DBP vs.
Guarina Agricultural and Realty Development Held:
Corporation (2014) G.R. No. 160758 | 2014-01-15
Guarina Corporation applied for a loan from DBP to finance
the development of its resort complex.
The loan was released in several installments. Guarina
Corporation demanded the release of the balance of the
loan, but DBP refused.
Instead, DBP directly paid some suppliers of Guarina
Corporation over the latter's objection.
DBP found upon inspection of the resort project that
Guarina Corporation had not completed the construction
works.
DBP thus demanded that Guarina Corporation expedite the
completion of the project, and warned that it would initiate
foreclosure proceedings should Guarina Corporation not do
so.
Unsatisfied with the non-action and objection of Guarina
Corporation, DBP initiated extrajudicial foreclosure
proceedings.
Guarina Corporation sued DBP in the RTC to demand
specific performance of the latter's obligations under the
loan agreement, and to stop the foreclosure of the
mortgages.
In the meantime, DBP applied for the issuance of a writ of
possession by the RTC which was granted. Aggrieved,
Guarina Corporation assailed the granting of the application
before the CA on certiorari. After the CA dismissed the
petition for certiorari, DBP sought the implementation of the
order for the issuance of the writ of possession. Over
Guarina Corporation's opposition, the RTC issued the writ of
possession.
The RTC declared that the extra-judicial sales of the
mortgaged properties are null and void.  (See Development Bank of the Philippines vs. Licuanan)
The CA sustained the decision.
Contract of Loan is a reciprocal obligation, one party cannot
be obliged to perform what is expected of it while the
other's obligation remains unfulfilled
Under the law, a loan requires the delivery of money or any
other consumable object by one party to another who
acquires ownership thereof, on the condition that the same
amount or quality shall be paid.
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.
3. By its failure to release the proceeds of the loan in their
entirety, DBP had no right yet to exact on Guarina
Corporation the latter's compliance with its own obligation
under the loan. Indeed, if a party in a reciprocal contract
like a loan does not perform its obligation, the other party
cannot be obliged to perform what is expected of it while
the other's obligation remains unfulfilled. In other words,
the latter party does not incur delay.
Mortgage is an accessory contract whose enforcement
depends on the principal obligation
5. Considering that it had yet to release the entire proceeds
of the loan, DBP could not yet make an effective demand for
payment upon Guarina Corporation to perform its obligation
under the loan. It would only be when a demand to pay had
been made and was subsequently refused that a borrower
could be considered in default, and the lender could obtain
the right to collect the debt or to foreclose the mortgage.
Hence, Guarina Corporation would not be in default without
the demand.
Banks must exercise the highest degree of diligence and
integrity because its business is imbued with public interest
6. Being a banking institution, DBP owed it to Guarina
Corporation to exercise the highest degree of diligence, as
well as to observe the high standards of integrity in the
performance in all its transactions because its business was
imbued with public interest.
The high standards were also necessary to ensure public
confidence in the banking system, for, according to
Philippine National Bank vs. Pike: "The stability of banks
largely depends on the confidence of the people in the
honesty and efficiency of banks."
Thus, DBP had to act with great care in applying the
stipulations of its agreement with Guarina Corporation, lest
it erodes such public confidence.
Yet, DBP failed in its duty to exercise the highest degree of
diligence by prematurely foreclosing the mortgages and
unwarrantedly causing the foreclosure sale of the
mortgaged properties despite Guarina Corporation not being
yet in default.
Guarina Corporation is legally entitled to the restoration of
the possession of the resort complex and payment of
reasonable rentals by DBP
11. Having found and pronounced that the extrajudicial
foreclosure by DBP was premature, and that the ensuing
foreclosure sale was void and ineffectual, the Court affirms
the order for the restoration of possession to Guarifia
Corporation and the payment of reasonable rentals for the
use of the resort. The CA properly held that the premature
and invalid foreclosure had unjustly dispossessed Guarifia
Corporation of its properties. Consequently, the restoration
of possession and the payment of reasonable rentals were
in accordance with Article 561 of the Civil Code, which
expressly states that one who recovers, according to law,
possession unjustly lost shall be deemed for all purposes
which may redound to his benefit to have enjoyed it without
interruption.
CONTRACT OF LEASE: Rodolfo Laygo and Willie
Laygo Vs. Municipal Mayor of Solano, Nueva Vizcaya,
G.R. No. 188448. January 11, 2017
The Municipal Government asserts that it is one of
lease, while petitioners insist that it is a BOT
agreement. Both parties, however, failed to present
the contracts which they purport to have. It is
likewise uncertain whether the contract would fall
under the coverage of the Statute of Frauds and
would, thus, be only proven through written
evidence. In spite of these, we find that the
Municipal Government was able to prove its claim,
through secondary evidence, that its contract with
petitioners was one of lease.
We have no reason to doubt the certifications of the
former mayor of Solano, Mayor Galima, and the
Municipal Planning and Development Office
(MPD0)37 which show that the contract of the
Municipal Government with petitioners' mother,
Clarita, was converted into a BOT agreement for a
time in 1992 due to the fire that razed the public
market. These certifications were presented and
offered in evidence by petitioners themselves. They
prove that Clarita was allowed to construct her
stalls that were destroyed using her own funds, and
with the payment of the lease rentals being
suspended until she recovers the cost she spent on
the construction. The construction was, in fact,
supervised by the MPDO for a period of three
months. The stalls were eventually constructed
completely and awarded to Clarita. She thereafter
reoccupied the stalls under a lease contract with the
Municipal Government. In fact, in his Notice dated
August 21, 2007, the Municipal Treasurer of Solano
reminded petitioners of their delinquent stall rentals
from May 2006 to July 2007. As correctly posited by
the Municipal Government, if the stalls were under a
BOT scheme, the Municipal Treasurer could not have
assessed petitioners of any delinquency.
Also, petitioners themselves raised, for the sake of
argument, that even if the contract may be
conceded as one of lease, the municipality is
nonetheless estopped from canceling the lease
contract because it subsequently accepted payment
of rentals until the time of the filing of the case.
In the same vein, the Sangguniang Bayan Resolution
No. 183-2004, which quoted Items No. 9 and 11 of
the lease contract on the absolute prohibition
against subleasing and the possible termination of
the contract in view of back rentals or any violation
of the stipulations in the contract, is presumed to
have been regularly issued. It deserves weight and
our respect, absent a showing of grave abuse of
discretion on the part of the members of the
Sanggunian.
WHEREFORE, in view of the foregoing, the petition is
GRANTED. The Decision dated December 16, 2008
and Resolution dated June 19, 2009of the Court of
Appeals in CA-G.R. SP No. 103922, and the
Resolution dated January 28, 2008 of the Regional
Trial Court of Bayombong, Nueva Vizcaya are
REVERSED and SET ASIDE. The Petition for
Mandamus against Mayor Santiago O. Dickson is
DISMISSED. SO ORDERED.
G.R. No. 228435, June 21, 2017 - KT CONSTRUCTION
SUPPLY, INC., REPRESENTED BY WILLIAM GO,
Petitioner, v. PHILIPPINE SAVINGS BANK,
Respondent.
It has long been settled that an acceleration clause
is valid and produces legal effects. In the case at
bench, the promissory note explicitly stated that
default in any of the installments shall make the
entire obligation due and demandable notice even
without or demand. Thus, KT Construction was
erroneous in saying that PSBank's complaint was
premature on the ground that the loan was due only
on October 12, 2011. KT Construction's entire loan
obligation became due and demandable when it
failed to pay an installment pursuant to the
acceleration clause.
Moreover, KT Construction could not evade
responsibility by claiming that it had not received
any demand letter for the payment of the loan.
PSBank had sent a demand letter, dated February 3,
2011, asking KT Construction to pay the remaining
obligation within five (5) days from receipt of the
letter. More importantly, even granting that KT
Construction did not receive the demand letter, the
loan still became due and demandable because the
parties expressly waived the necessity of demand.
Further, KT Construction is mistaken that it could
not be held liable for the entire loan obligation
because PSBank failed to prove how many
installments it had failed to pay. In Bognot v.RR!
Lending Corporation, the Court explained that once
the indebtedness had been established, the burden
is on the debtor to prove payment, wit:
Jurisprudence tells us that one who pleads payment
has the burden of proving it; the burden rests on the
defendant to prove payment, rather than on the
plaintiff to prove non-payment. Indeed, once the
existence of an indebtedness is duly established by
evidence, the burden of showing with legal certainty
that the obligation has been discharged by payment
rests on the debtor.
In the case at bench, KT Construction admitted that
it obtained a loan with PSBank. It, nevertheless,
averred that it had been regularly paying the loan.
Thus, KT Construction could have easily provided
deposit slips and other documentary evidence to
prove the fact of payment. It, however, merely
alleged that it religiously paid its obligation without
presenting any the evidence to substantiate said
obligation.
In a further attempt to absolve itself from the loan
obligation, KT Construction argued that the
promissory note was null and void because it was a
contract of adhesion. It may be true that KT
Construction had no hand in its preparation. Still, it
has been ruled in a plethora of cases that a contract
of adhesion is not invalid per se. Contracts of
adhesion, where one party imposes a ready-made
form of contract on the other, are not entirely
prohibited. The one who adheres to the contract is,
in reality, free to reject it entirely; if he adheres, he
gives his consent.
MEDICAL NEGLIGENCE: March 22, 2017 G.R. No.
189218 OUR LADY OF LOURDES HOSPITAL,
Petitioner vs SPOUSES ROMEO AND REGINA
CAPANZANA, Respondents
Regina Capanzana (Regina), a 40-year-old nurse and
clinical instructor pregnant with her third child, was
scheduled for her third caesarean section (C-
section) on 2 January 1998. However, a week
earlier, on 26 December 1997, she went into active
labor and was brought to petitioner hospital for an
emergency C-section. She first underwent a
preoperative physical examination by Dr. Miriam
Ramos4 (Dr. Ramos) and Dr. Milagros Joyce Santos,5
(Dr. Santos) the same attending physicians in her
prior childbirths. She was found fit for anesthesia
after she responded negatively to questions about
tuberculosis, rheumatic fever, and cardiac diseases.
On that same day, she gave birth to a baby boy.
When her condition stabilized, she was discharged
from the recovery room and transferred to a regular
hospital room.6
At 2:30 a.m. the following day, or 13 hours after her
operation, Regina who was then under watch by her
niece, Katherine L. Balad (Balad), complained of a
headache, a chilly sensation, restlessness, and
shortness of breath. She asked for oxygen and later
became cyanotic. After undergoing an x-ray, she was
found to be suffering from pulmonary edema. She
was eventually transferred to the Intensive Care
Unit, where she was hooked to a mechanical
ventilator. The impression then was that she was
showing signs of amniotic fluid embolism.7
On 2 January 1998, when her condition still showed
no improvement, Regina was transferred to the
Cardinal Santos Hospital. The doctors thereat found
that she was suffering from rheumatic heart disease
mitral stenosis with mild pulmonary hypertension,
which contributed to the onset of fluid in her lung
tissue (pulmonary edema). This development
resulted in cardiopulmonary arrest and,
subsequently, brain damage. Regina lost the use of
her speech, eyesight, hearing and limbs. She was
discharged, still in a vegetative state, on 19January
1998.8
Respondent spouses Capanzana filed a complaint for
damages9 against petitioner hospital, along with co-
defendants: Dr. Miriam Ramos, an
obstetrician/gynecologist; Dr. Milagros Joyce
Santos, an anesthesiologist; and Jane Does, the
nurses on duty stationed on the second floor of
petitioner hospital on 26-27 December 1997.10
Respondents imputed negligence to Ors. Ramos and
Santos for the latter's failure to detect the heart
disease of Regina, resulting in failure not only to
refer her to a cardiologist for cardiac clearance, but
also to provide the appropriate medical management
before, during, and after the operation. They further
stated that the nurses were negligent for not having
promptly given oxygen, and that the hospital was
equally negligent for not making available and
accessible the oxygen unit on that same hospital
floor at the time.11
They prayed for actual damages amounting to
₱514,645.80; compensatory damages, ₱3,4 l6,278.40;
moral damages, ₱5,000,000; exemplary damages,
₱2,000,000; attorney's fees, ₱500,000 as well as
₱5,000 per hearing and the costs of suit. They
likewise prayed for other just and equitable
reliefs.12
In order to successfully pursue a claim in a medical
negligence case, the plaintiff must prove that a
health professional either failed to do something
which a reasonably prudent health professional
would have or have not done; and that the action or
omission caused injury to the patient.  overemphasized - considering that according to
Proceeding from this guideline, the plaintiff must
show the following elements by a preponderance of
evidence: duty of the health professional, breach of
that duty, injury of the patient, and proximate
causation between the breach and the injury.
Meanwhile, in fixing a standard by which a court
may determine whether the physician properly
performed the requisite duty toward the patient,
expert medical testimonies from both plaintiff and
defense are resorted to. In this case, the expert
testimony of witness for the respondent Dr. Godfrey
Robeniol, a neurosurgeon, provided that the best
time to treat hypoxic encephalopathy is at the time
of its occurrence; i.e., when the patient is
experiencing difficulty in breathing and showing
signs of cardiac arrest. To recall, the records,
including petitioner's Nurses' Notes, indisputably
show that Regina complained of difficulty in
breathing before eventually showing signs of
cyanosis.  cause of her breathing difficulty. Indeed, even if the
We agree with the courts below in their finding that
when she was gasping for breath and turning
cyanotic, it was the duty of the nurses to intervene
immediately by informing the resident doctor. Had
they done so, proper oxygenation could have been
restored and other interventions performed without
wasting valuable time. That such high degree of care
and responsiveness was needed cannot be
expert medical evidence in the records, it takes only
five minutes of oxygen deprivation for irreversible
brain damage to set in.53 
Indeed, the Court has emphasized that a higher
degree of caution and an exacting standard of
diligence in patient management and health care are
required of a hospital's staff, as they deal with the
lives of patients who seek urgent medical
assistance.54 It is incumbent upon nurses to take
precautions or undertake steps to safeguard
patients under their care from any possible injury
that may arise in the course of the latter's treatment
and care.55The Court further notes that the
immediate response of the nurses was especially
imperative, since Regina herself had asked for
oxygen. They should have been prompted to respond
immediately when Regina herself expressed her
needs, especially in that emergency situation when
it was not easy to determine with certainty the
patient had not asked for oxygen, the mere fact that
her breathing was labored to an abnormal degree
should have impelled the nurses to immediately call
the doctor and to administer oxygen.
In this regard, both courts found that there was a
delay in the administration of oxygen to the patient,
caused by the delayed response of the nurses of
petitioner hospital.  proximate cause of the brain damage suffered by
They committed a breach of their duty to respond
immediately to the needs of Regina, considering her
precarious situation and her physical manifestations
of oxygen deprivation. We quote below the crucial
finding of the trial court:
The CA agreed with the trial court's factual finding
of delay in the administration of oxygen as
competently testified to by Balad.  or a failure to act, whenever it appears from the
Regina suffered from brain damage, particularly
hypoxic encephalopathy, which is caused by lack of
oxygen in the brain. The testimonies of Dr. Dizon and
Dr. Robeniol proved this fact. And the proximate
cause of the brain damage was the delay in
responding to Regina's call for help and for oxygen.
The trial court said:
Had the nurses exercised certain degree of
promptness and diligence in responding to the
patient[']s call for help[,] the occurrence of "hypoxic
encephalopathy" could have been avoided since lack
or inadequate supply of oxygen to the brain for 5
minutes will cause damage to it.62
The CA affirmed the above ruling of the RTC, that
whatever the cause of the oxygen deprivation was,
its timely and efficient management would have
stopped the chain of events that led to Regina's
condition.
We affirm the findings of the courts below that the
negligent delay on the part of the nurses was the
Regina. In Ramos, the Court defines proximate
cause as follows:
Proximate cause has been defined as that which, in
natural and continuous sequence, unbroken by any
efficient intervening cause, produces injury, and
without which the result would not have occurred.
An injury or damage is proximately caused by an act
evidence in the case, that the act or omission played
a substantial part in bringing about or actually
causing the injury or damage; and that the injury or
damage was either a direct result or a reasonably
probable consequence of the act or omission. It is
the dominant, moving or producing cause.
(Underscoring supplied; citations omitted).63
Thus, a failure to act may be the proximate cause if
it plays a substantial part in bringing about an injury.
Note also that the omission to perform a duty may
also constitute the proximate cause of an injury, but
only where the omission would have prevented the
injury.64 The Court also emphasizes that the injury
need only be a reasonably probable consequence of
the failure to act. In other words, there is no need for
absolute certainty that the injury is a consequence
of the omission.65
Applying the above definition to the facts in the
present case, the omission of the nurses - their
failure to check on Regina and to refer her to the
resident doctor and, thereafter, to immediately
provide oxygen - was clearly the proximate cause
that led to the brain damage suffered by the patient.
As the trial court and the CA both held, had the
nurses promptly responded, oxygen would have been
immediately administered to her and the risk of brain
damage lessened, if not avoided.
For the negligence of its nurses, petitioner is thus
liable under Article 218066 in relation to Article
217667 of the Civil Code. Under Article 2180, an
employer like petitioner hospital may be held liable
for the negligence of its employees based on its
responsibility under a relationship of patria
potestas.68 The liability of the employer under this
provision is "direct and immediate; it is not
conditioned upon a prior recourse against the
negligent employee or a prior showing of the
insolvency of that employee."69 The employer may
only be relieved of responsibility upon a showing
that it exercised the diligence of a good father of a
family in the selection and supervision of its
employees. The rule is that once negligence of the
employee is shown, the burden is on the employer to
overcome the presumption of negligence on the
latter's part by proving observance of the required
diligence.
In the instant case, there is no dispute that
petitioner was the employer of the nurses who have
been found to be negligent in the performance of
their duties. This fact has never been in issue.
Hence, petitioner had the burden of showing that it
exercised the diligence of a good father of a family
not only in the selection of the negligent nurses, but
also in their supervision.
On this point, the rulings of the RTC and the CA
diverge. While the trial court found due diligence in
both the selection and the supervision of the nurses,
the appellate court found that petitioner proved due
diligence only in the selection, but not in the
supervision, of the nurses.
After a careful review of the records, we find that
the preponderance of evidence supports the finding
of the CA that the hospital failed to discharge its
burden of proving due diligence in the supervision of
its nurses and is therefore liable for their negligence.
It must be emphasized that even though it proved
due diligence in the selection of its nurses, the
hospital was able to dispose of only half the burden
it must overcome.71
In the present case, there is no proof of actual
supervision of the employees' work or actual
implementation and monitoring of consistent
compliance with the rules. 
We therefore affirm the appellate court in finding
petitioner directly liable for the negligence of its
nurses under Article 2180 in relation to Article 2176
of the Civil Code.
WHEREFORE, premises considered, we AFFIRM
WITH MODIFICATION the Decision and Resolution
rendered by the Court of Appeals in CA-G.R. CV No.
89030 in that petitioner is hereby declared liable for
the payment to respondents of the total amount of
₱299,l 02.04 as actual damages minus ₱20, 141.60
representing the unpaid hospital bill as of 30
October 1998; ₱l,950,269.80 as compensatory
damages; ₱l00,000.00 as moral damages;
₱l00,000.00 as and by way of attorney's fees; and the
costs of suit, as well as interest at the rate of six
percent (6%) per annum on the resulting amount
from the finality of this judgment until full payment.
SO ORDERED.
ELISEO FAJARDO, JR., and MARISSA FAJARDO,
petitioners, vs. FREEDOM TO BUILD, INC.,
respondent., [G.R. No. 134692. August 1, 2000]
Freedom To Build, Incorporated, an owner-developer
and seller of low-cost housing, sold to petitioner-
spouses, a house and lot designated Lot No. 33,
Block 14, of the De la Costa Homes in Barangka,
Marikina, Metro Manila. The Contract to Sell
executed between the parties, contained a
Restrictive Covenant providing certain prohibitions,
to wit:[1]
"Easements. For the good of the entire community,
the homeowner must observe a two-meter easement
in front. No structure of any kind (store, garage,
bodega, etc.) may be built on the front easement.
"Upward expansion. A second storey is not
prohibited. But the second storey expansion must be
placed above the back portion of the house and
should not extend forward beyond the apex of the
original building.
"Front expansion: 2nd Storey: No unit may be
extended in the front beyond the line as designed
and implemented by the developer in the 60 sq. m.
unit. In other words, the 2nd floor expansion, in
front, is 6 meters back from the front property line
and 4 meters back from the front wall of the house,
just as provided in the 60 sq. m. units."[2]
The above restrictions were also contained in
Transfer Certificate of Title No. N-115384 covering
the lot issued in the name of petitioner-spouses.
The controversy arose when petitioners, despite
repeated warnings from respondent, extended the
roof of their house to the property line and expanded
the second floor of their house to a point directly
above the original front wall.[3] Respondent filed
before the Regional Trial Court, National Capital
Judicial Region, Branch 261, Pasig City, an action to
demolish the unauthorized structures.
After trial, judgment was rendered against
petitioners; thus:
"WHEREFORE, premises considered, defendant
spouses Eliseo B. Fajardo, Jr., and Marissa F.
Fajardo are hereby directed to immediately demolish
and remove the extension of their expanded housing
unit that exceeds the limitations imposed by the
Restrictive Covenant, otherwise the Branch Sheriff
of this Court shall execute this decision at the
expense of the defendants.
"As to damages and attorney's fees, it appearing
from the records of this case that no evidence to
sustain the same was adduced by either of the
parties, the Court deems it proper not to award any.
"SO ORDERED."[4]
On appeal to it, the Court of Appeals affirmed the
decision of the trial court.
A perusal of the provisions of the covenant would
show that the restrictions therein imposed were
intended -
"For the protection and benefit of the De La Costa
Low Income Housing Project, and of all the persons
who may now, or hereafter become owners of any
part of the project, and as part of the consideration
for the conveyance of the housing unit, these
restrictions are promulgated in order that; the
intents and purposes for which the project was
designed shall be upheld; to wit: subsequent duly
approved sale and assignments of housing units
shall be made only to low income families; a certain
level of privacy shall be observed; a community
spirit shall be fostered; and an undisturbed
possession and occupancy at the homeowners shall
be maintained."[5]
Restrictive covenants are not, strictly speaking,
synonymous with easements. While it may be
correct to state that restrictive covenants on the
use of land or the location or character of buildings
or other structures thereon may broadly be said to
create easements or rights, it can also be contended
that such covenants, being limitations on the
manner in which one may use his own property,[6]
do not result in true easements,[7] but a case of
servitudes (burden), sometimes characterized to be
negative easements or reciprocal negative
easements. Negative easement is the most common
easement created by covenant or agreement whose
effect is to preclude the owner of the land from
doing an act, which, if no easement existed, he
would be entitled to do.[8]
Courts which generally view restrictive covenants
with disfavor for being a restriction on the use of
one's property, have, nevertheless, sustained
them[9] where the covenants are reasonable,[10] not
contrary to public policy,[11] or to law,[12] and not
in restraint of trade.[13] Subject to these limitations,
courts enforce restrictions to the same extent that
will lend judicial sanction to any other valid
contractual relationship.[14] In general, frontline
restrictions on constructions have been held to be
valid stipulations.[15]
The provisions in a restrictive covenant prescribing
the type of the building to be erected are crafted not
solely for the purpose of creating easements,
generally of light and view, nor as a restriction as to
the type of construction,[16] but may also be aimed
as a check on the subsequent uses of the
building[17] conformably with what the developer
originally might have intended the stipulations to be.
