortgagee
presented as to who owned Lot No. 10. The Court enun
who, in good faith, relied upon what appears on the face of the certificate of title.
prima facie proofs of ownership or possession of the pr
Coupled with proof of actual possession of the property
When the property was mortgaged to HSLB, the registered owner of the subject property was Delgado
ownership.
who had in her name TCT No. 44848. Thus, HSLB cannot be faulted in relying on the face of Delgados
P a g e | 158
In this case, not only was the tax declaration in Alejandros name, but also, respondents admittedly
Thereconstructed
is, however,
a situation
despite
the fact
possessed the property mortgaged, their residence being
on it.
It was forwhere,
this very
reason
his was
title issued
being fraudulent,
the mortg
that they prayed for injunction before the RTC whenmortgaged
the writ ofproperty,
possession
against them.
therefrom
by reason
of public
policy. Th
There was, therefore, a prima facie proof of ownership
in this are
casegiven
whicheffect
respondents
failed
to rebut.
faith"
on thetorule
persons
dealing with prop
Consequently, the power of Alejandro to subject Lot No.
10 based
as collateral
thethat
loanall
was
upheld.
as buyers or mortgagees, are not required to go beyond w
interest in upholding the indefeasibility of a certificate of
MORTGAGEE INthe
GOOD
FAITH
land or
of any encumbrance thereon, protects a buyer
what appears on the face of the certificate of title.
Claudio v. Saraza,
Verily, a26,
mortgagee
has a right to rely in good faith on the
G.R. No. 213286, August
2015
absence of any sign that might arouse suspicion, has no
FACTS:
Accordingly, even if the mortgagor is not the rightful ow
The complaint alleged that Porfirio Claudio (Porfirio
mortgaged
property,
the by
mortgagee
good faith
acquired ten (10) parcels of land in Pasay City including
the property
covered
Transfer in
Certificate
of is enti
however,
that
the mortgagor,
who is not
the rightful
own
Title (TCT) No. 142989; that on June 18, 2004, Florentino
made
it appear
that his parents,
Porfirio
and
obtaining
a Torrens
over the thru
property
in of
his name
Mamerta Claudio, sold to him the lot covered by TCT
No. 142989
for title
P500,000.00
a deed
mortgaging
property
another who
absolute sale sometime in October 2003; that the saidsucceeds
deed ofinsale
was voidthe
because
the tosignatures
of relies
the vendors were forged and there was no consideration for the sale; that the signatures of petitioners
Theexpressing
doctrine oftheir
mortgagee
in to
good
faith only applies
Fermin and Asuncion appearing in the same deed of sale,
conformity
the conveyance,
certificate
of registration
title in his orofher
at the time
were likewise forged; and that subsequently, Florentino
sought the
thename
said property
in of
histhe mor
value is one
who entered
mortgage contract
name
before
the
Register
of
Deeds
of into a Pasay
City. with a
name over the mortgaged property. Such was not the situa
protection
accorded by
law to ainnocent
It was further averred in the complaint that on June 22,
2004, Florentino
executed
deed of mortgagees
real estate for val
yetthein mortgaged
the name property
of Florentino
rely on wh
mortgage over the subject lot with special power title
to sell
withouttojudicial
proceedings, in favor of Spouses Saraza to secure the payment of a loan in the aggregate amount of
faith
intention
P1,000,000.00; that Spouses Saraza were mortgageesGood
in bad
faithconnotes
because an
theyhonest
knew fully
well to
thatabstain
another.
Spouses
could
not be deemed to have act
Florentino could not have acquired the subject property
from his
parentsSaraza
because
Porfirio
notStates
dealing
with theatregistered
owner
of the propert
deceased on May 31, 1997 while Mamerta was in the were
United
of America
the time of
the alleged
land had yet
to be titledtoinascertain
the nametheofvalidity
mortgagor
sale; that Spouses Saraza did not conduct a credit investigation
on Florentino
of Flore
in estate
good faith
cannot
bevoid
extended
to ita mortga
his title and his authority to mortgage the subject lot;mortgagee
that the real
mortgage
was
because
title to the
property p
emanated from a falsified deed of absolute sale andagreement
void title; wherein
that the the
registration
of mortgaged
the real estate
and the
mortgagor hasbefore
no legal
mortgage, together with the special power of attorneyowner
and deed
of conveyances,
theauthority
Registeryet
of to mor
Deeds was procured through fraud; that it was only on June 28, 2004 that TCT No. 142989 was
cancelled and, in lieu thereof, TCT No. 145979 was issued in the name of Florentino; Jalbay,
and that Sr.
for vfailure
Philippine N
of mortgagor Florentino to redeem the subject property, it was consolidated in the name
of
Spouses
G.R. No. 177803, Aug
Saraza.
FACTS:
The subject property is a 257-square-meter lot at Del-N

Quezon City registered under the names of the Spous
Certificate of Title (TCT) covering said property was de
Register of Deeds was gutted by fire. Upon reconstitution
RULING:
Jalbay, married to Mamerta C. Jalbay, and because the S
NO. In Cavite Development Bank v. Lim, the Court explained
of
mortgagee
faith,
abroad, the doctrine
the
title
wasin good
released
to
thus:cralawlawlibrary
ISSUE:
Are the Spouses Saraza mortgagees in good faith.
P a g e | 159
Sometime in 1993, Virginia and her husband, Daniloauthentic

Agus ( and issued in the name of Emiliano Jalbay, he a
PNB, Ermita Branch, in order to acquire additional funds
saidfor
property.
their garments
Hence, business
there is no
operating
compelling
underreason
the to de
name of VJA Garments. As a security, the Spouses court.
Agus constituted a real estate mortgage over the
subject lot, which they represented as being owned by siblings Emiliano Jalbay, Jr., and Teresita JalbayCinco. The aforesaid borrowers, however, failed to settle their loan obligation.
Macaria Arguelles and the Heirs of the Deceased Pet
foreclosed the mortgage over the property. It likewise emerged as the highest bidder at the public
G.R. No. 200468, Mar
auction.
FACTS:
The late Fermina M. Guia was the registered owner of Lot

Subsequently, during a short vacation in the country, the
Spouses
learned
about
mortgage
and
4,560
squareJalbay
meters.
Fermina
M.the
Guia
sold the
south po
foreclosure of their property. Contending that the real
mortgage
andthethespouses
proceedings
forand
its Macari
1,350estate
square
meters to
Petronio
immediately
of Jalbay
the land,
the aDeed of
foreclosure were invalid for lack of consent of the real
registeredacquired
owners,possession
the Spouses
filed
of
Deeds
nor
annotated
on
the
Title.
At
the
same
time, Fer
complaint against PNB before the Quezon City RTC.
the consolidating
latter's wife Teresita
Guia to over
subdivide
the remaining
p
30800. They likewise sought to prevent the bank from
its ownership
the parcel
of
for the issuance of separate titles therefor, to wit: Lot 3-A,
land during the pendency of the case.
the delivery of the Transfer Certificate of Title (TCT) co
unregistered sale or the spouses Arguelles. However, d
ISSUE:
Arguelles claimed that they never received the TCT corres
Is PNB a mortgagee in good faith?
The spouses Guia obtained a loan in the amount of P24
Banlc and secured the loan with a Deed of Real Estate Mo
RULING:
wereentering
made pursuant
the Special
Power of At
YES. PNB exerted the necessary diligence in grantingMortgage
the loan and
into the to
assailed
real estate
owner of Lot 3-C, Fermina M. Guia, in favor of the m
mortgage. Not only did it require Emiliano, Jr., Cinco, and the Spouses Agus to submit their biodata,
Estate Mortgage and Special Power of Attorney wer
duly accomplished loan application and the TCT covering
the mortgaged lot, it likewise caused the
encumbrances.
subject property to be inspected and appraised, and conducted a thorough credit investigation on the
persons
of
the Arguelles alleged that it borrowers.
The spouses
was only in 1997
unregistered sale that they discovered from the Register o
thereafter,
spouses
Arguelles
registered
their
adverse cl
True, banks, in handling real estate transactions, are required
to the
exert
a higher
degree of
diligence,
care,
C.
and prudence than individuals. Unlike private individuals,
it is expected to exercise greater care and
prudence in its dealings, including those involving registered
ISSUE:lands.
Whether or not the respondent Malarayat Rura
exercise due diligence before entering into a mortgage
contract.
entitled
to protection on its mortgage lien.
despite the fact that the mortgagor is not the owner of the mortgaged property, his title being fraudulent,
RULING:
the mortgage contract and any foreclosure sale arising
therefrom are given effect by reason of public
NO.
The
Court held
that
cases where
the mortgagee
do
policy. This is the doctrine of "the mortgagee in good faith,"
wherein
buyers
or in
mortgagees
dealing
with
property,
the to
lawgorequires
a higher
degree
property covered by a Torrens Certificate of Title areof
noreal
longer
required
beyondthat
what
appears
on of pr
While one who buys from the registered owner does not n
the face of the title. However, the rule that persons dealing with registered lands can rely solely on the
who buys from one who is not the registered owner is ex
certificate of title is not applicable to banks. Thus, before
approving
a loan
application,necessary
it is a standard
title but
all factual
circumstances
for one to dete
operating practice for these institutions to conduct transferor,
an ocular or
inspection
of
the
property
offered
forAlthoug
in the capacity to transfer the land.
mortgage and to verify the veracity of the title to determine
its real owners.
only a mortgage,
the same rule applies inasmuch as the
necessary to protect the true owner of the property as "purchaser.
well as innocent third parties with a right, interest
Thus,
the mortgagor
is notofthe
registered owner of
or claim thereon from a usurper who may have acquiredwhere
a fraudulent
certificate
title.
of the same, it is incumbent upon the mortgagee to exercis
in dealing with such mortgagor.
Here, the Court finds that PNB has complied with the required degree of diligence, prudence, and care
in dealing with the mortgagor. There was also no Based
sign oroncircumstance
could processed
have possibly
the evidence,which
Land Bank
Maniego's l
triggered suspicion on the banks part. Aside from theNo.
factP-12026,
that the certificate
of
title
to
the
subject
lot
is
which was still under the name of Poblete.
L
P a g e | 160
previously used Poblete's title as collateral in its loan account with Land Bank. When the person
Upon
fullreal
payment
of the
purchase
pricesuch
for Lot
applying for the loan is other than the registered owner
of the
property
being
mortgaged,
fact20, Dul
Absolute
Sale
in
favor
of
spouses
Vilbar
and
their co-pu
should have already raised a red flag and which should have induced the Bank to make inquiries into
and delivered the owners duplicate copy of the Title cove
and confirm the authority to mortgage. A person who deliberately ignores a significant fact that could
the property. However, spouses Vilbar and Elena were no
create suspicion in an otherwise reasonable person is not
an innocent
for value.
names
because purchaser
Dulos Realty
allegedly failed to have the lo
to do so, until its President, Juan B. Dulos (Juan), died wit
Homeowners Savings and Loan Bank v. Asuncion Felonia, et.al.

Spouses Vilbar and Dulos Realty also executed a Con
G.R. No. 189477, February 26, 2014
P128,880.00. To pay for the balance of the purchase pr
FACTS:
obtained a housing loan from the Development Bank of t
Felonia and De Guzman were the registered owners mortgage
of a parcelover
of land.
Felonia
and De
Guzman
then the app
the said
lot. Dulos
Realty
facilitated
mortgaged the property to Delgado to secure the loan immediately
in the amountpaid
of P1,655,000.00.
However,
instead
to it as full payment
of the
purchase pr
of a real estate mortgage, the parties executed a Deed cancelled.
of Absolute Sale with an Option to Repurchase. A
year later, Felonia and De Guzman filed an action for Reformation of Contract. Inspite of the pendency
of the Reformation case in which she was the defendant,
DelgadoOpinion
filed a claimed
petition that
for the
of a Lots
In contrast,
he issuance
legally acquired
new title under Delgados name. After the new title was
issued
and
the
title
registered
in
the
names
of mortgage constituted over the said propertiesofby Otili
Felonia and De Guzman, was canceled, Delgado mortgaged
subject
Homeowners
(Gorospes) the
in his
favor.property
Opinion to
alleged
that the Gorosp
Savings and Loan Bank (HSLB) using her newly registered
title.
HSLB
then
caused
the
annotation
loan, executed a Deed of Real Estate MortgageofLots 20
the mortgage.
Opinion to file a Petition for Extra-Judicial Foreclosure
subject properties were sold at a public auction where
ISSUE: Whether or not HSLB was a purchaser in good
faith.
Certificate
of Sale was issued in his favor on and subsequ
The Gorospes failed to redeem the properties within the
RULING:
cancellation of their titles.
NO. A purchaser in good faith is defined as one who buys a property without notice that some other
person has a right to, or interest in, the property and ISSUE:
pays fullWho
and between
fair pricethe
at parties
the time
ofapurchase
or over Lo
has
better right
before he has notice of the claim or interest of other persons in the property. Although it is a recognized
principle that a person dealing on a registered land need
not go beyond its certificate of title, it is also a
RULING:
firmly settled rule that where there are circumstances OPINION.
which wouldThe
put Court
a partyconsidered
on guard and
prompt
Opinion
as him
a purchase
to investigate or inspect the property being sold to him.
prior to the execution of the mortgage, he only went to Lo
had occupants. He likewise admitted that he never tal
In the case at bar, HSLB utterly failed to take the necessary
precautions.
At the
time possession
the subject property
determine
the nature
of their
of the propertie
was mortgaged, there was yet no annotated NoticeGorospe,
of Lis Sr.
Pendens.
However,
at
the
time
HSLB He ne
that the occupants were mere tenants.
documentary
or otherwise,
thisIndeed,
claim. at
purchased the subject property, the Notice of Lis Pendens
was already
annotatedtoonconfirm
the title.
the time HSLB bought the subject property, HSLB had actual knowledge of the annotated Notice of Lis
The Courtwith
decided
Opinion
did not the
needlegal
to go beyo
Pendens. Instead of heeding the same, HSLB continued
the that
purchase
knowing
duty of ensuring that the Gorospes had clean title ove
repercussions a notice of lis pendens entails. HSLB took upon itself the risk that the Notice of Lis
investigation. He had, in this regard, no reason not to beli
Pendens leads to
that the claimed right of Spouses Vilbar was never annota
because it is settled that a party dealing with a registere

Certificate of Title in determining the true owner thereof,
Spouses Bernadette and Rodulfo
Angelito
allVibar
that hev.has
to lookOpinion
into and rely on are the entries in the
G.R. No. 176043, January 15, 2014
FACTS:
Inarguably, Opinion acted in good faith in dealing with the
Spouses Vilbar claimed that they and Dulos Realtyonand
(Dulos
the Development
titles presentedCorporation
to him, which
were Realty),
confirmed by th
entered into a Contract to Sell involving a 108-squareaccordance
meter lot designated
as Lot
forany
P19,440.00.
with the law,
and 20-B
without
liens or encumbr
Lot 20-A which was also covered and embraced by the same certificate of title is the subject of another
Contract to Sell between Elena Guingon (Elena) and Furthermore,
Dulos Realty.the
Sometime
in August that
1979,
spouses
Court enunciated
there
isa situation
Vilbar took possession of Lot 20-B in the concept ofnot
owners
and
exercised
acts
of
ownership
thereon
the owner of the mortgaged property, his title bein
with the permission of Dulos Realty after making some
advance payment.
foreclosure
sale arising therefrom are given effect by reaso
P a g e | 161
mortgagee in good faith based on the rule that all persons

Consequently,
dealing with
in case
property
of non-payment
covered by
ofathe
Torrens
secured debt
Certificate of Title, as buyers or mortgagees, are not required
the hypothecated
to go beyond
property
whatbut
appears
all its accessions
on the faceand
of access
the title. The public interest in upholding the indefeasibility of a certificate of title, as evidence of the
lawful ownership of the land or of any encumbranceThat
thereon,
a mortgage
protects
constituted
a buyer or
on mortgagee
a sugar central
who,includes
in
no
good faith, relied upon what appears on the face of thebuildings,
certificatemachinery,
of title. and accessories installed at the tim
buildings, machinery and accessories belonging to the mor
Respondent Opinion was proven to be in good faith when
However,
he dealt
the rule
with isthe
notGorospes
without and
qualifications.
relied on the
The Cour
the
presumption
that
the
ownership
of
accessions
titles presented to him. Spouses Vilbar, on the other hand, failed to present substantial evidence to prove and acc
owner of the principal. After all, it is an indispensable req
otherwise.
mortgagor be the absolute owner of the encumbered prope
improvements
subsequently
introduced or owned by t
Philippine National Bank v. Spouses All
Bernard
and Cresencia
Maranon
deemed
to form part of the mortgage. That the improv
G.R. No. 189316,are
June
1, 2013
only
if
so
owned
by the mortgagor is a rule that can ha
FACTS:
whether,mortgaged
real or personal,
needs
as an and
indispensable
elem
A 152-square meter parcel of land was among the properties
by Spouses
Rodolfo
Emilie
mortgagor
of
the
property
pledged
or
mortgaged.
Montealegre (Spouses Montealegre) to PNB as a security for a loan. In their transactions with PNB,
Spouses Montealegre used Transfer Certificate of Title (TCT) No. T-156512 over the subject lot
Otherwise
stated, absent an adverse claimant or any e
purportedly registered in the name of Emilie Montealegre
(Emilie).
accessions accruing or attached to the mortgaged proper
thusinitiated
also be foreclosure
foreclosed together
with on
thethe
principal
When Spouses Montealegre failed to pay the loan,may
PNB
proceedings
secured.
mortgaged properties, including the subject lot. In the auction sale held, PNB emerged as the highest
any evidence
sufficientlyregistered.
overthrowing
the
bidder. It was issued the corresponding CertificateCorollary,
of Sale which
was subsequently
A
mortgaged
property
precludes
the
application
of
Artic
Complaint was filed which alleged that Spouses Maraon are the true registered owners of the subject
irrelevant and inapplicable to mortgages and their result
lot.
found or declared to be not the true owner of the property,
ISSUE: Whether or not PNB was a mortgagor in good faith.

The Court stated that the foreclosure proceedings caused
found on the subject lot and the rent it yields. PNBs lien
RULING:
subject
lot alone
because
that improvements
sh
YES. It is readily apparent from the facts at hand that
the status
of PNBs
lienthe
onrule
the subject
lot has
Article
2127
of
the
Civil
Code
did
not
apply
under
the
pre
already been settled by the RTC in its Decision dated June 2, 2006 where it was adjudged as a
foreclosed,
remained
a property
of finality
Spouseswhen
Maraon; it
mortgagee in good faith whose lien shall subsist and be
respected.itThe
decision
lapsed into
excluded
from
any
consolidation
of
title
made
by PNB ov
neither of the parties moved for its reconsideration or appealed.
rent paid by Tolete had no basis.
The protection afforded to PNB as a mortgagee in good faith refers to the right to have its mortgage lien
mustissued
be remembered
there is technically
no juridica
carried over and annotated on the new certificate ofIttitle
to Spousesthat
Maraon.
The principle,
to the subject
lot because
its mortgagor
wa
however, is not the singular rule that governs realbinds
estatePNB
mortgages
and foreclosures
attended
by
mortgagee in good faith principle, the law allows PNB to
fraudulent transfers to the mortgagor.
such principle so as to create a juridical tie between PNB
Rent, as an accessory follow the principal. In fact,lotwhen
theclear
principal
property evidence
is mortgaged,
thethat no
despite
and undeniable
showing
mortgage shall include all natural or civil fruits and improvements found thereon when the secured
obligation becomes due as provided in Article 2127 of the Civil Code.
Philippine Banking Corporation v. Artu
Art. 2127. The mortgage extends to the natural accessions, to the improvements, growing
fruits,
and the Novem
G.R.
No. 183774,
rents or income not yet received when the obligation FACTS:
becomes due, and to the amount of the indemnity
granted or owing to the proprietor from the insurers
of the
mortgaged,
virtue of
Cipriana
wasproperty
the registered
owner or
of ain58,129-square
met
expropriation for public use, with the declarations, amplifications
and
limitations
established
by law,
her husband, respondent Jose Delgado (Jose),
entered in
whether the estate remains in the possession of the (buyer)
mortgagor,
or itsale
passes
hands for
of aa third
for the
of theinto
saidthe
property
consideration
person.
shall make partial payments from time to time and pay
Delgado) are ready to execute the deed of sale and transfer
P a g e | 162
FORECLOSU
At the time of sale, the buyer was already occupying a portion of the property where she operates a
noodle (bihon) factory while the rest was occupied by tenants which Sps. Delgado undertook to clear
LZKand
Holdings
prior to full payment. After paying the total sum of P147,000.00
being and
thenDevelopment
ready to payCorporatio
the
G.R. No.
balance, the buyer demanded the execution of the deed, which was refused. Eventually,
the187973,
buyer Janua
learned of the sale of the property to the Dys and FACTS:
its subsequent mortgage to petitioner Philippine
Banking Corporation (Philbank), prompting the filingLZK
of the
Complaint
for annulment
of certificate
Holdings
obtained
a P40, 000,000.00
loanof
from Pla
title, specific performance and/or reconveyance with
damages
against
Sps.
Delgado,
the
Dys
and
Estate Mortgage over its lot located in La Union. The lot m
Philbank.
a Transfer Certificate of Title.
ISSUE: Whether or not Philbank was a mortgagee in good

faith.
The lot
was sold at a public auction after Planters Ba
mortgage thereon due to LZK Holdings' failure to pay it
RULING:
bidder during the auction sale and its certificate of sale wa
YES. Philbank's mortgage rights over the subject properties shall be maintained. While it is settled that a
simulated deed of sale is null and void and therefore,LZK
does Holdings
not convey
anybefore
right that
couldof
ripen
into City,
a
filed
the RTC
Makati
Bra
valid title, it has been equally ruled that, for reasons ofjudicial
public foreclosure,
policy, the subsequent
of title note
mortgage nullification
contract, promissory
to a property is not a ground to annul the contractual right
which may
been derived
by a purchaser,
the issuance
of have
a temporary
restraining
order (TRO) or
mortgagee or other transferee who acted in good faith.consolidation of title over the lot by Planters Bank.
The doctrine of "mortgagee in good faith" is based on

the (3)
ruledays
that before
all persons
dealing with
property
Three
the expiration
of LZK
Holdings'
covered by a Torrens Certificate of Title are not required
to
go
beyond
what
appears
on
the
face
of
the
TRO effective for 20 days enjoining Planters Bank from
title. This is in deference to the public interest in upholding
indefeasibility
of a certificate
as
April 3,the2000,
the RTC-Makati
ordered of
thetitle
issuance
of a
evidence of lawful ownership of the land or of any encumbrance
thereon.
In
the
case
of
banks
and
other
purpose.
financial institutions, however, greater care and due diligence are required since they are imbued with
public interest, failing which renders the mortgagees
in bad
faith. or
Thus,
before
approving
a loan
ISSUE:
Whether
not the
issuance
of the Writ
of Possess
application, it is a standard operating practice for theseRULING:
institutions to conduct an ocular inspection of the
property offered for mortgage and to verify the genuineness
the of
titlepossession
to determine
realofowner(s)
YES. Aofwrit
is athe
writ
execution emp
thereof. The apparent purpose of an ocular inspectionpossession
is to protect
the
"true
owner"
of
the
property
of land. It commands the sheriff to as
enter the
well as innocent third parties with a right, interest entitled
or claimunder
thereon
a usurper
who
have
the from
judgment.
It may
be may
issued
in case o
acquired a fraudulent certificate of title thereto.
mortgage under Section 7 of Act No. 3135, as amended by
In this case, while Philbank failed to exercise greater

care said
in conducting
thebe issue
Under
provision, the ocular
writ of inspection
possessionof
may
properties offered for mortgage, its omission did not within
prejudice
innocent
third parties.
In upon
particular,
the any
one-year
redemption
period
the filing of
the buyer did not pursue her cause and abandoned her
claim
on
the
property.
On
the
other
hand,
Sps.
period, without need of a bond.
Delgado were parties to the simulated sale in favor of the Dys which was intended to mislead Philbank
into granting the loan application. Thus, no amount ofThe
diligence
thetrial
conduct
ocular
inspection
duty ofinthe
courtoftothe
grant
a writ
of possession i
could have led to the discovery of the complicity between
the
ostensible
mortgagors
(the
Dys)
and
course upon the filing of the proper motion and the
the approv
true owners (Sps. Delgado). In fine, Philbank can hardly
under
the premises
since
left be
to deemed
the trial negligent
court. Any
question
regarding
the regula
the ultimate cause of the mortgagors' (the Dys') defective
title
was
the
simulated
sale
to
which
Sps.
consequent cancellation of the writ, is to be determined
Delgado were privies.
Section 8 of Act No. 3135. Such question cannot be raise
proceeding is ex parte. The recourse is available even be
Indeed, a finding of negligence must always be contextualized
in law
lineand
withthe
theRules
attendant
circumstances
provided by
of Court.
of a particular case. As aptly held by the Court, the diligence with which the law requires the individual
or a corporation at all times to govern a particular conduct
varies the
with
the ministerial
nature of the
situationthein Court h
To emphasize
writ's
character,
which one is placed, and the importance of the act which
is
to
be
performed."
Thus,
without
diminishing
prohibit its issuance, just as it has held that issuance of the
the time-honored principle that nothing short of extraordinary
diligence
is required
of banks whose
for annulment
of mortgage
or the foreclosure
itself.
business is impressed with public interest, Philbank's inconsequential oversight should not and cannot
serve as a bastion for fraud and deceit.
Planters Bank, as the purchaser in the foreclosure sale, m
redemption period. In fact, it did apply for a writ on De
P a g e | 163
period. The San Fernando RTC, given its ministerial duty

moretothan
issuefour
the writ,
hundred
therefore,
pesos, should
such notice
have acted
shall also b
on the ex parte petition. The injunction order is of noconsecutive
moment because
weeks itinshould
a newspaper
be understood
of general
to circulation
have
in
merely stayed the consolidation of title. As previously stated, an injunction is not allowed to prohibit the
issuance of a writ of possession. Neither does the The
pending
Act only
caserequires
for annulment
the following:
of foreclosure sale,
mortgage contract, promissory notes and damages stay(1)
thethe
issuance
postingofofsaid
notices
writ.of sale in three public places, and
(2) The publication of the same in a newspaper of general
Lastly, the trial on the merits has not even started. Until the foreclosure sale of the property in question
Personalisnotice
mortgagor
notthe
necessary.
is annulled by a court of competent jurisdiction, petitioner
berefttoofthe
valid
title andis of
right to Neverth
notBank.
precluded
additional
prevent the issuance of a writ of possession to Planters
Until from
then, exacting
it is the trial
court'srequirements.
ministerial
function to grant the possessory writ to Planters Bank.
In this case, petitioner and respondent in entering into a c
correspondence relative to this mortgage, including d
notifications
of any judicial or extra-judicial action shall be
Jose Ramirez v. The Manila
Banking Corporation
G.R. No. 198800, December 11, 2013
FACTS:
Philippines
Bank ofBanking
Communicati
Petitioner Jose T. Ramirez mortgaged two parcels of land in favor of respondent
The Manila
G.R.
No.
179691,
Corporation to secure his P265,000 loan. The real estate mortgage provided that all correspondence Decem
relative to the mortgage including notifications of FACTS:
extrajudicial actions shall be sent to petitioner
In order toNsecure
loan of P1,650,000.00
Mary Ann O. Y
Ramirez at his given address as provided for under Paragraph
of theaDeed
Mortgage. Respondent
Le
Tio
Yeung,
executed
a
Real
Estate
Mortgage
over a pro
filed a request for extrajudicial foreclosure of real estate mortgage before Atty. Hipolito Saez on the
property was
covered
by Transfer
Certificate
of Title
ground that Ramirez failed to pay his loan despite demands.
During
the auction
sale on
September
8, (TCT
name.
The
parties
agreed
to
increase
the
amount
1994, respondent was the only bidder for the mortgaged properties. Thereafter, a certificate of sale was of the
Amended Real Estate Mortgage. After the respondent defa
issued in its favor as the highest bidder.
a petition for extrajudicial foreclosure of the mortgage, pur
In 2000, respondent demanded that Ramirez vacate the properties.
The mortgaged property was consequently foreclosed
P2,594,750.00
to the petitioner
which
emerged
as the hi
Ramirez sued respondent for annulment of sale and prayed
that the certificate
of sale be
annulled
on the
was mortgage
issued by was
the sheriff
registered with
ground, among others, that paragraph N of the real estate
violatedand
forthe
he sale
was was
not notified
failed
to
redeem
the
mortgage
within
the
one year redem
of the foreclosure and auction sale.
ownership over the property, resulting to the cancellation
TCT No. T-362374
in its name. The petitioner filed with th
In its answer, respondent claimed that the foreclosure proceedings
were valid.
a writ of possession which was granted.
ISSUE: What is the legal effect of violating paragraph N of the deed of mortgage which requires
ISSUE: Whether orbank?
not the issuance of the Writ of Possess
personal notice to the petitioner-mortgagor by the respondent-mortgagee
RULING:
RULING:
YES. The in
Court
stated that
it has consistently
held that
Unless the parties stipulate, personal notice to the mortgagor
extrajudicial
foreclosure
proceedings
property
even
during
the
redemption
period
for
as long a
is not necessary because Section 3 of Act No. 3135 only requires the posting of the notice of sale in
post
a bond in accordance
SectionIn7 this
of Act
No. 3135,
three public places and the publication of that notice in
a newspaper
of general with
circulation.
case,
the parties stipulated in paragraph N of the real estate mortgage that all correspondence relative to the
Upon
filing
of the
andRamirez
the approval
the bond, th
mortgage including notifications of extrajudicial actions
shall
be sent
to motion
mortgagor
at hisofgiven
issue
the
order
for
a
writ
of
possession.
When
address. Respondent had no choice but to comply with this contractual provision it has entered into withthe rede
property
has agree
been with
consolidated
theparagraph
purchasers
Ramirez. The contract is the law between them. Hence,
we cannot
the bankinthat
N name,
matter
of
right.
The
writ
of
possession
shall
be
issued
as a
of the real estate mortgage does not impose an additional obligation upon it to provide personal notice of
approval of a bond after consolidation of ownership and t
the extrajudicial foreclosure sale to the mortgagor Ramirez.
purchaser. The duty of the trial court to grant a writ of po
and the court may not exercise discretion or judgment:
Section 3, Act No. 3135 reads:
"Sec. 3. Notice shall be given by posting notices of the sale for not less than twenty days in at least three
Consequently,
the purchaser,
whoproperty
has a right
to possession
public places of the municipality or city where the property
is situated,
and if such
is worth
P a g e | 164
becomes the absolute owner of the property when no redemption is made. In this regard, the bond is no
longer needed. The purchaser can demand possession
RULING:
at any time following the consolidation of
ownership in his name and the issuance to him ofNO.
a new
While
TCT.
indeed
After
noconsolidation
evidence was of
presented
title in by
theappellan
purchasers name for failure of the mortgagor to redeem
properties
the property,
was conducted
the purchasers
by it before
right tosubmitting
possessionthe bid p
ripens into the absolute right of a confirmed owner. At
amount
that point,
approximates
the issuance
the loan
of avalue
writ of
under
possession,
its original appr
upon proper application and proof of title becomes merely a ministerial function. Effectively, the court
cannot exercise its discretion.
There should be no dispute that mere inadequacy of price
property. Nevertheless, where the inadequacy of the price
It was not disputed that the respondent failed to exercise
the mind
her right
revolts
of redemption
at it and such
within
that one
a reasonable
year fromman wo
consent
to
it,
the
sale
shall
be
declared
null
and void. Sai
the time of the registration of the sale. There was also no question that the propertys title had already
extrajudicial
foreclosure
sales so that
been transferred to the petitioner. As the actual owner case
of theofproperty,
it was
not only necessary,
but when
also a supp
bank-mortgagee for the mortgaged properties at the public
just, to allow the petitioner to take possession of the property it owns. It is illogical if the person already
readily set aside on account of such low purchase price. I
owning the property will be barred from possessingofit,price
in the
absence
of compelling
andgives
legitimate
is not
material
"when the law
the owner th
reasons to deny him possession.
public auction, upon the theory that the lesser the price
redemption." In fact, the property may be sold for less than
Spouses Francisco and Merced Rabat

v. Philippine
Here,
it may be National
that after Bank
the lapse of seven (7) years,
G.R. No. 158755,appreciated
June 18, 2012
in value but under the general rule cited ab
FACTS:
extrajudicial foreclosure sales. We are not inclined to inva
Spouses Francisco and Merced Rabat applied for a properties
loan with PNB.
RABATs
wereof purch
solely Subsequently,
on the alleged the
gross
inadequacy
granted a medium-term loan of P4.0 Million to maturealmost
three years
from
the
date
of
implementation.
The
the equivalent of the loan value of appellees
twe
Rabats signed a Credit Agreement and executed a RealEstate
EstateMortgage"
Mortgage over
twelvein(12)
parcels
land PNB
executed
favor
of of
appellant
which stipulated that the loan would be subject to disadvantage
interest at theis suffered
rate of 17%
annum, plus
by theper
mortgagor
as he the
stands to g
appropriate service charge and penalty charge of 3% per
any amountThus,
remaining
unpaid or not
the annum
right ofonredemption.
the re-appraisal
of the m
renewed when due. The Rabats executed another document
as "Amendmentthe
to original
the Credit
PNBs denominated
bid price of approximately
loan valu
Agreement" purposely to increase the interest rate from
17%
21% per
annum, inclusive
rather
thantoharmful
considering
the rightof
of service
redemption gr
charge and a penalty charge of 3% per annum to be financial
imposed hardship
on any amount
remaining
or losses
in their unpaid
businessorisnot
not an ex
renewed when due. They also executed another Realclear
Estate
Mortgage
over
nine
(9)
parcels
of
land
as
obligation to the bank-mortgagee.
additional security for their medium-term loan of Four Million (P4.0 M). These parcels of land were
agricultural, commercial and residential lots.
Further, the fact that the mortgaged property is sold at an a
not militate against the right of appellant PNB to the recov
The several availments of the loan accommodation onappellees.
various dates
the Rabats
reached
the aggregate
Our by
Supreme
Court
had ruled
in several cases
amount of THREE MILLION FIVE HUNDRED SEVENTEEN THOUSAND THREE HUNDRED
the proceeds
are were
insufficient
pay the d
EIGHTY (P3,517,380), as evidenced by the severalwhere
promissory
notes, of
allthe
of sale
which
due onto14
deficiency
from
theIndebtor.
A in
claim
of deficiency
March 1983. They failed to pay their outstanding balance
on due
date.
its letter
response
to the arisi
allowed.
appellees
claim proposal
of allegedly
p
letter of the Rabats requesting for more time within
whichAs
to toarrive
at a viable
for excessive
the
settlement of their account, PNB informed the Rabats
that
their
request
has
been
denied
and
gave
the
merit. The Court noted that the promissory notes expre
Rabats until 30 August 1986 to settle their account. annum to be imposed on any unpaid amount on due date.
For failure of the Rabats to pay their obligation, the PNB filed a petition for the extrajudicial foreclosure
of the real estate mortgage executed. After due notice andAntonio
publication,
mortgaged
of land
Dela the
Pena
and Alvinparcels
Dela Pena
v. Gemma
were sold at a public auction. PNB was the lone and highest bidder with a bid of P3,874,800.00.
As the Febru
G.R. No. 187490,
proceeds of the public auction were not enough to satisfy
the entire obligation, PNB sent anew two (2)
FACTS:
demand letters. Upon failure of the Rabats to comply
with
the demand
to settle
their
remaining
The suit
concerns
a 277 square
meter
parcel
of residential
outstanding obligation which then stood at P14,745,398.25,
including
interest,
penalties
and other
registered in the name of petitioner Antonia
R. Dela Pe
charges, PNB eventually filed a case against them. Pea" (Antegono). Antonia obtained from A.C. Aguila
P250,000.00 which, pursuant to the Promissory Note the
ISSUE: Whether or not the Trial Court erred in nullifying
theon
Sherifs
Auction
on with
the Ground
payable
or before
7 JulySale
1996,
interest that
pegged at 5
PNBs Winning Bid was very low.
P a g e | 165
also executed in favor of Aguila a notarized Deed ofNine

