ARELLANO UNIVERSITY-SCHOOL OF LAW

CIVIL LAW REVIEW II

SUPREME COURT DECISIONS: CASE DIGEST

(2016 to 2017 Cases)

Submitted to:

Atty. Crisostomo A.Uribe

Professor of Law

Submitted by:

Luigi Marvic G. Feliciano

2012-0630

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 TABLE OF CONTENTS

A. OBLIGATIONS IN GENERAL
UNITED ALLOY PHILIPPINES CORPORATION, SPOUSES DAVID C. CHUA AND
LUTEN CHUA v. UNITED COCONUT PLANTERS BANK, G.R. No. 175949, January 30,
2017 ,SECOND DIVISION,
PERALTA, J.:........................................................................................................ page 5

B. OBLIGATIONS; IMPOSSIBLE OBLIGATIONS

DELFIN C. GONZALEZ, JR. v. MAGDALENO M. PEA, ALABANG COUNTRY CLUB,
INC., AND MS. ARSENIA VERA,G.R. No. 214303, January 30, 2017,FIRST
DIVISION,SERENO, C.J.:...................................................................................... page 6

C. OBLIGATIONS; CONDITIONAL OBLIGATIONS

SERGIO R. OSMEA III v. POWER SECTOR ASSETS AND LIABILITIES
MANAGEMENT CORPORATION, EMMANUEL R. LEDESMA, JR., SPC POWER
CORPORATION, AND THERMA POWER VISAYAS, INC.,G.R. No. 212686, October 05,
2016, SPECIAL THIRD DIVISION,VELASCO JR., J.........................................page 8

D. OBLIGATIONS; SOLIDARY OBLIGATIONS

SPOUSES AMADO O. IBAEZ and ESTHER R. IBAEZ vs. JAMES HARPER as
Representative of the Heirs of FRANCISCO MUOZ, SR., the REGISTER OF
DEEDS OF MANILA and the SHERIFF OF MANILA,G.R. No. 194272, February
15, 2017,THIRD DIVISION,
JARDELEZA, J............................................................................................page 10

E. EXTINGUISHMENT OF OBLIGATIONS
ILOILO JAR CORPORATION, v. COMGLASCO CORPORATION/AGUILA
GLASS, G.R. No. 219509, January 18, 2017,SECOND
DIVISION,MENDOZA, J.:....................................................................................page 12

F. EXTINGUISHMENT OF OBLIGATIONS; PAYMENT OR PERFORMANCE

WERR CORPORATION INTERNATIONAL, v. HIGHLANDS PRIME, INC.,G.R. No.
187543, February 08, 2017; HIGHLANDS PRIME, INC. v. WERR CORPORATION
INTERNATIONAL, G.R. No. 187580, February 08, 2017,THIRD DIVISION,
JARDELEZA, J................................................................................................page 13

G. REMEDIES; RESCISSION/SPECIFIC PERFORMANCE

DR. RESTITUTO C. BUENVIAJE v. SPOUSES JOVITO R. AND LYDIA B. SALONGA,
JEBSON HOLDINGS CORPORATION AND FERDINAND JUAT BAEZ,G.R. No.
216023, October 05, 2016, FIRST DIVISION, PERLAS
BERNABE, J.............................................................................................................page 15

NATIVIDAD R. MUNAR, ET. AL v. ATTY. ELMER T. BAUTISTA and ATTY. WINSTON

F. GARCIA, A.C. No. 7424, February 8, 2017, THIRD DIVISION,
REYES,J...............................................................................................................page 17

Spouses Romeo Pajares v. Remarkable Laundry and Dru Cleaning, represented by,
Archimedes Solis, G.R. No. 212690, February 20, 2017, FIRST DIVISION, Del Castillo,
J............................................................................................................................ page 18

H. CONTRACTS IN GENERAL
KABISIG REAL WEALTH DEV., INC. AND FERNANDO C. TIO v. YOUNG
CORPORATION BUILDERS, G.R. No. 212375, January 25, 2017, SECOND DIVISION,
PERALTA, J.:............................................................................................................page 20

I. CONTRACTS; AUTONOMY OF CONTRACTS

RUTCHER T. DAGASDAS vs. GRAND PLACEMENT AND GENERAL SERVICES
CORPORATION, G.R. No. 205727, January 18, 2017, FIRST DIVISION, DEL
CASTILLO, J............................................................................................................page 22

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J. CONTRACTS; CONSENT
FERRO CHEMICALS, INC.v. ANTONIO M. GARCIA, ROLANDO NAVARRO, JAIME
Y. GONZALES AND CHEMICAL INDUSTRIES OF THE PHILIPPINES, INC., G.R. No.
168134, October 05, 2016; JAIME Y. GONZALES v. HON. COURT OF APPEALS AND
FERRO CHEMICALS, INC., G.R. NO. 168183, October 05, 2016, ANTONIO M.
GARCIA v. FERRO CHEMICALS, INC., G.R. NO. 168196, October 05, 2016, THIRD
DIVISION, PEREZ, J........................................................................................ page 24

K. CONTRACTS; PRIVITY OF CONTRACTS

MANUEL C. UBAS, SR. v. WILSON CHAN, G.R. No. 215910, February 06, 2017, FIRST
DIVISION, PERLAS-BERNABE, J....................................................................page 25

L. CONTRACTS; CONTRACTS OF ADHESION

TERESITA I. BUENAVENTURA, v. METROPOLITAN BANK AND TRUST COMPANY,
G.R. No. 167082, August 03, 2016, FIRST DIVISION,
BERSAMIN, J........................................................................................................... page 26

M. CONTRACTS; BREACH OF CONTRACTS

PRYCE PROPERTIES CORPORATION vs. SPOUSES SOTERO OCTOBRE, JR. and
HENRISSA A. OCTOBRE, and CHINA BANKING CORPORATION G.R. No. 186976.
December 7, 2016, THIRD DIVISION,
JARDELEZA, J......................................................................................................... page 27

N. CONTRACTS; VOID CONTRACTS

DELFIN C. GONZALEZ, JR. v. MAGDALENO M. PEA, ALABANG COUNTRY CLUB,
INC., AND MS. ARSENIA VERA,G.R. No. 214303, January 30, 2017,FIRST DIVISION,
SERENO, C.J.:...................................................................................... page 28

O. SALES
RCBC SAVINGS BANK v. NOEL M. ODRADA,G.R. No. 219037, October 19, 2016,
SECOND DIVISION, CARPIO, J....................................................................... page 30

P. SALES; ARTICLE 1452

Arcaina and Banta v. Ingram, G.R. No. 196444, 15 February 2017, THIRD DIVISION,
JARDELEZA, J................................................................................................... page 32.

Q. SALES; PURCHASERS IN GOOD FAITH

SPRING HOMES SUBDIVISION CO., INC., SPOUSES PEDRO L. LUMBRES AND
REBECCA T. ROARING v. SPOUSES PEDRO TABLADA, JR. AND ZENAIDA
TABLADA, G.R. No. 200009, January 23, 2017, SECOND DIVISION,
PERALTA, J.......................................................................................................... page 33

DESIDERIO RANARA, JR. v. ZACARIAS DE LOS ANGELES, JR., G.R. No. 200765,
August 08, 2016, THIRD DIVISION, REYES, J.....................................................page 35

R. SALES;INNOCENT PURCHASER FOR VALUE

THE ROMAN CATHOLIC BISHOP OF TUGUEGARAO vs. FLORENTINA
PRUDENCIO, Now Deceased, Substituted by Her Heirs, Namely: Exequiel, Lorenzo,
Primitivo, Marcelino, Juliana, Alfredo and Rosario, All Surnamed Domingo; A VELlNA
PRUDENCIO, Assisted by Her Husband Victoriano Dimaya; ERNESTO PENALBER* and
RODRIGO TALANG; SPOUSES ISIDRO CEPEDA and SALVACION DIVINI, Now
Deceased, Substituted by Her Heirs, Namely: Marcial, Pedro and Lina, All Surnamed
Cepeda, G.R. No. 187942, September 7, 2016, THIRD DIVISION, JARDELEZA,
J.......................................................................................................................... page 37

S. LEASE
RODOLFO LAYGO and WILLIE LAYGO vs. MUNICIPAL MAYOR OF SOLANO,
NUEVA VIZCAYA, G.R. No. 188448, January 11, 2017, THIRD DIVISION,
JARDELEZA, J...................................................................................................page 39

T. MORTGAGE; REAL ESTATE MORTGAGE

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 PHILIPPINE NATIONAL BANK v. VENANCIO C. REYES, JR.,G.R. No. 212483, October
05, 2016, SECOND DIVISION,
LEONEN, J.................................................................................................................... page 41

SPOUSES MAY S. VILLALUZ AND JOHNNY VILLALUZ, JR. v. LAND BANK OF THE
PHILIPPINES AND THE REGISTER OF DEEDS FOR DAVAO CITY, G.R. No. 192602,
January 18, 2017, THIRD DIVISION,
JARDELEZA, J.:...........................................................................................................page 42

U. MORTGAGE; MORTGAGEE IN GOOD FAITH

PRUDENTIAL BANK (NOW BANK OF THE PHILIPPINE ISLANDS) v. RONALD
RAPANOT AND HOUSING & LAND USE REGULATORY BOARD,G.R. No. 191636,
January 16, 2017, FIRST DIVISION, CAGUIOA,
J.............................................................................................................................. page 44

V. MORTGAGE; DRAGNET CLAUSE

PHILIPPINE NATIONAL BANK v. HEIRS OF BENEDICTO AND AZUCENA
ALONDAY, G.R. No. 171865, October 12, 2016, FIRST DIVISION,BERSAMIN,
J.............................................................................................................................. page 46

W. MORTGAGE; EQUITABLE MORTGAGE

MARCELINO REPUELA and CIPRIANO REPUELA, substituted by CARMELA
REPUELA, ET. AL vs. ESTATE OF THE SPOUSES OTILLO LARAWAN and
JULIANA BACUS, represented by NANCY LARAWAN MANCAO, ET.AL, G.R.
No. 219638. December 7, 2016, SECOND DIVISION,
MENDOZA, J........................................................................................................ page
48.

X. DAMAGES; COMPENSATORY DAMAGES

WILLIAM ENRIQUEZ AND NELIA-VELA ENRIQUEZ, v.ISAROG LINE
TRANSPORT, INC. AND VICTOR SEDENIO,G.R. No. 212008, November 16, 2016,
THIRD DIVISION, PERALTA,J....................................................... page 49

Y. DAMAGES; MORAL DAMAGES

ROSALIE SY AYSON vs. FIL-ESTATE PROPERTIES, INC., and FAIRWAYS AND

BLUEWATER RESORT AND COUNTRY CLUB, INC., G.R. No. 223254. December 1,
2016; FIL-ESTATE PROPERTIES, INC. and FAIRWAYS & BLUEWATER RESORT &
COUNTRY CLUB, INC. vs. ROSALIE SY AYSON, G.R. No. 223269. December 1, 2016,
FIRST DIVISION, PERLAS-BERNABE, J.................................................... page 50

Z. DAMAGES; ATTORNEYS FEES

MAERSK FILIPINAS CREWING INC., and MAERSK CO. IOM LTD., vs. JOSELITO R.
RAMOS, G.R. No. 184256, January 18, 2017, FIRST DIVISION,
SERENO, CJ.....................................................................................................page 52

AA. CREDIT TRANSACTIONS; INTERESTS

IBM PHILIPPINES, INC. v. PRIME SYSTEMS PLUS, INC.,G.R. No. 203192, August 15,
2016,SECOND DIVISION,DEL CASTILLO, J.:.................................................page 54

UNITED ALLOY PHILIPPINES CORPORATION, SPOUSES DAVID C. CHUA AND LUTEN

CHUA, Petitioners, v. UNITED COCONUT PLANTERS BANK, Respondent.
G.R. No. 175949, January 30, 2017
SECOND DIVISION
PERALTA, J.:

Nature of the Action: This 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

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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.

FACTS:

On December 18, 2000, herein petitioner corporation, United Alloy Philippine

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 obligationunder 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 favour.

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. 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. 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
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.

ISSUE:

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.

RULING:

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

As correctly held by both the RTC and the CA, Article 1159 of the Civil Code expressly provides that
"obligations 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.

DELFIN C. GONZALEZ, JR., Petitioner, v. MAGDALENO M. PEA, ALABANG COUNTRY

CLUB, INC., AND MS. ARSENIA VERA, Respondents.
G.R. No. 214303, January 30, 2017
FIRST DIVISION
SERENO, C.J.:

Nature of the Action: This 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).

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FACTS:
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 Sago 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 were executed pending appeal,
such as the subject shares.

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 value.

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. Petitioner came
directly to this Court and asked for the reversal of the ruling of the trial court's ruling. 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.

ISSUE:

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:

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.

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. Consequently, all levies, garnishment and sales executed pending appeal are declared null and
void, with the concomitant duty of restitution."

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

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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.

As regards legal impossibility, the RTC appears to have jumped to the conclusion that because of the
perfected sale of the shares to Vera, petitioner can no longer claim actual restitution of the property.

However, Article 1505 of the Civil Code instructs that " 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."

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.

SERGIO R. OSMEA III, Petitioner, v. POWER SECTOR ASSETS AND LIABILITIES

MANAGEMENT CORPORATION, EMMANUEL R. LEDESMA, JR., SPC POWER
CORPORATION, AND THERMA POWER VISAYAS, INC., Respondents.
G.R. No. 212686, October 05, 2016
SPECIAL THIRD DIVISION
VELASCO JR., J.

Nature of the Action: For resolution of the Court is the Manifestation/Motion dated March 16,
2016 of private respondent Therma Power Visayas, Inc. (TPVI). As TVPI expounded, a Notice of
Award dated April 30, 2014 was issued in its favor for the purchase of the Naga Power Plant
Complex (NPPC). The award, however, was cancelled because of the exercise by SPC Power
Corporation (SPC) of its Right to Top. TVPI then implores the Court to clarify the effect on the
Notice of Award of the subsequent annulment of the said Right to Top in our September 28, 2015
Decision, and prays for the reinstatement thereof.

