1)

G.R. No. 184458, January 14, 2015

RODRIGO RIVERA, Petitioner, v. SPOUSES SALVADOR CHUA AND S.

VIOLETA CHUA, Respondents.

[G.R. NO. 184472]

SPS. SALVADOR CHUA AND VIOLETA S.

CHUA, Petitioners, v. RODRIGO RIVERA, Respondent.

FACTS:

The parties were friends and kumpadres for a long time already. Rivera
obtained a loan from the Spouses Chua evidenced by a Promissory Note. The
relevant parts of the note are the following:

(a) FOR VALUE RECEIVED, I, RODRIGO RIVERA promise to pay spouses

SALVADOR C. CHUA and VIOLETA SY CHUA, the sum of One Hundred
Twenty Thousand Philippine Currency (_120,000.00) on December 31, 1995.

(b) It is agreed and understood that failure on my part to pay the amount of
(_120,000.00) One Hundred Twenty Thousand Pesos on December 31, 1995. I
agree to pay the sum equivalent to FIVEPERCENT (5%) interest monthly from the
date of default until the entire obligation is fully paid for.

Three years from the date of payment stipulated in the promissory note,
Rivera, issued and delivered to Spouses Chua two (2) checks drawn against his
account at Philippine Commercial International Bank (PCIB) but upon presentment
for payment, the two checks were dishonored for the reason “account closed.” As
of 31 May 1999, the amount due the Spouses Chua was pegged at P366,000.00
covering the principal of P120,000.00 plus five percent (5%) interest per month
from 1 January 1996 to 31 May 1999.

The Spouses Chua alleged that they have repeatedly demanded payment
from Rivera to no avail. Because of Rivera’s unjustified refusal to pay, the Spouses
Chua we’re constrained to file a suit before the MeTC, Branch 30, Manila. The
MeTC ruled against Rivera requiring him to pay the spouses Chua P120,000.00
plus stipulated interest at the rate of 5% per month from 1 January 1996, and legal
interest at the rate of 12% percent per annum from 11 June 1999 and was affirmed
by the RTC of Manila. The Court of Appeals further affirmed the decision upon
appeal of the two inferior courts but with modification of lowering the stipulated
interest to 12% per annum. Hence, the petition to the Supreme Court.

ISSUES:

1. Whether or not a demand from spouses Chua is needed to make Rivera liable.

2. Whether or not the stipulated interest is unconscionable and should really be

lowered.

RULING:
 On the first issue, Rivera is still liable under the terms of the Promissory
Note that he issued. Article 1169 of the Civil Code explicitly provides that the
demand by the creditor shall not be necessary in order that delay may exist when
the obligation or the law expressly so declare. The clause in the Promissory Note
containing the stipulation of interest (letter B in the above facts) which expressly
requires the debtor (Rivera) to pay a 5% monthly interest from the “date of
default” until the entire obligation is fully paid for. The parties evidently agreed
that the maturity of the obligation at a date certain, 31 December 1995, will give
rise to the obligation to pay interest.

On the second issue, the stipulated interest is unconscionable and should

really be lowered. The Supreme Court held that as observed by Rivera, the
stipulated interest of 5% per month or 60% per annum in addition to legal interests
and attorney’s fees is, indeed, highly iniquitous and unreasonable and stipulated
interest rates if illegal and are unconscionable the Court is allowed to temper
interest rates when necessary. Since the interest rate agreed upon is void, the
parties are considered to have no stipulation regarding the interest rate, thus, the
rate of interest should be 12% per annum computed from the date of judicial or
extrajudicial demand. However, the 12% per annum rate of legal interest is only
applicable until 30 June 2013, before the advent and effectivity of Bangko Sentral
ng Pilipinas (BSP) Circular No. 799, Series of 2013 reducing the rate of legal
interest to 6% per annum. Pursuant to our ruling in Nacar v. Gallery Frames,30
BSP Circular No. 799 is prospectively applied from 1 July 2013.
2)

G.R. No. 192602, January 18, 2017

SPOUSES MAY S. VILLALUZ AND JOHNNY VILLALUZ, JR., Petitioners,

vs. 

LAND BANK OF THE PHILIPPINES AND THE REGISTER OF DEEDS

FOR DAVAO CITY, Respondents.

