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Table of Contents

PAGE
OBLIGATIONS AND CONTRACTS
OBLIGATIONS
A. Breach of obligation
Delay
1. Arch. Eusebio Bernal v. Dr. Viviencio VIllaflor and Dra. Gergoria
VIllaflor
GR No. 213617, April 18, 2018
B. Prescription of Actions
2. Floro Mercene, petitioner v. Government Service Insurance
System, respondent
GR No. 192971, January 10, 2018
C. Mode of extinguishment of obligations
3. Spouses Francis N. Celones and Felicisima Celones,
petitioners, v. Metropolitan Bank and Trust Company and Atty.
Crisolito O. Dionido, respondents
GR No. 215691, November 21, 2018
CONTRACTS
A. Essential Elements of Contracts
Consent of the contracting parties
4. Philippine National Bank, petitioner, v. Antonio Bacani, Rodolfo
Bacani, Rosalia Vda. De Bayaua and Jovita Vda. De Bayaua,
respondent
GR No. 194983, June 20, 2018 (baka pwede under sale
redemption)

5. Conchita Gloria and Maria Lourdes Gloria-Payduan, petitioner,

v. Builders Savings and Loan Association, Inc., respondent
GT No. 202324, Kune 4, 2018
B. Fundamental Characteristics and / Principles of
Contracts
Relativity of Contracts
6. Asian Terminals, Inc., petitioner, v. Padoson Stainless Steel
Corporation, respondent
GR No. 211876, June 25, 2018
Mutuality of Contracts
7. Security Bank Corporation, petitioner v. Spouses Rodrigo and
Erlinda Mercado, respondents
GR No. 192934, June 27, 2018
C. Form of Contracts

D. Kinds of Contracts as to validity

8. Mateo Encarnacion (Deceased), substituted by his heirs,
namely: Elsa Deplian Encarnacion, Krizza Marie D.
Encarnacion, Loreta Encarnacion, Carmelita E. Staderman,
Corazon S. Encarnacion, Rizalina Encarnacion-Parong, Victoria
Encarnacion-Dula, Maria Helen Encarnacion-Day, Teresita
Encarnacion-Manalag, George Encarnacion, Mary MItchie E.
Edwardson, Ernesto Encarnacion, Mateo Encarnacion, Jr., and
Grace Wagner, petitioners, v. Thomaas Johnson, Respondent
GR No. 192285, July 11, 2018

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 SPECIAL CONTRACTS
Sales
A. In General
Kinds of Sale
9. Demosthenes R. Arbilon, petitioner, v. Sofronio Manlangit,
respondent
GR No. 197920, January 22, 2018
B. Essential Elements
10. Christopher R. Santos, complainant, v. Atty. Joseph A. Arrojado
AC No. 8502, June 27, 2018

11. Norma M. Diampoc, petitioner, v. Jessie Buenaventura and the

Registry of Deeds For the City of Taguig
GR No. 200383 March 19, 2018

12. Heirs of Paz Macalalad, Namely: Marieta Macalalad, Arlene

Macalalad-Aday, Jimmy Macalalad, Ma. Cristina Macalalad,
Nenita Macalalad-Papa, and Danny Macalalad, petitioners, v.
Rural Bank of Pola, Inc. and Register of Deeds of Oriental
Mindoro
GR No. 200899, June 20, 2018
LEASE
Lease
A. Rights and obligations of the lessor and lessee

13. Victoria N. Racelis, in her capacity as administrator, petitioner v.

Spouses Germil Javier and Rebecca Javier, respondents
GR No. 189609, January 29, 2018
CREDIT AND TRANSACTIONS
Guaranty and Suretyship
A. Nature and Effect of Guaranty
14. Ramon E. Reyes and Clara R. Pastor, petitioner, v. BANCOM
Development Corp., respondent
GR No. 190286, January 11, 2018
Pledge, Mortgage and Antichresis
A. Provisions common to pledge and mortgage
Essential requisites for a valid contract of pledge and
mortgage
15. Coca-Cola Bottlers Phils., Inc., petitioner, v. Spouses Efren and
Lolita Soriano, respondents
GR No. 211232, April 11, 2018
TORTS AND DAMAGES
A. Kinds of Damages
16. Manila Electric Company, Vicente Montero, Mr. Bondoc, and
Mr. Bayona, petitioners, petitioners v. NORDEC Philippines
and/or Marvex Industrial Corp. Represented by its
President, Dr. Potenciano R. Malvar, respondents
GR No. 196020, April 18, 2018

17. Orient Hope Agencies, Inc. and/or Zeo Marine, petitioners v.

Michael E. Jara, respondent
GR No. 204307, June 6, 2018

18. San Miguel Pure Foods Company, Inc. v. Foodsphere, Inc.

GR No. 217781, June 20, 2018

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19. Teresa Gutierrez Yamauchi, petitioner v. Romeo F. Suniga,
respondent
GR No. 199513, April 18, 2018

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 SECOND DIVISION
G.R. No. 213617 April 18, 2018

ARCH. EUSEBIO B. BERNAL, DOING BUSINESS UNDER THE NAME AND

STYLE CONTEMPORARY BUILDERS, Petitioner, v. DR. VIVENCIO
VILLAFLOR AND DRA. GREGORIA VILLAFLOR, Respondents.

REYES, JR., J.

NATURE OF THE ACTION:

This civil case assailing the CA decision insofar as it declared respondents
liable for interests on a monetary award of P1,710,271.21 at a rate of only 6%
per annum

FACTS:

Petitioner Architect Bernal doing business as Contemporary Builders filed

an action for sum of money against respondents Spouses Villaflor for the
payment of the balance for the construction of the Medical Arts Building in
Dagupan City.

The RTC ruled in favour of Bernal and ordered respondents Villaflor to pay
P2, 848 plus legal interest rate from March 4, 2008 until the full amout is paid.
Respondents Villaflor appealed to the CA. However, the CA affirmed the decision
of the RTC but the amount to P1,710,271.21 and changing the interest rate from
12% to 6% starting from the finality of the judgement until satisfaction.

ISSUE:

Whether the CA applied the correct interest rate.

RULING:

The Court partially grants the petition.

In Eastern Shipping Lines, Inc. vs. Court of Appeals, the Court made the
following pronouncement, which was intended to be the guidelines in the proper
determination of awards of interest:

1. When the obligation is breached, and it consists in the payment of a sum of

money, i.e., a loan or forbearance of money, the interest due should be that
which may have been stipulated in writing. Furthem1ore, the interest due shall
itself earn legal interest from the time it is judicially demanded. In the absence of
stipulation, the rate of interest shall be 12% [per annum] to be computed from
default, i.e., from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is

breached, an interest on the amount of damages awarded may be imposed at
the discretion of the court at the rate of 6% per annum. No interest, however,
shall be adjudged on unliquidated claims or damages except when or until the
demand can be established with reasonable certainty. Accordingly, where the
demand is established with reasonable certainty, the interest shall begin to run
from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code)
but when such certainty cannot be so reasonably established at the time the
demand is made, the interest shall begin to run only from the date the judgment
of the court is made (at which time the quantification of damages may be

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deemed to have been reasonably ascertained). The actual base for the
computation of legal interest shall, in any case, be on the amount finally
adjudged.

3. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 12% per annum from such finality until its
satisfaction, this interim period being deemed to be by then an equivalent to a
forbearance of credit.

In this case, the award of interest is discretionary on the part of the court. The
petitioner's original demand does not equate to a loan or forbearance of money
but pertains to the cost of construction and services, the amount of which has not
yet been determined with certainty even up to the time of the complaint's filing
with the RTC. Petitioner's original claim was in fact thereafter limited by the RTC
after a consideration of the evidence presented during trial, and ultimately further
reduced by the CA. The uncertainty was brought about by the numerous change
orders that happened while the subject Medical Arts Building was being
constructed. Clearly, at the time of the petitioner's judicial and extrajudicial
demands, the amount of the respondents' obligation remained uncertain.

It is material that the respondents' liability was reasonably ascertained only at the
time the CA rendered its Decision on February 14, 2014. The amount of the
award, specifically P1,710,271.21, was no longer questioned in petitioner's
motion for reconsideration with the CA, or in his petition for review before this
Court. In light of the pronouncement in Eastern Shipping that in such cases,
interest shall begin to run from the time the quantification of damages had been
reasonably ascertained, the CA decision should then be modified, but only in that
the interest of 6% per annum on the award of P1,710,271.21 shall be reckoned
from the time of the CA Decision's promulgation on February 14, 2014.

Once this judgment becomes final and executory, the award equates to a loan or
forbearance of money and from such time, the legal rate of interest begins to
apply. Petitioner's insistence on an increase in the interest rate from such time to
12% per annum is erroneous; his reference to jurisprudence prior to 2013 is
misplaced. In Circular No. 799 issued on June 21, 2013 by the Bangko Sentral
ng Pilipinas, the legal rate of interest on loans and forbearance of money was
reduced from 12% to 6% per annum from the time of the circular's effectivity on
July 1, 2013.

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 THIRD DIVISION
G.R. No. 192971 January 10, 2018

FLORO MERCENE, Petitioner vs.

GOVERNMENT SERVICE INSURANCE SYSTEM, Respondent.

MARTIRES, J.:

NATURE OF THE ACTION:

This is a Civil Case for the quieting of title on a parcel of land which has
been the subject of a Real Estate Mortgage

FACTS:

Petitioner Mercene obtained 2 loans from the GSIS for the amounts of
P29,500 and P14,500. Sometime in June 2014 petitioner filed a complaint for the
quieting of title against respondent because since 1968 GSIS has never
exercised it’s rights as a mortgagee. The REM constituted a cloud on the title of
his property, and GSIS’ right had already prescribed. GSIS on answered that the
complaint failed to state a cause of action and it argued that prescription does not
run against a government entity.

In the pre-trial conference, the RTC granted petitioner’s motion for a

judgment on the pleadings. The CA reversed the decision of the RTC stating the
petitioner’s complaint neither alleged the maturity date of the loans nor the fact
that a demand for payment was made. The CA added that prescription
commences only upon the accrual of the cause of action, and that a cause of
action in a written contract accrues only when there is an actual breach or
violation.

ISSUES:

Whether the mortgage had already prescribed

RULING:

No. In University of Mindanao, Inc. v. Bangko Sentral ng Pilipinas, et

al., the Court clarified that prescription runs in mortgage contract from the time
the cause of action arose and not from the time of its execution, to wit:
The prescriptive period neither runs from the date of the execution of a contract
nor does the prescriptive period necessarily run on the date when the loan
becomes due and demandable. Prescriptive period runs from the date of
demand, subject to certain exceptions.

In other words, ten (10) years may lapse from the date of the execution of
contract, without barring a cause of action on the mortgage when there is a gap
between the period of execution of the contract and the due date or between the
due date and the demand date in cases when demand is necessary. The
mortgage contracts in this case were executed by Saturnino Petalcorin in 1982.
The maturity dates of FISLAI's loans were repeatedly extended until the loans
became due and demandable only in 1990. Respondent informed petitioner of its
decision to foreclose its properties and demanded payment in 1999.

The running of the prescriptive period of respondent's action on the

mortgages did not start when it executed the mortgage contracts with Saturnino

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Petalcorin in 1982. The prescriptive period for filing an action may run either (1)
from 1990 when the loan became due, if the obligation was covered by the
exceptions under Article 1169 of the Civil Code; (2) or from 1999 when
respondent demanded payment, if the obligation was not covered by the
exceptions under Article 1169 of the Civil Code.

In Maybank Philippines, Inc. v. Spouses Tarrosa, the Court explained that

the right to foreclose prescribes after ten (10) years from the time a demand for
payment is made, or when then loan becomes due and demandable in cases
where demand is unnecessary, viz: An action to enforce a right arising from a
mortgage should be enforced within ten (10) years from the time the right of
action accrues, i.e., when the mortgagor defaults in the payment of his obligation
to the mortgagee; otherwise, it will be barred by prescription and the mortgagee
will lose his rights under the mortgage. However, mere delinquency in payment
does not necessarily mean delay in the legal concept. To be in default is different
from mere delay in the grammatical sense, because it involves the beginning of a
special condition or status which has its own peculiar effects or results.
In order that the debtor may be in default, it is necessary that: (a) the obligation
be demandable and already liquidated; (b) the debtor delays performance;
and (c) the creditor requires the performance judicially or extrajudicially, unless
demand is not necessary - i.e., when there is an express stipulation to that effect;
where the law so provides; when the period is the controlling motive or the
principal inducement for the creation of the obligation; and where demand would
be useless. Moreover, it is not sufficient that the law or obligation fixes a date for
performance; it must further state expressly that after the period lapses, default
will commence. Thus, it is only when demand to pay is unnecessary in case of
the aforementioned circumstances, or when required, such demand is made and
subsequently refused that the mortgagor can be considered in default and the
mortgagee obtains the right to file an action to collect the debt or foreclose the
mortgage.

Thus, applying the pronouncements of the Court regarding prescription on

the right to foreclose mortgages, the Court finds that the CA did not err in
concluding that Mercene's complaint failed to state a cause of action. It is
undisputed that his complaint merely stated the dates when the loan was
contracted and when the mortgages were annotated on the title of the lot used as
a security. Conspicuously lacking were allegations concerning: the maturity date
of the loan contracted and whether demand was necessary under the terms and
conditions of the loan.

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 FIRST DIVISION
G.R. No. 215691 November 21, 2018

SPOUSES FRANCIS N. CELONES AND FELICISIMA

CELONES, Petitioners, v. METROPOLITAN BANK AND TRUST COMPANY
AND ATTY. CRISOLITO O. DIONIDO, Respondents.

TIJAM, J.:

NATURE OF THE ACTION:

This is a civil case for Declaratory Relief and Injunction to compel
Metrobank to issue the certificates of redemption and to deliver to them the
certificates of title over the foreclosed properties.

FACTS:

Petitioners Spouses Celones together with their company, Processing

Partners and Packaging Corporation (PPPC), obtained various loans from
Metrobank for which they mortgaged various properties. The total obligation
amounted to P64,474,058.73. The Spouses Celones defaulted on their loans. In
the foreclosure sale Metrobank emerged as the highest bidder. Before the
expiration of the redemption period, Metrobank filed several petitions for the
issuance of writ of possession before several courts. Sometime in 2007,
petitioners offered to redeem the properties. Metrobank issued a Conditional
Notice of Approval and Redemption stating that the cost of redeeming the
property is P55 million to be paid on or before December 20, 2007. Petitioners
sought help from Atty Dionido who agreed to loan the said amount to the
spouses. In lieu of executing a loan agreement, Spouses Celones, PPPC,
Metrobank and Atty. Dionido executed a MOA, wherein the parties agreed for the
subrogation of Atty. Dionido to all the rights, interests of Metrobank over the loan
obligation of Spouses Celones and the foreclosed properties.

When petitioners demanded from Metrobank the return of the properties,

Metrobank refused on the ground that all its rights and interests have been
transferred to Atty. Dionido, hence he should be the one to issue the certificate
of redemption. Meanwhile Atty. Dionido sent several demand letters to the
Spouses Celones to vacate the properties. Aggrieved, the Spouses filed before
the RTC a case for declaratory relief and injuction to compel Metrobank to issue
certificates of redemption and to deliver to them the certificates of title over the
foreclosed properties.

The RTC ruled in favor of petitioners Celones. But the CA reversed the
RTC. Hence this petition.

ISSUE:

Whether or not Spouses Celones were able to redeem the foreclosed

properties from Metrobank using the loan acquired from Atty. Dionido.

RULING:

Yes. Novation is a mode of extinguishing an obligation by changing its

objects or principal obligations, by substituting a new debtor in place of the old
one, or by subrogating a third person to the rights of the creditor. In order that an
obligation may be extinguished by another which substitute the same, it is

8
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. Thus, "novation
must be stated in clear and unequivocal terms to extinguish an obligation. It
cannot be presumed and may be implied only if the old and new contracts are
incompatible on every point."

Examination of the MOA showed no express stipulation as to the novation

or extinction of the CNAR. Thus, for implied novation to exist, it is necessary to
determine whether the CNAR and the MOA are incompatible on every point such
that they cannot be reconciled and stand together. Under the CNAR, it is
provided that Metrobank approved the offer of Spouses Celones to redeem the
property in the amount of P55 Million. While under the MOA, Metrobank assigned
all its rights and interests to Atty. Dionido over the foreclosed properties including
the issuance of a certificate of redemption.

After careful scrutiny of the records, we find that the CNAR only deals with
the redemption right of Spouses Celones while the MOA deals with the
assignment of credit of Metrobank to Atty. Dionido. As such, the CNAR and the
MOA can be reconciled and can both stand together.

Unfortunately for Atty. Dionido, he merely acquired what right Metrobank

has, as of the date of the signing of the MOA, which was the issuance of a
Certificate of Redemption, because as of that date, the foreclosed properties
have already been redeemed by Spouses Celones from Metrobank. The fact that
Spouses Celones had already redeemed the foreclosed properties was
evidenced by the fact that as soon as Metrobank was paid the redemption
amount, the latter issued payment slips in the name of Spouses Celones.
Further, after the payment of the P55 Million, Metrobank caused the dismissal of
the civil cases it filed for issuance of writ of possession due to the fact that the
foreclosed properties had already been redeemed by the Spouses Celones. Had
the P55 Million been paid by Atty. Dionido to Metrobank as a consideration for
the assigment of credit, the receipt should have been under the name of Atty.
Dionido and not under the name of Spouses Celones.

Finding that the foreclosed properties had already been redeemed by Spouses
Celones, the Certificate of Redemption should naturally be issued by the
assignee, Atty. Dionido. To accept his contention that the redemption period of
the foreclosed properties had already lapsed and that Spouses Celones has lost
their right over the foreclosed properties is to go against the basic principle of
assigment of credit that the assignee cannot acquire no greater right than the
assignor.

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 SECOND DIVISION
G.R. No. 194983 June 20, 2018

PHILIPPINE NATIONAL BANK, Petitioner, v. ANTONIO BACANI, RODOLFO

BACANI, ROSALIA VDA. DE BAYAUA, JOSE BAYAUA AND JOVITA VDA.
DE BAYAUA, Respondent.

REYES, JR., J.:

NATURE OF THE ACTION:

This is a civil case seeking to reverse the CA decision which held that
PND fraudulently sold the subject property to the prejudice of respondents

FACTS:

Respondent Rodolfo is the registered owner of a parcel of land in Isabela.

The said land was used to secure the P80,000 loan which Rodolfo and his wife
Nellie obtained from PNB. The Spouses Bacani failed to pay the loan. PNB
extrajudicially foreclosed the property. The property was awarded to PNB as the
highest bidder. The spouses failed to redeem the propery hence the TCT was
cancelled and a new one was issued in the name of PNB. On November 29,
1989, PNB issued SEL Circular No. 8-7/89, revising its policy on the disposition
of acquired assets. Subject to certain conditions, former owners or their heirs, as
the case may be, were given priority in the re-acquisition of their foreclosed
assets '"on negotiated basis without public bidding.

Based on the circular the spouses Bacani made multiple offers for the
reacquisition of the property. However they were denied and were later informed
that the property was going to be sold in a public auction.

PNB sold the subject property through a negotiated sale to Renato de

Leon (Renato), for the price of Php1,500,000.00. Pursuant to this sale, the title of
PNB was cancelled, and TCT No. 261643 was issued in the name of Renato.
Renato later on filed an ejectment case against the respondents on February 18,
1997, which was favorably granted by the Municipal Trial Court of Santiago City.

The spouses filed a complaint for annulment of the sale and of Renato’s
title over the subject property. The RTC ruled in favour of the spouses and held
that PNB acted in bad faith in failing to give preference to the Spouses’ offer to
purchase the property. The CA affirmed.

ISSUES:

1. Whether the publication of an invitation to bid constitute a binding obligation on

the part of PNB to sell the subject property.

2. Whether the spouses have an enforeceable right to repurchase the property

RULING:

1. No. The publication of the Invitation to Bid, which included the subject
property, was not a binding obligation on the part of PNB. Article 1326 of the Civil
Code clearly provides that:

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ART. 1326. Advertisements for bidders are simply invitations to make
proposals, and the advertiser is not bound to accept the highest or lowest
bidder, unless the contrary appears.

Thus, the fact that the Invitation to Bid was published cannot bind PNB to any
offer from any party. PNB merely notified interested parties to submit their
proposals for the purchase of the subject property, which PNB may either accept
or reject as the absolute owner thereof. In the same manner, the published
bidding schedule was not an offer from PNB, notice and acceptance of which
would compel the bank to sell the subject property to such party.

There being no guarantee that the highest or lowest bid was entitled to purchase
the property, the Spouses Bacani cannot rely on the publication of the Invitation
to Bid to support their claim of fraud.Ultimately, the Spouses Bacani do not have
a cause of action, especially following the consolidation of the subject propet1y's
title in favor of PNB. At the time of the sale to Renato, PNB was the absolute
owner of the subject property. It had the right to dispose or alienate the property,
notwithstanding the intention of the Spouses Bacani to repurchase it.
Accordingly, the sale to Renato was valid. The complaint for the annulment of
said sale, as well as the annulment of Renato's title over the subject property,
must be dismissed.

2. No. In extrajudicial foreclosures of real estate mortgage, the debtor, his or her
successors-in-interest, or any judicial creditor or judgment creditor of said debtor,
is granted a period of one (l) year within which to redeem the property. The
redemption period is reckoned from the registration of the certificate of sale with
the Register of Deeds. When the debtor, or the successors-in-interest as the
case may be, fails to redeem the property within the prescribed statutory period,
the consolidation of ownership in favor of the purchaser becomes a matter of
right. At that point, the purchaser becomes the absolute owner of the property,
and may, as a necessary consequence, exercise all the essential attributes of
ownership. In this case, PNB's certificate of sale was registered on October 10,
1986 and one (1) year lapsed from this date without the Spouses Bacani
exercising their right to redeem the subject property. Due to the unfortunate
failure of the Spouses Bacani to exercise their redemption right, the title of
Rodolfo over the subject property was cancelled and TCT No. T-185028 was
issued in the name of PNB. At this point, PNB became the absolute owner of the
property and Rodolfo, as well as his wife, lost all their rights and interests over
it. Verily, PNB not only had the right to its possession, but also all the other rights
considered as essential attributes of ownership—including the right to dispose or
alienate the subject property.

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 FIRST DIVISION
G.R.No. 202324 June 04, 2018

CONCHITA GLORIA AND MARIA LOURDES GLORIA-

PAYDUAN, Petitioners, v. BUILDERS SAVINGS AND LOAN ASSOCIATION,
INC., Respondent.

DEL CASTILLO, J.

NATURE OF ACTION:
This is a civil case for the nullification of a Real Estate Mortgage.

FACTS:

Petitioners Spouses Juan and Conchita Gloria are the registered owens of
a parcel of land in Quezon City. Maria Lourdes Gloria-Payudan is their daughter.
On August 14, 1987 Juan passed away.