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FACTS:

On December 27, 2013, the Board of Directors of the Power Sector Assets and Liabilities Management
Corporation (PSALM) approved the commencement of the 3 rd round of bidding for the sale of the
153.1MW NPPC. Respondents SPC Power Corporation (SPC) and TVPI submitted their respective bids
for the project.

In due course, PSALM issued a Notice of Award dated April 30, 2014 in favor of TPVI, declaring the
latter as the Winning Bidder. The execution of a Land Lease Agreement (LLA) and Assets Purchase
Agreement (APA) in favor of TPVI, however, was subject to SPC's non-exercise of its Right to Top. On
the assumption that SPC validly exercised its Right to Top, PSALM executed the NPPC-APA and NPPC-
LLA in SPC's favor, cancelling TPVI's Notice of Award in the process. The Right to Top and the resultant
agreements from its exercise, however, were subsequently nullified by the Court through its September
28, 2015 Decision.

Petitioner Sergio R. Osmea III (Osmea) and respondents PSALM and SPC filed their respective
motions for reconsideration. Meanwhile, respondent TPVI filed the instant Manifestation/Motion wherein
it maintained that the nullification of SPC's Right to Top calls for the reinstatement of the cancelled April
30, 2014 Notice of Award in its favor.

ISSUE:

Whether Articles 1181 and 1185 of the Civil Code find application in this case.

RULING:

Articles 1181 and 1185 of the Civil Code find application in this case

The award of the NPPC-LLA and NPPC-LLA to TPVI further finds justification under Arts. 1181 and
1185 of the Civil Code, viz:

Article 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of
those already acquired, shall depend upon the happening of the event which constitutes the condition.
Article 1185. The condition that some event will not happen at a determinate time shall render the
obligation effective from the moment the time indicated has elapsed, or if it has become evident that the
event cannot occur.

The Court explained in The Wellex Group, Inc. v. U-Land Airlines, Co., Ltd. that, under Art. 1185, if an
obligation is conditioned on the non-occurrence of a particular event at a determinate time, that obligation
arises (a) at the lapse of the indicated time, or (b) if it has become evident that the event cannot occur. To
illustrate: Petitioner Wellex and respondent U-Land bound themselves to negotiate with each other within
a 40-day period to enter into a share purchase agreement. If no share purchase agreement was entered
into, both parties would be freed from their respective undertakings.
It is the non-occurrence or non-execution of the share purchase agreement that would give rise to the
obligation to both parties to free each other from their respective undertakings. This includes returning to
each other all that they received in pursuit of entering into the share purchase agreement.
At the lapse of the 40-day period, the parties failed to enter into a share purchase agreement. This lapse is
the first circumstance provided for in Article 1185 that gives rise to the obligation. Applying Article 1185,
the parties were then obligated to return to each other all that they had received in order to be freed from
their respective undertakings.
However, the parties continued their negotiations after the lapse of the 40-day period. They made
subsequent transactions with the intention to enter into the share purchase agreement. Despite that, they
still failed to enter into a share purchase agreement. Communication between the parties ceased, and no
further transactions took place.
It became evident that, once again, the parties would not enter into the share purchase agreement. This is
the second circumstance provided for in Article 1185. Thus, the obligation to free each other from their
respective undertakings remained.

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In the case at bar, PSALM's obligation to award the contract in TPVI's favor was dependent on the non-
occurrence of an event: SPC's legal and valid exercise of its Right to Top. As phrased by PSALM: "the
approval of the sale to TPVI was a conditional one, the consummation of which is dependent on the non-
exercise by SPC of its right to top." It has become apparent, however, that such event will never occur.
SPC can never legally and validly invoke its Right to Top in view of its nullity. The condition, therefore,
is deemed complied with by operation of law, and the obligation to execute the purchase contracts in
favor of TPVI, due and demandable.

SPOUSES AMADO O. IBAEZ and ESTHER R.

IBAEZ, petitioners, vs. JAMES HARPER as Representative of the Heirs of
FRANCISCO MUOZ, SR., the REGISTER OF DEEDS OF MANILA and the
SHERIFF OF MANILA, respondents.
G.R. No. 194272, February 15, 2017
THIRD DIVISION
JARDELEZA, J.

Nature of the Action: This is an Amended Petition for Review on Certiorari under Rule
45 of the Revised Rules of Court assailing the Decision dated October 29, 2009 (assailed
Decision) and Resolution dated September 29, 2010 (assailed Resolution) of the Court of
Appeals (CA) in CA-G.R. SP No. 98623. The CA set aside the Orders dated August
11,2006 and February 20, 2007 and reinstated the Order dated March 24, 2006 of the
Regional Trial Court (RTC) of Manila, Branch 40, in Civil Case No. 97-86454.

FACTS:

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Sometime in October 1996, spouses Amado and Esther Ibaez (spouses Ibaez) borrowed from
Francisco E. Muoz, Sr. (Francisco), Consuelo Estrada (Consuelo) and Ma. Consuelo E. Muoz
(Ma. Consuelo) the amount of P1,300,000.00 , payable in three months, with interest at the rate of
3% a month. The spouses Ibaez issued a Promissory Note binding themselves jointly and
severally to pay Ma. Consuelo and Consuelo the loan amount with interest. As security, on
October 17, 1996, the spouses Ibaez executed a Deed of Real Estate Mortgage in favor of Ma.
Consuelo and Consuelo over a parcel of land and its improvements covered by Transfer
Certificate of Title. Alleging that the conditions of the mortgage have been violated since
November 17, 1996 and that all check payments were dishonored by the drawee, Ma. Consuelo
and Consuelo applied for foreclosure of the real estate mortgage. Spouses Ibaez filed in the RTC
of Manila a Complaint for injunction and damages with prayers for writ of preliminary
injunction and temporary restraining order against Francisco, Ma. Consuelo, Consuelo, the Clerk
of Court and Ex-Officio Sheriff, Sheriff-in-Charge and Register of Deeds of the City of Manila.
Docketed as Civil Case No. 97-86454, the Complaint alleged that there is no reason to proceed
with the foreclosure because the real estate mortgage was novated.

The parties filed a Joint Motion for Approval of Amended Compromise Agreement. The
Amended Compromise Agreement, signed by the spouses Ibaez and Francisco, for himself and
on behalf of Ma. Consuelo and Consuelo. RTC approved the Amended Compromise Agreement.
Roberto C. Bermejo (Atty. Bermejo), representing himself as collaborating counsel for Francisco,
Ma. Consuelo and Consuelo, filed an Omnibus Motion for Execution and Lifting of the Status
Quo Order of December 16, 1997 and for the Issuance of Writ of Possession. RTC granted Atty.
Bermejo's motion. The spouses Ibaez moved to reconsider. RTC granted the spouses Ibaez'
Motion for Reconsideration. Spouses Ibaez filed a Motion for the Implementation of the
Amended Compromise Agreement. They argued that since there was no proper substitution of
the heirs of Francisco, the proper parties to substitute him are Ma. Consuelo and Consuelo.

ISSUE: WHETHER THE OBLIGATION OF SPOUSES IBANEZ WAS SOLIDARY.

RULING:

Here, the spouses Ibaez agreed to pay Francisco, Ma. Consuelo and Consuelo the total amount
of P3,000,000, with the initial payment of P2,000,000 to be sourced from the proceeds of a GSIS
loan and secured by the spouses Ibaez while the remaining balance of P1,000,000 to be paid one
year from the date of the Amended Compromise Agreement.

As correctly identified by the CA, the Amended Compromise Agreement clearly refers to the
spouses Ibaez as plaintiffs and Francisco, Consuelo and Ma. Consuelo as the defendants they
covenanted to pay. There is nothing in the Hatol, and the Amended Compromise Agreement it is
based on, which shows a declaration that the obligation created was solidary. In any case, solidary
obligations cannot be inferred lightly. They must be positively and clearly expressed. Articles
1207 and 1208 of the Civil Code provide: Art. 1207. The concurrence of two or more creditors or
of two or more debtors in one and the same obligation does not imply that each one of the former
has a right to demand, or that each one of the latter is bound to render, entire compliance with the
prestations. There is a solidary liability only when the obligation expressly so states, or when the
law or the nature of the obligation requires solidarity.

Art. 1208. If from the law, or the nature or the wording of the obligations to which the preceding
article refers the contrary does not appear, the credit or debt shall be presumed to be divided into
as many equal shares as there are creditors or debtors, the credits or debts being considered
distinct from one another, subject to the Rules of Court governing the multiplicity of suits.

In this case, given that solidarity could not be inferred from the agreement, the presumption under
the law applies the obligation is joint. As defined in Article 1208, a joint obligation is one
where there is a concurrence of several creditors, or of several debtors, or of several debtors, or of
several creditors and debtors, by virtue of which each of the creditors has a right to demand, and
each of the debtors is bound to render compliance with his proportionate part of the
prestation which constitutes the object of the obligation.

10
 ILOILO JAR CORPORATION, Petitioner, v. COMGLASCO CORPORATION/AGUILA
GLASS, Respondent.

G.R. No. 219509, January 18, 2017

SECOND DIVISION
MENDOZA, J.:

Nature of the Action: This petition for review on certiorari seeks to reverse and set aside the
January 30,2015 Decision and June 17,2015 Resolution of the Court of Appeals (CA) in CA-G.R.
CV No. 01475, which overturned the February 17, 2005 Amended Order of the Regional Trial
Court, Branch 37, Iloilo City (RTC).
FACTS:
On August 16, 2000, petitioner Iloilo Jar Corporation (Iloilo Jar), as lessor, and respondent Comglasco
Corporation/Aguila Glass (Comglasco), as lessee, entered into a lease contract over a portion of a
warehouse building, with an estimated floor area of 450 square meters, located on a parcel of land
identified as Lot 2-G-1-E-2 in Barangay Lapuz, La Paz District, Iloilo City. The term of the lease was for
a period of three (3) years or until August 15, 2003. 4

11
On December 1, 2001, Comglasco requested for the pre-termination of the lease effective on the same
date. Iloilo Jar, however, rejected the request on the ground that the pre-termination of the lease contract
was not stipulated therein. Despite the denial of the request for pre-termination, Comglasco still removed
all its stock, merchandise and equipment from the leased premises on January 15, 2002. From the time of
the withdrawal of the equipment, and notwithstanding several demand letters, Comglasco no longer paid
all rentals accruing from the said date.5

On September 14, 2003, Iloilo Jar sent a final demand letter to Comglasco, but it was again ignored.
Consequently, Iloilo Jar filed a civil action for breach of contract and damages before the RTC on October
10, 2003.6

On June 28, 2004, Comglasco filed its Answer 7 and raised an affirmative defense, arguing that by virtue
of Article 1267 of the Civil Code (Article 1267),8 it was released from its obligation from the lease
contract. It explained that the consideration thereof had become so difficult due to the global and regional
economic crisis that had plagued the economy. Likewise, Comglasco admitted that it had removed its
stocks and merchandise but it did not refuse to pay the rentals because the lease contract was already
deemed terminated. Further, it averred that though it received the demand letters, it did not amount to a
refusal to pay the rent because the lease contract had been pre-terminated in the first place.

On July 15, 2004, Iloilo Jar filed its Motion for Judgment on the Pleadings arguing that Comglasco
admitted all the material allegations in the complaint. It insisted that Comglasco's answer failed to tender
an issue because its affirmative defense was unavailing.

In its August 18, 2004 Order, the RTC granted the motion for judgment on the pleadings. the
CA reversed the amended order of the RTC.

ISSUE:

WHETHER OR NOT COMGLASCO WAS RELEASED OF ITS OBLIGATIONS BECAUSE OF

EXISTING GLOBAL AND REGIONAL ECONOMIC CRISIS THAT ALLEGEDLY DISENABLED IT
TO COMPLY WITH ITS OBLIGATIONS

RULING:

Comglasco's position fails to impress because Article 1267 applies only to obligations to do and not to
obligations to give. The obligation to pay rentals or deliver the thing in a contract of lease falls within the
prestation "to give." This article, which enunciates the doctrine of unforeseen events, is not, however, an
absolute application of the principle of rebus sic stantibus, which would endanger the security of
contractual relations. The parties to the contract must be presumed to have assumed the risks of
unfavorable developments.

Considering that Comglasco's obligation of paying rent is not an obligation to do, it could not rightfully
invoke Article 1267 of the Civil Code. Even so, its position is still without merit as financial struggles due
to an economic crisis is not enough reason for the courts to grant reprieve from contractual obligations.

WERR CORPORATION INTERNATIONAL, Petitioner, v. HIGHLANDS PRIME,

INC., Respondent.
G.R. No. 187543, February 08, 2017
HIGHLANDS PRIME, INC., Petitioner, v. WERR CORPORATION
INTERNATIONAL, Respondent.
G.R. No. 187580, February 08, 2017
THIRD DIVISION
JARDELEZA, J.

Nature of the Action: Consolidated petitions seeking to nullify the Court of Appeals (CA)
February 9, 2009 Decision and April 16, 2009 Resolution in CA-G.R. SP No. 105013. The CA

12
modified the August 11, 2008 Decision of the Construction Industry Arbitration Commission
(CIAC)

FACTS:
Highlands Prime, Inc. (HPI) and Werr Corporation International (Werr) are domestic corporations
engaged in property development and construction, respectively. For the construction of 54 residential
units contained in three clusters of five-storey condominium structures, known as "The Horizon-
Westridge Project," in Tagaytay Midlands Complex, Talisay, Batangas, the project owner, HPI, issued a
Notice of Award/Notice to Proceed to its chosen contractor, Werr, on July 22, 2005. Thereafter, the parties
executed a General Building Agreement 7 (Agreement) on November 17, 2005.