RealHundred
Estate Mortgage
Thousandover
Pesos
the (P20,950,000.00).
property, for the In sup
purpose of securing the payment of said loan obligation.
notes
The
were
deedpresented
provided,during
in part,
thethat
course
"(t)his
of contract
the trial of the
is for a period of Three (3) months from the date of this
Reyes
instrument".
executed Real Estate Mortgage Agreements involvi
debt became due and demandable, the defendant failed
Antonia executed a notarized Deed of Absolute Sale constrained
over the property
to foreclose
in favor
the of
properties.
respondent
As Gemma
alleged, after d
Remilyn C. Avila (Gemma), for the stated consideration
sold at public
of P600,000.00.
auction on December
Utilizing the
20, 2001
document,
by the Office
Gemma caused the cancellation of the Titles naming her
the as
Regional
the owner
TrialofCourt
the subject
of Malolos,
realty.Bulacan.
Gemma also
constituted a real estate mortgage over said parcel in favor of respondent Far East Bank and Trust
Company, to secure a loan facility with a credit limit
Atof
theP1,200,000.00.
public auction,Gemma
the mortgaged
obtainedproperties
the six (6)
were awa
loans from Visayas Avenue Branch of the FEBTC-BPI,price
in the
amounting
aggregatetosum
Nine
of Million
P1,200,000.00.
Thirty Two Thousand N
said date, the obligation already reached Thirty Million, Fo
Antonia filed with the Register of Deeds of Marikina an
Pesos
Affidavit
and Sixty
of Adverse
Seven Claim
Centavos
to the
(P30,420,041.67),
effect, among inclu
others, that she was the true and lawful owner of the property
publication
which
andhad
other
been
charges.
titled inAfter
the name
applying
of and,
the proce
that the Deed of Absolute Sale Gemma utilized inobligation,
procuringthere
her title
remains
was tosimulated.
be a deficiency
In viewand
of defenda
Gemmas failure to pay the principal as well as the accumulated
2003, to the interest
plaintiffand
in the
penalties
amounton
ofthe
P24,545,094.67.
loans she
obtained, on the other hand, FEBTC-BPI caused the extrajudicial foreclosure of the real estate mortgage
constituted over the property. As the highest bidder ISSUE:
at the public
Whether
auction
or not
conducted
petitioner
in the
is premises,
entitled to reco
FEBTC-BPI later consolidated its ownership over the respondent
realty and caused
despitethe
thesame
fact that
to be
respondents
titled in its property,
name
whi
under TCT No. 415392 of the Marikina registry.
in-interest at P47,536,000.00, was sold and later bought by
ISSUE: Whether or not FEBTC-BPI was a mortgageefor
or only
purchaser
P9,032,960.00
in bad faith.
in order to satisfy respondents ou
time of the sale, amounted to P30,420,041.67 inclusiv
RULING:
publication and other charges.
NO. Since foreclosure of the mortgage is but the necessary consequence of non-payment of the
mortgage debt, FEBTC-BPI was, likewise, acting wellRULING:
within its rights as mortgagee when it foreclosed
the real estate mortgage on the property upon Gemmas
YES.failure
The creditor
to pay is
thenotloans
precluded
secured
from
thereby.
recovering
The any un
mortgage predated Antonias filing of an Affidavit of
extrajudicial
Adverse Claim
foreclosure
with the
saleRegister
of the property
of Deeds
subject
of of the
Marikina and the annotation of a Notice of Lis Pendens.
is settled
The mortgage
that if the
directly
proceeds
and of
immediately
the sale aresubjects
insufficient to
the property upon which it is imposed, whoever the possessor
of mortgage,
may be,
the to
mortgagee
the fulfilment
is entitled
of thetoobligation
claim the deficie
for whose security it was constituted. When the principal
amended,
obligation
doesisnot
notdiscuss
paid when
the due,
mortgagees
the mortgagee
right to recov
consequently has the right to foreclose the mortgage, sell
provision
the property,
expressly
andorapply
impliedly
the proceeds
prohibiting
of the
recovery.
sale
If th
to the satisfaction of the unpaid loan.
the right to sue for any deficiency resulting from the fo
obligation, the law would expressly so provide. Absent su
The resolution of this case cannot be affected by the principles
the creditor
that
is banks
not precluded
like FEBTC-BPI
from taking
areaction
expected
to recover
simply
because
he
chose
to
extrajudicially
foreclose
to exercise more care and prudence than private individuals in that their dealings because their business the re
is impressed with public interest and their standard practice is to conduct an ocular inspection of the
Furthermore, it was also ruled that, in deference to the r
property offered to be mortgaged and verify the genuineness of the title to determine the real owner or
cannot be considered payment of an outstanding obligatio
owners thereof, hence, the inapplicability of the general
that a mortgagee
notthe
look
beyond the
therule
deficiency
even if it need
bought
mortgaged
property a
title does not apply to them. The validity of the Deedprice
of Absolute
executed
Antonia in favor
than itsSale
market
value by
notwithstanding
theoffact that
Gemma having been upheld, FEBTC-BPIs supposedamount
failure of
to the
ascertain
theobligation.
ownership of the property
debtors
has been rendered immaterial for the purpose of determining the validity of the mortgage executed in its
Hence,
it is wrong for petitioners to conclude that wh
favor as well as the subsequent extrajudicial foreclosure
thereof.
foreclosed properties at a very low price, the latter effectiv
whole obligation. Petitioners still had the option of eith
Bank of the Philippine Islands, as Successor-in-Interest
of same
Far East
Trustcorresponds
Company to what the
selling the
for aBank
price &
which
v. Cynthia Reyes
or by simply selling their right to redeem for a price whi
G.R. No. 182769, February 1, 2012
supposed market value of the said properties and the price
FACTS:
case,
able to of
recoup
the Million
loss they claim
Defendant Reyes borrowed, renewed and received from
Farpetitioners
East Bankwill
thebe
principal
Twenty
price obtained at the auction sale and, thus, enable them t
P a g e | 166
Moreover, petitioners are not justified in concluding that

RULING:
they should be considered as having paid their
as a the
rule,mortgaged
once the property
a debtor
obligations in full since respondent bank was the oneNO.
whoWhile
acquired
propertiesofand
that is fore
court
to place bank,
the GFI
control of
the price it paid was very inadequate. The fact thatthe
it is
respondent
as in
thepossession
mortgagee,and
which
occupied
a party
otheris than
judgment
the
eventually acquired the mortgaged properties and that
the bid by
price
was low
not athe
valid
reason debtor,
for
determine the nature of the said adverse posse
petitioners to refuse to pay the remaining balance hearing
of theirtoobligation.
party, not privy to the debtor, is protected by law and
mortgage is simply a security and not a satisfactionthird
of indebtedness.
has been given an opportunity to be heart. In other words
possession in favor of a purchaser in an extrajudicial for
CARLOS LIM, CONSOLACION LIM, EDMUNDO
LIM,
CARLITO
LIM,party
SHIRLEY
appears
that
there is a third
who is DIZON
in possession of t
and ARLEEN LIM v. DEVELOPMENT BANK OF THE PHILIPPINES
that of the debtor/mortgagor.
G.R. 177050 01 July 2013
FACTS:
Petitioners obtained a loan from DBP (Lim Account) secured
by several
real
estates to finance their
GOLDEN
WAY
MERCHANDISING
CORPOR
cattle raising business. Due to violent confrontations between the governement troopsG.R.
and 195540.
Muslim 13 Mar
rebels, petitioners were forced to abandon their cattle
ranch which resulted to the collapse of their
FACTS:
business and eventually to the failure to pay the loan. DBP sent letters to the petitioners advising them to
In 1985, petitioner executed a real estate mortgage with
settle their obligations to prevent foreclosure of the mortgage. Thereafter, petitioners had received notice
respondent extrajudicially foreclosed the mortgage in D
from the sheriff of the auction sale. Despite tender of partial payment to DBP, the sale has pushed
respondent as highest bidder. Certificate of sale was issu
through, DBP emerged as the highest bidder. A case for annulment of foreclosure sale was filed by
registered on February 2001. On March 2001, petitione
petitioners.
contending that the right of redemption is no longer a
registered. An action for specific performance was filed b
ISSUE: Whether or not the foreclosure was valid
the one-year redemption period under Act 3135 should gov
period under RA 8791 (General Banking Law).
RULING:
NO. While DBP had right to foreclose the mortgage, the sale should be nullified due to its failure to
ISSUE: What period should be applied?
send notice of the foreclosure sale to the petitioners. Personal notice to the mortgagor in extrajudicial
foreclosure is not necessary unless the parties stipulate
RULING:
personal notice to mortgagor in the event of foreclosure
The sale
period
but under
no notice
RA of
8791
the sale
should
wasbegiven.
applied.
The The Ge
persons,
such
as
the
petitioner,
of
the
right
to
redeem the
letters DBP gave to petitioners advising them to immediately pay their obligation to avoid impending
time for
the exercise
of agreement
such right requires
by reducing
foreclosure are NOT the notices required in their mortgage
agreement.
Their
DBPthe
to one-yea
The new redemption period commences from the date of
send the notice of foreclosure sale to the petitioners and not an advisory. The failure of DBP to comply
of the certificate of sale or three months after foreclosure,
with the contractual agreement to send notice is a breach sufficient to invalidate the sale.
The difference in the treatment of juridical persons and n

properties
foreclosed
these are used as resi
ROYAL SAVINGS BANK (now
GSIS Bank)
v. ASIAetwhether
al.
G.R. 183658. 10redemption
April 2013.period is retained, or used for industrial or c
term is deemed necessary to reduce the period of uncerta
FACTS:
mortgagee-banks
disposeofsooner
of these
acquired
Salita contracted a loan secured by a parcel of land with
the petitioner. to
Because
the failure
to pay
the asset
loan, petitioner foreclosed the mortgage under Act 3135 and it was the highest bidder. Salita failed to
redeem the property and as such title over the land were issued in petitioner's name. Petitioner filed for
Philippines
In
an ex-parte issuance of writ of possession, which was granted. The other respondents Maybank
herein claimed
to
G.R.
No. 2130
have been in open, continuous, exclusive and notorious possession in the concept of owners of the
land
in question for 40 years and claimed that they have noFACTS:
notice of any proceeding involving the land until
they received a Notice to Vacate by the Sheriff. The RTC quashed the writ of possession. Hence, this
The spouses Tarrosa secured a loan from the then PNB-Re
petition.
ISSUE: Whether or not the petitioner, as a government
financial
institution
can estate
be enjoined
fromover a
P91,
000.00,
secured (GFI),
by a real
mortgage
foreclosing on its delinquent accounts.
paying the loan, the spouses obtained another loan (P60
P a g e | 167
1984. This second loan the spouses failed to pay upon

time
maturity.
the right
In of
April,
action
1998,
accrues,
the spouses
i.e., when
received
the mortgagor
a
d
Final Demand Letter for payment of the amount of P564,579.91,

mortgagee; for
otherwise,
the second
it will
loan,
be which
barredthe
by spouses
prescription an
failed to pay, hence the bank foreclosed the property.

mortgage.
The property
However,
wasmere
eventually
delinquency
sold in payment
a public does no
auction, where Philmay Property, Inc emerged as the To

highest
be in bidder,
default and
is different
a corresponding
from mereCertificate
delay in the
of gramm
Sale issued. In September, 1998, the spouses filed a complaint
of a special
forcondition
declaration
or of
status
nullity
which
andhas
invalidity
its ownofpeculiar
the foreclosure of real estate and of public auction sale proceedings and damages with prayer for
In Villanueva,
order that the
may be of
in Deeds
default,ofit San
is necessar
preliminary injunction against Maybank, PPI, Sheriff
anddebtor
the Registry
already
liquidated;
the debtor
delays
performance; a
Carlos City, Negros Occidental before the RTC. They
contended
that the(b)second
load was
unsecured;
judicially and
or extrajudicially,
unless
demand isonnot
that Maybank unjustifiably refused to accept their payments;
the banks right
to foreclose
thenecessar
thatbank
effect;
where otherwise,
the law soand
provides;
the perio
property had prescribed or is barred by prescription. The
contented
assertedwhen
that the
inducement
for the creation
of the of
obligation;
and where
spouses acknowledgement and admission of their indebtedness
controverted
the defense
prescription.
sufficient that the law or obligation fixes a date for perform

After trial, the RTC ruled that indeed, the second loan
the period
was a secured
lapses, default
loan, subject
will commence.
to the continuing
Thus, it is only
security provision in the real estate mortgage. However,

the aforementioned
Maybanks rightcircumstances,
to foreclose, reckoned
or when required,
from
suc
March 11, 1984, had already prescribed consideringthat

thethelack
mortgagor
of any can
timely
be considered
judicial action,
in default
written
and the m
extrajudicial demand or written acknowledgment bycollect
the debtor
the debt
oforhis
foreclose
debt that
thecould
mortgage.
interrupt the
prescriptive period. It declared the foreclosure proceedings null and void and ordered the bank to pay the
In the present case, both the CA and the RTC reckoned
spouses moral and exemplary damages.
foreclose the real estate mortgage over the subject property
The CA, on appeal, affirmed the RTC judgment. It held

11, that
1984.
theThe
prescriptive
CA further
period
heldshould
that demand
be reckoned
was unneces
from March 11, 1984 when the second loan had become
light of
past
paragraph
due and 5remained
of the realunpaid
estate since
mortgage,
demand
which pert
was not a condition sine qua non for the accrual of the latters right to foreclose under paragraph 5 of the
the event
that theofMortgagor
herein
should fai
real estate mortgage. It observed that Maybank failed1.toInpresent
evidence
any timely
written
secured
by this
anyeffectively
part thereof, in ac
extrajudicial demand or written acknowledgment by the debtors
of their
debtmortgage,
that couldor
have
set forth,
or should
he/it
fail to perform any of the
interrupted the running of the prescriptive period. The bank went
up to the
Supreme
Court.
such case, the Mortgagee shall have the right, at its

ISSUE:
Whether or not the banks right to forceclose on the property had prescribed.
However, this provision merely articulated Maybanks r
RULING:
failure or refusal to comply with the obligation secured,
The petition is meritorious.
mortgagees in a similar situation. In no way did it affect
the need of prior demand under Article 1169[8] of the Ci
(a)enforced
that demand
shall
necessary
in order th
An action to enforce a right arising from a mortgage declare:
should be
within
tennot
(10)beyears
from the
P a g e | 168
interest surcharge was imposed, they stopped paying the m

default shall commence upon mere failure to pay on the maturity date of the loan. Hence, the CA erred
their business and high interest rate which overburdened th
in construing the above provision as one through which
the parties had dispensed with demand as a
foreclosure.
condition sine qua non for the accrual of Maybanks right to foreclose the real estate mortgage over the
The defendants evidence shows that no payment was mad
subject property, and thereby, mistakenly reckoned such right from the maturity date of the loan on
300,000.00. Only the monthly interest of 2.5% of the princ
March 11, 1984. In the absence of showing that demand
is from
unnecessary
for the
regularly
August 1992
untilloan
Juneobligation
1993. Thetointerest p
and October,
were
paid late
and after
no paym
become due and demandable, Maybanks right to foreclose
the real1993
estate
mortgage
accrued
onlythat
after
November 1993 until the property was foreclosed. Whe
the lapse of the period indicated in its final demand letter for Sps. Tarrosa to pay, i.e., after the lapse of
monthly interest, Emilia de la Cruz, certified public acc
five (5) days from receipt of the final demand letter defendants
dated March
4, advised
1998. Consequently,
boththe
theservices
CA
who
the latter to hire
of c
They sent
letter
of demand
addressed
and the RTC committed reversible error in declaringmortgage.
that Maybanks
righta to
foreclose
the real
estate to plai
and interest due. Despite the receipt of the said letter of de
mortgage had already prescribed.
to the defendants, hence, a petition for foreclosure was file
City Regional Trial Court which prayed that in view of
plaintiffs
in the
(principal and u
Thus, considering that the existence of the loan had been
admitted,
theamount
defaultof
onP3,
the579,100.00
part of the debtorsforeclosed at a public auction.
mortgagors had been duly established, and the foreclosure proceedings had been initiated within the
prescriptive period as afore-discussed, the Court findsThe

no Trial
reason
to nullify
extrajudicial
foreclosureand held
Court
Ruled the
in favor
of the respondents
favor of the mortgagee the subject property was valid. This
sale of the subject property.
ISSUE:
Whether or not the extrajudicial sale without the requisite
Baysa v. Plantilla
G.R. No. 159271
RULING:
FACTS:
NO. In the extrajudicial foreclosure of property subject of
On August 4, 1992, plaintiffs-spouses (Benito and Victoria
Baysa)theexecuted
estateUnder
mortgage
in Pow
to Regulate
Sale ofa real
Property
Special
favor of the defendants-spouses Fidel R. Plantilla Mortgages)
and SusanisPlantilla
whereby
plaintiffs-spouses
quite explicit
and definite
about the special
mortgaged their parcel of land in Cubao, Quezon Cityeither
to secure
the
payment
of
their
indebtedness
in the Sect
inserted in or attached to the deed of mortgage.
principal sum of P2,300,000.00 and accruing interest at the legal rate thereon and payable according to
the terms of the Mortgage Note. The Mortgage Note
signed1.byWhen
both aparties
the terms
of powe
Section
sale iscontaining
made under
a special
payment and interest rate was also executed on August
4, 1992.
It was expressly
agreed upon
both of mo
mortgage
hereafter
made as security
for thebypayment
parties in the mortgage note that the interest on the
of P2,300,000.00
wassection
2.5% shall
per month
the loan
provisions
of the following
govern as to
(P57,500.00) or a monthly rate equal to 7 percentage
points
above
the
prime
rate
of
the
Standard
shall be effected, whether or not provision for the same is m
Chartered Bank of Makati on the fifth working day before the interest is due. The improvements existing
on the land in question are a house, shop and warehouse. This parcel
of land to
including
the extrajudicial
improvementsforeclosu
Accordingly,
enable the
is worth P15 million. The interest at the rate of P57,500.00
September
1992been
up to
Mayinserted
1993 were
power from
to sell
should have
either
in the REM
regularly paid.
attached to the REM. But it is not disputed that no special
or attached to the REM. Hence, the respondent spouses as

They suffered business reverses and difficulty in collection
so they foreclosure,
became irregular
in the
monthly
the extrajudicial
but must
resort
to judicial for
payment of the agreed interest and for late payment they
were
charged
8%
interest
per
month,
the
Rule 68 of the Rules of Court. The omissionsame
of the spec
is reflected in the statement of account dated Marchmortgage
31, 1994 was
for P3,
053,772.00
in
the
statement
of of the
fatal to the validity and efficacy
account as of May 6, 1994 and in the statement of overdue
account
21, 1994.
When 8%
invalidation
of thedated
entireApril
proceedings
conducted
by the she
P a g e | 169
day and UCPB had it registered in February 1999. Title ov

The CA opined that the extrajudicial foreclosure was
nonetheless
valid despite
thewithin
omission
of the
of UCPB
after failure
to redeem
the redemption
pe
theciting
foreclosure
sale.
its pendency,
UCPB filed
special power to sell. It upheld the ruling of the RTC by
paragraph
13 During
of the REM,
which stated:
possession. Although possession of the property were t
to temporarily
remain
on the
for huma
In the event of non-payment of the entire principalallowed
and accrued
interest due
under
the property
conditions
injunction to prevent the implementation of the writ which
described in this paragraph, the mortgagors expressly and specifically agree to the extra-judicial
foreclosure of the mortgaged property.
ISSUE: Should the writ of possession be enjoined?
It held to be enough that the REM thereby empowered

the respondent spouses as the mortgagees to
RULING:
NO.
The onebyyear
redemption(as
period
should be reckon
extrajudicially foreclose the property inasmuch as such
agreement
the petitioners
the mortgagors)
Register
the redemption
period
expires witho
carried with it by necessary implication the grant of the
powerof
to Deeds.
sell theIfproperty
at the public
auction.
It relied on the ruling in Centeno v. Court of Appeals over the same consolidates in the purchaser. The consol
entitled to the possession of the property without any ne
issuance
of a agreed
writ of possession
to the
purchaser
becomes
Based on the text of paragraph 13, the petitioners
evidently
only to the
holding
of the
his name, while
mortgagor,
failing
to redeem, loses
extrajudicial foreclosure should they default in their obligations.
Their the
agreement
wasby
a mere
expression
the certificate
of sale
was registered
onnot
February
of their amenability to extrajudicial foreclosure as thethat
means
of foreclosing
the mortgage,
and did
reckoned
from
such
date.
Because
of
the
non-redemption
constitute the special power or authority to sell the mortgaged property to enable the mortgagees to
overthe
thespecial
property
in itsorname.
Thus,
of the petitio
recover the unpaid obligations. What was necessary was
power
authority
to the
selldenial
whether
inserted in the REM itself, or annexed thereto that authorized the respondent spouses to sell in the
public auction their mortgaged property.
DEVELOPMENT BANK OF THE PHILIPPINES v
G.R. 174329. 20 Octo
The requirement for the special power or authority
to
sell
finds
support
in
the
civil
law. To begin
FACTS:
with, because the sale of the property by virtue of theEnvironmental
extrajudicial foreclosure
would
be
made
through and M
Aquatics (EA) and Land Services
the sheriff by the respondent spouses as the mortgagees
as thefor
agents
of the
petitioners
as theits land t
DBP.acting
As security
the load,
LSME
mortgaged
mortgagors-owners, there must be a written authority
from for
theextrajudicial
latter in favor
of the former
applied
foreclosure
of the as
realtheir
estate mort
highest
bidder. Before
the lapse
of the 1878,
redemption
agents; otherwise, the sale would be void. And, secondly,
considering
that, pursuant
to Article
(5), perio
property
to
Matute.
DBP
said
that
Matute
could
redeem th
of the Civil Code, a special power of attorney was necessary for entering into any contract by which the
the loan. EA
and gratuitously
LSME and Matuute
a complaint pra
ownership of an immovable is transmitted or acquired
either
or for filed
a valuable
to redeem.
consideration, the written authority must be a special power of attorney to sell.
ISSUE: Should the redemption by Matute be allowed?

Contrary to the CAs opinion, therefore, the power or authority to sell by virtue of the extrajudicial
foreclosure of the REM could not be necessarily RULING:
implied from the text of paragraph 13, supra,
NO.foreclosure.
Under EO 81, the redemption price for properties
expressing the petitioners agreement to the extrajudicial
equivalent to the remaining balance of the loan, with inter
upon in the obligation from said date, unless the bidder ha
unless this had been delivered to him, in which case, the
interest. When DBP applied for extrajudicial foreclosure, i
REDEMPTION
Such action on the part of DBP should not be construed
demand the payment of the respondents' entrire obligation.
3135v.isSPOUSES
the generalLUMBO.
law that governs procedure and re
UNITED COCONUT PLANTERSAct
BANK
estate mortgage
G.R. 162757. 11 December
2013. but in determing the redemption pric
FACTS:
necessarily, the DBP chapter shall prevail.
Respondents entered into a loan agreement with UCPB, which they secured by executing a real estate
mortgage. For failure to settle their obligation, UCPB applied for an extrajudicial foreclosure of
mortgage and emerged as highest bidder on January 1999. The certificate of sale was isssued the same
P a g e | 170
CONCURENCE & PREFERE
PHILIPPINE DEPOSIT INSURANCE CORPOR

REVENUE
G.R. No. 172892, Jun
FACTS:
In Resolution No. 1056 dated October 26, 1994, the Mone
(BSP) prohibited the Rural Bank of Tuba (Benguet), Inc. (
placed it under receivership in accordance with Section 30
ANTICHRESIS
Philippine Deposit Insurance Corporation (PDIC) as r
evaluation of RBTIs financial condition and determine
Monetary Board issued Resolution No. 675 directing PD
ANICETO BANGIS et al v. HEIRS OF SERAFIN and SALUD ADOLFO
Accordingly and pursuant to Section 30 of the New C
GR 190875. 13assistance
June 2012
in the liquidation of RBTI which was approved.
FACTS:
of Internal Revenue (BIR) intervened as one of the c
The Adolfo's were the original registered owners of aproceedings
parcel of land
mortgaged until
to thePDIC
DBPhas
which
was a tax c
be suspended
secured
foreclosed upon their default in the payment of the obligation.
Serafin
repurchased
the samewith
afterrespect
his to th
PDIC moved
for partial
reconsideration
argued
that
Section
52(C)
of
the
Tax
Code
of
1997 does
wife died. Thereafter, Serafin allegedly mortgaged the property to Aniceto who immediately took
liquidation
closed When
banks is
governed
possession of the land but the transaction was never reduced
intoofwriting.
Serafin
died,by
hisSection
heirs 30 of
denied.
executed a Deed of Extrajudicial Partition over the property and thereafter expressed their intention to
ISSUE: Whether or not liquidation of closed banks is gov
redeem the mortgaged property from Aniceto but the latter refused, claiming that the transaction
Act?
between them was oneof sale.
RULING: YES. The position of the BIR, insisting o
ISSUE: Whether the transaction between the parties was
one of sale
not a mortgage
or antichresis
requirement
as and
a condition
for the approval
of the projec
liquidation, is contrary to both the letter and intent of the
law expressly provides that debts and liabilities of the
There was neither antichresis nor sale.
the rules
concurrence
and preference
For antichresis, 2134 of the NCC requires that the accordance
amount of with
principal
and on
interest
be specified
in
and fees due the Government enjoy priority only when t
writing, otherwise, it shall be void. In the case, the Heirs of Adolfo were unable to produce any
property, under Article 2241(1) of the Civil Code, or imm
document in support of their claim of antichresis.
same Code. However, with reference to the other real an
The basis of the claim of the Heirs of Bangis is thereferred
bare testimony
of property,"
one them (heirs)
and
theassessments
only
to as "free
the taxes
and
d
document presented to prove their claim was a photocopy
of the Extra-Judicial
Settlement
with
Absolute
in Articles
2241(1) and 2242(1)
of the
Civil
Code, such a
ninth place in the order of preference. On the other hand,
Sale, in violation of the best evidence rule.
secured first before the project of distribution of the assets
then the tax liabilities will be given absolute preference i
under Articles 2241(1) and 2242(1) of the Civil Code. In o
as proof that the taxpayer had completely paid off his tax
and pay first all tax liabilities and deficiencies of the ban
the pertinent provisions of the Civil Code. Following th
project of distribution of the banks assets be approved an
even though under Article 2244 of the Civil Code such deb
P a g e | 171
assessments due the National Government. The BIR effectively wants

SPOUSES
this Court
BAUTISTA
to ignore Section
v. SPOUSES
30 of JALAN
the New Central Bank Act and disregard Article 2244 of the Civil Code. However, as a courtGR
of law,
171464.
this 24 Jul
Court has the solemn duty to apply the law. It cannotFACTS:
and will not give its imprimatur to a violation of
the laws.
The Jalandoni were registered owners of 2 parcels of land
security, they offered these lots. It was discovered that the
issued in the name of the Bautistas. So the Jalandoni fi
AGENCY
Bautistas claim that Nasino offered to them the 2 parcels
money.
CONCEPT
ISSUE:Who has better right?

