CIVIL LAW

Soledad Dalton v. FGR Realty and Development Corp., Felix Ng, Nenita
Ng, and Florita Dayrit or Florita Regner
G.R. No. 172577, 19 January 2011, SECOND DIVISION, (Carpio, J.)
Failure to comply strictly with any of the requisites will render the
consignation void. Substantial compliance is not enough. The giving of notice
to the persons interested in the performance of the obligation is mandatory.
Failure to notify the persons interested in the performance of the obligation
will render the consignation void
A parcel of land owned by respondent Flora R. Dayrit was leased to
petitioners Dalton, et. al. Eventually, the land was sold to respondent FGR
Realty and Development Corporation. FGR Realty and Dayrit decided not to
accept payments from Dalton, et. al. for the purpose of terminating the lease
agreements.
Dalton, et. al. filed a complaint with the Regional Trial Court and
attached was a consignation of the rental payments. However, they failed to
notify the other party of such action. FGR Realty and Dayrit withdrew the
consigned amount with reservation to question the validity of the consignation.
ISSUE:
Whether or not the consignation made by Dalton, et. al. is void
HELD:
Petition DENIED.
Compliance with the requisites of a valid consignation is mandatory.
Failure to comply strictly with any of the requisites will render the consignation
void. Substantial compliance is not enough. The giving of notice to the persons
interested in the performance of the obligation is mandatory. Failure to notify
the persons interested in the performance of the obligation will render the
consignation void.
Under Art. 1257 of our Civil Code, in order that consignation of the thing
due may release the obligor, it must first be announced to the persons
interested in the fulfillment of the obligation. The consignation shall be
ineffectual if it is not made strictly in consonance with the provisions which
regulate payment . In said Article 1258, it is further stated that the
consignation having been made, the interested party shall also be notified
thereof.
We hold that the essential requisites of a valid consignation must be
complied with fully and strictly in accordance with the law, Articles 1256 to
1261, New Civil Code. That these Articles must be accorded a mandatory
construction is clearly evident and plain from the very language of the codal
provisions themselves which require absolute compliance with the essential
requisites therein provided. Substantial compliance is not enough for that
would render only a directory construction to the law. The use of the words

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"shall" and "must" which are imperative, operating to impose a duty which may
be enforced, positively indicate that all the essential requisites of a valid
consignation must be complied with.

Carolina Hernandez-Nievera, et. al. v. Wilfredo Hernandez, et.al.

G.R. No. 171165, 14 February 2011, SECOND DIVISION, (Peralta,
J.)
The test of incompatibility is whether the two obligations can stand
together, each one having its independent existence. If they cannot, they are
incompatible, and the latter obligation novates the first.
Project Movers Realty & Development Corporation (PMRDC), one of the
respondents, entered into different agreements with the other respondents
Home Insurance & Guaranty Corporation (HIGC) and Land Bank of the
Philippines through its president Mario Villamor in reference to construction
projects contemplated to be executed in Batangas and Caloocan City. PMRDC
then entered into a Memorandum of Agreement (MOA) with petitioners
Carolina Hernandez-Nievera, Margarita H. Malvar and Demetrio P. Hernandez
wherein PMRDC was given the option to buy pieces of land owned by the
former within 12 months from the date of the instrument along with the
payment of option money. It was further stated that in case there is failure to
avail within the stipulated option period of 12 months, the option money shall
be forfeited in favor of the vendor and the vendee shall return all the Transfer
Certificates of Title (TCT) of the covered parcels of land to the former.
When PMRDC decided to convey more properties to its Asset Pool, it
entered a Deed of Assignment and Conveyance with LBP and Demetrio, who
acted through the same special power of attorney used in the MOA. The DAC
sought to transfer and assign some lands in Area II to the asset pool in
exchange for a number of shares of stock which had been issued in favor and in
the name of Demetrio.
PMRDC admits that they did not avail the express stipulation of 12month option period in the MOA. Hernandez-Nievera, et. al. demands that the
TCTs be returned to them but PMRDC refused contending that the properties
were already transferred and assigned to the Asset Pool pursuant to the DAC.
Hernandez-Nievera, et. al. filed an action to rescind the MOA and to declare
the DAC a nullity. The trial court ruled in favor of Hernandez-Nievera.
Aggrieved, the other party appealed to the Court of Appeals which reversed
and set aside the ruling of the trial court. Hence, this petition.
ISSUE:
Whether or not the Memorandum of Agreement was novated by the Deed
of Assignment and Conveyance