Under the Agreement, Werr had the obligation to complete the project within 210 calendar days from
receipt of the Notice of Award/Notice to Proceed on July 22, 2005, or until February 19, 2006. 9 For the
completion of the project, HPI undertook to pay Werr a lump sum contract price of P271,797,900.00
inclusive of applicable taxes, supply and transportation of materials, and labor. 10 It was agreed that this
contract price shall be subject to the following payment scheme: (1) HPI shall pay 20% of the contract
price upon the execution of the agreement and the presentation of the necessary bonds and insurance
required under the contract, and shall pay the balance on installments progress billing subject to
recoupment of downpayment and retention money; (2) HPI shall retain 10% of the contract price in the
form of retention bond provided by Werr; (3) HPI may deduct or set off any sum against monies due
Werr, including expenses for the rectification of defects in the construction project; and (4) HPI has the
right to liquidated damages in the event of delay in the construction of the project equivalent to 1/10 of
1% of the contract price for every day of delay.

Upon HPI's payment of the stipulated 20% downpayment in the amount of P54,359,580.00, Werr
commenced with the construction of the project. The contract price was paid and the retention money was
deducted, both in the progress billings. The project, however, was not completed on the initial completion
date of February 19, 2006, which led HPI to grant several extensions and a final extension until October
15, 2006. On May 8, 2006, Werr sought the assistance of HPI to pay its obligations with its suppliers
under a "Direct Payment Scheme" totaling P24,503,500.08, which the latter approved only up to the
amount of P18,762,541.67. The amount is to be charged against the accumulated retention money. As of
the last billing on October 25, 2006, HPI had already paid the amount of P232,940,265.85 corresponding
to 93.18% accomplishment rate of the project and retained the amount of P25,738,258.01 as retention
bond.

The project was not completed on the last extension given. Thus, HPI terminated its contract with Werr on
November 28, 2006, which the latter accepted on November 30, 2006. No progress billing was adduced
for the period October 28, 2006 until the termination of the contract.

On October 3, 2007, Werr demanded from HPI payment of the balance of the contract price as reflected in
its financial status report which showed a conditional net payable amount of P36,078,652.90. On January
24, 2007, HPI informed Werr that based on their records, the amount due to the latter as of December 31,
2006 is P14,834,926.71. This amount was confirmed by Werr. Not having received any payment, Werr
filed a Complaint for arbitration against HPI before the CIAC to recover the P14,834,926.71 representing
the balance of its retention money.

In its Answer, HPI countered that it does not owe Werr because the balance of the retention money
answered for the payments made to suppliers and for the additional costs and expenses incurred after
termination of the contract. From the retention money of P25,738,258.01, it deducted (1) P18,762,541.67
as payment to the suppliers under the Direct Payment Scheme, and (2) P7,548,729.15 as additional costs
and expenses further broken down as follows: (a) P3,336,526.91 representing the unrecouped portion of
the 20% downpayment; (b) P542,500.00 representing the remainder of Werr's unpaid advances; (c)
P629,702.24 for the waterproofing works done by Dubbel Philippines; and (d) P3,040,000.00 for the
rectification works performed by A.A. Manahan Construction after the termination of the contract.
Deducting the foregoing from the accumulated retention money resulted in a deficiency of P573,012.81 in
its favor. By way of counterclaim, HPI prayed for the payment of liquidated damages in the amount of
P11,959,107.60 for the 44-day delay in the completion of the project reckoned from October 15, 2006 up
to the termination of the Agreement on November 28, 2006; for actual damages in the sum of
P573,012.81; and for attorney's fees of P500,000.00 and litigation expenses of P100,000.00. After due

13
proceedings, the CIAC rendered its Decision on August 11, 2008 where it granted Werr's claim for the
balance of the retention money. TheCA rendered the assailed decision, affirming the CIAC's findings on
the allowable charges against the retention money.

ISSUE:

Whether the provisions of the Civil Code particularly Arts. 1236 and 1376 are applicable in the present
case.

RULING:

At the outset, we do not agree with the CA that industry practice be rejected because liquidated damages
is provided in the Agreement, autonomy of contracts prevails, and industry practice is completely set
aside. Contracting parties are free to stipulate as to the terms and conditions of the contract for as long as
they are not contrary to law, morals, good customs, public order or public policy. Corollary to this rule is
that laws are deemed written in every contract.

Deemed incorporated into every contract are the general provisions on obligations and interpretation of
contracts found in the Civil Code. The Civil Code provides:

Art. 1234. If the obligation has been substantially performed in good faith, the obligor may recover as
though there had been a strict and complete fulfillment, less damages suffered by the obligee.

Art. 1376. The usage or custom of the place shall be borne in mind in the interpretation of the ambiguities
of a contract, and shall fill the omission of stipulations which are ordinarily established.
In previous cases, we applied these provisions in construction agreements to determine whether the
project owner is entitled to liquidated damages. We held that substantial completion of the project equates
to achievement of 95% project completion which excuses the contractor from the payment of liquidated
damages.

Considering the foregoing, it was error for the CA to immediately dismiss the application of industry
practice on the sole ground that there is an existing agreement as to liquidated damages. As expressly
stated under Articles 1234 and 1376, and in jurisprudence, the construction industry's prevailing practice
may supplement any ambiguities or omissions in the stipulations of the contract.

DR. RESTITUTO C. BUENVIAJE, Petitioner, v. SPOUSES JOVITO R. AND LYDIA B.

SALONGA, JEBSON HOLDINGS CORPORATION AND FERDINAND JUAT
BAEZ, Respondent.
G.R. No. 216023, October 05, 2016
FIRST DIVISION
PERLAS-BERNABE, J.

Nature of the Action: Assailed in this petition for review on certiorari are the Decision dated
November 29, 2013 and the Resolution dated December 15, 2014 of the Court of Appeals (CA)
in CA-G.R. SP No. 93422, essentially upholding the Decision dated September 16, 2004 and the

14
Resolution dated January 25, 2005 of the Housing and Land Use Regulatory Board (HLURB)
Board of Commissioners (HLURB-BOC).

FACTS:

On May 29, 1997, Jebson, an entity engaged in the real estate business, through its Executive Vice
President, Baez, entered into a Joint Venture Agreement (JVA) with Sps. Salonga. Under the JVA, Sps.
Salonga, who owned (3) parcels of land with an area of 2,935 square meters situated in Tagaytay City, and
covered by Transfer Certificate of Title (TCT) No. T-9000, agreed for Jebson to construct thereon ten (10)
high-end single detached residential units, to be known as Brentwoods Tagaytay Villas. They likewise
assumed to subdivide the property into individual titles upon which Jebson shall assume the liability to
pay their mortgage loan with the Metropolitan Bank and Trust Company. On the other hand, Jebson
undertook to construct the units at its own expense, secure the building and development permits, and the
license to sell from the HLURB, as well as the other permits required. Out of the 10 units, 7 units, will
belong to Jebson while the remaining 3 units, i.e., Units 1, 2, and 7, will correspond to Sps. Salonga's
share. The units allocated to Sps. Salonga were to be delivered within 6 months after Jebson's receipt of
the down payment for the units allocated to it. Jebson was also allowed to sell its allocated units under
such terms as it may deem fit, subject to the condition that the price agreed upon was with the conformity
of Sps. Salonga. On June 9, 1997, Jebson entered into a Contract to Sell with Buenviaje over Unit 5 for a
total consideration of P10,500,000.00, without the conformity of Sps. Salonga. Out of the purchase price,
P7,800,000.00 was paid through a "swapping arrangement," whereby Buenviaje conveyed to Jebson a
house and lot located in Garden Villas, Tagaytay valued at P5,800,000.00 and Tagaytay Highlands Golf
share No. 0722 worth P2,000,000.00 on July 1, 1997, while the remaining balance was paid periodically.
An additional sum of P125,000.00 for the retaining wall (P70,000.00) and air-conditioning system
(P55,000.00) was likewise paid for by Buenviaje. However, despite full payment of the contract price,
Jebson was unable to complete Unit 5 in violation of its contractual stipulation to finish the same within
twelve (12) months from the date of issuance of the building permit.

HLURB-RIV rendered a decision adverse to Salonga Spouses. Spouses Salonga appealed to the HLURB-
BOC, it reversed the decision of the HLURB-RIV. OP affirmed the Ruling of the HLURB-BOC. the CA
affirmed the OP ruling.

ISSUE:

Whether the grant of the remedy of specific performance in Buenviaje's favor was proper under the
prevailing circumstances of the case.

RULING:

Specific performance and "rescission" (more accurately referred to as resolution) are alternative remedies
available to a party who is aggrieved by a counter-party's breach of a reciprocal obligation. This is
provided for in Article 1191 of the Civil Code, which partly reads:

Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors
should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the obligation, with the
payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if
the latter should become impossible.

In this case, the HLURB-BOC, the OP, and the CA all pointed out that Buenviaje primarily prayed for the
remedy of specific performance - i.e., the completion of Unit 5, the subdivision of Sps. Salonga's property
into individual lots per unit, and the tum-over of Unit 5 as well as the subdivided lot portion allocated to
such unit to him and only prayed for the remedy of rescission as an alternative remedy. Thus, it remains
apparent that as between the two remedies made available to him, Buenviaje, had, in fact, chosen the
remedy of specific performance and therefore, ought to be bound by the choice he had made. To add,
"[t]he fundamental rule is that reliefs granted a litigant are limited to those specifically prayed for in the
complaint; other reliefs prayed for may be granted only when related to the specific prayer(s) in the
pleadings and supported by the evidence on record." Hence, based on this postulate, the lower tribunals
could hardly be faulted for granting the proper relief in accordance with what Buenviaje himself had
claimed.

15
Relatedly, it is observed that Buenviaje's alternative prayer for resolution is textually consistent with that
portion of Article 1191 of the Civil Code which states that an injured party "may also seek rescission,
even after he has chosen fulfillment, if the latter should become impossible." Nevertheless, the
impossibility of fulfillment was not sufficiently demonstrated in the proceedings conducted in this case.
As the HLURB BOC pointed out, "there is no finding that specific performance has become impossible
or that there are insuperable legal obstacles to the completion of the constructed units so as to justify
resolution." In fact, as the CA contrarily remarked, Buenviaje's "main prayer for specific performance
appears to be the more plausible course of action"since the units covered by the disputed Contracts To
Sell are almost finished, and have most likely been completed."

With these in mind, the CA therefore correctly upheld the directive for Jebson to comply with its
obligations under the subject CTS with Buenviaje as prayed for by the latter. Failing to show any cogent
reason to hold otherwise, Buenviaje can no longer recant his primary choice of relief. His prayer for
resolution in the instant petition must perforce fail.

NATIVIDAD R. MUNAR, BENNY 0. TAGUBA, REYNALD S. LAMPITOC, ADELINA A.

FARNACIO, ANITA R. DOMINGO, LUZ T. DOMINGO, EV ANGELINE G. VINARAO, MOISES
J. BARTOLOME, JR., ROSARIO R. RAMONES, MERCEDITA G. PIMENTEL, MYRNA A. .
CAMANTE, LEONIDA A. RUMBAOA, NORMA U. VILLANUEVA, ANTONIA M. TANGONAN,
ASUNCION C. MARQUEZ, JULIETA B. MADRID, ESTRELLA C. ARELLANO, LUDIVINA B.
SALES, JEANY M. FLORENTINO, and SHRI B. VISAYA, Petitioners, v. ATTY. ELMER T.
BAUTISTA and ATTY. WINSTON F. GARCIA, Respondents.
A.C. No. 7424, February 8, 2017
THIRD DIVISION
REYES, J.

16
Nature of the Action: This is a petition for review on certiorari under Rule 45 of the Rules of
Court from the Resolution of the Integrated Bar of the Philippines (IBP) passed by its Board of
Governors on June 5, 2008 adopting the Report and Recommendation dated March 27, 2008 of
the Commission on Bar Discipline (CBD) Investigating Commissioner Atty. Salvador B.
Hababag (Commissioner Hababag) and dismissing the undated administrative Complaint for
Disbarment

FACTS:
The petitioners are public school teachers and members of the GSIS residing in the provinces of Isabela
and Ifugao. 8 They alleged that sometime in November 1998, marketing representatives of the GSIS and
the San Lorenzo Ruiz Realty and Development Corporation (SLRRDC), namely Ferdinand Patajo, Levy
Gonzales and Martina Guerrero (Representatives), visited a number of public schools in the provinces of
Isabela and Ifugao, and enticed the teachers to avail of SLRRDC's low-cost housing units in San Lorenzo
Ruiz Subdivision (the Subdivision) located at Marabulig I, Cauayan, Isabela. The petitioners claimed that
they were induced to sign blank forms to supposedly reserve housing units in the Subdivision and were
not given the opportunity to review its contents due to the Representatives' excuse of being in a hurry. The
Representatives, however, assured them that they will return with the filled-up forms for the petitioners'
inspection and final decision, and that more GSIS personnel would meet them regarding the housing
project and loan. The petitioners highly relied on the said assurances by signing the blank forms in
contemplation of a good future investment. None of the Representatives or any person from SLRRDC or
GSIS returned as promised for the supposed further orientation and explanation on the housing project
and loan.

Petitioners filed a disbarment complaint against respondents. The respondents criticized the petitioners for
resorting to a disbarment complaint as a wrong remedy. The IBP-CBD, through Commissioner Hababag,
found no merit in the complaint because the disbarment suit constitutes an unwarranted and improper
collateral attack against the validity of Board Resolution No. 48. The IBP Board of Governors adopted
and approved the Report of Commissioner Hababag.

ISSUE:

Whether or not the petitioners are entitled to rescind the contract to restore them to their prior position
before the execution of the housing contracts upon the cancellation of the DCS.

RULING:

The contention is untenable. A careful perusal of the allegations in the complaint would show that the
issue hinges on the validity of Board Resolution No. 48 which allowed GSIS to collect arrears for the
cancelled housing loans. As aptly found by the IBP Board of Governors, the controversy should have
been resolved in accordance with the GSIS Law as set forth in Sections 30 and 31 of R.A. No. 8291
which confers original and exclusive jurisdiction on the GSIS on matters arising therefrom such as in the
instant case. It should also be noted that Board Resolution No. 48 was passed to enhance the collection
efforts of the GSIS in view of its fiduciary duty to its members regarding the GSIS funds. The assailed
memorandum issued by Atty. Bautista was an enhancement of the collection efforts of the GSIS on
delinquent accounts of members who availed of housing loans. The cancellation of the DCS and the
cession of SLRRDC 's rights in favour of GSIS warranted such collection upon the monthly salaries of the
petitioners. There being no administrative declaration of the resolution's invalidity, it was incumbent upon
Atty. Garcia to implement the same, as GSIS President and General Manager, in accordance with his
mandate under Section 4543 of R.A. No. 8291. Any disobedience would hold him liable under R.A. No.
301944 and the GSIS Charter.