RULING: The Jalandonis have a better right. The dispu
FORM
because the law provides a written authority when the
otherwise, the sale is void. In the case, Nasino had no writ
Bare allegations, unsubstantiated by evidence is not equiva
SPOUSES FERNANDO and LOURDES VILLORIA
v. CONTINENTAL
AIRLINES
considered
buyers in good
faith because they have failed
GR 188288. 16 January
2012..
authority, which is tantamount to bad faith. The Bautistas
constituted a mortgage over the parcels of land. Further
FACTS:
title over the parcels of land. Whatever rights Manila Cr
cannot prevail
must
yield to
the superior
The Villoria's purchased airline tickets on board Continental
Airlinesover,
(CAI)butfrom
a travel
agency
called rights
right
that
the
transferor
has.
Holiday Travel and was attended to by a certain Margaret. The Villorias agreed to buy the tickets only
after Margaret informed them that there were no available seats at Amtrak, a passenger train. Thereafter,
the Villoria's requested that their flight be rescheduled to an earlier date but Margaret informed them that
the flights via CIA were already fully booked and offered an alternative flight via Frontier Age. Since
the Frontier Air called for a higher fare, the Villoriasopted to request for a refund. Margaret, however,
YOSHIZAKI
v. JOY
TRAININ
denied his request as the subject tickets are non-refundable and the SALLY
only option
CAI can offer
is reGRinquired
174978. 31 Jul
issuance of new tickets. Fernando reserved 2 seats with Frontier Air. Afterwards, the Villorias
FACTS:
about the Amtrak and found that there are seats available. From Amtrak, Fernando went to Holiday and
confronted Margaret with the Amtrak ticket, telling her
thatJohnsons
she misled
into buying
the CAI
The
arethem
members
of the Board
oftickets
Trustees of Jo
by misrepresenting that Amtrak was already fully booked.
Upon
returning
to latter
the Philippines,
Villoria
personal
properties
of the
in favor of Sally.
Joy Train
demanded refund from CAI which it denied but he may
the subject
for the re-issuance
of new
ontake
the ground
that ticket
the Johnsons
did not possess
the requisi
tickets as these may be used as form of payment forthe
another
purchase
of CAI ticket.
Villoria the
hadsale.
the The RT
minority
of its members
had approved
subject tickets replaced by a single round trip to Los
Angeles,
California. CAI informed him that he
Hence,
the petition.
needed to pay additional because the subject tickets are
insufficient
the cost
the ticket.
Then,
ISSUE:
Wheretoorcover
not there
wasofa valid
sale by
the Johnso
he again filed a claim for refund. RTC allowed the refund
as CAI's agent, Margaret, acted in bad faith.
RULING:
The CA held otherwise because the spouses were not
ableAstoa prove
existence
of principal-agency
NO.
rule, athe
contract
of agency
may be oral. Howev
relationship.
specific form. The NCC provides that the contract of agen
ISSUE: Does a principal-agent relationship exist betweenn
CAI and
Holiday
Travel?
of a piece
of land
or any
interest therein; otherwise, the
RULING: YES. The elements of an agency are:
necessary to convey real rights over immovable properties
a. There is consent, express or implied of the parties toexpressly
establish mentions
the relationship
a sale or that includes a sale as a nece
b. The object is the execution of juridical act in relation
a third
person
it to
must
express
the powers of the agent in a clear and unm
c. The agent acts as a representative and not for himself
the authority, no construction should be given in the docum
d. The agent acts within its authority.
In the case, Sally was able to present 3 documentary evide
the Johnsons to sell. (a) TCT over the parcel of land, (b)
In the case, the (a) and (b) are present because CAI concluded
an agreement
with
Holiday that
the latter
upon examination,
these
documents
merely
state that t
would enter into contracts of carriage with third persons
on CAI's
behalf. the
Thesale
thirdofelement
is also
expressly
authorizing
the land
and buildin
present because Holiday merely acted in representation
of CAI andbecause
that there
hadwere
beenpresented
no allegation
thattrial wer
inadmissible
what
during
Holiday exceeded its authority. Thus, Holiday is deemed
to be
agent
of CAI.
Thus,
thean
sale
is unenforceable
having been made without
P a g e | 172
purchase price and pay the remaining balance in eight (8) m

the down payment, the TCT of the subject property would
Bank (IE Bank) and placed in escrow. It would only be rele
Alcantara v. Nido
amount. Furthermore, Benjamin was required to submit a s
618 SCRA 333
sale transaction, otherwise, the payment of the balance wo
FACTS:
P150,000.00 every month would be imposed.
Revelen, who is respondents daughter and of legal age, is the owner of an unregistered land with an
area of 1,939 square meters located in Cardona, Rizal. Sometime in March 1984, respondent accepted
Pursuant thereto, an Escrow Agreement, dated October 13,
the offer of petitioners to purchase a 200-square meter portion of Revelens lot (lot) at P200 per square
the Escrow Agent, obliging the latter to hold and take custo
meter. Petitioners paid P3,000 as downpayment and the balance was payable on installment. Petitioners
title to NICORP upon full payment of the subject property.
constructed their houses in 1985. In 1986, with respondents consent, petitioners occupied an additional
150 square meters of the lot. By 1987, petitioners had already paid P17,500 before petitioners defaulted
On October 14, 2004, NICORP issued a check in the amou
on their installment payments.
payment of the subject property.7 Thereafter, the TCT was
On 11 May 1994, respondent, acting as administrator and attorney-in-fact of Revelen, filed a complaint
for recovery of possession with damages and prayer for preliminary injunction against petitioners with
When petitioner discovered the sale, her lawyer immediate
the RTC.
Benjamin, both dated October 27, 2004, and to IE pank, da
ISSUE: whether the contract entered into by the respondent as an agent is void?
she was opposing the sale of the subject property and that
RULING: the contract is void as provided in Article 1874 of the Civil Code explicitly requires a written
enter into a contract to sell and demanding the return of the
authority before an agent can sell an immovable property. Based on a review of the records, there is
true and lawful attorney-in-fact, Manujel B. Flores, Jr. (Flo
absolutely no proof of respondents written authority to sell the lot to petitioners. In fact, during the prehowever, failed and refused to return the title of the subjec
trial conference, petitioners admitted that at the time of the negotiation for the sale of the lot, petitioners
were of the belief that respondent was the owner of lot. Petitioners only knew that Revelen was the
Consequently, petitioner filed a complaint before the RTC
owner of the lot during the hearing of this case. Consequently, the sale of the lot by respondent who did
declaration of nullity of the contract to sell, injunction, rec
not have a written authority from Revelen is void. A void contract produces no effect either against or in
for the issuance of a temporary restraining order and/or pre
favor of anyone and cannot be ratified.
starting the development of the subject property into a resi
the lots to prospective buyers. Petitioner denied receiving t
ISSUE: Whether Benjamin was authorized to sell the sub
the sale was void because under Art. 1878. Spe
SPECIAL POWER RULING:
OF ATTORNEY
following cases: xxx 5) To enter into any contract by whic
transmitted or acquired either gratuitously or for a valuable
Bautista-Spille v. Nicorp Management and Development Corp
is necessary to enter into any contract by which the own
G.R. No. 214057, Oct. 19, 2015
acquired either gratuitously or for a valuable considera
FACTS:
enableof
anland
appointee
of an agency (couched) in general term
Petitioner Bautista-Spille is the registered owner of a parcel
.
a sale or that includes a sale as a necessary ingredient of th
right executed
upon an agent
to sell real
estate, a power
of attorn
On June 20, 1996, petitioner and her spouse, Harold E.the
Spille,
a document
denominated
as
clear and Benjamin
unmistakable
language.
When there is any reas
General Power of Attorney4 in favor of her brother, respondent
Bautista
(
conveys
such in
power,
no such construction
authorizing the latter to administer all her businesses and
properties
the Philippines.
The said shall be given
document was notarized before the Consulate General of the Philippines, New York, United States of
In the case at bar nowhere in the General Power of Attorn
America.
impliedly, any power to sell the subject property or a portio
General
of Attorney
was couched
in very broad term
On August 13, 2004, Benjamin and NICORP Management
andPower
Development
Corporation
(
properties.
entered into a contract to sell which pertained to the parcel
of land for the agreed amount of
P15,000,000.00. In the said contract, NICORP agreed to give a down payment equivalent to 20% of the
P a g e | 173
Altamiranos. In 1994, Reman renewed Nena's option t

Alejandro, who introduced himself as the representatives o
V-Gent, Inc. v. Morning Star
Travelupon
and to
Tours,
Inc.,
agreed
which
Reman had made partial paymen
G.R. No. 186305,Alejandro
July 22, 2015
kept on avoided him. Because of this, Reman de
FACTS:
the execution of Deed of Absolute Sale. Thereafter, a com
annotation
lispendens
onbought
the titletwenty-six
over the property.
Pen
Sometime in June and in September 1998, the petitioner
V-Gent,ofInc.
(V-Gent)
(26)
Reman
discovered
that the
has Tours,
been sold
two-way plane tickets (Manila-Europe-Manila) from the
respondent
Morning
Starproperty
Travel and
Inc.to the Sp
ISSUE:
Can
the
verbal
contract
of
sale
between
Alejand
(Morning Star).
and Recio be held valid pursuant to apparent authority of
On June 24, 1998 and September 28, 1998, V-Gent returned a total of fifteen (15) unused tickets worth
RULING:
$8,747.50 to the defendant. Of the 15, Morning Star
refunded
onlyprovides
six (6) that
tickets
worth
NO.
The NCC
there
must$3,445.62.
be a written auth
Morning Star refused to refund the remaining nine (9)there
unused
repeateditdemands.
is atickets
noticedespite
of lispendens,
does not negate the fact
On December 15, 2000, petitioner V-Gent filed a money
claim
against
Morningagency,
Star forwhether
payment
of general
the
dealing
with
an assumed
it be
or
hold the
to ascertain
not only the fact of
unrefunded $5,301.88 plus attorney's fees. The complaint
wasprincipal
raffled toliable,
Branch
2 of the Metropolitan
authority,
and in case either is controverted, the burden
Trial Court (MeTC) of Manila and docketed as Civil Case
No. 169296-CV.
words,
when
the petitioner
relied
only
on the
Morning Star countered that V-Gent was not entitled to a refund because
the tickets
were
bought
on words
the of A
Reman is bound by the risk accompanying such trust on th
airline company's "buy one, take one" promo. It alleged that there were only fourteen (14) unused tickets
Apparent authority based on estoppel can arise from the
and only seven (7) of these were refundable; considering
that it out
hadwith
already
refunded
six (6)
hold himself
authority
and from
thetickets
principal who
(which is more or less 50o/o of 14), then there was nothing
else
to
refund.
would lead a reasonably prudent person to believe tha
Morning Star also questioned V-Gent's personality to
file the ofsuit.
asserted
passengers,
authority
an It
agent
arisesthat
onlythefrom
acts or in
conducts
conduct of the principal must have been known and reli
whose names the tickets were issued, are the real parties-in-interest.
exercise
of reasonable
prudence
by a of
third
personofas claim
On January 27, 2006, after due proceedings, the MeTC
dismissed
the complaint
for lack
a cause
positionthe
to its
detriment.
In that,
the case,
the sale
the Spou
action. Citing Rule 3, Section 3 of the Rules of Court,
MeTC
declared
as agent
of tothe
thus, he (Reman) cannot rely upon these acts or conduct to
passengers who paid for the tickets, V-Gent stood to
as negotiate.
the real party-in-interest. Nevertheless, it still
dismissed the complaint because V-Gent failed to prove its claim by a preponderance of evidence.
ISSUE: whether V-gent has acted as an agent of the passengers to have an standing to refund the said
Third party dealing w
ticket?
RULING:
V-Gent is not the real party in interest because it failed to prove the following elements concur: (1) the
Bankers
Insurance Corp v
agent acted in his own name during the transaction; (2) the agent acted forCountry
the benefit
of an undisclosed
, June 18
principal; and (3) the transaction did not involve the property of the principal. In the present GR
case,No.
only
FACTS:
the first element is present; the purchase order and the receipt were in the name of V-Gent. However,
On January
27, the
1992,
Unimarine
the remaining elements are absent because: (1) V-Gent
disclosed
names
of the Shipping
passengersLines,
to Inc.
Morning Star - in fact the tickets were in their names;
and industry,
(2) the transaction
was services
paid using
the
shipping
contracted the
of Keppel
Ceb
passengers' money. Therefore, Rule 3, Section 3 of theworks
Ruleson
of its
Court
cannot
vessel,
the apply.
M/V Pacific Fortune
On February 14, 1992, Cebu Shipyard issued Bill No.
services, which amounted to P4,486,052.00. Negotiations
the reduction of this amount to P3,850,000.00. The term
Shipyards February
18, 1992
letter to the President/Gener
REMAN RECIO v. HEIRS OF SPOUSES AGUEDO
and MARIA
ALTAMIRANO
GR 182349. 24compliance
July 2013. with the agreement, Unimarine, through Pau
FACTS:
Insurance Corp. (CBIC), through the latters agent, Bethov
NenaRecio (mother of Reman) leased from the Altamiranos
a parcel of land
with improvements,
Now, Respondent
is demanding
payment which
from Unima
the latter have inherited from their parents. Nena claimed
that
in
1988,
the
Altamiranos
offered
to
sell
Unimarines failure to heed Cebu Shipyards repeated
dem
the property to Nena, which the latter has accepted. the
Thesureties
acceptance
had
prompted
the
Altamiranos
to
CBIC on November 18, 1992, to inform them
waive the rentals over the property. However, the sale did not materialize due to the fault of the
to fulfill their obligations as sureties, and to respond wi
Altamiranos. Nonetheless, Nena continued to occupy and use the property with the consent of the
P a g e | 174
However, even the sureties failed to discharge their obligations, and so Cebu Shipyard filed a Complaint
dated January 8, 1993, before the RTC, Branch 18 of Cebu City, against Unimarine, CBIC.
Umipig
CBIC, in its Answer, said that Cebu Shipyards complaint states no cause of action. CBIC alleged
that v. Peo
677 SCRA 53 (2
the surety bond was issued by its agent, Quinain, in excess of his authority.
FACTS: Petitioners were charged with violation of Sectio
ISSUE: Whether or not CBIC(petitioner) is liable as a surety of Unimarine
Corrupt Practices Act because of the contract to sell enter
RULING: NO. In a contract of agency, a person, the agent, binds himself to represent another, the
authority to sell the parcels of land. Polytechnic (NMP
principal, with the latters consent or authority. Thus, agency is based on representation, where the agent
already vested in the name of the government, as man
acts for and in behalf of the principal on matters within the scope of the authority conferred upon him.
Accounting and Auditing Manual, Volume I, and despite t
Such acts have the same legal effect as if they were personally done by the principal. By this legal
GLENN B. SOLIS to sell the said lands not being the real
fiction of representation, the actual or legal absence of the principal is converted into his legal or
Special Power of Attorney allegedly issued by accused TE
juridical presence.
the non-acquisition of the land by the NMP, thus, ac
Our law mandates an agent to act within the scope of his authority. The scope of an agents authority is
performance of their official functions had given unwarr
what appears in the written terms of the power of attorney granted upon him. Under Article 1878(11) of
GLENN B. SOLIS and TERESITA JIMENEZ-TRINIDA
the Civil Code, a special power of attorney is necessary to obligate the principal as a guarantor or surety.
government particularly, the National Maritime Polytechni
In the case at bar, CBIC could be held liable even if Quinain exceeded the scope of his authority only if
Quinains act of issuing Surety Bond No. G (16) 29419 is
ISSUE: Whether Umipig and his companions are liable du
written terms of the power of attorney he was granted. However, contrary to what the RTC held, the
authority of the agents.
Special Power of Attorney accorded to Quinain clearly states the limits of his authority and particularly
RULING: Yes. The settled rule is that, persons dealing wi
provides that in case of surety bonds, it can only be issued in favor of the Department of Public Works
and if they would hold the principal liable, to ascertain not
and Highways, the National Power
and extent of authority. In this case, Palomo dealt with Sol
Corporation, and other government agencies; furthermore, the amount of the surety bond is limited to
attorney-in-fact of the registered owners, a certain Jimenez
P500,000.00.
abroad. At the very least, therefore, Palomo should have ex
Under Articles 1898 and 1910, an agents act, even if done beyond the scope of his authority, may bind
such fact of agency and sub-agency, knowing that he is dea
the principal if he ratifies them, whether expressly or tacitly. It must be stressed though that only the
owners themselves who are residents of a foreign country.
principal, and not the agent, can ratify the unauthorized acts, which the principal must have knowledge
letter-query sent by the OSG to Consul Bello to verify the
of. Ratification in agency is the adoption or confirmation by one person of an act performed on his
Solis, purportedly executed by the registered owners in fav
behalf by another without authority. The substance of the doctrine is confirmation after conduct,
another SPA in favor of Solis. This was the prudent course
amounting to a substitute for a prior authority. Ordinarily, the principal must have full knowledge at the
purchase transaction, Umipig had already noted legal infirm
time of ratification of all the material facts and circumstances relating to the unauthorized act of the
must also be stressed that at the time Palomo transacted ag
person who assumed to act as agent. Thus, if material facts were suppressed or unknown, there can
April 1996, the first purchase had not yet resulted in the tra
be no valid ratification and this regardless of the purpose or lack thereof in concealing such facts
1730-D which took place only later in the year 2000. As it
and regardless of the parties between whom the question of ratification may arise
presented by Solis was found to be fake. Palomo was indee
this principle does not apply if the principals ignorance of the material facts and circumstances was
authority of the alleged attorney-in-fact, Jimenez-Trinidad
willful, or that the principal chooses to act in ignorance of the facts. However,
Solis who was not directly authorized by the registered ow
circumstances putting a reasonably prudent man on inquiry, ratification cannot be implied as
against the principal who is ignorant of the facts
Neither Unimarine nor Cebu Shipyard was able to repudiate CBICs testimony that it was unaware of
the existence of Surety Bond No. G (16) 29419 and Endorsement No. 33152. There were no allegations
either that CBIC should have been put on alert with regard to Quinains business transactions done on its
behalf. It is clear, and undisputed therefore, that there can be no ratification in this case, whether express
Agent Acts in its own
or implied.
Bucton v. Rural Bank of
P a g e | 175
GR No. 179625, February

some of24,her
2014
properties entrusted to petitioner were produ
FACTS:
has collected and received all the fruits and income accr
Petitioner NicanoraBucton is the owner of a parcel of claims
land located
in Cagayan
Oro City.doAccording
that several
of thede
properties
not produce any fr
to petitioner, Erlinda Concepcion borrowed the title on
the
pretext
that
she
was
going
to
show
it to
an
supposed income derived from them is not
sufficient
to an
interested buyer. Instead, Concepcion obtained a loan
from
respondent
Rural
Bank
of
El
Salvador,
them.
Misamis Oriental, and mortgaged petitioners house and lot using an SPA allegedly executed by
Respondent claims that she made repeated verbal, and se
petitioner in favor of Concepcion. Concepcion failed to pay the loan. According to petitioner, her
theSheriff
latter Reynaldo
to render Cuyong
an accounting
to remit
house and lot were thereafter foreclosed by respondent
withoutand
a Notice
of the own
continued
to failhouse
and and
to refuse
to perform
Extra-Judicial Foreclosure or Notice of Auction Sale.
Petitioners
lot were
sold in her
an obligatio
auction sale in favor of respondent bank. Petitionerrevoked,
Bucton infiled
writing,
with all
thethe
RTC
powers
a complaint
and authority
for of adm
Annulment of Mortgage, Foreclosure, and Special Power
of
Attorney
(SPA)
against
Concepcion,
that she cannot return some of the properties to responden
respondent bank and Sheriff Cuyong. Respondent bank
filed a Third-Party
spousesshall belon
contracts
and that theComplaint
fruits fromagainst
the property
Concepcion and Agnes BuctonLugod (Lugod), the daughter of petitioner. Respondent bank claimed
agent of the respondent
that it would not have granted the loan and accepted the mortgage were it not for the assurance of
ISSUE:
Whether
or not
petitioner
in her content
Concepcion and Lugod that the SPA was valid. Petitioner
insisted
that her
signature
and is
hercorrect
husbands
signature on the SPA were forged and that ever since RULING:
she got married, she no longer used her maiden
NO. Even
lease agreements
name, NicanoraGabar, in signing documents. Petitioner
also though
denied the
appearing
before thecovering
notary those lots
public, who notarized the SPA. She also testified thatthetheadministration
property referred
to in
the SPA,
TCT No. attorne
of the
leases
to respondents
3838, is a vacant lot and that the house, which was
mortgaged
and
foreclosed,
is
covered
a
already revoked the authority of petitioner by
as administrato
different title, TCT No. 3839. The RTC issued a Decision
sustaining
the
claim
of
petitioner
that
the
administer the properties or to receive the income they gen
SPA was forged. It ruled that the respondent bank should have conducted a thorough inquiry on the
It is evident that the reason behind the failure of petitio
authenticity of the SPA considering that petitioners residence certificate was not indicated in the
What
important
is that
the former
acknowledgement of the SPA. The CA reversed theimmaterial.
findings of
the is
RTC.
The CA
declared
that fulfill h
transactions
she
entered
into
as
respondents
although the Promissory Note and the Real Estate Mortgage did not indicate that Concepcion was agent. P
the properties,
the letters
signing for and on behalf of her principal, petitioner isadministration
estopped fromof
denying
liability since
it wasshe
hersent to res
negligence in handing over her title to Concepcion thatofcaused
the loss. as respondents agent, to render an acc
her obligation,
ISSUE: Whether or not the act of Conception in signing
Estate these
Mortgage
indicating
and the
the Real
CA found
letterswithout
insufficient.
Petitioner wa
her principal will bind petitioner .
for 18 years or from 1979 to 1997, and four letters within 1
RULING:
to keep the principal informed and updated of the conditio
NO. In order to bind the principal by a deed executed by an agent, the deed must upon its face purport
There isIn
noother
doubtwords,
that petitioner is entitled to compensatio
to be made, signed and sealed in the name of the principal.
argues
that since
the expenses
for the
maintenance
of th
agent was authorized to mortgage the property is not
sufficient
to bind
the principal,
unless
the
generated,
then
whatever
is left of the income should
deed was executed and signed by the agent for and
on behalf
of his
principal.
Mortgage was entered into by Concepcion in her own
personal capacity.
In this case,
the authorized
contention
is not acceptable.
Considering
that neither of
agent failed to indicate in the mortgage that she wasproperties
acting forearned,
and on this
behalf
of
her
principal.
The with pe
Court cannot just agree
Real Estate Mortgage explicitly shows on its face, thatincome,
it was signed
byexpenses
Concepcion
her own
name should b
after the
haveinbeen
deducted,
and in her own personal capacity. In fact,there is nothing in the document to show that she was acting
repeatedly
claimed
all theincome
derived from these
or signing as an agent of petitioner. Thus, consistent
with the
law that
on agency
and established
theConcepcion.
expenses; thus, there is no remaining income left t
jurisprudence, petitioner cannot be bound by the acts of
agreed upon, and she failed to fix her own salary despite
applied the doctrine of quantum meruit.
Obligation The
of agent
doctrine of quantum meruit(as much as one deserv
equitable postulate that it is unjust for a person to retain be
principle, it should only be applied if no express contrac
Sazon v. Vasquez-Menancio
provision22,is 2012
applicable. Although petitioner was given the
GR No. 192085, February
failed to do so. Thus, she should at least be given what she
FACTS:
Respondent is a resident of the United States of America. Sometime in 1979, she entrusted the
management, administration, care and preservation of her properties to petitioner. Respondent avers that
Ace Navigation co., Inc. v. FG
P a g e | 176
674 SCRA 348 (2012)

Onshipped
Octoberon27,
1997,
Spouses
V. Prieto
FACTS: On July 19, 1990, Cardia Limited (CARDIA)
board
thethe
vessel
M/VMarcos
PakartiTiga
at (Mar
Bauang,
La
Union
a
complaint
against
Far
East
Shanghai Port China, 8,260 metric tons or 165,200 bags of Grey Portland Cement to be discharged at theBank an
Antonio
PrietoCorp.
(Antonio)
and Monette
to declare
Port of Manila and delivered to its consignee, Heindrich
Trading
(HEINDRICH).
ThePrieto
subject
contracts.
shipment was insured with respondents, FGU Insurance Corp. (FGU) and Pioneer Insurance and Surety
The plaintiffs narrated that in January 1996, they had ex
Corp. (PIONEER), against all risks under Marine money
Open Policy
No. 062890275
the amount
of prope
from FEBTC,
using as for
collateral
their real
P18,048,421.00.
Calumbaya, Bauang, La Union. Then Antonio, using
The subject vessel is owned by P.T. Pakarti Tata (PAKARTI)
which
it chartered
Shinwaa Kaiun
thereafter
obtained
from to
FEBTC
series Kaisha
of loans total
notes,
and
secured
by
separate
real
estate
mortgage
Ltd. (SHINWA). Representing itself as owner of the vessel, SHINWA entered into a charter party contr
theofloans,
leading
FEBTCCo.
to initiate
the extra-judicial
contract with Sky International, Inc. (SKY), an agent
KeeYeh
Maritime
(KEE YEH),
which fore
On
July
31,
2001
the
RTC
rendered
its
decision
dismissing
further chartered it to Regency Express Lines S.A. (REGENCY). Thus, it was REGENCY that directly
of plaintiff Marcos (as registered owner) did not appear
dealt with consignee HEINDRICH, and accordingly, issued Clean Bill of Lading No. SM-1.
could not be absolved of liability because he had no righ
On July 23, 1990, the vessel arrived at the Port of Manila
shipmentthat
wasthedischarged.
However, even if
agent and
had the
contracted;
mortgage contracts,
upon inspection of HEINDRICH and petitioner Ace
Navigation
(ACENAV),
agentbecause
of
be deemed
made Co.,
in hisInc.
behalf
as the principal
the
CARDIA, it was found that out of the 165,200 bagsthat
of even
cement,
43,905that
bagsAntonio
were inhad
badexceeded
order andhis autho
assuming
action
by executing
the letter offrom
acknowledgement
condition. Unable to collect the sustained damages in
the amount
of P1,423,454.60
the shipper, dated
under
the
premises.
CARDIA, and the charterer, REGENCY, the respondents, as co-insurers of the cargo, each paid the
ISSUE: Whether
or not Marcos
is liable for the unpaid loa
consignee, HEINDRICH, the amounts of P427,036.40
and P284,690.94,
respectively,
RULING: YES. Marcos could not deny that under the
consequently became subrogated to all the rights and causes
accruing
HEINDRICH.
grantedoftoaction
Antonio
as histoagent
the authority to borrow m
by way of mortgage to FEBTC; to sign, execute and d

ISSUE: whether the petitioner is liable in this case being
an agent.
proceeds
of the loans on the formers behalf. In other w
enforceable against petitioner, who was consequently fully
RULING:
Moreover, even if it was assumed that Antonios obtaining
No. petitioner is not liable.
On this score, Article 1868 of the Civil Code states: mortgage contracts also in his own name had exceeded his
still liable to FEBTC by virtue of his express ratification
ART. 1868. By the contract of agency, a person binds himself to render some service or to do something
Civil Code, the acts of an agent done beyond the scope of
in representation or on behalf of another, with the consent
or authority
of the
latter.
the latter
expressly
or impliedly
ratifies the same. In agen
Corollarily, Article 1897 of the same Code provides by
thatone
an agent
is
not
personally
liable
person of an act performed to
on the
hisparty
behalf by
with whom he contracts, unless he expressly binds himself
or exceeds
limits of hisafter
authority
without
ratification
is thethe
confirmation
the act,
amounting to
was such a ratification by Marcos, as borne out by his ex
giving such party sufficient notice of his powers.
September
As a that
lawyer,
Marcosexceeded
was fully awar
Both exceptions do not obtain in this case. Records are
bereft of12,1996.
any showing
ACENAV
wordof or
phrase, Neither
as well was
as of
the legal
effect
its authority in the discharge of its duties as a mere agent
CARDIA.
it alleged,
much
lessof his c
axiomatic that a mans act, conduct and declaration, where
proved, that ACENAV's limited obligation as agent of the shipper, CARDIA, was not known to
him.
HEINDRICH.
Ratification
FACTS:
Country Bankers Insurance Corp v

GR No. , June 18
FACTS:
Prieto v.On
CAJanuary 27, 1992, Unimarine Shipping Lines, Inc.
shipping
industry, contracted the services of Keppel Ceb
GR No. 158597, June
28, 2012
works on its vessel, the M/V Pacific Fortune
On February 14, 1992, Cebu Shipyard issued Bill No.
P a g e | 177
services, which amounted to P4,486,052.00. Negotiations

or implied.
between Cebu Shipyard and Unimarine led to
the reduction of this amount to P3,850,000.00. The terms of this agreement were embodied in Cebu
Shipyards February 18, 1992 letter to the President/General Manager of Unimarine, Paul Rodriguez. In
compliance with the agreement, Unimarine, through Paul Rodriguez, secured from Country Bankers
Insurance Corp. (CBIC), through the latters agent, BethovenQuinain (Quinain), CBIC Surety Bond
Now, Respondent is demanding payment from Unimarine. However, it failed to comply.QUASI-CONTR
Due to
Unimarines failure to heed Cebu Shipyards repeated demands, Cebu Shipyard, through counsel, wrote
the sureties CBIC on November 18, 1992, to inform them of Unimarines nonpayment, and to ask them
to fulfill their obligations as sureties, and to respond within seven days from receipt of theGonzalo
demand.v. Tarna
GR
No.
160600, Janua
However, even the sureties failed to discharge their obligations, and so Cebu Shipyard filed a Complaint
FACTS:
dated January 8, 1993, before the RTC, Branch 18 of Cebu
City, against Unimarine, CBIC.
After states
the Department
PublicCBIC
Works
and Highways
(
CBIC, in its Answer, said that Cebu Shipyards complaint
no cause ofofaction.
alleged
that
contract
for
the
improvement
of
the
Sadsadan-Maba-ay
Se
the surety bond was issued by its agent, Quinain, in excess of his authority.
the total
amount of 7 014 963 33 to his company,
ISSUE: Whether or not CBIC(petitioner) is liable as ainsurety
of Unimarine
Gonzalo
(Gonzalo)
subcontracted
to respondent
RULING: NO. In a contract of agency, a person, the agent, binds himself
to represent
another, theJohn Ta
supply of
materials
and labor for the
project
principal, with the latters consent or authority. Thus, agency
is based
on representation,
where
the under
agent the latt
agreement
stipulated,
among others,
thatupon
Tarnate
would pa
acts for and in behalf of the principal on matters within
the scope
of the authority
conferred
him.
thepersonally
contract price,
upon Tarnate
first and sec
Such acts have the same legal effect as if they were
donerespectively,
by the principal.
By this slegal
In of
furtherance
of their
agreement,into
Gonzalo
executed
fiction of representation, the actual or legal absence
the principal
is converted
his legal
or on A
as the contractor, was assigning to Tarnate an amount equ
juridical presence.
for theThe
project.
retention
fee (equivale
Our law mandates an agent to act within the scope ofDPWH
his authority.
scopeThis
of an10%
agents
authority
is
equipment
that
hadhim.
beenUnder
utilized
in the1878(11)
project. of
In the de
what appears in the written terms of the power of attorney
granted
upon
Article
Tarnatetoto obligate
use the official
receipt as
of aGonzalo
Construction
the Civil Code, a special power of attorney is necessary
the principal
guarantor
or
the collection of the 10% retention fee and in encashing
surety.
purposeexceeded the scope of his authority only if
In the case at bar, CBIC could be held liable even if Quinain
Tarnate
Quinains act of issuing Surety Bond No. G (16) 29419
is learned that Gonzalo had unilaterally rescinded th
of cancellation
of deed to
of what
assignment
dated
April
written terms of the power of attorney he was granted.
However, contrary
the RTC
held,
the 19, 199
that
the disbursement
voucher
for and
the 10%
retention fee h
Special Power of Attorney accorded to Quinain clearly
states
the limits of his
authority
particularly
and theinretention
to him
provides that in case of surety bonds, it can only be issued
favor of fee
the released
Department
of Public Works
Gonzalo admitted the deed of assignment and the authority
and Highways, the National Power
projectthe
hadamount
not been
implemented
of its can
Corporation, and other government agencies; furthermore,
of fully
the surety
bond is because
limited to
revoked the deed of assignment. He insisted that the assign
P500,000.00.
a mere product
ofof
thehissubcontract
that had
Under Articles 1898 and 1910, an agents act, even ifbeing
done beyond
the scope
authority, may
bindbeen ba
fully aware
of the
the principal if he ratifies them, whether expressly orTarnate,
tacitly.having
It mustbeen
be stressed
though
thatillegality
only theand inef
time
of
its
execution,
could
not
go
to
court
with unclean h
principal, and not the agent, can ratify the unauthorized acts, which the principal must have knowledge
deed ofby
assignment
or on
product
of suchon
deed
of. Ratification in agency is the adoption or confirmation
one person
of the
an act
performed
hisof assig
Tarnate
may demand after
the payment
by reason
behalf by another without authority. The substanceISSUE:
of the WON
doctrine
is confirmation
conduct,
RULING:
YES. Their
void because
every con
amounting to a substitute for a prior authority. Ordinarily,
the principal
must contract
have fullisknowledge
at the
or assigningrelating
to another
person
any contract
project th
time of ratification of all the material facts and circumstances
to the
unauthorized
act oforthe
Secretary
has approved
theorsubcontracting
or assignment
person who assumed to act as agent. Thus, if material
facts were
suppressed
unknown, there
can
However,orthe
Court
do not
with the
CAs
finding th
be no valid ratification and this regardless of the purpose
lack
thereof
inconcur
concealing
such
facts
6 of Presidential
Decree No.
and regardless of the parties between whom the question
of ratification
may1594
arisewas lesser than that of G
had voluntarily
entered
agreements was
with Gonz
this principle does not apply if the principals ignorance
of the material
factsinto
and the
circumstances
participate
in
the
bidding
for
the
project
because
heknew t
willful, or that the principal chooses to act in ignorance of the facts. However,
Givenratification
that Tarnate cannot
was a businessman
circumstances putting a reasonably prudent manDPWH.
on inquiry,
be impliedwho
as had re
against the principal who is ignorant of the facts financially and organizationally sound and established, wi
the performance
of the project,"
justifiably
t
Neither Unimarine nor Cebu Shipyard was able to repudiate
CBICs testimony
that ithewas
unawarepresumed
of
with Gonzalo.
For33152.
these reasons,
Tarnate
was not less guilt
the existence of Surety Bond No. G (16) 29419 and Endorsement
No.
There were
no allegations
TheretoisQuinains
no question
thattransactions
Tarnate provided
either that CBIC should have been put on alert with regard
business
done onthe
its equipm
with his obligations
theexpress
subcontract a
behalf. It is clear, and undisputed therefore, that there compliance
can be no ratification
in this case, under
whether
P a g e | 178
Gonzalo as the contractor who received the payment for

should
his contract
be forfeited
with by
theMekeni
DPWH and
as well
treated
as the
simply
10% as renta
retention fee that should have been paid to Tarnate pursuant
the may
deedthey
of assignment.
Considering
that loan p
vehicle.toNor
be retainedby
it as purported
Gonzalo refused despite demands to deliver to TarnateInthe
stipulated
10%
retention
fee
that
would
have
the first place, there is precisely no stipulation to such e
compensated the latter for the use of his equipment in the project, Gonzalo would be unjustly enriched at
Under Article 22 of the Civil Code, "[e]very person who
the expense of Tarnate if the latter was to be barred from recovering because of the rigid application of
any other means, acquires or comes into possession of som
the doctrine of in pari delicto.
or legal ground, shall return the same to him." Article 21
there are certain lawful, voluntary and unilateral acts whi
contract, to the end that no one shall be unjustly enriched
absence of specific terms and conditions governing the ca
Mekeni, a quasi-contractual relation was created between
itself by charging petitioner for the use of its vehicle whic
and effective promotion of its business. It may not, under
rents for the use of the company vehicle, refuse to refund
the car plan did not carry such a condition; the subject ve
Locsin II v. Mekeni Food Corp
fully, depreciated; the car plan arrangement benefited Mek
GR No. 192105, December 9, 2013
obtained by petitioner from using the vehicle was merely i
FACTS:
Conversely,
petitioner
recover
the monetary
In February 2004, respondent Mekeni Food Corporation
offered petitioner
thecannot
position
of Regional
Sales value
cost Supermarket/Food
of the vehicle; that Service
is not property
or money
Manager to oversee Mekenis National Capital Region
and South
Luzonthat belo
himpackage,
in lieu Mekeni
of the car
plan.petitioner
In other awords,
Mekenis
operations. In addition to a compensation and benefit
offered
car plan,
package.
To start
under which one-half of the cost of the vehicle is to petitioners
be paid by compensation
the company and
the other
halfwith,
to bethe vehic
Mekeni
is
unjustly
enriched
by
failing
to
refund
deducted from petitioners salary. Mekenis offer was contained in an Offer Sheet which was presented petitio
awardedSales
the value
of Mekenis
contribution
to petitioner. Petitioner began his stint as Mekeni Regional
Manager
on Marchcounterpart
17, 2004. To
be
him
at
Mekenis
expense.
able to effectively cover his appointed sales territory, Mekeni furnished petitioner with a used Honda
Civic car valued at P280,000.00, which used to be the service vehicle of petitioners immediate
supervisor. Petitioner paid for his 50% share through salary deductions of P5,000.00 each month.
Subsequently, Locsin resigned effective February 25, 2006. By then, a total of P112,500.00 had been
deducted from his monthly salary and applied as part of the employees share in the car plan. Petitioner
wanted to buy the car and he offered that the balance will be paid by him. Mekeni replied that the
Venzon v. Rural Bank of B
company car plan benefit applied only to employees who have been with the company forGR
fiveNo.
years;
for Augu
178031,
this reason, the balance that petitioner should pay on FACTS:
his service vehicle stood at P116,380.00 if he opts
to purchase the same. On May 3, 2007, petitioner filed against Mekeni, a Complaint for the recovery of
monetary claims consisting of unpaid salaries, commissions,
sick/vacation
benefits,
and recovery
On January
28, 2005, leave
petitioner
Virginia
M. Venzon filed
of monthly salary deductions which were earmarked for
his
cost-sharing
in
the
car
plan.
and Tax Declaration Nos. 96-GR-06-003-7002-R and
ISSUE: Whether or not petitioner is entitled to recover
the deductions
madeofbyBuenavista.
the company
from his
respondent
Rural Bank
Petitioner
alleged th
salaries for the payment of the car furnished to him Venzon, Sr., obtained a P5,000.00 loan from respondent
RULING: YES. It is seen that the Mekeni car plan offered
to petitioner
was They
subjectwere
to noable
other
or
Libertad,
Butuan City.
to term
payP2,300.00,
condition than that Mekeni shall cover one-half of itsP2,370.00.
value, andHowever,
petitionerin shall
in 1987,
turn pay
otherto pay th
March
she the
offered
half through deductions from his monthly salary. Mekeni
not shown,
documentary
evidence or
accepthas
payment,
and by
instead
shoved petitioner
away fro
otherwise, that there are other terms and conditions governing
its
car
plan
agreement
with
petitioner.
respondent foreclosed on the mortgage, and the prop
There is no evidence to suggest that if petitioner failed
to completely
one-half
of the cost of the
respondent,
beingcover
the highest
bidder.
vehicle, then all the deductions from his salary going The
to thepetitioner
cost of theargues
vehicle
willthe
be foreclosure
treated as rentals
that
proceedings
for his use thereof while working with Mekeni, andpublication
shall not be
refunded.
Indeed,
there
is
no
such
of the sale, lack of sheriffs final deed of sale a
stipulation or arrangement between them. The Court paid
cannot
allow
thatP6,000.00
payments on
made
on the9,car1995,
plan as evid
respondent
October
P a g e | 179
410848 issued on October 9, 1995.