FACTS :

Paula Agbisit (Agbisit), mother of petitioner May S. Villaluz (May),

requested the latter to provide her with collateral for a loan. At the time, Agbisit
was the chairperson of Milflores Cooperative and she needed P600,000 to
P650,000 for the expansion of her backyard cut flowers business. May convinced
her husband, Johnny Villaluz to allow Agbisit to use their land, located in Calinan,
Davao City and covered by Transfer Certificate of Title as collateral.
Spouses Villaluz executed a Special Power of Attorney in favor of Agbisit
authorizing her to, among others, "negotiate for the sale, mortgage, or other forms
of disposition a parcel of land covered by TCT, The one-page power of attorney
neither specified the conditions under which the special powers may be exercised
nor stated the amounts for which the subject land may be sold or mortgaged.
Unfortunately, Milflores Cooperative was unable to pay its obligations to
Land Bank. Thus, Land Bank filed a petition for extra-judicial foreclosure sale
with the Office of the Clerk of Court of Davao City. The Spouses Villaluz filed a
complaint with the Regional Trial Court (RTC) of Davao City seeking the
annulment of the foreclosure sale. The sole question presented before the RTC was
whether Agbisit could have validly delegated her authority as attorney-in-fact to
Milflores Cooperative. On appeal, the CA affirmed the RTC Decision.

ISSUE:
Whether or not the agent has the power to appoint a substitute
RULING:
Although the law presumes that the agent is authorized to appoint a
substitute, it also imposes an obligation upon the agent to exercise this power
conscientiously. The Spouses Villaluz understandably felt shorthanded because
their property was foreclosed by reason of another person's inability to pay.
However, they were not coerced to grant a special power of attorney in favor of
Agbisit. Nor were they prohibited from prescribing conditions on how such power
may be exercised. Absent such express limitations, the law recognizes Land Bank's
right to rely on the terms of the power of attorney as written. The decision was
denied and the higher court affirmed the CA decision dated September 22, 2009
and Resolution dated May 26, 2010.
3)

G.R. No. 211175, January 18, 2017

ATTY. REYES G. GEROMO, FLORENCIO BUENTIPO, JR., ERNALDO

YAMBOT and LYDIA BUSTAMANTE, Petitioners,
vs.
LA PAZ HOUSING AND DEVELOPMENT CORPORATION and
GOVERNMENT SERVICE INSURANCE SYSTEM, Respondents.

FACTS:
In 1987, Atty. Geromo, Bustamante and Yambot started occupying their
respective residential units from Adelina 1−A subdivision in San Pedro, Laguna
from La Paz, through GSIS financing. The properties were all situated along the
old Litlit Creek.  Buentipo, on the other hand, opted to demolish the turned over
unit and build a new structure thereon. After more than two (2) years of
occupation, cracks started to appear on the floor and walls on their houses. The
petitioners, through the President of the Adelina 1−A Homeowners Association,
requested La Paz, being the owner/developer to take remedial action.  They
collectively decided to construct a riprap/retaining wall in which La Paz
contributed p3,000 for each but petitioners claimed that despite of this retaining
wall, the condition of their housing units worsened as the years passed. La Paz
alleged that the structural defects could have been caused by the 1990 earthquake.
Year 1998, the petitioners decided to leave their housing units.
On May 2002, upon the request of the petitioners, the Municipal Engineer of
San Pedro and the Mines and Geosciences Bureau (MGB) of the Department of
Environment and Natural Resources (DENR) conducted an ocular inspection of the
subject properties. They found that there was “differential settlement of the area
where the affected units were constructed”. On the basis thereof, Atty. Geromo
filed a complaint for breach of contract with damages against La Paz and GSIS
before Housing and Land Regulatory Board (HLURB) on May 3, 2003, Buentipo,
Yambot and Bustamante filed a similar complaint against La Paz and GSIS. They
asserted that La Paz was liable for implied warranty against hidden defects and it
was negligent in building their houses on unstable land. La Paz averred that it had
secured the necessary permits and licenses for the subdivision project. The GSIS
moved for the dismissal of the complaint for its only participation in the
transaction was to grant loans to the petitioners for the purchase of their respective
properties.
In August 9, 2014 Decision, the HLURB Arbiter found La Paz liable for the
structural damage on the petitioners housing units, explaining that the damage was
caused by its failure to properly fill and compact the soil on which the houses were
built and to maintain (3) meters easement from the edge of the creek as require by
law. As to GSIS, the HLURB ruled that GSIS is not liable. September 12, 2005
decision of HLURB Board of Commissioners set aside the Arbiter’s decision. The
petitioners move for reconsideration but denied. The aggrieved petitioners elevated
the case to Office of the President (OP) which initially dismissed due to late filing.
The petitioners question the dismissal before the CA, and the CA ordered the OP to
resolve the appeal on the merits. Then the OP finally rendered a decision
dismissing the appeal for lack of merit. The petitioners appealed the OP decision
on CA, but the CA affirmed the ruling of the OP. The petitioners moved for
reconsideration but denied.