On December 7, 1993, Conchita and Lourdes filed before the RTC a

Second Amended Complaint against respondent Builders Savings and Loan
Association, Inc. (Builders Savings), Benildo Biag (Biag), and Manuel F. Lorenzo
for "declaration of null and void real estate mortgage, promissory note,
cancellation of notation in the transfer certificate of title, and damages" with
prayer for injunctive relief.
Petitioners claimed that Biag duped them into surrendering TCT 35814 to
him under the pretense that Biag would verify the title; that Biag claimed that the
title might need to be reconstituted; that Biag instead used the title to mortgage
the Kamuning property to respondent Builders Savings; that Conchita was
fraudulently made to sign the subject loan and mortgage documents by Biag,
who deceived Conchita into believing that it was actually Lourdes who requested
that these documents be signed; that the subject Mortgage and Promissory
Note contained the signature not only of Conchita, but of Juan, who was by then
already long deceased, as mortgagor and co-maker; that at the time the loan and
mortgage documents were supposedly executed, Conchita was already sickly
and senile, and could no longer leave her house; that Biag and Builders Savings
conspired in the execution of the forged loan and mortgage documents, that the
forged loan and mortgage documents were not signed/affirmed before a notary
public; that on account of Biag and Builders Savings' collusion, the subject
property was foreclosed and sold at auction to the latter; and that the loan and
mortgage documents, as well as the foreclosure and sale proceedings, were null
and void and should he annulled. Petitioners thus prayed that the Mortgage and
Promissory Note be declared null and void. On the other hand Builders alleged
that Lourdes had neither the capacity to sue nor the authority and interest since
she was just an “ampon” and was not legally adapted. Builders also presented
Credit Investigator Danilo Reyes who testified that Spouses Gloria and Biag
applied for a loan. RTC dismissed the complaint for lack of merit. The CA
reversed the decision.

ISSUE:

Whether or not mortgage and promissory note are valid

RULING:

12
 No. Finally, the Court finds the trial court to be correct in issuing the March
12, 2004 Order granting petitioners' motion for reconsideration and declaring the
mortgage and promissory note as null and void. The evidence indicates that
these documents were indeed simulated; as far as petitioners were concerned,
they merely entrusted the title to the subject property to Biag for the purpose of
reconstituting the same as he claimed that the title on file with the Registrar of
Deeds of Quezon City may have been lost by fire. Petitioners did not intend for
Biag to mortgage the subject property in 1991 to secure a loan; yet the latter,
without petitioners' knowledge and consent, proceeded to do just that, and in the
process, he falsified the loan and mortgage documents and the accompanying
promissory note by securing Conchita's signatures thereon through fraud and
misrepresentation and taking advantage of her advanced age and naivete and
forged Juan's signature and made it appear that the latter was still alive at the
time, when in truth and in fact, he had passed away in 1987. A Certificate of
Death issue d by the Quezon City Local Civil Registrar and marked as Exhibit "D"
and admitted by the trial court proves this fact. Under the Civil Code,

Art. 1346. An absolutely simulated or fictitious contract is void. x x x

Art. 1409. The following contracts are in existent and void from the beginning:

(1) x x x;

(2) Those which are absolutely simulated or fictitious;

As a consequence of Biag's fraud and forgery of the loan and mortgage

documents, the same were rendered null and void. This proceeds from the fact
that Biag was not the Owner of the subject property and may not thus validly
mortgage it, as well as the well-entrenched rule that a forged or fraudulent deed
is a nullity and conveys no title. "In a real estate mortgage contract, it is essential
that the mortgagor be the absolute owner of the property to be mortgaged;
otherwise, the mortgage is void." And "when the instrument presented for
registration is forged, even if accompanied by the owner's duplicate certificate of
title, the registered owner does not thereby lose his title, and neither does the
mortgagee acquire any right or title to the property. In such a case, the
mortgagee under the forged instrument is not a mortgagee protected by
Law." Lastly, when "the person applying for the loan is other than the registered
owner of the real property being mortgaged[,it] should have already raised a red
flag and x x x should have induced the [mortgagee] to make inquiries into and
confirm [the authority of the mortgagor]."

13
 FIRST DIVISION
G.R. No. 211876 June 25, 2018

ASIAN TERMINALS, INC., Petitioner, v. PADOSON STAINLESS STEEL

CORPORATION, Respondent.

TIJAM, J.:

NATURE OF THE ACTION:

This is a civil case for the complaint of a sum of money to determine who
should pay the storage fees agreed upon in the contract

FACTS:

Respondent Padoson Stainless Steel Corporation hired Asian Terminals,

Inc. (ATI) to provide arrastre, wharfage and storage services at the South Harbor
Port of Manila. ATI rendered storage services for a shipment of 9 stainless steel
coils and 72 hot-rolled steel coils imported in favour of Padoson. The shipment
was stored at ATI’s premises until discharged. Meanwhile the shipment became
the subject of a Hold Order issued by the BOC as an offshoot of a customs case
filed against Padoson due to its tax liabilities. ATI demanded from Padoson the
payment for its services however the demand went unheeded. Hence ATI filed a
complaint for Sum of Money and Damages with Prayer for the Issuance of Writ
of Preliminary Attachment against Padoson.

In its answer Padoson argued that the shipments suffered deterioration

while in ATI’s custody; and that due to such deteriorarion Padoson lost profits;
that the Hold-Order issued by the BOC was merely a leverage to claim
Padoson's alleged unpaid duties. The RTC dismissed ATI’s complaint and
Padoson’s counterclaim. The RTC reasoned out that by virtue of the Hold-Order
over Padoson's shipments, the BOC has acquired constructive possession over
the same. Consequently, the BOC should be the one liable to ATI's money
claims. The RTC, however, pointed out that since ATI did not implead the BOC in
its complaint, the BOC cannot be held to answer for the payment of the storage
fees. The CA Affirmed.

ISSUE:

Whether Padoson is liable for the payment of ATI’s services

RULING:

Yes. First, granting, without admitting, that the BOC has constructive
possession over Padoson's shipment, this does not, in itself release Padoson
from its obligation to pay the storage fees due to ATI. It has been established that
Padoson engaged ATI to perform arrastre, wharfage and storage services over
its shipments from October 12, 2001 and November 8, 2001, until it was
discharged from ATI's premises on July 29, 2006. Although Padoson's shipments
were the subject of BOC's Hold-Order dated September 7, 2001, the fact remains
that it was Padoson, and not BOC, that entered into a contract of service with ATI
and consequently was the one who was benefited therefrom.

The basic principle of relativity of contracts is that contracts can only bind
the parties who entered into it, and cannot favor or prejudice a third person, even

14
if he is aware of such contract and has acted with knowledge thereof. Indeed,
"where there is no privity of contract, there is likewise no obligation or liability to
speak about."

Guided by this doctrine, Padoson, cannot shift the burden of paying the storage
fees to BOC since the latter has never been privy to the contract of service
between Padoson and ATI. To rule otherwise would create an absurd situation
wherein a private party may free itself from liability arising from a contract of
service, by merely invoking that the BOC has constructive possession over its
shipment by the issuance of a Hold-Order.

Second, the BOC's Hold-Order is not in any way related to the contract of
service between ATI and Padoson. Rather, it is directed at Padoson's shipment
by reason of Padoson's tax liability and which triggered the filing of the Customs
Case. The BOC's exclusive jurisdiction over the shipment is solely for the
purpose of enforcing customs laws against Padoson's tax delinquency. The
BOC's interest over the shipment was limited to discharging its duty to collect
Padoson's tax liability. Put a bit differently, the BOC's Hold-Order is extraneous
to Padoson's obligation to pay the storage fees in favor of ATI. Even Padoson
admitted that the Hold-Order was issued by the BOC merely as a leverage to
claim Padoson's alleged unpaid duties. Clearly, Padoson has two monetary
obligations, albeit of different characters – one is its liability for storage fees with
ATI based on its contract of service, and the other is its tax liability with the BOC
which is the subject of the Customs case pending with the RTC.

Third, the RTC's pronouncement which was affirmed by the CA, to the effect that
the BOC, and not Padoson, should have been held liable for the storage fees
had it been impleaded in ATI's complaint, is erroneous. This presupposes that
BOC is an indispensable party, which it is not.

15
 FIRST DIVISION
G.R. No. 192934 June 27, 2018

SECURITY BANK CORPORATION, Petitioner, v. SPOUSES RODRIGO AND

ERLINDA MERCADO, Respondents.

JARDELEZA, J.:

NATURE OF THE ACTION:

This is a civil case assailing the interest rate imposed by Security Bank on
the ground that it violates of the principle of mutuality of contracts

FACTS:

Security Bank granted spouses Mercado a revolving credit line in the

amount of P 1,000,000.00. The terms and conditions of the agreement included a
stipulation wherein the Spouses Mercado agree to pay Security Bank interest on
outstanding Availments at a per annum rate determined from time to time by
Security Bank. Spouses Mercado executed a real estate mortgage on some of
their properties to secure the loan. The spouses defaulted, hence the properties
of the spouses were foreclosed. The spouses Mercado offered to redeem the
foreclosed properties for P10,000,000.00. However, Security Bank allegedly
refused the offer and made a counter-offer in the amount of P15,000,000.00.

Thereafter the spouses filed a complaint for annulment of foreclosure sale,

damages, injunction and specific performance, they argue among others that the
interests and the penalties imposed by Security Bank on their obligations were
iniquitous and unconscionable.

The RTC declared that: the foreclosure sales of the five parcels of land
void and that the interest rates contained in the revolving credit line agreement
void for being potestative or solely based on the will of Security Bank. On appeal,
the CA also concluded that the provisos giving Security Bank the sole discretion
to determine the annual interest rate is violative of the principle of mutuality of
contracts because there is no reference rate from which to peg the annual
interest rate to be imposed.

ISSUE:

Whether Security Bank’s provision on the interest rate violates the

principle of mutuality of contracts

RULING:

Yes. Basic is the rule that there can be no contract in its true sense
without the mutual assent of the parties. If this consent is absent on the part of
one who contracts, the act has no more efficacy than if it had been done under
duress or by a person of unsound mind. Similarly, contract changes must be
made with the consent of the contracting parties. The minds of all the parties
must meet as to the proposed modification, especially when it affects an
important aspect of the agreement In the case of loan contracts, the interest rate
is undeniably always a vital component, for it can make or break a capital

16
venture. Thus, any change must be mutually agreed upon, otherwise, it produces
no binding effect.

In that case, we found that the method of fixing interest rates is based
solely on the will of the bank. The method is "one-sided, indeterminate, and
[based on] subjective criteria such as profitability, cost of money, bank costs, etc.
x x x." It is "arbitrary for there is no fixed standard or margin above or below
these considerations."89 More, it is worded in such a way that the borrower shall
agree to whatever interest rate the bank fixes. Hence, the element of consent
from or agreement by the borrower is completely lacking.

The RTC and CA were correct in holding that the interest provisions in the
revolving credit line agreement and its addendum violate the principle of
mutuality of contracts. First, the authority to change the interest rate was given to
Security Bank alone as the lender, without need of the written assent of the
spouses Mercado. This unbridled discretion given to Security Bank is evidenced
by the clause "I hereby give my continuing consent without need of additional
confirmation to the interests stipulated as computed by [Security Bank]." The
lopsidedness of the imposition of interest rates is further highlighted by the lack
of a breakdown of the interest rates imposed by Security Bank in its statement of
account94 accompanying its demand letter.

Second, the interest rate to be imposed is determined solely by Security

Bank for lack of a stated, valid reference rate. The reference rate of "Security
Bank's prevailing lending rate" is not pegged on a market-based reference rate
as required by the BSP. In this regard, we do not agree with the CA that this case
is similar with Polotan, Sr. v. Court of Appeals (Eleventh Division).95 There, we
declared that escalation clauses are not basically wrong or legally
objectionable as long as they are not solely potestative but based on reasonable
and valid grounds. We held that the interest rate based on the "prevailing market
rate" is valid because it cannot be said to be dependent solely on the will of the
bank as it is also dependent on the prevailing market rates. The fluctuation in the
market rates is beyond the control of the bank.96 Here, however, the stipulated
interest rate based on "Security Bank's prevailing lending rate" is not
synonymous with "prevailing market rate." For one, Security Bank is still the one
who determines its own prevailing lending rate. More, the argument that Security
Bank is guided by other facts (or external factors such as Singapore Rate,
London Rate, Inter-Bank Rate) in determining its prevailing monthly rate fails
because these reference rates are not contained in writing as required by law
and the BSP. Thus, we find that the interest stipulations here are akin to the ones
invalidated in Silos and in Philippine Savings Bank for being potestative.

17
 FIRST DIVISION
March 19, 2018 G.R. No. 200383

NORMA M. DIAMPOC, Petitioner vs. JESSIE BUENAVENTURA and THE

REGISTRY OF DEEDS FOR THE CITY OF TAGUIG, Respondents

DEL CASTILLO, J.:

NATURE OF THE ACTION:

This is a civil case for the annulment of a deed of sale and recovery of
duplicate original copy of title, with damages, against respondent Jessie
Buenaventura (Buenaventura) and the Registry of Deeds for the Province of
Rizal.

FACTS:

Norma and Wilbur Diampoc (the Diampocs) are owners of a 174 square
meter parcel of land in Sginal Village Taguig City, covered by TCT No. 25044.
Jessie Buenaventura (Buenaventura) became their friend and requested to
borrow their owner’s copy of the TCT as a security for the P1 million loan that
Buenaventura wished to secure; the Diampocs acceded to the request on the
condition that Buenaventura should not sell the subject property and that
Buenaventura promised to give them P300,000.00 out of the P1 million loan
proceeds

Buenaventura asked them to sign a folded piece of paper without giving

them the opportunity to read the contents thereof. The Diampocs later found out
that half of their land was already in the name of Buenaventura. Hence, they
filed a complaint for the annulment of the deed of sale and recovery of duplicate
original copy of title with damages.

During trial before the RTC the spouses alleged that they only knew of the
sale after being informed by Engineer Aguinaldo who was conducting a survey of
their land, and presenting a deed of sale. Both Spouses corroborated that they
did not appear before the notary public and that when they signed the document,
the word “vendor” not yet present. On the other hand, Buenaventura alleged that
it was signed before a notary public.

The RTC dismissed their complaint for insufficiency of evidence.

According to the RTC, the Diampocs were short of the required evidence to
substantiate their allegations that the subject deed of sale is illegal and spurious.
The deed of sale being a public document, is prima facie evidence of the facts
stated therein. Under the rule, the terms of a contract are rendered conclusive
upon the parties and evidence aliunde is not admissible to vary or contradict a
complete and enforceable agreement embodied in a document. The pertinent
provision of the New Civil Code reads: ‘Art. 1159. Obligations arising from
contracts have the force of law between the contracting parties and should be
complied with in good faith'

The CA affirmed the findings of the RTC. The CA stated that notarized
documents, like the deed in question, enjoy the presumption of regularity which
can be overturned only by clear, convincing and more than merely preponderant
evidence. Miserably, the Diampocs, failed to discharge this burden. The

18
Diampocs are not illiterate, that they are educated persons who understood the
meaning of the word ‘vendor’ printed under their names. They could easily read
such word before they could affix their signatures. We are simply appalled by
Wilbur's pathetic explanation that it was ‘dark’ at the time he signed the deed so
that he failed to read the word 'vendor'.

ISSUE:

Whether there was a valid contract of sale

RULING:

Yes, The RTC and the CA are unanimous in declaring that the deed
should be sustained on account of petitioner's failure to discredit it with her
evidence. The CA further found that petitioner and her husband received in full
the consideration of P200,000.00 for the sale. As far as the lower courts are
concerned, the three requirements of cause, object, and consideration
concurred. This Court is left with no option but to respect the lower courts'
findings, for its jurisdiction in a petition for review on certiorari is limited to
reviewing only errors of law since it is not a trier of facts. This is especially so in
view of the identical conclusions arrived at by them. Petitioner and her husband's
admission that they failed to exercise prudence can only be fatal to their cause.
They are not unlettered people possessed with a modicum of intelligence; they
are educated property owners capable of securing themselves and their property
from unwarranted intrusion when required. They knew the wherewithal of
property ownership. Their failure to thus observe the care and circumspect
expected of them precludes the courts from lending a helping hand, and so they
must bear the consequences flowing from their own negligence.

The rule that one who signs a contract is presumed to know its contents
has been applied even to contracts of illiterate persons on the ground that if such
persons are unable to read, they are negligent if they fail to have the contract
read to them. If a person cannot read the instrument, it is as much his duty to
procure some reliable persons to read and explain it to him, before he signs it, as
it would be to read it before he signed it if he were able to do so and his failure to
obtain a reading and explanation of it is such gross negligence as will estop him
from avoiding it on the ground that he was ignorant of its contents. It is also a
well-settled principle that "the law will not relieve parties from the effects of an
unwise, foolish or disastrous agreement they entered into with all the required
formalities and with full awareness of what they were doing.

19
 FIRST DIVISION
G.R. No. 192285 July 11, 2018

MATEO ENCARNACION (DECEASED), SUBSTITUTED BY HIS HEIRS,

NAMELY: ELSA DEPLIAN-ENCARNACION, KRIZZA MARIE D.
ENCARNACION, LORETA ENCARNACION, CARMELITA E. STADERMAN,
CORAZON S. ENCARNACION, RIZALINA ENCARNACION-PARONG,
VICTORIA ENCARNACION-DULA, MARIA HELEN ENCARNACION-DAY,
TERESITA ENCARNACION-MANALANG, GEORGE ENCARNACION, MARY
MITCHIE E. EDWARDSON, ERNESTO ENCARNACION, MATEO
ENCARNACION, JR., AND GRACE WAGNER, Petitioners, v. THOMAS
JOHNSON, Respondent.

JARDELEZA, J.:

NATURE OF THE ACTION:

This is a civil case to annul an execution sale wherein an alien was

declared the highest bidder

FACTS:

Respondent Johnson filed an action for breach of contract with prayer for
damages against Spouses Narvin and Mary Edwarson, Mateo’s daughter, before
the Vancouver Registry of the SC of British Columbia. Respondent alleged that
the spouses convinced him to invest his money in a vehicle leasing company
owned by the spouses which turned out to be a fraudulent business scheme.
Respondent moved that the SC of British Columbia grant him a Mareva
injunction, with ex juris affect, to restrain Narvin and Mary from dealing with any
of their assets except as is necessary for payment of ordinary living expenses or
to carry on their ordinary business. The SC of British Columbia issued a Mareva
injunction and authorized respondent, among others, to obtain orders in foreign
jurisdictions which would permit its enforcement in those jurisdictions. The
Spouses were declared in default

Respondent filed an action for recognition and enforcement of foreign

judgment with prayer for the recognition of the Mareva injunction with the RTC of
Olongapo City. The RTC granted the petition and prohibited the spouses from
disposing their assets as well as those belonging or controlled by, the Zambales-
Canada Foundation, the 5-E Foundation and those belonging to Mateo. The
Spouses were declared in default. Thereafter, Johnson was declared the highest
bidder in the execution sale. Mateo filed a third party claim arguing that the was
the owner of the lands that were levied.

ISSUE:

Whether respondent Johnson, an alien may own private lands by virtue of an

execution sale.

RULING:

No. we nevertheless cannot turn a blind eye to the blatant violation of the
Constitution's prohibition on foreign ownership of lands. This violation was

20
committed when respondent was allowed to participate in the public auction
sales where, as highest bidder, he acquired land.

Section 7, Article XII of the Constitution states:

Sec. 7. Save in cases of hereditary succession, no private lands shall be
transferred or conveyed except to individuals, corporations, or associations
qualified to acquire or hold lands of the public domain.
The fundamental law is clear that aliens, whether individuals or
corporations, are disqualified from acquiring lands of the public domain. 68 The
right to acquire lands of the public domain is reserved only to Filipino citizens or
corporations at least 60% of the capital of which is owned by
Filipinos. Consequently, they are also disqualified from acquiring private lands.

In Matthews v. Taylor, we took cognizance of the violation of the

Constitutional prohibition on alien land ownership despite the failure of the trial
and appellate courts to consider and apply these constitutional principles. There
we said, "[t]he trial and appellate courts both focused on the property relations of
petitioner and respondent in light of the Civil Code and Family Code provisions.
They, however, failed to observe the applicable constitutional principles, which, in
fact, are the more decisive." We said further:

The rule is clear and inflexible: aliens are absolutely not allowed to acquire
public or private lands in the Philippines, save only in constitutionally recognized
exceptions. There is no rule more settled than this constitutional prohibition, as
more and more aliens attempt to circumvent the provision by trying to own lands
through another. In a long line of cases, we have settled issues that directly or
indirectly involve the above constitutional provision. We had cases where aliens
wanted that a particular property be declared as part of their father's estate; that
they be reimbursed the funds used in purchasing a property titled in the name of
another; that an implied trust be declared in their (aliens') favor; and that a
contract of sale be nullified for their lack of consent.

In this case, it is undisputed that respondent is a Canadian

citizen. Respondent neither denied this, nor alleged that he became a Filipino
citizen. Being an alien, he is absolutely prohibited from acquiring private and
public lands in the Philippines. Concomitantly, respondent is also prohibited from
participating in the execution sale, which has for its object, the transfer of
ownership and title of property to the highest bidder. What cannot be legally done
directly cannot be done indirectly. In light of this, we nullify the auction sales
conducted on June 23, 2004 and November 29, 2006 where respondent was
declared the highest bidder, as well as the proceedings which led to the
acquisition of ownership by respondent over the lands involved. Article 1409(1)
and (7) of the Civil Code states that all contracts whose cause, object, or purpose
is contrary to law or public policy, and those expressly prohibited or declared void
by law are inexistent and void from the beginning.

21
 FIRST DIVISION
G.R. No. 197920 January 22, 2018

DEMOSTHENES R. ARBILON, Petitioner, v. SOFRONIO

MANLANGIT, Respondent.

TIJAM, J.

NATURE OF THE ACTION:

This is a civil case to determine who is the valid owner of the compressor
purchased

FACTS:

Respondent Manlangit purchased a compressor and a stainless pump

from Davao Diamond Industrial Supply. Respondent claimed that the compressor
had been in the possession of petitioner from November 1997 up to the time of
the filing of the complaint, that despite demand, petitioner failed to return the
same to respondent.

Petitioner Arbilon in his answer claims that Manlangit is not the owner of
the compressor since he was never vested with its ownership because he failed
to pay for the items. Arbilon alleged that he voluntarily assumed the obligation to
pay in 4 installments since the compressor was indispensable in the mining
operation of Double A.

During the trial, respondent alleged that he was once a financier and
operator of a gold mine in Davao del Norte but when he ran out of funds,
petitioner and Major Efren Alcuizar took over the mining operations. When
petitioner and Alcuizar also ran out of funds, Lucia Sanchez Leanillo became the
financier of the mining operations. It appears that Leanillo paid for the
installments of the compressor on account of a separate contract of sale entered
into by Davao Diamond with her.

The RTC ruled in favor of the petitioner. The CA reversed the decision and
ruled that Manlangit was the owner of the compressor and was thus entitled to its
possession.

ISSUE:

Whether or not the CA erred when it ruled that respondent is the owner of the
compressor, hence entitled to its possession

RULING:

No. As found by the CA and undisputed by the respondent, the Sales

Invoice No. 82911 covering the disputed compressor contained the following
stipulation: It is hereby agreed that the goods listed to this invoice shall remain
the property of the seller until fully paid by the buyer. Failure of the buyer to pay
the goods as agreed upon, the seller may extra-judicially take possession of the
goods and dispose them accordingly.

