Civil Law 2 Cases

Submitted by:
RABAGO, John Carlo T.

Civil Law Review II
In Partial Fulfilment of the subject
Civil Law Review II
in San Sebastian College – Recoletos
College of Law
March 2017
(DIGESTED CASES IN CIVIL LAW)
Submitted To:
Atty. Crisostomo Uribe
Submitted By:
John Carlo Rabago
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Submitted by:
Civil Law Review II
Title: GUY VS. GACOTT, 780 SCRA 579, January 13, 2016
Nature: Petition for Review on Certiorari of the decision and resolution of

the Court of Appeals.
Ponente: J. MENDOZA. Second Division
Statement of Facts
This case was commenced when Atty. Glenn Gacott, from Palawan,
purchased two (2) brand new trans-receivers from Quantech Systems
Corporation (QSC) in Manila through its employee Rey Medestomas
(Medestomas), amounting to of P18,000.00. Subsequently, due to major
defects, Gacott personally returned the trans-receivers to QSC and
requested that they be replaced. Medestomas received the returned trans-
receivers and promised to send him the replacement units within two (2)
weeks. In this regard, Gacott did not receive the replacement units as
promised. QSC informed him that there were no available units and that it
could not refund the purchased price. Despite several demands, both oral
and written, Gacott was never given a replacement or a refund. The
demands caused Gacott to incur expenses in the total amount of
P40,936.44. Hence, Gacott filed a complaint for damages, where RTC ruled
in Gacott’s favour.
In view of this, the Sheriff attached Guy's vehicle by virtue of the Notice of
Attachment/Levy upon Personal property, then Guy filed his Motion to Lift
Attachment upon Personal property, arguing that he was not a judgment
debtor and, therefore, his vehicle could not be attached. The RTC issued an
order denying Guy's motion, explaining that considering QSC was not a
corporation, but a registered partnership, Guy should be treated as a
general partner pursuant to Section 21 of the Corporation Code, and he may
be held jointly and severally liable with QSC and Medestomas. The CA
rendered the assailed decision dismissing Guy's appeal for the same reasons
given by the trial
Issue
- What is the obligation of a partner with respect to the partnership

liabilities
Ruling
Partners' liability is subsidiary and generally joint; therefore, immediate levy

upon the property of a partner cannot be made.
Granting that Guy was properly impleaded in the complaint, the execution of
judgment would be improper. Article 1816 of the Civil Code governs the
liability of the partners to third persons, which states that:
“Article 1816. All partners, including industrial ones, shall be liable pro
rata with all their property and after all the partnership assets have
been exhausted, for the contracts which may be entered into in the name
and for the account of the partnership, under its signature and by a person
authorized to act for the partnership. However, any partner may enter into a
separate obligation to perform a partnership contract.”
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Submitted by:
Civil Law Review II
Firstly, the partners' obligation with respect to the partnership liabilities is

subsidiary in nature. It provides that the partners shall only be liable with
their property after all the partnership assets have been exhausted. To say
that one's liability is subsidiary means that it merely becomes secondary and
only arises if the one primarily liable fails to sufficiently satisfy the
obligation. Resort to the properties of a partner may be made only after
efforts in exhausting partnership assets have failed or that such partnership
assets are insufficient to cover the entire obligation. The subsidiary nature of
the partners' liability with the partnership is one of the valid defenses
against a premature execution of judgment directed to a partner.
In this case, had he been properly impleaded, Guy's liability would only arise
after the properties of QSC would have been exhausted. The records,
however, miserably failed to show that the partnership's properties were
exhausted. Clearly, no genuine efforts were made to locate the properties of
QSC that could have been attached to satisfy the judgment - contrary to the
clear mandate of Article 1816. Being subsidiary liable, Guy could only be
held personally liable if properly impleaded and after all partnership assets
had been exhausted.
Title: VITUG VS. ABUDA, 778 SCRA 609, January 11, 2016
Nature: Petition for Review on Certiorari on the decision and resolution of

the Court of Appeals.
Ponente: J. LEONEN. Second Division
Statement of Facts
Abuda loaned P250,000.00 to Vitug and his wife, Narcisa Vitug which was
secured by a mortgage of Vitug’s property in Tondo Foreshore along R-10,
Block A-50-3, Del Pan to Kagitingan Streets, Tondo, Manila. The property
was then a subject of a conditional Contract to Sell between the National
Housing Authority and Vitug. Pertinent portions of the mortgage deed reads:
That, with the full consent of wife Narcisa Vitug, hereby mortgage to
Evangeline A. Abuda, with full consent of husband Paulino Abuda, said
property for TWO HUNDRED FIFTY THOUSAND PESOS ONLY (P250,000.00),
in hand paid by Mortgagee and in hand received to full satisfaction by
Mortgagor, for SIX MONTHS (6) within which to pay back the full amount
plus TEN PERCENT (10%) agreed interest per month counted from the date
stated hereon;
That, upon consummation and completion of the sale by the NHA of said
property, the title-award thereof, shall be received by the Mortgagee by
virtue of a Special Power of Attorney, executed by Mortgagor in her favor,
authorizing Mortgagee to expedite, follow-up, cause the release and to
received [sic] and take possession of the title award of the said property
from the NHA, until the mortgage amount is fully paid for and settled.
In letters, D.M. Consunji, Inc. informed PNR and the other parties
that DMCI-PDI shall be its designated nominee for all the
agreements it entered and would enter with them in connection with
the railroad project.
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Submitted by:
Civil Law Review II
On November 17, 1997, the parties executed a "restructured" mortgage
contract on the property to secure the amount of P600,000.00 representing
the original P250,000.00 loan, additional loans, and subsequent credit
accommodations given by Abuda to Vitug with an interest of five (5) percent
per month. By then, the property was covered by Transfer Certificate of Title
No. 234246 under Vitug's name. Spouses Vitug failed to pay their loans
despite Abuda's demands. Abuda filed a Complaint for Foreclosure of
Property. The Regional Trial Court promulgated a Decision in favor of Abuda.
The CA affirmed with modification
Issue
- Whether the mortgage contract is valid.
Ruling
All the elements of a valid mortgage contract were present. For a mortgage
contract to be valid, the absolute owner of a property must have free
disposal of the property and that the property must be used to secure the
fulfillment of an obligation. Pursuant to Article 2085 of the Civil Code, it
provides that:
Art. 2085. The following requisites are essential to contracts of pledge and
mortgage:
(1) That they be constituted to secure the fulfillment of a principal

obligation;
(2) That the pledgor or mortgagor be the absolute owner of the thing
pledged or mortgaged;
(3) That the persons constituting the pledge or mortgage have the free
disposal of their property, and in the absence thereof, that they be
legally authorized for the purpose.
Petitioner, who held under his name a transfer certificate of title to the
property, mortgaged the property to respondent to secure the payment of
his loan of P600,000.00.
Petitioner claims that he only borrowed P250,000.00 and that he was only
made to sign another mortgage contract whose terms he did not agree to.
These claims were already found by the trial court and the Court of Appeals
to be unsupported by evidence. Petitioner's consent to the mortgage
contract dated November 17, 1997 was not vitiated. He voluntarily signed it
in the presence of a notary public, his wife, and other witnesses. Further, the
amount of P600,000.00 under the November 17, 1997 mortgage contract
represented the initial loan of P250,000.00 and the subsequent loan
amounts, which were found to have been actually released to petitioner. The
November 17, 1997 mortgage contract reflected the changes in the parties'
obligations after they executed the March 17, 1997 mortgage contract.
The mortgage contract entered into by petitioner and respondent contains all
the elements of a valid contract of mortgage. The trial court and the Court of
Appeals found no irregularity in its execution. There was no showing that it
was attended by fraud, illegality, immorality, force or intimidation, and lack
of consideration.
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Submitted by:
Civil Law Review II
Title: GAERLAN VS PHILIPPINE NATIONAL BANK, G.R. No. 217356,
September 07, 2016
Nature: Petition for Review on Certiorari under Rule 45 of the Rules of

Court.
Ponente: J. MENDOZA Second Division
Statement of Facts
The Supreme Marine Company, Inc. (SMCI) and MGG Marine Services, Inc.
(MGG) obtained from Philippine National Bank (PNB) a 5-year FCDU4 term
loan of not exceeding US$4,000,000.00 and a domestic bills purchase line
(DBP line) not exceeding P10,000,000.00. This agreement was embodied in
a Credit Agreement, signed by Robert S. Jaworski (Jaworski), President of
SMCI and petitioner Doroteo Gaerlan (Gaerlan), President and General
Manager of MGG, as borrowers, and Inocencio Deza, Jr., Executive Vice-
President of PNB, as lender. The loan had an annual interest rate
equivalent to 90-day London inter-bank offered rate plus spread of
2.5% from initial drawdown until its full payment. The loan proceeds
would be utilized to finance the construction of a double hull oil tanker called
Arabian Horse II, a joint business venture of SMCI and MGG.
To secure the loan, Gaerlan and Jaworski executed the Chattel Mortgage
with Power of Attorney over the vessel and, as additional security and by
way of payment to the loan, Gaerlan, as president of MGG, executed the
Deed of Assignment in favor of PNB, pertaining to its monthly income of at
least P6,000,000.00 arising from the proceeds of the Consecutive Voyage
Charter Party between Petron Corporation (Petron) and MGG.
When SMCI and MGG defaulted in the payment of their loan obligation, PNB
sent a demand letter but it was unheeded.
To protect its interest, PNB instituted a petition for the extrajudicial

foreclosure sale of Spouses Gaerlan's real property. The public auction sale
was held on February 20, 2001, with PNB as the winning and highest bidder.
The bid price amounting to P35,875,000.00 was applied as partial payment
of the loan obligation of SMCI and MGG, which amounted to
P520,647,758.5512 as of February 13, 2001. Thereafter, the Certificate of
Sale was issued and recorded on February 13, 2002.
On January 3, 2002, Gaerlan filed a complaint before the RTC-QC for the
nullification of contracts of loan, real estate mortgage and extrajudicial
foreclosure sale. RTC declared the contracts of loan and extrajudicial
foreclosure sale null and void and releasing Gaerlan from liability. The CA
reversed and set aside the decision of the RTC.
Issue
- Whether stipulated interest on the contract of loan was usurious
Ruling
It bears stressing that the court finds the same to be untenable. The law and
jurisprudence empowers the courts to temper interest rates and penalty
charges that are iniquitous, unconscionable and exorbitant. In exercising this
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Submitted by:
Civil Law Review II
vested power, however, the Court must consider the circumstances of the
case for what may be iniquitous and unconscionable in one may be totally
just and equitable in another. In the present case, petitioner failed to show
that the stipulated rate of interest was indeed exorbitant. He did not present
the Omnibus Agreement after the loan contract was restructured or any
other evidence to support his claim.
Title: CALILUNG VS PARAMOUNT INSURANCE CORPORATION, G.R. No.

195641, July 11, 2016
Nature: Petition for Review
Ponente: J. BERSAMIN, First Division
Statement of Facts
Sometime in 1987, Tarcisio S. Calilung, herein respondent, commissioned

Renato Punzalan, President of the RP Technical Services, Inc. (RPTS1), a
domestic corporation, also impleaded as respondent, of his desire to buy
shares of stocks (sic) worth P1,000,000.00 from RPTSI. During the
consultation meeting among the officers and stockholders of RPTSI, they did
not agree with Calilung's proposal because he will be in complete control of
the corporation. Instead, he allowed to buy P2,820.00 worth of shares with
the understanding that the remaining balance of P718,750.00 would be
invested to finance Shell Station Project in Batangas then being undertaken
by respondent RPTSI.
Thereafter, the respondent Punzalan, on behalf of RPTSI, executed a

promissory note in favor of Calilung in the amount of P718,750 with 14%
interest per annum, payable on or before April 9, 1988. The payment of this
promissory note was guaranteed by petitioner Paramount Insurance
Corporation (Paramount) under Surety Bond No. G (16) 7003 dated October
27, 1987. On the same date, Punzalan and Jose Manalo, Jr., another officer
of RPTSI, executed an indemnity agreement to the effect that Paramount
would be reimbursed of all expenses it will incur under the surety bond.
However, RPTSI failed to pay Calilung the amount stated in the promissory
note when it fell due, prompting him to file with the RTC a complaint for sum
of money against RPTSI and Paramount, docketed as Civil Case No. 56194.
For its part, Paramount filed a third party complaint against RPTSI and its
corporate officers, Punzalan and Manalo, Jr., seeking reimbursement for all
expenses it may incur under the surety bond.
Issue
- What is the rate of interest on the debt decreed in a final and

executory decision.
Ruling
The judgment directed the respondents to pay to the petitioner the principal
amount of P718,750.00, plus interest of 14% per annum from October 7,
1987 until full payment; 5% of the amount due as attorney's fees; and the
costs of suit. Being already final and executory, it is immutable, and can no
longer be modified or otherwise disturbed. Its immutability is grounded on
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Submitted by:
Civil Law Review II
fundamental considerations of public policy and sound practice, which
demand that the judgment of the courts, at the risk of occasional errors,
must become final at some definite date set by law or rule. Indeed, the
proper enforcement of the rule of law and the administration of justice
require that litigation must come to an end at some time; and that once the
judgment attains finality, the winning party should not be denied the fruits
of his favourable result. The only interest to be collected from the
respondents is the 14% per annum on the principal obligation of
P718,750.00 reckoned from October 7, 1987 until full payment. There was
no basis for the petitioner to claim compounded interest pursuant to Article
2212 of the Civil Code considering that the judgment did not include such
obligation. As such, neither the RTC nor any other court, including this
Court, could apply Article 2212 of the Civil Code because doing so would
infringe the immutability of the judgment. Verily, the execution must
conform to, and not vary from, the decree in the final and immutable
judgment.
In accordance with the express terms of the judgment, the respondents'

obligation to pay the 14% interest per annum was joint and several. This
meant that the respondents were in passive solidarity in relation to the
petitioner as their creditor, enabling him to compel either or both of them to
pay the entire obligation to him. Stated differently, each of the respondents
was a debtor of the whole as to the petitioner, but each respondent, as to
the other, was only a debtor of a part.
Title: EVER ELECTRICAL MANUFACTURING, INC. VS PHILIPPINE BANK OF

