January 2017

[JANUARY 2017 CASES] 1
RODOLFO LAYGO and WILLIE

LAYGO, petitioners, vs. MUNICIPAL MAYOR OF
SOLANO, NUEVA VIZCAYA, respondent.
G.R. No. 188448. January 11, 2017
Ponente: Justice Jardeleza
Third Division
DECISION
JARDELEZA, J p:
This is a Petition for Review on Certiorari under Rule 45 of

the Revised Rules of Court from the Decision dated December 16,
2008 of the Court of Appeals (CA) in CA-G.R. SP No. 103922 and its
Resolution dated June 19, 2009.
Facts
In July 2005, Aniza Bandrang (Bandrang) sent two letter-
complaints to then Municipal Mayor Santiago O. Dickson (Mayor
Dickson) and theSangguniang Bayan of Solano, Nueva Vizcaya,
informing them of the illegal sublease she entered into with
petitioners Rodolfo Laygo and Willie Laygo over Public Market Stalls
No. 77-A, 77-B, 78-A, and 78-B, which petitioners leased from the
Municipal Government. Bandrang claimed that petitioners told her
to vacate the stalls, which they subsequently subleased to another.
Bandrang expressed her willingness to testify against petitioners if
need be, and appealed that she be given priority in the future to
lease the stalls she vacated.
In August 2005, the Sangguniang Bayan endorsed the letter of
Bandrang and a copy of Resolution No. 183-2004 to Mayor Dickson
for appropriate action. The Sanggunian informed Mayor Dickson that
the matter falls under the jurisdiction of his office since
it (Sanggunian) has already passed and approved Resolution No.
183-2004, which authorized Mayor Dickson to enforce the provision
against subleasing of stalls in the public market.
Mayor Dickson, in response, informed the Sanggunian that the
stalls were constructed under a Build-Operate-Transfer (BOT)
scheme, which meant that the petitioners had the right to keep
their stalls until the BOT agreement was satisfied. He then asked
the Sanggunian if provisions were made to sanction lessees under
the BOT scheme similar to the provision against subleasing (Item
No. 9) in the contract of lease.
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Thereafter, Bandrang wrote another letter to the Sanggunian,

praying and recommending to Mayor Dickson, by way of a
resolution, the cancellation of the lease contract between the
Municipality and petitioners for violating the provision on
subleasing. She suggested that after which, the stalls can be bidded
upon anew and leased to the successful bidder. She made the
suggestion because Mayor Dickson did not act on her concerns even
after theSanggunian referred them to him.
The Sanggunian once again referred the letter of Bandrang,
together with a copy of Resolution No. 183-2004, to Mayor Dickson
for appropriate action. The Sanggunian opined that they no longer
need to make any recommendation to Mayor Dickson because
Resolution No. 183-2004 already empowered and authorized him to
cancel the lease contracts pursuant to its pertinent provisions.
Mayor Dickson, however, did not act on the letter of Bandrang
and on the referrals of the Sanggunian. Thus, Bandrang filed a
Petition forMandamus against him before the Regional Trial Court of
Bayombong, Nueva Vizcaya (RTC). Subsequently, she amended her
petition to implead petitioners. Bandrang alleged that despite
already being aware of the violations of the lease contracts of
petitioners with the Municipality, Mayor Dickson still refused to
enforce the provisions of the lease contracts against subleasing.
Bandrang concluded that Mayor Dickson's inaction can only be
construed as an unlawful neglect in the performance and
enforcement of his public duty as the Chief Executive of Solano,
Nueva Vizcaya. Thus, she sought an order directing Mayor Dickson
to immediately cancel the lease between the Municipal Government
and petitioners over Public Market Stall Nos. 77-A, 77-B, 78-A, and
78-B, and to lease the vacated stalls to interested persons.
In his Answer with Special and Affirmative Defenses, Mayor
Dickson claimed that under the principle of pari delicto, Bandrang
had no right to seek remedy with the court as she was guilty herself
in leasing the market stalls. Mayor Dickson insisted that he acted in
accordance with law by referring the matter to the Sanggunian for
appropriate action. He also argued that Bandrang had no cause of
action against him and that she was not a real-party-in-interest. He
likewise asserted that the subject of the mandamus was not proper
as it entailed an act which was purely discretionary on his part.
AIHTE
In his Pre-Trial Brief, Mayor Dickson elaborated that Bandrang
had no cause of action because the stalls were on a BOT scheme
covered by an ordinance. During the hearing, Mayor Dickson
presented a copy of the resolution of the Sanggunian indicating that
there was a directive to all stall owners in the public market of
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Solano, Nueva Vizcaya to build their own stalls after a fire gutted
the public market.
On the other hand, petitioners denied that they were the
lessees of Stalls 77 A and B and 78 A and B. They clarified that
Clarita Laygo (Clarita), their mother, was the lessee of the stalls by
virtue of a BOT scheme of the Municipality. At the time they entered
into a contract of lease with Bandrang, it was agreed that the
contract was subject to the consent of the other heirs of Clarita. The
consent, however, was never given; hence, there was no subleasing
to speak of. Even on the assumption that there was, petitioners
maintained that the prohibition on subleasing would not apply
because the contract between the Municipality and Clarita was one
under a BOT scheme. Resolution No. 183-2004 only covered stall
holders who violated their lease contracts with the Municipal
Government. Since their contract with the Municipal Government
was not a lease contract but a BOT agreement, Resolution No. 183-
2004 would neither apply to them, nor be enforced against them.
Further, even granting arguendo that the prohibition would apply,
petitioners claimed that there was no more ground for the
revocation of the lease because the subleasing claimed by
Bandrang had ended and the subsequent receipt by the Municipality
of payments ratified the contract with petitioners.
Meanwhile, on July 23, 2007, the RTC issued an Order
directing the substitution of then incumbent mayor Hon. Philip A.
Dacayo (Mayor Dacayo) as respondent in place of Mayor Dickson.
Bandrang filed a Motion for Summary Judgment on January 8,
2008 arguing that no genuine factual issues existed to necessitate
trial. Bandrang reiterated the violation of petitioners against
subletting in their lease contracts with the Municipal Government.
She stated that the will of the Sanggunianto enforce the policy
against subleasing was bolstered by the fact that it passed two
more resolutions, Resolution No. 017-2006 and Resolution No. 135-
2007, reiterating the implementation of Resolution No. 183-
2004. She also alleged for the first time that after the filing of the
case, another violation besides the prohibition on subletting
surfaced: the non-payment of stall rental fees. She pointed out that
petitioners admitted this violation when they exhibited during a
hearing the receipt of payment of rentals in arrears for over 17
months. Bandrang quoted Section 7B.06 (a) of Municipal Ordinance
No. 164, Series of 1994, which stated that failure to pay the rental
fee for three consecutive months shall cause automatic cancellation
of the contract of lease of space or stall. She then concluded that
this section left Mayor Dickson with no choice but to comply.
RTC Ruling
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In its Resolution dated January 28, 2008, the RTC granted the
petition. Thus:
"WHEREFORE, in view of all the foregoing, let a
Writ of Mandamus to issue ordering the Municipal Mayor
of Solano to implement Nos. 9 and 11 of the provisions
of the Contract of lease of stall between the Municipal
Government of Solano and private respondents Rodolfo
and Willie Laygo.
The Municipal Mayor of Solano, Hon. Philip A.
Dacayo, is hereby ordered as it is his duty to enforce
[Sangguniang Bayan] Resolution Nos. 183-2004 and
[135]-2007 immediately and without further delay.
SO ORDERED."
The RTC held that the contract between petitioners and the
Municipal Government was a lease contract, as evidenced by a
certification signed by Mayor Epifanio LD. Galima (Mayor Galima)
dated September 17, 2006. The RTC brushed aside the non-
presentation of the written contract of lease, noting that public
policy and public interest must prevail. The RTC also held that even
on the assumption that there was a BOT agreement between
petitioners and the Municipal Government, petitioners had already
been compensated for it, as evidenced by certifications of the
Municipal Government dated August 28, 2006 and September 17,
2006.
As regards the non-payment of stall rentals, the RTC ruled that
petitioners deemed to have admitted the allegation when they
exhibited to the court the receipt of payment of rentals in arrears.
The RTC, thus, concluded that petitioners clearly violated the
terms and conditions of the lease contract, which gave rise to the
enactment of Resolution No. 183-2004. Since Mayor Dickson failed
in his duty to enforce the resolution and delayed its implementation
without valid reason,mandamus is a proper remedy.
Petitioners appealed to the CA, while then incumbent Mayor
Dacayo filed a manifestation expressing his willingness to
implement Resolutions No. 183-2004 and 135-2007.
Court of Appeals Ruling
On December 16, 2008, the CA rendered the now assailed
Decision dismissing the appeal and sustaining the resolution of the
RTC.
The CA affirmed the finding of the RTC that the contract
between petitioners and the Municipal Government is a lease
contract and, thus, Resolution No. 183-2004 applies to them.
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On the issue of whether mandamus is proper, the CA also

affirmed the ruling of the RTC stating that although mandamus is
properly availed of to compel a ministerial duty, it is also available
to compel action in matters involving judgment and discretion but
not to direct an action in a particular way, to wit:
x x x However, mandamus is available to
compel action, when refused, in matters involving
judgment and discretion, though not to direct the
exercise of judgment or discretion in a particular way or
the retraction or reversal of an action already taken in
the exercise of either.
In the case at bar, the Sangguniang Bayan of
Solano ("Sanggunian") delegated to Mayor Dickson
and subsequently to incumbent Mayor Dacayo,the
power to cancel the lease contracts of those
market stallholders who violated their contracts
with the Municipality. Inferred from this power is the
power of the Mayor to determine who among the
market stallholders violated their lease contracts with
the Municipality. Such power connotes an exercise of
discretion.
When then Mayor Dickson refused to exercise this
discretion, even after the Sanggunian assured him that
the subject resolution empowered him to have the lease
contracts of the Laygos cancelled, said act of refusal
became proper subject of mandamus, as it involved a
duty expected of him to be performed. So with the
incumbent Mayor, the Hon. Philip Dacayo, as was
ordered by the Court below.
Willie Laygo filed a Motion for Reconsideration dated January
20, 2009, which was denied by the CA in a Resolution dated June
19, 2009.
Hence, this petition, which raised the following questions:
1. May the Sangguniang Bayan Resolution No. 183-2004 be
applied against petitioners despite the absence of a
contract of lease between them and the Municipal
Government of Solano, Nueva Vizcaya?
2. May the Sangguniang Bayan Resolution No. 183-2004 be
enforced by anybody else, except Mayor Dickson?
Petitioners reiterate their position that Resolution No. 183-
2004 cannot be enforced against them because there was no
contract of lease between them and the Municipal Government and
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therefore, there cannot be any occasion for petitioner to violate any

provision.
Moreover, petitioners argue that the resolution can only be
enforced by Mayor Dickson because it specified Mayor Dickson and
no other. Consequently, since Mayor Dickson is no longer in office,
he cannot now enforce Resolution No. 183-2004.
The Municipal Government, through the Provincial Legal
Officer of Nueva Vizcaya, stated in its Comment that the policy
against subleasing was bolstered by the enactment of
the Sanggunian of another resolution, Resolution No. 135-2007, with
the same purpose, but authorizing then Mayor Dacayo to implement
the No. 9 and No. 11 provisions in the contract of lease.
Our Ruling
We grant the petition.
There is preponderant evidence
that the contract between
petitioners and the Municipal
Government is one of lease.
The type of contract existing between petitioners and the
Municipal Government is disputed. The Municipal Government
asserts that it is one of lease, while petitioners insist that it is a BOT
agreement. Both parties, however, failed to present the contracts
which they purport to have. It is likewise uncertain whether the
contract would fall under the coverage of the Statute of Frauds and
would, thus, be only proven through written evidence. In spite of
these, we find that the Municipal Government was able to prove its
claim, through secondary evidence, that its contract with petitioners
was one of lease.
We have no reason to doubt the certifications of the former
mayor of Solano, Mayor Galima, and the Municipal Planning and
Development Office (MPDO) which show that the contract of the
Municipal Government with petitioners' mother, Clarita, was
converted into a BOT agreement for a time in 1992 due to the fire
that razed the public market. These certifications were presented
and offered in evidence by petitioners themselves. They prove that
Clarita was allowed to construct her stalls that were destroyed using
her own funds, and with the payment of the lease rentals being
suspended until she recovers the cost she spent on the
construction. The construction was, in fact, supervised by the MPDO
for a period of three months. The stalls were eventually constructed
completely and awarded to Clarita. She thereafter re-occupied the
stalls under a lease contract with the Municipal Government. In fact,
in his Notice dated August 21, 2007, the Municipal Treasurer of
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Solano reminded petitioners of their delinquent stall rentals from

May 2006 to July 2007. As correctly posited by the Municipal
Government, if the stalls were under a BOT scheme, the Municipal
Treasurer could not have assessed petitioners of any delinquency.
Also, petitioners themselves raised, for the sake of argument,
that even if the contract may be conceded as one of lease, the
municipality is nonetheless estopped from canceling the lease
contract because it subsequently accepted payment of rentals until
the time of the filing of the case.
In the same vein, the Sangguniang Bayan Resolution No. 183-
2004, which quoted Items No. 9 and 11 of the lease contract on the
absolute prohibition against subleasing and the possible termination
of the contract in view of back rentals or any violation of the
stipulations in the contract, is presumed to have been regularly
issued. It deserves weight and our respect, absent a showing of
grave abuse of discretion on the part of the members of
the Sanggunian.
Mandamus, however, is not
proper.
Mandamus is a command issuing from a court of competent
jurisdiction, in the name of the state or the sovereign, directed to
some inferior court, tribunal, or board, or to some corporation or
person requiring the performance of a particular duty therein
specified, which duty results from the official station of the party to
whole the writ is directed or from operation of law. As a
rule, mandamus will not lie in the absence of any of the following
grounds: [a] that the court, officer, board, or person against whom
the action is taken unlawfully neglected the performance of an act
which the law specifically enjoins as a duty resulting from office,
trust, or station; or [b] that such court, officer, board, or person has
unlawfully excluded petitioner/relator from the use and enjoyment
of a right or office to which he is entitled. Neither will the
extraordinary remedy of mandamus lie to compel the performance
of duties that are discretionary in nature. In Roble Arrastre, Inc. v.
Villaflor, we explained the difference between the exercise of
ministerial and discretionary powers, to wit:
"Discretion," when applied to public functionaries,
means a power or right conferred upon them by law or
acting officially, under certain circumstances,
uncontrolled by the judgment or conscience of others. A
purely ministerial act or duty in contradiction to a
discretional act is one which an officer or tribunal
performs in a given state of facts, in a prescribed
manner, in obedience to the mandate of a legal
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authority, without regard to or the exercise of his own

judgment upon the propriety or impropriety of the act
done. If the law imposes a duty upon a public officer
and gives him the right to decide how or when the duty
shall be performed, such duty is discretionary and not
ministerial. The duty is ministerial only when the
discharge of the same requires neither the exercise of
official discretion or judgment. (Citation omitted.)
Applying the foregoing distinction, we find that the Petition
for Mandamus must fail because the acts sought to be done are
discretionary in nature.
The petition sought an order to direct Mayor Dickson to cancel
the lease contract of petitioners with the Municipal Government and
to lease the vacated market stalls to interested persons. We have
already settled in the early case of Aprueba v. Ganzon that the
privilege of operating a market stall under license is always subject
to the police power of the city government and may be refused or
granted for reasons of public policy and sound public
administration. Being a delegated police power falling under the
general welfare clause of Section 16 of the Local Government Code,
the grant or revocation of the privilege is, therefore, discretionary in
nature.
Moreover, Resolution No. 183-2004, or even its subsequent
equivalent, Resolution No. 135-2007, merely authorizes the mayor
"to enforce the No. 11 provision of the contract of lease of market
stalls between the Municipal Government and the stallholders at the
Solano [P]ublic Market who violated the No. 9 provision of said
contract x x x." Item No. 11 provides that "[i]f any back rental
remains unpaid for more than [15] days or if any violation be made
of any of the stipulations of this lease by the LESSEE, the
LESSOR may declare this lease terminated and, thereafter, reenter
the leased premises and repossess the same, and expel the LESSEE
or others claiming under him/her from the leased premises." Clearly,
Item No. 11 does not give the mayor a mandate to motu propio or
automatically terminate or cancel the lease with a lessee who is
delinquent in the payment of rentals or who is in violation of any of
the provisions of the contract. This is apparent from the permissive
word "may" used in the provision. It does not specifically enjoin the
mayor to cancel the lease as a matter of "duty." Where the words of
a statute are clear, plain, and free from ambiguity, it must be given
its literal meaning and applied without attempted interpretation.
We do not discount, however, our ruling in previous cases
where we cited exceptions to the rule that only a ministerial duty
can be compelled by a writ of mandamus. In Republic v.
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Capulong, we held that as a general rule, a writ of mandamus will

not issue to control or review the exercise of discretion of a public
officer since it is his judgment that is to be exercised and not that of
the court. Courts will not interfere to modify, control or inquire into
the exercise of this discretion unless it be alleged and proven that
there has been an abuse or an excess of authority on the part of the
officer concerned.
In Angchango, Jr. v. Ombudsman, we also held that in the
performance of an official duty or act involving discretion, the
corresponding official can only be directed by mandamus to act, but
not to act one way or the other. However, this rule admits of
exceptions such as in cases where there is gross abuse of
discretion, manifest injustice, or palpable excess of authority. These
exceptions do not apply in this case.
Firstly, while Mayor Dickson may be compelled to act on the
directive provided in Resolution No. 135-2007, he may not be
compelled to do so in a certain way, as what was prayed for by
Bandrang in seeking the cancellation of the contract and to re-lease
the vacated market stalls to interested persons. It was enough that
Mayor Dickson be reminded of his authority to cancel the contract
under Item No. 11, but whether or not his decision would be for or
against Bandrang would be for Mayor Dickson alone to decide. Not
even the Court can substitute its own judgment over what he had
chosen.
As it was, Mayor Dickson did act on the matter before him. He
exercised his discretion by choosing not to cancel the contract on
the ground of pari delicto, explaining that Bandrang, as the sub-
lessee herself, was in violation of the same policy on subleasing.
The complaint does not allege that in deciding this way, Mayor
Dickson committed grave abuse of discretion, manifest injustice, or
palpable excess of authority. Neither did Bandrang present proof
that Mayor Dickson acted arbitrarily, wantonly, fraudulently, and
against the interest of the public when he chose not to cancel the
lease contract of petitioners.
Further, aside from the imperative duty of the respondent in a
petition for mandamus to perform that which is demanded of him, it
is essential that, on the one hand, the person petitioning for it has a
clear legal right to the claim that is sought. To be given due course,
a petition for mandamus must have been instituted by a party
aggrieved by the alleged inaction of any tribunal, corporation, board
or person which unlawfully excludes said party from the enjoyment
of a legal right. The petitioner in every case must therefore be an
aggrieved party, in the sense that he possesses a clear right to be
enforced and a direct interest in the duty or act to be performed.
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The Court will exercise its power of judicial review only if the case is
brought before it by a party who has the legal standing to raise the
constitutional or legal question. "Legal standing" means a personal
and substantial interest in the case such that the party has
sustained or will sustain direct injury as a result of the government
act that is being challenged. Does Bandrang have such legal
standing to institute the petition? We answer in the negative.
Following our ruling in the early case of Almario v. City Mayor,
et al., where we ruled that the petitioner seeking to compel the city
mayor to eject occupants of stalls in the public market had no locus
standi to file the petition for mandamus, we also arrive here with
the same conclusion. Similarly with Almario, Bandrang is not an
applicant for any stall in the public market which is the subject of
the controversy. She is neither a representative of any such
applicant, stall holder, or any association of persons who are
deprived of their right to occupy a stall in said market. As we have
deduced in Almario:
x x x Verily, he is not the real party in interest who
has the capacity, right or personality to institute the
present action. As this Court has well said in an
analogous case, "the petitioner does not have any
special or individual interest in the subject matter of the
action which would enable us to say that he is entitled
to the writ as a matter of right. His interest is only that
a citizen at large coupled with the fact that in his
capacity a[s] president of the Association of Engineers it
is his duty to safeguard the interests of the members of
his association." (Italics in the original, citation omitted.)
WHEREFORE, in view of the foregoing, the petition
is GRANTED. The Decision dated December 16, 2008 and
Resolution dated June 19, 2009 of the Court of Appeals in CA-G.R.
SP No. 103922, and the Resolution dated January 28, 2008 of the
Regional Trial Court of Bayombong, Nueva Vizcaya are
REVERSED and SET ASIDE. The Petition for Mandamus against
Mayor Santiago O. Dickson is DISMISSED.
SO ORDERED.
Velasco, Jr., Bersamin, Reyes and Caguioa, * JJ., concur.
||| (Laygo v. Municipal Mayor of Solano, Nueva Vizcaya, G.R. No.
188448, [January 11, 2017])
CIVIL LAW REVIEW 2

PRUDENTIAL BANK (now BANK OF THE PHILIPPINE

ISLANDS), petitioner, vs. RONALD RAPANOT and
HOUSING & LAND USE REGULATORY
BOARD, respondents.
G.R. No. 191636. January 16, 2017
Ponente: Justice Caguioa
First Division
DECISION
Only questions of law may be raised in petitions for review

on certiorari brought before this Court under Rule 45, since this
Court is not a trier of facts. While there are recognized exceptions
which warrant review of factual findings, mere assertion of these
exceptions does not suffice. It is incumbent upon the party seeking
review to overcome the burden of demonstrating that review is
justified under the circumstances prevailing in his case.
The Case
Before the Court is an Appeal by Certiorari under Rule 45 of
the Rules of Court (Petition) of the Decision dated November 18,
2009 (questioned Decision) rendered by the Court of Appeals-
Seventh Division (CA). The questioned Decision stems from a
complaint filed by herein private respondent Ronald Rapanot
(Rapanot) against Golden Dragon Real Estate Corporation (Golden
Dragon), Golden Dragon's President Ma. Victoria M. Vazquez and
herein petitioner, Bank of the Philippine Islands, formerly known as
Prudential Bank (Bank) for Specific Performance and Damages
(Complaint) before the Housing and Land Use Regulatory Board
(HLURB).
The Petition seeks to reverse the questioned Decision insofar
as it found that the Bank (i) was not deprived of due process when
the Housing and Land Use Arbiter (Arbiter) issued his Decision dated
July 3, 2002 without awaiting submission of the Bank's position
paper and draft decision, and (ii) cannot be deemed a mortgagee in
good faith with respect to Unit 2308-B2 mortgaged by Golden
Dragon in its favor as collateral.
The Facts
Golden Dragon is the developer of Wack-Wack Twin Towers
Condominium, located in Mandaluyong City. On May 9, 1995,
Rapanot paid Golden Dragon the amount of P453,329.64 as
reservation fee for a 41.1050-square meter unit in said
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condominium, particularly designated as Unit 2308-B2, and covered

by Condominium Certificate of Title (CCT) No. 2383 in the name of
Golden Dragon.
On September 13, 1995, the Bank extended a loan to Golden
Dragon amounting to P50,000,000.00 to be utilized by the latter as
additional working capital. To secure the loan, Golden Dragon
executed a Mortgage Agreement in favor of the Bank, which had the
effect of constituting a real estate mortgage over several
condominium units owned and registered under Golden Dragon's
name. Among the units subject of the Mortgage Agreement was
Unit 2308-B2. The mortgage was annotated on CCT No. 2383 on
September 13, 1995.
On May 21, 1996, Rapanot and Golden Dragon entered into a
Contract to Sell covering Unit 2308-B2. On April 23, 1997, Rapanot
completed payment of the full purchase price of said unit
amounting to P1,511,098.97. Golden Dragon executed a Deed of
Absolute Sale in favor of Rapanot of the same date. Thereafter,
Rapanot made several verbal demands for the delivery of Unit
2308-B2.
Prompted by Rapanot's verbal demands, Golden Dragon sent
a letter to the Bank dated March 17, 1998, requesting for a
substitution of collateral for the purpose of replacing Unit 2308-B2
with another unit with the same area. However, the Bank denied
Golden Dragon's request due to the latter's unpaid
accounts. Because of this, Golden Dragon failed to comply with
Rapanot's verbal demands.
Thereafter, Rapanot, through his counsel, sent several
demand letters to Golden Dragon and the Bank, formally
demanding the delivery of Unit 2308-B2 and its corresponding CCT
No. 2383, free from all liens and encumbrances. Neither Golden
Dragon nor the Bank complied with Rapanot's written demands.
AIHTE
Proceedings before the HLURB
On April 27, 2001, Rapanot filed a Complaint with the
Expanded National Capital Region Field Office of the HLURB. The
Field Office then scheduled the preliminary hearing and held several
conferences with a view of arriving at an amicable settlement.
However, no settlement was reached.
Despite service of summons to all the defendants named in
the Complaint, only the Bank filed its Answer. Thus, on April 5,
2002, the Arbiter issued an order declaring Golden Dragon and its
President Maria Victoria Vazquez in default, and directing Rapanot
and the Bank to submit their respective position papers and draft
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decisions (April 2002 Order). Copies of the April 2002 Order were
served on Rapanot and the Bank via registered mail. However, the
envelope bearing the copy sent to the Bank was returned to the
Arbiter, bearing the notation "refused to receive."
Rapanot complied with the April 2002 Order and personally
served copies of its position paper and draft decision on the Bank on
May 22, 2002 and May 24, 2002, respectively. In the opening
statement of Rapanot's position paper, Rapanot made reference to
the April 2002 Order.
On July 3, 2002, the Arbiter rendered a decision (Arbiter's
Decision) in favor of Rapanot, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is
hereby rendered as follows:
1. Declaring the mortgage over the condominium unit No.
2308-B2 covered by Condominium Certificate of
Title No. 2383 in favor of respondent Bank as null
and void for violation of Section 18 of Presidential
Decree No. 957[;]
2. Ordering respondent Bank to cancel the mortgage on
the subject condominium unit, and accordingly,
release the title thereof to the complainant;
3. Ordering respondents to pay jointly and severally the
complainant the following sums:
a. P100,000.00 as moral damages,
b. P100,000.00 as exemplary damages,
c. P50,000.00 as attorney's fees,
d. The costs of litigations (sic), and
e. An administrative fine of TEN THOUSAND PESOS
(P10,000.00) payable to this Office fifteen
(15) days upon receipt of this decision, for
violation of Section 18 in relation to Section
38 of PD 957;
4. Directing the Register of Deeds of Mandaluyong City to
cancel the aforesaid mortgage on the title of the
subject condominium unit; and
5. Immediate[ly] upon receipt by the complainant of the
owner's duplicate Condominium Certificate of Title
of Unit 2308-B2, delivery of CCT No. 2383 over Unit
2308-B2 in favor of the complainant free from all
liens and encumbrances.
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SO ORDERED.
On July 25, 2002, the Bank received a copy of Rapanot's
Manifestation dated July 24, 2002, stating that he had received a
copy of the Arbiter's Decision. On July 29, 2002, the Bank filed a
Manifestation and Motion for Clarification, requesting for the
opportunity to file its position paper and draft decision, and seeking
confirmation as to whether a decision had indeed been rendered
notwithstanding the fact that it had yet to file such submissions.
Subsequently, the Bank received a copy of Rapanot's Motion
for Execution dated September 2, 2002, to which it filed an
Opposition dated September 4, 2002.
Meanwhile, the Bank's Manifestation and Motion for
Clarification remained unresolved despite the lapse of five (5)
months from the date of filing. This prompted the Bank to secure a
certified true copy of the Arbiter's Decision from the HLURB.
On January 16, 2003, the Bank filed a Petition for Review with
the HLURB Board of Commissioners (HLURB Board) alleging, among
others, that it had been deprived of due process when the Arbiter
rendered a decision without affording the Bank the opportunity to
submit its position paper and draft decision.
The HLURB Board modified the Arbiter's Decision by: (i)
reducing the award for moral damages from P100,000.00 to
P50,000.00, (ii) deleting the award for exemplary damages, (iii)
reducing the award for attorney's fees from P50,000.00 to
P20,000.00, and (iv) directing Golden Dragon to pay the Bank all the
damages the latter is directed to pay thereunder, and settle the
mortgage obligation corresponding to Unit 2308-B2.
Anent the issue of due process, the HLURB Board held, as
follows:
xxx xxx xxx
With respect to the first issue, we find the same
untenable. Records show that prior to the rendition of its
decision, the office below has issued and duly sent an
Order to the parties declaring respondent GDREC in
default and directing respondent Bank to submit its
position paper. x x x (Underscoring omitted)
Proceedings before the Office of the President
The Bank appealed the decision of the HLURB Board to the
Office of the President (OP). On October 10, 2005, the OP issued a
resolution denying the Bank's appeal. In so doing, the OP adopted
the HLURB's findings. The Bank filed a Motion for Reconsideration,
which was denied by the OP in an Order dated March 3, 2006.
CIVIL LAW REVIEW 2