22
While the sales invoice is not a formal contract to sell, the sales invoice is
nevertheless the best evidence of the transaction between the respondent and
Davao Diamond. Sales invoices are commonly recognized in ordinary
commercial transactions as valid between the parties and, at the very least, they
serve as an acknowledgment that a business transaction has in fact transpired.
Thus, the moment respondent affixed his signature thereon, he is bound by all
the terms stipulated therein. The sales invoice contains the earmarks of a
contract to sell since the seller reserved the ownership of the thing sold until the
buyer fully paid the purchase price. We therefore agree with the CA that the
agreement between respondent and Davao Diamond is a contract to sell. As
such, the mere delivery of the compressor to respondent does not make him the
owner of the same.

Other than the self-serving statements of Leanillo, no other evidence was

presented to support her allegation that Davao Diamond entered into a separate
contract with her. In fact, at the time Leanillo paid the compressor in 1998, there
is no evidence that Davao Diamond revoked, rescinded or cancelled the contract
to sell with respondent.

Moreover, it must be considered that in view of the existing contract to sell

between respondent and Davao Diamond, the latter cannot simply sell the
property to petitioner. A contact to sell is a bilateral contract whereby the
prospective seller, while expressly reserving the ownership over the thing sold
despite the delivery thereof to the prospective buyer, binds himself to sell the
property exclusively to the prospective buyer upon full payment of the purchase
price. Thus, in the absence of any revocation or cancellation of the contract to
sell with respondent, Davao Diamond cannot legally sell the compressor to
petitioner.

23
 FIRST DIVISION
June 27, 2018 A.C. No. 8502

CHRISTOPHER R. SANTOS, Complainant vs.

ATTY. JOSEPH A. ARROJADO, Respondent

DEL CASTILLO, J.:

NATURE OF THE ACTION:

This is an administrative case against Atty. Arrojado for his alleged

violation of Article 1491 of the Civil Code.

FACTS:

Complainant Santos was the defendant in the unlawful detainer case filed
by Lilia Rodriguez wherein respondent, Atty. Arrojado, was the counsel for Lilia.
The case was resolved the same in favor of Atty. Arrojado's client.

Santos alleged that while the case was pending, Lilia sold one of the
properties in litis pendentia to Atty. Arrojado’s son and that Atty. Arrojado even
signed as a witness of the sale. Santos argues that Atty Arrojado committed
malpractice hence this instant complaint. Atty. Arrojado argued that the
proscription in the said article did not extend to relatives of the judicial officers
mentioned therein and that when the sale took place, his son was already of
legal age and discretion and that he did not facilitate the transaction.

It is complainant's contention that respondent lawyer, as counsel of record

in the ejectment case in question, cannot acquire the property subject of
litigation, either personally or through his son, without violating the Civil Code and
his ethical duties. The IBP Board of Governors recommended the dismissal of
the case.

ISSUE:

Whether or not the prohibition in Article 1491(5) of the Civil Code against
justices, judges, prosecuting attorneys, clerks of court, and other officers and
employees connected with the administration of justice, as well as lawyers, from
purchasing property and rights which may be the object of any litigation in which
they may take part by virtue of their profession, extends to their respective
immediate families or relatives.

RULING:

No. For reference, Article 1491(5) of the Civil Code is reproduced below:
Article 1491. The following persons cannot acquire by purchase, even at a public
or judicial auction, either in person or through the mediation of another.

(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts,
and other officers and employees connected with the administration of justice,
the property and rights in litigation or levied upon on execution before the court
within whose jurisdiction or territory they exercise their respective functions; this

24
prohibition includes the act of acquiring by assignment and shall apply to
lawyers, with respect to the property and rights which may be the object of any
litigation in which they may take part by virtue of their profession.

In Pena v. Delos Santos, we held that: The rationale advanced for the prohibition
in Article 1491(5) is that public policy disallows the transactions in view of the
fiduciary relationship involved, i.e., the relation of trust and confidence and the
peculiar control exercised by these persons. It is founded on public policy
because, by virtue of his office, an attorney may easily take advantage of the
credulity and ignorance of his client and unduly enrich himself at the expense of
his client. x x x

Undeniably, Article 1491(5) of the Civil Code prohibits the purchase by

lawyers of any interest in the subject matter of the litigation in which they
participated by reason of their profession. Here, however, respondent lawyer was
not the purchaser or buyer of the property or rights in litigation. For, in point of
fact, it was his son Julius, and not respondent lawyer, who purchased the subject
property.

Were we to include within the purview of the law the members of the
immediate family or relatives of the lawyer laboring under disqualification, we
would in effect be amending the law. As worded, Article 1491(5) of the Civil Code
covers only (1) justices; (2) judges; (3) prosecuting attorneys; (4) clerks of court;
(5) other officers and employees connected with the administration of justice; and
(6) lawyers. The enumeration cannot be stretched or extended to include
relatives of the lawyer - in this case, Julius, son of respondent lawyer.

Concededly, Article 1491 provides that "[t]he following persons cannot

acquire by purchase, even at a public or judicial auction, either in person or
through the mediation of another xx x." However, perusal of the records would
show that complainant failed to adduce any shred of evidence that Julius acted
or mediated on behalf of respondent lawyer, or that respondent lawyer was the
ultimate beneficiary of the sale transaction. The mere fact that it was Julius, son
of respondent lawyer, who purchased the property, will not support the allegation
that respondent lawyer violated Article 1491(5) of the Civil Code. As aptly noted
by the Investigating Commissioner, "[t]here is no evidence to show that
respondent had used his son as a conduit to gain the property in question xx x."

25
 SECOND DIVISION
G.R. No. 200899 June 20, 2018

HEIRS OF PAZ MACALALAD, NAMELY: MARIETA MACALALAD, ARLENE

MACALALAD-ADAY, JIMMY MACALALAD, MA. CRISTINA MACALALAD,
NENITA MACALALAD-PAPA, AND DANNY
MACALALAD, Petitioners, v. RURAL BANK OF POLA, INC. AND REGISTER
OF DEEDS OF ORIENTAL MINDORO, Respondents.

PERALTA, J.

NATURE OF THE ACTION:

This is a civil case for the declaration of nullity of a TCT and to determine
whether respondent bank is a mortgagee in good faith

FACTS:

Petitioners predecessor Paz Macalalad filed with the RTC of Calapan a

Complaint for "Declaration of Nullity of TCT No. T-117484" alleging that she is
the sole surviving legal heir of one Leopoldo Constantino, Jr. who died intestate
and without any issue; After Leopoldo’s death, it was made to appear that he
sold the property to Spouses Pimentel in whose name a new TCT was issued.
Spouses Pimentel obtained a loan from the Rural Bank of Pola with the property
mortgaged as security. Paz argued that RBP acted in bad faith and disregarded
its duty to investigate the validity of the tile of Spouses Pimentel. When Spouses
Pimentel failed to pay their loan, RBP foreclosed the mortgage wherein it
emerged as the highest bidder.

For its part, RBP argued that it is a mortgagee and purchaser in good faith
and that a title procure through fraud and misrepresentation can still be the
source of a valid and legal title if the same is in the hands of an innocent
purchaser for value. The RTC dismissed the complaint. The CA affirmed the
ruling of the RTC.

ISSUES:

1. Whether the CA erred in affirming the legality of the deed of sale purportedly
executed between Leopoldo Constatino Jr. and Spouses Pimentel

2. Whether the respondent bank acted in good faith and was an innocent
mortgagee for value

RULING:

1. This Court reiterates the settled principle that no one can give what one does
not have. Nemo dat quod non habet. Stated differently, no one can transfer a
right to another greater than what he himself has. Applying this principle to the
instant case, granting that the deed of sale in favor of the Spouses Pimentel was
forged, then, as discussed above, they could not have acquired ownership as
well as legal title over the same. Hence, they cannot give the subject property as
collateral in the mortgage contract they entered into with respondent bank.

However, there is an exception to the rule that a forged deed cannot be the root

26
of a valid title - that is when an innocent purchaser for value intervenes. Indeed, a
forged deed can legally be the root of a valid title when an innocent purchaser for
value intervenes. A purchaser in good faith and for value is one who buys the
property of another without notice that some other person has a right to or
interest in such property and pays a full and fair price for the same, at the time of
such purchase, or before he has notice of the claims or interest of some other
person in the property. Under Section 32 of Presidential Decree (P.D.) 1529, the
definition of an innocent purchaser for value has been expanded to include an
innocent lessee, mortgagee, or other encumbrancer for value.

In the present case, even assuming that the deed of sale between Leopoldo and
the Spouses Pimentel was indeed forged, the same may, nonetheless, give rise
to a valid title in favor of respondent bank if it is shown that the latter is a
mortgagee in good faith. Such good faith will entitle respondent bank to
protection such that its mortgage contract with the Spouses Pimentel, as well as
respondent bank's consequent purchase of the subject lot, may no longer be
nullified. Hence, as correctly pointed out by both the RTC and the CA, the basic
issue that needs to be resolved in the instant case is whether or not respondent
bank is a mortgagee and a subsequent purchaser of the subject lot in good faith.

2. Yes. Where the mortgagee is a bank, it cannot rely merely on the certificate of
title offered by the mortgagor in ascertaining the status of mortgaged properties.
Since its business is impressed with public interest, the mortgagee-bank is duty-
bound to be more cautious even in dealing with registered lands. Indeed, the rule
that a person dealing with registered lands can rely solely on the certificate of title
does not apply to banks. Thus, before approving a loan application, it is a
standard operating practice for these institutions to conduct an ocular inspection
of the property offered for mortgage and to verify the genuineness of the title to
determine the real owners thereof. The apparent purpose of an ocular inspection
is to protect the "true owner" of the property as well as innocent third parties with
a right, interest or claim thereon from a usurper who may have acquired a
fraudulent certificate of title thereto.

In this case, the Court finds no cogent reason to depart from the findings of both
the RTC and the CA that respondent was able to successfully discharge its
burden of proving its status as a mortgagor and subsequent purchaser in good
faith and for value.

27
 THIRD DIVISION
G.R. No. 189609 January 29, 2018

VICTORIA N. RACELIS, IN HER CAPACITY AS

ADMINISTRATOR, Petitioner, v. SPOUSES GERMIL JAVIER AND REBECCA
JAVIER, Respondents.

LEONEN, J.:

NATURE OF THE ACTION:

This is a Civil case for the ejectment of tenants who were exercising their
alleged right to suspend the payment of rent

FACTS:

Respondent Spouses Javier offered to purchase the Marikina property of

Petitioner. However, since they could not afford to pay the price of P3.5 million,
they offered to leased the property while they raise enough money. The spouses
used the property as their residence as the site of their tutorial School. In 2002,
The spouses reassured Racelis that they were still interested in purchasing the
property and even promised to pay P100,000 to buy them more time within which
to pay the purchase price. By the end of 2003 the spouses were only able to give
an “initial payment or goodwill money” amounting to P78,000. Thereafter they
started to fall behind in rental payments by February 2004.

Realizing that the Spouses had no genuine intention to purchase the

property, Racelis wrote a demand for the spouses to vacate the property by May
30, 2004. The spouses refused to vacate and also failed to pay rent. Hence,
Racelis caused the disconnection of their power supply. Racelis then filed an
ejectment suit against the spouses. The MeTC ruled in favour of the Spouses.
The RTC reversed the decision of the MeTC. The CA declared that the Spouses
were justified in withholding rental payments due to the disconnection of
electrical service over the property.

ISSUE:

Whether the Spouses can suspend the payment of rent under Article 1658 of the
Civil Code

RULING:

No. A contract of lease is a "consensual, bilateral, onerous and

commutative contract by which the owner temporarily grants the use of his
property to another who undertakes to pay rent therefor." Article 1658 of the Civil
Code allows a lessee to postpone the payment of rent if the lessor fails to either
(1) "make the necessary repairs" on the property or (2) "maintain the lessee in
peaceful and adequate enjoyment of the property leased." This provision
implements the obligation imposed on lessors under Article 1654 (3) of the Civil
Code.

The failure to maintain the lessee in the peaceful and adequate enjoyment
of the property leased does not contemplate all acts of disturbance. Lessees may

28
suspend the payment of rent under Article 1658 of the Civil Code only if their
legal possession is disrupted.

In this case, the disconnection of electrical service over the leased

premises on May 14, 2004 was not just an act of physical disturbance but one
that is meant to remove respondents from the leased premises and disturb their
legal possession as lessees. Ordinarily, this would have entitled respondents to
invoke the right accorded by Article 1658 of the Civil Code.

However, this rule will not apply in the present case because the lease
had already expired when petitioner requested for the temporary disconnection of
electrical service. Petitioner demanded respondents to vacate the premises by
May 30, 2004. Instead of surrendering the premises to petitioner, respondents
unlawfully withheld possession of the property. Respondents continued to stay in
the premises until they moved to their new residence on September 26, 2004. At
that point, petitioner was no longer obligated to maintain respondents in the
"peaceful and adequate enjoyment of the lease for the entire duration of the
contract." Therefore, respondents cannot use the disconnection of electrical
service as justification to suspend the payment of rent.

Assuming that respondents were entitled to invoke their right under Article
1658 of the Civil Code, this does exonerate them from their obligation under
Article 1657 of the civil Code "to pay the price of the lease according to the terms
stipulated." Lessees who exercise their right under Article 1658 of the Civil Code
are not freed from the obligations imposed by law or contract.

Moreover, respondents' obligation to pay rent was not extinguished when

they transferred to their new residence. Respondents are liable for a reasonable
amount of rent for the use and continued occupation of the property upon the
expiration of the lease. To hold otherwise would unjustly enrich respondents at
petitioner's expense.

29
 FIRST DIVISION
G.R. No. 190286 January 11, 2018

RAMON E. REYES AND CLARA R. PASTOR, Petitioners, v. BANCOM

DEVELOPMENT CORP., Respondent

SERENO, C.J.:

NATURE OF THE ACTION:

This is a civil case for the enforcement of an obligation arising from a

continuing surety agreement

FACTS:

A Continuing Guaranty was executed in favor of respondent Bancom by

Angel E. Reyes, Sr., Florencio Reyes, Jr., Rosario R. Du, Olivia Arevalo, and the
two petitioners herein, Ramon E. Reyes and Clara R. Pastor (the Reyes Group).
In the instrument, the Reyes Group agreed to guarantee the full and due
payment of obligations incurred by Marbella under an Underwriting Agreement
with Bancom.

Marbella failed to pay the promissory notes. Hence, Bancom filed a

complaint for sum of money against Marbella and the Reyes group. Marbella and
the Reyes group argued that they were just forced to enter into the agreement of
continuing surety against their will. The Marbella II contracts were entered into by
Bancom; the Reyes Group, as owners of the parcel of land to be utilized for the
condominium project along Roxas Boulevard; and Fereit Realty Development
Corporation (Fereit), a sister company of Bancom, as the construction developer
and project manager. This venture, however, soon encountered financial
difficulties. As a result, the Reyes Group was allegedly forced to enter into a
Memorandum of Agreement to take on part of the loans obtained by Fereit from
Bancom for the development of the project.

The RTC held that Marbella and the Reyes Group solidarily liable to
Bancom. The CA affirmed. Hence this petition.

ISSUE:

Whether the CA correctly ruled that petitioners are liable to Bancom for the
payment of the loan amounts indicated on the Promissory Notes issued by
Marbella

RULING:

Yes. we affirm the finding of the CA on the liability of petitioners. Having

executed a Continuing Guaranty in favor of Bancom, petitioners are solidarily
liable with Marbella for the payment of the amounts indicated on the Promissory
Notes.

As the appellate court observed, petitioners did not challenge the genuineness
and due execution of the promissory notes. Neither did they deny their
nonpayment of Marbella's loans or the fact that these obligations were covered
by the guaranty.

30
The obligations of Marbella and the Reyes Group under the Promissory Notes
and the Continuing Guaranty, respectively, are plain and unqualified. Under the
notes, Marbella promised to pay Bancom the amounts stated on the maturity
dates indicated. The Reyes Group, on the other hand, agreed to become liable if
any of Marbella's guaranteed obligations were not duly paid on the due date.
There is absolutely no support for the assertion that these agreements were not
meant to be binding.

We also note that even if the other agreements referred to by petitioners are
taken into account, the result would be the same. They would still be deemed
liable, since the two contracts they cited only establish the following premises: (a)
Fereit took on the responsibility of causing the release of certain receivables from
State Financing; (b) Marbella assumed the performance of the obligation of
Fereit after the latter failed to fulfill its duty; (c) Bancom would grant Marbella
additional financing for that purpose, with the obligation to be paid within three
years; and (d) Fereit would reimburse Marbella for the expenses the latter would
incur as a result of this assumption of the obligation. Specifically on the duty of
Marbella to pay back the additional financing, the Amendment states: Bancom
hereby agrees to grant the additional financing requested by Marbella II in the
principal amount of TWO MILLION EIGHT HUNDRED TWENTY EIGHT
THOUSAND ONE HUNDRED FORTY & 32/100 (P2,828,140.32), Philippine
Currency, payable by Marbella II within three (3) years, under such terms and
conditions as may be mutually agreed upon by Bancom and Marbella II. The
additional financing herein requested by Marbella II shall be payable by Marbella
II irrespective of whether Marbella II realizes a net profit after tax on its Marbella
II Condominium Project.

It is evident from the foregoing provisions that Bancom extended additional

financing to Marbella on the condition that the loan would be paid upon maturity.
It is equally clear that the latter obligated itself to pay the stated amount to
Bancom without any condition. The unconditional tenor of the obligation of
Marbella to pay Bancom for the loan amount, plus interest and penalties, is
likewise reflected in the Promissory Notes issued in favor of the latter. Marbella,
in turn, was granted the right to collect reimbursement from Fereit, an entirely
distinct entity. While it was averred that Bancom had complete control of Fereit's
assets and activities, we note that no sufficient evidence was presented in
support of this assertion.

31
 FIRST DIVISION
G.R. No. 211232 April 11, 2018

COCA-COLA BOTTLERS PHILS., INC., Petitioner, v. SPOUSES EFREN AND

LOLITA SORIANO, Respondents.

TIJAM, J.:

NATURE OF THE ACTION:

This is a civil action to determine the validity of the real estate mortgage
executed by the parties

FACTS:

Respondents Spouses Soriano were engaged in selling of Coca-Cola

products in Tuguegarao Cagayan. In 1999 the spouses were informed that they
needed security to continue their business. The spouses then handed 2
certificates of title over their property and were made to sign a blank document.
The spouses were assured that the document they signed were for mere
formality. When the spouses verbally demanded the return of their certificates of
title, their demand went unheeded.

When the spouses were contemplating on filing a petition for the issuance
of new titles, they discovered for the first time that their land was mortgaged in
favor of defendant-appellant Coca-Cola. Worse, the mortgage land was already
foreclosed. Hence, the spouses filed a complaint for annulment of sheriffs
foreclosure sale. They alleged that they never signed a mortgaged document and
that they were never notified of the foreclosure sale. Furthermore the spouses
aver that they never had monetary obligations or debts with Coca-Cola and that
They always paid their product deliveries in cash.

Coca-Cola insisted that the Spouses are indebted to them, and that the
signed real estate mortgage document was duly executed. And that the failure of
the parties to appear before the notary public for the execution of the document
does not render the same null and void or unenforceable. The RTC nullified the
REM. The CA affirmed.

ISSUE:

Whether the Real Estate Mortgage executed by the Spouses is valid

RULING:

Yes. At the outset, We stress that the registration of a REM deed is not
essential to its validity. The law is clear on the requisites for the validity of a
mortgage, to wit:

Art. 2085. The following requisites are essential to the contracts of pledge and
mortgage:

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

32
(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.

Third persons who are not parties to the principal obligation may secure the latter
by pledging or mortgaging their own property.

In relation thereto, Article 2125 provides:

Article 2125. In addition to the requisites stated in Article 2085, it is

indispensable, in order that a mortgage may be validly constituted, that the
document in which it appears be recorded in the Registry of Property. If the
instrument is not recorded, the mortgage is nevertheless binding between the
parties.

Thus, as between the parties to a mortgage, the non-registration of a REM

deed is immaterial to its validity. In the case of Paradigm Development
Corporation of the Philippines, v. Bank of the Philippine Islands,10 the mortgagee
allegedly represented that it will not register one of the REMs signed by the
mortgagor. In upholding the validity of the questioned REM between the said
parties, the Court ruled that "with or without the registration of the REMs, as
between the parties thereto, the same is valid and [the mortgagor] is bound
thereby." The Court, thus, cited its ruling in the case of Mobil Oil Philippines, Inc.,
v. Ruth R. Diocares, et al. a portion of which reads:

Xxx. The codal provision is clear and explicit. Even if the instrument were not
recorded, "the mortgage is nevertheless binding between the parties." The law
cannot be any clearer. Effect must be given to it as written. The mortgage
subsists; the parties are bound. As between them, the mere fact that there is as
yet no compliance with the requirement that it be recorded cannot be a bar to
foreclosure.

Moreover to rule as the lower court did would be to show less than fealty to the
purpose that animated the legislators in giving expression to their will that the
failure of the instrument to be recorded does not result in the mortgage being any
the less "binding between the parties." Based on the foregoing, the CA, in the
case at bar, clearly erred in ruling that the parties in the instant case cannot be
bound by the REM deed.

33
 THIRD DIVISION
G.R. No. 196020 April 18, 2018

MANILA ELECTRIC COMPANY, VICENTE MONTERO, MR. BONDOC, AND

MR. BAYONA, Petitioners, v. NORDEC PHILIPPINES AND/OR MARVEX
INDUSTRIAL CORP. REPRESENTED BY ITS PRESIDENT, DR.
POTENCIANO R. MALVAR, Respondents.

G.R. No. 196116 April 18, 2018

NORDEC PHILIPPINES REPRESENTED BY ITS PRESIDENT, DR.

POTENCIANO R. MALVAR,Petitioner, v. MANILA ELECTRIC COMPANY,
VICENTE MONTERO, MR. BONDOC, AND MR. BAYONA, Respondents.

LEONEN, J.:

NATURE OF THE ACTION:

This is a civil case to determine whether the award of damages is proper

FACTS:

Meralco was contracted to supply electricity to Marvex Industrial

Corporation under an agreement for sale of Electric energy. Marvex was billed
monthly according to its meter. However when Meralco found out that Marvex’s
meters were tampered with. During a second inspection Meralco found out that
the meters were tampered again. Meralco issued a differential billing statement
to the amount of P496,386.29. Meralco also sent demand letters which stated
that if the bill was not paid Meralco will disconnect Marvex electric service.
Nordec, the owner of Marvex sued Meralco for damages alleging that Meralco’s
inspectors conducted inspections without its consent or approval. Nordec also
alleged that It requested a recomputation which Meralco denied. Thereafter,
Meralco disconnected its electric services whitout prior notice resulting to loss of
income and cancellation of business opportunities. The RTC issued a writ of
preliminary injunction directing Meralco to restore Nordec’s power supply.

During another inspection done in the presence of Nordec’s president,

Meralco found out that the metering devices were broken and registered power
even when the equipment were off. The RTC dimissed Nordec’s original and
supplemental complaint. The CA reversed. Hence this petition.