In its Memorandum, respondent states in arguing for
the validity of the restrictive covenant that the -
"x x x restrictions are not without specific purpose.
In a low cost-socialized housing, it is of public
knowledge that owners-developers are constrained
to build as many number of houses on a limited land
area precisely to accommodate marginalized lot
buyers, providing as much as possible the safety,
aesthetic and decent living condition by controlling
overcrowding. Such project has been designed to
accommodate at least 100 families per hectare."[18]
There appears to be no cogent reasons for not
upholding restrictive covenants aimed to promote
aesthetics, health, and privacy or to prevent
overcrowding.
This Court is not unaware of its ruling in Ayala
Corporation vs. Ray Burton Development
Corporation,[22] which has merely adjudged the
payment of damages in lieu of demolition. In the
aforementioned case, however, the elaborate
mathematical formula for the determination of
compensatory damages which takes into account
the current construction cost index during the
immediately preceding 5 years based on the
weighted average of wholesale price and wage
indices of the National Census and Statistics Office
and the Bureau of Labor Statistics is explicitly
provided for in the Deed of Restrictions entered into
by the parties. This unique and peculiar
circumstance, among other strong justifications
therein mentioned, is not extant in the case at bar.
In sum, the Court holds that -
(1)....The provisions of the Restrictive Covenant are
valid;
(2)....Petitioners must be held to be bound thereby;
and
(3)....Since the extension constructed exceeds the
floor area limits of the Restrictive Covenant,
petitioner-spouses can be required to demolish the
structure to the extent that it exceeds the
prescribed floor area limits.
WHEREFORE, the assailed decision, dated 13 July
1998, of the Court of Appeals in CA-G.R. CV No.
50085, sustaining that of the court a quo, is
AFFIRMED. No costs.
SO ORDERED.
ALLIED BANKING CORPORATION, Petitioner, vs.
BANK OF THE PHILIPPINE ISLANDS, Respondents,
G.R. No. 188363 February 27, 2013
In this case, the evidence clearly shows that the
proximate cause of the unwarranted encashment of
the subject check was the negligence of respondent
who cleared a post-dated check sent to it thru the
PCHC clearing facility without observing its own
verification procedure.
As correctly found by the PCHC and upheld by the
RTC, if only respondent exercised ordinary care in
the clearing process, it could have easily noticed the
glaring defect upon seeing the date written on the
face of the check "Oct. 9, 2003".
Respondent could have then promptly returned the
check and with the check thus dishonored,
petitioner would have not credited the amount
thereof to the payee's account.
Thus, notwithstanding the antecedent negligence of
the petitioner in accepting the post-dated check for
deposit, it can seek reimbursement from respondent
the amount credited to the payee's account covering
the check.
The foregoing notwithstanding, it cannot be denied
that, indeed, private respondent was likewise
negligent in not checking its monthly statements of
account.
Had it done so, the company would have been
alerted to the series of frauds being committed
against RMC by its secretary.
This omission by RMC amounts to contributory
negligence which shall mitigate the damages that
may be awarded to the private respondent under
Article 2179 of the New Civil Code, to wit:
"x x x. When the plaintiff's own negligence was the
immediate and proximate cause of his injury, he
cannot recover damages. But if his negligence was
only contributory, the immediate and proximate
cause of the injury being the defendant's lack of due
care, the plaintiff may recover damages, but the
courts shall mitigate the damages to be awarded."
In view of this, we believe that the demands of
substantial justice are satisfied by allocating the
damage on a 60-40 ratio.
Thus, 40% of the damage awarded by the respondent
appellate court, except the award of P25,000.00
attorney's fees, shall be borne by private respondent
RMC; only the balance of 60% needs to be paid by
the petitioners.
Considering the comparative negligence of the two
(2) banks, we rule that the demands of substantial
justice are satisfied by allocating the loss of
P2,413,215.16 and the costs of the arbitration
proceedings in the amount of P7,250.00 and the
costs of litigation on a 60-40 ratio.
Apportionment of damages between parties who are
both negligent was followed in subsequent cases
involving banking transactions notwithstanding the
court's finding that one of them had the last clear
opportunity to avoid the occurrence of the loss.
In the interest of fairness, however, we believe it is
proper to consider respondent's own negligence to
mitigate petitioner's liability.
Article 2179 of the Civil Code provides:
xxxx
Following established jurisprudential precedents, we
believe the allocation of sixty percent (60%) of the
actual damages involved in this case (represented
by the amount of the checks with legal interest) to
petitioner is proper under the premises.
Respondent should, in light of its contributory
negligence, bear forty percent (40%) of its own
loss.31(Emphasis supplied)
Petitioner must bear the consequences of its
omission to exercise extraordinary diligence in
scrutinizing checks presented by its depositors.
Assessing the facts and in the light of the cited
precedents, the Court thus finds no error committed
by the CA in allocating the resulting loss from the
wrongful encashment of the subject check on a 60-
40 ratio.
KABISIG REAL WEALTH DEV., INC. AND FERNANDO
C. TIO, Petitioners, v. YOUNG CORPORATION
BUILDERS,
Respondent. G.R. No. 212375, January 25, 2017
Sometime in April 2001, Kabisig Real Wealth Dev.,
Inc. (Kabisig), through Ferdinand Tio (Tio),
contracted the services of Young Builders
Corporation (Young Builders) to supply labor, tools,
equipment, and materials for the renovation of its
building in Cebu City.
Young Builders then finished the work in September
2001 and billed Kabisig for P4,123,320.95.
However, despite numerous demands, Kabisig failed
to pay.  (12%) per annum of the amount awarded from the
It contended that no written contract was ever
entered into between the parties and it was never
informed of the estimated cost of the renovation.
Hence, Kabisig filed the instant petition.
Art. 1356. Contracts shall be obligatory in whatever
form they may have been entered into, provided all
the essential requisites for their validity are present.
xxxx
There is nothing in the law that requires a written
contract for the agreement in question to be valid
and enforceable. Also, the Court notes that neither
Kabisig nor Tio had objected to the renovation work,
until it was already time to settle the bill.
Under Article 2199 of the Civil Code, actual or
compensatory damages are those awarded in
satisfaction of, or in recompense for, loss or injury
sustained.
They proceed from a sense of natural justice and are
designed to repair the wrong that has been done, to
compensate for the injury inflicted. They either refer
to the loss of what a person already possesses (daño
emergente), or the failure to receive as a benefit
that which would have pertained to him (lucro
cesante),8 as in this case.
WHEREFORE, PREMISES CONSIDERED, the Court
DISMISSES the petition for lack of merit and
AFFIRMS the Decision of the Court of Appeals dated
June 28, 2013, and its Resolution dated March 28,
2014, in CA-G.R. CV No. 02945, with MODIFICATION
as to the interest which must be twelve percent
time of demand on September 11, 2001 to June 30,
2013, and six percent (6%) per annum from July 1,
2013 until its full satisfaction. SO ORDERED.
Jacinto Tanguilig, etc vs. Court of Appeals, et al.,
G.R. No. 117190. January 2, 1997
Sometime in April 1987 petitioner Jacinto M.
Tanguilig doing business under the name and style J.
M. T. Engineering and General Merchandising
proposed to respondent Vicente Herce Jr. to
construct a windmill system for him.  Moreover, it is a cardinal rule in the interpretation of
Pursuant to the agreement respondent paid
petitioner a down payment of P30,000.00 and an
installment payment of P15,000.00, leaving a
balance of P15,000.00.
On 14 March 1988, due to the refusal and failure of
respondent to pay the balance, petitioner filed a
complaint to collect the amount.
In his Answer before the trial court respondent
denied the claim saying that he had already paid this
amount to the San Pedro General Merchandising Inc.
(SPGMI) which constructed the deep well to which
the windmill system was to be connected.
We reverse the appellate court on the first issue but
sustain it on the second.
The preponderance of evidence supports the finding
of the trial court that the installation of a deep well
was not included in the proposals of petitioner to
construct a windmill system for respondent.  favor the presumption that "things have happened
There were in fact two (2) proposals:  according to the ordinary course of nature and the
one dated 19 May 1987 which pegged the contract
price at P87,000.00 (Exh. "1").
This was rejected by respondent.
The other was submitted three days later, i.e., on 22
May 1987 which contained more specifications but
proposed a lower contract price of P60,000.00 (Exh.
"A"). 
The latter proposal was accepted by respondent and
the construction immediately followed. 
Notably, nowhere in either proposal is the
installation of a deep well mentioned, even
remotely. 
contracts that the intention of the parties shall be
accorded primordial consideration[5] and, in case of
doubt, their contemporaneous and subsequent acts
shall be principally considered.[6]
An examination of such contemporaneous and
subsequent acts of respondent as well as the
attendant circumstances does not persuade us to
uphold him.
We are disinclined to accept the version of
respondent. 
Petitioner failed to show that the collapse of the
windmill was due solely to a fortuitous event.
The appellate court correctly observed that "given
the newly-constructed windmill system, the same
would not have collapsed had there been no inherent
defect in it which could only be attributable to the
appellee." It emphasized that respondent had in his
ordinary habits of life." This presumption has not
been rebutted by petitioner.
Finally, petitioner's argument that private
respondent was already in default in the payment of
his outstanding balance of P15,000.00 and hence
should bear his own loss, is untenable.
In reciprocal obligations, neither party incurs in
delay if the other does not comply or is not ready to
comply in a proper manner with what is incumbent
upon him.
When the windmill failed to function properly it
became incumbent upon petitioner to institute the
proper repairs in accordance with the guaranty
stated in the contract.  in the amount of P1,155,000.00 in favor of The Plaza.
Thus, respondent cannot be said to have incurred in
delay; instead, it is petitioner who should bear the
expenses for the reconstruction of the windmill.
Article 1167 of the Civil Code is explicit on this point
that if a person obliged to do something fails to do it,
the same shall be executed at his cost.
WHEREFORE, the appealed decision is MODIFIED.
Respondent VICENTE HERCE JR. is directed to pay
petitioner JACINTO M. TANGUILIG the balance of
P15,000.00 with interest at the legal rate from the
date of the filing of the complaint. In return,
petitioner is ordered to "reconstruct subject
defective windmill system, in accordance with the
one-year guaranty"[16]and to complete the same
within three (3) months from the finality of this
decision.
Heirs of Ramon C. Gaite, et al. vs. The Plaza, Inc.
and FGU Insurance CorporationG.R. No. 177685.
January 26, 2011,
On July 16, 1980, The Plaza, Inc. (The Plaza), a
corporation engaged in the restaurant business,
through its President, Jose C. Reyes, entered into a
contract4 with Rhogen Builders (Rhogen),
represented by Ramon C. Gaite, for the construction
of a restaurant building in Greenbelt, Makati, Metro
Manila for the price ofP7,600,000.00.
On July 18, 1980, to secure Rhogen’s compliance
with its obligation under the contract, Gaite and FGU
Insurance Corporation (FGU) executed a surety bond
On July 28, 1980, The Plaza paid P1,155,000.00 less
withholding taxes as down payment to Gaite.
On September 15, 1980, Engr. Gonzales informed
Gaite that the building permit for the construction of
the restaurant was revoked for non-compliance with
the provisions of the National Building Code and for
the additional temporary construction without
permit.6
The Memorandum Report of Building Inspector
Victor Gregory enumerated the following violations
of Rhogen in the construction of the building:
We disagree.
Under the principle of quantum meruit, a contractor
is allowed to recover the reasonable value of the
thing or services rendered despite the lack of a
written contract, in order to avoid unjust
enrichment.
Quantum meruit means that in an action for work
and labor, payment shall be made in such amount as
the plaintiff reasonably deserves.
To deny payment for a building almost completed
and already occupied would be to permit unjust
enrichment at the expense of the contractor.41
Rhogen failed to finish even a substantial portion of
the works due to the stoppage order issued just two
months from the start of construction.
Despite the down payment received from The Plaza,
Rhogen, upon evaluation of the Project Manager,
was able to complete a meager percentage much
lower than that claimed by it under the first progress
billing between July and September 1980.
Moreover, after it relinquished the project in January
1981, the site inspection appraisal jointly conducted
by the Project Manager, Building Inspector Engr.
Gregory and representatives from FGU and Rhogen,
Rhogen was found to have executed the works not in
accordance with the approved plans or failed to
seek prior approval of the Municipal Engineer.
Art. 1167. If a person obliged to do something fails to
do it, the same shall be executed at his cost.
This same rule shall be observed if he does it in
contravention of the tenor of the obligation.
Furthermore, it may be decreed that what has been
poorly done be undone.
In addition, Article 122 of the Articles of General
Conditions provides that the contractor shall not be
entitled to receive further payment "until the work is
finished." As the works completed by Rhogen were
not in accordance with approved plans, it should
have been executed at its cost had it not
relinquished the project in January 1981.
The CA thus did not err in sustaining the trial court’s
order for the return of the down payment given by
The Plaza to Rhogen.
Since Rhogen failed to account either for those
items which it had caused to be withdrawn from the
premises, or those considered damaged or lost due
spoilage, or disappeared for whatever reason – there
was no way of determining the exact quantity and
cost of those materials.
Hence, The Plaza was correctly allowed to recover
temperate damages.
China Banking Corporation v. Lagon,[163]
this court found that the bank was not a mortgagee
in good faith for its failure to question the due
execution of a Special Power of Attorney that was
presented to it in relation to a mortgage contract.
[164] This court said:
Though petitioner is not expected to conduct an
exhaustive investigation on the history of the
mortgagor's title, it cannot be excused from the duty
of exercising the due diligence required of a banking
institution.
Banks are expected to exercise more care and
prudence than private individuals in their dealings,
even those that involve registered lands, for their
business is affected with public interest.
SPOUSES EMILIANO L. JALBAY, SR. AND MAMERTA
C. JALBAY, PETITIONERS, VS. PHILIPPINE
NATIONAL BANK, RESPONDENT. , G.R. No. 177803 |
2015-08-03
True, banks, in handling real estate transactions, are
required to exert a higher degree of diligence, care,
and prudence than individuals.
Unlike private individuals, it is expected to exercise
greater care and prudence in its dealings, including
those involving registered lands.
A banking institution is expected to exercise due
diligence before entering into a mortgage contract.
Indeed, there is a situation where, despite the fact
that the mortgagor is not the owner of the
mortgaged property, his title being fraudulent, the
mortgage contract and any foreclosure sale arising
therefrom are given effect by reason of public policy.
This is the doctrine of "the mortgagee in good faith,"
wherein buyers or mortgagees dealing with property
covered by a Torrens Certificate of Title are no
longer required to go beyond what appears on the
face of the title.
However, the rule that persons dealing with
registered lands can rely solely on the certificate of
title is not applicable 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 veracity of the title to
determine its real owners.
January 11, 2016 G.R. No. 194964-65 UNIVERSITY
OF MINDANAO, INC., Petitioner, vs. BANGKO
SENTRAL NG PILIPINAS, ET AL., Respondents.
On May 25, 1982, University of Mindanao’s Vice
President for Finance, Saturnino Petalcorin,
executed a deed of real estate mortgage over
University of Mindanao’s property in Cagayan de Oro
City (covered by Transfer Certificate of Title No. T-
14345) in favor of Bangko Sentral ng Pilipinas.8 "The
mortgage served as security for FISLAI’s P1.9 Million
loan[.]"9 It was allegedly executed on University of
Mindanao’s behalf.10
On January 17, 1983, Bangko Sentral ng Pilipinas’
mortgage lien over the Iligan City properties and
Aurora de Leon’s certification were annotated on
Transfer Certificates of Title Nos. T-15696 and T-
15697.18 On January 18, 1983, Bangko Sentral ng
Pilipinas’ mortgage lien over the Iligan City
properties was also annotated on the tax
declarations covering the Iligan City properties.19
On July 16, 1999, University of Mindanao filed two
Complaints for nullification and cancellation of
mortgage. One Complaint was filed before the
Regional Trial Court of Cagayan de Oro City, and the
other Complaint was filed before the Regional Trial
Court of Iligan City.26
University of Mindanao alleged in its Complaints that
it did not obtain any loan from Bangko Sentral ng
Pilipinas. It also did not receive any loan proceeds
from the bank.27
We grant the Petition. Petitioner argues that the
execution of the mortgage contract was ultra vires.
As an educational institution, it may not secure the
loans of third persons.73 Securing loans of third
persons is not among the purposes for which
petitioner was established.74Petitioner is correct.
Corporations are artificial entities granted legal
personalities upon their creation by their
incorporators in accordance with law. Unlike natural
persons, they have no inherent powers. Third
persons dealing with corporations cannot assume
that corporations have powers. It is up to those
persons dealing with corporations to determine their
competence as expressly defined by the law and
their articles of incorporation.75
A corporation may exercise its powers only within
those definitions. Corporate acts that are outside
those express definitions under the law or articles of
incorporation or those "committed outside the
object for which a corporation is created"76 are
ultra vires.
The only exception to this rule is when acts are
necessary and incidental to carry out a corporation’s
purposes, and to the exercise of powers conferred
by the Corporation Code and under a corporation’s
articles of incorporation.77 This exception is
specifically included in the general powers of a
corporation under Section 36 of the Corporation
Code:
Petitioner does not have the power to mortgage its  unless he has by law a right to represent him.
properties in order to secure loans of other persons.
As an educational institution, it is limited to
developing human capital through formal instruction.
It is not a corporation engaged in the business of
securing loans of others.
The mortgage contracts executed in favor of
respondent do not bind petitioner. They were
executed without authority from petitioner.
Petitioner must exercise its powers and conduct its
business through its Board of Trustees.
Being a juridical person, petitioner cannot conduct
its business, make decisions, or act in any manner
without action from its Board of Trustees. The Board
of Trustees must act as a body in order to exercise
corporate powers. Individual trustees are not
clothed with corporate powers just by being a
trustee. Hence, the individual trustee cannot bind
the corporation by himself or herself.
The corporation may, however, delegate through a
board resolution its corporate powers or functions to
a representative, subject to limitations under the
law and the corporation’s articles of
incorporation.112
The relationship between a corporation and its
representatives is governed by the general
principles of agency.113Article 1317 of the Civil
Code provides that there must be authority from the
principal before anyone can act in his or her name:
ART. 1317. No one may contract in the name of
another without being authorized by the latter, or
2. GREAT ASIAN SALES CENTER CORPORATION and
TAN CHONG LIN, petitioners, vs. THE COURT OF
APPEALS and BANCASIA FINANCE AND
INVESTMENT CORPORATION, respondents. [G.R. No.
105774. April 25, 2002],
Great Asian is engaged in the business of buying and
selling general merchandise, in particular household
appliances. On March 17, 1981, the board of
directors of Great Asian approved a resolution
authorizing its Treasurer and General Manager,
Arsenio Lim Piat, Jr. ("Arsenio" for brevity) to secure
a loan from Bancasia in an amount not to exceed
P1.0 million. The board resolution also authorized
Arsenio to sign all papers, documents or promissory
notes necessary to secure the loan. On February 10,
1982, the board of directors of Great Asian approved
a second resolution authorizing Great Asian to
secure a discounting line with Bancasia in an
amount not exceeding P2.0 million. The second
board resolution also designated Arsenio as the
authorized signatory to sign all instruments,
documents and checks necessary to secure the
discounting line.
On March 4, 1981, Tan Chong Lin signed a Surety
Agreement in favor of Bancasia to guarantee,
solidarily, the debts of Great Asian to Bancasia. On
January 29, 1982, Tan Chong Lin signed a
Comprehensive and Continuing Surety Agreement in
favor of Bancasia to guarantee, solidarily, the debts
of Great Asian to Bancasia. Thus, Tan Chong Lin
signed two surety agreements ("Surety Agreements"
for brevity) in favor of Bancasia.
Great Asian, through its Treasurer and General
Manager Arsenio, signed four (4) Deeds of
Assignment of Receivables ("Deeds of Assignment"
for brevity), assigning to Bancasia fifteen (15)
postdated checks. Nine of the checks were payable
to Great Asian, three were payable to "New Asian
Emp.", and the last three were payable to cash.
Various customers of Great Asian issued these
postdated checks in payment for appliances and
other merchandise.
Great Asian and Bancasia signed the first Deed of
Assignment on January 12, 1982 covering four
postdated checks with a total face value of
P244,225.82, with maturity dates not later than
March 17, 1982. Of these four postdated checks, two
were dishonored. Great Asian and Bancasia signed
the second Deed of Assignment also on January 12,
1982 covering four postdated checks with a total
face value of P312,819.00, with maturity dates not
later than April 1, 1982. All these four checks were
dishonored. Great Asian and Bancasia signed the
third Deed of Assignment on February 11, 1982
covering eight postdated checks with a total face
value of P344,475.00, with maturity dates not later
than April 30, 1982. All these eight checks were
dishonored. Great Asian and Bancasia signed the
fourth Deed of Assignment on March 5, 1982
covering one postdated check with a face value of
P200,000.00, with maturity date on March 18, 1982.
This last check was also dishonored. Great Asian
assigned the postdated checks to Bancasia at a
discount rate of less than 24% of the face value of
the checks.
Arsenio endorsed all the fifteen dishonored checks
by signing his name at the back of the checks. Eight
of the dishonored checks bore the endorsement of
Arsenio below the stamped name of "Great Asian
Sales Center", while the rest of the dishonored
checks just bore the signature of Arsenio. The
drawee banks dishonored the fifteen checks on
maturity when deposited for collection by Bancasia,
with any of the following as reason for the dishonor:
"account closed", "payment stopped", "account
under garnishment", and "insufficiency of funds".
The total amount of the fifteen dishonored checks is
P1,042,005.00.
In summary, Great Asian’s four contracts assigning
its fifteen postdated checks to Bancasia expressly
stipulate the suspensive condition that in the event
the drawers of the checks fail to pay, Great Asian
itself will pay Bancasia.
Since the common condition in the contracts had
transpired, an obligation on the part of Great Asian
arose from the four contracts, and that obligation is
to pay Bancasia the full value of the checks,
including the stipulated penalty and attorney’s fees.
1. San Francisco Inn, hereto represented by its
authorized representative, Leodino M. Carandang Vs.
San Pablo City Water District, represented by its
General Manager Roger F. Borja and the SPCWD
Investigating Board
G.R. No. 204639. February 15, 2017
A MOA or contract between the water district entity
and the deep well operator/user is not required under
the law and the Rules.