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HELD:
Petition DENIED.
Hernandez-Nievera, et. al.s cause stems from the failure of PMRDC to
restore to them the possession of the TCTs of the lands within Area II upon its
failure to exercise the option to purchase within the 12-month period stipulated
in the MOA. Hernandez, et. al. maintain, however, that said obligation,
dependent as it is on the exercise of the option to purchase, has altogether
been expressly obliterated by the terms of the DAC whereby HernandezNievera, et. al., through Demetrio as attorney-in-fact, have agreed to novate
the terms of the MOA by extinguishing the core obligations of PMRDC on the
payment of option money. This seems to suggest that with the execution of the
DAC, PMRDC has already entered into the exercise of its option except that its
obligation to deliver the option money has, by subsequent agreement embodied
in the DAC, been substituted instead by the obligation to issue participation
certificates in Demetrios name but which, likewise, has not yet been
performed by PMRDC. But Hernandez-Nievera, et. al.s stand against the
validity of the DAC on the ground that the signature of Demetrio therein was
spurious.
On this score, this Court quotes with approval the decision of the Court
of Appeals, aptly citing the case of California Bus Lines, Inc. v. State
Investment House, Inc. thus
There are two ways which could indicate, in fine, the
presence of novation and thereby produce the effect of
extinguishing an obligation by another which substitutes the
same. The first is when novation has been explicitly stated and
declared in unequivocal terms. The second is when the old and the
new obligations are incompatible on every point. The test of
incompatibility is whether the two obligations can stand together,
each one having its independent existence. If they cannot, they are
incompatible,
and
the
latter
obligation
novates
the
first. Corollarily, changes that breed incompatibility must be
essential in nature and not merely accidental. The incompatibility
must take place in any of the essential elements of the obligation
such as its object, cause or principal conditions thereof; otherwise,
the change would be merely modificatory in nature and insufficient
to extinguish the original obligation.

F.A.T. Kee Computer Systems, Inc. v. Online Networks International,

Inc.
G.R. No. 171238, 2 February 2011, FIRST DIVISION, (Leonardo-De
Castro, J.)

CIVIL LAW
One who claims the benefit of an estoppel on the ground that he has
been misled by the representations of another must not have been misled
through his own want of reasonable care and circumspection. A lack of
diligence by a party claiming an estoppel is generally fatal. If the party
conducts himself with careless indifference to means of information reasonably
at hand, or ignores highly suspicious circumstances, he may not invoke the
doctrine of estoppel.
Petitioner F.A.T. Kee Computer Systems, Inc. is engaged in the business
of selling computer equipment and in the rendering of maintenance services
for its sold units. On the other hand, ONLINE is engaged in business of selling
computer units, parts, and software.
In its complaint, it was alleged that ONLINE sold computer printers to
FAT KEE which was evidenced by invoice receipts containing a stipulation that
an interest of 28% per annum is to be charged on all accounts overdue and
an additional sum equal to 25% of the amount will be charged by vendor for
attorneys fees plus cost of collection in case of suit. It was also said that the
president of FAT KEE, President Frederick Huang, Jr., made an offer to pay the
amount which was originally in US dollars into Philippine legal tender which
ONLINE accepted. After payments made in March to May 1998, ONLINE
decided to stop the application of interest in view of its good relationship with
FAT KEE. FAT KEE continued to pay; however, a balance remained according to
ONLINEs computations. Despite the repeated demands of ONLINE, FAT KEE
failed to pay the remaining balance without a valid reason.
FAT KEE answered the complaint stating that they were never informed
of ONLINEs agreement to its offer of paying US dollars. It also alleged that the
invoice receipts were unilaterally prepared by ONLINE. Furthermore, FAT KEE
stated that the payments tendered were in Philippine peso, in accordance with
the Statement of Account, and that these were accepted by ONLINE. They said
they already had paid the total amount of the debt.
According to the testimony of Huang, he said that there was no
agreement between FAT KEE and ONLINE for the payment in US dollars.
There was neither an agreement to a specific exchange rate.
ISSUE:
Whether or not ONLINE was estopped by the December Statement of
Account
HELD:
Petition DENIED.
In British American Tobacco v. Camacho, the Court emphasized the
doctrine of estoppel as follows:

CIVIL LAW
The elements of estoppel are: first, the actor who usually
must have knowledge, notice or suspicion of the true facts,
communicates something to another in a misleading way, either by
words, conduct or silence; second, the other in fact relies, and
relies reasonably or justifiably, upon that communication; third, the
other would be harmed materially if the actor is later permitted to
assert any claim inconsistent with his earlier conduct; and fourth,
the actor knows, expects or foresees that the other would act upon
the information given or that a reasonable person in the actor's
position would expect or foresee such action.
In the instant case, we find that FAT KEE cannot invoke estoppel against
ONLINE for the latters issuance of the SOA on December 9, 1997. The
testimonial evidence of both ONLINE and FAT KEE establish that, during the
meeting, the parties tried but failed to reach an agreement as regards the
payment of FAT KEEs outstanding obligation and the exchange rate to be
applied thereto. By their act of submitting their respective proposals and
counter-proposals on the mode of payment and the exchange rate, FAT KEE
and ONLINE demonstrated that it was not their intention to be further bound
by the SOA, especially with respect to the exchange rate to be used. Moreover,
FAT KEE only started making payments vis--vis the subject invoice receipts on
March 17, 1998, or two months after the aforementioned meeting.
At this point, Mijares v. Court of Appeals is instructive in declaring that:
One who claims the benefit of an estoppel on the ground that
he has been misled by the representations of another must not
have been misled through his own want of reasonable care and
circumspection. A lack of diligence by a party claiming an estoppel
is generally fatal. If the party conducts himself with careless
indifference to means of information reasonably at hand, or ignores
highly suspicious circumstances, he may not invoke the doctrine
of estoppel. Good faith is generally regarded as requiring the
exercise of reasonable diligence to learn the truth, and
accordingly estoppel is denied where the party claiming it was put
on inquiry as to the truth and had available means for ascertaining
it, at least where actual fraud has not been practised on the party
claiming the estoppel.

Insurance of the Philippine Islands Corporation v. Spouses Vidal S.

Gregorio and Julita Gregorio
G.R. No. 174104, 14 February 2011, SECOND DIVISION, (Peralta,
J.)

CIVIL LAW
Ultimately, the question of laches is addressed to the sound discretion of
the court and, being an equitable doctrine, its application is controlled by
equitable considerations. It cannot be used to defeat justice or perpetrate
fraud and injustice. It is the better rule that courts, under the principle of
equity, will not be guided or bound strictly by the statute of limitations or the
doctrine of laches when to be so, a manifest wrong or injustice would result.
Respondent spouses Vidal S. Gregorio and Julita Gregorio obtained loan
from petitioner Insurance of the Philippine Islands Corporation. As a security,
the spouses executed a Real Estate Mortgage of a parcel of land in Rizal.
Again, they obtained another loan along with a security of another parcel of
land in the same property in Rizal. For the third time, a loan was obtained and
this time, two parcels of land was executed as mortgage.
The Gregorio spouses failed to perform their obligation to pay. Hence,
their mortgaged properties were extrajudicially foreclosed. In the extrajudicial
foreclosure sale, Insurance of the Philippine Islands was the highest bidder.
The latter assumed ownership because the Gregorio spouses were not able to
redeem their properties.
Then the petitioner Corporation filed a Complaint against the spouses
because they found out while processing the documents for the application and
confirmation of its title over the foreclosed properties that the parcels of land
were already registered under the names of third persons and the Transfer
Certificates of Title (TCT) were also issued to them. They alleged that the
Gregorio spouses committed fraud in obtaining loans from them by
misrepresenting ownership over the foreclosed properties. On the other hand,
the spouses argue that petitioner's cause of action and right of action are
already barred by prescription and laches.
ISSUE:
Whether or not the Court of Appeals erred in ruling that petitioner's right
to any relief under the law has already prescribed or is barred by laches
HELD:
Petition GRANTED.
Insurance of the Philippine Islands filed an action for damages on the
ground of fraud committed against it by the spouses. Under the provisions of
Article 1146 of the Civil Code, actions upon an injury to the rights of the
plaintiff or upon a quasi-delict must be instituted within four years from the
time the cause of action accrued.
The Court finds no error in the ruling of the CA that Insurance of the
Philippine Island's cause of action accrued at the time it discovered the alleged
fraud committed by the Gregorio spouses. It is at this point that the four-year
prescriptive period should be counted. However, the Court does not agree with