ISSUE:

Whether or not Nordec Philippines is entitled to actual, temperate, moral

or exemplary damages, attorney's fees, and legal interest.

RULING:

Here, the Court of Appeals found that Meralco's disconnection had a

"domino effect" on Nordec's business, but that Nordec did not offer actual proof
of its losses. Nordec even admitted in its petition for review that there was an

34
"oversight" on its part in "adducing proof of the accurate amount of damages it
sustained" due to Meralco's acts.97 No pecuniary loss has been established in
this case, apart from the claim in Nordec's complaint that the "serious anxiety" of
the disconnection had caused Nordec's president to cancel business
appointments, purchase orders, and fail to fulfill contractual obligations, among
others. In this instance, nominal damages may be awarded. In Philippine
Telegraph & Telephone Corporation v. Court of Appeals:

Temperate or moderate damages may only be given if the "court finds that
some pecuniary loss has been suffered but that its amount cannot, from the
nature of the case, be proved with certainty." The factual findings of the appellate
court that respondent has failed to establish such pecuniary loss or, if proved,
cannot from their nature be precisely quantified precludes the application of the
rule on temperate or moderate damages. The result comes down to only a
possible award of nominal damages. Nominal damages are adjudicated in order
that a right of the plaintiff, which has been violated or invaded by the defendant,
may be vindicated or recognized and not for the purpose of indemnifying the
plaintiff for any loss suffered by him. The court may award nominal damages in
every obligation arising from any source enumerated in article 1157 of the Civil
Code or, generally, in every case where property right is invaded.

Nominal damages are awarded to vindicate the violation of a right suffered by a

party, in an amount considered by the courts reasonable under the
circumstances. Meralco's negligence in not providing Nordec sufficient notice of
disconnection of its electric supply, especially when there was an ongoing
dispute between them concerning the recomputation of the electricity bill to be
paid, violated Nordec's rights. Because of this, Nordec is entitled to nominal
damages in the amount of P30,000.00. Exemplary damages, which cannot be
recovered as a matter of right, may not be awarded if no moral, temperate, or
compensatory damages have been granted. Since exemplary damages cannot
be awarded, the award of attorney's fees should likewise be deleted. Moral
damages are also not proper, in line with Manila Electric Company v. TE.A.M
Electronics Corporation

35
 THIRD DIVISION
G.R. No. 204307 June 06, 2018

ORIENT HOPE AGENCIES, INC. AND/OR ZEO MARINE

CORPORATION, Petitioners, v. MICHAEL E. JARA, Respondent.

LEONEN, J.:

NATURE OF THE ACTION:

This is a civil case to claim disability benefits and damages

FACTS:

Respondent Jara was hired by Orient Hope, on behalf of its foreign

principal, Zeo Marine, as engine cadet on board M/V Orchid Sun. The
employment contract was for a duration of 10 months with a basic monthly salary
of US$230.00. On its way to Oman, M/V Orchid Sun sank off Muscat on July 12,
2007, during which Jara sustained leg injuries. He was treated at Khoula Hospital
in Oman and thereafter repatriated and admitted on August 3, 2007 at the
Metropolitan Hospital in Manila.

Jara underwent operation for his leg injuries. He did not return to the
company designated doctor after his checkup on March 2008. Jara filed a
complaint with the Labor arbiter insisting that he was entitle to total and
permanent disability benefits amounting to US$60,000. Based on the
assessment of the company physician the Labor arbiter ruled that respondent is
entitled to compensation equivalent to Grade 11 disability. The NLRC affimed the
decision of the LA.

The CA reversed the ruling and held that Jara was entitled to permanent
disability benefits. Jara also prayed for moral and exemplary damages.

ISSUE:

Whether respondent Jara is entitled to moral and exemplary damages and to

Attorney’s fees

RULING:

Yes. This Court finds no ground to disturb the uniform findings of the
Labor Arbiter, National Labor Relations Commission, and the Court of Appeals in
awarding attorney's fees. Since respondent was compelled to litigate due to
petitioners' denial of his valid claims, the award for attorney's fees was proper.
On damages, the Labor Arbiter denied respondent's claims for lack of
sufficient basis. The National Labor Relations Commission affirmed the findings
of the Labor Arbiter. The Court of Appeals, likewise, did not award moral and
exemplary damages.

Respondent contends that he suffered depression and anxiety because of

this case. He also claims exemplary damages for the inhumane treatment he
received from petitioners.

36
 In Sharpe Sea Personnel, Inc. v. Mabunay, Jr., this Court affirmed the
award of moral and exemplary damages because of an employer's bad faith in
belatedly releasing and submitting the disability rating.

By not timely releasing Dr. Cruz's interim disability grading, petitioners

revealed their intention to leave respondent in the dark regarding his future as a
seafarer and forced him to seek diagnosis from private physicians. Petitioners'
bad faith was further exacerbated when they tried to invalidate the findings of
respondent's private physicians, for his supposed failure to move for the
appointment of a third-party physician as required by the POEA-SEC, despite
their own deliberate concealment of their physician's interim diagnosis from
respondent and the labor tribunals. Thus, this Court concurs with the Court of
Appeals when it stated:

We also grant petitioner's prayer for moral and exemplary damages.

Private respondents acted in bad faith when they belatedly submitted petitioner's
Grade 8 disability rating only via their motion for reconsideration before the
NLRC. By withholding such disability rating from petitioner, the latter was
compelled to seek out opinion from his private doctors thereby causing him
mental anguish, serious anxiety, and wounded feelings, thus, entitling him to
moral damages of P50,000.00. Too, by way of example or correction for the
public good, exemplary damages of P50,000.00 is awarded.

In Magsaysay Maritime Corp. v. Chin, Jr., Oscar D. Chin, Jr. (Chin), a

seafarer, was found by a company-designated physician to have a moderate
rigidity of tract a year after his operation. When he claimed for disability
compensation, his employer offered US$30,000.00, which Chin accepted. Chin
then executed a Release and Quitclaim in favor of Magsaysay Maritime
Corporation. Subsequently, Chin filed a complaint for underpayment of disability
benefits and damages. The labor tribunals dismissed his complaint. The Court of
Appeals ruled that Chin was entitled to permanent and total disability benefit of
US$60,000.00 and remanded the case to the Labor Arbiter for determination of
Chin's other monetary claims.

Considering the blithe manner in which petitioners dealt with respondent's

condition and the rulings in Sharp Sea and Magsaysay Maritime, the amount of
P100,000.00 as moral damages would be commensurate to the anxiety and
inconvenience suffered by respondent. Exemplary damages of P100,000.00 is
also granted by way of example or correction for the public good.

37
 SECOND DIVISION
G.R. No. 217781 June 20, 2018

SAN MIGUEL PURE FOODS COMPANY, INC., Petitioner, v. FOODSPHERE,

INC., Respondent.

G.R. No. 217788, June 20, 2018

FOODSPHERE, INC., Petitioner, v. SAN MIGUEL PURE FOODS COMPANY,

INC., Respondent.

PERALTA, J.:

NATURE OF THE ACTION:

This is a civil case for damages based on an alleged trademark

infringement and unfair competition

FACTS:

Respondent San Miguel (SMPFCI) is the owner of the trademark for

“Purefoods Fiesta Ham” while petitioner Foodsphere bear the brand of CDO.
SMPFCI filed a complaint for trademark infringement and unfair competition
against Foodsphere alleging that Foodsphere mark is a colorable imitation of its
registered trademark and that they are confusingly similar.

SMPFCI alleged that its "FIESTA" ham, first introduced in 1980, has been
sold in countless supermarkets in the country with an average annual sales of
P10,791,537.25 and is, therefore, a popular fixture in dining tables during the
Christmas season. Its registered "FIESTA" mark has acquired goodwill.
Sometime in 2006, however, Foodsphere introduced its "PISTA" ham and
aggressively promoted it in 2007, claiming the same to be the real premium ham.

Thus, according to SMPFCI, the striking similarities between the marks

and products of Foodsphere with those of SMPFCI warrant its claim of trademark
infringement on the ground of likelihood of confusion as to origin, and being the
owner of "FIESTA," it has the right to prevent Foodsphere from the unauthorized
use of a deceptively similar mark. The case was dismissed for lack of merit and
because the case was filed beyond the 4 year prescriptive period.

However the Office of the Director General ruled that although there was
no trademark infringement, Foodsphere was liable for unfair competition. Thus,
the Director General ordered Foodsphere to pay nominal damages in the amount
of P100,000.00 and attorney's fees in the amount of P300,000.00 and to cease
and desist from using the labels, signs, prints, packages, wrappers, receptacles,
and materials used in committing unfair competition, as well as the seizure and
disposal thereof. The CA affirmed the decision, it initially awarded exemplary
damages, but eventually removed it as it was not specifically prayed for.

ISSUE:

Whether the CA erred in resolving that the award of exemplary damages be

deleted from the body of its decision

38
RULING:

No. With respect to G.R. No. 217781, the. Court finds no reason to
reverse the April 8, 2015 Resolution of the CA insofar as it resolved to delete
from the body of its September 24, 2014 Decision the award of exemplary
damages. SMPFCI said so itself, when there is a conflict between the dispositive
portion or fallo of a decision and the opinion of the court contained in the text or
body of the judgment, the former prevails over the latter. This rule rests on the
theory that the fallo is the final order, while the opinion in the body is merely a
statement ordering nothing. Thus, an order of execution is based on the
disposition, not on the body, of the Decision. Contrary to SMPFCI's assertion,
moreover, the Court finds inapplicable the exception to the foregoing rule which
states that the body of the decision will prevail in instances where the inevitable
conclusion from the body of the decision is so clear as to show that there was a
mistake in the dispositive portion.

Besides, it bears stressing that SMPFCI failed to prove its entitlement to

exemplary damages. Article 2233 of the Civil Code provides that exemplary
damages cannot be recovered as a matter of right; the court will decide whether
or not they should be adjudicated while Article 2234 thereof provides that while
the amount of the exemplary damages need not be proven, the plaintiff must
show that he is entitled to moral, temperate or compensatory damages before
the court may consider the question of whether or not exemplary damages
should be awarded. Thus, the Court has held, time and again, that exemplary
damages may be awarded for as long as the following requisites are present: (1)
they may be imposed, by way of example, only in addition, among others, to
compensatory damages, only after the claimant's right to them has been
established, and cannot be recovered as a matter of right, their determination
depending upon the amount of compensatory damages that may be awarded to
the claimant; (2) the claimant must first establish his right to moral, temperate,
liquidated or compensatory damages; and (3) the act must be accompanied by
bad faith or done in a wanton, fraudulent, oppressive or malevolent manner.
Here, SMPFCI particularly failed to prove its right to moral, temperate, liquidated
or compensatory damages.

39
 THIRD DIVISION
G.R. No. 199513 April 18, 2018

TERESA GUTIERREZ YAMAUCHI, Petitioner, v. ROMEO F.

SUÑIGA, Respondent.

MARTIRES, J.:

NATURE OF THE ACTION:

This is a civil case for damages due to the contract entered to in bad faith

FACTS:

Petitioner Teresa Yamauchi owns a house in Bel Air Laguna. She

consulted, respondent Suñiga for renovation. They agreed, the total cost was
P869,658.00-P849,658.00 for the renovation and P20,000.00 for permits and
licenses. On October 9, 2000, Yamauchi gave a partial payment in the amount of
P300,000.00 and another payment in the amount of P100,000.00 on January 31,
2001. Thereafter, Suñiga gave Yamauchi a Billing Summary stating that he had
accomplished 47.02% of the intended renovations and that after deducting the
amount of P400,000.00 previously given by Yamauchi, the latter was liable for
the billing amount of P8,992.50. Likewise, Suñiga gave Yamauchi an
Accomplishment Billing stating that he had accomplished 25.13% of the
additional works and that Yamauchi was liable for the billing amount of
P49,512.50. Around March 20014 Suñiga asked for additional funds.
Yamauchi then consulted her neighbor Engineer Thomas who informed
her that she could actually build a new house with the amount she paid.
Yamauchi got into an argument with Suñiga and they then decided to stop work.

Yamauchi, through counsel, sent a letter to Suñiga stating that due to the
bloated amount of the cost of renovation and Suñiga's stubborn refusal to
complete the project, she was constrained to terminate their contract. She
demanded the payment of P400,000.00, plus 12% interest thereon. Suñiga sent
a reply stating that the demand for payment was without basis since the
stoppage of the renovation was due to her non-payment of the billing. In turn,
Suñigademanded the payment of P49,512.50, representing the amount of
additional works that he had partially accomplished.

Yamauchi filed a complaint for rescission with prayer for damages. The
RTC ruled in favor of Yamauchi. The CA affirmed but removed the actual
damages. The CA also held that moral and exemplary damages should not be
awarded.

ISSUES:

1. Whether the CA erred in reduction the amount of actual damages

2. Whehter the CA erred in deleting the ward for moral and exemplary damages,
attorney’s fees and costs of litigation

RULING:

40
1. Yes. the CA failed to consider the fact that the house became uninhabitable
because the renovation was left unfinished. Yamauchi took pictures showing the
physical condition of the house nine (9) months after the supposed
renovation. True enough, these photographs confirmed that the house was no
longer habitable since the renovated portions left the entire house open and
exposed to the elements of nature. Contrary to the position of the CA, Yamauchi
did not gain anything from the incomplete renovation of her house. She, in fact,
lost it in its entirety.

Henceforth, having established that Yamauchi had suffered actual losses,

we now have to consider if the amount of losses were accurately proven, bearing
in mind that the ultimate effect of rescission is to restore the parties to their
original status before they entered into the contract. Rescission has the effect of
"unmaking a contract, or its undoing from the beginning, and not merely its
termination." Hence, rescission creates the obligation to return the object of the
contract because to rescind is to declare a contract void at its inception and to
put an end to it as though it never existed. Our objective now is to bring
Yamauchi back, as far as practicable, to a state as if no renovation happened.

2. With regard to moral damages, we find it proper to reinstate the award as we

find Suñiga had dealt with Yamauchi in bad faith. Moral damages are
recoverable only if the party from whom it is claimed has acted fraudulently or in
bad faith or in wanton disregard of his contractual obligations. In Adriano v.
Lasala, the Court said:

Bad faith does not simply connote bad judgment or negligence. It imports a
dishonest purpose or some moral obliquity and conscious doing of a wrong, a
breach of known duty through some motive or interest or ill will that partakes of
the nature of fraud. It is, therefore, a question of intention, which can be inferred
from one's conduct and/or contemporaneous statements.

In the case at bar, Suñiga acted in bad faith when he misrepresented himself to
be a licensed architect and bloated the figures of the renovation expenses.
Gathered from the records is Suñiga's admission that he never took the licensure
exam for architects, yet he signed documents pertaining to the renovation as if
he was an architect.

41
 SECOND DIVISION
G.R. No. 225033, August 15, 2018

SPOUSES ANTONIO BELTRAN AND FELISA

BELTRAN, Petitioners, v. SPOUSES APOLONIO CANGAYDA, JR. AND
LORETA E. CANGAYDA, Respondents.

CAGUIOA, J.:

NATURE OF THE CASE:

This is a Petition for Review on Certiorari under Rule 45 against the

CA decision directing petitioners Spouses Beltran to vacate the disputed
property on the ground that there was no perfected contract of sale

FACTS:

Respondent’s Spouses Cangayda verbally agreed to sell a parcel of

land to petitioners Spouses Beltran for P 35,000.00. Petitioners immediately
took possession of the property and built their family home on it, after
making an initial payment. Spouses Beltran made additional payments
which amounted to P29,690.00. However, despite respondents’ repeated
demands, petitioners failed to pay the remaining balance of P5,310.00. The
respondents referred the matter to the Barangay Chairman of Magugpo,
Tagum City wherein the parties signed an amicable settlement. In the
amicable settlement, petitioners promised to pay the balance to
respondents. And respondents for their part promised to sign a deed of
sale agreement after the payment of the remaining balance. However,
Petitioners failed to pay within the period set forth in the Amicable
Settlement. On January 14, 2009, or nearly 17 years after the expiration of
petitioners period to pay their remaining balance, respondents served to
the petitioners a “Last and Final Demand” to vacate the property. The
demand was left unheeded. Hence respondents filed a complaint for
recovery of possession and damages before the RTC.

The RTC ordered the petitioners to vacate the property and also
ordered the respondents to return the sum of P29,600.00 to the petitioners.
The RTC characterized the oral agreement between the parties as a
contract to sell. Aggrieved the Petitioners brought the case to the CA, they
argued that the oral agreement was not a contract to sell but rather, a
contract of sale which had the effect of transferring ownership of the
disputed property upon its delivery. Petitioners also raise, for the first time
on appeal, that the sale of the property constitutes a sale on installment
covered by RA 6552 or the Maceda Law. The CA affirmed the findings of the
RTC.

ISSUE:

Whether the CA erred when it affirmed the RTC Decision characterizing

the oral agreement between the parties as a contract to sell.

RULING:

42
 Yes. The agreement between the parties is an oral contract of sale. As a
consequence, ownership of the disputed property passed to petitioners upon its
delivery. The CA characterized the parties' agreement as a contract to sell
primarily on the basis of respondent Loreta's testimony which purportedly
confirms their intent to reserve ownership of the disputed property until full
payment of the purchase price According to the CA, the foregoing finding is
further bolstered by clause 6 of the Amicable Settlement, to which petitioner
Antonio expressed his assent. Clause 6 reads: That herein [respondent Apolonio,
Jr.] is also willing to signed a deed of sale agreement after [petitioner Antonio]
were able to pay the remaining balance.

The CA's finding is erroneous. Article 1458 of the Civil Code defines a contract of
sale: By the contract of sale one of the contracting parties obligates himself to
transfer the ownership of and to deliver a determinate thing, and the other to pay
therefore a price certain in money or its equivalent.
"[A] contract to sell, [on the other hand], is defined as a bilateral contract whereby
the prospective seller, while expressly reserving the ownership of the subject
property despite its delivery to the prospective buyer, commits to sell the property
exclusively to the prospective buyer" upon full payment of the purchase price.

Jurisprudence defines the distinctions between a contract of sale and a contract

to sell to be as follows: In a contract of sale, title passes to the vendee upon the
delivery of the thing sold; whereas in a contract to sell, by agreement the
ownership is reserved in the vendor and is not to pass until the full payment of
the price. In a contract of sale, the vendor has lost and cannot recover ownership
until and unless the contract is resolved or rescinded; whereas in a contract to
sell, title is retained by the vendor until the full payment of the price.

Based on the foregoing distinctions, the Court finds, and so holds, that the oral
agreement entered into by the parties constitutes a contract of sale and not a
contract to sell.
A plain reading of respondent Loreta's testimony shows that the parties' oral
agreement constitutes a meeting of the minds as to the sale of the disputed
property and its purchase price. Respondent Loreta's statements do not in any
way suggest that the parties intended to enter into a contract of sale at a later
time. Such statements only pertain to the time at which petitioners expected, or
at least hoped, to acquire the sufficient means to pay the purchase price agreed
upon.

Considering that respondents' Complaint is anchored upon their alleged

ownership of the disputed property, their prayer to recover possession thereof as
a consequence of such alleged ownership cannot prosper.

43
 First Division
G.R. 199052 June 26, 2019

Jebsen Maritime Inc., Vanoord Shipmanagement B.V. and/or Estanislao

Santiago, vs. Timoteo Gavina, substituted by his heirs, represented by
surviving spouse Nora J. Gavina

NATURE OF THE CASE:

This is a Civil Case which arose from a disability complaint filed by

Timoteo Gavina

FACTS:

On May 5, 2007, Timoteo embarked on vessel M/V Volvos Terranova as a

fitter for a 4 month employment contract. As a fitter, Timoteo is engaged in
welding, cutting, grinding or sanding iron pipes. However on July 11 he was
repatriated due to persistent cough and difficulty in breathing. Timoteo was later
on shown to have pneumonia and bronchiectasis, hence he was certified to be
unfit for sea service with disability grade I. Timoteo then filed the instant
complaint to the Labor Arbiter. Further tests, showed that he has lung cancer and
on February 2008 during the pendency of the case, Timoteo died.

Petitioners alleged that Timoteo disembarked and signed off due to the
end of his employment and was not medically repatriated and that Petitioners
asked Timoteo to support his calim of disability but to no avail. Petitioner also
argued that lung cancer is not work-related, hence the complaint should be
dismissed.

The LA dismissed the complaint. The NLRC overturned the LA decision

and held petitioners liable to pay respondent US$50,000 as death benefits,
US$2,526 as sickness allowance, reimbursement of hospital expenses and 10%
of the judgment award as attorney’s fees. The NLRC also awarded moral
damages of P50,000 and exemplary damages amounting to P50,000.

ISSUE:

Whether damages and attorney’s fees are proper.

RULING:

As stated by the NLRC in its Decision, "After the check-up, disability

benefits was not extended to the deceased seaman. This to us evinced is bad
faith on the part of the respondent." Bad faith is not simply bad judgment or
negligence. "lt imports dishonest purpose or some moral obliquity and conscious
doing of wrong. It means a breach of a known duty through some motive or
interest or ill will that partakes of the nature of fraud."

Verily, since petitioners are in bad faith, the award of moral damages
amounting to fifty thousand pesos (P50,000.00) is proper. As to the award of
exemplary damages, the New Civil Code provides that, "exemplary or corrective
damages are imposed, by way of example orcorrection for the public good, in
addition to the moral, temperate, liquidated or compensatory damages."

44
To discourage other employers who may be emboldened to follow the example
of petitioners in trying to evade liability, the award of exemplary damages
amounting to fifty thousand pesos (P50,000.00) is proper.

Lastly, as to the attorney's fees, the Supreme Court provides that, "The Court
also holds that [respondent] is entitled to attorney's fees in the concept of
damages and expenses of litigation. Attorney's fees are recoverable when the
defendant's act or omission has compelled the plaintiff to incur expenses to
protect his interest."

Moreover, under Article 2208 of the New Civil Code, attorney's fees may be
recovered in actions for indemnity under workmen's compensation and
employer's liability laws. Hence, the award of attorney's fees ten percent (10%) of
the aggregate monetary awards is warranted.

45
 Second Division
G.R. No. 240199 April 10, 2019

Spouses Isidro R. Salitico and Conrada C. Salitico vs. Heirs of

Resurreccion Martinez Felix, Namely: Luciano, Corazon and Concepcion,
all surnamed Felix, Recaredo P. Hernandez, In his Capacity as
administrator of the estate of Amanda H. Burgos, and the Register of Deeds
Caguioa, J.

NATURE OF THE CASE:

This is a Civil Case which stemmed from a Complaint for Specific

Performance with Damages

FACTS:

Amanda is the registered owner of a 1,413 square meter parcel of land.

This parcel of land was inherited by Amanda’s niece Resurreccion. Thereafter
Resurreccion executed a document entitled Bilihang Tuluyan ng Lupa, which
trasferred ownership of the land to petitioners Sps. Salitico. The latter took
possession of the subject property. Thereafter respondent Recaredo was
appointed as the executor of Amanda’s will. On March 9, 2010, the petitioners
received a demand letter requiring them to vacate the property and to surrender
possession to the respondent heirs. Hence, petitioners filed a complaint before
the RTC and sought the return in their favor of the owner’s duplicate copy of OCT
P-1908 and the exectution of the corresponding Deed of Absoluted Sale. The
RTC dismissed the complaint for lack of cause of action. The CA dismissed the
appeal due to the pendency of the probate proceedings before the probate court.