COMMUNICATIONS (PBCOM), G.R. Nos. 187822-23. August 3, 2016
Nature: Petition for Review on Certiorari.
Pontente: J. REYES, Third Division
Statement of Facts
Ever Electrical, represented by Vicente, took out a loan from PBCom in the
amount of P65,000,000.00 for its working capital. As security, Ever
mortgaged two parcels of land covered by Transfer Certicates of Title (TCT)
Nos. T- 61475 and T-61476 with areas of 10,025 square meters and 9,117
sq m, respectively, located at National Road, Barangay Makiling, Calamba,
Laguna. Subsequently, Ever executed Promissory Note No.
8200013327, which stated that the loan had a maturity date of December
27, 2010, and an interest rate of 8.5937% per annum for 10 years.
On February 14, 2003, the parties entered into a compromise agreement
whereby Vicente voluntarily undertook to pay for Ever's loan with PBCom.
Under the terms of the compromise agreement, Vicente would make partial
payments as stated in the promissory note with a caveat that any failure on
his part to pay the instalment due would make the whole amount
immediately demandable.
On February 21, 2003, the RTC approved the compromise

agreement. Consequently, the loan was restructured.
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Submitted by:
Civil Law Review II
However, Vicente was not able to make the necessary payments as
stipulated in the compromise agreement. PBCom, thus, led with the RTC a
motion for execution. PBCom alleged that Vicente violated the terms of the
compromise agreement for non- payment of instalments from September to
December 2003 and the rest of the quarter of 2004
Issue
- Whether the compromise agreement, which was judicially approved,
the same novated the original loan agreement.
Ruling
The Court disagrees.
Under the Civil Code, novation is one of the means to extinguish an

obligation. This is done either by changing the object or principal conditions,
by substituting the person of the debtor, or by subrogating a third person in
the rights of the creditor. It is a relative extinguishment since a new
obligation is created in lieu of the old obligation. The following requisites
must be met for novation to take place: (1) There must be a previous valid
obligation; (2) There must be an agreement of the parties concerned to a
new contract; (3) There must be the extinguishment of the old contract;
and (4) There must be the validity of the new contract.
However, novation is never presumed. Article 1292 of the Civil Code

provides:
Art. 1292. In order that an obligation may be extinguished by another which
substitutes the same, it is imperative that it be so declared in unequivocal
terms, or that the old and the new obligations be on every point
incompatible with each other. It must be established that the old and new
contracts are incompatible on all points, or that the will to novate appear by
express agreement of the parties or acts of equivalent import.
In the absence of an express provision, a contract may still be considered

novated impliedly if it passes the test of incompatibility, that is, whether
the contracts can stand together, each one having an independent
existence.
In the present case, the compromise agreement entered into by the parties
does not contain any provision releasing Ever (the debtor) from its liability to
PBCom (the lender).
Further, under the terms of the agreement, Vicente is an additional person

who would ensure that the loan of Ever to PBCom would be paid. Under the
rules of novation, the mere act of adding another person to be personally
liable, who in this case is Vicente, did not constitute novation since there
was no agreement to release Ever from its responsibility to PBCom. Thus,
absent the release of Ever from the original obligation, PBCom may still
enforce the obligation against it.Since there was no novation, PBCom may
proceed to collect from the original debtor, ever, under the terms of the
original loan agreement. The Court holds that there was no irregularity in
the issuance of the writ of execution, levy on the properties and the
subsequent sale of the auction sale.
Title: LAM VS. KODAK PHILIPPINES, LTD., 778 SCRA 96, January 11, 2016
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Submitted by:
Civil Law Review II
Nature: PETITION for review on certiorari of the decision and amended
decision of the Court of Appeals.
Ponente: J. LEONEN, Second Division
Statement of Facts
The Lam Spouses and Kodak Philippines, Ltd. entered into an agreement
(Letter Agreement) for the sale of three (3) units of the Kodak Minilab
System 22XL6 (Minilab Equipment) in the amount of ₱1,796,000.00 per unit.
On January 15, 1992, Kodak Philippines, Ltd. delivered one (1) unit of the
Minilab Equipment in Tagum, Davao Province. The delivered unit was
installed by Noritsu representatives on March 9, 1992.
The Lam Spouses issued postdated checks amounting to ₱35,000.00 each

for 12 months as payment for the first delivered unit, with the first check
due on March 31, 1992. The Lam Spouses requested that Kodak Philippines,
Ltd. not negotiate the check dated March 31, 1992 allegedly due to
insufficiency of funds. The same request was made for the check due on
April 30, 1992. However, both checks were negotiated by Kodak Philippines,
Ltd. and were honored by the depository bank. The 10 other checks were
subsequently dishonored after the Lam Spouses ordered the depository bank
to stop payment. Kodak Philippines, Ltd. canceled the sale and demanded
that the Lam Spouses return the unit it delivered together with its
accessories. The Lam Spouses ignored the demand but also rescinded the
contract through the letter dated November 18, 1992 on account of Kodak
Philippines, Ltd.’s failure to deliver the two (2) remaining Minilab Equipment
units.
Hence, the Kodak Philippines, Ltd. filed a Complaint for replevin and/or
recovery of sum of money. The trial court issued the Decision in favor of
Kodak Philippines, Ltd. The Court of Appeals agreed with the trial court’s
Decision.
Issue
- Whether the contract between petitioners Spouses Alexander and Julie

Lam and respondent Kodak Philippines, Ltd. pertained to obligations
that are severable, divisible, and susceptible of partial performance
under Article 1225 of the New Civil Code
Ruling
Under the , the intention of the parties was for there to be a single
transaction covering all three (3) units of the Minilab Equipment.
Respondent’s obligation was to deliver all products purchased under a
"package," and, in turn, petitioners’ obligation was to pay for the total
purchase price, payable in installments. The intention of the parties to bind
themselves to an indivisible obligation can be further discerned through their
direct acts in relation to the package deal. There was only one agreement
covering all three (3) units of the Minilab Equipment and their accessories.
The Letter Agreement specified only one purpose for the buyer, which was to
obtain these units for three different outlets. If the intention of the parties
were to have a divisible contract, then separate agreements could have been
made for each Minilab Equipment unit instead of covering all three in one
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Civil Law Review II
package deal. Furthermore, the 19% multiple order discount as contained in
the Letter Agreement was applied to all three acquired units.99 The "no
downpayment" term contained in the Letter Agreement was also applicable
to all the Minilab Equipment units. Lastly, the fourth clause of the Letter
Agreement clearly referred to the object of the contract as "Minilab
Equipment Package."
Article 1225. For the purposes of the preceding articles, obligations to give
definite things and those which are not susceptible of partial performance
shall be deemed to be indivisible. When the obligation has for its object the
execution of a certain number of days of work, the accomplishment of work
by metrical units, or analogous things which by their nature are susceptible
of partial performance, it shall be divisible. However, even though the object
or service may be physically divisible, an obligation is indivisible if so
provided by law or intended by the parties. (Emphasis supplied)
An obligation is indivisible when it cannot be validly performed in parts,

whatever may be the nature of the thing which is the object thereof. The
indivisibility refers to the prestation and not to the object thereof. In the
present case, the Deed of Sale of January 29, 1970 supposedly conveyed
the six lots to Natividad. The obligation is clearly indivisible because the
performance of the contract cannot be done in parts otherwise the value of
what is transferred is diminished. Petitioners are therefore mistaken in
basing the indivisibility of a contract on the number of obligors. There is no
indication in the Letter Agreement that the units petitioners ordered were
covered by three (3) separate transactions. The factors considered by the
Court of Appeals are mere incidents of the execution of the obligation, which
is to deliver three units of the Minilab Equipment on the part of respondent
and payment for all three on the part of petitioners. The intention to create
an indivisible contract is apparent from the benefits that the Letter
Agreement afforded to both parties. Petitioners were given the 19% discount
on account of a multiple order, with the discount being equally applicable to
all units that they sought to acquire. The provision on "no downpayment"
was also applicable to all units. Respondent, in turn, was entitled to payment
of all three Minilab Equipment units, payable by installments.
Title: HAPITAN VS. LAGRADILLA, 780 SCRA 288, January 13, 2016
Nature: Petition for review on certiorari of the decision and resolution of the
Court of Appeals.
Ponente: J. JARDELEZA, Third Division
Statement of Facts
Respondent Esmeralda Blacer Hapitan (Esmeralda) issued thirty-one (31)

United Coconut Planters Bank (UCPB) checks in various amounts in the total
amount of P510,463.98, payable to the order of respondent Warlily
Lagradilla (Warlily). The checks were dishonored by UCPB for reasons of
"account closed" when presented for payment by
Warlily.5chanroblesvirtuallawlibrary
On January 6, 1995, Warlily, with her husband Jimmy Lagradilla (Jimmy),

filed a civil case for sum of money against Nolan (Nolan) and Esmeralda
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Civil Law Review II
Hapitan, Ilona Hapitan (llona), and Spouses Jessie and Ruth Terosa
(Spouses Terosa), with a prayer that a writ for preliminary attachment be
issued against the real property of Esmeralda and Nolan, consisting of a
house and lot, as security for the satisfaction of any judgment that might be
recovered, which in their complaint Jimmy and Warlily alleged that they
made several demands on Nolan and Esmeralda for the latter to settle their
outstanding obligations. The latter spouses promised to convey and transfer
to Jimmy and Warlily the title of their house and lot, located at Barangay M.
V. Hechanova, Jaro, Iloilo City. The lot was covered by TCT No. T-103227 in
the name of Nolan and Esmeralda. Jimmy and Warlily later found out that
Nolan and Esmeralda separately executed a Special Power of Attorney (SPA)
designating Ilona, Nolan's sister, as their attorney-in-fact for the sale of the
same property. Jimmy and Warlily alleged that the property was fraudulently
sold to Spouses Terosa and that Nolan and Esmeralda were about to depart
from the Philippines with the intent to defraud their creditors;
Therefore, the prayer for the issuance of preliminary attachment of the

house and lot was made. The RTC rendered its Decision, ruling in favor of
Jimmy and Warlily where the CA agreed in toto.
Issue
- Whether the compromise agreement is valid
Ruling
A compromise agreement is defined as a contract whereby the parties make

reciprocal concessions in order to resolve their differences and thus avoid or
put an end to a lawsuit.
To have the force of law between the parties, a compromise agreement must
comply with the requisites and principles of contracts. Thus, it must have the
following elements: 1) the consent of the parties to the compromise; 2) an
object certain that is the subject matter of the compromise; and 3) the
cause of the obligation that is established.
The court said that while compromise agreements are generally favored and
encouraged by the courts, it must be proved that they were voluntarily,
freely, and intelligently entered into by the parties, who had full knowledge
of the judgment.46 The allegations of Jimmy and Warlily cast doubt on
whether they fully understood the terms of the Amicable Settlement when
they signed it. They further argued that they did not fully comprehend the
CA Decision in their favor. Thus, it may be reasonably inferred that Jimmy
and Warlily did not give consent to the Amicable Settlement with Nolan and
Ilona.
Title: BASES CONVERSION DEVELOPMENT AUTHORITY VS. DMCI PROJECT

DEVELOPERS, INC., 778 SCRA 216, January 11, 2016
Nature: Petition for review on certiorari of the decision and order of the
Regional Trial Court of Makati City, Branch 150.
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Submitted by:
Civil Law Review II
Statement of Facts
On February 8, 1996, BCDA and the other parties to the Joint Venture
Agreement, including D.M. Consunji, Inc. and/or its nominee, entered into
a Memorandum of Agreement. Under this agreement, the parties agreed
that the initial seed capital of P600 million shall be infused to Northrail. Of
that amount, P200 million shall be D.M. Consunji, Inc.'s share, which shall
be converted to equity upon Northrail’s privatization. Later, D.M. Consunji,
Inc.'s share was increased to P300 million.
Upon BCDA and Northrail's request, DMCI Project Developers, Inc. (DMCI-
PDI) deposited P300 million into NorthraiPs account with Land Bank of the
Philippines. The deposit was made on August 7, 199618for its "future
subscription of the Northrail shares of stocks." In NorthraiPs 1998 financial
statements submitted to the Securities and Exchange Commission, this
amount was reflected as "Deposits For Future Subscription." At that time,
NorthraiPs application to increase its authorized capital stock was still
pending with the Securities and Exchange Commission.
DMCI-PDI served a demand for arbitration to BCDA and Northrail, citing the
arbitration clause in the June 10, 1995 Joint Venture Agreement. 37 BCDA
and Northrail failed to respond.
DMCI-PDI filed before the Regional Trial Court of Makati a Petition to Compel
Arbitration against BCDA and Northrail, pursuant to the alleged arbitration
clause in the Joint Venture Agreement. The trial court denied BCDA's and
Northrail's Motions to Dismiss and granted DMCI-PDI's Petition to Compel
Arbitration.
Issue
- Whether or not the arbitration clause in the Joint Venture Agreement

should be interpreted as applicable only to the Joint Venture
Agreement's original parties.
Ruling
There is no rule that a contract should be contained in a single document. A

whole contract may be contained in several documents that are consistent
with one other. Moreover, at any time during the lifetime of an agreement,
circumstances may arise that may cause the parties to change or add to the
terms they previously agreed upon.
Thus, amendments or supplements to the agreement may be executed by

contracting parties to address the circumstances or issues that arise while a
contract subsists. When an agreement is amended, some provisions are
changed. Certain parts or provisions may be added, removed, or corrected.
These changes may cause effects that are inconsistent with the wordings of
the contract before the changes were applied. In that case, the old
provisions shall be deemed to have lost their force and effect, while the
changes shall be deemed to have taken effect. Provisions that are not
affected by the changes usually remain effective.
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Submitted by:
Civil Law Review II
A reading of all the documents of agreement shows that they were executed
by the same parties. Initially, the Joint Venture Agreement was executed
only by BCD A, PNR, and the foreign corporations. When the Joint Venture
Agreement was amended to include D.M. Consunji, Inc. and/or its nominee,
D.M. Consunji, Inc. and/or its nominee were deemed to have been also a
party to the original Joint Venture Agreement executed by BCDA, PNR, and
the foreign corporations. D.M. Consunji, Inc. and/or its nominee became
bound to the terms of both the Joint Venture Agreement and its amendment.
In other words, each document of agreement represents a step toward the

implementation of the project, such that the three agreements must be read
together for a complete understanding of the parties' whole agreement. The
Joint Venture Agreement, the amended Joint Venture Agreement, and the
Memorandum of Agreement should be treated as one contract because they
all form part of a whole agreement.
Hence, the arbitration clause in the Joint Venture Agreement should

not be interpreted as applicable only to the Joint Venture
Agreement's original parties. The succeeding agreements are deemed
part of or a continuation of the Joint Venture Agreement. The arbitration
clause should extend to all the agreements and its parties since it is still
consistent with all the terms and conditions of the amendments and
supplements.
Title: DEPARTMENT OF AGRARIAN REFORM, QUEZON CITY VS. CARRIEDO,