it deposited the AMC checks to Ayala Lumber and Hardw
ISSUE: Whether or not the foreclosure proceedings are
AMCs
null and
operations,
void
Metrobank assumed that the checks p
RULING: NO. Petitioner merely relied to a certification
Lumber
issued
and by
Hardwares
the clerk account.
of court Second,
stating that
Ayala
the Lumber
records of the foreclosure cannot be found. The Court
receive
ruledthe
thatchecks
the certification
that were deposited
is not sufficient
to its account;
to
d
disprove that there was no valid foreclosure made. Lumber
However,
and
petitioner
Hardware,
is the
entitled
two entities
to a return
are distinct,
of the and ch
P6,000.00 she paid to respondent in 1995. While this cannot
may not
bebe
deposited
validly considered
in the account
as aof
redemption
the other. of
This disju
her property as the payment was made long after the redemption
Lumber and
period
Hardware,
expired,through
respondent
its sole
had no
proprietor,
right
Chu
to receive the amount because of the fact that the Metrobank.
debt of petitioner was already paid through the
foreclosure.
Since respondent was not entitled to receive the said amount, as it is deemed fully paid from the
foreclosure of petitioners property since its bid price at the auction sale covered all that petitioner owed
it by way of principal, interest, attorneys fees and charges, it must return the same to petitioner. "If
something is received when there is no right to demand it, and it was unduly deliveredQUASI-DELICTS
through mistake,
the obligation to return it arises.
Metropolitan Bank and Trust Company v. Absolute Management ELEMENTS

Corporation AND LIABILITY
GR No. 170498, January 9, 2013
On October 5, 2000, Sherwood Holdings Corporation,DELA

Inc. (SHCI)
a complaint
for sum
of money
LLNA filed
v. BIONG,
G.R. No.
182356,
Dec. 4, 2013
Facts:alleged
On March
2000, atthat
around
11:00advance
p.m., Juan del
against Absolute Management Corporation (AMC). SHCI
in its30,
complaint
it made
Toyota
Corolla
car
along
North
Avenue,
Quezon
City. His
payments to AMC for the purchase of 27,000 pieces of plywood and 16,500 plyboards in the sum of
seated
at
the
front
passenger
seat
while
a
certain
Calimlim
P12,277,500.00, covered by Metrobank Checks. These checks were all crossed, and were all made
payable to AMC. They were given to Chua, AMCs General Manager. However, a year after Chua died.
Juan stopped the car across the Veterans Memorial Hos
SHCI made demands on AMC, after Chuas death, forturned
allegedly
itemsafter
worth
red.undelivered
A few seconds
theP8,331,700.00.
car halted, a dump t
According to AMC, these transactions could not besand
found
in its records.
investigation,
AMC pushi
suddenly
rammed Upon
the cars
rear end, violently
discovered that in 1998, Chua received from SHCI 18
checks
P31,807,500.00.
theMetrobank
impact, the
cars worth
rear end
collapsed and AMC
its rear wind
splinters
flew,
puncturing
Dra.
dela
Llana.
averred that it had no knowledge of Chuas transactions with SHCI and it did not receive any money
from the latter. AMC also asked the RTC to hold Metrobank liable for the subject checks in case it is
In the
first week ofcomplaint
May 2000,
Dra. dela
Llana
began to fe
adjudged liable to SHCI. In the petition, Metrobank filed
a fourth-party
against
Chuas
Estate.
the left side of her neck and shoulder. The pain became m
ISSUE: Whether or not Metrobank can sue Chuas Estate
by. Her injury became more severe. Her health deterior
RULING: YES. Metrobanks claim against Chuascould
estatenoaslonger
one based
on quasi-contract.
A 9,
quasimove her
left arm. On June
2000, she c
contract involves a juridical relation that the law creates
on
the
basis
of
certain
voluntary,
unilateral
Milla, a rehabilitation medicine specialist, to and
examine he
her that she suffered
fromcomplaint
a whiplash
injury,
injury cau
lawful acts of a person, to avoid unjust enrichment. Metrobanks
fourth-party
falls
underanthe
nerve running to her left arm and hand. Dr. Milla requi
quasi-contracts enunciated in Article 2154 of the Civilthe
Code.
therapy
to alleviate
her condition.
Dra. delathrough
Llanas condit
Article 2154 embodies the concept "solutioindebiti" which arises
when something
is delivered
three months of extensive physical therapy. Moreover, upo
mistake to a person who has no right to demand it. It obligates the latter to return what has been received
she was operated. The operation released the imping
through mistake. Solutioindebiti, as defined in Article
2154 of theDra.
Civildela
Code,
hasfrom
two indispensable
incapacitated
Llana
the practice of her p
requisites: first, that something has been unduly delivered
through
mistake; and second, that something
despite
the surgery.
was received when there was no right to demand it.
dela estate
Llana,should
on October
16, 2000,
In its fourth-party complaint, Metrobank claims thatDra.
Chuas
reimburse
it if demanded
it becomesfrom Re
injuries,
but
Rebecca
refused
to
pay.
Thus,
on May 8, 2
liable on the checks that it deposited to Ayala Lumber and Hardwares account upon Chuas instructions.
Rebecca acted
for damages
before
thetoRegional
This fulfills the requisites of solutioindebiti. First, Metrobank
in a manner
akin
a mistakeTrial
whenCourt of
that she lost the mobility of her arm as a result of t
P a g e | 180
claimedP150,000.00 for her medical expenses and an average monthly income

ofP30,000.00 since June 2000. She further prayed for actual, moral, and exemplary
damages as well as attorneys fees.
In defense, Rebecca maintained that Dra. dela Llana had no cause of action against
her as no reasonable relation existed between the vehicular
accident and
Dra.CONSTRUCTION
dela
RUKS KONSULT
AND
v. ADWOR
Llanas injury. She pointed out that Dra. dela Llanas
illness
became
manifest
one
ADVERTISING CORP., G.R. No. 204866, Jan. 21, 201
month and one week from the date of the vehicular accident.
Facts: The instant case arose from a complaint for damag
Transworld and Comark International Corporation. In the
that it is the owner of a 75 ft. x 60 ft. billboard structu
Guadalupe, Barangka Mandaluyong, which was misa
Issue: Whether Joels reckless driving is the proximate
causewhen,
of Dra.ondela
Llanas
impaired
August
11, 2003, the adjacent bill
whiplash injury.
Transworld and used by Comark collapsed and crashed
August 19, 2003, Adworld sent Transworld and Comark a
for the repairs of its billboard as well asloss of rental inc
Transworld sent its reply, admitting the damage caused b
Ruling: NO.
Adworlds billboard, but nevertheless, refused and fa
demanded by
Adworlds final demand letter
Dra. dela Llana failed to establish her case by preponderance
ofAdworld.
evidenceAs
Article
constrained
to causes
file thedamage
instant complaint,
praying for damag
2176 of the Civil Code provides that "[w]hoever by act
or omission
to
comprised
of P281,204.00 for materials,
another, there being fault or negligence, is obliged to of
payP474,204.00,
for the damage
done. Such
fault or negligence, if there is no pre-existing contractual
relation
between
the
parties,
P121,000.00 for indemnity for loss of income.
is a quasi-delict." Under this provision, the elements necessary to establish a quasidelict case are:
In its Answer with Counterclaim, Transworld averred that
(1) damages to the plaintiff;
was due
to extraordinarily
strong winds th
(2) negligence, by act or omission, of the defendant orstructure
by some person
for whose
acts
unexpectedly, and maintained that the damage cause
the defendant must respond, was guilty; and
structure was
hardly
noticeable. Transworld likewise file
(3) the connection of cause and effect between such negligence
and the
damages.
against Ruks, the company which built the collapsed
Based on these requisites, Dra. dela Llana must firstformers
establishfavor.
by preponderance
It was allegedoftherein that the structure
evidence the three elements of quasi-delict before we weak
determine
Rebeccas
liability
and poor
foundation
notassuited for billboards, thus
Joels employer. She should show the chain of causation
between
Joels
reckless
such, Ruks should ultimately be held liable for the dam
driving and her whiplash injury. Only after she has laid this foundation can the
billboard
structure.
presumption - that Rebecca did not exercise the diligence
of a good
father of a family
in the selection and supervision of Joel - arise. Once negligence, the damages and the
Forproceed
its part,with
Comark
denied liability for the damages cau
proximate causation are established, this Court can then
the application
and the interpretation of the fifth paragraph of Article structure,
2180 of themaintaining
Civil Code.that it does not have any interest
billboard structure as it only contracted the use of the same
The rationale for these graduated levels of analyses is that it is essentially the
Lastly, Ruks admitted that it entered into a contract
wrongful or negligent act or omission itself which creates the
construction of the latters billboard structure, but denie
contractual obligations. In this case, Dr. Llana failed to establish the causal
caused by its collapse. It contended that when Transworld
connection since the evidence presented by her will not point to the fact that the
already an existing foundation for the billboard and t
accident caused her whiplash injury.
structure according to the terms and conditions of its contr
Issue: Whether or not Adworld and Ruks should be held li

P a g e | 181
construction business under its Manager/Proprietor Janet S

Ruling: YES.
was the contractor of the reblocking project to repair th
lane of the national highway at San Agustin, Pili, Cama
Jurisprudence defines negligence as the omission to do1997to
something
November
which1997.
a reasonable
man, guided by those considerations which ordinarily regulate the conduct of human
affairs, would do, or the doing of something which Nena
a prudent
alleged
and
that
reasonable
she was the
man
surviving spouse of the late
would not do. It is the failure to observe for the protection
(Balbino)
of the
who
interest
figured
of in
another
the accident that transpired at
person that degree of care, precaution, and vigilance work
whichatthe
about
circumstances
6:30 p.m. justly
on October 30, 1997; that Ba
demand, whereby such other person suffers injury. sideswiped the road barricade placed by the company in t
road, causing him to lose control of his motorcycle a
In this case, the CA correctly affirmed the RTCs finding
cemented
thatroad,
Transworlds
resulting in
initial
his instant death; and that the
construction of its billboards lower structure withoutilluminated
the proper foundation,
warning signs
andonthat
the site of the project, espec
of Rukss finishing its upper structure and just merely
the proximate
assumingcause
that of
Transworld
the death of Balbino.
would reinforce the weak foundation are the two (2) successive acts which were the
direct and proximate cause of the damages sustained
In itsby
answer,
Adworld.
the company
Worse, both
denied Nenas allegations of
Transworld and Ruks were fully aware that the foundation
had installed
for the warning
formerssigns
billboard
and lights along the highway a
was weak; yet, neither of them took any positive step
project;
to reinforce
that at the
thetime
same.
of the
They
incident, the lights were wo
merely relied on each others word that repairs would its
be project
done to was
such duly
foundation,
inspected
but by the Department of Pu
none was done at all. Clearly, the foregoing circumstances
(DPWH),
showthe
thatOffice
both Transworld
of the Mayor of Pili, and the Pili Mu
and Ruks are guilty of negligence in the constructionthat
of the
it was
formers
foundbillboard,
to have and
satisfactorily taken measure
perforce, should be held liable for its collapse and themotorists.
resulting damage to Adworlds
billboard structure. As joint tortfeasors, therefore, they are solidarily liable to
Adworld. Verily, "[j]oint tortfeasors are those whoThe
command,
companyinstigate,
further alleged
promote,
that since the start of the pr
encourage, advise, countenance, cooperate in, aid or abet
installed
the commission
several warning
of a tort,
signs,
or namely: (a) big overhea
approve of it after it is done, if done for their benefit.
words
They
SLOW
are also
DOWN
referred
ROAD
to asUNDER REPAIR AHEAD
those who act together in committing wrong or whose
meters
acts,before
if independent
the reblocking
of eachsite, one facing the Pilibo
other, unite in causing a single injury. Under Articlefacing
2194 the
of Nagabound
the Civil Code,
motorists;
joint (b) road signs containin
tortfeasors are solidarily liable for the resulting damage.
ROAD UNDER
In otherREPAIR
words, 100
joint
METERS AHEAD placed o
tortfeasors are each liable as principals, to the same extent
the streamers;
and in the(c)
same
roadmanner
signs with
as the words SLOW DOWN
if they had performed the wrongful act themselves." 50 METERS AHEAD placed 50 meters before the p
surrounded the affected portion of the highway, and a se
were installed and switched on daily from 6:00 p.m. until
big warning signs containing the words SLOW DOWN RO
SLOW DOWN MEN WORKING were displayed at both
of the highway with illumination from two 50watt bulb
NEGLIGENCE
following morning; and (f) the unaffected portion of the
widened in the adjacent road shoulder to allow twoway v
The company insisted that the death of Balbino was an ac

own negligence,
confirmed by the police investigation
BJCD CONSTRUCTION v. LANUZO, G.R. No. 161151,
March 24,as2014,
others, that Balbino was not wearing any helmet at th
BERSAMIN J.
while Balbino
was overtaking another motorcycl
Facts: On January 5, 1998, Nena E. Lanuzo (Nena) occurred
filed a complaint
for damages1
also stated that the
road sign/barricade
installed on the road
against BJDC Construction (company), a single proprietorship
engaged
in the
P a g e | 182
The RTC held in favor of the heirs and ordered Shang

affirmed.
Issue: Whether or not there is negligence in this case.
Issue: Whether or not Shangri-la Hotel is liable for damag

Ruling: YES.
Ruling: NO.
Shangri-la is liable due to its own negligence.

Negligence must be the immediate and proximate cause of the injury Negligence
The testimony
revealedbythatthose
the management practice of th
is the omission to do something which a reasonable
man, guided
victim affairs,
was to would
deploy do,
onlyorone security or roving gu
considerations which ordinarily regulate the conduct the
of human
floorsman
of the
hotel,not
which
is inadequate
because the hote
the doing of something which a prudent and reasonable
would
do, or
as
hallways
not visible
to end.
Judge Cooley defines it, (t)he failure to observe for the
protection
of the end
interests
of That there was a recomme
to one
per floorwhich
but thisthe
was not followed. This omm
another person, that degree of care, precaution,
andguard
vigilance
business
is imbued
withInpublic
circumstances justly demand, whereby such other person
suffers
injury."
order interest. Hotelkeepers are
lodging
their guests
butthe
also security to their perso
that a party may be held liable for damages for any
injuryfor
brought
about by
The twin duty constitutes the essence of the busines
negligence of another, the claimant must prove guest.
that the
immediate and proximate cause of the injury.
Therefore,
thefollows:
hotel has a greater degree of care and re
existence of negligence in a particular case may be
stated as
defendant in doing the alleged negligent act use that
reasonable
care and caution
otherwise
the hotelkeepers
would just stand idly by while
which an ordinarily prudent person would have used
in
the
same
situation?
access to all hotel rooms on the pretense of being visit
not, then he is guilty of negligence. The trial courts absurd.
assessment of the credibility of
the witnesses and of their testimonies is preferred to that of the appellate courts
because of the trial courts unique firsthand opportunity to observe the witnesses and
their demeanor as such. SPO1 Corporal, a veteran police officer detailed for more
than 17 years at the Pili Police Station, enjoyed the presumption of regularity in the
PHILAM
INSURANCE
COMPANY INC., v. COURT O
performance of his official duties. The presumption,
although
rebuttable, stands
165413,
Feb.any
22, 2012,
SERENO
because the Lanuzo heirs did not adduce evidence
to show
deficiency
or J.
Facts:
Four
gensets
from
the
irregularity in the performance of his official duty as the police investigator of theUnited States of America
Petitioner
these
accident. They also did not show that he was impelled
by anyinsured
ill motive
or gensets.
bias to One of the gensets was d
office
in
Makati.
Citibank
instructed the shipper to place
testify falsely. The CA unreasonably branded the testimonies of Zamora and SPO1
building.
However,
shipper has no crane to do such
Corporal as selfserving. They were not. Selfserving
evidence
refers the
to outof
DMCI.
DMCI
lifted
the
genset
courtstatements that favor the declarants interest; it is disfavored mainly because thewith a crane that had a hyd
loading capacity
of admission
20 tons. During the lifting process,
adverse party is given no opportunity to dispute thea statement
and their
the
genset
fell
and
got
damaged.
would encourage fabrication of testimony. But court declarations are not selfserving
considering that the adverse party is accorded the opportunity to test the veracity of
Citibank
demanded
from DMCI
the declarations by crossexamination and other methods.
There
is no question
that the full value of the dam
cost, insurance
freight
to USD 212,850. Pr
Zamora and SPO1 Corporal were thoroughly crossexamined
by theand
counsel
foramounting
the
pay,
asserting
that
the
damage
was
caused
by an accident
Lanuzo heirs. Their recollections remained unchallenged by superior contrary
an
insurance
claim
with
Philam
for
the
value
of the gense
evidence from the Lanuzo heirs.
PhP
5,866,146.
MAKATI SHANGRI-LA HOTEL AND RESORT v.
HARPER,
G.R. No. 189998,
Aug. 29, 2012, BERSAMIN J.
thea right
of trip.
subrogation,
Philam demanded
Facts: Christian Harper was a Norweigian who came Claiming
to Manila on
business
He
gensets
fromroom.
DMCI,
stayed at Makati Shangri-la Hotel, but he was murdered
in value
his hotel
It which
was denied liability.
found that the murderer, a caucasian male, was able to trespass into the hotel room of
or of
notthe
DMCI
is negligent.
the victim and was then able to murder and rob the Issue:
victim.Whether
The heirs
victim
blame the hotel's gross negligence in providing the most basic security system of its
guests.
Ruling: NO.
P a g e | 183
MEDICAL NEGLIGENCE
For DMCI to be liable for damages, negligence on its part must be established.
Additionally, that finding must be the proximate cause of the damage to the genset.
Philam failed to establish DMCIs negligence.
CRUZ v. AGAS, Jr., G.R. No. 204095, June 15, 2015, M
Negligence is the want of care required by the circumstances.
It isComplaint-Affidavit5
a
Facts: In his
for Serious Physical
involves an unreasonably great risk of causing damage;
Imprudence and Medical Malpractice against Dr. Agas,
that falls below the standard established by law for the protection of others against
others, that sometime in May 2003, he engaged the serv
unreasonably great risk of harm.
Center (SLMC)for a medical check-up; that after being a
underwent
stool, urine, blood, and other body
Philam blames the conduct of DMCIs crane operator 28,
for 2003,he
the gensets
fall. Essentially,
it points out the following errors in operating the crane:
First, Del
did not
give
employees
andPilar
doctors
of the
said hospital; that on May 2
any reason for his act of raising the boom from 75 to 78
degrees at the stage
when the for a scheduled gastrosc
Gastro-Enterology
Department
genset was already set for lowering to the ground. Second,
Del
Pilars
revving
of theto perform the procedure w
because the specialist assigned
motor of the boom triggered the chain of events starting with the jerk, then
gave the colonoscopy results to the attending femal
followed by the swinging of the genset which was obviously violent as it caused the
information
body of the crane to tilt upward, and ultimately, caused
the boomand
withconsideration
the genset to of the assigned specialis
sedated
and the endoscopic
examination was carried o
fall. However, as held by the court, these arguments are
not indicative
that there was
consciousness,
he felt that
negligence since these are necessary actions to be made
by the crane operator
. something went wrong during
felt dizzy, had cold clammy perspiration and experienced
The test of negligence is as follows: Could a prudent
man,stand
in the
underbecause he felt so exhauste
could not
or sitcase
upright
consideration, foresee harm as a result of the course actually
pursued?
If so,heit was
abdomen;
that when
was the
about to urinate in the comfo
duty of the actor to take precautions to guard against that harm. Reasonable foresight
he tried to consult the specialist who performed the colono
of harm, followed by ignoring of the suggestion born of this prevision, is always
to be found; and that his cardiologist, Dra. Agnes Del Ro
necessary before negligence can be held to exist.
his critical condition and immediately referred him to the
thatthehecrane
had hemorrhage
in his abdomen and a
Applying the test, the circumstances would show thatsuspected
the acts of
operator
emergency surgical operation.
were rational and justified.
Moreover, the speculative assertion of Philam should be supported by specific
evidence of the cranes defects. Instead, Philam utterly
failed
to averred
contradict
Dr. Cruz
further
thatthe
he agreed to the operation
findings of MASC which made an actual site inspection
to
observe
the
crane
used
in
ICU on May 30, 2003, he found out that the doctors did
lifting the genset. In its Survey Certificate, it stated that:
* of the internal bleeding; that he learned that the
because
the crane was observed in actual operation and found to be in satisfactory
left side of his colon measuring 6-8 inches because it had
working condition.
wall which caused the internal bleeding; that despite the
tremendous pain in the incision area during his recovery
According to petitioners, the requisites of res ipsa loquitur
and that he
intravenous
Had the principle been applied, the burden of proof fever;
in establishing
duehad
diligence
in tubes attached to his arm
left case,
part of his chest and a nasogastric tube through his nos
operating the crane would have shifted to DMCI. In this
applicable, since there is direct evidence on the issue of diligence or lack thereof
Dr. aAgas,
the otherlaw,
hand,
pertaining to the lifting of the genset. The doctrine is not
rule ofon
substantive
but countered that Dr. Cruz
elements Inof any
reckless
merely a mode of proof or a mere procedural convenience.
event,imprudence or negligence. He ave
it appear
not know that he would p
loquitur merely provides a rebuttable presumption ofmade
negligence.
Onthat
this,hewedid
have
explained that
before
theDMCI,
start of the colonoscopy proced
already pointed out that the evidence does not prove negligence
on the
part of
and that due diligence on its part has been established.with Dr. Cruz and review his medical history which wa
gastrointestinal physician. He claimed that the gast
procedures conducted on Dr. Cruz were completely succ
latter did not manifest any significant adverse reaction or
procedures and that his vital signs were normal throughout
P a g e | 184
used proper care; and (4) the absence of explanation

Dr. Agas added that certifications and sworn statements
foregoing
were
requisites,
submitted
theby
most
the instrumental is the contro
Assistant Medical Director for Professional Services,thing
the Director
which caused
of thethe
Institute
injury.12
of
Digestive Diseases, the anesthesiologist, and the hospital nurse attesting to the fact
that the intraperitonial bleeding which developed after
In this
the colonoscopy
case, the Court
procedure,
agrees with Dr. Agas that hi
was immediately recognized, evaluated, carefully managed,
performing
andthecorrected;
colonoscopy
that on
heDr. Cruz was not immedia
provided an adequate and reasonable standard ofjustify
care the
to application
Dr. Cruz; ofthat
res ipsa
the loquitur doctrine.
endoscopist followed all precautionary measures; that the colonoscopy procedure was
done properly; that he was not negligent or reckless Dr.
in conducting
Agas was able
the colonoscopy
to establish that the internal bleeding
procedure; that he did not deviate from any standard
due medical
to the abnormal
norm, practice
condition
or and configuration of his
procedure; and that he exercised competence and diligence
beyond hisincontrol
rendering
considering
medicalthat the said condition cou
services to Dr. Cruz.
colonoscopic procedure. Dr. Agas adequately explained
laboratory tests, or diagnostic imaging, such as x-rays
Issue: Whether or not there is a medical negligence. tomography (CT) scan of the abdomen, could have detecte
endoscopic procedure.
Ruling: NO.
A medical negligence case can prosper if the patient can present solid proof that the
SOLIDUM
PEOPLEprudent
OF THE PHILIPPINES, G.R.
doctor, like in this case, either failed to do something
which a v.
reasonably
2014,
BERSAMIN
J. doctor
doctor would have done, or that he did something that
a reasonably
prudent
Facts: Gerald Albert Gercayo (Gerald) was born on June 2
would not have done, and such failure or action caused injury to the patient.
anus. Two days after his birth, Gerald underwent colosto
bring one end of the large intestine out through the abdom
In this case, Dr. Cruz has the burden of showing the negligence or recklessness of Dr.
excrete through a colostomy bag attached to the side of his
Agas. Although there is no dispute that Dr. Cruz sustained internal hemorrhage due to
a tear in the serosa of his sigmoid colon, he failed to show that it was caused by Dr.
On May 17, 1995, Gerald, then three years old, was a
Agass negligent and reckless conduct of the colonoscopy procedure. In other words,
Maynila for a pull-through operation. Dr. Leandro Resur
Dr. Cruz failed to show and explain that particular negligent or reckless act or
team, and was assisted by Dr. Joselito Luceo, Dr. Donat
omission committed by Dr. Agas. Stated differently, Dr. Cruz did not demonstrate that
Tibio. The anesthesiologists included Dr. Marichu Abe
there was "inexcusable lack of precaution" on the part of Dr. Agas.
petitioner Dr. Fernando Solidum (Dr. Solidum). Duri
experienced bradycardia, and went into a coma. His com
Res Ipsa Loquitur Doctrine
he regained consciousness only after a month. He could no
Not Applicable Against Respondent
Agitated by her sons helpless and unexpected condition

lodged a complaint for reckless imprudence resulting in se
Literally, res ipsa loquitur means the thing speaks for itself. It is the rule that the fact
the City Prosecutors Office of Manila against the attendin
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 plaintiffs
prima
Issue:
Whether
or not there
is medical negligence.
facie case, and present a question of fact for defendant to meet with an explanation.
Ruling: NO.
The requisites for the applicability of the doctrine of res ipsa loquitur are: (1) the
occurrence of an injury; (2) the thing which caused the
the negligence
control
An injury
action was
uponunder
medical
whether criminal, ci
and management of the defendant; (3) the occurrenceforwas
such
that
in
the
ordinary
the plaintiff to prove by competent evidence each of th
course of things, would not have happened if those who
had control
or management
namely:
(a) the duty
owed by the physician to the patient,
P a g e | 185
patient relationship, to act in accordance with theOlavere,

specificthenorms
uncle of
or Raymond.
standards
established by his profession; (b) the breach of the duty by the physicians failing to
act in accordance with the applicable standard of care;
After
(3)extending
the causation,
initiali.e.,
medical
there treatment to Raymond,
must be a reasonably close and causal connectionthat
between
the patient
the negligent
undergoact
"emergency
or
exploratory lapar
omission and the resulting injury; and (4) the damagesrequested
suffered by
thethe
parents
patient.
of Raymond to procure 500 cc of typ
operation. Complying with the request, Deogenes and A
In the medical profession, specific norms or standards
Philippine
to protect
National
the patient
Red Cross
againstto secure the required blood
unreasonable risk, commonly referred to as standards of care, set the duty of the
physician to act in respect of the patient. Unfortunately,
Atno
10:30
clearP.M.,
definition
Raymond
of thewas
dutywheeled inside the operati
of a particular physician in a particular case exists. Because
the hospital
most medical
surgeons,
malpractice
Drs. Zafe and Cereno, were busy o
cases are highly technical, witnesses with special medical
Charles
qualifications
Maluluy-on.
must
Assisting
providethem in the said operation w
guidance by giving the knowledge necessary to render
Tatad),
a fairwho
andwas
just the
verdict.
only As
senior
a anesthesiologist on dut
result, the standard of medical care of a prudent physician
Tatad also
musthappened
be determined
to be the
from
head of Anesthesiology Dep
expert testimony in most cases; and in the case of a specialist (like an
anesthesiologist), the standard of care by which the specialist
Just before
is judged
the operation
is the care on
andMaluluy-on was finished
skill commonly possessed and exercised by similar
involving
specialists
Lilia Aguila,
under a similar
woman who was giving birth to
circumstances. The specialty standard of care may be operating
higher than
room.
that required of the
general practitioner.
At 10:59 P.M., the operation on Charles Maluluy-on w
The standard of care is an objective standard by which
however,
the conduct
Dr. Tatad
of awas
physician
already working with the obste
sued for negligence or malpractice may be measured,
surgery
andonitLilia
doesAguila.
not depend,
There being no other available
therefore, on any individual physicians own knowledge
them,
either.
Drs. In
Zafe
attempting
and Cereno
to fix
decided
a
to defer the operation
standard by which a court may determine whether the physician has properly
performed the requisite duty toward the patient, expert
Drs.
medical
Zafe and
testimony
Cereno,from
in the
bothmeantime, proceeded to ex
plaintiff and defense experts is required. The judge,found
as the that
trier the
of fact,
latters
ultimately
blood pressure was normal a
determines the standard of care, after listening to the testimony
significant."
of all
Dr.medical
Cereno experts.
reported that based on the xray re
inside the thoracic cavity of Raymond was minimal at arou
Here, the Prosecution presented no witnesses with special medical qualifications in
anesthesia to provide guidance to the trial court on
At what
11:15 standard
P.M., Deogenes
of care and
wasAndrew Olavere returned
applicable. It would consequently be truly difficult, containing
if not impossible,
the requested
to determine
500 cc type "O" blood. They hand
whether the first three elements of a negligence Dr.
andRealuyo.
malpractice action were
attendant.
After Dr. Tatad finished her work with the Lilia Ag
immediately started their operation on Raymond at a
September 1995. Upon opening of Raymonds thoracic ca
CERENO v. COURT OF APPEALS G.R. No. 167366,
Sept.
26,was
2012,
PEREZ
J.
cc of
blood
stocked
therein.
The blood was evacuat
Facts: At about 9:15 in the evening of 16 September 1995, Raymond S. Olavere
puncture at the inferior pole of the left lung.
(Raymond), a victim of a stabbing incident, was rushed to the emergency room of the
Bicol Regional Medical Center (BRMC). There, Raymond
attended
Nurse negligence in this case.
Issue:was
Whether
theretoisby
a medical
Arlene Balares (Nurse Balares) and Dr. Ruel Levy Realuyo (Dr. Realuyo) the
emergency room resident physician.
Ruling: NO.
Subsequently, the parents of Raymondthe spousesThe