ISSUE:

Whether the CA erred in upholding the RTC’s decision which dismissed

the petitioners Sps. Salitico’s Complaint for Specific Performance due to lack of
cause of action.

RULING:

Yes. It is not disputed that by virtue of the decedent Amanda's will, i.e.,
Huling Habilin, Resurreccion inherited the subject property as the designated
devisee. The respondents heirs themselves admit that Resurreccion is a
testamentary heir of Amanda. It is likewise not disputed that Resurreccion sold
her interest over the subject property by executing a document entitled Bilihang
Tuluyan ng Lupa in favor of the petitioners Sps. Salitico who then proceeded to
take physical possession of the subject property. In fact, in the assailed Decision,
the CA recognized that the RTC itself had held that "Resurreccion validly sold to
the petitioners Sps. Salitico all her rights in the subject property which
sheinherited from Amanda H. Burgos as part of her undivided share in the
estateof the latter." As applied to the instant case, upon the death of Amanda,
Resurreccionbecame the absolute owner of the devised subject property, subject
to a resolutory condition that upon settlement of Amanda's Estate, the devise is
not declared inofficious or excessive. Hence, there was no legal bar preventing
Resurreccion from entering into a contract of sale with the petitioners Sps.
Salitico with respect to the former's share or interest over the subject property.

46
 In a contract of sale, the parties' obligations are plain and simple. The law
obliges the vendor to transfer the ownership of and to deliver the thing that is the
object of sale to the vendee. Therefore, as a consequence of the valid contract of
sale entered into by the parties, Resurreccion had the obligation to deliver the
subject property to the petitioners Sps. Salitico. In fact, it is not disputed that the
physical delivery of the subject property to the petitioners Sps. Salitico had been
done, with the latter immediately entering into possession of the subject property
after the execution of the Bilihang Tuluyan ng Lupa. Therefore, considering that a
valid sale has been entered into in the instant case, there is no reason for the
respondents heirs to withhold from the petitioners Sps. Salitico the owner's
duplicate copy of OCT P-1908.

To reiterate, Resurreccion already sold all of her interest over the subject
property to the petitioners Sps. Salitico. Therefore, the respondents heirs have
absolutely no rhyme nor reason to continue possessing the owner's duplicate
copy of OCT P-1908.

Obligations – Arts. 1156-1304 PAGE

A. In General

1. Definition - Art. 1156

2. Kinds of Obligations as to basis and enforceability - Art.
1423-1430; RA 6809
3. Prescription of Actions - 1139-1155
JOSE V. GAMBITO v. ADRIAN OSCAR Z. BACENA
G.R. No. 225929, January 24, 2018 41
ESMERALDO GATCHALIAN, duly represented by SAMUEL 43

47
GATCHALIAN vs. CESAR FLORES, JOSE LUIS ARANETA, CORAZON
QUING, and CYNTHIA FLORES
G.R. No. 225176. January 19, 2018
B. Sources of Civil Obligations
1. Law
2. Contracts
3. Quasi-contract
a. Negotiorum gestio
b. Solutio Indebiti
4. Acts or omissions punished by Law
5. Quasi-delicts
ROSEMARIE Q. REY v. CESAR G. ANSON
G.R. No. 211206, November 07, 2018 15
IRIS RODRIGUEZ v. YOUR OWN HOME DEVELOPMENT
CORPORATION (YOHDC)
G.R. No. 199451, August 15, 2018 26
FEDERAL EXPRESS CORPORATION V. LUWALHATI R. ANTONINO
AND ELIZA BETTINA RICASA ANTONINO (did not observe EO diligence)
G.R. No. 199455, June 27, 2018 9
C. Kinds of Civil Obligations
1. As to perfection and extinguishment
2. As to plurality of prestation
3. As to rights and obligation of multiple parties
KEIHIN-EVERETT FORWARDING CO., INC., PETITIONER, VS. TOKIO
MARINE MALAYAN INSURANCE CO., INC.** AND SUNFREIGHT
FORWARDERS & CUSTOMS BROKERAGE, INC., RESPONDENTS.
G.R. No. 212107, January 28, 2019 34
RAUL S. IMPERIAL v. HEIRS OF NEIL BAYABAN, AND MARY LOU
BAYABAN
G.R. No. 197626, October 03, 2018 19
CITYSTATE SAVINGS BANK vs. TERESITA TOBIAS and SHELLIDIE
VALDEZ
G.R. No. 227990. March 7, 2018 33
Breach of Obligations - Art. 1170

Manner of Breach
1. fraud
2. negligence
3. delay
4. any other manner of contravention
SPOUSES FRANCISCO ONG AND BETTY LIM ONG, AND SPOUSES
JOSEPH ONG CHUAN AND ESPERANZA ONG CHUAN v. BPI FAMILY
SAVINGS BANK, INC.
G.R. No. 208638, January 24, 2018 45
A. Modes of extinguishment of Obligations – Art 1231, other
modes:
1. Payment or performance
a. Dation in payment
2. Loss of the thing due or Impossibility of Performance
3. Condonation or remission of debt
4. Confusion and Merger
5. Compensation
6. Novation

48
GOLDSTAR RIVERMOUNT, INC. VS. ADVENT CAPITAL AND FINANCE
CORP., (FORMERLY ALL ASIA CAPITAL AND TRUST CORP.)
G.R. No. 211204, December 10, 2018 28

MABUHAY HOLDINGS CORPORATION VS. SEMBCORP LOGISTICS

LIMITED
G.R. No. 212734, December 05, 2018 29

UNITED COCONUT PLANTERS BANK vs. SPOUSES WALTER UY AND

LILY UY
G.R. No. 204039. January 10, 2018 (JOINT SOLIDARY) 27

FOOD FEST LAND, INC. AND JOYFOODS CORPORATION,

PETITIONERS, VS. ROMUALDO C. SIAPNO, TEODORO C. SIAPNO, JR.
AND FELIPE C. SIAPNO, RESPONDENTS.
G.R. No. 226088, February 27, 2019 36

Contracts – Arts. 1305 -1422

A. In General
B. Fundamental Characteristics/ Principles of Contracts
1. Consensuality of contracts
2. Autonomy of contracts
3. Mutuality of Contracts

C. Stages of Contract
1. Negotiation
2. Perfection

SALES
A. In General
B. Elements of a Contract of Sales
a. Essential elements
1. Consent of the contracting parties
2. Determinate subject matter
3. Price certain in money or its equivalents

SPOUSES CIPRIANO PAMPLONA and BIBIANA INTAC vs. SPOUSES

LILIA I. CUETO and VEDASTO CUETO
G.R. No. 204735. February 19, 2018 30

ROYAL PLAINS VIEW, INC. AND/OR RENATO PADILLO v. NESTOR C.

MEJIA
G.R. No. 230832, November 12, 2018 17

49
 D. Rights and Obligation of the Vendee
1. Payment of price
2. Right of Inspection
3. Acceptance
4. Maceda Law

C. Lease
1. In General
2. Elements
3. Obligations of Lessor/Lessee
4. Remedies
5. Termination of Lease

PARTNERSHIP

I. In general
A. Definition
B. Characteristics of Partnership as a Contract

ANICETO G. SALUDO, JR. v. PHILIPPINE NATIONAL BANK

G.R. No. 193138, August 20, 2018 23
SPECIAL CONTRACTS: ACCESSORY CONTRACTS
Guaranty and Suretyship

1. Definition
2. Nature/Characteristics/Extent
3. Effects of Guaranty
4. Modes of Extinguishment

Pledge, Mortgage, and Antichresis

1. In General
2. Essential Elements
3. Effects / Rights & Obligations
4. Extinguishment / Foreclosures
SPOUSES FRANCISCO ONG AND BETTY LIM ONG, AND SPOUSES
JOSEPH ONG CHUAN AND ESPERANZA ONG CHUAN v. BPI FAMILY
SAVINGS BANK, INC.
G.R. No. 208638, January 24, 20184 45

Extra-contractual Obligations

A. Law
B. Quasi-Contracts
C. Delicts
D. Quasi-Delicts
ARMANDO GO v. EAST OCEANIC LEASING AND FINANCE 56

50
CORPORATION
G.R. Nos. 206841-42. January 19, 2018
HEIRS OF ALFONSO YUSINGCO, REPRESENTED BY THEIR
ATTORNEY-IN-FACT, TEODORO K. YUSINGCO v. AMELITA BUSILAK,
COSCA NAVARRO, FLAVIA CURAYAG AND LIXBERTO1 CASTRO
G.R. No. 210504, January 24, 2018 60
TORTS AND DAMAGES
II. Liabilityfor Torts : Damages
A. In General
B. Kind of Damages
1. Actual and compensatory

NYMPHA S. ODIAMAR v. LINDA ODIAMAR VALENCIA

G.R. No. 213582, September 12, 2018 22

MARILOU PUNONGBAYAN-VISITACION vs. PEOPLE OF THE

PHILIPPINES AND CARMELITA P. PUNONGBAYAN
G.R. No. 194214. January 10, 2018 62

51
 SECOND DIVISION
G.R. No. 225929 January 24, 2018

JOSE V. GAMBITO, Petitioner, v. ADRIAN OSCAR Z. BACENA, Respondent.

REYES, JR., J.:

NATURE OF THE CASE:

This is a civil case for quieting of title and the declaration of nullity of title
over a parcel of land

FACTS:

Petitioner Gambito filed a complaint for quieting of title, declaration of

nullity of title, specific performance and damages over a parcel of land in Nueva
Vizcaya against respondent. Gambito claims that the land was donated to him by
his mother and that her mother acquired the property through a Deed of Sale.
Gambito claims that Bacena surreptitiously secured before the CENRO a
“Katibayan ng Orihinal na Titulo Bilang P-21362” covering land which was a part
of the same lot registered under Gambito. Gambito claims that his parents filed a
protest against Bacena with the CENRO but later withdraw the same because it
was not the proper forum.

Bacena alleged that the folder of Castriciones survey claimant of Lot 1331,
Cad 45, Nueva Vizcaya is supported by the records of the CENRO.That the his
title was regularly issued and was based on authentic documents. He also claims
that Gambito’s title is null and void because it was derived from a Deed of Sale
supposedly signed by vendor Pascual on Dec. 1994 although she already died
on Aug. 1988. The MTC ruled in favor of Gambito however the RTC reversed the
decision. The RTC held that in an action for quieting of title it is an indispensable
requisite that the plaintiff has a legal or an equitable title to or interest in the real
property subject of the action which is however wanting at the time Gambito filed
his verified Complaint. Moreover, the signatory-vendor, Covita denied that she
ever signed the Deed of Sale which is supposedly that of her husband, Mariano
G. Mateo, supposedly signifying his conformity to the sale, is likewise a fake
signature of her husband because he was already dead at the time of the
execution of the document having died on June 14, 1980. The RTC also noted
that Gambito’s title was derived through a certificate of title which was based on
a falsified Deed of Sale which was made to appear to have been signed by the
parties who were long dead at the time of its exeution. Further more the RTC
held that Bacena’s title has become indefeasible and incontrovertible as it has
been possessed by Bacena and his predecessors-in-interest and never been
occupied by Gambito. The CA Affirmed. Hence this petition.

ISSUES:

1. Whether Gambito may invoke laches to pursue his claim

2. Whether Gambito is a transferee in good faith

RULING:

52
1. No. 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.

It should be noted that the CA found that Bacena has no reason to doubt
his own ownership and possession of Lot No. 1331, as established in this case
obtained through the right of Castriciones. Moreover, it was Gambito who
disturbed that open, continuous, peaceful, adverse and notorious possession of
Bacena and his predecessors-in-interest. Thus, Bacena is not expected to assert
his right for having possession and title to the land in dispute and the CA is
correct when it found that Bacena has no reason to doubt his own ownership and
possession of Lot No. 1331. Hence, the Court is in accord with the CA when it
held that laches cannot apply and it should be Bacena and not Gambito who
should invoke laches.

Private ownership of land—as when there is prima facie proof of

ownership like a duly registered possessory information or a clear showing of
open continuous, exclusive, and notorious possession, by present or previous
occupants—is not affected by the issuance of a free patent over the same land.

While Gambito assails both the RTC and CA on the principle of laches on
the uninterrupted existence of OCT No. R-578 of 98 years, it should be noted
that the CA found, it was certain that when the cadastral survey was conducted
in 1913 to 1914, there were already two survey claimants, one of which is
Castriciones. Thus, OCT No. R-578 should not have included Lot No. 1331, as
there was already a supervening event that transpired from the time it was
applied for until the title was issued. Moreover, here it established that
Castriciones is the previous occupant with open continuous, exclusive, and
notorious possession as above contemplated. Hence, OCT No. R-578 issued as
a free patent, by application, cannot affect Castriciones' previous occupation with
open continuous, exclusive, and notorious possession.

2. No. While Gambito argues that the CA misapplied the concept of transferee in
good faith for the reason that bad faith has died when Pascual, inherited the
property from Venancio Pascual, We disagree.

Under Section 53 of Presidential Decree No. 1529, known as the Property

Registration Decree, in all cases of registration procured by fraud, the owner may
pursue all his legal and equitable remedies against the parties to such fraud
without prejudice, however, to the rights of any innocent holder for value of a
certificate of title. After the entry of the decree of registration on the original
petition or application, any subsequent registration procured by the presentation
of a forged duplicate certificate of title, or a forged deed or other instrument, shall
be null and void.

In this case, Gambito is not an innocent holder for value for the reason
that he is a donee acquiring the property gratuitously by a Deed of Donation and
not by purchase. Hence, the concept of an innocent purchaser for value cannot
apply to him.

In this case, it is an established fact that the fraud referred to by the CA is

the fraud on the transfer of the property from Pascual and Covita to Luz on the
basis of fake signatures considering that the vendor signatories therein are all
dead. As such, by applicability of the foregoing jurisprudence, the deed is
considered a forged deed and hence null and void. Thus, Luz's title is null and

53
void which transferred nothing by Deed of Donation to her son Gambito, the
petitioner herein. Hence, the CA did not misapply the concept of transferee in
good faith by considering the fraud in the transfer of the property to Luz
consequently ending up with Gambito.

FIRST DIVISION
G.R. No. 225176 January 19, 2018

ESMERALDO GATCHALIAN, duly represented by SAMUEL

GATCHALIAN, Petitioner vs.
CESAR FLORES, JOSE LUIS ARANETA, CORAZON QUING, and CYNTHIA
FLORES, Respondents

TIJAM, J.:

NATURE OF THE CASE:

This is a civil case to determine whether private land has been converted
public property by virtue of laches

FACTS:

Petitioner is a co-owner of a parcel of land covered by TCT 79180 located

at Parañaque City. The subject land is registered in the name of Petitioner’s
parents, spouses Gatchalian. On June 2011 petitioner filed a complaint for
ejectment with damages against respondents Cesar Flores, Jose Araneta,
Corazon Quing and Cynthia Flores. The survey conducted on the property
established that the lot of Segundo Mendoza encroached a protion of the subject
land which the Gatchalian’s tolerated. However the lot of Segundo was later on
sold and subdivided among the new owners including herein respondents. When
the latter demonstrated acts of gross ingratitude to the Gatchalians. Petitioner
and his family withdraw their tolerated possession, use, and occupation of the
portion of the subject land. Verbal and written demands were then served to the
respondent’s but they remained unheeded. The dispute reached the Lupong
Tagapamayapa but was still not resolved. Hence, the filing of the ejectment case.

Respondents denied that they usurped the property of the Gatchalian’s. In

fact they claim that it was the Gatchalian’s who encroached on the lot when they
put up a fence in the property. They insisted that the lot was a public road and is
now known as Don Juan Street Cat-mendoza. In the subdivision plan of the GAT
Mendoza Housing area the subject land is constituted as a right of way.
Respondent’s argues that petitioner has no cause of action against them.

The MeTC ordered respondents to vacate the disputed land and pay
rentals in the amount of ₱20,000.00 a month plus legal rate of interest. The RTC
reversed. The CA affirmed the ruling of the RTC. Petitioner appealed claiming
the CA erred in ruling that by virtue of laches the road lot has been converted to
public property of the municipality. He argues that the mere usage of public of the
road does not make it public property.

ISSUE:

Whether the subject has been converted into public property by virtue of laches

54
RULING:

No. As to the CA's finding that by virtue of laches the subject property has
been converted into public property, We do not agree.

It is well-settled that an "owner of a registered land does not lose his rights
over a property on the ground of laches as long as the opposing claimant's
possession was merely tolerated by the owner."
A torrens title is irrevocable and its validity can only be challenged in a direct
proceeding. A torrens title is an indefeasible and impresciptible title to a property
in favor of the person in whose name the title appears. The owner is entitled to all
the attributes of ownership of the property, including possession. The person who
has a torrens title over a land is entitled to possession thereof. As such, petitioner
can file an ejectment case against herein respondents who encroached upon a
portion of petitioner's property.

55
 THIRD DIVISION
G.R. No. 211206 November 07, 2018

ROSEMARIE Q. REY, Petitioner, v. CESAR G. ANSON, Respondent.

PERALTA, J.:

NATURE OF THE CASE:

This is a Civil Case for the reimbursement of excess payments of made in

a loan

FACTS:

Petitioner Rey borrowed from respondent Anson P200,000 payable in one

year and subject to 7.5% interest per month which would be paid bi-monthly by
way of postdated checks. 3 days later, or on August 26, 2002 Rey again
borrowed from Anson P350,000 subject to 7% interest per month and payable in
4 months. While Rey was able to pay the interest on the first loan for 12 months,
she was unable to pay the principal amount of P200,000 when it became due.
Rey also failed to pay her second loan.

Respondent obtained a third loan from Anson for P100,000. The parties
verbally agreed that the loan was subject to 3% interest. Thereafter a fourth loan
was verbally agreed upon by the parties, this loan was subject to 4% monthly
interest. Rey contends that on the 3rd and 4th loan she had made excess
payments in the sum of P41,360 and P17,960 respectively since no interest was
imposable in the absence of a written agreement.

Hence, petitioner now argues that her excess payments should be

returned by Anson in compliance with the principle of solution indebiti.

ISSUE:

Whether Anson should return the excess payment for the loans pursuant
to the principle of solution indebiti under the Civil Code

RULING:

Yes. The Court agrees with petitioner that Articles 1253 and 2154 of the
Civil Code apply to this case, and Cesar Anson is obliged to return to petitioner
excess payments received by him.

Article 1253 of the Civil Code states that "[i]f the debt produces interest, payment
of the principal shall not be deemed to have been made until the interests have
been covered." The Court reviewed the computation above made by petitioner
for Loan 1 and Loan 2, and found the computation to be correct.

The Court finds that in Loan 1, petitioner already paid in full the principal amount
of P200,000.00 and monthly interest thereon on November 8, 2003, leaving an
excess payment of P1,759.64. Further payments made by petitioner from

56
November 23, 2003 to August 23, 2004 resulted in overpayment amounting to
P144,259.64. The excess payment of P9,259.64 as of November 23, 2003 plus
excess payments made from December 23, 2003 to April 23, 2004 amounting to
P84,259.64 in Loan 1 may be applied to Loan 2, leaving a final excess payment
of P60,000.00 for Loan 1.

As regards Loan 2, petitioner fully paid the principal amount of P350,000.00 and
monthly interest thereon on May 26, 2004, leaving an excess payment of
P31,856.68. Payments made thereafter, from June 26, 2004 to September 26,
2004, resulted in excess payments amounting to P150,380.68 for Loan 2.
Petitioner also made excess payments of P41,360.00 in Loan 3, and P17,960.00
in Loan 4. Hence, the total excess payments made by petitioner in the four loans
amountedtoP269,700.68.

Since Cesar Anson received a total overpayment of P269,700.68 from petitioner,

he is obliged to return the amount in accordance with the principle of solutio
indebiti under Article 2154 of the Civil Code, to wit:

Article 2154. If something is received when there is no right to demand it, and it
was unduly delivered through mistake, the obligation to return it arises.

However, in regard to payment of interest on the overpayment made by

petitioner, the Court notes its ruling in Sps. Abella v. Sps. Abella, thus:

As respondents made an overpayment, the principle of solutio indebiti as

provided by Article 2154 of the Civil Code applies.

As respondents had already fully paid the principal and all conventional interest
that had accrued, they were no longer obliged to make further payments. Any
further payment they made was only because of a mistaken impression that they
were still due. Accordingly, petitioners are now bound by a quasi-contractual
obligation to return any and all excess payments delivered by respondents.

57
 THIRD DIVISION
G.R. No. 199451 August 15, 2018

IRIS RODRIGUEZ, Petitioner, v. YOUR OWN HOME DEVELOPMENT

CORPORATION (YOHDC), Respondent.

LEONEN, J.:

NATURE OF THE CASE:

This is a civil case for the recovery of money which allegedly would result
in unjust enrichment of respondent

FACTS:

This case originated from a low-cost housing project in Occ. Mindoro,

which respondent YOHDC entered with its partner Archangel Corporation.
Petitioner Iris’ husband, Tarcisius Rodriguez, was hired as project
coordinator/manager. Tarcisius found a property owned by Rosa Rosillas and
proceeded to negotiate with her. Rosillas agreed to sell the land for P1.2 million
however, Tarcisius misrepresented to the partner corporations that Rosillas
asked for P4 million. Rosillas was paid her P1.2 million in 2 installments but
Tarcisius still requested for 2 more checks in Rosillas’ name.

YOHDC found about the irregularities after it received reports of padding

of expenses and overpricing. YOHDC contacted Rosillas and Delos Reyes
regarding the checks. Both confimed that they never received, endorsed,
encashed or deposited any of the 4 checks. YOHDC demanded from Tarcisius
the amount of the checks which he failed to return. Tarcisius then requested to
settle YOHDC's claim by way of transferring properties. However, no settlement
was reached with Tarcisius, so YOHDC pursued its claim against the banks.
These events prompted the Rodriguez spouses to file a complaint for Damages
against YOHDC, BPI, Metrobank, Rosillas and Delos Reyes among others.

ISSUE:

Whether YOHDC is liable to Iris Rodriguez for P424,000 based on the

principle of unjust enrichment

RULING:

No. It cannot be said that YOHDC was unjustly enriched to make it liable
to petitioner.

Article 22 of the Civil Code of the Philippines states:

Every person who through an act of performance by another, or any other
means, acquires or comes into possession of something at the expense of the
latter without just or legal ground, shall return the same to him.

This provision addresses unjust enrichment. It is the State's public policy to

prevent a person from unjustly retaining a benefit, money, or property, at the

58
expense of another, or against the fundamental principles of justice, equity, and
good conscience.

Unjust enrichment has two (2) elements: a person benefited without a real or
valid basis or justification, and the benefit was at another person's expense or
damage. In Loria v. Muñoz, Jr.:

In this jurisdiction, public policy has been defined as "that principle of the law
which holds that no subject or citizen can lawfully do that which has a tendency
to be injurious to the public or against the public good."