Proceedings before the CA

The Bank filed a Petition for Review with the CA on April 17,
2006 assailing the resolution and subsequent order of the OP. The
Bank argued, among others, that the OP erred when it found that
the Bank (i) was not denied due process before the HLURB, and (ii)
is jointly and severally liable with Golden Dragon for damages due
Rapanot.
After submission of the parties' respective memoranda, the
CA rendered the questioned Decision dismissing the Bank's Petition
for Review. On the issue of due process, the CA held:
Petitioner asserts that it was denied due process
because it did not receive any notice to file its position
paper nor a copy of the Housing Arbiter's Decision.
Rapanot, meanwhile, contends that the Housing Arbiter
sent petitioner a copy of the April 5, 2002 Order to file
position paper by registered mail, as evidenced by the
list of persons furnished with a copy thereof. However,
according to Rapanot, petitioner "refused to receive" it.
xxx xxx xxx
In the instant case, there is no denial of due
process. Petitioner filed its Answer where it was able to
explain its side through its special and affirmative
defenses. Furthermore, it participated in the preliminary
hearing and attended scheduled conferences held to
resolve differences between the parties. Petitioner was
also served with respondent's position paper and draft
decision. Having received said pleadings of respondent,
petitioner could have manifested before the Housing
Arbiter that it did not receive, if correct, its order
requiring the submission of its pleadings and therefore
prayed that it be given time to do so. Or, it could have
filed its position paper and draft decision without
awaiting the order to file the same. Under the
circumstances, petitioner was thus afforded and availed
of the opportunity to present its side. It cannot make
capital of the defense of denial of due process as a
screen for neglecting to avail of opportunities to file
other pleadings.
With respect to the Bank's liability for damages, the CA held
thus:
Section 18 of PD 957, requires prior written
authority of the HLURB before the owner or developer of
a subdivision lot or condominium unit may enter into a
CIVIL LAW REVIEW 2

contract of mortgage. Hence, the jurisdiction of the

HLURB is broad enough to include complaints for
annulment of mortgage involving violations of PD 957.
Petitioner argues that, as a mortgagee in good
faith and for value, it must be accorded protection and
should not be held jointly and severally liable with
Golden Dragon and its President, Victoria Vasquez.
It is true that a mortgagee in good faith and for
value is entitled to protection, as held in Rural Bank of
Compostela vs. Court of Appeals but petitioner's
dependence on this ruling is misplaced as it cannot be
considered a mortgagee in good faith.
The doctrine of "mortgagee in good faith" is based
on the rule that all persons dealing with property
covered by a certificate of title, as mortgagees, are not
required to go beyond what appears on the face of the
title.
However, while a mortgagee is not under
obligation to look beyond the certificate of title, the
nature of petitioner's business requires it to take further
steps to assure that there are no encumbrances or liens
on the mortgaged property, especially since it knew that
it was dealing with a condominium developer. It should
have inquired deeper into the status of the properties
offered as collateral and verified if the HLURB's
authority to mortgage was in fact previously obtained.
This it failed to do.
It has been ruled that a bank, like petitioner,
cannot argue that simply because the titles offered as
security were clean of any encumbrances or lien, it was
relieved of taking any other step to verify the
implications should the same be sold by the developer.
While it is not expected to conduct an exhaustive
investigation of the mortgagor's title, it cannot be
excused from the duty of exercising the due diligence
required of banking institutions, for banks are expected
to exercise more care and prudence than private
individuals in their dealings, even those involving
registered property, for their business is affected with
public interest.
As aforesaid, petitioner should have ascertained
that the required authority to mortgage the
condominium units was obtained from the HLURB before
CIVIL LAW REVIEW 2

it approved Golden Dragon's loan. It cannot feign lack of

knowledge of the sales activities of Golden Dragon
since, as an extender of credit, it is aware of the
practices, both good or bad, of condominium
developers. Since petitioner was negligent in its duty to
investigate the status of the properties offered to it as
collateral, it cannot claim that it was a mortgagee in
good faith.
The Bank filed a Motion for Reconsideration, which was denied
by the CA in a Resolution dated March 17, 2010. The Bank received
a copy of the resolution on March 22, 2010.
On April 6, 2010, the Bank filed with the Court a motion
praying for an additional period of 30 days within which to file its
petition for review on certiorari.
On May 6, 2010, the Bank filed the instant Petition.
Rapanot filed his Comment to the Petition on September 7,
2010. Accordingly, the Bank filed its Reply on January 28, 2011.
Issues
Essentially, the Bank requests this Court to resolve the
following issues:
1. Whether or not the CA erred when it affirmed the resolution
of the OP finding that the Bank had been afforded due
process before the HLURB; and
2. Whether or not the CA erred when it affirmed the resolution
of the OP holding that the Bank cannot be considered a
mortgagee in good faith.
The Court's Ruling
In the instant Petition, the Bank avers that the CA
misappreciated material facts when it affirmed the OP's resolution
which denied its appeal. The Bank contends that the CA committed
reversible error when it concluded that the Bank was properly
afforded due process before the HLURB, and when it failed to
recognize the Bank as a mortgagee in good faith. The Bank
concludes that these alleged errors justify the reversal of the
questioned Decision, and ultimately call for the dismissal of the
Complaint against it.
The Court disagrees.
Time and again, the Court has emphasized that review of
appeals under Rule 45 is "not a matter of right, but of sound judicial
discretion." Thus, a petition for review on certiorari shall only be
granted on the basis of special and important reasons.
CIVIL LAW REVIEW 2

As a general rule, only questions of law may be raised in

petitions filed under Rule 45. However, there are recognized
exceptions to this general rule, namely:
(1) when the findings, are grounded entirely on
speculation, surmises or conjectures; (2) when the
inference made is manifestly mistaken, absurd or
impossible; (3) when there is grave abuse of
discretion; (4) when the judgment is based on a
misapprehension of facts; (5) when the findings of
facts are conflicting; (6) when in making its findings the
Court of Appeals went beyond the issues of the case, or
its findings are contrary to the admissions of both the
appellant and the appellee; (7) when the findings are
contrary to the trial court; (8) when the findings are
conclusions without citation of specific evidence on
which they are based; (9) when the facts set forth in the
petition as well as in the petitioner's main and reply
briefs are not disputed by the respondent; (10) when
the findings of fact are premised on the supposed
absence of evidence and contradicted by the evidence
on record; and (11) when the Court of Appeals
manifestly overlooked certain relevant facts not
disputed by the parties, which, if properly
considered, would justify a different conclusion. x
x x (Emphasis supplied)
The Bank avers that the second, fourth and eleventh
exceptions above are present in this case. However, after a
judicious examination of the records of this case and the respective
submissions of the parties, the Court finds that none of these
exceptions apply.
The Bank was not deprived of due
process before the HLURB.
The Bank asserts that it never received the April 2002 Order.
It claims that it was taken by surprise on July 25, 2002, when it
received a copy of Rapanot's Manifestation alluding to the issuance
of the Arbiter's Decision on July 3, 2002. Hence, the Bank claims
that it was deprived of due process, since it was not able to set forth
its "valid and meritorious" defenses for the Arbiter's consideration
through its position paper and draft decision.
The Court finds these submissions untenable.
"The essence of due process is to be heard." In administrative
proceedings, due process entails "a fair and reasonable opportunity
to explain one's side, or an opportunity to seek a reconsideration of
CIVIL LAW REVIEW 2

the action or ruling complained of. Administrative due process

cannot be fully equated with due process in its strict judicial sense,
for in the former a formal or trial-type hearing is not always
necessary, and technical rules of procedure are not strictly
applied."
As correctly pointed out by the CA in the questioned Decision,
the Bank was able to set out its position by participating in the
preliminary hearing and the scheduled conferences before the
Arbiter. The Bank was likewise able to assert its special and
affirmative defenses in its Answer to Rapanot's Complaint.
The fact that the Arbiter's Decision was rendered without
having considered the Bank's position paper and draft decision is of
no moment. An examination of the 1996 Rules of Procedure of the
HLURB then prevailing shows that the Arbiter merely acted in
accordance therewith when he rendered his decision on the basis of
the pleadings and records submitted by the parties thus far. The
relevant rules provide:
RULE VI PRELIMINARY CONFERENCE AND
RESOLUTION
xxx xxx xxx
Section 4. Position Papers. If the parties fail to
settle within the period of preliminary conference, then
they will be given a period of not more than thirty
(30) calendar days to file their respective verified
position papers, attaching thereto the affidavits
of their witnesses and documentary evidence.
In addition, as provided for by Executive
Order No. 26, Series of 1992, the parties shall be
required to submit their respective draft
decisions within the same thirty (30)-day period.
Said draft decision shall state clearly and
distinctly the findings of facts, the issues and the
applicable law and jurisprudence on which it is based.
The arbiter may adopt in whole or in part either of the
parties' draft decision, or reject both and prepare his
own decision.
The party who fails to submit a draft decision shall
be fined P2,000.00.
Section 5. Summary Resolution. With or
without the position paper and draft decision[,]
the Arbiter shall summarily resolve the case on
the basis of the verified pleadings and pertinent
CIVIL LAW REVIEW 2

records of the Board. (Emphasis and underscoring

supplied)
Clearly, the Arbiter cannot be faulted for rendering his
Decision, since the rules then prevailing required him to do so.
The Bank cannot likewise rely on the absence of proof of
service to further its cause. Notably, while the Bank firmly contends
that it did not receive the copy of the April 2002 Order, it did not
assail the veracity of the notation "refused to receive" inscribed on
the envelope bearing said order. In fact, the Bank only offered the
following explanation respecting said notation:
9. The claim that the Bank "refused to receive"
the envelope that bore the Order cannot be given
credence and is belied by the Bank's act of immediately
manifesting before the Housing Arbiter that it had not
yet received an order for filing the position paper and
draft decision.
This is specious, at best. More importantly, the records show
that the Bank gained actual notice of the Arbiter's directive to file
their position papers and draft decisions as early as May 22, 2002,
when it was personally served a copy of Rapanot's position paper
which made reference to the April 2002 Order. This shows as mere
pretense the Bank's assertion that it learned of the Arbiter's
Decision only through Rapanot's Manifestation. Worse, the Bank
waited until the lapse of five (5) months before it took steps to
secure a copy of the Arbiter's Decision directly from the HLURB for
the purpose of assailing the same before the OP.
The Mortgage Agreement is null and
void as against Rapanot, and thus
cannot be enforced against him.
The Bank avers that contrary to the CA's conclusion in the
questioned Decision, it exercised due diligence before it entered
into the Mortgage Agreement with Golden Dragon and accepted
Unit 2308-B2, among other properties, as collateral. The Bank
stressed that prior to the approval of Golden Dragon's loan, it
deployed representatives to ascertain that the properties being
offered as collateral were in order. Moreover, it confirmed that the
titles corresponding to the properties offered as collateral were free
from existing liens, mortgages and other encumbrances. Proceeding
from this, the Bank claims that the CA overlooked these facts when
it failed to recognize the Bank as a mortgagee in good faith.
The Court finds the Bank's assertions indefensible.
CIVIL LAW REVIEW 2

First of all, under Presidential Decree No. 957 (PD 957), no

mortgage on any condominium unit may be constituted by a
developer without prior written approval of the National Housing
Authority, now HLURB. PD 957 further requires developers to notify
buyers of the loan value of their corresponding mortgaged
properties before the proceeds of the secured loan are released. The
relevant provision states:
Section 18. Mortgages. No mortgage on any
unit or lot shall be made by the owner or developer
without prior written approval of the Authority. Such
approval shall not be granted unless it is shown that the
proceeds of the mortgage loan shall be used for the
development of the condominium or subdivision project
and effective measures have been provided to ensure
such utilization. The loan value of each lot or unit
covered by the mortgage shall be determined and the
buyer thereof, if any, shall be notified before the release
of the loan. The buyer may, at his option, pay his
installment for the lot or unit directly to the mortgagee
who shall apply the payments to the corresponding
mortgage indebtedness secured by the particular lot or
unit being paid for, with a view to enabling said buyer to
obtain title over the lot or unit promptly after full
payment thereof.
In Far East Bank & Trust Co. v. Marquez, the Court clarified the
legal effect of a mortgage constituted in violation of the foregoing
provision, thus:
The lot was mortgaged in violation of Section 18
of PD 957. Respondent, who was the buyer of the
property, was not notified of the mortgage before the
release of the loan proceeds by petitioner. Acts
executed against the provisions of mandatory or
prohibitory laws shall be void. Hence, the mortgage
over the lot is null and void insofar as private
respondent is concerned. (Emphasis supplied)
The Court reiterated the foregoing pronouncement in the
recent case of Philippine National Bank v. Lim and again in United
Overseas Bank of the Philippines, Inc. v. Board of Commissioners-
HLURB.
Thus, the Mortgage Agreement cannot have the effect of
curtailing Rapanot's right as buyer of Unit 2308-B2, precisely
because of the Bank's failure to comply with PD 957.
CIVIL LAW REVIEW 2

Moreover, contrary to the Bank's assertions, it cannot be

considered a mortgagee in good faith. The Bank failed to ascertain
whether Golden Dragon secured HLURB's prior written approval as
required by PD 957 before it accepted Golden Dragon's properties
as collateral. It also failed to ascertain whether any of the properties
offered as collateral already had corresponding buyers at the time
the Mortgage Agreement was executed.
The Bank cannot harp on the fact that the Mortgage
Agreement was executed before the Contract to Sell and Deed of
Absolute Sale between Rapanot and Golden Dragon were executed,
such that no amount of verification could have revealed Rapanot's
right over Unit 2308-B2. The Court particularly notes that Rapanot
made his initial payment for Unit 2308-B2 as early as May 9, 1995,
four (4) months prior to the execution of the Mortgage Agreement.
Surely, the Bank could have easily verified such fact if it had simply
requested Golden Dragon to confirm if Unit 2308-B2 already had a
buyer, given that the nature of the latter's business inherently
involves the sale of condominium units on a commercial scale.
It bears stressing that banks are required to exercise the
highest degree of diligence in the conduct of their affairs. The Court
explained this exacting requirement in the recent case of Philippine
National Bank v. Vila, thus:
In Land Bank of the Philippines v. Belle
Corporation, the Court exhorted banks to exercise the
highest degree of diligence in its dealing with properties
offered as securities for the loan obligation: cSEDTC
When the purchaser or the mortgagee
is a bank, the rule on innocent purchasers or
mortgagees for value is applied more
strictly. Being in the business of extending
loans secured by real estate mortgage,
banks are presumed to be familiar with the
rules on land registration. Since the banking
business is impressed with public interest,
they are expected to be more cautious, to
exercise a higher degree of diligence, care
and prudence, than private individuals in
their dealings, even those involving
registered lands. Banks may not simply rely
on the face of the certificate of title. Hence,
they cannot assume that, x x x the title
offered as security is on its face free of any
encumbrances or lien, they are relieved of
the responsibility of taking further steps to
CIVIL LAW REVIEW 2

verify the title and inspect the properties to

be mortgaged. As expected, the
ascertainment of the status or condition of a
property offered to it as security for a loan
must be a standard and indispensable part
of the bank's operations. x x x (Citations
omitted)
We never fail to stress the remarkable
significance of a banking institution to
commercial transactions, in particular, and to the
country's economy in general. The banking
system is an indispensable institution in the
modern world and plays a vital role in the
economic life of every civilized nation. Whether
as mere passive entities for the safekeeping and
saving of money or as active instruments of
business and commerce, banks have become an
ubiquitous presence among the people, who have
come to regard them with respect and even
gratitude and, most of all, confidence.
Consequently, the highest degree of diligence is
expected, and high standards of integrity and
performance are even required, of it. (Emphasis
and underscoring supplied)
In loan transactions, banks have the particular obligation of
ensuring that clients comply with all the documentary requirements
pertaining to the approval of their loan applications and the
subsequent release of their proceeds.
If only the Bank exercised the highest degree of diligence
required by the nature of its business as a financial institution, it
would have discovered that (i) Golden Dragon did not comply with
the approval requirement imposed by Section 18 of PD 957, and (ii)
that Rapanot already paid a reservation fee and had made several
installment payments in favor of Golden Dragon, with a view of
acquiring Unit 2308-B2.
The Bank's failure to exercise the diligence required of it
constitutes negligence, and negates its assertion that it is a
mortgagee in good faith. On this point, this Court's ruling in the
case of Far East Bank & Trust Co. v. Marquez is instructive:
Petitioner argues that it is an innocent mortgagee
whose lien must be respected and protected, since the
title offered as security was clean of any encumbrance
or lien. We do not agree.
CIVIL LAW REVIEW 2

"x x x As a general rule, where there is

nothing on the certificate of title to indicate
any cloud or vice in the ownership of the
property, or any encumbrance thereon, the
purchaser is not required to explore further
than what the Torrens Title upon its face
indicates in quest for any hidden defect or
inchoate right that may subsequently defeat
his right thereto. This rule, however, admits
of an exception as where the purchaser or
mortgagee has knowledge of a defect or
lack of title in the vendor, or that he was
aware of sufficient facts to induce a
reasonably prudent man to inquire into the
status of the property in litigation."
Petitioner bank should have considered that it was
dealing with a town house project that was already in
progress. A reasonable person should have been aware
that, to finance the project, sources of funds could have
been used other than the loan, which was intended to
serve the purpose only partially. Hence, there was need
to verify whether any part of the property was already
the subject of any other contract involving buyers or
potential buyers. In granting the loan, petitioner
bank should not have been content merely with a
clean title, considering the presence of
circumstances indicating the need for a thorough
investigation of the existence of buyers like
respondent. Having been wanting in care and
prudence, the latter cannot be deemed to be an
innocent mortgagee.
Petitioner cannot claim to be a mortgagee in
good faith. Indeed it was negligent, as found by
the Office of the President and by the CA.
Petitioner should not have relied only on the
representation of the mortgagor that the latter
had secured all requisite permits and licenses
from the government agencies concerned. The
former should have required the submission of
certified true copies of those documents and
verified their authenticity through its own
independent effort.
Having been negligent in finding out what
respondent's rights were over the lot, petitioner
CIVIL LAW REVIEW 2

must be deemed to possess constructive

knowledge of those rights. (Emphasis supplied)
The Court can surely take judicial notice of the fact that
commercial banks extend credit accommodations to real estate
developers on a regular basis. In the course of its everyday
dealings, the Bank has surely been made aware of the approval and
notice requirements under Section 18 of PD 957. At this juncture,
this Court deems it necessary to stress that a person who
deliberately ignores a significant fact that could create suspicion in
an otherwise reasonable person cannot be deemed a mortgagee in
good faith. The nature of the Bank's business precludes it from
feigning ignorance of the need to confirm that such requirements
are complied with prior to the release of the loan in favor of Golden
Dragon, in view of the exacting standard of diligence it is required to
exert in the conduct of its affairs.
Proceeding from the foregoing, we find that neither mistake
nor misapprehension of facts can be ascribed to the CA in rendering
the questioned Decision. The Court likewise finds that contrary to
the Bank's claim, the CA did not overlook material facts, since the
questioned Decision proceeded from a thorough deliberation of the
facts established by the submissions of the parties and the evidence
on record.
For these reasons, we resolve to deny the instant Petition for
lack of merit.
WHEREFORE, premises considered, the Petition for Review
on Certiorari is DENIED. The Decision dated November 18, 2009
and Resolution dated March 17, 2010 of the Court of Appeals in CA-
G.R. SP No. 93862 are hereby AFFIRMED.
SO ORDERED.
Sereno, C.J., Leonardo-de Castro, Del Castillo and Perlas-
Bernabe, JJ., concur.
||| (Prudential Bank v. Rapanot, G.R. No. 191636, [January 16, 2017])
CIVIL LAW REVIEW 2

MAERSK FILIPINAS CREWING, INC., and MAERSK

CO. IOM LTD., petitioners, vs. JOSELITO R.
RAMOS, respondent.
G.R. No. 184256. January 18, 2017
Ponente: CJ Sereno
First Division
DECISION
The Petition for Review before us assails the Decision and

Resolution of the Court of Appeals (CA) in CA-G.R. SP No. 94964,
affirming with modification the Resolution of the National Labor
Relations Commission (NLRC). The CA affirmed the findings of the
NLRC that petitioners Maersk Filipinas Crewing, Inc. (Maersk, Inc.) and
the Maersk Co. IOM, Ltd. (Maersk Ltd.) were liable to private
respondent Joselito Ramos for disability benefits. The appellate court,
however, deleted the awards for moral and exemplary damages.
As culled from the records of the CA, the antecedent facts are
as follows:
The facts of the case from which the present
petition arose show that on October 3, 2001, petitioner
Maersk Ltd., through its local manning agent petitioner
Maersk Inc., employed private respondent as able-
seaman of M/V NKOSSA II for a period of four (4)
months. Within the contract period and and while on
board the vessel, on November 14, 2001, private
respondent's left eye was hit by a screw. He was
repatriated to Manila on November 21, 2001 and was
referred to Dr. Salvador Salceda, the company-
designated physician, for [a] check-up.
CIVIL LAW REVIEW 2

Private respondent was examined by Dr. Anthony

Martin S. Dolor at the Medical Center Manila on
November 26, 2001 and was diagnosed with "corneal
scar and cystic macula, left, post-traumatic." On
November 29, 2001, he underwent a "repair of corneal
perforation and removal of foreign body to anterior
chamber, left eye." He was discharged on December 2,
2001 with prescribed home medications and had regular
check-ups. He was referred to another ophthalmologist
who opined that "no more improvement can be attained
on the left eye but patient can return back to duty with
the left eye disabled by 30%."
On May 22, 2002, he was examined by Dr. Angel
C. Aliwalas, Jr. at the Ospital ng Muntinlupa (ONM),
Alabang, Muntinlupa City, and was diagnosed with
"corneal scar with post-traumatic cataract formation,
left eye." On May 28, 2002, he underwent [an] eye
examination and glaucoma test at the Philippine
General Hospital (PGH), Manila.
Since private respondent's demand for disability
benefit[s] was rejected by petitioners, he then filed with
the NLRC a complaint for total permanent disability,
illness allowance, moral and exemplary damages and
attorney's fees. The parties filed with the NLRC their
respective position papers, reply, and rejoinder.
Meanwhile, in his medical report dated July 31,
2002, Dr. Dolor stated that although private
respondent's left eye cannot be improved by medical
treatment, he can return to duty and is still fit to work.
His normal right eye can compensate for the
discrepancy with the use of correctional glasses. On
August 30, 2002, petitioners paid private respondent's
illness allowance equivalent to one hundred twenty
(120) days salary.
On October 5, 2002, private respondent was
examined by Dr. Roseny Mae Catipon-Singson of Casa
Medica, Inc. (formerly MEDISERV Southmall, Inc.),
Alabang, Muntinlupa City and was diagnosed to have
"traumatic cataract with corneal scaring, updrawn pupil
of the anterior segment of maculapathy OS. His best
corrected vision is 20/400 with difficulty." Dr. Catipon-
Singson opined that private respondent "cannot be
employed for any work requiring good vision unless
condition improves."
CIVIL LAW REVIEW 2

On November 19, 2002, private respondent

visited again the ophthalmologist at the Medical Center
Manila who recommended "cataract surgery with intra-
ocular lens implantation," after evaluation of the retina
shall have been done."
In his letter dated January 13, 2003 addressed to
Jerome de los Angeles, General Manager of petitioner
Maersk, Inc., Dr. Dolor answered that the evaluation of
the physician from ONM could not have progressed in
such a short period of time, which is approximately one
month after he issued the medical report dated April 13,
2002, and a review of the medical reports from PGH and
the tonometry findings on the left and right eye showed
that they were within normal range, hence, could not be
labeled as glaucoma.
On 15 May 2003, the labor arbiter (LA) rendered a
Decision 7 dismissing the Complaint:
WHEREFORE, premises considered, the instant
complaint is DISMISSED for being prematurely filed. The
parties are enjoined to comply with the provisions of the
POEA Standard Contract in relation to the AMOSUP-
MAERSK Company CBA. In the meantime, respondents
Maersk Filipinas Crewing, Inc., and The Maersk Co., Ltd.,
are directed to provide continued medical assistance to
complainant Joselito Ramos until he is declared fit to
work, or the degree of his disability has been assessed
in accordance with the terms of the contract and the
CBA.
SO ORDERED.
The LA held that the Philippine Overseas Employment
Administration (POEA)-approved contract and Collective Bargaining
Agreement expressly provided for a situation in which the seafarer's
appointed doctor disagrees with the company-designated physician.
In this case, both parties may agree to the appointment of a third
doctor, whose assessment would then be final on both
parties. According to the LA, both failed to avail themselves of this
remedy.
On 28 July 2003, respondent filed a Manifestation stating that
on 21 July 2003, his counsel's messenger tried to file with the NLRC
a Notice of Appeal with Memorandum of Appeal. However, upon
arriving at around four o'clock in the afternoon, the messenger
found that the NLRC office was already closed due to a jeepney
strike. He then decided to file and serve copies of the notice with
CIVIL LAW REVIEW 2

memorandum by registered mail. It was only on the next day, 22

July 2003, that the filing of the rest of the copies and the payment
of fees were completed.
In reply to respondent's Manifestation, petitioners filed a
Motion for Outright Dismissal on the ground that the appeal had
been filed out of time.
In the meantime, on 30 July and 12 September 2003,
respondent underwent cataract extraction on both eyes. On 7
January 2004, he was fitted with correctional glasses and evaluated.
Dr. Dolor found that the former's "right eye is 20/20, the left eye is
20/70, and when both eyes are being used, his best corrected vision
is 20/20." On the basis of that report, respondent was pronounced
fit to work.
On 31 January 2006, the NLRC issued a Resolution granting
respondent's appeal and setting aside the LA's decision:
WHEREFORE, premises considered, Complainant's
appeal is partly GRANTED. The Labor Arbiter's Assailed
Decision in the above-entitled case is hereby VACATED
and SET ASIDE. A new one is entered ordering
Respondents to jointly and severally pay Complainant
the following: 1) disability compensation benefit in the
amount of US $6,270.00; 2) moral and exemplary
damages in the form of interest at 12% of US $6,270.00
per annum, reckoned from April 13, 2002, up to the time
of payment of said disability compensation benefit; and
3) attorney's fees equivalent to 10% of his total
monetary award.
SO ORDERED.
The NLRC found that it was not "[respondent's] fault that he
was not able to perfect his appeal on July 21, 2003, the latter part of
said day having been declared non-working by NLRC NCR, itself. It is
only just and fair, therefore, that Complainant should he given until
the next working day to perfect his appeal."
As regards the need to appoint a third doctor, the NLRC found
it unnecessary considering that "there is really no disagreement
between respondents' company-designated physician and
Complainant's physicians as to the percentage [30%] of visual
impairment of his left eye." Thus, respondent was awarded disability
compensation benefit in the amount of USD6,270 for Grade 12
impediment, moral and exemplary damages, and attorney's fees.
CIVIL LAW REVIEW 2