781 SCRA 301, January 20, 2016
Court of Appeals.
Statement of Facts
The land originally formed part of the agricultural land covered by Transfer
Certificate of Title (TCT) No. 17680,5which in turn, formed part of the total
of 73.3157 hectares of agricultural land owned by Roman De Jesus (Roman).
On May 23, 1972, petitioner Pablo Mendoza (Mendoza) became the tenant of
the land by virtue of a Contrato King Pamamuisan7 executed between him
and Roman. Pursuant to the Contrato, Mendoza has been paying twenty-five
(25) piculs of sugar every crop year as lease rental to Roman. It was later
changed to Two Thousand Pesos (P2, 000.00) per crop year, the land being
no longer devoted to sugarcane.
On November 7, 1979, Roman died leaving the entire 73.3157 hectares to

his surviving wife Alberta Constales (Alberta), and their two sons Mario De
Jesus (Mario) and Antonio De Jesus (Antonio).9 On August 23, 1984, Antonio
executed a Deed of Extrajudicial Succession with Waiver of Right which
made Alberta and Mario co-owners in equal proportion of the agricultural
land left by Roman.
On June 26, 1986, Mario sold approximately 70.4788 hectares to respondent

Romeo C. Carriedo (Carriedo), covered by the following titles and tax
13
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Civil Law Review II
declarations, to wit: 1. TCT No. 35055, 2. (Tax Declaration) TD No. 48354,
3. TCT No. 17681, 4. TCT No. 56897; and 5. TCT No. 17680
The area sold to Carriedo included the land tenanted by Mendoza (forming
part of the area covered by TCT No. 17680). Mendoza alleged that the sale
took place without his knowledge and consent.
In June of 1990, Carriedo sold all of these landholdings to the Peoples’

Livelihood Foundation, Inc. (PLFI) represented by its president, Bernabe
Buscayno.13 All the lands, except that covered by TCT No. 17680, were
subjected to Voluntary Land Transfer/Direct Payment Scheme and were
awarded to agrarian reform beneficiaries in 1997.
The parties to this case were involved in three cases concerning the land, to
wit: The Ejectment Case, The Redemption Case; and The Coverage Case.
Issue
- Whether Carriedo’s alleged failure to exercise his right of retention

after a long period of time constituted a waiver of his retention rights
Ruling
The court in this case, firmly disagrees.
The court said that, laches is defined as the failure or neglect for an
unreasonable and unexplained length of time, to do that which by exercising
due diligence could or should have been done earlier; it is negligence or
omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to assert it either has abandoned it or
declined to assert it. Where a party sleeps on his rights and allows laches to
set in, the same is fatal to his case.
In fact, Section 4 of DAR AO 02-03 provides:
Section 4. Period to Exercise Right of Retention

under RA 6657
4.1 The landowner may exercise his right of

retention at any time before receipt of notice of
coverage.
4.2 Under the Compulsory Acquisition (CA) scheme,

the landowner shall exercise his right of retention
within sixty (60) days from receipt of notice of
coverage.
4.3 Under the Voluntary Offer to Sell (VOS) and the

Voluntary Land Transfer (VLT)/Direct Payment
Scheme (DPS), the landowner shall exercise his right
of retention simultaneously at the time of offer for
sale or transfer.
Thus, the foregoing rules give Carriedo any time before receipt of the notice
of coverage to exercise his right of retention, or if under compulsory
acquisition (as in this case), within sixty (60) days from receipt of the notice
of coverage. The validity of the notice of coverage is the very subject of the
controversy before this court. Thus, the period within which Carriedo should
14
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Civil Law Review II
exercise his right of retention cannot commence until final resolution of this
case.
Now, even assuming in arguendo that the period within which Carriedo could
exercise his right of retention has commenced, still Carriedo cannot be said
to have neglected to assert his right of retention over the land. The records
show that per Legal Report dated December 13, 1999 prepared by Legal
Officer Ariel Reyes, Carriedo filed an application for retention which was even
contested by Pablo Mendoza’s son, Fernando. Though Carriedo subsequently
withdrew his application, his act of filing an application for retention belies
the allegation that he abandoned his right of retention or declined to assert
it.
Title: DE GUZMAN, JR. VS. COURT OF APPEALS, MINDANAO STATION, 785

SCRA 382, March 02, 2016
Court of Appeals, Mindanao Station.
Ponente: J. JARDELEZA, Third Division.
Statement of Facts
This case covers the property of a 480-square meter lot that formed part of
Lot No. 532 located at North Poblacion, Medina, Misamis Oriental. Lot No.
532, which has a total area of 25,178 square meters, was acquired by
Lamberto Bajao's (respondent) parent.
Petitioners acquired the property in two transactions. Both transactions were

evidenced by separate Deeds of Absolute Sale. Spouses Bajao allegedly
promised to segregate the property from the remaining area of Lot No.
53212 and to deliver a separate title to petitioners covering it. However,
because the promise was not forthcoming, petitioner Lydia S. de Guzman
executed an Affidavit of Adverse Claim on April 21, 1980 covering the
property. The petitioners initiated the segregation of the property which the
petitioners acquired Lot 2-A, Psd-10-002692. They allegedly acquired
possession over the land immediately, fenced the area, introduced
improvements, and planted it with fruit-bearing trees. On December 16,
1980, respondent caused the cancellation of petitioners' annotated adverse
claim over the property and later obtained Transfer Certificate of Title (TCT)
No. T-7133 on February 13 and October 2, 1981. Petitioners thereafter
requested respondent to deliver TCT No. T-7133 so they could present it to
the Register of Deeds, together with the two Deeds of Absolute Sale, for
proper annotation.26 Respondent, however, refused to heed their request.
Because of this, the petitioners filed a Complaint for Reconveyance with Writ
of Preliminary Mandatory Injunction and Damages. RTC ruled in favor of the
plaintiffs. CA reversed.
Issue
- Whether or not there is an implied trust
15
Submitted by:
Civil Law Review II
Ruling
Article 145688 of the Civil Code provides that a person acquiring property
through mistake or fraud becomes, by operation of law, a trustee of an
implied trust for the benefit of the real owner of the property.
An action for reconveyance based on an implied trust generally prescribes in

10 years, the reckoning point of which is the date of registration of the deed
or the date of issuance of the certificate of title over the property. Thus,
petitioners had 10 years from 1981 or until 1991 to file their complaint for
reconveyance of property. The Complaint, however, was filed only on
January 21, 2000, or more than 10 years from the issuance of TCT No. T-
7133. Hence, the action is already barred by prescription. The exception to
the ten-year rule on prescription is when the plaintiff is in possession of the
land to be reconveyed. In such case, the action becomes one for quieting of
title, which is imprescriptible. Here, petitioners allege that they were in
juridical possession of the property from the time they put up a fence on it
until the filing of the Complaint. Respondent disputes this claim, countering
that petitioners are not in actual and material possession of the property.
Whether petitioners have actual possession of the lot is a question of fact.
We have repeatedly ruled that a petition for review on certiorari under Rule
45 of the Rules of Court shall raise only questions of law and not questions
of Statement of Facts. When supported by substantial evidence, the findings
of fact of the CA are conclusive and binding on the parties and are not
reviewable by us, unless the case falls under any of the recognized
exceptions. Petitioners never raised any of these exceptions. Assuming they
did, none of the exceptions would apply.
Title: BUENAVENTURA VS METROPOLITAN BANK AND TRUST COMPANY,

G.R. No. 167082,
Court of Appeals.
Statement of Facts
This case was premised on Teresita Buenaventura’s act when she executed
Promissory Note (or "PN") Nos. 232663 and 232711, respectively, each in
the amount of Pl,500,000.00 and payable to Metropolitan Bank and Trust
Company (or "appellee"). 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
16
Submitted by:
Civil Law Review II
P2,061,208.08 and Pl ,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
The RTC ruled infavor of Metropolitan Bank and Trust Company. The CA
affirmed.
Issue
- Whether legal subrogation should be presumed
Ruling
The court held that a Legal subrogration finds no application because there
is no evidence showing that Imperial, the issuer of the checks, had
consented to the
subrogation, expressly or impliedly. In fact, this particular circumstance was
pointed out by the RTC itself. Also, as the CA emphatically observed, the
argument was off-tangent because the suit was not for the recovery of
money by virtue of
the checks of Imperial but for the enforcement of her obligation as the
maker
of the promissory notes.
Title: VICENTE D. CABANTING AND LALAINE V. CABANTING VS. BPI

FAMILY SAVINGS BANK, INC., G.R. 201927 February 17, 2016
Ponente: J. Peralta, Third Division
Statement of Facts
This case was commenced when Cabanting bought from Diamond Motors /
BPI a car on instalment basis for which a promissory note with chattel
mortgage was executed. One of the stipulations was that any failure to pay
an amount on schedule will make the entire outstanding sum to become due
and payable without prior notice and demand. When the two Cabantings
failed to pay some monthly amortizations, BPI sued them for replevin and
damages. Decision was rendered ordering them to pay the car’s unpaid
value with damages. The respondents appealed the decision claiming that
there has been no proof of prior demand and that the stipulation on its
waiver must be deemed invalid for being a contract of adhesion.
ISSUE/S
- WON a stipulation waiving the necessity of notice and demand is valid

- WON a contract of adhesion such as in this case is valid
- WON a prior demand is required in actions for replevin
RULING 1: Yes. Article 1169 of the Civil Code provides that one incurs in
delay or is in default from the time the obligor demands the fulfillment of the
obligation from the obligee. However, Article 1169 (1) also expressly
17
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Civil Law Review II
provides that demand is not necessary under certain circumstances, and one
of these circumstances is when the parties expressly waive demand.
RULING 2: Yes. A contract of adhesion is just as binding as ordinary

contracts. Such are not invalid per se and are not entirely prohibited
because the one who adheres to the contract is in reality free to reject it
entirely. If the other party adheres, he gives his consent. The court may
strike down such contracts as void when the weaker party is deprived of the
opportunity to bargain at an equal footing.
A contract of adhesion, wherein one party imposes a ready-made form of

contract on the other, is not strictly against the law. A contract of adhesion
is as binding as ordinary contracts, the reason being that the party who
adheres to the contract is free to reject it entirely. Contrary to petitioner's
contention, not every contract of adhesion is an invalid agreement. As we
had the occasion to state in Development Bank of the Philippines v. Perez:
xxx
In discussing the consequences of a contract of adhesion, we held in Rizal
Commercial Banking Corporation v. Court of Appeals:
It bears stressing that a contract of adhesion is just as binding as

ordinary contracts. It is true that we have, on occasion, struck down
such contracts as void when the weaker party is imposed upon in
dealing with the dominant bargaining party and is reduced to the
alternative of taking it or leaving it, completely deprived of the
opportunity to bargain on equal footing, Nevertheless, contracts of
adhesion are not invalid per se; they arc not entirely prohibited. The
one who adheres to the contract is in reality free to reject it entirely; if
he adheres, he gives his consent.
The validity or enforceability of the impugned contracts will have to be

determined by the peculiar circumstances obtaining in each case and the
situation of the parties concerned. Indeed, Article 24 of the New Civil Code
provides that "[in] all contractual, property or other relations, when one of
the parties is at a disadvantage on account of his moral dependence,
ignorance, indigence, mental weakness, tender age, or other handicap, the
courts must be vigilant for his protection".
xxx
Here, there is no proof that petitioners were disadvantaged, uneducated or

utterly inexperienced in dealing with financial institutions; thus, there is no
reason for the court to step in and protect the interest of the supposed
weaker party.
RULING 3: No. Prior demand is not a condition precedent to an action for a

writ of replevin, since there is nothing in Section 2, Rule 60 of the Rules of
Court that requires the applicant to make a demand on the possessor of the
property before an action for a writ of replevin could be filed.
Title: IPAMS VS DE VERA, G.R. No. 205703, March 07, 2016
Nature:: Petition for review on certiorari,
Ponente: J. MENDOZA, Second Division
18
Submitted by:
Civil Law Review II
Statement of Facts
Petitioner Industrial Personnel & Management Services, Inc. (IPAMS) is a

local placement agency duly organized and existing under Philippine laws,
with petitioner Angelito C. Hernandez as its president and managing
director. Petitioner SNC Lavalin Engineers & Contractors, Inc. (SNC-Lavalin)
is the principal of IPAMS, a Canadian company with business interests in
several countries. On the other hand, respondent Alberto Arriola (Arriola) is
a licensed general surgeon in the Philippines. Arriola was offered by SNC-
Lavalin, through its letter,5 dated May 1, 2008, the position of Safety Officer
in its Ambatovy Project site in Madagascar. The position offered had a rate
of CA$32.00 per hour for forty (40) hours a week with overtime pay in
excess of forty (40) hours. It was for a period of nineteen (19) months
starting from June 9, 2008 to December 31, 2009. Arriola was then hired by
SNC-Lavalin, through its local manning agency, IPAMS, and his overseas
employment contract was processed with the Philippine Overseas
Employment Agency (POEA)6 In a letter of understanding,7 dated June 5,
2008, SNC-Lavalin confirmed Arriola's assignment in the Ambatovy Project.
According to Arriola, he signed the contract of employment in the
Philippines.8 On June 9, 2008, Arriola started working in Madagascar. After
three months, Arriola received a notice of pre-termination of employment,
dated September 9, 2009, from SNC-Lavalin. It stated that his employment
would be pre-terminated effective September 11, 2009 due to diminishing
workload in the area of his expertise and the unavailability of alternative
assignments. Consequently, on September 15, 2009, Arriola was
repatriated. SNC-Lavalin deposited in Arriola's bank account his pay
amounting to Two Thousand Six Hundred Thirty Six Dollars and Eight
Centavos (CA$2,636.80), based on Canadian labor law.
Aggrieved, Arriola filed a complaint against the petitioners for illegal

dismissal and non-payment of overtime pay, vacation leave and sick leave
pay before the Labor Arbiter (LA).
The petitioners denied the charge of illegal dismissal against them. They
claimed that SNC-Lavalin was greatly affected by the global financial crises
during the latter part of 2008. The economy of Madagascar, where SNC-
Lavalin had business sites, also slowed down. As proof of its looming
financial standing, SNC-Lavalin presented a copy of a news item in the
Financial Post,10 dated March 5, 2009, showing the decline of the value of its
stocks. Thus, it had no choice but to minimize its expenditures and
operational expenses. It re-organized its Health and Safety Department at
the Ambatovy Project site and Arriola was one of those affected.11
The petitioners also invoked EDI-Staffbuilders International, Inc. v.