Unjust enrichment exists, according to Hulst v. PR Builders, Inc., "when a person

unjustly retains a benefit at the loss of another, or when a person retains money
or property of another against the fundamental principles of justice, equity and
good conscience." The prevention of unjust enrichment is a recognized public
policy of the State, for Article 22 of the Civil Code explicitly provides that "[e]very
person who through an act of performance by another, or any other means,
acquires or comes into possession of something at the expense of the latter
without just or legal ground, shall return the same to him." It is well to note that
Article 22 "is part of the chapter of the Civil Code on Human Relations, the
provisions of which were formulated as basic principles to be observed for the
rightful relationship between human beings and for the stability of the social
order; designed to indicate certain norms that spring from the fountain of good
conscience; guides for human conduct that should run as golden threads through
society to the end that law may approach its supreme ideal which is the sway
and dominance of justice."
In the case at bar, it is argued that YOHDC unjustly retained benefit at the
expense of the Rodriguez Spouses when the amounts of Delos Reyes' Checks
were reimbursed to it.

This Court finds that it did not.

First, Metrobank rightfully returned to YOHDC the amounts in Delos

Reyes' and Rosillas' Checks. Considering that Metrobank is the drawee bank, it
is obligated to return the full amounts of the checks upon discovering that they
were not paid to the correct payees. In Associated Bank v. Court of Appeals:

Thus, the return of the amounts to YOHDC was rightful and justified.
Likewise, it cannot be said that the amounts returned were at the expense of Iris,
considering that the amounts were not meant for the Rodriguez Spouses but for
Delos Reyes and Rosillas.

Furthermore, Iris has not proven that Delos Reyes released YOHDC from
the payment of its obligation to him. Hence, this Court cannot assume that
YOHDC is no longer obligated to pay Delos Reyes for his services on the
premise that the Rodriguez Spouses paid him a particular amount.

For Iris to claim any right to the amounts returned to YOHDC, she must
prove her claim with the required quantum of evidence. As established,
considering there was a previous duly notarized affidavit stating that Delos Reyes
did not receive any proceeds from his Checks, it was incumbent upon Iris to
prove by clear and convincing evidence that he indeed had been paid and that
he had released YOHDC from paying him its obligation. However, Iris failed in
this respect; thus, she cannot claim any reimbursement for the returned amount.

59
 THIRD DIVISION
G.R. No. 199455 June 27, 2018

FEDERAL EXPRESS CORPORATION, Petitioner, v. LUWALHATI R.

ANTONINO AND ELIZA BETTINA RICASA ANTONINO, Respondents.

LEONEN, J.:

NATURE OF THE CASE:

This is a civil case for the recovery of damages for the alleged failure of
FedEx to observe extraordinary diligence

FACTS:

Eliza was the owner of Unit 22-A in Allegro Condominium, located at New
York, United States. In November 2003, monthly common charges on the Unit
became due. These charges were for the period of July 2003 to November 2003,
and were for a total amount of US$9,742.8. Respondents Luwalhati and Eliza
were in the Philippines. They decided to send, trough FedEx, several Citibank
checks, allegedly amounting to US$11,619.35 to Veronica Sison, who was in
New York, for the payment of monthy charges and real estate taxes.

Sison was tasked to deliver the checks payable to Maxwell-KAtes Inc and
to the New York County Department of Finance. Sison allegedly did not receive
the package which resulted in the non-payment of respondent’s obligation and
the foreclosure of the Unit. Sison contacted FedEx to inquire about the non-
delivery. She was informed that the package was delivered to her neighbor but
there was no signed receipt.

Luwalhati and Eliza, through their counsel, sent a demand letter to FedEx
for payment of damages due to the non-delivery of the package, but FedEx
refused to heed their demand. Hence, on April 5, 2004, they filed their
Complaint for damages. FedEx claimed that Luwalhati and Eliza "ha[d] no cause
of action against it because they failed to comply with a condition precedent, that
of filing a written notice of claim within the 45 calendar days from the acceptance
of the shipment." The RTC ruled for respondents.

ISSUE:

Whether FedEx failed to observe the extraordinary diligence in this

instance

RULING:

Yes. The Civil Code mandates common carriers to observe extraordinary

diligence in caring for the goods they are transporting:
Article 1733. Common carriers, from the nature of their business and for reasons
of public policy, are bound to observe extraordinary diligence in the vigilance

60
over the goods and for the safety of the passengers transported by them,
according to all the circumstances of each case.
"Extraordinary diligence is that extreme measure of care and caution which
persons of unusual prudence and circumspection use for securing and
preserving their own property or rights." Consistent with the mandate of
extraordinary diligence, the Civil Code stipulates that in case of loss or damage
to goods, common carriers are presumed to be negligent or at fault, except in the
following instances:

1. Flood, storm, earthquake, lightning, or other natural disaster or calamity;

2. Act of the public enemy in war, whether international or civil;
3. Act or omission of the shipper or owner of the goods;
4. The character of the goods or defects in the packaging or in the containers;
5.Order or act of competent public authority

In all other cases, common carriers must prove that they exercised extraordinary
diligence in the performance of their duties, if they are to be absolved of liability.
The responsibility of common carriers to exercise extraordinary diligence lasts
from the time the goods are unconditionally placed in their possession until they
are delivered "to the consignee, or to the person who has a right to receive
them." Thus, part of the extraordinary responsibility of common carriers is the
duty to ensure that shipments are received by none but "the person who has a
right to receive them." Common carriers must ascertain the identity of the
recipient. Failing to deliver shipment to the designated recipient amounts to a
failure to deliver. The shipment shall then be considered lost, and liability for this
loss ensues.

Petitioner is unable to prove that it exercised extraordinary diligence in ensuring

delivery of the package to its designated consignee. It claims to have made a
delivery but it even admits that it was not to the designated consignee. It asserts
instead that it was authorized to release the package without the signature of the
designated recipient and that the neighbor of the consignee, one identified only
as "LGAA 385507," received it. This fails to impress.

The assertion that receipt was made by "LGAA 385507" amounts to little, if any,
value in proving petitioner's successful discharge of its duty. "LGAA 385507" is
nothing but an alphanumeric code that outside of petitioner's personnel and
internal systems signifies nothing. This code does not represent a definite,
readily identifiable person, contrary to how commonly accepted identifiers, such
as numbers attached to official, public, or professional identifications like social
security numbers and professional license numbers, function. Reliance on this
code is tantamount to reliance on nothing more than petitioner's bare, self-
serving allegations. Certainly, this cannot satisfy the requisite of extraordinary
diligence consummated through delivery to none but "the person who has a right
to receive" the package.

Given the circumstances in this case, the more reasonable conclusion is that the
package was not delivered. The package shipped by respondents should then be
considered lost, thereby engendering the liability of a common carrier for this
loss.
Petitioner cannot but be liable for this loss. It failed to ensure that the package
was delivered to the named consignee. It admitted to delivering to a mere
neighbor. Even as it claimed this, it failed to identify that neighbor.

61
 THIRD DIVISION
G.R. No. 197626 October 03, 2018

RAUL S. IMPERIAL, Petitioner, v. HEIRS OF NEIL BAYABAN, AND MARY

LOU BAYABAN, Respondents.

LEONEN, J.:

NATURE OF THE CASE:

This is a civil case for to determine the liability of the employer for
the injuries caused by his employee

FACTS:

A van and a tricycle, figured in an accident along Sumulong

Highway, Antipolo city. The Mitsubishi L-300 van was owned and registered
under Imperial’s name, and was driven by Laraga. The tricycle was driven
by Gerardo Mercado. On board the tricycle were the Bayaban Spouses who
sustained injuries. The Spouses demanded compensation from Imperial,
Laraga and Mercado for the hospital bills and loss of income. When neither
of them heeded the demand, the Spouses filed a Complaint for Damages
before the RTC of Antipolo.

Imperial denied liability, contending that the van was under the
custody of one Rosalia Pascua. According to Imperial, he lent the van to
Pascua. Imperial admitted that he had employed Laraga as family driver but
contended that he had exercised due diligence in the selection and
supervision of Laraga. Furthermore Laraga was already acting beyond the
scope of his duties when the accident happened because the accident
happened during a Sunday which was his rest day. The RTC ruled in favor
of the spouses. The CA affirmed.

ISSUE:

Whether or not the Court of Appeals shifted the burden on petitioner Raul
S. Imperial to prove that his employee, William Laraga, was not acting within the
scope of his assigned tasks

RULING:

Articles 2176 and 2180 of the Civil Code provide:

Article 2176. Whoever by act or omission causes damage to another, there being
fault or negligence, is obliged to pay for the damage done. Such fault or
negligence, if there is no pre-existing contractual relation between the parties, is
called a quasi-delict and is governed by the provisions of this Chapter.
....

62
Article 2180. The obligation imposed by Article 2176 is demandable not only for
one's own acts or omissions, but also for those of persons for whom one is
responsible.
....
Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even though
the former are not engaged in any business or industry.
....
The responsibility treated of in this article shall cease when the persons herein
mentioned prove that they observed all the diligence of a good father of a family
to prevent damage.
Articles 2176 and 2180 of the Civil Code were derived from Articles
1902 and 1903 of the Spanish Civil Code of 1889. Article 2176 defines "quasi-
delict" as the fault or negligence that causes damage to another, there being no
pre-existing contractual relations between the parties. On the other hand, Article
2180 enumerates persons who are vicariously liable for the fault or negligence of
persons over whom they exercise control, whether absolute or limited.
With respect to extra-contractual obligation arising from negligence,
whether of act or omission, it is competent for the legislature to elect—and our
Legislature has so elected—to limit such liability to cases in which the person
upon whom such an obligation is imposed is morally culpable or, on the contrary,
for reasons of public policy, to extend that liability, without regard to the lack of
moral culpability, so as to include responsibility for the negligence of those
persons whose acts or omissions are imputable, by a legal fiction, to others who
are in a position to exercise an absolute or limited control over them. The
legislature which adopted our Civil Code has elected to limit extra contractual
liability—with certain well-defined exceptions—to cases in which moral culpability
can be directly imputed to the persons to be charged. This moral responsibility
may consist in having failed to exercise due care in one's own acts, or in having
failed to exercise due care in the selection and control of one's agents or
servants, or in the control of persons who, by reason of their status, occupy a
position of dependency with respect to the person made liable for their conduct.
Specifically for employers, they are deemed liable or morally responsible for the
fault or negligence of their employees but only if the employees are acting within
the scope of their assigned tasks. An act is deemed an assigned task if it is
"done by an employee, in furtherance of the interests of the employer or for the
account of the employer at the time of the infliction of the injury or damage."

Applying the foregoing, this Court finds that respondents have discharged
the burden of proof necessary to hold Imperial vicariously liable under Article
2180 of the Civil Code.

There is no question here that Laraga was petitioner's driver, hence, his
employee, as this fact was admitted by petitioner. This Court likewise finds that
respondents have established that Laraga was acting within the scope of his
assigned tasks at the time of the accident. It was 3:00 p.m.73 and Laraga was
driving in Antipolo City, where, as alleged by petitioner, his greenhouse and
garden were located. It is worth noting that according to petitioner, he loaned the
van to Pascua for the maintenance of his greenhouse and the repair of the water
line pipes in his garden. The logical conclusion is that Laraga was driving the van
in connection with the upkeep of petitioner's Antipolo greenhouse and garden.
Laraga was driving the van in furtherance of the interests of petitioner at the time
of 1 the accident. The defense that Sunday was supposedly Laraga's day off fails
to convince. There is no proof whatsoever of the truthfulness of this allegation,
with Laraga not having appeared in court to testify on this matter.

63
 With respondents having discharged their burden of proof, the disputable
presumption that petitioner Imperial was negligent in the selection and
supervision of Laraga arises. Contrary to petitioner's claim, there was no shifting
of burden on him to prove that Laraga was acting outside of his assigned tasks.
Rather, petitioner had to put forward evidence that he had exercised due
diligence in the selection and supervision of Laraga as his driver to be relieved of
liability. Unfortunately for petitioner, he miserably failed to dispute the
presumption of negligence in his selection and supervision of Laraga.

SECOND DIVISION
G.R. No. 227990 March 07, 2018

CITYSTATE SAVINGS BANK, Petitioner, v. TERESITA TOBIAS AND

SHELLIDIE VALDEZ, Respondents.

REYES, JR., J.

NATURE OF THE CASE:

This is a civil case to determine the banks liability on an act done by its
employee

FACTS:

Respondent Tobias was later offered by Robles to sign-up in petitioner's

back-to-back scheme which is supposedly offered only to petitioner's most
valued clients. Under the scheme, the depositors authorize the bank to use their
bank deposits and invest the same in different business ventures that yield high
interest. Robles allegedly promised that the interest previously earned by Tobias
would be doubled and assured her that he will do all the paper work. Lured by
the attractive offer, Tobias signed the pertinent documents without reading its
contents and invested a total of Php 1,800,000.00 to petitioner through Robles.
Later, Tobias became sickly, thus she included her daughter and herein
respondent Shellidie Valdez as co-depositor in her accounts with the petitioner.

In 2005, Robles failed to remit to respondents the interest as scheduled.

Respondents tried to reach Robles but he can no longer be found; their calls
were also left unanswered. In a meeting with Robles' siblings, it was disclosed to
the respondents that Robles withdrew the money and appropriated it for personal
use.
Respondents filed a Complaint for sum of money and damages against
Robles and petitioner. In their Complaint, respondents alleged that Robles
committed fraud in the performance of his duties as branch manager, when he
lured Tobias in signing several pieces of blank documents, under the assurance
that everything was in order.

ISSUE:

Whether Citystate should be solidarily liable with Robles in the payment of

damages suffered by respondents

RULING:

64
 Yes. The contract between the bank and its depositor is governed by the
provisions of the Civil Code on simple loan or mutuum, with the bank as the
debtor and the depositor as the creditor.

In light of these, banking institutions may be held liable for damages for
failure to exercise the diligence required of it resulting to contractual breach or
where the act or omission complained of constitutes an actionable tort.

The nature of a bank's liability is illustrated in the consolidated cases of

Philippine Commercial International Bank v. CA, et al., Ford Philippines, Inc. v.
CA, et al. and Ford Philippines, Inc. v. Citibank, N.A., et al. The original actions a
quo were instituted by Ford Philippines, Inc. to recover the value of several
checks it issued payable to the Commissioner of Internal Revenue (CIR) which
were allegedly embezzled by an organized syndicate.

It is without question that when the action against the bank is premised on
breach of contractual obligations, a bank's liability as debtor is not merely
vicarious but primary, in that the defense of exercise of due diligence in the
selection and supervision of its employees is not available.26 Liability of banks is
also primary and sole when the loss or damage to its depositors is directly
attributable to its acts, finding that the proximate cause of the loss was due to the
bank's negligence or breach.

The bank, in its capacity as principal, may also be adjudged liable under
the doctrine of apparent authority. The principal's liability in this case however, is
solidary with that of his employee.

The doctrine of apparent authority or what is sometimes referred to as the

"holding out" theory, or the doctrine of ostensible agency, imposes liability, not
"as the result of the reality of a contractual relationship, but rather because of the
actions of a principal or an employer in somehow misleading the public into
believing that the relationship or the authority exists." It is defined as:

The power to affect the legal relations of another person by transactions

with third persons arising from the other's manifestations to such third person
such that the liability of the principal for the acts and contracts of his agent
extends to those which are within the apparent scope of the authority conferred
on him, although no actual authority to do such acts or to make such contracts
has been conferred.

Succinctly stating the foregoing principles, the liability of a bank to third

persons for acts done by its agents or employees is limited to the consequences
of the latter's acts which it has ratified, or those that resulted in performance of
acts within the scope of actual or apparent authority it has vested.

Consequently, petitioner is estopped from denying Robles' authority. As

the employer of Robles, petitioner is solidarity liable to the respondents for
damages caused by the acts of the former, pursuant to Article 1911 of the Civil
Code.

65
 SECOND DIVISION
G.R. No. 212107 January 28, 2019

KEIHIN-EVERETT FORWARDING CO., INC., PETITIONER, v. TOKIO MARINE

MALAYAN INSURANCE CO., INC.** AND SUNFREIGHT FORWARDERS &
CUSTOMS BROKERAGE, INC., RESPONDENTS.

REYES, J. JR., J.:

NATURE OF THE CASE:

This is a civil case to determine the right of respondent to be subrogated

to the rights of Honda

FACTS:

Honda trading ordered 80 bundles of Aluminum Alloy Ingots from PT

Molten Indonesia. PT Molten loaded the good in 2 container vans which were,
received in Jakarta by Nippon Express Co. Ltd for shipment to Manila. Aside for
insuring the entire shipment with Tokio Marine & Nichido Fire Insurance Co,
Honda Trading also engaged the services of petitioner Keihin-Everett to clear
and withdraw the cargo from the pier and to transport and deliver the same to its
warehouse at the Laguna Technopark in Biñan, Laguna. Petitioner had an
accreditation agreement with respondent Sunfreight Forwarders whereby the
latter undertook to render common carrier services for the former and to transport
inland goods within the Philippines.

The shipment arrived in Manila on Nov. 3, 2005 and was accordingly

offloaded from the ocean liner and temporarily stored at the CY Area of the
Manila International Port pending release by the Customs Authority. On Nov. 8,
2005, the shipment was caused to be released from the pier by petitioner and
turned over to respondent Sunfreight Forwarders for delivery to Honda Trading.
En route to the latter’s warehouse, the truch was hijacked and the container van
was taken away.

Claiming to have paid Honda Trading's insurance claim for the loss it
suffered, respondent Tokio Marine commenced the instant suit on October 10,
2006 with the filing of its complaint for damages against petitioner Keihin-Everett.
Respondent Tokio Marine maintained that it had been subrogated to all the rights
and causes of action pertaining to Honda Trading.

ISSUE:

Whether respondent has been subrogated to all the rights and causes of
action pertaining to Honda Trading

RULING:

66
 Yes. Unlike in the Malayan case, Tokio Marine presented as evidence, not
only the Honda Trading Insurance Policy, but also the Subrogation Receipt
evidencing that it paid Honda Trading the sum of US$38,855.83 in full settlement
of the latter's claim under Policy No. 83-00143689. During the trial, Keihin-Everett
even had the opportunity to examine the said documents and conducted a cross-
examination of the said Contract of Insurance. By presenting the insurance policy
constitutive of the insurance relationship of the parties, Tokio Marine was able to
confirm its legal right to recover as subrogee of Honda Trading.

Keihin-Everett insisted that Tokio Marine is not the insurer but TMNFIC,
hence, it argued that Tokio Marine has no right to institute the present action. As
it pointed out, the Insurance Policy shows in its face that Honda Trading procured
the insurance from TMNFIC and not from Tokio Marine.

While this assertion is true, Insurance Policy No. 83-00143689 itself expressly
made Tokio Marine as the party liable to pay the insurance claim of Honda
Trading pursuant to the Agency Agreement entered into by and between Tokio
Marine and TMNFIC. As properly appreciated by both the RTC and the CA, the
Agency Agreement shows that TMNFIC had subsequently changed its name to
that of Tokio Marine. By agreeing to this stipulation in the Insurance Policy,
Honda Trading binds itself to file its claim from Tokio Marine and thereafter to
accept payment from it.

At any rate, even if we consider Tokio Marine as a third person who

voluntarily paid the insurance claims of Honda Trading, it is still entitled to be
reimbursed of what it had paid. As held by this Court in the case of Pan Malayan
Insurance Corp. v. Court of Appeals, the insurer who may have no rights of
subrogation due to "voluntary" payment may nevertheless recover from the third
party responsible for the damage to the insured property under Article 123624 of
the Civil Code. Under this circumstance, Tokio Marine's right to sue is based on
the fact that it voluntarily made payment in favor of Honda Trading and it could
go after the third party responsible for the loss (Keihin-Everett) in the exercise of
its legal right of subrogation.

Setting aside this assumption, Tokio Marine nonetheless was able to

prove by the following documentary evidence, such as Insurance Policy, Agency
Agreement and Subrogation Receipt, their right to institute this action as
subrogee of the insured. Keihin-Everett, on the other hand, did not present any
evidence to contradict Tokio Marine's case.

Since the insurance claim for the loss sustained by the insured shipment
was paid by Tokio Marine as proven by the Subrogation Receipt – showing the
amount paid and the acceptance made by Honda Trading, it is inevitable that it is
entitled, as a matter of course, to exercise its legal right to subrogation as
provided under Article 2207 of the Civil Code.

67
THIRD DIVISION

FOOD FEST LAND, INC. AND JOYFOODS CORPORATION, PETITIONERS,

VS. ROMUALDO C. SIAPNO, TEODORO C. SIAPNO, JR. AND FELIPE C.
SIAPNO, RESPONDENTS.

G.R. No. 226088, February 27, 2019

PERALTA, J.:

Facts:

Respondents Romualdo C. Siapno, Teodoro C. Siapno and Felipe C. Siapno are

the registered owners of a 521-square-meter parcel of land (subject land) in
Dagupan City.Respondents entered into a Contract of Lease involving the
subject land with petitioner Food Fest Land, Inc. (Food Fest), a local corporation
who wanted to use such land as the site of a fastfood restaurant.

From the first up to the fifth year of the lease, Food Fest and its assignees paid
rent at the monthly rate prescribed for under the Contract of Lease. The rental
escalation clause in the said contract, which -requires the annual escalation of
monthly rent by 10%, was consistently observed on the second to the fifth year.

Respondents lodged before the RTC of Dagupan City a Complaint for sum of
money against Food Fest and Joyfoods which sum respondents refer to as the
"escalation for the years 2007 and 2008."

Food Fest and Joyfoods allege that the rental escalation clause of the Contract of
Lease — by reason of an unwritten agreement between Joyfoods and the
respondents — was actually suspended indefinitely beginning from the sixth year
of the lease. Hence, according to Food Fest and Joyfoods, the monthly rent
payable from the sixth year of the lease onwards is no longer determined by the
stipulations of the Contract of Lease, but by negotiation between Joyfoods and
respondents.

For the eleventh and twelfth year of the lease, Food Fest and Joyfoods aver that
respondents and Joyfoods had actually come to an agreement fixing the monthly
rentals thereon at P90,000.00 per month. Such agreement was precipitated, say
Food Fest and Joyfoods, by Joyfoods' letter dated July 4, 2007 to respondents.
To recall, it is in such lette

Food Fest and Joyfoods' plea is, in substance, an invocation of the concept of
novation - particularly, novation of an obligation by the substitution of the person
of the debtor. Their basic assertion is that the assignment by Food Fest of its
rights and obligations under the Contract of Lease to Tucky Foods, and the
assignment by Tucky Foods of the same rights and obligations to Joyfoods,
ought to have resulted in Food Fest's release from its obligations under the
Contract of Lease and its substitution therein by Joyfoods.

Issue:

68
Whether or not there exist novation which ought to have release the Food Fest's
release from its obligations under the Contract of Lease and its substitution
therein by Joyfoods.

Ruling:

NO. Novation is the extinguishment of an obligation by its modification and

replacement by a subsequent one. It takes place when an obligation is modified
in any of the following ways: (a) by changing its object or principal conditions, (b)
by substituting the person of the debtor, or (c) by subrogating a third person in
the rights of the creditor. In such instances, the obligation ceases to exist as a
new one — bearing the modifications agreed upon — takes its place. Novation
is, thus, a juridical act of dual function— for as it extinguishes an obligation, it
also creates a new one in lieu of the old.