However, when a MOA is voluntarily agreed upon
and executed, the obligation to pay production
assessment fees on the part of the deep well
operator/user and the right of the water district
entity to collect the fees arise from contract.26 
The parties are, therefore, legally bound to comply
with their respective prestations.
Unlike a MOA, which creates contractual
obligations, faithful compliance with the
requirements of Section 39 of PD 198 and Section 11
of the Rules creates binding obligations arising from
law.
Thus, in the absence of the requisite board
resolution, SPCWD cannot legally impose any
production assessment fees upon SFI.
October 4, 2017 G.R. No. 196419 PILIPINAS
MAKRO, INC., Petitioner vs. COCO CHARCOAL
PHILIPPINES, INC. and LIM KIM SAN, Respondents
Express Warranty vis-a vis Implied Warranty In
addressing the issues of the present case, the following
provisions of the deeds of sale between Makro and
respondents are pertinent:
The courts a quo agree that the DPWH project
encroached upon the properties Makro had purchased
from respondents. Nevertheless, the CA opined that
Makro was not entitled to a refund because it had actual
knowledge of the ongoing road widening project. The
appellate court likened Section 4(i) of the deeds of sale
as a warranty against eviction, which necessitates that
the buyer be in good faith for it to be enforced.
A warranty is a collateral undertaking in a sale of either
real or personal property, express or implied; that if the
property sold does not possess certain incidents or opportunity for the vendors to have been summoned
qualities, the purchaser may either consider the sale void precisely because no judicial action was instituted.
or claim damages for breach of warranty.18 Thus, a Further, even if Section 4(i) of the deeds of sale was to be
warranty may either be express or implied. deemed similar to an implied warranty against eviction,
An express warranty pertains to any affirmation of fact or the CA erred in concluding that Makro acted in bad faith.
any promise by the seller relating to the thing, the It is true that the warranty against eviction cannot be
natural tendency of which is to induce the buyer to enforced if the buyer knew of the risks or danger of
purchase the same.19 It includes all warranties derived eviction and still assumed its consequences.23The CA
from the language of the contract, so long as the highlights that Makro was aware of the encroachments
language is express-it may take the form of an even before the sale because the ongoing road widening
affirmation, a promise or a representation.20 project was visible enough to inform the buyer of the
On the other hand, an implied warranty is one which the diminution of the land area of the property purchased.
law derives by application or inference from the nature of The Court disagrees.
transaction or the relative situation or circumstances of It is undisputed that Makro's legal counsel conducted an
the parties, irrespective of any intention of the seller to ocular inspection on the properties in question before the
create it.21 In other words, an express warranty is execution of the deeds of sale and that there were
different from an implied warranty in that the former is noticeable works and constructions going on near them. 
found within the very language of the contract while the Nonetheless, these are insufficient to charge Makro with
latter is by operation of law. actual knowledge that the DPWH project had encroached
Thus, the CA erred in treating Section 4(i) of the deeds of upon respondents' properties.
sale as akin to an implied warranty against eviction. The dimensions of the properties in relation to the DPWH
First, the deeds of sale categorically state that the sellers project could have not been accurately ascertained
assure that the properties sold were free from any through the naked eye.
encumbrances which may prevent Makro from fully and A mere ocular inspection could not have possibly
absolutely possessing the properties in question. determined the exact extent of the encroachment. 
Second, in order for the implied warranty against eviction It is for this reason that only upon a relocation survey
to be enforceable, the following requisites must concur:  performed by a geodetic engineer, was it discovered that
(a) there must be a final judgment;  131 square meters and 130 square meters of the lots
(b) the purchaser has been deprived of the whole or part purchased from Coco Charcoal and Lim, respectively, had
of the thing sold;  been adversely affected by the DPWH project.
(c) said deprivation was by virtue of a prior right to the To reiterate, the fact of encroachment is settled as even
sale made by the vendor; and  the CA found that the DPWH project had disturbed a
(d) the vendor has been summoned and made co- portion of the properties Makro had purchased.
defendant in the suit for eviction at the instance of the The only reason the appellate court denied Makro
vendee.22  recompense was because of its purported actual
Evidently, there was no final judgment and no knowledge of the intrusion which is not reason enough to
deny Makro a refund of the proportionate amount
pursuant to Section 2 of the deeds of sale.
Nevertheless, the RTC errs in ordering respondents to
pay ₱l,500,00.00 each to Makro.
Under Section 2 of the deeds of sale, the purchase
price shall be adjusted in case of increase or decrease in
the land area at the rate of ₱8,500.00 per square meter. 
In the case at bar, 131 square meters and 130 square
meters of the properties of Coco Charcoal and Lim,
respectively, were encroached upon by the DPWH
project.  Appeals,35 the Court explained:
Applying the formula set under the deeds of sale, Makro
should be entitled to receive ₱l,113,500.00 from Coco
Charcoal and ₱l,105,000.00 from Lim.
It is noteworthy that Makro's complaint against
respondents also prayed for the same amounts. The RTC
awarded ₱l,500,00.00 without sufficient factual basis or
justifiable reasons.
WHEREFORE, the petition is GRANTED. The 30 December
2010 Decision and 7 April 2011 Resolution of the Court of
Appeals in CA-G.R. CV No. 83836 are REVERSED and SET
ASIDE. Petitioner Pilipinas Makro, Inc. is entitled to
recover ₱l,113,500.00 from respondent Coco Charcoal
Phils., Inc. and ₱l,105,000.00 from respondent Lim Kim
San.
LEY CONSTRUCTION AND DEVELOPMENT
CORPORATION, represented by its President, JANET
C. LEY, Petitioner, vs. MARVIN MEDEL SEDANO,
doing business under the name and style "LOLA
TABA LOLO PATO PALENGKE AT PALUTO SA
SEASIDE,", Respondent. August 23, 2017 G.R. No.
222711
(b) Where the parties have validly agreed in writing
before the filing of the action on the exclusive venue
thereof. 
(Emphases supplied)
Based on these provisions, the venue for personal
actions shall - as a general rule - lie with the court
which has jurisdiction where the plaintiff or the
defendant resides, at the election of the plaintiff.33
As an exception, parties may, through a written
instrument, restrict the filing of said actions in a
certain exclusive venue.34 In Briones v. Court of
Written stipulations as to venue may be restrictive in
the sense that the suit may be filed only in the place
agreed upon, or merely permissive in that the parties
may file their suit not only in the place agreed upon
but also in the places fixed by law. As in any other
agreement, what is essential is the ascertainment of
the intention of the parties respecting the matter.
As regards restrictive stipulations on venue,
jurisprudence instructs that it must be shown that
such stipulation is exclusive. In the absence of
qualifying or restrictive words, such as
"exclusively," "waiving for this purpose any other
venue," "shall only" preceding the designation of
venue, "to the exclusion of the other courts," or
words of similar import, the stipulation should be
deemed as merely an agreement on an additional
forum, not as limiting venue to the specified
place.36
In Pilipino Telephone Corporation v. Tecson,37 the
Court held that an exclusive venue stipulation is
valid and binding, provided that: 
(a) the stipulation on the chosen venue is exclusive
in nature or in intent;  construed as a stipulation on jurisdiction but rather,
(b) it is expressed in writing by the parties thereto;
and  parties are charged with knowledge of the existing
(c) it is entered into before the filing of the suit.38
After a thorough study of the case, the Court is
convinced that all these elements are present and
that the questioned stipulation in the lease contract,
i.e., Section 21 thereof, is a valid venue stipulation
that limits the venue of the cases to the courts of
Pasay City. It states:
21. Should any of the party (sic) renege or violate
any terms and conditions of this lease contract, it
shall be liable for damages. All actions or case[s]
filed in connection with this lease shall be filed with
the Regional Trial Court of Pasay City, exclusive of
all others.39 (Emphases and underscoring supplied)
The above provision clearly shows the parties'
intention to limit the place where actions or cases
arising from a violation of the terms and conditions
of the contract of lease may be instituted. This is
evident from the use of the phrase "exclusive of all
others" and the specification of the locality of Pasay
City as the place where such cases may be filed.
Notably, the fact that this stipulation generalizes
that all actions or cases of the aforementioned kind
shall be filed with the RTC of Pasay City, to the
exclusion of all other courts, does not mean that the
same is a stipulation which attempts to curtail the
jurisdiction of all other courts. It is fundamental that
jurisdiction is conferred by law and not subject to
stipulation of the parties.40 Hence, following the
rule that the law is deemed written into every
contract,41 the said stipulation should not be
one which merely limits venue. Moreover, "[t]he
law at the time they enter into the contract and at
the time it is to become operative."42 Thus, without
any clear showing in the contract that the parties
intended otherwise, the questioned stipulation
should be considered as a stipulation on venue (and
not on jurisdiction), consistent with the basic
principles of procedural law.
In this case, it is undisputed that petitioner's action
was one for collection of sum of money in an
amount43 that falls within the exclusive jurisdiction
of the RTC.44 Since the lease contract already
provided that all actions or cases involving the
breach thereof should be filed with the RTC of Pasay
City, and that petitioner’s complaint purporting the
said breach fell within the RTC's exclusive original
jurisdiction, the latter should have then followed the
contractual stipulation and filed its complaint before
the RTC of Pasay City. However, it is undeniable that
petitioner filed its complaint with the Valenzuela-
RTC; hence, the same is clearly dismissible on the
ground of improper venue, without prejudice,
however, to its refiling in the proper court.
That respondent had filed several motions for
extension of time to file a responsive pleading, or
that he interposed a counterclaim or third-party
complaint in his answer does not necessarily mean
that he waived the affirmative defense of improper
venue. The prevailing rule on objections to improper
venue is that the same must be raised at the earliest
opportunity, as in an answer or a motion to dismiss;
otherwise, it is deemed waived.45Here, respondent
timely raised the ground of improper venue since it
was one of the affirmative defenses raised in his
Answer with Third-Party Complaint.46 As such, it
cannot be said that he had waived the same.
In contrast, the counterclaim of respondent was
alleged to be a compulsory counterclaim,50 which
he was prompted to file only because of petitioner's
complaint for collection of sum of money, else the
same would be barred.51 In fact, his counterclaim
only sought reimbursement of his overpayment to
petitioner in the amount of ₱400,000.00, as well as
damages for the filing of a purported baseless suit.
Thus, his counterclaim is not covered by the venue
stipulation, since he is not asserting a violation of
the terms and conditions of the lease contract, but
rather an independent right which arose only
because of the complaint. The same goes for his
third-party complaint, whereby he only pleaded that
the rental payments remitted to PNCC for the period
August 2011 to December 2011 be reimbursed to him
in the event that petitioner's complaint is found to
be meritorious. Since his counterclaim and third-
party complaint are not covered by the venue
stipulation, respondent had, therefore, every right to
invoke the same whilst raising the ground of
improper venue against petitioner's complaint,
which action was, on the contrary, covered by the
stipulation. Thus, there is no inconsistency in
respondent's posturing, which perforce precludes
the application of the Pantranco ruling, as well as
negates the supposition that he had waived the  ordering respondents to pay petitioners the
defense of improper venue.
WHEREFORE, the petition is DENIED. Accordingly,
the Orders dated June 15, 2015 and January 27,
2016 of the Regional Trial Court of Valenzuela City,
Branch 75 in Civil 
Case No. 40-V-12 are hereby AFFIRMED.
SO ORDERED.
August 2, 2017 G.R. No. 206468 JUDITH D. DARINES
and JOYCE D. DARINES, Petitioners, vs. EDUARDO
QUIÑONES and ROLANDO QUITAN, Respondents.
Judith D. Darines (Judith) and her daughter, Joyce D.
Darines (Joyce) (petitioners) alleged in their
Complaint4that on December 31, 2005, they boarded
the Amianan Bus Line with Plate No. ACM 497 and
Body No. 808 as paying passengers enroute from
Carmen, Rosales, Pangasinan to Baguio City. 
Respondent Rolando M. Quitan (Quitan) was driving
the bus at that time. While travelling on Camp 3,
Tuba, Benguet along Kennon Road, the bus crashed
into a truck (with Plate No. XSE 578) which was
parked on the shoulder of Kennon Road. 
As a result, both vehicles were damaged; two
passengers of the bus died; and the other
passengers, including petitioners, were injured. In
particular, Joyce suffered cerebral concussion while
Judith had an eye wound which required an
operation.
Ruling of the Regional Trial Court
On July 14, 2010, the RTC rendered its Decision
following:
1. Moral Damages of One Hundred Thousand Pesos
(₱100,000.00);
2. Exemplary Damages of Thirty Thousand Pesos
(₱30,000.00);
3. Attorney's Fees of Fifteen Percent (15%) of the
Damages, plus Total Appearance Fees of Sixteen
Thousand Five Hundred Pesos (₱16,500.00); and
4. Costs of Suit.13
Aggrieved, respondents appealed to the CA.
Ruling of the Court of Appeals
In its October 29, 2012 Decision, the CA reversed
and set aside the RTC Decision.
The CA stressed that respondents did not dispute
that they were liable for breach of contract of
carriage; in fact, they paid for the medical and
hospital expenses of petitioners. Nonetheless, the
CA deleted the award of moral damages because
petitioners failed to prove that respondents acted
fraudulently or in bad faith, as shown by the fact that
respondents paid petitioners' medical and
hospitalization expenses. The CA held that, since no
moral damages was awarded, then there was no
basis to grant exemplary damages. Finally, it ruled
that because moral and exemplary damages were
not granted, then the award of attorney's fees must
also be deleted.
On March 6, 2013, the CA denied petitioners' Motion
for Reconsideration.
Our Ruling
The Court denies the Petition.
The Court fully agrees with the CA ruling that in an
action for breach of contract, moral damages may be
recovered only when  passenger caused by the breach of contract by a
a) death of a passenger results; or
b) the carrier was guilty of fraud and bad faith even
if death does not result; and that neither of these
circumstances were present in the case at bar. The
CA correctly held that, since no moral damages was
awarded then, there is no basis to grant exemplary
damages and attorney's fees to petitioners.
To stress, this case is one for breach of contract of
carriage (culpa contractual) where it is necessary to
show the existence of the contract between the
parties, and the failure of the common carrier to
transport its passenger safely to his or her
destination. An action for breach of contract differs
from quasi-delicts (also referred as culpa aquiliana
or culpa extra contractual) as the latter emanate
from the negligence of the tort feasor17 including
such instance where a person is injured in a
vehicular accident by a party other than the carrier
where he 1s a passenger.
The principle that, in an action for breach of
contract of carriage, moral damages may be
awarded only in case 
(1) an accident results in the death of a passenger;
or 
(2) the carrier is guilty of fraud or bad faith, is
pursuant to Article 1764, in relation to Article
2206(3) of the Civil Code, and Article 2220 thereof,18
as follows:
Article 1764. Damages in cases comprised in this
Section shall be awarded in accordance with Title
XVIII of this Book, concerning Damages.1âwphi1 
Article 2206 shall also apply to the death of a
common carrier. (Emphasis supplied)
Article 2206. The amount of damages for death
caused by a crime or quasi-delict shall be at least
three thousand pesos, even though there may have
been mitigating circumstances. In addition:
xxxx
(3) The spouse, legitimate and illegitimate
descendants and ascendants of the deceased may
demand moral damages for mental anguish by
reason of the death of the deceased.
Article 2220. Willful injury to property may be a legal
ground for awarding moral damages if the court
should find that, under the circumstances, such
damages are justly due. The same rule applies to
breaches of contract where the defendant acted
fraudulently or in badfaith. (Emphasis supplied)
The aforesaid concepts of fraud or bad faith and
negligence are basic as they are distinctly
differentiated by law. Specifically, fraud or bad faith
connotes "deliberate or wanton wrong doing"19 or
such deliberate disregard of contractual
obligations20 while negligence amount to sheer
carelessness.21
More particularly, fraud includes "inducement
through insidious machination."22 In turn, insidious
machination refers to such deceitful strategy or
such plan with an evil purpose. On the other hand,
bad faith does not merely pertain to bad judgment or
negligence but relates to a dishonest purpose, and a
deliberate doing of a wrongful act. Bad faith involves
"breach of a known duty through some motive or
interest or ill will that partakes of the nature of
fraud. "23
Clearly, unless it is fully established (and not just
lightly inferred) that negligence in an action for
breach of contract is so gross as to amount to
malice, then the claim of moral damages is without
merit.31
Here, petitioners impute negligence on the part of
respondents when, as paying passengers, they
sustained injuries when the bus owned and operated
by respondent Quiñones, and driven by respondent
Quitan, collided with another vehicle. 
Petitioners propounded on the negligence of
respondents, but did not discuss or impute fraud or
bad faith, or such gross negligence which would
amount to bad faith, against respondents. There
being neither allegation nor proof that respondents
acted in fraud or in bad faith in performing their
duties arising from their contract of carriage, they
are then not liable for moral damages.
The Court also sustains the CA's finding that
petitioners are not entitled to exemplary damages.
Pursuant to Articles 2229 and 223432 of the Civil
Code, exemplary damages may be awarded only in
addition to moral, temperate, liquidated, or
compensatory damages. Since petitioners are not
entitled to either moral, temperate, liquidated, or
compensatory damages, then their claim for
exemplary damages is bereft of merit.
Finally, considering the absence of any of the
circumstances under Article 220833 of the Civil
Code where attorney's fees may be awarded, the
same cannot be granted to petitioners.
All told, the CA correctly ruled that petitioners are
not entitled to moral and exemplary damages as well
as attorney's fees.
WHEREFORE, the Petition is DENIED. The October
29, 2012 Decision and March 6, 2013 Resolution of
the Court of Appeals in CA-G.R. CV No. 95638 are
AFFIRMED.
 G.R. No. 225402, September 04, 2017 ]
ENCARNACION CONSTRUCTION & INDUSTRIAL
CORPORATION, PETITIONER, V. PHOENIX READY
MIX CONCRETE DEVELOPMENT & CONSTRUCTION,
INC., RESPONDENT.
In the present petition, ECIC maintains that it is
entitled to its counterclaim because the Agreement
it signed with Phoenix, particularly Paragraph 15
thereof, is void for being a contract of adhesion; and,
the ready-mix concrete Phoenix delivered for the 3rd
floor slab of the VNHS building was substandard,
causing it to incur additional expenses to
reconstruct the building's 3rd floor.
A contract of adhesion is one wherein one party
imposes a ready-made form of contract on the other.
It is a contract whereby almost all of its provisions
are drafted by one party, with the participation of
the other party being limited to affixing his or her
signature or "adhesion" to the contract.[32]
However, contracts of adhesion are not invalid per
se as they are binding as ordinary contracts.[33]
While the Court has occasionally struck down
contracts of adhesion as void, it did so when the
weaker party has been imposed upon in dealing with
the dominant bargaining party and reduced to the
alternative of taking it or leaving it, completely
deprived of the opportunity to bargain on equal
footing.[34] Thus, the validity or enforceability of the
impugned contracts will have to be determined by
the peculiar circumstances obtained in each case
and the situation of the parties concerned.[35]
In this case, there is no proof that ECIC was
disadvantaged or utterly inexperienced in dealing
with Phoenix. There were likewise no allegations
and proof that its representative (and
owner/proprietor) Ramon Encarnacion (Encarnacion)
was uneducated, or under duress or force when he
signed the Agreement on its behalf. In fact,
Encarnacion is presumably an astute businessman
who signed the Agreement with full knowledge of its
import. Case law states that the natural presumption
is that one does not sign a document without first
informing himself of its contents and consequences.
[36] This presumption has not been debunked.
Moreover, it deserves highlighting that apart from
the January 27 and March 25, 2009 Contract
Proposals and Agreements, ECIC and Phoenix had
entered into three (3) similar Agreements under the
same terms and conditions[37] for the supply of
ready-mix concrete. Thus, the Court is hard-pressed
to believe that Encarnacion had no sufficient
opportunity to read and go over the stipulations of
the Agreement and reject or modify the terms had he
chosen to do so.
Further, the Court finds that the terms and
conditions of the parties' Agreement are plain, clear,
and unambiguous and thus could not have caused
any confusion. Paragraph 15 of the Agreement
provides that:
x x x x Any claim on the quality, strength, or quantity
of the transit mixed concrete delivered must be
made at the time of delivery. Failure to make the
claim constitutes a waiver on the part of the
SECOND PARTY for such claim and the FIRST PARTY
is released from any liability for any subsequent
claims on the quality, strength or [sic] the ready
mixed concrete.[38]
Based on these terms, it is apparent that any claim
that ECIC may have had as regards the quality or
strength of the delivered ready-mix concrete should
have been made at the time of delivery. However, it
failed to make a claim on the quality of the delivered
concrete at the stipulated time, and thus, said claim
is deemed to have been waived.
In this relation, the Court clarifies that the absence
of the signature of Encarnacion on the second page
of the Agreement did not render these terms
inoperative. This is because the first page of the
Agreement - on which the signature of Encarnacion
appears - categorically provides that the terms and
conditions stipulated on the Agreement's reverse
side form part of their contract and are equally
binding on them,viz.:
No terms and conditions shall be valid and binding
except those stipulated herein and/or the reverse
side thereof. No modifications, amendments,
assignments or transfer of this contract or any of the
stipulation herein contained shall be valid and
binding unless agreed by writing between the
PARTIES herein.
x x x x[39] (Emphasis and underscoring supplied)
Thus, by having its representative affix his signature
on the first page of the Agreement and thereby
accepting Phoenix's proposed contract, ECIC
likewise signified its conformity to the entirety of
the stipulated terms and conditions, including the
stipulations on the Agreement's reverse side. Verily,
ECIC positively and voluntarily bound itself to these
terms and conditions and cannot now claim
otherwise.
Finally, it should be noted that ECIC failed to raise
the alleged defect in the delivered concrete well
within a reasonable time from its discovery of the
hairline cracks, as it notified Phoenix thereof only 48
days after the last delivery date on April 29, 2009,
and days after it was already notified thereof by the
City Engineer's Office.[40] The lack of justifiable
explanation for this delay all the more bolsters the
conclusion that ECIC indeed waived its right to make
its claim.
In any event, the evidence on record do not support
ECIC's claim that the hairline cracks that appeared
on the 3rd floor slab of the VNHS building resulted
from the substandard quality of the delivered ready-
mix concrete. While it was shown that the City
Engineer's Office inspected the site and approved
the structural design before the delivered concrete
for the 3rd floor slab was poured, and that the
results of the test conducted by the Philippine
Geoanalytics Testing Center[44] from the samples
taken showed that the hardened concrete failed to
reach the required comprehensive strength days
after the pouring, ECIC, however, failed to account
for the period that intervened from the time the
delivered concrete was poured to the time the
hairline cracks were observed. As the claiming
party, it was incumbent upon ECIC to prove that the
hairline cracks were truly caused by the inferior
quality of the delivered concrete. Besides, Phoenix
offered a more plausible explanation, i.e., that ECIC
failed to observe the proper procedure for applying
and curing the delivered concrete during the
intervening period. This resulted in what Phoenix's
witness described as "plastic (cement) shrinkage
caused by the rapid evaporation of the water
component and other factors."[45]
All told, ECIC failed to convincingly prove its
counterclaim against Phoenix and thus, the same
was correctly denied by the CA.