SPOUES ROMEO PAJARES, Petitioners v. REMARKABLE LAUNDRY AND DRY CLEANING,

represented by, ARCHIMEDES SOLIS, Respondent.
G.R. No. 212690, February 20, 2017
FIRST DIVISION
Del Castillo, J.

Nature of the Action: Assailed in this Petition for Review on Certiorari is the December 11, 2013
Decision of the Court of Appeals (CA) in CA-G.R. CEB SP No. 07711 that set aside the February 19,
2013 Order of the RTC, Branch 17, Cebu City dismissing Civil Case No. CEB-39025 for lack of
jurisdiction

17
FACTS:
On September 3, 2012, Remarkable Laundry and Dry Cleaning (respondent) filed a Complaint
denominated as "Breach of Contract and Damages"6 against spouses Romeo and Ida Pajares (petitioners)
before the RTC of Cebu City, which was docketed as Civil Case No. CEB-39025 and assigned to Branch
17 of said court. Respondent alleged that it entered into a Remarkable Dealer Outlet Contract7 with
petitioners whereby the latter, acting as a dealer outlet, shall accept and receive items or materials for
laundry which are then picked up and processed by the former in its main plant or laundry outlet; that
petitioners violated Article IV (Standard Required Quota & Penalties) of said contract, which required
them to produce at least 200 kilos of laundry items each week, when, on April 30, 2012, they ceased
dealer outlet operations on account of lack of personnel; that respondent made written demands upon
petitioners for the payment of penalties imposed and provided for in the contract, but the latter failed to
pay; and, that petitioners' violation constitutes breach of contract.

The RTC issued an Order dismissing Civil Case No. CEB-39025 for lack of jurisdiction. Respondent filed
CA-G.R. CEB SP No. 07711, a Petition for Certiorari14 seeking to nullify the RTC's February 19, 2013
and April 29, 2013 Orders. It argued that the RTC acted with grave abuse of discretion in dismissing Civil
Case No. CEB-39025. According to respondent, said case is one whose subject matter is incapable of
pecuniary estimation and that the damages prayed for therein are merely incidental thereto. The CA
rendered the assailed Decision setting aside the February 19, 2013 Order of the RTC and remanding the
case to the court a quo for further proceedings.

ISSUE:

WHETHER THE CA ERRED IN REMANDING THE CASE TO THE RTC BECAUSE AN ACTION
FOR SPECIFIC PERFOMANCE IS ONE INCAPABLE OF PECUNIARY ESTIMATION.

RULING:

The RTC was correct in categorizing Civil Case No. CEB-39025 as an action for damages seeking to
recover an amount below its jurisdictional limit. Respondent's complaint denominated as one for "'Breach
of Contract & Damages" is neither an action for specific performance nor a complaint for rescission of
contract.

In ruling that respondent's Complaint is incapable of pecuniary estimation and that the RTC has
jurisdiction, the CA comported itself with the following ratiocination: A case for breach of contract is a
cause of action either for specific performance or rescission of contract. An action for rescission of
contract, as a counterpart of an action for specific performance, is incapable of peclU1iary estimation, and
therefore falls under the jurisdiction of the RTC.24 without, however, determining whether, from the four
corners of the Complaint, respondent actually intended to initiate an action for specific performance or an
action for rescission of contract. Specific performance is ''the remedy of requiring exact performance of a
contract in the specific form in which it was made, or according to the precise tem1s agreed upon. It is the
actual accomplishment of a contract by a party bound to fulfil it. Rescission of contract under Article
1191 of the Civil Code, on the other hand, is a remedy available to the obligee when the obligor cannot
comply with what is incumbent upon him.26 It is predicated on a breach of faith by the other party who
violates the reciprocity between them. Rescission may also refer to a remedy granted by law to the
contracting parties ai1d sometimes even to third persons in order to secure reparation of damages caused
them by a valid contract; by means of restoration of things to their condition in which they were prior to
the celebration of the contract.
It is imperative that we first determine the real nature of respondent's principal action, as well as the relief
sought in its Complaint,

An analysis of the factual and material allegations in the Complaint shows that there is nothing therein
which would support a conclusion that respondent's Complaint is one for specific performance or
rescission of contract. It should be recalled that the principal obligation of petitioners under the
Remarkable Laundry Dealership Contract is to act as respondent's dealer outlet. Respondent, however,
neither asked the RTC to compel petitioners to perfom1 such obligation as contemplated in said contract
nor sought the rescission thereof. There is no such thing as an "action for breach of contract." Rather,
breach of contract is a cause of action,32 but not the action or relief itself. Breach of contract may be the
cause of action in a complaint for specific performance or rescission of contract, both of which are
incapable of pecuniary estimation and, therefore, cognizable by the RTC. However, as will be discussed
below, breach of contract may also be the cause of action in a complaint for damages.

18
A complaint primarily seeking to enforce the accessory obligation contained in the penal clause is actually
an action for damages capable of pecuniary estimation.

KABISIG REAL WEALTH DEV., INC. AND FERNANDO C. TIO, Petitioners, v. YOUNG
CORPORATION BUILDERS, Respondent.

G.R. No. 212375, January 25, 2017

SECOND DIVISION
PERALTA, J.:

Nature of the Action: This is a 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

19
Regional Trial Court (RTC) of Cebu City, Branch 12, dated July 31, 2008 in Civil Case No.
CEB-27950.

FACTS:
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 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.

RTC of Cebu City rendered a Decision finding for Young Builders. Kabisig elevated the case to the CA.
On June 28, 2013, the appellate court affirmed the RTC Decision, with modification.

ISSUE(S):

1. WHETHER OR NOT THERE EXISTS A CONTRACT BETWEEN PETITIONERS AND

REPSONDENT; and
2. WHETHER OR NOT KABISIG IS LIABLE TO YOUNG BUILDERS FOR DAMAGES.

RULING:

I.

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 reads: Art. 1318. There is no contract unless the following requisites
concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract; and
(3) Cause of the obligation which is established.

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.

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. 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. There is nothing in the law that requires a written contract for the agreement in question to be
valid and enforceable. Also, the Court notes that neither Kabisig nor Tio had objected to the renovation
work, until it was already time to settle the bill.

II.

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 in recompense for,
loss or injury sustained. 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.

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.
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.

20
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.

RUTCHER T. DAGASDAS, Petitioner,

vs.
GRAND PLACEMENT AND GENERAL SERVICES CORPORATION, Respondent.

G.R. No. 205727, January 18, 2017

FIRST DIVISION

DEL CASTILLO, J.

21
Nature of the Action: 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.

FACTS:

Grand Placement and General Services Corp. (GPGS) is a license 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 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
conce1n 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 anidentification 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, 11M 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 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 1nismatch 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.

22
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.

LA dismissed the case for lack of merit. NLRC issued a Resolution finding Dagasdas' dismissal illegal.
the CA set aside the NLRC Resolutions and reinstated the LA Decision dismissing the case for lack of
merit.

ISSUE: Whether or not Dagasdas was validly dismissed from work?

RULING:

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.

23
 FERRO CHEMICALS, INC., Petitioner, v. ANTONIO M. GARCIA, ROLANDO NAVARRO,
JAIME Y. GONZALES AND CHEMICAL INDUSTRIES OF THE PHILIPPINES,
INC., Respondents.

G.R. No. 168134, October 05, 2016

JAIME Y. GONZALES, Petitioner, v. HON. COURT OF APPEALS AND FERRO CHEMICALS,

INC.,Respondents.

G.R. NO. 168183, October 05, 2016

ANTONIO M. GARCIA, Petitioner, v. FERRO CHEMICALS, INC., Respondent

G.R. NO. 168196, October 05, 2016

THIRD DIVISION

PEREZ, J.

Nature of the Action: Three consolidated Petitions for Review on Certiorari assailing the 3
March 2004 Decision and the 17 May 2005 Resolution of the Court of Appeals (CA) in CA-G.R.
CV No. 69970, which affirmed with modification the 4 September 2000 Decision of the
Regional Trial Court (RTC) of Makati City, Branch 61.

FACTS:
Ferro Chemicals Incorporated (Ferro Chemicals), is a domestic corporation duly authorized by existing
law to engage in business in the Philippines. It is represented in this action by its President, Ramon M.
Garcia.

Chemical Industries of the Philippines Inc. (Chemical Industries), on the other hand, is also a domestic
corporation duly organized and existing by virtue of Philippine laws. Antonio Garcia, one of the parties in
the instant case, is the Chairman of the Board of Directors (BOD) of Chemical Industries and a brother of
Ferro Chemical's President, Ramon Garcia. Rolando Navarro is the Corporate Secretary of Chemical
Industries while Jaime Gonzales is a close financial advisor of Antonio Garcia.

On 15 July 1988, Antonio Garcia and Ferro Chemicals entered into a Deed of Absolute Sale and
Purchase of Shares of Stock over 1,717,678 shares of capital stock of Chemical Industries registered
under the name of Antonio Garcia for a consideration of P-79,207,331.28 (subject shares). Included as
subjects of the sale were Antonio Garcia's 371,697 shares of stocks in Vision Insurance Consultants, Inc.,
(VIC) and his proprietary membership in Alabang Country Club and Manila Polo Club.

ISSUE:

Whether the representation of the plaintiff vitiate defendant's consent to the contract

RULING:

We conclude from the above that while the representation that plaintiff had the exclusive franchise' did
not vitiate defendant's consent to the contract, it was used by plaintiff to get from defendant a share of 30
per cent of the net profits; in other words, by pretending that he had the exclusive franchise and promising
to transfer it to defendant, he obtained the consent of the latter to give him (plaintiff) a big slice in the net
profits. This is the dolo incidente defined in article 1270 of the Spanish Civil Code, because it was used to
get the other party's consent to a big share in the profits, an incidental matter in the agreement.
"Thus, this Court held that the original agreement may not be declared null and void. This Court also said
that the plaintiff had been entitled to damages because of the refusal of the defendant to enter into the
partnership. However, the plaintiff was also held liable for damages to the defendant for the

24
misrepresentation that the former had the exclusive franchise to soft drink bottling operations.

To summarize, if there is fraud in the performance of the contract, then this fraud will give rise to
damages. If the fraud did not compel the imputing party to give his or her consent, it may not serve as the
basis to annul the contract; which exhibits dolo causante. However, the party alleging the existence of
fraud may prove the existence of dolo incidente. This may make the party against whom fraud is alleged
liable for damages."

MANUEL C. UBAS, SR., Petitioner, v. WILSON CHAN, Respondent.

G.R. No. 215910, February 06, 2017
FIRST DIVISION
PERLAS-BERNABE, J.

Nature of the Action: Petition for review on certiorari is the Decision dated October 28, 2014 of the
1 2

Court of Appeals (CA) in CA-G.R. CV No. 04024 dismissing the complaint filed by petitioner Manuel C.
Ubas, Sr. (petitioner) for lack of cause of action.

FACTS:

This case stemmed from a Complaint for Sum of Money with Application for Writ of Attachment
(Complaint) filed by petitioner against respondent Wilson Chan (respondent) before the Regional Trial
Court of Catarman, Northern Samar, Branch 19 (RTC), docketed as Civil Case No. C-1071. In his
Complaint, petitioner alleged that respondent, "doing business under the name and style of
UNIMASTER," was indebted to him in the amount of P1,500,000.00, representing the price of boulders,
sand, gravel, and other construction materials allegedly purchased by respondent from him for the
construction of the Macagtas Dam. He claimed that the said obligation has long become due and
demandable and yet, respondent unjustly refused to pay the same despite repeated demands. During trial,
petitioner testified that on January 1, 1998, he entered into a verbal agreement with respondent for the
supply of gravel, sand, and boulders for the Macagtas Dam project. He presented as the only proof of
their business transaction the subject checks issued to him by respondent and delivered to his office by
respondent's worker on different occasions. The RTC ruled that petitioner had a cause of action against
respondent. At the outset, it observed that petitioner's demand letter - which clearly stated the serial
numbers of the checks, including the dates and amounts thereof - was not disputed by respondent. Also, it
did not lend credence to respondent's claim that the subject checks were lost and only came into the
possession of petitioner. It also took note that respondent did not file a case for theft in relation to the lost
checks found in possession of petitioner.

The CA reversed and set aside the RTC's ruling, dismissing petitioner's complaint on the ground of lack of
cause of action. It held that respondent was not the proper party defendant in the case, considering that the
drawer of the subject checks was Unimasters, which, as a corporate entity, has a separate and distinct
personality from respondent.

ISSUE:

Whether or not the CA erred m dismissing petitioner's complaint for lack of cause of action.

Whether there exists between the parties, a privity of contract.

RULING:

As the RTC correctly ruled, it is presumed that the subject checks were issued for a valid consideration,
which therefore, dispensed with the necessity of any documentary evidence to support petitioner's
monetary claim. Unless otherwise rebutted, the legal presumption of consideration under Section 24 of
the NIL stands. Verily, "the vital function of legal presumption is to dispense with the need for proof.

In Pacheco v. CA, the Court has expressly recognized that a check "constitutes an evidence of
indebtedness" and is a veritable "proof of an obligation." Hence, petitioner may rely on the same as proof
of respondent's personal obligation to him.

Although the checks were under the account name of Unimasters, it should be emphasized that the
manner or mode of payment does not alter the nature of the obligation. The source of obligation, as
claimed by petitioner in this case, stems from his contract with respondent. When they agreed upon the
purchase of the construction materials on credit for the amount of P1,500,000,00, the contract between

25
them was perfected. Therefore, even if corporate checks were issued for the payment of the obligation,
the fact remains that the juridical tie between the two (2) parties was already established during the
contract's perfection stage and, thus, does not preclude the creditor from proceeding against the debtor
during the contract's consummation stage.