ISSUE: 
Whether or not, La Paz Housing should be held liable for the structural defects on
its implied warranty against hidden defects.

RULING:
Yes, La Paz is liable for the structural defects on its implied warranty against
hidden defects. Under Civil Code Article 1561, The vendor shall be responsible for
warranty against the hidden defects which the thing sold may have, should they
render it unfit for the use for which it is intended, or should they diminish its
fitness for such use to such an extent that, had the vendee been aware thereof, he
would not have acquired it or would have given a lower price for it; but said
vendor shall not be answerable for patent defects or those which may be visible, or
for those which are not visible if the vendee is an expert who, by reason of this
trade or profession, should have known them. And under  Article 1566 of the Civil
Code, the vendor is responsible to the vendee for any hidden faults or defects in the
thing sold, even though he was not aware thereof. This provision shall not apply if
the contrary has been stipulated and the vendor was not aware of the hidden faults
or defects in the thing sold.
5)

G.R. No. 167615, January 11, 2016

SPOUSES ALEXANDER AND JULIE LAM, Doing Business Under the

Name and Style "COLORKWIK LABORATORIES" AND "COLORKWIK
PHOTO SUPPLY", Petitioners,
vs.
KODAK PHILIPPINES, LTD., Respondent.

FACTS:

On January 8, 1992, the Lam Spouses and Kodak Philippines, Ltd. entered
into an agreement (Letter Agreement) for the sale of three (3) units of the Kodak
Minilab System 22XL6 (Minilab Equipment) in the amount of ₱1,796,000.00 per
unit, with the following terms:

“This confirms our verbal agreement for Kodak Phils., Ltd. To provide
Colorkwik Laboratories, Inc. with three (3) units Kodak Minilab System 22XL . . .
for your proposed outlets in Rizal Avenue (Manila), Tagum (Davao del Norte), and
your existing Multicolor photo counter in Cotabato City under the following terms
and conditions:

1. Said Minilab Equipment packages will avail a total of 19%

multiple order discount based on prevailing equipment price provided
said equipment packages will be purchased not later than June 30,
1992.

2. 19% Multiple Order Discount shall be applied in the form of

merchandise and delivered in advance immediately after signing of
the contract. * Also includes start-up packages worth P61,000.00.

3. NO DOWNPAYMENT.

4. Minilab Equipment Package shall be payable in 48 monthly

installments at THIRTY FIVE THOUSAND PESOS (P35,000.00)
inclusive of 24% interest rate for the first 12 months; the balance
shall be re-amortized for the remaining 36 months and the prevailing
interest shall be applied.

5. Prevailing price of Kodak Minilab System 22XL as of January 8,

1992 is at ONE MILLION SEVEN HUNDRED NINETY SIX
THOUSAND PESOS.

6. Price is subject to change without prior notice. *Secured with

PDCs; 1st monthly amortization due 45 days after installation.”

Kodak Philippines, Ltd. delivered one (1) unit of the Minilab Equipment in
Tagum, Davao Province. The delivered unit was installed by Noritsu
representatives. The Lam Spouses issued postdated checks amounting to
₱35,000.00 each for 12 months as payment for the first delivered unit, with the first
check due on March 31, 1992. The Lam Spouses requested that Kodak
Philippines, Ltd. not negotiate the check dated March 31, 1992 allegedly due to
insufficiency of funds. The same request was made for the check due on April 30,
1992. However, both checks were negotiated by Kodak Philippines, Ltd. and were
honored by the depository bank. The 10 other checks were subsequently
dishonored after the Lam Spouses ordered the depository bank to stop payment.
Kodak Philippines, Ltd. canceled the sale and demanded that the Lam Spouses
return the unit. The Lam Spouses ignored the demand but also rescinded the
contract through the letter dated November 18, 1992 on account of Kodak
Philippines, Ltd.’s failure to deliver the two (2) remaining Minilab Equipment
units.

Kodak Philippines, Ltd. filed a Complaint for replevin and/or recovery of sum
of money. The Lam Spouses failed to appear during the pre-trial conference. Thus,
they were declared in default. Kodak Philippines, Ltd. presented evidence ex-
parte. The trial court issued the Decision in favor of Kodak Philippines, Ltd.
ordering the seizure of the Minilab Equipment. Based on this Decision, Kodak
Philippines, Ltd. was able to obtain a writ of seizure for the Minilab Equipment
installed at the Lam Spouses’ outlet in Tagum, Davao Province. The writ was
enforced and Kodak Philippines, Ltd. gained possession of the Minilab Equipment
unit, accessories, and the generator set.