NLRC12 (EDI-Staffbuilders), pointing out that particular labor laws of a
foreign country incorporated in a contract freely entered into between an
OFW and a foreign employer through the latter's agent was valid. In the
present case, as all of Arriola's employment documents were processed in
Canada, not to mention that SNC-Lavalin's office was in Ontario, the
principle of lex loci celebrationis was applicable. Thus, the petitioners
insisted that Canadian laws governed the contract.
19
Submitted by:
Civil Law Review II
The petitioners continued that the pre-termination of Arriola's contract was
valid for being consistent with the provisions of both the Expatriate Policy
and laws of Canada. The said foreign law did not require any ground for
early termination of employment, and the only requirement was the written
notice of termination. Even assuming that Philippine laws should apply,
Arriola would still be validly dismissed because domestic law recognized
retrenchment and redundancy as legal grounds for termination.
Issue
- Whether or not the contract is valid
Ruling
The court held that a contract freely entered into should, of course, be
respected, as PIA argues, since a contract is the law between the parties.
The principle of party autonomy in contracts is not, however, an absolute
principle. The rule in Article 1306, of our Civil Code is that the contracting
parties may establish such stipulations as they may deem convenient,
"provided they are not contrary to law, morals, good customs, public order
or public policy." Thus, counterbalancing the principle of autonomy of
contracting parties is the equally general rule that provisions of applicable
law, especially provisions relating to matters affected with public policy, are
deemed written into the contract. Put a little differently, the governing
principle is that parties may not contract away applicable provisions of law
especially peremptory provisions dealing with matters heavily impressed
with public interest. The law relating to labor and employment is clearly such
an area and parties are not at liberty to insulate themselves and their
relationships from the impact of labor laws and regulations by simply
contracting with each other. x x x31
In this case, the Court held that the labor relationship between OFW and the
foreign employer is "much affected with public interest and that the
otherwise applicable Philippine laws and regulations cannot be rendered
illusory by the parties agreeing upon some other law to govern their
relationship."32 Thus, the Court applied the Philippine laws, instead of the
Pakistan laws. It was also held that the provision in the employment
contract, where the employer could terminate the employee at any time for
any ground and it could even disregard the notice of termination, violates
the employee's right to security of tenure under Articles 280 and 281 of the
Labor Code.
Title: PHILIPPINE NATIONAL BANK VS REYES, G.R. No. 212483, October 05,
2016
Nature: Petition for Review on Certiorari
Ponente: J. Leonen, Second Division
Statement of Facts
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[,]" while TCT No. 53994 was
registered under "Lilia C. Reyes, married to Venancio Reyes."
20
Submitted by:
Civil Law Review II
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. Regional Trial Court ordered
the annulment of the real estate mortgage and directed Lilia to reimburse
Philippine National Bank the loan amount with interest. CA affirmed.
Issue
- Whether or not the real estate of mortgage is valid
Ruling
The real estate mortgage over a conjugal property is void if the

non¬contracting 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.30chanrobleslaw
It is not disputed that the Reyes Spouses were married in 1973,31 before
the Family Code took effect. Under the Family Code, their property regime is
Conjugal Partnership of Gains; thus, Article 124 is the applicable provision
regarding te administration of their conjugal property. It states:
Art. 124. The administration and enjoyment of the conjugal partnership shall
belong to both spouses jointly. In case of disagreement, the husband's
decision shall prevail, subject to recourse to the court by the wife for proper
remedy, which must be availed of within five years from the date of the
contract implementing such decision.
In the event that one spouse is incapacitated or otherwise unable to

participate in the administration of the conjugal properties, the other spouse
may assume sole powers of administration. These powers do not include
disposition or encumbrance without authority of the court or the written
21
Submitted by:
Civil Law Review II
consent of the other spouse. In the absence of such authority or consent,
the disposition or encumbrance shall be void. However, the transaction shall
be construed as a continuing offer on the part of the consenting spouse and
the third person, and may be perfected as a binding contract upon the
acceptance by the other spouse or authorization by the court before the
offer is withdrawn by either or both offerors.
Any disposition or encumbrance of a conjugal property by one spouse must

be consented to by the other; otherwise, it is void.
Petitioner points to respondent's signature on the Promissory Notes and

Deed of Mortgage to prove that he consented to the transactions.33 For his
part, respondent alleges that his signature was forged and offers testimony
from a handwriting expert to prove that his signature on the bank
documents were falsified.34 The Regional Trial Court and the Court of
Appeals both agreed that respondent presented clear and convincing
evidence that his signature, as it appeared on the mortgage contract, was
forged.
Respondent offered the expert testimony of Efren B. Flores (Flores) of the

Questioned Document Section of the National Bureau of Investigation.
Flores, a handwriting expert, compared the signature on the loan documents
with the standard signatures of respondent.35 He concluded that they were
not written by the same person through the following observations: First,
the signatures on the loan documents were executed in a slowly drawn
motion of a pen. This can be observed in the hidden portion of the signature
because the changes in pen pressure were abrupt. Second, respondent's
standard signature is written with free and well-coordinated strokes.
Lastly, there were discrepancies in the structural pattern of letter formation

of the two (2) sets of signatures. With the signatures in the loan documents,
both the upper and lower loops were elongated. On the standard signatures,
the upper loop was shorter while the lower loop was bigger.
Title: UNIVERSITY OF MINDANAO, INC. VS BANGKO SENTRAL NG PILIPINAS

ET. AL, G.R. No. 194964-65, January 11, 2016
Statement of Facts
Before 1982, Guillermo B. Torres and Dolores P. Torres incorporated and

operated two (2) thrift banks: (1) First Iligan Savings & Loan Association,
Inc. (FISLAI); and (2) Davao Savings and Loan Association, Inc. (DSLAI).
Guillermo B. Torres chaired both thrift banks. He acted as FISLAI's
President, while his wife, Dolores P. Torres, acted as DSLAI's President and
FISLAI's Treasurer.
22
Submitted by:
Civil Law Review II
Upon Guillermo B. Torres' request, Bangko Sentral ng Pilipinas issued a P1.9
million standby emergency credit to FISLAI. The release of standby
emergency credit was evidenced by three (3) promissory notes dated
February 8, 1982, April 7, 1982, and May 4, 1982 in the amounts of
P500,000.00, P600,000.00, and P800,000.00, respectively. All these
promissory notes were signed by Guillermo B. Torres, and were co-signed by
either his wife, Dolores P. Torres, or FISLAI's Special Assistant to the
President, Edmundo G. Ramos, Jr.
On May 25, 1982, University of Mindanao's Vice President for Finance,

Saturnino Petalcorin, executed a deed of real estate mortgage over
University of Mindanao's property in Cagayan de Oro City (covered by
Transfer Certificate of Title No. T-14345) in favor of Bangko Sentral ng
Pilipinas.8 "The mortgage served as security for FISLAI's PI.9 Million
loan[.]"9 It was allegedly executed on University of Mindanao's behalf.
As proof of his authority to execute a real estate mortgage for University of

Mindanao, Saturnino Petalcorin showed a Secretary's Certificate signed on
April 13, 1982 by University of Mindanao's Corporate Secretary, Aurora de
Leon.
On October 21, 1982, Bangko Sentral ng Pilipinas granted FISLAI an

additional loan of P620,700.00. Guillermo B. Torres and Edmundo Ramos
executed a promissory note on October 21, 1982 to cover that amount.16
On November 5, 1982, Saturnino Petalcorin executed another deed of real

estate mortgage, allegedly on behalf of University of Mindanao, over its two
properties in Iligan City. This mortgage served as additional security for
FISLAI's loans. The two Iligan City properties were covered by Transfer
Certificates of Title Nos, T-15696 and T-15697.
On January 17, 1983, Bangko Sentral ng Pilipinas' mortgage lien over the
Iligan City properties and Aurora de Leon's certification were annotated on
Transfer Certificates of Title Nos. T-15696 and T-15697.18 On January 18,
1983, Bangko Sentral ng Pilipinas' mortgage lien over the Iligan City
properties was also annotated on the tax declarations covering the Iligan
City properties. The Regional Trial Court rendered a Decision in favor of
University of Mindanao. CA reversed.
Issue
- Whether petitioner University of Mindanao is bound by the real estate

mortgage contracts executed by Saturnino Petalcorin.
Ruling
The court held that the petitioner does not have the power to mortgage its
properties in order to secure loans of other persons.
As an educational institution, it is limited to developing human capital

thrpugh formal instruction. It is not a corporation engaged in the business of
securing loans of others. Hiring professors, instructors, and personnel;
acquiring equipment and real estate; establishing housing facilities for
personnel and students; hiring a concessionaire; and other activities that
can be directly connected to the operations and conduct of the education
23
Submitted by:
Civil Law Review II
business may constitute the necessary and incidental acts of an educational
institution. Securing FISLAI's loans by mortgaging petitioner's properties
does not appear to have even the remotest connection to the operations of
petitioner as an educational institution. Securing loans is not an adjunct of
the educational institution's conduct of business.81 It does not appear that
securing third-party loans was necessary to maintain petitioner's business of
providing instruction to individuals. This court upheld the validity of
corporate acts when those acts were shown to be clearly within the
corporation's powers or were connected to the corporation's purposes.
However, this should not be interpreted to mean that such presumption
applies to all cases, even when the act in question is on its face beyond the
corporation's power to do or when the evidence contradicts the presumption.
Presumptions are "inference[s] as to the existence of a fact not actually

known, arising from its usual connection with another which is known, or a
conjecture based on past experience as to what course human affairs
ordinarily take." Presumptions embody values and revealed behavioral
expectations under a given set of circumstances.
In this case, the presumption that the execution of mortgage contracts was
within petitioner's corporate powers does not apply. Securing third-party
loans is not connected to petitioner's purposes as an educational institution.
Title: HEIRS OF TEODORO CADELIÑA VS CADIZ, G.R. No. 194417,

November 23, 2016
Nature: Petition for certiorari under Rule 65 of the Revised Rules of Court,
Ponente: J. JARDALEZA, Third Division
Statement of Facts
Respondents filed complaints for reinstatement of possession as farmer

tenants against petitioners with the DARAB-Region 2, San Fermin, Cauayan,
Isabela docketed as DARAB Cases Nos. II-2063-ISA 2000 and II-2064-ISA
2000. Respondents alleged that they were the farmers/tillers of portions of
Lot No. 7050, Cad. 211, Santiago Cadastre (properties), "ownership then
claimed by Nicanor Ibuna, Sr. [who is] their landowner," since 1962 until
around the end of 1998 when they were deprived of their respective
possessions, occupations and tillage of the properties. This was allegedly
brought about by the execution of the decision of the CA in a previous case
(CA-G.R. CV No. 42237)ordering the transfer of the properties to Teodoro
Cadeliña (Teodoro) and his heirs, petitioners herein.
Petitioners moved to dismiss the complaint on the ground that respondents

cannot be considered as tenants under land reform law because they were
instituted by Nicanor Ibuna, Sr. (Ibuna) whose rights were declared by the
court illegal and unlawful in CA-G.R. CV No. 42237 and that the DARAB has
no jurisdiction to entertain the case for lack of tenancy relationship between
the parties. DARAB, ruled in favor of respondents. CA dismissed the petition
for not being sufficient in form and in substance.
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Issue
- Whether or not Respondents are agricultural leasehold lessees entitled

to security of tenure.
Ruling
Respondents are not agricultural leasehold lessees entitled to security of

tenure.
The court firstly addressed the petitioners' claim that there is inconsistency
between respondents' position of claiming ownership in CA-G.R. CV No.
42237, and their claim of tenancy relationship in this case. While we have
previously held that "tenancy relationship is inconsistent with the assertion
of ownership,"29 this is not applicable in the case of respondents. Records
show that respondents were previously issued title (albeit nullified in CA-
G.R. CV No. 42237) under Section 330 of Presidential Decree No.
152,31 which gives a share tenant actually tilling the land the preferential
right to acquire the portion actually tilled by him. Respondents' assertions of
ownership over the properties in CA-G.R. CV No. 42237 were only but a
consequence of their previous status as alleged tenants of Ibuna; their
claims of tenancy status and ownership were successive, and not
simultaneous. Thus, particular to the circumstances of their case, there was
no conflict between their assertion of ownership in CA-G.R. CV No. 42237
and of tenancy in this case.
Case Title: VILLARTA VS TALAVERA, JR., G.R. No. 208021, February 03,
2016
Ponente: J. CARPIO, Second Division
Statement of Facts
The Appellant Oscar Villarta filed the complaint a quo for reformation of
contracts, moral damages, and attorney's fees against appellee Gaudioso
Talavera, Jr.
According to him, he owned four parcels of land, all situated in Santiago City
viz: a) 1,243 square meters under TCT No. T-130095, b) 25,000 square
meters under TCT No. T-12142, c) 296 square meters [under] TCT No. T-
53252, and d) 1,475 square meters under TCT No. T-214950; sometime in
1993, he ventured into treasure hunting activites; in order to infuse his
much needed capital, he obtained several loans from appellee who was a
distant relative; as of 1996, his loan already reached P800,000.00, inclusive
of 3% interest per month; he religiously paid the interest, but when the
1997 financial crisis struck, appellee raised the interest to a rate between
7% and 10%; in 1995, appellee employed insidious words and machinations
in convincing him to execute a deed of absolute sale over TCT No. T-130095.
However, the real agreement was that the lot would only serve as security
for the several loans he obtained; in 1997, he was again convinced to
execute two more deeds of conveyance over the two lots under TCTs T-
12142 and T-53252, respectively; in 2001, he was informed that his loan
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had already reached P2,000,000.00 and since the 3 parcels of land were no
longer sufficient to cover the loan, he was further convinced to mortgage to
Maybank additional real properties, on top of the 3 parcels of land, to secure
a P50 million loan; when appellee realized that his loan was going to be
approved, the former demanded that he execute a deed of absolute sale
over the lot under TCT T-214950, yet, the real agreement was that the lot
would only serve as collateral; TCT T-53252 and T-12142 were returned to
him; when he requested appellee to remove the encumbrance on TCTs T-
130095 and T-214950 so that the bank could process the loan, appellee
suddenly demanded P5,000,000.00; when the bank learned of it, he was
advised not to pursue the loan because he would no longer have the means
to pay it; appellee took advantage of the situation and caused the
cancellation of TCT T-214950, by utilizing the deed of absolute sale, contrary
to their real agreement that the property should only serve as collateral; the
Deeds of Absolute Sale dated March 1995 and May 18, 2001 were in reality
an equitable mortgage; the P500,000.00 consideration for the Deed of
Absolute Sale dated May 18, 2001 was grossly inadequate because the
actual market value of the subject land was P5,900,000.00; despite the
execution of the two deeds of absolute sale, he still had possession of the
subject lots and and even leased them to Wellmade Manufacturing Corp.;
because of appellee's fraudulent act of transferring titles of the two lots to
his name, he suffered sleepless nights and serious anxiety; and, he also
prayed for attorney's fees and costs of suit.
The RTC ruled in favor of respondent. CA affirmed.
Issue
- Whether or not the transaction is an equitable mortgage
Ruling
Not an Equitable Mortgage
The trial court recognized that TCT No. T-130095 was covered by two Deeds
of Absolute Sale. However, the trial court was unconvinced that the 2001
Deeds of Absolute Sale were intended merely to secure petitioner's loan
obligations because both were executed when the loans were already
overdue. The CA affirmed the findings of the trial court. The CA conceded
that although "some of the circumstances mentioned under Art. 1602 are
present in the case at bar, the totality of the evidence shows that the parties
never intended to make TCT Nos. T-130095 and T-214950 as mere collateral
for [petitioner's] loans. The twin deeds of sale speak for themselves."
The court agreed with the lower courts' assessment of the Statement of
Facts. The conduct of the parties prior to, during, and after the execution of
the deeds of sale adequately shows that petitioner sold to respondent the
lots in question to satisfy his debts.
Respondent was able to sufficiently explain why the presumption of an