Deogenes
(Deogenes)
type Olavere
of lawsuit
which has been called medic
and Fe R. Serranoarrived at the BRMC. They were accompanied by one Andrew
P a g e | 186
appropriately, medical negligence, is that type of claim

respondent
which a through
victim has
theavailable
Philippine Clearing House Corpora
to him or her to redress a wrong committed by a medical professional which has
caused bodily harm. In order to successfully pursueThe
such
check
a claim,
was cleared
a patient
by must
respondent and petitioner cred
prove that a health care provider, in most cases awith
physician,
P1,000,000.00.
either failed
On October
to do 22, 2002, MMGIs acco
something which a reasonably prudent health care provider
funds would
thereinhave
were
done,
withdrawn.
or that A month later, Silva
he or she did something that a reasonably prudent provider
P1,000,000.00
would notfrom
havehis
done;
account.
and In response to Silvas com
that the failure or action caused injury to the his
patient.
account
Stated
with the
otherwise,
aforesaidthe
sum.
complainant must prove: (1) that the health care provider, either by his act or
omission, had been negligent, and (2) that such act or
Onomission
March 21,
proximately
2003, respondent
caused returned a photocopy of
the injury complained of.
the reason: "Postdated." Petitioner, however, refused to
respondent a photocopy of the check. Thereafter, the che
In medical negligence cases, it is settled that the complainant
Charge Slip, has
wasthe
tossed
burden
several
of times from petitioner t
establishing breach of duty on the part of the doctorspetitioner,
or surgeons.
until
It on
must
May
be 6,
proven
2003, respondent requested th
that such breach of duty has a causal connection to the
theresulting
check. Acting
death of
on the
the patient.
request, PCHC directed the respo
A verdict in malpractice action cannot be based check
on speculation
and informed
or conjecture.
it of PCHCs authority under Clearin
Causation must be proven within a reasonable medical
(CHOM)
probability
No. 279 dated
based06upon
September 1996 to split 50/5
competent expert testimony.
subject of a "Ping-Pong" controversy which shall be imple
Debit Adjustment Tickets against the outward demands of
The parents of Raymond failed in this respect. Aside
likewise
from encouraged
their failurerespondent
to prove to submit the controve
negligence on the part of the petitioners, they also
PCHC
failed
Arbitration
to proveMechanism.
that it was
petitioners fault that caused the injury. Their cause stands on the mere assumption
Issue: Whether
or not
the Doctrine of Last Clear Chance is
that Raymonds life would have been saved had petitioner
surgeons
immediately
operated on him; had the blood been cross-matched immediately and had the blood
Ruling:
been transfused immediately. There was, however,
no YES.
proof presented that
Raymonds life would have been saved had those things been done. Those are mere
clear
chance,
assumptions and cannot guarantee their desired result.The
Suchdoctrine
cannot of
be last
made
basis
of a stated broadly, is that th
notreputation
preclude aand
recovery
decision in this case, especially considering that the does
name,
career for
of the negligence of the defe
the defendant, by exercising reasonable care and prud
petitioners are at stake.
injurious consequences to the plaintiff notwithstanding the
doctrine necessarily assumes negligence on the part of the
negligence on the part of the plaintiff, and does no
assumption. Stated differently, the antecedent negligenc
preclude him from recovering damages caused by the sup
DOCTRINE OF LAST CLEARdefendant,
CHANCEwho had the last fair chance to prevent the impe
of due diligence. Moreover, in situations where the doctri
defendants failure to exercise such ordinary care, havin
avoid loss or injury, which was the proximate cause of the
ALLIED BANKING CORP. v. BANK OF THE PHILIPPINE ISLANDS, G.R.
injury.
188363, Feb. 27, 2013, VILLARAMA, Jr. J.
Facts: On October 10, 2002, a check in the amount of P1,000,000.00 payable to
In this case, the evidence clearly shows that the proximat
"Mateo Mgt. Group International" (MMGI) was presented for deposit and accepted at
encashment of the subject check was the negligence of
petitioner's Kawit Branch. The check, post-dated "Oct. 9, 2003", was drawn against
post-dated check sent to it thru the PCHC clearing facility
the account of Marciano Silva, Jr. (Silva) with respondent Bank of the Philippine
verification procedure. As correctly found by the PCHC
Islands (BPI) Bel-Air Branch. Upon receipt, petitioner sent the check for clearing to
P a g e | 187
only respondent exercised ordinary care in the clearing

must
process,
first beit satisfied,
could have
to wit:
easily
(1) the accident was of a k
noticed the glaring defect upon seeing the date writtenoccur
on the
unless
face someone
of the check
is negligent;
"Oct.
(2) the instrumentality
9, 2003". Respondent could have then promptly returned
injury was
the check
under and
the exclusive
with the control of the person c
check thus dishonored, petitioner would have not credited
suffered
themust
amount
not have
thereof
been
to due
the to any voluntary action o
payees account. Thus, notwithstanding the antecedentinjured.
negligence of the petitioner in
accepting the post-dated check for deposit, it can seek reimbursement from
respondent the amount credited to the payees accountThe
covering
Courttheconsiders
check. the application here of the doc
inappropriate. Although it should be conceded without di
third elements were present, considering that the anestheti
were exclusively within the control of Dr. Solidum, and
unconscious during the operation, could not have be
negligence, the first element was undeniably wanting. L
RES IPSA LOQUITOR
care, custody and control of his physicians for a pull-thr
the imperforate anus, Gerald was then of sound body an
submission to the physicians. Yet, he experienced bradyc
causing
of his
senses10,
and rendering him immobile. H
SOLIDUM v. PEOPLE OF THE PHILIPPINES, G.R.
No. loss
192123,
March
of oxygen supply to the brain that caused the slowing of
2014, BERSAMIN J.
termed
as bradycardia,
would not ordinarily occur in the
Facts: Gerald Albert Gercayo (Gerald) was born on June
2, 1992
with an imperforate
operation,
or duringprocedure
the administration
of anesthesia to the
anus. Two days after his birth, Gerald underwent colostomy,
a surgical
to
did not prove
the negligence
bring one end of the large intestine out through the abdominal
wall,that
enabling
him to of any of his attendin
anesthesiologists,
had
caused
the injury. In fact, the anesth
excrete through a colostomy bag attached to the side of his body.
had sensed in the course of the operation that the lack o
triggered
by the
vago-vagal
reflex, prompting them to
On May 17, 1995, Gerald, then three years old, was
admitted
at the
Ospital ng
patient.
Maynila for a pull-through operation. Dr. Leandro Resurreccion
headed the surgical
team, and was assisted by Dr. Joselito Luceo, Dr. Donatella Valea and Dr. Joseph
Tibio. The anesthesiologists included Dr. Marichu Abella, Dr. Arnel Razon and
petitioner Dr. Fernando Solidum (Dr. Solidum). During the operation, Gerald
INTERNATIONAL CONTAINER TERMINAL SEVIC
experienced bradycardia, and went into a coma. His coma lasted for two weeks, but
No. 195031, March 26, 2014, PEREZ J.
he regained consciousness only after a month. He could no longer see, hear or move.
Facts: On April 2, 1997, the twenty (20)feet container v
effects of [respondent] Celeste M. Chua arrived at the N
Agitated by her sons helpless and unexpected condition, Ma. Luz Gercayo (Luz)
Oakland, California. On even date, it was unloaded from t
lodged a complaint for reckless imprudence resulting in serious physical injuries with
the depot belonging to [petitioner] for safekeeping pending
the City Prosecutors Office of Manila against the attending physicians.
OnisApril
6, 1997, the container van was stripped and pa
Issue: Whether or not the doctrine of Res Ipsa Loquitor
applicable.
authorities. Further inspection thereof was scheduled on
the date scheduled, [petitioners] depot was gutted b
Ruling: NO.
container van, together with fortyfour (44) others, w
thereafter, speaks
seventyfor
percent (70%) of the conten
Res ipsa loquitur is literally translated as "the thingconducted
or the transaction
be totallywith
burnt
thirty of
percent (30%) thereof was
itself." Hence, res ipsa loquitur is applied in conjunction
thewhile
doctrine
[Respondent] demanded reimbursement for the value o
common knowledge."
demands fell on deaf ears.
In order to allow resort to the doctrine, therefore, the following essential requisites
Issue: Whether or not the Doctrine of Res Ipsa Loquitor is
P a g e | 188
cemented road, resulting in his instant death; and that the

Ruling: YES.
illuminated warning signs on the site of the project, espec
the proximate cause of the death of Balbino.
With respect to the issue of negligence, there is no doubt that, under the
circumstances of this case, petitioner is liable to respondent
In its answer,
for damages
the company
on account
denied Nenas allegations of
of the loss of the contents of her container van. Petitioner
had installed
itself admitted
warning during
signs and
the lights along the highway a
pretrial of this case that respondents container van project;
caught fire
that while
at the stored
time ofwithin
the incident, the lights were wo
its premises. Absent any justifiable explanation on theitspart
project
of petitioner
was duly
oninspected
the cause by the Department of Pu
of the fire as would absolve it from liability, the(DPWH),
presumption
the Office
that of
there
the Mayor
was of Pili, and the Pili Mu
negligence on its part comes into play. The situation that
in this
it case,
was found
therefore,
to have
calls for
satisfactorily taken measure
the application of the doctrine of res ipsa loquitur.
motorists.
The doctrine of res ipsa loquitur is based on the theory

The company
that thefurther
defendant
alleged
either
that since the start of the pr
knows the cause of the accident or has the best opportunity
installed
of several
ascertaining
warning
it and
signs,
the namely: (a) big overhea
plaintiff, having no knowledge thereof, is compelled words
to allege
SLOW
negligence
DOWNinROAD
generalUNDER REPAIR AHEAD
terms. In such instance, the plaintiff relies on proof ofmeters
the happening
before theofreblocking
the accidentsite, one facing the Pilibo
alone to establish negligence. The principle, furthermore,
facingprovides
the Nagabound
a means by
motorists;
which (b) road signs containin
a plaintiff can hold liable a defendant who, if innocent,ROAD
shouldUNDER
be able to
REPAIR
prove that
100he
METERS AHEAD placed o
exercised due care to prevent the accident complained
the streamers;
of from (c)
happening.
road signsIt with
is, the words SLOW DOWN
consequently, the defendants responsibility to show that
50 METERS
there was no
AHEAD
negligence
placed
on 50 meters before the p
his part. The doctrine, however, can be invoked when
surrounded
and only
thewhen,
affected
under
portion
the of the highway, and a se
circumstances involved, direct evidence is absent and
were
notinstalled
readily and
available.
switched
Here,
on daily from 6:00 p.m. until
there was no evidence as to how or why the fire in big
the warning
containersigns
yardcontaining
of petitioner
the words SLOW DOWN RO
started; hence, it was up to petitioner to satisfactorily
SLOW
prove
DOWN
that itMEN
exercised
WORKING
the were displayed at both
diligence required to prevent the fire from happening.ofThis
the highway
it failed to
with
do.illumination
Thus, the from two 50watt bulb
trial court and the Court of Appeals acted appropriately
following
in applying
morning;
the principle
and (f) the
of unaffected portion of the
res ipsa loquitur to the case at bar.
widened in the adjacent road shoulder to allow twoway v
The company insisted that the death of Balbino was an ac

own negligence, as confirmed by the police investigation
BJCD CONSTRUCTION v. LANUZO, G.R. No. 161151,
24, 2014,
others, March
that Balbino
was not wearing any helmet at th
BERSAMIN J.
occurred while Balbino was overtaking another motorcycl
Facts: On January 5, 1998, Nena E. Lanuzo (Nena) filed a complaint for damages1
also stated that the road sign/barricade installed on the road
against BJDC Construction (company), a single proprietorship engaged in the
construction business under its Manager/Proprietor Janet
S. de
la Cruz.
company
Issue:
Whether
or The
not the
Doctrine of Res Ipsa Loquitor is
was the contractor of the reblocking project to repair the damaged portion of one
lane of the national highway at San Agustin, Pili, Camarines
Sur from September
Ruling: NO.
1997to November 1997.
For the doctrine to apply, the following requirements must

Nena alleged that she was the surviving spouse of the (a)
latethe
Balbino
LosisBaos
Lanuzo
accident
of a kind
that ordinarily does not occur i
(Balbino) who figured in the accident that transpirednegligence;
at the site (b)
of ittheis reblocking
caused by an instrumentality within t
work at about 6:30 p.m. on October 30, 1997; thatdefendant
Balbinosor Honda
motorcycle
defendants;
and (c) the possibility of contr
sideswiped the road barricade placed by the companymake
in thethe
right
lane
portion
of
plaintiff responsiblethe
is eliminated.
road, causing him to lose control of his motorcycle and to crash on the newly
P a g e | 189
established that they are mere residents of the Manila Do

Based on the evidence adduced by the Lanuzo heirs,
whonegligence
attended to
cannot
the victim
be fairly
at the emergency room. Wh
ascribed to the company considering that it has showncircumstances
its installationpointed
of the necessary
out by the courts below seem dou
warning signs and lights in the project site. In that context,
imprudence
the fatal
on accident
the part was
of the
notpetitioners, this conclusion
caused by any instrumentality within the exclusive
through
controltheofscholarly
the company.
assumptions
In of a layman like the p
contrast, Balbino had the exclusive control of howunquestionable
he operated and
knowledge
managedofhisexpert witness/es. As to w
motorcycle. The records disclose that he himselfexercised
did notthe
take
requisite
the necessary
degree of skill and care in treating
precautions. As Zamora declared, Balbino overtook another
a matter
motorcycle
of expert opinion.
rider at a fast
speed, and in the process could not avoid hitting a barricade at the site, causing him to
be thrown off his motorcycle onto the newly cemented road. SPO1 Corporals
investigation report corroborated Zamoras declaration. This causation of the fatal
injury went uncontroverted by the Lanuzo heirs.
JARCIA v. PEOPLE, G.R. No. 187926, Feb. 15, 2012, MENDOZA J.

Facts: Belinda Santiago (Mrs. Santiago) lodged a complaint with the National
Bureau of Investigation (NBI) against the petitioners, Dr. Emmanuel Jarcia, Jr. (Dr.
Jarcia) and Dr. Marilou Bastan (Dr. Bastan), for their alleged neglect of professional
duty which caused her son, Roy Alfonso Santiago (Roy Jr.), to suffer serious physicalEMERGENCY RULE
injuries. Upon investigation, the NBI found that Roy Jr. was hit by a taxicab; that he
was rushed to the Manila Doctors Hospital for an emergency medical treatment; that
an X-ray of the victims ankle was ordered; that the X-ray
showed
no fracture
ORIXresult
METRO
LEASIN
AND FINANCE CORP. v. MA
as read by Dr. Jarcia; that Dr. Bastan entered the emergency
room
(ER)
and,
after
174089, Jan. 25, 2012, DEL
CASTILLO J.
conducting her own examination of the victim, informed
Mrs.
Santiago
that
since
it
Facts: Anacleto Edurese, Jr. (Edurese)
was driving a Pa
was only the ankle that was hit, there was no need BBG-334.
to examineHis
theIsabela-bound
upper leg; thatpassengers were the owne
eleven (11) days later, Roy Jr. developed fever, swelling
of the
right leg
and
Roberto and
Josephine
Mangalinao
(Mangalinao spouses
misalignment of the right foot; that Mrs. Santiago brought
him
back
to
the
hospital;
housemaid Rufina Andres and helper Armando Jebueza
and that the X-ray revealed a right mid-tibial fracturethe
andouter
a linear
hairline
in
lane
was afracture
Pampanga-bound
Fuso 10-wheele
the shaft of the bone.
number PAE-160, driven by Loreto Lucilo (Loreto), w
Charlie Palomar (Charlie). The Fuso was then already

Issue: Whether or not the Doctrine of Res Ipsa Loquitor is applicable.
swerving motion. Following behind the Pathfinder was an
Isuzu Cargo (Isuzu) with plate number PNS-768 driven
Ruling: YES.
with helper Rodolfo Navia (Rodolfo).
The requisites for the application of the doctrine of res ipsa loquitur are: (1) the
Just when the Pathfinder was already cruising along the N
accident was of a kind which does not ordinarily occur unless someone is negligent;
to overtake the Fuso, the latter suddenly swerved to
(2) the instrumentality or agency which caused the injury was under the exclusive
Pathfinders lane thereby blocking its way. As a result, th
control of the person in charge; and (3) the injury suffered must not have been due to
left door and left body. The impact caused both vehicles t
any voluntary action or contribution of the person injured.12
expressway. Almost instantly, the inevitable pileup hap
stepped on the brakes, the Isuzus front crashed into the re
In this case, the circumstances that caused patient Roy Jr.s injury and the series of
it a total wreck.
tests that were supposed to be undergone by him to determine the extent of the injury
suffered were not under the exclusive control of Drs. Jarcia and Bastan. It was
P a g e | 190
Issue: Whether or not the Doctrine of Emergency Rule

flight
is bound
applicable
for Manila.
in this case to
absolve the driver and owner of Isuzu.
Upon arriving in the Philippines, Wilfredo went to Samp
Ruling: NO.
incident. He was informed by Sampaguita Travel that it w
which cancelled their bookings.
[O]ne who suddenly finds himself in a place of danger, and is required to act without
Whether
or not the
Travel Agency and Cathy Paci
time to consider the best means that may be adopted Issue:
to avoid
the impending
danger,
joint trotfeasor.
is not guilty of negligence, if he fails to adopt what subsequently
and upon reflection
may appear to have been a better method, unless the emergency in which he finds
Ruling: YES.
himself is brought about by his own negligence.
Cathay
Sampaguita
Considering the wet and slippery condition of the road
thatPacific
night, and
Antonio
should Travel acted together in c
bookings
led Pathfinder.
to the erroneous cancellation of res
have been prudent to reduce his speed and increase his
distancewhich
from the
negligence
is the inproximate
cause of the technical injury
Had he done so, it would be improbable for him to have
hit the vehicle
front of him
become
or if he really could not avoid hitting it, prevent suchTherefore,
extensive they
wreckhave
to the
vehiclejoint tortfeasors, whose res
under
Article 2194
of care
the Civil
in front. With the glaring evidence, he obviously failed
to exercise
proper
in hisCode, is solidary.
driving.
VICARIOUS LIABILITY
JOINT TORTFEASOR
MAMARIL v. THE BOY SCOUT OF THE PHILIPPIN

14, 2013,
J.
CATHAY PACIFIC AIRWAYS v. REYES, G.R. No.Jan.
185891,
JunePERLAS-BERNABE
26, 2013,
Facts: Spouses Benjamin C. Mamaril and Sonia P. M
PEREZ J.
jeepney
operators
since 1971.
would park their six (6
Facts: Sometime in March 1997, respondent Wilfredo
Reyes
(Wilfredo)
made They
a
night trip
at to
theAdelaide,
Boy Scout
of the Philippines' (BSP) c
travel reservation with Sampaguita Travel for his familys
Australia
Concepcion
Street,
Malate, Manila
for a fee of P300.00 p
scheduled from 12 April 1997 to 4 May 1997. Upon
booking and
confirmation
of
Maywas
26,issued
1995 atfour
8 o'clock
in the evening, all these vehic
their flight schedule, Wilfredo paid for the airfare and
(4) Cathay
BSP compound. The following morning, however, one of
Pacific round-trip airplane tickets for Manila-HongKong-Adelaide-HongKongDCG 392 was missing and was never recovered. Accord
Manila.
Cesario Pea (Pea) and Vicente Gaddi (Gaddi) of AIB S
with whom
BSPand
hadhis
contracted
On the day of their scheduled departure from Adelaide,
Wilfredo
family for its security and prot
lookedcounter
familiaropened,
to themWilfredo
took the subject vehicle out of the
arrived at the airport on time. When the airport check-in
was informed by a staff from Cathay Pacific that the Reyeses did not have confirmed
Issue: Whether
or not they
the Doctrine
reservations, and only Sixtas flight booking was confirmed.
Nevertheless,
were of Vicarious Liability i
allowed to board the flight to HongKong due to adamant pleas from Wilfredo. When
Ruling:of
NO.
they arrived in HongKong, they were again informed
the same problem.
Unfortunately this time, the Reyeses were not allowed to board because the flight to
Thetovicarious
of anfrom
employer under Article 2180
Manila was fully booked. Only Sixta was allowed
proceed liability
to Manila
apply allowed
in this case.
It is the
uncontested
that Pea and Gaddi
HongKong. On the following day, the Reyeses were finally
to board
next
P a g e | 191
guards by AIB to BSP pursuant to the Guard Service SERRA

Contract.v.Clearly,
MUMAR,
therefore,
G.R. No.
no 193861, March 14, 2012,
Facts:and
At around
6:30 in guards
the evening of 3 April 2000, the
employer-employee relationship existed between BSP
the security
the National
Highway
assigned in its premises. Consequently, the latter's along
negligence
cannot be
imputedin Barangay Apopong, G
resulted in
death
of Armando Mumar (Mumar), husb
against BSP but should be attributed to AIB, the true employer
of the
Pea
and Gaddi.
Mumar (respondent).
It bears to reiterate that the subject loss was caused by the negligence of the security
Based on thevehicle
evidence
presented
guards in allowing a stranger to drive out plaintiffs-appellants'
despite
the before the Regional Tri
Santos
Armando Tenerife
(Tenerife) was drivin
latter's instructions that only their authorized drivers
mayCity,
do one
so. Moreover,
the
theMamaril's
National Highway
agreement with respect to the ingress and egress ofon
Sps.
vehicles. heading in the direction of P
Tenerife
the van owned
by petitioner Paulita
coordinated only with AIB and its security guards,
withoutnoticed
the knowledge
and
coming
from
the
opposite
direction,
which was trying to
consent of BSP. Accordingly, the mishandling of the parked vehicles that resulted in
and in
process
herein complained loss should be recovered only from
thethe
tort
feasorsencroached
(Pea andon his lane. The left side o
van, causing
Gaddi) and their employer, AIB; and not against the lessor,
BSP. the sedan to swerve to the left and end up on
The van collided head on with the motorcycle, which was
sedan on the outer lane, causing injuries to Mumar, which
Issue:
Whether
orJune
not Doctrine
of Vicarious Liability is ap
FILCAR TRANSPORT SERVICES v. ESPINAS, G.R.
No.
171456,
20,
2012, BRION J.
Facts: On November 22, 1998, at around 6:30 pm, respondent
Jose A. Espinas was
Ruling: YES.
driving his car along Leon Guinto Street in Manila. Upon reaching the intersection of
Leon Guinto and President Quirino Streets, Espinas stopped
his car.2180
When
Under Article
of the
the signal
Civil Code, employers are liable
light turned green, he proceeded to cross the intersection.
He was already
in the the scope of their assi
their employees
acting within
middle of the intersection when another car traversing
President negligence
Quirino Street
anddamage or injury to anoth
employees
causes
going to Roxa Boulevard, suddenly hit and bumped his
car. As a result
of the
impact,failed to exercise the due d
presumption
that the
employer
Espinas car turned clockwise. The other car escapedthe
from
the scene
of the
incident,
family
in the
selection
or supervision of its emplo
but Espinas was able to get its plate number.
employer is direct or immediate. It is not conditioned upo
negligent employee and a prior showing of insolvency of s
After verifying with the Land Transportation Office, Espinas learned that the owner
of the car is the petitioner. He then sent a demand of damage
which
wentArticle
unheeded.
Moreover,
under
2184 of the Civil Code,24 if th
drivers negligence, the owner of the vehicle who was pre
Issue: Whether or not Doctrine of Vicarious Liability if
is he
applicable
in this
case. the mishap by the exercise of d
could have
prevented
Ruling: YES.
Petitioner failed to show that she exercised the level

supervising her driver in order to prevent the accident. S
In this case, it was established that the petitioner is thehad
registered
owner
the vehicle
only been
herofdriver
for one year and she had no
who is involved in the mishap. The defense of he is not
the
owner
at
that
time
of
the accidents. She also adm
experience or record of previous
mishap is no meritorious as he is the registered owner
under the record
of Land
who maintained
the vehicle
and would even remind her "t
Transportation Office.
car."
Employer-employee relationship is not needed here inPetitioner

order to apply
the Doctrine
of the time of the accident, s
also admitted
that, at
Vicarious Liability in this case. Filcar neither avail ofhappening
the defense
Article
2180
andinonly
knew
theyofbumped into another vehic
the Civil Code.
She then closed her eyes and a moment later felt somethin
the car. When the vehicle stopped, petitioner left the sce
from her brother, leaving the other passengers to come to t
P a g e | 192
the respondent liable.
VILORIA v. CONTINENTAL AIRLINES, INC., G.R.

No. 188288,
Jan. 16, 2012,
Ruling:
NO.
REYES J.
Facts: On April 3, 2006, the Regional Trial Court of Antipolo
Branch
74 (RTC) a principal can only
In actionsCity,
based
on quasi-delict,
rendered a Decision, giving due course to the complaint
for by
sumitsofagents
moneyemployees
and
committed
if it has been establ
damages filed by petitioners Fernando Viloria (Fernando)
and
Lourdes
Viloria
evidence that the principal was also at fault or negligent o
(Lourdes), collectively called Spouses Viloria, against
Continental
control respondent
and supervision
over them.
Airlines, Inc. (CAI). As culled from the records, below are the facts giving rise to
such complaint.
In this case, Spouses Viloria did not present evidence th
contributed to Magers complained act either by instruct

On or about July 21, 1997 and while in the United Travel
States, and
Fernando
Mager purchased
to issue thefor
said misrepresentation.
himself and his wife, Lourdes, two (2) round trip airline tickets from San Diego,
California to Newark, New Jersey on board Continental
Airlines.
It may
seemFernando
unjust at purchased
first glance that CAI would conside
the tickets at US$400.00 each from a travel agency called
"Holiday
Travel"
wassubject contracts, which M
the terms and conditionsand
of the
attended to by a certain Margaret Mager (Mager). on
According
to Spouses
CAIs behalf,
in orderViloria,
to deny Spouses Vilorias reques
Fernando agreed to buy the said tickets after Mager informed
them
that
there
were
use of Lourdes ticket for the no
re-issuance of a new one, an
available seats at Amtrak, an intercity passenger trainthey
service
provider
in
the
United
are not bound by Magers supposed misrepresentatio
States. Per the tickets, Spouses Viloria were scheduledSpouses
to leave Vilorias
for Newark
on August
claim
for damages and maintaining
13, 1997 and return to San Diego on August 21, 1997.contracts. It may likewise be argued that CAI cannot de
from Magers acts, which were performed in complian

Subsequently, Fernando requested Mager to reschedule
their flight
to Newark
obligations
as CAIs
agent.to an
earlier date or August 6, 1997. Mager informed him that flights to Newark via
Continental Airlines were already fully booked and offered
the alternative
a round liability is anchored on
However,
a personsofvicarious
trip flight via Frontier Air. Since flying with Frontierwhether
Air called
for
a
higher
fare on
of the tortfeasor. Without su
absolute or limited,
US$526.00 per passenger and would mean traveling
by night,
opted to the liability to a person
which
couldFernando
justify extending
request for a refund. Mager, however, denied his request
as thethesubject
committed
tort. tickets are
non-refundable and the only option that Continental Airlines can offer is the reissuance of new tickets within one (1) year from the date the subject tickets were
issued. Fernando decided to reserve two (2) seats with Frontier Air.
ORIX METRO LEASIN AND FINANCE CORP. v. MA
174089,
Jan.
25, 2012,
DEL
CASTILLO J.
As he was having second thoughts on traveling via Frontier
Air,
Fernando
went
to the
Facts:
Anacleto
Edurese,
Jr.
(Edurese) was driving a Pa
Greyhound Station where he saw an Amtrak station nearby. Fernando made inquiries
His Isabela-bound
and was told that there are seats available and he canBBG-334.
travel on Amtrak
anytime andpassengers were the owne
Roberto and Josephine Mangalinao (Mangalinao spouses
any day he pleased. Fernando then purchased two (2) tickets for Washington, D.C.
housemaid Rufina Andres and helper Armando Jebueza
the outer lane was a Pampanga-bound Fuso 10-wheele
From Amtrak, Fernando went to Holiday Travel and
confronted
Mager
withbytheLoreto Lucilo (Loreto), w
number
PAE-160,
driven
Amtrak tickets, telling her that she had misled them
into buying
Continental
Charlie
Palomarthe(Charlie).
The Fuso was then already
motion.
Following
behind the Pathfinder was an
Airlines tickets by misrepresenting that Amtrak was swerving
already fully
booked.
Fernando
Isuzu
Cargo
(Isuzu)
with
plate
reiterated his demand for a refund but Mager was firm in her position that the subject number PNS-768 driven
with helper Rodolfo Navia (Rodolfo).
tickets are non-refundable.
Just when the Pathfinder was already cruising along the N

Issue: Whether or not the Doctrine of Vicarious Liability
should the
be applied
to hold
to overtake
Fuso, the
latter suddenly swerved to
P a g e | 193
Pathfinders lane thereby blocking its way. As a result,

wife
thedoPathfinder
not own the
hit the
jeepFusos
and that they were never the e
left door and left body. The impact caused both vehicles
stop in
middle
part,toOscar
Jr. the
claimed
to of
bethe
a victim himself. He alleged
expressway. Almost instantly, the inevitable pileupstole
happened.
Although
Antonio
his jeep while it was parked beside his drivers re
stepped on the brakes, the Isuzus front crashed into the rear of the Pathfinder leaving
joyride. Both he and a vehicle mechanic testified that the
it a total wreck. Soon after, the Philippine National Construction Corporation (PNCC)
started
mere police
pushing
sansthe
the ignition key. The vehicle
patrol arrived at the scene of the accident and informed
the by
Pulilan
about
without
anyresponded
headlightsaton.
And implying that this was
vehicular mishap. Police Investigator SPO2 Emmanuel
Banag
about
wasasillegally
2:15-2:30 a.m. of June 28, 1990 and investigated thevehicle
incident
gatheredtaken,
from Oscar
the Jr. submitted as part of
information and sketch provided by the PNCC patrolthe
as statements
well as from
statements
of the
Jemar
Alarcon (Jemar) and Benjamin An
provided by the truck helpers Charlie and Rodolfo.Inwho
the meantime,
the
Mangalinao
were with Allan in the jeep at the time of the acc
spouses, the driver Edurese, and the helper Jebueza investigating
were declaredofficer
dead on
spot said time, the vehicles he
thatthe
during
while 6-month old Marriane and the housemaid were declared dead on arrival at a
of this allegation, Oscar Jr. even filed before the same tr
nearby hospital. The occupants of the trucks escaped serious injuries and death.
against Allan and his companions docketed as Criminal Ca
was, however,
for insufficiency of evidence.
The children imputed recklessness, negligence, and imprudence
on dismissed
the truck drivers
for the deaths of their sister and parents; while they hold Sonny and Orix equally
Issue:ofWhether
liable for failing to exercise the diligence of a good father
a familyor
innot
the petitioner
selection is liable.
and supervision of their respective drivers. The children demanded payment of more
than P10.5 million representing damages and attorneys
fees. YES.
Ruling:
Petitioners
evidence casts doubt on his claim that h
Issue: Whether or not petitioner is liable despite an alleged
transferown
of ownership?
and is alleged cohorts. Negligence is presumed under the d
Ruling: YES.
Oscar Jr.s core defense to release him from responsib