That a privity of contract exists between petitioner and respondent is a conclusion amply supported by the
averments and evidence on record in this case.

TERESITA I. BUENAVENTURA, Petitioner, v. METROPOLITAN BANK AND TRUST

COMPANY, Respondent.

G.R. No. 167082, August 03, 2016

FIRST DIVISION

BERSAMIN, J.

Nature of the Action: In this appeal, the petitioner seeks the reversal of the decision promulgated on April
23, 2004, whereby the Court of Appeals (CA) affirmed with modification the judgment rendered on July
11, 2002 by the Regional Trial Court (RTC), Branch 61, in Makati City.

FACTS:
On January 20, 1997 and April 17, 1997, Teresita Buenaventura executed Promissory Note (or "PN") Nos.
232663 and 232711, respectively, each in the amount of PI,500,000.00 and payable to Metropolitan Bank
and Trust Company. PN No. 232663 was to mature on July 1, 1997, with interest and credit evaluation
and supervision fee (or "CESF") at the rate of 17.532% per annum, while PN No. 232711 was to mature
on April 7, 1998, with interest and CESF at the rate of 14.239% per annum. Both PNs provide for penalty
of 18% per annum on the unpaid principal from date of default until full payment of the obligation.
Despite demands, there remained unpaid on PN Nos. 232663 and 232711 the amounts of P2,061,208.08
and PI,492,236.37, respectively, as of July 15, 1998, inclusive of interest and penalty. Consequently,
appellee filed an action against appellant for recovery of said amounts, interest, penalty and attorney's
fees before the Regional Trial Court of Makati City. In answer, appellant averred that in 1997, she
received from her nephew, Rene Imperial (Or "Imperial"), three postdated checks drawn against appellee
(Tabaco Branch), i.e., Check No. TA 1270484889PA dated January 5, 1998 in the amount of
PI,200,000.00, Check No. 1270482455PA dated March 31, 1998 in the amount of PI,197,000.00 and
Check No. TA1270482451PA dated March 31, 1998 in the amount of P500,000.00 (or "subject checks"),
as partial payments for the purchase of her properties; that she rediscounted the subject checks with
appellee (Timog Branch), for which she was required to execute the PNs to secure payment thereof; and
that she is a mere guarantor and cannot be compelled to pay unless and until appellee shall have
exhausted all the properties of Imperial. RTC rendered its judgment in favor of plaintiff. CA promulgated
the assailed decision affirming the decision of the RTC with modification.

ISSUE:

WHETHER THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER IS

LIABLE UNDER THE PROMISSORY NOTES.

RULING:

First of all, the petitioner claims that the promissory notes she executed were contracts of
adhesion because her only participation in their execution was affixing her signature, and that the
terms of the promissory notes should consequently be strictly construed against the respondent as
the party responsible for their preparation. In contrast, the respondent counters that the terms and
conditions of the promissory notes were clear and unambiguous; hence, there was no room or
need for interpretation thereof. The respondent is correct.

What the petitioner advocates is for the Court to now read into the promissory notes terms and
conditions that would contradict their clear and unambiguous terms in the guise of such
promissory notes being contracts of adhesion. This cannot be permitted, for, even assuming that
the promissory notes were contracts of adhesion, such circumstance alone did not necessarily
entitle her to bar their literal enforcement against her if their terms were unequivocal. It is
preposterous on her part to disparage the promissory notes for being contracts of adhesion, for

26
she thereby seems to forget that the validity and enforceability of contracts of adhesion were the
same as those of other valid contracts.

A duly executed contract is the law between the parties, and, as such, commands them to comply
fully and not selectively with its terms. A contract of adhesion, of itself, does not exempt the
parties from compliance with what was mutually agreed upon by them.

PRYCE PROPERTIES CORPORATION, petitioner, vs. SPOUSES SOTERO OCTOBRE, JR.

and HENRISSA A. OCTOBRE, and CHINA BANKING CORPORATION, respondents.
G.R. No. 186976. December 7, 2016.
THIRD DIVISION
JARDELEZA, J

FACTS:

On July 22, 1997, respondent Spouses Sotero Octobre, Jr. and Henrissa A. Octobre (Spouses Octobre)
signed a Reservation Agreement with petitioner Pryce Properties Corporation (Pryce) for the purchase
of two lots with a total of 742 square meters located in Puerto Heights Village, Puerto Heights, Cagayan
de Oro City. The parties subsequently executed a Contract to Sell over the lot for the price of
P2,897,510.00 on January 7, 1998.
On February 4, 2004, Pryce issued a certification that Spouses Octobre had fully paid the purchase price
and amortization interests, as well as the transfer fees and other charges in relation to the property,
amounting to a total of P4,292,297.92. 3 But Pryce had yet to deliver the certificates of title, which
prompted Spouses Octobre to formally demand its delivery. Despite repeated demands, Pryce failed to
comply. Thus, on May 18, 2004, Spouses Octobre filed a complaint before the Housing and Land Use
Regulatory Board (HLURB), Regional Office No. 10 for specific performance, revocation of certificate of
registration, refund of payments, damages and attorney's fees. HLURB Arbiter rendered a
Decision dated March 31, 2005 finding that Spouses Octobre had no cause of action against China Bank
and rescinding the contract between Pryce and Spouses Octobre. On appeal, the HLURB Board of
Commissioners modified the Decision by ordering Pryce to pay the redemption value to China Bank so
that the latter may release the titles covering the lots purchased by Spouses Octobre. The Office of the
President, which affirmed in full the HLURB Board's Decision. Undeterred, Pryce elevated the case to
the Court of Appeals which denied the petition for review and affirmed the Office of the President's
Decision.

ISSUE:
Whether a breach of contract automatically triggers the award of actual or compensatory damages.

RULING:
Contractual breach is sufficient to justify an award for nominal damages but not compensatory damages
The records of this case are bereft of any evidentiary basis for the award of P30,000.00 as
compensatory damages. When the HLURB Arbiter initially awarded the amount, it merely mentioned
that "[Spouses Octobre] are entitled to compensatory damages, which is just and equitable in the
circumstances, even against an obligor in good faith since said damages are the natural and probable
consequences of the contractual breach committed." On the other hand, the Court of Appeals justified
the award of compensatory damages by stating that "it is undisputed that petitioner Pryce committed
breach of contract in failing to deliver the titles to respondents [Spouses] Octobre which necessitated
the award of compensatory damages." In their comment, Spouses Octobre emphasized that they were
"forced to litigate and seek the intervention of the courts because of Pryce's failure to comply with its
contractual and legal obligation" without so much as mentioning any proof that would tend to prove
any pecuniary loss they suffered.

27
In the absence of adequate proof, compensatory damages should not have been awarded. Nonetheless,
we find that nominal damages, in lieu of compensatory damages, are proper in this case. Under Article
2221, nominal damages may be awarded in order that the plaintiff's right, which has been violated or
invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the
plaintiff for any loss suffered. Nominal damages are "recoverable where a legal right is technically
violated and must be vindicated against an invasion that has produced no actual present loss of any kind
or where there has been a breach of contract and no substantial injury or actual damages whatsoever
have been or can be shown."

DELFIN C. GONZALEZ, JR., Petitioner, v. MAGDALENO M. PEA, ALABANG COUNTRY

CLUB, INC., AND MS. ARSENIA VERA, Respondents.
G.R. No. 214303, January 30, 2017
FIRST DIVISION
SERENO, C.J.:

Nature of the Action: 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).

FACTS:
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 Sago 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 were executed pending appeal,
such as the subject shares.

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 value.

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. Petitioner came
directly to this Court and asked for the reversal of the ruling of the trial court's ruling. 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.

28
ISSUE:

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:

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.

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. Consequently, all levies, garnishment and sales executed pending appeal are declared null and
void, with the concomitant duty of restitution."

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.

As regards legal impossibility, the RTC appears to have jumped to the conclusion that because of the
perfected sale of the shares to Vera, petitioner can no longer claim actual restitution of the property.

However, Article 1505 of the Civil Code instructs that " 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."

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.

29
 RCBC SAVINGS BANK, Petitioner, v. NOEL M. ODRADA, Respondent.
G.R. No. 219037, October 19, 2016
SECOND DIVISION
CARPIO, J.

Nature of the Action: Petition for review on certiorari assailing the 26 March 2014 Decision and
the 18 June 2015 Resolution of the Court of Appeals in CA-G.R. CV No. 94890.

FACTS:

In April 2002, respondent Noel M. Odrada (Odrada) sold a secondhand Mitsubishi Montero (Montero) to
Teodoro L. Lim (Lim) for One Million Five Hundred Ten Thousand Pesos (P1,510,000). Of the total
consideration, Six Hundred Ten Thousand Pesos (P610,000) was initially paid by Lim and the balance of
Nine Hundred Thousand Pesos (P900,000) was financed by petitioner RCBC Savings Bank (RCBC)
through a car loan obtained by Lim. As a requisite for the approval of the loan, RCBC required Lim to
submit the original copies of the Certificate of Registration (CR) and Official Receipt (OR) in his name.
Unable to produce the Montero's OR and CR, Lim requested RCBC to execute a letter addressed to
Odrada informing the latter that his application for a car loan had been approved.

On 5 April 2002, RCBC issued a letter that the balance of the loan would be delivered to Odrada upon
submission of the OR and CR. Following the letter and initial down payment, Odrada executed a Deed of
Absolute Sale on 9 April 2002 in favor of Lim and the latter took possession of the Montero.

When RCBC received the documents, RCBC issued two manager's checks dated 12 April 2002 payable to
Odrada for Nine Hundred Thousand Pesos (P900,000) and Thirteen Thousand Five Hundred Pesos
(P13,500). After the issuance of the manager's checks and their turnover to Odrada but prior to the checks'
presentation, Lim notified Odrada in a letter dated 15 April 2002 that there was an issue regarding the
roadworthiness of the Montero.

Odrada did not go to the slated meeting and instead deposited the manager's checks with International
Exchange Bank (Ibank) on 16 April 2002 and redeposited them on 19 April 2002 but the checks were
dishonored both times apparently upon Lim's instruction to RCBC.Consequently, Odrada filed a
collection suit against Lim and RCBC in the Regional Trial Court of Makati. Lim alleged that the
cancellation of the loan was at his instance, upon discovery of the misrepresentations by Odrada about the
Montero's roadworthiness. Lim claimed that the cancellation was not done ex parte but through a
letter12 dated 15 April 2002. He further alleged that the letter was delivered to Odrada prior to the
presentation of the manager's checks to RCBC. RCBC contended that the manager's checks were
dishonored because Lim had cancelled the loan. RCBC claimed that the cancellation of the loan was prior
to the presentation of the manager's checks. Moreover, RCBC alleged that despite notice of the defective
condition of the Montero, which constituted a failure of consideration, Odrada still proceeded with
presenting the manager's checks.
It was later disclosed during trial that RCBC also sent a formal notice of cancellation of the loan on 18
April 2002 to both Odrada and Lim. The trial court ruled in favor of Odrada. Court of Appeals dismissed
the appeal and affirmed the trial court's 1 October 2009 Decision.

ISSUE:

30
The court a quo gravely erred in finding that as between Odrada as seller and Lim as buyer of the vehicle,
only the former has the right to rescind the contract of sale finding failure to perform an obligation under
the contract of sale on the part of the latter only despite the contested roadworthiness of the vehicle,
subject matter of the sale.

RULING:

Under the law on sales, a contract of sale is perfected the moment there is a meeting of the minds upon
the thing which is the object of the contract and upon the price which is the consideration. From that
moment, the parties may reciprocally demand performance. Performance may be done through delivery,
actual or constructive. Through delivery, ownership is transferred to the vendee. However, the obligations
between the parties do not cease upon delivery of the subject matter. The vendor and vendee remain
concurrently bound by specific obligations. The vendor, in particular, is responsible for an implied
warranty against hidden defects.

Article 1547 of the Civil Code states: "In a contract of sale, unless a contrary intention appears, there is an
implied warranty that the thing shall be free from any hidden faults or defects." Article 1566 of the Civil
Code provides that "the vendor is responsible to the vendee for any hidden faults or defects in the thing
sold, even though he was not aware thereof." As a consequence, the law fixes the liability of the vendor
for hidden defects whether known or unknown to him at the time of the sale.

The law defines a hidden defect as one which would render the thing sold unfit for the use for which it is
intended, or would diminish its fitness for such use to such an extent that, had the vendee been aware
thereof, he would not have acquired it or would have given a lower price for it.

In this case, Odrada and Lim entered into a contract of sale of the Montero. Following the initial
downpayment and execution of the deed of sale, the Montero was delivered by Odrada to Lim and the
latter took possession of the Montero. Notably, under the law, Odrada's warranties against hidden defects
continued even after the Montero's delivery. Consequently, a misrepresentation as to the Montero's
roadworthiness constitutes a breach of warranty against hidden defects.

31
 ARCAINA AND BANTA v. INGRAM,
G.R. No. 196444, 15 February 2017.
THIRD DIVISION
JARDELEZA, J.

Nature of the Action: Petition for Review on Certiorari assailing the October 26, 2010
Decision and March 17, 2011 Resolution of the Court of Appeals (CA) in CA-G.R. SP No.
107997, which affirmed with modification the March 11, 2009 Decision of the Regional Trial
Court-Branch 7 of Legazpi City (RTC).

FACTS:

Arcaina is the owner of Lot No. 3230 (property). Arcainas attorney-in-fact, Banta, entered into a contract
with Ingram for the sale of the property. Banta showed Ingram and the latters attorney-in-fact, the metes
and bounds of the property and represented that Lot No. 3230 has an area of more or less 6,200 square
meters (sq. m.) per the tax declaration covering it. The contract price was P1,860,000.00, with Ingram
making installment payments for the property. They also separately executed deeds of absolute sale over
the property in Ingrams favor, dated March 21, 2005 by Banta, and April 13, 2005 by Arcaina.
Subsequently, Ingram caused the property to be surveyed and discovered that Lot No. 3230 has an area of
12,000 sq. m. Upon learning of the actual area of the property, Banta allegedly insisted that the difference
of 5,800 sq. m. remains unsold. This was opposed by Ingram who claims that she owns the whole lot by
virtue of the sale.