CIVIL LAW
the CA in its ruling that the discovery of the fraud should be reckoned from the
time of registration of the titles covering the subject properties.
Neither may the principle of laches apply in the present case.
The essence of laches or stale demands is the failure or neglect for an
unreasonable and unexplained length of time to do that which, by exercising
due diligence, could or should have been done earlier, thus, giving rise to a
presumption that the party entitled to assert it either has abandoned or
declined to assert it. It is not concerned with mere lapse of time; the fact of
delay, standing alone, being insufficient to constitute laches.
In addition, it is a rule of equity and applied not to penalize neglect or
sleeping on one's rights, but rather to avoid recognizing a right when to do so
would result in a clearly unfair situation. There is no absolute rule as to what
constitutes laches or staleness of demand; each case is to be determined
according to its particular circumstances. Ultimately, the question of laches is
addressed to the sound discretion of the court and, being an equitable doctrine,
its application is controlled by equitable considerations. It cannot be used to
defeat justice or perpetrate fraud and injustice. It is the better rule that courts,
under the principle of equity, will not be guided or bound strictly by the statute
of limitations or the doctrine of laches when to be so, a manifest wrong or
injustice would result.
It is significant to point out at this juncture that the overriding
consideration in the instant case is that petitioner Corporation was deprived of
the subject properties which it should have rightly owned were it not for the
fraud committed by the Gregorio spouses. Hence, it would be the height of
injustice if the spouses would be allowed to go scot-free simply because the
petitioner Corporation relied in good faith on the former's false
representations.

Spouses Luigi M. Guanio and Anna Hernandez-Guanio v. Makati

Shangri-La Hotel and Resort, Inc., aka Shangri-La Hotel Manila
G.R. No. 190601, 7 February 2011, SECOND DIVISION, (Carpio-Morales,
J.)
The law, recognizing the obligatory force of contracts, will not permit a
party to be set free from liability for any kind of misperformance of the
contractual undertaking or a contravention of the tenor thereof. A breach upon
the contract confers upon the injured party a valid cause for recovering that
which may have been lost or suffered.
Petitioner spouses, Luigi M. Guanio and Anna Hernandez-Guanio, booked
respondent Makati Shangri-La Hotel for their reception. However, during the

CIVIL LAW
wedding itself and even during the initial food tasting they encountered bad
service from the employees of the hotel. Due to that, the Guanio spouses sent a
letter-complaint to Makati Shangri-La wherein the latter responded with an
apology. Despite that, the Guanio spouses still filed a Complaint for breach of
contract to the Regional Trial Court of Makati City.
The Guanio spouses contends that the apology is an admission of the bad
service the hotel has rendered to them. On the other hand, Makati Shangri-La
denies it stating that their apology is a only standard followed by their
employees to express empathy in reference to the inconvenience experienced
by their dissatisfied customers.
ISSUE:
Whether or not the apology made by Makati Shagri-La is considered an
admission of breach of contract
HELD:
CA Decision PARTIALLY REVERSED.
What applies in the present case is Article 1170 of the Civil Code which
reads:
Art. 1170. Those who in the performance of their obligations are guilty of
fraud, negligence or delay, and those who in any manner contravene the tenor
thereof, are liable for damages.
RCPI v. Verchez, et al. enlightens:
In culpa contractual x x x the mere proof of the existence of the
contract and the failure of its compliance justify, prima facie, a
corresponding right of relief. The law, recognizing the obligatory
force of contracts, will not permit a party to be set free from
liability for any kind of misperformance of the contractual
undertaking or a contravention of the tenor thereof. A breach
upon the contract confers upon the injured party a valid cause for
recovering that which may have been lost or suffered. The
remedy serves to preserve the interests of the promissee that
may include his "expectation interest," which is his interest in
having the benefit of his bargain by being put in as good a
position as he would have been in had the contract been
performed, or his"reliance interest," which is his interest in
being reimbursed for loss caused by reliance on the contract by
being put in as good a position as he would have been in had the
contract not been made; or his"restitution interest," which is
his interest in having restored to him any benefit that he has
conferred on the other party. Indeed, agreements can accomplish
little, either for their makers or for society, unless they are made
the basis for action. The effect of every infraction is to create a