On 17 February 2006, petitioners filed a Motion for

Reconsideration, which the NLRC denied in its Resolution dated 31
March 2006.
Upon intermediate appellate review, the CA rendered a
Decision on 31 July 2007, the dispositive portion of which
reads: HEITAD
WHEREFORE, the assailed resolutions dated
January 31, 2006 and March 31, 2006 of public
respondent NLRC, 2nd Division, in NLRC NCR CA No.
037183-03 (NLRC NCR Case No. OFW-M-02-06-1591-00)
are AFFIRMED with the MODIFICATION that the awards
for moral and exemplary damages are DELETED.
SO ORDERED.
The CA affirmed all the findings of the NLRC on both
procedural and substantive issues, but deleted the award of moral
and exemplary damages, because there was no "sufficient factual
legal basis for the awards x x x." Here, the appellate court held that
respondent "presented no proof of his moral suffering, mental
anguish, fright or serious anxiety and/or any fraud, malice or bad
faith on the part of the petitioner. Consequently, there being no
moral damages, the award of exemplary damages did not
lie. However, because respondent was compelled to litigate to
protect his interests, the CA sustained the award for attorney's fees.
On 24 August 2007, petitioners filed a Motion for Partial
Reconsideration, arguing for the first time that respondent's appeal
filed with the NLRC was not perfected within the reglementary
period. They alleged that they received a copy of the Manifestation
of respondent denying that he had authorized the Sapalo Velez
Bundang & Bulilan Law Offices (SVBB) to continue representing him
after the issuance of the LA's Decision on 15 May 2003. Hence, they
argued respondent was not bound by the notice of appeal or by the
decisions rendered by the NLRC.
On 8 August 2008, the CA issued a Resolution denying the
aforementioned motion.
The CA held that respondent did not present any proof in
support of his Manifestation that the SVBB had no authority to
represent him before the NLRC or in the continuation of the case in
court. The appellate court then ruled that the "presumption that
SVBB is authorized to represent him before the NLRC and in the
case at bar stands."
Hence, this appeal.
ISSUES
CIVIL LAW REVIEW 2

From the foregoing, the issues may be reduced to the

following:
1. Whether counsel of respondent was authorized to represent
the latter after the LA had rendered its Decision on 15
May 2003;
2. Whether respondent perfected his appeal to the NLRC; and
3. Whether respondent is partially disabled and therefore
entitled to disability compensation.
THE COURT'S RULING
We shall deal with the issues seriatim.
The SVBB law firm is presumed to
have authority to represent
respondent.
Anent the first procedural issue, petitioners allege that
although the authority of an attorney to appear for and on behalf of
a party may be assumed, it can still be challenged by the adverse
party concerned. In this case, petitioners argue that the
presumption of the SVBB's authority to continue representing
respondent was "destroyed upon his filing of the Manifestation"
precisely denying that authority. It then follows that the appeal filed
by the law firm was unauthorized. As such, the appeal did not
prevent the LA Decision dated 15 May 2003 from attaining finality.
We disagree.
Section 21, Rule 138 of the Rules of Court provides a
presumption on a lawyer's appearance on behalf of a client:
SEC. 21. Authority of attorney to appear. An
attorney is presumed to be properly authorized to
represent any cause in which he appears, and no
written power of attorney is required to authorize
him to appear in court for his client, but the
presiding judge may, on motion of either party and on
reasonable grounds therefor being shown, require any
attorney who assumes the right to appear in a case to
produce or prove the authority under which he appears,
and to disclose, whenever pertinent to any issue, the
name of the person who employed him, and may
thereupon make such order as justice requires. An
attorney willfully appearing in court for a person without
being employed, unless by leave of the court, may be
punished for contempt as an officer of the court who
has misbehaved in his official transactions. (Emphasis
ours)
CIVIL LAW REVIEW 2

Aside from the presumption of authority to represent a client

in all stages of litigation, an attorney's appearance is also presumed
to be with the previous knowledge and consent of the litigant until
the contrary is shown.
This presumption is strong, as the "mere denial by a party
that he has authorized an attorney to appear for him, in the
absence of a compelling reason, is insufficient to overcome the
presumption, especially when denial comes after the rendition of an
adverse judgment."
In his Manifestation, private respondent averred that he
ceased communications with the SVBB after 15 May 2003; that he
did not cause the re-filing of his case; and that he did not sign any
document for the continuation of his case. However, he gave no
cogent reason for this disavowal. As pointed out by the CA, he
presented no evidence other than the denial in his Manifestation.
Moreover, respondent only sent his Manifestation disclaiming
the SVBB's authority on 1 February 2007. It was submitted almost
four years after the LA had dismissed his complaint for having been
prematurely filed. By that time, through the SVBB's efforts, the
NLRC had already rendered a Decision favorable to respondent.
It puzzles us why respondent would renounce the authority of
his supposed counsel at this late stage. The attempt of petitioners
to use this circumstance to their advantage in order to avoid
payment of liability should not be given any weight by this Court.
Respondent perfected his appeal
before the NLRC.
As to the second procedural issue, petitioners argue that
respondent did not perfect his appeal before the NLRC, considering
his failure to file copies of the Notice of Appeal with Memorandum of
Appeal and to pay the necessary fees to the NLRC on time.
We again disagree.
The failure of respondent to file his appeal before the NLRC
must be contextualized. We quote with favor its findings, as
affirmed by the CA:
As regards the first issue, there is no question that
July 21, 2003 was supposed to be the last day for the
filing by Complainant of his appeal form the Labor
Arbiter's Decision. Incidentally, a working "day" at the
NLRC NCR consists of eight (8) hours of work from 8:00
a.m. to 5:00 p.m. Complainant, therefore, had until 5:00
p.m. of July 21, 2003 to perfect his appeal. Notably, his
counsel's messenger reached the NLRC NCR at 4:00
CIVIL LAW REVIEW 2

p.m. of that day for the sole purpose of perfecting

Complainant's appeal. Unfortunately, however, the
NLRC NCR closed its Office at 3:30 p.m., earlier than the
normal closing time of 5:00 p.m., because of a jeepney
strike. Clearly, it was not Complainant's fault that he
was not able to perfect his appeal on July 21, 2003, the
latter part of said day having been declared non-
working by NLRC NCR, itself. It is only just and fair,
therefore, that Complainant should be given until the
next working day to perfect his appeal.
In any case, we have always held that the "[c]ourts have the
prerogative to relax procedural rules of even the most mandatory
character, mindful of the duty to reconcile both the need to speedily
put an end to litigation and the parties' right to due process."
Respondent suffers from permanent
partial disability and is entitled to
disability compensation.
On the substantive issue, petitioners submit that the award of
disability compensation is not warranted, because the injury
suffered by respondent cannot be considered permanent. It is
curable or can be corrected, since his continued fitness to work was
certified by the company-designated physician in two medical
reports.
On the other hand, respondent asserts that no less than the
company-designated physician had established the extent of the
former's visual impairment at 30%. Respondent posits that because
of the injury to his left eye and loss of vision, he has suffered the
impairment of his earning capacity and can no longer practice his
profession as a seaman.
We rule for respondent.
Preliminarily, it must be emphasized that this Court is not a
trier of facts. It is not our function to weigh and try the evidence all
over again. Findings of fact of quasi-judicial bodies, especially when
affirmed by the CA, are generally accorded finality and respect. As
long as these findings are supported by substantial evidence, they
must be upheld.
Disability does not refer to the injury or the pain that it has
occasioned, but to the loss or impairment of earning capacity. There
is disability when there is a diminution of earning power because of
actual absence from work. This absence must be due to the injury
or illness arising from, and in the course of, employment. Thus, the
basis of compensation is reduction of earning power.
CIVIL LAW REVIEW 2

Section 2 of Rule VII of the Amended Rules on Employees'

Compensation provides:
(c) A disability is partial and permanent if as a result of
the injury or sickness the employee suffers a permanent
partial loss of the use of any part of his body.
Permanent partial disability occurs when an employee loses
the use of any particular anatomical part of his body which disables
him to continue with his former work.
In this case, while petitioners' own company-designated
physician, Dr. Dolor, certified that respondent was still fit to work,
the former admitted in the same breath that respondent's left eye
could no longer be improved by medical treatment. As early as 13
April 2002, Dr. Dolor had in fact diagnosed respondent's left eye as
permanently disabled, to wit:
Present ophthalmologic examination showed corneal
scar and a cystic macula at the left eye. Vision on the
right eye is 20/20 and JI while the left showed only
20/60 and J6. Our ophthalmologist opined that no more
improvement can be attained on the left eye but patient
can return back to duty with left eye disabled by 30%.
Petitioners' argument that the injury was curable because
respondent underwent cataract extraction in on both eyes in 2003,
and Dr. Dolor issued a medical evaluation finding that respondent's
best corrected vision for both eyes was 20/20 (with correctional
glasses), are thus inconsequential. The curability of the injury "does
not preclude an award for disability because, in labor laws, disability
need not render the seafarer absolutely helpless or feeble to be
compensable; it is enough that it incapacitates him to perform his
customary work."
Indeed, the operation, which supposedly led to the correction
of respondent's vision, took place in 2003. Respondent sustained his
injury way back in 2001. During the span of roughly two years,
he was not able to reassume work as a seaman, resulting in
the loss and impairment of his earning capacity. It is also
interesting to note that despite petitioners' contentions that
respondent had been diagnosed as fit to return to work, no
reemployment offer was ever extended to him.
As to the extent and amount of compensation, petitioners
stress that Section 32 of the POEA Standard Terms and Conditions
Governing the Employment of Filipino Seafarers on Board Ocean
Going Vessels (Standard Employment Contract) only provides
disability compensation benefits for at least 50% loss of vision in
one eye. Since the schedule does not include the injury suffered by
CIVIL LAW REVIEW 2

respondent, they assert that the award of disability benefits is

unwarranted.
The Court finds no merit in this argument.
The POEA Standard Employment Contract was designed
primarily for the protection and benefit of Filipino seamen in the
pursuit of their employment on board ocean-going vessels. In
resolving disputes regarding disability benefits, its provisions must
be "construed and applied fairly, reasonably, and liberally in the
seamen's favor, because only then can the provisions be given full
effect."
Besides, the schedule of disabilities under Section 32 is in no
way exclusive. Section 20.B.4 of the same POEA Standard
Employment Contract clearly provides that "[t]hose illnesses not
listed in Section 32 of this Contract are disputably presumed as
work related." This provision only means that the disability schedule
also contemplates injuries not explicitly listed under it.
We therefore sustain the computational findings of the NLRC
as affirmed by the CA, to wit:
Relative to the amount of disability compensation,
Section 20.1.4.4 of the applicable CBA between
AMOSUP and Maersk Company (IOM) provides that the
rate of compensation for 100% disability for Ratings is
US$60,000.00, with any differences, including less than
10% disability, to be pro-rata. Section 20.1.5 of said CBA
further provides that "xxx any seafarer assessed at less
than 50% disability under the Contract but certified as
permanently unfit for further sea service in any capacity
by the company doctor, shall also be entitled to 100%
compensation" (Pages 48-49, Records). It is clear from
the latter provision that for a seafarer to be
entitled under said CBA to 100% compensation
for less than 50% disability, it must be the
company doctor who should certify that the
seafarer is permanently unfit for further sea
service in any capacity.
In the case at bar, Complainant had corneal
scar, a cystic macula and 30% loss of vision on his
left eye. Thus, applying Section 30 of the
standard contract, We hold that Complainant's
impediment grade is Grade 12. Under Section 30-
A of the standard contract, a seafarer who
suffered an impediment grade of Grade 12 is
entitled to 10.45% of the maximum rate.
CIVIL LAW REVIEW 2

Significantly, the company physician did not

certify Complainant as permanently unfit for
further sea service in any capacity. The company
physician certified that "xxx patient can return
back to duty with the left eye disabled by 30%"
(Page 39, Records). Complainant, therefore, is not
entitled to 100% disability compensation benefit,
but merely 10.45% of US$60,000.00, which is
computed as follows: US$60,000.00 x 10.45% =
US$6,270.00. Respondents, therefore, are liable
to Complainant for US$6,270.00 as compensation
benefit for his permanent partial disability, to be
paid in Philippine Currency equivalent at the exchange
rate prevailing during the time of payment. (Emphases
ours)
With respect to the award of attorney's fees, this Court affirms
the findings of the CA in toto. Respondent is entitled to attorney's
fees pursuant to Article 2208 (2) of the Civil Code, which justifies
the award of attorney's fees in actions for indemnity under
workmen's compensation and employer liability laws.
WHEREFORE, the Petition for Review on Certiorari is
hereby DENIED. The assailed Decision and Resolution of the Court
of Appeals in CA-G.R. SP No. 94964 are hereby AFFIRMED.
SO ORDERED.
Leonardo-de Castro, Del Castillo, Perlas-Bernabe and Caguioa,
JJ., concur.
||| (Maersk Filipinas Crewing, Inc. v. Ramos, G.R. No. 184256, [January
18, 2017])
CIVIL LAW REVIEW 2

RUTCHER T. DAGASDAS, petitioner, vs. GRAND

PLACEMENT AND GENERAL SERVICES
CORPORATION, respondent.
G.R. No. 205727. January 18, 2017
Ponente: Justice Del Castillo
First Division
DECISION
Before us is a Petition for Review on Certiorari assailing the

September 26, 2012 Decision of the Court of Appeals (CA) in CA-
G.R. SP No. 115396, which annulled and set aside the March 29,
2010 and June 2, 2010 Resolutions of the National Labor Relations
Commission (NLRC) in NLRC LAC OFW-L-02-000071-10, and
concomitantly reinstated the November 27, 2009 Decision of the
Labor Arbiter (LA) dismissing the Complaint for lack of merit.
Also challenged is the January 28, 2013 Resolution denying
the Motion for Reconsideration filed by Rutcher T. Dagasdas
(Dagasdas).
Factual Antecedents
Grand Placement and General Services Corp. (GPGS) is a
licensed recruitment or placement agency in the Philippines while
Saudi Aramco (Aramco) is its counterpart in Saudi Arabia. On the
other hand, Industrial & Management Technology Methods Co. Ltd.
(ITM) is the principal of GPGS, a company existing in Saudi Arabia.
In November 2007, GPGS, for and on behalf of ITM, employed
Dagasdas as Network Technician. He was to be deployed in Saudi
Arabia under a one-year contract with a monthly salary of Saudi
CIVIL LAW REVIEW 2

Riyal (SR) 5,112.00. Before leaving the Philippines, Dagasdas

underwent skill training and pre-departure orientation as Network
Technician. Nonetheless, his Job Offer indicated that he was
accepted by Aramco and ITM for the position of "Supt."
Dagasdas contended that although his position under his
contract was as a Network Technician, he actually applied for and
was engaged as a Civil Engineer considering that his transcript of
records, diploma as well as his curriculum vitae showed that he had
a degree in Civil Engineering, and his work experiences were all
related to this field. Purportedly, the position of Network Technician
was only for the purpose of securing a visa for Saudi Arabia because
ITM could not support visa application for Civil Engineers.
On February 8, 2008, Dagasdas arrived in Saudi
Arabia. Thereafter, he signed with ITM a new employment
contract which stipulated that the latter contracted him as
Superintendent or in any capacity within the scope of his abilities
with salary of SR5,112.00 and allowance of SR2,045.00 per month.
Under this contract, Dagasdas shall be placed under a three-month
probationary period; and, this new contract shall cancel all contracts
prior to its date from any source.
On February 11, 2008, Dagasdas reported at ITM's worksite in
Khurais, Saudi Arabia. There, he was allegedly given tasks suited for
a Mechanical Engineer, which were foreign to the job he applied for
and to his work experience. Seeing that he would not be able to
perform well in his work, Dagasdas raised his concern to his
Supervisor in the Mechanical Engineering Department.
Consequently, he was transferred to the Civil Engineering
Department, was temporarily given a position as Civil Construction
Engineer, and was issued an identification card good for one month.
Dagasdas averred that on March 9, 2008, he was directed to exit
the worksite but Rashid H. Siddiqui (Siddiqui),the Site Coordinator
Manager, advised him to remain in the premises, and promised to
secure him the position he applied for. However, before Dagasdas'
case was investigated, Siddiqui had severed his employment with
ITM.
In April 2008, Dagasdas returned to Al-Khobar and stayed at
the ITM Office. Later, ITM gave him a termination notice indicating
that his last day of work was on April 30, 2008, and he was
dismissed pursuant to clause 17.4.3 of his contract, which provided
that ITM reserved the right to terminate any employee within the
three-month probationary period without need of any notice to the
employee.
Before his repatriation, Dagasdas signed a Statement of
Quitclaim with Final Settlement stating that ITM paid him all the
CIVIL LAW REVIEW 2

salaries and benefits for his services from February 11, 2008 to April
30, 2008 in the total amount of SR7,156.80, and ITM was relieved
from all financial obligations due to Dagasdas.
On June 24, 2008, Dagasdas returned to the
Philippines. Thereafter, he filed an illegal dismissal case against
GPGS, ITM, and Aramco.
Dagasdas accused GPGS, ITM, and Aramco of
misrepresentation, which resulted in the mismatch in the work
assigned to him. He contended that such claim was supported by
exchanges of electronic mail (e-mail) establishing that GPGS, ITM,
and Aramco were aware of the job mismatch that had befallen
him. He also argued that although he was engaged as a project
employee, he was still entitled to security of tenure for the duration
of his contract. He maintained that GPGS, ITM, and Aramco merely
invented "imaginary cause/s" to terminate him. Thus, he claimed
that he was dismissed without cause and due process of law.
GPGS, ITM, and Aramco countered that Dagasdas was legally
dismissed. They explained that Dagasdas was aware that he was
employed as Network Technician but he could not perform his work
in accordance with the standards of his employer. They added that
Dagasdas was informed of his poor performance, and he conformed
to his termination as evidenced by his quitclaim. They also stressed
that Dagasdas was only a probationary employee since he worked
for ITM for less than three months.
Ruling of the Labor Arbiter
On November 27, 2009, the LA dismissed the case for lack of
merit.
The LA pointed out that when Dagasdas signed his new
employment contract in Saudi Arabia, he accepted its stipulations,
including the fact that he had to undergo probationary status. She
declared that this new contract was more advantageous for
Dagasdas as his position was upgraded to that of a Superintendent,
and he was likewise given an allowance of SR2,045.00 aside from
his salary of SR5,112.00 per month. According to the LA, for being
more favorable, this new contract was not prohibited by law. She
also decreed that Dagasdas fell short of the expected work
performance; as such, his employer dismissed him as part of its
management prerogative.
Consequently, Dagasdas appealed to the NLRC.
Ruling of the National Labor Relations Commission
CIVIL LAW REVIEW 2

On March 29, 2010, the NLRC issued a Resolution finding

Dagasdas' dismissal illegal. The decretal portion of the NLRC
Resolution reads:
WHEREFORE, the decision appealed from is
hereby REVERSED, and the respondent[s] are hereby
ordered to pay the complainant the salaries
corresponding to the unexpired portion of his contract
amounting to SR46,008 (SR5112 x 9 months, or from
May 1, 2008 to January 31, 2009),plus ten percent
(10%) thereof as attorney's fees. The respondents are
jointly and severally liable for the judgment awards,
which are payable in Philippine currency converted on
the basis of the exchange rate prevailing at the time of
actual payment.
SO ORDERED.
The NLRC stated that Dagasdas, who was a Civil Engineering
graduate, was "recruited on paper" by GPGS as Network Technician
but the real understanding between the parties was to hire him as
Superintendent. It held that GPGS erroneously recruited Dagasdas,
and failed to inform him that he was hired as a "Mechanical
Superintendent" meant for a Mechanical Engineer. It declared that
while ITM has the prerogative to continue the employment of
individuals only if they were qualified, Dagasdas' dismissal
amounted to illegal termination since the mismatch between his
qualifications and the job given him was no fault of his.
The NLRC added that Dagasdas should not be made to suffer
the consequences of the miscommunication between GPGS and ITM
considering that the government obligates employment agencies
recruiting Filipinos for overseas work to "select only medically and
technically qualified recruits."
On June 2, 2010, the NLRC denied the Motion for
Reconsideration of its Resolution dated March 29, 2010.
Undeterred, GPGS filed a Petition for Certiorari with the CA
ascribing grave abuse of discretion on the part of the NLRC in ruling
that Dagasdas was illegally dismissed.
Ruling of the Court of Appeals
On September 26, 2012, the CA set aside the NLRC
Resolutions and reinstated the LA Decision dismissing the case for
lack of merit.
The CA could not accede to the conclusion that the real
agreement between the parties was to employ Dagasdas as
Superintendent. It stressed that Dagasdas left the Philippines
CIVIL LAW REVIEW 2

pursuant to his employment contract indicating that he was to work

as a Network Technician; when he arrived in Saudi Arabia and
signed a new contract for the position of a Superintendent, the
agreement was with no participation of GPGS, and said new
contract was only between Dagasdas and ITM. It emphasized that
after commencing work as Superintendent, Dagasdas realized that
he could not perform his tasks, and "[s]eemingly, it was [Dagasdas]
himself who voluntarily withdrew from his assigned work for lack of
competence." It faulted the NLRC for failing to consider that
Dagasdas backed out as Superintendent on the excuse that the
same required the skills of a Mechanical Engineer.
In holding that Dagasdas' dismissal was legal, the CA gave
credence to Dagasdas' Statement of Quitclaim and Final Settlement.
It ruled that for having voluntarily accepted money from his
employer, Dagasdas accepted his termination and released his
employer from future financial obligations arising from his past
employment with it.
On January 28, 2013, the CA denied Dagasdas' Motion for
Reconsideration.
Hence, Dagasdas filed this Petition raising these grounds:
[1.] THE HONORABLE COURT OF APPEALS COMMITTED A
REVERSIBLE ERROR WHEN IT REVERSED THE FACTUAL
FINDINGS OF THE NATIONAL LABOR RELATIONS
COMMISSION.
[2] THE HONORABLE COURT OF APPEALS PATENTLY
ERRED WITH ITS FINDINGS THAT THE CONTRACT
SIGNED BY DAGASDAS IN AL-KHOBAR IS MORE
ADVANTAGEOUS TO THE LATTER AND THAT IT WAS [H]IS
PERSONAL ACT OR DECISION [TO SIGN] THE SAME.
[3] THE HONORABLE COURT OF APPEALS ALSO GRAVELY
ERRED IN FAULTING THE NLRC FOR ITS FAILURE TO
INVALIDATE OR DISCUSS THE FINAL SETTLEMENT AND
STATEMENT OF QUITCLAIM SIGNED BY [DAGASDAS].
Dagasdas reiterates that he was only recruited "on paper" as
a Network Technician but the real agreement between him and his
employer was to engage him as Superintendent in the field of Civil
Engineering, he being a Civil Engineering graduate with vast
experience in said field. He stresses that he was terminated
because of a "discipline mismatch" as his employer actually needed
a Mechanical (Engineer) Superintendent, not a Civil Engineer.
In addition, Dagasdas insists that he did not voluntarily back
out from his work. If not for the discipline mismatch, he could have
CIVIL LAW REVIEW 2

performed his job as was expected of him. He also denies that the
new employment contract he signed while in Saudi Arabia was more
advantageous to him since the basic salary and allowance
stipulated therein are just the same with that in his Job Offer. He
argues that the new contract was even disadvantageous because it
was inserted therein that he still had to undergo probationary status
for three months.
Finally, Dagasdas contends that the new contract he signed
while in Saudi Arabia was void because it was not approved by the
Philippine Overseas Employment Administration (POEA).He also
claims that CA should have closely examined his quitclaim because
he only signed it to afford his plane ticket for his repatriation.
On the other hand, GPGS maintains that Dagasdas was fully
aware that he applied for and was accepted as Network Technician.
It also stresses that it was Dagasdas himself who decide to accept
from ITM a new job offer when he arrived in Saudi Arabia. It further
declares that Dagasdas' quitclaim is valid as there is no showing
that he was compelled to sign it.
Issue
Was Dagasdas validly dismissed from work?
Our Ruling
The Petition is with merit.
As a rule, only questions of law may be raised in a petition
under Rule 45 of the Rules of Court. However, this rule allows
certain exceptions, including a situation where the findings of fact of
the courts or tribunals below are conflicting. In this case, the CA and
the NLRC arrived at divergent factual findings anent Dagasdas'
termination. As such, the Court deems it necessary to re-examine
these findings and determine whether the CA has sufficient basis to
annul the NLRC Decision, and set aside its finding that Dagasdas
was illegally dismissed from work.
Moreover, it is well-settled that employers have the
prerogative to impose standards on the work quantity and quality of
their employees and provide measures to ensure compliance
therewith. Non-compliance with work standards may thus be a valid
cause for dismissing an employee. Nonetheless, to ensure that
employers will not abuse their prerogatives, the same is tempered
by security of tenure whereby the employees are guaranteed
substantive and procedural due process before they are dismissed
from work.
Security of tenure remains even if employees, particularly the
overseas Filipino workers (OFW),work in a different jurisdiction.
CIVIL LAW REVIEW 2

Since the employment contracts of OFWs are perfected in the

Philippines, and following the principle of lex loci contractus (the law
of the place where the contract is made), these contracts are
governed by our laws, primarily the Labor Code of the
Philippines and its implementing rules and regulations. At the same
time, our laws generally apply even to employment contracts of
OFWs as our Constitution explicitly provides that the State shall
afford full protection to labor, whether local or overseas. Thus, even
if a Filipino is employed abroad, he or she is entitled to security of
tenure, among other constitutional rights.
In this case, prior to his deployment and while still in the
Philippines, Dagasdas was made to sign a POEA-approved contract
with GPGS, on behalf of ITM; and, upon arrival in Saudi Arabia, ITM
made him sign a new employment contract. Nonetheless, this new
contract, which was used as basis for dismissing Dagasdas, is void.
First, Dagasdas' new contract is in clear violation of his right
to security of tenure.
Under the Labor Code of the Philippines the following are the
just causes for dismissing an employee:
ARTICLE 297. [282] Termination by Employer.
An employer may terminate an employment for any of
the following causes:
(a) Serious misconduct or willful disobedience by
the employee of the lawful orders of his employer or
representative in connection with his work;
(b) Gross and habitual neglect by the employee of
his duties;
(c) Fraud or willful breach by the employee of the
trust reposed in him by his employer or duly authorized
representative;
(d) Commission of a crime or offense by the
employee against the person of his employer or any
immediate member of his family or his duly authorized
representative; and
(e) Other causes analogous to the foregoing.
However, per the notice of termination given to Dagasdas,
ITM terminated him for violating clause 17.4.3 of his new
contract, viz.:
17.4 The Company reserves the right to terminate
this agreement without serving any notice to the
Consultant in the following cases:
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xxx xxx xxx

17.4.3 If the Consultant is terminated by company
or its client within the probation period of 3 months.
Based on the foregoing, there is no clear justification for the
dismissal of Dagasdas other than the exercise of ITM's right to
terminate him within the probationary period.
While our Civil Code recognizes that parties may stipulate in
their contracts such terms and conditions as they may deem
convenient, these terms and conditions must not be contrary to law,
morals, good customs, public order or policy. The above-cited clause
is contrary to law because as discussed,
our Constitution guarantees that employees, local or overseas, are
entitled to security of tenure. To allow employers to reserve a right
to terminate employees without cause is violative of this guarantee
of security of tenure.
Moreover, even assuming that Dagasdas was still a
probationary employee when he was terminated, his dismissal must
still be with a valid cause. As regards a probationary employee, his
or her dismissal may be allowed only if there is just cause or such
reason to conclude that the employee fails to qualify as regular
employee pursuant to reasonable standards made known to the
employee at the time of engagement.
Here, ITM failed to prove that it informed Dagasdas of any
predetermined standards from which his work will be gauged. In the
contract he signed while still in the Philippines, Dagasdas was
employed as Network Technician; on the other hand, his new
contract indicated that he was employed as Superintendent.
However, no job description or such duties and responsibilities
attached to either position was adduced in evidence. It thus
means that the job for which Dagasdas was hired was not definite
from the beginning.
Indeed, Dagasdas was not sufficiently informed of the work
standards for which his performance will be measured. Even his
position based on the job title given him was not fully explained by
his employer. Simply put, ITM failed to show that it set and
communicated work standards for Dagasdas to follow, and on which
his efficiency (or the lack thereof) may be determined.
Second, the new contract was not shown to have been
processed through the POEA. Under our Labor Code,employers
hiring OFWs may only do so through entities authorized by the
Secretary of the Department of Labor and Employment. Unless the
employment contract of an OFW is processed through the POEA, the
same does not bind the concerned OFW because if the contract is
CIVIL LAW REVIEW 2

not reviewed by the POEA, certainly the State has no means of

determining the suitability of foreign laws to our overseas workers.
This new contract also breached Dagasdas' original contract
as it was entered into even before the expiration of the original
contract approved by the POEA. Therefore, it cannot supersede the
original contract; its terms and conditions, including reserving in
favor of the employer the right to terminate an employee without
notice during the probationary period, are void.
Third, under this new contract, Dagasdas was not afforded
procedural due process when he was dismissed from work.
As cited above, a valid dismissal requires substantive and
procedural due process. As regards the latter, the employer must
give the concerned employee at least two notices before his or her
termination. Specifically, the employer must inform the employee of
the cause or causes for his or her termination, and thereafter, the
employer's decision to dismiss him. Aside from the notice
requirement, the employee must be accorded the opportunity to be
heard.
Here, no prior notice of purported infraction, and such
opportunity to explain on any accusation against him was given to
Dagasdas. He was simply given a notice of termination. In fact, it
appears that ITM intended not to comply with the twin notice
requirement. As above-quoted, under the new contract, ITM
reserved in its favor the right to terminate the contract without
serving any notice to Dagasdas in specified cases, which included
such situation where the employer decides to dismiss the employee
within the probationary period. Without doubt, ITM violated the due
process requirement in dismissing an employee.
Lastly, while it is shown that Dagasdas executed a waiver in
favor of his employer, the same does not preclude him from filing
this suit.
Generally, the employee's waiver or quitclaim cannot prevent
the employee from demanding benefits to which he or she is
entitled, and from filing an illegal dismissal case. This is because
waiver or quitclaim is looked upon with disfavor, and is frowned
upon for being contrary to public policy. Unless it can be established
that the person executing the waiver voluntarily did so, with full
understanding of its contents, and with reasonable and credible
consideration, the same is not a valid and binding undertaking.
Moreover, the burden to prove that the waiver or quitclaim was
voluntarily executed is with the employer.
In this case, however, neither did GPGS nor its principal, ITM,
successfully discharged its burden. GPGS and/or ITM failed to show
CIVIL LAW REVIEW 2

that Dagasdas indeed voluntarily waived his claims against the

employer.
Indeed, even if Dagasdas signed a quitclaim, it does not
necessarily follow that he freely and voluntarily agreed to waive all
his claims against his employer. Besides, there was no reasonable
consideration stipulated in said quitclaim considering that it only
determined the actual payment due to Dagasdas from February 11,
2008 to April 30, 2008. Verily, this quitclaim, under the semblance
of a final settlement, cannot absolve GPGS nor ITM from liability
arising from the employment contract of Dagasdas.
All told, the dismissal of Dagasdas was without any valid
cause and due process of law. Hence, the NLRC properly ruled that
Dagasdas was illegally dismissed. Evidently, it was an error on the
part of the CA to hold that the NLRC committed grave abuse of
discretion amounting to lack or excess of jurisdiction when the NLRC
ruled for Dagasdas.
WHEREFORE,the Petition is GRANTED.The Decision dated
September 26, 2012 and Resolution dated January 28, 2013 of the
Court of Appeals in CA-G.R. SP No. 115396 are REVERSED and SET
ASIDE.Accordingly, the March 29, 2010 and June 2, 2010
Resolutions of the National Labor Relations Commission in NLRC LAC
OFW-L-02-000071-10 are REINSTATED.
SO ORDERED.
Sereno, C.J.,Leonardo-de Castro, Perlas-Bernabe and Caguioa,
JJ.,concur.
||| (Dagasdas v. Grand Placement and General Services Corp., G.R. No.
205727, [January 18, 2017])
CIVIL LAW REVIEW 2

SPRING HOMES SUBDIVISION CO., INC., SPOUSES PEDRO L.