The Lam Spouses then filed before the CA a Petition to Set Aside the Orders
issued by the trial court. These Orders were subsequently set aside by the CA, and
the case was remanded to the trial court for pre-trial. In its Decision, the RTC
dismissed the case and ordered the plaintiff to pay Lam Spouses Lam Spouses filed
their Notice of Partial Appeal. Kodak Philippines, Ltd. also filed an appeal.
However, the CA dismissed it for Kodak Philippines, Ltd.’s failure to file its
appellant’s brief, without prejudice to the continuation of the Lam Spouses’
appeal. The Resolution became final and executory.CA modified the decision of
the RTC.

ISSUES:

1 Whether the contract between petitioners Spouses Alexander and Julie Lam
and respondent Kodak Philippines, Ltd. pertained to obligations that are
severable, divisible, and susceptible of partial performance under Article
1225 of the New Civil Code; and
2 Upon rescission of the contract, what the parties are entitled to under Article
1190 and Article 1522 of the New Civil Code.

RULING:

(1) The Letter Agreement contained an indivisible obligation.

The intention of the parties is for there to be a single transaction covering all
three (3) units of the Minilab Equipment. Respondent’s obligation was to deliver
all products purchased under a "package," and, in turn, petitioners’ obligation was
to pay for the total purchase price, payable in installments.The intention of the
parties to bind themselves to an indivisible obligation can be further discerned
through their direct acts in relation to the package deal. There was only one
agreement covering all three (3) units of the Minilab Equipment and their
accessories. The Letter Agreement specified only one purpose for the buyer, which
was to obtain these units for three different outlets. If the intention of the parties
were to have a divisible contract, then separate agreements could have been made
for each Minilab Equipment unit instead of covering all three in one package deal.
Furthermore, the 19% multiple order discount as contained in the Letter
Agreement was applied to all three acquired units. The "no downpayment" term
contained in the Letter Agreement was also applicable to all the Minilab
Equipment units. Lastly, the fourth clause of the Letter Agreement clearly referred
to the object of the contract as "Minilab Equipment Package."

In ruling that the contract between the parties intended to cover divisible
obligations, the Court of Appeals highlighted: (a) the separate purchase price of
each item; (b) petitioners’ acceptance of separate deliveries of the units; and (c) the
separate payment arrangements for each unit. However, through the specified
terms and conditions, the tenor of the Letter Agreement indicated an intention for a
single transaction. This intent must prevail even though the articles involved are
physically separable and capable of being paid for and delivered individually,
consistent with the New Civil Code: Article 1225. For the purposes of the
preceding articles, obligations to give definite things and those which are not
susceptible of partial performance shall be deemed to be indivisible. When the
obligation has for its object the execution of a certain number of days of work, the
accomplishment of work by metrical units, or analogous things which by their
nature are susceptible of partial performance, it shall be divisible. However, even
though the object or service may be physically divisible, an obligation is
indivisible if so provided by law or intended by the parties. 

In Nazareno v. Court of Appeals, the indivisibility of an obligation is tested

against whether it can be the subject of partial performance: An obligation is
indivisible when it cannot be validly performed in parts, whatever may be the
nature of the thing which is the object thereof. The indivisibility refers to the
prestation and not to the object thereof. In the present case, the Deed of Sale of
January 29, 1970 supposedly conveyed the six lots to Natividad. The obligation is
clearly indivisible because the performance of the contract cannot be done in parts,
otherwise the value of what is transferred is diminished. Petitioners are therefore
mistaken in basing the indivisibility of a contract on the number of obligors.

There is no indication in the Letter Agreement that the units petitioners ordered
were covered by three (3) separate transactions. The factors considered by the
Court of Appeals are mere incidents of the execution of the obligation, which is to
deliver three units of the Minilab Equipment on the part of respondent and
payment for all three on the part of petitioners. The intention to create an
indivisible contract is apparent from the benefits that the Letter Agreement
afforded to both parties. Petitioners were given the 19% discount on account of a
multiple order, with the discount being equally applicable to all units that they
sought to acquire. The provision on "no down payment" was also applicable to all
units. Respondent, in turn, was entitled to payment of all three Minilab Equipment
units, payable by installments.

(2) The power to rescind obligations is implied in reciprocal ones, in case one
of the obligors should not comply with what is incumbent upon him.