equitable mortgage does not apply in the present case. The inadequacy of
the purchase price in the two deeds of sale dated 18 May 2001 was
supported by an Affidavit of True Consideration of the Absolute Sale of the
Property. Respondent did not tolerate petitioner's possession of the lots. The
transaction between petitioner and respondent is thus not an equitable
mortgage, but is instead a dacion en pago.
Dacion en pago is the delivery and transmission of ownership of a thing by

the debtor to the creditor as an accepted equivalent of the performance of
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an existing obligation. It is a special mode of payment where the
debtor offers another thing to the creditor who accepts it as
equivalent to the payment of an outstanding debt. For dacion en
pago to exist, the following elements must concur: (a) existence of a money
obligation; (b) the alienation to the creditor of a property by the debtor with
the consent of the former; and (c) satisfaction of the money obligation of the
debtor.
Title: Erorita vs. Dumlao, 781 SCRA 551, January 25, 2016
Court of Appeals.
Ponente: J. BRION, Second Division.
Statement of Facts
Spouses Antonio and Ligaya Dumlao (Spouses Dumlao) are the registered
owners of a parcel of land located at Barangay San Mariano, Roxas, Oriental
Mindoro, and covered by TCT No. T-53000. The San Mariano Academy
structures are built on the property.
The Spouses Dumlao bought the property in an extrajudicial foreclosure sale

on April 25, 1990. Because the former owners, Spouses Herminio and Editha
Erorita (Spouses Erorita), failed to redeem it, the title was consolidated in
the buyers' name.
The Spouses Dumlao agreed to allow the petitioners to continue to operate

the school on the property. The Spouses Erorita appointed Hernan and
Susan Erorita as the San Mariano Academy's administrators.
The Spouses Dumlao alleged that the Eroritas agreed on a monthly rent of
Twenty Thousand Pesos (P20,000.00), but had failed to pay rentals since
1990. The Spouses Erorita countered that the Dumlaos allowed them to
continue to run the school without rental out of goodwill and friendship.
On December 16, 2002, the Spouses Dumlao asked the petitioners to vacate
the property. Although the Spouses Erorita wanted to comply, they could not
immediately close the school without clearance from the Department of
Education, Culture, and Sports to whom they are accountable.
the Spouses Dumlao filed a complaint for recovery of possession before the
Regional Trial Court (RTC) against the defendants Hernan, Susan, and the
Spouses Erorita. In their joint answer, the defendants prayed that the
complaint be dismissed because they cannot be forced to vacate and to pay
the rentals under their factual circumstances.
After the issues were joined, the case was set for pre-trial. However, the
defendants-Eroritas failed to appear despite notice. Thus, the RTC declared
them in default and ordered the Spouses Dumlao to present evidence ex
parte.
On June 4, 2007, the RTC decided in the Spouses Dumlao's favor. The CA
affirmed the RTC's decision.
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Issue
- Whether or not laches’ applies
Ruling
With the jurisdictional issue resolved, we now examine whether the

petitioners timely raised this issue.
As a general rule, lack of jurisdiction over the subject matter may be raised
at any time, or even for the first time on appeal. An exception to this rule is
the principle of estoppel by laches.
Estoppel by laches may only be invoked to bar the defense of lack of

jurisdiction if the factual milieu is analogous to Tijam v. Sibonghanoy. In that
case, lack of jurisdiction was raised for the first time after almost fifteen (15)
years after the questioned ruling had been rendered and after the movant
actively participated in several stages of the proceedings. It was only
invoked, too, after the CA rendered a decision adverse to the movant.
In Figueroa v. People, we ruled that the failure to assail jurisdiction during

trial is not sufficient for estoppel by laches to apply. When lack of jurisdiction
is raised before the appellate court, no considerable length of time had
elapsed for laches to apply.16 Laches refers to the "negligence or omission
to assert a right within a reasonable length of time, warranting a
presumption that the party entitled to assert it either has abandoned it or
declined to assert it."
The factual setting of this present case is not similar to Tijam so as to trigger
the; application of the estoppel by laches doctrine. As in Figueroa, the
present petitioners assailed the RTC's jurisdiction in their appeal before the
CA. Asserting lack of jurisdiction on appeal before the CA does not constitute
laches. Furthermore, the filing of an answer and the failure to attend the
pre-trial do not constitute the active participation in judicial proceedings
contemplated in Tijam.
Thus, the general rule should apply. The petitioners timely questioned the
RTC's jurisdiction.
Title: THE INSULAR LIFE ASSURANCE COMPANY, LTD., VS. KHU, G.R. No.
195176, April 18, 2016
Nature: Petition for Review on Certiorari
Ponente: J. DEL CASTILLO, Second Division
Statement of Facts
On March 6, 1997, Felipe N. Khu, Sr. (Felipe) applied for a life insurance
policy with Insular Life under the latter’s Diamond Jubilee Insurance Plan.
Felipe accomplished the required medical questionnaire wherein he did not
declare any illness or adverse medical condition. Insular Life thereafter
issued him Policy Number A000015683 with a face value of P1 million. This
took effect on June 22, 1997.5
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On June 23, 1999, Felipe’s policy lapsed due to non-payment of the
premium covering the period from June 22, 1999 to June 23, 2000.6
On September 7, 1999, Felipe applied for the reinstatement of his policy and
paid P25,020.00 as premium. Except for the change in his occupation of
being self-employed to being the Municipal Mayor of Binuangan, Misamis
Oriental, all the other information submitted by Felipe in his application for
reinstatement was virtually identical to those mentioned in his original
policy.7
On October 12, 1999, Insular Life advised Felipe that his application for
reinstatement may only be considered if he agreed to certain conditions such
as payment of additional premium and the cancellation of the riders
pertaining to premium waiver and accidental death benefits. Felipe agreed to
these conditions and on December 27, 1999 paid the agreed additional
premium of P3,054.50.9
In consequence thereof, the premium rates on this policy are adjusted to

P28,000.00 annually, P14,843.00 semi-annually and P7,557.00 quarterly,
Philippine currency.10
On June 23, 2000, Felipe paid the annual premium in the amount of
P28,000.00 covering the period from June 22, 2000 to June 22, 2001. And
on July 2, 2001, he also paid the same amount as annual premium covering
the period from June 22, 2001 to June 21, 2002.11
On September 22, 2001, Felipe died. His Certificate of Death enumerated

the following as causes of death:
Immediate cause: a. End stage renal failure, Hepatic failure
Antecedent cause: b. Congestive heart failure, Diffuse myocardial

ischemia.
Underlying cause: c. Diabetes Neuropathy, Alcoholism, and

Pneumonia.12
On October 5, 2001, Paz Y. Khu, Felipe Y. Khu, Jr. and Frederick Y. Khu
(collectively, Felipe’s beneficiaries or respondents) filed with Insular Life a
claim for benefit under the reinstated policy. This claim was denied. Instead,
Insular Life advised Felipe’s beneficiaries that it had decided to rescind the
reinstated policy on the grounds of concealment and misrepresentation by
Felipe.
Hence, respondents instituted a complaint for specific performance with

damages. the RTC found for Felipe’s beneficiaries. The CA affirmed.
Issue
- Whether the contract is valid
Ruling
As a final note, to characterize the insurer and the insured as contracting

parties on equal footing is inaccurate at best. Insurance contracts are wholly
prepared by the insurer with vast amounts of experience in the industry
purposefully used to its advantage. More often than not, insurance contracts
are contracts of adhesion containing technical terms and conditions of the
29
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industry, confusing if at all understandable to laypersons, that are imposed
on those who wish to avail of insurance. As such, insurance contracts are
imbued with public interest that must be considered whenever the rights and
obligations of the insurer and the insured are to be delineated. Hence, in
order to protect the interest of insurance applicants, insurance companies
must be obligated to act with haste upon insurance applications, to either
deny or approve the same, or otherwise be bound to honor the application
as a valid, binding, and effective insurance contract.
Indeed, more than two years had lapsed from the time the subject insurance
policy was reinstated on June 22, 1999 vis-a-vis Felipe’s death on
September 22, 2001. As such the subject insurance policy has already
become incontestable at the time of Felipe’s death.
Title: VIL-REY PLANNERS AND BUILDERS VS LEXBER, INC. G.R. No.

189401. June 15, 2016
Nature: Petitions for review on certiorari under Rule 45 of the Rules of Court
seeking to nullify the Court of Appeals (CA) Decision1 and Resolution.
Ponente: SERENO, C.J. First Division
Statement of Facts
Vil-Rey and Lexber entered into a Construction Contract dated 17 April

1996 ( rst contract) whereby the former undertook to work on the
compacted back ll of the latter's 56,565-square-meter property in Barangay
Bangad, Cabanatuan City. Based on the rst contract, Vil-Rey shall complete
the project in 60 days for a consideration of P5,100,000. Lexber released to
Vil-Rey a mobilization downpayment of P500,000 secured by Surety Bond
G(16) No. 066915 ( rst surety bond) issued by Stronghold. For its part, Vil-
Rey agreed to indemnify Stronghold for whatever amount the latter might be
adjudged to pay Lexber under the surety bond. Vil-Rey and Lexber mutually
terminated the rst contract and entered into a Construction Contract dated 1
July 1996 (second contract) to cover the remaining works, but under revised
terms and conditions. The contract amount was P2,988,700.20, and the
scope of work was required to be completed in 60 days. On 23 December
1996, Vil-Rey and Lexber executed Work Order No. CAB-96-09 (third
contract) for the completion of the remaining works by 15 January 1997.
Under the third contract, a consideration of P1,168,728.37 shall be paid on
the following basis: 50% downpayment to be secured by a surety bond in
the same amount issued by Stronghold upon approval of the work order and
50% balance upon completion of the works. Accordingly, Stronghold issued
Surety Bond G(16) No. 077258 (second surety bond) in the amount of
P584,364.19 in favor of Lexber. Vil-Rey again obligated itself to indemnify
Stronghold for whatever amount the latter might be held to pay under the
surety bond.
In a letter dated 21 January 1997 addressed to Lexber, Vil-Rey requested

the extension of the contract period to 31 January 1997. Lexber granted the
request for extension. However, Vil-Rey failed to complete the works by the
end of the extended period, or even after Lexber gave it another ve days to
nish the works. Lexber then wrote Stronghold seeking to collect on the two
surety bonds issued in favor of the former.
30
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Civil Law Review II
Issue:
- Whether Vil-Rey is liable for breach of contract
Ruling
Vil-Rey is liable for breach of contract.

In resisting the ruling of the CA that Vil-Rey was guilty of breach of contract,
the latter alleges that the appellate court's ndings are based on a
misapprehension of facts. Vil-Rey argues that the consideration for the third
contract was P1,168,728.37, of which it was paid only P500,000.
Considering that there remained a balance of P668,728.37, the amount was
more than enough to offset that incurred by Lexber in order to finish the
works.
Breach of contract is the failure of a party, without legal reason, to comply

with the terms of a contract or perform any promise that forms either a part
or the whole of it. The failure of Vil-Rey to complete the works under the
third contract was never an issue in this case. It is clear that the next
payment for Vil-Rey would have fallen due upon completion of the works.
Thus, it cannot put up the defense that its failure to comply with its
obligation was because it was not paid.
Under the above provisions, the parties clearly took on reciprocal

obligations. These are obligations that arise from the same cause, such that
the obligation of one is dependent upon that of the other. The reciprocal
obligation in this case was Lexber's payment of the 50% balance upon Vil-
Rey's completion of the works on or before 15 January 1997. However,
despite the grant of extension until 31 January 1997, and even after the
lapse of another five-day grace period, Vil-Rey failed to finish the works
under the third contract. The law provides that the obligation of a person
who fails to ful ll it shall be executed at that person's cost. The CA was
correct in ruling that Vil-Rey should be held liable for the amount paid by
Lexber to another contractor to complete the works. Furthermore, Article
2201 of the Civil Code provides:
Article 2201. In contracts and quasi-contracts, the damages for which the
obligor who acted in good faith is liable shall be those that are the natural
and probable consequences of the breach of the obligation, and which the
parties have foreseen or could have reasonably foreseen at the time the
obligation was constituted.
In case of fraud, bad faith, malice or wanton attitude, the obligor shall be
responsible for all damages which may be reasonably attributed to the non-
performance of the obligation. In the absence of a clear showing of bad faith
on the part of Vil-Rey, it shall be liable for damages only with regard to
those that are the natural and probableconsequences of its breach. In this
case, the failure of Vil-Rey to nish the works compelled Lexber to secure the
services of another contractor, to which the latter paid a total of
P284,084.46. Considering that this amount was not a loan or forbearance of
money, We impose interest at the rate of 6% per annum from 17 February
1997 until the nality of this Decision. Thereafter, it shall earn interest at the
rate of 6% per annum until satisfaction.
Article 1169 of the Civil Code provides that in reciprocal obligations, delay by
one of the parties begins from the moment the other fulfills the obligation.
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In this case, Lexber is guilty of delay with regard to the amount of
P84,364.19, which should be paid. Also, the delay shall make it liable to Vil-
Rey for damages, which We impose in the form of interest at the rate of 6%
per annum from 24 December 1996 until the nullity of this Decision.
Thereafter, it shall earn interest at the rate of 6% per annum until
satisfaction.
The parties shall be allowed to compensate the amounts due them to the
extent of their respective obligations.
Title: METROPOLITAN BANK & TRUST COMPANY VS CHUY LU TAN. G.R. No.
202176. August 1, 2016
Nature: Petition for review on certiorari seeking to reverse and set aside the
Decision and Resolution of the Court of Appeals.
Ponente: J. PERALTA, Third Division
Statement of Facts
Between February 26, 1996 and May 8, 1996, herein respondents Chuy Lu
Tan (Chuy) and Romeo Tanco(Tanco) obtained ve loans from herein
petitioner Metropolitan Bank & Trust Company (Metrobank) with an
aggregate amount of Nineteen Million Nine Hundred Thousand Pesos
(P19,900,000.00). These loans are evidenced by five Promissory Notes
executed by Chuy and Tanco on various dates. As security for the said
loans, Chuy executed a Real Estate Mortgage on February 26, 1996 over a
1,449.70 square meter parcel of land in Quezon City covered by Transfer
Certi cate of Title No. RT-53314 (288923). In addition to the said mortgage,
herein respondents Sy Se Hiong (Sy) and Tan Chu Hsiu Yen (Tan) also
executed a Continuing Surety Agreement whereby they bound themselves to
be solidarily liable with Chuy and Tanco for the principal amount of
P19,900,000.00 "plus interests thereon at the rate or rates stated in the
obligation secured thereby, any or all penalties, costs and expenses which
may be incurred by [Metrobank] in granting and/or collecting the aforesaid
obligations/indebtedness/instruments, and including those for the custody,
maintenance, and preservation of the securities given therefor, as may be
incurred by [Metrobank] before or after the date of [the] Surety
Agreement."
Subsequently, Chuy and Tanco failed to settle their loans despite