WHEREFORE, the petition is DENIED. The Decision
dated July 22, 2015 and the Resolution dated June
29, 2016 of the Court of Appeals in CA-G.R. CV No.
102671 are hereby AFFIRMED.
The CA Ruling
In a Decision[26] dated July 22, 2015, the CA
affirmed the RTC ruling holding ECIC liable for the
payment of the delivered ready-mix concrete.
At the outset, the CA agreed with ECIC that the
docket fees for its counterclaim was paid well within
a reasonable time from the prescriptive date; thus,
the RTC should not have automatically dismissed its
counterclaim.[27] Nonetheless, it ruled that ECIC is
bound by their Agreement to pay for the delivered
ready-mix concrete. Moreover, it observed that
before ECIC signed and bound itself to the
Agreement, it should have questioned the condition
set under Paragraph 15, i.e., that complaints about
the quality of the concrete should be made upon
delivery.[28] Further, there is no showing that ECIC
was at a disadvantage when it contracted with
Phoenix so as to render the Agreement void on the
ground that it is a contract of adhesion. Thus, the CA
concluded that ECIC's failure to make any claim on
the strength and quality of the ready-mix concrete
upon delivery, pursuant to Paragraph 15 of the
Agreement, constitutes a waiver thereof on its part.
[29]
1. Dy Teban Trading, Inc. Vs. Peter C. Dy, et al.
G.R. No. 185647. July 26, 2017
Due to certain disagreements relating to its
management, DTTI instituted an action for injunction
against Peter C. Dy, Johnny C. Dy and Ramon C. Dy
(respondents) before the RTC on September 7, 2004.
This was docketed as an intra-corporate case.
Respondents, on the other hand, filed an action for
dissolution of the corporation.
In its petition before the RTC, DTTI alleged that
Johnny C. Dy (Johnny), an employee in its Montilla
branch, had "squandered cash sales and stocks"
from the branch either for his personal benefit or
that of Peter C. Dy (Peter) and Ramon C. Dy
(Ramon).7
To prevent further losses, DTTI decided to close its
Montilla branch and had the doors of the branch
store welded shut.
This notwithstanding, DTTI claimed that
respondents forcibly opened the branch store and
have continuously deprived it of the use of the same.
The RTC granted this motion and issued an Order18
which states:
WHEREFORE, in view of the foregoing, the Court
hereby considers Atty. Dollfuss R. Go to have waived
his right to cross-examine witness Lorencio C. Dy.
Accordingly, Atty. Wilfred D. Asis is hereby given a
period of fifteen (15) days from today within which to
file his written formal offer of exhibits. The
defendants are given the same number of days
reckoned from their receipt of a copy of plaintiffs
formal offer of exhibits within which to file their
comment or opposition thereto, after which the said
formal offer of exhibits shall be deemed submitted
for resolution.
SO ORDERED.19
In an Order29 dated May 26, 2008, the RTC held:
WHEREFORE, in the light of the foregoing, the
motion for continuance of the defendants is hereby
DENIED for lack of merit. The defendants are hereby
declared to have waived their right to present their
evidence and that this case is now deemed
submitted for decision.
SO ORDERED.30
On August 5, 2008, the CA denied the application for
a TRO or writ of preliminary injunction.31
In a Decision37 dated December 17, 2008, the CA
held that the RTC acted with grave abuse of
discretion when it issued the June 18, 2007 and May
26, 2008 Orders. It held:
WHEREFORE, in view of the foregoing, the twin
Orders of 18 June 2007 and of 26 May 2008 and the
Decision of 22 August 2008 rendered in Civil Case
No. 1235 by public respondent are hereby ordered
ANNULLED and SET ASIDE and the case REMANDED
to the trial court for further and appropriate
proceedings conformably with the above
discussions.
SO ORDERED.38
The issues thus presented are:
(1) Whether the action filed before the RTC was an
intra-corporate case properly heard by the R TC
acting as a special commercial court; and
(2) Whether the CA was correct in reversing the
orders of the RTC and holding that respondents were
deprived of their right to present evidence and to
cross-examine DTTI's witness.
Section 5 of the Securities Regulation Code41
transferred the jurisdiction of the Securities and
Exchange Commission (SEC) over intra-corporate
disputes to RTCs designated by the Supreme Court
as commercial courts.
The existence of an intra-corporate dispute must be
properly alleged in a complaint filed before a
commercial court because the allegations in the
complaint determine a tribunal's jurisdiction over the
subject matter.42
This means that the complaint must make out a
case that meets both the relationship and the nature
of the controversy tests.
Under the relationship test, a dispute is intra-
corporate if it is:
(1) between the corporation, partnership or
association and the public;
(2) between the corporation, partnership or
association and the state insofar as its franchise,
permit or license to operate is concerned;
(3) between the corporation, partnership or
association and its stockholders, partners, members
or officers; and
(4) among the stockholders, partners or associates
themselves.43
The nature of the controversy test, on the other
hand, requires that the dispute itself must be
intrinsically connected with the regulation of the
corporation, partnership or association.44
In Strategic Alliance Development Corporation v.
Star Infrastructure Development Corporation,45 we
explained that the controversy "must not only be
rooted in the existence of an intra-corporate
relationship, but must also refer to the enforcement
of the parties' correlative rights and obligations
under the Corporation Code as well as the internal
and intra-corporate regulatory rules of the
corporation."
Applying the foregoing tests, we agree with the CA
that the complaint filed by DTTI before the RTC was
a civil action for injunction and not an intra-
corporate dispute.
First, a reading of the complaint will reveal that it
contains no allegation that the defendants therein
(respondents in the present petition) are
stockholders of the corporation. Notably, the
complaint even identified Johnny as a DTTI
employee. The complaint also does not allege that
the other defendants therein have acted in their
capacity as stockholders in depriving DTTI of access
to its Montilla branch.
Second, the nature of the controversy does not
involve an intra-corporate dispute. The complaint for
injunction asks the RTC to order respondents to
cease from controlling DTTI's Montilla branch and
allow DTTI to use the same. In claiming that
respondents illegally possessed the branch store,
the complaint does not allege that it arose out of a
disagreement between the stockholders. Rather, the
complaint states that Johnny, DTTI's employee,
colluded with co-respondents Peter and Ramon in
forcibly opening the Montilla branch store and
preventing DTTI from using the property.
Third, DTTI, in its complaint, asked the RTC to: 
(1) prevent respondents from physically possessing
its branch store; and 
(2) allow DTTI to have access and control of the
building.47 Nowhere in its complaint did DTTI ask for
a determination of the parties' rights under the
Corporation Code, its articles of incorporation or its
by-laws.
Applying these principles, we rule that the CA erred
in reversing the RTC's Order declaring respondents
to have waived their right to present evidence.
xxx
WHEREFORE, in view of the foregoing, the petition is
GRANTED. The Decision dated December 17, 2008 of
the Court of Appeals is REVERSED. The Decision of
the Regional Trial Court, Butuan City dated August
22, 2008 and its Orders dated June 18, 2007 and May
26, 2008 are REINSTATED.
SO ORDERED.
TRANS MIDDLE EAST (PHILS.), G.R. No. 172556,
Petitioner,- versus –The Board of Directors of
Equitable AZCUNA, PCI Bank, represented by its
Chairman, CORAZON DELA PAZ and SABINO CHICO
NAZARIO, ACUT, JR. (in his capacity as GARCIA, and
Corporate Secretary of Equitable VELASCO, JR.,
JJ.PCI Bank), Respondents. Promulgated: June 9,
2006
x--------------------------------------------------- x
It is settled that as a general rule, the registered
owner of the shares of a corporation, even if they are
sequestered by the government through the PCGG,
exercises the right and the privilege of voting on
them.[23]
The PCGG as a mere conservator cannot, as a rule,
exercise acts of dominion by voting these shares.
[24]
The registered owner of sequestered shares may
only be deprived of these voting rights, and the
PCGG authorized to exercise the same, only if it is
able to establish that
(1) there is prima facie evidence showing that the
said shares are ill-gotten and thus belong to the
State; and
(2) there is an imminent danger of dissipation, thus
necessitating the continued sequestration of the
shares and authority to vote thereupon by the PCGG
while the main issue is pending before the
Sandiganbayan.[25]
Clearly, the existence of the writ of sequestration
alone would not legally justify barring TMEE from
voting its shares.
Such preclusion may only occur if there is prima
facie evidence showing that the said shares are ill-
gotten and there is an imminent danger of
dissipation.
It also bears notice that from the time the 1998
Resolution recognized the right of TMEE to vote its
shares until eight (8) years later, no serious
challenges were posed against the right of TMEE to
vote those shares by reason of the pending motion
for reconsideration. There is some dispute as to
whether during the last eight years of EPCIB
stockholder meetings, TMEE was actually able to
formally vote its shares[38] or merely consented to a
common slate of nominees previously agreed upon
to negate the need to conduct an actual meeting.
[39] Yet whatever the fact may be, these
stockholders meetings and election of the Board of
Directors were conducted to the satisfaction of
TMEE, which was able to successfully elect at least
one nominee to the Board. Those circumstances do
not bear the mark of TMEE being deprived of the
right to vote its shares in the stockholders meetings
from 1998 to 2005, when the contrary should have
resulted if the position of the respondents were to
be believed.
Finally, we consider the consequences of the
annulment of the assailed Resolution on the
subsequently held stockholders meeting and
election of the Board of Directors of EPCIB. It
appears that there is no serious dispute that TMEE
would have been entitled to one seat on the Board
had it been able to vote its shares. TMEE asserts
that it has 51,827,640 EPCIB shares,[47] equivalent
to 7.13% of the outstanding capital stock of the
bank. Respondent Board of Directors admits that the
shares of TMEE constitute 7.13% of the outstanding
capital stock of the bank.[48] Since Section 24 of
the Corporation Code allows a stockholder such as
TMEE to cumulate all of his shares in the voting for
directors, a 7.13 % stock interest in the outstanding
capital stock is sufficient to elect one seat in the 15-
seat EPCIB Board of Directors.[49] However, relying
on the null and void Resolution of the
Sandiganbayan, respondents Board of Directors and
Corporate Secretary prevented TMEE from voting its
shares and electing its nominee or representative to
the Board of Directors.
Clearly, TMEE is entitled to one seat on the Board of
Directors of EPCIB. There is the option of annulling
the entire election, but such step would be too
drastic in light of the fact that only one of the 15
seats should be necessarily affected upon the
seating of TMEEs nominee to the Board of Directors.
The more prudent step on the part of the Court is to
declare that one nominee or representative of TMEE
is entitled to be seated immediately on the Board of
Directors, and to direct the respondents EPCIB
Board and Board Corporate Secretary to admit and
recognize said nominee or representative of TMEE to
the Board of Directors in place of the person who
was elected to the Board at the 23 May 2006 annual
stockholders meeting had TMEE not been disallowed
to vote its shares.
It is this unconscionable delay that has precisely
allowed this unwanted circus to march into this
Court.
The protracted delay serves no end except to foster
mockery of the judicial system.
WHEREFORE, the PETITION is GRANTED. The
Resolution of the Sandiganbayan dated 22 May 2006
is declared NULL and VOID.
The election at the 23 May 2006 annual stockholders
meeting of the person to the seat in the Equitable-
PCI Bank Board of Directors to which petitioner
Trans Middle East (Phils.), Inc. is entitled is likewise
declared NULL and VOID.
PENDING FINALITY OF THIS DECISION AND
IMMEDIATELY UPON RECEIPT HEREOF, respondents
Board of Directors of Equitable-PCI Bank and
Corporate Secretary Sabino E. Acut, Jr. are
DIRECTED NOT TO RECOGNIZE said person whose
election to the Board of Directors is set aside and
nullified herein and TO RECOGNIZE the nominee or
representative of TMEE as a duly elected member of
the Board of Directors, with all the rights and
privileges appertaining to the position.
[ G.R. No. 222821, August 09, 2017 ] NORTH
GREENHILLS ASSOCIATION, INC., PETITIONER, V.
ATTY. NARCISO MORALES, RESPONDENT.
In his Amended Complaint, Atty. Morales alleged
that for a period spanning 33 years, he had an open,
continuous, immediate, and unhampered access to
the subdivision park through his side door, which
also served as an exit door in case of any
eventuality; that having such access to the park was
one of the considerations why he purchased the lot;
that the construction of the pavilion was illegal
because it violated his right to immediate access to
the park, Presidential Decree No. 957 and the Deed
of Donation of Ortigas & Co. Ltd., which required the
park to be maintained as an open area; and that the
restroom constructed by NGA was a nuisance per
se.
NGA, in its Answer with Compulsory Counterclaim,
rejected the assertions of Atty. Morales. It
contended that as the absolute owner of the park, it
had the absolute right to fence the property and
impose reasonable conditions for the use thereof by
both its members and third parties; that the
construction of the restroom was for the use and
benefit of all NGA members, including Atty. Morales;
and that Atty. Morales' use of a side entrance to the
park for 33 years could not have ripened into any
right because easement of right of way could not be
acquired by prescription. NGA likewise sought the
payment of P878,778.40 corresponding to the annual
membership dues which Atty. Morales had not been
paying since 1980.
Ruling of the CA
In its March 13, 2015 Decision,[10] the CA affirmed
the ruling of the OP. It found no error on the part of
the OP in affirming the characterization of the
restrooms built as nuisance per accidens
considering that the structure posed sanitary issues
which could adversely affect not only Atty. Morales,
but also his entire household; that even if there
existed a perimeter wall between the park and Atty.
Morales' home, the odor emanating from the
restroom could easily find its way to the dining area,
and the foul and noxious smell would make it very
difficult and annoying for the residents of the house
to eat; and that the proximity of the restroom to
Atty. Morales' house placed the people residing
therein at a greater risk of contracting diseases both
from improperly disposed waste and human
excrements, as well as from flies, mosquitoes and
other insects, should NGA fail to maintain the
cleanliness of the structures.
NGA moved for reconsideration, but its motion was
denied by the CA in its February 3, 2016 Resolution.
Hence, this petition.
The Ruling of the Court
The Court partly grants the petition.
On the finding that the restroom
was a nuisance per accidens
The CA in disposing the case, ruled that the
restroom posed sanitary issues to Atty. Morales and
is, therefore, a nuisance per accidens. Such is a
finding of fact, which is generally conclusive upon
the Court, because it is not its function to analyze
and weigh the evidence all over again.
There are, however, well-recognized exceptions.
These are  misapprehension of facts.
(1) when the findings are grounded entirely on The Court agrees.
speculations, surmises or conjectures;  A nuisance per accidens is one which depends upon
(2) when the inference made is manifestly mistaken, certain conditions and circumstances, and its
absurd or impossible;  existence being a question of fact, it cannot be
(3) when there is grave abuse of discretion;  abated without due hearing thereon in a tribunal
(4) when the judgment is based on a authorized to decide whether such a thing does in
misapprehension of facts;  law constitute a nuisance.[22] 
(5) when the findings of fact are conflicting;  A reading of the CA's decision would easily reveal
(6) when in making its findings the Court of Appeals that its conclusions were merely speculative. It
went beyond the issues of the case, or its findings wrote:
are contrary to the admissions of both the appellant It was improper on the part of the CA to assume
and the appellee;  those negative effects because modern day
(7) when the findings are contrary to that of the trial restrooms, even those for the use of the public, are
court;  clean, safe and emitting no odor as these are
(8) when the findings are conclusions without regularly maintained. For said reason, it was an error
citation of specific evidence on which they are on the part of the CA to rule that the restroom was a
based;  nuisance per accidens and to sustain the order that
(9) when the facts set forth in the petition as well as it should be relocated.
in the petitioners main and reply briefs are not Clearly, its finding was based on speculations, and
disputed by the respondent;  not evidence.
(10) when the findings of fact are premised on the On the finding that Atty. 
supposed absence of evidence and contradicted by Morales had no access to 
the evidence on record; or  to McKinley Park
(11) when the Court of Appeals manifestly NGA claims that the CA erred in upholding Atty.
overlooked certain relevant facts not disputed by the Morales' unbridled access to the park, which
parties, which, if properly considered, would justify a effectively constituted an easement of right of
different conclusion.[21] way /without any basis as against the clear statutory
NGA avers that the case falls under the said right of NGA, as the owner of the park, to fence and
exceptions considering that no proof was ever protect its property on the basis of Articles 429 and
presented to prove that the restroom was a nuisance 430 of the Civil Code.
per accidens. Absent such evidence, the CA's finding The Court agrees with NGA.
was only speculative, resulting in a grave Under the Civil Code, NGA, as owner of the park, has
the right to enclose or fence his land or tenements
by means of walls, ditches, live or dead hedges, or
by any other means without detriment to servitudes
constituted thereon. It also has a right to exclude
others from access to, and enjoyment of its property.
The conditions[25] set forth under the Deed of
Donation by Ortigas & Co. Ltd. to NGA could not be
used by Atty. Morales in his favor. Assuming that he
has a right as a member to use the park, it does not
mean that he can assert that his access to the park
could only be done through his side door. Atty.
Morales knows very well that he can access the
park through some other parts of the park.
WHEREFORE, the petition is PARTLY GRANTED. The
March 13, 2015 Decision and the February 3, 2016
Resolution of the Court of Appeals in CA-G.R. SP No.
131707, are REVERSED insofar as it affirmed (1)
Atty. Morales' entitlement to an unbridled access to
the park through his side door; and (2) the order to
relocate the restroom to another area.
SO ORDERED.
G.R. No. 210209, August 09, 2017 CATHAY LAND,
INC. AND CATHAY METAL CORPORATION,
Petitioners, v. AYALA LAND, INC., AVIDA LAND
CORPORATION** AND LAGUNA TECHNOPARK, INC.,
Respondents.
Petitioners Cathay Land, Inc. and Cathay Metal
Corporation (Cathay Group) own and develop a
mixed-use and multi-phase subdivision development
project known as the South Forbes Golf City which
covers an area of around 213 hectares of contiguous
land in Silang, Cavite.3
On February 5, 2003, the Cathay Group filed a
Complaint4 for easement of right of way with prayer
for the issuance of a preliminary
injunction/temporary restraining order against
respondents Ayala Land, Inc., Avida Land
Corporation, and Laguna Technopark, Inc., (Ayala
Group) before the Regional Trial Court (RTC), Branch
18, Tagaytay City.
The Complaint alleged that the Ayala Group
unjustifiably denied passage to Cathay Group's
personnel, vehicles and heavy equipment through its
properties by putting up checkpoints and
constructing gates which caused the development of
the latter's South Forbes Golf City project to be
interrupted and delayed.5
However, before trial could ensue, the parties
executed a Compromise Agreement6 dated July 4,
2003 where they "mutually agreed to amicably settle
all their claims as well as other claims and causes of
action that they may have against each other in
relation to the [Complaint]."7
Specifically, the Ayala Group granted a pedestrian,
vehicular and utility easement of right of way in
favor of the Cathay Group in consideration of and
subject to the latter's faithful compliance of its
undertakings in the Compromise Agreement.8
This includes undertakings relating to the
development of the Cathay Group's properties in the
area:
2.3 Undertakings of the Cathay Group Relating to the
Development of the Cathay Properties. The Cathay
Group will develop the Cathay properties into such
developments which are consistent with the
residential character of the adjacent developments
of Ayala Land and Laguna Properties in the Sta.
Rosa, Laguna and Silang, Cavite areas. More
particularly, but without limiting the generality of the
foregoing,the Cathay Group undertakes that it will
not develop and will not allow the development of
one or more of the following types of projects: (i)
cemetery, memorial park, mortuary or similar
development or related structures; (ii) industrial park
or estate, whether for heavy, medium or light
industries; (iii) high-rise buildings; (iv) low-cost or
socialized housing subdivisions within the purview of
Batas Pambansa Blg. 220; and (v) warehouse or
warehouse facilities.9
It was also expressly stated in the Compromise
Agreement that in the event of breach on the part of
the Cathay Group of any of its undertakings, the
Ayala Group has the right to withdraw or suspend
the grant of easement of right of way from the
Cathay Group, to wit:
4. Undertakings Essential. x x x Accordingly and
subject to Section 6 hereof, the Ayala Group has the
right to withdraw or suspend the grant of easement
of right-of-way subject to this agreement if the
Cathay Group or any of the Grantees shall breach
any of the provisions of this Agreement and the
Cathay Group or the Grantees shall have failed to
rectify such breach within a period of thirty (30) days
from receipt of a notice from the Ayala Group (or any
of its assigns).10
The Regional Trial Court Ruling
In its Order25 dated September 15, 2008, the RTC
denied the Motion for Execution filed by the Ayala
Group for lack of merit.
The Court of Appeals Ruling
The CA dismissed the Petition for Certiorari in its
Decision dated June 28, 2013, as it found no grave
abuse of discretion on the part of the RTC in
ordering the execution of the Compromise
Agreement.36
Issues
In the present Petition, the Cathay Group raises the
following arguments for the Court's resolution:
first, the one-page April 1, 2009 Order should be
nullified as it does not state the facts and the law on
which it is based, in violation of the requirements
under Section 14, Article VIII of the Constitution;41
second, the CA seriously erred when it affirmed the
questioned RTC Order, since it was never shown
that the Cathay Group had violated any of the laws
and ordinances of Silang, Cavite;42
third, the term "high-rise building" as used in the
Compromise Agreement should not be interpreted to
imply a "height limit of three storeys," as such
definition in the Fire Code was not contemplated by
the parties when they entered into the Compromise
Agreement;43 and fourth, the Writ of Execution
dated December 2, 2009 is void because it gives the
Sheriff unbridled authority to halt any of the Cathay
Group's construction projects which, in his personal
view, constitutes a "high-rise" structure.44
The Court's Ruling
The Petition is impressed with merit.
A judgment based on compromise agreement shall
be executed/implemented based strictly on the
terms agreed upon by the parties.
The Civil Code provides that "[a] compromise is a
contract whereby the parties, by making reciprocal
concessions, avoid a litigation or put an end to one
already commenced."45  properties.
It has the effect and authority of res judicata upon
the parties, but there shall be no execution except in
compliance with a judicial compromise.46
It is settled that once a compromise agreement is
approved by a final order of the court, it transcends
its identity as a mere contract binding only upon the
parties thereto, as it becomes a judgment that is
subject to execution in accordance with the Rules of
Court.
Judges, therefore, have the ministerial and
mandatory duty to implement and enforce it.47
Since the issuance of a writ of execution
implementing a judicial compromise is ministerial in
nature, it cannot be viewed as a judgment on the
merits as contemplated by Section 14, Article VIII of
the Constitution.48
To be clear, it is the decision based on a
compromise agreement that is considered as a
judgment on the merits, not the order pertaining to
its execution.