ISSUE:

Was Lot 3230 sold for a lump sum or for a unit price contract? To what extent of lot area is Ingram
entitled to?

HELD:

Lot No. 3230 was sold for a lump sum. Ingram is entitled only to 6,200 square meters.

In sales involving real estate, the parties may choose between two types of pricing agreement: a unit
price contract wherein the purchase price is determined by way of reference to a stated rate per unit area
(e.g., P1,000.00 per sq. m.) or a lump sum contract which states a full purchase price for an immovable
the area of which may be declared based on an estimate or where both the area and boundaries are stated

32
(e.g., P1 million for 1,000 sq. m., etc.). Here, the Deed of Sale executed by Banta on March 21, 2005 and
the Deed of Sale executed by Arcaina on April 13, 2005 both show that the property was conveyed to
Ingram at the predetermined price of P1,860,000.00. There was no indication that it was bought on a per-
square-meter basis. Thus, Article 1542 of the Civil Code governs the sale.

In a lump sum contract, a vendor is generally obligated to deliver all the land covered within the
boundaries, regardless of whether the real area should be greater or smaller than that recited in the
deed. However, in case there is conflict between the area actually covered by the boundaries and the
estimated area stated in the contract of sale, he/she shall do so only when the excess or deficiency
between the former and the latter is reasonable. Applying Del Prado to the case before us, we find that
the difference of 5,800 sq. m. is too substantial to be considered reasonable. We note that only 6,200 sq.
m. was agreed upon between petitioners and Ingram. Declaring Ingram as the owner of the whole 12,000
sq. m. on the premise that this is the actual area included in the boundaries would be ordering the delivery
of almost twice the area stated in the deeds of sale. Surely, Article 1542 does not contemplate such an
unfair situation to befall a vendor that he/she would be compelled to deliver double the amount that
he/she originally sold without a corresponding increase in price. In Asiain v. Jalandoni, we explained that
a vendee of a land when it is sold in gross or with the description more or less does not thereby ipso
facto take all risk of quantity in the land. The use of more or less or similar words in designating
quantity covers only a reasonable excess or deficiency. Therefore, we rule that Ingram is entitled only to
6,200 sq. m. of the property. An area of 5,800 sq. m. more than the area intended to be sold is not a
reasonable excess that can be deemed included in the sale.

SPRING HOMES SUBDIVISION CO., INC., SPOUSES PEDRO L. LUMBRES AND REBECCA
T. ROARING, Petitioners, v. SPOUSES PEDRO TABLADA, JR. AND ZENAIDA
TABLADA, Respondent.
G.R. No. 200009, January 23, 2017
SECOND DIVISION
PERALTA, J.

Nature of the Action: Petition for review on certiorari under Rule 45 of the Rules of Court
seeking to reverse and set aside the Decision dated May 31, 2011 and Resolution dated January
4, 2012 of the Court of Appeals (CA) in CA-G.R. CV No. 94352 which reversed and set aside
the Decision dated September 1, 2009, of the Regional Trial Court (RTC), Branch 92, Calamba
City.

FACTS:
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.

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 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
P179,500.00, more than the P157,500.00 purchase price as indicated in the Deed of Absolute Sale. 6 The
title over the subject property, however, remained with Spring Homes for its failure to cause the

33
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. 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. 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. The Motion to Dismiss was eventually denied by the trial
court on October 2, 2001. nterestingly, 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. 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.

ISSUE:

WHETHER OR NOT THE 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.

RULING:

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. 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, the first Deed of Sale executed in favor of the Spouses Tablada is valid and
with sufficient consideration. 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.

34
 DESIDERIO RANARA, JR., Petitioner, v. ZACARIAS DE LOS ANGELES, JR., Respondent.

G.R. No. 200765, August 08, 2016

THIRD DIVISION

REYES, J.

Nature of the Action: Petition for review on certiorari und Rule 45 of the Rules of Court
assailing the Decision dated September 15, 2011 and Resolution dated February 6, 2012 of the
Court of Appeals (CA) in CA-G.R. CV No. 90099, which affirmed the Decision dated June 27,
2007 of the Regional Trial Court (RTC) of Naga City, Branch 62, in Civil Case No. RTC 2001-
0345

FACTS:

Sometime in October 1989, Leonor Parada (Parada) loaned from Zacarias de los Angeles, Sr. (Zacarias,
Sr.) money amounting to P60,000.00 to finance her migration to Canada. It was agreed that the loan
would be payable within a period of 10 years. At the same time, Zacarias, Sr. informed Parada that the
money came from his son, the respondent. As security, Parada mortgaged a parcel of agricultural land
which would eventually be covered by Original Certificate of Title (OCT) No. 10020. It was stipulated
that the respondent would take Possession of and farm the land as payment for the loan interest. Parada,
thus, executed a Deed of Sale with Right to Repurchase dated October 26, 1989, during which time the
OCT had not yet been issued. The respondent took possession of the land, paid taxes due and converted

35
the forested portion into irrigated land, without objection from Parada. In 1991, OCT No. 10020 was
issued in the name of Parada, who brought with her to Canada the original owner's duplicate copy when
she left in 1992. Later, Parada gave the owner's duplicate to Zacarias Sr. upon reports that someone
attempted to enter the land. Parada also requested her tenant from another parcel of land, Salvador
Romero, to remit to the respondent her share of the harvest for the years 1992 to 1994. She also sent
$250.00 and P20,000.00.7chanrobleslaw

When Zacarias, Sr. fell sick in 2001, the respondent pleaded with Noel Parada (Noel), Parada's son, to
repurchase the property to finance his father's hospital and medical bills. The respondent later wrote a
letter to Parada demanding that she repurchase the property. Parada paid P40,000.00 delivered personally
to Zacarias Sr. by Noel at the hospital. The respondent found the amount unacceptable and returned the
P40,000.00 and along with P10,000.008 to Parada.9chanrobleslaw

On February 16, 2001, the respondent sold the land to the petitioner for P300,000.00. Two documents of
sale were executed: 1) for the actual sale price of P300,000.00; and 2) for P130,000.00 to be used as basis
for the computation of taxes, registration of the deed and transfer of ownership. The respondent then sent
Parada a letter dated July 17, 2001, enforcing the Deed of Sale with Right of Repurchase giving her 15
days to repurchase the property. The Deed of Absolute Sale with the purchase price of P150,000.00
between the petitioner and the respondent was signed on December 10, 2001. Parada insisted, in her
response to the letter dated July 17, 2001, that there was no pacto de retro sale and then tendered
P60,000.00 as payment for the loan, but it was refused by the respondent. She also learned that the
respondent fraudulently registered with the Register of Deeds of Camarines Sur the Deed of Sale with
Right to Repurchase, falsified the Affidavit of Seller/Transferor and that the respondent sold the property

ISSUE:

Whether or not the petitioner is a purchaser in good faith and for value.

Whether the doctrine of Pari Delicto will apply.

RULING:

The Court agrees with the courts a quo that the petitioner was in bad faith in purchasing the land since it
was his duty to investigate. A purchaser of land that is in the actual possession of the seller must make
some inquiry in the rights of the possessor of the land. The rule of caveat emptor requires the purchaser to
be Ware of the supposed title of the vendor and one who buys without checking the vendor's title takes all
the risks and losses consequent to such failure.

The rule on pari delicto is principally governed by Articles 1411 and 1412 of the Civil Code, which state
that: Article 1411. When the nullity proceeds from the illegality of the cause or object of the contract, and
the act constitutes a criminal offense, both parties being in pari delicto, they shall have no action against
each other, and both shall be prosecuted. Article 1412. If the act in which the unlawful or forbidden cause
consists does not constitute a criminal offense, the following rules shall be observed: 1. When the fault is
on the part of both contracting parties, neither may recover what he has given by virtue of the contract, or
demand the performance of the other's undertaking; The petition at bench does not speak of an illegal
cause of contract constituting a criminal offense under Article 1411. Neither can it be said that Article
1412 finds application although such provision which is part of Title II, Book IV of the Civil Code speaks
of contracts in general, as well as contracts which are null and void ab initio pursuant to Article 1409 of
the Civil Code - such as the subject contracts, which as claimed, are violative of the mandatory provision
of the law on legitimes.
Finding the inapplicability of the in pari delicto doctrine, We find occasion to stress that Article 1412 of
the Civil Code that breathes life to the doctrine speaks of the rights and obligations of the parties to the
contract with an illegal cause or object which does not constitute a criminal offense. It applies to contracts
which are void for illegality of subject matter and not to contracts rendered void for being simulated, or
those in which the parties do not really intend to be bound thereby. Specifically, in pari delicto situations
involve the parties in one contract who are both at fault, such that neither can recover nor have any action
against each other. (Citations omitted and emphasis ours)Here, there is neither an illegal cause nor
unlawful cause which would necessitate the application of Articles 1411 and 1412 of the Civil Code. The

36
petitioner is mistaken in the application of the doctrine of in pari delicto.

THE ROMAN CATHOLIC BISHOP OF TUGUEGARAO, Petitioner vs. FLORENTINA

PRUDENCIO, Now Deceased, Substituted by Her Heirs, Namely: Exequiel, Lorenzo, Primitivo,
Marcelino, Juliana, Alfredo and Rosario, All Surnamed Domingo; A VELlNA PRUDENCIO,
Assisted by Her Husband Victoriano Dimaya; ERNESTO PENALBER* and RODRIGO TALANG;
SPOUSES ISIDRO CEPEDA and SALVACION DIVINI, Now Deceased, Substituted by Her Heirs,
Namely: Marcial, Pedro and Lina, All Surnamed Cepeda, Respondents.
G.R. No. 187942, September 7, 2016
THIRD DIVISION
JARDELEZA, J.

Nature of the Action: Assailed in this Petition for Review on Certiorari is the October 21, 2008
Decision and May 11, 2009 Resolution of the Court of Appeals (CA) in CA-G.R. CV No. 77100.
The CA affirmed with modification the ruling of the Regional Trial CourtBranch 4 of

37
Tuguegarao City (RTC) declaring as null and void the sale to petitioner of 96,926 square meters
(sq. m.) of a lot located in Baggao, Cagayan

FACTS:
Felipe Prudencio (Felipe) married twice during his lifetime. With his first wife, Elena Antonio (Elena), he
begot five (5) children, namely: Valentina, Eusebia, Paula, Florentina and Avelina. With his second wife,
Teodora Abad (Teodora), he had two (2) children namely: Felipe Prudencio, Jr. (Prudencio, Jr.) and
Leonora. During the marriage of Felipe and Elena, they acquired a 13.0476 hectares (or 130,476 sq. m.)
parcel of land located at Sitio Abbot, Barrio Imurung, Baggao, Cagayan (Cagayan lot), covered by
Original Ce1iificate of Title No. 1343. When Elena died, Felipe and their children became co-owners of
the property.

Felipe then died intestate during his second marriage. Upon his death, Teodora, Prudencio, Jr. and
Leonora executed a Deed of Extra-Judicial Partition of the Estate of the late Felipe with Waiver of Rights
in favor of Teodora (Extra-Judicial Partition). While the Extra-Judicial Partition acknowledged that the
Cagayan lot was acquired during the marriage of Felipe and Elena, it stated that Felipe and Elena did not
have any children who could inherit the property; hence, Teodora and her children with Felipe are the
only living heirs by operation of law. 7 The Extra-Judicial Partition also provided that Prudencio, Jr. and
Leonora waived their rights over the Cagayan lot in favor of their mother Teodora. It was published in the
Daily Mirror on October 22 and 29, 1969 and November 5, 1969. Accordingly, title to the Cagayan lot
was transferred to Teodora's name under TCT No. 14306

On May 16, 1972, Teodora sold the Cagayan lot to respondents Spouses Isidro Cepeda and Salvacion
Divini (Spouses Cepeda). TCT No. 14306 was therefore cancelled, and TCT No. 184375 was issued in
favor of Spouses Cepeda.

On August 25, 1972, Spouses Cepeda sold the Cagayan lot to petitioner for P16,500.00. Thereafter,
petitioner was issued TCT No. T-20084.

On September 15, 1972, respondents-appellees filed a Complaint for Partition with Reconveyance against
petitioner. Respondents-appellees posited that they were fraudulently deprived of their rightful shares in
the estate of Felipe and Elena when the Extra-Judicial Partition declared Teodora as the sole owner of the
Cagayan lot. Spouses Cepeda maintained that their title over the Cagayan lot was clean and that they had
no knowledge that other persons had interest on it because Teodora's title over the property was clean.25
They asserted that like petitioner, they were purchasers for value and in good faith. Therefore, petitioner
has no cause of action against them. RTC ruled in favor of respondents-appellees. the CA affirmed with
modification the ruling of the RTC.

ISSUE:

Whether the excluded heirs could recover what is rightfully theirs from persons who are innocent
purchasers for value.

RULING:

Segura v. Segura teaches that the answer would not depend on the good faith or bad faith of the
purchaser, but rather on the fact of ownership, for no one can give what he does not have--nemo dat quad
non habet. Thus, the good faith or bad faith of petitioner is immaterial in resolving the present petition. A
person can only sell what he owns or is authorized to sell; the buyer can as a consequence acquire no
more than what the seller can legally transfer. The Sale to Spouses Cepeda and Petitioner is Limited to
Teodora's Share.

Teodora may therefore sell her undivided interest in the Cagayan lot, and such disposition shall affect
only her pro indiviso share. When she sold the entire property to Spouses Cepeda, the latter legally and
validly purchased only the part belonging to Teodora. The sale did not include the shares of respondents-

38
appellees, who were not aware of, and did not give their consent to such sale. Likewise, when Spouses
Cepeda sold the entire Cagayan lot to petitioner, the spouses only transferred to petitioner Teodora's pro
indiviso share.