Metrobank's repeated demands for payment. In a nal demand letter dated
October 27, 1999, Metrobank's counsel noti ed respondent Chuy that as of
October 15, 1999, their obligations, comprising the principal amount loaned,
together with interest and penalties, amounted to P24,353,062.03.
Consequently, on December 14, 1999, Metrobank extrajudicially foreclosed
the mortgage and the property was sold to it (Metrobank) as the highest
bidder for the amount of P24,572,268.00.
Issue
- Whether petitioner is entitled to deficiency claims
Ruling
Indeed, Article 1159 of the Civil Code expressly provides that obligations
arising from contracts have the force of law between the contracting parties
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and should be complied with in good faith. In the present case, it is clear
under the Promissory Notes, Real Estate Mortgage contract and the
Continuing Surety Agreement executed by respondents that they voluntarily
bound themselves to pay the amounts being claimed by petitioner.
Furthermore, there is no convincing evidence nor argument which would
show that petitioner is not entitled to the deficiency it claims. The CA simply
says that to allow petitioner to recover the amount it seeks, which is
allegedly over and above the actual value of the property it bought at public
auction, would amount to unjust enrichment. However, the Court does not
see any unjust enrichment resulting from upholding the right of the
petitioner to collect any deficiency from respondents. Unjust enrichment
exists when a person unjustly retains a benefit to the loss of another, or
when a person retains money or property of another against the
fundamental principles of justice, equity and good governance.
As discussed above, there is a strong legal basis for petitioner's claim
against respondents for the balance of their loan obligation.
Case title: DEVELOPMENT BANK OF THE PHILIPPINES VS CLARGES REALTY

CORPORATION, G.R. No. 170060. August 17, 2016
Nature: Petition for Review on Certiorari under Rule 45 of the Rules of

Court.
Statement of Facts
To secure a loan, Marinduque Mining and Industrial Corporation mortgaged

the property to Caltex Philippines, Inc. A second mortgage was constituted
over the property, this time in favor of the Development Bank of the
Philippines and the Philippine National Bank.
When Marinduque Mining and Industrial Corporation failed to pay its loan
obligations, the Development Bank of the Philippines and the Philippine
National Bank jointly instituted extrajudicial foreclosure proceedings over the
property sometime in July and August 1984. The mortgagee banks emerged
as the highest bidders during the public sale but were unable to redeem the
property because of Caltex Philippines, Inc.'s first mortgage. On January 20,
1986, first mortgagee Caltex Philippines, Inc. foreclosed its mortgage on the
property. As second mortgagee, the Development Bank of the Philippines
redeemed the property from Caltex Philippines, Inc. and the property
formed part of the Development Bank of the Philippines' physical assets. The
Development Bank of the Philippines then offered the property for public
sale, where Clarges Realty Corporation emerged as the highest
bidder. Clarges Realty Corporation offered P24,070,000.00 as payment for
the property. The Development Bank of the Philippines (as vendor) and
Clarges Realty Corporation (as vendee) executed a Deed of Absolute Sale for
the property. The parties agreed that all expenses to be incurred in
connection with the transfer of title to Clarges Realty Corporation would be
borne by the Development Bank of the Philippines. Moreover, the
Development Bank of the Philippines bound itself under Clause 6 of the Deed
of Absolute Sale to deliver a title to the property "free from any and all liens
and encumbrances on or before December 15, 1987."
The Development Bank of the Philippines succeeded in having the property

registered under its name. Marinduque Mining and Industrial Corporation's
TCT No. S- 16279 was cancelled and, in its place, TCT No. 151178 was
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issued. However, TCT No. 151178 contained annotations from the former
TCT No. 5- 1627 specifically, the mortgage lien of the Philippine National
Bank and a tax lien for unpaid taxes incurred by Marinduque Mining and
Industrial Corporation.
December 15, 1987 passed, and the Development Bank of the Philippines
delivered to Clarges Realty Corporation the owner's duplicate copy of TCT
No. 151178 with the mortgage and tax liens still annotated on it. Clarges
Realty Corporation demanded a clean title from the Development Bank of
the Philippines, but the bank failed to deliver a clean title.
Issue
- Whether debtor is released from the obligation?
Ruling
The court said that the petitioner cannot invoke Articles 1266 and 1267 of
the Civil Code. These provisions — which release debtors from their
obligations if they become legally or physical impossible or so difficult to be
manifestly beyond the contemplation of the parties — only apply to
obligations to do. They do not apply to obligations to give as when a party is
obliged to deliver a thing which, in this case, is a certificate of title to a real
property free from liens and encumbrances.
Interestingly, petitioner contends that it would have been liable for violating
the Anti-Graft and Corrupt Practices Act if it paid the tax liability of
Marinduque Industrial and Mining Corporation to cancel the tax lien on the
property. According to petitioner:
[The Development Bank of the Philippines] is a government bank. To pay the
taxes of a private corporation out of its coffers, and when such account was
already transferred to a Government Liquidator, such as [the Asset
Privatization Trust], would be a crime punishable under the Anti-Graft and
Corrupt Practices Law, at the very least, not to mention the enormous
amount of not less than P44 Million Pesos involved.
The court held that such argument was wrong. A lien is a "legal claim or
charge on property, either real or personal, as a collateral or security for the
payment of some debt or obligation." A lien, until discharged, follows the
property. Hence, when petitioner acquired the property, the bank also
acquired the liabilities attached to it, among them being the tax liability to
the Bureau of Internal Revenue. That the unpaid taxes were incurred by the
defunct Marinduque Industrial and Mining Corporation is immaterial. In
acquiring the property, petitioner assumed the obligation to pay for the
unpaid taxes. Thus, should petitioner pay the remaining P24,311,997.41 to
the Bureau of Internal Revenue, it would not be paying the taxes of a private
corporation. It would be paying the liability attached to its own property, and
there would be no violation of the Anti-Graft and Corrupt Practices Act.
Title: ENRIQUE Y. SAGUN, VS. ANZ GLOBAL SERVICES AND OPERATIONS

(MANILA), INC., G.R. No. 220399. August 22, 2016
Nature: Petition for review on certiorari.
Ponente: J. Perlas-Bernabe, First Division
34
Submitted by:
Civil Law Review II
Statement of Facts
Petitioner was employed at Hongkong and Shanghai Banking Corporation

Electronic Data Processing (Philippines), Inc. (HSBC-EDPI) when he applied
online for the position of Payments and Cash Processing Lead at respondent
ANZ Global Services and Operations (Manila), Inc. (ANZ), a domestic
corporation whose businesses involve a full range of banking products and
services.
After passing the interview and online examination, ANZ, through its Senior
Vice President for Operations, Gay Cruzada (Cruzada), offered petitioner the
position of Customer Service Officer, Payments and Cash Resolution, which
the latter accepted on June 8, 2011.
In the letter of con rmation of the offer which constituted petitioner's

employment agreement with ANZ, the terms and conditions of his
employment required, among others, a satisfactory result of his pre-
employment screening.
In addition, the Schedules, which likewise formed part of the employment
agreement, provided that petitioner was to be placed on a probationary
status for a period of six (6) months and that his appointment would take
effect from the date of reporting, which was to be not later than July 11,
2011.
Accordingly, on June 11, 2011, petitioner tendered his resignation at HSBC-
EDPI and the acknowledged copy thereof was transmitted to ANZ together
with his other pre-employment documentary requirements.
On July 11, 2011, petitioner was instructed to report to ANZ and was
handed a letter of retraction signed by ANZ's Human Resources Business
Partner, Paula Alcaraz (Alcaraz), informing him that the job offer had been
withdrawn on the ground that the company found material inconsistencies in
his declared information and documents provided after conducting a
background check with his previous employer, particularly at
Siemens. Asserting that his employment contract had already been
perfected upon his acceptance of the offer on June 8, 2011, and as such,
was already deemed an employee of ANZ who can only be dismissed for
cause, petitioner led a complaint for illegal dismissal with money claims
against ANZ, Cruzada, and Alcaraz (respondents) before the NLRC,
Issue
- Whether there was a perfected contract
Ruling
An employment contract, like any other contract, is perfected at the moment

the parties come to agree upon its terms and conditions, and thereafter,
concur in the essential elements thereof. In this relation, the contracting
parties may establish such stipulations, clauses, terms, and conditions as
they may deem convenient, provided they are not contrary to law, morals,
good customs, public order or public policy.
In this case, the Court agrees with the finding of the CA that there was
already a perfected contract of employment when petitioner signed ANZ's
employment offer and agreed to the terms and conditions that were
embodied therein. Nonetheless, the offer of employment extended to
petitioner contained several conditions before he may be deemed an
employee of ANZ. Among those conditions for employment was the
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"satisfactory completion of any checks (e.g., background, bankruptcy,
sanctions and reference checks) that may be required by ANZ. " Accordingly,
petitioner's employment with ANZ depended on the outcome of his
background check, which partakes of the nature of a suspensive condition,
and hence, renders the obligation of the would-be employer, i.e., ANZ in this
case, conditional. Article 1181 of the Civil Code provides:
Art. 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.
In the realm of civil law, a condition is defined as "every future and

uncertain event upon which an obligation or provision is made to depend. It
is a future and uncertain event upon which the acquisition or resolution of
rights is made to depend by those who execute the juridical act."
Jurisprudence states that when a contract is subject to a suspensive
condition, its effectivity shall take place only if and when the event which
constitutes the condition happens or is ful lled. A contract is one of the
five (5) sources of obligations as stated in the Civil Code. An obligation is de
ned as the juridical necessity to give, to do or not to do. While a contract
may be perfected in the manner of operation described above, the efficacy
of the obligations created thereby may be held in suspense pending the
fulfillment of particular conditions agreed upon. In other words, a perfected
contract may exist, although the obligations arising therefrom — if premised
upon a suspensive condition — would yet to be put into effect.
Here, the subject employment contract required a satisfactory completion of

petitioner's background check before he may be deemed an employee of
ANZ. Considering, however, that petitioner failed to explain the
discrepancies in his declared information and documents that were required
from him relative to his work experience at Siemens, namely: (a) that he
was only a Level 1 and not a Level 2 Technical Support Representative that
conducts troubleshooting for both computer hardware and software
problems; and (b) that he was found to have been terminated for cause and
not merely resigned from his post, that rendered his background check
unsatisfactory, ANZ's obligations as a would-be employer were held in
suspense and thus, had yet to acquire any obligatory force. To reiterate, in
a contract with a suspensive condition, if the condition does not happen, the
obligation does not come into effect. Thus, until and unless petitioner
complied with the satisfactory background check, there exists no obligation
on the part of ANZ to recognize and fully accord him the rights under the
employment contract. In fact, records also show that petitioner failed to
report for work on or before July 11, 2011, which was also a suspensive
condition mandated under sub-paragraph 4 of Schedule 1 of the contract.
Consequently, no employer-employee relationship was said to have been
created between petitioner and ANZ under the circumstances, and the
dismissal of the former's complaint for illegal termination from work, as held
by the NLRC, was correctly sustained by the CA.
Title: PIDLAOAN VS PIDLAOAN, G.R. No. 196470, April 20, 2016
Nature: Petition for review on certiorari
Ponente: J. BRION, Second Division
Statement of Facts
Rosario Victoria (Rosario) and Elma lived together since 1978 until Rosario
left for Saudi Arabia.
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In 1984, Elma bought a parcel of land with an area of 201 square meters in
Lucena City and was issued Transfer Certificate of Title (TCT) No. T-50282.2
When Rosario came home, she caused the construction of a house on the lot
but she left again after the house was built.
Elma allegedly mortgaged the house and lot to a certain Thi Hong Villanueva
in 1989.When the properties were about to be foreclosed, Elma allegedly
asked for help from her sister-in-law, Eufemia Pidlaoan (Eufemia), to redeem
the property.5 On her part, Eufemia called her daughter abroad, Normita, to
lend money to Elma. Normita agreed to provide the funds. Elma allegedly
sought to sell the land. When she failed to find a buyer, she offered to sell it
to Eufemia or her daughter.
On March 21, 1993, Elma executed a deed of sale entitled "Panananto ng