Nevertheless, in implementing a compromise
agreement, the "courts cannot modify, impose terms
different from the terms of [the] agreement, or set
aside the compromises and reciprocal concessions
made in good faith by the parties without gravely
abusing their discretion."49
In this case, the RTC, through Judge Young, granted
the Ayala Group's Motion for Execution of the
Compromise Agreement on account of the Cathay
Group's construction of "high-rise structures" on its
 
In its assailed Order dated April 1, 2009, the RTC
ruled as follows:
x x x Let the corresponding writ of execution be
issued to enforce the [Judgment] of this court dated
July 30, 2003 by then Judge Alfonso S. Garcia
enforcing the terms and conditions of the
Compromise Agreement dated [July 4, 2003].
And let [the] corresponding writ of injunction issue
against the plaintiff in this case for construction of
[high-rise] structures on [the] land subject matter of
the said agreement[for] being contrary to [the] laws
and ordinance of Silang, [Cavite] then applicable at
the time of the execution of said compromise
agreement.50
It will be recalled that under the Compromise
Agreement, the remedies available to the Ayala
Group should the Cathay Group fail to abide by the
terms of the agreement are, 
first: to notify the Cathay Group of such breach; and
second, either to withdraw or suspend the grant of
easement of right-of-way to the Cathay Group,51 if
the latter does not undertake to rectify the said
breach within 30 days from notice.  dismissing the Petition for Certiorari filed by the
It is this specific right that is enforceable through a
writ of execution, as expressly provided in Sections
4 and 6 of the Compromise Agreement.
In short, the Ayala Group has no right, under the
Compromise Agreement, to seek injunctive relief
from the courts in case the Cathay Group commits
an act contrary to its undertakings in the agreement.
To emphasize, under the Compromise Agreement,
the Ayala Group has no right to seek to enjoin the
Cathay Group from proceeding with the development
of its South Forbes Golf City project or from
constructing high-rise buildings as it did in its Motion
for Execution.
To be sure, the Ayala Group's right under the
Compromise Agreement that is enforceable through
a writ of execution is only the suspension or
withdrawal of the grant of easement of right of way.
Thus, the RTC, through Judge Young, seriously erred
when it issued a Writ of Execution and Writ of
Injunction prohibiting the Cathay Group from
constructing buildings with a height of 15 meters or
higher and other developments not in accord with
the residential character of the properties of the
Ayala Group in the area.
The RTC gravely abused its discretion when it
granted a remedy that is not available to the Ayala
Group, thereby imposing terms different from what
was agreed upon by the parties in their Compromise
Agreement.
Given these circumstances, the CA seriously erred in
Cathay Group.
The Ayala Group prematurely moved for the
execution of the compromise agreement.
In addition, there is likewise no sufficient proof that
the Cathay Group had violated the terms of the
Compromise Agreement, so as to warrant the RTC's
issuance of a writ of execution and a writ of
injunction in favor of the Ayala Group.
WHEREFORE, we GRANT the Petition for Review on
Certiorari. The Decision dated June 28, 2013 and the
Resolution dated November 26, 2013 of the Court of
Appeals in CA-G.R. SP No. 108480, as well as the
Order dated April 1, 2009 of the Regional Trial Court,
Branch 18, Tagaytay City in Civil Case No. TG-2335,
are hereby SET ASIDE and REVERSED.
SO ORDERED.
FORECLOSURE OF MORTGAGE: July 26, 2017 G.R.
No. 209452 GOTESCO PROPERTIES, INC., Petitioner
vs. SOLID BANK CORPORATION (NOW
METROPOLITAN BANK AND TRUST COMPANY),
Respondent
There are three (3) issues to be resolved before this
Court:
First, whether the foreclosure was premature;
Second, whether the requirements under Section 3
of Act No. 3135 were complied with; and
Finally, whether the Writ of Possession was properly
issued.
Petitioner defaulted in its obligation. Thus,
respondent was within its rights to foreclose the
property.
Petitioner defaulted in its obligation twice.  In this case, petitioner did not present any shred of
First, when it failed to pay the loan according to the
terms of the promissory note.
Second, when it failed to provide the additional
collateral demanded by respondent.
Petitioner never refuted that it defaulted in its
payment of the loan.
However, as the Court of Appeals correctly held,
that there was no perfected restructuring agreement
between the parties. The Civil Code requires
absolute acceptance of the offer before it can be
considered a binding contract:
Article 1319. Consent is manifested by the meeting
of the offer and the acceptance upon the thing and
the cause which are to constitute the contract. The
offer must be certain and the acceptance absolute.
A qualified acceptance constitutes a counter-offer.
Acceptance made by letter or telegram does not
bind the offerer except from the time it came to his
knowledge. The contract, in such a case, is
presumed to have been entered into in the place
where the offer was made.
Mendoza v. Court of Appeals96tells us that "[o]nly an
absolute and unqualified acceptance of a definite
offer manifests the consent necessary to perfect a
contract."
For a proposal to bind a party, there must be proof
that it consented to all the terms on offer.
To prove that the original period of payment was
extended, petitioner must show that respondent
unequivocally accepted the offer.
evidence which would prove that respondent agreed
to restructure the loan.
At best, petitioner only alleged that it sent a letter to
respondent to ask for a debt restructuring.
However, sending a proposal is not enough.
There must be proof that respondent expressly
accepted the offer.
Without an absolute acceptance, there is no
concurrence of 
minds.
Thus, this Court cannot bind respondent to
stipulations it never consented to.
Since the loan restructuring which Gotesco
proposed was not accepted, there is no question
that petitioner defaulted on the payment of its loan.
Petitioner's failure to provide the additional
collateral demanded by respondent constituted
another Event of Default under the Indenture.
Under the Indenture, petitioner agreed to maintain
the value of the collateral at a level at least equal to
the required collateral cover. Section 4.03 of the
Indenture provided:
The determination of whether the collateral is
impaired lies on respondent. As the Court of Appeals
aptly put, petitioner ignored respondent's demand Regional Trial Court with territorial jurisdiction over
"to its ruination." the real property to be foreclosed.
Under the Civil Code, there is default when a party It can be safely presumed that the RTC in this regard
obliged to deliver something fails to do so. In Social imposed standards and criteria for these
Security System v. Moonwalk Development & newspapers to qualify for the raffle, among the
Housing Corp.,this Court enumerated the elements criteria being that they [are] newspapers of general
of default: circulation in the locality.
In order that the debtor may be in default it is More so in this instance, when it merits judicial
necessary that the following requisites be present:  notice that the Remate, is one of the most widely
(1) that the obligation be demandable and already circulated tabloids in the country.
liquidated;  In any case, the alleged defect in the posting is
(2) that the debtor delays performance; and  superficial. The Notice of Sale was posted on August
(3) that the creditor requires the performance 15, 2000, while the auction sale took place on
judicially and extrajudicially. August 31, 2000. The Notice of Sale was posted for
Default generally begins from the moment the 16 days, only four (4) days less than what the law
creditor demands the performance of the obligation. requires.
(Citations omitted) The object of a notice of sale is to inform the public
When respondent asked to have the mortgaged of the nature and condition of the property to be
properties replaced, it was requiring petitioner to sold, and of the time, place and terms of the sale.
comply with its obligation to sustain the loan's Notices are given for the purpose of securing bidders
security at an appropriate level.  and to prevent a sacrifice of the property. If these
Clearly, petitioner defaulted when it refused to heed objects are attained, immaterial errors and mistakes
respondent's demand for additional collateral, as will not affect the sufficiency of the notice; but if
expressed in the February 9, 2000 letter. This gave mistakes or omissions occur in the notices of sale,
respondent enough reason to foreclose the property. which are calculated to deter or mislead bidders, to
As to the validity of the foreclosure proceeding, this depreciate the value of the property, or to prevent it
Court rules in the affirmative. from bringing a fair price, such mistakes or
omissions will be fatal to the validity of the notice,
It merits judicial notice that the newspaper where and also to the sale made pursuant thereto. (Citation
the Notice of Sale was published is chosen by raffle omitted)
among newspaper publications accredited by the
Generally, the purchaser in a public auction sale of a
foreclosed property is entitled to a writ of
possession during the redemption period. Section 7
of Act No. 3135, as amended by Act No. 4118,
provides:
It is ministerial upon the trial court to issue such
writ upon an ex parte petition of the purchaser.
However, this rule admits an exception.
The last sentence of Rule 39, Section 33 of the Rules
of Court is instructive:
Upon the expiration of the right of redemption, the
purchaser or redemptioner shall be substituted to
and acquire all the rights, title, interest and claim of
the judgment obligor to the property as of the time of
the levy. The possession of the property shall be
given to the purchaser or last redemptioner by the
same officer unless a third party is actually holding
the property adversely to the judgment obligor.
(Emphasis supplied.)
This Court in China Banking Corp. v. Spouses
Lozada145discussed that when the foreclosed
property is in the possession of a third party, the
issuance of a writ of possession in favor of the
purchaser ceases to be ministerial and may no
longer be done ex parte.146 However, for this
exception to apply, the property must be held by the
third party adversely to the mortgagor.
The Court of Appeals correctly held that this case
does not fall under the exception. Since it is the
petitioner, and not a third party, who is occupying
the property, the issuance of the
Writ of Possession is ministerial.
Any question regarding the validity of the mortgage
or its foreclosure cannot be a legal ground for the
refusal to issue a writ of possession.
Regardless of whether or not there is a pending suit
for the annulment of the mortgage or the foreclosure
itself, the purchaser is entitled to a writ of
possession, without prejudice, of course, to the
eventual outcome of the pending annulment
case.150 (Citation omitted)
As the winning bidder, respondent is entitled to the
Writ of Possession.
WHEREFORE, the Petition for Review on Certiorari is
hereby DENIED. The assailed Decision of the Court
of Appeals dated May 31, 2013 and Resolution dated
October 7, 2013 in CA-G.R. CV No. 97748 are
AFFIRMED.
SO ORDERED.
Luis Juan L. Virata and UEM-Mara Philippines
Corporation Vs. Alejandro Ng Wee Westmont
Investment Corp., et al./Westmont Investment,
Corporation Vs. Alejandro Ng Wee/Manuel Estrella
Vs. Alejandro Ng Wee/Simeon Cua, et al. Vs.
Alejandro Ng Wee/Anthony T. Reyes Vs. Alejandro Ng
Wee, et al.
G.R. No. 220926/G.R. No. 221058/G.R. No.
221109/G.R. No. 221135/G.R. No. 221218. July 5,
2017
a. That Wincorp defrauded Ng Wee is a finding
of fact that is conclusive on this Court
Enumerated in Medina v. Mayor Asistio, Jr.93 are the
recognized exceptions to the general rule.94 But any business at Makati City as evident from the
insofar as Wincorp is concerned, it failed to Certification dated January 3, 2006 issued by the
establish that any of these exceptions obtain in the Business Permits Office Of Makati City; 
present case. Thus, the Court sustains the finding of (b) it is not engaged in any lucrative business to
the trial court, as affirmed by the CA, that Wincorp is finance its operation; Despite the fact that its
liable to Ng Wee for perpetrating an elaborate primary purpose is to "invest in, purchase, or
scheme to defraud its investors. As held by the CA: otherwise acquire and own, hold, use, sell, assign,
[Ng Wee] would not have placed funds or invested transfer, mortgage, pledge, exchange, or otherwise
[in] the "sans recourse" transactions under the dispose of real or personal property of every kind
Power Merge borrower account had he not been and description ... ," no proof was adduced to show
deceived into believing that Power Merge is that it was carrying out or has carried out this
financially capable of paying the returns of his mandate in accordance with the law; 
investments/money placements. Wincorp accredited (c) From the time of its incorporation until the
Power Merge as a borrower, given it a credit line in revocation of its Certificate of Incorporation on
the maximum amount of ₱2,500,000,000.00, March 15, 2004, Power Merge has failed to file
Philippine Currency, allowed it to make drawdowns annual reports required by the SEC such as General
up to ₱2,183,755,253.ll, Philippine Currency, Information Sheets and Financial Statements; 
matched it with [Ng Wee's] investments/ money (4) No security whatsoever was demanded by
placements to the extent of ₱213,290,410.36, Wincorp or furnished by Power Merge in relation to
Philippine Currency, notwithstanding telling signs its credit line and drawdowns. 
which immediately cast doubt on its ability to Indeed, no person in his proper frame of mind would
perform its obligations under the Credit Line venture to lend hundreds of millions of pesos to a
Agreements, Promissory Notes and [Confirmation business entity having such a financial setup. x x x
Advices], to wit:  xxxx
(1) Power Merge had only been in existence as a The intent to defraud and deceive [Ng Wee] of his
corporation for barely two (2) years when it was investments/ money placements was manifest from
accredited as borrower by Wincorp;  the very start. Wincorp and Power Merge entered
(2) Power Merge is a thinly capitalized corporation into a Credit Line Agreement on February 15, 1999
with only ₱37,500,000.00 subscribed capital stock;  and an Amendment to Credit Line Agreement on
(3) Power Merge is not an ongoing concern because  March 15, 1999. It is interesting to note that they
(a) Despite the fact that Power Merge's principal simultaneously executed two Side Agreements
place of business is at 151 Paseo de Roxas St., which are peculiar because: 
Makati City, it has neither registered nor conducted (1) The dates of execution of the two Side
Agreements coincide with the dates of execution of means which human ingenuity can device, and
the credit agreements;  which are resorted to by one individual to secure an
(2) [The] two Side Agreements were executed by the advantage over another by false suggestions or by
same exact parties: Antonio Ong and Anthony Reyes suppression of truth and includes all surprise, trick,
for and on behalf of Wincorp and [Virata] and cunning, dissembling, and any unfair way by which
Augusto Geluz for and on behalf of Power Merge;  another is cheated.96
(3) The Credit Line Agreement dated February 15, Under Article 1170 of the New Civil Code, those who
1999 and the First Side Agreement dated February in the performance of their obligations are guilty of
15, 1999 were both acknowledged before notary fraud are liable for damages.
public, Atty. Fina De La Cuesta-Tantuico while the The fraud referred to in this Article is the deliberate
Amendment to Credit Line Agreement dated March and intentional evasion of the normal fulfillment of
15, 1999 and the Second Side Agreement dated obligation.97 Clearly, this provision is applicable in
March 15, 1999 were both acknowledged before the case at bar. It is beyond quibble that Wincorp
notary public, Atty. Eric R.G. Espiritu;  foisted insidious machinations upon Ng Wee in order
(4) The two Side Agreements have the same exact to inveigle the latter into investing a significant
provisions as the two credit agreements insofar as it amount of his wealth into a mere empty shell of a
purports to extend a credit line and increase the corporation. And instead of guarding the
credit line of Power Merge but the two Side investments of its clients, Wincorp executed Side
Agreements relieve Power Merge from any liability Agreements that virtually exonerated Power Merge
arising from the execution of the agreements and of liability to them; Side Agreements that the
promissory notes.95 investors could not have been aware of, let alone
Jurisprudence defines "fraud" as the voluntary authorize.
execution of a wrongful act, or a willful omission, The summation of Wincorp's actuations establishes
knowing and intending the effects which naturally the presence of actionable fraud, for which the
and necessarily arise from such act or omission. In company can be held liable. 
its general sense, fraud is deemed to comprise In Jason vs. People, the Court upheld the ruling that
anything calculated to deceive, including all acts where one states that the future profits or income of
and omissions and concealment involving a breach an enterprise shall be a certain sum, but he actually
of legal or equitable duty, trust, or confidence justly knows that there will be none, or that they will be
reposed, resulting in damage to another, or by which substantially less than he represents, the
an undue and unconscientious advantage is taken of statements constitute an actionable fraud where the
another.  hearer believes him and relies on the statement to
Fraud is also described as embracing all multifarious his injury.98
Just as in Jason, it is abundantly clear in the present
case that the profits which Wincorp promised to the
investors would not be realized by virtue of the Side
Agreements. The investors were kept in the dark as
regards the existence of these documents, and were
instead presented with Confirmation Advices from
Wincorp to give the transactions a semblance of
legitimacy, and to convince, if not deceive, the
investors to roll over their investments or to part
with their money some more.
COMPROMISE AGREEMENT ENTERED INTO IN
FOREIGN LAND : June 7, 2017 G.R. No. 18910
CHIQUITA BRANDS, INC. and CHIQUITA BRANDS
INTERNATIONAL, INC., Petitioners vs. HON. GEORGE
E. OMELIO, REGIONAL TRIAL COURT, DAVAO CITY,
BRANCH 14, SHERIFF ROBERTO C. ESGUERRA,
CECILIO G. ABENION, and 1,842 OTHER PLAINTIFFS
IN CIVIL CASE NO. 95-45, Respondents
A compromise is defined under the Civil Code as "a
contract whereby the parties, by making reciprocal
concessions, avoid a litigation or put an end to one
already commenced."206 
It may either be judicial or extrajudicial depending
on its object or the purpose of the parties.207
A compromise is judicial if the parties' purpose is to
terminate a suit already commenced.208
On the other hand, a compromise is extrajudicial if
its object is to avoid litigation.
In any case, a compromise validly entered into has
the authority and effect of res judicata as between
the parties.210 To this extent, a judicial compromise
and an extrajudicial compromise are no different
from each other.
However, unlike an extrajudicial compromise, a
compromise that has received judicial imprimatur
"becomes more than a mere contract."211 A judicial
compromise is regarded as a "determination of the
controversy" between the parties and "has the force
and effect of [a final] judgment."212 In other words,
it is both a contract and "a judgment on the
merits."213 It may neither be disturbed nor set aside
except in cases where there is forgery or when
either of the parties' consent has been vitiated.214
The doctrine on immutability of judgments applies to
compromise agreements approved by the courts in
the same manner that it applies to judgments that
have been rendered on the basis of a full-blown
trial.215 Thus, a judgment on compromise that has
attained finality cannot be "modified in any respect,
even if the modification is meant to correct
erroneous conclusions of fact and law, and whether
it be made by the court that rendered it or by the
Highest Court of the land."216
A judgment on compromise may be executed just
like any other final judgment217 in the manner
provided in the Rules of Court.218 The writ of
execution derives its validity from the judgment it
seeks to enforce and must essentially conform to
the judgment's terms.219 It can neither be wider in
scope nor exceed the judgment that gives it life.220
Otherwise, it has no validity. Thus, in issuing writs of
execution, courts must look at the terms of the
judgment sought to be enforced.
Under the judicially approved Compromise
Agreement, petitioners are obliged to deposit the
settlement amount in escrow within 10 business
days after they receive a signed Compromise
Agreement from the counsel of the claimants.
There was nothing in the Compromise Agreement
that required petitioners to ensure the distribution of
the settlement amount to each claimant. Petitioners'
obligation under the Compromise Agreement was
limited to depositing the settlement amount in
escrow.227
On the other hand, the actual distribution of the
settlement amounts was delegated to the chosen
mediator, Mr. Mills.228  laws."263 The laws of a foreign country must "be
To require proof that the settlement amounts have
been withdrawn and delivered to each claimant229
would enlarge the obligation of petitioners under the
Compromise  the same as domestic law.265 Unfortunately, there
Agreement.
Consequently, the Omnibus Order dated December
14, 2006, which directed the implementation of the
Writ of Execution, is likewise void.
Ordinarily, courts have the ministerial duty to grant
the execution of a final judgment.230 The prevailing
party may immediately move for execution of the
judgment, and the issuance of the writ follows as a
matter of course. 231Execution, being "the final
stage of litigation . . . [cannot] be frustrated. "232
Nevertheless, the execution of a final judgment may
be stayed or set aside in certain cases.
"Courts have jurisdiction to entertain motions to
quash previously issued writs of execution[. ]"233
They "have the inherent power, for the advancement
of justice, to correct the errors of their ministerial
officers and to control their own processes. "234
A writ of execution may be stayed or quashed when
"facts and circumstances transpire" after judgment
has been rendered that would make "execution
impossible or unjust."235
Under the Compromise Agreement, the law that shall
govern its interpretation is the law of Texas, United
States. 262 In this jurisdiction, courts are not
authorized to "take judicial notice of foreign
properly pleaded and proved" as facts.264
Otherwise, under the doctrine of processual
presumption, foreign law shall be presumed to be
is no evidence that Texan law has been proven as a
fact. Hence, this Court is constrained to apply
Philippine law.
Solidary liability under Philippine law is not to be
inferred lightly but must be clearly expressed.266
Under Article 1207 of the Civil Code, there is solidary
liability when "the obligation expressly so states, or
when the law or the nature of the obligation requires
solidarity."267
The Compromise Agreement provided:
25. Affiliates and Successors
This Agreement and the rights, obligations, and
covenants contained herein shall inure to the benefit
of and be binding upon The Plaintiffs and Settling
Defendants and their respective subsidiaries,
affiliates, controlled and related entities,
successors, and assigns.268
Clearly, the Compromise Agreement did not impose
solidary liability on the parties' subsidiaries,
affiliates, controlled, and related entities,
successors, and assigns but merely allowed them to
benefit from its effects. Thus, respondent Judge
Omelio gravely abused his discretion in holding that
the petitioners' subsidiaries and affiliates were
solidarily liable under the Compromise Agreement.
Respondent court's fervor in ordering the execution
of the compromise agreement appears to be fueled
by its compassion towards the workers who have
allegedly been exposed to DBCP. However, prudence
and judicial restraint dictate that a court's sympathy
towards litigants should yield to established legal
rules. Moreover, this jurisdiction should not alter the
mechanism established for claims here and abroad
as it can undo the entire process for all the farmers
involved.
WHEREFORE, the Petition for Certiorari is GRANTED.
The assailed orders and writs are ANNULLED and
SET ASIDE for having been issued with grave abuse
of discretion.
SO ORDERED.
REAL ESTATE MORTGAGE: G.R. No. 191174, June
07, 2017 PARADIGM DEVELOPMENT CORPORATION
OF THE PHILIPPINES, Petitioner, v. BANK OF THE
PHILIPPINES ISLANDS, Respondent.
The registration of the REMs, even if 
contrary to the supposed intent of the
parties, did not affect the validity of 
the mortgage contracts
According to PDCP, when FEBTC registered both
REMs, even 
if the intent was only to register one, the validity of
both REMs was vitiated by lack of consent. PDCP
claims that said intent is supported by the fact that
the REMs were constituted merely as "partial
security" for Sengkon's obligations and therefore
there was really no intent to be bound under both -
but only in one - REM.
The Court cannot see its way clear through PDCP's
argument. To begin with, the registration of the REM
contract is not essential to its validity. Article 2085
of the Civil Code provides:
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;
(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 of the Civil Code
reads:
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.
x x x x (Emphasis ours)
In Mobil Oil Philippines, Inc. v. Diocares, et al., 37
the trial court refused to order the foreclosure of the
mortgaged properties on the ground that while an
unregistered REM contract created a personal
obligation between the parties, the same did not
validly establish a REM. In reversing the trial court,
the Court said:
The lower court predicated its inability to order the
foreclosure in view of the categorical nature of the
opening sentence of [Article 2125] that 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."
Not[e] that it ignored the succeeding sentence: "If
the instrument is not recorded, the mortgage is
nevertheless binding between the parties." Its
conclusion, however, is that what was thus created
was merely "a personal obligation but did not
establish a [REM]."