CIVIL LAW
new duty, that is, to make RECOMPENSE to the one who has
been injured by the failure of another to observe his contractual
obligation unless he can show extenuating circumstances,
like proof of his exercise of due diligence x x x or of
the attendance of fortuitous event, to excuse him from his
ensuing liability. (emphasis and underscoring in the original;
capitalization supplied)
The Court notes that Makati Shangri-La could have managed the
"situation" better, it being held in high esteem in the hotel and service
industry. Given its vast experience, it is safe to presume that this is not its first
encounter with booked events exceeding the guaranteed cover. It is not
audacious to expect that certain measures have been placed in case this
predicament crops up. That regardless of these measures, respondent still
received complaints as in the present case, does not amuse.
Makati Shangri-La admitted that three hotel functions coincided with
petitioners' reception. To the Court, the delay in service might have been
avoided or minimized if respondent exercised prescience in scheduling events.
No less than quality service should be delivered especially in events which
possibility of repetition is close to nil. Petitioners are not expected to get
married
twice
in
their
lifetimes.

Anthony Ordua, et al. v. Eduardo J. Fuentebella, et al.

G.R. No. 176841, 29 June 2010, FIRST DECISION, (Velasco, Jr., J.)
The Statute of Frauds expressed in Article 1403, par. (2), of the Civil
Code applies only to executory contracts, i.e., those where no performance has
yet been made.
Perceived inadequacy of price, on the other hand, is not a sufficient
ground for setting aside a sale freely entered into, save perhaps when the
inadequacy is shocking to the conscience.
The subject of this case is a residential lot located at Fairview
Subdivision, Baguio City, which was firstly registered under Amando Gabriel,
Sr. Around 1996, Gabriel, Sr. sold the subject lot to Antonita Ordua but there
was no executed formal deed. The price of the lot was payable in installments
and Gabriel, Sr. accepted the set-up. Antonita and her sons have long been
residing in the lot since 1979 and even had a house constructed therein. They
also paid real property taxes and declared the lot for tax purposes.
After the death of Gabriel, Sr., his son and one of the respondents
Gabriel, Jr. continued to accept installment payments from Antonita. Then he
wrote a letter to her ordering her to fence off the lot and to construct a road on
the adjacent lot. However, despite the payments made by Antonita, Gabriel, Jr.

CIVIL LAW
sold the subject lot to Bernard Banta without the knowledge of Antonita and
the rest of petitioners. Banta then sold the subject lot to Marcos Cid and
Benjamin Cid. The Cids thereafter ceded the subject lot to Eduardo Fuentebilla,
Jr. Eduardo, through his lawyer, sent a letter to the residence of Gabriel, Jr.
ordering those living therein to vacate the lot or else ejectment would
commence.
When Antonita, et. al. went directly to Gabriel, Jr.s house after receiving
the letter, they were informed by the wife of Gabriel, Jr., Teresita Gabriel that
she filed an affidavit-complaint against her husband and the Cids for
falsification of public documents, because according to her, her signature was
forged in the deed of sale between Gabriel, Jr. and Banta. Teresita accompanied
Antonita to file a Complaint for Annulment of Sale, Title, Reconveyance with
Damages and along with this a prayer to acquire ownership over the subject lot
upon payment of their remaining balance.
ISSUES:
Whether or not the Statute of Frauds is applicable to partially executed
contracts
HELD:
Petition GRANTED.
The Statute of Frauds expressed in Article 1403, par. (2), of the Civil
Code applies only to executory contracts, i.e., those where no performance has
yet been made. Stated a bit differently, the legal consequence of noncompliance with the Statute does not come into play where the contract in
question is completed, executed, or partially consummated.
The Statute of Frauds, in context, provides that a contract for the sale of
real property or of an interest therein shall be unenforceable unless the sale or
some note or memorandum thereof is in writing and subscribed by the party or
his agent. However, where the verbal contract of sale has been partially
executed through the partial payments made by one party duly received by
the vendor, as in the present case, the contract is taken out of the scope of the
Statute.
Lest it be overlooked, a contract that infringes the Statute of Frauds is
ratified by the acceptance of benefits under the contract. Evidently, Gabriel, Jr.,
as his father earlier, had benefited from the partial payments made by the
petitioners. Thus, neither Gabriel Jr. nor the other respondentssuccessive
purchasers of subject lotscould plausibly set up the Statute of Frauds to
thwart petitioners efforts towards establishing their lawful right over the
subject lot and removing any cloud in their title. As it were, petitioners need
only to pay the outstanding balance of the purchase price and that would
complete the execution of the oral sale.