LUMBRES and REBECCA T. ROARING, petitioners vs. SPOUSES
PEDRO TABLADA, JR. and ZENAIDA TABLADA, respondents.
G.R. No. 200009, January 23, 2017
Ponente: Justice Peralta
Supreme Court, Second Division
Before the Court is a petition for review on certiorari under Rule 45 of

the Rules of Court seeking to reverse and set aside the Decision 1
dated May 31, 2011 and Resolution2 dated January 4, 2012 of the
Court of Appeals (CA) in CA-G.R. CV No. 94352 which reversed and set
aside the Decision3 dated September 1, 2009, of the Regional Trial
Court (RTC), Branch 92, Calamba City.
The factual antecedents are as follows.
On October 12, 1992, petitioners, Spouses Pedro L. Lumbres and

Rebecca T. Roaring, (Spouses Lumbres) entered into a Joint Venture
Agreement with Spring Homes Subdivision Co., Inc., through its
chairman, the late Mr. Rolando B. Pasic, for the development of several
parcels of land consisting of an area of 28,378 square meters. For
reasons of convenience and in order to facilitate the acquisition of
permits and licenses in connection with the project, the Spouses
Lumbres transferred the titles to the parcels of land in the name of
Spring Homes.4 On January 9, 1995, Spring Homes entered into a
Contract to Sell with respondents, Spouses Pedro Tablada, Jr. and
Zenaida Tablada, (Spouses Tablada) for the sale of a parcel of land
located at Lot No. 8, Block 3, Spring Homes Subdivision, Barangay
Bucal, Calamba, Laguna, covered by Transfer Certificate of Title (TCT)
No. T-284037.
On March 20, 1995, the Spouses Lumbres filed with the RTC of
Calamba City a complaint for Collection of Sum of Money, Specific
Performance and Damages with prayer for the issuance of a Writ of
Preliminary Attachment against Spring Homes for its alleged failure to
comply with the terms of the Joint Venture Agreement. Unaware of the
pending action, the Spouses Tablada began constructing their house on
the subject lot and thereafter occupied the same. They were then
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issued a Certificate of Occupancy by the Office Building Official.

Thereafter, on January 16, 1996, Spring Homes executed a Deed of
Absolute Sale in favor of the Spouses Tablada, who paid Spring Homes
a total of: Pl 79,500.00, more than the P157,500.00 purchase price as
indicated in the Deed of Absolute Sale. The title over the subject
property, however, remained with Spring Homes for its failure to cause
the cancellation of the TCT and the issuance of a new one in favor of
the Spouses Tablada, who only received a photocopy of said title.
Subsequently, the Spouses Tablada discovered that the subject

property was mortgaged as a security for a loan in the amount of over
P4,000,000.00 with Premiere Development Bank as mortgagee and
Spring Homes as mortgagor. In fact, since the loan remained unpaid,
extrajudicial proceedings were instituted. 7 Meanwhile, without waiting
for trial on the specific performance and sum of money complaint, the
Spouses Lumbres and Spring Homes entered into a Compromise
Agreement, approved by the Calamba RTC on October 28, 1999,
wherein Spring Homes conveyed the subject property, as well as
several others, to the Spouses Lumbres.8 By virtue of said agreement,
the Spouses Lumbres were authorized to collect Spring Homes'
account receivables arising from the conditional sales of several
properties, as well as to cancel said sales, in the event of default in the
payment by the subdivision lot buyers. In its capacity as mortgagee,
Premiere Development Bank was included as a party in the
Compromise Agreement.
In the exercise of the power granted to them, the Spouses Lumbres

started collecting deficiency payments from the subdivision lot buyers.
Specifically, they sent demand letters to the Spouses Tablada for the
payment of an alleged outstanding balance of the purchase price of
the subject property in the amount of P230,000.00. Vv'hen no payment
was received, the Spouses Lumbres caused the cancellation of the
Contract to Sell previously executed by Spring Homes in favor of the
Spouses Tablada. On December 22, 2000, the Spouses Lumbres and
Spring Homes executed a Deed of Absolute Sale over the subject
property, and as a result, a new title, TCT No. T-473055, was issued in
the name of the Spouses Lumbres.
On June 20, 2001, the Spouses Tablada filed a complaint for

Nullification of Title, Reconveyance and Damages against Spring
Homes and the Spouses Lumbres praying for the nullification of the
second Deed of Absolute Sale executed in favor of the Spouses
Lumbres, as well as the title issued as a consequence thereof, the
declaration of the validity of the first Deed of Absolute Sale executed in
their favor, and the issuance of a new title in their name. 11 The
Sheriffs Return dated August 1, 2001 indicated that while the original
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copy of the complaint and the summons were duly served upon the
Spouses Lumbres, summons was not properly served upon Spring
Homes because it was reportedly no longer existing as a corporate
entity.
On August 14, 2001, the Spouses Lumbres filed a Motion to Dismiss the
case against them raising as grounds the non-compliance with a
condition precedent and lack of jurisdiction of the RTC over the subject
matter. They alleged that the Spouses Tablada failed to avail of
conciliatory proceedings, and that the RTC has no jurisdiction since the
parties, as well as property in question, are all located at Calamba City,
and that the action instituted by the Spouses Tablada praying for the
nullification of the Compromise Agreement actually corresponds to a
nullification of a judgement issued by a co-equal trial court. The
Spouses Tablada opposed by alleging that Spring Homes holds office at
Paranaque City, falling under the exception from the requirement of
barangay conciliatory proceedings and that the action they filed was
for nullification of title issued to the Spouses Lumbres as a result of a
double sale, which is rightly under the jurisdiction of the trial court.
They also emphasized that as non-parties to the Compromise
Agreement, the same is not binding upon them. The Motion to Dismiss
was eventually denied by the trial court on October 2, 2001.
Interestingly, on even date, the Spouses Lumbres filed an ejectment

suit of their own before the Municipal Trial Court in Cities (MTCC) of
Calamba City demanding that the Spouses Tablada vacate the subject
property and pay rentals due thereon. The MTCC, however, dismissed
the suit ruling that the Spouses Lumbres registered their title over the
subject property in bad faith. Such ruling was reversed by the RTC
which found that there was no valid deed of absolute sale between the
Spouses Tablada and Spring Homes. Nevertheless, the CA, on appeal,
agreed with the MTCC and reinstated the decision thereof. This was
affirmed by the Court in Spouses Lumbres v. Spouses Tablada14 on
February 23, 2007.
Meanwhile, on the nullification and reconveyance of title suit filed by

the Spouses Tablada, the R TC noted that Spring Homes has not yet
been summoned. This caused the Spouses Tablada to move for the
discharge of Spring Homes as a party on the ground that the
corporation had already ceased to exist. The Spouses Lumbres,
however, opposed said motion claiming that Spring Homes is an
indispensable party.15 The RTC ordered the motion to be held in
abeyance until the submission of proof on Spring Homes' corporate
status. In the meantime, trial ensued. Eventually, it was shown that
Spring Homes' certificate of registration was revoked on September 29,
2003.16
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On September 1, 2009, the RTC rendered its Decision dismissing the

Spouses Tablada's action for lack of jurisdiction over the person of
Spring Homes, an indispensable party. 17 According to the trial court,
their failure to cause the service of summons upon Spring Homes was
fatal for Spring Homes was an indispensable party without whom no
complete determination of the case may be reached.18 In support
thereof, the RTC cited the pronouncement in Uy v. CA, et. al. that the
absence of an indispensable party renders all subsequent actuations of
the court null and void for want of authority to act not only as to the
absent parties but even as to those present. In the instant case, the
Spouses Tablada prayed that the Deed of Absolute Sale executed by
Spring Homes in favor of the Spouses Lumbres be declared null and
void and that Spring Homes be ordered to deliver the owner's duplicate
certificate of title covering the subject lot. Thus, without jurisdiction
over Spring Homes, the case could not properly proceed.21 The RTC
added that the Spouses Tablada's subsequent filing of the motion to
discharge does serve as an excuse for at that time, the certificate of
registration of Spring Homes had not yet been cancelled or revoked by
the Securities and Exchange Commission (SEC). In fact, the
assumption that it was already dissolved when the suit was filed does
not cure the defect, because the dissolution of a corporation does not
render it beyond the reach of courts considering the fact that it
continues as a body corporate for the winding up of its affairs.
In its Decision dated May 31, 2011, however, the CA reversed and set
aside the RTC Decision finding that Spring Homes is not an
indispensable party. It held that Spring Homes may be the vendor of
the subject property but the title over the same had already been
issued in the name of the Spouses Lumbres. So any action for
nullification of the said title causes prejudice and involves only said
spouses, the registered owners thereof. Thus, the trial court may very
well grant the relief prayed for by the Spouses Lumbres.23 In support
thereof, the appellate court cited the ruling in Seno, el. al. v. Mangubat,
et. al. wherein it was held that in the annulment of sale, where the
action was dismissed against defendants who, before the filing of said
action, had sold their interests in the subject land to their co-
defendant, the said dismissal against the former, who are only
necessary parties, will not bar the action from proceeding against the
latter as the remaining defendant, having been vested with absolute
title over the subject property. Thus, the CA maintained that the R TC' s
reliance on Uy v. CA is misplaced for in said case, it was imperative
that an assignee of interests in certain contracts be impleaded, and not
the assignor, as the RTC interpreted the ruling to mean. Thus, the
doctrine in Uy actually bolsters the finding that it is the Spouses
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Lumbres, as assignee of the subject property, and not Spring Homes,

as assignor, who are the indispensable parties.
Moreover, considering that the RTC had already concluded its trial on
the case and the presentation of evidence by both parties, the CA
deemed it proper to proceed to rule on the merits of the case. At the
outset, the appellate court noted that the ruling of the Court in
Spouses Lumbres v. Spouses Tablada back in 2007 cannot
automatically be applied herein for said ruling involves an ejectment
case that is effective only with respect to the issue of possession and
cannot be binding as to the title of the subject property. This
notwithstanding, the CA ruled that based on the records, the first sale
between Spring Homes and the Spouses Tablada must still be upheld
as valid, contrary to the contention of the Spouses Lumbres that the
same was not validly consummated due to the Spouses Tablada's
failure to pay the full purchase price of P409,500.00. According to the
appellate court, the first Deed of Absolute Sale clearly indicated that
the consideration for the subject property was P157,500.00.27 The
Spouses Lumbres' argument that such Deed of Absolute Sale was
executed only for the purpose of securing a loan from PAG-IBIG in favor
of the Spouses Tablada was unsubstantiated. In fact, even the second
Deed of Absolute Sale executed by Spring Homes in favor of the
Spouses Lumbres, as well as several receipts presented, indicated the
same amount of P157,500.00 as purchase price. As for the amount of
P409,500.00 indicated in the Contract to Sell executed between Spring
Homes and the Spouses Tablada, the CA adopted the findings of the
Court in Spouses Lumbres v. Spouses Tablada in 2007 and held that the
amount of P409,500.00 is actually composed not only of the subject
parcel of land but also the house to be constructed thereon. But since
it was proven that it was through the Spouses Tablada's own hard-
earned money that the house was constructed, there existed no
balance of the purchase price in the amount of :P230,000.00 as the
Spouses Lumbres vehemently insist, viz. :
Further, the spouses Lumbres alleged that what was legal

and binding between Spring Homes and plaintiffs-
appellants [spouses Tablada] was the Contract to Sell
which, in part, reads:
3. That the SELLER, for and in consideration of the

payments and other terms and conditions hereinafter to be
designated, has offered to sell and the BUYER has agreed
to buy certain parcel of land more particularly described as
follows:
Blk. Lot Area Price Total
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No. No. Sq. Per Selling

P- Meter sq. Price
111 Meter
3 8 105 P1,50
0
42 6,000
409,50
0
Similar to the ruling of the Supreme Court in Spouses Lumbres v.

Spouses Tablada, despite there being no question that the total land
area of the subject property was One Hundred Five (105) square
meters, there appears in the said contract to sell a numerical value of
Forty Two (42) square meters computed at the rate of Six Thousand
Pesos (1!6,000.00) per square meter. We agree with the findings of the
Supreme Court in this regard that the Forty Two (42) square meters
referred only to the land area of the house to be constructed in the
subject property. Since the spouses Lumbres failed to disprove the
plaintiffs-appellants [spouses Tablada] claim that it was through their
own hard earned money that enabled them to fund the construction
and completion of their house and not Spring Homes, there existed no
balance of the purchase price to begin with. It is important to note that
what the plaintiffs-appellants [spouses Tablada] bought from Spring
Homes was a vacant lot. Nowhere in the Deed of Absolute Sale
executed between plaintiffs-appellants [spouses Tablada] and Spring
Homes was it indicated that the improvements found thereon form part
of the subject property, lest, that any improvements existed thereto. It
was only through the plaintiffs-appellants [spouses Tablada] own
efforts that a house was constructed on the subject property.
The appellate court further stressed that at the time when the Spouses
Tablada entered into a contract of sale with Spring Homes, the title
over the subject property was already registered in the name of Spring
Homes. Thus, the Deed of Absolute Sale between Spring Homes and
the Spouses Tablada was valid and with sufficient consideration for
every person dealing with a 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 beyond the certificate to determine the
condition of the property.
In the end, the CA upheld the ruling of the Court in Spouses Lumbres v.
Spouses Tablada that notwithstanding the fact that the Spouses
Lumbres, as the second buyer, registered their Deed of Absolute Sale,
in contrast to the Spouses Tablada who were not able to register their
Deed of Absolute Sale precisely because of Spring Home's failure to
deliver the owner's copy of the TCT, the Spouses Tablada's right could
CIVIL LAW REVIEW 2

not be deemed defeated as the Spouses Lumbres were in bad faith for
even before their registration of their title, they were already informed
that the subject property was already previously sold to the Spouses
Tablada, who had already constructed their house thereon.30 Thus, the
CA disposed the case as follows:
WHEREFORE, in view of the foregoing premises, the instant appeal is

hereby GRANTED. The assailed Decision dated September 1, 2009 in
Civil Case No. 3117-2001-C is hereby ANNULLED AND SET ASIDE.
Accordingly, the Register of Deeds of Calamba, Laguna, is hereby
directed to cancel Transfer Certificate of Title No. T-473055 registered
in the name of the defendants-appellees spouses Pedro L. Lumbres and
Rebecca T. Roaring Lumbres and, in lieu thereof, issue a new one in the
name of plaintiffs-appellants.
SO ORDERED.
When their Motion for Reconsideration was denied by the CA in its

Resolution dated January 4, 2012, the Spouses Lumbres filed the
instant petition invoking the following arguments:
I.
THE COURT OF APPEALS ERRED IN NOT DISMISSING THE APPEAL FOR
LACK OF JURISDICTION OF THE TRIAL COURT OVER THE PERSON OF
SPRING HOMES AS AN INDISPENSABLE PARTY.
II.
HE COURT OF APPEALS ERRED IN ORDERING THAT RESPONDENTS, NOT
PETITIONERS, WERE PURCHASERS OF THE PROPERTY IN GOOD FAITH,
WHICH IS NOT IN ACCORD WITH ESTABLISHED FACTS, LAW, AND
JURISPRUDENCE.
In the instant petition, the Spouses Lumbres insist that the Spouses
Tablada have not yet paid the balance of the purchase price of the
subject property in the amount of P230,000.00 despite repeated
demands.32 They also insist that since Spring Homes, an indispensable
party, was not duly summoned, the CA should have affirmed the RTC's
dismissal of the instant complaint filed by the Spouses Tablada for lack
of jurisdiction.33 Citing the RTC's Decision, the Spouses Lumbres
reiterated that even assuming that Spring Homes had been dissolved
at the time of the filing of the complaint, the same does not excuse the
failure to implead it for it still continues as a body corporate for three
(3) years after revocation of its certificate of incorporation.
Moreover, the Spouses Lumbres faulted the CA in upholding the

findings of the Court in the 2007 case entitled Spouses Lumbres v.
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Spouses Tablada for the issue therein only involves physical possession
and not ownership. Contrary to the findings of the CA, the Spouses
Lumbres claim that the Spouses Tablada were not purchasers in good
faith for their failure to react to their repeated demands for the
payment of the P230,000.00. In fact, the Spouses Tablada even
admitted that they would pay the P230,000.00 upon the release of the
PAG-IBIG loan.36 Thus, the purported Deed of Absolute Sale between
Spring Homes and the Spouses Tablada is void for having no valuable
consideration, especially since it was issued merely for purposes of the
loan application from PAG-IBIG. On the other hand, the Spouses
Lumbres claim that they were in good faith since the First Deed of
Absolute Sale between Spring Homes and the Spouses Tablada was not
annotated at the back of the subject property's title.
The petition is bereft of merit.
At the outset, it must be noted that Spring Homes is not an

indispensable party. Section 7,38 Rule 3 of the Revised Rules of Court
defines indispensable parties as parties-in-interest without whom there
can be no final determination of an action and who, for this reason,
must be joined either as plaintiffs or as defendants.39 Time and again,
the Court has held that a party is indispensable, not only if he has an
interest in the subject matter of the controversy, but also if his interest
is such that a final decree cannot be made without affecting this
interest or without placing the controversy in a situation where the
final determination may be wholly inconsistent with equity and good
conscience.40 He is a person whose absence disallows the court from
making an effective, complete, or equitable determination of the
controversy between or among the contending parties.41 Conversely,
a party is not indispensable to the suit if his interest in the controversy
or subject matter is distinct and divisible from the interest of the other
parties and will not necessarily be prejudiced by a judgment which
does complete justice to the parties in court. If his presence would
merely permit complete relief between him and those already parties
to the action or will simply avoid multiple litigation, he is not
indispensable.
In dismissing the complaint for lack of jurisdiction, the trial court relied
on Uy v. CA, et. al. 43 and held that since Spring Homes, an
indispensable party, was not summoned, it had no authority to
proceed. But as aptly observed by the CA, the doctrine in Uy hardly
serves as basis for the trial court's conclusions and actually even
bolsters the finding that it is the Spouses Lumbres, as assignee of the
subject property, and not Spring Homes, as assignor, who are the
indispensable parties. In said case, the Public Estates Authority (PEA),
tasked to complete engineering works on the Heritage Memorial Park
CIVIL LAW REVIEW 2

project, assigned all of its interests therein to Heritage Park

Management Corporation (HP MC). When a complaint was filed against
the PEA in connection with the project, the Court affirmed the dismissal
thereof holding that HPMC, as assignee of PEA's interest, should have
been impleaded, being the indispensable party therein. The pertinent
portion of the Decision states:
Based on the Construction Agreement, PEA entered into it in its

capacity as Project Manager, pursuant to the PFT A. According to the
provisions of the PFT A, upon the formation of the HPMC, the PEA would
turn over to the HPMC all the contracts relating to the Heritage Park. At
the time of the filing of the CIAC Case on May 31, 2001, PEA ceased to
be the Project Manager of the Heritage Park Project, pursuant to
Section 11 of the PFT A. Through a Deed of Assignment, PEA assigned
its interests in all the existing contracts it entered into as the Project
Manager for Heritage Park to HPMC. As early as March 17, 2000, PEA
officially turned over to HPMC all the documents and equipment in its
possession related to the Heritage Park Project. Petitioner was duly
informed of these incidents through a letter dated March 13, 2000.
Apparently, as of the date of the filing of the CIAC Case, PEA is no
Jonger a party-in-interest. Instead, it is now CIAC Case, PEA is no longer
a party-in-interest. Instead, it is now private respondent HPMC, as the
assignee, who stands to be benefited or injured by the judgment in the
suit. In its absence, there cannot be a resolution of the dispute of the
parties before the court which is effective, complete or equitable. We
thus reiterate that HPMC is an indispensable party.
Moreover, as held by the CA, the pronouncement in Sena, et. al. v.

Mangubat, et. al. is instructive. In said case, the petitioner therein
entered into an agreement with certain respondents over a parcel of
land, which agreement petitioner believed to be merely an equitable
mortgage but respondents insisted to be a sale. The agreement,
however, was embodied in a document entitled "Deed of Absolute
Sale." Consequently, respondents were able to obtain title over the
property in their names. When two of the three respondents sold their
shares to the third respondent, the third respondent registered the
subject property solely in his name. Thereafter, the third respondent
further sold said property to another set of persons. Confronted with
the issue of whether the two respondents who sold their shares to the
third respondent should be impleaded as indispensable parties in an
action filed by petitioner to reform the agreement and to annul the
subsequent sale, the Court ruled in the negative, viz.:
The first issue We need to resolve is whether or not defendants Andres

Evangelista and Bienvenido Mangubat are indispensable parties.
Plaintiffs contend that said defendants being more dummies of
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defendant Marcos Mangubat and therefore not real parties in interest,

there is no room for the application of Sec. 7, Rule 3 of the Revised
Rules of Court.
XXXX
In the present case, there are no rights of defendants Andres

Evangelista and Bienvenido Mangubat to be safeguarded if the sale
should be held to be in fact an absolute sale nor if the sale is held to be
an equitable mortgage. Defendant Marcos Mangubat became the
absolute owner of the subject property by virtue of the sale to him of
the shares of the aforementioned defendants in the property. Said
defendants no longer have any interest in the subject property.
However, being parties to the instrument sought to be reformed, their
presence is necessary in order to settle all the possible issues of tile
controversy. Whether the disputed sale be declared an absolute sale or
an equitable mortgage, the rights of all the defendants will have been
amply protected. Defendants-spouses Luzame in any event may
enforce their rights against defendant Marcos Mangubat.
Similarly, by virtue of the second Deed of Absolute Sale between

Spring Homes and the Spouses Lumbres, the Spouses Lumbres
became the absolute and registered owner of the subject property
herein. As such, they possess that certain interest in the property
without which, the courts cannot proceed for settled is the doctrine
that registered owners of parcels of land whose title is sought to be
nullified should be impleaded as an indispensable party.47 Spring
Homes, however, which has already sold its interests in the subject
land, is no longer regarded as an indispensable party, but is, at best,
considered to be a necessary party whose presence is necessary to
adjudicate the whole controversy, but whose interests are so far
separable that a final decree can be made in-its absence without
affecting it.48 This is because when Spring Homes sold the property in
question to the Spouses Lumbres, it practically transferred all its
interests therein to the said Spouses. In fact, a new title was already
issued in the names of the Spouses Lumbres. As such, Spring Homes
no longer stands to be directly benefited or injured by the judgment in
the instant suit regardless of whether the new title registered in the
names of the Spouses Lumbres is cancelled in favor of the Spouses
Tablada or not. Thus, contrary to the ruling of the RTC, the failure to
summon Spring Homes does not deprive it of jurisdiction over the
instant case for Spring Homes is not an indispensable party.
On the merits of the case, the Court likewise affirms the findings of the
CA. The issue here involves what appears to be a double sale. First, the
Spouses Tablada entered into a Contract to Sell with Spring Homes in
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1995 which was followed by a Deed of Absolute Sale in 1996. Second,

in 2000, the Spouses Lumbres and Spring Homes executed a Deed of
Absolute Sale over the same property. The Spouses Lumbres
persistently insist that the first Deed of Sale executed by the Spouses
Tablada is void for having no valuable consideration. They argue that
out of the P409,500.00 purchase price under the Contract to Sell, the
Spouses Tablada merely paid Pl 79,500.00, failing to pay the rest in the
amount of P230,000.00 despite demands.
There is no merit in the contention.
As the CA held, it is clear from the first Deed of Absolute Sale that the
consideration for the subject property is P157,500.00. In fact, the same
amount was indicated as the purchase price in the second Deed of
Absolute Sale between Spring Homes and the Spouses Lumbres. As for
the varying amounts contained in the Contract to Sell, the Court notes
that the same has already been duly addressed by the Court in the
2007 Spouses Lumbres v. Spouses Tablada case, the pertinent portions
of which states:
In claiming their right of possession over the subject lot,

petitioners made much of the judicially approved Compromise
Agreement in Civil Case No. 2194-95-C, wherein Spring Homes' rights
and interests over the said lot under its Contract to Sell with the
respondents were effectively assigned to them. Petitioners argue
that out of the whole P409,500.00 purchase price under the
respondents Contract to Sell with Spring Homes, the
respondents were able to pay only P179,500.00, leaving a
balance of P230,000.00.
Upon scrutiny, however, the CA astutely observed that despite there

being no question that the total land area of the subject lot is 105
square meters, the Contract to Sell executed and entered into by
Spring Homes and the respondent spouses states:
3. That the SELLER, for and in consideration of the

payments and other terms and conditions hereinafter to be
designated, has offered to sell and the BUYER has agreed
to buy certain parcel of land more particularly described as
follows:
Blk. Lot Area Price Total

No. No. Sq. Per Selling
P- Meter sq. Price
111 Meter
3 8 105 P1,50
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0
42 6,000
409,50
0
The two deeds of absolute sale as well as the respondents' Tax