Novation of an obligation by substituting the person of the debtor, as the term

suggests, entails the replacement of the debtor by a third person. When validly
made, it releases the debtor from the obligation which is then assumed by the
third person as the new debtor. To validly effect such kind of novation, however,
it is not enough for the debtor to merely assign his debt to a third person, or for
the latter to assume the debt of the former; the consent of the creditor to the
substitution of the debtor is essential and must be had. As Article 1293 of the
Civil Code provides:

ARTICLE 1293. Novation which consists in substituting a new debtor in the place
of the original one, may be made even without the knowledge or against the will
of the latter, but not without the consent of the creditor. Payment by the new
debtor gives him the rights mentioned in articles 1236 and 1237.

The consent of respondents to the substitution of Food Fest by Joyfoods,

however, cannot be presumed from the sole fact that they accepted payments
from Joyfoods. It is well settled that mere acceptance by a creditor of payments
from a third person for the benefit of the debtor, sans any agreement that the
original debtor will also be released from his obligation, does not result in
novation but merely the addition of debtors

69
 THIRD DIVISION
G.R. No. 204039 January 10, 2018

UNITED COCONUT PLANTERS BANK, Petitioner vs.

SPOUSES WALTER UY AND LILY UY, Respondents

MARTIRES, J.:

NATURE OF THE CASE:

This is a civil case to determine the liability of UCPB to the Unit owner of
Kiener Hills

FACTS:

Prime Town Property Group Inc (PPGI) and E. Ganzon Inc. where the
joint developers of Kiener Hills Mactan Condominium Project (Kiener Hills). In
1997, the respondents spouses Uy entered into a Contract to Sell with PPGI for a
unit in Kiener Hills. On April 23, 1998, PPGI and petitioner UCPB executed a
MOA, Sale of Receivables and Assignment of Rights and Interests. By virtue of
the said agreements, PPGI transferred the right to collect receivables of the
buyers which included respondents, of units in Kiener Hills. The parties entered
into the said agreement as PPGI’s partial settlement of its P1,814,500,000 loan
with UCPB.

On April 2006, the HLURB Regional Office received respondents’

complaint for sum of money and damages against PPGI and UCPB. They
claimed that in spite of their full payment, PPGI failed to compled the construction
of their units in Kiener Hills. The HLURB found that the respondents were entitled
to a refund. Nonetheless, it found that UCPB cannot be solidarily liable with PPGI
because only the accounts receivables were conveyed to UCPB and not the
entire condominium project. The HLURB suspended the proceedings on account
of PPGI’s corporate rehabilitation. Subsequently, the HLURB reversed the
Regional Office Decision and found UCPB solidarily liable with PPGI because it
stepped into the latter’s shoes insofar as Kiener Hills is concerned. The HLURB
Board ruled that as PPGI’s assignee, UCPB was bound to refund the payments
made, without prejudice to its right of action against PPGI. The CA agreed that
respondents are entitled to a full refund of the payments they made but ruled that
UCPB is not solidarily liable with PPGI, and as such, it cannot be held liable for
the full satisfaction of respondents’ payments.

ISSUE:

Whether UCPB is jointly or solidarily liable in reimbursing the unit owners

of Kiener Hills

RULING:

70
 The Court still finds that the CA did not err in ruling that UCPB was only
jointly, and not solidarily liable to PPGI against respondents. In Spouses Choi v.
UCPB the Court had definitely ruled on UCPB 's liability to the purchasers of
Kiener Hills, viz:

The primordial issue to be resolved is whether, under the Agreement between

Primetown and UCPB, UCPB assumed the liabilities and obligations of
Primetown under its contract to sell with Spouses Choi.

An assignment of credit has been defined as an agreement by virtue of which the

owner of a credit, known as the assignor, by a legal cause - such as
sale, dation in payment or exchange or donation - and without need of the
debtor's consent, transfers that credit and its accessory rights to another, known
as the assignee, who acquires the power to enforce it to the same extent as the
assignor could have enforced it against the debtor. In every case, the obligations
between assignor and assignee will depend upon the judicial relation which is the
basis of the assignment. An assignment will be construed in accordance with the
rules of construction governing contracts generally, the primary object being
always to ascertain and carry out the intention of the parties. This intention is to
be derived from a consideration of the whole instrument, all parts of which should
be given effect, and is to be sought in the words and language employed.

In the present case, the Agreement between Primetown and UCPB

provided that Primetown, in consideration of ₱748,000,000.00, "assigned,
transferred, conveyed and set over unto [UCPB] all Accounts Receivables
accruing from [Primetown's Kiener] ... together with the assignment of all its
rights, titles, interests and participation over the units covered by or arising from
the Contracts to Sell from which the Accounts Receivables have arisen."

The Agreement further stipulated that "x x x this sale/assignment is limited

to the Receivables accruing to [Primetown] from the [b]uyers of the condominium
units in x x x [Kiener] and the corresponding Assignment of Rights and Interests
arising from the pertinent Contract to Sell and does not include except for the
amount not exceeding 30,000,000.00, Philippine currency, either singly or
cumulatively any and all liabilities which [Primetown] may have assumed under
the individual Contract to Sell."

The Agreement conveys the straightforward intention of Primetown to

"sell, assign, transfer, convey and set over" to UCPB the receivables, rights,
titles, interests and participation over the units covered by the contracts to sell.
It explicitly excluded any and all liabilities and obligations, which Primetown
assumed under the contracts to sell. The intention to exclude Primetown's
liabilities and obligations is further shown by Primetown's subsequent letters to
the buyers, which stated that "this payment arrangement shall in no way cause
any amendment of the other terms and conditions, nor the cancellation of the
Contract to Sell you have executed with [Primetown]."

Considering that UCPB is a mere assignee of the rights and receivables

under the Agreement, UCPB did not assume the obligations and liabilities of
Primetown under its contract to sell with Spouses Choi.

71
FIRST DIVISION
MABUHAY HOLDINGS CORPORATION VS. SEMBCORP LOGISTICS
LIMITED

G.R. No. 212734, December 05, 2018

TIJAM, J.:
Facts:
Mabuhay, IDHI, and Sembcorp entered into a Shareholders'
Agreement (Agreement) setting out the terms and conditions governing their
relationship in connection with a planned business expansion of WJSC and
WJNA. Sembcorp decided to invest in the said corporations, as a result of
Sembcorp's acquisition of shares.
Pursuant to Article 13 of the Agreement, Mabuhay and IDHI voluntarily agreed to
jointly guarantee that Sembcorp would receive a minimum accounting return of
US$929,875.50 (Guaranteed Return) at the end of the 24th month following the
full disbursement of the Sembcorp's equity investment in WJNA and WJSC. They
further agreed that the Guaranteed Return shall be paid three (3) months from
the completion of the special audits of WJSC and WJNA as per Article 13.3 of
the Agreement
Sembcorp requested for the payment of its Guaranteed Return from Mabuhay
and IDID. Mabuhay admitted its liability but asserted that since the obligation is
joint, it is only liable for fifty percent (50%) of the claim or US$464,937.75.
Sembcorp filed a Request for Arbitration before the International Court of
Arbitration of the International Chamber of Commerce (ICC) in accordance with
the Agreement.
The RTC ruled that the "simple contractual payment obligation" of Mabuhay and
IDHI to Sembcorp had been rescinded and modified by the merger or confusion
of the person of IDHI into the person of Sembcorp. As a result, said obligation
was converted into an intra-corporate matter
Issue:
Whether or not the liability of Mabuhay and IDHI rescinded and modified by the
merger or confusion.
Ruling:
Mabuhay contends that it entered into a joint venture, which is akin to a particular
partnership, with Sembcorp. Applying the laws on partnership, the payment of
the Guaranteed Return to Sembcorp is a violation of Article 1799 of the Civil
Code, as it shields the latter from sharing in the losses of the partnership. Ergo,
enforcement of the Final Award would be contrary to public policy as it upholds a
void stipulation.
The restrictive approach to public policy necessarily implies that not all violations
of the law may be deemed contrary to public policy. It is not uncommon for the

72
courts in Contracting States of the New York Convention to enforce awards
which does not conform to their domestic laws.

At any rate, Mabuhay's contention is bereft of merit. The joint venture between
Mabuhay, IDHI, and Sembcorp was pursued under the Joint Venture
Corporations, WJSC and WJNA. By choosing to adopt a corporate entity as the
medium to pursue the joint venture enterprise, the parties to the joint venture are
bound by corporate law principles under which the entity must operate. Among
these principles is the limited liability doctrine. The use of a joint venture
corporation allows the co-venturers to take full advantage of the limited liability
feature of the corporate vehicle which is not present in a formal partnership
arrangement. In fine, Mabuhay's application of Article 1799 is erroneous.

SPECIAL DIVISION
G.R. No. 211204 December 10, 2018

GOLDSTAR RIVERMOUNT, INC., Petitioner, v. ADVENT CAPITAL AND

FINANCE CORP., (FORMERLY ALL ASIA CAPITAL AND TRUST
CORP.),* Respondent.

J. REYES, JR., J.:

NATURE OF THE CASE:

This is a civil case about the validity of a dation in payment entered into between
a debtor and a creditor.

FACTS:

Petitioner Goldstar borrowed P55,000,000 from respondent Advent

Capital and Finance Corp., formerly All Asia Capital and Trust Corp. The loan
was payable in seven years, and it was secured by a real estate mortgage over
Goldstar’s property, covered by TCT No. 278069, and a chattel mortgage over its
equipment. Goldstar failed to pay, hence it offered its mortgaged properties as
payment for the loan. On May 26, 2000, the parties signed a Dation in payment
as settlement for the loan. Later on Goldstar learned that Advent had previously
assigned its receivables from the loan to the Development Bank of the
Philippines las November 1998. Goldstar alleged that Advent was no longer its
creditor when they agreed to a dation in Payment on May 26, 2000, thus making
the contract void. It is Goldstar’s position that since Advent had assigned its
rights to DBP prior to the Dation in Payment, their contract is a nullity. Goldstar
filed a complaint of nullity of the Dation in Payment in the RTC. The RTC
dismissed the complaint and rendered a Decision in Advent's favor. The CA
affirmed.

ISSUE:

Whether the CA erred in ruling that Advent may validly enter into a Dation in
Payment with Goldstar.

RULING:

No. Article 1315 of the New Civil Code provides that "contracts are
perfected by mere consent, and from that moment the parties are bound not only

73
to the fulfillment of what has been expressly stipulated but also to all the
consequences which, according to their nature, may be in keeping with good
faith, usage and law." From the moment Goldstar and Advent executed the
Dation in Payment, Goldstar agreed to transfer its rights and titles over the
mortgaged properties as settlement of its loan obligation. Goldstar cannot resort
to delaying tactics in fulfilling its part of the contract, by alleging amendments in
the Deed of Assignment. To reiterate, the Dation in Payment was signed on May
26, 2000, while the Amendment and Addendum was executed two months later
on July 27, 2000. Undoubtedly, the Amendment and Addendum was non-existent
at the time Goldstar and Advent signed the Dation in Payment. Therefore,
Goldstar cannot rely on a non-existing document to nullify a legally binding
agreement. The original terms of the Deed of Assignment prevail; in which case,
Advent is the creditor and has the right to collect and manage Goldstar's loan.

Section 1, Rule 45 of the Rules of Court states that only questions of law may be
raised. While jurisprudence provided several exceptions to this rule, the petitioner
must allege, substantiate, and prove the applicable exception/s so that the Court
may review the facts of the case. Otherwise, the factual findings of the trial court,
when affirmed by the CA, are binding on the Court.

Here, Goldstar failed to demonstrate how the CA's factual findings presented an
error oflaw. Goldstar's allegations on how the CA erred in ruling that DBP may
take over only when Advent is in default and in disregarding DBP's letter rely on
a re-evaluation of the evidence. Goldstar failed to prove that its petition falls
under any of the exceptions to the general rule allowing only questions of law to
be raised in a petition for review, so that this Court may review the evidence
presented.

74
 SECOND DIVISION
G.R. No. 208638 January 24, 2018

SPOUSES FRANCISCO ONG AND BETTY LIM ONG, AND SPOUSES

JOSEPH ONG CHUAN AND ESPERANZA ONG CHUAN, Petitioners, v. BPI
FAMILY SAVINGS BANK, INC., Respondent.

REYES, JR., J.:

NATURE OF THE CASE:

This is a civil case for the extrajudicial foreclosure of a Real Estate

Mortgage for the alleged non payment of the petitioners of their obligation

FACTS:

Petitioners Spouses Ong and Spouses Chuan are engaged in the

business of printing under the name and style “MELBROS PRINTING CENTER.”
They applied for credit facitlities offered by the Bank of Southeast Asia’s
managers, Ronnie Denila and Rommel Nayve. They executed a REM over their
property in Paco Manila as a security for a P15,000,000 term loan and a
P5,000,000 credit line for a total of P20 million.

BSA released only P10,444,271.49 of the term loan and only P3,000,000
of the credit line. BSA promised to release the remaining P 2,000,000
conditioned upon the payment of the P3,000,000 initially released to petitioners.
Hence, petitioners paid the P3,000,000, however BSA still refused the 2 million.
Petitioners then refused to pay the amortizations due on their term loan.
Thereafter, BPI merged with BSA and acquired all the latter’s rights and
obligations. BPI filed a petition for extrajudicial foreclosure of the REM for
petitioners’ default in the payment of their term loan. Petitioners filed an action for
damages with TRO and Preliminary Injunction. RTC ruled in favor of the
petitioners. The CA reversed.

ISSUES:

1. Whether there was already an existing and binding contract between

petitioners and BSA with regard to the omnibus credit line

2. Whether or not BSA incurred delay in the performance of its obligations

RULING:

1. Yes. As a rule, a contract is perfected upon the meeting of the minds of

the two parties. It is perfected by mere consent, that is, from the moment that
there is a meeting of the offer and acceptance upon the thing and the cause that
constitute the contract.
In the case of Spouses Palada v. Solidbank Corporation, et al., this Court held
that under Article 1934 of the Civil Code, a loan contract is perfected only upon
the delivery of the object of the contract. In that case, although therein petitioners
applied for a P3,000,000.00 loan, only the amount of P1,000,000.00 was
approved by therein respondent bank because petitioners became collaterally
deficient. Nonetheless, the loan contract was deemed perfected on March 17,
1997, the date when petitioners received the P1,000,000.00 loan, which was the
object of the contract and the date when the REM was constituted over the
property.

75
 Applying this to the case at bench, there is no iota of doubt that when BSA
approved and released the P3,000,000.00 out of the original P5,000,000.00
credit facility, the contract was perfected.
The conclusion reached by the appellate court that only the term loan of
P15,000,000.00 was proved to have materialized into an actual contract while the
P5,000,000.00 omnibus line credit remained non-existent is ludicrous. A careful
perusal of the records reveal that the credit facility that BSA extended to
petitioners was a credit line of P20,000,000.00 consisting of a term loan in the
sum of P15,000,000.00 and a revolving omnibus line of P3,000,000.00 to be
used in the petitioner's printing business. In separate Letters both dated January
31, 1997, BSA approved the term loan and the credit line. Such approval and
subsequent release of the amounts, albeit delayed, perfected the contract
between the parties.

2. Loan is a reciprocal obligation, as it arises from the same cause where

one party is the creditor and the other the debtor. The obligation of one party in a
reciprocal obligation is dependent upon the obligation of the other, and the
performance should ideally be simultaneous. This means that in a loan, the
creditor should release the full loan amount and the debtor repays it when it
becomes due and demandable.

In this case, BSA did not only incur delay in releasing the pre-agreed
credit line of P5,000,000.00 but likewise violated the terms of its agreement with
petitioners when it deliberately failed to release the amount of P2,000,000.00
after petitioners complied with their terms and paid the first P3,000,000.00 in full.
The default attributed to petitioners when they stopped paying their amortizations
on the term loan cannot be sustained by this Court because long before they
sent a Letter to BSA informing the latter of their refusal to continue paying
amortizations, BSA had already reneged on its obligation to release the amount
previously agreed upon, i.e., the P5,000,000.00 covered by the credit line.

Article 1170 of the Civil Code enumerates the instances when parties to a
contract may be held liable for damages, viz.:

Article 1170. Those who in the performance of their obligations are guilty of
fraud, negligence, or delay, and those who in any manner contravene the tenor
thereof, are liable for damages.

It bears stressing that petitioners entered into a credit agreement with BSA
to enable them to buy machineries and equipment for their printing business. On
its face, it can be gleaned that the purpose of the credit agreement with BSA was
indeed to assist and finance petitioner's business by way of providing additional
funds as working capital or revolving fund.

The direct consequences therefore of the acts of BSA are: the machinery
and equipment that were essential to petitioners' business and requisite for its
operations had to be procured so late in time and had crippled the printing of
school supplies, hence, petitioners were constrained to cancel purchase orders
of their clients to petitioners' damage.

76
THIRD DIVISION
ROYAL PLAINS VIEW, INC. AND/OR RENATO PADILLO v. NESTOR C.
MEJIA
G.R. No. 230832, November 12, 2018
J. REYES, JR., J.:

Facts:

Nestor and petitioner Corporation, represented by Renato's wife, Rosemarie

Padillo, entered into a contract denominated as Deed of Conditional Sale.

Nestor asked petitioner Renato to give him the original owner's duplicate copy of
TCT No. T-225549. Petitioner Renato found out that Nestor had sold the whole
property to the spouses Harris and Caroline Egina (spouses Egina).

Renato attempted several times to contact Nestor, but the latter did not take his
calls and simply vanished. Instead, Renato received a document entitled
"Rescission of Deed of Conditional Sale" dated February 5, 2010 from Nestor
whereby the latter rescinded the April 11, 2007 Deed of Conditional Sale alleging
that petitioners (Renato and the Corporation) had defaulted in the payment of the
monthly installments agreed upon.

Issue:

Whether or not the contract to sell entered between the parties nominated as
Deed of Conditional Sale may be rescinded upon default in payment.

Ruling:

In order to fully pass upon the validity and propriety of the Rescission of the Deed
of Conditional Sale executed by respondent Nestor, it is vital to characterize the
nature of the agreement between the parties - whether the same is a contract of
sale or a contract to sell. The courts have repeatedly recognized the distinction
between the two concepts.

The ruling of the Supreme Court in Lim v. Court of Appeals (182 SCRA 564
[1990]) is most illuminating. In the said case, a contract to sell and a contract of
sale were clearly and thoroughly distinguished from each other, with the High
Tribunal stressing that in a contract of sale, the title passes to the buyer upon the
delivery of the thing sold. In a contract to sell, the ownership is reserved in the
seller and is not to pass until the full payment of the purchase price is made. In
the first case, non-payment of the price is a negative resolutory condition; in the
second case, full payment is a positive suspensive condition. In the first case, the
vendor has lost and cannot recover the ownership of the property until and
unless the contract of sale is itself resolved and set aside. In the second case,
the title remains in the vendor if the vendee does not comply with the condition
precedent of making payment at the time specified in the contract.

This Court agrees with the CA that the April 11, 2007 Deed of Conditional Sale
executed between the parties is a contract to sell.
It is settled jurisprudence, to the point of being elementary, that an agreement
which stipulates that the seller shall execute a deed of sale only upon or after full
payment of the purchase price is a contract to sell, not a contract of sale.
In Reyes v. Tuparan, this Court declared in categorical terms that where the
vendor promises to execute a deed of absolute sale upon the completion by the
vendee of the payment of the price, the contract is only a contract to sell. The

77
aforecited stipulation shows that the vendors reserved title to the subject property
until full payment of the purchase price.

A careful reading of the notarized "Rescission of Deed of Conditional Sale"

executed by respondent Nestor reveals that he availed of the remedy of
rescission apparently because petitioners defaulted in the payment of their
monthly installment in the amount of P150,000.00. Obviously, respondent Nestor
used the word "rescission" in a loose sense. To say that a contract to sell is
rescissible is quite misplaced. Jurisprudence abounds with rulings that the
remedies of rescission, under Articles 1191 and 1592 of the Civil Code, are not
available in contracts to sell.
Respondent Nestor's action in canceling (through a notarized Rescission of
Conditional Sale) the contract to sell is unjustified.

THIRD DIVISION

SPOUSES CIPRIANO PAMPLONA and BIBIANA INTAC vs.

SPOUSES LILIA I. CUETO and VEDASTO CUETO

G.R. No. 204735. February 19, 2018

BERSAMIN, J p:
Facts:
This case involves conflicting claims between the parties involving their
transaction over a parcel of land and its improvements, with the respondents
claiming, on the one hand, that they had purchased the property on installment
pursuant to an oral contract to sell, and the petitioners insisting, on the other, that
the amounts paid by the respondents to them were in payment of the latter's
indebtedness for a previous loan.

Issue:
Whether or not there was sufficient evidence to show the existence of a partially
executed contract to sell

78
Ruling:
The admissions by Roilan and Vedasto of the petitioners' ownership of the
property could not be appreciated in favor of the petitioners. That Bibiana and
Lilia had entered into a contract to sell instead of a contract of sale must be well-
noted.

A contract to sell is akin to a conditional sale where the efficacy or obligatory

force of the vendor's obligation to transfer title is subordinated to the happening
of a future and uncertain event, so that if the suspensive condition does not take
place, the parties would stand as if the conditional obligation had never existed.
The suspensive condition is commonly full payment of the purchase price.

x x x [a] distinction must be made between a contract of sale in which title passes
to the buyer upon delivery of the thing sold and a contract to sell x x x where by
agreement the ownership is reserved in the seller and is not to pass until the full
payment, of the purchase price is made. In the first case, non-payment of the
price is a negative resolutory condition; in the second case, full payment is a
positive suspensive condition. Being contraries, their effect in law cannot be
identical. In the first case, the vendor has lost and cannot recover the ownership
of the land sold until and unless the contract of sale is itself resolved and set
aside. In the second case, however, the title remains in the vendor if the vendee
does not comply with the condition precedent of making payment at the time
specified in the contract.
In other words, in a contract to sell, ownership is retained by the seller and is not
to pass to the buyer until full payment of the price. x x x

The distinctions delineate why the admissions by Roilan and Vedasto were
consistent with the existence of the oral contract to sell between Lilia and
Bibiana. Under the oral contract to sell, the ownership had yet to pass to Lilia,
and Bibiana retained ownership pending the full payment of the purchase price
agreed upon.

79
 SPECIAL FIRST DIVISION
G.R. No. 213582 September 12, 2018

NYMPHA S. ODIAMAR,*Petitioner, v. LINDA ODIAMAR

VALENCIA, Respondent.

PERLAS-BERNABE, J.

NATURE OF THE CASE:

This is a civil case to determine the propriety of paying legal interest on a

monetary award from a loan obligation

FACTS:

The Court of appeals ordered petitioner Nympha Odiamar to pay

respondent Valencia the amount of P1,010,049 representing the remaining
balance of petitioner’s debt to respondent in the amount of P1,400,000.
Respondent prays for the imposition of legal interest on the monetary award due
to her. She also inists that Odiamar’s loan obligation to her is not just P1,400,000
but P2,100,000 and as such she should be made to pay such amount.