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Jose Marques and Maxilite Technologies, Inc., v. Far East Bank and
Trust Company, Far East Bank Insurance Brokers, Inc., and Makati
Insurance Company/Far East Bank and Trust Company and Makati
Insurance Company, v. Jose Marques and Maxilite Technologies, Inc.,
G.R. No. 171379, 171419, 10 January 2011
Silence may support an estoppel whether the failure to speak is
intentional or negligent.
Maxilite Technologies, Inc. is engaged in the importation and trade of
equipments for energy-efficiency systems. On the other hand, Far East Bank
and Trust Co. (FEBTC) is a local bank entrusted in the financing and
requirements of Maxilite and Maxilites president Jose N. Marques.
Far East Bank Insurance Brokers, Inc. (FEBIBI) and Makati Insurance
Company are insurance companies which are subsidiaries of FEBTC.
When Maxilite and Marques entered into a trust receipt transaction with
FEBTC for the shipping of high-technology equipment from the United States,
they put the merchandise as collateral. Then around August 1993, FEBIBI was
advised by FEBTC to initiate and manage the procurement and processing from
Makati Insurance Company of four separate and independent fire insurance
policies over the subject merchandise. Maxilite did their part by paying the
premiums through debit arrangement and FEBTC would debit the paid amount
evidenced by the statement of accounts sent to Maxilite. On October 1994, the
trust receipt account was completely settled.
Then on March 1995, Maxilite suffered losses amounting to at least P 2.1
million when a fire destroyed their office in Cebu City. They filed claims
against the fire insurance company with Makati Insurance Company. However,
it denied the fire loss claim putting up as a defense that they have not paid
their premium. FEBTC and FEBIBI stated they have no responsibility for the
denial of the claim.
ISSUE:
Whether or not there was an estoppel when Maxilite and Marques were
led to believe and they in fact believed that the settlement of Maxilite's trust
receipt account included the payment of the insurance premium
HELD:
Petition GRANTED.

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In estoppel, a party creating an appearance of fact, which is false, is
bound by that appearance as against another person who acted in good faith on
it. Estoppel is based on public policy, fair dealing, good faith and justice. Its
purpose is to forbid one to speak against his own act, representations, or
commitments to the injury of one who reasonably relied thereon. It springs
from equity, and is designed to aid the law in the administration of justice
where without its aid injustice might result.
Estoppel by silence arises where a person, who by force of
circumstances is obliged to another to speak, refrains from doing so and
thereby induces the other to believe in the existence of a state of facts in
reliance on which he acts to his prejudice. Silence may support an estoppel
whether the failure to speak is intentional or negligent.
Both trial and appellate courts basically agree that FEBTC is estopped
from claiming that the insurance premium has been unpaid. That FEBTC
induced Maxilite and Marques to believe that the insurance premium has in
fact been debited from Maxilites account is grounded on the the following
facts: (1) FEBTC represented and committed to handle Maxilites financing and
capital requirements, including the related transactions such as the insurance
of the trust receipted merchandise; (2) prior to the subject Insurance Policy No.
1024439, the premiums for the three separate fire insurance policies had been
paid through automatic debit arrangement; (3) FEBIBI sent FEBTC, not
Maxilite nor Marques, written reminders dated 19 October 1994, 24 January
1995, and 6 March 1995 to debit Maxilites account, establishing FEBTCs
obligation to automatically debit Maxilites account for the premium amount;
(4) there was no written demand from FEBTC or Makati Insurance Company
for Maxilite or Marques to pay the insurance premium; (5) the subject
insurance policy was released to Maxilite on 19 August 1994; and (6) the
subject insurance policy remained uncancelled despite the alleged nonpayment of the premium, making it appear that the insurance policy remained
in force and binding.