Declaration No. 019-1342 uniformly show that the land area of the
property covered by TCT No. T-284037 is 105 square meters. The
parties never contested its actual land area.
However, while there is only one parcel of land being sold,

which is Lot 8, Blk. 3, paragraph "1" above of the Contract to
Sell speaks of two (2) land areas, namely, "105" and "42," and
two (2) prices per square meter, to wit: "Pl,500" and "P6,000."
As correctly observed by the CA:
It does not require much imagination to understand why

figures "3," "8," "105" and "Pl,500" appear in the
paragraph "l" of the Contract to Sell. Certainly "3" stands
for "Blk. No.," "8" stands for "Lot No.," "105" stands for the
land area and "Pl ,500" stands for the price per square
meter. However, this Court is perplexed as regards figures
"42" and "6,000" as they are not accompanied by any "Blk.
No." and/or "Lot No." In other words, while there is only one
parcel of land being sold, paragraph "l" of the Contract to
Sell contains two land areas and two prices per square
meter. There is no reason for the inclusion of land area in
the computation when it was established beyond cavil that
the total area being sold is only 105 square meters.
Likewise, there is no explanation why there is another rate
for the additional 42 square meters, which was pegged at
P6,000 per square meter, while that of 105 square meters
was only Pl,500.00.
The CA could only think of one possible explanation: the Contract to

Sell refers only to a single lot with a total land area of 105 square
meters. The 42 square meters mentioned in the same contract and
therein computed at the rate of 1!6,000 per square meter refer to the
cost of the house which would be constructed by the respondents on
the subject lot through a Pag-lbig loan. The land area of the house to
be constructed was pegged at 42 square meters because of the
following restrictions in the Contract to Sell:
9. The lot(s) subject matter of this contract are subject to the following
restrictions:
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a) Any building which may be constructed at anytime in said lot(s)

must be strong x x x. Said building must not be constructed at a
distance ofless than (2) meters from any boundaries of the lot(s).
b) The total area to be voted to buildings or structures shall not exceed

eighty percent (80%) of the total area of the lot(s).
Thus, while the Spouses Lumbres would like Us to believe that based
on the Contract to Sell, the total selling price of the subject property is
P409,500.00, the contract itself, as well as the surrounding
circumstances following its execution, negate their argument. As
appropriately found by the Court, said amount actually pertains to the
sum of: (1) the cost of the land area of the lot at 105 square meters
priced at Pl ,500 per square meter; and (2) the cost of the house to be
constructed on the land at 42 square meters priced at P6,000 per
square meter. But it would be a grave injustice to hold the Spouses
Tablada liable for more than the cost of the land area when it was duly
proven that they used their own funds in the construction of the house.
As shown by the records, the Spouses Tablada was forced to use their
own money since their PAG-IBIG loan application did not materialize,
not through their own fault, but because Spring Homes failed, despite
repeated demands, to deliver to them the owner's duplicate copy of
the subject property's title required by the loan application. In reality,
therefore, what Spring Homes really sold to the Spouses Tablada was
only the lot in the amount of Pl57,500.00, since the house was
constructed thereon using the Spouses Tablada's own money. In fact,
nowhere in the Contract to Sell was it stated that the subject property
includes any improvement thereon or that the same even exists.
Moreover, as previously mentioned, in both the first and second Deeds
of Absolute Sale, it was indicated that the amount of the property
subject of the sale is only Pl57,500.00. Accordingly, the Court held
further in Spouses Lumbres v. Spouses Tablada:
Looking at the above-quoted portion of the Contract to Sell, the CA

found merit in the respondents' contention that the total selling price
of P409,5OO includes not only the price of the lot but also the cost of
the house that would be constructed thereon. We are inclined to agree.
The CA went on to say:
It could be argued that the contract to sell never mentions

the construction of any house or building on the subject
property. Had it been the intention of the parties that the
total selling price would include the amount of the house
that would be taken from a loan to be obtained from Pag-
Ibig, they could have specified so. However, one should not
lose sight of the fact that the contract to sell is an
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accomplished form. [Respondents,] trusting Spring Homes,

could not be expected to demand that another contract
duly reflective of their agreements be utilized instead of
the accomplished form. The terms and conditions of the
contract may not contemplate the inclusion of the cost of
the house in the total selling price, but the entries
typewritten thereon sufficiently reveal the intentions of the
parties.
The position of the [respondents] finds support in the

documents and subsequent actuations of Bertha Pasic, the
representative of Spring Homes. [Respondents] undeniably
proved that they spent their own hard-earned money to
construct a house thereon after their Pag-lbig loan did not
materialize. It is highly unjust for the [respondents] to pay
for the amount of the house when the loan did not
materialize due to the failure of Spring Homes to deliver
the owner's duplicate copy of TCT No. T-284037.
XXXX
If the total selling price was indeed

P409,500.00, as [petitioners] would like to poster,
said amount should have appeared as the
consideration in the deed of absolute sale dated
January 15, 1996. However, only P157,500.00 was
stated. The amount stated in the Deed of Absolute Sale
dated January 15, 1996 was not only a portion of the
selling price, because the Deed of Sale dated December
22, 2000 also reflected P157,500.00 as consideration. It is
not shown that [petitioners] likewise applied for a loan with
Pag-Ibig. The reasonable inference is that the consistent
amount stated in the two Deeds of Absolute Sale was the
true selling price as it perfectly jibed with the computation
in the Contract to Sell.
We find the CA's reasoning to be sound. At any rate, the

execution of the January 16, 1996 Deed of Absolute Sale in favor
of the respondents effectively rendered the previous Contract to
Sell ineffective and canceled. Furthermore, we find no merit in
petitioners' contention that the first sale to the respondents was
void for want of consideration. As the CA pointed out in its
assailed decision:
Other than the [petitioners'] self-serving assertion that the Deeds

of Absolute Sale was executed solely for the purpose of obtaining
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a Pag-Ibig loan, no other concrete evidence was tendered to

justify the execution of the deed of absolute sale. They failed to
overcome the clear and convincing evidence of the
[respondents] that as early as July 5, 1995 the latter had already
paid the total amount of :P.179,500.00, much bigger than the
actual purchase price for the subject land.
There is, therefore, no factual or legal basis for the Spouses

Lumbres to claim that since the Spouses Tablada still had an
outstanding balance of P230,000.00 from the total purchase
price, the sale between Spring Homes and the Spouses Tablada
was void, and consequently, they were authorized to unilaterally
cancel such sale, and thereafter execute another one transferring
the subject property in their names. As correctly held by the
Court in Spouses Lumbres v. Spouses Tablada,52 the first Deed of
Sale executed in favor of the Spouses Tablada is valid and with
sufficient consideration. Thus, in view of this validity of the sale
subject of the first Deed of Absolute Sale between Spring Homes
and the Spouses Tablada, the Court shall now determine who, as
between the two spouses herein, properly acquired ownership
over the subject property. In this regard, Article 1544 of the Civil
Code reads:
Art. 1544. If the same thing should have been sold to different
vendees, the ownership shall be transferred to the person who
may have first taken possession thereof in good faith, if it should
be movable property.
Should it be immovable property, the ownership shall

belong to the person acquiring it who in good faith first
recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the

person who in good faith was first in the possession, and, in the
absence thereof, to the person who presents the oldest title,
provided there is good faith. (Emphasis supplied)
The principle of primus tempore, potior jure (first in time,

stronger in right) gains greater significance in case of a double
sale of immovable property. Thus, the Court has consistently
ruled that ownership of an immovable property which is the
subject of a double sale shall be transferred: ( 1) to the person
acquiring it who in good faith first recorded it in the Registry of
Property; (2) in default thereof, to the person who in good faith
was first in possession; and (3) in default thereof, to the person
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who presents the oldest title, provided there is good faith. The
requirement of the law then is two-fold: acquisition in good faith
and registration in good faith. Good faith must concur with the
registration -that is, the registrant must have no knowledge of
the defect or lack of title of his vendor or must not have been
aware of facts which should have put him upon such inquiry and
investigation as might be necessary to acquaint him with the
defects in the title of his vendor. If it is shown that a buyer was in
bad faith, the alleged registration they have made amounted to
no registration at all.
Here, the first buyers of the subject property, the Spouses

Tablada, were able to take said property into possession but
failed to register the same because of Spring Homes' unjustified
failure to deliver the owner's copy of the title whereas the second
buyers, the Spouses Lumbres, were able to register the property
in their names. But while said the Spouses Lumbres successfully
caused the transfer of the title in their names, the same was
done in bad faith. As correctly observed by the Court in Spouses
Lumbres v. Spouses Tablada, the Spouses Lumbres cannot claim
good faith since at the time of the execution of their Compromise
Agreement with Spring Homes, they were indisputably and
reasonably informed that the subject lot was previously sold to
the Spouses Tablada. They were also already aware that the
Spouses Tablada had constructed a house thereon and were in
physical possession thereof. They cannot, therefore, be permitted
to freely claim good faith on their part for the simple reason that
the First Deed of Absolute Sale between Spring Homes and the
Spouses Tablada was not annotated at the back of the subject
property's title. It is beyond the Court's imagination how spouses
Lumbres can feign ignorance to the first sale when the records
clearly reveal that they even made numerous demands on the
Spouses Tablada to pay, albeit erroneously, an alleged balance of
the purchase price.
Indeed, knowledge gained by the first buyer of the second sale

cannot defeat the first buyer's rights except only as provided by
law, as in cases where the second buyer first registers in good
faith the second sale ahead of the first. Such knowledge of the
first buyer does bar her from availing of her rights under the law,
among them, first her purchase as against the second buyer. But
conversely, knowledge gained by the second buyer of the first
sale defeats his rights even if he is first to register the second
sale, since such knowledge taints his prior registration with bad
faith.
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Accordingly, in order for the Spouses Lumbres to obtain priority

over the Spouses Tablada, the law requires a continuing good
faith and innocence or lack of knowledge of the first sale that
would enable their contract to ripen into full ownership through
prior registration. But from the very beginning, the Spouses
Lumbres had already known of the fact that the subject property
had previously been sold to the Spouses Tablada, by virtue of a
valid Deed of Absolute Sale. In fact, the Spouses Tablada were
already in possession of said property and had even constructed
a house thereon. Clearly then, the Spouses Lumbres were in bad
faith the moment they entered into the second Deed of Absolute
Sale and thereafter registered the subject property in their
names. For this reason, the Court cannot, therefore, consider
them as the true and valid owners of the disputed property and
permit them to retain title thereto.
WHEREFORE, premises considered, the instant petition is

DENIED. The assailed Decision dated May 31, 2011 and
Resolution dated January 4, 2012 of the Court of Appeals in CA-
G.R. CV No. 94352are hereby AFFIRMED.
SO ORDERED.
KABISIG REAL WEALTH DEV., INC. and FERNANDO C. TIO,

petitioners vs. YOUNG BUILDERS CORPORATION, respondent
G.R. No. 212375, January 25, 2017
Supreme Court, Second Division
This is Petition for Review which petitioners Kabisig Real Wealth Dev.,
Inc. and Fernando C. Tio filed assailing the Court of Appeals (CA)
Decision dated June 28, 2013 and Resolution dated March 28, 2014 in
CA- G.R. CV No. 02945, affirming the Decision of the Regional Trial
Court (RTC) of Cebu City, Branch 12, dated July 31, 2008 in Civil Case
No. CEB- 27950.
The following are the pertinent antecedents of the case, as shown by

the records:
Sometime in April 2001, Kabisig Real Wealth Dev., Inc. (Kabisig),
through Ferdinand Tio (Tio), contracted the services of Young Builders
Corporation (Young Builders) to supply labor, tools, equipment, and
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materials for the renovation of its building in Cebu City. Young Builders
then finished the work in September 2001 and billed Kabisig for
P4,123,320.95. However, despite numerous demands, Kabisig failed to
pay. It contended that no written contract was ever entered into
between the parties and it was never informed of the estimated cost of
the renovation. Thus, Young Builders filed an action for Collection of
Sum of Money
against Kabisig.
On July 31, 2008, the RTC of Cebu City rendered a Decision finding for
Young Builders, thus:
WHEREFORE, judgment is hereby rendered ordering the defendants to

pay plaintiff P4,123,320.95 representing the value of services rendered
and materials used in the renovation of the building of defendant
Kabisig Real Wealth Dev., Inc. into a restaurant of defendant Ferdinand
Tio, by way of actual damages, plus 12% per annum from September
11, 2001 until it is fully paid. Costs against defendants.
SO ORDERED.
Therefore, Kabisig elevated the case to the CA. On June 28, 2013, the
appellate court affirmed the RTC Decision, with modification, viz.:
WHEREFORE, foregoing premises considered, the Decision dated July

31, 2008 rendered by the Regional Trial Court of Cebu City, Branch 12
in Civil Case No. CEB-27950 is hereby AFFIRMED with MODIFICA TION,
deleting the award for actual damages. As modified, the defendants
Kabisig Real Wealth Dev., Inc. and Ferdinand Tio are ordered to jointly
pay the plaintiff Young Builders Corporation Two Million Four Hundred
Thousand (P2,400,000.00) Pesos as TEMPERATE DAMAGES for the
value of services, rendered and materials used in the renovation of
defendants-appellants building. In addition, the total amount adjudged
shall earn interest at the rate of 12% per annum from September 11,
2001, until it is fully paid. Costs against defendants.
SO ORDERED.
Subsequently, Young Builders and Kabisig reconsideration, but both

were denied by the CA.
Hence, Kabisig filed the instant petition.
The sole issue is whether or not Kabisig is liable to Young Builders for
the damages claimed:
Under the Civil Code, a contract is a meeting of minds, with respect to

the other, to give something or to render some service. Article 1318
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reads:
Art. 1318. There is no contract unless the following requisites concur:

(1) Consent o f the contracting parties;
(2) Object certain which is the subject matter o f the contract; and
(3) Cause of the obligation which is established.
Accordingly, for a contract to be valid, it must have the following

essential elements: (1) consent of the contracting parties; (2) object
certain, which is the subject matter of the contract; and (3) cause of
the obligation which is established. Consent must exist, otherwise, the
contract is non- existent. Consent is manifested by the meeting of the
offer and the acceptance of the thing and the cause, which are to
constitute the contract. By law, a contract of sale, is perfected at the
moment there is a meeting of the minds upon the thing that is the
object of the contract and upon the price.
Indeed, it is a consensual contract which is perfected by mere consent.
Through the testimonies of both Young Builders' and Kabisig's

witnesses, Tio commissioned the company of his friend, Nelson Yu, to
supply labor, tools, equipment, and materials for the renovation of
Kabisig's building into a restaurant. While Tio argues that the
renovation was actually for the benefit of his partners, Fernando
Congmon, Gold En Burst Foods Co., and Sunburst Fried Chicken, Inc.,
and therefore, they should be the ones who must shoulder the cost of
the renovation, said persons were never impleaded in the instant case.
Moreover, all the documents pertaining to the project, such as official
receipts of payment for the building permit application, are under the
names of Kabisig and Tio.
Further, Kabisig's claim as to the absence of a written contract

between it and Young Builders simply does not hold water. It is settled
that once perfected, a contract is generally binding in whatever form,
whether written or oral, it may have been entered into, provided the
aforementioned essential requisites for its validity are present.7 Article
1356 of the Civil Code provides:
Art. 1356. Contracts shall be obligatory in whatever form they may

have been entered into, provided all the essential requisites for their
validity are present.
XXXX
There is nothing in the law that requires a written contract for the
agreement in question to be valid and enforceable. Also, the Court
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notes that neither Kabisig nor Tio had objected to the renovation work,
until it was already time to settle the bill.
Likewise, the appellate court aptly reduced the amount of damages

awarded by the RTC. Under Article 2199 of the Civil Code, actual or
compensatory damages are those awarded in satisfaction of, or
inrecompense for, loss or injury sustained. They proceed from a sense
of natural justice and are designed to repair the wrong that has been
done, to compensate for the injury inflicted. They either refer to the
loss of what a person already possesses (dano emergente), or the
failure to receive as a benefit that which would have pertained to him
(lucro cesante), as in this case.
For an injured party to recover actual damages, however, he is

required to prove the actual amount of loss with reasonable degree of
certainty premised upon competent proof and on the best evidence
available. The burden of proof is on the party who would be defeated if
no evidence would be presented on either side. He must establish his
case by a preponderance of evidence, which means that the evidence
adduced by one side is superior to that of the other. In other words,
damages cannot be presumed and courts, in making an award, must
point out specific facts that could afford a basis for measuring
compensatory damages. A court cannot merely rely on speculations,
conjectures, or guesswork as to the fact and amount of damages as
well as hearsay or uncorroborated testimony whose truth is suspect. A
party is entitled to adequate compensation only for such pecuniary
loss actually suffered and duly proved. Indeed, to recover actual
damages, the amount of loss must not only be capable of proof but
must actually be proven with a reasonable degree of certainty,
premised upon competent proof or best evidence obtainable of its
actual amount. Here, the evidence reveals that Young Builders failed to
submit any competent proof o f the specific amount o f actual damages
being claimed. The documents submitted by Young Builders either do
not bear the name of Kabisig or Tio, their conformity, or signature, or
do not indicate in any way that the amount reflected on its face
actually refers to the renovation project.
Notwithstanding the absence of sufficient proof, Young Builders still

deserves to be recompensed for actually completing the work. In the
absence of competent proof on the amount of actual damages, the
courts allow the party to receive temperate damages. Temperate or
moderate damages, which are more than nominal but less than
compensatory damages, may be recovered when the court finds that
some pecuniary loss has been suffered but its amount cannot, from the
nature of the case, be proved with certainty.
CIVIL LAW REVIEW 2

To determine the compensation due and to avoid unjust enrichment

from resulting out of a fulfilled contract, the principle of quantum
meruit may be used. Under this principle, a contractor is allowed to
recover the reasonable value of the services rendered despite the lack
of a written contract. The measure of recovery under the principle
should relate to the reasonable value of the services performed. The
principle prevents undue enrichment based on the equitable postulate
that it is unjust for a person to retain any benefit without paying for it.
Being predicated on equity, said principle should only be applied if no
express contract was entered into, and no specific statutory provision
was applicable.
The principle o f quantum meruit justifies the payment o f the

reasonable value of the services rendered and should apply in the
absence of an express agreement on the fees. It is notable that the
issue revolves around the parties' inability to agree on the fees that
Young Builders should receive. Considering the absence of an
agreement, and in view of the completion of the renovation, the Court
has to apply the principle of quantum meruit in determining how much
is due to Young Builders. Under the established circumstances, the
total amount of P2,400,000.00 which the CA awarded is deemed to be
a reasonable compensation under the principle of quantum meruit
since the renovation of Kabisig's building had already been completed
in 2001.
Finally, the rate of interest should be modified. When the obligation is

breached, and it consists in the payment of a sum of money, as in this
case, the interest due should be that which may have been stipulated
in writing. In the absence of stipulation, the rate of interest shall be
12%, later reduced to 6%, per annum to be computed from default,
i.e., from judicial or extrajudicial demand, subject to the provisions of
Article 1169 of the Civil Code. Here, the records would show that Young
Builders made the demand on September 11, 2001. Also, the rate of
legal interest for a judgment awarding a sum of money shall be 6% per
annum from the time such judgment becomes final and executory until
its satisfaction, this interim period being deemed to be by then an
equivalent to a forbearance of credit.
WHEREFORE, PREMISES CONSIDERED, the Court DISMISSES the

petition for lack of merit and AFFIRMS the Decision of the Court of
Appeals dated June 28, 2013, and its Resolution dated March 28, 2014,
in CA-G.R. CV No. 02945, with MODIFICATION as to the interest which
must be twelve percent (12%) per annum of the amount awarded from
the time of demand on September 11, 2001 to June 30, 2013, and six
percent (6%) per annum from July 1, 2013 until its full satisfaction.
CIVIL LAW REVIEW 2

SO ORDERED.
SCANMAR MARITIME SERVICES, INC., CROWN

SHIPMANAGEMENT INC., and VICTORIO Q.
ESTA, petitioners, vs. WILFREDO T. DE
LEON,respondent.
G.R. No. 199977. January 25, 2017
Ponente: CJ Sereno
First Division
DECISION
We resolve the Petition for Review on Certiorari filed by

petitioners Scanmar Maritime Services, Inc., Crown
Shipmanagement, Inc., and Victorio Q. Esta, assailing the Decision
and the Resolution of the Court of Appeals (CA). The CA affirmed the
rulings of the National Labor Relations Commission (NLRC) and the
Labor Arbiter (LA) finding respondent entitled to disability benefits
and attorney's fees. HTcADC
The antecedent facts are as follows:
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Respondent Wilfredo T. de Leon worked for petitioner Scanmar

Maritime Services, Inc. (Scanmar) as a seafarer aboard the vessels
of its principal, Crown Shipmanagement, Inc. He was repatriated on
13 September 2005 after completing his nine-month Philippine
Overseas Employment Administration-Standard Employment
Contract (POEA Contract). For 22 years in the service, there was no
account of any ailment he had contracted.
Prior to his next deployment, De Leon reported to Scanmar's
office on 17 November 2005 for a pre-employment medical
examination. Noticing that respondent dragged his right leg, the
company physician referred him to a neurologist for consultation,
management, and clearance. In the meantime, the status of
respondent in his Medical Examination Certificate was marked
"pending."
Thereafter, Scanmar no longer heard from De Leon. Two years
later, in December 2007, it received a letter from him asking for
disability benefits amounting to USD60,000. It did not reply to the
letter, prompting him to file a Complaint with the LA for disability
benefits and attorney's fees.
Before the LA, respondent alleged that on his last duty as a
Third Mate on board M/V Thuleland, he began feeling that
something was wrong with his body, and that he experienced lower
abdominal pain and saw blood in his stool. He also claimed that
after he disembarked in the Philippines on 13 September 2005, he
underwent a series of medical check-ups with his private doctors,
which revealed that he was suffering from L5-S1 radiculopathy.
As proof of his ailment, respondent submitted before the LA
(1) an Electrodiagnostic Laboratory Report dated 5 October 2005
from Dr. Ofelia Reyes stating the impression that there was an
electrophysiologic evidence of chronic right L5-S1 radiculopathies in
acute exacerbation; (2) a Medical Certification dated 21 November
2005 from Dr. Angel Luna of Seamen's Hospital signifying that
respondent was unfit for work, and that the latter's illness was work-
related; (3) a Magnetic Resonance Imaging of the Lumbosacral
Spine dated 7 December 2005, signed by Dr. Melodia B. Geslani of
De Los Santos Medical Center, stating the impression that
respondent had a mild central canal stenosis at L5-S1 secondary to
a small posterocentral disc protrusion; and (4) a Medical
Certification dated 6 October 2006 from Dr. Ricardo Guevara of the
Plaridel Country Hospital indicating that respondent was unfit for
sea service.
In response, petitioners raised three main contentions. First,
they belied the claim of respondent that he experienced an illness
aboard M/V Thuleland, given the absence of any such entry in the
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vessel's logbook. Second, petitioners highlighted the fact that when

he disembarked, De Leon did not complain of any illness, request
medical assistance, or submit himself to a post-employment
medical examination within three days from his disembarkation, as
required by his POEA Contract. Third, petitioners asserted that he
had failed to address his "pending" status and to follow the
company physician's advice for him to consult a neurologist.
The LA ruled in favor of De Leon, awarding him USD60,000
disability benefits and attorney's fees. The former held that, absent
any recorded incident after the disembarkation, the causative
circumstances leading to the permanent disability of respondent
must have transpired during the 22 years of the latter's
employment. The LA declared that the three-day post-employment
medical examination requirement did not apply, as respondent had
not been medically repatriated. The LA also awarded attorney's fees
to respondent.
Petitioners appealed to the NLRC, which affirmed the ruling of
the LA in toto. Thereafter, they lodged an original action
for certiorari before the CA, claiming that the NLRC had committed
grave abuse of discretion by awarding disability benefits to
respondent absent the following: (1) proof that the illness was
suffered during the term of his employment; (2) compliance with the
three-day post-employment medical examination requirement.
Petitioners also questioned the award of attorney's fees.
The CA dismissed the action for certiorari. With respect to the
first issue, it echoed the uniform analyses of the LA and the NLRC
that the causative circumstances leading to De Leon's permanent
disability must have transpired during the 22 years of his
employment. The CA declared that seafarers may recover money
claims even if their ailment appeared only after their repatriation.
In explaining respondent's injury, the CA referred
to MedicineNet.com and explained that:
Medical websites do tend to suggest that the risk
factors for the private respondent's illness,
radiculopathy, are activities that place an excessive or
repetitive load on the spine. Patients involved in heavy
labor are more prone to develop radiculopathy than
those with a more sedentary lifestyle. This partakes of a
nerve irritation caused by damage to the discs between
the vertebrae. Damage to the discs occurs because of
degeneration ("wear and tear") of the outer ring of the
disc, traumatic injury, or both.
CIVIL LAW REVIEW 2

It should be noted that the private respondent

worked his way from the bottom up, and only acquired
Third Mate status in the last five of the twenty two years
that he has been working with the company. In any
event, it cannot be gainsaid that he was consistently
engaged in stressful physical labor all throughout the
duration of his employment with petitioner Scanmar.
Anent the second issue, the CA agreed with the LA and the
NLRC that the three-day post-employment medical examination
requirement did not apply to respondent as he had not been
medically repatriated. As for the award of attorney's fees, the CA
sustained its award in his favor. Petitioners moved for
reconsideration, but to no avail.
Before this Court, petitioners contend that the ailment of De
Leon was not proven to be a work-related injury contracted at sea.
They maintain that, in any case, he is not entitled to permanent and
total disability benefits, since he failed to report for a post-medical
examination within three days from the time he disembarked, a
requirement explicitly stated in the POEA Contract. Petitioners also
assail the imposition of attorney's fees, allegedly granted to
respondent without basis.
In his Comment, respondent did not explain why he failed to
report for post-medical examination within three days from his
disembarkation. He nonetheless insists that his various medical
certificates prove that his radiculopathy is a work-related injury.
Respondent asserts his entitlement to attorney's fees, claiming that
petitioners acted in bad faith when they did not immediately treat
his injury.
RULING OF THE COURT
To be entitled to disability benefits, this Court refers to the
provisions of the POEA Contract, as it sets forth the minimum rights
of a seafarer and the concomitant obligations of an employer. Under
Section 20 (B) thereof, these are the requirements for
compensability: (1) the seafarer must have submitted to a
mandatory post-employment medical examination within three
working days upon return; (2) the injury must have existed during
the term of the seafarer's employment contract; and (3) the injury
must be work-related.
De Leon reneged on his obligation to
submit to a post-employment medical
examination within three days from
disembarkation.
CIVIL LAW REVIEW 2

It is not disputed that De Leon failed to submit to a post-

employment medical examination by a company-designated
physician within three working days from disembarkation. The LA,
the NLRC, and the CA excused him from complying with this
requirement, reasoning that he had not been medically repatriated.
This excuse does not hold water. In the past, we have
consistently held that the three-day rule must be observed by all
those claiming disability benefits, including seafarers who
disembarked upon the completion of contract. In InterOrient
Maritime Enterprises, Inc. v. Creer III the seafarer's repatriation was
not due to any medical reasons but because his employment
contract had already expired. On that occasion, the Court applied
the doctrine in Wallem Maritime Services, Inc. v. Tanawan, and held
that:
The rationale for the rule [on mandatory post-
employment medical examination within three days
from repatriation by a company-designated physician] is
that reporting the illness or injury within three days from
repatriation fairly makes it easier for a physician to
determine the cause of the illness or injury. Ascertaining
the real cause of the illness or injury beyond the period
may prove difficult. To ignore the rule might set a
precedent with negative repercussions, like opening
floodgates to a limitless number of seafarers claiming
disability benefits, or causing unfairness to the
employer who would have difficulty determining the
cause of a claimant's illness because of the passage of
time. The employer would then have no protection
against unrelated disability claims. aDSIHc
Hence, given that respondent had inexplicably breached this
requirement, the CA should have barred his claim for disability
benefits.
De Leon did not prove that he had
suffered his injury during the term of
his contract.
In the recital of their rulings, none of the tribunals a
quo discussed any particular sickness that De Leon suffered while at
sea, which was a factual question that should have been for the
labor tribunals to resolve. As they have failed to do so, this Court
must sift through and reexamine the credibility and probative value
of the evidence on record so as to ultimately decide whether or not
it would be just to award disability benefits to the seafarer.
CIVIL LAW REVIEW 2