The injured party may choose between the fulfilment and the rescission of the
obligation, with the payment of damages in either case. He may also seek
rescission, even after he has chosen fulfilment, if the latter should become
impossible. The court shall decree the rescission claimed, unless there be just cause
authorizing the fixing of a period. Rescission under Article 1191 has the effect of
mutual restitution. In Velarde v. Court of Appeals: Rescission abrogates the
contract from its inception and requires a mutual restitution of benefits received.
The Court of Appeals correctly ruled that both parties must be restored to their
original situation as far as practicable, as if the contract was never entered into.
Petitioners must relinquish possession of the delivered Minilab Equipment unit and
accessories, while respondent must return the amount tendered by petitioners as
partial payment for the unit received. Further, respondent cannot claim that the two
(2) monthly installments should be offset against the amount awarded by the Court
of Appeals to petitioners because the effect of rescission under Article 1191 is to
bring the parties back to their original positions before the contract was entered
into.

When rescission is sought under Article 1191 of the Civil Code, it need not be
judicially invoked because the power to resolve is implied in reciprocal
obligations. The right to resolve allows an injured party to minimize the damages
he or she may suffer on account of the other party’s failure to perform what is
incumbent upon him or her. When a party fails to comply with his or her
obligation, the other party’s right to resolve the contract is triggered. The
resolution immediately produces legal effects if the non-performing party does not
question the resolution. Court intervention only becomes necessary when the party
who allegedly failed to comply with his or her obligation disputes the resolution of
the contract. Since both parties in this case have exercised their right to resolve
under Article 1191, there is no need for a judicial decree before the resolution
produces effects.
6)

G.R. No. 201264, January 11, 2016

FLORANTE VITUG, Petitioner,

v. EVANGELINE A. ABUDA, Respondent.

FACTS:
Abuda loaned P250,000.00 to Vitug and his wife, Narcisa Vitug. As security
for the loan, Vitug mortgaged to Abuda his property. The property was then
subject of a conditional Contract to Sell between the National Housing Authority
and Vitug. That, upon consummation and completion of the sale by the NHA of
said property, the title-award thereof, shall be received by the Mortgagee by virtue
of a Special Power of Attorney, executed by Mortgagor in her favor. The parties
executed a "restructured" mortgage contract on the property to secure the amount
of P600,000.00 representing the original P250,000.00 loan, additional loans, and
subsequent credit accommodations given by Abuda to Vitug with an interest of
five (5) percent per month. By then, the property was covered by Transfer
Certificate of Title under Vitug's name. Spouses Vitug failed to pay their loans
despite Abuda's demands.
Abuda filed a Complaint for Foreclosure of Property before the Regional
Trial Court of Manila. On December 19, 2008, the Regional Trial Court
promulgated a Decision in favor of Abuda. On appeal, the RTC ruled in favor of
Abuda and ordered Vitug to pay the principal sum with interest and upon default of
the defendant to fully pay the aforesaid sums, the subject mortgaged property shall
be sold at public auction to pay off the mortgage debt. The judgement was
affirmed with the modification as to the payment of interest. Petitioner argues that
not all the requisites of a valid mortgage are present. He contends that a mortgagor
must have free disposal of the mortgaged property. That the existence of a
restriction clause in his title means that he does not have free disposal of his
property.
ISSUE:

Whether the restriction clause in petitioner's title rendered invalid the real
estate mortgage he and respondent Evangeline Abuda executed.

RULING:
No. Petitioner may dispose or encumber his property. The restrictions are
mere burden or limitations on petitioner’s jus disponendi. All the elements of a
valid mortgage contract were present. For a mortgage contract to be valid, the
absolute owner of a property must have free disposal of the property. That property
must be used to secure the fulfillment of an obligation. Article 2085 of the Civil
Code provides:
Art. 2085. The following requisites are essential to contracts of pledge and
mortgage:
 (1) That they be constituted to secure the fulfillment of a principal
obligation;
(2) That the pledgor or mortgagor be the absolute owner of the thing pledged
or mortgaged;
(3) That  the  persons  constituting  the  pledge  or mortgage have the free
disposal of their property, and in the absence thereof, that they be legally
authorized for the purpose.
Petitioner's undisputed title to and ownership of the property is sufficient to
give him free disposal of it. As owner of the property, he has the right to enjoy all
attributes of ownership including  jus disponendi or the right
to encumber, alienate, or dispose his property "without other limitations than those
established by law." Petitioner's claim that he lacks free disposal of the property
stems from the existence of the restrictions imposed on his title by the National
Housing Authority. These restrictions do not divest petitioner of his ownership
rights. They are mere burdens or limitations on petitioner's jus disponendi. Thus,
petitioner may dispose or encumber his property. However, the disposition or
encumbrance of his property is subject to the limitations and to the rights that may
accrue to the National Housing Authority. When annotated to the title, these
restrictions serve as notice to the whole world that the National Housing Authority
has claims over the property, which it may enforce against others. Contracts
entered into in violation of restrictions on a property owner's rights do not always
have the effect of making them void ab initio. Contracts that contain provisions in
favor of one party may be void ab initio or voidable. Contracts that lack
consideration, those that are against public order or public policy, and those that
are attended by illegality or immorality are void ab initio.
Contracts that only subject a property owner's property rights to conditions
or limitations but otherwise contain all the elements of a valid contract are merely
voidable by the person in whose favor the conditions or limitations are made. The
mortgage contract entered into by petitioner and respondent contains all the
elements of a valid contract of mortgage. The trial court and the Court of Appeals
found no irregularity in its execution. There was no showing that it was attended
by fraud, illegality, immorality, force or intimidation, and lack of consideration. At
most, therefore, the restrictions made the contract entered into by the parties
voidable by the person in whose favor they were made—in this case, by the
National Housing Authority. Petitioner has no actionable right or cause of action
based on those restrictions.
7)