Monsaluds
that hisreal
jeepowner
was stolen. He highlights that
The Supreme Court explained that Orix cannot point fingers
at theis alleged
the jeep
from
the Civil
parking
area was indeed carried o
to exculpate itself from vicarious liability under Article
2180
of the
Code.
concerted
efforts
of
Allan
and
Regardless of whoever Orix claims to be the actual owner of the Fuso by reason of a his five companions, not
area
and the weight of the jeep.
contract of sale, it is nevertheless primarily liable for surrounding
the damagesthe
or parking
injury the
truck
registered under it have caused.
Notably, the carnapping case filed against Allan and his g

by by
theproving
RTC forwho
insufficiency
of evidence. But even in this
Were a registered owner allowed to evade responsibility
the supposed
concluded by the CA, the evidentiary standard of prepond
transferee or owner is, it would be easy for him, by collusion with others or
was likewise not met to support Oscar Jr.s claim that his je
otherwise, to escape said responsibility and transfer the same to an indefinite person,
or to one who possesses no property with which to respond
financially
damage
The requisites
of for
the the
doctrine
of res ipsa loquitur as establi
or injury done. A victim of recklessness on the public
highways is usually without
as follows:
1) the the
accident
of damage.
a kind which
means to discover or identify the person actually causing
injuryisor
He does not ordinarily occur
negligent;
has no means other than by recourse to the registration in the Motor Vehicles Office
cause
theextend
injury to
was
under the exclusive control o
to determine who the owner is. The protection that 2)
thethe
law
aimsofto
him
3) the injury suffered must not have been due to any volu
would become illusory were the registered owner given the opportunity to escape
on the part of the person injured.
liability by disproving his ownership.
The above requisites are all present in this case. First, no

the road would suddenly be sideswiped and run over by a
the one in charge of the said vehicle had been negligen
DEL CARMEN, Jr. v. BACOY, G.R. No. 173870, April 25, 2012, DEL
caused the injury was under the exclusive control of Os
CASTILLO J.
Oscar Jr. entrusted the ignition key to Rodrigo, he had the
Facts: Defendants refused to assume civil liability for the victims deaths. Oscar Sr.
regard to the specific restrictions of the jeeps use, inclu
averred that the Monsaluds have no cause of action against them because he and his
drive it. As he is aware that the jeep may run without the i
P a g e | 194
responsibility to park it safely and securely and to exercise

instruct by
his petitioner
driver Rodrigo
of the to
required diligence. As aptl
observe the same precaution. Lastly, there was no evidence
showing of
thatwhatever
the death
nature
of the
was ever presented depictin
victims was due to any voluntary action or contribution
in on
thetheir
selection
part. and supervision of its driver, Gimena, desp
do so. In fact, in its petition, apart from denying the negl
imputing the same to the bus from which the victim
reiterates its argument that since it is not the registered
R TRANSPORT CORP. v. YU, G.R. No. 174161, Feb.
18, 2015,
PERALTA
J.
bumped
the victim,
it cannot
be held liable for the dam
Facts: At around 8:45 in the morning of December 12, 1993, Loreta J. Yu, after
Nowhere was it even remotely alleged that petitioner h
having alighted from a passenger bus in front of Robinson's Galleria along the northdiligence in the selection and supervision of its employe
bound lane of Epifanio de los Santos Avenue (EDSA), was hit and run over by a bus
petitioner cannot now avoid liability for the quasi-delict
driven by Antonio P. Gimena, who was then employed by petitioner R Transport
employee.
Corporation. Loreta was immediately rushed to Medical City Hospital where she was
pronounced dead on arrival.
On February 3, 1994, the husband of the deceased, respondent

Luisito G. TRANSPORT
Yu, filed a
DAVAO HOLIDAY
SERVICES CORP.
Complaint for damages before the Regional Trial Court
(RTC)Nov.
of Makati
CityREYES
against J.
211424,
26, 2014,
petitioner R Transport, Antonio Gimena, and MetroFacts:
ManilaOn
Transport
October Corporation
23, 2003, an information for reckle
(MMTC) for the death of his wife. MMTC denied homicide
its liabilitywas
reasoning
filed against
that itTungal.
is
Meanwhile, on Mar
merely the registered owner of the bus involved in Christian,
the incident,
the the
spouses
actualEmphasis,
owner, filed a separate action
being petitioner R Transport. It explained that underfees
thearising
Bus Installment
from the vehicular
Purchaseaccident against both petit
Program of the government, MMTC merely purchasedparties
the subject
agreement,
bus, among
the two
several
cases were jointly tried by the
others, for resale to petitioner R Transport, which willofinDavao
turn operate
City, Branch
the same
12.within
Metro Manila. Since it was not actually operating the bus which killed respondents
wife, nor was it the employer of the driver thereof, MMTC
On June
alleged
17, 2008,
that the
thecomplaint
RTC rendered its Judgment/Decis
against it should be dismissed. For its part, petitioner
TungalR was
Transport
foundalleged
guilty that
beyond reasonable doubt
respondent had no cause of action against it for it hadimprudence
exercised due
resulting
diligence
in homicide.
in the
selection and supervision of its employees and drivers and that its buses are in good
Issue:
Whether
not Doctrine
condition. Meanwhile, the driver Antonio Gimena was
declared
inordefault
for hisof Vicarious liability is app
failure to file an answer to the complaint.
Ruling: YES.
Issue: Whether or not the Doctrine of Vicarious Liability should be applied.
Article 2180 of the New Civil Code provides that an
Ruling: YES.
demandable not only for ones own acts or omissions, bu
for whom he is responsible. Employers, in particular, sha
Under Article 2180 of the New Civil Code, employers
caused
are by
liable
theirforemployees
the damages
acting within the scope of
caused by their employees acting within the scoperesponsibility
of their assigned
of employers
tasks. Once
shall only cease upon proof
negligence on the part of the employee is established,diligence
a presumption
of the good
instantly
fatherarises
of a family to prevent damage
that the employer was remiss in the selection and/or supervision of the negligent
employee. To avoid liability for the quasi-delict committed
The CA correctly
by its employee,
held thatitthe
is petitioner, being Tungal
incumbent upon the employer to rebut this presumption
liable
bytopresenting
the heirs of
adequate
Christian
and
after a finding that it was Tu
convincing proof that it exercised the care and diligence
for of
thea accident
good father
thatofcaused
a family
the death of the child. In
in the selection and supervision of its employees.
emphasized that when an employee causes damage due to
performing his own duties, there arises the juris tan
Unfortunately, however, the records of this case are bereft
employer
of any
is negligent,
proof showing
rebuttable
the only by proof of observ
P a g e | 195
good father of a family. In the selection of prospective

Issue:employees,
Whether oremployers
not petitioner
are is entitled to damages?
required to examine them as to their qualifications, experience and service records.
With respect to the supervision of employees, employers
Ruling:must
NO.formulate standard
operating procedures, monitor their implementation and impose disciplinary measures
of a cause of action are: (1) a right
for breaches thereof. These facts must be shown The
by essential
concreteelements
proof, including
an obligation on the part of the defendant to respect su
documentary evidence.
omission on the part of the defendant in violation of
resulting injury or damage to the plaintiff for which the l
The petitioner failed in this aspect. There then appearsthe
norecovery
cogent reason
for theorCourt
of damages
other appropriate relief.
to depart from the RTCs and CAs observation that the petitioner failed to establish
Petitioner
hasand
no supervision
cause of action
the modes and measures it adopted to ensure the proper
selection
of against the respondents
operate
a
cockpit
in
the
municipality.
Without any legal r
Tungal. This makes proper the order upon the petitioner to compensate the spouses
the municipality, petitioner is not entitled to damages. I
Emphasis for damages.
petitioner the right to recover damages; he must also hav
legal wrong inflicted by the respondents. The Court need
that the law will give redress for an act causing damage,
injuria that act must be not only hurtful, but wrongful."
DAMAGES
REQUISITES
ACTUAL
SNOW MOUNTAIN DAIRY CORP. v. GMA VETERA

DU v. JAYOMA, G.R. No. 175042, April 23, 2012, DEL CASTILLO J.
No. 192446, Nov. 19, 2014, PERALTA J.
Facts: The Sangguniang Bayan of the Municipality of Mabini, Bohol, enacted
Facts: On March 11, 2005, petitioner and respondent
Municipal Ordinance requiring the conduct of a public bidding for the operation of a
entered into a security service agreement where the parties
cockpit in the said municipality every four years.
For the period 1989 to 1992, the winning bidder was

Engr. Edgardo
Carabuena.
WHEREAS,
the AGENCY
has offered the CLIENT to pr
However, due to his failure to comply with the legal
requirements
for
operating
the protection of its employees,a properties and premises f
cockpit, the Sangguniang Bayan authorized petitioner
to continue of
his peace and order within
and Danilo
for theDumaintenance
cockpit operation until the winning bidder complies with the legal requirements.
MOUNTAIN DAIRY CORP.
On July 9, 1997, upon discovering that petitioner has been operating his cockpit in
NOW,Bayan
THEREFORE,
for and in consideration of the
violation of Municipal Ordinance, the Sangguniang
passed Municipal
mutual covenants
and stipulation hereinafter containe
Resolution suspending petitioners cockpit operation effective
upon approval.
AGENCY have agreed and do hereby agree and one with t
Respondent Jayoma, then Mayor of Mabini ordered petitioner to desist from holding
any cockfighting activity effective immediately. Feeling
aggrieved,
petitioner
filed a the CLIENT SEVEN (7
1. The
AGENCY
shall provide
Petition for Prohibition, against respondent mayor
and nine
the security services needs of
security
guardsmembers
who shallof
render
Sangguniang Bayan of Mabini. Petitioner prayed that a preliminary injunction and/or
a temporary restraining order be issued to prevent respondents
fromguards
suspending
his TWELVE (12) HOURS
2. The security
shall work
cockpit operation. The Petition for Prohibition was later
include
andamended
performtosuch
otherdamages.
duties incidental or connected with
P a g e | 196
xxxx
documentary proofs to support such claim.
8. The AGENCY shall charge the CLIENT for theIn Contract

this case,Price
respondent
equivalent
had not
to shown that the security g
SIXTEEN THOUSAND FOURTEEN (P16,014.00) PESOS
anotherper
employer,
month per
andguard
that per
it was compelled to pay th
twelve hours duty; x x x x
termination of the security agreement to be entitled to the
month. Indeed, no evidence was presented by respond
13. This contract shall begin on JANUARY 3, 2005 amount
and shallofend
lossonsuffered
JANUARY
by reason
3,
of the preterminatio
2006. The contract may be renewed subject to the mutual
recoveragreement
damages, there
of themust
parties
be pleading and proof of actu
unless sooner revoked or terminated for just cause by giving the other party prior
notice of termination date of contract;
Temperate damage was awarded instead in the amount of P
14. Both parties hereby agreed on the provision of this contract that only grave
violation thereof could warrant its termination upon a 30 day notice to other party.
COMSAVING BANK (NOW GSIS FAMILY BANK) v.
No. 170924,
Aug.
28, a2013,
J.
On April 13, 2005, petitioner, through its President Teodoro
T. Po,
wrote
letterBERSAMIN
to
Facts: Respondents were the owners of a residential lot
respondent's General Manager, Domingo de Guzman, informing the latter of the
meters situated in Bacoor, Cavite. Desirous of building t
former's decision to replace the security personnel effective
April themselves
15, 2005; and
thatUnified Home Lending Pro
they availed
of the
all monies due respondent as provided in the contract shall
settled. Home Mortgage Finance Corporation (NH
by thebeNational
they executed a construction contract with Carmencita C
GCB damages
Builders, representing
for the total contract
price of P265,000.00
The RTC awarded P952,833.50 actual or compensatory
the
to complete
the saying
construction
unserved portion of the contract. The CA affirmed
such award
that itwithin 75 days. To finan
Builders
facilitated
their
loan
application with Comsaving
represented that which respondent failed to receive as benefit which would have
they executed in favor of GCB Builders a deed of assign
pertained to it had the service contract not been pre-terminated illegally by petitioner.
P300,000.00 proceeds of the loan from Comsavings Bank
Comsavings Bank had released the total of P265,000
Issue: Whether or not the award of Actual Damage is correct.
construction cost, respondents inquired from GCB Builder
completed considering that their contract stipulated a com
Ruling: NO.
Cruz-Bay gave various excuses for the delay.
Respondents
demanded
the completion of the house. Estr
Art. 2199. Except as provided by law or by stipulation,
one is entitled
to an adequate
compensation only for such pecuniary loss suffered construction
by him as hesite
has and
duly found
proved.to her dismay that the h
Respondents
sued GCB Builders, Comsavings Bank an
Such compensation is referred to as actual or compensatory
damages.
contract and damages, praying that defendants be ordered
(1) to finish
the construction
Thus, actual or compensatory damages are those awarded
in satisfaction
of, or of
in the house; and (2) to pay
and attorneys
recompense for, loss or injury sustained. They proceeddamages,
from a sense
of naturalfees.
justice
and are designed to repair the wrong that has been done, to compensate for the injury
Whether one's
or notcase
Petitioner
inflicted and not to impose a penalty. The burden Issue:
is to establish
by a is liable to actual damage
preponderance of evidence which means that the evidence, as a whole, adduced by
Ruling: are
NO.not presumed. The
one side, is superior to that of the other. Actual damages
claimant must prove the actual amount of loss with a reasonable degree of certainty
To justify
an award
for actual
premised upon competent proof and on the best evidence
obtainable.
Specific
factsdamages, there must be co
amount oforloss.
Credence
that could afford a basis for measuring whatever compensatory
actual
damagescan
arebe given only to claims d
Respondents
not submit
any documentary proof, lik
borne must be pointed out. The award of actual damages
cannot bedid
simply
based on
actual
damages.
Nonetheless, it cannot be den
the mere allegation of a witness without any tangible claim
claim,for
such
as receipts
or other
substantial losses. Article 2224 of the Civil Code allows
P a g e | 197
damages when the court finds that some pecuniary loss

income.
was suffered
SSPI cannot
but its
loseamount
something that it was not entitle
cannot be proved with certainty. In lieu of actual SSPIs
damages,
claim
therefore,
that it was
temperate
entitled to interest income at the r
damages of P25,000.00 are awarded.
with Interco, as a measure of its actual damage, is fallac
provisions of a contract generally take effect only among t
heirs. SSPI cannot invoke the contractual stipulation on
Equitable because it is neither a party to the contract, nor a
EQUITABLE BANKING CORP. v. SPECIAL STEEL
PRODUCTS,
contracting
parties.INC., G.R.
No. 175350, June 13, 2012, DEL CASTILLO J.
Facts: In 1991, SSPI sold welding electrodes to Interco, as evidenced by 3 sales
Nevertheless, it is clear that defendants actions deprived
invoices. The invoices provided that Interco would pay interest at the rate of 36% per
its money for a period of two years. SSPI is therefore
annum in case of delay.
tortfeasors the profits that it failed to obtain from July
In payment for the above welding electrodes, Intercoshould
issued recover
3 checksinterest
payableat tothethelegal rate of 6% per annum
order of SSPI. Each check was crossed with the notation
"account
only" andand not for a loan or forbea
damages
based payee
on quasi-delict
was drawn against Equitable. The records only disclose that Uy presented each
crossed check to Equitable on the day of its issuance and claimed that he had good
title thereto. He demanded the deposit of the checks in his personal accounts in
Equitable.
Equitable acceded to Uys demands on the assumption that Uy, as the son-in-law of
LOSS OF EARNING CAPACIT
Intercos majority stockholder, was acting pursuant to Intercos orders. The bank also
relied on Uys status as a valued client. Thus, Equitable accepted the checks for
deposit in Uys personal accounts17 and stamped "ALL PRIOR ENDORSEMENT
AND/OR LACK OF ENDORSEMENT GUARANTEED" on their dorsal portion. Uy
PEOPLE v. IBANEZ, G.R. No. 197813, Sept. 25, 2013,
promptly withdrew the proceeds of the checks.
Facts: On August 29, 2004, Wilfredo Atendido was invite
Jesus and
Edwin making them a party o
In October 1991, SSPI reminded Interco of the unpaidsession
weldingwith
electrodes,
amounting
daughter,
was
underneath
the ithouse of a neighbor, 3 m
to P985,234.98.19 It reiterated its demand on January 14, 1992. Interco replied that
and his companions
were ostensibly in me
had already issued three checks payable to SSPI andwhere
drawnWilfredo
against Equitable.
SSPI
denied receipt of these checks. SSPI requested information from Equitable regarding
Rachel
saw her father
step away
the three checks. The bank refused to give any
information
invoking
the from the group to urinat
himself, Edwin snatched a t-shirt from a nearby clothesl
confidentiality of deposits.
over the head and face of Wilfredo. Robbed of vision as h
and for
pinned
SSPI and its president, Pardo, filed a complaint for Wilfredo
damages was
withwrestled
application
a down by Edwin, while
of
Wilfredos
chest.
Jesus,
armed
writ of preliminary attachment against Uy and Equitable Bank. The complaint alleged with a long iron bar, sw
the head. Terrified, Rachel stood immobilized as she wa
that the three crossed checks, all payable to the order of SSPI and with the notation
Thereafter, she saw her mother running out of their hous
"account payee only," could be deposited and encashedmother
by SSPI
only.for help to bring Wilfredo to the hospital.
asked
reach the hospital alive and was pronounced dead on arriva
Issue: Whether or not respondent is entitled to actual damages?
The trial court found the accused guilty beyond reasona
Ruling: YES.
murder and to indemnify the heirs of Wilfredo in the amo
indemnity; b) P25,000.00 as temperate damages;c) P50,00
SSPI did not recover interest payments at the stipulated
rate fromasInterco
because
it
P25,000.00
exemplary
damages;
and e) P1,946,180.00
agreed that the delay was not Intercos fault, but that Wilfredo.
of the defendants. If that is the
case, then Interco is not in delay (at least not after issuance of the checks) and the
Issue: Whether
or If
notInterco
the Heirs
stipulated interest payments in their contract did not become
operational.
is of the deceased Wilfr
earning
not liable to pay for the 36% per annum interest rate,
then capacity?
SSPI did not lose that
P a g e | 198
Ruling: NO.
Issue: Whether or not the Heirs of the deceased Miguelito

of earning capacity?
Compensation for lost income is in the nature of damages

and
as such requires due
Ruling:
NO.
proof of the damages suffered; there must be unbiased proof of the deceaseds
average income. In this case, only had the testimony
of Wilfredos
Damages
for loss ofspouse
earningwho
capacity are in the nature of
claimed that Wilfredo earned P400.00 to P500.00 dailyrule
as amust
doormat
vendor.
be duly proven by documentary evidence, not
testimony of the widow. By way of exception, damages f
Bare testimony of a deceaseds mother or spouse as tomay
the income
or earning
be awarded
despitecapacity
the absence of documentary evid
of the deceased must be supported by competent evidence
like
income
tax
returns
is self-employed earning less or
than the minimum wage un
receipts.
judicial notice may be taken of the fact that in the de
documentary evidence is available; or (2) the deceased is
Two exceptions to the rule that "documentary evidence
to
worker should
earning be
lesspresented
than the minimum
wage under current
substantiate the claim for damages for loss of earning capacity," and have thus
awarded damages where there is testimony that the
victim
either (1) selfIn this
case,was
no documentary
evidence was presented to bu
employed earning less than the minimum wage under current labor laws, and judicial
of earning capacity of the victim as claimed by his comm
notice may be taken of the fact that in the victim's line of work no documentary
shown
thatearning
the victim
by the exceptions men
evidence is available; or (2) employed as a daily-wage
worker
lesswas
thancovered
the
case. Settled is the rule that actual damages, inclusive
minimum wage under current labor laws."
caused by the crime, must be proved with a reasonable de
Although Wilfredos occupation as a doormat vendor
may fallto under
the first by the injured party. The
best evidence
prove obtainable
exception, the minimum wage for Region III, which
includesnothe
province
of
this criteria,
witness
was presented
to support the cont
Bulacan, is below P400.00 as per the National Wageswife
andofProductivity
the victim Commission
that the latter is a self-employed mas
Regional Daily Minimum Wage Rates as of August 2013.
Regrettably,
Hence,
this Court except
cannotfor
relytheon the uncorroborated testi
bare assertion of Wilfredo's spouse, there is nothing wife
to anchor
awardwhich
for loss
of specific details or parti
of thethevictim
lacks
earning capacity. Thus, the award for loss of earning
capacity in the amount of
earnings.
P1,946,180.00 should be deleted.
SERRA v. MUMAR, G.R. No. 193861, March 14, 2012,

Facts:LEONARDO-DE
On April 3, 2000, there was a vehicular accident a
PEOPLE v. VERGARA, G.R. No. 177763, July 3, 2013,
in
Barangay
Apopong, General Santos City, which resulte
CASTRO J.
Mumar,
ofon
respondent.
Facts: On February 10, 2001, accused-appellants were
causinghusband
a ruckus
LibertadColayco Streets, Pasay City by throwing water bottles at passers-by. At around 2:00
Armando
Tenerife
wasdown
driving
a.m., the victim, Miguelito Alfante, who was seemingly
drunk,
walked
the his Toyota Corolla sedan
heading
in
the
direction
of
Polomolok, South Cotabato
street. Vergara approached Alfante and told him: "Pare, mukhang high na high ka."
owned by
petitioner
coming
from the opposite direction, w
Alfante retorted: "Anong pakialam mo?" At this juncture,
Vergara
threw
his arm
a
passenger
jeep,
and
in
the
process
encroached on his lan
around Alfantes shoulder, received a knife from Inocencio, and suddenly stabbed
was Vergara
hit by the
van,
causing ran
the sedan to swerve to the le
Alfante. Vergara then said "Taga rito ako." Thereafter,
and
Inocencio
side
of
the
road.
The
van
collided
from the scene but were pursued by several witnesses. Alfante, meanwhile, was head on with the motor
meters behind the sedan on the outer lane, causing
brought to the Pasay City General Hospital where he died.
eventually led to his death.
The trial court as affirmed by the appellate court found accused-appellants guilty
Subsequently,
filed
beyond reasonable doubt of the crime of murder and ordered
them torespondent
pay, jointly
anda complaint against petition
of Reckless
resulting
severally the Heirs of the deceased Miguelito Alfante
the sumsImprudence
of P51,250.00,
as to Homicide. The trial
respondent.
On appeal,asthemoral
appellate court, affirmed the
actual damages, P50,000.00 as civil indemnification,
and P50,00.00
court awarded actual damages for loss of earning capacity
damages but there was no award for loss of earning capacity.
P a g e | 199
Issue: Whether or not the respondent as heir is entitled to

The debtor, Raul Arroyo, defaulted on his loan obliga
capacity?
received a Notice of Final Demand dated August 2, 2001,
liable to pay the loan obtained by Raul and Edwina Arro
Ruling: NO.
and penalty fees amounting to P7,703,185.54, and deman
Damages for loss of earning capacity is in the naturefailure
of actual
damages, which
as a with said demand, respon
of petitioner
to comply
rule must be duly proven by documentary evidence,collection
not merely
by
the
self-serving
of sum of money against him and the Arroyo
testimony of the widow. By way of exception, damages for loss of earning capacity
spouses can no longer be located, summons was not se
may be awarded despite the absence of documentary evidence when (1) the deceased
petitioner
actively
participated
is self-employed earning less than the minimum wage
under current
labor
laws, andin the case. Judgment wa
ordered
the payment
attorneys
judicial notice may be taken of the fact that in the
deceaseds
line ofofwork
no fees.
documentary evidence is available; or (2) the deceased is employed as a daily wage
Issue:labor
Whether
worker earning less than the minimum wage under current
laws.or not the award of attorneys fees was pro
It was error for the appellate court to have awarded

damages
forifloss
earning fees are allowed by law
Ruling:
Even
suchof attorney's
capacity based on petitioners testimony alone.
power to reduce the same if it is unreasonable. In Trade &
the Philippines v. Roblett Industrial Construction Corp., t

First, while it is conceded that the deceased was self-employed, there was no
the amount of attorney's fees to be paid since interests and
documentary proof available to prove his income from such occupation. There would
much asor the
principal debt. That is also the
have been receipts, job orders, or some form of thrice
writtenascontract
agreement
attorney'sfor
fees
amounting
to and
ten percent ( 10%) of the prin
between the deceased and his clients when he is contracted
a job.
Second,
penalty
charges, would
exceed the principal
more importantly, decedent was not earning "less than
the minimum
wage" definitely
at the
time of his death.
attorney's fees manifestly exorbitant. Hence, we reduce th
to ten percent (10%) of the principal debt only.
Respondent testified that her husband was earning not less than P6,000.00 per month.
On the other hand, the highest minimum wage rate at the time of the accident was
P148.00. At that rate, the monthly minimum wage would be P3,256.00 clearly an
amount less than what respondent testified to as her husbands
monthly earnings.
The
INTERNATIONAL
CONTAINER
TERMINAL SERVI
deceased would not fall within the recognized exceptions.
G.R. No. 195031, March 26, 2014, PEREZ J.
Facts: A twenty (20)-feet container van loaded with
[respondent] Celeste M. Chua arrived at the North Harb
California. On even date, it was unloaded from the vessel
belonging to [petitioner] for safekeeping pending the custo
1997, the container van was stripped and partiallyinspec
ATTORNEYS FEESFurther inspection thereof was scheduled on May 8, 19
scheduled, *petitioners+ depot was gutted by fire and *re
together with forty-four (44) others, were burned. In the s
seventy
percent
(70%)
of the contents of the van was fou
LIM v. SECURITY BANK CORP., G.R. No. 188539,
March
12, 2014,
PERALTA
thirty percent (30%) thereof was wet, dirty, and unusabl
J.
for the to
value
of the goods. However, her
Facts: Petitioner executed a Continuing Suretyship inreimbursement
favor of respondent
secure
August by
23,the
1999,
filed the suit below al
"any and all types of credit accommodation that may On
be granted
bank[respondent]
hereinto
and hereinafter" in favor of Raul Arroyo for the amount
of P2,000,000.00
is engulfed *petitioners+
proximate
cause of thewhich
fire that
covered by a Credit Agreement/Promissory Note Saidchemicals
promissorystored
note stated
that
the
therein; and, that [petitioner], in st
interest on the loan shall be 19% per annum, compounded
monthly,
for
the first
30 to exercise due dilige
chemicals in its depot,
failed
days from the date thereof, and if the note is not fully paid when due, an additional
supervision of its employees and/or of their work. She
penalty of 2% per month of the total outstanding principal and interest due and
value of the goods destroyed is (US$87,667.00) she has
unpaid, shall be imposed.
P a g e | 200
machine-copies of receipts showing an aggregate the

valueexcuse
of only
that(US$67,535.61)
he nonetheless proceeded to buy the l
that representative
the Muerteguisthe
were simply bluffing when
because, pursuant to [petitioners+ request, she gave assumed
to the latters
had
already
bought
the
same;
this is too convenient an ex
original receipts. Petitioner was ordered to pay damages and attorneys fees. Hence
Muertegui family lawyer, he had no right to take a p
this petition.
disclosed to him in confidence by his client, that would pl
with his duty. He may not, for his own personal interest
Issue: Whether or not the award of attorneys fees was proper.
clients word, believing it at one time and disbelieving
Muerteguis his undivided loyalty. He had the duty to prot
Ruling: An award of attorneys fees has always been
exception
rather
than the
andthecosts
even to
himself.
Petitioner Atty. Sabitsana is
rule and there must be some compelling legal reason
to bring thesituation
case within
representation
fromthe
the point of view that there
further
in terms applies.
of impaired loyalty, that is, to eval
exception and justify the award. In this case, none
of to
thethink
exceptions
any
way
will
impair
his
loyalty
Attorneys fees are not awarded every time a party prevails in a suit. The policy ofto a client.
the Court is that no premium should be placed on the right to litigate. Even when a
Moreover, as the Muertegui familys lawyer, Atty. Sabitsa
claimant is compelled to litigate with third persons or to incur expenses to protect his
safeguard his client's property, and not jeopardize it. Such
rights, still, attorneys fees may not be awarded where no sufficient showing of bad
and pursuant to his general agency. Even granting that A
faith could be reflected in a partys persistence in a case other than an erroneous
act as the Muertegui family's lawyer, he still owed them h
conviction of the righteousness of his cause.
of attorney-client relation provides no justiflcation tor
interest adverse to or in conflict with that of the former c
confidential information which the lawyer acquired w
client'sconfidence
once reposed should not be diveste
SABITSANA v. MUERTEGUI, G.R. No. 181359, Aug.
5, 2013, DEL CASTILLO
professional employment.This is underscored by the fact th
J.
information
from Carmen
which he used to his advantage
Facts: Garcia sold a parcel of land to the Muerteguis
in an unnotarized
document.
client.
From theAtty.
foregoing
disquisition, it can be seen that
He subsequently sold the same parcel of land to
petitioners
Sabitsana,
faith in
theapplied
sale of
Muerteguis family lawyer, in a notarized document. When
thepursuing
Muertegue
forthe lot despite being app
respondent's
favor.
the registration of the said parcel of land, Sabitsana opposed
the same
on Moreover,
the ground petitioner Atty. Sabitsan
towardruled
his clients,
the of
Muerteguis, and by his acts
that he owned the land. A civil case ensued. Theloyalty
trial court
in favor
insteadquestioned
of protecting
Over
respondents and awarded damages. On appeal, petitioner
thethem.
award
of and above the trial court's
justification
for the award of attorney's f
attorneys fees and litigation expenses considering theprovides
fact that further
he was not
in bad faith
costs
in
favor
of
the
respondent.
when he bought the said lot.
Issue: Whether or not the award of attorneys fees and litigation expenses is proper.
Ruling: Petitioners actual and prior knowledge of the first sale to Juanito makes
them purchasers in bad faith. It also appears that petitioner Atty. Sabitsana was remiss
in his duties as counsel to the Muertegui family. Instead of advising the Muerteguis to
register their purchase as soon as possible to forestall any legal complications that
accompany unregistered sales of real property, he did exactly the opposite: taking
advantage of the situation and the information he gathered from his inquiries and
investigation, he bought the very same lot and immediately
caused the registrationAND DEVELOPMENT C
ASIAN CONTSTRUCTION
thereof ahead of his clients, thinking that his purchase and prior registration would
CORP., G.R. No. 196723, Aug. 28, 2013, PERLAS BER
prevail. The Court cannot tolerate this mercenary attitude. Instead of protecting his
Facts: Asian Construction entered into a Civil Work Agr
clients interest, Atty. Sabitsana practically preyed on him.
the construction of a portion of the Light Rail Transit
Delos Santos Avenue, specifically, from Shaw Boulevard
Petitioner Atty. Sabitsana took advantage of confidential information disclosed to him
Avenue, Pasay City. The said Agreement provides that t
by his client, using the same to defeat him and beat him to the draw, so to speak. He
enforceability, and performance of the same shall be gov
rushed the sale and registration thereof ahead of his client. He may not be afforded
P a g e | 201
accordance with the law of the State of New York, U.S.A., without regard to, or legal
effect of, the conflicts of law provisions thereof" and that any dispute, controversy or
claim arising therefrom "shall be solely and finally settled
by arbitration."
ROSARIO,
Jr. V. DE GUZMAN, G.R. No. 191247, July
Facts: Spouses Pedro and Rosita de Guzman engaged the
Respondent paid the contract price. However, on September
1, 1998,
Sumitomo
Atty. Francisco
L. Rosario,
Jr. as defense counsel in the c
informed Asian Construction that it was terminating
Agreement
effective
by onethe
Loreta
A. Chong
for annulment of contract and r
damages
involving afailure
parcel "to
of land in Paraaque City.
September 5, 1998 due to the following reasons: (a) Asian
Constructions
commenced
from
the
RTC
and ended up in this Co
perform and complete the civil work for Notice to Proceed issued construction areas
represented
by petitioner,
within the duration of the Time Schedule in the Contract
Specification
of Civilwon
and their case at all levels. W
before this Court, Spouses de Guzman died in a vehicula
Architectural Works; (b) Asian Constructions failure to "provide adequate traffic
were substituted by their children, namely: Rosella de G
management as required in the Scope of Works pursuant
to subparagraph
5.2.4 of the
Guzman,
Arleen de Guzman,
and Philip Ryan de Guzman
Contract Specification of Civil and Architectural Work"; and (c) Asian Constructions
failure to "pay the suppliers of certain materialsPetitioner
and equipment
intothe
filed the used
Motion
Determine Attorneys Fees b
among
others,
that
he
had
a
verbal
construction of the Project in violation of paragraph 3.1.3, Article 3 of the agreement with the de
that he would
25% of the to
market value of the subject
Agreement." In view of the foregoing, Sumitomo requested
Asianget
Construction
against
them
by
Chong
would
"make the necessary arrangements for the proper turnover of the Project. The Arbitralbe dismissed. Despite the f
represented them, respondents refused his written dem
Tribunal rendered the Final Award which granted Sumitomos
claim for attorneys
contracted attorneys
fees. Petitioner insisted that he w
fees in the amount of US$200,000.00.
equivalent to 25% percent of the value of the subject lan
meruit.
Issue: Whether or not the award of attorneys fees is proper.
The RTC rendered the assailed order denying petitioners m
Ruling: Jurisprudence dictates that in the absence
a governing
stipulation,
wasoffiled
out of time.
The RTC stated that the said m
attorneys fees may be awarded only in case the plaintiff's
action
or
defendant's
judgment rendered in the stand
subject case, as affirmed by th
is so untenable as to amount to gross and evident bad faith.
final and executory on October 31, 2007. The RTC wro
motion was filed too late, it had already lost jurisdiction o
In this case, the parties agreed that reasonable attorneys fees shall be paid by the
decision
could
not be amended
defaulting party if it fails to perform any of its obligations
under
the Agreement
or by or corrected except for
would be
variance of the judgment rendered if h
the party not prevailing, if any dispute concerning There
the meaning
anda interpretation
would under
still bethe
included.
thereto arises. However, since the parties respective claims
Agreement had
already prescribed pursuant to New York State Law, considering as well that the
dispute was not regarding the meaning or construction
of Whether
any provision
the
Issue:
or notunder
the attorneys
fees awarded by the
Agreement, their stipulation on attorneys fees shouldbelong
remaintoinoperative.
Therefore,
the lawyer.
discounting the application of the foregoing stipulation, the Court proceeds to
examine the matter under the lens of bad faith pursuant to the above-discussed rules
Ruling: NO.
on attorneys fees.
After a careful scrutiny of the records, the Court observes that there was no gross and
In order to resolve the issues in this case, it is necessary
evident bad faith on the part of Asian Constructionofin attorneys
filing its complaint
against and extraordinary. In its
fees ordinary
Sumitomo since it was merely seeking payment of itsreasonable
unpaid works
done pursuant
compensation
paidtoto a lawyer by his client for
the Agreement.
its extraordinary concept, it is awarded by the court to t
paid by the losing party as indemnity for damages.13 A
similar in
some compromise
respects, theybe
differ from each other, as fu
Neither can its subsequent refusal to accept Sumitomos
offered
attorneys
fee
which
a
court
may,
in proper cases, awar
classified as a badge of bad faith since it was within its right to either accept or reject
strictly speaking, an item of damages. It differs from th
the same owing to its contractual nature. Verily, absent
any for
other
or equitable
counsel
thejust
latters
professional services. However, th
reason to rule otherwise, these incidents are clearly off-tangent
a finding
gross
things in with
common
that of
a treatment
of the subject is nec
and evident bad faith which altogether negates Sumitomos
entitlement
to
attorneys
court may grant to a successful party by way of attorne
damages sustained by him in prosecuting or defending, th
fees.
P a g e | 202
court. It may be decreed in favor of the party, not his lawyer, in any of the instances
authorized by law. On the other hand, the attorneys fee which a client pays his
counsel refers to the compensation for the latters services.
The losing
party against
PHILIPPINE
NATIONAL
CONSTRUCTION CORP. v
whom damages by way of attorneys fees may be assessed
is
not
bound
by,
nor
is
his 5, 2013, CERENO CJ.
CORP., G.R. No. 190957, June
liability dependent upon, the fee arrangement of the prevailing
party
with
his
lawyer.
Facts: The case involves a simple purchase transaction b
The amount stipulated in such fee arrangement may, Philippine
however, beNational
taken into
account Corporation (PNCC),
Construction
by the court in fixing the amount of counsel fees as anappellants
element ofRogelio
damages.Espiritu and Rolando Macasaet, and
represented by Cesar M. Ong, Jr., involving crushed basalt