Pagkatanggap ng Kahustuhang Bayad" transferring the ownership of the lot
to Normita.The last provision in the deed of sale provides that Elma shall
eject the person who erected the house and deliver the lot to Normita. The
document was signed by Elma, Normita, and two witnesses but it was not
notarized.
When Elma and Normita were about to have the document notarized, the
notary public advised them to donate the lot instead to avoid capital gains
tax. On the next day, Elma executed a deed of donation in Normita's favor
and had it notarized. TCT No. T-50282 was cancelled and TCT No. T-70990
was issued in Normita's name. Since then, Normita had been paying the real
property taxes over the lot but Elma continued to occupy the house. Rosario
found out about the donation when she returned to the country a year or
two after the transaction.
In 1997, the petitioners filed a complaint for reformation of contract,

cancellation of TCT No. T-70990, and damages with prayer for preliminary
injunction against Eufemia, Normita, and Herminigilda Pidlaoan
(respondents).
The petitioners argued that: first, they co-owned the lot because both of
them contributed the money used to purchase it; second, Elma and Normita
entered into an equitable mortgage because they intended to constitute a
mortgage over the lot to secure Elma's loan but they executed a deed of sale
instead; and third, the deed of donation was simulated because Elma
executed it upon the notary public's advice to avoid capital gains tax.
The RTC ruled that Rosario and Elma co-owned the lot and the house. Thus,
Elma could only donate her one-half share in the lot. CA affirmed.
Issue
- Whether the transaction between Elma and Normita was a sale, a

donation, or an equitable mortgage.
Ruling
An equitable mortgage is one which, although lacking in some formality or

other requisites demanded by statute, nevertheless reveals the intention of
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the parties to charge real property as security for a debt, and contains
nothing impossible or contrary to law.42 Articles 1602 and 1604 of the Civil
Code provide that a contract of absolute sale shall be presumed an equitable
mortgage if any of the circumstances listed in Article 1602 is attendant.
Two requisites must concur for Articles 1602 and 1604 of the Civil Code to
apply: one, the parties entered into a contract denominated as a contract of
sale; and two, their intention was to secure an existing debt by way of
mortgage.43
In the present case, the unnotarized contract of sale between Elma and
Normita is denominated as "Panananto ng Pagkatanggap ng Kahustuhang
Bayad."44 Its contents show an unconditional sale of property between Elma
and Normita. The document shows no intention to secure a debt or to grant
a right to repurchase. Thus, there is no evidence that the parties agreed to
mortgage the property as contemplated in Article 1602 of the Civil Code.
Clearly, the contract is not one of equitable mortgage.
Even assuming that Article 1602 of the Civil Code applies in this case, none
of the circumstances are present to give rise to the presumption of equitable
mortgage. One, the petitioners failed to substantiate their claim that the sale
price was unusually inadequate.45 In fact, the sale price of P30,000.00 is
not unusually inadequate compared with the lot's market value of P32,160
as stated in the 1994 tax declaration. Two, the petitioners continued
occupation on the property was coupled with the respondents' continuous
demand for them to vacate it. Third, no other document was executed for
the petitioners to repurchase the lot after the sale contract was executed.
Finally, the respondents paid the real property taxes on the lot.46 These
circumstances contradict the petitioners' claim of equitable mortgage.
A review of the sale contract or the "Panananto ng Pagkatanggap ng

Kahustuhang Bayad" shows that the parties intended no equitable mortgage.
The contract even contains Elma's undertaking to remove Rosario's house on
the property.47 This undertaking supports the conclusion that the parties
executed the contract with the end view of transferring full ownership over
the lot to Normita. The RTC rendered its Decision in favor of Sison. In sum,
we rule that based on the records of the case, Elma and Normita entered in
a sale contract, not a donation. Elma sold the entire property to Normita.
Accordingly, TCT No. T-70990 was validly issued in Normita's name.
Title: STA. FE REALTY, INC. VS SISON, G.R. No. 199431, August 31, 2016
Ponente: J. REYES, Third Division
Statement of Facts
SFRI agreed to sell to Sison the south eastern portion of the land covered by
TCT No. 61132. On October 19, 1989, SFRI executed a Deed of Sale over
the subject property to Fabregas for the amount of P10,918.00. Fabregas,
then, executed another deed of sale in favor of Sison for the same amount.
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This sale was authorized by SFRI in a Board Resolution dated April 30, 1989,
and was then adopted by its Board of Directors together with the
corresponding Secretary's Certificate dated October 11, 1989.anrobleslaw
Immediately thereafter, Sison caused the segregation of the corresponding

15,598 sq m from the whole 60,987-sq-m land and was designated as Lot 1-
B-1 in the subdivision plan Psd-04-038233. He took possession of the
subject property and introduced improvements thereon, such as fencing the
property, putting a no trespassing sign, barbed wires and hedges of big
tress. He also constructed a fishpond and a resort on the subject
property.robleslaw
However, Sison was not able to register the sale and secure a title in his
name over the subject property because the petitioners refused to pay realty
taxes and capital gains tax, as well as to tum over the owner's copy of TCT
No. 61132 and the subdivision plan. To protect his interest over the subject
property, Sison was constrained to pay the said taxes from 1979 to 1990.
Nevertheless, the defendants still refused to surrender the mother title and
all other pertinent documents necessary to transfer the title of the subject
property in Sison's name.
Meanwhile, on December 2, 1991, SFRI caused the subdivision of the entire

property covered by TCT No. 61132 into four lots was further subdivided into
four lots designated under subdivision plan Psd-0434-05-056810. As a result
of the subdivision of Lot 1-B into new lots, TCT No. 61132 was cancelled and
TCT No. T-255466 covering Lot 1-:-B-3-C was issued in the name of SFRI
with an area of 16,000 sq m and With an annotation of the right of first
refusal in favor of MRI.
Subsequently, SFRI sold Lot 1-B-3-C to Orosa as evidenced by the Deed of

Sale dated March 1, 1994. Orosa was able to transfer the property in his
name; thus, TCT No. T-255466 was cancelled, and TCT No. T-297261 was
issued in his name.
Sison claimed that Lot 1-B-3-C is practically one and the same with Lot 1-B-
1 which was previously sold by SFRI to Fabregas, and which the latter sold
to him except for the excess of 402 sq m. Accordingly, when Sison learned
about the subsequent sale of the subject property that he bought, he tried to
settle the matter amicably but the parties did not reach an agreement.
Hence, he instituted an action for reconveyance of property against the
defendants. The CA affirmed the findings of the RTC.
Issue
- Whether or not the contract of sale is valid
Ruling
The Court, however, concurs with the disquisition of the lower courts that
the evidence on record established that the deeds of sale were executed
freely and voluntarily. The RTC noted that the petitioners admitted their
intention to sell the subject property to Sison, and they voluntarily executed
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the said deeds of sale which were duly acknowledged before a notary public.
These admissions that the deeds of sale were signed and executed by them
in due course bar them from questioning or denying their acts. In this case,
all the elements for a contract to be valid are present. A perfected contract
of absolute sale exists between SFRI and Fabregas and then Fabregas and
Sison. There was meeting of the minds between the parties when they
agreed on the sale of a determinate subject matter, which is the south
eastern portion of Lot 1-B with an area of 15,598 sq m, and the price is
certain, without any condition or reservation of title on the part of the
petitioners.
Title: GALIUDO VS MAGRARE, G.R. No. 206584, January 11, 2016
Nature: Petition for review
Ponente: J. CARPIO, Second Division
Statement of Facts
On 19 August 2004, Mae Flor Galido (petitioner) filed before the RTC of San
Jose, Antique a petition5 to cancel all entries appearing on Transfer
Certificate of Title (TCT) Nos. T-22374, T-22375 and T-22376, all in the
name of Isagani Andigan (Andigan), and to annul TCT No. T-24815 and all
other TCTs issued pursuant to the Order dated 18 October 2011 of RTC
Branch 11, San Jose, Antique (Branch 11) in RTC Civil Case No. 2001-2-
3230. The petition was raffled to RTC Branch 12, San Jose, Antique (trial
court) and docketed as RTC Cad. Case No. 2004-819 Cad. Record No. 936.
The controversy revolves around three parcels of land, designated as Lot

1052-A-l, Lot 1052-A-2 and Lot 1052-A-3, all of the San Jose, Antique
Cadastre. These parcels of land were, prior to subdivision in 1999, part of
Lot 1052-A which was covered by TCT No. T-21405 in the name of Andigan.
On 28 December 1998, Andigan sold undivided portions of Lot 1052-A to

Nelson P. Magrare (Magrare), Evangeline M. Palcat (Palcat) and Rodolfo
Bayombong (Bayombong). To Magrare was sold an undivided portion with
an area of 700 square meters, more or less; to Palcat, 1,000 square meters,
more or less; and to Bayombong, 500 square meters, more or less.
On 8 May 2000, Andigan mortgaged the same three lots to petitioner and
the latter came into possession of the owner's duplicate copies of TCT Nos.
T-22374, T-22375 and T-22376.
On 6 February 2001, at 11:00 a.m., Magrare, Palcat and Bayombong

registered their respective adverse claims on TCT Nos. T-22374, T-22375
and T-22376. On the same day, at 3:00 p.m., petitioner also registered her
mortgage on the same TCTs, such that the certificates in the custody of the
Register of Deeds were annotated. Trial court ruled in favor of
respondents.CA affirmed
Issue
- Whether or not the mortgage was valid
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Ruling
No Valid Mortgage in Favor of Petitioner
In this case, the petitioner derives her title from Andigan, as mortgagor.
However, at the time Andigan mortgaged the lots to petitioner he had
already sold the same to Magrare, Palcat and Bayombong. Indeed,
petitioner's case is negated by Civil Case No. 2001-2-3230. There, Andigan
admitted that Lot Nos. 1052-A-l, 1052-A-2 and 1052-A-3 were the parcels of
land he sold to Magrare, Palcat and Bayombong, respectively, on 28
December 1998.42 Hence, when Andigan mortgaged the lots to petitioner on
8 May 2000, he no longer had any right to do so. We quote with approval
the discussion of the trial court:
Finally, when the spouses Andigan mortgaged to the herein petitioner Galido
Lot Nos. 1052-A-l and 1052-A-2, the said lots were already sold to the
respondents Palcat and Magrare. It is therefore as if nothing was mortgaged
to her because Isagani Andigan was no longer the owner of the mortgaged
real property. Under Art. 2085 of the Civil Code, two of the prescribed
requisites for a valid mortgage are, that, the mortgagor be the absolute
owner of the thing mortgaged and, that, he has the free disposal thereof.
These requisites are absent when Isagani Andigan and his wife mortgaged
the lots alluded to above to the herein petitioner. A spring cannot rise higher
than its source. Since Andigan no longer had any interest in the subject
properties at the time he mortgaged them to her, petitioner had nothing to
foreclose.
Title: METROPOLITAN BANK & TRUST COMPANY vs CHUY LU TAN, MR.

ROMEO TANCO, DR. SY SE HIONG, AND TAN CHU HSIU YEN G.R. No.
202176, August 01, 2016
Statement of Facts
Between February 26, 19-96 and May 8, 1996, herein respondents Chuy Lu
Tan (Chuy) and Romeo Tanco (Tanco) obtained five loans from herein
petitioner Metropolitan Bank & Trust Company (Metrobank) with an
aggregate amount of Nineteen Million Nine Hundred Thousand Pesos
(P19,900,000.00). These loans are evidenced by five Promissory Notes
executed by Chuy and Tanco on various dates. As security for the said loans,
Chuy executed a Real Estate Mortgage, In addition to the said mortgage,
herein respondents Sy Se Hiong (Sy) and Tan Chu Hsiu Yen (Tan) also
executed a Continuing Surety Agreement whereby they bound themselves to
be solidarily liable with Chuy and Tanco for the principal amount of
P19,900,000.00 "plus interests thereon at the rate or rates stated in the
obligation secured thereby, any or all penalties, costs and expenses which
may be incurred by Metrobank in granting and/or collecting the aforesaid
obligations/indebtedness/instruments, and including those for the custody,
maintenance, and preservation of the securities given therefor, as may be
incurred by Metrobank before or after the date of the Surety Agreement."
Subsequently, Chuy and Tanco failed to settle their loans despite
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Metrobank's repeated demands for payment. Consequently, Metrobank
extrajudicially foreclosed the mortgage and the property was sold to it
(Metrobank) as the highest bidder. However, Metrobank claimed that after
application of the bid price to the respondents' outstanding obligation and
the payment of the costs of foreclosure, accrued interest, penalty charges,
attorney's fees and other related expenses, there remained a deficiency of
P1,641,815.00. As such, Metrobank demanded from respondents the
payment of the said deficiency. For respondents' failure to heed Metrobank's
demand, the latter filed a suit for collection of a sum of money with the RTC
of Makati. The case was then set for pre-trial. Subsequently, Chuy was
declared in default for failure to attend the pre-trial and to file her pre-trial
brief. Thereafter, trial ensued wherein Metrobank was allowed to present its
evidence ex parte against Chuy. On July 17, 2008, the RTC rendered its
Decision ordering the herein defendants, namely, Chuy Lu Tan (Ms. Chuy),
Romeo Tanco (Mr. Tanco), Sy Se Hong (Mr. Sy) and Tan Chu Hsiu Yen (Mr.
Tan) to PAY, jointly and severally, the herein plaintiff Metropolitan Bank and
Trust Company (Metrobank). Both petitioner and respondents, with the
exception of Chuy, appealed the RTC Decision with the CA. The CA
promulgated its assailed Decision by reversing and setting aside the Decision
of the RTC and dismissing Metrobank's complaint. The CA ruled that to allow
Metrobank to recover the amount it seeks from respondents would be
iniquitous, unconscionable and would amount to unjust enrichment.
Metrobank filed a Motion for Reconsideration, but the CA denied it.
Issue
- Whether or not petitioner is entitled to the deficiency it claims.
Ruling
Yes. This Court has declared that unlike in an ordinary sale, inadequacy of
the price at a forced sale is immaterial and does not nullify a sale since, in a
forced sale, a low price is more beneficial to the mortgage debtor for it
makes redemption of the property easier.
Thus, even if the Court were to assume that the valuation of the property at
issue is correct, the Court still holds that the inadequacy of the price at
which it was sold at public auction does not prevent petitioner from claiming
any deficiency not covered by the said foreclosure sale. The law and
jurisprudence on the matter are clear enough to close the door on a
recourse to equity, insofar as the present case is concerned. Indeed, 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. In the present case, it is clear under the
Promissory Notes, Real Estate Mortgage contract and the Continuing Surety
Agreement executed by respondents that they voluntarily bound themselves
to pay the amounts being claimed by petitioner. Furthermore, there is no
convincing evidence nor argument which would show that petitioner is not
entitled to the deficiency it claims. The CA simply says that to allow
petitioner to recover the amount it seeks, which is allegedly over and above
the actual value of the property it bought at public auction, would amount to
unjust enrichment. However, the Court does not see any unjust enrichment
resulting from upholding the right of the petitioner to collect any deficiency
from respondents. Unjust enrichment exists when a person unjustly retains a
benefit to the loss of another, or when a person retains money or property of
another against the fundamental principles of justice, equity and good
governance. As discussed above, there is a strong legal basis for petitioner's
claim against respondents for the balance of their loan obligation.
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Title: SPS. PEN vs. SPS SANTOS, GR No. 160408, January 11, 2016
Statement of Facts
On April 9, 1986, the appellees (the Julians) obtained a P60,000.00 loan