G.R. No. 167519, January 14, 2015

THE WELLEX GROUP, INC., Petitioner, 

v. U-LAND AIRLINES, CO., LTD., Respondent.

FACTS:

Wellex and U-Land agreed to develop a long-term business relationship

through the creation of joint interest in airline operations and property development
projects in the Philippines. The agreement includes: I. Acquisition of APIC and
PEC shares; II. Operation and management of APIC/PEC/APC; III. Entering into
and funding a joint development agreement; and IV. The option to acquire from
WELLEX shares of stock of EXPRESS SAVINGS BANK ("ESB") up to 40% of
the outstanding capital stock of ESB of U-Land. The provisions of the
memorandum were agreed to be executed within 40 days from its execution date.

The 40-day period lapsed but Wellex and U-Land were not able to enter into
any share purchase agreement although drafts were exchanged between the two.
However, Despite the absence of a share purchase agreement, U-Land remitted to
Wellex a total of US$7,499,945.00. Wellex acknowledged the receipt of these
remittances in a confirmation letter addressed to U-Land and allegedly delivered
stock certificates and TCTs of subject properties. Despite these transactions,
Wellex and U-Land still failed to enter into the share purchase agreement and the
joint development agreement. Thus, U-Land filed a Complaint72 praying for
rescission of the First Memorandum of Agreement and damages against Wellex
and for the issuance of a Writ of Preliminary Attachment. Note: After verification
with the Securities and Exchange Commission, U-Land discovered that "APIC did
not own a single share of stock in APC.

RTC: Ruled In favor of Uland and ordered rescission of contract under Art.
1911 of the civil code. Basis of rescission: Wellex’s misrepresentation that APIC
was a majority shareholder of APC that compelled it to enter into the agreement..
“Notwithstanding the said remittances, APIC does not own a single share of APC.
On the other hand, defendant could not even satisfactorily substantiate its claim
that at least it had the intention to cause the transfer of APC shares to APIC.
Defendant obviously did not enter into the stipulated SPA because it did not have
the shares of APC transferred to APIC despite its representations. Under the
circumstances, it is clear that defendant fraudulently violated the provisions of the
MOA.”

On appeal, the Court of Appeals affirmed the ruling of the Regional Trial
Court. Hence this petition.

Petitioners invokes Suria v. Intermediate Appellate Court, which held that an

"action for rescission is not a principal action that is retaliatory in character under
Article 1191 of the Civil Code, but a subsidiary one which is available only in the
absence of any other legal remedy under Article 1384 of the Civil Code
Respondent U-land avers that this case was inapplicable because the pertinent
provision in Suria was not Article 1191 but rescission under Article 1383 of the
Civil Code. The "rescission" referred to in Article 1191 referred to "resolution" of
a contract due to a breach of a mutual obligation, while Article 1384 spoke of
"rescission" because of lesion and damage. Thus, the rescission that is relevant to
the present case is that of Article 1191, which involves breach in a reciprocal
obligation. It is, in fact, resolution, and not rescission as a result of fraud or lesion,
as found in Articles 1381, 1383, and 1384 of the Civil Code.

ISSUE:

Whether or not respondent U-Land correctly sought the principal relief of

rescission or resolution under Article 1191.

RULING

Yes. Respondent U-Land is praying for rescission or resolution under Article

1191, and not rescission under Article 1381. The failure of one of the parties to
comply with its reciprocal prestation allows the wronged party to seek the remedy
of Article 1191. The wronged party is entitled to rescission or resolution under
Article 1191, and even the payment of damages. It is a principal action precisely
because it is a violation of the original reciprocal prestation. Article 1381 and
Article 1383, on the other hand, pertain to rescission where creditors or even third
persons not privy to the contract can file an action due to lesion or damage as a
result of the contract. Rescission or resolution under Article 1191, therefore, is a
principal action that is immediately available to the party at the time that the
reciprocal prestation was breached. Article 1383 mandating that rescission be
deemed a subsidiary action cannot be applicable to rescission or resolution under
Article 1191. Thus, respondent U-Land correctly sought the principal relief of
rescission or resolution under Article 1191.
8)

G.R. No. 171127, March 11, 2015

NOEL CASUMPANG, RUBY SANGA-MIRANDA AND SAN JUAN DE

DIOS HOSPITAL, Petitioners, v. NELSON CORTEJO, Respondent.