The fee as an item of damages belongs to the party litigant
not to his lawyer. It PNCC. August 17, 1999,
appelleeand
to defendant-appellant
forms part of his judgment recoveries against the losing
party.
his
filed with theThe
trialclient
courtand
a complaint
against defendantslawyer may, however, agree that whatever attorneyssum
fee of
as money
an element
of
damages
with damages, alleging that;
the court may award shall pertain to the lawyer as his compensation
or asdefendants-appellants
part thereof.
(i) in March 1998,
engaged the servi
In such a case, the court upon proper motion may require
the
losing
party
to
pay
such
buying aggregates materials from plaintiff-appellee, for wh
fee directly to the lawyer of the prevailing party.
and supplied good quality crushed basalt rock;
(ii) the parties had initially agreed on the terms of payment

The two concepts of attorneys fees are similar in otherappellants
respects. would
They both
as corresponding to the valu
issuerequire,
the check
a prerequisite to their grant, the intervention of ordelivered,
the rendition
of
professional
or "Check Before Delivery," but prior to the imp
services by a lawyer. As a client may not be held liablepayment
for counsel
fees in favor
of his
agreement,
defendants-appellants
requested from
lawyer who never rendered services, so too may aterm
party
be
not
held
liable
for
from the delivery date within which to pay, which pla
attorneys fees as damages in favor of the winning and
party who enforced his rights
without the assistance of counsel. Moreover, both fees are subject to judicial control
(iii) after making deliveries pursuant to the purchase order
and modification. And the rules governing the determination of their reasonable
plaintiff-appellee, defendants appellants failed and refused
amount are applicable in one as in the other.
overdue accounts.
In the case at bench, the attorneys fees being claimed by the petitioner refers to the
The complaint prayed for payment of the amount of P782
compensation for professional services rendered, andatnot
indemnity
forthan
damages.
theasrate
of not less
6% monthly, to start in April, 1
He is demanding payment from respondents for having
successfully
handled
the
civil among others. On Novem
is completely settled and paid,"
case filed by Chong against Spouses de Guzman. Theappellants
award of attorneys
fees bytothedismiss, alleging that the
filed a motion
considering
that defendant-appellant
PNCC had been faith
RTC in the amount of P10, 000.00 in favor of Spouses
de Guzman,
which was
to
plaintiff-appellee,
as
can
be
seen
from the substantia
subsequently affirmed by the CA and this Court, is of no moment. The said award,
account
as
of
August
1999.
On
January
17, 2000, the trial
made in its extraordinary concept as indemnity for damages, forms part of the
dismiss. Thus, defendants-appellants filed their answer, all
judgment recoverable against the losing party and is to be paid directly to Spouses de
defendant-appellant PNCC was only with respect to th
Guzman (substituted by respondents) and not to petitioner.
Thus,that
to grant
petitioners
obligation
had not
been fully paid which, based on t
motion to determine attorneys fees would not result amounted
in a doubletoaward
of attorneys
onlyP474,095.92.
fees. And, contrary to the RTC ruling, there would be no amendment of a final and
Defendants-appellants filed a motion for reconsideration
executory decision or variance in judgment.
pendency of the case, the principal obligation was fully pa
the trial court of actual damages in the amount ofP782,
and legal bases.
Issue: Whether the CA gravely erred in awarding attorney

Ruling: YES.
The Court of Appeals gravely erred in awarding attorneys

2208 of the New Civil Code of the Philippines states the p
courts when awarding attorneys fees to a litigant. As a g
P a g e | 203
stipulate the recovery of attorneys fees. In the absenceRenato

of such
P. stipulation,
Dragon (Dragon)
this article
and Esperanza Tolentino (Tole
defaulted intothe
payment
restrictively enumerates the instances when these feesallegedly
may be recovered,
wit:
Art. of their debts under the
executed
in
favor
of
TMBC.
2208. In the absence of stipulation, attorney's fees and expenses of litigation, other
than judicial costs, cannot be recovered, except:(1) When exemplary damages are
Instead of filing a responsive pleading with the trial co
awarded;(2) When the defendant's act or omission has compelled the plaintiff to
motion to dismiss which was notably beyond the fifteen (
litigate with third persons or to incur expenses to protect his interest;(3) In criminal
the filing of a responsive pleading. Petitioner was declared
cases of malicious prosecution against the plaintiff;(4) In case of a clearly unfounded
to pay attorneys fees. Hence, this petition.
civil action or proceeding against the plaintiff; (5) Where the defendant acted in gross
and evident bad faith in refusing to satisfy the plaintiff's
plainly or
valid,
justaward
and of attorneys fees was pro
Issue: Whether
not the
demandable claim;(6) In actions for legal support;(7) In actions for the recovery of
wages of household helpers, laborers and skilled workers;(8)
for indemnity
Ruling:InInactions
the Award
of attorneys fees, the applicable pro
under workmen's compensation and employer's liability
laws;(9)
In
a
separate
civil
the NCC which allows the
grant thereof when the de
action to recover civil liability arising from a crime;(10)
When
at
least
double
judicial
compelled the plaintiff to litigate or to incur expens
costs are awarded;(11) In any other case where the court
deems itthe
justcircumstances
and equitablethat led to the filing of the
Considering
that attorney's fees and expenses of litigation shouldclear
be recovered.
ordinaryto satisfy their existing d
refusal of In
thethe
petitioners
sense, attorney's fees represent the reasonable compensation
paidoftotime
a lawyer
byaccommodations
his
long period
and the
granted to it
client for the legal services he has rendered to the latter;
while
in
its
extraordinary
them to satisfy their obligations, respondent was compelle
concept, they maybe awarded by the court as indemnity
for damages
to be paid by
litigate
for the protection
of the
the bank's interests, making t
losing party to the prevailing party. Attorney's fees as
part
of
damages
are
awarded
proper.
only in the instances specified in Article 2208of the Civil Code. As such, it is
necessary for the court to make findings of fact and law that would bring the case
within the ambit of these enumerated instances to justify the grant of such award, and
DAVID
v. MISAMIS
OCCIDENTAL
II ELECTRIC CO
in all cases it must be reasonable. The Supreme Court
perused
the assailed
CAs
G.R.
No. 194785,
11, 2012,
Decision, but cannot find any factual, legal, or equitable
justification
forJuly
the award
of MENDOZA J.
Facts: Petitioner
VirgiliobyS.the
David (David) was the ow
attorneys fees in favor of respondent. The only discernible
reason proffered
Electric
Sales,
a
company
engaged
in the business of sup
trial court in granting the award was that respondent, as complainant in the civil case,
including transformers for rural electric cooperatives
was forced to litigate to protect the latters interest. Thus, the court find that there is
Occidental II Electric Cooperative, Inc. (MOELCI), with
an obvious lack of a compelling legal reason to consider
the present
Ozamis
City. case as one that
falls within the exception provided under Article 2208The
of the
CivilResolved
Code. Absent
Board
statedsuch
the purchase of the said trans
finding, the SC hold that the award of attorneys fees through
by the court
a
quo,
as
sustained
a loan from the National Electrification Administ
by the appellate court, was improper and must be deleted.
no immediate action on the loan application, Engr. Rada
December 1992 and requested David to deliver the transfo
the required downpayment. David granted the request pro
pay interest at 24% per annum. Engr. Rada acquiesced to t
17, 1992, the goods were shipped to Ozamiz City via W
Lading, a sales invoice was included which stated the agre
annum. David filed a complaint for specific performance w
In response, MOECLI moved for its dismissal on the gro
cause of action as there was no contract of sale, to begin
the said contract
was unenforceable
under the Statute of F
MAGDIWANG REALTY CORP., v. MANILA BANKING
CORP., G.R.
No.
the case, hence, this petition.
195592, Sept. 5, 2012, REYES J.
Facts: A complaint for sum of money was filed on April 18, 2000 before the by
Issue:
Whether or(Magdiwang),
not the award of attorneys fees was pro
TMBC against herein petitioners, Magdiwang Realty
Corporation
P a g e | 204
given to him in violation of paragraph N of the real estat

Ruling: David was compelled to file an action againstpersonal
MOELCI
notice
but this
to him
reason
of said
aloneextrajudicial foreclosure un
will not warrant an award of attorneys fees. It is settled
personal
that the
notice
award
to oftheattorney's
mortgagor in extrajudicial forec
fees is the exception rather than the rule. Counsel's fees
necessary
are not awarded
because Section
every time
3 ofa Act No. 3135 only requir
party prevails in a suit because of the policy that no premium
of sale in
should
threebepublic
placedplaces
on theand the publication of tha
right to litigate. Attorney's fees, as part of damages, are
general
not necessarily
circulation.
equated
In this to
case,
the the parties stipulated in pa
amount paid by a litigant to a lawyer. In the ordinarymortgage
sense, attorney's
that all fees
correspondence
represent relative to the mortgag
the reasonable compensation paid to a lawyer by hisextrajudicial
client for theactions
legal services
shall be
he sent to mortgagor Rami
has rendered to the latter; while in its extraordinary concept,
Respondent
they had
mayno
bechoice
awarded
butby
to comply with this contrac
the court as indemnity for damages to be paid by the
into
losing
withparty
Ramirez.
to theThe
prevailing
contract is the law between them
party. Attorney's fees as part of damages are awardedwith
onlythe
in the
bank
instances
that paragraph
specifiedN of the real estate mor
in Article 2208 of the Civil Code which demandsadditional
factual, legal,
obligation
and equitable
upon it to provide personal n
justification. Its basis cannot be left to speculation or foreclosure
conjecture. sale
In this
to the
regard,
mortgagor
none Ramirez.
was proven.
The trial court awarded moral and exemplary damages, a
suit to Ramirez. In granting said monetary awards, the t
bank followed strictly the procedure in the extrajudicial fo
mortgage and had not filed prematurely an unlawful detain
would not have been forced to litigate and incur expenses.
COSTS
The Court deleted aforesaid monetary awards, except t

Nothing supports the trial courts award of moral damages
any physical
suffering,
mental anguish, fright, serious anx
RAMIREZ v. THE MANILA BANKING CORP., G.R.
No. 198800,
Dec. 11,
wounded feelings, moral shock, social humiliation, and
2013, VILLARAMA Jr. J.
Ramirez.
of moralatdamages must be anchore
Facts: Petitioner Jose T. Ramirez mortgaged two
parcelsThe
of award
land located
experienced
Bayanbayanan, Marikina City. The real estate Ramirez
mortgageactually
provides
that all mental anguish, besmir
correspondence relative to the mortgage includingnights,
notifications
extrajudicial
woundedoffeelings
or similar injury. Ramirezs testi
actions shall be sent to petitioner Ramirez at his given
address.
Respondent
filed
a Similarly, no exemplary
the moral damages he suffered.
request for extrajudicial foreclosure of real estate mortgage
since therebefore
is no Atty.
basis Hipolito
for the award of moral damages
Saez on the ground that Ramirez failed to pay his loan despite demands. Thereafter,
temperate, liquidated or compensatory damages. Exempla
a certificate of sale was issued in its favor as the highest bidder. Ramirez sued
way of example
forannulled
the public
respondent for annulment of sale and prayed that the certificate
of sale be
on good, in addition to mor
compensatory
damages.
The award of attorneys fees sin
the ground, among others, that paragraph N of the real
estate mortgage
was violated
state in the body of its decision the factual or legal reasons
for he was not notified of the foreclosure and auction sale.
The Trial Court ruled in favor of the petitioner
damages and cost of suit to the respondent for
respondent against the petitioner
and
awarded
moral,
exemplary
However,
with
the trial
courts award of costs of suit t
the
wrongful
suit
filed
by
theas a matter of course unles
allowed to the prevailing party
Rules of Court. These costs Ramirez may recover are thos

142 of the Rules of Court. For instance, Ramirez may reco
Issue: Whether or not the award of the trial court of the damages are valid.
in docketing his action for annulment of sale before the tri
amount of P3,530 or the amount of docket and lawful fees
Ruling: NO. Except for the Cost of Suit.
this petition before this Court.
The auction sale as well as the certificate of sale issued to respondent are null and
void since no notice of the foreclosure and sale by public auction was personally
P a g e | 205
paragraph 2, above, shall be 6% per annum from such fi

this interim period being deemed to be by then an equi
credit.
INTEREST
v. RURAL
BANK
NACAR v. GALLERY FRAMES, G.R. No. 189871,VENZON
Aug. 13, 2013,
PERALTA
J. OF BUENAVISTA, INC.,
2013,
DEL
CASTILLO
J.
Facts: Petitioner was illegally dismissed from his work.
The
Labor
Arbiter awarded
Facts:
This
case
aims
to
annul
back wages in his favor. However, there was a computation in the award of backa foreclosure sale conducte
the property of petitioner. Petitioner averred that an extra
wages. Petitioner questioned the same.
took place. And as such there could not have been notice
Issue: Whether or not petitioner is entitled to damages.and no sheriffs certificate of sale. However, noteworthy
paid the amount of 6000 pesos, after the period of redempt
Ruling: YES.
does not dispute the receipt of such amount.
When an obligation, regardless of its source, i.e., Issue:

law, contracts,
quasi-contracts,
Whether or
not the 6000 may be used to cover the d
delicts or quasi-delicts is breached, the contravenor can
be
held
liable
for damages.
sale.
The provisions under Title XVIII on Damages of the Civil Code govern in
determining the measure of recoverable damages.
Ruling: NO.
is entitled
to a return
With regard particularly to an award of interest Petitioner
in the concept
of actual
and of the P6, 000.00 she pai
not be thereof,
validly considered
compensatory damages, the rate of interest, as well asmay
the accrual
is imposed,as a redemption of her pr
as follows:
made long after the redemption period expired, responden
1. When the obligation is breached, and it consists in the
payment
of respondent
a sum of money,
amount.
Since
was not entitled to receive the s
i.e., a loan or forbearance of money, the interest due fully
shouldpaid
be that
which
may
have of petitioners property
from the foreclosure
been stipulated in writing. Furthermore, the interest due shall itself earn legal interest
auction sale covered all that petitioner owed it by way of p
from the time it is judicially demanded. In the absence of stipulation, the rate of
fees
and charges,
it must
returnorthe same to petitioner. "If s
interest shall be 6% per annum to be computed from
default,
i.e., from
judicial
thereofisArticle
no right
it, and it was unduly deliv
extrajudicial demand under and subject to the provisions
1169to ofdemand
the Civil
obligation to return it arises."Moreover, pursuant to Circu
Code.
of the Bangko
Sentralng
Pilipinas which took effect Ju
2. When an obligation, not constituting a loan or forbearance
of money,
is breached,
an interest on the amount of damages awarded may P6,000.00
be imposedshall
at the
discretion
earn interest atofthe rate of 6% per annum c
the court at the rate of 6% per annum. No interest, the
however,
be adjudged
Petitionshall
in Civil
Case up toonits full satisfaction.
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
ESTORES v. SUPANGAN, G.R. No. 175139, April 18, 2
be so reasonably established at the time the demand is made, the interest shall begin
Facts:
Hermojina
Estores
and respondent-spouses Art
to run only from the date the judgment of the court
is made
(at which
time the
entered
into
a
Conditional
Deed
quantification of damages may be deemed to have been reasonably ascertained). The of Sale whereby peti
to buy a parcel of land.
actual base for the computation of legal interest shall,respondent-spouses
in any case, be on offered
the amount
finally adjudged.
Consequently almost seven years from the time of the ex
3. When the judgment of the court awarding a sum of money becomes final and
notwithstanding
payment of1P3.5
executory, the rate of legal interest, whether the case
falls under paragraph
or million on the part of res
P a g e | 206
still failed to comply with her obligation. Hence, in a letter

The trial
datedcourt
September
rendered
27,a 2000,
decision in favour of responde
respondent-spouses demanded the return of the amount
and Comsavings
of P3.5 million
Bankwithin
solidarily
15 liable.
days from receipt of the letter. In reply, petitioner acknowledged receipt of the P3.5
Issue:Respondent-spouses
Whether or not Comsavings
bank is solidarily lia
million and promised to return the same within 120 days.
were
amenable to the proposal provided an interest of 12%damages.
compounded annually shall be
imposed on the P3.5 million. When petitioner still failed to return the amount despite
YES.for sum of money
demand, respondent-spouses were constrained to file Ruling:
a Complaint
before the Regional Trial Court (RTC) of Malabon against herein petitioner as well as
A banking institution like Comsavings Bank is obliged to
Roberto U. Arias as petitioner`s agent. RTC rendered its
respondentof Decision
diligencefinding
as well
as high standards of integrity a
spouses entitled to interest but only at the rate of 6%
per
annum
and
not
as is imbued with public in
transactions because its 12%
business
prayed by them. It also found respondent-spouses entitled
to attorneys feesBank
as they
in PhilippineNational
v. Pike: The stability of ban
confidence of the people in the honesty and efficiency o
were compelled to litigate to protect their interest.
connotes want of care in the performance of ones
characterized
by the want of even slight care, acting or o
Issue: Whether or not the imposition of the interest was
proper.
where
there
is
to act, not
Ruling: It is proper to impose interest notwithstanding the absence duty
of stipulation
in inadvertently but willfull
conscious
consequences
insofar as other p
the contract. Article 2210 of the Civil Code expressly
providesindifference
that interesttomay,
in
evinces a thoughtless disregard of consequences without
the discretion of the court, be allowed upon damages awarded for breach of contract.
them. There is no question that Comsavings Bank wa
In this case, there is no question that petitioner is legally
obligated
return the P3.5
dealings
with torespondents
because it did not comply w
million because of her failure to fulfill the obligationexercise
under the
Deed ofand integrity.
theConditional
required diligence
Sale, despite demand. Since the date of demand which is September 27, 2000 was
banking
institution
serving as an originator under the
satisfactorily established during trial, then the interest As
ratea of
12% should
be reckoned
of acceptance/completion,
it was fully aw
from said date of demand until the principal amount of
andthethecertificate
interest thereon
is fully
signed certificate was to affirm that the house had be
satisfied.
according to the approved plans and specifications, and th
accepted the delivery of the complete house. Given the p
should have desisted from presenting the certificate to res
without such conditions having been fulfilled. Yet, it m
certificate (through Estrella Capistrano, both in her per
TEMPERATE attorney-in-fact of her husband Danilo Capistrano) desp
house not yet even starting. Its act was irregular per se
purpose of the certificate. Worse, the pre-signing of the
was 28,
thereby
COMSAVINGS BANK v. CAPISTRANO, G.R. No.because
170942,itAug.
2013,enabled to gain in the process the
the form of several deductions from the proceeds of the lo
BERSAMIN J.
as anapplied
originator
Facts: In an attempt to build their own house, respondents
for abank.
loan On
fromthe
theother hand, respondents w
that the construction
of thethe
house was then still incom
petitioner.As proof of their qualifications to avail themselves
of a loan under
UHLP and to comply with the conditions prescribed
for the
approval oftheir
theirplight was that NHMFC d
defective.
Compounding
application, they submitted their record of employment,
the
amount
of
their
income,
monthly amortizations despite the non-completion of th
and a clearance from the Social Security System (SSS)
to the
effect
that theythem
had no
Bank
been
fair towards
as its clients, it should not ha
existing loans, among others. After which respondents executed in favor of GCB
certificate until it had confirmed that the construction
Builders a deed of assignment of the amount of the 300,000.00 proceeds of the loan
completed.
from Comsavings Bank. However, petitioner succeeded
in making respondents sign
the certificate of house acceptance/completion notwithstanding that the construction

of the house had not yet started. Respondents filed a case of specific performance
with damages against GCB Builders and Comsavings Bank.
PHILIPPINE AIRLINES, INC. v. LIM, G.R. No. 16898
P a g e | 207
PERALTA J.
The Court agrees with petitioner that respondent Manuel
forthe
damages
because,
Facts: On 22 February 1991, plaintiff Francisco Lao any
Limaward
went to
office of
third- as to said respondent, pe
with theirTours")
contract
carriage. Respondent Limtong wa
party defendant Rainbow Tours and Travel, Inc. ("Rainbow
andofpurchased
1991, as stated
in his confirmed plane ticke
three (3) confirmed PAL roundtrip tickets. They were February
booked on26,
a Link-Flight
PR842
doesreturn
not carry
withon
it an
assurance
that he will be travell
Cebu-Manila and Flight PR300 Manila-Hongkong. The
trip was
March
1,
his
chosen
companions.
Even
if
petitioner
failed to tran
1991.
and Go on the same flight as respondent Limtong, there is
contractby
ofPAL's
carriage
between
the latter and petitioner. Hen
Plaintiffs Francisco Lao Lim and Henry Go were informed
check-in
clerk
made liable
any damages
in favor of respondent Limto
that their bookings on Flight PR300 Manila-Hongkonghad
beenfor
cancelled
and that
their names were not on the computer's passenger list for the said flight. Plaintiff
is likewise
Manuel Limtong, however, was able to board the Petitioner
flight. Francisco
Laoliable
Lim for
andattorney's fees, because rec
Henry Go explained to the check-in clerk that they were
holding
confirmed
bookings
demanded payment for damages from petitioner but it w
and that they did not have the same cancelled. They likewise
begged
and pleaded
that
filed a case
in court
that petitioner
offered some form of
they be allowed to board the said flight but their pleas which
fell on the
deaf latter
ears. found insufficient. Clearly, responden
services of counsel to enforce a just claim, for which
Plaintiffs brought this suit for breach of contract of carriage and damages against PAL
alleging that the PAL personnel at the check-in clerkattorney's
at NAIA fees.
arrogantly shouted at
them and humiliated them in front of the other passengers by labeling their tickets
"cheap tickets" thus entitling them to moral damages. Plaintiffs further claimed that
because of their failure to reach Hongkong in time for the scheduled business
conferences, their contacts did not anymore wait for them.Since the business deals
that could have earned them a profit of P3,567,000.00 were not consummated, they
should then be entitled to the said amount.
MORAL
In its defense, PAL contended that plaintiffs were revenue passengers who made their
travel arrangements with Rainbow Tours. PAL then impleaded Rainbow Tours and
Travel, Inc. as third-party defendants, ascribing liability
on the latter for
whatever TERMINAL SERVIC
INTERNATINAL
CONTAINER
damages were suffered by plaintiffs Lao Lim and Go.
No. 195031, March 26, 2014, PEREZ J.
Facts: On April 2, 1997, the 20-feet container van loaded
The RTC rendered judgment sentencing the defendant Philippine Airlines and thirdCeleste Chua arrived at the North Harbor, Manila, from
party defendant Rainbow Tours and Travel, Inc. to jointly
and severally
unto the
was unloaded
from pay
the vessel
and was placed in the depot
plaintiff Francis Lao Lim reasonable temperate or moderate
damages,
andthea customs
like or inspection. On May 8, 1
safekeeping
pending
similar sum to the substituted plaintiff-heirs of the lategutted
HenrybyGo,
by way of container van was burne
firelikewise
and respondents
thereafter,
70% of the contents of the van was found to
reasonable temperate or moderate damages and for attorney's
fees.
thereof was wet, dirty, and unusable.
Issue: Whether the award for damages in favor of respondents proper.
Respondent demanded reimbursement for the value of
demands
fell on
deaf ears.with
On August 23, 1999, respo
Ruling: The court ruled affirming the Decision of
the Court
of Appeals
in the
essence,
that the
proximate cause of the fire
modification by deleting the award for moral damagesalleging,
in favor of
substituted
heirs
of the late Henry Go, and deleting the award of temperate
or moderate
damages
in
depot was
the combustible
chemicals
stored thereat; and, t
favor of respondent Manuel Limtong.
said flammable chemicals in its depot, failed to exercise du
and supervision of its employees and/or of their work.
The award of moral damages must be anchored on a clear showing that the
decision ordering herein petitioner to pay respondent actua
complainant actually experienced mental anguish, besmirched reputation, sleepless
its equivalent
nights, wounded feelings or similar injury. There US$67,535.61
was no better orwitness
to this in Philippine Peso at th
complaint;
moral
experience than complainant himself. Since complainant
Henry Go
faileddamages
to testify in
on the amount of P50,000.0
the witness stand, the trial court did not have anyP50,000.00.
factual basis to award moral
damages to him.
Issue: Whether or not respondent is entitled to moral
P a g e | 208
P50,000.00?
Issue: Whether or not Petitioner is liable to moral damage
Ruling: NO.
Ruling: YES.
2219
of the
the party
Civil Code, moral damages ma
An award of moral damages must be anchored on Under
a clearArticle
showing
that
or actions referred to in Article 20 of the Civil Code. M
claiming the same actually experienced mental anguish, besmirched reputation,
compensate the claimant for any physical suffering, men
sleepless nights, wounded feelings, or similar injury.
In the
case herein
under wounded feelings, mora
anxiety,
besmirched
reputation,
consideration, the records are bereft of any proof that
in fact
suffered
and respondent
similar injuries
unjustly
caused.
moral damages as contemplated in the afore-quoted provision of the Civil Code. The
Respondents
thatunjust
the acts of GCB Builders a
ruling of the trial court provides simply that: Petitioners
outright claimed
denial and
them
sleepless nights, worries and anx
refusal to heed respondents claim for payment of caused
the value
of to
hersuffer
lost/damaged
Danilo worked
in Saudi Arabia in order to p
shipment caused the latter to suffer serious anxiety,founded.
mental anguish
and wounded
construction
of their
family home. His anxiety and angui
feelings warranting the award of moral damages x x x.
The testimony
of respondent,
defective
construction
of their
on the other hand, merely states that when she failed
to recover
damages
fromhouse, as well as the inco
experienced
this suit were not easily probable.
petitioner, she was saddened, had sleepless nights and
anxietybecause
withoutofproviding
mere housewife,
but was
attorney-in-fact of Danilo in
specific details of the suffering she allegedly went through.
Since an award
ofthe
moral
working abroad, she was alon
damages is predicated on a categorical showing bytransaction.
the claimantWith
thatDanilo
she actually
construction
and
the
progress
of the present case. Given
experienced emotional and mental sufferings, it must be disallowed absent any
experienced worries and sleepless nights.
evidence thereon.
v. VERGARA,
COMSAVING BANK v. CAPISTRANO, G.R. No. PEOPLE
170924, Aug.
28, 2013, G.R. No. 177763, July 3, 2013
CASTRO J.
BERSAMIN J.
OnanFebruary
Facts: Respondents were the owners of a residentialFacts:
lot with
area of 10,
2002001,
squareaccused-appellants were ca
Colayco
Pasay
by throwing water bottles at
meters situated in Bacoor, Cavite. Desirous of building
their Streets,
own house
on City
the lot,
the (UHLP)
victim, Miguelito
Alfante, who was seemingly
they availed themselves of the Unified Home Lendinga.m.,
Program
implemented
VergaraOnapproached
Alfante and told him: "Pare, m
by the National Home Mortgage Finance Corporationstreet.
(NHMFC).
May 28, 1992,
Alfante
retorted:
pakialam
mo?" At this junctu
they executed a construction contract with Carmencita
Cruz-Bay,
the "Anong
proprietor
of
around
Alfantes
shoulder,
received a knife from Inocen
GCB Builders, for the total contract price of P265,000.00
with
the latter
undertaking
Alfante. the
Vergara
then saidGCB
"Taga rito ako." Thereafter,
to complete the construction within 75 days. To finance
construction,
from the
scene
pursued by several witnesses
Builders facilitated their loan application with Comsavings
Bank.
On but
Maywere
28, 1992,
brought to of
thethe
Pasay
City General
they executed in favor of GCB Builders a deed of assignment
amount
of the Hospital where he died.
P300,000.00 proceeds of the loan from Comsavings Bank. In September 1992, after
The trial to
court
as affirmed
Comsavings Bank had released the total of P265,000.00
GCB
Builders by
as the appellate court found
construction cost, respondents inquired from GCB Builder
when
their house
would
be crime of murder and orde
beyond
reasonable
doubt
of the
completed considering that their contract stipulated aseverally
completion
period
of
75
days.
the Heirs of the deceased Miguelito Alfante th
Cruz-Bay gave various excuses for the delay.
damages.
Respondents demanded the completion of the house. Estrella Capistrano went to the
construction site and found to her dismay that the
house
was still
unfinished.
Issue:
Whether
or not
the Heirs of the deceased Migue
Respondents sued GCB Builders, Comsavings Bank
and
NHMFC
for
breach
moral damages in the amount of
of P50,000.00?
contract and damages, praying that defendants be ordered jointly and severally liable:
(1) to finish the construction of the house; and (2) to Ruling:
pay themYES.
moral and exemplary
damages, and attorneys fees.
P a g e | 209
The award for moral damages in the amount of P50,000.00

norms of is
justice
proper
andeven
fair in
play
theis considered an infraction
absence of proof of mental and emotional suffering offor
thedamages.
victims heirs.
Such is
Asthe
borne
caseout
at bar.
by human nature and experience, a violent death invariably and necessarily brings
about emotional pain and anguish on the part of the victims
Here, petitioner
family. While
failednotoamount
establish factual basis for the i
of damages may totally compensate the sudden and electricity
tragic losstoofPermanent
a loved one
Light
it is
and to comply with the noti
nonetheless awarded to the heirs of the deceased to at law.
leastThere
assuage
is no
them.
direct evidence that points to respondents
with Permanent Lights electric meter. Notably, the latters
premises where it is readily accessible to anyone.
MANILA ELECTRIC COMPANY (MERALCO) v. CASTILLO, G.R. No.