ISSUE:

Whether petitioner should pay legal interest based on a monetary award

arising from a loan obligation

RULING:

At the outset, the Court notes that there are two (2) types of interest,
namely, monetary interest and compensatory interest. Monetary interest is the
compensation fixed by the parties for the use or forbearance of money. On the
other hand, compensatory interest is that imposed by law or by the courts as
penalty or indemnity for damages. In other words, the right to recover interest
arises only either by virtue of a contract (monetary interest) or as damages for
the delay or failure to pay the principal loan on which the interest is demanded
(compensatory interest).7

Anent monetary interest, it is an elementary rule that no interest shall be due

unless it has been expressly stipulated in writing.8 In this case, no monetary
interest may be imposed on the loan obligation, considering that there was no
written agreement expressly providing for such.

This notwithstanding, such loan obligation may still be subjected to

compensatory interest, following the guidelines laid down in Nacar v. Gallery
Frames, as follows:

Thus, from the foregoing, in the absence of an express stipulation as to

the rate of interest that would govern the parties, the rate of legal interest for
loans or forbearance of any money, goods or credits and the rate allowed in
judgments shall no longer be twelve percent (12%) per annum — as reflected in
the case of [Eastern Shipping Lines, Inc. v. CA (Eastern Shipping Lines)] and
Subsection X305.1 of the Manual of Regulations for Banks and Sections
4305Q.1, 4305S.3 and 4303P.1 of the Manual of Regulations for Non-Bank
Financial Institutions, before its amendment by BSP-MB Circular No. 799 — but
will now be six percent (6%) per annum effective July 1, 2013. It should be noted,
nonetheless, that the new rate could only be applied prospectively and not

80
retroactively. Consequently, the twelve percent (12%) per annum legal interest
shall apply only until June 30, 2013. Come July 1, 2013 the new rate of six
percent (6%) per annum shall be the prevailing rate of interest when applicable.

Applying the foregoing parameters to this case, petitioner's loan obligation

to respondent shall be subjected to compensatory interest at the legal rate of
twelve percent (12%) per annum from the date of judicial demand, i.e., August
20, 2003, until June 30, 2013, and thereafter at the legal rate of six percent (6%)
per annum from July 1, 2013 until finality of this ruling. Moreover, all monetary
awards14 due to respondent shall earn legal interest of six percent (6%) per
annum from finality of this ruling until fully paid.

81
 FIRST DIVISION
G.R. No. 193138 August 20, 2018

ANICETO G. SALUDO, JR., Petitioner, v. PHILIPPINE NATIONAL

BANK, Respondent.

JARDELEZA, J.:

NATURE OF THE CASE:

This is a civil case to determine whether SAFA Law Office entered into a
partnership

FACTS:

SAFA Law Office entered into a Contract of Lease with PNB, whereby the
latter agreed to lease 632 square meters of the second floor of the PNB Financial
Center Building in Quezon City for a period of three years and for a monthly
rental fee of P189,600.00. The rental fee is subject to a yearly escalation rate of
10%. SAFA Law Office then occupied the leased premises and paid advance
rental fees and security deposit in the total amount of P1,137,600.00.
On August 1, 2001, the Contract of Lease expired. According to PNB, SAFA Law
Office continued to occupy the leased premises until February 2005, but
discontinued paying its monthly rental obligations after December
2002. Consequently, PNB sent a demand letter dated July 17, 2003 for SAFA
Law Office to pay its outstanding unpaid rents in the amount of P4,648,086.34.
PNB sent another letter demanding the payment of unpaid rents in the amount of
P5,856,803.53 which was received by SAFA Law Office on November 10, 2003.

On October 4, 2006, PNB filed amotion to include an indispensable party

as plaintiff, praying that Saludo be orderd to amend his complaint to include
SAFA law Office as principal plaintiff. PNB argued that the lessee in the contract
of lease is not Saludo but SAFA law Office and that Saludo merely signed the
Contract of Lease as the managing partner of the law firm.

ISSUE:

Whether SAFA Law Office entered into a partnership and not a single
proprietorship

RULING:

Yes. SAFA Law Office is a partnership and not a single proprietorship.

Article 1767 of the Civil Code provides that by a contract of partnership, two or
more persons bind themselves to contribute money, property, or industry to a
common fund, with the intention of dividing the profits among themselves. Two or
more persons may also form a partnership for the exercise of a
profession. Under Article 1771, a partnership may be constituted in any form,
except where immovable property or real rights are contributed thereto, in which
case a public instrument shall be necessary. Article 1784, on the other hand,
provides that a partnership begins from the moment of the execution of the
contract, unless it is otherwise stipulated.

Here, absent evidence of an earlier agreement, SAFA Law Office was constituted
as a partnership at the time its partners signed the Articles of
Partnership45 wherein they bound themselves to establish a partnership for the

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practice of law, contribute capital and industry for the purpose, and receive
compensation and benefits in the course of its operation. The opening paragraph
of the Articles of Partnership reveals the unequivocal intention of its signatories
to form a partnership, to wit:

WE, the undersigned ANICETO G. SALUDO, JR., RUBEN E. AGPALO,

FILEMON L. FERNANDEZ, AND AMADO D. AQUINO, all of legal age, Filipino
citizens and members of the Philippine Bar, have this day voluntarily associated
ourselves for the purpose of forming a partnership engaged in the practice of law,
effective this date, under the terms and conditions hereafter set forth, and subject
to the provisions of existing laws

The subsequent registration of the Articles of Partnership with the SEC, on the
other hand, was made in compliance with Article 1772 of the Civil Code. The
other provisions of the Articles of Partnership also positively identify SAFA Law
Office as a partnership. It constantly used the words "partners" and "partnership."
It designated petitioner Saludo as managing partner, and Attys. Ruben E.
Agpalo, Filemon L. Fernandez, and Amado D. Aquino as industrial partners. It
also provided for the term of the partnership, distribution of net profits and losses,
and management of the firm in which "the partners shall have equal interest in
the conduct of [its] affairs." Moreover, it provided for the cause and manner of
dissolution of the partnership. These provisions would not have been necessary
if what had been established was a sole proprietorship. Indeed, it may only be
concluded from the circumstances that, for all intents and purposes, SAFA Law
Office is a partnership created and organized in accordance with the Civil Code
provisions on partnership.

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 FIRST DIVISION
G.R. No. 206841 January 19, 2018

ARMANDO GO, Petitioner vs.

EAST OCEANIC LEASING and FINANCE CORPORATION, Respondent

DEL CASTILLO, J.:

NATURE OF THE CASE:

This is a civil case to determine whether petitioner Go is liable to pay

damages

FACTS:

On March 22, 1995, petitioner Armando Go obtained a loan from

respondent East Oceanic Leasing and Finance Corporation in the amount of
₱4,062,888.00, payable in monthly installments of ₱169,287.00 until fully paid, as
evidenced by a Promissory Note that Go executed on the same day.

Notably, Go's loan application was approved on the basis of the report and
recommendation of Theodore Sy, then East Oceanic's Managing Director, which
specified that the purpose of the loan was for the upgrading of the bus fleet and
replacement of old units of Oriental Bus Lines, a bus company owned by Go.
Unfortunately, the checks were all dishonored by the DBP upon presentment for
payment with the reason "Account Under Garnished" stamped at the back of the
checks and as shown by the check return slips. East Oceanic duly informed Go
of the dishonor of said checks and demanded that he make good or pay the
same, but the latter failed to do so. By reason of the dishonored checks, Go's
loan became due and demandable. Thus, on February 7, 1996, East Oceanic

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filed a Complaint against Go before the RTC for collection of a sum of money
with prayer for preliminary attachment.

While the collection case was pending, East Oceanic filed a Complaint for
Damages dated April 14, 1998 with the RTC against Sy, alleging that the
corporation suffered a loss in the amount of ₱3,000,000.00 due to the latter's
false report and recommendation pertaining to the real purpose of Go's loan
application.

The RTC rendered judgement as follows: 1. Ordering defendant Theodore

Sy to pay plaintiff the following: a) P3,000,000 as actual damages with 6%
interest computed from the time of the filing of the case; b) P300,000 as
attorney’s fees; and c) P30,000 as litigation expenses; and 2. Ordering Armando
Go to pay plaintiff P2,814,054.84 plus 6% interes to be computed from the time
of the filing of the complaint.

ISSUE:

Whether the assailed RTC Decision is void for having no basis in fact and
in law as regards to Go’s civil liability to East Oceanic.

RULING:

Yes. The Constitution expressly provides that "'no decision shall be

rendered by any court without expressing therein clearly and distinctly the facts
and the law on which it is based. No petition for review or motion for
reconsideration of a decision of the court shall be refused due course or denied
without stating the basis therefore.''

In this case, a review of the records shows that the RTC had failed
to clearly and distinctly state the facts and the law on which it based its ruling
insofar as Go's civil liability to East Oceanic is concerned. There is absolutely no
discussion at all in the assailed Decision as to the RTC's ruling in the collection
case, particularly, cm how it arrived at its conclusion finding Go liable to pay East
Oceanic "'the sum of ₱2,814,054.86 plus 6% interest to be computed from the
time of the filing of the complaint.''

Given these circumstances, we find that the assailed Decision is void

insofar as the collection case is concerned, as it contained neither an analysis of
the evidence of East Oceanic and Go as regards the outstanding balance of the
latter's loan obligation, nor a reference to any legal basis in reaching its
conclusion as to Go's civil liability to East Oceanic. Clearly, the RTC failed to
meet the standard set forth in Section 14, Article VIII of the Constitution, and in
so doing, deprived Go of his right to due process "since he was not accorded a
fair opportunity to be heard by a fair and responsible magistrate."

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 SECOND DIVISION
G.R. No. 210504 January 24, 2018

HEIRS OF ALFONSO YUSINGCO, REPRESENTED BY THEIR ATTORNEY-IN-

FACT, TEODORO K. YUSINGCO, Petitioners, v. AMELITA BUSILAK, COSCA
NAVARRO, FLAVIA CURAYAG AND LIXBERTO CASTRO, Respondents.

PERALTA, J.:

NATURE OF THE CASE:

FACTS:

On August 11, 2005, herein petitioners filed five separate (5)

Complaints for accion publiciana and/or recovery of possession against herein
respondents and a certain Reynaldo Peralta. The suits, which were subsequently
consolidated, were filed with the MTCC of Surigao City. Petitioners uniformly
alleged in the said Complaints that: they are owners of three (3) parcels of land,
denominated as Lot Nos. 519, 520 and 1015, which are all located
at Barangay Taft, Surigao City; they inherited the lots from their predecessor-in-
interest, Alfonso Yusingco; they were in possession of the said properties prior to
and at the start of the Second World War, but lost possession thereof during the
war; after the war, petitioners discovered that the subject properties were
occupied by several persons, which prompted petitioners to file separate cases
for accion reivindicatoria and recovery of possession against these persons;
during the pendency of these cases, herein respondents entered different
portions of the same properties and occupied them without the knowledge and
consent of petitioners; petitioners were forced to tolerate the illegal occupation of
respondents as they did not have sufficient resources to protect their property at
that time and also because their ownership was still being disputed in the earlier
cases filed; subsequently, the cases which they earlier filed were decided in their

86
favor and they were declared the owners of the subject properties; thereafter,
petitioners demanded that respondents vacate the said properties, but the latter
refused. In their Answer, respondents raised essentially similar defenses,
contending, in essence, that: they have been in possession of the subject
properties for more than thirty (30) years; petitioners never actually possessed
the said parcels of land and that they never had title over the same; thus,
petitioners' claim would be in conflict with and inferior to respondents' claim of
possession.

The MTCC ruled in favour of petitioners, ordering the respondents to

vacate the lots, remove the improvements and pay compensation for the use of
property. The RTC Affirmed. The CA reversed and held that being an action in
personam, the judgments in the said case binds only the parties properly
impleaded therein. Since respondents were not parties to the said action, the CA
held that they could not be bound by the judgments declaring petitioners as
owners of the disputed properties. Hence, petitioners’ present actions to recover
possession of the said properties from respondents, on the basis of said
judgments must fail.

ISSUE:

Issues:

1. What is the nature of the complaint filed by the petitioners?

2. Whether or not the final and executory decisions rendered in a previous

accion reivindicatoria, finding petitioners to be the lawful owners of the subject
properties, are binding upon respondents.

Ruling:

1. Accion Reivindicatoria.

A perusal of the complaints filed by petitioners shows that the actions were
captioned as "Accion Publiciana and/or Recovery of Possession." However, the
Court agrees with the ruling of the lower courts that the complaints filed were
actually accion reivindicatoria. In a number of cases, SC had occasion to
discuss the three (3) kinds of actions available to recover possession of real
property, to wit: x x x (a) accion interdictal; (b) accion publiciana; and (a) accion
reivindicatoria.

Accion interdictal comprises two distinct causes of action, namely, forcible entry
(detentacion) and unlawful detainer (desahuico). The two are distinguished from
each other in that in forcible entry, the possession of the defendant is illegal from
the beginning, and that the issue is which party has prior de facto possession
while in unlawful detainer, possession of the defendant is originally legal but
became illegal due to the expiration or termination of the right to possess. Both
actions must be brought within one year from the date of actual entry on the land,
in case of forcible entry, and from the date of last demand, in case of unlawful
detainer. The issue in said cases is the right to physical possession.

87
Accion publiciana is the plenary action to recover the right of possession which
should be brought in the proper regional trial court when dispossession has
lasted for more than one year. It is an ordinary civil proceeding to determine the
better right of possession of realty independently of title. In other words, if at the
time of the filing of the complaint more than one year had elapsed since
defendant had turned plaintiff out of possession or defendant's possession had
become illegal, the action will be, not one of the forcible entry or illegal detainer,
but an accion publiciana. On the other hand, accion reivindicatoria is an action to
recover ownership also brought in the proper regional trial court in an ordinary
civil proceeding.

Accion reivindicatoria or accion de reivindicacion is, thus, an action whereby the

plaintiff alleges ownership over a parcel of land and seeks recovery of its full
possession. It is a suit to recover possession of a parcel of land as an element of
ownership. The judgment in such a case determines the ownership of the
property and awards the possession of the property to the lawful owner. It is
different from accion interdictal or accion publiciana where plaintiff merely alleges
proof of a better right to possess without claim of title.

On the basis of the above discussions, it is clear that the lower courts did not err
in ruling that the suits filed by petitioners are accion reivindicatoria, not accion
publiciana, as petitioners seek to recover possession of the subject lots on the
basis of their ownership thereof.

2. YES. The previous judgment is binding upon the respondents.

It is settled that a judgment directing a party to deliver possession of a property to

another is in personam. It is conclusive, not against the whole world, but only
"between the parties and their successors in interest by title subsequent to the
commencement of the action." An action to recover a parcel of land is a real
action but it is an action in personam, for it binds a particular individual only
although it concerns the right to a tangible thing. Any judgment therein is binding
only upon the parties properly impleaded and duly heard or given an opportunity
to be heard. However, this rule admits of the exception that even a non-party
may be bound by the judgment in an ejectment suit where he is any of the
following: (a) trespasser, squatter or agent of the defendant fraudulently
occupying the property to frustrate the judgment; (b) guest or occupant of the
premises with the permission of the defendant; (c) transferee pendente lite; (d)
sublessee; (e) co-lessee; or (f) member of the family, relative or privy of the
defendant.

Here, the respondents are mere intruders or trespassers who do not have a right
to possess the subject lots. They are occupying their respective portions simply
as places to stay with intention of acquiring the said properties in the event that
they are public lands and not owned by any private person. While the
defendants had declared their houses and improvements for tax purposes, not
one of them had declared in his name the lot in which his house or improvement
is built on. They just waited for the Yusingcos to show proof of their ownership of
the lot. The defendants never bothered to apply under any of the legal modes of
acquiring land of the public domain for the portion occupied by them. Obviously,
their physical possession of the premises was not under claim of ownership or in
the concept of an owner. Hence, the respondents’ possession cannot ripen into
ownership by prescription as claimed by them. They are intruders, plain and
simple, without any right of possession to be protected.

There is no question, therefore, that as between the petitioners who had been
judicially declared the owners of the land and the respondents who are mere

88
squatters therein, the former are entitled to such legal protection. Respondents,
being trespassers on the subject lots are bound by the said judgments, which
find petitioners to be entitled to the possession of the subject lots as owners
thereof.

THIRD DIVISION
G.R. No. 194214 January 10, 2018

MARILOU PUNONGBAYAN-VISITACION, Petitioner, v. PEOPLE OF THE

PHILIPPINES AND CARMELITA P. PUNONGBAYAN, Respondents.

MARTIRES, J.:

NATURE OF THE CASE:

This is a civil case for libel in which the propriety of the amount of moral
damages awarded is being questioned

FACTS:

Petitioner Marilou Punongbayan-Visitacion (Visitacion) was the corporate

secretary and assistant treasurer of St. Peter's College of Iligan City. On 26 July
1999, acting on the advice of her counsel, she wrote a letter to private
respondent Carmelita P. Punongbayan. The correspondence substantially
alleged that respondent commtted acts of falsification. Insulted, Punongbayan
filed a Complaint for Libel against Visitacion. On 25 October 1999, the Office of
the City Prosecutor of Iligan City issued a resolution approving the filing of a case
for libel against Visitacion.

The RTC convicted Visitacion and ordered her to pay moral damages to
the amount of P3,000,000. The CA affirmed.

ISSUE:

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 Whether the CA acted contrary to law when it affirmed the RTC’s
imposition of moral damages upon the petitioner in the excessive amount of
Three Million Pesos

RULING:

Moral damages is the amount awarded to a person to have suffered

physical suffering, mental anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation, and similar injury. It is given to
ease the victim's grief and suffering, and should reasonably approximate the
extent of the hurt caused and the gravity of the wrong done.

The RTC found Punongbayan entitled to moral damages because Visitacion's

libelous act caused her to suffer ridicule, sleepless nights, and moral damage.
Moral damages can be awarded even in the absence of actual or compensatory
damages. The fact that no actual or compensatory damage was proven before
the trial court does not adversely affect the offended party's right to recover moral
damages.

For moral damages to be awarded, proof of pecuniary loss is unnecessary

but the factual basis of damages and its causal connection to the defendant's
acts must be satisfactorily established. In short, the complainant's injury should
have been due to the actions of the offending party.

Here, the evidence on record justify the award of moral damages to

Punongbayan. She was a high-ranking officer of an educational institution whom
Visitacion accused of criminal or improper conduct. Such accusations were not
made known only to the victim but also to other persons such as her staff and
employees of a bank the school had transactions with. Thus, Punongbayan's
reputation was besmirched and she was humiliated before her subordinates and
other people. Clearly, her reputation was tarnished after being accused of
unsavory and questionable behavior, primarily attributable to Visitacion's act of
circulating the letter imputing wrongdoing of Punongbayan.

In Yuchengco v. The Manila Chronicle Publishing Corporation, the Court

explained that in awarding moral damages, the surrounding circumstances are
controlling factors but should always be commensurate to the perceived injury:
While there is no hard-and-fast rule in determining what would be a fair and
reasonable amount of moral damages, the same should not be palpably and
scandalously excessive. Moral damages are not intended to impose a penalty to
the wrongdoer, neither to enrich the claimant at the expense of the defendant.

Even petitioner, in his Comment dated June 21, 2010, agree that moral
damages "are not awarded in order to punish the respondents or to make the
petitioner any richer than he already is, but to enable the latter to find some cure
for the moral anguish and distress he has undergone by reason of the
defamatory and damaging articles which the respondents wrote and published."
Further, petitioner cites as sufficient basis for the award of damages the plain
reason that he had to "go through the ordeal of defending himself everytime
someone approached him to ask whether or not the statements in the
defamatory article are true."

In Philippine Journalists, Inc. (People's Journal) v. Thoenen,

citing Guevarra v. Almario, We noted that the damages in a libel case must
depend upon the facts of the particular case and the sound discretion of the
court, although appellate courts were "more likely to reduce damages for libel
than to increase them." So it must be in this case.

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 Moral damages are not a bonanza. They are given to ease the
defendant's grief and suffering. Moral damages should be reasonably
approximate to the extent of the hurt caused and the gravity of the wrong
done. The Court, therefore, finds the award of moral damages in the first and
second cause of action in the amount of P2,000,000.00 and P25,000,000.00,
respectively, to be too excessive and holds that an award of P1,000,000.00 and
P10,000,000.00, respectively, as moral damages are more reasonable.

With this in mind, the Court finds the award of P3,000,000.00 as moral
damages to be unwarranted. Such exorbitant amount is contrary to the essence
of moral damages, which is simply a reasonable recompense to the injury
suffered by the one claiming it. It was neither meant to punish the offender nor
enrich the offended party. Thus, to conform with the present circumstances, the
moral damages awarded should be equitably reduced to P500,000.00.

FIRST DIVISION

SOFIA TABUADA, NOVEE YAP, MA. LORETA NADAL, AND GLADYS

EVIDENTE, v. ELEANOR TABUADA, JULIETA TRABUCO, LAURETA
REDONDO, AND SPS. BERNAN CERTEZA & ELEANOR D. CERTEZA

G.R. No. 196510, September 12, 2018

BERSAMIN, J.
Nature of action: temporary restraining order (TRO) and for the issuance of the
writ of preliminary injunction
Facts:
Petitioners presented Sofia Tabuada, who testified that her late husband was
Simeon Tabuada, the son of Loreta Tabuada and the brother-in law of defendant
Eleanor Tabuada; that Loreta Tabuada had died on April 16, 1990 while her
husband had died on July 18, 1997; that she received the notice sent by the
Spouses Certeza regarding their land, known as Lot 4272-B-2, located at
Barangay Tacas, Jaro, Iloilo City that her husband had inherited from his mother,
Loreta Tabuada, and where they were residing, informing them that the land had
been mortgaged to them (Spouses Certeza); that she immediately inquired from
Eleanor Tabuada and Trabuco about the mortgage, and both admitted that they
had mortgaged the property to the Spouses Certeza; that she was puzzled to see
the signature purportedly of Loreta Tabuada on top of the name Loreta Tabuada
printed on the Mortgage of Real Rights dated July 1, 1994 and the Promissory
Note dated July 4, 1994 despite Loreta Tabuada having died on April 16, 1990;
that the property under mortgage was the where she and her daughters were
residing; that the notice caused her to lose her appetite and sleepless nights, and

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she suffered hypertension, which entitled her to moral damages of P100,000.00;
that she engaged her counsel to pursue the case against the defendants, paying
counsel P40,000.00; and that she further incurred litigation expenses of
P5,000.00.
Issue:
Whether or not the award of moral damages because action was not an instance
of disrespect to the dead is proper.
Ruling:
The RTC awarded moral damages to the petitioners based on disrespect to the
dead on the part of Eleanor Tabuada for fraudulently signing and executing the
mortgage by impersonating the late Loreta Tabuada.
The Court that the RTC thereby fell into a legal error that the Court should
correct. The petitioners cannot recover moral damages from Eleanor Tabuada on
the ground of "disrespect to the dead." The Civil Code provision under Article 309
on showing "disrespect to the dead" as a ground for the family of the deceased to
recover moral and material damages, being under the title of Funerals, obviously
envisions the commission of the disrespect during the period of mourning over
the demise of the deceased or on the occasion of the funeral of the mortal
remains of the deceased. Neither was true herein. Hence, the act of Eleanor
Tabuada of fraudulently representing the late Loreta Tabuada did not amount to
disrespect to the dead as basis for the recovery of moral damages.

92