[G.R. No. 171217]

DRA. RUBY SANGA-MIRANDA, Petitioner, v. NELSON

CORTEJO, Respondent.

[G.R. No. 171228]

SAN JUAN DE DIOS HOSPITAL, Petitioner, v. NELSON

CORTEJO, Respondent.

FACTS:

On April 22, 1988, at about 11:30 in the morning, Mrs. Cortejo brought her 11-
year old son, Edmer, to the Emergency Room of the San Juan de Dios Hospital
(SJDH) because of difficulty in breathing, chest pain, stomach pain, and fever.
Thereafter, she was referred and assigned to Dr. Casumpang, a pediatrician. At
5:30 in the afternoon of the same day, Dr. Casumpang, upon examination using
only a stethoscope, confirmed the diagnosis of Bronchopneumonia. Mrs. Cortejo
immediately advised Dr. Casumpang that Edmer had a high fever, and had no
colds or cough but Dr. Casumpang merely told her that her son's bloodpressure is
just being active and remarked that that's the usual bronchopneumonia, no colds,
no phlegm. Dr. Casumpang next visited the following day. Mrs. Cortejo again
called Dr. Casumpang's attention and stated that Edmer had a fever, throat
irritation, as well as chest and stomach pain. Mrs. Cortejo also alerted Dr.
Casumpang about the traces of blood in Edmer's sputum. Despite these pieces of
information, however, Dr. Casumpang simply nodded and reassured Mrs. Cortejo
that Edmer's illness is bronchopneumonia.

At around 11:30 in the morning of April 23, 1988, Edmer vomited phlegm with
blood streak prompting the Edmer's father to request for a doctor. Later, Miranda,
one of the resident physicians of SJDH, arrived. She claimed that although aware
that Edmer had vomited phlegm with blood streak she failed to examine the blood
specimen. She then advised the respondent to preserve the specimen for
examination. Thereafter, Dr. Miranda conducted a check-up on Edmer and found
that Edmer had a low-grade fever and rashes. At 3:00 in the afternoon, Edmer once
again vomited blood. Dr. Miranda then examined Edmer's sputum with blood and
noted that he was bleeding. Suspecting that he could be afflicted with dengue, Dr.
Miranda conducted a tourniquet test, which turned out to be negative. Dr. Miranda
then called up Dr. Casumpang at his clinic and told him about Edmer's condition.
Upon being informed, Dr. Casumpang ordered several procedures done. Dr.
Miranda advised Edmer's parents that the blood test results showed that Edmer was
suffering from Dengue Hemorrhagic Fever. Dr. Casumpang recommended
Edmer’s transfer to the ICU, but since the ICU was then full, the respondent,
insisted on transferring his son to Makati Medical Center.

At 12:00 midnight, Edmer, accompanied by his parents and by Dr. Casumpang,

was transferred to Makati Medical Center. Upon examination, the attending
physician diagnosed Dengue Fever Stage IV that was already in its irreversible
stage. Edmer died at 4:00 in the morning of April 24, 1988. His Death Certificate
indicated the cause of death as Hypovolemic Shock/hemorrhagic shock/Dengue
Hemorrhagic Fever Stage IV. Believing that Edmer's death was caused by the
negligent and erroneous diagnosis of his doctors, the respondent instituted an
action for damages against SJDH, and its attending physicians: Dr. Casumpang and
Dr. Miranda.

Dr. Casumpang contends that he gave his patient medical treatment and care to
the best of his abilities, and within the proper standard of care required from
physicians under similar circumstances. Dr. Miranda argued that the function of
making the diagnosis and undertaking the medical treatment devolved upon Dr.
Casumpang, the doctor assigned to Edmer. Dr. Miranda also alleged that she
exercised prudence in performing her duties as a physician, underscoring that it
was her professional intervention that led to the correct diagnosis of Dengue
Hemorrhagic Fever. SJDH, on the other hand, disclaims liability by asserting that
Dr. Casumpang and Dr. Miranda are mere independent contractors and consultants
(not employees) of the hospital; hence, Article 2180 of the Civil Code does not
apply.