RODOLFO LAYGO and WILLIE LAYGO, Petitioners, vs. MUNICIPAL MAYOR OF SOLANO,
NUEVA VIZCAYA, Respondent.
G.R. No. 188448, January 11, 2017

THIRD DIVISION

JARDELEZA, J.

Nature of the Action: 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.

39
FACTS:

In July 2005, Aniza Bandrang (Bandrang) sent two letter-complaints to then Municipal Mayor Santiago
O. Dickson and the Sangguniang 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.

The Sangguniang Bayan endorsed the letter of Bandrang and a copy of Resolution No. 183-2004 to
Mayor Dickson. 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. 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.
The Sanggunian once again referred the letter of Bandrang to Mayor Dickson. Dickson, however, did not
act on the letter of Bandrang and on the referrals. Thus, Bandrang filed a Petition for Mandamus. 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.

The RTC granted the petition for Mandamus. Petitioners appealed to the CA. 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

ISSUE:

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.

RULING:

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 (MPD0) 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
reoccupied the stalls under a lease contract with the Municipal Government. In fact, in his Notice dated
August 21, 2007, the Municipal Treasurer of 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.39

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.

40
 PHILIPPINE NATIONAL BANK, Petitioner, v. VENANCIO C. REYES, JR., Respondent.
G.R. No. 212483, October 05, 2016
SECOND DIVISION
LEONEN, J.

Nature of the Action: A Petition for Review on Certiorari assailing the Decision dated August
22, 2013 and the Resolution dated May 5, 2014 of the Court of Appeals. The assailed Court of
Appeals Decision affirmed the Decision and Order of Branch 81 of the Regional Trial Court of
Malolos, Bulacan, which annulled the real estate mortgage

FACTS:

41
Venancio is married to Lilia since 1973. During their union, they acquired three (3) parcels of land in
Malolos, Bulacan. Transfer Certificates of Title (TCT) Nos. T-52812 and T-52813 were registered under
"Felicidad Pascual and Lilia C. Reyes, married to Venancio Reyes[,]" 5 while TCT No. 53994 was
registered under "Lilia C. Reyes, married to Venancio Reyes."

The properties were mortgaged to Philippine National Bank on August 25, 1994 to secure a loan worth
P1,100,000.00,7 which on October 6, 1994 was increased to P3,000,000.00. According to Philippine
National Bank, the Reyes Spouses contracted and duly consented to the loan.

When the Reyes Spouses failed to pay the loan obligations, Philippine National Bank foreclosed the
mortgaged real properties. The auction sale was held on September 19, 1997. Philippine National Bank
emerged as the highest bidder, and a certificate of sale was issued in its favor.
On September 22, 1998, Venancio filed before the Regional Trial Court a Complaint (or Annulment of
Certificate of Sale and Real Estate Mortgage against Philippine National Bank. Upon order of the trial
court, Venancio amended his Complaint to include Lilia and the Provincial Sheriff of Bulacan as
defendants.

In assailing the validity of the real estate mortgage, Venancio claimed that his wife undertook the loan and
the mortgage without his consent and his signature was falsified on the promissory notes and the
mortgage. Since the three (3) lots involved were conjugal properties, he argued that the mortgage
constituted over them was void.
On May 27, 2009, Branch 81 of the Regional Trial Court of Malolos, Bulacan ordered the annulment of
the real estate mortgage and directed Lilia to reimburse Philippine National Bank the loan amount with
interest. Philippine National Bank appealed to the Court of Appeals. On August 22, 2013, the Court of
Appeals denied the appeal and affirmed the ruling of the Regional Trial Court.

ISSUE:

Whether the Court of Appeals erred in declaring the real estate mortgage void.

RULING:

A spouse's consent is indispensable for the disposition or encumbrance of conjugal properties.

The real estate mortgage over a conjugal property is void if the noncontracting spouse did not give
consent.

The Court of Appeals committed no reversible error in affirming the ruling of the Regional Trial Court.
The real estate mortgage over the conjugal properties is void for want of consent from respondent. The
Family Code is clear: the written consent of the spouse who did not encumber the property is necessary
before any disposition or encumbrance of a conjugal property can be valid.

The lower courts may have declared the mortgage void, but the principal obligation is not affected. It
remains valid.

SPOUSES MAY S. VILLALUZ AND JOHNNY VILLALUZ, JR., Petitioners, v. LAND BANK OF
THE PHILIPPINES AND THE REGISTER OF DEEDS FOR DAVAO CITY, Respondents.
G.R. No. 192602, January 18, 2017
THIRD DIVISION
JARDELEZA, J.:

Nature of the Action: This is a petition for review on certiorari, which seeks to set aside the
Decision dated September 22, 2009 and Resolution dated May 26, 2010 of the Court of Appeals
(CA) in CA-G.R. CV No. 01307, is whether the mortgage contract executed by the substitute is
valid and binding upon the principal.

42
FACTS:

Paula Agbisit (Agbisit), mother of petitioner May S. Villaluz (May), requested the latter to provide her
with collateral for a loan. At the time, Agbisit was the chairperson of Milflores Cooperative and she
needed P600,000 to P650,000 for the expansion of her backyard cut flowers business. May convinced her
husband, Johnny Villaluz (collectively, the Spouses Villaluz), to allow Agbisit to use their land, located in
Calinan, Davao City and covered by Transfer Certificate of Title (TCT) No. T-202276, as collateral. On
March 25, 1996, the Spouses Villaluz executed a Special Power of Attorney in favor of Agbisit
authorizing her to, among others, "negotiate for the sale, mortgage, or other forms of disposition a parcel
of land covered by Transfer Certificate of Title No. T-202276" and "sign in our behalf all documents
relating to the sale, loan or mortgage, or other disposition of the aforementioned property." The one-page
power of attorney neither specified the conditions under which the special powers may be exercised nor
stated the amounts for which the subject land may be sold or mortgaged.

On June 19, 1996, Agbisit executed her own Special Power of Attorney, appointing Milflores Cooperative
as attorney-in-fact in obtaining a loan from and executing a real mortgage in favor of Land Bank of the
Philippines (Land Bank). On June 21, 1996, Milflores Cooperative, in a representative capacity, executed
a Real Estate Mortgage in favor of Land Bank in consideration of the P3,000,000 loan to be extended by
the latter. On June 24, 1996, Milflores Cooperative also executed a Deed of Assignment of the
Produce/Inventory as additional collateral for the loan. Land Bank partially released one-third of the total
loan amount, or P995,500, to Milflores Cooperative on June 25, 1996. On the same day, Agbisit borrowed
the amount of P604,750 from Milflores Cooperative. Land Bank released the remaining loan amount of
P2,000,500 to Milflores Cooperative on October 4, 1996.

Unfortunately, Milflores Cooperative was unable to pay its obligations to Land Bank. Thus, Land Bank
filed a petition for extra-judicial foreclosure sale with the Office of the Clerk of Court of Davao City.
Sometime in August, 2003, the Spouses Villaluz learned that an auction sale covering their land had been
set tor October 2, 2003. Land Bank won the auction sale as the sole bidder.

The Spouses Villaluz filed a complaint with the Regional Trial Court (RTC) of Davao City seeking the
annulment of the foreclosure sale. The sole question presented before the RTC was whether Agbisit could
have validly delegated her authority as attorney-in-fact to Milflores Cooperative. Citing Article 1892 of
the Civil Code, the RTC held that the delegation was valid since the Special Power of Attorney executed
by the Spouses Villaluz had no specific prohibition against Agbisit appointing a substitute. Accordingly,
the RTC dismissed the complaint. On appeal, the CA affirmed the RTC Decision.

ISSUE:

Whether the mortgage contract executed by the substitute is valid and binding upon the principal.

RULING:

Articles 1892 and 1893 of the Civil Code provide the rules regarding the appointment of a substitute by
an agent: Art. 1892. The agent may appoint a substitute if the principal has not prohibited him from doing
so; but he shall be responsible for the acts of the substitute: (1) When he was not given the power to
appoint one; (2) When he was given such power, but without designating the person, and the person
appointed was notoriously incompetent or insolvent. All acts of the substitute appointed against the
prohibition of the principal shall be void.

Art. 1893. In the cases mentioned in Nos. 1 and 2 of the preceding article, the principal may furthermore
bring an action against the substitute with respect to the obligations which the latter has contracted under
the substitution.
The law creates a presumption that an agent has the power to appoint a substitute. The consequence of the
presumption is that, upon valid appointment of a substitute by the agent, there ipso jure arises an agency
relationship between the principal and the substitute, i.e., the substitute becomes the agent of the
principal. As a result, the principal is bound by the acts of the substitute as if these acts had been
performed by the principal's appointed agent. Concomitantly, the substitute assumes an agent's
ob1igations to act within the scope of authority, to act in accordance with the principal's instructions, and
to carry out the agency among others. In order to make the presumption inoperative and relieve himself
from its effects, it is incumbent upon the principal to prohibit the agent from appointing a substitute.

Although the law presumes that the agent is authorized to appoint a substitute, it also imposes an
obligation upon the agent to exercise this power conscientiously. To protect the principal, Article 1892

43
allocates responsibility to the agent for the acts of the substitute when the agent was not expressly
authorized by the principal to appoint a substitute; and, if so authorized but a specific person is not
designated, the agent appoints a substitute who is notoriously incompetent or insolvent. In these instances,
the principal has a right of action against both the agent and the substitute if the latter commits acts
prejudicial to the principal.

The case of Escueta v. Lim illustrates the prevailing rule. In that case, the father, through a special power
of attorney, appointed his daughter as his attorney-in-fact for the purpose of selling real properties. The
daughter then appointed a substitute or sub-agent to sell the properties. After the properties were sold, the
father sought to nullify the sale effected by the sub-agent on the ground that he did not authorize his
daughter to appoint a sub-agent. We refused to nullify the sale because it is clear from the special power
of attorney executed by the father that the daughter is not prohibited from appointing a substitute.
Applying Article 1892, we held that the daughter "merely acted within the limits of the authority given by
her father, but she will have to be 'responsible for the acts of the sub-agent,' among which is precisely the
sale of the subject properties in favor of respondent."

In the present case, the Special Power of Attorney executed by the Spouses Villaluz contains no restrictive
language indicative of an intention to prohibit Agbisit from appointing a substitute or sub-agent. Thus, we
agree with the findings of the CA and the RTC that Agbisit's appointment of Milflores Cooperative was
valid.

PRUDENTIAL BANK (NOW BANK OF THE PHILIPPINE ISLANDS), Petitioner, v. RONALD

RAPANOT AND HOUSING & LAND USE REGULATORY BOARD, Respondents.

G.R. No. 191636, January 16, 2017

FIRST DIVISION

CAGUIOA, J.

Nature of the Action: 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).

44
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 ofP453,329.64 as reservation fee for a
41.1050-square meter unit in said condominium. 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.

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. Rapanot made several verbal demands for the delivery of Unit 2308-B2. 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. 15 Because of this, Golden Dragon failed to
comply with Rapanot's verbal demands. 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. On April 27, 2001, Rapanot filed a Complaint with
the Expanded National Capital Region Field Office of the HLURB. The Arbiter rendered a decision in
favor of Rapanot. 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. The Bank filed a
Petition for Review with the CA on April 17, 2006 assailing the resolution and subsequent order of the
OP. the CA rendered the questioned Decision dismissing the Bank's Petition for Review.

ISSUE:

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.

RULING:

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.

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.

45
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.
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.

PHILIPPINE NATIONAL BANK, Petitioner, v. HEIRS OF BENEDICTO AND AZUCENA

ALONDAY,Respondent.
G.R. No. 171865, October 12, 2016
FIRST DIVISION
BERSAMIN, J.

Nature of the Action: Petition for review on certiorari.

FACTS:

46
On September 26, 1974, the Spouses Benedicto and Azucena Alonday (Spouses Alonday) obtained an
agricultural loan of P28,000.00 from the petitioner at its Digos, Davao del Sur Branch, and secured the
obligation by constituting a real estate mortgage on their parcel of land situated in Sta. Cruz, Davao del
Sur registered under Original Certificate of Title (OCT) No. P-3599 of the Registry of Deeds of Davao
del Sur.

On June 11, 1980, the Spouses Alonday obtained a commercial loan for P16,700.00 from the petitioner's
Davao City Branch, and constituted a real estate mortgage over their 598 square meter residential lot
situated in Ulas, Davao City. espondents Mercy and Alberto Alonday, the children of the Spouses
Alonday, demanded the release of the mortgage over the property covered.

RTC rendered judgment finding in favor of the respondents. The RTC observed that if the petitioner had
intended to have the second mortgage secure the pre-existing agricultural loan, it should have made an
express reservation to that effect; that based on the all-embracing clause, the mortgage was a contract of
adhesion, and the ambiguities therein should be construed strictly against the petitioner; that the last
sentence of the all-embracing clause provided that the mortgage would be null and void upon the payment
of the obligations secured by the mortgage; and that the petitioner was guilty of bad faith in refusing to
nullify the mortgage despite full payment of the commercial loan prior to its maturity.

The CA affirmed the RTC.

ISSUE:

The Court of Appeals grievously erred in restricting and delimiting the scope and validity of the standard
"all-embracing clause" in real estate mortgage contracts solely to future indebtedness and not to prior
ones, contrary to leading Supreme Court decisions on the matter.

RULING:

There is no question, indeed, that all-embracing or dragnet clauses have been recognized as valid means
to secure debts of both future and past origins. Even so, we have likewise emphasized that such clauses
were an exceptional mode of securing obligations, and have held that obligations could only be deemed
secured by the mortgage if they came fairly within the terms of the mortgage contract. For the all-
embracing or dragnet clauses to secure future loans, therefore, such loans must be sufficiently described
in the mortgage contract. If the requirement could be imposed on a future loan that was uncertain to
materialize, there is a greater reason that it should be applicable to a past loan, which is already subsisting
and known to the parties.