Claimants for disability benefits must first discharge the

burden of proving, with substantial evidence, that their ailment was
acquired during the term of their contract. They must show that
they experienced health problems while at sea, the circumstances
under which they developed the illness, as well as the symptoms
associated with it.
In this case, respondent adduced insufficient proof that he
experienced his injury or its symptoms during the term of his
contract.
In his Position Paper before the LA, De Leon allegedly felt
something wrong with his body, experienced lower abdominal pain,
and saw blood in his stool. To support his claim, he attached several
laboratory reports, as well as the medical certifications of Drs.
Reyes, Luna, Geslani, and Guevara, indicating that he had been
injured and was unfit for sea service.
These pieces of documentary evidence, however, bear dates
well past the disembarkation of respondent. Hence, none of the
attachments he has adduced prove the symptoms of the
radiculopathy he allegedly experienced during the term of his
contract.
Furthermore, this Court observes that the narration of De Leon
that he felt that something was wrong with his body is too general
to be worthy of adjudicative attention. In addition, his claims lack
material corroboration.
In contrast, petitioners submitted a Checklist/Interview Sheet
for Disembarked Crew indicating that De Leon had no medical
check-up in foreign ports; did not report any illness or injury to the
master of the vessel or the ship doctor; and did not request a post-
medical examination after disembarkation. Also, based on the
records, there is no documentation that De Leon had bouts of
sickness, injury, or illness associated with radiculopathy in his 22
years at sea. Hence, based on the evidence, it cannot be reasonably
concluded that respondent contracted radiculopathy during the
term of his contract.
De Leon failed to show that his
injury was work-related.
There must be a reasonable causal
connection between the ailment of
seafarers and the work for which
they have been contracted.
The second hurdle for seafarers claiming disability benefits is
to prove the positive proposition that there is a reasonable causal
connection between their ailment and the work for which they have
CIVIL LAW REVIEW 2

been contracted. Logically, the labor courts must determine their

actual work, the nature of their ailment, and other factors that may
lead to the conclusion that they contracted a work-related injury.
To illustrate, in NYK-Fil Ship Management, Inc. v. Talavera, the
labor tribunals first determined the nature of the seafarer's
employment based on the established facts of the case:
Complainant Talavera as Fitter performed repair
and maintenance works, like hydraulic line return and
other supply lines of the vessel; he did all the welding
works and assist[ed] the First and Second Engineer
during overhauling works of generators, engines and
others [sic] engineering works as directed by lifting,
carrying, pushing, pulling and moving heavy equipment
and materials and constantly performed overtime works
because the ship was old and always repair jobs are
almost anywhere inside the vessel. He found himself
with very few hours rest period. (Corrections in the
original)
Then, the tribunals relied upon the medical certificates on
record to characterize the particular radiculopathy of the seafarer:
Through degeneration, wear and tear or trauma, the
annulus fibrosus containing the soft disc material
(nucleus pulposus) may tear. This results in protrusion of
the disc or even extrusion of disc material into the
spinal canal or neural foramen. In addition, the nerve
fibers of the affected root are also compressed and this
situation leads to radiculopathy in the appropriate
muscles. When the nerve roots become compressed,
the herniated disc becomes significant. The most
common complaint in patients with a herniated disc is
that of severe low back pain developing immediately or
within a few hours after an injury.
Only after making such assessments did those tribunals find a
reasonable connection between the injuries and the seafarer's job.
This Court affirmed in that case that repetitive bending and lifting
caused the torsional stress on the claimant's back, which led him to
develop his L5-S1 radiculopathy.
Applying the same analytical method to the case at bar, this
Court observes that all the tribunals below relied on the mere fact of
the 22-year employment of De Leon as the causative factor that
triggered his radiculopathy. They did not even specify his duties as a
seafarer throughout his employment.
CIVIL LAW REVIEW 2

At most, respondent merely alleged that in his last stint as a

Third Mate, he was a watchstander. His job entailed that he was
responsible to the captain for keeping the ship, its crew, and its
cargo safe for eight hours a day. Still, he did not particularize the
laborious conditions of his work that would cause his injury.
The CA mentioned that De Leon was consistently engaged in
stressful physical labor throughout his 22 years of employment. But
it did not define these purported stressful physical activities, nor did
it point to any piece of evidence detailing his work.
Not only did claimant fail to portray his actual work; he also
failed to describe the nature, extent, and treatment of his
radiculopathy. Drs. Reyes, Luna, Geslani, and Guevara, who issued
medical opinions on his condition, stated that their patient was unfit
for sea service without discussing what caused his injury. Dr. Geslani
had an impression that respondent had a mild central canal
stenosis, which should have been further explained to depict the
gravity and permanence of respondent's injury. Dr. Luna prescribed
medicines and physical therapy for two weeks, but no subsequent
reports as regards this treatment plan followed her initial
certification.
Given the inadequacy of proof pertaining to the radiculopathy
of De Leon, the LA and the NLRC provided no discussion on its
character. To augment the void, the CA had to refer to a medical
website for an explanation. Nonetheless, the records still lack the
portrayal of how De Leon contracted the injury, its symptoms, and
its aggravating factors. The curability of the injury, in order to
determine whether it results in a permanent or temporary disability,
was not at all discussed in the proceedings below.
In effect, De Leon failed to show before the labor tribunals his
functions as a seafarer, as well as the nature of his ailment. Absent
these premises, none of the courts can rightfully deduce any
reasonable causal connection between his ailment and the work for
which he was contracted.
The proximity of the development
of the injury to the time of
disembarkation does not
automatically prove work
causation.
For the LA, the NLRC, and the CA, since there was no reported
incident befalling De Leon from the time he disembarked on 13
September 2005 to the time that he underwent medical
examination on 21 November 2005, whatever causative
CIVIL LAW REVIEW 2

circumstances led to his permanent disability must have transpired

during his 22 years of employment.
In support of this conclusion, the CA cited Nisda v. Sea Serve
Maritime Agency and Seagull Shipmanagement and Transport, Inc.
v. NLRC, in which this Court granted disability benefits to seafarers
who developed their ailments within a short period from
disembarkation.
In Nisda, We found that the seafarer had been hired for 15
years as a Tug Boat Master, who commanded the steering of large
vessels into and out of berths during 48-hour work weeks with a
maximum of 105 hours of overtime. The records in that case reveal
that he had "a medical complaint of pain in his parascapular region
of 6 months duration already way unto his consummated
employment service of his contract of employment [sic]." This Court
concluded that the duties of the seafarer caused his serious cardio-
vascular disease, which could not have developed
overnight. AIDSTE
In Seagull Shipmanagement, the seafarer worked as a
radioman. After 10 months of serving his one-year contract, he
suffered from bouts of coughing and shortness of breath on board
the vessel of his employers. The latter admitted that his work
exposed him to different climates and unpredictable weather, which
could trigger a heart failure. Based on this admission, and
considering the duties of the seafarer, We awarded benefits to his
heirs for the payment of his open-heart surgery.
Noticeably, Nisda and Seagull did not use the proximity of the
development of the injury to the time of disembarkation as the
basis for compensability. This Court in those cases made an effort to
find out the recognized elements in resolving seafarers' claims: the
description of the work, the nature of the injury or illness
contracted, and the connection between the two.
Here, the courts a quo merely speculated that because
respondent worked for 22 years, it then follows that his injury was
caused by his engagement as a seafarer. This blanket speculation
alone will not rise to the level of substantial evidence. Whilst the
degree of determining whether the illness is work-related requires
only probability, the conclusions of the courts must be still be based
on real, and not just apparent, evidence. Especially egregious is the
error of the CA when it augmented the speculative conclusions of
the LA and the NLRC, by referring to a medical website that has not
even been vetted to introduce into the CA Decision a modicum
presence of the causality requirement for compensable injuries. The
tribunals should have gone beyond their inferences. They should
have determined the duties of De Leon as a seafarer and the nature
CIVIL LAW REVIEW 2

of his injury, so that they could validly draw a conclusion that he

labored under conditions that would cause his purported permanent
and total disability.
Since De Leon failed to prove all the requirements for
compensability, this Court deletes the grant of USD60,000 for
permanent and total disability benefits. The award of attorney's fees
is likewise withdrawn, since the circumstances do not show that
petitioners acted without justification or with gross and evident bad
faith in refusing to satisfy respondent's claim for disability pay.
IN VIEW THEREOF, the Petition for Review filed by
petitioners on 24 February 2012 is GRANTED. Consequently, the
Court of Appeals Decision dated 9 August 2011 and Resolution
dated 5 January 2012 in CA-G.R. SP No. 112675 are REVERSED.
SO ORDERED.
Leonardo-de Castro, Del Castillo, Jardeleza * and Caguioa,
JJ., concur.
||| (Scanmar Maritime Services, Inc. v. De Leon, G.R. No. 199977,
[January 25, 2017])
CIVIL LAW REVIEW 2

NESTLE PHILIPPINES, INC., petitioner, vs. BENNY A.

PUEDAN, JR., JAYFER D. LIMBO, BRODNEY N. AVILA,
ARTHUR C. AQUINO, RYAN A. MIRANDA, RONALD R.
ALAVE, JOHNNY A. DIMAYA, MARLON B. DELOS
REYES, ANGELITO R. CORDOVA, EDGAR S.
BARRUGA, CAMILO B. CORDOVA, JR., JEFFRY B.
LANGUISAN, EDISON U. VILLAPANDO, JHEIRNEY S.
REMOLIN, MARY LUZ A. MACATALAD, * JENALYN M.
GAMUROT, DENNIS G. BAWAG, RAQUEL A.
ABELLERA, and RICANDRO G. GUATNO,
JR., respondents.
G.R. No. 220617. January 30, 2017
Ponente: Justice Perlas-Bernabe
First Division
DECISION
Assailed in this petition for review on certiorari are the

Decision dated March 26, 2015 and the Resolution dated September
17, 2015 of the Court of Appeals (CA) in CA-G.R. SP No. 132686,
which affirmed the Decision dated May 30, 2013 and the
Resolution dated August 30, 2013 of the National Labor Relations
Commission (NLRC) in LAC No. 02-000699-13/NCR-03-04761-12,
declaring petitioner Nestle Philippines, Inc. (NPI), jointly and
severally liable with Ocho de Septiembre, Inc. (ODSI) to respondents
Benny A. Puedan, Jr., Jayfer D. Limbo, Brodney N. Avila, Arthur C.
Aquino, Ryan A. Miranda, Ronald R. Alave, Johnny A. Dimaya, Marlon
B. Delos Reyes, Angelito R. Cordova, Edgar S. Barruga, Camilo B.
Cordova, Jr., Jeffry B. Languisan, Edison U. Villapando, Jheirney S.
Remolin, Mary Luz A. Macatalad, Jenalyn M. Gamurot, Dennis G.
CIVIL LAW REVIEW 2

Bawag, Raquel A. Abellera, and Ricandro G. Guatno, Jr.

(respondents) for separation pay, nominal damages, and attorney's
fees.
The Facts
The instant case arose from an amended complaint dated July
6, 2012 for illegal dismissal, damages, and attorney's fees filed by
respondents against, inter alia, ODSI and NPI. Respondents alleged
that on various dates, ODSI and NPI hired them to sell various NPI
products in the assigned covered area. After some time,
respondents demanded that they be considered regular employees
of NPI, but they were directed to sign contracts of employment with
ODSI instead. When respondents refused to comply with such
directives, NPI and ODSI terminated them from their position. Thus,
they were constrained to file the complaint, claiming that: (a) ODSI
is a labor-only contractor and, thus, they should be deemed regular
employees of NPI; and (b)there was no just or authorized cause for
their dismissal.
For its part, ODSI averred that it is a company engaged in the
business of buying, selling, distributing, and marketing of goods and
commodities of every kind and it enters into all kinds of contracts
for the acquisition thereof. ODSI admitted that on various dates, it
hired respondents as its employees and assigned them to execute
the Distributorship Agreement it entered with NPI, the relevant
portions of which state:
3.1 DISTRIBUTOR (ODSI) shall assign a sales force in
his/her regular employ, dedicated solely to the
handling of NPI Grocery Retail Products under this
Agreement, and who shall exclusively cover
assigned areas/channels of distribution.
3.2 DISTRIBUTOR shall service the outlets within the
Territory by re-selling Products obtained exclusively
from Nestle Philippines, Inc. and not from any other
source.
3.3 DISTRIBUTOR shall utilize booking and distribution
salesmen to undertake territory development.
Booking done by DISTRIBUTOR shall be delivered by
its personnel. Collection of accounts shall be taken
cared (sic) of by DISTRIBUTOR, without prejudice to
the provisions of Clause 13 hereof.
3.4 DISTRIBUTOR's route salesmen shall exclusively cover
assigned ex-truck areas/channels of distribution.
CIVIL LAW REVIEW 2

3.5 DISTRIBUTOR shall also provide training to its staff or

personnel where necessary, to improve operations
in servicing the requirements of DISTRIBUTOR's
customers. From time to time, NESTL shall offer to
DISTRIBUTOR suggestions and recommendations to
improve sales and to further develop the market.
3.6 DISTRIBUTOR shall meet the sales, reach and
distribution targets agreed upon by NESTL and
DISTRIBUTOR. For purposes of this clause, reach
targets refer to the number of stores, dealers
and/or outlets which DISTRIBUTOR should cover or
service within a particular period. Distribution
targets refer to the number of stock keeping units
and/or product lines covered by this Agreement.
In the event of DISTRIBUTOR's failure to meet NESTL's
sales targets, NESTL has the sole discretion of
assigning another distributor of the Products and/or
reducing the Territory covered by DISTRIBUTOR.
3.7 DISTRIBUTOR agrees to provide at its own cost and
expense facilities and other resources necessary for
the distribution and sale of the Products.
3.8 NESTL's sales personnel may get orders for the
Products distributed by DISTRIBUTOR and pass on
the said orders to DISTRIBUTOR.
3.9 NESTL shall provide the necessary promotional and
marketing support for the Products through
promotional materials, product information
literature, participation in trade fairs, and other
market development activities.
3.10 Should NESTL manufacture and/or distribute other
products not subject of this Agreement, which, in
NESTL's opinion, should likewise be extended to
DISTRIBUTOR's outlets, such additional products
shall be included among those listed in Annex "A"
hereof.
NESTL shall deliver the Products to DISTRIBUTOR's
warehouse(s) at its own expenses. Immediately
upon receipt of the Products, DISTRIBUTOR shall
carry out a visual inspection thereof. In the event
any quantity of the Products is found to be
defective upon such visual inspection, NESTL shall
replace such quantity of the Products at no cost to
DISTRIBUTOR.
CIVIL LAW REVIEW 2

3.11 All costs for transportation and/or shipment of the

Products from DISTRIBUTOR's warehouse(s) to its
outlets/customers shall be the account of the
DISTRIBUTOR.
However, the business relationship between NPI and ODSI
turned sour when the former's sales department badgered the latter
regarding the sales targets. Eventually, NPI downsized its marketing
and promotional support from ODSI which resulted to business
reverses and in the latter's filing of a petition for corporate
rehabilitation and, subsequently, the closure of its Nestl unit due to
the termination of the Distributorship Agreement and the failure of
rehabilitation. Under the foregoing circumstances, ODSI argued that
respondents were not dismissed but merely put in floating status.
On the other hand, NPI did not file any position paper or
appear in the scheduled conferences.
The Labor Arbiter Ruling
In a Decision dated December 28, 2012, the Labor Arbiter (LA)
dismissed the complaint for lack of merit, but nevertheless,
ordered, inter alia,ODSI and NPI to pay respondents nominal
damages in the aggregate amount of P235,728.00 plus attorney's
fees amounting to ten percent (10%) of the total monetary awards.
The LA found that: (a) respondents were unable to prove that they
were NPI employees; and (b) respondents were not illegally
dismissed as ODSI had indeed closed down its operations due to
business losses. As to the issue on the failure to give respondents a
thirty (30)-day notice prior to such closure, the LA concluded that all
the impleaded respondents therein (i.e., including NPI) should be
held liable for the payment of nominal damages plus attorney's
fees.
Aggrieved, respondents appealed to the NLRC.
The NLRC Ruling
In a Decision dated May 30, 2013, the NLRC reversed and set
aside the LA ruling and, accordingly, ordered ODSI and NPI to pay
each of the respondents: (a) separation pay amounting to 1/2
month pay for every year of service reckoned from the time they
were employed until the finality of the Decision; and (b) nominal
damages in the amount of P30,000.00. The NLRC likewise ordered
NPI and ODSI to pay respondents attorney's fees amounting to ten
percent (10%) of the monetary awards.
Contrary to the LA's findings, the NLRC found that while ODSI
indeed shut down its operations, it failed to prove that such closure
was due to serious business losses as it did not present
CIVIL LAW REVIEW 2

evidence, e.g., financial statements, to corroborate its claims. As

such, it ruled that respondents are entitled to separation pay. In this
relation, the NLRC also found that since ODSI failed to notify
respondents of such closure, the latter are likewise entitled to
nominal damages.
Further, the NLRC found ODSI to be a labor-only contractor of
NPI, considering that: (a) ODSI had no substantial capitalization or
investment; (b)respondents performed activities directly related to
NPI's principal business; and (c) the fact that respondents'
employment depended on the continuous supply of NPI products
shows that ODSI had not been carrying an independent business
according to its own manner and method. Consequently, the NLRC
deemed NPI to be respondents' true employer, and thus, ordered it
jointly and severally liable with ODSI to pay the monetary claims of
respondents.
Respondents moved for a partial reconsideration, arguing that
since it was only ODSI that closed down operations and not NPI and,
considering the finding that the latter was deemed to be their true
employer, NPI should reinstate them, or if not practicable, to pay
them separation pay equivalent to one (1) month pay for every year
of service. NPI also moved for reconsideration, contending
that: (a) it was deprived of its right to participate in the proceedings
before the LA and the NLRC; and (b) it had no employer-employee
relationship with respondents as ODSI was never its contractor,
whether independent or labor-only. However, the NLRC denied both
motions in a Resolution dated August 30, 2013, holding
that: (a) respondents' termination was due to the closure of ODSI's
Nestl unit, an authorized cause and, thus, the monetary awards in
their favor were proper; (b) NPI was not deprived of its right to
participate in the proceedings as it was duly served with copies of
the parties' respective pleadings, as well as the rulings of both the
LA and the NLRC; (c) assuming arguendo that NPI was indeed
deprived of due process, its subsequent filing of a motion for
reconsideration before the NLRC cured the defect as it was able to
argue its position in the said motion; and (d) the circumstances
surrounding the Distributorship Agreement between ODSI and NPI
showed that the former is indeed a labor-only contractor of the
latter.
Dissatisfied, NPI filed a petition for certiorari before the CA,
essentially insisting that: (a) it was deprived of due process before
the tribunals a quo; and (b) there was no employer-employee
relationship between NPI and respondents. Records reveal that no
other party elevated the matter before the CA.
The CA Ruling
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In a Decision dated March 26, 2015, the CA affirmed the NLRC

ruling. Anent the issue on due process, the CA held that NPI was not
deprived of its opportunity to be heard as it was able to receive a
copy of the complaint and other pleadings, albeit it failed to respond
thereto. As regards the substantive issue, the CA ruled that despite
ODSI and NPI's contract being denominated as a "Distributorship
Agreement," it contained provisions demonstrating a labor-only
contracting arrangement between them, as well as NPI's exercise of
control over the business of ODSI. Moreover, the CA pointed out
that: (a) there was nothing in the records which showed that ODSI
had substantial capital to undertake an independent business;
and (b)respondents performed tasks essential to NPI's business.
Undaunted, NPI moved for reconsideration, which was,
however, denied in a Resolution dated September 17, 2015; hence,
this petition.
The Issues Before the Court
The essential issues for the Court's resolution are whether or
not the CA correctly ruled that: (a) NPI was accorded due process by
the tribunals a quo; and (b) ODSI is a labor-only contractor of NPI,
and consequently, NPI is respondents' true employer and, thus,
deemed jointly and severally liable with ODSI for respondents'
monetary claims.
The Court's Ruling
To justify the grant of the extraordinary remedy
of certiorari, the petitioner must satisfactorily show that the court or
quasi-judicial authority gravely abused the discretion conferred
upon it. Grave abuse of discretion connotes a capricious and
whimsical exercise of judgment, done in a despotic manner by
reason of passion or personal hostility, the character of which being
so patent and gross as to amount to an evasion of positive duty or
to a virtual refusal to perform the duty enjoined by or to act at all in
contemplation of law.
In labor disputes, grave abuse of discretion may be ascribed
to the NLRC when, inter alia, its findings and conclusions are not
supported by substantial evidence, or that amount of relevant
evidence which a reasonable mind might accept as adequate to
justify a conclusion.
Guided by the foregoing considerations, the Court finds that
the CA was correct in ruling that the labor tribunals a quo gave NPI
an opportunity to be heard. However, it erred in not ascribing grave
abuse of discretion on the NLRC's finding that ODSI is a labor-only
contractor of NPI and, thus, the latter is the respondents' true
employer, and jointly and severally liable with ODSI for respondents'
CIVIL LAW REVIEW 2

monetary claims. As will be explained hereunder, such finding by

the NLRC is not supported by substantial evidence.
I.
The observance of fairness in the conduct of any investigation
is at the very heart of procedural due process. The essence of due
process is to be heard, and, as applied to administrative
proceedings, this means a fair and reasonable opportunity to
explain one's side, or an opportunity to seek a reconsideration of
the action or ruling complained of. Administrative due process
cannot be fully equated with due process in its strict judicial sense,
for in the former a formal or trial-type hearing is not always
necessary, and technical rules of procedure are not strictly
applied. The Court's disquisition in Ledesma v. CA is instructive on
this matter, to wit:
Due process, as a constitutional precept, does not
always and in all situations require a trial-type
proceeding. Due process is satisfied when a person is
notified of the charge against him and given an
opportunity to explain or defend himself. In
administrative proceedings, the filing of charges and
giving reasonable opportunity for the person so charged
to answer the accusations against him constitute the
minimum requirements of due process. The essence of
due process is simply to be heard, or as applied
to administrative proceedings, an opportunity to
explain ones side, or an opportunity to seek a
reconsideration of the action or ruling complained
of. (Emphasis and underscoring supplied)
In this case, NPI essentially claims that it was deprived of its
right to due process when it was not notified of the proceedings
before the LA and did not receive copies and issuances from the
other parties and the LA, respectively. However, as correctly
pointed out by the CA, NPI was furnished via courier of a copy of the
amended complaint filed by the respondents against it as shown by
LBC Receipt No. 125158910840. It is also apparent that NPI was also
furnished with the respondents' Position Paper, Reply, and
Rejoinder. Verily, NPI was indeed accorded due process, but as the
LA mentioned, the former chose not to file any position paper or
appear in the scheduled conferences.
Assuming arguendo that NPI was somehow deprived of due
process by either of the labor tribunals, such defect was cured
by: (a) NPI's filing of its motion for reconsideration before the
NLRC; (b) the NLRC's subsequent issuance of its Resolution dated
August 30, 2013 wherein the tribunal considered all of NPI's
CIVIL LAW REVIEW 2

arguments as contained in its motion; and (c) NPI's subsequent

elevation of the case to the CA. In Gonzales v. Civil Service
Commission, the Court reiterated the rule that "[a]ny seeming
defect in [the] observance [of due process] is cured by the filing of a
motion for reconsideration," and that "denial of due process cannot
be successfully invoked by a party who [was] afforded the
opportunity to be heard x x x." Similarly, in Autencio v. Maara, it
was held that defects in procedural due process may be cured when
the party has been afforded the opportunity to appeal or to seek
reconsideration of the action or ruling complained of.
Evidently, the foregoing shows that NPI was not denied due
process of law as it was afforded the fair and reasonable opportunity
to explain its side.
II.
In holding NPI jointly and severally liable with ODSI for the
monetary awards in favor of respondents, both the NLRC and the CA
held that based on the provisions of the Distributorship Agreement
between them, ODSI is merely a labor-only contractor of NPI. In this
regard, the CA opined that the following stipulations of the said
Agreement evinces that NPI had control over the business of ODSI,
namely, that: (a) NPI shall offer to ODSI suggestions and
recommendations to improve sales and to further develop the
market; (b) NPI prohibits ODSI from exporting its products (the No-
Export provision);(c) NPI provided standard requirements to ODSI for
the warehousing and inventory management of the sold goods;
and (d) prohibition imposed on ODSI to sell any other products that
directly compete with those of NPI.
However, a closer examination of the Distributorship
Agreement reveals that the relationship of NPI and ODSI is not that
of a principal and a contractor (regardless of whether labor-only or
independent), but that of a seller and a buyer/re-seller. As stipulated
in the Distributorship Agreement, NPI agreed to sell its products to
ODSI at discounted prices, which in turn will be re-sold to identified
customers, ensuring in the process the integrity and quality of the
said products based on the standards agreed upon by the
parties. As aptly explained by NPI, the goods it manufactures are
distributed to the market through various distributors, e.g., ODSI,
that in turn, re-sell the same to designated outlets through its own
employees such as the respondents. Therefore, the reselling
activities allegedly performed by the respondents properly pertain
to ODSI, whose principal business consists of the "buying, selling,
distributing, and marketing goods and commodities of every kind"
and "[entering] into all kinds of contracts for the acquisition of such
goods [and commodities]."
CIVIL LAW REVIEW 2

Thus, contrary to the CA's findings, the aforementioned

stipulations in the Distributorship Agreement hardly demonstrate
control on the part of NPI over the means and methods by which
ODSI performs its business, nor were they intended to dictate how
ODSI shall conduct its business as a distributor. Otherwise stated,
the stipulations in the Distributorship Agreement do not operate to
control or fix the methodology on how ODSI should do its business
as a distributor of NPI products, but merely provide rules of conduct
or guidelines towards the achievement of a mutually desired
result which in this case is the sale of NPI products to the end
consumer. In Steelcase, Inc. v. Design International Selections,
Inc., the Court held that the imposition of minimum standards
concerning sales, marketing, finance and operations are nothing
more than an exercise of sound business practice to increase sales
and maximize profits, to wit: SaCIDT
Finally, both the CA and DISI rely heavily on the
Dealer Performance Expectation required by Steelcase
of its distributors to prove that DISI was not functioning
independently from Steelcase because the same
imposed certain conditions pertaining to business
planning, organizational structure, operational
effectiveness and efficiency, and financial stability. It is
actually logical to expect that Steelcase, being one of
the major manufacturers of office systems furniture,
would require its dealers to meet several conditions for
the grant and continuation of a distributorship
agreement. The imposition of minimum standards
concerning sales, marketing, finance and
operations is nothing more than an exercise of
sound business practice to increase sales and
maximize profits for the benefit of both Steelcase
and its distributors. For as long as these
requirements do not impinge on a distributor's
independence, then there is nothing wrong with
placing reasonable expectations on
them. (Emphasis and underscoring supplied)
Verily, it was only reasonable for NPI it being a local arm of
one of the largest manufacturers of foods and grocery products
worldwide to require its distributors, such as ODSI, to meet
various conditions for the grant and continuation of a distributorship
agreement for as long as these conditions do not control the means
and methods on how ODSI does its distributorship business, as
shown in this case. This is to ensure the integrity and quality of the
products which will ultimately fall into the hands of the end
consumer.
CIVIL LAW REVIEW 2

Thus, the foregoing circumstances show that ODSI was not a

labor-only contractor of NPI; hence, the latter cannot be deemed the
true employer of respondents. As a consequence, NPI cannot be
held jointly and severally liable to ODSI's monetary obligations
towards respondents.
WHEREFORE, the petition is GRANTED. The Decision dated
March 26, 2015 and the Resolution dated September 17, 2015 of
the Court of Appeals in CA-G.R. SP No. 132686 are
hereby REVERSED and SET ASIDE. Accordingly, the Decision
dated May 30, 2013 and the Resolution dated August 30, 2013 of
the National Labor Relations Commission in LAC No. 02-000699-
13/NCR-03-04761-12 are MODIFIED, DELETING petitioner Nestle
Philippines, Inc.'s solidary liability with Ocho de Septiembre, Inc.
(ODSI) for the latter's monetary obligations to respondents Benny A.
Puedan, Jr., Jayfer D. Limbo, Brodney N. Avila, Arthur C. Aquino, Ryan
A. Miranda, Ronald R. Alave, Johnny A. Dimaya, Marlon B. Delos
Reyes, Angelito R. Cordova, Edgar S. Barruga, Camilo B. Cordova, Jr.,
Jeffry B. Languisan, Edison U. Villapando, Jheirney S. Remolin, Mary
Luz A. Macatalad, Jenalyn M. Gamurot, Dennis G. Bawag, Raquel A.
Abellera, and Ricandro G. Guatno, Jr. SCaITA
SO ORDERED.
Sereno, C.J., Leonardo-de Castro, Del Castillo and Caguioa, JJ.,
concur.
||| (Nestle Philippines, Inc. v. Puedan, Jr., G.R. No. 220617, [January 30,
2017])
CIVIL LAW REVIEW 2

DELFIN C. GONZALEZ, JR., petitioner, vs. MAGDALENO M.