Such a conclusion does not commend itself for
approval. 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.
xxxx
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." In the language of the Report
of the Code Commission: "In Article [2125] an
additional provision is made that if the instrument of
mortgage is not recorded, the mortgage, is
nevertheless binding between the parties." We are
not free to adopt then an interpretation, even
assuming that the codal provision lacks the
forthrightness and clarity that this particular norm
does and therefore requires construction, that would
frustrate or nullify such legislative objective.38
(Citation omitted and emphasis and underlining ours)
Hence, even assuming that the parties indeed
agreed to register only one of the two REMs, the
subsequent registration of both REMs did not affect
an already validly executed REM if there was no
other basis for the declaration of its nullity. That the
REMs were intended merely as "partial security"
does not make PDCP's argument more plausible
because as aptly observed by the CA, the PDCP's act
of surrendering all the titles to the properties to
FEBTC clearly establishes PDCP's intent to mortgage
all of the four properties in favor of FEBTC to secure
Sengkon's obligation under the Credit Line. The
Court notes that the principal debtor, Sengkon, has
several obligations under its Omnibus Line
corresponding to the several credit sub-facilities
made available to it by FEBTC. As found by the trial
court, PDCP intended to be bound only for Sengkon's
availments under the Credit Line sub-facility and not
for just any of Sengkon's availments. Hence, it is in
this sense that the phrase "partial security" should
be logically understood.
In this regard, PDCP argued that what its President
signed is a pro-forma REM whose important details
were still left in blank at the time of its execution.
But notably, nowhere in PDCP's Amended Complaint
did it anchor its cause of action for the nullity of the
REMs on this ground. While it indeed alleged this
circumstance, PDCP's Amended Complaint is
essentially premised on the supposed fraud
employed on it by FEBTC consisting of the latter's
assurances that the REMs it already signed would
not be registered.
In Solidbank Corporation v. Mindanao Ferroalloy
Corporation,39 the Court discussed the nature of
fraud that would annul or avoid a contract, thus:
Fraud refers to all kinds of deception - whether
through insidious machination, manipulation,
concealment or misrepresentation that would lead
an ordinarily prudent person into error after taking
the circumstances into account. In contracts, a
fraud known as dolo causante or causal fraud is
basically a deception used by one party prior to or
simultaneous with the contract, in order to secure
the consent of the other. Needless to say, the deceit
employed must be serious. In contradistinction, only
some particular or accident of the obligation is
referred to by incidental fraud or dolo incidente, or
that which is not serious in character and without
which the other party would have entered into the
contract anyway.40 (Citations omitted)
Under Article 1344 of the Civil Code, the fraud must
be serious to annul or avoid a contract and render it
voidable. This fraud or deception must be so
material that had it not been present, the defrauded
party would not have entered into the contract.
In the present case, even if FEBTC represented that
it will not register one of the REMs, PDCP cannot
disown the REMs it executed after FEBTC reneged
on its alleged promise. As earlier stated, with or
without the registration of the REMs, as between the
parties thereto, the same is valid and PDCP is
already bound thereby. The signature of PDCP's
President coupled with its act of surrendering the
titles to the four properties to FEBTC is proof that no
fraud existed in the execution of the contract.
Arguably at most, FEBTC's act of registering the
mortgage only amounted to dolo incidente which is
not the kind of fraud that avoids a contract.
No novation took place
The Court likewise agrees with the CA that no
novation took place in the present case. 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. Article
1293 of the Civil Code defines novation as "consists
in substituting a new debtor in the place of the
original one, [which] may be made even without the
knowledge or against the will of the latter, but not
without the consent of the creditor." However, while
the consent of the creditor need not be expressed
but may be inferred from the creditor's clear and
unmistakable acts,41 to change the person of the
debtor, the former debtor must be expressly
released from the obligation, and the third person or
new debtor must assume the former's place in the
contractual relation.42
Thus, in Ajax Marketing and Development
Corporation v. CA,43 the Court had already ruled
that:
The well-settled rule is that novation is never
presumed. Novation will not be allowed unless it is
clearly shown by express agreement, or by acts of
equal import. Thus, to effect an objective novation it
is imperative that the new obligation expressly
declare that the old obligation is thereby
extinguished, or that the new obligation be on every
point incompatible with the new one. In the same
vein, to effect a subjective novation by a change in
the person of the debtor it is necessary that the old
debtor be released expressly from the obligation,
and the third person or new debtor assumes his
place in the relation. There is no novation without
such release as the third person who has assumed
the debtor's obligation becomes merely a co-debtor
or surety.44 (Emphasis ours)
In the present case, PDCP failed to prove by
preponderance of evidence that Sengkon was
already expressly released from the obligation and
that STI assumed the former's obligation. Again, as
correctly pointed out by the CA, the Deed of
Assumption of Line/Loan with Mortgage (Deed of
Assumption) which was supposed to embody STI's
assumption of all the obligations of Sengkon under
the line, including but not necessarily limited to the
repayment of all the outstanding availments thereon,
as well as all applicable interests and other charges,
was not signed by the parties.
Contrary to PDCP's claim, the CA's rejection of its
claim of novation is not based on the absence of the
mortgagor's conformity to the Deed of Assumption.
The CA's rejection is based on the fact that the non-
execution of the Deed of Assumption by Sengkon,
STI and FEBTC rendered the existence of novation
doubtful because of lack of clear proof that Sengkon
is being expressly released from its obligation; that
STI was already assuming Sengkon's former place in
the contractual relation; and that FEBTC is giving its
conformity to this arrangement. While FEBTC indeed
approved Sengkon's request for the "change in
account name" from Sengkon to STI, such mere
change in account name alone does not meet the
required degree of certainty to establish novation
absent any other circumstance to bolster said
conclusion.
FEBTC's failure to send personal 
notice to the mortgagor is fatal to the
validity of the foreclosure proceedings
Indeed, FEBTC's failure to comply with its
contractual obligation to send notice to PDCP of the
foreclosure sale is fatal to the validity of the
foreclosure proceedings. In Metropolitan Bank v.
Wong,54 the Court ruled that while as a rule,
personal notice to the mortgagor is not required,
such notice may be subject of a contractual
stipulation, the breach of which is sufficient to
nullify the foreclosure sale, thus:
In resolving the first query, we resort to the
fundamental principle that a contract is the law
between the parties and, that absent any showing
that its provisions are wholly or in part contrary to
law, morals, good customs, public order, or public
policy, it shall be enforced to the letter by the
courts. Section 3, Act No. 3135 reads:
xxxx
The Act only requires (1) the posting of notices of
sale in three public places, and (2) the publication of
the same in a newspaper of general circulation.
Personal notice to the mortgagor is not necessary.
Nevertheless, the parties to the mortgage contract
are not precluded from exacting additional
requirements. In this case, petitioner and
respondent in entering into a contract of [REM],
agreed inter alia:
"all correspondence relative to this mortgage,
including demand letters, summonses, subpoenas, or
notifications of any judicial or extra-judicial action
shall be sent to the MORTGAGOR at 40-42 Aldeguer
St. Iloilo City, or at the address that may hereafter
be given in writing by the MORTGAGOR to the
MORTGAGEE."
Precisely, the purpose of the foregoing stipulation is
to apprise respondent of any action which petitioner
might take on the subject property, thus according
him the opportunity to safeguard his rights. When
petitioner failed to send the notice of foreclosure
sale to respondent, he committed a contractual
breach sufficient to render the foreclosure sale on
November 23, 1981 null and void.55 (Citation omitted
and italics in the original)
In trivializing FEBTC's failure to send personal notice
to PDCP however, the CA, citing Philippine National
Bank v. Nepomuceno Productions, Inc.,56 ruled that
since the principal object of a notice of sale is not so
much to notify the mortgagor but to inform the
public in general of the particularities of the
foreclosure, then personal notice to the mortgagor
may be disregarded.57 The cited case, however, is
inapplicable because that case did not in fact
involve stipulations on personal notice to mortgagor
nor the sending of notice to a wrong address. The
issue involved in that case is whether the parties to
the mortgage can validly waive the statutory
requirements of posting and publication and not
whether the bank can ignore a contractual
stipulation for personal notice. Neither is PNB v.
Spouses Rabat58 likewise cited by the CA applicable
because the trial court therein found that the
mortgage contract did not in fact require that
personal service of notice of foreclosure sale be
given to the mortgagors. The CA's cavalier disregard
of the mortgagor's contractual right to notice of the
foreclosure sale runs contrary to jurisprudence. In
Wong,59 the Court already had the occasion to
observe:
It is bad enough that the mortgagor has no choice
but to yield his property in a foreclosure proceeding.
It is infinitely worse, if prior thereto, he was denied
of his basic right to be informed of the impending
loss of his property. x x x.60
While the CA acknowledged that there was indeed a
contractual stipulation for notice to PDCP as
mortgagor, it considered the absence of a particular
address in the space provided therefor in the
mortgage contract as merely evincing an expression
of "general intent" between the parties and that this
cannot prevail against their "specific intent" that Act
No. 3135 be the controlling law between them, citing
Cortes v. Intermediate Appellate Court.61
The Court cannot agree with the CA. To begin with,
the value of the doctrine enunciated in Cortes has
long been considered questionable by this Court.
Thus, in Global Holiday Ownership Corporation v.
Metropolitan Bank and Trust Company,62 the Court
held:
But what is stated in Cortes no longer applies in
light of the Court's rulings in Wong and all the
subsequent cases, which have been consistent.
Cortes has never been cited in subsequent rulings of
the Court, nor has the doctrine therein ever been
reiterated. Its doctrinal value has been diminished
by the policy enunciated in Wong and the
subsequent cases; that is, that in addition to Section
3 of Act 3135, the parties may stipulate that
personal notice of foreclosure proceedings may be
required. Act 3135 remains the controlling law, but
the parties may agree, in addition to posting and
publication, to include personal notice to the
mortgagor, the non-observance of which renders the
foreclosure proceedings null and void, since the
foreclosure proceedings become an illegal attempt
by the mortgagee to appropriate the property for
itself.
Thus, we restate: the general rule is that personal
notice to the mortgagor in extrajudicial foreclosure
proceedings is not necessary, and posting and
publication will suffice. Sec. 3 of Act 3135 governing
extra-judicial foreclosure of [REMs], as amended by
Act 4118, requires only posting of the notice of sale
in three public places and the publication of that
notice in a newspaper of general circulation. The
exception is when the parties stipulate that personal
notice is additionally required to be given the
mortgagor. Failure to abide by the general rule, or its
exception, renders the foreclosure proceedings null
and void.63 (Citation omitted, italics ours, and
emphasis and underlining in the original deleted)
In fact, the 2002 case of Nepomuceno
Productions,64 cited by the CA, already made it
clear that while personal notice to the mortgagor in
extrajudicial foreclosure proceedings is not
necessary, this holds true only if the parties did not
stipulate therefor. Stated differently, personal notice
is necessary if the parties so agreed in their
mortgage contract. In the present case, the parties
provided in their REMs that:
12. All correspondence relative to this mortgage,
including demand letters, summonses, subpoenas, or
notifications of any judicial or extrajudicial action
shall be sent to the [PDCP] at _______________ or at the
address that may hereafter be given in writing by the
[PDCP] to the [FEBTC]. x x x.65
This provision clearly establishes the agreement
between the parties that personal notice is required
before FEBTC may proceed with the foreclosure of
the property and thus, FEBTC's act of proceeding
with the foreclosure despite the absence of personal
notice to the mortgagor was its own lookout.
That the portion on the mortgagor's address was left
in blank cannot be simply swept under the rug as "an
expression of general intent" that cannot prevail of
the parties' specific intent not to require personal
notice. Apart from the fact that this reasoning is
based on a questionable doctrine, the CA's ruling
completely ignored the fact that the mortgage
contract containing said stipulation was a standard
contract prepared by FEBTC itself. If the latter did
not intend to require personal notice, on top of the
statutory requirements of posting and publication,
then said provision should not have at all been
included in the mortgage contract. In other words,
the REMs in this case are contracts of adhesion, and
in case of doubt, the doubt should be resolved
against the party who prepared it.66
Accordingly, the CA should have considered the
"doubt" created by the blank space in the mortgage
contract against FEBTC and not in its favor.
Nonetheless, even if the Court ignores this particular
rule of interpretation, the fact that FEBTC caused
the sending of a notice, albeit at a wrong address, to
PDCP is itself a clear proof that the parties did
intend to impose a contractual requirement of
personal notice, FEBTC's undisputed breach of
which sufficiently nullifies the foreclosure
proceeding.
With the foregoing, the Court finds it unnecessary to
discuss PDCP's argument based on the alleged
violation of its constitutional right against
impairment of obligations and contract.
WHEREFORE, premises considered, the petition is
GRANTED. The Decision dated November 25, 2009
and Resolution dated February 2, 2010 of the Court
of Appeals in CA-G.R. CV No. 89755 are hereby
ANNULLED and SET ASIDE. The Decision dated April
16, 2007 of the Regional Trial Court of Quezon City,
Branch 222, in Civil Case No. Q01-44630 is
REINSTATED and AFFIRMED.
SO ORDERED.
RIGHT OF A MEMBER TO INSPECT CORPORATE
RECORDS: G.R. No. 211108, June 07, 2017
ALEJANDRO D.C. ROQUE, Petitioner, v. PEOPLE OF
THE PHILIPPINES, Respondent.
On November 17, 1993, Barangay Mulawin Tricycle
Operators and Drivers Association, Inc. (BMTODA)
became a corporation duly registered with the
Securities and Exchange Commission (SEC).
Sometime in August 2003, Oscar Ongjoco (Ongjoco),
a member of BMTODA, learned that BMTODA's funds
were missing. In a letter, Ongjoco requested copies
of the Association's documents pursuant to his right
to examine records under Section 74 of the
Corporation Code of the Philippines (Corporation
Code). However, Singson, the Secretary of BMTODA,
denied his request.
Ongjoco also learned that the incumbent officers
were holding office for three years already, in
violation of the one-year period provided for in
BMTODA's by-laws. He then requested from Roque,
the President of BMTODA, a copy of the list of its
members with the corresponding franchise numbers
of their respective tricycle fees and the franchise
fees paid by each member, but Roque denied
Ongjoco's request.
Ongjoco filed an Affidavit-Complaint against Roque
and Singson for violation of Section 74 in relation to
Section 144 of the Corporation Code because of their
refusal to furnish him copies of records pertaining to
BMTODA.
The Office of the City Prosecutor of San Jose Del
Monte, Bulacan found probable cause to indict
Roque and Singson. Hence, an Information was filed
against them, which reads:
In an Order7 dated November 12, 2008, the RTC
granted the motion and gave due course to Roque
and Singson's demurrer to evidence. The RTC ruled
that said association failed to prove its existence as
a corporation. Hence, a violation under the
Corporation Code cannot be made applicable against
its officers. The fallo thereof reads:
Accordingly, this demurrer is GIVEN DUE COURSE
and the instant case is hereby DISMISSED.
SO ORDERED.8
On appeal, the CA reversed and set aside the Order
dated November 12, 2008 of the RTC. The CA ruled
that BMTODA is a duly registered corporation. The
CA stated that a Petition to Lift Order of Revocation
and the SEC Order Lifting the Revocation were
presented in evidence; and that logic dictates that
such documentary evidence presupposes a duly
registered and existing entity. The dispositive
portion thereof reads:
WHEREFORE, premises considered, the instant
Petition for Certiorari is hereby GRANTED.
Accordingly, the court a quo's Order dated 12
November 2008 is hereby ANNULLED and SET
ASIDE.
This case is hereby remanded to the court a quo for
the presentation of defense evidence. SO
ORDERED.9
Hence, Roque, thru his counsel, filed the present
Petition.
The appeal lacks merit.
Section 7410 of the Corporation Code provides for
the liability for damages of any officer or agent of
the corporation for refusing to allow any director,
trustee, stockholder or member of the corporation to
examine and copy excerpts from its records or
minutes. Section 144 of the same Code further
provides for other applicable penalties in case of
violation of any provision of the Corporation Code.
Hence, to prove any violation under the
aforementioned provisions, it is necessary that: 
(1) a director, trustee, stockholder or member has
made a prior demand in writing for a copy of
excerpts from the corporations records or minutes; 
(2) any officer or agent of the concerned corporation
shall refuse to allow the said director, trustee,
stockholder or member of the corporation to
examine and copy said excerpts;  warrant the extinction of the corporation itself such
(3) if such refusal is made pursuant to a resolution or
order of the board of directors or trustees, the
liability under this section for such action shall be
imposed upon the directors or trustees who voted
for such refusal; and  cause the extinction or diminution of the rights and
(4) where the officer or agent of the corporation sets
up the defense that the person demanding to
examine and copy excerpts from the corporation's
records and minutes has improperly used any
information secured through any prior examination
of the records or minutes of such corporation or of
any other corporation, or was not acting in good
faith or for a legitimate purpose in making his
demand, the contrary must be shown or proved.11
Clearly, Ongjoco, as a member of BMTODA, had a
right to examine documents and records pertaining
to said association.
While it appears that the registration of BMTODA as
a corporation with the SEC was revoked on
September 30, 2003, the letter-request of Ongjoco to
Singson, which was dated while BMTODA's
registration was revoked, was actually received by
Singson after the revocation was lifted. In a Letter
dated October 11, 2004, the General Counsel of the
SEC made it clear that the SEC lifted the revocation
of BMTODA's registration on August 30, 2004. As the
CA correctly observed, the letter-request was
received by Singson on September 23, 2004 when
BMTODA had regained its active status.14
In any case, the revocation of a corporation's
Certificate of Registration does not automatically
that its rights and liabilities are likewise altogether
extinguished. In the case of Clemente v. Court of
Appeals15, the Court explained that the termination
of the life of a juridical entity does not, by itself,
liabilities of such entity nor those of its owners and
creditors.
Thus, the revocation of BMTODA's registration does
not automatically strip off Ongjoco of his right to
examine pertinent documents and records relating
to such association.
Also, since Roque admitted the revocation of
BMTODA's registration16, he cannot come forward
and disclaim BMTODA's registration with the SEC as
a corporation. It is logical to presume that a
registration precedes the revocation thereof; as any
registration cannot be revoked without its valid
existence.
Moreover, Roque also tries to exculpate himself from
liability by claiming Singson's denial of the request
of Ongjoco as Singson's personal act. We do not
agree.
A reading of this present Petition reveals that Roque
admitted17 his denial of Ongjoco's request, i.e., to
furnish him a copy of BMTODA's list of its members
with the corresponding franchise body numbers of
their respective tricycles and franchise fees paid by
each member. Also, what was requested from
Singson pertains to an entirely different document.
Thus, Singson's denial is immaterial, and does not
detract from Roque's denial of Ongjoco's request to
access the above-mentioned document. For his
individual and separate act, Roque should be held
accountable. Hence, Roque's denial is
unquestionably considered as a violation under the
Corporation Code.
WHEREFORE, the instant petition is DENIED. The
Decision dated August 31, 2012 and Resolution
dated January 22, 2014 of the Court of Appeals are
AFFIRMED in toto. SO ORDERED.
ACCELERATION CLAUSE: G.R. No. 228435, June 21,
2017 KT CONSTRUCTION SUPPLY, INC.,
REPRESENTED BY WILLIAM GO, Petitioner, v.
PHILIPPINE SAVINGS BANK, Respondent.
It has long been settled that an acceleration clause
is valid and produces legal effects.9 In the case at
bench, the promissory note explicitly stated that
default in any of the installments shall make the
entire obligation due and demandable even without
notice or demand.
Thus, KT Construction was erroneous in saying that
PSBank's complaint was premature on the ground
that the loan was due only on October 12, 2011.
KT Construction's entire loan obligation became due
and demandable when it failed to pay an installment
pursuant to the acceleration clause.
Moreover, KT Construction could not evade
responsibility by claiming that it had not received
any demand letter for the payment of the loan.
PSBank had sent a demand letter,10 dated February
3, 2011, asking KT Construction to pay the
remaining obligation within five (5) days from receipt
of the letter.
More importantly, even granting that KT
Construction did not receive the demand letter, the
loan still became due and demandable because the
parties expressly waived the necessity of demand.11
Further, KT Construction is mistaken that it could
not be held liable for the entire loan obligation
because PSBank failed to prove how many
installments it had failed to pay.
In Bognot v. RRI Lending Corporation,12 the Court
explained that once the indebtedness had been
established, the burden is on the debtor to prove
payment, to wit:chanRoblesvirtualLawlibrary
Jurisprudence tells us that one who pleads payment
has the burden of proving it; the burden rests on the
defendant to prove payment, rather than on the
plaintiff to prove non-payment.
Indeed, once the existence of an indebtedness is
duly established by evidence, the burden of showing
with legal certainty that the obligation has been
discharged by payment rests on the debtor.13
In the case at bench, KT Construction admitted that
it obtained a loan with PSBank. It, nevertheless,
averred that it had been regularly paying the loan.
Thus, KT Construction could have easily provided
deposit slips and other documentary evidence to
prove the fact of payment.
It, however, merely alleged that it religiously paid its
obligation without presenting any evidence to
substantiate the said obligation.
In a further attempt to absolve itself from the loan
obligation, KT Construction argued that the
promissory note was null and void because it was a
contract of adhesion. It may be true that KT
Construction had no hand in its preparation. Still, it
has been ruled in a plethora of cases that a contract
of adhesion is not invalid per se.14
Contracts of adhesion, where one party imposes a
ready-made form of contract on the other, are not
entirely prohibited. The one who adheres to the
contract is, in reality, free to reject it entirely; if he
adheres, he gives his consent.15
KT Construction also claimed that attorney's fees
should not be awarded for lack of legal basis. The
promissory note, however, categorically provided for
the payment of attorney's fees in case of default.
The said stipulation constituted a penal clause to
which the parties were bound, it being part of the
contract between the parties.16
KT Construction was mistaken in relying on Article
2208 of the Civil Code because the same applies
only when there is no stipulation as to the payment
of attorney's fees in case of default.
Only parties to the case may be bound by the court's
decision
The courts a quo, however, erred in holding Go and
Go-Tan solidarity liable for the judgment award in
PSBank's favor. In Guy v. Gacott,17 the Court ruled
that a judgment binds only those who were made
parties in the case, to
wit:chanRoblesvirtualLawlibrary
In the case at bench, Go and Go-Tan were neither
impleaded in the civil case nor served with
summons. They merely acted as representatives of
KT Construction, which was impleaded as the
defendant in the complaint. It is for this reason that
only KT Construction filed an answer to the
complaint. Thus, it is clear that the trial court never
acquired jurisdiction over Go and Go-Tan.
WHEREFORE, the April 22, 2016 Decision and
November 23, 2016 Resolution of the Court of
Appeals in CA-G.R. CV No. 103037, are AFFIRMED
with MODIFICATION, in that, only petitioner KT
Construction Supply, Inc. is bound by the judgment
award.
SO ORDERED.
G.R. No. 213486, April 26, 2017 EDITHA M.