It was undeniable that the petitioner had the opportunity to include some form of acknowledgement of the
previously subsisting agricultural loan in the terms of the second mortgage contract The mere fact that the
mortgage constituted on the property covered by TCT No. T-66139 made no mention of the pre-existing
loan could only strongly indicate that each of the loans of the Spouses Alonday had been
treated separately by the parties themselves, and this sufficiently explained why the loans had been
securedby different mortgages.

Another indication that the second mortgage did not extend to the agricultural loan was the fact that the
second mortgage was entered into in connection only with the commercial loan.
To reiterate, in order for the all-embracing or dragnet clauses to secure future and other loans, the loans
thereby secured must be sufficiently described in the mortgage contract. Considering that the agricultural
loan had been pre-existing when the mortgage was constituted on the property covered by TCT No. T-
66139, it would have been easy for the petitioner to have expressly incorporated the reference to such
agricultural loan in the mortgage contract covering the commercial loan. But the petitioner did not. Being
the party that had prepared the contract of mortgage, its failure to do so should be construed that it did not
at all contemplate the earlier loan when it entered into the subsequent mortgage.

47
 MARCELINO REPUELA and CIPRIANO REPUELA, substituted by CARMELA
REPUELA, ET. AL, petitioners, vs. ESTATE OF THE SPOUSES OTILLO LARAWAN and
JULIANA BACUS, represented by NANCY LARAWAN MANCAO, ET.AL, respondents.
G.R. No. 219638. December 7, 2016.
SECOND DIVISION
MENDOZA, J.

Nature of the Action: Petition for Review on Certiorari under Rule 45 of the Rules of
Court assails the May 29, 2014 Decision and the June 10, 2015 Resolution of the Court of
Appeals (CA) in CA-G.R. CV No. 03976, which reversed and set aside the February 23,
2011 Decision3 of the Regional Trial Court (RTC), Seventh Judicial Region, Branch 7,
Cebu City.

48
FACTS:

Spouses Lorenzo and Magdalena Repuela owned Lot No. 3357, situated in Lawaan III, Talisay
City, Cebu. Their children Marcelino Repuela and Cipriano Repuela succeeded them as owners of
the subject property. Sometime in July 1963, after the death of their parents, they went to the
house of Otillo Larawan (Otillo) to borrow P200.00 for Marcelino's fare to Iligan City; that to
secure the loan, the spouses Otillo and Juliana Larawan (Spouses Larawan) required them to turn
over the certificate of title for Lot No. 3357; that they were made to sign a purported mortgage
contract but they were not given a copy of the said document. For the Estate of Spouses Larawan,
on the other hand, the transaction between the Repuela brothers and Otillo was a sale and not a
mortgage of a parcel of land.

After the trial, the RTC decided in favor of the Repuela brothers. It held that the transaction
between the parties was not a sale but an equitable mortgage. CA reversed and set aside the
February 23, 2011 Decision of the RTC.

ISSUE:

Whether the Extrajudicial Declaration of Heirs and Sale amounted to an equitable

mortgage.

RULING:
An equitable mortgage is one which, although lacking in some formality, or form, or words, or other
requisites demanded by a statute, reveals the intention of the parties to charge real property as security
for a debt, and contains nothing impossible or contrary to law. For a presumption of an equitable
mortgage to arise, two requisites must first be satisfied, namely: that the parties entered into a contract
denominated as a contract of sale and that their intention was to secure an existing debt by way of
mortgage. In this case, it appears that two (2) instances enumerated in Article 1602 possession of the
subject property and inference that the transaction was in fact a mortgage attended the assailed
transaction.

WILLIAM ENRIQUEZ AND NELIA-VELA ENRIQUEZ, Petitioners, v.ISAROG LINE

TRANSPORT, INC. AND VICTOR SEDENIO, Respondent.
G.R. No. 212008, November 16, 2016
THIRD DIVISION
PERALTA,J.

Nature of the Action: Petition for Review which petitioners William Enriquez and Nelia Vela-
Enriquez filed assailing the Court of Appeals (CA) Decision dated June 13, 2013 and
Resolution dated March 4, 2014 in CA-G.R. CV No. 97376.
FACTS:

Enriquez was a passenger of a bus owned and operated by respondent Isarog Line Express Transport, Inc.
(Isarog Line) driven by Victor Sedenio on July 7, 1998. While traversing the diversion road at Silangang

49
Malicboy, Pagbilao, Quezon, said bus collided with another bus owned by Philtranco Service Enterprises,
Inc. (Philtranco) which was being driven by Primitivo Aya-ay. As a result of the impact between the two
(2) buses, several passengers died, including Sonny, who was twenty-six (26) years old at that time.

Sonny's parents, petitioners William Enriquez and Nelia Vela-Enriquez, filed a complaint for damages
against Isarog Line and Philtranco as well as their drivers. RTC rendered a Decision finding Isarog Line,
Sedenio, Philtranco, and Aya-ay solidarity liable for Sonny's death. Isarog Line then appealed before the
CA. On June 13, 2013, the appellate court affirmed the RTC Decision.

ISSUE:

Whether or not the Spouses Enriquez are entitled to the amount of P1,038,960.00 as damages for their
son's loss of earning capacity.

RULING:

Under Article 2206 of the Civil Code, the heirs of the victim are entitled to indemnity for loss of earning
capacity. Article 2206. The amount of damages for death caused by a crime or quasi-delict shall be at least
three thousand pesos, even though there may have been mitigating circumstances. In addition:
Compensation of this nature is awarded not for loss of earnings, but for loss of capacity to earn. The
indemnification for loss of earning capacity partakes of the nature of actual damages which must be duly
proven by competent proof and the best obtainable evidence thereof. Thus, as a rule, documentary
evidence should be presented to substantiate the claim for damages for loss of earning capacity. By way
of exception, damages for loss of earning capacity may be awarded despite the absence of documentary
evidence when (1) the deceased was self-employed and earning less than the minimum wage under
current labor laws, in which case, judicial notice may be taken of the fact that in the deceased's line of
work no documentary evidence is available; or (2) the deceased was employed as a daily wage worker
earning less than the 'minimum wage under current labor laws. In the case at bar, while the CA itself ruled
that the certification from ASLAN stating that Sonny was earning P185.00 per day as a security guard is
admissible in evidence, it held that the same has no probative value since the signatory was never
presented to testify. However, the rule is that evidence not objected to is deemed admitted and may be
validly considered by the court in arriving at its judgment,8 as what the RTC in this case aptly did, since it
was indubitably in a better position to assess and weigh the evidence presented during trial.

ROSALIE SY AYSON, petitioner, vs. FIL-ESTATE PROPERTIES, INC., and FAIRWAYS

AND BLUEWATER RESORT AND COUNTRY CLUB, INC., respondent.
G.R. No. 223254. December 1, 2016.
IL-ESTATE PROPERTIES, INC., and FAIRWAYS & BLUEWATER RESORT &
COUNTRY CLUB, INC., petitioners, vs. ROSALIE SY AYSON, respondent.
G.R. No. 223269. December 1, 2016
FIRST DIVISION
PERLAS-BERNABE, J.

Nature of the Action: These consolidated petitions for review on certiorari are the
Decision dated March 1, 2013 and the Resolution dated February 22, 2016 of the Court
of Appeals (CA) in CA-G.R. CV. No. 03010, which affirmed with modification the
Decision dated March 1, 2004 and the Order dated February 6, 2009 of the Regional Trial
Court of Kalibo, Aklan, Branch 9 (RTC)
50
FACTS:
The instant case arose from a Complaint for recovery of possession and damages filed by Ayson
against Fil-Estate and Fairways before the RTC, alleging that she is the registered owner of a 1,000-
square meter parcel of land, more or less, located in Yapak, Malay, Aklan, i.e., the northwestern area of
Boracay Island, denominated as Lot No. 14-S and covered by Transfer Certificate of Title (TCT) No. T-
24562 7 (subject land). Sometime in June 1997, she discovered that Fil-Estate and Fairways illegally
entered into the subject land and included it in the construction of its golf course without her prior
consent and authorization. Despite receipt of a Notice to Cease and Desist from Ayson, Fil-Estate and
Fairways continued their encroachment and development of the subject land making it now a part of the
entire golf course. Thus, she was constrained to file the instant complaint.
In their defense, Fil-Estate and Fairways maintain that the subject land was formerly owned by one
Divina Marte Villanueva (Villanueva), with whom they entered into a Joint Venture Agreement (JVA)
for the development of the Fairways and Bluewater Resort Golf and Country Club. Fil-Estate and
Fairways explained that prior to the JVA, Villanueva sold portions of her property to various buyers,
including Ayson, with the caveat that such portions may be used in a development project. In this light,
Villanueva allegedly convinced her buyers to agree to a land swap should such development push
through. When the project commenced, the other buyers readily agreed to said land swaps.
Unfortunately, talks with Ayson stalled, prompting Fil-Estate and Fairways to "exclude" development
work on the subject land. Nevertheless, Fil-Estate and Fairways commenced construction on the subject
land, allegedly relying in good faith upon Villanueva's assurance that her other former buyers, e.g.,
Ayson, would eventually agree with the land swap agreements. According to Fil-Estate and Fairways,
Ayson only signified her objection to the inclusion of the subject land in the development project when
construction was almost finished. Fil-Estate and Fairways further averred that they tried to remedy the
situation by negotiating with Ayson, but to no avail.

RTC ruled in Ayson's favor and, accordingly, ordered Fil-Estate and Fairways to pay her. The CA
affirmed the RTC ruling with modification reducing the award of damages.

ISSUE:

The issues raised in the instant petition largely pertain only to the propriety of the awards of
moral damages, exemplary damages, and attorney's fees in Ayson's favor and the corresponding
amounts thereof, as well as the correctness of the valuation of the subject land at US$40,000.00
and the monthly rental therefor.

RULING:

Both the RTC and the CA found that Ayson is the undisputed owner of the subject land, as evidenced by
TCT No. T-24562. Despite such knowledge, Fil-Estate and Fairways nevertheless chose to rely on
Villanueva's empty assurances that she will be able to convince Ayson to agree on a land swap
arrangement; and thereafter, proceeded to enter the subject land and introduce improvements thereon.
both lower courts concluded that Fil-Estate and Fairways' acts were done in bad faith and resulted in
injury to Ayson; hence, they are liable for, inter alia, moral damages, exemplary damages, and
attorney's fees.
Verily, the finding of Fil-Estate and Fairways' bad faith, as well as their liability for moral
damages, exemplary damages, and attorney's fees, are all factual matters which are not within the ambit
of the instant petition for review on certiorari under Rule 45 of the Rules of Court. In this regard, it has
long been settled that factual findings of the trial court, affirmed by the CA, are final and conclusive and
may not be reviewed on appeal, save for certain exceptions, which Fil-Estate and Fairways failed to
show in this case.

CA correctly reduced the awards for moral damages, exemplary damages.

51
 MAERSK FILIPINAS CREWING INC., and MAERSK CO. IOM LTD., Petitioners,
vs.
JOSELITO R. RAMOS, Respondent.

G.R. No. 184256, January 18, 2017

FIRST DIVISION

SERENO, CJ.

Nature of the Action: 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 finding of the NLRC.

52
FACTS:

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 while on board the vessel, on November 14, 2001, private respondents 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.

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 benefits 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."

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.

Labor Arbiter dismissed the complaint. NLRC issued a Resolution granting respondent's appeal and
setting aside the LA's decision. Upon intermediate appellate review, the CA rendered a Decision. 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

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ISSUE:

Whether the respondent is entitled to the award of attorneys fees.

RULING:

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.

IBM PHILIPPINES, INC., Petitioner, v. PRIME SYSTEMS PLUS, INC., Respondent.

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 G.R. No. 203192, August 15, 2016

SECOND DIVISION

DEL CASTILLO, J.:

Nature of the Action: Petition for Review which seeks to assail the Decision of the Court of
Appeals (CA) dated January 30, 2012 and its Resolution dated August 17, 2012. The CA
Decision modified the Regional Trial Court's (RTC) Decision dated March 25, 2008 by ordering
respondent to pay petitioner P24,622,394.72 with 6% legal interest per annum and deleting the
award of P1,000,000.00 as attorney's fees.

FACTS:

Petitioner entered into an agreement with respondent whereby the former will deliver 45 automated teller
machines (ATMs) and several computer hardware to respondent's customers for the total price of
P24,743,610.43. On September 9, 2002, petitioner instituted a Complaint for sum of money, attorney's
fees, costs of litigation with application for the issuance of a Writ of Preliminary Attachment against
respondent. In the said Complaint, petitioner sought to have respondent pay the former P45,997,266.22
representing respondent's unpaid obligation with 3% monthly interest.
In its Answer dated June 17, 2003, respondent denied the allegations in the Complaint Respondent also
alleged that "it had folly paid for the fifty six (56) ATMs it purchased from [petitioner] during the period
covering December 1997 to February 1998."

RTC rendered its Decision dated March 25, 2008 ordering respondent to pay the sum of P46,036,028.42
with interest at 6% per annum from March 15, 2006 and attorney's fees in the amount of P1,000,000.00.

The CA modified the decision of the RTC and granted the petition with modifications.

ISSUE:

Did petitioner's imposition of 3% monthly interest constitute a written stipulation under Article 1956 of
the Civil Code.

RULING:

It has been a long-standing rule that for interest to become due and demandable, two requisites must be
present: (1) that there must be an express stipulation for the payment of interest and (2) the agreement to
pay interest is reduced in writing. this Court finds that the evidence points to respondent's lack of consent
to a 3% monthly interest. Petitioner adamantly claims that respondent's act of requesting for a lower
interest rate shows the latter's agreement to a 3% monthly interest. Although respondent did agree to the
imposition of interest per se, the fact that there was never a clear rate of interest still leaves room to guess
as to how much interest respondent will pay. This is precisely the reason why Article 1956 was included
in the Civil Code - so that both parties clearly agree to and are folly aware of the price to be. paid in a
contract.
In the absence of agreement as to the exact rate of interest, the C A properly applied the legal rate of 6%
annual interest following our ruling in Eastern Shipping Lines, Inc. v. Court of Appeals and the Bangko
Sentral ng Pilipinas MB Circular No. 799, series of 2013.

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