PEA, ALABANG COUNTRY CLUB, INC., and MS. ARSENIA
VERA, respondents.
G.R. No. 214303. January 30, 2017
Ponente: CJ Sereno
First Division
RESOLUTION
Before this Court is a Petition for Review on Certiorari assailing

the Omnibus Resolution and Resolution of the Regional Trial Court
(RTC) of Makati City, Branch 65, which denied the prayer of
petitioner Delfin C. Gonzalez, Jr. to be restored as owner of the
shares issued by respondent Alabang Country Club, Inc. (ACCI).
The facts in this case are not disputed.
In its Decision dated 28 May 1999, the RTC of Bago City
adjudged petitioner liable to respondent Magdaleno M. Pea for the
payment of the agency's fees and damages amounting to P28.5
million. Petitioner, together with his co-petitioners in that case,
appealed the Decision, while Pea moved for execution pending
appeal of this ruling. The grant of that motion resulted in the sale to
Pea of petitioner's ACCI shares on 16 October 2000. Through a
private sale on 2 May 2001, he was able to sell and transfer the
subject shares to respondent Arsenia Vera.
On 19 October 2011, this Court issued a Decision in G.R. Nos.
145817, 145822, 162562, entitled Urban Bank, Inc. v. Pea, which
vacated with finality the Decision of the RTC of Bago City dated 28
May 1999.
Considering that the Decision of the RTC of Bago City had
been completely vacated and declared null and void, this Court held
that the concomitant execution pending appeal was likewise null
and without effect. Thus, we held that Urban Bank and its officers
and directors, including petitioner herein, were entitled to the full
restoration of their ownership and possession of all properties that
CIVIL LAW REVIEW 2

were executed pending appeal, such as the subject shares. In the

dispositive portion of the Decision, we categorically issued the
following directives:
a. Urban Bank, Teodoro Borlongan, Delfin C. Gonzalez,
Jr., Benjamin L. de Leon, P. Siervo H. Dizon, Eric L. Lee,
Ben Y. Lim, Jr., Corazon Bejasa, and Arturo Manuel, Jr.,
(respondent bank officers) shall be restored to full
ownership and possession of all properties executed
pending appeal;
b. If the property levied or garnished has been sold on
execution pending appeal and Atty. Magdaleno Pea is
the winning bidder or purchaser, he must fully restore
the property to Urban Bank or respondent bank officers,
and if actual restitution of the property is impossible,
then he shall pay the full value of the property at the
time of its seizure, with interest;
c. If the property levied or garnished has been sold to a
third party purchaser at the public auction, and title to
the property has not been validly and timely
transferred to the name of the third party, the
ownership and possession of the property shall be
returned to Urban Bank or respondent bank officers,
subject to the third party's right to claim restitution for
the purchase price paid at the execution sale against
the judgment creditor;
d. If the purchaser at the public auction is a third party,
and title to the property has already been validly
and timely transferred to the name of that party,
Atty. Pea must pay Urban Bank or respondent bank
officers the amount realized from the sheriff's sale of
that property, with interest from the time the property
was seized. (Emphasis and underscoring in the original)
We then ordered that the proceedings with respect to any due
restitution under the circumstances shall be transferred to a
regional trial court in the National Capital Region, Makati City.
The restitution proceedings were raffled to the RTC of Makati
City, Branch 65. Thereafter, petitioner moved for execution, seeking
restoration of his actual ACCI shares. The ACCI countered that the
club shares petitioner was claiming could no longer be returned to
him, because they had already been transferred by Pea to Vera.
In its Omnibus Resolution dated 30 April 2014, the RTC
concluded that Pea's private sale of the shares to Vera on 2 May
2001 was valid, given that the latter was an innocent purchaser for
CIVIL LAW REVIEW 2

value. As such, Vera could not be charged with knowledge of the

controversy involving the ACCI shares. Considering the validity of
the sale, the trial court held that the actual restitution of the
property to petitioner was no longer possible. Applying paragraph
(b) of the above-quoted dispositive portion of the Decision, it
directed Pea to pay for the value of the property instead. The RTC
ruling reads: 7
IV. PROPERTIES SUBJECT OF RESTITUTION OR
REPARATION OF DAMAGES WITH RESPECT TO DELFIN C.
GONZALEZ, JR.:
xxx xxx xxx
c. The title to the share in Alabang Country Club
having been validly and timely transferred to
the name of Arsenia Vera, Magdaleno Pea
shall pay Delfin C. Gonzalez, Jr. the full value
of the property at the time of its seizure with
interest counted as of said date.
SO ORDERED. DHITCc
Aside from herein petitioner, Delfin C. Gonzalez, Jr., his co-
petitioners in Urban Bank Eric L. Lee and Urban Bank, were
likewise not restored to their ownership of their movable properties.
The RTC held that:
I. PROPERTIES SUBJECT OF RESTITUTION OR
REPARATION OF DAMAGES WITH RESPECT TO URBAN
BANK (NOW EXPORT INDUSTRY BANK):
xxx xxx xxx
b. Regarding the three (3) shares of Urban Bank in
Tagaytay Highlands International Golf Club
previously covered by Certificate Nos. 3027,
3166, and 3543 which are now in the names
of third parties under Certificate Nos. 3848,
3847, and 3837, respectively, Magdaleno
Pea must pay Urban Bank the amount
realized from the sheriff's sale of these three
(3) shares, with interest from the time these
properties were seized;
xxx xxx xxx
II. PROPERTIES SUBJECT OF RESTITUTION OR
REPARATION OF DAMAGES WITH RESPECT TO ERIC L.
LEE:
xxx xxx xxx
CIVIL LAW REVIEW 2

b. Regarding the Manila Golf and Country Club

previously in the name of Eric Lee which was
validly and timely transferred in the name of
Jose Singson, Magdaleno Pea must pay Eric
Lee the amount realized from the sheriff's
sale thereof, with interest from the time the
said share was seized;
c. As to the share in Sta. Elena Golf Club (previously
Certificate No. M099A), the title thereto
having been validly and timely transferred in
the name of Oscar Reyes and later to his
assignee, Christian Osmond Reyes,
Magdaleno Pea must pay Eric Lee the
amount realized from the sheriff's sale, with
interest from the time the property was
seized;
xxx xxx xxx
In all these instances, the RTC refused to restore to Urban
Bank, Eric L. Lee, and Delfin C. Gonzales, Jr. the actual ownership of
their respective club shares on the pretext that these had already
been transferred to third parties.
Subsequently, petitioner moved for reconsideration, but the
RTC denied his motion in its Resolution dated 17 September 2014.
Aggrieved, he came directly to this Court and asked for the reversal
of the ruling of the trial court's ruling, as well as for the cancellation
of the shares in the name of Vera.
Petitioner points out that Pea obtained the property at a
public auction that has been declared void by this Court. He then
asserts that Vera, as successor-in-interest, has no right over those
shares. He further claims that the trial court erred in concluding that
the actual restitution of the club shares to him was impossible, since
the transfer of the property could have simply been recorded in the
club's stock and transfer books.
In their Comments filed before this Court, both the ACCI and
Pea submit that no error can be imputed to the RTC for declaring
the impossibility of the actual restitution of the shares. In particular,
the ACCI claims that because the subject property has been
transferred to a third person, its return to petitioner is no longer
possible. Respondent Vera failed to file her comment despite notice.
This case presents a lone question of law: whether or not the
RTC faithfully complied with our directive to restore to Urban Bank
and the latter's officers their properties illegally obtained by Pea.
RULING OF THE COURT
CIVIL LAW REVIEW 2

We grant the Petition. Indeed, the RTC did not comply with our
ruling in Urban Bank when it refused to restore to petitioner the
actual ownership of his club shares on the mere pretext that these
had already been sold by Pea to his successor-in-interest.
As stated in this Court's Decision dated 19 October 2011, the
RTC was bound to comply with this relevant directive:
b. If the property levied or garnished has been sold on
execution pending appeal and Atty. Magdaleno Pea
is the winning bidder or purchaser, he must fully
restore the property to Urban Bank or respondent bank
officers, and if actual restitution of the property is
impossible, then he shall pay the full value of the
property at the time of its seizure, with interest;
(Emphasis supplied)
There is no factual dispute that Pea acquired the ACCI shares
of petitioner by virtue of a winning bid in an execution sale that had
already been declared by this Court, with finality, as null and
void. In no uncertain terms, we declared that the
"concomitant execution pending appeal is likewise without
any effect. x x x. Consequently, all levies, garnishment and
sales executed pending appeal are declared null and void,
with the concomitant duty of restitution x x x."
Void transactions do not produce any legal or binding effect,
and any contract directly resulting from that illegality is likewise
void and inexistent. Therefore, Pea could not have been a valid
transferee of the property. As a consequence, his successor-in-
interest, Vera, could not have validly acquired those shares. The RTC
thus erred in refusing to restore the actual ACCI shares to petitioner
on the basis of their void transfer to Vera.
Neither was the RTC correct in its characterization of the
actual restitution of the ACCI shares to petitioner as "impossible."
For the obligation to be considered impossible under Article 1266 of
the Civil Code, its physical or legal impossibility must first be
proven.
Here, the RTC did not make any finding on whether or not it
was physically impossible to effect the actual restitution of the
property. On the other hand, petitioner correctly points out that
since the shares are movable by nature, the same can be
transferred back to Gonzalez, Jr. by recording the transaction in the
stock and transfer book of the club.
As regards legal impossibility, the RTC appears to have
jumped to the conclusion that because of the perfected sale of the
CIVIL LAW REVIEW 2

shares to Vera, petitioner can no longer claim actual restitution of

the property.
However, Article 1505 of the Civil Code instructs that "x x x
where goods are sold by a person who is not the owner thereof, and
who does not sell them under authority or with the consent of the
owner, the buyer acquires no better title to the goods than the
seller had, unless the owner of the goods is by his conduct
precluded from denying the seller's authority to sell. x x x."
The Court itself settled that Pea acquired the properties by
virtue of a null and void execution sale. In effect, his buyers
acquired no better title to the goods than he had. Therefore, the RTC
erred in appreciating the existence of legal impossibility in this case
on the mere pretext that the properties had already been
transferred to third parties. By virtue of Article 1505, the true
owners of the goods are definitely not legally precluded from
claiming the ownership of their actual properties.
All told, given the encompassing and overarching declaration
of this Court nullifying the acquisition by Pea of the properties of
Urban Bank and its directors, and considering that actual restitution
of the movable properties is neither physically nor legally
impossible, this Court finds that the refusal of the RTC to restore the
actual shares on the mere pretext that these had been transferred
by Pea to third persons as utterly devoid of basis. Consequently,
pursuant to our final ruling in Urban Bank, petitioner must be
restored as owner of the actual ACCI shares, and not just be paid
the full value of the property.
WHEREFORE, premises considered, this Court resolves to:
A. REVERSE the Omnibus Resolution dated 30 April 2014 and
Resolution dated 17 September 2014 issued in Civil Case No. 12-
758 by the Regional Trial Court of Makati City, Branch 65, insofar as
these rulings refused to restore to the original owners the actual
ownership of their club shares on the mere pretext that these had
already been sold by Magdaleno Pea to his successor-in-interest,
and thus SET ASIDE the following pronouncements by the Regional
Trial Court in the Omnibus Resolution dated 30 April 2014 as
affirmed in the Resolution dated 17 September 2014:
I. PROPERTIES SUBJECT OF RESTITUTION OR
REPARATION OF DAMAGES WITH RESPECT TO URBAN
BANK (NOW EXPORT INDUSTRY BANK):
xxx xxx xxx
b. Regarding the three (3) shares of Urban Bank in
Tagaytay Highlands International Golf Club
CIVIL LAW REVIEW 2

previously covered by Certificate Nos. 3027,

3166, and 3543 which are now in the names
of third parties under Certificate Nos. 3848,
3847, and 3837, respectively, Magdaleno
Pea must pay Urban Bank the amount
realized from the sheriff's sale of these three
(3) shares, with interest from the time these
properties were seized;
xxx xxx xxx
II. PROPERTIES SUBJECT OF RESTITUTION OR
REPARATION OF DAMAGES WITH RESPECT TO ERIC L.
LEE: CTIEac
xxx xxx xxx
b. Regarding the Manila Golf and Country Club
previously in the name of Eric Lee which was
validly and timely transferred in the name of
Jose Singson, Magdaleno Pea must pay Eric
Lee the amount realized from the sheriff's
sale thereof, with interest from the time the
said share was seized;
c. As to the share in Sta. Elena Golf Club (previously
Certificate No. M099A), the title thereto
having been validly and timely transferred in
the name of Oscar Reyes and later to his
assignee, Christian Osmond Reyes,
Magdaleno Pea must pay Eric Lee the
amount realized from the sheriff's sale, with
interest from the time the property was
seized;
xxx xxx xxx
IV. PROPERTIES SUBJECT OF RESTITUTION OR
REPARATION OF DAMAGES WITH RESPECT TO DELFIN C.
GONZALES, JR.:
xxx xxx xxx
c. The title to the share in Alabang Country Club
having been validly and timely transferred to
the name of Arsenia Vera, Magdaleno Pea
shall pay Delfin C. Gonzalez, Jr. the full value
of the property at the time of its seizure with
interest counted as of said date.
B. ORDER the presiding judge of the Regional Trial Court of
Makati City, Branch 65 to EXECUTE FULLY AND WITH DISPATCH,
CIVIL LAW REVIEW 2

WITH RESPECT TO ALL PERSONS AND PROPERTIES COVERED,

the Decision of this Court dated 19 October 2011 in G.R. Nos.
145817, 145822, and 162562 to restore and deliver to Urban Bank
and its directors the full ownership and possession of all their actual
properties executed pending appeal.
SO ORDERED.
Leonardo-de Castro, Del Castillo, Perlas-Bernabe and Caguioa,
JJ., concur.
||| (Gonzalez, Jr. v. Pea, G.R. No. 214303 (Resolution), [January 30,
2017])
UNITED ALLOY PHILIPPINES CORPORATION,

SPOUSES DAVID C. CHUA and LUTEN
CHUA, petitioners, vs. UNITED COCONUT PLANTERS
BANK, respondent.
G.R. No. 175949. January 30, 2017
Second Division
DECISION
Before the Court is a petition for review on certiorari seeking

the reversal and setting aside of the Decision and Resolution of the
Court of Appeals (CA), dated September 21, 2006 and December
11, 2006, respectively, in CA-G.R. CV No. 81079. The assailed
Decision affirmed the Decision of the Regional Trial Court (RTC) of
Makati City, Branch 135, in Civil Case No. 01-1332, while the
questioned Resolution denied petitioners' Motion for
Reconsideration.
CIVIL LAW REVIEW 2

The pertinent factual and procedural antecedents of the case

are as follows:
On December 18, 2000, herein petitioner corporation, United
Alloy Philippines Corporation (UNIALLOY) applied for and was
granted a credit accommodation by herein respondent United
Coconut Planters Bank (UCPB) in the amount of PhP50,000,000.00,
as evidenced by a Credit Agreement. Part of UNIALLOY's obligation
under the Credit Agreement was secured by a Surety
Agreement, dated December 18, 2000, executed by UNIALLOY
Chairman, Jakob Van Der Sluis (Van Der Sluis), UNIALLOY President,
David Chua and his spouse, Luten Chua (Spouses Chua), and one
Yang Kim Eng (Yang). Six (6) Promissory Notes, were later executed
by UNIALLOY in UCPB's favor, to wit:
1) #8111-00-20031-1, executed on December 18,
2000, in the amount of US$110,000.00;
2000, in the amount of PhP6,000,000.00;
4) #8111-01-20005-6, executed on February 7,
2001, in the amount of US$320,000.00;
5) #8111-01-00009-0, executed on February 26,
6) #8111-01-00030-8, executed on April 30, 2001,
in the amount of PhP16,029,320.88.
In addition, as part of the consideration for the credit
accommodation, UNIALLOY and UCPB also entered into a "lease-
purchase" contract wherein the former assured the latter that it will
purchase several real properties which UCPB co-owns with the
Development Bank of the Philippines.
Subsequently, UNIALLOY failed to pay its loan obligations. As a
result, UCPB filed against UNIALLOY, the spouses Chua, Yang and
Van Der Sluis an action for Sum of Money with Prayer for Preliminary
Attachment on August 27, 2001. The collection case was filed with
the Regional Trial Court of Makati City (RTC of Makati) and docketed
as Civil Case No. 01-1332. Consequently, UCPB also unilaterally
rescinded its lease-purchase contract with UNIALLOY.
On the other hand, on even date, UNIALLOY filed against
UCPB, UCPB Vice-President Robert Chua and Van Der Sluis a
complaint for Annulment and/or Reformation of Contract with
Damages, with Prayer for a Writ of Preliminary Injunction or
Temporary Restraining Order. Claiming that it holds office and
CIVIL LAW REVIEW 2

conducts its business operations in Tagoloan, Misamis Oriental,

UNIALLOY filed the case with the Regional Trial Court of Cagayan De
Oro City(RTC of CDO) and was docketed as Civil Case No. 2001-219.
UNIALLOY contended that Van Der Sluis, in cahoots with UCPB Vice-
President Robert Chua, committed fraud, manipulation and
misrepresentation to obtain the subject loan for their own benefit.
UNIALLOY prayed, among others, that three (3) of the six (6)
Promissory Notes it executed be annulled or reformed or that it be
released from liability thereon.
On September 12, 2001, UNIALLOY filed an Urgent Motion to
Dismiss the collection case (Civil Case No. 01-1332) filed by UCPB
on the ground oflitis pendentia and forum shopping. UNIALLOY
contended that its complaint for annulment of contract (Civil Case
No. 2001-219) and the collection case filed by UCPB involves the
same parties and causes of action. On October 31, 2001, the RTC of
Makati issued an Order denying UNIALLOY's motion to dismiss.
In the meantime, UCPB and its co-defendants also filed a
Motion to Dismiss UNIALLOY's complaint for annulment of contract
on the grounds of improper venue, forum shopping, litis pendentia,
and harassment or nuisance suit. On September 13, 2001, the RTC
of CDO issued an Order dismissing UNIALLOY's complaint for
annulment of contract. The dispositive portion of the Order reads,
thus: aScITE
ACCORDINGLY, finding meritorious that the venue is
improperly laid and the complain[ant] engaged in
forum-shopping and harassment of defendant Jakob Van
Der Sluis, this case is hereby DISMISSED rendering the
prayer for issuance of a writ of preliminary injunction
moot and academic, and ordering plaintiff to turn over
possession of the subject premises of the properties in
question at Barangay Gracia, Tagoloan, Misamis Oriental
to defendant United Coconut Planters Bank.
SO ORDERED.
Thereafter, on motion, the RTC of CDO issued an Order of
Execution, dated September 14, 2001, directing UNIALLOY to turn
over to UCPB the property subject of their lease-purchase
agreement.
UNIALLOY then filed a petition
for certiorari and mandamus with the CA questioning the September
13 and September 14, 2001 Orders of the RTC of CDO. UNIALLOY
also prayed for the issuance of a writ of preliminary injunction. The
case was docketed as CA G.R. SP. No. 67079.
CIVIL LAW REVIEW 2

On February 18, 2002, the CA promulgated a

Resolution granting UNIALLOY's prayer for the issuance of a writ of
preliminary injunction. UCPB questioned the above CA Resolution by
filing a petition for certiorari with this Court, which was docketed as
G.R. No. 152238. On March 18, 2002, this Court issued a Resolution
which restrained the CA from enforcing its February 18, 2002
Resolution.
On January 28, 2005, this Court, rendered its Decision in G.R.
No. 152238 denying UCPB's petition for certiorari and affirming the
CA Resolution granting the writ of preliminary injunction.
Thereafter, on August 17, 2007, the CA promulgated a
Decision dismissing UNIALLOY's certiorari petition and affirming the
September 13 and September 14, 2001 Orders of the RTC of CDO.
UNIALLOY then filed a petition for review on certiorari challenging
the above CA Decision. The case was docketed as G.R. No. 179257.
On November 23, 2015, this Court promulgated a Decision in
G.R. No. 179257 denying UNIALLOY's petition. This Court held that
the CA did not err in affirming the dismissal of UNIALLOY's complaint
on the grounds of improper venue, forum shopping and for being a
harassment suit. This Court also ruled that the August 17, 2007
Decision of the CA neither violated this Court's January 28, 2005
Decision in G.R. No. 152238 nor contradicted the CA's February 18,
2002 Resolution granting the preliminary injunction prayed for by
UNIALLOY because the dismissal of UNIALLOY's main action carried
with it the dissolution of any ancillary relief previously granted in
the said case, such as the abovementioned preliminary injunction.
Subsequently, this Court's Decision in G.R. No. 179257 became final
and executory per Entry of Judgment dated January 20, 2016.
Meanwhile, on March 15, 2002, UNIALLOY filed with the RTC of
Makati an omnibus motion praying for the suspension of the
proceedings of the collection case in the said court on the ground of
pendency of the certiorari petition it filed with this Court. However,
the RTC denied UNIALLOY's motion in its Order dated August 19,
2002.
Subsequently, on June 17, 2003, the RTC of Makati rendered
Judgment in the collection case in favor of UCPB. The dispositive
portion of the RTC Decision reads, thus: HEITAD
WHEREFORE, premises considered, judgment is
hereby rendered in favor of plaintiff. Defendants are
hereby ordered to pay plaintiff the following:
a. The sum of US DOLLARS: (US$435,494.44) with
interest and penalty charges from August 1, 2001 until
fully paid.
CIVIL LAW REVIEW 2

b. The sum of P26,940,950.80 with interest and

penalty charges from August 1, 2001 until fully paid.
c. Attorney's fees in the amount of P1,000,000.00.
d. Costs of suit.
SO ORDERED.
UNIALLOY appealed the above RTC Decision with the CA.
On September 21, 2006, the CA rendered its assailed
judgment denying UNIALLOY's appeal and affirming the questioned
RTC Decision.
Hence, the instant petition raising the following issues:
5.01 THE HONORABLE COURT OF APPEALS
COMMITTED A SERIOUS, REVERSIBLE ERROR, IF NOT
GRAVE ABUSE OF DISCRETION, IN REFUSING TO
RESOLVE AS TO
I
WHETHER OR NOT THE TRIAL COURT ERRED
IN DENYING PETITIONERS' URGENT MOTION
TO DISMISS
II
IN DENYING PETITIONERS' OMNIBUS
MOTION TO SUSPEND PROCEEDINGS AND
TO LIFT WRIT OF PRELIMINARY ATTACHMENT
III
AND/OR COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR IN
EXCESS OF JURISDICTION IN RENDERING
THE ASSAILED QUESTIONED DECISION
WHEN THERE IS A PENDING CIVIL ACTION
BEFORE THE REGIONAL TRIAL COURT OF
CAGAYAN DE ORO, BRANCH 40, INVOLVING
THE SAME PARTIES AND SUBJECT MATTER
WHICH CASE, IS NOW PENDING AND
ASSAILED BY THE PLAINTIFF-APPELLEE VIA
PETITION BEFORE THE HONORABLE
SUPREME COURT. aDSIHc
5.02 THE HONORABLE COURT OF APPEALS
COMMITTED A SERIOUS, REVERSIBLE ERROR IF NOT
GRAVE ABUSE OF DISCRETION, IN DENYING
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PETITIONERS' URGENT MOTION FOR RECONSIDERATION

WITHOUT STATING CLEARLY AND DISTINCTLY THE
FACTUAL AND LEGAL BASIS THEREOF.
Petitioners' basic argument is that the resolution of the instant
petition basically hinges on the outcome of the petition filed under
G.R. No. 179257. Considering that the promissory notes subject of
G.R. No. 179257 are among the promissory notes which are also
involved in the present case, petitioner contends that a judgment
by this Court in G.R. No. 179257 that reverses the Decision of the
RTC of Cagayan de Oro City, which in effect would declare the nullity
of the subject promissory notes, may conflict with the Decision of
this Court in the present petition, which involves the collection of
the sum being represented in the same promissory notes. Thus,
petitioner prays for the dismissal of the collection case (Civil Case
No. 01-1332) filed by UCPB or the suspension of proceedings therein
pending resolution of its petition in G.R. No. 179257.
However, as mentioned above, on November 23, 2015, the
2nd Division of this Court already came up with a Decision in G.R.
No. 179257 which affirmed the RTC's dismissal of UNIALLOY's
complaint. Pertinent portions of the said Decision read as follows:
CA CDO did not err in affirming the
dismissal of UniAlloy's Complaint on the
grounds of improper venue, forum shopping
and for being a harassment suit
The RTC was correct in dismissing UniAlloy's Complaint
on the ground of improper venue. In general, personal
actions must be commenced and tried (i) where the
plaintiff or any of the principal plaintiffs resides, (ii)
where the defendant or any of the principal defendants
resides, or (III) in the case of a resident defendant where
he may be found, at the election of the plaintiff.
Nevertheless, the parties may agree in writing to limit
the venue of future actions between them to a specified
place.
In the case at bench, paragraph 18 of the LPA
expressly provides that "[a]ny legal action arising out of
or in connection with this Agreement shall be
brought exclusively in the proper courts of Makati City,
Metro Manila." Hence, UniAlloy should have filed its
complaint before the RTC of Makati City, and not with
the RTC of Cagayan de Oro City.
CIVIL LAW REVIEW 2

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But to justify its choice of venue, UniAlloy insists that

the subject matter of its Complaint in Civil Case No.
2001-219 is not the LPA, but the fictitious loans that
purportedly matured on April 17, 2001.
UniAlloy's insistence lacks merit. Its Complaint
unequivocally sought to declare "as null and void the
unilateral rescission made by defendant UCPB of its
subsisting Lease Purchase Agreement with [UniAlloy]."
What UCPB unilaterally rescinded is the LPA and without
it there can be no unilateral rescission to speak of.
Hence, the LPA is the subject matter or at least one of
the subject matters of the Complaint. Moreover, and to
paraphrase the aforecited paragraph 18 of the LPA, as
long as the controversy arises out of or is connected
therewith, any legal action should be filed exclusively
before the proper courts of Makati City. Thus, even
assuming that the LPA is not the main subject matter,
considering that what is being sought to be annulled is
an act connected and inseparably related thereto, the
Complaint should have been filed before the proper
courts in Makati City.
With regard forum-shopping, our review of the records
of this case revealed that UniAlloy did not disclose in the
Verification/Certification of the Complaint the pendency
of Civil Case No. 2001-156 entitled "Ernesto Paraiso and
United Alloy Philippines Corporation v. Jakob Van Der
Sluis." The trial court took judicial notice of its pendency
as said case is also assigned and pending before it.
Thus, we adopt the following unrebutted finding of the
RTC:
These two civil cases have identical causes
of action or issues against defendant Jakob
Van Der Sluis for having misrepresented to
plaintiff and its stockholders that he can
extend financial assistance in running the
operation of the corporation, such that on
April 6, 2001 plaintiff adopted a
Stockholders Resolution making defendant
Jakob chairman of the corporation for having
the financial capability to provide the
financial needs of plaintiff and willing to
finance the operational needs thereof; that
a Memorandum of Agreement was
subsequently entered between the parties
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whereby defendant Jakob obligated to

provide sufficient financial loan to plaintiff to
make it profitable; that Jakob maliciously
and willfully reneged [on] his financial
commitments to plaintiff prompting the
stockholders to call his attention and
warned him of avoiding the said agreement;
that defendant who had then complete
control of plaintiffs bank account with
defendant UCPB, through fraudulent
machinations and manipulations, was able
to maliciously convince David C. Chua to
pre-sign several checks; that defendant
Jakob facilitated several huge loans
purportedly obtained by plaintiff which
defendant himself could not even account
and did not even pay the debts of the
corporation but instead abused and
maliciously manipulated plaintiffs account.
Forum-shopping indeed exists in this case,
for both actions involve the same
transactions and same essential facts and
circumstances as well as identical causes of
action, subject matter and issues, x x
x ETHIDa
As mentioned above, this Court's Decision in the above case
has become final and executory on January 20, 2016.
Thus, contrary to petitioners' position, there is no longer any
possibility that the Decision of the RTC of CDO may conflict with the
disposition of the present case because UNIALLOY's complaint for
annulment of contract has already been dismissed with finality. This
Court will, thus, proceed to resolve the merits of the instant case.
The fundamental issue here is whether or not herein
petitioners, together with their co-defendants Van Der Sluis and
Yang, are liable to pay respondent the amounts awarded by the RTC
of Makati City in its June 17, 2003 Decision.
The Court rules in the affirmative.
As ruled upon by both the RTC and the CA, UNIALLOY failed to
pay its obligations under the above promissory notes and that
herein petitioner Spouses Chua, together with their co-defendants
Van Der Sluis and Yang freely executed a Surety Agreement
whereby they bound themselves jointly and severally with
CIVIL LAW REVIEW 2