CATOTOCAN, Petitioner, v. LOURDES SCHOOL OF
QUEZON CITY, INC./LOURDES SCHOOL, INC. AND
REV. FR. CESAR F. ACUIN, OFM CAP, RECTOR,
Respondent.
On appeal, on October 20, 2010,19 the NLRC
affirmed the Labor Arbiter's decision. The NLRC held
that Catotocan performed all the acts that a retired
employee would do after retirement under the new
school policy. These were voluntary acts and she
cannot be considered to have been forced to retire
or to have been illegally dismissed.
Catotocan moved for reconsideration, but the same
was denied in a Resolution dated May 13, 2011.
Dissatisfied, Catotocan filed a petition for certiorari
before the Court of Appeals.
In the disputed Decision20 dated October 29, 2013,
the Court of Appeals dismissed the petition for lack
of merit. The NLRC Decision dated October 20, 2010
and Resolution dated May 13, 2011 were affirmed.
The appellate court agreed that while Catotocan
was initially opposed to the idea of her retirement at
an age below 60 years, her subsequent actions,
however, after her retirement are tantamount to
consent to the addendum to the school's retirement
policy of retiring from service upon serving the
school for at least thirty (30) continuous years.
Hence, this appeal.:
In a nutshell, Catotocan asserts that her receipt of
her retirement benefits will not stop her from
pursuing an illegal dismissal complaint against
LSQC.
We deny the petition.
Retirement is the result of a bilateral act of the
parties, a voluntary agreement between the
employer and the employee whereby the latter, after
reaching a certain age, agrees to sever his or her
employment with the former. Article 287 of the Labor
Code is the primary provision which governs the age
of retirement and states: Art. 287. Retirement. x x x
x Thus, retirement plans, as in LSQC's retirement plan,
xxx
In the absence of a retirement plan or agreement
providing for retirement benefits of employees in the
establishment, an employee upon reaching the age
of sixty (60) years or more, but not beyond sixty-five
(65) years which is hereby declared the compulsory
retirement age, who has served at least five (5)
years in the said establishment, may retire and shall
be entitled to retirement pay equivalent to at least
one-half (1/2) month salary for every year of service,
a fraction of at least six (6) months being considered
as one whole year. (Emphasis Supplied)
Under this provision, the retirement age is primarily
determined by the existing agreement or
employment contract. Only in the absence of such
an agreement shall the retirement age be fixed by
law, which provides for a compulsory retirement age
at 65 years, while the minimum age for optional
retirement is set at 60 years.21
Jurisprudence is replete with cases discussing the
employer's prerogative to lower the compulsory
retirement age subject to the consent of its
employees. In Pantranco North Express, Inc. v.
NLRC,22 the Court upheld the retirement of the
private respondent therein pursuant to a CBA
allowing the employer to compulsorily retire
employees upon completing 25 years of service to
the company. Interpreting Article 287, the Court held
that the Labor Code permits employers and
employees to fix the applicable retirement age lower
than 60 years of age.23
allowing employers to retire employees who have
not yet reached the compulsory retirement age of 65
years are not per se repugnant to the constitutional
guaranty of security of tenure. By its express
language, the Labor Code permits employers and
employees to fix the applicable retirement age at 60
years or below, provided that the employees'
retirement benefits under any CBA and other
agreements shall not be less than those provided
therein.24
Indeed, acceptance by the employees of an early
retirement age option must be explicit, voluntary,
free, and uncompelled. While an employer may
unilaterally retire an employee earlier than the
legally permissible ages under the Labor Code, this
prerogative must be exercised pursuant to a
mutually instituted early retirement plan. In other
words, only the implementation and execution of the
option may be unilateral, but not the adoption and
institution of the retirement plan containing such
option.25 However, We already had the occasion to
strike down the added requirement that an employer
must first consult its employee prior to retiring him,
as this requirement unduly constricts the exercise
by management of its option to retire the said
employee. Due process only requires that notice of
the employer's decision to retire an employee be
given to the employee.26
Here, the CA and the NLRC did not gravely abuse its
discretion in finding that LSQC did not illegally
dismiss Catotocan from service. While it may be true
that Catotocan was initially opposed to the idea of
her retirement at an age below 60 years, it must be
stressed that Catotocan's subsequent actions after
her "retirement" are actually tantamount to her
consent to the addendum to the LSQC's retirement
policy of retiring her from service upon serving the
school for at least thirty (30) continuous years, to
wit: (1) after being notified that she was being
retired from service by LSQC, she opened a savings
account with BDO, the trustee bank; (2) she
accepted all the proceeds of her retirement
package: the lump sum and all the monthly
payments credited to her account until June 2009;
(3) upon acceptance of the retirement benefits,
there was no notation that she is accepting the
retirement benefits under protest or without
prejudice to the filing of an illegal dismissal case.
We also did not find an iota of evidence showing that
LSQC exerted undue influence against Catotocan to
acquire her consent on the school's retirement
policy. Suffice it to say that from the foregoing,
Catotocan performed all the acts to ratify her
retirement in accordance with LSQC's retirement
policy.
We, likewise, quote the NLRC's finding that
Catotocan's subsequent actions after LSQC
implemented the retirement program as to negate
her allegation of illegal dismissal. We quote:
As cleared during the dialogue with Father [Arieta],
if an employee is retired against her/his will, the
trustee bank would not allow the release of the trust
fund to the employee. Clearly, appellant's retirement
pay was released to her up to the last centavo. She
opened a savings account with BDO for the purpose,
withdrew the money, applied for re-appointment and
received salaries therefore. In doing so, she
performed all the acts that a retired employee would
do after retirement under the new school policy. In
view of her voluntary acts and enjoyment of the
monetary benefits in accordance with the school's
new retirement plan, We cannot consider her to have
been forced to retire or illegally dismissed.
Although there was an exchange of communications
about the retirees' objection to the new retirement
policy years earlier, eventually, appellant assented
thereto when she opened a savings account with
BDO, withdrew the money for her personal use and
applied again for a teaching job with the school.
While it is true that the acceptance of retirement
pay and her eventual appointment as Guidance
Counselor did not amount to a waiver to contest her
alleged forced retirement or illegal dismissal, the
voluntary nature of her acts from June 2006 up to
June 2009 clearly belies her claim of illegal
dismissal.
Obviously, appellant filed this complaint claiming
illegal dismissal after she had benefited from the
proceeds of her retirement in June 2006, and
received salaries as Guidance Counselor of the
appellee school for the subsequent three (3) years
which ended in 2009. By her actuations, she is
already estopped from questioning the legality of the
new retirement policy.
xxx
Indeed, the most telling detail indicative of
Catotocan's voluntary assent to LSQC's retirement
policy was her correspondence with the latter
following her "retirement." In particular, in her
Letter28 dated January 27, 2005, Catotocan availed
of the privilege of being re-hired after retirement by
virtue of the "'Contractual Employment of Retired
Employees" provision of LSQC's retirement policy. It
must be emphasized that the re-hiring was exclusive
only for those employees who has availed of the
retirement benefits or who has been retired by the
school but who has not yet reached 65 years of age.
Thus, since Catotocan has availed of this
contractual employment which is exclusively offered
only to LSQC's qualified retirees for three (3)
consecutive years following her retirement, she can
no longer dispute that she has indeed legitimately
retired from employment, and was not illegally
dismissed.
xxx
Finally, the ruling in Cercado29 and Jaculbe30
cannot be applied to this case, simply because in
those cases, there was no subsequent express
acknowledgment of "retirement" which is present in
this case. It must be stressed also that Catotocan's
repeated application and availment of the re-hiring
program of LSQC for qualified retirees for 3
consecutive years is a supervening event that would
reveal that she has already voluntarily and freely
signified her consent to the retirement policy
despite her initial opposition to it. Moreover, in
contrast, in the Cercado case, Cercado was
consistent in not giving her consent to the
retirement plan of her employer as in fact she
refused the check representing her retirement
benefits; in this case, however, not only did
Catotocan received all of her retirement benefits but
she also applied and availed the LSQC's re-hiring
policy of retirees.
Although the Court has, more often than not, been
inclined towards the plight of the workers and has
upheld their cause in their conflicts with the
employers, such inclination has not blinded it to the
rule that justice is in every case for the deserving, to
be dispensed in the light of the established facts and
applicable law and doctrine.31
WHEREFORE, premises considered, the Decision
dated October 29, 2013 and the Resolution dated
July 15, 2014 of the Court of Appeals in CA-G.R. SP
No. 120117 are hereby AFFIRMED. SO ORDERED.
March 29, 2017G.R. No. 205657INTERNATIONAL
EXCHANGE BANK NOW UNION BANK OF THE
PHILIPPINES, Petitioner vs SPOUSES JEROME AND
QUINNIE BRIONES, AND JOHN DOE, Respondents
On July 2, 2003, spouses Jerome and Quinnie
Briones (Spouses Briones) took out a loan of
₱3,789,216.00 from iBank to purchase a BMW Z4
Roadster.6 The monthly amortization for two (2)
years was ₱78,942.00.
The Spouses Briones executed a promissory note
with chattel mortgage that required them to take out
an insurance policy on the vehicle. The promissory
note also gave iBank, as the Spouses Briones'
attomey-infact, irrevocable authority to file an
insurance claim in case of loss or damage to the
vehicle. The insurance proceeds were to be made
payable to iBank.
On November 5, 2003, at about 10:50 p.m., the
mortgaged BMW Z4 Roadster was camapped by
three (3) armed men in front of Metrobank Banlat
Branch in Tandang Sora, Quezon City. Jerome
Briones (Jerome) immediately reported the incident
to the Philippine National Police Traffic Management
Group.
The Spouses Briones declared the loss to iBank,
which instructed them to continue paying the next
three (3) monthly installments "as a sign of good
faith," a directive they complied with.
On March 26, 2004, or after the Spouses Briones
finished paying the three (3)-month installment,
iBank sent them a letter demanding full payment of
the lost vehicle.
On April 30, 2004, the Spouses Briones submitted a
notice of claim with their insurance company, which
denied the claim on June 29, 2004 due to the
delayed reporting of the lost vehicle.
On May 14, 2004, iBank filed a complaint for replevin
and/or sum of money against the Spouses Briones
and a person named John Doe.16 The Complaint
alleged that the Spouses Briones defaulted in paying
the monthly amortizations of the mortgaged vehicle.
After no settlement was arrived at during the Pre-
trial Conference, the case was referred to Mediation
and Judicial Dispute Resolution. However, the
parties still failed to agree on a compromise
settlement.
The dispositive portion of the Regional Trial Court
Decision read:
WHEREFORE, premises considered, judgment is
hereby rendered dismissing this case as the
obligation of both parties to each other has already
been considered extinguished by compensation.
SO ORDERED. (Emphasis in the original)
The Regional Trial Court's Decision was appealed by
iBank to the Court of Appeals, which dismissed24 it
on September 27, 2012.
The Court of Appeals ruled that the terms and
stipulations of the promissory note with chattel
mortgage were clear. Sections 6 and 22 of the
promissory note provided that the Spouses Briones,
as the mortgagors, would insure the vehicle against
loss, damage, theft, and fire with the insurance
proceeds payable to iBank, as the mortgagee.26
Furthermore, in the event of loss or damage,
Spouses Briones irrevocably appointed iBank or its
assigns as their attorney-in-fact with full power to
process the insurance claim.
The Court of Appeals stated that as the Spouses
Briones' agent, iBank was bound by its acceptance
to carry out the agency. However, instead of filing an
insurance claim, iBank opted to collect the balance
of Spouses Briones' loan. By not looking after the
interests of its principal, the Court of Appeals ruled
that iBank should be held liable for the damages
suffered by Spouses Briones.
The Court of Appeals likewise upheld the Regional
Trial Court's ruling that "the denial of the insurance
claim [for delayed filing] was a direct consequence
of [the] bank's  relation to a third person;
inaction in not filing the insurance claim."
The dispositive portion of the Court of Appeals
Decision read:
WHEREFORE, the instant appeal is hereby DENIED.
The assailed Decision dated June 16, 2011 of the
Regional Trial Court, Branch 138, Makati City is
AFFIRMED.
SO ORDERED. (Emphasis in the original)
On February 6, 2013, the Court of Appeals denied
iBank's motion for reconsideration,34 prompting
iBank to appeal the denial to this Court.
The Petition is devoid of merit. In a contract of
agency, "a person binds himself to render some
service or to do something in representation or on
behalf of another, with the consent or authority of
the latter." Furthermore, Article 1884 of the Civil
Code provides that "the agent is bound by his
acceptance to carry out the agency, and is liable for
the damages which, through his non-performance,
the principal may suffer."
Rallos v. Felix Go Chan & Sons Realty Corporation46
lays down the elements of agency:
Out of the above given principles, sprung the
creation an acceptance of the relationship of agency
whereby one party, called the principal (mandante),
authorizes another, called the agent (mandatario), to
act for and in his behalf in transactions with third
persons. The essential elements of agency are: 
(1) there is consent, express or implied, of the
parties to establish the relationship; 
(2) the object is the execution of a juridical act in
 
(3) the agent acts as a representative and not for
himself; and 
(4) the agent acts within the scope of his authority.
(Emphasis in the original, citation omitted)
All the elements of agency exist in this case. Under
the promissory note with chattel mortgage, Spouses
Briones appointed iBank as their attorney-in-fact,
authorizing it to file a claim with the insurance
company if the mortgaged vehicle was lost or
damaged. Petitioner was also authorized to collect
the insurance proceeds as the beneficiary of the
insurance policy.
Article 1370 of the Civil Code is categorical that
when "the terms of a contract are clear and leave no
doubt upon the intention of the contracting parties,
the literal meaning of its stipulations shall control."
The determination of agency is ultimately factual in
nature and this Court sees no reason to reverse the
findings of the Regional Trial Court and the Court of
Appeals. They both found the existence of an agency
relationship between the Spouses Briones and
iBank, based on the clear wording of Sections 6 and
22 of the promissory note with chattel mortgage,
which petitioner prepared and respondents signed.
Petitioner asserts that the Spouses Briones
effectively revoked the agency granted under the
promissory note when they filed a claim with the
insurance company.
Petitioner is mistaken. Revocation as a form of
extinguishing an agency under Article 192453 of the
Civil Code only applies in cases of incompatibility,
such as when the principal disregards or bypasses
the agent in order to deal with a third person in a
way that excludes the agent.
In the case at bar, the mortgaged vehicle was
camapped on November 5, 2003 and the Spouses
Briones immediately informed petitioner about the
loss. The Spouses Briones continued paying the
monthly installment for the next three (3) months
following the vehicle's loss to show their good faith.
However, on March 26, 2004, petitioner demanded
full payment from Spouses Briones for the lost
vehicle. The Spouses Briones were thus constrained
to file a claim for loss with the insurance company
on April 30, 2004, precisely because petitioner failed
to do so despite being their agent and being
authorized to file a claim under the insurance policy.
Not surprisingly, the insurance company declined
the claim for belated filing.
The Spouses Briones' claim for loss cannot be seen
as an implied revocation of the agency or their way
of excluding petitioner. They did not disregard or
bypass petitioner when they made an insurance
claim; rather, they had no choice but to personally
do it because of their agent's negligence. This is not
the implied termination or revocation of an agency
provided for under Article 1924 of the Civil Code.
While a contract of agency is generally revocable at
will as it is primarily based on trust and confidence,
Article 1927 of the Civil Code provides the instances
when an agency becomes irrevocable:
Article 1927. An agency cannot be revoked if a
bilateral contract depends upon it, or if it is the
means of fulfilling an obligation already contracted,
or if a partner is appointed manager of a partnership
in the contract of partnership and his removal from
the management is unjustifiable.
A bilateral contract that depends upon the agency is
considered an agency coupled with an interest,
making it an exception to the general rule of
revocability at will. Lim v. Saban emphasizes that
when an agency is established for both the principal
and the agent, an agency coupled with an interest is
created and the principal cannot revoke the agency
at will.
In the promissory note with chattel mortgage, the
Spouses Briones authorized petitioner to claim,
collect, and apply• the insurance proceeds towards
the full satisfaction of their loan if the mortgaged
vehicle were lost or damaged. Clearly, a bilateral
contract existed between the parties, making the
agency irrevocable. Petitioner was also aware of the
bilateral contract; thus, it included the designation
of an irrevocable agency in the promissory note with
chattel mortgage that it prepared for the Spouses
Briones to sign.
Petitioner asserts that the insurance coverage is
only an alternative available to the Spouses Briones;
and with the denial of the insurance claim, the
Spouses Briones are obligated to pay the remaining
balance plus interest of the mortgaged vehicle.
The petitioner is again mistaken. As the agent,
petitioner was mandated to look after the interests
of the Spouses Briones. However, instead of going
after the insurance proceeds, as expected of it as
the agent, petitioner opted to claim the full amount
from the Spouses Briones, disregard the established
principal-agency relationship, and put its own
interests before those of its principal.
The facts show that the insurance policy was valid
when the vehicle was lost, and that the insurance
claim was only denied because of the belated filing.
Having been negligent in its duties as the duly
constituted agent, petitioner must be held liable for
the damages suffered by the Spouses Briones
because of non-performance65 of its obligation as
the agent, and because it prioritized its interests
over that of its principal.
Furthermore, petitioner's bad faith was evident when
it advised the Spouses Briones to continue paying
three (3) monthly installments after the loss,
purportedly to show their good faith. A principal and
an agent enjoy a fiduciary relationship marked with
trust and confidence, therefore, the agent has the
duty "to act in good faith [to advance] the interests
of [its] principal."
If petitioner was indeed acting in good faith, it could
have timely informed the Spouses Briones that it
was terminating the agency and its right to file an
insurance claim, and could have advised them to
facilitate the insurance proceeds themselves.
Petitioner's failure to do so only compounds its
negligence and underscores its bad faith. Thus, it
will be inequitable now to compel the Spouses
Briones to pay the full amount of the lost property.
WHEREFORE, premises considered, the Petition is
DENIED. The Court of Appeals Decision and
Resolution dated September 27, 2012 and February
6, 2013, respectively, in CA-G.R. CV. No. 97453 are
AFFIRMED.
SO ORDERED.
Rodolfo Laygo and Willie Laygo Vs. Municipal Mayor
of Solano, Nueva Vizcaya, G.R. No. 188448. January
11, 2017
The Municipal Government asserts that it is one of
lease, while petitioners insist that it is a BOT
agreement. Both parties, however, failed to present
the contracts which they purport to have. It is
likewise uncertain whether the contract would fall
under the coverage of the Statute of Frauds and
would, thus, be only proven through written
evidence. In spite of these, we find that the
Municipal Government was able to prove its claim,
through secondary evidence, that its contract with
petitioners was one of lease.
We have no reason to doubt the certifications of the
former mayor of Solano, Mayor Galima, and the
Municipal Planning and Development Office
(MPD0)37 which show that the contract of the
Municipal Government with petitioners' mother,
Clarita, was converted into a BOT agreement for a
time in 1992 due to the fire that razed the public
market. These certifications were presented and
offered in evidence by petitioners themselves. They
prove that Clarita was allowed to construct her
stalls that were destroyed using her own funds, and
with the payment of the lease rentals being
suspended until she recovers the cost she spent on
the construction. The construction was, in fact,
supervised by the MPDO for a period of three
months. The stalls were eventually constructed
completely and awarded to Clarita. She thereafter
reoccupied the stalls under a lease contract with the
Municipal Government. In fact, in his Notice dated
August 21, 2007, the Municipal Treasurer of Solano
reminded petitioners of their delinquent stall rentals
from May 2006 to July 2007. As correctly posited by
the Municipal Government, if the stalls were under a
BOT scheme, the Municipal Treasurer could not have
assessed petitioners of any delinquency.
Also, petitioners themselves raised, for the sake of
argument, that even if the contract may be
conceded as one of lease, the municipality is
nonetheless estopped from canceling the lease
contract because it subsequently accepted payment
of rentals until the time of the filing of the case.
In the same vein, the Sangguniang Bayan Resolution
No. 183-2004, which quoted Items No. 9 and 11 of
the lease contract on the absolute prohibition
against subleasing and the possible termination of
the contract in view of back rentals or any violation
of the stipulations in the contract, is presumed to
have been regularly issued. It deserves weight and
our respect, absent a showing of grave abuse of
discretion on the part of the members of the
Sanggunian.
WHEREFORE, in view of the foregoing, the petition is
GRANTED. The Decision dated December 16, 2008
and Resolution dated June 19, 2009of the Court of
Appeals in CA-G.R. SP No. 103922, and the a nonincorporated agency expires, the powers,
Resolution dated January 28, 2008 of the Regional duties and functions, as well as the assets and
Trial Court of Bayombong, Nueva Vizcaya are liabilities of that agency, revert to and are re-
REVERSED and SET ASIDE. The Petition for assumed by the Republic of the Philippines
Mandamus against Mayor Santiago O. Dickson is (Republic). 
DISMISSED. SO ORDERED. This rule holds in the absence of special provisions
of law specifying some other manner of disposition -
March 20, 2017 G.R. No. 181984 REPUBLIC OF THE
the devolution or transmission of such powers,
PHILIPPINES THROUGH ITS TRUSTEE, THE
duties, and functions - to some other identified
PRIVATIZATION AND MANAGEMENT OFFICE,
successor agency or instrumentality of the
Petitioner vs
Republic.38
PHILIPPINE INTERNATIONAL CORPORATION,
In this case, Republic Act (R.A.) No. 875839 provides
Respondent
that "upon the expiration of the terms of the
As a general rule, points of law, theories, and
Committee on Privatization and the Asset
arguments not brought before the trial court cannot
Privatization Trust, all their powers, function, duties
be raised for the first time on appeal and will not be
and responsibilities, all properties, real or personal
considered by this Court; otherwise, a denial of
assets, equipment and records, as well as their
respondent's right to due process would result.36
obligations and liabilities, shall devolve upon the
Nevertheless, this Court will consider and resolve
National Government."40 In turn, the national
the issue in the interest of justice and the complete
government devolved the powers, functions,
adjudication of the rights and obligations of the
obligations, and assets of APT to PMO through E.O.
parties.
323.
PMO is bound by the Lease Agreement. It is
One of the existing obligations of APT upon the
undisputed that PMO is the successor agency of
termination of its term was to respect the Lease
APT. Consequently, it assumes the existing
Agreement. To recall, there is a previous judgment
obligations of APT upon the termination of the
by the RTC and CA, as affirmed by this Court, finding
latter's existence. 
that APT had an obligation to respect the lease by
In Iron and Steel Authority v. Court qf Appeals,37
virtue of its constructive notice of the same. This is
this Court explained that when the statutory term of
a judgment that has lapsed into finality.
It is a fundamental rule that when a final judgment
becomes executory, it thereby becomes immutable
and unalterable. The judgment may no longer be
modified in any respect, even if the modification is
meant to correct what is perceived to be an
erroneous conclusion of fact or law. This principle
holds regardless of whether the modification is
attempted to be made by the court rendering it or by
the highest court of the land.41 Further, it is settled
that the dictum laid down in a final judgment or
order becomes binding between the same parties,
their privies, and their successors-in-interest.42
On account of the final judgment that bound APT to
the Lease Agreement, PMO is also obligated to
respect the lease contract as the former's successor
agency.