ISSUES:

1. Whether or not Casumpang had committed inexcusable lack of precaution in

diagnosing and in treating the patient
2. Whether or not Miranda had committed inexcusable lack of precaution in
diagnosing and in treating the patient
3. Whether or not there is a causal connection between the petitioners' negligent
act/omission and the patient's resulting death
4. Whether or not the petitioner hospital is solidarity liable with the petitioner
doctors

RULING:

Yes, Casumpang was negligent. Even assuming that Edmer's symptoms

completely coincided with the diagnosis of bronchopneumonia, we still find Dr.
Casumpang guilty of negligence. Wrong diagnosis is not by itself medical
malpractice. Physicians are generally not liable for damages resulting from a bona
fide error of judgment and from acting according to acceptable medical practice
standards. Nonetheless, when the physician's erroneous diagnosis was the result of
negligent conduct, it becomes an evidence of medical malpractice.

In the present case, evidence on record established that in confirming the

diagnosis of bronchopneumonia, Dr. Casumpang selectively appreciated some and
not all of the symptoms presented, and failed to promptly conduct the appropriate
tests to confirm his findings. In sum, Dr. Casumpang failed to timely detect dengue
fever, which failure, especially, when reasonable prudence would have shown that
indications of dengue were evident and/or foreseeable, constitutes negligence.
Apart from failing to promptly detect dengue fever, Dr. Casumpang also failed to
promptly undertake the proper medical management needed for this disease. Dr.
Casumpang failed to measure up to the acceptable medical standards in diagnosing
and treating dengue fever.

Dr. Casumpang's claim that he exercised prudence and due diligence in

handling Edmer's case, sside from being self-serving, is not supported by
competent evidence. He failed, as a medical professional, to observe the most
prudent medical procedure under the circumstances in diagnosing and treating
Edmer.

On the second issue, Dr. Miranda is not liable for negligence. The court found
that Dr. Miranda was not independently negligent. Although she was subject to the
same standard of care applicable to attending physicians, as a resident physician,
she merely operates as a subordinate who usually refer to the attending physician
on the decision to be made and on the action to be taken. We also believe that a
finding of negligence should also depend on several competing factors. In this
case, before Dr. Miranda attended to Edmer, Dr. Casumpang had diagnosed Edmer
with bronchopneumonia. There is also evidence supporting Dr. Miranda's claim
that she extended diligent care to Edmer. In fact, when she suspected, during
Edmer's second episode of bleeding, that Edmer could be suffering from dengue,
she wasted no time in conducting the necessary tests, and promptly notified Dr.
Casumpang about the incident. Indubitably, her medical assistance led to the
finding of dengue fever. Dr. Miranda's error was merely an honest mistake of
judgment; hence, she should not be held liable for medical negligence.

In the third issue, causal connection between the petitioners' negligence and the
patient's resulting death was established Casumpang failed to timely diagnose
Edmer with dengue fever despite the presence of its characteristic symptoms; and
as a consequence of the delayed diagnosis, he also failed to promptly manage
Edmer's illness. Had he immediately conducted confirmatory tests, and promptly
administered the proper care and management needed for dengue fever, the risk of
complications or even death, could have been substantially reduced. That Edmer
later died of Dengue Hemorrhagic Fever Stage IV, a severe and fatal form of
dengue fever, established the causal link between Dr. Casumpang's negligence and
the injury. The element of causation is successfully proven.

On the last issue, SJDH is solidarily liable. As a rule, hospitals are not liable for
the negligence of its independent contractors. However, it may be found liable if
the physician or independent contractor acts as an ostensible agent of the hospital.
This exception is also known as the doctrine of apparent authority. SJDH impliedly
held out and clothed Dr. Casumpang with apparent authority leading the
respondent to believe that he is an employee or agent of the hospital. Based on the
records, the respondent relied on SJDH rather than upon Dr. Casumpang, to care
and treat his son Edmer. His testimony during trial showed that he and his wife did
not know any doctors at SJDH; they also did not know that Dr. Casumpang was an
independent contractor. They brought their son to SJDH for diagnosis because of
their family doctor's referral. The referral did not specifically point to Dr.
Casumpang or even to Dr. Miranda, but to SJDH.

Mrs. Cortejo accepted Dr. Casumpang's services on the reasonable belief that
such were being provided by SJDH or its employees, agents, or servants. By
referring Dr. Casumpang to care and treat for Edmer, SJDH impliedly held out Dr.
Casumpang as a member of its medical staff. SJDH cannot now disclaim liability
since there is no showing that Mrs. Cortejo or the respondent knew, or should have
known, that Dr. Casumpang is only an independent contractor of the hospital. In
this case, estoppel has already set in.