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UNIALLOY, to pay the latter's loan obligations with UCPB. Pertinent

portions of the said Surety Agreement are reproduced hereunder, to
wit:
xxx xxx xxx
ARTICLE I
LIABILITIES OF SURETIES
Section 1.01. The SURETIES, jointly and severally
with the PRINCIPAL, hereby unconditionally and
irrevocably guarantee the full and complete payment
when due, whether at stated maturity, by acceleration
or otherwise, of all sums payable by
the PRINCIPAL under the Credit Agreement, the
Note/s and other related documents or instruments
referred to therein (hereinafter referred to collectively as
the "Loan Documents") the terms and conditions of
which are hereby deemed incorporated by reference.
The liability of the SURETIES shall not be limited
to the aggregate principal amount of FIFTY MILLION
PESOS (P50,000,000.00), Philippine Currency, or
its foreign currency equivalent, but shall include
such interest, fees, penalties and other charges due
thereon, as well as any and all renewals, extensions,
restructurings or conversions of
the Accommodation or any portion thereof, as may
appear in the books and records of account of
the BANK.
Such extension/s, renewal/s, restructuring/s, or
conversion/s of the Accommodation or any portion
thereof, including any increase in the principal amount
thereof, or the imposable interest rates and other bank
charges, shall be binding upon the SURETIES under the
terms of this SURETY AGREEMENT, without need of
any further notice to or consent or conformity of
the SURETIES, all of which are hereby expressly
waived.
Section 1.02. This SURETY AGREEMENT is a
guarantee of payment and not merely of collection and
is intended to be a perfect and continuing indemnity in
favor of the BANK for the amounts and to the extent
stated above. For this purpose, the SURETIES hereby
commit that for as long as thisSURETY AGREEMENT is
in effect, the SURETIES shall not sell, lease, transfer,
CIVIL LAW REVIEW 2

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assign or encumber any of its present and future

properties without the written consent of the BANK,
which consent will not be unreasonably withheld.
The liability of the SURETIES shall be absolute,
irrevocable, unconditional, direct, immediate and not
contingent upon the pursuit by the BANK of whatever
remedies it may have against the PRINCIPAL or the
other sureties for the Accommodation, and shall be
performed by the SURETIES strictly in accordance with
the terms hereof and under any and all circumstances,
including the existence of any claim, set-off, defense or
other rights which theSURETIES or any person or entity
may have at any time against the BANK for any reason
whatsoever, whether or not related to this SURETY
AGREEMENT, the Loan Documents or under such
other documents executed in relation thereto, or
contemplated hereunder. cSEDTC
ARTICLE II
TERM
Section 2.01. This SURETY AGREEMENT shall
remain in full force and effect until payment in full of all
amount for which the PRINCIPAL is or may be liable as
set forth in ARTICLE I hereof, regardless of the absence
of any further or other assent or conformity of, or notice
to the SURETIES, or any circumstance, or provision of
law which might otherwise constitute a defense or
discharge of the SURETIES, all of which are hereby
expressly waived.
ARTICLE III
DEFAULT
Section 3.01. If the BANK shall declare the
obligation of the PRINCIPAL to be due and payable
because of the happening of any of the event of default
as defined in the Credit Agreement, the SURETIES,
upon receipt of written notice from the BANK, shall
forthwith pay to the BANK the full amount of the said
obligations, without need of demand, protest or notice
of any kind, other than the notice provided herein, all of
which are likewise expressly waived by the SURETIES.
In this connection, the BANK is hereby given full
power and authority to apply whatever moneys or
CIVIL LAW REVIEW 2

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things of value belonging to the SURETIESwhich may

be in the possession or control of the BANK in payment
of the obligations mentioned above.
ARTICLE IV
BINDING EFFECT
Section 4.01. This SURETY AGREEMENT shall
except upon the other SURETIES, if any whose
liability(ies) is/are extinguished by way of compromise
or otherwise be binding upon the SURETIES, their heirs
and successors in interest and shall inure to the benefit
of and be enforceable by theBANK, its assigns and
successors in interest. For this purpose,
the SURETIES have agreed, as they hereby agree, that
an extinguishment of liability(ies) of any of
the SURETIES shall not be an obstacle to
the BANK from demanding payment from the
other SURETIES, if any, so long as
the Accommodation has not been fully collected.
xxx xxx xxx
Petitioners do not deny their liability under the abovequoted
Surety Agreement.
As correctly held by both the RTC and the CA, Article 1159 of
the Civil Code expressly provides that "[o]bligations arising from
contracts have the force of law between the contracting parties and
should be complied with in good faith." The RTC as well as the CA
found nothing which would justify or excuse petitioners from non-
compliance with their obligations under the contract they have
entered into. Thus, it becomes apparent that petitioners are merely
attempting to evade or, at least, delay the inevitable performance
of their obligation to pay under the Surety Agreement and the
subject promissory notes which were executed in respondent's
favor.
The Court notes, however, that the interest rates imposed on
the subject promissory notes were made subject to review and
adjustment at the sole discretion and under the exclusive will of
UCPB. Moreover, aside from the Consolidated Statement of Account
attached to the demand letters addressed to petitioner spouses
Chua and their co-defendants, no other competent evidence was
shown to prove the total amount of interest due on the above
promissory notes. In fact, based on the attached Consolidated
Statement of Account, UCPB has already imposed a 24% interest
rate on the total amount due on respondents' peso obligation for a
CIVIL LAW REVIEW 2

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short period of six months. Settled is the rule that any contract
which appears to be heavily weighed in favor of one of the parties
so as to lead to an unconscionable result is void. Any stipulation
regarding the validity or compliance of the contract which is left
solely to the will of one of the parties, is likewise, invalid.
Moreover, courts have the authority to strike down or to
modify provisions in promissory notes that grant the lenders
unrestrained power to increase interest rates, penalties and other
charges at the latter's sole discretion and without giving prior notice
to and securing the consent of the borrowers. This unilateral
authority is anathema to the mutuality of contracts and enable
lenders to take undue advantage of borrowers. Although the Usury
Law has been effectively repealed, courts may still reduce iniquitous
or unconscionable rates charged for the use of money. Furthermore,
excessive interests, penalties and other charges not revealed in
disclosure statements issued by banks, even if stipulated in the
promissory notes, cannot be given effect under the Truth in Lending
Act.
The Court, thus, finds it proper to modify the interest rates
imposed on respondents' obligation. Pursuant to the ruling in Nacar
v. Gallery Frames, et al., the sums of US$435,494.44 and
PhP26,940,950.80 due to UCPB shall earn interest at the rate of
12% per annum from the date of default, on August, 1, 2001, until
June 30, 2013 and thereafter, at the rate of 6% per annum, from July
1, 2013 until finality of this Decision. The total amount owing to
UCPB as set forth in this Decision shall further earn legal interest at
the rate of 6% per annum from its finality until full payment thereof,
this interim period being deemed to be by then an equivalent to a
forbearance of credit.
Finally, pursuant to the parties' Credit Agreement as well as
the subject Promissory Notes, respondents are also liable to pay a
penalty charge at the rate of 1% per month or 12% per annum.
WHEREFORE, the instant petition is DENIED. The Decision
and Resolution of the Court of Appeals, dated September 21, 2006
and December 11, 2006, respectively, in CA-G.R. CV No. 81079,
are AFFIRMED with MODIFICATION by directing petitioners and
their co-defendants to pay respondent UCPB the following:
(1) the principal amounts of US$435,494.44 and
PhP26,940,950.80;
(2) legal interest of 12% per annum on the above principal
amounts reckoned from August 1, 2001 until June 30,
2013;
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(3) penalty charge of 12% per annum from August 1, 2001

until fully paid; and
(4) an interest of 6% from July 1, 2013 until fully paid.
SO ORDERED.
Carpio, Bersamin * Mendoza and Leonen, JJ., concur.
||| (United Alloy Philippines Corp. v. United Coconut Planters Bank ,
G.R. No. 175949, [January 30, 2017])
CIVIL LAW REVIEW 2

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JENESTOR B. CALDITO AND MARIA FILOMENA T. CALDITO,

PETITIONERS vs. ISAGANI V. OBADO and GEREON V. OBADO,
RESPONDENTS
G.R. NO. 181586, January 30, 2017
Ponente: Justice Reyes
Third Division
Assailed in this petition for review on certiorari under Rule 45 of

Revised Rules of Court are the Decision dated July 17, 2007 and the
Resolution dated January 29, 2008 of the Court of Appeals (CA) in CA-
G.R. CV No. 87021, which reversed and set aside the Decision dated
December 23, 2005 of the Regional Trial Court (RTC) of Laoag City,
Ilocos Norte, Branch 12, in Civil Case No. 12932-12.
The Facts
This petition stemmed from a complaint 5 for quieting of

ownership over a parcel of land covering the 272.33 square meters
eastern portion of Lot No. 1633 situated at Barangay No. 5, San
Vicente, Sarrat, Ilocos Norte, filed by Spouses Jenestor B. Caldito and
Ma. Filomena Tejada Caldito (Filomena) (petitioners) against Isagani V.
Obado (Isagani) and Gereon V. Obado (respondents).
The record showed that as early as 1921, Lot No. 1633 was
declared for taxation purposes in the name of Felipe Obado (Felipe).
After Felipes death, Patemo Obado (Paterno), whom Felipe treated like
his own son, subsequently occupied Lot No. 1633 and continued to pay
the realty taxes of the same.
Sometime in 1995, Antonio Ballesteros (Antonio) executed an

Affidavit of Ownership dated February 23, 1995 narrating his claim
over the subject parcel of land. In his affidavit, Antonio claimed that Lot
No. 1633 was co-owned by Felipe with his five siblings, namely: Eladia,
Estanislao, Maria, Severmo and Tomasa, all sumamed Obado.
On the next day following the execution of the said affidavit or

on February 24, 1995, Antonio and Elena Ballesteros (Spouses
Ballesteros) sold the subject parcel of land to the petitioners for the
sum of P70,000.000 evidenced by a Deed of Absolute Sale. Thereafter,
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the petitioners declared the subject lot for taxation purposes and paid
the realty taxes thereon.
In 2002, the petitioners attempted to build a house on the

subject parcel of land but the respondents prevented them from
completing the same. The respondents then filed a complaint before
the barangay but no amicable settlement was reached between the
parties. Hence, on December 8, 2003, the petitioners instituted a
complaint for quieting of ownership against the respondents before the
RTC, as well as an injunctive writ to prevent the respondents from
interfering with the construction of their house. For their part, the
respondents averred that the Spouses Ballesteros were not the owners
and possessors of the subject parcel of land. They maintained that Lot
No. 1633 was inherited by their father, Patemo, from its original owner
Felipe, and they have been paying the real property taxes for the entire
property. They asserted that the petitioners are buyers in bad faith
since their family had been in possession of the entire Lot No. 1633
since 1969 and had been in. open, peaceful and uninterrupted
possession of the whole property up to the present or for more than 30
years in the concept of an owner.
After trial, the court a quo rendered its judgment in favor of the
petitioners. The trial court upheld the validity of the sale between the
petitioners and the Spouses Ballesteros and dismissed the
respondents claim of ownership over Lot No. 1633. The trial court held
that the petitioners presented convincing evidence of ownership over
the subject parcel of land which consists of the following: (a) the Deed
of Absolute Sale executed between the petitioners and the Spouses
Ballesteros; (b) the tax declarations all paid by the petitioners only;
and (c) the Affidavit of Ownership allegedly executed by Antonio. The
trial court also found that the respondents have no successional rights
over the property of Felipe based on the governing law and on the
order of intestate succession at that time and the established facts.
Thus, the RTC disposed as follows:
WHEREFORE, IN VIEW OF ALL THE FOREGOING

PREMISES, the preponderance of evidence having
substantially and sufficiently tilted in favor of the
[petitioners] herein and against the [respondents] herein
named and their siblings, this Court hereby renders
judgment declaring the validity of the 272.33 square
meters eastern portion of Lot No. 1633 in favor of the
[petitioners] and, the [respondents] are hereby ordered to
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do the following:
1. to respect, recognize and not to

molest the lawful ownership and
possession of the [petitioners] over the
272.33 square meters located at the
eastern portion of Lot No. 1633 of the
Sarrat Cadastre;
2. to pay jointly and severally to the

[petitioners] the total sum of:
2.a. P118,453.50 - as andfor actual damages;

2.b. P400,000.00 - as and for moral damages;
2.c. PI00,000.00 - as and for nominal damages;
2.d. P200,000.00 - as andfor
temperate damages; and 2.e.
P300,000.00 - as and for exemplary
damages or corrective.
With costs against the [respondents].

SO ORDERED. (Emphasis and italics in the original)
On appeal, the CA reversed and set aside the RTC decision upon
finding that: (1) the petitioners failed to prove the title of their
immediate predecessors-in-interest, the Spouses Ballesteros; (2) the
petitioners failed to support their claim that Felipe and his siblings,
Eladia, Estanislao, Maria, Severino and Tomasa, co-owned Lot No.
1633; (3) Antonio should have been called to the witness stand to
testify on the contents of his Affidavit of Ownership; (4) the Deed of
Absolute Sale is not a sufficient and convincing evidence that the
petitioners predecessors-in-interest have a title on the subject parcel
of land, which they can transfer; (5) the petitioners are not innocent
purchasers for value since the subject lot is not registered and is in the
possession of another person, other than the Spouses Ballesteros; (6)
nothing in the record could establish the relationship between Felipe
and his supposed legal heirs; and (7) the respondents enjoy a legal
presumption of just title in their favor since they are in possession of
the entire Lot No.
1633. The CA then ruled that:
For a party seeking to quiet their ownership of the

portion in litigation, [the petitioners] have, for starters,
miserably failed to prove the title of their immediate
CIVIL LAW REVIEW 2

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predecessors-in-interest, the [Spouses; Ballesteros].

Except for the February 23, 1995 Affidavit of Ownership
executed by [Antonio], there is, in fact, no evidence on
record to support the claim that the subject parcel was,
indeed, co-owned by [Felipe] [and] i his siblings, Eladia,
Estanislao, Maria, Severino and Tomasa, all sumamed
Obado. To our mind, the fact that [Antonio] was not even
called to the witness stand to testify on the contents of
his Affidavit of Ownership should have immediately impelled
the trial court to discount its probative value and, with it,
the very foundation of [the respondents] supposed cause
of action.
xxxx
With even greater reason are we disposed towards

the reversal of the trial courts holding that, pursuant to
the provisions of the Spanish Civil Code of 1889 on intestate
succession, Eladia, Estanislao, Maria, Severino and
Tomasa, all sumamed Obado were the ones who have
rightfully inherited the subject parcel from their brother,
[Felipe]. Except for the aforesaid February 23, 1995
Affidavit of Ownership executed by [Antonio], [the
respondents] correctly argue that there is nothing on
record from which the relationship of said decedent and
his supposed legal heirs may be reasonably deduced.
Even if said relationship were, moreover, assumed, the
absence of evidence showing that [Felipe] predeceased all
of his supposed siblings impel us to regard, with
considerable askance, the trial courts disposition of the
case by application of said rules on intestate succession.
Litigations cannot be properly resolved by suppositions,
deductions, or presumptions, with no basis in evidence for
the truth must have | to be determined by the hard rules
on admissibility and proof. This is particularly true, of the
case at bench where the successional rights determined
by the trial court are diametrically opposed to [Antonios]
Affidavit of Ownership which dubiously claimed that the
subject parcel was, in fact, co-owned by [Felipe] and his
ostensible siblings and had already been partitioned by
and among them.
The petitioners moved for reconsideration but the same was

denied. Hence, this petition.
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The Issue
WHETHER OR NOT THE PETITIONERS WERE ABLE TO

PROVE OWNERSHIP OVER THE SUBJECT PARCEL OF LAND.
Ruling of the Court
The petition has no merit.
At the outset, it bears to emphasize that there is no dispute with

respect to the fact that Felipe was the original owner of the entire
parcel of unregistered land known as Lot No. 1633 which he started
declaring as his property for taxation purposes as early as 1921. When
Felipe died without issue, Lot No. 1633 was subsequently occupied by
Patemo who then declared the same for taxation purposes and paid
the realty taxes thereon.
The petitioners complaint styled as being for the quieting of

ownership is in fact an action for quieting of title. The petitioners
anchor their cause of action upon the Deed of Sale and the Affidavit of
Ownership executed by Antonio. On the other hand, the respondents
countered that: (1) they inherited from their father, Patemo, Lot No.
1633, of which the herein disputed subject parcel of land is part; and
(2) they have been in possession of the same for more than 30 years in
the concept of an owner.
Essentially, the issues raised center on the core question of

whether the petitioners were able to prove ownership over the subject
parcel of land. In resolving this issue, the pertinent point of inquiry is
whether the petitioners predecessors-in-interest, the Spouses
Ballesteros, have lawful title over the subject parcel of land.
While the question raised is essentially one of fact, of which the Court
normally abstains from, yet, considering the incongruent factual
conclusions of the courts below, the Court is constrained to go by the
exception to the general rule and proceed to reassess the factual
circumstances of the case and make its own assessment of the
evidence and documents on record. But even if the Court were to re-
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evaluate the evidence presented, there is still no reason to depart

from'the CAs ruling that Lot No. 1633 is owned by the respondents.
The Court concurs with the disquisition of the CA that the
petitioners failed to: (1) prove the title of their immediate
predecessors-in-interest, the Spouses Ballesteros; and (2) present
evidence supporting the claim that Lot No. 1633 was co-owned by
Felipe and his siblings, Eladia, Estanislao, Maria, Severino and
Tomasa. Also, the Court finds that the RTC mistakenly relied upon the
Affidavit of Ownership, executed by Antonio, to conclude that the
petitioners were possessors in good faith and with just title who
acquired the subject parcel of land through a valid deed of sale.
In this case, the petitioners cause of action relates to an

action to quiet title which has two indispensable requisites, namely:
(1) the plaintiff or complainant has a legal or an equitable title to or
interest in the real property subject of the action; and (2) the deed,
claim, encumbrance or proceeding claimed to be casting cloud on his
title must be shown to be in fact invalid or inoperative despite its
prima facie appearance of validity or legal efficacy.
From the foregoing provisions, it is clear that the petitioners

cause of action must necessarily fail mainly in view of the absence of
the first requisite since the petitioners were not able to prove
equitable title or ownership over the subject parcel of land.
The petitioners claim of legal title over the subject parcel of

land by virtue of the Deed of Sale and Affidavit of Ownership issued
by Antonio cannot stand because they failed to prove the title of their
immediate predecessors-in-interest, the Spouses Ballesteros. The
Court cannot give full credence to Antonios Affidavit of Ownership for
he simply made general and self-serving statements therein which
were favorable to him, and which were not supported with
documentary evidence, with no specifics as to when their
predecessors-in-interest acquired the subject parcel of land, and
when the Donations Propter Nuptias were made. Indeed, such is hardly
the well-nigh incontrovertible evidence required in cases of this
nature. The petitioners must present proof of specific acts of
ownership to substantiate his claim and cannot just offer general
CIVIL LAW REVIEW 2

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statements which are mere conclusions of law than factual evidence

of possession. Moreso, Antonio
was not even called to the witness stand to testify on the contents of
his Affidavit of Ownership, thus, making the affidavit hearsay evidence
and its probative value questionable. Accordingly, this affidavit must
be excluded from the judicial proceedings being inadmissible hearsay
evidence.
Furthermore, the said affidavit was executed by Antonio only a

day before the subject parcel of land was sold to the petitioners. The
trial court should have considered this in evaluating the value of the
said affidavit in relation to the ownership of the subject parcel of land.
The trial courts reliance on the Affidavit of Ownership executed by
Antonio that the entire Lot No. 1633 was co- owned by Felipe and his
siblings, Eladia, Estanislao, Maria, Severino and Tomasa is misplaced,
considering that nothing on record shows the relationship between
Felipe and his supposed legal heirs. It also indicates the fact that there
is no evidence showing Felipe predeceasing all his supposed siblings.
Moreover, no other piece of evidence was ever presented to prove that
Lot No. 1633 was ever subdivided. In fact, the petitioners admitted that
the subject lot has always been declared for taxation purposes in the
name of Felipe and that the Spouses Ballesteros or the siblings of
Felipe have never declared the same for taxation purposes in their
names.
While the petitioners submitted official receipts and tax

declarations to prove payment of taxes, nowhere in the evidence was it
shown that Spouses Ballesteros declared the subject parcel of land in
their name for taxation purposes or paid taxes due thereon. True, a tax
declaration by itself is not sufficient to prove ownership. Nonetheless, it
may serve as sufficient basis for inferring possession. In fact, what the
petitioners presented as their pieces of evidence are receipts and tax
declarations which they, as the new owners of the subject parcel of
land, have paid. Thus, the petitioners could not also rely on these tax
declarations and receipts because those are of recent vintage and do
not reflect the fact that their predecessors-in-interest have been
paying realty taxes for the subject parcel of land.
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11
Be that as it may, the rights of the respondents as owners of Lot

No. 1633 were never alienated from them despite the sale of the
subject parcel of land by the Spouses Ballesteros to the petitioners nor
does the fact that the petitioners succeeded in paying the real property
taxes of the subject parcel of land. Besides, it seems that the
petitioners knew of the fact that they did not have a title to the subject
parcel of land and could not, therefore, have validly registered the
same, because of the respondents possession of the entire property.
The respondents also presented the following pieces of

evidence: (1) old certified photocopies of declarations of real property
and original copy of tax receipts from year 1921 to 1944 in the name
of Felipe, covering payments by the latter for Lot No. 1633 from which
the subject parcel of land was taken; (2) original copy of tax receipts
from year 1961 to year 1989 in the name of the respondents father
Patemo, covering payments by the latter for Lot No. 1633;(3) original
copy of tax receipt dated July 21, 2004 in the name of Isagani, covering
payments by the latter for Lot No. 1633; (4) original copy of the
Certification issued by the Municipal Treasurer of Sarrat, Ilocos Norte
that Lot No. 1633 covered by Tax Declaration No. 03-001-00271
declared in the name of Felipe is not delinquent in the payment of
realty taxes.
Although tax declarations or realty tax payment of property are

not
conclusive evidence of ownership, as in the instant case, they are good
indicia of possession in the concept of owner, for no one in his right
mind
would be paying taxes for a property that is not in his actual or
constructive
possession. They constitute evidence of great weight in support of the
claim of title of ownership by prescription when considered with the
actual possession of the property by the applicant.
Indeed, the respondents presentation of the tax declarations

and tax receipts which all are of ancient era indicates possession in the
concept of an owner by the respondents and their predecessors-in-
interests. The tax declarations in the name of Patemo take on great
significance because the respondents can tack their claim of ownership
to that of their father. It is worthy to note that the respondents father
Patemo to whom they inherited the entire Lot No. 1633 paid the taxes
due under his name from 1961 to 1989; and subsequently, the
respondents paid the taxes due after the death of Patemo in 2003.
Granting without admitting that Felipes possession of Lot No. 1633
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11
cannot be tacked with the respondents possession, the latters

possession can be tacked with that of Patemo. Thus, from 1961 to the
time of the filing of the quieting of title by the petitioners in 2003, the
respondents have been in possession of the entire Lot No. 1633 in the
concept of an owner for almost 42 years. This period of time is
sufficient to vest extraordinary acquisitive prescription over the
property on the respondents. As such, it is immaterial now whether the
respondents possessed the property in good faith or not.
Admittedly, the respondents built their house at the western
portion of Lot No. 1633, and Isagani has declared that the eastern part
was their familys garden. Thus, it was fenced with bamboo and was
planted with banana trees and different vegetables. Clearly, there is no
doubt that the respondents did not only pay the taxes due for the
whole Lot No. 1633, in which the eastern portion is a part, but rather,
the respondents were able to prove that they have possession of the
whole lot.
While the findings of the CA that the petitioners were a buyer in

bad faith is in accord with the evidence on record, it must be pointed
out, however, that they overlooked the fact that Lot No. 1633 is an
unregistered piece of land. The Court had already ruled that the issue
of good faith or bad faith of a buyer is relevant only where the subject
of the sale is a registered land but not where the property is an
unregistered land. One who purchases an unregistered land does so at
his peril. His claim of having bought the land in good faith, i.e. without
notice that some other person has a right to, or interest in, the
property, would not protect him if it turns out that the seller does not
actually own the property. All the same, the application of this doctrine
will not affect the outcome of this case.
Obviously, the petitioners cannot benefit from the deed of sale

of the subject parcel of land, executed by the Spouses Ballesteros in
their favor, to support their claim of possession in good faith and with
just title. The Court noted that in Filomenas testimony, she even
admitted that the respondents own the bigger portion of Lot No. 1633.
Thus, it is clear that the petitioners chose to close their eyes to facts
which should have put a reasonable man on his guard. The petitioners
failed to ascertain whether the Spouses Ballesteros were the lawful
owner of the subject parcel of land being sold. Far from being prudent,
the petitioners placed full faith on the Affidavit of Ownership that
Antonio executed. Hence, when the subject parcel of land was bought
CIVIL LAW REVIEW 2

11
by the petitioners, they merely stepped into the shoes of the Spouses
Ballesteros and acquired whatever rights and obligations appertain
thereto.
It is also worthy to note of the respondents reaction when the

petitioners tried to construct a house in the subject parcel of land in
2002. Upon learning that a house was being built on the eastern
portion of Lot No. 1633, the respondents went to the barangay to file a
complaint.30 Clearly, this indicates the respondents vigilance to protect
their property. The Court also notes that in the respondents possession
of the entire Lot No. 1633 for almost 42 years, there was no instance
during this time that the petitioners or their predecessors-in-interest,
for that matter, questioned the respondents right over Lot No. 1633.
From the foregoing disquisitions, it is clear that the petitioners were not
able to prove equitable title or ownership over the subject parcel of
land. Except for their claim that they merely purchased the same from
the Spouses Ballesteros, the petitioners presented no other justification
to disprove the ownership of the respondents. Since the Spouses
Ballesteros had no right to sell the subject parcel of land, the
petitioners cannot be deemed to have been the lawful owners of the
same.
WHEREFORE, the petition is DENIED. The Decision dated July 17,
2007 and the Resolution dated January 29, 2008 of the Court of Appeals-in
CA-G.R. CV No. 87021 are AFFIRMED.
CIVIL LAW REVIEW 2

11
CIVIL LAW REVIEW 2

January 2017

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[JANUARY 2017 CASES] 1

RODOLFO LAYGO and WILLIE

This is a Petition for Review on Certiorari under Rule 45 of

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Thereafter, Bandrang wrote another letter to the Sanggunian,

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On the issue of whether mandamus is proper, the CA also

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therefore, there cannot be any occasion for petitioner to violate any

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Solano reminded petitioners of their delinquent stall rentals from

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authority, without regard to or the exercise of his own

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Capulong, we held that as a general rule, a writ of mandamus will

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PRUDENTIAL BANK (now BANK OF THE PHILIPPINE

Only questions of law may be raised in petitions for review

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condominium, particularly designated as Unit 2308-B2, and covered

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Proceedings before the CA

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contract of mortgage. Hence, the jurisdiction of the

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it approved Golden Dragon's loan. It cannot feign lack of

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As a general rule, only questions of law may be raised in

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the action or ruling complained of. Administrative due process

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records of the Board. (Emphasis and underscoring

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First of all, under Presidential Decree No. 957 (PD 957), no

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Moreover, contrary to the Bank's assertions, it cannot be

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verify the title and inspect the properties to

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"x x x As a general rule, where there is

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must be deemed to possess constructive

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MAERSK FILIPINAS CREWING, INC., and MAERSK

The Petition for Review before us assails the Decision and

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Private respondent was examined by Dr. Anthony

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On November 19, 2002, private respondent

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memorandum by registered mail. It was only on the next day, 22

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On 17 February 2006, petitioners filed a Motion for

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From the foregoing, the issues may be reduced to the

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Aside from the presumption of authority to represent a client

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