At any rate, assuming that PMO was a third party to
the Lease Agreement, it is still bound by it. PIC's
leasehold rights have been clearly annotated on TCT
No. 90816.43 It is settled that once a lease is
recorded, as in this case, it becomes binding on third
persons. Therefore, from the time of the execution of
the lease contract, its efficacy continues until it is
terminated on the grounds provided for by law.44
On account of the foregoing annotation, as well as
the finding that APT had constructive notice of the
lease, PMO can no longer deflect the binding effect
of the Lease Agreement on the latter.
On the matter of the alleged prejudice to the
government caused by the unconscionably low
rental rates and for a period that amounts to
perpetuity, we find these allegations to be
premature and without clear basis. In fact, the MeTC
itself doubted the claim on the rental rates, because
it appeared that the rental being paid for another
land in the vicinity was far lower than that paid by
PIC, a fact that was not disputed by PM0.45 In any
event, the parties are not precluded from negotiating
an improvement of the financial terms of the Lease
Agreement.
Further, if PMO indeed believed that the Lease
Agreement was grossly disadvantageous to the
government, it should have brought the proper
judicial action available under the law.
As correctly ruled by the CA, the mere failure to
agree on a new rental rate can no longer divest PIC
of the latter's vested right to renew the lease
pursuant to paragraph 1.01 of the Lease Agreement.
WHEREFORE, the Petition for Review on Certiorari
under Rule 45 is DENIED for lack of merit. The Court
of Appeals Decision46 and Resolution47 in CA-G.R.
SP No. 89465 are hereby AFFIRMED.
SO ORDERED.
March 1, 2017 G.R. No. 205578 GEORGIA OSMEÑA-
JALANDONI, Petitioner vs CARMEN A. ENCOMIENDA,
Respondent
Encomienda narrated that she met petitioner
Georgia Osmeña-Jalandoni in Cebu on October 24,
1995, when the former was purchasing a
condominium unit and the latter was the real estate
broker. Thereafter, Encomienda and Jalandoni
became close friends. On March 2, 1997, Jalandoni
called Encomienda to ask if she could borrow money
for the search and rescue operation of her children
in Manila, who were allegedly taken by their father,
Luis Jalandoni. Encomienda then went to
Jalandoni's house and handed ₱l00,000.00 in a
sealed envelope to the latter's security guard. While
in Manila, Jalandoni again borrowed money for the
following errands:4
1. Publication in SunStar Daily of Georgia's missing
children ₱l1,000.00
2. Reproduction of the pictures of Georgia's children
720.00
3. Additional reproduction of pictures 1,350.00
4. Plane fare for Georgia's secretary to Manila
3,196.00
5. Allowance of Germana Berning in going to Manila
4,080.00
6. Cash airbill of Kabayan Forwarders 49.50
7. Cash airbill of Kabayan Forwarders 49.50
8. Salary of Georgia's household helper Reynilda
Atillo for March 16-31, 1997 750.00
9. Salary of Georgia's driver Billy Tano for March 16-
31, 1997 2,000.00
10. Petty cash for Germana Berning 250.00
11. Consultancy fee of Germana Berning 7,000.00
12. Filing fee of case filed by Georgia against CIS
100,500.00
13. Cebu cable bill per receipt No. 197743 380.00
14. Cebu cable bill per receipt No. 197742 380.00
15. Bankard bill of Georgia 840.00
16. Services of 2 security guards for 2/1-15/97 and
3/1-31/97 14,715.00
17. One sack of rice and gasoline 1,270.00
18. Food allowance for Georgia's household and
payment for food ordered 2,900.00
19. Shipping charge of immigration papers sent to
Georgia in Manila 145.45
20. Shipping charge of cellphone and easy call pager
sent to Georgia 145 .45
21. Salary of Georgia's helper Renilda Atillo from
April 1-15, 1997 750.00
22. Purchase of cellphone registered in the name of
Encomienda's sister, Paz 10,260.00
23. Pager acquired on April 10, 1997 upon Georgia's
request 6,351.00
24. Wanted ad in Panay News and expenses of
Georgia's secretary 8,500.00
25. Salary of Billy Tano from April 1-15, 1997
2,000.00
26. Water consumption of Georgia's house in
Paradise Village 1,120.00
2 7. Services of security guard from April 1-15, 1997
4,905.00
28. Telephone bill for Georgia's residential phone
from March 25 to April 24, 1997 3,609.77
29. Telephone bill for Georgia's other telephone line
440.20
30. Plane ticket for Georgia's psychic friends
$1,570.00
31. Petty cash for GRO Co. owned by Georgia
3,150.00
32. Bill of cellphone under the name of Paz
Encomienda 5,468.70
33. Another bill of cellphone used by Georgia
3,923.87
34. Cost of reproduction of pictures 2,500.00
35. Salary of driver and house help of Georgia from
May 15-31, 1997 3,250.00
36. Service charge of Georgia's cellphone number
550.00
37. Ritual performed in Georgia's house to drive
away evil spirits 17,500.00
38. Prayers for Georgia's missing children 5,500.00
39. Amount given to priest who performed a blessing
of the house of Georgia 500.00
40. Globe cellular phone bill of Georgia as of 5/10/97
7,957.24
41. Salary of Germana Berning for May 1997 6,000.00
42. Amount given to priest for mass and blessing
2,500.00
43. Cash given to G. Berning for payment of
Georgia's phone bill 3,000.00
44. Gasoline for Georgia's car paid on 6/10/97 per
cash slip #221088 150.00
45. Gasoline for Georgia's car paid on 6/10/97 per
cash slip #220997 379.44
46. Bill for Georgia's Easycall pager 1,605.09
47. Security guard services for May 16-31 4,905.00
48. Globe bill for cellular phone from April 18, 1997
to May 17, 1997 5,543.98
49. Bill of cellular phone registered in the name of
Paz Encomienda but used by Georgia paid on June
18, 1997 14,169.21
50. Charge for changing the cap of Easycall pager on
June 21, 1997 275.00
51. Monthly bill for Georgia's Easycall pager from 7 /
15/97 to 10/14/97 1,551.00
52. Water bill for April-May 1997 paid on June 25,
1997 1,728.31
53. Cebu Cable bill paid on 6125197 380.00
54. PLDT bill for the telephone in Georgia's
residence 2,097.98
55. Electric bill paid on 6/25/97 1,964.43
56. Purchase of steel cabinet on 6/25/97 2,750.00
57. Airbill of JRS in sending the cap of Easycall
pager 20.00
58. Bill for the cellphone in the name of Paz
Encomienda but used by Georgia, June to July 8,
1997 8,630.11
59. Penalty for downgrading of executive line of
cellphone 1,045.00
60. Globe cellphone bill paid on 9/10/97 1,903.00
61. Charge for downgrading of cellphone plan from
Advantage to Basic 660.00
62. Penalty for Easycall 11/17/97 1,248.50
On April 1, 1997, Jalandoni borrowed ₱l Million from
Encomienda and promised that she would pay the
same when her money in the bank matured.
Thereafter, Encomienda went to Manila to attend the
hearing of Jalandoni's habeas corpus case before
the CA where ₱100,000.00 more was requested. On
May 26, 1997, now crying, Jalandoni asked if
Encomienda could lend her an additional
₱900,000.00. Encomienda still acceded, albeit
already feeling annoyed. All in all, Encomienda spent
around ₱3,245,836.02 and $6,638.20 for Jalandoni.
When Jalandoni came back to Cebu on July 14,
1997, she never informed Encomienda. Encomienda
then later gave Jalandoni six (6) weeks to settle her
debts. Despite several demands, no payment was
made. Jalandoni insisted that the amounts given
were not in the form of loans. When they had to
appear before the Barangay for conciliation, no
settlement was reached. But a member of the
Lupong Tagapamayapa of Barangay Kasambagan,
Laureano Rogero, attested that J alandoni admitted
having borrowed money from Encomienda and that
she was willing to return it. Jalandoni said she
would talk to her lawyer first, but she never came
back. Hence, Encomienda filed a complaint. She
impleaded Luis as a necessary party, being
Georgia's husband.
For her defense, Jalandoni claimed that there was
never a discussion or even just an allusion about a
loan. She confirmed that Encomienda would indeed
deposit money in her bank account and pay her bills
in Cebu. But when asked, Encomienda would tell her
that she just wanted to extend some help and that it
was not a loan. When Jalandoni returned to Cebu,
Encomienda wanted to fetch her at the airport but
the former refused. This allegedly made Encomienda
upset, causing her to eventually demand payment for
the amounts originally intended to be gratuitous.
On January 9, 2006, the RTC of Cebu City dismissed
Encomienda's complaint, the dispositive portion of
which states:
WHEREFORE, in view of the foregoing, this case is
hereby dismissed.
SO ORDERED.5
Therefore, Encomienda brought the case to the CA.
On March 29, 2012, the appellate court granted the
appeal and reversed the RTC Decision, to wit:
WHEREFORE, the defendant-appellant's appeal is
GRANTED. The decision of the trial court dated
January 9, 2006 is hereby REVERSED and SET ASIDE
and in its stead render judgment against defendant-
appellee Georgia Osmefia-Jalandoni ordering the
latter to pay plaintiff-appellant Carmen A.
Encomienda the following:
1. The sum of Three Million Two Hundred Forty-Five
Thousand Eight Hundred Thirty-Six (₱3,245,836.02)
Pesos and 02/100 and Six Thousand Six Hundred
Thirty-Eight (US$6,638.20) US Dollars and 20/100;
2. Legal interest of Twelve (12%) Percent from
August 14, 1997 the date of extrajudicial demand.
3. Attorney's fees and expenses of litigation in the
amount of One Hundred Thousand (₱l 00,000.00)
Pesos.
Xxx
SO ORDERED.6
Jalandoni filed a motion for reconsideration, but the
same was denied.7 Hence, the instant petition.
The sole issue in this case is whether or not
Encomienda is entitled to be reimbursed for the
amounts she defrayed for Jalandoni.
But the second paragraph of Article 1236 of the Civil
Code provides:
xxxx
Whoever pays for another may demand from the
debtor what he has paid, except that if he paid
without the knowledge or against the will of the
debtor, he can recover only insofar as the payment
has been beneficial to the debtor.8
The principle of unjust enrichment finds application
in this case. Unjust enrichment exists when a person
unfairly retains a benefit to the loss of another, or
when a person retains money or property of another
against the fundamental principles of justice, equity,
and good conscience. There is unjust enrichment
under Article 22 of the Civil Code when (1) a person
is unjustly benefited, and (2) such benefit is derived
at the expense of or with damages to another. The
principle of unjust enrichment essentially
contemplates payment when there is no duty to pay,
and the person who receives the payment has no
right to receive it.12 The CA is then correct when it
ruled that allowing Jalandoni to keep the amounts
received from Encomienda will certainly cause an
unjust enrichment on Jalandoni' s part and to
Encomienda's damage and prejudice.
WHEREFORE, PREMISES CONSIDERED, the Court
DISMISSES the petition for lack of merit and
AFFIRMS the Decision of the Court of Appeals, Cebu
City dated March 29, 2012 and its Resolution dated
December 19, 2012 in CA-G.R. CV No. 01339, with
MODIFICATION as to the interest which must be
twelve percent (12%) per annum of the amount
awarded from the time of demand on August 14,
1997 to June 30, 2013, and six percent (6%)13 per
annum from July 1, 2013 until its full satisfaction.
SO ORDERED.
February 22, 2017 G.R. No. 206343 LAND BANK OF
THE PHILIPPINES, Petitioner, vs.LORENZO MUSNI,
EDUARDO SONZA and SPOUSES IRENEO AND
NENITA SANTOS, Respondents.
This Court resolves the following issues:
1. Whether petitioner is a mortgagee in good faith
and an innocent purchaser for value; and
2. Whether petitioner is entitled to the award of
damages.
Petitioner is neither a mortgagee in good faith nor an
innocent purchaser for value.
The doctrine protecting mortgagees and innocent
purchasers in good faith emanates from the social
interest embedded in the legal concept granting
indefeasibility of titles. 
On petitioner's claim that it was a mortgagee in
good faith, the Court of Appeals held that petitioner
"was actually remiss in its duty to ascertain the title
of [respondents Eduardo and Nenita] to the
property."The Court of Appeals' Decision reads:
Bank's] good faith is the fact that TCT No. 304649
which was mortgaged to the bank, was issued by
virtue of a Decision of the [Department of Agrarian
Reform Adjudication Board] Region III dated
December 29,1997. The said Decision was, however,
inscribed only on February 25, 1998, after the
issuance of TCT No. 304649 on February 8, 1998. In
addition, the property was mortgaged to [Land Bank]
a few days after the inscription of the alleged
Decision of the [Department of Agrarian Reform
Adjudication Board]. This circumstance should have
aroused a suspicion on the part of [Land Bank] and
anyone who deliberately ignores a significant fact
that would create suspicion in an otherwise
reasonable person cannot be considered as a
mortgagee in good faith.
We quote the following disquisitions of the trial court
on the Land Bank's apparent bad faith in the
transaction:
"[Land Bank] however tried to show that the title of
the land owned by Jovita Musni was cancelled by
virtue of a decision of the [Department of Agrarian
Reform] Adjudication Board, Region III and in lieu
thereofTCT No. 304649 was issued in favor of Nenita
Sonza et.al. The date of the decision in (sic)
December 29, 1997 but inscribed only on February
25, 1998. If this were so, why is it that Nenita Santos
was issued TCT No. 304649 on February 8, 1998,
before the Decision was inscribed. Defendant Nenita
Santos never mentioned any decision of the
[Department of Agrarian Reform Adjudication Board]
awarding the lot to her."
The Court of Appeals also found that petitioner was
not an innocent purchaser for value:
Neither can We also consider [Land Bank] as an
innocent purchaser for value because the subject
property was foreclosed on May 4, 1999 while the
complaint for falsification was filed on March 4,
1999.
A purchaser in good faith is one who buys property
without notice that some other person has a right to
or interest in such property and pays its fair price
before he has notice of the adverse claims and
interest of another person in the same property.
Clearly, the factual circumstances as afore-cited
surrounding the acquisition of the disputed property
do not make [Land Bank] an innocent purchaser for
value or a purchaser in good faith. Thus, We are in
accord with the ruling of the trial court in that:
"In the instant case, the Court cannot consider the
Land Bank of the Philippines as innocent purchaser
for value. With all its resources, it could have
ascertained how Nenita Sonza acquired the land
mortgaged to it and later foreclosed by it. The fact
the land (sic) was foreclosed after Criminal Case No.
4066-99 was instituted should have warned it. The
questionable ownership of Nenita Sonza for it and its
employees to obtain knowledge of the questionable
transfer of the land to Nenita Sonza. Its failure to
take the necessary steps or action shall make the
bank liable for damages. The bank shall be
responsible for its and its employer shortcomings."
(Citations omitted)
The rule on "innocent purchasers or [mortgagees] for
value" is applied more strictly when the purchaser or
the mortgagee is a bank. Banks are expected to
exercise higher degree of diligence in their dealings,
including those involving lands. Banks may not rely
simply on the face of the certificate of title. 
Had petitioner exercised the degree of diligence
required of banks, it would have ascertained the
ownership of one of the properties mortgaged to it.
Where "the findings of fact of the trial courts are
affirmed by the Court of Appeals, the same are
accorded the highest degree of respect and,
generally, will not be disturbed on appeal[;] Such
findings are binding and conclusive on this Court."
Accordingly, this Court finds no reason to disturb the
findings of the Court of Appeals, which affirmed the
findings of the trial court, that petitioner is neither a
mortgagee in good faith nor an innocent purchaser
for value.
G.R. No. 212690* SPOUSES ROMEO PAJARES and
IDA T. PAJARES, Petitioners vs. REMARKABLE
LAUNDRY AND DRY CLEANING, represented by
ARCHEMEDES G. SOLIS, Respondent
Respondent's complaint denominated
as one for "'Breach of Contract &
Damages" is neither an action for
specific performance nor a complaint
for rescission of contract.
An analysis of the factual and material allegations in
the Complaint shows that there is nothing therein
which would support a conclusion that respondent's
Complaint is one for specific performance or
rescission of contract. It should be recalled that the
principal obligation of petitioners under the
Remarkable Laundry Dealership Contract is to act as
respondent's dealer outlet. Respondent, however,
neither asked the RTC to compel petitioners to
perfom1 such obligation as contemplated in said
contract nor sought the rescission thereof. The
Complaint's body, heading, and relief are bereft of
such allegation. In fact, neither phrase appeared on
or was used in the Complaint when, for purposes of
clarity, respondent's counsels, who are presumed to
be learned in law, could and should have used any of
those phrases to indicate the proper designation of
the Complaint. To the contrary, respondent's
counsels designated the Complaint as one for
"Breach of Contract & Damages," which is a
misnomer and inaccurate. This erroneous notion was
reiterated in respondent's Memorandum30 wherein it
was stated that "the main action of CEB 39025 is
one for a breach of contract."31There is no such
thing as an "action for breach of contract." Rather,
"[b]reach of contract is a cause of action,32but not
the action or relief itself"33 Breach of contract may
be the cause of action in a complaint for specific
performance or rescission of contract, both of which
are incapable of pecuniary estimation and, therefore,
cognizable by the RTC. However, as will be
discussed below, breach of contract may also be the
cause of action in a complaint for damages.
A complaint primarily seeking to
enforce the accessory obligation
contained in the penal clause is actually
an action for damages capable of
pecuniary estimation.
Neither can we sustain respondent's contention that
its Complaint is incapable of pecuniary estimation
since it primarily seeks to enforce the penal clause
contained in Article IV of the Remarkable Dealer
Outlet Contract, which reads:
Article IV: STANDARD REQUIRED QUOTA &
PENALTIES
In consideration [sic] for such renewal of franchise-
dealership rights, the dealer outlet must have a
minimum 200 kilos on a six-day or per week pick-up
for the entire duration of the contract to FREE the
dealer outlet from being charge [sic] Php200/week
on falling below required minimum kilos per week of
laundry materials. Automatic charging shall become
part of the billing on the services of the dealer outlet
on cases where the minimum requirements on
required kilos are not met.
The RL Main Operator has the option to cancel,
terminate this dealership outlet contract, at its
option should [sic] in the event that there are unpaid
services equivalent to a two-week minimum required
number of kilos of laundry materials but not ₱8,000
worth of collectibles, for services performed by the
RL Main Operator or its assigned Franchise Outlet,
unpaid bills on ordered and delivered support
products, falling below required monthly minimum
number of kilos.
Ten [percent] (10%) interest charge per month will
be collected on all unpaid obligations but should not
be more than 45 days or an additional 10% on top of
uncollected amount shall be imposed and shall earn
additional 10% on the next succeeding months if it
still remains unpaid. However, if the cause of default
is due to issuance of a bouncing check the amount
of such check shall earn same penalty charge with
additional 5% for the first two weeks and 10% for
the next two weeks and its succeeding two weeks
thereafter from the date of dishonor until fully paid
without prejudice to the filling of appropriate cases
before the courts of justice. Violation of this
provision if remained unsettled for two months shall
be considered as violation [wherein] Article XV of
this agreement shall be applied.34
To Our mind, petitioners' responsibility under the
above penal clause involves the payment of
liquidated damages because under Article 222635 of
the Civil Code the amount the parties stipulated to
pay in case of breach are liquidated damages. "It is
attached to an obligation in order to ensure
performance and has a double function: (1) to
provide for liquidated damages, and (2) to strengthen
the coercive force of the obligation by the threat of
greater responsibility in the event of breach."36
Concomitantly, what respondent primarily seeks in
its Complaint is to recover aforesaid liquidated
damages (which it termed as "incidental and
consequential damages") premised on the alleged
breach of contract committed by the petitioners
when they unilaterally ceased business operations.
Breach of contract may also be the cause of action
in a complaint for damages filed pursuant to Article
1170 of the Civil Code. It provides:
Art. 1170. Those who in the performance of their
obligations are guilty of fraud, negligence, or delay,
and those who in any manner contravene the tenor
thereof; are liable for damages. (Emphasis supplied)
In Pacmac, Inc. v. Intermediate Appellate Court,37
this Court held that the party who unilaterally
terminated the exclusive distributorship contract
without any legal justification can be held liable for
damages by reason of the breach committed
pursuant to Article 1170.
In sum, after juxtaposing Article IV of the
Remarkable Dealer Outlet Contract vis-a-vis the
prayer sought in respondent's Complaint, this Court
is convinced that said Complaint is one for damages.
True, breach of contract may give rise to a
complaint for specific performance or rescission of
contract. In which case, the subject matter is
incapable of pecuniary estimation and, therefore,
jurisdiction is lodged with the RTC. However, breach
of contract may also be the cause of action in a
complaint for damages. Thus, it is not correct to
immediately conclude, as the CA erroneously did,
that since the cause of action is breach of contract,
the case would only either be specific pe1formance
or rescission of contract because it may happen, as
in this case, that the complaint is one for damages.
In an action for damages, the court
which has jurisdiction is determined by
the total amount of damages claimed.
Having thus determined the nature of respondent's
principal action, the next question brought to fore is
whether it is the RTC which has jurisdiction over the
subject matter of Civil Case No. CEB-39025.
Paragraph 8, Section 1938 of BP 129, as amended by
Republic Act No. 7691,39 provides that where the
amount of the demand exceeds ₱100,000.00,
exclusive of interest, damages of whatever kind,
attorney's fees, litigation expenses, and costs,
exclusive jurisdiction is lodged with the RTC.
Otherwise, jurisdiction belongs to the Municipal Trial
Court.40
The above jurisdictional amount had been increased
to ₱200,000.00 on March 20, 1999 and further raised
to ₱300,000.00 on February 22, 2004 pursuant to
Section 5 of RA 7691.41
Then in Administrative Circular No. 09-9442 this
Court declared that "where the claim for damages is
the main cause of action, or one of the causes of
action, the amount of such claim shall be considered
in determining the jurisdiction of the court." In other
words, where the complaint primarily seeks to
recover damages, all claims for damages should be
considered in determining which court has
jurisdiction over the subject matter of the case
regardless of whether they arose from a single
cause of action or several causes of action.
Since the total amount of the damages claimed by
the respondent in its Complaint filed with the RTC on
September 3, 2012 amounted only to ₱280,000.00,
said court was correct in refusing to take
cognizance of the case.
WHEREFORE, the Petition is GRANTED and the
December 11, 2013 Decision and March 19, 2014
Resolution of the Court of Appeals in CA-G.R. CEB SP
No. 07711 are REVERSED and SET ASIDE. The
February 19, 2013 Order of the Regional Trial Court,
Branch 17, Cebu City dismissing Civil Case No. CEB-
39025 for lack of jurisdiction is REINSTATED.
SO ORDERED.