from appellant Adelaida Pen. Two (2) promissory notes were executed by
the appellees in favor of appellant Adelaida to evidence the foregoing loans.
As security, on May 23, 1986, the appellees executed a Real Estate
Mortgage over their property covered by TCT No. 327733 registered under
the name of appellee Santos Julian, Jr. The owner's duplicate of TCT No.
327733 was delivered to the appellants.
When the loans became due and demandable, appellees failed to pay despite
several demands. As such, appellant Adelaida decided to institute
foreclosure proceedings. However, she was prevailed upon by appellee Linda
not to foreclose the property because of the cost of litigation and since it
would cause her embarrassment as the proceedings will be announced in
public places at the City Hall, where she has many friends. Instead, appellee
Linda offered their mortgaged property as payment in kind. After the
execution of the Deed of Sale, appellant Pen paid the capital gains tax and
the required real property tax. Title to the property was transferred to the
appellants by the issuance of TCT No. 364880 on July 17, 1987. A
reconstituted title was also issued to the appellants on July 09, 1994 when
the Quezon City Register of Deeds was burned.
On the other hand, the appellees aver the following: At the time the
mortgage was executed, they were likewise required by the appellant
Adelaida to sign a one (1) page document purportedly an "Absolute Deed of
Sale". Said document did not contain any consideration, and was "undated,
unfilled and unnotarized". They allege that their total payments amounted to
P115,400.00 and that their last payment was on June 28, 1990 in the
amount of P100,000.00.
Unable to meet the demand, appellee Linda desisted from the offer and
requested that she be shown the land title which she conveyed to the
appellee Adelaida, but the latter refused. Upon verification with the Registry
of Deeds of Quezon City, she was informed that the title to the mortgaged
property had already been registered in the name of appellee Adelaida and
that the transfer was entered on July 17, 1987. A reconstituted title, also
appeared on file in the Registry of Deeds replacing TCT No. 364880. By
reason of the foregoing discoveries, appellee filed an Affidavit of Adverse
Claim on January 1993. Counsel for the appellees, on August 12, 1994,
formally demanded the reconveyance of the title and/or the property to
them, but the appellants refused. In the process of obtaining other
documents; the appellees also discovered that the appellants have obtained
several Declarations of Real Property, and a Deed of Sale consisting of two
(2) pages which was notarized. Said document indicates a consideration of
P70,000.00 for the lot, and was made to appear as having been executed on
October 22, 1986. On September 8, 1994, appellees filed a suit for the
Cancellation of Sale, Cancellation of Title issued to the appellants; Recovery
of Possession; Damages with Prayer for Preliminary Injunction. The
complaint alleged that appellant Adelaida, through obvious bad faith,
maliciously typed, unilaterally filled up, and caused to be notarized the Deed
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of Sale earlier signed by appellee Julian, and used this spurious deed of sale
as the vehicle for her fraudulent transfer unto herself the parcel of land
covered by TCT No. 327733. In its judgment rendered on August 30, 1999,
the RTC ruled in favor of the respondents. According greater credence to the
version of the respondents on the true nature of their transaction, the trial
court concluded that they had not agreed on the consideration for the sale at
the time they signed the deed of sale; that in the absence of the
consideration, the sale lacked one of the essential requisites of a valid
contract; that the defense of prescription was rejected because the action to
impugn the void contract was imprescriptible; and that the promissory notes
and the real estate mortgage in favor of the petitioners were nonetheless
valid, rendering the respondents liable to still pay their outstanding
obligation with interest. CA affirmed with modification. Pronounced that the
deed of sale as void but not because of the supposed lack of consideration
as the R TC had indicated, but because of the deed of sale having been
executed at the same time as the real estate mortgage, which rendered the
sale as a prohibited pactum commissorium in light of the fact that the deed
of sale was blank as to the consideration and the date, which details would
be filled out upon the default by the respondents; that the promissory notes
contained no stipulation on the payment of interest on the obligation, for
which reason no monetary interest could be imposed for the use of money;
and that compensatory interest should instead be imposed as a form of
damages arising from Linda's failure to pay the outstanding obligation..
Issue
- Whether or not the CA erred in ruling against the validity of the deed
of sale
Ruling
The Court affirms the CA, and adopts its conclusions on the invalidity of the
deed of sale.
Article 2088 of the Civil Code prohibits the creditor from appropriating the
things given by way of pledge or mortgage, or from disposing of them; any
stipulation to the contrary is null and void. The elements for pactum
commissorium to exist are as follows, to wit: (a) that there should be a
pledge or mortgage wherein property is pledged or mortgaged by way of
security for the payment of the principal obligation; and (b) that there
should be a stipulation for an automatic appropriation by the creditor of the
thing pledged or mortgaged in the event of non-payment of the principal
obligation within the stipulated period. The first element was present
considering that the property of the respondents was mortgaged by Linda in
favor of Adelaida as security for the farmer's indebtedness. As to the second,
the authorization for Adelaida to appropriate the property subject of the
mortgage upon Linda's default was implied from Linda's having signed the
blank deed of sale simultaneously with her signing of the real estate
mortgage. The haste with which the transfer of property was made upon the
default by Linda on her obligation, and the eventual transfer of the property
in a manner not in the form of a valid dacion en pago ultimately confirmed
the nature of the transaction as a pactum commissorium. Linda's deed of
sale had been executed simultaneously with the real estate mortgage. The
completion and execution of the deed of sale had been conditioned on the
non-payment of the debt by Linda, and reasonably pronounced that such
circumstances rendered the transaction pactum commissorium. The Court
should not disturb or undo the CA's conclusion in the absence of the clear
showing of abuse, arbitrariness or capriciousness on the part of the CA.
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In a sale, the contract is perfected at the moment when the seller obligates
herself to deliver and to transfer ownership of a thing or right to the buyer
for a price certain, as to which the latter agrees. The absence of the
consideration from Linda's copy of the deed of sale was credible proof of the
lack of an essential requisite for the sale. In other words, the meeting of the
minds of the parties so vital in the perfection of the contract of sale did not
transpire. And, even assuming that Linda's leaving the consideration blank
implied the authority of Adelaida to fill in that essential detail in the deed of
sale upon Linda's default on the loan, the conclusion of the CA that the deed
of sale was a pactum commisorium still holds, for, as earlier mentioned, all
the elements of pactum commisorium were present.
Title: BONIFACIO DANAN vs SPOUSES GREGORIO SERRANO AND ADELAIDA

REYES, G.R. No. 195072, August 01, 2016
Statement of Facts
Respondents spouses Gregorio Serrano and Adelaida Reyes (Spouses

Serrano) are the registered owners of a parcel of land. Sometime in the
years 1940 and 1950, when the property was still co-owned by respondent
Gregorio and his siblings, Gregorio's sisters, Marciana and Felicidad, gave
petitioner Bonifacio Danan and a certain Artemio Vitug permission to possess
400 square meters each of the total estate and to build their homes thereon
in exchange for one cavan of palay every year. While Bonifacio and Artemio
paid the P2,000.00 upon the signing of the Agreement, they were both
unable to pay the balance of the purchase price when they fell due.
Nevertheless, they remained in possession of their respective lots. In a
Complaint dated September 10, 1998, the Spouses Serrano, through their
son and attorney-in-fact, Arnel Francisco Serrano, instituted ejectment
proceedings against Bonifacio and Artemio. The complaint, however, was
dismissed on the ground of lack of jurisdiction by the Municipal Trial Court
(MTC).
Meanwhile, in a Complaint for specific performance, Bonifacio and Artemio

alleged that they purchased their respective portions of land via the
Agreement dated June 27, 1976 and since then, stopped paying the yearly
rental of one cavan ofpalay. While they admitted to their failure to pay the
remaining balance of the purchase price in the amount of P4,000.00, they
claimed that such was due to the continuous absence of the Spouses
Serrano. Despite their ability and willingness to pay the aforesaid amount,
however, Bonifacio and Artemio were shocked to have found that as early as
September 1994, the Spouses Serrano had already obtained the title over
the subject properties in their names.
Thus, Bonifacio and Artemio prayed that judgment be rendered ordering the
Spouses Serrano to sign, execute, and deliver the proper deed of sale,
together with the corresponding titles over the portions of land in their favor,
declaring the documents in May 1992 as null and void, and awarding moral
damages, exemplary damages, attorney's fees and litigation expenses. The
RTC granted the Complaint of Bonifacio and Artemio and ordered the
Spouses Serrano to execute and sign the proper Deed of Sale, deliver the
corresponding titles after receiving the P4,000.00 balance, and pay
consequent moral and exemplary damages and attorney's fees.
45
Submitted by:
Civil Law Review II
However, the CA reversed and set aside the RTC Decision finding that the
trial court seemed to have failed to properly determine the true nature of the
agreement between the parties for being primarily impelled by supposed
impulses of equity, stressing that Bonifacio and Artemio were allegedly
unschooled and easily induced by the wealthy spouses. Motion for
Reconsideration was denied by the CA.
Issue
- Whether or not Spouses Serrano conforms to the requirement

prescribed under RA 6552.
Ruling
No. There is no showing that the Spouses Serrano complied with the
requirements prescribed by RA No. 6552. A cursory reading of the
"Agreement in Receipt Form" would readily reveal that the same is a
contract to sell and not a contract of sale. As expressly stipulated therein,
the parties "agreed that in June 1978, upon the completion of the full
payment of the agreed price, the herein vendor will deliver to the vendee a
title corresponding to the lot or portion sold."28 Clearly, the title to the
property was to remain with the Spouses Serrano, to pass only to Bonifacio
until his full payment of the purchase price. It is imperative to note,
however, that in view of the nature of the agreement herein, a contract to
sell real property on installment basis, the provisions of RA No. 6552 must
be taken into account insofar as the rights of the parties in cases of default
are concerned.
Thus, the rights of the buyer in the event he defaults in the payment of the
succeeding installments depend upon whether he has paid at least two (2)
years of installments or less. In the case at hand, it is undisputed that
Bonifacio was only able to pay the first P2,000.00 installment upon the
signing of their agreement, thereafter, failing to pay the balance of the
purchase price when they fell due on June 30, 1977 and June 30, 1978. It is,
therefore, Section 4 of RA No. 6552 that applies herein. Essentially, the said
provision provides for three (3) requisites before the seller may actually
cancel the subject contract: first, the seller shall give the buyer a sixty (60)-
day grace period to be reckoned from the date the installment became
due; second, the seller must give the buyer a notice of cancellation/demand
for rescission by notarial act if the buyer fails to pay the installments due at
the expiration of the said grace period; and, third, the seller may actually
cancel the contract only after thirty (30) days from the buyer's receipt of the
said notice of cancellation/demand for rescission by notarial act. Thus, when
there is failure on the part of the seller to comply with the requirements
prescribed by RA No. 6552 insofar as the cancellation of a contract to sell is
concerned, the Court shall not hesitate in upholding the sale, albeit being
subject to the full payment by the buyer of the purchase price.
Notwithstanding the failure by the spouses to comply with the cancellation
requirements under RA No. 6552, however, Bonifacio's action for specific
performance must nonetheless fail on the ground of prescription.
46

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Submitted by:

RABAGO, John Carlo T.

In Partial Fulfilment of the subject

Civil Law Review II

in San Sebastian College – Recoletos

(DIGESTED CASES IN CIVIL LAW)

Atty. Crisostomo Uribe

John Carlo Rabago

Nature: Petition for Review on Certiorari of the decision and resolution of

Ponente: J. MENDOZA. Second Division

- What is the obligation of a partner with respect to the partnership

Partners' liability is subsidiary and generally joint; therefore, immediate levy

Firstly, the partners' obligation with respect to the partnership liabilities is

Nature: Petition for Review on Certiorari on the decision and resolution of

Ponente: J. LEONEN. Second Division

- Whether the mortgage contract is valid.

(1) That they be constituted to secure the fulfillment of a principal

Nature: Petition for Review on Certiorari under Rule 45 of the Rules of

Ponente: J. MENDOZA Second Division

To protect its interest, PNB instituted a petition for the extrajudicial

- Whether stipulated interest on the contract of loan was usurious

Title: CALILUNG VS PARAMOUNT INSURANCE CORPORATION, G.R. No.

Nature: Petition for Review

Ponente: J. BERSAMIN, First Division

Sometime in 1987, Tarcisio S. Calilung, herein respondent, commissioned

Thereafter, the respondent Punzalan, on behalf of RPTSI, executed a

- What is the rate of interest on the debt decreed in a final and

In accordance with the express terms of the judgment, the respondents'

Title: EVER ELECTRICAL MANUFACTURING, INC. VS PHILIPPINE BANK OF

Nature: Petition for Review on Certiorari.

Pontente: J. REYES, Third Division

On February 21, 2003, the RTC approved the compromise

The Court disagrees.

Under the Civil Code, novation is one of the means to extinguish an

However, novation is never presumed. Article 1292 of the Civil Code

In the absence of an express provision, a contract may still be considered

Further, under the terms of the agreement, Vicente is an additional person

Ponente: J. LEONEN, Second Division

The Lam Spouses issued postdated checks amounting to ₱35,000.00 each

- Whether the contract between petitioners Spouses Alexander and Julie

An obligation is indivisible when it cannot be validly performed in parts,

Ponente: J. JARDELEZA, Third Division

Respondent Esmeralda Blacer Hapitan (Esmeralda) issued thirty-one (31)

On January 6, 1995, Warlily, with her husband Jimmy Lagradilla (Jimmy),

Therefore, the prayer for the issuance of preliminary attachment of the

- Whether the compromise agreement is valid

A compromise agreement is defined as a contract whereby the parties make

Title: BASES CONVERSION DEVELOPMENT AUTHORITY VS. DMCI PROJECT

Ponente: J. LEONEN, Second Division

- Whether or not the arbitration clause in the Joint Venture Agreement

There is no rule that a contract should be contained in a single document. A

Thus, amendments or supplements to the agreement may be executed by

In other words, each document of agreement represents a step toward the

Hence, the arbitration clause in the Joint Venture Agreement should

Title: DEPARTMENT OF AGRARIAN REFORM, QUEZON CITY VS. CARRIEDO,

Ponente: J. JARDELEZA, Third Division

On November 7, 1979, Roman died leaving the entire 73.3157 hectares to

On June 26, 1986, Mario sold approximately 70.4788 hectares to respondent

In June of 1990, Carriedo sold all of these landholdings to the Peoples’

- Whether Carriedo’s alleged failure to exercise his right of retention

The court in this case, firmly disagrees.

In fact, Section 4 of DAR AO 02-03 provides:

Section 4. Period to Exercise Right of Retention