182976, Jan. 14, 2013, VILLARAMA Jr. J.
Facts: On April 19, 1994, Fully Phased InspectorsCAYETANO
of petitioner v.Meralco,
sought
COLEGIO
DE SAN JUAN DE LETRA
permission to inspect Permanent Lights electric meter.
The
results
of
the
inspection
179545, July 11, 2012, PEREZ J.
show that the terminal seal of Permanent Lights meter
was deformed,
its decided
meter seal
Facts:
Respondent
to build a central library
was covered with fake lead, and the 100th dial pointer
was
misaligned.
On
the
basis
Petitioners were commissioned to undertake the project. T
of these findings, it was concluded that the meter was
and electric
(the tampered
Contract) with
was executed
for a total project cost of P52,
supply to Permanent Light was immediately disconnected.
In
order
to
secure
the
with this, petitioners gave respondent
a Technical Specific
reconnection of electricity to Permanent Light, respondents
paid
P50,000
as
down
part of the Contract and which detailed how petition
payment on the differential bill to be rendered by Meralco.
construction project. The parties agreed on a project durat
effective upon the signing of the Contract and the issuanc
Respondents received an electric bill in the amount of
P38,693.53 for the period of
permit.
March 22, 1994 to April 21, 1994. This was followed by another bill for P192,009.64
covering the period from November 19, 1993 to On
April
21, 1994.
Respondents
30 April
2005, petitioners
submitted to respondent its
contested both assessments. They likewise complained
of
a
significant
increase
in
a 100% completion of the project; (2) informing respond
their electric bills since petitioner installed the replacement
meter
on April
was P10
million;
and20,
(3)1994.
requesting a final inspection of th
day inspection, serious problems regarding workmanship a
On August 2, 1995, respondents filed against Meralco
a Petition
for Injunction,
discovered
and documented
by respondents. The parties a
Recovery of a Sum of Money and Damages withcorrective
Prayer for
Issuance works
of a on the project would be d
andthe
completion
Temporary Restraining Order (TRO) and Writ of Preliminary
inspection
Injunction.
results. Respondents
prayed for the issuance of a permanent injunction to enjoin petitioner from cutting
Petitioners
resumed
repair, rehabilitation and cleaning w
power supply to Permanent Light. For failure to observe
due process
in disconnecting
June upon
2005 petitioner
only. Petitioners
electricity to Permanent Light, the trial court imposed
moral allege
and that respondents failure
and in full
drained them financially and emotionally, com
exemplary damages in the amount of P200,000 and P100,000,
respectively.
additional loans for the project, as a result of which,
standing were adversely affected. Respondent, on the
Issue: Whether or not Petitioner is liable to moral damages
petitioners malicious breach embarrassed it in the eyes of
Ruling: YES.
to make do with makeshift classrooms, laboratories, an
Article 32 of the Civil Code provides for the award ofstudents.
moral damages in cases where
the rights of individuals, including the right against deprivation of property without
not Petitioners are entitled to moral dam
due process of law, are violated. In Quisumbing v. Issue:
ManilaWhether
ElectricorCompany
Court treated the immediate disconnection of electricity without notice as a form of
deprivation of property without due process of law,Ruling:
which NO.
entitles the subscriber
aggrieved to moral damages. The action of the petitioner in maliciously disconnecting
None of the parties are entitled to moral damages. A breac
the electric service constitutes a breach of public policy.
For
public
broad asonly if the party guilty of th
to an
award
of utilities,
moral damages
their powers are, have a clear duty to see to it that they
dobad
not faith.
violate
nor transgress
or in
Likewise,
a breach of contract may give ri
the rights of the consumers. Any act on their part that
militates
against
the
ordinary
the guilty party acted in a wanton, fraudulent, reckless
P a g e | 210
manner.
writ of preliminary attachment against Uy and Equitable B
Petitioners agreed to a staggered payment of the progress
they
cannot
that billings;
the threehence,
crossed
checks,
all payable to the order of
now claim that they were adversely affected by respondents
payments
in
installment.
"account payee only," could be deposited and encashed by
Also, with respect to the down payment, there was no showing that respondents
capacity, Pardo claimed an award of P3 million as
failure to pay the same on time and in full was attended by fraud or bad faith or was
defendants.
He allegedly
in wanton or oppressive disregard of petitioners rights.
More importantly,
an suffered
award hypertension, anxiety, a
thatthat
thethe
government
would
charge him for tax evasion or m
of moral damages must be anchored on a clear showing
party entitled
thereto
actually experienced mental anguish, besmirched reputation, sleepless nights,
Issue:alleged
Whether
or their
not Pardo
is entitled to moral damages?
wounded feelings, or similar injury. Here, while petitioners
that
finances
were adversely affected, they did not present any evidence thereof, such as documents
evidencing the loans they were supposedly compelled Ruling:
to obtain.
YES.
Respondent also failed to present sufficient evidenceMoral

of their
entitlement
to moral only when they are th
damages
are recoverable
damages. The alleged besmirched reputation it allegedly suffered as a result of the
defendants wrongful act or omission. Both the trial and
building not having been finished on time was not supported by any evidence other
Pardo indeed suffered as a result of the diversion of the
than respondents bare allegation.
matter and
thatexemplary
the things
he was worried and anxious
Absent any showing that the parties are entitled to moral
damages,
their respective claims therefore must be disallowed. materialize. It is rare for a person, who is beset with m
through his emotions and distinguish which fears or anxie
bother with. So long as the injured partys moral suffe
defendants actions, he may recover moral damages. H
EQUITABLE BANKING CORP. v. SPECIAL STEEL
PRODUCTS,
G.R.
million
is excessive.INC.,
Moral
damages are given not to punis
No. 175350, June 13, 2012, DEL CASTILLO J.
give the plaintiff the means to assuage his sufferings with
Facts: In 1991, SSPI sold welding electrodes to Interco,
as evidenced
by 3assales
The award
of P50,000.00
moral damages is reasonable u
invoices. The invoices provided that Interco would pay interest at the rate of 36% per
annum in case of delay.
In payment for the above welding electrodes, Interco issued 3 checks payable to the
PEOPLE v. NURFRASHIR HASHIM, G.R. No. 194255
order of SSPI. Each check was crossed with the notation "account payee only" and
SERENO
was drawn against Equitable. The records only disclose
thatJ.Uy presented each
Accused-appellant
approached AAA to encourage
crossed check to Equitable on the day of its issuanceFacts:
and claimed
that he had good
BBB
was
at
her
house,
when
title thereto. He demanded the deposit of the checks in his personal accounts inaccused-appellant paid he
work as a saleslady in Brunei. BBB, AAA, CCC, Cristy,
Equitable.
Labuan, Malaysia where they stayed at a hotel for th
instructed
CCC of
and Cristy to wear "sexy c
Equitable acceded to Uys demands on the assumption
that Uy,BBB,
as theAAA,
son-in-law
going
to
meet
their
supposed
boss
Intercos majority stockholder, was acting pursuant to Intercos orders. The bank also named Bunso at Cape
Malaysia.
When the
theychecks
arrivedforat Cape Imperial, accused
relied on Uys status as a valued client. Thus, Equitable
accepted
BunsoPRIOR
but they
failed to reach an agreement on the purp
deposit in Uys personal accounts17 and stamped "ALL
ENDORSEMENT
four
girls.
So,
accused
MackyUy
and Jun brought the girls to
AND/OR LACK OF ENDORSEMENT GUARANTEED" on their dorsal portion.
where the latter were introduced to a certain person n
promptly withdrew the proceeds of the checks.
alleged owner of the salon, and their purported manag
In October 1991, SSPI reminded Interco of the unpaidMommy
weldingSusan.
electrodes, amounting
to P985,234.98.19 It reiterated its demand on January 14, 1992. Interco replied that it
groupEquitable.
was staying
had already issued three checks payable to SSPI andWhile
drawnthe
against
SSPIat the Classic Hotel in La
numerous
occasions
to
have
sexual intercourse with Franz
denied receipt of these checks. SSPI requested information from Equitable regarding
presence
of
other
people.
She
the three checks. The bank refused to give any information invoking the followed his orders for
physical harm on her.
confidentiality of deposits.
first, private
complainants
not aware of the circu
SSPI and its president, Pardo, filed a complaint for At
damages
with application
for were
a
P a g e | 211
employment at the Golden Lotus. It was only afterrenovation

they agreed
costtohim
stayP27,000.00;
there for that in December 2000,
employment that they were forced to become sex workers
vacatetothe
earn
premises;
money and
Palado
payenclosed
off
and fenced the prem
the debts they incurred from their travel from Zamboanga
from City
entering
to Labuan,
and using
Malaysia.
the same; that he reported the
AAA and BBB worked as prostituted women. On 12 July
caused
2003,
the BBB
same had
to bea customer
recorded in the police blotter; that
who was a law enforcer at Kota Kinabalu, Malaysia.
theShe
leased
sought
premises
his help
by means
for her
of strategy, violence, force a
return to the Philippines, and he agreed. The Golden
that injunctive
Lotus wasrelief
raided
be granted
by the to restrain Palado and Ne
Immigration Officers, and the prostituted Filipino women,
him ofincluding
possession;
AAA
thatand
he BBB,
be restored in his possession of
were detained until all the women were deported to thethat
Philippines.
any structure built thereon in the meantime be
indemnified attorneys fees in the amount of P30,000.00
Issue: Whether or not AAA and BBB are entitled to moral
damages?
trial court
dismissed Barics Complaint but the appellate
of the trial courd and awarded. Baric nominal damages in
Ruling: YES.
Petitioner seeks to be absolved from liability on the awa
favor of Baric, and argued that because it is not privy
The criminal case of Trafficking in Persons as a Prostitute
is and
an analogous
Palado
Baric. case to the
crimes of seduction, abduction, rape, or other lascivious acts. In fact, it is worse. To
be trafficked as a prostitute without ones consent andIssue:
to be Whether
sexually or
violated
not a third
four party
to may be held liable for n
five times a day by different strangers is horrendous and atrocious. There is no doubt
that the victims experienced physical suffering, mental
Ruling:anguish,
NO.
fright, serious
anxiety, besmirched reputation, wounded feelings, moral shock, and social
Nominal
damages
humiliation when she was trafficked as a prostitute in
Malaysia.
Since are
therecoverable
crime of where a legal right is te
be vindicated against an invasion that has produced no act
Trafficking in Persons was aggravated, being committed by a syndicate. While it is
or where there has been a breach of contract and no s
true that accused-appellant was not tried and convicted
of the whatsoever
crime of trafficking
damages
have beeninor can be shown.
persons, the Court based its award of damages on the Civil Code, and not on the AntiTrafficking in Persons Act.
Under Article 2221 of the Civil Code, nominal damages m
whose right has been violated or invaded by the defe
vindicating or recognizing that right, not for indemnifyin
suffered. Nominal damages are not for indemnification o
vindication or recognition of a right violated or invaded."
Network Bank did not violate any of Baric's rights; it w

transferee of the property. Surely, it is not prohibited from
while the forcible entry case was pending, because as t
subject property, Palado may transfer his title at any t
ONE NETWORK RURAL BANK, INC. v. BARIC,follows
G.R. No.
5, or encumbrance. Any inva
the193684,
propertyMarch
as a lien
2014, DEL CASTILLO J.
rights as lessee was committed solely by Palado, and N
Facts: Jaime Palado was the registered owner of implicated
real property
with guilty
a building
or found
unless it actually took part in
containing commercial spaces for lease. Respondentacts,
Danilo
G.
Baric
was
a
lessee
which does not appear to be so from the evidence on
therein, operating a barber shop on one of the commercial spaces. Baric received a
appears that Barie was ousted through Palado's acts e
written notice from Palado demanding the return of the leased commercial space
acquired the subject property or came into the picture. Th
within 40 days from December 15, 2000.
bank liable for nominal damages.
Baric filed a case for forcible entry with prayer for injunctive relief against Palado
and herein petitioner One Network Rural Bank, Inc. In his Amended Complaint,
Baric alleged that he had been occupying the leased space since 1994; that in 2000,
he renovated the leased space with Palados consent and knowledge, and the
NOMINAL
P a g e | 212
EXEMPLARY
BERSAMIN J.
Facts: Respondents were the owners of a residential lot
meters situated in Bacoor, Cavite. Desirous of building t
they availed themselves of the Unified Home Lending Pro
by the
National
Mortgage Finance Corporation (NH
RAMIREZ v. THE MANILA BANKING CORP., G.R.
No.
198800,Home
Dec. 11,
they executed a construction contract with Carmencita C
2013, VILLARAMA Jr. J.
GCB
the total The
contract price of P265,000.00
Facts: Jose Ramirez mortgaged two parcels of land
in Builders,
favor of for
respondent
complete
theestate
construction
Manila Banking Corporation to secure his P265,000 toloan.
The real
mortgagewithin 75 days. To finan
Builders
facilitated
their
loan of
application with Comsaving
provides that all correspondence relative to the mortgage including notifications
they
executed
in
favor
of
GCB
Builders a deed of assign
extrajudicial actions shall be sent to petitioner Ramirez at his given address.
P300,000.00 proceeds of the loan from Comsavings Bank
Comsavings
had before
released the total of P265,000
Respondent filed a request for extrajudicial foreclosure
of real estateBank
mortgage
Atty. Hipolito Saez on the ground that Ramirez construction
failed to paycost,
his respondents
loan despiteinquired from GCB Builder
completed
considering
that only
their contract stipulated a com
demands. During the auction sale on September 8, 1994, respondent was the
Cruz-Bay
various
excuses
bidder for the mortgaged properties. Thereafter, a certificate
of gave
sale was
issued
in itsfor the delay.
favor as the highest bidder.
Respondents demanded the completion of the house. Estr

site Ramirez
and found
In 2000, respondent demanded that Ramirez vacateconstruction
the properties.
suedto her dismay that the h
Respondents
sued
GCB
Builders,
Comsavings Bank an
respondent for annulment of sale and prayed that the certificate of sale be annulled on
the ground, among others, that the real estate mortgage
was violated
for hepraying
was notthat defendants be ordered
contract
and damages,
notified of the foreclosure and auction sale.
(1) to finish the construction of the house; and (2) to pay
damages, and attorneys fees.
The trial court ruled that the extrajudicial foreclosure proceedings were null and void
and the certificate of sale is invalid and ordered the
bank
to payorP50,000.00
as is liable to exemplary dam
Issue:
Whether
not Petitioner
exemplary damages.
Ruling: YES. The law allows the grant of exemplary dam

Issue: Whether or not respondent bank is liable to exemplary
in the
amount
the publicdamages
good. The
business
of a bank is affected with pu
of P50,000.00?
a sworn profession of diligence and meticulousness in giv
For this reason, the bank should guard against injury attrib
faith on its part. The banking sector must at all times
Ruling: No.
meticulousness. The grant of exemplary damages is
carelessness
of petitioner,
aggravated
by its lack of prompt
Nothing supports the trial courts award of moral damages.
There was
no testimony
of
any physical suffering, mental anguish, fright, serious anxiety, besmirched reputation,
2208 injury
of the suffered
Civil Code
wounded feelings, moral shock, social humiliation, Article
and similar
by allows recovery of attorn
Ramirez. The award of moral damages must be anchored
onare
a clear
showing
that the plaintiff has incurr
damages
awarded
or where
Ramirez actually experienced mental anguish, besmirched
reputation,
sleepless
interest by reason of defendants act or omission. C
nights, wounded feelings or similar injury. Ramirezsdamages
testimonywere
is also
wanting
as to here, and that responden
properly
awarded
the moral damages he suffered.
litigate its cause, P30,000.00 be allowed as attorneys
reasonable.
Similarly, no exemplary damages can be awarded since
there is no basis for the award
of moral damages and there is no award of temperate, liquidated or compensatory

damages. Exemplary damages are imposed by way of example for the public good, in
addition to moral, temperate, liquidated or compensatory damages.
TANKEH v. DEVELOPMENT BANK OF THE PHILI
171428, Nov. 11, 2013, LEONEN J.
Facts: Respondent Ruperto Tankeh is the president of Ster
was incorporated to operate ocean-going vessels engaged
Ruperto Tankeh applied for a $3.5 million loan from publ
COMSAVING BANK v. CAPISTRANO, G.R. No. 170924, Aug. 28, 2013,
P a g e | 213
Bank of the Philippines for the partial financing of anare

ocean-going
intended tovessel
serve named
as a deterrent
the
to serious wrong doin
M/V Golden Lilac.
undue sufferings and wanton invasion of the rights of an
those guilty of outrageous conduct. These terms are gene
According to petitioner, Ruperto approached him and
interchangeably.
informed him
In that
common
he was
law, there is preference in the
operating a new shipping line business. Petitioner claimed
when the
thataward
respondent
is to account
had told
for injury to feelings and fo
him that petitioner would be given one thousand (1,000)
humiliation
shares tosuffered
be a director
by a person
of the as a result of an injury th
business. The shares were worth P1,000,000.00.
wantonly inflicted, the theory being that there should be
caused by the highly reprehensible conduct of the defend
On May 12, 1981, petitioner signed the Assignment circumstances
of Shares of Stock
as willfulness,
with Voting
wantonness, malice, gross
Rights. Petitioner then signed the May 12, 1981 promissory
oppression,
note in
insult
December
or fraud
1981.
or gross fraudthat intensi
He was the last to sign this note as far as the other signatories
punitive orwere
vindictive
concerned.
damages
The are often used to refer to
loan was approved by respondent Development Bank that
of the
may
Philippines
be awarded
on March
against18,
a person to punish him for
1981. The vessel was acquired on September 29, 1981either
for $5.3
case,
million.
these damages
On December
are intended in good measure
3, 1981, respondent corporation Sterling Shipping Lines,
others like
Inc.him
through
from similar
respondent
conduct in the future.
Ruperto executed a Deed of Assignment in favor of Development Bank of the
Philippines. On June 16, 1983, petitioner wrote a letter
Totojustify
respondent
an award
Ruperto
for exemplary
saying
damages, the wrongfu
that he was severing all ties and terminating his involvement
by bad faith,
withand
Sterling
an award
Shipping
of damages would be allowed o
Lines, Inc. He required that its board of directors passin
a resolution
a wanton,releasing
fraudulent,
him reckless
from
or malevolent manne
all liabilities, particularly the loan contract withRuperto
Development
acted in aBank
fraudulent
of the
manner through the finding
Philippines. In addition, petitioner asked that the
failure
private
to actrespondents
in a manner consistent
notify
with propriety, good m
Development Bank of the Philippines that he had severed his ties with Sterling
Shipping Lines, Inc. The accounts of respondent Sterling
SinceShipping
exemplary
Lines,
damages
Inc. inensure
the that future litigants or
Development Bank of the Philippines were transferred
to
public
respondent
Asset
acting in a similarly malevolent manner, it is incumbent
Privatization Trust on June 30, 1986.
such a way that will serve as a categorical warning and wi
will be dealt with in a similar manner. The amount of tw
On January 29, 1987, the M/V Sterling Ace was sold in Singapore for $350,000.00 by
(P200,000.00) is sufficient for this purpose.
Development Bank of the Philippines. When petitioner came to know of the sale, he
wrote respondent Development Bank of the Philippines to express that the final price
was inadequate, and therefore, the transaction was irregular. At this time, petitioner
was still bound as a debtor because of the promissory
note. Petitioner
filed severalG.R. No. 161921, July 17,
ARDIENTE
v. PASTOFIDE,
Complaints and alleged that respondent Ruperto, together
with
Arenas,
Jr. and
Vargas,
Facts:
Joyce
Ardiente
and
her husband Dr. Roberto Ardie
unittocovered
by Transfer
of Title No. 69905
had exercised deceit and fraud in causing petitioner
bind himself
jointlyCertificate
and
entered
into aofMemorandum
of Agreement
severally to pay respondent Development Bank of theArdiente
Philippines
the amount
the
conveying
in
favor
Ma.
Theresa
Pastorfide
all
their rights
mortgage loan. Although he had been made a stockholder and director of the
unit at Emily Homes in consideration of P70,000.00.
respondent corporation Sterling Shipping Lines, Inc., petitioner alleged that he had
never invested any amount in the corporation and that
had never
an actual
Forhe4 years,
Ma. been
Theresa's
use of the water connection in
member of the board of directors. He alleged that allwas
the never
moneyquestioned
he had supposedly
nor perturbed until on March 12,
invested was provided by respondent Ruperto. He claimed
that he onlyofattended
one was cut off. Proceeding t
water connection
Ma. Theresa
de Oro
Water
District
(COWD) to complain, a certain Mr
meeting of the board. In that meeting, he was introduced
to two
directors
representing
that
she
was
delinquent
forofthree (3) months corresp
Development Bank of the Philippines. Other than that, he had never been notified
December 1998, January 1999, and February 1999. Ma. T
another meeting of the board of directors.
date of her payment was March 18, 1999 yet due. Mrs. M
was at the instance
Issue: Whether or not respondent Ruperto is liable to exemplary
damagesof Joyce Ardiente that the water line wa
On March 15, 1999, Ma. Theresa paid the delinquent bills

her lawyer, Ma. Theresa wrote a letter to the COWD to
cutting oforthecorrective
water line.
On March 18, 1999, COWD, th
Also known as punitive or vindictive damages, exemplary
damages
Ruling: YES.
P a g e | 214
Gaspar Gonzalez, Jr., answered and reiterated that itRuling:

was atYES.
the instance of Joyce
Ardiente that the water line was cut off. Aggrieved, Ma. Theresa Pastorfide and her
husband filed a complaint for damages against petitioner,
Unlike COWD
the criminal
and liability
its manager
which is basically a State conc
Gaspar Gonzalez.
however, is likewise, if not primarily, intended for the o
thereby. It would make little sense for an award of exemp
Issue: Whether or not Petitioner is liable to exemplaryprivate
damages
offended party when the aggravating circumsta
withheld when it is qualifying. Withal, the ordinary o
Ruling: YES.
aggravating circumstance is a distinction that should only
criminal, rather than to the civil, liability of the offender.
Article 2229 provides that exemplary damages may be imposed by way of example or
aspect
of thearecase,
an aggravating
circumstance, wheth
correction for the public good. Nonetheless, exemplary
damages
imposed
not to
entitle the
offended
to an award of exem
enrich one party or impoverish another, but to serveshould
as a deterrent
against
or asparty
a
unbridled
meaning
negative incentive to curb socially deleterious actions.
In the instant
case,oftheArticle
award 2230 of the Civil Code
of exemplary damages is sustained, although it damages
reduced inthe
granted,
theamount
amount of
P30,000.00 is proper to conform
considering that respondent spouses were deprived of their water supply for more
than 9 months, and such deprivation would have continued were it not for the relief
granted by the trial court.
PEOPLE v. MALICDEM, G.R. No. 184601, Nov. 12, 20
Article 2208 of the Civil Code provides, among others,
that attorneys
fees may be
CASTRO
J.
recovered when exemplary damages are awarded,Facts:
when On
theAugust
defendant's
act Casullar
or
11, 2002,
and Concepcion me
omission has compelled the plaintiff to litigate with third
to incur
expenses
the persons
artesian orwell.
At around
9:00 p.m., while they were
to protect his interest, and where the defendant acted in
gross and
evident
bad if
faith
inknew the whereabouts of h
appellant
arrived
asking
they
(Rogelio).
They
answered
in
the
negative. They noticed th
refusing to satisfy the plaintiffs plainly valid, just and demandable claim.
alcohol and was drunk. Accused-appellant asked agai
Rogelio. As they stood to leave, appellant suddenly emb
six-inch knife to the left part of his chest. When accused
again,LEONARDO-DE
Wilson was able to deflect this blow which resulte
PEOPLE v. VERGARA, G.R. No. 177763, July 3, 2013,
Intending to help his friend, Bernardo was hit by the kn
CASTRO J.
course of aiding Wilson, Joel boxed the accused-app
Facts: On February 10, 2001, accused-appellants were
causing aMolina,
ruckus on
LibertadFrancisco
Rogelios
father, arrived at the scen
Colayco Streets, Pasay City by throwing water bottles
at
passers-by.
At
around
2:00
stomach by appellant. Accused-appellant then ran away
a.m., the victim, Miguelito Alfante, who was seemingly
down
thecar to the Region I Medic
Wilsondrunk,
aboardwalked
a police
patrol
street. Vergara approached Alfante and told him: "Pare,
mukhang
high
na
high
ka."
where Wilson was declared dead on arrival.
Alfante retorted: "Anong pakialam mo?" At this juncture, Vergara threw his arm
around Alfantes shoulder, received a knife from Inocencio,
and suddenly
The trial court
convictedstabbed
the accused-appellant of the crim
Alfante. Vergara then said "Taga rito ako." Thereafter, Vergara and Inocencio ran
Appelate
court meanwhile,
affirmed the was
decision of the trial court and
from the scene but were pursued by several witnesses.
Alfante,
the to pay exemplary damages in the amount of P25,000.
brought to the Pasay City General Hospital where he died.
Issue: accused-appellants
Whether or not accused-appellant
is liable to pay
The trial court as affirmed by the appellate court found
guilty
amount of
P25,000?
beyond reasonable doubt of the crime of murder and ordered
them
to pay, jointly and
severally the Heirs of the deceased Miguelito Alfante the sums of P51,250.00, as
Ruling:
but the amount
andYES
P50,00.00
as moralis P30,000.00 per recent ju
damages.
Unlike the criminal liability which is basically a State conc

Issue: Whether or not the Heirs of the deceased Miguelito
are entitled
to
however,Alfante
is likewise,
if not primarily,
intended for the o
exemplary damages?
thereby. It would make little sense for an award of exemp
private offended party when the aggravating circumsta
P a g e | 215
withheld when it is qualifying. Withal, the ordinary

some
or of
qualifying
its construction
nature equipment
of an
to PDSC as addition
its obligation.
aggravating circumstance is a distinction that shouldcompliance
only be of with
consequence
to the
criminal, rather than to the civil, liability of the offender. In fine, relative to the civil
For failure of FCC to accomplish the project within the
aspect of the case, an aggravating circumstance, whether ordinary or qualifying,
PDSC, informed FCC that it was terminating their con
should entitle the offended party to an award of exemplary damages within the
Paragraph 12.1 of the Building Contract. Subsequently, P
unbridled meaning of Article 2230 of the Civil Code.
FCC for the payment of liquidated damages amounting
delay.
Issue: Whether or not PICC is liable for the payment of liq

LIQUIDATED
Ruling: YES.
Article 2226 of the Civil Code allows the parties to

liquidated damages to be paid in case of breach. It is attach
to insure performance and has a double function: (1)
PHILIPPINE CHARTER INSURANCE CORP. v. PETROLEUM
damages, and (2) to strengthen the coercive force of the
DISTRIBUTORS AND SERVICE CORP. G.R. No.greater
180898,
April 18, 2012,
responsibility
in the event of breach. As a general r
MENDOZA J.
law between the parties, and they are bound by its stipulati
Facts: Petroleum Distributors and Services Corporation
(PDSC),
into agood customs, public or
not contrary
to entered
law, morals,
building contract with N.C. Francia Constructioncontracting
Corporation
(FCC),
the such stipulations, clause
parties
may for
establish
construction of a four-story commercial and parkingthey
complex.
Under
the
contract,
may deem convenient.
FCC agreed to undertake the construction of Park N Fly for the price of P
45,522,197.72.
By the language of the performance bond issued by PCIC
faithful compliance by FCC of its obligations in the cons
The parties agreed that the construction work would
on primary
Februarypurpose
1, 1999.for the acquisition of the
In begin
fact, the
Under the Project Evaluation and Review Techniqueguarantee
Critical Path
Method
to PDSC that (PERTthe project would proceed in acc
CPM), the project was divided into two stages: Phase
1
of
the
construction
workto ensure the payment of a
conditions of the contract and
would be finished on May 17, 1999 and Phase 2 would
begin
on
May
18,
1999
contractor would fail in the and
full performance of the contr
finish on October 20, 1999. The project should be turned
over bygave
October
21,the
1999.
by PCIC
PDSC
rightIt to proceed against it (PC
was further stipulated that in the event FCC failed compliance
to finish thewith
project
within the
its obligation.
period specified, liquidated damages equivalent to 1/10 of 1% of the contract price
for every day of delay shall accrue in favor of PDSC. Corollary, when PDSC communicated to FCC that it wa
PCICs liability, as surety, arose. The claim of PDSC again
FCC procured Performance Bond No. 31915 amounting to P 6,828,329.00 from
failure of FCC to perform its obligation under the buildi
petitioner Philippine Charter Insurance Corporation (PCIC) to secure full and faithful
value of the securities given as well as the proceeds of th
performance of its obligation under the Building Contract.
deducted from the claim of liquidated damages.
The construction started on February 1, 1999. Pursuant to the Building Contract,
PDSC sourced out construction materials and subcontracted various phases of the
work to help obtain the lowest cost of the construction and speed up the work of the
project. These resulted in the reduction of the contract price. During the Phase 1 of
the project, PDSC noticed that FCC was sixteen (16) days behind schedule and
reminded FCC to catch up with the schedule of the projected work path, or it would
impose the penalty of 1/10 of the 1% of the contract price. The problem, however,
was not addressed, as the delay increased to 30 days and ballooned to 60 days.
Consequently, FCC executed a deed of assignment, assigning a portion of its
receivables from Caltex Philippines, Inc. (Caltex), and a chattel mortgage, conveying
P a g e | 216

Civil Law Review II Case Updates

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Civil Law Review II Case Updates

Uploaded by

Copyright:

Available Formats

Submitted to:

ATTY. LILYBETH SINDAYEN-LIBIRAN

CIVIL LAW II: CASE UPDATES

METROPOLITAN BANK AND TRUST COMPANY v

Facts: Petitioner Metropolitan Bank and Trust Compa

BIASE, CAMACHO, CAYADAN, DIAZ, DINULONG, NARCIDA, PIC-IT, SILVA, WACHAYNA

Respondents opened a Joint Peso Account with petitioners Pritil-Tondo Branch.

The Office of the City Prosecutor of Manila issued a

Petitioner claims that it did not breach its contract with

The "Hold Out" clause applies only if there is a valid and

PNB v. SPOUSES MARAON, G.R. No. 189316, June

Facts: The controversy at bar involves a 152-square meter

Cu Unjieng e Hijos v. Mabalacat Sugar Co. A mortg

Spouses Paderes v. Court of Appeals. The improve

Castro, Jr. v. CA. Article 2127 is predicated on the presu

of accessions and accessories also belongs to the mortgagor

PCIC claims that DPCC was already in default as early as

Art. 1169, NCC. Those obliged to deliver or to do someth

To secure the completion of the works within the time stip

for the payment of liquidated damages, among others.

Petitioners liability for liquidated damages is not be

Dieparine, Jr. v. Court of Appeals. "A construction co

PASCUA v. G & G REAL TV CORPORATION

paying the contract price.

The spouses Bonrostro are liable for interest on the i

DBP v. GUARIA AGRICULTURAL AND REALTY D

Prior to the release of the loan, DBP required Guaria C

The loan was released in several instalments, and pursuant

Guaria Corporation demanded the release of the DBP's

Considering that it had yet to release the entire proceeds

Development Bank of the Philippines v. Licuanan. It wo

Assuming that DBP could already exact from the latter it

Under the circumstances, DBP's foreclosure of the mo

3. When the period is the controlling motive or the

cause of action to foreclose the real estate mortgage ove

5. In the event that the Mortgagor herein should fail or ref

However, mere delinquency in payment does not necessarily

accrued only after the lapse of the period indicated inThe

also claimed to be heirs of Angel C. Santos.

portion of one lane of the national highway at San Agustin,

The company further alleged that since the start of Reasonable

Issue: Whose negligence was the proximate cause of the

ordinary course of things, would not happen if those who

Reyes v. Sisters of Mercy Hospital. Res ipsa loquitur

BIGNAY EXIM PHILIPPINES, INC. v. Union

Guaria Corporation sued DBP to demand specific p

Guaria Corporation executed a chattel mortgage over the personal properties

Being a banking institution, DBP owed it to Guaria C

Philippine National Bank v. Pike. "The stability of ban

exercised extraordinary diligence in transporting the

Philbank filed its Answer asserting that it is an innocent m

favor of the Dys which was intended to mislead Philbank

In this light, the Dys' and Sps. Delgado's deliberate simulation

(a) The cause of the unforeseen and unexpected occurrenc

A monthly 5% late payment charge, 25% attorneys

Issue: Whether the real and proximate cause of NWA's

charges without offending the basic tenets of due process

RGM INDUSTRIES, INC. v. UNITED PACIFIC CAPITAL CORP.

David granted the request provided that MOELCI woul

The circumstances attendant herein are similar to those in

annum (p.a.), attorney's fees equivalent to 15% of the

Development Bank of the Philippines v. Family Food

as to actually prevent the spouses Bonrostro from making

Issue: Whether or not the Principle of Constructive